Indonesia downplays US exit from coal transition partnership deal

Indonesia’s top official for an international initiative stated on Thursday that the US’ withdrawal from a collaborative effort aimed at assisting developing nations in transitioning away from coal will have a minimal effect on Indonesia, according to a Reuters report.

The US made a significant policy shift this year by withdrawing from the Just Energy Transition Partnership (JETP), an initiative comprising 10 donor nations. 

This decision was a direct consequence of President Donald Trump’s broader agenda to reduce foreign aid commitments. 

JETP plan

The JETP aims to support developing countries in transitioning away from fossil fuels towards cleaner energy sources, ensuring that the shift is equitable and minimizes socio-economic disruption for affected communities. 

The US withdrawal, therefore, raises questions about the future funding and political momentum of the partnership, potentially impacting its ability to achieve its ambitious climate and development goals. 

This move aligns with a broader “America First” foreign policy stance, prioritizing domestic spending and reducing international financial obligations.

The JETP with Indonesia, a landmark initiative aiming to accelerate the nation’s shift away from fossil fuels, was initially heralded with the promise of a substantial financial commitment. 

In 2022, when the plan was first unveiled, a US official characterised the $20 billion in pledged funds as the “single largest climate finance transaction” to date. 

This ambitious partnership sought to support Indonesia’s efforts to transition to cleaner energy sources, reduce greenhouse gas emissions, and promote sustainable development. 

Slow disbursement of funds

However, despite the significant initial fanfare and the urgent need for climate action, the actual disbursement of these promised funds has been remarkably slow. 

The lack of tangible financial flows has raised concerns about the efficacy of such large-scale climate finance mechanisms and the challenges involved in translating pledges into concrete action. 

Paul Butarbutar, acting head of the JETP Indonesia Secretariat told the Financial Times Energy Transition Summit Asia conference:

The direct impact of US withdrawal from the JETP is not so severe as many people thought.

With a population exceeding 275 million, this Southeast Asian nation has consistently pointed to its low per-capita emissions, especially when contrasted with wealthier countries. 

It has also cited a lack of affordable financing as justification for its continued dependence on its extensive coal reserves.

These reserves have been instrumental in providing its citizens with the lowest electricity prices in the region.

Existing guarantees

Indonesia will no longer receive $60 million in grants from the US, according to Butarbutar.

However, US guarantees to the World Bank, totaling half of the proposed $2 billion in financial contributions, have already been finalised.

These guarantees were intended to help Indonesian firms secure loans for their energy transition.

Butarbutar said:

We still can use the guarantee. So now it is up to us whether we want to use it or not.

Butarbutar stated that the remaining US commitment would no longer be part of JETP funding, but could instead be channeled through bilateral cooperation between the two nations.

Butarbutar further stated that beyond the guarantee, specific projects could receive financing from US interests. 

As an illustration, he mentioned the US Development Finance Corp’s funding of a geothermal project that involved a US company.

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