The Climate Change Institutional Assessment of Indonesia (CCIA) is a study led by Mr. Arun Arya, Senior Public Sector Management Specialist and the Task Team Leader of the World Bank’s Public Finance Management Program in Indonesia. The study report was used as one of the Background Papers for the World Bank’s Country Climate and Development Report (2023). The study report offers a comprehensive examination of Indonesia’s institutional capacity to address the challenges of climate change governance. The assessment focuses on five critical pillars: Organization, Planning, Public Finance, Subnational Governments and State-Owned Enterprises (SOEs), and Accountability. Each of these pillars is meticulously analyzed to identify strengths, gaps, and opportunities for improvement, particularly in the management of climate risks and the execution of climate change policies.
Key Findings:
- Organization: The assessment reveals that Indonesia has established a robust regulatory framework for climate change, drawing on its international obligations, notably the Paris Agreement. The Ministry of Environment and Forestry (MOEF) plays a pivotal role in driving the climate agenda. However, coordination between sectors and among different government agencies remains a significant challenge. To streamline implementation, the report recommends formally designating MOEF as the lead climate agency and instituting formal coordination mechanisms with other ministries.
- Planning: Indonesia’s strategic planning framework encompasses both long-term and medium-term initiatives, notably the 2050 Long-Term Strategy for Low Carbon and Climate Resilience (LTS-LCCR) and the country’s Nationally Determined Contributions (NDCs). Although climate risk assessments and vulnerability evaluations are integrated into these plans, there remain significant gaps, particularly in addressing transition risks and ensuring effective implementation of climate initiatives. The report advises strengthening the link between planning and execution, as well as improving monitoring and evaluation processes.
- Public Finance: Progress has been made in embedding climate considerations into public finance through tools like climate budget tagging (CBT) and the introduction of green financial instruments, such as the Green Sukuk. Nonetheless, a substantial resource gap persists, especially for mitigation efforts. The alignment between public finance mechanisms and national climate targets is incomplete. The report suggests that formalizing the CBT framework and developing a Climate Change Fiscal Framework (CCFF) could help in mobilizing the necessary resources for effective climate action.
- Subnational Governments and State-Owned Enterprises (SOEs): Subnational governments play a crucial role in advancing climate adaptation and mitigation measures. However, their effectiveness is limited by coordination challenges, unclear functional mandates, and funding constraints. Similarly, SOEs are recognized for their contribution to environmentally responsible programs, but greater accountability and disclosure in climate-related activities are needed. The assessment recommends revisiting the functional roles of sectors such as forestry and energy and improving coordination mechanisms across different levels of government.
- Accountability: While Indonesia has a legal framework that provides for climate change accountability, including transparency measures and mechanisms for stakeholder engagement, there are still gaps. Specifically, the report highlights the need to formalize regulations further, enhance public access to climate information, and establish mechanisms for independent oversight. It recommends developing specific regulations for climate disclosure and strengthening audit and judicial review processes related to climate actions.
Recommendations:
The report outlines several actionable recommendations to strengthen Indonesia’s institutional framework for climate governance:
- Strengthen institutional capacity and coordination mechanisms, with MOEF positioned as the lead agency for climate policy implementation.
- Improve the alignment between climate strategies and public finance, particularly by formalizing climate budget tagging and establishing a comprehensive climate fiscal framework.
- Expand the role of subnational governments and SOEs in climate action, ensuring clearer mandates and improved access to resources.
- Enhance accountability by formalizing detailed climate-related regulations and improving public access to information and stakeholder engagement mechanisms.
Conclusion:
Indonesia has made significant progress in developing a policy framework to address climate change, but notable gaps remain in implementation, coordination, and resource mobilization. The CCIA provides key recommendations to bolster Indonesia’s institutional capacity, enabling it to meet its climate goals as outlined in the NDCs and the LTS-LCCR.
The Team:
This Climate Change Institutional Assessment (CCIA) report was prepared by a World Bank team led by Arun Arya (Senior Public Sector Management Specialist, EEAG1/Task Team Leader (TTL)), and consisted of Dr Muhamad Chatib Basri (NDC Economic Adviser for Government Indonesia/ Consultant EEAG1), Erwin Ariadharma (Senior Public Sector Management Specialist, EEAG1), Hari Purnomo (Senior Public Sector Specialist, EEAG1), Muhammad Khudadad Chattha (Young Professional, EEAG1), Ahmad Zaki Fahmi (Economist, EEAG1), Budi Permana (Senior Procurement Specialist, EEAR2), Unggul Suprayitno (Senior Financial Management Specialist, EEAG1), Vrilly Rondonuwu (Consultant, EEAG1), Arzrin Rasuwin (Consultant, EEAG1), and Corry Huntangadi (Program Assistant, EACIF).