When Indonesia hosted the second Asia Zero Emission Community (AZEC) ministerial meeting in Jakarta to discuss how decarbonisation strategies might work around the region, eyebrows were raised among the local environmental community.
To continue reading, subscribe to Eco‑Business.
There's something for everyone. We offer a range of subscription plans.
- Access our stories and receive our Insights Weekly newsletter with the free EB Member plan.
- Unlock unlimited access to our content and archive with EB Circle.
- Publish your content with EB Premium.
Initiated by Japan prime minister Kishida Fumio in 2020 and launched by 11 partner countries including Australia and Asean nations in 2023, the forum aims to provide a platform for government officials and business leaders to advance decarbonisation solutions while promoting economic growth.
“What we are trying to do is promote inclusivity and focus on as many [climate] projects as possible. We are trying to find solutions – namely Asian solutions to Asian challenges,” said Arsjad Rasjid, chairman of Indonesian Chamber of Commerce and Industry (KADIN), who represented Indonesia during the AZEC roundtable.
However, the proposed decarbonisation initiatives have raised doubt among environmentalists, who claim that the forum’s projects may bring about more harm than good.
“AZEC lacks transparency and does not allow for public participation, particularly from local communities,” commented Fanny Tri Jambore Christanto, mining and energy campaign manager of Indonesian environmental nonprofit WALHI. “We also oppose the forum for promoting fossil fuels through its projects and technologies.”
Since the announcement of its launch in January 2022, AZEC has been part of Japan’s broader climate “green transformation” policy, which heavily relies on fossil fuel-based technologies. Japan has pledged up to US$8 billion to AZEC countries by 2030 for energy projects, including renewable energy, hydrogen, ammonia, and carbon capture and storage (CCS).
A study by research group Zero Carbon Analytics, published on Friday, found that of the 158 memoranda of understanding that Japan has signed with partner countries under the Asia Zero Emission Community initiative (AZEC), more than one third (35 per cent) use technologies tied to liquified natural gas (LNG), ammonia co-firing with coal plants, and CCS.
“
False solutions move us further from real energy transition efforts.
Lay Monica, economic researcher, Center of Economic and Law Studies
Japan’s ‘false solutions’
Japan, the world’s fourth-largest economy, has been heavily dependent on imported coal, oil, and gas, especially since the 2011 Fukushima disaster. It is also the second-largest public financier of international fossil fuel projects, spending over US$4.8 billion annually. The country continues to build and plan new coal-fired power plants at home and overseas, particularly in Asia, with operations extending beyond 2040.
Despite pledging to achieve net-zero emissions by 2050, Japan’s decarbonisation efforts rely on costly and largely unproven technologies, such as CCS. The country also claims that new fossil fuel plants can reduce emissions by burning ammonia in coal plants and blending hydrogen with fossil gas in gas plants, which has drawn criticism from environmental groups who question their effectiveness as climate solutions.
As the world’s largest LNG importer over the last decade, Japan also plays a crucial role in developing LNG infrastructure across Southeast Asia, which is promoted through various AZEC projects.
“These false solutions move us further from real energy transition efforts. They also monetise climate action, as they are driven by profit and business interests rather than genuine environmental benefits,” explained Lay Monica, economic researcher at Center of Economic and Law Studies (CELIOS).
Following the first AZEC ministerial meeting in March 2023, over 140 civil society groups from 18 countries, including Bangladesh, Indonesia and Philippines, issued an open letter, calling on Kishida to stop prolonging the use of fossil fuels and derailing the transition to renewable energy across Asia.
Japanese civil society groups, including Friends of Earth Japan, have criticised Japan’s efforts to promote fossil fuel-based technologies through AZEC, labelling it a “greenwashing strategy” that impedes the energy transition.
Despite these concerns, the Japanese government continues to support and expand AZEC projects, extending the use of fossil fuel-based technologies in Southeast Asia and elsewhere.
“There have been no consistent successes in capturing carbon using CCS technology. Most projects have struggled to maintain even 80 per cent efficiency. When it comes to CCS, there are concerns about where the captured carbon will be utilised, the costs of preventing leaks, and minimising emissions to levels that avoid additional warming or groundwater contamination,” explained Monica.
Inside AZEC’s energy transition projects
During the meeting in Jakarta, Japan signed 70 memorandum of understandings (MoU) on energy transition projects with partners, with US$1 billion funded by Japan’s Ministry of Economy, Trade and Industry.
Of these projects, 34 were proposed by Indonesia, including the Muara Laboh Geothermal Project and the Legok Nangka waste-to-energy (WTE) project. Both projects have faced controversy and protests during various stages of their development.
Phase one of the Muara Laboh Geothermal Power Plant (PLTP) in Solok Selatan, West Sumatra, has been in development since 2019, and was funded by the Japan Bank for International Cooperation (JBIC) and Nippon Export and Investment Insurance (NEXI). Indonesian president Joko Widodo lobbied Japan’s prime minister in late December 2023 to accelerate phased two of the US$500 million project.
According to WALHI, the land acquisition process for the geothermal project involved the intimidation of affected communities, with local officials forcing landowners to relinquish their lands. The project lacked transparency and public consultantion with local communities, the nonprofit says. The plant’s operation has also resulted in severe environmental contamination, impacting farmers who rely on river flows, leading to failed rice crops due to water pollution.
“We are advocating for local communities who oppose geothermal projects across the country. These projects often obstructed access to water sources for local communications and put their livelihoods at risk,” stated Christanto.
The Legok Nangka WTE Project in West Java has also been criticised, primarily due to funding via a US$100 million loan from the International Bank for Reconstruction and Development (IBRD), the lending arm of the World Bank. The project imposes a tipping fee of IDR386,000 (US$25) per tonne of waste processed on the central and regional governments.
Using incinerator technology from Japanese company Sumitomo, the Indonesian government claimed the WTE project could process up to 2,000 tonnes of waste per day, with the potential energy generated reaching up to 50 megawatt (MW).
However, recent studies have shown that incinerators in the United States, the United Kingdom and Europe emit more greenhouse gasses than coal-fired power plants. Additionally, this technology could emit volatile organic compounds that could pose health risks.
“VOCs can contribute to genetic mutations, including lung cancer. WTE technology might also emit carbon monoxide and nitrogen oxides, which are as harmful as carbon dioxide (CO2). We need to reassess whether our waste meets the necessary standards to produce sufficient energy,” explained Monica.
Is Indonesia Japan’s carbon waste dumping ground?
CELIOS contends that Japan plans to dispose of its waste from carbon capture technologies in developing countries like Indonesia through AZEC. This involves Indonesia renting land for Japan to dump its carbon waste and providing a site for its transportation.
“Japan will likely encourage Indonesia to purchase the necessary technology through loans for this scheme. Once Japan disposes of its carbon waste and we store it, Indonesia is expected to receive some form of return or profit,” said Monica.
However, there has been no transparency regarding the calculation of potential returns. Other costs, including risk management and high monitoring expenses, must be factored into projects. Given the narrow margin of safety in carbon storage, proper monitoring is crucial, critics argue.
In addition to the carbon export scheme, experts have also highlighted the risk of debt distress from the implementation of AZEC projects in Indonesia, as the loan-based scheme could further deteriorate the country’s fiscal health.
“The question is, how large will the risk premium that Japan charges be? This will be reflected in the interest rate, but the specifics are not yet known. We also need to consider whether this additional loan will lead to any intervention in domestic policy,” said Monica.
Loan-based financing has long been a trend in climate diplomacy, increasing the financial burden on countries like Indonesia. Similar to the rich-world backed Just Energy Transition Partnership (JETP) scheme to move Indonesia off fossil fuels, which is 90 per cent loan-based financing, AZEC also follows this trend and could lead to additional debt.
“In climate diplomacy, developed countries should acknowledge their historical debt regarding CO2 emissions, having emitted far more CO2 than their carbon budgets. They should provide grants to support the climate and energy transition efforts of developing countries,” said Christanto.
“Relying on loans only increases the financial burden on countries like Indonesia rather than supporting their climate action.”
