Coal may Scupper Indonesia’s Pretensions to a Green Future

By: Johannes Nugroho

Indonesia, which held this year’s G20 presidency, snared a bonanza at the recent summit in Bali when it signed a US$20 billion agreement known as the Just Energy Transition Partnership (JETP) to help the country, Southeast Asia’s largest, phase out coal as its main source of energy. Half of that amount will be borne by donor countries: Canada, Denmark, France, Germany, Italy, Japan, Norway, the United States, and the United Kingdom, along with the European Union, while the other half will be met by international financial institutions

While the loan represents a laudable commitment by advanced economies to nudge their developing counterparts into transitioning to greener energy sources, Indonesia’s particular conditions should force the question of whether the country can truly deliver its carbon emission pledges. Indonesia today is one of the world’s largest exporters of coal. Figures from the first quarter of 2022 point to a 35 percent increase in exports compared to last year’s. Coal is Indonesia’s main export commodity in the non-oil-and-gas category.

Coal mining is also an industry in which many politicians and members of Indonesia’s economic elite are heavily involved. Project Multatuli, an independent, investigative journalistic initiative, released a report in February this year detailing the way coal mining owners have colluded with political interests in Indonesia, coining the term “coal oligarchs. The report names several individuals who are part of Indonesia’s political or economic elite —in some cases both— who control the coal industry.

As of 2020, the five biggest coal holding companies were in the hands of Aburizal Bakrie (former minister and Golkar politician), Fuganto Widjaja (the Widjajas are one of Indonesia’s wealthiest families), Sandiaga Uno (former vice-presidential candidate and currently Minister of Tourism and Creative Economy), Edwin Soeryadjaya (one of Indonesia’s wealthiest individuals), Garibaldi “Boy” Thohir (brother of Erick Thohir), Erick Thohir (current Minister of State-owned-enterprises and a close ally of President Joko Widodo), Agus Lasmono (who ranks 22 on Indonesia’s Richest List), and Low Tuck Kwong (who is also on Indonesia’s Richest List).

Perhaps more importantly, the report highlights two names with even greater political significance: Luhut Binsar Pandjaitan, Coordinating Minister of Maritime Affairs and Investment who played a crucial role in securing the JETP loan for Indonesia, and Prabowo Subianto, Minister of Defense and a presidential hopeful. Both men have sizeable investments in coal mining as well.

These powerful men are in charge of Indonesia’s above-the-board and regulated coal industry. But illegal miners are aplenty in the country. Data from the Ministry of Energy and Natural Resources claim there were 2,700 illegal coal mines being operated spread across the country in 2021.

With rising coal prices due to the war in Ukraine, more have no doubt sprung up as a result. The illegal miners’ collusion with the authorities also means the sector is largely unregulated, making them impervious to any official efforts to transition out of coal. These illegal operations have also been singled out for causing the most environmental damage due to their haphazard non-standard mining procedures.

Indonesia’s own record in phasing out coal is in itself unimpressive. 50 percent of its electricity is generated by coal-powered steam plants. By 2019, it should have capped coal production at 400 million tonnes annually but quietly opted out. Not counting the output generated by illegal mines, the country is expected to churn out 663 million tonnes of coal this year.

Then there is the issue of public support for ditching coal, which is unlikely to happen in the near future. A 2020 YouGov poll found 21 percent of Indonesians did not believe in global warming, the highest percentage of climate change deniers in any country in the world.

The second recipient after South Africa under JETP, Indonesia managed to secure more than double the amount South Africa is to receive under the same deal. While US climate envoy John Kerry was positively brimming with enthusiasm for the deal, calling it “groundbreaking,” a dose of realism is called for.

The JETP loan is meant to have turned Indonesia into an emission-free nation by 2050. But the incestuous links between economic and political interests of the players in the coal sector, coupled with a public that cannot be relied upon to hold power to account when it comes to climate change, should serve as sobering reminders.

Donor countries and institutions would be better served if stringent provisions were put in place within the deal, especially when targets and due diligence are concerned. The US$20 billion should act as a transformative tool that benefits all Indonesians instead of, what seems quite likely, lining the pockets of the so-called “coal oligarchs.”

Johannes Nugroho is a journalist based in Surabaya, Indonesia