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Based on the data above, around 45 US699.7 million of the planned budget should be allocated for the land-based
mitigation window, primarily to support Indonesia’s efforts in reducing emissions from deforestation and land degradation,
and sustainable land-use planning. Currently, the ICCTF is supporting the implementation of several projects in Indonesia,
such as sustainable management of degraded peatland in ive provinces to mitigate GHG emissions and optimise crop
productivity Thamrin, 2014. These projects will support the achievement of Indonesia’s target for reducing emissions but are
not intended to generate emission reduction units that could be sold on the carbon market.
However, the fact that the ICCTF has, to date, secured less than 1 of its target budget for 2012-2020 raises questions about
its ability to achieve the desired scale and impact. Nevertheless, several ministerial representatives consulted for this study
cited ICCTF as needing support and proposed it as a serious candidate for managing REDD+ interim forest inance.
3.4.2 Joint Crediting Mechanism JCM
The Joint Crediting Mechanism JCM between Indonesia and Japan is a cooperation proposal from Japan to Indonesia and
other developing countries. This mechanism supports emission reduction targets in both countries and strengthens bilateral
investment cooperation Carbon Trade Mechanism Division, 2013. Japan and Indonesia mutually recognised that veriied
reductions or removals from the mitigation projects under the JCM could be used as a part of their own internationally
pledged greenhouse gases mitigation efforts. The two countries
work in close cooperation to facilitate inancial, technological and capacity building support necessary for the implementation
of the JCM JCM, 2013.
The JCM star ts its operation as a non-tradable credit type mechanism and both countries will continue consultation for
transition to a tradable credit type mechanism. Indonesia and Japan agreed that the JCM will be valid until a new international
framework under the United Nations Framework Convention on Climate Change UNFCCC becomes operational JCM, 2013.
The JCM scope of activities will include various sectors, namely energy, construction, transport, mining, waste and agriculture
Carbon, 2013. REDD+ is also within the potential scope of the JCM, and feasibility studies were conducted for over 19
REDD+ related projects in Indonesia. However, no REDD+ projects have been selected under this mechanism due to a lack
of demand for REDD+ credits and an unclear methodology. Furthermore, the JCM emphasises a focus on the creation and
transfer of new technology to tackle climate issues. Therefore, at the time of writing, the JCM does not serve to address the lack
of demand or inance for REDD+ emission reductions. system. Risk is reduced through this portfolio approach, because
if one project fails there are others through which to provide the credits. This risk reduction could also enable a higher price
to be sought for the carbon, which beneits the producers of carbon credits.
The aim is for the performance aggregation modality to result in a win-win-win situation: buyers get security of supply, sellers
receive a higher price and intermediaries get a steady margin. The Indonesian government is proposing this direct purchasing
of forest carbon offsets in part to address the lack of market demand for REDD+ emission reductions that is creating
inancial obstacles to development of new projects.
Agus Sari stated that this modality will only become active once the carbon market is more developed and is unlikely
to be active prior to 20152016. There are also a number of regulatory requirements and operational structures that need
to be in place before Modality 3 could launch.
The establishment of FREDDI is supported by the inance provided in the Norway-Indonesia LoI. Agus Sari projects that
up to US10 billion until 2020 will be required by FREDDI to inance the planned emission reductions from forests and
peatland. Of that, US1 billion will come from Norway, US2 billion is anticipated to come from further public sources and
the remaining US7 billion will come from the private sector.
In the medium term, it is intended that FREDDI will be capitalised by all sectors, including domestic and international, public and
private sector sources. FREDDI is expected to encourage domestic private investment to play a signiicant role.
The subsidiary funds under FREDDI provide an opportunity to establish a inancial collaboration structure that will support
the mobilisation of new funds. The subsidiary funds can be special purpose vehicle companies, fund managers or collective
investment agreements. The REDD+ Managing Agency is responsible for deining the
strategic direction of FREDDI, including outlining the thematic focus of its activities. However, since the REDD+ Managing
Agency was established as a non-departmental government institution, at present it does not have the legal right to manage
the fund. Revision to Presidential Regulation No.802011 is required to provide a legal basis for operational control of
FREDDI by the REDD+ Managing Agency. A key priority is for the REDD+ Managing Agency to work closely with
3.4.3 Fund for REDD+ Indonesia FREDDI
