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ADB will not finance dirty energy projects
Indonesia has been exposed to more frequent extreme weather changes believed to be caused by climate change
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em>Indonesia has been exposed to more frequent extreme weather changes believed to be caused by climate change. The government plans to make its development strategy more environmentally friendly by producing fewer emissions in boosting its economy. The Jakarta Post’s Adianto P. Simamora interviewed David McCauley, principal climate change specialist of the Asian Development Bank (ADB) about climate financing issues needed for a low-carbon economy on the sidelines of climate talks in Cancun, Mexico. Below are the excerpts.
Question: What is the economic cost of climate change in Indonesia?
Answer: We don’t yet have a figure for economic cost. We still rely on estimates made by the World Bank analysis on economic cost on climate change adaptation but it is not detailed on a country level. For the Asia-Pacific region, predicted economic cost is around US$10 billion per year for the region to adjust to climate change over the next two decades.
That is a huge drain on the development process and it becomes extremely important for consideration in developing planning in policy-making.
The ADB is beginning to do some analyses by sector to get a figure for economic cost. We are looking at those most vulnerable sectors such as agriculture, water and transportation, especially coastal infrastructure. We are also looking at the cost impact of climate change such as on health.
We expect to have some sectors’ data ready by the end of next year.
David McCauley: JP/Adianto P. Simamora
The Indonesian government plans to shift to a low-carbon economy. Do you think it is feasible to balance economic growth with emissions?
I believe it could be implemented but there must be some changes in policy structures in order to give stronger incentives for renewable energy.
The three largest sources of emissions in Indonesia are from forest and land use, energy and transportation. The government is clearly aware of that and has taken measures to address it, including its cooperation with international communities.
President Susilo Bambang Yudhoyono has also set up the REDD-plus taskforce to look at cross-sector problems to slow down deforestation and look at emissions from peatland and natural forests.
For the energy sector, Indonesia has one of the world’s largest potentials for geothermal power. The development of geothermal in Indonesia has been a priority and the ADB is helping with investment by financing it from our own resources and from the climate investment fund or clean technology fund with a total of $400 million.
In terms of transport, we put more emphasis on public transport. Therefore, it has to be sector by sector of the three most important areas.
One problem in shifting to a low-carbon economy is climate financing. What is your comment?
A lot of attention has been given to forest and land-use. Norway has pledged $1 billion in resources and there is also strong bilateral support from Australia, the United States, Germany, Japan and from multilateral support from agents of the climate investment fund. The ADB is working with the World Bank and the government of Indonesia.
We have worked through the investment program in cooperation with the World Bank and Partnership to provide between $60 million and $80 million, mostly in grants. We are working with the REDD taskforce and it should be coordinated closely with Norwegian funding.
In REDD-plus, the government should able to generate external financing of between $400 million and $450 million for the next three years. But I don’t think there will be any problems in finding financing for the REDD development phase.
In the energy sector, we are working to provide financing on geothermal as well as energy efficiency.
Beginning next year, the ADB will join the climate change loan program, which has been in operation for two years with support from Japan, France and the World Bank. It will provide direct financing for the Indonesia development program that was linked to measures to take in the area of climate finance.
Investment in the transportation sector is a little harder because there are a lot of different types of investment. In urban areas, for example, city planning is not just from central government, we have to work with the city administration to think through the city planning to reduce private cars, such as in the case of the busway project in Jakarta. It is a little complicated to organize.
Some NGOs have protested ADB policies in financing coal-fired plant projects. What is your comment?
We recognize many countries will continue relying on fossil fuels for some years to come but we will help them move away from relying on them.
The approach is to look at the energy strategy of the country and we only consider financing projects on fossil fuels if they meet two criteria.
The first is the project should be part of the country’s long-term strategy toward a low-carbon energy sector in the country.
The second is that it should be used to introduce technology that is more efficient. If they are going to burn fossil fuels, it should be done with the most efficient technology and better still, they should reduce their reliance on coal over time.
But at present, the ADB is not providing much financing to coal-fired power plants. We don’t have a big portfolio on power plant projects for consideration in the future because of the difficulties in meeting this criteria.
