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Breakthroughs needed for green business

Jakarta Post
3 minute read

Indonesia needs significant breakthroughs to promote green business practices and lure more sizeable pro-environment investment, a business group says.

The Indonesian Chamber of Commerce and Industry (Kadin) deputy chairwoman for environment and climate change, Shinta Widjaja Kamdani, said Wednesday that a few obstacles still hindered business stakeholders from adopting green business models and made the country less attractive as a destination for eco-friendly investment.

“We should address a variety of issues, such as permits, fiscal incentives and financing, to get out of doing business as usual. Without solutions to these matters, we will stay where we are now many years to come,” Shinta said on the sidelines of a sustainable business dialogue hosted by Kadin and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH.

Citing licensing as one of the notable challenges to draw eco-friendly business, Shinta said that on many occasions investors were forced to halt their projects due to licensing issues.

She referred to the failure of a carbon trading program in Kalimantan under the Reducing Emissions from Deforestation and Forest Degradation (REDD+) a few years ago caused by an absence of land use permits.

Under a REDD+ scheme agreed in 2010, Indonesia vowed to stop conceding its vast rain forests and peatlands for commercial use for two years and as a result it obtained compensation totaling US$1 billion from Norway.

“A few projects could not begin because of problems relating to land even though investors were ready to kick off,” Shinta said. Access to financing also served as another major hurdle hampering investment in green projects, such as geothermal energy, Shinta said.

Setting up a geothermal power plant, for instance, requires as much as five-times the investment of a coal-fired power plant. “Without sufficient access to funds, such projects will be hard to implement,” Shinta said. 

Shinta added that fiscal incentives, including tax breaks, were needed to support firms willing to adopt green business models and invest in pro-environment projects.

Meanwhile, Finnish Ambassador to Indonesia Kai Sauer said in Jakarta on Wednesday that his country planned to further strengthen its partnership with Indonesia in renewable energy development after a current program expired next year.

Since 2011, Finland’s foreign affairs department and Indonesia’s Energy and Mineral Resources Ministry’s directorate general for renewable energy have been coopering under the Energy and Environment Partnership (EEP). Under the program, which will last until next year, as much as ¤4 million ($5.4 million) have been allocated for 20 projects related to study and development of renewable energy.

“EEP is a catalyst for more comprehensive cooperation. We would like to intensify also the corporate sector’s participation in Indonesia’s energy sector through a different program. Education could be one level,” the Finnish ambassador said after an annual EEP meeting in Jakarta on Wednesday.

The Energy and Mineral Resources Ministry’s director general for renewable energy Rida Mulyana said that 95 percent of energy needs in Indonesia were fulfilled by oil, gas and coal.

Despite abundant renewable sources, Indonesia remains dependent on fossil fuels. As economic growth drives demand for fuel and electricity, fossil fuels have become more expensive, especially since the country needs to import oil to meet demand amid declining domestic production.

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