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How can we fund the climate agenda in Indonesia

How can we fund the climate agenda in Indonesia

By M. Chatib Basri, Teuku Riefky

Characterized by its long coastline, massive deforestation, food insecurity, and high reliance on coal and fossil fuels, Indonesia is particularly vulnerable to the impact of climate change. While it is critical to accelerating green transition for its population, Indonesia’s progress in achieving net zero also bears global significance due to the country being the fourth largest emitter of greenhouse gases. Regardless, concrete effort and progress on climate transition in Indonesia have been slow. Having various economic development priorities, Indonesia faces a substantial financing gap for its decarbonization agenda stemming from limited fiscal space, relatively higher cost of capital, shallow domestic financial market, and limited access to international finance. Aside from finance, political economy considerations are critical. Like any other reform, the success of climate transition depends not on whether the reform agenda is good or bad but on political support to make the reform sustainable. Here we discuss these political economy aspects and attempt to address the question of how Indonesia can finance the climate transition agenda.

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