Indonesia Environment Fund: Bridging the Financing Gap in Environmental Programs (CPI)

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International development partners have recognized Indonesia’s efforts to better meet its climate and environmental goals by pledging their financial support. Indonesia has pledged to reduce 29% emissions by 2030 on its own and 41% with international assistance. However, without adequate delivery mechanisms for climate finance that are capable of navigating the complex arrangements of development cooperation, the collective efforts towards these goals could be ineffective and inefficient.

Indonesia’s Landscape of Public Climate Finance—a 2014 report published by the Ministry of Finance and Climate Policy Initiative—pointed to significant challenges faced by development partners in delivering finance, and by the Government of Indonesia in absorbing international climate finance at scale. A funding mechanism capable of accommodating these challenges is necessary for Indonesia to meet its climate and environment goals.

Recently, the Ministry of Finance and the Ministry of Environment and Forestry has established a public service agency (Badan Layanan Umum or BLU) as a non-structural entity under the Ministry of Finance to manage funds for environmental protection and management, including climate change mitigation and adaptation efforts. The regulatory framework of a BLU provides solid legal basis for a robust and flexible vehicle to fund activities for public interest, including managing money from international donors.

This paper aims to unpack the Public Agency for Environment Fund Management (Badan Pengelolaan Dana Lingkungan Hidup—BPDLH) and analyze its role and potential as the “financing hub” for environmental programs in Indonesia. The analysis is supported by a review of the BLU regulatory frameworks, and includes a comparison with seven fund-managing BLUs already in operation. The paper also analyzes the two funding windows to be managed by BPDLH as it begins its operations, namely the Reducing Emissions from Deforestation and Forest Degradation (REDD+) Fund and Forest Rehabilitation Revolving Fund. To read the full report, refer to the CPI website.