Jakarta. Experts and industry leaders said in a seminar in Jakarta last week that, since economic growth increases consumption of energy and natural resources, Indonesia must do its math better to work out if its policies to reduce greenhouse gas emissions are working, and to decide whether its private sector is actually helping the government to contribute to reducing global warming.
The world’s fourth-most populous nation is a major producer of palm oil, pulp and paper. The combination of its large population – 260 million – and its abundant natural resources has pushed the country to become the 16th largest economy in the world.
According to global consultancy McKinsey & Company, Indonesia has the potential to become the seventh-largest economy in the world by 2030, but its lack of progress on environmental management has already made the country the world’s fifth-largest emitter of greenhouse gases.
Government officials, captains of industry, environmental researchers and lawmakers gathered to tackle the question of sustainability and growth during a discussion forum titled “Beyond Profitability,” hosted by GlobeAsia magazine in Jakarta on Dec. 6.
Aside from performing a temperature check on Indonesia’s progress in sticking to its climate change commitments, the seminar challenged the panelists to discuss how and why environmentally sustainable practices can and should maximize economic growth – as well as companies’ bottom lines.
Environmental Toll of Growth
Hanny Chrysolite, forest and climate officer for Indonesia at the World Resources Institute (WRI), pointed out during the seminar that Indonesia can “only” meet its ambitious target of a 29 percent reduction in greenhouse gas emissions by 2030 using “business-as-usual” projections, and up to 41 percent with international assistance and external financing, if the government can find a way to strengthen existing environmental policies.
Chrysolite delivered the WRI’s analysis on carbon dioxide (CO2) mitigation based on current government policies and land-use and energy regulations. This includes a moratorium on new forest and peatland concessions, and a new peatland restoration framework.
Then there are the government-set renewable energy mix targets, social forestry policies and degraded forest land rehabilitation practices.
Unfortunately, these measures do not go far enough to meet Indonesia’s climate commitments, the WRI study concluded. Chrysolite said its quantitative analysis indicates that Indonesia’s existing sustainability measures will only reduce emissions to 2.3 gigatons of CO2, still way above the 2030 target of 2 gigatons.
She also warned that Indonesia’s emission sources would likely change in the future, as economic growth and population increase lead to unprecedented demand for goods and services, which will ultimately lead to higher energy demand.
When that happens, the energy sector will become a key source of CO2 emissions.
“We are on track to triple our use of natural resources by 2050, posing a severe threat to economic and human security,” Chrysolite said. She emphasized that the country’s private sector may need to think seriously about taking on new business models that are not predicated on “selling more stuff to more people.”
Rachmat Witoelar, President Joko “Jokowi” Widodo’s special envoy for climate change, said the current administration has submitted its emission reduction targets as part of the so-called “Nationally Determined Contribution” documents to the United Nations Framework Convention on Climate Change in 2015 – thus showing it is serious about reducing greenhouse emissions.
This latest pledge renewed a previous commitment made by Jokowi’s predecessor, Susilo Bambang Yudhoyono, at the Group of 20 summit in 2009, which set Indonesia’s emission reduction target at 26 percent by 2020.
Finding Balance Between Growth and Health of the Earth
The Indonesian government has been taking seriously criticism by environmentalists of its policies, following a trend of world leaders paying more attention to one the most pressing issues of mankind: climate change.
As consumers around the world show more than ever a predilection for environmentally friendly products, governments and the private sector are also forced to balance their responsibilities to communities, the economy and the planet.
This new balancing act, at least for the time being, looks to be a tough task for Indonesia.
“We’re a developing nation, is climate change an urgent issue for us? Yes it is, but alleviation of poverty is also important [here]. This puts us [Indonesia] in an antagonistic position – can we keep growing but at the same time keep the earth healthy?” said Rachmat, who has led many negotiations on behalf of the Indonesian government on climate change deals at various multinational forums.
He said Indonesia is never tired of reminding developed nations to do more to counter climate change, since developing nations like itself often still struggle with basic economic problems.
“Even if we do manage to achieve our [emission reduction] target of 29 percent, the world will still go under [water],” Rachmat said.
Another skeptical voice during the seminar came from one of Indonesia’s opposition party lawmakers, who said the country’s target of 23 percent of its energy mix by 2025 consisting of renewables is “hardly possible.”
Private Sector Contribution
Shinta Kamdani of the Indonesian Chamber of Commerce and Industry (Kadin) said the private sector needs incentives and crystal-clear regulations to address future challenges related to climate change.
“At the end of the day, when we talk about sustainable development, we are not just talking about climate change or environmental challenges, but obviously also their social aspects. At the end of the day, businesses have to make money, so profitability is still the most important aspect,” said Shinta, who is also president of the Indonesian Business Council for Sustainable Development (IBCSD), which has been organizing a collaborative private sector initiative for more sustainable business practices.
The IBCSD has identified several major factors that are hampering Indonesia’s push toward better environmental sustainability. These include a lack of leadership, lack of skilled human resources, weak law enforcement, waste management problems, financing problems, population control problems and scarce environmental services.
Shinta encouraged Indonesia’s private sector to engage in business transmissions, guided by a sustainable development agenda, to move the country from a “brown economy” to a “green economy.”
A brown economy relies on conventional assets, such as property, fossil fuels and financial assets, Shinta said.
A green economy meanwhile, refers to capital investment in the green sector that involves renewable energy, green transportation, sustainable agriculture, businesses that cares about biodiversity protection and land and water conservation.
In the ideal green economy, companies will pay more attention to climate crises, biodiversity, energy and fuel, food, water, the financial system and the global economy.
To comply with the Paris agreement on climate change, Indonesia has already modified its regulations to reduce crude oil and coal consumption and increase the use of natural gas and renewable energy.
According to its current regulations, 23 percent of the country’s energy mix should come from renewable sources by 2025, and 31 percent by 2050. It is currently only 7 percent.
Great Indonesia Movement Party (Gerindra) lawmaker Aryo Djojohadikusumo, who is a member of House of Representatives Commission VII, which oversees energy issues, said he was pessimistic that Indonesia can achieve this target.
Fueling his pessimism is the fact that the government seems adamant to replace fossil fuels with sustainable energy but refuses to make it easier for investors to put their money in the energy sector. Aryo said the Jokowi administration even offers scant support for state-owned utility company Perusahaan Listrik Negara (PLN) in the national power expansion project.
Basrie Kamba, director for external relations and corporate affairs at Jakarta-listed nickel miner Vale Indonesia, meanwhile said implementing sustainable business practices in Indonesia is a tough task, but not impossible.
He said the only thing that is needed is for all stakeholders – the government, private sector, chief strategists of major companies, media and public – to play their part.
“Sustainable growth is not a pipe dream, but to get there it needs hard works [by all stakeholders], including the CEO, COO and the government,” Basrie said. He added that this also comes at some cost, and requires a strong willingness to implement, but that it will pay off in the future in the form of a more stable and profitable business.
Additional reporting by Tabita Diela and Dames Alexander Sinaga