SUSTAINABLE DEVELOPMENT FINANCING FOR FULFILLING CLIMATE CHANGE MITIGATION AND ADAPTATION COMMITMENT

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Helen Robertson
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Presented by: Dr Parjiono Director of Centre for Climate Change Financing and

1 BADAN KEBIJAKAN FISKAL KEMENTERIAN KEUANGAN RI SUSTAINABLE DEVELOPMENT FINANCING FOR FULFILLING CLIMATE CHANGE MITIGATION AND ADAPTATION COMMITMENT Presented by: Dr Parjiono Director of Centre for Climate Change Financing and Multilateral Policy Fiscal Policy Agency Ministry of Finance Jakarta, 20 December 2017

2 OUTLINE DEVELOPMENT CHALLENGES AND OPPORTUNITIES DEVELOPMENT AND CLIMATE ROADMAP CLIMATE COMMITMENTS AND FOLLOW UPS BUDGET TAGGING AND CLIMATE FINANCE FISCAL POLICY STRATEGY AND DIRECTION ALIGNING PRO GROWTH POLICIES 2

3 MITIGATION CHALLENGES AND OPPORTUNITIES Sector Challenges Opportunities Transport ation Forestry Industry Energy Waste Private vehicles waste large amounts of fuel and cause congestion in cities, leading to economic losses to businesses. Indonesia s tropical rainforests are the third largest in the world, but revenues from forestry licensing are only $300 million annually; some $4 billion is lost every year through illegal logging. It is estimated that around 57 per cent of deforestation in Indonesia in the first decade of the millennium was attributable to palm oil. Coal accounts for over half of Indonesia s electricity s energy source. Indonesia produces 64 million tons of waste annually and almost 70% ends up in landfills. A lot of the waste doesn t even get that far and ends up in the streets, nature and the ocean. Green urban transport solutions such as mass rapid transport can transform expanding cities into sustainable highgrowth centers. Better governance is needed to ensure that forestry resources are well managed. By implementing ISPO and RSPO and train smallholder farmers Indonesia has 40% of the world s potential geothermal resources, which, if tapped, could help double the share of renewable energy for electricity generation to 23% in 10 years. Waste-to-Energy can contribute immensely in tackling the complex waste issues, as well as play an important part in supporting the government s target of MW. 3

4 ADAPTATION CHALLENGES AND OPPORTUNITIES Sector Challenges Opportunities Water Agriculture Maritime and Fisheries Health Indonesia s growth has contributed to environmental degradation, ranging from flooding in urban areas, forest fires, to overfishing and coastal ecosystem deterioration. Indonesia is still a net importer of cereals, pulses and sugar and is facing the challenge of hunger and malnutrition with nearly 38% of its children suffering from under weight and malnutrition. Indonesia has over 2.6 million fishermen, but unreported and illegal fishing leads to $20 billion worth of lost revenue. Over 24 million families in Indonesia use wood for cooking, which contributes to 165,000 premature deaths each year from indoor air pollution. The country must shift to a green growth model to ensure its development remains sustainable. Indonesia should use climate smart farming system to produce sufficient food for the country to meet the food and nutritional security while not degrading the environment and contributing to the climate change. Well-managed maritime resources, however, can ensure food security, promote sustainable tourism, and build resilience. Investments in clean technology such as cook stoves that use cleaner energy will help save lives and prevent families from losing hard-earned savings to health-care spending. 4

DEVELOPMENT AND CLIMATE ROADMAP FOR INDONESIA Mitigation Strategy 1. Transportation 2. Forestry 3. Industry 4. Energy 5. Waste 1. Food Security 2. Natural and Built Environmental Degradation 3.

5 DEVELOPMENT AND CLIMATE ROADMAP FOR INDONESIA Mitigation Strategy 1. Transportation 2. Forestry 3. Industry 4. Energy 5. Waste 1. Food Security 2. Natural and Built Environmental Degradation 3. Cross-Sectoral with Forestry Adaptation Strategy 1. Water 2. Agriculture 3. Maritime and Fisheries 4. Health 6 Ministries ICCSR, 2010: 16 Ministries/ Agencies RAN GRK, 2011 RAN API, 2014 Ministry Environment & Forestry, Ministry Transportation, Ministry of Energy & Mineral Resources, Ministry of Agriculture, Ministry Public Work & Housing, Ministry of Industry In 2009, at the G20 Pittsburgh summit, Indonesia pledged to achieve a 26 percent reduction in emissions in 5 sectors against the business-as-usual scenario in 2020, or 41 percent with international support. In 2010 Bappenas compiled the ICCSR (Indonesia Climate Change Sectoral Roadmap) which became the basis for the preparation of the National Action Plan for Greenhouse Gas Emission Reduction (RAN GRK) and the National Action Plan for Climate Change Adaptation (RAN API). In 2011, Presidential Regulation 61/2011 on RAN-GRK was issued. Ministry of Environment & Forestry, Ministry of Transportation, Ministry of Energy & Mineral Resources, Ministry of Agriculture, Ministry of Public Work & Housing, Ministry of Marine Affairs & Fisheries, Meteorology, Climatology & Geophysics Agency, Technology Research and Implementation Agency, Indonesia Institute of Sciences, Ministry of Internal Affairs, National Board for Disaster Counter, Statistics Indonesia, Ministry of Agrarian & Spatial Planning, Ministry of Law and Human Rights, Indonesian Geospatial Information Agency, Ministry of Health 5

6 COMMITMENT TO CLIMATE ADAPTATION: NDC Climate Smart Farming Water Resilience Energy Resilience Forest Preservation Maritime Resilience Healthcare Self Reliance Public Service Reliability Infrastructure Reliability Urban System Reliability Follow-ups: Strengthening local capacity Knowledge management Convergent policy between climate change adaptation and disaster risk reduction Application of adaptive technology 6

7 COMMITMENT TO CLIMATE ADAPTATION: RAN-API As per the RAN API (National Action Plans for Climate Adaptation), there are 5 (five) areas of resilience to be considered in the planning and development process. Economic resilience: food and energy Livelihood System Resilience Ecosystem Resilience Special Region Resilience Bearing Capacity SUSTAINABLE DEVELOPMENT & ADAPTIVE TO CHANGES 7

CLIMATE BUDGET TAGGING - MILESTONES Base Year GRK emissions Perpres 61/2011 RAN-GRK MFF Study LESS Study SDF Program RAN-API PMK 143/2015 Climate Budget Tagging Climate Mitigation Budget Tagging on

2015 2016 2017 2018 2019 2020 Climate budget tagging process flow within planning and budgeting cycle Emission Reduction & Resilience Target Ministry & Agency Work Plan (RENJA K/L) Ministry/Agency

& Ministry/Agency Ministry of Finance & Ministry/Agency Ministry/Agency Ministry of Planning, Ministry of Environment and Forestry & Ministry/Agency Supporting the emission reduction policy within

public finances used for mitigation actions in the forestry, peatland, energy and transportation sectors.

8 CLIMATE BUDGET TAGGING - MILESTONES Base Year GRK emissions Perpres 61/2011 RAN-GRK MFF Study LESS Study SDF Program RAN-API PMK 143/2015 Climate Budget Tagging Climate Mitigation Budget Tagging on ADIK System Climate Mitigation and Adaptation Budget Tagging on KRISNA System Sub-national Climate Budget tagging Budget tagging Implementation Status of GRK emissions Climate budget tagging process flow within planning and budgeting cycle Emission Reduction & Resilience Target Ministry & Agency Work Plan (RENJA K/L) Ministry/Agency Work Plan & Budget (RKA K/L) Worlk Plan and Budget (RKA K/L) Implementation Emissions Reduction Indication Climate Budget, Emissions Status, and Resilience Index Ministry/Agency Ministry of Planning & Ministry/Agency Ministry of Finance & Ministry/Agency Ministry/Agency Ministry of Planning, Ministry of Environment and Forestry & Ministry/Agency Supporting the emission reduction policy within RAN-GRK, the Ministry of Finance has done the following: Ministry of Environment and Forestry & Ministry of Finance A study on Mitigation Fiscal Framework / MFF (2012) to analyze the effectiveness of public finances used for mitigation actions in the forestry, peatland, energy and transportation sectors. A study of Low Emission Budget Tagging & Scoring System / LESS (2013) to identify total budget allocations and budget realizations used for mitigation activities, as well as to determine the amount of budget required to reduce a ton of CO2e emissions. As a follow-up to the recommendations of the MFF and LESS studies, the Sustainable Development Finance / SDF (2014) program was introduced to strengthen the government's capacity to manage climate budgets and to develop sustainable fiscal instruments for financing climate change related activities. 8

9 CLIMATE BUDGET TAGGING CURRENT RESULTS State Budget supports 6 ministries (based on MOF ADIK data), 2016 Revised State Budget for 6 ministries amounting IDR72,285T related to climate mitigation 2017 State Budget amounting IDR77,654T supports climate mitigation. Alokasi Anggaran (miliar rupiah) Ministry APBNP APBN APBNP 2016 APBN 2017 Ministry of Environment and Forestry Output Output Ministry of Agriculture Kementan KLHK ESDM Kemenperin Kemenhub KemenPUPR APBNP APBN Ministry of Energy and Mineral Resources Total 2016 Revised State Budget 27,630 5,895 7,741 2,980 42,902 97,031 Ministry of Transportation Ministry of Industry Rev State Budget Component Level 4,266 1,620 1, ,050 30,714 Percentage Kementerian PUPR TOTAL

Landscape of Public Climate Finance in Indonesia, CPI, July, 2014.

10 Landscape of Public Climate Finance in Indonesia, CPI, July, The study concluded that 67% of climate finance in Indonesia in 2011 was originated from the state budget, while the remainders were from international donor. Private sectors have yet to contribute to climate actions in Indonesia. 10

11 MULTILATERAL CLIMATE FINANCE 12,00 Multilateral Climate Finance (as of October 2017) ($ billion) 10,00 8,00 6,00 4,00 2,00 0,00 Source: accessed in November

STRATEGY DIRECTION OBJECTIVE MID-TERM FISCAL POLICY STRATEGY AND DIRECTION Inclusive economic growth and consolidation of fiscal

Territory Dimension FORTIFY FISCAL MANAGEMENT TO SUPPORT SUSTAINABLE AND EQUITABLE ECONOMIC GROWTH IN REALIZING WELFARE: STRENGTHENING

Effectiveness of social protection programs & priorities; 3. Improving the quality of fiscal decentralization Expanding Fiscal Capacity 1.

Efficiency & effectiveness of subsidies and social protections; 4.Strengthening bureaucratic reforms.

12 STRATEGY DIRECTION OBJECTIVE MID-TERM FISCAL POLICY STRATEGY AND DIRECTION Inclusive economic growth and consolidation of fiscal sustainability to achieve prosperity: Poverty Reduction, Unemployment and Inequality Human Dimensions Priority Sector Dimensions Equity & Territory Dimension FORTIFY FISCAL MANAGEMENT TO SUPPORT SUSTAINABLE AND EQUITABLE ECONOMIC GROWTH IN REALIZING WELFARE: STRENGTHENING ALLOCATION, DISTRIBUTION, AND STABILIZATION FUNCTION Improving Quality Spending (big push policy) 1. Infrastructure Improvement; 2. Effectiveness of social protection programs & priorities; 3. Improving the quality of fiscal decentralization Expanding Fiscal Capacity 1.Improvement of tax ratio & asset management; 2.Efficiency of non-priority expenditure; 3.Efficiency & effectiveness of subsidies and social protections; 4.Strengthening bureaucratic reforms. Maintaining Resilience and Risk Control 1.Controlling deficits and debt ratios, as well as gradually reducing them 2.The primary balance becoming positive; 3.Strengthening fiscal resilience (fiscal buffer, flexibility and use of SAL budget surplus to anticipate uncertainty) 12

2018 FISCAL POLICY STRATEGY AND DIRECTION 2018 Government Work Plan (RKP) Theme Accelerate Investment and Infrastructure for Growth and Equity 2018 Fiscal Policy 2018 Strengthen fiscal management to

Natural Resources and Assets Management Spending Strengthening spending quality Increased quality of capital expenditure; Non-priority expenditure efficiency (goods spending and subsidies on target);

13 2018 FISCAL POLICY STRATEGY AND DIRECTION 2018 Government Work Plan (RKP) Theme Accelerate Investment and Infrastructure for Growth and Equity 2018 Fiscal Policy 2018 Strengthen fiscal management to accelerate equitable economic growth Productive Efficient Resilient Controlled Risk Revenue Optimalization 1.Tax Ratio; 2.Natural Resources and Assets Management Spending Strengthening spending quality Increased quality of capital expenditure; Non-priority expenditure efficiency (goods spending and subsidies on target); Synergy between relevant programs (social protection programs); Maintain and Refocusing priority budgets (Infrastructure, Education, Health and Transfer to Local and Rural Funds). Financing Sustainability and Financing Efficiency Deficit and debt ratios are under control and should be reduced in the medium term; The primary balance is positive; Develop creative financing. 13

14 ALIGNING PRO GROWTH POLICIES THINKING PROCESS 14

15 A GREEN ALIGNMENT SAMPLE CASE 15

16 ANOTHER GREEN ALIGNMENT SAMPLE CASE 16

17 BADAN KEBIJAKAN FISKAL KEMENTERIAN KEUANGAN RI Terima Kasih Merci Thank You

INDONESIA S GREEN BOND & GREEN SUKUK INITIATIVE

CLIMATE CHANGE INDONESIA S GREEN BOND & GREEN SUKUK INITIATIVE MINISTRY OF FINANCE REPUBLIC OF INDONESIA 1 CONTENTS OVERVIEW CLIMATE CHANGE [1] Indonesia s Climate Change Vulnerability Map [2] Climate