Innovative approaches to financing for inclusive green returns: Indonesia's case

Innovative approaches to financing for inclusive green returns:

Indonesia case

BASAH HERNOWODirector for Forestry and Water Resources Conservation

Indonesia National Development Planning Agency

Presented at Forest Asia Summit, 5 May 2014, Shangri-La Hotel Jakarta

Ministry of National Development Planning

www.icctf.or.idIndonesia Climate Change Trust Fund

Establishment: 3 September 2009

Funding: Blend the state budget and international contribution

Goal: To support the GoI efforts to reduce GHG emissions, move the country

towards a low‐carbon economy, and adapt to the negative impacts of

climate change.

Purpose: 1.Mainstreaming CC issues into national, provincial & local development planning2.Implementing GHG emissions mitigation and adaptation initiatives

Establishment: 3 September 2009

Funding: Blend the state budget and international contribution

Goal: To support the GoI efforts to reduce GHG emissions, move the country

towards a low‐carbon economy, and adapt to the negative impacts of

climate change.

Purpose: 1.Mainstreaming CC issues into national, provincial & local development planning2.Implementing GHG emissions mitigation and adaptation initiatives

What makes ICCTF Unique

1. Strategic Role• Implementation of RAN & RAD-GRK• Support to implementation of RAN-API• NAMAs support facility for Indonesia

2. Triggering Initiatives • Alternative funding mechanism to blend

international and domestic funds• Strategic and innovative pilot projects funding

for further replication

3. Direct AccessEndorsement to be National Funding Entity accredited

with the GCF

What makes ICCTF Unique

1. Strategic Role• Implementation of RAN & RAD-GRK• Support to implementation of RAN-API• NAMAs support facility for Indonesia

2. Triggering Initiatives • Alternative funding mechanism to blend

international and domestic funds• Strategic and innovative pilot projects funding

for further replication

3. Direct AccessEndorsement to be National Funding Entity accredited

with the GCF

Investment Windows

Land Based Mitigation

Energy Resilience and Adaptation

Indonesia Climate Change Trust Fund


Forest-Climate Finance Institution

Government’sState Budget

International Development Cooperation

Bilateral Multilateral

Ministry of National Development Planning (Bappenas)

REDD+ AgencyMinistry of Forestry

Funding Source

Responsible Ministry/ Agency

Institution

Disbursement Mechanism

Focus Area

Forest Management Unit

Indonesia Climate Change Trust Fund

(ICCTF)

Millennium Challenge Account Indonesia

(MCAI)

Fund for REDD+ Indonesia (FREDDI)*

• Direct grant to FMU through state budget mechanism

• Joint venture with communities, cooperatives, private comp.

Grant to Executing Agency (central govt.) & Implementing Agency (central & local govt., academia, CSO, private)

• Grant to community; • Loan to private sector.

Grant, loan, equity investment, performance base.

non-timber forest products, environmental services, community timber products, carbon business

1. Land Based Mitigation2. Energy

3. Resilience & Adaptation

1. Participatory Land Use Planning;

2. Technical and Oversight Assistance

3. Financial Facility4. Green Knowledge

Implementation of REDD+ National Strategy

Other Gov’t Ministries/ Agencies

Develop-ment

Programs

Grant, research, technical assistance

1.Mitigation

2.Adaptation

*) Under discussion


Organizational Structure

Structure of PREP-ICCTF(current)

Structure of LWA-ICCTF(Perpres 80/2011)

Board of Trustee/Majelis Wali Amanat (MWA)

oChair (Bappenas)oSecretaryoMembers (GoI, donors, CSO, private, academia)

National Fund Manager/

Pengelola Dana Amanat (PDA/Bank

Mandiri)

Secretariat-Executive Director-Professional Staff

KPA Supporting Unit (appointed Bappenas Staff)

Executing Agency/

Pengelola Proyek

Implementing Agency/

Pelaksana Proyek

Contract, Approval &Guidance

Fund Transfer

Reporting


Sustainable Peatland Management 1.Banjarbaru, South Kalimantan2.Jabiren, Central Kalimantan3.Muaro, Jambi4.Pelalawan, Riau

11. Sidoarjo, East Java12. Kediri, East Java13. Kudus, Central Java14. Muara Enim, South

Sumatra15. Pekanbaru, Riau16. Tanjab Barat, Jambi17. Porsea, North

Sumatra18. Deli, North Sumatra

Energy Conservation1. DKI Jakarta, Jakarta2. Tangerang, Banten3. Serang, Banten4. Bekasi, West Java5. Bandung, West Java6. Bogor, West Java7. Klaten, Central Java8. Semarang, Central Java9. Surabaya, East Java10. Gresik, East Java

Public Awareness & Education

1. Serdang Bedagai. 2. North Sumatra 3. Batu, Malang, East Java4. Bau-Bau, SouthEast Sulawesi5. Kamal Muara, North Jakarta6. Indramayu, West Java

ICCTF Pilot Project 2010-2011


Health Vulnerability: Assessment, Mapping, and Community Based Adaptation on Dengue Hemorrhagic Fever and Malaria Diseases (ICCTF-MoH)1. West Sumatra2. DKI Jakarta3. East Java4. Bali5. Central Kalimantan

ICCTF On-going Projects 2012-2014

Sustainable Management of Degraded Peatland to Mitigate Green House Gas Emissions and Optimize Crop Productivity (ICCTF-MoA)1.Papua 4. Riau2. Kalimantan Barat 5. Jambi3. Kalimantan Tengah

Enhancing Sustainable Management of Community-Based Wood Pellets Production as Biomass Energy to Support Low Carbon Economy and Climate Change Mitigation in Bangkalan, Madura, East Java (ICCTF-MoFor)1. Bangkalan, Madura


Toward NFE Application for the Green Climate Fund

Lessons learned•Organizational set up needs to be clear and certain (The ICCTF is transitioning to become a self-managed National Trust Fund)

– ICCTF is currently at the final stage on a transition plan to a National Trust Fund management structure that comprises of a Board of Trustees (Majelis Wali Amanat/MWA), a National Fund Manager (Pengelola Dana Amanat/PDA), a Secretariat and a Supporting Unit of State Budget Owner (Kuasa Pemegang Anggaran/KPA).

•Applicants need to be able to meet fiduciary standards related to financial management (transparency and efficient spending is key)•requires existing successful track record in delivering development programs.•Further strategically important investments are made in the institutional development of the ICCTF through funds provided by the German government to enhance “climate finance readiness”


Milestones ICCTF 2020


SGP (Small Grants Program) Projects as Innovation Phase

Enhancing Carbon Sequestration in

Community Forest as a Landbased

Mitigation Action (ARuPA, Bantul)

Public-Private Partnership

Model in Climate Change Mitigation

Action in Conservation Area

(FoF-IPB, Riau)

Adaptation on Seaweed

Aquaculture (LSM HUMANIORA,

Kendari)

Planning and Information System for Street Lighting Energy Efficiency (Politeknik ATMI,

Surakarta)

Strengthening Climate Information System for Farmers and Fishers (PIKUL,

Kupang)

Strengthening Coastal Community Resilience through Participatory

Multimedia Technology (Bingkai)


1. ICCTF pools and aligns resources provided either by Indonesian government or by private sector entities to support a mutually agreed ‐portfolio of projects and programmes.

2. ICCTF will act as a financial portal to receive and distribute funds from international Funds, development partners, and other climate change funding mechanisms (Green Climate Fund, NAMAs Facility, Adaptation Fund, EU Global Efficiency and Renewable Energy Fund, etc).

3. ICCTF could be the main vehicle to fund the programs/activities of internationally supported NAMAs (up to 41% target).

Role of ICCTF: ‘NAMAs Support Facility’

Note: ICCTF as ‘Climate Change Finance Registry’ is decided on Policy Coordination on July 15, 2013


Proposed Approach for PPP

ICCTF will support (capacity building, FS development etc) directly the project on the pipeline – special procedure apply

ICCTF is ready with procedure & SOP for open tender for all projects

ICCTF is ready to finance not only ‘enabling condition’ but also investments needed

Indonesia innovative approaches to financing: Climate Change and Forest

Sustainable forest ,

improved community livelihood ,

while reducing carbon

emission

Examples from ICCTF on Biomass Energy Estate

Forest Management Unit or Kesatuan Pengelolaan Hutan (KPH) Gerbang Lestari at Bangkalan, Madura plants Calliandra callothyrsus or Red Calliandra to produce wood pellet.

FOREST MANAGEMENT UNIT (FMU)/ KESATUAN PENGELOLAAN HUTAN (KPH)

Forestry Sector Main Challenge:Contribution to the Sustainable Development

• Generating revenues from forest resources through timber and non-timber forest products, biodiversity, food, energy, and medicine

• Forest based clustery industry to improve the synergy between up-stream and down-stream industry

• Provide employment opportunities• Reduce poverty on the communities living inside and

surrounding forest areas• Environmental and biodiversity protection, including

development of environmental services• Implementation of good forest governance

Forest Management Unit (FMU) or Kesatuan Pengelolaan Hutan (KPH)

FMU FINANCING SCHEME FOR SUSTAINABLE FOREST MANAGEMENT

FMU/KPH PartnershipPartnership

REDD+

Communitiesforest

Environment services

Non-timber forest products

Carbon trading

Sustainable forest management

Sustainable forest management

Forest conservationForest conservation

Biodiversity

Revenues and employments

Government initial

investment

Carbon Emission Reduction

Carbon Emission Reduction

INVESTMENT

Forest Utilisation inside FMUForest Utilisation inside FMU

WILAYAH TERTENTU

(Special Zone)

IUPHHK-HA

IUPHHK-HT

HTR

HKMHD

Community

empowerment

Private

Cooperation

s

Forest Utilisation in the Special Zone (Permenhut 47/2013)

A.Sustainable forest investmentB.Establish cooperation or joint venture with communities, BUMN/D/S, Cooperatives, small scale business).

• ENVIRONMENTAL SERVICES

• NON-TIMBER FOREST PRODUCTS

• FOREST AREA FOR SOCIAL AND OTHER PURPOSES

• TIMBER PRODUCTS• NON-TIMBER FOREST

PRODUCTS

PRODUCTION FOREST

PROTECTED FOREST

TYPES OF FOREST UTILISATION IN THE SPECIAL ZONE ON PROTECTED AND PRODUCTION FMU

TYPES OF FOREST UTILISATION IN THE SPECIAL ZONE ON PROTECTED AND PRODUCTION FMU

Development of 600 FMUs across Indonesia

forest

Transforming 120 FMU Prototypes

120 FMU Prototypes to Ministry of Forestry and Local Governments according to each institution’ function

Covers:a. Legally clean dan clear

forest areab. Institution dev’tc. Planning (development

and business plan)d. Doing businesses

FMU DEVELOPMENT STRATEGY 2015-2019

GOOD FOREST GOVERNANCEGOOD FOREST GOVERNANCE

ICCTF AND SMALL HOLDERS FINANCING

HKMHKM

HDHD

HTRHTR

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ICCTFICCTF