Despite Japanese banks’ newly published coal policies indicating restrictions to coal financing, the report ‘Uncertain and Harmful:Japanese coal investment in Indonesia’ shows the flow of money to coal has not stopped.[2]Currently eight new coal power units with Japanese funding are under construction in Indonesia while 4 more units are in the planning stage. Several major Japanese institutions, including the country’s biggest banks - MUFG Bank, Mizuho Bank and Sumitomo Mitsui Banking Corporation -- are involved in funding these projects.
“Japan is a country of high technical knowledge and resources. Their investments are welcome in Indonesia, but if they’re going to invest in energy they should help us build a modern system, one that’s in line with global climate and energy trends. We need investment in demand management, energy efficiency and renewables instead of coal,” said Tata Mustasya, regional climate and energy campaign coordinator of Greenpeace Southeast Asia.
Contrary to the Japanese insistence that investments are intended to help Indonesian people gain access to electricity, the report finds that 8 out of the 12 new coal projects funded by Japan are on the Java-Bali grid, where access to electricity is at its highest, at approximately 99%. Areas with low electrification rate have no ongoing projects.
The overemphasis on the Java-Bali grid has created an overcapacity problem. In November 2017, the CEO of the sole state-run power company PLN said 40% of electricity is unused. Due to the overcapacity and the depreciation of the Indonesian currency PLN is in serious financial trouble, which has caused the Indonesian government to delay several coal projects.
“Japanese funders of coal projects need to realize they’re facing a rising financial risk from the overcapacity situation, delays of capacity additions and increasing demands for air pollution control in Indonesia. While at the same time, the cost of solar and wind is rapidly decreasing globally, and it would soon be lower than cost of coal power in this country. It is time for them to move their involvement toward a cleaner and renewable energy to be in line with the rest of the world.” said Elrika Hamdi, Energy Finance Analyst of The Institute for Energy Economics and Financial Analysis (IEEFA).
A delegation from Japan is present at the ongoing UN climate change conference COP24 in Poland, where discussions will take place in the wake of the Intergovernmental Panel on Climate Change report (IPCC).
“The science from the IPCC report from this autumn is crystal clear: to stay within 1.5 degrees global warming we have to cut two thirds of coal use by 2030 and phase it out almost completely by 2050. Both Japan and Indonesia have committed to the Paris Agreement, but ongoing coal projects in both countries speaks of a serious lack of understanding on the urgency to cut emissions. If Japan and Indonesia wish to honor their commitment to Paris, both countries need to modernise their approach to energy fast.” said Hanna Hakko, Energy Campaigner, Greenpeace Japan.
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Notes:
[1] ‘Uncertain and Harmful: Japanese coal investment in Indonesia’
[2] Coal policies of the Japanese three mega banks:
MUFG Bank
Mizuho bank
Sumitomo Mitsui Banking Corporation