In this hybrid seminar, Dr Masyita Crystallin shares her insights on how Indonesia plans to balance its economic and welfare priorities while strengthening its leadership in global climate governance.
CLIMATE CHANGE IN SOUTHEAST ASIA PROGRAMME & INDONESIA STUDIES PROGRAMME JOINT HYBRID SEMINAR
Thursday, 28 March 2024 – Dr Masyita Crystallin, Special Advisor to the Minister of Finance on Macroeconomic and Fiscal Policy, Republic of Indonesia, offered her views on Indonesia’s plans to achieve their ambitious climate targets and the challenges that they will face in doing so. The session was moderated by Ms Melinda Martinus, Lead Researcher with the ASEAN Studies Centre and the Climate Change in Southeast Asia Programme at the ISEAS – Yusof Ishak Institute (ISEAS) in Singapore.
Dr Crystallin began with an overview of the global and regional economic outlook, particularly on the macroeconomic conditions in emerging countries. Highlighting global challenges and uncertainty when dealing with climate-based investments, Dr Crystallin emphasised the inherent long-term nature of climate investments and the need for additional climate financing despite the elevated risks associated with the current volatile international economic circumstances such as high-interest rates and inflationary pressures. The measures to ration carbon budgets to avoid a disorderly transition were also discussed. Several pertinent issues were raised regarding climate financing, in particular the large disparity between finance flows needed to keep on track with 1.5°C global warming scenario and the current amount, the insufficient quantity of private sector funding, the debt heavy nature of current projects, the inefficient disbursement of funds, and the severely limited share of adaptation projects.
In the second part of her presentation, Dr Crystallin shared about Indonesia’s profile and commitment in global climate action, where energy and forestry (and other land uses) are the main contributors to greenhouse gas emissions. She noted the almost tenfold difference in abatement costs between the energy sector as compared to the forestry sector, as well as the role of energy transition beyond green sectors in Indonesia’s environmental strategy. On the international stage, Indonesia has continued its leadership in promoting collective action in addressing climate change and strengthening the sustainable finance ecosystem in Southeast Asia through the ASEAN Taxonomy for Sustainable Finance initiative, developing its own national taxonomy as well as efforts in the G20 Sustainable Finance Working Group and the Coalition of Finance Ministers for Climate Action forum.
Thirdly, Dr Crystallin discussed Indonesia’s Green Fiscal and Financial Policies, its climate policy strategy, and its plan to escape the middle-income trap. This includes establishing the regulation on carbon pricing through trade and non-trade instruments, the Indonesian Carbon Exchange (IDXCarbon), the Indonesia Energy Transition Mechanism (ETM) Country Platform to facilitate energy transition using blended financing, and offering fiscal financing supports through various means. Challenges with regard to consolidating the sustainable finance ecosystem among Indonesian authorities were also discussed, along with the risks that the energy transition exposes to the financial sector.
Concluding her presentation, Dr Crystallin noted several details regarding the Indonesia’s ETM, along with the Climate Investment Funds Accelerating Coal Transition (CIF-ACT) Investment Plan. She talked about the essential ecosystem required for energy transition, which includes domestic regulations (carbon markets, transition financing regulation), institutions (independent registry and verification bodies), and policy (transition taxonomy). Three challenges in energy transition were also raised, regarding “greenwashing” concerns, the interoperability of transition financing, and the classification of ETM activities as carbon reduction and not avoidance, all of which make it necessary to adopt energy transition concepts in the green taxonomy to crowd in private investment to transition activities.
During the Q&A session, Dr Crystallin answered a range of questions on the phasing out of fossil fuels and electricity subsidies under the new Indonesian government’s programmes, the potential scepticism of Indonesia’s energy transition due to internal vested interests against reform and the potential solutions to that, the potential distributive effects of the energy transition, and the increased role that International Partnerships Group (IPG) investors could play through Just Energy Transition Partnership (JETP) projects. Questions about the socioeconomic aspects of Indonesia’s transition were also raised, in particular the role of youths in Indonesia for climate action and how the country could mitigate adverse impacts on employees and businesses in affected sectors.
The webinar drew an audience of over 85 participants.