An analysis of the first 18 months of JETP implementation in Vietnam and Indonesia

Southeast Asia is at a pivotal moment in its journey towards decarbonisation. The commitments made under the Just Energy Transition Partnerships (JETPs) in Vietnam and Indonesia indicate both countries’ dedication to accelerating decarbonisation. High-level commitments include deploying large-scale renewable energy, enhancing interconnection and storage, phasing out unabated coal-fired power generation and ceasing the issuance of new coal-fired power plants.

While JETPs are not designed to achieve a wholesale energy transition, their initial implementation is crucial for building momentum in the region. Successful operationalisation will not only enhance the credibility of the JETP model globally but also unlock further financial flows in both countries.

This policy brief assesses JETPs’ first 18 months in operation and their ability to build momentum towards just energy transitions in Indonesia and Vietnam. Climateworks Centre analysis identified the key drivers and barriers that will enable both countries to fulfil their net zero commitments and achieve a just energy transition.

This policy brief provides a comprehensive stocktake analysis for policy-makers, financial institutions, researchers and civil society stakeholders to explore Vietnam and Indonesia’s progress on just energy transitions in the initial phases of implementing JETPs. This brief aims to serve as a resource to inform about the progress made and areas for improvement to operationalise JETPs in Vietnam and Indonesia.

For this brief, we assessed policies, financial flows, investments and initiatives in Vietnam and Indonesia based on 26 systemic, financial, governance and socio-economic benchmarks developed for our just energy transition framework.

Systemic benchmarks

Vietnam and Indonesia face distinct challenges in their energy transitions. In Vietnam, while some coal-fired power projects were delayed in the Power Development Plan 8 (2023–2030), there is no formal plan to retire on-grid coal plants, with new capacity still being built. Indonesia has announced a retirement plan for a portion of its on-grid coal infrastructure by 2030, but it has not progressed at the pace and scale necessary to achieve the country’s net zero target. Both countries are advancing renewable energy deployment, yet challenges persist in interconnection and storage infrastructure, which are crucial for supporting the transition to low-carbon technologies.

Financial benchmarks

Financial clarity and the deployment of credit enhancement instruments are critical to determining the success of JETPs’ operationalisation. Vietnam has partially clarified its public capital commitments, but its green bond market, which is integral to its JETP’s success, remains underdeveloped.

Indonesia has shown significant progress, particularly in deploying credit enhancement instruments for early coal plant retirements. Both countries rely heavily on commercial loans from Development Finance Institutions, potentially straining fiscal capacities.

Governance benchmarks

Effective governance is crucial for aligning JETP objectives with national and international commitments. Vietnam has made partial progress in aligning its capital mobilisation with national development plans. However, there is room to improve cross-ministerial coordination. Indonesia has established a more structured governance framework, with a clear division of roles and responsibilities among ministries.

Socio-economic benchmarks

Both countries face significant socio-economic challenges in ensuring the energy transition is equitable, inclusive and just. While environmental impact assessments in Vietnam include participatory elements such as stakeholder engagement with vulnerable groups, their effectiveness is unknown due to limited transparency of methods and resource allocation to participate in the process. Indonesia has made some progress in supporting economic diversification and job creation in coal-dependent regions. However, both countries can do more to enhance incentives and compensation mechanisms to promote reskilling and upskilling the labour force to support the unfolding energy transition.

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This policy brief provides insights into the state of energy transition in Indonesia and Vietnam in the first 18 months of JETP operations:

  • Energy and industrial policies primarily operate on a national level; yet significant opportunities exist to adopt place-based policies at sub-national levels (city and provincial scales) that can maximise benefits for governments, financiers, industries and local communities. Such approaches can enable large-scale renewable energy deployment while accelerating coal phase-out by addressing socio-economic considerations.
  • There are significant opportunities for both countries to learn from JETPs’ operationalisation to date. The implementation is country-specific, demonstrating success and sandbox policies, that is, frameworks within which participants can test innovative concepts in the market under more flexible regulatory requirements at a smaller scale.
  • The benchmarks outlined in this report should not be considered in isolation, as policy instruments and outcomes directly impact one another, demonstrating the need for a holistic approach in policy design and implementation.
  • Industries can play a more active role in ensuring a just energy transition through meaningful partnerships with governments to support upskilling and reskilling programs.

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