Strengthening Indonesia’s JETP : optimising clean energy finance and investment to achieve net-zero emissions

Abstract

Indonesia faces a major challenge in realizing a just energy transition towards the Net Zero Emissions (NZE) target by 2060, amid the dominance of fossil energy and bureaucratic complexity. Through the Just Energy Transition Partnership (JETP) initiative, with a funding commitment of USD 20 billion, Indonesia seeks to accelerate the use of renewable energy. However, the implementation of the Clean Energy and Investment (CEFI) policy still lags behind neighboring countries, such as Vietnam and Thailand. Based on existing research, this study identifies barriers in access and allocation of CEFI, and formulates optimal strategies to strengthen JETP in accelerating inclusive and equitable energy transition. This study uses a systematic literature review (SLR) from 72 selected publications, interesting findings show that the limitations of green financial infrastructure, regulatory uncertainty, exchange rate risk, and the performance of off-takers such as the National Electric Company (PT PLN) and state-owned oil and gas companies (PT Pertamina) are the main factors in the slow achievement of net-zero emissions. In addition, social inequality and lack of community involvement in clean energy projects also add to the achievement of the energy transition in the net-zero emission target. Therefore, this study provides recommendations for the need for pro-investment policy reform, strengthening existing legal frameworks, developing innovative financial instruments, and strengthening collaboration between central and local governments, the private sector, and local communities. The integration of CEFI and JETP is believed to accelerate the adoption of clean technology and ensure that the energy transition in Indonesia takes place in a sustainable and equitable manner, so as to contribute to reducing national and global emissions.