Unlocking Transition Finance for Achieving Net Zero Emissions in Indonesia

The document identifies a USD 146.4 billion investment gap for Indonesia's 2030 ENDC targets, noting that private financial institutions' climate finance represents only 3% of their total investments. While new regulations like the Indonesia Taxonomy for Sustainable Finance (TKBI) and POJK 18/2023 support decarbonization, significant barriers remain, including contradictory fossil fuel subsidies and a mismatch between the long-term capital needs of climate projects and the short-term nature of commercial bank funding.

• Indonesia faces a substantial climate investment gap of approximately USD 146.4 billion, representing a 51% deficit in meeting 2030 ENDC targets. Between 2015 and 2021, public and private financial institutions provided USD 41.7 billion, which is roughly 15% of the country's requirements.
• Private financial institutions, primarily commercial ones, have a low level of climate alignment, with climate finance making up only 3% of their total investments.
• Recent regulatory updates intended to support national decarbonization include the Indonesia Taxonomy for Sustainable Finance (TKBI) Versions 1 (February 2024) and 2 (February 2025), and OJK Regulation No 18 Year 2023 regarding debt securities and sustainability-based bonds and sukuk.
• Contradictory state spending creates market disincentives for decarbonization, as fossil fuel subsidies account for 9% of total state expenditure, while climate spending accounts for only 6%.
• A financing mismatch exists because climate-aligned projects are capital-intensive with long life cycles, whereas commercial banks rely on short-term deposits and debt instruments (typically three to five-year tenors), leading to higher borrowing costs or project unviability.

APA

Climate Policy Initiative (2025). Unlocking Transition Finance for Achieving Net Zero Emissions in Indonesia. https://www.climatepolicyinitiative.org/publication/unlocking-transition-finance-for-achieving-net-zero-emissions-in-indonesia/

Chicago

Climate Policy Initiative. Unlocking Transition Finance for Achieving Net Zero Emissions in Indonesia. 2025. https://www.climatepolicyinitiative.org/publication/unlocking-transition-finance-for-achieving-net-zero-emissions-in-indonesia/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Unlocking Transition Finance for Achieving Net Zero Emissions in Indonesia |date=24 February 2025 |url=https://www.climatepolicyinitiative.org/publication/unlocking-transition-finance-for-achieving-net-zero-emissions-in-indonesia/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2025unlocking, author = {{Climate Policy Initiative}}, title = {{Unlocking Transition Finance for Achieving Net Zero Emissions in Indonesia}}, institution = {Climate Policy Initiative}, year = {2025}, month = feb, url = {https://www.climatepolicyinitiative.org/publication/unlocking-transition-finance-for-achieving-net-zero-emissions-in-indonesia/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }