Policy brief 2 a redd jurisdictional approach to achieve green development

DISCUSSION PAPER NO. 2/2014: A REDD+ JURISDICTIONAL APPROACH TO ACHIEVE GREEN DEVELOPMENT IN INDONESIA

PUTTING THINGS INTO PERSPECTIVE: REDD+ AND GREEN DEVELOPMENT IN INDONESIA The Government of Indonesia (GoI) is committed to an inclusive model of green growth and actors at multiple levels of government are already making efforts to mainstream green development into policy, planning and investment processes.

This commitment is based on Indonesia’s selfinterest and a growing recognition that green development is a pathway to prosperous, sustainable future. The private sector is also mobilizing towards green development, and increasing community empowerment is fundamental to achieving equitable, low-carbon development. Green development will only be achieved if there is a coordinated effort between all elements of society. REDD+ in Indonesia sees green development as not only isolated to emission reduction, but also a balanced approach towards ecology and economy.

Reducing greenhouse gas (GHG) emissions is a central part of green development and the GoI has committed to reduce its emissions by 26% below business as usual by 2020, and by 41% with international support. The National Action Plan to Reduce GHG Emissions (RAN-GRK) provides the basis for the GoI to implement emission reduction efforts nationwide. Each province has prepared their own RAD-GRK, which identifies the most appropriate mitigation activities within the province, based on local development priorities and plans.

The REDD+ National Strategy (Stranas) defines how Indonesia can reduce emissions from deforestation and forest degradation (REDD+), a major source of the country’s emissions, and recognizes the crucial roles of both national and sub-national governments in doing this.

Eleven provinces, that cover more than 80% of

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Discussion Paper No. 2/2014: A jurisdictional approach to REDD+ and green development in Indonesia

Indonesia’s forests, have or are in the process of preparing their REDD+ Strategy and Action Plan (SRAP). These provincial strategies outline locally-derived actions for how Indonesia’s priority sub-national jurisdictions can achieve the green development goals of the REDD+ Stranas, namely, reducing GHG emissions, increasing forest carbon stocks, and conserving biodiversity while supporting economic growth.

These goals clearly demonstrate that REDD+ is not only aligned with but fundamental to green development in Indonesia.

The Government of Indonesia is developing its REDD+ program in three phases: phase 1 (preparation), phase 2 (transformation) and phase 3 (contributions-for-verified emission reductions).

Throughout these three phases, the GoI benefits from short-to-medium term international support from a range of donors, but is also working to ensure that these contributions support a transition towards the long-term goal of the REDD+, when “Indonesia’s forests and land areas become a net carbon sink by 2030 as a result of appropriate policies for sustaining economic and ecosystem service functions of forests.”

The REDD+ Agency recognizes the need to create a clear framework that empowers all levels of government in Indonesia, and other key stakeholders, to manage, implement and coordinate REDD+ activities. This paper considers the role that REDD+ finance, programs and institutions can play to support a REDD+ jurisdictional approach as part of green development in Indonesia and explores the key elements of a framework that will support this.

WHAT IS A JURISDICTIONAL APPROACH? Within the Indonesian governance framework, the following administrative units can be considered as a ‘jurisdiction’; the Republic of Indonesia, any of its provinces (propinsi), districts (kabupaten) or lower levels of government units, e.g. subdistricts (kecamatan) or villages (kelurahan). Based on this, the REDD+ Agency defines the REDD+ jurisdictional approach as: “the nationwide approach under which REDD+ is implemented and administered through Indonesia’s provincial and district government units, with performance aggregated at the national level.”

A REDD+ jurisdictional approach (JA) means that all programs and activities that aim to reduce emissions from deforestation and forest degradation are planned and implemented within the existing jurisdictional structure of a country.

The aggregation mentioned in the definition highlights the need for a harmonized approach to determine ‘beyond carbon’ performance across different jurisdictional levels, while also ensuring alignment with national system and international reporting requirements. This will require the establishment of a nationwide REDD+ JA framework that clearly defines the responsibilities of all government levels within a common and coordinated structure for delivering REDD+ goals.

One of the benefits of implementing REDD+ through a JA is that it does not require the establishment of a new system. The jurisdictional approach, as the name implies, aims to integrate REDD+ within the Indonesia’s current jurisdictional structure by building on existing systems. New institutions may need to be established at different levels to manage REDD+ planning, activities and monitoring (e.g. the REDD+ Agency); however, the priority remains in utilizing and strengthening existing entities.

The term ‘jurisdictional REDD+’ was first used in the context of carbon accounting to move away from project-by-project measurement towards an accounting system for entire administrative units.

In addition, this approach also provides better opportunities to address the risks of displacement and reversals. Since then REDD+ has evolved beyond a purely carbon-focused incentive mechanism, therefore, the concept of REDD+ JA needs to reflect REDD+’s position within a broader dialogue of green growth and development.

Therefore, this paper looks beyond jurisdictional GHG measurement and accounting systems and considers them as just one element within a complete REDD+ JA framework.

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WHY IS THE REDD+ JA APPROPRIATE FOR INDONESIA? The majority of land in Indonesia is publicly designated and, as a result, the government is responsible for the key land use decisions, such as spatial planning and licensing, also taking in account the rights of indigenous and local communities. In addition, it is the government that sets fiscal policy and domestic budgets, which have a significant influence over public and private actors’ decisions related to land use. Therefore, Indonesia’s REDD+ program must build on the roles of the various government jurisdictions, from the national to the village-level.

Indonesia has an increasingly decentralized political structure where the provincial, district and village-level authorities have considerable mandates, especially in relation to natural resource management. The JA works within the existing tiers of Indonesia’s government to create a dialogue between different government actors to agree on the appropriate roles for each level of government. In addition, the JA also gives responsibility to the stakeholders most closely involved in forest and land use management, such as Forest Management Units (FMU), which will play a key role in sustainable forest management and addressing deforestation. Also, REDD+ enables integration, among others through communitybased REDD+ programs and working with the private sector and local communities. As a result, REDD+ JA allows the national program to guide sub-national implementation but also provides an opportunity for bottom-up, locally-derived REDD+ solutions that meet the needs and uses the skills of local stakeholders.

By allowing sub-national governments to define their own REDD+ strategies, the JA encourages close integration within existing planning processes, such as spatial and development plans. Mainstreaming REDD+ into jurisdictional

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Discussion Paper No. 2/2014: A jurisdictional approach to REDD+ and green development in Indonesia

government planning systems helps to ensure government accountability as there are existing engagement opportunities that allow all stakeholders to be engaged in these planning processes and scrutinize governments when these plans are not met.

At the same time, there are numerous ongoing REDD+ initiatives across Indonesia, which need to be integrated into sub-national strategies and programs. The JA provides flexibility to allow existing projects and activities to fit within provincial and district REDD+ programs, as part of the overall national framework. In addition, the JA allows the more advanced jurisdictions to accelerate implementation, while others can continue the necessary readiness and planning activities with support from national and international entities.

The JA encourages close collaboration between government entities, companies and communities that are active within a jurisdiction. The jurisdictional government has existing mechanisms to enable cross-sectoral coordination, though they need to be strengthened to find solutions to address the drivers of deforestation. Jurisdictional programs can help ensure that private sector plays an active role in dialogue and planning and encourage them to go “beyond compliance” in their sustainability commitments. This multistakeholder and multi-sector approach enables

HOW THE REDD+ AGENCY SUPPORTS A JURISDICTIONAL APPROACH

sub-national partnerships of government, private sector, and local communities to negotiate and agree to long-term land use plans that are a prerequisite for green development.

The JA encourages jurisdictions to mobilize funding from all available sources to deliver their REDD+ programs. Ultimately the achievement of REDD+ goals will require reform of Indonesia’s fiscal policies on land-based sectors so that every jurisdiction has clear economic incentives to prevent deforestation and forest degradation.

While this reform is discussed, the REDD+ JA allows for programs to develop a variety of short-to-medium term funding options, including results-based payments (emission reduction and broader green growth outputs/outcomes, where appropriate), along with input-based grants.

Finally, the REDD+ JA approach is aligned with the international consensus that REDD+ implementation needs to move from a project to a programmatic approach. This is consistent with Indonesia’s position in various international forums, including the United Nations Framework Convention on Climate Change (UNFCCC) guidance with regards to nationwide approach through sub-national implementation.

The JA is an essential component for the Agency to plan, implement, and evaluate REDD+ in Indonesia. However, it is recognized that achieving the goals of the REDD+ and, ultimately, delivering green development in Indonesia, requires a joint effort across the whole GoI. This will involve both horizontal coordination between national ministries and vertical collaboration with national and sub-national governments.

According to Presidential Decree 62/2013, the national REDD+ Agency has responsibility for coordinating Indonesia’s overall national REDD+ program. Its roles can be divided into two sets of complementary responsibilities; (i) direct management and (ii) collaborative initiatives. The direct management roles of the REDD+ Agency include: • Developing and implementing implementing a range of national priority REDD+ programs, including activities that create the necessary enabling environment for achieving REDD+ goals across the country.

• Facilitating the planning process at all levels of government to allow sub-national jurisdictions to plan and coordinate the implementation of their own REDD+ programs within a broader national framework with agreed standards and policies for mitigation actions and safeguards.

• Establishing and managing a financing mechanism that provides funds to national priority programs, along with sub-national governments and other stakeholders to implement activities that reduce GHG emissions, while meeting broader development goals.

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• Creating a national system to measure and evaluate each jurisdiction’s performance towards REDD+ goals and compliance with safeguards.

• Identifying the priority REDD+ jurisdictions within Indonesia based on their bio-physical and socio-economic characteristics, including developing JA models at the provincial and district levels by taking into account existing experiences from; i.e. Berau district.

A REDD+ JA FRAMEWORK FOR INDONESIA In order to carry out its multiple roles and collaborate with all the necessary actors, the REDD+ Agency is working to establish a national REDD+ JA framework that provides guidance to all REDD+ stakeholders, outlines their responsibilities and explains how they will benefit from the system.

It is proposed that Indonesia’s overall REDD+ JA framework consists of three interconnected systems related to; (i) planning and implementation, (ii) funding and incentives and (iii) evaluating performance, as described below: • The ‘planning and implementation’ implementation’ system provides a hierarchical structure that defines how each level of government develops and implements a jurisdictional REDD+ plan or strategy, while working with all the relevant stakeholders using a programmatic approach.

• The ‘funding and incentives’ system outlines how the plans, strategies or programs will be financed from a range of domestic and international, and public and private funding sources.

• The ‘evaluating performance’ system will measure the progress at each jurisdictional level towards achieving REDD+ goals and compliance with safeguards, to deliver green development.

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Discussion Paper No. 2/2014: A jurisdictional approach to REDD+ and green development in Indonesia

PLANNING AND IMPLEMENTATION: USING A PROGRAMMATIC APPROACH The REDD+ National Strategy (Stranas) is the GoI’s overarching planning document that outlines the country’s plans for achieving REDD+. The REDD+ Stranas defines four goals; (i) reduce emissions from land use, (ii) increase forest carbon stocks, (iii) protect biodiversity and (iv) promote economic growth. All sub-national strategies, plans and activities should be developed within the framework of the REDD+ Stranas and aligned with these goals.

Within the REDD+ strategy, there are a number of national-level programs that need to be coordinated and facilitated by the REDD+ Agency in collaboration with national Ministries, e.g. Ministry of Environment and Forestry, Ministry of Finance, Bappenas. These national REDD+ programs are needed to remove obstacles and enable sub-national programs, and include: • Supporting land tenure reform, transparency and accountability by mapping the forest estate, supporting recognition of adat rights, advancing spatial plan reforms, carrying out license reviews and continuing the One Map initiative.

• Developing priority investment programs, such as the 10 ‘imperative actions1 ’, FMU development and peatland restoration and management, which enable sub-national implementation through upfront finance and technical assistance.

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• Promoting reform of the government’s fiscal framework and budgets on land-based sectors through provision of greater incentives for achieving REDD+ goals and green development (see further information in the ‘funding and incentives’ section).

Alongside planning, coordinating and implementing these national programs, the REDD+ Agency will need to develop guidance for sub-national governments on how to develop their own jurisdictional programs. The REDD+ Agency has already facilitated the development of 11 SRAPs, which outline province-specific priority activities to deliver Indonesia’s REDD+ goals.

Further support may be required to ensure that all key provinces have a high-quality strategic documents that has been socialized with all key stakeholders.

As district governments will play a central role in implementation of REDD+ programs and activities, it is critical that each district develops its own strategy within the framework of the relevant SRAP. This document should outline the key interventions that support the district’s existing development goals (e.g. agricultural production, poverty alleviation and infrastructure development), in a manner that also delivers the REDD+ goals.

The REDD+ Agency’s 10 imperative actions (IAs) are (i) monitoring the moratorium, (ii) reviewing permits, (iii) supporting law enforcement, (iv) mapping customary forests and capacity building, (v) preventing forest and land fire, (vi) developing green villages, (vii) developing green schools, (viii) supporting spatial planning, (ix) addressing conflict resolution and (x) supporting effective national park management.

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While the REDD+ programs of provinces and districts need to reflect the different roles of each level of government in natural resource governance, the planning approach to develop a jurisdictional program is similar and include the following: • Strong partnerships between government, local communities, private sector and development partners with clearly defined roles.

• Stakeholder engagement engagement throughout the process to support collaboration, e.g. using national safeguards systems; such as PRISAI and SIS. • An agreed set of shared development objectives in order to clarify expectations.

• A clear statement of political commitment from local government leadership.

• Clear connections with the development and spatial plans of the jurisdiction.

• Analytical tools that provide high-quality data and information to the key decision makers.

The planning approach outlined above should lead to the production of a jurisdictional strategy that outlines spatially-explicit interventions that support economic development, social and environmental goals, all of which are supported by relevant stakeholders. Once a jurisdictional strategy has been developed, either at the province or district-level, the following steps must be followed to move towards implementation: • Creating the necessary institutional setting to implement the strategy, including strengthening existing institutions and, where necessary, establishing new institutions. As a part of this process; endorsing the emergence and development of FMU is a key step towards the implementation of jurisdictional

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Discussion Paper No. 2/2014: A jurisdictional approach to REDD+ and green development in Indonesia

REDD+.

• Mobilizing resources to support implementation from government budgets, including available funding mechanisms , international public funding sources and private sector investments, while using grant funding to leverage these other funding sources.

• Developing programmatic approaches to implement the jurisdictional strategy in cases where recurring challenges can be addressed by applying a common method in multiple locations, for example, (i) establishing FMU, (ii) developing green village programs, (iii) supporting sustainable corporate practices and (iii) strengthening government protected areas.

Implementation at the provincial level is likely focus on creating the right enabling environment to achieve the REDD+ goals, e.g. spatial planning, regulatory reform and land tenure. In addition, the provincial governments will need to play a large coordination role in supporting districts develop their own strategies and programs, within the framework of their own REDD+ SRAP. Implementation at the district level will need to be led and managed by the district government but the actual implementers of the activities are likely to be the local stakeholders that are already engaged in land management activities, e.g. local communities or private sector companies. This highlights the importance of these stakeholders playing a central role in the planning phase.

All REDD+ plans and activities in Indonesia should be developed and implemented in line with the appropriate national system of social and environmental safeguards.

FUNDING AND INCENTIVES: SHIFTING FROM INTERNATIONAL TO DOMESTIC FINANCING At every level of government the funding for REDD+ programs needs to come from a range of sources, including: • Domestic support (e.g. budgetary allocations and fiscal transfers) to support or incentivize the implementation of REDD+ programs.

• Bilateral and other financial sources, including from international climate finance (e.g. multinational climate funds or carbon markets) and the private sector (e.g. a palm oil company’s own investments to meet certification requirements) being channeled through the Fund for REDD+ in Indonesia (FREDDI) to different stakeholders.

It should be noted that over time the relative contributions of each of these sources will change.

At the moment, REDD+ in Indonesia is primarily supported by the international community; however, this support is both time-limited and finite. Based on CPI studies, the current biggest donor towards REDD+ is the GoI. The ultimate goal of transitioning to a low-carbon, green economy will only be achieved if these international contributions are effectively used to restructure Indonesia’s domestic incentives, including the regulatory and fiscal frameworks, to support REDD+ goals and green development.

At the moment, Indonesia’s fiscal framework often provides incentives to exploit natural resources unsustainably and use land inefficiently. The REDD+ Agency aims to work with the Ministry of Finance to create enabling conditions so that subnational governments receive greater incentives to

prevent forest conversion and the private sector is steered towards carrying out sustainable activities in the appropriate areas. This is a fundamental activity for ensuring the long-term success of Indonesia’s REDD+ efforts.

Alongside international climate finance, all government levels in Indonesia must also allocate their own resources to implement REDD+ programs and activities. This requires the appropriate actions from the provincial SRAPs and district strategies to be integrated into the development and sectoral plans at every level of government. Once these actions are integrated into planning documents, budget can be allocated to support their implementation. This requires political support of the relevant sectoral ministries and agencies, along with the national and regional parliaments.

International finance can help Indonesia begin to move in the right direction. It is envisioned that FREDDI will have a number of funding windows that will provide finance to REDD+ programs and activities at every level of government and to nongovernment actors, who will directly implement REDD+ activities. Different funding mechanisms will need to be used to create the appropriate incentives for each group of actors involved with implementing REDD+ in Indonesia. Some examples of funding mechanisms include: • Direct support to national programs: The successful implementation of REDD+ in Indonesia will require the implementation of a number of national programs, including supporting land tenure reform, developing

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priority investment programs and promoting fiscal reform.

• ‘Payment for Performance’ (P4P) for verified CO2: CO2-based payments can provide clear incentives to sub-national jurisdictions to reduce their GHG emissions. This payment for performance (P4P) approach can incentivize a jurisdiction to establish a supportive enabling environment (e.g. development/spatial plans, policies and regulations) and to implement site-based emission reduction activities.

However, it is not yet clear whether this incentive type is appropriate for provincial or district-level payments2 .

• ‘Payment for Results’ (P4R) for outputs or outcomes: While the concept of CO2 emissions is not always understood by key stakeholders and payments for verified emissions requires the establishment of complicated technical systems, CO2-based payments may not be an appropriate incentive for sub-national REDD+ implementation. An alternative approach is a payments for results (P4R) structure that incentivizes jurisdictions to achieve previously agreed outputs or outcomes that are aligned with their REDD+ or green growth strategy. This approach requires the identification of payment triggers that are easy to communicate, measure and verify and will ideally use existing financial mechanisms that sub-national governments already use and trust3 . For both P4P and P4R, FREDDI is currently designing a mechanism to collaborate with Ministry of Finance towards real implementation.

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• Grant payments to ‘partner agencies’ and/or NGOs: Ahead of the establishment of the P4P and P4R systems described above, FREDDI will commence sub-national implementation by providing grants to ‘partner agencies’ (e.g. large national and international NGOs), who can coordinate and transfer funds to REDD+ implementing agencies (e.g. NGOs or community groups) within priority jurisdictions. All the REDD+ activities supported by the ‘partner agencies’ should be aligned with the relevant jurisdictional REDD+ strategy or program.

Beyond domestic sources and FREDDI’s funding mechanisms, sub-national governments should target other sources of finance to implement their REDD+ or green growth strategies, including: • International climate finance: There are a number of international funds looking to support jurisdictional-scale REDD+ programs in Indonesia, e.g. FCPF Carbon Fund, BioCarbon Fund and REDD+ Early Movers.

It is important that the programs established by these funds are aligned with Indonesia’s overall vision for a REDD+ JA system. Beyond these funds, there are also the compliance and voluntary carbon markets, which are at various stages of development.

• Private sector investment: Private sector companies operating in Indonesia’s land use sectors (e.g. forestry, mining and agriculture) will only shift their investment to sustainable activities when there are clear financial benefits to do so. This requires coordinated action from all levels of government to reform the relevant regulatory and licensing frameworks.

This CO2-based P4P structure will allow other international climate funds (e.g. FCPF Carbon Fund, BioCarbon Fund and REDD+ Early Movers) to engage with the most advanced provinces to pilot this system.

See the World Bank’s paper on P4R for more information.

Discussion Paper No. 2/2014: A jurisdictional approach to REDD+ and green development in Indonesia

EVALUATING PERFORMANCE: MEASURING PROGRESS TOWARDS GREEN GROWTH In order to truly assess REDD+ performance using a JA, an evaluation system is required to measure each jurisdiction’s progress against the four goals of Indonesia’s REDD+ Stranas and the recognized system of safeguards. Combining these environmental (both CO2 and ecosystem/ biodiversity aspects), economic and social targets provides a comprehensive framework of green growth indicators.

The REDD+ Agency, supported by its technical partners, is developing a ‘REDD+ Actions Performance Index’ (RAPI), which will be a tool to gather information related to REDD+ progress in sub-national jurisdictions. RAPI will include two indexes, one for readiness and one for performance: • The Readiness Index will provide a snapshot of the current situation in the key provinces and the districts before the start of JA implementation. The baseline data captured in this index will identify the initial condition of sub-national jurisdictions and indicate how close they are to graduating to the different phases of REDD+.

• The Performance Index will keep track of the ongoing REDD+ activities in each province and district, and evaluate the jurisdictions’ performance against a set of indicators.

The data captured will provide information regarding the dynamics in the key subnational jurisdictions, highlight the impacts delivered through the JA and outline the provinces and districts progress towards green growth.

While it now broadly recognized that REDD+ activities should deliver green development outcomes, where reducing emissions and balancing it with economy and ecology is central to REDD+. Therefore, measuring, reporting and verification (MRV) is an essential part of for the broader performance evaluation system, especially as Indonesia needs to report its national CO2 emissions to the UNFCCC. The calculation of Indonesia’s national CO2 performance requires the establishment of a national reference emission level (REL), which needs to be nationwide and spatially explicit. This work is currently being carried out through an inter-ministerial process, facilitated by the REDD+ Agency.

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CONCLUSION REDD+ REDD+ has the potential to support the broader transformation of Indonesia’s economy and landscape management toward green development. REDD+ concepts and systems are still evolving globally and in Indonesia, and the REDD+ jurisdictional approach will continue to evolve as well. The REDD+ JA helps to ensure REDD+ achieves Indonesia’s green development approach by taking a collaborative approach, supporting the full set of development objectives important to key stakeholders, and strengthening key cross-cutting functions related to jurisdictional planning, monitoring, and incentives for sustainable landscapes.

“This policy brief has been written by the national REDD+ Agency of Indonesia (BP REDD+), with inputs provided by the Global Green Growth Institute (GGGI), The Nature Conservancy (TNC), the World Bank, and other contributing partners.”

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