Indonesia needs $200 billion annual investment in 2021-2030 to decarbonise-govt

JAKARTA (Reuters) - Indonesia will need to invest $150 billion to $200 billion per year in low carbon programmes over the next nine years to meet its goal to reach net zero carbon emissions by 2060 or sooner, a new government study showed on Wednesday.

Indonesia, the world's eighth-biggest greenhouse gas emitter, has recently brought forward its target to reach net zero emission by 2060 or earlier, from 2070 initially.

In the study by the planning ministry, authorities found that transforming the economy to meet the new goal would cost $20 billion per year in 2021 and 2022, and an average of $150 to $200 billion per year between 2021 to 2030, or 3.4% to 4.5% of gross domestic product (GDP).

To finance that, the government must phase out fossil fuel subsidies and reallocate some investments, on top of generating revenue from the recently passed carbon tax, the report said.

By cutting fossil fuel subsidies and setting up carbon trading, the government could generate savings and new revenue, respectively, to the equivalent of 2.2% of GDP in 2030.

"Some of that revenue will be needed for social protection programmes and other investments to ensure a just transition, but the balance could finance green infrastructure," the report said.

Authorities also expect funding from REDD+ and major bilateral and multilateral donors, assuming Indonesia could successfully restore and protect its forests, peatlands and mangroves, and tap funding from the Asian Development Bank, the World Bank and other multilateral lenders.

The report also noted Indonesia needs to attract private sector investment in renewable power plants, while estimating power consumption will rise threefold by 2060, reaching 9.3 terajoules.

"The intervention in the energy sector, electric vehicle technology, energy efficiency, sustainable land use and waste management could create 1.8 to 2.7 million jobs in 2030," Arifin Rudiyanto, deputy planning minister said at the virtual launch of the report.

Indonesia should reach its target to become a high income country by 2045 by investing in decarbonisation measures, compared with a prediction of GDP shrinkage under a business-as-usual approach, due to the impact of climate change, he said.

(Reporting by Gayatri Suroyo and Bernadette Christina Munthe; Editing by Martin Petty)