Climate Finance Policy in Indonesia Green Budgeting Virtual Meeting - 17 March 2020

1. CLIMATE FINANCE POLICY IN
INDONESIA
CENTER FOR CLIMATE FINANCE AND MULTILATERAL POLICY
FISCAL POLICY AGENCY
MINISTRY OF FINANCE
Noor Syaifudin
Center for Climate Finance and Multilateral Policy
17 March 2020

2. 2
Observed global temperature change and modeled response
to stylized anthropogenic emission and forcing pathways
(IPCC,2018)
Global average temperature anomaly
(IPCC,2018)
Global Land-Ocean Temperature Index 1880-2020
(NASA)
THE RISE OF CLIMATE
CHANGE
§ Climate change is a natural phenomenon caused by
the accumulation of increased levels of GHG
emissions in the atmosphere due to human behavior.
§ Based on data from NASA and IPCC, trend of earth’s
temperature are increasing. That will trigger climate
cycle anomalies such as erratic and extreme rainfall,
prolonged drought season, the increase of

3. 3
INDONESIA’S VISION IN 2045: BECOMES A
DEVELOPED COUNTRY
Infrastructure
HR improvement on R&D, education, health,
& social safety net system.
Human Resources Quality
Technology & innovation in supporting
industry development
Technology
Public service quality & business process
improvement
Government Bureaucracy
Quality Infrastructure to support mobility &
boost national development
Good governance in spatial planning
management with integrated system
Spatial Planning
Sound State Budget as a key
modality for Indonesia 2045
Economic & Finance Resources
BUSINESS
Driven by
Services Sector
73%
Source: Bappenas,
Kemenkeu
POPULATION
Million
People319
ECONOMIC STRUCTURE
Shifting to
High Value Added
Sectors
ECONOMY
5World
Top
PRODUCTIVITY
Productive
Age 47%
MIDDLE INCOME
Middle
Income70%
URBAN
Lived in
Urban Area73% US$23.199
PER CAPITA INCOME
Per Capita Income
Economy
Fiscal Policy Theme in 2020:
“State Budget (APBN) as Accelerator of National
Competitiveness through Innovation and
Strengthening the Quality of Human Capital”
Indonesia’s economic growth is one of the most stable among other
countries, supported with credible fiscal management & structural
reforms. In ensuring sustainable growth and cope with the global
challenges, the Government of Indonesia has strong commitment
facing global issues, such as discourse on FED rates issue, trade wars,
fluctuations in commodity prices, climate change, and other issues to
ensure our national sustainable development.

4. To Reach Our Vision in 2045, We Also Need to Accomplish Two
Important Agendas in 2030 Related to Climate Change
4
ROAD TO 2045
2019 2030 2045
NDC
SUSTAINABLE
DEVELOPMENT GOALS
(SDGs)
INDONESIA
NATIONALLY DETERMINED
CONTRIBUTIONS (NDC)
Indonesia’s commitment on SDGs and Climate Change also in line
with RPJMN 2014-2019, Sustainable Development Goals (Perpres
No. 59/2017), Nawa Cita, and RPJMN 2020-2024.

5. 5
7 Development Agenda in RPJMN 2020-2024
1. Strengthening Economic Resilience for Quality Growth
2. Developing Areas to Reduce Inequality
3. Improving Human Resources Quality and Competitiveness
4. Mental Revolution and Cultural Development
5. Strengthening Infrastructure to Support Economic Development and Basic Services
6. Building the Environment, Enhancing Disaster Resilience and Climate Change
7. Strengthening Politics, Law, Defense, and Security and also Public Service Transformation

6. 6
Climate Change in Indonesia has affected various economic sectors such as water resources, marine and fisheries,
agriculture, forestry, urban and rural areas, and health. The value of economic losses that will be borne by Indonesia in
2050 due to climate change and ecological disasters could reach Rp132 trillion, equivalent to 1.4 percent of the current
value of Indonesia's GDP (USAID, 2016)
More than 3,9 million people in 105 municipalities/cities
in Java and Nusa Tenggara experienced drought in 2017
Source: BNPB, 2017
Climate change has triggered the risk of
hydrometeorological disasters, about 80% of disasters in
Indonesia are hydrometeorological disasters
Source: NDC, 2016.
17,4% of the area in Jakarta was affected by flood which
caused of death of 23 people and more than 65.000
victims of evacuation (January 2014).
Source: Asian Development Bank Institute, 2016
INDONESIA’S
VULNERABILITY TO THE
IMPACT OF CLIMATE
CHANGE
The 4 major natural disasters that occurred in Indonesia were floods, droughts, hurricanes, and landslides. The number
of flood and drought events has increased in the last few decades. In 2005-2015, Indonesia experienced 15,458
disasters. 80% of disasters are categorized as hydro-meteorological disasters such as floods, hurricanes, extreme sea
waves, forest and land fires, drought, and extreme weather while the rest is categorized as a geological disaster.
Temperature level in Indonesia 1960-2000
“When we act immediately to
tackle climate change, we
automatically moving towards
achieving two important agendas
in 2030 (SDGs and NDC)”

7. 7
1997
2011
National Action Plan on
GHG Emission Reduction
(RAN-GRK)
Ratification of Kyoto Protocol into
UU No. 17/2004
2007
BALI -
INDONESIA
Indonesia hosted
UNFCCC-COP 2007
Ratification of UNFCCC into
UU No. 6/1994
1992
1994 2004
2014
National Action Plan on
Adaptation (RAN-API)
2015
Paris
Agreement
ND
C
Submission of Nationally Determined
Contribution (NDC)
2016
Ratification of Paris
Agreement into
UU No. 16/2016
2016
The Implementation of
Climate Budget Tagging
(CBT)
2016
Submission of the
2nd
BUR to UNFCCC
2018
2019
Climate Change as
Development Agenda in
RPJMN 2020-2024
Commitment on
Katowice Package
2018
OUR COMMITMENT AND
EXPERIENCES ON CLIMATE
CHANGE ACTIONS

8. 8
Based on Paris Agreement dan
Indonesia’s Nationally Determined
Contribution (NDC-Indonesia)
29%
Indonesia has committed to reduce
emission by 2030
(unconditional
scenario)
International support
(conditional scenario)
and
41%
LIVELIHOOD
Health, Settlement, and Infrastructure
ECOSYSTEM
SUPPORTING SYSTEM
Land and Forestry
Energy
(314 Miton of CO2e)
Waste
(11 Mton CO2e)
Agriculture
9 Mton of CO2e
IPPU
(2,75 Mton CO2e)
59,6%
37,7%
1,3% 1,1% 0,3%
(497 Mton of CO2e)
GoI COMMITMENT ON
CLIMATE CHANGE IN NDC
ECONOMY
Food and Energy Security
EMISSION REDUCTION
TARGET PER SECTOR
SPECIAL TERRITORY
Cities, Coastal, and Small Islands
ADAPTATION AREA:

9. 9
INDONESIA’S FISCAL POLICY
TO TACKLE CLIMATE CHANGE
Taxation Policy to Boost
Investment in Climate Action
State Spending for
Mitigation and Adaptation Action
Green Financing for climate resilience
and emission reduction projectsGreen
Financing

10. 10
Taxation Policy to Boost
Investment in Climate Action
Tax Holiday
(PMK 150/2018)
Reduction of corporate income tax by 100% for new and renewable
energy infrastructure (pioneering industry)
Tax Allowance
(PP 78 Tahun 2019)
Income tax facilities for certain business fields in certain areas
Income Tax Borne by Government
(UU APBN; PMK 179/2013)
The income tax is borne by the government for geothermal business
activities
Exemption on Import Duty
(PMK 176/2009 s.t.d.d. PMK 188/2015)
Exemption on machinery. goods and materials import.
VAT Exemption
(PP 81/2015)
Exemption on import and handover machinery & equipment not
including spare parts.
Exemption on Import Duty
(PMK 177/2007)
Exemption on import of goods for geothermal activities provided
to certain business entities. Pertamina. and Geo Dipa Energi.
Exclusion of Collection for Income Tax Article 22
(PMK 34/2017 stdd PMK 110/2018)
Exclusion for import of goods in geothermal activities
Taxation & Customs Facilities
(PMK 21/2010)
Granted for the activity of utilizing renewable energy sources (tax
allowance. exemption from collecting Income Tax article 22.
exempting VAT. and exempting import duties).

11. 11
Taxation Policy to Boost
Investment in Climate Action
11
PIONEERING INDUSTRY COVERAGE
Upstream metal
based industry:
steel/non-steel
Oil and Gas refining
industry with or
without
Petroleum. natural
gas. and coal based
petrochemical
industry
Organic Basic Chemical
Industry from agricultural.
plantation. or forestry
products
Inorganic Basic
Chemical Industry
Main Raw Material
for Pharmaceutical
Industry
Irradiated. Electromedic.
or Electrotherapy
Equipment Manufacturing
Industry
Main Components for
Electronic or Telematics
Equipment Manufacturing
Industry
Machine and Main
Components
Manufacturing
Industry
Robotics Component
Manufacturing Industry that
support the Machinery
Manufacturing Industry
Main Components in
Electric Power
Generation Machines
Manufacturing Industry
Main Components in
Automotive
Manufacturing
Industry
Main Components of
Vessel Manufacturing
Industry
Main Components of
Aircraft Manufacturing
Industry and Aerospace
Complementary Industry
Main Components
of Railway
Manufacturing
Industry
Agriculture. Plantation. or
Forestry Based
Manufacturing Industries
that Produce Pulp
Digital Economy which
includes data processing.
hosting. and activities
related to it
Economy
Infrastructure
New and Renewable Energy Power Plant

12. 12
CLIMATE BUDGET PERFORMANCE
State Spending for
Mitigation and Adaptation Action
In 2019, Government allocated
IDR95,8 trillion for climate action.
Meanwhile, based on Indonesia 2nd
Biennial Update Report (BUR),
Indonesia needs around IDR
3.307,2 trillion (USD 228,1 million)
for implementing climate action in
2018 to 2030, or about IDR 254,4
trillion (USD 17.55 million) annually.
STATE
BUDGET
(APBN)
FINANCING
NEEDS
2016 2017 2018 2019
72,4 95,6 109,7 95,8
RpTrillion
4,5%
4,9%
3,5%
3,9%
Portion on State
Budget (%)
Climate Budget Allocation in
APBN
Output
Output from Climate Budget
263
159
276
209
2016 2017 2018 2019
102
Adaptation
263
Mitigation
159
Mitigation
140
Adaptation
136
Mitigation
131
Mitigation

13. 13
Climate Financing for SDGs and Climate
Actions
Green
Financing
INOVATIVE FINANCING: GREEN SUKUK
13
Global Green Sukuk (5 Years): First Issuance
Geographical
distribution
Investor type
distribution
Green investor
participation
The first issue is March 2018 worth
USD 1.25 Billion. The second issue
was in February 2019 with a value of
USD 750 million.
Green Sukuk is an instrument to finance government programs related to Climate Change Actions.
including supporting Sustainable Development Goals (SDGs).
Indonesia received 8
international awards
from the issuance of
Green Sukuk
GREEN SUKUK RETAILGLOBAL GREEN SUKUK
The Ministry of Finance Indonesia
launched the Green Sukuk Retail
(Sukuk Savings) on November 1. 2019.
• The government issued the first retail green sukuk
(saving retail) on November 1st. 2019. There is the first
time sukuk that carries the environmental theme
(green sukuk) offered to individual investors (retail).
• Total volume of Green Sukuk Retail purchase orders
that have been set is IDR 1,46 trillion with total 7.735
investors.
• Millennial investors are the most investors in Green
Sukuk Retail with total 3.950 investors (51,07%).

14. 14
GREEN
SUKUK
SECTORS
SUSTAINABLE
RESOURCE
MANAGEMENT
• Sustainable management of natural
resources
• Conservation of habitats and
biodiversity
GREEN TOURISM
• New tourism areas development
that are in line with the principles
of green tourism
• Optimization supporting
infrastructure to encourage
sustainable tourism
SUSTAINABLE
AGRICULTURE
• Development of sustainable
agriculture and methods such as
organic farming. low pesticides.
R&D for climate-resistant seeds. and
energy efficiency in agriculture
• Subsidy mechanism for agricultural
insurance
WASTE TO ENERGY AND
WASTE MANAGEMENT
• Development of waste
management
• processing waste into renewable
energy
• Rehabilitation of landfills
RENEWABLE ENERGY
• New renewable energy generation and
transmission
• Research and development of products and
technologies for renewable energy generation.
including turbines and solar panels.
ENVIRONMENTALLY
FRIENDLY TECHNOLOGY
(FOR ELECTRICITY
GENERATION)
• Increase the energy efficiency of infrastructure
to reduce energy consumption below 10% of
the average national energy consumption.
• Research and development of products and
technologies to reduce energy consumption
CLIMATE CHANGE
RECILIENCY (DISASTER
IMPACTED AREA)
• Research to encourage technological
innovation that supports sustainability
• Food security
• Flood mitigation
• Drought risk management
• Health management
SUSTAINABLE
TRANSPORTATION
• Development of an environmentally friendly
transportation system
• Increased energy efficiency (which reduces
energy consumption by around 10%)
• Improved transportation network that meets
climate resiliency standards
GREEN BUILDING
• Development of green buildings in
accordance with Greenship developed by
the Green Building Council in Indonesia
FINANCING FRAMEWORK OF GREEN SUKUK
The results of each Green Bonds and Green Sukuk will be used exclusively for funding (in the form of budget allocations / subsidies / new
projects / refinancing) green projects of the following sectors:
*Untuk menghindari keraguan dalam hal apapun. proyek hijau yang memenuhi syarat tidak meliputi:
a) kapasitas pembangkit listrik berbasis bahan bakar fosil baru;
b) pembangkit listrik tenaga air berksala besar (kapasitas >30MW) dengan area penampungan
tambahan besar; dan
c) aset berbasis nuklir atau terkait dengan nuklir.
Climate Financing for SDGs and Climate
Actions
Green
Financing

15. 15
MITIGATION
AND
ADAPTATION
UNDERLYING ASSETS OF THE FIRST GREEN SUKUK ISSUANCE (2018)
Ministry of
Transportation
Minister For Public Works and
Settlements
Ministry of Energy and
Mineral Resources
Renewable EnergyResiliency of areas at risk due
to disasters caused by climate
change
Sustainable
Transportation
Waste to Energy and
Wasre Management
Environmentally
friendly
technology for
electricity
generation
UNDERLYING SECTORS
MINISTRY/INSTITUTION
Climate Financing for SDGs and Climate
Actions
Green
Financing

16. 16
ENVIRONMENT FUND AGENCY/BPDLH
AS LOW CARBON DEVELOPMENT AGENT
“We need to maintain and develop the development
strategy so that Indonesia’s economy able to grow
higher. tackling poverty. and inclusive development.
However. our commitment to reduce GHG emissions
could still be done. We from the Ministry of Finance
are ready to support the implementation of BPDLH
with good governance and optimum efficiency.
Because humans without nature are destitute.”
-Sri Mulyani. Menteri Keuangan RI-
Source of
Fund
Development partners (multilateral.
bilateral. non-government)
Revenue from Government
Services and Investment
Non-Tax Revenue
Funding
Scheme
Grant
Loan
Subsidy
Carbon Trade
MINISTRIES THAT INVOLVED
SOURCE AND FUNDING SCHEME
BPDLH aims to support conservation and
environmental management. biodiversity
management. and addressing the impact
of climate changeOFFICIAL CEREMONY OF BPDLH (9 OCTOBER 2019)
Climate Financing for SDGs and Climate
Actions
Green
Financing

17. 17
SDG INDONESIA ONE
InvestorContributionProduct
Donor (Philanthropy)
and Impact/Climate
Funds
Donor.
Impact/Climate
Funds and
Development Banks
Commercial Banks and
Institutional Investor
Institutional
Investor and
Developer
Equity. Equity-
Linked
Investment
Equity Financing
Grant (Project
Preparation. Technical
Assistance. Research)
SDG Development
Facilities
SDG De-Risking
Facilities
Concessional Loan. First-
Loss Facility. Interest
Subsidy. Guarantee
Premium Subsidy. VGF etc.
Financing Facilities
Senior Loan.
Subordinated Loan
SDG Indonesia One
(Managed by PT SMI)
Contribution:
Grant. Technical Assistance
Contribution :
Loan, grant
Contribution :
Loan. Bond. Sukuk
Contribution :
Equity
SDG Projects
Objective:
Support pre-construction
project development
Objective:
Project de-risking
(improving bankability)
Objective:
Construction / post-
construction finance
Objective:
Investment in high impact
/ new frontier SDG sector
SDG INDONESIA ONE FUNDING SCHEME
SDG Indonesia One is a blended finance platform managed by PT. Sarana Multi Infrastruktur (SMI) to facilitate philanthropic
involvement, international donor agencies, aid allocation, green investors, commercial banks, Multilateral Development
Banks (MDBs), etc.
Health. Education. Renewable Energy. and Infrastructure
(transportation. water & waste management)*
*potential to be expanded
SDG INDONESIA ONE PRIORITY SECTORS
SDG Indonesia One will manage & utilize the fund amount to
USD2.46 billion* to facilitate 93 projects worth USD18.2 billion.
*from 26 development partners (as per October. 2019)
SDG Indonesia One is an innovative financing instrument that
supports infrastructure development in achieving 16 of the 17
SDG objectives
Climate Financing for SDGs and Climate
Actions
Green
Financing

18. 18
GREEN CLIMATE FUND (GCF)
Fiscal Policy Agency representing the Minister of Finance as
National Designated Authority (NDA) of Green Climate Fund
(GCF)-Indonesia based on Minister of Finance Decree
No.756/KMK.10/2017
THE ROLE OF FISCAL POLICY AGENCY AS NDA-GCF
Strategic leadership of GCF activities in Indonesia
Develop Country Program with Line Ministries and
State Agencies
Nominate national entities to get accreditation from
GCF
Issuance of No Objection letter
Lead the implementation of the Readiness and
Preparatory Support Program (RPSP)
GCF OBJECTIVES
Climate Financing for SDGs and Climate
Actions
Green
Financing

19. 19
Projects/Programs Approved by the GCF
Readiness
Facility
FundingProposal
GCF Readiness Program
to strengthen NDA and
AE institutional capacity
1
Project Preparation
Facility of Semarang’s
Bus Rapid Transit
2
Funding Scheme (in million USD)
Geothermal Resource Risk Mitigation
Facility (GREM)
Funding facility program for the development of geothermal
energy that specifically de-risk the development stage.
Implementation will be with PT SMI as executing entity.
GCF Funding : USD 100 mil
Co-financing : USD 310 mil
3
Grant :
US$ 850 ,000
Grant :
US$ 788,000
Climate Investor One (CIO)
Pendanaan GCF : USD 100 mil
Co-financing : USD 721,5 mil
Blended finance facility with different funding scheme for each stages
(development, construction, and implementation). Implemented in 11
countries, and Indonesia is expected to access minimum of USD 43.9 mil out of
the total project amount.
Funding Scheme (in million USD)
4
Climate Financing for SDGs and Climate
Actions
Green
Financing

20. THE WAY FORWARDCBT is expected to be the integrated in national budgeting system (with the DG
Budget and Ministry of National Development).
CBT is also to be developed in the regional level
CBT system is expected to enable the climate finance instruments (e.g.
Green Sukuk, Green Project-Based Sukuk, GCF, EFT etc)
The need for better nation-wide cooperation and governance to achieve
NDC targets.
The need to develop innovative climate finance through the use of state budget to
leverage private finance.

21. 21
Ways Forward
CBT is expected to be the integrated in national budgeting system (with the DG
Budget and Ministry of National Development).
CBT is also to be developed in the regional level
CBT system is expected to enable the climate finance instruments (e.g.
Green Sukuk, Green Project-Based Sukuk, GCF, EFT etc)
The need for better nation-wide cooperation and governance to achieve
NDC targets.
The need to develop innovative climate finance through the use of state
budget to leverage private finance.

22. THANK YOU
CENTER FOR CLIMATE FINANCE AND MULTILATERAL POLICY
FISCAL POLICY AGENCY
MINISTRY OF FINANCE