1. The Low Emission Budget Marking And Scoring System FPA Ramadhan Harisman Ministry of Finance, Indonesia Songdo, Incheon, 3 December 2013

2. Fiscal Policy Agency Ministry of Finance, Indonesia Background 2  Voluntary commitment to reduce emissions by 2020 with:26% emission reduction using domestic resources and up to 41% reduction with international support (COP15, 2010)  RAN-GRK : Presidential Regulation No.61/2011 on National Action Plan to Reduce GHG Emissions as : the implementation reference for mitigation actions by 5 priority sectors/ areas at the national & local levels  The needs to develop a system for tracking the budget units allocated for climate mitigation and to assess the impact of per unit of budget spent on emission reduction. The system should be able to track the quantity of expenditure allocated and spent on climate mitigation actions. The information on the total budget spent for mitigation actions can then be verified with the performance data or the output produced by such actions. Decision makers can then assess the quality of expenditure, based on the emission reduction achieved by a unit of government spending.

3. Fiscal Policy Agency Ministry of Finance, Indonesia 3 Purpose: to identify the total amount of budget allocation and actual expenditure on climate mitigation and to assess the contribution of per unit of budget to achieve emission reduction targets Budget marking: to develop a system to track, monitor, and report climate mitigation expenditures. The system will mark budget codes that are relevant to climate mitigation actions to identify and report the proportion of government expenditure allocated and spent to implement climate mitigation actions Budget scoring: to indicate the impact of government spending on emission reductions and enable decision-makers to prioritize actions that maximize the benefits of the spending. Low Emission Budget Marking and Scoring System

4. Fiscal Policy Agency Ministry of Finance, Indonesia 4 LESS (Continue) Outputs: Criteria for budget marking to track and report mitigation expenditures of line ministries/agencies Methodology to develop mitigation budget scoring, based on the impact of government spending on emission reduction Scope: Two sectors: Forestry and Energy The report also covers activities beyond those currently listed in the Presidential Regulation 61/2011, particularly those activities/action directly reduce or absorb GHG emissions. The analysis however only covers a subset of the total government spending on climate mitigation, where data on performance are available.

5. Fiscal Policy Agency Ministry of Finance, Indonesia 5 Process  Develop definition and criteria of climate mitigation expenditure based on the Presidential Regulation 61/2011 and international discourse  Identify climate mitigation expenditure within two selected ministries based on the proposed definition and criteria.  Assess the existing government financial management and accounting system to propose options for the marking system  Discuss options of the climate mitigation marking system within the Ministry of Finance, and with the Ministry of Planning as well as relevant sectoral ministries.  Develop an academic paper as the basis for developing a regulation necessary to establish a climate mitigation marking system.

6. Fiscal Policy Agency Ministry of Finance, Indonesia 6  Article 1 (7) of Presidential Regulation 61/2011 defined climate mitigation as the efforts to reduce emissions and increase the absorption of GHG from various sources control in order to reduce the risks caused by the changing climate.  Climate expenditure can be defined as expenditures that contribute to the achievement of: Reducing GHG emissions Increasing the capacity to absorb GHG emissions Conservation of carbon stocks Proposed Definition

7. Fiscal Policy Agency Ministry of Finance, Indonesia 7 Climate Mitigation in Indonesia  Core activities – immediately reduce emissions/increase the absorption of GHG;  Supporting activities – do not have immediate impact on emission reduction but are important to support the implementation of core activities.

8. Fiscal Policy Agency Ministry of Finance, Indonesia 8 Marking Options ApproachAdvantagesDisadvantages Prioities ( based on national priorities setting in the annual Government Workplan (RKP ) No new regulation needed  Need to reformat RKA/KL Application  Unsustainable – depending on government priority  Not included in the budget realization Functions ( based on the “intention (objective)/need” and refers mainly to the eleven functions of COFOG (Code of Functional Classification of Government) set by the OECD/IMF )  Included in the budget realization report  No need to reformat the application  Can also include budget managed by the Ministry of Finance  Cannot be classified as more than one sub- function  New regulation in the form of PMK (Budget Classification) is required Themes ( it is currently ad- hoc in nature, which means that it is carried out voluntarily by line ministries ) No need to change the application of RKA KL  Require new regulation to enforce KL to report this  No clarity on marking of budget managed by Min Fin  Not included in budget realization report

9. Fiscal Policy Agency Ministry of Finance, Indonesia 9  At this stage, the marking of climate mitigation expenditure has only focused on differentiating between climate mitigation expenditure versus non-climate expenditures.  Climate mitigation expenditure can be further classified as having direct and indirect impact.  In order to classify expenditure based on the impact, a specific field should be added next to the theme, function or priorities.  Adding another field may also allow for the inclusion of scores or weights assigned for each expenditure based on its impact on climate mitigation. Marking Options…. (2)

10. Fiscal Policy Agency Ministry of Finance, Indonesia 10 Enforcement for line ministries to track, monitor and report climate mitigation expenditures Political processes to ensure full support from relevant stakeholders may be time consuming (learning from the experience of gender budgeting) Challenges Develop draft of a Ministerial Decree. Conduct simulation with two selected ministries (Forestry and Energy) based on the draft of the decree on the marking Finalize the decree and present the draft to the Minister of Finance Next Steps

11. THANK YOU Fiscal Policy Agency Ministry of Finance, Indonesia