Institute for Global Environmental Strategies Towards sustainable development - policy oriented, practical and strategic research on global environmental issues Experience in Implementing Indonesia Climate Change Program Loan and Lessons for Future Cooperation May 6, 2011 Hironori Hamanaka Chair of the Board of Directors Institute 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 –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  Mainstreaming  Mainstreaming climate policy in national development program  Enhancing capacities for policy implementation –Financing scheme –Financing scheme inventory system –Establish greenhouse gas inventory system NAMA & MRV system –Develop NAMA & MRV system For CCPL, development of MRV systems (in terms of MRV of actions as well as MRV of financing of CCPL) policy coordination –Further improve policy coordination among government agencies –Enhancing capacities of local government –Enhancing capacities of local government  Improving and enhancing international cooperation 6

CCPL: Scheme 7 General budget support Policy dialogues Monitoring/assessment of agreed policy targets/actions Monitoring/assessment of agreed policy targets/actions How CCPL operates? Providing information for discussion/decision making Deciding continued/ additional support Modifying/adding targets/actions as necessary

CCPL Phase I CCPL Phase I ( ) Policy Matrix legal/regulatory and institutional reforms; and pilot projects  Implementation of legal/regulatory and institutional reforms; and pilot projects are monitored/discussed in the following sectors and cross sectoral issues: MitigationAdaptation Cross sectoral issues LULUCF Energy Water Resource Agriculture Understanding climate change impact; Mainstreaming; Spatial Planning; CDM; Co-benefits; Fiscal Incentives; Early Warning Systems Disaster management Marine, Coral & Fisheries Water Supply & Sanitation 8

CCPL Phase II CCPL Phase II ( ) Policy Matrix  Phase II puts more priority on upstream policies or key policy issues (planning, GHG inventory, financing)  More stakeholders are joining the cooperative framework. i.e. World bank(2010-)) MitigationAdaptation Key policy issues LULUCF Energy Water Resource Agriculture Mainstreaming Marine, Coral & Fisheries 9 Financing scheme/ Policy coordination GHG inventory Vulnerability assessment Transportation

CCPL: Impacts  Provided further opportunity to coordination and communication in inter-ministerial issues:  Watershed management issue  Renewable 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 energy  Mainstreamed climate change into development issue (National Medium Term Development Plan ( ) 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 10

CCPL: Lessons (1) 11  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: CCPL: Lessons (2) 12  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 actions  Experience 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 Hamanaka Chair, Board of Directors, Institute for Global Environmental Strategies