Challenges and Opportunities for Implementing Financing Mechanisms for Climate Change Mitigation Guided by Principles of Good Governance: The Case of Indonesia

Indonesia’s nearly 260 million inhabitants live on 7,000 islands extending 5,000 kilometers east to west. The fourth most populous country, with 34 provinces and nearly 500 districts, Indonesia consistently ranks among the world’s top 10 greenhouse gas emitters. Land-use changes such as the conversion of forest cover to agriculture and the burning of forest and peat are the country’s top sources of emissions, followed by energy use and waste management.

In 2007, Indonesia hosted the 13th Conference of Parties to the United Nations Framework Convention on Climate Change and declared, along with other developing countries, its resolution to reduce greenhouse gas (GHG) emissions. In 2009, at the Group of Twenty (G20) meeting, the president of Indonesia committed the country to reducing its GHG emissions by 26 percent by 2020 using domestic resources and by up to 41 percent (compared to business as usual) if given international support.

In 2011, Presidential Regulation No. 61 provided the policy framework for climate change mitigation in agriculture, forestry and peat land, energy and transportation, industry, and waste, and Presidential Regulation No. 71 prepared national GHG inventories. Substantially reducing GHG emissions will require major shifts in land-use policies and practices (that is, enforcement) and investment in efficient and renewable energies, transportation, industry, and waste management. Institutions need to be provided with appropriate development capacity, and the private sector and civil society need to be engaged in the process of change (Auracher and von Lüpke2017).

International donors were quick to pledge support to these initiatives but hesitant to disburse funds because of Indonesia’s opaque fiscal practices, procedures, and regulations.