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Indonesia : World Bank Support for Coal

Indonesia : World Bank Support for Coal. Arif Fiyanto Greenpeace Southeast Asia - Indonesia World Bank Group AGM – October 2013. Indonesia – Climate Change. World’s largest coal exporter

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Indonesia : World Bank Support for Coal

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  1. Indonesia:World Bank Support for Coal ArifFiyanto Greenpeace Southeast Asia - Indonesia World Bank Group AGM – October 2013

  2. Indonesia – Climate Change • World’s largest coal exporter • Many newly built and planned coal plants in India and Vietnam rely on imported coal from Indonesia, including Tata Mundra UMPP

  3. Indonesia – Climate Change • GHG emissions per capita are growing faster than GDP per capita • Current energy growth path relies on increasing contributions from carbon intensive sources - coal-fired power. • Unless there is a shift from the current government plan, IEA (2007) projects Indonesia’s fossil fuel related GHG emissions could triple by 2025

  4. Current Government Energy Growth Plan: Fast Track I & II Power Projects (under development)

  5. Overview of World Bank Involvement WORLD BANK SUPPORT INDONESIAN GOVERNMENT COAL DEVELOPMENT Purukcahu Cangkuang Railway PPP Framework providing industry subsidies World Bank: Infrastructure Development Policy Loans (2007-2010) Sumsel (South Sumatra) Mine-Mouth Plants (600 MW and 1200 MW) Indonesia Infrastructure Guarantee Fund (IIGF): Guarantee of $34 to CJPP Guarantees in pipeline for other projects World Bank: Loan to IIGF of $30 million Central Java Power Project (2000 MW) World Bank: $480 million standby faciity for IIGF IFC: Transaction Advisor

  6. World Bank Infrastructure Development Policy Loans • Four I-DPLs covering 2007 to 2011 totaling $850 m aimed at roads, water, and electricity • Support to GOI infrastructure development plan, including the Fast Track power projects • Framework for public-private partnerships (PPP): • Indonesia Infrastructure Guarantee Fund (IIGF) • Indonesia Infrastructure Financing Facility (IIFF)

  7. Indonesia Infrastructure Guarantee Fund (IIGF) • Guarantees for infrastructure projects under the PPP scheme, including Fast Track power projects • Key to obtaining finance • World Bank $480 m standby facility and additional $30 m IIGF loan (FY2013)

  8. Indonesia Power Sector PPP Framework • PPP framework provides government incentives including: • VAT tax exemptions, • import duty exemptions, • income tax rate reductions, • accelerated rates of depreciation, • land tax exemptions, • building tax exemptions, • the IIGF guarantees • Subsidies to private investors for power projects whether fossil fuel or renewable.

  9. Indonesia Infrastructure Guarantee Fund (IIGF) – Coal Projects • Central Java Power Plant – 2,000 MW ($40 million guarantee) • Kalimantan - PurukCahu-Bangkuang Coal Railway (for exports) • Coal-Fired Mine-mouth SumselPower Plant 9 - 1,200 MW • Coal-Fired Mine-mouth SumselPower Plant 10 - 600 MW

  10. Central Java Power Plant • IFC Transaction Advisor: • analyze project fundamentals (grew from GOI-proposed 800 MW to 2,000 MW) • promote and secure project to investors • prepare PPP contract

  11. Central Java Power Plant • If it built, it will pump 10,8 million tones of CO2 into the atmosphere annualy • Itwill also release 226 kg of mercury each year • It will also release 16200 tonnes of SOx, 20200 tonnes NOx, and 610 tonnes of PM 2.5 each year

  12. Local opposition to IIGF supported projects • Central Java Power Plant • Lawsuit against the Batang regent for making a bylaw for the project that contradicted regulations to protect the Marine Natural Park • Multiple protests have been held by thousands of residents who insist that the power plant will harm the environment and threaten their livelihoods • The financial close was recently delayed for 6 months due to local villagers refusing to give up their land

  13. Local opposition to IIGF supported projects • Kalimantan - PurukCahu-Bangkuang Coal Railway (for exports) • US$3 billion, 385 km rail project to connect coal mines in northern Kalimantan to a port at Batanjung in southern Kalimantan • More than a dozen Central Kalimantan-based organizations oppose the coal railway based on environmental, social, and economic concerns. • Railway construction will accelerate deforestation and undermine goals of Central Kalimantan as a REDD+ pilot province.

  14. Conclusions • World Bank Indonesia Infrastructure DPLs initiated policies and institutions that promote coal development in Indonesia • Instead of guiding Indonesia – already the world’s largest coal exporter – onto a low-carbon development path, the Bank’s infrastructure program has fortified a coal-intensive future

  15. Recommendations • Withdraw the Bank’s financial backing from the Indonesia Infrastructure Guarantee Fund (IIGF) unless the IIGF stops support for the Central Java Power Project and all other coal projects. • Ensure that the Bank’s Energy Directions’ limit on coal financing is comprehensive and applies to all forms of support, including development policy loans, financial intermediaries, and advisory services.

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