• Current Condition: need to change

• Toward Green Economy

• Closing Remarks

2

CURRENT CONDITIONNeed to Change

3

World Economy Significantly Grow

Sumber : Austrian Development Agency (2010) dalam Adiningsih (2010)

Yet, …..

With Treats to Environment………….

Sumber: United Nations Environment Programme (2010 & 2011)).

Source : United Nations Environment Programme (2010).

UNEP: Business As Usual Scenario by 2030:

• Global energy demand up by 45%• Oil price up to US$180 per barrel• GHG emissions up 45%• Global average temperature up 6°C• Sustained losses equivalent to 5-10% of global

GDP• Poor countries will suffer costs in excess of 10% of

their GDP

Lead to Uncertain Economic Growth...

Sumber : United Nations Environment Programme (2011) dalam Adiningsih (2010) .

INDONESIA

• The on‐going unbalanced ecological footprint  (unsustainable pattern of consumption and production) vs bio‐capacity ECOLOGICAL DEFICIT;

• Recent economic crisis and environmental disaster leads to no‐option than shift to sound‐economic development.

8

0

500

1000

1500

2000

2000 2005 2010      BAU

2015      BAU

2020      BAU

2020 target

Peat Fire

LUCF

Waste

Agiculture

Industry

Energy

‐26%

‐41%

• Environmental condition is alarming, furthermore GHG emission tends to increase;

Indonesia’s 2020 carbon challenges

• Absence of market and economic value on the natural resources and environment;

• Lack of priority, and limited options of policy instruments, incl. Legal basis to develop various incentives;

9Source: World Bank (2002)and LIPI (2010)

Biodiversity lost: case of Borneo

10

PAPUA

KALTIM

KALBARRIAU

KALTENG

NAD

SUMSEL

JAMBI

JATIMJABAR JATENG

SUMUT

SULSEL

SULTENG

KALSEL

SUMBAR

NTB NTT

SULTRA

LAMPUNG

MALUT

MALUKU

SULUT

BENGKULU

BABEL

BALI

BANTEN

DIY

GORONTALO

0 340 680170 Kilometers

Legend

Green GDP% GDP reg57 ‐ 7374 ‐ 8081 ‐ 8586 ‐ 8990 ‐ 92

Map of Indonesian Green GDP

sumber: KLH, ESP2 DANIDA, 2009

Environmental Quality Index of Islands (av. 2006 – 2008)

Main Islands EQI _________________________________1. Papua 75,292. Sulawesi 73,663. Bali dan Nusa Tenggara 68,964. Sumatera 64,635. Kalimantan 62,016. Jawa 53,50_______________________________________

Indonesia 60,07

Sumber: MoE, ESP2 DANIDA, 2009

Based on 3 indicators: surface water quality, air quality and land  coverage

Unsustainable consumption and production (huge Ecological Footprint) 

Without environmental carrying capacity (Bio‐Capacity)consideration, lead to:ECOLOGICAL DEFICIT..

Business As Usual Is Not The Answer,

Change Lifestyle globally is A MUST

Sumber : Adiningsih (2010) .

TOWARDSGreen Economy

13

Source : Austrian Development Agency (2010).

Green Economy is not a new concept, yet has been 40 years in development…

Limits to growth: scenarios (Meadows) 1960s 

Questioning consumption: (Ehrlich) 1970s

Sustainable development: (Brundtland 1989)

Green economic policy: (Pearce 1989)

Returns to environment investments: (Pearce 2005)

Economics of climate change: (Stern 2006)

Economics of ecosystems and biodiversity: (TEEB 2009)

Prosperity without Growth: (Jackson 2009)

Beyond GDP: (Sarkozy Commission 2009)

Source : United Nations Environment Programme (2010).

•Increase in greeninvestment

•Increase in quantity & quality of jobs in green sectors

•Increase in share of green sectors in GDP

•Decrease in resource use per unit of production

•Decrease in Environmental cost of production or consumption

• Decrease in wasteful consumption

UNEP’s GE

Source : Austrian Development Agency (2010) in Adiningsih (2010).

GE Coaliton(Green Economy Coalition):

“A fair and resilient economy, which provides a better quality of life for all achieved within the ecological limits 

of one planet”

Different people emphasise different levels:

Micro‐economic activity: local green activities & (social) enterprise

Macro‐economic policy:set of economic and institutional policies (prices, accounting…)

Values:new paradigm and new innovation (protect nature, social justice/equity, resilient economy)

Global Initiatives on Green Growth and Green Economy: a comparison...

Source : Institute for Global Environment Strategies (2010).

3 Bottom line of Sustainable

Development

ENVIRONMENT “Planet”

ECONOMY “Profit”

SOCIAL “People”

•Efficiency•Growth•Stability

• Poverty • Social Gaps• Culture

Natural resources .Pollution/degradation .

Biodiversity .

Profit

People Planet

Eksploitatif Ekstraktif

Conflict

Sumber : Eryatno (2011)

Satisfaction of Human Needs by the Efficient

Use of Resources

Respect for Ecological Integrity

and Biodiversity

Social EquityPOLICY DESIGN

Equity Between Generations

Delegation of Authority

Stakeholder Participation

Ecological Services

Good Decision Making

Traditional Knowledge

Source : Eryatno (2011)

People Participate

BusinessEcology Ecological Services Industries

Ecological Carrying Capacity

Green Investment

Traditional KnowledgeStandard (effluent/ambient

Source : Eryatno (2011)

Why are so many people thinking we should first become rich and deal with climate problems later? It is the convenient paradigm of the Kuznets curve of pollution

Poor and clean

Rich and dirty

Rich and clean

Conventional Wisdom:More Wealth, more carbon intensity

Sumber : von Weizsacker (2009)

Escaping from this mindset means we need a„Kuznets Curve“ of decarbonization!

Rich and carbon free

GREEN ECONOMY “ Indonesia is of the view that Green Economy is a development paradigm that based on resource efficiency approach with strong emphasizes on internalizing cost of natural resource depletion on environmental degradation, efforts on alleviate the poverty, creating decent jobs, and ensuring sustainable economic growth” 

(Indonesian Delegation/DELRI, UNEP 11th G SS, February, 2010)   

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Definisi:Kondisi membaiknya kehidupan (well being) dan keadilan sosial (social equity) dengan secara signifikan mengurangi resiko lingkungan dan kelangkaan ekologi.

Green economy: menghubungkan pertumbuhan ekonomi, keberlanjutan lingkungan

(Bappenas, 2012)

25

Both.. PUBLIC POLICIES and MARKETS fail the environment

(subsidized growth, distorsed energy price, no internalization the externalities)Are main causes of the current environmental challenges

INTERVENTION TO

CORRECT MARKET AND BEHAVIOUR

25

UNSUSTAINABLE CONSUMPTION AND PRODUCTION

SUSTAINABLE PRODUCTION ANC CONSUMPTION

SCP framework 26as it  lead s to sustainable development , it requires incentives

Economic to follow waves of innovation:

Source : United Nations Industrial Development Organization (2009) in Adiningsih (2010).

Effectiveness & Impacts

• Building Environmental Awareness  EIs have been able to raise environmental awareness of stakeholders. 

• Incentivizing Sustainable Use of Resources  provide incentive fot stakeholders to move towards sustainable use of resources behaviour

• Promoting Environmental Investment  shifted “end of pipe” to “industrial efficiency”

• Complementing Environmental Law Compliance EIs, such as environmental labelling, environmental performance rating system as well as environmental compensation,  contribute to enhance environmental compliance of the stakeholders, and to strengthen environmental law enforcement.  

28

Hindrances

• Lack of common understanding about economic instrument for environmental management among stake holders in Indonesia

• Lack of sectoral support to implement economic instrument;• Lack of legal framework, especially with regard to fiscal 

instruments;• There are many conflicting regulatory instruments with regard 

to fiscal initiatives for natural resource extraction and environmental regulation;

• Lack of clear targets for implementation of economic instrument both at local scale and national scales.

29

30

Scope of EIs for Environmental Protection and Management in Indonesia

3131

PLANNING FINANCE/FUND

Natural Resources and Environmental Accounting (NREA)

Internalization of Environmental Cost

Green GDP/GDRP

Environmental Emergency Fund for Mitigation and  Rehabilitation

Environmental Performance Bond

INCENTIVE/DISINCENTIVE

Green Banking and sound Capital Market

Environmental Taxation (retribution, tax, subsidy, fee, etc)

Payment for Environmental Services (PES)

Tradeable permit

Environmental Performance Award

Green Procurement 

Environmental Compensations (Payment for Environmental Services between regions)

Environmental Labelling (Ecolabel)

Environmental Trust Fund

Environmental Insurance

Green Government Budget

Source: Act 32/2009

Revenuemobilisation

Incentives towardssustainable resource use

Objectives of Environmental Finance

Incentives set by the State

Payments forEnvironmental

Services

Access and Benefit Sharing

Carbon Offsets

Environmental funds

Debt-for-nature swaps

Mechanisms foradministrating funds

Refundsystems

Concessions or performancebonds

Creation of markets

Private donations

Emission charges Tradable

permitsEnvironmentaltaxes

Waste and water fees

certificationEnvironmental Fiscal Reform

Fundsfrom outside

resourcemanagement

Funds linked

to resourceuse (self-

generated)

Funds from governmentand donors budegts

Reform and removal of adverse subsidies

Productcharges

Diagram modified from Emerton, L. et al. (2006) Sustainable Financing of Protected Areas, IUCN and Fischer, A. / Petersen, L. / Hubbert, W. (2004): Natural Resources and Governance: Incentives for Sustainable Resource Use, GTZ).

Overview of development of incentive instruments for the environment  in Indonesia (emphasized by Act 32/2009)

32

• Fiscal Policy  incentives for REDD/ forestry / other sector

• Streamlining DAK for Environment

Carbon Tax

Fiscal  mechanism/ tax exemption for manufacturingto  encourage low emission 

Grant mechanism for transport system

Climate Change

Subsidy/ fiscal incentives for renewable energy

Time 2010 2011 2012 2013 2014

• Develop charge mechanism for waste

• Develop protocol for Payment for Environmental Services (PES)

• Capacity Building For EI’s• Develop protocol for environmental

damage assessment • Legal framework Develop protocol for economic valuation in

relation to spatial planning

33

From Lessons Learned To Further Development

34

Focus on getting the market price of environment right

1. Shifting away levies from items that are valued highly by society (manual work, intellectual creativity) to undesirable items (pollution);

2. Tax-subsidies to correct distortions (taxing private for subsidizing public transportation, taxing fossil fuel to subsidize wind energy);

3. Environmental service user pays the provider (down-stream river user pays upstream river people to prevent sedimentation)

35

Integrating decentralized policy making• Provinces and Districts are autonomous to impose

levies on natural resources with Central Government’s approval.

Effective implementation in nature• Possible and reasonable cost to implement, falls as

clearly and directly as possible on the ultimate payer, embody no favoritism or special exception, correspond to the payer’s ability to pay, and NOT bring about undesirable economic distortions.

Public and Private Involvement

• Actively involvement of stakeholders are crucial

SUGGESTIONS FOR FURTHER DEVELOPMENT

To set a policy direction for further develop economic instruments for environmental protection and management in Indonesia, aiming, mainly, to change unsustainable consumption and production pattern into more resource use efficient behaviour

36

GREEN ECONOMY AS ONE OF KEY TO SUSTAINABLE DEVELOPMENT

PRO PEOPLE (poor people) PRO GROWTH

PRO ENVIRONMENT PRO JOBS

GREEN ECONOMY

• Extended Producer Responsibiliry

• CSR 

• FROM MAINSTREAMING TO COMPLEMENTARITY• TIERING/LEVELING OF INDICATOR: global & local

• INTEGRATED DASH BOARD OF SUSTAINABLE DEVELOPMENT 

• Green GDP• Inclusive 

Economic  Policy

• ENR Intensity• Env. Quality 

Index• Green Budget 

Rasio

• Rasio on decent jobs

• Labour wealth

CLOSING REMARKS • Shifting to inclusive and sound environmentally economic growth  is 

a must  through changing unsustainable consumption and production pattern;

• Implementing economic instrument for environmental management in Indonesia is both timely and urgent as an integral part of Indonesia’s sustainable development;

• Given many varieties of economic instruments to be implemented with their complexities and constraints, a priority must be chosen;

• There are many initiatives that have been developed and implemented with regard to those instruments in Indonesia. Yet, there are some constraints with these initiatives which could be remedied and improved. 

38

Thank YouContact us:

Assistant Deputy for Environmental EconomicDeputy Minister for Environmental Governance

A Building, 4th floor Jl D.I Panjaitan Kav 24 

Kebun Nanas ‐ Jakarta TimurPh/fx.  +62 21 8517161