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FINAL ASSESSMENT REPORT

PES/REDD+ FINANCE ASSESSMENT AND

DEVELOPMENT OF STRATEGIES TO

INCENTIVIZE LANDSCAPE SCALE LEDS

JAKARTA, MARCH 31, 2016

This publication was produced for review by the United States Agency for International Development. It was prepared

by Tetra Tech ARD.

This publication was prepared by PT. Hydro Program International and supported by the

USAID LESTARI program.

This publication was prepared for review by the United States Agency for International

Development under Contract # AID-497-TO-15-00005.

The period of this contract is from July 2015 to July 2020.

Implemented by: Tetra Tech P.O. Box 1397 Burlington, VT 05402

USAID LESTARI Final Assessment Report - PES/REDD+ Finance Assessment and Development of Strategies to

Incentivize Landscape Scale LEDS P a g e | 1

FINAL ASSESSMENT

REPORT

PES/REDD+ FINANCE ASSESSMENT

AND DEVELOPMENT OF STRATEGIES

TO INCENTIVIZE LANDSCAPE SCALE

LEDS

JAKARTA, MARCH 31, 2016

DISCLAIMER

This publication is made possible by the support of the American People through the United

States Agency for International Development (USAID). The contents of this publication are the

sole responsibility of Tetra Tech ARD and do not necessarily reflect the views of USAID or the

United States Government.

USAID LESTARI Final Assessment Report - PES/REDD+ Finance Assessment and Development of Strategies

to Incentivize Landscape Scale LEDS P a g e | 2

TABLE OF CONTENTS

LIST OF TABLES ................................................................................................................. 4

LIST OF FIGURES ............................................................................................................... 5

ACRONYMS AND ABBREVIATIONS .................................................................................. 6

EXECUTIVE SUMMARY .................................................................................................... 12

RINGKASAN EKSEKUTIF ................................................................................................. 14

1. INTRODUCTION ............................................................................................................ 16

Payment for Environmental Services (PES) concept .................................................. 17

HPI’s activities in accomplishing the SOW objectives ............................................... 18

2. FINANCIAL ARCHITECTURE FOR RURAL LOW EMISSION DEVELOPMENT IN

FOREST AND AGRICULTURE .......................................................................................... 20

2.1. Nationally operated financing supports ................................................................ 26

2.1.1. The Indonesia Climate Change Trust Fund (ICCTF) ........................................ 26

2.1.2. Forest Management Unit (FMU) Fund ................................................................ 28

2.1.3. Shared Revenue Fund (Dana Bagi Hasil – DBH) on Forestry .......................... 30

2.1.4. Village Fund (Dana Desa) ................................................................................ 32

2.1.5. National Community Empowerment Program (Program Nasional Pemberdayaan

Masyarakat PNPM – Mandiri Kehutanan) .................................................................... 33

2.1.6. People’s Business Credit Program (Kredit Usaha Rakyat - KUR) ..................... 34

2.1.7. Timber Harvesting Postponement Credit (Kredit Tunda Tebang - KTT) ........... 36

2.1.8. Watershed Fund (Dana Daerah Aliran Sungai - Dana DAS) ............................ 37

2.1.9. Grant from the Central Government to Local Government (Hibah Daerah) ...... 38

2.1.10. National Park Fund (Dana Taman Nasional) .................................................. 40

2.2. Internationally operated financial support mechanisms ..................................... 41

2.2.1. Norway – Indonesia REDD+ partnership .......................................................... 44

2.2.2. Forest Investment Program (FIP) ..................................................................... 46

2.2.3. Forest Carbon Partnership Facility (FCPF) ...................................................... 51

2.2.4. REDD Early Movers (REM) .............................................................................. 55

2.2.5. Green Climate Fund (GCF) .............................................................................. 56

2.2.6. Global Environment Facility (GEF) managed funds .......................................... 59

2.2.7. BioCarbon Fund Initiative for Sustainable Forest Landscapes (ISFL) ............... 62

2.2.8. Bilateral commitments financing support .......................................................... 63

2.2.9. Market-based payments for emission reductions (compliance & voluntary) ...... 68

2.3. Private sector & civil society financial support mechanisms.............................. 72

2.3.1. NGOs (national and international) .................................................................... 72

2.3.2. Private companies............................................................................................ 75

3. DEVELOPMENTS TO BE MONITORED ........................................................................ 78

4. INSTITUTIONS WITH A MANDATE TO IMPLEMENT PES AND REDD+ ...................... 80

4.1. Context and relationship between implementing institutions ............................. 80

4.2. Readiness of actors at the landscape level .......................................................... 87



4.2.1. Readiness of actors in Aceh ............................................................................. 87

4.2.2. Readiness of actors in Central Kalimantan ....................................................... 88

4.2.3. Readiness of actors in Papua .......................................................................... 89

5. GOVERNMENT REGULATIONS ON PES AND REDD+ ................................................ 91

a) Draft Regulation on Environmental Economics Instruments ................................. 91

b) Law No. 23 of 2014 on Regional Governance (Article 14) ..................................... 93

6. CONCLUSIONS ............................................................................................................. 95

6.1. Focal point of coordination for funding opportunities......................................... 95

6.2. Financing opportunities and mechanisms for LESTARI ...................................... 95

6.3. Maintaining the potential for renewable energy development ............................ 97

6.4. Challenges of regulatory frameworks and institutional readiness ..................... 98

6.5. Challenges of PES/REDD+ design and implementation ...................................... 99

7. RECOMMENDATIONS ................................................................................................. 101

7.1. Incorporating PES in the utilization of domestic funds ..................................... 101

7.2. Supporting the establishment of Climate Change BLU under the MoF ............ 102

7.3. Accessing the GCF and Norway funds ............................................................... 102

7.4. Designing PES scheme ........................................................................................ 103

7.4.1. PES design on water in Southeast Aceh (including. Gayo Lues) .................... 104

7.4.2. PES design on water in the buffer zone of Cyclops Nature Reserve .............. 104

7.4.3. PES design in Central Kalimantan ................................................................. 105

8. REKOMENDASI-REKOMENDASI ............................................................................... 106

8.1. Mengintegrasikan PJL dalam pemanfaatan dana domestik .............................. 106

8.2. Mendukung pembentukan BLU Perubahan Iklim ............................................... 107

8.3. Mengakses dana GCF dan dana Norwegia ......................................................... 107

8.4. Skema pengembangan pembayaran jasa lingkungan ....................................... 109

8.4.1. Desain PJL air di Aceh Tenggara (termasuk Gayo Lues) ............................... 110

8.4.2. Desain PJL air di kawasan penyangga Cagar Alam Cyclops ......................... 110

8.4.3. Desain PJL di Kalimantan Tengah ................................................................. 110

9. BIBLIOGRAPHY .......................................................................................................... 112

ANNEXES: ....................................................................................................................... 116

Annex 1. Funds Profile ................................................................................................ 116

Annex 2. ICCTF Project Management Cycle .............................................................. 123

Annex 3. KUR Application Procedure and Distribution Mechanism ........................ 124

Annex 4. Questionnaires for LESTARI Site Visit ....................................................... 126

Annex 5. List of Stakeholders Consulted .................................................................. 134

Annex 6. Government Regulations Related To PES And REDD+ ............................ 136

Annex 7. Indicative Work Plans .................................................................................. 149

USAID LESTARI Final Assessment Report - PES/REDD+ Finance Assessment and Development of

Strategies to Incentivize Landscape Scale LEDS P a g e | 4

LIST OF TABLES Table 1: Financial barriers, types and mechanisms ............................................................. 22 Table 2: Sources of existing FMU development funding ...................................................... 28 Table 3: Shared Revenue (DBH) distribution ....................................................................... 31 Table 4: Plan for the 2016 sectoral KUR feature.................................................................. 35 Table 5: FIP activities in Indonesia ...................................................................................... 47 Table 6: FIP funds allocation ............................................................................................... 47 Table 7: FIP I activities and collaborating institutions ........................................................... 48 Table 8: FIP II activities and collaborating institutions .......................................................... 49 Table 9: FIP III activities and collaborating institutions ......................................................... 50 Table 10: List of projects in Indonesia under UK’s International Climate Fund ..................... 64 Table 11: Overview of Compliance and VER Markets for land-based mitigation .................. 69 Table 12: Land-based Emission Reduction Markets per world region .................................. 71 Table 13: Eligibility of KEHATI grants .................................................................................. 73 Table 14: Type and reporting line of FMUs/KPHs ................................................................ 80 Table 15: List of KPHs in LESTARI landscapes .................................................................. 81 Table 16: Division of authority - natural protected area ........................................................ 93 Table 17: Funds profile ...................................................................................................... 116 Table 18: REDD+ related regulations at the national level ................................................. 136 Table 19: REDD+ related regulations at the sub-national level .......................................... 141 Table 20: PES related regulations at the national level ...................................................... 143 Table 21: List of PES and REDD+ related regulations in Aceh .......................................... 147 Table 22: List of PES and REDD+ related regulations in Central Kalimantan .................... 147 Table 23: List of PES and REDD+ related regulations in Papua ........................................ 148



LIST OF FIGURES Figure 1: Ecosystem services from forests .......................................................................... 18 Figure 2: International climate finance ................................................................................. 21 Figure 3: Global climate finance architecture diagram ......................................................... 22 Figure 4: Government management of foreign funding ........................................................ 23 Figure 5: The landscape of public finance in Indonesia ....................................................... 25 Figure 6: ICCTF fund management ..................................................................................... 27 Figure 7: Distribution mechanism for local grants ................................................................ 39 Figure 8: Total bilateral and multilateral ODA committed to the forestry sector 2013 ........... 42 Figure 9: Total bilateral ODA to reduce GHG emissions in the forestry sector ..................... 42 Figure 10: Total commitments to REDD+ by donor type, 2009-2014 ................................... 43 Figure 11: REDD+ finance commitments by donor type, 2009-2014 ................................... 43 Figure 12: Phases of Norwegian fund based on LoI ............................................................ 44 Figure 13: Milestones of REDD+ readiness ......................................................................... 52 Figure 14: Carbon Fund processing steps: From ER-PIN to ERPA Implementation ............ 53 Figure 15: Milestones of Indonesia’s activity under FCPF ................................................... 55 Figure 16: Flow chart for GCF initial proposal approval process .......................................... 57 Figure 17: Voluntary land-based emission reduction volume traded and transaction

value ................................................................................................................................... 69 Figure 18: Certification Standards in voluntary land-based emission reduction market ........ 70 Figure 19: Transacted emission reduction volumes (tCO2e) per project status .................... 70 Figure 20: Origin & destiation of land-based ERs in voluntary and compliance markets ...... 72 Figure 21: Institutions with a mandate to implement REDD+ at the LESTARI landscape .... 85 Figure 22: Institutions with a mandate to implement PES in Indonesia ................................ 86 Figure 23: PES concept based on draft government regulation ........................................... 92 Figure 24: PES mechanism based on draft government regulation ..................................... 92



ACRONYMS AND ABBREVIATIONS ADB Asian Development Bank

AE Accredited Entity (for GCF)

AFOLU Agriculture, Forestry and Other Land Use

AMEP Activity Monitoring and Evaluation Plan

APBD Anggaran Pendapatan dan Belanja Daerah (Sub-national Government

Budget)

APBN Anggaran Pendapatan dan Belanja Negara (State Budget)

APL Area Penggunaan Lain (Other Land Use)

B Billion

BAPPEDA Badan Perencanaan Pembangunan Daerah (Local Development

Planning Agency)

BAPPENAS Badan Perencanaan Pembangunan Nasional (National Development

Planning Agency)

BI Bank Indonesia (Central Bank of Indonesia)

BioCF BioCarbon Fund

BIOCLIME Biodiversity and Climate Change Program

BKF Badan Kebijakan Fiskal (Fiscal Policy Agency)

BKSDA Balai Konservasi Sumber Daya Alam (National Resources Conservation

Agency)

BLH Badan Lingkungan Hidup (Government Environmental Agency at sub-

national level)

BLU Badan Layanan Umum (Public Service Agency)

BLUD Badan Layanan Umum Daerah (Local Government Public Service

Agency)

BNI Bank Nasional Indonesia (National Bank of Indonesia)

BPDAS Badan Pengelola Daerah Aliran Sungai (Watershed Management

Agency)

BP-REDD+ Badan Pengelola REDD+ (Indonesia REDD+ Agency)

BP2HP Balai Pemantauan Pemanfaatan Hutan Produksi (Monitoring Agency for

the Utilization of Production Forest)

BRG Badan Restorasi Gambut (Peatland Restoration Agency)

BRI Bank Rakyat Indonesia (People Bank of Indonesia)

BUMD Badan Usaha Milik Daerah (Local Government Owned Company)

CA Conservation Area

CBFM Community Based Forest Management

CCBS Climate, Community, and Biodiversity Standard

CCBA PDD Climate, Community and Biodiversity Alliance - Project Design Document

CBNRM Community-Based Natural Resources Management

CER Certified Emission Reduction

CI Conservation International



CIF Climate Investment Fund

CMMP Conservation Management and Monitoring Plan

CPI Climate Policy Initiative

CSO Civil Society Organization

CSR Corporate Social Responsibility

C to C Community to Community

DANIDA Danish International Development Agency

DAK/SAF Dana Alokasi Khusus (Special Allocation Fund)

DAS Daerah Aliran Sungai (Watershed)

DBH Dana Bagi Hasil (Shared Revenue)

DFID UK Department for International Development

DG Directorate General

DGCCM Directorate General of Climate Change Mitigation

DIPA Daftar Isian Pelaksanaan Anggaran (Budget Utilization List)

DNPI Dewan Nasional Perubahan Iklim (National Climate Change Council)

DNS Debt for Nature Swap

DR Dana Reboisasi (Reforestation Fund)

DTP Dana Tambahan Penghasilan (Co-administration fund)

DPRD Dewan Perwakilan Rakyat Daerah (People Representative Council at the

sub-national level)

EBTKE Energi Baru Terbarukan dan Konservasi Energi (New Renewable Energy

and Energy Conservation)

EFN The Russell E. Train Education for Nature Program

ER Emission Reduction

ER-PIN Emission Reduction Project Idea Note

ERPA Emission Reduction Payment Agreement

ERPD Emission Reduction Program Document

ERR Emissions Reduction and Removal

ESP Environmental Support Program (Danish International Development Agency)

ETF Environmental Transformation Fund

EUR Euro

FAO Food and Agriculture Organization

FCPF Forest Carbon Partnership Facility

FDI Foreign Direct Investment

FFI Fauna and Flora International

FFP Firm Fixed Price

FGD Focus Group Discussion

FGMC Forest Governance Markets and Climate Program

FIP Forest Investment Program

FMLC Forest Management for Local Community

FMT Facility Management Team

FORCLIME Forest and Climate Change Program

FORDA Forestry Research and Development Agency

FPIC Free Prior Informed Consent

FREDDI Fund for REDD+ in Indonesia

FREL Forest Reference Emission Level



FWI Forest Watch Indonesia

GBP Great British Pound

GCF Green Climate Fund

GDP Gross Domestic Product

GEF Global Environment Facility

GHG Greenhouse gas

GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit

GoI Government of Indonesia

GP Green Prosperity

G to C Government to Community

G to G Government to Government

HD Hutan Desa (Village Forest)

HoB Heart of Borneo

HPI Hydro Power International Ltd.

ICAO International Civil Aviation Organization

ICCTF Indonesia Climate Change Trust Fund

ICRAF International Center for Research in Agroforestry

IDR Indonesian Rupiah

IFACS Indonesia Forest and Climate Support

IFC International Finance Corporation

IFT Intergovernmental Fiscal Transfer

IIUPH Ijin Usaha Pemanfaatan Hasil Hutan (Forest Exploitation Permit Fee)

IRR Internal Rate of Return

ISFL Initiative for Sustainable Forest Landscapes (BioCF WBG)

ITP Industrial Tree Plantation

JNR Jurisdiction and Nested REDD+

KPH/FMU Kesatuan Pengelola Hutan (Forest Management Unit)

KPHK Kesatuan Pengelola Hutan Konservasi (FMU Conservation)

KPHL Kesatuan Pengelola Hutan Lindung (FMU Protection)

KPHP Kesatuan Pengelola Hutan Produksi (FMU Production)

KSDAE Konservasi Sumber Daya Alam dan Ekosistem (Natural Resources and

Ecosystem Conservation)

KTH Kelompok Tani Hutan (Forest Farmer Group)

KTT Kredit Tunda Tebang (Harvest Postponement Credit)

KUR Kredit Usaha Rakyat (People Business Credit Program)

LBA Landscape Baseline Assessment

LCP Landscape Conservation Plan

LCS Low Carbon Support

LDC Least Developed Country

LEDS Low Emissions Development Strategies

LEMASA Lembaga Masyarakat Adat Suku Amungme (Amungme Customary

Group Organization)

LEMASKO Lembaga Masyarakat Adat Suku Kamoro (Kamoro Customary Group

Organization)

LoA Letter of Agreement

LoI Letter of Intent



LPMK Lembaga Pengembangan Masyarakat Adat Amungme dan Kamoro

(Amungme and Kamoro Tribal Groups Development Organization)

LULUCF Land Use, Land-Use Change and Forestry

LWA Lembaga Wali Amanat (Board of Trustee - ICCTF)

M Million

MDB Multilateral Development Bank

MFI Micro Finance Institution

MoEF Indonesian Ministry of Environment and Forestry

MoF Ministry of Finance

MoFor Ministry of Forestry

MRV Measurement, Reporting, Verification

MSF Multi Stakeholders Forum

MSME Micro, Small and Medium Enterprises and Cooperatives

MWA Majelis Wali Amanah (Board of Trustee)

M&E Monitoring & Evaluation

NAMA Nationally Appropriate Mitigation Action

NBFI Non-Banking Financial Institutions

NDA National Designated Authority

NIE National Implementing Entity

NGO Non-Governmental Organization

NORAD Norwegian Agency for Development Cooperation

NPHD Naskah Perjanjian Hibah Daerah (Letter of Agreement on Local Grant)

NTFP Non Timber Forest Product

ODA Official Development Assistance

OECD Organization for Economic Co-operation and Development

OFP Official Focal Point

PAD Pendapatan Ali Daerah (Local Government Revenue)

PAKLIM Policy Advise for Environment and Climate Change

PCN Project Concept Note

PDA Pengelola Dana Amanat (Trust Fund Manager - ICCTF)

PDAM Perusahaan Air Minum Daerah (Local government owned drinking water

company)

PDAS-HL Pengelolaan Daerah Aliran Sungai dan Hutan Lindung (Watershed

Managament and Protection Forest)

PDD Project Design Document (VCS)

Perpres Peraturan Presiden (Presidential Regulation)

PES Payment for Environmental Services (Pembayaran Jasa Lingkungan –

PJL)

PHPL Pengelolaan Hutan Produksi Lestari (Sustainable Production Forest

Management)

PIN Project Idea Note

PIP Pusat Investasi Pemerintah (Government Investment Center)

PNPM Program Nasional Pemberdayaan Masyarakat (National Community

Empowerment Program)

PKPPIM Pusat Kebijakan Pembiayaan Perubahan Iklim dan Multilateral (Center

for Climate Change Financing and Multilateral Policy)



PP Peraturan Pemerintah (Government Regulation)

PPI Pengendalian Perubahan Iklim (Climate Change Control – MoEF)

PPP Public Private Partnership

PSDA Pengelolaan Sumber Daya Air (Forest Resource Rent Provision)

PSDH Pengelolaan Sumber Daya Hutan (Forest Resource Provision)

Pusat P2H Pusat Pembiayaan Pembangunan Hutan (Center for Forest

Development)

P to C Private to Community

PT. SMI Perseroan Terbatas Sarana Multi Infrastruktur

RAD-GRK Rencana Aksi Daerah Penurunan Emisi Gas Rumah Kaca (Local Action

Plan for Reducing Greenhouse Gas emissions)

RAN-GRK Rencana Aksi Nasional Penurunan Emisi Gas Rumah Kaca (National

Action Plan for Reducing Greenhouse Gas emissions)

RDKL Reksadana Kehati Lestari (Kehati Mutual Fund)

REDD+ Reducing Emissions from Deforestation and Forest Degradation

REL Reference Emission Level

REM REDD Early Movers

RPJM Rencana Pembangunan Jangka Menengah (Mid-Term Development

Planning)

RPJP Rencana Pembangunan Jangka Panjang (Long-Term Development

Planning)

RSPO Roundtable on Sustainable Palm Oil

RTRW Rencana Tata Ruang Wilayah (Regional Spatial Planning)

SCBFWM Strengthening Community Based Forest and Watershed Management

SEA Strategic Environmental Assessments

SGP Small Grant Program

SIU Surat Ijin Usaha (Business Permit)

SKPD Satuan Kerja Perangkat Daerah (Regional/Local Government Working

Unit)

SOW Scope of Work

SRAP Strategi Rencana Aksi Provinsi (Climate Change’s Provincial Strategic

Action Plans)

TFCA Tropical Forest Conservation Action

TKI Tenaga Kerja Indonesia (Migrant worker)

TNGL Taman Nasional Gunung Leuser (Gunung Leuser National Park)

UKCCU United Kingdom Climate Change Unit

UNDP United Nations Development Program

UNEP United Nations Environment Program

UNFCCC United Nations Framework Convention on Climate Change

UPT Unit Pelayanan Teknis (Technical Implementation Unit)

UPTD Unit Pelayanan Teknis Daerah (Regional/Local Technical Implementation

Unit)

USAID United States Agency for International Development

USD United States Dollar

USG United States Government

VER Verified Emission Reduction



VCS Verified Carbon Standard

WBG World Bank Group

WRI World Resource Institute

WWF World Wildlife Fund

YAPEDA Yayasan Peduli AIDS

YTS Yayasan Tambuhak Sinta



EXECUTIVE SUMMARY USAID’s LESTARI project supports the Government of Indonesia (GoI) to reduce

greenhouse gas (GHG) emissions and conserve biodiversity in carbon rich and biologically

significant forest and mangrove ecosystems. Built on the strong foundation of USAID’s

IFACS project, LESTARI applies a landscape approach to reduce GHG emissions,

integrating forest and peatland conservation with low emissions development (LEDS) on

other, already degraded land. This is achieved through improved land use governance,

enhanced protected areas management and protection of key species, sustainable private

sector and industry practices, and expanded constituencies for conservation among various

stakeholders. LESTARI is implemented under the leadership of Tetra Tech and a consortium

of partners including WWF-Indonesia, Winrock International, Wildlife Conservation Society

(WCS), Blue Forests, Yayasan Sahabat Cipta, PT Hydro South Pole Carbon, Sustainable

Travel International (STI), Michigan State University, and the FIELD Foundation. LESTARI

runs from August 2015 through July 2020.

PT. Hydro Program International (HPI) provides strategic advisory on Payments for

Environmental Services (PES) and Reduced Emissions from Deforestation and Forest

Degradation (REDD+) funding in Indonesia. These are part of LESTARI’s Strategic

Approach #8 – PES and REDD+ Innovative Finance. This report provides an analysis of the

current financial architecture for PES and REDD+ in Indonesia by identifying existing and

potential funding sources for sustainable rural landscapes. Funds are classified into three

main groups: nationally operated financial support, internationally operated financial support,

and private sector and civil society operated financial support. Taking into account recent

developments from the UNFCCC COP21 in Paris, private sector sustainability activities and

results-based payments are analyzed and framed against the overall financing architecture.

Political context and institutional capacity are key attributes for long-term finance for

PES/REDD+ activities. While institutional reform and regulatory changes in Indonesia have

had success in some sectors, the overall progress towards delivery of integrated climate

change mitigation, climate finance and results based payment schemes, including PES and

REDD+, has not met all expectations. Therefore, the design of readiness activities for results

based payments is a key task for LESTARI moving forward. Readiness building at the

national and local levels requires continued relationship building and advocacy with many

different stakeholders. Synergies and alignment with higher levels of potential funding

sources require as much attention as embedding PES/REDD+ activities into the local

context and involves managing expectations on the timing and amount of financial

compensation available, as well as making clear existing uncertainties. A coordinated focal

point for the LESTARI co-financing architecture and a communications strategy on

PES/REDD+ are proposed to optimize the program’s positioning within key stakeholder

networks.

National funds represent a larger source of funding for sustainable landscape management

in Indonesia compared with international sources. Additionally, access to local funds is often

more predictable. As a result of these factors, it is necessary to target the Village Fund and

initiate negotiations on concrete PES/REDD+ related co-financing road maps. Other national

funds such as the Disaster Relief Fund, the National Park Fund and the Watershed Fund



should also be monitored as secondary priorities. To address existing capacity issues of

decision makers in charge of financing, especially the Ministry of Environment and Forestry

(MoEF) and Ministry of Finance (MoF), LESTARI should also target capacity building

programs at the national and sub-national levels. The MoEF and MoF are strongly influential

in the ongoing reform processes, particularly regarding the future organization of Indonesia’s

climate finance landscape. Capacity building on climate finance practices for sustainable

landscapes is a promising way of maintaining integration of PES/REDD+ activities in any

future climate finance system in Indonesia.

Creating access to the Norway funds and the Green Climate Fund (GCF) are priorities when

mobilizing international funds. To take advantage of these funding options, a specific study

to elaborate pathways, viability, potential partners and eligible LESTARI PES/REDD+

activities that could be proposed for funding will need to be carried out. In addition, an

initiative to harness the synergies and co-benefits of rural electrification through renewable

energy is strongly recommended. Simultaneously, there is also a need to design

PES/REDD+ schemes for specific opportunities identified in the landscapes. An initial

assessment suggests that a PES for water in the Southeast Aceh and Cyclops Landscape

should be developed while activities related to community-based forest fire management in

Central Kalimantan should be further explored.



RINGKASAN EKSEKUTIF Proyek USAID LESTARI bertujuan mendukung Pemerintah Indonesia dalam mengurangi

emisi gas rumah kaca (GRK) dan melestarikan keanekaragaman hayati ekosistem hutan

dan bakau yang kaya karbon. LESTARI berusaha mencapai tujuan tersebut melalui

peningkatan tata kelola lahan, peningkatan pengelolaan kawasan lindung dan spesies kunci,

pemberian dukungan kepada pihak swasta untuk mengembangkan praktek operasi yang

berkelanjutan, dan perluasan area konservasi. Proyek LESTARI dijadwalkan beroperasi dari

Agustus 2015 sampai Juli 2020.

PT. Hydro Program Internasional (HPI) memberikan advokasi strategis Pembayaran Jasa

Lingkungan (PJL) dan Pengurangan Emisi dari Penggundulan dan Degradasi Hutan

(REDD+) di Indonesia. Ini adalah bagian dari Pendekatan Strategis LESTARI # 8 - PJL dan

Inovasi Finansial REDD+. Laporan ini merupakan analisis terkini dari arsitektur keuangan

PJL dan REDD+ di Indonesia dengan mengidentifikasi sumber pendanaan yang ada saat ini

serta sumber pendanaan yang sedang dikembangkan untuk pengelolaan bentang alam

pedesaan yang berkelanjutan. Sumber pendanaan dikelompokkan berdasarkan institusi

yang mengoperasikan dana tersebut. Pendanaan diklasifikasikan menjadi tiga kelompok

utama, yaitu: pendanaan yang dioperasikan oleh organisasi nasional, pendanaan yang

dioperasikan oleh organisasi internasional, dan pendanaan yang dioperasikan oleh sektor

swasta dan masyarakat sipil. Perkembangan terkini UNFCCC COP-21 di Paris memaparkan

berbagai kegiatan sektor swasta yang berkelanjutan dan pembayaran berbasis hasil

(results-based payments) yang juga berpotensi untuk menjadi sumber pendanaan dan

kerangka arsitektur pembiayaan bersama.

Konteks politik dan kapasitas institusi pelaksana adalah dua kunci pembiayaan jangka

panjang kegiatan PJL dan REDD+. Meskipun reformasi kelembagaan dan perubahan

kerangka hukum serta peraturan di Indonesia dalam beberapa sektor mengalami

kesuksesan sejak 2009, secara keseluruhan kemajuan pelaksanaan mitigasi perubahan

iklim, pendanaan perubahan iklim, dan skema pembayaran berbasis hasil termasuk PJL

masih belum sesuai harapan. Oleh karena itu, LESTARI perlu mengembangkan kegiatan-

kegiatan yang bisa menyiapkan terlaksananya pembayaran berbasis hasil di masa

mendatang. Penyiapan para aktor baik di tingkat nasional maupun lokal membutuhkan

dibangunnya hubungan intensif dan dilakukannya kegiatan advokasi dengan berbagai

pemangku kepentingan. Sinergi dan keselarasan antara kegiatan untuk menyiapkan

pembayaran berbasis hasil dan potensi sumber pendanaan perlu mendapat perhatian yang

sebanding dengan upaya menjadikan PJL dan REDD+ sebagai bagian dari kegiatan

masyarakat lokal sehari-hari. Upaya ini mencakup pengaturan harapan masyarakat dalam

segi waktu pembayaran jasa, jumlah kompensasi yang akan diterima, dan adanya resiko

ketidakpastian pembayaran. Laporan ini menekankan pentingnya koordinasi terpusat

melalui focal point untuk menangani arsitektur pembiayaan bersama LESTARI serta

perumusan strategi komunikasi bersama PJL dan REDD+ dalam rangka mengoptimalkan

posisi LESTARI dalam jejaring para pemangku kepentingan di Indonesia.

Pendanaan domestik memiliki kontribusi yang lebih besar dalam pembiayaan pengelolaan

bentang alam berkelanjutan di Indonesia dibandingkan dengan pendanaan internasional. Di

samping itu, aksesibilitas dana domestik dapat lebih diprediksi. Oleh karena itu, LESTARI



perlu mengembangkan strategi untuk memberdayakan Dana Desa dan mulai melakukan

negosiasi co-financing untuk merealisasikan kegiatan PJL dan REDD+. Sebagai prioritas

kedua, pendanaan domestik lain seperti Dana Penanggulangan Bencana, Dana Taman

Nasional dan Dana Daerah Aliran Sungai perlu terus dipantau. Untuk mengatasi isu

kapasitas para pengambil keputusan di bidang keuangan khususnya di Kementerian

Lingkungan Hidup dan Kehutanan (KLHK) serta Kementerian Keuangan, LESTARI juga

perlu menyelenggarakan program peningkatan kapasitas di tingkat nasional dan daerah.

KLHK dan Kementerian Keuangan memiliki peranan penting dalam proses reformasi

institusional dan mekanisme pendanaan perubahan iklim di Indonesia. Pengembangan

kapasitas sumber daya manusia dalam praktek pendanaan perubahan iklim untuk

pengelolaan bentang alam berkelanjutan merupakan sebuah cara yang menjanjikan untuk

mengintegrasikan kegiatan-kegiatan PJL/REDD+ ke dalam sistem pendanaan perubahan

iklim di Indonesia di masa mendatang.

Terbukanya akses terhadap dana Norwegia dan Green Climate Fund (GCF) selayaknya

menjadi prioritas LESTARI untuk memobilisasi pendanaan internasional. Untuk

memanfaatkan peluang tersebut, perlu dilakukan studi yang menjelaskan arah, kelayakan,

mitra potensial dan kegiatan PJL/REDD+ di bentang alam LESTARI yang tepat untuk

didanai oleh kedua sumber pendanaan tersebut. Selain itu, inisiatif untuk memanfaatkan

sinergi dan co-benefit dari kelistrikan pedesaan menggunakan energi terbarukan juga perlu

dipertimbangkan. Secara bersamaan, LESTARI juga perlu mendesain skema PJL/REDD+

berdasarkan potensi yang telah diidentifikasi seperti PJL air di Aceh Tenggara dan kawasan

penyangga Cyclops di Papua. Di samping itu, kegiatan yang berhubungan dengan

pengelolaan kebakaran hutan berbasis masyarakat di Kalimantan Tengah perlu ditinjau lebih

lanjut untuk selanjutnya dikembangkan dengan menggunakan skema PJL dan REDD+.



1. INTRODUCTION A number of new opportunities for co-financing PES/REDD+ activities exist in Indonesia.

New funding pledges for REDD+ at the Paris Climate Conference in 2015 are promising and

the dynamics surrounding fund distribution of the Norway bilateral initiative are also starting

to take shape in early 2016. Additionally, the creation of the Indonesia Climate Change Trust

Fund (ICCTF), the replenishment of the Global Environment Facility (GEF) trust fund, and

the initial capitalization of the Green Climate Fund (GCF) in 2015 all bring increased

opportunities for accessing funds for PES/REDD+ activities. These are partially linked to the

implementation of the Provincial Strategic Action Plan for REDD+ (Strategi dan Rencana

Aksi Provinsi - SRAP), where all of the provinces in which LESTARI landscapes exist have

completed SRAPs and are in the process of meeting other requirements. LESTARI activities

are focused in six strategic landscapes on three of Indonesia’s largest islands, where

primary forest cover remains most intact and carbon stocks are greatest.

An important and more omnipresent source of funding comes from government budgets. A

study from the Climate Policy Initiative (CPI) revealed that domestic funding for climate

actions in the land use sector exceeded international funding by a large margin in 2011; of

the USD 486 million of finance going to the agriculture and forestry sectors in 2011, only

12% came from international development partners, while the bulk of it came from the

Indonesian government (Angela and Glenday 2016). With regards to international funding,

only 18% of international development partner climate finance disbursements went to the

land use sector despite 70% of GHG emissions coming from land use change, forestry and

agriculture in 2012 (Angela and Glenday 2016). Most international finance is bilateral and

channeled by a small group of international entities.

The innovative financing strategic approach outlined in this report will be tied closely to the

project’s forest and land use governance and advocacy technical theme in order to support

access to GoI’s budget for green enterprises and activities that support the government’s

commitment to reducing emissions by 2020. LESTARI’s theory of change is that mobilizing

national and international climate change financing resources will develop capacities for

sustainable land use and forest management, and ultimately conserve biodiversity and

reduce emissions.

To be able to access increased financing from government agencies, LESTARI needs to

work with central and local (provincial & district) government officials to promote Low

Emission Development Strategies (LEDSs), forest conservation and climate change

mitigation programs that meet emission reduction commitments. LESTARI will also need to

identify and engage relevant ministries to gain more access to and support for additional

financing sources and to explore potential collaboration with similar government programs

that optimize benefits to communities and the environment. Additional funding is essential for

catalyzing local government leadership in climate change mitigation and forest conservation.

This report aims to achieve the following Scope of Work (SOW) to advise subsequent

PES/REDD+ related activities in LESTARI landscapes:



A thorough and up-to-date assessment of all potential funds available for

PES/REDD+, both national and international, from donors, trust funds, government

sources and the private sector. This will include comprehensive information on

eligibility, funding mechanisms, size of funding available, funding disbursement and

other relevant information needed by stakeholders in the LESTARI landscapes. This

assessment should also include funds and mechanisms that are currently under

development and that could affect the LESTARI landscapes.

Documentation of all current institutions and relevant authorities (national, provincial

and local) with a mandate to implement PES/REDD+ schemes within the LESTARI

landscapes, including a capacity assessment for implementation of such mandates.

The assessment shall include regulations approved (nationally, provincially or

locally), human resources, experience in PES/REDD+, and financial capacity of the

institutions identified.

Realistic recommendations for harnessing PES/REDD+ finance to incentivize LEDS

on a landscape scale over the next five years, including potential and financial

opportunities. Strategies should build on the Landscape Baseline Analysis (LBA),

Strategic Environmental Assessment – Low Emission Development Strategy (SEA-

LEDS), and Landscape Conservation Plan (LCP) recommendations where

appropriate.

This chapter provides an introduction of the assignment and gives an overview of the PES

concept. Chapter 2 discusses potential funds (existing and under development) for

PES/REDD+ in Indonesia’s climate finance landscape, and covers comprehensive

information on eligibility, funding mechanisms, size of funding available, funding

disbursement and other relevant information needed by stakeholders in the LESTARI

landscapes. Chapter 3 describes potential climate finance developments to look out for, and

new financial instruments that may be established that could potentially finance LESTARI in

the long run. Chapter 4 presents the institutions with a mandate to implement PES and

REDD+ activities, along with an assessment of their capacity. Chapter 5 identifies

PES/REDD+ related regulations at the national, provincial, and local levels. Main

conclusions addressing the challenges and opportunities are detailed in Chapter 6.

Institutional recommendations for optimizing LESTARI’s approach for acquiring co-financing

and implementing PES/REDD+ activities in the landscapes that build on LBA, SEA-LEDS

and LCPs, are also included. Building on the conclusions made, Chapter 7 develops a

succinct list of high value opportunities that can be leveraged by the LESTARI program to

harness PES/REDD+ finance. Preliminary actions for the further development of each

recommendation, within the overall LESTARI timeline, are also developed.

Payment for Environmental Services (PES) concept Payment for environmental services (also referred to as payments for ecosystem services,

PES) was originally defined as a voluntary transaction for a well-defined ecological service,

with at least one buyer, at least one provider, and based on the condition that the buyer(s)

only pay if the provider(s) continue to deliver the defined ecosystem service over time

(Wunder 2015). PES is a tool for ensuring that those who maintain an ecosystem’s ability to

provide services, such as watershed protection, are compensated for doing so. Payees may

be beneficiaries, such as users of these services, or polluters offsetting their negative



environmental impacts elsewhere. In the current economic system, the stewardship of

ecosystems is not rewarded, often resulting in their over-use or conversion to more profitable

land uses (Global Canopy Program 2015). This occurs despite evidence that the resulting

loss of these ecosystem services can have a significant economic cost. PES schemes have

proliferated over the last few decades and are mainly focused on carbon, biodiversity and

hydrological services.

Figure 1: Ecosystem services from forests

Source: (Tetra Tech ARD 2015), LESTARI first annual work plan, page 20.

PES has been widely applied in a variety of ways and at different levels in Indonesia.

Despite this, none of these PES initiatives can be categorized according to the original PES

concept as defined by several references (PNPM 2011). Performance-based payments for

greenhouse gas (GHG) emission reductions and removals are understood as being a

particular form of PES, with climate regulation being the service that is monitored and

compensated.

HPI’s activities in accomplishing the SOW objectives HPI has effectively accomplished the objectives defined in the SOW by undertaking desk

research and organizing consultation meetings with a variety of government officials,

including with those at the National Development Agency (BAPPENAS), the Indonesian

Climate Change Trust Fund (ICCTF), the Ministry of Environment and Forestry (MoEF), the

United Nations Development Program (UNDP) REDD+ unit and other international

development agencies, to document policy objectives, funds, and current activities that affect

the LESTARI landscape.

In addition to the meetings conducted with relevant actors at the national level, HPI also

visited LESTARI regional offices and landscapes to better understand issues and

opportunities for PES and REDD+ in each landscape. In its site visits to Aceh, Central

Kalimantan, and Papua, HPI consultants met with representatives from various institutions at

the provincial and local levels, including:

(i) Sub-national Development Planning Agency (BAPPEDA Propinsi and BAPPEDA

Kota/Kabupaten)

(ii) Government Forestry Office (Dinas Kehutanan)

(iii) Government Environmental Agency (Badan Lingkungan Hidup – BLH)

(iv) National Park Agency (Balai Taman Nasional)



(v) Forest Management Unit (FMU/KPH)

(vi) Technical Implementing Unit (Unit Pelaksanaan Teknis – UPT & UPTD), including

the:

Natural Resources Conservation Agency (Balai Konservasi Sumber Daya

Alam - BKSDA)

Watershed Management Agency (Badan Pengelola Daerah Aliran Sungai -

BP DAS)

Monitoring Agency for the Utilization of Production Forest (Balai Pemantauan

Pemanfaatan Hutan Produksi - BP2HP)

Forest Area Stabilization Agency (Badan Pemantapan Kawasan Hutan –

BPKH)

(vii) Government Tourism Office (Dinas Pariwisata)

(viii) Local Non-Governmental Organizations (NGOs) and Civil Society Organizations

(CSOs)



2. FINANCIAL

ARCHITECTURE FOR

RURAL LOW EMISSION

DEVELOPMENT IN FOREST

AND AGRICULTURE This chapter analyzes the current financial architecture for PES and REDD+ in Indonesia. It

identifies and maps out existing and potential funding sources for sustainable rural

landscapes by highlighting and presenting some options so that they can be considered

solid, bankable and scalable. Funding sources are classified based on the institution

managing/operating the fund, and are categorized as nationally operated financial support,

internationally operated financial support, and support from the private sector and civil

society.

Classification is carried out according to the institution operating the fund instead of grouping

the funding sources based on the origin of funds, as the latter has proved challenging. In

their management and operationalization, funds that originate from foreign sources may

interact with those from other sources of both international and national origins in a

program/project, and may also be operated by a national entity.

Figure 2 provides an overview of the flow of funding from donors to recipients in international

climate finance.



Figure 2: International climate finance

Source: ( CICERO and Climate Policy Initiative 2015)

There are a number of channels through which international climate finance flows, including

multilateral channels (both within and outside of UNFCCC financing mechanisms), bilateral

channels, regional channels, and also national climate change channels and funds. In

addition to multilateral channels, some developed countries have established climate finance

initiatives or are channeling climate finance through their bilateral development assistance

institutions, while some developing countries have set up regional and national funds and

channels to receive climate finance.

There are various types of climate finance with different governance structures, modalities

and objectives. While the transparency of climate finance that is programmed through

multilateral initiatives is increasing, detailed information on bilateral initiatives, and regional

and national funds is often less readily available (Smita Nakhooda, Charlene Watson, Liane

Schalatek 2015).

Figure 3 illustrates the global climate finance architecture, focusing on public climate

financing mechanisms, and provides an overview of the key actors including donors, bilateral

institutions, multilateral institutions, and regional and national funds.



Figure 3: Global climate finance architecture diagram

Source: (Smita Nakhooda, Charlene Watson, Liane Schalatek 2015); adapted

Different financial instruments (grants, loans, equity) can be leveraged to overcome different

financial or non-financial barriers. Table 1 outlines a number of barriers and how financial

instruments can help to overcome these barriers.

Usually PES/REDD+ activities fall into the categories of low (or no) return investments or

high up-front costs with a lack of access to capital (such as ecotourism). Carbon markets in

a wider sense can be understood to represent performance-based payments for ecosystem

services, such as water, in general.

Table 1: Financial barriers, types and mechanisms

Barriers to mitigation actions

Type of financing Public finance mechanism

Low (or no) return on investment

Contribution to investment and operational costs

Up-front grant (e.g. direct subsidies, investment tax breaks, grant component of concessional loans)

Funding during operation (e.g. feed-in remuneration, carbon markets, PES)

High up-front costs and lacking access to capital

Facilitating access to finance

Provision of debt, e.g. through loans or credit lines



Barriers to mitigation actions

Type of financing Public finance mechanism

Provision of equity

Incentivizing existing financing system

High risk Provision of risk coverage

Risk guarantees/insurance schemes/equity/first-lose grants

High transaction costs - Standardization and aggregation

Non-financial barriers (e.g. regulatory barriers, lack of information and capacity)

(Financing) technical assistance

Mostly in the form of grants

Source: (ECN/Ecofys 2014); adapted

Funds originating from both foreign and domestic sources that are managed by the

Indonesian government will be registered in the State/National Budget (Anggaran

Pendapatan dan Belanja Negara – APBN). The management and operationalization of funds

originating from foreign sources in Indonesia is regulated as illustrated in the following figure.

Figure 4: Government management of foreign funding

Source: HPI elaboration

The utilization of funds for GHG emission reduction and removal (ERR) programs, including

in the forestry sector in Indonesia, is carried out by both the central government authority

and the local government authority.

Activities under the central government authority (ministries/agencies) are financed

through:

Sectoral ministry/agency funds (Daftar Isian Pelaksanaan Anggaran, DIPA)

The Deconcentration Fund (Dana Dekonsentrasi)

The Assistance Task Fund (Dana Tugas Pembantuan)



Activities financed under the local government authority are financed through:

Specific Allocation Fund (Dana Alokasi Khusus, DAK) for the forestry sector – for

financing local activities based on a set of priorities and criteria

The Performance-Based Grant (Dana Insentif Kinerja), based on the implementation

of locally-proposed GHG ER initiatives and the accomplishment of particular targets

Local Grants (Hibah Daerah) for financing local activities proposed by local

governments

Figure 5 provides an overview of the public finance landscape in Indonesia, which will be

covered in more detail in Chapter 6.

The list of all funds (nationally operated financing support, internationally operated financing

support, and private sector and civil society financing support) along with their eligibility,

funding mechanisms, size of funding available, and funding disbursement are summarized in

Annex 1.

.

USAID LESTARI Final Assessment Report - PES/REDD+ Finance Assessment and Development of Strategies to Incentivize Landscape Scale LEDS P a g e | 25

Figure 5: The landscape of public finance in Indonesia1

Source: (CPI and BKF 2014)

1 This study was conducted using data in 2011; studies using data after 2011 are yet to be available. Flows are expressed in IDR billions.



2.1. Nationally operated financing supports This section gives an overview of funds that are managed by national entities. The ICCTF is

discussed in this section because even though its funding originates from various foreign

donors, it is operated under BAPPENAS, a government institution. This section also

discusses several funds related to the forestry sector and other sectors that can potentially

be used to support LESTARI activities at the local level.

2.1.1. The Indonesia Climate Change Trust Fund (ICCTF)

Eligibility CSOs, NGOs, private sector, universities/academies and government institutions

Funding Mechanism

Grants: Small Grant Program (SGP) and large grants

Size of Funding Available

IDR 500 million (~ USD 40,000) for small grants

Up to several million USD (> IDR 3 billion or ~ USD 225,000) for large grants

Funding Disbursement

Small grant: disbursed in lump sum and is relatively quick once reporting requirements are fulfilled

Large grant: disbursement mechanism is under development

Additional info Thematic areas: land-based mitigation, energy, and adaptation & resilience

The ICCTF aims to develop innovative ways of linking international finance sources with

national investment strategies. It acts as a catalyst for attracting investment for the

implementation of a range of alternative financing mechanisms for climate change mitigation

and adaptation programs in Indonesia. The ICCTF receives non-refundable contributions

from bilateral and multilateral donors, as well as from the private sector2, and is managed

nationally by the ICCTF Secretariat under BAPPENAS, with Bank Mandiri serving as the

selected fund manager. The ICCTF fund flow and fund management structure is illustrated in

the following figure.

2 The ICCTF had not received contributions from the private sector as of December 2015, and is currently trying to engage

the private sector.



Figure 6: ICCTF fund management

Source: (ICCTF 2015)

The ICCTF focuses on providing support for early stage development (pilot projects) in three

thematic areas: land-based mitigation, energy, and adaptation and resilience. The ICCTF

provides up to IDR 500 million (approximately USD 40,000) funding per project for SGPs,

dedicated for urgent adaptation and mitigation activities, mainly at the community level. The

ICCTF has funded six programs under the SGP, including: Carbon Sequestration in

Community Forests, Public Private Partnership (PPP) Model against Forest Degradation and

Deforestation, and Climate Forecast for Farmers and Fishermen. Projects under the SGP

lasted between 6 to 8 months on average.

In addition, the ICCTF also provides funding for larger scale projects that can reach several

million USD (above IDR 3 billion or USD 225,000) in combined investments for both

mitigation and adaptation activities. Some larger scale projects that have been funded by the

ICCTF include: (i) Research and Technology Development of Sustainable Peat Management

to Enhance Carbon Sequestration and Mitigation of Greenhouse Gas Emissions (2010 –

2012), USD 1,213,615.5; (ii) Sustainable Management of Degraded Peatland to Mitigate

Green House Gas Emissions and Optimize Crop Productivity (2012 – 2014), USD

1,279,494.7; and (iii) Public Awareness Training and Education Program on Climate Change

Issues for All Levels of Societies in Mitigation and Adaptation (2010 – 2012), USD

1,367,851.39 (ICCTF 2015). There were no larger scale projects being funded by the ICCTF

in 2015, mainly due to internal changes within the organization. However, it is expected that

the ICTTF will resume its funding support for larger scale projects in the near future.

To access the fund, CSOs, NGOs, the private sector, and universities/academies, as well as

government institutions, are required to submit project proposals. Individuals are not eligible

to apply for the funds. Upcoming grant opportunities along with the format for the proposal

document can be downloaded at the ICCTF website: http://icctf.or.id/call-for-proposals-p-

2265-en/. The ICCTF Project Management Cycle for the financing of activities follows the

nine steps as illustrated in Annex 2.

http://icctf.or.id/call-for-proposals-p-2265-en/

http://icctf.or.id/call-for-proposals-p-2265-en/



The SGP selection mechanism consists of two stages: (i) the screening of all proposals

based on administrative requirements; and (ii) an in-depth assessment based on specific

criteria (Step 2 and Step 3 of Annex 2). The application process and selection criteria of

larger grant projects is envisioned to be slightly different to those of the SGP, and are

currently still under development.

Financial due diligence includes performance based payments that will be conducted over

the duration of any approved projects in lieu of agreed upon milestones between the ICCTF

and the recipient/beneficiary to monitor the progress of the project in achieving an individual

project's objectives. In addition, lessons learnt from projects previously implemented will also

be identified and documented in the ICCTF's investment and fundraising strategies.

The ICCTF has also registered to be a National Implementing Entity (NIE) to the UNFCCC’s

Adaptation Fund. Its transition to becoming Indonesia’s NIE to the Adaptation Fund is being

supported by GIZ, the German development agency. However, challenges remain. Although

the establishment of the ICCTF is a step in the right direction, there is no overarching

mechanism for donor coordination (EIA Commission 2015). Moreover, the policies and legal

framework at the provincial and local levels are not yet adequate for facilitating the delivery

and management of climate finance.

2.1.2. Forest Management Unit (FMU) Fund

Eligibility All types of FMUs/KPHs: FMU Conservation (KPHK), FMU Protection (KPHL), FMU Production (KPHP)

Funding Mechanism Budget transfer


Up to IDR 3 billion (~ USD 225,000) per KPH; however, the actual funds disbursed are much less. Government allocated budget for the KPHs changes from year to year with a decreasing trend


Yearly as part of government budgeting process

Additional Info KPHK is funded by central government, KPHP and KPHL are funded by both APBN and sub-national government budgets (APBD)

FMUs (locally known as Kesatuan Pengelola Hutan - KPH) have the potential to play a

significant role in contributing to sustainable development by protecting natural resources,

reducing GHG emissions from forest and peatlands, and by improving the livelihoods of local

communities. There are three types of FMUs: Conservation FMUs (KPHK), Protection FMUs

(KPHL), and Production FMUs (KPHP). The KPHK is managed directly by the national

government, while the KPHL and KPHP are currently managed by the district government

and will soon be transferred to the provincial government.3

3 As part of the implementation of Law No. 23 of 2014 on Local Governance. The transfer of authority is expected to be

completed by October 2016.



The source of funding for KPH development and operation comes from the state budget

(APBN), sub-national government budget (Anggaran Pendapatan Belanja Daerah, APBD),

and other legal and legitimate funds. Significant financial input from local, national and

international sources, as well as the KPH’s own income stream, are still needed to set up the

management structure and the technical infrastructure of KPHs. Existing KPH development

funds are summarized in the following table.

Table 2: Sources of existing FMU development funding

State Budgets (APBN) Local Government

Budget (APBD) Other legal and legitimate funds

Special Allocation Fund (Dana Alokasi Khusus - DAK) on forestry

Intergovernmental fiscal transfers

Grants

Shared revenue (Dana Bagi Hasil - DBH)

Local revenue (Pendapatan Asli Daerah - PAD).

Corporate Social Responsibility (CSR) fund

De-concentration fund – PES

National community empowerment program (PNPM) – Mandiri Kehutanan

– –

Village fund – –

Co-administration task fund (DTP) – –

Source: (PKPPIM 2015)

The following section describes each type of source – state budget, local budget and others

– the Shared Revenue Fund (Dana Bagi Hasil – DBH), the Village Fund (Dana Desa), and

the PNPM – Mandiri Kehutanan will be discussed further in Section 2.1.3, Section 2.1.4 and

Section 2.1.5 respectively.

Special Allocation Fund (Dana Alokasi Khusus – DAK)

The Special Allocation Fund (locally known as Dana Alokasi Khusus - DAK), is sourced from

the state budget (APBN) and allocated to a particular region to fund special activities in

accordance with national priorities based on criteria set by the government. In the forestry

sector, DAK is one of the sources of funding used to finance forestry development at the

subnational level. DAK-forestry policy in 2014 was focused on the improvement of KPHP

and KPHL, the improvement of watershed capabilities, protection of forests and essential

areas, and community empowerment.

Deconcentration Fund (Dana Dekonsentrasi)

The Deconcentration Fund is a form of funding from the state budget (APBN) and is

deployed by the governor at the provincial level, covering all expenditures for delegation of

tasks from the central government to provincial government, excluding funds allocated for

central governmental offices located in the regions.



Co-Administration Task Fund (Dana Tambahan Penghasilan – DTP)

The Co-Administration Task Fund (DTP) is a fund from the state budget that is transferred to

local government and includes all revenues and expenditures for implementing tasks. It is

mainly allocated for the development of infrastructure. Funds for co-administration are also

one source of funding that can be implemented by local government financed by the KPHs,

given that the development and operationalization of KPHs is one of KPH’s priority policies.

Sub-national Government Budget (APBD)

The Sub-National Government Budget (APBD) comes from intergovernmental fiscal

transfers. Funds transferred from the central government that can be used for forestry

development include DAK-Forestry, DBH-DR, DBH-PSDH, and DBH-IIUPH. Local

governments can use these mechanisms to fund forestry development activities in territories

under their administration by referring to central government rules.

A study from the Center of Climate Change Financing and Multilateral Policy (Pusat

Kebijakan Pembiayaan Perubahan Iklim dan Multilateral – PKPPIM) under the Fiscal Policy

Agency (Badan Kebijakan Fiskal – BKF) at the MoF suggested that alternative funding from

CSR, grants, and the PNPM have higher efficiency and effectiveness than other existing

options, although budget from these three sources is smaller than that of the DAK and DBH

mechanisms (PKPPIM 2015). However, the utilization of alternative sources of funding

needs to be accompanied by institutional changes in the KPH. The KPHK and KPHL are

structured as the Public Service Agency (Badan Layanan Umum, BLU) and the Local Public

Service Agency (Badan Layanan Umum Daerah, BLUD), while the KPHP is advised to

change into a BLUD or Local Government-owned Enterprise (BUMD).

2.1.3. Shared Revenue Fund (Dana Bagi Hasil – DBH) on Forestry

Eligibility All district/city governments



Variable, depending on the revenue of the year; proportion is calculated based on proportion in Shared Revenue (locally known as Dana Bagi Hasil – DBH) is a fund sourced from the state budget (APBN) and allocated proportionally to a region to finance the implementation of decentralizing processes. The distribution of DBH in forestry is implemented based on natural resource revenues in the current budget and distributed on a quarterly basis through transfer from the State Treasury to the Regional Treasury Account.

The distribution mechanism of the DBH starts with the selection of the producing regions and determines the basis for calculating the DBH of natural resources by the MoEF after consulting with the Ministry of Home Affairs. The criteria are then conveyed to the MoF to be decreed as estimated DBH of natural resource allocation for each region. The calculation of real DBH of natural resources is carried out on a quarterly basis through data reconciliation between the



central government and the producing regions. The distribution of state revenue derived from forestry DBH is divided in the following way:

Table 3


Distributed on a quarterly basis through transfer from the State Treasury to the Regional Treasury Account

Shared Revenue (locally known as Dana Bagi Hasil – DBH) is a fund sourced from the state

budget (APBN) and allocated proportionally to a region to finance the implementation of

decentralizing processes. The distribution of DBH in forestry is implemented based on

natural resource revenues in the current budget and distributed on a quarterly basis through

transfer from the State Treasury to the Regional Treasury Account.

The distribution mechanism of the DBH starts with the selection of the producing regions and

determines the basis for calculating the DBH of natural resources by the MoEF after

consulting with the Ministry of Home Affairs. The criteria are then conveyed to the MoF to be

decreed as estimated DBH of natural resource allocation for each region. The calculation of

real DBH of natural resources is carried out on a quarterly basis through data reconciliation

between the central government and the producing regions. The distribution of state revenue

derived from forestry DBH is divided in the following way:

Table 3: Shared Revenue (DBH) distribution

Institution

Forest Exploitation Permit Fee

(IIUPH)

Forest Resource Provision (PSDH)

Reforestation Fund (DR)4

Central government 20% 20% 60%

Provincial government 16% 16%

District/city government 64% - 40%

District/city government where the production takes place

- 32% -

Other districts/cities in the province

- 32% -

Source: (PKPPIM 2015)

4 To be used for forest and land rehabilitation.



2.1.4. Village Fund (Dana Desa)

Eligibility All villages



IDR 1 billion (~ USD 74,000) per village with possibility to increase


Yearly as part of government budgeting process. The fund is transferred from the central government account to village’s account via district government’s account

Additional Info Efforts are being made at the district and village levels to better manage and allocate the money based on village needs and priorities

The Village Fund is mandated by Law No. 6 of 2014 (Village Law), which allows all villages

across the archipelago to receive IDR 1 billion per year of assistance from the central

government to develop their economies and infrastructure. The Village Fund covers funds

from the state budget earmarked for villages, which are transferred through the district/city

budget and are used to finance administration and development, and to foster social and

community empowerment.5

The Fund is aimed at improving the welfare of rural communities and the quality of human

life, as well as poverty reduction, through: (1) the fulfillment of basic needs; (2) the

development of rural infrastructure; (3) the potential development of local economies; and (4)

the use of natural resources in an environmentally sustainable manner.6 The use of village

funds for sustainable development needs based on the condition and potential of the village,

which among others, includes support for management of village forests (Hutan Desa – HD)

and community forests, and capacity development for local communities on renewable

energy and the environment (PKPPIM 2015).

The Village Fund, as part of the village decentralization process, is a relatively new

government initiative that has great potential to accelerate local development. As it has only

just begun, it is too early to examine and debate program implementation outcomes,

however, a number of challenges in the design of the nascent program have already

become apparent. When large resources are directed into a village without strong oversight,

budgets are not always used for the benefit of those that need them the most (World Bank

2015). In addition, the Village Law itself does not provide an adequate enough basis for

regulating proper village financial management. Some believe that the initiative is all about

the distribution of money with no clear plan for its proper management (East Asia Forum

2015).

Despite stipulations in the Ministry of Villages, Underdeveloped Regions and Transmigration

Regulation No. 21 of 2015 on the Priority of Village Fund Utilization in 2016, a big portion of

5 Government Regulation No. 60 of 2014 on Village Fund Originating from the Budget of the State Budget, amended by

Government Regulation No. 22 of 2015. 6 Village, Rural Development and Transmigration Ministerial Regulation No. 5 of 2015.



the money is currently spent on infrastructure development, with less being spent on

community empowerment. At the sub-national level, the provincial and district governments

are still in the process of formulating local regulations and developing guidelines on the

management of the Village Fund, while the funds have actually already been handed over to

the villages. This is due to lack of capacity within local government, village administration,

and local communities (East Asia Forum 2015). Furthermore, mechanisms to control village

spending are underdeveloped.

In LESTARI landscapes, initiatives using the Village Fund for activities related to the

environment and forestry that support local economic development can be seen in Aceh

Tenggara and Central Kalimantan. In Aceh Tenggara, the district/regency government hires

six experts as external consultants to provide technical assistance, which takes the form of

advocacy efforts aimed at promoting the issuance of three to four provincial regulations as a

regulatory framework and at developing guidelines and a management plan for the utilization

of the Village Fund. In Central Kalimantan, there have been discussions among various

government institutions, local communities, and NGOs on using the Village Fund to finance

initiatives related to forest fire management at the village level. These initiatives, however,

are still in a preliminary stage.

2.1.5. National Community Empowerment Program (Program Nasional

Pemberdayaan Masyarakat PNPM – Mandiri Kehutanan)

Eligibility Villages in and around forest areas

Funding Mechanism Budget transfer (from central and district government to village government)


Variable


Yearly as part of government accounting process

The PNPM – Mandiri Kehutanan program aims to alleviate poverty in areas surrounding

forests, in collaboration with a range of sectors other than forestry and is coordinated by the

Coordinating Ministry for Humanity and Cultural Development (Kementerian Koordinator

Bidang Pembangunan Manusia dan Kebudayaan, formerly Kemenko Kesra).7 The PNPM

program consists of various activities including the development of conservation villages,

community forestry, partnerships, and village forest management for communities

surrounding protected forests and production forests. The program’s beneficiaries are

groups of people who have been identified by the Technical Implementation Unit (Unit

Pelaksana Teknis, UPT) or Regional Technical Implementation Unit (Unit Pelaksana Teknis

Daerah, UPTD), Regional Offices of Forestry, and license holders in the field of forestry and

local communities.

7 Forestry Ministerial Regulation No. 16 of 2011 on General Guidelines of the National Program for Community

Empowerment in Forestry.



2.1.6. People’s Business Credit Program (Kredit Usaha Rakyat - KUR)

Eligibility Micro, small and medium enterprises (MSME) and cooperatives

Funding Mechanism

Credit and micro-credits backed by guarantees from state-owned companies


Micro KUR: IDR 25 million (~ USD 2,000) for a max. of 3 years for working capital and 5 years for investments

Retail KUR: IDR 25 million to IDR 500 million (~ USD 2,000 to USD 38,000) for a max. of 4 years for working capital and 5 years for investments, can be extended to up to 10 years for hardwood investment

TKI KUR (designed for migrant workers): IDR 25 million (~ USD 2,000), duration is based on the migrant workers’ employment contract and shall not exceed 3 years

Sectoral KUR: IDR 500 million – IDR 30 billion (~ USD 38,000 – USD 2 million) for max. 10 years


Three different mechanisms:

directly to MSME from participating banks

indirectly through linkage institutions by executing patterns

indirectly through linkage institutions by channeling patterns

Additional Info Types of credit at the moment: micro KUR, retail KUR, TKI KUR (designed for migrant workers)

Sectoral KUR is planned to be introduced in 2016

The people’s business credit program (KUR), established in 2008, is a credit/working capital

and/or investment financing scheme specifically dedicated to micro, small and medium

enterprises (MSME) and cooperatives in the productive enterprise8 sector that are mostly not

bankable9 due to lack of collateral (Tim Nasional Percepatan Penanggulangan Kemiskinan,

TNP2K, n.d). The KUR aims to accelerate the development of economic activities, alleviate

poverty and expand work opportunities. Individual or community groups in the LESTARI

landscapes may use this credit to finance activities related to the LESTARI

programs/projects later on. Through this credit, commercial banks provide working capital to

microfinance institutions (MFIs). The loans are guaranteed by the government through

guarantor institutions.

The implementation of the KUR program is supported by three pillars: government,

guarantor institutions and banks. The government, through the Bank of Indonesia (BI) and

line ministries (e.g. Ministry of Agriculture, Ministry of Environment and Forestry, Ministry of

Maritime Affairs and Fisheries), assists and supports the implementation of credit provisions

and guarantees. Two state-owned companies, PT. Asuransi Kredit Indonesia (PT. Askrindo)

and Perusahaan Umum Jaminan Kredit Indonesia (Perum Jamkrindo), currently serve as

8 Effort to produce goods or services to provide added value and increase entrepreneur income. 9 MSME that are not able to meet a bank’s credit/financing requirements.



guarantor institutions that guarantee the credit distributed by the banks. Banks are recipients

of the guarantees and serve as credit distributors to the MSMEs. To date, three commercial

banks, Bank Rakyat Indonesia (BRI), Bank Mandiri, and Bank Negara Indonesia (BNI), carry

out the function of credit lenders.

The Indonesian Government intends to mobilize between IDR 100 trillion to IDR 123 trillion

(~ USD 7.2 billion to USD 8.89 billion) in 2016 as small business loans under its KUR

program for the purpose of boosting economic growth (Coordinating Minister for Economic

Affairs 2015). Additionally, the government has been preparing to cut the lending rate of its

subsidized KUR from 22%-24% to as low as 9% and to merge the credit program scheme

into the sectoral KUR in 2016 (Coordinating Minister for Economic Affairs 2015). To reach

these targets, the government is considering adding PT. Jaminan Kredit Daerah (PT.

Jamkrida) as a guarantor institution in each province. The government is also considering

including more state, private and regional development lenders for the credit program.

Furthermore, non-banking financial institutions (NBFIs), finance companies, and venture

capital companies will serve as distributing institutions and and/or linkage institutions.

The sectoral KUR is aimed at supporting development of business in each area based on

their respective potential. It has a higher credit ceiling (IDR 500 million to IDR 30 billion or ~

USD 38,000 to USD 2,250,000) and has targeted a number of sectors such as food-crops,

horticulture, plantation/estates, livestock, cow nursery, marine tourism, renewable energy

and energy conservation. Table 4 summarizes the government’s plan for the sectoral KUR

feature in 2016 - the details of the application procedure and distribution mechanism are

available in Annex 3.

Table 4: Plan for the 2016 sectoral KUR feature

No Description 2016’s sectoral KUR

1 Interest As much as 9% effective yearly or adjusted by equivalent flat interest

2 Activities funded

Food-crops, horticulture, plantation/estates, livestock, cow nursery, marine tourism, rice, cacao, coffee, sea weed, rattan and salt, renewable energy and energy conservation that will contribute to the realization of the National Energy Policy as stipulated in Government Regulation No. 79 Year 2014, conservation of industrial energy as regulated in Government Regulation No. 70 Year 2009 or Ministry of Energy and Mineral Resources (MEMR) No. 14 Year 2010

3 Credit ceiling Between IDR 500 million – IDR 30 billion (~ USD 38,000 – USD 2.25 million)

4 Duration Maximum 10 years

5

Extension period, restructuring, and extension

In case extension is needed, credit ceiling, or restructuring of working capital and/or investment, then the extension period, credit ceiling, and/or restructuring will follow the characteristics of each commodity

6 Guarantee binding

Additional collateral based on assessment by bank



No Description 2016’s sectoral KUR

7 Grace period Based on characteristic of each commodity

Source: (Coordinating Minister for Economic Affairs 2015)

2.1.7. Timber Harvesting Postponement Credit (Kredit Tunda Tebang - KTT)

Eligibility Farmer groups, cooperatives (those receiving loans from government)

Individuals/members can apply for the loan to the cooperative or farmer group receiving money from the government/MoEF

Funding Mechanism

Low-interest credit


Variable, depending on the size of community group/cooperative

Variable, maturity is 5-8 years (depending on the harvest)


Lump sum, directly to community group/cooperative

Lump sum, directly to individual applying for loan

To encourage community forest farmers to postpone timber harvesting, the MoEF provides

Harvest Postponement Credits (locally known as Kredit Tunda Tebang - KTT), which allow

farmers not to cut when in need but to wait until the trees are bigger and thus carry a greater

commercial value. With this credit, farmers can pursue productive activities. Collateral takes

the form of standing crops or community forest trees with a circumference of 30 centimeters.

Farmers are not allowed to cut down the trees that are pledges within a predetermined

timeframe.

This credit is managed by the Public Service Agency (Badan Layanan Umum - BLU) Unit –

Center for Forest Development (Pusat Pembiayaan Pembangunan Hutan - Pusat P2H),

which helps the farmers apply for credit with a loan term of between up to five and eight

years, and with low interest referring to the Central Bank of Indonesia’s interest rate.

The credits can be used for a number of purposes, for example, for the livestock sector

(50%), economically productive activities such as furniture production or additional capital,

restaurants, and wood trading (40%). They can also be used for paying school fees and

consumer costs.

An example of the successful operationalization of this credit comes from the forest farmers

group (locally known as Kelompok Tani Hutan - KTH) in Jasema, Terong Village, Bantul

Regency of Jogjakarta province. Other areas where KTT has been operationalized are

Bojonegoro in East Java and Banyumas in Central Java (Bidik Online 2015).10

10 Requirement and application form can be downloaded at http://www.dephut.go.id/uploads/files/perkaP2H_p01-

2012_lamp4.pdf

http://www.dephut.go.id/uploads/files/perkaP2H_p01-2012_lamp4.pdf

http://www.dephut.go.id/uploads/files/perkaP2H_p01-2012_lamp4.pdf



HPI believes that KTT is an innovative mechanism with a proven record of accomplishment

on a local scale for small holders – and therefore in a special category of which not many

examples exist. Despite this being a loan for timber trees and not strictly a PES, KTT

overcame several barriers related to operating on a local scale that many schemes fail to do.

Particular attention should therefore be paid to it as a mechanism for the learning

exercises.

2.1.8. Watershed Fund (Dana Daerah Aliran Sungai - Dana DAS)

Eligibility Local community groups/organizations, villages



Variable

Nursery program (KBR)

BLM-PPMPBK = IDR 50 million (~ USD 4000)

Funding Disbursement Yearly as part of government budgeting process

According to Government Regulation No. 37, 2012 on Watershed Management

(Pengelolaan Daerah Aliran Sungai, DAS), the main funding for DAS management comes

from the APBN, APBD, grants, and/or other funding such as trust funds, environmental

funds, and PES. BPDAS managed several programs such as the Nursery Program (Kebun

Bibit Rakyat – KBR) and grants for the local community for the development of conservation

based community forest (Bantuan Langsung Masyarakat Pengembangan Perhutanan

Masyarakat Pedesaan Berbasis Konservasi, BLM-PPMPBK). The BPDAS provides funds of

IDR 50 million (~ USD 4000) through BLM-PPMPBK to create alternative livelihoods for local

communities/villages in and around forest areas and also manages seeding programs

(KBR), targeted on the watershed area that falls under the category of “needs to be

recovered”. Under the BLM-PPMPBK, 70% of the money needs to be used for tree

replanting and building up/maintaining land conservation practices whereas the other 30%

can be spent on purchasing cattle and fish. Local community groups in villages under the

area of prioritized watersheds, in or around forest areas, in underdeveloped/remote areas, or

indigenous communities are eligible to apply. Only one local community group can receive

the BLM-PPMPBK in a specific village.

Other sources of watershed funding come from projects funded by donors, such as the two

projects detailed below.

Strengthening Community-Based Forestry and Watershed Management (SCBFWM)

The Strengthening Community-Based Forest and Watershed Management (SCBFWM)

project is designed to back up the Government's program on community-based forest and

watershed management, by addressing inequitable distribution of benefits from forest

resources and lack of capacity of local authorities, as major underlying causes of land and

forest degradation. The SCBFWM is administered by UNDP with grants from GEF. The

project is specifically designed to complement the five-year national pledge of approximately

USD 300 million to rehabilitate degraded forest and land distributed across 282 prioritized

watersheds located in 400 districts in 32 provinces, and Indonesia’s annually approved

Reforestation Fund at district level.



Community-Based Natural Resources Management (CBNRM)

The Community-Based Natural Resources Management (CBNRM) grant is one of the three

windows under the Green Prosperity (GP) Facility that will make available grant funding for

smaller scale projects that promote enhanced natural resource management to improve the

sustainability of GP Facility’s renewable energy and/or agricultural investments, as well as

support rural livelihoods and economic development. The CBNRM grant can be used to

finance the following types of project: integrated landscape, watershed and catchment

protection, community-based or collaborative natural resource management projects,

sustainable agriculture for smallholder farmers, and small-scale, community-based

renewable energy or heat generation.

CBNRM works in 10 provinces and 24 districts in Indonesia, but does not operate in either

Aceh or Central Kalimantan. In theory, the Watershed Fund structure of SCBFWMs &

CBNRM could be closely aligned with LESTARI’s Conservation Management and

Monitoring Plans (CMMPs).

2.1.9. Grant from the Central Government to Local Government (Hibah Daerah)

Eligibility Local government

Funding Mechanism Grants


Variable


Note Fund allocation should be based on criteria; however, no clear and robust criteria have been developed so far. Current disbursement of funds only targets mitigation actions, not yet targeting prevention and adaptation actions.

Grants from the central government to local governments are intended to support local

development programs based on the priorities and policies of the government. These grants

can originate from grants received from domestic revenue (APBN or other sources) or

forwarded grants/loans from international donors (loans or grants). They could be in the form

of cash, or goods and services. Local governments may need to provide matching grants if

required, depending on the agreement or contract with the donors.

Grants from the Central Government to the Local Government are stipulated under

Government Regulation No. 2 of 2012. This regulation provides guideline criteria on how

grants should be operationalized and what types of activities can be supported, depending

on the origin of the money, i.e. whether it comes from foreign or local sources. However, the

criteria that local governments would need to meet to receive the grants are not yet defined.

The following figure details the mechanism for channeling grants to the sub-national

governments:



Figure 7: Distribution mechanism for local grants

Source: (Ministry of Finance 2013) Presentation of Director of Financing and Local Capacity

Grants received by sub-national governments are managed and implemented in the sub-

national government budget (APBD) mechanism according to respective laws. This means

that the grants and the matching grants (if required by the Agreement) must be budgeted

and included in the Budget Implementation Document of the Local Government Unit (SKPD).

For monitoring and evaluation as well as the audit, the regions that received grants must

submit a report on the progress of activity implementation on a quarterly basis to the

BAPPENAS and to related state ministers/head of technical agencies. Sanctions can be

imposed on local governments to prevent grants from being incorrectly used by ensuring that

they are no longer channeled to the regions in question.

The Government Disaster Mitigation budget is one example of a grant given by the central

government to the local government. Its terms are stipulated in Government Regulation (PP)

No. 22 Year 2008 on Financing and Management of Disaster Relief. At the time of writing,

the disaster mitigation budget can only be used to finance activities at the emergency and

post disaster stages, and is not yet able to finance pre-disaster activities.

The government considers forest fires as a national disaster and aims to shift more

resources towards prevention. The latest development shows that the National Disaster

Relief Agency (Badan Nasional Penanggulangan Bencana - BNPB) and the Sub-National

Disaster Relief Agency (Badan Penanggulangan Bencana Daerah - BPBD) are keen to work

with local communities at the village level on forest fires prevention activities. The BNPB and

BPBDs allocate special budget (for operations, logistics and equipment), and in cooperation

with the sub-national government and private sector, provide incentives in the form of

financial or non-financial rewards to fire-prone villages that are able to keep their forested

areas free of fires.

This initiative has been implemented in Riau and Jambi provinces in the island of Sumatera,

where the government provides a financial reward of IDR 100 million (~ USD 7500) to

villages that are free from forest fires (desa bebas api/desa peduli api). The Government of

Central Kalimantan has discussed its intention to set up a grand strategy and a road map for

community-based forest fire prevention management and has organized coordination

meetings at the provincial level for this purpose. They have also discussed the possibility of

replicating the desa peduli api program in Central Kalimantan. Furthermore, the BNPB also

intends to make use of the village fund for community-based forest fire prevention program

and it is currently coordinating with the Ministry of Villages, Underdeveloped Regions, and

Transmigration on this plan.



The Government Disaster Mitigation Budget is a potential fund for financing REDD+ and

PES activities. However, the eligibility criteria for local governments to receive this grant

need to be developed. Another challenge in utilizing this fund for the financing of pre-disaster

activities relates to government accounting issues, whereby the disaster mitigation budget is

currently placed under the accounts of the government contingency fund. This means that

this fund is not allocated to each ministry/agency but rather comes under the control of the

MoF, and can then be accessed by any ministry/agency in an emergency situation.

Contingency funding can only be used when it is deemed completely necessary, and

disaster prevention activities are currently still considered as not urgent in comparison to

activities at the emergency and post-disaster stages. To date, the bulk of contingency

funding is used by the police department to deal with terrorism issues.

2.1.10. National Park Fund (Dana Taman Nasional)

Eligibility National Park Agency

Funding Mechanism Government allocated budget (central government)

Size of Funding Available Variable, depending on the area and priority


Note National park is managed and funded by central government

The main source of funding for national parks in Indonesia comes from the APBN. The

budget used for financing operational activities in national parks comes from the budget

allocated to each national park through the Budget Implementation List (DIPA), which

includes transactions for personnel expenditures, shopping goods, and capital expenditure.

National parks also receive support from international, multilateral, bilateral, private sector

and community funding, and through partnership with donors. The MoEF allocates

approximately IDR 10 – 20 billion for daily operational activities for each national park. The

funds vary depending on the size of the national parks and the types of activities carried out.

National Parks in Aceh

Current support from donors for national parks in LESTARI landscapes in Aceh include:

Climate change mitigation and species conservation in the Leuser ecosystem

This project aims to support the sustainable management of the Gunung Leuser ecosystem

in Sumatra, in particular in the Aceh Selatan, Subulussalam and Singkil districts. This project

is expected to balance the needs for biodiversity conservation with those of the population

for using the natural resources. KfW Development Bank is the implementing organization

and has provided financial support totaling EUR 8,499,414 (~ USD 9,487,895.85). The

project runs from August 2013 – April 2019.

Protection of Aceh Selatan Singkil Strategic Area

TFCA-Sumatera is a Debt for Nature Swap (DNS) Program between the US Government

and the Government of Indonesia with two swap partners, namely Conservation International



and KEHATI-The Indonesia Biodiversity Foundation. The program provides grants to local

NGOs and universities in Indonesia focusing on conservation in Sumatera and rehabilitation

of landscapes with a total funding commitment of USD 30 million over an eight-year period

(2009-2018).

National Parks in Central Kalimantan

Current support from donors for national parks in LESTARI landscapes in Central

Kalimantan include:

Sebangau Conservation Project

This project was initiated by WWF in Sebangau National Park. The following three activities

were conducted: restoration and rehabilitation (canal blocking and tree planting program),

community empowerment (ecotourism, agroforestry, fisheries, sustainable agriculture and

home industry), and collaborative management between Sebangau National Park and local

stakeholders (local government, NGOs, communities, researchers and the private sector).

Developing a Productivity Model of Local Responsibility in Ecosystem Restoration in

Kotawaringin East, Central Kalimantan

GEF provides small grants of USD 30,000 with co-financing of USD 44,260 for community

development of ecosystem restoration plans and REDD+ projects to optimize benefits for

communities and other local stakeholders in Kotawaringin Timur, Central Kalimantan. The

project aimed to increase communities’ bargaining position in relation to the management of

natural resources and allow them to contribute to the planning process of the Katingan

Project. The implementing partner was Yayasan Puter, and the project took place from July

2012 – July 2013.

2.2. Internationally operated financial support mechanisms This section discusses financial support originating from foreign donors that has been used

and/or potentially could be used to finance PES/REDD+ activities in Indonesia that are

operated by a foreign entity. This section covers both bilateral commitments and multilateral

cooperation for international development. Finally, this section also focuses on financing

support options relevant to LESTARI, though some options (like REDD+ Early Movers -

REM) are not yet applicable to Indonesia.

Internationally operated development finance available to PES/REDD+ activities in

Indonesia mainly has two targets: climate change mitigation (and/or adaptation) and

conservation. Several of the nationally operated funds discussed above are supported by

this development finance as well, but this section will focus on funds mainly under

international operation. A succinct overview of the climate-related development finance

landscape focusing on REDD+ follows and provides a useful introduction to the current

situation.

The relationship between funding channels (multilateral vs. bilateral) and financial

instruments (equity vs. grants vs. loans) are established in the OECD study “Development

Assistance Committee dataset: Climate-related development finance in 2013”.



Figure 8: Total bilateral and multilateral ODA committed to the forestry sector 201311

Source: (OECD 2013)

The amount of funding available as international climate finance (committed, not pledged)

has varied over the years, with considerable linkages and crossover with multi-purpose

funding. The year 2013 saw a significant drop in overall funding available for climate change

mitigation.

Figure 9: Total bilateral ODA to reduce GHG emissions in the forestry sector12

Source: (OECD 2013)

Norway has dominated bilateral donor commitments since 2009, allocating more than double

the amount of that of Germany, the donor with the second largest commitments. The World

11 For all developing countries with climate mitigation as a principal or significant objective, by channel and financial

instrument 12 Committed to all developing countries, by whether climate mitigation was a principal objective or a significant objective, 2002-2013.



Bank dominates multilateral donor commitments with more than triple the amount of that of

the second largest donor, the Forest Investment Program.

Figure 10: Total commitments to REDD+ by donor type, 2009-2014

Source: (Chávez, Schaap and Breitfeller 2015)

Represented as a time series, it is notable that REDD+ Finance Commitments peaked in

2009 and, after a small recovery in 2012, marked their lowest fully recorded year yet in 2014.

The main difference here is in public sector finance commitments, with voluntary carbon

markets increasing their contribution to land-based climate change mitigation efforts in 2014.

Figure 11: REDD+ finance commitments by donor type, 2009-2014

Source: (Chávez, Schaap and Breitfeller 2015)

Land use activities supported by international development partners have focused on

capacity building and strengthening enabling environments by far. In addition, most

international development partner finance was delivered through contractors or international

groups as opposed to through the Indonesian government or local organizations.



2.2.1. Norway – Indonesia REDD+ partnership

Eligibility Appointed Ministry/Agency in a country (MoEF)

Funding Mechanism Grants in 1st and 2nd phase, result-based finance/carbon credits in 3rd phase


USD 1 billion in three phases

Funding Disbursement Under development

Note USD 200 million for Phase 1 and 2; USD 800 million for Phase 3

Norway and Indonesia have entered into a partnership to support Indonesia’s efforts to

reduce GHG emissions from deforestation, forest degradation and peatlands. A Letter of

Intent (LoI) between the Government of Norway and the Government of Indonesia on

cooperation on REDD+ was signed on 26 May 2010. Norway will support these efforts by

providing funding for up to USD 1 billion in three phases. In the first phase, funds will be

devoted to finalizing Indonesia’s climate and forest strategy and putting in place enabling

policies and institutional reforms. Phase 2 aims to prepare Indonesia for non-market based

payments for performance in the form of verified emission reductions (VER), while at the

same time initiating larger scale mitigation actions through a province-wide pilot project. In

the third phase, contributions for the VER mechanism are expected to be implemented

nationally.

A series of project phases and expected outputs on each phase is illustrated in the following

figure.

Figure 12: Phases of Norwegian fund based on LoI

Source: HPI elaboration based on (BP REDD+ 2014)



This partnership follows the government to government scheme, in which funds can be

accessed when the national government approves funding support that is dedicated to

climate change and environment related programming, including REDD+ in the national

budget.13 Funding is allocated on the basis of deliverables, channeled through an agreed

financing mechanism. The partnership is performance-based, both in terms of actual

emission reductions and with regards to policy change and institutional reforms required.

This means that funding will depend on the program being executed according to these

agreed principles, and will be assessed annually by an independent third party review group.

The Government of Norway has contributed USD 30 million in Phase 1 to the achievement

of institutional development of REDD+, an extension of the moratorium, completion of the

National REDD+ Strategy and the Strategy and Action Plan for Provinces (Strategi dan

Rencana Aksi Provinsi - SRAP), development of a Monitoring, Reporting, and Verification

(MRV) system and review of licensing. An interim phase (Phase IIA) was designed to bridge

some of the important work that was not completed in the preparation phase and also to

prepare a solid foundation for the transformation and implementation phases. In this interim

phase, the Government of Norway is contributing USD 10 million.

The creation and operationalization of the National REDD+ Agency is an important

milestone for REDD+ implementation in Indonesia as it triggers the second phase of the

program. This agency, however, was dissolved in January 2015 and no funding has been

disbursed since. Out of a total of USD 200 million allocated for Phase I and Phase II, less

than half has been spent as of today. Phase IIA was halted due to the dissolution of the

National REDD+ Agency, and some activities under this phase, including the

operationalization of pilot projects, were also halted. As a result, Phase IIB, which was

initially planned to commence in March 2015, has not yet started and most likely will

experience further delays in its implementation.

One of the core aspects of the LoI is the development of a funding instrument to channel

support from the international community. The REDD+ Task Force and the National REDD+

Agency created this fund, which was known as Financing REDD+ in Indonesia (FREDDI).

FREDDI is supposed to operate under a mandate from the National REDD+ Agency, which

defined its strategy, scope, and scale of funding activities.14 By the time the National REDD+

Agency was dissolved in January 2015, FREDDI was not yet operational.

The Norwegian funds are currently managed on an interim basis by the REDD+ Unit under

the UNDP Environmental Division. UNDP’s management is projected to continue until June

2016 or until another institutional mechanism is set up by the government. The UNDP

REDD+ Unit currently manages USD 12 million and oversees the continuation of programs

in transitional phases which were previously implemented by the REDD+ Agency, namely:

Prevention of forest and peat land fire in five fire prone provinces, namely West

Sumatera, Riau, Jambi, Central Kalimantan and Central Sulawesi

13 Please see http://www.wri.org/sites/default/files/norwegian_fast_start_finance_contribution.pdf 14 http://www.unorcid.org/upload/UNORCID_-_The_Funding_Instrument_for_REDD_in_Indonesia_-_AUG_2015.pdf

(page 5/39)

http://www.wri.org/sites/default/files/norwegian_fast_start_finance_contribution.pdf

http://www.unorcid.org/upload/UNORCID_-_The_Funding_Instrument_for_REDD_in_Indonesia_-_AUG_2015.pdf



Law enforcement and review of laws on licensing, and compliance auditing for fire

prevention

Improvement of community welfare, land management, and sustainable forests

through social forestry

Land-related conflict resolution

Participative land mapping by local and customary communities and institutional

strengthening, stakeholder involvement and awareness raising on social economic

issues, as well as environmental issues related to Phase 2 preparation

At the time of writing, UNDP REDD+ had carried out activities in community-based fire

management (CBFM), and, specifically in Central Kalimantan, assisted the MoEF in

supporting a community group artesian well program in Jumpun Pambelun. Canal blocking

is another priority program in Central Kalimantan that is expected to be implemented in the

near future.

The Government of Indonesia will establish a new institutional arrangement for managing

the Norwegian Fund and will eventually take over its administration from the UNDP REDD+

Unit. However, milestones and timelines for this transition have yet to be set and candidate

institutions/agencies also need to be determined. Current developments indicate that the

MoF will most likely take over the management of the Norway funds. The MoF is planning to

establish a new BLU called BLU Climate Change (BLU Perubahan Iklim) to be the next fund

administrator. This BLU will serve as the administrator of all funds related to climate finance.

The ICCTF that is currently managed by BAPPENAS and funds managed by the Center of

Forest Development Financing (Pusat Pembiayaan Pembangunan Hutan – Pusat P2H) at

the MoEF are envisioned to be merged into the administration of this new BLU. Additionally,

FREDDI, which was not yet operational when the REDD+ Agency was dissolved, is also

expected to come under the management of the BLU. The government is currently

formulating a draft regulation that will serve as the legal basis for the establishment of this

new mechanism. This plan, however, has a high level of uncertainty in terms of the timeline

involved and the institutional arrangements, resulting from the structure of Indonesian

government organizations and the overlapping roles and functions of government institutions

(MoEF, MoF, and BAPPENAS) in climate finance.

2.2.2. Forest Investment Program (FIP)

Eligibility Appointed Ministry/Agency in a country (MoEF)

Funding Mechanism Grants & Loans


FIP I: USD 17.5 million (grant); expected co-financing

USD 6 million

FIP II: USD 17.5 million (grant); expected co-financing

USD 8 million

FIP III: USD 2.5 million (grant) & USD 32.5 million (loan) expected co-financing USD 6 million

Funding Disbursement Through Multinational Development Banks (MDBs) and their respective disbursement regulations (see Table 5)



The FIP is a program under the Strategic Climate Fund that provides funding to support

developing countries in reducing deforestation and forest degradation and to promote

sustainable forest management that leads to emission reductions and enhancement of forest

carbon stocks. The World Bank is the trustee of the Strategic Climate Fund and provides

secretariat services through the Climate Investment Funds (CIF) Administrative Unit.

The eligibility criteria of the FIP are:

a. Countries that meet eligibility criteria of Official Development Assistance (ODA)

b. An active Multilateral Development Banks (MDBs) country program15

In November 2012 Indonesia was selected by the FIP sub-committee as one of eight pilot

countries. FIP in Indonesia will be administered by the ADB, IBRD, and the IFC, and will be

executed by the MoEF.

FIP activities in Indonesia are focused on three inter-related themes.

Table 5: FIP activities in Indonesia

Program Project title Focus of activities Managing

Institutions

FIP I Community-focused investments to address deforestation and forest degradation

Institutional development

forest enterprises and CBFM

community capacity

ADB

FIP II Promoting Sustainable Community Based Natural Resource Management and Institutional Development

Institutional development

community capacity

IBRD

FIP III Strengthening Forestry Enterprises to Mitigate Carbon Emissions

Forest enterprises and CBFM

IFC

Source: (Climate Investment Fund 2012) and second public consultation FIP II, 2014

An additional amount of up to USD 6.5 million is available under the Dedicated Grant

Mechanism (DGM) 16 for customary law communities (Masyarakat Hukum Adat). The

additional resources may be used to: (i) build institutional capacity, forest governance and

information; (ii) mitigate GHG emissions from the forest sector, including through supporting

forest ecosystem services; and (iii) support measures outside the forest sector to reduce the

pressure on forests, such as through the creation of alternative livelihood and poverty

reduction opportunities.

15 ‘Active’ program means where MDB has a lending program and/or policy dialogue with the country. 16 Indonesia Forest Investment Program TOR for the Second Joint Mission (12-16 December 2011)



Table 6: FIP funds allocation

Program MDB

FIP amount (USD million)

Expected co-financing (USD

million) Sector

Grant Loan Total

FIP I ADB 17.5 17.5 6.0 Public

FIP II IBRD 17.5 17.5 8.0 (DANIDA) Public

FIP III IFC 2.5 32.5 35.0 99.0 Private

Source: (Climate Investment Fund 2012) and Second public consultation FIP II, 2014

All provinces in LESTARI landscapes are selected for potential FIP interventions.

FIP I: Community-focused investments to address deforestation and forest

degradation

FIP I aims to reduce GHG emissions from forests in Sintang and Kapuas Hulu district in

West Kalimantan province. The province is one of the top five provinces contributing to GHG

emissions from deforestation, with a mean deforestation rate of 132,500 ha per year.

Specific activities include REDD+ activities to be implemented in 17 villages and 5 FMUs;

activities to strengthen local, provincial and national governmental forest institutions; and the

harmonization of REDD+ related policies at different institutional levels.

Table 7: FIP I activities and collaborating institutions

Collaborating institutions Primary role

MDBs partner

ADB Managing implementation and FIP grant financing

Co-financing Confirmed: ADB, GEF/SFM, Government of Japan. Under discussion: Government of Germany (KfW/GIZ), Government of the USA (USAID, Dept. of State, Millennium Challenge Corporation), others to be confirmed.

Technical and in-kind co-financing

Government Ministry of Environment and Forestry Executing Agency

Coordinating Ministry for Economic Affairs;

Ministry of Finance

Coordination

West Kalimantan Provincial Government

Provincial-level implementation

Sintang and Kapuas Hulu district District-level implementation

Direct

Stakeholders

Local community institutions, including customary institutions

Partners in activities and

beneficiaries of incentive schemes




Forest Management Unit (KPH) Institutions

Implementing unit at pilot site

Local Government Technical Implementation Units (UPT)

Partners in activities and training

participants

Private Sector Inputs to activities and participants of incentive schemes

Source: (Climate Investment Fund 2012)

FIP II: Promoting sustainable community-based natural resource management and

institutional development

FIP II aims to complete the MoEF’s plans to address the problems of governance and

management of forest resources. The ultimate objective is to reduce greenhouse gas

emissions and enhance carbon stocks while generating livelihood co-benefits.

Table 8: FIP II activities and collaborating institutions


MDBs partner

IBRD Managing implementation and FIP grant financing

Co-financing IAFCP Co-financing for spatial planning and community activities

FCPF Co-financing for policy dialogue, baseline data collection

Danida

Government Ministry of Environment and Forestry

Policy reform on REDD+, steering and internalization of FIP into KPH units

National Land Agency Policy on village level spatial planning

Ministry of Home Affairs

Guidance on and facilitation of KPH institution, engagement of province and district governments, and village economic empowerment

Bappenas Policy and steering

Ministry of Agriculture Collaboration on village level spatial planning and improvement of local economy

BAPPEDA Collaboration on spatial planning

Provincial governments Partners and beneficiaries of capacity building activities




Direct

Stakeholders

Local community Beneficiaries of community level planning and economic activities within KPHs and in buffer zones

Village and other local community institutions, including customary institutions

Partners in activities, including KPH-based

activities, and beneficiaries of incentive schemes

Selected KPH Institutions

Site level project management, partners and beneficiaries of capacity building activities


FIP III: Strengthening of Forest Enterprises to Mitigate Carbon Emissions,

administered by the International Finance Corporation (IFC)

FIP III aims to strengthen the productive capacity and business skills of forestry enterprises

and firms in other related sectors, by leveraging private sector investment. IFC will work with

its partners to promote sustainable forest management, leading to emission reductions and

protection of forest carbon stocks. The MoEF will serve as the lead government agency with

IFC serving as the lead MDB for investment and technical assistance initiatives oriented

towards private sector enterprises in the forestry sector, in addition to other associated

sectors that affect forests. Other partner agencies and stakeholders are presented in the

table below.

Table 9: FIP III activities and collaborating institutions


MDB and co-financier

IFC Managing implementation and FIP concession and grant financing and providing technical assistance

Commercial banks, credit unions and financial institutions

Co-financing

Bilateral donors Technical assistance grant

Government agencies

MoEF Steering committee

Coordinating Ministry of Economic Affair, MoF, Ministry of Crafts, SMEs

National level coordination

Private forest ownership, KPH Provincial and district level execution

Forest enterprises Investor, concession holder, processor, manufacturer, buyer

Direct stakeholders

Contractors Operations, technical and business service

Cooperatives Member based woodlot and marketing operations




Groups of smallholders Smallholder woodlot operators, participant

NGOs Strengthening capacity of small business


2.2.3. Forest Carbon Partnership Facility (FCPF)

Eligibility An eligible REDD+ country (through Ministry or other Government Agency)

Funding Mechanism Grants (Readiness Fund & Carbon Fund)


(global, not just Indonesia)

Total fund capital of USD 850 million, as of March 2015

Readiness Fund: 3.85 million (TBC)

Carbon Fund: USD 465 million (total)

Funding Disbursement Grants

The FCPF has two separate but complementary funding mechanisms — the Readiness

Fund and the Carbon Fund. Both funds are underpinned by a multi-donor fund of

governments and non-governmental entities, including private companies that make a

minimum financial contribution of USD 5 million.

The FCPF has created a framework and processes for REDD+ readiness17, which helps

countries prepare themselves for future systems of financial incentives for REDD+ by

developing the necessary policies and systems. The Carbon Fund will provide payments for

VER from REDD+ programs in countries that have made considerable progress towards

REDD+ readiness.

The World Bank is the trustee of both the Readiness Fund and the Carbon Fund and

provides secretariat services through a Facility Management Team (FMT).18 The FMT

administers the funds and makes proposals to the FCPF Participants Committee (PC)19, and

provides country advisory services and REDD+ methodology support. It ensures that FCPF

operations comply with applicable policies in the areas of safeguards, procurement and

financial management.

Currently, the Forestry Research and Development Agency (FORDA) at the MoEF is the

managing agency for the FCPF. The contact person for the FCPF is Prof. San Afri Awang of

17 Please see https://www.forestcarbonpartnership.org/design-process 18 A group of World Bank staff which coordinates and oversees the work of the FCPF. It is housed within the bank’s Carbon

Finance Unit, which is in the Environment Department. The FMT team includes staff with regional, legal and carbon finance

experience. They are also the point of contact for civil society. 19 The governing body of the FCPF charged with making decisions on all aspects of importance to the readiness process-including approving the templates for R-Plans, the criteria and standards for their assessment, and their approval. The PC also approves the annual operating budget of the FMT.

https://www.forestcarbonpartnership.org/design-process



FORDA at [email protected]. FORDA is located at Jalan Gunung Batu No. 5,

Bogor, West Java – Indonesia, 16118; phone: +62-251-8633944.

Readiness Fund

The Readiness Fund aims to support developing countries in preparing themselves for

participation in a future, large-scale system of positive incentives for REDD+. This includes:

adopting national REDD+ strategies; developing reference emission levels (RELs);

designing MRV systems; and making REDD+ national management arrangements, including

proper environmental and social safeguards. To date, USD 385 million has been made

available to fund readiness activities. A country will receive a maximum of USD 3.8 million

for the readiness process.

To access this fund, a country needs to submit a Readiness Plan Idea Note (PIN) to the

FCPF. The next step is for the selected countries to prepare their Readiness Plan, which

acts as a framework for a country to set a clear plan, budget and schedule for undertaking

REDD+ activities. Then, the partnership’s governing body20 reviews and assesses

Readiness Plans, and on that basis decides on the allocation of FCPF grants to countries.

Figure 13: Milestones of REDD+ readiness

Source: (Forest Carbon Partnership Facility (FCPF) 2015)

20 The governing body is a Participants Committee, which meets three times a year and makes the main decisions for the

FCPF. The Participants Committee serves for a term of one year, and consists of 10 members selected by REDD+ Country

Participants and 10 members selected jointly by the Donor Participants and Carbon Fund Participants at the time of an

annual Participants Assembly meeting.

mailto:[email protected]



The World Bank, the Inter-American Development Bank, the UNDP, and the UN Food and

Agriculture Organization (FAO) are delivery partners under the Readiness Fund and are

responsible for providing REDD+ readiness support services to specific countries.

Indonesia has been granted USD 3.4 million from the FCPF Readiness Preparation Grant

and it is currently proposing an additional USD 5 million.21 Under the first Readiness Fund,

Indonesia selected pilot provinces for REDD+ implementation and the framework for

readiness structures and implementation at the provincial and district levels that are in need

of strengthening for successful REDD+ implementation. Accordingly, the key area of focus in

the request for additional funding is for strengthening the institutional, legal, and regulatory

capacities and creating robust benefit sharing frameworks that are workable at the sub-

national level and consistent with the national approach. Indonesia’s intention to submit a

request for additional finance to the FCPF has been endorsed by the 3rd National FCPF

Steering Committee, held on 12 February 2014.

Carbon Fund

Countries that have made significant progress in their REDD+ readiness efforts may be

selected to participate in the Carbon Fund, through which the FCPF will pilot incentive

performance-based payments for REDD+ policies and measures against an established

reference emission level, for which the fund has set up its own methodological framework.22

The fund, totaling USD 465 million, is available for this purpose. To date, there are 11 ER-

PINs in the FCPF pipeline, of which Indonesia is one of the countries on the list. 23

The following figure illustrates processes involved in accessing the fund.

Figure 14: Carbon Fund processing steps: From ER-PIN to ERPA Implementation

Source: (Forest Carbon Partnership Facility (FCPF) 2015)

21https://forestcarbonpartnership.org/sites/fcp/files/2014/May/Mid%20Term%20progress%20Report%20Indonesia%20May

%202014.pdf 22 Please see https://www.forestcarbonpartnership.org/carbon-fund-methodological-framework 23 Please see https://www.forestcarbonpartnership.org/er-pins-fcpf-pipeline

https://www.forestcarbonpartnership.org/what-redd

https://forestcarbonpartnership.org/sites/fcp/files/2014/May/Mid%20Term%20progress%20Report%20Indonesia%20May%202014.pdf

https://forestcarbonpartnership.org/sites/fcp/files/2014/May/Mid%20Term%20progress%20Report%20Indonesia%20May%202014.pdf

https://www.forestcarbonpartnership.org/carbon-fund-methodological-framework

https://www.forestcarbonpartnership.org/er-pins-fcpf-pipeline



Programs submitted to the Carbon Fund will have to meet the following criteria:

Focus on results, namely high-quality and sustainable emission reductions, including

social and environmental benefits;

Sufficient scale of implementation, e.g., at the level of an administrative jurisdiction

within a country or at the national level;

Consistency with emerging compliance standards under the UNFCCC and other

regimes;

Diversity, so as to generate learning value for the FCPF and other participants;

Clear mechanisms so that the incentives for REDD+ reach those who need them;

and

Transparent stakeholder consultations.

The Carbon Fund will remunerate the selected countries in accordance with negotiated

contracts for verifiably reducing emissions above those in the reference scenario. The

Carbon Fund’s payments are intended to provide an incentive to the recipient countries and

the various stakeholders - including forest-dependent indigenous peoples, other forest

dwellers or the private sector - to achieve long-term sustainability in financing forest

conservation and management programs. This would help reduce the negative impact on

the global climate from the loss and impoverishment of forests.

Indonesia submitted its ER-PIN to the FCPF on 5 September 2014 with the ER Program

Name “Indonesia District Level REDD+ ER Program”.24 The ER PIN was developed by the

Ministry of Forestry25 and the REDD+ Agency26, with support from various stakeholders in

central and local government agencies, as well as national and local NGOs. There are seven

locations of ER programs in Indonesia: Kutai Barat and Berau (East Kalimantan); Kapuas27

(Central Kalimantan); Donggala and Tolitoli (Central Sulawesi); and Merangin and Bungo

(Jambi).28

The FCPF program in Indonesia aims to accelerate transformative reforms in forest and land

governance through the scaling-up of the development of FMUs, improvements in land and

spatial planning, site-specific community-based activities, and management of forest

concessions and estate crops. These emission reduction programs under the FCPF Carbon

Fund are part of Indonesia’s national REDD+ initiative and as such will include activities

closely matched to the national REDD+ strategy and activities at the provincial level. By

focusing on sub-national implementation initially, the program will generate important

lessons that can be applied to other forest-rich parts of the country in a phase approach and

inform the broader national REDD+ strategy.

24 Please see https://www.forestcarbonpartnership.org/sites/fcp/files/2014/september/Indonesia%20ER-

PIN%20September_12_resubmitted_edit_final.pdf 25 Currently merged with Ministry of Environment. 26 The REDD+ Agency was dissolved in January 2015. 27 The preliminary list of key local partners in Kapuas district are Kalimantan Forest Carbon Partnership (KFCP), Kapuas

Customary Dayak Council, Tahanjungan Tarung Foundation, Petak Danum Foundation, Inter Village Communication

Forum 28 Please see

http://www.forestcarbonpartnership.org/sites/fcp/files/2014/october/CF11%202c.%20Indonesian_Presentation_CF11_20141

005.pdf

https://www.forestcarbonpartnership.org/sites/fcp/files/2014/september/Indonesia%20ER-PIN%20September_12_resubmitted_edit_final.pdf

https://www.forestcarbonpartnership.org/sites/fcp/files/2014/september/Indonesia%20ER-PIN%20September_12_resubmitted_edit_final.pdf

http://www.forestcarbonpartnership.org/sites/fcp/files/2014/october/CF11%202c.%20Indonesian_Presentation_CF11_20141005.pdf

http://www.forestcarbonpartnership.org/sites/fcp/files/2014/october/CF11%202c.%20Indonesian_Presentation_CF11_20141005.pdf



Milestones of Indonesia’s activity under the FCPF are summarized in the following figure.

Figure 15: Milestones of Indonesia’s activity under FCPF

Source: (FCPF 2014)

Currently, FCPF only works with readiness grants at the national level. If ERPA

implementation for performance-based payments was initiated, LESTARI emission reduction

monitoring should be harmonized with the national reporting and benefit distribution

mechanisms discussed.

2.2.4. REDD Early Movers (REM)

Eligibility Ministry/institution in a country (MoEF)



-

Funding Disbursement -

Note Not available for Indonesia

REM has a funding volume of EUR 32.5 million, and REM has already agreed to spend around EUR 19 million buying 8 million tons of CO2 from REDD+ activities in the state of Acre over a four-year period

REDD Early Movers (REM) currently only operates in Colombia, Ecuador and Brazil and

does not currently accept applications from other countries. REM contributes to the

application of this approach in selected countries. REM supports REDD pioneers, also called

Early Movers, who are already taking the initiative themselves in forest conservation for

climate change mitigation. The program rewards the climate change mitigation performance

of “Early Movers” and promotes sustainable development for the benefit of small-scale



farmers as well as forest-dependent and indigenous communities through fair benefit

sharing. KfW Development Bank makes payments for independently verified REDD

emission reductions achieved by Early Movers. The REM partner countries make their own

contribution in order to keep the complexity of risk management low.

REM has a funding volume of EUR 32.5 million, and has already agreed to spend around

EUR 19 million buying 8 million tons of CO2 from REDD+ activities in the state of Acre over a

four-year period. Contact: Daniel Haas BMZ Bonn/Division 311 dahlmannstrabe4, 53113

Bonn; [email protected]

2.2.5. Green Climate Fund (GCF)

Eligibility Accredited Entities: accredited national, sub-national, regional, and international implementing entities and intermediaries (including NGOs, government ministries, national development banks, and other domestic or regional organizations that can meet the fund’s standards); and the private sector

Funding Mechanism Grants, loans, guarantees, equity


Micro project: USD < 10 million; Small project: USD 10 – 50 million; Medium project: USD 50 – 250 million; Large project: > 250 million

Total funding pledges of > USD 10 billion to the GCF

Funding Disbursement Grants, Loans, Equity, Results-based payments

Additional info Indonesia is still developing a framework for the National Designated Authority (NDA) establishment and the issues of accredited entity

Two Indonesian institutions pursuing AEs: Sarana Multi Infrastruktur Ltd. (PT. SMI) and KEHATI foundation

The GCF is a multilateral climate fund within the framework of the UNFCCC for investing in

climate change mitigation and adaptation in developing countries, primarily based on

contributions from industrialized countries. The purpose of the fund is to promote the

paradigm shift towards low-emission and climate-resilient development pathways. In

allocating its resources, the fund aims for a 50:50 balance between mitigation and

adaptation over time. The fund also aims to allocate a minimum of 50% of the adaptation

allocation to particularly vulnerable countries, including least developed countries (LDCs),

small island developing states (SIDS) and African states.

One element of the GCF that supports developing countries is the Readiness Program.29

The Secretariat works closely with various international organizations such as the United

Nations Environment Program (UNEP), World Resource Institute (WRI), the UNDP climate

29 The Readiness Program prepares developing countries to effectively and efficiently plan for, access, manage, deploy and

monitor climate financing. One of the key activities is to help develop pipelines of national projects in line with countries’

climate change strategies, plans and policies while involving the private sector. The lessons learned will be shared with the

GCF Board and Secretariat and with other initiatives dedicated to enhancing climate finance readiness.




finance readiness program, the GIZ and KfW climate finance ready initiatives, and the Asian

Development Bank (ADB) readiness programs to ensure complementarity.

The GCF will finance projects in the public and private sectors that contribute towards

achieving at least one of the eight strategic impacts of the fund30, where projects will be

evaluated against the fund’s investment criteria: impact potential, paradigm shift potential,

sustainable development, responsive to recipients’ needs, promotion of country ownership,

and efficiency & effectiveness. The fund has identified five investment priorities that will

deliver major mitigation and adaptation benefits, one of them related to forestry, that is

aimed at scaling up finance for forests and climate change.

Access to GCF resources to undertake climate change projects and programs is possible

only through Accredited Entities (AEs). AEs can submit funding proposals to the fund at any

time. The GCF board will only consider funding proposals that are submitted with a formal

letter of no objection. An AE may submit a concept note for feedback and recommendations

from the GCF, in consultation with the NDA or Focal Point. Considering the recommendation

of the Technical Advisory Panel, the GCF board decides whether the concept is endorsed,

not endorsed with a possibility of resubmission, or rejected.

The flow of the GCF approval process is illustrated in the following figure.31

Figure 16: Flow chart for GCF initial proposal approval process

Source: (Green Climate Fund 2015)

30 Classified in two broad categories: (1) Mitigation strategic impacts – reduced emissions from: (i) transport, (ii) energy

generation and access, (iii) forest and land use, and (iv) buildings, cities, industries, and appliances; and (2) Adaptation

strategic impacts – increased resilience of: (i) health, food and water security, (ii) livelihoods of people and communities,

(iii) infrastructure and built environment, and (iv) ecosystem and ecosystem services. 31 More detailed information on the GCF proposal approval process can be found by following this link:

http://www.gcfund.org/fileadmin/00_customer/documents/Operations/4.2_Project_Approval_Process.pdf; the criteria for

program and project funding can be downloaded at this link:

http://gcfund.net/fileadmin/00_customer/documents/MOB201406-

7th/GCF_B07_03_Initial_Proposal_Approval_Process_fin_20140508.pdf

http://www.gcfund.org/fileadmin/00_customer/documents/Operations/4.2_Project_Approval_Process.pdf

http://gcfund.net/fileadmin/00_customer/documents/MOB201406-7th/GCF_B07_03_Initial_Proposal_Approval_Process_fin_20140508.pdf

http://gcfund.net/fileadmin/00_customer/documents/MOB201406-7th/GCF_B07_03_Initial_Proposal_Approval_Process_fin_20140508.pdf



The GCF has approved its first eight projects including two from SIDS (Fiji and the Maldives)

and three from LDCs (Bangladesh, Malawi and Senegal) (Climate Analytics 2015).

Indonesia Focal Point/NDA Contact Info:

Indonesia has financially contributed USD 250,000 to the GCF and has recently undergone

a national political transition, leading to changes in national institutional arrangements

including the closure of climate finance institutions such as The National Council on Climate

Change (DNPI), which previously played the role of the GCF focal point in Indonesia.32 The

new NDA to the GCF for Indonesia is:

Dr. Suahasil Nazara Chairman of Fiscal Policy Agency Email: [email protected] Secretariat: Center for Climate Change and Multilateral Policy (PKPPIM) Fiscal Policy Agency Ministry of Finance of Indonesia

Contact Person: Mr. Syurkani Ishak Kasim (Director) R.M. Notohamiprodjo Building 5th Floor Jl. Dr. Wahidin No. 1 Jakarta 10710 Indonesia Phone: +62 21 3483 1678 Fax: +62 21 34831677 Email: [email protected]

There are currently 20 GCF AEs in the world. In additional to national entities, there are

regional and international entities that can access and implement projects globally, such as

Conservation International (CI), Deutsche Bank, UNEP, UNDP, ADB, and the World Bank.

Indonesia is still in the process of developing a framework for the establishment of the NDA

and is also working on the accreditation of new AEs. As of today, there are two Indonesian

institutions pursuing GCF accreditation, namely PT. SMI and KEHATI foundation.33 GCF

accreditation is a long and intricate process that makes it difficult to predict. Additionally, AEs

can only access the fund for certain types of fiduciary functions, size of project/activity, and

environmental and social risk category.

GCF Private Sector Facility (PSF)

Eligibility All developing country Parties to the UNFCCC through Accredited Entities (AEs): commercial banks regulated by central banks, private equity houses, investment firms and funds, impact funds, regulated financial intermediaries, development banks

Funding Mechanism Senior debt, subordinated debt, equity, guarantees, and

grants


Under definition

32 DNPI used to be the authority administering the GCF, and has been merged into the MoEF. 33 Criteria of accredited institutions can be found in this link:

http://www.gcfund.org/fileadmin/00_customer/documents/Accreditation/GCF_Accreditation_Application_form_v1_with_ex

amples_of_supporting_documents.pdf



http://www.gcfund.org/fileadmin/00_customer/documents/Accreditation/GCF_Accreditation_Application_form_v1_with_examples_of_supporting_documents.pdf

http://www.gcfund.org/fileadmin/00_customer/documents/Accreditation/GCF_Accreditation_Application_form_v1_with_examples_of_supporting_documents.pdf



Funding Disbursement Under definition

Note Program area: agriculture & forestry, water, clean energy, transportation & logistics, construction/building, manufacturing

The GCF Private Sector Facility (PSF) focuses on climate-sensitive private sector

investments in developing countries. The PSF is created to address the particular

investment requirements of the private sector and to promote public-private partnerships.

The PSF invests alongside qualified commercial banks, private equity firms, funds,

development banks and other financial intermediaries for climate change projects and

programs. It also provides financing to financial intermediaries for climate change projects

and programs. The PSF can be used to finance activities implemented by large, medium,

small, and micro enterprises. Non-accredited private sector entities can potentially access

GCF funds through accredited local financial intermediaries. The GCF approved its first eight

projects in November 2015, with discussions regarding several criteria still continuing.34

2.2.6. Global Environment Facility (GEF) managed funds

Eligibility Government agencies, civil society organizations, private sector companies, research institutions

Funding Mechanism Grants (can be transferred to or blended with loans, guarantees, equity)


Various types of projects (modalities):

Full-sized Projects (FSPs) – over USD 2 million,

Medium-sized Projects (MSPs) – up to USD 2 million,

Enabling Activities (EAs) - up to USD 1 million,

Small Grants Program (SGPs) – up to USD 50,000,

Programmatic Approach – amount not defined.


Through Implementing Entities like UNDP, UNEP and the World Bank

Additional Info Focus of GEF Trust Fund biodiversity, climate change, land degradation, sustainable forest management, international waters, and chemicals.

Focus of the Special Climate Change Fund (SCCF) and Least Developed Countries Fund (LDCF): climate change adaptation

The GEF has provided USD 14.5 billion in grants and mobilized USD 75.4 billion in

additional financing for almost 4,000 projects since its establishment in 1992.35 The GEF has

become an international partnership of 183 countries, international institutions, CSOs, and

34 Please see http://www.greenclimate.fund/-/green-climate-fund-approves-first-8-investmen-1 35 Please see https://www.thegef.org/gef/whatisgef

https://www.thegef.org/gef/whatisgef



the private sector, which addresses global environmental issues and currently has 18

implementing partners, including the ADB, UNDP, World Bank Group, and UNEP.

GEF support is provided to government agencies, civil society organizations, private sector

companies and research institutions to implement projects and programs in recipient

countries. GEF’s work covers biodiversity, climate change, land degradation, sustainable

forest management, international waters and chemicals.

GEF provides funding to various types of projects ranging from several thousand to several

million dollars from the GEF Trust Fund, Special Climate Change Fund (SCCF) and Least

Developed Countries Fund (LDCF) in the form of five different types of grants as listed in the

table above. The GEF also hosts the Adaptation Fund Secretariat. Each country gets a

budget allocation under each four-year replenishment cycle. Indonesia’s allocation for the

2014-2018 replenishment period is USD 84 million, of which USD 22 million is for climate

change mitigation and USD 58 million is for biodiversity.36

There are multiple possibilities for accessing GEF funding. The following are the key steps

that should be taken to submit a project proposal:

i. Contact the Operational Focal Point (OFP) in the country.37 The OFP is

responsible for the review and endorsement of projects to ensure consistency with

national priorities. Thus, the initial idea should first be discussed with him/her. The

OFP is also responsible for facilitating and coordinating all the GEF-related activities

within the country. He/she often organizes and coordinates National Portfolio

Formulation Exercises38, national consultations and other processes for the

programming of the portfolio of GEF projects. The different project ideas for GEF

financing are discussed, prioritized and consolidated through these multi-stakeholder

processes. The OFPs for Indonesia are:

Mr. Daniel Simanjuntak

Political Focal Point since 2015-01-16

Counselor

Embassy of Indonesia

2020 Massachusetts Avenue, N.W.

Washington, DC 20036

Tel: +1 202 775 5200 Email: [email protected]

Ms. Laksmi Dhewanti

OFP since 2015-08-20 Ministry of Environment and Forestry Manggala Wanabakti Building Jl. Gatot Subroto, Senayan Jakarta 10270, Indonesia Tel: +62 21 5720210

Fax: +62 21 5720210

Email: [email protected]

In addition, the OFP can guide the project proponent in avoiding duplication of

activities, in case a similar project has already been funded. To access the list of all

GEF-funded projects in Indonesia, including an overview of the country’s allocation

and utilization, visit https://www.thegef.org/gef/country_profile

36 Please see https://www.thegef.org/gef/STAR/GEF6_country_allocations 37 Please see https://www.thegef.org/gef/focal_points_list 38 Please see https://www.thegef.org/gef/npfe



https://www.thegef.org/gef/country_profile

https://www.thegef.org/gef/focal_points_list

https://www.thegef.org/gef/npfe



ii. Meet the eligibility criteria. For a project or program to be considered for GEF-

funding, it must fulfill the following eligibility criteria:

a. It has to be undertaken in an eligible country.39

b. It has to be country-driven and consistent with national priorities. All GEF

projects should be based on national priorities designed to support sustainable

development.

c. It has to address one or more of the GEF focal area strategies.40

d. It has to seek GEF financing only for the agreed-upon incremental costs on

measures to achieve global environmental benefits.

e. It has to be endorsed by the OFP of the country. For regional projects and

programs, the endorsement of the OFPs of all participating countries is required.

For global projects, an endorsement letter is not required.

f. It must involve the public in project design and implementation, following

the Policy on Public Involvement41 in GEF-Financed Projects and the respective

guidelines.

iii. Choose a GEF Agency.42 The GEF Agency (e.g. UNDP, UNEP or World Bank) is

responsible for the development and implementation of projects and programs. This

means that the GEF Agency will be the proponent’s partner at all stages of the

project. The choice of the agency should be based on its respective comparative

advantages as stated in the document Comparative Advantages of the GEF

Agencies Corrigendum.43

iv. Select a type of modality. The GEF provides funding through four modalities: full-

sized projects, medium-sized projects, enabling activities and programs. The project

proponent should select the one that best fits the idea to be developed into a

proposal. Depending on the type of modality selected, different templates have to be

completed describing the project proposal for its review and approval.

v. Civil Society Organizations have the opportunity to apply for GEF grants through

the Small Grants Program. 44

Additional details in the review and approval of these projects can be found under the

policies and guidelines of the Project Cycle45 and the Templates and Guidelines46 on the

GEF website.

39 Please see https://www.thegef.org/gef/country_eligibility . In other words, countries are eligible for GEF funding in a

focal area if: (i) they meet eligibility criteria established by the relevant COP of that convention, (ii) they are members of the

conventions and are countries eligible to borrow from the World Bank (IBRD and/or IDA), (iii) they are eligible recipients

of UNDP technical assistance through country programming. 40 Please see https://www.thegef.org/gef/GEF6-Programming-Directions 41 Please see https://www.thegef.org/gef/policies_guidelines/public_involvement 42 Please see https://www.thegef.org/gef/gef_agencies 43 Please see https://www.thegef.org/gef/node/428 44 Please see https://www.thegef.org/gef/sgp 45 Please see https://www.thegef.org/gef/project_cycle 46 Please see https://www.thegef.org/gef/guidelines_templates

https://www.thegef.org/gef/country_eligibility

https://www.thegef.org/gef/GEF6-Programming-Directions

https://www.thegef.org/gef/policies_guidelines/public_involvement

https://www.thegef.org/gef/gef_agencies

https://www.thegef.org/gef/node/428

https://www.thegef.org/gef/sgp

https://www.thegef.org/gef/project_cycle

https://www.thegef.org/gef/guidelines_templates



2.2.7. BioCarbon Fund Initiative for Sustainable Forest Landscapes (ISFL)

Eligibility Country

Funding Mechanism Grants and results based payments for achieved emission reductions


USD 170-180 million


-

The BioCarbon Fund Initiative for Sustainable Forest Landscapes (ISFL)47 is a multi-lateral

fund administered by the World Bank that seeks to promote reduced GHG emissions from

the land use sector, reduced deforestation and forest degradation in developing countries

(REDD+) and to promote sustainable agriculture, as well as smarter land-use planning,

policies and practices. The initiative will deploy results-based finance to incentivize changes

at the landscape level.

Within the World Bank there is complementarity between the climate and forest initiatives

such as the FCPF, the FIP, and the BioCF. ISFL will provide countries with

the following types of financing:

Grant funding and technical assistance through the BioCFplus.

Results based payments for achieved emission reductions through the BioCF’s 3rd

tranche.

The fund’s capital is USD 380 million from the contributing participants of Germany, Norway,

the UK, and the US, and has been operational since 2013.

The BioCF ISFL operates at the jurisdictional level. Thus, on the ground interventions would

be at a significant scale and policy interventions would impact the whole jurisdiction or even

whole nation. The preliminary average size of each ISFL jurisdictional program is USD 70-80

M. In Zambia and Ethiopia, the jurisdictional program is agreed and funding has been

initiated; Colombia and Indonesia are targeted jurisdictions.

At the COP21 in December 2015 in Paris, the UK and Germany pledged an additional

USD 100 M to the ISFL to support expansion into Indonesia48.

HPI views it as worthwhile to inquire with the ISFL when activities in Indonesia would start

and if LESTARI could be a pilot landscape program.

47 http://www.biocearbonfund-isfl.org/ 48 http://www.ecosystemmarketplace.com/articles/norway-germany-uk-pledge-5-billion-to-combat-tropical-deforestation/

http://www.biocearbonfund-isfl.org/

http://www.ecosystemmarketplace.com/articles/norway-germany-uk-pledge-5-billion-to-combat-tropical-deforestation/



2.2.8. Bilateral commitments financing support

Eligibility A country (through an appointed government ministry/agency)

Funding Mechanism Grants/loans


Variable

Funding Disbursement Variable

This section analyzes funding support originating from bilateral cooperation. Funding from

the Government of Norway is not presented in this section as it is already discussed in sub-

section 2.2.1. (NORAD-UNDP).

2.2.8.1. Denmark - DANIDA

The Danish government, through its development corporation DANIDA, provides an

Environmental Support Program (ESP3) to the Government of Indonesia for developing

inclusive and sustainable growth through improved environmental management and climate

change mitigation and adaptation. Currently, ESP3 is in its third phase and places emphasis

on strengthening coordination between the national and regional government. Central Java

Province has been chosen as a pilot province, and the results are expected to be applied in

other provinces. The ESP3 is coordinated by BAPPENAS and is implemented jointly by the

MoEF, and the Ministry of Energy and Mineral Resources. The program also includes

support to four individual forest and climate projects implemented by Burung Indonesia, the

World Agroforestry Center and the World Bank.

ESP3 runs from 2013-18 with a total budget of DKK 270 M (USD 50 million or IDR 600

billion) as a grant. Through close cooperation with key central government agencies who

have the potential to change "business as usual", ESP3 seeks to facilitate gradual

transformation towards a green economy. One component of the ESP3 program consists of

a number of initiatives mostly run by NGOs. Partly funded through the Danish Fast Start

Climate Fund for 2012, this component supports Indonesia's climate commitments, and

seeks to improve livelihoods for forest dependent communities through sustainable natural

resource management and forest protection. This effort is administered by NGOs and

implemented either in direct cooperation with or under the coordination of BAPPENAS.

Indonesian projects supported by the Danish government are: Harapan Rainforest

implemented by Burung Indonesia; Locally Appropriate Mitigation Actions implemented by

World Agroforestry Center (ICRAF); the REDD+ Support Facility implemented by the World

Bank; Large Scale Forest Stewardship Council (FSC) certification in Indonesia implemented

by the Borneo Initiative; and support to the Indonesia Forest Investment

Program implemented by the World Bank.

2.2.8.2. United Kingdom Climate Change Unit (UKCCU) - the Department for

International Development (DFID)

The UK has committed to working with Indonesia to help it move to a low carbon based

economy and to meet its national emissions targets. The UK through the United Kingdom



Climate Change Unit (UKCCU) supports three thematic areas, namely forestry and land-use,

energy and international climate negotiations. With regards to the forestry and land-use

sector, the UKCCU has been providing the following support:

preventing illegal logging and helping Indonesia implement the Voluntary

Partnership Agreement with the EU on timber exports,

developing and implementing its spatial plan and ensuring that uncontrolled

deforestation does not take place in Papua,

promoting accountability and the rule of law in land licensing in 13 districts in four

forest provinces.

The UKCCU also leads the implementation of other climate change programs in Indonesia

that are funded by other departments within DFID or other departments in the UK

government, such as a GBP 10 million new phase of the Multi-Stakeholder Forestry

Program, funded from DFID’s Forest Governance Markets and Climate Program (FGMC).

The work of the UKCCU contributes directly to the objectives of the UK International Climate

Fund (ICF). The UK’s ICF is the primary channel of UK Climate Change Finance. It became

operational in 2011 and replaced the Environmental Transformation Fund (ETF). The main

target of the ICF is to help developing countries adapt to climate change, embark on low

carbon growth and tackle deforestation (Ulrich, Bohnke and Eidt 2015). International climate

funds approved totaled USD 325 million between 2003 and 2012, focusing primarily on

mitigation. Most attention is being paid to reducing forest and land based emissions activities

(and the highest portion of these funds is disbursed on REDD+ activities), which is

appropriate since up to 85% of Indonesia’s emissions come from these sectors. The ICF's

funding portfolio is split between capital contributions/concessional loans and grant finance.

The majority of contributions to multilateral funds take the form of concessional capital.

Grants are used primarily as a mechanism for bilateral contributions. The following table lists

projects funded by the UKCCU in Indonesia that could be

Table 10: List of projects in Indonesia under UK’s International Climate Fund

Name of project Approved

(USD Million)

Improving Governance of Land Use, Land-Use Change and Forestry (LULUCF) in Indonesia

4.1

Indonesia Multi stakeholder Forestry Program II 2.2

Degraded Land Mapping in Indonesia 0.8

Degraded Land Mapping for Kalimantan and Papua Provinces 0.7

Comprehensive Program on Spatial Planning and Low Carbon Development in Papua

0.38



Name of project Approved

(USD Million)

Program Design for Spatial Planning and Low Carbon Development in Papua49

0.24

Spatial Planning and Low Carbon Development in Papua 0.15

Source: Climate Funds Update (Dec, 2015): http://www.climatefundsupdate.org/data

UKCCU programs under the operational plan of 2011-2016 completed their spending in

2015. However, the impacts on reducing deforestation and promoting low carbon investment

are expected to continue beyond that. The post-2015 results will be fully reported by the

UKCCU if it continues operation beyond 2015. If the UK introduces different institutional

arrangements in Indonesia, provision for reporting results will be incorporated into these

plans.

2.2.8.3. Germany – GIZ and KfW

At governmental negotiations in November 2013, the governments of Germany and of

Indonesia agreed that bilateral development cooperation should focus on three priority

areas:

(i) Energy and climate change

(ii) Inclusive growth

(iii) Good governance and global networks

The official partner for German development cooperation in Indonesia is BAPPENAS. GIZ

and KfW are the German development organizations that implement German international

development projects and programs. GIZ and KfW work together in supporting the

Indonesian German Forests and Climate Change Programme (FORCLIME) projects in

Indonesia, in which GIZ provides technical support while KfW provides financial support for

project implementation.

Deutsche Gesellschaft fuer Internationale Zusammenarbeit GmbH or GIZ

GIZ, the German development agency, currently has three programs in Indonesia, namely

the (i) Forests and Climate Change Program (FORCLIME), (ii) Biodiversity and Climate

Change Project (BIOCLIME), and (iii) Policy Advice for Environment and Climate Change

(PAKLIM).

FORCLIME – GIZ and KfW

The overall objective of FORCLIME is to reduce GHG emissions from the forest sector while

improving the livelihoods of Indonesia's poor rural communities. Support to REDD+

demonstration activities is a key feature of the program, providing decision-makers with

49 Program Design for Spatial Planning and Low Carbon Development in Papua is supported by the UKCCU. The UKCCU

allocated GBP 280,000 over eight months (September 2011 – Aril 2012). The fund is paid out on the basis of invoices

submitted after Month 2, Month 4 and on completion of the assignment (Intervention Summary).



experience of how REDD+ can be implemented on the ground. FORCLIME support comes

from GIZ and KfW, and the program runs from 2009 – 2016.

FORCLIME is commissioned by the German Federal Ministry for Economic Cooperation and

Development (BMZ) with the MoEF as the lead executing agency. With FORCLIME,

Germany supports Indonesia’s efforts to reduce GHG emissions from the forestry sector, to

conserve forest biodiversity within the regional Heart of Borneo Initiative, and to implement

sustainable forest management. The support provided by FORCLIME includes, among

others: advice on strategy development for REDD+ and forest development at national,

provincial and district levels; development of PES schemes to support sustainable

livelihoods in rural areas; innovative design of mechanisms and regulations for district-

based REDD+ initiatives; MRV facilitation; and capacity building for sustainable forest

management and nature conservation.

FORCLIME consists of six components:

(i) Regulatory framework (advisory services on forestry and climate policy)

(ii) Sustainable forest management and REDD+50

(iii) FMU establishment51

(iv) Sustainable economic development (green economy)

(v) Support for capacity building

(vi) Integration of biodiversity conservation

GIZ - BIOCLIME

BIOCLIME’s overall objective is to preserve biodiversity and the carbon sequestration

capacity of selected forest ecosystems of South Sumatra as a contribution to the

implementation of Indonesia’s emissions reduction target. BIOCLIME supports district and

provincial governments in their efforts to develop and implement conservation and

management concepts for reducing emissions from their forests and conserving forest

biodiversity in order to contribute to the GHG emission reduction goal and the achievement

of the Aichi biodiversity target in Indonesia. The project partner organization is the MoEF as

the leading ministry in the forestry and biodiversity sector and the government of the

province of South Sumatera as the implementing partner.

BIOCLIME cooperates with different levels inside the Indonesian government, with NGOs

and universities, as well as with local communities. It places emphasis on building bridges

between district and provincial governments and providing a toolset for decision making on

policy and land use planning suitable for leading to a national standard and supporting the

Indonesian One Map Policy.

BIOCLIME is designed to act as a coordinating unit for all relevant activities in this field. It

does this by further developing data management and associated capacities, and by

50 FORCLIME supports private forest companies in the FSC certification process of their forest concessions, particularly

companies located in the pilot districts Berau, Malinau and Kapuas Hulu. 51 FORCLIME actively supports the development of three Model FMUs in Malinau District in North Kalimantan Province,

Berau District in East Kalimantan, and Kapuas Hulu District in West Kalimantan.



improving the reporting system with special attention to the development of FMU. BIOCLIME

consists of five work packages:

(i) Establishment of a database for the conservation and sustainable management

of areas of high biodiversity

(ii) Shaping of transparent and participatory planning and decision-making

processes for the selection and management of protected areas

(iii) Strengthening of management capabilities and capacities

(iv) Development and implementation of an adapted local MRV system for land use,

biodiversity, risk potential and biomass

(v) Improvement of livelihoods of the local communities living in the area

GIZ - PAKLIM

GIZ PAKLIM is commissioned by the German Federal Ministry for Economic Cooperation

and Development (BMZ) and the lead executing agency is the MoEF. The overall term for

PAKLIM was 2009 – 2015. The objective of PAKLIM was to reduce GHG emissions, improve

living conditions, make industrial energy use more efficient and help the country adapt to

climate change. GIZ PAKLIM consists of three working areas:

Work Area 1: Climate mitigation policy advice, with the following main objectives: (i)

implement climate mitigation action plans and disseminate best practices at the

provincial level, and (ii) support Nationally Appropriate Mitigation Action (NAMA)

development and an MRV system

Work Area 2: Industries and industrial estates, with the main objective of integrating

private sector actors into mitigation actions, fostering voluntary partnerships and

development partnerships

Work Area 3: Climate education and awareness, with the main objective of raising

awareness for the reasons for and the impact of climate change among Indonesian

youth

The PAKLIM program has helped develop a national strategy for the introduction of

mitigation measures in relevant sectors to achieve Indonesia’s targets for GHG emission

reductions. The main elements of this strategy are found in the guidelines on implementing

the National Mitigation Action Plan (RAN-GRK), which were drawn up jointly with the Ministry

of National Development Planning. With assistance from PAKLIM, the Ministry of National

Development Planning is currently setting up a secretariat that will support the relevant

ministries and provincial authorities in preparing NAMAs and implementing the RAN-GRK.

Partnerships for the development of climate change action plans have been established with

ten cities in Indonesia, namely: Blitar, Malang, Mojokerto, Yogyakarta, Surakarta, Pasuruan,

Probolinggo, Semarang, Salatiga and Pekalongan.

KfW Development Bank

The KfW forestry portfolio in Indonesia includes REDD+, biodiversity and integrated

watershed management, ecosystem restoration, and the ASEAN regional program. KfW

provides financial support under the FORCLIME program in Kalimantan and also cooperates

with other organizations such as the Frankfurt Zoological Society (ZGF) in Sumatera. The

first program to support the three districts in Kalimantan was launched in 2008 and up to



EUR 80 million will be invested in sustainable forestry by 2022. With its commitment in the

FORCLIME program, KfW seeks to demonstrate the viability of a pro-poor REDD+

mechanism in Kalimantan. KfW uses a district-based approach in order to prepare selected

pilot areas for national and international carbon markets. KfW finances measures to achieve

readiness in three districts of Kalimantan (Kapuas Hulu, Malinau, Berau), realizes an

investment program for REDD+ demonstration activities and develops an innovative and fair

incentive payment scheme.

KfW also supports two big national parks in Sumatra and Sulawesi, combined with the

rehabilitation of important water catchment areas. In Sumatera, KfW supports climate

change mitigation and species conservation in the Leuser ecosystem of Sumatra, which falls

under the LESTARI landscape in Aceh. The project aims to support sustainable

management of the Gunung Leuser ecosystem in Sumatra, in particular in the South Aceh,

Subulussalam and Singkil districts. The primary objective of the project is to balance the

needs for conserving biodiversity with those of the population for using the natural

resources. The implementing partners for the project are the MoEF, Natural Resources and

Ecosystem Conservation (Ditjen Konservasi Sumber Daya Alam dan Ekosistem, KSDAE),

Regional Body for Planning and Development (BAPPEDA) Aceh, local planning and forestry

authorities (BAPPEDA, Dinas Kehutanan), Gunung Leuser National Park (Taman Nasional

Gunung Leuser, TNGL), and the Regional Natural Resources Conservation Agency (Badan

Konservasi Sumber Daya Alam, BKSDA) Singkil. The project runs from August 2013 – April

2019 with a grant totaling EUR 8.5 million.52

Still in Sumatera, KfW also supports a conservation concession for the protection of critically

endangered Sumatran orangutans. KfW will support provision of 39,000 hectares of tropical

rainforest in Bukit Tigapuluh in central Sumatra for the reintroduction of more than 300

orangutans into their natural habitat. The implementation of the concession is funded via the

KfW Development Bank at almost EUR 3.6 million.

2.2.9. Market-based payments for emission reductions (compliance &

voluntary)

Eligibility VERs following respective market protocols

Funding Mechanism Over-the-counter (OTC) transaction of VERs against payment


See below

Funding Disbursement See Funding Mechanism

Market-based payments for emission reductions from land-based mitigation have leveraged

USD 1.2 billion since 2002, including USD 0.9 billion from voluntary markets. The 2014

transaction volume for voluntary land-based emission reduction payments was USD 128

million.

52 Please see https://www.kfw-entwicklungsbank.de/International-financing/KfW-Development-Bank/About-

us/News/News-Details_180352.html

https://www.kfw-entwicklungsbank.de/International-financing/KfW-Development-Bank/About-us/News/News-Details_180352.html

https://www.kfw-entwicklungsbank.de/International-financing/KfW-Development-Bank/About-us/News/News-Details_180352.html



Voluntary land-based emission reduction payments significantly increased their market

transaction value and traded emission reduction volume from 2013 to 2014. Voluntary

markets therefore stand out against the trend of reduced public sector finance committed to

climate change mitigation and for REDD+ since 2009 (see section 2.2.).

Figure 17: Voluntary land-based emission reduction volume traded and transaction value

Source: (Forest Trends' Ecosystem Marketplace 2015)

Table 11: Overview of Compliance and VER Markets for land-based mitigation


At this point, no advanced efforts exist for a compliance market that includes Indonesian

emission reductions. Therefore, the voluntary market continues to be the only market-based

mechanism for emission reduction performance applicable to Indonesia.

The supply and demand of land-based emission reductions for the voluntary market is

dominated by 90% of certification combinations including the Verified Carbon Standard

(VCS).



Figure 18: Certification Standards in voluntary land-based emission reduction market


58% of land-based emission reduction certificates issued in the voluntary market apply the

VCS in combination with the Climate, Community, and Biodiversity Standard (CCBS). The

VCS offers GHG accounting methodologies allowing for issuance of verified emission

reductions from avoided deforestation, avoided forest degradation, sustainable forest

management, reforestation, conservation and increase of soil carbon, among others. Several

emission reduction activities can be grouped into a single REDD+ project.

For performance-based payments in the voluntary market, buyers display a strong

preference for emission reduction certificates from projects and programs that have

undergone verification of their reported monitoring results (MRV) and issued certificates in

registry.

Figure 19: Transacted emission reduction volumes (tCO2e) per project status




Table 12: Land-based Emission Reduction Markets per world region


It should be noted that in 2014 Asian forest carbon initiatives harvested only USD 9.6 million

of USD 257 million results-based payments (ex-post MRV) – or 3.7% of the world’s total. As

no compliance market instruments for Asian forest carbon offsets exist, the USD 9.6 million

came entirely from the USD 128 million voluntary forest carbon market – bringing the Asian

share to 7.5% of the global voluntary forest carbon market. This share is considered

relatively small for the world’s most populated region when compared with, e.g., a share of

36% for Latin America. In the absence of compliance forest carbon markets and a small

share in voluntary forest carbon markets, the overall success of Asian and therefore

Indonesian initiatives to develop and transact forest carbon assets in market mechanisms

since 2009 has been limited.

No specific studies exist on the reason of underperformance of Asian forest carbon initiatives

versus Latin American and African offset projects in result-based market mechanisms.

These regions are comparable because they are equally not eligible for compliance forest

carbon markets and compete for shares in the voluntary forest carbon market.

A few preliminary possibilities include:

In Latin America and Africa, since 2010 the supply has included community-based

REDD+ and mixed native species reforestation – the most highly valued forest

carbon offset project.

Voluntary forest carbon offset buyers came predominantly from North America and

Europe, not from the industrialized nations of Asia and Oceania.

Asian supply attracted exclusively limited European demand, with little demand from

North America and close to none from Asia and Oceania.

In the communication narratives playing a large role in the decision-making of

voluntary offset buyers in North America & Europe, fighting poverty in Africa and

protecting the Amazon rainforest are well-established causes.

Still, the voluntary carbon market and voluntary non-carbon grants from budgets for CSR of

multinational companies active in Indonesia should not be ruled out as a potential additional

funding source. The draft assessment report will include detailed technical recommendations

on how the window for such irregular opportunities can be created and kept open in synergy

with a strategy to secure sustained public sector finance.



Figure 20: Origin & destination of land-based ERs in voluntary and compliance markets


2.3. Private sector & civil society financial support mechanisms This section presents funding sources and projects/programs that are funded and/or

implemented by the private sector and civil society.

2.3.1. NGOs (national and international)

2.3.1.1. KEHATI Foundation

Eligibility NGOs, community organizations, governmental

research institutions, universities, professional

institutions

Work in three prioritized ecosystems: agriculture, forestry, and coastal & small island programs



Latest data not available

Total grant (1995-2013: USD 25.500.000)53

Funding Disbursement -

Note Proposal needs to be submitted in KEHATI format

The KEHATI Foundation has developed a type of investment, which can be regarded as

green investment, to provide a ground for business society to participate in biodiversity

53 Please see https://www.cbd.int/doc/meetings/ecr/cbwecr-2014-04/other/cbwecr-2014-04-presentation-day4-05-en.pdf

https://www.cbd.int/doc/meetings/ecr/cbwecr-2014-04/other/cbwecr-2014-04-presentation-day4-05-en.pdf



conservation efforts and sustainable development, in the form of the KEHATI Mutual Fund

(Reksadana KEHATI Lestari - RDKL) and KEHATI Sustainable and Responsible Investment

Index (KEHATI SRI Index). Fundraising is also carried out through the KEHATI Mutual Fund

managed by PT BAHANA TCW. The investment return is used as a grant to fund the

programs in the three ecosystems of agriculture, forestry, and coastal and small islands.

KEHATI Mutual Fund (Reksadana KEHATI Lestari - RDKL)

The RDKL is a mutual fund in the form of a Collective Investment Contract54, with the

objective of mobilizing financial support from the public for sustainable funding of biodiversity

programs carried out by the KEHATI foundation, through an investment concept that takes

the form of a mutual fund. This mutual fund was launched in April 2007 by the Foundation in

cooperation with PT Bahana TCW Investment Management as the selected fund manager.

The investors are the companies that own a CSR or Green Investment budget allocation.

KEHATI Sustainable and Responsible Investment Index (KEHATI SRI Index)

The objective of the establishment of the index is to carry out biodiversity conservation

programs by raising awareness and consciousness towards biodiversity, among the

public, business sector and capital market, and to provide open information to the public in

identifying the selected companies rated by the index, which are regarded as beneficial and

constantly managing sustainable development.55 Selection mechanisms for the companies

to be included in the KEHATI SRI Index consist of two steps: (i) an initial selection through

negative and financial aspects; and (ii) evaluation of fundamental aspects.

Procedure to become KEHATI’s grant receiving partners56

KEHATI provides grants for organizations working in three prioritized ecosystems, namely

agricultural programs, forestry programs, and coastal and small island programs. The

programs should focus on the sustainable conservation and utilization of biodiversity, and

should last more than one year. Grant funding for specific programs such as MFP II, TFCA

Sumatra, TFCA Kalimantan can be proposed directly to the program at www.mfp.or.id,

www.tfcasumatera.org, and www.tfcakalimantan.or.id respectively.

To submit a proposal to the KEHATI Foundation, an applicant needs to prepare a proposal

in the defined format (can be downloaded at

http://www.kehati.or.id/images/Format%20Proposal.pdf).

The following are the procedures for proposal submission:

KEHATI will send a letter of proposal receipt to the party who proposed the

activities within two-weeks at the latest, after the proposal has been received by

KEHATI.

The proposal will be assessed and evaluated by an Independent Proposal Evaluator,

consisting of experts related to the theme of the proposal.

54 Based on Law No.8 Year 1995 concerning Capital Market and its implementing regulation. 55 Please see http://www.kehati.or.id/en/indeks-sri-kehati-2.html 56 Please see http://www.kehati.or.id/en/kemitraan-3.html

http://www.mfp.or.id/

http://www.tfcasumatera.org/

http://www.tfcakalimantan.or.id/

http://www.kehati.or.id/images/Format%20Proposal.pdf)

http://www.kehati.or.id/en/indeks-sri-kehati-2.html

http://www.kehati.or.id/en/kemitraan-3.html



Evaluation will be completed within one month after the deadline of proposal

submission.

KEHATI will inform the proposal sender of the evaluation result within one month, at

the latest, after the evaluation process is completed.

The following table summarizes eligibility of KEHATI grants:

Table 13: Eligibility of KEHATI grants

Eligible Institutions and Organizations57

Non-eligible Institutions and Organizations58

NGOs and volunteer organizations All government institutions, not including research institutions owned by universities and state higher educational institutions

Educational and training institutes Commercial private and public companies, national and international as well

Religious groups, cultural groups, youth organizations, students, women organizations

Cooperatives and government-sponsored associations

Professional associations and groups of experts

Labor and entrepreneurs’ associations

- Military and para-military organizations

- Political organizations and international organizations

- Individuals

Source: KEHATI, web: http://www.kehati.or.id/en/kemitraan-3/dana-hibah-3.html

Further information on KEHATI cooperation for biodiversity conservation and utilization can

be obtained by contacting the Resource Development Officer, [email protected], phone:

(+62 21) 7183185 & 7183187; fax: (+62 21) 7196131.

2.3.1.2. World Wide Fund for Nature (WWF)

Eligibility Community groups



Variable


The World Wide Fund for Nature (WWF) Indonesia does not receive financial support from

the government budget (APBN and APBD). It’s funding comes from more than 40 donors

57 Organizations formed by local communities. 58 KEHATI cannot channel its grant to individuals for certain educational purposes, conferences, travelling, building,

renovation, purchase or ownership of land and buildings or purchase of vehicles and other equipment.

http://www.kehati.or.id/en/kemitraan-3/dana-hibah-3.html




(international and national), aid agencies, and a total of more than 64,000 supporters from

across Indonesia. WWF obtains 57% of its funding from individuals and from endowments,

17% from international sources (such as the World Bank, DFID, USAID) and 11% from

various companies59.

To support its programs, WWF Indonesia develops an innovative partnership model to

collaborate with companies in the form of the Corporate Partnership Program. This

Partnership Program can be packed in accordance with the needs of nature conservation

but also encourages corporate partners to contribute through transformation, communication

to the public and CSR. In addition, WWF also carries out fundraising activities. Fundraisers

deal directly with the public and convey the issues of preservation and conservation of

nature and a green lifestyle, as well as raise support in the form of individual donations. In

addition, WWF Indonesia has also partnered with professional institutions that specialize in

organizing fundraising activities.60

WWF also developed a trust fund initiative, the Sumatera Sustainability Fund (SFS)61, an

initiative of sustainable financing for a conservation program in Sumatera Island. The SFS is

a trust fund that aims to support 10 governors on ecosystem-based spatial planning. WWF

has several grants that can be applied by local organizations in LESTARI landscapes, such

as Reforestation Grants62 and Conservation Workshop Grants.63

2.3.2. Private companies

In general, private companies including international consumer goods companies (Unilever,

Nestlé, L’Oreal and others) organize their CSR activities in non-standardized ways. This

means that there is no public grant window or selection process for proposal requirements.

Companies operating in this landscape usually have their own CSR program.

In relation to becoming involved with sustainable palm oil growers beyond simple RSPO

sourcing, one consumer goods company gave the feedback that they felt their position was

too distant from local agricultural production and they encouraged their suppliers of refined

palm oil, e.g. Wilmar, Golden Agri Resources etc., to take leadership in this regard.

A more direct and common way that consumer goods companies invest in local sustainable

landscape and climate change mitigation initiatives is through the purchase of verified

emission reductions via the voluntary carbon market. A direct link to the supply chain (e.g.

palm oil) can act as a strong asset for attracting specific buyers, along with the other social &

environmental co-benefits associated with REDD+. Voluntary carbon market transactions

have a tendency to be small and irregular, also incurring transaction costs. A current trend of

advanced CSR-motivated buyers of forest carbon credits is to move away from the “broad

portfolio of credits off the shelf” to support one or a few strategic projects on amore long-term

basis. This lends predictability to the project and reduces transaction costs at both ends.

59 Please see https://id.wikipedia.org/wiki/World_Wide_Fund_for_Nature 60 Please see http://www.wwf.or.id/cara_anda_membantu/fundraiser_wwf2/ 61 SSF was initially established by six founders on 12 February 2010 in Jakarta and was facilitated by Indonesian

Coordinating Minister for the Economy in collaboration with WWF-Indonesia. 62 Please see http://www.worldwildlife.org/projects/reforestation-grants 63 Please see http://www.worldwildlife.org/projects/conservation-workshop-grants

https://id.wikipedia.org/wiki/World_Wide_Fund_for_Nature

http://www.wwf.or.id/cara_anda_membantu/fundraiser_wwf2/

http://www.worldwildlife.org/projects/reforestation-grants

http://www.worldwildlife.org/projects/conservation-workshop-grants



2.3.2.1. Consumer goods companies sourcing palm oil

Eligibility NGOs, community organizations, private sector implementing organizations

Funding Mechanism Grants from CSR and demand for sustainably produced commodities


Variable


Several consumer goods companies operate CSR programs, with the aim of making their

supply chain more environmentally responsible. In September 2014, 37 national and 20

subnational governments, 53 companies and institutions, 16 indigenous community

networks, and 54 civil society organizations committed to halving deforestation by 2020 and

ending it by 2030. The private sector signatories represent USD 1.36 trillion in annual

revenues connected in part to the “big four” deforestation-driving commodities: palm oil, soy,

beef, and pulp and paper. Most of these companies – including household names such as

Walmart, L’Oreal, Danone, McDonald’s and General Mills – have defined specific targets to

reduce deforestation within their supply chains, with deadlines fast approaching. There are

another 270 companies with similar commitments not tied to the declaration but otherwise

documented by the Supply Change64 project collaborators.

The Unilever Sustainable Living Plan is a company blueprint for achieving Unilever’s vision

to double the size of its business, whilst reducing its environmental footprint and increasing

positive social impact.65 It consists of three components, namely: (i) improving health and

wellbeing, (ii) reducing environmental impact, and (iii) enhancing livelihood. The plan sets

wide-ranging targets to achieve these goals by 2020 and includes how the company sources

raw materials and how consumers use the brand’s products.

Unilever intends to fully source its agricultural raw material sustainably by 2020. Unilever’s

ultimate objective is to ensure that its supply chain is deforestation-free. It will strive for a net

positive environmental impact and for improved livelihoods of smallholder farmers. For

instance, Unilever aims to be able to say and to prove that all palm oil purchased by the

company comes from traceable and certified sustainable sources. As of December

2014, Unilever was able to trace 70% of its global palm oil purchases to 1,800 known crude

palm oil mills.66

In August 2015, Unilever teamed up with WWF to reach the wider public with its green

campaign Bright Future, which focuses on protecting trees in Indonesia and Brazil.67

Specifically, the partnership between Unilever and WWF will fund projects in Brazil and

Indonesia that focus on reducing deforestation and forest degradation, restoring forest

areas, promoting sustainable forest management and increasing tree stocks in agricultural

64 Please see www.supply-change.org 65 Please see https://www.unilever.com/sustainable-living/ 66 Please see http://blog.cifor.org/28657/in-indonesia-corporate-commitment-to-sustainable-palm-oil?fnl=en 67 Please see www.brightfuture.unilever.co.id

http://www.unilever.com/sustainable-living/the-sustainable-living-plan/reducing-environmental-impact/sustainable-sourcing/transforming-the-palm-oil-industry/sourcing-palm-oil-with-smallholder-farmers.html

http://www.supply-change.org/

https://www.unilever.com/sustainable-living/

http://blog.cifor.org/28657/in-indonesia-corporate-commitment-to-sustainable-palm-oil?fnl=en

http://www.brightfuture.unilever.co.id/



landscapes. The tree protection program68 is part of Unilever’s commitment to sustainable

living and will help fund the protection of one million trees in Brazil and Indonesia. The

partnership supports a long-term program by WWF and their partners, BirdLife International

and The Wildlife Conservation Society.

2.3.1.4 Freeport

Operating in Mimika District, PT. Freeport Indonesia has carried out various CSR programs,

mainly directed towards two indigenous communities in the area: Amungme and Kamoro.

Two dedicated local organizations were set up to manage the CSR fund from PT. Freeport

for these community groups, namely Lembaga Masyarakat Adat Suku Amungme (LEMASA)

for the Amungme tribal group and Lembaga Masyarakat Adat Suku Kamoro (LEMASKO) for

the Kamoro tribal group. Freeport has its own mechanism for operating its CSR programs

through a foundation called Lembaga Pengembangan Masyarakat Adat Amungme dan

Kamoro (LPMK), where it has a set of programs and a management plan.

2.3.1.5 Kalimantan Gold Corporation Ltd.

Kalimantan Gold Corporation Ltd. (locally known as PT Kalimantan Surya Kencana), a

mineral exploration company operating in Central Kalimantan, has been conducting a CSR

program operated by Yayasan Tambuhan Sinta (discussed in more detail in Section 4.2.2).69

The CSR program mainly focuses on improving the quality of life of Dayak villagers living

close to a mineral concession in the upper Kahayan River by minimizing the effects of

mercury in its operation.

68 A program to protect a million trees by supporting forest protection programs in Brazil and Indonesia. 69 This company created Yayasan Tambuhak Sinta (YTS) to spearhead its commitment to improving the local economy and

social welfare.



3. DEVELOPMENTS TO BE MONITORED This section describes new financial instruments that may be established and are potentially

applicable for ultimately financing LESTARI. Potential actors that may become involved or

new programs that could incentivize sustainable rural landscape management in Indonesia

through PES/REDD+ are discussed (Forest Trends' Ecosystem Marketplace 2015).

Public REDD+ finance: Several pledges exist from bilateral initiatives and multilateral

development banks to strongly increase their climate finance by 2020. Public REDD+

finance should have a sizeable share of the USD 100 billion goal for global climate finance

by 2020. ADB said it would more than double its spending to USD 6 billion in the same year.

The World Bank said it would increase its commitments to climate change by a third - which

at current funding levels would mean USD 16 billion a year, with the potential to leverage an

additional USD 13 billion from other funders.70 Unfortunately, at this point there is no clarity

on i) when these pledges will be realized as committed funds, and ii) through which bilateral

or multilateral mechanisms (GCF, GEF or others) these would be realized and how much

would be earmarked for sustainable landscapes and destined for sub-national activities.

Aviation negotiations: To meet its goal of keeping global net carbon emissions from the

aviation sector at 2020 emission levels post-2020 (and precluding the invention of no-carbon

jet fuel), the International Civil Aviation Organization (ICAO) will need to develop a market-

based mechanism to offset its emissions, until technological advances will allow the sector to

reduce its emissions below 2020 levels again. Offsets are likely to be a key component, and

the ICAO is considering including Certified Emission Reductions (CERs) from the Clean

Development Mechanism (CDM) and/or REDD+ offsets in what would be the first sectoral

ETS. The details may be ironed out in time for ICAO’s next triennial meeting in 2016. This

could become relevant as a revenue stream to sell verified GHG ERRs under a program like

the VCS.

Internal carbon pricing: Currently, 437 companies now calculate an internal price on

carbon, according to CDP – more than triple the number from the previous year. Another

583 said they plan to start putting a price on carbon within two years. Nearly a third of the

companies that internally priced carbon in 2013 were also engaged in carbon offsetting,

according to an Ecosystem Marketplace analysis of CDP data. Buyers such as Microsoft,

The Walt Disney Company, TD Bank, Aviva, and Barclays charge their business divisions

according to their emissions and use a portion of the revenue to purchase offsets. As more

companies put an internal price on carbon, more may turn to offsetting to neutralize

unavoidable emissions. This could also become relevant as a revenue stream to sell verified

GHG ERRs under a program like the VCS.

70 Please see http://www.bloomberg.com/news/articles/2015-11-30/climate-finance-programs-reap-41-billion-in-pledges-in-

paris



Ecosystem-based impact investment: In response to a survey by Nature Vest and Eko

Asset Management Partners, 51 private investors indicated that they intend to deploy

USD 5.6 billion in conservation impact investments before 2018 – almost triple the

USD 1.9 billion they spent between 2009 and 2013. About 3% of past investment

(USD 58 million) went to land-based funding mechanisms such as REDD+. This would mean

that in the years before 2018, up to USD 200 million could be available as finance for land-

based funding mechanisms. Investors said the limiting factor to growth is not available

capital but rather a shortage of deals with the appropriate risk/return profiles. Public-private

partnerships could help address this challenge. For example, the Althelia Climate Fund

found a way to reduce risks to its REDD+ investors by securing a USD 133.8 million loan

guarantee from the US Agency for International Development.71 At this point though, the

Althelia fund is closed and not sourcing new GHG ERR projects.

Ecosystem Green Bond: A concept where a sovereign-issued bond covers an ecosystem

on a larger scale, deemed worthy of protection, and uses the proceeds to finance any

conservation-related activities in this ecosystem. The protected ecosystems could be a

system of terrestrial national parks or marine parks. The sources of repayment would be the

cash-flow generated from activities by the ecosystem (e.g. user fees for access to parks). To

reduce risk and pricing and increase appeal, full or partial repayment would be guaranteed

by the sovereign or an international finance institution. The size of this bond would depend

on the relevant ecosystem. Coupon payments would be in line with the issuer’s credit rating.

The successful placement of such mainstream investment products in the market could be

crucial in lifting conservation finance to the next stage (Global Canopy Program, 2015). In

2014, USD 4.2 billion72 was already seen in agriculture/forestry green bonds, in 2015 it was

USD 2.3 billion73. A key issue for compatibility of LESTARI PES/REDD+ activities with green

bonds are investment grade economic activities that hold a solid expectation of Internal Rate

of Return (IRR) on which a bond could be issued.

Government Peatlands Restoration Agency (Badan Restorasi Gambut - BRG).

Responding to severe forest fire in 2015, the government set up an agency which reported

directly to the President through Presidential Regulation No.1 Year 2016, issued on 16

January 2016, with the main task of overcoming and preventing peatland fires. This agency

is commissioned to coordinate and facilitate peatland restoration in seven priority provinces,

namely: Riau, Jambi, South Sumatera, West Kalimantan, Central Kalimantan, South

Kalimantan and Papua. The BRG is obliged to plan and implement a peatland ecosystem

restoration program over five years (2016 – 2020) across an area of 2,000,000 ha, with an

annual target area of 30% in 2016, 20% in 2017, 20% in 2018, 20% in 2019, and 10% in

2020. The priority areas for the planning and implementation of this target will begin in

Pulang Pisau District in Central Kalimantan, Musi Banyuasin District and Ogan Komering Ilir

District in South Sumatera, and Meranti Islands District in Riau. In addition, Norway is also

planning to provide support to this agency. The development of the BRG is worth monitoring

as its work plan may have activities related to PES/REDD+ and is closely aligned with

LESTARI’s focus in Central Kalimantan.

71 Please see https://www.usaid.gov/news-information/press-releases/may-28-2014-us-government-althelia-climate-fund-

mobilize-1338-million-forest-conservation 72 Please see https://www.climatebonds.net/bonds-climate-change-2014 73 Please see http://www.climatebonds.net/files/files/CBI-HSBC%20report%2010Nov%20JG.pdf

https://www.usaid.gov/news-information/press-releases/may-28-2014-us-government-althelia-climate-fund-mobilize-1338-million-forest-conservation

https://www.usaid.gov/news-information/press-releases/may-28-2014-us-government-althelia-climate-fund-mobilize-1338-million-forest-conservation



4. INSTITUTIONS WITH A MANDATE TO IMPLEMENT PES AND REDD+ There are three government institutions in Indonesia that have a prominent role in climate

finance budgeting and coordination and also in leading the PES/REDD+ process in

Indonesia. These are the Ministry of Finance, the National Development Planning Agency

(BAPPENAS), and the Ministry of Environment and Forestry. However, PES/REDD+ related

activities require cross-sectoral coordination among several government institutions as well

as partnership with NGOs, local communities and the private sector.

4.1. Context and relationship between implementing

institutions

The following section describes the institutions with the mandate to implement PES/REDD+,

along with a description of their roles.

Ministry of Environment and Forestry (MoEF)

The MoEF is currently in charge of issuing licenses for ecosystem restoration and other

PES-type activities including water use, carbon capture & storage, and tourism. The MoEF

has increasingly contributed to the development of PES/REDD+ type activities following the

discontinuation and integration of the REDD+ Agency’s functions and roles into the MoEF.

Previously, the REDD+ Agency led the process of formulating REDD+ strategy, policy and

financial mechanisms.

Presidential Regulation No.16 of 2015 stipulated that the MoEF is the government institution

mandated to implement PES and REDD+. The MoEF Regulation No. 18 of 2015 on the

Organization and Working Structure of the MoEF further elaborates the organizational

structure and role of each division in the ministry. Under this regulation, the Directorate

General of Climate Change Control (Direktorat Jendral Pengendalian Perubahan Iklim –

Ditjen PPI) is mandated to implement REDD+, whereas three different directorate generals

are mandated with the implementation of PES, namely the: (i) Directorate General of Natural

Resource and Ecosystem Conservation (DG KSDAE), (ii) Directorate General of Sustainable

Management for Production Forest (DG PHPL), and the (iii) Directorate General of

Watershed and Protected Forest Management (DG PDAS-HL).

The establishment of Forest Management Units (KPHs) is expected to spearhead forest

management by the government. At the time of writing, only a few KPHs are fully operational

in the country as well as in LESTARI landscapes. Most of the KPHs in the LESTARI

landscapes are in the process of institutional establishment, but some do not yet have an

organizational design or have not held consultations on their management plans yet.



However, provincial governments both in Central Kalimantan and Papua are working

towards the establishment of KPHs.

Due to the enactment of Law No. 23 of 2014 on Local Governance that transfers most of the

authority over forests from the district to provincial level, including the authority on the design

of the organizational structure and appointment of personnel in the KPHs, the KPH

establishment process is partially suspended. This suspension is unlikely to cease until the

revised Government Regulation No. 41 of 2007 on the Organization of Local Government

Apparatus is enacted.74

Three types of KPH are currently structured under different directorate generals (DGs) at the

MoEF at the national level, and are operated by three different UPTs at the sub-national

level, the details of which are presented in the following table.

Table 14: Type and reporting line of FMUs/KPHs

Type of KPH Line of reporting

National level Sub-national level

Conservation FMU (KPHK)

DG Natural Resources Conservation and Ecosystem (DG KSDAE),

Natural Resources Conservation and Ecosystem Agency (Balai Konservasi Sumber Daya Alam - BKSDA)

Production FMU (KPHP)

DG Sustainable Forest Production (DG PHPL)

Monitoring Agency for the Utilization of Production Forest (Balai Pemantauan Pemanfaatan Hutan Produksi - BP2HP)

Protection FMU (KPHL)

DG Watershed Management and Protection Forest (DG PDAS-HL)

Watershed Management Agency (Badan Pengelola Daerah Aliran Sungai - BPDAS)


The FMUs/KPHs are established in three steps: area establishment, institutional

establishment, and formulation and consultation of the management plan, with each step

comprising of several other technical steps. KPH establishment is a cross-sectoral process

involving several government institutions at the national and sub-national levels.

Table 15 presents all KPHs in the LESTARI landscapes along with their operational status. A

KPH is considered legally operational if it has: (i) an area (administrative boundary) enacted

through ministerial regulation, (ii) staff appointed by government authority (central

government for KPHK and provincial or regency government for KPHL and KPHP), (iii) an

office locally present in the area, and (iv) a work plan.

If a KPH has already had an area enacted but has not yet had personnel appointed or if its

organizational structure has not been defined yet (type A or B), it is classified as a KPH in

the organizational design phase.

74 Please see http://www.slideshare.net/rugczar/rancangan-pengganti-pp-no-41-tahun-2007

http://www.slideshare.net/rugczar/rancangan-pengganti-pp-no-41-tahun-2007



Table 15: List of KPHs in LESTARI landscapes

Landscape Districts/

Conservation Area

FMU/KPH Operational

Status Remarks

ACEH

Leuser

Aceh Tenggara KPHL Region

VI Legally operational

Area: Aceh Tenggara, Aceh Selatan, Subulussalam Regencies Aceh Selatan

Aceh Barat Daya

- - -

Gayo Lues KPHL Region III

Legally operational

Area: Aceh Tengah, Gayo Lues Regencies

Leuser National Park*

National Park Agency

Legally operational

-

Singkil Wildlife Sanctuary*

KPHK Rawa Singkil

Legally operational

-

CENTRAL KALIMANTAN

Katingan – Kahayan

Katingan KPH Katingan

Organizational design

Need further confirmation on the type of KPH (L/P)

Pulang Pisau

KPHL Pulang Pisau

KPHP Pulang Pisau


KPHL will be established first, followed by KPHP

Gunung Mas KPHP Gunung Mas

Legally operational

KPH Model

Palangkaraya KPH Palangkaraya



Bukit Baka Bukit Raya National Park*


Legally operational -

Sebangau National Park*


Legally operational

-

PAPUA

Lorentz Lowlands

Mimika KPHL Mimika Legally

operational -

Asmat - - -

Lorentz National Park*


Legally operational

-



Landscape Districts/

Conservation Area

FMU/KPH Operational

Status Remarks

Mappi-Bouven Digoel

Mappi - - -

Bouven Digoel KPH Bouven Digoel



Sarmi Sarmi

KPHP Lintas Sarmi & Memberamo Raya

KPH Sarmi

Legally operational


KPHP Model


Cyclops

Jayapura Regency

KPH Jayapura Regency



Jayapura City KPH Jayapura City



Cyclops Nature Reserve*

KPHK Cyclops75


Will serve as KPHK model

* Conservation area


Unlike KPHs in other provinces, the KPHs in Aceh are unique and can serve as a model for

KPH establishment as they follow watershed boundaries. This means that the KPH

boundaries are tangent to each other, which is beneficial for developing an REL approach

because wall-to-wall mapping and prediction of land use change can be applied.76

Therefore, options for developing the sub-national REL baseline calculation for the JNR

approach are less challenging for Aceh province.

Ministry of Finance (MoF)

The MoF is responsible for ensuring that climate change requirements are reflected in

budget priorities, pricing policies, and financial market rules (Center for Climate Change and

Multilateral Policy (PKPPIM) 2016). It has two divisions that have tasks related to climate

finance: the Division of Debt Management that has a finance tracking role, and a Fiscal

Policy Office (Badan Kebijakan Fiskal – BKF) that sets the fiscal policy. Through the

PKPPIM, the BKF has been actively conducting studies on benefit sharing mechanisms for

PES,77 and is currently setting up a new funding mechanism in the form of an “umbrella

75 The FMU/KPH organizational structure has been designed by BPKSDA Papua. 76 VCS REDD methodology using JNR approach, applied to “wall to wall” boundary. 77 Please see http://www.fiskal.kemenkeu.go.id/2010/adoku/2014%5Ckajian%5Cpkppim%5CGPB%20Strategy.pdf

http://www.fiskal.kemenkeu.go.id/2010/adoku/2014%5Ckajian%5Cpkppim%5CGPB%20Strategy.pdf



mechanism” under a proposed General Service Agency for Climate Change (Badan

Layanan Umum – BLU Perubahan Iklim).

Development Planning Agency (BAPPENAS & BAPPEDA)

BAPPENAS is the coordinating ministry for the implementation of bilateral and multilateral

aid projects, which include REDD+, related projects. It also acts as the secretariat for the

RAN-GRK as stipulated in Presidential Decree No. 61 of 2011. BAPPENAS has been

involved in the design of various REDD+ strategies in the country. At the implementation

level, it acts as the administrator of the ICCTF.

Central Bank of Indonesia (Bank Indonesia - BI)

Despite not directly implementing PES/REDD+ activities, the Central Bank of Indonesia

plays a role in regulating green banking, which can be used to finance PES/REDD+ related

activities. The BI and the MoEF have signed a memorandum of understanding to cooperate

on establishing ground rules for environmentally friendly banking practices (The Jakarta Post

2015). The BI has also issued a regulation, namely Central bank of Indonesia Regulation No

14 of 2015 on commercial bank asset quality assessment, particularly with regard to

environmental aspects.78 In line with the Bank Indonesia directive, several Indonesian banks

have now initiated green banking practices, such as the state-owned Bank Mandiri that has

cooperated with Agence Française de Développement (AFD) to actively finance some

renewable energy and energy efficiency projects (The Jakarta Post 2015).

In addition to government institutions, the implementation of PES/REDD+ related activities

will not succeed without participation from other actors either at the international, national or

local level. The following are three groups of actors that play an integral role in PES/REDD+

activities:

(i) International organizations

(ii) Non-governmental actors: private sector and NGOs

(iii) Local community

Figure 21 and Figure 22 illustrate the relationship between institutions in the implementation

of REDD+ and PES related activities.

78 This regulation encourages Indonesia’s banking industry to put more emphasis on the preservation of the environment by

lending more to environmentally friendly customers and to limit lending to non-environmentally friendly ones.


Figure 21: Institutions with a mandate to implement REDD+ at the LESTARI landscape



Figure 22: Institutions with a mandate to implement PES in Indonesia




4.2. Readiness of actors at the landscape level HPI identified actors and potential partners to implement PES/REDD+ at the landscape level

through desk research and expert input. Among organizations visited in Aceh, Central

Kalimantan, and Papua, only a few have the capacity to implement PES/REDD+ related

activities.

The assessment is carried out through a desk review, and interviews using questionnaires

as presented in Annex 4. The capacity assessment focuses mostly on knowledge and

practical experience in implementation activities similar to PES/REDD+.

This section only presents organizations that have been involved in:

handling distribution of incentives related to PES/REDD+ or similar sustainable

landscape activities,

monitoring activities related to compensation of performance-based payment, or

that are:

considered as potential partners for the implementation of PES/REDD+ related

activities.

The list of all organizations consulted during the site visit is presented in Annex 5.

4.2.1. Readiness of actors in Aceh

Forum Aih Jamur Delem (FAJEM)

FAJEM is a local NGO managing water conservation activities in Aih Jamur Delem, Gayo

Lues Regency. It was involved in IFACS activities and is also a partner organization for

LESTARI. The FAJEM staff have sufficient knowledge in water conservation. Further

capacity building is required for aspects of organizational and financial administration

management.

FKPSM

FKPSM is a local NGO that is currently involved in the management of Trumon Singkil

Biodiversity corridor, Trumon Committee Response Unit (CRU) Trumon. It has sufficient

human resource capacity in proposal development and financial reporting. Further capacity

building on specific issues related to fund raising programs and data administration are

required for further PES/REDD+ activities. Diversification on the scope of activities is also

necessary.

Leuser National Park Agency

Leuser National Park Agency already has a management plan and has potential for

ecotourism and hydro power development. The Agency has a Village Conservation Model

(Model Desa Konservasi – MDK), with 13 villages inside and surrounding the national park



participating in the initiative.79 The MDK consists of three key activities: community

empowerment, village economic development based conservation, and spatial planning

based conservation. The Leuser Ecosystem also has the backing of the Leonardo DiCaprio

Foundation, which provides support to Forest, Nature and Environment of Aceh (HAKA) - a

local NGO that focuses on protection, conservation and restoration - to establish “a mega-

fauna sanctuary” in the Leuser Ecosystem.

4.2.2. Readiness of actors in Central Kalimantan

Faculty of Agriculture and Forestry of the Palangkaraya Muhammadiyah University

The Faculty of Agriculture and Forestry of the Muhammadiyah University successfully

manages an educational forest (hutan pendidikan) in Mungku Baru village, a sub-district of

Rakumpit, by supporting local community activities. It works closely with forest dependent

communities living in forest surroundings by developing alternative livelihood programs. The

university, through its program, incentivizes local communities to not cut trees in the forest

by providing them with alternative means of livelihood such as through yam and candlenut

farming. It has also developed a medicinal plants farm and is currently in the process of

linking the local community with Sidomuncul, a company producing herbal medicine, to

leverage the farm’s production and ultimately improve economic conditions for the local

community.

The unit in the university that manages this educational forest consists of experts in various

fields including forestry, livelihood and culture, which enables the unit to develop programs

that really meet the needs of the local community. The unit is experienced in developing

proposals and managing funds from various international organizations, NGOs and the

private sector. It also has strong links and cooperates with various institutions locally in

Central Kalimantan, nationally across Indonesia, and also works with international partners.

Yayasan Tambuhak Sinta (YTS)

Despite never having been involved in specific PES/REDD+ related activities, Yayasan

Tambuhak Sinta (YTS), a local NGO, has the potential to implement PES/REDD+ activities

in Katingan/Kahayan landscape, and is very keen on working with such activities. The YTS

manages funds from various sources: international organizations (UNIDO, UNEP),

international and national NGOs, government institutions, CSR funds from private

companies, has its own fund raising effort, and is currently working in the areas of

environment, livelihood, health and education targeting the local community. The strength of

YTS is in its participatory approach with local communities, which results from its long

involvement in the CSR programs of a mineral concession in the upper Kahayan River. Its

staff are also well trained in proposal development and report writing in Bahasa and English.

Further information on this foundation can be found at http://www.tambuhaksinta.com/.

79 Please see http://gunungleuser.or.id/konservasi-kawasan/mdk/

http://www.tambuhaksinta.com/



Pokker SHK

Pokker SHK is a local NGO and has been involved in the development of one out of five

project concept notes submitted to the ICCTF. It continues to provide support to the four

village forests (hutan desa) that are currently pursuing environmental services certification

through the Plan Vivo scheme, allowing the project to generate revenue from GHG ER

sales. Unfortunately, the Plan Vivo standard has very low market penetration in voluntary

carbon markets.

Sebangau National Park Agency

Sebangau National Park Agency is one of the key stakeholders in the LESTARI Katingan-

Kahayan lowland landscape in Central Kalimantan, particularly with regards to issues related

to forest fire management. The National Park Agency already has a management plan with

a strong emphasis on community involvement in forest management. In addition, it has also

developed a master plan on ecotourism and is looking for investment.

Bukit Baka Bukit Raya National Park Agency

As with the Sebangau National Park Agency, the Bukit Baka Bukit Raya National Park

Agency already has a management plan for its area. The area of national park that is

included in the LESTARI landscape has potential for ecotourism and hydro power

development. The main challenge faced by the national park is illegal gold mining, and

various steps have been taken to deal with this. The Park Agency, however, does not have

adequate funding or human resources for implementing all of the activities in their

management plan.

4.2.3. Readiness of actors in Papua

BBKSDA Papua

As a government institution supervising the management of all conservation areas including

the Cyclops Nature Reserve and Lorentz National Park, the BBKSDA is an important player

in the landscape. It is very keen on working with LESTARI in any conservation activities

given that the BBKSDA realizes that it does not have enough financial capacity to finance

conservation activities in its administrative area. In addition, it does not have enough staff to

manage its very large conservation area. The BBKSDA is also aware that its human

resources are still lacking necessary skills and capacity (management, financial reporting,

technical) for implementing activities related to PES and REDD+ in its jurisdiction.

Considering its lack of staff, the BBKSDA Papua has recruited local communities to be forest

police and tries to empower and involve local communities in forestry activities.

Hirosi

Located in Sentani, Jayapura Regency, Hirosi is a local NGO that has been actively seeking

opportunities for PES activities that can be developed in its area. It currently manages a

recreational area equipped with various facilities including two swimming pools and a green

school. The water for the swimming pools is sourced from a natural waterfall in the Cyclops

nature reserve. Despite not specifically being involved in the distribution of incentives in a

performance-based payment mechanism, Hiroshi is only one of a very few organizations in



Papua with the capacity to implement PES/REDD+ related activities in the Cyclops

landscape. It has managed small to medium sized funds and has adequate human resource

capacity. To be able to implement PES/REDD+ activities properly, a capacity building

program is required, particularly on organizational and financial management.

Qualala – PT. Alam Indah Jayapura

Qualala, a private company working in the water bottle industry, is a potential partner for the

implementation of PES/REDD+ activities in the Cyclops landscape given that the water used

in the industry comes from the Cyclops nature reserve. Compared with PDAM, a local

government-owned drinking water company that consistently shows a negative profit,

Qualala has better financial capacity as well as more skilled human resources. Given that

this company is not a member of the collaborative management for Cyclops, further

engagement is required to get them onboard with the idea of developing PES in the area.

Perusahaan Daerah Air Minum (PDAM)

PDAM has managed drinking water services sourced from Cyclops Nature Reserve for

Jayapura City and Sentani. Despite having various social community development activities,

the PDAM has not yet implemented PES concept in its community development activities.

The PDAM is one of the signatories of the LESTARI co-management initiative and is

considered to be one of the key players in any PES scheme on water that has the potential

to be developed in the landscape. It has financial capacity to be part of PES initiative;

however, for this initiative to happen, further engagement and human resource development

trainings on PES need to be further undertaken.

Yayasan Peduli AIDS (Yapeda)

Yayasan Peduli AIDS (Yapeda) is a local NGO and was involved in various local community

development programs during IFACS. Its staff is predominantly young and well educated,

and as such, it can be considered as a standout example in the Mimika region. Compared

with other organizations, Yapeda has better overall management skills, including for financial

reporting and proposal development.



5. GOVERNMENT

REGULATIONS ON PES

AND REDD+ The GoI has issued several regulations and policies that form the basis of the legal

framework for PES and REDD+ implementation in the country. The GoI is still formulating

appropriate policies to strengthen PES development and implementation, especially in

relation to REDD+. This chapter discusses PES and REDD+ related regulations at the

national, provincial and local levels, covering regulations that have already been approved

and those that are currently under development.

Currently, no overarching regulation for the PES mechanism has been approved at the

national level, although the GoI has made continuous efforts to formulate one. Some of the

earlier work included the development of ecosystem restoration concessions, water use and

catchment area protection, nature-based tourism and forest carbon.

There was an attempt to quantify the percentage of benefit transfer distribution from forest-

carbon activities through the former Ministry of Forestry (MoFor - now the MoEF) Regulation

No. 36 of 2009, but it was deemed invalid as only the MoF has the authority to regulate

financial distribution mechanisms (CIFOR 2015). Since 2010, the MoF has conducted

consultations and discussions with stakeholders at the local level to gather inputs that will be

used as the basis for the revision of MoFor Regulation No. 36 of 2009, particularly regarding

aspects related to benefit-sharing mechanisms.

The list of all PES and REDD+ related regulations are summarized in Annex 5. However,

this section will further elaborate two of the most important regulations for shaping the future

of PES and REDD+ mechanisms in Indonesia.

a) Draft Regulation on Environmental Economics Instruments The GoI has already drafted a government regulation on environmental economic

instruments with a proposed PES concept, as illustrated in Figure 23, and a PES

mechanism as illustrated in Figure 24. This draft regulation is derived from Law No. 32 of

2009 on Environmental Protection and Management.



Figure 23: PES concept based on draft government regulation


Figure 24: PES mechanism based on draft government regulation


To preserve environmental functions, the central and local governments should develop and

implement environmental economic instruments that include: (i) planning on development

and economic activities, (ii) environment funding, and (iii) incentives and/or disincentives.

The instruments for the planning of development and economic activities can take the form

of a compensation and payoff mechanism between local governments, among others. The

instruments for environmental funding include a guarantee fund for environmental recovery,

a fund for handling environmental contamination and/or degradation and environmental

recovery, and a trust fund (dana amanah) for conservation. The development of a PES

mechanism is part of the incentive and disincentive instrument.



b) Law No. 23 of 2014 on Regional Governance (Article 14) The authority to manage natural protected areas lies with the MoEF, with some authority

given to provincial and local governments. Law No. 23 of 2014 was enacted to redefine the

relationship between authorities (the central, provincial and local governments), as

previously stipulated under Law No. 32 of 2014 on Regional Governance and lastly

amended by Law No. 12 of 2008.

Under the new law, district and city governments only have the authority to manage large

forest parks. One of the consequences of this law is that all KPHPs and KPHLs will no

longer be managed by regency/district/city governments, as the authority will be transferred

to the provincial government.80 As a result, regency/district/city level government will no

longer provide financial contributions to these types of KPH. The KPHs will receive funding

from the APBN, APBD Propinsi, and other sources of funding.

There is an indication that the government unit of forestry at the district/regency level (SKPD

Dinas Kehutanan Kabupaten/Kota) will no longer be operational. However, the full

implementation of Law No. 32 of 2014 is subject to the enactment of the revision of

Government Regulation No. 41 of 2007 on the Organization of Local Government

Apparatus.

Table 16 shows the different levels of authority of government institutions in relation to the

management of natural protected areas under Law No. 23 of 2014.

Table 16: Division of authority - natural protected area

Institutions Level Remarks on authority

Policy and norms

MoEF National to local

Develop a macro plan.

Gazette all forest statuses and develop standards for conservation of forests and their ecosystems.

Provincial government

Province Develop a macro plan (cross-districts) - (no longer applicable).

District/city government

Local Develop a macro plan (for the respective district) - (no longer applicable).

Administration (implementation)


Develop standards and criteria for natural protected area management.

Manage national park and KPHK.

80 There was an indication that the District Government Unit of Forestry (Dinas Kehutanan Kota/Kabupaten) will no longer

be operational, therefore regional government responsibilities for forestry rests at the province level (Province Government

Office of Forestry / Dinas Kehutanan Provinsi).



Institutions Level Remarks on authority


Province Manage cross-district protection forests and other relevant natural protected areas.

Manage KPHP and KPHL.

Manage permits covering cross-district protection forests.


Local Manage district/city protection forests and other relevant natural protected areas - (now limited to managing grand forest parks).

Manage permits in the respective districts/cities - (no longer applicable).

Control / monitoring


Supervise activities in protection forests.


Province Supervise activitiesin protection forests - (no

longer applicable).


Local Supervise activitiesin protection forests - (no

longer applicable).

Source: (CIFOR 2015) available at: http://www.cifor.org/publications/pdf_files/OccPapers/OP-132.pdf



6. CONCLUSIONS This chapter synthesizes the main outcomes of the information collection and analysis

process of the previous chapters. The focus lies on general opportunities and challenges

relevant to LESTARI’s future planning. Valuable key messages regarding contextual

awareness are also presented. Based on these conclusions, final concrete

recommendations are developed on how to harness opportunities and overcome challenges

in Chapter 7.

6.1. Focal point of coordination for funding opportunities

A focal point of coordination is vital for properly managing distribution of funds from various

sources of funding, co-financing, and partnership opportunities to finance PES and REDD+

activities in the landscape. LESTARI could facilitate the flow of funds from donors or fund

managers to organizations in the landscape through a focal point of coordination. The need

to coordinate and improve the capacity of LESTARI staff and stakeholders on fund

management, including grants and fund applications, was already highlighted in the

LESTARI Quarterly Report – First Quarter of Year 1 (October – December 2015).

This can be done by the strengthening capacity of LESTARI’s staff that deal with funding

both at the national and landscape level. Among various possible activities that could be

carried out by the focal point of coordination is the development of a LESTARI co-financing

architecture which is both a comprehensive business plan and incentive structure for

REDD+/PES activities as much as an instrument to attract public and private as well as

domestic and international finance. The financial architecture will have to describe how the

provision of incentives and funds are re-financed, disbursed, replenished; how cash flow is

managed; and how fiduciary and guarantee procedures are set up. In other words, it should

explain and justify all elements of the proposed financial management scheme, and depict

and detail all financial mechanisms, flow of funds and financial provisions.

6.2. Financing opportunities and mechanisms for

LESTARI

There are a number of funds in Indonesia’s climate finance arena (both international and

domestic) that can be used to finance PES/REDD+ activities in the LESTARI landscapes.

However, the utilization of these funds has not reached their maximum potential due to

capacity issues of the institutions managing them and/or the political dynamics within the

institutions.

The size of domestic funding directed towards sustainable forest management in Indonesia

exceeds international funding by far (Angela and Glenday 2016). As illustrated in Figure 5 in

Chapter 2, domestic funds were mainly channeled through budget transfer instruments and

the bulk of them supported “indirect” activities, with most support going to the forestry sector.

Domestic funding sources are relatively straightforward and can be accessed by local

community groups in a more cost effective way, with less stringent requirements on proposal



development and report writing. The majority of domestic funds are already disbursed and

implemented on the ground. These funds, however, face common and persistent challenges

in management, oversight, and optimized use for the benefit of local communities.

The Village Fund is one of the few funds that is directly managed at the village level, as

opposed to other types of government funds that are usually administered at the national or

district levels. If managed properly through a participatory approach, the Village Fund would

have a better chance of contributing to local community development with stronger local

ownership. In addition, district/city governments facilitating the flow of funding from central

government to the villages are still in need of various types of assistance. Embedded in a

larger framework of sustainable landscape management, the fund could overcome some

barriers of scale and institutional coordination. The Village Fund could be a prime source for

performance-based PES funding in the landscapes. For this, building on local experiences

such as the Timber Harvesting Postponement Credit (Kredit Tunda Tebang - KTT) (see

section 2.1.7) and international best practices of PES will be important. This discussion is

continued as a final recommendation in section 7.1

The Government Disaster Relief Agency (BNPB) considers forest fires to be a national

disaster and aims at shifting more resources, including the National Disaster Relief Fund,

towards prevention activities. This is aligned with the LESTARI focus on community-based

forest fire management in the Katingan-Kahayan Landscape in Central Kalimantan. The

Watershed Fund offers various programs targeting local communities living around

prioritized watersheds, such as the Nursery Program (Kebun Bibit Rakyat – KBR) and BLM-

PPMPBK. Synergies and LEDS programmatic alignment of the National Park Fund

supporting activities for communities in the national parks inside LESTARI landscapes

should be sought where possible. In addition, activities supported by PNPM Mandiri

Kehutanan can also be aligned and leveraged by LESTARI.

For international funding, the Norway – GoI partnership is the largest pledged fund for forest

conservation for Indonesia. Although there have been operational challenges, the likelihood

of this fund being transferred and spent is ultimately large. LESTARI should closely monitor

ongoing developments in the MoF and MoEF and explore ways to be ready once payments

towards sub-national activities are on the agenda. The GCF, the largest international climate

fund, is a prospective new funding opportunity worth pursuing by LESTARI. Unlike many

other international funds, the GCF supports activities managed by sub-national

governments, NGOs and the private sector that should increase the likelihood of success.

Directing capacity building workshops towards relevant actors at the MoEF and MoF, as well

as local governments, could further achieve this goal. In addition, having solid M&E and

MRV frameworks in operation will position LESTARI well. This discussion is continued as a

final recommendation in section 7.3.

LESTARI can develop joint initiatives and organize joint activities with private companies

operating in the landscapes through their CSR programs to create synergy. Despite their

vision to become a “carbon balanced” company and efforts to reduce GHG emissions in

their supply chain, consumer goods companies seem to show little interest in being involved

with sustainable palm oil growers beyond simple RSPO sourcing. The companies view their

position in the supply chain as being too distant from local agriculture. A more direct and

common way that consumer goods companies invest in local sustainable landscapes and



climate change mitigation initiatives is through the purchase of VERs via the voluntary

carbon market.

6.3. Maintaining the potential for renewable energy

development

Rural electrification with renewable energy in LESTARI landscapes at lower costs and with

independence from fossil fuel expenses is one of the catalysts for sustainable development.

Use of renewable energy sources such as hydropower and biomass are an alternative to

fossil fuel use for decentralized electrification of villages. Where watersheds offer potential

for micro-hydro installations, these should be given preference. Renewable energy initiatives

increase resource efficiency in the rural green economy, relieve households of expenditures

related to purchasing fuel, enable alternative income streams from non-forest dependent

local businesses through energy cost reductions, and reduce GHG emissions (FAS et all.

2013). In addition, a simple calculation suggests that investment in a 10-15 kW micro-hydro

or micro-biomass-gasifier system is lower than the investment required for generators and

their fuel costs for five years.81

Hydropower plants and biomass gasifier power plants require fuel from renewable sources

that can be obtained from sustainable forest management or solid waste management

practices. In turn, revenue earned from hydropower and biomass operations can be used to

finance sustainable forest management or waste management activities. Forest

conservation for maintaining the potential of renewable energy is therefore aligned with

LESTARI SEA-LEDS.

Biomass and micro-hydropower in the landscapes present not only a high number of co-

benefits and enabling value, but also have large up-scaling potential and connection with

other USAID objectives such as sustainable rural development, economic growth and

promotion of renewable energies.

Financing schemes from public and private sources as well as from commercial banks either

from international or domestic sources can be used to finance the initial investment of

renewable energy power generation. Developing the skills of local communities is essential

for maintaining effective power plant operations. At the same time, establishing a network of

technical experts would also reduce risks associated with the investment and help to raise

the awareness of the wider community, government and the private sector.

A series of watershed and forest conservation activities can create an enabling environment

for renewable energy development within the LESTARI landscapes. LESTARI can

collaborate with USAID Indonesian Clean Energy Development (ICED) to move forward with

the development of renewable energy, including setting up a pilot project within the

LESTARI landscapes. Southeast Aceh and Gayo Lues are the ideal places for a hydropower

81 Generally, micro-hydro can be installed at the cost of USD 2000 – 3000/kW capacity. The investment cost often depends on the quality of product and services installed on a particular site. For instance, simple operation of micro-hydro power may cost only USD 1000 – 1500/kW, but its reliability will be questionable (engine operations may not last more than two years).



pilot project due to the importance of watersheds in these areas. Renewable energy

development is also aligned with Gayo Lues’ vision to become diesel free by 2017, a

program of the District Government Office of Mining and Energy (Dinas Pertambangan dan

Energi Kabupaten).

HPI has a strong track record on renewable energy consultancy in Indonesia and is ready to

design an approach for watershed conservation, conduct an initial survey, undertake risk

assessments, and develop capacity of local communities in support of watershed and forest

conservation.

Biomass is another potential renewable energy where biomass gasifier power plants can be

fed from sustainable forest management practices or solid waste materials from palm oil

mills or plantation operations. However, development of a biomass gasifier power plant from

scratch, including the establishment of sources of biomass, requires a lot of work, making it

impractical for LESTARI in most landscapes. A biomass gasifier power plant is best

developed in a location where biomass waste is already available. Thus, cooperation with

palm oil plantations producing biomass waste is a possible scenario to explore further.

6.4. Challenges of regulatory frameworks and

institutional readiness

Both the regulatory framework and institutional capacity to implement PES/REDD+

mandates in LESTARI landscapes are not yet at an operational stage in most cases.

Incomplete regulations on PES/REDD+ in Indonesia across all administrative levels and the

lack of practical examples of successfully implemented PES schemes in Indonesia inhibits

the implementation of such mandates. Continued relationship building, capacity building and

co-creation of opportunities will have to continue in order to identify institutional

arrangements with concrete pathways for co-finance acquisition and distribution.

The majority of potential actors (government and non-government) in the landscapes do not

have sufficient capacity to implement PES/REDD+ related activities. If a specific

PES/REDD+ initiative is envisioned to be developed in the landscapes and all implementing

partners are clearly identified, a more detailed capacity assessment and long-term capacity

building plan would need to be further developed. The capacity building programs should

include developing understanding on the PES/REDD+ concept and its benefits to the local

community, and should also emphasize management aspects (organizational and financial)

of PES/REDD+ for actors managing distribution of incentives.

While institutional reform and regulatory changes in Indonesia have had success in some

sectors since 2009, there has been limited progress towards delivery of integrated climate

change mitigation, climate finance and results based payment schemes, including PES and

REDD+. These types of activities have not meet all expectations as there are still obstacles

for stakeholders interested in sustainable landscape management. The complexity of

Indonesian governance is highlighted in CPI’s report, which stated that Indonesia has

persisting weaknesses in its enabling environment that impede efficient land use

investments (Angela and Glenday 2016). Such issues include both technical and non-

technical aspects including lack of financial management as well as limited capacity of

institutions and human resources. Efforts in recent years to explore new and more efficient



ways of cooperation and increasing aid effectiveness such as the Indonesia-Norway results-

based agreement have encountered hurdles and have yet to deliver at the envisaged scale

or pace.

Following the dissolution of the REDD+ Agency and incorporation of its role into the MoEF,

the GoI has been working on institutional arrangements and mechanisms for managing the

Norway funds and the eventual takeover of the interim administration from the REDD+ Unit

under the UNDP Environment Division. However, debate on which institution should play

this role in the future is currently still underway. Current developments indicate that the MoF

will most likely takeover the management of the Norway funds and other climate related

funds (including the ICTTF and previous funding instrument - FREDDI) with its plan to

establish a new BLU - Perubahan Iklim. This plan, however, has a high level of uncertainty

regarding its timeline and institutional arrangements, considering the architecture and

overlapping roles and functions of several government institutions (MoEF, MoF, and

BAPPENAS) in climate finance. If the plan to establish a new BLU under the MoF is not

realized, it is likely that the BLU of BP2HP under the MoEF will be the most important

government institution managing climate funds in Indonesia. The government is currently

drafting a regulation on the Reforestation Fund (Dana Reboisasi) that is currently managed

by the BLU-BP2HP, with the strong possibility of expanding the use of the fund for PES. The

need to engage with the BLU for future financing opportunities is further discussed as a

recommendation in Section 7.3.

6.5. Challenges of PES/REDD+ design and

implementation

The design and communication of any PES initiative should take into account previous PES

type schemes in Indonesia and the key lessons that are applicable to the sites of interest.

Success stories from Lombok and West Java emphasize the role of multi-stakeholder

governance and participatory planning, while other experiences highlight the importance of a

clear communication plan. The expectation of local stakeholders and communities of

receiving large and timely allocations of funds from PES schemes will have to be

strategically managed from the beginning. It is essential to define a very clear

communication strategy on PES and align all involved staff and facilitators.

A clearly defined and iteratively revised communication strategy on PES timing and

expectations for local facilitators can help to maintain interest and commitment while

avoiding misunderstandings, disappointment and frustration throughout the process. When

referring to potential direct payments to public budgets, households or stakeholders, it will be

essential to explain: (i) the conditionality of payments, (i) timelines and (iii) gateways to their

effective introduction. It will be important to be clear about the fact that the payments, their

amounts, their disbursement schedules and other elements are still to be defined. Many of

these aspects are very hard to define at an early stage, but questions about these issues

can come up very early in stakeholder consultations. It’s therefore advisable to take a

cautious approach in order to avoid creating frustrating expectations and endangering the

Free Prior Informed Consent (FPIC) process in landscapes.

Financial incentives for sustainable forest management can also come in the form of low

interest loans brokered by domestic public and private financial actors. The support of banks



with a national or provincial branch network can greatly advance the distribution of PES

payments or low-interest loans. A relevant example is the KUR (section 2.1.4 & Annex 3).

Internationally, the Amazon Sustainable Foundation developed a partnership with a national

bank to outfit signatories to its PES/REDD+ scheme with a free bank account where PES

money accumulated monthly until farmers came to town – as long as they were found in

compliance with the system’s rules (FAS et all. 2013). Such schemes around bank

accounts and micro-credit schemes should be integrated into consideration of co-finance

distribution and local PES implementation mandates.

The importance of the voluntary forest carbon market should not be overestimated as a

source for the majority of performance-based payments. Still, being ready to report soundly

monitored GHG emission reductions can be relevant for accessing finance via international

carbon markets and donors and investors. Both Norway funds and the GCF are

considering performance-based payments for sub-national PES/REDD+ activities. The

creation of a credible asset of GHG ERRs achieved and monitored against a solid baseline

is a multi-purpose effort related to both internal M&E and external MRV frameworks.

The requirement of performance monitoring will continue to be a core aspect both on the co-

finance acquisition and PES activity finance front. Results-based finance such as from the

Norway-GoI partnership or carbon market demand fulfillment of their respective M&E or

MRV frameworks. Likewise, local PES schemes will only create tangible results when

payments for ecosystem services are linked to the monitored performance of local actors to

incentivize behavioral changes. Therefore, the integration of existing LESTARI M&E

frameworks with GHG MRV and local ecosystem service providers demands attention.



7. RECOMMENDATIONS Based on the criteria provided by LESTARI and the conclusions of the analysis, HPI regards

the following recommendations as realistic and achievable initiatives to be pursued in the

next four years. The proposed recommendations will contribute to achieving four indicators

in the AMEP:

Indicator 4: number of public policies addressing climate change and/or biodiversity

conservation introduced, changed or adopted consistent with citizen input

Indicator 12: number of people receiving United States Government (USG)

supported training in natural resources management and/or biodiversity conservation

Indicator 13: amount of investment mobilized (in USD) for climate change as

supported by USG assistance

Indicator 14: number of people receiving livelihood co-benefits (monetary or non-

monetary)

An indicative work plan with an overview of the temporal integration of initiatives is available

in Annex 7.

7.1. Incorporating PES in the utilization of domestic

funds

LESTARI should work with and advise the district government and village administrator to

allocate a certain percentage of the Village Fund for environmental purposes and to

incorporate PES based on the priorities and specific needs of a village. This can be done by

gaining experience around the implementation of the Village Fund and obtaining stakeholder

feedback on their wishes and interests.

A village or district level PES will most likely come with a village regulation (peraturan desa)

or a district level regulation (peraturan daerah) as part of the process. This will help achieve

indicator 4 of LESTARI, and also help address one of the LCP’s recommendations for

Southeast Aceh – “the need to establish an umbrella law at the district level and a more

detailed law at village level that sets out the provisions on the management of the natural

resources in Southeast Aceh District.” A pilot project in Southeast Aceh should be given first

priority due to the already existing advocacy efforts at the district and village levels (see

Section 7.5.1). Replication of this initiative in other districts in the landscape will magnify the

impacts.

In addition to the Village Fund, LESTARI should consider partnerships with BPDAS for

incorporating PES into programs funded by the Watershed Fund, and should also seek

close cooperation with the BNPB in utilizing the Disaster Relief Fund for forest fire

prevention management in Central Kalimantan (see Section 7.4.3). The Cyclops landscape

in Papua could be another focus area.

HPI is ready to support LESTARI’s efforts at all levels, from village to national, in the

necessary development of concepts, presentations, stakeholder consultations, workshops,



and concept notes in order to direct a portion of the Village Fund towards LESTARI’s PES

schemes (see section 7.5).

7.2. Supporting the establishment of Climate Change

BLU under the MoF

Despite the dynamic arrangement of the management of climate finance within the

government, there is an opportunity for LESTARI to tap into government funding in its

current form or under the proposed new arrangement. LESTARI should support advocacy

efforts in climate finance at the national level and also provide technical assistance and

capacity building on how results-based payments can be introduced. If the plan to establish

a new Climate Change BLU (BLU Perubahan Iklim) under the MoF is realized, LESTARI

should organize a workshop to present its project and initiatives in need of support or co-

financing. LESTARI should support capacity building programs for the BLU aimed at

improving the BLU’s capacity in managing funds, particularly with regards to project

management skills (both financial and technical aspects). This should be done in such a way

to promote LESTARI landscapes to the BLU. If the plan to establish a new BLU under the

MoF does not materialize, LESTARI should approach the BLU of BP2HP under the MoEF,

who will be the most important institution managing climate finance in Indonesia.

To facilitate this, LESTARI needs to cooperate with USAID Build Indonesia to Take Care of

Nature for Sustainability (Bangun Indonesia dengan Jaga Alam untuk Keberlanjutan -

BIJAK), which focuses more on advocacy efforts at the national level. HPI is ready to

support LESTARI’s capacity building and advocacy efforts through its relevant networks, and

through the organization of events, workshops, presentations and publications. As a result of

its strong relations with both the MoF and MoEF, gained from extensive work in the technical

and policy aspects of climate finance, HPI can provide continuous advisory services on the

optimal positioning of LESTARI in the dynamic climate finance landscape of Indonesia at the

national level.

7.3. Accessing the GCF and Norway funds

PES schemes, forest fire management in Central Kalimantan (section 7.5), and conserving

forests for creating an enabling environment for village electrification using renewable

energy (section 6.3), are all eligible activities for climate change mitigation under the GCF

and Norway funds. These two international funding opportunities are by far the most

promising and worth pursuing. HPI recommends launching a concerted effort to access GCF

and/or Norway funding for LESTARI landscapes with clear deliverables of progress within 12

months.

The GCF is an exciting new funding opportunity as it is the largest international climate fund

with USD 10 billion of initial capitalization and has just started project selection for financing

(see section 2.2.5). The fund has identified five investment priorities that will deliver major

mitigation and adaptation benefits, one of them related to forestry, which aims at scaling-up

finance for forests and climate change. In addition, the GCF might also start making result-

based payments for sub-national REDD+ soon to support mitigation and adaptation actions.



The key issue in accessing the GCF is the need to apply through Accredited Entities (AEs),

whereby an AE can only access the fund for certain types of fiduciary functions, sizes of

project/activity within a program, and under certain environmental and social risk categories.

Becoming a GCF AE is a long and intricate process, which is not practical for temporary

programs such as LESTARI. Recent intelligence suggests that partnering with already

established AEs promises to be a more cost-effective approach than trying to become a

newly accredited entity. LESTARI can partner with regional and international entities that

can access and implement projects globally, such as Conservation International (CI),

Deutsche Bank AG, UNEP, UNDP, ADB, and the World Bank. The progress of PT. SMI and

KEHATI Foundation in becoming Indonesia’s GCF AEs is also worth monitoring.

For the GCF, this fund access push should result in a clear gateway decision after

approximately three months and scoring of LESTARI landscape activities for funding

probability under the GCF. HPI estimate that in a good scenario a concept note could pass

several stakeholder rounds and receive a non-objection from the NDA and could be

submitted to the GCF between 10-14 months after initiation of the effort. Due to limited

experience with funding approvals under the GCF it is difficult to say how much time would

realistically pass between concept note submission, review, and decision and potential fund

disbursement. A realistic assessment is that the GCF could represent an international option

for funding LEDS activities in the final years of LESTARI and beyond.

In addition to the GCF, the Norway funds are another promising source of funding that

needs to be continuously monitored. Despite the USD 1 billion that Norway has offered to

Indonesia, less than 10% has been handed over. As a result, LESTARI should also consider

tapping into the Norway funds by bridging how performance based payment could really

work, particularly for PES schemes and forest fire management. Norway’s intention to

support the Peatland Restoration Agency (BRG) is also worth monitoring, particularly for

LESTARI’s focus on forest fires in Central Kalimantan.

In addition to supporting the establishment of the Climate Change BLU under the MoF (see

Section 7.2), LESTARI, with the support of HPI, can explore possibilities for operationalizing

performance based payments at a sub-national level through other approaches, including

partnering with the private sector and proposal submission to access the Norway funds once

Indonesia’s funding instrument through the Climate Change BLU is established.

7.4. Designing PES scheme

Designing a PES scheme and mechanism is a milestone in implementing LESTARI’s work

plan and integrating PES in supporting activities of each technical theme in the landscapes

such as water resource management in Aceh, forest fire management in Central

Kalimantan, and collaborative management for conservation area management in Papua.

A clearly defined communication strategy on PES timing and expectations for local

facilitators can help maintain people’s interest and commitment while avoiding

misunderstandings, disappointment and frustration through the process. When referring to

potential direct payments to public budgets, households or stakeholders, it will be essential

to explain: (i) the conditionality of payments, (ii) the timeline and (iii) gateways to their

effective introduction.



Generic elements for PES best practices should be elaborated by expert analysis based on

existing LCP, LEDS, SEA and other documents, new data mining, surveys and stakeholder

consultation. HPI is ready to initiate the participatory elaboration of PES design documents

(Engel, Pagiola and Wunder 2008) including:

Identification of service of interest

Definition of sellers and buyers of PES and funding sources

Definition of area/level of service

Technical, legal and socio-economic study

Calculation of payment threshold based on opportunity cost

Definition of payment mechanism (frequency and fund access)

Institutional coordination framework and implementation responsibilities

Good governance structure (capacity building and public participation,

mechanisms for transparency and accountability, dispute settlement)

Monitoring and evaluation frequency and timeline

The following is a summary of the status of existing ideas on PES opportunities in Aceh,

Central Kalimantan and Papua. Development of PES initiatives in specific areas in the

landscapes is based on the prioritization of the LCP, LEDS and SEA, as well as on already

existing efforts on the ground. In these cases, support from LESTARI will help leverage the

impact of local initiatives.

7.4.1. PES design on water in Southeast Aceh (including. Gayo Lues)

Aligning with the LCP, PES for water pilot projects need to take place in priority focus areas

for conservation activities in Southeast Aceh including the Gayo Lues regency using the

Village Fund (see Section 7.1). The priority focus area in Southeast Aceh are: (i) Lawe

Loning Aman, Lawe Sigala-Gala Subdistrict; (ii) Lawe Mengkudu, Ketambe Subdistrict; (iii)

Pulo Piku, Darul Hasanah Subdistrict; and (iv) Peseluk Pesimbe, Deleng Pokhkisen

Subdistrict. Following up on IFACS initiatives, a PES scheme can also be developed for

management of the Panosan-Sepakat Watershed in Gayo Lues.

7.4.2. PES design on water in the buffer zone of Cyclops Nature Reserve

Building on the signing of the MoU on the co-management initiative in the Cyclops buffer

zone and stakeholder awareness on the importance of protecting Cyclops Nature Reserve

for maintaining clean water sources, livelihoods of indigenous people and biodiversity

conservation, LESTARI should develop a PES scheme on water management in this area.

This PES will leverage Cyclops’ collaborative management by incentivizing indigenous

people and local communities to maintain the forest area for sustainable water management.

LESTARI should engage PDAM and PT. Indah Alam Qualala for possible funding

opportunities, collaborate with BBKSDA Papua for local community empowerment, and use

the MSF as a platform for communication between stakeholders. LESTARI should start by

promoting enabling conditions through awareness raising, building institutional frameworks,

developing capacity building programs on performance based payment for environmental

management, and linking PES activities to the green economy. Some prominent issues to

be addressed include: (i) lack of capacity of local actors, particularly on overall project

management, proposal development, and financial reporting, (ii) overlapping land ownership

related to customary law, and (iii) developing an understanding of benefit transfer



mechanisms, particularly on how these mechanisms will address the root causes of land use

change and deforestation that are mainly caused by mountain communities migrating to the

provincial capital of Jayapura instead of the indigenous people and local communities.

7.4.3. PES design in Central Kalimantan

A pilot project related to forest fire management in Pulang Pisau District of Central

Kalimantan will be closely aligned with LESTARI’s focus in the lowland Katingan-Kahayan

landscape. LESTARI should seek close cooperation with BNPB and BPBD, who are

currently placing more attention and directing more resources towards forest fires. In

addition, monitoring the development of the BLU Climate Change establishment under the

MoF and Peatland Restoration Agency (BRG) is crucial given that the Norwegian

government is intending to support the BRG particularly on peat fire management through

the BLU Climate Change once it is established.

A similar initiative for incentivizing villages that are able to keep their forests free from fire

using the Disaster Relief Fund from the BNPB in Jambi and Riau can also be adopted.

LESTARI can also support the BNPB by providing technical input or co-financing its efforts

in utilizing the Village Fund for forest fire prevention. In the Pulang Pisau district of Central

Kalimantan, a pilot project related to forest fire management in one or two of the following

villages will help realize the objectives of the LCP: Kalawa, Mantaren I, Gohong, Buntoi,

Jabiren, and Taruna.

In the upland areas of Katingan-Kahayan landscape where illegal mining threatens the

river’s ecosystem, the possibility of a PES for water scheme can be further studied and

developed. Cooperation with mining companies should also be sought where possible given

that some companies have already carried out CSR programs aimed at minimizing the

social and environmental impacts of their operations. Bukit Baka Bukit Raya National Park

Agency should also be part of the partnership given that it has already carried out some

efforts to minimize illegal mining within its boundaries. This is aligned with LESTARI’s focus

on collaborative management of conservation areas in the upland areas of the Katingan-

Kahayan landscape.



8. REKOMENDASI-

REKOMENDASI Berdasarkan hasil analisis dan kriteria yang ditentukan oleh LESTARI, HPI mengusulkan

beberapa rekomendasi yang dianggap realistis untuk dicapai dalam jangka waktu empat

tahun ke depan. Rekomendasi-rekomendasi yang disarankan akan berkontribusi terhadap

tercapainya empat indikator sebagaimana tercantum di dalam AMEP.

Indikator 4: jumlah kebijakan publik mengenai perubahan iklim dan/atau konservasi

keanekaragaman hayati yang diusulkan, diubah, atau ditetapkan dengan masukan

masyarakat

Indikator 12: jumlah orang yang menerima bantuan pelatihan manajemen sumber

daya alam dan/atau keanekaragaman hayati dari pemerintah Amerika Serikat

Indikator 13: jumlah investasi yang berhasil dimobilisasikan (dalam dollar Amerika)

menggunakan bantuan pemerintah Amerika Serikat untuk perubahan iklim

Indikator 14: jumlah orang yang menerima manfaat berupa mata pencaharian (uang

dan bukan uang)

Rencana kerja awal terintegrasi dari inisiatif-inisiatif yang diusulkan tersedia di Lampiran 7.

8.1. Mengintegrasikan PJL dalam pemanfaatan dana

domestik

LESTARI perlu bekerja sama dengan pemerintah kota/kabupaten dan pengurus desa untuk

mengusulkan pengalokasian sebagian Dana Desa (berupa persentase) untuk pemeliharaan

lingkungan, dan mengintegrasikan inisiatif PJL ke dalamnya berdasarkan prioritas dan

kebutuhan desa. Hal ini bisa dilakukan dengan mengumpulkan informasi dan pengalaman

dari berbagai pihak terkait tentang pelaksanaan penggunaan Dana Desa di lapangan, dan

melalui pemahaman akan minat dan harapan para pemangku kepentingan.

PJL di tingkat desat atau kabupaten/kota bisanya disertai dengan perumusan peraturan

desa atau peraturan pemerintah kabupaten/kota sebagai bagian dari proses. Hal ini akan

membantu LESTARI mencapai indikator 4 dan juga menjawab salah satu rekomendasi

Rencana Konservasi Bentang Alam di Aceh Tenggara – “kebutuhan untuk merumuskan

sebuah payung hukum di tingkat kabupaten/kota dan peraturan yang lebih rinci di tingkat

desa sebagai landasan pengelolaan sumber daya alam di Kabupaten Aceh Tenggara”.

Sebuah proyek percontohan di Aceh Tenggara perlu menjadi prioritas utama karena sudah

ada upaya advokasi di tingkat kabupaten dan desa (lihat bagian 8.5.1). Replikasi inisiatif di

desa-desa di kabupaten/kota yang lainnya akan memperluas dampak yang diharapkan.

Selain Dana Desa, LESTARI perlu mempertimbangkan untuk melakukan kerjasama dengan

BPDAS dalam mengintegrasikan PJL ke dalam program-program yang didanai

menggunakan Dana Daerah Aliran Sungai (Dana DAS) dan juga perlu berkolaborasi dengan

BNPB dalam memanfaatkan Dana Penanggulangan Bencana untuk pengelolaan kebakaran



hutan di Kalimantan Tengah (lihat bagian 8.4.3). Bentang alam Cyclops di Papua juga bisa

menjadi fokus area yang lain.

HPI bersedia untuk membantu upaya LESTARI di segala tingkatan dari tingkat desa sampai

tingkat nasional dalam mengembangkan konsep, membuat presentasi, dan melakukan

konsultasi dengan para pemangku kepentingan, menyelenggarakan lokakarya, dan

membuat peta konsep untuk mengarahkan pemanfaatan Dana Desa sehingga bisa selaras

dengan skema PJL LESTARI (lihat bagian 8.5).

8.2. Mendukung pembentukan BLU Perubahan Iklim

Di tengah dinamika struktur kelembagaan pemerintah dalam pengelolaan pendanaan

perubahan iklim, masih ada kesempatan bagi LESTARI untuk mengakses pendanaan

pemerintah di bawah struktur yang ada saat ini maupun di bawah struktur yang sedang

diusulkan. LESTARI perlu mendukung upaya advokasi pendanaan perubahan iklim di

tingkat nasional dan juga memberikan dukungan teknis serta peningkatan kapasitas untuk

memperkenalkan konsep pembayaran berbasis hasil. Jika rencana pendirian BLU

Perubahan Iklim di bawah Kementerian Keuangan terlaksana, LESTARI perlu

menyelenggarakan lokakarya untuk memperkenalkan proyek dan inisiatif-inisiatif yang

memerlukan dukungan pendanaan atau pembiayaan bersama (co-financing). LESTARI

perlu membantu peningkatan kapasitas BLU dalam pengelolaan pendanaan, terutama

dalam manajemen proyek (baik aspek keuangan maupun teknis). Hal ini perlu dilakukan

melalui cara-cara yang bisa mempromosikan bentang alam LESTARI. Apabila rencana

pendirian BLU baru dibawah Kementerian Keuangan ini tidak terwujud, LESTARI perlu

merangkul BLU BP2HP di Kementerian Lingkungan Hidup dan Kehutanan (KLHK) yang

akan menjadi institusi terpenting dalam pengelolaan pendanaan perubahan iklim di

Indonesia.

Untuk memfasilitasi inisiatif ini, LESTARI perlu bekerja sama dengan USAID Bangun

Indonesia dengan Jaga Alam untuk (BIJAK), yang lebih berfokus pada advokasi di tingkat

nasional. HPI siap membantu upaya peningkatan kapasitas dan advokasi LESTARI melalui

jejaring HPI yang relevan, dan juga melalui penyelenggaraan acara, lokakarya, presentasi,

serta publikasi. HPI memiliki hubungan erat dengan Kemeterian Keuangan dan KLHK dari

pekerjaan-pekerjaan terdahulu baik di aspek teknis maupun kebijakan pendanaan iklim

sehingga HPI mampu mengoptimalkan posisi LESTARI dalam dinamika pendanaan iklim di

Indonesia.

8.3. Mengakses dana GCF dan dana Norwegia

Skema PJL, pengelolaan kebakaran hutan di Kalimantan Tengah (bagian 8.5), dan menjaga

hutan untuk menciptakan situasi pendukung pelistrikan pedesaan menggunakan energi

terbarukan (bagian 6.3) merupakan kegiatan-kegiatan yang bisa diajukan dalam program

mitigasi perubahan iklim menggunakan pendanaan GCF dan Norwegia. Saat ini keduanya

merupakan sumber pendanaan iklim internasional yang paling menjanjikan dan yang paling

patut untuk diakses. HPI merekomendasikan sebuah upaya terpadu sebagai upaya

mengakses pendanaan GCF dan Norwegia dalam jangka waktu 12 bulan dengan capaian

(deliverable) yang jelas.



GCF merupakan sumber pendanaan baru yang menjanjikan karena GCF merupakan dana

perubahan iklim internasional terbesar dengan kapitalisasi awal sebesar 10 milyar Amerika

dan baru saja memulai seleksi proyek yang akan didanai (lihat bagian 2.2.5). Pendanaan ini

memiliki lima prioritas investasi yang diharapkan akan memberikan manfaat mitigasi dan

adaptasi dimana sektor kehutanan merupakan salah satu dari kelima sektor prioritas yang

bertujuan untuk memperbesar skala pendanaan hutan dan perubahan iklim. Di samping itu

GCF juga akan mulai mengoperasionalkan pembayaran berbasis hasil untuk REDD+ di

tingkat daerah.

Isu utama dalam mengakses dana GCF adalah perlunya memasukkan aplikasi melalui

entitas terakreditasi (accredited entities) dimana sebuah entitas hanya bisa mengakses

dana untuk fungsi fidusia tertentu, ukuran poyek atau kegiatan terterntu, dan di bawah

kategori resiko social dan lingkungan tertentu. Menjadi sebuah entitas terakreditasi

membutuhkan proses yang panjang dan rumit dimana hal ini tidak praktis untuk dilakukan

oleh program-program yang sifatnya sementara seperti LESTARI. Bermitra dengan entitas

yang sudah terakreditasi akan lebih efektif dibandingkan dengan mencoba menjadi entitas

terakreditasi baru. LESTARI bisa bermitra dengan entitas yang sudah terakreditasi baik di

tingkat regional maupun internasional seperti Conservation International (CI), Deutsche

Bank AG, UNEP, UNDP, ADB, dan World Bank. Perkembangan PT. SMI dan Yayasan

Kehati dalam menjadi entitas terakreditasi juga perlu dimonitor.

Upaya untuk mengakses dana GCF perlu berujung pada sebuah langkah yang jelas setelah

3 bulan dan dengan mempertimbangkan kegiatan yang tepat untuk didanai oleh GCF di

bentang alam LESTARI. HPI memperkirakan bahwa dalam skenario yang optimis, sebuah

concept note bisa melewati beberapa ronde diskusi para pemangku kepentingan dan

memperoleh peryataan tidak keberatan (a non objection letter) dari otoritas nasional yang

ditunjuk (NDA) dan bisa diserahkan ke GCF antara 10-14 bulan sejak dimulainya upaya ini.

Dikarenakan belum banyak contoh dalam proses persetujuan pendanaan GCF, jangka

waktu realistis yang dibutuhkan untuk penyerahaan konsep awal, pengkajian, pengambikan

keputusan, dan penyaluran dana masih belum bisa diprediksi untuk saat ini. Secara realistis

GCF bisa menjadi sumber pendanaan internasional untuk mendukung kegiatan di dalam

Strategi Pembangunan Rendah Karbon dalam tahun-tahun terakhir LESTARI dan

setelahnya.

Selain dana GCF, dana Norwegia adalah sumber pendanaan menjanjikan lainnya yang

perlu terus dimonitor. Pada saat laporan ini ditulis, dari 10 juta milyar AS yang ditawarkan

oleh Norwegia untuk Indonesia, kurang dari 10% nya saja yang sudah tersalurkan. Oleh

karena itu, LESTARI perlu mempertimbangkan untuk mengakses dana Norwegia dengan

menjembatani operasionalisasi pembayaran berbasis hasil, khususnya untuk skema PJL

dan pengelolaan kebakaran hutan. Keinginan Norwegia untuk mendukung Badan Restorasi

Gambut (BRG) juga perlu selalu dimonitor terkait dengan fokus kegiatan LESTARI dalam

pengelolaan kebakaran hutan di Kalimantan Tengah.

Selain mendukung pembentukan BLU Perubahan Iklim di bawah Kementerian Keuangan

(lihat bagian 8.2), LESTARI dengan dukungan dari HPI bisa menjajaki berbagai

kemungkinan untuk mengoperasionalkan pembayaran berbasis hasil di tingkat daerah

melalui cara-cara lain termasuk bermitra dengan sektor swasta dan pengajuan proposal

untuk mengakses dana Norway pada saat instrumen pendanaan Indonesia yang

direncanakan akan dikelola oleh BLU Perubahan Iklim sudah terbentuk.



8.4. Skema pengembangan pembayaran jasa

lingkungan

Merancang skema dan mekanisme PJL merupakan sebuah lompatan dalam implementasi

rencana kerja LESTARI dan mengintegrasikan PJL ke dalam aktivitas pendukung dari setiap

tema teknis di bentang alam LESTARI seperti pengelolaan sumber daya air di Aceh,

pengelolaan kebakaran hutan di Kalimantan Tengah, dan pengelolaan daerah konservasi

secara kolaboratif di Papua.

Strategi komunikasi yang tepat dan jelas bagi para fasilitator untuk mengkomunikasikan

waktu PJL dan harapan yang realistis bisa membantu menjaga minat dan komitmen

masyarakat. Secara bersamaan, hal ini bisa mencegah salah pengertian, kekecewaan, dan

frustasi di sepanjang proses. Ketika merujuk pada potensi pembayaran langsung ke

anggaran publik, rumah tangga, dan pemangku kepentingan lainnya, berikut adalah hal-hal

penting yang perlu dijelaskan: (i) kondisi pembayaran, (ii) jangka waktu, dan (iii) kesempatan

untuk memperkenalkan PJL secara efektif.

Komponen umum dari praktek terbaik PJL perlu dikembangkan oleh pakar berdasarkan

Rencana Konservasi Bentang Alam, Strategi Pembangunan Rendah Karbon, dan Kajian

Lingkungan Hidup Strategis serta dokumen-dokumen terkait lainnya, pencarian data terbaru,

dan konsultasi para pemangku kepentingan. HPI siap melakukan penjabaran dokumen

desain PJL melalui pendekatan partisipatif (Engel, Pagiola and Wunder 2008) termasuk:

Identifikasi jenis jasa lingkungan

Definisi penjual dan pembeli jasa lingkungan serta sumber pendanaan

Definisi wilayah/tingkatan jasa lingkungan

Studi teknis, hukum, dan social ekonomi

Perhitungan batas pembayaran berdasarkan biaya peluang (opportunity cost)

Definisi mekanisme pembayaran (frekuensi dan akses pendanaan)

Kerangka koordinasi institusi dan tanggung jawab pelaksanaan

Struktur pemerintahan (peningkatan kapasitas dan partisipasi publik, mekanisme

transparansi dan akuntability, dan penyelesaian sengketa)

Frekuensi dan waktu pengawasan dan evaluasi (monitoring and evaluation)

Berikut ini adalah ringkasan status ide pengembangan potensi PJL yang ada di Aceh,

Kalimantan Tengah, dan Papua. Pengembangan inisiatif PJL di area bentang alam

LESTARI perlu didasarkan pada prioritas yang terdapat di dalam Rencana Konservasi

Bentang Alam, Strategi Pembangunan Rendah Karbon, dan Kajian Lingkungan Hidup

Strategis serta upaya yang sudah ada di lapangan. Dalam hal ini, dukungan dari LESTARI

bisa membantu memaksimalkan manfaat inisiatif lokal.



8.4.1. Desain PJL air di Aceh Tenggara (termasuk Gayo Lues)

Selaras dengan Rencana Konservasi Bentang Alam, proyek percontohan PJL air perlu

dilaksanakan di area yang diprioritaskan untuk konservasi di Aceh Tenggara termasuk Gayo

Lues dengan memanfaatkan Dana Desa (lihat bagian 8.1). Berikut ini adalah desa-desa

prioritas di Aceh Tenggara berdasarkan Rencana Konservasi Bentang Alam: (i) Lawe

Loning Aman, Kecamatan Lawe Sigala-Gala; (ii) Lawe Mengkudu, Kecamatan Ketambe; (iii)

Pulo Piku, Kecamatan Darul Hasanah; dan (iv) Peseluk Pesimbe, Kecamatan Deleng

Pokhkisen. Menindaklanjuti inisiatif IFACS, skema PJL juga bisa dikembangkan untuk

pengelolaan daerah aliran sungai Panosan-Sepakat di Gayo Lues. Kerjasama dengan Balai

Taman Nasional Gunung Leuser dan dengan organisasi-organisasi lokal seperti FAJEM

juga diperlukan untuk mewujudkan inisiatif PJL di Aceh.

8.4.2. Desain PJL air di kawasan penyangga Cagar Alam Cyclops

Menindaklanjuti penandatanganan Nota Kesepahaman (MoU) pengelolaan bersama

kawasan penyangga Cagar Alam Cyclops dan kesadaran pemangku kepentingan akan

pentingnya melindungi Cagar Alam Cyclops untuk menjaga sumber air bersih, mata

pencaharian penduduk asli, dan konservasi keanekaragaman hayati, LESTARI perlu

mengembangkan sebuah skema PJL untuk pengelolaan sumber daya air di area ini. Inisiatif

PJL ini juga akan menjadi pengungkit bagi pelaksanaan pengelolaan bersama Cyclops

dengan memberikan insentif kepada penduduk asli dan masyarakat lokal dalam menjaga

kawasan hutan untuk pengelolaan air yang berkelanjutan. LESTARI perlu merangkul PDAM

dan PT. Indah Alam Qualala untuk kemungkinan pendanaan, berkolaborasi dengan

BBKSDA Papua untuk pemberdayaan masayarakat lokal, dan menggunakan Forum Multi

Pihak sebagai media komunikasi antar para pemangku kepentingan. LESTARI perlu

memulai inisiatif ini dengan menciptakan kondisi pemungkin melalui penyadaran

masyarakat, pengembangan kerangka institusional, dan merancang program peningkatan

kapasitas untuk pembayaran berbasis hasil dalam pengelolaan lingkungan dan

menghubungkan kegiatan PJL dengan pengembangan ekonomi hijau di pedesaan.

Beberapa isu utama yang perlu dipecahkan adalah: (i) kurangnya kemampuan aktor lokal

terutama dalam manajemen proyek secara keseluruhan, pengembangan proposal, dan

laporan keuangan, (ii) tumpang tindih kepemilikan tanah terkait dengan hukum adat

setempat, dan (iii) penyadar-tahuan masyarakat tentang mekanisme transfer manfaat

terutama bagaimana mekanisme ini bisa memecahkan akar permasalahan perubahan

penggunaan lahan dan penggundulan hutan yang lebih disebabkan oleh migrasi komunitas

gunung ke ibu kota provinsi, Jayapura, dan bukan oleh penduduk asli setempat.

8.4.3. Desain PJL di Kalimantan Tengah

Proyek percontohan terkait pengelolaan kebakaran hutan di Kabupaten Pulang Pisau

sejalan dengan fokus LESTARI di area bawah Bentang Alam Katingan-Kahayan. LESTARI

perlu bekerja sama dengan BNPB dan BPBD yang saat ini sedang memberikan perhatian

lebih serta mengerahkan sumber daya yang lebih besar untuk pencegahan kebakaran

hutan. Di samping itu, perkembangan pembentukan BLU Perubahan Iklim di bawah

Kementerian Keuangan dan kemajuan Badan Restorasi Gambut juga perlu terus

diperhatikan mengingat Norwegia berencana untuk mendukung BRG dalam upaya



pengelolaan kebakaran hutan di lahan gambut melalui BLU Perubahan Iklim setelah BLU ini

terbentuk.

Inisiatif yang serupa dengan pemberian instentif kepada Desa Peduli Api di Jambi dan Riau

menggunakan Dana Penanggulangan Bencana juga bisa diadopsi. LESTARI bisa

mendukung BNPB dengan memberikan input teknis dan pembiayaan bersama dalam

upaya-upaya pemanfaatan Dana Desa untuk pencegahan kebakaran hutan. Di Kabupaten

Pulang Pisau, proyek percontohan di satu atau beberapa desa berikut ini bisa membantu

mencapai tujuan Rencana Konservasi Bentang Alam: Kalawa, Mantaren I, Gohong, Buntoi,

Jabiren, dan Taruna.

Di bagian atas Bentang Alam Katingan – Kahayan dimana pertambangan emas illegal

mengancam kehidupan ekosistem sungai, potensi pengembangan skema PJL air bisa

dipelajari dan dikembangankan lebih lanjut. Kerjasama dengan perusahaan pertambangan

juga perlu dilakukan jika memungkinan karena beberapa perusahaan pertambangan telah

berupaya untuk meminimalkan dampak lingkungan dan sosial dari operasi mereka melalui

program-program CSR. Balai Taman Nasional Bukit Baka Bukit Raya juga perlu menjadi

bagian dalam kemitraan LESTARI karena Balai Taman Nasional ini sudah melakukan

berbagai upaya untuk menanggulangi permasalahan penambangan liar di wilayahnya. Hal

ini selaras dengan fokus LESTARI tentang pengelolaan bersama kawasan konservasi di

bagian atas Bentang Alam Katingan – Kahayan.



9. BIBLIOGRAPHY

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kredit-tunda-tebang.html#sthash.nJsyXp31.0yl8TdBt.dpuf. June 2015.

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.pdf (accessed January 2016).

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Indonesia Climate Change Trust Fund. ODI. March 2014.

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(accessed December 10, 2015).


ANNEXES:

Annex 1. Funds Profile Table 17: Funds profile

No Fund Eligibility Funding Mechanism Size of Funding Available Funding Disbursement Note

Nationally Operated Financing Support

1 The Indonesia Climate Change Trust Fund (ICCTF)

CSOs, NGOs, private sector, universities/academies, and government institutions

Thematic area: land-based mitigation, energy, and adaptation & resilience

Grants (small grant and large grant)

IDR 500 million (~ USD 50,000) for small grant

Up to several million USD (> IDR 3 billion or USD 250,000) for large grant

Small grant: disbursed in lump sum and is relatively quick once reporting requirements are fulfilled

Large grant: disbursement mechanism is under development

2 Forest Management Unit (FMU/KPH) Fund

All types of FMUs/KPHs: FMU Conservation (KPHK), FMU Protection (KPHL), FMU Production (KPHP)

Budget transfer IDR 3 billion (~ USD 225,000) per KPH; however, the actual fund disbursed is much less than that, and fund allocated by government changes from year to year


KPHK is funded by central government, KPHP and KPHL are funded by both APBN and sub-national government budgets (APBD)

3 People’s Business Credit Program (KUR)

Micro, small and medium enterprises (MSME) and cooperatives

Credit and micro-credits backed by guarantees from state-owned companies

Micro KUR: IDR 25 million for a max. of 3 years for working capital and 5 years for investments

Retail KUR: IDR 25 million to IDR 500

Three different mechanisms:

directly to MSME from participating banks

indirectly through linkage institutions

3 types of credit at the moment: micro KUR, retail KUR, TKI KUR (designed for migrant workers)

Sectoral KUR is planned to be introduced in 2016



million for a max. of 4 years for working capital and 5 years for investments, can be extended up to 10 years for hardwood investment

TKI KUR: IDR 25 mill, duration is based on the migrant workers’ employment contract and shall not exceeding 3 years.

Sectoral KUR: IDR 500 million – IDR 30 billion (equivalent to USD 36,000 – USD 2 million) for max. 10 years

by executing patterns

indirectly through linkage institutions by channeling patterns

4 Timber Harvesting Postponement Credit (KTT)

Farmer groups, cooperatives (the one receiving loan from government)

Individual/member can apply for the loan to the cooperative or farmer group receiving money from government/MoEF

Low-interest loan Vary, depending on the size of community group/cooperative

Vary, loan duration is 5-8 years (depending on the harvest

Lump sum, directly to community group/cooperative

Lump sum, directly to individual applying loan

5 Watershed Fund (Dana DAS)

BP DAS (Watershed management agency)

Budget transfer Vary Yearly as part of government budgeting process

6 Grant from Central Government to Local Government

Local government Grants Vary Yearly as part of government budgeting process

Fund allocation should be based on criteria; however, no clear and robust criteria have been developed so



(Hibah Daerah) far. Current disbursement of fund only targets mitigation action and not yet prevention and adaptation

7 National Park Fund National Park Agency in each national park

Budget transfer Vary, depending on the area and priority


National park is managed and funded by central government

8 Shared Revenue on forestry

All district/city governments

Budget transfer Variable, proportional depending on the shared revenue of the year

Distributed on a quarterly basis through transfer from the State Treasury to the Regional Treasury Account

10 Village Fund (Dana Desa)

All villages Budget transfer IDR 1 billion (~ USD 74,000) per village with possibility of increase


11 National Community Empowerment Program (Program Nasional Pemberdayaan Masyarakat, PNPM Mandiri Kehutanan)

Villages in and around forest area

Budget transfer (from central and district government to village government)

Variable Yearly as part of government accounting process.

Internationally Operated Financing Support

1 Norway-Indonesia REDD Partnership (NORAD-UNDP-GoI)

Appointed ministry/institution in a country (Ministry of Environment and Forestry in Indonesia)

Grants in 1st and 2nd phase, result-based finance/carbon credits in 3rd phase

USD 1 billion in three phases

Under development USD 200 million for Phase 1 and 2; USD 800 million for Phase 3

Currently being administered by UNDP REDD under Environmental Division until June 2016



2 Forest Investment Fund (FIP)

Ministry/institution in a country (Ministry of Environment and Forestry in Indonesia)

Grants, concessional loans, guarantees, equity

FIP I: USD 17.5 million (grant); expected co-financing USD 6 million

FIP II: USD 17.5 million (grant); expected co-financing USD 8 million

FIP III: USD 2.5 million (grant) & USD 32.5 million (loan) expected co-financing USD 6 million

- Through Multinational Development Banks (MDBs) and their respective disbursement regulations

3 Forest Carbon Partnership Facility (FCPF)

An eligible REDD country (through ministry or other government agency)

Grants (Readiness Fund & Carbon Fund)

Readiness Fund: 3.8 million

Carbon Fund: USD 465 million (total)

TBC

4 REDD Early Movers (REM)

Ministry/institution in a country (Ministry of Environment and Forestry in Indonesia)

Grants - - Not available for Indonesia

REM has a funding volume of 32.5 million Euros, and REM has already agreed to spend around 19 million Euros buying 8 million tons of CO2 from REDD+ activities in the state of Acre over a 4-year period.



5 Green Climate Fund (GCF)

Accredited Entities: accredited national, sub-national, regional, and international implementing entities and intermediaries (including NGOs, government ministries, national development banks, and other domestic or regional organizations that can meet the Fund’s standards); and private sector

Grants, loans, guarantees, equity

Micro project: USD 0 – 10 million; Small project: USD 10 – 50 million; Medium project: USD 50 – 250 million; Large project: > 250 million

Total funding pledges of > USD 10 billion to the GCF

Under development82 Indonesia is still developing a framework for the NDA establishment and the issues of accredited entity.

Two accredited institutions so far: Sarana Multi Infrastruktur Ltd. (PT. SMI) and KEHATI foundation.

6 Global Environmental Facility (GEF)

Government agencies, civil society organizations, private sector companies, research institutions

Grants (can be transferred or blended with to loans, guarantees, equity)

Various types of projects (modalities):

Full-sized Projects (FSPs) – over USD 2 million,

Medium-sized Projects (MSPs) – up to USD 2 million,

Enabling Activities (EAs) - up to USD 1 million,

Small Grants Program (SGPs) – up to USD 50,000,

Programmatic Approach

Through Implementing Entities like UNDP, UNEP and the World Bank

Focus of GEF Trust Fund biodiversity, climate change, land degradation, sustainable forest management, international waters, and chemicals.

Focus of the Special Climate Change Fund (SCCF) and Least Developed Countries Fund (LDCF): climate change adaptation

82http://um.dk/en/~/media/UM/English-site/Documents/Danida/About-

Danida/Danida%20transparency/Consultations/2014/2nd%20half%202014/Draft%20Organisation%20Strategy%20for%20the%20Green%20Climate%20Fund.pdf



– amount not defined.

7 BioCarbon Fund Initiative for Sustainable Forest Landscapes (ISFL)

Country Grants and results based payments for achieved emission reductions

Preliminary Funding: USD 70-80 M

Additional funding pledge over 100 M from UK and Germany at COP 21 in Paris to support expansion into Indonesia

Country

8 Bilateral commitment financing support

A country (through an appointed government ministry/agency)

Grants/loans Vary Vary

9 Market-based Payments for Emission Reductions (Compliance & Voluntary)

Verified Emission Reductions (VERs) following respective market protocols

Over-the-counter (OTC) transaction of VERs against payment

TBA TBA

Private Sector & Civil Society Financing Support

1 KEHATI Foundation NGOs, Community Organizations, Governmental Research Institutions, Universities, Professional Institutions.

Work in 3 prioritized ecosystems: agriculture, forestry, and coastal &

Grants Latest data not available

Total grant (1995-2013: US$ 25.500.000) 83

Not available Proposal needs to be submitted in KEHATI format

83 https://www.cbd.int/doc/meetings/ecr/cbwecr-2014-04/other/cbwecr-2014-04-presentation-day4-05-en.pdf

https://www.cbd.int/doc/meetings/ecr/cbwecr-2014-04/other/cbwecr-2014-04-presentation-day4-05-en.pdf



small islands programs

2 NGOs Community Organizations,

Grants Vary Vary, mostly grants

3 Private Companies NGOs, CSOs, Universities

CSR Program Vary Vary, mostly grants



Annex 2. ICCTF Project Management Cycle

Source: (ICCTF 2015) web: http://icctf.or.id/fund-management/

Step 1. Submit prospective proposals

a) Sectoral ministries and local governmental bodies will be invited to submit proposals for activities eligible for financing b) Sector ministries may either submit their own proposals, or partner with other parties such as NGOs or academic institutions.

Step 2. Pre-appraise prospective proposals

a) The ICCTF Secretariat will check the completeness of project proposals and documentations

b) After all documentation complete, the Secretariat will submit the project proposal to the Technical Committee (TC) for further assessment.

c) In the case of incomplete documentation, the Secretariat will discuss with proponents the need for the appropriate completion of documentation.

d) The Secretariat will also check project eligibility according to eligibility criteria

Step 3. Assessment of the project proposal by the TC:

a) The TC will assess the eligibility, feasibility, sustainability and impact of the proposed activities according to criteria set by the Steering Committee (SC).

b) These criteria will take into account available funding and existing grant agreements with development partners.

c) During the assessment of the proposal, if required, the TC may ask for assistance from the pool of experts.

Step 4. Submit project proposals for approval by the SC

If a project proposal meets all criteria for financing by the ICCTF, the Secretariat will submit the proposal and assessment reports, including recommendations for approval or rejection, prepared by TC to the SC;

Step 5. Approve a proposal

a) During the SC meetings, the Head of Secretariat will present the project proposals and ask the SC for approval or rejection based on the recommendation of the TC.

b) If required, the SC could invite the TC or Experts to clarify their recommendations.

Step 6. Sign project agreement

a) Secretariat will send notification letter to project proponents informing the approval or rejection of their proposals.

b) This notification letter will also be sent to the Trustee for the approved project proposal; The Trustee will arrange for the signing of the project implementation agreement by the Project Proponent.

c) The Trustee will send one copy of the agreement to Secretariat for filing

Step 7. Implementation of the approved activities

a) Proponent has to assign a coordination team that will be responsible to coordinate the implementation of the activities led by a Project Manager. The approved activity proposal can be implemented by the proponent or sub-contracted to third party;

b) If the activities will be sub-contracted to 3rd party, the Proponent will conduct a fair bidding process in accordance with government regulations and/or other principles of procurement in the grant agreement) to select a Contractor; which will then be communicated to the Trustee and the Secretariat.

c) The Contractor must submit regular progress reports to the Coordination Team to make sure that the activity progress is in line with the targeted output.

d) In case the proponent will implement the activities an implementation team, which can be the same as the coordination team, has to be established with clear tasks and responsibilities, clear time schedule and milestones, clear planning, and clear reporting responsibilities.

e) If required, the proponent can ask for assistance from the secretariat to provide support in project management due to lack of expertise and experiences or lack of human resources.

Step 8. Disbursement of funds

a) The Contractor or the implementation team can submit a payment request to the Trustee with a copy to the Secretariat based on payment term

b) Payment requests will be checked by the Trustee and confirmed with the Project Manager of the Coordination Team.

c) Once the Project Manager approves it, the Trustee can disburse the fund to the Contractor with a copy of disbursement proof to be sent to the Secretariat.

Step 9. Organise monitoring, evaluation and auditing:

a) Once a year, on behalf of the SC the Secretariat will organise missions to monitor and evaluate projects funded by the ICCTF.

b) Mission reports will be presented at the SC or Technical Committee level.

c) The ICCTF will be audited once a year and an audit report will be presented to the SC.

http://icctf.or.id/fund-management/



Annex 3. KUR Application Procedure and Distribution Mechanism

The MSMEs can obtain KUR from participating banks by:84

Submitting a KUR application letter to a bank, attaching supporting documents such as

business legality statement, business permits, financial statements, etc.

The bank will then evaluate/analyze the MSME’s business feasibility, based on the

application letter.

If a bank considers an MSME feasible, then it will approve the KUR request. The decision

to approve KUR is fully under a bank’s authority.

The bank and MSME sign a credit/financing agreement.

The MSME is obligated to repay (including through installments) the credit to the bank.

The following are general requirements for MSMEs to access KUR:

Not be receiving credit/financing from banks and/or not receiving funds through government

credit programs.

Be permitted to receive consumptive credit (e.g. mortgage loans, credit cards, etc.).

Have a repayment certificate (Surat Keterangan Lunas) from the bank, if an MSME is listed

on the BI Debtor Information System but has already paid off the loan.

For Micro KUR, it is not necessary to check BI Debtor Information System.

To receive KUR, MSME needs to submit these legal documents to the distributing banks:

Identification documents (e.g. identity card, driving license and family card)

Business/venture legal documents (e.g. deed of establishment, deed of alteration)

Business permit (e.g. business permit/SIU, company registration document/TDP, certificate

of domicile/SK Domisili)

Accounting records or financial statements

Proof of collateral

The participating banks have full authority to make a decision on loan approval based on the

feasibility analysis of a potential KUR recipient. KUR debtor who had received and paid off KUR

are allowed to submit a new KUR request, as long as the debtor is not yet bankable.

The distribution mechanisms of KUR can be carried out in three different ways: (i) directly to

MSME from participating banks, (ii) indirectly through linkage institutions by executing patterns,

and (iii) indirectly, through linkage institutions by channeling patterns as shown in the figure below:

84 http://www.tnp2k.go.id/en/frequently-asked-questions-faqs/cluster-iii-2/credit-for-businesses-Program-kur/

http://www.tnp2k.go.id/en/frequently-asked-questions-faqs/cluster-iii-2/credit-for-businesses-Program-kur/



1. Direct distribution to MSME from participating

banks

a Bank carries out individual assessment on prospective KUR debtor. When debtor is assessed as feasible and approved by the participating bank, the KUR debtor signs a credit agreement

b Bank applies for a guarantee to guarantor company

2. Indirect distribution through linkage institutions85 by executing patterns

a. Linkage institution applies for credit/financing to participating bank

b. Participating bank checks debtor information system and conducts feasibility analysis. When considered feasible and approved, the participating bank signs credit/financing agreement with linkage institution.

c. Participating bank applies request for credit/financing guarantee to guarantor company.

d. Linkage institution distributes credit/financing received from participating bank to MSME from linkage institution.

e. MSME debtor repays credit/financing obligation to linkage institution.

Linkage institution is responsible for the KUR repayment to the participating bank.

3. Indirect distribution through linkage institutions by channeling patterns

a. To obtain credit/financing from a participating bank, MSME authorizes the board of linkage institution to submit a credit request and offers collateral to the participating bank.

b. Linkage institution representing MSME submits credit request to the participating bank.

c. Participating bank checks debtor information system and conducts feasibility analysis. When MSME (Usaha Mikro Kecil Menengah Koperasi, UMKMK) is considered feasible and approved by the participating bank:

d. Based on the authority of the participating bank, the linkage institution signs Credit/Financing Agreement with MSME.

e. Based on the authority of the MSME, the linkage institution signs a credit/financing agreement with the participating bank.

f. Bank submits guarantee request to guarantor company.

g. Linkage institution forwards the credit/financing loan received from the participating bank to MSME debtor. MSME debtor pays the payment obligations to the participating bank through the linkage institution. MSME is responsible for the KUR payments to the participating bank.

Source: (TNP2K n.d.)

85 Linkage institutions are secondary cooperatives, primary cooperatives (savings and loan cooperatives, savings and loan

cooperative units), village credit agencies (BKD), Baitul Mal Wa Tanwil (BMT), Syariah/people’s credit banks (BPR/BPRS), non-

bank financial institutions, venture groups, micro finance institutions.



Annex 4. Questionnaires for LESTARI Site Visit

Background Info

REDD+

REDD+ stands for Reducing Emissions from Deforestation & Forest Degradation. The concept

aims to achieve a measurable improvement of forest management. The improvement shall be

incentivized by benefits towards people who make local decisions on land use (e.g. landholders,

communities) to reduce deforestation and degradation. The incentives can be improvements of

infrastructure of health, education or financing for economic activities without deforestation

(alternative income) or in form of direct payments – Payment for Ecosystem Services.

PES

Ecosystem Services are benefits people derive from healthy ecosystems, such as fertile soils,

clean water & air, climate regulation, recreation, pollination, timber, foods, medicinal plants and

other non-timber forest products. They benefit both local people and people from far away and are

the basis for a healthy economy and society. Economic activities for livelihood of people or

monetary profit can threaten to degrade Ecosystem Services (e.g. deforestation). As Ecosystem

Services are not much regulated and not valued in monetary terms, their degradation is not

accounted as a loss. This creates the issue that monetary profits based on ecosystem degradation

are private to the land user, but the loss of the Ecosystem Service is public to the society.

Payment for Ecosystem Services tries to re-balance this issue by putting a monetary value to

Ecosystem Services. The concept is aims to achieve a measurable improvement of ecosystem

management. The improvement shall be incentivized by benefits towards people who make local

decisions on land use (e.g. landholders, communities). In a PES the incentive is a pre-agreed

payment to the land user when it was verified that ecosystem management is good.

Local Organization. Area: _______________________/Name: ________________________

General Information:

1. What is the focus of your organization?

2. How many employees do you have in your organization? Where do they come from? Can you

tell me a little bit about their background?

3. What is your organization structure? (get the organogram, if possible)



Experiences in Sustainable Landscapes, PES and REDD+:

4. What was previous work of your organization related to Agriculture and Forestry?

5. Have you worked on transfer of benefits to communities and landholders in return for

environmental management?

6. Has your organization carried out activities related to transfer of benefits to communities and

landholders in return for environmental management (PES and REDD+)? (YES/NO)

If YES, continuo to A, if NO – stop here.

A. If YES,

Questions Forests Monetary transfer

Information on Activities

ACTIVITIES a. What kind of activities that

have been done?

b. What type of services (water,

carbon, ecotourism,

biodiversity, natural beauty,

geothermal, etc.)

c. When?

d. Implementation period

e. Target of activities (break

down based on phases of

activities/Deliverable, if any)

f. Location

ACTORS (Stakeholders):

a. Service provider

b. Beneficiaries (user)

c. Third parties (facilitator,

legislator, mediator, verifier)

d. Financial manager (bank,

cooperative, other org.)

e. Donor, if applicable

f. Others

TRANSCATION MECHANISM:

Note: Information needs to be supported by documentation, such as contract, transaction record, audit report, etc.)



Questions Forests Monetary transfer

Payment:

a. What is the unit of

measurement of the service?

b. What is price per unit service?

c. How does payment being

done (via bank, cooperative,

etc)

d. When payment is done?

Payment distribution:

e. How does money (incentive)

is distributed to the service

providers?

Unit of service provider

(individual, household,

organization, village)

Period of distribution

Who does the distribution?

MONITORING:

a. Are there any documents of

measurement to determine

the payment?

(payment or purchase receipts minutes of meeting)

b. Who is responsible for

monitoring and keeping the

documentation?

What would you like to do better if you would start such a program again?

Organization’s specific Information

What is your organization’s specific role in this activity?

What are the targets to be achieved of your organization in that particular activity?

Based on the targets that have been set, do you think this activity is classified as success? Why?

If it is a SUCCESS, what are

the lessons learned?

It is NOT SUCCESS, what are

the challenges?



Additional Capacity Assessment:

7. Does your organization have experience in preparing proposals related to sustainable

landscapes, forests, PES/REDD+? Please tell me a little more

8. Does your organization have experience in preparing reports, including financial reports on

projects related to sustainable landscapes, forests, or PES/REDD+? Please tell me a little more

9. What kind of training (if needed) will be useful to improve organizations’ skills and qualification in

implementing project activities related to sustainable landscapes, forests, or PES/REDD+?

10. Do you have any other comments/opinions related to capacity of your organization in

implementing to sustainable landscapes, forests, or PES/REDD+?



Questionnaire 2

LESTARI Regional Office: ___________________________________________

Work Plan

Do you have a work plan for the next 5 years? (YES/NO, YES but annual plan instead of 5 year-

plan)

1. If YES, what are the focuses (thematic and area) in year 1, 2, 3, 4, and 5? (ask for a copy of

work plan if possible)

2. If NO, why? When do you think the work plan will be ready?

Relation to Local Government

3. What are the government institutions relevant to LESTARI activities in your area? Do they

provide funding? (follow this table)

Institutions Theme/topic Funding (Y/N)

Contact Name Phone/Email

4. What are the local government regulations related to/regulating benefit transfer for

environmental management activities applicable to your stakeholders in your area?

Potential Implementing Organizations

5. Which organizations (both national and local org) do you think have the potential to implement

project/program related to benefit transfer for environmental management in your area? What do

you think about their capacity (i.e. human resources, reporting skills both on financial and non-

financial contexts, performance, etc.)

Organization Focus (topic and area)

Capacity Assessment (Human Resource, Reporting Skills, Past

Performance, etc)

Contact (Name,

Phone, Email)

Consortium Partners operating in this area

6. Who are LESTARI’s consortium members operating in your area?



Organization Specification/Focus and Area Contact (Name, Phone, Email)

Additional Info - important notes from this area:



Questionnaire 3

Government. Level: ________________________Institution:

________________________

1. What are the institutions/organizations with a mandate to implement benefit transfer for

environmental management (PES/REDD+) in your area? (both government and non-

government organizations). Please elaborate the function of each organization (fund

provider, implementer, facilitator, etc.)

2. What is the mechanism for benefit transfer for environmental management (PES/REDD+)

activities in your area, if any? (some districts may not have mechanism in place)

3. (this includes regulations that are still currently under development)

4. Is there funding from government or donors in your organization (or other institution that

you know) that can be utilized to fund benefit transfer for environmental management (PES

and REDD+) activities in your area?

(Note: if funding exists, please separate pure government funding from non-government

funding)

Government Funding Mechanism: How is fund being allocated and distributed?

Non-government Funding Mechanism:

5. Were there any activities of benefit transfer for environmental management (PES/REDD+)

in your area? YES/NO



If YES, fill the following table (PES/REDD+ experience may be separated activities)

Questions REDD+ PES

When? (period)

What kind of services?

What are the context/activity?

Who were involved?

Service provider

Beneficiaries (user)

Third parties (facilitator,

legislator, mediator,

verifier)

Financial manager

(bank, cooperative,

other org.)

Donor, if applicable

Others

What was the target to be achieved for that activity?

Do you think that activity was classified as success? Why?

If it is a SUCCESS,

what are the lessons

learned?

It is NOT SUCCESS,

what are the

challenges?

6. Additional info. Opinions/comments on PES and REDD+?



Annex 5. List of Stakeholders Consulted

List of stakeholders consulted in Central Kalimantan

No Name Organizations Contact

1 Ozzy LESTARI

2 Domingus Provincial Government Forestry Office

3 Ismail BPDAS Kahayan 081931754999

082311555758

4 Iman Rusmana BP2HP 081385012030

[email protected]

5 Rahmat KPH Gunung Mas 085249799664

6 Ibu Yuna BPKH Palangkaraya 081347367667

7 Mursyid BLH Provinces 0816280989

8 Adib Gunawan Sebangau National Park Agency

08115451118

9 Virasadi Nursu’i BBBR Agency 081345494257

10 Hap Baperdo BLH Katingan 0811520490

11 Kiwok BPBD 081251668957

12 Restono Dinas Kehutanan Pulang Pisau

0822507432

13 Kartie Vitamery

Lia Anggraeni

Yayasan Tambuhak Sinta (YTS)

081349190041

081251606426

14 Dedi YCI

15 Siti Maimunah Muhammadiyah University 081366109055

16 Atit & UNDP REDD Division 082168513039

08136086101

17 Hendro Provincial Government Tourism Agency

085252701119



List of stakeholders consulted in Papua

No Name Organizations Contact

1 Priyo Cenderawasih University 08124850271

2 Amsal Provincial Government Forestry Office

081247235600

3 Zaenal Arifin

Elizabeth Sapulele

BPDAS Memberamo 08129304305

0811482099

4 M. G. Nababan

Dahlan Iskan

Yani

BKSDA 08125405080

081344007142

081380811132

5 Gerald BP2HP Papua 08124809136

6 Sance Theresa Dinas Kehutanan Palangkaraya 081248833836

7 Kitty (Amalia) BLH Kota Palangkaraya 081344182686

8 Hirosi Marchel Suebu 085244182519

9 Andre Lim Fort Mumbai Green 081344048112

10 John Rumbiah Dinas Kehutanan Mimika 0811495019

11 Yohan Lorentz National Park Agency

12 Andi Yapeda

13 Edo LEMASCO 081354033468


Annex 6. Government Regulations Related To PES And REDD+

Table 18: REDD+ related regulations at the national level

No Regulations Key components

Remarks Objectives Focus activities Institutions 86 Time Authorities

1 Presidential Regulation No. 61/2011 on the national action plan on GHG emission reductions (RAN-GRK).

To reduce GHG emissions in Indonesia by 26%/41% by 2020 against a BAU baseline. REDD+ represents a very important element of RAN-GRK with 88% of the envisioned reductions related to REDD+ activities

GHG emission reduction activities in the following sectors: (1) Forestry and Peat Land, (2) Agriculture, (3) Energy & Transport, (4) Industry, (5) Waste.

Focus activities related to REDD+: Forest and land fire control, network system and water management, RHL (forest and land rehabilitation), HTI (Industrial Plantation Forest), HR (Community Forest), Illegal logging eradication, Deforestation prevention, Community empowerment

Bappenas as Coordinator; Line Ministries and provincial government as implementer

2011- 2020

Bappenas

2 Presidential Regulation No. 71/2011 on the national GHG inventory system

The Regulation mandates different bodies of the government to produce national, local and corporate GHG inventories on an annual basis. The GHG inventory as part of MRV system is prerequisite of the successful REDD+

Development of:

1. Accounting Process and Procedure of GHG Inventories;

2. Task & Authorities of Governments at Central as well as Provincial and Municipal/regency Levels;

3. Verification and Reporting processes

MoEF as Coordinator; Line Ministries to develop individual GHG inventories

2011 MoEF

86 Institutions involved or to be created




implementation

3 President Decree No. 25 of 2011 on the Task Force for Preparation of the REDD+ Agency

UKP4 (discontinued).

Continuation of Presidential Decree No. 19 of 2010.

To develop REDD+ readiness and prepare for the REDD+ Agency.

Formulation of REDD+ national strategy and national action plan on greenhouse gas mitigation (RAN-GRK).

Preparation for REDD+

Agency.Formulation of REDD+

finance mechanism. Preparation for MRV agency. Formulation of criteria for pilot provinces.

REDD+ Task Force

(discontinued). Line ministries: MoEF, BAPPENAS, MOF, MoA, MEMR, etc. UKP4. BPN

Until 31 Dec 2012.

Fund comes from APBN and Norway- Indonesia LoI.

4 Presidential Regulation No. 62/2013 on the establishment of the national REDD+ Agency to implement REDD+ objectives.

The REDD+ Managing Agency is aimed to support the President to implement REDD+ activities in Indonesia.

Defined tasks of the REDD+ Agency including the development of the REDD+ National Strategy; the framework for social, environmental and financial safeguards; REDD+ policies; and instruments and mechanisms for REDD+ funding and benefit distribution

REDD+ Managing Agency

n/a President

5 PR No. 62 of 2013 on the REDD+ Agency (which was integrated into the MoEF through PR No. 16 of 2015)

To achieve REDD+ objectives in Indonesia by developing relevant policies and implementing REDD+ projects (addressing deforestation, forest degradation and peatland degradation).

Coordination and planning for REDD+ development and implementation in Indonesia, which includes developing:

The REDD+ national strategy

REDD+ safeguards

Actions to mainstream

REDD+ in the development agenda

Financial benefit distribution mechanism

Improving capacity, law enforcement and MRV

REDD+ Agency (discontinued). Line ministries: MoEF, BAPPENAS, MoFa, MoA, MEMR, etc.

UKP4.BPN.

REDD+ Agency (ministry- ranking, but now discontinued).

Stakeholder committee to be established. Funds for REDD+ Indonesia to be established.




6 Constitutional Court Decision No. 35/2012 on indigenous forest management

Restoring indigenous forest management to the indigenous people

Judicial review of Law No. 41 of 1999 on national forest management and utilization. After review, indigenous people have the right to occupy and cultivate forest land for the fulfillment of personal needs.

Constitutional Court

2012 Constitutional Court

7 MoFor Regulation No. 68 of 2008 on the

Implementationof

Demonstration Activities for Reducing Emissions from Deforestation and Forest Degradation

To develop REDD demonstration activities.

Developing REDD methodology, technology and institutions.

MoEF (WG on Climate Change), international organizations, forest concession holders, customary forest managers.

5 years MoEF

8 MoFor Regulation No. 30 of 2009 on the Implementation of the Procedure for REDD

To prevent and reduce emissions from deforestation and forest degradation.

Conducting forest management

activitiesas part of REDD

implementation.Setting the reference

emission level prior to REDD implementation. Conducting monitoring. Submitting a monitoring report to the MoF. Distributing financial benefit based on relevant regulations.

Independent Appraisal (to be

created).REDD

Commission (to be created – now discontinued with responsibility lying with the MoEF). MoEF.

National registry (to be created).

Provincial governments.

Local governments. Forest license holders.

30 years

MoEF (license

issuing).

Local governments (issuing recommendations).

This MoFR is no longer valid since the creation of the REDD+ Task Force (and eventually the REDD+ Agency) by the president. The REDD+ Agency has how been




International organizations.

discontinued

9 MoFor Regulation No. 47 of 2011 on a Partial Transfer of Authority on Forestry Governance

To improve the efficiency and effectiveness of the government’s delivery of public services in the forest sector, particularly

Carbon accounting in forest areas.

MRV preparation.

REDD readiness activities.

Transfer of Authority on Forestry

Governance from the MoF tothe

Bupatis ofBerau, Malinau and

Kapuas Hulu under the

Frameworkof REDD+

Demonstration Activities

MoEF.Berau

Bupati. Malinau Bupati. Kapuas Hulu Bupati.

Not available.

MoEF. Berau Bupati. Malinau Bupati. Kapuas Hulu Bupati.

MoEF to provide additional budget to respective local governments.

10 Government Regulation No. 21 of 2011 on Forest Reclamation Guidelines87

The Forest reclamation guidelines is meant to provide a reference for forest reclamation activities. The objective is to ensure that forest reclamation will be carried out in accordance with general patterns, standards and criteria.

The Forest Reclamation Guideline provides guidance on the following topics: Location inventory, Decision on location, Planning, Execution, Institution, Technical monitoring and assistance, Reporting mechanism, Sanction, Erosion or sedimentation, Location altitude, Types of vegetation

MoEF n/a MoEF

Presidential Regulation No. 1 Year 2016 on Peatlands Restoration Agency

To establish a Peatland Restoration Agency in order to accelerate the peatland recovery of the region and the return of hydrological functions as a result of peat

a. Peatland area of approx. 2,000,000 ha

b. Annual target area: 30% in 2016, 20% in 2017, 20% in 2018, 20% in 2019, and 10% in 2020

c. coordinating and facilitating the

To be developed: Peatland Restoration Agency;

Lead implementation:

2016 - 2020

President The head of Agency was just appointed in Jan 2016.

87 http://faolex.fao.org/docs/pdf/ins107031.pdf




land and forest fires

Peat land area of approx. 2,000,000 ha.

Annual target area: 30% in 2016, 20% in 2017, 20% in 2018, 20% in 2019, and 10% in 2020

restoration of peat land in the province of Riau, Jambi, South Sumatra Province, West Kalimantan, Central Kalimantan Province, South Kalimantan and Papua Province.

d. Implementation and strengthening policy coordination

e. restoration of peat land;

f. mapping hydrological unity of peat land;

g. zoning protection and

h. aquaculture activities;

i. rewetting peat and accessories;

j. rearrangement of burning peat areas management;

k. socialization and education on peat restoration;

MoEF

Source: HPI’s compilation based on (CIFOR 2015)


Table 19: REDD+ related regulations at the sub-national level


Objectives Focus activities Institutions 88 Time Authorities Remarks

1 SRAP Aceh (2013)

The purpose of the Regional Strategy and Action Plan on REDD + is divided into three stages:

1) short-term: improvement of the condition of the overall forest governance so that the province can contribute to the achievement of Indonesia's commitment to cutting emissions by 26-41% by 2020.

2) Medium-term objective: sustainable practices, mechanisms of governance and forest management are widely established and developed

3) Long-term goal: The forestry sector in the province becomes a net sink sector. In addition, sustainable economic and ecosystem services are supported.

(1) Reduce GHG emissions from land users and amendments sector and forestry (Land Use, Land Use Change, and Forestry/LULUCF);

(2) Increasing carbon storage;

(3) Enhance the conservation of biodiversity; and

(4) Increase the value and sustainability of the economic functions of forests.

MoEF (Directorate General for Climate Change Control (DJ-PPI))

2011-2030


2 SRAP Central Kalimantan

tbd MoEF (Directorate General for Climate Change Control (DJ-PPI))


3 SRAP Papua (2013)

(1) Increasing the capacity of forest management and land-based low-carbon management

(2) Optimizing the regulatory and institutional framework for forestry sector

(3) Ensure the active participation of indigenous people in the forest and land-use management


2011-2020


* Sectoral share of total GHG emissions in 2010 in the respective province 88 Institutions involved or to be created



Objectives Focus activities Institutions 88 Time Authorities Remarks

4 RAD-GRK Aceh

The RAD-GRK adjusts national and sectoral policies and instruments originating from RAN-GRK and is to be used in conjunction with the RAN-GRK to improve coherence between the sub-national and national levels, especially with regards to data relevant to GHG inventories and emissions scenarios.

(1) Agriculture and Forest & Peatland (93%*)

(2) Energy & Transport (6.1%*)

(3) Industry & Waste Management (1%*)

Individual provincial government institutions

2013 - 2020

Bappeda

5 RAD-GRK Central Kalimantan

(1) Land-based (99%*)

(2) Energy (0.8%*)

Waste Management

(3) (0.2%*)


2013 - 2020

Bappeda

6 RAD-GRK Papua

(1) Land-based (99.7%*)

(2) Energy (0.2%*)

(3) Waste Management (0.1%*)


2013 - 2020

Bappeda

Source: HPI’s compilation


Table 20: PES related regulations at the national level


Remarks Objectives Forest area eligible Focus activities Institutions 89 Time Authorities

1 Government Regulation No. 6 of 2007 on Forest Planning and the Formulation of Forest Management and Utilization Plans (as revised by GR No. 3 of 2008)

To formulate forest planning as part of forest management in Indonesia.

Production forest management units (KPHP). Protection forest management units (KPHL). Conservation forest management units (KPHK).

Incorporating environmental

services as forest

sector activities,

including: water

utilization, nature-

based tourism, biodiversity conservation, environmental protection, carbon sequestration and/or storage.

MoF (now MoEF), forest license holders.

25 years

Article 19.b

2 MoFor Regulation No. 61 of 2008 on the Procedures for Obtaining Permits for the

Utilizationof

Timber Products in Ecosystem Restoration Activities in Production Forests (as revised by MoFor Regulation No. 50 of 2010)

To develop ecosystem restoration in production forests.

Production forests: 14,000– 200,000

ha.

IUPK.

Environmental service concessions (IUPJL). Logging concessions (IUPHHK).

Protection,enrichment

and maintenance, Biodiversity conservation, NTFP utilization.

MoEF, corporations, forest concession holders.

Max. of 65 years (extension:

35 years)

MoEF

89 Institutions involved or to be created




3 Law No. 32 Year 2009 on Environmental Protection and Management

to reduce and avoid the pollution and damage to the environment and to establish an effective environmental management system

TBA Includes regulations on

Planning;

utilization;

control;

maintenance;

supervision; and

law enforcement

on environmental protection and management

TBA TBA TBA Article 42, 43, and 44 as basis of PES activities in Indonesia.

4 MoFor Regulation No. 36 of 2009 on the

Implementationof

the Permit Issuance Procedure for Carbon Sequestration and/or Carbon Storage Business Activities in Production and Protection Forests

To develop forest carbon sequestration and storage activities.

Environmental services concession in production forests

(IUPJL-HP).

Logging concession in natural forests (IUPHHK-HA). Plantation forest concession (IUPHHK-HT).

Community forest concession

(IUPHHK-HKm).

Community plantation forest concession (IUPHHK-HTR).

Ecosystem restoration

Forest carbon sequestration and storage as part of the environmental service activities in production and protection forests, which include a series of activities under sustainable forest management.

MoEF (DG of Planning, FG Forest

Production).Fo

rest license holders.

MoEF, governor and bupatis/

mayors (license issuing).

Funds can come from internal corporations (concession holders), CSR, donor agencies.




concession (IUPHHK-RE).

KPHs

Conservation forest.

Customary forest.

Rights forest.

Village forest.

5 MoFor Regulation No. 42 Year 2009 on General Pattern, Criteria, and Standard Watershed Management; and Ministry of Forestry Regulation No. 37 Year 2012 on Watershed Management

The objective of this regulation is to coordinate, integrate, synchronize and synergize watershed management in Indonesia

TBA Regulates the national watershed management as a whole including guidance on planning, implementation, monitoring and evaluation of related activities.

MoEF 15 years MoEF PES related to water management as part of watershed management.

6 MoFor Regulation No. 20 of 2012 on Forest Carbon Implementation

To implement forest-carbon activities in accordance with sustainable forest management principles.

Production forests.

Protection forests.

Conservation forests.

Demonstration activities and/or full implementation,

consisting of:

nursery and planting

forest-carbon enrichment

protection of forests in

logging concessions

biodiversity conservation

MoEF (i.e. WG on Climate Change). Forest license holders.

Not available.

MoEF (license issuing).




sustainable forest

management

sustainable forest

protection management

forest conservation

management

community

empowerment

carbon baselining, MRV

boundary mapping and

establishment

7 MoFor Regulation No. 22 of 2012 on Guidance on Environmental Service Tourism Activities in Protection Forests

To provide

guidancefor

nature-based tourism activities.

Nature based tourism service providers (IUPJLWA-PJWA). Nature based tourism facility providers (IUPJLWA-PSWA).

Activities to provide nature-based tourism services. Activities to provide nature-based tourism facilities.

MoEF. Nature-based tourism providers.

20 years

MoEF (license

issuing).

Local governments (extending licenses).

8 Draft of Government Regulation on Environmental Economics Instrument

TBA

TBA TBA TBA TBA TBA Under development.

Source: HPI’s compilation based on CIFOR Occational Paper 132: Forest and land-use governance in a decentralized Indonesia - A legal and policy review, 2015,

http://www.cifor.org/publications/pdf_files/OccPapers/OP-132.pdf

http://www.cifor.org/publications/pdf_files/OccPapers/OP-132.pdf



Table 21: List of PES and REDD+ related regulations in Aceh

Regulation Theme Key points

Governor of Aceh Regulation No. 20 of 2013

Organization Structure and Operation of Technical Implementing Unit (UPT) at the Provincial Government Forestry Office (Dinas Kehutanan Propinsi)

PES function is the responsibility of KPH, under the Forest Protection and Natural Conservation Unit

Provincial Regulation (Qanun) No. 2 of 2011

Environmental Management Article 16 and 19


Forestry Management in Nangroe Aceh Darussalam Province

Article 15, 16, 17 and 38


IUPJL Permit Issuance Article 6, 7, 10

Governor of Aceh Regulation No. 3 of 2014

Provincial Strategic Action Plan (SRAP) Document

Historical deforestation data is provided, for Aceh Province

Ministry of Forestry Decree No. 276/Kpts-VI/97 (23 May 1997).

Leuser National Park

Ministry of Forestry Decree No. 166/Kpts-II/1998

Rawa Singkil Wildlife Reserve

Source: HPI own elaboration

Table 22: List of PES and REDD+ related regulations in Central Kalimantan


Governor Regulation No.41/2014

Management of High Conservation Area (HCA) for plantations in Central Kalimantan

Governor Regulation No.10/2012

Provincial Strategy and Local Action Plan for Reducing GHG emissions (RAD-GRK)

Provincial Regulation No.5/2011

Sustainable Management of Plantation Businesses

Governor Regulation No. 17/2011

Guideline on Plantation Management Permits

Provincial Regulation No.5 of 2003

Forest fire or land control

City of Palangka Raya Regulation No. 7 of 2003

Forest and land fire prevention and mitigation in Palangka Raya

Article 18, clause 3

Source: HPI own elaboration



Table 23: List of PES and REDD+ related regulations in Papua


Provincial Regulation No. 21 of 2008

Sustainable forestry management in Papua Province

Article 55 and 56

Law No. 21 of 2001 Special autonomy of Papua Province –

Provincial Regulation No. 23 of 2013

Spatial planning of Papua Province –

Mimika Regency Regulation No. 2 of 2008

Authority of Mimika Regency –


Protection and Management of Mangrove Ecosystem

–


Spatial planning of Mimika Regency –

Draft Jayapura Regency Regulation

Protection of Sentani Lake –

Draft Jayapura Regency regulation

Cyclops forest and mountain protection

–

Government Regulation No. 59 of 1998

Tariff on state revenue from non taxation

Entrance fee for Lorenz National Park90


90 http://ahabdul.blogspot.co.id/2013/05/tarif-masuk-taman-nasional-lorentz.html

http://ahabdul.blogspot.co.id/2013/05/tarif-masuk-taman-nasional-lorentz.html


Annex 7. Indicative Work Plans

This workplans will need to be refined through further discussions with LESTARI

M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J

Recommendation - Incorporating PES in to Local Funds

Phase 1 - Design of the Approach

Phase 2 - District Level activities

Phase 3 - Village/community Level activities

Phase 4 - Replication


Recommendation - Access NORAD funds & GCF

Phase 1 - Design of the Approach

Phase 2 - Consultations with National Level Stakeholders (MoF,

Phase 3 - Selection of Partners and Eligible Activities

Phase 4 - Proposal development and stakeholder consultation

Phase 5 - Proposal submission and presentation

Phase 6 - Support Funding Rollout, Implementation, Replication


Recommendation - Supporting the Climate Change BLU

Phase 1 - Workshops

Phase 2 - Capacity building

Phase 3 - Support for Project Implimentation


Recommendation - PES design and study

Current institutional and ecosystem landscape

Basic PES design sucture

Nagotiation stage

Implementation

Monitoring and evaluation framework

Implemetation/Pilot

Activities2016 2017 2018 2019 2020

Activities2016 2017 2018 2019 2020

Activities2016 2017 2018 2019 2020

Activities2016 2017 2018 2019 2020

LESTARI

Wisma GKBI, 12th Floor, #1210

Jl. Jend. Sudirman No. 28, Jakarta 10210, Indonesia.

Phone: +62-21 574 0565 Fax: +62-21 574 0566

Email: [email protected]