GGPR Objectives and Policy Recommendations
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On 10 July 2019, the OECD released the first Green Growth Policy Review of Indonesia. It examines progress towards sustainable development and green growth, with a special emphasis on the nexus of land use, ecosystems and climate change.
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GGPR Objectives and Policy Recommendations
- 2. Main objectives of the GGPR • Provide a diagnosis of the state of environment • Help the Indonesian government evaluate progress on green growth goals • Identify and share good practices and innovative solutions in Indonesia • Identify most pressing challenges holding back green growth • Provide targeted policy recommendations to overcome these 2
- 3. Economic growth has been impressive 50 100 150 200 250 300 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2005=100 Real GDP in selected ASEAN countries, China and OECD, 2005-17 China (P.R.) Indonesia Malaysia Philippines Thailand OECD Source: OECD (2018), OECD National Accounts Statistics (database); World Bank (2018), World Development Indicators (database).
- 4. Decoupling of energy use and GHG emissions from economic growth 40 80 120 160 200 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2005=100 Source: OECD (2016), “Greenhouse gas emissions by source”, OECD Environment Statistics (database); MfE (2016) Inventory Submission to the UNFCCC; OECD (2016), OECD National Accounts statistics (database). GDP GHG emissions (excl. land use) Total GHG emissions (incl. land use) Energy supply
- 5. Indonesia is prone to natural disasters 5 0 5 10 15 20 25 30 35 40 China United States India Indonesia Philippines Viet Nam Japan Pakistan Haiti Mexico Top 10 countries with the highest number of reported natural disaster events Climatological Geophysical Hydrological Meteorological Source: CRED (2017), Annual Disaster Statistical Review 2016.
- 7. Air pollution is above WHO guidlines 7 9 6 6 6 6 7 7 7 7 8 8 10 10 10 10 10 12 12 12 12 12 13 13 13 14 14 16 16 16 16 16 16 17 18 21 21 21 22 25 25 0 5 10 15 20 25 30 Mean population exposure to PM2.5 OECD and BRIICS countries (2016), µg/m3 53 WHO guideline value 90 Source: IEA (2018), IEA World Energy Statistics and Balances (database).
- 8. Selected recommendations • Continue to develop air quality monitoring systems • Make information on air emissions publicly available & develop a national emissions inventory • Update standards for industries 8
- 9. WASTE MANAGEMENT 9PHOTO: Melissa Hobson, manta with plastic in Indonesia
- 10. Waste management remains a challenge Landfilled 66% Not managed 20% Composted 7% Waste bank 2% Other 5% Waste management in urban areas, 2016 Source: MEF (2017), Peran Pemerintah Daerah Dalam Pelaksanaan Mitigasi Emisi Gas Rumah Kaca Sektor Limbah [The role of the regional government in the implementation of GHG reduction targets in the waste sector], presentation, Jakarta 24 August 2017. 47% 53% 0 50 100 150 200 250 300 350 400 Status of landfills, 2017 Controlled landfills Open-dump landfills
- 11. Selected recommendations • Close open dumps and expand public waste services to 100% of the population • Strengthen enforcement to ensure that the environmental standards are met in the landfills • Implement extended producer responsibility 11
- 13. Access to water and sanitation is improving 13 0 20 40 60 80 2006 2008 2010 2012 2014 2016 %ofhouseholds Access to improved water sources and sanitation, 2006-17 Improved sources of drinking, bathing and cooking water Improved sanitation services Source: BPS (2018), Environmental Pillar: Indicators of Sustainable Development 2018.
- 14. Selected recommendations • Develop long-term strategies to ensure water security • Enhance monitoring of groundwater levels and enforcement of permits. • Enhance water pollution prevention and mitigation by improving sanitation facilities and expanding centralised sewerage networks in metropolitan areas 14
- 16. Indonesia plays an important role in addressing climate change Note: GHG emissions include emissions and removals from land use, land-use change and forestry. Source: CAIT Climate Data Explorer, Country Greenhouse Gas Emissions, World Resources Institute. MoEF (2018), Laporan Inventarisasi Gas Rumah Kaca dan MRV Nasional 2017 [GHG Inventory Report and National MRV 2017]. [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE][CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] -100% -50% 0% 50% 100% 150% 200% 250% GHG emissions, top 20 world's emitters, 2014 and change in 2000-14
- 17. GHG emissions are on the rise 0 500 1 000 1 500 2 000 2 500 3 000 2000 2005 2010 2015 2020 2025 2030 Mt CO2 eq GHG emissions by sector (2000-16) and targets Energy Industrial processes Agriculture Waste Forestry and other land use Peat fires BAU 2020 BAU 2030 -26% - 41% - 29% - 41% BAU -29% -41% Source: Ministry of Environment and Forestry (2018), Laporan Inventarisasi Gas Rumah Kaca dan MRV Nasional 2017 [GHG Inventory Report and National MRV 2017].
- 18. 18 The electricity mix relies on coal, increasing GHG emissions 0 100 200 300 400 500 600 700 800 900 1000 Korea Indonesia Australia Estonia Mexico SaudiArabia Netherlands China Israel SouthAfrica OECD Japan CzechRepublic Germany UnitedStates Poland Finland Russia Italy SlovakRepublic Ireland Greece Chile Belgium Spain Turkey Hungary Argentina Slovenia Luxembourg France Austria Switzerland Denmark UnitedKingdom Brazil NewZealand Latvia Canada India Sweden Portugal Norway Iceland gofCO2/kWh Carbon intensity of electricity production, OECD and G20 countries, 2017 Source: IEA (2018), IEA World Energy Statistics and Balances (database).
- 19. 19 Investment in renewables needs to accelerate 0 5 10 15 20 25 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 % Share of renewables in primary energy supply (2007-25) Biofuel Geothermal Hydropower Total renewables Note: Excludes energy supply of biomass (mainly firewood and charcoal) and negligible quantities of solar and wind energy. Source: Ministry of Energy and Mineral Resources (2018), Handbook of Energy & Economic Statistics of Indonesia 2017. Projected increase based on past growth rates Increase needed to reach target Target: 23%
- 20. MAKING THE TRANSITION MORE COST-EFFECTIVE
- 21. 21 There is room for better use of environmental taxes 1.6% 0.8% 0% 1% 2% 3% 4% % of GDP Revenue from environmentally related taxes, selected emerging economies, 2016 Source: OECD (2018), OECD calculations based on OECD Environment Statistics (database).
- 22. Most GHG emissions from energy use face no carbon price 0% 20% 40% 60% 80% 100% CHE LUX NOR FRA GBR IRL ISL SVN NLD KOR GRC ITA AUT ESP DNK DEU FIN PRT SVK SWE BEL CAN ISR HUN LVA POL MEX JPN CZE EST TUR USA NZL ARG AUS CHL IND ZAF CHN BRA IDN RUS Carbon pricing gap at EUR 30 in 2015, OECD and G20 countries Note: The carbon pricing gap measures how much countries fall short fall short of pricing CO2 emissions in line with a benchmark value for carbon prices of EUR 30 (a low-end estimate of the climate damage from 1 tonne of CO2 emissions). Data refer to CO2 emissions from energy use only. Source: OECD (2018), Effective Carbon Rates; IEA (2018), IEA CO2 Emissions from Fuel Combustion Statistics (database). 86% of CO2 emissions from energy use face are not priced
- 23. Great progress in reducing subsidies for fossil fuel consumption… 3.6% 0.8% 0% 1% 2% 3% 4% 5% 0 50 100 150 200 250 300 350 400 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* IDR trillion Government expenditure on energy consumption subsidies Electricity LPG Kerosene Diesel Petrol * Planned budget. Source: Government of Indonesia (2017), Country submission to the G20 Fossil Fuel Subsidies Reform Initiative. % of GDP
- 24. The land-use, ecosystems and climate nexus
- 25. • 10-15% of global flora and fauna • One of the world’s largest tropical forests • 20% of mangroves • 20% of coral reefs One of the world’s most biodiverse countries 25
- 26. Deforestation is high, but declining -3 -2.5 -2 -1.5 -1 -0.5 0 million ha Ten countries with the largest average annual reduction in forest cover 2010-15 2005-10 Source: FAO (2018), FAOSTAT (database).
- 27. Deforestation has decreased since 2015 0.0 0.2 0.4 0.6 0.8 1.0 1.2 2012 2013 2014 2015 2016 2017 Million ha Net deforestation in Indonesia, 2012-17 -56% Source: OECD (2018), OECD calculations based on OECD Environment Statistics (database).
- 28. Protected areas need to expand to reach the Aichi target Source: OECD (2018), "Biodiversity: Protected areas", OECD Environment Statistics (database). 0 5 10 15 20 25 30 35 40 45 % of territory Terrestrial protected areas in selected G20 countries, 2018 Aichi target 0 5 10 15 20 25 30 35 40 45 % of the EEZ Marine protected areas in selected G20 countries, 2018 Aichi target
Notas del editor
- Welcome and thanks Dear friends, good morning. It is a great pleasure for me be here this morning to launch the OECD Green Growth Policy Review of Indonesia. On behalf of the OECD, I would like to extend a warm welcome to all you of you. And I would like to express our gratitude and thanks to those of you who have participated in the development of this report – a process of nearly two years! The fact that we have gathered high-level presentatives and experts of so many different ministries (MoEF, Finance, BAPPENAS, MENKO) showcases what we consider to be at the heart of green growth: to integrate environmental considerations into all economic sectors and spheres of government. The integration of environmental goals in Indonesia’s national development plans and the Ministry of Finance’s engagement in green finance are good practices that other countries can learn from. Please allow me to present to you the key messages that emerge from the GGPR, before we entre into discussion of some specific items.
- For those of you who are less familiar with the OECD: The OECD is a forum where countries can compare policy experiences, seek answers to common problems, identify good practice and work to co‑ordinate domestic and international policies. In this spirit, the GGPR’s objectives are to: Provide a diagnosis of Indonesia’s state of environment (areas covered: climate change, air quality, water management, waste management, biodiversity protection, and integration of environmental concerns into economic sectors) Help the Indonesian government evaluate progress in achieving its environmental and green growth goals Identify good practices and innovative tools used in Indonesia and share these with other countries facing similar challenges Identify the most pressing challenges holding back economic and environmental performance Provide concrete and targeted policy recommendations to help Indonesia achieve its sustainable development goals Allow me to share with you some of the main takeaways from the review. [Note: Could be dropped]
- Two decades after the Asian Financial Crisis, Indonesia’s economy is larger, stronger and more inclusive than ever before. GDP grew at 5% annually, lifting millions of people out of poverty.
- Indonesia has decoupled some environmental pressures from economic growth: Between 2005 and 2016, GHG emissions and energy supply have grown at a slower pace than GDP. However, environmental pressures remain high in Indonesia. Energy demand and GHG emissions will continue to rise in absolute terms with economic and population growth. Air pollution is above international guidelines; clean freshwater is becoming scarcer; and pollution and land use change are putting under pressures on Indonesia’s unique biodiversity. Transport, waste, and water infrastructure has not kept pace with the rapid population growth and urbanisation. These pressures create high environmental, economic and health costs, especially for the vulnerable and poor. At the OECD, we also like to plot other environmental indicators on this chart, for instance air emissions, water and material consumption and waste generation. However, data on these dimensions are generally limited in Indonesia. While we recognize that there have been important improvement, the GGPR urges Indonesia to keep investing in the collection, harmonization and analysis of environmental data. It is the first step for informed decision making and evaluation of the effectiveness of public policies.
- Indonesia is also among the countries in the world with the highest risk from environmental hazards and climate change impacts. This highlights the need to put resilient, low-emission infrastructure at the heart of Indonesia’s sustainable growth strategy.
- COVER
- Air pollution The average population exposure to air pollution is lower than in many other emerging economies (marked in dark blue), but it is still above the WHO guideline value. Indonesia made progress in addressing air pollution, for instance by adopting the EURO 4 standards for passenger vehicles. Cities like Jakarta have seen massive investment in public transport and introduction of traffic management policies (such as the odd-even system, car-free days). Data collection has considerably improved, with about 40 cities now having permanent monitoring stations. However, the country is missing a comprehensive and systematic air emission inventory; air emission standards for certain stationary sources (e.g. coal power plants) are low by international comparison and enforcement of standards needs to be improved.
- The GGPR therefore recommends to: Continue to expand monitoring systems for air quality Make information on air emissions publicly available & work towards a national emissions inventory Update standards for large industries
- COVER
- Indonesia has a good legal basis for sound waste management. But more efforts are needed to put these into reality. 20% of urban solid waste is not collected and managed. Nearly half of landfills are open/uncontrolled dumps, a number which is however declining. Needless to say, this creates significant air, soil and water pollution that comes at high environmental, health and economic costs. The GGPR welcomes Indonesia’s initiatives to improve its waste management, including the scaling up of “waste banks”. This is an innovative tool that will be interesting for other emerging and developing economies. The GGPR welcomes the new National Solid Waste Management Policy and Strategy, which aims to reduce waste generation by 30% by 2025 and to properly manage the remainder, and recommends to implement it with priority.
- COVER
- Access to improved water and sanitation improved steadily. But, the expansion of water supply and sewerage networks has not kept pace with population growth and urbanisation. This, combined with pollution of surface waters, has forced people to rely on groundwater, leading to over-extraction in several areas. The water quality of rivers and lakes is poor and has declined over the past decade. Half of Java’s rivers are considered polluted or heavily polluted.
- Indonesia is among the world’s largest GHG emitters and has seen a relatively large increase in emissions since the turn of the century (both is shown on the chart). It therefore plays an important role in addressing global warming.
- Emissions increased by 42% since 2000 and, under a BAU scenario, will growth even faster in the coming decade. Indonesia has set GHG emission reduction target for 2020 and 2030 and it put in place several elements of an integrated framework for climate change to achieve them: A remarkable achievement is the integration of climate change in the national development plan and notably the development of Indonesia’s first “low-carbon development plan” for 2020-24; Indonesia also introduced budget tagging for climate change in 2015; and launched initiatives to leverage climate finance, for example through green bonds. I am sure we will hear more about these important initiatives during the discussion this morning. Thanks to its policies put in place, Indonesia is on track to achieve its 2020 target. However, The GGPR warns that more efforts are needed to meet the 2030 target, particularly in the two sectors that account for the bulk of emissions: i) energy and ii) land use, land-use change and forestry (LULUCF).
- Indonesia’s power mix is one of the most carbon-intensive among OECD and G20 economies (and actually in the world). This stresses the importance of accelerating the decarbonisation of power supply, especially in light of the rapidly growing demand for electricity. Plans to raise coal use significantly to meet growing energy demand put coherence with climate change objectives into question. The GGPR therefore calls for better alignment energy policy with climate change objectives. It calls for targets and a strategy to reduce the carbon intensity of the energy sector. ----- The development of Indonesia’s first “low-carbon development plan” for 2020-24 is an opportunity to achieve better policy alignment. It is an important endeavour that will hopefully inspire other fast-growing economies.
- Indonesia has a large potential for renewable energy and set an ambitious target: to source 23% of energy supply from renewables by 2025. However, current investment levels are low by international comparison. As you can see on the chart, a step increase is needed if Indonesia is to reach its 23% target. The GGPR therefore calls for a comprehensive, transparent and achievable plan to accelerate the development of renewables. ---- Overall, we have seen that public investment in the green economy has increased considerably. Indonesia’s “budget tagging system” has shown that 5.4% of the state budget supported the green economy in 2018. While this is a success story, the GGPR highlights that more needs to be done to leverage private sector investment in the green economy. Water, sanitation and waste management remains severely underfunded. Service charges and tariffs are often kept down out of affordability concerns, but this has discouraged investment in service expansion and improvement. The GGPR suggests that service fees should be raised, at least for those who can afford it.
- One of the GGPR’s key messages is that better use of green taxes and cost-reflective pricing of services would make the green transition more cost-effective. Revenue from environmentally related taxes reached 0.8% of GDP, a relatively low share compared to OECD countries and other emerging economies. Most of this revenue stems from vehicle taxation (while transport fuel taxes account for the greatest part of environmentally related tax revenue in most OECD and G20 countries). In Indonesia, energy taxation is particularly low.
- Energy prices are well below their true costs, due to a combination of low energy taxes and fossil fuel subsidies. This not only discourages energy savings, it also makes it hard for renewables to compete with fossil fuels. This slide shows the carbon pricing gap, an indicator developed by the OECD that shows how much countries fall short fall short of pricing CO2 emissions at EUR 30 (= the low-end benchmark of the climate damage from 1 tonne of CO2 emissions). You can see that Indonesia’s carbon pricing gap is the second largest among OECD and G20 countries. Only 86% of total energy use in Indonesia faces a carbon price; and those 14% that are prices, face a relatively low price The review recommends to move towards more cost-reflective energy pricing that reflect the true cost of energy use. More concretely, this implies raising transport fuel taxes and introducing energy taxes or an explicit carbon price for other sectors. The GGPR recommends Indonesia to implement an explicit carbon price, even if at low levels. This should go hand in hand with the reduction of fossil fuel subsidies – an area in which Indonesia has already made grade progress in recent years.
- This slides shows how expenditure for fossil fuel consumption subsidies have declined. This is an area that Indonesia is to be commended for. However, you can see that subsidies went up again in 2018 and 2019. The GGPR encourages Indonesia to follow its success in 2015 and 2016 and continue to reduce energy consumption subsidies, which mostly benefit the rich. Social policies are better placed to support poor households than energy subsidies.
- Indonesia’s biodiversity is of global importance. Ten to fifteen percent of global flora and fauna, one of the world’s largest tropical forests, 20% of mangroves and 20% of coral reefs are home to Indonesia. However, its ecosystems face pressures from habitat loss due to deforestation and forest degradation, pollution, over-exploitation and climate change.
- The expansion of agriculture and timber plantations (legal and illegal) has been a major source of habitat loss. Between 2005 and 2015, Indonesia has lost 7% of its forests (which adds up to the size of the United Kingdom). This is the second largest area in absolute terms, after Brazil.
- However, there a positive signs: deforestation dropped by half since a peak in 2015.
- Protected areas cover 12% of land area, and 2% of marine area – below the respective Aichi targets of 17% and 10%. As in many countries, protected areas are often fragmented. Effective biodiversity conservation in protected areas is hampered by insufficient funding and capacity gaps. The GGPR congratulates Indonesia for the steps it has taken to address the issues that have historically hampered more sustainable land use. A key policy is the adoption of moratoriums to slow conversion of peatland to agriculture, which as you know, is one of the main sources of GHG emissions and a driver of biodiversity loss. We also welcome the increased resources and better inter-agency collaboration and the increased resources allocated to monitor and enforce laws related to forestry. Institutional reforms, such as the establishment of Forest Management Units, are helping improve forest management at the site level The One Map initiative is a key step to clarify the legal status of land, a major barrier to sustainable land management in the past. The Social Forestry programme is helping improve community access to land. All these are important initiatives. Looking forwards, it will be important to monitor these programmes to ensure that they lead to more sustainable management on the ground. It is a question of securing sufficient financial and human resources to build capacity, align sector policies and effectively co‑ordinate action across government levels. The GGPR recognizes the establishment of the Environmental Fund Management Agency as an important step in accessing the USD 1 billion, which Norway has pledged to support reducing emissions from deforestation and forest degradation (REDD+). We believe that this Fund can act a an important player in establishing carbon markets, and to make it economically attractive for people and businesses to preserve the natural capital they own or use.
- To conclude, Indonesia has significant opportunities for accelerating the transition towards a low-carbon, greener and more inclusive economy. We hope the evaluation and the recommendations in this report will help Indonesia develop a shared vision and a comprehensive green growth strategy for a low-carbon economy. Indonesia’s impressive economic performance over the last 20 years leaves no-one in any doubt that it knows how to generate solid economic growth. The question for the next quarter century is whether it will be able to continue to deliver that growth in a way that protects its natural asset base. OECD stands ready to support Indonesia in the implementation of the recommendations outlined in this review. I look forward to open and lively fruitful discussion.