Climate Financing in Indonesia:
Finance for REDD+ & Forest Conservation
Prepared for Media Training
3rd Asia-Pacific Rainforest Summit 2018
Yogyakarta, 21 April 2018
Research team:
Stibniati Atmadja, Shintia D. Arwida, P3SEKPI

THINKING beyond the canopy
 Climate Finance in Indonesia – Overview
 Introduction to FIM research
 Latest Development
Outline

THINKING beyond the canopy
Climate Finance in Indonesia - Overview
 Climate change mitigation is not explicitly pronounced in Nawa Cita.
However, in RPJMN 2015-2019, climate change is set as one of the
national development general policy as “improving the quality of the
environment, natural disaster mitigation and climate change handling.”
Climate change is also manifest in cross sectoral programmes in
RPJMN with a target to reduce GHG emission by as much as 26 % in
2019 and to increase climate change resilience in subnational regions.
 Total expenditure for climate mitigation actions:
2012 - IDR 15.9 trillion (US$ 1.3b)
2017 - US$ 5b.
 The National Development Planning Agency (Bappenas): for the period
of 2007 to 2014, Indonesia had spent USD 17.48 billion for climate
change adaptation, mitigation and supporting activities.
 GoI’s budget allocation for the implementation of climate change
actions and plans for the period of 2015 to 2019 is USD 55.01 billion.

THINKING beyond the canopy
Budget Tagging
 The MoF introduced budget tagging for climate mitigation in 2014
and made it mandatory for the six key ministries responsible for
meeting the mitigation targets under RAN-GRK.
 These six ministries are: Ministry of Industry, Ministry of Environment
and Forestry, Ministry of Energy and Mineral Resources, Ministry of
Transport and Ministry of Public Works and Housing
 Climate mitigation became one of the thematic budget coding in the
national budgeting system and was fully implemented for the fiscal
years 2016 and 2017
 The result of budget tagging shows an increase in the amount of
climate change mitigation budget from 72.35 trillion IDR (US$ 5.36b)
in 2016 to 81.79 trillion IDR (US$ 6.01b) in 2017.

THINKING beyond the canopy
Distribution of the mitigation
budget by Ministry
Ministry 2016 2017
CEILING REALIZATION CEILING
Ministry of Industry 0.05 0.03 (65%) 0.04
Ministry of Environment
and Forestry
1.62 1.13 (70%) 1.46
Ministry of Energy and
Mineral Resources
2.17 1.54 (71%) 3.52
Ministry of Agriculture 4.27 3.15 (74%) 4.84
Ministry of Transportation 21.00 10.83 (52%) 23.88
Ministry of Public Works
and Housing
43.23 35.72 (83%) 48.05
(in trillion IDR) (Source: Analysis Report on Climate Mitigation Budget, MoF)

THINKING beyond the canopy
External Funding
 Grant
Over the period 2008-2014, GoI has received IDR 1.18 trillion. This
amount is much less than the announced global level at IDR 3.04 trillion.
 Loan
The Climate Change development Policy Loan Program from World
Bank. Worth of US$ 200 million.
 Trust fund
The Indonesia Climate Change Trust Fund (ICCTF) is a national trust
fund dedicated for climate finance. By the end of 2014, the disbursement
had reached US$ 11.1m and had received a commitment of US$ 5m
from the US.

THINKING beyond the canopy
 Private funding
there is no national system available to record private sector
contributions in climate change investments. estimated 55% of the
finance flow from international development partners into Indonesia
goes directly to state-owned enterprises and the private sector, and that
between2-3% of implementation activities are carried out by private
sector entities. It is estimated that around US$ 1 billion was invested by
private sector firms in climate related activities in Indonesia in 2011.
Source:
• Ministry of Environment and Forestry, 2015, Indonesia First Biennial Update Report (BUR) p.4-9
• Ministry of Environment and Forestry, 2017, Towards Operationalization of Climate Finance, p.34
• UNDP
• www.climatefundsupdate.org/data
• http://icctf.or.id/icctf-disbursement-2010-2014/
External Funding

Introduction to FIM research
Question:
 How can REDD+ outcomes be incentivized at the subnational level?
How is that done so far, and can it be done better?
Approach
 Study 3 existing FIM examples from national to local level
 Interviews at national level and sub national level
Definition
Incentive mechanism is a set of policies, institutions, and capital
(human and non-human) that work together to ensure the incentives
are produced, delivered and received by the target population, and
produce the wanted/intended behavioral outcome.

3Es Framework in FIMS:
 Effectiveness and efficiency in:
Making incentives available and sufficient to bring the desired
outcome
Targeting beneficiaries that can bring the desired outcome
Delivering incentives to beneficiaries
Monitoring and evaluating outcomes
 Equity in incentivizing targeted beneficiaries:
 Target population: the population of individuals/institutions whose
behavioral change is sought by the mechanism
 Beneficiaries are segments of the target population who directly
receive incentives
9

Selected Case Study
- Trust Fund
affiliation: Bappenas
- Grant
- Upfront payment
- Regional Incentive
Fund
- Govt. Fiscal
Transfer
- Performance
based award
- The Forest
Service
Development
Finance Center of
MoEF
- Loan
- Input based

Distribution of Funds - DID, ICCTF and BLU-P3H
Jambi
Province
Central Java
Province

Interim Finding: ICCTF
Indonesia Climate Change Trust
Fund
 The fund is disbursed via third parties (NGOs,
universities, etc.). There is a possibility of elite capture.
 Reporting system based on APBN reporting model is
quite complicated for the grantee.
 Scope of activities are small and cannot provide benefit
for whole community.
 Audit related to quality of
content achievement is needed
 monitoring platform that
allows community participation.

Interim Finding: DID
Regional Incentive Fund
 DID : incentive for sub national governments for their
excellent performance on education, health sectors and
welfare improvement
 Designated use of funding and clear guideline from
national government.
 Not always match with the need of sub national but more
efficient in terms of
monitoring.
 Equal chance for all sub-
national to access the fund.

Interim Finding: BLUP3H
The Forest Service Development Finance Center
• The “loan” format, made it less interesting for small
holders
• There is a risk of bad credit, how to mitigate?
• Clean and clear tenure status is needed to avoid
conflict in claiming benefit
• Change in political arena due
to Law No.23/2014  district
government lost their authority
• The role of field assistant
(penyuluh) is crucial

Latest Development
 GoI is preparing Public Service Fund for the Management of
Environmental Funds (BLU LH) that will be managed by Ministry of
Environment & Forestry in collaboration with Ministry of Finance
 BLU LH will act like a Trust Fund for environmental related funding,
including REDD+
 On 10th November 2017, President Joko Widodo has signed
Government Regulation No. 46/2017 on Environmental Economic
Instruments as legal basis of BLU LH.
 In progress: the Presidential Regulation on the Establishment of BLU
LH. It will regulate operational modalities of BLULH, particularly
standard operational procedures at sub national level.
 Source of funding: state budget, RoI, donor funding
 Has three financing modalities, namely:
Grants
Investments: returns are expected in terms of monetary and
performance units.
Payment for performance

Thank you!
With co-financing from:
The CIFOR REDD+ Financial Incentive Mechanism Study
is supported by: