Economic expansion in Indonesia has brought prosperity and improved living conditions to local populations, through jobs, infrastructure investment, and increased availability of essential services like transport, health, and education. Yet, Indonesia’s current growth path is resulting in social and environmental challenges. The country’s future economic challenge is to deliver a rapid, yet inclusive, and people-centered form of economic growth in support of the ambitious social and economic goals expressed in Indonesia’s new National Mid-term Development Plan (RPJMN 2015-19). This was adopted in early 2015 to reflect the current administration’s strategy to meet development challenges.

However, increasing pressures on the environment threaten progress toward these goals. Indonesia’s natural capital base is being eroded, with corresponding impacts on the country’s food, water, and energy security affecting the long-term prosperity of all Indonesians. Indonesia’s total GHG emissions are estimated to account for over 6% of the global total. Forestry and land use emissions are by far the largest source, emissions from energy consumption also growing. Transforming Indonesia’s growth pattern into a more sustainable one remains a challenge due to weak institutions, poor governance, and a global market for unsustainable extractive sectors, which results in high rates of deforestation and other social and environmental issues. Green growth will require demonstrations of innovative technologies, organizations and processes, effective government policies to protect the environment, and consistent involvement by private business and civil society groups in the shift to cleaner, more inclusive growth.

The main elements of Indonesia’s Economic Master Plan (MP3EI), launched during the previous administration, still feature in the current government’s development priorities. Specifically, the establishment of SEZs throughout the country has been stepped up and prioritized. Ambitious plans to develop a number of SEZs across Indonesia highlight the importance of ensuring green growth in these processes.

Indonesia’s NDC lays out an exciting and challenging approach to integrate food, water, and energy security through a ‘landscape approach’ underpinned by sound ecosystem management. This approach is well suited to valuing natural capital and ecosystem services. It also puts a premium on good spatial planning and effective, cross-sectoral governance.

This project aims to serve the priorities of Indonesia’s RPJMN 2015-19, which sets a course for a clean, transparent, democratic government, strengthening the rural economy, land tenure reform, and increasing the productivity and competitiveness of the Indonesian people. The plan is particularly ambitious in setting targets for economic growth, food and energy security, poverty reduction, spatial planning, and natural resource management. These targets reflect the nation’s urgent development needs, as well as Indonesia’s international commitments to contribute to SDGs and climate change actions.

The 2017-18 WPB for Indonesia covers the second phase of the Indonesia Green Growth program. Phase I (2013-15) focused on mainstreaming green growth in development planning, building the capacity of government partners to use innovative tools, and facilitating green growth strategies. Notable results to date include a national green growth roadmap, district-level Green Growth Strategies supported by government budget allocations, and the adoption of an approach and methodology to mainstream project design and investment through a Green Growth Assessment Process (GGAP). The GGAP was supported by extended cost-benefit assessments (eCBA) of four projects and an eCBA handbook. By the end of 2016, investment opportunities in the solar PV and bioenergy sectors, as well the forest and land use sectors, will be leveraged through improved project design and green growth guidelines for SEZs will be completed.

Based on the success of Phase I, GGGI obtained earmarked funding from Norway to continue with Phase II (2016-19). Phase II builds on these results by piloting green investments, enhancing sustainability, and replication by institutionalizing green growth methods and mainstreaming green growth within policies and investment plans.

PROJECT OUTPUTS FOR 2017-18:

• Develop and submit recommendations on incorporating renewable energy into Regional Energy Master Plans of East and Central Kalimantan
• Support the adoption of green growth policy guidelines in SEZs in 2 provinces or districts
• Develop and submit recommendations on mainstreaming green growth into sectoral, provincial and district level development plans in East and Central Kalimantan
• Develop and submit a renewable energy investment framework at district or provincial level
• Develop and submit national-level policy recommendations and fiscal instruments to promote green investment in SEZs
• Design and submit policy instruments to reduce risk and enhance investment decisions for REDD+ activities
• Deliver at least 4 training events on green growth planning and investment tools and methods
• Prepare and submit 1 pre-feasibility study and 2 project designs for bankable projects
• Prepare and submit 1 pre-feasibility study for a green infrastructure project in a Special Economic Zone
• Develop and submit 3 proposals for forest and land-based GHG mitigation projects for financing
• Green Growth Facility expands its knowledge support services beyond the existing 2 pilot provinces
• At least 12 knowledge products on green growth produced and disseminated
• Finalize design and pilot delivery of a green growth curriculum for government agencies
• Mainstream safeguards, poverty reduction and social inclusion (including gender) into all program outputs

PROJECT OUTCOMES FOR 2017-18:

• Governments adopt green growth plans relating to energy, SEZs, forest- and land-based GHG mitigation for implementation
• Governments adopt and implement policies and instruments to improve the enabling environment for green investment
• Financing is approved for at least 3 bankable green projects
• Green Growth Facility effectively supports the development and implementation of green growth policies at national and sub-national levels

The four outcomes of the Phase II framework are designed with multiple linkages to make them mutually reinforcing. For green growth to succeed, it requires systematic planning and coordination, the right mix of policies and enabling conditions, and an adequate flow of public and private investment to projects on the ground. All of these require capable institutions and leaders.

Implementation plans set the overall direction, goals, and means of economic development for sectors, regions, and the nation to deliver green growth. The following outputs will drive this outcome:

• Recommendations on incorporating renewable energy into Regional Energy Master Plans of East and Central Kalimantan developed;
• Adoption of green growth policy guidelines in SEZs in 2 provinces or districts supported; and
• Recommendations on mainstreaming green growth into sectoral, provincial, and district level development plans in East and Central Kalimantan developed.

Improvements to the enabling environment provide a conducive investment climate reducing risks which builds the confidence of public and private investors to invest in green growth. The following outputs will drive this outcome:

• Renewable energy investment framework at district or provincial level developed;
• National-level policy recommendations and fiscal instruments to promote green investment in SEZs developed;
• Policy instruments to reduce risk and enhance investment decisions for REDD+ activities designed; and
• At least 4 training events on green growth planning and investment tools and methods delivered.

Green financing from both public and private sources is needed to demonstrate the bankability of green projects and programs. The following outputs will drive this outcome:

• 1 pre-feasibilty study and 2 project designs for bankable projects;
• 1 pre-feasibility study for a green infrastructure prepared;
• 3 proposals for forest and land-based GHG mitigation projects for financing developed; and
• Knowledge support services of a Green Growth Facility expanded beyond the existing 2 pilot provinces.

Well governed and capable institutions and leadership are needed over the longer term. To ensure the sustainability of applying a systematic approach toward green growth, the use of tools to support decision making and performance measurement, and to replicate the development of bankable green projects, a Green Growth Facility will support replication and scaling up of in-country capacity building of systems and institutions that can deliver green growth. The Facility will act as a clearinghouse and delivery mechanism for green growth information, knowledge, and skills. Training modules will be developed for inclusion in official curricula and programs, both with national and sub-national partners, as well as to reach a broader target audience in other sectors and in provinces and districts across Indonesia. The following outputs will drive this outcome:

• At least 12 knowledge products on green growth produced and disseminated; and
• Design of a green growth curriculum for government agencies finalized and piloted.

Phase II of the Program will focus on three areas: (i) energy, with a particular focus on renewable energy and energy efficiency; (ii) SEZs, with a focus on green infrastructure projects; and (iii) forest- and land-based mitigation, with a focus on enabling and financing REDD+ programs within the broader context of green growth, with an expanded support beyond the two pilot provinces Central Kalimantan and East Kalimantan to other priority provinces.