Green Growth Training Toolkit
Introduction: Who are we?
Government of Indonesia and GGGI Green Growth Program
Indonesia, member of GGGI • • • •
Indonesia is founding member of GGGI. GoI signed the GGGI Establishment Agreement in Seoul on17 September 2012. Indonesia is a participating member of GGGI. The Ministry of Planning and Development (Bappenas) is appointed as a focal point by an interministerial meeting on 16 October 2012.
Justification to join GGGI By becoming a GGGI member, the GoI can accelerate the impementation of green growth in Indonesia, in accordance with: • Law No. 17/2007 – RPJPN 2005-2025 – the 6th mission, Indonesia Asri dan Lestari, which prioritizes sustainability principles • Law No. 32/2009 on Environmental Protection and Management • Presidential Regulation No. 5/2010 – RPJMN 2010-2014 – Mainstreaming sustainable development into national development • Presidential Regulation No. 61/2011 – National Action Plan on Greenhouse Gases Emission Reduction
Indonesia ratification Bappenas is supporting the ratification of an agreement with Indonesia for official recognition as an Intergovernmental Organisation.
3
GGGI in Indonesia
April 2013 Overarching MoU signed
June 2013 Launch of Program
2013
Upcoming: Formation of Steering Committee
Oct 2013 International launch of tools and methodology used for green growth appraoch
Formation of Advisory Panel Ministerial Decree 2014
Workshops/training so far: ~ 14 May 2013 Strategic Plan developed and First workshop with implementing agencies
July 2013 Launch in East Kalimantan
Sep 2013 High level visit to Vice President Of Indonesia
Dec 2013 Launch in Central Kalimantan
4
GoI – GGGI Green Growth Program
Green Growth Program 2013-2014
Memorandum of understanding A memorandum of understanding between Bappenas and GGGI has been signed to kick-start the GGGI Indonesia Program.
Implementing ministries and cross sectoral stakeholders The program will be implemented with a number of key ministries, including Coordinating Ministry of Economic Affairs, ESDM, UKP4, and the Bappeda of East Kalimantan (EK) and Central Kalimantan (CK) involving a range of stakeholders in government, private sector and CSOs
5
GoI – GGGI Green Growth Program
Indonesia needs a systematic approach with concrete steps
6
The GoI-GGGI Green Growth Programme
Country level
Component level
Green Growth Plan
1 “To promote Green Growth in Indonesia that recognises the value of natural capital, improves resilience, builds local economies and is inclusive and equitable.”
Greening the planning process
“To mainstream green growth within Indonesia’s economic and development planning processes”
1A 1B
“To increase the use of green technology and increase capital investment in green industry” (GIMS)
1C
2
REDD+ for green growth
“To ensure that REDD+ finance, programs and policies catalyze green growth in Indonesia”
2
3
Regional engagement
“To support key provincial governments in prioritizing and implementing green growth.
3CK 3EK
7
Section 1: What is Green Growth?
What is Sustainable Development "Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.“ (Brundtland Report) Characteristics of Sustainable Development • Concern for equity and fairness - ensuring the rights of the poor and of future generations • Long-term view - applying the precautionary principle • Systems thinking - understanding the interconnections between the environment, economy and society Sustainable Development Timeline
1970s • • •
1970: First Earth Day 1976: UN Conference on Human Settlements was conducted linking the environment and human settlement 1978: OECD Directorate of the Environment re-launches research on environmental and economic linkages
2000s • • •
2000: UN Millennium Development Goals gathering 2005: Kyoto Protocol enters into force 2009: Copenhagen climate negotiation
1980s •
1960s • • •
1962: Silent spring (by Rachel Carson) explain the interconnections among the environment, economy and social well being. 1967: Establishment of Environmental Defense Fund (EDF) to pursue legal solutions to environmental damage. 1969: National Environmental Policy Act is passed in United States.
•
1980: World Conservation Strategy was released by IUCN 1985: Climate Change meeting of the World Meteorological Society, the UNEP and the International Council of Scientific Union predicting global warming
1990s • •
•
1992: Earth Summit was conducted 1996: ISO 14001 adoption as voluntary international standard for corporate environmental management system 1999: Launches of the Dow Jones Sustainability Index
9
Sustainable Development Economically Feasible
Sustainable Development Socially Acceptable
Environmentally Sustainable
Economic Production Social Justice
Political Support
Cultural Appreciation
Ecological Sustainable
• •
Efficiency in natural resource use Maintain the availability of renewable resources
• •
Applied technology to substitute nonrenewable resources Maintain environmental quality 10
Green Growth Contributes to Sustainable Development
BAPPENAS Framework for Sustainable Development 4 Pillars of Sustainable Development
Social
Green Economy
Environment
Governance
GOI-GGGI Green Growth Program
11
Green Growth: What is it and what are the benefits? •
Green growth is an approach for achieving a number of simultaneous objectives bringing Indonesia closer to true sustainable development
•
It provides a practical framework for national development objectives such as climate change mitigation, adaptation to natural disasters, food and energy security and East-West cohesion.
•
Green Growth supports pro-growth, pro-jobs, pro-poor and pro-environment goals.
•
Green Growth ideas and tools will facilitate decision making in better analysing policies and projects to produce wider benefits for the economy, society and the environment.
The concept for green growth in Indonesia is being informed by the views of leading international organizations involved in green growth planning and development, including: “Green Economy is one that results in improved human well‐being and social equity, while significantly reducing environmental risks and ecological scarcities. It is low carbon, resource efficient, and socially inclusive” (UNEP) “Green growth means fostering economic growth and development, whilst ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies” (OECD) “Growth that is efficient in its use of natural resources, clean in that it minimises pollution and environmental impacts, and resilient in that it accounts for natural hazards and the role of environmental management and natural capital in preventing physical disasters” (World Bank) “A resilient economy that provides a better quality of life for all within the ecological limits of the planet.” (Green Economy Coalition) “A new paradigm balancing green and growth” (UNESCAP)
12
Global challenges under Business As Usual Rising Energy Demand
8.000
Energy demand, Mtoe
Billion, m3
Water scarcity
7.000
6.000 2.700
9.000
8.000
7.000
6.000
5.000
5.000 4.000 6.900
4.000
3.000 3.000 2.000
4.500
4.200 2.000
1.000
1.000
0 2010 existing withdrawals
2030 withdrawals
Supply-demand gap
Existing, accessible, reliable, sustainable supply
Aggregated global gap between existing accessible, reliable supply and 2030 water withdrawals.
0 Asia-Pacific Europe & Eurasia
North America
2011
Africa
Middle East
Latin America
2035
Total primary energy demand, by region, Mtoe, 2011 and 2035
13
Global challenges under Business As Usual Volatile energy and food prices
Rising global temperatures and sea levels Global mean sea level, mm
160 140
120 100 80 60 40
20
250 200 150
100 50
2000
1990
1980
1970
1960
1950
1940
1930
Annual_Mean
2010
2000
1990
1980
1970
1960
1950
-0.8
1940
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0
-0.4
1930
50
0.0
1920
100
1910
150
0.4
1900
200
0.8
1890
250
Tide gauge data
1.2
1880
Global surface temp. anomaly (deg.C)
300
2000
1920
Uncertainty
Coal price (Japan c.i.f steam coal)
FAO Monthly Food Price Index
1910
1900
1890
2011
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
-50
1880
0
0
5-year_Mean 14
Global challenges under Business As Usual Ecosystem destruction
Increasing costs of natural disasters 250
4.0
200
3.0 150
100 2.0
50
Total ecological footprint
0
1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
1.0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Total biocapacity
Global ecological footprint and biocapacity, 1961-2007 (ha/capita)
Estimated damage caused by reported natural disasters, 1970-2010, $ Billion 15
Challenges facing Indonesia under Business As Usual
Indonesia has seen spectacular growth since 1990 and especially since the Asian Financial Crisis:
$5.000 $4.000
$80 $3.000 $2.000
• 57 million people have been lifted out of poverty
$1.000
•
$60 $40
Coal Natural Gas Renewables
2011
2010
2009
2008
2007
0
2006
0
2005
1
2004
40
2003
2
2002
80
2001
3
2000
120
1999
4
1998
160
1997
5
1996
With economic and population growth has come huge increases in energy production and consumption, despite efficiency gains …
200
1995
Since the millennium, Indonesia’s population has grown by 37 million – the size of Poland’s entire population.
1994
GDP per capita
1993
Investment
2005$ per kg oil equivalent
• Growth in recent years has hovered around 6% per annum
$0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
1992
$0
Average incomes have doubled
1991
$20
1990
$100
TWh
Billion USD
$120
Hydro Oil Energy Intensity ($/energy use)
16
70%
-
60%
2
50%
•
6
• Mineral stocks are depleting at nearly $10bn a year
30% 8
10
0%
12
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
10%
Forested Area
Deforestation has averaged 0.6% a year
• Indonesia’s Reserve/Production Ratios are only 14 for coal and 11 for oil
Mineral depletion (USD)
Carbon emissions are rising with increased material and energy consumption … 2.5
… and increasingly the income distribution is concentrated towards a lucky few. GINI Coefficient
MtCO2/capita
But, growth has often been at the expense of the environment.
4
40%
20%
Billions
Challenges facing Indonesia under Business As Usual
2 1.5
1
50 40 30 20
10
0.5
0
0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 0 = perfect equality, 100 = perfect inequality
17
Challenges facing Indonesia under Business As Usual
The impacts of climate change are likely to affect Indonesia in particular: • Rising temperatures impacting agricultural productivity • Increased rainfall and flooding at the same time as increased drought in some areas
Areas of high water stress, 2050s
Sources: UNEP / GRID-Arendal Maps and Graphics Library; Global warming and agriculture, William Cline 2007
Red = <0.5 m litres/per person. Extreme Stress
Sources: Centre for Environmental Systems Research, University of Kassel
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A Green Growth Vision for Indonesia The year is 2050 … •
Indonesia is a post-industrial democracy
•
bhineka tunggal ika … “unity in diversity.”
•
$32,000/head income
•
Population is well educated, healthy, and economically productive
•
A child born in 2045 in Papua, Maluku, or Nusa Tenggara enjoys same life chances as in Java, Sumatra, or Bali
•
Diversified, low-carbon economy
•
Ecological rehabilitation
•
Forest-based sectors and fisheries thriving as are ecotourism, biotechnology, and renewable energy
•
Indonesia is self-sufficient in energy
•
Annual GHG emissions onto a declining pathway
Proposed definition by GGGI’s Steering Committee including Emil Salim 19
A Green Growth Framework for Indonesia: The 5 outcomes of Green Growth
Greenhouse gas reduction Social, economic and environmental resilience
Equitable and inclusive growth
Green Growth
Sustained economic growth
Healthy natural capital providing ecosystem services
20
A Green Growth Framework for Indonesia: The 5 outcomes of Green Growth Healthy and productive ecosystems providing services What is it? • Growth that sustains natural capital, which can supply a continuous flow ecosystem services. Why is it important and how does it link to national and sub-national objectives? • RPJMN: “improve the management of natural resources and the environment to support quality of life” • Law 32/2009 on Environmental Protection Management. • Long-term sustainability of growth and higher standard of living • Green value chain • Preserves natural beauty for future generations What type of policies could support implementation? • Economic incentives • Spatial planning • Information and voluntary initiatives
21
A Green Growth Framework for Indonesia: The 5 outcomes of Green Growth GHG Emissions Reduction What is it? • Low-carbon growth to minimize future adverse impacts on society from climate change Why is it important and how does it link to national and sub-national objectives? • International climate change commitments • National policies (RAN-GRK … ) • Clean technology development including energy efficiency, waste-to-energy, and renewables • Business case for reducing deforestation What type of policies could support implementation? • Economic incentives • Technology mandates • Information and voluntary initiatives
22
A Green Growth Framework for Indonesia: The 5 outcomes of Green Growth Sustained Economic Growth What is it? • Robust and diverse growth o support broad-based social prosperity. Why is it important and how does it link to national and sub-national objectives? • 7% growth • Top-6 Global Economies by 2050 • RPJPN and RPJMN. • Avoiding “middle income trap” • Environmental Goods and Services opportunity What type of policies could support implementation? • Investment in Infrastructure • Stability for private sector investment • Fiscal support for Green Industries • R&D and innovation support • Advanced manufacturing
23
A Green Growth Framework for Indonesia: The 5 outcomes of Green Growth Inclusive and equitable growth What is it? • Growth for all segments of society, including children, women, and men, those in urban and rural areas, the affluent and the poor, the marginalized and the well connected. Why is it important and how does it link to national and sub-national objectives? • Bhinneka Tunggal Ika • Drives social inclusion, fairness and justice.
What type of policies could support implementation? • Investment in health and education • Social safety net • Infrastructure for remote areas • SEZs for remote areas
24
A Green Growth Framework for Indonesia: The 5 outcomes of Green Growth Social, economic and environmental resilience What is it? • Economic, social, and environmental stability in the face of external shocks Why is it important and how does it link to national and sub-national objectives? • RPJMN: Management of Natural Disasters. • Food security • Stable investment in future and avoids poverty trap • Protects against climate change. What type of policies could support implementation? • Investment in health and education • Government-sponsored insurance • Social safety net • Climate-resilient infrastructure • Adaptation for agriculture • Advanced manufacturing and services • Macroeconomic management
25
A Green Growth Framework for Indonesia: Starting with Natural Capital and leading to Sustainable Development
26
How does Green Growth help Indonesia?
International competitiveness
Natural gas and geothermal powered industry
Increasing value-add in minerals and refining sector
New green technologies
Off-grid electrification
Compound fertilizers
Waste-to Energy
Green coal
Waste-to Energy
Sustainable Palm Oil
Smart cities
27
Section 2: Applying Green Growth to policy and project planning
Introduction Rencana Pembangunan Jangka Panjang Nasional- RPJPN (Long Term National Development Plan) Description RPJPN is a national development planning that provides direction and guidance for vision and mission for 20 years period. Key Institution
1. Bappenas as coordinator and analyst of program evaluation from sectoral ministries and institutions* 2. Sectoral ministries and institutions for program control and evaluation* Period 2005-2025
*Undang-Undang Republik Indonesia Nomor 17 Tahun 2007
29
Introduction Rencana Pembangunan Jangka Menengah Nasional- RPJMN (Mid-Term National Development Plan) Description • Stages in achieving 2005-2025 RPJPN vision • Formulation of challenges, strategy, and targets in order to overcome challenges of the nation for 5 years period. Key Institutions • Bappenas as coordinator of program Planning, Monitoring and Evaluation • Book Coordinator; 1. Book I (Priority and National Focus Priority) is Bappenas 2. Book II each sector is led by Sectoral Coordinator 3. Book III is led by the Deputy related to the regional development sector Period • RPJMN I 2005-2009 • RPJMN II 2010-2014 • RPJMN III 2015-2019 • RPJMN IV 2020-2024
30
Introduction
Elements of good planning • Understanding impact of plans Data; quantitative information Evidence; additional qualitative proof • Coordination between institutions Ministries Public sector Private sector Civil society/NGOs • Scenarios Baseline/ Business as usual (BAU) Green Growth Scenario; Provide long-term benefit Sustainable growth Green investment strategy leads to higher annual growth rate compare to Business as usual Other scenarios
Source: UNEP, 2011
31
National policy planning
Central Government
20 Year Plan
5 Year Plan
1 Year Plan
Budget
RPJPN
RPJMN
RKP
RAPBN
Renstra KL
Renja KL
RKA KL
MP3EI RTRWN
32
Sub- National policy planning
Provincial & Regional Government
20 Year Plan
5 Year Plan
1 Year Plan
Budget
RPJPD
RPJMD
RKPD
RAPBD
MP3EI RTRWN
Renstra SKPD
Renja SKPD
RKA SKPD
33
Project planning
Stage 0
Pre-project policy planning
Stage 1
Feasibility and options analysis
• RPJMN/D
• Market appraisal
• Spatial Plan
• Technical appraisal
Stage 2
Financial analysis
• Appraisal of financial costs and benefits
Stage 3
Environmental Assessment
• AMDAL
• Economic Zones (KEK, KSN) • List of investments
34
Project planning
34
Green Growth Assessment Process: Policies and Projects GGF
Step 1
GGAP
Step 3
Step 2
GGP
Social, economic and environment al resilience
National & Regional
Greenhouse gas emission reduction
Green Growth
plans Sustained economic growth
Sector plans
Business As Usual
Policies & enablers
Extractives
National
National
Production Land use Connectivity
Inclusive and equitable growth
Healthy and productive ecosystems providing services
Province
Province Corridor
Corridor
District
Project generation and Identification
Sector
Towards a green growth vision
Revisit policy & enablers to remove barriers and ensure projects fully align with Green Growth planning approach
Step 6
Feasibility assessment
Step 4
GG potential assessment
Step 5
eCBA
Business Cases
Targets inform and test the vision
Step 7 Monitoring & Evaluation
Roadmap and setting
eCBA
Step 8
Roadmap
targets
36
Integrating Green Growth in National and sub-national policy planning National Green Targets Strategic Green Policies
20 Year Plan
5 Year Plan
1 Year Plan
Budget
RPJPN
RPJMN
RKP
RAPBN
MP3EI RTRWN SEA Green targets / KPIs
Green incentives budgeted for
Renstra KL
Sector-specific targets Use of eCBA techniques to value assets
Renja KL
RKA KL
M & E
Sector-specific policy incentives
37
Project planning
Stage 0
Pre-project policy planning
Stage 1
Feasibility and options analysis
• RPJMN/D
• Market appraisal
• Spatial Plan
• Technical appraisal
Stage 2
Financial analysis
• Appraisal of financial costs and benefits
Stage 3
Environmental Assessment
• AMDAL
• Economic Zones (KEK, KSN) • List of investments
38
Integrating Green Growth in Project planning
Stage 0 Preproject policy planning
Stage 1
Feasibility and options analysis
• RPJMN/D
• Market appraisal
• Spatial Plan
• Technical appraisal
• Economic Zones (KEK, KSN)
• List of investments • Strategic Environmental Assessment
Stage 2
Stage 3
Cost Benefit Analysis
Financial analysis
• Appraisal of financial costs and benefits
Prioritises projects for implementation Re-designs projects and corridors
Stage 5
Multi Criteria Analysis
• Appraisal of social costs and benefits
• GGAP filtering of projects • Strategic Environmental Assessment
Stage 4
Impact Assessme nt
• Integrating wider qualitative and strategic impacts
Re-designs projects Provides policy and investment suggestions
• AMDAL • Socio-Economic Impact Assessment
Final risk mitigation measure Provides overall info on project before procurement
39
Integrating Green Growth in Project planning: Practical example • Need 100 MW of • Options include: power in Kota ‘X’ • Gas • Hydro • Geothermal • Biodiesel
Stage 0 Preproject policy planning
Stage 1
Feasibility and options analysis
• Profitable options: • Socially-best options: Gas Hydro Geothermal Geothermal Hydro Gas
Stage 2
Financial analysis
Stage 3
Cost Benefit Analysis
• Best overall options: • Risk mitigation by minor re-location Geothermal Hydro Gas
Stage 4
Multi Criteria Analysis
Stage 5
Impact Assessme nt
40
Recap
1.
2. GGF
Step 1
GGAP
Step 3
Step 2
GGP National & Regional
Greenhouse gas emission Social, reduction economic Sustained and economic environment Green growth al resilience Growth
plans
Sector plans
Business As Usual
Policies & enablers
Extractives
National
National
Production Land use Connectivity
Inclusive and equitable growth
3.
Healthy and productive ecosystems providing services
Province
Province Corridor
Corridor
District
Project generation and Identification
Sector
Towards a green growth vision
Revisit policy & enablers to remove barriers and ensure projects fully align with Green Growth planning approach
Feasibility assessment Step 6
GG potential assessment eCBA
Business Cases
Targets inform and test the vision
Preproject policy planning
Stage 1
Feasibility and options analysis
Stage 2
Financial analysis
Stage 3
Cost Benefit Analysis
Stage 4
Multi Criteria Analysis
Step 4
Step 5 Step 7
Monitoring & Evaluation
Roadmap and setting
targets
Stage 0
Green Growth
eCBA
Step 8
Roadmap
Business As Usual
Stage 5
Impact Assessme nt
41
Section 3: Measuring Green Growth
Current approach to measuring growth
About GDP • Gross Domestic Product is internationally used to measure levels of development • Yet, it is very crude measure: it really only measures “what comes out of the factory gate” Economically Feasible
GDP
Environmentally Sustainable Socially Acceptable
• •
It says little about what is socially acceptable or environmentally sustainable. And, it is even a limited measure of economic success (e.g. Natural Disasters, Traffic Jams)
43
Current approach to measuring growth; what is missing?
Efficient in Natural resource used
Know the Natural Resource Stock
Know the real contribution of each sector to GDP
As basis for natural resource and environmental management
Applied technology to substitute non-renewable resource used
Maintain environmental quality
Know the natural resource and environmental damage
Wealth Community
Maintain the sustainability of renewable resources
Economy with Social & Environmental Vision
Sustainable Resources
44
International examples of measuring green growth Measuring Green Growth • A number of institutions have researched Green Growth indicators and recommend the framework below as international best practice
Source: Green Growth Knowledge Platform: Moving Towards a Common Approach on Green Growth Indicators
Inputs and Natural Assets
• • • •
Water (volume and quality of freshwater) Forest and marine resources (ha forest, tonnes fish) Mineral/energy resources (gas reserves) Biodiversity (protected areas, species)
Production and productivity
• • • •
Energy intensity (kWh per unit GDP) Material intensity (tonnes per unit GDP) Waste (% collected and recycled) Innovation (R&D, labour productivity)
• • •
Health (deaths/illnesses from air pollution) Risk (exposure to natural disasters) Waster (availability of clean drinking water, freshwater quality) Ecosystem services (available for recreation, aesthetic value)
Outputs and well-being
•
Case Study: China’s productivity targets by 2020 (on 2000 levels) • Energy intensity (energy used per unit GDP) by 50 to 60 per cent • Water intensity (water used per unit of GDP) by 80 per cent • Sulphur dioxide (SO2) intensity (SO2 emissions per unit of GDP) by 75 per cent • Carbon dioxide (CO2) intensity (CO2 emissions per unit of GDP) by 60 per cent
Source: UNESCAP, Greening Growth in Asia and the Pacific
45
Macro and micro indicators Macro indicators can draw data from micro, project level indicators
Examples given on next slides Greenhouse gas reduction
Social, economic and environmental resilience
Equitable and inclusive growth
Green Growth
Macro, national / province level
Micro, project level
Depend on project, examples given as part of eCBA slides
Sustained economic growth Indicators
Indicators
Healthy natural capital providing ecosystem services National, province and district level indicators for monitoring, evaluation and target setting
Project indicators improve awareness of breadth of project impacts and can be used for monitoring and evaluation
46
Stock and flow or absolute and intensity indicators
e.g. capital or labour
Stock
Absolute
2014
Intensity Absolute
Continuing over time…
Options include: • Population • GDP • Geographical area • Hours worked • Biochemical Oxygen Demand of water
47
Macro, absolute indicators of green growth
Sustainable development pillar
Economic
Social
Environmental
Normative green growth outcome
Sustained Economic Growth
Equitable and Inclusive Growth
Healthy Natural Capital Providing Ecosystem Services
Stock
R
Flow
GHG reduction
Gross capital formation R FDI R Working population Debt
Poverty headcount Population Population living in land area where elevation is below 5 meters
R
Forested area GEF index for biodiversity Mammal species threatened Marine protected areas Fish species threatened Healthy coral reef area Fish stocks Primary energy reserves
HDI Government social spending Gini coefficient Access to electricity Access to public health clinics Access to internet
Fishery production Government environmental R spending Deforestation rate Primary energy consumption Water stress index Freshwater withdrawals
GDP (PPP) GDP growth (% yoy) Total factor productivity (% growth) Formal employment Informal employment Unemployment Underemployment
R R R R
R R R R
Forested area Fossil fuel reserves + imports exports
GHGs Deforestatio n rate
Notes: R = Indicator that is an element of the resilience outcome
48
Macro, intensity indicators of green growth Sustainable development pillar Normative green growth outcome
Stock
Social
Environmental
Sustained Economic Growth
Equitable and Inclusive Growth
Healthy Natural Capital Providing Ecosystem Services GHG reduction
R
Gross capital formation/GDP FDI/GDP Working population/GDP Debt/GDP
GDP/Population GDP/hour worked (labour productivity) Sector GDP/GDP (e.g. Agriculture GDP/GDP) RGDP/GDP Formal employment/Population Informal employment/Population Unemployment/Population Underemployment/Population
Flow
Economic
R
R
R R R
Poverty headcount/Population Population living in land area where elevation is R below 5 meters/Population
Forested area/Geographical area Water pollution/Biochemical Oxygen Demand emissions
Forested area/Geogra phical area
Government environmental spending/GDP Population/Geographi cal area Energy consumption/Populati on Energy consumption/GDP Water use/Population
GHG/GDP GHG/Popula tion
Government social spending/GDP Literate population/Population Access to electricity/Population Access to public health clinics/Population Access to internet/Population
R
R R
Notes: R = Indicator that is an element of the resilience outcome
49
Regional performance: Existing Green Growth KPIs 195
200
KPI distorted by mining profit repatriation
Mn Rp/ employed person
180 160 140 120 100 80 60
42
40
40
Central Kalimantan East Kalimantan North Sulawesi South Sulawesi Indonesia
60%
54%
56% 52% 48%
50% 40% 29%
30%
20%
48
Central Kalimantan East Kalimantan North Sulawesi South Sulawesi Indonesia
10%
21
20 0%
0
Forest cover
Labour Productivity
Note: CK EK NS Indo 2010, SS 2012
Note: EK Indo NS SS 2010, CK 2008
60%
100%
50%
50%
44%
40% 30%
23% 20%
Central Kalimantan East Kalimantan North Sulawesi South Sulawesi Indonesia
10%
95% 95%
95% 93%
90%
87%
85% 80% 80%
Central Kalimantan East Kalimantan North Sulawesi South Sulawesi Indonesia
75% 0.02%
0% PLN power generated from renewable energy (other IPPs may generate more percentage)
Note: Hydro power, steam power, geo thermal, solar power 2012
70% Electricity Availability
Note: EK 2010, CK NS SS Indo 2011 50
Regional performance: Existing Green Growth KPIs 0.45
0.41
0.40
Gini Co-efficient
0.35
30%
0.37
Central Kalimantan East Kalimantan North Sulawesi South Sulawesi Indonesia
0.32
0.30 0.25
27%
0.40
0.20
0.20 0.15 0.10
27% 25%
25%
20%
17% 15%
15% 10%
Central Kalimantan East Kalimantan North Sulawesi South Sulawesi Indonesia
5%
0.05 0%
0.00
Sectoral diversification
Measuring inequality
Note: EK NS 2010, CK Indo 2011, SS 2012 12%
Note: EK, NS 2010, Indo 2011, SS 2012 45%
11% 10%
10%
9%
8%
7%
6% 6% 4%
41%
40% Central Kalimantan East Kalimantan North Sulawesi South Sulawesi Indonesia
35%
31%
30%
25%
26% 21%
20%
15%
15%
Central Kalimantan East Kalimantan North Sulawesi South Sulawesi Indonesia
10%
2%
5% 0%
0% Poverty Headconut
Note: CK EK NS Indo 2010, SS 2012
Accessibility to the internet
Note: CK EK 2010, NS SS 2011, Indo 2012 51
Measuring Economic Diversification Trade, Hotel & Restaurants; 8.9%
Manufacturing Industry; 27.7%
Services; 16.6% Agriculture, Livestock, Forestry and Fishery Mining and Quarrying; 41.4%
Mining and Quarrying
Manufacturing Industry
Transport and Communication; 11.5% Trade, Hotel & Restaurants; 17.0%
Agriculture, Livestock, Forestry and Fishery; 19.5%
Manufacturing Industry; 8.1%
Construction; 16.5%
Electricity, Gas & Water Supply
North Sulawesi GDRP Share
East Kalimantan GDRP Share Construction Services; 13.4%
Transport and Communication Trade, Hotel & Restaurants; 20.9%
Agriculture, Livestock, Forestry and Fishery, 28.4%
Trade, Hotel & Restaurants
Services; 18.7%
Transport and Communication Mining and Quarrying; 9.6%
Finance, Real Estate and Business Services Services
Central Kalimantan GDRP Share
Agriculture, Livestock, Forestry and Fishery; 26.4%
Mining and Quarrying Trade, Hotel & Restaurants; 19.0%
Manufacturin g Industry
South Sulawesi GDRP Share 52
Section 4: Doing Green Growth Analysis â&#x20AC;&#x201C; Tools and Methodologies
Green Growth Assessment Process tool: Objectives Objectives of the tool • • • •
A template for conducting project and intervention assessments. A user friendly way to display the financial and other green growth information about projects. A transparent tool for assessing projects. A bank of relevant indicators for assessing Green Growth impacts in Indonesia.
The supporting Green Growth Planning Guidance paper • •
An explanation of Green Growth and a framework for assessing the green growth potential of projects. A way of supporting stakeholders consider the variety of green growth impacts when developing policies and interventions. 54
Green Growth Assessment Process tool: Overall process GGF
Step 1
GGAP
Step 3
Step 2
GGP
Social, economic and environment al resilience
National & Regional
Greenhouse gas emission reduction
Green Growth
plans Sustained economic growth
Sector plans
Business As Usual
Policies & enablers
Extractives
National
National
Production Land use Connectivity
Inclusive and equitable growth
Healthy and productive ecosystems providing services
Province
Province Corridor
Corridor
District
Project generation and Identification
Sector
Towards a green growth vision
Revisit policy & enablers to remove barriers and ensure projects fully align with Green Growth planning approach
Step 6
Feasibility assessment
Step 4
GG potential assessment
Step 5
eCBA
Business Cases
Targets inform and test the vision
Step 7 Monitoring & Evaluation
Roadmap and setting
eCBA
Step 8
Roadmap
targets
55
Using the Green Growth Assessment Process tool (1)
Basic information
1 Feasibility questionnaire
Green growth assessment
2
3
Results
4
• Complete basic information about the project, including its name, location and a description of the project
• Complete the feasibility questionnaire. This determines whether or not the project is at the right stage for the GGAP assessment, or whether barriers such as data availability, would limit the assessment
• Enter data about the project against the quantitative indicatros displayed
• Assess the project’s performance against the green growth outcomes and compare against other projects
56
Using the Green Growth Assessment Process tool (2)
Basic information
Data entry fields
Feasibility questionnaire
Green growth assessment
Results viewer
Results
57
Using the Green Growth Assessment Process tool (3) 1
3
2 Project Name*
Project Type*
Project 1
Bridge
Developer Organisati on
Abiilty to assess Corridor* Bali-Nusa Tenggara
Project 2
Road
Java
Project 3
Water station
Sulawesi
Project 4
Airport
Sulawesi
Project Name*
Project 3 Project 4
…
Indicators
Protected or productive land displaced
…
Data Quality
Project 1
15
Primary
Project 2
50
Proxy
Source
4
…
GHG Emissions Economic Growth
Social Development Ecosystems
Resilience
Project 3
…
Project 2
Healthy and productive ecosystems
Ha
Will we have access to the data we need to assess the project?
Project 1
Green Growth Dimension
Metric
Is there sufficient data available for the green growth potential assessment?
…
…
$-2
$-1
$-
$1
The results viwer combines all the data entered to give projects a score for each green growth outcome, and ranks them accordingly
$2 Millions
Project 4
58
Extended Cost Benefit Analysis (eCBA): Objectives and Benefits
•
• • • • •
Broader decision making private vs. public sector fiscal impact efficient vs. equitable environmental impact contribution to poverty reduction.
• • • •
Depending on the level of capacity and resources available, eCBAs are typically conducted by consultants and academics supporting government. Government is often responsible for the following Stages: Stage 1: Identify project baseline Set study scope and objectives Stage 2: Identify Green Growth options Stage 3: Map Impact Pathways Translate results into policy solutions Stage 7: Consider implications
• •
59
Extended Cost Benefit Analysis (eCBA): Objectives and Benefits
Hydrological Effect
Land Use
Welfare for water users
Water Services
Carbon Sequestration
Emision Reduction
Carbon Buyers
Conservation of Biodiversity
Ecosystem Services
Welfare for Beneficiaries
Bio-Physical Relationship
Valuation
60
Extended Cost Benefit Analysis (eCBA): Steps Stage 1
Identify project baseline
Stage 2
Identify Green Growth options
Stage 3
Map Impact Pathways
Stage 4
Collect data
• Consult project stakeholders
• Consult project stakeholders
• Identify outputs, outcomes and impacts
• Collect data from project documentation
• Review project documentation
• Consult experts
• Assess materiality • Collect local market data
• Literature review
• Identify scope for • Collect CBA international technology data
Stage 5
Extended Cost Benefit Analysis • Quantify costs and benefits of green growth interventions • Value cost and benefits to society
Stage 6
Validate Findings
Stage 7
Consider implicati ons
• Validate findings • Consider with stakeholders implications of results for policy
• Consider implications for project re-design and investment
61
Extended Cost Benefit Analysis (eCBA): Step 1 Stage 1
Identify project baseline
Stage 2
Identify Green Growth options
Stage 3
Stage 4
Map Impact Pathways
Collect data
Stage 5
Extended Cost Benefit Analysis
Stage 6
Validate Findings
Stage 7
Consider implicati ons
Objective â&#x20AC;˘ Understand the project objectives key activities, geographical and economic scope of the project as it is currently designed Key activities
Financial Appraisal Engineering Documents Spatial Plans Master Plans
62
Extended Cost Benefit Analysis (eCBA): Step 2 Stage 1
Identify project baseline
Stage 2
Identify Green Growth options
Stage 3
Map Impact Pathways
Stage 4
Collect data
Stage 5
Extended Cost Benefit Analysis
Stage 6
Validate Findings
Stage 7
Consider implicati ons
Objective • Identify possible improvements to the baseline scenario • “Can this project be designed better to improve Green Growth Performance”? Key activities • Stakeholder engagement and research on the baseline:
Literature
63
Extended Cost Benefit Analysis (eCBA): Step 3 Stage 1
Identify project baseline
Stage 2
Identify Green Growth options
Stage 3
Stage 4
Map Impact Pathways
Stage 5
Collect data
Extended Cost Benefit Analysis
Stage 6
Validate Findings
Stage 7
Consider implicati ons
Objective • Map out the impacts of the project in a consistent and rigorous way to prioritise most material impacts and understand how to value impacts on different stakeholders. Key activities • Create impact pathways for the Baseline and Green Growth Scenario: • Map activities/inputs (done in Stage 1) • Map outputs; what has changed in physical terms? (e.g. hectares forest, tonnes of output) • Map outcomes; how have stakeholders been affected? (lung disease and healthcare costs, reduced water regulation and cost to downstream hydro plant; increased profit) • Map impacts; would these outcomes have happened anyway? Input • Financial and other resources committed
Output • Quantitative measure of change
Outcome • Which stakeholders are affected?
Impact • Would these have happened anyway? What is the baseline?
• What is the outcome for them, in Rp. terms? 64
Extended Cost Benefit Analysis (eCBA): Step 3 Stage 1
Stage 2
Identify project baseline
Stage 3
Identify Green Growth options
Map Impact Pathways
Stage 4
Stage 5
Collect data
Extended Cost Benefit Analysis
Stage 6
Validate Findings
Stage 7
Consider implicati ons
Example Fish ponds in coastal mangroves
Input • Mangrove areas • Fertilizer • Fish seeds
Output
Outcome
• Increase fish pond production • Reduce mangrove areas • Reduce fish catch production
Positive • Revenue for fish farmers • Food resilience for local community • Local job creation Negative •Local Climate Change Risk • Coastal pollution • Erosion
Impact
Compared to before: • More revenue than normal fishing • More food than normal fishing • Same number of fisherman • More climate change risk • More unfiltered pollution • More erosion
Exercise 1: Choose the right drop-down option for each stage of the pathway.
65
Extended Cost Benefit Analysis (eCBA): Step 4 Stage 1
Identify project baseline
Stage 2
Stage 3
Identify Green Growth options
Map Impact Pathways
Stage 4
Collect data
Stage 5
Extended Cost Benefit Analysis
Stage 6
Validate Findings
Stage 7
Consider implicati ons
Objective • Collect data to value the impact pathways Key activities • Literature review and stakeholder engagement to collect data including: Category
Data
Technology
• • •
Input requirements (materials, land, labour, fuels) Investment and running costs Levels of output per $ input (tonnes of production etc.)
Social
• • • •
Willingness-to-Pay surveys Income/health/education/unemployment levels Healthcare costs/costs of disease Social return on education
Economic
• •
Product prices and transport costs Multiplier effects
Environmental
• • •
Pollutant output ratios (tCO2, SOx, BOD etc. per tonne of production) Local environmental characteristics (population, weather, hydrology) Ecosystem services affected and their value 66
Extended Cost Benefit Analysis (eCBA): Step 4 Stage 1
Stage 2
Identify Green Growth options
Identify project baseline
Stage 3
Stage 4
Map Impact Pathways
Collect data
Stage 5
Stage 6
Extended Cost Benefit Analysis
Stage 7
Consider implicati ons
Validate Findings
Common Data Sources Category
Potential Data Sources
Data
Indonesia Specific Sources
Technology
Social
Economic Environmental
• • •
Input requirements (materials, land, labour, fuels) Investment and running costs Levels of output per $ input (tonnes of production etc.)
• • • •
Willingness-to-Pay surveys Income/health/education/unemployment levels Healthcare costs/costs of disease Social return on education
• •
Product prices and transport costs Multiplier effects
•
Pollutant output ratios (tCO2, SOx, BOD etc. per tonne of production) Local environmental characteristics (population, weather, hydrology) Ecosystem services affected and their value
• •
International Sources • GGGI
•
BPS Indonesia
•
BPPT
•
•
ISPO
Consultation with local experts
•
Green Growth Knowledge Platform
•
OECD
•
UNDP
•
UNEP
•
World Bank
•
WWF
•
PwC
•
RSPO
67
Extended Cost Benefit Analysis (eCBA): Step 5 Stage 1
Stage 2
Identify project baseline
Identify Green Growth options
Stage 3
Map Impact Pathways
Stage 4
Stage 5
Collect data
Extended Cost Benefit Analysis
Stage 6
Validate Findings
Stage 7
Consider implicati ons
Objective • Value negative (costs) and positive (benefits) impacts on stakeholders, expressed in monetary terms comparable across regions and time periods. • Answer questions “Is this project net positive?”, “What is the balance of social, environmental and economic costs and benefits?”, and “What is the distribution of private vs. public benefits?” Identifying Benefits and Costs Financial costs
Financial benefits
•
Up-front investment
•
New product revenue
•
Maintenance
•
Higher product price
•
Labour
•
Fuel and other efficiency savings
•
Land
•
Fuel costs
•
Other operating costs
Exercise 2: Which are benefits and which are costs? Exercise 3: Calculate the costs and benefits for one year only.
68
Extended Cost Benefit Analysis (eCBA): Step 5 Stage 1
Stage 2
Identify Green Growth options
Identify project baseline
Stage 3
Map Impact Pathways
Stage 4
Collect data
Stage 5
Extended Cost Benefit Analysis
Stage 6
Validate Findings
Stage 7
Consider implicati ons
Comparing benefits and costs across time 2014
2015
69
Extended Cost Benefit Analysis (eCBA): Step 5 Stage 1
Identify project baseline
Stage 2
Stage 3
Identify Green Growth options
Map Impact Pathways
Stage 4
Stage 5
Stage 6
Extended Cost Benefit Analysis
Collect data
Stage 7
Consider implicati ons
Validate Findings
Comparing benefits and costs across time Tahun (1)
Cost (Rp) (2)
Benefit (Rp) (3)
Net Benefit (4)=(3-2)
DF 10% (5)= 1/(1+r)t
PV 10% (6)= (4x5)
1
500
(500)
0,909
2
400
(400)
0,826
(330,4)
- 784,9
(454,5)
3
200
200
0,751
150,2
4
300
300
0,683
204,9
5
400
400
0,620
6
500
500
0,564
TOTAL
+885,5
NPV
248 282,0 100,2
Feasible investment since NPV > 0 at discount rate of 10% • Value of PV of benefits = Rp 885,5, value of PV of costs = (Rp 784,9) • Net B/C = (885,5/784,9) = 1,13 … every unit cost provides a net benefit of 1.13
70
Extended Cost Benefit Analysis (eCBA): Step 5 Stage 1
Identify project baseline
Stage 2
Identify Green Growth options
Stage 3
Stage 4
Map Impact Pathways
Stage 5
Stage 6
Extended Cost Benefit Analysis
Collect data
Validate Findings
Stage 7
Consider implicati ons
Comparing benefits and costs across time Tahu (1)
Cost (Rp) (2)
Benefit (Rp) (3)
NB (4)=(3-2)
DF 10% (5) =1/(1+r)t
PV 10% (6)=(4x5)
DF 15% (7) =1/(1+r)t
PV 15% (8)=(4x7)
1
500
(500)
0,909
(454,5)
0,869
(434,5)
2
400
(400)
0,826
(330,4)
0,756
(302,4)
3
200
200
0,751
150,2
0,657
131,4
4
300
300
0,683
204,9
0,572
171,6
5
400
400
0,620
284,4
0,497
198,8
6
500
500
0,564
282,0
0,432
216
TOTAL
NPV
100,6
-19,1
IRR: at DF 10% NPV +, try to calculate the (-) NPV by increase the discount rate. At DF 15% NPV is negatif (19,1) so we can start to use the IRR formula IRR = 10 % + (15%-10%){(100,6)/(100,6-(-19,1)} = 14,20 % Means, based on IRR project criteria is feasible since it gives return 14,20% (>10%) Exercise 4: Insert a discount rate of 10% - what is the NPV? Delete the discount rate, what is the IRR? Is the investment profitable? Exercise 5-7: Consider replacing 10% of the coal capacity for Palm Kernel Shells. What is the NPV of this scenarios at 15% discount rate. Compare to the base case of 100% coal. Is the PKS investment profitable?
71
Extended Cost Benefit Analysis (eCBA): Step 5 Stage 1
Identify project baseline
Stage 2
Identify Green Growth options
Stage 3
Stage 4
Map Impact Pathways
Collect data
Stage 5
Extended Cost Benefit Analysis
Stage 6
Validate Findings
Stage 7
Consider implicati ons
Wider impacts: financial vs. economic impacts 1. Opportunity cost 2. Externalities 3. Social discounting
72
Extended Cost Benefit Analysis (eCBA): Step 5 Stage 1
Stage 2
Identify Green Growth options
Identify project baseline
Stage 3
Map Impact Pathways
Stage 4
Stage 5
Extended Cost Benefit Analysis
Collect data
Stage 6
Validate Findings
Stage 7
Consider implicati ons
Wider impacts: Shadow pricing and opportunity cost • Principle 1: All resources must be valued at their full opportunity cost to the economy Information • Old car burns 500 litres a year. • New car burns 300 litres a year • Fuel price is 6,500 Rp/litre (after a subsidy of 3,500 Rp/litre – let’s say it costs 10,000 litre to import)
Financial Benefit Fuel saving = 200 litres * 6,500 Rp. = 1,300,000Rp/year
Economic Benefit to individual Fuel saving = 200 litres * 6,500 Rp. = 1,300,000Rp/year
Benefit to government Subsidy saving = 200 litres *3,500 Rp = 700,000 Rp/year
= 10,000 Rp * 200 litres = 2m Rp/year
Go back to Exercises 3 and 4. Change the ‘price of coal’ from the Domestic Market Obligation price of $40 to the potential export price of $67. What happens to NPV? What can we learn from this exercise?
73
Extended Cost Benefit Analysis (eCBA): Step 5 Stage 1
Identify project baseline
Stage 2
Identify Green Growth options
Stage 3
Map Impact Pathways
Stage 4
Collect data
Stage 5
Extended Cost Benefit Analysis
Stage 6
Validate Findings
Stage 7
Consider implicati ons
Wider impacts: Externalities and Total Economic Value â&#x20AC;˘ Principle 2: We must value the impacts actions have on others â&#x20AC;Ś where markets fail to capture these impacts
Exercise 8: Calculate the GHGs and Sulfur Dioxide saved from fuel substitution. Include them in cashflow calculation. Why is tax removed from this calculation (Hint: see previous slide).
74
Extended Cost Benefit Analysis (eCBA): Step 5 Stage 1
Stage 2
Stage 3
Identify Green Growth options
Identify project baseline
Stage 4
Map Impact Pathways
Collect data
Stage 5
Stage 6
Extended Cost Benefit Analysis
Validate Findings
Stage 7
Consider implicati ons
Wider impacts: Externalities and Total Economic Value â&#x20AC;˘ Principle 2: We must value the impacts actions have on others â&#x20AC;Ś where markets fail to capture these impacts Total Economic Value Non-use value
Use value
Direct use value
Indirect use value
Option value
Existence value
Altruistic value
Bequest value
Value directly paid for a good or service
Ecosystem services
Future direction and indirect use values
Knowledge of continued existence of a resource
Knowledge of the continued use of a resource by others in current generation
Knowledge of passing on resources to future generations
Walking, fishing
Climate regulation
Option to develop
Existence of species
Knowledge of recreation
Wish for future generations to enjoy
75
Extended Cost Benefit Analysis (eCBA): Step 5 Stage 1
Identify project baseline
Stage 2
Identify Green Growth options
Stage 3
Map Impact Pathways
Stage 4
Collect data
Stage 5
Extended Cost Benefit Analysis
Stage 6
Validate Findings
Stage 7
Consider implicati ons
Wider impacts: Externalities and Total Economic Value â&#x20AC;˘ Principle 2: We must value the impacts actions have on others â&#x20AC;Ś where markets fail to capture these impacts
Source: WWF 76
Extended Cost Benefit Analysis (eCBA): Step 5 Stage 1
Stage 2
Identify Green Growth options
Identify project baseline
Stage 3
Map Impact Pathways
Stage 4
Collect data
Stage 5
Extended Cost Benefit Analysis
Stage 6
Validate Findings
Stage 7
Consider implicati ons
Wider impacts: Social Discount Rate â&#x20AC;˘ Principle 3: We must trade-off impacts across time by how society trades them off, not individuals
10%
10%
5%
10% Exercise 8: Change the discount rate to something lower (5-10%). What happens to NPV? What does this mean for government decision making? Look at the summary of results. What is the overall lesson to learn?
77
Extended Cost Benefit Analysis (eCBA): Step 6 Stage 1
Identify project baseline
Stage 2
Identify Green Growth options
Stage 3
Map Impact Pathways
Stage 4
Collect data
Stage 5
Stage 6
Extended Cost Benefit Analysis
Validate Findings
Stage 7
Consider implicati ons
Objective â&#x20AC;˘ Confirm accuracy and reliability of results Key activities
Green Growth?
Green Growth
Green Growth?
Exercise 9: What happens if you change the capital costs by 10%? What does this imply for planning?
78
Extended Cost Benefit Analysis (eCBA): Step 7 Stage 1
Identify project baseline
Stage 2
Stage 3
Identify Green Growth options
Stage 4
Map Impact Pathways
Collect data
Stage 5
Extended Cost Benefit Analysis
Stage 6
Validate Findings
Stage 7
Consider implicati ons
Objective • Understand if policy needs changing to maximise Green Growth performance of this project, and across the economy
Key activities • Identify enabling, incentive-based, and investment policies that might assist … Category
Key issues and questions
Specific policy types
Enablers
Identify practical barriers to implementation. How can policy/planning help?
• • • • •
Spatial planning to overcome land/terrain constraints Education to improve quantity and skill-levels of labour Finance for SMEs and other credit-starved businesses Transport infrastructure to provide route to market Forex loans to import capital equipment
Incentives for private sector
Identify ways that policy can improve investability through higher revenues, lower costs, decreased risk
• • • •
Subsidies and other incentives (Feed in Tariffs, Carbon price. R&D subsidy) Tax breaks and accelerated deprecation Subsidised loans and loan guarantees Guaranteed price or volume (e.g. commitment to public sector procurement)
Direct government investment
Check fiscal sustainability, capital requirements and which government agency should fund
•
Clear fiscal arrangements between national and sub-national and across departments on revenue and cost sharing Clear financing agreement with Ministry of Finance
•
Go back to Exercises 1-7: Ex 6: Unhide Row 26 Add a FiT of 1c/kWh or biomass generation? Does this change the business case? Societal costs and benefits? What are the other ways we can make this PKS investment more attractive to investors?
79
Extended Cost Benefit Analysis (eCBA): Step 7 Stage 1
Stage 2
Identify project baseline
•
Identify Green Growth options
Stage 3
Stage 4
Map Impact Pathways
Stage 5
Collect data
Extended Cost Benefit Analysis
Stage 6
Stage 7
Validate Findings
Consider implicati ons
Long-list of green policies to consider applying … "Information Provision"
"Voluntary Codes & Agreements"
“Market-Based Instruments"
Awareness & Media Campaigns
Industry Codes & Performance Standards
Charges or Taxes
Eco-Labelling
(Public) Voluntary Challenges
Permit Trading Schemes
Green Technology/Process Mandates
Public Disclosure of Polluter Information
Negotiated Agreements
Green Subsidies
Output Quotas or Prohibitions
Unilateral Initiatives
Fossil Energy Subsidies Reform
Commercial Licensing
Electricity Feed-inTariffs
Emissions Permitting
SMART and/or Net Metering
Location Permitting
Government Procurement schemes
Vehicle Permitting
Local content Incentives
Legal local content Requirements
Research & Development Grants/Loans and Academic Awards
Transport Restrictions
Business Start-up incentives
Import/Export Bans
“Command & Control Regulation" Input Quantity / Mix Quotas
Payment for Ecosystem Services
80
Appendix 1: Case Study â&#x20AC;&#x201C; Maloy Development, East Kalimantan
Sesi 3: Case Study â&#x20AC;&#x201C; KIPI MALOY Activity
Intervention
Power Generation
Full replacement of coal for biomass / natural gas in power generation Other renewable energy sources (e.g. Solar PV)
Coal Processing
Responsible Mining Practices â&#x20AC;&#x201C;Enforcement of existing legislation Promote gasification of coal for power generation, with Carbon Capture and Storage
Road
Protecting migration routes Re-routing road to avoid Kutai National Park Offsetting hydrology disruption
Rail
Converting railway to transport people/passengers as well as other freight (e.g.: forest products) Converting diesel-based railway to electric railway
Shipping
Minimize bunkering spillage through prohibition of fuelling at Maloy
Industry
Utilization of energy efficient technologies Utilization of renewable energy technologies (e.g. Solar PV) Reduction of solid waste and wastewater run-off Optimization of CPO production streams11 including Biodiesel
Other
Vocational training to support local uptake of job vacancies created in tourism and advanced manufacturing.
82
Overview of potential Green Growth interventions Interventions 5 - Coal Mine
3 - Coal Railway
4 - Palm Oil Plantation
1- KIPI Maloy
2 - Toll Road
Kutai National Park
83
KIPI Maloy Development Plan
84
Key questions for analysis in the Extended CBA
1. Strategic rationale: Why is the project being constructed?
2. Options for delivery: What are the different ways it could be designed? 3. Scope: Which indicators should be used to measure which areas?
4. Materiality: Which areas are important to measure? 5. Results: What are the $ costs and $ benefits of moving to a GG scenario?
6. Other Impacts: What are the qualitative costs and benefits? 7. Policy: Which policy instruments drive project re-design?
8. Business Case: Is the Green Growth scenario financially viable 9. Implementation: What are the other enablers needed to realise Green Growth? 85
Session 4: Exercise - ECBA
Activity
Intervention
Power Generation
Substitution of coal for biomass in power generation
Coal
Promote local processing of coal into natural gas and fertilizer
Palm Oil Plantation
Implementation of Best Management Practices (BMP)
Road
Rerouting/extension of the road to develop tourist resort
Rail
Railway rerouted to follow existing road's route Railway converted to accommodate CPO freight Cold-ironing (on-shore power) Removal of anti-fouling paint Ballast Water Treatment Program
Shipping
86
Example Impact Pathway: Coal-to-PKS substitution
Green Power Generation
Business As Usual: Coal-fired power generation
Green Growth: Use Palm Kernel Shells for fuel
Physical change
Stakeholder affected
Stakeholder outcome
Change in CO2 emissions
Global community
Climate change mitigated
Change in other air pollutants (SOx, NOx)
Local Communities and Workers
Health and productivity impacts avoided
Changes in financial performance
PLN and other companies in the KIPI
Lower profitability
New value-chain chain for PKS
Palm Oil Plantations, Power industry, Local and National Government
New Green Industries
Increase in renewables production
Local and National Government
Reduced exposure to fuel price changes
Increased coal available for export
Coal industry Government
Improved Current Account Balance
87
Findings and assumptions
Coal processing
Core activity
Net benefit (USD million)
Rail
Palm oil
347
Rail
389
Energy generation
32*
Road
209
Palm oil Road Power Shipping
Million USD (2013)
-500
500
1,500
2,500
Shipping
0.04*
Coal processing
2,829
Total
3,806.04
3,500 * Negative private NPV
Economic growth
GHG Emissions
Ecosystems
Social development
Resilience
88
Power generation: Retrofit 4% of power production to Biomass
GHG Emissions Economic Growth Social Development Ecosystems Resilience
$-200
$-100
$-
$100
$200
• Cost of retrofitting: USD 8.7 million • avoided annual coal consumption: 115,593 t/year. • Decrease in CO2e by 183,082 t/year • SO2 by 876,349 kg/year • NOx by 288,809 kg/year • PM10 by 35,773kg/year Social NPV: USD 32 million
Millions
89
Coal: Coal into gas and fertilizer
GHG Emissions
Economic Growth Social Development Ecosystems Resilience
$-
$1,000
$2,000
• Investment cost: USD 1.6 billion • Net CO2e reduction: 709,897 t/year • SOx: 18,986,143 kg/year • NOx: 18,202,115 kg/year • PM10: 2,906,446 kg/year • Social NPV: USD 2.8 Billion
$3,000
Millions
90
Palm Oil plantations: Productivity improvement through implementation of BMP
GHG Emssions Economic Growth Social Development Ecosystems
• Total cost: USD 3.8 Million • Increase in CPO production: 74,956 t/year • Reduced area deforested: 7,496 Ha • Social NPV: USD 347 Million
Resilience
$-
$100
$200
$300
$400 Millions
91
Road: extension to develop eco-tourism
GHG Emissions Economic Growth
Social Development Ecosystems Resilience
$-
$50
$100
$150
$200
$250
• Investment Cost: USD 106 Million • Direct annual tourism revenues: USD 110 million • Indirect annual revenues: USD 47 Million • Local jobs created: 6,500 (50 per million spent) • Social NPV: USD 209 Million
Millions
92
Rail: rerouting & utilization for CPO transport
GHG Emissions
Economic Growth Social Development Ecosystems Resilience
$-
$100
$200
$300
$400
• Investment cost: USD 400 Million • Change in GHG emissions from road-rail shift: 8,635 tCO2/year • Reduced CPO transportation cost: USD 28.8 Million/year • Social NPV: USD 389 Million
$500 Millions
93
Shipping: on-shore power, ballast water treatment, removal of anti-fouling paint
GHG Emissions Economic Growth
Social Development Ecosystems
Resilience
$-2
$-1
$-
$1
• Investment cost: USD 2.8 Million • Avoided CO2 emission: 1,077 tCO2/year • Mangrove area preserved: 350 Ha • Coral area preserved: 1km2 • Social NPV: USD 40 Thousand
$2 Millions
94
Summary Model Available on Request TOTAL FOR GREEN GROWTH SCENARIO Numbers represent difference from Business As Usual scenario (USD 2013) Discounted costs Discounted benefits NPV
$ $ $
-4,188,363,272 7,996,175,801 3,807,812,529
Total discounted costs (private only) Total discounted benefits (private only) Total NPV (private only)
$ $ $
-4,146,231,910 6,327,128,756 2,180,896,847
GHG Emissions Economic Growth Social development Ecosystems Resilience
$ $ $ $ $
736,446,928 2,253,530,933 806,915,633 7,179,963 3,739,072
Benefit : Cost Ratio
60%
30
50%
25
40%
20
30%
15
20%
10
Coal processing Rail
Palm oil
1.91
Road Power
10%
Shipping Key assumptions Social Discount Rate Social Cost of Carbon
-500
10.0% % 78 USD/tCO2
500
1,500
2,500
3,500
Power - Substititution of coal for biomass in Power
GHG Emissions
Ecosystems
Social development
-108,657,016 140,867,755 32,210,740
Total discounted costs (private only) Total discounted benefits (private only) Total NPV (private only)
$ $ $
-108,657,016 -108,657,016
Benefit Cost Ratio Economic Rate of Return
Price of coal (f.o.b.)(4,000 kcal/kg) Price of PKS Coal plant capacity factor Amount of biomass used as fuel Air pollution health damages Road transport costs in Kaltim
45 USD/tonne 106 USD/tonne 85% % 2% % High % Medium
1.3 54%
Shipping
Economic Rate of Return (LHS)
$ $ $
-15,198,398 362,494,512 347,296,114
Total discounted costs (private only) Total discounted benefits (private only) Total NPV (private only)
$ $ $
-15,198,398 222,331,839 207,133,440
Millions
Rail
Coal
Benefit Cost Ratio (RHS)
Key assumptions
Total discounted costs Total discounted benefits Total NPV
Benefit Cost Ratio Economic Rate of Return
$15
Road
Resilience
$20
Millions
0 Palm Oil
Palm Oil - Implementation of Best Management Practices
Key assumptions $ $ $
5
0% Power
Economic growth
Discounted costs Discounted benefits NPV
Million USD (2013)
Cost of implementing Palm Oil Best Management Practices Cost of certifying/monitoring BMP through RSPO CPO export price (f.o.b.) Supply of CPO to Maloy for domestic processing Proportion of Palm Oil exported as crude Average boost in yield from Best Management Practices Average CPO yield Kaltim Proportion of plantations implementing BMP Proportion of yield boost feeding to reduced land use
23.9 n/a
High High 690 2,498,530 40% 15% 5 20% 50%
USD/tonne tonnes/yr % % t/ha/yr % %
$160 $140 $120
$10 $100
GHG Emissions $5
GHG Emssions
Economic Growth
Economic Growth
$80
Social Development
Social Development
Ecosystems
$0 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
$60
Ecosystems
Resilience
Resilience $40
-$5 $20 -$10 $-200
$-100
$-
$100
$0
$200
1
Millions
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
$-
21
$100
$200
$300
Private cost
Total Cost
Private benefit
Total Benefit
Road - Extension of the road to develop tourist resort
Discounted Annual Net Benefit (Private)
Private cost
Discounted Annual Net Benefit (Total)
$ $ $
-541,324,755 750,339,501 209,014,746
Total discounted costs (private only) Total discounted benefits (private only) Total NPV (private only)
$ $ $
-499,193,392 539,682,689 40,489,297
Benefit Cost Ratio Economic Rate of Return
Cost of building one 100-room hotel in Indonesia Spend per tourist per day (weighted average) Tourism potential of East Kutia if infrastructure provided Tourism multiplier Kaltim Proportion of new tourist spend diverted from existing Kaltim tourist spend Hotel capacity factor Proportion of tourists that are international
High 160 5% 1.31 20% 59% 50%
Total Cost
Private benefit
Shipping - Cold-ironing (on-shore power) - Removal of anti-fouling paint Comment Total discounted costs Returns from tourism investment should justify road expenditre Total discounted benefits May be issues relating to Marine Protected Area and operation of current Ports along Total coastline. NPV No obvious need for government intervention other than awareness raising Total discounted costs (private only) Total discounted benefits (private only) Total NPV (private only)
Key assumptions
Total discounted costs Total discounted benefits Total NPV
USD million USD % of visitors to Sabah % % rooms occupied on average
1.4 29%
Total Benefit
Millions
$60
Discounted Annual Net Benefit (Private)
Discounted Annual Net Benefit (Total)
- Ballast Water Treatment Programme
Key assumptions
$ $ $
-5,792,025 5,832,719 40,694
$ $ $
-5,792,025 1,998,740 -3,793,285
Cost of Ballast Water Treatment System Cost of operating BWTS Price of Marine Diesel Oil Price of Marine Gasoline Oil Ships use low-sulfur or high-sulfur fuel Amount of biomass used as fuel in coal Power Air pollution health damages Valuation of coral ecosystem Cost of anti-fouling paint
Benefit Cost Ratio Economic Rate of Return
$80
$400 Millions
-$20
-$15
Millions
2
1.01 n/a
Low Low 600 USD/tonne 950 USD/tonne High Sulfur Fuel (2.7%) 2% % High High Low
$5 $4
$40 $3 $20 GHG Emissions
$0 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Economic Growth
21
-$20
$2
GHG Emissions Economic Growth
$1
Social Development
Social Development Ecosystems
-$40
Ecosystems
$0 1
Resilience
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
Resilience
-$1
-$60
-$2
-$80 $-
-$100
$50
$100
$150
$200
$250
-$3
$-2
$-1
$-
$1
Millions -$4 Private cost
Total Cost
Private benefit
Total Benefit
Rail - Railway rerouted to follow existing road's route - Railway converted to accommodate CPO freight Total discounted costs Total discounted benefits Total NPV
$ $ $
-468,197,842 857,874,100 389,676,257
Total discounted costs (private only) Total discounted benefits (private only) Total NPV (private only)
$ $ $
-468,197,842 843,365,169 375,167,326
Discounted Annual Net Benefit (Private)
Discounted Annual Net Benefit (Total)
Private cost
Total Cost
Private benefit
Total Benefit
Discounted Annual Net Benefit (Private)
Coal - Promote gasification of coal for power generation
Key assumptions
Benefit Cost Ratio Economic Rate of Return
Proportion of CPO transiting to Maloy able to use the railway Carbon stock in Kaltim forest Forest ecosystem valuation Road transport costs in Kaltim Proportion of railway route over which land clearance can be avoided Number of CPO handling terminals required
64% % 200 tCO2/ha High Medium 70% % 6
1.8 22%
$ $ $
-3,049,193,236 5,878,767,214 2,829,573,978
Total discounted costs (private only) Total discounted benefits (private only) Total NPV (private only)
$ $ $
-3,049,193,236 4,719,750,320 1,670,557,084
Benefit Cost Ratio Economic Rate of Return
$200
$100
Discounted Annual Net Benefit (Total)
Key assumptions
Total discounted costs Total discounted benefits Total NPV
Millions
Millions
$2 Millions
-$120
Price of sulfur Price of anhydrous ammonia (c.i.f) Air pollution health damages Social Cost of Carbon Skilled labour cost East Kalimantan Price of coal (f.o.b.)(5,900 kcal/kg) Levelised Cost of alternative coal generation
150 700 High 78.00 6.71 67.00 0.08
$/tonne $/tonne
$/hr $/tonne $/k Wh
1.9 31%
$1,000
$500
$0 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
GHG Emissions
$0 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
GHG Emissions
Economic Growth
-$100
Social Development
Economic Growth -$500
Social Development
Ecosystems
-$200
Ecosystems
Resilience
Resilience -$1,000
-$300
-$400
$-
$100
$200
$300
$400
$500
-$1,500
Millions
$-
$1,000
$2,000
$3,000 Millions
-$500
-$2,000 Private cost
Total Cost
Private benefit
Total Benefit
Discounted Annual Net Benefit (Private)
Discounted Annual Net Benefit (Total)
Private cost
Total Cost
Private benefit
Total Benefit
Discounted Annual Net Benefit (Private)
Discounted Annual Net Benefit (Total)
95