Key Takeaways
- 1$1.4T transition financing gap identified across four major Asian coal economies
- 2JETP commitments of $47.5B remain 73% undisbursed three years after launch
- 3Indonesia's PT PLN plans early retirement of 6.7GW coal capacity by 2030
- 4Worker reskilling and community transition costs estimated at 8-12% of total capex
The Scale of the Challenge
Asia accounts for 78% of global coal power capacity and over 80% of new coal plant additions in the past five years. A credible 1.5°C-aligned transition pathway requires the early retirement of 540 GW of coal capacity across Asia by 2035 — capacity that currently underpins national grids, employment in mining regions, and tax revenues for sub-sovereign governments.
MindEarth's analysis, drawing on IEA, IRENA, and country-level grid operator data, estimates the total just transition financing requirement across India, Indonesia, Vietnam, and the Philippines at $1.4 trillion through 2040. This includes capital costs for replacement renewable capacity ($820B), grid modernisation and storage ($310B), and just transition components — worker reskilling, community development, and stranded asset compensation ($270B).
Just Energy Transition Partnerships (JETPs)
The JETP model, launched at COP26 with the South Africa partnership and subsequently extended to Indonesia, Vietnam, and Senegal, represents the most ambitious multilateral attempt to mobilise just transition finance. Cumulative JETP commitments now total $47.5 billion, with Indonesia ($20B) and Vietnam ($15.5B) representing the largest Asian programmes.
However, disbursement has been slow. Three years after the South Africa JETP launch, only 27% of committed funds have been disbursed, and substantial portions have funded studies and technical assistance rather than physical transition activities. Indonesia's JETP Comprehensive Investment and Policy Plan (CIPP) faces delays in finalising the project pipeline and resolving disagreements over the treatment of captive coal plants serving industrial customers.
“Three years after the South Africa JETP launch, only 27% of committed funds have been disbursed.”
Blended Finance Structures
The emerging consensus among DFIs and commercial lenders is that blended finance — combining concessional capital from public sources with commercial debt and equity — is the most viable structure for funding just transition at scale. Concessional capital absorbs first-loss risk, enabling commercial investors to participate at acceptable risk-adjusted returns.
Indonesia's PT PLN early retirement programme for 6.7 GW of coal capacity by 2030 is being structured as a blended vehicle, with ADB and World Bank providing concessional debt at 2.5-3.5% interest rates alongside commercial syndicated loans at 6.5-7.5%. The blended cost of capital of approximately 5.2% makes early retirement economically viable relative to continuing operations.
The Social Dimension
Worker reskilling, community transition, and just labour outcomes are not optional ESG accessories — they are the core political precondition for credible transition pathways. MindEarth's case studies of coal community transitions in Germany, Poland, and the UK indicate that successful programmes invest 8-12% of total transition capex in social components, including early retirement packages for older workers, retraining for younger workers, economic diversification grants for affected municipalities, and continued healthcare and education access during transition periods.
Asian transition programmes have historically under-invested in this dimension. The Just Transition Investment Platforms being developed in Indonesia and Vietnam are attempting to address this through dedicated funding windows for social programmes, but design choices around eligibility, governance, and disbursement mechanisms will determine actual impact.
