In the nascent Indonesian new energy industry, the west risks financing China’s profit, and control. Plus, in factors: Enel builds a solar panel plant in the US but China still dominates the value chain; lithium stays hot; and the price cap on Russian oil nears, but with what consequences? While in markets, LNG prices resist demand, Japan’s economy shrinks, the UK does austerity – and stray missiles plus wheat uncertainty threaten to disrupt it all.
The US, EU, and a number of other countries this week signed a 20 billion USD plan to help Indonesia transition away from coal. It’s reportedly the biggest climate finance deal ever signed. The aim is to see Indonesia peak its power-sector emissions by 2030, and have renewables make up 34% of all power generation by then. On top of that financing commitment, Indonesia this week signed a 300 million USD pact with the Asian Development Bank to refinance and retire a coal-fired power plant.
Concurrently, Indonesia is ramping up investments in the EV battery industry, which will help it both power and benefit from the energy transition. On the same day as the ADB coal plant retirement deal, Indonesia’s sovereign wealth fund announced a 2 billion USD fund to invest in the EV value chain.
But here’s the rub: The two other main partners in the fund are the Chinese battery giant CATL, and the global arm of China Merchants Bank. While western countries help to finance Indonesia’s pivot away from coal, Chinese firms and state entities are staking out influential, and potentially lucrative, positions in the emergent industry to be built off that pivot. Is the west financing China’s profit – and control?
For more on the larger context of this reality – and a proposal for redressing it – read commentary we published this week from EU Parliament member Reinhard Bütikofer on how Europe, and with it the US, can use today’s geopolitical crisis to refocus international economic policy around production; in short, how the west can turn narrative, commitments, and dollars into action.