The Next Phase of Indonesia Green Taxonomy: Transition Finance to Support Decarbonization

The report advocates for Indonesia Green Taxonomy 2.0 to incorporate 'transition finance' to bridge the gap between traditional and green finance. It highlights the ASEAN Taxonomy's approach to coal phase-out—where shortening a plant's commercial operation to a maximum of 35 years can qualify it as sustainable—and warns against including 'captive coal plants' in the green category to avoid deterring global investors. The author proposes a framework based on five G20 pillars, emphasizing clear technical screening criteria, synchronized disclosure policies, and a Just Transition Finance Framework to ensure equitable benefits.

• A transition taxonomy in Indonesia is intended to facilitate the early decommissioning of coal-fired power plants by defining measurable parameters for investment, while also preventing greenwashing through the imposition of integrity and governance criteria on businesses and financiers.
• The ASEAN Taxonomy for Sustainable Finance (Version 2) allows the phase-out of coal-fired power plants to be considered sustainable if the plant's commercial operation is limited to a maximum of 35 years, compared to a typical lifetime of 45-60 years.
• The report advises against categorizing captive coal plants—such as the 20 GW of capacity planned for downstream industry and battery production—as 'green' in the taxonomy, as coal-powered factories are unattractive to global investors seeking to reduce Scope 3 emissions.
• To implement transition finance, Indonesia should develop a framework based on five G20 pillars: identifying eligible activities via taxonomy-based criteria, improving reporting and disclosure, utilizing tailored finance instruments (including blended finance), implementing policy measures to incentivize capital, and mitigating socioeconomic impacts through a just transition.
• The report recommends leveraging the USD 20 billion Just Energy Transition Partnership (JETP) commitments to create innovative financing structures for early coal retirement and synchronizing disclosure policies, such as POJK 51/2017, with the updated taxonomy.

APA

Climate Policy Initiative (2023). The Next Phase of Indonesia Green Taxonomy: Transition Finance to Support Decarbonization. https://www.climatepolicyinitiative.org/publication/the-next-phase-of-indonesia-green-taxonomy-transition-finance-to-support-decarbonization/

Chicago

Climate Policy Initiative. The Next Phase of Indonesia Green Taxonomy: Transition Finance to Support Decarbonization. 2023. https://www.climatepolicyinitiative.org/publication/the-next-phase-of-indonesia-green-taxonomy-transition-finance-to-support-decarbonization/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=The Next Phase of Indonesia Green Taxonomy: Transition Finance to Support Decarbonization |date=2 October 2023 |url=https://www.climatepolicyinitiative.org/publication/the-next-phase-of-indonesia-green-taxonomy-transition-finance-to-support-decarbonization/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2023next, author = {{Climate Policy Initiative}}, title = {{The Next Phase of Indonesia Green Taxonomy: Transition Finance to Support Decarbonization}}, institution = {Climate Policy Initiative}, year = {2023}, month = oct, url = {https://www.climatepolicyinitiative.org/publication/the-next-phase-of-indonesia-green-taxonomy-transition-finance-to-support-decarbonization/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }