Indonesia needs to invest US$200bn per year to decarbonise by 2030

Out-Law News | 27 Oct 2021 | 6:18 am | 1 min. read

Indonesia will need to invest US$200 billion per year over the next decade in order to meet its target of decarbonisation, according to a government report.

The Indonesian government will need to phase out fossil fuel subsidies and reallocate some investments, as well as generate revenue from the recently passed carbon tax, according to a Reuters account of a report from the planning ministry.

Some of that revenue will be needed for social protection programmes and other investments to ensure a ‘just transition’, and the remainder could finance green infrastructure.

It said that the government expect funding from major bilateral and multilateral donors and tap funding from the Asian Development Bank (ADB), the World Bank (WB) and other multilateral lenders.

Renewables expert John Yeap of Pinsent Masons, the law firm behind Out-Law, said: “Decarbonisation will be a challenge for nations such as Indonesia that have a heavy reliance on fossil-based generation and a growing economy. It also has a domestic coal industry.  Ensuring a just transition will therefore be an important and integral part of the decarbonisation agenda. The decommissioning of coal fired power plants have to come with not just zero emission generation, but a clear policy around social issue.”

Anggia Rukmasari of Indonesia-based law firm Legalexica, said: “As one of the biggest contributors to greenhouse gas emission, Indonesia’s commitment should be widely appreciated. We hope in turn this will lead to more opportunities in renewable and sustainable technology. In order for meaningful breakthroughs to occur, the market should be vibrant and lucrative enough for investors. Thus from a regulatory standpoint, clarify is key. In this regard, the ball is in the government’s court.”

In August, Indonesia set its goal for achieving net zero emissions by 2060.

In October, the country planned to increase its solar power generating capacity by an additional 4.7 gigawatts (GW) by 2030 as part of its efforts for net zero carbon emissions by 2060. The country was reported to introduce a new carbon tax in the same month.