As Indonesia took up the mantle of G20 presidency, 2022 was a particularly momentous year filled with opportunities to examine the country’s climate finance landscape, improve the underpinning regulatory framework, and foster greater global cooperation on ensuring just energy transitions. Two priority themes received significant policy attention last year — sustainable finance and energy transition — as reflected in the launch of Indonesia Green Taxonomy 1.0 in January and the issuance of Presidential Regulation “Perpres 112/2022” on the Acceleration of Renewable Energy Development for Power Supply in September. Indonesia also renewed its climate commitments by releasing an Enhanced NDC ahead of COP27, slightly increasing the country’s 2030 emission reduction targets, including additional targets that could be achieved with appropriate international support.
The year ended on a high note with two landmark initiatives announced at the G20 Summit in Bali. On November 14, Indonesia’s Energy Transition Mechanism (ETM) Country Platform was launched and positioned as the country’s delivery vehicle for just and affordable energy transition. The following day, the Indonesia Just Energy Transition Partnership (JETP) was officially announced, with the potential for up to USD 20 billion worth of grants and concessional loans to accelerate coal phase-out and renewable energy investment.
In recognition of those key events and opportunities in 2023, our work at CPI Indonesia has evolved beyond providing policy analyses and advisories to designing investment ecosystems and innovative financing instruments to support the growth of energy efficiency projects. Harnessing the strategic momentum brought by the ETM Country Platform and JETP announcements, CPI launched a Rooftop Solar Investment Accelerator Facility at BNEF Summit Bali and taken on the role of knowledge and technical partner to support Indonesia’s ETM Country Platform.
Here is the full reflection of progresses we have achieved in both sustainable finance and energy transition areas last year and a preview of what is underway for 2023.
SUSTAINABLE FINANCE
Indonesia Blue Finance Landscape
In this first study of its kind, CPI captured the full landscape of blue finance in Indonesia and examined the extent of available financing access for micro, small and medium enterprises (MSMEs) as prominent but largely underbanked players in Indonesia’s blue economy.
Indonesia Green Taxonomy 1.0: Yellow Does Not Mean Go
Indonesia Green Taxonomy 1.0 is a promising first step and a crucial tool for financial institutions to expand their green investment portfolios, but more detailed provisions are still needed to ensure inclusive transition pathways across sectors and interoperability with other taxonomies across different jurisdictions.
Are Indonesian Banks Ready to Account Climate-related Matters?
Based on a focus group survey involving Indonesia’s major commercial banks, this report analyzes the country’s financial sector readiness and progress in assessing, reporting, and disclosing climate-related matters against national guidelines and international best practices.
ENERGY TRANSITION
Paris Alignment of Power Sector Finance Flows in Indonesia: Challenges, Opportunities and Innovative Solutions
Despite the increasing trend of renewable energy investments, total tracked power sector finance commitments in Indonesia, as of 2020, were still dominated by fossil fuels. This brief examines the challenges and opportunities in financing Indonesia’s ambitious targets on renewable energy transition.
Policy dialogue: Powering the transition to net zero
In conjunction with the HSBC Indonesia Summit 2022, this dialogue combined various business and policy perspectives in discussing financial solutions to Indonesia’s net-zero transitions.
Lowy Institute Debate: Factoring environmental costs of industrialization for truly resilient economy
As part of the Lowy Institute’s multi-perspective debate series reflecting on the latest state of Southeast Asia economy, CPI Indonesia Director Tiza Mafira shared her view that resilient economies of the future will be those that do not rely on linear industrialisation which deplete resources, generate emissions, and fail to internalize external costs. The economy can be more resilient if it is circular instead of linear, decentralised instead of centralised, and diverse instead of monocultural.
Opinion: Designing a carbon tax roadmap for Indonesia’s green transition
Recognizing the time-sensitive nature and pivotal role of a carbon tax roadmap for Indonesia’s green transition, this piece examines the prerequisites for a roadmap design that is strategically aligned with the country’s net-zero targets and transition pathways toward a low-carbon future.
How to Finance a Credible Coal Transition
Amidst the current landscape where coal provides over 60% of Indonesia’s electricity generation, the recently announced JETP will significantly increase the need for well-structured Coal Transition Mechanisms (CTMs). With inputs from finance, energy and policy experts across developed and emerging markets, CPI, Climate Bonds Initiative (CBI), and Rocky Mountain Institute (RMI) have developed an initial set of guidelines to help financiers, policy makers, coal plant owners, and civil society navigate reputational risks and potential pitfalls of coal-to-clean transition.
Launch of Rooftop Solar Investment Accelerator Facility at BNEF Summit Bali
In support of Indonesian government’s ambitious target of achieving 23% renewable energy mix by 2025, CPI launched a Rooftop Solar Investment Accelerator Facility aimed at lowering investors’ perceived risks of developing commercial and industrial (C&I) rooftop solar projects by incubating potential project plans to be more commercially viable and creditworthy.
CPI’s key role in supporting Indonesia’s energy transition
Named as a knowledge and technical partner to support PT Sarana Multi Infrastruktur (PT SMI) as Indonesia ETM Country Platform manager, CPI’s role will include conducting policy analyses, stakeholder convening, and making overall recommendations to ensure effective multistakeholder collaborations for truly sustainable and just energy transition.
What’s next for Yayasan CPI Indonesia?
At CPI, our main goal is to support governments, businesses, and development finance institutions in accelerating the transition to net-zero and climate-resilient economies.
In 2023, CPI Indonesia will build on its existing work on climate finance tracking, policy analysis, and technical assistance while also deepening our focus on supporting Indonesian government in achieving its evolving targets on renewable energy development, energy efficiency, and just energy transition. We will launch a series of studies mapping key stakeholders behind both green and dirty investments in Indonesia, and identify ways to accelerate coal divestment. We will also grow our portfolios and impacts on facilitating rooftop solar investment, de-risking energy efficiency projects, accelerating affordable and just energy transition, and setting the groundwork for establishing Sustainable Finance Hub in Indonesia.
We would love to hear from you. Let us know what your top priorities are for 2023. And you can stay informed on the research, events, and other important updates by subscribing to our Yayasan CPI Indonesia newsletter below.
