Beyond Bilateral Funding: Creating New Mechanisms for REDD+Operationalization in Indonesia
Hideyuki Kubo (REDD+ Expert)

DAY2Session 2

Beyond Bilateral Funding: Creating New Mechanisms for REDD+ Operationalization in Indonesia
Hideyuki Kubo (REDD+ Expert)

International Seminar
REDD+ Finance Mechanism and Its Optimum Use:How to incentivize forest conservation

Beyond Bilateral Funding:Creating New Mechanisms for
REDD+ Operationalization in Indonesia

Talk about
1. Scope of REDD+ in Indonesia
2. Sources and scales of REDD+ finance3. Emerging financial mechanisms
4. A way forwardHideyuki Kubo
4 February 2015

For the next 10 minutes, I am going to talk about three things.

First, the scope of REDD in thecontext of Indonesia; second, sources and scales of REDD finance; third, emerging financial mechanisms,
particularly focusing on the trust fund.

1. Scoping REDD+ in Indonesia
1. Scope of REDD+ in Indonesia
 Institutional arrangement (e.g.)

MRV; Safeguard; Funding instrument
 Policies and measures as well as projects (e.g.)
Policy:Moratorium; Customary rights

Institution:

Forest Management Unit (FMU)

Project:

Input‐based / InvestmentPrivate sector: Zero deforestation
Finance for REDD+  How to finance these activities

Let me start with the scope of REDD+.

Since yesterday, we are talking about financing REDD.

My question at the very beginning is, financing what actions?

What is the scope of REDD? What are

REDD activities that are financed? When we talk about REDD, it is often categorized into two broad
categories.

One is readiness or, I call it, institutional arrangement including MRV or safeguard or strategies orthese kinds of the basic arrangement without which REDD+ cannot function.
The second aspect is actual activities addressing deforestation and degradation, including policies andmeasures as well as projects.

These are a set of instruments and actions to address deforestations.

If welook at the Indonesian context, there are a wide range of instruments and activities that can be observed under
the scope of policies and measures and project.
For example, at the policy level, as William already discussed while ago, the moratorium policy isthere.

This means no new concession licenses over primary forest and peat land. But it excludes secondaryDAY2
Session 2forest as William described. It is not really perfect, but at least the primary forest conversion was prohibited.
The assumption is that, once this policy is effectively implemented, no deforestation should be observed inprimary forests.
The other significant policy is the legalization of customary forests.

Let us say that 40 million

hectares could be conserved or sustainably managed under customary communities.

One key point is that

AMAN1, the indigenous group, is saying that it is not simply recognizing the legal right of forests forcommunities but forests should be permanent.
cannot be utilized for other purposes.

Therefore, even if customary right is legally recognized, it

It is only for the forest.

That is the basic tenet of this legal proposal.

If you look at the institutional level, the Ministry of Forestry has been actively promoting theinstitutional development of the Forest Management Unit (FMU).

In Indonesia, it is said that around 35

million hectares of forests are under an open access regime, which means no institutional arrangement is madesuch as concessions or community management. These 35 million hectares are prone to conversion anddegradation.

The idea of the government is to put forest management institutions on these lands and be

responsible for the governance, so trying to reduce the rate of deforestation.
There are also projects for addressing deforestation.
projects.

‘Input-based’ means ODA projects or NGO

Although the number is small, there are investment projects like the Rimba Raya in Central

Kalimantan which already obtained VCS credits and sold out.
What I specifically would like to mention here is on the private sector policy.
yesterday about no deforestation commodities.

In Indonesia, there are several large companies working on

the plantation development like oil palm and fast-wood plantations.
deforestation or zero deforestation.

Peter mentioned

Some of them have already declared noThat means, when they establish new plantations, they do not convert

natural forests anymore but they establish plantations on degraded lands or the existing plantations.
companies actually implement the policy, the deforestation rate should be declined.

If these

These are a set of actions

and instruments that need to be paid attention to in the context of financing REDD+.

2. Current Financial Sources for REDD+
2. Sources and scales of REDD+ finance(1) Sources
REDD+ related activities (e.g.)
Institutionalarrangement

Policies andmeasures;projectDonor

Nat’lbudget

LoI*

Other

MRVY

Y

Y

SafeguardYYY

Funding instruments

YY

Y

Moratorium

Y

Y

Customary rightY

Y

FMU

Y

Input‐based Projects

Y

Privatesector

Y
Y

Y

Y

Y

Investment projectY

Zero deforestation

Y* The work conducted by REDD+ Agency, which is funded by Norwegian government under theLetter of Intent (LoI).

Next is about sources and scales of REDD finance.

1These are instruments and activities primarilyIndigenous Peoples Alliance of the Archipelago: http://www.aman.or.id/en/

Beyond Bilateral Funding: Creating New Mechanisms for REDD+
Operationalization in Indonesia
Hideyuki Kubo (REDD+ Expert)

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financed by the national budget, donor funding, and partly private sector funding as well.

I want to refer tothe letter of intent (LOI) that was made between the Norwegian government and Government of Indonesia in2010.

The Norwegian government committed $1 billion for the REDD+, among which $800 million are forresults-based payment and $200 million are for readiness and policy and measures. The money is spent
through the implementation of these activities, and they are mainly conducted by the REDD+ Agency.
Some of you may know that the REDD+ Agency was created two years ago and just disbanded twoweeks ago.

It was due to the basic policy of the new government of pursuing the efficiency of theadministration.

It is not simply this REDD+ Agency that was disbanded, but many agencies were basicallyintegrated in ministries to promote the efficiency and avoid overlapping.

Now, this REDD+ Agency’s

function and duty are integrated into the Ministry of Environment and Forestry.

They will set up newDirectorate General (DG) to deal with climate change issues. Therefore, new work arrangement will emerge
shortly.

3. Scale of Financing(2) Scales Public climate finance in 2011: US$0.95 billion
By Government of Indonesia – US$0.63 billion(66%)
By Int’l development partner – US$0.32 billion (34%)
 Int’l commitment on climate finance as of 2011$4.4 billion (Norway $1 billion) for multiple years
 Financial requirement on REDD+ until 2020
$5‐10 billion (REDD+ Taskforce 2012)
Source: CPI (2014); GCP (2014)

Scale of the funding: we do not really have the exact figures for REDD+, so this is just a reference.
Climate finance is not limited to the forestry and the peat land management, but also including the sectors ofenergy, industry, transportation and waste. We have the figure of one billion dollar in 2011 for the entire
climate finance. As greenhouse gas emissions from Indonesia are largely coming from the land and forest
sector, we can assume that the significant amount must have been contributed to this sector, and theinternational funding as well.
REDD+ by 2020.

Also, the forecast is made.

It is said that five to 10 billion will be required forDAY2
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4. Emerging Financial Mechanism
3. Emerging financial mechanisms
 Trust Fund: to follow Presidential Regulation 80/2011
Responsible
AgencyMinistry ofIndonesia Climate National
Change Trust
Development
Fund (ICCTF)
Planning(Bappenas)
Trust Fund

Fund for REDD+Indonesia(FREDDI)

REDD+
Agency(1)Funding
Sources

Focus Area in
Mitigation

International
Land based
Development
mitigation;
Cooperation &Energy
State budget
International
Development
Cooperation

Implementationof Nat’l REDD+Strategy

Remark: (1) Presidential Regulation 16/2015 stipulates the revoke of Presidential Regulation 62/2013
on the establishment of National REDD+ Agency.
Source: ICCTF Business Plan 2014‐2020 (2014)

Coming to the emerging financial mechanism, the government of Indonesia issued Presidential
Regulation in 2011 on trust fund.

At the moment there are two trust funds that are related to REDD+.

The

first one, Indonesia Climate Change Trust Fund2, which is already in operation, is managed by national develop
planning ministry or Bappenas.

The funding areas include the land-based mitigations, energy, and alsoadaptations.

The second one is the fund for REDD+ Indonesia; we call it FREDDI3, which is still underpreparation.

This is being promoted and developed by the REDD+ Agency. The purpose of this fund is tosupport the implementation of the national REDD strategy.

That means that it is totally for REDD+.

 ICCTF: Indonesian Climate Change Trust Fund
• So far $16 million of International contribution• Grants provided to Ministries, CSO, research inst.
• Plans to apply as a National Implementing Entity(NIE) of Green Climate Fund (GCF)• Pilot projects in the land based mitigation sector(1) Sustainable Peat Management (2010‐14)(2) Community‐Based Wood Pellets Production (2012‐14)

Because ICCTF4 is already in operation, let me just overview what it is and how it works.
$16 million are already contributed by the UK, Australia, Germany, and Sweden.

Compared with Norwegianfunding, it is quite small, and the grants are already provided to concerned ministries.
grants are provided to civil society organizations and research institutes.

In addition to it, small

What is interesting here is thatICCTF is very explicit to apply as a national implementing entity of the Green Climate Fund.
intend to channel the funds from international society to the Indonesian climate sector.
land based mitigation sector, there are already two projects being funded and implemented.

http://www.icctf.or.id/
Financing Reduction Emission Degradation and Deforestation Instrument
4 Indonesia Climate Change Trust Fund2
3So far,Therefore, theyIn the context ofBeyond Bilateral Funding: Creating New Mechanisms for REDD+
Operationalization in Indonesia
Hideyuki Kubo (REDD+ Expert)

DAY2Session 2

 Instrument and mechanism under preparation(1) FREDDI – Four funding windows
Strategic (Readiness, Nat’l priorities, Emergency)
Sub‐national priority (CB, Performance‐based payment)
Competitive (Proposals)
Small scale grant (For community‐based activities)(2) JCM: Joint Crediting Mechanism
Bilateral crediting mechanism between Indonesia andJapan (initially) as non‐tradable credits.

Another emerging instrument or mechanism is FREDDI, which is still under preparation. While theICCTF is the trust fund for the project funding, FREDDI can provide not only project funding but also tosupport readiness activities, national priorities; that means policies and measures and also performance-basedpayment.

The scope of FREDDI is really flexible.

How this can be operationalized is really the challengeof the Ministry of Environment and Forestry in the coming years.

Another emerging mechanism includes

the joint crediting mechanism which was discussed yesterday.

5. A Way Forward
4. A way forward• Scope of REDD+ activities is broad and they aresupported by multiple sources. On addressing
deforestation and forest/peatland degradation, both
policies and measures as well as investment projects
need to be continuously funded.
• As REDD+ Agency used to take key roles in designingand implementing REDD+ activities, newarrangement of dealing with readiness work needs
to be urgently developed, including theoperationalization of FREDDI and the mechanism offostering funding from Green Climate Fund.

I summarize two main points.

First, the scope of REDD+ Indonesia is very broad.

It is not only

investment projects or so called demonstration projects, but also policies and measures that potentially give
impact on deforestation and degradations.

These activities need to be paid attention to.

Secondly, theREDD+ Agency, which was taking a very important role to advance REDD+ program implementation inIndonesia, is now disbanded. How the new arrangement can be made and proposed is really important.

Weneed to support the emergence of new institutional arrangement. That includes the operationalization of theFREDDI and also we need to look at a mechanism of how the international funding (the Green Climate Fundas well) is channeled to Indonesia.

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