President Susilo Bambang Yudhoyono has pledged to reduce Indonesia's carbon emissions by at least 26 percent by 2020, and potentially more, depending on international support. With this pledge, Indonesia has positioned itself at the forefront of efforts to combat global climate change.

Such reductions in carbon emissions must not conflict with Indonesia's efforts to improve living standards. So how can these two goals reconciled? The National Council on Climate Change (DNPI), the entity created by President Yudhoyono to coordinate climate change-related activities within Indonesia, is developing detailed answers to this crucial question.

The traditional thinking is that reducing carbon emissions must come at the expense of economic growth, with environmental financing and international assistance providing a form of welfare payment to compensate local communities for these losses. Such a viewpoint is too simplistic.