Indonesia Weighs ‘Green’ Label for Some New Coal Projects

The Paiton Power Station, a coal-fired power plant in East Java, Indonesia.

The Paiton Power Station, a coal-fired power plant in East Java, Indonesia. YTL Power International Berhad via Wikipedia

Indonesian officials said they may label loans to some new coal plants as “green” investments.

Last year Indonesia unveiled a labeling system for business ventures, reserving a green label for those that benefit the environment, a yellow label for those that are neither harmful nor helpful, and a red label for those that pose a clear threat. The aim was to guide private money to the most environmentally friendly projects. Currently, coal plants are labeled either yellow or red.

But last week, financial regulators said they are reviewing the system and may classify loans to new coal plants as “green” if those plants aid the shift to clean energy, for instance, by supplying power to an EV battery plant.

“It is extremely concerning that now, new coal-powered generation could be seen as protecting or improving the environment,” analysts at the Institute for Energy Economics and Financial Analysis, an energy think tank, wrote in a blog post. “Not only would national credibility be hurt, but the move might also border on state-sanctioned greenwashing.”

Analysts said that, by watering down the definition of “green,” Indonesia may end up deterring foreign lenders, who would need to do more research to assess the environmental bona fides of a project, at added cost.


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