Indonesia’s External Climate Funding Support Needs to Better Target the Needs of the Forestry Sector

Spotlight Activity: Indonesia’s External Climate Funding Support Needs to Better Target the Needs of the Forestry Sector

Indonesia is a recipient of international climate finance. Sources of finance vary. For nearly a decade, REDD+ projects (reducing emissions from deforestation and forest degradation in developing countries) have been the main source of international climate finance flowing to Indonesia. Most notably in 2010, the Norwegian government signed a partnership with the Indonesian government to provide up to 1 billion USD to projects that prevent forest degradation and destruction of peat. This aid is dependent upon projects that prove that they can achieve results.

The UNFCCC created the Green Climate Fund (GCF) as a financing source for green projects and programs. Governments and international entities can submit project proposals to GCF to receive funding. GCF attempts to allocate funds equally to mitigation and adaptation efforts, with 50% of all funds directed to the least developed countries.

Domestically, Indonesia has its own fund called the ICCTF, which began operating in 2014 under Bappenas. ICCTF stands for the Indonesian Climate Change Trust Fund. At the end of 2017 the fund administered 63 projects cutting emissions for land and energy use and increasing resiliency. 42 of these projects focused on land adaptation and mitigation. ICCTF helps the Indonesian government set goals for mitigation and adaptation, working closely with RAD-/RAN-GRK and RAN-API plans. ICCTF claims its projects completed up to 2017 have the potential to reduce 9.5 million tons of CO2 emissions. ICCTF seeks to scale up peatland restoration efforts. 43% of ICCTF funds comes from USAID, 34% from the UKCCU, 4% from DANIDA (Denmark’s development agency), and 20% from Indonesia. Another source of climate financing has recently been introduced through 1.25 billion USD of green Islamic-compliant bonds, sukuk. Once bonds are issued, countries or companies will receive penalties if green promises are broken. The monitoring of sukuk is still underdeveloped. Many of the bonds issued internationally went to questionably “green” projects. The recent TLFF sustainability bond attempts to overcome this problem with better safeguards and more robust objectives. For now, sukuk and TLFF have not proven themselves to be any more than a greenwashing of bonds.

The largest foreign investments into Indonesian mitigation projects include a $729 million investment in a thermal power plant in East Java (with Japan’s JIBS), a geothermal acceleration project at $480 million (with Japan’s JIBC), $400 million from the clean technology fund (contributed by the United States), a $236 million Climate Change Program Loan from Japan, and funding for a geothermal power plant in Lumut Balai (JICA) at $234 million. REDD+ projects do not receive nearly as much funding despite forestry and land use dominating Indonesia’s GHG emission profile.

Status: Falling Behind

Indonesia has significant sources of climate finance, but is failing to produce mitigation results from REDD+ projects. The Norwegian government gave 50 million USD to begin the REDD+ payment mechanism. Indonesia has not succeeded in reducing deforestation rates. The Norwegian government has confessed “they haven’t seen actual progress in reducing deforestation in Indonesia”. Indonesia has not received much further funding from the 1 billion dollar deal with Norway, as of 2017 the number hovers around $112 million. This is not surprising. Widodo’s moratorium on conversion of forests and peatlands is routinely disregarded. Palm oil plantations increased from 4 million hectares to 11.9 million hectares in 2017. REDD+ schemes are not incentivizing people to reduce deforestation. These programs lack good leadership, oversight, design, and adequate funding. REDD+’s system for proving mitigation program success – their MRV system is the National Registry on Climate Change Oversight – is still in its early days despite nearly 20 years of REDD+ programming. The Indonesian government is developing a new funding mechanism for REDD+ projects called BLU. This mechanism is also still in its early days.

The Indonesian pledge to the Paris Agreement included a 41% reduction conditional upon international support. Indonesia has received international support but has not ratcheted up mitigation efforts or discussed how the 26% reduction commitment will increase with greater international support up to the 41%.

The REDD+ program needs to work with subnational units to improve implementation. More community and village participation and benefit sharing in REDD+ projects are necessary to ensure their success. REDD+ must have diverse funding sources and insulation from outside interests to ensure funds go to the intended recipients.

Take Action

Please send the following message to the policymaker below.

Indonesia continues to be all talk of mitigation and conservation but no action. REDD+ programming needs to be concentrated in an independent agency that develops, implements, and supports REDD+ projects while accountably managing international finances to those projects. The Indonesian government needs to prioritize international finance in REDD+ schemes over geothermal exploration. Both are important investments. However, forestry and land use are the main sources of GHG emissions. Projects that protect forests and stabilize peatlands need to be expanded. REDD+ needs better leadership and independence from the Ministry of Environment and Forestry. It should also work with the Peatland Restoration Agency (Restorasi Badan Gamhut) to develop projects that include communities and protect carbon sinks.

Contact the Ministry of Environment and Forestry:

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