Assessing priorities and financing needs of LEDS implementation by sub-national

governments

a Joint Crediting Mechanism (JCM) case study

Dicky Edwin Hindarto

Head of Indonesia Joint Crediting Mechanism Secretariat

After the Paris Agreement…..

Paris Deal includes a temperature limit of “well below 2 C”

and stated that there should be “efforts” to limit it

to 1.5 C. To do so, it requires 32 GtCO2e emission to be

cut in 2050, and around US$ 40 trillion of additional

investment to transition to a global low-carbon economy.

To achieve long-term temperature goal or in another word reaching net zero-emission after 2050.

Legal obligation on developed countries to continue to provide climate finance to developing countries.

On mitigation, binds parties to prepare and regularly update climate commitments and developing countries are encouraged to move towards stricter goals.

The agreement was made, but how to implement it are very different things. Basically there are two important things that related to the future mitigation: is the NDC enough to reduce the GHG emission, and is the budget sufficient to finance the mitigation activities…

Indonesia INDC Un-conditionality:

….Indonesia’s is committed to reducing emissions by 29% compared to the

business as usual (BAU) scenario by 2030, as a fair reduction target scenario based on country’s most recent assessment of the 2010’s National Action Plan on GHG Reduction. The BAU scenario is projected approximately 2,881 GtCO2eq in 2030….

Conditionality:

As articulated in the aforementioned Unconditional Reduction Indonesia’s target should encourage support from international cooperation, which is expected to help Indonesia to increase its contribution up to 41% reduction in emissions by 2030. ….Indonesia’s additional 12% of intended contribution by 2030 is subject to provision in the global agreement including through bilateral cooperation, covering technology/ deployment and transfer, capacity building, payment for performance mechanisms, technical cooperation and access to financial resources… …Indonesia will meet its unconditional commitments regardless of the existence of international market mechanisms. Indonesia welcomes bilateral, regional and international market mechanisms that facilitate and expedite technology development and transfer, payment for performance, technical cooperation, and access to financial resources to support Indonesia’s climate mitigation and adaptation efforts toward a climate resilient future…

From the agreement to implementation

• Paris Agreement gave target and also ambition to combat the climate change, but in the same time it also give challenges and uncertainties in its implementation.

• Government budget solely will not enough to combat the climate change, it require private sectors involvement as well as international support!

• It requires a strong domestic commitment in every countries to implement it.

• Several challenges and difficulties such as lack of capacities, insufficient budget, and lack of technologies may occur.

• Indonesia, will use a non-market as well as market-based mechanism (MBM) to achieve its emission reduction target, pre and post Paris Agreement.

• MBM is a policy mechanisms that use market, price, and other economic variables to provide incentives for polluters to reduce or eliminate negative environmental externalities.

Before Paris Agreement After Paris Agreement

?

LEDS implementation post Paris Agreement

Development Plans

Low Emissions Development Strategies (LEDS)

Market Based Mechanism

Non Market Based Mechanism

Sustainable Development Impacts

Clim

ate Ch

ange Im

pacts

MRV is very important for the LEDS implementation, and it must be embedded in emission reduction calculation and sustainable development evaluation.

MRV

MRV MRV MRV MRV MRV MRV

MRV

MRV

MRV

• Post Paris Agreement, Low Emissions Development Strategy (LEDS) will be widely implemented in line with the effort to achieve NDC targets.

• For Indonesia, LEDS implementation also means the integration between national development masterplan and NDC target achievement programs.

• Indonesia has experiences in the LEDS development & implementation, the Implementation of National Action Plan (NAP) on GHG Emission Mitigation and Adaptation.

• Since 2005, Indonesia has also implemented several market based mechanisms scheme.

Sub nationals, sectoral, and project based LEDS implementation

1. Indonesia’s NAP on GHG Mitigation and NAP Adaptation are implemented at the national level. Indonesia also has developed several NAMAs projects which is expected can significantly contributes to the emission reduction.

2. The established NAMA’s programmes are based on non market approaches.

3. To ensure the effectiveness of LEDS implementation, it is expected to integrate the between non-market and market based mechanisms.

4. MBM can be utilized to accelerate the implementation of emission reduction activities by providing low-carbon technologies, financing support, and capacity development, particularly for the Indonesia stakeholders.

5. Sub national, sectoral, and project based LEDS implementation can be developed using market based mechanism rather than national level due to its complexity.

National Level

Sub national and sectoral

Project and installation based

Current market based mechanisms in Indonesia

CDM • Overly high

expectation • Difficult and complex

to be implemented • Ceased due to the

lack of demands • Currently no CDM

project developed • Unbalance/unfair

credits allocation as all the credits goes to the buyer

VCS • Smaller scale than

CDM. • Indonesia has the

biggest REDD+ project and it is until now the only land based project of VCS in Indonesia.

• Several projects was conversion from CDM, due to the lack of CER demand.

The JCM Scheme • The Joint Crediting Mechanism currently is the most progressive market based

mechanism and climate change mitigation activities in Indonesia and in the world. • It is not only about the bilateral carbon trading, but rather how to develop and

implement the green investment as well as low emission development and technology transfer between the 2 countries.

• Japan and Indonesia have their own national target on emission reduction and it can be achieved through JCM by the emission credit sharing.

• Both countries are required to increase their economic development as well as develop more opportunities for their private sectors.

Indonesia

INDC

Market and

non market

approaches

JCM is the newest and the most progressive market based mechanism in the world

Other Voluntary Scheme • Plan Vivo is one of the

voluntary scheme that developed in Indonesia.

• The projects are relatively small and usually are social forest projects.

• Climate, Community and Biodiversity Standard (CCBS) and Gold Standard are also used to “wrapped” the carbon projects.

Basic concept of JCM

• The Joint Crediting Mechanism as a G-to-G scheme which encourages private sector organizations to invest in Low Carbon Development activities in Indonesia through incentive from the Government of Japan.

• JCM cooperation is not only conducted by Japan and Indonesia, but also with other 15 developing countries.

• Bilateral Cooperation on the Joint Crediting Mechanism for the Low Carbon Growth Partnership between the Republic of Indonesia and Japan has been signed by the Coordinating Minister for Economic Affairs of Indonesia and Minister for Foreign Affairs of Japan.

• Objectives of the JCM:

1. Facilitate diffusion of leading low carbon technologies, products, systems, services, and infrastructure as well as implementation of mitigation actions, and contributing to sustainable development of developing countries.

2. Evaluate contributions to GHG emission reductions/removals from developed countries in a quantitative manner, through mitigation actions implemented in developing countries and use those emission reductions or removals to achieve emission reduction targets of the developed countries.

3. Contribute to the ultimate objective of the UNFCCC by facilitating global actions for emission reductions or removals.

108 FS have been conducted

23 projects are being

implemented

41 million USD grant from Japan

70 million USD from Indonesia private sectors

investment

JCM Project Funding

Model Project

50% 50%

Subsidy by MOEJ Project participants Own cost

MOEJ

ADB

JFJCM

(Trust Fund)

OCR/ADF*

JCM Credits

Grant

Loan/

Grant etc.

* OCR: Ordinary Capita lResources,

ADF: Asian Development Fund Project

Additional costs with adoption of advanced low-

carbon technologies

Mitigation through

conventional

technologies

(Selection from

pipeline projects)

MRV

Other financial

institutions

and funds

Loan/

Grant etc.

Co-

financing

Contribution

Initial cost for the installation of new equipment

GHG

Emission

Reduction

Subsidy from METI Financial support from private sector

The amount of subsidy is based on the negotiation with METI

Can be greater than 50%

ADB Trust Fund – JFJCM

Demonstration Project

• Similar view on global emission reduction can generate financing for city to city cooperation.

• Japan and host countries government can promote new technologies and sustainable development criteria.

List of JCM projects JCM Implemented Projects (from 108 Feasibility Studies) Emission Reduction

Demonstration Project

Remote Auto-Monitoring System for Thin-Film Solar Power Plant in Indonesia 1.433 tCO2/tahun

Energy Saving by Optimum Operation at Oil Refinery 3.400 tCO2/tahun

Utility Facility Operation Optimization Technology 58.000 tCO2/tahun

The low carbonization of mobile communication’s BTS by the introduction of TRIBRID system in Indonesia 163 tCO2/tahun

Model Project

Power generation by waste heat recovery in cement industry 122.000 tCO2/tahun

Energy Savings at Convenience Stores 372 tCO2/tahun

Energy saving through introduction of regenerative burners to the aluminum holding furnace of the automotive components manufacturer 856 tCO2/tahun

Solar power hybrid System installation to existing base transceiver stations in off-grid area 2.786 tCO2/tahun

Energy saving by double bundle-type heat pump 170 tCO2/tahun

Introduction of High efficient Old Corrugated Cartons Process at Paper Factory 14.884 tCO2/tahun

Reducing GHG emission at textile factories by upgrading to air-saving loom 566 tCO2/tahun

Installation of Gas Co-generation System for Automobile Manufacturing Plant 20,439 tCO2tahun

Energy Saving for Shopping Mall with High Efficiency Centrifugal Chiller 925 tCO2/tahun

Energy Saving for Industrial Park with Smart LED Street Lighting System 900 tCO2/tahun

Energy saving by introduction of high efficiency once-through boiler system in a film factory 428 tCO2/tahun

Introduction of high efficiency once-through boiler and RO pure water system in golf ball factory 380 tCO2/tahun

Jakabaring Sports City Megasolar Power Plant Project 1.265 tCO2/tahun

REDD+ Model Project

REDD+ Model Project in Boalemo district 100.000 tCO2/tahun

Registered Project

Energy saving for air-conditioning and process cooling by Introducing High-efficiency Centrifugal Chiller 114 tCO2/tahun

Project of Introducing High Efficiency Refrigerators to a Food Industry Cold Storage in Indonesia (credit issued) 29 tCO2/tahun

Project of Introducing High Efficient Refrigerator to a Frozen Food Processing Plant in Indonesia (credit issued) 11 tCO2/tahun

Energy saving for textile factory facility cooling by high efficiency centrifugal chiller 118 tCO2/tahun

Energy saving for air-conditioning and process cooling at textile factory 117 tCO2/tahun

Total: 23 Projects 329.382 tCO2/year

Japan Private Sector

State Owned Company

Local-State Owned Company

Indonesia Private Sector

Third party entity

Government of Japan

Government of Indonesia

88 join JCM scheme (Including FS and projects)

30 join JCM scheme

11 TPEs are designated

Local Government

*As of May 2016

1 join JCM scheme

3 join JCM scheme

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Stakeholders in JCM

1.Energy conservation in airport

2.Energy conservation in WWTP

3.Biomass energy

1. Building’s energy management

2. Waste management

3. Street lightings

1. Building’s energy management 2. Waste management

City-to-City

Surabaya & Kitakyushu

Bandung & Kawasaki

Batam & Yokohama

City-to-City Cooperation scheme

Bekasi site:

• Installed technology: Compressor (2x43 Kw)

• The chillers were used for the cooling room purposes.

• For Bekasi site 20% reduction of energy consumption is expected than the reference scenario.

• Total amount of credit issued: 29 tCO2

JCM project example 1: Energy efficient refrigerants to cold chain industry

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Karawang site: • Installed technology: Compressor (43

kW)and Intelligent Quick Freezer. • By using Intelligent Quick Freezer,

production capacity in Karawang site has increased from 2 tpd to 4 tpd.

• Total amount of credit issued: 11tCO2

The first two JCM projects to issued credits Project participants: PT Adib Global Food Indonesia & Mayekawa MFG

• PT Semen Indonesia Tbk (SMGR) began constructing the power plant by utilizing the exhaust gas (Waste Heat Recovery Power Generation / WHRPG) Tuban I - IV with a capacity of 30.4 MW, which utilizes waste heat produced by the 4 kilns inside the factory to generate steam for the power generator.

• Up to 122,000 tCO2/year is expected to be reduced.

• Can save up to 85% of its electricity bill • The project now is in its design and

procurement of main equipment stage. This project is expected to finish on December 2016.

JCM project example 3: The waste heat recovery power generation in cement industry

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Project participant: PT Semen Indonesia Tbk & JFE Engineering

Our website: http://jcm.ekon.go.id Contact us at secretariat@jcmindonesia.com

Sekretariat JCM Indonesia Gedung Kementerian Koordinator Bidang Perekonomian Lt.2

Jl. Medan Merdeka Barat 7, Jakarta 10110

Thank you! Terima kasih!