Indonesia's Transition to a Green Economy: a Stocktaking Report, 2019
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INDONESIA’S TRANSITION TO A GREEN ECONOMY – A STOCKTAKING REPORT 2 Copyright © United Nations Development Programme, 2019 The report is published as part of the Partnership for Action on Green Economy (PAGE) – an initiative by the United Nations Environment Programme (UNEP), the International Labour Organization (ILO), the United Nations Development Programme (UNDP), the United Nations Industrial Development Organization (UNIDO) and the United Nations Institute for Training and Research (UNITAR). This publication may be reproduced in whole or in part and in any form for educational or non-profit purposes without special permission from the copyright holder, provided acknowledgement of the source is made. UNDP would appreciate receiving a copy of any publication that uses this publication as a source. No use of this publication may be made for resale or for any other commercial purpose whatsoever without prior permission in writing from the United Nations Development Programme. Citation PAGE (2019), Indonesia’s Transition to a Green Economy: A Stocktaking Report Disclaimer The designations employed and the presentation of the material in this publication do not imply the expression of any opinion whatsoever on the part of the United Nations Development Programme concerning the legal status of any country, territory, city or area or of its authorities, or concerning delimitation of its frontiers or boundaries. Moreover, the views expressed do not necessarily represent the decision or the stated policy of the United Nations Development Programme, nor does citing of trade names or commercial processes constitute endorsement. STOCKTAKING REPORT 2019 3 ACKNOWLEDGEMENT This report was commissioned by the Partnership for Action on Green Economy (PAGE) Indonesia under UNDP Indonesia Country Office as PAGE Indonesia appointed lead agency. With the extent of the scope, this report would not have been made possible without the support of many organizations and individuals which have contributed throughout the development process. This is to extend the well- deserved gratitude to all who have contributed. Firstly, we would like to convey our gratitude to PAGE Focal Points in UNDP Indonesia Country Office, as well as the representatives of other UN Agencies which collaborate with UNDP in the PAGE Indonesia initiative namely UN Environment, ILO, UNITAR, and UNIDO for the supervision, review, comments and insights for the report development. Highest gratitude is also expressed to BAPPENAS, especially to the Directorate of Environmental Affairs as well as the Office of President’s Special Envoy for Climate Change Control, who have provided us supervision, inputs, and direction of the Government of Indonesia policy directions with regards to green economy and climate actions. The report was also supported by various development partners who have been supporting the Government’s efforts in various climate action interventions and especially in the Low Carbon Development Initiative (LCDI). The inputs gathered in the report have been provided by: New Climate Economy (NCE), WRI Indonesia, GGGI, UKCCU, GIZ PAGE, GIZ PAKLIM, UNDP PMR, World Bank Waves, System Dynamics Boot Camp, ICCTF, and IFC. In addition, meaningful inputs were also provided by the Ministry of Environment and Forestry, Financial Services Authority of Indonesia (OJK), and Indonesian Renewable Energy Society (METI). We would like to thank all participating and supporting partners and organizations who have responded our meeting requests and provided their time and meaningful insights, information, and lessons learned from their experiences that were required to develop this report. PAGE Indonesia extends its gratitude to the PAGE Secretariat for its overall support and guidance provided to conduct the stocktaking study. The agencies of PAGE Indonesia are also thankful for the financial support provided by the governments of Finland, Germany, Norway, South Korea, Sweden, Switzerland, United Arab Emirates, as well as the European Union. Consultant team: Sri Handayani Lailly Prihatiningtyas Semerdanta Pusaka STOCKTAKING REPORT 2019 4 EXECUTIVE SUMMARY Low Carbon Development Initiative Having achieved notable economic and social progress throughout the past decade, Indonesia still has to face many structural challenges such as deterioration of natural resources, ecological degradation, and growing income inequalities. To tackle these issues and to attain sustainable development growth, the Government of Indonesia (GoI) has been working progressively on Low Carbon Development Initiative (LCDI) policy ever since it was initiated during the UNFCCC COP 23 in 2017. LCDI aims to explicitly incorporate the environmental considerations (carbon emissions reduction targets and carrying capacity) into the national development-planning. Under the mandate of the Law 32/2009 on Environmental Protection and Management and its operational guidelines of Government Regulation (PP) 46/2016 on Strategic Environmental Assessment (SEA), the Government of Indonesia through BAPPENAS, has conducted the SEA by assessing policies, plans, and/or programs with respect to the environmental conditions as part of development of the National Medium-Term Development Plan (RPJMN) 2020-2024. The process was carried out by applying system dynamics modelling, a planning tool that allows simultaneous assessment of social, environmental and economic impacts in various development scenarios into its strategic planning. During LCDI Phase 1, the system dynamics modelling exercise produced Low Carbon Development scenarios that will be integrated in the RPJMN 2020-2024, which will guide Indonesia’s development to transition towards a low carbon pathway. The policy scenarios developed by the model produced favorable results such as: · Achievement of Indonesia’s NDC targets by yielding emission reduction up to 43 % by 2030 and emission intensity reduction up to 51% by 2045. · Facilitation of 6% of GDP growth per year between 2019-2045. · Increased employment by provision of 15,3 million additional jobs by 2045. · Promotion of renewable energy by targeting a 30 % share of biofuels in the transportation sector to substitute fossil fuel demand. This in turn will provide fiscal savings up to nearly 120 billion US$ (0.54 % of GDP) by 2045 from the reduced oil subsidies. · Transition towards renewable energy by scaling up its contribution up to 30% by 2045 and decrease of energy intensity up to 4,5% by 2045. · Full enforcement of forest, palm oil, mining, and peat land moratorium to preserve 41.1 million ha of primary forest, which includes 15 million ha of peat land; while also abiding to committed water, fisheries, and biodiversity targets. STOCKTAKING REPORT 2019 5 The above policy scenarios indicate how implementation of LCDI could deliver immediate gains for the economy, for people and for the local and global environment. However, several challenges exist that might hinder a fast and effective implementation of LCDI within the national and sub-national level. Notable challenges include the absence of an appropriate coordinating mechanism for regulatory and operational procedures; the need of high engagement and communication with stakeholders from public and non-public sectors; the sectoral and silo-based institutional setting doubled with sectoral regulation which may hinder the mobilization, coordination, monitoring, and evaluation efforts during the implementation phase; the absence of a reliable and integrated database system; lack of personnel competencies, especially those related to the system dynamic modelling; and the finance and investment gap which requires the formulation of resource mobilization mechanisms and strategies to mobilize financial resources from the state budget, private sector, as well as international funds. With the aforementioned condition, the LCDI Phase 2 will be focused on translating the LCDI policy into programmatic activities with twofold objectives; the first is to address challenges in LCDI Phase 1 in order to support LCDI model development for next RPJMN, and second is to support the implementation of LCDI development scenarios by involving multi-stakeholders, improving the integrated Monitoring, Evaluation and Reporting system, strengthening communication and replicating the LCD model at the sub-national level. Moreover, in the implementation process, since LCDI model serves as an overarching framework, it requires active participation and engagement of state actors within national and sub-national level, as well as non-state actors including the private sector and development partners. Figure 1. LCDI Phase 2 Framework the Government of Indonesia (GoI)’s priority sectors for the LCDI Phase 2 are energy, industry, agriculture, forestry & peat (land-use), blue carbon (mangrove, seagrass), and waste. STOCKTAKING REPORT 2019 6 Based on the assessment with respect to the economic, social, and environmental profiles of Indonesia; as well as the mapping of currently enacted policies and governance structure; to achieve its objective, it is considered best to align the PAGE Indonesia workplan with implementation of the LCDI Phase 2 framework. The framework provides avenue in bringing out collaborative effort to promote and support inclusive green economy interventions and program within National and Sub-National level as illustrated in Figure 1. In addition, the framework is in accordance with the GoI development policy agenda and commitment as it is also interlinked with the RPJMN. This Stocktaking