Friday, May 27, 2016

Why coal is a bad bet for Indonesia's future -Countries around the world, from the US to China, are turning their back on coal


This month, across the world, people are standing up for a future without fossil fuels.  The Break Free movement envisages a world powered not with the dirty energies of coal and oil, but with renewables – solar, the wind, geothermal and tidal energy. 

Countries around the world, from the US to China, are turning their back on coal and investing instead in renewable energy. 

China’s National Energy Administration has told all but three provinces to suspend approvals for coal-fired power plants – affecting 90 percent of new capacity.  There is a fundamental shift happening in the Chinese economy, which means that not only will China’s need for coal imports continue to fall, it might even become a coal exporter – in direct competition with Indonesia.

India too, once a huge market for Indonesian coal, is cutting coal imports, down by 34 percent in 2015 compared to the previous year.  With the Chinese and Indian markets shrinking, who will be left to buy Indonesia’s coal? 

Coal exports usually subsidized domestic coal prices.  Now those exports are disappearing.  Most mining companies are cutting their output, and after years of soaring profits, they are now asking the government for handouts.

Meanwhile, the renewable energy market is booming. Renewables supplied 90 percent of the world’s new energy capacity last year, and can compete on cost with coal in most markets.  That’s why state electricity company PLN is switching 8 GW of its capacity to renewables.

The cost of developing renewable energy in Indonesia over the next ten years is Rp 260 trillion ( US$19.1 billion ). It sounds excessive.  But it’s only one-tenth of what has been spent on subsidies for fossil fuel-based energy over the last ten years.  So a renewable energy future is within Indonesia’s reach.

But instead of targeting this goal, there are plans to build more and more coal-fired power plants.  Some of the same countries that are saying “no” to coal at home are investing in coal-plants in Indonesia, even selling us their old, unwanted technology.

And no wonder the Chinese and Japanese are queuing up to sign deals for building coal power in Indonesia.  They get a 30-year power purchase agreement from PLN, backed by the Indonesian government.  Indonesian taxpayers are being locked-in to pay for dirty energy for decades to come.

It’s a double hit for the Indonesian people, who will also have to carry the cost of paying back loans from multilateral development banks for these coal-fired plants.  According to preliminary research by the Bank Information Center ( BIC ) and Greenpeace, between 2007 and 2015, USD 1.4 billion was approved in loans for energy projects, nearly all of which had gone to fossil fuels.                

These loans are supposed to help countries move to a low-carbon development path to better protect the environment. 

But that’s not happening in Indonesia.  The money is instead supporting carbon-heavy infrastructure, which will be with us for decades, regardless of the wishes of local people as we have seen in the development of the Batang coal power plant.  It is just one of many power plants being supported by international development loans and guarantees, backed by global multilateral development banks, like the World Bank and the ADB, and financiers like JBIC. The bank’s president, Jim Yong Kim, said this month that if all coal plants in the south and southeast Asia go ahead, “we are finished […] it would spell disaster for us and our planet”.

The World Bank needs to listen to its president’s warning.  Bank lending for development must prioritize low-carbon development over fossil fuels.  All multilateral banks must cut incentives and guarantees for carbon-intensive projects in Indonesia. 

It is time for us to divest in coal.  There is another energy future which beckons – one that is cheaper, healthier and better for all Indonesians.  We must break free from coal.

Arif Fiyanto is climate and energy coordinator at Greenpeace Southeast Asia


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