Intergovernmental fiscal transfers for conservation : the case of reducing emissions from deforestation and forest degradation (REDD+) in Indonesia
Creators: name: Irawan, Silvia
Publisher: name: The Australian National University
Year: 2011
Subjects: subject: SD418.3.I5 I73 2011
subject: Intergovernmental fiscal relations Indonesia
subject: Fiscal policy Indonesia
subject: Revenue Indonesia
subject: Transfer payments Indonesia
subject: Deforestation Economic aspects Indonesia
subject: Deforestation Environmental aspects Indonesia
subject: Indonesia Economic policy

description: Properly designed intergovernmental fiscal transfers (IFTs) offer an innovative instrument to create incentives for local public actors to support conservation. As conservation restricts local governments' capacity to generate revenues from alternative land-use activities, compensation to reconcile local costs with the benefits of conservation that reach beyond local boundaries is required. Whilst studies on IFTs for conservation have focused mainly on the distribution formula, this thesis comprehensively examines all elements of the design of IFTs, including conditionality and accountability. The thesis considers both the theoretical justifications and the wider political and administrative context in developing the design of IFTs for conservation. The case of Reducing Emissions from Deforestation and Forest Degradation (REDD+) revenues distribution in Indonesia is selected as the case study. The pragmatism paradigm, which incorporates both qualitative and quantitative methods, is adopted in this study. Policy analysis to develop policy options to address environmental problems should emphasise integration of the interpretivist and rationalist approaches. Decision makers need to define policy problems with the target groups, who often have contradictory values and beliefs; whilst simultaneously, environmental issues involve a great number of technical issues that require a rationalist approach. A multiple case studies approach is applied as the research strategy with two sample provinces, Riau and Papua. In-depth interviews with government officials reveal that a dynamic interaction between actors and their different interest determine the final decision on land-use activities. Several factors should therefore exist when transferring IFTs for REDD+ revenue distribution including, inter alia, voluntary participation of local governments in REDD+. Moreover, government officials perceive that conditionality of IFTs is preferred in conservation for political and administrative reasons. When the use of IFTs for conservation is left to political processes, there is a high possibility that the funds may be used for other development priorities. Earmarking is therefore important for IFTs, to compensate for the management and transaction costs of conservation; whilst, for opportunity costs, IFTs can be transferred with more flexibility for local governments to decide on the use of the funds. The opportunity cost analysis conducted in this study shows that REDD+ would lead to a substantial loss of public revenues at all government levels. Institutional and political (including informal benefits) may no longer be obtained if local government choose to pursue REDD+. The distribution of REDD+ revenue, using IFTs, needs to create a direct link between the distribution of public revenues and district governments' decisions on land-use activities. To determine the amount of IFTs to distribute REDD+ revenues, both the cost reimbursement and derivation approaches can be used. The cost reimbursement approach distributes IFTs just enough to cover the costs of REDD+, which vary between localities; whilst the derivation approach sets a fixed rate to determine the amount of IFTs and ignores the costs of REDD+. Finally, the successful implementation of IFTs will be determined by the technical capacity of local governments to manage public resources at the local level. Hence, designing IFTs for conservation should consider political and administrative factors within a complex bureaucratic environment.