Indonesia seeks to shift towards green economy

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Indonesia aims to double its use of renewable energy in 10 years. It plans to have 30,000 megawatts of power generated from geothermal, hydro, wave and solar energy.

But the high initial investment in green infrastructure and limited state budget is a major deterrent. And Jakarta is inviting private sectors to chip in as the country attempts to shift towards a green economy.

The private and public sectors gathered in Jakarta to discuss how to make Southeast Asia’s largest economy more sustainable, inclusive and environmentally friendly.

The high growth Indonesia experienced in the last decade or so has come at a high cost. While it produced more palm oil and exports more coal than anyone else in the world, it has also destroyed its tropical rainforests.

The World Bank estimated that in 2009, Indonesia had forgone up to 10 per cent of GDP annually due to environmental degradation.

Over three months last year, forest fires caused an estimated US$1 billion in damage. This was mainly due to the conversion of peat land to agriculture and timber plantations.

The Indonesian government has since committed to change course, including imposing a moratorium on forest concessions and setting carbon emission targets. And it wants to do more; it is looking to increase renewable resources in an energy mix that is currently dominated by coal.

Indonesian Vice President Jusuf Kalla said: “Currently, we have 52,000 megawatts. In 10 years, we will have 120,000 megawatts. Renewable energy should make up 30,000 megawatts. Now it is only 12,000 megawatts.”

However, it is not going to come cheap. Green technology could cost up to four times the cost of a coal-powered power plant.

But the World Bank believes those challenges can be overcome.

Sri Mulyani Indrawati, managing director of the World Bank, said: “Cambodia and Vietnam have integrated green growth plans into economic policies and market-based incentive mechanisms. Thailand’s most recent multi-year development plan includes green growth strategies, including the goal to reduce energy intensity by 25 per cent by the year 2030. Malaysia has developed and implemented a law on climate change and a law to encourage renewable energy. Indonesia can learn from these experiences.”

The World Bank believes that East Asia could lead in green development despite it needing some US$8 trillion in infrastructure investment till 2020. And it welcomes new players such as the Asian International Investment Bank (AIIB) and New Development Bank to play their role.

Indonesia needs an estimated US$450 billion to build roads, railways, ports and power plants to revive its economy which has shrunk in the last two years. And the state budget can only cover 30 per cent. The rest will have to come from the private sector and international financial institutions such as the World Bank and the AIIB, even as it costs more to turn the brown economy green.




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