Indonesia Readies $1b ‘Green’ Fund to Spur Clean Investments, Reduce Emissions

Jakarta Globe 26 Jan 10;

A planned new national fund to drive infrastructure developments that help cut greenhouse gas emissions will be running this year with $1 billion in it, a Finance Ministry official said on Tuesday.

At global climate talks in Copenhagen last month, President Susilo Bambang Yudhoyono announced the plan to develop the Indonesia Green Investment Fund, aimed at catalyzing development that could speed economic growth, boost food and clean water production and help cut emissions blamed for global warming.

Indonesia has promised to slash its emissions by at least 26 percent from “business as usual” levels by 2020, but Yudhoyono has also vowed to boost economic growth to 7 percent or more by 2014.

Indonesia’s sovereign wealth fund, the Government Investment Unit, will put $100 million into the fund, with a further $900 million coming from foreign governments including Norway and Australia, as well as institutional investors, said Edward Gustely, a senior Ministry of Finance adviser.

“We’re in the initial stages, but the target is to have this fund operational this year,” Gustely said, adding that it would rival Brazil’s Amazon Fund in size and scope. “There’s no reason why this can’t, in the next five years, scale to $5 billion or more.”

Brazil launched its Amazon Fund in 2008 to promote sustainable development and scientific research in the world’s largest rain forest, with donations from Europe.

Indonesia last year became the first country to launch a legal framework for a UN-backed scheme called Reducing Emissions from Deforestation and Degradation, which allows polluters to earn tradeable carbon credits by paying developing nations not to chop down their trees.

The green investment fund will not offer loans or grants but rather top-off funding for projects where a bank lender is seeking an additional cash injection.

“Many technology providers and project sponsors don’t have the balance sheet to fulfill the required equity needed to secure financing,” said Gustely. “We would come in and play a catalyst role to ensure good projects with good asset quality, with good expertise and proper management, can be deployed and proceed.”

Projects like the Indonesia Green Investment Fund are a way for countries to take the initiative on climate change, Gustely said. “This is driven by creating more food, water and energy in a sustainable fashion while trying to achieve Indonesia’s growth objectives,” he said.

Fitrian Ardiansyah, climate change program director for World Wildlife Fund Indonesia, welcomed the fund but said more needed to be done to reduce Indonesia’s greenhouse gas emissions.

“The Indonesian government heavily subsidies fossil fuels, but investment in renewable energy sources is too expensive. The government must help the private sector by making investment in renewable energy sources cheaper, which will address the problem. But at the moment coal plants continue to be built, which does not help,” he said.

Reuters