Coal demand in Indonesia and Vietnam is set to climb through 2030, the IEA warns, as slow funding and energy security concerns undermine multibillion-dollar transition deals with coal plant retirements.
Coal consumption in Indonesia and Vietnam is expected to keep climbing until at least 2030 despite multi-billion-dollar energy transition deals signed with wealthy nations and development banks, the International Energy Agency said.
In its annual coal report, the Paris-based IEA forecast that coal use across Southeast Asia will grow by 4.5 percent a year between 2025 and 2030. Indonesia, Vietnam and the Philippines will account for most of the increase. Coal-heavy India is also projected to see a 3.3 percent rise in coal demand over the decade.
The growth in these countries will offset sharp declines in coal use in developed economies and a smaller reduction in China, leaving global coal demand largely flat and only slightly lower by 2030, the agency said.
For 2024, global coal demand is set to increase by 0.5 percent to a record 8.85 billion tonnes. In the United States, higher natural gas prices and policy measures that slowed the retirement of coal-fired power plants reversed a 15-year downward trend in coal consumption, the report found.
Coal produces far more planet-heating emissions than oil or gas when burned. Rapidly cutting its use is seen as essential to meeting global climate targets, and countries agreed to phase down coal at the COP26 climate summit in Glasgow in 2021.
To support that goal, donor nations launched Just Energy Transition Partnerships in 2021 and 2022 to help countries such as South Africa, Vietnam and Indonesia move away from coal.
However, responding to a question from Climate Home News, IEA director of energy markets and security Keisuke Sadamori said at a press briefing this week that the partnerships in Indonesia and Vietnam have so far failed to bend the curve of coal use.
Fabby Tumiwa, head of the Institute for Essential Services Reform who advised the Indonesian government on its JETP, said the programme is stalling partly because rich country partners have not provided funding to support the early retirement of coal-fired power plants.
A draft Indonesian energy plan seen by Climate Home News in August 2023 proposed retiring one sixth of the country’s coal-fired power capacity by 2030. That target was later removed from the final version published the same year after disputes over financing with wealthy nations. Instead, the plan said coal plants would not be shut before their scheduled closures earlier than 2035.
Tumiwa said the lack of international funding for early closures has made it harder for JETP partner countries including Germany, Japan and the UK to press Indonesia to stop building new coal-fired power plants.
Even beyond 2030, early retirements appear uncertain. State utility PLN recently cancelled plans to close the Cirebon-1 coal-fired power plant seven years early in 2035, citing the high cost of compensating the plant’s owner. The decision came despite promised financial support from the Asian Development Bank through its Energy Transition Mechanism.
Think tank IESR has argued that the health benefits of closing the highly polluting plant early would outweigh the financial costs, saying the decision to keep it running signals a weakening commitment to the energy transition.
Indonesia’s Chief Economic Minister Airlangga Hartarto said earlier this month that Cirebon-1 is less polluting than many other plants in the country, adding it would make more sense to shut down older and dirtier facilities first.
Tumiwa also said a major weakness of the JETP lies in its focus on coal plants supplying the national grid while largely overlooking so-called captive coal plants that directly power industrial facilities such as nickel and aluminium smelters.
By the time planners realised captive coal made up a significant share of capacity, it was too late to redesign the partnership, he said. The Indonesian JETP secretariat has estimated that shifting the captive power sector, which currently relies on coal for three quarters of its electricity, to cleaner energy would require $31 billion by 2030 and $92 billion by 2050.
The IEA said rising coal use in Indonesia and Vietnam is being driven mainly by surging electricity demand linked to economic and population growth. In Indonesia, coal consumption is increasing sharply in industries such as nickel and aluminium, while in Vietnam the expansion of its power-hungry manufacturing sector has fueled demand.
Funding for clean energy under the JETPs has so far been slow. Indonesia’s partnership, which pledged to mobilise $20 billion by 2027, has delivered about $3 billion to date, mostly in concessional loans. Japan has been the largest contributor, providing nearly $2 billion.
In Vietnam, only three projects have reached funding agreements, together worth less than $1 billion.
The IEA report said discussions in Indonesia have intensified around energy security, affordability and orderly transition pathways. The country holds large reserves of relatively cheap coal, and state-owned utility PLN has encouraged investment in coal mining and transport.
Vietnam has also softened its plans to close coal plants and has jailed environmental campaigners. In May, European governments announced loans under the JETP for a transmission line and two hydropower plants, but no measures were unveiled to support early coal plant closures.
