ESP2_3.FGD 2 Green Economy Strategy

FGD 2 Green Economy Strategy

Output: 3. Implementation of Economic Instruments for Environmental Management

Prepared by:

LPM EQUATOR

Minutes of Event

Event : FGD 2 Green Economy Strategy

Output : Report F. Paper on Review of Existing Fiscal Policy of Environmental

Management in Indonesia

Date : July 28th, 2011

Budget Line : 3

Environmental Support Programme

TABLE OF CONTENTS

1. Cover (Name of Event) 2. Executive Summary 3. TOR of the Event 4. Meeting Minutes 5. Event Materials

ESP-Environmental Support Programme

Danida

EXECUTIVE SUMMARY


Output : Report F. Paper on the Review Existing Fiscal Policy for

Environmental Management in Indonesia


Budget Line : 3

Background One of the critical issues that need to be addressed in

Indonesia’s economic development is how its economic progress

could be balanced with sound environmental management. The

green economy strategy is one of such a options to address this

issue. The ministry of environment along with DANIDA ESP2

project have agreed to pursue the green economy strategy as a

vehicle for sound environmental management. In this regard,

green economy strategy has been selected in Danida-KLH

Concept Notes of ESP2 Implementing Economic Instrument in

Indonesia. To identify such a strategy, series FGDs has to be

carried out to condense the right strategy for pursuing green

economy’s Indonesia. The first FGD was held and has identified

several keys challenges such as fiscal policies, scaling up

opportunities, and political sensitivity with regards to energy

subsidy. Those challenges need to be answered so that the a

comprehensive strategy could be identified. It is the intention of

this second FGD that those strategies should be discussed,

challenged and condensed for designing the concrete green

economy strategy.

Objective The objective of the second Focus Group Discussion is to

highlight some key strategies developed from previous FGD and

discuss these with relevant stakeholders. The purpose is to get

reactions, elaboration, and scrutinizing challenges and

opportunities in their implementation.

Expected Result 1. A comprehensive conceptual design of achieving green strategy in Indonesia’s economic setting

2. Systematic and comprehensive strategies of pursuing green strategy in Indonesia.

3. Comprehensive and systematic programs to support implementation of green economy in Indonesia.

Follow up the

forthcoming event

The first focus group discussion highlighted various issues, problems, and gaps in the existing initiatives to promote green economy in Indonesia. Among those gaps, the followings can be considered the keys: 1. The green economy concept has not been well-understood

especially at the grass root level 2. Green economy initiatives do exists in Indonesia, yet its

effectiveness in achieving measurable targets relative to our economy or to the damage that we have done is hardly discussed.

3. Failures in scaling-up of many good initiatives may have been attributed to the ineffective and inconsistent market regulation; risk of losing competitiveness; financial constraints; and sub-optimal coordination; and

4. Big push, macro level reform like removing energy subsidies has been constrained by social and political barriers.

In order to narrow those gaps, the following general strategies can be identified yet should be elaborated into workable policies and programs: Strategy 1: Establishing and quantifying targets of greening

the Indonesian economy at macro, micro, sectoral, and regional level.

Strategy 2: Breaking social and political barriers of abolishing energy subsidies

Strategy 3: Harmonizing policies and programs across government agencies through the revitalization or the creation of effective coordinating institutions.

Strategy 4: Promoting green investment by private financing with complementary public capital expenditure.

Strategy 5: Creating and revitalizing market regulation that is effective, consistent without reducing economic competitiveness.

Strategy 6: Revenue-neutral tax substitution to encourage favourable behaviour of economic agents toward green economy.

Strategy 7: Optimizing the inter-governmental fiscal relation to promote green economy.

Strategy 8: Strengthening the existing environmental regulatory agencies.

Strategy 9: Promoting behavioural changes toward green economy across all elements of society through systematic, structured, and long-term oriented public education.

TERMS OF REFERENCE FOR EVENT





Budget Line : 3

BACKGROUND

One of the critical issues that need to be addressed in Indonesia’s economic

development is how its economic progress could be balanced with sound

environmental management. The green economy strategy is one of such a options

to address this issue. The ministry of environment along with DANIDA ESP2 project

have agreed to pursue the green economy strategy as a vehicle for sound

environmental management. In this regard, green economy strategy has been

selected in Danida-KLH Concept Notes of ESP2 Implementing Economic Instrument

in Indonesia. To identify such a strategy, series FGDs has to be carried out to

condense the right strategy for pursuing green economy’s Indonesia. The first FGD

was held and has identified several keys challenges such as fiscal policies, scaling

up opportunities, and political sensitivity with regards to energy subsidy. Those

challenges need to be answered so that the a comprehensive strategy could be

identified. It is the intention of this second FGD that those strategies should be

discussed, challenged and condensed for designing the concrete green economy

strategy.

OBJECTIVES

The objective of this second FGD, among other things are:

1. To discuss a comprehensive design of achieving green strategy for Indonesia’s economic development

2. To identify concrete strategies of achieving green economy given existing fiscal, social and political constraints

3. To provide a comprehensive and systematic programs that support green economy strategy.

OUTPUTS

4. A comprehensive conceptual design of achieving green strategy in Indonesia’s economic setting

5. Systematic and comprehensive strategies of pursuing green strategy in Indonesia.

6. Comprehensive and systematic programs to support implementation of green economy in Indonesia.

AGENDA

08:00 – 09:00 Registration

09:00 – 09:20 Opening remarks (KLH)

09:20 – 10:20 Key person presentations

Medium and long-term strategies for the promotion of green economy in Indonesia: key target indicators and how to achieve them – BAPPENAS (Deputy Minister for Natural Resources or her representative)

Existing and future fiscal initiatives to promote green economy: shortcomings and challenges – Fiscal Policy Office/BKF, Ministry of Finance (Mr. Kindy Sjahrir/BKF)

Removing social and political barriers to reforming energy pricing policies – Parliament/political party representatives (Dr. M. Ikhsan Mojo, Partai Demokrat)

10:20 – 10:30 FGD technical guidance by consultant

10:30 – 12:00 FGD (Plenary discussion)

12:00 – 12:30 Harvest by consultants

12:30 – 12:40 Closing remarks

12:40 – 14:00 Lunch

Descriptions

of the

Participants/

Invitees

Participants are expected to consist of the following:

Bappenas staffs that has been taking part in green economy initiatives at the agency.

ESDM staffs that has been taking part in green economy initiatives at the ministry.

Ministry of Trade and Industry staffs that has knowledge on their current program on promoting green economy initiatives to manufacturing sectors.

Fiscal Policy Office staffs that have knowledge in fiscal instruments to support green economy including climate change mitigation.

Local government. Relevant NGOs. Relevant experts. Relevant private sectors.

Minutes of Meeting





Budget Line : 3

1. List of Participants

KEMENTERIAN/LEMBAGA PHONE/EMAIL STATUS

Kementerian Keuangan

1 Direktur Pajak Daerah dan Retribusi

Daerah, Direktorat Jenderal

Perimbangan Keuangan Daerah

087880055484/

[email protected],

081394555957/

[email protected]

Riva Setiara, Adrian K

2 Kepala Pusat Kebijakan PPRF, Badan

Kebijakan Fiskal

08158124724/

[email protected],

081227018596/

[email protected]

Mutaqin, Prima

Yudhistira

3 Kepala Pusat Kebijakan Ekonomi

Makro, Badan Kebijakan Fiskal

081380898771/

[email protected]

Subkhan

Bappenas

1 Direktur Perencanaan dan

Pengembangan Pendanaan

Pembangunan, Deputi Bidang

Pendanaan Pembangunan

[email protected]

Anna Amalia

Kementerian Lingkungan Hidup

1 Staff Asisten Deputi Ekonomi

Lingkungan, Deputi Bidang Tata

Lingkungan

021-8517161/

[email protected],

081315185630/

[email protected]

Novrizal Tahar,

Sulistianingsih S,

Isharyanto, Untung

Kementerian Kehutanan

1 Kepala Pusat Penelitian dan

Pengembangan Kebijakan dan

Perubahan Iklim

08161996976/

[email protected]

Fitri Nurfatriani

Kementerian ESDM

1 Direktur Aneka Energi Baru Dan

Energi Terbarukan, Direktorat

Jenderal Energi Baru, Terbarukan

dan Konservasi Energi

081320939327/

[email protected],

081393701860/

[email protected]

Andri Suhindra, Adhi

Devawijaya

2 Direktur Panas Bumi, Direktorat

Jenderal Energi baru, Terbarukan

dan Konservasi Energi

081320738905/

[email protected]

Dwipayana

3 Direktur Konservasi Energi,

Direktorat Jenderal Energi Baru,

Terbarukan dan Konservasi Energi

085727191119/

[email protected]

Safiul

mailto:[email protected]













4 Direktur Teknik dan Lingkungan

Ketenagalistrikan, Direktorat

Jenderal Listrik dan Pemanfaatan

Energi

081316892740/

[email protected]

Fauzi

Kementerian Pertanian

1 Kepala Pusat Analisis Sosial

Ekonomi dan Kebijakan Pertanian

08121110367/

[email protected]

Istiqlal Amien

Kemeterian Pekerjaan Umum

1 Kepala Pusat Pembinaan

Penyelenggaraan Konstruksi

08122526706/

[email protected],

081905606339/

[email protected]

Nugroho Wuritomo,

R Angga M

Kementerian Perindustrian

1 Pusat Pengkajian Industri Hijau dan

Lingkungan Hidup

087888692745/

[email protected]

Denny Noviansyah

Kementerian Tenaga Kerja &

Transmigrasi

1 Kepala Pusat Administrasi

Kerjasama Luar Negeri/

081904109475/

[email protected]

Alfania Ramdhani

2 Sekretaris Direktur Jenderal

Pembinaan Hubungan Industrial

dan Jaminan Sosial Tenaga Kerja,

Direktorat Jenderal Pembinaan

Hubungan Industrial dan Jaminan

Sosial Tenaga Kerja

[email protected]

Dinar Titus

3 Direktur Produktivitas dan

Kewirausahaan, Direktorat Jenderal

Pembinaan Pelatihan dan

Produktivitas

0818970014/

[email protected]

Kris Wahyuni

4 Kepala Balai Besar Produktivitas,

Direktorat Jenderal Pembinaan

Pelatihan dan Produktivitas

081398999678, 081380951614 Indarti, Budi Hartati

Kementerian Perhubungan

1 Direktur Lalu Lintas dan Angkutan

Jalan, Direktorat Jenderal

Perhubungan Darat

081932442014/

[email protected]

Desi Waluyanti

2 Direktur Bina Sistem Transportasi

Perkotaan, Direktorat Jenderal

Perhubungan Darat

085292539635/

[email protected],

0819870553

[email protected]

Fahni M, Jose Anri G

DANIDA

1 Mogens Strauup 081613040664

2 Monica

International Institute For

Sustainable Development












1 Regional Coordinator for TKN

Southeast Asia (Alexander Chandra)

0818825323/

[email protected],

0817790440/

[email protected]

Lucky Lontoh,

Alexander C. Chandra

Pertamina

1 Director of General Affairs 08121015531/

[email protected]

Sri Oetari S

PLN

1 Direktur Energi Primer 0811482706/

[email protected]

Denny Marbun

2 Direktur Bisnis dan Manajemen

Resiko

08128205553/

[email protected]

M Budi Setianto

IPB

1 Prof. Ir. Akhmad Fauzi, M.Sc., Ph.D

Universitas Padjadjaran

1 Dr. Suzyanna

2 Arief Anshary Yusuf, SE., M.Sc.,

Ph.D

081399399985/

[email protected]

Konsultan Equator

1 Ir. Rimun Wibowo, M.Si 0811117109/

[email protected]

2 Intan Adhi Perdana, S.Pi., M.Si 08122383855/

[email protected]

3 August Restiawan Soetisjno, SE.,

MM

085888160928/

[email protected]

4 Ir. Denny D. Indradjaja, MEP, MSIE

5 Drs. Nandang Mulyasantosa, MM










AGENDA

FGD 2 GREEN ECONOMY STRATEGY, 28 JULY 2011

Waktu Kegiatan

08:00 – 09:00 Participant registration

09:00 – 09:20 Opening remarks

09:20 – 10:20 Key Person Presentation:

Dr. Ir. Endah Murniningtyas, MSc , Deputy Minister for Natural Resources and Environment, BAPPENAS

“Strategi untuk Pengembangan Green Economy di Indonesia.”

Dr. Kindy Sjahrir, BKF

“Fiscal Avenue for Green Growth.”

10:20 – 10:30 FGD's Technical Guidance by Consultant

10:30 – 12:00 FGD (Plenary discussion)

12:00 – 12:30 Harvest by consultant

12:30 – 12:40 Closing remarks

12:40 – 14:00 Lunch break

Describe the overall main activities and outputs/discussions/outstandings

under each agenda)

1 Introduction

The objective of the second Focus Group Discussion is to highlight some key strategies

developed from previous FGD and discuss these with relevant stakeholders. The purpose is

to get reactions, elaboration, and scrutinizing challenges and opportunities in their

implementation.

The first focus group discussion itself highlighted various issues, problems, and gaps in the

existing initiatives to promote green economy in Indonesia. Among those gaps, the

followings can be considered the keys:

5. The green economy concept has not been well-understood especially at the grass root

level

6. Green economy initiatives do exists in Indonesia, yet its effectiveness in achieving

measurable targets relative to our economy or to the damage that we have done is

hardly discussed.

7. Failures in scaling-up of many good initiatives may have been attributed to the

ineffective and inconsistent market regulation; risk of losing competitiveness; financial

constraints; and sub-optimal coordination; and

8. Big push, macro level reform like removing energy subsidies has been constrained by

social and political barriers.

In order to narrow those gaps, the following general strategies can be identified yet should

be elaborated into workable policies and programs:

Strategy 1: Establishing and quantifying targets of greening the Indonesian economy at

macro, micro, sectoral, and regional level.


Strategy 3: Harmonizing policies and programs across government agencies through the

revitalization or the creation of effective coordinating institutions.

Strategy 4: Promoting green investment by private financing with complementary public

capital expenditure.

Strategy 5: Creating and revitalizing market regulation that is effective, consistent without

reducing economic competitiveness.

Strategy 6: Revenue-neutral tax substitution to encourage favourable behaviour of

economic agents toward green economy.



Strategy 9: Promoting behavioural changes toward green economy across all elements of

society through systematic, structured, and long-term oriented public

education.

2 Perspectives from Bappenas and Ministry of Finance

The FGD featured two presentations from two strategic government agencies: Bappenas and

Ministry of Finance. Bappenas sees green economy as an integral part of a broader concept

of sustainable development and emphasizes that green economy must always be related to

other development agendas. Its place in the context of development planning is by bridging

the gap between the Millennium Development Goals (MDGs) and The Environment or natural

capital. Commenting to the 9 strategies, Bappenas reminded that there should be distinction

between long-run and short-run strategies.

Ministry of Finance (MoF) sees the green economy cannot be implemented without changing

the structure of incentives in the economy. Low returns on green economy (such as green

investment) is the biggest obstacles to its success. The key element for changing this

incentive structures is fiscal policies. MoF also recognized that energy pricing reform is

necessary for green economy and highlighted some policy reform options. However, it seems

that those options presented is not really straightforward and does not take into account the

element of urgency in regards to the waste of resources involved from spending around $20

billion per year for energy subsidy.

3 The nine strategies

3.1 Strategy 1 - Establishing and quantifying targets of greening the Indonesian

economy at macro, micro, sectoral, and regional level

The strategy (strategy 1) of establishing and quantifying targets of greening the Indonesian

economy at macro, micro, sectoral, and regional level is indeed important. Indonesian

government has given an example of implementing this strategy through its national action

plan to reduce greenhouse gasses emissions by 26% (with domestic resource and an extra

15% with international assistance). This is a good example of how quantification of target

can be implemented. However, this strategy only focuses on climate change yet there are

many other pressing environmental problems not addressed by this national action plan like

local pollution, water resource, and biodiversity. At the practical and regional or local level of

economic planning, to work, these targets have to be reflected as well with spatial planning.

3.2 Strategy 2 - Breaking social and political barriers of abolishing energy subsidies

With regard to strategy 2 on breaking the social and political barriers of reducing fuel

subsidy, there is a tone of optimism coming from various stake holders. As evidenced by

various studies like mapping of societal elements, fuel pricing reforms is not actually

objected by the majority of elements within the civil society. Elements of the civil society can

be surprisingly open for rational and discussion about the reforms. The remaining stumbling

block is actually political barriers. Political opponents of any government in office will always

see any plan of reform as potential political advantages. In the current political map without

single majority, political calculation has been the main reasons for the slow reform. This

situation is quite in contrast to the idea that political parties or parliaments are supposed to

be a representation of society of which majority of it is not resistant to the fuel pricing

reform.

Interestingly, energy subsidy has been seen by stakeholders including key government

officials and representative from electricity company (PLN) as blocking the way toward the

green economy. The fact that the subsidies goes to wrong beneficiaries are the primary

concern. All consumers including large-scale industries do enjoy the subsidy. The general

understanding is that subsidy is not always a wrong policy measure so long as it is correctly

targeted. One way of better targeting is by changing it from subsidizing commodities into

directly subsidizing people who need them. The potential of consensus on the attitude

towards the fuel subsidy is right before us. Political barrier now is identified as the single

bottleneck for reform.

3.3 Strategy 3 - Harmonizing policies and programs across government agencies

through the revitalization or the creation of effective coordinating institutions

Some of the stakeholders see that harmonizing policies and programs across government

agencies through the revitalization or the creation of effective coordinating institutions

(strategy 3) is necessary to implement a green economy strategy that works. A good

example of problems attributed to sub-optimal coordination and harmonization of policies is

in geothermal development. First, geothermal is planned to be a good substitute of fossil

fuels, yet its competitiveness in relative to fossil fuels is still low due to bad pricing policies

and excessive development of cheaper fossil energy like coals. Second, geothermal

development is conflicting with land acquisition regulation where its authority lies with

regional or local government. There are some cases where full support from regional

government is not as strong as expected for reasons like unfair distribution of benefit from

geothermal revenues as perceived by regional government. Another example of sub-optimal

harmonization that is seen by stakeholders is our policy on sales of natural gas. High

domestic demand seems to be sacrificed for foreign exports. Natural gas is relatively cleaner

compared to other fossil fuel like coals hence; its consumption is favourable from green

economy’s perspective.

3.4 Strategy 4 - Promoting green investment by private financing with

complementary public capital expenditure

Possible focuses of attentions are pointed out in the discussions regarding the strategy 4 of

promoting green investment by private financing with complementary public capital

expenditure. Investment in geothermal sector does need a major government role due to

high risk involved in the phase of exploration and exploitation. Private-public partnership

(PPP) should be exploited to as a strategy to promote green investment in other areas. There

is room of opportunity as the institutional foundation for this scheme has been established

such as the setup of the Indonesian Infrastructure Guarantee Fund (IIGF). This can be used

as good instrument for managing fiscal risks. As far as green economy strategy is concerned,

however, any scheme related do the PPP approach need to be tailored to promote specifically

green investment or green infrastructure such as in energy sector and transportation sectors.

The incorporation of green economy agenda in this effort needs to be ensured.

3.5 Strategy 5 - Creating and revitalizing market regulation that is effective,

consistent without reducing economic competitiveness

Private sector initiatives in green economy activities have been widely observed.

Technological conversion for energy conservation, for example, has already taken place in

industries. However, to make this kind of activities extended covering the majority of

business entities, market regulation is very crucial because the business-as-usual

unregulated markets are not favourable toward green economy. Corporate Social

Responsibility need to be enhanced with a structured incentive system modified through

appropriate regulations. Such regulations need to at least have the following properties: (1)

The regulation or the change in the regulation needs to have clear objectives and important

(non-negligible, big in size relative to the economy) and measurable impacts; (2) the

regulation need to minimize the deterioration of our industries’ competitiveness especially to

our foreign trading partners; (3) a guarantee that the changing in regulation will be

consistent across the long period of time.

3.6 Strategy 6 - Revenue-neutral tax substitution to encourage favourable

behaviour of economic agents toward green economy

Revenue-neutral tax substitution is a policy of increasing some taxes, such to discourage

polluting or resource-intensive activities yet reducing other taxes (or subsidizing) such as to

encouraging green economy or green investment or even any general taxes that can

encourage economic activities or to neutralize adverse impact of introducing the new taxes.

Increasing tax alone can be perceived negatively by businesses, yet the idea of tax

substitution may have less or even zero negative perception. Stakeholders, however, pointed

out some possible difficulties in the implementation of such taxes. The tax jurisdiction, for

example, is disproportionately under the authority of central government. One good example

is indirect tax or value added tax. Engineering the indirect taxes to discourage resource-

intensive or pollution intensive activities may have different consequences to regions,

because different regions have different kind of natural resource and environmental

problems. Implementing local taxes, on the other hand, is quite unlikely to have bigger

impact as the authority of local government is relatively low. Another issue is earmarking. In

the context of current fiscal regulation, the implementation of earmarking is not really

straightforward. The difficulties in designing, not to mention implementing, environmental

regulation with potential revenue can be illustrated with how difficult it is the current process

of designing the right and fair mechanism of REDD+.

3.7 Strategy 7 - Optimizing the inter-governmental fiscal relation to promote green

economy

Although green economy is often referred to a strategy of national scale, in Indonesia, local

governments, despite their financial dependency on transfers from central government, have

greater authority in spending as well as other critical authorities. Without overlooking the

potential of local governments in autonomously creating favourable environment toward

green economy or green local/regional economic growth, there is also more rooms to devise

a specific fiscal relation that can create a system of incentives among local governments to

motivate them even more in the pursuit of green economy. The potential element in the

current setting of the inter-government fiscal relation is the allocation of special allocation

fund (Dana Alokasi Khusus or DAK). This DAK can be utilized for the promotion of green

economy by creating a specific allocation scheme that will reward local government whose

policies/programs are in favour of green economy and discourages local governments whose

policies/programs endanger or creating bottleneck for a greener local growth. Currently such

a system is already been discussed in the Ministry of Finance. However, concrete clear

concepts, not to mention its implementation, is yet in place.

3.8 Strategy 8 - Strengthening the existing environmental regulatory agencies

Green economy is a cross-cutting concept, yet the idea will never be achieved without

supporting the existing environmental regulatory agencies, especially, those under the

coordination of the State Ministry of the Environment as well as their local/regional

counterparts as well as other relevant agencies such as the Ministry of Forestry, or Marine

and Fisheries. One crucial function traditionally served by the State Ministry of the

Environment is monitoring progress of environmental protection. The implementation of

green economy involves various activities where this kind of function plays a necessary role.

Investing in natural resources sector to ensure the sustainability of natural resource use such

as water, and other ecosystem are traditional fields of this ministry. Monitoring externalities

coming from various economic activities such as industrial process and transports are also

best served by this agency. With more orientation toward green economy, their capacity

needs to be improved and expanded in particular to ensure the effectiveness of these

activities, governance, not to mention technologies. Current allocation of funding need to be

proportionately shifted to ensure such function serves the reorientation of economic activities

toward green economy.

3.9 Strategy 9 - Promoting behavioural changes toward green economy across all

elements of society through systematic, structured, and long-term oriented public

education

Public education can function as a supporting tool for promoting green economy because it

can help change people’s behaviour. However, this is not a substitute for a good incentive

system in a market society. It is a complement. Public education that works, however, take

times, hence we need long-run strategies. Things that need to be avoided in this kind of

strategy include short-term oriented moral suasion that tend to be sporadic and only

implemented as responses to particular situations. Good public education strategy is

characterized by the following: (a) long-term orientation; (b) covers formal (at all levels of

education) and informal education; (c) recognizing local values/cultures; (d) professional, in

the sense that they are carried out through systematic, structured, and based on best quality

of public communication to ensure its outreach and effectiveness.

EVENT MATERIALS

(Bahan presentasi + Lampiran)

Presentation By Dr. Ir. Endah Murniningtyas, MSc , Deputy Minister for Natural Resources and

Environment, BAPPENAS

STRATEGI UNTUK PENGEMBANGAN GREEN ECONOMY DI INDONESIA

Deputi Bidang Sumberdaya Alam dan Lingkungan Hidup

Disampaikan pada FGD Green Economy Strategy

Hotel Sahid, Jakarta, 28 Juli 2011

1

OUTLINE

I. EKONOMI HIJAU II. PEMBANGUNAN

BERKELANJUTAN DALAM RENCANA PEMBANGUNAN NASIONAL

III.RAN GRK DAN EKONOMI HIJAU

2

I. EKONOMI HIJAU (GREEN ECONOMY)

UNEP, Working Paper v.1.0, 2010

GE adalah konsep yang menghubungkan antara pertumbuhan ekonomi dan keberlanjutan lingkungan.

IMPLIKASI: a. Realisasi pertumbuhan dan kesempatan kerja dari kegiatan

yang rendah polusi ke kegiatan yang efisien menggunakan sumberdaya (pada sektor energi, air , limbah , bangunan pertanian dan hutan)

b. Mengelola perubahan struktural yang tekait seperti dampak terhadap rumah tangga dan sektor ekonomi tradisional.

3

Karakteristik:

Substantially increased investment in economic sectors that build and enhance the earth’s natural capital or reduce ecological scarcities and environmental risks.

Sektor Ekonomi yang tercakup:

Renewable energy, low carbon transport, energy efficient buildings, clean technology, improved waste management, improved freshwater provision,sustainable agriculture and forest management, and sustainable fisheries.

4

II. PEMBANGUNAN BERKELANJUTAN DALAM RENCANA PEMBANGUNAN

NASIONAL

5

Visi: Indonesia yang MANDIRI, MAJU, ADIL DAN MAKMUR

RENCANA PEMBANGUNAN JANGKA PANJANG NASIONAL (RPJPN) 2005-2025

MISI:

1. Terwujudnya masyarakat Indonesia yang berakhlak mulia, bermoral, beretika, berbudayadan beradab

2. Terwujudnya bangsa yang berdaya saing untuk mencapai masyarakat yang lebih makmurdan sejahtera

3. Terwujudnya Indonesia yang demokratis, berlandaskan hukum dan berkeadilan

4. Terwujudnya Indonesia aman dan damai bagi seluruh rakyat serta terjaganya keutuhanwilayah NKRI dan kedaulatan negara dari ancaman baik DN maupun LN.

5. Terwujudnya pembangunan yang lebih merata dan berkeadilan

6. Terwujudnya Indonesia ASRI DAN LESTAR I

7. Terwujudnya Indonesia sebagai negara kepulauan yang mandiri, maju, kuat dan berbasiskankepentingan nasional

8. Terwujudnya peranan Indonesia yang meningkat dalam pergaulan dunia internasional

6

MISI 6TERWUJUDNYA INDONESIA ASRI DAN LESTARI

Ditandai oleh:1. Membaiknya pengelolaan dan pendayagunaan SDA dan pelestarian fungsi LH

yang dicerminkan oleh tetap terjaganya fungsi, daya dukung dan kemampuanpemulihannya dalam mendukung kualitas kehidupan sosial dan ekonomi secaraserasi, seimbang dan lestari.

2. Terpeliharanya kekayaan dan keanekaragaman jenis dan kekhasan SDA untukmewujudkan nilai tambah, daya saing bangsa serta modal pembangunannasional.

3. Meningkatnya kesadaran, sikap mental dan perilaku masyarakat dalampengelolaan SDA dan pelestarian LH untuk menjaga kenyamanan dan kualitaskehidupan.

7

ARAH KEBIJAKAN:a. SDA dan LH Harus dikelola secara seimbang untuk menjamin

keberlanjutanpembangunan nasional danb. Penerapan prinsip-prinsip berkelanjutan di seluruh sektor dan wilayah

Aspek SosialSocial Aspects• Kesetaraan

/equitability• Kesehatan /health• Pendidikan /

education• Perumahaan /

housing• Keamanan

/security• Kependudukan /

population

Aspek ekonomiEconomic Aspects• Struktur Ekonomi /

Economic Structure

• Pola Konsumsi danProduksi / Consumption and Production Pattern

Aspek LingkunganEnvironment Aspects• Atmosfer/

Atmosphere• Lahan / Land• Laut dan Pesisir /

Marine and Coastal Areas

• Air Bersih/Fresh Water

• KeanekaragamanHayati/ Biodiversity

Aspek KelembagaanInstitutional Aspects• Kerangka Kerja

Kelembagaan / Institutional Framework

• KemampuanInstitusi / Institutional Capability

Framework for Construction of Suistainable Development Indicators, September, 2001

MDG

GovernanceGreen Economy

Environment and Biodiversity (IBSAP)

Pembangunan lingkungan secara konkrit (terukur dan dapat diinternalisasikan)RAN GRK sebagai momentum untuk membangun green economy

mewujdukan pembangunan berkelanjutan

8

III. RAN GRK DAN EKONOMI HIJAU

9

10RAN GRK: 1. Komitmen Indonesia: cara dan instrumen untuk meningkatkan kualitas kehidupan dari “brown” menjadi “green” dan berkelanjutan.2. Kontriusi Indonesia untuk menurunkan emisi global.

Komitmen PresidenDi G-20 Pittsburgh dan COP15Penurunan emisi GRK pada tahun 2020

26% 26+15=41%

BAU BAU + international supports

RAN GRK

BAPPENAS

10

KEHUTANAN DAN LAHAN GAMBUT

PERTANIAN

ENERGI DAN TRANSPORTASI

INDUSTRI

LIMBAH

RAN GRK

1. Kesempatan untuk mengkuantifikasikan(ukuran kuantitatif) pembangunan lingkungan

2. Kesempatan untuk menghargai (valuasi) jasa lingkungan penyediaan jasa lingkungan menjadi salah satu pilihan ekonomi.

3. Ukuran dan valuasi alat untuk internalisasi masalah lingkungan dan kelestarian lingkungan ke dalam setiap aspek kehidupan. Internalisasi ke bidang ekonomi menghijaukan ekonomi (green economy).

11

Kuantifikasi1. Penciptaan ukuran atau proxy ukuran rumus

internasional local context (ukuran lokal atau indikator lokal)

2. Inventory: status saat ini skenario penurunan pada masing-masing sektor dan secara nasional.

3. Valuasi dari ukuran mekanisme “pasar” – insentif-disinsentif.

4. Internalisasi ukuran dan valuasi perilaku di berbagai bidang/kegiatan ekonomi dan kehidupan.

5. Ketersediaan data: nasional dan lokal konsisten dan kontinyu

6. Kemudahan untuk mengukur, memantau dan mengevaluasi: lokalnasional internasional

12

Presentation By Dr. Kindy Sjahrir, BKF

Fiscal Avenue for Green Growth

Centre for Bilateral and Regional PolicyFiscal Policy Office

28 July 2011

Outline:

Fiscal Tools for Green Growth

Green Growth – Phasing Out Fuel Subsidy

Mid-Term Expenditure Framework - Green Infrastructure

Challenges

1. Fiscal Tools for Green Growth

2

Green Growth: Inclusive Growth

Source: OECD

Inclusive Growth: How to Green Growth?

Public Policy Options for Green Growth

Principles for Green Fiscal Policy

• inclusive costing: carbon tax or cap-and-trade

• Perverse incentives and distorting policies

minimized

• Non-price market failures alleviated

• Externalities (non-carbon) internalized

• Linking in with development objectives

• Distributional issues addressed

• International dimension – do fair share, make

use of available financing and support

Fiscal Instruments: Finance Minister Regulation on Green Growth

• No.24/PMK.011/2010 ttg Pemberian Fasilitas Perpajakan

dan Kepabenan untuk Kegiatan Pemanfaatan Sumber

Energi Terbarukan

• No.176/PMK.011/2009 ttg Pembebasan Bea Masuk atas

Impor Mesin serta Barang dan Bahan untuk

Pembangunan atau Pengembangan Industri dalam

rangka Penanaman Modal

• No.154/PMK.011/2008 ttg Pembebasan Bea Masuk atas

Impor Barang Modal dalam rangka Pembangunan dan

Pengembangan Industri Pembangkit Tenaga Listrik untuk

Kepentingan Umum.

2. Green Growth – Phasing Out Fuel Subsidy

8

Regulatory Framework on Fuel Subsidy

9

Assumption in setting –up fuels subsidy: ICP, exchange rate,Alpha, MOPS, and fuel volume

Payment of subsidized fuels according to supreme auditors (BPK-RI)

Allocation for subsidized fuels varied according to changes in

parameters in revised budget (APBN-P)

Law No.22/2001 on Oil and Gas

Govt Regulation No.36 /2004 on Downstream Oil and Gas

Presidential Decree No.55/2005 on retail domestic fuel prices and preceeding Presidential Decree No.9/2006

Presidential Decree No.71/2005 on Provision and Distribution of Particular Typer of Fuels

a

Fuel Subsidy Calculation Formula

• Retail fuel price is the retail selling price per liter of fuel in domestic area.

• Tax is a Value Added Tax (PPN 10%) and Motor Vehicle Fuel Tax(PBBKB 5%).

• Reference price of fuel is calculated based on the MOPS price plus distribution costs and margins.

• Reference price of fuel = MOPS + α

α is the distribution cost + margin

MOPS (Mid Oil Platt’s Singapore) is the price on the stock sale and purchase transactions on the Singapore oil

Fuel Subsidy :

= [Reference Price of Fuel - (Retail Fuel Prices - Tax) ] x Fuel Volume

0

1000

2000

3000

4000

5000

6000

7000

8000

MOPS Official Price Retail Price

IDR/liter

a

VAT & PBBKB

Subsidy

Reference price of Fuel

10

Non-Discretionary Spending

During period 2005-2010:

• 34% average from Fiscal Capacity (State Revenue) spent for transfer to local government, 21% for subsidy and 21% for Wages and Capital Expenditure.

• More than 15% of State Revenue spent for debt interest and other expenditure.

11

Mandatory Spending Ratio, 2005 - 2010

toexp

to net rev

toexp

toexp

toexp

toexp

toexp

to net rev

to net rev

to net rev

to net rev

to net rev

Transfer to local gov Subsidy Personnel exp Interest exp Goods exp Other exp

0

20

40

60

80

100

To exp To net rev

2005 2006 2007 2008 2009 2010

90 9185

8985

92 87 88 85

93

85

97

per

cen

tage

Mandatory Spending Ratio 2005 - 2010

Transfer to region Subsidy Personnel Exp Interest Payment Capital Exp Other Exp

To exp To expTo exp To expTo expTo net rev

To net rev

To net rev

To net rev

To net rev

Indonesia Fuel price compared with the ASEAN countries is still very low

0

5,000

10,000

15,000

SINGAPORE PHILIPINE THAILAND VIETNAM MALAYSIA INDONESIA

8,4

29

6,5

90

7,3

67

7,0

49

4,7

84

4,5

00

11

,56

0

8,4

51 8

,77

7

7,7

59

5,0

66

4,5

00

IDR/Liter

GDP/Capita :

DIESEL GASOLINE

USD 33.714 USD 1.582 USD 3.470 USD 779 USD 6.648 USD 1.748

12

Fuel Subsidy Policy

Policy 2011:

1. Continuing kerosene to LPG conversion program,

2. Controlling subsidized fuel consumption through close distribution system,

3. Limiting the user of subsidized fuel,

4. Enhancing the development of alternative energy,

5. Subsidized bio-fuel by average at IDR2.000-IDR2.500 per liter,

6. Increasing Fuel Vehicle Tax (PBBKB)by 5 percent.

Policy 2010:

• Limiting subsidized fuel users to households, micro businesses, fishery businesses, public transportation and public services

• Reducing the consumption of fossil fuels by introducing new types of bio-fuel

• Continuing kerosene to LPG 3 kg conversion program

• Improving the subsidized fuel distribution mechanism to enable the subsidy to be more targeted

• To enhance monitoring of subsidized fuel distribution, increasing sanctions for misuse, and reforming the fuel business sector administration

13

Policy Framework for Phasing Out Fuel Subsidy

•Rising fuel consumption

•Fuel prices increases

•Bottleneck domestic refineries

•Restricting domestic fuel stock

•Insufficient infrastructure and transportation

•Ineffective fuel subsidy

Current Condition

Fuel Subsidy Alleviation

•Decreasing energy intensity

•Provision of sufficient infrastructure and transport of fuel

•Alleviating fuel subsidy along with compensating variation

•Energy diversification

Strategy

•Lower volume of subsidized fuels

•Minimum subsidy on fuels

•Non-fuel diversified renewable energy sources

Target Condition

Strategy of Subsidy Reform

The phasing out of inefficient fossil fuel subsidies in Indonesia is to

be implemented in a gradual manner in order to minimize the spill-

over impact on the poor noting that a large part of the consumption

basket of the poor is affected by higher fossil fuel prices.

The phasing out strategy is to be sequenced through managing the

demand side by adopting measures that will reduce fossil fuel

energy consumption and then by gradually narrowing the gap

between domestic and international prices. 14

• Transform price subsidy to direct subsidy

• Social Safety Net to shield the vulnerable

a. Energy diversification

b. Closed distribution system

c. Fiscal incentive and disincentive

a. Minimizing fuels distribution cost

b. Full cost absorption of fuel provision

c. Effective targeting and costing of fuels subsidy

Reduction

of Fuel Subsidy

Compensating Variance

Less Volume of Subsidized

Fuels

Fuel Price Reference

Mid-Term Development Plan Fuel Subsidy Phase-out Strategy

Subsidized Fuel and Target Subsidy

Sep ' 05 Okt ' 05 Apr ' 06 2007 2008 2009 2010 2011 2012 2013 2014

Household S S S S S

Small Business S S S S S

Industry NS NS NS NS NS NS NS NS NS NS NS

Transportation S S S S S

Fishery NS NS S S S


Transportation S S S S S

Fishery S S S S S


Sea Freight Industry NS NS NS NS NS NS NS NS NS NS NS

Sea Freight Industry NS NS NS NS NS NS NS NS NS NS NS

Gasoline

Kerosene

S/Closed 2

S/Closed 2

S/Closed 2

S/Closed 2

S/Closed 1

S/Closed 1

Diesel

S/Closed 2

Fuel Oil for Sea Freight Industry

Diesel Oil for Sea Freight Industry

S/Closed 1

S/Closed 1

S/Closed 1

Stage V Stage VI

S/Closed 2

S/Closed 1

Fuel UserStage VII Stage VIII

16

S = Subsidy : Still subsidized

NS = Non Subsidy : Not subsidized

S/closed 1 : Test arrangement for closed distribution system (2009-2010)S/closed 2 : The trial closed distribution system in gradually (2011-2014)

Potential reform options But a number of alternative options could be considered

1. The ESDM Road Map (January 2010)

Phased and gradual reduction in subsidies with a focus on household sector and,

to a lesser extent, commercial transport sector

Alternative could exempt motorcycles given sensitivity of this user group

2. Convertible fuel vouchers

All households without a car are eligible for a monthly voucher entitling them to

purchase a fixed quantity (eg, max 15 L) of gasoline at a fixed discount to the

economic price. These vouchers would be convertible into cash (ie, redeemed for

cash value).

3. Indexation of regulated fuel prices to the economic cost of fuel

Regulated fuel prices are a fixed percentage (eg, 90%) of the economic cost of

fuel

Compensates poor households through Keluarga Harapan & increased social

spending

4. Full deregulation of fuel prices with compensating KH program

Gradually deregulate gasoline & diesel fuel prices by 2014 using appropriate fuel

price mechanism which gradually closes gap with economic price

Compensate poor households through KH & increased social spending

Could be done in one “big bang” or gradually using appropriate fuel price

adjustment mechanism which gradually closes gap with economic price

Could reduce subsidies for gasoline first since benefits poor less

17

• Targeted subsidies allocation• Developing alternatives energies (coal, gas, geothermal)• Agriculture integrated subsidies• Food subsidies allocation• Improving PSO subsidies effectivity (Pelni, Pos, Kereta Api)• Tax subsidies

Subsidies Policies, 2009-2014Subsidies Policies 2009-2014

18

-

5.0

10.0

15.0

20.0

-

50.0

100.0

150.0

200.0

250.0

2010 2011 2012 2013 2014

%

In ID

R T

rillio

n

Non Energy Subsidy Energy Subsidy % to GDP % to Total Exp

88.9 92.8

56.051.1

44.3

-

3.0

6.0

9.0

-

30.0

60.0

90.0

120.0

2010 2011 2012 2013 2014

%

In ID

R T

rillio

n

Fuel Subidy % to Total Expenditure

Medium Term Expenditure Framework Fuel Subsidy

3. Mid-Term Expenditure Framework - Green Infrastructure

19

Fiscal Risk

• Government fiscal risk matrix

• Government has to deal with fiscal risks under

transparent and accountable management of

fiscal to ensure the sustainability.

DirectObligation in any even

ContingentObligation if a particular

event occurs

ExplicitGovernment liability created

by a law or contract

Government Debt Government Guarantees

ImplicitA “political” obligation of

government that reflects public

and interest-group

pressures

Longstanding and popular

social spending that

government could, in

theory,

cut.

Obligation to bail out banks

that are too big to fail

Source : Government at Risk: Contingent Liabilities and Fiscal Risks, 2002.

20

Infrastructure Development • Financial crisis in the late 1990s caused the investment of

infrastructure fell down from more than 6 percent of GDP, or about USD15 billion/year, to 2 percent of GDP and most of that is spent on maintenance.

• To recover the economic situation, PPP scheme is the reasonable option in developing infrastructure for more efficient and effective government spending.

• Projection of infrastructure investment needed in 2010-2014

*) Source: Bappenas, 2010

USD214Bio

USD 140 Bio

USD74 Bio

Total Funding Needed

Gov’tBudge

t + SOE

Funding Gap

Private

PPP Scheme is expected to cover around 50% of

total private funding needed

21

USD74 Bio

PPP Scheme Raises Government Risks

• Since 2005, GOI has committed to support the infrastructure

development by the PPP scheme.

• To implement the PPP scheme, private investors need government

guarantees to ensure their investment in infrastructure projects.

• The provision of government guarantees create fiscal risks.

• Guarantee, provided by government support letter (conventional

guarantee), negatively influences the fiscal sustainability.

Conventional Guarantee Ideal Guarantee

blanket Specific risks

immeasurable measurable

support letter guarantee agreement

direct (probable cause a sudden shock)

indirect - none(ring fence mechanism)

no-regulation by regulation (transparent and accountable)

Coverage Risk

Exposure

Form of Guarantee

Impact to Gov. Budget

Legal basis

Guarantee Fund as a Fiscal Instrument

The Indonesia Infrastructure Guarantee Fund (IIGF) has been established as an instrument in managing fiscal risks.

IIGF could leverage their capacity and capability by cooperation and partnership with multilateral agency and other institutions.

23

Transparent and Accountable Management

Appraising and structuring process (including risk allocation) of the PPP project are more professional, consistent, and independent;

Risk coverage is stated in the form of agreement between IIGF and project company (investor);

The project risks are measured accurately;

Providing ring fence to the Government balance sheet because the guarantee claim will be paid by the IIGF first;

Public, especially private investor and lender, will be easier to access the information of guarantee mechanism and the exposure of the liabilities;

Government does not have to reserve fund to ensure the fiscal sustainability.

IIGF

Illustration on Ring Fence Mechanism

Without IIGF With IIGF

Project Company

Gov. Budget

Project Company

Contingent Liability

Gov. Budget

Contingent Liability

Guarantee

Guarantee

Capital injection

Ring Fencing

1

2

24

1

IIGF

23

3. Challenges

25 26

Usage Efficiency

Development Program

Macro & Fiscal Policy

Minister of Finance

Ecosystem Policy

Min. Environment

Building ,Construction

Civil Works

SOEs Policy

State Owned Enterprises

A/R Forest Resources

Forestry

Manufacturing, Processing

Energy & MiningIndustry

Modality & Policy

Transports

Invest & Financing

Coord. Econ AffairsD N P I

Min Energy & Mineral

BP Migas

BPH Migas

Pertamina P L N

Mining

Forest Industry

Planning (Bappenas)

Public Transports

Appliances

Building

Regio

n G

ov

National Action Plan

R/E, CSS, Supply Efficiency

LULUCF, REDD

National Roadmap

Green PaperLow Carbon

The Need for Policy Coordination

TERIMA KASIH

FGD's Technical Guidance by Arief Anshary Yusuf, SE., M.Sc., Ph.D

4 Key highlights from previous activities

The green economy concept has not been well-understood especially at the grass root level

Green economy initiatives do exists in Indonesia, yet its effectiveness in achieving measurable targets relative to our economy or to the damage that we have done is hardly discussed.

Failures in scaling-up of many good initiatives may have been attributed to the ineffective and inconsistent market regulation; risk of losing competitiveness; financial constraints; and sub-optimal coordination; and

Big push, macro level reform like removing energy subsidies has been constrained by social and political barriers.

9 key strategies (1-5)

Strategy 1: Establishing and quantifying targets of greening the Indonesian economy at macro, micro, sectoral, and regional level.


Strategy 3: Harmonizing policies and programs across government agencies through the revitalization or the creation of effective coordinating institutions.

Strategy 4: Promoting green investment by private financing with complementary public capital expenditure.

Strategy 5: Creating and revitalizing market regulation that is effective, consistent without reducing economic competitiveness.

9 key strategies (6-9)

Strategy 6: Revenue-neutral tax substitution to encourage favorable behavior of economic agents toward green economy.



Strategy 9: Promoting behavioural changes toward green economy across all elements of society through systematic, structured, and long-term oriented public education.

DOCUMENTATION OF THE EVENT

Name of The Event : FGD 2 Green Economy Strategy

Venue : Hotel Sahid Jaya, Jakarta


Openng Remarks by

Dr. Arief Anshory

Yusuf, Senior Green

Economy Expert

Presentation ”Strategi

untuk Pengembangan

Green Economy di

Indonesia ” by Dr. Ir.

Endah Murniningtyas,

M.Sc, Deputy Minister

for Natural Resources

and Environment,

BAPPENAS

Presentation ”Fiscal

Avenue for Green

Growth” by Dr. Kindy

Sjahrir, M.Sc, BKF

FGD Participant

Focus Group

Discussion

Focus Group

Discussion

ESP2_3.FGD 2 Green Economy Strategy

Documents

Transcript of ESP2_3.FGD 2 Green Economy Strategy