Working closely with the Ministry of Energy and Mineral Resources (MoEMR), the Green Growth Program supports efforts for greener growth in the energy sector, particularly in the renewable energy and energy efficiency sub-sectors.

Planning

A green growth approach to energy planning at the national and sub-national levels will set a solid foundation for achieving Indonesia’s national energy priorities including strengthening energy security, expanding energy infrastructure, increasing the use of renewable energy, and reducing energy subsidies.

The National Energy Policy aims to draw 16% of all energy needs from renewable sources by 2019 and 23% by 2025.

Enabling

The Green Growth Program develops and provides systematic enabling approaches, including methods, tools, indicators and best practices, to encourage green investment in Indonesia’s national energy priorities.

Driving Investment

Green growth approaches can help Indonesia to apply innovative and creative funding schemes to encourage investments in renewable energy and energy efficiency projects. The Green Growth Program offers investment services (e.g. arranging finance, match-making investors and project developers) for project development to reduce project risks and help the projects reach a bankable stage. Potential investors can be linked to projects in early stages either through independent power producer (IPP) schemes, energy service company (ESCO), or other financial and legal arrangements.

Currently, the focus is on solar photovoltaic systems, the use of palm oil waste for energy, and other bioenergy solutions, but activities can expand based on interest and market demand. The program also explores investment opportunities in energy conservation and develops energy efficiency solutions through execution of energy audits in industry sectors.

The program places substantial emphasis on a landscape-based approach as forest, peat, and land play a crucial role in providing multiple services to society. Working with the Ministry of Environment and Forestry (MoEF), the program mainstreams green growth principles and tools in development and economic plans within a jurisdiction. Resource efficient technologies and environmentally sustainable practices are encouraged in the forest and agriculture sectors.

Planning

The National Medium-term Development Plan aims to achieve food, water, and energy security within an integrated ‘landscape approach’ grounded in sound ecosystem management. The landscape approach emphasizes the interconnections among ecosystems over large areas, such as whole watersheds, along with the linkages among land uses, users, and the institutions that govern them. This is inherently a green growth approach.

The Green Growth Program seeks to achieve the government’s goals by fully and explicitly valuing ecosystem services in plans, policies, business models, and investment.

Enabling

Recognizing and capitalizing on the value inherent in ecosystems—known as ‘natural capital’—can unleash a variety of new opportunities for sustainable economic growth. The Green Growth Program works with the districts and provinces where projects are situated to help shape the necessary enabling policies and encourage access to finance and markets.

Activities to enable and encourage successful implementation of a green growth approach in the context of sustainable landscape are:

1. Driving investment in new business models for forest and peatland management.
2. Building sustainable supply chains.
3. Creating new markets for natural capital and ecosystem services.
4. Bringing forest management closer to the forest and forest-dependent communities.
5. Restoring the vitality of ecosystems at a landscape scale.
6. Mobilizing forest carbon finance.

Driving Investment

The Green Growth Program offers both financial and technical assistance for project development to reduce project risks and help the projects reach a bankable stage to attract green investment. Projects designed within the context of sustainable landscapes will demonstrate commercially viable business models in forestry or forest-related sectors with strong involvement of local stakeholders including indigenous communities, smallholder farmers, and private enterprises.

These projects will be designed to attract both private and public investment, including climate finance. They are expected to capitalize on valuable products and services, including timber and non-timber forest products.

The national development plan views the expansion and improvement of infrastructure as an engine of regional economic growth, needed to overcome constraints on connectivity and productivity, but it also recognizes the need for environmental sustainability. The development of special economic zones (SEZs) is a priority for policymakers in Indonesia, as they are considered a highly effective strategy for attracting foreign direct investment.

Working with the National Council for Special Economic Zones (Dewan Nasional Kawasan Ekonomi Khusus/DN KEK) under the Coordinating Ministry of Economic Affairs, the Green Growth Program develops an integrated framework of policy guidelines and instruments that links macro-level fiscal and investment policies towards SEZs, ultimately leading to investment plans and bankable projects in SEZs.

Planning

From a green growth perspective, SEZs are potential innovation zones where government and business can experiment with policy instruments and regulatory mechanisms to drive traditional economic growth targets such as exports and job creation while maximizing economic benefits from cost internalization and sustainable use of natural capital and ecosystem services.

Eight SEZs have been established officially by government regulation and are eligible for special economic incentives.

The Green Growth Program strives to integrate green growth in the design of SEZ master plans and urban development plans by fostering the inclusion of extended costs-benefit analysis (eCBA) and applying ‘smart city’ technologies to ensure sustainable and socially inclusive benefits over the long term.

Enabling

An important policy instrument for accelerating regional economic growth is the establishment of special economic zones (SEZs) throughout the country. Although this is not a new policy, it has been stepped up and prioritized by the current government to help accelerate investment in new infrastructure.

Ensuring that eCBA becomes one of the required tools in strategic environmental assessments (SEA) helps mainstream green growth principles into development plans. eCBA enables guide planners and investment decision-makers to take account of the full range of social, environmental, and economic impacts.

Driving Investment

The Green Growth Program supports national and provincial government agencies in developing bankable green growth projects within SEZs, including applying the eCBA tool as part of the project’s feasibility study. Use of the eCBA will help ensure that the identified projects can attract funding from a growing pool of climate-related investment funds that make environmental performance a key evaluation criterion.

The program is already providing strategic advice to the East Kalimantan government in drafting a Master Plan Green Economy in East Kalimantan (MPEH). Under this plan, eight Provincial Strategic Zones (Kawasan Strategis Provinsi, KSP) are being developed across East Kalimantan. These KSPs have the potential to be developed further into SEZs in the future.

The Green Climate Fund (GCF) is a financing mechanism of the United Nations Framework Convention on Climate Change (UNFCCC) and is specifically established to provide (financial) support so that developing countries like Indonesia can reach its emission reduction targets. It has raised USD 10.3 billion as per January 2018, and by 2020 the GCF plans to raise USD 100 billion per year.

The GCF can provide (financial) support to Indonesia by channeling funds to green projects and programmes. Such projects can be designed and submitted to the GCF through both domestic and international accredited entities – if such projects are in line with the country strategy and legislation. The main communication channel between the GCF and countries is the nationally appointed National Designated Authority (NDA), which is hosted by the Fiscal Policy Agency of the Ministry of Finance in Indonesia.

The Fiscal Policy Agency (FPA) has nominated GGGI as Delivery Partner to implement Green Climate Fund (GCF) readiness and preparatory support programme (”readiness program”) in Indonesia. The ultimate objective of the readiness program is to increase the country capacity to actualize the core principals of GCF business model which are country ownership and country-driven approach.

There are 5 outcomes of this readiness and preparatory programme:

1. Country capacity strengthen
2. Stakeholders engaged
3. Direct Access Entities realized
4. Access to Finance
5. Private sector mobilization