Institute for Global Environmental StrategiesTowards sustainable development - policy oriented, practical and strategic research on global environmental issues

Experience in Implementing Experience in Implementing Indonesia Climate ChangeIndonesia Climate Change

Program Loan and Lessons for Program Loan and Lessons for Future CooperationFuture Cooperation

May 6, 2011Hironori Hamanaka

Chair of the Board of DirectorsInstitute for Global Environmental Strategies

ADB-JICA-AFD Seminar at ADB Annual Meeting, Hanoi, Viet Nam

Panel Questions (Tentative)• Q1: Is investing in “climate-smart” development really smart?

What changes in international financing framework are critical to facilitate “climate-smart” development? Is there a need for new international investment-development paradigm?

• Q2: Which mechanisms did/did not Southeast Asian countries adopt to mobilize investments to address climate change? What are key strengths and weaknesses? What changes are necessary for domestic policy frameworks in various Southeast Asian countries?

• Q3: What are the drivers and determinants of “climate-smart” investments, especially from the private sector? What are the key reasons for limited private investments in Southeast Asia? What needs to be done to change this situation?

• Q4: Which innovative financing mechanisms (climate change credit lines, program loans, carbon funds, climate change trust funds, etc.) are worth pursuing in Asia in general and Southeast Asia in particular, especially for climate change adaptation and disaster risk reduction?

Introduction• Government of Japan (GOJ) and JICA, in collaboration with

AFD, have been providing a Climate Change Program Loan (CCPL) to the Government of Indonesia (GOI) since 2008.– With a view to supporting GOI in enhancing climate

change mitigation and adaptation policies and measures.

• Setting targets in the policy matrix, addressing Indonesia’s major concerns and priority with regard to climate change

• Conducting monitoring and policy dialogues

– General budget support by the loan • Experience gained in implementing CCPL and lessons

leaned are useful:– For answering some of the panel questions– For planning and implementing NAMAs, and for

promoting international cooperation to support enhanced actions by developing countries.

Why Indonesia?

• A major emitter of GHG• Vulnerable to climate change impacts• National Climate Change Action Plan (2007)• Hosted UNFCCC COP13 and adopted the

Bali Action Plan (2007)• Japan and Indonesia agreed on CCPL (2008)

– Focusing on institution building to enhance climate mitigation and adaptation actions

– GOJ/JICA and AFD have been providing program loan to GOI.

Estimated net greenhouse gas emissions in Indonesia

Source: ”Indonesia’s National Action Plan and MRV”, Ministry of Environment, Republic of Indonesia, 2010.

Indonesia’s low carbon development: challenges

MainstreamingMainstreaming climate policy in national development program

Enhancing capacities for policy implementation 　　　　　– Financing schemeFinancing scheme 　– Establish greenhouse gas inventory systeminventory system 　– Develop NAMA & MRV systemNAMA & MRV system

• For CCPL, development of MRV systems (in terms of MRV of actions as well as MRV of financing of CCPL)

– Further improve policy coordinationpolicy coordination among government agencies 　

– Enhancing capacities of local governmentEnhancing capacities of local government 　　 Improving and enhancing international cooperation

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General budget supportGeneral budget support

Policy dialoguesPolicy dialogues

Monitoring/assessment of agreed policy targets/actions

Monitoring/assessment of agreed policy targets/actions

How CCPL operates?

Providing information for discussion/decision makingProviding information for

discussion/decision making

Deciding continued/additional support

Deciding continued/additional support

Modifying/adding targets/actions as

necessary

Modifying/adding targets/actions as

necessary

CCPL Phase I (2007-09) Policy MatrixCCPL Phase I (2007-09) Policy MatrixImplementation of legal/regulatory and institutional reforms; legal/regulatory and institutional reforms; and pilot projects and pilot projects are monitored/discussed in the following sectors and cross sectoral issues:

MitigationMitigation AdaptationAdaptation

Cross sectoral issuesCross sectoral issues

LULUCF

Energy

Water Resource

Agriculture

Understanding climate change impact; Mainstreaming; Spatial Planning;

CDM; Co-benefits; Fiscal Incentives; Early Warning Systems

Disaster managemen

t

Marine, Coral & Fisherie

sWater

Supply & Sanitation

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CCPL Phase II (2010-2012) Policy MatrixCCPL Phase II (2010-2012) Policy Matrix Phase II puts more priority on upstream policiesPhase II puts more priority on upstream policies or key policy issues (planning, or key policy issues (planning, GHG inventory, financing)GHG inventory, financing) More stakeholders are joining the cooperative framework. i.e. World More stakeholders are joining the cooperative framework. i.e. World bank(2010-))bank(2010-))

MitigationMitigation AdaptationAdaptation

Key policy issuesKey policy issues

LULUCF

EnergyWater

ResourceAgricultur

e

Mainstreaming

Marine, Coral & Fisheries

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Financing scheme/ Policy coordination

GHG inventory

Vulnerability assessment

Transportation

Provided further opportunity to coordination and communication in inter-ministerial issues:

Watershed management issueRenewable energy development

Facilitated sharing progress/challenges of policy actions and discussion on potential measures/additional cooperation toward further progress among GOI, and development partners: (e.g.) forestry, renewable energyMainstreamed climate change into development issue (National Medium Term Development Plan ( 2010-14) and Indonesia Climate Change Sectoral Roadmap)Implemented important new policies in key sectors

could provide further progress of policies and actions in public and private sector in the future

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Experience in preparation, monitoring and implementation of policy matrix provides insight to development of NAMA and MRV.

Series of policy dialogues based on monitoring the policy matrix in CCPL process brought positive effects to

indentifying barriers to and discussing countermeasures for implementation of policies and projects;enhancing additional international cooperation (i.e. development of additional TAs and Grant)

Factors would strengthen positive effects of CCPL:

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Sense of ownership among all relevant ministries/agencies is key to success of programs; Targets should be linked with clear means of evaluation; A series of strategically designed policy dialogues can facilitate the introduction of enhanced climate policies and better coordination among stakeholders;Budget process is strengthened to encouraging sector ministries engage more seriously.

Better coordination with other schemes addressing climate change (such as JICA climate change related TAs) is important.

Potential contribution to the collective effort for enhancing

climate actionsExperience gained in implementing CCPL:

– Demonstrate that developing countries can enhance climate actions, with appropriate support by developed countries.

Experience in developing NAMAs and MRV system in Indonesia, through CCPL Phase II and TA projects:– Can be widely shared with international

community, and– Is expected to contribute to the design of

international MRV system.

Further issues related to panel questions (1)

(Related to First Question) • Further aligning development and climate change

assistance (i.e. grant, TA and loan, multi-funding approach, etc)

• Develop a evaluation tool and guidelines for MRV of development assistance

(Related to Second Question)• CCPL process provides further international

cooperation• Indonesia developed Innovative mechanisms

– ICCTF – REED+ financing instrument (on-going)

• Weakness: need to enhance personal and institutional capacity • Strength: secure budget with national ownership

Further issues related to panel questions

(Related to Third Question)• One of the major barriers for limited private

investment is domestic regulatory uncertainty in Indonesia.– Pricing/subsidy issue

• To attract private investment, further policy reform should be encouraged.– Developing policy framework and attempting

to establish exploration fund and FIT(feed-in-tariff) scheme for geothermal power (in the policy matrix)

Thank you very much

Hironori HamanakaChair, Board of Directors,

Institute for Global Environmental Strategieshamanaka@iges.or.jp