Indonesia Gradually Belays the Coal Usage as it Eyes Funding

Indonesia is taking steps to amend its green taxonomy, as indicated by its Domestic Financial Services Authority (OJK), aiming to simplify the funding process for the early cessation of coal-fired power plants. This decision comes in the wake of an updated taxonomy for sustainable finance that the Asean Secretariat released in June.

Serving as a comprehensive manual, this document aids Asean nations, enterprises, and investors in crafting and executing sustainable development agendas. According to this revised classification by the Asean taxonomy board, a coal-fired power plant's early retirement can be labeled as either green or amber, contingent on the specific evaluation of the particular facility in question.

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OJK highlighted that this modification in the taxonomy would streamline the acquisition of sustainable financing for projects that seek an early end to coal-power plants. By doing so, it can accelerate and enhance the efficiency of the phase-out operation. OJK stressed that one of the significant challenges hindering the early retirement of coal-power plants has been the shortage of investments and funds. Such early closures entail substantial monetary expenditures, especially when curtailing a facility's functional lifespan.

A case in point has been the delayed takeover of the state-owned PLN's Pelabuhan Ratu coal-power facility by coal manufacturer Bukit Asam, primarily due to the financial implications. Initiated in October 2022, both entities are still in the process of comprehensive evaluation and scrutiny.

OJK has projected that the adjustments to the Indonesian green taxonomy will be finalized by the year's conclusion. Furthermore, under this revamped framework, OJK is contemplating the inclusion of coal-power stations that supply electricity to sectors producing eco-friendly and sustainable commodities, including electric vehicles.

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According to the article by Procurement Resource, Indonesia, guided by its Domestic Financial Services Authority (OJK), is amending its green taxonomy to expedite funding for the early decommissioning of coal-fired power plants. This move, influenced by the Asean Secretariat's revised sustainable finance taxonomy, aims to streamline sustainable financing for such endeavors.

Challenges like funding shortages have previously hindered early plant retirements, as evident in the delayed takeover of PLN's Pelabuhan Ratu coal-power plant. By year-end, the updated taxonomy is expected to be in place, potentially incorporating coal-power facilities that cater to green industries, furthering Indonesia's sustainable ambitions.