- Rights & Accountability
- A formal complaint has been lodged against the World Bank Group for providing back-door financing for two new coal power plants in Indonesia.
- The new Java 9 and 10 plants are expected to cause thousands of premature deaths and contribute more than 250 million metric tons of CO2 to the earth’s atmosphere.
- Local communities say the plants are unnecessary and the impacts will be catastrophic.
(Banten Province, Indonesia – September 14, 2023) Communities in Indonesia’s Banten Province have lodged a complaint against the World Bank Group for indirectly backing the development of two massive new coal-fired power plants, which expand an existing complex of eight plants that have caused devastating impacts on local communities and the environment. The complaint, filed with the support of local and international non-governmental organizations PENA Masyarakat, Trend Asia, Inclusive Development International and Recourse, details how the bank’s private lending arm, the International Finance Corporation (IFC), has supported the construction of the new plants at the Suralaya coal complex through a $15.36 million equity investment in one of the projects’ financiers, Hana Bank Indonesia. Complainants are calling for the Java 9 and 10 construction to be stopped immediately, and for fair and full redress for harms already suffered.
With a combined capacity of 2000 megawatts, the new plants, known as Java 9 and 10, would increase the size of this already massive coal complex by 50% and compound ongoing harms, including respiratory problems, air pollution caused by coal dust and toxic waste. The plants are expected to cause thousands of premature deaths and will release an estimated 250 million metric tons of carbon dioxide into the atmosphere over their 30-year lifespan.
“The Java 9 and 10 expansion is totally unwarranted—electricity needs in the area are already being met and the Java-Bali grid is already oversupplied—and yet it will devastate local communities and tip the world closer to a climate catastrophe, to which Indonesia and its citizens are uniquely susceptible. That’s the opposite of what’s needed to achieve the net-zero emissions target and undermines the Paris Agreement.” Novita Indri, campaigner, Trend Asia
As outlined in the complaint, the Java 9 and 10 plants are making an already dire situation worse. Farming and fishing in the area are becoming increasingly unviable, families have been forcibly evicted without adequate compensation to make way for the new plants, and the last remaining beach in the area has been destroyed, greatly impacting tourism and local businesses. The increased carbon dioxide emissions are also of grave concern, considering the vulnerability of Indonesia to climate change and extreme weather events. The complaint also argues that construction of new coal plants is unnecessary in the region, where electricity supply already exceeds demand.
“I’m confused as to why Java 9 and 10 are being built, because the Suralaya community does not experience any advantageous benefits; in fact, the new projects would worsen existing environmental degradation and lead to respiratory disease. It’s silly for the company to claim that this project will generate prosperity for the community.” Mad Haer Effendi, Director of PENA Masyarakat.
IFC’s investment in Hana Bank Indonesia violates its Sustainability Framework and Green Equity Approach
As outlined in the complaint, submitted on Wednesday to IFC’s Compliance Advisor Ombudsman (CAO), the fact that IFC failed to identify its client Hana Bank Indonesia’s new investment in Java 9 and 10 and failed to appropriately assess the mega coal project against its social and environmental policies represents a serious supervision failure. It also demonstrates that despite IFC’s new Green Equity Approach, an initiative launched in 2019 requiring financial intermediary clients, including Hana Bank, to increase climate-related lending and eliminate coal exposure—or reduce it to near zero—by 2030, IFC was still indirectly financing new coal.
“Support for Java 9 and 10 is completely at odds with the World Bank’s mission—the plants will exacerbate, not reduce, the impacts of both poverty and climate change. IFC’s failure to prevent its client funding two massive new coal plants in the 11th hour of the global climate emergency undermines its commitment to the Paris Agreement on climate change.” Kate Geary, co-director of Recourse
While IFC has since closed loopholes in its Green Equity Approach that allowed Hana Bank to invest in Java 9 and 10, even the updated approach with its ‘no new coal’ commitment allows financial intermediary clients to invest in captive coal power and to underwrite bonds for coal developers. Furthermore, while IFC has stated that the approach applies to all existing equity clients, it is unclear whether and how that is being enforced.
“Promoting coal expansion is antithetical to IFC’s mission. The Java 9 and 10 project is so out of line with the bank’s environmental and social standards it’s unlikely it can be brought into compliance. IFC’s responsibility now is to stop further harm from the project and to help remedy the harm already caused.” Sarah Jaffe, senior legal and policy associate at Inclusive Development International
The projects put the World Bank Group at odds with Indonesia’s Just Energy Transition Partnership, a $20 billion initiative funded by a coalition of wealthy countries and global lenders to help the country speed its transition away from coal, toward cleaner energy sources.
The complainants argue that the Java 9 & 10 expansion should never have been undertaken and should be stopped immediately. If stopping the project is not possible, they call on IFC to ensure that it is upgraded and modified to reduce the social and environmental harms posed by the development and to come as close as possible to compliance. Complainants are also seeking full and fair redress for harms already suffered, an end to Hana Bank Indonesia’s financing of coal projects and systemic policy changes by IFC to eliminate all indirect support for coal projects.
Photo credit: Melvinas Priananda, Trend Asia.
More information on the impact of the Java 9 and 10 projects and IFC’s role can be found here: https://re-course.org/wp-content/uploads/2021/11/Closing-loopholes-How-the-IFC-can-help-stop-fossil-fuel-finance.pdf
Photos for use with proper accreditation can be downloaded here: https://drive.google.com/drive/folders/1LW1MkGl0T2opZFtYy4GBn16fwudUgV7H?usp=drive_link
Daniel Willis, finance campaign manager at Recourse
Time Zone: BST (GMT+1)
Novita Indri, energy campaigner at Trend Asia
Time Zone: Western Indonesian Time (GMT+7)
Languages: English, Bahasa Indonesia