Green Label for the Coal Power Plant Financing, Financial Authority Takes a Major Setback

Green Label for the Coal Power Plant Financing, Financial Authority Takes a Major Setback

Revision of Green Taxonomy regulation by OJK opens up the opportunity to give green labels on coal-fired power plants for smelters (captive power plants).


Jakarta, 31 August 2023 – The discussion of Indonesia’s green taxonomy revision being carried out by OJK (Otoritas Jasa Keuangan) drew sharp criticism. In the revision, OJK opened the opportunity for coal financing for the captive power plant or generator in industrial areas to be labeled under the green category. This step is considered a big backward step by the civil societies from the development of sustainable financing regulation and contradictory with the ASEAN green taxonomy that places early power plant retirement under the green label.


At this moment, we can see the negative impact of climate change clearly and sooner from the scientists’ estimation. Coal power plants are the most significant source of carbon emissions globally. Based on the Paris Agreement objective, the International Energy Agency (IEA) has appealed the absence of coal power plants to limit the temperature rise under 1.5C.


Financial institutions also have a crucial role in tackling the climate crisis. More than 200 global financial institutions have had a policy to no longer finance coal. Unfortunately, no Indonesian financial institutions are included on that list. Because of that, several civil societies convey their objection to OJK’s action.



Binbin Mariana, Asia Energy Finance Campaigner from Market Forces, said:

“OJK’s plan to categorize financing for constructing coal-fired power plants for smelters as green on the grounds of supporting Indonesia’s transition to renewable energy risks greater greenwashing by Indonesian banks.


“It’s out of line with global climate goals for banks to categorize financing as transitional when it is purely helping industries that are not environmentally friendly appear green.”


“It’s very concerning that transition-washing is on the rise as green finance is being used to fund high-carbon companies that do not have a credible plan to shift their business away from fossil fuels.”


Bhima Yudhistira, Economist and Director Executive of CELIOS, stated: 

“Indonesia’s direction of green taxonomy improvement is not in line with the energy transition commitment. There are dark riders in the green taxonomy development process. Green taxonomy 2.0 supposedly no longer accommodates business sectors that contribute to the carbon emission increase.”


“Precisely what is expected is a red label on coal mining, oil, and gas, the construction of new coal-fired power plants. So that banks and other financial institutions don’t have loopholes in continuing to finance the new fossil-based energy sector. I am worried that with the green taxonomy, which still accommodates the finances of the fossil energy sector, making banks

even less interested in financing renewable energy, ultimately the renewable energy mix remains small,” said Bhima.


Bhima added, “OJK must resolutely refuse new power plant financing in the industrial areas to support downstream. It must be understood that when financing new power plants under the pretext of downstream is massive, the products produced from the downstream process will face many challenges. First, Indonesia’s downstream products, especially nickel and bauxite, will be considered to cause high carbon emissions. Prospective buyers like EV

companies will likely look for alternative sources. Second, consumers become skeptical toward the development of electric vehicles because the downstream process still relies on fossil energy. Although, given the maximum incentive, the demand of electric car and motorcycle sellers is not necessarily in demand, especially in the export segment.”


Pius Ginting, Coordinator of the Association of AEER (Aksi Ekologi dan Emansipasi Rakyat) stated: 

“Categorizing coal-fired power plants in transitional mineral areas as green to ease financial support contradicts social justice and environmental justice principles. The number of

communities around the transitional mineral industry area who experience respiratory pain due to worsening air has increased in the industrial area of Morowali, Weda. By continuing to use PLTU, even though transitional mineral products can reduce pollution in urban areas, it

will exacerbate pollution in rural areas in the center of industrial areas.”


Ahmad Ashov Birry, Coordinator #BersihkanIndonesia:

“Amid the air pollution crisis in Jakarta, OJK did not learn and instead encouraged the replication of the disaster elsewhere. At a time when the urgency to improve the governance of mineral downstream transition is increasingly urgent, the OJK instead adds fuel to the fire.”


“OJK strategy today will negatively impact Indonesia’s energy transition acceleration. We will see whether the JETP transition cooperation scheme, which has not met the 1.5C target, will experience a further setback and compel President Jokowi, President Biden, Prime

Minister Kishida, and the others to speak with a fork tongue.”

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