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Climate Change and Indonesia

Climate Change and Indonesia. By Charlie Reed. Background. Physical 735,000sq mi; 17,000 islands Social Indicators Population – 211,700,000 (4 th Largest in the World) Growth – 1.3%, Replacement Rate 2.3 Urban 43% Poverty 16% Income Per Capita $810 (GNI 2003) Life Expectancy 67

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Climate Change and Indonesia

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  1. Climate Change and Indonesia By Charlie Reed

  2. Background • Physical • 735,000sq mi; • 17,000 islands • Social Indicators • Population – 211,700,000 (4th Largest in the World) • Growth – 1.3%, Replacement Rate 2.3 • Urban 43% • Poverty 16% • Income Per Capita $810 (GNI 2003) • Life Expectancy 67 • .6% of GDP on health, 1.2% of GNI on education (Low) • Net Primary Enrolment %93; Illiteracy 12% Indonesia is better off then other low income countries.

  3. Economic indicators • GDP growth 3.4% ; per capita GDP growth 2.3%; Was around 6% until Asian financial crisis • Economic make up (Value Added % of GDP) • 16.6 % Agriculture (40% of labor force) • 43.3 % Industry • 39.9 % Services • Export 31.2% of GDP, Import 25.7% • Investment Climate • Lost share in world export market • Major issues Investors : macroeconomic instability, policy uncertainty, and corruption • Indonesia must improve investment laws and increase confidence in the government • Survey shows that it takes 151 days to start a business (Thailand 33, Malaysia 30, China 41) • Terrorism affects investment • After 2002 Bali and 2003 Marriot bombing investment approvals declined • Future Economic Outlook • GDP growth to be 5% in 2005 and should remain high • Investment Climate to improve

  4. Carbon Emissions • Indonesia is responsible for 1% of global total.

  5. Climate Change Impacts on Indonesia • More than 17,000 islands, 81 thousand km coastlines- Estimated cost of about 10% GDP • Health • Like other developing countries- Increase transmission of vector born diseases • Heat stress • Impacts due to sea level change • 1990- 110 of 170 million live on near the Ocean. • Loss of marsh land and other agricultural land costing 11.3 billion annually (60cm) • Tsunami is example of how sea level rise can devastate the poor ocean side population. • Forestry • Forestry will benefit because of increased growth- Studies show that 2 times CO2 causes tropical biomass growth of 12% • AgriculturalImpacts • Agricultural production will decline due to flooding, erosion, loss of arable land, and accelerated evapotranspiration during dry seasons • Crop yields will fall • Soybean production would decline by 20% to %40 and rice by 2.5% • Estimated that soil erosion and land loss has cost $6 billion annually

  6. Developments/Agencies • Indonesia signed UNFCCC in June 1992 and ratified it in August 1994 • Set up a monitoring system for CO2 emissions and sinks. • Set up the National Committee on Climate Change (NCCC) to address climate issues • Consist of representatives from various government agencies, NGOs, academic and business communities. • Strengthen the coordination between government institutions. • Develop national institutions to anticipate climate change. • Evaluate the implementation of UNFCCC and KP. • Develop global cooperation and partnership in dealing with CC issues. • Represent Indonesia in the COP’s meetings and high level summits related to the convention and the protocol. • Encourage active participation of all stakeholders in dealing with CC. • Encourage and guide R&D in related sectors. • Encourage and guide technology transfers in order to reduce GHG in all sectors. • Indonesia signed the Kyoto Protocol in 1998 • Approved its ratification on June, 28 2004

  7. Agencies • Ministry of Environment • Oversee all environmental affairs • NCCC • Consist of representatives from various government agencies, NGOs, academic and business communities. • Strengthen the coordination between government institutions. • Develop national institutions to anticipate climate change. • Evaluate the implementation of UNFCCC and KP. • Develop global cooperation and partnership in dealing with CC issues. • Represent Indonesia in the COP’s meetings and high level summits related to the convention and the protocol. • Encourage active participation of all stakeholders in dealing with CC. • Encourage and guide R&D in related sectors. • Encourage and guide technology transfers in order to reduce GHG in all sectors.

  8. The National Committee on Climate Change Chair: Minister of Environment Secretary: Deputy Min. for Env. Conservation of MOE Vice Secretary: Head of AMG Secretariat /Support. Unit: Climate & Atmospheric Affairs, MOE NDPA DOFA DOFO DOHRI DEMR DIT DOT DOA DOH DOHA DOFI MORT DMF NISA MOE = Ministry of the Environment AMG = Agency for Meteorology and Geophysics NDPA = National Development Planning Agency DOFA = Department of Foreign Affairs DOFO = Department of Forestry DOHRI= Department of Housing and Regional Infrastructure DEMR = Department of Energy and Mineral Resources DIT = Department of Industry and Trade DOT = Department of Transportation DOA = Department of Agriculture DOH = Department of Health DOHA= Department of Home Affairs DOFI = Department of Finance MORT= Ministry of Research and Technology DMF = Department of Maritime and Fisheries NISA = National Institute for Space & Aeronautics

  9. CDM • Under Article 12 the objective is to assist Annex 1 countries to meet there target, and assist Non Annex 1 countries to achieve Sustainable Development • Since 1996 Indonesia has actively supported the Activities Implemented Jointly (AIJ) mechanism • Indonesia will be looking to attract CDM projects • Indonesia has the potential of hosting CDM projects that reduce a total of 125 MT of carbon • Revenues of 50m/yr, profits of $25m/yr • Indication of a country’s preparedness for CDM Projects • Ratification of Kyoto protocol • Appointment on a Designated National Authority (DNA) • Approved Criteria for National approval of CDM projects • Number of projects approved

  10. CDM • Ministry of the Environment established Indonesia’s Designated National Authority (NDA) in April 2004 • The DNA would act as a National Focal Point for communication between parties. COP SBSTA, SBI UNFCCC Secr. NFP National Committee Stakeholders CER CER

  11. Currently there are several components that need capacity building • DNA • Project proponents • Local authorities • Local communities and other local stakeholders • Potential operational entity • Legal consultant • Financial institutions

  12. CDM • CDM should only be accepted if they fulfill these Criteria to develop Sustainable Development. • No adverse environmental impact • Environmentally sound technology transfer • Stakeholder participation • Respect of Customary Right (land tenure) • Increased employment • Community development program • Capacity building improvement • Local economic benefits • Equitable distribution of benefits • No net increase in external debt burden • See notes for more explanation

  13. Posible CDM Projects • Wayang Windu Unit 2, • 110MW geothermal project in Java. Potential reduction for a crediting period of 7 years around 750,000 tCO2e for 5.2 euro a ton • Utilization of Combined Solar, Wind and Biomass for a small agro-processing unit • Potential emission reduction of 9,600 tCO2e over 10 years • Bandarjaya Rice Husk Power Plant • Rice husk to be used to generate electricity . Potential of emission reduction is 139,390 over 10 years. • Inducement efficiency project • Use alternative fuels and various process optimization techniques to reduce CO2 emissions from cement producer. Reduction of one million tCO2e/year • Countries that have shown the most interest are Netherlands, Japan, Denmark, Austria and Canada • "We'll offer more qualified projects that reduce more carbon, a guarantee that the projects will be sustainable and of course, a more negotiable price of carbon," • Sudariyono, the deputy for environmental conservation at the Office of the State Minister of Environment.

  14. Sinks (Forestry) • Forest considered second to only Brazil as the most important world heritage of tropical forest • The inclusion of sinks can be very profitable for Indonesia • If Indonesia were to control 10% of the market for sinks they would produce 1.8 mtCO2e/year, causing revenues of an extra $80 million. • Indonesia has recently had a startling decline in forest cover • Despite a 38% increase in plantation forest overall has fallen by 16% from 1990 to 2000 • Fires have reduced forest cover, emitted CO2 and regional air pollution, and have cost billions • Adding value to forest through sinks would reduce the incentive fro deforestation • By combining carbon emission and forestry into a system with clear property rights, progress could be made in solving many of Indonesia's environmental issues linked to deforestation.

  15. Forest • Growth of Indonesian forest provide a sink that sequester CO2 at a rate of 686,790 Gg annually • The energy sector in Indonesia 170Gg annually (1994)

  16. Oil and Energy • Indonesia is part of OPEC receives $9 billion a year from oil exports • Export 1.4 million barrels of oil a day out of world total of 78 million barrels which is 3.8% of OPEC in 2003 • A decreased demand for oil because of Kyoto protocol would decrease revenues because of decreased market share of OPEC. • But Indonesia's Oil capacity is decreasing. In 1991 they represented 6% of OPEC output and produced under capacity. • Effects of a rise in Oil Prices • On one hand it increase value of oil exports and generates revenue • On the other hand higher oil prices reduce demand for exports. • Increase of oil cost by $10 causes a .6% decrease of world GDP growth

  17. Oil and Energy • Indonesia subsidizes oil prices • As oil prices rise the cost of subsidies increases causing major fiscal strain • Implications of subsidies on energy use • Since oil is under priced in Indonesia there is a tendency to overuse. • Energy use per GDP has increased slightly while in most countries it has decrease by approximately 1% a year reflecting increased efficiency. • Indonesian can increase the economic incentive for energy efficiency reducing CO2 emission • Side Note: While OPEC is the sworn enemy of the Kyoto Protocol and emission reduction measures, yet it has probably done the most to curb climate change by inflating prices and making cleaner option viable.

  18. Steps to Reduce Indonesia’s Emissions • Any steps measures to reduce emission must do so without hampering the national development objectives. • Energy • Removal of subsidies • Promote Renewable energy • Promote public adoption of energy conservation • Restructure prices to include externalities • Transportation • Promote use of public transportation. • Road Pricing and area traffic control systems to allow road users to realize the value of that public good • Control vehicle emission and promote the use of clean fuels

  19. Agriculture • Promote improved agricultural practices that emit less GHG • Staple food diversification by promotion of non rice food sources • Improve technology transfer. • Forestry • Stronger regulations of forest management • Revise current management policies • Prevent the occurrence of forest fires through better preparation • Replenish forest • Costal Resources • Promote coral reef rehabilitation and develop national marine resource evaluation and planning program • Continue to Develop a nationwide tide gauge station network to monitor sea level rise • Prepare long term adaptation strategy for possibility of sea level rise.

  20. Conclusions • Indonesia is highly susceptible to damage from climate change and sea level rise. • Have a vested interest GHG reduction • Indonesia has just ratified the Kyoto protocol and is interested in CDM projects • Successful implementation of CDM project could improve the investment environment as a whole and attract investors in all markets. • CDM projects would help achieve the ultimate goal of sustainable development. • Energy subsidies are costly and hazardous to the environment. • Carbon sinks can be used to set up a clear system of property rights to help manage and protect the forest cover • Many Steps that can be taken to reduce CO2 emissions improve other pollution problems and contribute to Sustainable Development

  21. Thank You • http://unfccc.int/resource/docs/natc/indonc1.pdf • http://dna-cdm.menlh.go.id/en/ • www.menlh.go.id

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