By: I Dewa Made Raditya Margenta (Research Staff at Purnomo Yusgiantoro Center (PYC)).
Filda C.Yusgiantoro (Senior Researcher at Purnomo Yusgiantoro Center (PYC)).
China – Indonesia’s relationship is likely to get stronger amid the decision made by the G7 to halt coal projects globally. Even so, these Asia giant nations should deliver a solid message to influence other nations in catalyzing the global clean energy transition and fostering the global climate agenda.
Disagreements among G20’s members to end international funds to coal and deciding phase-out timeline has opened a new chapter in the global energy sector, leading to the COP 26 in Glasgow this November. In the G20 meeting in Naples, the members agree to accelerate the clean energy transition to abate climate change. Yet, they failed to reach a consensus because of the discord from Russia, China, Turkey, India, and Saudi Arabia. Nonetheless, this disagreement will not stop most of G20’s members from ending the widespread coal funding worldwide.
Previously, the commitment of G7 to stop funding coal projects globally is a crucial step to limit the rise in global temperatures to 1.5 degrees Celsius above pre-industrial times. The G7 members also settled a global partnership to accelerate zero-emission vehicles utilization, decarbonize the power sector by the 2030s, and end international fossil-fuel backing. On the one hand, this decision pressures other countries to consider the configuration of their current and future energy mixes. On the other hand, it could drive Asian nations, including Indonesia, to tap China to fund its coal project.
China has become one of Indonesia’s most important economic and development partners. According to Indonesia’s Investment Coordinating Board (BKPM), China has invested USD 4.8 billion or 16.7% of total foreign direct investment in Indonesia. With restrictions made by the G7, China’s influence in Indonesia may strengthen, especially in supporting coal-based energy programs.
China is one of the essential partners in coal projects in Indonesia. According to Global Energy Monitor, China has financed almost USD 16 million to generate nearly 10 GW of electricity from coal-fired power plants.
Although Indonesia will start phasing out coal-fired plants in 2030, transforming coal into DME or synthetic fuel remains crucial to reduce LPG and fuel import dependency. Also, Indonesia plans to produce hydrogen energy which is sourced from coal. Thus, Indonesia will turn to China for capital provision. Meanwhile, the market opportunity in Indonesia offers a potential increase to China’s state income.
However, suppose China decides to support Indonesia’s downstream coal program, global pressure on questioning Indonesia’s commitment to the Paris Agreement may arise. This should be avoided to maintain its international relations stability.
Instead, China’s back on coal projects undoubtedly faces more pressure globally, and it may lead China to stop fossil fuel funding.
Thus, China and Indonesia could opt to increase cooperation for clean energy programs in Indonesia, such as electric vehicles, Li-ion batteries, and solar projects. Both countries can also exert a solid message to Asian nations considering their substantial influence on the Asian and global economies.
China – Indonesia, the Asian mighty giants
China is currently the largest developing country and the world’s second-largest economy. The Belt and Road Initiative (BRI), which has supported more than 70 countries and organizations, illustrates China’s global leverage. This strong initiative, which aims to promote economic development and inter-regional connectivity, depicts how China’s power can influence other countries’ development.
Therefore, the disagreement in the previous G20 summit will be the perfect time for China to stop funding fossil fuel projects and give supports to green projects.
This decision will strengthen China’s global influence. It also aligns with Xi Jinping’s pledge on China’s carbon neutrality by 2060 and the introduction of carbon emission trading as China’s commitment to the Paris Agreement.
Meanwhile, Indonesia possesses excellent economic potential, which will be crucial for its 2045 goals to be a developed country. Also, Indonesia already set the net-zero target date at 2060. To achieve these goals, Indonesia should start focusing on green economic recovery for sustainable development. Thus more prolonged fossil fuel utilization will be undesirable considering its negative externalities to the environment.
Indonesia’s plans to introduce carbon tax and carbon trading schemes will encourage renewable energy to be more economically preferable and catalyze the energy transition. If Indonesia can successfully implement its energy transition, it can set the example for the other Asian nations. Besides, Indonesia is the most influential state within ASEAN and has solid bilateral relationships.
Joint commitment and strategic regional partnership
Given the enormous influence of these two countries globally and in the Asian region, now is the right time to affirm their commitment to the global climate agenda. Therefore, Indonesia and China should affirm their domestic targets on clean energy-environmental programs. Their strategic partnership is also crucial to support each nation’s goals.
In addition, China and Indonesia can collaborate with other nations within their regions to achieve common goals in supporting each climate agenda. The closest step that can be taken is to strengthen diplomatic relations in the Asian region by focusing on the economic-environmental and socio-economic aspects.
For this reason, it is interesting to see what strategic steps Indonesia and China will take ahead of COP 26 in Glasgow. Their commitment and influence are crucial to accelerating climate issues abatement, unless these are only weasel words.
Disclaimer: This opinion piece is the author(s) own and does not necessarily represent opinions of the Purnomo Yusgiantoro Center (PYC).
This opinion has been published on Modern Diplomacy
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