Indonesia
Photo by Fikri Rasyid, Unsplash
Nature and people clash in SE Asia's regional powerhouse
The world’s most populous Muslim-majority country, Indonesia is a newly-industrialised regional powerhouse and the G20’s only Southeast Asian member. Rapid urbanisation and industrialisation powered by abundant oil, gas, coal and precious metals have driven strong economic development since the 1960s, lifting millions out of poverty.
But this growth has had dramatic environmental consequences too: although Indonesia remains a biodiversity hotspot, the archipelago’s rich ecosystem is severely strained by deforestation, pollution and habitat loss, with many once-abundant species such as the Sumatran tiger, orangutan, rhinoceros and leopard all close to collapse. And with the world’s sixth-highest levels of income inequality, the benefits of Indonesia’s rapid rise are far from equally distributed.
Emerging in 1998 from thirty years of military dictatorship, Indonesia’s political and economic landscape has evolved rapidly over the last two decades. A stable if flawed multi-party democracy has emerged, with serious concerns over accountability and cartelisation, and a booming service industry has eclipsed the once-dominant industrial sector in terms of employment and GDP. Unsurprisingly for a polity which covers over seventeen thousand islands, Indonesia has well-developed marine, maritime and shipping industries; other core sectors include motorcycle manufacture, textiles, and chemicals.
Indonesia’s overall economic direction is set under a series of Medium Term Development Plans (Rencana Pembangunan Jangka Menengah Nasional), the current iteration of which runs from 2020-24 and includes a number of green economy objectives: improving environmental quality, increasing resilience against climate risk and disaster, and – for the first time – low carbon development. A National Plan for Reducing GHG Emissions (Rencana Aksi Nasional Penurunan Emisi Gas Rumah Kaca, RAN-GRK) and a nascent emissions trading scheme round out the policy picture.
Taken together, Indonesia’s environmental objectives show steadily improving ambition over the last decade, but still fall some way short of meeting Paris Agreement targets and are marred by inconsistent implementation.
One area of real strength is Indonesia’s pioneering early adoption of a capitals-based approach to nature conservation and restoration. The System for Integrated Environmental and Economic Accounts (SISNERLING) was first introduced in 1990 and has been refined since, with support from the World Bank’s WAVES initiative. Social capital accounting remains some way off, however.
Finance is another bright spot: Indonesia's Sustainable Finance Roadmap is now in its 2nd phase, adding a green finance taxonomy, development incentives and sustainable finance guidance to existing requirements for financial institutions to report against ESG principles and sustainability metrics to the Financial Services Authority, the OJK.
Given these advances, Indonesia’s response to COVID-19 has been especially disappointing. Plunged into a recession in 2020, the government’s response to date has been very far from green: unconditional bailouts to oil, gas, coal and aviation; new limits to public participation in environmental assessments; serious dilution of environmental standards; and rapid deregulation of the mining industry. To date, the country’s business-first approach comes at the cost of social and environmental welfare, undermining Indonesia’s real progress towards an inclusive green economy.
Photo by Fikri Rasyid, Unsplash
Policy Scores
Last updated 23 Oct 2022
Green COVID-19 Recovery
During 2020 and early 2021, Indonesia has so far issued approximately USD$57 billion (or 5.4% of GDP) in fiscal stimulus in response to the pandemic, according to the IMF. Funds have been primarily directed at healthcare and social protection, alongside tax incentives, loans and guarantees for businesses. Despite receiving financial support from development partners, Indonesias USD$47 billion National Economic Recovery Programme (PEN) provides just USD$240 million in green funds to prop up the rail industry, while issuing unconditional bailouts worth more than USD$6.1 billion to a state-owned oil and gas corporation, a coal-powered electricity supplier and the national airline.
Elsewhere, green measures are thin on the ground, but the government has introduced a number of incentives and concessions to support domestic renewable energy businesses (mainly solar) including introducing subsidies for the Biodiesel B30 Development Programme, alongside support for renewable energy projects via suspending tax income and VAT, lowering interest rates and eliminating financial penalties for independent power producers. In line with these measures, the government is preparing a flagship solar energy programme which will subsidise rooftop solar installation for eligible households, but further details are outstanding. More recently, Indonesia passed the Omnibus job-creation bill which limits public participation in environmental assessments, allows developers to self-declare their compliance with environmental standards and scraps some environmental permitting altogether - severely weakening workers rights and nature-damaging accountability mechanisms. The bill has also been passed alongside another law assisting the expansion and deregulation of the mining industry. Meanwhile, the introduction of subsidies which lower the cost of fossil-fuel generated electricity and industrial gas contrasts the Indonesian Finance Ministers statement that the country will focus on a green recovery, with regulation on carbon pricing in the pipeline.
Taken together, Indonesia has introduced a few specific green stimulus policies but with relatively weak commitments, countered by considerable financial support to the state-owned fossil industry and weakening of environmental protections. Indonesias approach to stimulus has so far been primarily a regulatory one, with the government sending mixed messages launching both green and brown subsidies/concessions in attempt to support domestic industry. This approach looks set to continue, with Indonesias 2021 Infrastructure Budget allocating stimulus funds both to the construction of a natural gas network for households and support for rooftop solar (though the budget remains uncertain as 60% of the funds are dependent on the private sector). More generally, as is evident from the Omnibus Bill, the countrys business-first approach comes at the cost of social and environmental welfare, undermining genuine progress towards an inclusive green economy.
During 2020 and early 2021, Indonesia has so far issued approximately USD$57 billion (or 5.4% of GDP) in fiscal stimulus in response to the pandemic, according to the IMF. Funds have been primarily directed at healthcare and social protection, alongside tax incentives, loans and guarantees for businesses. Despite receiving financial support from development partners, Indonesias USD$47 billion National Economic Recovery Programme (PEN) provides just USD$240 million in green funds to prop up the rail industry, while issuing unconditional bailouts worth more than USD$6.1 billion to a state-owned oil and gas corporation, a coal-powered electricity supplier and the national airline.
Elsewhere, green measures are thin on the ground, but the government has introduced a number of incentives and concessions to support domestic renewable energy businesses (mainly solar) including introducing subsidies for the Biodiesel B30 Development Programme, alongside support for renewable energy projects via suspending tax income and VAT, lowering interest rates and eliminating financial penalties for independent power producers. In line with these measures, the government is preparing a flagship solar energy programme which will subsidise rooftop solar installation for eligible households, but further details are outstanding. More recently, Indonesia passed the Omnibus job-creation bill which limits public participation in environmental assessments, allows developers to self-declare their compliance with environmental standards and scraps some environmental permitting altogether - severely weakening workers rights and nature-damaging accountability mechanisms. The bill has also been passed alongside another law assisting the expansion and deregulation of the mining industry. Meanwhile, the introduction of subsidies which lower the cost of fossil-fuel generated electricity and industrial gas contrasts the Indonesian Finance Ministers statement that the country will focus on a green recovery, with regulation on carbon pricing in the pipeline.
Taken together, Indonesia has introduced a few specific green stimulus policies but with relatively weak commitments, countered by considerable financial support to the state-owned fossil industry and weakening of environmental protections. Indonesias approach to stimulus has so far been primarily a regulatory one, with the government sending mixed messages launching both green and brown subsidies/concessions in attempt to support domestic industry. This approach looks set to continue, with Indonesias 2021 Infrastructure Budget allocating stimulus funds both to the construction of a natural gas network for households and support for rooftop solar (though the budget remains uncertain as 60% of the funds are dependent on the private sector). More generally, as is evident from the Omnibus Bill, the countrys business-first approach comes at the cost of social and environmental welfare, undermining genuine progress towards an inclusive green economy.
Governance
National green economy plan
In order to meet its Climate change commitments, Indonesia aims to focus on land use, "new" and renewable energies, and waste management. The National Plan for reducing GHG emissions also adds as priority sectors agriculture and industry. However, the actual plans are not in line with the Paris Agreement targets. Particularly in regards to the energy sector, commitments are at least 31% of "new" and renewable energies, where "new" entails a new technology.
The country has released frameworks and roadmaps, such as the Low Carbon Development reports, and delivering a green growth. The Low Carbon Development Initiative/Report (LCDI) is integrated to Indonesia's Medium Term Development Plan 2020-2024. Improving environmental quality, increasing resilience against climate risk and disaster, and Low Carbon Development are grouped together as one of the seven development agenda in the 5-year period. However, it is not clear that these have landed in ambitious implementation processes.
In order to meet its Climate change commitments, Indonesia aims to focus on land use, "new" and renewable energies, and waste management. The National Plan for reducing GHG emissions also adds as priority sectors agriculture and industry. However, the actual plans are not in line with the Paris Agreement targets. Particularly in regards to the energy sector, commitments are at least 31% of "new" and renewable energies, where "new" entails a new technology.
The country has released frameworks and roadmaps, such as the Low Carbon Development reports, and delivering a green growth. The Low Carbon Development Initiative/Report (LCDI) is integrated to Indonesia's Medium Term Development Plan 2020-2024. Improving environmental quality, increasing resilience against climate risk and disaster, and Low Carbon Development are grouped together as one of the seven development agenda in the 5-year period. However, it is not clear that these have landed in ambitious implementation processes.
Inclusive governance
There are processes in place to encourage public consultation and participation in policymaking, including the Multi-Stakeholder Consultation Forum for Development Planning process (Musrenbang). The latest Open Government Action Plan intends to introduce pilot projects of community-based evaluation for development programs. Regarding the corporate sector, there is lack of general involvement of employees in both consultation processes as well as corporate governance. While the Voluntary National Review highlights the percentage of women participating in managerial positions and parliament, there is no mandated representation or targets in relation to this.
There are processes in place to encourage public consultation and participation in policymaking, including the Multi-Stakeholder Consultation Forum for Development Planning process (Musrenbang). The latest Open Government Action Plan intends to introduce pilot projects of community-based evaluation for development programs. Regarding the corporate sector, there is lack of general involvement of employees in both consultation processes as well as corporate governance. While the Voluntary National Review highlights the percentage of women participating in managerial positions and parliament, there is no mandated representation or targets in relation to this.
SDG business strategy
While Indonesia currently lacks a national strategy or a specific policy regarding the implication of the business sector in the achievement of the Sustainable Development Goals, the government has a key role, through the Ministry of Finance, in the Sarana Multi Infrastruktur (SMI), an integrated funding cooperation platform to support infrastructure development oriented towards Sustainable Development Goals or SDGs. In addition, the private sector has shown some initiative in this regards, developing two private initiatives that support the involvement of the private sector in SDG implementation. The Indonesian Business Council for Sustainable Development, which built a platform to exchange knowledge and has published documents with best practices and the IBCSD, together with UN Global Compact Indonesia and the Indonesian Philanthropy Association created the Forum Philanthropy and Business in Indonesia for SDGs.
While Indonesia currently lacks a national strategy or a specific policy regarding the implication of the business sector in the achievement of the Sustainable Development Goals, the government has a key role, through the Ministry of Finance, in the Sarana Multi Infrastruktur (SMI), an integrated funding cooperation platform to support infrastructure development oriented towards Sustainable Development Goals or SDGs. In addition, the private sector has shown some initiative in this regards, developing two private initiatives that support the involvement of the private sector in SDG implementation. The Indonesian Business Council for Sustainable Development, which built a platform to exchange knowledge and has published documents with best practices and the IBCSD, together with UN Global Compact Indonesia and the Indonesian Philanthropy Association created the Forum Philanthropy and Business in Indonesia for SDGs.
Wealth accounting
The Indonesia System for Integrated Environmental and Economic Accounts has existed since 1990 and has kept improving over the years. It has a legal mandate in Indonesia and all government departments use instruments such as Environmental Economic Accounting. Efforts to measure the countrys natural resources used in economic production, particularly the typically-traded ones such as minerals and timber, have been made, but estimates of resources remaining in nature have not yet been measured. In addition, long term indicators have been used used to design some national priority objectives, and support specific laws and regulations. However,progress is lacking in the development of social capital accounts.
The Indonesia System for Integrated Environmental and Economic Accounts has existed since 1990 and has kept improving over the years. It has a legal mandate in Indonesia and all government departments use instruments such as Environmental Economic Accounting. Efforts to measure the countrys natural resources used in economic production, particularly the typically-traded ones such as minerals and timber, have been made, but estimates of resources remaining in nature have not yet been measured. In addition, long term indicators have been used used to design some national priority objectives, and support specific laws and regulations. However,progress is lacking in the development of social capital accounts.
Finance
Green finance plan
Indonesia's Financial Services Authority (OJK) is implementing a Sustainable Finance Roadmap which is now in its 2nd phase. In phase I, together with an Umbrella Policy, OJK introduced eight principles of sustainable finance, requirement for financial players to devise a strategy (and report on it) that contains ESG principles in their business plans, characterized of a number of Sustainable Business Activities, introduced regulation incentives for issuance of green bonds. non-public Issuance of bonds accounted for USD 725m, and a public issuance of USD 3.25bn (October 2019). In Phase II, it is introducing different policies (green taxonomy, incentive development, guidance of sustainable finance implementation in capital markets, etc.), products and market infrastructure (i.e. development of primary and secondary market).
Additionally, the Sustainable Finance Roadmap is complemented by OJK Regulation No. 51/POJK.03/2017, whoihc makes it mandatory for any financial institution, issuer and public company to prepare annual sustainability report to accompany their annual report. The regulation also set requirements for Action Plans on Sustainable Finance to be submitted to the OJK together with business plans, when financial services companies required to do so tender their business plans.
Indonesia's Financial Services Authority (OJK) is implementing a Sustainable Finance Roadmap which is now in its 2nd phase. In phase I, together with an Umbrella Policy, OJK introduced eight principles of sustainable finance, requirement for financial players to devise a strategy (and report on it) that contains ESG principles in their business plans, characterized of a number of Sustainable Business Activities, introduced regulation incentives for issuance of green bonds. non-public Issuance of bonds accounted for USD 725m, and a public issuance of USD 3.25bn (October 2019). In Phase II, it is introducing different policies (green taxonomy, incentive development, guidance of sustainable finance implementation in capital markets, etc.), products and market infrastructure (i.e. development of primary and secondary market).
Additionally, the Sustainable Finance Roadmap is complemented by OJK Regulation No. 51/POJK.03/2017, whoihc makes it mandatory for any financial institution, issuer and public company to prepare annual sustainability report to accompany their annual report. The regulation also set requirements for Action Plans on Sustainable Finance to be submitted to the OJK together with business plans, when financial services companies required to do so tender their business plans.
Green fiscal & monetary policy
Progress in implementation of renewable energies (and National Determined Contribution) is slower than expected in part due to lack of sufficient fiscal and other incentives from the government for new and renewable energies. Renewable energy producers benefit from some tax exemptions but are subject to essentially the same taxes as other electricity producers. Although the Government has issued over USD 3bn in green bonds, it is not earmarking fossil fuel revenues for specific purposes, and they are recycled in the budget (and some taxes from oil and gas are used in a proportionate amount to subsidize fuel and electricity). Using fossil fuel revenues for economic diversification is a matter that is still under discussion.
There has been some advancement in this area, however. For instance, since 2015, the Ministry of Finance has been integrating the Climate Budget Tagging into the planning and budgeting system, tracking and reviewing the total public climate spending in Indonesia. Nonetheless, the recommendations it can provide are quite limited and involve improving the tagging methodology, mandating more spending coverage to be tagged, and system integration. There is also a recommendation to develop a method to measure climate finance effectiveness.
Progress in implementation of renewable energies (and National Determined Contribution) is slower than expected in part due to lack of sufficient fiscal and other incentives from the government for new and renewable energies. Renewable energy producers benefit from some tax exemptions but are subject to essentially the same taxes as other electricity producers. Although the Government has issued over USD 3bn in green bonds, it is not earmarking fossil fuel revenues for specific purposes, and they are recycled in the budget (and some taxes from oil and gas are used in a proportionate amount to subsidize fuel and electricity). Using fossil fuel revenues for economic diversification is a matter that is still under discussion.
There has been some advancement in this area, however. For instance, since 2015, the Ministry of Finance has been integrating the Climate Budget Tagging into the planning and budgeting system, tracking and reviewing the total public climate spending in Indonesia. Nonetheless, the recommendations it can provide are quite limited and involve improving the tagging methodology, mandating more spending coverage to be tagged, and system integration. There is also a recommendation to develop a method to measure climate finance effectiveness.
Safe & accountable banks
OJK (Indonesias Financial Services Authority) has been working on a stress testing framework for a few years. From 2015 onwards OJK invited 17 banks to discuss its 'Stress Testing Implementation Scenario', apply the framework and submit their results. As of 2017, Indonesian banks are required to submit financial stress test results twice a year, but the assessments do not include social or environmental components. OJK has also issued regulation mandating that Indonesian banks implement risk management where stress testing forms part of the units covered.
OJK (Indonesias Financial Services Authority) has been working on a stress testing framework for a few years. From 2015 onwards OJK invited 17 banks to discuss its 'Stress Testing Implementation Scenario', apply the framework and submit their results. As of 2017, Indonesian banks are required to submit financial stress test results twice a year, but the assessments do not include social or environmental components. OJK has also issued regulation mandating that Indonesian banks implement risk management where stress testing forms part of the units covered.
Pricing carbon
Indonesia is working towards a domestic Emissions Trading Scheme (ETS) for the power and industry sectors. At this moment, the aim is to implement a voluntary domestic ETS for the power sector, followed by a mandatory domestic ETS. The Government plans to establish a public service agency to manage this ETS, which is currently under discussion. The timeline is to implement the mandatory ETS in 2024, with a voluntary pilot starting in 2021 for the power sector.
Indonesia is working towards a domestic Emissions Trading Scheme (ETS) for the power and industry sectors. At this moment, the aim is to implement a voluntary domestic ETS for the power sector, followed by a mandatory domestic ETS. The Government plans to establish a public service agency to manage this ETS, which is currently under discussion. The timeline is to implement the mandatory ETS in 2024, with a voluntary pilot starting in 2021 for the power sector.
Sectors
Green sectoral policy plan
In terms of achieving Indonesias NDC, the government established the Directorate General of Climate Change, under the Ministry of Environment and Forestry, to be coordinated with the Ministry of National Development Planning and the Ministry of Finance. The NDC establishes as priorities land use, "new" and renewable energies, and waste management. The National Plan reducing GHG emissions also adds as priority sectors agriculture and industry. Although there are medium term development plans for five year periods, it is not clear how these are focused on the green economy.
Coordination between the ministries usually happens between the Ministry of Finance and the relevant sectoral ministries namely: the Ministry of Energy and Mineral Resources, the Ministry of Transportation, Ministry of Public Works, Ministry of Industry and the Ministry of Environment and Forestry where the coordination largely revolves around funding needs and allocation of funds. The investments needed in the respective sectors is coordinated through the Coordinating Ministry of Maritime and Investment affairs. The Ministry of National Development Planning has the responsibility to provide guideline for green sectoral planning and to coordinate with the technical ministries.
In terms of implementation, the government ministries have issued frameworks and roadmaps, but no details on actual implementation. The Voluntary National review describes efforts conducted in agriculture, infrastructure development, among other sectors, but no details on coordination or on how whether there is a coordinated effort to develop a green economy.
In terms of achieving Indonesias NDC, the government established the Directorate General of Climate Change, under the Ministry of Environment and Forestry, to be coordinated with the Ministry of National Development Planning and the Ministry of Finance. The NDC establishes as priorities land use, "new" and renewable energies, and waste management. The National Plan reducing GHG emissions also adds as priority sectors agriculture and industry. Although there are medium term development plans for five year periods, it is not clear how these are focused on the green economy.
Coordination between the ministries usually happens between the Ministry of Finance and the relevant sectoral ministries namely: the Ministry of Energy and Mineral Resources, the Ministry of Transportation, Ministry of Public Works, Ministry of Industry and the Ministry of Environment and Forestry where the coordination largely revolves around funding needs and allocation of funds. The investments needed in the respective sectors is coordinated through the Coordinating Ministry of Maritime and Investment affairs. The Ministry of National Development Planning has the responsibility to provide guideline for green sectoral planning and to coordinate with the technical ministries.
In terms of implementation, the government ministries have issued frameworks and roadmaps, but no details on actual implementation. The Voluntary National review describes efforts conducted in agriculture, infrastructure development, among other sectors, but no details on coordination or on how whether there is a coordinated effort to develop a green economy.
Small business support
Currently main challenge in Indonesia for SMEs is access to financial services. In 2018, only 23.6% of SMEs had access to them. According to a OECD report, Indonesia has measures to specifically help SMEs access funds for green investments, such as the Indonesia's Centre of Forest Development Financing, that provides soft loans to micro and small enterprises, and establishes revenue sharing arrangements, long payback periods, below-market interest rates, etc. Although there's a growing market for social enterprises, this type of enterprises doesnt have a specific legal recognition, nor is there evidence that it is currently under active discussion or development. A Sustainable recovery program with a focus on MSMEs green industry is currently being studied by the BAPPENAS with the possibility of expanding the upstream support for Good Agricultural Practice (GAP). The program will be in a form of loan support and capacity building on environmental risk management encouraging MSMEs to enter to green sectors.
Currently main challenge in Indonesia for SMEs is access to financial services. In 2018, only 23.6% of SMEs had access to them. According to a OECD report, Indonesia has measures to specifically help SMEs access funds for green investments, such as the Indonesia's Centre of Forest Development Financing, that provides soft loans to micro and small enterprises, and establishes revenue sharing arrangements, long payback periods, below-market interest rates, etc. Although there's a growing market for social enterprises, this type of enterprises doesnt have a specific legal recognition, nor is there evidence that it is currently under active discussion or development. A Sustainable recovery program with a focus on MSMEs green industry is currently being studied by the BAPPENAS with the possibility of expanding the upstream support for Good Agricultural Practice (GAP). The program will be in a form of loan support and capacity building on environmental risk management encouraging MSMEs to enter to green sectors.
Carbon budgeting
There is currently no Carbon Budget in place in Indonesia. Indonesia's National Determined Contribution consists of an unconditional reduction target of 29% and a conditional reduction target up to 41% of the business as usual scenario by 2030. There are no current targets beyond 2030 and there is no intention to increase the countrys emissions reduction target in its updated NDC.
There is currently no Carbon Budget in place in Indonesia. Indonesia's National Determined Contribution consists of an unconditional reduction target of 29% and a conditional reduction target up to 41% of the business as usual scenario by 2030. There are no current targets beyond 2030 and there is no intention to increase the countrys emissions reduction target in its updated NDC.
Clean energy policy
Indonesias National Determined Contribution document sets the ambition of "new" and renewable energies to be at least 23% in 2025 and at least 31% in 2050. The rest are either coal (minimum 25% in 2050), oil (less than 20% in 2050) or gas (minimum 24%). "New energy" sources stand for sources that can be produced by using new technology, including non-renewable such as nuclear, hydrogen, coal bed-methane, liquefied coal and gasified coal. Although there are some tax exemptions for renewable energy producers, renewable energies have suffered a number of setbacks. These include, among others, postponed geothermal auctions, pushing back from 2023 to 2026 green diesel produced entirely with palm oil, difficulties for project developers to acquire land permits, or regulated prices for fossil fuels that give price advantage over "new" and renewable energies.
However, the Government is currently drafting and planning to issue a Presidential Regulation that regulates the purchase of renewable energy-based electricity at competitive prices, including a feed-in-tariff for RE plants under 5MW. This Presidential Regulation will also consider the projection of electricity demand and generation in the General Plan for Electricity Supply (RUPTL) 2021-2030. In addition, the Ministry of Energy and Mineral Resources released Regulation No.04/2020 to simplify renewable power generation regulation and the bankability of renewable projects to enhance the competitiveness of renewable electricity in relation to fossil fuel power sources.
Indonesias National Determined Contribution document sets the ambition of "new" and renewable energies to be at least 23% in 2025 and at least 31% in 2050. The rest are either coal (minimum 25% in 2050), oil (less than 20% in 2050) or gas (minimum 24%). "New energy" sources stand for sources that can be produced by using new technology, including non-renewable such as nuclear, hydrogen, coal bed-methane, liquefied coal and gasified coal. Although there are some tax exemptions for renewable energy producers, renewable energies have suffered a number of setbacks. These include, among others, postponed geothermal auctions, pushing back from 2023 to 2026 green diesel produced entirely with palm oil, difficulties for project developers to acquire land permits, or regulated prices for fossil fuels that give price advantage over "new" and renewable energies.
However, the Government is currently drafting and planning to issue a Presidential Regulation that regulates the purchase of renewable energy-based electricity at competitive prices, including a feed-in-tariff for RE plants under 5MW. This Presidential Regulation will also consider the projection of electricity demand and generation in the General Plan for Electricity Supply (RUPTL) 2021-2030. In addition, the Ministry of Energy and Mineral Resources released Regulation No.04/2020 to simplify renewable power generation regulation and the bankability of renewable projects to enhance the competitiveness of renewable electricity in relation to fossil fuel power sources.
People
Green jobs
Indonesia has implemented measures to create jobs and attract green investment. The Green Growth program benefits from international funding and aims to direct green investment to priority sectors in order to help achieve the NDC and the SDGs. Other measures include waste banks, the Tropical Landscapes Finance Facility. While the most significant job programs would help tackle inequality, there is no particularly green perspective in them. These include Making Indonesia 4.0 that expects to create millions of jobs in food & beverage, apparel, automotive, electronics and chemicals, and a program that aims to benefit 1m smallholder farming households to create jobs in the agricultural sector. Apart from waste management related green jobs, Indonesia has established green jobs in the energy sector particularly for geothermal exploration specialist. While currently there is a limited variety of green jobs in Indonesia, new opportunities are expected to be explored as the country transitions to low carbon development.
Indonesia has implemented measures to create jobs and attract green investment. The Green Growth program benefits from international funding and aims to direct green investment to priority sectors in order to help achieve the NDC and the SDGs. Other measures include waste banks, the Tropical Landscapes Finance Facility. While the most significant job programs would help tackle inequality, there is no particularly green perspective in them. These include Making Indonesia 4.0 that expects to create millions of jobs in food & beverage, apparel, automotive, electronics and chemicals, and a program that aims to benefit 1m smallholder farming households to create jobs in the agricultural sector. Apart from waste management related green jobs, Indonesia has established green jobs in the energy sector particularly for geothermal exploration specialist. While currently there is a limited variety of green jobs in Indonesia, new opportunities are expected to be explored as the country transitions to low carbon development.
Pro-poor policy
There are a number of pro-poor policies and programs in place in Indonesia, although generally there is not a green or climate related approach to them. The Family Hope Program is a quarterly cash transfer program targeting very poor families. Transfers are conditioned to registering in local health and education institutions, ensuring pregnant women and children receive exams and vaccines, and that children are attending school. There are also programs targeting financial inclusion and developing underdeveloped regions and villages (the Village fund). Some of these measures have had a positive green impact, such as the Family Hope Program, which has had as a consequence a reduction of 30% in tree loss, although this is an indirect rather than a prime objective of the initiative.
There are a number of pro-poor policies and programs in place in Indonesia, although generally there is not a green or climate related approach to them. The Family Hope Program is a quarterly cash transfer program targeting very poor families. Transfers are conditioned to registering in local health and education institutions, ensuring pregnant women and children receive exams and vaccines, and that children are attending school. There are also programs targeting financial inclusion and developing underdeveloped regions and villages (the Village fund). Some of these measures have had a positive green impact, such as the Family Hope Program, which has had as a consequence a reduction of 30% in tree loss, although this is an indirect rather than a prime objective of the initiative.
Participatory policymaking
Public consultation is embedded in the countrys regulatory framework under Law 12/2011 on the Development of Laws and Regulations. The Law 25 of 2004 also seeks to optimize public participation. It establishes National Development Planning System and delineates the public's ability to formally participate in the process via Multi Stakeholder Consultation Forum for Development Planning process (Musrenbang). This process has limitations such as ensuring inputs are taking into account and a correct identification of civil society organizations. The last two Open Government Action Plans included goals to encourage a more accountable and participative village government planning, including in the participation processes people of diverse contexts (age, gender, etc.). in addition, usually involvement of communities would end at this stage. Therefore, there is a commitment to introduce and encourage community-based evaluation for development programs, which is expected to be implemented in a pilot form in different project areas.
In the development process following the drafting of the countrys NDC, for instance, which involved the preparation of Indonesia Long Term Strategy by the Ministry of Environment and Forestry involved a series of workshop which were attended by a wide range of stakeholders including the private sector, multilateral institutions and other line ministries in order to gain inputs for formulating the LTS. This was followed by a public consultaation phase.
Public consultation is embedded in the countrys regulatory framework under Law 12/2011 on the Development of Laws and Regulations. The Law 25 of 2004 also seeks to optimize public participation. It establishes National Development Planning System and delineates the public's ability to formally participate in the process via Multi Stakeholder Consultation Forum for Development Planning process (Musrenbang). This process has limitations such as ensuring inputs are taking into account and a correct identification of civil society organizations. The last two Open Government Action Plans included goals to encourage a more accountable and participative village government planning, including in the participation processes people of diverse contexts (age, gender, etc.). in addition, usually involvement of communities would end at this stage. Therefore, there is a commitment to introduce and encourage community-based evaluation for development programs, which is expected to be implemented in a pilot form in different project areas.
In the development process following the drafting of the countrys NDC, for instance, which involved the preparation of Indonesia Long Term Strategy by the Ministry of Environment and Forestry involved a series of workshop which were attended by a wide range of stakeholders including the private sector, multilateral institutions and other line ministries in order to gain inputs for formulating the LTS. This was followed by a public consultaation phase.
Innovative social protection
There are a number of social protection programs in Indonesia, including subsidised a Health Insurance program for poor and at-risk individuals, an educational cash stipend, and conditional cash transfers for the elderly and the disabled. While the country boasts a universal health coverage system and a number of programs targeting poor people, generally there is no clear strategic approach that includes innovative social protection policies. However, there are some recent progress in this area. For instance, in October 2020, the Ministry of Social Affair committed to establish a pilot Green Social Work program through an inclusion within a tertiary education program.
There are a number of social protection programs in Indonesia, including subsidised a Health Insurance program for poor and at-risk individuals, an educational cash stipend, and conditional cash transfers for the elderly and the disabled. While the country boasts a universal health coverage system and a number of programs targeting poor people, generally there is no clear strategic approach that includes innovative social protection policies. However, there are some recent progress in this area. For instance, in October 2020, the Ministry of Social Affair committed to establish a pilot Green Social Work program through an inclusion within a tertiary education program.
Nature
Ocean & land conservation
Indonesias Voluntary National Review includes actions in relation to SDG 14 and 15 regarding 2017 and 2018, but not 2019. There has been an increase in the designation of Marine protected areas, although there are lack of data on whether the country achieved the amount of ha targeted for 2019. In addition, 11 fisheries management areas have determined a fishery management plan through a ministerial decree. The issue of forest clearance is a major issue in Indonesia., and, as such the government established a moratorium on the clearing of primary forest and prohibiting conversion of its remaining forests. This moratorium has since been made definitive. The government has also made the effort to uphold its commitment to reduce the deforestation rate, making progress in its NDC and REDD+ implementation and enhancing natural forest conservation.
Indonesias Voluntary National Review includes actions in relation to SDG 14 and 15 regarding 2017 and 2018, but not 2019. There has been an increase in the designation of Marine protected areas, although there are lack of data on whether the country achieved the amount of ha targeted for 2019. In addition, 11 fisheries management areas have determined a fishery management plan through a ministerial decree. The issue of forest clearance is a major issue in Indonesia., and, as such the government established a moratorium on the clearing of primary forest and prohibiting conversion of its remaining forests. This moratorium has since been made definitive. The government has also made the effort to uphold its commitment to reduce the deforestation rate, making progress in its NDC and REDD+ implementation and enhancing natural forest conservation.
Natural capital accounts
In 1990 Indonesia's Statistics Agency (BPA) created the System for integrated Environmental and Economic Accounts (SISNERLING), which has been continuously improved on an ongoing basis. The outputs of SISNERLING include, among other data, assets accounts for timber, energy mineral resources, land use and land cover (some islands). Initial pilot water accounts underway. The Country is working in a Natural Resources Fiscal Potential report, which is expected to be completed in 2025.
In 1990 Indonesia's Statistics Agency (BPA) created the System for integrated Environmental and Economic Accounts (SISNERLING), which has been continuously improved on an ongoing basis. The outputs of SISNERLING include, among other data, assets accounts for timber, energy mineral resources, land use and land cover (some islands). Initial pilot water accounts underway. The Country is working in a Natural Resources Fiscal Potential report, which is expected to be completed in 2025.
Natural capital committee
A coordination team of nine agencies was established. Implementation was developed through a National Steering and Technical Committee, led by the Ministry of Planning, the Statistical Agency and the Ministry of Finance. World Bank's WAVES has been involved since 2013 in providing advice, capacity building, and developing SISNERLING. The organizational structure was designed to ensure participation and collaboration between ministries, and the team works on analysing streamlined environmental-economic accounting, and developing accounts based on the SEEA standard. All government departments have to develop an inventory of natural resources and use environmental-economic accounting. Long-term indicators provided information to design a number of national priority objectives related to food security, energy and environmental and disaster management. They are used to support specific laws and regulations too.
A coordination team of nine agencies was established. Implementation was developed through a National Steering and Technical Committee, led by the Ministry of Planning, the Statistical Agency and the Ministry of Finance. World Bank's WAVES has been involved since 2013 in providing advice, capacity building, and developing SISNERLING. The organizational structure was designed to ensure participation and collaboration between ministries, and the team works on analysing streamlined environmental-economic accounting, and developing accounts based on the SEEA standard. All government departments have to develop an inventory of natural resources and use environmental-economic accounting. Long-term indicators provided information to design a number of national priority objectives related to food security, energy and environmental and disaster management. They are used to support specific laws and regulations too.
Nature-based fiscal reform
The Government of Indonesia is planning to subsidise fuel for industries and business using approximately 14% of the budget deemed for recovery. It both taxes and subsidizes production and consumption of oil, gas, coal and electricity, being the balance a net subsidy to consumers. The Government removed gasoline subsidies and reduced them for diesel. However, it still subsidizes electricity consumption (public companies supply electricity at loss and receive compensations). In 2020 Indonesia capped the price of domestic coal at USD 20 per tonne below the market value to boost consumption.
Nonetheless, the government has recently announced two initiatives from the Ministry of Finance to move forward in terms of green fiscal reform, but both are in early stages of development:
The Biodiversity Finance, is a joint project between the Ministry of Finance, the Ministry of Planning, the Ministry of Marine Affairs, the Ministry of Environment and Forestry, and the the National Science Institute (LIPI). However, it is still in early phases of development and it is not clear what the actions or pilots will be implemented yet.
The Ecological Fiscal Transfer is piloted by the Ministry of Finance in several provinces to incentivise forest protection/forest standing. The EFT aims to improve the formula of several national-to-regional fiscal transfers such as Regional Incentive Fund (DID) and even Village Fund (Dana Desa), and have identified the critical regulations to be improved.
The Government of Indonesia is planning to subsidise fuel for industries and business using approximately 14% of the budget deemed for recovery. It both taxes and subsidizes production and consumption of oil, gas, coal and electricity, being the balance a net subsidy to consumers. The Government removed gasoline subsidies and reduced them for diesel. However, it still subsidizes electricity consumption (public companies supply electricity at loss and receive compensations). In 2020 Indonesia capped the price of domestic coal at USD 20 per tonne below the market value to boost consumption.
Nonetheless, the government has recently announced two initiatives from the Ministry of Finance to move forward in terms of green fiscal reform, but both are in early stages of development:
The Biodiversity Finance, is a joint project between the Ministry of Finance, the Ministry of Planning, the Ministry of Marine Affairs, the Ministry of Environment and Forestry, and the the National Science Institute (LIPI). However, it is still in early phases of development and it is not clear what the actions or pilots will be implemented yet.
The Ecological Fiscal Transfer is piloted by the Ministry of Finance in several provinces to incentivise forest protection/forest standing. The EFT aims to improve the formula of several national-to-regional fiscal transfers such as Regional Incentive Fund (DID) and even Village Fund (Dana Desa), and have identified the critical regulations to be improved.