Indonesia Must Prepare to Lead the G20 Energy-Climate Agenda

For the first time ever, the group of the largest twenty economies (The G20) had arranged an Energy and Climate Ministerial Meeting under the presidency of Italy. The meeting, which was a crucial step ahead of this year’s United Nations Climate Talk known as COP26, has successfully generated a Joint Energy and Climate Communiqué consisting of fifty-eight points surrounding commitments and strategies for the clean energy transition.

Nevertheless, the Communiqué lacked substance and ambition, as the ministers have failed to agree on setting a date of phasing out unabated coal and stopping finance for fossil fuels projects. There was also a disagreement regarding how urgent climate action is, with some countries aimed to cap temperature rise at 1.5 degrees within a decade, while others sought to do so by 2050 as agreed in Paris Agreement.

The disagreements left the G20 to discuss this matter at the next summit in October. Despite the significant progress that has been made, there is a growing pessimism that this year’s summit will fail to produce a substantive and ambitious energy-climate agreement.

Shall the mentioned scenario arrive, Indonesia will be grappled with complex challenges ahead. Taking the next G20 Presidency, Indonesia will need to prepare adequate measures to set up agreements on highly contested matters.

The State of Play at the Energy and Climate Ministerial Meeting

The G20 Energy and Climate Ministerial Meeting had brought together economies that accounted for 90% of the world’s gross domestic product and 80% of global CO2 emissions. It can only mean that any agreement resulting from this group will significantly impact the global effort against climate change.

However, the G20 countries came to the meeting with different worldviews, as one might have relied more heavily on a carbon-based economy compared to the others. For example, China, Indonesia, Australia, and India were ranked first, second, fourth, and fifth respectively as the world’s largest coal producers. These countries are net-exporters of hard coal and rely much on it to light up their power sector. There are also Saudi Arabia and Russia, the world’s largest crude oil exporters and important figures within the alliance of the Organisation of Petroleum Exporting Countries (OPEC).

On the other hand, European countries were coming as the leading figures in the clean energy transition. As for the United States (US) and Canada, despite their extensive oil and gas production, both countries were coming with a strong alignment toward progressive energy transition agenda.

Having different backgrounds, these countries found it difficult to create a common language on energy transition policies, particularly in phasing out coal and removing fossil fuel subsidies. China, India, Russia, and Saudi Arabia were within the camp of opposing those ideas. Beijing and New Delhi then appeared to be the camp’s most influential figures by declining to sign the contested points at the end of the meeting.

Turkey had also expressed its opposition toward the current climate act architecture, focusing on the “unfair” classification of developing and developed countries set in the Paris Agreement.

The complex contestation within the meeting had disappointed many environmental activists. The President of the COP26, Alok Sharma, even described it as “frustrating” knowing the leading countries could not agree on coal phase-out. From the current situation, the huge gap of understanding on coal phase-out will be the key issue among the G20 countries in the foreseeable future.

Looking Ahead: Preparing Appropriate Measures for Indonesia

With only two months left for the next G20 summit, countries’ preferences will not change drastically. There is a slight possibility that the Rome summit will resolve any of the disputed issues, and even if it does, the heated debate at the last meeting should have warned Jakarta that leading the G20 summit on these issues would be a challenging duty.

The first matter that Indonesia needs to prepare is to reach a compromise on coal phase-out. European countries and their allies will come with stronger pressure over time, as they want to phase out coal as soon as possible. On the other hand, coal phase-out seems technically unlikely for less developed countries in the short term, considering their reliance on coal in their power sector.

To find the middle ground of this matter, Indonesia has to set up a clear and specified timeline for coal phase-out, accommodating both ambition and technical promptness of the G20 members. Developed countries could be mandated to phase out coal by 2025, while less-developed countries should be obliged to install carbon capture technologies at every coal-fired power plant before phasing out coal entirely by the end of the decade.

The obligation should also be accompanied with a targeted amount of reduced emissions. This will stimulate less-developed countries to accelerate the energy transition, as the price of electricity generated from those coal-fired power plants will be higher than electricity produced with renewable energy.

The second matter is to build climate act commitment and earning political trust from the G20 countries. Indonesia has submitted its newest long-term climate strategy, highlighting three possible decarbonisation scenarios by 2050. But experts have deemed that the strategy published by Indonesia’s Ministry of Environment and Forestry is “not good enough”.

Even at its most ambitious scenario, Indonesia still expects coal’s contribution as much as 38% in electricity supply by 2050. Despite the net-zero targeted at this scenario, many have regretted the decision of Jakarta to perpetuate coal in its power sector for the next three decades.

The strategy also lacked clarity, as it does not integrate policies from related government bodies and state-owned enterprises, including the Ministry of Energy and Mineral Resources (MEMR), oil company Pertamina, and electricity monopolist Perusahaan Listrik Negara (PLN).

Considering the insufficient climate framework, Jakarta will struggle to gain trust from the G20 countries to lead on energy and climate issues. Establishing a more integrated and ambitious climate strategy before holding the G20 presidency, therefore, will be the key for Indonesia should it expects political leadership in next year’s forums.

Lastly, Indonesia must prepare to balance the interest of major powers regarding access to critical minerals. Although discussed during the last summit, this issue still leaves question marks over the required policies to stabilize the global supply chain of critical minerals.

Most of the world’s critical minerals, including lithium, cobalt, and other rare materials, are currently produced in China, while the US is experiencing rapid demand growth for them. These critical minerals are required to assemble essential technologies for clean energy transition, such as batteries and electric vehicles.

Unsurprisingly, each major power has a different outlook in approaching this matter. The US will most likely engage with its partner, particularly Japan and Australia. On the other hand, China will most likely engage with its partner in South Asia and Africa. The rivalry on access to critical material will present a global supply chain that is susceptible to disruption caused by geopolitical issues.

Indonesia should use the G20 presidency as momentum to lead major powers in arranging critical minerals governance, noting that the governance will be profitable for mineral exporting countries and carrying out sustainability measures. Most importantly, it also must ensure equitable market access for all.

The fact that Indonesia holds the largest nickel reserve in the world can be a major diplomatic tool in setting up this agenda. In light of the growing demand for critical minerals, Jakarta has had the required instruments to establish itself as a leading figure on this matter.

The G20 presidency will undoubtedly present challenges for Indonesia, particularly in managing the energy-climate agenda. But there is still time to prepare, and it is up to Jakarta whether to see it as an opportunity or as a burden. Shall Indonesia aspire to approach the presidency as an opportunity, it needs to prepare appropriate measures and work its best to generate substantive and ambitious outputs.

Aji Said Muhammad Iqbal Fajri adalah Co-Founder Adidaya Initiative & Mahasiswa Master International Energy, Paris School of International Affairs, SciencesPo. Dapat ditemui di instagram dengan nama pengguna @ajisaidiqbal.