Indonesia has made significant strides towards achieving its “Net Zero Emissions 2060” goal by signing a Memorandum of Understanding (MoU) between PT PLN and Germany’s Kreditanstalt für Wiederaufbau (KfW) Bank during COP-29 in Baku, Azerbaijan. This agreement marks a crucial step in fostering clean energy development with a €1.2 billion (IDR 20.15 trillion) green financing commitment.
Indonesia aims to increase renewable energy capacity by 75% of the 100 GW total planned electricity capacity in the next 15 years. Clean energy development is expected to enhance Indonesia’s industrial competitiveness while aligning with global climate goals.
PLN, Indonesia’s state electricity company, has initiated collaborations and green projects to support sustainable energy transition. This includes leveraging international partnerships to drive carbon reduction and bloster energy self-sufficiency.
Representing Germany’s support for global green initiatives, KfW emphasizes Indonesia’s pivotal role in clean energy transformation, focusing on geothermal, hydro, and transmission projects to achieve net-zero emissions.
Green financing supports Indonesia’s transition to a sustainable economy by funding projects in renewable energy, carbon trading, and low-carbon infrastructure. Highlights include:
Green Sukuk: Over USD 7.2 billion (IDR 108 trillion) raised since 2018, reducing 10.5 million tons of CO2 emissions.
Carbon Trading: Potential economic value of USD 565.9 billion from forests, mangroves, and peatlands.
Bank Financing: Banks like Bank Mandiri increased green portfolios to IDR 205 trillion.
Regional Ecological Funding: Fiscal incentives for local governments to promote eco-friendly initiatives.
Green financing trends in Indonesia show a 20% increase in 2024 compared to previous years, reaching over IDR 40 trillion by November. This reflects stronger implementation of sustainable finance taxonomy and enhanced focus on low-carbon projects.
Indonesia collaborates with partners like Global Green Growth Institute (CGGI) and KfW to secure investments, develop green business models, and strengthen international commitments. Mechanisms like the Sustainable Linked Financing Framework (SLFF) aim to attract over USD 100 billion for renewable energy and smart grid projects.
The Ministry of Finance estimates that Indonesia needs USD 280 billion for climate action by 2030, with only 30% covered by state budgets. Private and international funding are vital to bridging this gap.
Developing countries require USD 2.4 trillion annually by 2030 for climate action, with adaptation needs ranging from USD 187 to 359 billion per year. Current funding levels fall significantly short, highlighting the importance of global partnerships like COP-29 to address these challenges.