GREEN FINANCE: U.S. exit from JETP threatens $3 billion green financing for Indonesia, Vietnam

The Trump administration, shirking climate responsibility, has once again pulled the U.S. out of international agreements. Treasury officials have confirmed that the United States has withdrawn from the Just Energy Transition Partnership (JETP), refusing to provide the financing needed by developing countries for climate transformation. This decision could severely impact the efforts of South Africa, Indonesia, and Vietnam in phasing out coal.

Indonesia, Vietnam reel from U.S. JETP withdrawal
JETP is seen as a crucial financing mechanism for Southeast Asian countries to achieve their decarbonization goals, facilitating the transition from high-carbon coal-fired power generation to low-carbon renewable energy sources.

According to Reuters, the U.S. had committed a total of $3 billion to Indonesia and Vietnam, while its commitment to South Africa exceeded $1 billion, with most of the funds in the form of commercial loans.

Paul Butarbutar, the head of the JETP Secretariat in Indonesia, noted that the U.S. withdrawal was part of an executive order signed by Trump and is expected to affect energy transition research and the distribution of subsidies. However, he also mentioned that “the US will still collaborate with Indonesia for development of renewable energy and other forms of energy, as long as it is still in line with US interests.”

Earlier, when the Trump administration’s stance on JETP wavered, Fabby Tumiwa, Executive Director of the Indonesian Institute for Energy Economics (IESR), stated that Indonesia should not completely rule out the possibility of cooperation with the U.S. in the energy sector.

However, he suggested that the Prabowo government should not focus solely on the U.S., but instead broaden its horizons by starting with improvements to Indonesia’s investment environment to attract more foreign capital into the National Power Supply Plan (RUPTL).

U.S. President Trump withdraws from international climate organizations, Including JETP. (Photo: Donald J. Trump’s facebook)

U.S. President Trump withdraws from international climate organizations, including JETP. (Photo: Donald J. Trump’s facebook)

Indonesia’s green transition relies on foreign investment
According to Fabby, Indonesia’s annual funding requirement for renewable energy development is as high as $40 billion, much of which must come from foreign direct investment.

Indonesia still relies heavily on coal for power generation. In 2022, the country secured $20 billion in energy transition funds through JETP from developed nations and international organizations. However, according to the Prabowo government, the U.S. has yet to fulfill its commitments, with some even labeling JETP as a “failed program.”

Despite JETP’s underperformance in Indonesia, part of the blame lies with the country’s long-standing coal industry, which makes the decommissioning and transition of power plants more complex.

This February, the German government announced that it, along with Japan, would co-lead JETP, confirming that the U.S. would no longer play a leading role and that the original plan would remain unaffected. But if the Trump administration fully withdraws its support, the funding for the coal phase-out will be significantly reduced.