Good (Energy) News from Indonesia #2
It’s been a while, but let’s carry on with the count. This time we’re going to have a look at the pecuniary matters:
8. The Indonesian government established an agency responsible to pool climate change funds both from state budget and from international institutions, and to assign these funds to climate change related projects across the country: Indonesia Climate Change Trust Fund (ICCTF) in 2009.
It also aims to mainstream climate change priorities into national and local development planning and policies, and implement GHG emissions mitigation measures and adaptation to climate change initiatives. ICCTF is the first national government trust fund institution in Indonesia as a follow up of Indonesian commitment in COP13 in Bali, and globally the first example of a national mechanism to fund climate change action. It has three thematic windows: energy, land-based mitigation, and adaptation and resilience. Currently a “Satuan Kerja”, this financial mechanism is working under the jurisdiction of Bappenas. All eligible Indonesian institutions have access to ICCTF funds through the executing agencies (line ministries/agencies). There’s “Apply for grants” page in the ICCTF website, encouraging the public and private institutions to apply for funding in sustainability projects.
Interesting ongoing projects that are currently overseen by ICCTF:
Strengthening Resilience of Coastal Community through Technology and Participatory Media. Targeted at fisherman community in four provinces: Yogyakarta, West Java, Banten, Sulawesi.
Public awareness and education project -> one of the deliverables is a curricula modules on climate change for all levels of formal schools in Indonesia. Another one is TV programs for knowledge diffusion of climate change adaptation and mitigation to general public. YEAY!
On a precaution note: in practice, however, its operationalisation has been slow, and with a current capitalisation of $11.4 million, it is a relatively small source of finance in a country that accesses hundreds of millions of dollars of concessional donor support for climate related purposes.
9. We also have similar financial mechanism as ICCTF but with a wider scope, Millennium Challenge Account (MCA)-Indonesia. While ICCTF is designed to channel climate finance from various international actors, the MCA-Indonesia is dedicated as the framework for the US MCC grant in the country. Indonesia managed to won the US Millennium Challenge Corporation (MCC) grant in 2009, over Zambia and Colombia. The MCA-Indonesia then was established in 2011 under Bappenas as the framework for the grant implementation and supervision. The MCA-Indonesia is aimed to promote poverty reduction in Indonesia through sustainable economic growth.
It covers green prosperity, community-based health and nutrition, procurement modernization, and crosscutting activities. Climate change projects are accounted under green prosperity pillar. The five-year grant was first implemented in 2013, and will end in 2018. Grant products include:
RE Co-financing grant. Prioritized for projects in the scale of 1 – 10 MW, grid-connected
Green prosperity partnership grant. Two objectives: increasing household income and reducing land-based GHG by promoting utilization of renewable energy and sustainable natural resources management.
10. Otoritas Jasa Keuangan (Financial Services Authority) together with related ministries and international financial institutions published the “Roadmap for Sustainable Finance in Indonesia”, aimed to enhance the sustainable financing by financial institutions in the country.
It means the government has a good intention to encourage and put pressure on financial institutions (including banks, capital market, and non-bank financial services) to support ventures whose portfolio is based on sustainability principles. The Roadmap will be translated to regulations by OJK, which has to be complied by the financial service institutions (FSI) operating in Indonesia. Now, if the roadmap is implemented and adopted by the financial service institutions, we will have the financial resources flowing to sustainable and climate-resilient business. Yeay!
(PS: Bank Artha Graha Internasional, Bank Central Asia (BCA), Bank Negara Indonesia (BNI), Bank Rakyat Indonesia (BRI), Bank BRI Syariah, Bank Mandiri, and Bank Jawa Barat dan Banten are scheduled to implement these guidelines in January 2016.)
The Roadmap outlines three strategic activities:
Increasing the supply of sustainable financing, by provision of incentives to FSIs to expand their green (financial) products, information sharing, increasing access to global public fund, etc.
Increasing the demand of sustainable financing, by building public awareness, providing education on green investment and financing.
Increasing oversight and coordination on the sustainable finance implementation, by strengthening risk management and law implementation, creating a forum for coordination between institutions, etc.
On the positive side: the roadmap defines annual targets and activity plans from 2015 to 2024 -> tangible. It also plans to oblige the financial service institutions to publish Sustainability Report for oversight and transparency -> accountability and social pressure are addressed. Besides, more work for the FSI -> more vacancies? :p
On a precaution note: the OJK itself should be held accountable on implementing the Roadmap à an implementation with updated goals/strategies report by OJK annually during the roadmap time frame is required.
11. Clean Energy Handbook by OJK
Still some good vibes from the financial ends, the OJK published guidelines for financing RE projects in Indonesia: from an overview of the potential technologies, existing regulations for clean energy, financing schemes, to evaluation approaches.
The focus for this first volume lies on mini-hydro, biomass, and biogas small-scale renewable energy projects. Not only useful for the financial services institutions, this book is equally, if not more, valuable to the project owners or to those who want to initiate a clean energy project in planning and securing the funding. It includes feasibility guidelines as well as risk management insights, therefore providing best practices for the project managers on working out the business plan for their project.
With all these financial mechanisms exist, one should expect a better environment for sustainable businesses and clean energy ventures to bloom.
Taking an example in Uruguay’s renewable energy boost case: at the end of the day, it’s about the sustainability in the business scheme. If there is a secure business environment, investments on clean energy are very attractive since the operational and maintenance costs are low. Furthermore, the flourishing competition would further bring down the cost -> virtuous cycle?
Long-term (sustainable) policies ftw! :)