The Economic Challenge of Climate Change

Asia Views, In Focus Column, Fitrian Ardiansyah, Edition: 40/VI/January2010

People, economies and the natural environment are now being affected by human-induced climate change. Climate change can lead to damages to natural, communal and business assets.

Some studies typically place damages in the range of 1-1.5 percent of Gross Domestic Products (GDP) per year for developed countries, and 2-9 percent for developing countries if the average temperature increases between 1.5 and 4.0oC.

This is also true for Indonesia. The observed and projected impact of climate change in the country include the increase in the severity of droughts, flooding, fires, coral bleaching, the gradual increase in sea level rise, and the increase in frequency of extreme weathers including storms which will be destroying natural and human-made systems in the area.

For instance, a WWF report released in May 2009 set out the full extent of the threats to the coral reefs of Indonesia, which are part of the Coral Triangle region of the Pacific Ocean.

The report further shows that climate change challenges are increasing, and how unchecked climate change will ultimately undermine and destroy ecosystems and livelihoods of hundreds of million people in the Coral Triangle.

Another study conducted by the World Resources Institute has estimated that due to climate change, Indonesia’s agricultural productivity may decline by 15 percent by 2080 at the time when our population is expected to grow to around 300 million.

Avoiding the Worst

There is a growing need for investing urgently in climate change action in order to avoid escalating costs in the future. Public funding needs to be the core source of funding to meet the incremental costs of adaptation.

UN Framework Convention on Climate Change (UNFCCC) calculates the need for US$ 49-171 billion a year – to adapt to climate change alone until 2030 – in which US$28-67 billion is required to help efforts in developing countries.

The existing provision of funds to cope with these impacts, however, is not at the level that is sufficient to meet these requirements.

Special Climate Change Fund (SCCF) and the Least Developed Countries Fund (LDCF) only allocate US$114 million and the Adaptation Fund established last year can only accumulate and provide around US$200 million.

Therefore, Indonesia together with other countries need to forge a deal in Copenhagen which will guarantee additional fresh and predictable financial support coming from developed countries, not only from 2010 to 2012, but also through 2020 and beyond.

Domestically, Indonesia needs to also seriously prepare its sectoral, regional and domestic plans to adapt to climate change. Vulnerable sectors – e.g. agriculture, marine and coastal, forestry and infrastructure – and other areas need to be assessed, prioritized and strengthened with sufficient budgets.

On the other hand, economic development in Indonesia typically implies a larger dependence on climate-sensitive sectors, in particular the energy generated from coal, oil and other fossil fuels, and greater land use leading to deforestation.

Energy plays an important role in boosting the country’s economy and improving its social welfare. Historical data from the Ministry of Energy and Mineral Resources show that domestic demand for energy has been increasing faster than the average growth of population.

With the current rate of the use of fossil fuels, the obvious consequence is high GHG emission, especially CO2. During the period of 1990-1997, the CO2 emission increased at a rate of 7 percent per year, while afterwards it increased to 6 percent per year.

Indonesia’s economies are also a key location for – and driver of – large-scale deforestation.

Pressured by the demand to provide land for agriculture, settlements, infrastructure and mining operations, the country has lost around 2.8 million hectares (1995-2000) and currently 0.8 million hectares (2006-2008) forest cover, according to the Forestry Ministry.

An official document from IFCA (Indonesia Forest Climate Alliance) indicates that Indonesia requires US$ 4 billion in five years to ensure enabling conditions prior to concretely addressing deforestation and forest degradation.

With the economic growth around 6 percent per year, the projected GHG emission of Indonesia – based on business as usual (BAU) development pattern – is definitely going larger than today.

Nevertheless, decoupling economic development from GHG emission is not impossible.

Adequate, sufficient and sustainable financing is required to significantly reduce GHG emissions.

A global financial architecture for climate change is needed to be agreed in Copenhagen to shift public and private finance and investment flows towards decoupling economic growth from increasing emissions to a low carbon economy.

Domestically, Indonesia needs to put its developmental policies and governmental interventions in the direction of a low carbon economy and promote incentives for sustainable development.

President Susilo Bambang Yudhoyono’s pledged intention to cut GHG emissions by 26 percent by 2020 from “business as usual” (BAU) levels is a good start for this country to embrace a low carbon economy.

This of course needs to be backed up by concrete actions and a clear budgeting system, which in the end support these actions and determine the pathway Indonesia’s development.

If this is chosen, Indonesia’s future can be secured against the threat climate change poses to its people and to its economic development.

Fitrian Ardiansyah is Program director of climate & energy at WWF-Indonesia, and adjunct lecturer at Paramadina Graduate School of Diplomacy

Asiaviews, Vol.III No.8 December 2009 – January 2010, This article is published in AsiaViews a monthly magazine covering Southeast Asia Region. The magazine is a joint collaboration between Tempo, Bangkok Post, Today, News Break and Malaysian Business.

Original link:


Dire Consequences of Ignoring Climate Change

Fitrian Ardiansyah

Program Director of Climate & Energy, WWF-Indonesia

This article is published in AsiaViews (May-June 2007, Edition: 17/IV/May/2007), a monthly magazine covering Southeast Asia Region. The magazine is a joint collaboration between Tempo, Bangkok Post, Today, News Break and Malaysian Business. The pdf format of this article can be found here: AsiaViews_May-Jun07_8-9_Climate_Indonesia_FA 

Climate change is real and happening this very moment. Being one of the countries that will be greatly affected, Indonesia needs to get her act together to confront this clear and present danger.

This year, the IPCC (Intergovernmental Panel on Climate Change) released its three important working group reports. The reports clearly signaled that: “there are no doubts over the reality of climate change, declaring the proof to be “unequivocal”; the scale and speed of adverse impacts on humans and their livelihoods and on unique ecosystems are enormous; and avoiding dangerous climate change is technologically and economically possible but the time left to act is short”.

Using the IPCC model, Indonesia will experience an increase in the average temperature of 0.1 to 0.3 oC per decade. The increase in temperature will subsequently affect the climate and result in adverse repercussions on human and surrounding ecosystems, such as the rising levels of sea water and greater intensity and increase in the frequency of rainfall, tropical storms, and drought.

Due to the higher sea water level rise of 8-30 cm, as an archipelagic country, Indonesia could lose up to 2,000 islands. This would lead to a shift of the country’s boundaries and affect the security of the nation. As mentioned in the WGII (working group II) report of IPCC, it would also displace 30 million refugees world-wide and with most people living in the coastal areas, Indonesia will suffer the most.

In terms of rainfall, there is a prediction that the country could experience an increase in both the intensity and frequency of rainfall. This would shift the beginning of the wet and dry seasons, which will have a negative impact on the production of rice in Java and Bali, causing a decrease in production by 7-18%.

The change of climate patterns would also add to the already existing hazards, including floods, land-slides drought and tropical storms. According to the Indonesian National Coordinating Board for Disaster Management, in 2003-05 alone climate-hydrological related disasters reached 1,429 cases or 53.3% of the overall disasters happening in Indonesia.

On the other hand, when the dry season hits, the country could also face the possibility of prolonged drought and, in some areas where forest and land fires are still obvious problems, the probability of them occurring will be even higher. In just the one month of September 2006, there were 26,561 hot spots: the highest since August 1997 when 37,938 cases were counted.

The challenge for Indonesia now is to have the appropriate and effective response mechanism to address the issue of climate change. Both national and local action is needed in parallel with international initiatives.

As a party that has ratified the UN Framework Convention on Climate Change (UNFCCC) in 1994 and the Kyoto Protocol in 2004, through the issuance of Law number 17/2004, Indonesia has taken some steps towards addressing this issue.

A good example of this is the development of a national institution to manage a Clean Development Mechanism (CDM) which, if utilised effectively, will enable the country to reduce greenhouse gases emission of CO2 up to 23-24 ton per annum (based on the national strategic study of 2001/02 to analyse the potential of emission reduction from the energy and forestry sectors).

Indonesia, however, still needs to further develop a firmer stance and take stronger action in several major areas. There is as yet no national comprehensive strategy, in accordance with the UNFCCC, to anticipate the adverse impact of climate change.

As one of the most vulnerable countries, Indonesia needs to do vulnerability and adaptation assessment and mapping in order to cope with the impact properly. This would help the country to identify priority areas, communities and sectors for adaptation strategy, planning and implementation.

Subsequently, there is an urgent need to mainstream the adaptation strategy into the national and sectoral development strategies and planning. Without this, Indonesia will develop its areas and people with the risk of developmental failures due to environmental disasters.

On the mitigation part, Indonesia needs to urge industrialized countries to cut their emission further if the global community wants to maintain the level of the increase in temperature up to 2 oC only, which will result in an impact level which can still be dealt with.

As written in the report of IPCC WGIII, to stay in the lowest CO2 emission ppm range by 2030, the maximum cost is 0.12% of GDP while the estimated total cost is some 3%. In his review, Sir Nicholas Stern warned that the cost of inaction is estimated to be at 5-20% by 2050, by far a greater amount.

As for Indonesia, the country’s contribution to the global level of greenhouse gases emission is gradually becoming greater, especially if emission from deforestation including peat land conversion and forest and land fires are taken into account. Some organizations believe that Indonesia is already the third largest emitter in the world if these are factored in.

There is nevertheless a window of opportunity for Indonesia and other forested countries to make a positive contribution to efforts in reducing emission from deforestation. The UNFCCC at its Conference in Bali this December is planning to hold formal negotiations to develop a mechanism in providing positive incentives with appropriate policy approaches for REDD – reducing emission from deforestation in developing countries.

Indonesia has a good chance to come up with a strong position and call for the development of the framework of REDD, create policies and measures to reduce and monitor deforestation and improve capacity building. Indonesia also needs to negotiate with different parties to gain support for an initial pilot scheme to address the issue of deforestation and the reduction of emission from deforestation.

If these action steps on adaptation and reducing emission from deforestations can be prepared and implemented seriously, it would send a positive initial signal to the Indonesian people and the world that Indonesia is indeed ready to cope with climate change and its adverse consequences.