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Financing strategy for a climate-resilient Indonesia
The medium-term objective of Indonesia’s climate change mitigation and adaptation strategy is to manage risks in all its development sectors by 2020 through strengthening local capacity, better knowledge management, convergent policies on climate change adaptation and disaster risk reduction, and the adoption of adaptive technologies.
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A model poses in one of the booths in in the Indonesia Climate Change expo at Jakarta Convention Center on Thursday, April 14, 2016. (Antara/Sigid Kurniawan)
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n the sidelines of the United Nations General Assembly last week, I spoke with business leaders at the Bloomberg Forum to underscore Indonesia’s commitment to its climate-resilient future. As finance minister, the climate financing aspect of this development challenge is within my purview and something I am deeply passionate about.
There is continued support and growing expectation for the private sector’s increased role in developing creative and innovative financing — including concessional sources — for adaptation and mitigation projects. The function of local governments is also widely recognized as more important to solve the challenges related to their critical role at the grassroots level.
By 2050, the world will need to feed 9 billion people while reducing emissions and ensuring climate-resilient food security. An additional 1.1 billion people will require access to electricity while transitioning from fossil fuels. Climate change remains the top concern of global leaders per last year’s World Economic Forum survey. These challenges and more are just over the horizon.
As the fourth largest nation in the world, Indonesia will play its part in meeting this global challenge. The medium-term objective of Indonesia’s climate change mitigation and adaptation strategy is to manage risks in all its development sectors by 2020 through strengthening local capacity, better knowledge management, convergent policies on climate change adaptation and disaster risk reduction, and the adoption of adaptive technologies.
Its pre-2020 financing needs — to the tune of Rp 931.4 trillion (US$69 billion) — must come from various funding sources: the national budget, the private sector and international support. Over the period, the budget would only be able to finance Rp 621 trillion.
In line with the post-2020 Paris Agreement and to achieve our target of a 41 percent reduction in greenhouse gas (GHG) emissions by 2030 in our Nationally Determined Contributions (NDC), Indonesia requires international support not only for financial resources, but also expertise, knowledge and technology development to sustain our effort. Thus, an innovative financing strategy to achieve sustainable development goals, environmental conservation and GHG emission reduction activities is essential.
The government encourages the private sector to participate in climate change financing through their own funding or public private partnerships. As part of the budget instrument, the Finance Ministry has provided several fiscal incentives to support the NDC and to promote investments in renewable energy. These fiscal instruments include tax holiday and allowance, income tax facility for the geothermal sector, as well as VAT and import duty exemption for capital goods.
