OECD Green Growth Policy Review
Indonesia HIGHLIGHTS
2019
OECD Environmental Performance Reviews THE OECD The Organisation for Economic Co-operation and Development (OECD) provides its 36 member countries with a forum to work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to help governments respond to new developments and concerns. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies.
WHAT ARE EPRs? OECD Environmental Performance Reviews (EPRs) provide evidence-based analysis and assessment of countries’ progress towards their environmental policy objectives. They promote peer learning, enhance government accountability and provide targeted recommendations to help countries improve their environmental performance. They are supported by a broad range of economic and environmental data. The OECD has been conducting EPRs of its member and partner countries for more than 25 years. All reports, and more information, are available on the EPR website: http://oe.cd/epr.
THE GGPR OF INDONESIA Indonesia is one of five major emerging economies with which the OECD has established a key partnership. In the context of this mutually beneficial co-operation, the OECD conducted the first Green Growth Policy Review (GGPR) of Indonesia. The GGPR reviews Indonesia’s policy framework for green growth and examines how effectively green growth aspects have been integrated into economic policies and planning processes. The GGPR was developed within the same peer review framework as OECD EPRs. However, it has a stronger focus on balancing environmental protection with economic and social development needs and is more forward looking. It provides 49 recommendations to enhance policy coherence, efficiency and effectiveness. Particular emphasis is placed on the nexus between land use, ecosystems and climate change.
http://oe.cd/epr
“Indonesia’s social and economic development since the Asian financial crisis has been impressive. The challenge is to continue and foster strong and inclusive growth while addressing environmental pressures that, if unchecked, will put development and citizens’ well-being at risk. The OECD stands ready to work with and for Indonesia in this critical endeavour.” Angel Gurría OECD Secretary-General
Indonesia
HIGHLIGHTS
Overview Indonesia is the world’s fourth most populated country, and the largest archipelagic one. Vibrant economic growth has lifted millions of people out of poverty since the turn of the century. Economic success, however, has come at a high environmental cost. Rapid land-use change and reliance on fossil energy make Indonesia one of the world’s largest greenhouse gas (GHG) emitters. Deforestation and pollution are pressuring its megadiverse ecosystems. Environmental services such as water supply, sanitation and waste management need to be further expanded and improved. Indonesia has set ambitious targets to transition to a greener economy. Achieving this transition will require continued efforts to develop policies, strengthen institutions and secure sufficient resources. OPPORTUNITIES Extremely rich biodiversity, including large tropical forests and peatlands, providing ecosystem services and supporting the economy. Ongoing modernisation of land use governance, with a focus on landscape and community-based management. Large untapped renewable energy potential. Integration of green, low-carbon goals in the 2020-24 national development plan.
INDONESIA 2017 Population 264 million
Progress in greening fiscal policy through reduction of fossil-fuel subsidies and climate budget tagging.
GDP/capita
CHALLENGES
(current purchasing power parity)
USD 12 300 (OECD average is 44 000)
Total area 1 913 580 km2 Population density 140 inhabitants/km² (OECD average is 35)
Currency USD 1 = IDR 13 381
Rising GHG emissions and high vulnerability to climate change. Loss of carbon-rich forests and peatlands for agriculture driving GHG emissions and habitat loss. Insufficient infrastructure and resources for waste and water management. Weak institutional capacity and co-ordination across levels of government, hampering effective law enforcement and implementation. Insufficient use of environmentally related taxes and other economic instruments. 3
OECD GREEN GROWTH POLICY REVIEW OF INDONESIA
Key environmental trends and developments
Indonesia is one of the world’s 17 megadiverse countries. It has one of the largest areas of tropical forest, as well as extremely rich coastal and marine ecosystems. Its vast natural resource endowments make it one of the largest producers and exporters of mineral, energy, timber and agricultural products. Taken together, natural resource-based activities account for around 20% of value added and 50% of exports. While Indonesia made progress in decoupling economic development from environmental pressures, unsustainable resource extraction, pollution and environmental degradation remain a challenge.
ENERGY AND CLIMATE
The economy used 29% more energy in 2016 than in 2005, reflecting rapid economic growth, rising living standards and improved energy access. Per capita energy use remains significantly lower than in OECD countries.
The energy mix relies on fossil fuels, mainly due to the predominance of coal for power generation (Figure 1). The share of modern renewable energy sources (excluding primary biofuels) has decreased to 10% of energy use, one of the lowest values among OECD and G20 countries. Plans to raise coal use significantly to meet growing energy demand put coherence with climate change objectives into question.
Indonesia is one of the ten world’s largest GHG emitters. GHG emissions have increased by 42% since 2000. Conversion of forest and peatland for agriculture and energy use in power generation and industry is the main emission source (Figure 2).
Recent reductions in land-based emissions put Indonesia on track to meet its voluntary 2020 target of a 26% decrease from the business-as-usual scenario. However, further efforts are needed to achieve the minimum 29% reduction target for 2030 (Figure 2). Most emission reductions are expected to come from cutting land-based emissions. Reducing the carbon intensity of energy supply would greatly help achieve the 2030 target and put the economy on a low-carbon development pathway.
Geography exposes Indonesia to natural and climate risks such as earthquakes, extreme weather events and sea-level rise. To better prepare for such events, the country is developing a vulnerability index. In addition, the central government is providing guidance to speed development of provincial climate change adaptation plans.
Natural gas
Hydro
2016 54%
6%
26% Natural gas
Oil
Coal
2005 41% Source: IEA (2018), IEA World Energy Statistics (database).
4
31%
15%
8% 4%
Hydro
Geothermal
Oil
Coal
Geothermal
Figure 1. Coal increasingly dominates the electricity mix, electricity generation by source
8% 5%
3 000
Business as usual 2030
Peat fires Forestry and other land use Agriculture Waste Industry Energy
2 500 2 000 1 500
HIGHLIGHTS
Figure 2. Greenhouse gas emissions are on the rise, emissions by sector and targets, million tonnes of CO2 equivalent
Business as usual 2020
-29%
-26%
-41%
-41%
1 000 500 2000
2005 2005
2010 2010
2015 2015
2020 2020
2025
2030
Source: MoEF (2018), Second Biennial Updated Report under the United Nations Framework Convention on Climate Change.
AIR QUALITY
Some 95% of the population is exposed to harmful pollution levels, OECD data show. Transport, coal-fired power generation and waste burning are major pollution sources. Forest and peat fires lead to pollution peaks.
The government has adopted several measures to improve air quality, including air emission standards for industry and vehicles. Some standards, however, such as those for coal power plants and the pulp and paper industry, are more lax than international best practice. The capital, Jakarta, has stepped up action to
reduce pollution from heavy traffic by better enforcing vehicle emission standards, expanding public transport and restricting vehicle circulation. This will help tackle pollution from the fast-growing vehicle fleet (Figure 3).
Air quality data are insufficient, but the government is working to install continuous monitoring in all major cities. A new online reporting system for industrial facilities should broaden data collection on air emissions. In the medium term it could support development of an air emission inventory.
Figure 3. The number of vehicles has tripled since 2005, total number of vehicles, millions, 2005-17 160
Motorcycles
Passenger cars
Freight cars
Buses
140 120 100 80 60 40 20 0 2005
2007
2009
2011
2013
2015
2017
Source: BPS (2018), “Transportation”, Statistics Indonesia (database).
Next steps | energy, climate change and air quality
Ensure consistency between energy policy and climate change objectives. Set targets and develop strategies to reduce the carbon intensity of the energy sector.
Develop an integrated strategy to address air pollution. Update emission standards for heavily polluting industries.
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OECD GREEN GROWTH POLICY REVIEW OF INDONESIA
Key environmental trends and developments cont’d WASTE MANAGEMENT AND CIRCULAR ECONOMY
A third of municipal solid waste is burned or dumped, largely due to insufficient infrastructure, financial and institutional capacity, and public awareness. Collected waste mostly ends up in landfills, about half of which are uncontrolled dumps (Figure 4). Poor waste management causes significant air, soil and water pollution.
Improving waste management is a government priority. The 2017 National Solid Waste Management Policy and Strategy aims for a 30% reduction in solid waste generation by 2025, and proper management of the remainder. It addresses many barriers to more sustainable waste management and should be implemented as a matter of priority.
Waste banks (page 9) have proved to be an innovative tool to speed improvement of municipal waste services. Some cities have banned single-use plastic bags. A comprehensive strategy to develop a recycling industry should complement these efforts. Currently, less than 2% of waste is recycled.
Indonesia is a large contributor to marine debris. A 2018 presidential regulation aims to reduce marine waste by 70% by 2025 through awareness building, better management of land based waste, waste prevention on coasts and at sea, and research and development. The government pledged to devote USD 1 billion to this end.
WATER
Figure 4. Two-thirds of collected waste is landfilled, Waste management in urban areas, 2016
Even though Indonesia hosts 5% of global freshwater resources, several regions face water stress. Freshwater quality is often poor due to untreated discharges from households and industry. Half of the rivers of Java, the most populated island, are considered polluted or heavily polluted.
Access to improved water and sanitation reached 72% and 68% in 2017, respectively, but regional disparity remains large. Expansion of water supply and sewerage networks has not kept pace with population growth and urbanisation. This fact, combined with pollution of surface waters, has forced people to rely on groundwater, leading to over-extraction Jakarta’s coastal in several areas.
Various policy initiatives aimed at reducing pollution have achieved encouraging results. However, their scale has been too small to significantly improve water quality in targeted rivers.
Landfilled 66%
districts have dropped
Not managed 20%
4 metres in the past 40 years due to groundwater over-extraction and land subsidence.
Composted Waste bank 7%
Incinerated 2%
2%
Recycled Other 1% 1%
Note: Data refer to urban areas including 14 metropolitan cities, 17 big cities and 73 medium-sized cities for the period 2015-16. Source: MoEF (2017), Peran Pemerintah Daerah Dalam Pelaksanaan Mitigasi Emisi Gas Rumah Kaca Sektor Limbah [The role of the regional government in the implementation of GHG reduction targets in the waste sector], presentation, Jakarta 24 August 2017.
Next steps | waste management and water
6
Expand formal waste collection to 100% of the population and phase out open dumps. Continue to build local government waste management capacity. Develop extended producer responsibility programmes for waste that poses a high risk to the environment, such as batteries, tyres and electronic waste.
Develop comprehensive strategies for water supply, sanitation and wastewater management. Strengthen capacity for monitoring of groundwater levels and enforce abstraction and discharge permits.
HIGHLIGHTS
Environmental governance
Indonesia’s Constitution recognises people’s right to “a good and healthy environment”. Environmental laws are generally stringent, but implementation gaps persist. Differences in institutional capacity at the provincial and district levels make law enforcement and implementation of policies and programmes uneven and often challenging.
MULTILEVEL GOVERNANCE
The 2001 decentralisation reform gave provincial and local governments more authority to manage their natural resources. Some regions set up interjurisdiction collaboration on environmental issues to share good practices and build capacity.
The Ministry of Environment and Forestry (MoEF) oversees compliance monitoring and enforcement activities of subnational governments. The MoEF has increasingly used such “second-line enforcement” recently.
ENVIRONMENTAL ASSESSMENT
COMPLIANCE AND ENFORCEMENT
Better enforcement of environmental legislation is a government priority. However, compliance assurance is hampered by the low institutional capacity of subnational governments.
Written warnings and compliance orders are by far the most used administrative enforcement tools, although approaches vary by jurisdiction. An environmental certification programme for judges is helping improve judicial capacity and criminal enforcement. Still, data on the regulated community, its compliance behaviour and enforcement sanctions are limited.
The PROPER programme (page 8) is one of the main tools to encourage better business practices by rating companies based on several aspects of their environmental performance. Disclosing the data underlying a rating would enhance transparency.
Improve environmental data collection, disclosure of industrial environmental performance, and awareness building among citizens.
Environmental impact assessment, undertaken mainly at the provincial and district levels, has improved due to stricter regulatory requirements and better guidance. Strategic environmental assessment is increasingly used. However, both instruments are hindered by limited technical capacity, insufficient follow-up and limited public involvement.
Next steps | governance
Build capacity of provincial and district authorities in environmental assessment and permitting.
Create formal mechanisms for both horizontal and vertical co-ordination on environmental issues.
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OECD GREEN GROWTH POLICY REVIEW OF INDONESIA
Case studies PROPER
Medan
The Program for Pollution Control, Evaluation, and Rating (PROPER) aims to encourage better businesses practices by ranking companies by environmental performance. Using a simple colour-coded rating, PROPER has been effective in mobilising public opinion to influence environmental behaviour of large industries. Factories rated gold and green get public recognition, which can help them gain a competitive edge, while public pressure on factories rated blue, red and black should act as a deterrent. Non-compliant companies (those rated black or red) are referred for enforcement action. The rating is largely based on self-assessment. Over 1Â 800 companies (6% of large industrial enterprises) participate in the programme.
Jakarta Semarang Bandung
THE TROPICAL LANDSCAPES FINANCE FACILITY
The Tropical Landscapes Finance Facility, launched in 2016, uses public money to unlock private finance for sustainable land use. The facility co-ordinates between government, the private sector and communities to foster investment in sustainable agriculture, ecosystem restoration and renewables. BNP Paribas and ADM Capital act as fund managers while the United Nations Environment Programme manages the secretariat. The inaugural deal, closed in 2018, is a USD 95 million bond supporting socially inclusive, climate-friendly production of natural rubber. It is Asia’s first corporate sustainability bond.
8
Surabaya
HIGHLIGHTS
WASTE BANKS
BUILDING MASS RAPID TRANSIT IN MAJOR CITIES
Waste banks (bank sampah in Indonesian) are places where people can exchange organic and recyclable waste for small amounts of money. The banks have proved to be an effective tool to speed improvement of municipal waste services. They help build public awareness, develop sorting capacity and create job opportunities. Thanks to their relatively low cost, they have expanded rapidly across the archipelago. In early 2019, some 7 500 banks managed about 2% of total waste generated, up from 0.01% in 2014.
Indonesia is developing several major public transport projects to reduce congestion, improve air quality and provide inclusive access to opportunities. This effort includes bus rapid transit systems in 29 cities and mass rapid transit systems in 6 metropolitan areas and 17 cities. USD 20 billion was allocated for 2015‑19 to this end. One of the largest projects is the Jakarta mass rapid transit system, the country’s first underground railway system.
INDONESIA
TARGETING ELECTRICITY SUBSIDIES
PROTECTING BIODIVERSITY THROUGH CORRIDORS
The elimination of subsidised electricity prices for industrial users and wealthy households helped cut electricity subsidy expenditure by more than half between 2014 and 2017. For residential consumers, the targeting of the subsidy has been improved thanks to development of a unified poverty database gathering socio-economic information on the poorest households.
So-called essential ecosystem areas (EEAs) can be established within commercial concessions to protect ecologically valuable habitat and enhance ecosystem connectivity. An example is the Wehea-Kelay landscape in East Kalimantan. The area is an important carbon sink and home to rich biodiversity, including around 25 000 orangutans. However, it is largely under commercial permits. In 2016, the governor of East Kalimantan and the MoEF established a multi-stakeholder forum, including oil palm and timber plantations and logging concessions, to conserve and manage an EEA in the Wehea-Kelay landscape.
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OECD GREEN GROWTH POLICY REVIEW OF INDONESIA
Towards green growth Indonesia has considerable potential for green growth. Current efforts to better integrate environmental considerations into economic development planning provide an opportunity to reap the benefits of policies fostering both socio-economic and environmental goals. Alignment of sector policies with environmental objectives and effective implementation and enforcement of environmental legislation will be pivotal. Better use of green taxes and cost-reflective pricing of services would make the green transition more cost-effective. GREENING TAXES
Environmentally related tax revenue reached 0.8% of GDP in 2016, which is low compared to most OECD and G20 countries (Figure 5). Vehicle taxes account for the bulk of this revenue. Overall, the tax system needs better alignment with environmental objectives and the polluter pays principle.
Vehicle taxes are high, but do not encourage the purchase of low-emission vehicles. However, discussions about better alignment are ongoing. Expansion of road pricing would help address transport externalities while securing funding for infrastructure.
Energy taxes are low, discouraging energy savings and the shift to cleaner energy sources. With only two small energy taxes in place, 86% of CO2 emissions from energy use are not priced. A carbon tax was considered in 2009, but has not been implemented.
Revenue collection from natural resource extraction is improving thanks to greater transparency and better land-use governance and law enforcement. Raising the rate of some royalties, especially in the forestry sector, could help the government collect full economic rent on natural resource use.
Figure 5. Indonesia could make greater use of green taxes, Environmentally related tax revenue, selected OECD countries and emerging economies, 2016, percentage of GDP (left axis) % 4
3
2
1.6%
1
0.8%
0 Turkey
OECD
South Africa (2015)
Mexico
Chile
India (2011)
Indonesia
Source: OECD (2018), “Environmental policy instruments”, OECD Environment Statistics (database); country submission.
10
China (P.R. of) (2015)
Brazil (2015)
Peru
HIGHLIGHTS
Figure 6. Fossil-fuel subsidies decreased considerably, Government expenditure on energy consumption subsidies, IDR trillions 0
100
200
300
400
500
2012
Subsidies to fossil fuel consumption dropped from about 30% of central government expenditure to 10% over 2014-16 thanks to better targeting of subsidies to poor households (Figure 6). Transport fuels remain cheaper than their real costs, however. Indonesia’s engagement in the G20 peer review on fossil fuel subsidy reform helped improve transparency on fossil-fuel production subsidies, which are not systematically tracked.
Support to farmers reached 4.6% of GDP in 2015, the OECD estimated. Market price support and fertiliser subsidies account for the bulk of this support. In addition to being economically inefficient, such subsidies encourage wasteful use and pollution. To reduce the budget burden, the government aims to better target the subsidies to small farmers.
30%
27%
2013
28%
2014
2015
REFORMING ENVIRONMENTALLY HARMFUL SUBSIDIES
10%
GREEN GROWTH FRAMEWORK Diesel
2016
8%
Environmental sustainability is integrated in Indonesia’s 2015-19 National Medium-Term Development Plan. The 2020-24 plan will be the country’s first low-carbon one. Indonesia has made remarkable efforts to build modelling capacity and strengthen evidence on economy-environment links.
Indonesia is stepping up efforts to finance the green transition. A climate change budget tagging system is enhancing transparency of environmentrelated spending while supporting alignment of expenditure with environmental goals. A 2017 regulation made Indonesia one of the first countries to regulate sustainable finance. In 2018, Indonesia launched its first green sukuk (Islamic bonds).
Petrol Kerosene LPG
2017
8%
Note: CGE = Central government expenditure. Source: Country submission; MoF (2019), Indonesia’s Effort to Phase out and Rationalise its Fossil-fuel Subsidies: A Report on the G20 Peer-review of Inefficient Fossil-fuel Subsidies that Encourage Wasteful Consumption in Indonesia.
Electricity Total energy subsidies (% of CGE)
Expenditure for fertiliser subsidies increased more than
tenfold in real terms over 2005-17.
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OECD GREEN GROWTH POLICY REVIEW OF INDONESIA
Towards green growth cont’d INVESTING IN RENEWABLES, ENERGY EFFICIENCY, WATER AND SANITATION
Investment in clean energy falls short of what is needed to meet the country’s target of sourcing at least 23% of energy supply from renewables by 2025 (Figure 7). It also remains small relative to investment in oil, coal and natural gas.
The cost of renewables is high in Indonesia. Investment is associated with high risk due to frequent policy changes, lack of a clear strategy for renewables, lack of carbon pricing, off-take risks and local content requirements.
Indonesia aims to reduce energy intensity by 1% per year to 2025. Achieving this would avoid 341 Mt CO2 eq between 2017 and 2025, and there is significant scope to improve efficiency further. Compliance with some efficiency standards is not yet comprehensive, and others are too lax to have a significant effect on the market. Water, sanitation and waste management are severely underfunded. Service charges and tariffs are often kept down out of affordability concerns, but this has discouraged investment in service expansion and improvement. In response, a fund has been set up to financially assist local governments in managing their drinking water companies.
Figure 7. The renewables target will be hard to achieve, Share of renewables in primary energy supply % 25
Indonesia’s environmental technology market is among the ten largest in the world, at USD 6.9 billion in 2017. Yet slow implementation and lack of enforcement limit the effect of environmental regulations on demand for green goods and services. Local content requirements and lack of transparency in public tenders hinder foreign investment in the sector.
Several positive initiatives are under way to promote good business practices, including development of Green Industry Standards, a Green Industry Certification Body and a Green Industry Authorization Committee. PROPER is the main tool to incentivise better business practices by ranking companies for performance (see case study on page 8).
Indonesia is less R&D-intense than other Southeast Asian countries and fast-growing economies such as India and China. However, there is encouraging growth in the number of patent applications for climate change-related technology. Indonesia has pledged to increase the R&D budget on clean energy ninefold over five years. Most of the increase would support development of cleaner fossil fuel-based energy.
Note: Data exclude energy supply of solid biomass (mainly firewood and charcoal) and negligible quantities of solar and wind energy. Source: MoEMR (2018), 2018 Handbook of Energy & Economic Statistics of Indonesia.
2025 target (23%)
20
Next steps | towards green growth
15
Make better use of green taxes to better apply the polluter pays principle. Consider establishing a green tax commission to support this reform.
Continue reducing fossil-fuel subsidies, combining these reductions with targeted support for the poor. Introduce a carbon price on energy use, even if it is initially low.
Develop a comprehensive, transparent achievable plan to scale up renewables.
Gradually raise user fees for waste, water and sanitation services to encourage investment in service expansion and improvement.
10
5
Linear forecast 7.3% Biofuels Geothermal
0
12
DEVELOPING GREEN MARKETS
Hydropower 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025
and
HIGHLIGHTS
The land-use, ecosystems and climate nexus
Land-based activities, such as mining, agriculture, forestry and fishing, have enabled continued economic growth, but also led to problems such as deforestation, pollution and conflicts over land rights. Achieving a sustainable land-use sector will be pivotal to meeting the Paris climate agreement targets and Sustainable Development Goals. Indonesia has already laid the groundwork for better land management.
A GLOBAL CENTRE FOR BIODIVERSITY
Indonesia is one of 17 megadiverse countries. It is home to some of the world’s largest tropical forests and peatlands, some 10-15% of flora and fauna species and 20% of coral reefs and mangrove habitats.
Figure 8. Deforestation has been high, the ten countries with the largest annual average reduction in forest area, million hectares, 2010-15 (green), 2005-10 (orange).
2.0
1.0
0.5
0
Brazil
Its unique natural capital and its archipelagic landscapes are deeply rooted in Indonesia’s cultural identity. They support production of mineral, energy, timber and agricultural products and exports, provide the livelihoods of a large share of the population and deliver essential ecosystem services such as such as clean air and water, habitat, carbon storage and protection against natural hazards.
Indonesia
Expansion of agriculture and timber plantations (legal and illegal) has been a major source of habitat loss. Over 2005-15, Indonesia lost 7% of its forest (a total of 1.4 million ha) (Figure 8). Deforestation has since decreased, but remains high by international comparison. About 9% of bird species, 27% of mammals and 3% of reptiles are threatened with extinction.
Paraguay
Land use and land-use change account for half of total GHG emissions. Drainage and burning of carbon-rich peatland are the main drivers (Figure 9).
1.5
Myanmar Nigeria Tanzania
Zimbabwe D.R. Congo Argentina Peru
Source: FAO (2018), FAOSTAT (database).
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OECD GREEN GROWTH POLICY REVIEW OF INDONESIA
The land-use, ecosystems and climate nexus cont’d
PROTECTING VALUABLE ECOSYSTEMS
Terrestrial and marine protected areas cover 12% of land and 2.8% of marine area, below the respective Aichi targets of 17% and 10%. Effective management remains a challenge due to insufficient funding and capacity gaps. The government is partnering with local communities to enhance management effectiveness. Indonesia has stepped up efforts to protect peatlands. A two year moratorium on the issuance of new land use permits for primary forest and deep peatlands was first issued in 2011 and extended three times. In 2016, a moratorium on conversion of all peatland was issued. Efforts have been stepped up to reduce peat decomposition and fires, for example by keeping peatland wet and establishing provincial and local task forces on forest fires, and to restore peatlands. Norway has pledged USD 1 billion to support reducing emissions from deforestation and forest degradation (REDD+). The government is establishing an Environmental Fund Management Agency to host the funding mechanism required for access to the Norwegian funding. Plans call for using the agency to About aggregate of rainforest species carbon are endemic, including credits iconic mammal species generated by such as the Bornean smaller-scale orangutan and the conservation Sumatra elephant programmes.
60%
14
CLARIFYING LAND RIGHTS
The legal status of land has often been ambiguous due to the existence of conflicting maps and land use permits. The One Map initiative aims to address this by creating a unified map with 85 thematic layers.
Work is ongoing to simplify the permitting process for land use and verify that existing permits were issued correctly.
The government is committed to increasing equal access for communities living in or near forests. The Social Forestry programme has allocated about 12.9 million ha to provide legal access to land for local communities. Of this, 2.5 million ha has so far been distributed to communities.
Natural capital accounting Statistics Indonesia has been a pioneer in valuation of ecosystem services provided by land. Its System of Environmental-Economic Accounts helps capture the value of services such watershed protection and carbon storage, providing a basis for decision making about alternative land use. The accounts, undertaken with support from the Wealth Accounting and the Valuation of Ecosystem Services (WAVES) partnership, can also be used to inform the development of payment for ecosystem services by identifying priority areas for natural capital conservation. Pilot studies have been undertaken in several provinces and the government aims to link land accounts with ecosystem accounts. Indonesia should continue work to value natural capital and ecosystem services and use this information to inform policy making.
HIGHLIGHTS
STRENGTHENING LAW ENFORCEMENT AND FOREST MANAGEMENT
Indonesia is increasing resources and strengthening inter-agency collaboration to monitor and enforce laws related to forestry. Weaknesses in these areas have led to losses of state revenue, deforestation and non-compliance with environmental regulations. The MoEF has set up enforcement offices in all 35 provinces.
The establishment of Forest Management Units is helping improve forest management at the site level. The units act as intermediaries between local communities, plantations and local and national government and can help find solutions to land conflicts.
Timber and palm oil certification programmes help ensure that resources are used legally and sustainably. However, thus far only 17% of palm oil is certified under the Indonesian Sustainable Palm Oil standard. The standard ensures that production complies The 2015 forest with minimum legal and peat fires caused and regulatory damage estimated at requirements, but it does not guarantee that production is , consistent with climate or 1.9% of GDP change and ecosystem protection targets.
USD 16 billion
Figure 9. Burning of peatland is major source of GHG emissions, GHG emissions from forestry, land use and land-use change (LULUCF), 2005-16, million tonnes of CO2 equivalent 2 000
Cropland Forest
1 800
Conversion to grassland
1 600
Peat decomposition Peat fires
1 400
Conversion to cropland
1 200
Conversion to other land
1 000 800 600 400
2030 reduction targets 217
200
64
0 - 200 - 400
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2030
Source: MoEF (2018), Second Biennial Updated Report under the United Nations Framework Convention on Climate Change.
Next steps | land use, ecosystems and climate
Replace moratoriums with a predictable legal framework governing sustainable development of primary forest and peatland.
Set specific targets for reducing deforestation.
Accelerate efforts to deter, identify and penalise illegal land use, including by training Forest Management Units personnel and enforcement officers. Finalise the ONE map and provide public access to it.
Expand protected areas and increase resources for their management.
Encourage the use of market instruments for biodiversity conservation, including through the new Environmental Fund Management Agency.
13 15
OECD Green Growth Policy Review of
Indonesia 2019 MORE INFORMATION OECD Green Growth Policy Review of Indonesia 2019 The report and all data are available on http://oe.cd/ggpr-indonesia Environmental Performance Review programme http://oe.cd/epr
CONTACTS Head of Division Nathalie Girouard Nathalie.Girouard@oecd.org Review Co-ordinators Eija Kiiskinen and Britta Labuhn Eija.Kiiskinen@oecd.org and Britta.Labuhn@oecd.org Communications Natasha Cline-Thomas Natasha.Cline-Thomas@oecd.org
IMAGE CREDITS All images and icons are from Shutterstock.com and TheNounProject. com unless otherwise specified. p. 9 Wikimedia Commons/Syaifan Bahtiar Nirwansyah (CC BY-SA 4.0), p.16 icon from SilhouetteGarden.com. This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Donors: Germany, Japan, Korea, the Netherlands, New Zealand, Norway, Sweden, Switzerland, and the MAVA Foundation through the Green Growth Knowledge Platform of UN Environment.
July 2019
http://oe.cd/epr