Globally, countries with lower income will be hit harder by climate change and the poor will suffer the most because of climate change (Gray, 2021).
Current Condition on Climate Change and Its Effect
Issues about climate change have been becoming a widespread concern among a lot of people. Many people urge the world’s leaders to start taking real action to tackle climate change, especially as the effect of climate change has become more apparent. One of the most recent important meetings among world leaders was the G20, in which Indonesia was chosen as the host last year. One of the main topics in the G20 is Energy Transition, which is one of the keys to tackling climate change. 2020-2022 has been very turbulent with many issues going on, such as Covid-19 pandemic, recession issues, and the Russia-Ukraine war that lead to energy crises in many European Countries.
Fossil fuels have been one of the main energy resources all over the world. But, it is nonrenewable and harmful to the environment. This is why energy transition is very important and needs to be done soon. The energy crisis that happen during Covid-19 pandemics where countries facing shortages and significant price surge of oil, gas, and electricity might be one of our chances to start transitioning our energy from nonrenewable energy to sustainable and renewable energy. In one of the G20 meetings, The Ministry of National Development Planning/Bappenas encourages G20 member countries to support joint action in prioritizing low-carbon green and blue economic development in developing countries, especially in terms of planning, capacity building, and preparing action plans related to financing and investment.
The significant impact of climate change that we can feel and see in our daily life has led to public outcry demanding commitment and real action from the government to start making a change and planning sustainable development. Climate change will affect agriculture productivity, mortality rate, energy usage, crime rate, storm activities and weather, and also shoreline erosion (Hsiang et al., 2017). If the government doesn’t implement any policies to tackle climate change or decides to go on with the business-as-usual (BAU) scenario (there’s no action and policies taken), then in 2048, the world will lose a total of 18% of its potential GDP (Gross Domestic Product) (Guo et al., 2021). Another study has also found that Asia, as a continent with big economic activity and development will be the most affected area because of climate change where the economy will decrease by 26,5% and ASEAN will lose 37,4% of its current GDP. Globally, countries with lower income will be hit harder by climate change and the poor will suffer the most because of climate change (Gray, 2021). Thus, the climate change problem needs to be taken seriously.
A study by Moore et al. (2022), found that the public perceptions of climate change, the future cost and effectiveness of climate change mitigation and technologies, and how political institutions respond to public pressure are all important determinants to see how the climate will change over the years. It is unavoidable how climate change policies have become a political tool too. In Indonesia, each president has different policies and actions regarding environmental issues.
Policies on Environment and Climate Change Over Time
During 1990-2000 or during the New Order regime until the early Reform era, one of the main problems regarding the environment was deforestation. Back then, Indonesia has the highest deforestation rate among countries with rainforests. Indonesia’s forest was decreasing by -1,79% every year based on FAO (Food And Agriculture Organization) Statistics. Even though during the 1990s Indonesia recorded a very high economic development rate, in fact, the development that was being made was not environmentally friendly at all and not sustainable in the long run. Back then, environmentally friendly policies and sustainable development were not popular among the policymakers as many of them thought that environmentally friendly and sustainable development will make development more expensive and will slow down economic growth.
Later, Indonesia’s deforestation rate actually decreased, but if we compared the number to another country’s deforestation rate, it is still quite high. According to the European Union’s Joint Research Centre (2020), Indonesia is among the top 10 global CO2 emitters. The majority of Indonesia’s CO2 emission comes from changes of land use, such as deforestation and land degradation. A study by FAO (2021) found that agricultural expansion is responsible for 90% of deforestation. In Indonesia, the expansion of palm oil plantations is accountable the most as most of the land is used for palm oil plantations.
President Susilo Bambang Yudhoyono (SBY), during his second period as president, added ‘pro-environment’ to his development strategy slogan. Originally, his development strategy slogan was only ‘pro-growth, pro-job, and pro-poor’. Prior to this, in 2007 Indonesia hosted COP 13 or United Nations Climate Change Conference in Bali and Indonesia as one of the global top 10 CO2 emitters was asked to take responsibilities and commitment to make a sustainable development. Then, at the 2009 G20 Leader Summit at Pittsburgh, SBY announced that Indonesia will commit to reduce its CO2 emission as much as 26% below business-as-usual (BAU) scenarios or up to 41% if there are international assistance. With this plea, SBY sets climate change as one of the top national priorities. SBY also signed an agreement with Norway to implement REDD+ (Reducing Emissions from Deforestation and forest Degradation) Program with a pledge of 1 billion USD.
As the embodiment of his commitment, SBY developed a National Council of Climate Change (Dewan Nasional Perubahan Iklim) that later produced the National Strategy on how to reduce the C02 emission. The implementation of SBY’s pledge in reality is not perfect and 100% accurate. There are many shortcomings in the implementation of the program. But, it is still considered as a good start because Indonesia is one of the first developed countries that is willing to make a significant pledge in such a big event.
After SBY’s period ended, Joko Widodo became the president in October 2014. His main development strategy slogan is called Nawacita which includes 9 objectives that he wants to achieve. But, the Nawacita doesn’t emphasize and reflect any priority in climate change or the environment. Instead, it is more focused on building more infrastructure. There are several important decisions and policies that Jokowi made during this period that is related to environmental management. During his period, President Jokowi merged the Ministry of Environment and the Ministry of Forestry with the said reason to create more efficiency, this decision eventually caused a lot of pros and contra. Later, he also dismissed the National Council of Climate Change and Badan Pengelola Pengurangan Emisi dari Deforestasi dan Degradasi Hutan (BP REDD). In exchange, the government developed a Directorate General of Climate Change (Direktorat Jenderal Pengendalian Perubahan Iklim) under the Ministry of Environment and Forestry, This controversial decision was seen as a violation of the Letter of Intent (LoI) that was made with Norway and also seen as a downgrading or slowing down of the effort made by the government to tackle the climate change.
One of the most notable decisions that is made under Jokowi’s government is the subsidy removal on gasoline and a limited fixed subsidy on diesel and kerosene. Many experts see these policies as Indonesia’s most important policy related to climate change because it will lead to fuel efficiency and will be reducing carbon emissions. In 2014, the funds needed to subsidize fuel was 274,7 trillion rupiahs, and in 2015 the funds needed decreased by 84% to only 44,4 trillion rupiahs (Kominfo, 2017). The government states that the funds will be allocated to develop sustainable energy and build another infrastructure.
One of the most notable decisions that is made under Jokowi’s government is the subsidy removal on gasoline and a limited fixed subsidy on diesel and kerosene.
In 2016, Indonesia ratified the Paris Agreement, which is a legally binding international treaty on climate change, adopted by 196 Parties at COP 21 in Paris. Its goal is to limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels. By ratifying this agreement, Indonesia also submitted the Nationally Determined Contribution (NDC) for the 2020-2030 period which includes target to decrease carbon emission by 29% less than the business-as-usual scenario in 2030 and net zero emission by 2060 (Bappenas, 2021).
Green Economy Implementation as a Solution on Climate Change
Pressure from the public forced the government to start making a change by implementing sustainable development and changing the way we do our business or economics. President Joko Widodo has mentioned about transforming Indonesian economy into green economy several times. In the last decade, green economy has been more popular among policy makers, but it is still loosely defined. UNEP or United Nation Environment Programme (2008) defined green economy as an economy that will improve human well-being and social equity, while significantly reducing environmental risks and ecological scarcities, and also aims for sustainable development. It is expected that the economy will be low-carbon, resource-efficient, and socially inclusive. In green economy, growth in employment and income are driven by public and private instruments into such economic activities, infrastructure and assets that allow reduced carbon emissions and pollution, enhanced energy and resource efficiency, and prevention of the loss of biodiversity and ecosystem services. By this definition, we can conclude that green economics is highly correlated with fiscal, financing, and investment policies made by the government.
The government, through the Ministry of National Development Planning of the Republic of Indonesia or Bappenas, has been developing green economy program in Indonesia, called Green Growth Program, which is one of their main programmes in recent years. The Green Growth Program is made to align with the NDC that has been made before. To support the program, Bappenas recently launched its Green Economy Index at the G20 2022 with three main factors, environmental aspects, economic aspects, and social aspects. With this index, it will be easier to track progress that Indonesia has made over the years.
One of the most important parts of the Green Growth Program is the Net-zero Emission target. Net zero emission means that the number of carbon we omit will be the same as the number of carbon we absorb, and it is almost the same concept with carbon neutrality (Rogelj et al., 2015). To achieve this target, the government set a priority on low carbon development in four main sectors, namely energy, land, waste, and fiscal. In the energy sector, the government has made several policies such as transition to electric vehicles, energy efficiency, and the development of EBT/Energi Baru Terbarukan by using solar energy, biomass, wind power, or hydropower. In the land sector, the government has made several policies such as reforestation, mangrove rehabilitation, and preventing forest fires. In the waste sector, the government has made several policies such as circular economics adaptation and reducing liquid waste production. Meanwhile, in the fiscal sector, the government removed the gasoline subsidy and implemented carbon taxing. Carbon tax implementation has been one of the most awaited programs, it is actually scheduled to start in July 2022, but it has been postponed again.
Net zero emission means that the number of carbon we omit will be the same as the number of carbon we absorb, and it is almost the same concept with carbon neutrality (Rogelj et al., 2015).
Carbon tax is made to internalize the impact of carbon production by imposing tax or price on every carbon the entities produce. However, there are several opposing views regarding carbon tax because several studies that were done in some developed countries show that carbon tax has regressive effects (Hamilton & Cameron., 1994; Baranzini et al., 2000), which implies that low-income individuals will carry the tax burden, rather those with higher income. On the other hand, recent studies done in developing countries found that carbon tax is essentially progressive (Yusuf & Resosudarmo, 2015; Hasudungan, 2017), where the tax will be distributed proportionally. Hence, the government should implement the carbon tax policy soon because it will help to address the climate change problem. The carbon tax could act as an incentive for companies to transition toward cleaner and more sustainable sources of energy.
The role of the government is very important in tackling climate change. As a regulator, every policy and decision that the government makes will affect every economic activity that is happening in the country. Green economy that aims for a sustainable and inclusive development without risking the environment might be the answer we need to tackle climate change. The urgency to start changing our way of living is needed to create stability, not just economic stability, but political stability too. In Indonesia, Bappenas played a huge part on this issue as the national planning agency. The Green Growth Program, through making low carbon development is very necessary as it will show the effort from the government to realize the NDC they have made. If the Government doesn’t take any action to slow down the climate change, Indonesia would suffer a great loss, not just economically, but in every aspect possible.
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Editor: Qisthan Ghazi