Why some Indonesians worry about a $20 billion climate deal to get off coal
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This is THE INDICATOR FROM PLANET MONEY. I'm Wailin Wong. Late last year, President Biden and a bunch of other world leaders went to Indonesia for a meeting of the G-20, this group of many of the world's largest economies. And they announced a big climate deal - $20 billion in loans, grants and private financing to get Indonesia off coal. Right now Indonesia gets about 60% of its electricity from coal. And coal, of course, is this massive source of planet-heating carbon dioxide. So if this climate deal leads to success, it could be a model to get other emerging economies to reduce their coal-fired electricity, too.
Today on the show, we're bringing you an episode from our friends at Short Wave, NPR's daily science podcast. Indonesia is this ambitious climate test case. But loopholes, price caps and potential conflicts of interest could undermine the effort there and could cast doubts on future deals to get other countries off coal. After the break, Short Wave co-host Aaron Scott talks with Julia Simon, NPR's climate solutions reporter.
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AARON SCOTT: OK, Julia, so how does Indonesia fit into weaning the world off coal?
JULIA SIMON: So this deal to get off coal in Indonesia - it isn't just about Indonesia. It's one of multiple deals. They call them Just Energy Transition Partnerships - one acronym in this whole episode, I promise. But it's called a JETP.
SCOTT: Is this kind of one of the ways that industrial parts of the world, like the U.S. and the EU, can help developing countries deal with climate change, like all that loss and damage funding that we heard about last year at COP27?
SIMON: In the same vein. And there are now a lot of JETP deals in the works at various stages in South Africa. There's one in Vietnam, maybe one soon in India. So for now, it's country by country.
CAMILLA FENNING: It's probably unlikely that we can kind of keep going just one JETP, one JETP, one JETP, you know, a few every year. That's not going to be fast enough.
SIMON: This is Camilla Fenning of the climate and energy research group E3G. And this is why what's happening in Indonesia is especially important.
FENNING: We're going to kind of have to, you know, do JETPs by a factor of 10 or 20 or 30. And to do that, we just need to devise a system where there's more of a sort of template, more of a machine.
SCOTT: So is Indonesia kind of serving up a model, potentially, for how future countries could get off coal around the world?
SIMON: Exactly. And that's partly why the doubts about Indonesia's deal are so glaring.
SCOTT: I know we're going to get to those doubts, but before, I would love to learn about why this deal happened in Indonesia in the first place.
SIMON: Yeah, so Indonesia - it's actually the world's largest exporter of coal for electricity.
SCOTT: Wow.
SIMON: And it also has more coal electricity than it even needs. That's because in recent years, the country had all these very optimistic projections for growth. It signed these long-term contracts with coal plants. Those projections didn't end up coming to fruition, in part because of the pandemic. And now the country is basically stuck with all this coal. Here is Rachmat Kaimuddin. He's a deputy minister in the Indonesian government
RACHMAT KAIMUDDIN: You can't just say, sorry, we don't want to do it anymore.
SCOTT: So is the $20 billion supposed to actually kind of be used to prematurely shut down a lot of these coal plants?
SIMON: Yeah, the details aren't all out yet, but Kaimuddin says, potentially, the loans and grants could help the country to pay to shut down coal plants ahead of schedule and make some space for renewables on this grid that's so dominated by coal. But there are big red flags here.
SCOTT: How many flags are we talking about?
SIMON: There are a lot of red flags. We're going to do three red flags.
SCOTT: Three - top three.
SIMON: Here's the first one. Not long before the $20 billion deal was announced in Bali, Indonesia's president made this new regulation. It says no new coal plants, except plants that are already in the pipeline or plants that are attached to national strategic projects. So people in Indonesia I spoke to said this is really concerning. Here's Anissa Suharsono, an energy analyst in Jakarta.
ANISSA SUHARSONO: They keep saying no new coal, no new coal, no new coal. So the way I see it, it's like they put that clause there to give a loophole.
SCOTT: Yeah, it's the kind of loophole that can fit a power plant through it.
SIMON: Many power plants, potentially. For instance, Indonesia announced this big green industrial park that will make all this stuff for the green transition, like electric vehicle batteries. And the idea is that this green park will run on renewable energy, but it will take years, so for now, Indonesia plans to build brand-new coal plants for it. It's not the only park. And so if all these, you know, parks for these new green tech, if they build coal plants, that's potentially a lot of coal.
SCOTT: And a lot of emissions that are putting us entirely in the wrong direction for dealing with climate change.
SIMON: Exactly. The International Energy Agency said that to keep warming less than 1.5 degrees Celsius and avoid the worst effects of climate change, there should be, quote, "no new development of unabated coal power plants."
SCOTT: So that's our first big red flag. What's No. 2?
SIMON: The second has to do with renewables. And there are these renewable targets in the deal. The deal has this goal of getting to 34% renewables by 2030. And I spoke to half a dozen renewable energy company CEOs and investors in Indonesia who think this 34% goal in seven years is too ambitious, mainly because the country has these big roadblocks that make it hard for renewables to make money.
SCOTT: What kind of roadblocks are we talking about?
SIMON: So there is this price cap that keeps coal prices so low that renewables struggle to compete. And while there was an announcement about the deal that says Indonesia is going to phase down coal subsidies, it's really unclear what that means because the country isn't just building new coal power plants, Aaron. It's also turning coal into gas for cooking. Last year, Indonesia and a company based in Pennsylvania began constructing this $2.3 billion facility to make gas from coal. And this makes a lot of emissions, and it requires subsidies.
SCOTT: OK, Julia, so Indonesia is subsidizing coal, which is making it a lot harder for renewables to compete. That brings us, I think, to our third red flag.
SIMON: That's right. Something you have to know about Indonesia is that a lot of the political elite have interests in coal. That green park that's planning to build new coal plants is a project of a coal billionaire whose brother is a government minister. And another minister, Luhut Pandjaitan, sometimes known as Pak Luhut - he's running the deal to get off coal, and he has coal assets himself.
SCOTT: OK, I can see why there is fear of conflicts of interest here.
SIMON: And so I reached out to Pak Luhut's office by email. His office replied that transparency and accountability are critical components of Indonesia's decarbonization efforts. I did ask his deputy about this, though, Deputy Minister Rachmat Kaimuddin.
KAIMUDDIN: Pak Luhut is my direct supervisor, and I can say so far he's been very, very supportive of this decarbonization and never once, he mentioned about, like, you know, what about my asset or whatever? It's not about that.
SCOTT: So, Julia, I have to ask, did you ask the U.S. participants in this deal what they thought about these potential red flags?
SIMON: I did. I emailed John Kerry's office, the U.S. special envoy for climate. And he said in an email Indonesia made these commitments not only to combat the climate crisis but also to transform and grow their economy. And the Just Energy Transition Partnership is squarely focused on supporting Indonesia's aspirations.
SCOTT: OK. So is this a done deal? Or is there the chance some of these red flags could still be addressed?
SIMON: They could definitely be addressed because this deal isn't done. And the people I spoke with in Indonesia really hope that they start releasing more details to the public about the deal, that they start involving more stakeholders, like Indonesians involved in renewables and environmentalists. And for all this talk about how the international community can support getting Indonesia off of coal, Anissa Suharsono says the strongest message from the international community to help move Indonesia off of coal would be for international banks to stop funding any new coal.
SUHARSONO: You want to send a message? You want us to get off coal? Stop funding us.
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SCOTT: This episode was produced by Liz Metzger, edited by our managing producer Rebecca Ramirez and fact-checked by Anil Oza. Alex Drewenskus was our audio engineer. I'm Aaron Scott. Thanks, as always, for listening to SHORT WAVE from NPR.
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