Draft Market Readiness Proposal (MRP) Presentation Country: Indonesia Responsible agency: Indonesia National Council on Climate Change (DNPI) Date of submission: May 13, 2013 DRAFT MARKET READINESS PROPOSAL: INDONESIA
Outline of Presentation Overview MRP Objective(s) and Focus MRP Development Process Market Readiness Proposal 1. Policy Context and the Big Picture 2. MRP Target Areas: Assessment and Rationale 3. Core Technical and Institutional Readiness Components, including Regulatory Components 4. Planning for a Market-based Instrument 5. Organization, Communication, Consultation and Engagement 6. Schedule and Budget 2 DRAFT MARKET READINESS PROPOSAL: INDONESIA
Overview 3 DRAFT MARKET READINESS PROPOSAL: INDONESIA
MRP Objectives The Long Term Goal: The establishment of new market mechanisms or market based instruments to scale-up mitigation actions in Indonesia based on country-specific conditions and international carbon market situations. The Objectives: To understand and determine the type and scope of appropriate market- based instruments; to prepare supporting draft regulation as needed; to design and establish market infrastructures; to build required capacity of participating institutions and individuals. The objectives will be achieved through inclusive process to secure political support and commitment; and to enhance knowledge, competence, and intellectual contribution of key line ministries and other stakeholders. MRP Focus Core Technical and Institutional Readiness Components in Power and Industry Sectors: • Emission profile and baseline setting • MRV system development and piloting Planning for a Market-based Instrument: • Technical assessment and policy consultation on market instrument • Piloting the instrument 4 DRAFT MARKET READINESS PROPOSAL: INDONESIA
MRP Development Process Indonesia’s MRP has been developed from intensive and extensive consultation process involving key stakeholders to ensure consensus and commitment for future implementation. 5 DRAFT MARKET READINESS PROPOSAL: INDONESIA
MRP Development Process 6 DRAFT MARKET READINESS PROPOSAL: INDONESIA
Market Readiness Proposal 7 DRAFT MARKET READINESS PROPOSAL: INDONESIA
1. Policy Context and the Big Picture Geographical and demographical conditions present unique climate challenges. Archipelago of 13,700 islands, of which 2,000 islands inhabited and 81% of total area is sea: enourmous challenges to support people’s mobility and goods distribution . 237.6 million population with >50% population live in Java island and electrification ratio 73%: efficiency vs equality issues in development . 8 DRAFT MARKET READINESS PROPOSAL: INDONESIA
1. Policy Context and the Big Picture Economic and GHG emissions growth are still coupled. 2011 GDP: USD846 billion with income per capita of USD3,500 Average economic growth: 6% Energy elasticity: >1 Source: WRI 9 DRAFT MARKET READINESS PROPOSAL: INDONESIA
1. Policy Context and the Big Picture Historical Projection 2005 GHG emissions: 1,791 MtCO 2 e 2020 emissions projected to reach 2,950 MtCO 2 e LUCF and peat major sources of emission until 2020 Energy-related emissions will be the fastest-growing Source: Second National Communication 10 DRAFT MARKET READINESS PROPOSAL: INDONESIA
1. Policy Context and the Big Picture Emissions reduction commitment in 2009 devised from LULUCF and energy mix policies, setting targets of 26% with own resources and additional 15% with international support, by 2020 against BAU scenario. Key emissions reduction areas: 1. Sustainable peat land management 2. Reduction of deforestation and land degradation 3. Carbon sequestration development 4. Promoting energy saving 5. Alternative and renewable energy resource development 6. Solid and liquid waste reduction 7. Shift to low-emission transport modes Reduction beyond unilateral and supported NAMAs is possible to be credited. Source: BAPPENAS 11 DRAFT MARKET READINESS PROPOSAL: INDONESIA
1. Policy Context and the Big Picture The 26-41% targets have been translated into an indicative list of activities in the Presidential Regulation on National Action Plan for GHG Emission Reduction (the RAN-GRK). Emission Reduction Responsible Sector (MtCO 2 eq.) Activities Ministry(ies) Unilateral Supported Forest and land fire control, network system management and water MoFor, MoPW Forestry management, forestry and land rehabilitation, HTO (Industrial Plantation and Peat- 672 1,039 Forest), HKm (Community Forest), illegal logging eradication, deforestation land prevention, community empowerment, etc. Introduction of low emission paddy varieties, irrigation water efficiency, MoA, MoPW Agriculture 8 11 organic fertilizer use, land use optimization, waste utilization, etc. Bio-fuel use, engines with higher fuel efficiency standard, improvement in MEMR, MoT, Energy and TDM (Transportation Demand Management), quality improvement of MoF, MoT, 38 56 public transport and road, demand side management, energy efficiency, MoSOE, DKI, Transport renewable energy development, post-mining replanting, etc. MoPW Process modification and clean technology implementation, energy MoI Industry 1 5 management in energy-intensive industries e.g. cement, ozone-depleting substances eradication, etc. Waste management by 3R, and urban integrated waste water MoPW Waste 48 78 management TOTAL 767 1,189 12 DRAFT MARKET READINESS PROPOSAL: INDONESIA
1. Policy Context and the Big Picture Various policies have been issued to support GHG emissions reduction targets and low-carbon development. Policy Name Targeted Outcome Applicability Presidential National Action Plan on 26%-41% emissions reduction below 2020 Various sectors Regulation 61/2011 GHG Emissions Reduction BAU (the RAN-GRK) Presidential National GHG Inventory Periodic updated information of emissions All sectors Regulation 71/2011 and emissions reduction Presidential National Energy Policy Optimal energy mix (17% new and renewable Energy sector Regulation 5/2006 energy) and <1 energy elasticity in 2025 Government Energy Conservation Energy management and conservation Energy users Regulation 70/2009 >6000 TOE/y MoI Regulation Roadmap of CO2 Emission 2% voluntary and 3% mandatory reduction in All cement 12/2012 Reduction in Cement 2011-2015 and 2016-2020 below 2009 producers Industry emission intensity MEMR Regulation Electricity Purchasing Energy security and encourage renewable Power sector 4/2012 Price of Small-medium energy development Renewable Power Plant and Excess Power MEMR Regulation Energy Management Clear guideline on energy conservation Energy users 14/2012 options and management >6000 TOE/y 13 DRAFT MARKET READINESS PROPOSAL: INDONESIA
1. Policy Context and the Big Picture: Role of Market Instruments Market instruments, e.g. CDM, proved to be effective to spur emissions reduc- tion by industries. Clean Development Mechanism • Total 212 CDM projects approved by Indonesia DNA, • 128 projects registered, mostly of methane avoidance projects, and • 28 CDM projects issued their CERs worth 7.9 million ton CO 2 , mostly of geothermal. Increasing opportunity from voluntary carbon market • 11 VCS projects have been developed, including 1 REDD+ project in Central Kalimantan, • Six of them have already produced 2,2 million ton VER. 14 DRAFT MARKET READINESS PROPOSAL: INDONESIA
1. Policy Context and the Big Picture: Role of Market Instruments Indonesia highly considers further utilization of market instruments. • Depends on UNFCCC negotiation outcomes Multilateral • Need balance between robust and flexible methodology carbon market • Require international environment and SD criteria Bilateral and • Between Indonesia and developing countries, e.g. JCM with Japan regional carbon • Could be an international carbon market offset scheme • Start from facilitating voluntary offset (the NCS) Domestic carbon • Developed and traded in Indonesia market • Simple yet robust • Could be linked to wider mechanisms 15 DRAFT MARKET READINESS PROPOSAL: INDONESIA
1. Policy Context and the Big Picture: Role of Market Instruments Market-based approaches are to enhance the effectiveness of climate change/low carbon development policies. Development of market readiness, including market elements and infrastructure, aimed to encourage adoption of market approaches to scale-up implementation of existing/future mitigation activities. Vision of Market Instrument Development Building readiness Establishing instruments Map policies and Implementation actors Options identification, Develop market assessment and review Start with domestic elements Policy consultation instrument Develop market Test instruments Continuous review and infrastructure improvement Establish regulatory framework Seek international linkage 16 DRAFT MARKET READINESS PROPOSAL: INDONESIA
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