Rich nations scramble to seal coal transition deals before COP27

As they prepare for the next round of global climate talks in November, officials from rich countries are trying to pull together a series of multibillion-dollar packages to help poor countries phase out coal.

But negotiations have been snarled by national politics and Russia’s war in Ukraine, which has made the dirtiest fossil fuel a lucrative commodity to mine and export, according to people familiar with the talks who asked not to be identified because the discussions are private.

The talks stem from a landmark $8.5 billion pledge by the UK, US and European Union before last year’s COP26 summit to support South Africa’s move away from fossil fuels. The deal has become a model for decarbonizing other nations including India, Indonesia and Vietnam. The hope is that agreements can be reached with those countries before COP27, the people said, and that details of the South Africa pact will be finalized by then.

Much of the focus is on Indonesia, which will this year host the Group of 20’s meetings and have significant influence over COP27. Getting a deal done could earn rich countries some goodwill in Egypt after they failed again last year to meet a decade-old target to deliver $100 billion a year in climate finance for poor nations. But developed countries are also adamant that money can only flow if recipient governments come up with detailed economy-wide plans to end the use of coal.

Three officials from donor countries that visited Indonesia this year raised concerns privately that President Joko Widodo’s cabinet remains split over the need to end the use of coal. That’s been compounded by the war, which has raised the demand for coal exports. The government hasn’t come up with a coherent plan to transition away from coal, an obstacle to any breakthroughs this year, they said, asking not to be named so as not to jeopardize the talks.

“There are about 20 different visions within the Indonesian government about what they’re actually talking about,” said Jake Schmidt, senior strategic director of the international climate program at the Natural Resources Defense Council, who closely monitors the discussions. “There are still factions within the Indonesian government that are wondering why should we not build more coal and why should we transition?”

Indonesian ministries contacted by Bloomberg didn’t immediately respond to queries sent ahead of a week-long public holiday. The government last October released a plan to get to net-zero emissions by 2060 which includes retiring all coal-fired power plants by 2055.

Indonesia’s finance minister, Sri Mulyani Indrawati, has said one of the biggest challenges is convincing private owners of coal plants to switch them off. Speaking on the sidelines of the IMF spring meetings in Washington in April, she also said rising inflation and borrowing costs were making any deal tougher to reach.

“If you ask Indonesia to transition off this energy that will bankrupt my budget, bankrupt the PLN, it will not fly,’’ she said, referring to the state electricity utility PT Perusahaan Listrik Negara.

Still, progress has been made recently as officials engaged in difficult questions about the speed of Indonesia’s energy transition and discussions have become more granular, according to a U.S. Treasury official familiar with the matter. US officials met with ministers and PLN representatives in Washington last week.