This report explores a critical dimension of Indonesia's energy transition: the aspect of "justice." Sustainable financing initiatives in Indonesia, such as the Just Energy Transition Partnership (JETP) and the Energy Transition Mechanism (ETM), reflect the recognition that high reliance on fossil fuels has transformed the energy transition from a mere policy option to an urgent prerequisite for mitigating the climate crisis. However, the implementation of these policies must not solely focus on achieving financial efficiency, amidst the USD 247,3 billion funding requirement to achieve the 2030 NDC targets and a funding gap of 49%. Furthermore, energy transition financing policies must integrate the principle of fairness for disproportionately affected groups, such as workers, vulnerable communities, and indigenous communities, to ensure that no one is left behind in the journey towards clean energy.
This report identifies three vulnerable groups for analysis. First, affected workers, including many informal workers who face the risk of layoffs without adequate social safety nets such as the Job Loss Guarantee program under Jamsostek. Second, vulnerable groups include women excluded from participation and access to capital, people with disabilities who face structural barriers in the labor market, and children and the elderly who bear the heaviest health burdens from coal pollution. Third, indigenous peoples are often displaced from their customary lands by energy projects without adequate consultation through Free, Prior, and Informed Consent mechanisms.
This report highlights the significant gap between green financing commitments and the actual integration of justice principles. Indonesia's Sustainable Finance Taxonomy is considered too loose due to its voluntary nature. Meanwhile, funding allocations for retraining programs and compensation for affected workers under schemes like JETP remain minimal. Based on this analysis, this report presents policy recommendations structured around the principles of energy justice: procedural, distributive, recognitive, and restorative.
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