The unheard protests of people in Cirebon, Indonesia

Wednesday, April 10, 2019

FFG Japan, FFG Indonesia, FFG The Netherlands, FFG Belgium

The problem

The planned coal-fired power plant Cirebon Unit 2, with an estimated capacity of 1,000 megawatts, is an expansion of a power plant located in the West Java region of Cirebon, Indonesia, that has sparked much controversy and debate within the country and among the project’s investors.

The power plant has been denounced for having adverse effects on the surrounding environment as well as the livelihoods of the local community. Since the establishment of the first coal-fired power plant in the region (Cirebon Unit 1 in 2012), local communities have experienced substantial loss in production in their salt harvesting activities, farming and fishing as a result of the thermal, water and air pollution caused by the plant. The expansion of the project will only cause further environmental destruction and perpetuate widespread unemployment and poverty.

Despite these clear concerns, a large number of commercial banks, including the ING Group, the Singaporean bank, Oversea-Chinese Banking Corporation Limited (OCBC), and four main Japanese banks – the Japan Bank for International Cooperation (JBIC), Sumitomo Mitsui Banking Corporation (SMBC), Mizuho Bank and Bank of Tokyo-Mitsubishi UFJ – approved a $1.7bn loan agreement to finance the disputed project.[1] Two French banks (Société Générale and Crédit Agricole) and BNP Paribas were initially part of the deal; however, by December 2016 they had withdrawn from the bank consortium in order to fulfil their new commitment to not financing any new coal-fired plants – a policy also endorsed by ING.[2]

Throughout 2016 in Cirebon, demonstrations and protests were held against the banks, calling for a halt in the expansion of the power plant.[3] The project was also the subject of a civil case, as claims were made that local officials did not satisfy all the legal and procedural requirements before accepting the project’s environmental impact assessment, known as an AMDAL.[4] WALHI (Friends of the Earth Indonesia), a partner organization of ResponsiBank Indonesia (the Fair Finance Guide in Indonesia), stated that both the AMDAL and the environmental permit were issued without the legally required consultation with affected communities.[5]

JBIC’s and ING’s involvement in the power plant demonstrates that they are willing to engage in companies with corrupt practices and that show disrespect for the local community. Their involvement in the project is in stark contrast to the obligations set out in both banks’ policies regarding environmental and human rights.

Influencing activities

In December 2017, the Fair Finance Guide coalitions in Indonesia, Japan and the Netherlands, supported by those in Belgium and Germany, began to confront the banks involved with the evidence on the power plant’s many adverse effects on the surrounding communities and environment. FFG NL strongly criticized ING’s decision to co-fund the new coal-fired power plant, given the obvious detrimental impacts of Cirebon Unit 1.

The FFG teams engaged in discussions with the associated financial institutions, in particular ING and JBIC, urging the funders to withdraw their support and follow the example of the two French banks and BNP Paribas. In December 2017, ResponsiBank Indonesia sent a letter of complaint to ING, calling on it to stop financing the power plant,[6] while WALHI was part of a wider international petition submitted to the Japanese government to demand that JBIC withdraw its funding.[7]

FFG Belgium sent a letter to ING (February 2017), co-signed by the Belgian Climate Coalition, urging the bank to stop investing in the Cirebon power plant. This was followed up with phone calls to both ING Belgium and The Netherlands. A press release was sent out and a Belgian national newspaper (de Standaard) ran a major feature on Cirebon, comparing it to the North Dakota Pipeline.

Change in financial institutions

Unfortunately ING ignored virtually all the complaints from the NGOs.[8] Its continued investment in the Cirebon Unit 2 plant is at odds with the fact that the group’s coal policy, updated in 2015, states that ING will not finance any new coal-fired power plants.[9]

As a result of the engagement between FFG Japan and the Japanese banks, in August 2018 JBIC suspended its loan disbursement for the Cirebon Unit 2 power plant for several months, after the local court declared the cancellation of the project’s environmental permit.[10]

However, despite the substantial negative impacts of the power plant on the local communities and surrounding environment, several financial institutions remain committed to financing the expansion of the plant, and Cirebon 2 is expected to be operational by 2022.

Change in companies invested in

The continued pressure from CSOs and communities has had some positive impact on companies. The Korean Electric Power Corporation (KEPCO) has committed to suspend its support for further expansion of the power plant – Cirebon Unit 3 – following a question and answer session with the Korean Parliament in October 2018.[11] Hopefully, the increased political will demonstrated by KEPCO will serve as an example to other global investors and encourage them to terminate their support for coal-fired energy projects in Indonesia.

Impact on the ground

Although the construction of the plant continues and the communities in and around Cirebon are still negatively affected, the legal actions and protest from local communities as well as national and international networks of CSOs has had an impact beyond Indonesia – and ensured that the protests of communities in Cirebon have not gone unheard. A global movement against financing dirty energy is growing, and financial institutions are beginning to take this into account.

While attempts to halt the construction of the plant have failed and WALHI’s lawsuit was dismissed by the Bandung State Administrative Court in May 2018,[12] the organization continues to fight for the rights of the community and has submitted an appeal on the court’s decision to the Supreme Court.

ResponsiBank Indonesia believes that continuous pressure on financial institutions to divest from coal is crucial. Reaching out to financial institutions and government(s) and fighting legal battles at the local level are essential to raise awareness of the social and environmental risks of the Cirebon expansion. More collaboration with wider networks and stakeholders is needed to generate enough public pressure to convince investors to stop investing in such harmful projects.[13]

 

Read the full report here

 

[1] Sekitan. (2017). ‘Japanese and Singaporean banks step in to finance Indonesian coal plant in face of opposition from communities and environmentalists’. February 28, 2017.  http://sekitan.jp/jbic/en/2017/03/17/2071

[2] Ibid.

[3] EerlijkeBankwijzer. (2016). ‘Demonstration in Java against the coal power plant where ING is also investing’. November 10, 2016. https://eerlijkegeldwijzer.nl/bankwijzer/nieuws/2017/ing-opnieuw-betrokken-bij-controversieel-energieproject/

[4] Ibid.

[5] Isabel Esterman. (2017). ‘Indonesia Court Revokes Environmental License for the Cirebon Coal plant expansion’. Mongabay. https://news.mongabay.com/2017/04/indonesian-court-revokes-environmental-license-for-the-cirebon-coal-plant-expansion/ (last accessed October 9, 2018).

[6] Letter of complaint from ResponsiBank Indonesia: http://bit.ly/ComplaintLetterToING

[7] Sekitan. (2018). ‘171 CSOs from 40 Countries Call on Japanese Government to Stop its Public Finance for Cirebon and Indramayu Coal Plants in West Java, Indonesia’. http://sekitan.jp/jbic/en/2018/05/20/2823 (last accessed December 6, 2018).

[8] https://twitter.com/Responsibank_ID/status/961186132254797827

[9] ING. ‘Sustainability’. https://www.ing.com/Sustainability/Our-Stance/Energy.htm

[10] Sekitan. (2017). ‘Condemning JBIC for disbursing the loan for Cirebon coal Japan for its continuous support for fossil fuel projects’. November 17, 2017. http://sekitan.jp/jbic/en/2017/11/17/2489 (last accessed December 6, 2018).

[11] WALHI. (2018). ‘PLTU Suralaya Contributes to High NOx Pollution in Java; Some Environmental Organizations Urge Korean Lenders to Not Be Engaged in Suralaya Power Plant Expansion Project’. https://walhi.or.id/pltu-suralaya-menyumbang-pencemaran-nox-yang-tinggi-di-jawa-sejumlah-organisasi-lingkungan-desak-pendana-korea-tidak-terlibat-dalam-proyek-ekspansi-pltu-suralaya/ (last accessed October 24, 2018).

[12] Cirebon Power. (2018). ‘Walhi’s Lawsuit is Dismissed, The Bandung State Administrative Court Upholds the Environmental License of Cirebon II PLTU’. May 4, 2018. https://www.cirebonpower.co.id/walhis-lawsuit-is-dismissed-the-bandung-state-administrative-court-upholds-the-environmental-license-of-cirebon-ii-pltu/ (last accessed December 6, 2018).

[13] Yann Louvel. (2016). ‘Cirebon 2 Coal Power Plant Indonesia’. https://www.banktrack.org/project/cirebon3/pdf (last accessed October 9, 2018).

 

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