3 Things the Government Should Do to Involve Private Sector in Climate Action
Indonesia is progressing on climate action to reduce greenhouse gas (GHG) emissions as pledged in its Nationally Determined Contribution (NDC). As the country’s contribution to the global Paris Agreement, NDC signals urgent and huge responsibility that could shape Indonesia’s development path. The IPCC’s recent scientific report makes it clear that we need to strengthen ambition and enhance cross-sectoral collaboration to avoid the towering challenges of climate change. And that time is now.
Indonesia’s NDC highlights the importance of non-state actors, including private sectors, to join the battalion of climate fighter. Private sectors offer innovation and technology that can both deliver and increase Indonesia’s climate commitment. With the global trend transitioning into the low-carbon economy, recent study finds that nearly USD 26 trillion investment opportunity could be unlocked for climate action until 2030. Since being transparent company that practicing sustainability will provide a good reputation to attract more investor, businesses could tap into this opportunity by setting companies’ target for reducing emissions.
While proactive action from businesses is required to achieve the utmost benefit of low carbon development, government needs to support the implementation through:
1. Reviewing regulations
A coherent regulation framework must be established in order to enable private sector to implement clear and measurable policies. Conflicting policies issued by various institutions have potentials to be a bottleneck to advance climate agenda and create losses to the relevant stakeholder. Hence, an urgent initial step would be to conduct regulatory review to identify possible hindrance and revision needed in the existing policies. For example, Indonesia commits to supply 23% of its energy mix with renewable energy by 2025 within the National Energy General Plan (RUEN). Meanwhile, at the same time the government targeted to meet the electricity demand through designing 35,000Megawatt power plant programs which will be mostly derived from coal power. While RUEN opens opportunities for private sector to invest more in renewable energy programs, the development is also constrained by the domination on coal for electricity supply. Especially with the government regulation stipulated electricity from renewable energy must be set at a price about 15% cheaper than existing power plants in a province, it will lead to difficulties for the business actor to compete with the established coal power plant. Synchronizing different laws is key to show the government's readiness in creating a profitable business environment.
2. Avoiding multiple reporting systems
To date, Indonesian government collected companies’ emissions profile in three different platforms, under different mandate and purpose: SiINAS hosted by the Ministry of Industry for data inventory of industrial activity and market opportunities, PROPER hosted by the Ministry of Environment and Forestry for companies’ activities in environmental management, and POME hosted by the Ministry of Energy and Mineral Resources for energy audit system. The current system demands companies to submit their activities to all these sites on an annual basis. The similarities of database across these platforms make the system ineffective, leading to burden on the part of private sectors due to double reporting and government for multiple efforts in validating data. Creating one integrated platform with accurate and updated data on climate action by businesses will be powerful to inform Indonesia’s overall climate change mitigation effort.
3. Providing incentive
Clear incentives and win-win solutions across stakeholders are key in delivering climate action. With voluntary-based action in implementing green business, national government need stronger incentives and promote mutually-beneficial impact for private sectors. Currently, there are several incentive schemes designed by the government to acknowledge companies’ effort in conducting green business, including ‘green industry award’ to reward companies that implement sustainable practice; ‘Subroto Award’ to reward participation in the advanced technology of energy combustion; and PROPER as a private sectors’ performance rating program for environmental management. These awards enhance companies’ reputation, which eventually may positively affect business.
Lessons Learned from Japan
Japan has been involving private sectors within the act of global warming countermeasures since 1996. Some initiatives have been implemented to control company’s emissions and ensure the sustainable practice is well-executed. One success example is KEIDANREN, a Japan Business Federation initiative to reduce greenhouse gas emissions, manage waste disposal and promote material-cycle society. Committed to creating low carbon society since 2009, KEIDANREN now involves 1,376 representative companies, 109 nationwide industrial associations, and 47 regional economic organizations. As Japan business association, KEIDANREN promotes the member to formulate long-term vision for decarbonization society and to support government by providing relevant information on effort to reduce GHG emissions.
The exponential increase number of participants in KEIDANREN are due to the strict law prevailed by the government. Since 2005, Japan issued mandatory accounting and reporting system of company’s emissions for business operations. There are also some pressure from external investor to engage in green sustainable business practice, thus creating supportive atmosphere for companies to fight climate change.
Indonesia’s New Initiative
Andrew Steer of World Resources Institute introduces Partnership to Strengthen Transparency for Co-Innovation (PaSTI) at COP24 in Katowice, Poland. Photo credit: COP24 Japan Pavillion/Flickr
Recent COP 24 highlights call for action across sectors to better achieve climate target. For Indonesia, it may need to further spur climate commitment from private sectors to achieve sustainable development objective. In this respect, while taking into account those abovementioned three issues, the success of Japan case has been an encouraging example for Indonesia to advance its climate ambition.
To that end and help accelerate climate action, last year Indonesia joined a new initiative called Partnership to Strengthen Transparency for co-Innovation (PaSTI). The program is designed to bridge interest between the government and non-state actors to collaboratively move towards sustainable and transparent practice of business operations. Beyond scaling up the climate target, PaSTI could become an opportunity to swiftly achieve the Sustainable Development Goals (SDGs) through cooperation across stakeholders. An example of such cooperation is an effective transparency framework for reporting system to increase non-parties participation in achieving climate goal (SDGs 17.17).
Throughout the project implementation of PaSTI aims to move towards sustainable business practice, it address the key question of ‘how to involve private sector in climate action?’. The series of PaSTI’s discussion provides landscape analysis on incentive to strengthen the Monitoring Reporting and Verification (MRV) systems of climate action. The inclusive process of forum involves ministries as well as non-state actors to better harmonize the idea of the strategy for enhancing climate transparency framework in Indonesia.
Having these abovementioned studies, the next goal of PaSTI is to design the standardized tool for effective nationally integrated reporting system, along with the implementation guidelines to relevant actors. It also followed by capacity building activities in order to resolve the policies and regulations gap among relevant ministries. With the project able to facilitate the interest of many parties, it could become opportunities for private sector to contribute more towards low carbon future.