The Just Energy Transition Partnership (JETP) can succeed without the United States
Key Findings
The U.S. exit from the Just Energy Transition Partnership (JETP) can be viewed as favorable for the energy transition. Given the U.S. administration’s contradictory priorities to drill for oil and gas and enhance liquefied natural gas (LNG) sales overseas, its continued involvement may have led to delays or diversions.
Despite the U.S. withdrawal, critical financing and support for the JETP remains. Germany and Japan have partnered as co-leaders to fill the U.S.’s vacated leadership position in Indonesia’s USD20 billion JETP.
Shifting geopolitics and uncertain global economics highlight the need for the energy transition. Current U.S. policies contribute to market volatility, rising fossil fuel prices, exchange rate fluctuations, and higher financing costs for fossil-fueled power investments.
Accelerated deployment of renewable energy can create a natural near-term hedge against global volatility by switching energy supplies to stable, non-dollar-denominated, indigenous resources.
On 04 March 2025, the U.S. government sent messages to the governments of Indonesia, Vietnam, and South Africa that it was withdrawing from the Just Energy Transition Partnership (JETP). The U.S. exit from JETP is not unexpected as the Trump administration had already abdicated the program’s co-leadership role in early February 2025.
Representing more than USD45 billion in funding, the three JETPs seek to simultaneously encourage the early retirement of high carbon dioxide-emitting fossil fuel power plants while accelerating their replacement with clean energy. This transition would be funded through concessionary public finance and private sector investment backed by strategic grants and philanthropic monies. These funding sources spurred JETP governments to develop customized long-term investment plans, outlining how transition investment could be utilized. This planning may not have happened at the same scale or integrated extent without the JETP.
U.S. priorities contradict JETP’s objectives in Southeast Asia
Given the current U.S. administration’s priorities and ambitions to “drill, baby, drill” for oil and gas, the withdrawal from JETP can be viewed as favorable for the energy transition. The program’s complexities and transformative potential demand the involvement of a “coalition of the willing.” The original countries (including the European Union), private sector partners, and philanthropies still support JETP and want to realize the mechanism’s potential. In the case of Indonesia, Germany has quickly stepped in to fill the U.S.’s vacated leadership role. Japan has reaffirmed its co-leadership role and remains committed to Indonesia’s USD20 billion JETP. Despite the U.S. exit, critical financing and support for the program remains.
Continued U.S. involvement in JETP may have led to delays or diversions from its intended transformative sustainability goals. The U.S. administration clearly wants to enhance liquefied natural gas (LNG) sales overseas, which is fundamentally incompatible with JETP’s objectives. Meanwhile, LNG sales to developing markets in Asia face an uphill battle as countries struggle with the high cost of LNG compared to far cheaper and more sustainable renewable energy options like solar and wind. In fact, Vietnam has recently revised its power development plan to focus on renewables due to lower cost and faster delivery times. Consequently, the exit of the U.S., the world’s largest LNG exporter, may instead boost efforts to rapidly scale up renewable energy capacity in JETP countries by reducing emphasis on a perceived need for imported gas as a ‘transition fuel’ from coal.
Geopolitical volatility underscores the energy transition need
While critics lament that JETP has not progressed quickly enough since its announcement in November 2022, evolving global economic and geopolitical conditions have strengthened the case for the energy transition that the program supports. The current U.S. administration’s policies have injected uncertainty and volatility into international markets. For countries that are energy importers, this manifests in unpredictable and rapidly changing fossil fuel prices. These energy price woes are exacerbated by adverse currency exchange rate fluctuations as those fuels are contracted for and purchased in U.S. dollars. Furthermore, aggressive U.S. protectionist trade policies risk fueling inflation, leading to higher interest rates and increasing financing costs for long-term debt in fossil-fueled power plants.
JETP and its associated low-cost, quick-to-build renewable energy investments are the appropriate formula for the challenges faced by emerging markets and developing economies. Deploying renewable energy in countries like Indonesia and Vietnam creates a natural hedge against the volatility of global markets and shifting geopolitics by increasingly tying energy supplies to stable, indigenous resources – sun, wind, and water.
Despite the clear economic advantages of renewable energy, these transition investments require large amounts of capital. Indonesia’s Comprehensive Investment and Policy Plan, developed for the JETP, outlines a USD100 billion commitment through 2030, while Vietnam’s Resource Mobilization Plan identifies USD86 billion for transition projects. These figures are just the beginning. Over the next two decades, additional investments in transmission, energy management, and supply will be essential. Catalytic capital investment is needed to kickstart the transition process, making JETP, its core concepts, and committed partners critical for an environmentally sustainable future and a stable economy.
