The Political Economy of Climate Finance: Stakeholder Relationship Dynamics in the Indonesian Just Energy Transition Partnership

Abstract

As the global community tackles climate change, climate finance emerges as a critical mechanism to facilitate the transition to low-carbon economies in developing nations. This study explores the political economy of climate finance, focusing on Indonesia’s Just Energy Transition Partnership (JETP). Through qualitative analysis of stakeholder interviews, the study unpacks the complex dynamics and power asymmetries influencing climate finance mobilisation, governance, and implementation. Key challenges identified include Indonesia’s weak institutional framework, policy ambiguity, competing domestic interests, lack of political alignment among international partners, and unrealistic targets. These issues reflect deeper tensions between sovereign decision-making and external pressures, compounded by entrenched coal sector interests and fragmented donor strategies. The findings highlight the climate finance curse, where large-scale financial inflows can create inefficiencies, governance challenges, and perpetuate external influence, akin to neo-colonial practices. This study suggests the need for greater transparency, achievable targets, inclusive governance, and improved coordination among international partners to ensure effective climate finance delivery.