Items filtered by date: June 2011
President Yudhoyono on recent International Summits emphasized that Government of Indonesia (GOI) has strong commitment to implement green economy concept. President targeted that green economy concept in Indonesia could achieve both economy growth at a minimum of seven percent and to reduce carbon emission to 26 percent by year 2020.
The striving target of GOI is based on G-20’s commitment to carry out sustainability development and overcoming poverty in the world (United Nation, 2010). State leaders of G-20 believe that green economy can be an alternative paradigm, in which better wealth does not lead to growing environmental risk, ecological scarcities, and social disparities (UNEP, 2011).
Besides, the importance to realize green economy in Indonesia as it is associated problems of fiscal policy. After Indonesia turn out to be an oil net importer country, fiscal policy of Indonesia always depends on fluctuation of world crude oil price.
This fact makes state budget (APBN) always revised in mid year and has multiplier effect in wide aspect. Recorded data explained that in last eleven years (2000 – 2011), average of energy subsidy based fossil accounted IDR 104.84 trillion in every year or equivalent 17.8 percent from state budget.
Realization of green economy in Indonesia is expected could be reduced usage of energy based fossil, both from vehicle motor, factory, and electricity. In the same time, green economy will push production and use of renewable energy. To understand how the right scheme to realize this goal, we use “the threshold 21 world model” which introduced by UNEP (2011).
The model assumes that a country allocates two percent of GDP into green investment, particularly in renewable energy investment. Based on calculation and referring to the model, the green investment would be around IDR 26,186 trillion until 2050, used of renewable energy will be increased significantly into 90 percent from total usage of the energy. This composition will be reduced energy subsidy based fossil, where estimated percentage of energy subsidy based fossil only one percent from state budget.
The achievement of green economy by 2050 will affect to macro economy and alleviate social problems. Estimated by economic growth seven percent per annum, Indonesia’s GDP into IDR 96,170 trillion by 2050, where in the same time it could reduce carbon emission for about 17.5 percent. Number of poverty is projected will decrease into six percent by 2050.
However, the results could be achieved by presumption that this will happen in ideal condition, since in real there are many factors which affected the targets. Recent GOI which naturally established by democracy system makes policy decisions almost always depend on their political party interests. Decision for new policy mostly based on target for next general election, both for presidential and house of representative.
Therefore, strategy formulation for enabling green economy concept must include political aspects. As theoretical in political economy, the recent political regime could be reelected and continue the power if they could meet with people’s expectations, where most of expectations desire for total welfare. At this point, actually green economy concept transform into political capital, where realization of the green economy can create prosperity.
Implementing green economy in Indonesia could not be done dramatically. Implementation of this concept must be done step by step. Generally, UNEP (2011) has introduced six guides to enabling green economy in every country i.e. (i) prioritized investment and spending to stimulate the greening of economic sectors; (ii) taxes and market-based instruments as tools to promote green investment and innovation; (iii) stop to government spending in areas that deplete environmental assets; (iv) a well-designed regulatory framework creates incentives to drive green economic activity; (v) investing in capacity building and education to support a transition to a green economy; and (vi) strengthened international governance to assist governments in promoting a green economy.
In these frameworks, GOI as well as state must be positioned as an effective regulator. The high of investment to execute green economy has to be implemented by private sector as business as usual. As per our calculation, to implement green economy, Indonesia needs green investment consecutively IDR 122 trillion, IDR 240 trillion, IDR 472 trillion, and IDR 1,827 trillion by 2015, 2020, 2030, and 2050.
Major investment and finance institutions, such as private equity, venture capital, investment bank, bank, and insurance company, both local and global will play main role to implement green economy. Indonesia in the coming future is projected as one of the largest green market in the world, both from supply and demand side, which make investment and finance institutions could allocate their fund to invest in Indonesia (World Bank, 2011). Currently green direct investment in Indonesia, especially in renewable energy has in average IRR around 15 percent per annum, as of this will convince the investors in getting sustainability profit in Indonesia.
We also estimate in the next coming years the value of IRR in green direct investment in Indonesia will increase gradually. Green policies of GOI, especially green incentive and green taxes priority could gradually reduce fixed cost in exploration and build up renewable energy, thus production cost will be cheaper than current cost.
Moreover, as per recorded data showed that total asset under management, bank deposit and other funds in the world was more than US$ 100 trillion by the end 2010. In other side, total green investment in the world along 2011 will approximately around US$ 500 billion (Bloomberg New Energy Finance, 2011). This figure makes an allocation of fund to green investment, particularly in Indonesia could be realized smoothly. Therefore, this year should be right milestone of GOI to carry out green economy.