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Green is the new gold: Unlocking Indonesia's prosperity through climate finance
By the estimates of Finance Minister Sri Mulyani Indrawati in 2023, Indonesia needs at least Rp 4 quadrillion (US$250 billion) to meet its Nationally Determined Contribution (NDC) and achieve its greenhouse gas emission reduction targets by 2030.
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Carbon era: President Joko “Jokowi” WIdodo, chairman of the Financial Services Authority (OJK) Mahendra Siregar and several cabinet ministers attend the launch of the Indonesian Carbon Exchange on Sept. 26, 2023, at the Indonesia Stock Exchange (IDX) building in Jakarta. (Antara/IDX)
T
he election dust has settled, and a new administration prepares to take the helm in a few months. Its in-tray is overflowing: ambitious economic growth targets hover around 8 percent, coupled with the urgent need to expand access to affordable health care, education and free nutritious meals.
However, Indonesia's current financial landscape presents an intense challenge. In this tight fiscal environment, securing the necessary funds to achieve these goals is shrouded in uncertainty. The question is not just how to achieve these goals, but also where the necessary funds will come from. Tight finances demand creative solutions.
The challenge is also amplified by the need to address the climate crisis. Indonesia, like the rest of the world, faces a critical responsibility to transition toward sustainable practices. Accordingly, this agenda also requires substantial funding.
According to the estimates of Finance Minister Sri Mulyani Indrawati in 2023, Indonesia needs at least Rp 4 quadrillion (US$250 billion) to meet its Nationally Determined Contribution (NDC) and achieve its greenhouse gas emission reduction targets by 2030 – she added that the annual state budget could barely afford 20 percent of it.
This, again, raises a precarious question: where will the 80 percent come from? Unfortunately, relying solely on state resources to take on both national development and climate change is simply not feasible in today's economic climate. This is where climate finance emerges as a bridge to thrive on.
There is a crucial misconception to bust: climate finance is not solely about mitigating climate change. It is a powerful development tool in its own right.
At its core, climate finance is about fostering people's prosperity and well-being. By empowering communities, alleviating poverty and strengthening a nation's overall capability, climate finance enables sustainable economic growth.
