Cross-Sector Strategic Collaboration for Methane Mitigation Financing

Starting from the urgency of reducing methane emissions, which contribute up to a third of global warming, Climate Policy Initiative (CPI) Indonesia convened a stakeholder discussion bringing together government, financial institutions, development partners, industry associations, and the private sector to explore opportunities for reducing emissions in the industrial sector, implementation barriers, and financing strategies that can accelerate mitigation action. The urgency of reducing methane emissions aligns with Indonesia’s commitment to actively mitigate the climate crisis through the Enhanced NDC, the 2025–2045 National Long-Term Development Plan (RPJPN), the Golden Indonesia 2045 vision, and participation in the Global Methane Pledge. “Indonesia’s participation in the Global Methane Pledge is an important step to encourage the industrial sector to strengthen waste management planning,” explained Dr. Ir. Haruki Agustina, M.Sc., Director of Climate Change Mitigation at the Ministry of Environment (KLH). KLH has a national waste sector roadmap that has been cascaded to the subnational level and is currently preparing methane mitigation guidelines for the industrial and domestic sectors. For the industrial sector, KLH stressed the importance of cooperation with the Ministry of Industry so that these guidelines can be translated into a more detailed methane mitigation roadmap suited to the characteristics of each industry. In line with this, the Ministry of Industry highlighted methane mitigation opportunities in several key subsectors. This was conveyed by the Directorate of Chemical, Oleochemical, and Feed Industry (IKOP), which sees potential for reducing high emissions from Palm Oil Mill Effluent (POME) by using new, more efficient technology to process Crude Palm Oil (CPO). The Directorate of Forest and Plantation-Based Industry (IHHP) then presented mitigation opportunities in the pulp and paper industry, including through upgrading wastewater treatment installations, utilising sludge as an alternative fuel, and strengthening emission measurement, reporting, and verification systems. This was confirmed by the Biomass Directorate of PLN Energi Primer Indonesia (EPI), which revealed the potential for utilising waste from the industrial sector to meet bioenergy needs in supporting the low-carbon energy transition, de-dieselisation, and regional electrification. Industry input was then provided by the Indonesian Pulp and Paper Association (APKI), KIS Group, and the Indonesian BioMethane Society Foundation (IBMS). They noted that project implementation still faces challenges regarding licensing, contract structures, overlapping environmental regulations, Environmental Impact Assessment (AMDAL) requirements, and limited access to financing. More specifically regarding financing, PT Sarana Multi Infrastruktur (SMI) and Indonesia Infrastructure Finance (IIF) emphasised the importance of cash flow certainty, credible buyers, and bankable project structures. IIF also presented opportunities from the Blended Finance Delivery Mechanism (BFDM) programme with potential grant funding of around US$45 million. The Climate Bonds Initiative further highlighted the growing interest of global investors through green bond instruments to finance methane mitigation projects that meet sustainability standards. Targeted financing strengthened by strategic cross-sector and stakeholder collaboration is key to scaling up methane mitigation action in Indonesia. “Indonesia has a great opportunity to accelerate methane emission reductions in the industrial sector while creating energy independence and security through the utilisation of waste into valuable energy. However, to attract large-scale financing, regulatory certainty, ease of licensing, bankable contract structures, credible measurement, reporting, and verification mechanisms, and financing instruments capable of lowering risk for investors are needed,” said Berliana Yusuf, Senior Analyst at CPI Indonesia. Through this activity, CPI Indonesia encourages stronger collaboration between the government, financing institutions, and industry players to develop pilot projects, strengthen technical assistance, and open financing pathways that can increase the scale of methane emission reductions in the industrial sector. With the right financing strategy, methane mitigation can become an important opportunity for Indonesia to strengthen climate action, enhance industrial competitiveness, and support the transition towards a low-carbon economy.