Latest World Bank report on international trade and green transition in Indonesia
On January 18, 2024, I had the opportunity to attend a joint event by the Ministry of Trade and The World Bank. The theme was “Trading Towards Sustainability: The Role of Trade Policies in Indonesia’s Green Transformation.” Quite a mouthful, but from the title you can tell the focus was on how trade policy can facilitate Indonesia’s green transition.
This event essentially promoted the World Bank’s latest report on Indonesia’s trade policy. The report discusses Indonesia’s trade in goods categorized as “green goods” – products needed for the green transition such as electric vehicles, solar panels, and the capital goods and raw materials required to produce them. The report can be downloaded here.
The report was presented by its lead author, Angela Montfaucon. According to Ms. Montfaucon, imports are needed not only to accelerate adoption but also to grow the green industry itself, since much of the imports consist of capital goods. Indonesia needs to reduce tariffs on green goods. More importantly, Indonesia needs to push for harmonization and streamlining of non-tariff measures (NTMs), not just domestically but also regionally and even globally. This is crucial to help Indonesia improve market access to developed countries that are willing to pay a premium for products with a “green” label.
This report could serve as a great entry point for researchers interested in studying the relationship between international trade, green transition, and future economic growth.
What made the event particularly interesting was the participation of several private sector representatives working in green industries. These included Ms. Noni from Bluebird, Mr. Suharji from Amandina Bumi Nusantara (rPET), Ms. Candra from ECADIN (CCS), and Mr. Fajar from Syntek (solar PV construction). Each shared their experiences in their respective fields and the challenges they face.
Amandina Bumi Nusantara explained that their company has successfully produced recycled PET bottles with a smaller carbon footprint. Although these bottles are more expensive than virgin PET bottles, their clients (mostly large companies like Coca-Cola) are willing to pay the premium.
Ms. Candra said that Indonesia has potential for carbon capture and storage (CCS), partly because Indonesia has plenty of underground space to store captured carbon (likely referring to depleted fossil fuel reserves and mining cavities). If true, this is exciting because it means we could sell carbon storage space from former mining sites.
Lastly, solar PV. Solar PV growth in Indonesia has been rapid, with installed capacity doubling each year. However, it still lags far behind countries like Thailand, Vietnam, and India.
According to the private sector representatives, the main issues are TKDN (local content requirement) rules and SNI (Indonesian national standard) certification. There were many examples of NTM-related problems, but I recall one from Mr. Fajar in the solar PV industry. He mentioned that getting SNI certification requires waiting in a queue for one year. Because solar PV technology advances so rapidly, by the time a product receives SNI certification, it’s often already outdated.
In short, the event was excellent and I learned a lot. I’m always delighted that my field of international trade remains relevant and keeps getting more interesting. It really is time for environmental issues to be integrated into international trade and international economics more broadly.
By the way, the event can be watched on YouTube. The event page is on Facebook.
