FINAL ASSESSMENT REPORT
PES/REDD+ FINANCE ASSESSMENT AND DEVELOPMENT OF STRATEGIES TO INCENTIVIZE LANDSCAPE SCALE LEDS
JAKARTA, MARCH 31, 2016
This publication was produced for review by the United States Agency for International Development. It was prepared by Tetra Tech ARD.
This publication was prepared by PT. Hydro Program International and supported by the USAID LESTARI program.
This publication was prepared for review by the United States Agency for International Development under Contract # AID-497-TO-15-00005.
The period of this contract is from July 2015 to July 2020.
Implemented by: Tetra Tech P.O. Box 1397 Burlington, VT 05402
FINAL ASSESSMENT REPORT
PES/REDD+ FINANCE ASSESSMENT AND DEVELOPMENT OF STRATEGIES TO INCENTIVIZE LANDSCAPE SCALE LEDS
JAKARTA, MARCH 31, 2016
DISCLAIMER This publication is made possible by the support of the American People through the United States Agency for International Development (USAID). The contents of this publication are the sole responsibility of Tetra Tech ARD and do not necessarily reflect the views of USAID or the United States Government.
USAID LESTARI Final Assessment Report - PES/REDD+ Finance Assessment and Development of Strategies to Incentivize Landscape Scale LEDS P a g e | 1 TABLE OF CONTENTS
LIST OF TABLES ...... 4 LIST OF FIGURES ...... 5 ACRONYMS AND ABBREVIATIONS ...... 6 EXECUTIVE SUMMARY ...... 12 RINGKASAN EKSEKUTIF ...... 14 1. INTRODUCTION ...... 16 Payment for Environmental Services (PES) concept ...... 17 HPI’s activities in accomplishing the SOW objectives ...... 18 2. FINANCIAL ARCHITECTURE FOR RURAL LOW EMISSION DEVELOPMENT IN FOREST AND AGRICULTURE ...... 20 2.1. Nationally operated financing supports ...... 26 2.1.1. The Indonesia Climate Change Trust Fund (ICCTF) ...... 26 2.1.2. Forest Management Unit (FMU) Fund ...... 28 2.1.3. Shared Revenue Fund (Dana Bagi Hasil – DBH) on Forestry ...... 30 2.1.4. Village Fund (Dana Desa) ...... 32 2.1.5. National Community Empowerment Program (Program Nasional Pemberdayaan Masyarakat PNPM – Mandiri Kehutanan) ...... 33 2.1.6. People’s Business Credit Program (Kredit Usaha Rakyat - KUR) ...... 34 2.1.7. Timber Harvesting Postponement Credit (Kredit Tunda Tebang - KTT) ...... 36 2.1.8. Watershed Fund (Dana Daerah Aliran Sungai - Dana DAS) ...... 37 2.1.9. Grant from the Central Government to Local Government (Hibah Daerah) ...... 38 2.1.10. National Park Fund (Dana Taman Nasional) ...... 40 2.2. Internationally operated financial support mechanisms ...... 41 2.2.1. Norway – Indonesia REDD+ partnership ...... 44 2.2.2. Forest Investment Program (FIP) ...... 46 2.2.3. Forest Carbon Partnership Facility (FCPF) ...... 51 2.2.4. REDD Early Movers (REM) ...... 55 2.2.5. Green Climate Fund (GCF) ...... 56 2.2.6. Global Environment Facility (GEF) managed funds ...... 59 2.2.7. BioCarbon Fund Initiative for Sustainable Forest Landscapes (ISFL) ...... 62 2.2.8. Bilateral commitments financing support ...... 63 2.2.9. Market-based payments for emission reductions (compliance & voluntary) ...... 68 2.3. Private sector & civil society financial support mechanisms...... 72 2.3.1. NGOs (national and international) ...... 72 2.3.2. Private companies...... 75 3. DEVELOPMENTS TO BE MONITORED ...... 78 4. INSTITUTIONS WITH A MANDATE TO IMPLEMENT PES AND REDD+ ...... 80 4.1. Context and relationship between implementing institutions ...... 80 4.2. Readiness of actors at the landscape level ...... 87
USAID LESTARI Final Assessment Report - PES/REDD+ Finance Assessment and Development of Strategies to Incentivize Landscape Scale LEDS P a g e | 2 4.2.1. Readiness of actors in Aceh ...... 87 4.2.2. Readiness of actors in Central Kalimantan ...... 88 4.2.3. Readiness of actors in Papua ...... 89 5. GOVERNMENT REGULATIONS ON PES AND REDD+ ...... 91 a) Draft Regulation on Environmental Economics Instruments ...... 91 b) Law No. 23 of 2014 on Regional Governance (Article 14) ...... 93 6. CONCLUSIONS ...... 95 6.1. Focal point of coordination for funding opportunities...... 95 6.2. Financing opportunities and mechanisms for LESTARI ...... 95 6.3. Maintaining the potential for renewable energy development ...... 97 6.4. Challenges of regulatory frameworks and institutional readiness ...... 98 6.5. Challenges of PES/REDD+ design and implementation ...... 99 7. RECOMMENDATIONS ...... 101 7.1. Incorporating PES in the utilization of domestic funds ...... 101 7.2. Supporting the establishment of Climate Change BLU under the MoF ...... 102 7.3. Accessing the GCF and Norway funds ...... 102 7.4. Designing PES scheme ...... 103 7.4.1. PES design on water in Southeast Aceh (including. Gayo Lues) ...... 104 7.4.2. PES design on water in the buffer zone of Cyclops Nature Reserve ...... 104 7.4.3. PES design in Central Kalimantan ...... 105 8. REKOMENDASI-REKOMENDASI ...... 106 8.1. Mengintegrasikan PJL dalam pemanfaatan dana domestik ...... 106 8.2. Mendukung pembentukan BLU Perubahan Iklim ...... 107 8.3. Mengakses dana GCF dan dana Norwegia ...... 107 8.4. Skema pengembangan pembayaran jasa lingkungan ...... 109 8.4.1. Desain PJL air di Aceh Tenggara (termasuk Gayo Lues) ...... 110 8.4.2. Desain PJL air di kawasan penyangga Cagar Alam Cyclops ...... 110 8.4.3. Desain PJL di Kalimantan Tengah ...... 110 9. BIBLIOGRAPHY ...... 112 ANNEXES: ...... 116 Annex 1. Funds Profile ...... 116 Annex 2. ICCTF Project Management Cycle ...... 123 Annex 3. KUR Application Procedure and Distribution Mechanism ...... 124 Annex 4. Questionnaires for LESTARI Site Visit ...... 126 Annex 5. List of Stakeholders Consulted ...... 134 Annex 6. Government Regulations Related To PES And REDD+ ...... 136 Annex 7. Indicative Work Plans ...... 149
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LIST OF TABLES
Table 1: Financial barriers, types and mechanisms ...... 22 Table 2: Sources of existing FMU development funding ...... 28 Table 3: Shared Revenue (DBH) distribution ...... 31 Table 4: Plan for the 2016 sectoral KUR feature...... 35 Table 5: FIP activities in Indonesia ...... 47 Table 6: FIP funds allocation ...... 47 Table 7: FIP I activities and collaborating institutions ...... 48 Table 8: FIP II activities and collaborating institutions ...... 49 Table 9: FIP III activities and collaborating institutions ...... 50 Table 10: List of projects in Indonesia under UK’s International Climate Fund ...... 64 Table 11: Overview of Compliance and VER Markets for land-based mitigation ...... 69 Table 12: Land-based Emission Reduction Markets per world region ...... 71 Table 13: Eligibility of KEHATI grants ...... 73 Table 14: Type and reporting line of FMUs/KPHs ...... 80 Table 15: List of KPHs in LESTARI landscapes ...... 81 Table 16: Division of authority - natural protected area ...... 93 Table 17: Funds profile ...... 116 Table 18: REDD+ related regulations at the national level ...... 136 Table 19: REDD+ related regulations at the sub-national level ...... 141 Table 20: PES related regulations at the national level ...... 143 Table 21: List of PES and REDD+ related regulations in Aceh ...... 147 Table 22: List of PES and REDD+ related regulations in Central Kalimantan ...... 147 Table 23: List of PES and REDD+ related regulations in Papua ...... 148
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LIST OF FIGURES
Figure 1: Ecosystem services from forests ...... 18 Figure 2: International climate finance ...... 21 Figure 3: Global climate finance architecture diagram ...... 22 Figure 4: Government management of foreign funding ...... 23 Figure 5: The landscape of public finance in Indonesia ...... 25 Figure 6: ICCTF fund management ...... 27 Figure 7: Distribution mechanism for local grants ...... 39 Figure 8: Total bilateral and multilateral ODA committed to the forestry sector 2013 ...... 42 Figure 9: Total bilateral ODA to reduce GHG emissions in the forestry sector ...... 42 Figure 10: Total commitments to REDD+ by donor type, 2009-2014 ...... 43 Figure 11: REDD+ finance commitments by donor type, 2009-2014 ...... 43 Figure 12: Phases of Norwegian fund based on LoI ...... 44 Figure 13: Milestones of REDD+ readiness ...... 52 Figure 14: Carbon Fund processing steps: From ER-PIN to ERPA Implementation ...... 53 Figure 15: Milestones of Indonesia’s activity under FCPF ...... 55 Figure 16: Flow chart for GCF initial proposal approval process ...... 57 Figure 17: Voluntary land-based emission reduction volume traded and transaction value ...... 69 Figure 18: Certification Standards in voluntary land-based emission reduction market ...... 70 Figure 19: Transacted emission reduction volumes (tCO2e) per project status ...... 70 Figure 20: Origin & destiation of land-based ERs in voluntary and compliance markets ...... 72 Figure 21: Institutions with a mandate to implement REDD+ at the LESTARI landscape .... 85 Figure 22: Institutions with a mandate to implement PES in Indonesia ...... 86 Figure 23: PES concept based on draft government regulation ...... 92 Figure 24: PES mechanism based on draft government regulation ...... 92
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ACRONYMS AND ABBREVIATIONS
ADB Asian Development Bank AE Accredited Entity (for GCF) AFOLU Agriculture, Forestry and Other Land Use AMEP Activity Monitoring and Evaluation Plan APBD Anggaran Pendapatan dan Belanja Daerah (Sub-national Government Budget) APBN Anggaran Pendapatan dan Belanja Negara (State Budget) APL Area Penggunaan Lain (Other Land Use) B Billion BAPPEDA Badan Perencanaan Pembangunan Daerah (Local Development Planning Agency) BAPPENAS Badan Perencanaan Pembangunan Nasional (National Development Planning Agency) BI Bank Indonesia (Central Bank of Indonesia) BioCF BioCarbon Fund BIOCLIME Biodiversity and Climate Change Program BKF Badan Kebijakan Fiskal (Fiscal Policy Agency) BKSDA Balai Konservasi Sumber Daya Alam (National Resources Conservation Agency) BLH Badan Lingkungan Hidup (Government Environmental Agency at sub- national level) BLU Badan Layanan Umum (Public Service Agency) BLUD Badan Layanan Umum Daerah (Local Government Public Service Agency) BNI Bank Nasional Indonesia (National Bank of Indonesia) BPDAS Badan Pengelola Daerah Aliran Sungai (Watershed Management Agency) BP-REDD+ Badan Pengelola REDD+ (Indonesia REDD+ Agency) BP2HP Balai Pemantauan Pemanfaatan Hutan Produksi (Monitoring Agency for the Utilization of Production Forest) BRG Badan Restorasi Gambut (Peatland Restoration Agency) BRI Bank Rakyat Indonesia (People Bank of Indonesia) BUMD Badan Usaha Milik Daerah (Local Government Owned Company) CA Conservation Area CBFM Community Based Forest Management CCBS Climate, Community, and Biodiversity Standard CCBA PDD Climate, Community and Biodiversity Alliance - Project Design Document CBNRM Community-Based Natural Resources Management CER Certified Emission Reduction CI Conservation International
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CIF Climate Investment Fund CMMP Conservation Management and Monitoring Plan CPI Climate Policy Initiative CSO Civil Society Organization CSR Corporate Social Responsibility C to C Community to Community DANIDA Danish International Development Agency DAK/SAF Dana Alokasi Khusus (Special Allocation Fund) DAS Daerah Aliran Sungai (Watershed) DBH Dana Bagi Hasil (Shared Revenue) DFID UK Department for International Development DG Directorate General DGCCM Directorate General of Climate Change Mitigation DIPA Daftar Isian Pelaksanaan Anggaran (Budget Utilization List) DNPI Dewan Nasional Perubahan Iklim (National Climate Change Council) DNS Debt for Nature Swap DR Dana Reboisasi (Reforestation Fund) DTP Dana Tambahan Penghasilan (Co-administration fund) DPRD Dewan Perwakilan Rakyat Daerah (People Representative Council at the sub-national level) EBTKE Energi Baru Terbarukan dan Konservasi Energi (New Renewable Energy and Energy Conservation) EFN The Russell E. Train Education for Nature Program ER Emission Reduction ER-PIN Emission Reduction Project Idea Note ERPA Emission Reduction Payment Agreement ERPD Emission Reduction Program Document ERR Emissions Reduction and Removal ESP Environmental Support Program (Danish International Development Agency) ETF Environmental Transformation Fund EUR Euro FAO Food and Agriculture Organization FCPF Forest Carbon Partnership Facility FDI Foreign Direct Investment FFI Fauna and Flora International FFP Firm Fixed Price FGD Focus Group Discussion FGMC Forest Governance Markets and Climate Program FIP Forest Investment Program FMLC Forest Management for Local Community FMT Facility Management Team FORCLIME Forest and Climate Change Program FORDA Forestry Research and Development Agency FPIC Free Prior Informed Consent FREDDI Fund for REDD+ in Indonesia FREL Forest Reference Emission Level
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FWI Forest Watch Indonesia GBP Great British Pound GCF Green Climate Fund GDP Gross Domestic Product GEF Global Environment Facility GHG Greenhouse gas GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit GoI Government of Indonesia GP Green Prosperity G to C Government to Community G to G Government to Government HD Hutan Desa (Village Forest) HoB Heart of Borneo HPI Hydro Power International Ltd. ICAO International Civil Aviation Organization ICCTF Indonesia Climate Change Trust Fund ICRAF International Center for Research in Agroforestry IDR Indonesian Rupiah IFACS Indonesia Forest and Climate Support IFC International Finance Corporation IFT Intergovernmental Fiscal Transfer IIUPH Ijin Usaha Pemanfaatan Hasil Hutan (Forest Exploitation Permit Fee) IRR Internal Rate of Return ISFL Initiative for Sustainable Forest Landscapes (BioCF WBG) ITP Industrial Tree Plantation JNR Jurisdiction and Nested REDD+ KPH/FMU Kesatuan Pengelola Hutan (Forest Management Unit) KPHK Kesatuan Pengelola Hutan Konservasi (FMU Conservation) KPHL Kesatuan Pengelola Hutan Lindung (FMU Protection) KPHP Kesatuan Pengelola Hutan Produksi (FMU Production) KSDAE Konservasi Sumber Daya Alam dan Ekosistem (Natural Resources and Ecosystem Conservation) KTH Kelompok Tani Hutan (Forest Farmer Group) KTT Kredit Tunda Tebang (Harvest Postponement Credit) KUR Kredit Usaha Rakyat (People Business Credit Program) LBA Landscape Baseline Assessment LCP Landscape Conservation Plan LCS Low Carbon Support LDC Least Developed Country LEDS Low Emissions Development Strategies LEMASA Lembaga Masyarakat Adat Suku Amungme (Amungme Customary Group Organization) LEMASKO Lembaga Masyarakat Adat Suku Kamoro (Kamoro Customary Group Organization) LoA Letter of Agreement LoI Letter of Intent
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LPMK Lembaga Pengembangan Masyarakat Adat Amungme dan Kamoro (Amungme and Kamoro Tribal Groups Development Organization) LULUCF Land Use, Land-Use Change and Forestry LWA Lembaga Wali Amanat (Board of Trustee - ICCTF) M Million MDB Multilateral Development Bank MFI Micro Finance Institution MoEF Indonesian Ministry of Environment and Forestry MoF Ministry of Finance MoFor Ministry of Forestry MRV Measurement, Reporting, Verification MSF Multi Stakeholders Forum MSME Micro, Small and Medium Enterprises and Cooperatives MWA Majelis Wali Amanah (Board of Trustee) M&E Monitoring & Evaluation NAMA Nationally Appropriate Mitigation Action NBFI Non-Banking Financial Institutions NDA National Designated Authority NIE National Implementing Entity NGO Non-Governmental Organization NORAD Norwegian Agency for Development Cooperation NPHD Naskah Perjanjian Hibah Daerah (Letter of Agreement on Local Grant) NTFP Non Timber Forest Product ODA Official Development Assistance OECD Organization for Economic Co-operation and Development OFP Official Focal Point PAD Pendapatan Ali Daerah (Local Government Revenue) PAKLIM Policy Advise for Environment and Climate Change PCN Project Concept Note PDA Pengelola Dana Amanat (Trust Fund Manager - ICCTF) PDAM Perusahaan Air Minum Daerah (Local government owned drinking water company) PDAS-HL Pengelolaan Daerah Aliran Sungai dan Hutan Lindung (Watershed Managament and Protection Forest) PDD Project Design Document (VCS) Perpres Peraturan Presiden (Presidential Regulation) PES Payment for Environmental Services (Pembayaran Jasa Lingkungan – PJL) PHPL Pengelolaan Hutan Produksi Lestari (Sustainable Production Forest Management) PIN Project Idea Note PIP Pusat Investasi Pemerintah (Government Investment Center) PNPM Program Nasional Pemberdayaan Masyarakat (National Community Empowerment Program) PKPPIM Pusat Kebijakan Pembiayaan Perubahan Iklim dan Multilateral (Center for Climate Change Financing and Multilateral Policy)
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PP Peraturan Pemerintah (Government Regulation) PPI Pengendalian Perubahan Iklim (Climate Change Control – MoEF) PPP Public Private Partnership PSDA Pengelolaan Sumber Daya Air (Forest Resource Rent Provision) PSDH Pengelolaan Sumber Daya Hutan (Forest Resource Provision) Pusat P2H Pusat Pembiayaan Pembangunan Hutan (Center for Forest Development) P to C Private to Community PT. SMI Perseroan Terbatas Sarana Multi Infrastruktur RAD-GRK Rencana Aksi Daerah Penurunan Emisi Gas Rumah Kaca (Local Action Plan for Reducing Greenhouse Gas emissions) RAN-GRK Rencana Aksi Nasional Penurunan Emisi Gas Rumah Kaca (National Action Plan for Reducing Greenhouse Gas emissions) RDKL Reksadana Kehati Lestari (Kehati Mutual Fund) REDD+ Reducing Emissions from Deforestation and Forest Degradation REL Reference Emission Level REM REDD Early Movers RPJM Rencana Pembangunan Jangka Menengah (Mid-Term Development Planning) RPJP Rencana Pembangunan Jangka Panjang (Long-Term Development Planning) RSPO Roundtable on Sustainable Palm Oil RTRW Rencana Tata Ruang Wilayah (Regional Spatial Planning) SCBFWM Strengthening Community Based Forest and Watershed Management SEA Strategic Environmental Assessments SGP Small Grant Program SIU Surat Ijin Usaha (Business Permit) SKPD Satuan Kerja Perangkat Daerah (Regional/Local Government Working Unit) SOW Scope of Work SRAP Strategi Rencana Aksi Provinsi (Climate Change’s Provincial Strategic Action Plans) TFCA Tropical Forest Conservation Action TKI Tenaga Kerja Indonesia (Migrant worker) TNGL Taman Nasional Gunung Leuser (Gunung Leuser National Park) UKCCU United Kingdom Climate Change Unit UNDP United Nations Development Program UNEP United Nations Environment Program UNFCCC United Nations Framework Convention on Climate Change UPT Unit Pelayanan Teknis (Technical Implementation Unit) UPTD Unit Pelayanan Teknis Daerah (Regional/Local Technical Implementation Unit) USAID United States Agency for International Development USD United States Dollar USG United States Government VER Verified Emission Reduction
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VCS Verified Carbon Standard WBG World Bank Group WRI World Resource Institute WWF World Wildlife Fund YAPEDA Yayasan Peduli AIDS YTS Yayasan Tambuhak Sinta
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EXECUTIVE SUMMARY
USAID’s LESTARI project supports the Government of Indonesia (GoI) to reduce greenhouse gas (GHG) emissions and conserve biodiversity in carbon rich and biologically significant forest and mangrove ecosystems. Built on the strong foundation of USAID’s IFACS project, LESTARI applies a landscape approach to reduce GHG emissions, integrating forest and peatland conservation with low emissions development (LEDS) on other, already degraded land. This is achieved through improved land use governance, enhanced protected areas management and protection of key species, sustainable private sector and industry practices, and expanded constituencies for conservation among various stakeholders. LESTARI is implemented under the leadership of Tetra Tech and a consortium of partners including WWF-Indonesia, Winrock International, Wildlife Conservation Society (WCS), Blue Forests, Yayasan Sahabat Cipta, PT Hydro South Pole Carbon, Sustainable Travel International (STI), Michigan State University, and the FIELD Foundation. LESTARI runs from August 2015 through July 2020.
PT. Hydro Program International (HPI) provides strategic advisory on Payments for Environmental Services (PES) and Reduced Emissions from Deforestation and Forest Degradation (REDD+) funding in Indonesia. These are part of LESTARI’s Strategic Approach #8 – PES and REDD+ Innovative Finance. This report provides an analysis of the current financial architecture for PES and REDD+ in Indonesia by identifying existing and potential funding sources for sustainable rural landscapes. Funds are classified into three main groups: nationally operated financial support, internationally operated financial support, and private sector and civil society operated financial support. Taking into account recent developments from the UNFCCC COP21 in Paris, private sector sustainability activities and results-based payments are analyzed and framed against the overall financing architecture.
Political context and institutional capacity are key attributes for long-term finance for PES/REDD+ activities. While institutional reform and regulatory changes in Indonesia have had success in some sectors, the overall progress towards delivery of integrated climate change mitigation, climate finance and results based payment schemes, including PES and REDD+, has not met all expectations. Therefore, the design of readiness activities for results based payments is a key task for LESTARI moving forward. Readiness building at the national and local levels requires continued relationship building and advocacy with many different stakeholders. Synergies and alignment with higher levels of potential funding sources require as much attention as embedding PES/REDD+ activities into the local context and involves managing expectations on the timing and amount of financial compensation available, as well as making clear existing uncertainties. A coordinated focal point for the LESTARI co-financing architecture and a communications strategy on PES/REDD+ are proposed to optimize the program’s positioning within key stakeholder networks.
National funds represent a larger source of funding for sustainable landscape management in Indonesia compared with international sources. Additionally, access to local funds is often more predictable. As a result of these factors, it is necessary to target the Village Fund and initiate negotiations on concrete PES/REDD+ related co-financing road maps. Other national funds such as the Disaster Relief Fund, the National Park Fund and the Watershed Fund USAID LESTARI Final Assessment Report - PES/REDD+ Finance Assessment and Development of Strategies to Incentivize Landscape Scale LEDS P a g e | 12
should also be monitored as secondary priorities. To address existing capacity issues of decision makers in charge of financing, especially the Ministry of Environment and Forestry (MoEF) and Ministry of Finance (MoF), LESTARI should also target capacity building programs at the national and sub-national levels. The MoEF and MoF are strongly influential in the ongoing reform processes, particularly regarding the future organization of Indonesia’s climate finance landscape. Capacity building on climate finance practices for sustainable landscapes is a promising way of maintaining integration of PES/REDD+ activities in any future climate finance system in Indonesia.
Creating access to the Norway funds and the Green Climate Fund (GCF) are priorities when mobilizing international funds. To take advantage of these funding options, a specific study to elaborate pathways, viability, potential partners and eligible LESTARI PES/REDD+ activities that could be proposed for funding will need to be carried out. In addition, an initiative to harness the synergies and co-benefits of rural electrification through renewable energy is strongly recommended. Simultaneously, there is also a need to design PES/REDD+ schemes for specific opportunities identified in the landscapes. An initial assessment suggests that a PES for water in the Southeast Aceh and Cyclops Landscape should be developed while activities related to community-based forest fire management in Central Kalimantan should be further explored.
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RINGKASAN EKSEKUTIF
Proyek USAID LESTARI bertujuan mendukung Pemerintah Indonesia dalam mengurangi emisi gas rumah kaca (GRK) dan melestarikan keanekaragaman hayati ekosistem hutan dan bakau yang kaya karbon. LESTARI berusaha mencapai tujuan tersebut melalui peningkatan tata kelola lahan, peningkatan pengelolaan kawasan lindung dan spesies kunci, pemberian dukungan kepada pihak swasta untuk mengembangkan praktek operasi yang berkelanjutan, dan perluasan area konservasi. Proyek LESTARI dijadwalkan beroperasi dari Agustus 2015 sampai Juli 2020.
PT. Hydro Program Internasional (HPI) memberikan advokasi strategis Pembayaran Jasa Lingkungan (PJL) dan Pengurangan Emisi dari Penggundulan dan Degradasi Hutan (REDD+) di Indonesia. Ini adalah bagian dari Pendekatan Strategis LESTARI # 8 - PJL dan Inovasi Finansial REDD+. Laporan ini merupakan analisis terkini dari arsitektur keuangan PJL dan REDD+ di Indonesia dengan mengidentifikasi sumber pendanaan yang ada saat ini serta sumber pendanaan yang sedang dikembangkan untuk pengelolaan bentang alam pedesaan yang berkelanjutan. Sumber pendanaan dikelompokkan berdasarkan institusi yang mengoperasikan dana tersebut. Pendanaan diklasifikasikan menjadi tiga kelompok utama, yaitu: pendanaan yang dioperasikan oleh organisasi nasional, pendanaan yang dioperasikan oleh organisasi internasional, dan pendanaan yang dioperasikan oleh sektor swasta dan masyarakat sipil. Perkembangan terkini UNFCCC COP-21 di Paris memaparkan berbagai kegiatan sektor swasta yang berkelanjutan dan pembayaran berbasis hasil (results-based payments) yang juga berpotensi untuk menjadi sumber pendanaan dan kerangka arsitektur pembiayaan bersama.
Konteks politik dan kapasitas institusi pelaksana adalah dua kunci pembiayaan jangka panjang kegiatan PJL dan REDD+. Meskipun reformasi kelembagaan dan perubahan kerangka hukum serta peraturan di Indonesia dalam beberapa sektor mengalami kesuksesan sejak 2009, secara keseluruhan kemajuan pelaksanaan mitigasi perubahan iklim, pendanaan perubahan iklim, dan skema pembayaran berbasis hasil termasuk PJL masih belum sesuai harapan. Oleh karena itu, LESTARI perlu mengembangkan kegiatan- kegiatan yang bisa menyiapkan terlaksananya pembayaran berbasis hasil di masa mendatang. Penyiapan para aktor baik di tingkat nasional maupun lokal membutuhkan dibangunnya hubungan intensif dan dilakukannya kegiatan advokasi dengan berbagai pemangku kepentingan. Sinergi dan keselarasan antara kegiatan untuk menyiapkan pembayaran berbasis hasil dan potensi sumber pendanaan perlu mendapat perhatian yang sebanding dengan upaya menjadikan PJL dan REDD+ sebagai bagian dari kegiatan masyarakat lokal sehari-hari. Upaya ini mencakup pengaturan harapan masyarakat dalam segi waktu pembayaran jasa, jumlah kompensasi yang akan diterima, dan adanya resiko ketidakpastian pembayaran. Laporan ini menekankan pentingnya koordinasi terpusat melalui focal point untuk menangani arsitektur pembiayaan bersama LESTARI serta perumusan strategi komunikasi bersama PJL dan REDD+ dalam rangka mengoptimalkan posisi LESTARI dalam jejaring para pemangku kepentingan di Indonesia.
Pendanaan domestik memiliki kontribusi yang lebih besar dalam pembiayaan pengelolaan bentang alam berkelanjutan di Indonesia dibandingkan dengan pendanaan internasional. Di samping itu, aksesibilitas dana domestik dapat lebih diprediksi. Oleh karena itu, LESTARI USAID LESTARI Final Assessment Report - PES/REDD+ Finance Assessment and Development of Strategies to Incentivize Landscape Scale LEDS P a g e | 14
perlu mengembangkan strategi untuk memberdayakan Dana Desa dan mulai melakukan negosiasi co-financing untuk merealisasikan kegiatan PJL dan REDD+. Sebagai prioritas kedua, pendanaan domestik lain seperti Dana Penanggulangan Bencana, Dana Taman Nasional dan Dana Daerah Aliran Sungai perlu terus dipantau. Untuk mengatasi isu kapasitas para pengambil keputusan di bidang keuangan khususnya di Kementerian Lingkungan Hidup dan Kehutanan (KLHK) serta Kementerian Keuangan, LESTARI juga perlu menyelenggarakan program peningkatan kapasitas di tingkat nasional dan daerah. KLHK dan Kementerian Keuangan memiliki peranan penting dalam proses reformasi institusional dan mekanisme pendanaan perubahan iklim di Indonesia. Pengembangan kapasitas sumber daya manusia dalam praktek pendanaan perubahan iklim untuk pengelolaan bentang alam berkelanjutan merupakan sebuah cara yang menjanjikan untuk mengintegrasikan kegiatan-kegiatan PJL/REDD+ ke dalam sistem pendanaan perubahan iklim di Indonesia di masa mendatang.
Terbukanya akses terhadap dana Norwegia dan Green Climate Fund (GCF) selayaknya menjadi prioritas LESTARI untuk memobilisasi pendanaan internasional. Untuk memanfaatkan peluang tersebut, perlu dilakukan studi yang menjelaskan arah, kelayakan, mitra potensial dan kegiatan PJL/REDD+ di bentang alam LESTARI yang tepat untuk didanai oleh kedua sumber pendanaan tersebut. Selain itu, inisiatif untuk memanfaatkan sinergi dan co-benefit dari kelistrikan pedesaan menggunakan energi terbarukan juga perlu dipertimbangkan. Secara bersamaan, LESTARI juga perlu mendesain skema PJL/REDD+ berdasarkan potensi yang telah diidentifikasi seperti PJL air di Aceh Tenggara dan kawasan penyangga Cyclops di Papua. Di samping itu, kegiatan yang berhubungan dengan pengelolaan kebakaran hutan berbasis masyarakat di Kalimantan Tengah perlu ditinjau lebih lanjut untuk selanjutnya dikembangkan dengan menggunakan skema PJL dan REDD+.
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1. INTRODUCTION
A number of new opportunities for co-financing PES/REDD+ activities exist in Indonesia. New funding pledges for REDD+ at the Paris Climate Conference in 2015 are promising and the dynamics surrounding fund distribution of the Norway bilateral initiative are also starting to take shape in early 2016. Additionally, the creation of the Indonesia Climate Change Trust Fund (ICCTF), the replenishment of the Global Environment Facility (GEF) trust fund, and the initial capitalization of the Green Climate Fund (GCF) in 2015 all bring increased opportunities for accessing funds for PES/REDD+ activities. These are partially linked to the implementation of the Provincial Strategic Action Plan for REDD+ (Strategi dan Rencana Aksi Provinsi - SRAP), where all of the provinces in which LESTARI landscapes exist have completed SRAPs and are in the process of meeting other requirements. LESTARI activities are focused in six strategic landscapes on three of Indonesia’s largest islands, where primary forest cover remains most intact and carbon stocks are greatest.
An important and more omnipresent source of funding comes from government budgets. A study from the Climate Policy Initiative (CPI) revealed that domestic funding for climate actions in the land use sector exceeded international funding by a large margin in 2011; of the USD 486 million of finance going to the agriculture and forestry sectors in 2011, only 12% came from international development partners, while the bulk of it came from the Indonesian government (Angela and Glenday 2016). With regards to international funding, only 18% of international development partner climate finance disbursements went to the land use sector despite 70% of GHG emissions coming from land use change, forestry and agriculture in 2012 (Angela and Glenday 2016). Most international finance is bilateral and channeled by a small group of international entities.
The innovative financing strategic approach outlined in this report will be tied closely to the project’s forest and land use governance and advocacy technical theme in order to support access to GoI’s budget for green enterprises and activities that support the government’s commitment to reducing emissions by 2020. LESTARI’s theory of change is that mobilizing national and international climate change financing resources will develop capacities for sustainable land use and forest management, and ultimately conserve biodiversity and reduce emissions.
To be able to access increased financing from government agencies, LESTARI needs to work with central and local (provincial & district) government officials to promote Low Emission Development Strategies (LEDSs), forest conservation and climate change mitigation programs that meet emission reduction commitments. LESTARI will also need to identify and engage relevant ministries to gain more access to and support for additional financing sources and to explore potential collaboration with similar government programs that optimize benefits to communities and the environment. Additional funding is essential for catalyzing local government leadership in climate change mitigation and forest conservation.
This report aims to achieve the following Scope of Work (SOW) to advise subsequent PES/REDD+ related activities in LESTARI landscapes:
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A thorough and up-to-date assessment of all potential funds available for PES/REDD+, both national and international, from donors, trust funds, government sources and the private sector. This will include comprehensive information on eligibility, funding mechanisms, size of funding available, funding disbursement and other relevant information needed by stakeholders in the LESTARI landscapes. This assessment should also include funds and mechanisms that are currently under development and that could affect the LESTARI landscapes. Documentation of all current institutions and relevant authorities (national, provincial and local) with a mandate to implement PES/REDD+ schemes within the LESTARI landscapes, including a capacity assessment for implementation of such mandates. The assessment shall include regulations approved (nationally, provincially or locally), human resources, experience in PES/REDD+, and financial capacity of the institutions identified. Realistic recommendations for harnessing PES/REDD+ finance to incentivize LEDS on a landscape scale over the next five years, including potential and financial opportunities. Strategies should build on the Landscape Baseline Analysis (LBA), Strategic Environmental Assessment – Low Emission Development Strategy (SEA- LEDS), and Landscape Conservation Plan (LCP) recommendations where appropriate. This chapter provides an introduction of the assignment and gives an overview of the PES concept. Chapter 2 discusses potential funds (existing and under development) for PES/REDD+ in Indonesia’s climate finance landscape, and covers comprehensive information on eligibility, funding mechanisms, size of funding available, funding disbursement and other relevant information needed by stakeholders in the LESTARI landscapes. Chapter 3 describes potential climate finance developments to look out for, and new financial instruments that may be established that could potentially finance LESTARI in the long run. Chapter 4 presents the institutions with a mandate to implement PES and REDD+ activities, along with an assessment of their capacity. Chapter 5 identifies PES/REDD+ related regulations at the national, provincial, and local levels. Main conclusions addressing the challenges and opportunities are detailed in Chapter 6. Institutional recommendations for optimizing LESTARI’s approach for acquiring co-financing and implementing PES/REDD+ activities in the landscapes that build on LBA, SEA-LEDS and LCPs, are also included. Building on the conclusions made, Chapter 7 develops a succinct list of high value opportunities that can be leveraged by the LESTARI program to harness PES/REDD+ finance. Preliminary actions for the further development of each recommendation, within the overall LESTARI timeline, are also developed.
Payment for Environmental Services (PES) concept Payment for environmental services (also referred to as payments for ecosystem services, PES) was originally defined as a voluntary transaction for a well-defined ecological service, with at least one buyer, at least one provider, and based on the condition that the buyer(s) only pay if the provider(s) continue to deliver the defined ecosystem service over time (Wunder 2015). PES is a tool for ensuring that those who maintain an ecosystem’s ability to provide services, such as watershed protection, are compensated for doing so. Payees may be beneficiaries, such as users of these services, or polluters offsetting their negative
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environmental impacts elsewhere. In the current economic system, the stewardship of ecosystems is not rewarded, often resulting in their over-use or conversion to more profitable land uses (Global Canopy Program 2015). This occurs despite evidence that the resulting loss of these ecosystem services can have a significant economic cost. PES schemes have proliferated over the last few decades and are mainly focused on carbon, biodiversity and hydrological services.
Figure 1: Ecosystem services from forests Source: (Tetra Tech ARD 2015), LESTARI first annual work plan, page 20.
PES has been widely applied in a variety of ways and at different levels in Indonesia. Despite this, none of these PES initiatives can be categorized according to the original PES concept as defined by several references (PNPM 2011). Performance-based payments for greenhouse gas (GHG) emission reductions and removals are understood as being a particular form of PES, with climate regulation being the service that is monitored and compensated.
HPI’s activities in accomplishing the SOW objectives HPI has effectively accomplished the objectives defined in the SOW by undertaking desk research and organizing consultation meetings with a variety of government officials, including with those at the National Development Agency (BAPPENAS), the Indonesian Climate Change Trust Fund (ICCTF), the Ministry of Environment and Forestry (MoEF), the United Nations Development Program (UNDP) REDD+ unit and other international development agencies, to document policy objectives, funds, and current activities that affect the LESTARI landscape.
In addition to the meetings conducted with relevant actors at the national level, HPI also visited LESTARI regional offices and landscapes to better understand issues and opportunities for PES and REDD+ in each landscape. In its site visits to Aceh, Central Kalimantan, and Papua, HPI consultants met with representatives from various institutions at the provincial and local levels, including:
(i) Sub-national Development Planning Agency (BAPPEDA Propinsi and BAPPEDA Kota/Kabupaten) (ii) Government Forestry Office (Dinas Kehutanan) (iii) Government Environmental Agency (Badan Lingkungan Hidup – BLH) (iv) National Park Agency (Balai Taman Nasional)
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(v) Forest Management Unit (FMU/KPH) (vi) Technical Implementing Unit (Unit Pelaksanaan Teknis – UPT & UPTD), including the: Natural Resources Conservation Agency (Balai Konservasi Sumber Daya Alam - BKSDA) Watershed Management Agency (Badan Pengelola Daerah Aliran Sungai - BP DAS) Monitoring Agency for the Utilization of Production Forest (Balai Pemantauan Pemanfaatan Hutan Produksi - BP2HP) Forest Area Stabilization Agency (Badan Pemantapan Kawasan Hutan – BPKH) (vii) Government Tourism Office (Dinas Pariwisata) (viii) Local Non-Governmental Organizations (NGOs) and Civil Society Organizations (CSOs)
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2. FINANCIAL ARCHITECTURE FOR RURAL LOW EMISSION DEVELOPMENT IN FOREST AND AGRICULTURE
This chapter analyzes the current financial architecture for PES and REDD+ in Indonesia. It identifies and maps out existing and potential funding sources for sustainable rural landscapes by highlighting and presenting some options so that they can be considered solid, bankable and scalable. Funding sources are classified based on the institution managing/operating the fund, and are categorized as nationally operated financial support, internationally operated financial support, and support from the private sector and civil society.
Classification is carried out according to the institution operating the fund instead of grouping the funding sources based on the origin of funds, as the latter has proved challenging. In their management and operationalization, funds that originate from foreign sources may interact with those from other sources of both international and national origins in a program/project, and may also be operated by a national entity.
Figure 2 provides an overview of the flow of funding from donors to recipients in international climate finance.
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Figure 2: International climate finance Source: ( CICERO and Climate Policy Initiative 2015)
There are a number of channels through which international climate finance flows, including multilateral channels (both within and outside of UNFCCC financing mechanisms), bilateral channels, regional channels, and also national climate change channels and funds. In addition to multilateral channels, some developed countries have established climate finance initiatives or are channeling climate finance through their bilateral development assistance institutions, while some developing countries have set up regional and national funds and channels to receive climate finance.
There are various types of climate finance with different governance structures, modalities and objectives. While the transparency of climate finance that is programmed through multilateral initiatives is increasing, detailed information on bilateral initiatives, and regional and national funds is often less readily available (Smita Nakhooda, Charlene Watson, Liane Schalatek 2015).
Figure 3 illustrates the global climate finance architecture, focusing on public climate financing mechanisms, and provides an overview of the key actors including donors, bilateral institutions, multilateral institutions, and regional and national funds.
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Figure 3: Global climate finance architecture diagram Source: (Smita Nakhooda, Charlene Watson, Liane Schalatek 2015); adapted
Different financial instruments (grants, loans, equity) can be leveraged to overcome different financial or non-financial barriers. Table 1 outlines a number of barriers and how financial instruments can help to overcome these barriers.
Usually PES/REDD+ activities fall into the categories of low (or no) return investments or high up-front costs with a lack of access to capital (such as ecotourism). Carbon markets in a wider sense can be understood to represent performance-based payments for ecosystem services, such as water, in general.
Table 1: Financial barriers, types and mechanisms Barriers to mitigation Type of financing Public finance mechanism actions Low (or no) return on Contribution to Up-front grant (e.g. direct subsidies, investment investment and investment tax breaks, grant operational costs component of concessional loans) Funding during operation (e.g. feed-in remuneration, carbon markets, PES) High up-front costs and Facilitating access Provision of debt, e.g. through loans or lacking access to capital to finance credit lines
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Barriers to mitigation Type of financing Public finance mechanism actions Provision of equity Incentivizing existing financing system High risk Provision of risk Risk guarantees/insurance coverage schemes/equity/first-lose grants High transaction costs - Standardization and aggregation Non-financial barriers (e.g. (Financing) Mostly in the form of grants regulatory barriers, lack of technical information and capacity) assistance
Source: (ECN/Ecofys 2014); adapted
Funds originating from both foreign and domestic sources that are managed by the Indonesian government will be registered in the State/National Budget (Anggaran Pendapatan dan Belanja Negara – APBN). The management and operationalization of funds originating from foreign sources in Indonesia is regulated as illustrated in the following figure.
Figure 4: Government management of foreign funding Source: HPI elaboration
The utilization of funds for GHG emission reduction and removal (ERR) programs, including in the forestry sector in Indonesia, is carried out by both the central government authority and the local government authority.
Activities under the central government authority (ministries/agencies) are financed through: Sectoral ministry/agency funds (Daftar Isian Pelaksanaan Anggaran, DIPA) The Deconcentration Fund (Dana Dekonsentrasi) The Assistance Task Fund (Dana Tugas Pembantuan)
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Activities financed under the local government authority are financed through: Specific Allocation Fund (Dana Alokasi Khusus, DAK) for the forestry sector – for financing local activities based on a set of priorities and criteria The Performance-Based Grant (Dana Insentif Kinerja), based on the implementation of locally-proposed GHG ER initiatives and the accomplishment of particular targets Local Grants (Hibah Daerah) for financing local activities proposed by local governments Figure 5 provides an overview of the public finance landscape in Indonesia, which will be covered in more detail in Chapter 6.
The list of all funds (nationally operated financing support, internationally operated financing support, and private sector and civil society financing support) along with their eligibility, funding mechanisms, size of funding available, and funding disbursement are summarized in Annex 1.
.
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Figure 5: The landscape of public finance in Indonesia1 Source: (CPI and BKF 2014)
1 This study was conducted using data in 2011; studies using data after 2011 are yet to be available. Flows are expressed in IDR billions.
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2.1. Nationally operated financing supports This section gives an overview of funds that are managed by national entities. The ICCTF is discussed in this section because even though its funding originates from various foreign donors, it is operated under BAPPENAS, a government institution. This section also discusses several funds related to the forestry sector and other sectors that can potentially be used to support LESTARI activities at the local level.
2.1.1. The Indonesia Climate Change Trust Fund (ICCTF)
Eligibility CSOs, NGOs, private sector, universities/academies and government institutions Funding Grants: Small Grant Program (SGP) and large grants Mechanism
Size of Funding IDR 500 million (~ USD 40,000) for small grants Available Up to several million USD (> IDR 3 billion or ~ USD 225,000) for large grants Funding Small grant: disbursed in lump sum and is relatively quick Disbursement once reporting requirements are fulfilled Large grant: disbursement mechanism is under development Additional info Thematic areas: land-based mitigation, energy, and adaptation & resilience
The ICCTF aims to develop innovative ways of linking international finance sources with national investment strategies. It acts as a catalyst for attracting investment for the implementation of a range of alternative financing mechanisms for climate change mitigation and adaptation programs in Indonesia. The ICCTF receives non-refundable contributions from bilateral and multilateral donors, as well as from the private sector2, and is managed nationally by the ICCTF Secretariat under BAPPENAS, with Bank Mandiri serving as the selected fund manager. The ICCTF fund flow and fund management structure is illustrated in the following figure.
2 The ICCTF had not received contributions from the private sector as of December 2015, and is currently trying to engage the private sector.
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Figure 6: ICCTF fund management Source: (ICCTF 2015)
The ICCTF focuses on providing support for early stage development (pilot projects) in three thematic areas: land-based mitigation, energy, and adaptation and resilience. The ICCTF provides up to IDR 500 million (approximately USD 40,000) funding per project for SGPs, dedicated for urgent adaptation and mitigation activities, mainly at the community level. The ICCTF has funded six programs under the SGP, including: Carbon Sequestration in Community Forests, Public Private Partnership (PPP) Model against Forest Degradation and Deforestation, and Climate Forecast for Farmers and Fishermen. Projects under the SGP lasted between 6 to 8 months on average.
In addition, the ICCTF also provides funding for larger scale projects that can reach several million USD (above IDR 3 billion or USD 225,000) in combined investments for both mitigation and adaptation activities. Some larger scale projects that have been funded by the ICCTF include: (i) Research and Technology Development of Sustainable Peat Management to Enhance Carbon Sequestration and Mitigation of Greenhouse Gas Emissions (2010 – 2012), USD 1,213,615.5; (ii) Sustainable Management of Degraded Peatland to Mitigate Green House Gas Emissions and Optimize Crop Productivity (2012 – 2014), USD 1,279,494.7; and (iii) Public Awareness Training and Education Program on Climate Change Issues for All Levels of Societies in Mitigation and Adaptation (2010 – 2012), USD 1,367,851.39 (ICCTF 2015). There were no larger scale projects being funded by the ICCTF in 2015, mainly due to internal changes within the organization. However, it is expected that the ICTTF will resume its funding support for larger scale projects in the near future.
To access the fund, CSOs, NGOs, the private sector, and universities/academies, as well as government institutions, are required to submit project proposals. Individuals are not eligible to apply for the funds. Upcoming grant opportunities along with the format for the proposal document can be downloaded at the ICCTF website: http://icctf.or.id/call-for-proposals-p- 2265-en/. The ICCTF Project Management Cycle for the financing of activities follows the nine steps as illustrated in Annex 2.
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The SGP selection mechanism consists of two stages: (i) the screening of all proposals based on administrative requirements; and (ii) an in-depth assessment based on specific criteria (Step 2 and Step 3 of Annex 2). The application process and selection criteria of larger grant projects is envisioned to be slightly different to those of the SGP, and are currently still under development.
Financial due diligence includes performance based payments that will be conducted over the duration of any approved projects in lieu of agreed upon milestones between the ICCTF and the recipient/beneficiary to monitor the progress of the project in achieving an individual project's objectives. In addition, lessons learnt from projects previously implemented will also be identified and documented in the ICCTF's investment and fundraising strategies.
The ICCTF has also registered to be a National Implementing Entity (NIE) to the UNFCCC’s Adaptation Fund. Its transition to becoming Indonesia’s NIE to the Adaptation Fund is being supported by GIZ, the German development agency. However, challenges remain. Although the establishment of the ICCTF is a step in the right direction, there is no overarching mechanism for donor coordination (EIA Commission 2015). Moreover, the policies and legal framework at the provincial and local levels are not yet adequate for facilitating the delivery and management of climate finance.
2.1.2. Forest Management Unit (FMU) Fund
Eligibility All types of FMUs/KPHs: FMU Conservation (KPHK), FMU Protection (KPHL), FMU Production (KPHP) Funding Mechanism Budget transfer
Size of Funding Up to IDR 3 billion (~ USD 225,000) per KPH; however, the Available actual funds disbursed are much less. Government allocated budget for the KPHs changes from year to year with a decreasing trend Funding Yearly as part of government budgeting process Disbursement Additional Info KPHK is funded by central government, KPHP and KPHL are funded by both APBN and sub-national government budgets (APBD)
FMUs (locally known as Kesatuan Pengelola Hutan - KPH) have the potential to play a significant role in contributing to sustainable development by protecting natural resources, reducing GHG emissions from forest and peatlands, and by improving the livelihoods of local communities. There are three types of FMUs: Conservation FMUs (KPHK), Protection FMUs (KPHL), and Production FMUs (KPHP). The KPHK is managed directly by the national government, while the KPHL and KPHP are currently managed by the district government and will soon be transferred to the provincial government.3
3 As part of the implementation of Law No. 23 of 2014 on Local Governance. The transfer of authority is expected to be completed by October 2016.
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The source of funding for KPH development and operation comes from the state budget (APBN), sub-national government budget (Anggaran Pendapatan Belanja Daerah, APBD), and other legal and legitimate funds. Significant financial input from local, national and international sources, as well as the KPH’s own income stream, are still needed to set up the management structure and the technical infrastructure of KPHs. Existing KPH development funds are summarized in the following table.
Table 2: Sources of existing FMU development funding Local Government Other legal and State Budgets (APBN) Budget (APBD) legitimate funds
Special Allocation Fund (Dana Intergovernmental Grants Alokasi Khusus - DAK) on forestry fiscal transfers Shared revenue (Dana Bagi Hasil - Local revenue Corporate Social DBH) (Pendapatan Asli Responsibility (CSR) Daerah - PAD). fund De-concentration fund – PES National community empowerment – – program (PNPM) – Mandiri Kehutanan Village fund – – Co-administration task fund (DTP) – –
Source: (PKPPIM 2015)
The following section describes each type of source – state budget, local budget and others – the Shared Revenue Fund (Dana Bagi Hasil – DBH), the Village Fund (Dana Desa), and the PNPM – Mandiri Kehutanan will be discussed further in Section 2.1.3, Section 2.1.4 and Section 2.1.5 respectively.
Special Allocation Fund (Dana Alokasi Khusus – DAK)
The Special Allocation Fund (locally known as Dana Alokasi Khusus - DAK), is sourced from the state budget (APBN) and allocated to a particular region to fund special activities in accordance with national priorities based on criteria set by the government. In the forestry sector, DAK is one of the sources of funding used to finance forestry development at the subnational level. DAK-forestry policy in 2014 was focused on the improvement of KPHP and KPHL, the improvement of watershed capabilities, protection of forests and essential areas, and community empowerment.
Deconcentration Fund (Dana Dekonsentrasi)
The Deconcentration Fund is a form of funding from the state budget (APBN) and is deployed by the governor at the provincial level, covering all expenditures for delegation of tasks from the central government to provincial government, excluding funds allocated for central governmental offices located in the regions.
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Co-Administration Task Fund (Dana Tambahan Penghasilan – DTP)
The Co-Administration Task Fund (DTP) is a fund from the state budget that is transferred to local government and includes all revenues and expenditures for implementing tasks. It is mainly allocated for the development of infrastructure. Funds for co-administration are also one source of funding that can be implemented by local government financed by the KPHs, given that the development and operationalization of KPHs is one of KPH’s priority policies.
Sub-national Government Budget (APBD)
The Sub-National Government Budget (APBD) comes from intergovernmental fiscal transfers. Funds transferred from the central government that can be used for forestry development include DAK-Forestry, DBH-DR, DBH-PSDH, and DBH-IIUPH. Local governments can use these mechanisms to fund forestry development activities in territories under their administration by referring to central government rules.
A study from the Center of Climate Change Financing and Multilateral Policy (Pusat Kebijakan Pembiayaan Perubahan Iklim dan Multilateral – PKPPIM) under the Fiscal Policy Agency (Badan Kebijakan Fiskal – BKF) at the MoF suggested that alternative funding from CSR, grants, and the PNPM have higher efficiency and effectiveness than other existing options, although budget from these three sources is smaller than that of the DAK and DBH mechanisms (PKPPIM 2015). However, the utilization of alternative sources of funding needs to be accompanied by institutional changes in the KPH. The KPHK and KPHL are structured as the Public Service Agency (Badan Layanan Umum, BLU) and the Local Public Service Agency (Badan Layanan Umum Daerah, BLUD), while the KPHP is advised to change into a BLUD or Local Government-owned Enterprise (BUMD).
2.1.3. Shared Revenue Fund (Dana Bagi Hasil – DBH) on Forestry
Eligibility All district/city governments Funding Mechanism Budget transfer Size of Funding Variable, depending on the revenue of the year; proportion is Available calculated based on proportion in Shared Revenue (locally known as Dana Bagi Hasil – DBH) is a fund sourced from the state budget (APBN) and allocated proportionally to a region to finance the implementation of decentralizing processes. The distribution of DBH in forestry is implemented based on natural resource revenues in the current budget and distributed on a quarterly basis through transfer from the State Treasury to the Regional Treasury Account. The distribution mechanism of the DBH starts with the selection of the producing regions and determines the basis for calculating the DBH of natural resources by the MoEF after consulting with the Ministry of Home Affairs. The criteria are then conveyed to the MoF to be decreed as estimated DBH of natural resource allocation for each region. The calculation of real DBH of natural resources is carried out on a quarterly basis through data reconciliation between the
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central government and the producing regions. The distribution of state revenue derived from forestry DBH is divided in the following way:
Table 3 Funding Distributed on a quarterly basis through transfer from the Disbursement State Treasury to the Regional Treasury Account
Shared Revenue (locally known as Dana Bagi Hasil – DBH) is a fund sourced from the state budget (APBN) and allocated proportionally to a region to finance the implementation of decentralizing processes. The distribution of DBH in forestry is implemented based on natural resource revenues in the current budget and distributed on a quarterly basis through transfer from the State Treasury to the Regional Treasury Account.
The distribution mechanism of the DBH starts with the selection of the producing regions and determines the basis for calculating the DBH of natural resources by the MoEF after consulting with the Ministry of Home Affairs. The criteria are then conveyed to the MoF to be decreed as estimated DBH of natural resource allocation for each region. The calculation of real DBH of natural resources is carried out on a quarterly basis through data reconciliation between the central government and the producing regions. The distribution of state revenue derived from forestry DBH is divided in the following way:
Table 3: Shared Revenue (DBH) distribution Forest Forest Exploitation Resource Reforestation Institution Permit Fee Provision Fund (DR)4 (IIUPH) (PSDH)
Central government 20% 20% 60% Provincial government 16% 16% District/city government 64% - 40% District/city government where - 32% - the production takes place
Other districts/cities in the - 32% - province
Source: (PKPPIM 2015)
4 To be used for forest and land rehabilitation.
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2.1.4. Village Fund (Dana Desa)
Eligibility All villages Funding Mechanism Budget transfer
Size of Funding IDR 1 billion (~ USD 74,000) per village with possibility to Available increase Funding Yearly as part of government budgeting process. The fund is Disbursement transferred from the central government account to village’s account via district government’s account Additional Info Efforts are being made at the district and village levels to better manage and allocate the money based on village needs and priorities
The Village Fund is mandated by Law No. 6 of 2014 (Village Law), which allows all villages across the archipelago to receive IDR 1 billion per year of assistance from the central government to develop their economies and infrastructure. The Village Fund covers funds from the state budget earmarked for villages, which are transferred through the district/city budget and are used to finance administration and development, and to foster social and community empowerment.5
The Fund is aimed at improving the welfare of rural communities and the quality of human life, as well as poverty reduction, through: (1) the fulfillment of basic needs; (2) the development of rural infrastructure; (3) the potential development of local economies; and (4) the use of natural resources in an environmentally sustainable manner.6 The use of village funds for sustainable development needs based on the condition and potential of the village, which among others, includes support for management of village forests (Hutan Desa – HD) and community forests, and capacity development for local communities on renewable energy and the environment (PKPPIM 2015).
The Village Fund, as part of the village decentralization process, is a relatively new government initiative that has great potential to accelerate local development. As it has only just begun, it is too early to examine and debate program implementation outcomes, however, a number of challenges in the design of the nascent program have already become apparent. When large resources are directed into a village without strong oversight, budgets are not always used for the benefit of those that need them the most (World Bank 2015). In addition, the Village Law itself does not provide an adequate enough basis for regulating proper village financial management. Some believe that the initiative is all about the distribution of money with no clear plan for its proper management (East Asia Forum 2015).
Despite stipulations in the Ministry of Villages, Underdeveloped Regions and Transmigration Regulation No. 21 of 2015 on the Priority of Village Fund Utilization in 2016, a big portion of
5 Government Regulation No. 60 of 2014 on Village Fund Originating from the Budget of the State Budget, amended by Government Regulation No. 22 of 2015. 6 Village, Rural Development and Transmigration Ministerial Regulation No. 5 of 2015.
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the money is currently spent on infrastructure development, with less being spent on community empowerment. At the sub-national level, the provincial and district governments are still in the process of formulating local regulations and developing guidelines on the management of the Village Fund, while the funds have actually already been handed over to the villages. This is due to lack of capacity within local government, village administration, and local communities (East Asia Forum 2015). Furthermore, mechanisms to control village spending are underdeveloped.
In LESTARI landscapes, initiatives using the Village Fund for activities related to the environment and forestry that support local economic development can be seen in Aceh Tenggara and Central Kalimantan. In Aceh Tenggara, the district/regency government hires six experts as external consultants to provide technical assistance, which takes the form of advocacy efforts aimed at promoting the issuance of three to four provincial regulations as a regulatory framework and at developing guidelines and a management plan for the utilization of the Village Fund. In Central Kalimantan, there have been discussions among various government institutions, local communities, and NGOs on using the Village Fund to finance initiatives related to forest fire management at the village level. These initiatives, however, are still in a preliminary stage.
2.1.5. National Community Empowerment Program (Program Nasional Pemberdayaan Masyarakat PNPM – Mandiri Kehutanan)
Eligibility Villages in and around forest areas
Funding Mechanism Budget transfer (from central and district government to village government)
Size of Funding Variable Available
Funding Yearly as part of government accounting process Disbursement
The PNPM – Mandiri Kehutanan program aims to alleviate poverty in areas surrounding forests, in collaboration with a range of sectors other than forestry and is coordinated by the Coordinating Ministry for Humanity and Cultural Development (Kementerian Koordinator Bidang Pembangunan Manusia dan Kebudayaan, formerly Kemenko Kesra).7 The PNPM program consists of various activities including the development of conservation villages, community forestry, partnerships, and village forest management for communities surrounding protected forests and production forests. The program’s beneficiaries are groups of people who have been identified by the Technical Implementation Unit (Unit Pelaksana Teknis, UPT) or Regional Technical Implementation Unit (Unit Pelaksana Teknis Daerah, UPTD), Regional Offices of Forestry, and license holders in the field of forestry and local communities.
7 Forestry Ministerial Regulation No. 16 of 2011 on General Guidelines of the National Program for Community Empowerment in Forestry.
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2.1.6. People’s Business Credit Program (Kredit Usaha Rakyat - KUR)
Eligibility Micro, small and medium enterprises (MSME) and cooperatives Funding Credit and micro-credits backed by guarantees from state- Mechanism owned companies
Size of Funding Micro KUR: IDR 25 million (~ USD 2,000) for a max. of 3 Available years for working capital and 5 years for investments Retail KUR: IDR 25 million to IDR 500 million (~ USD 2,000 to USD 38,000) for a max. of 4 years for working capital and 5 years for investments, can be extended to up to 10 years for hardwood investment TKI KUR (designed for migrant workers): IDR 25 million (~ USD 2,000), duration is based on the migrant workers’ employment contract and shall not exceed 3 years Sectoral KUR: IDR 500 million – IDR 30 billion (~ USD 38,000 – USD 2 million) for max. 10 years Funding Three different mechanisms: Disbursement directly to MSME from participating banks indirectly through linkage institutions by executing patterns indirectly through linkage institutions by channeling patterns Additional Info Types of credit at the moment: micro KUR, retail KUR, TKI KUR (designed for migrant workers) Sectoral KUR is planned to be introduced in 2016
The people’s business credit program (KUR), established in 2008, is a credit/working capital and/or investment financing scheme specifically dedicated to micro, small and medium enterprises (MSME) and cooperatives in the productive enterprise8 sector that are mostly not bankable9 due to lack of collateral (Tim Nasional Percepatan Penanggulangan Kemiskinan, TNP2K, n.d). The KUR aims to accelerate the development of economic activities, alleviate poverty and expand work opportunities. Individual or community groups in the LESTARI landscapes may use this credit to finance activities related to the LESTARI programs/projects later on. Through this credit, commercial banks provide working capital to microfinance institutions (MFIs). The loans are guaranteed by the government through guarantor institutions.
The implementation of the KUR program is supported by three pillars: government, guarantor institutions and banks. The government, through the Bank of Indonesia (BI) and line ministries (e.g. Ministry of Agriculture, Ministry of Environment and Forestry, Ministry of Maritime Affairs and Fisheries), assists and supports the implementation of credit provisions and guarantees. Two state-owned companies, PT. Asuransi Kredit Indonesia (PT. Askrindo) and Perusahaan Umum Jaminan Kredit Indonesia (Perum Jamkrindo), currently serve as
8 Effort to produce goods or services to provide added value and increase entrepreneur income. 9 MSME that are not able to meet a bank’s credit/financing requirements.
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guarantor institutions that guarantee the credit distributed by the banks. Banks are recipients of the guarantees and serve as credit distributors to the MSMEs. To date, three commercial banks, Bank Rakyat Indonesia (BRI), Bank Mandiri, and Bank Negara Indonesia (BNI), carry out the function of credit lenders.
The Indonesian Government intends to mobilize between IDR 100 trillion to IDR 123 trillion (~ USD 7.2 billion to USD 8.89 billion) in 2016 as small business loans under its KUR program for the purpose of boosting economic growth (Coordinating Minister for Economic Affairs 2015). Additionally, the government has been preparing to cut the lending rate of its subsidized KUR from 22%-24% to as low as 9% and to merge the credit program scheme into the sectoral KUR in 2016 (Coordinating Minister for Economic Affairs 2015). To reach these targets, the government is considering adding PT. Jaminan Kredit Daerah (PT. Jamkrida) as a guarantor institution in each province. The government is also considering including more state, private and regional development lenders for the credit program. Furthermore, non-banking financial institutions (NBFIs), finance companies, and venture capital companies will serve as distributing institutions and and/or linkage institutions.
The sectoral KUR is aimed at supporting development of business in each area based on their respective potential. It has a higher credit ceiling (IDR 500 million to IDR 30 billion or ~ USD 38,000 to USD 2,250,000) and has targeted a number of sectors such as food-crops, horticulture, plantation/estates, livestock, cow nursery, marine tourism, renewable energy and energy conservation. Table 4 summarizes the government’s plan for the sectoral KUR feature in 2016 - the details of the application procedure and distribution mechanism are available in Annex 3.
Table 4: Plan for the 2016 sectoral KUR feature No Description 2016’s sectoral KUR As much as 9% effective yearly or adjusted by equivalent 1 Interest flat interest Food-crops, horticulture, plantation/estates, livestock, cow nursery, marine tourism, rice, cacao, coffee, sea weed, rattan and salt, renewable energy and energy conservation that will contribute to the realization of the National Energy 2 Activities funded Policy as stipulated in Government Regulation No. 79 Year 2014, conservation of industrial energy as regulated in Government Regulation No. 70 Year 2009 or Ministry of Energy and Mineral Resources (MEMR) No. 14 Year 2010
Between IDR 500 million – IDR 30 billion (~ USD 38,000 – 3 Credit ceiling USD 2.25 million) 4 Duration Maximum 10 years Extension In case extension is needed, credit ceiling, or restructuring period, of working capital and/or investment, then the extension 5 restructuring, period, credit ceiling, and/or restructuring will follow the and extension characteristics of each commodity Guarantee Additional collateral based on assessment by bank 6 binding
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No Description 2016’s sectoral KUR 7 Grace period Based on characteristic of each commodity
Source: (Coordinating Minister for Economic Affairs 2015)
2.1.7. Timber Harvesting Postponement Credit (Kredit Tunda Tebang - KTT)
Eligibility Farmer groups, cooperatives (those receiving loans from government) Individuals/members can apply for the loan to the cooperative or farmer group receiving money from the government/MoEF Funding Low-interest credit Mechanism Size of Funding Variable, depending on the size of community Available group/cooperative Variable, maturity is 5-8 years (depending on the harvest) Funding Lump sum, directly to community group/cooperative Disbursement Lump sum, directly to individual applying for loan To encourage community forest farmers to postpone timber harvesting, the MoEF provides Harvest Postponement Credits (locally known as Kredit Tunda Tebang - KTT), which allow farmers not to cut when in need but to wait until the trees are bigger and thus carry a greater commercial value. With this credit, farmers can pursue productive activities. Collateral takes the form of standing crops or community forest trees with a circumference of 30 centimeters. Farmers are not allowed to cut down the trees that are pledges within a predetermined timeframe.
This credit is managed by the Public Service Agency (Badan Layanan Umum - BLU) Unit – Center for Forest Development (Pusat Pembiayaan Pembangunan Hutan - Pusat P2H), which helps the farmers apply for credit with a loan term of between up to five and eight years, and with low interest referring to the Central Bank of Indonesia’s interest rate.
The credits can be used for a number of purposes, for example, for the livestock sector (50%), economically productive activities such as furniture production or additional capital, restaurants, and wood trading (40%). They can also be used for paying school fees and consumer costs.
An example of the successful operationalization of this credit comes from the forest farmers group (locally known as Kelompok Tani Hutan - KTH) in Jasema, Terong Village, Bantul Regency of Jogjakarta province. Other areas where KTT has been operationalized are Bojonegoro in East Java and Banyumas in Central Java (Bidik Online 2015).10
10 Requirement and application form can be downloaded at http://www.dephut.go.id/uploads/files/perkaP2H_p01- 2012_lamp4.pdf
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HPI believes that KTT is an innovative mechanism with a proven record of accomplishment on a local scale for small holders – and therefore in a special category of which not many examples exist. Despite this being a loan for timber trees and not strictly a PES, KTT overcame several barriers related to operating on a local scale that many schemes fail to do. Particular attention should therefore be paid to it as a mechanism for the learning exercises.
2.1.8. Watershed Fund (Dana Daerah Aliran Sungai - Dana DAS)
Eligibility Local community groups/organizations, villages Funding Mechanism Budget transfer Size of Funding Variable Available Nursery program (KBR) BLM-PPMPBK = IDR 50 million (~ USD 4000) Funding Disbursement Yearly as part of government budgeting process
According to Government Regulation No. 37, 2012 on Watershed Management (Pengelolaan Daerah Aliran Sungai, DAS), the main funding for DAS management comes from the APBN, APBD, grants, and/or other funding such as trust funds, environmental funds, and PES. BPDAS managed several programs such as the Nursery Program (Kebun Bibit Rakyat – KBR) and grants for the local community for the development of conservation based community forest (Bantuan Langsung Masyarakat Pengembangan Perhutanan Masyarakat Pedesaan Berbasis Konservasi, BLM-PPMPBK). The BPDAS provides funds of IDR 50 million (~ USD 4000) through BLM-PPMPBK to create alternative livelihoods for local communities/villages in and around forest areas and also manages seeding programs (KBR), targeted on the watershed area that falls under the category of “needs to be recovered”. Under the BLM-PPMPBK, 70% of the money needs to be used for tree replanting and building up/maintaining land conservation practices whereas the other 30% can be spent on purchasing cattle and fish. Local community groups in villages under the area of prioritized watersheds, in or around forest areas, in underdeveloped/remote areas, or indigenous communities are eligible to apply. Only one local community group can receive the BLM-PPMPBK in a specific village.
Other sources of watershed funding come from projects funded by donors, such as the two projects detailed below.
Strengthening Community-Based Forestry and Watershed Management (SCBFWM)
The Strengthening Community-Based Forest and Watershed Management (SCBFWM) project is designed to back up the Government's program on community-based forest and watershed management, by addressing inequitable distribution of benefits from forest resources and lack of capacity of local authorities, as major underlying causes of land and forest degradation. The SCBFWM is administered by UNDP with grants from GEF. The project is specifically designed to complement the five-year national pledge of approximately USD 300 million to rehabilitate degraded forest and land distributed across 282 prioritized watersheds located in 400 districts in 32 provinces, and Indonesia’s annually approved Reforestation Fund at district level. USAID LESTARI Final Assessment Report - PES/REDD+ Finance Assessment and Development of Strategies to Incentivize Landscape Scale LEDS P a g e | 37
Community-Based Natural Resources Management (CBNRM)
The Community-Based Natural Resources Management (CBNRM) grant is one of the three windows under the Green Prosperity (GP) Facility that will make available grant funding for smaller scale projects that promote enhanced natural resource management to improve the sustainability of GP Facility’s renewable energy and/or agricultural investments, as well as support rural livelihoods and economic development. The CBNRM grant can be used to finance the following types of project: integrated landscape, watershed and catchment protection, community-based or collaborative natural resource management projects, sustainable agriculture for smallholder farmers, and small-scale, community-based renewable energy or heat generation.
CBNRM works in 10 provinces and 24 districts in Indonesia, but does not operate in either Aceh or Central Kalimantan. In theory, the Watershed Fund structure of SCBFWMs & CBNRM could be closely aligned with LESTARI’s Conservation Management and Monitoring Plans (CMMPs).
2.1.9. Grant from the Central Government to Local Government (Hibah Daerah)
Eligibility Local government Funding Mechanism Grants Size of Funding Variable Available
Funding Disbursement Yearly as part of government budgeting process Note Fund allocation should be based on criteria; however, no clear and robust criteria have been developed so far. Current disbursement of funds only targets mitigation actions, not yet targeting prevention and adaptation actions.
Grants from the central government to local governments are intended to support local development programs based on the priorities and policies of the government. These grants can originate from grants received from domestic revenue (APBN or other sources) or forwarded grants/loans from international donors (loans or grants). They could be in the form of cash, or goods and services. Local governments may need to provide matching grants if required, depending on the agreement or contract with the donors.
Grants from the Central Government to the Local Government are stipulated under Government Regulation No. 2 of 2012. This regulation provides guideline criteria on how grants should be operationalized and what types of activities can be supported, depending on the origin of the money, i.e. whether it comes from foreign or local sources. However, the criteria that local governments would need to meet to receive the grants are not yet defined.
The following figure details the mechanism for channeling grants to the sub-national governments:
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Figure 7: Distribution mechanism for local grants Source: (Ministry of Finance 2013) Presentation of Director of Financing and Local Capacity
Grants received by sub-national governments are managed and implemented in the sub- national government budget (APBD) mechanism according to respective laws. This means that the grants and the matching grants (if required by the Agreement) must be budgeted and included in the Budget Implementation Document of the Local Government Unit (SKPD). For monitoring and evaluation as well as the audit, the regions that received grants must submit a report on the progress of activity implementation on a quarterly basis to the BAPPENAS and to related state ministers/head of technical agencies. Sanctions can be imposed on local governments to prevent grants from being incorrectly used by ensuring that they are no longer channeled to the regions in question.
The Government Disaster Mitigation budget is one example of a grant given by the central government to the local government. Its terms are stipulated in Government Regulation (PP) No. 22 Year 2008 on Financing and Management of Disaster Relief. At the time of writing, the disaster mitigation budget can only be used to finance activities at the emergency and post disaster stages, and is not yet able to finance pre-disaster activities.
The government considers forest fires as a national disaster and aims to shift more resources towards prevention. The latest development shows that the National Disaster Relief Agency (Badan Nasional Penanggulangan Bencana - BNPB) and the Sub-National Disaster Relief Agency (Badan Penanggulangan Bencana Daerah - BPBD) are keen to work with local communities at the village level on forest fires prevention activities. The BNPB and BPBDs allocate special budget (for operations, logistics and equipment), and in cooperation with the sub-national government and private sector, provide incentives in the form of financial or non-financial rewards to fire-prone villages that are able to keep their forested areas free of fires.
This initiative has been implemented in Riau and Jambi provinces in the island of Sumatera, where the government provides a financial reward of IDR 100 million (~ USD 7500) to villages that are free from forest fires (desa bebas api/desa peduli api). The Government of Central Kalimantan has discussed its intention to set up a grand strategy and a road map for community-based forest fire prevention management and has organized coordination meetings at the provincial level for this purpose. They have also discussed the possibility of replicating the desa peduli api program in Central Kalimantan. Furthermore, the BNPB also intends to make use of the village fund for community-based forest fire prevention program and it is currently coordinating with the Ministry of Villages, Underdeveloped Regions, and Transmigration on this plan.
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The Government Disaster Mitigation Budget is a potential fund for financing REDD+ and PES activities. However, the eligibility criteria for local governments to receive this grant need to be developed. Another challenge in utilizing this fund for the financing of pre-disaster activities relates to government accounting issues, whereby the disaster mitigation budget is currently placed under the accounts of the government contingency fund. This means that this fund is not allocated to each ministry/agency but rather comes under the control of the MoF, and can then be accessed by any ministry/agency in an emergency situation. Contingency funding can only be used when it is deemed completely necessary, and disaster prevention activities are currently still considered as not urgent in comparison to activities at the emergency and post-disaster stages. To date, the bulk of contingency funding is used by the police department to deal with terrorism issues.
2.1.10. National Park Fund (Dana Taman Nasional)
Eligibility National Park Agency Funding Mechanism Government allocated budget (central government) Size of Funding Available Variable, depending on the area and priority Funding Disbursement Yearly as part of government budgeting process Note National park is managed and funded by central government
The main source of funding for national parks in Indonesia comes from the APBN. The budget used for financing operational activities in national parks comes from the budget allocated to each national park through the Budget Implementation List (DIPA), which includes transactions for personnel expenditures, shopping goods, and capital expenditure. National parks also receive support from international, multilateral, bilateral, private sector and community funding, and through partnership with donors. The MoEF allocates approximately IDR 10 – 20 billion for daily operational activities for each national park. The funds vary depending on the size of the national parks and the types of activities carried out.
National Parks in Aceh
Current support from donors for national parks in LESTARI landscapes in Aceh include:
Climate change mitigation and species conservation in the Leuser ecosystem
This project aims to support the sustainable management of the Gunung Leuser ecosystem in Sumatra, in particular in the Aceh Selatan, Subulussalam and Singkil districts. This project is expected to balance the needs for biodiversity conservation with those of the population for using the natural resources. KfW Development Bank is the implementing organization and has provided financial support totaling EUR 8,499,414 (~ USD 9,487,895.85). The project runs from August 2013 – April 2019.
Protection of Aceh Selatan Singkil Strategic Area
TFCA-Sumatera is a Debt for Nature Swap (DNS) Program between the US Government and the Government of Indonesia with two swap partners, namely Conservation International
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and KEHATI-The Indonesia Biodiversity Foundation. The program provides grants to local NGOs and universities in Indonesia focusing on conservation in Sumatera and rehabilitation of landscapes with a total funding commitment of USD 30 million over an eight-year period (2009-2018).
National Parks in Central Kalimantan
Current support from donors for national parks in LESTARI landscapes in Central Kalimantan include:
Sebangau Conservation Project This project was initiated by WWF in Sebangau National Park. The following three activities were conducted: restoration and rehabilitation (canal blocking and tree planting program), community empowerment (ecotourism, agroforestry, fisheries, sustainable agriculture and home industry), and collaborative management between Sebangau National Park and local stakeholders (local government, NGOs, communities, researchers and the private sector).
Developing a Productivity Model of Local Responsibility in Ecosystem Restoration in Kotawaringin East, Central Kalimantan
GEF provides small grants of USD 30,000 with co-financing of USD 44,260 for community development of ecosystem restoration plans and REDD+ projects to optimize benefits for communities and other local stakeholders in Kotawaringin Timur, Central Kalimantan. The project aimed to increase communities’ bargaining position in relation to the management of natural resources and allow them to contribute to the planning process of the Katingan Project. The implementing partner was Yayasan Puter, and the project took place from July 2012 – July 2013.
2.2. Internationally operated financial support mechanisms This section discusses financial support originating from foreign donors that has been used and/or potentially could be used to finance PES/REDD+ activities in Indonesia that are operated by a foreign entity. This section covers both bilateral commitments and multilateral cooperation for international development. Finally, this section also focuses on financing support options relevant to LESTARI, though some options (like REDD+ Early Movers - REM) are not yet applicable to Indonesia.
Internationally operated development finance available to PES/REDD+ activities in Indonesia mainly has two targets: climate change mitigation (and/or adaptation) and conservation. Several of the nationally operated funds discussed above are supported by this development finance as well, but this section will focus on funds mainly under international operation. A succinct overview of the climate-related development finance landscape focusing on REDD+ follows and provides a useful introduction to the current situation.
The relationship between funding channels (multilateral vs. bilateral) and financial instruments (equity vs. grants vs. loans) are established in the OECD study “Development Assistance Committee dataset: Climate-related development finance in 2013”. USAID LESTARI Final Assessment Report - PES/REDD+ Finance Assessment and Development of Strategies to Incentivize Landscape Scale LEDS P a g e | 41
Figure 8: Total bilateral and multilateral ODA committed to the forestry sector 201311 Source: (OECD 2013)
The amount of funding available as international climate finance (committed, not pledged) has varied over the years, with considerable linkages and crossover with multi-purpose funding. The year 2013 saw a significant drop in overall funding available for climate change mitigation.
Figure 9: Total bilateral ODA to reduce GHG emissions in the forestry sector12 Source: (OECD 2013)
Norway has dominated bilateral donor commitments since 2009, allocating more than double the amount of that of Germany, the donor with the second largest commitments. The World
11 For all developing countries with climate mitigation as a principal or significant objective, by channel and financial instrument 12 Committed to all developing countries, by whether climate mitigation was a principal objective or a significant objective, 2002- 2013.
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Bank dominates multilateral donor commitments with more than triple the amount of that of the second largest donor, the Forest Investment Program.
Figure 10: Total commitments to REDD+ by donor type, 2009-2014 Source: (Chávez, Schaap and Breitfeller 2015)
Represented as a time series, it is notable that REDD+ Finance Commitments peaked in 2009 and, after a small recovery in 2012, marked their lowest fully recorded year yet in 2014. The main difference here is in public sector finance commitments, with voluntary carbon markets increasing their contribution to land-based climate change mitigation efforts in 2014.
Figure 11: REDD+ finance commitments by donor type, 2009-2014 Source: (Chávez, Schaap and Breitfeller 2015)
Land use activities supported by international development partners have focused on capacity building and strengthening enabling environments by far. In addition, most international development partner finance was delivered through contractors or international groups as opposed to through the Indonesian government or local organizations.
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2.2.1. Norway – Indonesia REDD+ partnership
Eligibility Appointed Ministry/Agency in a country (MoEF)
Funding Mechanism Grants in 1st and 2nd phase, result-based finance/carbon credits in 3rd phase Size of Funding USD 1 billion in three phases Available Funding Disbursement Under development Note USD 200 million for Phase 1 and 2; USD 800 million for Phase 3
Norway and Indonesia have entered into a partnership to support Indonesia’s efforts to reduce GHG emissions from deforestation, forest degradation and peatlands. A Letter of Intent (LoI) between the Government of Norway and the Government of Indonesia on cooperation on REDD+ was signed on 26 May 2010. Norway will support these efforts by providing funding for up to USD 1 billion in three phases. In the first phase, funds will be devoted to finalizing Indonesia’s climate and forest strategy and putting in place enabling policies and institutional reforms. Phase 2 aims to prepare Indonesia for non-market based payments for performance in the form of verified emission reductions (VER), while at the same time initiating larger scale mitigation actions through a province-wide pilot project. In the third phase, contributions for the VER mechanism are expected to be implemented nationally.
A series of project phases and expected outputs on each phase is illustrated in the following figure.
Figure 12: Phases of Norwegian fund based on LoI Source: HPI elaboration based on (BP REDD+ 2014)
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This partnership follows the government to government scheme, in which funds can be accessed when the national government approves funding support that is dedicated to climate change and environment related programming, including REDD+ in the national budget.13 Funding is allocated on the basis of deliverables, channeled through an agreed financing mechanism. The partnership is performance-based, both in terms of actual emission reductions and with regards to policy change and institutional reforms required. This means that funding will depend on the program being executed according to these agreed principles, and will be assessed annually by an independent third party review group.
The Government of Norway has contributed USD 30 million in Phase 1 to the achievement of institutional development of REDD+, an extension of the moratorium, completion of the National REDD+ Strategy and the Strategy and Action Plan for Provinces (Strategi dan Rencana Aksi Provinsi - SRAP), development of a Monitoring, Reporting, and Verification (MRV) system and review of licensing. An interim phase (Phase IIA) was designed to bridge some of the important work that was not completed in the preparation phase and also to prepare a solid foundation for the transformation and implementation phases. In this interim phase, the Government of Norway is contributing USD 10 million.
The creation and operationalization of the National REDD+ Agency is an important milestone for REDD+ implementation in Indonesia as it triggers the second phase of the program. This agency, however, was dissolved in January 2015 and no funding has been disbursed since. Out of a total of USD 200 million allocated for Phase I and Phase II, less than half has been spent as of today. Phase IIA was halted due to the dissolution of the National REDD+ Agency, and some activities under this phase, including the operationalization of pilot projects, were also halted. As a result, Phase IIB, which was initially planned to commence in March 2015, has not yet started and most likely will experience further delays in its implementation.
One of the core aspects of the LoI is the development of a funding instrument to channel support from the international community. The REDD+ Task Force and the National REDD+ Agency created this fund, which was known as Financing REDD+ in Indonesia (FREDDI). FREDDI is supposed to operate under a mandate from the National REDD+ Agency, which defined its strategy, scope, and scale of funding activities.14 By the time the National REDD+ Agency was dissolved in January 2015, FREDDI was not yet operational.
The Norwegian funds are currently managed on an interim basis by the REDD+ Unit under the UNDP Environmental Division. UNDP’s management is projected to continue until June 2016 or until another institutional mechanism is set up by the government. The UNDP REDD+ Unit currently manages USD 12 million and oversees the continuation of programs in transitional phases which were previously implemented by the REDD+ Agency, namely:
Prevention of forest and peat land fire in five fire prone provinces, namely West Sumatera, Riau, Jambi, Central Kalimantan and Central Sulawesi
13 Please see http://www.wri.org/sites/default/files/norwegian_fast_start_finance_contribution.pdf 14 http://www.unorcid.org/upload/UNORCID_-_The_Funding_Instrument_for_REDD_in_Indonesia_-_AUG_2015.pdf (page 5/39)
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Law enforcement and review of laws on licensing, and compliance auditing for fire prevention Improvement of community welfare, land management, and sustainable forests through social forestry Land-related conflict resolution Participative land mapping by local and customary communities and institutional strengthening, stakeholder involvement and awareness raising on social economic issues, as well as environmental issues related to Phase 2 preparation At the time of writing, UNDP REDD+ had carried out activities in community-based fire management (CBFM), and, specifically in Central Kalimantan, assisted the MoEF in supporting a community group artesian well program in Jumpun Pambelun. Canal blocking is another priority program in Central Kalimantan that is expected to be implemented in the near future.
The Government of Indonesia will establish a new institutional arrangement for managing the Norwegian Fund and will eventually take over its administration from the UNDP REDD+ Unit. However, milestones and timelines for this transition have yet to be set and candidate institutions/agencies also need to be determined. Current developments indicate that the MoF will most likely take over the management of the Norway funds. The MoF is planning to establish a new BLU called BLU Climate Change (BLU Perubahan Iklim) to be the next fund administrator. This BLU will serve as the administrator of all funds related to climate finance.
The ICCTF that is currently managed by BAPPENAS and funds managed by the Center of Forest Development Financing (Pusat Pembiayaan Pembangunan Hutan – Pusat P2H) at the MoEF are envisioned to be merged into the administration of this new BLU. Additionally, FREDDI, which was not yet operational when the REDD+ Agency was dissolved, is also expected to come under the management of the BLU. The government is currently formulating a draft regulation that will serve as the legal basis for the establishment of this new mechanism. This plan, however, has a high level of uncertainty in terms of the timeline involved and the institutional arrangements, resulting from the structure of Indonesian government organizations and the overlapping roles and functions of government institutions (MoEF, MoF, and BAPPENAS) in climate finance.
2.2.2. Forest Investment Program (FIP)
Eligibility Appointed Ministry/Agency in a country (MoEF) Funding Mechanism Grants & Loans Size of Funding FIP I: USD 17.5 million (grant); expected co-financing Available USD 6 million FIP II: USD 17.5 million (grant); expected co-financing USD 8 million FIP III: USD 2.5 million (grant) & USD 32.5 million (loan) expected co-financing USD 6 million Funding Disbursement Through Multinational Development Banks (MDBs) and their respective disbursement regulations (see Table 5)
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The FIP is a program under the Strategic Climate Fund that provides funding to support developing countries in reducing deforestation and forest degradation and to promote sustainable forest management that leads to emission reductions and enhancement of forest carbon stocks. The World Bank is the trustee of the Strategic Climate Fund and provides secretariat services through the Climate Investment Funds (CIF) Administrative Unit.
The eligibility criteria of the FIP are: a. Countries that meet eligibility criteria of Official Development Assistance (ODA) b. An active Multilateral Development Banks (MDBs) country program15
In November 2012 Indonesia was selected by the FIP sub-committee as one of eight pilot countries. FIP in Indonesia will be administered by the ADB, IBRD, and the IFC, and will be executed by the MoEF.
FIP activities in Indonesia are focused on three inter-related themes.
Table 5: FIP activities in Indonesia Managing Program Project title Focus of activities Institutions
FIP I Community-focused Institutional development ADB investments to address forest enterprises and deforestation and forest CBFM degradation community capacity FIP II Promoting Sustainable Institutional development IBRD Community Based Natural community capacity Resource Management and Institutional Development FIP III Strengthening Forestry Forest enterprises and IFC Enterprises to Mitigate Carbon CBFM Emissions Source: (Climate Investment Fund 2012) and second public consultation FIP II, 2014
An additional amount of up to USD 6.5 million is available under the Dedicated Grant Mechanism (DGM) 16 for customary law communities (Masyarakat Hukum Adat). The additional resources may be used to: (i) build institutional capacity, forest governance and information; (ii) mitigate GHG emissions from the forest sector, including through supporting forest ecosystem services; and (iii) support measures outside the forest sector to reduce the pressure on forests, such as through the creation of alternative livelihood and poverty reduction opportunities.
15 ‘Active’ program means where MDB has a lending program and/or policy dialogue with the country. 16 Indonesia Forest Investment Program TOR for the Second Joint Mission (12-16 December 2011)
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Table 6: FIP funds allocation
FIP amount (USD Expected co- Program MDB million) financing (USD Sector Grant Loan Total million) FIP I ADB 17.5 17.5 6.0 Public FIP II IBRD 17.5 17.5 8.0 (DANIDA) Public FIP III IFC 2.5 32.5 35.0 99.0 Private Source: (Climate Investment Fund 2012) and Second public consultation FIP II, 2014
All provinces in LESTARI landscapes are selected for potential FIP interventions.
FIP I: Community-focused investments to address deforestation and forest degradation
FIP I aims to reduce GHG emissions from forests in Sintang and Kapuas Hulu district in West Kalimantan province. The province is one of the top five provinces contributing to GHG emissions from deforestation, with a mean deforestation rate of 132,500 ha per year. Specific activities include REDD+ activities to be implemented in 17 villages and 5 FMUs; activities to strengthen local, provincial and national governmental forest institutions; and the harmonization of REDD+ related policies at different institutional levels.
Table 7: FIP I activities and collaborating institutions Collaborating institutions Primary role MDBs ADB Managing implementation and partner FIP grant financing Co-financing Confirmed: ADB, GEF/SFM, Technical and in-kind co- Government of Japan. Under financing discussion: Government of Germany (KfW/GIZ), Government of the USA (USAID, Dept. of State, Millennium Challenge Corporation), others to be confirmed.
Government Ministry of Environment and Forestry Executing Agency Coordinating Ministry for Economic Coordination Affairs; Ministry of Finance West Kalimantan Provincial Provincial-level implementation Government
Sintang and Kapuas Hulu district District-level implementation Direct Local community institutions, Partners in activities and Stakeholders including customary institutions beneficiaries of incentive schemes
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Collaborating institutions Primary role Forest Management Unit (KPH) Implementing unit at pilot site Institutions Local Government Technical Partners in activities and Implementation Units (UPT) training participants Private Sector Inputs to activities and participants of incentive schemes Source: (Climate Investment Fund 2012)
FIP II: Promoting sustainable community-based natural resource management and institutional development
FIP II aims to complete the MoEF’s plans to address the problems of governance and management of forest resources. The ultimate objective is to reduce greenhouse gas emissions and enhance carbon stocks while generating livelihood co-benefits.
Table 8: FIP II activities and collaborating institutions Collaborating institutions Primary role MDBs IBRD Managing implementation and FIP grant partner financing
Co-financing IAFCP Co-financing for spatial planning and community activities FCPF Co-financing for policy dialogue, baseline data collection Danida Government Ministry of Policy reform on REDD+, steering and Environment and internalization of FIP into KPH units Forestry National Land Agency Policy on village level spatial planning Ministry of Home Guidance on and facilitation of KPH institution, Affairs engagement of province and district governments, and village economic empowerment Bappenas Policy and steering Ministry of Agriculture Collaboration on village level spatial planning and improvement of local economy
BAPPEDA Collaboration on spatial planning Provincial governments Partners and beneficiaries of capacity building activities
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Collaborating institutions Primary role Direct Local community Beneficiaries of community level planning and Stakeholders economic activities within KPHs and in buffer zones Village and other local Partners in activities, including KPH-based community institutions, activities, and beneficiaries of incentive including customary schemes institutions Selected KPH Site level project management, partners and Institutions beneficiaries of capacity building activities
Source: (Climate Investment Fund 2012)
FIP III: Strengthening of Forest Enterprises to Mitigate Carbon Emissions, administered by the International Finance Corporation (IFC)
FIP III aims to strengthen the productive capacity and business skills of forestry enterprises and firms in other related sectors, by leveraging private sector investment. IFC will work with its partners to promote sustainable forest management, leading to emission reductions and protection of forest carbon stocks. The MoEF will serve as the lead government agency with IFC serving as the lead MDB for investment and technical assistance initiatives oriented towards private sector enterprises in the forestry sector, in addition to other associated sectors that affect forests. Other partner agencies and stakeholders are presented in the table below.
Table 9: FIP III activities and collaborating institutions Collaborating institutions Primary role MDB and IFC Managing implementation and FIP co-financier concession and grant financing and providing technical assistance Commercial banks, credit Co-financing unions and financial institutions Bilateral donors Technical assistance grant Government MoEF Steering committee agencies Coordinating Ministry of National level coordination Economic Affair, MoF, Ministry of Crafts, SMEs Private forest ownership, KPH Provincial and district level execution Forest enterprises Investor, concession holder, processor, manufacturer, buyer Direct Contractors Operations, technical and business stakeholders service
Cooperatives Member based woodlot and marketing operations
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Collaborating institutions Primary role Groups of smallholders Smallholder woodlot operators, participant
NGOs Strengthening capacity of small business
Source: (Climate Investment Fund 2012)
2.2.3. Forest Carbon Partnership Facility (FCPF)
Eligibility An eligible REDD+ country (through Ministry or other Government Agency) Funding Mechanism Grants (Readiness Fund & Carbon Fund) Size of Funding Total fund capital of USD 850 million, as of March 2015 Available Readiness Fund: 3.85 million (TBC) (global, not just Carbon Fund: USD 465 million (total) Indonesia) Funding Disbursement Grants
The FCPF has two separate but complementary funding mechanisms — the Readiness Fund and the Carbon Fund. Both funds are underpinned by a multi-donor fund of governments and non-governmental entities, including private companies that make a minimum financial contribution of USD 5 million.
The FCPF has created a framework and processes for REDD+ readiness17, which helps countries prepare themselves for future systems of financial incentives for REDD+ by developing the necessary policies and systems. The Carbon Fund will provide payments for VER from REDD+ programs in countries that have made considerable progress towards REDD+ readiness.
The World Bank is the trustee of both the Readiness Fund and the Carbon Fund and provides secretariat services through a Facility Management Team (FMT).18 The FMT administers the funds and makes proposals to the FCPF Participants Committee (PC)19, and provides country advisory services and REDD+ methodology support. It ensures that FCPF operations comply with applicable policies in the areas of safeguards, procurement and financial management.
Currently, the Forestry Research and Development Agency (FORDA) at the MoEF is the managing agency for the FCPF. The contact person for the FCPF is Prof. San Afri Awang of
17 Please see https://www.forestcarbonpartnership.org/design-process 18 A group of World Bank staff which coordinates and oversees the work of the FCPF. It is housed within the bank’s Carbon Finance Unit, which is in the Environment Department. The FMT team includes staff with regional, legal and carbon finance experience. They are also the point of contact for civil society. 19 The governing body of the FCPF charged with making decisions on all aspects of importance to the readiness process- including approving the templates for R-Plans, the criteria and standards for their assessment, and their approval. The PC also approves the annual operating budget of the FMT.
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FORDA at [email protected]. FORDA is located at Jalan Gunung Batu No. 5, Bogor, West Java – Indonesia, 16118; phone: +62-251-8633944.
Readiness Fund
The Readiness Fund aims to support developing countries in preparing themselves for participation in a future, large-scale system of positive incentives for REDD+. This includes: adopting national REDD+ strategies; developing reference emission levels (RELs); designing MRV systems; and making REDD+ national management arrangements, including proper environmental and social safeguards. To date, USD 385 million has been made available to fund readiness activities. A country will receive a maximum of USD 3.8 million for the readiness process.
To access this fund, a country needs to submit a Readiness Plan Idea Note (PIN) to the FCPF. The next step is for the selected countries to prepare their Readiness Plan, which acts as a framework for a country to set a clear plan, budget and schedule for undertaking REDD+ activities. Then, the partnership’s governing body20 reviews and assesses Readiness Plans, and on that basis decides on the allocation of FCPF grants to countries.
Figure 13: Milestones of REDD+ readiness Source: (Forest Carbon Partnership Facility (FCPF) 2015)
20 The governing body is a Participants Committee, which meets three times a year and makes the main decisions for the FCPF. The Participants Committee serves for a term of one year, and consists of 10 members selected by REDD+ Country Participants and 10 members selected jointly by the Donor Participants and Carbon Fund Participants at the time of an annual Participants Assembly meeting.
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The World Bank, the Inter-American Development Bank, the UNDP, and the UN Food and Agriculture Organization (FAO) are delivery partners under the Readiness Fund and are responsible for providing REDD+ readiness support services to specific countries.
Indonesia has been granted USD 3.4 million from the FCPF Readiness Preparation Grant and it is currently proposing an additional USD 5 million.21 Under the first Readiness Fund, Indonesia selected pilot provinces for REDD+ implementation and the framework for readiness structures and implementation at the provincial and district levels that are in need of strengthening for successful REDD+ implementation. Accordingly, the key area of focus in the request for additional funding is for strengthening the institutional, legal, and regulatory capacities and creating robust benefit sharing frameworks that are workable at the sub- national level and consistent with the national approach. Indonesia’s intention to submit a request for additional finance to the FCPF has been endorsed by the 3rd National FCPF Steering Committee, held on 12 February 2014.
Carbon Fund
Countries that have made significant progress in their REDD+ readiness efforts may be selected to participate in the Carbon Fund, through which the FCPF will pilot incentive performance-based payments for REDD+ policies and measures against an established reference emission level, for which the fund has set up its own methodological framework.22 The fund, totaling USD 465 million, is available for this purpose. To date, there are 11 ER- PINs in the FCPF pipeline, of which Indonesia is one of the countries on the list. 23
The following figure illustrates processes involved in accessing the fund.
Figure 14: Carbon Fund processing steps: From ER-PIN to ERPA Implementation Source: (Forest Carbon Partnership Facility (FCPF) 2015)
21https://forestcarbonpartnership.org/sites/fcp/files/2014/May/Mid%20Term%20progress%20Report%20Indonesia%20May %202014.pdf 22 Please see https://www.forestcarbonpartnership.org/carbon-fund-methodological-framework 23 Please see https://www.forestcarbonpartnership.org/er-pins-fcpf-pipeline
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Programs submitted to the Carbon Fund will have to meet the following criteria:
Focus on results, namely high-quality and sustainable emission reductions, including social and environmental benefits; Sufficient scale of implementation, e.g., at the level of an administrative jurisdiction within a country or at the national level; Consistency with emerging compliance standards under the UNFCCC and other regimes; Diversity, so as to generate learning value for the FCPF and other participants; Clear mechanisms so that the incentives for REDD+ reach those who need them; and Transparent stakeholder consultations.
The Carbon Fund will remunerate the selected countries in accordance with negotiated contracts for verifiably reducing emissions above those in the reference scenario. The Carbon Fund’s payments are intended to provide an incentive to the recipient countries and the various stakeholders - including forest-dependent indigenous peoples, other forest dwellers or the private sector - to achieve long-term sustainability in financing forest conservation and management programs. This would help reduce the negative impact on the global climate from the loss and impoverishment of forests.
Indonesia submitted its ER-PIN to the FCPF on 5 September 2014 with the ER Program Name “Indonesia District Level REDD+ ER Program”.24 The ER PIN was developed by the Ministry of Forestry25 and the REDD+ Agency26, with support from various stakeholders in central and local government agencies, as well as national and local NGOs. There are seven locations of ER programs in Indonesia: Kutai Barat and Berau (East Kalimantan); Kapuas27 (Central Kalimantan); Donggala and Tolitoli (Central Sulawesi); and Merangin and Bungo (Jambi).28
The FCPF program in Indonesia aims to accelerate transformative reforms in forest and land governance through the scaling-up of the development of FMUs, improvements in land and spatial planning, site-specific community-based activities, and management of forest concessions and estate crops. These emission reduction programs under the FCPF Carbon Fund are part of Indonesia’s national REDD+ initiative and as such will include activities closely matched to the national REDD+ strategy and activities at the provincial level. By focusing on sub-national implementation initially, the program will generate important lessons that can be applied to other forest-rich parts of the country in a phase approach and inform the broader national REDD+ strategy.
24 Please see https://www.forestcarbonpartnership.org/sites/fcp/files/2014/september/Indonesia%20ER- PIN%20September_12_resubmitted_edit_final.pdf 25 Currently merged with Ministry of Environment. 26 The REDD+ Agency was dissolved in January 2015. 27 The preliminary list of key local partners in Kapuas district are Kalimantan Forest Carbon Partnership (KFCP), Kapuas Customary Dayak Council, Tahanjungan Tarung Foundation, Petak Danum Foundation, Inter Village Communication Forum 28 Please see http://www.forestcarbonpartnership.org/sites/fcp/files/2014/october/CF11%202c.%20Indonesian_Presentation_CF11_20141 005.pdf
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Milestones of Indonesia’s activity under the FCPF are summarized in the following figure.
Figure 15: Milestones of Indonesia’s activity under FCPF Source: (FCPF 2014)
Currently, FCPF only works with readiness grants at the national level. If ERPA implementation for performance-based payments was initiated, LESTARI emission reduction monitoring should be harmonized with the national reporting and benefit distribution mechanisms discussed.
2.2.4. REDD Early Movers (REM)
Eligibility Ministry/institution in a country (MoEF) Funding Mechanism Grants Size of Funding - Available Funding Disbursement - Note Not available for Indonesia REM has a funding volume of EUR 32.5 million, and REM has already agreed to spend around EUR 19 million buying 8 million tons of CO2 from REDD+ activities in the state of Acre over a four-year period
REDD Early Movers (REM) currently only operates in Colombia, Ecuador and Brazil and does not currently accept applications from other countries. REM contributes to the application of this approach in selected countries. REM supports REDD pioneers, also called Early Movers, who are already taking the initiative themselves in forest conservation for climate change mitigation. The program rewards the climate change mitigation performance of “Early Movers” and promotes sustainable development for the benefit of small-scale
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farmers as well as forest-dependent and indigenous communities through fair benefit sharing. KfW Development Bank makes payments for independently verified REDD emission reductions achieved by Early Movers. The REM partner countries make their own contribution in order to keep the complexity of risk management low.
REM has a funding volume of EUR 32.5 million, and has already agreed to spend around
EUR 19 million buying 8 million tons of CO2 from REDD+ activities in the state of Acre over a four-year period. Contact: Daniel Haas BMZ Bonn/Division 311 dahlmannstrabe4, 53113 Bonn; [email protected]
2.2.5. Green Climate Fund (GCF)
Eligibility Accredited Entities: accredited national, sub-national, regional, and international implementing entities and intermediaries (including NGOs, government ministries, national development banks, and other domestic or regional organizations that can meet the fund’s standards); and the private sector Funding Mechanism Grants, loans, guarantees, equity Size of Funding Micro project: USD < 10 million; Small project: USD 10 Available – 50 million; Medium project: USD 50 – 250 million; Large project: > 250 million Total funding pledges of > USD 10 billion to the GCF Funding Disbursement Grants, Loans, Equity, Results-based payments Additional info Indonesia is still developing a framework for the National Designated Authority (NDA) establishment and the issues of accredited entity Two Indonesian institutions pursuing AEs: Sarana Multi Infrastruktur Ltd. (PT. SMI) and KEHATI foundation
The GCF is a multilateral climate fund within the framework of the UNFCCC for investing in climate change mitigation and adaptation in developing countries, primarily based on contributions from industrialized countries. The purpose of the fund is to promote the paradigm shift towards low-emission and climate-resilient development pathways. In allocating its resources, the fund aims for a 50:50 balance between mitigation and adaptation over time. The fund also aims to allocate a minimum of 50% of the adaptation allocation to particularly vulnerable countries, including least developed countries (LDCs), small island developing states (SIDS) and African states.
One element of the GCF that supports developing countries is the Readiness Program.29 The Secretariat works closely with various international organizations such as the United Nations Environment Program (UNEP), World Resource Institute (WRI), the UNDP climate
29 The Readiness Program prepares developing countries to effectively and efficiently plan for, access, manage, deploy and monitor climate financing. One of the key activities is to help develop pipelines of national projects in line with countries’ climate change strategies, plans and policies while involving the private sector. The lessons learned will be shared with the GCF Board and Secretariat and with other initiatives dedicated to enhancing climate finance readiness.
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finance readiness program, the GIZ and KfW climate finance ready initiatives, and the Asian Development Bank (ADB) readiness programs to ensure complementarity.
The GCF will finance projects in the public and private sectors that contribute towards achieving at least one of the eight strategic impacts of the fund30, where projects will be evaluated against the fund’s investment criteria: impact potential, paradigm shift potential, sustainable development, responsive to recipients’ needs, promotion of country ownership, and efficiency & effectiveness. The fund has identified five investment priorities that will deliver major mitigation and adaptation benefits, one of them related to forestry, that is aimed at scaling up finance for forests and climate change.
Access to GCF resources to undertake climate change projects and programs is possible only through Accredited Entities (AEs). AEs can submit funding proposals to the fund at any time. The GCF board will only consider funding proposals that are submitted with a formal letter of no objection. An AE may submit a concept note for feedback and recommendations from the GCF, in consultation with the NDA or Focal Point. Considering the recommendation of the Technical Advisory Panel, the GCF board decides whether the concept is endorsed, not endorsed with a possibility of resubmission, or rejected.
The flow of the GCF approval process is illustrated in the following figure.31
Figure 16: Flow chart for GCF initial proposal approval process Source: (Green Climate Fund 2015)
30 Classified in two broad categories: (1) Mitigation strategic impacts – reduced emissions from: (i) transport, (ii) energy generation and access, (iii) forest and land use, and (iv) buildings, cities, industries, and appliances; and (2) Adaptation strategic impacts – increased resilience of: (i) health, food and water security, (ii) livelihoods of people and communities, (iii) infrastructure and built environment, and (iv) ecosystem and ecosystem services. 31 More detailed information on the GCF proposal approval process can be found by following this link: http://www.gcfund.org/fileadmin/00_customer/documents/Operations/4.2_Project_Approval_Process.pdf; the criteria for program and project funding can be downloaded at this link: http://gcfund.net/fileadmin/00_customer/documents/MOB201406- 7th/GCF_B07_03_Initial_Proposal_Approval_Process_fin_20140508.pdf
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The GCF has approved its first eight projects including two from SIDS (Fiji and the Maldives) and three from LDCs (Bangladesh, Malawi and Senegal) (Climate Analytics 2015).
Indonesia Focal Point/NDA Contact Info:
Indonesia has financially contributed USD 250,000 to the GCF and has recently undergone a national political transition, leading to changes in national institutional arrangements including the closure of climate finance institutions such as The National Council on Climate Change (DNPI), which previously played the role of the GCF focal point in Indonesia.32 The new NDA to the GCF for Indonesia is:
Dr. Suahasil Nazara Contact Person: Chairman of Fiscal Policy Agency Mr. Syurkani Ishak Kasim (Director) Email: [email protected] R.M. Notohamiprodjo Building 5th Floor Jl. Dr. Wahidin No. 1 Jakarta Secretariat: 10710 Indonesia Center for Climate Change and Multilateral Policy (PKPPIM) Phone: +62 21 3483 1678 Fiscal Policy Agency Fax: +62 21 34831677 Ministry of Finance of Indonesia Email: [email protected]
There are currently 20 GCF AEs in the world. In additional to national entities, there are regional and international entities that can access and implement projects globally, such as Conservation International (CI), Deutsche Bank, UNEP, UNDP, ADB, and the World Bank. Indonesia is still in the process of developing a framework for the establishment of the NDA and is also working on the accreditation of new AEs. As of today, there are two Indonesian institutions pursuing GCF accreditation, namely PT. SMI and KEHATI foundation.33 GCF accreditation is a long and intricate process that makes it difficult to predict. Additionally, AEs can only access the fund for certain types of fiduciary functions, size of project/activity, and environmental and social risk category.
GCF Private Sector Facility (PSF)
Eligibility All developing country Parties to the UNFCCC through Accredited Entities (AEs): commercial banks regulated by central banks, private equity houses, investment firms and funds, impact funds, regulated financial intermediaries, development banks Funding Mechanism Senior debt, subordinated debt, equity, guarantees, and grants
Size of Funding Under definition Available
32 DNPI used to be the authority administering the GCF, and has been merged into the MoEF. 33 Criteria of accredited institutions can be found in this link: http://www.gcfund.org/fileadmin/00_customer/documents/Accreditation/GCF_Accreditation_Application_form_v1_with_ex amples_of_supporting_documents.pdf
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Funding Disbursement Under definition Note Program area: agriculture & forestry, water, clean energy, transportation & logistics, construction/building, manufacturing
The GCF Private Sector Facility (PSF) focuses on climate-sensitive private sector investments in developing countries. The PSF is created to address the particular investment requirements of the private sector and to promote public-private partnerships. The PSF invests alongside qualified commercial banks, private equity firms, funds, development banks and other financial intermediaries for climate change projects and programs. It also provides financing to financial intermediaries for climate change projects and programs. The PSF can be used to finance activities implemented by large, medium, small, and micro enterprises. Non-accredited private sector entities can potentially access GCF funds through accredited local financial intermediaries. The GCF approved its first eight projects in November 2015, with discussions regarding several criteria still continuing.34
2.2.6. Global Environment Facility (GEF) managed funds
Eligibility Government agencies, civil society organizations, private sector companies, research institutions Funding Mechanism Grants (can be transferred to or blended with loans, guarantees, equity) Size of Funding Various types of projects (modalities): Available Full-sized Projects (FSPs) – over USD 2 million, Medium-sized Projects (MSPs) – up to USD 2 million, Enabling Activities (EAs) - up to USD 1 million, Small Grants Program (SGPs) – up to USD 50,000, Programmatic Approach – amount not defined. Funding Through Implementing Entities like UNDP, UNEP and the Disbursement World Bank Additional Info Focus of GEF Trust Fund biodiversity, climate change, land degradation, sustainable forest management, international waters, and chemicals. Focus of the Special Climate Change Fund (SCCF) and Least Developed Countries Fund (LDCF): climate change adaptation
The GEF has provided USD 14.5 billion in grants and mobilized USD 75.4 billion in additional financing for almost 4,000 projects since its establishment in 1992.35 The GEF has become an international partnership of 183 countries, international institutions, CSOs, and
34 Please see http://www.greenclimate.fund/-/green-climate-fund-approves-first-8-investmen-1 35 Please see https://www.thegef.org/gef/whatisgef
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the private sector, which addresses global environmental issues and currently has 18 implementing partners, including the ADB, UNDP, World Bank Group, and UNEP.
GEF support is provided to government agencies, civil society organizations, private sector companies and research institutions to implement projects and programs in recipient countries. GEF’s work covers biodiversity, climate change, land degradation, sustainable forest management, international waters and chemicals.
GEF provides funding to various types of projects ranging from several thousand to several million dollars from the GEF Trust Fund, Special Climate Change Fund (SCCF) and Least Developed Countries Fund (LDCF) in the form of five different types of grants as listed in the table above. The GEF also hosts the Adaptation Fund Secretariat. Each country gets a budget allocation under each four-year replenishment cycle. Indonesia’s allocation for the 2014-2018 replenishment period is USD 84 million, of which USD 22 million is for climate change mitigation and USD 58 million is for biodiversity.36
There are multiple possibilities for accessing GEF funding. The following are the key steps that should be taken to submit a project proposal:
i. Contact the Operational Focal Point (OFP) in the country.37 The OFP is responsible for the review and endorsement of projects to ensure consistency with national priorities. Thus, the initial idea should first be discussed with him/her. The OFP is also responsible for facilitating and coordinating all the GEF-related activities within the country. He/she often organizes and coordinates National Portfolio Formulation Exercises38, national consultations and other processes for the programming of the portfolio of GEF projects. The different project ideas for GEF financing are discussed, prioritized and consolidated through these multi-stakeholder processes. The OFPs for Indonesia are:
Mr. Daniel Simanjuntak Ms. Laksmi Dhewanti Political Focal Point since 2015-01-16 OFP since 2015-08-20 Counselor Ministry of Environment and Forestry Embassy of Indonesia Manggala Wanabakti Building Jl. Gatot Subroto, Senayan 2020 Massachusetts Avenue, N.W. Jakarta 10270, Indonesia Washington, DC 20036 Tel: +62 21 5720210 Tel: +1 202 775 5200 Fax: +62 21 5720210 Email: [email protected] Email: [email protected]
In addition, the OFP can guide the project proponent in avoiding duplication of activities, in case a similar project has already been funded. To access the list of all GEF-funded projects in Indonesia, including an overview of the country’s allocation and utilization, visit https://www.thegef.org/gef/country_profile
36 Please see https://www.thegef.org/gef/STAR/GEF6_country_allocations 37 Please see https://www.thegef.org/gef/focal_points_list 38 Please see https://www.thegef.org/gef/npfe
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ii. Meet the eligibility criteria. For a project or program to be considered for GEF- funding, it must fulfill the following eligibility criteria: a. It has to be undertaken in an eligible country.39 b. It has to be country-driven and consistent with national priorities. All GEF projects should be based on national priorities designed to support sustainable development. c. It has to address one or more of the GEF focal area strategies.40 d. It has to seek GEF financing only for the agreed-upon incremental costs on measures to achieve global environmental benefits. e. It has to be endorsed by the OFP of the country. For regional projects and programs, the endorsement of the OFPs of all participating countries is required. For global projects, an endorsement letter is not required. f. It must involve the public in project design and implementation, following the Policy on Public Involvement41 in GEF-Financed Projects and the respective guidelines. iii. Choose a GEF Agency.42 The GEF Agency (e.g. UNDP, UNEP or World Bank) is responsible for the development and implementation of projects and programs. This means that the GEF Agency will be the proponent’s partner at all stages of the project. The choice of the agency should be based on its respective comparative advantages as stated in the document Comparative Advantages of the GEF Agencies Corrigendum.43 iv. Select a type of modality. The GEF provides funding through four modalities: full- sized projects, medium-sized projects, enabling activities and programs. The project proponent should select the one that best fits the idea to be developed into a proposal. Depending on the type of modality selected, different templates have to be completed describing the project proposal for its review and approval. v. Civil Society Organizations have the opportunity to apply for GEF grants through the Small Grants Program. 44 Additional details in the review and approval of these projects can be found under the policies and guidelines of the Project Cycle45 and the Templates and Guidelines46 on the GEF website.
39 Please see https://www.thegef.org/gef/country_eligibility . In other words, countries are eligible for GEF funding in a focal area if: (i) they meet eligibility criteria established by the relevant COP of that convention, (ii) they are members of the conventions and are countries eligible to borrow from the World Bank (IBRD and/or IDA), (iii) they are eligible recipients of UNDP technical assistance through country programming. 40 Please see https://www.thegef.org/gef/GEF6-Programming-Directions 41 Please see https://www.thegef.org/gef/policies_guidelines/public_involvement 42 Please see https://www.thegef.org/gef/gef_agencies 43 Please see https://www.thegef.org/gef/node/428 44 Please see https://www.thegef.org/gef/sgp 45 Please see https://www.thegef.org/gef/project_cycle 46 Please see https://www.thegef.org/gef/guidelines_templates
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2.2.7. BioCarbon Fund Initiative for Sustainable Forest Landscapes (ISFL)
Eligibility Country Funding Mechanism Grants and results based payments for achieved emission reductions Size of Funding USD 170-180 million Available Funding - Disbursement
The BioCarbon Fund Initiative for Sustainable Forest Landscapes (ISFL)47 is a multi-lateral fund administered by the World Bank that seeks to promote reduced GHG emissions from the land use sector, reduced deforestation and forest degradation in developing countries (REDD+) and to promote sustainable agriculture, as well as smarter land-use planning, policies and practices. The initiative will deploy results-based finance to incentivize changes at the landscape level.
Within the World Bank there is complementarity between the climate and forest initiatives such as the FCPF, the FIP, and the BioCF. ISFL will provide countries with the following types of financing:
Grant funding and technical assistance through the BioCFplus. Results based payments for achieved emission reductions through the BioCF’s 3rd tranche. The fund’s capital is USD 380 million from the contributing participants of Germany, Norway, the UK, and the US, and has been operational since 2013.
The BioCF ISFL operates at the jurisdictional level. Thus, on the ground interventions would be at a significant scale and policy interventions would impact the whole jurisdiction or even whole nation. The preliminary average size of each ISFL jurisdictional program is USD 70-80 M. In Zambia and Ethiopia, the jurisdictional program is agreed and funding has been initiated; Colombia and Indonesia are targeted jurisdictions.
At the COP21 in December 2015 in Paris, the UK and Germany pledged an additional USD 100 M to the ISFL to support expansion into Indonesia48.
HPI views it as worthwhile to inquire with the ISFL when activities in Indonesia would start and if LESTARI could be a pilot landscape program.
47 http://www.biocearbonfund-isfl.org/ 48 http://www.ecosystemmarketplace.com/articles/norway-germany-uk-pledge-5-billion-to-combat-tropical-deforestation/
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2.2.8. Bilateral commitments financing support
Eligibility A country (through an appointed government ministry/agency) Funding Mechanism Grants/loans Size of Funding Variable Available Funding Disbursement Variable
This section analyzes funding support originating from bilateral cooperation. Funding from the Government of Norway is not presented in this section as it is already discussed in sub- section 2.2.1. (NORAD-UNDP).
2.2.8.1. Denmark - DANIDA The Danish government, through its development corporation DANIDA, provides an Environmental Support Program (ESP3) to the Government of Indonesia for developing inclusive and sustainable growth through improved environmental management and climate change mitigation and adaptation. Currently, ESP3 is in its third phase and places emphasis on strengthening coordination between the national and regional government. Central Java Province has been chosen as a pilot province, and the results are expected to be applied in other provinces. The ESP3 is coordinated by BAPPENAS and is implemented jointly by the MoEF, and the Ministry of Energy and Mineral Resources. The program also includes support to four individual forest and climate projects implemented by Burung Indonesia, the World Agroforestry Center and the World Bank.
ESP3 runs from 2013-18 with a total budget of DKK 270 M (USD 50 million or IDR 600 billion) as a grant. Through close cooperation with key central government agencies who have the potential to change "business as usual", ESP3 seeks to facilitate gradual transformation towards a green economy. One component of the ESP3 program consists of a number of initiatives mostly run by NGOs. Partly funded through the Danish Fast Start Climate Fund for 2012, this component supports Indonesia's climate commitments, and seeks to improve livelihoods for forest dependent communities through sustainable natural resource management and forest protection. This effort is administered by NGOs and implemented either in direct cooperation with or under the coordination of BAPPENAS.
Indonesian projects supported by the Danish government are: Harapan Rainforest implemented by Burung Indonesia; Locally Appropriate Mitigation Actions implemented by World Agroforestry Center (ICRAF); the REDD+ Support Facility implemented by the World Bank; Large Scale Forest Stewardship Council (FSC) certification in Indonesia implemented by the Borneo Initiative; and support to the Indonesia Forest Investment Program implemented by the World Bank.
2.2.8.2. United Kingdom Climate Change Unit (UKCCU) - the Department for International Development (DFID) The UK has committed to working with Indonesia to help it move to a low carbon based economy and to meet its national emissions targets. The UK through the United Kingdom
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Climate Change Unit (UKCCU) supports three thematic areas, namely forestry and land-use, energy and international climate negotiations. With regards to the forestry and land-use sector, the UKCCU has been providing the following support:
preventing illegal logging and helping Indonesia implement the Voluntary Partnership Agreement with the EU on timber exports, developing and implementing its spatial plan and ensuring that uncontrolled deforestation does not take place in Papua, promoting accountability and the rule of law in land licensing in 13 districts in four forest provinces. The UKCCU also leads the implementation of other climate change programs in Indonesia that are funded by other departments within DFID or other departments in the UK government, such as a GBP 10 million new phase of the Multi-Stakeholder Forestry Program, funded from DFID’s Forest Governance Markets and Climate Program (FGMC).
The work of the UKCCU contributes directly to the objectives of the UK International Climate Fund (ICF). The UK’s ICF is the primary channel of UK Climate Change Finance. It became operational in 2011 and replaced the Environmental Transformation Fund (ETF). The main target of the ICF is to help developing countries adapt to climate change, embark on low carbon growth and tackle deforestation (Ulrich, Bohnke and Eidt 2015). International climate funds approved totaled USD 325 million between 2003 and 2012, focusing primarily on mitigation. Most attention is being paid to reducing forest and land based emissions activities (and the highest portion of these funds is disbursed on REDD+ activities), which is appropriate since up to 85% of Indonesia’s emissions come from these sectors. The ICF's funding portfolio is split between capital contributions/concessional loans and grant finance. The majority of contributions to multilateral funds take the form of concessional capital. Grants are used primarily as a mechanism for bilateral contributions. The following table lists projects funded by the UKCCU in Indonesia that could be
Table 10: List of projects in Indonesia under UK’s International Climate Fund Approved Name of project (USD Million) Improving Governance of Land Use, Land-Use Change and Forestry 4.1 (LULUCF) in Indonesia Indonesia Multi stakeholder Forestry Program II 2.2 Degraded Land Mapping in Indonesia 0.8 Degraded Land Mapping for Kalimantan and Papua Provinces 0.7 Comprehensive Program on Spatial Planning and Low Carbon 0.38 Development in Papua
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Approved Name of project (USD Million) Program Design for Spatial Planning and Low Carbon Development in 0.24 Papua49 Spatial Planning and Low Carbon Development in Papua 0.15
Source: Climate Funds Update (Dec, 2015): http://www.climatefundsupdate.org/data
UKCCU programs under the operational plan of 2011-2016 completed their spending in 2015. However, the impacts on reducing deforestation and promoting low carbon investment are expected to continue beyond that. The post-2015 results will be fully reported by the UKCCU if it continues operation beyond 2015. If the UK introduces different institutional arrangements in Indonesia, provision for reporting results will be incorporated into these plans.
2.2.8.3. Germany – GIZ and KfW At governmental negotiations in November 2013, the governments of Germany and of Indonesia agreed that bilateral development cooperation should focus on three priority areas:
(i) Energy and climate change (ii) Inclusive growth (iii) Good governance and global networks The official partner for German development cooperation in Indonesia is BAPPENAS. GIZ and KfW are the German development organizations that implement German international development projects and programs. GIZ and KfW work together in supporting the Indonesian German Forests and Climate Change Programme (FORCLIME) projects in Indonesia, in which GIZ provides technical support while KfW provides financial support for project implementation.
Deutsche Gesellschaft fuer Internationale Zusammenarbeit GmbH or GIZ
GIZ, the German development agency, currently has three programs in Indonesia, namely the (i) Forests and Climate Change Program (FORCLIME), (ii) Biodiversity and Climate Change Project (BIOCLIME), and (iii) Policy Advice for Environment and Climate Change (PAKLIM).
FORCLIME – GIZ and KfW
The overall objective of FORCLIME is to reduce GHG emissions from the forest sector while improving the livelihoods of Indonesia's poor rural communities. Support to REDD+ demonstration activities is a key feature of the program, providing decision-makers with
49 Program Design for Spatial Planning and Low Carbon Development in Papua is supported by the UKCCU. The UKCCU allocated GBP 280,000 over eight months (September 2011 – Aril 2012). The fund is paid out on the basis of invoices submitted after Month 2, Month 4 and on completion of the assignment (Intervention Summary).
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experience of how REDD+ can be implemented on the ground. FORCLIME support comes from GIZ and KfW, and the program runs from 2009 – 2016.
FORCLIME is commissioned by the German Federal Ministry for Economic Cooperation and Development (BMZ) with the MoEF as the lead executing agency. With FORCLIME, Germany supports Indonesia’s efforts to reduce GHG emissions from the forestry sector, to conserve forest biodiversity within the regional Heart of Borneo Initiative, and to implement sustainable forest management. The support provided by FORCLIME includes, among others: advice on strategy development for REDD+ and forest development at national, provincial and district levels; development of PES schemes to support sustainable livelihoods in rural areas; innovative design of mechanisms and regulations for district- based REDD+ initiatives; MRV facilitation; and capacity building for sustainable forest management and nature conservation.
FORCLIME consists of six components:
(i) Regulatory framework (advisory services on forestry and climate policy) (ii) Sustainable forest management and REDD+50 (iii) FMU establishment51 (iv) Sustainable economic development (green economy) (v) Support for capacity building (vi) Integration of biodiversity conservation
GIZ - BIOCLIME
BIOCLIME’s overall objective is to preserve biodiversity and the carbon sequestration capacity of selected forest ecosystems of South Sumatra as a contribution to the implementation of Indonesia’s emissions reduction target. BIOCLIME supports district and provincial governments in their efforts to develop and implement conservation and management concepts for reducing emissions from their forests and conserving forest biodiversity in order to contribute to the GHG emission reduction goal and the achievement of the Aichi biodiversity target in Indonesia. The project partner organization is the MoEF as the leading ministry in the forestry and biodiversity sector and the government of the province of South Sumatera as the implementing partner.
BIOCLIME cooperates with different levels inside the Indonesian government, with NGOs and universities, as well as with local communities. It places emphasis on building bridges between district and provincial governments and providing a toolset for decision making on policy and land use planning suitable for leading to a national standard and supporting the Indonesian One Map Policy.
BIOCLIME is designed to act as a coordinating unit for all relevant activities in this field. It does this by further developing data management and associated capacities, and by
50 FORCLIME supports private forest companies in the FSC certification process of their forest concessions, particularly companies located in the pilot districts Berau, Malinau and Kapuas Hulu. 51 FORCLIME actively supports the development of three Model FMUs in Malinau District in North Kalimantan Province, Berau District in East Kalimantan, and Kapuas Hulu District in West Kalimantan.
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improving the reporting system with special attention to the development of FMU. BIOCLIME consists of five work packages:
(i) Establishment of a database for the conservation and sustainable management of areas of high biodiversity (ii) Shaping of transparent and participatory planning and decision-making processes for the selection and management of protected areas (iii) Strengthening of management capabilities and capacities (iv) Development and implementation of an adapted local MRV system for land use, biodiversity, risk potential and biomass (v) Improvement of livelihoods of the local communities living in the area
GIZ - PAKLIM
GIZ PAKLIM is commissioned by the German Federal Ministry for Economic Cooperation and Development (BMZ) and the lead executing agency is the MoEF. The overall term for PAKLIM was 2009 – 2015. The objective of PAKLIM was to reduce GHG emissions, improve living conditions, make industrial energy use more efficient and help the country adapt to climate change. GIZ PAKLIM consists of three working areas:
Work Area 1: Climate mitigation policy advice, with the following main objectives: (i) implement climate mitigation action plans and disseminate best practices at the provincial level, and (ii) support Nationally Appropriate Mitigation Action (NAMA) development and an MRV system Work Area 2: Industries and industrial estates, with the main objective of integrating private sector actors into mitigation actions, fostering voluntary partnerships and development partnerships Work Area 3: Climate education and awareness, with the main objective of raising awareness for the reasons for and the impact of climate change among Indonesian youth
The PAKLIM program has helped develop a national strategy for the introduction of mitigation measures in relevant sectors to achieve Indonesia’s targets for GHG emission reductions. The main elements of this strategy are found in the guidelines on implementing the National Mitigation Action Plan (RAN-GRK), which were drawn up jointly with the Ministry of National Development Planning. With assistance from PAKLIM, the Ministry of National Development Planning is currently setting up a secretariat that will support the relevant ministries and provincial authorities in preparing NAMAs and implementing the RAN-GRK. Partnerships for the development of climate change action plans have been established with ten cities in Indonesia, namely: Blitar, Malang, Mojokerto, Yogyakarta, Surakarta, Pasuruan, Probolinggo, Semarang, Salatiga and Pekalongan.
KfW Development Bank
The KfW forestry portfolio in Indonesia includes REDD+, biodiversity and integrated watershed management, ecosystem restoration, and the ASEAN regional program. KfW provides financial support under the FORCLIME program in Kalimantan and also cooperates with other organizations such as the Frankfurt Zoological Society (ZGF) in Sumatera. The first program to support the three districts in Kalimantan was launched in 2008 and up to
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EUR 80 million will be invested in sustainable forestry by 2022. With its commitment in the FORCLIME program, KfW seeks to demonstrate the viability of a pro-poor REDD+ mechanism in Kalimantan. KfW uses a district-based approach in order to prepare selected pilot areas for national and international carbon markets. KfW finances measures to achieve readiness in three districts of Kalimantan (Kapuas Hulu, Malinau, Berau), realizes an investment program for REDD+ demonstration activities and develops an innovative and fair incentive payment scheme.
KfW also supports two big national parks in Sumatra and Sulawesi, combined with the rehabilitation of important water catchment areas. In Sumatera, KfW supports climate change mitigation and species conservation in the Leuser ecosystem of Sumatra, which falls under the LESTARI landscape in Aceh. The project aims to support sustainable management of the Gunung Leuser ecosystem in Sumatra, in particular in the South Aceh, Subulussalam and Singkil districts. The primary objective of the project is to balance the needs for conserving biodiversity with those of the population for using the natural resources. The implementing partners for the project are the MoEF, Natural Resources and Ecosystem Conservation (Ditjen Konservasi Sumber Daya Alam dan Ekosistem, KSDAE), Regional Body for Planning and Development (BAPPEDA) Aceh, local planning and forestry authorities (BAPPEDA, Dinas Kehutanan), Gunung Leuser National Park (Taman Nasional Gunung Leuser, TNGL), and the Regional Natural Resources Conservation Agency (Badan Konservasi Sumber Daya Alam, BKSDA) Singkil. The project runs from August 2013 – April 2019 with a grant totaling EUR 8.5 million.52
Still in Sumatera, KfW also supports a conservation concession for the protection of critically endangered Sumatran orangutans. KfW will support provision of 39,000 hectares of tropical rainforest in Bukit Tigapuluh in central Sumatra for the reintroduction of more than 300 orangutans into their natural habitat. The implementation of the concession is funded via the KfW Development Bank at almost EUR 3.6 million.
2.2.9. Market-based payments for emission reductions (compliance & voluntary)
Eligibility VERs following respective market protocols Funding Mechanism Over-the-counter (OTC) transaction of VERs against payment Size of Funding See below Available Funding Disbursement See Funding Mechanism
Market-based payments for emission reductions from land-based mitigation have leveraged USD 1.2 billion since 2002, including USD 0.9 billion from voluntary markets. The 2014 transaction volume for voluntary land-based emission reduction payments was USD 128 million.
52 Please see https://www.kfw-entwicklungsbank.de/International-financing/KfW-Development-Bank/About- us/News/News-Details_180352.html
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Voluntary land-based emission reduction payments significantly increased their market transaction value and traded emission reduction volume from 2013 to 2014. Voluntary markets therefore stand out against the trend of reduced public sector finance committed to climate change mitigation and for REDD+ since 2009 (see section 2.2.).
Figure 17: Voluntary land-based emission reduction volume traded and transaction value Source: (Forest Trends' Ecosystem Marketplace 2015)
Table 11: Overview of Compliance and VER Markets for land-based mitigation
Source: (Forest Trends' Ecosystem Marketplace 2015)
At this point, no advanced efforts exist for a compliance market that includes Indonesian emission reductions. Therefore, the voluntary market continues to be the only market-based mechanism for emission reduction performance applicable to Indonesia.
The supply and demand of land-based emission reductions for the voluntary market is dominated by 90% of certification combinations including the Verified Carbon Standard (VCS).
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Figure 18: Certification Standards in voluntary land-based emission reduction market Source: (Forest Trends' Ecosystem Marketplace 2014)
58% of land-based emission reduction certificates issued in the voluntary market apply the VCS in combination with the Climate, Community, and Biodiversity Standard (CCBS). The VCS offers GHG accounting methodologies allowing for issuance of verified emission reductions from avoided deforestation, avoided forest degradation, sustainable forest management, reforestation, conservation and increase of soil carbon, among others. Several emission reduction activities can be grouped into a single REDD+ project.
For performance-based payments in the voluntary market, buyers display a strong preference for emission reduction certificates from projects and programs that have undergone verification of their reported monitoring results (MRV) and issued certificates in registry.
Figure 19: Transacted emission reduction volumes (tCO2e) per project status Source: (Forest Trends' Ecosystem Marketplace 2015)
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Table 12: Land-based Emission Reduction Markets per world region
Source: (Forest Trends' Ecosystem Marketplace 2015)
It should be noted that in 2014 Asian forest carbon initiatives harvested only USD 9.6 million of USD 257 million results-based payments (ex-post MRV) – or 3.7% of the world’s total. As no compliance market instruments for Asian forest carbon offsets exist, the USD 9.6 million came entirely from the USD 128 million voluntary forest carbon market – bringing the Asian share to 7.5% of the global voluntary forest carbon market. This share is considered relatively small for the world’s most populated region when compared with, e.g., a share of 36% for Latin America. In the absence of compliance forest carbon markets and a small share in voluntary forest carbon markets, the overall success of Asian and therefore Indonesian initiatives to develop and transact forest carbon assets in market mechanisms since 2009 has been limited.
No specific studies exist on the reason of underperformance of Asian forest carbon initiatives versus Latin American and African offset projects in result-based market mechanisms. These regions are comparable because they are equally not eligible for compliance forest carbon markets and compete for shares in the voluntary forest carbon market.
A few preliminary possibilities include:
In Latin America and Africa, since 2010 the supply has included community-based REDD+ and mixed native species reforestation – the most highly valued forest carbon offset project. Voluntary forest carbon offset buyers came predominantly from North America and Europe, not from the industrialized nations of Asia and Oceania. Asian supply attracted exclusively limited European demand, with little demand from North America and close to none from Asia and Oceania. In the communication narratives playing a large role in the decision-making of voluntary offset buyers in North America & Europe, fighting poverty in Africa and protecting the Amazon rainforest are well-established causes.
Still, the voluntary carbon market and voluntary non-carbon grants from budgets for CSR of multinational companies active in Indonesia should not be ruled out as a potential additional funding source. The draft assessment report will include detailed technical recommendations on how the window for such irregular opportunities can be created and kept open in synergy with a strategy to secure sustained public sector finance.
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Figure 20: Origin & destination of land-based ERs in voluntary and compliance markets Source: (Forest Trends' Ecosystem Marketplace 2013)
2.3. Private sector & civil society financial support mechanisms This section presents funding sources and projects/programs that are funded and/or implemented by the private sector and civil society.
2.3.1. NGOs (national and international)
2.3.1.1. KEHATI Foundation
Eligibility NGOs, community organizations, governmental research institutions, universities, professional institutions Work in three prioritized ecosystems: agriculture, forestry, and coastal & small island programs Funding Mechanism Grants Size of Funding Latest data not available Available Total grant (1995-2013: USD 25.500.000)53 Funding Disbursement - Note Proposal needs to be submitted in KEHATI format
The KEHATI Foundation has developed a type of investment, which can be regarded as green investment, to provide a ground for business society to participate in biodiversity
53 Please see https://www.cbd.int/doc/meetings/ecr/cbwecr-2014-04/other/cbwecr-2014-04-presentation-day4-05-en.pdf
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conservation efforts and sustainable development, in the form of the KEHATI Mutual Fund (Reksadana KEHATI Lestari - RDKL) and KEHATI Sustainable and Responsible Investment Index (KEHATI SRI Index). Fundraising is also carried out through the KEHATI Mutual Fund managed by PT BAHANA TCW. The investment return is used as a grant to fund the programs in the three ecosystems of agriculture, forestry, and coastal and small islands.
KEHATI Mutual Fund (Reksadana KEHATI Lestari - RDKL)
The RDKL is a mutual fund in the form of a Collective Investment Contract54, with the objective of mobilizing financial support from the public for sustainable funding of biodiversity programs carried out by the KEHATI foundation, through an investment concept that takes the form of a mutual fund. This mutual fund was launched in April 2007 by the Foundation in cooperation with PT Bahana TCW Investment Management as the selected fund manager. The investors are the companies that own a CSR or Green Investment budget allocation.
KEHATI Sustainable and Responsible Investment Index (KEHATI SRI Index)
The objective of the establishment of the index is to carry out biodiversity conservation programs by raising awareness and consciousness towards biodiversity, among the public, business sector and capital market, and to provide open information to the public in identifying the selected companies rated by the index, which are regarded as beneficial and constantly managing sustainable development.55 Selection mechanisms for the companies to be included in the KEHATI SRI Index consist of two steps: (i) an initial selection through negative and financial aspects; and (ii) evaluation of fundamental aspects.
Procedure to become KEHATI’s grant receiving partners56
KEHATI provides grants for organizations working in three prioritized ecosystems, namely agricultural programs, forestry programs, and coastal and small island programs. The programs should focus on the sustainable conservation and utilization of biodiversity, and should last more than one year. Grant funding for specific programs such as MFP II, TFCA Sumatra, TFCA Kalimantan can be proposed directly to the program at www.mfp.or.id, www.tfcasumatera.org, and www.tfcakalimantan.or.id respectively.
To submit a proposal to the KEHATI Foundation, an applicant needs to prepare a proposal in the defined format (can be downloaded at http://www.kehati.or.id/images/Format%20Proposal.pdf).
The following are the procedures for proposal submission:
KEHATI will send a letter of proposal receipt to the party who proposed the activities within two-weeks at the latest, after the proposal has been received by KEHATI. The proposal will be assessed and evaluated by an Independent Proposal Evaluator, consisting of experts related to the theme of the proposal.
54 Based on Law No.8 Year 1995 concerning Capital Market and its implementing regulation. 55 Please see http://www.kehati.or.id/en/indeks-sri-kehati-2.html 56 Please see http://www.kehati.or.id/en/kemitraan-3.html
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Evaluation will be completed within one month after the deadline of proposal submission. KEHATI will inform the proposal sender of the evaluation result within one month, at the latest, after the evaluation process is completed. The following table summarizes eligibility of KEHATI grants:
Table 13: Eligibility of KEHATI grants Eligible Institutions and Non-eligible Institutions and Organizations57 Organizations58 NGOs and volunteer organizations All government institutions, not including research institutions owned by universities and state higher educational institutions Educational and training institutes Commercial private and public companies, national and international as well Religious groups, cultural groups, youth Cooperatives and government-sponsored organizations, students, women associations organizations Professional associations and groups of Labor and entrepreneurs’ associations experts - Military and para-military organizations - Political organizations and international organizations - Individuals Source: KEHATI, web: http://www.kehati.or.id/en/kemitraan-3/dana-hibah-3.html
Further information on KEHATI cooperation for biodiversity conservation and utilization can be obtained by contacting the Resource Development Officer, [email protected], phone: (+62 21) 7183185 & 7183187; fax: (+62 21) 7196131.
2.3.1.2. World Wide Fund for Nature (WWF)
Eligibility Community groups Funding Mechanism Grants Size of Funding Variable Available Funding Disbursement Variable
The World Wide Fund for Nature (WWF) Indonesia does not receive financial support from the government budget (APBN and APBD). It’s funding comes from more than 40 donors
57 Organizations formed by local communities. 58 KEHATI cannot channel its grant to individuals for certain educational purposes, conferences, travelling, building, renovation, purchase or ownership of land and buildings or purchase of vehicles and other equipment.
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(international and national), aid agencies, and a total of more than 64,000 supporters from across Indonesia. WWF obtains 57% of its funding from individuals and from endowments, 17% from international sources (such as the World Bank, DFID, USAID) and 11% from various companies59.
To support its programs, WWF Indonesia develops an innovative partnership model to collaborate with companies in the form of the Corporate Partnership Program. This Partnership Program can be packed in accordance with the needs of nature conservation but also encourages corporate partners to contribute through transformation, communication to the public and CSR. In addition, WWF also carries out fundraising activities. Fundraisers deal directly with the public and convey the issues of preservation and conservation of nature and a green lifestyle, as well as raise support in the form of individual donations. In addition, WWF Indonesia has also partnered with professional institutions that specialize in organizing fundraising activities.60
WWF also developed a trust fund initiative, the Sumatera Sustainability Fund (SFS)61, an initiative of sustainable financing for a conservation program in Sumatera Island. The SFS is a trust fund that aims to support 10 governors on ecosystem-based spatial planning. WWF has several grants that can be applied by local organizations in LESTARI landscapes, such as Reforestation Grants62 and Conservation Workshop Grants.63
2.3.2. Private companies
In general, private companies including international consumer goods companies (Unilever, Nestlé, L’Oreal and others) organize their CSR activities in non-standardized ways. This means that there is no public grant window or selection process for proposal requirements. Companies operating in this landscape usually have their own CSR program.
In relation to becoming involved with sustainable palm oil growers beyond simple RSPO sourcing, one consumer goods company gave the feedback that they felt their position was too distant from local agricultural production and they encouraged their suppliers of refined palm oil, e.g. Wilmar, Golden Agri Resources etc., to take leadership in this regard.
A more direct and common way that consumer goods companies invest in local sustainable landscape and climate change mitigation initiatives is through the purchase of verified emission reductions via the voluntary carbon market. A direct link to the supply chain (e.g. palm oil) can act as a strong asset for attracting specific buyers, along with the other social & environmental co-benefits associated with REDD+. Voluntary carbon market transactions have a tendency to be small and irregular, also incurring transaction costs. A current trend of advanced CSR-motivated buyers of forest carbon credits is to move away from the “broad portfolio of credits off the shelf” to support one or a few strategic projects on amore long-term basis. This lends predictability to the project and reduces transaction costs at both ends.
59 Please see https://id.wikipedia.org/wiki/World_Wide_Fund_for_Nature 60 Please see http://www.wwf.or.id/cara_anda_membantu/fundraiser_wwf2/ 61 SSF was initially established by six founders on 12 February 2010 in Jakarta and was facilitated by Indonesian Coordinating Minister for the Economy in collaboration with WWF-Indonesia. 62 Please see http://www.worldwildlife.org/projects/reforestation-grants 63 Please see http://www.worldwildlife.org/projects/conservation-workshop-grants
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2.3.2.1. Consumer goods companies sourcing palm oil
Eligibility NGOs, community organizations, private sector implementing organizations Funding Mechanism Grants from CSR and demand for sustainably produced commodities Size of Funding Variable Available Funding Disbursement Variable
Several consumer goods companies operate CSR programs, with the aim of making their supply chain more environmentally responsible. In September 2014, 37 national and 20 subnational governments, 53 companies and institutions, 16 indigenous community networks, and 54 civil society organizations committed to halving deforestation by 2020 and ending it by 2030. The private sector signatories represent USD 1.36 trillion in annual revenues connected in part to the “big four” deforestation-driving commodities: palm oil, soy, beef, and pulp and paper. Most of these companies – including household names such as Walmart, L’Oreal, Danone, McDonald’s and General Mills – have defined specific targets to reduce deforestation within their supply chains, with deadlines fast approaching. There are another 270 companies with similar commitments not tied to the declaration but otherwise documented by the Supply Change64 project collaborators.
The Unilever Sustainable Living Plan is a company blueprint for achieving Unilever’s vision to double the size of its business, whilst reducing its environmental footprint and increasing positive social impact.65 It consists of three components, namely: (i) improving health and wellbeing, (ii) reducing environmental impact, and (iii) enhancing livelihood. The plan sets wide-ranging targets to achieve these goals by 2020 and includes how the company sources raw materials and how consumers use the brand’s products.
Unilever intends to fully source its agricultural raw material sustainably by 2020. Unilever’s ultimate objective is to ensure that its supply chain is deforestation-free. It will strive for a net positive environmental impact and for improved livelihoods of smallholder farmers. For instance, Unilever aims to be able to say and to prove that all palm oil purchased by the company comes from traceable and certified sustainable sources. As of December 2014, Unilever was able to trace 70% of its global palm oil purchases to 1,800 known crude palm oil mills.66
In August 2015, Unilever teamed up with WWF to reach the wider public with its green campaign Bright Future, which focuses on protecting trees in Indonesia and Brazil.67 Specifically, the partnership between Unilever and WWF will fund projects in Brazil and Indonesia that focus on reducing deforestation and forest degradation, restoring forest areas, promoting sustainable forest management and increasing tree stocks in agricultural
64 Please see www.supply-change.org 65 Please see https://www.unilever.com/sustainable-living/ 66 Please see http://blog.cifor.org/28657/in-indonesia-corporate-commitment-to-sustainable-palm-oil?fnl=en 67 Please see www.brightfuture.unilever.co.id
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landscapes. The tree protection program68 is part of Unilever’s commitment to sustainable living and will help fund the protection of one million trees in Brazil and Indonesia. The partnership supports a long-term program by WWF and their partners, BirdLife International and The Wildlife Conservation Society.
2.3.1.4 Freeport Operating in Mimika District, PT. Freeport Indonesia has carried out various CSR programs, mainly directed towards two indigenous communities in the area: Amungme and Kamoro. Two dedicated local organizations were set up to manage the CSR fund from PT. Freeport for these community groups, namely Lembaga Masyarakat Adat Suku Amungme (LEMASA) for the Amungme tribal group and Lembaga Masyarakat Adat Suku Kamoro (LEMASKO) for the Kamoro tribal group. Freeport has its own mechanism for operating its CSR programs through a foundation called Lembaga Pengembangan Masyarakat Adat Amungme dan Kamoro (LPMK), where it has a set of programs and a management plan.
2.3.1.5 Kalimantan Gold Corporation Ltd. Kalimantan Gold Corporation Ltd. (locally known as PT Kalimantan Surya Kencana), a mineral exploration company operating in Central Kalimantan, has been conducting a CSR program operated by Yayasan Tambuhan Sinta (discussed in more detail in Section 4.2.2).69 The CSR program mainly focuses on improving the quality of life of Dayak villagers living close to a mineral concession in the upper Kahayan River by minimizing the effects of mercury in its operation.
68 A program to protect a million trees by supporting forest protection programs in Brazil and Indonesia. 69 This company created Yayasan Tambuhak Sinta (YTS) to spearhead its commitment to improving the local economy and social welfare.
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3. DEVELOPMENTS TO BE MONITORED
This section describes new financial instruments that may be established and are potentially applicable for ultimately financing LESTARI. Potential actors that may become involved or new programs that could incentivize sustainable rural landscape management in Indonesia through PES/REDD+ are discussed (Forest Trends' Ecosystem Marketplace 2015).
Public REDD+ finance: Several pledges exist from bilateral initiatives and multilateral development banks to strongly increase their climate finance by 2020. Public REDD+ finance should have a sizeable share of the USD 100 billion goal for global climate finance by 2020. ADB said it would more than double its spending to USD 6 billion in the same year. The World Bank said it would increase its commitments to climate change by a third - which at current funding levels would mean USD 16 billion a year, with the potential to leverage an additional USD 13 billion from other funders.70 Unfortunately, at this point there is no clarity on i) when these pledges will be realized as committed funds, and ii) through which bilateral or multilateral mechanisms (GCF, GEF or others) these would be realized and how much would be earmarked for sustainable landscapes and destined for sub-national activities.
Aviation negotiations: To meet its goal of keeping global net carbon emissions from the aviation sector at 2020 emission levels post-2020 (and precluding the invention of no-carbon jet fuel), the International Civil Aviation Organization (ICAO) will need to develop a market- based mechanism to offset its emissions, until technological advances will allow the sector to reduce its emissions below 2020 levels again. Offsets are likely to be a key component, and the ICAO is considering including Certified Emission Reductions (CERs) from the Clean Development Mechanism (CDM) and/or REDD+ offsets in what would be the first sectoral ETS. The details may be ironed out in time for ICAO’s next triennial meeting in 2016. This could become relevant as a revenue stream to sell verified GHG ERRs under a program like the VCS.
Internal carbon pricing: Currently, 437 companies now calculate an internal price on carbon, according to CDP – more than triple the number from the previous year. Another 583 said they plan to start putting a price on carbon within two years. Nearly a third of the companies that internally priced carbon in 2013 were also engaged in carbon offsetting, according to an Ecosystem Marketplace analysis of CDP data. Buyers such as Microsoft, The Walt Disney Company, TD Bank, Aviva, and Barclays charge their business divisions according to their emissions and use a portion of the revenue to purchase offsets. As more companies put an internal price on carbon, more may turn to offsetting to neutralize unavoidable emissions. This could also become relevant as a revenue stream to sell verified GHG ERRs under a program like the VCS.
70 Please see http://www.bloomberg.com/news/articles/2015-11-30/climate-finance-programs-reap-41-billion-in-pledges-in- paris
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Ecosystem-based impact investment: In response to a survey by Nature Vest and Eko Asset Management Partners, 51 private investors indicated that they intend to deploy USD 5.6 billion in conservation impact investments before 2018 – almost triple the USD 1.9 billion they spent between 2009 and 2013. About 3% of past investment (USD 58 million) went to land-based funding mechanisms such as REDD+. This would mean that in the years before 2018, up to USD 200 million could be available as finance for land- based funding mechanisms. Investors said the limiting factor to growth is not available capital but rather a shortage of deals with the appropriate risk/return profiles. Public-private partnerships could help address this challenge. For example, the Althelia Climate Fund found a way to reduce risks to its REDD+ investors by securing a USD 133.8 million loan guarantee from the US Agency for International Development.71 At this point though, the Althelia fund is closed and not sourcing new GHG ERR projects.
Ecosystem Green Bond: A concept where a sovereign-issued bond covers an ecosystem on a larger scale, deemed worthy of protection, and uses the proceeds to finance any conservation-related activities in this ecosystem. The protected ecosystems could be a system of terrestrial national parks or marine parks. The sources of repayment would be the cash-flow generated from activities by the ecosystem (e.g. user fees for access to parks). To reduce risk and pricing and increase appeal, full or partial repayment would be guaranteed by the sovereign or an international finance institution. The size of this bond would depend on the relevant ecosystem. Coupon payments would be in line with the issuer’s credit rating. The successful placement of such mainstream investment products in the market could be crucial in lifting conservation finance to the next stage (Global Canopy Program, 2015). In 2014, USD 4.2 billion72 was already seen in agriculture/forestry green bonds, in 2015 it was USD 2.3 billion73. A key issue for compatibility of LESTARI PES/REDD+ activities with green bonds are investment grade economic activities that hold a solid expectation of Internal Rate of Return (IRR) on which a bond could be issued.
Government Peatlands Restoration Agency (Badan Restorasi Gambut - BRG). Responding to severe forest fire in 2015, the government set up an agency which reported directly to the President through Presidential Regulation No.1 Year 2016, issued on 16 January 2016, with the main task of overcoming and preventing peatland fires. This agency is commissioned to coordinate and facilitate peatland restoration in seven priority provinces, namely: Riau, Jambi, South Sumatera, West Kalimantan, Central Kalimantan, South Kalimantan and Papua. The BRG is obliged to plan and implement a peatland ecosystem restoration program over five years (2016 – 2020) across an area of 2,000,000 ha, with an annual target area of 30% in 2016, 20% in 2017, 20% in 2018, 20% in 2019, and 10% in 2020. The priority areas for the planning and implementation of this target will begin in Pulang Pisau District in Central Kalimantan, Musi Banyuasin District and Ogan Komering Ilir District in South Sumatera, and Meranti Islands District in Riau. In addition, Norway is also planning to provide support to this agency. The development of the BRG is worth monitoring as its work plan may have activities related to PES/REDD+ and is closely aligned with LESTARI’s focus in Central Kalimantan.
71 Please see https://www.usaid.gov/news-information/press-releases/may-28-2014-us-government-althelia-climate-fund- mobilize-1338-million-forest-conservation 72 Please see https://www.climatebonds.net/bonds-climate-change-2014 73 Please see http://www.climatebonds.net/files/files/CBI-HSBC%20report%2010Nov%20JG.pdf
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4. INSTITUTIONS WITH A MANDATE TO IMPLEMENT PES AND REDD+
There are three government institutions in Indonesia that have a prominent role in climate finance budgeting and coordination and also in leading the PES/REDD+ process in Indonesia. These are the Ministry of Finance, the National Development Planning Agency (BAPPENAS), and the Ministry of Environment and Forestry. However, PES/REDD+ related activities require cross-sectoral coordination among several government institutions as well as partnership with NGOs, local communities and the private sector. 4.1. Context and relationship between implementing institutions
The following section describes the institutions with the mandate to implement PES/REDD+, along with a description of their roles.
Ministry of Environment and Forestry (MoEF)
The MoEF is currently in charge of issuing licenses for ecosystem restoration and other PES-type activities including water use, carbon capture & storage, and tourism. The MoEF has increasingly contributed to the development of PES/REDD+ type activities following the discontinuation and integration of the REDD+ Agency’s functions and roles into the MoEF. Previously, the REDD+ Agency led the process of formulating REDD+ strategy, policy and financial mechanisms.
Presidential Regulation No.16 of 2015 stipulated that the MoEF is the government institution mandated to implement PES and REDD+. The MoEF Regulation No. 18 of 2015 on the Organization and Working Structure of the MoEF further elaborates the organizational structure and role of each division in the ministry. Under this regulation, the Directorate General of Climate Change Control (Direktorat Jendral Pengendalian Perubahan Iklim – Ditjen PPI) is mandated to implement REDD+, whereas three different directorate generals are mandated with the implementation of PES, namely the: (i) Directorate General of Natural Resource and Ecosystem Conservation (DG KSDAE), (ii) Directorate General of Sustainable Management for Production Forest (DG PHPL), and the (iii) Directorate General of Watershed and Protected Forest Management (DG PDAS-HL).
The establishment of Forest Management Units (KPHs) is expected to spearhead forest management by the government. At the time of writing, only a few KPHs are fully operational in the country as well as in LESTARI landscapes. Most of the KPHs in the LESTARI landscapes are in the process of institutional establishment, but some do not yet have an organizational design or have not held consultations on their management plans yet.
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However, provincial governments both in Central Kalimantan and Papua are working towards the establishment of KPHs.
Due to the enactment of Law No. 23 of 2014 on Local Governance that transfers most of the authority over forests from the district to provincial level, including the authority on the design of the organizational structure and appointment of personnel in the KPHs, the KPH establishment process is partially suspended. This suspension is unlikely to cease until the revised Government Regulation No. 41 of 2007 on the Organization of Local Government Apparatus is enacted.74
Three types of KPH are currently structured under different directorate generals (DGs) at the MoEF at the national level, and are operated by three different UPTs at the sub-national level, the details of which are presented in the following table.
Table 14: Type and reporting line of FMUs/KPHs Line of reporting Type of KPH National level Sub-national level Conservation DG Natural Resources Natural Resources Conservation and FMU (KPHK) Conservation and Ecosystem Agency (Balai Konservasi Ecosystem (DG KSDAE), Sumber Daya Alam - BKSDA) Production DG Sustainable Forest Monitoring Agency for the Utilization of FMU (KPHP) Production (DG PHPL) Production Forest (Balai Pemantauan Pemanfaatan Hutan Produksi - BP2HP) Protection FMU DG Watershed Watershed Management Agency (KPHL) Management and (Badan Pengelola Daerah Aliran Sungai Protection Forest (DG - BPDAS) PDAS-HL)
Source: HPI elaboration
The FMUs/KPHs are established in three steps: area establishment, institutional establishment, and formulation and consultation of the management plan, with each step comprising of several other technical steps. KPH establishment is a cross-sectoral process involving several government institutions at the national and sub-national levels.
Table 15 presents all KPHs in the LESTARI landscapes along with their operational status. A KPH is considered legally operational if it has: (i) an area (administrative boundary) enacted through ministerial regulation, (ii) staff appointed by government authority (central government for KPHK and provincial or regency government for KPHL and KPHP), (iii) an office locally present in the area, and (iv) a work plan.
If a KPH has already had an area enacted but has not yet had personnel appointed or if its organizational structure has not been defined yet (type A or B), it is classified as a KPH in the organizational design phase.
74 Please see http://www.slideshare.net/rugczar/rancangan-pengganti-pp-no-41-tahun-2007
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Table 15: List of KPHs in LESTARI landscapes
Districts/ Operational Landscape Conservation FMU/KPH Remarks Area Status
ACEH
Aceh Area: Aceh Tenggara, Tenggara KPHL Region Legally Aceh Selatan, VI operational Subulussalam Aceh Selatan Regencies Aceh Barat - - - Daya Leuser KPHL Region Legally Area: Aceh Tengah, Gayo Lues III operational Gayo Lues Regencies Leuser National Park Legally - National Park* Agency operational Singkil Wildlife KPHK Rawa Legally - Sanctuary* Singkil operational
CENTRAL KALIMANTAN
Organization Need further KPH Katingan al design confirmation on the Katingan type of KPH (L/P) KPHL Pulang Organization KPHL will be Pisau al design established first, Pulang Pisau KPHP Pulang followed by KPHP Pisau KPHP Legally Gunung Mas KPH Model Katingan – Gunung Mas operational Kahayan KPH Organization Need further Palangkaraya Palangkaraya al design confirmation on the type of KPH (L/P) Bukit Baka National Park Legally Bukit Raya Agency operational - National Park* Sebangau National Park Legally - National Park* Agency operational
PAPUA
KPHL Mimika Legally Mimika - operational Lorentz Asmat - - - Lowlands Lorentz National Park Legally - National Park* Agency operational
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Districts/ Operational Landscape Conservation FMU/KPH Remarks Area Status Mappi - - - Mappi- Bouven KPH Bouven Organizational Need further Digoel Bouven Digoel Digoel design confirmation on the type of KPH (L/P) KPHP Lintas Legally KPHP Model Sarmi & operational Memberamo
Sarmi Sarmi Raya Organizational Need further KPH Sarmi design confirmation on the type of KPH (L/P) KPH Organizational Need further Jayapura Jayapura design confirmation on the Regency Regency type of KPH (L/P) KPH Organizational Need further Cyclops Jayapura City Jayapura design confirmation on the City type of KPH (L/P) Cyclops KPHK Organizational Will serve as KPHK Nature Cyclops75 design model Reserve* * Conservation area
Source: HPI elaboration
Unlike KPHs in other provinces, the KPHs in Aceh are unique and can serve as a model for KPH establishment as they follow watershed boundaries. This means that the KPH boundaries are tangent to each other, which is beneficial for developing an REL approach because wall-to-wall mapping and prediction of land use change can be applied.76 Therefore, options for developing the sub-national REL baseline calculation for the JNR approach are less challenging for Aceh province.
Ministry of Finance (MoF)
The MoF is responsible for ensuring that climate change requirements are reflected in budget priorities, pricing policies, and financial market rules (Center for Climate Change and Multilateral Policy (PKPPIM) 2016). It has two divisions that have tasks related to climate finance: the Division of Debt Management that has a finance tracking role, and a Fiscal Policy Office (Badan Kebijakan Fiskal – BKF) that sets the fiscal policy. Through the PKPPIM, the BKF has been actively conducting studies on benefit sharing mechanisms for PES,77 and is currently setting up a new funding mechanism in the form of an “umbrella
75 The FMU/KPH organizational structure has been designed by BPKSDA Papua. 76 VCS REDD methodology using JNR approach, applied to “wall to wall” boundary. 77 Please see http://www.fiskal.kemenkeu.go.id/2010/adoku/2014%5Ckajian%5Cpkppim%5CGPB%20Strategy.pdf
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mechanism” under a proposed General Service Agency for Climate Change (Badan Layanan Umum – BLU Perubahan Iklim).
Development Planning Agency (BAPPENAS & BAPPEDA)
BAPPENAS is the coordinating ministry for the implementation of bilateral and multilateral aid projects, which include REDD+, related projects. It also acts as the secretariat for the RAN-GRK as stipulated in Presidential Decree No. 61 of 2011. BAPPENAS has been involved in the design of various REDD+ strategies in the country. At the implementation level, it acts as the administrator of the ICCTF.
Central Bank of Indonesia (Bank Indonesia - BI)
Despite not directly implementing PES/REDD+ activities, the Central Bank of Indonesia plays a role in regulating green banking, which can be used to finance PES/REDD+ related activities. The BI and the MoEF have signed a memorandum of understanding to cooperate on establishing ground rules for environmentally friendly banking practices (The Jakarta Post 2015). The BI has also issued a regulation, namely Central bank of Indonesia Regulation No 14 of 2015 on commercial bank asset quality assessment, particularly with regard to environmental aspects.78 In line with the Bank Indonesia directive, several Indonesian banks have now initiated green banking practices, such as the state-owned Bank Mandiri that has cooperated with Agence Française de Développement (AFD) to actively finance some renewable energy and energy efficiency projects (The Jakarta Post 2015).
In addition to government institutions, the implementation of PES/REDD+ related activities will not succeed without participation from other actors either at the international, national or local level. The following are three groups of actors that play an integral role in PES/REDD+ activities:
(i) International organizations (ii) Non-governmental actors: private sector and NGOs (iii) Local community Figure 21 and Figure 22 illustrate the relationship between institutions in the implementation of REDD+ and PES related activities.
78 This regulation encourages Indonesia’s banking industry to put more emphasis on the preservation of the environment by lending more to environmentally friendly customers and to limit lending to non-environmentally friendly ones.
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Figure 21: Institutions with a mandate to implement REDD+ at the LESTARI landscape Source: HPI elaboration
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Figure 22: Institutions with a mandate to implement PES in Indonesia Source: HPI elaboration
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4.2. Readiness of actors at the landscape level HPI identified actors and potential partners to implement PES/REDD+ at the landscape level through desk research and expert input. Among organizations visited in Aceh, Central Kalimantan, and Papua, only a few have the capacity to implement PES/REDD+ related activities.
The assessment is carried out through a desk review, and interviews using questionnaires as presented in Annex 4. The capacity assessment focuses mostly on knowledge and practical experience in implementation activities similar to PES/REDD+.
This section only presents organizations that have been involved in:
handling distribution of incentives related to PES/REDD+ or similar sustainable landscape activities, monitoring activities related to compensation of performance-based payment, or that are: considered as potential partners for the implementation of PES/REDD+ related activities. The list of all organizations consulted during the site visit is presented in Annex 5.
4.2.1. Readiness of actors in Aceh
Forum Aih Jamur Delem (FAJEM)
FAJEM is a local NGO managing water conservation activities in Aih Jamur Delem, Gayo Lues Regency. It was involved in IFACS activities and is also a partner organization for LESTARI. The FAJEM staff have sufficient knowledge in water conservation. Further capacity building is required for aspects of organizational and financial administration management.
FKPSM
FKPSM is a local NGO that is currently involved in the management of Trumon Singkil Biodiversity corridor, Trumon Committee Response Unit (CRU) Trumon. It has sufficient human resource capacity in proposal development and financial reporting. Further capacity building on specific issues related to fund raising programs and data administration are required for further PES/REDD+ activities. Diversification on the scope of activities is also necessary.
Leuser National Park Agency
Leuser National Park Agency already has a management plan and has potential for ecotourism and hydro power development. The Agency has a Village Conservation Model (Model Desa Konservasi – MDK), with 13 villages inside and surrounding the national park
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participating in the initiative.79 The MDK consists of three key activities: community empowerment, village economic development based conservation, and spatial planning based conservation. The Leuser Ecosystem also has the backing of the Leonardo DiCaprio Foundation, which provides support to Forest, Nature and Environment of Aceh (HAKA) - a local NGO that focuses on protection, conservation and restoration - to establish “a mega- fauna sanctuary” in the Leuser Ecosystem.
4.2.2. Readiness of actors in Central Kalimantan
Faculty of Agriculture and Forestry of the Palangkaraya Muhammadiyah University
The Faculty of Agriculture and Forestry of the Muhammadiyah University successfully manages an educational forest (hutan pendidikan) in Mungku Baru village, a sub-district of Rakumpit, by supporting local community activities. It works closely with forest dependent communities living in forest surroundings by developing alternative livelihood programs. The university, through its program, incentivizes local communities to not cut trees in the forest by providing them with alternative means of livelihood such as through yam and candlenut farming. It has also developed a medicinal plants farm and is currently in the process of linking the local community with Sidomuncul, a company producing herbal medicine, to leverage the farm’s production and ultimately improve economic conditions for the local community.
The unit in the university that manages this educational forest consists of experts in various fields including forestry, livelihood and culture, which enables the unit to develop programs that really meet the needs of the local community. The unit is experienced in developing proposals and managing funds from various international organizations, NGOs and the private sector. It also has strong links and cooperates with various institutions locally in Central Kalimantan, nationally across Indonesia, and also works with international partners.
Yayasan Tambuhak Sinta (YTS)
Despite never having been involved in specific PES/REDD+ related activities, Yayasan Tambuhak Sinta (YTS), a local NGO, has the potential to implement PES/REDD+ activities in Katingan/Kahayan landscape, and is very keen on working with such activities. The YTS manages funds from various sources: international organizations (UNIDO, UNEP), international and national NGOs, government institutions, CSR funds from private companies, has its own fund raising effort, and is currently working in the areas of environment, livelihood, health and education targeting the local community. The strength of YTS is in its participatory approach with local communities, which results from its long involvement in the CSR programs of a mineral concession in the upper Kahayan River. Its staff are also well trained in proposal development and report writing in Bahasa and English. Further information on this foundation can be found at http://www.tambuhaksinta.com/.
79 Please see http://gunungleuser.or.id/konservasi-kawasan/mdk/
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Pokker SHK
Pokker SHK is a local NGO and has been involved in the development of one out of five project concept notes submitted to the ICCTF. It continues to provide support to the four village forests (hutan desa) that are currently pursuing environmental services certification through the Plan Vivo scheme, allowing the project to generate revenue from GHG ER sales. Unfortunately, the Plan Vivo standard has very low market penetration in voluntary carbon markets.
Sebangau National Park Agency
Sebangau National Park Agency is one of the key stakeholders in the LESTARI Katingan- Kahayan lowland landscape in Central Kalimantan, particularly with regards to issues related to forest fire management. The National Park Agency already has a management plan with a strong emphasis on community involvement in forest management. In addition, it has also developed a master plan on ecotourism and is looking for investment.
Bukit Baka Bukit Raya National Park Agency
As with the Sebangau National Park Agency, the Bukit Baka Bukit Raya National Park Agency already has a management plan for its area. The area of national park that is included in the LESTARI landscape has potential for ecotourism and hydro power development. The main challenge faced by the national park is illegal gold mining, and various steps have been taken to deal with this. The Park Agency, however, does not have adequate funding or human resources for implementing all of the activities in their management plan.
4.2.3. Readiness of actors in Papua
BBKSDA Papua
As a government institution supervising the management of all conservation areas including the Cyclops Nature Reserve and Lorentz National Park, the BBKSDA is an important player in the landscape. It is very keen on working with LESTARI in any conservation activities given that the BBKSDA realizes that it does not have enough financial capacity to finance conservation activities in its administrative area. In addition, it does not have enough staff to manage its very large conservation area. The BBKSDA is also aware that its human resources are still lacking necessary skills and capacity (management, financial reporting, technical) for implementing activities related to PES and REDD+ in its jurisdiction. Considering its lack of staff, the BBKSDA Papua has recruited local communities to be forest police and tries to empower and involve local communities in forestry activities.
Hirosi
Located in Sentani, Jayapura Regency, Hirosi is a local NGO that has been actively seeking opportunities for PES activities that can be developed in its area. It currently manages a recreational area equipped with various facilities including two swimming pools and a green school. The water for the swimming pools is sourced from a natural waterfall in the Cyclops nature reserve. Despite not specifically being involved in the distribution of incentives in a performance-based payment mechanism, Hiroshi is only one of a very few organizations in
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Papua with the capacity to implement PES/REDD+ related activities in the Cyclops landscape. It has managed small to medium sized funds and has adequate human resource capacity. To be able to implement PES/REDD+ activities properly, a capacity building program is required, particularly on organizational and financial management.
Qualala – PT. Alam Indah Jayapura
Qualala, a private company working in the water bottle industry, is a potential partner for the implementation of PES/REDD+ activities in the Cyclops landscape given that the water used in the industry comes from the Cyclops nature reserve. Compared with PDAM, a local government-owned drinking water company that consistently shows a negative profit, Qualala has better financial capacity as well as more skilled human resources. Given that this company is not a member of the collaborative management for Cyclops, further engagement is required to get them onboard with the idea of developing PES in the area.
Perusahaan Daerah Air Minum (PDAM)
PDAM has managed drinking water services sourced from Cyclops Nature Reserve for Jayapura City and Sentani. Despite having various social community development activities, the PDAM has not yet implemented PES concept in its community development activities. The PDAM is one of the signatories of the LESTARI co-management initiative and is considered to be one of the key players in any PES scheme on water that has the potential to be developed in the landscape. It has financial capacity to be part of PES initiative; however, for this initiative to happen, further engagement and human resource development trainings on PES need to be further undertaken.
Yayasan Peduli AIDS (Yapeda)
Yayasan Peduli AIDS (Yapeda) is a local NGO and was involved in various local community development programs during IFACS. Its staff is predominantly young and well educated, and as such, it can be considered as a standout example in the Mimika region. Compared with other organizations, Yapeda has better overall management skills, including for financial reporting and proposal development.
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5. GOVERNMENT REGULATIONS ON PES AND REDD+
The GoI has issued several regulations and policies that form the basis of the legal framework for PES and REDD+ implementation in the country. The GoI is still formulating appropriate policies to strengthen PES development and implementation, especially in relation to REDD+. This chapter discusses PES and REDD+ related regulations at the national, provincial and local levels, covering regulations that have already been approved and those that are currently under development.
Currently, no overarching regulation for the PES mechanism has been approved at the national level, although the GoI has made continuous efforts to formulate one. Some of the earlier work included the development of ecosystem restoration concessions, water use and catchment area protection, nature-based tourism and forest carbon.
There was an attempt to quantify the percentage of benefit transfer distribution from forest- carbon activities through the former Ministry of Forestry (MoFor - now the MoEF) Regulation No. 36 of 2009, but it was deemed invalid as only the MoF has the authority to regulate financial distribution mechanisms (CIFOR 2015). Since 2010, the MoF has conducted consultations and discussions with stakeholders at the local level to gather inputs that will be used as the basis for the revision of MoFor Regulation No. 36 of 2009, particularly regarding aspects related to benefit-sharing mechanisms.
The list of all PES and REDD+ related regulations are summarized in Annex 5. However, this section will further elaborate two of the most important regulations for shaping the future of PES and REDD+ mechanisms in Indonesia. a) Draft Regulation on Environmental Economics Instruments The GoI has already drafted a government regulation on environmental economic instruments with a proposed PES concept, as illustrated in Figure 23, and a PES mechanism as illustrated in Figure 24. This draft regulation is derived from Law No. 32 of 2009 on Environmental Protection and Management.
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Figure 23: PES concept based on draft government regulation Source: HPI elaboration
Figure 24: PES mechanism based on draft government regulation Source: HPI elaboration
To preserve environmental functions, the central and local governments should develop and implement environmental economic instruments that include: (i) planning on development and economic activities, (ii) environment funding, and (iii) incentives and/or disincentives. The instruments for the planning of development and economic activities can take the form of a compensation and payoff mechanism between local governments, among others. The instruments for environmental funding include a guarantee fund for environmental recovery, a fund for handling environmental contamination and/or degradation and environmental recovery, and a trust fund (dana amanah) for conservation. The development of a PES mechanism is part of the incentive and disincentive instrument.
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b) Law No. 23 of 2014 on Regional Governance (Article 14) The authority to manage natural protected areas lies with the MoEF, with some authority given to provincial and local governments. Law No. 23 of 2014 was enacted to redefine the relationship between authorities (the central, provincial and local governments), as previously stipulated under Law No. 32 of 2014 on Regional Governance and lastly amended by Law No. 12 of 2008.
Under the new law, district and city governments only have the authority to manage large forest parks. One of the consequences of this law is that all KPHPs and KPHLs will no longer be managed by regency/district/city governments, as the authority will be transferred to the provincial government.80 As a result, regency/district/city level government will no longer provide financial contributions to these types of KPH. The KPHs will receive funding from the APBN, APBD Propinsi, and other sources of funding.
There is an indication that the government unit of forestry at the district/regency level (SKPD Dinas Kehutanan Kabupaten/Kota) will no longer be operational. However, the full implementation of Law No. 32 of 2014 is subject to the enactment of the revision of Government Regulation No. 41 of 2007 on the Organization of Local Government Apparatus.
Table 16 shows the different levels of authority of government institutions in relation to the management of natural protected areas under Law No. 23 of 2014.
Table 16: Division of authority - natural protected area Institutions Level Remarks on authority Policy and norms MoEF National to Develop a macro plan. local Gazette all forest statuses and develop standards for conservation of forests and their ecosystems. Provincial Province Develop a macro plan (cross-districts) - (no government longer applicable). District/city Local Develop a macro plan (for the respective government district) - (no longer applicable). Administration (implementation) MoEF National to Develop standards and criteria for natural local protected area management. Manage national park and KPHK.
80 There was an indication that the District Government Unit of Forestry (Dinas Kehutanan Kota/Kabupaten) will no longer be operational, therefore regional government responsibilities for forestry rests at the province level (Province Government Office of Forestry / Dinas Kehutanan Provinsi).
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Institutions Level Remarks on authority Provincial Province Manage cross-district protection forests and government other relevant natural protected areas. Manage KPHP and KPHL. Manage permits covering cross-district protection forests. District/city Local Manage district/city protection forests and government other relevant natural protected areas - (now limited to managing grand forest parks). Manage permits in the respective districts/cities - (no longer applicable). Control / monitoring
MoEF National to Supervise activities in protection forests. local Provincial Province Supervise activities in protection forests - (no government longer applicable). District/city Local Supervise activities in protection forests - (no government longer applicable).
Source: (CIFOR 2015) available at: http://www.cifor.org/publications/pdf_files/OccPapers/OP-132.pdf
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6. CONCLUSIONS
This chapter synthesizes the main outcomes of the information collection and analysis process of the previous chapters. The focus lies on general opportunities and challenges relevant to LESTARI’s future planning. Valuable key messages regarding contextual awareness are also presented. Based on these conclusions, final concrete recommendations are developed on how to harness opportunities and overcome challenges in Chapter 7. 6.1. Focal point of coordination for funding opportunities
A focal point of coordination is vital for properly managing distribution of funds from various sources of funding, co-financing, and partnership opportunities to finance PES and REDD+ activities in the landscape. LESTARI could facilitate the flow of funds from donors or fund managers to organizations in the landscape through a focal point of coordination. The need to coordinate and improve the capacity of LESTARI staff and stakeholders on fund management, including grants and fund applications, was already highlighted in the LESTARI Quarterly Report – First Quarter of Year 1 (October – December 2015).
This can be done by the strengthening capacity of LESTARI’s staff that deal with funding both at the national and landscape level. Among various possible activities that could be carried out by the focal point of coordination is the development of a LESTARI co-financing architecture which is both a comprehensive business plan and incentive structure for REDD+/PES activities as much as an instrument to attract public and private as well as domestic and international finance. The financial architecture will have to describe how the provision of incentives and funds are re-financed, disbursed, replenished; how cash flow is managed; and how fiduciary and guarantee procedures are set up. In other words, it should explain and justify all elements of the proposed financial management scheme, and depict and detail all financial mechanisms, flow of funds and financial provisions. 6.2. Financing opportunities and mechanisms for LESTARI
There are a number of funds in Indonesia’s climate finance arena (both international and domestic) that can be used to finance PES/REDD+ activities in the LESTARI landscapes. However, the utilization of these funds has not reached their maximum potential due to capacity issues of the institutions managing them and/or the political dynamics within the institutions.
The size of domestic funding directed towards sustainable forest management in Indonesia exceeds international funding by far (Angela and Glenday 2016). As illustrated in Figure 5 in Chapter 2, domestic funds were mainly channeled through budget transfer instruments and the bulk of them supported “indirect” activities, with most support going to the forestry sector. Domestic funding sources are relatively straightforward and can be accessed by local community groups in a more cost effective way, with less stringent requirements on proposal
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development and report writing. The majority of domestic funds are already disbursed and implemented on the ground. These funds, however, face common and persistent challenges in management, oversight, and optimized use for the benefit of local communities.
The Village Fund is one of the few funds that is directly managed at the village level, as opposed to other types of government funds that are usually administered at the national or district levels. If managed properly through a participatory approach, the Village Fund would have a better chance of contributing to local community development with stronger local ownership. In addition, district/city governments facilitating the flow of funding from central government to the villages are still in need of various types of assistance. Embedded in a larger framework of sustainable landscape management, the fund could overcome some barriers of scale and institutional coordination. The Village Fund could be a prime source for performance-based PES funding in the landscapes. For this, building on local experiences such as the Timber Harvesting Postponement Credit (Kredit Tunda Tebang - KTT) (see section 2.1.7) and international best practices of PES will be important. This discussion is continued as a final recommendation in section 7.1
The Government Disaster Relief Agency (BNPB) considers forest fires to be a national disaster and aims at shifting more resources, including the National Disaster Relief Fund, towards prevention activities. This is aligned with the LESTARI focus on community-based forest fire management in the Katingan-Kahayan Landscape in Central Kalimantan. The Watershed Fund offers various programs targeting local communities living around prioritized watersheds, such as the Nursery Program (Kebun Bibit Rakyat – KBR) and BLM- PPMPBK. Synergies and LEDS programmatic alignment of the National Park Fund supporting activities for communities in the national parks inside LESTARI landscapes should be sought where possible. In addition, activities supported by PNPM Mandiri Kehutanan can also be aligned and leveraged by LESTARI.
For international funding, the Norway – GoI partnership is the largest pledged fund for forest conservation for Indonesia. Although there have been operational challenges, the likelihood of this fund being transferred and spent is ultimately large. LESTARI should closely monitor ongoing developments in the MoF and MoEF and explore ways to be ready once payments towards sub-national activities are on the agenda. The GCF, the largest international climate fund, is a prospective new funding opportunity worth pursuing by LESTARI. Unlike many other international funds, the GCF supports activities managed by sub-national governments, NGOs and the private sector that should increase the likelihood of success. Directing capacity building workshops towards relevant actors at the MoEF and MoF, as well as local governments, could further achieve this goal. In addition, having solid M&E and MRV frameworks in operation will position LESTARI well. This discussion is continued as a final recommendation in section 7.3.
LESTARI can develop joint initiatives and organize joint activities with private companies operating in the landscapes through their CSR programs to create synergy. Despite their vision to become a “carbon balanced” company and efforts to reduce GHG emissions in their supply chain, consumer goods companies seem to show little interest in being involved with sustainable palm oil growers beyond simple RSPO sourcing. The companies view their position in the supply chain as being too distant from local agriculture. A more direct and common way that consumer goods companies invest in local sustainable landscapes and
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climate change mitigation initiatives is through the purchase of VERs via the voluntary carbon market. 6.3. Maintaining the potential for renewable energy development
Rural electrification with renewable energy in LESTARI landscapes at lower costs and with independence from fossil fuel expenses is one of the catalysts for sustainable development. Use of renewable energy sources such as hydropower and biomass are an alternative to fossil fuel use for decentralized electrification of villages. Where watersheds offer potential for micro-hydro installations, these should be given preference. Renewable energy initiatives increase resource efficiency in the rural green economy, relieve households of expenditures related to purchasing fuel, enable alternative income streams from non-forest dependent local businesses through energy cost reductions, and reduce GHG emissions (FAS et all. 2013). In addition, a simple calculation suggests that investment in a 10-15 kW micro-hydro or micro-biomass-gasifier system is lower than the investment required for generators and their fuel costs for five years.81
Hydropower plants and biomass gasifier power plants require fuel from renewable sources that can be obtained from sustainable forest management or solid waste management practices. In turn, revenue earned from hydropower and biomass operations can be used to finance sustainable forest management or waste management activities. Forest conservation for maintaining the potential of renewable energy is therefore aligned with LESTARI SEA-LEDS.
Biomass and micro-hydropower in the landscapes present not only a high number of co- benefits and enabling value, but also have large up-scaling potential and connection with other USAID objectives such as sustainable rural development, economic growth and promotion of renewable energies.
Financing schemes from public and private sources as well as from commercial banks either from international or domestic sources can be used to finance the initial investment of renewable energy power generation. Developing the skills of local communities is essential for maintaining effective power plant operations. At the same time, establishing a network of technical experts would also reduce risks associated with the investment and help to raise the awareness of the wider community, government and the private sector.
A series of watershed and forest conservation activities can create an enabling environment for renewable energy development within the LESTARI landscapes. LESTARI can collaborate with USAID Indonesian Clean Energy Development (ICED) to move forward with the development of renewable energy, including setting up a pilot project within the LESTARI landscapes. Southeast Aceh and Gayo Lues are the ideal places for a hydropower
81 Generally, micro-hydro can be installed at the cost of USD 2000 – 3000/kW capacity. The investment cost often depends on the quality of product and services installed on a particular site. For instance, simple operation of micro-hydro power may cost only USD 1000 – 1500/kW, but its reliability will be questionable (engine operations may not last more than two years).
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pilot project due to the importance of watersheds in these areas. Renewable energy development is also aligned with Gayo Lues’ vision to become diesel free by 2017, a program of the District Government Office of Mining and Energy (Dinas Pertambangan dan Energi Kabupaten).
HPI has a strong track record on renewable energy consultancy in Indonesia and is ready to design an approach for watershed conservation, conduct an initial survey, undertake risk assessments, and develop capacity of local communities in support of watershed and forest conservation.
Biomass is another potential renewable energy where biomass gasifier power plants can be fed from sustainable forest management practices or solid waste materials from palm oil mills or plantation operations. However, development of a biomass gasifier power plant from scratch, including the establishment of sources of biomass, requires a lot of work, making it impractical for LESTARI in most landscapes. A biomass gasifier power plant is best developed in a location where biomass waste is already available. Thus, cooperation with palm oil plantations producing biomass waste is a possible scenario to explore further. 6.4. Challenges of regulatory frameworks and institutional readiness
Both the regulatory framework and institutional capacity to implement PES/REDD+ mandates in LESTARI landscapes are not yet at an operational stage in most cases. Incomplete regulations on PES/REDD+ in Indonesia across all administrative levels and the lack of practical examples of successfully implemented PES schemes in Indonesia inhibits the implementation of such mandates. Continued relationship building, capacity building and co-creation of opportunities will have to continue in order to identify institutional arrangements with concrete pathways for co-finance acquisition and distribution.
The majority of potential actors (government and non-government) in the landscapes do not have sufficient capacity to implement PES/REDD+ related activities. If a specific PES/REDD+ initiative is envisioned to be developed in the landscapes and all implementing partners are clearly identified, a more detailed capacity assessment and long-term capacity building plan would need to be further developed. The capacity building programs should include developing understanding on the PES/REDD+ concept and its benefits to the local community, and should also emphasize management aspects (organizational and financial) of PES/REDD+ for actors managing distribution of incentives.
While institutional reform and regulatory changes in Indonesia have had success in some sectors since 2009, there has been limited progress towards delivery of integrated climate change mitigation, climate finance and results based payment schemes, including PES and REDD+. These types of activities have not meet all expectations as there are still obstacles for stakeholders interested in sustainable landscape management. The complexity of Indonesian governance is highlighted in CPI’s report, which stated that Indonesia has persisting weaknesses in its enabling environment that impede efficient land use investments (Angela and Glenday 2016). Such issues include both technical and non- technical aspects including lack of financial management as well as limited capacity of institutions and human resources. Efforts in recent years to explore new and more efficient
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ways of cooperation and increasing aid effectiveness such as the Indonesia-Norway results- based agreement have encountered hurdles and have yet to deliver at the envisaged scale or pace.
Following the dissolution of the REDD+ Agency and incorporation of its role into the MoEF, the GoI has been working on institutional arrangements and mechanisms for managing the Norway funds and the eventual takeover of the interim administration from the REDD+ Unit under the UNDP Environment Division. However, debate on which institution should play this role in the future is currently still underway. Current developments indicate that the MoF will most likely takeover the management of the Norway funds and other climate related funds (including the ICTTF and previous funding instrument - FREDDI) with its plan to establish a new BLU - Perubahan Iklim. This plan, however, has a high level of uncertainty regarding its timeline and institutional arrangements, considering the architecture and overlapping roles and functions of several government institutions (MoEF, MoF, and BAPPENAS) in climate finance. If the plan to establish a new BLU under the MoF is not realized, it is likely that the BLU of BP2HP under the MoEF will be the most important government institution managing climate funds in Indonesia. The government is currently drafting a regulation on the Reforestation Fund (Dana Reboisasi) that is currently managed by the BLU-BP2HP, with the strong possibility of expanding the use of the fund for PES. The need to engage with the BLU for future financing opportunities is further discussed as a recommendation in Section 7.3. 6.5. Challenges of PES/REDD+ design and implementation
The design and communication of any PES initiative should take into account previous PES type schemes in Indonesia and the key lessons that are applicable to the sites of interest. Success stories from Lombok and West Java emphasize the role of multi-stakeholder governance and participatory planning, while other experiences highlight the importance of a clear communication plan. The expectation of local stakeholders and communities of receiving large and timely allocations of funds from PES schemes will have to be strategically managed from the beginning. It is essential to define a very clear communication strategy on PES and align all involved staff and facilitators.
A clearly defined and iteratively revised communication strategy on PES timing and expectations for local facilitators can help to maintain interest and commitment while avoiding misunderstandings, disappointment and frustration throughout the process. When referring to potential direct payments to public budgets, households or stakeholders, it will be essential to explain: (i) the conditionality of payments, (i) timelines and (iii) gateways to their effective introduction. It will be important to be clear about the fact that the payments, their amounts, their disbursement schedules and other elements are still to be defined. Many of these aspects are very hard to define at an early stage, but questions about these issues can come up very early in stakeholder consultations. It’s therefore advisable to take a cautious approach in order to avoid creating frustrating expectations and endangering the Free Prior Informed Consent (FPIC) process in landscapes.
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with a national or provincial branch network can greatly advance the distribution of PES payments or low-interest loans. A relevant example is the KUR (section 2.1.4 & Annex 3). Internationally, the Amazon Sustainable Foundation developed a partnership with a national bank to outfit signatories to its PES/REDD+ scheme with a free bank account where PES money accumulated monthly until farmers came to town – as long as they were found in compliance with the system’s rules (FAS et all. 2013). Such schemes around bank accounts and micro-credit schemes should be integrated into consideration of co-finance distribution and local PES implementation mandates.
The importance of the voluntary forest carbon market should not be overestimated as a source for the majority of performance-based payments. Still, being ready to report soundly monitored GHG emission reductions can be relevant for accessing finance via international carbon markets and donors and investors. Both Norway funds and the GCF are considering performance-based payments for sub-national PES/REDD+ activities. The creation of a credible asset of GHG ERRs achieved and monitored against a solid baseline is a multi-purpose effort related to both internal M&E and external MRV frameworks.
The requirement of performance monitoring will continue to be a core aspect both on the co- finance acquisition and PES activity finance front. Results-based finance such as from the Norway-GoI partnership or carbon market demand fulfillment of their respective M&E or MRV frameworks. Likewise, local PES schemes will only create tangible results when payments for ecosystem services are linked to the monitored performance of local actors to incentivize behavioral changes. Therefore, the integration of existing LESTARI M&E frameworks with GHG MRV and local ecosystem service providers demands attention.
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7. RECOMMENDATIONS
Based on the criteria provided by LESTARI and the conclusions of the analysis, HPI regards the following recommendations as realistic and achievable initiatives to be pursued in the next four years. The proposed recommendations will contribute to achieving four indicators in the AMEP:
Indicator 4: number of public policies addressing climate change and/or biodiversity conservation introduced, changed or adopted consistent with citizen input Indicator 12: number of people receiving United States Government (USG) supported training in natural resources management and/or biodiversity conservation Indicator 13: amount of investment mobilized (in USD) for climate change as supported by USG assistance Indicator 14: number of people receiving livelihood co-benefits (monetary or non- monetary) An indicative work plan with an overview of the temporal integration of initiatives is available in Annex 7. 7.1. Incorporating PES in the utilization of domestic funds
LESTARI should work with and advise the district government and village administrator to allocate a certain percentage of the Village Fund for environmental purposes and to incorporate PES based on the priorities and specific needs of a village. This can be done by gaining experience around the implementation of the Village Fund and obtaining stakeholder feedback on their wishes and interests.
A village or district level PES will most likely come with a village regulation (peraturan desa) or a district level regulation (peraturan daerah) as part of the process. This will help achieve indicator 4 of LESTARI, and also help address one of the LCP’s recommendations for Southeast Aceh – “the need to establish an umbrella law at the district level and a more detailed law at village level that sets out the provisions on the management of the natural resources in Southeast Aceh District.” A pilot project in Southeast Aceh should be given first priority due to the already existing advocacy efforts at the district and village levels (see Section 7.5.1). Replication of this initiative in other districts in the landscape will magnify the impacts.
In addition to the Village Fund, LESTARI should consider partnerships with BPDAS for incorporating PES into programs funded by the Watershed Fund, and should also seek close cooperation with the BNPB in utilizing the Disaster Relief Fund for forest fire prevention management in Central Kalimantan (see Section 7.4.3). The Cyclops landscape in Papua could be another focus area.
HPI is ready to support LESTARI’s efforts at all levels, from village to national, in the necessary development of concepts, presentations, stakeholder consultations, workshops,
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and concept notes in order to direct a portion of the Village Fund towards LESTARI’s PES schemes (see section 7.5). 7.2. Supporting the establishment of Climate Change BLU under the MoF
Despite the dynamic arrangement of the management of climate finance within the government, there is an opportunity for LESTARI to tap into government funding in its current form or under the proposed new arrangement. LESTARI should support advocacy efforts in climate finance at the national level and also provide technical assistance and capacity building on how results-based payments can be introduced. If the plan to establish a new Climate Change BLU (BLU Perubahan Iklim) under the MoF is realized, LESTARI should organize a workshop to present its project and initiatives in need of support or co- financing. LESTARI should support capacity building programs for the BLU aimed at improving the BLU’s capacity in managing funds, particularly with regards to project management skills (both financial and technical aspects). This should be done in such a way to promote LESTARI landscapes to the BLU. If the plan to establish a new BLU under the MoF does not materialize, LESTARI should approach the BLU of BP2HP under the MoEF, who will be the most important institution managing climate finance in Indonesia.
To facilitate this, LESTARI needs to cooperate with USAID Build Indonesia to Take Care of Nature for Sustainability (Bangun Indonesia dengan Jaga Alam untuk Keberlanjutan - BIJAK), which focuses more on advocacy efforts at the national level. HPI is ready to support LESTARI’s capacity building and advocacy efforts through its relevant networks, and through the organization of events, workshops, presentations and publications. As a result of its strong relations with both the MoF and MoEF, gained from extensive work in the technical and policy aspects of climate finance, HPI can provide continuous advisory services on the optimal positioning of LESTARI in the dynamic climate finance landscape of Indonesia at the national level. 7.3. Accessing the GCF and Norway funds
PES schemes, forest fire management in Central Kalimantan (section 7.5), and conserving forests for creating an enabling environment for village electrification using renewable energy (section 6.3), are all eligible activities for climate change mitigation under the GCF and Norway funds. These two international funding opportunities are by far the most promising and worth pursuing. HPI recommends launching a concerted effort to access GCF and/or Norway funding for LESTARI landscapes with clear deliverables of progress within 12 months.
The GCF is an exciting new funding opportunity as it is the largest international climate fund with USD 10 billion of initial capitalization and has just started project selection for financing (see section 2.2.5). The fund has identified five investment priorities that will deliver major mitigation and adaptation benefits, one of them related to forestry, which aims at scaling-up finance for forests and climate change. In addition, the GCF might also start making result- based payments for sub-national REDD+ soon to support mitigation and adaptation actions.
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The key issue in accessing the GCF is the need to apply through Accredited Entities (AEs), whereby an AE can only access the fund for certain types of fiduciary functions, sizes of project/activity within a program, and under certain environmental and social risk categories. Becoming a GCF AE is a long and intricate process, which is not practical for temporary programs such as LESTARI. Recent intelligence suggests that partnering with already established AEs promises to be a more cost-effective approach than trying to become a newly accredited entity. LESTARI can partner with regional and international entities that can access and implement projects globally, such as Conservation International (CI), Deutsche Bank AG, UNEP, UNDP, ADB, and the World Bank. The progress of PT. SMI and KEHATI Foundation in becoming Indonesia’s GCF AEs is also worth monitoring.
For the GCF, this fund access push should result in a clear gateway decision after approximately three months and scoring of LESTARI landscape activities for funding probability under the GCF. HPI estimate that in a good scenario a concept note could pass several stakeholder rounds and receive a non-objection from the NDA and could be submitted to the GCF between 10-14 months after initiation of the effort. Due to limited experience with funding approvals under the GCF it is difficult to say how much time would realistically pass between concept note submission, review, and decision and potential fund disbursement. A realistic assessment is that the GCF could represent an international option for funding LEDS activities in the final years of LESTARI and beyond.
In addition to the GCF, the Norway funds are another promising source of funding that needs to be continuously monitored. Despite the USD 1 billion that Norway has offered to Indonesia, less than 10% has been handed over. As a result, LESTARI should also consider tapping into the Norway funds by bridging how performance based payment could really work, particularly for PES schemes and forest fire management. Norway’s intention to support the Peatland Restoration Agency (BRG) is also worth monitoring, particularly for LESTARI’s focus on forest fires in Central Kalimantan.
In addition to supporting the establishment of the Climate Change BLU under the MoF (see Section 7.2), LESTARI, with the support of HPI, can explore possibilities for operationalizing performance based payments at a sub-national level through other approaches, including partnering with the private sector and proposal submission to access the Norway funds once Indonesia’s funding instrument through the Climate Change BLU is established. 7.4. Designing PES scheme
Designing a PES scheme and mechanism is a milestone in implementing LESTARI’s work plan and integrating PES in supporting activities of each technical theme in the landscapes such as water resource management in Aceh, forest fire management in Central Kalimantan, and collaborative management for conservation area management in Papua.
A clearly defined communication strategy on PES timing and expectations for local facilitators can help maintain people’s interest and commitment while avoiding misunderstandings, disappointment and frustration through the process. When referring to potential direct payments to public budgets, households or stakeholders, it will be essential to explain: (i) the conditionality of payments, (ii) the timeline and (iii) gateways to their effective introduction.
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Generic elements for PES best practices should be elaborated by expert analysis based on existing LCP, LEDS, SEA and other documents, new data mining, surveys and stakeholder consultation. HPI is ready to initiate the participatory elaboration of PES design documents (Engel, Pagiola and Wunder 2008) including:
Identification of service of interest Definition of sellers and buyers of PES and funding sources Definition of area/level of service Technical, legal and socio-economic study Calculation of payment threshold based on opportunity cost Definition of payment mechanism (frequency and fund access) Institutional coordination framework and implementation responsibilities Good governance structure (capacity building and public participation, mechanisms for transparency and accountability, dispute settlement) Monitoring and evaluation frequency and timeline The following is a summary of the status of existing ideas on PES opportunities in Aceh, Central Kalimantan and Papua. Development of PES initiatives in specific areas in the landscapes is based on the prioritization of the LCP, LEDS and SEA, as well as on already existing efforts on the ground. In these cases, support from LESTARI will help leverage the impact of local initiatives.
7.4.1. PES design on water in Southeast Aceh (including. Gayo Lues)
Aligning with the LCP, PES for water pilot projects need to take place in priority focus areas for conservation activities in Southeast Aceh including the Gayo Lues regency using the Village Fund (see Section 7.1). The priority focus area in Southeast Aceh are: (i) Lawe Loning Aman, Lawe Sigala-Gala Subdistrict; (ii) Lawe Mengkudu, Ketambe Subdistrict; (iii) Pulo Piku, Darul Hasanah Subdistrict; and (iv) Peseluk Pesimbe, Deleng Pokhkisen Subdistrict. Following up on IFACS initiatives, a PES scheme can also be developed for management of the Panosan-Sepakat Watershed in Gayo Lues.
7.4.2. PES design on water in the buffer zone of Cyclops Nature Reserve
Building on the signing of the MoU on the co-management initiative in the Cyclops buffer zone and stakeholder awareness on the importance of protecting Cyclops Nature Reserve for maintaining clean water sources, livelihoods of indigenous people and biodiversity conservation, LESTARI should develop a PES scheme on water management in this area. This PES will leverage Cyclops’ collaborative management by incentivizing indigenous people and local communities to maintain the forest area for sustainable water management. LESTARI should engage PDAM and PT. Indah Alam Qualala for possible funding opportunities, collaborate with BBKSDA Papua for local community empowerment, and use the MSF as a platform for communication between stakeholders. LESTARI should start by promoting enabling conditions through awareness raising, building institutional frameworks, developing capacity building programs on performance based payment for environmental management, and linking PES activities to the green economy. Some prominent issues to be addressed include: (i) lack of capacity of local actors, particularly on overall project management, proposal development, and financial reporting, (ii) overlapping land ownership related to customary law, and (iii) developing an understanding of benefit transfer
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mechanisms, particularly on how these mechanisms will address the root causes of land use change and deforestation that are mainly caused by mountain communities migrating to the provincial capital of Jayapura instead of the indigenous people and local communities.
7.4.3. PES design in Central Kalimantan
A pilot project related to forest fire management in Pulang Pisau District of Central Kalimantan will be closely aligned with LESTARI’s focus in the lowland Katingan-Kahayan landscape. LESTARI should seek close cooperation with BNPB and BPBD, who are currently placing more attention and directing more resources towards forest fires. In addition, monitoring the development of the BLU Climate Change establishment under the MoF and Peatland Restoration Agency (BRG) is crucial given that the Norwegian government is intending to support the BRG particularly on peat fire management through the BLU Climate Change once it is established.
A similar initiative for incentivizing villages that are able to keep their forests free from fire using the Disaster Relief Fund from the BNPB in Jambi and Riau can also be adopted. LESTARI can also support the BNPB by providing technical input or co-financing its efforts in utilizing the Village Fund for forest fire prevention. In the Pulang Pisau district of Central Kalimantan, a pilot project related to forest fire management in one or two of the following villages will help realize the objectives of the LCP: Kalawa, Mantaren I, Gohong, Buntoi, Jabiren, and Taruna.
In the upland areas of Katingan-Kahayan landscape where illegal mining threatens the river’s ecosystem, the possibility of a PES for water scheme can be further studied and developed. Cooperation with mining companies should also be sought where possible given that some companies have already carried out CSR programs aimed at minimizing the social and environmental impacts of their operations. Bukit Baka Bukit Raya National Park Agency should also be part of the partnership given that it has already carried out some efforts to minimize illegal mining within its boundaries. This is aligned with LESTARI’s focus on collaborative management of conservation areas in the upland areas of the Katingan- Kahayan landscape.
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8. REKOMENDASI- REKOMENDASI
Berdasarkan hasil analisis dan kriteria yang ditentukan oleh LESTARI, HPI mengusulkan beberapa rekomendasi yang dianggap realistis untuk dicapai dalam jangka waktu empat tahun ke depan. Rekomendasi-rekomendasi yang disarankan akan berkontribusi terhadap tercapainya empat indikator sebagaimana tercantum di dalam AMEP.
Indikator 4: jumlah kebijakan publik mengenai perubahan iklim dan/atau konservasi keanekaragaman hayati yang diusulkan, diubah, atau ditetapkan dengan masukan masyarakat Indikator 12: jumlah orang yang menerima bantuan pelatihan manajemen sumber daya alam dan/atau keanekaragaman hayati dari pemerintah Amerika Serikat Indikator 13: jumlah investasi yang berhasil dimobilisasikan (dalam dollar Amerika) menggunakan bantuan pemerintah Amerika Serikat untuk perubahan iklim Indikator 14: jumlah orang yang menerima manfaat berupa mata pencaharian (uang dan bukan uang) Rencana kerja awal terintegrasi dari inisiatif-inisiatif yang diusulkan tersedia di Lampiran 7. 8.1. Mengintegrasikan PJL dalam pemanfaatan dana domestik
LESTARI perlu bekerja sama dengan pemerintah kota/kabupaten dan pengurus desa untuk mengusulkan pengalokasian sebagian Dana Desa (berupa persentase) untuk pemeliharaan lingkungan, dan mengintegrasikan inisiatif PJL ke dalamnya berdasarkan prioritas dan kebutuhan desa. Hal ini bisa dilakukan dengan mengumpulkan informasi dan pengalaman dari berbagai pihak terkait tentang pelaksanaan penggunaan Dana Desa di lapangan, dan melalui pemahaman akan minat dan harapan para pemangku kepentingan.
PJL di tingkat desat atau kabupaten/kota bisanya disertai dengan perumusan peraturan desa atau peraturan pemerintah kabupaten/kota sebagai bagian dari proses. Hal ini akan membantu LESTARI mencapai indikator 4 dan juga menjawab salah satu rekomendasi Rencana Konservasi Bentang Alam di Aceh Tenggara – “kebutuhan untuk merumuskan sebuah payung hukum di tingkat kabupaten/kota dan peraturan yang lebih rinci di tingkat desa sebagai landasan pengelolaan sumber daya alam di Kabupaten Aceh Tenggara”. Sebuah proyek percontohan di Aceh Tenggara perlu menjadi prioritas utama karena sudah ada upaya advokasi di tingkat kabupaten dan desa (lihat bagian 8.5.1). Replikasi inisiatif di desa-desa di kabupaten/kota yang lainnya akan memperluas dampak yang diharapkan.
Selain Dana Desa, LESTARI perlu mempertimbangkan untuk melakukan kerjasama dengan BPDAS dalam mengintegrasikan PJL ke dalam program-program yang didanai menggunakan Dana Daerah Aliran Sungai (Dana DAS) dan juga perlu berkolaborasi dengan BNPB dalam memanfaatkan Dana Penanggulangan Bencana untuk pengelolaan kebakaran
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hutan di Kalimantan Tengah (lihat bagian 8.4.3). Bentang alam Cyclops di Papua juga bisa menjadi fokus area yang lain.
HPI bersedia untuk membantu upaya LESTARI di segala tingkatan dari tingkat desa sampai tingkat nasional dalam mengembangkan konsep, membuat presentasi, dan melakukan konsultasi dengan para pemangku kepentingan, menyelenggarakan lokakarya, dan membuat peta konsep untuk mengarahkan pemanfaatan Dana Desa sehingga bisa selaras dengan skema PJL LESTARI (lihat bagian 8.5). 8.2. Mendukung pembentukan BLU Perubahan Iklim
Di tengah dinamika struktur kelembagaan pemerintah dalam pengelolaan pendanaan perubahan iklim, masih ada kesempatan bagi LESTARI untuk mengakses pendanaan pemerintah di bawah struktur yang ada saat ini maupun di bawah struktur yang sedang diusulkan. LESTARI perlu mendukung upaya advokasi pendanaan perubahan iklim di tingkat nasional dan juga memberikan dukungan teknis serta peningkatan kapasitas untuk memperkenalkan konsep pembayaran berbasis hasil. Jika rencana pendirian BLU Perubahan Iklim di bawah Kementerian Keuangan terlaksana, LESTARI perlu menyelenggarakan lokakarya untuk memperkenalkan proyek dan inisiatif-inisiatif yang memerlukan dukungan pendanaan atau pembiayaan bersama (co-financing). LESTARI perlu membantu peningkatan kapasitas BLU dalam pengelolaan pendanaan, terutama dalam manajemen proyek (baik aspek keuangan maupun teknis). Hal ini perlu dilakukan melalui cara-cara yang bisa mempromosikan bentang alam LESTARI. Apabila rencana pendirian BLU baru dibawah Kementerian Keuangan ini tidak terwujud, LESTARI perlu merangkul BLU BP2HP di Kementerian Lingkungan Hidup dan Kehutanan (KLHK) yang akan menjadi institusi terpenting dalam pengelolaan pendanaan perubahan iklim di Indonesia.
Untuk memfasilitasi inisiatif ini, LESTARI perlu bekerja sama dengan USAID Bangun Indonesia dengan Jaga Alam untuk (BIJAK), yang lebih berfokus pada advokasi di tingkat nasional. HPI siap membantu upaya peningkatan kapasitas dan advokasi LESTARI melalui jejaring HPI yang relevan, dan juga melalui penyelenggaraan acara, lokakarya, presentasi, serta publikasi. HPI memiliki hubungan erat dengan Kemeterian Keuangan dan KLHK dari pekerjaan-pekerjaan terdahulu baik di aspek teknis maupun kebijakan pendanaan iklim sehingga HPI mampu mengoptimalkan posisi LESTARI dalam dinamika pendanaan iklim di Indonesia. 8.3. Mengakses dana GCF dan dana Norwegia
Skema PJL, pengelolaan kebakaran hutan di Kalimantan Tengah (bagian 8.5), dan menjaga hutan untuk menciptakan situasi pendukung pelistrikan pedesaan menggunakan energi terbarukan (bagian 6.3) merupakan kegiatan-kegiatan yang bisa diajukan dalam program mitigasi perubahan iklim menggunakan pendanaan GCF dan Norwegia. Saat ini keduanya merupakan sumber pendanaan iklim internasional yang paling menjanjikan dan yang paling patut untuk diakses. HPI merekomendasikan sebuah upaya terpadu sebagai upaya mengakses pendanaan GCF dan Norwegia dalam jangka waktu 12 bulan dengan capaian (deliverable) yang jelas.
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GCF merupakan sumber pendanaan baru yang menjanjikan karena GCF merupakan dana perubahan iklim internasional terbesar dengan kapitalisasi awal sebesar 10 milyar Amerika dan baru saja memulai seleksi proyek yang akan didanai (lihat bagian 2.2.5). Pendanaan ini memiliki lima prioritas investasi yang diharapkan akan memberikan manfaat mitigasi dan adaptasi dimana sektor kehutanan merupakan salah satu dari kelima sektor prioritas yang bertujuan untuk memperbesar skala pendanaan hutan dan perubahan iklim. Di samping itu GCF juga akan mulai mengoperasionalkan pembayaran berbasis hasil untuk REDD+ di tingkat daerah.
Isu utama dalam mengakses dana GCF adalah perlunya memasukkan aplikasi melalui entitas terakreditasi (accredited entities) dimana sebuah entitas hanya bisa mengakses dana untuk fungsi fidusia tertentu, ukuran poyek atau kegiatan terterntu, dan di bawah kategori resiko social dan lingkungan tertentu. Menjadi sebuah entitas terakreditasi membutuhkan proses yang panjang dan rumit dimana hal ini tidak praktis untuk dilakukan oleh program-program yang sifatnya sementara seperti LESTARI. Bermitra dengan entitas yang sudah terakreditasi akan lebih efektif dibandingkan dengan mencoba menjadi entitas terakreditasi baru. LESTARI bisa bermitra dengan entitas yang sudah terakreditasi baik di tingkat regional maupun internasional seperti Conservation International (CI), Deutsche Bank AG, UNEP, UNDP, ADB, dan World Bank. Perkembangan PT. SMI dan Yayasan Kehati dalam menjadi entitas terakreditasi juga perlu dimonitor.
Upaya untuk mengakses dana GCF perlu berujung pada sebuah langkah yang jelas setelah 3 bulan dan dengan mempertimbangkan kegiatan yang tepat untuk didanai oleh GCF di bentang alam LESTARI. HPI memperkirakan bahwa dalam skenario yang optimis, sebuah concept note bisa melewati beberapa ronde diskusi para pemangku kepentingan dan memperoleh peryataan tidak keberatan (a non objection letter) dari otoritas nasional yang ditunjuk (NDA) dan bisa diserahkan ke GCF antara 10-14 bulan sejak dimulainya upaya ini. Dikarenakan belum banyak contoh dalam proses persetujuan pendanaan GCF, jangka waktu realistis yang dibutuhkan untuk penyerahaan konsep awal, pengkajian, pengambikan keputusan, dan penyaluran dana masih belum bisa diprediksi untuk saat ini. Secara realistis GCF bisa menjadi sumber pendanaan internasional untuk mendukung kegiatan di dalam Strategi Pembangunan Rendah Karbon dalam tahun-tahun terakhir LESTARI dan setelahnya.
Selain dana GCF, dana Norwegia adalah sumber pendanaan menjanjikan lainnya yang perlu terus dimonitor. Pada saat laporan ini ditulis, dari 10 juta milyar AS yang ditawarkan oleh Norwegia untuk Indonesia, kurang dari 10% nya saja yang sudah tersalurkan. Oleh karena itu, LESTARI perlu mempertimbangkan untuk mengakses dana Norwegia dengan menjembatani operasionalisasi pembayaran berbasis hasil, khususnya untuk skema PJL dan pengelolaan kebakaran hutan. Keinginan Norwegia untuk mendukung Badan Restorasi Gambut (BRG) juga perlu selalu dimonitor terkait dengan fokus kegiatan LESTARI dalam pengelolaan kebakaran hutan di Kalimantan Tengah.
Selain mendukung pembentukan BLU Perubahan Iklim di bawah Kementerian Keuangan (lihat bagian 8.2), LESTARI dengan dukungan dari HPI bisa menjajaki berbagai kemungkinan untuk mengoperasionalkan pembayaran berbasis hasil di tingkat daerah melalui cara-cara lain termasuk bermitra dengan sektor swasta dan pengajuan proposal untuk mengakses dana Norway pada saat instrumen pendanaan Indonesia yang direncanakan akan dikelola oleh BLU Perubahan Iklim sudah terbentuk. USAID LESTARI Final Assessment Report - PES/REDD+ Finance Assessment and Development of Strategies to Incentivize Landscape Scale LEDS P a g e | 108
8.4. Skema pengembangan pembayaran jasa lingkungan
Merancang skema dan mekanisme PJL merupakan sebuah lompatan dalam implementasi rencana kerja LESTARI dan mengintegrasikan PJL ke dalam aktivitas pendukung dari setiap tema teknis di bentang alam LESTARI seperti pengelolaan sumber daya air di Aceh, pengelolaan kebakaran hutan di Kalimantan Tengah, dan pengelolaan daerah konservasi secara kolaboratif di Papua.
Strategi komunikasi yang tepat dan jelas bagi para fasilitator untuk mengkomunikasikan waktu PJL dan harapan yang realistis bisa membantu menjaga minat dan komitmen masyarakat. Secara bersamaan, hal ini bisa mencegah salah pengertian, kekecewaan, dan frustasi di sepanjang proses. Ketika merujuk pada potensi pembayaran langsung ke anggaran publik, rumah tangga, dan pemangku kepentingan lainnya, berikut adalah hal-hal penting yang perlu dijelaskan: (i) kondisi pembayaran, (ii) jangka waktu, dan (iii) kesempatan untuk memperkenalkan PJL secara efektif.
Komponen umum dari praktek terbaik PJL perlu dikembangkan oleh pakar berdasarkan Rencana Konservasi Bentang Alam, Strategi Pembangunan Rendah Karbon, dan Kajian Lingkungan Hidup Strategis serta dokumen-dokumen terkait lainnya, pencarian data terbaru, dan konsultasi para pemangku kepentingan. HPI siap melakukan penjabaran dokumen desain PJL melalui pendekatan partisipatif (Engel, Pagiola and Wunder 2008) termasuk:
Identifikasi jenis jasa lingkungan Definisi penjual dan pembeli jasa lingkungan serta sumber pendanaan Definisi wilayah/tingkatan jasa lingkungan Studi teknis, hukum, dan social ekonomi Perhitungan batas pembayaran berdasarkan biaya peluang (opportunity cost) Definisi mekanisme pembayaran (frekuensi dan akses pendanaan) Kerangka koordinasi institusi dan tanggung jawab pelaksanaan Struktur pemerintahan (peningkatan kapasitas dan partisipasi publik, mekanisme transparansi dan akuntability, dan penyelesaian sengketa) Frekuensi dan waktu pengawasan dan evaluasi (monitoring and evaluation) Berikut ini adalah ringkasan status ide pengembangan potensi PJL yang ada di Aceh, Kalimantan Tengah, dan Papua. Pengembangan inisiatif PJL di area bentang alam LESTARI perlu didasarkan pada prioritas yang terdapat di dalam Rencana Konservasi Bentang Alam, Strategi Pembangunan Rendah Karbon, dan Kajian Lingkungan Hidup Strategis serta upaya yang sudah ada di lapangan. Dalam hal ini, dukungan dari LESTARI bisa membantu memaksimalkan manfaat inisiatif lokal.
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8.4.1. Desain PJL air di Aceh Tenggara (termasuk Gayo Lues)
Selaras dengan Rencana Konservasi Bentang Alam, proyek percontohan PJL air perlu dilaksanakan di area yang diprioritaskan untuk konservasi di Aceh Tenggara termasuk Gayo Lues dengan memanfaatkan Dana Desa (lihat bagian 8.1). Berikut ini adalah desa-desa prioritas di Aceh Tenggara berdasarkan Rencana Konservasi Bentang Alam: (i) Lawe Loning Aman, Kecamatan Lawe Sigala-Gala; (ii) Lawe Mengkudu, Kecamatan Ketambe; (iii) Pulo Piku, Kecamatan Darul Hasanah; dan (iv) Peseluk Pesimbe, Kecamatan Deleng Pokhkisen. Menindaklanjuti inisiatif IFACS, skema PJL juga bisa dikembangkan untuk pengelolaan daerah aliran sungai Panosan-Sepakat di Gayo Lues. Kerjasama dengan Balai Taman Nasional Gunung Leuser dan dengan organisasi-organisasi lokal seperti FAJEM juga diperlukan untuk mewujudkan inisiatif PJL di Aceh.
8.4.2. Desain PJL air di kawasan penyangga Cagar Alam Cyclops
Menindaklanjuti penandatanganan Nota Kesepahaman (MoU) pengelolaan bersama kawasan penyangga Cagar Alam Cyclops dan kesadaran pemangku kepentingan akan pentingnya melindungi Cagar Alam Cyclops untuk menjaga sumber air bersih, mata pencaharian penduduk asli, dan konservasi keanekaragaman hayati, LESTARI perlu mengembangkan sebuah skema PJL untuk pengelolaan sumber daya air di area ini. Inisiatif PJL ini juga akan menjadi pengungkit bagi pelaksanaan pengelolaan bersama Cyclops dengan memberikan insentif kepada penduduk asli dan masyarakat lokal dalam menjaga kawasan hutan untuk pengelolaan air yang berkelanjutan. LESTARI perlu merangkul PDAM dan PT. Indah Alam Qualala untuk kemungkinan pendanaan, berkolaborasi dengan BBKSDA Papua untuk pemberdayaan masayarakat lokal, dan menggunakan Forum Multi Pihak sebagai media komunikasi antar para pemangku kepentingan. LESTARI perlu memulai inisiatif ini dengan menciptakan kondisi pemungkin melalui penyadaran masyarakat, pengembangan kerangka institusional, dan merancang program peningkatan kapasitas untuk pembayaran berbasis hasil dalam pengelolaan lingkungan dan menghubungkan kegiatan PJL dengan pengembangan ekonomi hijau di pedesaan. Beberapa isu utama yang perlu dipecahkan adalah: (i) kurangnya kemampuan aktor lokal terutama dalam manajemen proyek secara keseluruhan, pengembangan proposal, dan laporan keuangan, (ii) tumpang tindih kepemilikan tanah terkait dengan hukum adat setempat, dan (iii) penyadar-tahuan masyarakat tentang mekanisme transfer manfaat terutama bagaimana mekanisme ini bisa memecahkan akar permasalahan perubahan penggunaan lahan dan penggundulan hutan yang lebih disebabkan oleh migrasi komunitas gunung ke ibu kota provinsi, Jayapura, dan bukan oleh penduduk asli setempat.
8.4.3. Desain PJL di Kalimantan Tengah
Proyek percontohan terkait pengelolaan kebakaran hutan di Kabupaten Pulang Pisau sejalan dengan fokus LESTARI di area bawah Bentang Alam Katingan-Kahayan. LESTARI perlu bekerja sama dengan BNPB dan BPBD yang saat ini sedang memberikan perhatian lebih serta mengerahkan sumber daya yang lebih besar untuk pencegahan kebakaran hutan. Di samping itu, perkembangan pembentukan BLU Perubahan Iklim di bawah Kementerian Keuangan dan kemajuan Badan Restorasi Gambut juga perlu terus diperhatikan mengingat Norwegia berencana untuk mendukung BRG dalam upaya
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pengelolaan kebakaran hutan di lahan gambut melalui BLU Perubahan Iklim setelah BLU ini terbentuk.
Inisiatif yang serupa dengan pemberian instentif kepada Desa Peduli Api di Jambi dan Riau menggunakan Dana Penanggulangan Bencana juga bisa diadopsi. LESTARI bisa mendukung BNPB dengan memberikan input teknis dan pembiayaan bersama dalam upaya-upaya pemanfaatan Dana Desa untuk pencegahan kebakaran hutan. Di Kabupaten Pulang Pisau, proyek percontohan di satu atau beberapa desa berikut ini bisa membantu mencapai tujuan Rencana Konservasi Bentang Alam: Kalawa, Mantaren I, Gohong, Buntoi, Jabiren, dan Taruna.
Di bagian atas Bentang Alam Katingan – Kahayan dimana pertambangan emas illegal mengancam kehidupan ekosistem sungai, potensi pengembangan skema PJL air bisa dipelajari dan dikembangankan lebih lanjut. Kerjasama dengan perusahaan pertambangan juga perlu dilakukan jika memungkinan karena beberapa perusahaan pertambangan telah berupaya untuk meminimalkan dampak lingkungan dan sosial dari operasi mereka melalui program-program CSR. Balai Taman Nasional Bukit Baka Bukit Raya juga perlu menjadi bagian dalam kemitraan LESTARI karena Balai Taman Nasional ini sudah melakukan berbagai upaya untuk menanggulangi permasalahan penambangan liar di wilayahnya. Hal ini selaras dengan fokus LESTARI tentang pengelolaan bersama kawasan konservasi di bagian atas Bentang Alam Katingan – Kahayan.
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ANNEXES:
Annex 1. Funds Profile Table 17: Funds profile No Fund Eligibility Funding Mechanism Size of Funding Available Funding Disbursement Note
Nationally Operated Financing Support 1 The Indonesia CSOs, NGOs, private Grants (small grant IDR 500 million (~ USD Small grant: Climate Change sector, and large grant) 50,000) for small grant disbursed in lump Trust Fund (ICCTF) universities/academies, Up to several million sum and is relatively and government USD (> IDR 3 billion or quick once reporting institutions USD 250,000) for large requirements are Thematic area: land- grant fulfilled based mitigation, Large grant: energy, and adaptation disbursement & resilience mechanism is under development
2 Forest Management All types of FMUs/KPHs: Budget transfer IDR 3 billion (~ USD Yearly as part of KPHK is funded by central Unit (FMU/KPH) FMU Conservation 225,000) per KPH; government government, KPHP and Fund (KPHK), FMU Protection however, the actual fund budgeting process KPHL are funded by both (KPHL), FMU Production disbursed is much less APBN and sub-national (KPHP) than that, and fund government budgets allocated by government (APBD) changes from year to year 3 People’s Business Micro, small and medium Credit and micro- Micro KUR: IDR 25 Three different 3 types of credit at the Credit Program enterprises (MSME) and credits backed by million for a max. of 3 mechanisms: moment: micro KUR, retail (KUR) cooperatives guarantees from years for working capital directly to MSME KUR, TKI KUR (designed state-owned and 5 years for from participating for migrant workers) companies investments banks Sectoral KUR is planned Retail KUR: IDR 25 indirectly through to be introduced in 2016 million to IDR 500 linkage institutions
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No Fund Eligibility Funding Mechanism Size of Funding Available Funding Disbursement Note million for a max. of 4 by executing years for working capital patterns and 5 years for indirectly through investments, can be linkage institutions extended up to 10 years by channeling for hardwood patterns investment TKI KUR: IDR 25 mill, duration is based on the migrant workers’ employment contract and shall not exceeding 3 years. Sectoral KUR: IDR 500 million – IDR 30 billion (equivalent to USD 36,000 – USD 2 million) for max. 10 years
4 Timber Harvesting Farmer groups, Low-interest loan Vary, depending on the Lump sum, directly Postponement cooperatives (the one size of community to community Credit (KTT) receiving loan from group/cooperative group/cooperative government) Vary, loan duration is 5- Lump sum, directly Individual/member can 8 years (depending on to individual apply for the loan to the the harvest applying loan cooperative or farmer group receiving money from government/MoEF 5 Watershed Fund BP DAS (Watershed Budget transfer Vary Yearly as part of (Dana DAS) management agency) government budgeting process 6 Grant from Central Local government Grants Vary Yearly as part of Fund allocation should be Government to government based on criteria; however, Local Government budgeting process no clear and robust criteria have been developed so
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No Fund Eligibility Funding Mechanism Size of Funding Available Funding Disbursement Note (Hibah Daerah) far. Current disbursement of fund only targets mitigation action and not yet prevention and adaptation 7 National Park Fund National Park Agency in Budget transfer Vary, depending on the Yearly as part of National park is managed each national park area and priority government and funded by central budgeting process government 8 Shared Revenue on All district/city Budget transfer Variable, proportional Distributed on a forestry governments depending on the shared quarterly basis revenue of the year through transfer from the State Treasury to the Regional Treasury Account 10 Village Fund (Dana All villages Budget transfer IDR 1 billion (~ USD Yearly as part of Desa) 74,000) per village with government possibility of increase budgeting process 11 National Community Villages in and around Budget transfer Variable Yearly as part of Empowerment forest area (from central and government Program (Program district government accounting process. Nasional to village Pemberdayaan government) Masyarakat, PNPM Mandiri Kehutanan) Internationally Operated Financing Support 1 Norway-Indonesia Appointed Grants in 1st and 2nd USD 1 billion in three Under development USD 200 million for Phase REDD Partnership ministry/institution in a phase, result-based phases 1 and 2; USD 800 million (NORAD-UNDP- country (Ministry of finance/carbon for Phase 3 rd GoI) Environment and credits in 3 phase Currently being Forestry in Indonesia) administered by UNDP REDD under Environmental Division until June 2016
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No Fund Eligibility Funding Mechanism Size of Funding Available Funding Disbursement Note
2 Forest Investment Ministry/institution in a Grants, FIP I: USD 17.5 million - Through Multinational Fund (FIP) country (Ministry of concessional loans, (grant); expected co- Development Banks Environment and guarantees, equity financing USD 6 million (MDBs) and their Forestry in Indonesia) respective disbursement FIP II: USD 17.5 million regulations (grant); expected co- financing USD 8 million FIP III: USD 2.5 million (grant) & USD 32.5 million (loan) expected co-financing USD 6 million 3 Forest Carbon An eligible REDD country Grants (Readiness Readiness Fund: 3.8 Partnership Facility (through ministry or other Fund & Carbon million (FCPF) government agency) Fund) Carbon Fund: USD 465 million (total) TBC 4 REDD Early Movers Ministry/institution in a Grants - - Not available for (REM) country (Ministry of Indonesia Environment and REM has a funding Forestry in Indonesia) volume of 32.5 million Euros, and REM has already agreed to spend around 19 million Euros buying 8 million tons of CO2 from REDD+ activities in the state of Acre over a 4-year period.
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No Fund Eligibility Funding Mechanism Size of Funding Available Funding Disbursement Note
5 Green Climate Fund Accredited Entities: Grants, loans, Micro project: USD 0 – Under development82 Indonesia is still (GCF) accredited national, sub- guarantees, equity 10 million; Small project: developing a framework national, regional, and USD 10 – 50 million; for the NDA international Medium project: USD 50 establishment and the implementing entities – 250 million; Large issues of accredited and intermediaries project: > 250 million entity. (including NGOs, Total funding pledges of Two accredited government ministries, > USD 10 billion to the institutions so far: Sarana national development GCF Multi Infrastruktur Ltd. banks, and other (PT. SMI) and KEHATI domestic or regional foundation. organizations that can meet the Fund’s standards); and private sector 6 Global Government agencies, Grants (can be Various types of projects Through Focus of GEF Trust Fund Environmental civil society transferred or (modalities): Implementing Entities biodiversity, climate Facility (GEF) organizations, private blended with to Full-sized Projects like UNDP, UNEP and change, land degradation, sector companies, loans, guarantees, (FSPs) – over USD 2 the World Bank sustainable forest research institutions equity) million, management, international waters, and Medium-sized Projects chemicals. (MSPs) – up to USD 2 million, Focus of the Special Climate Change Fund Enabling Activities (EAs) (SCCF) and Least - up to USD 1 million, Developed Countries Small Grants Program Fund (LDCF): climate (SGPs) – up to USD change adaptation 50,000, Programmatic Approach
82http://um.dk/en/~/media/UM/English-site/Documents/Danida/About- Danida/Danida%20transparency/Consultations/2014/2nd%20half%202014/Draft%20Organisation%20Strategy%20for%20the%20Green%20Climate%20Fund.pdf
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No Fund Eligibility Funding Mechanism Size of Funding Available Funding Disbursement Note – amount not defined.
7 BioCarbon Fund Country Grants and Preliminary Funding: Country Initiative for results based USD 70-80 M Sustainable Forest payments for Additional funding Landscapes (ISFL) achieved emission pledge over 100 M from reductions UK and Germany at COP 21 in Paris to support expansion into Indonesia 8 Bilateral A country (through an Grants/loans Vary Vary commitment appointed government financing support ministry/agency) 9 Market-based Verified Emission Over-the-counter TBA TBA Payments for Reductions (VERs) (OTC) transaction of Emission following respective VERs against Reductions market protocols payment (Compliance & Voluntary) Private Sector & Civil Society Financing Support 1 KEHATI Foundation NGOs, Community Grants Latest data not available Not available Proposal needs to be Organizations, Total grant (1995-2013: submitted in KEHATI Governmental US$ 25.500.000) 83 format Research Institutions, Universities, Professional Institutions. Work in 3 prioritized ecosystems: agriculture, forestry, and coastal &
83 https://www.cbd.int/doc/meetings/ecr/cbwecr-2014-04/other/cbwecr-2014-04-presentation-day4-05-en.pdf
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No Fund Eligibility Funding Mechanism Size of Funding Available Funding Disbursement Note small islands programs 2 NGOs Community Grants Vary Vary, mostly grants Organizations, 3 Private Companies NGOs, CSOs, CSR Program Vary Vary, mostly grants Universities
Source: HPI elaboration
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Annex 2. ICCTF Project Management Cycle
Step 1. Submit prospective proposals Step 6. Sign project agreement Step 7. Implementation of the approved activities a) Sectoral ministries and local governmental bodies will be a) Secretariat will send notification letter to invited to submit proposals for activities eligible for financing a) Proponent has to assign a coordination team that will be responsible to coordinate the project proponents informing the approval implementation of the activities led by a Project Manager. The approved activity proposal can b) Sector ministries may either submit their own proposals, or rejection of their proposals. or partner with other parties such as NGOs or academic be implemented by the proponent or sub-contracted to third party; institutions. b) This notification letter will also be sent to b) If the activities will be sub-contracted to 3rd party, the Proponent will conduct a fair bidding the Trustee for the approved project process in accordance with government regulations and/or other principles of procurement in proposal; The Trustee will arrange for the the grant agreement) to select a Contractor; which will then be communicated to the Trustee signing of the project implementation and the Secretariat. agreement by the Project Proponent. c) The Contractor must submit regular progress reports to the Coordination Team to make sure Step 2. Pre-appraise prospective proposals c) The Trustee will send one copy of the that the activity progress is in line with the targeted output. agreement to Secretariat for filing a) The ICCTF Secretariat will check the completeness of d) In case the proponent will implement the activities an implementation team, which can be the project proposals and documentations same as the coordination team, has to be established with clear tasks and responsibilities, clear time schedule and milestones, clear planning, and clear reporting responsibilities. b) After all documentation complete, the Secretariat will submit the project proposal to the Technical Committee e) If required, the proponent can ask for assistance from the secretariat to provide support in (TC) for further assessment. project management due to lack of expertise and experiences or lack of human resources. c) In the case of incomplete documentation, the Secretariat will discuss with proponents the need for the Step 5. Approve a proposal appropriate completion of documentation. a) During the SC meetings, the Head of d) The Secretariat will also check project eligibility Secretariat will present the project proposals Step 8. Disbursement of funds according to eligibility criteria and ask the SC for approval or rejection a) The Contractor or the implementation team can submit a payment request to the Trustee with based on the recommendation of the TC. a copy to the Secretariat based on payment term b) If required, the SC could invite the TC or b) Payment requests will be checked by the Trustee and confirmed with the Project Manager of Experts to clarify their recommendations. the Coordination Team. c) Once the Project Manager approves it, the Trustee can disburse the fund to the Contractor Step 3. Assessment of the project proposal by the TC: with a copy of disbursement proof to be sent to the Secretariat. a) The TC will assess the eligibility, feasibility, sustainability and impact of the proposed activities according to criteria Step 4. Submit project proposals for set by the Steering Committee (SC). approval by the SC Step 9. Organise monitoring, evaluation and auditing: b) These criteria will take into account available funding If a project proposal meets all criteria for and existing grant agreements with development partners. financing by the ICCTF, the Secretariat will a) Once a year, on behalf of the SC the Secretariat will organise missions to monitor and submit the proposal and assessment evaluate projects funded by the ICCTF. c) During the assessment of the proposal, if required, the reports, including recommendations for b) Mission reports will be presented at the SC or Technical Committee level. TC may ask for assistance from the pool of experts. approval or rejection, prepared by TC to the SC; c) The ICCTF will be audited once a year and an audit report will be presented to the SC. Source: (ICCTF 2015) web: http://icctf.or.id/fund-management/
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Annex 3. KUR Application Procedure and Distribution Mechanism
The MSMEs can obtain KUR from participating banks by:84 Submitting a KUR application letter to a bank, attaching supporting documents such as business legality statement, business permits, financial statements, etc. The bank will then evaluate/analyze the MSME’s business feasibility, based on the application letter. If a bank considers an MSME feasible, then it will approve the KUR request. The decision to approve KUR is fully under a bank’s authority. The bank and MSME sign a credit/financing agreement. The MSME is obligated to repay (including through installments) the credit to the bank. The following are general requirements for MSMEs to access KUR: Not be receiving credit/financing from banks and/or not receiving funds through government credit programs. Be permitted to receive consumptive credit (e.g. mortgage loans, credit cards, etc.). Have a repayment certificate (Surat Keterangan Lunas) from the bank, if an MSME is listed on the BI Debtor Information System but has already paid off the loan. For Micro KUR, it is not necessary to check BI Debtor Information System.
To receive KUR, MSME needs to submit these legal documents to the distributing banks: Identification documents (e.g. identity card, driving license and family card) Business/venture legal documents (e.g. deed of establishment, deed of alteration) Business permit (e.g. business permit/SIU, company registration document/TDP, certificate of domicile/SK Domisili) Accounting records or financial statements Proof of collateral The participating banks have full authority to make a decision on loan approval based on the feasibility analysis of a potential KUR recipient. KUR debtor who had received and paid off KUR are allowed to submit a new KUR request, as long as the debtor is not yet bankable.
The distribution mechanisms of KUR can be carried out in three different ways: (i) directly to MSME from participating banks, (ii) indirectly through linkage institutions by executing patterns, and (iii) indirectly, through linkage institutions by channeling patterns as shown in the figure below:
84 http://www.tnp2k.go.id/en/frequently-asked-questions-faqs/cluster-iii-2/credit-for-businesses-Program-kur/
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1. Direct distribution to MSME from participating banks a Bank carries out individual assessment on prospective KUR debtor. When debtor is assessed as feasible and approved by the participating bank, the KUR debtor signs a credit agreement b Bank applies for a guarantee to guarantor company 2. Indirect distribution through linkage institutions85 by executing patterns a. Linkage institution applies for credit/financing to participating bank b. Participating bank checks debtor information system and conducts feasibility analysis. When considered feasible and approved, the participating bank signs credit/financing agreement with linkage institution. c. Participating bank applies request for credit/financing guarantee to guarantor company. d. Linkage institution distributes credit/financing received from participating bank to MSME from linkage institution. e. MSME debtor repays credit/financing obligation to linkage institution. Linkage institution is responsible for the KUR repayment to the participating bank. 3. Indirect distribution through linkage institutions by channeling patterns a. To obtain credit/financing from a participating bank, MSME authorizes the board of linkage institution to submit a credit request and offers collateral to the participating bank. b. Linkage institution representing MSME submits credit request to the participating bank. c. Participating bank checks debtor information system and conducts feasibility analysis. When MSME (Usaha Mikro Kecil Menengah Koperasi, UMKMK) is considered feasible and approved by the participating bank: d. Based on the authority of the participating bank, the linkage institution signs Credit/Financing Agreement with MSME. e. Based on the authority of the MSME, the linkage institution signs a credit/financing agreement with the participating bank. f. Bank submits guarantee request to guarantor company. g. Linkage institution forwards the credit/financing loan received from the participating bank to MSME debtor. MSME debtor pays the payment obligations to the participating bank through the linkage institution. MSME is responsible for the KUR payments to the participating bank.
Source: (TNP2K n.d.)
85 Linkage institutions are secondary cooperatives, primary cooperatives (savings and loan cooperatives, savings and loan cooperative units), village credit agencies (BKD), Baitul Mal Wa Tanwil (BMT), Syariah/people’s credit banks (BPR/BPRS), non- bank financial institutions, venture groups, micro finance institutions.
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Annex 4. Questionnaires for LESTARI Site Visit
Background Info
REDD+
REDD+ stands for Reducing Emissions from Deforestation & Forest Degradation. The concept aims to achieve a measurable improvement of forest management. The improvement shall be incentivized by benefits towards people who make local decisions on land use (e.g. landholders, communities) to reduce deforestation and degradation. The incentives can be improvements of infrastructure of health, education or financing for economic activities without deforestation (alternative income) or in form of direct payments – Payment for Ecosystem Services.
PES
Ecosystem Services are benefits people derive from healthy ecosystems, such as fertile soils, clean water & air, climate regulation, recreation, pollination, timber, foods, medicinal plants and other non-timber forest products. They benefit both local people and people from far away and are the basis for a healthy economy and society. Economic activities for livelihood of people or monetary profit can threaten to degrade Ecosystem Services (e.g. deforestation). As Ecosystem Services are not much regulated and not valued in monetary terms, their degradation is not accounted as a loss. This creates the issue that monetary profits based on ecosystem degradation are private to the land user, but the loss of the Ecosystem Service is public to the society.
Payment for Ecosystem Services tries to re-balance this issue by putting a monetary value to Ecosystem Services. The concept is aims to achieve a measurable improvement of ecosystem management. The improvement shall be incentivized by benefits towards people who make local decisions on land use (e.g. landholders, communities). In a PES the incentive is a pre-agreed payment to the land user when it was verified that ecosystem management is good.
Local Organization. Area: ______/Name: ______
General Information:
1. What is the focus of your organization?
2. How many employees do you have in your organization? Where do they come from? Can you tell me a little bit about their background?
3. What is your organization structure? (get the organogram, if possible)
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Experiences in Sustainable Landscapes, PES and REDD+:
4. What was previous work of your organization related to Agriculture and Forestry?
5. Have you worked on transfer of benefits to communities and landholders in return for environmental management?
6. Has your organization carried out activities related to transfer of benefits to communities and landholders in return for environmental management (PES and REDD+)? (YES/NO)
If YES, continuo to A, if NO – stop here.
A. If YES,
Questions Forests Monetary transfer Information on Activities ACTIVITIES a. What kind of activities that have been done? b. What type of services (water, carbon, ecotourism, biodiversity, natural beauty, geothermal, etc.) c. When? d. Implementation period e. Target of activities (break down based on phases of activities/Deliverable, if any) f. Location ACTORS (Stakeholders): a. Service provider b. Beneficiaries (user) c. Third parties (facilitator, legislator, mediator, verifier) d. Financial manager (bank, cooperative, other org.) e. Donor, if applicable f. Others TRANSCATION MECHANISM: Note: Information needs to be supported by documentation, such as contract, transaction record, audit report, etc.)
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Questions Forests Monetary transfer Payment: a. What is the unit of measurement of the service? b. What is price per unit service? c. How does payment being done (via bank, cooperative, etc) d. When payment is done? Payment distribution: e. How does money (incentive) is distributed to the service providers? Unit of service provider (individual, household, organization, village) Period of distribution Who does the distribution? MONITORING: a. Are there any documents of measurement to determine the payment? (payment or purchase receipts minutes of meeting) b. Who is responsible for monitoring and keeping the documentation? What would you like to do better if you would start such a program again? Organization’s specific Information What is your organization’s specific role in this activity? What are the targets to be achieved of your organization in that particular activity? Based on the targets that have been set, do you think this activity is classified as success? Why? If it is a SUCCESS, what are the lessons learned?
It is NOT SUCCESS, what are the challenges?
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Additional Capacity Assessment:
7. Does your organization have experience in preparing proposals related to sustainable landscapes, forests, PES/REDD+? Please tell me a little more
8. Does your organization have experience in preparing reports, including financial reports on projects related to sustainable landscapes, forests, or PES/REDD+? Please tell me a little more
9. What kind of training (if needed) will be useful to improve organizations’ skills and qualification in implementing project activities related to sustainable landscapes, forests, or PES/REDD+?
10. Do you have any other comments/opinions related to capacity of your organization in implementing to sustainable landscapes, forests, or PES/REDD+?
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Questionnaire 2
LESTARI Regional Office: ______
Work Plan Do you have a work plan for the next 5 years? (YES/NO, YES but annual plan instead of 5 year- plan)
1. If YES, what are the focuses (thematic and area) in year 1, 2, 3, 4, and 5? (ask for a copy of work plan if possible)
2. If NO, why? When do you think the work plan will be ready?
Relation to Local Government 3. What are the government institutions relevant to LESTARI activities in your area? Do they provide funding? (follow this table)
Institutions Theme/topic Funding Contact Name Phone/Email (Y/N)
4. What are the local government regulations related to/regulating benefit transfer for environmental management activities applicable to your stakeholders in your area?
Potential Implementing Organizations
5. Which organizations (both national and local org) do you think have the potential to implement project/program related to benefit transfer for environmental management in your area? What do you think about their capacity (i.e. human resources, reporting skills both on financial and non- financial contexts, performance, etc.)
Organization Focus Capacity Assessment Contact (topic and area) (Human Resource, Reporting Skills, Past (Name, Performance, etc) Phone, Email)
Consortium Partners operating in this area 6. Who are LESTARI’s consortium members operating in your area?
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Organization Specification/Focus and Area Contact (Name, Phone, Email)
Additional Info - important notes from this area:
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Questionnaire 3
Government. Level: ______Institution: ______
1. What are the institutions/organizations with a mandate to implement benefit transfer for environmental management (PES/REDD+) in your area? (both government and non- government organizations). Please elaborate the function of each organization (fund provider, implementer, facilitator, etc.)
2. What is the mechanism for benefit transfer for environmental management (PES/REDD+) activities in your area, if any? (some districts may not have mechanism in place)
3. (this includes regulations that are still currently under development)
4. Is there funding from government or donors in your organization (or other institution that you know) that can be utilized to fund benefit transfer for environmental management (PES and REDD+) activities in your area?
(Note: if funding exists, please separate pure government funding from non-government funding)
Government Funding Mechanism: How is fund being allocated and distributed?
Non-government Funding Mechanism:
5. Were there any activities of benefit transfer for environmental management (PES/REDD+) in your area? YES/NO
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If YES, fill the following table (PES/REDD+ experience may be separated activities) Questions REDD+ PES When? (period)
What kind of services?
What are the context/activity? Who were involved? Service provider Beneficiaries (user) Third parties (facilitator, legislator, mediator, verifier) Financial manager (bank, cooperative, other org.) Donor, if applicable Others What was the target to be achieved for that activity? Do you think that activity was classified as success? Why?
If it is a SUCCESS, what are the lessons learned?
It is NOT SUCCESS, what are the challenges?
6. Additional info. Opinions/comments on PES and REDD+?
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Annex 5. List of Stakeholders Consulted
List of stakeholders consulted in Central Kalimantan
No Name Organizations Contact 1 Ozzy LESTARI 2 Domingus Provincial Government Forestry Office 3 Ismail BPDAS Kahayan 081931754999 082311555758 4 Iman Rusmana BP2HP 081385012030 [email protected] 5 Rahmat KPH Gunung Mas 085249799664 6 Ibu Yuna BPKH Palangkaraya 081347367667 7 Mursyid BLH Provinces 0816280989 8 Adib Gunawan Sebangau National Park 08115451118 Agency 9 Virasadi Nursu’i BBBR Agency 081345494257 10 Hap Baperdo BLH Katingan 0811520490 11 Kiwok BPBD 081251668957 12 Restono Dinas Kehutanan Pulang 0822507432 Pisau 13 Kartie Vitamery Yayasan Tambuhak Sinta 081349190041 Lia Anggraeni (YTS) 081251606426 14 Dedi YCI 15 Siti Maimunah Muhammadiyah University 081366109055 16 Atit & UNDP REDD Division 082168513039 08136086101 17 Hendro Provincial Government 085252701119 Tourism Agency
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List of stakeholders consulted in Papua
No Name Organizations Contact 1 Priyo Cenderawasih University 08124850271 2 Amsal Provincial Government Forestry 081247235600 Office 3 Zaenal Arifin BPDAS Memberamo 08129304305 Elizabeth Sapulele 0811482099 4 M. G. Nababan BKSDA 08125405080 Dahlan Iskan 081344007142 Yani 081380811132 5 Gerald BP2HP Papua 08124809136 6 Sance Theresa Dinas Kehutanan Palangkaraya 081248833836 7 Kitty (Amalia) BLH Kota Palangkaraya 081344182686 8 Hirosi Marchel Suebu 085244182519 9 Andre Lim Fort Mumbai Green 081344048112 10 John Rumbiah Dinas Kehutanan Mimika 0811495019 11 Yohan Lorentz National Park Agency 12 Andi Yapeda 13 Edo LEMASCO 081354033468
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Annex 6. Government Regulations Related To PES And REDD+
Table 18: REDD+ related regulations at the national level Key components No Regulations Remarks Objectives Focus activities Institutions 86 Time Authorities 1 Presidential To reduce GHG emissions in GHG emission reduction activities in Bappenas as 2011- Bappenas Regulation No. Indonesia by 26%/41% by the following sectors: (1) Forestry Coordinator; Line 2020 61/2011 on the 2020 against a BAU and Peat Land, (2) Agriculture, (3) Ministries and national action plan baseline. REDD+ represents Energy & Transport, (4) Industry, (5) provincial on GHG emission a very important element of Waste. government as reductions (RAN- RAN-GRK with 88% of the implementer Focus activities related to REDD+: GRK). envisioned reductions Forest and land fire control, network related to REDD+ activities system and water management, RHL (forest and land rehabilitation), HTI (Industrial Plantation Forest), HR (Community Forest), Illegal logging eradication, Deforestation prevention, Community empowerment 2 Presidential The Regulation mandates Development of: MoEF as 2011 MoEF Regulation No. different bodies of the 1. Accounting Process and Coordinator; Line 71/2011 on the government to produce Procedure of GHG Inventories; Ministries to national GHG national, local and corporate develop individual 2. Task & Authorities of Governments inventory system GHG inventories on an GHG inventories at Central as well as Provincial and annual basis. The GHG Municipal/regency Levels; inventory as part of MRV system is prerequisite of the 3. Verification and Reporting successful REDD+ processes
86 Institutions involved or to be created
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Key components No Regulations Remarks Objectives Focus activities Institutions 86 Time Authorities implementation 3 President Decree Continuation of Presidential Formulation of REDD+ national REDD+ Task Until 31 Fund No. 25 of 2011 on Decree No. 19 of 2010. strategy and national action plan on Force Dec comes the Task Force for To develop REDD+ greenhouse gas mitigation (RAN- (discontinued). 2012. from APBN Preparation of the readiness and prepare for GRK). Line ministries: and REDD+ Agency the REDD+ Agency. Preparation for REDD+ MoEF, Norway- Indonesia UKP4 Agency. Formulation of REDD+ BAPPENAS, (discontinued). finance mechanism. Preparation for MOF, MoA, LoI. MRV agency. Formulation of criteria MEMR, etc. for pilot provinces. UKP4. BPN 4 Presidential The REDD+ Managing Defined tasks of the REDD+ Agency REDD+ n/a President Regulation No. Agency is aimed to support including the development of the Managing 62/2013 on the the President to implement REDD+ National Strategy; the Agency establishment of REDD+ activities in framework for social, environmental the national Indonesia. and financial safeguards; REDD+ REDD+ Agency to policies; and instruments and implement REDD+ mechanisms for REDD+ funding and objectives. benefit distribution 5 PR No. 62 of 2013 To achieve REDD+ Coordination and planning for REDD+ REDD+ Agency REDD+ Stakeholde on the REDD+ objectives in Indonesia by development and implementation in (discontinued). Agency r Agency (which was developing relevant policies Indonesia, which includes developing: Line ministries: (ministry- committee integrated into the and implementing REDD+ The REDD+ national strategy MoEF, ranking, but to be MoEF through PR projects (addressing BAPPENAS, now established No. 16 of 2015) deforestation, forest REDD+ safeguards MoFa, MoA, discontinued . Funds for degradation and peatland Actions to mainstream MEMR, etc. ). REDD+ degradation). UKP4. BPN. Indonesia REDD+ in the development agenda to be Financial benefit distribution established mechanism . Improving capacity, law enforcement and MRV
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Key components No Regulations Remarks Objectives Focus activities Institutions 86 Time Authorities 6 Constitutional Restoring indigenous forest Judicial review of Law No. 41 of 1999 Constitutional 2012 Constitutiona Court Decision No. management to the on national forest management and Court l Court 35/2012 on indigenous people utilization. After review, indigenous indigenous forest people have the right to occupy and management cultivate forest land for the fulfillment of personal needs. 7 MoFor Regulation To develop REDD Developing REDD methodology, MoEF (WG on 5 years MoEF No. 68 of 2008 on demonstration activities. technology and institutions. Climate Change), the international Implementation of organizations, Demonstration forest concession Activities for holders, Reducing customary forest Emissions from managers. Deforestation and Forest Degradation 8 MoFor Regulation To prevent and reduce Conducting forest management Independent 30 years MoEF This MoFR No. 30 of 2009 on emissions from deforestation activities as part of REDD Appraisal (to be (license is no the Implementation and forest degradation. implementation. Setting the reference created). REDD issuing). longer valid of the Procedure emission level prior to REDD Commission (to Local since the for REDD implementation. Conducting be created – now governments creation of monitoring. Submitting a monitoring discontinued with (issuing the REDD+ report to the MoF. Distributing responsibility recommenda Task Force financial benefit based on relevant lying with the tions). (and regulations. MoEF). MoEF. eventually the REDD+ National registry Agency) by (to be created). the Provincial president. governments. The Local REDD+ governments. Agency Forest license has how holders. been
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Key components No Regulations Remarks Objectives Focus activities Institutions 86 Time Authorities International discontinue organizations. d
9 MoFor Regulation To improve the efficiency Carbon accounting in forest areas. MoEF. Berau Not MoEF. MoEF to No. 47 of 2011 on and effectiveness of the Bupati. Malinau available. Berau provide MRV preparation. a Partial Transfer government’s delivery of Bupati. Kapuas Bupati. additional of Authority on public services in the forest REDD readiness activities. Hulu Bupati. Malinau budget to Forestry sector, particularly Bupati. respective Transfer of Authority on Forestry Governance Kapuas Hulu local
Governance from the MoF to the Bupati. governmen Bupatis of Berau, Malinau and ts. Kapuas Hulu under the
Framework of REDD+ Demonstration Activities 10 Government The Forest reclamation The Forest Reclamation Guideline MoEF n/a MoEF Regulation No. 21 guidelines is meant to provides guidance on the following of 2011 on Forest provide a reference for forest topics: Location inventory, Decision on Reclamation reclamation activities. The location, Planning, Execution, Guidelines87 objective is to ensure that Institution, Technical monitoring and forest reclamation will be assistance, Reporting mechanism, carried out in accordance Sanction, Erosion or sedimentation, with general patterns, Location altitude, Types of vegetation standards and criteria. Presidential To establish a Peatland a. Peatland area of approx. To be developed: 2016 - President The head Regulation No. 1 Restoration Agency in order 2,000,000 ha Peatland 2020 of Agency Year 2016 on to accelerate the peatland b. Annual target area: 30% in 2016, Restoration was just Peatlands recovery of the region and 20% in 2017, 20% in 2018, 20% in Agency; appointed Restoration the return of hydrological 2019, and 10% in 2020 Lead in Jan Agency functions as a result of peat 2016. c. coordinating and facilitating the implementation:
87 http://faolex.fao.org/docs/pdf/ins107031.pdf
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Key components No Regulations Remarks Objectives Focus activities Institutions 86 Time Authorities land and forest fires restoration of peat land in the MoEF province of Riau, Jambi, South Sumatra Province, West Peat land area of approx. Kalimantan, Central Kalimantan 2,000,000 ha. Province, South Kalimantan and Annual target area: 30% in Papua Province. 2016, 20% in 2017, 20% in d. Implementation and strengthening 2018, 20% in 2019, and 10% policy coordination in 2020 e. restoration of peat land; f. mapping hydrological unity of peat land; g. zoning protection and h. aquaculture activities; i. rewetting peat and accessories; j. rearrangement of burning peat areas management; k. socialization and education on peat restoration;
Source: HPI’s compilation based on (CIFOR 2015)
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Table 19: REDD+ related regulations at the sub-national level Key components No Regulations Objectives Focus activities Institutions 88 Time Authorities Remarks 1 SRAP Aceh The purpose of the Regional (1) Reduce GHG emissions from MoEF 2011- MoEF (2013) Strategy and Action Plan on REDD land users and amendments sector (Directorate 2030 (Directorate + is divided into three stages: and forestry (Land Use, Land Use General for General for 1) short-term: improvement of the Change, and Forestry/LULUCF); Climate Change Climate condition of the overall forest (2) Increasing carbon storage; Control (DJ- Change PPI)) Control (DJ- governance so that the province can (3) Enhance the conservation of PPI)) contribute to the achievement of biodiversity; and Indonesia's commitment to cutting (4) Increase the value and emissions by 26-41% by 2020. sustainability of the economic 2) Medium-term objective: functions of forests. sustainable practices, mechanisms 2 SRAP of governance and forest tbd MoEF MoEF Central management are widely established (Directorate (Directorate Kalimantan and developed General for General for Climate Change Climate 3) Long-term goal: The forestry Control (DJ- Change sector in the province becomes a net sink sector. In addition, PPI)) Control (DJ- sustainable economic and PPI)) 3 SRAP Papua ecosystem services are supported. (1) Increasing the capacity of forest MoEF 2011- MoEF (2013) management and land-based low- (Directorate 2020 (Directorate carbon management General for General for (2) Optimizing the regulatory and Climate Change Climate institutional framework for forestry Control (DJ- Change sector PPI)) Control (DJ- PPI)) (3) Ensure the active participation of indigenous people in the forest and land-use management
* Sectoral share of total GHG emissions in 2010 in the respective province 88 Institutions involved or to be created
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Key components No Regulations Objectives Focus activities Institutions 88 Time Authorities Remarks 4 RAD-GRK The RAD-GRK adjusts national and (1) Agriculture and Forest & Individual 2013 - Bappeda Aceh sectoral policies and instruments Peatland (93%*) provincial 2020 originating from RAN-GRK and is to (2) Energy & Transport (6.1%*) government be used in conjunction with the institutions (3) Industry & Waste Management RAN-GRK to improve coherence (1%*) between the sub-national and 5 RAD-GRK national levels, especially with (1) Land-based (99%*) Individual 2013 - Bappeda Central regards to data relevant to GHG (2) Energy (0.8%*) provincial 2020 Kalimantan inventories and emissions government Waste Management scenarios. institutions (3) (0.2%*) 6 RAD-GRK (1) Land-based (99.7%*) Individual 2013 - Bappeda Papua (2) Energy (0.2%*) provincial 2020 government (3) Waste Management (0.1%*) institutions
Source: HPI’s compilation
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Table 20: PES related regulations at the national level Key components No Regulations Remarks Objectives Forest area eligible Focus activities Institutions 89 Time Authorities 1 Government To formulate Production forest Incorporating MoF (now 25 years Article 19.b Regulation No. 6 of forest planning management units environmental MoEF), forest 2007 on Forest as part of forest (KPHP). Protection services as forest license holders. Planning and the management in forest management sector activities, Formulation of Indonesia. units (KPHL). Forest Conservation forest including: water Management and management units utilization, nature- Utilization Plans (KPHK). based tourism, (as revised by GR biodiversity No. 3 of 2008) conservation, environmental protection, carbon sequestration and/or storage. 2 MoFor Regulation To develop Production forests: Protection, enrichment MoEF, Max. of 65 MoEF No. 61 of 2008 on ecosystem 14,000– 200,000 and maintenance, corporations, years the Procedures for restoration in ha. Biodiversity forest (extension: Obtaining Permits production conservation, NTFP concession 35 years) IUPK. for the forests. utilization. holders. Utilization of Environmental Timber Products in service concessions Ecosystem (IUPJL). Logging Restoration concessions Activities in (IUPHHK). Production Forests (as revised by MoFor Regulation No. 50 of 2010)
89 Institutions involved or to be created
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Key components No Regulations Remarks Objectives Forest area eligible Focus activities Institutions 89 Time Authorities 3 Law No. 32 Year to reduce and TBA Includes regulations on TBA TBA TBA Article 42, 2009 on avoid the Planning; 43, and 44 Environmental pollution and as basis of Protection and damage to the utilization; PES Management environment control; activities in and to establish Indonesia. an effective maintenance; environmental supervision; and management law enforcement system
on environmental protection and management 4 MoFor Regulation To develop Environmental Forest carbon MoEF (DG of MoEF, Funds can No. 36 of 2009 on forest carbon services concession sequestration and Planning, FG governor come from the sequestration in production forests storage as part of the Forest and bupatis/ internal Implementation of and storage (IUPJL-HP). environmental service Production). Fo mayors corporations the Permit activities. activities in production rest license (concession Logging concession (license Issuance and protection forests, holders. holders), in natural forests issuing). Procedure for which include a series CSR, donor (IUPHHK-HA). Carbon of activities under agencies. Plantation forest Sequestration sustainable forest concession and/or Carbon management. (IUPHHK-HT). Storage Business Activities in Community forest Production and concession Protection Forests (IUPHHK-HKm). Community plantation forest concession (IUPHHK-HTR). Ecosystem restoration
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Key components No Regulations Remarks Objectives Forest area eligible Focus activities Institutions 89 Time Authorities concession (IUPHHK-RE). KPHs Conservation forest. Customary forest. Rights forest. Village forest. 5 MoFor Regulation The objective of TBA Regulates the national MoEF 15 years MoEF PES related No. 42 Year 2009 this regulation is watershed management to water on General to coordinate, as a whole including managemen Pattern, Criteria, integrate, guidance on planning, t as part of and Standard synchronize implementation, watershed Watershed and synergize monitoring and managemen Management; and watershed evaluation of related t. Ministry of Forestry management in activities. Regulation No. 37 Indonesia Year 2012 on Watershed Management 6 MoFor Regulation To implement Production forests. Demonstration activities MoEF (i.e. WG Not MoEF No. 20 of 2012 on forest-carbon and/or full on Climate available. (license Protection forests. Forest Carbon activities in implementation, Change). Forest issuing). Implementation accordance with Conservation consisting of: license holders. sustainable forests. nursery and planting forest management forest-carbon principles. enrichment protection of forests in logging concessions biodiversity conservation
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Key components No Regulations Remarks Objectives Forest area eligible Focus activities Institutions 89 Time Authorities sustainable forest management sustainable forest protection management forest conservation management community empowerment carbon baselining, MRV boundary mapping and establishment 7 MoFor Regulation To provide Nature based tourism Activities to provide MoEF. Nature- 20 years MoEF No. 22 of 2012 on guidance for service providers nature-based tourism based tourism (license Guidance on nature-based (IUPJLWA-PJWA). services. Activities to providers. issuing). Environmental tourism Nature based tourism provide nature-based Local Service Tourism activities. facility providers tourism facilities. governments Activities in (IUPJLWA-PSWA). (extending Protection Forests licenses). 8 Draft of TBA TBA TBA TBA TBA TBA Under Government development Regulation on . Environmental Economics Instrument
Source: HPI’s compilation based on CIFOR Occational Paper 132: Forest and land-use governance in a decentralized Indonesia - A legal and policy review, 2015, http://www.cifor.org/publications/pdf_files/OccPapers/OP-132.pdf
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Table 21: List of PES and REDD+ related regulations in Aceh Regulation Theme Key points Governor of Aceh Organization Structure and Operation PES function is the Regulation No. 20 of 2013 of Technical Implementing Unit (UPT) responsibility of KPH, at the Provincial Government Forestry under the Forest Office (Dinas Kehutanan Propinsi) Protection and Natural Conservation Unit Provincial Regulation Environmental Management Article 16 and 19 (Qanun) No. 2 of 2011 Provincial Regulation Forestry Management in Nangroe Article 15, 16, 17 and (Qanun) No. 14 of 2002 Aceh Darussalam Province 38 Provincial Regulation IUPJL Permit Issuance Article 6, 7, 10 (Qanun) No. 15 of 2002 Governor of Aceh Provincial Strategic Action Plan Historical Regulation No. 3 of 2014 (SRAP) Document deforestation data is provided, for Aceh Province Ministry of Forestry Leuser National Park Decree No. 276/Kpts- VI/97 (23 May 1997). Ministry of Forestry Rawa Singkil Wildlife Reserve Decree No. 166/Kpts- II/1998
Source: HPI own elaboration
Table 22: List of PES and REDD+ related regulations in Central Kalimantan
Regulation Theme Key points
Governor Regulation Management of High Conservation No.41/2014 Area (HCA) for plantations in Central Kalimantan
Governor Regulation Provincial Strategy and Local Action No.10/2012 Plan for Reducing GHG emissions (RAD-GRK)
Provincial Regulation Sustainable Management of No.5/2011 Plantation Businesses
Governor Regulation No. Guideline on Plantation Management 17/2011 Permits
Provincial Regulation No.5 Forest fire or land control of 2003
City of Palangka Raya Forest and land fire prevention and Article 18, clause 3 Regulation No. 7 of 2003 mitigation in Palangka Raya
Source: HPI own elaboration
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Table 23: List of PES and REDD+ related regulations in Papua
Regulation Theme Key points
Provincial Regulation No. 21 Sustainable forestry management in Article 55 and 56 of 2008 Papua Province
Law No. 21 of 2001 Special autonomy of Papua Province –
Provincial Regulation No. 23 Spatial planning of Papua Province – of 2013
Mimika Regency Regulation Authority of Mimika Regency – No. 2 of 2008
Mimika Regency Regulation Protection and Management of – No. 12 of 2014 Mangrove Ecosystem
Mimika Regency Regulation Spatial planning of Mimika Regency – No. 15 of 2011
Draft Jayapura Regency Protection of Sentani Lake – Regulation
Draft Jayapura Regency Cyclops forest and mountain – regulation protection
Government Regulation No. Tariff on state revenue from non Entrance fee for Lorenz 59 of 1998 taxation National Park90
Source: HPI elaboration
90 http://ahabdul.blogspot.co.id/2013/05/tarif-masuk-taman-nasional-lorentz.html
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This workplans will need to be refined through further discussions with LESTARI
2016 2017 2018 2019 2020 Activities M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J Recommendation - Incorporating PES in to Local Funds Phase 1 - Design of the Approach Phase 2 - District Level activities Phase 3 - Village/community Level activities Phase 4 - Replication
2016 2017 2018 2019 2020 Activities M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J Recommendation - Access NORAD funds & GCF Phase 1 - Design of the Approach Phase 2 - Consultations with National Level Stakeholders (MoF, Phase 3 - Selection of Partners and Eligible Activities Phase 4 - Proposal development and stakeholder consultation Phase 5 - Proposal submission and presentation Phase 6 - Support Funding Rollout, Implementation, Replication
2016 2017 2018 2019 2020 Activities M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J Recommendation - Supporting the Climate Change BLU Phase 1 - Workshops Phase 2 - Capacity building Phase 3 - Support for Project Implimentation
2016 2017 2018 2019 2020 Activities M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J Recommendation - PES design and study Current institutional and ecosystem landscape Basic PES design sucture Nagotiation stage Implementation Monitoring and evaluation framework Implemetation/Pilot
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LESTARI
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