Indonesia Receiving International Financial Support to Stimulate New Green Economy

After a long history of allowing its tropical mangrove forests to be systematically cut down for logging, agricultural, and industrial purposes, as well as being one of the worst offenders with respect to carbon emissions, Indonesia has recently made notable policy changes in an effort to move to a green, more sustainable economy.

Indonesian mangrove forest. Stock photo.

In recognition, the World Bank just approved its first ever developmental policy loan dedicated to climate mitigation and adaptations in Indonesia.

The $200 million loan - to be giving in four yearly installments - is designed to focus on key benefits, according to World Bank, including:

• The promotion of energy efficiency.
• A reduction in the overall use of fossil fuel.
• A reduction in forest loss, and peatland conversion and burning.
• The development of renewable energies, like geothermal and biomass.
• Improving infrastructure for water resource management.
• Improving the ability to respond to water-related climate change impacts, such as droughts and floods.
• Making farmers more prepared for climate change impacts (floods, droughts, and pests) on food production.

In praise, Joachim von Amsberg, World Bank Director for Indonesia, commented that, “Over the last two years, the (Indonesian) government has already managed to bring climate change into the national planning and budgeting process,” referring to the country’s new National Council on Climate Change.

Mr. von Amsberg also believes that, “With the right policies and greater capacity, Indonesia can gradually make the shift to low-carbon growth and also reach its shorter term target of 26 percent reduction in greenhouse gas emissions.”

Map courtesy of FrontierMarkets.com.

The World Bank’s loan comes on the heals of Norway and Indonesia entering into a partnership to support Indonesia’s efforts to reduce greenhouse gas emissions from deforestation, as well as reduce the degradation of forests and peatlands.

Norway plans to support these efforts with up to $1 billion based on Indonesia’s performance over the course of the next seven to eight years, according to the Royal Norwegian Embassy in Jakarta, which added that the partnership will have three phases.

In the first phase, funds will be devoted to finalizing Indonesia’s climate and forest strategy, and putting in place policies and institutional reforms.

In the second phase, the objective will be to make Indonesia ready for the “contributions-for-verified emissions reductions,” while at the same time initiating larger scale mitigation (improvement/recovery) actions through a province-wide pilot project.

In the third phase, starting in 2014, the contributions-for-verified emissions reductions mechanism will be implemented nationally.

The Norwegian Embassy said, “The program is expected to bring significant reductions in Indonesia’s greenhouse gas emissions, as well as improvements in forest governance and law enforcement.

“Almost 80 percent of Indonesia’s current greenhouse gas emissions stem from deforestation, land use change and drying, (and the) decomposing and burning of peatland. This means Indonesia can make deeper cuts in CO2 emissions and do it more quickly than most other countries, and it’s this unique opportunity the Norway-Indonesia REDD+ Partnership will support. As part of the program, Indonesia will implement a two-year suspension on all new concessions for conversion of peat and natural forest.”

Indonesian President Susilo Bambang Yudhoyono commented on the concessions, saying that, “Adequacy of non-forest land in Indonesia to accommodate the growth of the plantation industry is very important, as the main source of livelihood in Indonesia.

“Suspension of concessions is intended to stimulate efforts to divert industrial incentives that make it economically rational for firms to open new plantations on degraded land rather than forest and peatlands. These efforts will require further assistance and international support (that are) wider and larger than (what) can be given” by cooperation with REDD +.

“However, Norway’s contribution will help provide a strong impetus for the design of this shift,” he added.

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