Eco-Collaborations: How Global Partnerships are Fueling Indonesia’s Green Technology Drive

Indonesia is making significant steps in green technology development through global partnerships, focusing on renewable energy, environmental conservation, and sustainable development goals. The country is leveraging international collaborations to meet its environmental and energy objectives.

The agreement was signed by Indonesia’s Energy Minister Arifin Tasrif (right) and IRENA Director-General Francesco La Camera in the margins of COP26 in Glasgow, Scotland as countries double down on climate action largely through measures to decarbonize the energy system. Indonesia holds G20 Presidency in 2022 (photo courtesy IRENA).

A key international initiative is the partnership between Indonesia and the International Renewable Energy Agency (IRENA). This collaboration supports Indonesia’s ambitious goal to increase its renewable energy mix to 23% by 2025. Indonesia, being the largest energy consumer in the Association of Southeast Asian Nations (ASEAN), accounts for nearly 40% of the region’s total energy use. The country possesses considerable potential for solar, geothermal, wind, and hydropower resources, alongside a strong bioenergy industry, positioning it well for a transition to a low-carbon energy system. IRENA has been instrumental in this transition, offering policy advice, facilitating international partnerships, and sharing best practices through its Renewable Energy Roadmap (REmap) program. The program identifies potential areas across Indonesia for renewable energy development and investment, aiding the country’s National Energy Policy implementation. A more ambitious energy transition could lead to a 0.5% increase in GDP, a 2.6% rise in economy-wide jobs, and an 8.1% boost in social welfare by 2050 compared to the current energy scenario. Employment in the renewable energy sector could significantly increase, potentially reaching around 2 million by 2030 and 2.5 million by 2050, primarily in bioenergy and solar technologies

The partnership between the European Union and Indonesia shows the commitment to green inclusive development. This policy-driven cooperation forms a part of their broader strategic partnership, with the EU contributing through the Multiannual Indicative Programme 2021-2027. This program dedicates EUR 20 million in grant funding to support partnership projects targeting green development within Indonesia.

Moreover, the Just Energy Transition Partnership (JETP), unveiled at the G20 Summit in Bali, highlights a groundbreaking commitment. This initiative aims for an ambitious energy transition in Indonesia, targeting net zero emissions in the power sector by 2050, the expansion of renewable energies, and the phasing down of coal-fired electricity generation. The partnership expects to mobilize €19 billion in public and private financing, with the EU and its member states, along with international partners like Canada, Japan, Norway, the UK, and the US, contributing significantly to this fund. This support extends beyond financial aspects, involving technical assistance and efforts to explore renewable energy potentials, such as offshore wind power, and to enhance energy connectivity at the ASEAN level​​.

One of the notable collaborations is with China, where the Indonesia Investment Authority has set up a green electric vehicle (EV) fund worth at least $2 billion. The primary objective of this green EV fund is to invest across the EV value chain, capturing the rapidly growing market fueled by global commitments to reduce greenhouse gas emissions. This project, with a total investment of $6 billion, aims to cover the spectrum from nickel mining and processing to battery material production, as well as battery manufacturing and recycling. Indonesia aims to develop its own EV and battery industries. The country has ambitions to sell 2.1 million electric motorcycles and 400,000 electric cars by 2025​​.

For international businesses, these collaborations mean a greater emphasis on sustainability, environmental compliance, and green technology. As Indonesia partners with global entities to meet its ambitious green goals, international companies must align their products, services, and practices with these objectives to participate in the Indonesian market. This alignment might involve investing in cleaner, more sustainable technologies, adopting greener practices in manufacturing and operations, or ensuring that supply chains are environmentally friendly and socially responsible. In terms of procurement, these global partnerships shows a shift towards more sustainable procurement practices. Companies looking to do business in Indonesia are now encouraged, or in some cases required, to source materials and products that meet higher environmental standards. This could mean prioritizing suppliers who use renewable energy, adhere to strict environmental regulations, or support local communities and biodiversity. International businesses must therefore reassess their procurement strategies to ensure they can meet these new standards, which might involve developing new supplier relationships or investing in local production capabilities.

For international businesses, the collaborations with Indonesia highlight a shift towards sustainability and green initiatives. Companies entering the Indonesian market are now expected to integrate environmental sustainability into their products, services, and operational practices to align with the country’s green objectives. This shift requires the adoption of sustainable technologies, eco-friendly manufacturing processes, and responsible supply chain management. Moreover, these global partnerships are reshaping procurement practices, urging companies to source materials that comply with higher environmental standards. Businesses may need to forge new supplier relationships or enhance local production methods to meet these evolving requirements, ensuring support for renewable energy, adherence to environmental regulations, and contribution to community welfare.