Green Finance Optimizes the Use of Renewable Energy, Says Energy Minister

MINISTRY OF ENERGY AND MINERAL RESOURCES

REPUBLIC OF INDONESIA

PRESS RELEASE

NUMBER: 391.Pers/04/SJI/2021

Date: 4 November 2021

Green Finance Optimizes the Use of Renewable Energy, Says Energy Minister

A comprehensive plan of green finance is a path to significantly increase the share of new, renewable energy (NRE), energy efficiency, and sustainable infrastructure.

"Without adequate green finance, we cannot put our plans into action to realize the ambitions set out in the Nationally Determined Contribution (NDC)," said Minister of Energy and Mineral Resources (EMR), Arifin Tasrif, in an event titled "Financing green recovery for a low-carbon and climate-resilient Southeast Asia" organized by the Asian Development Bank (ADB) during the COP26 in Glasgow, Scotland, on Tuesday (2/10).

Arifin went on to express his appreciation to ADB that had supported the development of low-carbon infrastructure projects in Indonesia and the Southeast Asian nations (ASEAN) through Energy Transition Mechanism (ETM).

"I would like to express my appreciation to ADB that has proposed ETM to accelerate emission reduction in Indonesia and other ASEAN member countries. We think the ETM is suitable to accelerate decarbonization in Indonesia, particularly for early retirement of coal-fired power plants," said Arifin.

Arifin highlighted that the financial support of ADB would impact positively on Southeast Asian countries in their green recovery efforts after the Covid-19 pandemic. "ASEAN as an epicenter of global economic growth should contribute more to actualizing the post-pandemic visions," Arifin added.

The International Energy Agency (IEA) in its Sustainable Recovery publication reported that the Covid-19 pandemic had led to a drop in energy investment of almost 20% year-on-year in 2020, equaling USD400 billion. "The pandemic wrought havoc on energy supply and demand across the globe," said Arifin.

The crisis triggered by the pandemic, continued Arifin, should become a golden opportunity to rearrange the composition of energy so as to increase the share of greener supply of energy as set out in the ASEAN Plan of Actions for Energy Cooperation (APAEC). The APAEC aims to accelerate energy transition, strengthen energy resilience by developing innovations and cooperation, and increase the targets for NRE and energy intensity.

"As the only ASEAN member in the G20 economies, Indonesia has consistently delivered key massages from the Southeast Asian region, such as the acceleration of energy transition to support economic recovery," affirmed Arifin.

Indonesia has a strong commitment to utilizing NRE to combat climate change. "We are preparing a Roadmap to Net Zero Emission by 2060 or sooner. The Roadmap will carefully consider socio-economic conditions and the energy transition development with timely-specific targets," explained Arifin.

To show this commitment, the Indonesian government is formulating relevant regulations. For example, the General Plan on Electricity Supply (RUPTL) of 2021-2030 has been made more environmentally friendly, with NRE controlling 51.6% of the share. Additionally, the government is drafting a presidential regulation on NRE tariffs and pricing of carbon trade.

In terms of finance, the Indonesian government has a number of instruments in place, including low-interest loan as well as fiscal and non-fiscal incentives. "The Ministry of EMR, the Ministry of Finance, and other relevant agencies will work with the ADB to explore the possibilities of implementing the ETM," Arifin concluded.

The ADB has given its support to the Indonesian government in the signing of a Memorandum of Understanding (MoU) with Indonesia's state electricity company PT Perusahaan Listrik Negara. The MoU was signed by President Director of PLN, Zulkifli Zaini, and ADB's Director General of Southeast Asia Department, Ramesh Subramaniam, on Monday (1/11) local time.

The MoU covers a full feasibility study of the reduction of coal-fired power plants, especially from technical and financial aspects, evaluation of the ETM structure, search for suitable programs or other mechanisms, and design of equitable technical assistance programs. (IY)

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