Singapore and Indonesia signed a memorandum of understanding (MOU) regarding partnerships on climate change and sustainability on March 21, as reported by Strait Times on the same day. Under the MOU, the two countries will collaborate in four key areas, including carbon pricing and markets, nature-based solutions and ecosystem-based approach, clean technology and solutions, and green and blended finance. Blended finance refers to capital from mixed sources to support sustainable projects in developing countries. Indonesia will establish a Blended Finance Alliance under the Group of 20 (G20) framework, and Singapore is invited to join the alliance, according to Indonesia’s Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan, who signed the MOU on behalf of Indonesia.
Indonesia proposed the Blended Finance Alliance after it took over the leadership of the G20 this year. The alliance will be a multilateral agency that focuses on funds and projects regarding climate change and the United Nations’ sustainable development targets. Indonesia bets on blended finance to fund investments in the country’s renewable power plants and environmental conservation projects such as mangrove rehabilitation and restoration. Indonesia aims for net-zero carbon emission by 2060 or sooner and estimated the target to require investments of up to USD200bn per year in low carbon programs from 2021 to 2030. Aside from the broadened financing channel, Indonesia also seeks Singapore’s expertise in the carbon market through the partnership. Indonesia will start imposing carbon taxes on coal-fired power plants at a minimum rate of USD2.09 per ton of carbon dioxide beginning in April this year, after Singapore priced its carbon tax for 2024 at USD18.6 per ton in February, a fivefold increase compared with the current level.