State electricity company says upcoming elections won't derail Indonesia's 2060 net-zero ambitions

Despite being an emerging economy pushing through with industrialisation, Indonesia is serious about reducing its carbon emissions.  

Different ministries and state agencies have issued regulations targeted at net-zero transition in different sectors and businesses.

Notable initiatives include increasing the use of rooftop solar systems in Indonesia, as well as the currently deliberated renewable energy bill to incentivise transition to green energy. 

However, ahead of the 2024 elections, concerns were raised about whether campaigning by political parties and figures could disrupt such commitments towards Indonesia’s ambitions. 

Speaking about the plausibility, Sinthya Roesly, Chief Financial Officer at state-owned electricity company PLN, says that the institution always works to maintain independence as it employs an apolitical, “technocratic” approach in its work. 

“Will political intervention affect the transition? What I can say is that we are carrying out a technocratic approach which ensures [the process] is conducted regardless of whether there is a political event. With or without the election, this must be done,” she tells GovInsider. 

Accelerating the transition to net-zero 

One initiative that could help Indonesia accelerate the transition is the Just Energy Transition Partnership (JETP).  

The initiative, which focuses on gradually phasing out coal plants, will see Indonesia receive US$20 billion in funding from International Partners Group (IPG) member states and the Glasgow Financial Alliance for Net Zero (GFANZ) Working Group, which includes HSBC and Citibank. 

Roesly adds that the JETP, if done successfully, could showcase a commitment to bringing Indonesia’s net-zero dream to fruition. Involving global partners in the project, she says, could lead to additional investment from more international stakeholders. 

“The entire process of JETP is monitored and facilitated by independent and credible international agencies; hence, we expect credible results,” she says. “Therefore, the international community, banks, global investors and global financial institutions can look at it as a serious plan, and they can take part in supporting Indonesia.” 

In addition to collaborating with international agencies, PLN has worked with local business partners to accelerate energy transition. The latest is an agreement with 10 companies to install rooftop photovoltaic (PV) systems with a total capacity of 187 Megawatt peak (MWp). 

Worries ahead of the general elections 

Aside from the viability of its green projects, Indonesia is facing another nationwide concern: elections that are set to be held next year.  

The general elections will see over 204 million Indonesians vote for their next government, and the world will be watching closely as the election results will determine the direction Indonesia will go forward – and this includes the country’s net-zero ambitions.  

After the General Elections Commission (KPU) formally announced the presidential candidates, it appears these candidates bring different perspectives on climate change. 

Ganjar Pranowo from the Indonesian Democratic Party of Struggle (PDI-P), for example, has voiced his intention to reduce coal consumption. Noting that while many people get rich from the commodity, its use must be immediately shifted to reduce carbon emissions.  

Meanwhile, National Democratic Party-backed Anies Baswedan emphasised the need for a just and impartial approach in fighting climate change as the impacts have been more severe on certain groups, including the coastal communities. 

Besides the views of these leading political figures, political parties are also vying for influence in the country’s regulatory process.  

While most parties agree that action and commitment are needed to fight the climate crisis, each party’s direct or indirect affiliation with certain sectors, including the very lucrative coal mining sector, might affect decision-making when it comes to climate issues. 

As concerning as this might be, PLN’s Roesly stresses that the state-owned enterprise will remain independent from external influence as it takes part in a phase-out project that international bodies be monitoring. 

“We’re optimistic that the political intervention will not happen, and that we will continue as an [independent electricity market] operator. Hopefully, we can maintain that trust because the Asian Development Bank, the World Bank and other global partners will also oversee this process.” 

Investment is much needed 

Foreign investment will be vital to the Southeast Asian nation’s net-zero aspirations. 

In August, Febrio Kacaribu, Chairman at the Fiscal Policy Agency, Ministry of Finance, Republic of Indonesia, revealed that Indonesia needed a staggering US$281 billion to finance its carbon reduction projects until 2030.  

Acknowledging that external parties would be key to the success of these projects, he called upon both public and private sector players in Indonesia to help finance them. 

Some agencies, including the finance ministry, have formulated a handful of schemes to woo investors, in the form of tax holidays, tax allowances, VAT facilities, and more. 

Carbon trading is another alternative for businesses to reduce their carbon emissions, as mandated in a 2021 presidential regulation.  

The Financial Services Authority (OJK), which oversees the programme, said the regulation, known as PP No. 98, maps out various mechanisms that are expected to bring in more green investments and help Indonesia reduce carbon emissions significantly. 

It regulates inter-business trade through cap-and-trade scheme, countering emissions through carbon offset, carbon levy, as well as combination of existing schemes. 

And under OJK’s regulation No. 14/2023, Indonesia formally launched its own carbon exchange (IDXCarbon) in September, which President Director of the Indonesia Stock Exchange, Iman Rachman, has called an “important milestone” in the country’s decarbonisation commitment. 

As of 27 October, transactions in the voluntary carbon market were valued at Rp29.45 billion (US$1.85 million) from just 16 players – 15 buyers and one seller.