Indonesia on course to mitigate climate change

A key challenge is to curb emissions growth without sacrificing development
Anggito Abimanyu, Business Times 16 Dec 09;

OVER the last half of 2009, the Asia-Pacific region has experienced a number of major natural disasters which have had a devastating impact on numerous regional economies and the lives of millions of people. Take, for example, the shifts in weather patterns that have resulted in more frequent typhoons and extremes of climate such as flooding, drought and landslides around Asia-Pacific.

Now more than ever, there is an urgency to speed up measures to mitigate their impact as we are increasingly confronted by the stark realities of the impact of climate change on our everyday lives.

As an archipelago of more than 17,000 islands, Indonesia has also been subjected to its share of natural disasters at enormous economic costs. We recognised the need for action back in 2007 when our government played an active role in continuing the efforts to mitigate climate change at the United Nations Framework Convention on Climate Change.

Our efforts over the past two years have been focused on continuing and building on this momentum. At the last G-20 Forum meeting in the United States, President Susilo Bambang Yudhoyono stated that with Indonesia's new climate change action plan, the country could reduce emissions by 26 per cent in BAU (business-as-usual) conditions by 2020, and up to 41 per cent with international support.

Given the impact of climate change on Indonesia's pursuit of sustainable development, it is imperative for the country to have a comprehensive action plan. Central to Indonesia's climate change agenda is the economic policy of the country. Indonesian government representatives, including the Ministry of Finance (MOF), have been playing an active role in discussions with European ambassadors both in Jakarta and at the UN's Climate Change plenary sessions held in Barcelona.

Our focus has been on funding and targets related to emission cuts - we are one of the first developing countries to have announced a target on emissions reductions so our stake in ensuring the continuation of discussions and agreement between different parties is high. Prior to that, the recently concluded Asean Leaders Summit provided an opportunity for President Yudhoyono to brief the 10-member Asean on the results of the G-20 meeting in Pittsburg with particular reference to climate change.

Indonesia was the only Asean member state present at the G-20 developing and developed nations' meeting. In a statement released during the 15th Asean summit, Indonesia and Asean leaders pledged to 'work together and with other countries to contribute to this year's Copenhagen Summit so that it results in a mutually meaningful outcome for both developed and developing countries'.

Indonesia's climate challenges are no different from those of other developing or developed countries and economic policies are instrumental in how we respond.

While the global financial situation has made it harder to shift public financing to climate-related projects, it has necessitated reforms indirectly resulting in opportunities related to economic policy. More importantly, it provides a momentum going forward to introduce a new framework where economic decisions take into consideration the sustainability of resources and the environment, replacing the BAU approach associated with economic development.

A key challenge for Indonesia is to curb the growth in emissions without sacrificing economic growth and development. Indonesia needs to reduce the carbon content of our energy, and at the same time explore using our large sources of low-carbon energy such as geothermal power. We also need to conserve our forests and improve land management, thereby saving large amounts of carbon emissions.

Indonesia recognises the significant opportunities associated with international carbon financing and is one of 30 developing nations participating in the Reducing Emissions from Deforestation membership under the Forest Carbon Partnership Facility. This is a partnership that could benefit from the first financial mechanism to pay countries for saving their tropical forests.

The World Bank estimates Indonesia could earn between US$400 million and US$2 billion a year in a forest carbon market where industrialised nations can offset some of their carbon emissions by buying credits from countries such as Indonesia.

After this month's climate change conference in Copenhagen, the key question that will confront all policymakers around the world revolves around the financing issue. Financing is crucial to these emissions issues and we need to look not just overseas, but also locally to make changes to fiscal policies and institutional frameworks.

Just recently, we announced Indonesia's Green Paper, which delivers both short and long-term options for climate mitigation in the country. Initiated by the MOF, this definitive study on the economics of climate change and policy options provides recommendations to secure financing via introduction of emissions pricing, as well as by using public carbon finance to support institutional reform and provide much-needed upfront financing for mitigation initiatives.

The new government of Indonesia has a mandate to carry out this programme over the next five years. The MOF will play its role in supporting Indonesia's pursuit and implementation of its national action plan on climate change as outlined by the President. This will primarily be achieved through fiscal policy that encourages usage of renewable and alternative energy resources, facilitates greater public and private partnership through co-financing, and continues ongoing economic reform initiatives that will improve Indonesia's investment and business climate.

Given the scientific evidence of accelerating climate change, the cost to adapt to global warming will be expensive, even for developed countries. Any delays will have immediate impact, especially on less developed countries whose economies are not financially prepared. Therefore, it is imperative for all countries attending the UN Copenhagen Conference to endorse, at the very least, an agreement that comprises global targets for emission cuts.

The main issues of climate change are emissions and finance, so governments from both developed and developing nations need to work together and be fully involved in the global decision-making process, now and following on from Copenhagen.

The writer has been the head of the Fiscal Policy Office, Ministry of Finance, Indonesia since 2006. He holds a PhD in environmental economics from the University of Pennsylvania