Jason Chia Jung Teo

This dissertation furthers the vibrant conversation around renewable energy and climate finance. It focuses on the planned 2024 relocation of the Indonesian capital from Jakarta, which faces devastating climate impacts, to East Kalimantan, a province with vast coal deposits and lush rainforest. While the government intendsto develop renewable energy technologies to deliver low-carbon electricity to the new capital, a closer examination reveals the challenges. The research methodology is divided into three parts. First, an analysis of the electricity generation mix of low-carbon cities globally with a population of more than three million is conducted. Second, the renewable energy potential of East Kalimantan is analysed and a renewable energy installation mix is put forward. Finally, financing methods—primarily debt instruments such as green bonds, transition bonds, sustainability-linked loans, and sukuk (1)—are assessed.

The dissertation argues that the adverse social and environmental impacts posed by renewable energy projects can be mitigated through the use of green and transition bonds in conjunction with covenants, transparency in reporting, and certification by independent parties. Sukuk can also play a role, as they require proceeds to be used to acquire tangible assets and not to fund the general financial needs of the issuer. Therefore, the creation of a ‘Green Sukuk’, which would receive the same level of scrutiny as green bonds, could potentially be used to curb ‘greenwashing’ by ensuring that the funds are used for identified renewable energy assets.

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(1)Sukuk are financial products whose terms and structures comply with Sharia, with the intention of creating returns similar to those of conventional fixed-income instruments like bonds(Debashis Dey, 2020).