New Funding Programs for Climate Change Mitigation and Adaptation Efforts in Indonesia

Climate change has emerged as one of the world’s most pressing matters. Global heating, frequent natural disasters, and depleting natural resources have called for concrete mitigation and adaptation efforts from every stakeholder. Unfortunately, funding often becomes an obstacle in implementing those efforts. In Indonesia, the Ministry of Finance and UNDP launched funding programs encouraging startups to implement climate change mitigation and adaptation efforts.

Climate Change Mitigation and Adaptation Cost

Climate change mitigation and adaptation efforts require a significant amount of funding. According to the United Nations Environment Programme (UNEP), the estimated cost of climate adaptation in developing countries is USD 70 million annually. The cost is predicted to reach USD 140–300 million by 2030 and USD 280–500 million by 2050.

In Indonesia’s Enhanced Nationally Determined Contribution (ENDC) document, the country set an emission reduction target of 31.89% in 2030 with its own efforts and 43.2% with international help. According to the Ministry of Finance, Indonesia needs climate mitigation funding of IDR 3,799 trillion (USD 243 million) until 2030.

To reach its target, Indonesia must implement significant mitigation efforts in carbon-intensive industries, including energy, transport, waste, industrial, and agriculture. Implementing Environmental, Social, and Governance (ESG) principles also becomes crucial, especially for businesses as one of the actors responsible for the impacts of climate change. At the same time, however, they also have significant potential to drive changes. Therefore, businesses must be encouraged to shift their operations to include climate mitigation and adaptation efforts.

Catalytic Funding and Incentivizing Mitigation Outcomes

On December 11, 2023, the Indonesian Environment Fund (BPDLH), under the Ministry of Finance, and the United Nations Development Programme launched the Catalytic Funding Program and the Incentivizing Mitigation Outcomes Program. The Catalytic Funding Program aims to increase and accelerate BPDLH investment impacts in achieving Indonesia’s sustainable development targets.

The program invites startup companies under the Indonesia Impact Fund to implement large-scale beneficial impact solutions by expanding their business activities to high-risk areas, underserved regions, and vulnerable populations and communities. In this program, BPDLH will provide funding to startups that implement sustainable business practices.

“This Catalytic Fund program is the first step in BPDLH’s commitment to accelerate sustainable development targets and involve relevant ecosystem actors such as startups in implementing best practices and impact investment initiatives with innovative approaches in driving ESG through public-private partnerships,” said Joko Tri Haryanto, Executive Director of BPDLH. “One of the opportunities to mainstream ESG in Indonesia’s development is the implementation of blended finance that will accommodate the involvement of the financial services industry, private sector, and philanthropists in infrastructure financing in Indonesia.”

On the other hand, the Incentivizing Mitigation Outcomes program aims to encourage businesses to implement climate mitigation actions and enter the carbon markets. Supported by the UNDP, BPDLH has prepared two modalities for providing incentives:

For mitigation action managers who have prepared Dokumen Rancangan Aksi Mitigasi (Mitigation Actions Plan Document) and validated by Validation and Verification Institutions.
For businesses that own the letter of emission reduction certificate (SPE-GRK) to participate in the Indonesian Carbon Exchange as a form of contribution to achieving Indonesia’s ENDC target.

“Mutual cooperation between stakeholders is very important in our efforts to achieve the SDGs,” said Norimasa Shimomura, Resident Representative of UNDP Indonesia.

Translator: Kresentia Madina

The original version of this article is published in Indonesian at Green Network Asia – Indonesia.

Abul Muamar

Managing Editor at Green Network Asia | Website | + posts

Amar is the Manager of Indonesian Digital Publications at Green Network Asia. He holds a Master’s degree in Philosophy from Universitas Gadjah Mada and a Bachelor’s degree in Communication Studies from Universitas Sumatera Utara. He has over ten years of professional experience in journalism as a reporter and editor for several national-level media companies in Indonesia. He is also a writer, editor, and translator with a particular interest in socio-economic and environmental issues.