FRAMEWORK FOR INDUSTRY’S
NET-ZERO TRANSITION
1
8 March 2023
Hakimul Batih
Indonesia CEFIM
Programme
Representative
Developing financing solutions in emerging and developing
economies

Solutions for a net-zero transition requires
understanding of industry / country considerations
Technology
transfer & R&D
Carbon
Markets
Asset
stranding
High costs of
transition &
competitiveness
A flexible approach is
needed to develop
solutions that encompass
many considerations for
emerging and developing
economies
• Improving enabling market
conditions
• Financing

Min. of Industry
Min. of Finance
Min. of Energy
Min. of Environment
Min. of Planning
Other government
Financial regulator
…
Motors
Cement
…
MSMEs
Clusters
Iron / steel
…
Heavy
industry
Supply
chains
R&D
Tech.
transfer
Assets
Key stakeholders and Framework’s 3 Pillars
Develop financing
solutions for a
pipeline of bankable
projects
Solutions to improve
the enabling market
conditions
Support international
dialogue by sharing of
best practices
Understanding benefits &
risks of industry’s low-
carbon transition
2. Implementation Outcomes 3. Framework benefits
1. Focus Area
Finance
institutions
Policy
makers
Energy system
and
infrastructures
Regulation, target setting
Implementation, reporting
Industry

The Framework is a step-by-step guide
on how to approach industry transition
Deliverables
Activities
Step 1
Stakeholder Engagement
and Focus Area
Step 2
Background Research
Step 3
Business Cases and
Pipeline of Projects
Step 4
Market and Financing
Solutions
Step 5
Disseminate Framework
outcomes
Pillar 1
Focus Area
Pillar 2
Implementation Outcomes
Pillar 3
Framework Benefits
Report:
Country status
and Focus Area
Slide deck:
pathway,
projects,
business cases
Market &
Financing
solutions
Policy
brief(s)
Use cases
Bilateral meetings
Workshops
Desktop Research
Workshops
In-house
analysis
Plenary
session
Workshops
Consultations
Plenary
session
Meetings and
conferences
Website
communication
Envisaged Framework implementation period: around 12 months

5
Overview of Pillar 1: Focus Area
Steps 1 and 2
Engage with the OECD CEFIM programme
counterpart
Identify and understand the stakeholder groups’
priorities
Agree on the Focus Area
1.1
1.2
1.3
Set up a Steering Committee and
prepare Terms of Reference and work plan
1.4
2.3
2.2
2.1
Desktop research on current status of
technology, policy and financing
Regulatory, policy, financial and business status
Inform Step 1 to confirm the Focus Area

6
Overview of Pillar 2: Implementation Outcomes
Step 3: Business Cases and Pipeline of Projects
Evaluate business cases and identify
a pipeline of projects and financing needs
Assess investment needs
Choose a net zero pathway for the Focus Area
Choose a Current Policies scenario as a reference
3.1
3.2
3.3 3.4
Technology solutions
to close the transition gap:
• Energy efficiency
• Direct use of renewables
• Switching to low-carbon fuels
and feedstocks
• Circular economy
• CCUS
Investment needs for the technology
solutions
Based on quantification of technology
solutions (how many tons of low-carbon
fuels, % of recycling, ...)
2020 2050
2030 2040
Emissions of
Focus Area
[Mt CO2/yr]
Current policies
scenario
Net-zero
transition pathway
Choice of scenario/pathway
based on existing analyses for the
Focus area
Business Cases and pipeline of
projects
Based on a subset of technology
solutions consistent with the net-
zero transition pathway
Selection of relevant technologies
and projects:
• Technical parameters
• Economic parameters (CAPEX,
market prices, …)
• Selection of indicators and
metrics (Internal Rate of Return,
public money spend…)

7
Overview of Pillar 2: Implementation Outcomes
Step 4: Market and financing solutions
4.1
4.3
4.4
4.5
Agree on a monitoring and evaluation
mechanism
Identify financing gaps in the available financing
instruments
Match low-carbon projects and financing
solutions
Establish the financing and market barriers
Develop market enabling solutions
4.2 Develop financing solutions
Analysis of gaps and barriers
Based on extended desktop research and
work with stakeholders, supported by
output of business cases in Step 3
Internal Rate of Return
[ % ]
Low-carbon Conventional
Development of solutions
Based on policy toolboxes and
workshops with stakeholder groups;
covering the capital and the operation
and maintenance costs
Internal Rate of Return
[ % ]
Low-carbon Conventional
Matching of solutions with projects
Based on quantitative KPIs (required
financing, CO2 improvement, ...)
Definition of country-level mechanisms
for monitoring and evaluation
Policy maker Industry
Finance institutions

Contributing to broader energy, climate and financing
policy dialogue and international cooperation
3. Framework
benefits
Framework
for
Industry’s
net-zero
Transition
Country
priorities
Market &
Financing
solutions
Trade
Industry
Value
Chain
Net-Zero
Pathway
Just
Transition
Carbon
markets
Technology &
Digitalisation
Transition
finance
Blended
finance
Emissions
tracking &
ESG
Projects
develop
ment
Standards &
certification
Finance institutions
Industry
Policy makers
CEFIM
coordination
of the
Framework
Stakeholder groups
September 2022:
Framework
launch
2022-2024:
Indonesia
& Thailand
Timeline
Engage new
countries: Egypt,
India, South Africa and
others

• In 2022 the Government of Indonesia pledged to reduce emissions from 2020-2030 by 31.89%
(unconditionally) up to 43.20% (conditionally) against the 2030 business as usual (BAU) scenario.
• 6 strategic steps identified in MEMR's Roadmap for NZE 2060 for the industry sector:
9
Introduction
Nationally Determined Contribution & Net-zero Emission
Fuel switch
Energy
efficiency
Electrification in
industry
Hydrogen Biomass
Carbon Capture
and Storage
(CCS)
• Electricity share
increase from
24% in 2020 to
51% in 2060
• Reduce coal
share from 33%
in 2020 to 7% in
2060
• Reduce natural
gas share from
27% in 2020 to
15% in 2060
• Reduce
specific energy
consumption of
equipment by
50-60% by
2060
• For low
temperature
processes (e.g.,
food &
beverage,
textile,
electronic
devices),
assuming 55%
electrification
in 2060
• Replace fossil
natural gas by
green
hydrogen in
high-
temperature
processes from
2036
• Replace fossil
fuels with
biomass in
high-
temperature
processes,
especially in
the cement
industry
• Use CCS in the
cement and steel
sectors starting
from 2036
• Potential to
reduce 13 million
tons CO2
emissions from
the use of coal
and gas in these
sectors..

10
Introduction
Energy mix outlook for industry in Indonesia
 September 2022: Energy Sector Roadmap to
net zero emissions by 2060 in Indonesia by
Ministry of Energy and Mineral Resources
(MEMR) and the International Energy Agency
(IEA)
 Based on the IEA’s Announced Pledges
Scenario (APS), with net zero emissions in
Indonesia by 2060
 Accelerated scenario: Net Zero Emissions by
2050 (NZE)
 Decarbonisation solutions vary for each
industry subsector
Source: IEA, 2022

11
Introduction
Focus Area selection: underlying questions
Role of industry subsectors decarbonisation
to achieve Indonesia’s energy/climate goals?
Which sectors will benefit from the “market”
and “financing” solutions that the OECD
Framework offers?
What is the outlook of industry towards
decarbonization: which subsectors face the
highest urgency and biggest challenges?
What are the strategic industry subsectors
for Indonesia’s economy and society?

Breakdown by industry sub-sectors [%] (2016)
12
Contribution to Gross Domestic Product
Manufacturing industry: 20% of Indonesia’s GDP in 2020
Food and beverages,
32.8%
Tobacco products , 5.2%
Textile and apparel,
6.4%
Paper and paper
products, 4.0%
Chemical and pharmacy,
9.9%
Rubber and plastics, 3.5%
Non-metallic
mineral, 3.9%
Basic metal, 4.0%
Fabricated
metal, 10.7%
Transport equipment,
10.5%
Furniture, 1.4%
Wood products, 3.6%
Machinery and
equipment, 1.8%
Source: UNDP, 2018

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19 Products from Coal and Petroleum Refinery
33 Repair and Installation for Machines and Equipment
28 Machines and Equipment That Cannot Be Classified Elsewhere
21 Pharmaceuticals, Chemical Medicinal Products and Traditional Medicines
30 Other Transport Equipment
18 Printing and Reproduction of Recording Media
26 Computers, Electronic and Optical Goods
27 Electrical Equipment
17 Paper and Paper Goods
24 Metal Base
11 Beverage
29 Motorized Vehicles, Trailers and Semi Trailers
20 Chemicals and Articles of Chemicals
31 Furniture
25 Metal Goods, Not Machinery and Equipment
22 Rubber, Rubber and Plastic Products
32 Other Manufacturing
15 Leather and Leather Goods and Footwear
12 Tobacco Processing
23 Non-Metal Excavated Goods
13 Textile
16 Wood, Wood and Cork Products Excluding Furniture and Woven Products…
14 Apparel
10 Food
0 1,000,000 2,000,000 3,000,000 4,000,000
Total Workers by subsector in 2020 (2-digit ISIC)
13
Employment structure varies widely according to the
industry subsector considered
Source: BPS, 2022
Ratio of
the workers in large and medium
companies
to the total number of workers
Number of workers
Sectors dominated by large
and medium companies
Large and medium
companies:
annual revenue
above
IDR 2.5 billion
(USD ~155,000)

-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
Chemicals Fuels Mach and
Elec
Metals Minerals Plastic or
Rubber
Stone and
Glass
Textiles
and
Clothing
Food Wood,
Pulp and
Paper
14
Export/Trade: Indonesia had a neutral balance of payments
in 2016-2020, turning positive to USD 34 bln in 2021
Trade flows of the main industrial sectors in Indonesia, in 1000 US Dollars, 2019
Source: Government of Indonesia, 2021
Main contributor to trade balance
Ferro-nickel
and
Stainless steel
Copper ores
and
concentrates
Natural
rubber and
gums
Coal, briquettes,
lignite
Plywood, chemical
wood pulp and
uncoated paper
Palm oil,
coconut, palm
kernel

15
Total final energy consumption of the industry sector
Total final energy consumption of industrial subsectors, in
Mtoe/y, 2000-2019
Caveat: Based on OECD/IEA data, almost half of the energy
consumption of the industry is not allocated to a specific
subsector.
Note: Mtoe = million tonnes of oil equivalent
Source: OECD, 2022
0
10
20
30
40
50
60
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Non-energy use
Industry not
elsewhere specified
Textile and leather
Wood and wood
products
"Paper, pulp and
printing"
Food and tobacco
Machinery
Transport equipment
Non-metallic
minerals
Non-ferrous metals
Chemical and
petrochemical
Iron and steel
Construction
Mining and
quarrying
Total final consumption [Mtoe/year]
Total final energy consumption of the industry sector by
energy source (left axis, in %) and total in Mtoe/y (labels)
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0%
20%
40%
60%
80%
100%
Coal Gas Oil Biomass and waste Electricity District heat
Total final energy consumption [Mtoe/year]

16
CO2 emissions breakdown by industry subsectors
284 Mt CO2e in 2019
Contributions of subsectors of the manufacturing industry to the GHG emissions, 2019
b) Industrial Process and Product Use: 58 Mt CO2-eq/yr
Source: Government of Indonesia, 2021
Iron and
Steel, 18.4%
Chemical,
7.7%
Pulp, Paper,
and Print,
9.5%
Food
Processing,
Beverages,
and Tobacco,
10.4%
Non-
Metallic
Mineral
Industry,
14.9%
Non-specified
Industry,
39.0%
Cement
production,
51.8%
Ammonia
production,
16.7%
Iron & Steel
production,
11.9%
Paraffin
wax use,
6.7%
Others,
12.9%
a) Energy-related emissions: 136 Mt CO2-eq/yr
c) 30% of electricity generation: 90 Mt CO2-eq/yr
e

17
Scenario analysis
Industry sector energy use and CO2 emissions
 CO2 emissions reach a peak around 2030 in a net-zero scenario. The majority of CO2 emissions are energy-related
in the next decades.
 As renewable electricity develops in a net-zero scenario, the relative share of industry emissions increases.
CO2 emissions by sector in a net-zero emission pathway
Source: MEMR's Roadmap for NZE 2060 (modeling result)
-600
-400
-200
0
200
400
600
800
1000
1200
1400
1600
2010 2020 2030 2040 2050 2060
Electricity Industry Transportation
Buildings Total Energy
Energy-related CO2 emissions breakdown
-600
-400
-200
0
200
400
600
800
1000
1200
1400
1600
2010 2020 2030 2040 2050 2060
Mt CO2-eq /
yr
Waste Industrial Processes and Product Use
Agriculture Energy
Food and Land Use Net emissions

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Strategic matrices of sectors
Strategic matrix – Economic and social criteria
Bubble size:
% of fossil fuels
in subsector
energy
consumption
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2
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30000 600000
Strategic matrix – Environment criteria
GDP
Contribution
(%
of
GDP)
Number of employees High
Low
Low
High
Bubble size
Trade balance
(USD)
Blue: Positive
Orange: Negative
High
Low
Low
High
Energy use
(Mtoe)
GHG
emissions
(Mt
CO
2
)
Caveat: all bubbles have the same size, because in the OECD/IEA
data, the share of fossil fuels is 100% for every industry sector

19
Discussion for Focus Area selection
• Which subsectors combine a strategic importance for Indonesia’s economic and
social indicators and are large emitters of CO2?
• Which subsectors will need to transform their industrial processes to achieve the
country’s objective of net-zero emissions?
• Which technology or fuel switch could have the highest impact to reduce CO2
emissions?
• Which sectors, technology and low-carbon fuels face barriers to finance investments
in projects consistent with a net-zero pathway?

20
Please visit our webpage:
www.oecd.org/cefim/
For more information, please contact:
Hakimul Batih
Hakimul.BATIH@oecd.org
Joseph Cordonnier
Joseph.CORDONNIER@oecd.org