Our award-winning reporting has moved

Context provides news and analysis on three of the world’s most critical issues:

climate change, the impact of technology on society, and inclusive economies.

Part of: Coal and climate change
Back to package

Japan, China, S. Korea bankroll Indonesia's coal despite Paris pledge

by Thin Lei Win | @thinink | Thomson Reuters Foundation
Wednesday, 19 July 2017 11:19 GMT

Expanding Indonesia's use of coal - a major driver of climate change - would not be possible without the foreign money, an analysis says

By Thin Lei Win

BANGKOK, July 19 (Thomson Reuters Foundation) - Japan, China and South Korea are bankrolling environmentally destructive coal-fired power plants in Indonesia despite their pledges to reduce climate-changing emissions under the Paris climate deal, analysts told the Thomson Reuters Foundation.

Australia-based environmental finance organisation Market Forces said it analysed 22 coal power deals in Indonesia since January 2010 and found state-run financiers for the three nations were involved in 18 of them.

In all, foreign banks, both commercial and state-owned, are providing 98 percent of the debt finance for the projects, amounting to $16.7 billion.

Indonesian banks provided just 2 percent of the financial resources for the projects, according to the Market Forces analysis published this week.

Japan, China and South Korea "are on board with the Paris climate change agreement. They make all the right noises politically," Julien Vincent, executive director of Market Forces, told the Thomson Reuters Foundation in a phone interview.

But "these are the same governments underwriting new coal development elsewhere", he said, calling the actions "egregious".

The landmark 2015 Paris Agreement, which came into force in November, seeks to limit the rise in average world temperatures to well below 2 degrees Celsius above preindustrial times.

Coal is the most polluting of the major fossil fuels and scientists say its use must be rapidly phased out to give the world a chance of meeting its goals to curb climate change that is stoking more deadly heatwaves, floods and sea level rise around the world.

Indonesia, Southeast Asia's largest economy, is already one of the world's biggest emitters of greenhouse gases.

Market Forces said the Export-Import Bank of China (China Exim) was involved in seven of the coal power deals, the Japan Bank for International Cooperation (JBIC) and the China Development Bank (CDB) in five deals each, and the Korea Development Bank (KDB) in one deal.

The Export-Import Bank of Korea (Korea Eximbank) is also involved in one deal, together with JBIC, it said.

JBIC declined to comment on the projects it is involved in in Indonesia but said in an e-mail that emerging countries are looking to expand their power sources in response to surging demand and are using coal due to its economic efficiency and reliability.

"JBIC, as a policy-based financial institution of Japan, will work in tandem with the Japanese government to financially support projects which leverage on highly-efficient Japanese technology and know-how in line with the host country's context," the bank said.

Korean Eximbank declined to comment.

Multiple calls to the public relations departments of CDB and China Exim went unanswered. KDB did not respond to emails seeking comment.

On their websites, the banks say they have environmental guidelines for projects they fund, and are committed to protecting the environment and supporting green energy.


In supporting the coal projects, the banks offer terms that are low-interest and long term, making the projects possible. The plants "would not exist without external funding," Vincent said.

Globally, many countries are shutting down or putting on hold plans for coal-fired power plants as costs for wind and solar power plummet. China has been leading the charge, in part to limit pollution and climate change - though it has also been financially backing new coal plants in Pakistan.

The deals in Indonesia between January 2010 and March 2017 represent 21 coal power projects with a combined capacity of 13.1 gigawatts.

Market Forces said its analysis of Indonesia's latest Electricity Supply Business Plan from 2017 to 2026 - where coal is the largest source of energy at 50 percent - shows there is likely to be a significant oversupply of energy.

Hozue Hatae, a researcher with Friends of the Earth Japan, which has been working with communities in Indonesia, said demand for electricity has not been increasing as much as estimated.

A thorough analysis should be done to determine whether the plants are necessary and whether there are sensible alternatives, Hatae said.

Without that, the health and livelihoods of communities in Indonesia would be put at risk for "an exercise in temporarily extending the market for coal mining and coal power generation", Vincent said.

Kimiko Hirata, international director for Tokyo-based environmental group Kiko Network, agreed.

"We have seen lots of human rights violation and environmental impacts caused by (coal-fired power projects) in the past," Hirata said via email.

(Reporting By Thin Lei Win, Editing by Laurie Goering; Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's rights, corruption and climate change. Visit www.trust.org)

Our Standards: The Thomson Reuters Trust Principles.