Climate Finance between People’s Needs and Safety
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between People’s Needs and Safety Use of part of or the whole of the book should mention the source: (WALHI 2011), Climate Finance, between People’s Needs and Safety. WALHI, Jakarta, Indonesia Authors: Agustinus Prasetyantoko, Dani Setiawan Editor: Hendro Sangkoyo Sri Ranti Translator: Aditya Warman Lay-Outer: StarNet Sources of photo: - WALHI (Friends of the Earth Indonesia) - Diana Gultom DebtWatch (Reparation for Climate Debt & World Bank Out of Climate Finance) - Erwin Quinones FOE Philippines (Cut Down Your Emission) The research and publication of the book are financially supported by Oxfam GB. The content and the research outputs do not reflect the opinion and position of Oxfam GB. Published by: Wahana Lingkungan Hidup Indonesia (WALHI) Jl. Tegal Parang Utara No.14 Jakarta 12790 Telp. 021-79193363 Fax. 021-7941673 Email : info@walhi.or.id Website : www.walhi.or.id First edition, March 2011 Wahana Lingkungan Hidup Indonesia (WALHI) The National Library of the Republic of Indonesia; Catalogue in Printing Climate Finance First edition: Jakarta, WALHI, 2011 xviii+124 p. 14 x 21 cm ISBN : 978-979-8071-78-2
The publisher is not responsible for the content
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PREFACE
We would like to express many thanks to God for His blessings and grace so that the book “Climate Finance, between People’s Needs and Safety” can be completed. The book is an academic paper on climate change finance, aiming to provide input that can be used by the government of Indonesia and the civil society in climate change negotiations to encourage adaptation funding that prioritizes people’s safety and that ensures cross-sectoral gender equity. WALHI sees that the government of Indonesia has so far been focusing only on mitigation programs while what people need is adaptation programs. It is most ironic that most of climate funds Indonesia received are sourced from foreign debts. This may be due to Indonesia’s unpreparedness in negotiations due to lack of information and complete data on which adaptation funding schemes is the most beneficial for Indonesia and what programs are best implemented.
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As such, a comprehensive analysis of the existing climate finance schemes needs to be done. In this early phase, only a macro analysis has been done. The methods used included documentation study, and policy analysis with full participation of the stakeholders – NGOs and the government. The book elaborates how domestic and global constellations affect the ongoing climate finance in Indonesia. The domestic constellation include forest clearing by forest concession (HPH) companies and the establishment of palm plantations, which have caused a lot of conflicts among the government, investors, the elites and indigenous/local peoples, as well as carbon trade issue, which is considered to benefit large investors only. The global crisis constellation and the increasing popularity of financial incentive-based emission reduction such as REDD+ or other huge grants or loans in the name of climate change need to be monitored in terms of how such funds are obtained and used: do the uses comply with the principles of climate and ecological justice and of human rights? One more thing to ensure is that climate finance will not add burden to the already suffering people. Many thanks are expressed to all that have contributed to the publication of the book “Climate Finance: Between People’s Needs and Safety”. Last but not least, we expect that the book can enrich both personal knowledge and discourses of all that are interested in encouraging climate justice issue. Eco greetings,
Berry Nahdian Forqan Executive Director of WALHI
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CONTENTS PREFACE
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Contents
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Figure indexs
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Table indexs
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Chart indexs
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Picture indexs
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Summary
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Introduction
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Climate Change Finance Programs : Context and Interests
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2.1 Domestic Constellation
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2.2 Global Constellation
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2.3 REDD Plus in Indonesia
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2.3.1 Emission Reduction Target Scenario
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2.3.2 Challenges
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2.3.3. Victims’ Perspective
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2.3.4. Redistribution Mechanism
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2.3.5. Integration with the National Strategy
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Climate Finance Flows in Indonesia
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3.1 Funding Architecture
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3.2 Trapped in Climate Change Debts
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3.2.1. The Climate Change Sector/Project Loan
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3.2.2 The Climate Change Program Loan
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3.3 Sources of Grants
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3.4 Debt Swap
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3.5 Indonesia Climate Change Trust Fund
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Climate Finance Governance in Indonesia
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Climate Fund Management Principles
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5.1 Company’s Tax and Individual Subsidy
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5.2 Climate Change Finance Does Not Come From
Loans
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5.3 Expansion of Adaptation Programs
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5.4 Expansion of Participation
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5.5 Institutional Support
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Closing
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Endnotes
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Bibliography
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Glossary
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FIGURE INDEXS Figure 1. Big investors’ ownership in the forestry sector
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Figure 2. Growth of Palm Plantation Area in Indonesia, 1967 – 2009
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Figure 3. Palm Production by Ownership, 1967-2009.
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Figure 4. The Largest Emitters in Indonesia
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Figure 5. Emission Level by Province
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Figure 6. Forest Conversion Rate in 1998
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Figure 7. Role of CPO in the plantation sector
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Figure 8. Average emission reduction target up to 2010
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Figure 9. Emission Reduction Target Scenario
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Figure 10. Law Enforcement in Illegal Logging Cases in 2008
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TABLE INDEXS Table 1. Forest Concessionaires during the New Order’s era
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Table 2. Companies and Loaning Banks
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Table 3. Largest Palm Companies (2006)
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Table 4. List of the Richest People and Palm Plantation Owned
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Table 5. List of Private Investment Companies incorporated in IIGCC
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Table 6. Funds supporting REDD+ and the activities
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Table 7. REDD+ Phases in Indonesia
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Tabel 8. Sectoral Mitigation Action Matrix up to 2020
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Table 9. Position of Foreign Loans (2004 – 2010)
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Table 10. Repayment of Principle Loans and Payment of Interests 2005-2010 67 Table 11. The Climate Change Sector Loan
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Table 12. Climate Investment Fund
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Table 13. Term of Conditions of Climate Change Program Loans 73 Table 14. Climate Change Program Loan 2008-2010
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Table 15. Regulations and Policies Produced based on Climate Change Policy Loan
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Table 16. Financing Plan for PREP-ICCTF
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Table 17. ICCTF’s Budget Summary
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Table 18. ICCTF Implementation Phases
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CHART INDEXS Chart 1. Government-private Twin Mechanism
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Chart 2. Certificate Emission Reduction and Carbon Market
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Chart 3. The National REDD+ Strategy
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Chart 4. National Action Plan REDD+ Strategy
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Chart 5. CC/ICCTF Financial Architecture
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PICTURE INDEXS Picture 1. Flow of Climate Change Program Loans
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Picture 2. Foreign Loan/Grant Mechanism
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Summary
Climate Finance Between People’s Needs and Safety Climate change finance is a new investment modus that holds huge potential benefits. That is why climate change finance attract not only the attention of government bureaucrats and social activists, but also that of investors in financial markets. A three-dimensional crisis – finance, food and energy – that haunts the future of the world is a proof that behind the dynamics of food and energy price movements play capital power and interests to reap benefits. There is now another lucrative investment plating field, i.e. various agenda related to climate change, notably carbon trading. Climate change is basically not a new thing. Ever since
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the 1992 Earth Summit in Rio de Jeneiro, the emission reduction framework has been institutionalized in the United Nations Framework Convention on Climate Change (UNFCCC). Then, in 1997 a stricter agreement on the global emission reduction target was set forth in the Kyoto Protocol. In addition to the target, the Protocol also contains an agreement on flexible mechanisms, which are of three kinds, i.e. International Emissions Trading (IET), Clean Development Mechanism (CDM), and Joint Implementation (JI). IET allows Annex I countries as green house gas (GHG) emitters to “trade” in their emissions up to a specified quota called Assigned Amount Unit (AAU or allowance), calculated on a basis of difference in reduction emission marginal cost that differs by country. With IET, it is expected that Annex I countries will obey the obligation to reduce emission with less cost. CDM and JI are both project-based mechanisms, referring to the “production of emission reduction” concept, while IET refers to “limitation of emission”. Market-based approach becomes an important pillar that is persistently encouraged by Annex I countries in its implementation phase. COP 13 in Bali in 2007 with its Bali Action Plan has shifted the focus of the obligation to mitigate climate change to how to maintain the carbon sequestration capacity in non-Annex I countries, notably forested countries, through funding mechanism and emission quota trade. In 2008, UNFCCC with support from FAO, the UNDP and the UNEP launched the UNREDD program to encourage non-Annex I countries to prepare themselves for the implementation of what is called REDD+. REDD+ strategies go beyond the scope of deforestation and forest degradation as they also cover conservation, sustainable forest management and increase of forest carbon stock for emission reduction.
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REDD as a funding scheme focuses more on the forestry sector. Indonesia is the country with the world’s third largest forest area after Brazil and the Republic of Congo. The complexity faced by Indonesia’s forestry sector is also very high. First, 85% of the Indonesia’s baseline emission (2005) came from land uses and changes in use of forests and peatland.1 Second, forests have been the target of exploitation for a long time. In the first phase, when forests were still dense, companies exploited forests through forest concessions [Hak Pengelolaan Hutan (HPH)] granted by the New Order’s regime. Each conglomerate at that time would have subsidiaries engaged in the forestry sector. In this phase, foreign players came into credit schemes, financing forest conversion projects. The second phase started with the great interest in palm extensification. In 2010, Indonesia beat Malaysia as the world’s largest exporter of crude palm oil (CPO). Large private companies extensively expanded palm plantations. In the era, almost all the Indonesian richest men listed in Forbes or Globe Asia would have subsidiaries/companies in the field of palm. Besides, CPO was one of the primary exports after coal. Thanks to both the commodities, Indonesia was successful in getting through the 2007/2008 crisis. Many foreign studies such as those done by Morgan Stanley, CLSA, Standchart, etc. tended to place Indonesia as the main exporter of raw materials to China and India. Thus, Indonesia was playing a determining role in global value chain of CPO. Riau Province was one of the first locations for palm cultivation as an industrial plant/plantation. It was also the province with the highest rate of forest conversion (and hence the largest emitter) in Indonesia.
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The third phase will probably start when climate change finance through market mechanism is fully operational. In Europe, for example, the prospect of economic expansion of climate change management has fostered the formation of the Institutional Investors Group on Climate Change (IIGCC), an association of 70 companies with the total asset exceeding ₏6 trillion. The association is ready to fund various carbon trade proposals. Various independent private consultants, auditors, assessors and others have prepared various schemes, tools and instruments to be funded. If the scenario works, old stories will repeat that investors will always win the game and local communities, especially those vulnerable to exploitation (women, children, the physically disabled) will lose. Therefore, a decisive position must be taken to respond to the development of climate change finance in Indonesia, notably REDD+. The government has also pronounced the national commitment to reducing 26% of the business-as-usual emission level by 2020 and 41% with the help of international aid. In line with this, the preparation of market schemes to respond to climate change in underway, including formulation of emission reduction roadmaps and strategies for the national development policies. Eventually, the many scenarios require the government’s capacity to mobilize enormous domestic and foreign funding sources to finance activities related to the commitment. As enormous funds are needed, the government has quickly opened the door for new funds, both grants and development loans. The new funds can be sourced from bilateral creditors (Japan, France, etc.) or multilateral creditors (the World Bank, ADB, the UNDP), subject to the UNFCCC and Official Development
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Assistance’s (ODA) regulations and procedures. The grants and foreign debts are also used as the media to exchange information and lessons to strengthen and improve the national planning system, budget, procurement, monitoring and evaluation as well as institutional and human resources’ capacity. Thus, one thing is certain: the need for climate change funds may increase the incoming flow of enormous new foreign loans to Indonesia. At the same time, a number of bilateral and multilateral creditors provide climate change mitigation and adaptation finance schemes, which are mostly through debt schemes. During 2008-2010, the government obtained new loans amounting to US$2.3 billion from France, Japan, the World Bank and the Climate Investment Fund scheme for climate change programs and projects. Asian Development Bank (ADB) also plans to provide some loans for Indonesia’s climate change programs as much as US$600 million for the period of 2011-2013. 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 renewable energy infrastructure and public transport). Behind this is inserted a new agenda through the policy matrix required by the debt schemes to speed up the implementation of unfinished agendas, i.e. full liberalization in the energy sector (fuel and electricity). Using debts as a low-cost funding scheme does not justify getting new debts, let alone to make up the deficit in the state’s budget. In any case, all the debts are the state’s burden that must be borne by the people in the future. All the stories also remind us of the times when poverty issue was advantageously used to obtain foreign loans and grants. Poverty reduction programs and projects financed by debts have placed the poor
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as the first victim of development programs/project and fueled corruption. The World Bank and Asian Development Bank are two creditors having long been distributing debts to Indonesia. Both are known as the institutional actors playing behind the economic liberalization in Indonesia through the loans masquerading as poverty reduction aids. Their support for extractive industries, for example, plays a strategic role in ensuring the importation of raw materials from Indonesia. As we all know, industrialized countries are hungry for raw materials, notably extractive ones, to support the continuity of their processing industries. Therefore, turning to these institutions for climate finance does not conform to the principle of climate justice. Another clear, undeniable fact is the increasing debt-based funding with low absorption. The performance level of debtfunded projects has been in a 60-70% range in the last 10 years. The low performance leads to increasing repayment of commitment fees. The situation at least provides us with a picture of how the ambition to continously rely on debts is not accompanied by readiness at planning up to implementation level. Even, many debt-sourced projects have not been working and have missed the target. This is what is currently happening with the management of climate change funds in Indonesia. The existing mechanism [through the state budget of revenues and expenditures (APBN)] or new initiatives to create trust funds have yet to reflect substantial control of people over the management. No standard climate change fund management mechanisms have been in place. There are still many appertures that can be used to distribute funds to finance climate change programs in Indonesia.
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dana-dana untuk membiayai program perubahan iklim di It seems that climate change finance in Indonesia has yet Indonesia. to incorporate climate justice principle as the center of all the Nampaknya pembiayaan perubahan iklim di Indonesia activities to be undertaken. Climate change management in memang belum menempatkan prinsip keadilan iklim sebagai Indonesia not meant to transform the dilakukan. unjust andPenanganan exploitative pusat dari isseluruh tindakan yang akan economic, political,iklim social and cultural The threats dampak perubahan di Indonesia tidaksystem. dimaksudkan untuk and impacts arising from climate change have been felt but melakukan transformasi sistem ekonomi, politik, sosial, dan budaya yang tidak adiltodan eksploitatif. danindampakthe solutions offered address climateAncaman change will fact be dampak perubahan iklim telah nyata dirasakan, tetapi solusi yang strengthening the grip of capital power, bringing us to ecological ditawarkan justeru akan semakin mengukuhkan cengkraman and humanity crisis. gurita modal yang membawa kita pada krisis ekologi dan kemanusiaan.
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Chapter 1
Introduction
Attention to environmental issues, especially climate change issue, is not new at all. The world has long been paying attention to this crucial issue. The global financial crisis that hit the USA and developed countries in 2007-2008, however, turned climate change issue into a paradox. On the one hand, in order to get out of the crisis, the USA paid a lot of attention to economic rehabilitation by focusing on long-term sustainability. Therefore, the term “green economy� emerged as rehabilitation plans were developed.
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Climate Finance PENDANAAN IKLIM between People’s Needs and Safety antara kebutuhan dan keselamatan Rakyat
perubahan iklim hand, menjadi beban On the other the financial tersendiri, dihindari oleh difficulties yang madeingin commitment to negara maju. Isu pembiayaan perubahan climate finance a specific burden, a iklim menjadi begitu dilematis, di satu burden that they were trying to avoid. sisi dibutuhkan untuk mengarahkan Climate change finance issue became perekonomian ke depan menuju akonsep dilemma:kesinambungan, on the one hand,termasuk it was neededterhadap to directkrisis. the economy towards kebal Di sisi lain, krisis juga menimbulkan keengganan untuk sustainability, including making it mengikat terlalu jauh mengenai immune to crises; on the other hand, komitmen pembiayaan perubahan iklim the crisis made them reluctant to be tersebut. Salah satu perkembangan boundpatut too dicermati, much by the commitment. yang isu krisis ekologis One ofmasuk the developments that needed juga dalam agenda penting to be closely para observed was that the pembicaraan pemimpin negaranegara G-20. Artinya, global, ecological crisis issue was secara the important ada kesadaran untuk agendasemacam of the G-20 meeting. This means menempatkan persoalan krisis ekologis that, globally, there was an awareness to termasuk perubahan iklim sebagai make ecological crises, including climate salah satu prioritas utama yang 2 perlu change, one ofperhatian the main2priorities. . mendapatkan Namun, mengikatbinding untuk However,komitmen legally menurunkan tidak carbon mudah commitmentsemisi to karbon reducing dilakukan. Membuat komitmen untuk emission are not easy to implement. bersama-sama menurunkan emisi Making commitments to reducing disamping meningkatkan proporsi emission together well as perubahan increasing pembiayaan dalamasrangka the climate changejalan finance portion iklim justru menemui yang semakin have been getting more complex. In the berliku. Dalam Konperensi Para Pihak ke 16 dari Konvensi PBB tentang perubahan 16th COP in Cancun, Mexico, the world’s iklim Cancun, Mexico, para pemimpin gagal melanjutkan leadersdi failed to formulate a legally binding agreement. The Protokol Kyoto untuk menyusun kesepakatan yang mengikat. statement of Indian Minister of Environment, Jairam Ramesh, Pernyataan Menteri Lingkungan Hidup India, Jairam Ramesh that India would be willing to make a binding commitment was yang menyatakan India bersedia menorehkan komitmennya 3 negatedmengikat by his Prime Minister. secara justru dinegasi oleh Perdana Menterinya sendiri3.
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Meskipun demikian, pertemuan Cancun berhasil mengarahkan pembicaraan untuk meneruskan komitmen yang However, theProtokol Cancun Kyoto meeting was successful in directing the tertuang dalam yang akan habis masa berlakunya berlakunya tahun 2012 (Periode Komitmen negotiation pada to continue the commitment set forthI).inPertemuan the Kyoto Cancun pada dasarnya merupakan ajang kompromi negara maju Protocol, which will expire in 2012 (the first commitment period). dan negara sedang berkembang untuk meneruskan komitmen The Meeting was basically a negotiation forum of developed pengurangan emisi dunia, melalui komitmen kedua setelah and developing to continue to Kyoto. Pertemuancountries Cancun juga memiliki the arti commitment penting karena
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reducing the world’s emission through the second commitment after Kyoto. It was also important as it was concluded with an agreement to an action plan, including the provision of climate funds. With regard to the contradiction in the development of green fund at global level, this paper tries to put forward some main orientations. First, developing countries must be given greater flexibility to implement adaptation, in relation to the requirements of climate change finance. Second, the implementation and management of climate funds must be placed in the perspective and interests of non-Annex I countries, and not those of investors and capital owners in Annex I countries. Upon putting forward these two main propositions, this paper has several objectives. First, it aims to macro map the climate finance issue, especially from the post 2007/2008 global crisis context. The question then is why the world paid so much attention to climate finance just when it was hit by a crisis. Second, this paper also wants to see how the domestic constellation addresses the financing issue. In this part, we will see how deviation might potentially happen, in relation to the bad governance and bureaucracy. In the context of economic and political system, which in practice is oriented to market system strategies to manage economic expansion, we will discuss the impacts and the risks arising from the climate finance initiative. Third, this paper will of course provide recommendations of how climate change crises can serve as the starting point to change public services for the better to improve people’s well-being, as mandated by the Constitution, and not to advantageously use the fund to do business as usual.
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pengentasan kemiskinan, banyak yang akhirnya jatuh menjadi We yang have menguntungkan had experience pihak-pihak in the pastterkait that most poverty proyek proyek, tetapi reduction programs benefited project-related parties, not bukan orang miskinonly itu sendiri. Sekarang ini tampak adanya kecenderungan pembiayaan perubahan iklim akan the target peopleprogram (the poor). There is a trend that climate finance menjadi proyek investasi yang lebih menguntungkan programs will become more profitable investment projectspara for investor. Dengan begitu, pembiayaan penanganan perubahan investors. As such, they will become investment instruments that iklum itu sendiri menjadi instrumen investasi yang secara do not substantially address the core problem in particular substansial justru tidak memecahkan masalah itself, intinya, terutama, the interests of people and other vulnerable terkait dengan kepentingan masyarakat dangroups. komunitas rentan lainnya.
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Chapter 2 Climate Change Finance Programs : Context and Interests 2.1 Domestic Constellation Indonesia is the country with the world’s third largest tropical forest areas after Brazil and the Republic of Congo. Forests have been both local and national sources of revenues. The Indonesia’s economic expansion in the last generation has been relying on, among others, the values of systematic and planned forest extraction. As a result of the politics, Indonesia’s deforestation rate is among the highest in the world. The government has been paying a lot of attention to climate change recently. Even in the strategy to achieve sustainable
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development, it has proclaimed another set of principles, i.e. the principles of pro-growth, pro-job, pro-poor and pro-environment. The pro-environment principle emerged after President SBY signed an LoI with the Norwegian government, which is committed to a US$1billion climate grant. The grant is given in the context of a cooperation focusing on the implementation of REDD programs. The scheme is the follow-up action of the 2007 Climate Change Summit in Bali during COP 13. On paper, the Indonesian government’s commitment is of course beneficial given the fact that Indonesia is among the countries that will be most affected by climate change (floods, draughts, harvest failure, etc.). A study by the Asian Development Bank shows that in end of the century, the loss due to climate change in Indonesia is projected to reach 2.5-7 percent of the GDP4. Despite this, another worrying fact is that most of the Indonesians still live in poverty, lacking the capacity and flexibility to face the impacts of climate change on productivity and to face the damages caused by the associated extreme disasters and weathers5. As such, not only might aggregate loss to the economy potentially occur, the people, notably those with the lowest economic bargaining power, will also be most affected due to their inability to adapt to the impacts of climate change. It is ironic that while forest exploitation does not provide adequate contribution to people’s interests, the people themselves are not capable of addressing the impacts of forest destruction.
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Indonesia is among the countries that will be most affected by the impacts of climate change (floods, draughts, harvest failure, etc.) The expansion of forest extractive industries in the past only involved and benefited a number of businesses. In the New Order era, forest concessions were granted to the ruling power’s cronies. It was they who destructed forests and robbed forest richness through paper and pulp factories. In addition, concessions were granted to clear forests for interests considered to provide greater contribution to the economy, such as agriculture and industry. During the 1990s, as many as 75 plantation companies were granted permits to convert forests into ready-to-cultivate areas. In a short time, as many as 750 hundred thousand hectares of forestland, ten times as large as Jakarta city, were cleared. One of the world’s lungs, the island of Kalimantan, has lost much of its forest cover under the New Order’s forest concession scheme (HPH), not to mention the rampant conflicts with the local people. Local (domestic) investors were not the only ones involved in various forestry projects in Kalimantan. In general, foreign investors were involved through joint venture schemes or provision of funds. It was a common practice that local companies got loans from global financiers. One example is PT. Agro Indomas, which has quite vast concession in Kalimantan. It has obtained
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antara kebutuhan dan keselamatan Rakyat Climate Finance pendanaan. Sangat umum bahwa perusahaan lokal mendapatkan between People’s Needs and pinjaman sindikasi dariSafety berbagai lembaga keuangan tingkat global. Misalnya saja, PT. Agro Indomas memiliki cakupan wilayah enormous funds besar from various global financiers, others operasi cukup di Kalimantan, banyak among mendapatkan dukungan dana dariDevelopment berbagai lembaga keuangan global, CDC (Commonwealth Cooperation) from England diantaranya CDC (Commonwealth Development Cooperation) and Rabobank from the Netherlands. The company, which also dari Inggris dan Rabobank dari Belanda. Perkebunan PT. Agro has CPO facilities, obtained a concession over 12,500 hectares Indomas yang juga disertai dengan unit pengolahan minyak in the vicinity of Danau Sembuluh, which encompasses three sawit (CPO) mendapat ijin oleh pemerintah untuk menguasai villages, i.e. Terawan, Bangkal andDanau Sembuluh, including Lanpasa hutan seluas 12.500 ha di daerah Sembuluh yang meliputi hamlet. PT. Agro Indomas itself isdan a business entity/foreign direct 3 desa, yaitu Terawan, Bangkal Sembuluh termasuk Dusun investment hasIndomas been operational in Kalimantan since the Lanpasa. PT.and Agro sendiri merupakan entitas usaha/ investasi asing (foreign direct investment) dan sudah beroperasi New Order era. di Kalimantan sejak zaman Orde Baru. The chart below shows the massive control of private investors Diagram di bawah ini menunjukkan fenomena masifnya in Indonesia’s forest management in kepengelolaan 1997, in the end of the penguasaan pemodal swasta dalam hutan di New Orderpada regime. Big1997, investors dominated the forestry sector, Indonesia tahun pada akhir rezim Orde Baru. Pemodal outnumbering small-scale/collective Compared besar mendominasi sektor perhutananenterprises. dibandingkan dengan usaha kecil atau kolektif.. Dibandingkan dengan tahun 1996, with the year 1996, the growth was incredibly fast. pertumbuhannya juga begitu pesat. Figure 1. Big investors’ ownership in the forestry sector Grafik 1. Kepemilikan Pemodal Besar di Sektor Kehutanan
Source: :Casson, Sumber Casson 1999 1999
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Di samping bekal izin usaha, para In addition to permits,mengandalkan investors rely pengusaha juga on working capital from foreign sources. penyerapan modal dari sumber-sumber Thus, they get both political and financial pembiayaan luar-negeri. Mereka berhasil keduanya support. Thismendapatkan has turned the companies sekaligus: dukungan politik dan into demolition machines posing danger dukungan keuangan. Kenyataan inilah to social and environmental balance. yang membuat perusahaan-perusahaan At thatmenjadi time, corporations not yang only telah mesin perusak destroyed the bagi environment but also berbahaya keseimbangan committed rightsDiviolation. In sosial dan human lingkungan. masa itu, korporasi saja in telah melakukan the case ofbukan Indorayon North Sumatra, pengrusakan lingkungan, tetapi juga it is clear that its survival operations are banyak melakukan pelanggaran hak supported by human rights violation asasi manusia. Dalam kasus Indorayon and environmental destruction. It is di Sumatra Utara nampak jelas bahwa reported that 7 people have been shot usaha mereka untuk tetap bertahan to death by the police, 90 others have telah diiringi dengan berbagai praktek been allegedlyterhadap kidnapped and tortured, pelanggaran kemanusiaan di samping menganggu keseimbangan 2 have been missing, never to be found sosial lingkungan. again, 5 dan have been blinded orDilaporkan physically bahwa 7 orang meninggal ditembak disabled due to assaults, and 7 have had polisi, 90 orang diduga diculik dan 6 . their houses businesses destroyed disiksa, dua and orang dinyatakan hilang danAstidak berhasil 5 orang far as social ditemukan, and environmental mengalami kebutaan atau cacat tubuh balance is concerned, logging akibat penganiayaan, 7 orang dirusak companies have forced 40-50 millions 6 rumah dan tempat usahanya. of forest-dependent people to change Dalam hal keseimbangan lingkungan their fate. Migrating to towns is surely sosial, perusahaan-perusahaan yang not a betterhutan solution will only add penebang telahand mengakibatkan urban problems, and insisting on hutan living 40 –50 juta penduduk di sekitar yang hidupnyaareas sangat tergantung in the degraded will force them to dengan hutan harus merubah nasib live a degraded life. Thus, the presence mereka. Bermigrasi ke kota-kota besar of forestry and plantation companies tentu bukan solusi yang lebih baik, dan have indeed disrupted the social and hanya akan menambah persoalan di environmental balance.
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During the 1990s Pada zaman Orde Baru, 1990-an, konsesi when the New eksploitasi hutan Order was ruling, diberikan kroniforestkepada concessions kroniwere yanggranted dekat dengan to the kekuasaan. Mereka cronies. As many as 75 inilah para perusak plantation companies hutan yang telah were granted permit merampas kekayaan to convert forests into hutan melalui pendirian ready-to-cultivate areas. pabrik-pabrik kertas a short time, as danInbubur kayu (pulp many as 750Sebanyak hundred and paper). 75 perusahaan dalam thousand hectares of waktu singkat,ten berhasil forestland, times lahan tidak asmembuka large as Jakarta city, kurang dari 750 ribu were cleared. One of hektar atau lebih dari the world’s lungs, the sepuluh kali lipat luas island of Kalimantan, kota Jakarta. Salah has since of satu pulaulost yangmuch tadinya its forest cover merupakan sumber paru-paru dunia adalah Pulau Kalimantan, kini salah satu pulau yang paling kritis keadaan tutupan hutannya.
Climate Finance
between People’s Needs and Safety
Dutch banks such as Rabobank, the ING group and ABNAmro state that they have long incorporated environmental criteria into their investment decisions. However, a study by AID Environment and Puti Jaji on PT Matrasawit in East Kalimantan shows the opposite. PT Matrasawit is a subsidiary of PT SMART, Indonesia’s national private company obtained financial facilities from Rabobank, the ING Group, and ABN-Amro from 1995 to 2001. PT Matrasawit has converted 2,500 hectares of primary forest, which were once the habitat of orangutans – one of the protected species, into palm plantation. In 1999 the local court decided that the company had been proven guilty of illegally burning the forest. The native Dayak people said that the company burned down their gardens and palm trees without paying any compensation. The data from the Department of Marine and Fishery show that European banks such as ABN Amro Bank, Rabobank, Fortis Bank, and ING have given credits to palm companies. As such, pressure to include environmental factors into the banks’ financial decision has been increasing. Under such a circumstance, the banks have to consider environmental destruction factor in their financial risk calculation. The reason is that, if they do not care, forests will be destroyed. A study by the World Bank reports that during 1997-1998 more than 9 million hectares of forests were destroyed. In such a big environmental disaster, not a single company was punished while the Minister of Forestry had identified 176 companies to be held accountable for such destruction7. Several intensive studies conclude that Indonesia has been experiencing the worst deforestation rate in the world. An investigative report by Greenpeace estimates that in 2010 forests in Sumatra and Kalimantan will be gone if the deforestation rate continues8.
12
Duringperiode 1997-1998 millionkehancuran hectares of forests were destroyed. Sepanjang 1997 more – 1998than telah9 terjadi hutan lebih dari 9 juta Inhektar. such a Di bigdalam environmental disaster, not a single company was punished while bencana besar tersebut tidak ada satupun perusahaan yang mendapatkan hukuman, padahal Menteri mengidentifikasi the Minister of Forestry had identified 176Kehutanan companies sudah to be held accountable 176 perusahaan yang harus bertanggung jawab atas musibah besar tersebut for such destruction
jawab atas musibah besar tersebut7. Dari laporan beberapa studi intensif, disimpulkan bahwacalculation, Indonesia sedang mengalami Besides, according to USAID’s from each minute laju penyusutan hutan terparah di dunia. Menurut laporan of logging activity, Indonesia loses US$1,300 of the non-payable investigatif yang dilakukan oleh Greenpeace, diperkirakan pada taxes. As a result, the Indonesian government has less budget tahun 2010 hutan di Sumatra dan Kalimantan akan musnah jika to be allocated for health, education, public services and laju penyusutan hutan yang ada saat ini terus berlangsung8. environmental protection. Selain itu, menurut perhitungan USAID, dari setiap menit aksi penebangan liar, pemerintah Indonesia menderita kerugian The table below shows the large number of businesses sebesar US$ 1.300 akibat pajak yang tidak disetorkan. Akibatnya, becoming forestdana kingsyang through forest concessions they obtained semakin sedikit dapat dialokasikan pemerintah untuk during the New Order era. The data were compiled in 1997, urusan kesehatan, pendidikan, institusi pengurusan-publik serta thus reflectinglingkungan. the configuration of businesses in the emerging perlindungan capital that time. Tabelconglomeration di bawah ini atmenggambarkan para pengusaha di zaman Orde Baru yang berhasil memperoleh konsesi hutan cukup banyak, sehingga mereka menjadi penguasa hutan. Data dikompilasi pada tahun 1997 sehingga mencerminkan konfigurasi perusahaan yang berkembang pada era konglomerasi kapital di Indonesia.
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Climate Finance PENDANAAN IKLIM between People’s Needs and Safety antara kebutuhan dan keselamatan Rakyat
Table Forest Concessionaires during theOrde NewBaru Order’s era Tabel 1. 1. Para penguasa hutan pada masa Holding Company
Group
Total Land Bank Area (Ha)
Total Area Planted (Ha)
PT. Pan London Sumatera Indonesia
Napan Group
245,629
78,944
PT. Bakrie Sumatra Plantation
Bakrie and Brothers
376,041
34,392
PT. Golden Sinar Mas Group Agri resources
582, 208
211,713
PT. Astra Agro Lestari Tbk.
Astra International
280,000
177,976
PT. Asian Agri
Raja Garuda Mas
200,000
110,000
PT. Salim Plantations
Salim Group
275,000
125,000
PT. Soefindo
Soefin Group
47,777
37,180
PT. Tolan Tiga
SIPEF Group
52,869
36,312
1,982,242
821,369
Total
Sumber Casson 1999 1999 Source :: Casson
Perusahaan-perusahaan seperti PT PTBarito Pacific, PT Companies such as PT Barito Pacific, Indorayon Utama, Indorayon Utama, dll. tetap mampu beroperasi dengan baik etc. can maintain their operations and keep obtaining loans serta mendapatkan kredit meskipun mereka banyak merugikan although theymasyarakat have caused losses to people and the kepentingan danenormous menimbulkan masalah lingkungan. environment. GermanExport and Finnish Credit Agencies, Credit German and Finnish CreditExport Agencies, Credit Suisse First Suisse First Boston, Credit Lyonnais, Lehman Brothers, Morgan Boston, Credit Lyonnais, Lemhan Brothers, Morgan Stanley dan Bearing adalah sekolompok yang financing telah mendukung Stanley and Bearing are among bank the banks forestry berdirinya perusahaan-perusahaan yang bergerak di sektor companies. kehutanan.
14 14
Table 2. Companies and Loaning Banks Companies Total debts Debts Maturity in million received US dollars PT London Consortium debt Sumatra Indonesia : $ 122 Tbk
Early 1997
$ 46.6 in 1998
Loaning banks
Bank consortium comprising: - citicorp international Ltd, USA - Commerzbank, SingaporeBranch - Rabobank, Jhiongkong Branch - Shanghai Banking corporation, Singapore
Premissory notes : $ 40 Forward contract : $ 103,5
$ 97 in 1999
- Union Bank of Switzerland - Sumitomo Bank Ltd, Singapore Branch - Bank of Taiwan Premissory notes - Indosuez Bank, Prancis - Citibank, AS - LTCB, Jepang Forward contrac - Credit Agricole Indosuez - Union Bank of Switzerland - Citicorp Financial Services Limited
15
Climate Finance
between People’s Needs and Safety Companies Total debts Debts Maturity in million received US dollars PT Bakrie $ 70 Sumatra $ 1.020 Plantations Bakrie & Brothers
1996
1999
Loaning banks
- Rabobank NederlandSingapore Branch - PT Bank Kredit Lyonnais Indonesia, Medan - Credit Suisse, Singapore - Japan Asia Investment
PT SMART
Total utang $ 212,1
April 1995
$ 104 Having been paid in August 1998
- The Chase Manhattan Bank, New York
$ 14 in 1999
- Nederlandse FiancieringsMaatschappij Voor Ontzikkellingslanden N.V (FMO)
$ 62,8 in 2000
- PT Bank Societe Generale Indonesia
- ABN-Amro Bank N.V , Jakarta - Fuju Bank Limited, Singapore
- PT Bank Danamon Indonesia - PT Bank Dagang Negara - Jaya Fuju Leasing - PT Bank Credit Lyonnais Indonesia - PT Sanwa Indonesia Bank - PT Bank Sakura Swadharma - PT Bank International Indonesia
16
Companies Total debts Debts Maturity in million received US dollars PT Indofood Sukses Makmur
$ 1.047.7
1996 $ 81.1 and early in 1997 1997, $ 449.1 in 1998, $ 417.4 in 1999 126.5 in 2000
Loaning banks
- Citibank N.A Jakarta PT BCA - The Hongkong Shanghai banking Corporation - Bank of TokyoMitsubhisi, LTD - Bank Societe Generale Indonesia - Deutsche Bank - Credit Suisse First Boston, Singapore - Citicorp Investment Bank - The Chase Manhattan Asia Limited - LTCB Merchant Bank - Fuji Bank Limited Singapore - Bank of Tokyo, Mitsubhisi Ltd., Singapore - Bankers Trust Company Hongkong - Bank of Amerika Asia Limited - Ocrim SPA, Italia - Yasuda Trust & Banking Co., ltd - PT Bank Daiwa Perdania Source : Casson 1999
17
Climate Finance
between People’s Needs and Safety
Conspiracy between the ruling power, forest concessionaires and foreign creditors in the New Order regime has not just stopped. In the reform era, many capital owners have been earning much profit from palm. When forests were still dense, these money-seekers gained profits from paper and pulp. Now, after forests have been cleared and been ready to cultivate, they reap the benefits from palm oil, which sells well on the international market. Based on the statistical data from the Directorate General of Estate Crops, palm plantations have expanded rapidly. Smallholders’ Palm Plantation [Perkebunan kelapa sawit rakyat (PR)] grew rapidly from 3,125 hectares in its inception in early 1980s to nearly 3 million hectares in 2009. Field data may reveal a much larger plantation size than the official data. In other words, in more or less 30 years, the expansion grew a thousand times. State-owned Plantation Enterprises [Perusahaan Perkebunan Negara (PBN)] grew from 65,573 hectares in 1967 to 617,169 hectares in 2009 while in the same period private-owned enterprises [Perusahaan Perkebunan Swasta (PBS)] grew from 40,235 hectares to 3.5 million hectares. In 2009 Indonesia’s CPO production stood at 18.5 million tons. Of this, 51% were produced by PBS; PR and PBN contributed 37% and 12% respectively. In this respect, private-owned companies were playing a significant role as their plantation size kept expanding and made greater contribution to the national production.
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Figure2.2.Perkembangan Growth of PalmLuas Plantation Area in Indonesia, Grafik Areal Perkebunan Kelapa Sawit di 1967 – 2009 Indonesia Tahun 1967 – 2009
Source:Jenderal Directorate General ofPerkebunan Private Plantation Sumber : Direktorat Perkebunan Swasta(PBS); (PBS); National Plantation (PBN);(PBN); and Smallholder’s Plantation Perkebunan Nasional dan Perkebunan Rakyat(PR) (PR)
Dari di atasshows terlihat meskipun Perusahaan Thegrafik chart above that bahwa while State-owned Plantation Perkebunaan Negara (PBN) muncul lebih dahulu, tetapi Enterprises (PBN) emerged first, both PR and PBS grew more dalam perkembangannya kemudian, Perusahaan Perkebunan rapidly with PBS growing the most rapidly and with the highest Swasta (PBS) dan Perkebunan Rakyat (PR) tumbuh lebih pesat. productivity. swasta The rapid growth paling of PBS was driven not only by Perkebunan tumbuh pesat, dengan tingkat various credityang scheme support provided both domestic and produktivitas paling besar pula. by Pesatnya perkebunan global banks, also theoleh government’s to clear and swasta selain but didorong berbagaipermits dukungan fasilitas convert forests palm plantations. Land conversion once perkreditan dari into perbankan, baik domestik maupun global, juga karena dukunganwhen, dari pemerintah dengan ijin aroused a controversy in the midst of strongpemberian pressure from pembukaan lahan hutan untuk environmental NGOs, some big dikonversi companiesmenjadi such as lahan Nestle sawit. and Konversi lahan menjadi kawasan sawit sempat menimbulkan Unilever boycotted Sinarmas’s products. Afterwards, moratorium kontroversi ketika was di hadapan on forest clearing applied fordesakan a while. kuat dari kelompokkelompok gerakan lingkungan, beberapa perusahaan besar seperti Nestle melakukanencompassing boikot terhadap With the dan totalUnilever palm plantations 7 produkmillion produk Sinarmas. Setelah itu, isu moratorium penghentian hectares, Indonesia produced 18,461,240 tonsatau of CPO in 2009 pemberian ijin pembukaan lahan menjadi kawasan tanaman industri sawit sempat dilakukan.
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7 juta hektar, di tahun 2009 Indonesia memproduksi kelapa sawit sebesar 18.461.240 ton (lihat grafik 3). Berdasarkan komposisi Climate Finance kepemilikan between People’stanah Needs produksi and Safety kelapa sawit, dan jika dibandingkan dengan pangsa produksi dari masing-masing jenis pengusahaan perkebunan, maka dipastikanof bahwa perkebunan (see Figure 3). Thebisa composition the land owned swastalah and the yang memiliki produksi sawit terbesar, oleh production by hasil the three typeskelapa of plantations showsdiikuti that PBS perkebunan rakyat dan perkebunan negara, masing-masing accounted for the largest share of the total production, followed dengan tingkat produksi per tahun 9,4 juta ton (PBS); 6,8 juta ton by PR and PBN, with the annual production rate being 9.4 million, (PBR); dan 2,1 juta ton (PBN). 6.8 million and 2.1 million tons respectively. Grafik 3. Produksi Perkebunan Komoditi Kepala Sawit di Figure 3. Palm Production by Ownership, 1967-2009. Indonesia Berdasar Kepemilikan Periode 1967 – 2009.
Sumber : Direktorat Jenderal Perkebunan Source: the Directorate General of Estate Crops
Cerita kesuksesan para pengusaha pengolahan kayu dan bubur kertas pada masa Orde Baru diulangi dengan kisah sukses The success stories of timber and pulp industry during the para pengusaha kalapa sawit yang berhasil memanfaatkan lahan New Order regimetersebut. is repeated by di palm industry, which makes yang telah dibuka Tabel bawah ini menggambarkan use of the cleared land. The table shows plantation size urutan besaran perkebunan sawit below (terutama oleh pihak swasta) by ownership, notably those owned by the private sector. The berdasarkan kepemilikan. Posisi penguasaan lahan terbesar company with largest plantation sizeMas is Raja Garuda Mas ditempati oleh the perusahaan Raja Garuda (RGM), kemudian disusul oleh Wilmar Group dan di urutan adalah (RGM), followed by the Wilmar Group andketiga Guthrie Bhd.Guthrie RGM Bhd. RGM dimiliki oleh kelompok konglomerat Sukanto is owned by Sukanto Tanoto, one of the Indonesia’s richest people (ranked sixth in 2010) with the total wealth of 2.8 billion US dollars. The domination of RGM in the palm sector is 20 demonstrated by the rapid growth of one of its subsidiaries – PT.
20
Asian Agri. Guthrie Group Limited is a Malaysia-based company, whose core business is plantation. Table 3. Largest Palm Companies (2006) Company
Land Size (Ha)
1
Raja Garuda Mas
467.9
7.85
2
Wilmar Group
350.0
5.87
3
Guthrie Bhd.
288.9
4.85
4
Sinar Mas Group
208.9
3.51
5
Astra Argo Lestari
189.9
3.19
6
Cilandra Perkasa Group
60.9
1.02
7
SocoďŹ ndo Group
46.8
0.79
8
Kurnia Group
42.9
0.72
9
Lonsum Group
40.5
0.68
10
Bakrie Group
20.1
0.34
11
Others
1,425.0
23.91
3,141.8
52.73
696.7
11.69
2,120.3
35.58
5,958.8
100.00
No.
Private Plantation companies State-owned plantation companies Smallholders’ Palm Plantation Total
Percentage (%)
Source: Directorate General of Estate Crops, Department of Agriculture, BPS.
21
Climate Finance
between Table 4. ListPeople’s Needs and Safety of the Richest People and Palm Plantation Owned
Susanto Lim GlobeAsia Rich List 2008 : 105 Wealth (billion dollars) : 0.120
Arifin and Hilmi Panigoro GlobeAsia Rich List 2008 : 13 Wealth (billion dollars) : 1.050 Sudono Salim GlobeAsia Rich List 2008 : 4 Wealth (billion dollars) : 3.040 Tunas Baru Lampung Tbk. : Widarto and Santoso Winata Land size (Ha.) : 106,761 Areas planted (Ha.): 44,404 CPO production (Ton/Year) : 124,000 Darmex Agro Duta Palma Group : Surya Darmadi Land size (Ha.) : Areas planted (Ha.): 60,000 CPO production (Ton/ Tahun) : 190,000 GlobeAsia Rich List 2008 : Wealth (billion dollars) :
Musim Mas : Bachtiar Karim Land size (Ha.) : 180,000 Areas planted (Ha.): 180,000 CPO production (Ton/Year) : 210,000 GlobeAsia Rich List 2008 : 42 Wealth (billion dollars) : 0.360 Tri Putra Agro Persada: Teddy Rachmat and Benny Subianto Land size (Ha.) : n.a. Areas planted (Ha.): 120,000 CPO production (Ton/Year) : 220,000 GlobeAsia Rich List 2008 : 21 & 98 Wealth (billion dollars) : 0.654 n 0.130
22
Golden Agri Resources: Eka Tjipta Widjaya Land size (Ha.) : 1,300,000 Areas planted (Ha.): 383,732 CPO production (Ton/Year) : 1,967,092 GlobeAsia Rich List 2008 : 3 Wealth (billion dollars) : 3.800 Indofood Agri Resources: Anthony Salim Land size (Ha.) : 455,910 Areas planted (Ha.): 173,059 CPO production (Ton/Year) : 1,013,637 Asian Agri dan Raja Garuda Mas: Sukanto Tanoto Land size (Ha.) : n.a Areas planted (Ha.): 160,000* CPO production (Ton/Year) : 1,000,000 GlobeAsia Rich List 2008 : 7 Wealth (billion dollars) : 1.430 Wilmar International: Martua Sitorus Land size (Ha.) : 500,000 Areas planted (Ha.): 200,000 CPO production (Ton/Year) : 900,000* GlobeAsia Rich List 2008 : 12 Wealth (billion dollars) : 12 Ciliandra Group Fist Resources: Martias Land size (Ha.) : 278,000 Areas planted (Ha.): 95,241 CPO production (Ton/Year) : 322,678 GlobeAsia Rich List 2008 : 34 Wealth (billion dollars) : 0.410 Sampoerna Agro Tbk.: Putera Sampoerna Land size (Ha.) : 200,000 Areas planted (Ha.): 90,055 CPO production (Ton/Year) : 265,468 GlobeAsia Rich List 2008 : 5 Wealth (billion dollars) : 2.420 Note. *Estimate Source: GlobeAsia, June 2009
23
Climate Finance
between People’s Needs and Safety
The ownership pattern and companies in Indonesia’s palm sector are not concentrated on one business group. As can be seen, a number of private companies own 52.73% of the total palm plantations in Indonesia, or equal to 3,141.8 thousand hectares. The largest company in terms of plantation size is Raja Garuda Mas, which owns 7.85% or around 467.9 thousand hectares and the smallest is the Bakrie Group with 0.34% or 20.1 thousand hectares (see Table 4). We can also see from the table that Eka Tjipta Widjaya is among the biggest player in Indonesia’s forestry sector since the New Order regime. It is likely that he will also become an important player in the carbon market. One interesting thing is that the richest people on the list are those who are also engaged in the palm sector. In general, most of Indonesia’s palm companies are listed in the world’s richest people. It can be concluded then that palm business is a very promising one. For example, the owner of Golden Agri Resources – Eka Tjipta Widjaya – owns around 1.3 million hectares of land (383,732 of which have been planted), and produces 1.9 million tons of CPO annually, and Eka Tjipta Wijaya is one of Indonesia’s richest men. (see Table 4). The data compiled by the Indonesia’s Ministry of Environment show that five sectors are the largest emission contributors, i.e. peatland, forests, energy resources, industry and transporation9. Land Use Change and Forestry (LUCF) contributed 48% of the total, followed by the energy sector (21%), peat fires (12%), flue gas (11%), agriculture (5%) and industry (3%). In relation to this, the Indonesian government has expressed its loose commitment to reducing 26-41% of business-as-usual emission level in 2020.
24
Figure 4. The Largest Emitters in Indonesia Flue gas 11%
Energy 21%
Peat fires (12%)
Industry 3% Agriculture 5% Land Use Change and Forestry (LUCF) contributed 48%
Source: the Ministry of Environment, 2009
As the government is cooperating with the private sector to address long-term problems – as introduced in the Public Private Partnership (PPP) concept, the emission reduction program will also involve the funds provided by the private sector. The fund includes both domestic and foreign fund, as well as the CDM (Clean Development Mechanism) and PES (Payment for Environmental Services) schemes. One big question that arises is will the private sector involvement not repeat the history where foreign investors could always make better use of the situation to get more benefits? The interests of indigenous/local people are generally excluded from these private business schemes. It seems that there is a correlation between palm producers and the areas emitting the most emission. The chart below shows Riau as an area emitting the most emission, and it is exactly in
25
PENDANAAN IKLIM Climate Finance antara kebutuhan dan keselamatan between People’s Needs and Safety Rakyat
yangwhere palingpalm banyak mengeluarkan emisi (CO2). Dan persis di Riau plantations are mostly established. Historically, daerahSumatra itulah, luas tanah perkebunan kelapadeveloping sawit termasuk North Province was the first province palm yang paling besar di Indonesia. Secara historis, Sumatra Utara as a plantation commodity, followed by Riau, the current site of adalah daerah yang pertama kali mengembangkan kelapa sawit large-scale palm cultivation. sebagai komoditas perkebunan, disusul oleh Riau yang menjadi lahan budidaya kelapa sawit secara besar-besaran. The chart below shows reference emission levels for each Grafik ini menunjukkan level emisi acuan (reference province diofbawah Indonesia, based on the historical data on forests emission levels) untuk tiap-tiap provinsi di Indonesia, berdasarkan and estate crops. data historis tentang hutan dan tanaman.
26
Grafik 5. Tingkat Emisi per Provinsi Figure5. 5.Tingkat Emission Level byProvinsi Province Grafik Emisi per
Source:: National Bappenas Sumber National Strategy Strategy for for REDD REDD +, +, Bappenas Sumber : National Strategy for REDD +, Bappenas
Grafik Konversi Hutan Figure6. 6.Tingkat Forest Conversion Rate 1998 in 1998 Grafik 6. Tingkat Konversi Hutan 1998
Source:: Casson, 1999 Sumber Casson, 1999 Sumber : Casson, 1999
In thekonteks context of Indonesia’s economic Dalam strategi pembangunan ekonomidevelopment di Indonesia, Dalam konteks strategi pembangunan ekonomi di Indonesia, strategies, CPO will still bemenjadi the main export commodity, so minyak sawit mentah masih andalan komoditas ekspor. minyak sawit mentah masih menjadi andalan komoditas ekspor. Sehingga, tergambar bahwa ada korelasi antara kerusakan hutan, that there is a correlation between forest destruction, export Sehingga, tergambar bahwa ada korelasi antara kerusakan hutan, strategi ekspor dan kinerja pembangunan. Ketiganya saling strategi ekspor dan kinerja pembangunan. Ketiganya saling
27 27
Climate Finance
between People’s Needs and Safety
PENDANAAN IKLIM antara kebutuhan dan keselamatan Rakyat
strategies and development performance. All these three mempengaruhi satu sama Grafik di show bawahthat ini CPO menunjukkan influence one another. Thelain. chart below becomes berapa di sektor perkebunan, komiditas CPO menjadi andalan. the main commodity in the plantation sector. Grafik 7. Perkebunan Figure 7.Peran Role ofCPO CPOdalam in thesektor plantation sector
Sumber: BPS, diolah Source: BPS, processed
2.2 Konstelasi Global
pembiayaan perubahan iklim pertama-tama adalah 2.2Skema Global Constellation
komitmen global di mana 42 negara yang digolongkan dalam The first scheme in climate change funds was dianggap a global UNFCCC sebagai kelompok negara Annex I yang paling besar kontribusinya dalamlisted pemanasan Bumi khususnya commitment where 42 countries by the UNFCCC as Annex sejak akhir and Perang Dunia II to wajib payment I countries considered be melakukan the greatesttransfer contributors to untuk penanganan perubahan iklim. Namun demikian, ketika global warming – especially since WW II – were obliged to mekanisme lentur yang disinggung di atas menjadi pemecahan transfer payment for climate change mitigation. However, when semu yang memudahkan kelompok Annex I mencapai sasaran the loose mechanism above has become an apparent pengurangan emisinya, kompensasi emisi karbon solution (carbon that helped Annex I countries to achieve their emission reduction offset) menjadi bukan saja sebuah peluang sektor keuangan dan perbankan untukoffers membiayai berbagaiforprogram terkait target, carbon offset an opportunity financiers and dengan perubahan iklim. Program-program penanganan itu banks to finance climate change-related programs. The programs sendiri menjadi sebuah sirkuit perluasan kapital yang sangat themselves become an extremely lucrative capital expansion menggiurkan nilainya. Salah satu program yang dirancang circuit. One of the programs that is developed under the carbon dengan prinsip kompensasi emisi karbon, serta memberikan offset scheme and that kapital allows the involvement of industrial and peluang keterlibatan industri dan keuangan adalah financial REDD capital(Reducing is REDD (Reducing Emissions from Deforestation Program Emissions from Deforestation and Forest and Forest Degradation). Degradation).
28 28
“
Requiring polluters to finance pollution reduction measures and providing incentive for polluters that succeed in reducing pollution and emission below the predetermined target may lead to incentives that even drive polluting industries to increase emission as the way out is in place In principle, REDD is a way or strategy to reduce emission through forest conservation (avoided deforestation) that is financed by companies in need of additional emission quota above a pre-determined cap, which varies with countries. Technically speaking, emission reductions (conservation) are counted as “credits” that can be sold on the international carbon market. The credits may also be offered to donors (multilateral bodies) to be exchanged with funding commitment in the form of compensation for efforts to reduce emissions. During COP 15 in Copenhagen in 2009, a new landmark in climate change finance was set, where a partial agreement was reached near the end of the Conference (Copenhagen Accord) recommending funding sources to support REDD+. Australia, France, Japan, Norway, England and the USA were committed to providing a US$3.5 billion package for REDD implementation, apart from the 2008 UN-REDD commitment to helping forested countries prepare for REDD (REDD-Readiness). Such an amount was far lower than the estimated fund needed to finance UNFCCC’s mitigation and adaptation measures.
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Climate Finance
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Introduction to REDD is believed to change the landscape of climate change management with the involvement of the private sector. Climate change management has become a “commodity” ready to be used as an investment tool in a trade pattern that involves market players. From the financing side, this publicprivate partnership scheme will potentially ease the achievement of the emission reduction target. To reduce emission up to 50% in 2030 will require US$17-23 billion annually10. Despite this, it should be noted that all the carbon offset-based schemes and their implementation (emission quota trade) have many flaws, from the theoretical basis up to potential leaks and financial crime as well as a potential crisis like the sub-prime mortgage crisis in the USA in 2008. The logic behind the greater involvement of the private sector in the implementation of mitigation programs is as follow: the huge fund need cannot be provided by governments only, let alone those of the non-Annex I countries. That is why climate change finance will involve various funding schemes – grants, loans, or private investments. The involvement of the private sector with governments (public-private partnership) is an innovation in the financial and banking sector, a continuation of the one since 1980s that has driven repeated systemic crises in the sector. The point is that efforts to reduce pollution level are done by requiring polluters to finance pollution mitigation measures and by providing incentives for polluters that succeed in reducing the pollution or emission below the pre-determined target. In the previous COPs, a warning had been expressed that the logic might lead to incentives that would encourage polluting industries to even increase emission as the way out was in place (perverse incentive).
30
“
All the carbon offset-based schemes and their implementation (emission quota trade) have many flaws, from the theoretical basis up to potential leaks and financial crime as well as a potential crisis like the sub-prime mortgage crisis in the USA in 2008 With regard to industrial and financial capital interests, the application of the market principle will stimulate investors on the global market to make investments, notably in mitigation programs. While this is in line with the actual interest of the global investment market, it should be noted that the expansion of this “climate change economy� will potentially diminish control over money markets and stock markets, which tended to be stricter some time ago. Following the 2007/2008 crisis, there have been discussions to go back to the more conventional financial system. First, bank regulations will be stricter. This has been reflected in the US Financial Reform Law passed some time ago. Second, excessive profit taking behavior will be limited. This is also set forth in the US Law, where the executive-level salaries will be limited in a such a way that companies cannot determine executive-level salaries arbitrarily as they used to do. Third, there is a discourse to re-apply the 1944 version Glass - Steagall Act, or a law that limits banks to make investments on money markets. Such a law requires that commercial banks be separated from investment banks.
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Climate Finance
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Besides, there is a more macro factor such as discourses on using gold as the world-wide anchor currency. As we know, financial innovations have spread after 1971 when the US President decided to cancel the direct convertibility of the United States dollar to gold. Since then, currencies have been circulated in many forms (quasy money), such as low-quality bonds. Another discourse is the tax on foreign capital inflow (Tobin Tax) or capital control. All show how the investment world will experience quite a drastic change, which will result in more limited investment opportunities. Why, since the US 2007/2008 crisis, have nearly all developed countries turned their eyes to green economy, which includes climate change funds? Surely, the framework is to develop a green sustainable long-term economy. However, we should be aware that the condition may become a new landscape for financial investment business, as mentioned above. If private investment were not to enter into climate change finance yet, there would still be a risk like the one occurring in the past. When multilateral institutions were formed, especially the World Bank, what did happen then was a creation of a giant poverty reduction project, notably in developing countries. The program did involve enormous grants and loans, but in many cases, the poor were the ones getting much less benefits than the other parties involved. Driven by rent-seeking behavior in a country controlled by a number of interest parties (state captured), poverty reduction programs have mostly turned into projects benefitting suppliers while the target beneficiaries receive the least. The table below shows the list of private companies coordinated under the Institutional Investors Group on Climate
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menguntungkan para penyedia layanan (supplier), tetapi target yang dilayani justru mendapatkan manfaat paling kecil. Tabel di bawah ini menunjukkan daftar perusahaan swasta yang berada dalam Institutional Investors Group for on Change (IIGCC). IIGCCkoordinasi is a collaboration of investors in Europe Climate Change (IIGCC). IIGCC merupakan forum kolaborasi dari climate change projects. The association incorporates around 70 para investor di kawasan Eropa untuk proyek-proyek perubahan companies. iklim. Asosiasi ini beranggotakan sekitar 70 perusahaan. Table 5. List of Private Investment Companies incorporated in Tabel 5. Daftar Perusahaan Investasi Swasta yang tergabung IIGCC dalam IIGCC Alfred Berg Amundi APG Asset Management ATP
Aviva Investors Baptist Union of Great Britain BBC Pension Trust Bedfordshire Pension Fund BlackRock
Ethos Foundation F&C Management Ltd First Swedish National Pension Fund Fourth Swedish National Pension Fund Generation Investment Management LLP Good Energies Greater Manchester Pension Fund Grosvenor Fund Management Henderson Global Investors
BMS World Hermes Mission BNP Paribas PENDANAAN IKLIM Investment HgCapital antara kebutuhan dan keselamatan Rakyat Partners BT Pension HSBC Investments Scheme 33 CB Richard Ellis Hudson Clean Investors Energy CCLA Investment Impax Asset 33 Management Management Central Finance
Merseyside Pension Fund Northern Trust Osmosis Investment Management PGGM Investments
PKA PRUPIM Robeco Schroders Second Swedish National Pension Fund South Yorkshire Pensions Authority The Church in Wales The Church of England Pensions Board The Roman Catholic Diocese of Plymouth The Roman Catholic Diocese of Portsmouth The Roman Catholic
PENDANAAN IKLIM antara kebutuhan dan keselamatan Rakyat Climate Finance
between People’s Needs and Safety BT Pension The Church of England HSBC Investments Scheme Pensions Board CB Richard Ellis Hudson Clean The Roman Catholic Investors Energy Diocese of Plymouth CCLA Investment Impax Asset The Roman Catholic Management Management Diocese of Portsmouth Central Finance The Roman Catholic Board of the Insight Investment Diocese of Salford Methodist Church Church Third Swedish National Commissioners Invicta Capital Pension Fund for England Climate Change Joseph Rowntree United Reformed Church Capital Charitable Trus Co-operative Kent County Council Universities Asset Pension Fund Superannuation Scheme Management London Borough of West Midlands Corporation of Hounslow Pension Metropolitan Authorities London Pension Fund Fund Pension Fund London Borough of West Yorkshire Pension Earth Capital Islington Pension Fund Partners Fund London Borough of Environment William Leech Charitable Newham Pension Agency Pension Trust Fund Fund Environmental Technologies London Pensions Fund Authority Fund
Dalam sebuah negara yang masih carut-marut seperti In a country plagued with masuk so manydalam problems like Indonesia, Indonesia ini, risiko untuk perangkap dalam the risk to getprogram trappedpembiayaan in the implementation of climate finance pelaksanaan perubahan iklim sangat besar. Apalagi jika memang yang akan berlaku adalah pendekatan programs is very high, especially if the program use marketpasar tentu saja tidakwill banyak basedyang approaches, which not mengakomodasi accommodate thekepentingan interests of indigenous/local people, the marginalized, women and children. They are the very vulnerable groups that will be disadvantaged
34 34
masyarakat lokal (adat), kelompok marjinal, perempuan dan anak-anak. Mereka adalah kelompok yang sangat rentan yang justru dirugikan jika proyek investasi perubahan iklim mulai if climate change projects are to involve the funds that are melibatkan aliran dana yang sekarang ini tengah mencari target currently seeking targets and investment instruments. dan instrumen investasi. In Pada principle, REDD+ works combining bothmenggabungkan the government prinsipnya, REDD+bybekerja dengan mekanisme pemerintah In dan swasta. Secara can umum, and private mechanisms. general, the mechanism be mekanismenya bisa tergambar dalam bagan di bawah ini, illustrated in the chart below, which is well known as the yang dikenal sebagai model kembar pendanaan iklim (twin mechanism). Pada Basically, dasarnya, there targetare akhir dariultimate programgoals ini ada Twin Mechanism. three of tiga,program: yaitu : menurunkan deforestasi, pengurangan kemiskinan the deforestation reduction, poverty reduction and dan pembangunan yang berkesinambungan. ini sustainable development. These targets are toTiga be target achieved dicapai melalui aktivitas-aktivitas berbasis proyek yang sumber through project-based activities whose funding is sourced dananya dua, yaitu pasar karbon (mekanisme pasar) dan sumber from twoberasal sources: carbon trade (market mechanism) and rich lain yang dari pemerintah negara kaya. countries. Bagan 1. Mekanisme Pendanaan Kembar dari Swasta dan Chart 1. Government-private Twin Mechanism Pemerintah
Sumber Source:: IIED briefing
Prinsip dasar yang digunakan untuk mendanai proyek-proyek The basic principle used to fund climate change projects is perubahan iklim berbasis pada rekonsiliasi dua pendekatan, yaitu based on pasar the reconciliation of two approaches: market power kekuatan dan pemerintah. Mekanisme Pemerintah: pada and the government. The government mechanism: basically, the
35 35
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government’s funds can be sourced from various schemes such as the emission quota auction in the European Union’s Emissions Trading Scheme (EU ETS), developmental assistance funds and other funds from developed countries such as the Norway’s commitment. The EU ETS is the largest multi-national emissions trading scheme in the world, involving European countries. The EU ETS is one of the important pillars of the EU’s commitment to emission reduction within their energy policy framework. The mechanism is basically part of the EU’s commitment in the United Nations Framework Convention on Climate Change (UNFCCC) formed in 1992 and the Kyoto Protocol agreed to in 1997. The EU countries have agreed to the allowable emission limit under the EU ETS framework. The Kyoto Protocol has various emission reduction schemes, among others11: 1. Joint Implementation projects (JI), which is defined by Article 6 of the Kyoto Protocol, which produce Emission Reduction Units (ERUs). One ERU represents the successful emissions reduction equivalent to one ton of carbon dioxide equivalent (tCO2e). 2. Clean Development Mechanism (CDM), which is defined by Article 12, which produces Certified Emission Reductions (CERs). One CER represents the successful emissions reduction equivalent to one ton of carbon dioxide equivalent (tCO2e). 3. International Emissions Trading (IET) as defined by Article 17. Market Mechanism: Basically, private players from Annex 1 countries are allowed to get involved in emission reduction programs in developing countries. They include investors, banks, investment banks, and others, which basically manage an
36
amount of money for investment purposes (i.e. to earn profits). The mechanism used is that the project owner or developer first has to register and be validated under certified standards and methodologies obtain a certain certificate recognized sertifikat tertentu to yang mendapatkan pengakuan dalam by the market mechanism. Each project basically makes an mekanisme pasar. Setiap proyek pada dasarnya melakukan investment to earn income from carbon credits based on certain investasi untuk mendapatkan pendapatan dari kredit karbon berdasarkan padasituations. situasi lokal dan regional Hasil local and regional The income will thentertentu. be audited by dari investasi ini akan diaudit secara periodik oleh pengawas a certified independent supervisor to evaluate the progress of independen diakui (bersertifikat) untuk mengevaluasi such a carbonyang investment. perkembangan investasi dari kredit karbon tersebut. The scheme belowinishows a countrysebuah having negara an emission Skema di bawah menunjukkan yang reduction project will obtain CER (Certificate Emission Reduction), memiliki proyek pengurangan emisi karbon akan memperoleh CER (Certificate Emission Reduction), yang(via bisa which can be sold to developed countries thediperjualbelikan private sector). ke negara maju (maupun pihak swasta). Lalu negara berkembang And the developing countries where the project is implemented tersebuh akan memperoleh dana atau program will get some funds or programs (technology transfer). (transfer technology). Chart Market Bagan2.2.Certificate CertificateEmission EmissionReduction Reductionand danCarbon Pasar Karbon
12 Source: Singh12 Sumber:
In private-funded schemes, yang the mechanism is directly related Dalam skema pembiayaan didanai oleh pihak swasta, mekanisme akan lebih langsung dengan proyekto projects that specifically give profitberkaitan schemes within a relatively proyek yang spesifik menghasilkan skema keuntungan dalam certain time frame. Unlike government funding mechanisms, kerangka waktu are yang bisaflexible diperhitungkan relatif pasti. whose purposes more such as forsecara capacity building, Berbeda dengan pembiayaan pemerintah yang lebih fleksibel penggunaannya, misalnya untuk peningkatan kapasitas, fasilitasi dsb. pembiayaan dari mekanisme pasar sulit dilakukan untuk 37 itu, proyek-proyek yang akan kepentingan adaptasi. Dan karena didanai oleh pihak swasta umumnya akan mengambil skema
Climate Finance
between People’s Needs and Safety
market mechanism-based financing is hard to implement for adaptation purposes. Therefore, private-funded projects generally run mitigation schemes. As agreed to in the UNFCCC framework, the emission reduction aims to have 20-40% reduction in 2012 compared with the 1990 levels. Of the target, 10% is expected to be achieved through REDD+ strategy. Thus, REDD programs will play an important role in global climate change finance schemes. The 2008 Eliasch Review report shows that global forestry funding is estimated to reach 17-33 billion US dollars in 2030. As such, government’s funds will not suffice. The scenario is then to apply carbon market principles by involving market players, who estimatedly can provide 7 billion US dollars annually to reduce deforestation in 2020. Despite this scenario, there will still be a deficit of 11-19 billion US dollars annually, which is expected to be covered by the UNFCCC Annex I countries. Norway has committed to allocating 2.5 billion US dollars for climate change and forestry issues for five years after the commitment was made (COP 15 in Copenhagen, Denmark). With regard to this commitment, Indonesia will obtain 1 billion US dollars from the Norwegian government to reduce green house gas emission and deforestation and forest degradation through the Letter of Intent (LOI) signed on 26 May 2010 in Oslo, Norway. The agreement states that Indonesia will obtain a grant of US$1 billions for Reduction of Emissions from Deforestation and Degradation/REDD) in Indonesia. The agreement will be implemented in three stages: preparation, implementation, and evaluation of the successful reduction13.
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Chart 3. The National REDD+ Strategy
2.3 REDD Plus in Indonesia REDD plus deserves more attention as it is one of the relatively big and well-established schemes at both domestic and global level. The Indonesian government via Bappenas has developed a national strategy to implement REDD plus. Basically, the strategy is a follow up of the commitment expressed by the Indonesian President during COP 15 in Copenhagen that Indonesia would reduce green house gas emission by 26% (by itself ) up to 41% (with the help of multilateral institutions) in 2020. Considering that in the context of Indonesia, the largest source of emission is forest clearing, forest-related programs will be playing an important role both domestically and globally. The
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Climate Finance
between People’s Needs and Safety
national strategy plan for REDD+ implementation is part of the Indonesian government’s commitment as well as a follow up of the Indonesia-Norway LoI.
2.3.1 Emission Reduction Target Scenario Below is the national strategy on REDD+. The figure below clearly illustrates the significance of market roles in emission reduction in Indonesia’s context. Even in this optimistic scenario, if the private sector’s roles through carbon credits are opened, the reduction target will exceed 41%. This is a very ambitious target but does not take into account the complexity and the potential risks arising from the involvement of the private sector in emission reduction projects. Figure 8. Average emission reduction target up to 2010
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Grafik 9. penurunan emisi Figure 9.Skenario Emissiontarget Reduction Target Scenario
Domestic Pembiayaan dari dalamfinance negeri
National Budget (APBN) + private + public APBN + Swasta + Masyarakat
International finance Pembiayaan bantuan internasional Carbondiperdagangkan credits to trade Carbon credit untuk -- market market based based Sumber: Strategi Nasional REDD + oleh Bappenas Source: The National REDD+ Strategy by Bappenas
Rencana pelibatan swasta dalam proyek penurunan emisi The plan to involve the private umum, sector in emission reduction memang menjadi kecenderungan baik di tingkat global projects is a general tendency at global level, which is then dan kemudian diikuti oleh kecenderungan di tingkat domestik. accepted at domestic level. Basically, policies at domestic level Pada dasarnya, kebijakan di tingkat domestik merupakan amplifikasi dari kecenderungan yangtendency. ada di tingkat global. are the amplification of the global When climate Ketika tata kelola dan tata laksana dari program pembiayaan change fund governance and implementation at global level perubahan iklim global of membuka peran swasta, open a room for di thetingkat involvement the private sector, the begitupun di dalam negeri, strategi nasionalnya juga mengikuti, tendency is followed at domestic level and the national strategy dengan kecenderungan yang selalu berulang, yaitu tingkat also adopts Artinya. it, with Respons repeateddomestik tendency,cenderung i.e. the amplification amplifikasi. berlebihan level. This means that global. global demands tend to be excessively menyikapi permintaan responded to at domestic level. Namun di sisi lain, selalu ada gejala pula bahwa tata kelola di dalam negeri cenderung lebih longgar, risiko On the other hand, there is always ansehingga indicationberbagai that domestic yang muncul di tingkat global dengan pelibatan sektor swasta, governance tends to be looser, making the risks arising from the akan dengan sendirinya memunculkan potensi risiko yang lebih involvement the private sector globalgambaran level evententang higher besar di levelofdomestik. Berikut iniatadalah at domesticpenegakan level. Below is the illustrations of how lawhutan was bagaimana hukum dalam kasus pembalakan enforced against illegal logging The majority sepanjang 2008. Mayoritas kasus throughout yang terjerat2008. dinyatakan bebas (36 kasus), kalaupun ada Those tindakan hukumguilty dengan of the case sementara were dropped (46 cases). declared (24 vonis bersalah, sebagian besar hukumannya kurang dari satu cases) were sentenced to less than one-year imprisonment. 19 tahun (24 kasus). Vonis hukuman 1 – 2 tahun sebanyak 19 kasus. cases ended up with 1-2 years of imprisonment. These facts are Fakta ini juga diakui oleh pemerintah (Bappenas). acknowledged by the government (Bappenas).
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Figure 10. Law Enforcement in Illegal Logging Cases in 2008
Source: Annual Report of the Indonesia’s Ministry of Justice, 2009
Table 6. Funds supporting REDD+ and the activities No
Activity Indonesia Forest Carbon Alliance (IFCA) : Brief study/analysis on methodology aspects, policies and REDD preparation in Indonesia Demonstration Activities a. Proposed Aus AID 2nd Demonstration Activities b. GTZ Merang: Measures to restore forest areas; strategies and structures for peat forest management integrated; fire management scheme c. FORCLIME : Innovative designs for REDD demonstration activities incl. establishment of FMUs d. TNC : Demonstration activities ‘Berau Forest Carbon Program’ : improved forest management, forest restoration, oil palm swap, land use planning, policies and enforcement
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Cost USD 900,000
€1,445,255 (20082011) *) €7 M (2010-2012) *) USD 3.6 M (20082010)
USD 50 M (20112015) **)
No
Activity e. KFCP: Reducing deforestation & forest degradation (incl. rehabilitation of peat land); monitoring & carbon accounting; payment mechanism; readiness at provincial and district level. f. ITTO: Institutional setting to prevent deforestation; technology in restoration and rehabilitation of PSF; demonstration activities with the plantation of indigenous species g. KOICA: Joint research and implementation of pilot project on afforestation/reforestation CDM project and REDD. h. UN REDD : Capacity forspartial socioeconomic planning incorporating REDD; empowered local stakeholders to beneďŹ t from REDD; Multistakeholder endorsed district REDD plus
Cost
AUD 30 M *)
USD 540 K (20102012) *)
USD 5 M (20092013) *)
USD 1.5 M (20102011) *)
MRV - Capacity development of GOI to operate an effective data management system - Wall-to-wall land cover change analysis; compilation of land use and management information, existing ground based measurements - Models adopted calibrated and further, developed by GOI to estimate emissions from land use change - GOI management teams and equipment to support the INCAS
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Aus AID 2 M *)
Climate Finance
between People’s Needs and Safety
No
Activity a. ICRAF: Credible estimates of the dynamics of carbon stocks at the national level over the past 20 years that complies with Tier 3 approach b. Proposed FCPF: Establishment of PSPs represented various forest types for ground-based forest carbon monitoring-Tier 3 approach c. JICA: Improvement of monitoring and assessment system through the use of satellite images and the capacity to estimate biomass and carbon
Cost 1,123 Million (2009-2011) *)
USD 720K (20082011) *)
USD 950K (20102011) *)
UNREDD: Review standard & methodology MRV. Institution: 1. UN-REDD: Consensus on key issues for national REDD policy development 2. UN-REDD: Dissemination of REDD lesson learned incl. building national knowledge & learning network. 3. UN-REDD: Communications Programme – incl. national campaign, education & communication materials, training with local stakeholders as targets.
USD 500 K (20102011) *) USD 400K (20102011) *) USD 700K (20102011) *)
Payment Distribution 1. FORCLIME: Establishment sustainable payment mechanism.
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€20 Million (20102014) *)
No
Activity 1.
Cost
UN-REDD: a. Compilation existing payment systems b. Analysis of benefits and constraints of existing system c. Options for modifications to meet requirements of a REDD payment system
Environment safeguard : UN-REDD: Toolkit for priority setting to maximize potential carbon benefits and incorporating co-benefits, at the provincial level UN REDD Central Sulawesi (plans)
USD 400K (20102011) *)
USD 375K (20102011) *) USD 5.6 M ***)
Source *) Sarsito (2010), **) Executive Summary Strategic Plan of Berau Forest Carbon (2010) and* **) Indonesia Timber Market Report Vo. 15 No.15, 1st-15th August 2010 hal.4.
The implementation of REDD+ in Indonesia can generally be divided into three important stages: formulation of the national strategy and REDD+ action plan, preparation and preliminary activities, and REDD+ implementation. The table below gives the complete activities: Table 7. REDD+ Phases in Indonesia Strategy 2010
-
Development of the National REDD+ Strategy
-
Development of the National REDD+Action PLan
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Climate Finance
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RPJMN (2010 – 2014)
Readiness from intial activities - Development of REDD+ Infrastructure Pre-requisites - Fulfilment of REDD+ enabling conditions - Implementation of initial activities
RPJMN (2015 – 2019)
Implementation - Integration into RPJM - Full REDD+ implementation Source: The National REDD+ Strategy by Bappenas
The figure below shows the dissemination stages at national level and the launching plan of REDD+ document at national level. The work plan is targeted to have been completed in October 2010.
Consultation with takeholders (1)
Preparation of Draft and National Strategy & RAN REDD+ (2)
Draft and National Strategy & RAN REDD+ (3)
Revision of the Draft and the National Strategy & RAN REDD+ (5), (7)
First Revision of the Draft and the National Strategy & RAN REDD+ (11)
Second Revision of the Draft and the National Strategy & RAN REDD+ (13), (15)
Discussions within the Implementing Team (4), (6), (8)
Discussions within the Steering Team (9)
Draft and National Strategy & RAN REDD+ (10)
National Consultation (14)
Discussions within the Implementing Team (16)
Launching of the National Strategy and RAN REDD+ (19)
Discussions within the Steering Team (17)
National Strategy and RAN REDD+ (18)
Multistakeholder Consultation in 7 regions (12)
Region
Steering Team
Implementing Team/ Author’s Team and Working Groups Technical Team
Chart 4. National Action Plan REDD+ Strategy
Source: The National REDD+ Strategy by Bappenas
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Beberapa Tantangan 2.3.2 Challenges a. Keterlibatan Swasta a. Involvement of Pihak the Private Sector Mengapa pihak swasta dilibatkan dalam program pendanaan Why is the private sector involved in climate change fund perubahan iklim? Jawabannya, sangat jelas, dana dari pemerintah programs? The answer is very clear: the government’s funds will tidak akan cukup mendanai program-program tersebut? not suffice fund such berikutnya programs. However, next question Namun, adatopertanyaan yang jauhthe lebih substansial, is muchdengan more substantial: Will the involvement of the private apakah keterlibatan swasta akan menjawab persoalan sector address climate change problems? If yes, then will the perubahan iklim? Kalaupun ya, apakah masyarakat luas akan general public Bukannya be benefitted? Is itpasar not that the market will diuntungkan? skema tersebut sangatscheme berpotensi potentially be beneficial to investors but exclude the interests of memberikan keuntungan pada pemilik modal, namun dalam waktu yang sama mengeklusi kepentingan masyarakat lokal, local peoples, especially the vulnerable ones (women, children, terutama masyarakat yang rentan (perempuan, anak-anak dsb). etc.)? b. Minimnya Dana Adaptasi b. Lack of Adaptation Fund Melihat konteks kelahiran REDD plus serta sejarah tentang As far as how REDD+ came to existence and the history of keterlibatan para pemiliki modal dalam pengelolaan hutan, the involvement the private sector in forest management are skema bisnis yangofmenguntungkan merupakan sebuah jebakan. concerned,sebagian profitable business are nothing butbentuk a trap. Mengapa besar danaschemes yang disalurkan dalam Why is most of the fund allocated for mitigation, not adaptation? mitigasi, dan bukan adaptasi? Jawabannya, karena dengan The answer is, with thebertumpu mitigationpada models basedperdagangan on emission model mitigasi yang prinsip quota trade funding mechanism, it is easier to develop kuota emisithrough lewat mekanisme keuangan/pembiayaan, lebih business menyusun schemes and models whose profits can be projected. mudah skema bisnis serta model usaha yang bisa diperhitungkan Di lain On the other hand, theproyeksi need of keuntungannya. non-Annex I countries to pihak, adapt kebutuhan bagisocial negara-negara non-Annex untuk melakukan notably to the and ecological impactsI of climate change
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Climate Finance PENDANAAN IKLIM between People’s Needs and Safety antara kebutuhan dan keselamatan Rakyat
cannot be translated into adaptasi always khususnya menghadapi dampak sosial-ekologis dari Moreover, perubahan investment opportunities. iklim tidak selalu dapat donors’ perspective of diterjemahkan adaptation ke that dalam peluang Apalagi, is expenses for investasi. adaptation will perspektif donor tentang adaptasi in fact compete with the general adalah bahwa development funds.pengeluaran untuk adaptasi justru akan menciptakan kompetisi dengan dana are pembangunan Adaptation projects basically pada umumnya. activities undertaken to increase the capacity address the current and Proyek to adaptasi pada dasarnya future loss in various fields as a result merupakan aktivitas yang dilakukan of climate change. to this, dalam rangka In relation meningkatkan kemampuan berhadapan dengan the REDD+ scheme should orientate kerugian saat ini dancarbon masa yang akan not only to reducing emission datang berbagai bidang sebagai but alsodalam promoting sustainability of konsekuensi dari perubahan iklim. forest ecological functions, as well as Terkait dengan hal tersebut, skema REDD addressing forest-related problems, in plus mestinya tidak hanya berorientasi particular poverty and expansion of untuk menurunkan emisi karbon namun environmentally destructive industries juga harus mempromosikan pengurusan such as mining, which are now allowed kelangsungan fungsi-fungsi ekologis to operate even in protected forests. hutan, di samping mengatasi berbagai persoalan hutan, A report terkait published by the khususnya UNFCCC kemiskinan penduduk dan perluasan industri yang bersifat Secretariat in 2007 said that the total estimated world’s climate merusak hutan, seperti pertambangan yang sekarang justru investment and fund would fetch US$60-US$182 billion up to diperbolehkan berlangsung di wilayah-wilayah hutan lindung.. 2030. Some US$28 to US$67 billion (or equivalent to 0.13-0.3 Laporan yang dipublikasikan oleh UNFCCC pada percent of the world’s GDP) would gosekretariat to developing countries. tahun 2007 menyebutkan, total estimasi tambahan investasi The larges adaptation fund portion was for infrastructure, which dan pendanaan adaptasi billion perubahan needed around US$8-130 up to iklim 2030. di Theseluruh UNFCCCdunia also mencapai US$ 60 – US$ 182 miliar hingga tahun 2030. Sekitar foresaw additional fund amounting to US$52-62 billion for US$28 hingga US$67 miliar (atau sekitar 0,13 sampai 0,3 persen agriculture, water resources, health, ecosystem and coastal total PDB dunia) merupakan kebutuhan bagi negara-negara 14 . protection; most would goterbesar to developing countries berkembang. Kebutuhan pembiayaan adaptasi adalah pada sektor infrastruktur, yangestimates membutuhkan dana sekitar US$ In addition to the UNFCCC’s, of adaptation fund were 8 – 130 miliar hingga tahu 2030. UNFCCC juga memperkirakan made by various groups. The World Bank (2006) estimated that dana tambahan sekitar US$52-62 miliar untuk sektor pertanian, sumber daya air, kesehatan, perlindungan ekosistem serta
48 48
wilayah pesisir, sebagian besar dana tersebut akan digunakan 14 the fundberkembang. need for developing countries would reach bagiadaptation negara-negara 15 US$9-41 billion annually up to 2020, while Oxfam International Selain UNFCCC, perkiraan kebutuhan pendanaan adaptasi (2007) gave a larger estimate: US$50 billion annually16. These muncul dari berbagai kalangan. Di antaranya adalah Bank Dunia show that adaptation funds are what developing countries (2006), yang memperkirakan kebutuhan dana adaptasi bagi badly need at the moment although havemiliar to face the fact negara berkembang mencapai sekitarthey US$ 9-41 per tahun that the2020, funds15available at international level are allocated more sementara angka yang dikeluarkan oleh Oxfam hingga for mitigation programs. Internasional (2007) lebih banyak dari perkiraan Bank Dunia, yaitu mencapai US$ 50 miliar per tahun.16 Kenyataan ini sesungguhnya Currently, fund for global mitigation programs is ten times ingin menunjukan bahwa dana adaptasi merupakan kebutuhan as much as that for adaptation programs, at least this is what terbesar negara-negara berkembang saat ini. Meskipun mereka has been promised. From the USA, dana-dana nearly halfyang of the US$38 harus menghadapi kenyataan bahwa tersedia di billion fund for mitigation will be through Clean Development internasional lebih banyak diperuntukan bagi program mitigasi.
49 49
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between People’s Needs and Safety
Mecanism17. On contrary, despite the high risk and vulnerability, Asian countries will only have US$3.8 billion of global adaptation fund, of which Japan is the largest contributor.18 It is estimated that South Asia, East Asia and the Pacific will need up to US$35 billion annually between 2010 and 2050 for adaptation. Despite this, mitigation programs are the ones receiving the largest climate fund to date19. In COP 16 in Cancun, developed countries agreed to a commitment and would provide additional US$30 billion for adaptation and mitigation funds for the 2010-2012 period. The commitment also included a long-term fund of US$100 billion annually starting from 2020.
2.3.3 Victims’ Perspective History has it that the involvement of the private sector in forest management tended to exclude local people’s interests. Therefore, more local people-oriented approaches should be adopted as in many forest management schemes people tend to be disadvantaged. Various forest management regulations have been developed, but none are based on victim’s perspective, for example: 1. P. 68/Menhut-II/2008 on the Implementation of Demonstration Activities of REDD, 2. Forestry Minister’s Decree (Permenhut) No. 30/MenhutII/2009 on REDD Procedures, 3. Forestry Minister’s Decree (Permenhut) No. 36/MenhutII/2009 on Licensing of Utilization of Carbon Sequestration and or Storage in Production Forests and Protected Forests
2.3.4 Redistribution Mechanism With the inclusion of market principles, REDD implementation will lead to the shrinking of state’s payment transfer for welfare
50
programs and subsidies. A concrete implication in Indonesia’s context is the removal of fuel subsidy as the subsidy is thought to provide incentives for environmental pollution. In this case, the market principle in climate change program management collides with the social reality that the general public still need the subsidy. Indonesia along with Brazil has the highest deforestation rate with 1.87 million hectares of forest disappearing annually. In the meantime, Indonesia is classified as the world’s third largest emitters after the USA and China, due to forest and peat fires. An analysis of the 1997 forest and peat fires estimates that some 0.81-2.57 Gt of carbon were released into the atmosphere, accounting for 13-40% of the global annual emission from fossil fuel burning. This means that the largest emission contributor in Indonesia was not fossil fuel burning in cars and industry. The problem was much more primitive than that as it was due largely to the high risk of forest fires. There must be an integration of policies and adequate provision of energy sources for domestic interests.
2.3.5 Integration with the National Strategy In the 2009-2014 Mid-term Development Plan (RPJM) 20092014], environmental issues received relatively much attention. The issues at least had relevance with 3 out of 11 government’s priorities, i.e. food security, energy and the environment, and disaster management. Integration of REDD+ is an important priority so that the scheme is widely known by bureaucratic apparatus, both at national and regional level. The National Climate Change Council (with representatives from 15 ministries) has been formed to harmonize Indonesia’s climate change policies.
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The Indonesian government has created climate trust fund and developed climate change policy papers and low carbon development strategies. The Ministry of Finance also has facilities to promote environmentally-friendly energy initiatives, including geothermal. The Ministry of Industry has formulated roadmaps and strategies to reduce emission through 4 main industries: cement, pulp and paper, steel and textile. The direction of the development policy, which is integrated with climate change issue, is summarized in the 2005-2025 Long-Term Development Plan (RPJP) 2005-2025], the 2004-2009 Mid-Term Development Work Plan (RPJM) 2004-2009], the 2010-2014 Mid-Term Development Plan (RPJM) 2010-2014] and Government Work Plans for the years 2009 and 2010. To integrate climate change into the national development plan and in the framework of sustainable development, the government – in this case Bappenas – has prepared a short-term multisectoral plan, as reflected in ”The National Development Plan: Responses to Climate Change (2008). The document contains various activities in the context of funding mechanism and institution arrangements and provides a basis for the development of climate change partnerships. The document, along with other technical and sectoral ones, was used as a basis for the development of the 2010-2014 Long-Term Development Plan (RPJM), which was released in early 2010. The designing of a national level climate change agenda requires the government’s capacity to mobilize both domestic and foreign funding sources to fund the associated activities. The government is convinced that the ambitious target can be achieved considering that most of Indonesia’s emission comes from the forestry sector, such as deforestation and forest fires20.
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Text of the BAP on enhanced action on the provision of financial resources and investment for mitigation dan adaptation (decision 1/CP.13, para. 1.e.i-vi) •
• • • • •
Improved access to adequate, predictable and sustainable financial recources and financial and technical support, and the provision of new and additional resources, including official and concessional funding for developing country parties; Positive incentives for developing country perties for enhanced implementation of national mitigation strategies and adaptation action; Innovative means of funding to assist developing country parties that are particularly vulnerable to the adverse impact of climate change in meeting the cost of adaptation; Means to incentivize the implementation of adaptation actions on the basis of sustainable development policies; Mobilization of public- and private – sector funding and investment, including facilitation of climate –friendly investment choices; Financial and technical support for capacity-building in the assessment of the costs of adaptation in developing countries, in particular the most vulnerable ones, to aid in determining their financial needs.
sebagian besar emisi Indonesia berasal dari sektor kehutanan, seperti kebakaran hutan dan deforestasi.20 Untuk mewujudkan komitmen ini,this maka disusun Rencana Aksi Nasional Penurunan To realize commitment, the Indonesian government has Gas Rumah Kaca (RAN-GRK) yang prinsipnya adalah NAMAs oleh prepared the National Action Plan for Green House Gas Reduction Indonesia. Nationally Appropriate Mitigation Actions (NAMAs) (RAN-GRK), which is basically NAMAs. The Nationally Appropriate adalah upaya pengurangan emisi secara sukarela oleh negara Mitigation Actions (NAMAs) is a voluntary effort of developing berkembang dalam konteks pembangunan berkelanjutan. countriesdapat to reduce emission in the context sustainable NAMAs didukung oleh pendanaan, alih of teknologi dan development. NAMAs can be supported by industrialized penguatan kapasitas oleh Negara industri yang sifatnya terukur, countries through funding, technology transfer and capacity dilaporkan dan diverifikasi (Measurable, Reportable and 21 measurable, reportable and verifiable/MRV).21 building that are Verifiable/MRV). RAN-GRK ini yang selanjutnya akan dievaluasi RAN-GRK will besesuai evaluated and reviewed in accordance with dan dikajiulang kebutuhan nasional dan perkembangan the national and memenuhi the recent global development so that global terkini,needs sehingga persyaratan dan pengakuan internasional (UNFCCC). it is in line with the international (UNFCCC’s) requirements and recognition.
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PENDANAAN IKLIM Climate Finance antara kebutuhan dan keselamatan between People’s Needs and Safety Rakyat
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Chapter III Climate Finance Flows
3.1 Funding Architecture Climate finance is a term given to financial sources currently being mobilized to mitigate climate change, that will enable developing countries to reduce emission and adapt to climate change impacts. The advance in the new funding scheme gets justification for political and scientific reasons.22 On the contrary, the market mechanism-based resolutions, which since their inception have led to increasing green house gas emission and which have been arisen from climate change-driven social ecological crises, are contested by many.23 Funding affairs were emphasized during COP 13 in Bali in 2007, where it agreed to provide sufficient, predictable and sustainable funds to fund various mitigation and adaptation activities in developing
55
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countries. The Bali Action Plan (BAP) is seen as a milestone in raising the political status of adaptation measures and lays a basis for more detailed discussions about the international adaptation funds. More importantly, BAP emphasizes the significance of equal treatment to improve various mitigation and adaptation measures. Climate finance receives special attention from the Indonesian government currently. It is said that Indonesia needs new and additional funds from both domestic and foreign sources to implement the development activities to support the government’s commitment to reducing carbon emission by 26% in 2020 at business as usual (BAU) level and by 41% through international aids.24 Climate change finance policies are used to fund activities and are implemented through fiscal policies that encourage reduction of green house gas emission by giving added values to carbon. This is considered as a low-cost climate change policy that will generate revenue in the long run. The fiscal policies can be in the form of (1) emission trading and (2) carbon tax/levy. The first policy means the government sets the amount of GHG emissions estimated to be emitted and sells a permit to certain parties to emit such an amount of emission. The second policy means the government sets a price of each emission along with the associated tax.25 As the government needs enormous funds, it quickly opens the door for incoming new funds from grants and or foreign loans. The funds can be sourced from bilateral or multilateral creditors through mechanisms under the UNFCCC’s or Official Development Assistance’s (ODA’s) procedures. ODA is defined as a flow of money to ODA’s recipient countries and to multilateral development institutions. The
56
funds must be distributed by official institutions, including state’s and local governments or the recipients’ executive body, and these institutions must promote developing countries’ economic development and prosperity as the main goal. ODA must be provided as soft loans accompanied by grants of not less than 25% (OECD, 2008).26 The grants or foreign loans are used not only for funding but also for exchanging information and lessons to strengthen and improve the national planning, budget, procurement, monitoring and evaluation as well as institutional and human capacity. The use of loans to fund adaptation and mitigation programs has caused a lot of debates. Some argue that such a use may put heavy repayment burden to developing countries. Others say that such loans should be of high degree of concessionality. This view is based on the investment need to fund capital-intensive mitigation activities. Basically, though, funding should be viewed as the basic right of the legal obligation of developed countries as the largest emitters to prevent and compensate for loss, not as help (see India’s submission in UNFCCC, 2009a: 41).27 Therefore, climate funds must be given as aid, not debts, and it is up to the recipient countries to determine their use priority. Developed countries should be obliged to provide developing countries with ecological rehabilitation as a compensation for the advancement of development in developed countries that has led to environmental degradation and economic injustice
57
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in developing countries. The advanced level of developed countries’ economy cannot be separated from the exploitation of natural resources and provision of illegitimate debts in developing countries. The rapid economic growth in developed countries – centers of capitalism – increases the need for abundant raw material supply from exploitation of natural resources in developing countries. Developing countries have long been positioned as supporters of industrialization advancement in capitalist countries by supplying minerals, oil, gas, coal, palm oil, timber and agricultural products. Foreign debts and various development aids, both distributed through bilateral and multilateral schemes, are important to ensure the continuity of the supply. Therefore, in the context of climate finance debate, nonAnnex I countries see adaptation fund as basically something very different from Official Development Assistance (ODA) or at least an addition to ODA’s commitment, which stands at 0.7% of GDP. In ODA, the power relation between donors and recipient countries is not equal, and even it is very often that ODA mechanism entails requirements that disadvantage recipient countries. In adaptation funds, on contrary, the relation is equal, where developed countries have not only moral responsibilities but also legal obligation to support developing countries.28 Critical attitudes towards ODA as a climate finance mechanism are also based on past history of ODA distribution that brought much harm to people. The position of Indonesia itself towards ODA’s role in climate finance is basically inclined to be more pragmatic. It should be underlined that ODA for climate change programs must be provided as soft loan and should not decline donors’ commitment
58
to funding other sectors not related to climate change, on condition that this must be subject to the regulations applicable in the country and must comply with the principles set forth in the Paris Declaration governing projects to be funded.29 The position of the government is based on the intention to utilize funding opportunities available at international level, in the midst of the State’s increasing financial burden for development needs and annual debt repayments. The terms and conditions of the use of ODA, both bilateral and multilateral ones) are based on Presidential Instruction (Inpres) No. 8 of 1984 on Use of Foreign Export Credit, improved by Governmental Regulation (Peraturan Pemerintah) No 2 of 2006 on Procedure for the Provision of External Loans and Grants and the Forwarding of External Loans and Grants, which stipulates that debts in the form of soft loans must meet the following criteria: 1. repayment period: 25 years or more 2. grace period: 7-10 years 3. interest rate: 2-3% 4. there is a grant element in the debt as much as 35% Currently, climate finance in Indonesia are mostly oriented to fund mitigation programs. This is in line with the government’s commitment to reducing GHG emission in Indonesia by 26% in 2020. The funds themselves may come from domestic and foreign sources, with the former being taken from the State Developing countries have long been positioned as supporters of industrialization advancement in capitalist countries by supplying minerals, oil, gas, coal, palm oil, timber and agricultural products. Foreign debts and various development aids, both distributed through bilateral and multilateral schemes, are important to ensure the continuity of the supply.
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budget of revenues and expenditures (APBN) in accordance with the 2010-2014 Mid-Term Development Plan (RPJMN). Funding sources from the State budget of revenues and expenditures (APBN) can be classified into: a) pure rupiahs, b) domestic and foreign grants, c) foreign debts, Debt to Nature Swap, d) Indonesian Climate Change Trust Fund, and e) Green fund. However, the 26% commitment, fulfilled unilaterally, comes not only from the national source, but also other domestic fund sources such as regional governments’ budget (APBD), government’s debts, private investment (banking and nonbanking) and corporate social responsibility (CSR). Other sources of fund are expected from the domestic private sector that includes a) banks, b) non-Banks, and c) Corporate Social Responsibility (CSR), as well as global funds. The global funds are sourced from Global Environment Fund, Copenhagen Green Climate Fund, or other global funding schemes. These sources are expected to support the government’s programs to achieve the emission reduction target in Indonesia. In “Indonesia Climate Change Sectoral Roadmap (ICCSR), the projected fund need for Indonesia’s mitigation programs, based on the calculation by the National Development Planning Agency (Bappenas), fetches US$68.6 billion up to 2020.30 The ICCSR contains mitigation strategies and adaptation framework in nine sectors, namely forestry, energy, industry, transportation, waste, agriculture, marine and fishery, water resources and health, to face climate change challenges up to 2030. The ICCSR is expected to be a reference for the national and regional governments in implementing mitigation and adaptation programs.
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In general, the scope of ICCSR’s content can be classified into Secara umum, ruang lingkup materi ICCSR dapat two: mitigation menjadi and adaptation. With regard toadaptasi. mitigation, the dikelompokkan dua, yaitu mitigasi dan Dalam focus is mitigasi, directedfokus to three main sectors: forestry bidang kegiatan diarahkan pada and tiga peat, sektorenergyutama yaitu: Kehutanan dan gambut, energi-industri-transportasi, dan industry-transportation, and waste. The others are classified into limbah. Sementara yang lainnya dikategorikan adaptasi. Dana adaptation. The funds needed to support the activities in ICCSR yang diperlukan untuk mendukung kegiatan yang tercantum are to support the implementation of the RPJMN 2010-2014 and dalam ICCSR untuk mendukung pelaksanaan RPJMN 2010-2014 the next up toselanjutnya 2030. yang adaRPJMN dan RPJMN hingga 2030. Tabel 8. Matriks MitigasiAction Sektoral sampai dengan Table 8. SectoralAksi Mitigation Matrix up to 2020 2020 Sector
Total Mitigation cost (billion USD)
% Emission Reduction each sector
Energy (Java-Bali) / RUPTL
53.776
6.20%
Energy (Sumatera) / RUPTL
9.714
22.22%
Industry/Cement
0.47
7.66%
Transport/Modal Shifting
2.01*
10.0%
Waste/Electrical Generation from Sanitary Landfill in Urban
1.49
42.1%
Waste/3R and Composting in Rural
0.81
24.8%
Forestry (LULUCF) and Peatland
0.34
26.7%
Total
68.6
23.7%
*= excludng costs *= tidak termasuknegative biaya negatif Sumber: ICCSR, BAPPENAS 2009 Source: ICCSR, BAPPENAS 2009
61
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Based on the plans in the RPJM 2010-2014, the estimated resource envelope for 2010-2014 related to GHG emission reduction available is about IDR37.889 trilion.31 However, the “National Economic, Environment and Development Study (NEEDS) for Climate Change” report published by DNPI in 2009 gives a slightly different figure. It is said that the government is committed to allocating IDR83.3 trillion to achieve the 26% emission reduction target. To achieve the 41% emission reduction target will require IDR168.3 trillion. The average annual cost to reduce emission in all sectors up to 2020 is about EUR5.95 billion to achieve the 26% reduction (the first mitigation scenario) and about EUR12.02 billion to achieve the 41% reduction (the second mitigation scenario). If all the potential measures to reduce emission were to be applied, then the average annual cost for all sectors up to 2030 would reach EUR12.84 billion.32 It is unfortunate that no appropriate estimates have been in place to calculate the adaptation need from the government’s sectoral mapping. One of ADB’s studies reports that the adaptation cost for Indonesia’s agriculture and coastal zones will reach the average US$5 billion annually up to 2020. The annual benefits to avoid destruction from climate change to Indonesia tend to exceed the cost Indonesia will have to spend annually up to 2050. Even the study says that in 2100, the benefits that With the total state budget amounting to IDR1.126 trillion in 2010, the government needed to take IDR237 trillion from it for debt installment repayment (of the principal debt and the interest). This would happen as Indonesia had huge debts.
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Indonesia will gain might reach 1.6 percent of the GDP, compared with the cost needed, which will fetch 0.12 percent of the GDP (ADB, 2009). The huge funds needed to address climate change may significantly increase Indonesia’s debt burden in the future. The increasing dependence on debts may give birth to a lazy fiscal regime, where the government is getting lazier to reform its revenue (from tax and natural resources) system to achieve fiscal self-sufficiency. Budget allocation for debt repayment will use up all budget to achieve the national development goals mandated by the Constitution (education, health, occupation, agriculture, including prevention of climate change impacts). In such a case, Indonesia becomes an interesting example. With the total state budget amounting to IDR1.126 trillion in 2010, the government needed to take IDR237 trillion from it for debt installment repayment (of the principal debt and the interest). This would happen as Indonesia had huge debts. Up to June 2010, the Department of Finance recorded the total amount of Indonesia’s debts, which stood at IDR1,609 trillion. The accumulated repayment of the principal debts and the interests for the period 2005-2009 reached IDR879 trilion.33 In addition, the use of the debts is in fact in contradiction to the basic principle of “climate justice”, where industrialized countries should be obliged to pay the destruction they have created from their emission. Industrialized countries, with only less than 20% of the world’s population, are the ones most responsible for 75% of the world’s total emission in the past (historical emission).34 Using debts, developing countries will in fact suffer twin impacts: suffering from the adverse impacts of climate change and the obligation to repay the adaptation and mitigation programs they receive.
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Climate Finance
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Table 9. Position of Foreign Loans (2004 – 2010) Note
2004
2005
2006
2007
2008
2009
2010 (Q II)
Government and monetary authorities
82,725
80,072
75,809
80,609
86,576
99,265
105,697
According to institutions
82,725
80,072
75,809
80,609
86,576
99,265
105,697
National government
70,153
69,245
73,051
76.92
85,122
90,853
97,571
Monetary authorities (BI)
12,572
10,827
2,758
3,688
1,454
8,412
8,126
According to terms and conditions
82,725
80,072
75,809
80,609
86,576
99,265
105,697
Commercial
5,234
9,440
13,857
18,418
19.93
31,415
39,697
Noncommercial
77,491
70,632
61,952
62,191
66,646
67.85
66.00
ODA
59,244
54,362
46,943
47,663
58,126
58,342
57,305
Non-ODA
18,247
16.27
15,008
14,528
13.52
9,508
8,694
Private
54,299
50,58
52,927
56,032
62,565
73,606
77,632
Financiers
8,215
6,386
6.59
7,515
8,835
12,597
15,035
Bank
3,909
4,057
4,573
5,401
5,668
9.53
11,505
Non-Bank
4,306
2,329
2,017
2,114
3,167
3,066
3,530
Nonfinanciers
46,084
44,194
46,337
48,517
53,729
61,009
62,597
137,024 130,652 128,736
136,64
149,141 172,871 183,329
Total
source: Bank Indonesia, 2010
3.2 Trapped in Climate Change Debts Up to the year 2010, the Indonesian government received new debts for climate change mitigation amounting to US$2.3 billion, comprising US$1.9 billion for programs and US$400 million for projects. 35 The sources of the debts were bilateral and multilateral creditors. In the first phase, Japan and France pioneered a new debt scheme to fund climate change programs in Indonesia called “Climate Change Policy Loan.” This
64
was followed up by the World Bank, which has been the only international financial institution having provided program debt facilities for Indonesia since 2010. The development policy loans from the three creditors were used to make up the deficit in the state budget. Besides raising a question about its effectiveness of and transparency in the use, debts of those kinds could advantageously be used by the creditors to dictate Indonesia’s economic political policies using climate change issue. The notion is based on Indonesia’s previous experience in distributing Development Policy Loan (DPL). Similarly, the use of clean technology to replace the widespread use of fossil fuel-based technology need huge investments. Therefore, precaution is badly needed if creditors’ project offers are to be accepted. The use of the grants and foreign debts complies with the principles set forth in the Paris Declaration and the Jakarta Commitment on equality between creditors and recipients countries. However, recipient countries cannot deny creditors’ great roles in providing financial support and technical assistance since the early phase of the aid, maintaining creditors’ dominance. This is what has happened in climate change policy making. The government has prepared climate-friendly economic development strategies under the coordination and financial support of some bilateral and multilateral creditors. Creditors including Australia, Germany, Holland, France, England, Japan, ADB and the World Bank are actively involved in developing policies at macro-to-sectoral level. As elaborated below, the active involvement of creditors has limited the room for pro-national climate change policy strategies. As a result, the government’s climate change analyses
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and policies give more priorities to climate change activities that support the market scheme. The policy matrix, on which work plans and baseline debt agreements are based, covers sensitive issues in energy subsidies, carbon market mechanisms, and the private sector’s involvement in provision of energy infrastructure. The situation has made climate change policy making nonsensitive to two things: the use of foreign debts to finance climate change projects and programs in Indonesia, and, 2) the position of international financiers such as the World Bank and ADB, which have bad track records in financing energyrelated (coal and fossil fuel) and plantation projects To Indonesia’s civil society, international financiers’ climate change policies are none but endeavors to divert climate change issue into expansion of new development loans. Moreover, international financiers such as the World Bank and ADB actively market their development loans in the name of climate change.36 The civil society generally says that climate change finance must comply with conventions regulating the obligation of Annex I countries, and provide financial support through grants and transfer of clean technology for developing countries that suffer big impacts such as Indonesia.37 The use of foreign debts for climate change activities during 2008-2010 still aroused controversy. There were disagreements between the government and the national legislature [House of Representatives (DPR)] about this. DPR emphasized that climate change mitigation was a shared responsibility; therefore, the fund should not have come from debts but grants from the DPR’s supervision was highly needed to ensure whether the debts were really needed to reduce emission or whether they were used only to make up the deficit in the state budget. Should this not be monitored, the effectiveness of climate change mitigation would be a mere lip service, generating no benefits for the people
66
emitters. There was a deep concern that the debts would be used to add to the declining exchange reserve.38 This was not an overstatement as the government had to think very hard to pay debt installments, mostly in foreign currency. Therefore, new debts, notably development loans, constituted an important source to address the problem. At this level, DPR’s supervision was highly needed to ensure whether the debts were really needed to reduce emission or whether they were used only to make up the deficit in the state budget. It was worried that climate change issue is used as an instrument to expand new debt schemes in various sectors. Should this not be monitored, the effectiveness of climate change mitigation would be a mere lip service, generating no benefits for the people. DPR’s supervision in climate change finance was in fact inadequate. Only those concerned about the issue rejected the plan as indicated by the fact that for three years the issue was not seriously discussed in the budget meetings between the government and DPR. Table 10. Repayment of the Principle Debts and the Interests 2005-2010 Detail
2005
2006
2007
2008
2009
2010*
Payment of Interest (trilion IDR)
65.199
79.082
79.806
88.429
109.590
112.452
A. Domestic Loans
42.600
54.908
54.079
59.887
70.699
74.126
B. Foreign Loans
22.599
24.174
25.727
28.542
38.890
38.326
61.569
77.741
100.705
103.768
113.331
124.667
24.456
25.060
42.783
40.333
45.300
Loan repayment (trilion IDR) Maturity and Buyback SBN
67
70.541
Climate Finance
between People’s Needs and Safety Foreign Loan Installments Total
37.112
52.681
57.922
63.435
68.031
126.768
156.823
180.511
192.197
222.921
54.136 237.119
source: APBN, DJPU, diolah *APBN-P 2010
So far, the climate change loans received by the Indonesian government are of two types:
3.2.1 The Climate Change Sector/Project Loan These are debts directly related to certain activities undertaken by ministries or institutions so that they are covered by the budgets or debts that are continuously given to regional governments or state-owned enterprises (BUMN). Basically, project loans are given by creditors in the form of goods and services. Policies governing their uses are always directed to finance the rehabilitation and development of economic infrastructure such as roads, bridges, schools as well as social infrastructure such as hospitals. Table 11. The Climate Change Sector Loan
Source: the Republic of Indonesia Ministry of Finance, 2010
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Project loans are in fact an instrument to market the creditors’ goods and services. These project loans are among the tools to finance activities in various projects or specific sectors that support the achievement of climate change mitigation and adaptation in Indonesia. Their uses are directed to finance projects or investment programs that promote use of clean technology and renewable energy. The finance scheme in this framework is related to support from some international financiers such as IBRD, IFC and ADB and some bilateral financiers. These clean technology project loans are a new scheme commonly known as Climate Investment Fund (CIF). CIF was established in 2008 with the aim to promote a new approach to mobilization of climate change finance for developing countries. CIF is a collaboration of the World Bank group and creditors such as African Developmentes Bank (AfDB), Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), and Inter-American Development Bank (IADB). The first fund will be distributed through the Clean Technology Fund (CTF) scheme with the total allocated fund given as soft loans amounting to US$4.4 billion and 13 investment plan portfolios in 9 countries with the total fund prepared amounting to US$4.4 billion for a one-year period.39 CIF has two kinds of fund: 1. Climate Technology Fund, aiming to accelerate the transformation process (developing countries) towards low carbon growth path through cost-effective GHG emission mitigation, with innovation and deployment of clean technology in developing countries being central to success. 2. Strategic Climate Fund, which is a special fund allocated for a number of targeted projects to develop new approaches with potential for scaling-up. A climate resilience pilot program is the first SCF’s project.
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When it was approved in July 2008, the trust fund for both CIF’s instruments was US$6.3 billion, lower than the initial proposal of US$10 billion. In distributing the fund, Multilateral Development Bank will provide additional grant and loans for developing countries to mitigate climate change. In 2010, Indonesia obtained a funding commitment of US$400 million under the Climate Technology Fund (CTF) scheme. The loan was a fund and an investment for Indonesia to reduce emission through transformation of use of renewable energy (RE) and energy efficiency (EE). The World Bank mentioned that through the scheme it could help Indonesia to achieve provision of 17% energy through RE and EE out of the 30% target in 2025.40 The investment would also help the Indonesian government to increase the geothermal capacity by 800 MW out of the 4,700 MW and 9,500 MW targeted for the year 2014 and 2025 respectively. The new capacity (800 MW) geothermal investment could reduce CO2 emission by 5.1 million tons annual and is projected to exceed 100 million tons in a 20-year period.
Climate Investment Fund (CIF) requires low carbon pathways-based development schemes, adding additional debt burden to poor and developing countries, which have been suffering from exploitation by developed countries.
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Table 12. Climate Investment Fund
Source: the Republic of Indonesia Ministry of Finance, 2010
Specifically, CTF Investment Plan is a co-financing scheme for two fields: (a) large-scale geothermal capacity building, involving a total US$300 million fund. ADB and IBRD each contributed US$125 million with the rest (US$50 million) being provided by IFC to support the private sector. (b) acceleration of initiative to promote Energy Efficiency (EE) and Renewable Energy (RE), involving a total US$100 million
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sourced from ADB and IFC to support biomass and micro hydro projects. The CTF Investment would mobilize finance up to US$2.7 billion from multilateral institutions, stateowned enterprises (BUMN), and the private sector. Financing support for geothermal investments and application of renewable energy in Indonesia are estimated to be increasing in the subsequent years. To facilitate the increasing financing in the sector, the government has prepared various policy reform packages to address the bottlenecks that limit investments. Among the reformed policies are those on price, incentives for geothermal construction, transparent and competitive geothermal concession tender, risk management and increase in domestic capacity. The policy packages are also supported by the climate change development policy loans between the Indonesian government and the World Bank, which started in 2010. Through the loans, it is expected that more friendly regulations would be created to attract larger investments in renewable energy sources and improved fossil fuel efficiency.41 The financing framework under the CIF scheme is in fact arousing criticisms from many parties. This is due primarily to the World Bank’s strong control over the fund distribution and to the poor transparency and democratization in decision making within it. In addition, the CIF framework developed by the World Bank is considered to neglect the “polluter pays” principle, where the largest burden to address climate change crises is placed on developed countries due to their funding capacity and advanced technology in addition to their higher pollution trails compared with those in poor and developing countries. CIF is given to poor and developing countries in the form of loans, which often requires low carbon pathway-based development schemes. This surely gives additional debt burdens to poor and
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developing countries having been suffering from developed countries’ exploitation.42
3.2.2 The Climate Change Program Loan Cash loans more commonly known as development program loans are those used to finance the deficit (budget support), which will be disbursed when the policy matrix is fulfilled or a certain activity is accomplished. Policy matrix generally contains reform programs that must be done by the government in certain sectors in accordance with the creditors’ direction. Table 13. Term of Conditions of Climate Change Program Loans CCDPL (World bank)
Amount
Interest rate
USD 200 : milion (FY 2010)
CCPL (JICA) USD 300 milion (FY 2008) USD 300 milion(FY 2009) USD 300 milion (FY 2010)
: LIBOR + 0.24%
Grace Period : 9 years Repayment 24,5 years Period Front end-fee 0.25% Commitment : Charge
CCPL (AFD/France) USD 200 milion(FY 2008) USD 300 milion (FY 2009) USD 300 milion (FY 2010)
0.15%
LIBOR – 30 bps (FY 2008) EURIBOR – 30 bps (FY 2009) LIBOR + 50 bps (FY 2010)
5 years
5 years
15 years
15 years -
0.1%
-
Source: the Republic of Indonesia Ministry of Finance, 2010
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From 2008 to 2010, Indonesia got a foreign debt under the “Climate Change Program Loan” scheme from two bilateral creditors, namely Japan and France, and one multilateral one – the World Bank, amounting to US$1.9 billion in the form of soft loan. The loan was a bilateral agreement between Indonesia and Japan under a new finance mechanism called “Cool Earth Partnership”, which started to be discussed in 2007. The “Cool Earth Loan” is given to developing countries to reduce GHG emission and to achieve economic growth in a compatible way. The scope of the assistance will cover projects and programs contributing to climate change mitigation, and many sectors and fields (forest conservation, greening, pollution prevention, energy saving and natural resource conservation, environmental conservation, new and renewable energy sources, ozone layer protection, marine pollution, prevention of desertification, water availability that contributes to prevention of infectious diseases and poverty reduction).43 When the Japanese government launched the program in 2008, the total fund available amounted to approximately US$10 billion over the next five years, aiming at two goals: 1) adaptation to climate change and improved access to clean energy (up to US$2 billion); it is a scheme of grant aid, technical assistance and financing aid through international organisations to fulfill the needs of developing countries, and 2) climate change mitigation (up to US$8 billion). This is a scheme of technology transfer from Japan and promotion of GHG emission reduction at global level.44 Examples include increased energy efficiency in power plants. The Climate Change Program Loan (CCPL) for Indonesia is the first case of Climate Change Japanese ODA Loan for climate change mitigation.45 The Japanese loan for Indonesia is an untied soft loan
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with preferential interest rate of 0.15%, 15 years of repayment period and 5 years of grace period. These requirements are somewhat more expensive in terms of repayment period than the term & conditions of “Climate Change Japanese ODA Loan,” with 0.30% interest rate, 40-year repayment period and 10-year grace period.46 Along with Japan, the French government via Agence Française de Développement (AFD) has also provided financing since early stages. During 2008-2010, France provided Indonesia with climate change program loan of US$800 million. Besides, AFD also provided a grant of technical assistance for energy efficiency in cement and steel industry (to the Ministry of Industry) as well as a feasibility study on small-scale green carbon market and methodologies for spatial plan (to the Ministry of Forestry). AFD also financed the second phase of study on GHG emission abatement cost curve undertaken by McKinsey & Company for the National Council on Climate Change (DNPI).47 During 2007-2009, the World Bank was involved in debt distribution but it was actively facilitating discussions and providing input, supporting documents and technical assistance on program priorities to be undertaken by the Indonesian government.48 The Bank’s involvement started in the 2010 budget year through a loan agreement between the Indonesian government and the World Bank under the “Climate Change Development Policy Loan (CC DPL)” scheme amounting to US$200 million. The scheme was slated to run up to 2012. Based on the ADB’s business plan in Indonesia, ADB would also be involved in climate change financing, which was slated for the year 2011. The total amount of fund available amounted to US$600 million for the 2011-2013 period.49
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Table 14. Climate Change Program Loans 2008 – 2010 No 1 2 3
Country/ Institution Japan/ JICA France/ AFD World Bank Total
Amount (in million USD) 2008 2009 2010 300 300 300 200 300 300 200 500 600 800
Total 900 800 200 1,900
Source: the Ministry of Finance, 2010
The policy reform approach in the World Bank’s loan uses the same policy matrix as used by the Indonesian-Japanese-French governments under the CCPL scheme. Some substance in the energy, peatland and forestry sectors has been sharpened. The World Bank also emphasizes that the CC DPL scheme has direct and indirect links to both completed and ongoing projects or programs, for example link with the REDD’s demonstration activities or policies on electricity price and fuel subsidy within the context of the Bank’s Infrastructure Development Policy Loan (IDPL) scheme. The scheme is also related to the loans under the Climate Technology Fund (CTF) scheme of US$400 million in 2010, namely support for friendlier policies on energy investment. The Climate Change Program Loan – CCPL and the CC DPL/WB) are aimed to support the ongoing policy reform, to address various climate change issues, through a number of goals/activities set out in the three-yearly “Policy Matrix”, which includes: Mitigation (forestry, energy, transportation), adaptation (agriculture, water, etc.), and cross-sectoral issues. The policy matrix is based on the National Climate Change Mitigation Action Plan, launched during the 2007 COP 13 in Bali and on the “National Development Planning: Response to Climate Change (Yellow Book)” published for the first time in 2008.
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The purposes of the aggregate loans are to (i) improve climate change mitigation through increase of GHG absorption and GHG emission control, (ii) strengthen the government’s adaptation capacity in responding to the adverse impacts of climate change, and (iii) improve cross-sectoral climate change-related actions, by supporting the implementation of the government’s policies on climate change through policy dialogs. Picture 1. Flow of Climate Change Program Loans
Source : Policy Matrix (GOI-JICA-AFD-WB
The fund received was not directly used to finance climate change projects/activities listed in the policy matrix. The related ministries (or institutions) would finance the activities from their own budget or other financial sources.50 The flexible characteristics of the loans enabled the government (in this case the Ministry of Finance) to use them for priority programs
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in other sectors. Thus, the distribution of the fund was mixed with the government’s budget and became an integral part of the budget use policy of the State budget of revenues and expenditures (APBN). Despite this, some activities listed in the policy matrix were still the priorities to be implemented by each of the related ministries in the fiscal year as set forth in the loan agreement. Since the loan-based cooperation mechanism was agreed, the government has produced more than ten legislation products and tens of cross-sectoral policies related to climate change mitigation and adaptation agendas in Indonesia in accordance with the policy matrix. Basically, the policy is an instrument to prepare the legal infrastructure for the institutionalization of market mechanism into the implementation of climate change agendas in Indonesia. Some of the agendas are declared not yet ready for implementation, among others those related to electricity pricing that better reflects the economic price. The progress of the implementation of the policy matrix is continuously evaluated and monitored in accordance with the World Bank and ADB’s loan distribution plan up to 2013. The various legislation products and other regulations produced are thought to help Indonesia develop profitable policies, regulations and institutional arrangements that enable Indonesia to access global climate finance and carbon market.
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Table 15. Regulations and Policies Produced based on Climate Change Policy Loan Policy Area / Sector
Policy (2007 – 2010)
Follow up (2011-2012)
1. MITIGATION
Peatland Conservation
Forestry Minister Decree No. P.55/Menhut-II/2008 on the Master Plan of Rehabilitation and Conservation of Peat Management Areas in Central Kalimantan
Forestry Minister Decree No. P.68/Menhut-II/2008 Dated 11 December Reduced Emissions 2008 on from Deforestation Implementation of and Degradation Demonstration (REDD) Activities of Reduced Emission from Deforestation and Forest Degradation (REDD) Forestry Minister Decree No. P.30/Menhut-II/2009 On Trade in Reduced Emission from Deforestation and Forest Degradation (REDD)
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To publish presidential decree that covers specific measures for petland conservation and wet peatland management to reduce carbon emission To complete the ministerial decree on REDD Mechanism and procedures that defines the roles and responsibilities of regional governments, people, and the private sector in managing carbon asset.
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Policy Area / Sector
Policy (2007 – 2010)
Follow up (2011-2012)
Forestry Minister Decree No. P.36/Menhut-II/2009 On Licensing Procedures for Utilization of Carbon Sequestration and/ or Stock in Production Forests and Protected Forest
Forest Management and Governance
Renewable Energy Development
Forestry Minister Decree No P.38/ Menhut-II/2009 Dated 12 June 2009 on Standards and Guidelines to Assessment of Sustainable Production Forest Management Performance and to Timber Legality Verification. Presidential Decree No. 4 of 2010 on Assignment to PT PLN (the National Electricity Agency) to Accelerate Development of Power Plants Powered by Renewable Energy, Coal and Gas
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To formalize inter-government transfer mechanism to finance and increase incentives for regional governments to strengthen forest management activities to reduce emission.
Policy Area / Sector
Policy (2007 – 2010) Energy and Mineral Resource Minister Decree No. 32 of 2009 on Standard Purchasing Price for Purchase of Electricity by PT PLN (the National Electricity Agency) from geothermal plants
Follow up (2011-2012) To produce draft regulations to make clearer the compensation scheme for additional cost of geothermal electricity for offtakers
To review the impacts of Energy Energy and Mineral and Mineral Resource Minister Resource (ESDM) Decree No. 31 of Minister Decree No. 2009 on Purchase of No.31/2009, and to Electricity by PT put forward new or PLN (the National revised regulations Electricity Agency) from to promote further Small- and Middle-scale and more effective Renewable Energydevelopment of powered Plants or renewable energy. Excess of Electricity The draft is to be Power prepared in 2011 and be issued in 2012. Finance Minister Decree No. 24/ PMK.011/2010 on Provision of Taxation and Customs Facilities for Use of Renewable Energy Resources
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Policy Area / Sector
Policy (2007 – 2010)
Follow up (2011-2012)
Finance Minister Decree No. 21/ PMK.011/2010 The government will bear VATs on importation of goods for upstream exploration of oil and gas, and for geothermal exploration for the 2010 fiscal year Law No. 30/2007 on Energy Energy Efficiency
Energy Pricing
Government Regulation No. 70/2009 on Energy Conservation
Finalization of the roadmap to improve electricity subsidy policy.
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- To undertaken activities in accordance with the roadmap, including arrangement. - Electricity bill will start to reflect economic and environmental costs.
Policy Area / Sector
Policy (2007 – 2010)
Follow up (2011-2012)
1. ADAPTATION
Water Resources Sector
To complete the master plan for the Java River Presidential Decree No. Basin, which 12 of 2008 on Water integrates climate Resource Board change adaptation approaches, by enacting ministerial decree.
Agriculture Sector
To develop an irrigation asset information management system . Application of the Rice Intensification System in several provinces. Application of the Climate Change Field School in selected provinces.
Disaster Risk Management
Law No. 24/2007 on Disaster Management Presidential Decree No. 8 of 2008 on Disaster Management Body that leads to the National Disaster Management Body [Badan Nasional Penanggulangan Bencana (BNPB)].
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Policy Area / Sector
Policy (2007 – 2010) The National Action Plan for Disaster Risk Mitigation (RAN PRB2010-2012) Mainstreaming of RAN PRB in the adaptation context into the national mid-term development plan (RPJMN, 2009)
Marine and Fisheries Sector
Launching of the National Action Plan for Coral Triangle Initiative (CTI) for coral reefs, fishery and foodcrops. Government’s approval of the CTI Action Roadmap for the 20102011 period.
1. CROSS SECTORAL AND INSTITUTIONAL ISSUES Mainstreaming Climate Change in the National Development Program
Approval of mitigation activities and some commitments under Copenhagen Accord (January 2010).
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Follow up (2011-2012)
Policy Area / Sector
Policy (2007 – 2010)
Follow up (2011-2012)
To issue “Development Planning Response to Climate Change” (2008) and to update it in March 2010. To finalize “Indonesia Climate Change Sectoral Roadmap” (ICCSR) in March 2010. Policy Coordination and Financing Scheme for Climate Change
To issue the national Action Plan for Climate Change Mitigation and Adaptation (December 2007) Presidential Decree No. 46 of 2008 on the National Council on Climate Change Creation of Indonesia Climate Change Trust Fund (ICCTF) Source: Policy Matrix (GOI-JICA-AFD-WB)
Under the loan scheme, Bappenas is assigned to represent the government as the head of the Steering Committee (SC) as well as the program implementor. Other SC’s representatives include the Coordinating Ministry of Economy, the Ministry of Welfare and the Ministry of Finance while the creditors monitor and send a mission twice or three times a year to supervise the government. The three creditors also provide technical
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assistance and analyst’s services to help the government develop policies in the energy, forestry and industry sectors during the implementation of the programs. The members of the SC are the ministries’ echelon I officials (equal in ranks to directorate general or deputy) assigned to provide policy directions, coordinate the overall implementation, and coordinate with the creditors to achieve the policy matrix. The members of the technical Committee are echelon 2 officials (equal in ranks to director) that meet regularly to monitor the work schedule and plan, and prepare reports and recommendations for the SC.
3.3 Sources of Grants To achieve to goals of the climate change agenda, including fulfillment of the policy matrix, the government obtains additional technical assistance, capacity building and support for pilot initiatives. Grant aids come from various donors including England, Australia, Germany and Holland, France, USA and Norway. Additional bilateral aid can also be distributed through Indonesia Climate Change Trust Fund (with UNDP as the fund manager). All the distributed funds are generally used to finance various mitigation programs through REDD scheme, and development of geothermal and renewable energy.
3.4 Debt Swap In addition to grants, the Indonesian government has signed various agreements on Debt to Nature Swap. The first one was with the German government, worth EUR12,500,000 through two programs, i.e. the “Financial Assistance for Environmental Investments for Micro and Small Enterprises” project. The scheme was given provided that the government via the Ministry of Environment would finance activities to improve small and middle-scale enterprises (UKM) engaged in environmental affairs to be able to manage resources and waste to achieve
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production efficiency equivalent to EUR6,250,000 during 20062010. Up to date, there has been debt cancellation amounting to EUR3,223,462.62 as a result of the 2006-2008. Program implementation The German’s second debt-tonature swap program was the “Strengthening the Development of National Parks in Fragile Ecosystems” program, worth EUR12,500,000. The program required the government via the Ministry of Forestry to finance the strengthening of national parks’ capacity in protected forest management in fragile ecosystems, worth EUR6,250,000 during 2007-2011. The program is implemented in (1) Gunung Leuser National Park, (2) Kerinci Seblat National Park, and (3) Bukit Barisan Selatan National Park. Debt swap agreement was also made with the US government through the “Tropical Forest Conservation Act (TFCA)” program in 2009 to maintain forest sustainability in Indonesia, which was undertaken by 2 NGOs: Conservation International Indonesia and Yayasan Kehati. Through the program, the Indonesian government would get a write-off worth nearly US$30 million over the next eight years. In return, the Indonesian government was committed to switching the rest of the repayment to a “Trust Fund” account managed by Singapore-based HSBC, amounting to nearly US$30 million as well, which was then given as grant for Sumatra’s forest conservation. The program is known as “Trust Fund” DNS TFCA. The US government contributed US$20 million and Conservation International (CI) and Yayasan Keanekaragaman Hayati (KEHATI) as the DNS TFCA swap partners each contributed US$1 million.51 The DNS-TFCA program basically facilitated conservation, protection, restoration and sustainable use of tropical rainforests under the coordination of the Ministry of Forestry. It was implemented in three regions of Sumatra: North Sumatra with Batang Gadis National Park as the focal point, in central Sumatra
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with Bukit Tigapuluh National Park as the focal point, and in South Sumatra with Way Kambas National Park as the focal point. With regard to climate change finance, the debt swap mechanism could have provided short-term finance, especially as it did not always require new institutional arrangements. However, it was feared that this short-term mechanism would create instability of public fund source in the long run. The fear was due to the difficulty in assessing how much money would possibly be generated by the scheme in the future as it depended primarily on the debt level of developing countries and the political willingness of developed countries to cut some of the debts.52 In general, debt swap agreements involve a small amount of money and require mobilization of additional funds from the recipient countries. This requires strong commitments from the recipient countries to compromising their budget use priorities to finance climate change mitigation and adaptationrelated activities. The use of debt swap for climate change also needs to be scrutinized, in order for them not to harm the national and people’s interests of Indonesia. One of Greenomics’s analyses of the Indonesia-USA debt nature swap, for example, said that the US government in fact did not give a cut to the rest of Indonesia’s debts. In fact, the USA was benefited from such mechanism with regard to climate change. Economically, the agreement did not bring positive impacts on Indonesia as it still had to repay all its debts through the trust fund managed by the Singaporean-based HSBC. At implementation level, the program actually brought new problems to national park management in Indonesia. The conservation program in Way Kambas National Park in Lampung, one of the project sites, triggered the displacement of the local fishermen and the burning of their village. About 30 huts and 170 houses were burned down by the joint force of the Park and the Police in mid-July 2010 (Walhi, 2010). The violence
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against powerless people in the name of conservation was just intolerable by any standards, especially if such an act were orchestrated by corporations to smooth their way to control and exploit natural resources in protected forests and national parks. It is therefore necessary for the government to consider the economic political aspects, in addition to technical ones, when negotiating a haircut through the debt swap scheme, for example, the determination of priority program to be financed and the terms and conditions required by the creditor. One important to be noted is whether the program benefits many people. It is natural if the creditors have some interests; however, if not careful, the people and the nation will only become the victims.
3.5 Indonesia Climate Change Trust Fund In December 2009, two countries agreed to allocate some fund to the ICCTF, namely England (up to GBP10 million, equivalent to US$16.5 million) and Australia (up to AUD2 million, equivalent to US$1.8 million). In October 2010, the UNDP received US$8,514,883 from the DFID and AusAID as their contribution to the ICCTF, where the UNDP served as the fund manager. The mechanism to receive and distribute funds complied with the program standards applicable within the UNDP. As much as US$4,633,198 was distributed to three activities to be implemented by the Ministry of Agriculture, the Ministry of Industry and the Meteorology, Climatology and Geophysics Agency (BMKG) plus another US848,499 to support the implementation of ICCTF.54 Currently, the ICCTF will only rely on grants to finance a number of ministries and institutions in mitigation and adaptation programs. However, in line with the finance mechanism, ICCTF is a combination of financing from the private-government, foreign debt and financial market sectors.
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Table 16. Financing Plan for PREP-ICCTF
Table 17. ICCTF’s Budget Summary
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Chapter IV Climate Finance Governance in Indonesia Climate change finance in Indonesia basically uses the existing mechanisms within the current foreign loans and grants. In determining and submitting proposed activities which will be financed by grants and loans, ministries/institutions hold a dominant role. This is summarized in Government Regulation (PP) No. 2/2006 and Decree of the Minister of National Development Planning/Chairman of Bappenas No. 5/2006. In the framework of foreign loan and/or grant planning, the President sets a five-year Foreign Loan Requirement Plan based on the proposal of the Ministers and the Minister of National Development Planning prepared in accordance with development priorities which can be financed by foreign loans. Foreign soft-loans are managed together by the related institutions under the coordination of the Coordinating Minister
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for Economic Affairs, Bappenas, the Ministry of Finance, Bank Indonesia, and relevant technical ministries. Bappenas will be the entrance for every new project loan proposal. Bappenas, in cooperation with creditors and ministries (or agencies), will analyze the proposed project feasibility. Project loan proposal must be registered in the Blue Book or be consistent with the umbrella climate change project listed in the Blue Book. Once the project meets the criteria and is ready to be negotiated, the Ministry of Finance will process the negotiation with the creditors and sign a loan agreement on behalf of the government. Foreign grant/loan acceptance by the national government requires the approval of the national legislature (DPR) in accordance with Law No. 17/2003 on State Finances. Therefore, all projects and programs to be financed through foreign grants/loans must be defined first in the State budget of revenues and expenditures (APBN). In terms of evaluation and reporting, ministries/institutions will submit report to Bappenas and will coordinate and submit progress report to the creditors afterwards. In terms of accountability of state budget utilization, the President is obliged to submit a bill on accountability for the state budget implementation to DPR in the form of financial statements which have been audited by The Supreme Audit Agency (BPK), no later than 6 (six) months after the fiscal year ends. Here, transparency and accountability aspects must also be taken into consideration. The audit process by the The Supreme Audit Agency of the grant and loan projects/programs for climate change is not only limited to financial aspects, but also should include supervision and performance of the projects/programs which are currently being and have been done. If necessary, rules to conduct special audits of grant and loan funds to finance climate change programs/projects have to be made. This becomes an urgent need, considering climate change fund distribution needs a
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“
Kritik terbesar dalam The biggest criticism sistem berlaku saat of theyang current system adalah, ada isinithat therebelum is no clear mekanisme of yang jelas mechanism people’s mengenai keterlibatan involvement in the rakyat di dalam whole budgetingproses process, keseluruhan especially kebijakanconcerning anggaran, budgets that willakan be khususnya yang dibiayai hibah financed by oleh foreign grants maupunand utang luar negeri loans. more transparent and accountable mechanism to ensure that ini menjadi kebutuhan yang mendesak, mengingat penyaluran danafunds perubahan membutuhkan satu mekanisme yang the reach theiklim targets. lebih transparan dan akuntabel untuk memastikan dana tersebut Although tepat sasaran.climate finance mechanism through the door of the state budget has a clear legal basis, it does not mean that Meskipun mekanisme pendanaan iklim melalui pintu APBN the management is more efficient and transparent. People’s memiliki pijakan hukum yang jelas, tidak berarti pengelolaannya involvement in planning, implementation, and evaluation on lebih efisien dan transparan. Keterlibatan rakyat dalam proses activities related to climate change must be regulated more perencanaan, pelaksanaan, hingga evaluasi kegiatan-kegiatan substantially. The biggest criticism of the current that yang terkait dengan perubahan iklim harus diatursystem secaraislebih there is no clear mechanism of people’s involvement in substansial. Kritik terbesar dalam sistem yang berlaku saatthe ini whole especially concerning that adalah,budgeting belum ada process, mekanisme yang jelas mengenaibudgets keterlibatan will be financed by foreign grants and loans.kebijakan Substantially, public rakyat di dalam keseluruhan proses anggaran, khususnya yang dibiayai hibah people’s maupunsovereignty utang luar consultation doesakan not take placeoleh to realize negeri.budgeting, Konsultasi publik dalamthe pengertian yang at substansial tidak over nor does discussions the national terjadi untuk mewujudkan kedaulatan rakyat dalam anggaran. legislature (DPR), because usually discussions on loan-financed Begitupun halnya are ketika tingkat DPR, projects/programs onlyproses limitedpembahasan to reaching andiagreement on karena biasanya pembahasan mengenai proyek/program yang the budget amount required for the programs or projects. dibiayai oleh utang hanya terbatas kesepakatan menganai besaran anggaran yang dibutuhkan dalam pembiayaan program atau proyek.
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Picture 2. Foreign Loan/Grant Mechanism53
Foreign Loan Foreign Grant
Local Goverment Central Goverment (Ministry of Finance)
Private
Chart 5. CC/ICCTF Financial Architecture
People’s participation in climate change budget planning and monitoring becomes one of the entry points of just development. With their participation in planning and budgeting, people are no longer seen as the development objects.
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People’s sovereignty over determination of climate change finance is also a key to fund distribution effectiveness so that the benefits can be reaped directly by many people. To ensure this, it takes a strong commitment from the government and the national legislature (DPR) so that climate change finance policies can meet the elements described above. Besides through the state budget of revenues and expenditures (APBN) mechanism, climate change funds are also distributed through a trust fund institution established by the government to accommodate climate change finance. In September 2009, the Indonesian government officially launched a new institution named Indonesia Climate Change Trust Fund (ICCTF) through Decree of the Minister of National Development Planning No.44/M.PPN/HK/09/2009. ICCTF is expected to be complement of various finance mechanisms that already exist and can serve as a financing alternative to finance various activities related to climate change issues. The United Nation Development Programme (UNDP), the United Nations’s network, has been appointed to manage the fund during the transition period before the Indonesian government takes full control of it. Fund management by a trust fund is not yet known in Indonesia’s financial governance system. This is due to the absence of laws that regulate formation of such a trust fund to manage foreign funds. Therefore, the appointment of UNDP is confirmed as a way to solve such an obstacle. Nevertheless, trust fund institutions are still established in Indonesia and are adjusted to specific needs. Thus, to deal with such a problem, government is formulating Government Regulation Plan (RPP) for foreign loan and grant provision procedures. From the meeting minutes published by the Department of Justice and Human Rights, it is known that the development of RPP is meant to legalize trust fund’s existence, which has no clear legal basis.55
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Actually, the purpose of ICCTF is to develop a low-carbon economy in Indonesia in accordance with the national development plan set out in the Medium-Term Development Plan (RPJM) and the Government Work Plan (RKP). To meet this need, ICCTF is placed as a forum to facilitate and speed up investment in renewable energy and energy efficiency, sustainable forest management, and conservation, and also o reduce the vulnerability of coastal, agricultural, and waters areas. In addition, this institution is also expected to bridge the lack of funds required for the government’s recent framework of climate change adaptation and mitigation. All financed activities must conform with government’s policies in the fight against climate change in accordance with the National Action Plan and the Yellow Book issued by Bappenas. Moreover, climate change funds available at international level is leading to a trend of the need to create a kind of special trust fund at national level given the scope that is limited to mitigation and adaptation only. For the government and donors, it is considered an effective way to improve the management effectiveness in addressing climate change in Indonesia in a more transparent, accountable, and efficient way. It aims to combine domestic and international finances to invest in government’s projects which are usually ineligible for state budget financing. Budgeting mechanism by using the existing bureaucracy is considered too complicated and hampers fund distribution in Indonesia. ICCTF consists of two phases and two types of funds. In the first phase called “Innovation Phase”, ICCTF will distribute grants to non-profit socioeconomic activities. The funds to be distributed come from various donor institutions of friend countries and multilateral institutions, and are called “Innovation Funds”. In the second phase, ICCTF provides “Transformation Fund” finance mechanism which will use the funds coming from
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Public-Private Partnership, loans, and financial markets. Such funds can be distributed for various activities that contribute to emission reduction. The Innovation Fund was operational in late 2010 while the Transformation Fund is expected to be operational in 2013. The ICCTF is managed by the Environment Directorate of Bappenas and supported by various international institutions, including the United Nations Development Programme (UNDP). Table 18. ICCTF Implementation Phases
All ICCTF’s investment decisions must be made by the SC that consists of representatives from Bappenas, the Ministry of Finance, National Council on Climate Change; and donors. Two representatives of the civil society are invited to attend SC meeting as members with no voting rights. A Technical Committee, represented by Bappenas, the Ministry of Finance, and donors will support the SC in selecting and evaluating proposals and activities. A Secretariat is established to manage the daily operations, to provide technical, administrative and logistic supports for the SC and the Technical Committee, and to
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provide capacity building and technical assistance to ministries and local governments implementing ICCTF-financed initiatives. Finance contribution through the ICCTF mechanism will go into a special account managed by the trust fund structure, where UNDP is appointed as a temporary fund manager, to be further handed over to an independent financial institution such as a bank. This means that the Indonesian government hands over the financial management to an independent institution. All the money coming into the ICCTF account is a separate part of the State finances. Therefore, an audit of the ICCTF fund will be conducted by an independent auditor appointed by the fund manager. It is also mentioned that ICCTF fund management will use the principles of accountability and transparency. The national laws (laws or other governmental regulations) concerning financial management, audit, bid, monitoring, and evaluation can be used as far as is relevant to the needs of the ICCTF. Otherwise, ICCTF’s technical standard (SOP) will be applicable.56 Fund given by donors to the ICCTF is still off-budget. After the ministry/institution whose proposal is approved receives the ICCTF fund, the program must be registered into the Budget Implementation Entry List (DIPA). At this point, the fund is already included in the budgeting system of the state budget. The fund included in DIPA/the state budget system as usual will be audited by the The Supreme Audit Agency (BPK). If the ICCTF will provide fund to CSOs/Universities directly (not yet decided at this time), then system will not be the same as that applicable to ministries/agencies, who must register it to DIPA. In such a case, the system to be used is the existing reporting system that is considered the most accountable and will be audited by an independent auditor.
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However, not all climate change funds will be distributed through the state budget or the ICCTF. In the case of Norway’s financial support worth US$1 billion for mitigation programs, the government of Norway and Indonesia agree to use the UNDP as a “trustee” or a grant management institution, despite the Indonesian government’s previous proposal to use one of the national banks to manage the grant. Norway would not approve if the grant were managed by a financial institution offered by the government of Indonesia. The rejection is due to the fact that Indonesia has no law on trust fund.57
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Chapter V Climate Fund Management Principles
5.1. Company’s Tax and Individual Subsidy The implementation of market principles cannot be interpreted simply that subsidies should be removed. It is precisely the State’s tasks to undertake redistribution by imposing taxes on the one side and providing subsidies on the other side. So the subsidy mechanism is not the only one to be affected, but taxes can be applied to the greatest emitters. In developing countries like Indonesia, policies cannot be individually-based, but institutionally-based. Palm oil, coal, and oil and gas companies can be targeted to pay higher taxes. Meanwhile, the state serves to distribute taxes to individuals who really need subsidies.
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5.2 Climate Change Finance Does Not Come From Loans The government’s heavy loan burden makes it difficult to carry out environmental conservation programs. This is not a surprise as all the attention is focused on the effort to repay all the loans. Even the government should cut down the budgets of very important sectors to set aside more funds to repay the loans. Therefore, debt write-off is an important solution of Indonesia to have sufficient funds to restore and prevent the adverse impacts of climate change and to meet people’s basic rights. Loan use in climate change financing must also be scrutinized. Since the 1970s, multilateral financial institutions like IMF, the World Bank, and ADB have been influential in regulating that any loan given is used to reform economic policies to allow expansion of international companies in Indonesia. Developing countries have become laboratories to apply the standard recipes for economic recovery and neo-liberal style development such as investment liberalization, free trade, and social budget reduction. The use of grants for climate change must also consider such aspects, so that the uses of all the grants given are focused only on specific purposes outlined in the national development priorities and do not contradict with the constitution. In line with this, international financial institutions’ involvement (the World Bank and ADB) in climate change affairs in Indonesia itself is naturally in direct contradiction to climate justice principles. Multilateral financial institutions like IMF, the World Bank, and ADB, are deemed non-transparent and unaccountable and they are also believed to have worked for the sake of the First World countries that constitute the major shareholders, to intervene in recipient countries. These institutions promote “development” paradigm which is
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contrary to the welfare of the people and the planet. They are also responsible for the accumulation of illegitimate debt in Indonesia and southern countries in general. Even to this day, as what they have been doing steadily for several decades, they keep financing dangerous projects, including large-scale fossil fuel projects and other projects aggravating climate change. Therefore, climate change finance should not be in the form of loan or other loan instruments requiring political or economic prerequisites, or in the form of private investment. This violates the principles and objectives for improvement and recovery, increases oppression to Southern countries, further damages people’s and nature’s rights, and deepens capitalist exploitation and colonization of the atmosphere. The government is also demanded to use the state budget efficiently so that sufficient and sustainable funds are available at domestic level to finance various adaptation activities in Indonesia.
5.3 Expansion of Adaptation Programs Indonesia, like other developing countries, should have more adaptation programs than mitigation ones. Donors and recipients do not share equal institutional qualities, so do the complexities of the problems faced. Therefore, the proportion of adaptation programs should be higher. This research has not yet described adaptation finance scheme proposals in Indonesia. Therefore, further studies on this subject will be necessary to provide strong basis for the implementation of climate change agendas in Indonesia that will bring more benefits to the people.
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PENDANAAN IKLIM Climate Finance antara kebutuhan dan keselamatan between People’s Needs and Safety Rakyat
5.4 ofPartisipasi Participation 5.4Expansion Perluasan Persoalan di negara sedang berkembang kemampuan The problem in developing countries adalah is negotiation skill melakukan negosiasi (capacity building) yang becampur (capacity building) which is mixed with personal interest dengan mengemukanya kepentingan pribadi (korupsi). Hasil (corruption). The ultimate result is policies excluding marginalized akhirnya adalah kebijakan yang mengeklusi masyarakat marjinal. communities. To addresspendekatan these wouldyang require more community’s Untuk itu, dibutuhkan lebih menginklusikan interest-oriented approaches by involving multistakeholders kepentingan masyarakat dengan melibatkan berbagai pihak terkait (multistakeholder), seperti masyarakat such as local communities, NGOs, universities, etc. lokal, NGO, perguruan tinggi dan sebagainya.
5.5 Support 5.5 Institutional Dukungan Kelembagaan APBN sebagai mekanisme perubahan The state budget as the penyaluran mechanismpendanaan to distribute climate iklim di Indonesia perlu mendapatkan perbaikan. Partisipasi change funds in Indonesia needs to be improved. People’s rakyat dalam seluruh proses pembuatan anggaran untuk participation in the whole budgeting process for climate change kegiatan mitigasi dan adaptasi perubahan iklim harus mendapat mitigationPartisipasi and adaptation activities shouldtingkatan be prioritized. This prioritas. ini berlaku di seluruh baik pada participation takes place at levels, local ketersediaan to national. Therefore, level daerah hingga nasional. Karenanya, informasi menjadi satu hal sangat becomes vital, agarvery kontrol hal the availability ofyang information vitalrakyat so thatdalam people’s perencanaan dan pengawasan anggaran bisa diwujudkan dalam control in budget planning and monitoring can be realized at a tingkat yang lebih substansial. Hal ini perlu didukung oleh more substantial level. It also needs to juga be supported by effective kelembagaan DPR yang efektif, agar proses pembahasan dan institutional capacity of the national legislature (DPR), so that pengawasan anggaran, khususnya yang menyangkut dengan budget discussions process, especially regarding agenda perubahan and iklimmonitoring memberikan jaminan kepastian bahwa climate banyak change agenda, guarantee that the general rakyat sebagai may penerima manfaat utama dari public dana are the main beneficiaries of the fund. tersebut.
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The existence of trust fund to accommodate climate change Keberadaan lembaga dana perwalian (trust fund) untuk funds in Indonesia also has to be strictly overseen by people. menampung pendanaan perubahan iklim di Indonesia The adoption of the principles of participation, transparency, juga harus mendapat kontrol yang kuat dari rakyat. accountability, and effectiveness of climate akuntabiliatas, change fund Prinsip-prinsip partisipasi, transparansi, distribution in thispenyaluran mechanismdana does perubahan not necessarily this serta efektifitas iklimsetyang institution free from the state financial system rules that diadopsi dalam mekanisme ini, tidak serta-merta dapat membebaskan lembaga dalam aturan keuangan have been set forth in theini constitution and sistem laws. The national negara yang telah diatur dalam konstitusi dan undang legislature (DPR) also needs to oversee the trust fund institution undang. Pengawasan terhadap keberadaan to prevent abuse of power and corruption. The role of thelembaga national dana perwalian juga perlu dilakukan oleh DPR, untuk legislature (DPR) in its monitoring and budgeting functions menghindari penyalahgunaan kewenangan dan korupsi. shouldDPR also be strengthened to prevent accumulation of loans in Peran juga harus diperkuat, dalam menjalankan fungsi the name of climate programs. pengawasan dan change pembuat anggaran untuk mencegah
terjadinya praktek akumulasi utang atas nama program perubahan iklim.
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Chapter VI
Closing
Climate funds sourced from foreign loans and promotion of a market-based approach in climate disaster management in Indonesia are a new way of foreign capital expansion in Indonesia. A policy matrix containing policy reform programs in the forestry and energy sectors provides strong support for creation of carbon market and markets for technology from developed countries. In addition, these new policies are used to speed up the implementation of liberalization agenda, such as energy subsidy removal to create a more friendly investment climate for investors.
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Dari semua itu, jalan ceritanya All thesesama, tell the same story: investors selalu pemilik modal wins the struggle, while people continue memenangkan perebutan, sementara to suffer.terus-menerus In the forestry menderita. sector, for rakyat Di sektor example, whenkehutanan our forests misalnya, were still pada waktu hutan kita masih lebat, dense, forest managers and forestry para pengelola hutan dan industry industries benefited enormously from kehutanan memperoleh keuntungan them. When forests have been cleared sangat besar dari hutan kita. Ketika and most of them havedan beensebagian planted hutan sudah dibuka with oilditanami palm, it iskelapa the entrepreneurs and besar sawit, lagi-lagi capitalists again that gain the benefits. para pengusaha dan pemilik modal yang diuntungkan. Satu pertanyaan One intriguing question is will REDD Plus menggelitik : apakah skema REDD plus scheme lead to the same results, in which juga akan bernasib serupa, yaitu para capitalists will earn a big profit, while pemilik modal akan mendapatkan the people once again have to suffer for keuntungan yang tinggi, sementara long? lagi-lagi harus menanggung rakyat derita yang panjang.
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Endnotes 1. DNPI Media Kit 2010. The emission figures for Indonesia and their details vary. Some even are still controversial. See the emission details from the Ministry of Environment (2009) below. 2. See, for example, UNEP’s report “Rethinking the Economic Recovery: A Global Green New Deal”, April 2009. The report said that following food, energy and financial crises, the perception that expenses to finance climate change were a burden was a big mistake. Restoration projects promoting environmental issues could even become like the New Deal in Roosevelt’s time (1930). Specifically, the report encouraged the birth of a new commitment in the form of “Global Green New Deal” (GGND) to address the situations post the 2007/2008 crises. 3. See the Financial Express, Saturday, 11 December 2010. Previously, the Times of India said that during the summit meeting the Indian Minister of Environment had expressed a commitment that India would be legally bound to international agreements to reduce emission. 4. ADB (2009), The Economics of Climate Change in Southeast Asia: A Regional Review. Manila 5. Bank Dunia (2010), Memasyarakatkan Perubahan Iklim Demi Kelestarian Lingkungan
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6. Human Right Watch’s report (2003), as quoted in “Menanti Tanggung Jawab Sosial Sektor Finansial di Indonesia”, BWI & SOMO. (2004). 7. The loss arising from the 1997-1998 forest fires is estimated to fetch US$9.3 billion, excluding the incalculable cost such as increasing green house effects, which according to researches are quite significant. 8. “Partners in Crime: Greenpeace’s Investigation into the Connection between England and Indonesia’s Timber Tycoons”, prepared by Greenpeace. 9. National Council on Climate Change, (2009), National Economic, Environment and Development Study (NEEDS) for Climate Change, Indonesia Country Study 10. Data from Stern Review on the Economics of Climate Change. 11. As explained in http://en.wikipedia.org/wiki/European_Union_ Emission_Trading_Scheme, 12. See Jitendra Kumar Singh, Clean Development Mechanism (CDM) and Carbon Trading in India. 13. See Antara News, Monday, 25 October 2010, “Norway satisfied with the implementation of LoI with Indonesia”. 14. Asa Persson, et all., Adaptation Finance under a Copenhagen Agreed Outcome, Stockholm Environment Institute, 2009. 15. Parry, M. et al. 2009. Assessing the Costs of Adaptation to Climate Change: a review of the UNFCCC and other recent estimates. International Institute for Environment and Development and Grantham Institute for Climate Change, London. 16. Oxfam International, Adapting to Climate Change, Oxfam briefing Paper, May 2007. 17. The source? (isn’t the figure too big?) See for example, the “Bretton Woods Project 2011” report showing the WBG’s statistics for CDM.
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18. Charlie Parker, Jessica Brown, Jonathan Pickering, Emily Roynestad, Niki Mardas, Andrew W. Mitchell, The Little Climate Finance Book, Oxford UK: Global Canopy Programme, 2009, 20. 19. World Bank, The Costs to Developing Countries of Adapting to Climate Change: New Methods and Estimates The Global Report of the Economics of Adaptation to Climate Change Study Consultation Draft, siteresources.worldbank.org/INTCC/.../ EACCReport0928Final.pdf 20. BAPPENAS, National Development Planning: Indonesia Responses to Climate Change, Badan Perencanaan Pembangunan Nasional, 2010. 21. Bali action Plan, paragraph 1 b ii in Decision 1/CP.13. 22. http://www.odi.org.uk/resources/download/5159-english.pdf. 23. See for example, Lohman, L. Uncertainty Markets and Carbon Markets- Variations on Polanyian Themes, The New Political Economy. Ibid, Carbon Trading: a critical conversation on climate change, privatisation and power. Upsalla, Dag HammarskjÜ ld Foundation, 2006. 24. During the G-20 Summit in September 2009 in Pittsburgh, President Yudhoyono voluntarily expressed Indonesia’s commitment to an ambitious strategy (road map) to reduce emission by up to 26% compared with the business as usual level up to 2020, making Indonesia the first developing country to undertake that. Indonesia repeated its reduction commitment in COP-15 negotiation round in Copenhagen in December 2009, and then was associated with Copenhagen Accord in Januari 2010. 25. Academic paper on the 2010-2014 National Action Plan to Reduce GHG Emission, September 2010. 26. Global Canopy Programme, The Little Climate Finance Book, UK: Oxford, 2009.
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27. Global Canopy Programme, The Little Climate Finance Book, UK: Oxford, 2009. 28. Asa Persson, et all., Adaptation Finance under a Copenhagen Agreed Outcome, Stockholm Environment Institute, 2009 p. 15. 29. BAPPENAS, National Development Planning: Indonesia Responses to Climate Change, Badan Perencanaan Pembangunan Nasional, 2010. 30. BAPPENAS, Indonesia Climate Change Sectoral Roadmap (ICCSR), BAPPENAS, December 2009. 31. Academic paper on the 2010-2014 National Action Plan to Reduce GHG Emission, September 2010. 32. DNPI, National Economic, Environment and Development Study (NEEDS) for Climate Change, National Council on Climate Change Republic of Indonesia, December 2009. 33. Koalisi Anti Utang’s Briefing Paper, 2010. 34. http://www.odi.org.uk/resources/download/5159-english.pdf. 35. Dr. Maurin Sitorus, Pengelolaan Pendanaan Perubahan Iklim Pemerintah Indonesia, Direktorat Pinjaman dan Hibah Ditjen Pengelolaan Utang, 2010. 36. Firdaus Cahyadi, Isu Perubahan Iklim dan Proyek Utang, Satu Dunia, 2009, http://www.satudunia.net/content/isuperubahaniklim-dan-proyek-utang 37. Voice Of America, LSM: Dana Perubahan Iklim Jangan Melalui Skema Utang, http://www.voanews.com/indonesian/ news/LSMDesak-Dana-Perubahan-Iklim-Bukan-dariUtang-98678174.html. 38. http://nasional.kompas.com/read/2008/12/24/03124159/ utang.perubahan.iklim.ditentang. 39. World Bank, Beyond the Sum of Its Part; Combining Financial Instruments to Support Low-Carbon Development, World Bank, 2010.
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40. Climate Investment Fund, Clean Technology Fund: Investment Plan for Indonesia, April 2010, http://www. climateinvestmentfunds.org/cif/sites/climateinvestmentfunds. org/files/CTF_Indonesia_investment_plan_041210.pdf. 41. Ibid 42. World Bank Climate Investment Fund, Institute for Essential Service Reform, Briefing Focus Vol. 1. No. 2 September 2008. 43. JBIC Press Release, September 2, 2008. See: http://www. jica.go.jp/english/news/jbic_archive/autocontents/english/ news/2008/000105/index.html. 44. Japan International Cooperation Agency (JICA), JICA’s Cooperation in Climate Change, June 1, 2009. 45. Financial Mechanism for “Cool Earth Partnership”, lihat: http:// www.mofa.go.jp/policy/economy/wef/2008/mechanism.html. 46. Japan International Cooperation Agency (JICA), “Terms and Conditions of “Climate Change ODA Loan,” April 1, 2010. See: http://www.jica.go.jp/english/operations/schemes/oda_loans/ standard/index.html 47. International Bank for Reconstruction and Development, Climate Change Development Policy Loan, Program Document, 2010. www.worldbank.org. 48. Ibid 49. Asian Development Bank, Country Operations Business Plan, Indonesia: 2011-2013, September 2010. 50. BAPPENAS, National Development Planning: Indonesia Responses to Climate Change, Badan Perencanaan Pembangunan Nasional, 2010. 51. Greenomics Indonesia, Kesepakatan “Debt for Nature Swap” ASRI, Juni 2009. 52. Global Canopy Programme, The Little Climate Finance Book, UK: Oxford, 2009.
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53. ICCTF update, September 2010. www.icctf.org 54. Peraturan Pemerintah No. 2 Tahun 2006 tentang Tata Cara Pengadaan Pinjaman dan/atau Penerimaan Hibah serta Penerusan Pinjaman dan/atau Hibah Luar Negeri. 55. h t t p : / / d j p p. d e p k u m h a m . g o. i d / h o m e / 6 3 - r a n c a n g a n peraturanpemerintah/490-rpp-tentang-tata-cara-pengadaanpinjaman-luarnegeri-dan-penerimaan-hibah.html. 56. http://www.icctf.org/site/ 57. http://www.neraca.co.id/2010/11/03/pemerintah-gagalyakinkankemampuan-perbankan-nasional/.
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BIBLIOGRAPHY 1. Ahya, Chetan, Deyi Tan and Shweta Singh. 2009. Indonesia Economics Adding Another ”I” to the B‐R‐I‐C Story?, Morgan Stanley Research. 2. Asa Persson, et all., 2009. Adaptation Finance under a Copenhagen Agreed Outcome, Stockholm Environment Institute. 3. Asia Foundation Team. 2008. The Cost of Moving Goods Road Transportation, Regulations and Charges in Indonesia, Research Report, The Asia Foundation. 4. Asian Development Bank. 2010. Country Operations Business Plan, Indonesia: 2011-2013, ADB. 5. BAPPENAS, 2010. National Development Planning: Indonesia Responses to Climate Change, Badan Perencanaan Pembangunan Nasional. 6. BAPPENAS. 2010. National Strategy REDD Plus, Badan Perencanaan Pembangunan Nasional. 7. Casson, Anne. 2003. ” Oil palm, soybeans & critical habitat loss”, A Review Prepared for the WWF Forest Conversion Initiative, WWF. 8. Casson, Anne. 2001. “Decentralisation of Policy Making and Administration of Policies Affecting Forests and Estate Crops in Kotawaringin Timur”, Working Paper, CIFOR.
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9. Casson, Anne. 1999. The Hesitant Boom: Indonesia’s Oil Palm Sub-Sector in an Era of Economic Crisis and Political Change, Center for International Forestry Research. 10. Charlie Parker, Jessica Brown, Jonathan Pickering, Emily Roynestad, Niki Mardas, Andrew W. Mitchell. 2009. The Little Climate Finance Book, Oxford UK: Global Canopy Programme, 11. Climate Investment Fund, April 2010. Clean Technology Fund: Investment Plan for Indonesia, http://www. climateinvestmentfunds.org/cif/sites/climateinvestmentfunds. org/files/CTF_Indonesia_investment_plan_041210.pdf. 12. DNPI. 2009. National Economic, Environment and Development Study (NEEDS) for Climate Change, National Council on Climate Change Republic of Indonesia, December 2009. 13. Greenomics Indonesia. 2009. Kesepakatan “Debt for Nature Swap” AS-RI. 14. Humphreys, Macartan, Jeffrey D. Sachs and Joseph E. Stiglitz. 2007. Escaping the Resource Curse, Columbia University Press. 15. IIED Briefing. 2009. Financing REDD: Meshing Market with Government Funds. 16. International Bank for Reconstruction and Development, Climate Change Development Policy Loan, Program Document, 2010. www.worldbank.org. 17. Lyon, Gerard, Fauzi Ichsan, Eric Sugandi, Lee Wee Kok and Thomas Harr. 2009. Indonesia Asia’s Emerging Powerhouse, Standard Cartered Bank. 18. Memis, Emel and Manuel F. Montes. 2008. “Who’s afraid of Industrial Policy?”, Discussion Paper, Asia Pacific Trade and Investment Initiative, UNDP. 19. Molnar, Margit and Molly Lesher. 2008. “Recovery and Beyond: Enhancing Competitiveness to Realise Indonesia’s Trade Potential”, OECD Trade Policy Working Papers No. 82.
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20. Naskah Akademis Rencana Aksi Nasional Penurunan Emisi Gas Rumah Kaca 2010-2014, September 2010. 21. Oxfam International. 2007. Adapting to Climate Change, Oxfam briefing Paper, May 2007. 22. Palley, Thomas I.. 2003. “Lifting the Natural Resource Curse”, Foreign Service Journal, 80: 54 – 61. 23. _____. 2006. “The Fallacy of the Revised Bretton Woods Hypothesis”, Public Policy Brief No.85, The Levy Economics Institute of Bard College. 24. Parry, M. et al. 2009. Assessing the Costs of Adaptation to Climate Change: a review of the UNFCCC and other recent estimates. International Institute for Environment and Development and Grantham Institute for Climate Change, London. 25. Sachs, J. and A.M. Warner (2001). The Curse of Natural Resources, European Economic Review, 45, 827‐838. 26. Sitorus, Maurin, Dr. 2010. Pengelolaan Pendanaan Perubahan Iklim Pemerintah Indonesia, Direktorat Pinjaman dan Hibah Ditjen Pengelolaan Utang. 27. Stijns, Jean‐Philippe C. 2001. Natural Resource Abundance and economic Growth Revisited, Working Paper. 28. Nigel Thornton (2010), Realing development effectiveness: Making the Most of Climate Change Finance in Asia and the Pacific, Capacity Development for Development Effectiveness Facility for Asia and Pacific. 29. Transparency International, Forest Governance Integrity in Asia Pacific, TIAP Strategy 2010. 30. Forest governance in Congo: Corruption rules?, U4 BRIEF, September 2010 31. World Bank, The Costs to Developing Countries of Adapting to Climate Change: New Methods and Estimates The Global Report of the Economics of Adaptation to Climate Change Study
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Consultation Draft, siteresources.worldbank.org/INTCC/.../ EACCReport0928Final.pdf 32. World Bank, 2010. Beyond the Sum of Its Part; Combining Financial Instruments to Support Low-Carbon Development, World Bank. 33. Peraturan Pemerintah No. 2 Tahun 2006 tentang Tata Cara Pengadaan Pinjaman dan/atau Penerimaan Hibah serta Penerusan Pinjaman dan/atau Hibah Luar Negeri.
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GLOSSARY APBN( Anggaran Pendapatan dan Belanja Negara ) : State budget of revenues and expenditures BAPPENAS ( Badan Perencanaan Pembangunan Nasional) : National Agency Planning BMKG ( Badan Meterologi, Klimatologi dan Geofisika) : Meteorology, Climatology and Geophysics Agency BPK ( Badan Pemeriksa Keuangan ) : Supreme Audit Agency, BPS (Badan Pusat Statistik) : BPS-Statistic Indonesia (Previously Central Statistical Bureau) DPR ( Dewan Perwakilan Rakyat ) : House of Representative BUMN (Badan Usaha Milik Negara) : State-Owned Enterprises CCPL ( Climate Change Program Loan) DIPA (Daftar Isian Pelaksanaan Anggaran ) : Budget Implementation Entry List DNPI ( Dewan Nasional Perubahan Iklim ) : National Council on Climate Change HPH (Hak Penguasaan Hutan ) : Forest Concession Scheme MW : Mega Watt PBN (Perusahaan Perkebunan Negara) : State-owned Plantation Enterprise PBS (Perusahaan Perkebunan Swasta) : Private Plantation PR (Perkebunan Rakyat) : Smallholder’s Plantation
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RAN-GRK (Rencana Aksi Nasional Penurunan Gas Rumah Kaca) : National Action Plan for Gas House Gases Reduction REDD : Reducing Emissions from Deforestation and Forest Degradation RKP (Rencana Kerja Pemerintah) : Government Work Plan RPJMN ( Rencana Pembangunan Jangka Menengah Nasional) : National Mid-term Development Plan RPJP (Rencana Pembangunan Jangka Panjang) : Long-Term Development Plan SC( Steering Committee) UN REDD Program : the United Nations Collaborative initiative on Reducing Emissions from Deforestation and forest Degradation (REDD) in developing countries WW (World War)
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Ralat Buku Edisi Bahasa Indonesia : - Halaman xiii paragraf 2, baris 4 dari bawah, tertulis CLSA, Standchart dsb seharusnya CLSA, Standchart dan sebagainya. - Halaman xvii seharusnya adalah Foto dengan tulisan Only 50 years left What will you do for our future. - Halaman 9 Tabel 18. Phase 2 ( innovation fund) pada kolom executing institutions, tertulis phase 3, seharusnya tidak ada. - Halaman 14 tertulis Perusahaan-perusahaan seperti PT. Barito Pacific, PT. Indo Rayon Utama, dll seharusnya tertulis Perusahaanperusahaan seperti PT. Barito Pacific, PT. Indo Rayon Utama, dan lain-lain. - Halaman 14 tertulis Lemhan Brothers seharusnya Lehman Brothers. - Halaman 60 paragraf 1 baris 9 poin c tertulis Debt to Nature swap seharusnya Debt to Nature Swap. - Halaman 68 Tabel 11 tertulis The Climate change sector loan seharusnya The Climate Change Sector Loan - Halaman 76 tertulis pertanian, air dll, seharusnya tertulis pertanian, air dan lain-lain. - Halaman 99 tertulis Tabel 17. Tahapan Implementasi ICCTF, seharusnya tertulis Tabel 18.
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