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India deal also floated, documents reveal, but all three face major hurdles.
An employee works on a truck filled with coal at the Karya Citra Nusantara (KCN) Marunda port in Jakarta | Adek Berry/AFP via Getty Images
BY KARL MATHIESEN AND JACOPO
The G7 and its partners have made multi-billion dollar offers to wean Vietnam, Indonesia and India off coal — but it has yet to convince emerging economies to drop the dirtiest fossil fuel.
The three deals have been under negotiation through much of 2022 and are being modeled on an earlier, $8.5 billion deal to shut down South Africa’s coal industry, dubbed a Just Energy Transition Partnership (JETP).
It’s hoped that at least two new partnerships might be unveiled during the COP27 U.N. climate talks, which start on November 6 in Egypt. Discussions with Vietnam and Indonesia have advanced to the point where initial cash offers of around $5 billion and $10 billion, respectively, have been made, according to reports from the EU’s diplomatic service for the Council of the EU, dated October 24 and seen by POLITICO. A person familiar with the matter said the numbers attributed by the EU to the deals may have changed.
Talks with India, on the other hand, have not progressed as far, with the government in Delhi keener to talk about backing for renewable energy than phasing out its coal industry. “More time might be needed to conclude a JETP, with progress more likely under the Indian G20 presidency,” one report said.
The donor group for the Vietnam and Indonesia deals is the G7, Norway and Denmark. New Zealand is also considering joining the Indonesia deal.
The cash offers are combinations of public and private finance as well as technical assistance. But raising public funds for climate efforts abroad has become increasingly challenging even for the world’s richest countries as inflation, rising energy costs and the war in Ukraine add to the strain on treasuries.
The European External Action Service (EEAS) reported that the deal being brokered with Indonesia by the U.S. and Japan was endangered by a coal power project in the province of Northern Kalimantan. Indonesia’s government approved the 5-gigawatt “captive coal-fired facility” despite the donor group’s “consistent position” that if this project were to move forward the JETP would be off the table, the EEAS said.
As part of “robust” talks led by U.S. Treasury Secretary Janet Yellen and climate envoy John Kerry, the donors are now exploring how solar and battery storage might replace the coal plants.
A meeting in Washington on October 14 “confirmed the willingness of both sides to successfully launch the JETP, nevertheless some major differences still exist,” said the EEAS report. Media reports citing Indonesian think tanks have said the government in Jakarta expects to announce the deal at the G20 leaders’ summit in Bali, which runs in the second week of COP27.
The donors have told Indonesia they should aim for a 2030 peak in power sector emissions before heading to zero by 2050-2055.
But Indonesia has objected to a proposed timeline for rolling out renewable energy and cutting coal subsidies, the EEAS said. Jakarta has also demanded more money to accelerate its retirement of coal plants.
The donors have also asked for reforms that stamp out protectionist policies, coal subsidies and regulatory uncertainty. But the EEAS report said that the talks had actually worsened on these aspects: “Indonesia starts [to] deviate from the previous constructive position on needed policy reforms.”
In Vietnam, a major stumbling block is money. Hanoi expects something in line with the South African and Indonesian deals, the EEAS report said, rather than the $5 billion on the table. The EU and U.K. are leading the talks and have suggested that more money may come later.
They have told Vietnam they want the deal to target a 2030 peak in power emissions and for coal to peak at 25 GW in 2025. It should also include a reduction in Vietnam’s pipeline of new coal power projects, currently the world’s third largest, and a target of at least 60 GW for renewable energy by 2030.
“Right now we’re working very hard with Vietnam to get Vietnam to do what is sensible regarding the transition to energy,” Kerry told reporters on a call Wednesday. “Unfortunately, in Vietnam some forces are fighting to keep coal, and coal is doing most of the damage that we have today in the world in terms of the climate crisis.”
The European Commission declined to comment on the leaked documents and the U.S. State Department did not respond before publication. The governments of Indonesia, U.K. and Vietnam were contacted for comment.
Kerry said countries that failed to jump to renewables now risked being economically damaged: “This is the trend. This is the future. And we need more countries to embrace that future and make this transition happen.”
G7 offered Vietnam and Indonesia $15B to drop coal. They said ‘maybe’
India deal also floated, documents reveal, but all three face major hurdles.
www.politico.eu
