The Two Faces of Transition: Reconciling Indonesia’s Top-Down Finance with Bottom-Up Energy Justice
Author: Ali Reza
The global climate challenge is systemic, pushing the world toward a sustainable energy transformation. But for countries of the Global South, this transformation poses a painful paradox. They are being called upon to divert from the very fossil fuels that powered the development of the Global North, even as they continue to battle the urgent day-to-day crises of economic development and energy poverty.
No country embodies this paradox more starkly than Indonesia. On one hand, the archipelago is a carbon-heavy giant: it is the world's fourth-largest coal producer, and its grid is deeply dependent on coal-fired power plants. On the other hand, it is blessed with some of the world's richest potential in geothermal, solar, hydro, and wind resources.
This reality has split Indonesia's energy transition into two distinct faces. The first is the "top-down" face dominating global headlines: a $20 billion, internationally-backed Just Energy Transition Partnership - or JETP - designed to rapidly decarbonize the industrial grid. The second is a quieter, "bottom-up" face emerging from Indonesia's own villages and financial markets. This is a transition driven by community-owned micro-hydro projects and innovative sovereign financing.
The $20 billion question, of course, is which of these two faces really represents a "just and inclusive" future. A close examination will find that the top-down model, for all its gigantic scale, is structurally flawed, built on debt, and failing its "just" mandate. The road to an equitable future for Indonesia could well be found not in newspaper headlines but in tapping its own homegrown, community-centric solutions.
What Does 'Just' Really Mean?
In order to critically evaluate these two paths, we need to first determine what "just and inclusive" really means. The term is not some vague aspiration; it is an analytical framework rooted in three distinct, interdependent pillars of energy justice.
The first is Distributive Justice. This might be considered the most intuitive pillar and it asks: who reaps the benefits and who bears the costs? It requires that the transition provide equitable access for all—particularly the poor—to "affordable cleaner sources of energy". It also requires that burdens—including job losses because of the closure of a coal mine or increased costs for energy—are not shifted disproportionately onto the backs of the poor and vulnerable.
The second is Procedural Justice. Who has voice at the table? This pillar argues that fair outcomes can never come from unfair processes. It requires the "need for inclusion and democratic participation in the planning and decision-making process" by those very people an energy project will affect. Besides being a pre-condition for success, procedural justice is about creating "trust among stakeholders" and making sure local communities are not just informed but are active participants in their own futures.
A third, most profound, yet often ignored pillar is Restorative Justice. This dimension is not only about the future, but it's also about the past. It involves "repairing damage and proactively preventing harm." In a country like Indonesia, with a composite history of land and resource conflicts, this means addressing the legacy of displacement, pollution, and marginalization of indigenous communities that has regularly accompanied large-scale extraction and energy projects.
These pillars are not a checklist; they are a system. A transition that fails on procedure—that is decided in closed rooms by distant financiers—will almost surely fail on distribution, placing the burden on those who had no voice. This framework is the test that Indonesia's $20 billion JETP must pass.
The $20 Billion Test: A Top-Down Model Fails the Justice Test
The Indonesia JETP, announced at the G20 summit in Bali, was hailed as a "model of support for climate action from developed to developing countries." This would unlock $20 billion of public and private finance toward faster movement by Indonesia away from coal, through a CIPP that also includes several major MDBs such as the World Bank and the ADB.
Judged against our three pillars, however, this top-down model reveals deep-seated injustices.
The first failure is procedural. The JETP process has indeed gained wide criticism for its "distorted and untransparent consultations." Though some Indonesian civil society groups were consulted, core financial terms and priorities are defined by the IPG and financiers. Such top-down structure "diminishes the role of civil society" and local businesses, sidelining the very communities that the transition is supposed to serve.
This procedural failure directly causes a distributive disaster. The $20 billion headline figure is dangerously misleading. It is not a $20 billion gift; it is overwhelmingly a $20 billion loan package. Grant funding-the money needed for the "just" part of the equation, like social protection and worker reskilling-makes up a "minute share" of the total. Analysis of the JETP financial structure, as with predecessors, shows this share is staggeringly low, estimated at only 3-4 percent.
The rest constitutes 96-97 percent, comprising both concessional and commercial-rate loans, in a structure that is threatening to "worsen existing debt distress" in Indonesia. This turns what is supposedly a "partnership" into a debt trap that compels Indonesia to go deeply into debt to solve a climate crisis it did not cause.
Yet this commitment of $20 billion represents only a fraction of the actual need. Indonesia's own CIPP estimates that the total investment required by 2030 will be at least $97.2 billion. Therefore, the $20 billion pledge covers only about 20 percent of the identified cost, leaving a large gulf between the promise and the reality.
This is not an Indonesia-specific flaw, but a design failure of the whole JETP model. The $8.5 billion JETP to South Africa faced exactly the same criticism: a pledge amount covering only a fraction of its $98.3 billion plan and the same minuscule 4 percent grant allocation. These are not "Just Energy Transition Partnerships." They are, as one report characterizes, "finance deals operating under the moniker just," with remarkably little finance devoted to explicitly justice-focused initiatives."
The Human Cost of a Top-Down Transition
This high-finance failure has a devastating human cost. The JETP's primary goal is the early retirement of coal-fired power plants. This focus on stranded assets threatens to create stranded communities.
The coal mining industry is one of the largest employers in Indonesia, responsible for up to 150,000 direct jobs. These jobs are highly concentrated in "coal-dependent regions" like East Kalimantan and South Sumatra, where entire local economies depend on the industry. A just transition would harness the JETP's 3-4 percent grant fund to build a bridge for these workers, through aggressive funding of social protection mechanisms, worker reskilling programs, and strategies for economic diversification. That bridge isn't being built.
Although Indonesian government agencies such as BAPPENAS (the Ministry of National Development Planning) have initiated "green jobs occupational mapping," the reality on the ground is a policy vacuum. A 2025 report from the Institute for Essential Services Reform (IESR) had this to say: "there are still limited government programs dedicated to preparing potentially impacted workers in fossil fuel industries for the transition."
This is the central "justice" failure of the JETP. In prioritizing loan-based infrastructure finance over grant-based social protection, the partnership abandons the very workers it purports to support.
This is not only a moral failure; it is a profound strategic error. When you create a large, geographically-concentrated, and desperate population of unemployed workers, you are not building a transition; you are manufacturing a powerful political bloc that will, out of sheer necessity, fight to stop decarbonization to protect their families. By definition, an unjust transition is an unstable and politically unviable one.
The 'Bottom-Up' Face: An Authentic Indonesian Solution
While headlines are dominated by the JETP and its flawed model, a more authentic, just, and effective transition is already being built from the ground up, led by Indonesian innovation.
First, Indonesia has led by example in creating its own mechanisms of sovereign finance. Well before the JETP was even a blueprint, Indonesia became the first sovereign issuer of Green Sukuk in the world. This is not a loan imposed from abroad but a financial instrument controlled from within. Run by its Ministry of Finance, the Green Sukuk mechanism utilizes a "Climate Budget Tagging" system, which is totally transparent and funnels proceeds toward nationally-determined, green projects that include renewable energy and sustainable transport. The model represents procedural justice in finance: it is sovereign, transparent, and aligned with domestic priorities.
Second, models that are already solving the "last mile" problem are functioning at the community level and are "bottom-up." While the grid-scale JETP will never reach millions in remote rural areas, decentralized renewable energy is. These are not theories; they are proven successes.
In the indigenous village of Kasepuhan Ciptagelar, a community-based micro-hydro system was successfully implemented with community leaders, a collaborative approach designed specifically to address local "energy injustice."
In Luku Wingir, another community-owned micro hydro not only brought light but "enhanced the local economy" and was built on the powerful Indonesian value of "gotong royong" (collective actions).
These community-based models represent the very essence of a just transition. They are "economically just and democratically distributed." They are distributively just because they deliver affordable power to the poor. They are procedurally just since they are based on "gotong royong" and community ownership. And they are restoratively just because they empower indigenous communities and respect local values.
Conclusion: A Policy for a People-Centered Future
Indonesia's energy transition is the story of these two faces: the "top-down" JETP proposes massive scale but is structurally unjust, built on debt, and procedurally exclusive; while the "bottom-up" model of community energy and sovereign finance gives profound justice but currently lacks scale.
The path ahead lies not in choosing one over the other but in forcing the two to merge. A real "just" policy for Indonesia would pursue a dual-track strategy.
Reform from the Top Down: Indonesia needs to exert its political influence in the renegotiation of the JETP. It should insist on turning a much larger fraction of the $20 billion into 'grants', rather than loans. This grant money must then be 'ring-fenced' to address the critical social protection gap: financing the worker reskilling and community support programs for coal-dependent regions that are currently missing.
Scale the Bottom-Up: The government needs to use national policy and domestic finance, such as the Green Sukuk, to start aggressively scaling the already proven "gotong royong" models. That is, removing the regulatory and financial barriers currently preventing small-scale decentralized renewable energy projects from scaling up and accessing investment.
Ultimately, a just transition is not about megawatts or financial instruments. It is about governance. It is about "who wins, who loses, how and why." The Indonesian model of "gotong royong" provides the answer. Justice is not achieved when finance is merely distributed; it is achieved when power is truly shared.
