Indonesia: Team Europe – EIB to support two bus rapid transit systems and contribute to reduction of urban CO2 emissions

(Source: European Investment Bank)

  • The EU bank is set to finance low-carbon urban infrastructure projects in the city of Batam and Metropolitan Makassar, Indonesia to develop two bus rapid transit (BRT) systems.
  • The two projects were prepared with the support of the FELICITY programme, a project preparation facility jointly implemented by GIZ and the EIB, financed by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU).
  • The two BRT projects will help Indonesia to reduce CO2 emissions and contribute to global climate action.

The European Investment Bank (EIB), the climate bank of the European Union, has announced its plans to finance two bus rapid transit systems (BRT) in the cities of Batam and Makassar in the Republic of Indonesia. The EIB financing will be a part of wider Team Europe support for the Government of Indonesia in reducing country’s greenhouse gas emissions by up to 41% by 2030. Low-carbon urban infrastructure development projects like the BRT systems are key to reducing global greenhouse gas emissions as cities worldwide produce some 70% of all these emissions worldwide.

The cities in the South Sulawesi Province and Riau Island of Indonesia, home to some 3 million people, developed their BRT system projects with support from the Financing Energy for Low-carbon Investment – Cities Advisory Facility (FELICITY) – a project preparation facility jointly implemented by the EIB and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, and funded by the International Climate Initiative (IKI) of the German Ministry of Environment, Natural Conservation and Nuclear safety (BMU).

FELICITY helps cities across the world develop bankable urban investment projects and in turn contribute more effectively to reducing global greenhouse gas emissions, improving health and well-being and enabling a just green transition to carbon-neutral cities. The programme is active in Brazil, Ecuador, Indonesia and Mexico.

EIB Vice President Kris Peeters said: “With this commitment to support Indonesia`s low-carbon urban development projects the EIB is taking climate there where it matters most: to our cities which emit more than 70% of the world’s GHG emissions. Together with our partners from the EU and Germany, the EIB will support Indonesia in addressing effectively climate change, and at the same time, help unlocking major investment opportunities that will accelerate the green economic recovery of Indonesia from COVID-19. It is exactly with this type of investments that we contribute to mitigating the devastating consequences of climate change and stimulate the transition to the carbon-neutral cities of tomorrow.”

First Counsellor for Environment, Climate Action and Digital at the Delegation of the European Union to Indonesia and Brunei Darussalam Henriette Faergemann said: “The European Green Deal is the European Union’s response to the global crisis of climate change and environmental degradation. However, the ambition of the Green Deal will not be achieved by Europe acting alone. This is why the European Union engages with Indonesia as an important partner for climate action, including for low-carbon development in urban areas.”

Director for Multilateral External Funding Ministry of National Development Planning of Indonesia (Bappenas) Dr Raden Siliwanti said: “The Government of Indonesia and Bappenas stand ready to support the successful implementation of the sustainable transport projects in Makassar and Batam, as the key elements of the country’s strategy to reduce greenhouse gas emissions and contribute to global climate action.”

GIZ Country Director for Indonesia and ASEAN Martin Hansen said: “Through the joint implementation of FELICITY together with the European Investment Bank and our Indonesian partners at national and subnational level, we are delivering on urban climate action. But we need to intensify our efforts. The smart combination of technical and financial cooperation is the way forward to ensure that financing gaps for low-carbon urban infrastructure investments are addressed effectively in Indonesia — and globally.”

The EIB announced its intention to finance the two FELICITY-supported projects during the Low-carbon urban infrastructure preparation and financing in Indonesia panel at COP26 in Glasgow. The panel hosted representatives of the EIB, European Commission, German Government, GIZ, Ministry of Development Planning of the Republic of Indonesia (BAPPENAS), officials of the South Sulawesi Government, and the cities of Makassar and Batam.

Team Europe provides comprehensive support to climate action in Indonesia

Development of the two BRT systems in Indonesia was also supported by the GIZ programme SUTIR NAMA/INDOBUS which helps develop urban transport projects in Indonesia. With technical cooperation in project preparation, advisory services, tailor-made capacity development assistance in designing and structuring low-carbon infrastructure projects provided by GIZ and FELICITY, and more affordable, long-term financing to come from the EIB, Team Europe delivered a comprehensive support package to local and national-level climate action plans in Indonesia.

This kind of comprehensive support in all stages of project development including access to more affordable long-term finances accelerates global climate action by enabling promoters to develop bankable projects under the highest standards and requirements of international financiers such as the EIB.

Technical advisory cooperation and advisory support provided by FELICITY is crucial for the EIB as it helps in mobilise investments for low-carbon urban development and reduces time from application to financing, facilitating timely and efficient support for climate action efforts.

Background information

About the EIB in Asia:

For 25 years, the European Investment Bank has supported economic development in Asia and the Pacific region. The projects we help finance make people’s lives easier — from cutting travel times in Bangalore with a new metro line, to providing access to drinkable water and rural roads in Cambodia.

In Asia, we have chosen to focus our lending on climate action across all sectors. We also work to include gender equality in our projects, ensuring that women, men, girls and boys can benefit from projects equally and equitably.

About the FELICITY programme:

The Financing Energy for Low-carbon Investment – Cities Advisory Facility is an initiative of GIZ and the European Investment Bank (EIB) to support low-carbon infrastructure projects in cities that contribute significantly to sustainable development and climate change mitigation. As a project preparation facility, FELICITY offers technical assistance to cities in designing and structuring their infrastructure investment projects. FELICITY prioritises the interests of cities and incorporates the perspective of international financiers. The FELICITY projects in Mexico, Brazil, Ecuador, and Indonesia have an estimated investment volume of €322 million and a greenhouse gas emissions reduction potential of up to 1.98 million tCO2eq over 15 years. This equals the annual greenhouse gas emissions of about 430 000 passenger cars.  

About FELICITY in Indonesia:

In Indonesia, FELICITY supports the preparation of two bankable BRT projects in line with international financing requirements, training the project promoter and facilitating the project’s financing. FELICITY thereby cooperates with the GIZ-implemented SUTRI NAMA and INDOBUS projects to align forces, increase expertise and provide the most efficient technical cooperation to the project promoter. Crucial challenges in early-stage project preparation such as feasible and best-fit technological options, net greenhouse gas emission reductions, environmental and social impact assessments, clear and sound funding and financing schemes and the required institutional arrangements are addressed by technical cooperation from FELICITY, SUTRI NAMA and INDOBUS.

About GIZ Indonesia:

The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH has been working in Indonesia since 1975. Currently, GIZ Indonesia provides their expertise and advisory services in the thematic focal areas of climate policy and climate finance, economic and social development and employment, energy transition, governance, natural resource management and sustainable urban infrastructure.

GIZ is working in Indonesia on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU), the German Federal Foreign Office and the European Union. GIZ’s office in Jakarta oversees bilateral, regional and global cooperation projects in Indonesia, Timor-Leste and in conjunction with the ASEAN Secretariat.

About the European Union (EU) in Indonesia:

The European Union and Indonesia have been close partners for more than 30 years. A bilateral Partnership and Cooperation Agreement (PCA) was signed in 2009 and is in force since 2014. This was the first in ASEAN, an indicator of the strong ties between the EU and Indonesia. The European Union sees Indonesia as key partner in the Indo-Pacific region and within ASEAN. EU’s aim is to expand EU-Indonesia relations in areas of mutual interest. A priority is concluding the Comprehensive Economic Partnership Agreement (CEPA) free trade negotiations. The European Union also aims to build a comprehensive green cooperation agenda with Indonesia, supporting the realisation of the Sustainable Development Goals and promoting a carbon-neutral, circular society.

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