Indonesia, as one of the biggest economy in the world, faces twin challenge of reducing carbon footprints and growing its economy. Though still far in sight, it is expected that the country could transition into a more sustainable economic model.

In the last few years, the Government of Indonesia have been taking strategic steps to attain a low carbon economy in the country. There are a couple of approaches that the Government has taken to realise that vision, such as through restoration of degraded land and investing in green projects.

This brief article would like to examine three seperate instances, through which one could see that low carbon economy initiatives has been rather progressing in Indonesia.

1. Low Carbon Development In National Medium Term Development Plan 2020-2024

The low carbon initiative has been incorporated into Indonesia’s National Medium Term Development Plan 2020-2024.

The planning document mentions the progress the progress on emission reduction on three specific sectors, namely: energy; land use; and industrial process and waste management. Hence for 2024, there is a target to reduce emission by 27% by 2024, a number that is aligned with Indonesia’s Nationally Determined Contribution (NDC).

The document also sets out strategic actions in order to achieve said target. The land use sector is encouraged to restore peatland, rehabilitate degraded lands, and improve agricultural productivity. Meanwhile for industry sector, initiatives such as development green industry and management of industrial waste is recommended to further the emission reduction initiatives. Last but not least in the energy sector, developing renewable energy would be a key action to realise the low carbon development plan.

2. Forest Carbon Partnership Facility

Indonesia has entered agreement with World Bank in Forest Carbon Partnership Facility (FCPF) for reducing emissions from deforestation and forest degradation (REDD+) in East Kalimantan province.

Indonesia will receive up to US$110 million after independent third-party verification of reported emission reductions is completed. Indonesia is the first country in the East Asia Pacific region to receive payment through the World Bank's FCPF.

This upfront payment will facilitate the start of the East Kalimantan Benefit Sharing Plan, which was developed through a consultative, transparent, and participatory process to ensure that all relevant stakeholders of the program can access the benefits of emission reduction payments.

This program is an opportunity for all parties to take joint action in protecting Indonesia's forests and reducing emissions, helping to address the impacts of climate change and steer Indonesia towards a green development path.

Aside from becoming a major financial incentives on climate actions, it should be highlighted that this accomplishment marks that international community have recognized that a green policy driven by a provincial government could work in Indonesia.

3. Financing framework for renewable energy

Indonesia has already several financing mechanism in place to support investment in clean energy.

To name a just a few, there are PT Sarana Multi Infrastruktur (PT SMI) – a special mission vehicle operating under Ministry of Finance – and Indonesia Infrastructure Guarantee Fund (IIGF) – a large public finance institution, the focus of which lies in providing guarantees for Public Private Partnership (PPP) projects in Indonesia. Both of these intuitions have included clean energy projects as one of their top priority.

In 2019, data shows that renewable energy financed by PT SMI reached USD 224 million. Through the SDG One Platform, PT SMI plans to further expand its portfolio on clean energy investment.

The financing facilities in Indonesia have already been operating to de-risk investment, raise the commerciality of projects, as well as become a platform to blend private and public finance. Surely, there are various lessons learned from years of implementation of this frameworks. Eventually, years of implementation, lessons learned, and positive-net impacts of these projects could bring additional capital and investors in Indonesia, to showcase that investing on low carbon economy initiatives in Indonesia could bring a tangible return.

CarbonX sees that carbon projects in voluntary carbon market is another example of low carbon economy initiatives that could contribute significantly in Indonesian economic growth. There will be green jobs, a sustainably managed environment, and enhanced resilience of communities affected by climate impacts. At the end of the day, these actions would lead to climate mitigation and adaptation, as well as the improvement of livelihoods of local communities.