Indonesia is not on the list of Annex 1 parties to the Kyoto Protocol, which mostly include industrialized countries. However, Indonesia is the third biggest greenhouse gases (GHG) emitter in the world and is vulnerable to the impacts of climate change.
For those reasons, Indonesia has committed to reduce its emissions by 26 percent by 2020 compared to business as usual.
Many projects of GHG emission reduction have been conducted to meet that long-term goal. The projects seem to only focus on the forestry sector.
Indeed, GHG emission is dominated by forest degradation and land clearing. Indonesia is also a country with relatively abundant forests that could be used to harness international funding assistance in emission reduction projects through the Clean Development Mechanism (CDM) and Reducing Emissions from Deforestation and Degradation (REDD).
Projects on emission reduction from Indonesia’s forests are usually implemented with funding assistance of CDM and REDD. In several projects the World Bank provides support through trust funds and establishes the Forest Carbon Trust (FCT).
The objectives of the FCT are to provide credibility to incentive payment schemes and to provide certainty for the long-term nature of the income stream.
While reducing GHG emissions from the forestry sector have to continue, the potential of GHG reduction from other sectors such as energy should also be promoted.
The energy sector contributes only 9 percent to the total GHG emission. However, the emissions from the sector have increased significantly at the level of 7 percent per year.
Indonesia’s energy sector has several characteristics. First, the supply is still challenged to meet the (potential) demand.
In addition, the government’s objective is to increase the electricity access for the people from 65 percent of the population to 90 percent by 2020. Therefore, increasing the energy supply is the main goal of the government.
Second, Indonesia’s energy source is dominated by fossil fuels: Coal and oil. Burning fossil fuels not only generates energy product but also GHG emissions and thus contributes to climate change.
Third, energy consumption in Indonesia is not efficient. Elasticity and intensity of energy in Indonesia are among the highest in the world, illustrating inefficiency in energy use.
Reducing GHG emissions from the energy sector in Indonesia could be achieved by: Improving the efficiency of energy consumption, and moving from fossil fuels to renewable energy sources. Businesses as well as public sectors could participate in the processes.
Increasing energy efficiency should be a “win-win strategy” for business and public sectors. Saving energy saves money. So does moving from fossil fuels to low-emission energy sources.
In fact, private and public sectors seem to be less enthusiastic to do so because the processes usually mean adopting new technology, and this does generally mean a high initial cost.
Indonesia’s position in the international climate agreement gives the country a possibility to search for funding assistance from developed countries included in the Annex 1 of the Kyoto Protocol.
The fund could be used to invest in new low-emission technology. PT Semen Padang is an example of a company receiving financial assistance for its effort to move from coal to waste as the source of the company’s energy.
Another obstacle in applying low-emission technology is that the private and public sectors do not know the possible ways to improve their performance.
In some cases, improving energy efficiency can be achieved by adding simple and cheap tools or by rearranging the layout of the production process.
Therefore, audits in the process of production related to energy consumption is needed.
To accelerate emission reduction from the energy sector, Indonesia needs an Energy Carbon Trust. The Trust is an independent company funded by the government to help Indonesia to move to a low carbon economy.
The tasks of the Trust, among others, are helping private and public sectors reduce GHG emissions and capture the opportunities of low carbon technologies available in the market, providing free practical advice (such as energy audits) to private and public sectors to help them reduce their energy consumption, assisting the sectors to search for financial assistance to implement low-emission technology, and providing credibility and certainty to incentive payment schemes (in case third parties are involved in financing emission reduction).
Reducing GHG emissions in Indonesia should also focus on energy because the country’s energy use has been increasing substantially. Private and public sectors can take part in reducing GHG emissions by improving energy efficiency and moving from fossil fuels to renewable, low-consuming energy sources.
The writer is a lecturer at the School of Economics, Parahyangan Catholic University, Bandung.
