Indonesia: World Bank Support for Coal Arif Fiyanto Greenpeace Southeast Asia - Indonesia World Bank Group AGM – October 2013

Indonesia – Climate Change World’s largest coal exporter Many newly built and planned coal plants in India and Vietnam rely on imported coal from Indonesia, including Tata Mundra UMPP

Indonesia – Climate Change GHG emissions per capita are growing faster than GDP per capita Current energy growth path relies on increasing contributions from carbon intensive sources - coal- fired power. Unless there is a shift from the current government plan, IEA (2007) projects Indonesia’s fossil fuel related GHG emissions could triple by 2025

Current Government Energy Growth Plan: Fast Track I & II Power Projects (under development) Year adopted Power source Fast Track I (MW) Fast Track II (MW) Total Projects Total Generation Percent of Generation Coal14,6113, ,28371% Gas5601,30041,8607% Geothermal4403,867464,30717% Hydropower1,1743 5% Total15,61110, ,624

Overview of World Bank Involvement World Bank: Infrastructure Development Policy Loans ( ) Indonesia Infrastructure Guarantee Fund (IIGF): Guarantee of $34 to CJPP Guarantees in pipeline for other projects Central Java Power Project (2000 MW) Purukcahu Cangkuang Railway World Bank: Loan to IIGF of $30 million Sumsel (South Sumatra) Mine-Mouth Plants (600 MW and 1200 MW) IFC: Transaction Advisor World Bank: $480 million standby faciity for IIGF PPP Framework providing industry subsidies WORLD BANK SUPPORT INDONESIAN GOVERNMENT COAL DEVELOPMENT

World Bank Infrastructure Development Policy Loans Four I-DPLs covering 2007 to 2011 totaling $850 m aimed at roads, water, and electricity Support to GOI infrastructure development plan, including the Fast Track power projects Framework for public-private partnerships (PPP): –Indonesia Infrastructure Guarantee Fund (IIGF) –Indonesia Infrastructure Financing Facility (IIFF)

Indonesia Infrastructure Guarantee Fund (IIGF) Guarantees for infrastructure projects under the PPP scheme, including Fast Track power projects Key to obtaining finance World Bank $480 m standby facility and additional $30 m IIGF loan (FY2013)

Indonesia Power Sector PPP Framework PPP framework provides government incentives including : –VAT tax exemptions, –import duty exemptions, –income tax rate reductions, –accelerated rates of depreciation, –land tax exemptions, –building tax exemptions, –the IIGF guarantees Subsidies to private investors for power projects whether fossil fuel or renewable.

Indonesia Infrastructure Guarantee Fund (IIGF) – Coal Projects Central Java Power Plant – 2,000 MW ($40 million guarantee) Kalimantan - Puruk Cahu-Bangkuang Coal Railway (for exports) Coal-Fired Mine-mouth Sumsel Power Plant 9 - 1,200 MW Coal-Fired Mine-mouth Sumsel Power Plant MW

Central Java Power Plant IFC Transaction Advisor: –analyze project fundamentals (grew from GOI- proposed 800 MW to 2,000 MW) –promote and secure project to investors –prepare PPP contract

Central Java Power Plant If it built, it will pump 10,8 million tones of CO2 into the atmosphere annualy It will also release 226 kg of mercury each year It will also release tonnes of SOx, tonnes NOx, and 610 tonnes of PM 2.5 each year

Local opposition to IIGF supported projects Central Java Power Plant –Lawsuit against the Batang regent for making a bylaw for the project that contradicted regulations to protect the Marine Natural Park –Multiple protests have been held by thousands of residents who insist that the power plant will harm the environment and threaten their livelihoods –The financial close was recently delayed for 6 months due to local villagers refusing to give up their land

Local opposition to IIGF supported projects Kalimantan - Puruk Cahu-Bangkuang Coal Railway (for exports) –US$3 billion, 385 km rail project to connect coal mines in northern Kalimantan to a port at Batanjung in southern Kalimantan –More than a dozen Central Kalimantan-based organizations oppose the coal railway based on environmental, social, and economic concerns. –Railway construction will accelerate deforestation and undermine goals of Central Kalimantan as a REDD+ pilot province.

Conclusions World Bank Indonesia Infrastructure DPLs initiated policies and institutions that promote coal development in Indonesia Instead of guiding Indonesia – already the world’s largest coal exporter – onto a low-carbon development path, the Bank’s infrastructure program has fortified a coal-intensive future

Recommendations Withdraw the Bank’s financial backing from the Indonesia Infrastructure Guarantee Fund (IIGF) unless the IIGF stops support for the Central Java Power Project and all other coal projects. Ensure that the Bank’s Energy Directions’ limit on coal financing is comprehensive and applies to all forms of support, including development policy loans, financial intermediaries, and advisory services.