China’s coal investments in Indonesia at odds with its climate ambition

Chinese investments in low-end coal power plants are inconsistent with Indonesian interests, and China’s ambition to curb carbon emissions
The Chinese export of its development model of ‘pollute first, clean up later’ is a detrimental practice that nations need to learn to say no to

Iva Dim

Published: 10:00pm, 2 May 2021

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As Indonesia struggles to meet growing electricity needs and achieve the same electrification rates as its neighbours, it is welcoming questionable investments from China that could prove costly for itself and its future ambitions of sustainable growth.

Sure, Chinese President Xi Jinping’s ambitious climate pledge is proof that China is interested in changing its ways. The country is the world’s largest emitter of carbon dioxide, followed by the United States and India, and increasingly, the top contributors to climate change are expected to follow up their grandiose rhetoric with concrete action.

China has the potential to be the world leader in climate action as it takes a far-sighted approach to policymaking. Already, as the West continues to be plagued by short-termism, populism and internal politicking, China is on track to become the world’s largest economy by 2028. Yet, not unlike Goliath, this giant nation is not without faults and shortcomings.

China’s new five-year plan falls short of expected climate targets; the country is still too unsustainably dependent on coal. Through its Belt and Road Initiative, China is also failing to rise to environmental challenges and practise the green policies it preaches. China must go green locally as well as globally, or run the risk of neutralising its own policy gains.

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Indonesia currently needs foreign investment from initiatives such as the belt and road plan. Despite being a member of G20 and a potential leader and stabiliser of Southeast Asia, Indonesia was late in setting up a sovereign fund, leaving it financially debilitated and costing it a significant delay in its coal phase-out. Currently, more than half of Indonesia’s electricity is generated from coal, making it highly coal-dependent at present, and increasingly so for the foreseeable future.

A recent study of investments in Indonesia’s coal sector found that China invested in a “significantly higher number of subcritical coal power plants”, using outdated technology, than Japanese and other foreign investors. Some of these plants are among the 35 constructed for the state electric company Perusahaan Listrik Negara, which accounts for over two-thirds of the country’s power generation capacity.

Such Chinese investments are not only inconsistent with Indonesian interests, but also self-defeating, with regard to China’s ambition to curb carbon emissions – which would require a truly global commitment.

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Moreover, a portion of these coal power investments were made by Chinese aluminium and steel companies, meaning they will not improve Indonesia’s electrification rates nor close the inequality gap. Instead, these plants will serve the needs of Chinese firms manufacturing carbon-intensive metals.

Hence, Indonesia’s environmental degradation is being fuelled by short-sighted investments. The Chinese export of its development model of “pollute first, clean up later”, in the form of supposedly lucrative deals, is a detrimental practice that nations need to learn to say no to, as Kenya did. Indonesia must have higher standards for investors, or the populous, increasingly powerful nation will be locked into a coal-dependent future, ultimately expediting climate change and the sinking of Jakarta.

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Indonesia has vast potential for development of hydro and geothermal power, renewable sources which are largely going untapped and which will account for only 23 per cent of the energy supply by 2025. Indonesia can attract alternative investments and work more closely with countries like Norway, which signed a deal to help protect Indonesia’s forests.

It is when China engages in contradictory practices, as it has in Indonesia, that it draws Western scepticism. By actively investing in unsustainable practices, China is leaving Indonesia with technology unfit to support development – let alone meet future needs.

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This has a detrimental impact on the rest of the world’s efforts to curb carbon emissions. Here, China risks going head-to-head with the West and pushing the European Union to take bolder steps, for example, by imposing a tax on high-carbon imports and protect its industries against carbon leakage (which occurs when companies relocate to avoid the costs of stringent climate change policies, as is perhaps the case for Chinese firms in Indonesia).

China is a developing country, but also already a superpower. With this status, it has certain responsibilities to other countries, and it should mind the impact its growth has on the climate and environmental degradation. China should not hide behind the past failures of the West, but instead make improvements and better decisions – because it can.

Iva Dim is a senior research fellow at Strategic Pan Indo-Pacific Arena (strategicpipa.com) based in Britain