Difficult policy choices in Indonesia’s energy development

By Fitrian Ardiansyah, published in Coal Asia, August 17 – September 4, 2013, page 90-91

for the pdf version, please see Opinion Fitrian Ardiansyah_CoalAsia_AugSep2013

CoalAsia_AugSep2013_difficultchoiceAs an emerging economy and fast growing consumer of energy, Indonesia faces a difficult decision when it wants to continue its economic growth while at the same time ensuring that its greenhouse gas (GHG) emissions are reduced.

Currently, along with the growth in Indonesia’s economy, the energy demand of the country increases significantly, as the transport and industrial sectors grow, households become more affluent and commercial area development expands rapidly.

According to a 2009 report by the Finance Ministry and a 2011 analysis by PricewaterhouseCoopers, Indonesia’s steady economic growth of more than 6%, even during the recent global recession, was accompanied by a 9% growth in electricity demand and a 7% growth in the country’s total energy demand each year.

Should the country search for an easy answer for its energy supply, the most probable path is likely to be heavily relying on its fossil fuels, particularly coal and gas reserves.

Indonesia cannot any longer depend on oil to sustain its energy development. Since 2004, as reported by many studies, the country has already been a net importer of both crude oil and refined products.

With the relatively high global oil prices, the dependency on imported oil has placed considerable strain on the Indonesian economy and will create further burden, particularly since the country still has significant oil and electricity subsidies.

Hence, the country may see an option to maximize the use of coal and gas as one of the optimal solutions to meet its energy demand.

To boost the use of coal for power generation, for instance, the government launched a ‘crash program’ as mandated by the Presidential Regulation No. 71 of 2006, instructing the state-owned electricity company (Perusahaan Listrik Negara [PLN]) to accelerate the development of 10,000 MW (Megawatts) coal-fired plants.

With regard to the use of gas for power generation, the president issued the President Regulation No. 4 of 2010 that instructs PLN to develop gas-fired power station, along with the development of power plants that use renewable energy and more coals (known as the ‘second crash program’ of another 10,000 MW).

Such option in utilizing coal and gas, however, is not without unwanted consequences.

The first consequence is the likelihood of resources depletion risk. With pressures on production mounting to meet the export demand for coal and gas as well as rising domestic consumption, coal and natural gas shortages may eventually happen.

If Indonesia is not careful in managing its two important non-renewable resources, a similar situation to what the country has experienced with oil can recur, hitting back its economy.

If coal is heavily exploited and the rate of use for power generation is high, Indonesia will also likely to have another immediate negative consequence, which is a significant increase in its GHG emissions, especially CO2.

If electricity generation is dominated by coal, for instance, some experts predict increased CO2 emissions from the power sector by 2030, reaching 810 million metric tons of carbon dioxide equivalent (MtCO2e), or nearly seven times the amount in 2005.

In fact, the continuous increase in the use of fossil fuels may lead to an increase in the overall country’s GHG emissions by fourfold in 2030.

This projected growth in emissions is in contradiction with Indonesia’s pledge on climate change actions, as announced by its president, to reduce GHG emission by 26% by 2020 and to increase the use of renewable energy so that it accounts for 25% of total energy production by 2025. Such pledge has been further legally stipulated, among others, in the Presidential Regulation No. 61 of 2011 regarding the National Action Plan to Reduce GHG.

In addition, the high CO2 emissions resulting from a significant increase in fossil fuel consumption are likely to exacerbate global climate change impacts, in which Indonesia as an archipelagic nation is already vulnerable to.

With the current situation, the country has already experienced weather and climate-related disasters related. Data from the National Disaster Management Agency reveal that in the period of 1815-2013, the occurrence of disasters in this country has been dominated by this type of disasters, consisting of flooding (38%), land-sliding (18%), typhoons (18%), droughts (13%), flooding and land-sliding (3%), tidal waves or coastal erosion (2%) and forest/
land fires (1%).

Against these backdrops of a dilemma in further using fossil fuels, renewable and new energy resources appear to be well positioned to play a critical role in Indonesia’s energy policy.

To accelerate the use of renewable and new energy, however, is also not without difficulties.

If Indonesia is merely endeavoring towards climate change mitigation goals, for instance, the country may formulate a package of policies which totally promote and accelerate renewable energy development and radical reduction of fossil fuel subsidies.

Of various renewable energy sources (e.g. hydro, solar, biomass, geothermal) available in the country, unfortunately, not all can be considered as the ‘preferred solution’ to meet an ever increasing energy demand of Indonesia.

Geothermal power in particular appears to be the most appropriate and preferred solution. This is understandable because first, the country holds approximately 40% of the world’s geothermal reserves, which are still underutilized. It has also the potential to replace coal-fired power plants as a baseload electricity source with virtually no emissions.

Even with the attractiveness of geothermal and the push to develop this energy, an abrupt limitation to fossilbased energy consumption, as part of such environmentally-friendly policy, will likely have an adverse impact on the Indonesian economy.

This could happen particularly where rapid industrialization and economic development have been fueled mostly by fossil-based energy sources over so many decades, and rapid transformation means rapid changes required in the government’s and society’s sides. These include policy, programmatic and budgeting changes, as well as changes in public perception and support (especially when the price of energy may need to be adjusted).

Physical changes are also required in a bigger scale. The government needs to push for new infrastructure development, particularly in the forms of power plant, and grid transmission and distribution. This, for sure, will entail huge investment, human capacity and other support coming not only from outside the country but also domestically.

Such gigantic development programs cannot be carried out overnight.

Hence, there is a need for creative and balanced but firm solutions so that the country can achieve its goal to continue its economic growth while reducing its GHG emissions.

To start with, strong leadership and clear guidance from the top level of the government is key, especially to tailor different efforts and different technological development so that Indonesia has an optimal energy mix policy and reasonable but effective implementation programs.

The 2014 presidential and parliamentary elections may present such opportunity. The public need to scrutinize the candidates and ensure that they only elect those who have clear platforms to equitably balance economic and environmental goals.

Other immediate actions required to achieve such balanced solutions are mobilizing financial support and building human resource capacity. Close collaboration with the private sector is crucial in this case, especially when the government would like to attract huge investments for the future energy development.

The overall endeavor is a herculean task for a developing country like Indonesia. Nevertheless, the country has to take it on to ensure that its future is as bright as it aspires.

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The author is climate and sustainability specialist, a doctoral candidate at the Australian National University, and the recipient of Australian Leadership Award and Allison Sudradjat Award.

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The dynamics of climate change governance in Indonesia

“The dynamics of climate change governance in Indonesia”. Authors: Prof Budy P. ResosudarmoFitrian Ardiansyah and Lucentezza Napitupulu.

A book chapter (Chapter 4) in D. Held, C. Rogers & EM Nag (eds), Climate Governance in the Developing World, Polity (2013), Cambridge.

Please check the pre-published/proof-read edition here Chapter 4. Indonesia_resosudarmo_ardiansyah_napitupulu or if you want to access the chapter and/or the book: http://www.polity.co.uk/book.asp?ref=9780745662763

9780745662770frcvr.indd

Info:

This chapter is an attempt to explain why the Indonesian president made a major climate change commitment, although the issue of mitigation had not been widely discussed domestically. The chapter also offers an explanation as to why the implementation of this commitment has been relatively slow so far. Understanding the forces behind Indonesia’s climate change commitment and the complexity of its implementation constitutes an important first step on the path towards resolving the challenges that have hindered progress.

Keywords:  Climate change governance – Indonesia – Climate change mitigation and adaptation – Climate change policy

Chapter4_ClimateGovernance

Reviews:

“This valuable book once and for all dispels the myth that developing countries are unwilling to take action to confront climate change. By disentangling the complex motivations and incentives facing policy-makers, and the obstacles they face, this is important reading for all who want to understand how all countries can be encouraged to become part of the solution to climate change.” Andrew Steer, World Resources Institute

“This is a book of considerable value not only to governments and other stakeholders in the developing world, but to others across the globe as well. The principle of ‘common but differentiated responsibility’ really needs considerable analysis and interpretation for application in different parts of the world. This book very ably reviews global developments and developing country initiatives to highlight the choices, opportunities and challenges facing the developing world in the field of climate governance. Given the very readable material presented in these pages, I would recommend this piece of literature to anyone interested in climate issues across the globe.” Rajendra K. Pachauri, Yale University

The large developing countries are essential to the global effort on climate change. This book by people with deep expertise in each country tells us with authority what they are doing and how. High quality work on an important subject.” Ross Garnaut, University of Melbourne

———————————-Table of Contents of the BookList of Contributors
Preface
Abbreviations1. Editors’ Introduction: Climate Governance in the Developing World
David Held, Charles Roger and Eva-Maria NagPart I. Asia2. A Green Revolution: China’s Governance of Energy and Climate Change
David Held, Charles Roger and Eva-Maria Nag
3. The Evolution of Climate Policy in India: Poverty and Global Ambition in Tension
Aaron Atteridge
4. The Dynamics of Climate Governance in Indonesia
Budy P. Resosudarmo, Fitrian Ardiansyah and Lucentezza Napitupulu
5. Low-Carbon Green Growth and South Korea’s Governance of Climate Change
Jae-Seung Lee

Part II. Americas

6. Discounting the Future: The Politics of Climate Change in Argentina
Matías Franchini and Eduardo Viola
7. Controlling the Amazon: Brazil’s Evolving Response to Climate Change
David Held, Charles Roger and Eva-Maria Nag
8. Making “Peace with Nature”: Costa Rica’s Campaign for Climate Neutrality
Robert Fletcher
9. A Climate Leader? The Politics and Practice of Climate Governance in Mexico
Simone Pulver

Part III. Africa

10. Resources and Revenues: The Political Economy of Climate Initiatives in Egypt
Jeannie Sowers
11. Ethiopia’s Path to a Climate-Resilient Green Economy
David Held, Charles Roger and Eva-Maria Nag
12. Reducing Climate Change Vulnerability in Mozambique: From Policy to Practice
Angus Hervey and Jessica Blythe
13. Reaching the Crossroads: The Development of Climate Governance in South Africa
Lesley Masters

—————————————-
Book Authors Information:

David Held is Master of University College and Professor of Politics and International Relations at Durham University.

Charles Roger is a PhD student at the University of British Columbia and Liu Scholar at the Liu Institute for Global Issues.

Eva-Maria Nag is the Executive Editor of Global Policy at the London School of Economics and Political Science.

Reducing Emissions from Deforestation and Forest Degradation Plus (REDD+)

Panelist: Fitrian Ardiansyah, ANU (10 minutes)

 

From ANU CAPPE (Australian National University – Centre for Applied Philosophy and Public Ethics) Workshop on “Designing just institutions for global climate governance”

(Canberra, ANU, 30 June -1 July 2011)

 

Original link:

http://www.cappe.edu.au/docs/Climate%20governance%20workshop%20docs/Ardiansyah_paper.pdf

 

Good afternoon Colleagues,

 

First of all, I’d like to thank the organiser, particularly Jonathan, for setting up this important panel discussion and allowing me to discuss before you about one of the heated topics in the realm of climate change negotiation as well as the nexus of climate change and development, which is REDD+ (Reducing Emissions from Deforestation and Forest Degradation Plus).

 

Before I move on, I’d like to present this slide, containing a picture which I believe often reflects on the view of some if not the majority of people living in tropical developing forest nations when they try to grasp the idea about REDD+. As we may have known, the governments of some tropical forest countries have been struggling to address deforestation for decades. If we take into account emissions resulting from LULUCF (Land Use, Land Use Change and Forestry), Indonesia and Brazil and some other countries can be considered as major emitters.

 

On the other hand, addressing deforestation means changing, altering, adjusting their development paradigms and pathways, and this definitely is not easy for these governments. As you also may have known, deforestation and forest degradation have been mostly caused or driven by the development of at least four influential sectors, namely forestry, plantations/agriculture, mining and infrastructure. These sectors have significantly contributed to economic development of these countries as well as the global market. Timber, paper, soya bean, palm oil, sugar cane are to name few commodities which have provided an increase in the level of wealth in these countries. Hence, without a provision of economic alternatives or other positive incentives, it would be a herculean task for governments of developing countries to change their development patterns by stopping or reducing deforestation, which eventually reducing emissions.

 

When, at COP-11 in Canada, a proposal was tabled for the provision of incentives and other forms of support to avoid deforestation to be part of the climate agreement by Costa Rica and Papua New Guinea, and this proposal, after reframed, debated, negotiated and refined, was incorporated in the Bali Action Plan at COP-13 in Indonesia, and recognised as one important building blocks at the last COP in Mexico, many tropical forest nations see this as a hope to both tackling deforestation and promote economic development of the countries.

 

However, in my view, there are at least 3 (three) crucial aspects if REDD+ wants to be effectively workable addressing both emissions reduction and economic developing in developing countries. These are governance, financing, and implementation capacity.

 

Let’s look at the first important aspect, which is governance. Governance performance is important, since it helps stakeholders and actors determine whether their efforts would reach the desired objectives and goals. REDD+ from its early days has gone through and under a ‘multi-level governance’ process. At the multi lateral arena, it has, among others, the UNFCCC REDD+ related negotiation, the UN REDD Programme (UN-REDD) and the Forest Carbon Partnership Facility (FCPF). Although, REDD+ has been incorporated as part of the Cancun Package, and widely recognised that without REDD+ the 2 degree Celsius climate stabilisation goal will not be reached, the faith of this initiative still depends on the entire negotiation to reach an agreement in a bigger context of UNFCCC. A tricky part of the REDD+ in the negotiation is that it does not only include deforestation and forest degradation, but also conservation, sustainable management of forests and the enhancement of carbon stock. The inclusion of these is believed to have been done to incorporate the interests of India, China and other similar countries. Widening the scope means widening the participation of countries, although this may not necessarily widen the actions to reduce emissions and this may complicate the methodologies for carbon accounting which could also mean undermining the credibility for emissions reduction.

 

Other levels of governance that is crucial for REDD+ are the national and local levels. At these levels, issues that can be highlighted include what sort of benefit-sharing or revenue-sharing mechanisms which are going to be developed and selected and whether these mechanisms reach those actors who are really protecting and managing forests, including indigenous people; what sort of policies put in place to address deforestation as well as drivers of deforestation. Also, the high likely debates are over baseline development, transparency, corruption, the involvement of wider actors, stakeholders, forest dependent people, indigenous people, etc. As you may have known, many developing countries have issues surrounding unclear laws and policies, overlapping of policies among sectors and layers of governments resulting in deforestation and land use change.

 

The second important aspect that I would like to discuss is about the financing side, again. There is a huge question about what consider sufficient and adequate when it comes to addressing deforestation, and, whether this money is compatible with money or investment coming in from other sectors which could lead to further deforestation. Just to provide you with a good example. The bilateral agreement of Indonesia and Norway as well as Norway and Brazil each provides the possibility of funds for REDD+ US$1 billion. Is this sufficient when at the same time, for instance, there is US$8 billion available from the Chinese Development Bank for the development of oil palm plantations in Indonesia. And, unlike REDD fund, where the money will come later one, the money for oil palm development is already available.

 

Hence, there is a serious issue of opportunity costs. Countries embracing REDD+ surely need to address the interests of sectors, actors, regions, etc., who have been left out or maybe negatively impacted by the decision of the countries to have REDD+ policies. For example, economic alternative or different types of financial support may be needed so that these parties would support REDD+. Non-state actors, namely the private sector and/or financial institutions play a crucial role, first, to add to the public fund. However, their involvement would depend on whether there is certainty about a scheme that will guarantee the future of REDD credits.

 

Otherwise, demand for REDD financing, and if this only depends on public funds, risk placing pressures on donor government aid budgets as well as budgets of developing countries, resulting in the potential redistribution of funds from existing development programs that may jeopardise progress made of countries’ development. Although, the continued investment in conception phase or early actions is critical to ensure that REDD+ initiative is well designed and administered.

 

At multi-lateral arena, the challenge of financing is also clear especially when it comes to the choice of the scheme for REDD+. There are at least 3 (three) schemes proposed, which are fund-based mechanism, market-linked scheme, and the hybrid model. Under a market based scheme, countries that reduce REDD emission below a set of a pre set baseline would receive credits that could be sold in the market and used by purchasing nations to meet their international mitigation obligations. Fund based scheme involves the establishment of international funds to finance REDD activities or to provide incentives for countries to address REDD issues. There are pros and cons about consequences of either scheme. Among others, these include the leakage issues, additionality, permanence, fungibility, sovereignty, property rights, representativeness, etc.

 

My last important aspect is the capacity to implement REDD+. The capacity that I mention here includes capacity to develop baseline or reference level, to monitor, report and verify the reduction of emissions, develop and manage an institution, to develop just and fair distribution mechanism, to engage with wider actors who directly on the ground dealing with deforestation as well as at other arena. Also, which is rather more important, is the capacity to enforce or willingness to enforce any given policies or schemes that involved REDD since enforcement or lack of it may be viewed as one of the major obstacles in addressing land use change and deforestation in developing countries.

 

In brief, I would say that REDD+ provides good opportunity for developing countries to reduce emissions, contributing to mitigating climate change. However, there are crucial aspects which need to be strengthened or reformed before REDD+ becomes operationalised and reaching its goals. I thank you.