Hi, this is Dana Perkins and you're listening to Switched On the VNAF podcast. Back in November of twenty twenty two, Indonesia was the host of the B twenty and G twenty meetings in Bali, and this is when BNAF hosted our very first summit in Southeast Asia. In the day's leading up, it was at this event that Ben Vickers, who is the chief editor for BNAF, first interviewed Anis
Bizweedan on stage. Now at the time that they met, they talked about recording this episode, and a few months later, here we are on Switched On talking about the path to decarbonization for Indonesia. On today's episode, we hear from Pacanis regarding goals for decarbonizing, how Indonesia is approaching the issue, and how one might think about timelines for emerging markets. As a reminder, BNAF does not provide investment or strategy advice, and we have a very complete disclaimer that can be
listened to at the end of the show. Additionally, if you were interested in seeing the videos from bnaf's summit in Bali, they can be found at about dot BNAF dot com, forward slash Bali Forward slash videos. I'm going to take you straight into the interview now because Ben provides a great introduction both for Anise Buzuela and for Indonesia. Let's hear their conversations.
So we have with us Anis Buzwaden, candidate in Indonesia's presidential election in twenty twenty four next year. Now, among much other experience, he's been a Minister Education and Culture in the country, and he's been the governor of Jakarta until late last year. Now, also Anni, he knows the US very well. He was a full Bright scholar at the University of Maryland School of Public Policy, and he got a doctorate in political science from Northern Illinois University.
That's some years ago, though a lot of waters has passed under the bridge since then. Still Indonesia and standing as a candidate for the presidency. This is an amazingly complex country. Just to give a little bit of an idea of the scale, population of two hundred and seventy two million, and it's many thousand, many thousand islands, two.
Thousand islands, and hundreds of languages languages, one.
Hundreds of Bogan languages. My goodness. Now, compared that size two hudred and seventy two million, compared to the EU that has four hundred and forty six million. For example, the US, the whole US is three hundred and thirty three million. They're about so john seventy two million massive population. The economy is growing at five percent per year. One other measure as emissions. Of course, so Indonesians per capita
emissions are two tons of CO two a year. That compares to six point one tons in the European Union and fourteen tons in the US. That however, you also know two tons in Indonesia and it's increasing, whereas the six tons in the EU and the fourteen tons in US are both numbers that are decreasing over time. Who knows if they're going to meet at some point, but that's the degarbanization process in which we're going to be
talking about. First of all, and now what makes Indonesia's move to a lower carbon economy especially challenging.
Part of the reasons is because this is a society that use energy at the family level for mobility, which is consume a lot of energy, and our development has been focusing on the car oriented development and therefore, for example, like the case of Jakarta just as and illustrations why it is challenging. We have eleven million population in our city and we have about the same numbers of motorcycles
and cars. So actually our motorcycles we have thirteen million, thirty million motorcycles and three million cars registered cars and motorcycles. So when we're talking about the carbonization, so it is challenging because you have to handle it at the smallest units of your society, which is a family level, at individual levels, right, and that's why this is one of
the one of the big challenges. So converting into transit oriented development that has been our commitment and we work on it in the past five years and we're seeing a tremendous change. So if we are able to continue this, then we tackle one of the challenges on the governmentization.
That's really interesting. So is the scale of the carbonization, the little details you have to go into my spait, that's one of the challenges. Yes, yes, and there's not two big companies you can go to and get the job done. It's many millions of people that have to change their habits and have to change.
And on top of that, our fuel is heavily subsidized. So what happened is mobility we're using private vehicles, and the private vehicles we're using fuel that is heavily subsidized, and reducing the subsidy is politically challenging and now with the increase of world oil price, it has put price sure us in government. But on the other hand, this also one of key reason why the carbonization becomes important.
From the government point of view. We need to reduce that subsidy, and to reduce that subsidy, then peoples need to reduce their oil consumption fuel consumption, and to do that give incentive for conversion into electric vehicles, and that is the avenue that we are now doing.
That's super interesting. Now, there was some good news at the end of last year in November, I think it was the just Energy Transition Partnership, which was led in this case by the US and Japan, along with Canada, the EU, Germany, France, the UK normally a bunch of countries signed a deal to help fund the energy transition in Indonesia. Now that's going to provide twenty billion dollars over the next three to five years. Now, I think at the point was the biggest deal and been done
this sort. That was very exciting, but we have to put that in context. The country has a target to reach at zero in twenty sixty and our calculations indicate that the cost of reaching by that time is going to be it's going to require three point five trillion dollars of investment. This is a massive process. There's only a lot of money as to border into the country. That was the twenty billion dollars in a different life. So my question to you is where is this money going to come from?
That's one of the biggest challenges actually, And when you look at this issue, there are a few area that you have to look at it. One is what I mentioned earlier, mobility, Two is power plans that we have in the country, and three is the new constructions of power plants across Indonesia. Let me give you a illustrations. You talk about the country earlier. This is two hundred and seventy million peoples and you know what often offerlook
is this is an archipelago. This is not a continental so you don't have a centralized boarding grip that distribute power across the country. The other hand, it gives you incentive to create more sustainable power generator because then small islands across Indonesia do you have and in the tropical area in the equator, which definitely solar generated energy is something that we are pursuing. So how do you finance
all of this? I think, based on our experience in the PARTA for example, PPP is one of the way to go. So private public partnership, right, So when it comes to public project, inviting private sectors to come into the equation is key. For example, when we are doing electrifications of our buses, then we partners with the private sectors and they do the investment, we purchase their services, and it was a way to go and otherwise it
would cause us a lot. But by having that kind of partnership then we're able to attract a large number of investment and still from the business point of view, that can make it a good business. But on the other hand, it is in line with our sustainable objective.
So you're suggesting part of this money, a sizeable chunk is going to have to come from private investors. I think, So essentially, what is what you're saying.
On the one have a private investment but also government driven project, So it's a punish yes, but the utility in the country is still stay controlled PLN. Is that likely changes the reforms likely to come in that area or is that it's likely to come. Reform likely to come given the challenge that we have and the speed of supply. The growth of supply has not been satisfying. So I think we will come to a point where major reform needs to the place.
That again, probably a contentious issue, quite quite a complicated political brass. I imagine all right, now, Indonesia's power demand is expected to grow three to five times by twenty fifty, just because the economy is growing, population, so on. But that means that the power system itself is going to need to expand probably more than eightfold by that time,
and potentially much more than that. So as this power system grows in all the ways it can, how are we going to balance that against sticking to these emissions targets which have in next area by twenty sixty? Yeah, I was how do you keep that? Think earlier?
The setting of Indonesia is an archipelago, but also this is an area it's often called a spring of fires. That's where Innunicia is. So we're talking about solar generative power. Indonisio has one of the richer's potensils for that and that has not been explored much. And those tools were sustainable source of power. So I think on the one hand we have that target. On the other hand, we
are seeing opportunity in the new area. However, there's one more things is we need to have more fair and just transitions from call power generated energy which we have been using in the bus a few decades into a cleaner one. But that transition will require times for that. So I'm seeing for the futures the transition needs to take place. But on the other hand, we need to address seriously about taking new avenues which is a soller generated and also the theodre so.
Just energy transition partnership that we talked about earlier. The twenty billion dollars are aimed at taking cold out. Yeah, because the Indonesia is the largest the world's largest export of thermal coal at the moment. The various things going on there in that market to ensure the country has enough coal for its own needs. But that's something that will potentially need to be need to be addressed because fair enough they can burn it, but if you're still
exporting coal where everyone else is burning coal. There's still a good business there. But there are other other things, and as somebody's starting to some of these things, for example, the renewable generation targets for twenty thirty, the target at the moment is for twenty three to twenty five percent of renewable generation of power generation to be coming from renewables by twenty thirty. That sounds like a lot twenty thirty twenty five percent our generation by twenty thirty, but
it's actually the lowest among twenty countries. So is that something that is changing. That's that's one question.
Up to twenty thirty, maybe among the lowest, but when you're talking about twenty fifty, then we were catching up in the immediate first decades of that transitions. As I mentioned earlier, we have quite a large burden on our soldiers, so we don't want to be too ambitious the first ten years. However, this is not only about twenty thirty.
We're talking about twenty fifty, twenty sixty. Our ambition and twenty fifty is at par with other countries, and we do hope by then we will have more rooms to maneuver in terms of financial support, in terms of source of new energy, and hopefully in some of technology available. The technology that we may be seeing in twenty thirty would may have been completely different than what we have today, So we have to put that into account when we
talk about the speed of that transition. So, yes, we may be among the lowest to reach the twenty to thirty, but we're at par for twenty fifth.
Okay, so it's not fair comparison. Yeah, it's not fairy invisive, you're starting slowly. It's like place for your catching outrivaty. Yeah.
And even in our case in Zakarada, for example, we aim thirty percent reductions of greenhouse emissions by twenty thirty. That target was achieved much earlier. We reached twenty six percent reduction in twenty twenty one.
You know, so you're setting let's target so you can look really good.
But once we get there, then we expedite the process.
Yeah, yeah, yeah, it makes sense, makes sense. Yeah, you didn't want to shootself in the foot with targets being too high and no achieving you right, Yeah, Okay.
It's not like Michaelangelo, say, you know, I'm not worried about it you feel to it's if you're target when I'm worried, is your dargist too law?
And it's different REI. So there are other ways. I think of Indonesia participating in this energy transition to a sort of clean, cleaner economy in a way. And of course there's EBS entrification of transport, which is a big thing, and I named Jacati did some things in that respect. But I want to talk about nickel because Indonesia has about a quarter of all known nickel deposits in the world, and nickel, of course is an important component of batteries.
And sorry, what's going to happen there? What would you like to see happen with mining and potentially being part of the supply chain for.
Batteries, Persia will play a major roles in the supply channel batteries for sure, big as our nickels. But also we would like to see advancement of technology on the use of nichols, and we have invested a lot. And what we'd like to see also the fact that we're to see more of battery manufacturing taking place in Indonesia, so instead of us exporting raw madrials of nickels, we'd
like to have battery productions here in the country. So in that directions electrifications of our public transport of private vehicles in line with the presence of supply of battery, which is key for electric vehicles. I believe it would help to expedite the process of achieving authority.
So you want to stimulate internal demand for batteries as it were, within the country as a way of enabling that industry to grow. And indeed, who's going to make batories in Indonesia. It may not immediately an Indonescient company, but at least it is being produced within Indonesia in Indonesia. And since the demand is so high in terms of battery for electric vehicles as well as for other like solar panels and et cetera, again, that's going to need investments.
So presumly money is the product three point five trillion whatever it is.
See again, when it comes to this, I think from the government point of view, we outline the policy direction and then give the incentive and disassentive from fiscal point of view, right, that's to allow market to actually grow and provide solutions. So the solution to this problem can be from by us creating us in government creating the markets for that. The demand is definitely there, but we need to create markets that supply will grow.
Is that going to require more reform or pieces in place distangy.
Definitely, some regulations need to be revised. Give you an example, all of regulations with regard to private vehicles has always been combustion based vehicles and we need to revise all of that and it requires a lot of work, but we need to do that. And then tariff barriers on electric base equipment from motorcycles all the way to solar panels for example. This is very interesting for importations and
for productions. So we really have to look at details of many of our policies to give incentive of conversion into a more sustainable approach of technology. That's what needed and if we do that, market will grow.
Yeah, it's the current government so aligned with these sort of idea.
I think so LUs two years ago it was twenty twenty that of a President Jocob we issued the new regulations that they got to this and we need to have more of this. It's in the directions of creating new markets for sustainable solution.
Interesting. So we're getting close to the end of the time we have so just one, maybe two more questions. Now, with investment required a discale three point five trillion dollars, it's going to be important to establish priorities. I would imagine we can't do everything or once. What will be top of the list and most effectively? And what road does government have in attract this mine. You've alluded to that already.
I speaks the question here is what would be your prior ships focus on the urban areas in Indonesia. Indonesia is large, but it has to start somewhere, and the best way on addressing this challenge is by focusing on major cities. When you say major cities, how many is twelve twelve citasties, twelve big cities, and then from there you go to the more medium size this which will have around fifty
of roll. If you address that, then we will be able to significantly improve our speed of achieving our target. Many thought that Indonesia is an agriculture base. It's a rural based society. It used to be, but by now fifty seven percent of our population is living in the cities. Right and this is a trend across the globe. The world will have around seventy percent of our populations by
twenty thirty twenty thirty five. So if we address our privy, put our priorities into sustainable urban mobility and a transit oriented development in our urban area, we will significantly reduce our burden. And I think that's where the priority should be.
Just because I think networks of cities are a very interesting way maybe of working in getting a European Union and many places where it might work. But in the case of Indonesia, would you have to work with the individual governors of different cities and different administrations or is there a network? Are they coordinated? Are they used to working together those twelve seasies.
There's not a formal network of those cities. But what happened is this city government may not have the physical capacity to convert from cor oriented development into transit the development the way Jakarta did it. Because Jakarta has the fiscal power. That's where national government can step in, right by assisting these twelve cities. Let's convert into trugit oriented development.
Here are the policy framework, here are the channel for financing, Here are some rules and regulations, and then they will definitely willing to join that. But if we are only giving them sort of instructions unit to achieve this target and that target, they would say, where can I get the money? What are the policy framework to allow us
to achieve that? So the fact that we have a lot of major cities and they don't have the physical capacity for that conversion, we have to look at it as an opportunity for center government.
You're going to help them over with that barriox because exactly.
Because at the end of the day, the report will be at the national level, so local achievement will be accumulated, the numbers will be acculiumated in the national level, and we need to start somewhere, and that somewhere is the urban area. So why do we just do that and do that approach? And I think to be able to report to the world, then interne Easia is being responsible and we cantribute our parts.
That's great. Well, as governor of Jakarta, you've had some experience at how cities operate, so hopefully that plan works out. In terms of the scale of transformation that's requires. We say there's lot of money, but there's transformation in many other ways as well. And of course it's consumer choice, its habits. It's economic transformation and different sorts and creating
new industries such as battering manufacturing. And I'm wondering if transformation this scale, is there a risk that it could actually become a hindrance to development in the country, Decarbonization becomes something hard to do and grow at the same time, and other trade offs to be made. There are we at risk of overregulation sort of excessive adminisrative burden. I'm getting these things done. What's your view?
Theoretically people can say that, but it cannot be an ecology can work hand in hand and we'll work it up together. Theoretically we can say that, but in reality the challenge is on how do we go about it. I think one important aspect is, let's not reinvent the wheel. Okay, let's learn from countries cities across the globe what our breakthrough that we can actually learn, adopt, adapt And I think that's where cooperation is important so that we can learn that. But I do think that we are at
the point where we cannot tolerate this anymore. So this is a time in which we just have to take a responsible policy into action. And it may be hard, but we just have to do it because if we delay, if we don't take this route, regardless of how heavy it is, we will not have the kind of earth and ecosystem that we like to be for our children and the children of our children. It sounds like a very idealistic but it is actually the reality. So we just have to do it.
That's an interesting idea to keep in mind, isn't it.
Yeah, it sounds, but it is reality we need to address. And I think new generations of nonations we're really for it. So even though if at the beginning it may cause us extra in terms of resources, in terms of time and all of that, I think the band will keep that in mind that this is something that we have to do.
Okay, one last line, one sentence. If do you have a message I space for the international finance community or investor community, what would you say to them?
One thing, Let's put time perspective of our transition in a fair way.
As we thought earlier.
If we look at our transition in the period of ten years, we may be seeing different approach if we do it in twenty thirty or fourth years. For a country like us who have undergone I would say less sustainable oriented development in the past, I give us time and then number two is partnering in terms of financing. We need the world to help the flopping countries including Indonesia to pay for the way basically in term of unecessarily sources to reach Arthajit.
It's been really interesting to talking to you and thanks plus great on ik give your time, most welcome.
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