Climate Budget Tagging: Amplifying Sub-National Government’s Role in Climate Planning and Financing in Indonesia

Abstract

The economic growth that Indonesia has experienced relies heavily on the availability of natural resources, and consequently the success to mitigate environmental risks is associated with climate change. Such fact is widely acknowledged in the medium-term national planning process and reflected appropriately in several key national climate policies. The establishment of a far-reaching national plan on climate mitigation has pushed the sub-national governments to set ambitious targets that supposedly guide provincial and district governments to carry out low carbon development plans. Using climate budget tagging as defined by UNDP as a public expenditure assessment tool, insights from East Kalimantan Province and West Kutai District were attained. The results of climate budget tagging in the province and one of its districts consecutively depict that 7% and 47% of budget allocation in 2015 were potentially in support of low carbon development, while in 2016 both allocations in East Kalimantan (24%) and West Kutai (16%) encouraged further discussions on the dynamics of climate mitigation at the sub-national level of governance. Nonetheless, such seemingly high allocations of the regional government budget that were earmarked for achieving climate mitigation targets were not equipped with clear outputs and outcomes that were sensitive to climate mitigation. The findings also show that there was insufficient local government fiscal space to reinforce the newly set Indonesia’s NDC target of 29% emission reduction by 2030. In ensuring that climate mitigation is being integrated into the development agenda, as well as in promoting transparency, accountability, comparability and consistency in climate finance, the following policy recommendations are proposed: (1) anticipating and preparing for the incoming reforms in functions, responsibilities and resources across levels of sub-national government; (2) clarifying government activities’ indicators, outputs and outcomes to better suit the climate mitigation targets; and (3) creating an innovative fiscal transfer financing scheme.