Facing the Indonesia’s green investment gap, the Indonesian government is developing a low-carbon initiative to attract green investments and achieve its emission reduction targets by 2030.
Indonesia’s development model over the decades has been to exploit its abundant natural resources to feed a population that’s now ballooned to 260 million and fuel an economy that’s among the world’s top 20.
So while it boasts some of the last great swaths of tropical rainforest anywhere in the world, it has also been razing them at rates exceeding the deforestation of the Brazilian Amazon. Similarly, Indonesia has some of the richest marine fishing areas of any country, yet trails only China in the amount of plastic waste that it dumps into the ocean. And though it spans an area a fifth of the United States, much of its economic activity and more than half its population is concentrated in a single island the size of North Carolina.
Cognizant that its natural resources can’t sustain the current pace of its development trajectory, the government is now ushering in a new development blueprint that tries to keep within this ecological “carrying capacity.”
“We realize that the degradation of environmental quality has [reached a] critical level,” Bambang Brodjonegoro, Indonesia’s minister for national development planning, said in his opening speech at the Sustainable Resources Dialogue in Singapore last month. “We need to develop a proper policy and strategy starting from now. It’s time for us from now on to consider the carrying capacity [of our resources].”
The consequences of the current rate of development and destruction of the environment have been severe. Indonesia faces housing, water and food shortages. For years now, the country has had to import staple foods such as rice, as farmland on the densely populated island of Java — the country’s rice-growing heartland — are taken over for roads and commercial developments. The U.N. Food and Agriculture Organization estimates that 19.4 million Indonesians suffer from hunger each day.
Under the so-called Indonesia’s green investment and development plan, which will succeed the current five-year plan that expires in 2019, centers on quantifying the country’s ecological resources and planning its economic development accordingly, to prevent the depletion of those resources.
“For example, if we’re talking about agricultural, it’s clear that Java has no more carrying capacity,” Bambang said. “If we’re talking about [palm oil] plantations, maybe in some places there’s already too many. Therefore, rather than clearing new land, we need to focus on replanting existing crops.
We can see that ont he national level water resources are not a problem. But if we look at each island, we can see that regions like Java and Bali are already at critical level.”
– Medrilzam, director of environmental affairs, National Development Planning Agency (BAPPENAS), Indonesia
Ecological tipping point
Medrilzam, the head of the environmental department at the planning ministry, known by its Indonesian acronym Bappenas, says the green development plan is urgently needed because Indonesia has for decades developed economically with little to no regard for its carrying capacity.
“We realize that our current development trajectory is a cause for great concern if we don’t do something [to change the model] and start considering our carrying capacity,” he tells Mongabay at his office in Jakarta. “We can’t continue our current way of exploiting our natural resources.”
He points to the news to demonstrate that there’s something wrong with the way Indonesia currently manages its natural resources in service to its economy. Reports about landslides are becoming more common; as new roads are built through mountainous areas, the vehicle traffic shakes the soil loose. The problem is compounded by a booming population, with people building homes and clearing farmland in areas prone to landslides.
Landslides killed 156 people in 2017, making them the deadliest natural disaster in a country accustomed to volcanic eruptions, earthquakes and tsunamis. From 2014 to 2017, landslides accounted for more deaths than other natural disasters, according to the National Disaster Mitigation Agency (BNPB).
Rivers have also suffered under the onslaught of household and industrial waste. The Citarum in Java, dubbed the world’s most polluted river, is the most notorious example, but by no means the only one. The discharge of fertilizer and raw sewage into the river have led to fecal bacteria levels 5,000 times higher than allowable limits, while chemical effluent from the thousands of textile factories that line its banks have spiked the water’s pH level to a skin-burning 14.
In the past, before the water took on the cloudy hue of whichever dye the factories happened to be pumping into it that day, fish could be seen in the river. Now they’re largely gone, an estimated 60 per cent of the river’s fish species wiped out.
These and other pressures are pushing Indonesia closer to its ecological tipping point, an inflection on the growth-resources curve that Bappenas is trying to pinpoint in its green development plan. The scale of the problem varies across the country, and is particularly acute in more densely populated regions where natural resources have been exploited more intensively.
“We can see that for water resources, maybe on the national level, it’s not a problem yet,” Medrilzam says. “But if we look at each island, we can see that regions like Java and Bali are already at critical level.”
A unified front
Indonesia already has a mechanism in place to consider the ecological carrying capacity whenever new development proposals are put forward, called the Strategic Environmental Assessment, or KLHS.
The KLHS is an assessment that local governments are required to carry out prior to issuing permits for land or forest management, such as for plantations or mines, to ensure that each proposed development adheres to a sustainable and environmentally friendly development model.
But local authorities have largely neglected the requirement, and few if any include the assessments in their zoning and development plans. Medrilzam says this is because the process of drafting the KLHS and local development plans are separate, carried out by different agencies. The environmental assessment is done by local environmental agencies, while the development plans are drawn up by the local equivalents of the Bappenas.
“There’s a notion that the process for the KLHS and development planning are separate, which is totally wrong,” Medrilzam says. “They’re supposed to be unified. Our environmental guys are responsible for providing info on carrying capacity to our planning guys. That’s not happening.”
As a result, many development projects across Indonesia have drawn criticism for ignoring environmental and social impacts.
In 2016, the national government came under fire for allegedly bypassing regulations in its rush to issue a permit to build a high-speed railway line between the capital, Jakarta, and the city of Bandung, some 150 kilometers (93 miles) away. The process of gathering data for the project was cut down from six months to a week, and a study on the impact of the project on the water catchment area near Bandung was omitted entirely.
Under Bappenas’s proposed green development plan, this sort of scenario can be prevented altogether by combining the planning and environmental assessments under the ministry, Medrilzam says.
“We at the level of the central government want to give an example [to local governments],” he says. “So both the KLHS and the mid-term development plan are done by Bappenas. It won’t be called KLHS anymore, but carrying capacity. So the environmental assessment process is already embedded in the development planning.
Our state budget only covers 17 to 20 per cent of our development needs. The government has to be smart in its budget to leverage the 80 per cent.”
– Tjokorda Nirata Samadhi, country director, World Resource Institute, Indonesia
In search of Indonesia’s green investment
As the man behind the green development plan, Medrilzam has high hopes for it.
Not only will it put a figure on Indonesia’s carrying capacity for the first time, the plan will also serve as the country’s first low-carbon development initiative, and is expected to usher in a new socioeconomic development model aimed at lowering greenhouse gas emissions.
The green development plan will focus on the five areas of agriculture and forestry, energy and transportation, fisheries, peat, and water — with a particular focus on the energy and land use sectors, which together account for roughly 80 per cent of the country’s greenhouse gas emissions.
“Indonesia is setting an example of how much all countries can integrate their development and climate agendas,” Lord Nicholas Stern, co-chair of the Global Commission on the Economy and Climate, said in a press release.
As one of the largest greenhouse gas emitters in the world, largely because of the destruction of its rainforests and carbon-rich peatlands for oil palm and pulpwood plantations, Indonesia’s climate actions have a significant impact on international efforts to limit the global temperature rise to below 2 degrees Celsius (3.6 degrees Fahrenheit) — the goal agreed to under the Paris Agreement.
Armed with this low-carbon development initiative, the Indonesian government aims to cut greenhouse gas emissions by 29 per cent by 2030 compared to the business-as-usual trajectory.
“We want to capture the spirit of the Paris Agreement through our development plan,” Medrilzam says.
Under the Indonesia’s green investment and development plan, the government will lay out which key policies, investments and actions are needed to establish a low-carbon economy; enhance agricultural productivity and rural livelihoods; address food waste and improve food security; and protect forests and biodiversity while increasing Indonesia’s resilience and adaptation to climate change.
Medrilzam says the green development plan is designed to not sacrifice economic growth. Instead, it seeks a balance between growth and environmental carrying capacity.
“Our expectation is to be able to have green investment,” he says.
The World Resources Institute (WRI) Indonesia, an environmental think tank working with Bappenas to design the green development plan, says investment is critical in achieving a low-carbon economy for Indonesia.
“Our state budget only covers 17 to 20 per cent of our development needs,” WRI Indonesia country director Tjokorda Nirarta Samadhi said on the sidelines of the Sustainable Resources Dialogue event in Singapore. “So who’s funding the [other] 80 per cent? Definitely not the government. That’s why the government has to be smart in its budget to leverage the 80 per cent.”
In its role advising the government on the low-carbon initiative, WRI Indonesia is tasked with sounding the private sector to understand what kind of green investment is attractive.
“The plan is to capture ideas from the private sector on green investment, options for business and possible financing,” Tjokorda said. “What do they want? Let’s say we’re talking about energy and the stakeholders say we have to phase out coal yesterday, not today. But how do we do that? They will say these are the business options, such as solar panels and so on. But there are some requirements for that, such as improving the country’s feed-in tariff.”
Another area that could attract green investment is peat restoration, something the Indonesian government is striving to promote with a target to restore 20,000 square kilometres (7,700 square miles) of degraded peat forest nationwide by 2020.
The cost for this undertaking, according to a recent study by researchers at the University of Queensland, Australia, will likely exceed $4.6 billion.
To date, however, the Indonesian government has budgeted just $200 million for the initiative, according to the study.
“So the state budget only covers around 4 per cent from the needed budget,” Tjokorda said. “At the same time, we know that there are 14,000 square kilometres of peat restoration target in concessions, and these companies until now still see peat restoration as a cost. Well, we’re inviting them to think of how to turn peat restoration into business opportunities.”
To that end, WRI Indonesia is in talks with companies to see what they need to turn the task of peat restoration from a costly endeavour into a viable business opportunity, including carbon tax schemes or carbon trading.
This kind of approach makes the green development plan a much more investment-oriented model than Indonesia’s previous mid-term development plans.
“Previous development plans usually involved background studies, and then there were laundry lists of programs that needed to be implemented,” Tjokorda said. “But when it comes to investment, there’s [been] no follow up.
“Now, we’re trying one step or two steps further. We list down the programs and how to implement them and how to finance them. In the end, the development plans of both the government and the private sector will be the same, going in the same direction. That’s a new path.”