22 23
Meanwhile, analysis conducted in 2014 by the Indonesian Ministry of Finance’s Fiscal Policy Agency and Climate Policy
Initiative stated that in 2011 the Government of Indonesia disbursed US951 million of climate inance from public
sources, of which 66 came from national sources and 34 from international sources. The bulk of this inance 60
supported essential ‘indirect’ activities to create necessary enabling conditions and the remainder went to direct mitigation
and adaptation activities, of which the majority was directed at the forestry sector 73. The analysis also showed that the
forestry sector beneitted from the highest share of direct and indirect climate inance of all sectors under the RAN-GRK,
approximately 41, or US257 million CPI, 2014. It is worth noting the contrasting igures from BAPPENAS
and the Ministry of Finance for 2011, of US2.22 billion versus US951 million respectively, with the latter also including
international inance channelled through the state budget. One of the reasons for the disparity between the two is that
the data presented in the Ministry of Finance’s Fiscal Policy Agency and Climate Policy Initiative report only captures actual
realised expenditure, as opposed to total committed funds. This example shows the magnitude of domestic climate inance
being allocated in Indonesia while also highlighting the challenge of interpreting data between ministries and the need for
systematic inancial MRV for climate inance in Indonesia.
SOURCE AMOUNT US
MILLION LENGTH OF
FUNDING REDD+
TYPE OF FINANCE
Agence française du développement AFD 800
2008 – 2010 Soft loans
World Bank 400
2010 – 2012 IBRD loans The International Bank
for Reconstruction and Development World Bank
400 Unknown
Soft loans AusAID
2 2008 – 2012
ü
Grants AusAIDIFCI
75.9 2007 – 2012
ü
Grants JICA
1000 2008 – 2010
Soft loans JICA
16.5 2009 – 2014
ü
Mix grants and loans USAID
136 2010 – 2014
Grants Norway
1000 2010 – 2016
ü
Grants DFID
2.4 Unknown
Technical assistance DFID
17.9 2010 – 2011
ü
Grants UN-REDD
5.6 2010
ü
Grants FCPF
3.6 2010 – 2012
ü
Grants FIP
80 2010 – 2012
Grants Germany KFW
68 2010 – 2015
ü
Grants Germany GIZ
10 2010 – 2015
ü
Technical assistance Germany KFW
332 2011 – 2017
ü
Soft Loans Germany KFW
2 Unknown
Technical assistance Germany International Climate InitiativeICI
15.35 2008 – 2011
ü
Grants GEF
4 Unknown
Grants European Union
23.7 2007 – 2014
ü
Grants
Total US 4.4 bn
Table 4: Financial commitments to climate change
Source: Brown and Peskett, 2012. Does not mean the entire fund is allocated for REDD+, but simply that REDD+ is one of the sectors that will be funded. US200 million of this total is allocated for REDD+ readiness, and the remaining US800 million for performance-based payments.
3.2.2 International sources of inance for forests and peatland
In addition to the government budget, Indonesia has, and continues to receive, substantial inancial commitments and
pledges of inance for mitigation of climate change from donor countries and institutions.
As of 2011, it was estimated that US4.4 billion in international inancial support for climate change in Indonesia had been
committed for the following few years. This roughly breaks down as US2.94 billion in concessional loans, US1.44 billion
in grants and technical assistance, US3.48 billion in bilateral assistance and US913 million in multilateral assistance
Brown and Peskett, 2012. Data on past and current inancial commitments for climate change actions are provided in Table 4,
which also shows which of these commitments include inance for REDD+.
24 25
3.2.3 Need for systematic monitoring of REDD+ inance
Table 4 provides data from 2011. At present we do not have access to more up-to-date information. However, the data
highlights the variety of international sources that are providing REDD+ inance to Indonesia. It also indicates the types of
inance made available. The majority is in grant or loan form aimed at readiness activities. Only the Norway commitment
includes performance-based inance, or more speciically, performance-based payments for REDD+. Another limitation of
the commitments shown is the time frame. Although disbursal rates of inance may go beyond project timeframes, there are
currently no commitments beyond 2017 and very few after 2015. One of the dificulties in tracking climate change inance, and
more speciically REDD+ inance, in Indonesia is that there is no existing dedicated system that records either. Furthermore, the
majority of climate change inance that Indonesia receives, from both multilateral and bilateral sources, typically does not deine
speciic amounts to be allocated to REDD+. Most of these funds fall under broader umbrellas of environment, conservation
or development programs in which climate change, and particularly REDD+, is one individual component. According to
Indonesia’s Fiscal Agency, tracking grant funding is more complex than tracking loans. Grants received and spent by a number
of parties in Indonesia have not been registered and reported systematically, particularly those managed by
non-government actors. The Government of Indonesia recognises this as a challenge.
The Ministry of Forestry is in the process of recording the levels of climate inance, including for REDD+, received by the
Ministry of Forestry
10
. Meanwhile the Ministry of Finance is also in the process of recording the level of climate inance received and
disbursed by the Government of Indonesia.
11
Ultimately what is needed is a systematic and comprehensive mechanism for monitoring and evaluation of all sources and
types of climate inance in Indonesia. In line with the National REDD+ Strategy, Indonesia is in the process of establishing the
Fund for REDD+ in Indonesia FREDDI, which is expected to create a transparent system that records all inancial aspects
of REDD+ in Indonesia. It will be important to ensure that this effort integrates with those efforts of individual ministries. Further
explanation about FREDDI is provided in Section 3.4.3 below. Note that due to current limitations to the monitoring of
climate inance, and more speciically REDD+ inance, funds available for REDD+ in Indonesia may be larger than presented
in this report.
3.3 The REDD+ inancing gap
While it is dificult to calculate an exact igure for Indonesia’s REDD+ inance needs, the data gathered indicates a signiicant
gap between estimates of what is required to inance emission reducing activities from forests and peatland, and the inance
that is currently available from domestic and international sources. Only about 30 – 40 of the committed funds are
for REDD+, and most are for readiness activities rather than payment for REDD+ emission reductions Tanzler and Maulida,
2013, and therefore do not directly contribute to boosting demand for REDD+.
Lack of inance and demand to pay for Indonesia’s REDD+
emission reductions
It is dificult to give an exact igure of the inance gap to pay for REDD+ emission reductions.
However, the only known source of performance- based inance in Indonesia committed for emission
reductions from REDD+ is the US800 million allocated by Norway under phase 3 of the Norway-
Indonesia Letter of Intent. Contrast this igure with the conservative estimates that between US5-10
billion
is required to inance REDD+ up to 2020 REDD+ Taskforce, 2012, and it is clear that the
inance gap is substantial According to Agus Sari, Deputy Head of the REDD+ Agency
on Planning and Funding, while the US1billion from the LoI between Indonesia and Norway is both generous and much
welcomed, it is not enough for Indonesia to reach its targets. He also stated that “without additional inance there is no legal
reform, no paradigm shift, no solution to tenure problems, and there is no conlict resolution” Sari, 2014.
Although public and other domestic inance sources will certainly be channelled into meeting REDD+ emission reductions targets,
and the wider transition to a green economy, it is fair to say that Indonesia still requires substantial additional inance to meet its
emission reduction targets from REDD+. However, it is also important to acknowledge that Indonesia still
faces constraints to its absorptive capacity for REDD+ inance, which is an underlying cause of the slow rate of disbursal under
some inance commitments. A simple comparison of REDD+ emission reduction targets versus available inance provides
an important illustration of the inance gap in principle, but must be understood in the context of the signiicant progress
still required before REDD+ can be implemented at the scale required to meet these targets.
3.4 Current mechanisms for inancing REDD+ in Indonesia
Currently, there are several formal mechanisms for inancing REDD+ in Indonesia. This subsection provides a brief
description of these mechanisms.
3.4.1 Indonesia Climate Change Trust Fund ICCTF
