Financing green industries incentives for environmental investment in indonesia
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FINANCING GREEN INDUSTRIES: Incentives for Environmental Investment in Indonesia. Laksmi Dhewanthi Assistant Deputy Minister for Incentive and Environmental Fund State Ministry of Environment International Conference on Green Industry in Asia Manila, Phillippines, 9-11 September 2009.

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FINANCING GREEN INDUSTRIES: Incentives for Environmental Investment in Indonesia

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Financing green industries incentives for environmental investment in indonesia

FINANCING GREEN INDUSTRIES: Incentives for Environmental Investment in Indonesia

Laksmi Dhewanthi

Assistant Deputy Minister for Incentive and Environmental Fund

State Ministry of Environment

International Conference on Green Industry in Asia

Manila, Phillippines, 9-11 September 2009


Content

CONTENT

  • Rationale

  • Existing Policy Initiatives

  • Experiences and Lessons Learned

  • Further Developments


Financing green industries incentives for environmental investment in indonesia

RATIONALE

Indonesia is of the view that Financing the environment is essential


Financing green industries incentives for environmental investment in indonesia

This is Indonesia, …......


Financing green industries incentives for environmental investment in indonesia

This is also Indonesia......


Why financing environment matters for development

Why Financing Environment matters? for development

pollution and natural degradation are not just environmental challenges and that the economic consequences of environmental problems require a long-term response, because:

  • threatens on poverty eradication and achievement of MDGs

    • actions to address environmental challenges correlates to issues of equity and justice

       developing countries have limited options as they could not shift resources from their development agenda and poverty alleviation to environmentally sound.

  • Threatens national security, in term of food, energy, defense, and others


Why financing environment matters for finance regime

Why Financing Environment matters? for finance regime

  • Finance regime can play a more active role in responding to environmental challenges

     affect countries’ spending priorities, revenue raising opportunities, insurance markets, investment options & capital markets.

  • The global interest to improve existing international financing mechanisms

     to develop innovative approaches to financial/fiscal activities related to environment, esp. climate change adaptation and mitigation

  • It is a must to be look for win-win-win solutions and new commitments of resources,

    such as new policies, incentives, and integrating approaches

    • engage the machinery of government, the private sector and society in helping to solve these problems.


Existing policy initiatives

Existing Policy Initiatives

POLICIESas well as MARKETFAILURES

(subsidized growth, distorted energy prices, no pollution cost)

are main causes of the current environmental problems

POLICY INTERVENTIONS

&

MARKET CORRECTIONS

POLICY INITIATIVES

includeINCENTIVE/DISINSENTIVE SCHEMES

8


Non monetary incentive initiatives recognition publication technical facilitation etc

Non Monetary Incentive Initiatives(recognition, publication, technical facilitation, etc)

  • ADIPURA(a Clean and Green Cities award programme)

  • KALPATARUaward program (for individual/group/ company for their dedication to the environmental management practices)

  • PROPER (Business Environmental Performance Rating)

  • ICPC (Indonesian Cleaner Production Centre)

  • Demonstration Project, etc


Financing green industries incentives for environmental investment in indonesia

MONETARY INCENTIVE SCHEMES

FOR ENVIRONMENTAL MANAGEMENT IN INDONESIA

Fiscal Instruments

Financing Instruments

Market Instruments

Subsidies

Soft Loans

Technological Procurements

Tax Exemptions

Grants

Implemented

Deposit Refunds

User Taxes

Alternatives source of fund

Royalties

Performance Bonds

User Taxes

Performance Bonds

Reduced Loan Interests

Product Taxes

Bulk Purchasings

Alternatives

Emission Taxes

Deposit Refunds

Environmental Fund

Tax Differentiations

Liabilities Payments

Financing Guarantees

Tax Exemptions

No Compliance Fees


Financing green industries incentives for environmental investment in indonesia

Other incentives

  • Collaboration with Indonesian central bank, to internalized environmental measurements into bank’ policies

    i.e. BI regulation no. 2/2005 and Circulate Letter of BI No. SEBI No 7/3/DPNP which includes inclusion of environmental performance within bank credit policy  i.e. create direct financial disincentive for PROPER’ participating companies;

  • CDM (Clean Development Mechanism)

  • Special “environment” Budget Allocation for Local Government

  • PES (Payment for Ecosystem/ecological Services)


Experiences and lessons learned

EXPERIENCES AND LESSONS LEARNED

Environmental related industries, MSMEs


Financing green industries incentives for environmental investment in indonesia

Environmental Soft Loan Schemes


Eligible investments

ELIGIBLE INVESTMENTS

  • Pollution prevention equipment:

  • Cleaner production equipment: energy efficiency and changing sound environmentally technology.

  • Non ozone depleting substance (ODS) equipments.

  • All equipment to save natural resources and reduce wastes (recycling of waste, plastics, metals, and woods).

  • End-of-pipe technologies:

    • Waste water treatment plants;

    • Air pollution treatment plants;

    • Solid waste treatment plants.

  • Environmental analysis equipment:

    • Emission analysis equipments for auto repairs;

    • Laboratory equipment.

  • Financing environmentally materials: raw materials and additive materials or substitution of bleaching agent.

  • Certificationof environmentally sound industries (environmental management system certificate).

MoE

3

2

4

Financial Institutions

5

1

Industries, SMSEs


We finance

We finance…

  • Pollution control

  • Waste minimization/reduction

  • Solid waste management

  • Production and Energy Efficiency

  • Utilization of waste

  • 3R, organic fertilizer

  • Alternatives energy

  • renewable energy

  • etc


Lessons learned

Consultant

WWTP

Recycle

1%

14%

13%

APC

2%

Cleaner Production

70%

LESSONS LEARNED

  • Perception toward environmental investment has changed  from cost center into profit center, thus environmental investment is an investment

  • Demand on CP increased

  • from almost 80% “end of pipe” type

    of investment (1997-2002)

  • MSMEs and FIs’ capacity built

  • Environmental performance improved

     increase resource efficiency and utilization of waste

    Success factors  commitment, trust & active role of stakeholders, availability of criteria and standard, HRD, and risks sharing.

Utilization of loans by type of Investment (2007)


Financing green industries incentives for environmental investment in indonesia

Still, need to address

  • Absence of market/economic value of environmental friendly investment and technology

  • Lack of priority, both politically and technically, to support environmental friendly initiatives

  • Limited type and amount of fund sources

  • Limited options of policy instruments, incl. legal basis to develop other incentives, law enforcement, etc


Pre v enti f vs kurati f

Preventifvs Kuratif

FURTHER DEVELOPMENTS: Taking Benefits from Climate Change Regime

Cost and level of environmental degradation

early prevention is cheaper (Stern)

$1 now prevent $40 future

Time dimension


Financing green industries incentives for environmental investment in indonesia

  • Develop other “tailored” env’l financing scheme, i.e. ERI, for technology developer, PPP, etc

  • Develop further incentive schemes  Embark toward Environmental Fiscal Reform

  • Mobilized more financial resources, incl. DNS, etc

  • Involve broaden FIs and stakeholders

  • BASIC NOTIONS for further initiatives:

  • Focus on getting the market price of environment right

  • Integrating decentralized policy making process

  • Effective implementation in nature

Newly Indonesian Act on Environmental Protection and Management of 2009


Financing green industries incentives for environmental investment in indonesia

Overview of development of incentive instruments

for the environment

PRACTICE 1 - Analysis of EFR instruments

Diagram based on Emerton, L. et al. (2006) Sustainable Financing of Protected Areas, IUCN and Fischer, A. / Petersen, L. / Hubbert, W. (2004): Natural Resources and Governance: Incentives for Sustainable Resource Use, GTZ).


Financing green industries incentives for environmental investment in indonesia

Thank you

for further information:

Assistant Deputy for Incentive and Environmental Fund

State Ministry of Environment, Republic of Indonesia

A Building, 4th floor, Jl D.I PanjaitanKav 24

Kebun Nanas - Jakarta 13410 INDONESIA

Tlp/Fx. +62 21 851716

Website: http://www.menlh.go.id/pinjamanlunak

Contact person:

LaksmiDhewanthi ([email protected])

DamayantiRatunanda ([email protected])


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