Indonesia receives green policy support

The second phase of Indonesia’s Green Growth Program was initiated last Wednesday. It is the outcome of an extensive consultation that has been going on since May 2014, which has included a great variety of Indonesian stakeholders. The first phase of the program was launched in June 2013.

Phase II of the program will focus on fostering green investment "and related enabling conditions prioritizing energy, special economic zones, forest and land based mitigation," said the Global Green Growth Institute (GHGI), which is an intergovernmental institution for the promotion of green growth headquartered in Seoul.

Among its various objectives, the program aims to develop green strategies at all levels and for several different sectors; provide the necessary incentives to implement the set strategies; improve the institutional capacity to achieve green targets; and bring public and private resources closer.

The task is cumbersome. Indonesia has announced green policies in the past (e.g the solar PV tender with the central government determining the locations where the capacity should be developed) but has failed to achieve meaningful solar installations.

Complex investment rules are the main reason for this failure. Indonesia’s laws limit the foreign ownership of Indonesian energy projects, thus restricting the country from foreign expertise and finance.

Another hurdle is that artificially low electricity prices discourage many households and businesses to install their own PV systems.

A policy decision to slash petrol and gasoline subsidies in 2014 and then a new decree for the development of 5 GW of solar energy over the next 2-3 years using feed-in tariffs has raised hopes. However, institutional capacity and foreign investment rules will determine their success.

Hopefully, the new program between the Government of Indonesia and the Global Green Growth Institute will provide the necessary policy support to get these schemes moving. Phase II of the program will include an investment of US$18.5 million, funded by the government of Norway, in the form of technical expertise for the government and other stakeholders in Indonesia, said the Global Green Growth Institute.