Climate Finance Effectiveness: A Comparative Analysis of Geothermal Development in Indonesia and the Philippines

• Author: Kathryn Chelminski
• DOI: 10.1177/10704965211070034
• Date: 01 June 2022
• Published date: 01 June 2022
• Subject Matter: Articles

Article

The Journal of Environment &

Development

2022, Vol. 31(2) 139–167

© The Author(s) 2022

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DOI: 10.1177/10704965211070034

journals.sagepub.com/home/jed

Climate Finance

Effectiveness: A

Comparative Analysis of

Geothermal Development

in Indonesia and the

Philippines

Kathryn Chelminski

Abstract

In light of commitments made under the UNFCCC Paris Agreement and Glasgow

Climate Pact, trillions of dollars are needed to fund climate mitigation and adaptation in

developing countries. However, few studies have investigated the effectiveness of

climate f‌inance or how it impacts barriers to renewable energy development in re-

cipient countries. This article contributes to the literature by investigating climate

f‌inance effectiveness through comparative case study analysis of its impacts on geo-

thermal development in Indonesia and the Philippines. The article f‌inds that three

mechanisms of climate f‌inance—utility modif‌ier, social learning and capacity building—

work interdependently in impacting the f‌inancial, regulatory, and technical barriers to

geothermal development in Indonesia and the Philippines but are individually in-

suff‌icient to scale the industry; political will and energy shocks play a signif‌icant in-

tervening role. This paper raises policy implications for climate f‌inance effecti veness

and renewable energy technology deployment in developing countries.

Keywords

climate f‌inance, Indonesia, Philippines, geothermal, domestic politics, renewable

energy, technology transfer, effectiveness, global governance

University of Toronto, Toronto, Canada

Corresponding Author:

Kathryn Chelminski, Aff‌iliated Postdoctoral Fellow, University of Toronto, The Observatory, 315 Bloor St

W, Toronto M5S 1A1, Canada.

Email: kathryn.chelminski@utoronto.ca

Introduction

To avoid global climate catastrophe, the climate f‌inance needs are immense. An es-

timated $1.6 trillion to $3.8 trillion is needed through 2050 for a full energy trans-

formation, and an additional $280 billion to $500 billion is needed annually for

adaptation in developing countries (CPI, 2019). In the wake of COP26 Climate Summit

in Glasgow, the urgent demands for climate f‌inance increased, yet we still have limited

understanding of how effective climate f‌inance is at achieving its aims of fostering

sustainable climate mitigation and adaptation in recipient countries. In this context, this

article investigates climate f‌inance effectiveness through comparative case study

analysis of its impacts on geothermal development in Indonesia and the Philippines.

Located in the Ring of Fire, a seismically active area in the Asia Pacif‌ic, Indonesia

and the Philippines are the world’s two largest producers of geothermal energy after the

US, yet they demonstrate different trajectories of geothermal development. Despite

Indonesia’s superior geothermal reserves (∼24 GW), it has only developed approxi-

mately 9% of its potential, while the Philippines has developed 44% of its potential

capacity (∼4 GW) (DOE, 2019;MEMR, 2020). This raises the question of why there

are disparities in the advancement of geothermal development and, namely, why the

Philippines has developed nearly its full potential of geothermal capacity while In-

donesia has not. While the trajectories of geothermal development in these countries

diverged over the years, and despite delays in achieving capacity targets, Indonesia

surpassed the Philippines in 2017 to become the world’s second largest producer of

geothermal energy. This advancement is a manifestation of how the government, with

the support of international development agencies, has successfully targeted certain

barriers that have plagued geothermal development in Indonesia for decades; never-

theless, a signif‌icant gap between targets and the reality of renewable installed capacity

remains. Meanwhile, the Philippines led in share of geothermal resources developed

since the government, supported by international aid, prioritized development in the

1980s–1990s; however, this growth plateaued after primary resources were developed,

and the lull has continued ever since.

To address the barriers to and costs of climate change mitigation and adaptation,

bilateral and multilateral aid have played an important role in clean energy de-

velopment; both Indonesia and the Philippines have received substantial amounts of

funding earmarked for renewable energy, yet many barriers to deployment remain in

both countries. Multilateral development banks committed approximately USD 192.4

billion in global climate f‌inance between 2015 and 2019, and of the 2019 f‌inancing

commitments, 76% (USD 46.6 million) were earmarked for mitigation (African

Development Bank, 2020). This article investigates the ways through which cli-

mate f‌inance has addressed barriers to geothermal development in Indonesia and the

Philippines from the 1970s to 2020. Using the term “climate f‌inance,”this paper

examines multilateral, bilateral, and transnational development aid for climate miti-

gation and adaptation, as well as the complementary funding for capacity building,

policy advising, and technical assistance, as it relates to geothermal development

specif‌ically.

1

Through comparison of two cases, this research explores the interaction

140 The Journal of Environment & Development 31(2)