By Mehmet Enes Beşer
Just Energy Transition Partnerships (JETPs) are a new ambitious model of climate finance—a call to unlock billions of dollars to facilitate developing economies to transition away from coal without abandoning livelihoods and support sustainable development. Two of Southeast Asia’s most coal-dependent countries, Vietnam and Indonesia, were among the earliest to sign JETP agreements with donor governments and multilateral development institutions. While the commitments were met with cautious optimism, realization of the partnerships has revealed entrenched problems that can subvert their potential to make a difference. At the heart of the problem is a huge financing gap.
While the headline commitments under both JETPs are huge—at $20 billion in pledged funding for Indonesia and $15.5 billion for Vietnam—both mainly consist of private finance and non-concessional loans. That has been criticized by national constituencies and by civil society as not being large or competitive enough to underwrite deep decarbonization. The cost of capital, exchange risk, and lack of guarantees make it impossible for local players to tap the assured finance at scale. In the absence of greater concessional, patient, and locally driven finance, these JETPs run the risk of remaining aspirational plans rather than drivers of substantial change. The second major challenge in both nations is the donor-national agenda alignment gap.
The G7-leadership donor countries would like ambitious phase-out schedules for coal and rapid growth of renewables. However, Hanoi and Jakarta’s top priorities are energy security, competitiveness in industry, and balanced growth. Both governments are hesitant to be coaxed by foreigners into taking steps which would destabilize domestic energy planning or open them to political blackmail. Vietnam’s reluctance to finalize its Power Development Plan VIII and Indonesia’s reluctance to push coal retirement earlier in a more activist manner are testimonials to this friction. The labor is not technologically singular but deeply political—in requiring diplomacy to respect national sovereignty and maintain world climate ambition. The political economy of coal is also deeply ingrained.
Indonesia’s political patronage system is heavily invested in coal, as it’s a significant driver of export income and political favors. Rich conglomerates and domestic elites have stakes in coal-fired power generation and mining, and therefore structural reforms are politically charged. Less export-dependent Vietnam is also confronted by vested interests in state-owned enterprises as well as a fossil-fuel-dominated long-term power sector. Incumbent producers and established institutional arrangements are, in both cases, imperiled by the energy transition. Unless it is accompanied by political compromise and strategic compensation, phase-out of coal can mobilize opposition instead of reform. Just as important are the social aspects of the transition.
JETPs are founded on the principle of a “just” transition—but practice works justice hard. In Vietnam and Indonesia, coal not only provides electricity but livelihoods in coal-mining communities and spin-offs. Phasing out coal without credible retraining programs, job creation, and social protection risks worsening inequality and fueling unrest. Thus far, implementation of JETP has been criticized on the absence of consultation with affected communities and civil society organizations. A fair transition will not be established on the sole bases of top-down finance flows and diplomatic effort—but it has to be established on the foundations of participatory planning and local ownership. There are also infrastructural and technical constraints. Mass integration of intermittent renewable energy requires large-scale redesign of the grid, regulatory reform, and capacity building in both countries. Grid congestion and curtailment have already led to solar and wind deployments being postponed in Vietnam. Indonesia’s island geography and dispersed grid structure pose additional challenges. Rollout of JETP must be holistic—beyond coal retirement to the entire energy system, from generation to transmission to consumption.
Conclusion
The promise of JETPs in Vietnam and Indonesia is to release a paradigm shift towards low-carbon, inclusive energy futures. That promise is not guaranteed. Financing gaps, political inertia, institutional complexity, and social vulnerability all pose significant risks to implementation. To be successful, JETPs must evolve from headline announcements to adaptive, context-responsive strategies responsive to both global climate imperatives and national realities.
That means looking beyond the one-size-fits-all solution to energy transition. Donors must offer more flexible, lower-cost financing and recognize the different transitions each country must make. Recipient governments must maintain transparency, provide effective stakeholder participation, and inject justice at every stage of the transition. That way, JETPs will be living up to their name—not just as finance instruments, but as instruments of climate leadership in Southeast Asia that are fair.