Opportunity and Risk of REDD+, Green Economy, and Sustainable Development

OPPORTUNITY AND RISK of REDD+, GREEN ECONOMY, AND SUSTAINABLE DEVELOPMENT

Dr. Irfa Ampri Center of Climate Change Financing and Multilateral Policy

Fiscal Policy Agency, Ministry of Finance

Jakarta, 25 July 2012

Outline

• The Future Economic and Development agenda

• New Business Opportunities

• Challenges (Risk)

• Risk Mitigation

• Conclusions

The Future Economic and Development Agenda

• REDD+

Rewarding actors that maintain and protect forests in both the forest area and

other land use area (Area Penggunaan Lain - APL)

– contribute significantly (85%) to achievement of national commitment (27/41)

• Green Economy (GE)

One that results in improved human well-being and social equity, while

significantly reducing environmental and ecological risks

• Sustainable development (SD)

Development that meets the needs of the present without compromising the

ability of future generations to meet their own needs (Economic Growth,

Environmental Aspect, Social Aspect)

• REDD+ correlates closely to the effective implementation of GE with

later contributing to the SD goals

New Business Opportunity

• If managed properly according to the country’s specific, REDD+ and GE will not be the threats for the achievement of national agenda (maintain high growth and reduce poverty level)

– The issue is how to effectively use the resources availability in order to compete with the traditional ways

• On the contrary, REDD+ and GE can provide new economic and business opportunities while at the same time conserve the environment and ecology

– Business providing added value and resource efficiency

• New industries and clean and renewable energy will arise

Global total New investment in clean energy, 2004–11 ($bn)

Source: Bloomberg New Energy Finance Note: Includes corporate and government R&D, and small distributed capacity. Adjusted for re-invested equity. Does not include proceeds from acquisition transactions

$54bn

$75bn

$113bn

$153bn

$187bn $189bn

$247bn

39%

51%

35%

22%

1%

31%

2004 2005 2006 2007 2008 2009 2010

$0bn$0bn

$0bn

$0bn

$0bn $0bn

$260bn

5%

2004 2005 2006 2007 2008 2009 2010 2011

$0bn$0bn

$0bn

$0bn

$0bn $0bn

$260bn

5%

2004 2005 2006 2007 2008 2009 2010 2011

5%

New Business Opportunity (Indonesia Case)

• New ways of doing business in forest areas and APL will reduce carbon

emission to 778.15 Million Ton CO2e by 2014.

– Assuming carbon price of US$4 per ton CO2e, new business in forestry

sector will produce revenues of USS 3.2 billions.

• 2% investment in green economy in Indonesia will provide 4,4-6,3 million

new job opportunity, in 5 years a head (report by Green and Decent Job dari

International Trade Union Confederation)

• Ecotourism can create jobs and provide revenue to support the conservation

of natural capital. Ecotourism in Indonesia is growing by 8% per yea

• Banning in exporting raw rattan and other forest raw materials will expand

and create industries providing value added with better price. At the same

time, reduce the exploitation of forest and ecology.

No Activities/Targets Location

Estimate Carbon

Emission Reduction

Carbon Credit Value (assume US$4 per ton

CO2e)

(Million Ton CO2e)

(US$ million)

1 Penataan Batas Kawasan Hutan sepanjang 25.000 Km

Seluruh provinsi

123.41 493.64

2 HTI/HTR seluas 3 juta ha 26 provinsi 110.1 440.4

3 Lahan pertanian baru seluas 325.000 ha

11 provinsi 103.98 415.92

4 Optimalisasi Lahan gambut terlantar dan lahan non tanaman pangan seluas 250.000 ha

9 provinsi 100.75 403

5 Hutan Kemasyarakatan (HKm)/Hutan Desa (HD) seluas 2.500.000 ha

25 provinsi 91.75 367

6 Kemitraan usaha dalam hutan rakyat seluas 250.000 ha

11 provinsi 9.18 36.72

7 Kelapa sawit seluas 860.000 ha 19 provinsi 74.53 298.12

8 Karet seluas 105.200 ha 14 provinsi 2.38 9.52

9 Kakao seluas 687.000 ha 16 provinsi 5.42 21.68

10 Rehabilitasi lahan kritis pada DAS prioritas seluas 1.954.000 ha

Seluruh provinsi kecuali DKI Jakarta

71.71 286.84

11 Ekosistem esensial sebagai penyangga kehidupan sebesar 10 %

17 provinsi 41.5 166

12 konservasi dan perlindungan hutan pada 12 provinsi prioritas

12 provinsi 49.77 199.08

13 REDD di kawasan konservasi (hutan gambut)

2 provinsi: Jambi dan Kalteng

3.67 14.68

Total

788.15

3,152.60

Opportunity and Risk Attachment forestry.docx

Challenges (Risk)

• REDD+ and GE will threat the achievement of national development

goals

– of As developing Country ---- Grow now, clean up later (prefer short term

achievement > long term goal

– Some studies show that moratorium of new licenses for logging and plantation

brings negative economic impacts to certain local communities

• Sustainability of international commitment is not clear

o Grant, technology transfer, voluntary carbon market, and countries’

commitment in achieving emission reduction goals

• Sustainability of Government commitment:

o Moratorium, Financial support (BLU, K/L DIPA, grants), & Fiscal incentives

o Licensing for carbon businesses

Challenges (Risk continue..)

• The limitation of public funding

o Public funding to leverage private participation

• Private business involvement in green environment and forest

sectors are still limited

• Sustainability of local government support:

o Moratorium, Licensing for carbon businesses

o Benefit and incentives for local economy

• Mitigation of tenure conflict in degraded lands including peat lands

o Benefits and incentives for local community

o Protection for carbon businessmen

• The sustainability of carbon prices and participation parties

Risk Mitigation

• Change the culture from the recipient to the owner of REDD+

• 4 Pilllar of development strategy (pro growth, pro poor, pro job, pro environtment)

should work simultaneously and equally

• Prioritize education and R&D

• Manage appropriate public finance support (budget, fiscal incentives, and regional

Transfer)

• Provide a comprehensive incentive support for the participation of private and

financial sectors

• New institutions in managing REDD+ (REDD+institution and Dana Perwalian)

should show best practices and concerted collaboration with related parties

• Active participation in multilateral fora showing our best examples in attracting other

countries increase commitment

• Donors assistance is still relevant in the area where Indonesia has the limitation in

implementing REDD+ and GE

Conclusions

• REDD+ correlates positively with GE and SD

• REDD+ and GE will not be the threats for the achievement of

national agenda (maintain high growth and reduce poverty level)

• REDD+ and GE can provide new economic and business

opportunities while at the same time conserve the environment and

ecology

• Challenges in effective implementation of REDD+ and GE are

abundant, and can be mitigated through, among others, change the

culture, education, sustainability of public finance, improvement of

investment climate for private and financial institution

participation, and active diplomacy in international fora

THANK YOU