The World’s Top Coal Exporter Can’t Afford To Go Green

By Haley Zaremba - Jun 13, 2022

• Indonesia is facing an uphill battle in its push to transition away from coal.
• As the world’s top coal exporter, kicking the fossil fuel will potentially cost billions.
• Further complicating the issue, Indonesia has a massive surplus of coal on its hands after it was heavily over-invested in the sector in past decades.

How much will it cost to wean Indonesia off coal? This is a pressing question for world leaders and climate policy-makers around the world in the lead-up to this year’s COP27 climate summit, set to take place in Sharm el-Sheikh, Egypt this November. Just before the summit, in which the world’s premier politicians, scientists, policymakers, and industry leaders convene to set goals, broker deals, and make concrete agendas to meet the emissions standards set by the Paris climate agreement in 2015, G-20 leaders are meeting in Bali to try to ink a deal to wean the world’s biggest coal exporter off of the dirty fossil fuel. But it won’t come easy.

Indonesia ranks high on the COP27 agenda as it represents one of the biggest hurdles to phasing out coal on a global scale, a necessary component of all pathways to lowering global emissions enough to avoid the worst effects of climate change. The Intergovernmental Panel on Climate Change (IPCC) has stated that the world will have to shut down all coal-fired stations by 2040 at the latest, and had previously urged that the world must reach peach coal by 2020. Instead, the world saw an enormous rebound of coal use in 2021, as ongoing pandemic woes coupled with sanctions on Russian energy caused energy prices to skyrocket. 

The renewed vitality of the coal industry is one of many obstacles standing in the way of weaning Indonesia off of coal. The Southeast Asian island nation has the fourth biggest population in the world, and the third biggest coal-fired power capacity, after India and China, making it one of just a few countries with the power to make or break the Paris agreement. But coal is deeply embedded in the economic and political machinations of the country, and getting rid of it will not be easy. 

The Indonesian parliament just drafted a “clean energy” bill that prominently features the continued use of coal, to the dismay and outrage of environmental experts and climate advocates. According to the Indonesia Mining Advocacy Network, a watchdog agency, as much as 50% of the country’s 575 members of parliament are directly connected to the mining sector. The Indonesian workers who rely on coal for their livelihoods are also pushing back against climate efforts, and are advocating to keep raising coal output targets while the market is hot. 

Further complicating the issue, Indonesia has a massive surplus of coal on its hands after it was heavily over-invested in the sector in past decades. Convincing them not to make use of this cheap and abundant energy source will be difficult – and expensive. This is what’s on the minds of the world’s richest nations as they work toward brokering one of their trickiest deals yet on the eve of COP27. “Indonesia will be our next partnership,” US Treasury Climate Counselor John Morton was quoted by Bloomberg this week. "If this were easy, it would have been done years ago. Countries could have managed this on their own,” he said. “We're talking about economy-wide economic transitions of energy sectors, which are huge political beasts."

So far, the world’s richest nations have not made good on their promises to provide climate finance to the world’s poorest countries. Global leaders have recognized that this kind of economic cooperation is fundamental to a successful energy transition and pathway to 1.5 degrees, and had promised 12 years ago to give $100 billion in climate finance to poor countries by 2020. They broke their promise. But at last year’s COP26 in Glasgow, the pledge was reinstated. Now the G-20, a group of 19 nations and the European Union representing 90% of the gross world product, is headed to Bali to put some of that money where its mouth is and make a Just Energy Transition Partnership with Indonesia to help “break the status quo,” in the words of U.S. climate envoy John Kerry

It will be a huge uphill battle, but already The Asian Development Bank has launched a multi-billion dollar plan to help Indonesia and the Philippines phase out half of their coal plants over the next 10 to 15 years, and Indonesia has promised to retire some stations earlier than planned if it’s economically viable. Breaking Indonesia of its coal habit will cost the world billions more in climate finance, but experts will tell you it’s a small price to pay for avoiding catastrophic climate change.

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