walhi climate finance book

i

Climate FinanCebetween People’s needs and Safety

Climate FinanCebetween People’s Needs and Safety

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Use of part of or the whole of the book should mention the source:

(WALHI 2011), Climate Finance, between People’s Needs and Safety. WALHI, Jakarta, Indonesia

Authors:Agustinus Prasetyantoko, Dani Setiawan

Editor:Hendro SangkoyoSri Ranti

Translator:Aditya Warman

Lay-Outer:StarNet

Sources of photo: - WALHI (Friends of the Earth Indonesia) - Diana Gultom DebtWatch (Reparation for Climate Debt & World Bank

Out of Climate Finance) - Erwin Quinones FOE Philippines (Cut Down Your Emission)

The research and publication of the book are financially supported by Oxfam GB. The content and the research outputs do not reflect the opinion and position of Oxfam GB.

Published by:Wahana Lingkungan Hidup Indonesia (WALHI)Jl. Tegal Parang Utara No.14 Jakarta 12790Telp. 021-79193363Fax. 021-7941673Email : [email protected] : www.walhi.or.id

First edition, March 2011Wahana Lingkungan Hidup Indonesia (WALHI)The National Library of the Republic of Indonesia; Catalogue in PrintingClimate Finance

First edition: Jakarta, WALHI, 2011xviii+124 p. 14 x 21 cm

ISBN : 978-979-8071-78-2

The publisher is not responsible for the content

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PREFACE

We would like to express many thanks to God for His blessings and grace so that the book “Climate Finance, between People’s Needs and Safety” can be completed.

The book is an academic paper on climate change finance, aiming to provide input that can be used by the government of Indonesia and the civil society in climate change negotiations to encourage adaptation funding that prioritizes people’s safety and that ensures cross-sectoral gender equity.

WALHI sees that the government of Indonesia has so far been focusing only on mitigation programs while what people need is adaptation programs. It is most ironic that most of climate funds Indonesia received are sourced from foreign debts. This may be due to Indonesia’s unpreparedness in negotiations due to lack of information and complete data on which adaptation funding schemes is the most beneficial for Indonesia and what programs are best implemented.


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As such, a comprehensive analysis of the existing climate finance schemes needs to be done. In this early phase, only a macro analysis has been done. The methods used included documentation study, and policy analysis with full participation of the stakeholders – NGOs and the government.

The book elaborates how domestic and global constellations affect the ongoing climate finance in Indonesia. The domestic constellation include forest clearing by forest concession (HPH) companies and the establishment of palm plantations, which have caused a lot of conflicts among the government, investors, the elites and indigenous/local peoples, as well as carbon trade issue, which is considered to benefit large investors only.

The global crisis constellation and the increasing popularity of financial incentive-based emission reduction such as REDD+ or other huge grants or loans in the name of climate change need to be monitored in terms of how such funds are obtained and used: do the uses comply with the principles of climate and ecological justice and of human rights? One more thing to ensure is that climate finance will not add burden to the already suffering people.

Many thanks are expressed to all that have contributed to the publication of the book “Climate Finance: Between People’s Needs and Safety”.

Last but not least, we expect that the book can enrich both personal knowledge and discourses of all that are interested in encouraging climate justice issue.

Eco greetings,

Berry nahdian ForqanExecutive Director of WALHI

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CONTENTS

PReFaCe iiiContents vFigure indexs viiTable indexs viiiChart indexs ixPicture indexs xSummary xiintroduction 1Climate Change Finance Programs :Context and interests 7 2.1 Domestic Constellation 7

2.2 Global Constellation 28

2.3 REDD Plus in Indonesia 39

2.3.1 Emission Reduction Target Scenario 40

2.3.2 Challenges 47

2.3.3. Victims’ Perspective 50

2.3.4. Redistribution Mechanism 50

2.3.5. Integration with the National Strategy 51

Climate Finance Flows in indonesia 55 3.1 Funding Architecture 55

3.2 Trapped in Climate Change Debts 64

3.2.1. The Climate Change Sector/Project Loan 68

3.2.2 The Climate Change Program Loan 73

3.3 Sources of Grants 86

3.4 Debt Swap 86

3.5 Indonesia Climate Change Trust Fund 90


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Climate Finance Governance in indonesia 93Climate Fund management Principles 103 5.1 Company’s Tax and Individual Subsidy 103

5.2 Climate Change Finance Does Not Come From

Loans 104

5.3 Expansion of Adaptation Programs 105

5.4 Expansion of Participation 106

5.5 Institutional Support 106

Closing 109endnotes 113Bibliography 119Glossary 123

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FIGURE INDEXS

Figure 1. Big investors’ ownership in the forestry sector 10

Figure 2. Growth of Palm Plantation Area in Indonesia, 1967 – 2009 19

Figure 3. Palm Production by Ownership, 1967-2009. 20

Figure 4. The Largest Emitters in Indonesia 25

Figure 5. Emission Level by Province 27

Figure 6. Forest Conversion Rate in 1998 27

Figure 7. Role of CPO in the plantation sector 28

Figure 8. Average emission reduction target up to 2010 40

Figure 9. Emission Reduction Target Scenario 41

Figure 10. Law Enforcement in Illegal Logging Cases in 2008 42


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TABLE INDEXS

table 1. Forest Concessionaires during the New Order’s era 14

table 2. Companies and Loaning Banks 15

table 3. Largest Palm Companies (2006) 21

table 4. List of the Richest People and Palm Plantation Owned 22

table 5. List of Private Investment Companies incorporated in IIGCC 33

table 6. Funds supporting REDD+ and the activities 42

table 7. REDD+ Phases in Indonesia 45

tabel 8. Sectoral Mitigation Action Matrix up to 2020 61

table 9. Position of Foreign Loans (2004 – 2010) 64

table 10. Repayment of Principle Loans and Payment of Interests 2005-2010 67

table 11. The Climate Change Sector Loan 68

table 12. Climate Investment Fund 71

table 13. Term of Conditions of Climate Change Program Loans 73

table 14. Climate Change Program Loan 2008-2010 76

table 15. Regulations and Policies Produced based on Climate Change Policy Loan 79

table 16. Financing Plan for PREP-ICCTF 91

table 17. ICCTF’s Budget Summary 91

table 18. ICCTF Implementation Phases 99

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CHART INDEXS

Chart 1. Government-private Twin Mechanism 35

Chart 2. Certificate Emission Reduction and Carbon Market 37

Chart 3. The National REDD+ Strategy 39

Chart 4. National Action Plan REDD+ Strategy 46

Chart 5. CC/ICCTF Financial Architecture 96


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PICTURE INDEXS

Picture 1. Flow of Climate Change Program Loans 77

Picture 2. Foreign Loan/Grant Mechanism 96

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SUmmARy

CLImATE FINANCEBETwEEN PEOPLE’S NEEDS

AND SAFETy

Climate change finance is a new investment modus that holds huge potential benefits. That is why climate change finance attract not only the attention of government bureaucrats and social activists, but also that of investors in financial markets. A three-dimensional crisis – finance, food and energy – that haunts the future of the world is a proof that behind the dynamics of food and energy price movements play capital power and interests to reap benefits.

There is now another lucrative investment plating field, i.e. various agenda related to climate change, notably carbon trading. Climate change is basically not a new thing. Ever since


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the 1992 Earth Summit in Rio de Jeneiro, the emission reduction framework has been institutionalized in the United Nations Framework Convention on Climate Change (UNFCCC). Then, in 1997 a stricter agreement on the global emission reduction target was set forth in the Kyoto Protocol. In addition to the target, the Protocol also contains an agreement on flexible mechanisms, which are of three kinds, i.e. International Emissions Trading (IET), Clean Development Mechanism (CDM), and Joint Implementation (JI). IET allows Annex I countries as green house gas (GHG) emitters to “trade” in their emissions up to a specified quota called Assigned Amount Unit (AAU or allowance), calculated on a basis of difference in reduction emission marginal cost that differs by country. With IET, it is expected that Annex I countries will obey the obligation to reduce emission with less cost. CDM and JI are both project-based mechanisms, referring to the “production of emission reduction” concept, while IET refers to “limitation of emission”.

Market-based approach becomes an important pillar that is persistently encouraged by Annex I countries in its implementation phase. COP 13 in Bali in 2007 with its Bali Action Plan has shifted the focus of the obligation to mitigate climate change to how to maintain the carbon sequestration capacity in non-Annex I countries, notably forested countries, through funding mechanism and emission quota trade. In 2008, UNFCCC with support from FAO, the UNDP and the UNEP launched the UN-REDD program to encourage non-Annex I countries to prepare themselves for the implementation of what is called REDD+. REDD+ strategies go beyond the scope of deforestation and forest degradation as they also cover conservation, sustainable forest management and increase of forest carbon stock for emission reduction.

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REDD as a funding scheme focuses more on the forestry sector. Indonesia is the country with the world’s third largest forest area after Brazil and the Republic of Congo. The complexity faced by Indonesia’s forestry sector is also very high. First, 85% of the Indonesia’s baseline emission (2005) came from land uses and changes in use of forests and peatland.1 Second, forests have been the target of exploitation for a long time. In the first phase, when forests were still dense, companies exploited forests through forest concessions [Hak Pengelolaan Hutan (HPH)] granted by the New Order’s regime. Each conglomerate at that time would have subsidiaries engaged in the forestry sector. In this phase, foreign players came into credit schemes, financing forest conversion projects.

The second phase started with the great interest in palm extensification. In 2010, Indonesia beat Malaysia as the world’s largest exporter of crude palm oil (CPO). Large private companies extensively expanded palm plantations. In the era, almost all the Indonesian richest men listed in Forbes or Globe Asia would have subsidiaries/companies in the field of palm. Besides, CPO was one of the primary exports after coal. Thanks to both the commodities, Indonesia was successful in getting through the 2007/2008 crisis. Many foreign studies such as those done by Morgan Stanley, CLSA, Standchart, etc. tended to place Indonesia as the main exporter of raw materials to China and India. Thus, Indonesia was playing a determining role in global value chain of CPO.

Riau Province was one of the first locations for palm cultivation as an industrial plant/plantation. It was also the province with the highest rate of forest conversion (and hence the largest emitter) in Indonesia.


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The third phase will probably start when climate change finance through market mechanism is fully operational. In Europe, for example, the prospect of economic expansion of climate change management has fostered the formation of the Institutional Investors Group on Climate Change (IIGCC), an association of 70 companies with the total asset exceeding €6 trillion. The association is ready to fund various carbon trade proposals. Various independent private consultants, auditors, assessors and others have prepared various schemes, tools and instruments to be funded.

If the scenario works, old stories will repeat that investors will always win the game and local communities, especially those vulnerable to exploitation (women, children, the physically disabled) will lose. Therefore, a decisive position must be taken to respond to the development of climate change finance in Indonesia, notably REDD+.

The government has also pronounced the national commitment to reducing 26% of the business-as-usual emission level by 2020 and 41% with the help of international aid. In line with this, the preparation of market schemes to respond to climate change in underway, including formulation of emission reduction roadmaps and strategies for the national development policies. Eventually, the many scenarios require the government’s capacity to mobilize enormous domestic and foreign funding sources to finance activities related to the commitment.

As enormous funds are needed, the government has quickly opened the door for new funds, both grants and development loans. The new funds can be sourced from bilateral creditors (Japan, France, etc.) or multilateral creditors (the World Bank, ADB, the UNDP), subject to the UNFCCC and Official Development

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Assistance’s (ODA) regulations and procedures. The grants and foreign debts are also used as the media to exchange information and lessons to strengthen and improve the national planning system, budget, procurement, monitoring and evaluation as well as institutional and human resources’ capacity.

Thus, one thing is certain: the need for climate change funds may increase the incoming flow of enormous new foreign loans to Indonesia. At the same time, a number of bilateral and multilateral creditors provide climate change mitigation and adaptation finance schemes, which are mostly through debt schemes. During 2008-2010, the government obtained new loans amounting to US$2.3 billion from France, Japan, the World Bank and the Climate Investment Fund scheme for climate change programs and projects. Asian Development Bank (ADB) also plans to provide some loans for Indonesia’s climate change programs as much as US$600 million for the period of 2011-2013.

Climate change issue has become a new “window” to market various debt schemes for Indonesia, in the form of programs (for policy reform) and projects (for the development of renewable energy infrastructure and public transport). Behind this is inserted a new agenda through the policy matrix required by the debt schemes to speed up the implementation of unfinished agendas, i.e. full liberalization in the energy sector (fuel and electricity). Using debts as a low-cost funding scheme does not justify getting new debts, let alone to make up the deficit in the state’s budget. In any case, all the debts are the state’s burden that must be borne by the people in the future. All the stories also remind us of the times when poverty issue was advantageously used to obtain foreign loans and grants. Poverty reduction programs and projects financed by debts have placed the poor


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as the first victim of development programs/project and fueled corruption.

The World Bank and Asian Development Bank are two creditors having long been distributing debts to Indonesia. Both are known as the institutional actors playing behind the economic liberalization in Indonesia through the loans masquerading as poverty reduction aids. Their support for extractive industries, for example, plays a strategic role in ensuring the importation of raw materials from Indonesia. As we all know, industrialized countries are hungry for raw materials, notably extractive ones, to support the continuity of their processing industries. Therefore, turning to these institutions for climate finance does not conform to the principle of climate justice.

Another clear, undeniable fact is the increasing debt-based funding with low absorption. The performance level of debt-funded projects has been in a 60-70% range in the last 10 years. The low performance leads to increasing repayment of commitment fees. The situation at least provides us with a picture of how the ambition to continously rely on debts is not accompanied by readiness at planning up to implementation level. Even, many debt-sourced projects have not been working and have missed the target.

This is what is currently happening with the management of climate change funds in Indonesia. The existing mechanism [through the state budget of revenues and expenditures (APBN)] or new initiatives to create trust funds have yet to reflect substantial control of people over the management. No standard climate change fund management mechanisms have been in place. There are still many appertures that can be used to distribute funds to finance climate change programs in Indonesia.

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dana-dana untuk membiayai program perubahan iklim di Indonesia.

Nampaknya pembiayaan perubahan iklim di Indonesia memang belum menempatkan prinsip keadilan iklim sebagai pusat dari seluruh tindakan yang akan dilakukan. Penanganan dampak perubahan iklim di Indonesia tidak dimaksudkan untuk melakukan transformasi sistem ekonomi, politik, sosial, dan budaya yang tidak adil dan eksploitatif. Ancaman dan dampak-dampak perubahan iklim telah nyata dirasakan, tetapi solusi yang ditawarkan justeru akan semakin mengukuhkan cengkraman gurita modal yang membawa kita pada krisis ekologi dan kemanusiaan.

It seems that climate change finance in Indonesia has yet to incorporate climate justice principle as the center of all the activities to be undertaken. Climate change management in Indonesia is not meant to transform the unjust and exploitative economic, political, social and cultural system. The threats and impacts arising from climate change have been felt but the solutions offered to address climate change will in fact be strengthening the grip of capital power, bringing us to ecological and humanity crisis.


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1

Chapter 1

INTRODUCTION

Attention to environmental issues, especially climate change issue, is not new at all. The world has long been paying attention to this crucial issue. The global financial crisis that hit the USA and developed countries in 2007-2008, however, turned climate change issue into a paradox. On the one hand, in order to get out of the crisis, the USA paid a lot of attention to economic rehabilitation by focusing on long-term sustainability. Therefore, the term “green economy” emerged as rehabilitation plans were developed.


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PENDANAAN IKLIMantara kebutuhan dan keselamatan Rakyat

perubahan iklim menjadi beban tersendiri, yang ingin dihindari oleh negara maju. Isu pembiayaan perubahan iklim menjadi begitu dilematis, di satu sisi dibutuhkan untuk mengarahkan perekonomian ke depan menuju konsep kesinambungan, termasuk kebal terhadap krisis. Di sisi lain, krisis juga menimbulkan keengganan untuk mengikat terlalu jauh mengenai komitmen pembiayaan perubahan iklim tersebut. Salah satu perkembangan yang patut dicermati, isu krisis ekologis juga masuk dalam agenda penting pembicaraan para pemimpin negara-negara G-20. Artinya, secara global, ada semacam kesadaran untuk menempatkan persoalan krisis ekologis termasuk perubahan iklim sebagai salah satu prioritas utama yang perlu mendapatkan perhatian2.

Namun, komitmen mengikat untuk menurunkan emisi karbon tidak mudah dilakukan. Membuat komitmen untuk bersama-sama menurunkan emisi disamping meningkatkan proporsi pembiayaan dalam rangka perubahan iklim justru menemui jalan yang semakin berliku. Dalam Konperensi Para Pihak ke 16 dari Konvensi PBB tentang perubahan iklim di Cancun, Mexico, para pemimpin gagal melanjutkan Protokol Kyoto untuk menyusun kesepakatan yang mengikat. Pernyataan Menteri Lingkungan Hidup India, Jairam Ramesh yang menyatakan India bersedia menorehkan komitmennya secara mengikat justru dinegasi oleh Perdana Menterinya sendiri3.

On the other hand, the financial difficulties made commitment to climate finance a specific burden, a burden that they were trying to avoid. Climate change finance issue became a dilemma: on the one hand, it was needed to direct the economy towards sustainability, including making it immune to crises; on the other hand, the crisis made them reluctant to be bound too much by the commitment. One of the developments that needed to be closely observed was that the ecological crisis issue was the important agenda of the G-20 meeting. This means that, globally, there was an awareness to make ecological crises, including climate change, one of the main priorities.2

However, legally binding commitments to reducing carbon emission are not easy to implement. Making commitments to reducing emission together as well as increasing the climate change finance portion have been getting more complex. In the 16th COP in Cancun, Mexico, the world’s leaders failed to formulate a legally binding agreement. The statement of Indian Minister of Environment, Jairam Ramesh, that India would be willing to make a binding commitment was negated by his Prime Minister.3

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Meskipun demikian, pertemuan Cancun berhasil mengarahkan pembicaraan untuk meneruskan komitmen yang tertuang dalam Protokol Kyoto yang akan habis masa berlakunya berlakunya pada tahun 2012 (Periode Komitmen I). Pertemuan Cancun pada dasarnya merupakan ajang kompromi negara maju dan negara sedang berkembang untuk meneruskan komitmen pengurangan emisi dunia, melalui komitmen kedua setelah Kyoto. Pertemuan Cancun juga memiliki arti penting karena

However, the Cancun meeting was successful in directing the negotiation to continue the commitment set forth in the Kyoto Protocol, which will expire in 2012 (the first commitment period). The Meeting was basically a negotiation forum of developed and developing countries to continue the commitment to


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reducing the world’s emission through the second commitment after Kyoto. It was also important as it was concluded with an agreement to an action plan, including the provision of climate funds.

With regard to the contradiction in the development of green fund at global level, this paper tries to put forward some main orientations. First, developing countries must be given greater flexibility to implement adaptation, in relation to the requirements of climate change finance. Second, the implementation and management of climate funds must be placed in the perspective and interests of non-Annex I countries, and not those of investors and capital owners in Annex I countries.

Upon putting forward these two main propositions, this paper has several objectives. First, it aims to macro map the climate finance issue, especially from the post 2007/2008 global crisis context. The question then is why the world paid so much attention to climate finance just when it was hit by a crisis. Second, this paper also wants to see how the domestic constellation addresses the financing issue. In this part, we will see how deviation might potentially happen, in relation to the bad governance and bureaucracy. In the context of economic and political system, which in practice is oriented to market system strategies to manage economic expansion, we will discuss the impacts and the risks arising from the climate finance initiative. Third, this paper will of course provide recommendations of how climate change crises can serve as the starting point to change public services for the better to improve people’s well-being, as mandated by the Constitution, and not to advantageously use the fund to do business as usual.

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pengentasan kemiskinan, banyak yang akhirnya jatuh menjadi proyek yang menguntungkan pihak-pihak terkait proyek, tetapi bukan orang miskin itu sendiri. Sekarang ini tampak adanya kecenderungan program pembiayaan perubahan iklim akan menjadi proyek investasi yang lebih menguntungkan para investor. Dengan begitu, pembiayaan penanganan perubahan iklum itu sendiri menjadi instrumen investasi yang secara substansial justru tidak memecahkan masalah intinya, terutama, terkait dengan kepentingan masyarakat dan komunitas rentan lainnya.

We have had experience in the past that most poverty reduction programs only benefited project-related parties, not the target people (the poor). There is a trend that climate finance programs will become more profitable investment projects for investors. As such, they will become investment instruments that do not substantially address the core problem itself, in particular the interests of people and other vulnerable groups.


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Chapter 2

CLImATE CHANGE FINANCE PROGRAmS :

CONTEXT AND INTERESTS

2.1 Domestic Constellation

Indonesia is the country with the world’s third largest tropical forest areas after Brazil and the Republic of Congo. Forests have been both local and national sources of revenues. The Indonesia’s economic expansion in the last generation has been relying on, among others, the values of systematic and planned forest extraction. As a result of the politics, Indonesia’s deforestation rate is among the highest in the world.

The government has been paying a lot of attention to climate change recently. Even in the strategy to achieve sustainable


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development, it has proclaimed another set of principles, i.e. the principles of pro-growth, pro-job, pro-poor and pro-environment. The pro-environment principle emerged after President SBY signed an LoI with the Norwegian government, which is committed to a US$1billion climate grant. The grant is given in the context of a cooperation focusing on the implementation of REDD programs. The scheme is the follow-up action of the 2007 Climate Change Summit in Bali during COP 13.

On paper, the Indonesian government’s commitment is of course beneficial given the fact that Indonesia is among the countries that will be most affected by climate change (floods, draughts, harvest failure, etc.). A study by the Asian Development Bank shows that in end of the century, the loss due to climate change in Indonesia is projected to reach 2.5-7 percent of the GDP4. Despite this, another worrying fact is that most of the Indonesians still live in poverty, lacking the capacity and flexibility to face the impacts of climate change on productivity and to face the damages caused by the associated extreme disasters and weathers5.

As such, not only might aggregate loss to the economy potentially occur, the people, notably those with the lowest economic bargaining power, will also be most affected due to their inability to adapt to the impacts of climate change. It is ironic that while forest exploitation does not provide adequate contribution to people’s interests, the people themselves are not capable of addressing the impacts of forest destruction.

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The expansion of forest extractive industries in the past only involved and benefited a number of businesses. In the New Order era, forest concessions were granted to the ruling power’s cronies. It was they who destructed forests and robbed forest richness through paper and pulp factories. In addition, concessions were granted to clear forests for interests considered to provide greater contribution to the economy, such as agriculture and industry.

During the 1990s, as many as 75 plantation companies were granted permits to convert forests into ready-to-cultivate areas. In a short time, as many as 750 hundred thousand hectares of forestland, ten times as large as Jakarta city, were cleared. One of the world’s lungs, the island of Kalimantan, has lost much of its forest cover under the New Order’s forest concession scheme (HPH), not to mention the rampant conflicts with the local people.

Local (domestic) investors were not the only ones involved in various forestry projects in Kalimantan. In general, foreign investors were involved through joint venture schemes or provision of funds. It was a common practice that local companies got loans from global financiers. One example is PT. Agro Indomas, which has quite vast concession in Kalimantan. It has obtained

Indonesia is among the countries that will be most affected by the impacts of

climate change (floods, draughts, harvest failure, etc.)


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pendanaan. Sangat umum bahwa perusahaan lokal mendapatkan pinjaman sindikasi dari berbagai lembaga keuangan tingkat global. Misalnya saja, PT. Agro Indomas memiliki cakupan wilayah operasi cukup besar di Kalimantan, banyak mendapatkan dukungan dana dari berbagai lembaga keuangan global, diantaranya CDC (Commonwealth Development Cooperation) dari Inggris dan Rabobank dari Belanda. Perkebunan PT. Agro Indomas yang juga disertai dengan unit pengolahan minyak sawit (CPO) mendapat ijin oleh pemerintah untuk menguasai hutan seluas 12.500 ha di daerah Danau Sembuluh yang meliputi 3 desa, yaitu Terawan, Bangkal dan Sembuluh termasuk Dusun Lanpasa. PT. Agro Indomas sendiri merupakan entitas usaha/investasi asing (foreign direct investment) dan sudah beroperasi di Kalimantan sejak zaman Orde Baru.

Diagram di bawah ini menunjukkan fenomena masifnya penguasaan pemodal swasta dalam kepengelolaan hutan di Indonesia pada tahun 1997, pada akhir rezim Orde Baru. Pemodal besar mendominasi sektor perhutanan dibandingkan dengan usaha kecil atau kolektif.. Dibandingkan dengan tahun 1996, pertumbuhannya juga begitu pesat.

Grafik 1. Kepemilikan Pemodal Besar di Sektor Kehutanan

Sumber : Casson 1999

enormous funds from various global financiers, among others CDC (Commonwealth Development Cooperation) from England and Rabobank from the Netherlands. The company, which also has CPO facilities, obtained a concession over 12,500 hectares in the vicinity of Danau Sembuluh, which encompasses three villages, i.e. Terawan, Bangkal and Sembuluh, including Lanpasa hamlet. PT. Agro Indomas itself is a business entity/foreign direct investment and has been operational in Kalimantan since the New Order era.

The chart below shows the massive control of private investors in Indonesia’s forest management in 1997, in the end of the New Order regime. Big investors dominated the forestry sector, outnumbering small-scale/collective enterprises. Compared with the year 1996, the growth was incredibly fast.

Figure 1. Big investors’ ownership in the forestry sector

Source: Casson, 1999

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Di samping bekal izin usaha, para pengusaha juga mengandalkan penyerapan modal dari sumber-sumber pembiayaan luar-negeri. Mereka berhasil mendapatkan keduanya sekaligus: dukungan politik dan dukungan keuangan. Kenyataan inilah yang membuat perusahaan-perusahaan telah menjadi mesin perusak yang berbahaya bagi keseimbangan sosial dan lingkungan. Di masa itu, korporasi bukan saja telah melakukan pengrusakan lingkungan, tetapi juga banyak melakukan pelanggaran hak asasi manusia. Dalam kasus Indorayon di Sumatra Utara nampak jelas bahwa usaha mereka untuk tetap bertahan telah diiringi dengan berbagai praktek pelanggaran terhadap kemanusiaan di samping menganggu keseimbangan sosial dan lingkungan. Dilaporkan bahwa 7 orang meninggal ditembak polisi, 90 orang diduga diculik dan disiksa, dua orang dinyatakan hilang dan tidak berhasil ditemukan, 5 orang mengalami kebutaan atau cacat tubuh akibat penganiayaan, 7 orang dirusak rumah dan tempat usahanya.6

Dalam hal keseimbangan lingkungan sosial, perusahaan-perusahaan yang penebang hutan telah mengakibatkan 40 –50 juta penduduk di sekitar hutan yang hidupnya sangat tergantung dengan hutan harus merubah nasib mereka. Bermigrasi ke kota-kota besar tentu bukan solusi yang lebih baik, dan hanya akan menambah persoalan di

Pada zaman Orde Baru, 1990-an, konsesi

eksploitasi hutan diberikan kepada kroni-

kroni yang dekat dengan kekuasaan. Mereka inilah para perusak

hutan yang telah merampas kekayaan

hutan melalui pendirian pabrik-pabrik kertas

dan bubur kayu (pulp and paper). Sebanyak 75 perusahaan dalam

waktu singkat, berhasil membuka lahan tidak

kurang dari 750 ribu hektar atau lebih dari sepuluh kali lipat luas

kota Jakarta. Salah satu pulau yang tadinya

merupakan sumber paru-paru dunia adalah Pulau Kalimantan, kini

salah satu pulau yang paling kritis keadaan

tutupan hutannya.

In addition to permits, investors rely on working capital from foreign sources. Thus, they get both political and financial support. This has turned the companies into demolition machines posing danger to social and environmental balance. At that time, corporations not only destroyed the environment but also committed human rights violation. In the case of Indorayon in North Sumatra, it is clear that its survival operations are supported by human rights violation and environmental destruction. It is reported that 7 people have been shot to death by the police, 90 others have been allegedly kidnapped and tortured, 2 have been missing, never to be found again, 5 have been blinded or physically disabled due to assaults, and 7 have had their houses and businesses destroyed6.

As far as social and environmental balance is concerned, logging companies have forced 40-50 millions of forest-dependent people to change their fate. Migrating to towns is surely not a better solution and will only add urban problems, and insisting on living in the degraded areas will force them to live a degraded life. Thus, the presence of forestry and plantation companies have indeed disrupted the social and environmental balance.

During the 1990s when the New

Order was ruling, forest concessions

were granted to the cronies. As many as 75

plantation companies were granted permit

to convert forests into ready-to-cultivate areas.

In a short time, as many as 750 hundred thousand hectares of forestland, ten times

as large as Jakarta city, were cleared. One of the world’s lungs, the

island of Kalimantan, has since lost much of

its forest cover


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Dutch banks such as Rabobank, the ING group and ABNAmro state that they have long incorporated environmental criteria into their investment decisions. However, a study by AID Environment and Puti Jaji on PT Matrasawit in East Kalimantan shows the opposite. PT Matrasawit is a subsidiary of PT SMART, Indonesia’s national private company obtained financial facilities from Rabobank, the ING Group, and ABN-Amro from 1995 to 2001. PT Matrasawit has converted 2,500 hectares of primary forest, which were once the habitat of orangutans – one of the protected species, into palm plantation. In 1999 the local court decided that the company had been proven guilty of illegally burning the forest. The native Dayak people said that the company burned down their gardens and palm trees without paying any compensation.

The data from the Department of Marine and Fishery show that European banks such as ABN Amro Bank, Rabobank, Fortis Bank, and ING have given credits to palm companies. As such, pressure to include environmental factors into the banks’ financial decision has been increasing. Under such a circumstance, the banks have to consider environmental destruction factor in their financial risk calculation. The reason is that, if they do not care, forests will be destroyed. A study by the World Bank reports that during 1997-1998 more than 9 million hectares of forests were destroyed. In such a big environmental disaster, not a single company was punished while the Minister of Forestry had identified 176 companies to be held accountable for such destruction7. Several intensive studies conclude that Indonesia has been experiencing the worst deforestation rate in the world. An investigative report by Greenpeace estimates that in 2010 forests in Sumatra and Kalimantan will be gone if the deforestation rate continues8.

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jawab atas musibah besar tersebut7. Dari laporan beberapa studi intensif, disimpulkan bahwa Indonesia sedang mengalami laju penyusutan hutan terparah di dunia. Menurut laporan investigatif yang dilakukan oleh Greenpeace, diperkirakan pada tahun 2010 hutan di Sumatra dan Kalimantan akan musnah jika laju penyusutan hutan yang ada saat ini terus berlangsung8. Selain itu, menurut perhitungan USAID, dari setiap menit aksi penebangan liar, pemerintah Indonesia menderita kerugian sebesar US$ 1.300 akibat pajak yang tidak disetorkan. Akibatnya, semakin sedikit dana yang dapat dialokasikan pemerintah untuk urusan kesehatan, pendidikan, institusi pengurusan-publik serta perlindungan lingkungan.

Tabel di bawah ini menggambarkan para pengusaha di zaman Orde Baru yang berhasil memperoleh konsesi hutan cukup banyak, sehingga mereka menjadi penguasa hutan. Data dikompilasi pada tahun 1997 sehingga mencerminkan konfigurasi perusahaan yang berkembang pada era konglomerasi kapital di Indonesia.

Sepanjang periode 1997 – 1998 telah terjadi kehancuran hutan lebih dari 9 juta hektar. Di dalam bencana besar tersebut tidak ada satupun perusahaan yang

mendapatkan hukuman, padahal Menteri Kehutanan sudah mengidentifikasi 176 perusahaan yang harus bertanggung jawab atas musibah besar tersebut

Besides, according to USAID’s calculation, from each minute of logging activity, Indonesia loses US$1,300 of the non-payable taxes. As a result, the Indonesian government has less budget to be allocated for health, education, public services and environmental protection.

The table below shows the large number of businesses becoming forest kings through forest concessions they obtained during the New Order era. The data were compiled in 1997, thus reflecting the configuration of businesses in the emerging capital conglomeration at that time.

During 1997-1998 more than 9 million hectares of forests were destroyed. In such a big environmental disaster, not a single company was punished while

the Minister of Forestry had identified 176 companies to be held accountable for such destruction


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table 1. Forest Concessionaires during the New Order’s era

Source : Casson 1999

Companies such as PT Barito Pacific, PT Indorayon Utama, etc. can maintain their operations and keep obtaining loans although they have caused enormous losses to people and the environment. German and Finnish Export Credit Agencies, Credit Suisse First Boston, Credit Lyonnais, Lehman Brothers, Morgan Stanley and Bearing are among the banks financing forestry companies.

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Tabel 1. Para penguasa hutan pada masa Orde Baru

Holding Company

Group Total Land Bank Area

(Ha)

Total Area Planted (Ha)

PT. Pan London Sumatera Indonesia

Napan Group 245,629 78,944

PT. Bakrie Sumatra Plantation

Bakrie and Brothers

376,041 34,392

PT. Golden Agri resources

Sinar Mas Group 582, 208 211,713

PT. Astra Agro Lestari Tbk.

Astra International

280,000 177,976

PT. Asian Agri Raja Garuda Mas

200,000 110,000

PT. Salim Plantations

Salim Group 275,000 125,000

PT. Soefindo Soefin Group 47,777 37,180

PT. Tolan Tiga SIPEF Group 52,869 36,312

Total 1,982,242 821,369

Sumber : Casson 1999

Perusahaan-perusahaan seperti PT Barito Pacific, PT Indorayon Utama, dll. tetap mampu beroperasi dengan baik serta mendapatkan kredit meskipun mereka banyak merugikan kepentingan masyarakat dan menimbulkan masalah lingkungan. German and Finnish Export Credit Agencies, Credit Suisse First Boston, Credit Lyonnais, Lemhan Brothers, Morgan Stanley dan Bearing adalah sekolompok bank yang telah mendukung berdirinya perusahaan-perusahaan yang bergerak di sektor kehutanan.

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table 2. Companies and loaning Banks

Companies total debts in million US dollars

Debts received

maturity loaning banks

Pt londonSumatraindonesiatbk

Consortium debt: $ 122

Early1997

$ 46.6in 1998

Bank consortium comprising:

- citicorp international Ltd, USA

- Commerzbank, SingaporeBranch

- Rabobank, Jhiongkong Branch

- Shanghai Banking corporation, Singapore

Premissorynotes : $ 40Forwardcontract : $103,5

$ 97in 1999

- Union Bank of Switzerland

- Sumitomo Bank Ltd, Singapore Branch

- Bank of Taiwan

Premissory notes

- Indosuez Bank, Prancis

- Citibank, AS

- LTCB, Jepang

Forward contrac

- Credit Agricole Indosuez

- Union Bank of Switzerland

- Citicorp Financial Services Limited


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Debts received


Pt BakrieSumatraPlantationsBakrie &Brothers

$ 70$ 1.020

1996 1999 - Rabobank Nederland- Singapore Branch

- PT Bank Kredit Lyonnais Indonesia, Medan

- Credit Suisse, Singapore

- Japan Asia Investment

Pt SmaRt Total utang$ 212,1

April1995

$ 104Having been paid in August 1998

- The Chase Manhattan Bank, New York

- ABN-Amro Bank N.V , Jakarta

- Fuju Bank Limited, Singapore

$ 14in 1999

- Nederlandse Fiancierings- Maatschappij Voor Ontzikkellingslanden N.V (FMO)

$ 62,8in 2000

- PT Bank Societe Generale Indonesia

- PT Bank Danamon Indonesia

- PT Bank Dagang Negara

- Jaya Fuju Leasing

- PT Bank Credit Lyonnais Indonesia

- PT Sanwa Indonesia Bank

- PT Bank Sakura Swadharma

- PT Bank International Indonesia

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Debts received


PtindofoodSuksesmakmur

$ 1.047.7 1996and early 1997

$ 81.1in 1997,

$ 449.1in 1998,

$ 417.4in 1999

126.5in 2000

- Citibank N.A Jakarta PT BCA

- The Hongkong Shanghai banking Corporation

- Bank of Tokyo- Mitsubhisi, LTD

- Bank Societe Generale Indonesia

- Deutsche Bank

- Credit Suisse First Boston, Singapore

- Citicorp Investment Bank

- The Chase Manhattan Asia Limited

- LTCB Merchant Bank

- Fuji Bank Limited Singapore

- Bank of Tokyo, Mitsubhisi Ltd., Singapore

- Bankers Trust Company Hongkong

- Bank of Amerika Asia Limited

- Ocrim SPA, Italia

- Yasuda Trust & Banking Co., ltd

- PT Bank Daiwa Perdania

Source : Casson 1999


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Conspiracy between the ruling power, forest concessionaires and foreign creditors in the New Order regime has not just stopped. In the reform era, many capital owners have been earning much profit from palm. When forests were still dense, these money-seekers gained profits from paper and pulp. Now, after forests have been cleared and been ready to cultivate, they reap the benefits from palm oil, which sells well on the international market.

Based on the statistical data from the Directorate General of Estate Crops, palm plantations have expanded rapidly. Smallholders’ Palm Plantation [Perkebunan kelapa sawit rakyat (PR)] grew rapidly from 3,125 hectares in its inception in early 1980s to nearly 3 million hectares in 2009. Field data may reveal a much larger plantation size than the official data. In other words, in more or less 30 years, the expansion grew a thousand times. State-owned Plantation Enterprises [Perusahaan Perkebunan Negara (PBN)] grew from 65,573 hectares in 1967 to 617,169 hectares in 2009 while in the same period private-owned enterprises [Perusahaan Perkebunan Swasta (PBS)] grew from 40,235 hectares to 3.5 million hectares.

In 2009 Indonesia’s CPO production stood at 18.5 million tons. Of this, 51% were produced by PBS; PR and PBN contributed 37% and 12% respectively. In this respect, private-owned companies were playing a significant role as their plantation size kept expanding and made greater contribution to the national production.

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Figure 2. Growth of Palm Plantation Area in Indonesia, 1967 – 2009

Source: Directorate General of Private Plantation (PBS);

National Plantation (PBN); and Smallholder’s Plantation (PR)

The chart above shows that while State-owned Plantation Enterprises (PBN) emerged first, both PR and PBS grew more rapidly with PBS growing the most rapidly and with the highest productivity. The rapid growth of PBS was driven not only by various credit scheme support provided by both domestic and global banks, but also the government’s permits to clear and convert forests into palm plantations. Land conversion once aroused a controversy when, in the midst of strong pressure from environmental NGOs, some big companies such as Nestle and Unilever boycotted Sinarmas’s products. Afterwards, moratorium on forest clearing was applied for a while.

With the total palm plantations encompassing 7 million hectares, Indonesia produced 18,461,240 tons of CPO in 2009

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Grafik 2. Perkembangan Luas Areal Perkebunan Kelapa Sawit di Indonesia Tahun 1967 – 2009

Sumber : Direktorat Jenderal Perkebunan Perkebunan Swasta (PBS); Perkebunan Nasional (PBN); dan Perkebunan Rakyat (PR)

Dari grafik di atas terlihat bahwa meskipun Perusahaan Perkebunaan Negara (PBN) muncul lebih dahulu, tetapi dalam perkembangannya kemudian, Perusahaan Perkebunan Swasta (PBS) dan Perkebunan Rakyat (PR) tumbuh lebih pesat. Perkebunan swasta tumbuh paling pesat, dengan tingkat produktivitas yang paling besar pula. Pesatnya perkebunan swasta selain didorong oleh berbagai dukungan fasilitas perkreditan dari perbankan, baik domestik maupun global, juga karena dukungan dari pemerintah dengan pemberian ijin pembukaan lahan hutan untuk dikonversi menjadi lahan sawit. Konversi lahan menjadi kawasan sawit sempat menimbulkan kontroversi ketika di hadapan desakan kuat dari kelompok-kelompok gerakan lingkungan, beberapa perusahaan besar seperti Nestle dan Unilever melakukan boikot terhadap produk-produk Sinarmas. Setelah itu, isu moratorium atau penghentian pemberian ijin pembukaan lahan menjadi kawasan tanaman industri sawit sempat dilakukan.


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(see Figure 3). The composition of the land owned and the production by the three types of plantations shows that PBS accounted for the largest share of the total production, followed by PR and PBN, with the annual production rate being 9.4 million, 6.8 million and 2.1 million tons respectively.

Figure 3. Palm Production by Ownership, 1967-2009.

Source: the Directorate General of Estate Crops

The success stories of timber and pulp industry during the New Order regime is repeated by palm industry, which makes use of the cleared land. The table below shows plantation size by ownership, notably those owned by the private sector. The company with the largest plantation size is Raja Garuda Mas (RGM), followed by the Wilmar Group and Guthrie Bhd. RGM is owned by Sukanto Tanoto, one of the Indonesia’s richest people (ranked sixth in 2010) with the total wealth of 2.8 billion US dollars. The domination of RGM in the palm sector is demonstrated by the rapid growth of one of its subsidiaries – PT.

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Dengan total areal perkebunan produksi kelapa sawit sebesar 7 juta hektar, di tahun 2009 Indonesia memproduksi kelapa sawit sebesar 18.461.240 ton (lihat grafik 3). Berdasarkan komposisi kepemilikan tanah produksi kelapa sawit, dan jika dibandingkan dengan pangsa produksi dari masing-masing jenis pengusahaan perkebunan, maka bisa dipastikan bahwa perkebunan swastalah yang memiliki hasil produksi kelapa sawit terbesar, diikuti oleh perkebunan rakyat dan perkebunan negara, masing-masing dengan tingkat produksi per tahun 9,4 juta ton (PBS); 6,8 juta ton (PBR); dan 2,1 juta ton (PBN).

Grafik 3. Produksi Perkebunan Komoditi Kepala Sawit di Indonesia Berdasar Kepemilikan Periode 1967 – 2009.

Sumber : Direktorat Jenderal Perkebunan

Cerita kesuksesan para pengusaha pengolahan kayu dan bubur kertas pada masa Orde Baru diulangi dengan kisah sukses para pengusaha kalapa sawit yang berhasil memanfaatkan lahan yang telah dibuka tersebut. Tabel di bawah ini menggambarkan urutan besaran perkebunan sawit (terutama oleh pihak swasta) berdasarkan kepemilikan. Posisi penguasaan lahan terbesar ditempati oleh perusahaan Raja Garuda Mas (RGM), kemudian disusul oleh Wilmar Group dan di urutan ketiga adalah Guthrie Bhd. RGM dimiliki oleh kelompok konglomerat Sukanto

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Asian Agri. Guthrie Group Limited is a Malaysia-based company, whose core business is plantation.

table 3. Largest Palm Companies (2006)

no. Company land Size(Ha)

Percentage (%)

1 Raja Garuda Mas 467.9 7.85

2 Wilmar Group 350.0 5.87

3 Guthrie Bhd. 288.9 4.85

4 Sinar Mas Group 208.9 3.51

5 Astra Argo Lestari 189.9 3.19

6 Cilandra Perkasa Group 60.9 1.02

7 Socofindo Group 46.8 0.79

8 Kurnia Group 42.9 0.72

9 Lonsum Group 40.5 0.68

10 Bakrie Group 20.1 0.34

11 Others 1,425.0 23.91

Private Plantation companies 3,141.8 52.73

State-owned plantation companies 696.7 11.69

Smallholders’ Palm Plantation 2,120.3 35.58

total 5,958.8 100.00Source: Directorate General of Estate Crops, Department of Agriculture, BPS.


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Table 4. List of the Richest People and Palm Plantation Owned

Susanto LimGlobeAsia Rich List 2008 : 105Wealth (billion dollars) : 0.120

Sudono SalimGlobeAsia Rich List 2008 : 4Wealth (billion dollars) : 3.040

Tri Putra Agro Persada: Teddy Rachmat and Benny SubiantoLand size (Ha.) : n.a.Areas planted (Ha.): 120,000CPO production (Ton/Year) : 220,000GlobeAsia Rich List 2008 : 21 & 98Wealth (billion dollars) : 0.654 n 0.130

Darmex Agro Duta PalmaGroup : Surya DarmadiLand size (Ha.) :Areas planted(Ha.): 60,000CPO production (Ton/Tahun) : 190,000GlobeAsia Rich List 2008 :Wealth (billion dollars) :

Arifin and Hilmi PanigoroGlobeAsia Rich List 2008 : 13Wealth (billion dollars) : 1.050

Musim Mas : Bachtiar KarimLand size (Ha.) : 180,000Areas planted (Ha.): 180,000CPO production (Ton/Year) : 210,000GlobeAsia Rich List 2008 : 42Wealth (billion dollars) : 0.360

Tunas Baru Lampung Tbk. :Widarto and Santoso WinataLand size (Ha.) : 106,761Areas planted (Ha.): 44,404CPO production (Ton/Year) :124,000

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Golden Agri Resources: Eka Tjipta WidjayaLand size (Ha.) : 1,300,000Areas planted (Ha.): 383,732CPO production (Ton/Year) : 1,967,092GlobeAsia Rich List 2008 : 3Wealth (billion dollars) : 3.800

Ciliandra Group Fist Resources: Martias Land size (Ha.) : 278,000Areas planted (Ha.): 95,241CPO production (Ton/Year) : 322,678GlobeAsia Rich List 2008 : 34Wealth (billion dollars) : 0.410

Asian Agri dan Raja Garuda Mas: Sukanto TanotoLand size (Ha.) : n.aAreas planted (Ha.): 160,000*CPO production (Ton/Year) :1,000,000GlobeAsia Rich List 2008 : 7Wealth (billion dollars) : 1.430

Indofood Agri Resources: Anthony SalimLand size (Ha.) : 455,910Areas planted (Ha.): 173,059CPO production (Ton/Year) : 1,013,637

Wilmar International:Martua SitorusLand size (Ha.) : 500,000Areas planted (Ha.): 200,000CPO production (Ton/Year) :900,000*GlobeAsia Rich List 2008 : 12Wealth (billion dollars) : 12

Sampoerna Agro Tbk.: Putera SampoernaLand size (Ha.) : 200,000 Areas planted (Ha.): 90,055CPO production (Ton/Year) : 265,468GlobeAsia Rich List 2008 : 5Wealth (billion dollars) : 2.420

Note. *EstimateSource: GlobeAsia, June 2009


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The ownership pattern and companies in Indonesia’s palm sector are not concentrated on one business group. As can be seen, a number of private companies own 52.73% of the total palm plantations in Indonesia, or equal to 3,141.8 thousand hectares. The largest company in terms of plantation size is Raja Garuda Mas, which owns 7.85% or around 467.9 thousand hectares and the smallest is the Bakrie Group with 0.34% or 20.1 thousand hectares (see Table 4). We can also see from the table that Eka Tjipta Widjaya is among the biggest player in Indonesia’s forestry sector since the New Order regime. It is likely that he will also become an important player in the carbon market.

One interesting thing is that the richest people on the list are those who are also engaged in the palm sector. In general, most of Indonesia’s palm companies are listed in the world’s richest people. It can be concluded then that palm business is a very promising one. For example, the owner of Golden Agri Resources – Eka Tjipta Widjaya – owns around 1.3 million hectares of land (383,732 of which have been planted), and produces 1.9 million tons of CPO annually, and Eka Tjipta Wijaya is one of Indonesia’s richest men. (see Table 4).

The data compiled by the Indonesia’s Ministry of Environment show that five sectors are the largest emission contributors, i.e. peatland, forests, energy resources, industry and transporation9. Land Use Change and Forestry (LUCF) contributed 48% of the total, followed by the energy sector (21%), peat fires (12%), flue gas (11%), agriculture (5%) and industry (3%). In relation to this, the Indonesian government has expressed its loose commitment to reducing 26-41% of business-as-usual emission level in 2020.

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Figure 4. The Largest Emitters in Indonesia

Source: the Ministry of Environment, 2009

As the government is cooperating with the private sector to address long-term problems – as introduced in the Public Private Partnership (PPP) concept, the emission reduction program will also involve the funds provided by the private sector. The fund includes both domestic and foreign fund, as well as the CDM (Clean Development Mechanism) and PES (Payment for Environmental Services) schemes.

One big question that arises is will the private sector involvement not repeat the history where foreign investors could always make better use of the situation to get more benefits? The interests of indigenous/local people are generally excluded from these private business schemes.

It seems that there is a correlation between palm producers and the areas emitting the most emission. The chart below shows Riau as an area emitting the most emission, and it is exactly in

Land Use Change and

Forestry (LUCF)

contributed 48%

Peat fires (12%)Energy

21%

Flue gas 11%

Agriculture 5%

Industry 3%


2627

Grafik 5. Tingkat Emisi per Provinsi

Sumber : National Strategy for REDD +, Bappenas

Grafik 6. Tingkat Konversi Hutan 1998

Sumber : Casson, 1999

Dalam konteks strategi pembangunan ekonomi di Indonesia, minyak sawit mentah masih menjadi andalan komoditas ekspor. Sehingga, tergambar bahwa ada korelasi antara kerusakan hutan, strategi ekspor dan kinerja pembangunan. Ketiganya saling

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yang paling banyak mengeluarkan emisi (CO2). Dan persis di daerah itulah, luas tanah perkebunan kelapa sawit termasuk yang paling besar di Indonesia. Secara historis, Sumatra Utara adalah daerah yang pertama kali mengembangkan kelapa sawit sebagai komoditas perkebunan, disusul oleh Riau yang menjadi lahan budidaya kelapa sawit secara besar-besaran.

Grafik di bawah ini menunjukkan level emisi acuan (reference emission levels) untuk tiap-tiap provinsi di Indonesia, berdasarkan data historis tentang hutan dan tanaman.

Riau where palm plantations are mostly established. Historically, North Sumatra Province was the first province developing palm as a plantation commodity, followed by Riau, the current site of large-scale palm cultivation.

The chart below shows reference emission levels for each province of Indonesia, based on the historical data on forests and estate crops.

2727






Figure 5. Emission Level by Province

Source: National Strategy for REDD +, Bappenas

Figure 6. Forest Conversion Rate in 1998

Source: Casson, 1999

In the context of Indonesia’s economic development strategies, CPO will still be the main export commodity, so that there is a correlation between forest destruction, export

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mempengaruhi satu sama lain. Grafik di bawah ini menunjukkan berapa di sektor perkebunan, komiditas CPO menjadi andalan.

Grafik 7. Peran CPO dalam sektor Perkebunan

Sumber: BPS, diolah

2.2 Konstelasi Global

Skema pembiayaan perubahan iklim pertama-tama adalah komitmen global di mana 42 negara yang digolongkan dalam UNFCCC sebagai kelompok negara Annex I yang dianggap paling besar kontribusinya dalam pemanasan Bumi khususnya sejak akhir Perang Dunia II wajib melakukan transfer payment untuk penanganan perubahan iklim. Namun demikian, ketika mekanisme lentur yang disinggung di atas menjadi pemecahan semu yang memudahkan kelompok Annex I mencapai sasaran pengurangan emisinya, kompensasi emisi karbon (carbon offset) menjadi bukan saja sebuah peluang sektor keuangan dan perbankan untuk membiayai berbagai program terkait dengan perubahan iklim. Program-program penanganan itu sendiri menjadi sebuah sirkuit perluasan kapital yang sangat menggiurkan nilainya. Salah satu program yang dirancang dengan prinsip kompensasi emisi karbon, serta memberikan peluang keterlibatan kapital industri dan keuangan adalah Program REDD (Reducing Emissions from Deforestation and Forest Degradation).

strategies and development performance. All these three influence one another. The chart below show that CPO becomes the main commodity in the plantation sector.

Figure 7. Role of CPO in the plantation sector

Source: BPS, processed

2.2 Global Constellation

The first scheme in climate change funds was a global commitment where 42 countries listed by the UNFCCC as Annex I countries and considered to be the greatest contributors to global warming – especially since WW II – were obliged to transfer payment for climate change mitigation. However, when the loose mechanism above has become an apparent solution that helped Annex I countries to achieve their emission reduction target, carbon offset offers an opportunity for financiers and banks to finance climate change-related programs. The programs themselves become an extremely lucrative capital expansion circuit. One of the programs that is developed under the carbon offset scheme and that allows the involvement of industrial and financial capital is REDD (Reducing Emissions from Deforestation and Forest Degradation).

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In principle, REDD is a way or strategy to reduce emission through forest conservation (avoided deforestation) that is financed by companies in need of additional emission quota above a pre-determined cap, which varies with countries. Technically speaking, emission reductions (conservation) are counted as “credits” that can be sold on the international carbon market. The credits may also be offered to donors (multilateral bodies) to be exchanged with funding commitment in the form of compensation for efforts to reduce emissions. During COP 15 in Copenhagen in 2009, a new landmark in climate change finance was set, where a partial agreement was reached near the end of the Conference (Copenhagen Accord) recommending funding sources to support REDD+. Australia, France, Japan, Norway, England and the USA were committed to providing a US$3.5 billion package for REDD implementation, apart from the 2008 UN-REDD commitment to helping forested countries prepare for REDD (REDD-Readiness). Such an amount was far lower than the estimated fund needed to finance UNFCCC’s mitigation and adaptation measures.

“Requiring polluters to finance pollution reduction measures and providing incentive

for polluters that succeed in reducing pollution and emission below the pre-

determined target may lead to incentives that even drive polluting industries to

increase emission as the way out is in place


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Introduction to REDD is believed to change the landscape of climate change management with the involvement of the private sector. Climate change management has become a “commodity” ready to be used as an investment tool in a trade pattern that involves market players. From the financing side, this public-private partnership scheme will potentially ease the achievement of the emission reduction target. To reduce emission up to 50% in 2030 will require US$17-23 billion annually10. Despite this, it should be noted that all the carbon offset-based schemes and their implementation (emission quota trade) have many flaws, from the theoretical basis up to potential leaks and financial crime as well as a potential crisis like the sub-prime mortgage crisis in the USA in 2008.

The logic behind the greater involvement of the private sector in the implementation of mitigation programs is as follow: the huge fund need cannot be provided by governments only, let alone those of the non-Annex I countries. That is why climate change finance will involve various funding schemes – grants, loans, or private investments. The involvement of the private sector with governments (public-private partnership) is an innovation in the financial and banking sector, a continuation of the one since 1980s that has driven repeated systemic crises in the sector. The point is that efforts to reduce pollution level are done by requiring polluters to finance pollution mitigation measures and by providing incentives for polluters that succeed in reducing the pollution or emission below the pre-determined target. In the previous COPs, a warning had been expressed that the logic might lead to incentives that would encourage polluting industries to even increase emission as the way out was in place (perverse incentive).

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With regard to industrial and financial capital interests, the application of the market principle will stimulate investors on the global market to make investments, notably in mitigation programs. While this is in line with the actual interest of the global investment market, it should be noted that the expansion of this “climate change economy” will potentially diminish control over money markets and stock markets, which tended to be stricter some time ago. Following the 2007/2008 crisis, there have been discussions to go back to the more conventional financial system. First, bank regulations will be stricter. This has been reflected in the US Financial Reform Law passed some time ago. Second, excessive profit taking behavior will be limited. This is also set forth in the US Law, where the executive-level salaries will be limited in a such a way that companies cannot determine executive-level salaries arbitrarily as they used to do. Third, there is a discourse to re-apply the 1944 version Glass - Steagall Act, or a law that limits banks to make investments on money markets. Such a law requires that commercial banks be separated from investment banks.

“All the carbon offset-based schemes and their implementation (emission

quota trade) have many flaws, from the theoretical basis up to potential leaks and financial crime as well as a potential crisis like the sub-prime mortgage crisis in the

USA in 2008


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Besides, there is a more macro factor such as discourses on using gold as the world-wide anchor currency. As we know, financial innovations have spread after 1971 when the US President decided to cancel the direct convertibility of the United States dollar to gold. Since then, currencies have been circulated in many forms (quasy money), such as low-quality bonds. Another discourse is the tax on foreign capital inflow (Tobin Tax) or capital control.

All show how the investment world will experience quite a drastic change, which will result in more limited investment opportunities. Why, since the US 2007/2008 crisis, have nearly all developed countries turned their eyes to green economy, which includes climate change funds? Surely, the framework is to develop a green sustainable long-term economy. However, we should be aware that the condition may become a new landscape for financial investment business, as mentioned above.

If private investment were not to enter into climate change finance yet, there would still be a risk like the one occurring in the past. When multilateral institutions were formed, especially the World Bank, what did happen then was a creation of a giant poverty reduction project, notably in developing countries. The program did involve enormous grants and loans, but in many cases, the poor were the ones getting much less benefits than the other parties involved. Driven by rent-seeking behavior in a country controlled by a number of interest parties (state captured), poverty reduction programs have mostly turned into projects benefitting suppliers while the target beneficiaries receive the least.

The table below shows the list of private companies coordinated under the Institutional Investors Group on Climate

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menguntungkan para penyedia layanan (supplier), tetapi target yang dilayani justru mendapatkan manfaat paling kecil.

Tabel di bawah ini menunjukkan daftar perusahaan swasta yang berada dalam koordinasi Institutional Investors Group on Climate Change (IIGCC). IIGCC merupakan forum kolaborasi dari para investor di kawasan Eropa untuk proyek-proyek perubahan iklim. Asosiasi ini beranggotakan sekitar 70 perusahaan.

Tabel 5. Daftar Perusahaan Investasi Swasta yang tergabung dalam IIGCC

Alfred Berg Ethos Foundation Merseyside Pension Fund

AmundiF&C Management

LtdNorthern Trust

APG Asset

Management

First Swedish

National Pension

Fund

Osmosis Investment

Management

ATP

Fourth Swedish

National Pension

Fund

PGGM Investments

Aviva Investors

Generation

Investment

Management LLP

PKA

Baptist Union of

Great BritainGood Energies PRUPIM

BBC Pension

Trust

Greater Manchester

Pension FundRobeco

Bedfordshire

Pension Fund

Grosvenor Fund

ManagementSchroders

BlackRockHenderson Global

Investors

Second Swedish National

Pension Fund

BMS World

MissionHermes

South Yorkshire Pensions

Authority

BNP Paribas

Investment

Partners

HgCapital The Church in Wales

Change (IIGCC). IIGCC is a collaboration of investors in Europe for climate change projects. The association incorporates around 70 companies.

table 5. List of Private Investment Companies incorporated in IIGCC

34


BT Pension

Scheme HSBC Investments

The Church of England

Pensions Board

CB Richard Ellis

Investors

Hudson Clean

Energy

The Roman Catholic

Diocese of Plymouth

CCLA Investment

Management

Impax Asset

Management

The Roman Catholic

Diocese of Portsmouth

Central Finance

Board of the

Methodist Church

Insight InvestmentThe Roman Catholic

Diocese of Salford

Church

Commissioners

for England

Invicta CapitalThird Swedish National

Pension Fund

Climate Change

Capital

Joseph Rowntree

Charitable TrusUnited Reformed Church

Co-operative

Asset

Management

Kent County Council

Pension Fund

Universities

Superannuation Scheme

Corporation of

London Pension

Fund

London Borough of

Hounslow Pension

Fund

West Midlands

Metropolitan Authorities

Pension Fund

Earth Capital

Partners

London Borough of

Islington Pension

Fund

West Yorkshire Pension

Fund

Environment

Agency Pension

Fund

London Borough of

Newham Pension

Fund

William Leech Charitable

Trust

Environmental

Technologies

Fund

London Pensions Fund Authority

Dalam sebuah negara yang masih carut-marut seperti Indonesia ini, risiko untuk masuk dalam perangkap dalam pelaksanaan program pembiayaan perubahan iklim sangat besar. Apalagi jika memang yang akan berlaku adalah pendekatan pasar yang tentu saja tidak banyak mengakomodasi kepentingan


3434


BT Pension

Scheme HSBC Investments

The Church of England

Pensions Board

CB Richard Ellis

Investors

Hudson Clean

Energy

The Roman Catholic

Diocese of Plymouth

CCLA Investment

Management

Impax Asset

Management

The Roman Catholic

Diocese of Portsmouth

Central Finance

Board of the

Methodist Church

Insight InvestmentThe Roman Catholic

Diocese of Salford

Church

Commissioners

for England

Invicta CapitalThird Swedish National

Pension Fund

Climate Change

Capital

Joseph Rowntree

Charitable TrusUnited Reformed Church

Co-operative

Asset

Management

Kent County Council

Pension Fund

Universities

Superannuation Scheme

Corporation of

London Pension

Fund

London Borough of

Hounslow Pension

Fund

West Midlands

Metropolitan Authorities

Pension Fund

Earth Capital

Partners

London Borough of

Islington Pension

Fund

West Yorkshire Pension

Fund

Environment

Agency Pension

Fund

London Borough of

Newham Pension

Fund

William Leech Charitable

Trust

Environmental

Technologies

Fund

London Pensions Fund Authority

Dalam sebuah negara yang masih carut-marut seperti Indonesia ini, risiko untuk masuk dalam perangkap dalam pelaksanaan program pembiayaan perubahan iklim sangat besar. Apalagi jika memang yang akan berlaku adalah pendekatan pasar yang tentu saja tidak banyak mengakomodasi kepentingan

In a country plagued with so many problems like Indonesia, the risk to get trapped in the implementation of climate finance programs is very high, especially if the program use market-based approaches, which will not accommodate the interests of indigenous/local people, the marginalized, women and children. They are the very vulnerable groups that will be disadvantaged

35

35

masyarakat lokal (adat), kelompok marjinal, perempuan dan anak-anak. Mereka adalah kelompok yang sangat rentan yang justru dirugikan jika proyek investasi perubahan iklim mulai melibatkan aliran dana yang sekarang ini tengah mencari target dan instrumen investasi.

Pada prinsipnya, REDD+ bekerja dengan menggabungkan mekanisme pemerintah dan swasta. Secara umum, mekanismenya bisa tergambar dalam bagan di bawah ini, yang dikenal sebagai model kembar pendanaan iklim (twin mechanism). Pada dasarnya, target akhir dari program ini ada tiga, yaitu : menurunkan deforestasi, pengurangan kemiskinan dan pembangunan yang berkesinambungan. Tiga target ini dicapai melalui aktivitas-aktivitas berbasis proyek yang sumber dananya dua, yaitu pasar karbon (mekanisme pasar) dan sumber lain yang berasal dari pemerintah negara kaya.

Bagan 1. Mekanisme Pendanaan Kembar dari Swasta dan Pemerintah

Sumber : IIED briefing

Prinsip dasar yang digunakan untuk mendanai proyek-proyek perubahan iklim berbasis pada rekonsiliasi dua pendekatan, yaitu kekuatan pasar dan pemerintah. Mekanisme Pemerintah: pada

if climate change projects are to involve the funds that are currently seeking targets and investment instruments.

In principle, REDD+ works by combining both the government and private mechanisms. In general, the mechanism can be illustrated in the chart below, which is well known as the

Twin Mechanism. Basically, there are three ultimate goals of the program: deforestation reduction, poverty reduction and sustainable development. These targets are to be achieved through project-based activities whose funding is sourced from two sources: carbon trade (market mechanism) and rich countries.

Chart 1. Government-private Twin Mechanism

Source: IIED briefing

The basic principle used to fund climate change projects is based on the reconciliation of two approaches: market power and the government. The government mechanism: basically, the


36

government’s funds can be sourced from various schemes such as the emission quota auction in the European Union’s Emissions Trading Scheme (EU ETS), developmental assistance funds and other funds from developed countries such as the Norway’s commitment. The EU ETS is the largest multi-national emissions trading scheme in the world, involving European countries. The EU ETS is one of the important pillars of the EU’s commitment to emission reduction within their energy policy framework. The mechanism is basically part of the EU’s commitment in the United Nations Framework Convention on Climate Change (UNFCCC) formed in 1992 and the Kyoto Protocol agreed to in 1997. The EU countries have agreed to the allowable emission limit under the EU ETS framework.

The Kyoto Protocol has various emission reduction schemes, among others11:1. Joint Implementation projects (JI), which is defined by

Article 6 of the Kyoto Protocol, which produce Emission Reduction Units (ERUs). One ERU represents the successful emissions reduction equivalent to one ton of carbon dioxide equivalent (tCO2e).

2. Clean Development Mechanism (CDM), which is defined by Article 12, which produces Certified Emission Reductions (CERs). One CER represents the successful emissions reduction equivalent to one ton of carbon dioxide equivalent (tCO2e).

3. International Emissions Trading (IET) as defined by Article 17.

Market Mechanism: Basically, private players from Annex 1 countries are allowed to get involved in emission reduction programs in developing countries. They include investors, banks, investment banks, and others, which basically manage an

37

37

sertifikat tertentu yang mendapatkan pengakuan dalam mekanisme pasar. Setiap proyek pada dasarnya melakukan investasi untuk mendapatkan pendapatan dari kredit karbon berdasarkan pada situasi lokal dan regional tertentu. Hasil dari investasi ini akan diaudit secara periodik oleh pengawas independen yang diakui (bersertifikat) untuk mengevaluasi perkembangan investasi dari kredit karbon tersebut.

Skema di bawah ini menunjukkan sebuah negara yang memiliki proyek pengurangan emisi karbon akan memperoleh CER (Certificate Emission Reduction), yang bisa diperjualbelikan ke negara maju (maupun pihak swasta). Lalu negara berkembang tersebuh akan memperoleh dana atau program (transfer technology).

Bagan 2. Certificate Emission Reduction dan Pasar Karbon

Sumber: Singh12

Dalam skema pembiayaan yang didanai oleh pihak swasta, mekanisme akan lebih langsung berkaitan dengan proyek-proyek yang spesifik menghasilkan skema keuntungan dalam kerangka waktu yang bisa diperhitungkan secara relatif pasti. Berbeda dengan pembiayaan pemerintah yang lebih fleksibel penggunaannya, misalnya untuk peningkatan kapasitas, fasilitasi dsb. pembiayaan dari mekanisme pasar sulit dilakukan untuk kepentingan adaptasi. Dan karena itu, proyek-proyek yang akan didanai oleh pihak swasta umumnya akan mengambil skema mitigasi.

amount of money for investment purposes (i.e. to earn profits). The mechanism used is that the project owner or developer first has to register and be validated under certified standards and methodologies to obtain a certain certificate recognized by the market mechanism. Each project basically makes an investment to earn income from carbon credits based on certain local and regional situations. The income will then be audited by a certified independent supervisor to evaluate the progress of such a carbon investment.

The scheme below shows a country having an emission reduction project will obtain CER (Certificate Emission Reduction), which can be sold to developed countries (via the private sector). And the developing countries where the project is implemented will get some funds or programs (technology transfer).

Chart 2. Certificate Emission Reduction and Carbon Market

Source: Singh12

In private-funded schemes, the mechanism is directly related to projects that specifically give profit schemes within a relatively certain time frame. Unlike government funding mechanisms, whose purposes are more flexible such as for capacity building,


38

market mechanism-based financing is hard to implement for adaptation purposes. Therefore, private-funded projects generally run mitigation schemes.

As agreed to in the UNFCCC framework, the emission reduction aims to have 20-40% reduction in 2012 compared with the 1990 levels. Of the target, 10% is expected to be achieved through REDD+ strategy. Thus, REDD programs will play an important role in global climate change finance schemes.

The 2008 Eliasch Review report shows that global forestry funding is estimated to reach 17-33 billion US dollars in 2030. As such, government’s funds will not suffice. The scenario is then to apply carbon market principles by involving market players, who estimatedly can provide 7 billion US dollars annually to reduce deforestation in 2020.

Despite this scenario, there will still be a deficit of 11-19 billion US dollars annually, which is expected to be covered by the UNFCCC Annex I countries. Norway has committed to allocating 2.5 billion US dollars for climate change and forestry issues for five years after the commitment was made (COP 15 in Copenhagen, Denmark). With regard to this commitment, Indonesia will obtain 1 billion US dollars from the Norwegian government to reduce green house gas emission and deforestation and forest degradation through the Letter of Intent (LOI) signed on 26 May 2010 in Oslo, Norway. The agreement states that Indonesia will obtain a grant of US$1 billions for Reduction of Emissions from Deforestation and Degradation/REDD) in Indonesia. The agreement will be implemented in three stages: preparation, implementation, and evaluation of the successful reduction13.

39

Chart 3. The National REDD+ Strategy

2.3 ReDD Plus in indonesia

REDD plus deserves more attention as it is one of the relatively big and well-established schemes at both domestic and global level. The Indonesian government via Bappenas has developed a national strategy to implement REDD plus. Basically, the strategy is a follow up of the commitment expressed by the Indonesian President during COP 15 in Copenhagen that Indonesia would reduce green house gas emission by 26% (by itself ) up to 41% (with the help of multilateral institutions) in 2020.

Considering that in the context of Indonesia, the largest source of emission is forest clearing, forest-related programs will be playing an important role both domestically and globally. The


40

national strategy plan for REDD+ implementation is part of the Indonesian government’s commitment as well as a follow up of the Indonesia-Norway LoI.

2.3.1 emission Reduction target Scenario

Below is the national strategy on REDD+.

The figure below clearly illustrates the significance of market roles in emission reduction in Indonesia’s context. Even in this optimistic scenario, if the private sector’s roles through carbon credits are opened, the reduction target will exceed 41%. This is a very ambitious target but does not take into account the complexity and the potential risks arising from the involvement of the private sector in emission reduction projects.

Figure 8. Average emission reduction target up to 2010

26%

41%

> 41%

Emission under REL

Unilateral NAMAs

Supported NAMAs

C-credit

Time 2020

Ave

rage E

mis

sion

<1 year: 24

1-2 year: 19

3-5 year: 5

6-10 year: 8

>10 year: 0

Bebas: 36

life time: 0

death: 0

4141

Grafik 9. Skenario target penurunan emisi

Sumber: Strategi Nasional REDD + oleh Bappenas

Rencana pelibatan swasta dalam proyek penurunan emisi memang menjadi kecenderungan umum, baik di tingkat global dan kemudian diikuti oleh kecenderungan di tingkat domestik. Pada dasarnya, kebijakan di tingkat domestik merupakan amplifikasi dari kecenderungan yang ada di tingkat global. Ketika tata kelola dan tata laksana dari program pembiayaan perubahan iklim di tingkat global membuka peran swasta, begitupun di dalam negeri, strategi nasionalnya juga mengikuti, dengan kecenderungan yang selalu berulang, yaitu tingkat amplifikasi. Artinya. Respons domestik cenderung berlebihan menyikapi permintaan global.

Namun di sisi lain, selalu ada gejala pula bahwa tata kelola di dalam negeri cenderung lebih longgar, sehingga berbagai risiko yang muncul di tingkat global dengan pelibatan sektor swasta, akan dengan sendirinya memunculkan potensi risiko yang lebih besar di level domestik. Berikut ini adalah gambaran tentang bagaimana penegakan hukum dalam kasus pembalakan hutan sepanjang 2008. Mayoritas kasus yang terjerat dinyatakan bebas (36 kasus), sementara kalaupun ada tindakan hukum dengan vonis bersalah, sebagian besar hukumannya kurang dari satu tahun (24 kasus). Vonis hukuman 1 – 2 tahun sebanyak 19 kasus. Fakta ini juga diakui oleh pemerintah (Bappenas).

Pembiayaan dari dalam negeriAPBN + Swasta + Masyarakat

Pembiayaan bantuan internasional

Carbon credit untuk diperdagangkan- market based

Figure 9. Emission Reduction Target Scenario

Source: The National REDD+ Strategy by Bappenas

The plan to involve the private sector in emission reduction projects is a general tendency at global level, which is then accepted at domestic level. Basically, policies at domestic level are the amplification of the global tendency. When climate change fund governance and implementation at global level open a room for the involvement of the private sector, the tendency is followed at domestic level and the national strategy also adopts it, with repeated tendency, i.e. the amplification level. This means that global demands tend to be excessively responded to at domestic level.

On the other hand, there is always an indication that domestic governance tends to be looser, making the risks arising from the involvement of the private sector at global level even higher at domestic level. Below is the illustrations of how law was enforced against illegal logging throughout 2008. The majority of the case were dropped (46 cases). Those declared guilty (24 cases) were sentenced to less than one-year imprisonment. 19 cases ended up with 1-2 years of imprisonment. These facts are acknowledged by the government (Bappenas).

Domestic financeNational Budget (APBN) + private + public

international finance

Carbon credits to trade- market based


42

Figure 10. Law Enforcement in Illegal Logging Cases in 2008

Source: Annual Report of the Indonesia’s Ministry of Justice, 2009

table 6. Funds supporting REDD+ and the activities

no activity Cost

Indonesia Forest Carbon Alliance (IFCA): Brief study/analysis on methodologyaspects, policies and REDD preparation in Indonesia

USD 900,000

Demonstration activities

a. Proposed Aus AID 2nd DemonstrationActivities

€1,445,255 (2008-2011) *)

b. GTZ Merang: Measures to restoreforest areas; strategies and structuresfor peat forest managementintegrated; fire management scheme

€7 M (2010-2012)*)

c. FORCLIME : Innovative designs forREDD demonstration activities incl.establishment of FMUs

USD 3.6 M (2008-2010)

d. TNC : Demonstration activities ‘BerauForest Carbon Program’ : improvedforest management, forest restoration,oil palm swap, land use planning,policies and enforcement

USD 50 M (2011-2015) **)

26%

41%

> 41%

Emission under REL

Unilateral NAMAs

Supported NAMAs

C-credit

Time 2020

Ave

rage E

mis

sion

<1 year: 24

1-2 year: 19

3-5 year: 5

6-10 year: 8

>10 year: 0

free: 36

life time: 0

death: 0

43

no activity Coste. KFCP: Reducing deforestation & forest

degradation (incl. rehabilitation ofpeat land); monitoring & carbonaccounting; payment mechanism;readiness at provincial and districtlevel.

AUD 30 M *)

f. ITTO: Institutional setting toprevent deforestation; technology inrestoration and rehabilitation of PSF;demonstration activities with theplantation of indigenous species

USD 540 K (2010-2012) *)

g. KOICA: Joint research andimplementation of pilot project onafforestation/reforestation CDMproject and REDD.

USD 5 M (2009-2013) *)

h. UN REDD : Capacity forspartial socio-economic planning incorporatingREDD; empowered local stakeholdersto benefit from REDD; Multi-stakeholder endorsed district REDDplus

USD 1.5 M (2010-2011) *)

mRV- Capacity development of GOI

to operate an effective datamanagement system

Aus AID 2 M *)

- Wall-to-wall land cover changeanalysis; compilation of land useand management information,existing ground basedmeasurements

- Models adopted calibrated andfurther, developed by GOI toestimate emissions from land usechange

- GOI management teams andequipment to support the INCAS


44

no activity Costa. ICRAF: Credible estimates of the

dynamics of carbon stocks at thenational level over the past 20years that complies with Tier 3approach

1,123 Million(2009-2011) *)

b. Proposed FCPF: Establishmentof PSPs represented variousforest types for ground-basedforest carbon monitoring-Tier 3approach

USD 720K (2008-2011) *)

c. JICA: Improvement of monitoringand assessment system throughthe use of satellite images and thecapacity to estimate biomass andcarbon

USD 950K (2010-2011) *)

UNREDD: Review standard & methodologyMRV.

Institution:

1. Un-ReDD: Consensus on key issuesfor national REDD policy development

USD 500 K (2010-2011) *)

2. Un-ReDD: Dissemination of REDDlesson learned incl. building nationalknowledge & learning network.

USD 400K (2010-2011) *)

3. Un-ReDD: CommunicationsProgramme – incl. national campaign,education & communication materials,training with local stakeholders astargets.

USD 700K (2010-2011) *)

Payment Distribution

1. FORCLIME: Establishmentsustainable payment mechanism.

€20 Million (2010-2014) *)

45

no activity Cost

1. UN-REDD:

USD 400K (2010-2011) *)

a.

b.

c.

Compilation existing payment systemsAnalysis of benefits and constraints of existing systemOptions for modifications to meet requirements of a REDD payment system

Environment safeguard :UN-REDD: Toolkit for priority setting to maximize potential carbon benefits and incorporating co-benefits, at the provincial level

USD 375K (2010-2011) *)

UN REDD Central Sulawesi (plans) USD 5.6 M ***)

Source *) Sarsito (2010), **) Executive Summary Strategic Plan of Berau Forest Carbon (2010) and* **) Indonesia Timber Market Report Vo. 15 No.15,

1st-15th August 2010 hal.4.

The implementation of REDD+ in Indonesia can generally be divided into three important stages: formulation of the national strategy and REDD+ action plan, preparation and preliminary activities, and REDD+ implementation. The table below gives the complete activities:

table 7. REDD+ Phases in Indonesia

2010

Strategy

-

-

Development of the National REDD+ Strategy

Development of the National REDD+Action PLan


46

RPJmn (2010 – 2014)

Readiness from intial activities-

--

Development of REDD+ Infrastructure Pre-requisites Fulfilment of REDD+ enabling conditions Implementation of initial activities

RPJmn (2015 – 2019)

implementation--

Integration into RPJMFull REDD+ implementation


The figure below shows the dissemination stages at national level and the launching plan of REDD+ document at national level. The work plan is targeted to have been completed in October 2010.

Chart 4. National Action Plan REDD+ Strategy


Aut

hor’s

Tea

m a

nd

Tech

nica

l Tea

m

Consultation with takeholders

(1)

Revision of the Draft and the National Strategy & RAN REDD+ (5), (7)

First Revision of the Draft and the National

Strategy & RAN REDD+ (11)

Second Revision of the Draft and the National Strategy & RAN REDD+

(13), (15)

Preparation of Draft and National Strategy & RAN

REDD+ (2)

Draft and National Strategy & RAN

REDD+ (3)

Discussions within the Implementing

Team (4), (6), (8)

Discussions within the Steering Team

(9)

Multistakeholder Consultation in 7

regions (12)

Discussions within the Steering Team

(17)

National Strategy and RAN REDD+

(18)Draft and National Strategy & RAN

REDD+ (10)

Discussions within the Implementing

Team(16)

Launching of the National

Strategy and RAN REDD+ (19)

National Consultation (14)

Impl

emen

ting

Team

/ W

orki

ng G

roup

sS

teer

ing

Team

Reg

ion

4747

2.3.2 Beberapa Tantangan

a. Keterlibatan Pihak Swasta

Mengapa pihak swasta dilibatkan dalam program pendanaan perubahan iklim? Jawabannya, sangat jelas, dana dari pemerintah tidak akan cukup mendanai program-program tersebut? Namun, ada pertanyaan berikutnya yang jauh lebih substansial, apakah dengan keterlibatan swasta akan menjawab persoalan perubahan iklim? Kalaupun ya, apakah masyarakat luas akan diuntungkan? Bukannya skema pasar tersebut sangat berpotensi memberikan keuntungan pada pemilik modal, namun dalam waktu yang sama mengeklusi kepentingan masyarakat lokal, terutama masyarakat yang rentan (perempuan, anak-anak dsb).

b. Minimnya Dana Adaptasi

Melihat konteks kelahiran REDD plus serta sejarah tentang keterlibatan para pemiliki modal dalam pengelolaan hutan, skema bisnis yang menguntungkan merupakan sebuah jebakan. Mengapa sebagian besar dana yang disalurkan dalam bentuk mitigasi, dan bukan adaptasi? Jawabannya, karena dengan model mitigasi yang bertumpu pada prinsip perdagangan kuota emisi lewat mekanisme keuangan/pembiayaan, lebih mudah menyusun skema bisnis serta model usaha yang bisa diperhitungkan proyeksi keuntungannya. Di lain pihak, kebutuhan bagi negara-negara non-Annex I untuk melakukan

2.3.2 Challenges

a. involvement of the Private Sector

Why is the private sector involved in climate change fund programs? The answer is very clear: the government’s funds will not suffice to fund such programs. However, the next question is much more substantial: Will the involvement of the private sector address climate change problems? If yes, then will the general public be benefitted? Is it not that the market scheme will potentially be beneficial to investors but exclude the interests of local peoples, especially the vulnerable ones (women, children, etc.)?

b. lack of adaptation Fund

As far as how REDD+ came to existence and the history of the involvement of the private sector in forest management are concerned, profitable business schemes are nothing but a trap. Why is most of the fund allocated for mitigation, not adaptation? The answer is, with the mitigation models based on emission quota trade through funding mechanism, it is easier to develop business schemes and models whose profits can be projected. On the other hand, the need of non-Annex I countries to adapt notably to the social and ecological impacts of climate change


4848


adaptasi khususnya menghadapi dampak sosial-ekologis dari perubahan iklim tidak selalu dapat diterjemahkan ke dalam peluang investasi. Apalagi, perspektif donor tentang adaptasi adalah bahwa pengeluaran untuk adaptasi justru akan menciptakan kompetisi dengan dana pembangunan pada umumnya.

Proyek adaptasi pada dasarnya merupakan aktivitas yang dilakukan dalam rangka meningkatkan kemampuan berhadapan dengan kerugian saat ini dan masa yang akan datang dalam berbagai bidang sebagai konsekuensi dari perubahan iklim. Terkait dengan hal tersebut, skema REDD plus mestinya tidak hanya berorientasi untuk menurunkan emisi karbon namun juga harus mempromosikan pengurusan kelangsungan fungsi-fungsi ekologis hutan, di samping mengatasi berbagai persoalan terkait hutan, khususnya kemiskinan penduduk dan perluasan industri yang bersifat merusak hutan, seperti pertambangan yang sekarang justru diperbolehkan berlangsung di wilayah-wilayah hutan lindung..

Laporan yang dipublikasikan oleh sekretariat UNFCCC pada tahun 2007 menyebutkan, total estimasi tambahan investasi dan pendanaan adaptasi perubahan iklim di seluruh dunia mencapai US$ 60 – US$ 182 miliar hingga tahun 2030. Sekitar US$28 hingga US$67 miliar (atau sekitar 0,13 sampai 0,3 persen total PDB dunia) merupakan kebutuhan bagi negara-negara berkembang. Kebutuhan terbesar pembiayaan adaptasi adalah pada sektor infrastruktur, yang membutuhkan dana sekitar US$ 8 – 130 miliar hingga tahu 2030. UNFCCC juga memperkirakan dana tambahan sekitar US$52-62 miliar untuk sektor pertanian, sumber daya air, kesehatan, perlindungan ekosistem serta

cannot always be translated into investment opportunities. Moreover, donors’ perspective of adaptation is that expenses for adaptation will in fact compete with the general development funds.

Adaptation projects are basically activities undertaken to increase the capacity to address the current and future loss in various fields as a result of climate change. In relation to this, the REDD+ scheme should orientate not only to reducing carbon emission but also promoting sustainability of forest ecological functions, as well as addressing forest-related problems, in particular poverty and expansion of environmentally destructive industries such as mining, which are now allowed to operate even in protected forests.

A report published by the UNFCCC Secretariat in 2007 said that the total estimated world’s climate investment and fund would fetch US$60-US$182 billion up to 2030. Some US$28 to US$67 billion (or equivalent to 0.13-0.3 percent of the world’s GDP) would go to developing countries. The larges adaptation fund portion was for infrastructure, which needed around US$8-130 billion up to 2030. The UNFCCC also foresaw additional fund amounting to US$52-62 billion for agriculture, water resources, health, ecosystem and coastal protection; most would go to developing countries14.

In addition to the UNFCCC’s, estimates of adaptation fund were made by various groups. The World Bank (2006) estimated that

4949

wilayah pesisir, sebagian besar dana tersebut akan digunakan bagi negara-negara berkembang.14

Selain UNFCCC, perkiraan kebutuhan pendanaan adaptasi muncul dari berbagai kalangan. Di antaranya adalah Bank Dunia (2006), yang memperkirakan kebutuhan dana adaptasi bagi negara berkembang mencapai sekitar US$ 9-41 miliar per tahun hingga 2020,15 sementara angka yang dikeluarkan oleh Oxfam Internasional (2007) lebih banyak dari perkiraan Bank Dunia, yaitu mencapai US$ 50 miliar per tahun.16 Kenyataan ini sesungguhnya ingin menunjukan bahwa dana adaptasi merupakan kebutuhan terbesar negara-negara berkembang saat ini. Meskipun mereka harus menghadapi kenyataan bahwa dana-dana yang tersedia di internasional lebih banyak diperuntukan bagi program mitigasi.

the adaptation fund need for developing countries would reach US$9-41 billion annually up to 2020,15 while Oxfam International (2007) gave a larger estimate: US$50 billion annually16. These show that adaptation funds are what developing countries badly need at the moment although they have to face the fact that the funds available at international level are allocated more for mitigation programs.

Currently, fund for global mitigation programs is ten times as much as that for adaptation programs, at least this is what has been promised. From the USA, nearly half of the US$38 billion fund for mitigation will be through Clean Development


50

Mecanism17. On contrary, despite the high risk and vulnerability, Asian countries will only have US$3.8 billion of global adaptation fund, of which Japan is the largest contributor.18 It is estimated that South Asia, East Asia and the Pacific will need up to US$35 billion annually between 2010 and 2050 for adaptation. Despite this, mitigation programs are the ones receiving the largest climate fund to date19. In COP 16 in Cancun, developed countries agreed to a commitment and would provide additional US$30 billion for adaptation and mitigation funds for the 2010-2012 period. The commitment also included a long-term fund of US$100 billion annually starting from 2020.

2.3.3 Victims’ Perspective

History has it that the involvement of the private sector in forest management tended to exclude local people’s interests. Therefore, more local people-oriented approaches should be adopted as in many forest management schemes people tend to be disadvantaged. Various forest management regulations have been developed, but none are based on victim’s perspective, for example:

1. P. 68/Menhut-II/2008 on the Implementation of Demons-tration Activities of REDD,

2. Forestry Minister’s Decree (Permenhut) No. 30/Menhut-II/2009 on REDD Procedures,

3. Forestry Minister’s Decree (Permenhut) No. 36/Menhut-II/2009 on Licensing of Utilization of Carbon Sequestration and or Storage in Production Forests and Protected Forests

2.3.4 Redistribution mechanism

With the inclusion of market principles, REDD implementation will lead to the shrinking of state’s payment transfer for welfare

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programs and subsidies. A concrete implication in Indonesia’s context is the removal of fuel subsidy as the subsidy is thought to provide incentives for environmental pollution. In this case, the market principle in climate change program management collides with the social reality that the general public still need the subsidy.

Indonesia along with Brazil has the highest deforestation rate with 1.87 million hectares of forest disappearing annually. In the meantime, Indonesia is classified as the world’s third largest emitters after the USA and China, due to forest and peat fires. An analysis of the 1997 forest and peat fires estimates that some 0.81-2.57 Gt of carbon were released into the atmosphere, accounting for 13-40% of the global annual emission from fossil fuel burning. This means that the largest emission contributor in Indonesia was not fossil fuel burning in cars and industry. The problem was much more primitive than that as it was due largely to the high risk of forest fires. There must be an integration of policies and adequate provision of energy sources for domestic interests.

2.3.5 integration with the national Strategy

In the 2009-2014 Mid-term Development Plan (RPJM) 2009-2014], environmental issues received relatively much attention. The issues at least had relevance with 3 out of 11 government’s priorities, i.e. food security, energy and the environment, and disaster management. Integration of REDD+ is an important priority so that the scheme is widely known by bureaucratic apparatus, both at national and regional level. The National Climate Change Council (with representatives from 15 ministries) has been formed to harmonize Indonesia’s climate change policies.


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The Indonesian government has created climate trust fund and developed climate change policy papers and low carbon development strategies. The Ministry of Finance also has facilities to promote environmentally-friendly energy initiatives, including geothermal. The Ministry of Industry has formulated roadmaps and strategies to reduce emission through 4 main industries: cement, pulp and paper, steel and textile. The direction of the development policy, which is integrated with climate change issue, is summarized in the 2005-2025 Long-Term Development Plan (RPJP) 2005-2025], the 2004-2009 Mid-Term Development Work Plan (RPJM) 2004-2009], the 2010-2014 Mid-Term Development Plan (RPJM) 2010-2014] and Government Work Plans for the years 2009 and 2010. To integrate climate change into the national development plan and in the framework of sustainable development, the government – in this case Bappenas – has prepared a short-term multisectoral plan, as reflected in ”The National Development Plan: Responses to Climate Change (2008). The document contains various activities in the context of funding mechanism and institution arrangements and provides a basis for the development of climate change partnerships. The document, along with other technical and sectoral ones, was used as a basis for the development of the 2010-2014 Long-Term Development Plan (RPJM), which was released in early 2010.

The designing of a national level climate change agenda requires the government’s capacity to mobilize both domestic and foreign funding sources to fund the associated activities. The government is convinced that the ambitious target can be achieved considering that most of Indonesia’s emission comes from the forestry sector, such as deforestation and forest fires20.

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sebagian besar emisi Indonesia berasal dari sektor kehutanan, seperti kebakaran hutan dan deforestasi.20 Untuk mewujudkan komitmen ini, maka disusun Rencana Aksi Nasional Penurunan Gas Rumah Kaca (RAN-GRK) yang prinsipnya adalah NAMAs oleh Indonesia. Nationally Appropriate Mitigation Actions (NAMAs) adalah upaya pengurangan emisi secara sukarela oleh negara berkembang dalam konteks pembangunan berkelanjutan. NAMAs dapat didukung oleh pendanaan, alih teknologi dan penguatan kapasitas oleh Negara industri yang sifatnya terukur, dilaporkan dan diverifikasi (Measurable, Reportable and Verifiable/MRV).21 RAN-GRK ini yang selanjutnya akan dievaluasi dan dikajiulang sesuai kebutuhan nasional dan perkembangan global terkini, sehingga memenuhi persyaratan dan pengakuan internasional (UNFCCC).

Text of the BAP on enhanced action on the provision of financial resources and investment for mitigation dan adaptation (decision 1/CP.13, para. 1.e.i-vi)

• Improved access to adequate, predictable and sustainable financial recources and financial and technical support, and the provision of new and additional resources, including official and concessional funding for developing country parties;

• Positive incentives for developing country perties for enhanced implementation of national mitigation strategies and adaptation action;

• Innovative means of funding to assist developing country parties that are particularly vulnerable to the adverse impact of climate change in meeting the cost of adaptation;

• Means to incentivize the implementation of adaptation actions on the basis of sustainable development policies;

• Mobilization of public- and private – sector funding and investment, including facilitation of climate –friendly investment choices;

• Financial and technical support for capacity-building in the assessment of the costs of adaptation in developing countries, in particular the most vulnerable ones, to aid in determining their financial needs.

To realize this commitment, the Indonesian government has prepared the National Action Plan for Green House Gas Reduction (RAN-GRK), which is basically NAMAs. The Nationally Appropriate Mitigation Actions (NAMAs) is a voluntary effort of developing countries to reduce emission in the context of sustainable development. NAMAs can be supported by industrialized countries through funding, technology transfer and capacity building that are measurable, reportable and verifiable/MRV).21 RAN-GRK will be evaluated and reviewed in accordance with the national needs and the recent global development so that it is in line with the international (UNFCCC’s) requirements and recognition.


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Chapter III

CLImATE FINANCE FLOwS

3.1 Funding architecture

Climate finance is a term given to financial sources currently being mobilized to mitigate climate change, that will enable developing countries to reduce emission and adapt to climate change impacts. The advance in the new funding scheme gets justification for political and scientific reasons.22 On the contrary, the market mechanism-based resolutions, which since their inception have led to increasing green house gas emission and which have been arisen from climate change-driven social ecological crises, are contested by many.23 Funding affairs were emphasized during COP 13 in Bali in 2007, where it agreed to provide sufficient, predictable and sustainable funds to fund various mitigation and adaptation activities in developing


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countries. The Bali Action Plan (BAP) is seen as a milestone in raising the political status of adaptation measures and lays a basis for more detailed discussions about the international adaptation funds. More importantly, BAP emphasizes the significance of equal treatment to improve various mitigation and adaptation measures.

Climate finance receives special attention from the Indonesian government currently. It is said that Indonesia needs new and additional funds from both domestic and foreign sources to implement the development activities to support the government’s commitment to reducing carbon emission by 26% in 2020 at business as usual (BAU) level and by 41% through international aids.24 Climate change finance policies are used to fund activities and are implemented through fiscal policies that encourage reduction of green house gas emission by giving added values to carbon. This is considered as a low-cost climate change policy that will generate revenue in the long run. The fiscal policies can be in the form of (1) emission trading and (2) carbon tax/levy. The first policy means the government sets the amount of GHG emissions estimated to be emitted and sells a permit to certain parties to emit such an amount of emission. The second policy means the government sets a price of each emission along with the associated tax.25

As the government needs enormous funds, it quickly opens the door for incoming new funds from grants and or foreign loans. The funds can be sourced from bilateral or multilateral creditors through mechanisms under the UNFCCC’s or Official Development Assistance’s (ODA’s) procedures.

ODA is defined as a flow of money to ODA’s recipient countries and to multilateral development institutions. The

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funds must be distributed by official institutions, including state’s and local governments or the recipients’ executive body, and these institutions must promote developing countries’ economic development and prosperity as the main goal. ODA must be provided as soft loans accompanied by grants of not less than 25% (OECD, 2008).26

The grants or foreign loans are used not only for funding but also for exchanging information and lessons to strengthen and improve the national planning, budget, procurement, monitoring and evaluation as well as institutional and human capacity.

The use of loans to fund adaptation and mitigation programs has caused a lot of debates. Some argue that such a use may put heavy repayment burden to developing countries. Others say that such loans should be of high degree of concessionality. This view is based on the investment need to fund capital-intensive mitigation activities. Basically, though, funding should be viewed as the basic right of the legal obligation of developed countries as the largest emitters to prevent and compensate for loss, not as help (see India’s submission in UNFCCC, 2009a: 41).27 Therefore, climate funds must be given as aid, not debts, and it is up to the recipient countries to determine their use priority.

Developed countries should be obliged to provide developing countries with ecological rehabilitation as a compensation for the advancement of development in developed countries that has led to environmental degradation and economic injustice


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in developing countries. The advanced level of developed countries’ economy cannot be separated from the exploitation of natural resources and provision of illegitimate debts in developing countries.

The rapid economic growth in developed countries – centers of capitalism – increases the need for abundant raw material supply from exploitation of natural resources in developing countries. Developing countries have long been positioned as supporters of industrialization advancement in capitalist countries by supplying minerals, oil, gas, coal, palm oil, timber and agricultural products. Foreign debts and various development aids, both distributed through bilateral and multilateral schemes, are important to ensure the continuity of the supply.

Therefore, in the context of climate finance debate, non-Annex I countries see adaptation fund as basically something very different from Official Development Assistance (ODA) or at least an addition to ODA’s commitment, which stands at 0.7% of GDP. In ODA, the power relation between donors and recipient countries is not equal, and even it is very often that ODA mechanism entails requirements that disadvantage recipient countries. In adaptation funds, on contrary, the relation is equal, where developed countries have not only moral responsibilities but also legal obligation to support developing countries.28 Critical attitudes towards ODA as a climate finance mechanism are also based on past history of ODA distribution that brought much harm to people.

The position of Indonesia itself towards ODA’s role in climate finance is basically inclined to be more pragmatic. It should be underlined that ODA for climate change programs must be provided as soft loan and should not decline donors’ commitment

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to funding other sectors not related to climate change, on condition that this must be subject to the regulations applicable in the country and must comply with the principles set forth in the Paris Declaration governing projects to be funded.29 The position of the government is based on the intention to utilize funding opportunities available at international level, in the midst of the State’s increasing financial burden for development needs and annual debt repayments.

The terms and conditions of the use of ODA, both bilateral and multilateral ones) are based on Presidential Instruction (Inpres) No. 8 of 1984 on Use of Foreign Export Credit, improved by Governmental Regulation (Peraturan Pemerintah) No 2 of 2006 on Procedure for the Provision of External Loans and Grants and the Forwarding of External Loans and Grants, which stipulates that debts in the form of soft loans must meet the following criteria: 1. repayment period: 25 years or more2. grace period: 7-10 years3. interest rate: 2-3%4. there is a grant element in the debt as much as 35%

Currently, climate finance in Indonesia are mostly oriented to fund mitigation programs. This is in line with the government’s commitment to reducing GHG emission in Indonesia by 26% in 2020. The funds themselves may come from domestic and foreign sources, with the former being taken from the State

Developing countries have long been positioned as supporters of industrialization advancement in capitalist countries by supplying minerals, oil, gas, coal, palm oil, timber and agricultural products. Foreign debts and various development aids, both distributed through bilateral and multilateral schemes, are important to ensure the continuity of the supply.


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budget of revenues and expenditures (APBN) in accordance with the 2010-2014 Mid-Term Development Plan (RPJMN).

Funding sources from the State budget of revenues and expenditures (APBN) can be classified into: a) pure rupiahs, b) domestic and foreign grants, c) foreign debts, Debt to Nature Swap, d) Indonesian Climate Change Trust Fund, and e) Green fund. However, the 26% commitment, fulfilled unilaterally, comes not only from the national source, but also other domestic fund sources such as regional governments’ budget (APBD), government’s debts, private investment (banking and non-banking) and corporate social responsibility (CSR).

Other sources of fund are expected from the domestic private sector that includes a) banks, b) non-Banks, and c) Corporate Social Responsibility (CSR), as well as global funds. The global funds are sourced from Global Environment Fund, Copenhagen Green Climate Fund, or other global funding schemes. These sources are expected to support the government’s programs to achieve the emission reduction target in Indonesia.

In “Indonesia Climate Change Sectoral Roadmap (ICCSR), the projected fund need for Indonesia’s mitigation programs, based on the calculation by the National Development Planning Agency (Bappenas), fetches US$68.6 billion up to 2020.30 The ICCSR contains mitigation strategies and adaptation framework in nine sectors, namely forestry, energy, industry, transportation, waste, agriculture, marine and fishery, water resources and health, to face climate change challenges up to 2030. The ICCSR is expected to be a reference for the national and regional governments in implementing mitigation and adaptation programs.

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Secara umum, ruang lingkup materi ICCSR dapat dikelompokkan menjadi dua, yaitu mitigasi dan adaptasi. Dalam bidang mitigasi, fokus kegiatan diarahkan pada tiga sektor utama yaitu: Kehutanan dan gambut, energi-industri-transportasi, dan limbah. Sementara yang lainnya dikategorikan adaptasi. Dana yang diperlukan untuk mendukung kegiatan yang tercantum dalam ICCSR untuk mendukung pelaksanaan RPJMN 2010-2014 yang ada dan RPJMN selanjutnya hingga 2030.

Tabel 8. Matriks Aksi Mitigasi Sektoral sampai dengan 2020

SectorTotal Mitigation

cost(billion USD)

% Emission Reduction each

sector

Energy (Java-Bali) / RUPTL

53.776 6.20%

Energy (Sumatera) /RUPTL

9.714 22.22%

Industry/Cement 0.47 7.66%

Transport/Modal Shifting

2.01* 10.0%

Waste/Electrical Generation from Sanitary Landfill in Urban

1.49 42.1%

Waste/3R and Composting in Rural

0.81 24.8%

Forestry (LULUCF) and Peatland

0.34 26.7%

Total 68.6 23.7%

*= tidak termasuk biaya negatif

Sumber: ICCSR, BAPPENAS 2009

In general, the scope of ICCSR’s content can be classified into two: mitigation and adaptation. With regard to mitigation, the focus is directed to three main sectors: forestry and peat, energy-industry-transportation, and waste. The others are classified into adaptation. The funds needed to support the activities in ICCSR are to support the implementation of the RPJMN 2010-2014 and the next RPJMN up to 2030.

table 8. Sectoral Mitigation Action Matrix up to 2020

*= excludng negative costs

Source: ICCSR, BAPPENAS 2009


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Based on the plans in the RPJM 2010-2014, the estimated resource envelope for 2010-2014 related to GHG emission reduction available is about IDR37.889 trilion.31 However, the “National Economic, Environment and Development Study (NEEDS) for Climate Change” report published by DNPI in 2009 gives a slightly different figure. It is said that the government is committed to allocating IDR83.3 trillion to achieve the 26% emission reduction target. To achieve the 41% emission reduction target will require IDR168.3 trillion. The average annual cost to reduce emission in all sectors up to 2020 is about EUR5.95 billion to achieve the 26% reduction (the first mitigation scenario) and about EUR12.02 billion to achieve the 41% reduction (the second mitigation scenario). If all the potential measures to reduce emission were to be applied, then the average annual cost for all sectors up to 2030 would reach EUR12.84 billion.32

It is unfortunate that no appropriate estimates have been in place to calculate the adaptation need from the government’s

sectoral mapping. One of ADB’s studies reports that the adaptation cost for Indonesia’s agriculture

and coastal zones will reach the average US$5 billion annually up to 2020. The

annual benefits to avoid destruction from climate change to Indonesia tend to exceed the cost Indonesia will have to spend annually up to 2050. Even the study says that in 2100, the benefits that

With the total state budget amounting to IDR1.126 trillion in 2010, the government needed to take

IDR237 trillion from it for debt installment repayment (of the principal debt and the interest).

This would happen as Indonesia had huge debts.

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Indonesia will gain might reach 1.6 percent of the GDP, compared with the cost needed, which will fetch 0.12 percent of the GDP (ADB, 2009).

The huge funds needed to address climate change may significantly increase Indonesia’s debt burden in the future. The increasing dependence on debts may give birth to a lazy fiscal regime, where the government is getting lazier to reform its revenue (from tax and natural resources) system to achieve fiscal self-sufficiency. Budget allocation for debt repayment will use up all budget to achieve the national development goals mandated by the Constitution (education, health, occupation, agriculture, including prevention of climate change impacts). In such a case, Indonesia becomes an interesting example. With the total state budget amounting to IDR1.126 trillion in 2010, the government needed to take IDR237 trillion from it for debt installment repayment (of the principal debt and the interest). This would happen as Indonesia had huge debts. Up to June 2010, the Department of Finance recorded the total amount of Indonesia’s debts, which stood at IDR1,609 trillion. The accumulated repayment of the principal debts and the interests for the period 2005-2009 reached IDR879 trilion.33

In addition, the use of the debts is in fact in contradiction to the basic principle of “climate justice”, where industrialized countries should be obliged to pay the destruction they have created from their emission. Industrialized countries, with only less than 20% of the world’s population, are the ones most responsible for 75% of the world’s total emission in the past (historical emission).34 Using debts, developing countries will in fact suffer twin impacts: suffering from the adverse impacts of climate change and the obligation to repay the adaptation and mitigation programs they receive.


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table 9. Position of Foreign Loans (2004 – 2010)

note 2004 2005 2006 2007 2008 2009 2010(Q ii)

Government and monetary

authorities 82,725 80,072 75,809 80,609 86,576 99,265 105,697

according to institutions 82,725 80,072 75,809 80,609 86,576 99,265 105,697

national government 70,153 69,245 73,051 76.92 85,122 90,853 97,571

monetary authorities (Bi) 12,572 10,827 2,758 3,688 1,454 8,412 8,126

according to terms and

conditions 82,725 80,072 75,809 80,609 86,576 99,265 105,697

Commercial 5,234 9,440 13,857 18,418 19.93 31,415 39,697

non-commercial 77,491 70,632 61,952 62,191 66,646 67.85 66.00

ODa 59,244 54,362 46,943 47,663 58,126 58,342 57,305

non-ODa 18,247 16.27 15,008 14,528 13.52 9,508 8,694

Private 54,299 50,58 52,927 56,032 62,565 73,606 77,632

Financiers 8,215 6,386 6.59 7,515 8,835 12,597 15,035

Bank 3,909 4,057 4,573 5,401 5,668 9.53 11,505

non-Bank 4,306 2,329 2,017 2,114 3,167 3,066 3,530

non-financiers 46,084 44,194 46,337 48,517 53,729 61,009 62,597

total 137,024 130,652 128,736 136,64 149,141 172,871 183,329

source: Bank Indonesia, 2010

3.2 trapped in Climate Change Debts

Up to the year 2010, the Indonesian government received new debts for climate change mitigation amounting to US$2.3 billion, comprising US$1.9 billion for programs and US$400 million for projects. 35 The sources of the debts were bilateral and multilateral creditors. In the first phase, Japan and France pioneered a new debt scheme to fund climate change programs in Indonesia called “Climate Change Policy Loan.” This

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was followed up by the World Bank, which has been the only international financial institution having provided program debt facilities for Indonesia since 2010.

The development policy loans from the three creditors were used to make up the deficit in the state budget. Besides raising a question about its effectiveness of and transparency in the use, debts of those kinds could advantageously be used by the creditors to dictate Indonesia’s economic political policies using climate change issue. The notion is based on Indonesia’s previous experience in distributing Development Policy Loan (DPL). Similarly, the use of clean technology to replace the widespread use of fossil fuel-based technology need huge investments. Therefore, precaution is badly needed if creditors’ project offers are to be accepted.

The use of the grants and foreign debts complies with the principles set forth in the Paris Declaration and the Jakarta Commitment on equality between creditors and recipients countries. However, recipient countries cannot deny creditors’ great roles in providing financial support and technical assistance since the early phase of the aid, maintaining creditors’ dominance. This is what has happened in climate change policy making. The government has prepared climate-friendly economic development strategies under the coordination and financial support of some bilateral and multilateral creditors. Creditors including Australia, Germany, Holland, France, England, Japan, ADB and the World Bank are actively involved in developing policies at macro-to-sectoral level.

As elaborated below, the active involvement of creditors has limited the room for pro-national climate change policy strategies. As a result, the government’s climate change analyses


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and policies give more priorities to climate change activities that support the market scheme. The policy matrix, on which work plans and baseline debt agreements are based, covers sensitive issues in energy subsidies, carbon market mechanisms, and the private sector’s involvement in provision of energy infrastructure. The situation has made climate change policy making nonsensitive to two things: the use of foreign debts to finance climate change projects and programs in Indonesia, and, 2) the position of international financiers such as the World Bank and ADB, which have bad track records in financing energy-related (coal and fossil fuel) and plantation projects

To Indonesia’s civil society, international financiers’ climate change policies are none but endeavors to divert climate change issue into expansion of new development loans. Moreover, international financiers such as the World Bank and ADB actively market their development loans in the name of climate change.36 The civil society generally says that climate change finance must comply with conventions regulating the obligation of Annex I countries, and provide financial support through grants and transfer of clean technology for developing countries that suffer big impacts such as Indonesia.37

The use of foreign debts for climate change activities during 2008-2010 still aroused controversy. There were disagreements between the government and the national legislature [House of Representatives (DPR)] about this. DPR emphasized that climate change mitigation was a shared responsibility; therefore, the fund should not have come from debts but grants from the

DPR’s supervision was highly needed to ensure whether the debts were really needed to reduce emission or whether they were used only to make up the deficit in the state budget. Should this not be monitored, the effectiveness of climate change mitigation would be a mere lip service, generating no benefits for the people

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emitters. There was a deep concern that the debts would be used to add to the declining exchange reserve.38 This was not an overstatement as the government had to think very hard to pay debt installments, mostly in foreign currency. Therefore, new debts, notably development loans, constituted an important source to address the problem.

At this level, DPR’s supervision was highly needed to ensure whether the debts were really needed to reduce emission or whether they were used only to make up the deficit in the state budget. It was worried that climate change issue is used as an instrument to expand new debt schemes in various sectors. Should this not be monitored, the effectiveness of climate change mitigation would be a mere lip service, generating no benefits for the people. DPR’s supervision in climate change finance was in fact inadequate. Only those concerned about the issue rejected the plan as indicated by the fact that for three years the issue was not seriously discussed in the budget meetings between the government and DPR.

table 10. Repayment of the Principle Debts and the Interests 2005-2010

Detail 2005 2006 2007 2008 2009 2010*

Payment of interest(trilion iDR)

65.199 79.082 79.806 88.429 109.590 112.452

a. Domestic loans 42.600 54.908 54.079 59.887 70.699 74.126

B. Foreign loans 22.599 24.174 25.727 28.542 38.890 38.326

loan repayment (trilion iDR) 61.569 77.741 100.705 103.768 113.331 124.667

maturity and Buyback SBn 24.456 25.060 42.783 40.333 45.300 70.541


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Foreign loan installments 37.112 52.681 57.922 63.435 68.031 54.136

total 126.768 156.823 180.511 192.197 222.921 237.119

source: APBN, DJPU, diolah

*APBN-P 2010

So far, the climate change loans received by the Indonesian government are of two types:

3.2.1 the Climate Change Sector/Project loan

These are debts directly related to certain activities undertaken by ministries or institutions so that they are covered by the budgets or debts that are continuously given to regional governments or state-owned enterprises (BUMN). Basically, project loans are given by creditors in the form of goods and services. Policies governing their uses are always directed to finance the rehabilitation and development of economic infrastructure such as roads, bridges, schools as well as social infrastructure such as hospitals.

table 11. The Climate Change Sector Loan

Source: the Republic of Indonesia Ministry of Finance, 2010

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Project loans are in fact an instrument to market the creditors’ goods and services. These project loans are among the tools to finance activities in various projects or specific sectors that support the achievement of climate change mitigation and adaptation in Indonesia. Their uses are directed to finance projects or investment programs that promote use of clean technology and renewable energy. The finance scheme in this framework is related to support from some international financiers such as IBRD, IFC and ADB and some bilateral financiers.

These clean technology project loans are a new scheme commonly known as Climate Investment Fund (CIF). CIF was established in 2008 with the aim to promote a new approach to mobilization of climate change finance for developing countries. CIF is a collaboration of the World Bank group and creditors such as African Developmentes Bank (AfDB), Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), and Inter-American Development Bank (IADB). The first fund will be distributed through the Clean Technology Fund (CTF) scheme with the total allocated fund given as soft loans amounting to US$4.4 billion and 13 investment plan portfolios in 9 countries with the total fund prepared amounting to US$4.4 billion for a one-year period.39 CIF has two kinds of fund:

1. Climate Technology Fund, aiming to accelerate the transformation process (developing countries) towards low carbon growth path through cost-effective GHG emission mitigation, with innovation and deployment of clean technology in developing countries being central to success.

2. Strategic Climate Fund, which is a special fund allocated for a number of targeted projects to develop new approaches with potential for scaling-up. A climate resilience pilot program is the first SCF’s project.


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When it was approved in July 2008, the trust fund for both CIF’s instruments was US$6.3 billion, lower than the initial proposal of US$10 billion. In distributing the fund, Multilateral Development Bank will provide additional grant and loans for developing countries to mitigate climate change. In 2010, Indonesia obtained a funding commitment of US$400 million under the Climate Technology Fund (CTF) scheme. The loan was a fund and an investment for Indonesia to reduce emission through transformation of use of renewable energy (RE) and energy efficiency (EE). The World Bank mentioned that through the scheme it could help Indonesia to achieve provision of 17% energy through RE and EE out of the 30% target in 2025.40

The investment would also help the Indonesian government to increase the geothermal capacity by 800 MW out of the 4,700 MW and 9,500 MW targeted for the year 2014 and 2025 respectively. The new capacity (800 MW) geothermal investment could reduce CO2 emission by 5.1 million tons annual and is projected to exceed 100 million tons in a 20-year period.

Climate Investment Fund (CIF) requires low carbon pathways-based development schemes, adding additional debt burden to poor and developing countries, which have been suffering from exploitation by developed countries.

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table 12. Climate Investment Fund


Specifically, CTF Investment Plan is a co-financing scheme for two fields:

(a) large-scale geothermal capacity building, involving a total US$300 million fund. ADB and IBRD each contributed US$125 million with the rest (US$50 million) being provided by IFC to support the private sector.

(b) acceleration of initiative to promote Energy Efficiency (EE) and Renewable Energy (RE), involving a total US$100 million


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sourced from ADB and IFC to support biomass and micro hydro projects. The CTF Investment would mobilize finance up to US$2.7 billion from multilateral institutions, state-owned enterprises (BUMN), and the private sector.

Financing support for geothermal investments and application of renewable energy in Indonesia are estimated to be increasing in the subsequent years. To facilitate the increasing financing in the sector, the government has prepared various policy reform packages to address the bottlenecks that limit investments. Among the reformed policies are those on price, incentives for geothermal construction, transparent and competitive geothermal concession tender, risk management and increase in domestic capacity. The policy packages are also supported by the climate change development policy loans between the Indonesian government and the World Bank, which started in 2010.

Through the loans, it is expected that more friendly regulations would be created to attract larger investments in renewable energy sources and improved fossil fuel efficiency.41 The financing framework under the CIF scheme is in fact arousing criticisms from many parties. This is due primarily to the World Bank’s strong control over the fund distribution and to the poor transparency and democratization in decision making within it. In addition, the CIF framework developed by the World Bank is considered to neglect the “polluter pays” principle, where the largest burden to address climate change crises is placed on developed countries due to their funding capacity and advanced technology in addition to their higher pollution trails compared with those in poor and developing countries. CIF is given to poor and developing countries in the form of loans, which often requires low carbon pathway-based development schemes. This surely gives additional debt burdens to poor and

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developing countries having been suffering from developed countries’ exploitation.42

3.2.2 the Climate Change Program loan

Cash loans more commonly known as development program loans are those used to finance the deficit (budget support), which will be disbursed when the policy matrix is fulfilled or a certain activity is accomplished. Policy matrix generally contains reform programs that must be done by the government in certain sectors in accordance with the creditors’ direction.

table 13. Term of Conditions of Climate Change Program Loans

CCDPl(World bank)

CCPl(JiCa)

CCPl(aFD/France)

Amount :USD 200 milion (FY 2010)

USD 300 milion (FY 2008)USD 300

milion(FY 2009)USD 300 milion

(FY 2010)

USD 200 milion(FY 2008)USD 300 milion (FY 2009)USD 300 milion (FY 2010)

Interest rate : LIBOR + 0.24% 0.15%

LIBOR – 30 bps (FY 2008)EURIBOR – 30 bps (FY 2009)LIBOR + 50 bps (FY 2010)

Grace Period : 9 years 5 years 5 yearsRepayment Period 24,5 years 15 years 15 years

Front end-fee 0.25% -Commitment Charge : - 0.1% -



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From 2008 to 2010, Indonesia got a foreign debt under the “Climate Change Program Loan” scheme from two bilateral creditors, namely Japan and France, and one multilateral one – the World Bank, amounting to US$1.9 billion in the form of soft loan. The loan was a bilateral agreement between Indonesia and Japan under a new finance mechanism called “Cool Earth Partnership”, which started to be discussed in 2007. The “Cool Earth Loan” is given to developing countries to reduce GHG emission and to achieve economic growth in a compatible way.

The scope of the assistance will cover projects and programs contributing to climate change mitigation, and many sectors and fields (forest conservation, greening, pollution prevention, energy saving and natural resource conservation, environmental conservation, new and renewable energy sources, ozone layer protection, marine pollution, prevention of desertification, water availability that contributes to prevention of infectious diseases and poverty reduction).43

When the Japanese government launched the program in 2008, the total fund available amounted to approximately US$10 billion over the next five years, aiming at two goals: 1) adaptation to climate change and improved access to clean energy (up to US$2 billion); it is a scheme of grant aid, technical assistance and financing aid through international organisations to fulfill the needs of developing countries, and 2) climate change mitigation (up to US$8 billion). This is a scheme of technology transfer from Japan and promotion of GHG emission reduction at global level.44 Examples include increased energy efficiency in power plants.

The Climate Change Program Loan (CCPL) for Indonesia is the first case of Climate Change Japanese ODA Loan for climate change mitigation.45 The Japanese loan for Indonesia is an untied soft loan

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with preferential interest rate of 0.15%, 15 years of repayment period and 5 years of grace period. These requirements are somewhat more expensive in terms of repayment period than the term & conditions of “Climate Change Japanese ODA Loan,” with 0.30% interest rate, 40-year repayment period and 10-year grace period.46

Along with Japan, the French government via Agence Française de Développement (AFD) has also provided financing since early stages. During 2008-2010, France provided Indonesia with climate change program loan of US$800 million. Besides, AFD also provided a grant of technical assistance for energy efficiency in cement and steel industry (to the Ministry of Industry) as well as a feasibility study on small-scale green carbon market and methodologies for spatial plan (to the Ministry of Forestry). AFD also financed the second phase of study on GHG emission abatement cost curve undertaken by McKinsey & Company for the National Council on Climate Change (DNPI).47

During 2007-2009, the World Bank was involved in debt distribution but it was actively facilitating discussions and providing input, supporting documents and technical assistance on program priorities to be undertaken by the Indonesian government.48 The Bank’s involvement started in the 2010 budget year through a loan agreement between the Indonesian government and the World Bank under the “Climate Change Development Policy Loan (CC DPL)” scheme amounting to US$200 million. The scheme was slated to run up to 2012. Based on the ADB’s business plan in Indonesia, ADB would also be involved in climate change financing, which was slated for the year 2011. The total amount of fund available amounted to US$600 million for the 2011-2013 period.49


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table 14. Climate Change Program Loans 2008 – 2010

no Country/institution

amount (in million USD)total

2008 2009 20101 Japan/ JICA 300 300 300 9002 France/ AFD 200 300 300 8003 World Bank - 200 200

total 500 600 800 1,900

Source: the Ministry of Finance, 2010

The policy reform approach in the World Bank’s loan uses the same policy matrix as used by the Indonesian-Japanese-French governments under the CCPL scheme. Some substance in the energy, peatland and forestry sectors has been sharpened. The World Bank also emphasizes that the CC DPL scheme has direct and indirect links to both completed and ongoing projects or programs, for example link with the REDD’s demonstration activities or policies on electricity price and fuel subsidy within the context of the Bank’s Infrastructure Development Policy Loan (IDPL) scheme. The scheme is also related to the loans under the Climate Technology Fund (CTF) scheme of US$400 million in 2010, namely support for friendlier policies on energy investment.

The Climate Change Program Loan – CCPL and the CC DPL/WB) are aimed to support the ongoing policy reform, to address various climate change issues, through a number of goals/activities set out in the three-yearly “Policy Matrix”, which includes: Mitigation (forestry, energy, transportation), adaptation (agriculture, water, etc.), and cross-sectoral issues. The policy matrix is based on the National Climate Change Mitigation Action Plan, launched during the 2007 COP 13 in Bali and on the “National Development Planning: Response to Climate Change (Yellow Book)” published for the first time in 2008.

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The purposes of the aggregate loans are to (i) improve climate change mitigation through increase of GHG absorption and GHG emission control, (ii) strengthen the government’s adaptation capacity in responding to the adverse impacts of climate change, and (iii) improve cross-sectoral climate change-related actions, by supporting the implementation of the government’s policies on climate change through policy dialogs.

Picture 1. Flow of Climate Change Program Loans

Source : Policy Matrix (GOI-JICA-AFD-WB

The fund received was not directly used to finance climate change projects/activities listed in the policy matrix. The related ministries (or institutions) would finance the activities from their own budget or other financial sources.50 The flexible characteristics of the loans enabled the government (in this case the Ministry of Finance) to use them for priority programs


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in other sectors. Thus, the distribution of the fund was mixed with the government’s budget and became an integral part of the budget use policy of the State budget of revenues and expenditures (APBN). Despite this, some activities listed in the policy matrix were still the priorities to be implemented by each of the related ministries in the fiscal year as set forth in the loan agreement.

Since the loan-based cooperation mechanism was agreed, the government has produced more than ten legislation products and tens of cross-sectoral policies related to climate change mitigation and adaptation agendas in Indonesia in accordance with the policy matrix. Basically, the policy is an instrument to prepare the legal infrastructure for the institutionalization of market mechanism into the implementation of climate change agendas in Indonesia. Some of the agendas are declared not yet ready for implementation, among others those related to electricity pricing that better reflects the economic price. The progress of the implementation of the policy matrix is continuously evaluated and monitored in accordance with the World Bank and ADB’s loan distribution plan up to 2013. The various legislation products and other regulations produced are thought to help Indonesia develop profitable policies, regulations and institutional arrangements that enable Indonesia to access global climate finance and carbon market.

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table 15. Regulations and Policies Produced based on Climate Change Policy Loan

Policy area / Sector Policy (2007 – 2010) Follow up (2011-2012)

1. mitiGatiOn

PeatlandConservation

Forestry Minister Decree No.P.55/Menhut-II/2008on the Master Plan of Rehabilitation and Conservation of Peat Management Areas in Central Kalimantan

To publish presidential decree that covers specific measures for petland conservation and wet peatland management to reduce carbon emission

Reduced emissionsfrom Deforestationand Degradation(ReDD)

Forestry Minister Decree No.P.68/Menhut-II/2008Dated 11 December2008 on Implementation of DemonstrationActivities of Reduced Emission from Deforestation and Forest Degradation (REDD)

To complete the ministerial decree on REDD Mechanism and procedures that defines the roles and responsibilities of regional governments, people, and the private sector in managing carbon asset.

Forestry Minister Decree No.P.30/Menhut-II/2009On Trade in Reduced Emission from Deforestation and Forest Degradation (REDD)


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Forestry Minister Decree No.P.36/Menhut-II/2009On Licensing Procedures for Utilization of Carbon Sequestration and/or Stock in Production Forests and Protected Forest

Forestmanagement andGovernance

Forestry Minister Decree No P.38/Menhut-II/2009Dated 12 June 2009on Standards and Guidelines to Assessment of Sustainable Production Forest Management Performance and to Timber Legality Verification.

To formalize inter-government transfer mechanism to finance and increase incentives for regional governments to strengthen forest management activities to reduce emission.

Renewable energyDevelopment

Presidential Decree No.4 of 2010 on Assignment to PT PLN (the National Electricity Agency) to Accelerate Development of Power Plants Powered by Renewable Energy, Coal and Gas

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Energy and Mineral Resource Minister Decree No. 32 of 2009 on Standard Purchasing Price for Purchase of Electricity by PT PLN (the National Electricity Agency) from geothermal plants

To produce draft regulations to make clearer the compensation scheme for additional cost of geothermal electricity for off-takers

Energy and Mineral Resource Minister Decree No. 31 of 2009 on Purchase of Electricity by PTPLN (the National Electricity Agency) from Small- and Middle-scale Renewable Energy-powered Plants or Excess of Electricity Power

To review the impacts of Energy and Mineral Resource (ESDM) Minister Decree No. No.31/2009, and to put forward new or revised regulations to promote further and more effective development of renewable energy.The draft is to be prepared in 2011 and be issued in 2012.

Finance Minister Decree No. 24/PMK.011/2010 on Provision of Taxation and Customs Facilities for Use of Renewable Energy Resources


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Finance Minister Decree No. 21/PMK.011/2010The government will bear VATs on importation of goods for upstream exploration of oil and gas, and for geothermal exploration for the 2010 fiscal year

Law No. 30/2007 on Energy

energy efficiency

Government Regulation No. 70/2009 on Energy Conservation

energy Pricing

Finalization of the roadmap to improve electricity subsidy policy.

- To undertaken activities in accordance with the roadmap, including arrangement.- Electricity bill will start to reflect economic and environmental costs.

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1. aDaPtatiOn

Water ResourcesSector

Presidential Decree No. 12 of 2008 on Water Resource Board

To complete the master plan for the Java River Basin, which integrates climate change adaptation approaches, by enacting ministerial decree.

agriculture Sector

To develop an irrigation asset information management system .Application of the Rice Intensification System in several provinces. Application of the Climate Change Field School in selected provinces.

Disaster Riskmanagement

Law No. 24/2007 on Disaster Management

Presidential Decree No. 8 of 2008 on Disaster Management Body that leads to the National Disaster Management Body [Badan NasionalPenanggulanganBencana (BNPB)].


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The National Action Plan for Disaster Risk Mitigation (RAN PRB-2010-2012)

Mainstreaming of RAN PRB in the adaptation context into the national mid-term development plan (RPJMN, 2009)

marine andFisheries Sector

Launching of the National Action Plan for Coral Triangle Initiative(CTI) for coral reefs, fishery and foodcrops. Government’s approval of the CTI Action Roadmap for the 2010-2011 period.

1. CROSS SeCtORal anD inStitUtiOnal iSSUeS

mainstreamingClimate Changein the nationalDevelopmentProgram

Approval of mitigation activities and some commitments under Copenhagen Accord(January 2010).

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To issue “DevelopmentPlanning Response toClimate Change” (2008)and to update it in March 2010.

To finalize “Indonesia ClimateChange SectoralRoadmap” (ICCSR) in March 2010.

Policy Coordinationand FinancingScheme for ClimateChange

To issue the national Action Plan for Climate Change Mitigation and Adaptation(December 2007)

Presidential Decree No. 46 of 2008 on the National Council on Climate Change

Creation of Indonesia ClimateChange Trust Fund(ICCTF)

Source: Policy Matrix (GOI-JICA-AFD-WB)

Under the loan scheme, Bappenas is assigned to represent the government as the head of the Steering Committee (SC) as well as the program implementor. Other SC’s representatives include the Coordinating Ministry of Economy, the Ministry of Welfare and the Ministry of Finance while the creditors monitor and send a mission twice or three times a year to supervise the government. The three creditors also provide technical


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assistance and analyst’s services to help the government develop policies in the energy, forestry and industry sectors during the implementation of the programs. The members of the SC are the ministries’ echelon I officials (equal in ranks to directorate general or deputy) assigned to provide policy directions, coordinate the overall implementation, and coordinate with the creditors to achieve the policy matrix. The members of the technical Committee are echelon 2 officials (equal in ranks to director) that meet regularly to monitor the work schedule and plan, and prepare reports and recommendations for the SC.

3.3 Sources of Grants

To achieve to goals of the climate change agenda, including fulfillment of the policy matrix, the government obtains additional technical assistance, capacity building and support for pilot initiatives. Grant aids come from various donors including England, Australia, Germany and Holland, France, USA and Norway. Additional bilateral aid can also be distributed through Indonesia Climate Change Trust Fund (with UNDP as the fund manager). All the distributed funds are generally used to finance various mitigation programs through REDD scheme, and development of geothermal and renewable energy.

3.4 Debt Swap

In addition to grants, the Indonesian government has signed various agreements on Debt to Nature Swap. The first one was with the German government, worth EUR12,500,000 through two programs, i.e. the “Financial Assistance for Environmental Investments for Micro and Small Enterprises” project. The scheme was given provided that the government via the Ministry of Environment would finance activities to improve small and middle-scale enterprises (UKM) engaged in environmental affairs to be able to manage resources and waste to achieve

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production efficiency equivalent to EUR6,250,000 during 2006-2010. Up to date, there has been debt cancellation amounting to EUR3,223,462.62 as a result of the 2006-2008.

Program implementation The German’s second debt-to-nature swap program was the “Strengthening the Development of National Parks in Fragile Ecosystems” program, worth EUR12,500,000. The program required the government via the Ministry of Forestry to finance the strengthening of national parks’ capacity in protected forest management in fragile ecosystems, worth EUR6,250,000 during 2007-2011. The program is implemented in (1) Gunung Leuser National Park, (2) Kerinci Seblat National Park, and (3) Bukit Barisan Selatan National Park.

Debt swap agreement was also made with the US government through the “Tropical Forest Conservation Act (TFCA)” program in 2009 to maintain forest sustainability in Indonesia, which was undertaken by 2 NGOs: Conservation International Indonesia and Yayasan Kehati. Through the program, the Indonesian government would get a write-off worth nearly US$30 million over the next eight years. In return, the Indonesian government was committed to switching the rest of the repayment to a “Trust Fund” account managed by Singapore-based HSBC, amounting to nearly US$30 million as well, which was then given as grant for Sumatra’s forest conservation. The program is known as “Trust Fund” DNS TFCA. The US government contributed US$20 million and Conservation International (CI) and Yayasan Keanekaragaman Hayati (KEHATI) as the DNS TFCA swap partners each contributed US$1 million.51

The DNS-TFCA program basically facilitated conservation, protection, restoration and sustainable use of tropical rainforests under the coordination of the Ministry of Forestry. It was implemented in three regions of Sumatra: North Sumatra with Batang Gadis National Park as the focal point, in central Sumatra


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with Bukit Tigapuluh National Park as the focal point, and in South Sumatra with Way Kambas National Park as the focal point.

With regard to climate change finance, the debt swap mechanism could have provided short-term finance, especially as it did not always require new institutional arrangements. However, it was feared that this short-term mechanism would create instability of public fund source in the long run. The fear was due to the difficulty in assessing how much money would possibly be generated by the scheme in the future as it depended primarily on the debt level of developing countries and the political willingness of developed countries to cut some of the debts.52 In general, debt swap agreements involve a small amount of money and require mobilization of additional funds from the recipient countries. This requires strong commitments from the recipient countries to compromising their budget use priorities to finance climate change mitigation and adaptation-related activities.

The use of debt swap for climate change also needs to be scrutinized, in order for them not to harm the national and people’s interests of Indonesia. One of Greenomics’s analyses of the Indonesia-USA debt nature swap, for example, said that the US government in fact did not give a cut to the rest of Indonesia’s debts. In fact, the USA was benefited from such mechanism with regard to climate change. Economically, the agreement did not bring positive impacts on Indonesia as it still had to repay all its debts through the trust fund managed by the Singaporean-based HSBC. At implementation level, the program actually brought new problems to national park management in Indonesia. The conservation program in Way Kambas National Park in Lampung, one of the project sites, triggered the displacement of the local fishermen and the burning of their village. About 30 huts and 170 houses were burned down by the joint force of the Park and the Police in mid-July 2010 (Walhi, 2010). The violence


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against powerless people in the name of conservation was just intolerable by any standards, especially if such an act were orchestrated by corporations to smooth their way to control and exploit natural resources in protected forests and national parks.

It is therefore necessary for the government to consider the economic political aspects, in addition to technical ones, when negotiating a haircut through the debt swap scheme, for example, the determination of priority program to be financed and the terms and conditions required by the creditor. One important to be noted is whether the program benefits many people. It is natural if the creditors have some interests; however, if not careful, the people and the nation will only become the victims.

3.5 indonesia Climate Change trust Fund

In December 2009, two countries agreed to allocate some fund to the ICCTF, namely England (up to GBP10 million, equivalent to US$16.5 million) and Australia (up to AUD2 million, equivalent to US$1.8 million). In October 2010, the UNDP received US$8,514,883 from the DFID and AusAID as their contribution to the ICCTF, where the UNDP served as the fund manager. The mechanism to receive and distribute funds complied with the program standards applicable within the UNDP. As much as US$4,633,198 was distributed to three activities to be implemented by the Ministry of Agriculture, the Ministry of Industry and the Meteorology, Climatology and Geophysics Agency (BMKG) plus another US848,499 to support the implementation of ICCTF.54 Currently, the ICCTF will only rely on grants to finance a number of ministries and institutions in mitigation and adaptation programs. However, in line with the finance mechanism, ICCTF is a combination of financing from the private-government, foreign debt and financial market sectors.

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table 16. Financing Plan for PREP-ICCTF

table 17. ICCTF’s Budget Summary


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Chapter IV

CLImATE FINANCE GOVERNANCE IN INDONESIA

Climate change finance in Indonesia basically uses the existing mechanisms within the current foreign loans and grants. In determining and submitting proposed activities which will be financed by grants and loans, ministries/institutions hold a dominant role. This is summarized in Government Regulation (PP) No. 2/2006 and Decree of the Minister of National Development Planning/Chairman of Bappenas No. 5/2006. In the framework of foreign loan and/or grant planning, the President sets a five-year Foreign Loan Requirement Plan based on the proposal of the Ministers and the Minister of National Development Planning prepared in accordance with development priorities which can be financed by foreign loans.

Foreign soft-loans are managed together by the related institutions under the coordination of the Coordinating Minister


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for Economic Affairs, Bappenas, the Ministry of Finance, Bank Indonesia, and relevant technical ministries. Bappenas will be the entrance for every new project loan proposal. Bappenas, in cooperation with creditors and ministries (or agencies), will analyze the proposed project feasibility. Project loan proposal must be registered in the Blue Book or be consistent with the umbrella climate change project listed in the Blue Book. Once the project meets the criteria and is ready to be negotiated, the Ministry of Finance will process the negotiation with the creditors and sign a loan agreement on behalf of the government. Foreign grant/loan acceptance by the national government requires the approval of the national legislature (DPR) in accordance with Law No. 17/2003 on State Finances. Therefore, all projects and programs to be financed through foreign grants/loans must be defined first in the State budget of revenues and expenditures (APBN).

In terms of evaluation and reporting, ministries/institutions will submit report to Bappenas and will coordinate and submit progress report to the creditors afterwards. In terms of accountability of state budget utilization, the President is obliged to submit a bill on accountability for the state budget implementation to DPR in the form of financial statements which have been audited by The Supreme Audit Agency (BPK), no later than 6 (six) months after the fiscal year ends. Here, transparency and accountability aspects must also be taken into consideration.

The audit process by the The Supreme Audit Agency of the grant and loan projects/programs for climate change is not only limited to financial aspects, but also should include supervision and performance of the projects/programs which are currently being and have been done. If necessary, rules to conduct special audits of grant and loan funds to finance climate change programs/projects have to be made. This becomes an urgent need, considering climate change fund distribution needs a

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ini menjadi kebutuhan yang mendesak, mengingat penyaluran dana perubahan iklim membutuhkan satu mekanisme yang lebih transparan dan akuntabel untuk memastikan dana tersebut tepat sasaran.

Meskipun mekanisme pendanaan iklim melalui pintu APBN memiliki pijakan hukum yang jelas, tidak berarti pengelolaannya lebih efisien dan transparan. Keterlibatan rakyat dalam proses perencanaan, pelaksanaan, hingga evaluasi kegiatan-kegiatan yang terkait dengan perubahan iklim harus diatur secara lebih substansial. Kritik terbesar dalam sistem yang berlaku saat ini adalah, belum ada mekanisme yang jelas mengenai keterlibatan rakyat di dalam keseluruhan proses kebijakan anggaran, khususnya yang akan dibiayai oleh hibah maupun utang luar negeri. Konsultasi publik dalam pengertian yang substansial tidak terjadi untuk mewujudkan kedaulatan rakyat dalam anggaran. Begitupun halnya ketika proses pembahasan di tingkat DPR, karena biasanya pembahasan mengenai proyek/program yang dibiayai oleh utang hanya terbatas kesepakatan menganai besaran anggaran yang dibutuhkan dalam pembiayaan program atau proyek.

Kritik terbesar dalam sistem yang berlaku saat

ini adalah, belum ada mekanisme yang jelas mengenai keterlibatan

rakyat di dalam keseluruhan proses kebijakan anggaran,

khususnya yang akan dibiayai oleh hibah

maupun utang luar negeri

“The biggest criticism of the current system

is that there is no clear mechanism of people’s

involvement in the whole budgeting process,

especially concerning budgets that will be

financed by foreign grants and loans.

more transparent and accountable mechanism to ensure that the funds reach the targets.

Although climate finance mechanism through the door of the state budget has a clear legal basis, it does not mean that the management is more efficient and transparent. People’s involvement in planning, implementation, and evaluation on activities related to climate change must be regulated more substantially. The biggest criticism of the current system is that there is no clear mechanism of people’s involvement in the whole budgeting process, especially concerning budgets that will be financed by foreign grants and loans. Substantially, public consultation does not take place to realize people’s sovereignty over budgeting, nor does the discussions at the national legislature (DPR), because usually discussions on loan-financed projects/programs are only limited to reaching an agreement on the budget amount required for the programs or projects.


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Picture 2. Foreign Loan/Grant Mechanism53

Chart 5. CC/ICCTF Financial Architecture

People’s participation in climate change budget planning and monitoring becomes one of the entry points of just development. With their participation in planning and budgeting, people are no longer seen as the development objects.

Foreign Loan

Foreign Grant

Central Goverment(Ministry of Finance)

Local Goverment

Private

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People’s sovereignty over determination of climate change finance is also a key to fund distribution effectiveness so that the benefits can be reaped directly by many people. To ensure this, it takes a strong commitment from the government and the national legislature (DPR) so that climate change finance policies can meet the elements described above.

Besides through the state budget of revenues and expenditures (APBN) mechanism, climate change funds are also distributed through a trust fund institution established by the government to accommodate climate change finance. In September 2009, the Indonesian government officially launched a new institution named Indonesia Climate Change Trust Fund (ICCTF) through Decree of the Minister of National Development Planning No.44/M.PPN/HK/09/2009. ICCTF is expected to be complement of various finance mechanisms that already exist and can serve as a financing alternative to finance various activities related to climate change issues. The United Nation Development Programme (UNDP), the United Nations’s network, has been appointed to manage the fund during the transition period before the Indonesian government takes full control of it.

Fund management by a trust fund is not yet known in Indonesia’s financial governance system. This is due to the absence of laws that regulate formation of such a trust fund to manage foreign funds. Therefore, the appointment of UNDP is confirmed as a way to solve such an obstacle. Nevertheless, trust fund institutions are still established in Indonesia and are adjusted to specific needs. Thus, to deal with such a problem, government is formulating Government Regulation Plan (RPP) for foreign loan and grant provision procedures. From the meeting minutes published by the Department of Justice and Human Rights, it is known that the development of RPP is meant to legalize trust fund’s existence, which has no clear legal basis.55


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Actually, the purpose of ICCTF is to develop a low-carbon economy in Indonesia in accordance with the national development plan set out in the Medium-Term Development Plan (RPJM) and the Government Work Plan (RKP). To meet this need, ICCTF is placed as a forum to facilitate and speed up investment in renewable energy and energy efficiency, sustainable forest management, and conservation, and also o reduce the vulnerability of coastal, agricultural, and waters areas. In addition, this institution is also expected to bridge the lack of funds required for the government’s recent framework of climate change adaptation and mitigation. All financed activities must conform with government’s policies in the fight against climate change in accordance with the National Action Plan and the Yellow Book issued by Bappenas.

Moreover, climate change funds available at international level is leading to a trend of the need to create a kind of special trust fund at national level given the scope that is limited to mitigation and adaptation only. For the government and donors, it is considered an effective way to improve the management effectiveness in addressing climate change in Indonesia in a more transparent, accountable, and efficient way. It aims to combine domestic and international finances to invest in government’s projects which are usually ineligible for state budget financing. Budgeting mechanism by using the existing bureaucracy is considered too complicated and hampers fund distribution in Indonesia.

ICCTF consists of two phases and two types of funds. In the first phase called “Innovation Phase”, ICCTF will distribute grants to non-profit socioeconomic activities. The funds to be distributed come from various donor institutions of friend countries and multilateral institutions, and are called “Innovation Funds”. In the second phase, ICCTF provides “Transformation Fund” finance mechanism which will use the funds coming from

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Public-Private Partnership, loans, and financial markets. Such funds can be distributed for various activities that contribute to emission reduction.

The Innovation Fund was operational in late 2010 while the Transformation Fund is expected to be operational in 2013. The ICCTF is managed by the Environment Directorate of Bappenas and supported by various international institutions, including the United Nations Development Programme (UNDP).

table 18. ICCTF Implementation Phases

All ICCTF’s investment decisions must be made by the SC that consists of representatives from Bappenas, the Ministry of Finance, National Council on Climate Change; and donors. Two representatives of the civil society are invited to attend SC meeting as members with no voting rights. A Technical Committee, represented by Bappenas, the Ministry of Finance, and donors will support the SC in selecting and evaluating proposals and activities. A Secretariat is established to manage the daily operations, to provide technical, administrative and logistic supports for the SC and the Technical Committee, and to


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provide capacity building and technical assistance to ministries and local governments implementing ICCTF-financed initiatives.

Finance contribution through the ICCTF mechanism will go into a special account managed by the trust fund structure, where UNDP is appointed as a temporary fund manager, to be further handed over to an independent financial institution such as a bank. This means that the Indonesian government hands over the financial management to an independent institution. All the money coming into the ICCTF account is a separate part of the State finances. Therefore, an audit of the ICCTF fund will be conducted by an independent auditor appointed by the fund manager. It is also mentioned that ICCTF fund management will use the principles of accountability and transparency. The national laws (laws or other governmental regulations) concerning financial management, audit, bid, monitoring, and evaluation can be used as far as is relevant to the needs of the ICCTF. Otherwise, ICCTF’s technical standard (SOP) will be applicable.56

Fund given by donors to the ICCTF is still off-budget. After the ministry/institution whose proposal is approved receives the ICCTF fund, the program must be registered into the Budget Implementation Entry List (DIPA). At this point, the fund is already included in the budgeting system of the state budget. The fund included in DIPA/the state budget system as usual will be audited by the The Supreme Audit Agency (BPK).

If the ICCTF will provide fund to CSOs/Universities directly (not yet decided at this time), then system will not be the same as that applicable to ministries/agencies, who must register it to DIPA. In such a case, the system to be used is the existing reporting system that is considered the most accountable and will be audited by an independent auditor.

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However, not all climate change funds will be distributed through the state budget or the ICCTF. In the case of Norway’s financial support worth US$1 billion for mitigation programs, the government of Norway and Indonesia agree to use the UNDP as a “trustee” or a grant management institution, despite the Indonesian government’s previous proposal to use one of the national banks to manage the grant. Norway would not approve if the grant were managed by a financial institution offered by the government of Indonesia. The rejection is due to the fact that Indonesia has no law on trust fund.57


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Chapter V

CLImATE FUND mANAGEmENT PRINCIPLES

5.1. Company’s tax and individual Subsidy

The implementation of market principles cannot be interpreted simply that subsidies should be removed. It is precisely the State’s tasks to undertake redistribution by imposing taxes on the one side and providing subsidies on the other side. So the subsidy mechanism is not the only one to be affected, but taxes can be applied to the greatest emitters. In developing countries like Indonesia, policies cannot be individually-based, but institutionally-based. Palm oil, coal, and oil and gas companies can be targeted to pay higher taxes. Meanwhile, the state serves to distribute taxes to individuals who really need subsidies.


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5.2 Climate Change Finance Does not Come From loans

The government’s heavy loan burden makes it difficult to carry out environmental conservation programs. This is not a surprise as all the attention is focused on the effort to repay all the loans. Even the government should cut down the budgets of very important sectors to set aside more funds to repay the loans. Therefore, debt write-off is an important solution of Indonesia to have sufficient funds to restore and prevent the adverse impacts of climate change and to meet people’s basic rights.

Loan use in climate change financing must also be scrutinized. Since the 1970s, multilateral financial institutions like IMF, the World Bank, and ADB have been influential in regulating that any loan given is used to reform economic policies to allow expansion of international companies in Indonesia. Developing countries have become laboratories to apply the standard recipes for economic recovery and neo-liberal style development such as investment liberalization, free trade, and social budget reduction. The use of grants for climate change must also consider such aspects, so that the uses of all the grants given are focused only on specific purposes outlined in the national development priorities and do not contradict with the constitution.

In line with this, international financial institutions’ involvement (the World Bank and ADB) in climate change affairs in Indonesia itself is naturally in direct contradiction to climate justice principles. Multilateral financial institutions like IMF, the World Bank, and ADB, are deemed non-transparent and unaccountable and they are also believed to have worked for the sake of the First World countries that constitute the major shareholders, to intervene in recipient countries. These institutions promote “development” paradigm which is

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contrary to the welfare of the people and the planet. They are also responsible for the accumulation of illegitimate debt in Indonesia and southern countries in general. Even to this day, as what they have been doing steadily for several decades, they keep financing dangerous projects, including large-scale fossil fuel projects and other projects aggravating climate change.

Therefore, climate change finance should not be in the form of loan or other loan instruments requiring political or economic prerequisites, or in the form of private investment. This violates the principles and objectives for improvement and recovery, increases oppression to Southern countries, further damages people’s and nature’s rights, and deepens capitalist exploitation and colonization of the atmosphere. The government is also demanded to use the state budget efficiently so that sufficient and sustainable funds are available at domestic level to finance various adaptation activities in Indonesia.

5.3 expansion of adaptation Programs

Indonesia, like other developing countries, should have more adaptation programs than mitigation ones. Donors and recipients do not share equal institutional qualities, so do the complexities of the problems faced. Therefore, the proportion of adaptation programs should be higher.

This research has not yet described adaptation finance scheme proposals in Indonesia. Therefore, further studies on this subject will be necessary to provide strong basis for the implementation of climate change agendas in Indonesia that will bring more benefits to the people.


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5.4 Perluasan Partisipasi

Persoalan di negara sedang berkembang adalah kemampuan melakukan negosiasi (capacity building) yang becampur dengan mengemukanya kepentingan pribadi (korupsi). Hasil akhirnya adalah kebijakan yang mengeklusi masyarakat marjinal. Untuk itu, dibutuhkan pendekatan yang lebih menginklusikan kepentingan masyarakat dengan melibatkan berbagai pihak terkait (multistakeholder), seperti masyarakat lokal, NGO, perguruan tinggi dan sebagainya.

5.5 Dukungan Kelembagaan

APBN sebagai mekanisme penyaluran pendanaan perubahan iklim di Indonesia perlu mendapatkan perbaikan. Partisipasi rakyat dalam seluruh proses pembuatan anggaran untuk kegiatan mitigasi dan adaptasi perubahan iklim harus mendapat prioritas. Partisipasi ini berlaku di seluruh tingkatan baik pada level daerah hingga nasional. Karenanya, ketersediaan informasi menjadi satu hal yang sangat vital, agar kontrol rakyat dalam hal perencanaan dan pengawasan anggaran bisa diwujudkan dalam tingkat yang lebih substansial. Hal ini juga perlu didukung oleh kelembagaan DPR yang efektif, agar proses pembahasan dan pengawasan anggaran, khususnya yang menyangkut dengan agenda perubahan iklim memberikan jaminan kepastian bahwa rakyat banyak sebagai penerima manfaat utama dari dana tersebut.

5.4 expansion of Participation

The problem in developing countries is negotiation skill (capacity building) which is mixed with personal interest (corruption). The ultimate result is policies excluding marginalized communities. To address these would require more community’s interest-oriented approaches by involving multistakeholders such as local communities, NGOs, universities, etc.

5.5 institutional Support

The state budget as the mechanism to distribute climate change funds in Indonesia needs to be improved. People’s participation in the whole budgeting process for climate change mitigation and adaptation activities should be prioritized. This participation takes place at levels, local to national. Therefore, the availability of information becomes very vital so that people’s control in budget planning and monitoring can be realized at a more substantial level. It also needs to be supported by effective institutional capacity of the national legislature (DPR), so that budget discussions and monitoring process, especially regarding climate change agenda, may guarantee that the general public are the main beneficiaries of the fund.

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Keberadaan lembaga dana perwalian (trust fund) untuk menampung pendanaan perubahan iklim di Indonesia juga harus mendapat kontrol yang kuat dari rakyat. Prinsip-prinsip partisipasi, transparansi, akuntabiliatas, serta efektifitas penyaluran dana perubahan iklim yang diadopsi dalam mekanisme ini, tidak serta-merta dapat membebaskan lembaga ini dalam aturan sistem keuangan negara yang telah diatur dalam konstitusi dan undang undang. Pengawasan terhadap keberadaan lembaga dana perwalian juga perlu dilakukan oleh DPR, untuk menghindari penyalahgunaan kewenangan dan korupsi. Peran DPR juga harus diperkuat, dalam menjalankan fungsi pengawasan dan pembuat anggaran untuk mencegah terjadinya praktek akumulasi utang atas nama program perubahan iklim.

The existence of trust fund to accommodate climate change funds in Indonesia also has to be strictly overseen by people. The adoption of the principles of participation, transparency, accountability, and effectiveness of climate change fund distribution in this mechanism does not necessarily set this institution free from the state financial system rules that have been set forth in the constitution and laws. The national legislature (DPR) also needs to oversee the trust fund institution to prevent abuse of power and corruption. The role of the national legislature (DPR) in its monitoring and budgeting functions should also be strengthened to prevent accumulation of loans in the name of climate change programs.


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Chapter VI

CLOSING

Climate funds sourced from foreign loans and promotion of a market-based approach in climate disaster management in Indonesia are a new way of foreign capital expansion in Indonesia. A policy matrix containing policy reform programs in the forestry and energy sectors provides strong support for creation of carbon market and markets for technology from developed countries. In addition, these new policies are used to speed up the implementation of liberalization agenda, such as energy subsidy removal to create a more friendly investment climate for investors.


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Dari semua itu, jalan ceritanya selalu sama, pemilik modal memenangkan perebutan, sementara rakyat terus-menerus menderita. Di sektor kehutanan misalnya, pada waktu hutan kita masih lebat, para pengelola hutan dan industry kehutanan memperoleh keuntungan sangat besar dari hutan kita. Ketika hutan sudah dibuka dan sebagian besar ditanami kelapa sawit, lagi-lagi para pengusaha dan pemilik modal yang diuntungkan. Satu pertanyaan menggelitik : apakah skema REDD plus juga akan bernasib serupa, yaitu para pemilik modal akan mendapatkan keuntungan yang tinggi, sementara rakyat lagi-lagi harus menanggung derita yang panjang.

All these tell the same story: investors wins the struggle, while people continue to suffer. In the forestry sector, for example, when our forests were still dense, forest managers and forestry industries benefited enormously from them. When forests have been cleared and most of them have been planted with oil palm, it is the entrepreneurs and capitalists again that gain the benefits. One intriguing question is will REDD Plus scheme lead to the same results, in which capitalists will earn a big profit, while the people once again have to suffer for long?


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ENDNOTES

1. DNPI Media Kit 2010. The emission figures for Indonesia and their details vary. Some even are still controversial. See the emission details from the Ministry of Environment (2009) below.

2. See, for example, UNEP’s report “Rethinking the Economic Recovery: A Global Green New Deal”, April 2009. The report said that following food, energy and financial crises, the perception that expenses to finance climate change were a burden was a big mistake. Restoration projects promoting environmental issues could even become like the New Deal in Roosevelt’s time (1930). Specifically, the report encouraged the birth of a new commitment in the form of “Global Green New Deal” (GGND) to address the situations post the 2007/2008 crises.

3. See the Financial Express, Saturday, 11 December 2010. Previously, the Times of India said that during the summit meeting the Indian Minister of Environment had expressed a commitment that India would be legally bound to international agreements to reduce emission.

4. ADB (2009), The Economics of Climate Change in Southeast Asia: A Regional Review. Manila

5. Bank Dunia (2010), Memasyarakatkan Perubahan Iklim Demi Kelestarian Lingkungan


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6. Human Right Watch’s report (2003), as quoted in “Menanti Tanggung Jawab Sosial Sektor Finansial di Indonesia”, BWI & SOMO. (2004).

7. The loss arising from the 1997-1998 forest fires is estimated to fetch US$9.3 billion, excluding the incalculable cost such as increasing green house effects, which according to researches are quite significant.

8. “Partners in Crime: Greenpeace’s Investigation into the Connection between England and Indonesia’s Timber Tycoons”, prepared by Greenpeace.

9. National Council on Climate Change, (2009), National Economic, Environment and Development Study (NEEDS) for Climate Change, Indonesia Country Study

10. Data from Stern Review on the Economics of Climate Change.

11. As explained in http://en.wikipedia.org/wiki/European_Union_Emission_Trading_Scheme,

12. See Jitendra Kumar Singh, Clean Development Mechanism (CDM) and Carbon Trading in India.

13. See Antara News, Monday, 25 October 2010, “Norway satisfied with the implementation of LoI with Indonesia”.

14. Asa Persson, et all., Adaptation Finance under a Copenhagen Agreed Outcome, Stockholm Environment Institute, 2009.

15. Parry, M. et al. 2009. Assessing the Costs of Adaptation to Climate Change: a review of the UNFCCC and other recent estimates. International Institute for Environment and Development and Grantham Institute for Climate Change, London.

16. Oxfam International, Adapting to Climate Change, Oxfam briefing Paper, May 2007.

17. The source? (isn’t the figure too big?) See for example, the “Bretton Woods Project 2011” report showing the WBG’s statistics for CDM.

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18. Charlie Parker, Jessica Brown, Jonathan Pickering, Emily Roynestad, Niki Mardas, Andrew W. Mitchell, The Little Climate Finance Book, Oxford UK: Global Canopy Programme, 2009, 20.

19. World Bank, The Costs to Developing Countries of Adapting to Climate Change: New Methods and Estimates The Global Report of the Economics of Adaptation to Climate Change Study Consultation Draft, siteresources.worldbank.org/INTCC/.../EACCReport0928Final.pdf

20. BAPPENAS, National Development Planning: Indonesia Responses to Climate Change, Badan Perencanaan Pembangunan Nasional, 2010.

21. Bali action Plan, paragraph 1 b ii in Decision 1/CP.13.

22. http://www.odi.org.uk/resources/download/5159-english.pdf.

23. See for example, Lohman, L. Uncertainty Markets and Carbon Markets- Variations on Polanyian Themes, The New Political Economy. Ibid, Carbon Trading: a critical conversation on climate change, privatisation and power. Upsalla, Dag Hammarskjö ld Foundation, 2006.

24. During the G-20 Summit in September 2009 in Pittsburgh, President Yudhoyono voluntarily expressed Indonesia’s commitment to an ambitious strategy (road map) to reduce emission by up to 26% compared with the business as usual level up to 2020, making Indonesia the first developing country to undertake that. Indonesia repeated its reduction commitment in COP-15 negotiation round in Copenhagen in December 2009, and then was associated with Copenhagen Accord in Januari 2010.

25. Academic paper on the 2010-2014 National Action Plan to Reduce GHG Emission, September 2010.

26. Global Canopy Programme, The Little Climate Finance Book, UK: Oxford, 2009.


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28. Asa Persson, et all., Adaptation Finance under a Copenhagen Agreed Outcome, Stockholm Environment Institute, 2009 p. 15.


30. BAPPENAS, Indonesia Climate Change Sectoral Roadmap (ICCSR), BAPPENAS, December 2009.

31. Academic paper on the 2010-2014 National Action Plan to Reduce GHG Emission, September 2010.

32. DNPI, National Economic, Environment and Development Study (NEEDS) for Climate Change, National Council on Climate Change Republic of Indonesia, December 2009.

33. Koalisi Anti Utang’s Briefing Paper, 2010.

34. http://www.odi.org.uk/resources/download/5159-english.pdf.

35. Dr. Maurin Sitorus, Pengelolaan Pendanaan Perubahan Iklim Pemerintah Indonesia, Direktorat Pinjaman dan Hibah Ditjen Pengelolaan Utang, 2010.

36. Firdaus Cahyadi, Isu Perubahan Iklim dan Proyek Utang, Satu Dunia, 2009, http://www.satudunia.net/content/isu-perubahaniklim-dan-proyek-utang

37. Voice Of America, LSM: Dana Perubahan Iklim Jangan Melalui Skema Utang, http://www.voanews.com/indonesian/news/LSMDesak-Dana-Perubahan-Iklim-Bukan-dari-Utang-98678174.html.

38. http://nasional.kompas.com/read/2008/12/24/03124159/utang.perubahan.iklim.ditentang.

39. World Bank, Beyond the Sum of Its Part; Combining Financial Instruments to Support Low-Carbon Development, World Bank, 2010.

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40. Climate Investment Fund, Clean Technology Fund: Investment Plan for Indonesia, April 2010, http://www.climateinvestmentfunds.org/cif/sites/climateinvestmentfunds.org/files/CTF_Indonesia_investment_plan_041210.pdf.

41. Ibid

42. World Bank Climate Investment Fund, Institute for Essential Service Reform, Briefing Focus Vol. 1. No. 2 September 2008.

43. JBIC Press Release, September 2, 2008. See: http://www.jica.go.jp/english/news/jbic_archive/autocontents/english/news/2008/000105/index.html.

44. Japan International Cooperation Agency (JICA), JICA’s Cooperation in Climate Change, June 1, 2009.

45. Financial Mechanism for “Cool Earth Partnership”, lihat: http://www.mofa.go.jp/policy/economy/wef/2008/mechanism.html.

46. Japan International Cooperation Agency (JICA), “Terms and Conditions of “Climate Change ODA Loan,” April 1, 2010. See: http://www.jica.go.jp/english/operations/schemes/oda_loans/standard/index.html

47. International Bank for Reconstruction and Development, Climate Change Development Policy Loan, Program Document, 2010. www.worldbank.org.

48. Ibid

49. Asian Development Bank, Country Operations Business Plan, Indonesia: 2011-2013, September 2010.


51. Greenomics Indonesia, Kesepakatan “Debt for Nature Swap” ASRI, Juni 2009.



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53. ICCTF update, September 2010. www.icctf.org

54. Peraturan Pemerintah No. 2 Tahun 2006 tentang Tata Cara Pengadaan Pinjaman dan/atau Penerimaan Hibah serta Penerusan Pinjaman dan/atau Hibah Luar Negeri.

55. ht tp : / /d jpp.depkumham.go. id/home/63-rancangan-peraturanpemerintah/490-rpp-tentang-tata-cara-pengadaan-pinjaman-luarnegeri-dan-penerimaan-hibah.html.

56. http://www.icctf.org/site/

57. http://www.neraca.co.id/2010/11/03/pemerintah-gagal-yakinkankemampuan-perbankan-nasional/.

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9. Casson, Anne. 1999. The Hesitant Boom: Indonesia’s Oil Palm Sub-Sector in an Era of Economic Crisis and Political Change, Center for International Forestry Research.

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Consultation Draft, siteresources.worldbank.org/INTCC/.../EACCReport0928Final.pdf

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GLOSSARy

APBN( Anggaran Pendapatan dan Belanja Negara ) : State budget of revenues and expenditures

BAPPENAS ( Badan Perencanaan Pembangunan Nasional) : National Agency Planning

BMKG ( Badan Meterologi, Klimatologi dan Geofisika) : Meteorology, Climatology and Geophysics Agency

BPK ( Badan Pemeriksa Keuangan ) : Supreme Audit Agency,

BPS (Badan Pusat Statistik) : BPS-Statistic Indonesia (Previously Central Statistical Bureau)

DPR ( Dewan Perwakilan Rakyat ) : House of Representative

BUMN (Badan Usaha Milik Negara) : State-Owned Enterprises

CCPL ( Climate Change Program Loan)

DIPA (Daftar Isian Pelaksanaan Anggaran ) : Budget Implementation Entry List

DNPI ( Dewan Nasional Perubahan Iklim ) : National Council on Climate Change

HPH (Hak Penguasaan Hutan ) : Forest Concession Scheme

MW : Mega Watt

PBN (Perusahaan Perkebunan Negara) : State-owned Plantation Enterprise

PBS (Perusahaan Perkebunan Swasta) : Private Plantation

PR (Perkebunan Rakyat) : Smallholder’s Plantation


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RAN-GRK (Rencana Aksi Nasional Penurunan Gas Rumah Kaca) : National Action Plan for Gas House Gases Reduction

REDD : Reducing Emissions from Deforestation and Forest Degradation

RKP (Rencana Kerja Pemerintah) : Government Work Plan

RPJMN ( Rencana Pembangunan Jangka Menengah Nasional) : National Mid-term Development Plan

RPJP (Rencana Pembangunan Jangka Panjang) : Long-Term Development Plan

SC( Steering Committee)

UN REDD Program : the United Nations Collaborative initiative on Reducing Emissions from Deforestation and forest Degradation (REDD) in developing countries

WW (World War)

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Ralat Buku edisi Bahasa indonesia :

- Halaman xiii paragraf 2, baris 4 dari bawah, tertulis CLSA, Standchart dsb seharusnya CLSA, Standchart dan sebagainya.

- Halaman xvii seharusnya adalah Foto dengan tulisan Only 50 years left What will you do for our future.

- Halaman 9 Tabel 18. Phase 2 ( innovation fund) pada kolom executing institutions, tertulis phase 3, seharusnya tidak ada.

- Halaman 14 tertulis Perusahaan-perusahaan seperti PT. Barito Pacific, PT. Indo Rayon Utama, dll seharusnya tertulis Perusahaan-perusahaan seperti PT. Barito Pacific, PT. Indo Rayon Utama, dan lain-lain.

- Halaman 14 tertulis Lemhan Brothers seharusnya Lehman Brothers.

- Halaman 60 paragraf 1 baris 9 poin c tertulis Debt to Nature swap seharusnya Debt to Nature Swap.

- Halaman 68 Tabel 11 tertulis The Climate change sector loan seharusnya The Climate Change Sector Loan

- Halaman 76 tertulis pertanian, air dll, seharusnya tertulis pertanian, air dan lain-lain.

- Halaman 99 tertulis Tabel 17. Tahapan Implementasi ICCTF, seharusnya tertulis Tabel 18.

walhi climate finance book

Documents

book climate finance

climate funds indonesia

climate change finance

ongoing climate finance

principles of climate

government of indonesia

climate change negotiations

climate change need