The Public Climate Finance Landscape

16 An Indonesian Ministry of Finance CPI Report This landscape study tracks the lifecycle of climate inance through the lens of a small but critical group of actors. We ind that domestic actors especially, play multiple roles throughout the lifecycle of lows in Indonesia, and act as sources, intermediaries and disbursement channels. The overlap in roles is in part a product of implementing the governance requirements described in the previous section, and the real-life complexity of the landscape and lifecycle of public climate inance lows in Indonesia. In this irst detailed exploration of the lifecycle of climate inance in Indonesia, we organize our analysis by focusing on pivotal actors in the landscape in their role as both providing and intermediating or disbursing inance throughout its lifecycle. We explore which inancing instruments and mechanisms they use, how they deliver inance, and for what end uses. Figure 3, The Indonesian Public Climate Finance Flows diagram also known as the ‘climate inance spaghetti diagram’ illustrates the land-scape of public climate inance lows in Indonesia along their life cycle for the year 2011. The width of the arrows in the diagram represents the relative volume of the lows. Local governments’ and state-owned enterprises’ lows are presented without quantiication since our case study analysis for these components did not allow for a comprehensive estimation. Figure 2 provides a more simpliied overview of the main sources, instruments, disbursement channels and sectors of climate inance identiied in the study.

4. The Public Climate Finance Landscape

• In 2011, at least IDR 8,377 billion USD 951 million in public climate inance was disbursed in Indonesia. 66 of disbursements originated from national sources, while international sources contributed 34. • Although 2011 public climate inance expenditure is signiicant, inance from public and private sources will need to be increased in future years to meet Indonesia’s emission reduction targets. • Most inance was delivered through domestic budget expenditure 71, complemented by loans 12 and grants 16 from bilateral development partners. • In 2011, the Indonesian government implemented the majority of climate actions and activities 77, while State-owned enterprises also played an important role in implementation 12. International development partners, private sector, NGOs and others were responsible for the minor share of implementation approx 2-3 each. • Around 60 of the total climate inance supported ‘indirect activities’ or the establishment of enabling environments to support future climate action. Policy development accounted for the majority of this indirect spending IDR 3,225 billion USD 366 million. • Around 40 of the total climate inance went to ‘direct’ mitigation and adaptation actions on the ground. IDR 3,004 billion USD 341 million supported mitigation, while at least IDR 384 billion USD 44 million went to adaptation. • There is signiicant uncertainty around the total amount of public climate inance spent in 2011. We identiied an additional IDR 10,008 billion USD 1.136 million that supported key development activities, which may also have contributed to climate outcomes, and particularly to adaptation outcomes. However, we could not estimate or verify the climate-speciic share of this development inance. • Some of the most emission-intense sectors beneit from the highest share of climate inance, including forestry 41, energy 19, agriculture and livestock management 10, transport 9, and waste and waste water 7. Figure 2: Simpliied breakdown of public climate inance lows in Indonesia in 2011 Energy 413 Transport 515 Waste and waste water 424 Industrial process emissions 60 Infrastructure and coastal protection 14 Disaster risk management 178 Other 140 Agriculture 796 Forestry and land use 2,986 Non- structural agency 163 Ministries and Central Gov. 5,333 Local Gov. 1 Private 30 Budget Expenditure 5,496 Revolving Fund 30 Central Government 933 Private 165 Other 279 International Development Partner 253 State- Owned Enterprises 998 NGO 160 Local Government 49 Non-structural agency 14 Budget expenditure from intl. loans 464 Budget pxpenditure from intl. grants 15 Intl. Grant 1,327 Others 12 Concessional loans 1,024 Equity 9 Domestic Public Climate Finance International Public Climate Finance State budget 5,526 Bilateral Development Partners 2,576 Local Government 50 Forestry and land use 3,467 Industrial process emissions 63 Transport 719 Infrastructure and coastal protection 288 Waste and waste water 621 SOURCES INSTRUMENTS DISBURSEMENT CHANNELS SECTORS Intl. Grant 1,327 Revolving Fund 30 Others 12 Concessional loans 1,024 Equity 9 Budget expenditure 5,975 Ministries and Central Gov. Agencies 6,265 Non- structural agency 177 Private 195 Other 279 NGO 160 International Development Partner 253 State- Owned Enterprises 998 Energy 1,623 Other 404 Agriculture 817 Disaster risk management 374 PUBLIC CLIMATE FINANCE FLOWS IN INDONESIA IN 2011 Infrastructure and coastal protection 275 Waste and waste water 197 Disaster risk management 195 Industrial process emissions 3 Agriculture 21 Forestry and land use 481 Transport 204 Energy 1,211 Other 264 The green hashes above represent the volume of finance in each sector that is sourced from international development partners but ultimately spent via the Indonesian Government. Other 170 Intl. Climate Funds 68 National Climate Funds 21 Multilaterals 16 INSTRUMENTS DISBURSEMENT CHANNELS SECTORS INSTRUMENTS DISBURSEMENT CHANNELS SECTORS ALL FIGURES IN BILLIONS OF INDONESIAN RUPIAH IDR Source: Study team analysis of budget data and international development partner survey Note: Flows are expressed in IDR billions and are rounded to produce whole numbers, and as such may not add up. We exclude movements of inance between actors which did not result in disbursements to projects. Notes: Figures are indicative of annual flows for 2011. All data presented relates to disbursements or movements of finance between actors in 2011. Flows are expressed in IDR billions and rounded to produce whole numbers; and as such values might not add up.. We show finance that we could identify clearly as climate-specific as “solid” flows. The diagram captures upfront capital investment costs for low carbon and climate resilient activities, plus activities that indirectly support mitigation or adaptation, such as policy development, capacity building, setup of MRV systems, or research and development. We only track upfront investments and not lifetime inflows. There is significant uncertainty around how much climate-specific finance is being disbursed from the state budget to support indirect activities in general, and adaptation activities in particular. We represent the full range, including the band of uncertainty up to an additional IDR 10,008 billion, in the diagram as a “shadow,” reflecting the scale of climate-specific finance and portion of potentially relevant finance that we could not verify. We included movements of finance between actors where we know they happened ICCTF, Geothermal Risk Mitigation Fund, Eximbank, although there were not disbursements to projects in 2011. Equity participation is comparable to what we call balance sheet financing in the global landscape. Budget Transfer Central Government State Budget Intl. Development Partners Low-cost Project Debt Budget Transfer Sources Intermediaries Instruments Disbursement Channels Uses THE LANDSCAPE OF PUBLIC CLIMATE FINANCE IN INDONESIA IN 2011 - IDR 8,377 BN TOTAL CENTRAL GOVERNMENT 7,242 BUDGET EXPENDITURE 5,975 NATIONAL FUNDS INTL. FUNDS - 56 LOCAL GOVERNMENTS PROJECT-LEVEL EQUITY - 9 OTHER - 12 AGRICULTURE - 817 SECTOR FORESTRY - 3,467 INDUSTRIAL - 63 TRANSPORT - 719 WASTE - 621 DISASTER RISK - 374 INFRASTRUCTURE 288 OTHER 404 DIRECT USE LOCAL BUDGET STATE BUDGET 7,242 INT’L DEV’T PARTNERS 3,123 479 1,2 66 30 LOW-COST PROJECT DEBT - 1,024 LOCAL GOVERN- MENTS - 50 PRIVATE ACTORS - 195 NGO - 160 OTHER - 279 STATE-OWNED ENTERPRISES INT’L DEV’T PARTNERS - 253 NON-STRUCTURAL AGENCIES - 177 MITIGATION 3,004 ADAPTATION 384 MRV - 308 RD - 517 OTHER - 578 INDIRECT USE POLICY DEV’T 3,225 BUDGET EXP. THRU LOCAL GOV. NE REVOLVING FUND EQUITY PARTI- CIPATION NE GRANTS - 1,327 PROJECT-LEVEL MAR- KET RATE DEBT - 264 ENERGY - 1,623 28 21 1,262 CAPACITY BUILDING - 361 997 MINISTRIES CENTRAL GOVERNMENT AGENCIES 6,265 998 19 An Indonesian Ministry of Finance CPI Report Box 3: Uncertainty in our estimates of climate inance lowing through Indonesian state budget in 2011 There is signiicant uncertainty about how much money the state and local budgets actually disburse to support climate change action in general, and adaptation actions in particular. We illustrate the impact of this uncertainty in the climate inance spaghetti as a ‘grey’ shadow that represents the possible upper bound of total public climate inance lows. We could not verify this upper bound largely due to lack of clear and suiciently detailed deinitions that made it diicult to determine which budget items are climate speciic. 1 With respect to state budget expenditure for mitigation, we identiied but could not verify around IDR 22 billion USD 2 million, related to direct actions targeting agriculture and waste, and waste water sectors. Meanwhile, we identiied but could not verify IDR 1,594 billion USD 181 million of disbursements that supported indirect activities such as policy development, RD and monitoring systems, mostly related to forestry and infrastructure development. For adaptation, the uncertainty is greater still. We identiied IDR 8,392 billion USD 952 million worth of development activities that may be contributing to climate outcomes. The majority of funding included in this upper bound relates to development infrastructure, such as improving environmental infrastructure of settlements, water supply and–resources management, irrigation networks, coastal protection, or dam inspection. These actions have climate beneits, but we have been unable to quantify the climate-speciic portion of funding. 2 Figure 4 highlights those sectors and uses that are most afected by questions of uncertainty. 1 The RAN-GRK and RAN-API frame how climate inance is currently being deined in Indonesia. Therefore, some ministries were hesitant to identify the climate speciic actions in their budget according to the CPI deinition of climate inance. They preferred their numbers to be in line with what they reported to Government of Indonesia, even if that excluded activities that had a climate co-beneit already in 2011. In addition, neither the RAN-GRK nor RAN-API were in efect in 2011 so ministries did not want to apply them retrospectively. Additionally, where ministries’ planning departments were interested in applying the RAN-GRK and RAN-API deinitions, this was not always easy to do, as generally only the ministries’ technical departments know the budget activities in suicient detail to allow them to be easily match deinitions with activity components. 2 The Government of Indonesia is currently developing a new budget tagging system. As a result we did not estimate the climate-speciic shares of some climate-applicable activities, in part because we did not want to pre-empt upcoming government decisions on how activities might be scored. We note that the CPEIR has already pioneered an approach to budget marking that provides a basis for monitoring change. Our marking system was more conservative, and therefore excluded some activities that might have been included under the CPEIR. Because we could not calculate climate-speciic shares, our range of uncertainty includes the whole cost of activities that potentially provide climate speciic outcomes. ALL FIGURES IN BILLIONS OF INDONESIAN RUPIAH 218 8,610 1,725 5,657 4,063 M I T I G AT I ON I ND I R EC T A DA PTAT I O N 500 bn rp 100 bn rp Upper estimate of financial flows Identifiable climate finance Scale: 1,747 Uncertainty in Tracking 2011 Public Climate Finance in Indonesia 2,960 3,949 Forestry 37 3 57 Industrial process emissions Transport 586 19 195 178 Disaster Risk Management 9 131 174 Others 21 11 398 397 399 464 Agriculture 264 406 Energy 149 41 Waste and waste water 553 572 2 2 8,384 14 369 Infrastructure and coastal protection S E CTO R S Source: Study team analysis of budget data Note: Flows are expressed in IDR billions and are rounded to produce whole numbers, and as such may not add up. 21 An Indonesian Ministry of Finance CPI Report

4.1 Indonesian central government