Accountability of Climate Change Financing from Europe to Asia; Indonesia Case Study Dani Setiawan Coordinator, Anti Debt Coalition-KAU (Member of Indonesia Climate Finance Network) Email: danisetia@gmail.com
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Climate Change Financing in Asia •
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Asia has received the most international climate finance to date, largely for mitigation activities. US$588 million has been directed to mitigation activities in Asia, which represents more than 70% of dedicated climate finance for the region. The Climate Funds Update (CFU) website reports that a total of $1.73 billion for Asian countries has been approved between 2004 and October 2011 from dedicated climate funds. Approximately $866 million of this approved funding has been disbursed, including $60 million this year. Almost 3,000 Clean Development Mechanism (CDM) projects under the Kyoto Protocol are implemented in Asia and the Pacific representing 82% of the CDM project portfolio. The CDM today primarily supports hydropower, wind, and biomass energy. The UNFCCC, drawing on unverified self-reporting by Annex I parties, estimates that $5.4billion in climate finance had been directed to Asia through bilateral channels by 2010, which accounts for 68.9% of bilateral climate finance reported during that period. The top funding recipients were China ($1.09 billion), India ($1.517billion), Turkey ($914 million), and Indonesia ($880 million). Source: http://www.climatefundsupdate.org
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Source of Climate Financing in Indonesia 1. The Climate Change Programme Loan (CCPL) 2. The Indonesia Climate Change Trust Fund (ICCTF) 3. The Indonesia Green Investment Fund (IGIF) 4. Norway-Indonesia Letter of Intent (LOI) 5. Bilateral and Multilateral Project/Programme Support 6. Debt to Nature Swap 3
International Commitment for Climate Change Financing to Indonesia (2007 – 2016)
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Brown & Peskett ( 2011)
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1. The Climate Change Program Loan •
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The Climate Change Program Loan (CCPL) is a soft loan (concessional loan) aimed to supporting policy reform on climate change in Indonesia through a number of objectives / activities within the framework of a three-year "Policy Matrix" (the policy matrix), which includes: Mitigation (forestry, energy, transport), adaptation (agriculture, water, etc.), and cross-sectoral issues. Funded by four creditors: the World Bank, Asian Development Bank, Japan (JICA), and France (AFD). Amount of loan disbursed from 2008 to 2011 was a US$2,3 billion and USD400 million of that amount has been canceled by the Government of Indonesia in 2011.
Sumber: Setiawan, 2011
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• CCPL is managed by the Ministry of Finance and it’s use to close the budget deficit and does not directly finance climate change projects / activities listed in the policy matrix. Ministries / agencies will fund the activities listed in the policy matrix through their own budget or other funding sources. • CCPL is an instrument to prepare the legal infrastructure for the institutionalization of market mechanisms in the implementation of the climate change agenda in Indonesia. For example, to produce legislation and policies relating to cross-sectoral agenda of climate change mitigation and adaptation. • In CCPL, mitigation programs such as in forestry, energy, water resources, and the industry becomes a priority agenda in line with emission reduction targets proposed by the government of Indonesia.
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Specific Outcome of CCPL Energy Sector Increase of geothermal capacity to 9,500MW in 2025(reduction of CO2 emission is estimated about 60 million ton per year) Development of relevant laws and regulations, and improvement of investment climate to facilitate private sector's investment in order to increase the share of renewable energy (including bio fuel but except for geothermal) to at least 10% of total energy supply in 2025 Reduction of CO2 emission in power plant as much as 17% per year from Business as usual in 2025 by renewable energy development and energy conservation.
Forestry Sector Launch of new market mechanism-oriented pilot projects (REDD) which are purposed to prevent forest decrease ncrease of CO2 absorption capacity in the forestry sector with reliable and secure plantation management including forest fire prevention and peat land rehabilitation
Industry, Domestic (household) and Commercial Sector Reduction of energy intensity to the range of between 12% and 18% by 2025 Development of relevant laws and regulations to improve energy efficiency Preparation of Road Map of CO2 emission reduction for the major industrial sectors (e.g. Cement, Steel) while improving database of energy consumption, and provision of the regulation of CO2 emission reduction including target amount in each sector. Water Resource Management Sector Formulation of the Integrated Water Resource Management Plan Establishment of National Water Council which coordinates various interests among stakeholders and functions as the center point in formulating the facility-building plan 8
2. The Indonesia Climate Change Trust Fund (ICCTF) •
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ICCTF was formed on September 14th, 2009 through regulation of the Minister of National Development Planning/Head of National Development Planning Agency, Republic of Indonesia (BAPPENAS) No. 44/M.PPN./HK09/2009. Furthermore, to strengthen legal basis of the establishment of the Trust Fund, was made Presidential Regulation No. 80/2011 on the Trust Fund. Objectives: (1) Coordination and harmonization of climate change financing in Indonesia. (2) To develop a low-carbon economy in Indonesia in accordance with the national development plan set out in the MediumTerm Development Plan (RPJM) and the Government Work Plan (RKP). Facilitate and speed up investment in renewable energy and energy efficiency, sustainable forest management and conservation, and also to reduce the vulnerability of coastal, agricultural, and water areas. Disbursement of trust funds (including ICCTF) to the Ministry/ Agency, Local Government, CSOs, and private sector implemented by the mechanisms of 9 National Budget.
ICCTF (2) •
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Three Bilateral dan Multilateral contributors for ICCTF: – DFID/UKCCU: USD 9,518,110 – AusAID: USD 1,404,470 – SIDA: USD 331,730 The amount of contributions received for the period 2009-2011 was USD 11,254,310 from the total recources committed by the contributors of USD 16,100,000. USD 848,499 has been allocated for secretariat operations and USD 4,6333,199 for financing three pilot projects (ICCTF Business Plan, 2011-2020). UNDP as Interim Trustee until Dec 2012. Three pilot project activities have been conducted are two projects under mitigation window (land-based and energy), and one project under adaptation and resilience window. There’s two proposed new windows: a) Policy Formulation window and b) Support and Collaboration window (engage universities and NGO on CC implementation). 10
Responses from Social Movements • Since 2008, several organizations formed "Indonesia Climate Finance Network “ from various organizations • From 2008-2011, a series of campaigns and lobby to refused loan scheme financing and the involvement of international financial institutions (World Bank, ADB, etc.,) In financing and managing the adaptation and mitigation program in Indonesia. • Encourage the mainstreaming of adaptation as a priority program of government funding of climate change issue in Indonesia. 11
Debt Cancellation • •
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Based on the urge of civil society, the Government of Indonesia in 2012 to cancel the foreign debt amounting to USD400 million for new climate change program. The loan was originally planned as a program loan for budget support to the Government (rather than lending activities). Cancellation of the loan is the instruction of President in the management of government borrowing and better policies to address climate change with more emphasis financing from domestic sources and cooperation with the grant scheme (Ministry of Finance Letter, Jan. 2012). Until now, there are no new foreign debt facilities for the climate change program. Although a number of bilateral and multilateral creditors are making out of debt schemes program.
Source: Ministery of Finance, 2012
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Conclusion •
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Climate Change issue has become a new “window” to market various debt schemes for Indonesia, in the form of programs (for policy reform) and projects (for the development of energy project, infrastructure, and forest). Inserted a new agenda through the policy matrix required by the debt schemes to speed up the implementation of unfinished agenda, i.e. full liberalization in the energy sector in Indonesia (fuel and electricity). International Finance Institution (WB, ADB) are important actors playing behind the economic liberalization in Indonesia through loan and grant. Their support for extractive industries, for example, play strategic role in ensuring the importation and exploitation of raw material from Indonesia. Therefore, turning to these institutions for climate finance does not conform to the principle of climate justice. Indonesia, like other developing countries, should have more adaptation programs than mitigation ones given the complexities of the problems faced. 13
Thank You
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