Green Investment Key to Accelerating Industrial Decarbonisation in Indonesia
Efforts to decarbonise industry in Indonesia require more than just corporate commitment. Project readiness, access to finance, and collaboration between industrial players and financial institutions are critical factors in accelerating the transition towards a low-carbon economy amidst increasing pressure from global emission standards and carbon trading.
This issue was the primary focus of the Project Developer and Financing Institution Business Forum: Accelerating Climate Investment for Industrial Decarbonisation in Indonesia, organised by the Indonesia Business Council for Sustainable Development (IBCSD) alongside Sustainable Energy Transition in Indonesia (SETI) in Jakarta. The forum brought together representatives from industry, government, financial institutions, and technical organisations to discuss the challenges and opportunities of investing in low-carbon projects.
“One of the challenges we currently face is how to bridge industrial investment needs with appropriate funding schemes so that more decarbonisation projects can become bankable and realised. Through this forum, we aim to open a space for dialogue between project developers and financial institutions, so that the gap between implementation needs and access to funding can be mapped together,” said IBCSD Executive Director Indah Budting, as quoted on Saturday.
At the national level, the strengthening of the energy transition and the carbon trading ecosystem is beginning to open financing opportunities for industrial decarbonisation actions. Globally, the dynamics of international trade and the implementation of Environmental, Social, and Governance (ESG) standards are increasingly positioning carbon emissions as a strategic factor in industrial competitiveness.
The European Union’s Carbon Border Adjustment Mechanism (CBAM) policy is also gaining attention among national industrial players. This policy imposes carbon cost adjustments on high-emission intensity imported products, thereby encouraging industries to accelerate emission reductions.
Hery Kuswanto, Head of the Fund Development Division at the Directorate of Fund Collection and Development of the Environmental Fund Management Agency (BPDLH) under the Ministry of Finance, stated that financial support can be provided through institutional strengthening and the development of greenhouse gas emission trading mechanisms for the industrial sector.
“Funding support for industrial sector decarbonisation can be achieved through governance strengthening, including supporting the Ministry of Industry in developing mechanisms and institutions for greenhouse gas emission trading in the industrial sector. Moving forward, guarantee schemes and financing instruments are expected to help green transition projects, which are still perceived as less bankable, to become more eligible for financing,” said Hery.
Meanwhile, Krisman Riyadi, an expert investment administrator from the Directorate of Promotion for East Asia, South Asia, Middle East, and Africa at the Ministry of Investment and Downstreaming/BKPM, assessed that project readiness is a vital factor in attracting investors. Green transition projects must be developed into sustainable investment opportunities that are ready to be offered to global investors.
“In addition to policy support, the future challenge is how green transition projects can be developed into sustainable investment opportunities that are ‘ready to offer’. The government continues to aggressively promote sustainable investment, particularly in the renewable energy and green industry sectors, to accelerate the fulfilment of decarbonisation investment needs in Indonesia,” said Krisman.
In addition to the plenary session, the forum also featured group discussions addressing industrial energy efficiency, renewable energy projects, as well as the circular economy and waste management. The discussions were directed towards identifying investment needs, project risks, and opportunities for financing schemes that align with the characteristics of each sector.
Several key challenges emerged during the discussions, including evolving regulations, the high cost of green technology investment, technical hurdles in establishing emission baselines and data verification, and the lack of a collaborative ecosystem between regulators, industry, and financial institutions.