6 An Indonesian Ministry of Finance CPI Report
1.2 Contextualizing Indonesia’s climate change challenges
Indonesia has signiicant climate change mitigation and adaptation opportunities and challenges. As one of the
world’s major global emitters,
3
Indonesia has potential to contribute substantially to global eforts to reduce
greenhouse gas emissions. Recognizing this, Indonesia made important national commitments in 2009 to
reduce greenhouse gas emissions by 26 against business-as-usual levels by 2020, or by up to 41 with
international assistance. Indonesia is striving to realize these reductions while achieving broader sustainable
development and economic goals, aiming to meet an economic growth target of 7 on average over the same
period.
Indonesia’s mitigation commitments are deined in Presidential Regulation 612011, which details a
National Action Plan on Reducing Greenhouse Gas Emissions RAN-GRK. The RAN-GRK comprises 50
categories of policies or actions in ive key sectors, including agriculture, forestry and peat lands, energy
and transportation, industry, and waste management. Indonesia’s political and governance system is highly
decentralized, and, as a result over the past two years, the Government of Indonesia has undertaken an
extensive process to develop regional implementation plans RAD-GRK that translate national plans to the
provincial level see Box 2.
Complementing these national and provincial plans, the Indonesian Government has also developed and
begun to implement a range of policies and incentives to support a nationally appropriate transition to a low-
carbon economy. These include policies to support fuel switching, renewable energy, and sustainable land use
see Box 5.
3 WRI 2013 estimates that Indonesia was the 7th largest emitter includ-
ing LULUCF in 2010 with emissions of 1,170 MtCO2e.
Work has also started to clarify Indonesia’s climate inance needs, and to track planned expenditures from
the state budget. In 2012, the Government published the Mitigation Fiscal Framework MFF
4
in which the MoF estimated that the cost of actions in forestry and peat
lands, energy, and transportation sectors consistent with reaching the 26 by 2020 emission reduction
target, might reach between IDR 100,000 billion and IDR 140,000 billion USD 10,719 million and USD 15,007
million per year in 2020.
5
Prior to the MFF, Indonesia’s National Council on Climate Change DNPI estimated
that an additional IDR 168,300 billion USD 18,040 million in domestic and international inance would be
required in 2020, to achieve the diference between the 26 and 41 emissions reduction goals DNPI, 2009.
Both estimates were derived using broad assumptions and may not relect inal costs. However they provide
a sense of the scale of Indonesia’s overarching climate inance challenge and highlight the importance of
spending available lows efectively and eiciently.
Indonesia also faces signiicant challenges building climate resilience and managing unavoidable climate
impacts. As an archipelago of more than 17,000 low- lying islands with an economy based on natural
resources, much of Indonesia’s land mass is highly vulnerable to climate impacts. To respond to this
challenge, the Government of Indonesia has developed and is currently inalizing a National Action Plan on
Climate Change Adaptation RAN-API which will provide a blueprint for building resilience in four
main areas: economic food and energy, social and livelihoods, ecosystems, and special areas urban
and coastal. To date, Indonesia’s inance needs for adaptation have not been estimated comprehensively.
4 The MFF was developed in the context of the Climate Public Expenditure and Institutional Reviews CPEIRs which have been carried out in a
number of Asian countries, initially with support from UNDP and UNEP Aid Efectiveness, 2014.
5 The estimate relates to indicative annual costs in 2020, expressed in 2012
prices. Conversion from IDR to USD was calculated using 2012 average exchange rate from oanda.com. This total amount is to support the 26
nationally supported target. Additional international funding will be required to go beyond the 26 commitment. The Indonesian Government
estimates that 93 of the emissions reductions implemented by the RAN- GRK to support the 26 target will be delivered in the forestry, peat land,
energy, and transportation sectors. See MoF 2012.
7 An Indonesian Ministry of Finance CPI Report
2.1 Deinition of climate inance and framework for tracking the life cycle
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