Indonesia's financial regulator (OJK) is considering making coal-fired power plants that supply electricity to electric vehicle battery manufacturers eligible for green financing, its chief said on Tuesday, drawing criticism from environmentalists.
OJK chief Mahendra Siregar told reporters Indonesia's "green taxonomy", a framework defining what investment is considered environmentally friendly, is currently being revised to include funding for early retirement of coal power plants, to match the taxonomy agreed by the Association of Southeast Asian Nations (ASEAN).
Under the same review, the OJK would consider to expand the green label to loans for coal-fired power plants used by industries that make products considered sustainable, such as batteries for electric vehicles, Mahendra said.
"In the end, we need to see the whole result, the end product of the whole supply chain," Mahendra said, explaining why such funding could be considered environmentally sound.
If adopted, this would relegate Indonesia to the bottom of the pack of global green or sustainable finance taxonomies, the Institute for Energy Economics and Financial Analysis (IEEFA) think tank said in a statement.
"It is extremely concerning that now, new coal-powered generation could be seen as protecting or improving the environment. This simply goes against scientific evidence," analysts at IEEFA said.
While many global banks have stopped funding coal assets, most Indonesian lenders have continued to finance projects related to the fossil fuel.
Indonesia is one of the world's top carbon emitters and also the biggest exporter of coal globally. But it has pledged to reach net zero emission by 2060, in part by replacing dirty sources in electricity generation with renewables.
Last year, Indonesia secured a commitment from nations led by the United States and Japan to mobilise $20 billion funding to speed up its transition to cleaner energy under the Just Energy Transition Partnership (JETP) scheme.
The publication of Indonesia's investment plan for the funds, initially due in August, has been pushed back to later this year, to factor in coal power plants being built privately by manufacturers for their own industrial use, said a member of the JETP Indonesia working group. (Reporting by Fransiska Nangoy, Bernadette Christina Munthe; Editing by Simon Cameron-Moore)