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Green transition guidelines missing in Indonesia’s economic recovery push
Indonesia's commitment to environmentally friendly and sustainable development is not for a want of trying. But will the government be able to go beyond economic recovery when private sector concerns are also factored in?
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n spite of its initial slow response to the current global crisis, the Indonesian government was quick to set up a national economic recovery (PEN) program to address any fallout from the COVID-19 pandemic.
However, upon closer examination of the program, there is little to suggest there is a strong commitment by the state to direct the country toward a “greener” economic recovery.
Data from Statistics Indonesia (BPS) has revealed that the Indonesian economy contracted 3.49 percent year-on-year in the third quarter of 2020, in what amounts to a slight recovery from the minus 5.32 percent growth at the half-year mark.
To support businesses and encourage spending, the state issued Government Regulation (PP) No. 23/2020 on the PEN program. It proceeded to reallocate funding from other budget posts, reaching a total of Rp 695 trillion (US$49.01 billion) as of Nov. 22.
From this sum, Rp 97.26 trillion has been allocated for healthcare spending, Rp 234.33 trillion for social safety net programs and Rp 65.97 trillion to support ministries and regional administrations.
A further Rp 114.81 trillion will come as incentives for micro, small and medium businesses, while Rp 62.22 trillion is for stimulus measures for state-owned enterprises (SOEs) and Rp 120.6 trillion is for business incentives.
In the energy sector, where renewable energy sources have yet to be seriously considered in the short and medium term, state-owned electricity firm PLN is set to receive Rp 45.42 trillion as part of what the government calls accelerated compensation under the PEN scheme. This comes in addition to the Rp 5 trillion in capital injections set aside from this year’s state budget.
Despite the amount of money that is going into the electricity offtaker, PLN remains reliant on dirty energy sources such as coal in the long term.
According to the 2019-2028 PLN energy procurement plan, coal will still make up the largest share of Indonesian electricity sources – 54.45 percent – by 2028.
Renewables, meanwhile, will take up just 23 percent of the total share, followed by natural gas at 22 percent and oil at 0.4 percent of electricity sources.
The government has also planned to allocate up to Rp 4.54 trillion for the food state and environmental program to deal with any problems of food insecurity and environmental damage that may arise from and during the pandemic.
However, neither the Agriculture Ministry nor the Environment and Forestry Ministry have yet to receive funding to address these specific concerns.
The latter received additional funding to the tune of Rp 812.43 billion for economic recovery programs this year, which covers mangrove restoration, the social forestry program and plans to establish food estates.
Greenpeace Southeast Asia’s climate and energy campaigner, Tata Mustasya, said there were still ways that government funding under the PEN program could be put toward environmental projects, even if there was no specific earmarking for a green economic recovery.
He suggested that village funds be used to fund local environmentally friendly programs such as replanting or riverbed restoration.
Echoing an increasingly popular assumption among good governance experts, Tata said the pandemic provided the opportunity to start a transition into renewable energy.
“We cannot prevent the climate crisis without starting the transition from dirty energy such as coal to clean renewable energy,” Tata told The Jakarta Post recently.
While Indonesia is still far from becoming a climate-responsible country, it is not for the want of trying.
In June, the Institute for Essential Services Reform (IESR), a clean energy think tank, unveiled alongside the government the Surya Nusantara (Solar Archipelago) plan, which aims to produce 1 gigawatt of peak power (GWp) a year from solar panels alone.
The scheme is expected to target millions of Indonesia’s poorest households over the next four to five years, and is expected to cost Rp 15 trillion annually – funded from the state budget.
However, the government has yet to commit financially to the scheme. “There have been discussions about [the green transition], but what we are lacking are concrete steps [to start it],” said Tata. Relevant officials were not immediately available for comment.
One reason for the lack of progress is because President Joko “Jokowi” Widodo’s administration is still heavily focused on economic growth as the paradigm of development.
The Greenpeace campaigner said that the government viewed the cost of environmental programs to be too high, hence the meager ambitions formalized in Indonesia’s updated 2020 nationally determined contributions (NDCs) for climate change.
Under the NDCs that were finalized in February, Indonesia pledges to reduce emissions by 29 percent independently or by 41 percent with international assistance by 2030 – the same target as the first NDCs submitted in 2016.
Even then, the country has yet to submit all of the documents for the NDCs to the United Nations Framework Convention on Climate Change (UNFCCC) secretariat.
University of Indonesia economist Sonny Mumbunan, who is also a researcher at the Research Centre for Climate Change, acknowledged that the government had green recovery in mind when setting out its development goals.
The 2020-2024 National Medium-Term Development Plan (RPJMN) defines targets for emission reduction in line with the NDCs, in addition to setting up economic targets.
“Indonesia is among the first to have specific emission reduction outcomes. That is worth mentioning,” Sonny told the Post recently.
He even said that some sectors might already have regular funding and programs to support the country’s emission reduction target and post-pandemic green recovery.
However, the scale and impact of such commitments may not be influential enough, as opposed to a situation where they are allocated a specific budget from the economic recovery program.
“We are running the race but we don’t have the capacity for low-carbon transition to face climate injustice, extreme weather and emerging new pandemics,” Sonny said.
Think Policy Society cofounder and environmental economist Andhyta F. Utami acknowledged that the government had been aware for some time of the need for a green transition.
In some cases, that awareness translated into policy commitments, such as the targeted 23 percent share of renewable energy planned for 2030, the 2 million hectares of peatland set for restoration and the ban on clearing primary forests.
She also said the current direction of the national economic recovery was not necessarily wrong, despite the lack of specific funding for green programs.
“What we need to monitor is the government’s commitment to sustainable development. We should prevent economic recovery from merely reeling to the pre-pandemic level,” Andhyta said.
She also said the government needed to show some commitment beyond business-as-usual recovery, especially if the people were to expect a specific green recovery program.
“But the question is whether those commitments and leadership exist in this country, or are they still hindered by private interests or other short-term goals?” she said.
