Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Indonesia’s president Joko Widodo has called on the west to release a promised $20bn to finance his country’s green energy transition and do more to support its critical resources, which underpin emerging technologies such as electric vehicles and batteries.
In an interview with the Financial Times, Widodo said there was “tremendous” concern in Indonesia over the delay of the funds, which a group of advanced economies, led by the US, promised a year ago to help accelerate the closure of its coal-powered plants.
“Don’t question Indonesia’s commitment towards [the] energy transition. What I’m questioning is the commitment of the developed states,” he said, adding that he had raised the issue at the G7 summit in Japan in May and the G20 summit in India in September.
“Indonesia has walked the talk. We have even gone so far as developing the electric vehicle industry to support green energy,” he said, adding he was confident that western financing would materialise.
Widodo’s rare public intervention came at a time of intense geopolitical interest in the region. During his nine years in office, he has sought to steer Indonesia on a middle path between Washington and Beijing, with Chinese companies dominating the country’s nickel supply chain.
The Indonesian president, who is widely known as Jokowi, spoke ahead of a bilateral meeting with US president Joe Biden at the Asia Pacific Economic Cooperation summit, which starts this weekend, when he will push for an exemption to allow Indonesia’s nickel industry to benefit from subsidies in the Inflation Reduction Act.
Indonesia is the world’s largest producer of nickel and has protested against its exclusion from Washington’s landmark sweeping green energy funding package. US lawmakers have said that such a deal would in effect subsidise the Chinese companies that control Indonesia’s nickel industry via joint ventures.
“If we can reach this agreement [on an exemption], it will be a major step for Indonesia and the US and it will be a breakthrough for the global electric vehicle industry,” Widodo said in Nusantara, Indonesia’s new planned capital.
He also firmly rejected the idea that Indonesia segregate its nickel supply chain between China and the US. “We would like to keep our options open for all countries,” he added. “There are still other markets, but we want the US market.”
The Just Energy Transition Partnership — under which Indonesia was promised $20bn to facilitate its transition away from coal — is seen as a crucial test of how developed nations and financial institutions will work with developing economies on climate change.
Multilateral organisations involved in the negotiations said a crucial reason for the delay was the difficulty faced by the US and its allies, including the UK and EU, in getting budget approval to release funds.
Even as Indonesia calls for more funding to help it pivot away from coal, private coal power has been expanding, often for nickel processing, a sticking point with the west. There was no mention of plans to cut the so-called captive coal plants — many of which power nickel smelters — in Indonesia’s recent draft investment plan for the climate deal.
The US private sector, which will provide some of the funds under the JETP, has also raised concerns about policy uncertainty in Indonesia, with Widodo set to step down next year.
Asked about criticism of Indonesia’s failure to reduce coal power, Widodo declined to address the issue directly but said his government remained committed to decarbonising its economy. “We know that climate change is a serious problem. We will shift from coal to green energy,” he said.
China has sensed an opportunity in the delay. Beijing and Jakarta launched the Indonesia-China Energy Transition Cooperation dialogue ahead of the 10th anniversary of Xi Jinping’s Belt and Road Initiative in October, and China has promised billions in new green investments for Indonesia.
Widodo has presided over almost a decade of economic growth and is hugely popular, but will reach the presidential term limit next autumn.
One of the top initiatives of the 62-year-old leader’s second and final term has been to ban exports of raw nickel ore and encourage investors to build factories and processing facilities.
Widodo also warned that EU carbon controls targeting iron and steel would be “very damaging” to the Indonesian economy and voiced concern about the fallout of deforestation regulation passed this year on producers of coffee, palm oil and rubber, three of his country’s biggest exports.
“Palm oil producers are not just large companies, 45 per cent of them are smallholders, involving 16mn people,” said Widodo, adding that coffee, tea and cocoa farmers would also be badly hit.
Read the full article here