Climate Change and Indonesia

By Charlie Reed

Background• Physical

– 735,000sq mi; – 17,000 islands

• Social Indicators– Population – 211,700,000 (4th Largest in the World) – Growth – 1.3%, Replacement Rate 2.3– Urban 43%– Poverty 16%– Income Per Capita $810 (GNI 2003)– Life Expectancy 67– .6% of GDP on health, 1.2% of GNI on education (Low)– Net Primary Enrolment %93; Illiteracy 12%

Indonesia is better off then other low income countries.

• Economic indicators– GDP growth 3.4% ; per capita GDP growth 2.3%; Was around 6% until Asian financial crisis

– Economic make up (Value Added % of GDP)• 16.6 % Agriculture (40% of labor force)• 43.3 % Industry• 39.9 % Services

– Export 31.2% of GDP, Import 25.7%

• Investment Climate– Lost share in world export market

– Major issues Investors : macroeconomic instability, policy uncertainty, and corruption• Indonesia must improve investment laws and increase confidence in the government• Survey shows that it takes 151 days to start a business (Thailand 33, Malaysia 30, China 41)

– Terrorism affects investment• After 2002 Bali and 2003 Marriot bombing investment approvals declined

• Future Economic Outlook – GDP growth to be 5% in 2005 and should remain high

– Investment Climate to improve

Carbon Emissions

• Indonesia is responsible for 1% of global total.

0

1

2

3

4

1980 1985 1990 1995 2000

Total CO2 Emissions

CO2 Emissions Per Capita

CO2 Emissions Per GDP (1993 Rupiah)

CO2 Emissions, Relative Trends, IndonesiaIndex 1980 = 1

Source: Energy Information Administration, World Development Indicators

Climate Change Impacts on Indonesia

• More than 17,000 islands, 81 thousand km coastlines- Estimated cost of about 10% GDP

• Health

–Like other developing countries- Increase transmission of vector born diseases

– Heat stress• Impacts due to sea level change

– 1990- 110 of 170 million live on near the Ocean. – Loss of marsh land and other agricultural land costing 11.3 billion annually (60cm)– Tsunami is example of how sea level rise can devastate the poor ocean side population.

• Forestry– Forestry will benefit because of increased growth- Studies show that 2 times CO2 causes

tropical biomass growth of 12% • Agricultural Impacts

– Agricultural production will decline due to flooding, erosion, loss of arable land, and accelerated evapotranspiration during dry seasons

– Crop yields will fall• Soybean production would decline by 20% to %40 and rice by 2.5%

– Estimated that soil erosion and land loss has cost $6 billion annually

Developments/Agencies• Indonesia signed UNFCCC in June 1992 and ratified it in August 1994• Set up a monitoring system for CO2 emissions and sinks.• Set up the National Committee on Climate Change (NCCC) to address

climate issues– Consist of representatives from various government agencies, NGOs, academic

and business communities.– Strengthen the coordination between government institutions.– Develop national institutions to anticipate climate change. – Evaluate the implementation of UNFCCC and KP.– Develop global cooperation and partnership in dealing with CC issues.– Represent Indonesia in the COP’s meetings and high level summits related to the

convention and the protocol. – Encourage active participation of all stakeholders in dealing with CC.– Encourage and guide R&D in related sectors. – Encourage and guide technology transfers in order to reduce GHG in all sectors.

• Indonesia signed the Kyoto Protocol in 1998• Approved its ratification on June, 28 2004

Agencies

• Ministry of Environment– Oversee all environmental affairs

• NCCC– Consist of representatives from various government agencies, NGOs, academic

and business communities.– Strengthen the coordination between government institutions.– Develop national institutions to anticipate climate change. – Evaluate the implementation of UNFCCC and KP.– Develop global cooperation and partnership in dealing with CC issues.– Represent Indonesia in the COP’s meetings and high level summits related to the

convention and the protocol. – Encourage active participation of all stakeholders in dealing with CC.– Encourage and guide R&D in related sectors. – Encourage and guide technology transfers in order to reduce GHG in all sectors.

Secretary: Deputy Min. for Env. Conservation of MOE

Vice Secretary: Head of AMG

Chair:

Minister of Environment

Secretariat /Support. Unit:

Climate & Atmospheric Affairs, MOE

NDPA DOFA DOFO DOHRI DEMR DIT DOT DOA DOH DOHA DOFI MORT DMF NISA

The National Committee on Climate Change

MOE = Ministry of the EnvironmentAMG = Agency for Meteorology and GeophysicsNDPA = National Development Planning AgencyDOFA = Department of Foreign AffairsDOFO = Department of ForestryDOHRI= Department of Housing and Regional InfrastructureDEMR = Department of Energy and Mineral ResourcesDIT = Department of Industry and Trade

DOT = Department of Transportation DOA = Department of AgricultureDOH = Department of HealthDOHA= Department of Home AffairsDOFI = Department of FinanceMORT= Ministry of Research and TechnologyDMF = Department of Maritime and FisheriesNISA = National Institute for Space & Aeronautics

• Under Article 12 the objective is to assist Annex 1 countries to meet there target, and assist Non Annex 1 countries to achieve Sustainable Development

• Since 1996 Indonesia has actively supported the Activities Implemented Jointly (AIJ) mechanism

• Indonesia will be looking to attract CDM projects– Indonesia has the potential of hosting CDM projects that reduce a total

of 125 MT of carbon– Revenues of 50m/yr, profits of $25m/yr

• Indication of a country’s preparedness for CDM Projects– Ratification of Kyoto protocol – Appointment on a Designated National Authority (DNA)– Approved Criteria for National approval of CDM projects– Number of projects approved

CDM

• Ministry of the Environment established Indonesia’s Designated National Authority (NDA) in April 2004

– The DNA would act as a National Focal Point for communication between parties.

CDM

CER

UNFCCC Secr.

CER

NFP

COP SBSTA,SBI

Stakeholders

National Committee

• Currently there are several components that need capacity building

– DNA– Project proponents– Local authorities– Local communities and other local stakeholders– Potential operational entity– Legal consultant– Financial institutions

CDM

• CDM should only be accepted if they fulfill these Criteria to develop Sustainable Development.

– No adverse environmental impact

– Environmentally sound technology transfer

– Stakeholder participation

– Respect of Customary Right (land tenure)

– Increased employment

– Community development program

– Capacity building improvement

– Local economic benefits

– Equitable distribution of benefits

– No net increase in external debt burden

– See notes for more explanation

Posible CDM Projects• Wayang Windu Unit 2,

– 110MW geothermal project in Java. Potential reduction for a crediting period of 7 years around 750,000 tCO2e for 5.2 euro a ton

• Utilization of Combined Solar, Wind and Biomass for a small agro-processing unit– Potential emission reduction of 9,600 tCO2e over 10 years

• Bandarjaya Rice Husk Power Plant– Rice husk to be used to generate electricity . Potential of emission reduction is 139,390 over

10 years.

• Inducement efficiency project– Use alternative fuels and various process optimization techniques to reduce CO2 emissions

from cement producer. Reduction of one million tCO2e/year

• Countries that have shown the most interest are Netherlands, Japan, Denmark, Austria and Canada

• "We'll offer more qualified projects that reduce more carbon, a guarantee that the projects will be sustainable and of course, a more negotiable price of carbon,"

– Sudariyono, the deputy for environmental conservation at the Office of the State Minister of Environment.

Sinks (Forestry)

• Forest considered second to only Brazil as the most important world heritage of tropical forest

• The inclusion of sinks can be very profitable for Indonesia– If Indonesia were to control 10% of the market for sinks they would produce 1.8

mtCO2e/year, causing revenues of an extra $80 million.

• Indonesia has recently had a startling decline in forest cover– Despite a 38% increase in plantation forest overall has fallen by 16% from 1990

to 2000– Fires have reduced forest cover, emitted CO2 and regional air pollution, and

have cost billions

• Adding value to forest through sinks would reduce the incentive fro deforestation

– By combining carbon emission and forestry into a system with clear property rights, progress could be made in solving many of Indonesia's environmental issues linked to deforestation.

Forest

• Growth of Indonesian forest provide a sink that sequester CO2 at a rate of 686,790 Gg annually– The energy sector in Indonesia 170Gg annually

(1994)

Percentage Change in Forest Area by Type, Indonesia, 1990-2000

-20% 0% 20% 40% 60% 80%

Plantation

Natural Forest

Total Forest

Percentage Change 1990-2000

World

Asia (excluding Middle East)

Indonesia

Source: World Resources Institute

Oil and Energy

• Indonesia is part of OPEC receives $9 billion a year from oil exports – Export 1.4 million barrels of oil a day out of world total of 78

million barrels which is 3.8% of OPEC in 2003– A decreased demand for oil because of Kyoto protocol would

decrease revenues because of decreased market share of OPEC.

– But Indonesia's Oil capacity is decreasing. In 1991 they represented 6% of OPEC output and produced under capacity.

• Effects of a rise in Oil Prices– On one hand it increase value of oil exports and generates

revenue– On the other hand higher oil prices reduce demand for exports.

• Increase of oil cost by $10 causes a .6% decrease of world GDP growth

Oil and Energy• Indonesia subsidizes oil prices

– As oil prices rise the cost of subsidies increases causing major fiscal strain

• Implications of subsidies on energy use– Since oil is under priced in Indonesia there is a tendency to overuse.

– Energy use per GDP has increased slightly while in most countries it has decrease by approximately 1% a year reflecting increased efficiency.

– Indonesian can increase the economic incentive for energy efficiency reducing CO2 emission

• Side Note: While OPEC is the sworn enemy of the Kyoto Protocol and emission reduction measures, yet it has probably done the most to curb climate change by inflating prices and making cleaner option viable.

Steps to Reduce Indonesia’s Emissions

• Any steps measures to reduce emission must do so without hampering the national development objectives. – Energy

• Removal of subsidies• Promote Renewable energy• Promote public adoption of energy conservation• Restructure prices to include externalities

– Transportation• Promote use of public transportation.• Road Pricing and area traffic control systems to allow road users to realize

the value of that public good• Control vehicle emission and promote the use of clean fuels

– Agriculture• Promote improved agricultural practices that emit less GHG

• Staple food diversification by promotion of non rice food sources

• Improve technology transfer.

– Forestry• Stronger regulations of forest management

• Revise current management policies

• Prevent the occurrence of forest fires through better preparation

• Replenish forest

– Costal Resources• Promote coral reef rehabilitation and develop national marine

resource evaluation and planning program

• Continue to Develop a nationwide tide gauge station network to monitor sea level rise

• Prepare long term adaptation strategy for possibility of sea level rise.

Conclusions• Indonesia is highly susceptible to damage from climate change and

sea level rise.– Have a vested interest GHG reduction

• Indonesia has just ratified the Kyoto protocol and is interested in CDM projects– Successful implementation of CDM project could improve the

investment environment as a whole and attract investors in all markets.– CDM projects would help achieve the ultimate goal of sustainable

development.• Energy subsidies are costly and hazardous to the environment.• Carbon sinks can be used to set up a clear system of property rights

to help manage and protect the forest cover• Many Steps that can be taken to reduce CO2 emissions improve

other pollution problems and contribute to Sustainable Development

Thank You• http://unfccc.int/resource/docs/natc/indonc

1.pdf

• http://dna-cdm.menlh.go.id/en/

• www.menlh.go.id