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Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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Indonesia’s Pivot Away From Coal Will Require Massive Investments

  • As the world’s largest coal exporter, Indonesia will play a key role in reducing global emissions, but it needs help to do it. 
  • Transitioning away from coal will require billions of dollars in investment that Indonesia doesn’t have. 
  • Weaning Indonesia off of coal by 2040 “will prevent approximately 1.7 gigatons of CO2 emissions from being released into the atmosphere.

Getting Indonesia to kick its coal habit will be no easy feat. Not only does coal dominate the island nation’s energy mix, it is deeply embedded in the country’s politics. Indonesia is the world’s largest exporter of coal, and leaving the dirtiest fossil fuel behind will require massive investment as well as a political upheaval. Coal money currently funds local and national budgets, and coal-powered development plans are what put President Joko Widodo, in addition to many other Indonesian politicians, into office. Transitioning Indonesia away from coal, however, is an essential piece of any plan which would enable the world to avoid the worst impacts of climate change.

Without Jakarta's buy-in, it will be impossible to lower global greenhouse gas emissions enough to avoid global warming surpassing 1.5 degrees Celsius over pre-industrial averages (the goal set by the Paris agreement). But weaning Indonesia off of coal will require billions of dollars that Indonesia doesn’t have. This is why the country has been of high priority for climate finance initiatives in which the world’s wealthiest countries have pledged to help fund the decarbonization of the world’s poorest countries. However, those wealthy countries have not kept their promise. But at last year’s COP26 in Glasgow, wealthy countries promised to redouble their efforts and to follow through with the re-instated promise to deliver $100 billion a year in climate finance.

Indonesian leaders have been warming up to the idea of transitioning away from coal, and have drafted a “Long-Term Strategy for Low Carbon and Climate Resilience 2050,” which includes plans to retrofit 75% of domestic coal plants with carbon capture, utilization and storage (CCUS) technology. Not only will this be necessary for the health of the planet, it will also be a big win for the Indonesian economy. A new analysis from TransitionZero shows that retiring Indonesia’s coal plants would present massive economic, social and environmental benefits. 

In fact, the TransitionZero analysis suggests that the Indonesian economy could benefit even more by speeding up and intensifying its decarbonization strategy. The analysis finds that the country’s coal fleet could be retired as soon as 2040 by buying out coal power plants before the end of their life cycle and before the end of their contracts, a strategy known as power purchase agreements (PPAs). This would cost about $37 billion, a figure that experts see as a small price to pay for tackling the “last bastion of coal.” 

Environmental news outlet Mongabay reports that weaning Indonesia off of coal by 2040 “will prevent approximately 1.7 gigatons of CO2 emissions from being released into the atmosphere, equivalent to almost three years of Indonesia’s annual emissions, which will be in line with the greater effort to limit global warming to 1.5 degrees Celsius.Furthermore, new jobs generated by a renewable energy transition in Indonesia “would outweigh coal closure job losses by six to one.”

This strategy would also help Indonesia avoid the very real and very expensive externalities of continued coal production going forward. When the impacts of coal plants on air pollution, water stress, local resources, and climate change are taken into account, “the true cost of coal power plants in Indonesia is $67 per megawatt-hour, 27% more than the new cost of clean energy alternatives,” Mongabay reports. 

Indeed, this math holds true not just for Indonesia, but for the world as a whole. While decarbonization’s high up-front costs present some very real barriers, the alternative would be much more costly. According to recent calculations by the insurance giant Swiss Re, climate change could cost the global economy a whopping $23 trillion USD in 2050. Furthermore, an April analysis by the United States Office of Management and Budget calculated that in the U.S. alone, climate change could cost $2 trillion each year by the end of the century.

By Haley Zaremba for Oilprice.com


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