Indonesia can unlock trillions of dollars in climate investment by combining policy reform and innovative business models, according to a report by the International Finance Corporation, published on Thursday (02/11).
Southeast Asia’s biggest economy officially jumped on the bandwagon last year to support the Paris Agreement aimed at strengthening the global response to climate change threat, yet the country has limited government funding to do so.
The report titled “Creating Markets for Climate Business” said more than $1 trillion in investment is already flowing into climate-related projects in industries such as renewable energy, off-grid solar and energy storage, agribusiness, green buildings, urban transportation, water and urban waste management.
The report found that renewable energy investments could rise to $11 trillion cumulative by 2040; investments in off-grid solar and energy storage can reach $23 billion a year by 2025; $3.4 trillion cumulative investments by 2025 for green building; $13 trillion cumulative investments by 2030 in water supply and sanitation.
“The private sector holds the key to fighting climate change,” IFC chief executive Philippe Le Houérou said in a statement.
The report, which is a follow-up of last year’s publication titled “Climate Investment Opportunities in Emerging Markets,” said Indonesia – along with other major markets such as Vietnam and some Pacific island nations – are becoming attractive markets for off-grid solar and mini-grid systems.
“The private sector has the innovation, the financing and the tools,” Le Houérou said, noting that the IFC may assist governments but that the effort also requires policy reforms.
Indonesia has a decent start following a subsidy cut on fossil fuel in 2014, a rational move to both bolster the state budget and protect the environment by providing a disincentive to burn fuels.