Paper short abstract:

The paper examines different strategies taken by investors from Japan, South Korean, and China to support phase-out of coal fired power plants in Indonesia. The findings shed light on the variation in foreign investors’ engagement with climate action in emerging economies.

Paper long abstract:

Achieving the Paris Agreement’s goals requires a rapid transition of our energy system from fossil fuels. This transition is especially needed in large emerging economies where electricity consumption and greenhouse gas emissions continue to increase. While many emerging economies have made pledges on net zero, their transitions are often influenced by foreign investors who control significant amounts of assets in their energy sector. Focusing on the case of Indonesia – a major emerging economy with a coal power-based electricity sector but strong commitments to clean energy transition, we comparatively examine the strategies taken by investors from China, Japan, and South Korea to phase-out of coal-fired power plants. The three East Asian countries together have financed most of the coal-produced electricity in Indonesia, but they seem to have different strategies in engaging with Indonesia’s energy transition. Using data from various sources, we find that Japanese investors have agreed to support early retirement of a coal plant (Cirebon 1) whilst South Korean investors have transformed some coal-fired plants to hybrid ones utilizing green ammonia and green hydrogen (Java 9 and 10). In the meantime, Chinese investors have yet to make any concrete action to support phaseout of their plants. To explain this variation, we inductively propose a framework based on the development finance model adopted by foreign financiers and transnational networks in which they are embedded. Our study sheds light on foreign investors’ influence on energy transition in developing countries and identifies pathways to leveraging transnational support for climate action.