This year, Indonesian businesses are ready to deliver on COP26's climate commitments

The stage is set for sustainable energy transition. This was a clear message when President Joko Widodo and the Indonesian and international leaders agreed to set this as one of the top priorities at the recent B20 inception meeting.

This year, Indonesia is hosting the G20 – a strategic multilateral platform connecting the world’s major developed and emerging economies. G20 members represent more than 80% of the world’s GDP but also 80% of the world’s CO2 emissions. Therefore, decisions and commitments made by this group will play a significant role in the global economic recovery as well as climate transition.

As part of the G20, the B20 brings together the global business community to provide recommendations in advance to the G20 Leaders’ Summit in Bali, Indonesia later in this year.

Throughout the discussion, five key themes emerged:

Indonesia set a series of ambitious energy transition commitments in the lead up to COP26. These include committing to 50%+ of its new electricity capacity coming from renewable energy in the next 10 years, not building any new coal power plants beyond those already planned and reaching net zero by 2060 if not earlier. These were made prior to COP26’s coal ‘phase-down’ and it demonstrates that this could be achieved through international public-private partnerships.

President Joko Widodo continued to set a strong ambition for “massive electrification” despite the current starting point where electricity mix is still dominated by coal power for 60%+ of its total capacity. He outlined some of the key opportunities that Indonesia’s energy transition represents; these include delivering on the country’s vast and varied renewable potential (up to 418 GW), exploiting Indonesia’s rich reserves of key energy transition materials such as nickel, bauxite, tin and copper to establishing new industries and starting to retire coal-fired power plants by decommissioning 5.5 GW of capacity.

However, the Indonesian President was also clear on two critical requirements for his country. He called out the importance of “transiting without adversely affecting people and the need for international investment, technology and support.”

As part of B20, the business community has the opportunity to mobilise the private sector and pass along the Glasgow baton to Bali, where the G20 and B20 Summit will take place in November 2022.

To date, 683 of the largest 2,000 public companies have declared net zero commitments. Of these, only 13% are from Emerging Markets and Developing Economies (EMDEs). The recent inception meeting reinforced the vital role that micro, small and medium enterprises play in economies such as Indonesia. They account for more than 60% of the GDP and therefore, supporting their transition to net zero is just as critical.

KADIN, the Indonesian Chamber of Commerce, recently set up its own net zero hub to support Indonesian businesses on their path to pledging their net zero commitments.

A longstanding member of KADIN, Bakrie & Brothers has been championing sustainability and the energy transition. The 80 years old group has embarked on a major transition to pivot towards sustainable and digital business ventures, including EV buses, battery storage, renewable energy, smart prefab housing and fin tech.

Indonesia’s ambition to deliver on energy transition needs to be matched by both investment and support from the international finance and business communities.

In order to meet its net zero targets, Indonesia estimates it will need an average of USD 150-200bn per year until 2030. Along with Indonesia, EMDEs will require more than seven times the amount of today’s capital spending in clean energy on an annual basis by 2030 to ensure the world is on track to reach net zero by 2050.

The good news, as highlighted by Mark Carney during the meeting, is that “The money that is needed is available, with more than 450 of the largest banks, insurers and pensions funds committing to manage their $130 Trillion assets in line with net zero requirements”.

The World Economic Forum’s Mobilizing Investments for Clean Energy in Emerging Economies (MICEE) initiative has been set up to drive collective action and impact by bringing together the public and private sector to accelerate the investments needed in clean energy in EMDEs. KADIN and Accenture are working closely with the World Economic Forum as part of MICEE to unlock financing for clean energy projects in Indonesia.

Besides financing, EMDEs at the beginning of their energy transition journey need technical support to be able to grow their clean energy capacity quickly, as well as transfer skills to train new generations of clean energy workers.

Energy transition leaders can leverage the opportunity to enter new markets with high renewables potential, while implementing industrialised clean energy solutions. For example, the Indonesia’s system value analysis, which Accenture launched at COP26 leveraging the World Economic Forum’s system value framework, recommended that Indonesia could unlock its vast renewables potential by building renewable energy zones (large scale renewable power plants, >500MW) following the successful example of India’s mega solar parks. These have played a key role in enabling India’s exponential renewables capacity growth, by addressing key risks and challenges projects were facing.

Industrialising solar and wind power was one of the key priorities highlighted in last year’s B20 Italy's taskforce on energy, chaired by Francesco Starace, Enel’s Group CEO. During this year’s meeting, he highlighted the importance of accelerating and delivering the ‘inevitable’ energy transition without the same amount of inequality as previous transitions.

The need for a fair and just transition has been a key theme throughout the B20 meeting. It raises the importance of addressing the inequalities and social challenges which may arise as a result of energy transition.

Conversely, there are tremendous opportunities arising from proper planning. For example, in the US, it was estimated that 55% of coal power plant workers could be employed in the solar sector with no re-training, and that the majority of coal power workers could be absorbed in the solar sector at higher median wages. In Indonesia specifically, it is expected that the green economy could create up to 4.4 million new jobs by 2030, as highlighted by the National Development Planning Agency Bappenas.

However, energy transition will affect a wider set of stakeholders which go beyond its direct workforce. It impacts communities, informal economies, and youth who either benefited or would have benefited from, for example, coal power plants. This further reinforces the importance to discover a new lease of life for all the assets which will be retired because of energy transition. This can be done by repurposing former plants or mines into renewable energy projects, as demonstrated by companies such as Enel and EDP in Europe and Latin America.

We know this must be the decade of delivery for the energy transition and we believe this B20 is poised to be the ‘climate’ B20, demonstrating how public and private, local and global, can all work together – particularly in developing and emerging markets – for the world to stay on track for 1.5C.