Prospects for Mercury Emission Reduction Project Finance in Indonesia

In the past, emerging economies such as Indonesia would have qualified for funding to assist with projects to reduce emissions from the coal combustion sector. Now, as the Paris Climate Convention requires countries to phase down or even phase out coal by set deadlines, funding is only available for early coal plant closure or replacement. Whilst this will accelerate the move to renewable energy, in many growing regions where gas and nuclear are not available, coal will remain an integral part of the baseload energy mix until reliable, dispatchable, and affordable alternatives are found. This is likely to be measured in terms of decades rather than years. Without external funding, many growing regions will be unable to afford to upgrade and retrofit the old plants on which they continue to rely. They will find it hard to justify spending money on sources that may not see a return on investment before closure. The withdrawal of funding for coal to reduce emissions from the sector will therefore, in the short term, have the opposite effect and will lock in ‘dirty’ coal plants for decades.