Usaid-Lestari Pes Redd Finance Assessment

FINAL ASSESSMENT REPORT
PES/REDD+ FINANCE ASSESSMENT AND

DEVELOPMENT OF STRATEGIES TO
INCENTIVIZE LANDSCAPE SCALE LEDS
JAKARTA, MARCH 31, 2016
This publication was produced for review by the United States Agency for International Development. It was prepared
by Tetra Tech ARD.
This publication was prepared by PT. Hydro Program International and supported by the
USAID LESTARI program.
This publication was prepared for review by the United States Agency for International
Development under Contract # AID-497-TO-15-00005.
The period of this contract is from July 2015 to July 2020.
Implemented by:
Tetra Tech
P.O. Box 1397
Burlington, VT 05402
FINAL ASSESSMENT
REPORT
PES/REDD+ FINANCE ASSESSMENT
AND DEVELOPMENT OF STRATEGIES
TO INCENTIVIZE LANDSCAPE SCALE
LEDS
JAKARTA, MARCH 31, 2016
DISCLAIMER
This publication is made possible by the support of the American People through the United
States Agency for International Development (USAID). The contents of this publication are the
sole responsibility of Tetra Tech ARD and do not necessarily reflect the views of USAID or the
United States Government.
USAID LESTARI Final Assessment Report - PES/REDD+ Finance Assessment and Development of Strategies to
Incentivize Landscape Scale LEDS Page |1
TABLE OF CONTENTS
LIST OF TABLES ................................................................................................................. 4
LIST OF FIGURES ............................................................................................................... 5
ACRONYMS AND ABBREVIATIONS .................................................................................. 6
EXECUTIVE SUMMARY .................................................................................................... 12
RINGKASAN EKSEKUTIF ................................................................................................. 14
1. INTRODUCTION ............................................................................................................ 16
Payment for Environmental Services (PES) concept .................................................. 17
HPI’s activities in accomplishing the SOW objectives ............................................... 18
2. FINANCIAL ARCHITECTURE FOR RURAL LOW EMISSION DEVELOPMENT IN
FOREST AND AGRICULTURE .......................................................................................... 20
2.1. Nationally operated financing supports................................................................ 26
2.1.1. The Indonesia Climate Change Trust Fund (ICCTF) ........................................ 26
2.1.2. Forest Management Unit (FMU) Fund ................................................................ 28
2.1.3. Shared Revenue Fund (Dana Bagi Hasil – DBH) on Forestry .......................... 30
2.1.4. Village Fund (Dana Desa) ................................................................................ 32
2.1.5. National Community Empowerment Program (Program Nasional Pemberdayaan
Masyarakat PNPM – Mandiri Kehutanan) .................................................................... 33
2.1.6. People’s Business Credit Program (Kredit Usaha Rakyat - KUR)..................... 34
2.1.7. Timber Harvesting Postponement Credit (Kredit Tunda Tebang - KTT) ........... 36
2.1.8. Watershed Fund (Dana Daerah Aliran Sungai - Dana DAS) ............................ 37
2.1.9. Grant from the Central Government to Local Government (Hibah Daerah) ...... 38
2.1.10. National Park Fund (Dana Taman Nasional) .................................................. 40
2.2. Internationally operated financial support mechanisms ..................................... 41
2.2.1. Norway – Indonesia REDD+ partnership .......................................................... 44
2.2.2. Forest Investment Program (FIP) ..................................................................... 46
2.2.3. Forest Carbon Partnership Facility (FCPF) ...................................................... 51
2.2.4. REDD Early Movers (REM) .............................................................................. 55
2.2.5. Green Climate Fund (GCF) .............................................................................. 56
2.2.6. Global Environment Facility (GEF) managed funds .......................................... 59
2.2.7. BioCarbon Fund Initiative for Sustainable Forest Landscapes (ISFL) ............... 62
2.2.8. Bilateral commitments financing support .......................................................... 63
2.2.9. Market-based payments for emission reductions (compliance & voluntary) ...... 68
2.3. Private sector & civil society financial support mechanisms.............................. 72
2.3.1. NGOs (national and international) .................................................................... 72
2.3.2. Private companies............................................................................................ 75
3. DEVELOPMENTS TO BE MONITORED ........................................................................ 78
4. INSTITUTIONS WITH A MANDATE TO IMPLEMENT PES AND REDD+ ...................... 80
4.1. Context and relationship between implementing institutions ............................. 80
4.2. Readiness of actors at the landscape level .......................................................... 87
USAID LESTARI Final Assessment Report - PES/REDD+ Finance Assessment and Development of Strategies
to Incentivize Landscape Scale LEDS Page |2
4.2.1. Readiness of actors in Aceh............................................................................. 87
4.2.2. Readiness of actors in Central Kalimantan ....................................................... 88
4.2.3. Readiness of actors in Papua .......................................................................... 89
5. GOVERNMENT REGULATIONS ON PES AND REDD+ ................................................ 91
a) Draft Regulation on Environmental Economics Instruments ................................. 91
b) Law No. 23 of 2014 on Regional Governance (Article 14) ..................................... 93
6. CONCLUSIONS ............................................................................................................. 95
6.1. Focal point of coordination for funding opportunities......................................... 95
6.2. Financing opportunities and mechanisms for LESTARI...................................... 95
6.3. Maintaining the potential for renewable energy development ............................ 97
6.4. Challenges of regulatory frameworks and institutional readiness ..................... 98
6.5. Challenges of PES/REDD+ design and implementation ...................................... 99
7. RECOMMENDATIONS ................................................................................................. 101
7.1. Incorporating PES in the utilization of domestic funds ..................................... 101
7.2. Supporting the establishment of Climate Change BLU under the MoF ............ 102
7.3. Accessing the GCF and Norway funds ............................................................... 102
7.4. Designing PES scheme ........................................................................................ 103
7.4.1. PES design on water in Southeast Aceh (including. Gayo Lues) .................... 104
7.4.2. PES design on water in the buffer zone of Cyclops Nature Reserve .............. 104
7.4.3. PES design in Central Kalimantan ................................................................. 105
8. REKOMENDASI-REKOMENDASI ............................................................................... 106
8.1. Mengintegrasikan PJL dalam pemanfaatan dana domestik .............................. 106
8.2. Mendukung pembentukan BLU Perubahan Iklim ............................................... 107
8.3. Mengakses dana GCF dan dana Norwegia ......................................................... 107
8.4. Skema pengembangan pembayaran jasa lingkungan ....................................... 109
8.4.1. Desain PJL air di Aceh Tenggara (termasuk Gayo Lues) ............................... 110
8.4.2. Desain PJL air di kawasan penyangga Cagar Alam Cyclops ......................... 110
8.4.3. Desain PJL di Kalimantan Tengah ................................................................. 110
9. BIBLIOGRAPHY .......................................................................................................... 112
ANNEXES: ....................................................................................................................... 116
Annex 1. Funds Profile ................................................................................................ 116
Annex 2. ICCTF Project Management Cycle .............................................................. 123
Annex 3. KUR Application Procedure and Distribution Mechanism ........................ 124
Annex 4. Questionnaires for LESTARI Site Visit ....................................................... 126
Annex 5. List of Stakeholders Consulted .................................................................. 134
Annex 6. Government Regulations Related To PES And REDD+ ............................ 136
Annex 7. Indicative Work Plans .................................................................................. 149
to Incentivize Landscape Scale LEDS Page |3
LIST OF TABLES
Table 1: Financial barriers, types and mechanisms ............................................................. 22
Table 2: Sources of existing FMU development funding ...................................................... 28
Table 3: Shared Revenue (DBH) distribution ....................................................................... 31
Table 4: Plan for the 2016 sectoral KUR feature.................................................................. 35
Table 5: FIP activities in Indonesia ...................................................................................... 47
Table 6: FIP funds allocation ............................................................................................... 47
Table 7: FIP I activities and collaborating institutions ........................................................... 48
Table 8: FIP II activities and collaborating institutions .......................................................... 49
Table 9: FIP III activities and collaborating institutions ......................................................... 50
Table 10: List of projects in Indonesia under UK’s International Climate Fund ..................... 64
Table 11: Overview of Compliance and VER Markets for land-based mitigation .................. 69
Table 12: Land-based Emission Reduction Markets per world region.................................. 71
Table 13: Eligibility of KEHATI grants .................................................................................. 73
Table 14: Type and reporting line of FMUs/KPHs ................................................................ 80
Table 15: List of KPHs in LESTARI landscapes .................................................................. 81
Table 16: Division of authority - natural protected area ........................................................ 93
Table 17: Funds profile ...................................................................................................... 116
Table 18: REDD+ related regulations at the national level ................................................. 136
Table 19: REDD+ related regulations at the sub-national level .......................................... 141
Table 20: PES related regulations at the national level ...................................................... 143
Table 21: List of PES and REDD+ related regulations in Aceh .......................................... 147
Table 22: List of PES and REDD+ related regulations in Central Kalimantan .................... 147
Table 23: List of PES and REDD+ related regulations in Papua ........................................ 148
USAID LESTARI Final Assessment Report - PES/REDD+ Finance Assessment and Development of
Strategies to Incentivize Landscape Scale LEDS Page |4
LIST OF FIGURES
Figure 1: Ecosystem services from forests .......................................................................... 18
Figure 2: International climate finance ................................................................................. 21
Figure 3: Global climate finance architecture diagram ......................................................... 22
Figure 4: Government management of foreign funding ........................................................ 23
Figure 5: The landscape of public finance in Indonesia ....................................................... 25
Figure 6: ICCTF fund management ..................................................................................... 27
Figure 7: Distribution mechanism for local grants ................................................................ 39
Figure 8: Total bilateral and multilateral ODA committed to the forestry sector 2013 ........... 42
Figure 9: Total bilateral ODA to reduce GHG emissions in the forestry sector ..................... 42
Figure 10: Total commitments to REDD+ by donor type, 2009-2014 ................................... 43
Figure 11: REDD+ finance commitments by donor type, 2009-2014 ................................... 43
Figure 12: Phases of Norwegian fund based on LoI ............................................................ 44
Figure 13: Milestones of REDD+ readiness ......................................................................... 52
Figure 14: Carbon Fund processing steps: From ER-PIN to ERPA Implementation ............ 53
Figure 15: Milestones of Indonesia’s activity under FCPF ................................................... 55
Figure 16: Flow chart for GCF initial proposal approval process .......................................... 57
Figure 17: Voluntary land-based emission reduction volume traded and transaction
value ................................................................................................................................... 69
Figure 18: Certification Standards in voluntary land-based emission reduction market ........ 70
Figure 19: Transacted emission reduction volumes (tCO2e) per project status .................... 70
Figure 20: Origin & destiation of land-based ERs in voluntary and compliance markets ...... 72
Figure 21: Institutions with a mandate to implement REDD+ at the LESTARI landscape .... 85
Figure 22: Institutions with a mandate to implement PES in Indonesia ................................ 86
Figure 23: PES concept based on draft government regulation ........................................... 92
Figure 24: PES mechanism based on draft government regulation ..................................... 92
ACRONYMS AND
ABBREVIATIONS
ADB Asian Development Bank
AE Accredited Entity (for GCF)
AFOLU Agriculture, Forestry and Other Land Use
AMEP Activity Monitoring and Evaluation Plan
APBD Anggaran Pendapatan dan Belanja Daerah (Sub-national Government
Budget)
APBN Anggaran Pendapatan dan Belanja Negara (State Budget)
APL Area Penggunaan Lain (Other Land Use)
B Billion
BAPPEDA Badan Perencanaan Pembangunan Daerah (Local Development
Planning Agency)
BAPPENAS Badan Perencanaan Pembangunan Nasional (National Development
Planning Agency)
BI Bank Indonesia (Central Bank of Indonesia)
BioCF BioCarbon Fund
BIOCLIME Biodiversity and Climate Change Program
BKF Badan Kebijakan Fiskal (Fiscal Policy Agency)
BKSDA Balai Konservasi Sumber Daya Alam (National Resources Conservation
Agency)
BLH Badan Lingkungan Hidup (Government Environmental Agency at sub-
national level)
BLU Badan Layanan Umum (Public Service Agency)
BLUD Badan Layanan Umum Daerah (Local Government Public Service
Agency)
BNI Bank Nasional Indonesia (National Bank of Indonesia)
BPDAS Badan Pengelola Daerah Aliran Sungai (Watershed Management
Agency)
BP-REDD+ Badan Pengelola REDD+ (Indonesia REDD+ Agency)
BP2HP Balai Pemantauan Pemanfaatan Hutan Produksi (Monitoring Agency for
the Utilization of Production Forest)
BRG Badan Restorasi Gambut (Peatland Restoration Agency)
BRI Bank Rakyat Indonesia (People Bank of Indonesia)
BUMD Badan Usaha Milik Daerah (Local Government Owned Company)
CA Conservation Area
CBFM Community Based Forest Management
CCBS Climate, Community, and Biodiversity Standard
CCBA PDD Climate, Community and Biodiversity Alliance - Project Design Document
CBNRM Community-Based Natural Resources Management
CER Certified Emission Reduction
CI Conservation International
CIF Climate Investment Fund
CMMP Conservation Management and Monitoring Plan
CPI Climate Policy Initiative
CSO Civil Society Organization
CSR Corporate Social Responsibility
C to C Community to Community
DANIDA Danish International Development Agency
DAK/SAF Dana Alokasi Khusus (Special Allocation Fund)
DAS Daerah Aliran Sungai (Watershed)
DBH Dana Bagi Hasil (Shared Revenue)
DFID UK Department for International Development
DG Directorate General
DGCCM Directorate General of Climate Change Mitigation
DIPA Daftar Isian Pelaksanaan Anggaran (Budget Utilization List)
DNPI Dewan Nasional Perubahan Iklim (National Climate Change Council)
DNS Debt for Nature Swap
DR Dana Reboisasi (Reforestation Fund)
DTP Dana Tambahan Penghasilan (Co-administration fund)
DPRD Dewan Perwakilan Rakyat Daerah (People Representative Council at the
sub-national level)
EBTKE Energi Baru Terbarukan dan Konservasi Energi (New Renewable Energy
and Energy Conservation)
EFN The Russell E. Train Education for Nature Program
ER Emission Reduction
ER-PIN Emission Reduction Project Idea Note
ERPA Emission Reduction Payment Agreement
ERPD Emission Reduction Program Document
ERR Emissions Reduction and Removal
ESP Environmental Support Program (Danish International Development Agency)
ETF Environmental Transformation Fund
EUR Euro
FAO Food and Agriculture Organization
FCPF Forest Carbon Partnership Facility
FDI Foreign Direct Investment
FFI Fauna and Flora International
FFP Firm Fixed Price
FGD Focus Group Discussion
FGMC Forest Governance Markets and Climate Program
FIP Forest Investment Program
FMLC Forest Management for Local Community
FMT Facility Management Team
FORCLIME Forest and Climate Change Program
FORDA Forestry Research and Development Agency
FPIC Free Prior Informed Consent
FREDDI Fund for REDD+ in Indonesia
FREL Forest Reference Emission Level
FWI Forest Watch Indonesia
GBP Great British Pound
GCF Green Climate Fund
GDP Gross Domestic Product
GEF Global Environment Facility
GHG Greenhouse gas
GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit
GoI Government of Indonesia
GP Green Prosperity
G to C Government to Community
G to G Government to Government
HD Hutan Desa (Village Forest)
HoB Heart of Borneo
HPI Hydro Power International Ltd.
ICAO International Civil Aviation Organization
ICCTF Indonesia Climate Change Trust Fund
ICRAF International Center for Research in Agroforestry
IDR Indonesian Rupiah
IFACS Indonesia Forest and Climate Support
IFC International Finance Corporation
IFT Intergovernmental Fiscal Transfer
IIUPH Ijin Usaha Pemanfaatan Hasil Hutan (Forest Exploitation Permit Fee)
IRR Internal Rate of Return
ISFL Initiative for Sustainable Forest Landscapes (BioCF WBG)
ITP Industrial Tree Plantation
JNR Jurisdiction and Nested REDD+
KPH/FMU Kesatuan Pengelola Hutan (Forest Management Unit)
KPHK Kesatuan Pengelola Hutan Konservasi (FMU Conservation)
KPHL Kesatuan Pengelola Hutan Lindung (FMU Protection)
KPHP Kesatuan Pengelola Hutan Produksi (FMU Production)
KSDAE Konservasi Sumber Daya Alam dan Ekosistem (Natural Resources and
Ecosystem Conservation)
KTH Kelompok Tani Hutan (Forest Farmer Group)
KTT Kredit Tunda Tebang (Harvest Postponement Credit)
KUR Kredit Usaha Rakyat (People Business Credit Program)
LBA Landscape Baseline Assessment
LCP Landscape Conservation Plan
LCS Low Carbon Support
LDC Least Developed Country
LEDS Low Emissions Development Strategies
LEMASA Lembaga Masyarakat Adat Suku Amungme (Amungme Customary
Group Organization)
LEMASKO Lembaga Masyarakat Adat Suku Kamoro (Kamoro Customary Group
Organization)
LoA Letter of Agreement
LoI Letter of Intent
LPMK Lembaga Pengembangan Masyarakat Adat Amungme dan Kamoro
(Amungme and Kamoro Tribal Groups Development Organization)
LULUCF Land Use, Land-Use Change and Forestry
LWA Lembaga Wali Amanat (Board of Trustee - ICCTF)
M Million
MDB Multilateral Development Bank
MFI Micro Finance Institution
MoEF Indonesian Ministry of Environment and Forestry
MoF Ministry of Finance
MoFor Ministry of Forestry
MRV Measurement, Reporting, Verification
MSF Multi Stakeholders Forum
MSME Micro, Small and Medium Enterprises and Cooperatives
MWA Majelis Wali Amanah (Board of Trustee)
M&E Monitoring & Evaluation
NAMA Nationally Appropriate Mitigation Action
NBFI Non-Banking Financial Institutions
NDA National Designated Authority
NIE National Implementing Entity
NGO Non-Governmental Organization
NORAD Norwegian Agency for Development Cooperation
NPHD Naskah Perjanjian Hibah Daerah (Letter of Agreement on Local Grant)
NTFP Non Timber Forest Product
ODA Official Development Assistance
OECD Organization for Economic Co-operation and Development
OFP Official Focal Point
PAD Pendapatan Ali Daerah (Local Government Revenue)
PAKLIM Policy Advise for Environment and Climate Change
PCN Project Concept Note
PDA Pengelola Dana Amanat (Trust Fund Manager - ICCTF)
PDAM Perusahaan Air Minum Daerah (Local government owned drinking water
company)
PDAS-HL Pengelolaan Daerah Aliran Sungai dan Hutan Lindung (Watershed
Managament and Protection Forest)
PDD Project Design Document (VCS)
Perpres Peraturan Presiden (Presidential Regulation)
PES Payment for Environmental Services (Pembayaran Jasa Lingkungan –
PJL)
PHPL Pengelolaan Hutan Produksi Lestari (Sustainable Production Forest
Management)
PIN Project Idea Note
PIP Pusat Investasi Pemerintah (Government Investment Center)
PNPM Program Nasional Pemberdayaan Masyarakat (National Community
Empowerment Program)
PKPPIM Pusat Kebijakan Pembiayaan Perubahan Iklim dan Multilateral (Center
for Climate Change Financing and Multilateral Policy)
PP Peraturan Pemerintah (Government Regulation)
PPI Pengendalian Perubahan Iklim (Climate Change Control – MoEF)
PPP Public Private Partnership
PSDA Pengelolaan Sumber Daya Air (Forest Resource Rent Provision)
PSDH Pengelolaan Sumber Daya Hutan (Forest Resource Provision)
Pusat P2H Pusat Pembiayaan Pembangunan Hutan (Center for Forest
Development)
P to C Private to Community
PT. SMI Perseroan Terbatas Sarana Multi Infrastruktur
RAD-GRK Rencana Aksi Daerah Penurunan Emisi Gas Rumah Kaca (Local Action
Plan for Reducing Greenhouse Gas emissions)
RAN-GRK Rencana Aksi Nasional Penurunan Emisi Gas Rumah Kaca (National
Action Plan for Reducing Greenhouse Gas emissions)
RDKL Reksadana Kehati Lestari (Kehati Mutual Fund)
REDD+ Reducing Emissions from Deforestation and Forest Degradation
REL Reference Emission Level
REM REDD Early Movers
RPJM Rencana Pembangunan Jangka Menengah (Mid-Term Development
Planning)
RPJP Rencana Pembangunan Jangka Panjang (Long-Term Development
Planning)
RSPO Roundtable on Sustainable Palm Oil
RTRW Rencana Tata Ruang Wilayah (Regional Spatial Planning)
SCBFWM Strengthening Community Based Forest and Watershed Management
SEA Strategic Environmental Assessments
SGP Small Grant Program
SIU Surat Ijin Usaha (Business Permit)
SKPD Satuan Kerja Perangkat Daerah (Regional/Local Government Working
Unit)
SOW Scope of Work
SRAP Strategi Rencana Aksi Provinsi (Climate Change’s Provincial Strategic
Action Plans)
TFCA Tropical Forest Conservation Action
TKI Tenaga Kerja Indonesia (Migrant worker)
TNGL Taman Nasional Gunung Leuser (Gunung Leuser National Park)
UKCCU United Kingdom Climate Change Unit
UNDP United Nations Development Program
UNEP United Nations Environment Program
UNFCCC United Nations Framework Convention on Climate Change
UPT Unit Pelayanan Teknis (Technical Implementation Unit)
UPTD Unit Pelayanan Teknis Daerah (Regional/Local Technical Implementation
Unit)
USAID United States Agency for International Development
USD United States Dollar
USG United States Government
VER Verified Emission Reduction
Strategies to Incentivize Landscape Scale LEDS P a g e | 10
VCS Verified Carbon Standard
WBG World Bank Group
WRI World Resource Institute
WWF World Wildlife Fund
YAPEDA Yayasan Peduli AIDS
YTS Yayasan Tambuhak Sinta
Strategies to Incentivize Landscape Scale LEDS P a g e | 11
EXECUTIVE SUMMARY
USAID’s LESTARI project supports the Government of Indonesia (GoI) to reduce
greenhouse gas (GHG) emissions and conserve biodiversity in carbon rich and biologically
significant forest and mangrove ecosystems. Built on the strong foundation of USAID’s
IFACS project, LESTARI applies a landscape approach to reduce GHG emissions,
integrating forest and peatland conservation with low emissions development (LEDS) on
other, already degraded land. This is achieved through improved land use governance,
enhanced protected areas management and protection of key species, sustainable private
sector and industry practices, and expanded constituencies for conservation among various
stakeholders. LESTARI is implemented under the leadership of Tetra Tech and a consortium
of partners including WWF-Indonesia, Winrock International, Wildlife Conservation Society
(WCS), Blue Forests, Yayasan Sahabat Cipta, PT Hydro South Pole Carbon, Sustainable
Travel International (STI), Michigan State University, and the FIELD Foundation. LESTARI
runs from August 2015 through July 2020.
PT. Hydro Program International (HPI) provides strategic advisory on Payments for
Environmental Services (PES) and Reduced Emissions from Deforestation and Forest
Degradation (REDD+) funding in Indonesia. These are part of LESTARI’s Strategic
Approach #8 – PES and REDD+ Innovative Finance. This report provides an analysis of the
current financial architecture for PES and REDD+ in Indonesia by identifying existing and
potential funding sources for sustainable rural landscapes. Funds are classified into three
main groups: nationally operated financial support, internationally operated financial support,
and private sector and civil society operated financial support. Taking into account recent
developments from the UNFCCC COP21 in Paris, private sector sustainability activities and
results-based payments are analyzed and framed against the overall financing architecture.
Political context and institutional capacity are key attributes for long-term finance for
PES/REDD+ activities. While institutional reform and regulatory changes in Indonesia have
had success in some sectors, the overall progress towards delivery of integrated climate
change mitigation, climate finance and results based payment schemes, including PES and
REDD+, has not met all expectations. Therefore, the design of readiness activities for results
based payments is a key task for LESTARI moving forward. Readiness building at the
national and local levels requires continued relationship building and advocacy with many
different stakeholders. Synergies and alignment with higher levels of potential funding
sources require as much attention as embedding PES/REDD+ activities into the local
context and involves managing expectations on the timing and amount of financial
compensation available, as well as making clear existing uncertainties. A coordinated focal
point for the LESTARI co-financing architecture and a communications strategy on
PES/REDD+ are proposed to optimize the program’s positioning within key stakeholder
networks.
National funds represent a larger source of funding for sustainable landscape management
in Indonesia compared with international sources. Additionally, access to local funds is often
more predictable. As a result of these factors, it is necessary to target the Village Fund and
initiate negotiations on concrete PES/REDD+ related co-financing road maps. Other national
funds such as the Disaster Relief Fund, the National Park Fund and the Watershed Fund
to Incentivize Landscape Scale LEDS P a g e | 12
should also be monitored as secondary priorities. To address existing capacity issues of
decision makers in charge of financing, especially the Ministry of Environment and Forestry
(MoEF) and Ministry of Finance (MoF), LESTARI should also target capacity building
programs at the national and sub-national levels. The MoEF and MoF are strongly influential
in the ongoing reform processes, particularly regarding the future organization of Indonesia’s
climate finance landscape. Capacity building on climate finance practices for sustainable
landscapes is a promising way of maintaining integration of PES/REDD+ activities in any
future climate finance system in Indonesia.
Creating access to the Norway funds and the Green Climate Fund (GCF) are priorities when
mobilizing international funds. To take advantage of these funding options, a specific study
to elaborate pathways, viability, potential partners and eligible LESTARI PES/REDD+
activities that could be proposed for funding will need to be carried out. In addition, an
initiative to harness the synergies and co-benefits of rural electrification through renewable
energy is strongly recommended. Simultaneously, there is also a need to design
PES/REDD+ schemes for specific opportunities identified in the landscapes. An initial
assessment suggests that a PES for water in the Southeast Aceh and Cyclops Landscape
should be developed while activities related to community-based forest fire management in
Central Kalimantan should be further explored.
RINGKASAN EKSEKUTIF
Proyek USAID LESTARI bertujuan mendukung Pemerintah Indonesia dalam mengurangi
emisi gas rumah kaca (GRK) dan melestarikan keanekaragaman hayati ekosistem hutan
dan bakau yang kaya karbon. LESTARI berusaha mencapai tujuan tersebut melalui
peningkatan tata kelola lahan, peningkatan pengelolaan kawasan lindung dan spesies kunci,
pemberian dukungan kepada pihak swasta untuk mengembangkan praktek operasi yang
berkelanjutan, dan perluasan area konservasi. Proyek LESTARI dijadwalkan beroperasi dari
Agustus 2015 sampai Juli 2020.
PT. Hydro Program Internasional (HPI) memberikan advokasi strategis Pembayaran Jasa
Lingkungan (PJL) dan Pengurangan Emisi dari Penggundulan dan Degradasi Hutan
(REDD+) di Indonesia. Ini adalah bagian dari Pendekatan Strategis LESTARI # 8 - PJL dan
Inovasi Finansial REDD+. Laporan ini merupakan analisis terkini dari arsitektur keuangan
PJL dan REDD+ di Indonesia dengan mengidentifikasi sumber pendanaan yang ada saat ini
serta sumber pendanaan yang sedang dikembangkan untuk pengelolaan bentang alam
pedesaan yang berkelanjutan. Sumber pendanaan dikelompokkan berdasarkan institusi
yang mengoperasikan dana tersebut. Pendanaan diklasifikasikan menjadi tiga kelompok
utama, yaitu: pendanaan yang dioperasikan oleh organisasi nasional, pendanaan yang
dioperasikan oleh organisasi internasional, dan pendanaan yang dioperasikan oleh sektor
swasta dan masyarakat sipil. Perkembangan terkini UNFCCC COP-21 di Paris memaparkan
berbagai kegiatan sektor swasta yang berkelanjutan dan pembayaran berbasis hasil
(results-based payments) yang juga berpotensi untuk menjadi sumber pendanaan dan
kerangka arsitektur pembiayaan bersama.
Konteks politik dan kapasitas institusi pelaksana adalah dua kunci pembiayaan jangka
panjang kegiatan PJL dan REDD+. Meskipun reformasi kelembagaan dan perubahan
kerangka hukum serta peraturan di Indonesia dalam beberapa sektor mengalami
kesuksesan sejak 2009, secara keseluruhan kemajuan pelaksanaan mitigasi perubahan
iklim, pendanaan perubahan iklim, dan skema pembayaran berbasis hasil termasuk PJL
masih belum sesuai harapan. Oleh karena itu, LESTARI perlu mengembangkan kegiatan-
kegiatan yang bisa menyiapkan terlaksananya pembayaran berbasis hasil di masa
mendatang. Penyiapan para aktor baik di tingkat nasional maupun lokal membutuhkan
dibangunnya hubungan intensif dan dilakukannya kegiatan advokasi dengan berbagai
pemangku kepentingan. Sinergi dan keselarasan antara kegiatan untuk menyiapkan
pembayaran berbasis hasil dan potensi sumber pendanaan perlu mendapat perhatian yang
sebanding dengan upaya menjadikan PJL dan REDD+ sebagai bagian dari kegiatan
masyarakat lokal sehari-hari. Upaya ini mencakup pengaturan harapan masyarakat dalam
segi waktu pembayaran jasa, jumlah kompensasi yang akan diterima, dan adanya resiko
ketidakpastian pembayaran. Laporan ini menekankan pentingnya koordinasi terpusat
melalui focal point untuk menangani arsitektur pembiayaan bersama LESTARI serta
perumusan strategi komunikasi bersama PJL dan REDD+ dalam rangka mengoptimalkan
posisi LESTARI dalam jejaring para pemangku kepentingan di Indonesia.
Pendanaan domestik memiliki kontribusi yang lebih besar dalam pembiayaan pengelolaan
bentang alam berkelanjutan di Indonesia dibandingkan dengan pendanaan internasional. Di
samping itu, aksesibilitas dana domestik dapat lebih diprediksi. Oleh karena itu, LESTARI
perlu mengembangkan strategi untuk memberdayakan Dana Desa dan mulai melakukan
negosiasi co-financing untuk merealisasikan kegiatan PJL dan REDD+. Sebagai prioritas
kedua, pendanaan domestik lain seperti Dana Penanggulangan Bencana, Dana Taman
Nasional dan Dana Daerah Aliran Sungai perlu terus dipantau. Untuk mengatasi isu
kapasitas para pengambil keputusan di bidang keuangan khususnya di Kementerian
Lingkungan Hidup dan Kehutanan (KLHK) serta Kementerian Keuangan, LESTARI juga
perlu menyelenggarakan program peningkatan kapasitas di tingkat nasional dan daerah.
KLHK dan Kementerian Keuangan memiliki peranan penting dalam proses reformasi
institusional dan mekanisme pendanaan perubahan iklim di Indonesia. Pengembangan
kapasitas sumber daya manusia dalam praktek pendanaan perubahan iklim untuk
pengelolaan bentang alam berkelanjutan merupakan sebuah cara yang menjanjikan untuk
mengintegrasikan kegiatan-kegiatan PJL/REDD+ ke dalam sistem pendanaan perubahan
iklim di Indonesia di masa mendatang.
Terbukanya akses terhadap dana Norwegia dan Green Climate Fund (GCF) selayaknya
menjadi prioritas LESTARI untuk memobilisasi pendanaan internasional. Untuk
memanfaatkan peluang tersebut, perlu dilakukan studi yang menjelaskan arah, kelayakan,
mitra potensial dan kegiatan PJL/REDD+ di bentang alam LESTARI yang tepat untuk
didanai oleh kedua sumber pendanaan tersebut. Selain itu, inisiatif untuk memanfaatkan
sinergi dan co-benefit dari kelistrikan pedesaan menggunakan energi terbarukan juga perlu
dipertimbangkan. Secara bersamaan, LESTARI juga perlu mendesain skema PJL/REDD+
berdasarkan potensi yang telah diidentifikasi seperti PJL air di Aceh Tenggara dan kawasan
penyangga Cyclops di Papua. Di samping itu, kegiatan yang berhubungan dengan
pengelolaan kebakaran hutan berbasis masyarakat di Kalimantan Tengah perlu ditinjau lebih
lanjut untuk selanjutnya dikembangkan dengan menggunakan skema PJL dan REDD+.
1. INTRODUCTION
A number of new opportunities for co-financing PES/REDD+ activities exist in Indonesia.
New funding pledges for REDD+ at the Paris Climate Conference in 2015 are promising and
the dynamics surrounding fund distribution of the Norway bilateral initiative are also starting
to take shape in early 2016. Additionally, the creation of the Indonesia Climate Change Trust
Fund (ICCTF), the replenishment of the Global Environment Facility (GEF) trust fund, and
the initial capitalization of the Green Climate Fund (GCF) in 2015 all bring increased
opportunities for accessing funds for PES/REDD+ activities. These are partially linked to the
implementation of the Provincial Strategic Action Plan for REDD+ (Strategi dan Rencana
Aksi Provinsi - SRAP), where all of the provinces in which LESTARI landscapes exist have
completed SRAPs and are in the process of meeting other requirements. LESTARI activities
are focused in six strategic landscapes on three of Indonesia’s largest islands, where
primary forest cover remains most intact and carbon stocks are greatest.
An important and more omnipresent source of funding comes from government budgets. A
study from the Climate Policy Initiative (CPI) revealed that domestic funding for climate
actions in the land use sector exceeded international funding by a large margin in 2011; of
the USD 486 million of finance going to the agriculture and forestry sectors in 2011, only
12% came from international development partners, while the bulk of it came from the
Indonesian government (Angela and Glenday 2016). With regards to international funding,
only 18% of international development partner climate finance disbursements went to the
land use sector despite 70% of GHG emissions coming from land use change, forestry and
agriculture in 2012 (Angela and Glenday 2016). Most international finance is bilateral and
channeled by a small group of international entities.
The innovative financing strategic approach outlined in this report will be tied closely to the
project’s forest and land use governance and advocacy technical theme in order to support
access to GoI’s budget for green enterprises and activities that support the government’s
commitment to reducing emissions by 2020. LESTARI’s theory of change is that mobilizing
national and international climate change financing resources will develop capacities for
sustainable land use and forest management, and ultimately conserve biodiversity and
reduce emissions.
To be able to access increased financing from government agencies, LESTARI needs to

work with central and local (provincial & district) government officials to promote Low
Emission Development Strategies (LEDSs), forest conservation and climate change
mitigation programs that meet emission reduction commitments. LESTARI will also need to
identify and engage relevant ministries to gain more access to and support for additional
financing sources and to explore potential collaboration with similar government programs
that optimize benefits to communities and the environment. Additional funding is essential for
catalyzing local government leadership in climate change mitigation and forest conservation.
This report aims to achieve the following Scope of Work (SOW) to advise subsequent
PES/REDD+ related activities in LESTARI landscapes:
 A thorough and up-to-date assessment of all potential funds available for
PES/REDD+, both national and international, from donors, trust funds, government
sources and the private sector. This will include comprehensive information on
eligibility, funding mechanisms, size of funding available, funding disbursement and
other relevant information needed by stakeholders in the LESTARI landscapes. This
assessment should also include funds and mechanisms that are currently under
development and that could affect the LESTARI landscapes.
 Documentation of all current institutions and relevant authorities (national, provincial
and local) with a mandate to implement PES/REDD+ schemes within the LESTARI
landscapes, including a capacity assessment for implementation of such mandates.
The assessment shall include regulations approved (nationally, provincially or
locally), human resources, experience in PES/REDD+, and financial capacity of the
institutions identified.
 Realistic recommendations for harnessing PES/REDD+ finance to incentivize LEDS
on a landscape scale over the next five years, including potential and financial
opportunities. Strategies should build on the Landscape Baseline Analysis (LBA),
Strategic Environmental Assessment – Low Emission Development Strategy (SEA-
LEDS), and Landscape Conservation Plan (LCP) recommendations where
appropriate.
This chapter provides an introduction of the assignment and gives an overview of the PES
concept. Chapter 2 discusses potential funds (existing and under development) for
PES/REDD+ in Indonesia’s climate finance landscape, and covers comprehensive
information on eligibility, funding mechanisms, size of funding available, funding
disbursement and other relevant information needed by stakeholders in the LESTARI
landscapes. Chapter 3 describes potential climate finance developments to look out for, and
new financial instruments that may be established that could potentially finance LESTARI in
the long run. Chapter 4 presents the institutions with a mandate to implement PES and
REDD+ activities, along with an assessment of their capacity. Chapter 5 identifies
PES/REDD+ related regulations at the national, provincial, and local levels. Main
conclusions addressing the challenges and opportunities are detailed in Chapter 6.
Institutional recommendations for optimizing LESTARI’s approach for acquiring co-financing
and implementing PES/REDD+ activities in the landscapes that build on LBA, SEA-LEDS
and LCPs, are also included. Building on the conclusions made, Chapter 7 develops a
succinct list of high value opportunities that can be leveraged by the LESTARI program to
harness PES/REDD+ finance. Preliminary actions for the further development of each
recommendation, within the overall LESTARI timeline, are also developed.
Payment for Environmental Services (PES) concept

Payment for environmental services (also referred to as payments for ecosystem services,
PES) was originally defined as a voluntary transaction for a well-defined ecological service,
with at least one buyer, at least one provider, and based on the condition that the buyer(s)
only pay if the provider(s) continue to deliver the defined ecosystem service over time
(Wunder 2015). PES is a tool for ensuring that those who maintain an ecosystem’s ability to
provide services, such as watershed protection, are compensated for doing so. Payees may
be beneficiaries, such as users of these services, or polluters offsetting their negative
environmental impacts elsewhere. In the current economic system, the stewardship of
ecosystems is not rewarded, often resulting in their over-use or conversion to more profitable
land uses (Global Canopy Program 2015). This occurs despite evidence that the resulting
loss of these ecosystem services can have a significant economic cost. PES schemes have
proliferated over the last few decades and are mainly focused on carbon, biodiversity and
hydrological services.
Figure 1: Ecosystem services from forests

Source: (Tetra Tech ARD 2015), LESTARI first annual work plan, page 20.
PES has been widely applied in a variety of ways and at different levels in Indonesia.
Despite this, none of these PES initiatives can be categorized according to the original PES
concept as defined by several references (PNPM 2011). Performance-based payments for
greenhouse gas (GHG) emission reductions and removals are understood as being a
particular form of PES, with climate regulation being the service that is monitored and
compensated.
HPI’s activities in accomplishing the SOW objectives

HPI has effectively accomplished the objectives defined in the SOW by undertaking desk
research and organizing consultation meetings with a variety of government officials,
including with those at the National Development Agency (BAPPENAS), the Indonesian
Climate Change Trust Fund (ICCTF), the Ministry of Environment and Forestry (MoEF), the
United Nations Development Program (UNDP) REDD+ unit and other international
development agencies, to document policy objectives, funds, and current activities that affect
the LESTARI landscape.
In addition to the meetings conducted with relevant actors at the national level, HPI also
visited LESTARI regional offices and landscapes to better understand issues and
opportunities for PES and REDD+ in each landscape. In its site visits to Aceh, Central
Kalimantan, and Papua, HPI consultants met with representatives from various institutions at
the provincial and local levels, including:
(i) Sub-national Development Planning Agency (BAPPEDA Propinsi and BAPPEDA

Kota/Kabupaten)
(ii) Government Forestry Office (Dinas Kehutanan)
(iii) Government Environmental Agency (Badan Lingkungan Hidup – BLH)
(iv) National Park Agency (Balai Taman Nasional)
(v) Forest Management Unit (FMU/KPH)
(vi) Technical Implementing Unit (Unit Pelaksanaan Teknis – UPT & UPTD), including
the:
 Natural Resources Conservation Agency (Balai Konservasi Sumber Daya
Alam - BKSDA)
 Watershed Management Agency (Badan Pengelola Daerah Aliran Sungai -
BP DAS)
 Monitoring Agency for the Utilization of Production Forest (Balai Pemantauan
Pemanfaatan Hutan Produksi - BP2HP)
 Forest Area Stabilization Agency (Badan Pemantapan Kawasan Hutan –
BPKH)
(vii) Government Tourism Office (Dinas Pariwisata)
(viii) Local Non-Governmental Organizations (NGOs) and Civil Society Organizations
(CSOs)
2. FINANCIAL
ARCHITECTURE FOR
RURAL LOW EMISSION
DEVELOPMENT IN FOREST
AND AGRICULTURE
This chapter analyzes the current financial architecture for PES and REDD+ in Indonesia. It
identifies and maps out existing and potential funding sources for sustainable rural
landscapes by highlighting and presenting some options so that they can be considered
solid, bankable and scalable. Funding sources are classified based on the institution
managing/operating the fund, and are categorized as nationally operated financial support,
internationally operated financial support, and support from the private sector and civil
society.
Classification is carried out according to the institution operating the fund instead of grouping
the funding sources based on the origin of funds, as the latter has proved challenging. In
their management and operationalization, funds that originate from foreign sources may
interact with those from other sources of both international and national origins in a
program/project, and may also be operated by a national entity.
Figure 2 provides an overview of the flow of funding from donors to recipients in international
climate finance.
Figure 2: International climate finance
Source: ( CICERO and Climate Policy Initiative 2015)
There are a number of channels through which international climate finance flows, including
multilateral channels (both within and outside of UNFCCC financing mechanisms), bilateral
channels, regional channels, and also national climate change channels and funds. In
addition to multilateral channels, some developed countries have established climate finance
initiatives or are channeling climate finance through their bilateral development assistance
institutions, while some developing countries have set up regional and national funds and
channels to receive climate finance.
There are various types of climate finance with different governance structures, modalities
and objectives. While the transparency of climate finance that is programmed through
multilateral initiatives is increasing, detailed information on bilateral initiatives, and regional
and national funds is often less readily available (Smita Nakhooda, Charlene Watson, Liane
Schalatek 2015).
Figure 3 illustrates the global climate finance architecture, focusing on public climate
financing mechanisms, and provides an overview of the key actors including donors, bilateral
institutions, multilateral institutions, and regional and national funds.
Figure 3: Global climate finance architecture diagram
Source: (Smita Nakhooda, Charlene Watson, Liane Schalatek 2015); adapted
Different financial instruments (grants, loans, equity) can be leveraged to overcome different
financial or non-financial barriers. Table 1 outlines a number of barriers and how financial
instruments can help to overcome these barriers.
Usually PES/REDD+ activities fall into the categories of low (or no) return investments or
high up-front costs with a lack of access to capital (such as ecotourism). Carbon markets in
a wider sense can be understood to represent performance-based payments for ecosystem
services, such as water, in general.
Table 1: Financial barriers, types and mechanisms

Barriers to mitigation
Type of financing Public finance mechanism
actions
Low (or no) return on Contribution to Up-front grant (e.g. direct subsidies,
investment investment and investment tax breaks, grant
operational costs component of concessional loans)
Funding during operation (e.g. feed-in
remuneration, carbon markets, PES)
High up-front costs and Facilitating access Provision of debt, e.g. through loans or
lacking access to capital to finance credit lines
Barriers to mitigation
Type of financing Public finance mechanism
actions
Provision of equity
Incentivizing existing financing system
High risk Provision of risk Risk guarantees/insurance
coverage schemes/equity/first-lose grants
High transaction costs - Standardization and aggregation
Non-financial barriers (e.g. (Financing) Mostly in the form of grants
regulatory barriers, lack of technical
information and capacity) assistance
Source: (ECN/Ecofys 2014); adapted
Funds originating from both foreign and domestic sources that are managed by the
Indonesian government will be registered in the State/National Budget (Anggaran
Pendapatan dan Belanja Negara – APBN). The management and operationalization of funds
originating from foreign sources in Indonesia is regulated as illustrated in the following figure.
Figure 4: Government management of foreign funding

Source: HPI elaboration
The utilization of funds for GHG emission reduction and removal (ERR) programs, including
in the forestry sector in Indonesia, is carried out by both the central government authority
and the local government authority.
Activities under the central government authority (ministries/agencies) are financed

through:
 Sectoral ministry/agency funds (Daftar Isian Pelaksanaan Anggaran, DIPA)
 The Deconcentration Fund (Dana Dekonsentrasi)
 The Assistance Task Fund (Dana Tugas Pembantuan)
Activities financed under the local government authority are financed through:
 Specific Allocation Fund (Dana Alokasi Khusus, DAK) for the forestry sector – for
financing local activities based on a set of priorities and criteria
 The Performance-Based Grant (Dana Insentif Kinerja), based on the implementation
of locally-proposed GHG ER initiatives and the accomplishment of particular targets
 Local Grants (Hibah Daerah) for financing local activities proposed by local
governments
Figure 5 provides an overview of the public finance landscape in Indonesia, which will be
covered in more detail in Chapter 6.
The list of all funds (nationally operated financing support, internationally operated financing
support, and private sector and civil society financing support) along with their eligibility,
funding mechanisms, size of funding available, and funding disbursement are summarized in
Annex 1.
Figure 5: The landscape of public finance in Indonesia1
Source: (CPI and BKF 2014)
1 This study was conducted using data in 2011; studies using data after 2011 are yet to be available. Flows are expressed in IDR billions.
USAID LESTARI Final Assessment Report - PES/REDD+ Finance Assessment and Development of Strategies to Incentivize Landscape Scale LEDS P a g e | 25
2.1. Nationally operated financing supports
This section gives an overview of funds that are managed by national entities. The ICCTF is
discussed in this section because even though its funding originates from various foreign
donors, it is operated under BAPPENAS, a government institution. This section also
discusses several funds related to the forestry sector and other sectors that can potentially
be used to support LESTARI activities at the local level.
2.1.1. The Indonesia Climate Change Trust Fund (ICCTF)
Eligibility CSOs, NGOs, private sector, universities/academies and

government institutions
Funding Grants: Small Grant Program (SGP) and large grants
Mechanism
Size of Funding  IDR 500 million (~ USD 40,000) for small grants
Available  Up to several million USD (> IDR 3 billion or ~ USD
225,000) for large grants
Funding  Small grant: disbursed in lump sum and is relatively quick
Disbursement once reporting requirements are fulfilled
 Large grant: disbursement mechanism is under
development
Additional info Thematic areas: land-based mitigation, energy, and adaptation
& resilience
The ICCTF aims to develop innovative ways of linking international finance sources with
national investment strategies. It acts as a catalyst for attracting investment for the
implementation of a range of alternative financing mechanisms for climate change mitigation
and adaptation programs in Indonesia. The ICCTF receives non-refundable contributions
from bilateral and multilateral donors, as well as from the private sector2, and is managed
nationally by the ICCTF Secretariat under BAPPENAS, with Bank Mandiri serving as the
selected fund manager. The ICCTF fund flow and fund management structure is illustrated in
the following figure.
2 The ICCTF had not received contributions from the private sector as of December 2015, and is currently trying to engage
the private sector.
Figure 6: ICCTF fund management
Source: (ICCTF 2015)
The ICCTF focuses on providing support for early stage development (pilot projects) in three
thematic areas: land-based mitigation, energy, and adaptation and resilience. The ICCTF
provides up to IDR 500 million (approximately USD 40,000) funding per project for SGPs,
dedicated for urgent adaptation and mitigation activities, mainly at the community level. The
ICCTF has funded six programs under the SGP, including: Carbon Sequestration in
Community Forests, Public Private Partnership (PPP) Model against Forest Degradation and
Deforestation, and Climate Forecast for Farmers and Fishermen. Projects under the SGP
lasted between 6 to 8 months on average.
In addition, the ICCTF also provides funding for larger scale projects that can reach several
million USD (above IDR 3 billion or USD 225,000) in combined investments for both
mitigation and adaptation activities. Some larger scale projects that have been funded by the
ICCTF include: (i) Research and Technology Development of Sustainable Peat Management
to Enhance Carbon Sequestration and Mitigation of Greenhouse Gas Emissions (2010 –
2012), USD 1,213,615.5; (ii) Sustainable Management of Degraded Peatland to Mitigate
Green House Gas Emissions and Optimize Crop Productivity (2012 – 2014), USD
1,279,494.7; and (iii) Public Awareness Training and Education Program on Climate Change
Issues for All Levels of Societies in Mitigation and Adaptation (2010 – 2012), USD
1,367,851.39 (ICCTF 2015). There were no larger scale projects being funded by the ICCTF
in 2015, mainly due to internal changes within the organization. However, it is expected that
the ICTTF will resume its funding support for larger scale projects in the near future.
To access the fund, CSOs, NGOs, the private sector, and universities/academies, as well as
government institutions, are required to submit project proposals. Individuals are not eligible
to apply for the funds. Upcoming grant opportunities along with the format for the proposal
document can be downloaded at the ICCTF website: http://icctf.or.id/call-for-proposals-p-
2265-en/. The ICCTF Project Management Cycle for the financing of activities follows the
nine steps as illustrated in Annex 2.
The SGP selection mechanism consists of two stages: (i) the screening of all proposals
based on administrative requirements; and (ii) an in-depth assessment based on specific
criteria (Step 2 and Step 3 of Annex 2). The application process and selection criteria of
larger grant projects is envisioned to be slightly different to those of the SGP, and are
currently still under development.
Financial due diligence includes performance based payments that will be conducted over
the duration of any approved projects in lieu of agreed upon milestones between the ICCTF
and the recipient/beneficiary to monitor the progress of the project in achieving an individual
project's objectives. In addition, lessons learnt from projects previously implemented will also
be identified and documented in the ICCTF's investment and fundraising strategies.
The ICCTF has also registered to be a National Implementing Entity (NIE) to the UNFCCC’s
Adaptation Fund. Its transition to becoming Indonesia’s NIE to the Adaptation Fund is being
supported by GIZ, the German development agency. However, challenges remain. Although
the establishment of the ICCTF is a step in the right direction, there is no overarching
mechanism for donor coordination (EIA Commission 2015). Moreover, the policies and legal
framework at the provincial and local levels are not yet adequate for facilitating the delivery
and management of climate finance.
2.1.2. Forest Management Unit (FMU) Fund
Eligibility All types of FMUs/KPHs: FMU Conservation (KPHK), FMU

Protection (KPHL), FMU Production (KPHP)
Funding Mechanism Budget transfer
Size of Funding Up to IDR 3 billion (~ USD 225,000) per KPH; however, the
Available actual funds disbursed are much less. Government allocated
budget for the KPHs changes from year to year with a
decreasing trend
Funding Yearly as part of government budgeting process
Disbursement
Additional Info KPHK is funded by central government, KPHP and KPHL are
funded by both APBN and sub-national government budgets
(APBD)
FMUs (locally known as Kesatuan Pengelola Hutan - KPH) have the potential to play a
significant role in contributing to sustainable development by protecting natural resources,
reducing GHG emissions from forest and peatlands, and by improving the livelihoods of local
communities. There are three types of FMUs: Conservation FMUs (KPHK), Protection FMUs
(KPHL), and Production FMUs (KPHP). The KPHK is managed directly by the national
government, while the KPHL and KPHP are currently managed by the district government
and will soon be transferred to the provincial government.3
3As part of the implementation of Law No. 23 of 2014 on Local Governance. The transfer of authority is expected to be
completed by October 2016.
The source of funding for KPH development and operation comes from the state budget
(APBN), sub-national government budget (Anggaran Pendapatan Belanja Daerah, APBD),
and other legal and legitimate funds. Significant financial input from local, national and
international sources, as well as the KPH’s own income stream, are still needed to set up the
management structure and the technical infrastructure of KPHs. Existing KPH development
funds are summarized in the following table.
Table 2: Sources of existing FMU development funding

Local Government Other legal and
State Budgets (APBN)
Budget (APBD) legitimate funds
Special Allocation Fund (Dana Intergovernmental Grants
Alokasi Khusus - DAK) on forestry fiscal transfers
Shared revenue (Dana Bagi Hasil - Local revenue Corporate Social
DBH) (Pendapatan Asli Responsibility (CSR)
Daerah - PAD). fund
De-concentration fund – PES
National community empowerment – –
program (PNPM) – Mandiri
Kehutanan
Village fund – –
Co-administration task fund (DTP) – –
Source: (PKPPIM 2015)
The following section describes each type of source – state budget, local budget and others
– the Shared Revenue Fund (Dana Bagi Hasil – DBH), the Village Fund (Dana Desa), and
the PNPM – Mandiri Kehutanan will be discussed further in Section 2.1.3, Section 2.1.4 and
Section 2.1.5 respectively.
Special Allocation Fund (Dana Alokasi Khusus – DAK)
The Special Allocation Fund (locally known as Dana Alokasi Khusus - DAK), is sourced from
the state budget (APBN) and allocated to a particular region to fund special activities in
accordance with national priorities based on criteria set by the government. In the forestry
sector, DAK is one of the sources of funding used to finance forestry development at the
subnational level. DAK-forestry policy in 2014 was focused on the improvement of KPHP
and KPHL, the improvement of watershed capabilities, protection of forests and essential
areas, and community empowerment.
Deconcentration Fund (Dana Dekonsentrasi)
The Deconcentration Fund is a form of funding from the state budget (APBN) and is
deployed by the governor at the provincial level, covering all expenditures for delegation of
tasks from the central government to provincial government, excluding funds allocated for
central governmental offices located in the regions.
Co-Administration Task Fund (Dana Tambahan Penghasilan – DTP)
The Co-Administration Task Fund (DTP) is a fund from the state budget that is transferred to
local government and includes all revenues and expenditures for implementing tasks. It is
mainly allocated for the development of infrastructure. Funds for co-administration are also
one source of funding that can be implemented by local government financed by the KPHs,
given that the development and operationalization of KPHs is one of KPH’s priority policies.
Sub-national Government Budget (APBD)
The Sub-National Government Budget (APBD) comes from intergovernmental fiscal

transfers. Funds transferred from the central government that can be used for forestry
development include DAK-Forestry, DBH-DR, DBH-PSDH, and DBH-IIUPH. Local
governments can use these mechanisms to fund forestry development activities in territories
under their administration by referring to central government rules.
A study from the Center of Climate Change Financing and Multilateral Policy (Pusat
Kebijakan Pembiayaan Perubahan Iklim dan Multilateral – PKPPIM) under the Fiscal Policy
Agency (Badan Kebijakan Fiskal – BKF) at the MoF suggested that alternative funding from
CSR, grants, and the PNPM have higher efficiency and effectiveness than other existing
options, although budget from these three sources is smaller than that of the DAK and DBH
mechanisms (PKPPIM 2015). However, the utilization of alternative sources of funding
needs to be accompanied by institutional changes in the KPH. The KPHK and KPHL are
structured as the Public Service Agency (Badan Layanan Umum, BLU) and the Local Public
Service Agency (Badan Layanan Umum Daerah, BLUD), while the KPHP is advised to
change into a BLUD or Local Government-owned Enterprise (BUMD).
2.1.3. Shared Revenue Fund (Dana Bagi Hasil – DBH) on Forestry
Eligibility All district/city governments

Size of Funding Variable, depending on the revenue of the year; proportion is
Available calculated based on proportion in
Shared Revenue (locally known as Dana Bagi Hasil – DBH)
is a fund sourced from the state budget (APBN) and allocated
proportionally to a region to finance the implementation of
decentralizing processes. The distribution of DBH in forestry
is implemented based on natural resource revenues in the
current budget and distributed on a quarterly basis through
transfer from the State Treasury to the Regional Treasury
Account.
The distribution mechanism of the DBH starts with the
selection of the producing regions and determines the basis
for calculating the DBH of natural resources by the MoEF
after consulting with the Ministry of Home Affairs. The criteria
are then conveyed to the MoF to be decreed as estimated
DBH of natural resource allocation for each region. The
calculation of real DBH of natural resources is carried out on
a quarterly basis through data reconciliation between the
central government and the producing regions. The
distribution of state revenue derived from forestry DBH is
divided in the following way:
Table 3
Funding Distributed on a quarterly basis through transfer from the
Disbursement State Treasury to the Regional Treasury Account
Shared Revenue (locally known as Dana Bagi Hasil – DBH) is a fund sourced from the state
budget (APBN) and allocated proportionally to a region to finance the implementation of
decentralizing processes. The distribution of DBH in forestry is implemented based on
natural resource revenues in the current budget and distributed on a quarterly basis through
transfer from the State Treasury to the Regional Treasury Account.
The distribution mechanism of the DBH starts with the selection of the producing regions and
determines the basis for calculating the DBH of natural resources by the MoEF after
consulting with the Ministry of Home Affairs. The criteria are then conveyed to the MoF to be
decreed as estimated DBH of natural resource allocation for each region. The calculation of
real DBH of natural resources is carried out on a quarterly basis through data reconciliation
between the central government and the producing regions. The distribution of state revenue
derived from forestry DBH is divided in the following way:
Table 3: Shared Revenue (DBH) distribution

Forest Forest
Exploitation Resource Reforestation
Institution
Permit Fee Provision Fund (DR)4
(IIUPH) (PSDH)
Central government 20% 20% 60%

Provincial government 16% 16%
District/city government 64% - 40%
District/city government where
- 32% -
the production takes place
Other districts/cities in the

- 32% -
province
Source: (PKPPIM 2015)
4 To be used for forest and land rehabilitation.
2.1.4. Village Fund (Dana Desa)
Eligibility All villages

Size of Funding IDR 1 billion (~ USD 74,000) per village with possibility to
Available increase
Funding Yearly as part of government budgeting process. The fund is
Disbursement transferred from the central government account to village’s
account via district government’s account
Additional Info Efforts are being made at the district and village levels to
better manage and allocate the money based on village
needs and priorities
The Village Fund is mandated by Law No. 6 of 2014 (Village Law), which allows all villages
across the archipelago to receive IDR 1 billion per year of assistance from the central
government to develop their economies and infrastructure. The Village Fund covers funds
from the state budget earmarked for villages, which are transferred through the district/city
budget and are used to finance administration and development, and to foster social and
community empowerment.5
The Fund is aimed at improving the welfare of rural communities and the quality of human
life, as well as poverty reduction, through: (1) the fulfillment of basic needs; (2) the
development of rural infrastructure; (3) the potential development of local economies; and (4)
the use of natural resources in an environmentally sustainable manner.6 The use of village
funds for sustainable development needs based on the condition and potential of the village,
which among others, includes support for management of village forests (Hutan Desa – HD)
and community forests, and capacity development for local communities on renewable
energy and the environment (PKPPIM 2015).
The Village Fund, as part of the village decentralization process, is a relatively new
government initiative that has great potential to accelerate local development. As it has only
just begun, it is too early to examine and debate program implementation outcomes,
however, a number of challenges in the design of the nascent program have already
become apparent. When large resources are directed into a village without strong oversight,
budgets are not always used for the benefit of those that need them the most (World Bank
2015). In addition, the Village Law itself does not provide an adequate enough basis for
regulating proper village financial management. Some believe that the initiative is all about
the distribution of money with no clear plan for its proper management (East Asia Forum
2015).
Despite stipulations in the Ministry of Villages, Underdeveloped Regions and Transmigration

Regulation No. 21 of 2015 on the Priority of Village Fund Utilization in 2016, a big portion of
5 Government Regulation No. 60 of 2014 on Village Fund Originating from the Budget of the State Budget, amended by
Government Regulation No. 22 of 2015.
6 Village, Rural Development and Transmigration Ministerial Regulation No. 5 of 2015.
the money is currently spent on infrastructure development, with less being spent on
community empowerment. At the sub-national level, the provincial and district governments
are still in the process of formulating local regulations and developing guidelines on the
management of the Village Fund, while the funds have actually already been handed over to
the villages. This is due to lack of capacity within local government, village administration,
and local communities (East Asia Forum 2015). Furthermore, mechanisms to control village
spending are underdeveloped.
In LESTARI landscapes, initiatives using the Village Fund for activities related to the
environment and forestry that support local economic development can be seen in Aceh
Tenggara and Central Kalimantan. In Aceh Tenggara, the district/regency government hires
six experts as external consultants to provide technical assistance, which takes the form of
advocacy efforts aimed at promoting the issuance of three to four provincial regulations as a
regulatory framework and at developing guidelines and a management plan for the utilization
of the Village Fund. In Central Kalimantan, there have been discussions among various
government institutions, local communities, and NGOs on using the Village Fund to finance
initiatives related to forest fire management at the village level. These initiatives, however,
are still in a preliminary stage.
2.1.5. National Community Empowerment Program (Program Nasional

Pemberdayaan Masyarakat PNPM – Mandiri Kehutanan)
Eligibility Villages in and around forest areas
Funding Mechanism Budget transfer (from central and district government to

village government)
Size of Funding Variable

Available
Funding Yearly as part of government accounting process
Disbursement
The PNPM – Mandiri Kehutanan program aims to alleviate poverty in areas surrounding
forests, in collaboration with a range of sectors other than forestry and is coordinated by the
Coordinating Ministry for Humanity and Cultural Development (Kementerian Koordinator
Bidang Pembangunan Manusia dan Kebudayaan, formerly Kemenko Kesra).7 The PNPM
program consists of various activities including the development of conservation villages,
community forestry, partnerships, and village forest management for communities
surrounding protected forests and production forests. The program’s beneficiaries are
groups of people who have been identified by the Technical Implementation Unit (Unit
Pelaksana Teknis, UPT) or Regional Technical Implementation Unit (Unit Pelaksana Teknis
Daerah, UPTD), Regional Offices of Forestry, and license holders in the field of forestry and
local communities.
7Forestry Ministerial Regulation No. 16 of 2011 on General Guidelines of the National Program for Community
Empowerment in Forestry.
2.1.6. People’s Business Credit Program (Kredit Usaha Rakyat - KUR)
Eligibility Micro, small and medium enterprises (MSME) and

cooperatives
Funding Credit and micro-credits backed by guarantees from state-
Mechanism owned companies
Size of Funding  Micro KUR: IDR 25 million (~ USD 2,000) for a max. of 3
Available years for working capital and 5 years for investments
 Retail KUR: IDR 25 million to IDR 500 million (~ USD 2,000
to USD 38,000) for a max. of 4 years for working capital
and 5 years for investments, can be extended to up to 10
years for hardwood investment
 TKI KUR (designed for migrant workers): IDR 25 million (~
USD 2,000), duration is based on the migrant workers’
employment contract and shall not exceed 3 years
 Sectoral KUR: IDR 500 million – IDR 30 billion (~ USD
38,000 – USD 2 million) for max. 10 years
Funding Three different mechanisms:
Disbursement  directly to MSME from participating banks
 indirectly through linkage institutions by executing patterns
 indirectly through linkage institutions by channeling patterns
Additional Info  Types of credit at the moment: micro KUR, retail KUR, TKI
KUR (designed for migrant workers)
 Sectoral KUR is planned to be introduced in 2016
The people’s business credit program (KUR), established in 2008, is a credit/working capital
and/or investment financing scheme specifically dedicated to micro, small and medium
enterprises (MSME) and cooperatives in the productive enterprise8 sector that are mostly not
bankable9 due to lack of collateral (Tim Nasional Percepatan Penanggulangan Kemiskinan,
TNP2K, n.d). The KUR aims to accelerate the development of economic activities, alleviate
poverty and expand work opportunities. Individual or community groups in the LESTARI
landscapes may use this credit to finance activities related to the LESTARI
programs/projects later on. Through this credit, commercial banks provide working capital to
microfinance institutions (MFIs). The loans are guaranteed by the government through
guarantor institutions.
The implementation of the KUR program is supported by three pillars: government,

guarantor institutions and banks. The government, through the Bank of Indonesia (BI) and
line ministries (e.g. Ministry of Agriculture, Ministry of Environment and Forestry, Ministry of
Maritime Affairs and Fisheries), assists and supports the implementation of credit provisions
and guarantees. Two state-owned companies, PT. Asuransi Kredit Indonesia (PT. Askrindo)
and Perusahaan Umum Jaminan Kredit Indonesia (Perum Jamkrindo), currently serve as
8 Effort to produce goods or services to provide added value and increase entrepreneur income.
9 MSME that are not able to meet a bank’s credit/financing requirements.
guarantor institutions that guarantee the credit distributed by the banks. Banks are recipients
of the guarantees and serve as credit distributors to the MSMEs. To date, three commercial
banks, Bank Rakyat Indonesia (BRI), Bank Mandiri, and Bank Negara Indonesia (BNI), carry
out the function of credit lenders.
The Indonesian Government intends to mobilize between IDR 100 trillion to IDR 123 trillion
(~ USD 7.2 billion to USD 8.89 billion) in 2016 as small business loans under its KUR
program for the purpose of boosting economic growth (Coordinating Minister for Economic
Affairs 2015). Additionally, the government has been preparing to cut the lending rate of its
subsidized KUR from 22%-24% to as low as 9% and to merge the credit program scheme
into the sectoral KUR in 2016 (Coordinating Minister for Economic Affairs 2015). To reach
these targets, the government is considering adding PT. Jaminan Kredit Daerah (PT.
Jamkrida) as a guarantor institution in each province. The government is also considering
including more state, private and regional development lenders for the credit program.
Furthermore, non-banking financial institutions (NBFIs), finance companies, and venture
capital companies will serve as distributing institutions and and/or linkage institutions.
The sectoral KUR is aimed at supporting development of business in each area based on
their respective potential. It has a higher credit ceiling (IDR 500 million to IDR 30 billion or ~
USD 38,000 to USD 2,250,000) and has targeted a number of sectors such as food-crops,
horticulture, plantation/estates, livestock, cow nursery, marine tourism, renewable energy
and energy conservation. Table 4 summarizes the government’s plan for the sectoral KUR
feature in 2016 - the details of the application procedure and distribution mechanism are
available in Annex 3.
Table 4: Plan for the 2016 sectoral KUR feature

No Description 2016’s sectoral KUR
As much as 9% effective yearly or adjusted by equivalent
1 Interest
flat interest
Food-crops, horticulture, plantation/estates, livestock, cow
nursery, marine tourism, rice, cacao, coffee, sea weed,
rattan and salt, renewable energy and energy conservation
that will contribute to the realization of the National Energy
2 Activities funded Policy as stipulated in Government Regulation No. 79 Year
2014, conservation of industrial energy as regulated in
Government Regulation No. 70 Year 2009 or Ministry of
Energy and Mineral Resources (MEMR) No. 14 Year 2010
Between IDR 500 million – IDR 30 billion (~ USD 38,000 –

3 Credit ceiling
USD 2.25 million)
4 Duration Maximum 10 years
Extension In case extension is needed, credit ceiling, or restructuring
period, of working capital and/or investment, then the extension
5
restructuring, period, credit ceiling, and/or restructuring will follow the
and extension characteristics of each commodity
Guarantee Additional collateral based on assessment by bank
6
binding
No Description 2016’s sectoral KUR
7 Grace period Based on characteristic of each commodity
Source: (Coordinating Minister for Economic Affairs 2015)
2.1.7. Timber Harvesting Postponement Credit (Kredit Tunda Tebang - KTT)
Eligibility  Farmer groups, cooperatives (those receiving loans from

government)
 Individuals/members can apply for the loan to the
cooperative or farmer group receiving money from the
government/MoEF
Funding Low-interest credit
Mechanism
Size of Funding  Variable, depending on the size of community
Available group/cooperative
 Variable, maturity is 5-8 years (depending on the harvest)
Funding  Lump sum, directly to community group/cooperative
Disbursement  Lump sum, directly to individual applying for loan
To encourage community forest farmers to postpone timber harvesting, the MoEF provides
Harvest Postponement Credits (locally known as Kredit Tunda Tebang - KTT), which allow
farmers not to cut when in need but to wait until the trees are bigger and thus carry a greater
commercial value. With this credit, farmers can pursue productive activities. Collateral takes
the form of standing crops or community forest trees with a circumference of 30 centimeters.
Farmers are not allowed to cut down the trees that are pledges within a predetermined
timeframe.
This credit is managed by the Public Service Agency (Badan Layanan Umum - BLU) Unit –
Center for Forest Development (Pusat Pembiayaan Pembangunan Hutan - Pusat P2H),
which helps the farmers apply for credit with a loan term of between up to five and eight
years, and with low interest referring to the Central Bank of Indonesia’s interest rate.
The credits can be used for a number of purposes, for example, for the livestock sector
(50%), economically productive activities such as furniture production or additional capital,
restaurants, and wood trading (40%). They can also be used for paying school fees and
consumer costs.
An example of the successful operationalization of this credit comes from the forest farmers
group (locally known as Kelompok Tani Hutan - KTH) in Jasema, Terong Village, Bantul
Regency of Jogjakarta province. Other areas where KTT has been operationalized are
Bojonegoro in East Java and Banyumas in Central Java (Bidik Online 2015).10
10Requirement and application form can be downloaded at http://www.dephut.go.id/uploads/files/perkaP2H_p01-

2012_lamp4.pdf
HPI believes that KTT is an innovative mechanism with a proven record of accomplishment
on a local scale for small holders – and therefore in a special category of which not many
examples exist. Despite this being a loan for timber trees and not strictly a PES, KTT
overcame several barriers related to operating on a local scale that many schemes fail to do.
Particular attention should therefore be paid to it as a mechanism for the learning
exercises.
2.1.8. Watershed Fund (Dana Daerah Aliran Sungai - Dana DAS)
Eligibility Local community groups/organizations, villages

Available  Nursery program (KBR)
 BLM-PPMPBK = IDR 50 million (~ USD 4000)
Funding Disbursement Yearly as part of government budgeting process
According to Government Regulation No. 37, 2012 on Watershed Management

(Pengelolaan Daerah Aliran Sungai, DAS), the main funding for DAS management comes
from the APBN, APBD, grants, and/or other funding such as trust funds, environmental
funds, and PES. BPDAS managed several programs such as the Nursery Program (Kebun
Bibit Rakyat – KBR) and grants for the local community for the development of conservation
based community forest (Bantuan Langsung Masyarakat Pengembangan Perhutanan
Masyarakat Pedesaan Berbasis Konservasi, BLM-PPMPBK). The BPDAS provides funds of
IDR 50 million (~ USD 4000) through BLM-PPMPBK to create alternative livelihoods for local
communities/villages in and around forest areas and also manages seeding programs
(KBR), targeted on the watershed area that falls under the category of “needs to be
recovered”. Under the BLM-PPMPBK, 70% of the money needs to be used for tree
replanting and building up/maintaining land conservation practices whereas the other 30%
can be spent on purchasing cattle and fish. Local community groups in villages under the
area of prioritized watersheds, in or around forest areas, in underdeveloped/remote areas, or
indigenous communities are eligible to apply. Only one local community group can receive
the BLM-PPMPBK in a specific village.
Other sources of watershed funding come from projects funded by donors, such as the two
projects detailed below.
Strengthening Community-Based Forestry and Watershed Management (SCBFWM)
The Strengthening Community-Based Forest and Watershed Management (SCBFWM)

project is designed to back up the Government's program on community-based forest and
watershed management, by addressing inequitable distribution of benefits from forest
resources and lack of capacity of local authorities, as major underlying causes of land and
forest degradation. The SCBFWM is administered by UNDP with grants from GEF. The
project is specifically designed to complement the five-year national pledge of approximately
USD 300 million to rehabilitate degraded forest and land distributed across 282 prioritized
watersheds located in 400 districts in 32 provinces, and Indonesia’s annually approved
Reforestation Fund at district level.
Community-Based Natural Resources Management (CBNRM)
The Community-Based Natural Resources Management (CBNRM) grant is one of the three
windows under the Green Prosperity (GP) Facility that will make available grant funding for
smaller scale projects that promote enhanced natural resource management to improve the
sustainability of GP Facility’s renewable energy and/or agricultural investments, as well as
support rural livelihoods and economic development. The CBNRM grant can be used to
finance the following types of project: integrated landscape, watershed and catchment
protection, community-based or collaborative natural resource management projects,
sustainable agriculture for smallholder farmers, and small-scale, community-based
renewable energy or heat generation.
CBNRM works in 10 provinces and 24 districts in Indonesia, but does not operate in either
Aceh or Central Kalimantan. In theory, the Watershed Fund structure of SCBFWMs &
CBNRM could be closely aligned with LESTARI’s Conservation Management and
Monitoring Plans (CMMPs).
2.1.9. Grant from the Central Government to Local Government (Hibah Daerah)
Eligibility Local government

Funding Mechanism Grants
Available

Note Fund allocation should be based on criteria; however, no
clear and robust criteria have been developed so far.
Current disbursement of funds only targets mitigation
actions, not yet targeting prevention and adaptation
actions.
Grants from the central government to local governments are intended to support local
development programs based on the priorities and policies of the government. These grants
can originate from grants received from domestic revenue (APBN or other sources) or
forwarded grants/loans from international donors (loans or grants). They could be in the form
of cash, or goods and services. Local governments may need to provide matching grants if
required, depending on the agreement or contract with the donors.
Grants from the Central Government to the Local Government are stipulated under
Government Regulation No. 2 of 2012. This regulation provides guideline criteria on how
grants should be operationalized and what types of activities can be supported, depending
on the origin of the money, i.e. whether it comes from foreign or local sources. However, the
criteria that local governments would need to meet to receive the grants are not yet defined.
The following figure details the mechanism for channeling grants to the sub-national
governments:
Figure 7: Distribution mechanism for local grants
Source: (Ministry of Finance 2013) Presentation of Director of Financing and Local Capacity
Grants received by sub-national governments are managed and implemented in the sub-
national government budget (APBD) mechanism according to respective laws. This means
that the grants and the matching grants (if required by the Agreement) must be budgeted
and included in the Budget Implementation Document of the Local Government Unit (SKPD).
For monitoring and evaluation as well as the audit, the regions that received grants must
submit a report on the progress of activity implementation on a quarterly basis to the
BAPPENAS and to related state ministers/head of technical agencies. Sanctions can be
imposed on local governments to prevent grants from being incorrectly used by ensuring that
they are no longer channeled to the regions in question.
The Government Disaster Mitigation budget is one example of a grant given by the central
government to the local government. Its terms are stipulated in Government Regulation (PP)
No. 22 Year 2008 on Financing and Management of Disaster Relief. At the time of writing,
the disaster mitigation budget can only be used to finance activities at the emergency and
post disaster stages, and is not yet able to finance pre-disaster activities.
The government considers forest fires as a national disaster and aims to shift more
resources towards prevention. The latest development shows that the National Disaster
Relief Agency (Badan Nasional Penanggulangan Bencana - BNPB) and the Sub-National
Disaster Relief Agency (Badan Penanggulangan Bencana Daerah - BPBD) are keen to work
with local communities at the village level on forest fires prevention activities. The BNPB and
BPBDs allocate special budget (for operations, logistics and equipment), and in cooperation
with the sub-national government and private sector, provide incentives in the form of
financial or non-financial rewards to fire-prone villages that are able to keep their forested
areas free of fires.
This initiative has been implemented in Riau and Jambi provinces in the island of Sumatera,
where the government provides a financial reward of IDR 100 million (~ USD 7500) to
villages that are free from forest fires (desa bebas api/desa peduli api). The Government of
Central Kalimantan has discussed its intention to set up a grand strategy and a road map for
community-based forest fire prevention management and has organized coordination
meetings at the provincial level for this purpose. They have also discussed the possibility of
replicating the desa peduli api program in Central Kalimantan. Furthermore, the BNPB also
intends to make use of the village fund for community-based forest fire prevention program
and it is currently coordinating with the Ministry of Villages, Underdeveloped Regions, and
Transmigration on this plan.
The Government Disaster Mitigation Budget is a potential fund for financing REDD+ and
PES activities. However, the eligibility criteria for local governments to receive this grant
need to be developed. Another challenge in utilizing this fund for the financing of pre-disaster
activities relates to government accounting issues, whereby the disaster mitigation budget is
currently placed under the accounts of the government contingency fund. This means that
this fund is not allocated to each ministry/agency but rather comes under the control of the
MoF, and can then be accessed by any ministry/agency in an emergency situation.
Contingency funding can only be used when it is deemed completely necessary, and
disaster prevention activities are currently still considered as not urgent in comparison to
activities at the emergency and post-disaster stages. To date, the bulk of contingency
funding is used by the police department to deal with terrorism issues.
2.1.10. National Park Fund (Dana Taman Nasional)
Eligibility National Park Agency

Funding Mechanism Government allocated budget (central government)
Size of Funding Available Variable, depending on the area and priority
Note National park is managed and funded by central
government
The main source of funding for national parks in Indonesia comes from the APBN. The
budget used for financing operational activities in national parks comes from the budget
allocated to each national park through the Budget Implementation List (DIPA), which
includes transactions for personnel expenditures, shopping goods, and capital expenditure.
National parks also receive support from international, multilateral, bilateral, private sector
and community funding, and through partnership with donors. The MoEF allocates
approximately IDR 10 – 20 billion for daily operational activities for each national park. The
funds vary depending on the size of the national parks and the types of activities carried out.
National Parks in Aceh
Current support from donors for national parks in LESTARI landscapes in Aceh include:
Climate change mitigation and species conservation in the Leuser ecosystem
This project aims to support the sustainable management of the Gunung Leuser ecosystem
in Sumatra, in particular in the Aceh Selatan, Subulussalam and Singkil districts. This project
is expected to balance the needs for biodiversity conservation with those of the population
for using the natural resources. KfW Development Bank is the implementing organization
and has provided financial support totaling EUR 8,499,414 (~ USD 9,487,895.85). The
project runs from August 2013 – April 2019.
Protection of Aceh Selatan Singkil Strategic Area
TFCA-Sumatera is a Debt for Nature Swap (DNS) Program between the US Government
and the Government of Indonesia with two swap partners, namely Conservation International
and KEHATI-The Indonesia Biodiversity Foundation. The program provides grants to local
NGOs and universities in Indonesia focusing on conservation in Sumatera and rehabilitation
of landscapes with a total funding commitment of USD 30 million over an eight-year period
(2009-2018).
National Parks in Central Kalimantan
Current support from donors for national parks in LESTARI landscapes in Central
Kalimantan include:
Sebangau Conservation Project

This project was initiated by WWF in Sebangau National Park. The following three activities
were conducted: restoration and rehabilitation (canal blocking and tree planting program),
community empowerment (ecotourism, agroforestry, fisheries, sustainable agriculture and
home industry), and collaborative management between Sebangau National Park and local
stakeholders (local government, NGOs, communities, researchers and the private sector).
Developing a Productivity Model of Local Responsibility in Ecosystem Restoration in

Kotawaringin East, Central Kalimantan
GEF provides small grants of USD 30,000 with co-financing of USD 44,260 for community
development of ecosystem restoration plans and REDD+ projects to optimize benefits for
communities and other local stakeholders in Kotawaringin Timur, Central Kalimantan. The
project aimed to increase communities’ bargaining position in relation to the management of
natural resources and allow them to contribute to the planning process of the Katingan
Project. The implementing partner was Yayasan Puter, and the project took place from July
2012 – July 2013.
2.2. Internationally operated financial support

mechanisms
This section discusses financial support originating from foreign donors that has been used
and/or potentially could be used to finance PES/REDD+ activities in Indonesia that are
operated by a foreign entity. This section covers both bilateral commitments and multilateral
cooperation for international development. Finally, this section also focuses on financing
support options relevant to LESTARI, though some options (like REDD+ Early Movers -
REM) are not yet applicable to Indonesia.
Internationally operated development finance available to PES/REDD+ activities in

Indonesia mainly has two targets: climate change mitigation (and/or adaptation) and
conservation. Several of the nationally operated funds discussed above are supported by
this development finance as well, but this section will focus on funds mainly under
international operation. A succinct overview of the climate-related development finance
landscape focusing on REDD+ follows and provides a useful introduction to the current
situation.
The relationship between funding channels (multilateral vs. bilateral) and financial
instruments (equity vs. grants vs. loans) are established in the OECD study “Development
Assistance Committee dataset: Climate-related development finance in 2013”.
Figure 8: Total bilateral and multilateral ODA committed to the forestry sector 201311
Source: (OECD 2013)
The amount of funding available as international climate finance (committed, not pledged)
has varied over the years, with considerable linkages and crossover with multi-purpose
funding. The year 2013 saw a significant drop in overall funding available for climate change
mitigation.
Figure 9: Total bilateral ODA to reduce GHG emissions in the forestry sector 12
Source: (OECD 2013)
Norway has dominated bilateral donor commitments since 2009, allocating more than double
the amount of that of Germany, the donor with the second largest commitments. The World
11For all developing countries with climate mitigation as a principal or significant objective, by channel and financial
instrument
12
Committed to all developing countries, by whether climate mitigation was a principal objective or a significant objective, 2002-
2013.
Bank dominates multilateral donor commitments with more than triple the amount of that of
the second largest donor, the Forest Investment Program.
Figure 10: Total commitments to REDD+ by donor type, 2009-2014

Source: (Chávez, Schaap and Breitfeller 2015)
Represented as a time series, it is notable that REDD+ Finance Commitments peaked in

2009 and, after a small recovery in 2012, marked their lowest fully recorded year yet in 2014.
The main difference here is in public sector finance commitments, with voluntary carbon
markets increasing their contribution to land-based climate change mitigation efforts in 2014.
Figure 11: REDD+ finance commitments by donor type, 2009-2014

Source: (Chávez, Schaap and Breitfeller 2015)
Land use activities supported by international development partners have focused on

capacity building and strengthening enabling environments by far. In addition, most
international development partner finance was delivered through contractors or international
groups as opposed to through the Indonesian government or local organizations.
2.2.1. Norway – Indonesia REDD+ partnership
Eligibility Appointed Ministry/Agency in a country (MoEF)
Funding Mechanism Grants in 1st and 2nd phase, result-based finance/carbon

credits in 3rd phase
Size of Funding USD 1 billion in three phases
Available
Funding Disbursement Under development
Note USD 200 million for Phase 1 and 2; USD 800 million for
Phase 3
Norway and Indonesia have entered into a partnership to support Indonesia’s efforts to
reduce GHG emissions from deforestation, forest degradation and peatlands. A Letter of
Intent (LoI) between the Government of Norway and the Government of Indonesia on
cooperation on REDD+ was signed on 26 May 2010. Norway will support these efforts by
providing funding for up to USD 1 billion in three phases. In the first phase, funds will be
devoted to finalizing Indonesia’s climate and forest strategy and putting in place enabling
policies and institutional reforms. Phase 2 aims to prepare Indonesia for non-market based
payments for performance in the form of verified emission reductions (VER), while at the
same time initiating larger scale mitigation actions through a province-wide pilot project. In
the third phase, contributions for the VER mechanism are expected to be implemented
nationally.
A series of project phases and expected outputs on each phase is illustrated in the following
figure.
Figure 12: Phases of Norwegian fund based on LoI

Source: HPI elaboration based on (BP REDD+ 2014)
This partnership follows the government to government scheme, in which funds can be
accessed when the national government approves funding support that is dedicated to
climate change and environment related programming, including REDD+ in the national
budget.13 Funding is allocated on the basis of deliverables, channeled through an agreed
financing mechanism. The partnership is performance-based, both in terms of actual
emission reductions and with regards to policy change and institutional reforms required.
This means that funding will depend on the program being executed according to these
agreed principles, and will be assessed annually by an independent third party review group.
The Government of Norway has contributed USD 30 million in Phase 1 to the achievement
of institutional development of REDD+, an extension of the moratorium, completion of the
National REDD+ Strategy and the Strategy and Action Plan for Provinces (Strategi dan
Rencana Aksi Provinsi - SRAP), development of a Monitoring, Reporting, and Verification
(MRV) system and review of licensing. An interim phase (Phase IIA) was designed to bridge
some of the important work that was not completed in the preparation phase and also to
prepare a solid foundation for the transformation and implementation phases. In this interim
phase, the Government of Norway is contributing USD 10 million.
The creation and operationalization of the National REDD+ Agency is an important

milestone for REDD+ implementation in Indonesia as it triggers the second phase of the
program. This agency, however, was dissolved in January 2015 and no funding has been
disbursed since. Out of a total of USD 200 million allocated for Phase I and Phase II, less
than half has been spent as of today. Phase IIA was halted due to the dissolution of the
National REDD+ Agency, and some activities under this phase, including the
operationalization of pilot projects, were also halted. As a result, Phase IIB, which was
initially planned to commence in March 2015, has not yet started and most likely will
experience further delays in its implementation.
One of the core aspects of the LoI is the development of a funding instrument to channel
support from the international community. The REDD+ Task Force and the National REDD+
Agency created this fund, which was known as Financing REDD+ in Indonesia (FREDDI).
FREDDI is supposed to operate under a mandate from the National REDD+ Agency, which
defined its strategy, scope, and scale of funding activities.14 By the time the National REDD+
Agency was dissolved in January 2015, FREDDI was not yet operational.
The Norwegian funds are currently managed on an interim basis by the REDD+ Unit under
the UNDP Environmental Division. UNDP’s management is projected to continue until June
2016 or until another institutional mechanism is set up by the government. The UNDP
REDD+ Unit currently manages USD 12 million and oversees the continuation of programs
in transitional phases which were previously implemented by the REDD+ Agency, namely:
 Prevention of forest and peat land fire in five fire prone provinces, namely West
Sumatera, Riau, Jambi, Central Kalimantan and Central Sulawesi
13Please see http://www.wri.org/sites/default/files/norwegian_fast_start_finance_contribution.pdf

14http://www.unorcid.org/upload/UNORCID_-_The_Funding_Instrument_for_REDD_in_Indonesia_-_AUG_2015.pdf
(page 5/39)
 Law enforcement and review of laws on licensing, and compliance auditing for fire
prevention
 Improvement of community welfare, land management, and sustainable forests
through social forestry
 Land-related conflict resolution
 Participative land mapping by local and customary communities and institutional
strengthening, stakeholder involvement and awareness raising on social economic
issues, as well as environmental issues related to Phase 2 preparation
At the time of writing, UNDP REDD+ had carried out activities in community-based fire
management (CBFM), and, specifically in Central Kalimantan, assisted the MoEF in
supporting a community group artesian well program in Jumpun Pambelun. Canal blocking
is another priority program in Central Kalimantan that is expected to be implemented in the
near future.
The Government of Indonesia will establish a new institutional arrangement for managing
the Norwegian Fund and will eventually take over its administration from the UNDP REDD+
Unit. However, milestones and timelines for this transition have yet to be set and candidate
institutions/agencies also need to be determined. Current developments indicate that the
MoF will most likely take over the management of the Norway funds. The MoF is planning to
establish a new BLU called BLU Climate Change (BLU Perubahan Iklim) to be the next fund
administrator. This BLU will serve as the administrator of all funds related to climate finance.
The ICCTF that is currently managed by BAPPENAS and funds managed by the Center of
Forest Development Financing (Pusat Pembiayaan Pembangunan Hutan – Pusat P2H) at
the MoEF are envisioned to be merged into the administration of this new BLU. Additionally,
FREDDI, which was not yet operational when the REDD+ Agency was dissolved, is also
expected to come under the management of the BLU. The government is currently
formulating a draft regulation that will serve as the legal basis for the establishment of this
new mechanism. This plan, however, has a high level of uncertainty in terms of the timeline
involved and the institutional arrangements, resulting from the structure of Indonesian
government organizations and the overlapping roles and functions of government institutions
(MoEF, MoF, and BAPPENAS) in climate finance.
2.2.2. Forest Investment Program (FIP)
Eligibility Appointed Ministry/Agency in a country (MoEF)

Funding Mechanism Grants & Loans
Size of Funding  FIP I: USD 17.5 million (grant); expected co-financing
Available USD 6 million
 FIP II: USD 17.5 million (grant); expected co-financing
USD 8 million
 FIP III: USD 2.5 million (grant) & USD 32.5 million (loan)
expected co-financing USD 6 million
Funding Disbursement Through Multinational Development Banks (MDBs) and
their respective disbursement regulations (see Table 5)
The FIP is a program under the Strategic Climate Fund that provides funding to support
developing countries in reducing deforestation and forest degradation and to promote
sustainable forest management that leads to emission reductions and enhancement of forest
carbon stocks. The World Bank is the trustee of the Strategic Climate Fund and provides
secretariat services through the Climate Investment Funds (CIF) Administrative Unit.
The eligibility criteria of the FIP are:

a. Countries that meet eligibility criteria of Official Development Assistance (ODA)
b. An active Multilateral Development Banks (MDBs) country program15
In November 2012 Indonesia was selected by the FIP sub-committee as one of eight pilot
countries. FIP in Indonesia will be administered by the ADB, IBRD, and the IFC, and will be
executed by the MoEF.
FIP activities in Indonesia are focused on three inter-related themes.
Table 5: FIP activities in Indonesia

Managing
Program Project title Focus of activities
Institutions
FIP I Community-focused Institutional development ADB

investments to address forest enterprises and
deforestation and forest CBFM
degradation
community capacity
FIP II Promoting Sustainable Institutional development IBRD
Community Based Natural community capacity
Resource Management and
Institutional Development
FIP III Strengthening Forestry Forest enterprises and IFC
Enterprises to Mitigate Carbon CBFM
Emissions
Source: (Climate Investment Fund 2012) and second public consultation FIP II, 2014
An additional amount of up to USD 6.5 million is available under the Dedicated Grant
Mechanism (DGM) 16 for customary law communities (Masyarakat Hukum Adat). The
additional resources may be used to: (i) build institutional capacity, forest governance and
information; (ii) mitigate GHG emissions from the forest sector, including through supporting
forest ecosystem services; and (iii) support measures outside the forest sector to reduce the
pressure on forests, such as through the creation of alternative livelihood and poverty
reduction opportunities.
15 ‘Active’ program means where MDB has a lending program and/or policy dialogue with the country.
16 Indonesia Forest Investment Program TOR for the Second Joint Mission (12-16 December 2011)
Table 6: FIP funds allocation
FIP amount (USD Expected co-
Program MDB million) financing (USD Sector
Grant Loan Total million)
FIP I ADB 17.5 17.5 6.0 Public

FIP II IBRD 17.5 17.5 8.0 (DANIDA) Public
FIP III IFC 2.5 32.5 35.0 99.0 Private
Source: (Climate Investment Fund 2012) and Second public consultation FIP II, 2014
All provinces in LESTARI landscapes are selected for potential FIP interventions.
FIP I: Community-focused investments to address deforestation and forest

degradation
FIP I aims to reduce GHG emissions from forests in Sintang and Kapuas Hulu district in
West Kalimantan province. The province is one of the top five provinces contributing to GHG
emissions from deforestation, with a mean deforestation rate of 132,500 ha per year.
Specific activities include REDD+ activities to be implemented in 17 villages and 5 FMUs;
activities to strengthen local, provincial and national governmental forest institutions; and the
harmonization of REDD+ related policies at different institutional levels.
Table 7: FIP I activities and collaborating institutions

Collaborating institutions Primary role
MDBs ADB Managing implementation and
partner FIP grant financing
Co-financing Confirmed: ADB, GEF/SFM, Technical and in-kind co-
Government of Japan. Under financing
discussion: Government of Germany
(KfW/GIZ), Government of the USA
(USAID, Dept. of State, Millennium
Challenge Corporation), others to be
confirmed.
Government Ministry of Environment and Forestry Executing Agency

Coordinating Ministry for Economic Coordination
Affairs;
Ministry of Finance
West Kalimantan Provincial Provincial-level implementation
Government
Sintang and Kapuas Hulu district District-level implementation

Direct Local community institutions, Partners in activities and
Stakeholders including customary institutions beneficiaries of incentive
schemes
Forest Management Unit (KPH) Implementing unit at pilot site
Institutions
Local Government Technical Partners in activities and
Implementation Units (UPT) training
participants
Private Sector Inputs to activities and
participants of incentive
schemes
Source: (Climate Investment Fund 2012)
FIP II: Promoting sustainable community-based natural resource management and

institutional development
FIP II aims to complete the MoEF’s plans to address the problems of governance and
management of forest resources. The ultimate objective is to reduce greenhouse gas
emissions and enhance carbon stocks while generating livelihood co-benefits.
Table 8: FIP II activities and collaborating institutions

MDBs IBRD Managing implementation and FIP grant
partner financing
Co-financing IAFCP Co-financing for spatial planning and

community activities
FCPF Co-financing for policy dialogue, baseline data
collection
Danida
Government Ministry of Policy reform on REDD+, steering and
Environment and internalization of FIP into KPH units
Forestry
National Land Agency Policy on village level spatial planning
Ministry of Home Guidance on and facilitation of KPH institution,
Affairs engagement of province and district
governments, and village economic
empowerment
Bappenas Policy and steering
Ministry of Agriculture Collaboration on village level spatial planning
and improvement of local economy
BAPPEDA Collaboration on spatial planning

Provincial governments Partners and beneficiaries of capacity building
activities
Direct Local community Beneficiaries of community level planning and
Stakeholders economic activities within KPHs and in buffer
zones
Village and other local Partners in activities, including KPH-based
community institutions, activities, and beneficiaries of incentive
including customary schemes
institutions
Selected KPH Site level project management, partners and
Institutions beneficiaries of capacity building activities
FIP III: Strengthening of Forest Enterprises to Mitigate Carbon Emissions,

administered by the International Finance Corporation (IFC)
FIP III aims to strengthen the productive capacity and business skills of forestry enterprises
and firms in other related sectors, by leveraging private sector investment. IFC will work with
its partners to promote sustainable forest management, leading to emission reductions and
protection of forest carbon stocks. The MoEF will serve as the lead government agency with
IFC serving as the lead MDB for investment and technical assistance initiatives oriented
towards private sector enterprises in the forestry sector, in addition to other associated
sectors that affect forests. Other partner agencies and stakeholders are presented in the
table below.
Table 9: FIP III activities and collaborating institutions

MDB and IFC Managing implementation and FIP
co-financier concession and grant financing and
providing technical assistance
Commercial banks, credit Co-financing
unions and financial institutions
Bilateral donors Technical assistance grant
Government MoEF Steering committee
agencies
Coordinating Ministry of National level coordination
Economic Affair, MoF, Ministry
of Crafts, SMEs
Private forest ownership, KPH Provincial and district level execution
Forest enterprises Investor, concession holder,
processor, manufacturer, buyer
Direct Contractors Operations, technical and business
stakeholders service
Cooperatives Member based woodlot and

marketing operations
Groups of smallholders Smallholder woodlot operators,
participant
NGOs Strengthening capacity of small

business
2.2.3. Forest Carbon Partnership Facility (FCPF)
Eligibility An eligible REDD+ country (through Ministry or other

Government Agency)
Funding Mechanism Grants (Readiness Fund & Carbon Fund)
Size of Funding Total fund capital of USD 850 million, as of March 2015
Available Readiness Fund: 3.85 million (TBC)
(global, not just Carbon Fund: USD 465 million (total)
Indonesia)
Funding Disbursement Grants
The FCPF has two separate but complementary funding mechanisms — the Readiness
Fund and the Carbon Fund. Both funds are underpinned by a multi-donor fund of
governments and non-governmental entities, including private companies that make a
minimum financial contribution of USD 5 million.
The FCPF has created a framework and processes for REDD+ readiness17, which helps
countries prepare themselves for future systems of financial incentives for REDD+ by
developing the necessary policies and systems. The Carbon Fund will provide payments for
VER from REDD+ programs in countries that have made considerable progress towards
REDD+ readiness.
The World Bank is the trustee of both the Readiness Fund and the Carbon Fund and
provides secretariat services through a Facility Management Team (FMT).18 The FMT
administers the funds and makes proposals to the FCPF Participants Committee (PC)19, and
provides country advisory services and REDD+ methodology support. It ensures that FCPF
operations comply with applicable policies in the areas of safeguards, procurement and
financial management.
Currently, the Forestry Research and Development Agency (FORDA) at the MoEF is the
managing agency for the FCPF. The contact person for the FCPF is Prof. San Afri Awang of
17Please see https://www.forestcarbonpartnership.org/design-process

18A group of World Bank staff which coordinates and oversees the work of the FCPF. It is housed within the bank’s Carbon
Finance Unit, which is in the Environment Department. The FMT team includes staff with regional, legal and carbon finance
experience. They are also the point of contact for civil society.
19
The governing body of the FCPF charged with making decisions on all aspects of importance to the readiness process-
including approving the templates for R-Plans, the criteria and standards for their assessment, and their approval. The PC also
approves the annual operating budget of the FMT.
FORDA at awangzaza02@gmail.com. FORDA is located at Jalan Gunung Batu No. 5,
Bogor, West Java – Indonesia, 16118; phone: +62-251-8633944.
Readiness Fund
The Readiness Fund aims to support developing countries in preparing themselves for
participation in a future, large-scale system of positive incentives for REDD+. This includes:
adopting national REDD+ strategies; developing reference emission levels (RELs);
designing MRV systems; and making REDD+ national management arrangements, including
proper environmental and social safeguards. To date, USD 385 million has been made
available to fund readiness activities. A country will receive a maximum of USD 3.8 million
for the readiness process.
To access this fund, a country needs to submit a Readiness Plan Idea Note (PIN) to the
FCPF. The next step is for the selected countries to prepare their Readiness Plan, which
acts as a framework for a country to set a clear plan, budget and schedule for undertaking
REDD+ activities. Then, the partnership’s governing body20 reviews and assesses
Readiness Plans, and on that basis decides on the allocation of FCPF grants to countries.
Figure 13: Milestones of REDD+ readiness

Source: (Forest Carbon Partnership Facility (FCPF) 2015)
20The governing body is a Participants Committee, which meets three times a year and makes the main decisions for the
FCPF. The Participants Committee serves for a term of one year, and consists of 10 members selected by REDD+ Country
Participants and 10 members selected jointly by the Donor Participants and Carbon Fund Participants at the time of an
annual Participants Assembly meeting.
The World Bank, the Inter-American Development Bank, the UNDP, and the UN Food and
Agriculture Organization (FAO) are delivery partners under the Readiness Fund and are
responsible for providing REDD+ readiness support services to specific countries.
Indonesia has been granted USD 3.4 million from the FCPF Readiness Preparation Grant
and it is currently proposing an additional USD 5 million.21 Under the first Readiness Fund,
Indonesia selected pilot provinces for REDD+ implementation and the framework for
readiness structures and implementation at the provincial and district levels that are in need
of strengthening for successful REDD+ implementation. Accordingly, the key area of focus in
the request for additional funding is for strengthening the institutional, legal, and regulatory
capacities and creating robust benefit sharing frameworks that are workable at the sub-
national level and consistent with the national approach. Indonesia’s intention to submit a
request for additional finance to the FCPF has been endorsed by the 3rd National FCPF
Steering Committee, held on 12 February 2014.
Carbon Fund
Countries that have made significant progress in their REDD+ readiness efforts may be
selected to participate in the Carbon Fund, through which the FCPF will pilot incentive
performance-based payments for REDD+ policies and measures against an established
reference emission level, for which the fund has set up its own methodological framework.22
The fund, totaling USD 465 million, is available for this purpose. To date, there are 11 ER-
PINs in the FCPF pipeline, of which Indonesia is one of the countries on the list. 23
The following figure illustrates processes involved in accessing the fund.
Figure 14: Carbon Fund processing steps: From ER-PIN to ERPA Implementation
Source: (Forest Carbon Partnership Facility (FCPF) 2015)
21https://forestcarbonpartnership.org/sites/fcp/files/2014/May/Mid%20Term%20progress%20Report%20Indonesia%20May
%202014.pdf
22 Please see https://www.forestcarbonpartnership.org/carbon-fund-methodological-framework
23 Please see https://www.forestcarbonpartnership.org/er-pins-fcpf-pipeline
Programs submitted to the Carbon Fund will have to meet the following criteria:
 Focus on results, namely high-quality and sustainable emission reductions, including

social and environmental benefits;
 Sufficient scale of implementation, e.g., at the level of an administrative jurisdiction
within a country or at the national level;
 Consistency with emerging compliance standards under the UNFCCC and other
regimes;
 Diversity, so as to generate learning value for the FCPF and other participants;
 Clear mechanisms so that the incentives for REDD+ reach those who need them;
and
 Transparent stakeholder consultations.
The Carbon Fund will remunerate the selected countries in accordance with negotiated
contracts for verifiably reducing emissions above those in the reference scenario. The
Carbon Fund’s payments are intended to provide an incentive to the recipient countries and
the various stakeholders - including forest-dependent indigenous peoples, other forest
dwellers or the private sector - to achieve long-term sustainability in financing forest
conservation and management programs. This would help reduce the negative impact on
the global climate from the loss and impoverishment of forests.
Indonesia submitted its ER-PIN to the FCPF on 5 September 2014 with the ER Program
Name “Indonesia District Level REDD+ ER Program”.24 The ER PIN was developed by the
Ministry of Forestry25 and the REDD+ Agency26, with support from various stakeholders in
central and local government agencies, as well as national and local NGOs. There are seven
locations of ER programs in Indonesia: Kutai Barat and Berau (East Kalimantan); Kapuas27
(Central Kalimantan); Donggala and Tolitoli (Central Sulawesi); and Merangin and Bungo
(Jambi).28
The FCPF program in Indonesia aims to accelerate transformative reforms in forest and land
governance through the scaling-up of the development of FMUs, improvements in land and
spatial planning, site-specific community-based activities, and management of forest
concessions and estate crops. These emission reduction programs under the FCPF Carbon
Fund are part of Indonesia’s national REDD+ initiative and as such will include activities
closely matched to the national REDD+ strategy and activities at the provincial level. By
focusing on sub-national implementation initially, the program will generate important
lessons that can be applied to other forest-rich parts of the country in a phase approach and
inform the broader national REDD+ strategy.
24 Please see https://www.forestcarbonpartnership.org/sites/fcp/files/2014/september/Indonesia%20ER-

PIN%20September_12_resubmitted_edit_final.pdf
25 Currently merged with Ministry of Environment.
26 The REDD+ Agency was dissolved in January 2015.
27 The preliminary list of key local partners in Kapuas district are Kalimantan Forest Carbon Partnership (KFCP), Kapuas
Customary Dayak Council, Tahanjungan Tarung Foundation, Petak Danum Foundation, Inter Village Communication
Forum
28 Please see
http://www.forestcarbonpartnership.org/sites/fcp/files/2014/october/CF11%202c.%20Indonesian_Presentation_CF11_20141
005.pdf
Milestones of Indonesia’s activity under the FCPF are summarized in the following figure.
Figure 15: Milestones of Indonesia’s activity under FCPF

Source: (FCPF 2014)
Currently, FCPF only works with readiness grants at the national level. If ERPA
implementation for performance-based payments was initiated, LESTARI emission reduction
monitoring should be harmonized with the national reporting and benefit distribution
mechanisms discussed.
2.2.4. REDD Early Movers (REM)
Eligibility Ministry/institution in a country (MoEF)

Size of Funding -
Available
Funding Disbursement -
Note  Not available for Indonesia
 REM has a funding volume of EUR 32.5 million, and
REM has already agreed to spend around EUR 19
million buying 8 million tons of CO2 from REDD+
activities in the state of Acre over a four-year period
REDD Early Movers (REM) currently only operates in Colombia, Ecuador and Brazil and
does not currently accept applications from other countries. REM contributes to the
application of this approach in selected countries. REM supports REDD pioneers, also called
Early Movers, who are already taking the initiative themselves in forest conservation for
climate change mitigation. The program rewards the climate change mitigation performance
of “Early Movers” and promotes sustainable development for the benefit of small-scale
farmers as well as forest-dependent and indigenous communities through fair benefit
sharing. KfW Development Bank makes payments for independently verified REDD
emission reductions achieved by Early Movers. The REM partner countries make their own
contribution in order to keep the complexity of risk management low.
REM has a funding volume of EUR 32.5 million, and has already agreed to spend around
EUR 19 million buying 8 million tons of CO2 from REDD+ activities in the state of Acre over a
four-year period. Contact: Daniel Haas BMZ Bonn/Division 311 dahlmannstrabe4, 53113
Bonn; daniel.has@mbz.bund.de
2.2.5. Green Climate Fund (GCF)
Eligibility Accredited Entities: accredited national, sub-national,

regional, and international implementing entities and
intermediaries (including NGOs, government ministries,
national development banks, and other domestic or
regional organizations that can meet the fund’s standards);
and the private sector
Funding Mechanism Grants, loans, guarantees, equity
Size of Funding  Micro project: USD < 10 million; Small project: USD 10
Available – 50 million; Medium project: USD 50 – 250 million;
Large project: > 250 million
 Total funding pledges of > USD 10 billion to the GCF
Funding Disbursement Grants, Loans, Equity, Results-based payments
Additional info  Indonesia is still developing a framework for the
National Designated Authority (NDA) establishment
and the issues of accredited entity
 Two Indonesian institutions pursuing AEs: Sarana Multi
Infrastruktur Ltd. (PT. SMI) and KEHATI foundation
The GCF is a multilateral climate fund within the framework of the UNFCCC for investing in
climate change mitigation and adaptation in developing countries, primarily based on
contributions from industrialized countries. The purpose of the fund is to promote the
paradigm shift towards low-emission and climate-resilient development pathways. In
allocating its resources, the fund aims for a 50:50 balance between mitigation and
adaptation over time. The fund also aims to allocate a minimum of 50% of the adaptation
allocation to particularly vulnerable countries, including least developed countries (LDCs),
small island developing states (SIDS) and African states.
One element of the GCF that supports developing countries is the Readiness Program.29
The Secretariat works closely with various international organizations such as the United
Nations Environment Program (UNEP), World Resource Institute (WRI), the UNDP climate
29 The Readiness Program prepares developing countries to effectively and efficiently plan for, access, manage, deploy and
monitor climate financing. One of the key activities is to help develop pipelines of national projects in line with countries’
climate change strategies, plans and policies while involving the private sector. The lessons learned will be shared with the
GCF Board and Secretariat and with other initiatives dedicated to enhancing climate finance readiness.
finance readiness program, the GIZ and KfW climate finance ready initiatives, and the Asian
Development Bank (ADB) readiness programs to ensure complementarity.
The GCF will finance projects in the public and private sectors that contribute towards
achieving at least one of the eight strategic impacts of the fund30, where projects will be
evaluated against the fund’s investment criteria: impact potential, paradigm shift potential,
sustainable development, responsive to recipients’ needs, promotion of country ownership,
and efficiency & effectiveness. The fund has identified five investment priorities that will
deliver major mitigation and adaptation benefits, one of them related to forestry, that is
aimed at scaling up finance for forests and climate change.
Access to GCF resources to undertake climate change projects and programs is possible
only through Accredited Entities (AEs). AEs can submit funding proposals to the fund at any
time. The GCF board will only consider funding proposals that are submitted with a formal
letter of no objection. An AE may submit a concept note for feedback and recommendations
from the GCF, in consultation with the NDA or Focal Point. Considering the recommendation
of the Technical Advisory Panel, the GCF board decides whether the concept is endorsed,
not endorsed with a possibility of resubmission, or rejected.
The flow of the GCF approval process is illustrated in the following figure.31
Figure 16: Flow chart for GCF initial proposal approval process
Source: (Green Climate Fund 2015)
30 Classified in two broad categories: (1) Mitigation strategic impacts – reduced emissions from: (i) transport, (ii) energy
generation and access, (iii) forest and land use, and (iv) buildings, cities, industries, and appliances; and (2) Adaptation
strategic impacts – increased resilience of: (i) health, food and water security, (ii) livelihoods of people and communities,
(iii) infrastructure and built environment, and (iv) ecosystem and ecosystem services.
31 More detailed information on the GCF proposal approval process can be found by following this link:
http://www.gcfund.org/fileadmin/00_customer/documents/Operations/4.2_Project_Approval_Process.pdf; the criteria for

program and project funding can be downloaded at this link:
http://gcfund.net/fileadmin/00_customer/documents/MOB201406-
7th/GCF_B07_03_Initial_Proposal_Approval_Process_fin_20140508.pdf
The GCF has approved its first eight projects including two from SIDS (Fiji and the Maldives)
and three from LDCs (Bangladesh, Malawi and Senegal) (Climate Analytics 2015).
Indonesia Focal Point/NDA Contact Info:
Indonesia has financially contributed USD 250,000 to the GCF and has recently undergone
a national political transition, leading to changes in national institutional arrangements
including the closure of climate finance institutions such as The National Council on Climate
Change (DNPI), which previously played the role of the GCF focal point in Indonesia.32 The
new NDA to the GCF for Indonesia is:
Dr. Suahasil Nazara Contact Person:

Chairman of Fiscal Policy Agency Mr. Syurkani Ishak Kasim (Director)
Email: suahasilnazara@fiskal.depkeu.go.id R.M. Notohamiprodjo Building 5th Floor
Jl. Dr. Wahidin No. 1 Jakarta
Secretariat: 10710 Indonesia
Center for Climate Change and Multilateral
Policy (PKPPIM) Phone: +62 21 3483 1678
Fiscal Policy Agency Fax: +62 21 34831677
Ministry of Finance of Indonesia Email: syurkani@fiskal.depkeu.go.id
There are currently 20 GCF AEs in the world. In additional to national entities, there are
regional and international entities that can access and implement projects globally, such as
Conservation International (CI), Deutsche Bank, UNEP, UNDP, ADB, and the World Bank.
Indonesia is still in the process of developing a framework for the establishment of the NDA
and is also working on the accreditation of new AEs. As of today, there are two Indonesian
institutions pursuing GCF accreditation, namely PT. SMI and KEHATI foundation.33 GCF
accreditation is a long and intricate process that makes it difficult to predict. Additionally, AEs
can only access the fund for certain types of fiduciary functions, size of project/activity, and
environmental and social risk category.
GCF Private Sector Facility (PSF)
Eligibility All developing country Parties to the UNFCCC through

Accredited Entities (AEs): commercial banks regulated by
central banks, private equity houses, investment firms and
funds, impact funds, regulated financial intermediaries,
development banks
Funding Mechanism Senior debt, subordinated debt, equity, guarantees, and
grants  
Size of Funding Under definition
Available
32DNPI used to be the authority administering the GCF, and has been merged into the MoEF.
33Criteria of accredited institutions can be found in this link:
http://www.gcfund.org/fileadmin/00_customer/documents/Accreditation/GCF_Accreditation_Application_form_v1_with_ex
amples_of_supporting_documents.pdf
Funding Disbursement Under definition
Note Program area: agriculture & forestry, water, clean energy,
transportation & logistics, construction/building,
manufacturing
The GCF Private Sector Facility (PSF) focuses on climate-sensitive private sector
investments in developing countries. The PSF is created to address the particular
investment requirements of the private sector and to promote public-private partnerships.
The PSF invests alongside qualified commercial banks, private equity firms, funds,
development banks and other financial intermediaries for climate change projects and
programs. It also provides financing to financial intermediaries for climate change projects
and programs. The PSF can be used to finance activities implemented by large, medium,
small, and micro enterprises. Non-accredited private sector entities can potentially access
GCF funds through accredited local financial intermediaries. The GCF approved its first eight
projects in November 2015, with discussions regarding several criteria still continuing.34
2.2.6. Global Environment Facility (GEF) managed funds
Eligibility Government agencies, civil society organizations, private

sector companies, research institutions
Funding Mechanism Grants (can be transferred to or blended with loans,
guarantees, equity)
Size of Funding Various types of projects (modalities):
Available  Full-sized Projects (FSPs) – over USD 2 million,
 Medium-sized Projects (MSPs) – up to USD 2 million,
 Enabling Activities (EAs) - up to USD 1 million,
 Small Grants Program (SGPs) – up to USD 50,000,
 Programmatic Approach – amount not defined.
Funding Through Implementing Entities like UNDP, UNEP and the
Disbursement World Bank
Additional Info  Focus of GEF Trust Fund biodiversity, climate change,
land degradation, sustainable forest management,
international waters, and chemicals.
 Focus of the Special Climate Change Fund (SCCF) and
Least Developed Countries Fund (LDCF): climate change
adaptation
The GEF has provided USD 14.5 billion in grants and mobilized USD 75.4 billion in
additional financing for almost 4,000 projects since its establishment in 1992.35 The GEF has
become an international partnership of 183 countries, international institutions, CSOs, and
34 Please see http://www.greenclimate.fund/-/green-climate-fund-approves-first-8-investmen-1

35 Please see https://www.thegef.org/gef/whatisgef
the private sector, which addresses global environmental issues and currently has 18
implementing partners, including the ADB, UNDP, World Bank Group, and UNEP.
GEF support is provided to government agencies, civil society organizations, private sector
companies and research institutions to implement projects and programs in recipient
countries. GEF’s work covers biodiversity, climate change, land degradation, sustainable
forest management, international waters and chemicals.
GEF provides funding to various types of projects ranging from several thousand to several
million dollars from the GEF Trust Fund, Special Climate Change Fund (SCCF) and Least
Developed Countries Fund (LDCF) in the form of five different types of grants as listed in the
table above. The GEF also hosts the Adaptation Fund Secretariat. Each country gets a
budget allocation under each four-year replenishment cycle. Indonesia’s allocation for the
2014-2018 replenishment period is USD 84 million, of which USD 22 million is for climate
change mitigation and USD 58 million is for biodiversity.36
There are multiple possibilities for accessing GEF funding. The following are the key steps
that should be taken to submit a project proposal:
i. Contact the Operational Focal Point (OFP) in the country. 37 The OFP is
responsible for the review and endorsement of projects to ensure consistency with
national priorities. Thus, the initial idea should first be discussed with him/her. The
OFP is also responsible for facilitating and coordinating all the GEF-related activities
within the country. He/she often organizes and coordinates National Portfolio
Formulation Exercises38, national consultations and other processes for the
programming of the portfolio of GEF projects. The different project ideas for GEF
financing are discussed, prioritized and consolidated through these multi-stakeholder
processes. The OFPs for Indonesia are:
Mr. Daniel Simanjuntak  Ms. Laksmi Dhewanti

Political Focal Point since 2015-01-16  OFP since 2015-08-20 
Counselor  Ministry of Environment and Forestry
Embassy of Indonesia  Manggala Wanabakti Building
Jl. Gatot Subroto, Senayan
2020 Massachusetts Avenue, N.W. 
Jakarta 10270, Indonesia
Washington, DC 20036  
Tel: +62 21 5720210 
Tel: +1 202 775 5200 
Fax: +62 21 5720210 
Email:
daniel.simanjuntak@embassyofindonesia.org Email: ldhewanthi@gmail.com
In addition, the OFP can guide the project proponent in avoiding duplication of
activities, in case a similar project has already been funded. To access the list of all
GEF-funded projects in Indonesia, including an overview of the country’s allocation
and utilization, visit https://www.thegef.org/gef/country_profile
36 Please see https://www.thegef.org/gef/STAR/GEF6_country_allocations

37 Please see https://www.thegef.org/gef/focal_points_list
38 Please see https://www.thegef.org/gef/npfe
ii. Meet the eligibility criteria. For a project or program to be considered for GEF-
funding, it must fulfill the following eligibility criteria:
a. It has to be undertaken in an eligible country.39
b. It has to be country-driven and consistent with national priorities. All GEF
projects should be based on national priorities designed to support sustainable
development.
c. It has to address one or more of the GEF focal area strategies.40
d. It has to seek GEF financing only for the agreed-upon incremental costs on
measures to achieve global environmental benefits.
e. It has to be endorsed by the OFP of the country. For regional projects and
programs, the endorsement of the OFPs of all participating countries is required.
For global projects, an endorsement letter is not required.
f. It must involve the public in project design and implementation, following
the Policy on Public Involvement41 in GEF-Financed Projects and the respective
guidelines.
iii. Choose a GEF Agency.42 The GEF Agency (e.g. UNDP, UNEP or World Bank) is
responsible for the development and implementation of projects and programs. This
means that the GEF Agency will be the proponent’s partner at all stages of the
project. The choice of the agency should be based on its respective comparative
advantages as stated in the document Comparative Advantages of the GEF
Agencies Corrigendum.43
iv. Select a type of modality. The GEF provides funding through four modalities: full-
sized projects, medium-sized projects, enabling activities and programs. The project
proponent should select the one that best fits the idea to be developed into a
proposal. Depending on the type of modality selected, different templates have to be
completed describing the project proposal for its review and approval.
v. Civil Society Organizations have the opportunity to apply for GEF grants through
the Small Grants Program. 44
Additional details in the review and approval of these projects can be found under the
policies and guidelines of the Project Cycle45 and the Templates and Guidelines46 on the
GEF website.
39 Please see https://www.thegef.org/gef/country_eligibility . In other words, countries are eligible for GEF funding in a
focal area if: (i) they meet eligibility criteria established by the relevant COP of that convention, (ii) they are members of the
conventions and are countries eligible to borrow from the World Bank (IBRD and/or IDA), (iii) they are eligible recipients
of UNDP technical assistance through country programming.
40 Please see https://www.thegef.org/gef/GEF6-Programming-Directions
41 Please see https://www.thegef.org/gef/policies_guidelines/public_involvement
42 Please see https://www.thegef.org/gef/gef_agencies
43 Please see https://www.thegef.org/gef/node/428
44 Please see https://www.thegef.org/gef/sgp
45 Please see https://www.thegef.org/gef/project_cycle
46 Please see https://www.thegef.org/gef/guidelines_templates
2.2.7. BioCarbon Fund Initiative for Sustainable Forest Landscapes (ISFL)
Eligibility Country
Funding Mechanism Grants and results based payments for achieved emission
reductions
Size of Funding USD 170-180 million
Available
Funding -
Disbursement
The BioCarbon Fund Initiative for Sustainable Forest Landscapes (ISFL)47 is a multi-lateral
fund administered by the World Bank that seeks to promote reduced GHG emissions from
the land use sector, reduced deforestation and forest degradation in developing countries
(REDD+) and to promote sustainable agriculture, as well as smarter land-use planning,
policies and practices. The initiative will deploy results-based finance to incentivize changes
at the landscape level.
Within the World Bank there is complementarity between the climate and forest initiatives
such as the FCPF, the FIP, and the BioCF. ISFL will provide countries with
the following types of financing:
 Grant funding and technical assistance through the BioCFplus.

 Results based payments for achieved emission reductions through the BioCF’s 3rd
tranche.
The fund’s capital is USD 380 million from the contributing participants of Germany, Norway,
the UK, and the US, and has been operational since 2013.
The BioCF ISFL operates at the jurisdictional level. Thus, on the ground interventions would
be at a significant scale and policy interventions would impact the whole jurisdiction or even
whole nation. The preliminary average size of each ISFL jurisdictional program is USD 70-80
M. In Zambia and Ethiopia, the jurisdictional program is agreed and funding has been
initiated; Colombia and Indonesia are targeted jurisdictions.
At the COP21 in December 2015 in Paris, the UK and Germany pledged an additional
USD 100 M to the ISFL to support expansion into Indonesia48.
HPI views it as worthwhile to inquire with the ISFL when activities in Indonesia would start
and if LESTARI could be a pilot landscape program.
47 http://www.biocearbonfund-isfl.org/
48 http://www.ecosystemmarketplace.com/articles/norway-germany-uk-pledge-5-billion-to-combat-tropical-deforestation/
2.2.8. Bilateral commitments financing support
Eligibility A country (through an appointed government

ministry/agency)
Funding Mechanism Grants/loans
Available
Funding Disbursement Variable
This section analyzes funding support originating from bilateral cooperation. Funding from
the Government of Norway is not presented in this section as it is already discussed in sub-
section 2.2.1. (NORAD-UNDP).
2.2.8.1. Denmark - DANIDA

The Danish government, through its development corporation DANIDA, provides an
Environmental Support Program (ESP3) to the Government of Indonesia for developing
inclusive and sustainable growth through improved environmental management and climate
change mitigation and adaptation. Currently, ESP3 is in its third phase and places emphasis
on strengthening coordination between the national and regional government. Central Java
Province has been chosen as a pilot province, and the results are expected to be applied in
other provinces. The ESP3 is coordinated by BAPPENAS and is implemented jointly by the
MoEF, and the Ministry of Energy and Mineral Resources. The program also includes
support to four individual forest and climate projects implemented by Burung Indonesia, the
World Agroforestry Center and the World Bank.
ESP3 runs from 2013-18 with a total budget of DKK 270 M (USD 50 million or IDR 600
billion) as a grant. Through close cooperation with key central government agencies who
have the potential to change "business as usual", ESP3 seeks to facilitate gradual
transformation towards a green economy. One component of the ESP3 program consists of
a number of initiatives mostly run by NGOs. Partly funded through the Danish Fast Start
Climate Fund for 2012, this component supports Indonesia's climate commitments, and
seeks to improve livelihoods for forest dependent communities through sustainable natural
resource management and forest protection. This effort is administered by NGOs and
implemented either in direct cooperation with or under the coordination of BAPPENAS.
Indonesian projects supported by the Danish government are: Harapan Rainforest

implemented by Burung Indonesia; Locally Appropriate Mitigation Actions implemented by
World Agroforestry Center (ICRAF); the REDD+ Support Facility implemented by the World
Bank; Large Scale Forest Stewardship Council (FSC) certification in Indonesia implemented
by the Borneo Initiative; and support to the Indonesia Forest Investment
Program implemented by the World Bank.
2.2.8.2. United Kingdom Climate Change Unit (UKCCU) - the Department for
International Development (DFID)
The UK has committed to working with Indonesia to help it move to a low carbon based
economy and to meet its national emissions targets. The UK through the United Kingdom
Climate Change Unit (UKCCU) supports three thematic areas, namely forestry and land-use,
energy and international climate negotiations. With regards to the forestry and land-use
sector, the UKCCU has been providing the following support:
 preventing illegal logging and helping Indonesia implement the Voluntary

Partnership Agreement with the EU on timber exports,
 developing and implementing its spatial plan and ensuring that uncontrolled
deforestation does not take place in Papua,
 promoting accountability and the rule of law in land licensing in 13 districts in four
forest provinces.
The UKCCU also leads the implementation of other climate change programs in Indonesia
that are funded by other departments within DFID or other departments in the UK
government, such as a GBP 10 million new phase of the Multi-Stakeholder Forestry
Program, funded from DFID’s Forest Governance Markets and Climate Program (FGMC).
The work of the UKCCU contributes directly to the objectives of the UK International Climate
Fund (ICF). The UK’s ICF is the primary channel of UK Climate Change Finance. It became
operational in 2011 and replaced the Environmental Transformation Fund (ETF). The main
target of the ICF is to help developing countries adapt to climate change, embark on low
carbon growth and tackle deforestation (Ulrich, Bohnke and Eidt 2015). International climate
funds approved totaled USD 325 million between 2003 and 2012, focusing primarily on
mitigation. Most attention is being paid to reducing forest and land based emissions activities
(and the highest portion of these funds is disbursed on REDD+ activities), which is
appropriate since up to 85% of Indonesia’s emissions come from these sectors. The ICF's
funding portfolio is split between capital contributions/concessional loans and grant finance.
The majority of contributions to multilateral funds take the form of concessional capital.
Grants are used primarily as a mechanism for bilateral contributions. The following table lists
projects funded by the UKCCU in Indonesia that could be
Table 10: List of projects in Indonesia under UK’s International Climate Fund
Approved
Name of project
(USD Million)
Improving Governance of Land Use, Land-Use Change and Forestry 4.1
(LULUCF) in Indonesia
Indonesia Multi stakeholder Forestry Program II 2.2
Degraded Land Mapping in Indonesia 0.8
Degraded Land Mapping for Kalimantan and Papua Provinces 0.7
Comprehensive Program on Spatial Planning and Low Carbon 0.38
Development in Papua
Approved
Name of project
(USD Million)
Program Design for Spatial Planning and Low Carbon Development in 0.24
Papua49
Spatial Planning and Low Carbon Development in Papua 0.15
Source: Climate Funds Update (Dec, 2015): http://www.climatefundsupdate.org/data
UKCCU programs under the operational plan of 2011-2016 completed their spending in
2015. However, the impacts on reducing deforestation and promoting low carbon investment
are expected to continue beyond that. The post-2015 results will be fully reported by the
UKCCU if it continues operation beyond 2015. If the UK introduces different institutional
arrangements in Indonesia, provision for reporting results will be incorporated into these
plans.
2.2.8.3. Germany – GIZ and KfW

At governmental negotiations in November 2013, the governments of Germany and of
Indonesia agreed that bilateral development cooperation should focus on three priority
areas:
(i) Energy and climate change

(ii) Inclusive growth
(iii) Good governance and global networks
The official partner for German development cooperation in Indonesia is BAPPENAS. GIZ
and KfW are the German development organizations that implement German international
development projects and programs. GIZ and KfW work together in supporting the
Indonesian German Forests and Climate Change Programme (FORCLIME) projects in
Indonesia, in which GIZ provides technical support while KfW provides financial support for
project implementation.
Deutsche Gesellschaft fuer Internationale Zusammenarbeit GmbH or GIZ
GIZ, the German development agency, currently has three programs in Indonesia, namely
the (i) Forests and Climate Change Program (FORCLIME), (ii) Biodiversity and Climate
Change Project (BIOCLIME), and (iii) Policy Advice for Environment and Climate Change
(PAKLIM).
FORCLIME – GIZ and KfW
The overall objective of FORCLIME is to reduce GHG emissions from the forest sector while
improving the livelihoods of Indonesia's poor rural communities. Support to REDD+
demonstration activities is a key feature of the program, providing decision-makers with
49 Program Design for Spatial Planning and Low Carbon Development in Papua is supported by the UKCCU. The UKCCU
allocated GBP 280,000 over eight months (September 2011 – Aril 2012). The fund is paid out on the basis of invoices
submitted after Month 2, Month 4 and on completion of the assignment (Intervention Summary).
experience of how REDD+ can be implemented on the ground. FORCLIME support comes
from GIZ and KfW, and the program runs from 2009 – 2016.
FORCLIME is commissioned by the German Federal Ministry for Economic Cooperation and
Development (BMZ) with the MoEF as the lead executing agency. With FORCLIME,
Germany supports Indonesia’s efforts to reduce GHG emissions from the forestry sector, to
conserve forest biodiversity within the regional Heart of Borneo Initiative, and to implement
sustainable forest management. The support provided by FORCLIME includes, among
others: advice on strategy development for REDD+ and forest development at national,
provincial and district levels; development of PES schemes to support sustainable
livelihoods in rural areas; innovative design of mechanisms and regulations for district-
based REDD+ initiatives; MRV facilitation; and capacity building for sustainable forest
management and nature conservation.
FORCLIME consists of six components:
(i) Regulatory framework (advisory services on forestry and climate policy)

(ii) Sustainable forest management and REDD+50
(iii) FMU establishment51
(iv) Sustainable economic development (green economy)
(v) Support for capacity building
(vi) Integration of biodiversity conservation
GIZ - BIOCLIME
BIOCLIME’s overall objective is to preserve biodiversity and the carbon sequestration

capacity of selected forest ecosystems of South Sumatra as a contribution to the
implementation of Indonesia’s emissions reduction target. BIOCLIME supports district and
provincial governments in their efforts to develop and implement conservation and
management concepts for reducing emissions from their forests and conserving forest
biodiversity in order to contribute to the GHG emission reduction goal and the achievement
of the Aichi biodiversity target in Indonesia. The project partner organization is the MoEF as
the leading ministry in the forestry and biodiversity sector and the government of the
province of South Sumatera as the implementing partner.
BIOCLIME cooperates with different levels inside the Indonesian government, with NGOs
and universities, as well as with local communities. It places emphasis on building bridges
between district and provincial governments and providing a toolset for decision making on
policy and land use planning suitable for leading to a national standard and supporting the
Indonesian One Map Policy.
BIOCLIME is designed to act as a coordinating unit for all relevant activities in this field. It
does this by further developing data management and associated capacities, and by
50 FORCLIME supports private forest companies in the FSC certification process of their forest concessions, particularly
companies located in the pilot districts Berau, Malinau and Kapuas Hulu.
51 FORCLIME actively supports the development of three Model FMUs in Malinau District in North Kalimantan Province,
Berau District in East Kalimantan, and Kapuas Hulu District in West Kalimantan.
improving the reporting system with special attention to the development of FMU. BIOCLIME
consists of five work packages:
(i) Establishment of a database for the conservation and sustainable management

of areas of high biodiversity
(ii) Shaping of transparent and participatory planning and decision-making
processes for the selection and management of protected areas
(iii) Strengthening of management capabilities and capacities
(iv) Development and implementation of an adapted local MRV system for land use,
biodiversity, risk potential and biomass
(v) Improvement of livelihoods of the local communities living in the area
GIZ - PAKLIM
GIZ PAKLIM is commissioned by the German Federal Ministry for Economic Cooperation
and Development (BMZ) and the lead executing agency is the MoEF. The overall term for
PAKLIM was 2009 – 2015. The objective of PAKLIM was to reduce GHG emissions, improve
living conditions, make industrial energy use more efficient and help the country adapt to
climate change. GIZ PAKLIM consists of three working areas:
Work Area 1: Climate mitigation policy advice, with the following main objectives: (i)
implement climate mitigation action plans and disseminate best practices at the
provincial level, and (ii) support Nationally Appropriate Mitigation Action (NAMA)
development and an MRV system
Work Area 2: Industries and industrial estates, with the main objective of integrating
private sector actors into mitigation actions, fostering voluntary partnerships and
development partnerships
Work Area 3: Climate education and awareness, with the main objective of raising
awareness for the reasons for and the impact of climate change among Indonesian
youth
The PAKLIM program has helped develop a national strategy for the introduction of
mitigation measures in relevant sectors to achieve Indonesia’s targets for GHG emission
reductions. The main elements of this strategy are found in the guidelines on implementing
the National Mitigation Action Plan (RAN-GRK), which were drawn up jointly with the Ministry
of National Development Planning. With assistance from PAKLIM, the Ministry of National
Development Planning is currently setting up a secretariat that will support the relevant
ministries and provincial authorities in preparing NAMAs and implementing the RAN-GRK.
Partnerships for the development of climate change action plans have been established with
ten cities in Indonesia, namely: Blitar, Malang, Mojokerto, Yogyakarta, Surakarta, Pasuruan,
Probolinggo, Semarang, Salatiga and Pekalongan.
KfW Development Bank
The KfW forestry portfolio in Indonesia includes REDD+, biodiversity and integrated
watershed management, ecosystem restoration, and the ASEAN regional program. KfW
provides financial support under the FORCLIME program in Kalimantan and also cooperates
with other organizations such as the Frankfurt Zoological Society (ZGF) in Sumatera. The
first program to support the three districts in Kalimantan was launched in 2008 and up to
EUR 80 million will be invested in sustainable forestry by 2022. With its commitment in the
FORCLIME program, KfW seeks to demonstrate the viability of a pro-poor REDD+
mechanism in Kalimantan. KfW uses a district-based approach in order to prepare selected
pilot areas for national and international carbon markets. KfW finances measures to achieve
readiness in three districts of Kalimantan (Kapuas Hulu, Malinau, Berau), realizes an
investment program for REDD+ demonstration activities and develops an innovative and fair
incentive payment scheme.
KfW also supports two big national parks in Sumatra and Sulawesi, combined with the
rehabilitation of important water catchment areas. In Sumatera, KfW supports climate
change mitigation and species conservation in the Leuser ecosystem of Sumatra, which falls
under the LESTARI landscape in Aceh. The project aims to support sustainable
management of the Gunung Leuser ecosystem in Sumatra, in particular in the South Aceh,
Subulussalam and Singkil districts. The primary objective of the project is to balance the
needs for conserving biodiversity with those of the population for using the natural
resources. The implementing partners for the project are the MoEF, Natural Resources and
Ecosystem Conservation (Ditjen Konservasi Sumber Daya Alam dan Ekosistem, KSDAE),
Regional Body for Planning and Development (BAPPEDA) Aceh, local planning and forestry
authorities (BAPPEDA, Dinas Kehutanan), Gunung Leuser National Park (Taman Nasional
Gunung Leuser, TNGL), and the Regional Natural Resources Conservation Agency (Badan
Konservasi Sumber Daya Alam, BKSDA) Singkil. The project runs from August 2013 – April
2019 with a grant totaling EUR 8.5 million.52
Still in Sumatera, KfW also supports a conservation concession for the protection of critically
endangered Sumatran orangutans. KfW will support provision of 39,000 hectares of tropical
rainforest in Bukit Tigapuluh in central Sumatra for the reintroduction of more than 300
orangutans into their natural habitat. The implementation of the concession is funded via the
KfW Development Bank at almost EUR 3.6 million.
2.2.9. Market-based payments for emission reductions (compliance &

voluntary)
Eligibility VERs following respective market protocols

Funding Mechanism Over-the-counter (OTC) transaction of VERs against
payment
Size of Funding See below
Available
Funding Disbursement See Funding Mechanism
Market-based payments for emission reductions from land-based mitigation have leveraged
USD 1.2 billion since 2002, including USD 0.9 billion from voluntary markets. The 2014
transaction volume for voluntary land-based emission reduction payments was USD 128
million.
52Please see https://www.kfw-entwicklungsbank.de/International-financing/KfW-Development-Bank/About-

us/News/News-Details_180352.html
Voluntary land-based emission reduction payments significantly increased their market
transaction value and traded emission reduction volume from 2013 to 2014. Voluntary
markets therefore stand out against the trend of reduced public sector finance committed to
climate change mitigation and for REDD+ since 2009 (see section 2.2.).
Figure 17: Voluntary land-based emission reduction volume traded and transaction
value
Source: (Forest Trends' Ecosystem Marketplace 2015)
Table 11: Overview of Compliance and VER Markets for land-based mitigation
At this point, no advanced efforts exist for a compliance market that includes Indonesian
emission reductions. Therefore, the voluntary market continues to be the only market-based
mechanism for emission reduction performance applicable to Indonesia.
The supply and demand of land-based emission reductions for the voluntary market is
dominated by 90% of certification combinations including the Verified Carbon Standard
(VCS).
Figure 18: Certification Standards in voluntary land-based emission reduction market
58% of land-based emission reduction certificates issued in the voluntary market apply the
VCS in combination with the Climate, Community, and Biodiversity Standard (CCBS). The
VCS offers GHG accounting methodologies allowing for issuance of verified emission
reductions from avoided deforestation, avoided forest degradation, sustainable forest
management, reforestation, conservation and increase of soil carbon, among others. Several
emission reduction activities can be grouped into a single REDD+ project.
For performance-based payments in the voluntary market, buyers display a strong

preference for emission reduction certificates from projects and programs that have
undergone verification of their reported monitoring results (MRV) and issued certificates in
registry.
Figure 19: Transacted emission reduction volumes (tCO2e) per project status
Table 12: Land-based Emission Reduction Markets per world region
It should be noted that in 2014 Asian forest carbon initiatives harvested only USD 9.6 million
of USD 257 million results-based payments (ex-post MRV) – or 3.7% of the world’s total. As
no compliance market instruments for Asian forest carbon offsets exist, the USD 9.6 million
came entirely from the USD 128 million voluntary forest carbon market – bringing the Asian
share to 7.5% of the global voluntary forest carbon market. This share is considered
relatively small for the world’s most populated region when compared with, e.g., a share of
36% for Latin America. In the absence of compliance forest carbon markets and a small
share in voluntary forest carbon markets, the overall success of Asian and therefore
Indonesian initiatives to develop and transact forest carbon assets in market mechanisms
since 2009 has been limited.
No specific studies exist on the reason of underperformance of Asian forest carbon initiatives
versus Latin American and African offset projects in result-based market mechanisms.
These regions are comparable because they are equally not eligible for compliance forest
carbon markets and compete for shares in the voluntary forest carbon market.
A few preliminary possibilities include:
 In Latin America and Africa, since 2010 the supply has included community-based
REDD+ and mixed native species reforestation – the most highly valued forest
carbon offset project.
 Voluntary forest carbon offset buyers came predominantly from North America and
Europe, not from the industrialized nations of Asia and Oceania.
 Asian supply attracted exclusively limited European demand, with little demand from
North America and close to none from Asia and Oceania.
 In the communication narratives playing a large role in the decision-making of
voluntary offset buyers in North America & Europe, fighting poverty in Africa and
protecting the Amazon rainforest are well-established causes.
Still, the voluntary carbon market and voluntary non-carbon grants from budgets for CSR of
multinational companies active in Indonesia should not be ruled out as a potential additional
funding source. The draft assessment report will include detailed technical recommendations
on how the window for such irregular opportunities can be created and kept open in synergy
with a strategy to secure sustained public sector finance.
Figure 20: Origin & destination of land-based ERs in voluntary and compliance
markets
2.3. Private sector & civil society financial support

mechanisms
This section presents funding sources and projects/programs that are funded and/or
implemented by the private sector and civil society.
2.3.1. NGOs (national and international)
2.3.1.1. KEHATI Foundation
Eligibility  NGOs, community organizations, governmental

research institutions, universities, professional
institutions
 Work in three prioritized ecosystems: agriculture,
forestry, and coastal & small island programs
Size of Funding Latest data not available
Available Total grant (1995-2013: USD 25.500.000)53
Funding Disbursement -
Note Proposal needs to be submitted in KEHATI format
The KEHATI Foundation has developed a type of investment, which can be regarded as
green investment, to provide a ground for business society to participate in biodiversity
53 Please see https://www.cbd.int/doc/meetings/ecr/cbwecr-2014-04/other/cbwecr-2014-04-presentation-day4-05-en.pdf
conservation efforts and sustainable development, in the form of the KEHATI Mutual Fund
(Reksadana KEHATI Lestari - RDKL) and KEHATI Sustainable and Responsible Investment
Index (KEHATI SRI Index). Fundraising is also carried out through the KEHATI Mutual Fund
managed by PT BAHANA TCW. The investment return is used as a grant to fund the
programs in the three ecosystems of agriculture, forestry, and coastal and small islands.
KEHATI Mutual Fund (Reksadana KEHATI Lestari - RDKL)
The RDKL is a mutual fund in the form of a Collective Investment Contract54, with the
objective of mobilizing financial support from the public for sustainable funding of biodiversity
programs carried out by the KEHATI foundation, through an investment concept that takes
the form of a mutual fund. This mutual fund was launched in April 2007 by the Foundation in
cooperation with PT Bahana TCW Investment Management as the selected fund manager.
The investors are the companies that own a CSR or Green Investment budget allocation.
KEHATI Sustainable and Responsible Investment Index (KEHATI SRI Index)
The objective of the establishment of the index is to carry out biodiversity conservation
programs by raising awareness and consciousness towards biodiversity, among the
public, business sector and capital market, and to provide open information to the public in
identifying the selected companies rated by the index, which are regarded as beneficial and
constantly managing sustainable development.55 Selection mechanisms for the companies
to be included in the KEHATI SRI Index consist of two steps: (i) an initial selection through
negative and financial aspects; and (ii) evaluation of fundamental aspects.
Procedure to become KEHATI’s grant receiving partners56
KEHATI provides grants for organizations working in three prioritized ecosystems, namely
agricultural programs, forestry programs, and coastal and small island programs. The
programs should focus on the sustainable conservation and utilization of biodiversity, and
should last more than one year. Grant funding for specific programs such as MFP II, TFCA
Sumatra, TFCA Kalimantan can be proposed directly to the program at www.mfp.or.id,
www.tfcasumatera.org, and www.tfcakalimantan.or.id respectively.
To submit a proposal to the KEHATI Foundation, an applicant needs to prepare a proposal

in the defined format (can be downloaded at
http://www.kehati.or.id/images/Format%20Proposal.pdf).
The following are the procedures for proposal submission:
 KEHATI will send a letter of proposal receipt to the party who proposed the
activities within two-weeks at the latest, after the proposal has been received by
KEHATI.
 The proposal will be assessed and evaluated by an Independent Proposal Evaluator,
consisting of experts related to the theme of the proposal.
54 Based on Law No.8 Year 1995 concerning Capital Market and its implementing regulation.
55 Please see http://www.kehati.or.id/en/indeks-sri-kehati-2.html
56 Please see http://www.kehati.or.id/en/kemitraan-3.html
 Evaluation will be completed within one month after the deadline of proposal
submission.
 KEHATI will inform the proposal sender of the evaluation result within one month, at
the latest, after the evaluation process is completed.
The following table summarizes eligibility of KEHATI grants:
Table 13: Eligibility of KEHATI grants

Eligible Institutions and Non-eligible Institutions and
Organizations57 Organizations58
NGOs and volunteer organizations All government institutions, not including
research institutions owned by universities
and state higher educational institutions
Educational and training institutes Commercial private and public companies,
national and international as well
Religious groups, cultural groups, youth Cooperatives and government-sponsored
organizations, students, women associations
organizations
Professional associations and groups of Labor and entrepreneurs’ associations
experts
- Military and para-military organizations
- Political organizations and international
organizations
- Individuals
Source: KEHATI, web: http://www.kehati.or.id/en/kemitraan-3/dana-hibah-3.html
Further information on KEHATI cooperation for biodiversity conservation and utilization can
be obtained by contacting the Resource Development Officer, kpsd@kehati.or.id, phone:
(+62 21) 7183185 & 7183187; fax: (+62 21) 7196131.
2.3.1.2. World Wide Fund for Nature (WWF)
Eligibility Community groups

Available
The World Wide Fund for Nature (WWF) Indonesia does not receive financial support from
the government budget (APBN and APBD). It’s funding comes from more than 40 donors
57Organizations formed by local communities.

58KEHATI cannot channel its grant to individuals for certain educational purposes, conferences, travelling, building,
renovation, purchase or ownership of land and buildings or purchase of vehicles and other equipment.
(international and national), aid agencies, and a total of more than 64,000 supporters from
across Indonesia. WWF obtains 57% of its funding from individuals and from endowments,
17% from international sources (such as the World Bank, DFID, USAID) and 11% from
various companies59.
To support its programs, WWF Indonesia develops an innovative partnership model to

collaborate with companies in the form of the Corporate Partnership Program. This
Partnership Program can be packed in accordance with the needs of nature conservation
but also encourages corporate partners to contribute through transformation, communication
to the public and CSR. In addition, WWF also carries out fundraising activities. Fundraisers
deal directly with the public and convey the issues of preservation and conservation of
nature and a green lifestyle, as well as raise support in the form of individual donations. In
addition, WWF Indonesia has also partnered with professional institutions that specialize in
organizing fundraising activities.60
WWF also developed a trust fund initiative, the Sumatera Sustainability Fund (SFS)61, an
initiative of sustainable financing for a conservation program in Sumatera Island. The SFS is
a trust fund that aims to support 10 governors on ecosystem-based spatial planning. WWF
has several grants that can be applied by local organizations in LESTARI landscapes, such
as Reforestation Grants62 and Conservation Workshop Grants.63
2.3.2. Private companies
In general, private companies including international consumer goods companies (Unilever,

Nestlé, L’Oreal and others) organize their CSR activities in non-standardized ways. This
means that there is no public grant window or selection process for proposal requirements.
Companies operating in this landscape usually have their own CSR program.
In relation to becoming involved with sustainable palm oil growers beyond simple RSPO
sourcing, one consumer goods company gave the feedback that they felt their position was
too distant from local agricultural production and they encouraged their suppliers of refined
palm oil, e.g. Wilmar, Golden Agri Resources etc., to take leadership in this regard.
A more direct and common way that consumer goods companies invest in local sustainable
landscape and climate change mitigation initiatives is through the purchase of verified
emission reductions via the voluntary carbon market. A direct link to the supply chain (e.g.
palm oil) can act as a strong asset for attracting specific buyers, along with the other social &
environmental co-benefits associated with REDD+. Voluntary carbon market transactions
have a tendency to be small and irregular, also incurring transaction costs. A current trend of
advanced CSR-motivated buyers of forest carbon credits is to move away from the “broad
portfolio of credits off the shelf” to support one or a few strategic projects on amore long-term
basis. This lends predictability to the project and reduces transaction costs at both ends.
59 Please see https://id.wikipedia.org/wiki/World_Wide_Fund_for_Nature

60 Please see http://www.wwf.or.id/cara_anda_membantu/fundraiser_wwf2/
61 SSF was initially established by six founders on 12 February 2010 in Jakarta and was facilitated by Indonesian
Coordinating Minister for the Economy in collaboration with WWF-Indonesia.

62 Please see http://www.worldwildlife.org/projects/reforestation-grants
63 Please see http://www.worldwildlife.org/projects/conservation-workshop-grants
2.3.2.1. Consumer goods companies sourcing palm oil
Eligibility NGOs, community organizations, private sector

implementing organizations
Funding Mechanism Grants from CSR and demand for sustainably produced
commodities
Available
Several consumer goods companies operate CSR programs, with the aim of making their
supply chain more environmentally responsible. In September 2014, 37 national and 20
subnational governments, 53 companies and institutions, 16 indigenous community
networks, and 54 civil society organizations committed to halving deforestation by 2020 and
ending it by 2030. The private sector signatories represent USD 1.36 trillion in annual
revenues connected in part to the “big four” deforestation-driving commodities: palm oil, soy,
beef, and pulp and paper. Most of these companies – including household names such as
Walmart, L’Oreal, Danone, McDonald’s and General Mills – have defined specific targets to
reduce deforestation within their supply chains, with deadlines fast approaching. There are
another 270 companies with similar commitments not tied to the declaration but otherwise
documented by the Supply Change64 project collaborators.
The Unilever Sustainable Living Plan is a company blueprint for achieving Unilever’s vision
to double the size of its business, whilst reducing its environmental footprint and increasing
positive social impact.65 It consists of three components, namely: (i) improving health and
wellbeing, (ii) reducing environmental impact, and (iii) enhancing livelihood. The plan sets
wide-ranging targets to achieve these goals by 2020 and includes how the company sources
raw materials and how consumers use the brand’s products.
Unilever intends to fully source its agricultural raw material sustainably by 2020. Unilever’s
ultimate objective is to ensure that its supply chain is deforestation-free. It will strive for a net
positive environmental impact and for improved livelihoods of smallholder farmers. For
instance, Unilever aims to be able to say and to prove that all palm oil purchased by the
company comes from traceable and certified sustainable sources. As of December
2014, Unilever was able to trace 70% of its global palm oil purchases to 1,800 known crude
palm oil mills.66
In August 2015, Unilever teamed up with WWF to reach the wider public with its green
campaign Bright Future, which focuses on protecting trees in Indonesia and Brazil.67
Specifically, the partnership between Unilever and WWF will fund projects in Brazil and
Indonesia that focus on reducing deforestation and forest degradation, restoring forest
areas, promoting sustainable forest management and increasing tree stocks in agricultural
64 Please see www.supply-change.org

65 Please see https://www.unilever.com/sustainable-living/
66 Please see http://blog.cifor.org/28657/in-indonesia-corporate-commitment-to-sustainable-palm-oil?fnl=en
67 Please see www.brightfuture.unilever.co.id
landscapes. The tree protection program68 is part of Unilever’s commitment to sustainable
living and will help fund the protection of one million trees in Brazil and Indonesia. The
partnership supports a long-term program by WWF and their partners, BirdLife International
and The Wildlife Conservation Society.
2.3.1.4 Freeport
Operating in Mimika District, PT. Freeport Indonesia has carried out various CSR programs,
mainly directed towards two indigenous communities in the area: Amungme and Kamoro.
Two dedicated local organizations were set up to manage the CSR fund from PT. Freeport
for these community groups, namely Lembaga Masyarakat Adat Suku Amungme (LEMASA)
for the Amungme tribal group and Lembaga Masyarakat Adat Suku Kamoro (LEMASKO) for
the Kamoro tribal group. Freeport has its own mechanism for operating its CSR programs
through a foundation called Lembaga Pengembangan Masyarakat Adat Amungme dan
Kamoro (LPMK), where it has a set of programs and a management plan.
2.3.1.5 Kalimantan Gold Corporation Ltd.

Kalimantan Gold Corporation Ltd. (locally known as PT Kalimantan Surya Kencana), a
mineral exploration company operating in Central Kalimantan, has been conducting a CSR
program operated by Yayasan Tambuhan Sinta (discussed in more detail in Section 4.2.2).69
The CSR program mainly focuses on improving the quality of life of Dayak villagers living
close to a mineral concession in the upper Kahayan River by minimizing the effects of
mercury in its operation.
68A program to protect a million trees by supporting forest protection programs in Brazil and Indonesia.
69This company created Yayasan Tambuhak Sinta (YTS) to spearhead its commitment to improving the local economy and
social welfare.
3. DEVELOPMENTS TO BE
MONITORED
This section describes new financial instruments that may be established and are potentially
applicable for ultimately financing LESTARI. Potential actors that may become involved or
new programs that could incentivize sustainable rural landscape management in Indonesia
through PES/REDD+ are discussed (Forest Trends' Ecosystem Marketplace 2015).
Public REDD+ finance: Several pledges exist from bilateral initiatives and multilateral
development banks to strongly increase their climate finance by 2020. Public REDD+
finance should have a sizeable share of the USD 100 billion goal for global climate finance
by 2020. ADB said it would more than double its spending to USD 6 billion in the same year.
The World Bank said it would increase its commitments to climate change by a third - which
at current funding levels would mean USD 16 billion a year, with the potential to leverage an
additional USD 13 billion from other funders.70 Unfortunately, at this point there is no clarity
on i) when these pledges will be realized as committed funds, and ii) through which bilateral
or multilateral mechanisms (GCF, GEF or others) these would be realized and how much
would be earmarked for sustainable landscapes and destined for sub-national activities.
Aviation negotiations: To meet its goal of keeping global net carbon emissions from the
aviation sector at 2020 emission levels post-2020 (and precluding the invention of no-carbon
jet fuel), the International Civil Aviation Organization (ICAO) will need to develop a market-
based mechanism to offset its emissions, until technological advances will allow the sector to
reduce its emissions below 2020 levels again. Offsets are likely to be a key component, and
the ICAO is considering including Certified Emission Reductions (CERs) from the Clean
Development Mechanism (CDM) and/or REDD+ offsets in what would be the first sectoral
ETS. The details may be ironed out in time for ICAO’s next triennial meeting in 2016. This
could become relevant as a revenue stream to sell verified GHG ERRs under a program like
the VCS.
Internal carbon pricing: Currently, 437 companies now calculate an internal price on
carbon, according to CDP – more than triple the number from the previous year. Another
583 said they plan to start putting a price on carbon within two years. Nearly a third of the
companies that internally priced carbon in 2013 were also engaged in carbon offsetting,
according to an Ecosystem Marketplace analysis of CDP data. Buyers such as Microsoft,
The Walt Disney Company, TD Bank, Aviva, and Barclays charge their business divisions
according to their emissions and use a portion of the revenue to purchase offsets. As more
companies put an internal price on carbon, more may turn to offsetting to neutralize
unavoidable emissions. This could also become relevant as a revenue stream to sell verified
GHG ERRs under a program like the VCS.
70Please see http://www.bloomberg.com/news/articles/2015-11-30/climate-finance-programs-reap-41-billion-in-pledges-in-

paris
Ecosystem-based impact investment: In response to a survey by Nature Vest and Eko
Asset Management Partners, 51 private investors indicated that they intend to deploy
USD 5.6 billion in conservation impact investments before 2018 – almost triple the
USD 1.9 billion they spent between 2009 and 2013. About 3% of past investment
(USD 58 million) went to land-based funding mechanisms such as REDD+. This would mean
that in the years before 2018, up to USD 200 million could be available as finance for land-
based funding mechanisms. Investors said the limiting factor to growth is not available
capital but rather a shortage of deals with the appropriate risk/return profiles. Public-private
partnerships could help address this challenge. For example, the Althelia Climate Fund
found a way to reduce risks to its REDD+ investors by securing a USD 133.8 million loan
guarantee from the US Agency for International Development.71 At this point though, the
Althelia fund is closed and not sourcing new GHG ERR projects.
Ecosystem Green Bond: A concept where a sovereign-issued bond covers an ecosystem

on a larger scale, deemed worthy of protection, and uses the proceeds to finance any
conservation-related activities in this ecosystem. The protected ecosystems could be a
system of terrestrial national parks or marine parks. The sources of repayment would be the
cash-flow generated from activities by the ecosystem (e.g. user fees for access to parks). To
reduce risk and pricing and increase appeal, full or partial repayment would be guaranteed
by the sovereign or an international finance institution. The size of this bond would depend
on the relevant ecosystem. Coupon payments would be in line with the issuer’s credit rating.
The successful placement of such mainstream investment products in the market could be
crucial in lifting conservation finance to the next stage (Global Canopy Program, 2015). In
2014, USD 4.2 billion72 was already seen in agriculture/forestry green bonds, in 2015 it was
USD 2.3 billion73. A key issue for compatibility of LESTARI PES/REDD+ activities with green
bonds are investment grade economic activities that hold a solid expectation of Internal Rate
of Return (IRR) on which a bond could be issued.
Government Peatlands Restoration Agency (Badan Restorasi Gambut - BRG).

Responding to severe forest fire in 2015, the government set up an agency which reported
directly to the President through Presidential Regulation No.1 Year 2016, issued on 16
January 2016, with the main task of overcoming and preventing peatland fires. This agency
is commissioned to coordinate and facilitate peatland restoration in seven priority provinces,
namely: Riau, Jambi, South Sumatera, West Kalimantan, Central Kalimantan, South
Kalimantan and Papua. The BRG is obliged to plan and implement a peatland ecosystem
restoration program over five years (2016 – 2020) across an area of 2,000,000 ha, with an
annual target area of 30% in 2016, 20% in 2017, 20% in 2018, 20% in 2019, and 10% in
2020. The priority areas for the planning and implementation of this target will begin in
Pulang Pisau District in Central Kalimantan, Musi Banyuasin District and Ogan Komering Ilir
District in South Sumatera, and Meranti Islands District in Riau. In addition, Norway is also
planning to provide support to this agency. The development of the BRG is worth monitoring
as its work plan may have activities related to PES/REDD+ and is closely aligned with
LESTARI’s focus in Central Kalimantan.
71 Please see https://www.usaid.gov/news-information/press-releases/may-28-2014-us-government-althelia-climate-fund-

mobilize-1338-million-forest-conservation
72 Please see https://www.climatebonds.net/bonds-climate-change-2014
73 Please see http://www.climatebonds.net/files/files/CBI-HSBC%20report%2010Nov%20JG.pdf
4. INSTITUTIONS WITH A
MANDATE TO IMPLEMENT
PES AND REDD+
There are three government institutions in Indonesia that have a prominent role in climate
finance budgeting and coordination and also in leading the PES/REDD+ process in
Indonesia. These are the Ministry of Finance, the National Development Planning Agency
(BAPPENAS), and the Ministry of Environment and Forestry. However, PES/REDD+ related
activities require cross-sectoral coordination among several government institutions as well
as partnership with NGOs, local communities and the private sector.
4.1. Context and relationship between implementing

institutions
The following section describes the institutions with the mandate to implement PES/REDD+,
along with a description of their roles.
Ministry of Environment and Forestry (MoEF)
The MoEF is currently in charge of issuing licenses for ecosystem restoration and other
PES-type activities including water use, carbon capture & storage, and tourism. The MoEF
has increasingly contributed to the development of PES/REDD+ type activities following the
discontinuation and integration of the REDD+ Agency’s functions and roles into the MoEF.
Previously, the REDD+ Agency led the process of formulating REDD+ strategy, policy and
financial mechanisms.
Presidential Regulation No.16 of 2015 stipulated that the MoEF is the government institution
mandated to implement PES and REDD+. The MoEF Regulation No. 18 of 2015 on the
Organization and Working Structure of the MoEF further elaborates the organizational
structure and role of each division in the ministry. Under this regulation, the Directorate
General of Climate Change Control (Direktorat Jendral Pengendalian Perubahan Iklim –
Ditjen PPI) is mandated to implement REDD+, whereas three different directorate generals
are mandated with the implementation of PES, namely the: (i) Directorate General of Natural
Resource and Ecosystem Conservation (DG KSDAE), (ii) Directorate General of Sustainable
Management for Production Forest (DG PHPL), and the (iii) Directorate General of
Watershed and Protected Forest Management (DG PDAS-HL).
The establishment of Forest Management Units (KPHs) is expected to spearhead forest

management by the government. At the time of writing, only a few KPHs are fully operational
in the country as well as in LESTARI landscapes. Most of the KPHs in the LESTARI
landscapes are in the process of institutional establishment, but some do not yet have an
organizational design or have not held consultations on their management plans yet.
However, provincial governments both in Central Kalimantan and Papua are working
towards the establishment of KPHs.
Due to the enactment of Law No. 23 of 2014 on Local Governance that transfers most of the
authority over forests from the district to provincial level, including the authority on the design
of the organizational structure and appointment of personnel in the KPHs, the KPH
establishment process is partially suspended. This suspension is unlikely to cease until the
revised Government Regulation No. 41 of 2007 on the Organization of Local Government
Apparatus is enacted.74
Three types of KPH are currently structured under different directorate generals (DGs) at the
MoEF at the national level, and are operated by three different UPTs at the sub-national
level, the details of which are presented in the following table.
Table 14: Type and reporting line of FMUs/KPHs

Line of reporting
Type of KPH
National level Sub-national level
Conservation DG Natural Resources Natural Resources Conservation and
FMU (KPHK) Conservation and Ecosystem Agency (Balai Konservasi
Ecosystem (DG KSDAE), Sumber Daya Alam - BKSDA)
Production DG Sustainable Forest Monitoring Agency for the Utilization of
FMU (KPHP) Production (DG PHPL) Production Forest (Balai Pemantauan
Pemanfaatan Hutan Produksi - BP2HP)
Protection FMU DG Watershed Watershed Management Agency
(KPHL) Management and (Badan Pengelola Daerah Aliran Sungai
Protection Forest (DG - BPDAS)
PDAS-HL)
The FMUs/KPHs are established in three steps: area establishment, institutional

establishment, and formulation and consultation of the management plan, with each step
comprising of several other technical steps. KPH establishment is a cross-sectoral process
involving several government institutions at the national and sub-national levels.
Table 15 presents all KPHs in the LESTARI landscapes along with their operational status. A
KPH is considered legally operational if it has: (i) an area (administrative boundary) enacted
through ministerial regulation, (ii) staff appointed by government authority (central
government for KPHK and provincial or regency government for KPHL and KPHP), (iii) an
office locally present in the area, and (iv) a work plan.
If a KPH has already had an area enacted but has not yet had personnel appointed or if its
organizational structure has not been defined yet (type A or B), it is classified as a KPH in
the organizational design phase.
74 Please see http://www.slideshare.net/rugczar/rancangan-pengganti-pp-no-41-tahun-2007
Table 15: List of KPHs in LESTARI landscapes
Districts/ Operational
Landscape Conservation FMU/KPH Remarks
Area Status
ACEH
Aceh Area: Aceh Tenggara,

Tenggara KPHL Region Legally Aceh Selatan,
VI operational Subulussalam
Aceh Selatan Regencies
Aceh Barat - - -
Daya
Leuser
KPHL Region Legally Area: Aceh Tengah,
Gayo Lues
III operational Gayo Lues Regencies
Leuser National Park Legally -
National Park* Agency operational
Singkil Wildlife KPHK Rawa Legally -
Sanctuary* Singkil operational
CENTRAL KALIMANTAN
Organization Need further

KPH
Katingan al design confirmation on the
Katingan
type of KPH (L/P)
KPHL Pulang Organization KPHL will be
Pisau al design established first,
Pulang Pisau followed by KPHP
KPHP Pulang
Pisau
KPHP Legally
Katingan – Gunung Mas
Gunung Mas operational
KPH Model
Kahayan
KPH Organization Need further
Palangkaraya Palangkaraya al design confirmation on the
type of KPH (L/P)
Bukit Baka National Park Legally
Bukit Raya Agency operational -
National Park*
Sebangau National Park Legally
-
PAPUA
KPHL Mimika Legally

Mimika -
operational
Lorentz
Asmat - - -
Lowlands
Lorentz National Park Legally
-
Districts/ Operational
Landscape Conservation FMU/KPH Remarks
Area Status
Mappi - - -
Mappi-
Bouven KPH Bouven Organizational Need further
Digoel Bouven Digoel Digoel design confirmation on the
type of KPH (L/P)
KPHP Lintas Legally KPHP Model
Sarmi & operational
Memberamo
Sarmi Sarmi Raya
Organizational Need further
KPH Sarmi design confirmation on the
type of KPH (L/P)
KPH Organizational Need further
Jayapura
Jayapura design confirmation on the
Regency
Regency type of KPH (L/P)
KPH Organizational Need further
Cyclops Jayapura City Jayapura design confirmation on the
City type of KPH (L/P)
Cyclops KPHK Organizational
Will serve as KPHK
Nature Cyclops75 design
model
Reserve*
* Conservation area
Unlike KPHs in other provinces, the KPHs in Aceh are unique and can serve as a model for
KPH establishment as they follow watershed boundaries. This means that the KPH
boundaries are tangent to each other, which is beneficial for developing an REL approach
because wall-to-wall mapping and prediction of land use change can be applied.76
Therefore, options for developing the sub-national REL baseline calculation for the JNR
approach are less challenging for Aceh province.
Ministry of Finance (MoF)
The MoF is responsible for ensuring that climate change requirements are reflected in
budget priorities, pricing policies, and financial market rules (Center for Climate Change and
Multilateral Policy (PKPPIM) 2016). It has two divisions that have tasks related to climate
finance: the Division of Debt Management that has a finance tracking role, and a Fiscal
Policy Office (Badan Kebijakan Fiskal – BKF) that sets the fiscal policy. Through the
PKPPIM, the BKF has been actively conducting studies on benefit sharing mechanisms for
PES,77 and is currently setting up a new funding mechanism in the form of an “umbrella
75 The FMU/KPH organizational structure has been designed by BPKSDA Papua.

76 VCS REDD methodology using JNR approach, applied to “wall to wall” boundary.
77 Please see http://www.fiskal.kemenkeu.go.id/2010/adoku/2014%5Ckajian%5Cpkppim%5CGPB%20Strategy.pdf
mechanism” under a proposed General Service Agency for Climate Change (Badan
Layanan Umum – BLU Perubahan Iklim).
Development Planning Agency (BAPPENAS & BAPPEDA)
BAPPENAS is the coordinating ministry for the implementation of bilateral and multilateral
aid projects, which include REDD+, related projects. It also acts as the secretariat for the
RAN-GRK as stipulated in Presidential Decree No. 61 of 2011. BAPPENAS has been
involved in the design of various REDD+ strategies in the country. At the implementation
level, it acts as the administrator of the ICCTF.
Central Bank of Indonesia (Bank Indonesia - BI)
Despite not directly implementing PES/REDD+ activities, the Central Bank of Indonesia
plays a role in regulating green banking, which can be used to finance PES/REDD+ related
activities. The BI and the MoEF have signed a memorandum of understanding to cooperate
on establishing ground rules for environmentally friendly banking practices (The Jakarta Post
2015). The BI has also issued a regulation, namely Central bank of Indonesia Regulation No
14 of 2015 on commercial bank asset quality assessment, particularly with regard to
environmental aspects.78 In line with the Bank Indonesia directive, several Indonesian banks
have now initiated green banking practices, such as the state-owned Bank Mandiri that has
cooperated with Agence Française de Développement (AFD) to actively finance some
renewable energy and energy efficiency projects (The Jakarta Post 2015).
In addition to government institutions, the implementation of PES/REDD+ related activities

will not succeed without participation from other actors either at the international, national or
local level. The following are three groups of actors that play an integral role in PES/REDD+
activities:
(i) International organizations

(ii) Non-governmental actors: private sector and NGOs
(iii) Local community
Figure 21 and Figure 22 illustrate the relationship between institutions in the implementation
of REDD+ and PES related activities.
78This regulation encourages Indonesia’s banking industry to put more emphasis on the preservation of the environment by
lending more to environmentally friendly customers and to limit lending to non-environmentally friendly ones.
Figure 21: Institutions with a mandate to implement REDD+ at the LESTARI landscape
Figure 22: Institutions with a mandate to implement PES in Indonesia
4.2. Readiness of actors at the landscape level
HPI identified actors and potential partners to implement PES/REDD+ at the landscape level
through desk research and expert input. Among organizations visited in Aceh, Central
Kalimantan, and Papua, only a few have the capacity to implement PES/REDD+ related
activities.
The assessment is carried out through a desk review, and interviews using questionnaires
as presented in Annex 4. The capacity assessment focuses mostly on knowledge and
practical experience in implementation activities similar to PES/REDD+.
This section only presents organizations that have been involved in:
 handling distribution of incentives related to PES/REDD+ or similar sustainable

landscape activities,
 monitoring activities related to compensation of performance-based payment, or
that are:
 considered as potential partners for the implementation of PES/REDD+ related
activities.
The list of all organizations consulted during the site visit is presented in Annex 5.
4.2.1. Readiness of actors in Aceh
Forum Aih Jamur Delem (FAJEM)
FAJEM is a local NGO managing water conservation activities in Aih Jamur Delem, Gayo
Lues Regency. It was involved in IFACS activities and is also a partner organization for
LESTARI. The FAJEM staff have sufficient knowledge in water conservation. Further
capacity building is required for aspects of organizational and financial administration
management.
FKPSM
FKPSM is a local NGO that is currently involved in the management of Trumon Singkil
Biodiversity corridor, Trumon Committee Response Unit (CRU) Trumon. It has sufficient
human resource capacity in proposal development and financial reporting. Further capacity
building on specific issues related to fund raising programs and data administration are
required for further PES/REDD+ activities. Diversification on the scope of activities is also
necessary.
Leuser National Park Agency
Leuser National Park Agency already has a management plan and has potential for
ecotourism and hydro power development. The Agency has a Village Conservation Model
(Model Desa Konservasi – MDK), with 13 villages inside and surrounding the national park
participating in the initiative.79 The MDK consists of three key activities: community
empowerment, village economic development based conservation, and spatial planning
based conservation. The Leuser Ecosystem also has the backing of the Leonardo DiCaprio
Foundation, which provides support to Forest, Nature and Environment of Aceh (HAKA) - a
local NGO that focuses on protection, conservation and restoration - to establish “a mega-
fauna sanctuary” in the Leuser Ecosystem.
4.2.2. Readiness of actors in Central Kalimantan
Faculty of Agriculture and Forestry of the Palangkaraya Muhammadiyah University
The Faculty of Agriculture and Forestry of the Muhammadiyah University successfully

manages an educational forest (hutan pendidikan) in Mungku Baru village, a sub-district of
Rakumpit, by supporting local community activities. It works closely with forest dependent
communities living in forest surroundings by developing alternative livelihood programs. The
university, through its program, incentivizes local communities to not cut trees in the forest
by providing them with alternative means of livelihood such as through yam and candlenut
farming. It has also developed a medicinal plants farm and is currently in the process of
linking the local community with Sidomuncul, a company producing herbal medicine, to
leverage the farm’s production and ultimately improve economic conditions for the local
community.
The unit in the university that manages this educational forest consists of experts in various
fields including forestry, livelihood and culture, which enables the unit to develop programs
that really meet the needs of the local community. The unit is experienced in developing
proposals and managing funds from various international organizations, NGOs and the
private sector. It also has strong links and cooperates with various institutions locally in
Central Kalimantan, nationally across Indonesia, and also works with international partners.
Yayasan Tambuhak Sinta (YTS)
Despite never having been involved in specific PES/REDD+ related activities, Yayasan
Tambuhak Sinta (YTS), a local NGO, has the potential to implement PES/REDD+ activities
in Katingan/Kahayan landscape, and is very keen on working with such activities. The YTS
manages funds from various sources: international organizations (UNIDO, UNEP),
international and national NGOs, government institutions, CSR funds from private
companies, has its own fund raising effort, and is currently working in the areas of
environment, livelihood, health and education targeting the local community. The strength of
YTS is in its participatory approach with local communities, which results from its long
involvement in the CSR programs of a mineral concession in the upper Kahayan River. Its
staff are also well trained in proposal development and report writing in Bahasa and English.
Further information on this foundation can be found at http://www.tambuhaksinta.com/.
79 Please see http://gunungleuser.or.id/konservasi-kawasan/mdk/
Pokker SHK
Pokker SHK is a local NGO and has been involved in the development of one out of five
project concept notes submitted to the ICCTF. It continues to provide support to the four
village forests (hutan desa) that are currently pursuing environmental services certification
through the Plan Vivo scheme, allowing the project to generate revenue from GHG ER
sales. Unfortunately, the Plan Vivo standard has very low market penetration in voluntary
carbon markets.
Sebangau National Park Agency
Sebangau National Park Agency is one of the key stakeholders in the LESTARI Katingan-
Kahayan lowland landscape in Central Kalimantan, particularly with regards to issues related
to forest fire management. The National Park Agency already has a management plan with
a strong emphasis on community involvement in forest management. In addition, it has also
developed a master plan on ecotourism and is looking for investment.
Bukit Baka Bukit Raya National Park Agency
As with the Sebangau National Park Agency, the Bukit Baka Bukit Raya National Park
Agency already has a management plan for its area. The area of national park that is
included in the LESTARI landscape has potential for ecotourism and hydro power
development. The main challenge faced by the national park is illegal gold mining, and
various steps have been taken to deal with this. The Park Agency, however, does not have
adequate funding or human resources for implementing all of the activities in their
management plan.
4.2.3. Readiness of actors in Papua
BBKSDA Papua
As a government institution supervising the management of all conservation areas including

the Cyclops Nature Reserve and Lorentz National Park, the BBKSDA is an important player
in the landscape. It is very keen on working with LESTARI in any conservation activities
given that the BBKSDA realizes that it does not have enough financial capacity to finance
conservation activities in its administrative area. In addition, it does not have enough staff to
manage its very large conservation area. The BBKSDA is also aware that its human
resources are still lacking necessary skills and capacity (management, financial reporting,
technical) for implementing activities related to PES and REDD+ in its jurisdiction.
Considering its lack of staff, the BBKSDA Papua has recruited local communities to be forest
police and tries to empower and involve local communities in forestry activities.
Hirosi
Located in Sentani, Jayapura Regency, Hirosi is a local NGO that has been actively seeking
opportunities for PES activities that can be developed in its area. It currently manages a
recreational area equipped with various facilities including two swimming pools and a green
school. The water for the swimming pools is sourced from a natural waterfall in the Cyclops
nature reserve. Despite not specifically being involved in the distribution of incentives in a
performance-based payment mechanism, Hiroshi is only one of a very few organizations in
Papua with the capacity to implement PES/REDD+ related activities in the Cyclops
landscape. It has managed small to medium sized funds and has adequate human resource
capacity. To be able to implement PES/REDD+ activities properly, a capacity building
program is required, particularly on organizational and financial management.
Qualala – PT. Alam Indah Jayapura
Qualala, a private company working in the water bottle industry, is a potential partner for the
implementation of PES/REDD+ activities in the Cyclops landscape given that the water used
in the industry comes from the Cyclops nature reserve. Compared with PDAM, a local
government-owned drinking water company that consistently shows a negative profit,
Qualala has better financial capacity as well as more skilled human resources. Given that
this company is not a member of the collaborative management for Cyclops, further
engagement is required to get them onboard with the idea of developing PES in the area.
Perusahaan Daerah Air Minum (PDAM)
PDAM has managed drinking water services sourced from Cyclops Nature Reserve for
Jayapura City and Sentani. Despite having various social community development activities,
the PDAM has not yet implemented PES concept in its community development activities.
The PDAM is one of the signatories of the LESTARI co-management initiative and is
considered to be one of the key players in any PES scheme on water that has the potential
to be developed in the landscape. It has financial capacity to be part of PES initiative;
however, for this initiative to happen, further engagement and human resource development
trainings on PES need to be further undertaken.
Yayasan Peduli AIDS (Yapeda)
Yayasan Peduli AIDS (Yapeda) is a local NGO and was involved in various local community
development programs during IFACS. Its staff is predominantly young and well educated,
and as such, it can be considered as a standout example in the Mimika region. Compared
with other organizations, Yapeda has better overall management skills, including for financial
reporting and proposal development.
5. GOVERNMENT
REGULATIONS ON PES
AND REDD+
The GoI has issued several regulations and policies that form the basis of the legal
framework for PES and REDD+ implementation in the country. The GoI is still formulating
appropriate policies to strengthen PES development and implementation, especially in
relation to REDD+. This chapter discusses PES and REDD+ related regulations at the
national, provincial and local levels, covering regulations that have already been approved
and those that are currently under development.
Currently, no overarching regulation for the PES mechanism has been approved at the
national level, although the GoI has made continuous efforts to formulate one. Some of the
earlier work included the development of ecosystem restoration concessions, water use and
catchment area protection, nature-based tourism and forest carbon.
There was an attempt to quantify the percentage of benefit transfer distribution from forest-
carbon activities through the former Ministry of Forestry (MoFor - now the MoEF) Regulation
No. 36 of 2009, but it was deemed invalid as only the MoF has the authority to regulate
financial distribution mechanisms (CIFOR 2015). Since 2010, the MoF has conducted
consultations and discussions with stakeholders at the local level to gather inputs that will be
used as the basis for the revision of MoFor Regulation No. 36 of 2009, particularly regarding
aspects related to benefit-sharing mechanisms.
The list of all PES and REDD+ related regulations are summarized in Annex 5. However,
this section will further elaborate two of the most important regulations for shaping the future
of PES and REDD+ mechanisms in Indonesia.
a) Draft Regulation on Environmental Economics

Instruments
The GoI has already drafted a government regulation on environmental economic
instruments with a proposed PES concept, as illustrated in Figure 23, and a PES
mechanism as illustrated in Figure 24. This draft regulation is derived from Law No. 32 of
2009 on Environmental Protection and Management.
Figure 23: PES concept based on draft government regulation
Figure 24: PES mechanism based on draft government regulation

To preserve environmental functions, the central and local governments should develop and
implement environmental economic instruments that include: (i) planning on development
and economic activities, (ii) environment funding, and (iii) incentives and/or disincentives.
The instruments for the planning of development and economic activities can take the form
of a compensation and payoff mechanism between local governments, among others. The
instruments for environmental funding include a guarantee fund for environmental recovery,
a fund for handling environmental contamination and/or degradation and environmental
recovery, and a trust fund (dana amanah) for conservation. The development of a PES
mechanism is part of the incentive and disincentive instrument.
b) Law No. 23 of 2014 on Regional Governance
(Article 14)
The authority to manage natural protected areas lies with the MoEF, with some authority
given to provincial and local governments. Law No. 23 of 2014 was enacted to redefine the
relationship between authorities (the central, provincial and local governments), as
previously stipulated under Law No. 32 of 2014 on Regional Governance and lastly
amended by Law No. 12 of 2008.
Under the new law, district and city governments only have the authority to manage large
forest parks. One of the consequences of this law is that all KPHPs and KPHLs will no
longer be managed by regency/district/city governments, as the authority will be transferred
to the provincial government.80 As a result, regency/district/city level government will no
longer provide financial contributions to these types of KPH. The KPHs will receive funding
from the APBN, APBD Propinsi, and other sources of funding.
There is an indication that the government unit of forestry at the district/regency level (SKPD
Dinas Kehutanan Kabupaten/Kota) will no longer be operational. However, the full
implementation of Law No. 32 of 2014 is subject to the enactment of the revision of
Government Regulation No. 41 of 2007 on the Organization of Local Government
Apparatus.
Table 16 shows the different levels of authority of government institutions in relation to the
management of natural protected areas under Law No. 23 of 2014.
Table 16: Division of authority - natural protected area

Institutions Level Remarks on authority
Policy and norms
MoEF National to  Develop a macro plan.
local
 Gazette all forest statuses and develop
standards for conservation of forests and their
ecosystems.
Provincial Province  Develop a macro plan (cross-districts) - (no
government longer applicable).
District/city Local  Develop a macro plan (for the respective
government district) - (no longer applicable).
Administration (implementation)
MoEF National to  Develop standards and criteria for natural
local protected area management.
 Manage national park and KPHK.
80There was an indication that the District Government Unit of Forestry (Dinas Kehutanan Kota/Kabupaten) will no longer
be operational, therefore regional government responsibilities for forestry rests at the province level (Province Government
Office of Forestry / Dinas Kehutanan Provinsi).
Institutions Level Remarks on authority
Provincial Province  Manage cross-district protection forests and
government other relevant natural protected areas.
 Manage KPHP and KPHL.
 Manage permits covering cross-district
protection forests.
District/city Local  Manage district/city protection forests and
government other relevant natural protected areas - (now
limited to managing grand forest parks).
 Manage permits in the respective
districts/cities - (no longer applicable).
Control / monitoring  
MoEF National to  Supervise activities in protection forests.

local
Provincial Province  Supervise activities in protection forests - (no
District/city Local  Supervise activities in protection forests - (no
Source: (CIFOR 2015) available at: http://www.cifor.org/publications/pdf_files/OccPapers/OP-132.pdf
6. CONCLUSIONS
This chapter synthesizes the main outcomes of the information collection and analysis
process of the previous chapters. The focus lies on general opportunities and challenges
relevant to LESTARI’s future planning. Valuable key messages regarding contextual
awareness are also presented. Based on these conclusions, final concrete
recommendations are developed on how to harness opportunities and overcome challenges
in Chapter 7.
6.1. Focal point of coordination for funding opportunities

A focal point of coordination is vital for properly managing distribution of funds from various
sources of funding, co-financing, and partnership opportunities to finance PES and REDD+
activities in the landscape. LESTARI could facilitate the flow of funds from donors or fund
managers to organizations in the landscape through a focal point of coordination. The need
to coordinate and improve the capacity of LESTARI staff and stakeholders on fund
management, including grants and fund applications, was already highlighted in the
LESTARI Quarterly Report – First Quarter of Year 1 (October – December 2015).
This can be done by the strengthening capacity of LESTARI’s staff that deal with funding
both at the national and landscape level. Among various possible activities that could be
carried out by the focal point of coordination is the development of a LESTARI co-financing
architecture which is both a comprehensive business plan and incentive structure for
REDD+/PES activities as much as an instrument to attract public and private as well as
domestic and international finance. The financial architecture will have to describe how the
provision of incentives and funds are re-financed, disbursed, replenished; how cash flow is
managed; and how fiduciary and guarantee procedures are set up. In other words, it should
explain and justify all elements of the proposed financial management scheme, and depict
and detail all financial mechanisms, flow of funds and financial provisions.
6.2. Financing opportunities and mechanisms for

LESTARI
There are a number of funds in Indonesia’s climate finance arena (both international and
domestic) that can be used to finance PES/REDD+ activities in the LESTARI landscapes.
However, the utilization of these funds has not reached their maximum potential due to
capacity issues of the institutions managing them and/or the political dynamics within the
institutions.
The size of domestic funding directed towards sustainable forest management in Indonesia
exceeds international funding by far (Angela and Glenday 2016). As illustrated in Figure 5 in
Chapter 2, domestic funds were mainly channeled through budget transfer instruments and
the bulk of them supported “indirect” activities, with most support going to the forestry sector.
Domestic funding sources are relatively straightforward and can be accessed by local
community groups in a more cost effective way, with less stringent requirements on proposal
development and report writing. The majority of domestic funds are already disbursed and
implemented on the ground. These funds, however, face common and persistent challenges
in management, oversight, and optimized use for the benefit of local communities.
The Village Fund is one of the few funds that is directly managed at the village level, as
opposed to other types of government funds that are usually administered at the national or
district levels. If managed properly through a participatory approach, the Village Fund would
have a better chance of contributing to local community development with stronger local
ownership. In addition, district/city governments facilitating the flow of funding from central
government to the villages are still in need of various types of assistance. Embedded in a
larger framework of sustainable landscape management, the fund could overcome some
barriers of scale and institutional coordination. The Village Fund could be a prime source for
performance-based PES funding in the landscapes. For this, building on local experiences
such as the Timber Harvesting Postponement Credit (Kredit Tunda Tebang - KTT) (see
section 2.1.7) and international best practices of PES will be important. This discussion is
continued as a final recommendation in section 7.1
The Government Disaster Relief Agency (BNPB) considers forest fires to be a national
disaster and aims at shifting more resources, including the National Disaster Relief Fund,
towards prevention activities. This is aligned with the LESTARI focus on community-based
forest fire management in the Katingan-Kahayan Landscape in Central Kalimantan. The
Watershed Fund offers various programs targeting local communities living around
prioritized watersheds, such as the Nursery Program (Kebun Bibit Rakyat – KBR) and BLM-
PPMPBK. Synergies and LEDS programmatic alignment of the National Park Fund
supporting activities for communities in the national parks inside LESTARI landscapes
should be sought where possible. In addition, activities supported by PNPM Mandiri
Kehutanan can also be aligned and leveraged by LESTARI.
For international funding, the Norway – GoI partnership is the largest pledged fund for forest
conservation for Indonesia. Although there have been operational challenges, the likelihood
of this fund being transferred and spent is ultimately large. LESTARI should closely monitor
ongoing developments in the MoF and MoEF and explore ways to be ready once payments
towards sub-national activities are on the agenda. The GCF, the largest international climate
fund, is a prospective new funding opportunity worth pursuing by LESTARI. Unlike many
other international funds, the GCF supports activities managed by sub-national
governments, NGOs and the private sector that should increase the likelihood of success.
Directing capacity building workshops towards relevant actors at the MoEF and MoF, as well
as local governments, could further achieve this goal. In addition, having solid M&E and
MRV frameworks in operation will position LESTARI well. This discussion is continued as a
final recommendation in section 7.3.
LESTARI can develop joint initiatives and organize joint activities with private companies
operating in the landscapes through their CSR programs to create synergy. Despite their
vision to become a “carbon balanced” company and efforts to reduce GHG emissions in
their supply chain, consumer goods companies seem to show little interest in being involved
with sustainable palm oil growers beyond simple RSPO sourcing. The companies view their
position in the supply chain as being too distant from local agriculture. A more direct and
common way that consumer goods companies invest in local sustainable landscapes and
climate change mitigation initiatives is through the purchase of VERs via the voluntary
carbon market.
6.3. Maintaining the potential for renewable energy

development
Rural electrification with renewable energy in LESTARI landscapes at lower costs and with
independence from fossil fuel expenses is one of the catalysts for sustainable development.
Use of renewable energy sources such as hydropower and biomass are an alternative to
fossil fuel use for decentralized electrification of villages. Where watersheds offer potential
for micro-hydro installations, these should be given preference. Renewable energy initiatives
increase resource efficiency in the rural green economy, relieve households of expenditures
related to purchasing fuel, enable alternative income streams from non-forest dependent
local businesses through energy cost reductions, and reduce GHG emissions (FAS et all.
2013). In addition, a simple calculation suggests that investment in a 10-15 kW micro-hydro
or micro-biomass-gasifier system is lower than the investment required for generators and
their fuel costs for five years.81
Hydropower plants and biomass gasifier power plants require fuel from renewable sources
that can be obtained from sustainable forest management or solid waste management
practices. In turn, revenue earned from hydropower and biomass operations can be used to
finance sustainable forest management or waste management activities. Forest
conservation for maintaining the potential of renewable energy is therefore aligned with
LESTARI SEA-LEDS.
Biomass and micro-hydropower in the landscapes present not only a high number of co-
benefits and enabling value, but also have large up-scaling potential and connection with
other USAID objectives such as sustainable rural development, economic growth and
promotion of renewable energies.
Financing schemes from public and private sources as well as from commercial banks either
from international or domestic sources can be used to finance the initial investment of
renewable energy power generation. Developing the skills of local communities is essential
for maintaining effective power plant operations. At the same time, establishing a network of
technical experts would also reduce risks associated with the investment and help to raise
the awareness of the wider community, government and the private sector.
A series of watershed and forest conservation activities can create an enabling environment
for renewable energy development within the LESTARI landscapes. LESTARI can
collaborate with USAID Indonesian Clean Energy Development (ICED) to move forward with
the development of renewable energy, including setting up a pilot project within the
LESTARI landscapes. Southeast Aceh and Gayo Lues are the ideal places for a hydropower
81 Generally, micro-hydro can be installed at the cost of USD 2000 – 3000/kW capacity. The investment cost
often depends on the quality of product and services installed on a particular site. For instance, simple operation
of micro-hydro power may cost only USD 1000 – 1500/kW, but its reliability will be questionable (engine
operations may not last more than two years).
pilot project due to the importance of watersheds in these areas. Renewable energy
development is also aligned with Gayo Lues’ vision to become diesel free by 2017, a
program of the District Government Office of Mining and Energy (Dinas Pertambangan dan
Energi Kabupaten).
HPI has a strong track record on renewable energy consultancy in Indonesia and is ready to
design an approach for watershed conservation, conduct an initial survey, undertake risk
assessments, and develop capacity of local communities in support of watershed and forest
conservation.
Biomass is another potential renewable energy where biomass gasifier power plants can be
fed from sustainable forest management practices or solid waste materials from palm oil
mills or plantation operations. However, development of a biomass gasifier power plant from
scratch, including the establishment of sources of biomass, requires a lot of work, making it
impractical for LESTARI in most landscapes. A biomass gasifier power plant is best
developed in a location where biomass waste is already available. Thus, cooperation with
palm oil plantations producing biomass waste is a possible scenario to explore further.
6.4. Challenges of regulatory frameworks and

institutional readiness
Both the regulatory framework and institutional capacity to implement PES/REDD+
mandates in LESTARI landscapes are not yet at an operational stage in most cases.
Incomplete regulations on PES/REDD+ in Indonesia across all administrative levels and the
lack of practical examples of successfully implemented PES schemes in Indonesia inhibits
the implementation of such mandates. Continued relationship building, capacity building and
co-creation of opportunities will have to continue in order to identify institutional
arrangements with concrete pathways for co-finance acquisition and distribution.
The majority of potential actors (government and non-government) in the landscapes do not
have sufficient capacity to implement PES/REDD+ related activities. If a specific
PES/REDD+ initiative is envisioned to be developed in the landscapes and all implementing
partners are clearly identified, a more detailed capacity assessment and long-term capacity
building plan would need to be further developed. The capacity building programs should
include developing understanding on the PES/REDD+ concept and its benefits to the local
community, and should also emphasize management aspects (organizational and financial)
of PES/REDD+ for actors managing distribution of incentives.
While institutional reform and regulatory changes in Indonesia have had success in some
sectors since 2009, there has been limited progress towards delivery of integrated climate
change mitigation, climate finance and results based payment schemes, including PES and
REDD+. These types of activities have not meet all expectations as there are still obstacles
for stakeholders interested in sustainable landscape management. The complexity of
Indonesian governance is highlighted in CPI’s report, which stated that Indonesia has
persisting weaknesses in its enabling environment that impede efficient land use
investments (Angela and Glenday 2016). Such issues include both technical and non-
technical aspects including lack of financial management as well as limited capacity of
institutions and human resources. Efforts in recent years to explore new and more efficient
ways of cooperation and increasing aid effectiveness such as the Indonesia-Norway results-
based agreement have encountered hurdles and have yet to deliver at the envisaged scale
or pace.
Following the dissolution of the REDD+ Agency and incorporation of its role into the MoEF,
the GoI has been working on institutional arrangements and mechanisms for managing the
Norway funds and the eventual takeover of the interim administration from the REDD+ Unit
under the UNDP Environment Division. However, debate on which institution should play
this role in the future is currently still underway. Current developments indicate that the MoF
will most likely takeover the management of the Norway funds and other climate related
funds (including the ICTTF and previous funding instrument - FREDDI) with its plan to
establish a new BLU - Perubahan Iklim. This plan, however, has a high level of uncertainty
regarding its timeline and institutional arrangements, considering the architecture and
overlapping roles and functions of several government institutions (MoEF, MoF, and
BAPPENAS) in climate finance. If the plan to establish a new BLU under the MoF is not
realized, it is likely that the BLU of BP2HP under the MoEF will be the most important
government institution managing climate funds in Indonesia. The government is currently
drafting a regulation on the Reforestation Fund (Dana Reboisasi) that is currently managed
by the BLU-BP2HP, with the strong possibility of expanding the use of the fund for PES. The
need to engage with the BLU for future financing opportunities is further discussed as a
recommendation in Section 7.3.
6.5. Challenges of PES/REDD+ design and

implementation
The design and communication of any PES initiative should take into account previous PES
type schemes in Indonesia and the key lessons that are applicable to the sites of interest.
Success stories from Lombok and West Java emphasize the role of multi-stakeholder
governance and participatory planning, while other experiences highlight the importance of a
clear communication plan. The expectation of local stakeholders and communities of
receiving large and timely allocations of funds from PES schemes will have to be
strategically managed from the beginning. It is essential to define a very clear
communication strategy on PES and align all involved staff and facilitators.
A clearly defined and iteratively revised communication strategy on PES timing and
expectations for local facilitators can help to maintain interest and commitment while
avoiding misunderstandings, disappointment and frustration throughout the process. When
referring to potential direct payments to public budgets, households or stakeholders, it will be
essential to explain: (i) the conditionality of payments, (i) timelines and (iii) gateways to their
effective introduction. It will be important to be clear about the fact that the payments, their
amounts, their disbursement schedules and other elements are still to be defined. Many of
these aspects are very hard to define at an early stage, but questions about these issues
can come up very early in stakeholder consultations. It’s therefore advisable to take a
cautious approach in order to avoid creating frustrating expectations and endangering the
Free Prior Informed Consent (FPIC) process in landscapes.
Financial incentives for sustainable forest management can also come in the form of low
interest loans brokered by domestic public and private financial actors. The support of banks
with a national or provincial branch network can greatly advance the distribution of PES
payments or low-interest loans. A relevant example is the KUR (section 2.1.4 & Annex 3).
Internationally, the Amazon Sustainable Foundation developed a partnership with a national
bank to outfit signatories to its PES/REDD+ scheme with a free bank account where PES
money accumulated monthly until farmers came to town – as long as they were found in
compliance with the system’s rules (FAS et all. 2013). Such schemes around bank
accounts and micro-credit schemes should be integrated into consideration of co-finance
distribution and local PES implementation mandates.
The importance of the voluntary forest carbon market should not be overestimated as a
source for the majority of performance-based payments. Still, being ready to report soundly
monitored GHG emission reductions can be relevant for accessing finance via international
carbon markets and donors and investors. Both Norway funds and the GCF are
considering performance-based payments for sub-national PES/REDD+ activities. The
creation of a credible asset of GHG ERRs achieved and monitored against a solid baseline
is a multi-purpose effort related to both internal M&E and external MRV frameworks.
The requirement of performance monitoring will continue to be a core aspect both on the co-
finance acquisition and PES activity finance front. Results-based finance such as from the
Norway-GoI partnership or carbon market demand fulfillment of their respective M&E or
MRV frameworks. Likewise, local PES schemes will only create tangible results when
payments for ecosystem services are linked to the monitored performance of local actors to
incentivize behavioral changes. Therefore, the integration of existing LESTARI M&E
frameworks with GHG MRV and local ecosystem service providers demands attention.
7. RECOMMENDATIONS
Based on the criteria provided by LESTARI and the conclusions of the analysis, HPI regards
the following recommendations as realistic and achievable initiatives to be pursued in the
next four years. The proposed recommendations will contribute to achieving four indicators
in the AMEP:
 Indicator 4: number of public policies addressing climate change and/or biodiversity

conservation introduced, changed or adopted consistent with citizen input
 Indicator 12: number of people receiving United States Government (USG)
supported training in natural resources management and/or biodiversity conservation
 Indicator 13: amount of investment mobilized (in USD) for climate change as
supported by USG assistance
 Indicator 14: number of people receiving livelihood co-benefits (monetary or non-
monetary)
An indicative work plan with an overview of the temporal integration of initiatives is available
in Annex 7.
7.1. Incorporating PES in the utilization of domestic

funds
LESTARI should work with and advise the district government and village administrator to
allocate a certain percentage of the Village Fund for environmental purposes and to
incorporate PES based on the priorities and specific needs of a village. This can be done by
gaining experience around the implementation of the Village Fund and obtaining stakeholder
feedback on their wishes and interests.
A village or district level PES will most likely come with a village regulation (peraturan desa)
or a district level regulation (peraturan daerah) as part of the process. This will help achieve
indicator 4 of LESTARI, and also help address one of the LCP’s recommendations for
Southeast Aceh – “the need to establish an umbrella law at the district level and a more
detailed law at village level that sets out the provisions on the management of the natural
resources in Southeast Aceh District.” A pilot project in Southeast Aceh should be given first
priority due to the already existing advocacy efforts at the district and village levels (see
Section 7.5.1). Replication of this initiative in other districts in the landscape will magnify the
impacts.
In addition to the Village Fund, LESTARI should consider partnerships with BPDAS for
incorporating PES into programs funded by the Watershed Fund, and should also seek
close cooperation with the BNPB in utilizing the Disaster Relief Fund for forest fire
prevention management in Central Kalimantan (see Section 7.4.3). The Cyclops landscape
in Papua could be another focus area.
HPI is ready to support LESTARI’s efforts at all levels, from village to national, in the
necessary development of concepts, presentations, stakeholder consultations, workshops,
and concept notes in order to direct a portion of the Village Fund towards LESTARI’s PES
schemes (see section 7.5).
7.2. Supporting the establishment of Climate Change

BLU under the MoF
Despite the dynamic arrangement of the management of climate finance within the
government, there is an opportunity for LESTARI to tap into government funding in its
current form or under the proposed new arrangement. LESTARI should support advocacy
efforts in climate finance at the national level and also provide technical assistance and
capacity building on how results-based payments can be introduced. If the plan to establish
a new Climate Change BLU (BLU Perubahan Iklim) under the MoF is realized, LESTARI
should organize a workshop to present its project and initiatives in need of support or co-
financing. LESTARI should support capacity building programs for the BLU aimed at
improving the BLU’s capacity in managing funds, particularly with regards to project
management skills (both financial and technical aspects). This should be done in such a way
to promote LESTARI landscapes to the BLU. If the plan to establish a new BLU under the
MoF does not materialize, LESTARI should approach the BLU of BP2HP under the MoEF,
who will be the most important institution managing climate finance in Indonesia.
To facilitate this, LESTARI needs to cooperate with USAID Build Indonesia to Take Care of
Nature for Sustainability (Bangun Indonesia dengan Jaga Alam untuk Keberlanjutan -
BIJAK), which focuses more on advocacy efforts at the national level. HPI is ready to
support LESTARI’s capacity building and advocacy efforts through its relevant networks, and
through the organization of events, workshops, presentations and publications. As a result of
its strong relations with both the MoF and MoEF, gained from extensive work in the technical
and policy aspects of climate finance, HPI can provide continuous advisory services on the
optimal positioning of LESTARI in the dynamic climate finance landscape of Indonesia at the
national level.
7.3. Accessing the GCF and Norway funds

PES schemes, forest fire management in Central Kalimantan (section 7.5), and conserving
forests for creating an enabling environment for village electrification using renewable
energy (section 6.3), are all eligible activities for climate change mitigation under the GCF
and Norway funds. These two international funding opportunities are by far the most
promising and worth pursuing. HPI recommends launching a concerted effort to access GCF
and/or Norway funding for LESTARI landscapes with clear deliverables of progress within 12
months.
The GCF is an exciting new funding opportunity as it is the largest international climate fund
with USD 10 billion of initial capitalization and has just started project selection for financing
(see section 2.2.5). The fund has identified five investment priorities that will deliver major
mitigation and adaptation benefits, one of them related to forestry, which aims at scaling-up
finance for forests and climate change. In addition, the GCF might also start making result-
based payments for sub-national REDD+ soon to support mitigation and adaptation actions.
The key issue in accessing the GCF is the need to apply through Accredited Entities (AEs),
whereby an AE can only access the fund for certain types of fiduciary functions, sizes of
project/activity within a program, and under certain environmental and social risk categories.
Becoming a GCF AE is a long and intricate process, which is not practical for temporary
programs such as LESTARI. Recent intelligence suggests that partnering with already
established AEs promises to be a more cost-effective approach than trying to become a
newly accredited entity. LESTARI can partner with regional and international entities that
can access and implement projects globally, such as Conservation International (CI),
Deutsche Bank AG, UNEP, UNDP, ADB, and the World Bank. The progress of PT. SMI and
KEHATI Foundation in becoming Indonesia’s GCF AEs is also worth monitoring.
For the GCF, this fund access push should result in a clear gateway decision after
approximately three months and scoring of LESTARI landscape activities for funding
probability under the GCF. HPI estimate that in a good scenario a concept note could pass
several stakeholder rounds and receive a non-objection from the NDA and could be
submitted to the GCF between 10-14 months after initiation of the effort. Due to limited
experience with funding approvals under the GCF it is difficult to say how much time would
realistically pass between concept note submission, review, and decision and potential fund
disbursement. A realistic assessment is that the GCF could represent an international option
for funding LEDS activities in the final years of LESTARI and beyond.
In addition to the GCF, the Norway funds are another promising source of funding that
needs to be continuously monitored. Despite the USD 1 billion that Norway has offered to
Indonesia, less than 10% has been handed over. As a result, LESTARI should also consider
tapping into the Norway funds by bridging how performance based payment could really
work, particularly for PES schemes and forest fire management. Norway’s intention to
support the Peatland Restoration Agency (BRG) is also worth monitoring, particularly for
LESTARI’s focus on forest fires in Central Kalimantan.
In addition to supporting the establishment of the Climate Change BLU under the MoF (see
Section 7.2), LESTARI, with the support of HPI, can explore possibilities for operationalizing
performance based payments at a sub-national level through other approaches, including
partnering with the private sector and proposal submission to access the Norway funds once
Indonesia’s funding instrument through the Climate Change BLU is established.
7.4. Designing PES scheme

Designing a PES scheme and mechanism is a milestone in implementing LESTARI’s work
plan and integrating PES in supporting activities of each technical theme in the landscapes
such as water resource management in Aceh, forest fire management in Central
Kalimantan, and collaborative management for conservation area management in Papua.
A clearly defined communication strategy on PES timing and expectations for local
facilitators can help maintain people’s interest and commitment while avoiding
misunderstandings, disappointment and frustration through the process. When referring to
potential direct payments to public budgets, households or stakeholders, it will be essential
to explain: (i) the conditionality of payments, (ii) the timeline and (iii) gateways to their
effective introduction.
Generic elements for PES best practices should be elaborated by expert analysis based on
existing LCP, LEDS, SEA and other documents, new data mining, surveys and stakeholder
consultation. HPI is ready to initiate the participatory elaboration of PES design documents
(Engel, Pagiola and Wunder 2008) including:
 Identification of service of interest

 Definition of sellers and buyers of PES and funding sources
 Definition of area/level of service
 Technical, legal and socio-economic study
 Calculation of payment threshold based on opportunity cost
 Definition of payment mechanism (frequency and fund access)
 Institutional coordination framework and implementation responsibilities
 Good governance structure (capacity building and public participation,
mechanisms for transparency and accountability, dispute settlement)
 Monitoring and evaluation frequency and timeline
The following is a summary of the status of existing ideas on PES opportunities in Aceh,
Central Kalimantan and Papua. Development of PES initiatives in specific areas in the
landscapes is based on the prioritization of the LCP, LEDS and SEA, as well as on already
existing efforts on the ground. In these cases, support from LESTARI will help leverage the
impact of local initiatives.
7.4.1. PES design on water in Southeast Aceh (including. Gayo Lues)
Aligning with the LCP, PES for water pilot projects need to take place in priority focus areas
for conservation activities in Southeast Aceh including the Gayo Lues regency using the
Village Fund (see Section 7.1). The priority focus area in Southeast Aceh are: (i) Lawe
Loning Aman, Lawe Sigala-Gala Subdistrict; (ii) Lawe Mengkudu, Ketambe Subdistrict; (iii)
Pulo Piku, Darul Hasanah Subdistrict; and (iv) Peseluk Pesimbe, Deleng Pokhkisen
Subdistrict. Following up on IFACS initiatives, a PES scheme can also be developed for
management of the Panosan-Sepakat Watershed in Gayo Lues.
7.4.2. PES design on water in the buffer zone of Cyclops Nature Reserve
Building on the signing of the MoU on the co-management initiative in the Cyclops buffer
zone and stakeholder awareness on the importance of protecting Cyclops Nature Reserve
for maintaining clean water sources, livelihoods of indigenous people and biodiversity
conservation, LESTARI should develop a PES scheme on water management in this area.
This PES will leverage Cyclops’ collaborative management by incentivizing indigenous
people and local communities to maintain the forest area for sustainable water management.
LESTARI should engage PDAM and PT. Indah Alam Qualala for possible funding
opportunities, collaborate with BBKSDA Papua for local community empowerment, and use
the MSF as a platform for communication between stakeholders. LESTARI should start by
promoting enabling conditions through awareness raising, building institutional frameworks,
developing capacity building programs on performance based payment for environmental
management, and linking PES activities to the green economy. Some prominent issues to
be addressed include: (i) lack of capacity of local actors, particularly on overall project
management, proposal development, and financial reporting, (ii) overlapping land ownership
related to customary law, and (iii) developing an understanding of benefit transfer
mechanisms, particularly on how these mechanisms will address the root causes of land use
change and deforestation that are mainly caused by mountain communities migrating to the
provincial capital of Jayapura instead of the indigenous people and local communities.
7.4.3. PES design in Central Kalimantan
A pilot project related to forest fire management in Pulang Pisau District of Central
Kalimantan will be closely aligned with LESTARI’s focus in the lowland Katingan-Kahayan
landscape. LESTARI should seek close cooperation with BNPB and BPBD, who are
currently placing more attention and directing more resources towards forest fires. In
addition, monitoring the development of the BLU Climate Change establishment under the
MoF and Peatland Restoration Agency (BRG) is crucial given that the Norwegian
government is intending to support the BRG particularly on peat fire management through
the BLU Climate Change once it is established.
A similar initiative for incentivizing villages that are able to keep their forests free from fire
using the Disaster Relief Fund from the BNPB in Jambi and Riau can also be adopted.
LESTARI can also support the BNPB by providing technical input or co-financing its efforts
in utilizing the Village Fund for forest fire prevention. In the Pulang Pisau district of Central
Kalimantan, a pilot project related to forest fire management in one or two of the following
villages will help realize the objectives of the LCP: Kalawa, Mantaren I, Gohong, Buntoi,
Jabiren, and Taruna.
In the upland areas of Katingan-Kahayan landscape where illegal mining threatens the
river’s ecosystem, the possibility of a PES for water scheme can be further studied and
developed. Cooperation with mining companies should also be sought where possible given
that some companies have already carried out CSR programs aimed at minimizing the
social and environmental impacts of their operations. Bukit Baka Bukit Raya National Park
Agency should also be part of the partnership given that it has already carried out some
efforts to minimize illegal mining within its boundaries. This is aligned with LESTARI’s focus
on collaborative management of conservation areas in the upland areas of the Katingan-
Kahayan landscape.
8. REKOMENDASI-
REKOMENDASI
Berdasarkan hasil analisis dan kriteria yang ditentukan oleh LESTARI, HPI mengusulkan
beberapa rekomendasi yang dianggap realistis untuk dicapai dalam jangka waktu empat
tahun ke depan. Rekomendasi-rekomendasi yang disarankan akan berkontribusi terhadap
tercapainya empat indikator sebagaimana tercantum di dalam AMEP.
 Indikator 4: jumlah kebijakan publik mengenai perubahan iklim dan/atau konservasi

keanekaragaman hayati yang diusulkan, diubah, atau ditetapkan dengan masukan
masyarakat
 Indikator 12: jumlah orang yang menerima bantuan pelatihan manajemen sumber
daya alam dan/atau keanekaragaman hayati dari pemerintah Amerika Serikat
 Indikator 13: jumlah investasi yang berhasil dimobilisasikan (dalam dollar Amerika)
menggunakan bantuan pemerintah Amerika Serikat untuk perubahan iklim
 Indikator 14: jumlah orang yang menerima manfaat berupa mata pencaharian (uang
dan bukan uang)
Rencana kerja awal terintegrasi dari inisiatif-inisiatif yang diusulkan tersedia di Lampiran 7.
8.1. Mengintegrasikan PJL dalam pemanfaatan dana

domestik
LESTARI perlu bekerja sama dengan pemerintah kota/kabupaten dan pengurus desa untuk
mengusulkan pengalokasian sebagian Dana Desa (berupa persentase) untuk pemeliharaan
lingkungan, dan mengintegrasikan inisiatif PJL ke dalamnya berdasarkan prioritas dan
kebutuhan desa. Hal ini bisa dilakukan dengan mengumpulkan informasi dan pengalaman
dari berbagai pihak terkait tentang pelaksanaan penggunaan Dana Desa di lapangan, dan
melalui pemahaman akan minat dan harapan para pemangku kepentingan.
PJL di tingkat desat atau kabupaten/kota bisanya disertai dengan perumusan peraturan
desa atau peraturan pemerintah kabupaten/kota sebagai bagian dari proses. Hal ini akan
membantu LESTARI mencapai indikator 4 dan juga menjawab salah satu rekomendasi
Rencana Konservasi Bentang Alam di Aceh Tenggara – “kebutuhan untuk merumuskan
sebuah payung hukum di tingkat kabupaten/kota dan peraturan yang lebih rinci di tingkat
desa sebagai landasan pengelolaan sumber daya alam di Kabupaten Aceh Tenggara”.
Sebuah proyek percontohan di Aceh Tenggara perlu menjadi prioritas utama karena sudah
ada upaya advokasi di tingkat kabupaten dan desa (lihat bagian 8.5.1). Replikasi inisiatif di
desa-desa di kabupaten/kota yang lainnya akan memperluas dampak yang diharapkan.
Selain Dana Desa, LESTARI perlu mempertimbangkan untuk melakukan kerjasama dengan
BPDAS dalam mengintegrasikan PJL ke dalam program-program yang didanai
menggunakan Dana Daerah Aliran Sungai (Dana DAS) dan juga perlu berkolaborasi dengan
BNPB dalam memanfaatkan Dana Penanggulangan Bencana untuk pengelolaan kebakaran
hutan di Kalimantan Tengah (lihat bagian 8.4.3). Bentang alam Cyclops di Papua juga bisa
menjadi fokus area yang lain.
HPI bersedia untuk membantu upaya LESTARI di segala tingkatan dari tingkat desa sampai
tingkat nasional dalam mengembangkan konsep, membuat presentasi, dan melakukan
konsultasi dengan para pemangku kepentingan, menyelenggarakan lokakarya, dan
membuat peta konsep untuk mengarahkan pemanfaatan Dana Desa sehingga bisa selaras
dengan skema PJL LESTARI (lihat bagian 8.5).
8.2. Mendukung pembentukan BLU Perubahan Iklim

Di tengah dinamika struktur kelembagaan pemerintah dalam pengelolaan pendanaan
perubahan iklim, masih ada kesempatan bagi LESTARI untuk mengakses pendanaan
pemerintah di bawah struktur yang ada saat ini maupun di bawah struktur yang sedang
diusulkan. LESTARI perlu mendukung upaya advokasi pendanaan perubahan iklim di
tingkat nasional dan juga memberikan dukungan teknis serta peningkatan kapasitas untuk
memperkenalkan konsep pembayaran berbasis hasil. Jika rencana pendirian BLU
Perubahan Iklim di bawah Kementerian Keuangan terlaksana, LESTARI perlu
menyelenggarakan lokakarya untuk memperkenalkan proyek dan inisiatif-inisiatif yang
memerlukan dukungan pendanaan atau pembiayaan bersama (co-financing). LESTARI
perlu membantu peningkatan kapasitas BLU dalam pengelolaan pendanaan, terutama
dalam manajemen proyek (baik aspek keuangan maupun teknis). Hal ini perlu dilakukan
melalui cara-cara yang bisa mempromosikan bentang alam LESTARI. Apabila rencana
pendirian BLU baru dibawah Kementerian Keuangan ini tidak terwujud, LESTARI perlu
merangkul BLU BP2HP di Kementerian Lingkungan Hidup dan Kehutanan (KLHK) yang
akan menjadi institusi terpenting dalam pengelolaan pendanaan perubahan iklim di
Indonesia.
Untuk memfasilitasi inisiatif ini, LESTARI perlu bekerja sama dengan USAID Bangun
Indonesia dengan Jaga Alam untuk (BIJAK), yang lebih berfokus pada advokasi di tingkat
nasional. HPI siap membantu upaya peningkatan kapasitas dan advokasi LESTARI melalui
jejaring HPI yang relevan, dan juga melalui penyelenggaraan acara, lokakarya, presentasi,
serta publikasi. HPI memiliki hubungan erat dengan Kemeterian Keuangan dan KLHK dari
pekerjaan-pekerjaan terdahulu baik di aspek teknis maupun kebijakan pendanaan iklim
sehingga HPI mampu mengoptimalkan posisi LESTARI dalam dinamika pendanaan iklim di
Indonesia.
8.3. Mengakses dana GCF dan dana Norwegia

Skema PJL, pengelolaan kebakaran hutan di Kalimantan Tengah (bagian 8.5), dan menjaga
hutan untuk menciptakan situasi pendukung pelistrikan pedesaan menggunakan energi
terbarukan (bagian 6.3) merupakan kegiatan-kegiatan yang bisa diajukan dalam program
mitigasi perubahan iklim menggunakan pendanaan GCF dan Norwegia. Saat ini keduanya
merupakan sumber pendanaan iklim internasional yang paling menjanjikan dan yang paling
patut untuk diakses. HPI merekomendasikan sebuah upaya terpadu sebagai upaya
mengakses pendanaan GCF dan Norwegia dalam jangka waktu 12 bulan dengan capaian
(deliverable) yang jelas.
GCF merupakan sumber pendanaan baru yang menjanjikan karena GCF merupakan dana
perubahan iklim internasional terbesar dengan kapitalisasi awal sebesar 10 milyar Amerika
dan baru saja memulai seleksi proyek yang akan didanai (lihat bagian 2.2.5). Pendanaan ini
memiliki lima prioritas investasi yang diharapkan akan memberikan manfaat mitigasi dan
adaptasi dimana sektor kehutanan merupakan salah satu dari kelima sektor prioritas yang
bertujuan untuk memperbesar skala pendanaan hutan dan perubahan iklim. Di samping itu
GCF juga akan mulai mengoperasionalkan pembayaran berbasis hasil untuk REDD+ di
tingkat daerah.
Isu utama dalam mengakses dana GCF adalah perlunya memasukkan aplikasi melalui
entitas terakreditasi (accredited entities) dimana sebuah entitas hanya bisa mengakses
dana untuk fungsi fidusia tertentu, ukuran poyek atau kegiatan terterntu, dan di bawah
kategori resiko social dan lingkungan tertentu. Menjadi sebuah entitas terakreditasi
membutuhkan proses yang panjang dan rumit dimana hal ini tidak praktis untuk dilakukan
oleh program-program yang sifatnya sementara seperti LESTARI. Bermitra dengan entitas
yang sudah terakreditasi akan lebih efektif dibandingkan dengan mencoba menjadi entitas
terakreditasi baru. LESTARI bisa bermitra dengan entitas yang sudah terakreditasi baik di
tingkat regional maupun internasional seperti Conservation International (CI), Deutsche
Bank AG, UNEP, UNDP, ADB, dan World Bank. Perkembangan PT. SMI dan Yayasan
Kehati dalam menjadi entitas terakreditasi juga perlu dimonitor.
Upaya untuk mengakses dana GCF perlu berujung pada sebuah langkah yang jelas setelah
3 bulan dan dengan mempertimbangkan kegiatan yang tepat untuk didanai oleh GCF di
bentang alam LESTARI. HPI memperkirakan bahwa dalam skenario yang optimis, sebuah
concept note bisa melewati beberapa ronde diskusi para pemangku kepentingan dan
memperoleh peryataan tidak keberatan (a non objection letter) dari otoritas nasional yang
ditunjuk (NDA) dan bisa diserahkan ke GCF antara 10-14 bulan sejak dimulainya upaya ini.
Dikarenakan belum banyak contoh dalam proses persetujuan pendanaan GCF, jangka
waktu realistis yang dibutuhkan untuk penyerahaan konsep awal, pengkajian, pengambikan
keputusan, dan penyaluran dana masih belum bisa diprediksi untuk saat ini. Secara realistis
GCF bisa menjadi sumber pendanaan internasional untuk mendukung kegiatan di dalam
Strategi Pembangunan Rendah Karbon dalam tahun-tahun terakhir LESTARI dan
setelahnya.
Selain dana GCF, dana Norwegia adalah sumber pendanaan menjanjikan lainnya yang
perlu terus dimonitor. Pada saat laporan ini ditulis, dari 10 juta milyar AS yang ditawarkan
oleh Norwegia untuk Indonesia, kurang dari 10% nya saja yang sudah tersalurkan. Oleh
karena itu, LESTARI perlu mempertimbangkan untuk mengakses dana Norwegia dengan
menjembatani operasionalisasi pembayaran berbasis hasil, khususnya untuk skema PJL
dan pengelolaan kebakaran hutan. Keinginan Norwegia untuk mendukung Badan Restorasi
Gambut (BRG) juga perlu selalu dimonitor terkait dengan fokus kegiatan LESTARI dalam
pengelolaan kebakaran hutan di Kalimantan Tengah.
Selain mendukung pembentukan BLU Perubahan Iklim di bawah Kementerian Keuangan

(lihat bagian 8.2), LESTARI dengan dukungan dari HPI bisa menjajaki berbagai
kemungkinan untuk mengoperasionalkan pembayaran berbasis hasil di tingkat daerah
melalui cara-cara lain termasuk bermitra dengan sektor swasta dan pengajuan proposal
untuk mengakses dana Norway pada saat instrumen pendanaan Indonesia yang
direncanakan akan dikelola oleh BLU Perubahan Iklim sudah terbentuk.
8.4. Skema pengembangan pembayaran jasa
lingkungan
Merancang skema dan mekanisme PJL merupakan sebuah lompatan dalam implementasi
rencana kerja LESTARI dan mengintegrasikan PJL ke dalam aktivitas pendukung dari setiap
tema teknis di bentang alam LESTARI seperti pengelolaan sumber daya air di Aceh,
pengelolaan kebakaran hutan di Kalimantan Tengah, dan pengelolaan daerah konservasi
secara kolaboratif di Papua.
Strategi komunikasi yang tepat dan jelas bagi para fasilitator untuk mengkomunikasikan
waktu PJL dan harapan yang realistis bisa membantu menjaga minat dan komitmen
masyarakat. Secara bersamaan, hal ini bisa mencegah salah pengertian, kekecewaan, dan
frustasi di sepanjang proses. Ketika merujuk pada potensi pembayaran langsung ke
anggaran publik, rumah tangga, dan pemangku kepentingan lainnya, berikut adalah hal-hal
penting yang perlu dijelaskan: (i) kondisi pembayaran, (ii) jangka waktu, dan (iii) kesempatan
untuk memperkenalkan PJL secara efektif.
Komponen umum dari praktek terbaik PJL perlu dikembangkan oleh pakar berdasarkan
Rencana Konservasi Bentang Alam, Strategi Pembangunan Rendah Karbon, dan Kajian
Lingkungan Hidup Strategis serta dokumen-dokumen terkait lainnya, pencarian data terbaru,
dan konsultasi para pemangku kepentingan. HPI siap melakukan penjabaran dokumen
desain PJL melalui pendekatan partisipatif (Engel, Pagiola and Wunder 2008) termasuk:
 Identifikasi jenis jasa lingkungan

 Definisi penjual dan pembeli jasa lingkungan serta sumber pendanaan
 Definisi wilayah/tingkatan jasa lingkungan
 Studi teknis, hukum, dan social ekonomi
 Perhitungan batas pembayaran berdasarkan biaya peluang (opportunity cost)
 Definisi mekanisme pembayaran (frekuensi dan akses pendanaan)
 Kerangka koordinasi institusi dan tanggung jawab pelaksanaan
 Struktur pemerintahan (peningkatan kapasitas dan partisipasi publik, mekanisme
transparansi dan akuntability, dan penyelesaian sengketa)
 Frekuensi dan waktu pengawasan dan evaluasi (monitoring and evaluation)
Berikut ini adalah ringkasan status ide pengembangan potensi PJL yang ada di Aceh,
Kalimantan Tengah, dan Papua. Pengembangan inisiatif PJL di area bentang alam
LESTARI perlu didasarkan pada prioritas yang terdapat di dalam Rencana Konservasi
Bentang Alam, Strategi Pembangunan Rendah Karbon, dan Kajian Lingkungan Hidup
Strategis serta upaya yang sudah ada di lapangan. Dalam hal ini, dukungan dari LESTARI
bisa membantu memaksimalkan manfaat inisiatif lokal.
8.4.1. Desain PJL air di Aceh Tenggara (termasuk Gayo Lues)
Selaras dengan Rencana Konservasi Bentang Alam, proyek percontohan PJL air perlu
dilaksanakan di area yang diprioritaskan untuk konservasi di Aceh Tenggara termasuk Gayo
Lues dengan memanfaatkan Dana Desa (lihat bagian 8.1). Berikut ini adalah desa-desa
prioritas di Aceh Tenggara berdasarkan Rencana Konservasi Bentang Alam: (i) Lawe
Loning Aman, Kecamatan Lawe Sigala-Gala; (ii) Lawe Mengkudu, Kecamatan Ketambe; (iii)
Pulo Piku, Kecamatan Darul Hasanah; dan (iv) Peseluk Pesimbe, Kecamatan Deleng
Pokhkisen. Menindaklanjuti inisiatif IFACS, skema PJL juga bisa dikembangkan untuk
pengelolaan daerah aliran sungai Panosan-Sepakat di Gayo Lues. Kerjasama dengan Balai
Taman Nasional Gunung Leuser dan dengan organisasi-organisasi lokal seperti FAJEM
juga diperlukan untuk mewujudkan inisiatif PJL di Aceh.
8.4.2. Desain PJL air di kawasan penyangga Cagar Alam Cyclops
Menindaklanjuti penandatanganan Nota Kesepahaman (MoU) pengelolaan bersama

kawasan penyangga Cagar Alam Cyclops dan kesadaran pemangku kepentingan akan
pentingnya melindungi Cagar Alam Cyclops untuk menjaga sumber air bersih, mata
pencaharian penduduk asli, dan konservasi keanekaragaman hayati, LESTARI perlu
mengembangkan sebuah skema PJL untuk pengelolaan sumber daya air di area ini. Inisiatif
PJL ini juga akan menjadi pengungkit bagi pelaksanaan pengelolaan bersama Cyclops
dengan memberikan insentif kepada penduduk asli dan masyarakat lokal dalam menjaga
kawasan hutan untuk pengelolaan air yang berkelanjutan. LESTARI perlu merangkul PDAM
dan PT. Indah Alam Qualala untuk kemungkinan pendanaan, berkolaborasi dengan
BBKSDA Papua untuk pemberdayaan masayarakat lokal, dan menggunakan Forum Multi
Pihak sebagai media komunikasi antar para pemangku kepentingan. LESTARI perlu
memulai inisiatif ini dengan menciptakan kondisi pemungkin melalui penyadaran
masyarakat, pengembangan kerangka institusional, dan merancang program peningkatan
kapasitas untuk pembayaran berbasis hasil dalam pengelolaan lingkungan dan
menghubungkan kegiatan PJL dengan pengembangan ekonomi hijau di pedesaan.
Beberapa isu utama yang perlu dipecahkan adalah: (i) kurangnya kemampuan aktor lokal
terutama dalam manajemen proyek secara keseluruhan, pengembangan proposal, dan
laporan keuangan, (ii) tumpang tindih kepemilikan tanah terkait dengan hukum adat
setempat, dan (iii) penyadar-tahuan masyarakat tentang mekanisme transfer manfaat
terutama bagaimana mekanisme ini bisa memecahkan akar permasalahan perubahan
penggunaan lahan dan penggundulan hutan yang lebih disebabkan oleh migrasi komunitas
gunung ke ibu kota provinsi, Jayapura, dan bukan oleh penduduk asli setempat.
8.4.3. Desain PJL di Kalimantan Tengah
Proyek percontohan terkait pengelolaan kebakaran hutan di Kabupaten Pulang Pisau

sejalan dengan fokus LESTARI di area bawah Bentang Alam Katingan-Kahayan. LESTARI
perlu bekerja sama dengan BNPB dan BPBD yang saat ini sedang memberikan perhatian
lebih serta mengerahkan sumber daya yang lebih besar untuk pencegahan kebakaran
hutan. Di samping itu, perkembangan pembentukan BLU Perubahan Iklim di bawah
Kementerian Keuangan dan kemajuan Badan Restorasi Gambut juga perlu terus
diperhatikan mengingat Norwegia berencana untuk mendukung BRG dalam upaya
pengelolaan kebakaran hutan di lahan gambut melalui BLU Perubahan Iklim setelah BLU ini
terbentuk.
Inisiatif yang serupa dengan pemberian instentif kepada Desa Peduli Api di Jambi dan Riau
menggunakan Dana Penanggulangan Bencana juga bisa diadopsi. LESTARI bisa
mendukung BNPB dengan memberikan input teknis dan pembiayaan bersama dalam
upaya-upaya pemanfaatan Dana Desa untuk pencegahan kebakaran hutan. Di Kabupaten
Pulang Pisau, proyek percontohan di satu atau beberapa desa berikut ini bisa membantu
mencapai tujuan Rencana Konservasi Bentang Alam: Kalawa, Mantaren I, Gohong, Buntoi,
Jabiren, dan Taruna.
Di bagian atas Bentang Alam Katingan – Kahayan dimana pertambangan emas illegal
mengancam kehidupan ekosistem sungai, potensi pengembangan skema PJL air bisa
dipelajari dan dikembangankan lebih lanjut. Kerjasama dengan perusahaan pertambangan
juga perlu dilakukan jika memungkinan karena beberapa perusahaan pertambangan telah
berupaya untuk meminimalkan dampak lingkungan dan sosial dari operasi mereka melalui
program-program CSR. Balai Taman Nasional Bukit Baka Bukit Raya juga perlu menjadi
bagian dalam kemitraan LESTARI karena Balai Taman Nasional ini sudah melakukan
berbagai upaya untuk menanggulangi permasalahan penambangan liar di wilayahnya. Hal
ini selaras dengan fokus LESTARI tentang pengelolaan bersama kawasan konservasi di
bagian atas Bentang Alam Katingan – Kahayan.
9. BIBLIOGRAPHY
Angela, Falconer, and Skye Glenday. Taking Stock of International Contributions to Low
Carbon, Climate Resilient Land Use in Indonesia. Climate Policy Initiative. February 2, 2016.
http://climatepolicyinitiative.org/publication/taking-stock-of-international-contributions-to-low-
carbon-climate-resilient-land-use-in-indonesia/ (accessed February 2016).
Wunder, Sven. CIFOR Payments for environmental services: Some nuts and bolts.
Occasional Paper No. 42. 2015. http://www.cifor.org/publications/pdf_files/OccPapers/OP-
42.pdf (accessed 2015).
Global Canopy Program. The Little Sustainable Landscape Book. 2015 2015.
http://globalcanopy.org/sustainablelandscapes .
Tetra Tech ARD. USAID LESTARI Year 1 Work Plan (October 1, 2015 – September 30,
2016). Tetra Tech ARD. 2015. http://staging.lestari.or.id/en/usaid-lestari-year-1-work-plan-
october-1-2015-september-30-2016-2/ (accessed December 2015).
PNPM. Payment for Ecosystem Services (PES) . April 2011.

http://pnpmlmp.blogspot.co.id/2012/06/payment-for-ecosystem-services-pes.html (accessed
January 2016).
CICERO and Climate Policy Initiative. Background Report on Long-term Climate Finance.
Climate Policy Initiative. 2015. http://climatepolicyinitiative.org/wp-
content/uploads/2015/06/2015-Background-report-on-long-term-climate-finance.pdf
(accessed January 2016).
Smita Nakhooda, Charlene Watson, Liane Schalatek. The Global Climate Finance
Architecture. December 2015. http://www.odi.org/sites/odi.org.uk/files/odi-
assets/publications-opinion-files/10046.pdf (accessed January 2016).
ECN/Ecofys. Insights on NAMA development: mitigation momentum phase 1. May 2014.

http://www.mitigationmomentum.org/downloads/Insights_from_NAMA_development_2014.p
df (accessed February 2016).
CPI and BKF. The Landscape of Public Climate Finance in Indonesia: An Indonesian
Ministry of Finance & CPI Report. July 2014. http://climatepolicyinitiative.org/wp-
content/uploads/2014/07/The-Landscape-of-Public-Finance-in-Indonesia.pdf (accessed
January 2016).
ICCTF. Indonesia Climate Change Trust Fund. 2015. http://icctf.or.id/land-based-mitigation-

p-2359-en/ (accessed December 2015).
EIA Commission. Climate Change Profile Indonesia. July 2015.

http://api.commissiemer.nl/docs/os/i71/i7152/climate_change_profile_indonesia.pdf
(accessed December 2015).
PKPPIM. "Options for Funding Forest Management Unit to Support Low Carbon
Development." PKPPIM, Jakarta, 2015.
World Bank. Indonesia Country Brief. 2015.

http://siteresources.worldbank.org/EXTCDD/Resources/430160-
1435154813801/Indonesia_Country_Brief.pdf (accessed February 2016).
East Asia Forum. Indonesian village decentralisation is all money no plan. June 2015.
http://www.eastasiaforum.org/2015/06/27/indonesian-village-decentralisation-is-all-money-
no-plan/ (accessed February 2016).
Coordinating Minister for Economic Affairs. Persiapan Pelaksanaan Program KUR Sektoral.
Coordinating Minister for Economic Affairs, Jakarta: Coordinating Minister for Economic
Affairs, 2015.
Bidik Online. Kemenhut RI Gelontorkan Program Kredit Tunda Tebang - See more at:
http://www.bidikonline.com/m/read-486-2015-06-06-kemenhut-ri-gelontorkan-program-
kredit-tunda-tebang.html#sthash.nJsyXp31.0yl8TdBt.dpuf. June 2015.
http://www.bidikonline.com/m/read-486-2015-06-06-kemenhut-ri-gelontorkan-program-
kredit-tunda-tebang.html#sthash.nJsyXp31.0yl8TdBt.dpbs (accessed December 2015).
Ministry of Finance. "Mekanisme Hibah Daerah." January 2013.

http://www.slideshare.net/infosanitasi/bahan-direktur-apeksi-28-januari-2013 (accessed
December 16, 2015).
OECD. Climate-related development finance in 2013. PDF, OECD, OECD, 2013.
Chávez, Gustavo Silva, Brian Schaap, and Jessica Breitfeller. REDD+ Finance Flows 2009-
2014 Trends and Lessons Learned in REDDX Countries. Forest Trends. November 2015.
http://www.forest-trends.org/documents/files/doc_5029.pdf (accessed January 2016).
BP REDD+. REDD+ Implementation Scheme. 2014. http://www.reddplus.go.id/tentang-

redd/skema-pelaksanaan-redd-di-indonesia (accessed 2015).
Climate Investment Fund. Investment Plan for Indonesia. November 2012.

http://climateinvestmentfunds.org/cif/sites/climateinvestmentfunds.org/files/FIP_6_Indonesia
_0.pdf (accessed December 2015).
Forest Carbon Partnership Facility (FCPF). Forest Carbon Partnership Facility (FCPF).
FCPF. 2015. https://forestcarbonpartnership.org/carbon-fund-0 (accessed December 08,
2015).
FCPF. Indonesia FCPF Carbon Fund ER-PIN. September 2014.

https://www.forestcarbonpartnership.org/sites/fcp/files/2014/september/Indonesia%20ER-
PIN%20September_12_resubmitted_edit_final.pdf (accessed December 2015).
Green Climate Fund. Green Climate Fund. 2015. http://www.greenclimate.fund/home

Climate Analytics. GCF approved its first batch of project proposals. November 2015.
http://climateanalytics.org/files/gcfb11_outcomes_briefing_paper.pdf (accessed January
2016).
Ulrich, V, J Bohnke, and V Eidt. "Financing the Green Transformation: How to make Green
Finance work in Indonesia." 2015.
Forest Trends' Ecosystem Marketplace. "Converging at the Crossroads: State of Forest

Carbon Finance 2015." Forest Trends Ecosystem Marketplace. November 2015.
http://www.forest-trends.org/documents/files/doc_5020.pdf (accessed November 26, 2015).
Turning over a New Leaf: State of the Forest Carbon Markets 2014. November 2014.
http://www.forest-trends.org/documents/files/doc_4770.pdf (accessed December 2015).
Covering New Ground: State of the Forest Carbon Markets 2013. November 2013.
http://www.forest-trends.org/fcm2013.php (accessed December 2015).
Center for Climate Change and Multilateral Policy (PKPPIM). Role of MoF in Climate
Financing. 2016. http://www.fiskal.kemenkeu.go.id/pkppim/en/site/index/role-of-mof-in-
climate-financing (accessed February 2016).
The Jakarta Post. Moving toward an era of green financing. January 2015.
http://www.thejakartapost.com/news/2015/01/20/moving-toward-era-green-financing.html
CIFOR. CIFOR Occational Paper 132: Forest and land-use governance in a decentralized
Indonesia - A legal and policy review. 2015.
http://www.cifor.org/publications/pdf_files/OccPapers/OP-132.pdf (accessed 01 26, 2016).
FAS et all. Promoting Forest Stewardship in the Bolsa Floresta Programme: Local Livelihood
Strategies and Preliminary Impacts. CIFOR and University of Bonn, Rio De Janeiro: CIFOR
and Universoty of Bonn, 2013.
Engel, Stefanie, Stefano Pagiola, and Sven Wunder. Designing payments for environmental
services in theory and practice: An overview of the issues. May 2008.
http://www.sciencedirect.com/science/article/pii/S0921800908001420 (accessed February
2016).
TNP2K. CREDIT FOR BUSINESSES PROGRAMME. n.d.

http://www.tnp2k.go.id/en/frequently-asked-questions-faqs/cluster-iii-2/credit-for-businesses-
programme-kur/ (accessed December 2010, 2015).
PKPPIM. Instruments and Mechanisms for Financing of Greenhouse Gas Emission

Reduction Programs In the Land Based Sector. 2012. http://www.climatefinance-
asiapacific.org/attachments/article/28/BKF%202012%20Financing%20Intrument%20Land%
20Based%20Sector%20ENG.pdf (accessed December 2015).
Tetra Tech ARD. USAID LESTARI Landscape Baseline Analysis Plan . September 2015.
http://staging.lestari.or.id/en/usaid-lestari-landscape-baseline-analysis-plan-3/ (accessed
December 2015).
USAID LESTARI Activity Monitoring and Evaluation Plan (AMEP). February 2016.
http://staging.lestari.or.id/en/usaid-lestari-activity-monitoring-evaluation-plan-amep/
(accessed February 2016).
USAID LESTARI Quarterly Report October – December 2015. Tetra Tech ARD. January
2016. http://staging.lestari.or.id/en/usaid-lestari-quarterly-report-october-december-2015/
(accessed February 2016).
Landscape Conservation Plans (LCP). Tetra Tech ARD. October 2015.

http://staging.lestari.or.id/en/category/publications/landscape-conservation-plans/ (accessed
December 2015).
Strategic Environmental Assessments (SEA). Tetra Tech ARD. October 2015.

http://staging.lestari.or.id/en/category/publications/sea-leds-document/ (accessed December
2015).
YTS. Yayasan Tambuhak Sinta (YTS). 2015. http://www.tambuhaksinta.com/ (accessed

January 2016).
Hirosi. CPA Hirosi Papua. August 2015. http://cpahirosipapua.blogspot.co.id/ (accessed

January 2016).
Climate Fund Update. Global climate finance architecture. November 2015.

http://www.climatefundsupdate.org/data/the-funds-v2 (accessed December 2015).
Climate Policy Initiative. Global Landscape of Climate Finance 2015. November 16, 2015.
http://climatepolicyinitiative.org/publication/global-landscape-of-climate-finance-2015/
GCF Task Force. Press Release: Governors' Climate and Forests Task Force. 2015.
http://www.gcftaskforce.org/documents/2015/Indonesia_Governors_Summit_Press_Release
.pdf (accessed January 2016).
Global Environment Facility. Global Environment Facility (GEF). 2013.

https://www.thegef.org/gef/ (accessed December 2015).
Overseas Development Institute. The effectiveness of climate finance: a review of the

Indonesia Climate Change Trust Fund. ODI. March 2014.
http://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/8898.pdf
(accessed December 10, 2015).
ANNEXES:
Annex 1. Funds Profile
Table 17: Funds profile
No Fund Eligibility Funding Mechanism Size of Funding Available Funding Disbursement Note
Nationally Operated Financing Support

1 The Indonesia  CSOs, NGOs, private Grants (small grant  IDR 500 million (~ USD  Small grant:
Climate Change sector, and large grant) 50,000) for small grant disbursed in lump
Trust Fund (ICCTF) universities/academies, sum and is relatively
 Up to several million
and government USD (> IDR 3 billion or quick once reporting
institutions USD 250,000) for large requirements are
 Thematic area: land- grant fulfilled
based mitigation,  Large grant:
energy, and adaptation disbursement
& resilience mechanism is under
development
2 Forest Management All types of FMUs/KPHs: Budget transfer IDR 3 billion (~ USD  Yearly as part of KPHK is funded by central
Unit (FMU/KPH) FMU Conservation 225,000) per KPH; government government, KPHP and
Fund (KPHK), FMU Protection however, the actual fund budgeting process KPHL are funded by both
(KPHL), FMU Production disbursed is much less APBN and sub-national
(KPHP) than that, and fund government budgets
allocated by government (APBD)
changes from year to year
3 People’s Business Micro, small and medium Credit and micro-  Micro KUR: IDR 25  Three different  3 types of credit at the
Credit Program enterprises (MSME) and credits backed by million for a max. of 3 mechanisms: moment: micro KUR, retail
(KUR) cooperatives guarantees from years for working capital KUR, TKI KUR (designed
 directly to MSME
state-owned and 5 years for for migrant workers)
from participating
companies investments banks  Sectoral KUR is planned
 Retail KUR: IDR 25  indirectly through to be introduced in 2016
million to IDR 500 linkage institutions
million for a max. of 4 by executing
years for working capital patterns
and 5 years for  indirectly through
investments, can be linkage institutions
extended up to 10 years by channeling
for hardwood patterns
investment
 TKI KUR: IDR 25 mill,
duration is based on the
migrant workers’
employment contract
and shall not exceeding
3 years.
 Sectoral KUR: IDR 500
million – IDR 30 billion
(equivalent to USD
36,000 – USD 2 million)
for max. 10 years
4 Timber Harvesting  Farmer groups, Low-interest loan  Vary, depending on the  Lump sum, directly
Postponement cooperatives (the one size of community to community
Credit (KTT) receiving loan from group/cooperative group/cooperative
government)  Vary, loan duration is 5-  Lump sum, directly
 Individual/member can 8 years (depending on to individual
apply for the loan to the the harvest applying loan
cooperative or farmer
group receiving money
from government/MoEF
5 Watershed Fund BP DAS (Watershed Budget transfer Vary Yearly as part of
(Dana DAS) management agency) government
budgeting process
6 Grant from Central Local government Grants Vary Yearly as part of Fund allocation should be
Government to government based on criteria; however,
Local Government budgeting process no clear and robust criteria
have been developed so
(Hibah Daerah) far. Current disbursement
of fund only targets
mitigation action and not
yet prevention and
adaptation
7 National Park Fund National Park Agency in Budget transfer Vary, depending on the Yearly as part of National park is managed
each national park area and priority government and funded by central
budgeting process government
8 Shared Revenue on All district/city Budget transfer Variable, proportional Distributed on a
forestry governments depending on the shared quarterly basis
revenue of the year through transfer from
the State Treasury to
the Regional Treasury
Account
10 Village Fund (Dana All villages Budget transfer IDR 1 billion (~ USD Yearly as part of
Desa) 74,000) per village with government
possibility of increase budgeting process
11 National Community Villages in and around Budget transfer Variable Yearly as part of
Empowerment forest area (from central and government
Program (Program district government accounting process.
Nasional to village
Pemberdayaan government)
Masyarakat, PNPM
Mandiri Kehutanan)
Internationally Operated Financing Support
1 Norway-Indonesia Appointed Grants in 1st and 2nd USD 1 billion in three Under development USD 200 million for Phase
REDD Partnership ministry/institution in a phase, result-based phases 1 and 2; USD 800 million
(NORAD-UNDP- country (Ministry of finance/carbon for Phase 3
GoI) Environment and credits in 3rd phase Currently being
Forestry in Indonesia) administered by UNDP
REDD under Environmental
Division until June 2016
2 Forest Investment Ministry/institution in a Grants,  FIP I: USD 17.5 million - Through Multinational
Fund (FIP) country (Ministry of concessional loans, (grant); expected co- Development Banks
Environment and guarantees, equity financing USD 6 million (MDBs) and their
Forestry in Indonesia) respective disbursement
 FIP II: USD 17.5 million
regulations
(grant); expected co-
financing USD 8 million
 FIP III: USD 2.5 million
(grant) & USD 32.5
million (loan) expected
co-financing USD 6
million
3 Forest Carbon An eligible REDD country Grants (Readiness Readiness Fund: 3.8
Partnership Facility (through ministry or other Fund & Carbon million
(FCPF) government agency) Fund) Carbon Fund: USD 465
million (total)
TBC
4 REDD Early Movers Ministry/institution in a Grants - -  Not available for
(REM) country (Ministry of Indonesia
Environment and
 REM has a funding
Forestry in Indonesia)
volume of 32.5 million
Euros, and REM has
already agreed to spend
around 19 million Euros
buying 8 million tons of
CO2 from REDD+
activities in the state of
Acre over a 4-year period.
5 Green Climate Fund Accredited Entities: Grants, loans,  Micro project: USD 0 – Under development82  Indonesia is still
(GCF) accredited national, sub- guarantees, equity 10 million; Small project: developing a framework
national, regional, and USD 10 – 50 million; for the NDA
international Medium project: USD 50 establishment and the
implementing entities – 250 million; Large issues of accredited
and intermediaries project: > 250 million entity.
(including NGOs,
 Total funding pledges of  Two accredited
government ministries,
> USD 10 billion to the institutions so far: Sarana
national development
GCF Multi Infrastruktur Ltd.
banks, and other
(PT. SMI) and KEHATI
domestic or regional
foundation.
organizations that can
meet the Fund’s
standards); and private
sector
6 Global Government agencies, Grants (can be Various types of projects Through  Focus of GEF Trust Fund
Environmental civil society transferred or (modalities): Implementing Entities biodiversity, climate
Facility (GEF) organizations, private blended with to  Full-sized Projects like UNDP, UNEP and change, land degradation,
sector companies, loans, guarantees, (FSPs) – over USD 2 the World Bank sustainable forest
research institutions equity) million, management,
international waters, and
 Medium-sized Projects chemicals.
(MSPs) – up to USD 2
million,  Focus of the Special
Climate Change Fund
 Enabling Activities (EAs) (SCCF) and Least
- up to USD 1 million, Developed Countries
 Small Grants Program Fund (LDCF): climate
(SGPs) – up to USD change adaptation
50,000,
 Programmatic Approach
82http://um.dk/en/~/media/UM/English-site/Documents/Danida/About-
Danida/Danida%20transparency/Consultations/2014/2nd%20half%202014/Draft%20Organisation%20Strategy%20for%20the%20Green%20Climate%20Fund.pdf
– amount not defined.
7 BioCarbon Fund Country Grants and  Preliminary Funding: Country
Initiative for results based USD 70-80 M
Sustainable Forest payments for
 Additional funding
Landscapes (ISFL) achieved emission
pledge over 100 M from
reductions
UK and Germany at
COP 21 in Paris to
support expansion into
Indonesia
8 Bilateral A country (through an Grants/loans Vary Vary
commitment appointed government
financing support ministry/agency)
9 Market-based Verified Emission Over-the-counter TBA TBA
Payments for Reductions (VERs) (OTC) transaction of
Emission following respective VERs against
Reductions market protocols payment
(Compliance &
Voluntary)
Private Sector & Civil Society Financing Support
1 KEHATI Foundation  NGOs, Community Grants Latest data not available Not available Proposal needs to be
Organizations, Total grant (1995-2013: submitted in KEHATI
Governmental US$ 25.500.000) 83 format
Research Institutions,
Universities,
Professional
Institutions.
 Work in 3 prioritized
ecosystems: agriculture,
forestry, and coastal &
83 https://www.cbd.int/doc/meetings/ecr/cbwecr-2014-04/other/cbwecr-2014-04-presentation-day4-05-en.pdf
small islands programs
2 NGOs Community Grants Vary Vary, mostly grants
Organizations,
3 Private Companies NGOs, CSOs, CSR Program Vary Vary, mostly grants
Universities
Annex 2. ICCTF Project Management Cycle
Step 1. Submit prospective proposals Step 6. Sign project agreement Step 7. Implementation of the approved activities
a) Sectoral ministries and local governmental bodies will be a) Secretariat will send notification letter to
invited to submit proposals for activities eligible for financing a) Proponent has to assign a coordination team that will be responsible to coordinate the
project proponents informing the approval implementation of the activities led by a Project Manager. The approved activity proposal can
b) Sector ministries may either submit their own proposals, or rejection of their proposals.
or partner with other parties such as NGOs or academic be implemented by the proponent or sub-contracted to third party;
institutions. b) This notification letter will also be sent to b) If the activities will be sub-contracted to 3rd party, the Proponent will conduct a fair bidding
the Trustee for the approved project process in accordance with government regulations and/or other principles of procurement in
proposal; The Trustee will arrange for the the grant agreement) to select a Contractor; which will then be communicated to the Trustee
signing of the project implementation and the Secretariat.
agreement by the Project Proponent.
c) The Contractor must submit regular progress reports to the Coordination Team to make sure
Step 2. Pre-appraise prospective proposals c) The Trustee will send one copy of the that the activity progress is in line with the targeted output.
agreement to Secretariat for filing
a) The ICCTF Secretariat will check the completeness of d) In case the proponent will implement the activities an implementation team, which can be the
project proposals and documentations same as the coordination team, has to be established with clear tasks and responsibilities, clear
time schedule and milestones, clear planning, and clear reporting responsibilities.
b) After all documentation complete, the Secretariat will
submit the project proposal to the Technical Committee e) If required, the proponent can ask for assistance from the secretariat to provide support in
(TC) for further assessment. project management due to lack of expertise and experiences or lack of human resources.
c) In the case of incomplete documentation, the
Secretariat will discuss with proponents the need for the Step 5. Approve a proposal
appropriate completion of documentation. a) During the SC meetings, the Head of
d) The Secretariat will also check project eligibility Secretariat will present the project proposals Step 8. Disbursement of funds
according to eligibility criteria and ask the SC for approval or rejection a) The Contractor or the implementation team can submit a payment request to the Trustee with
based on the recommendation of the TC. a copy to the Secretariat based on payment term
b) If required, the SC could invite the TC or b) Payment requests will be checked by the Trustee and confirmed with the Project Manager of
Experts to clarify their recommendations. the Coordination Team.
c) Once the Project Manager approves it, the Trustee can disburse the fund to the Contractor
Step 3. Assessment of the project proposal by the TC: with a copy of disbursement proof to be sent to the Secretariat.
a) The TC will assess the eligibility, feasibility, sustainability
and impact of the proposed activities according to criteria Step 4. Submit project proposals for
set by the Steering Committee (SC). approval by the SC
If a project proposal meets all criteria for Step 9. Organise monitoring, evaluation and auditing:
b) These criteria will take into account available funding
and existing grant agreements with development partners. financing by the ICCTF, the Secretariat will a) Once a year, on behalf of the SC the Secretariat will organise missions to monitor and
submit the proposal and assessment evaluate projects funded by the ICCTF.
c) During the assessment of the proposal, if required, the reports, including recommendations for
TC may ask for assistance from the pool of experts. b) Mission reports will be presented at the SC or Technical Committee level.
approval or rejection, prepared by TC to the
SC; c) The ICCTF will be audited once a year and an audit report will be presented to the SC.
Source: (ICCTF 2015) web: http://icctf.or.id/fund-management/
Annex 3. KUR Application Procedure and Distribution
Mechanism
The MSMEs can obtain KUR from participating banks by:84

 Submitting a KUR application letter to a bank, attaching supporting documents such as
business legality statement, business permits, financial statements, etc.
 The bank will then evaluate/analyze the MSME’s business feasibility, based on the
application letter.
 If a bank considers an MSME feasible, then it will approve the KUR request. The decision
to approve KUR is fully under a bank’s authority.
 The bank and MSME sign a credit/financing agreement.
 The MSME is obligated to repay (including through installments) the credit to the bank.
The following are general requirements for MSMEs to access KUR:
 Not be receiving credit/financing from banks and/or not receiving funds through government
credit programs.
 Be permitted to receive consumptive credit (e.g. mortgage loans, credit cards, etc.).
 Have a repayment certificate (Surat Keterangan Lunas) from the bank, if an MSME is listed
on the BI Debtor Information System but has already paid off the loan.
 For Micro KUR, it is not necessary to check BI Debtor Information System.
To receive KUR, MSME needs to submit these legal documents to the distributing banks:
 Identification documents (e.g. identity card, driving license and family card)
 Business/venture legal documents (e.g. deed of establishment, deed of alteration)
 Business permit (e.g. business permit/SIU, company registration document/TDP, certificate
of domicile/SK Domisili)
 Accounting records or financial statements
 Proof of collateral
The participating banks have full authority to make a decision on loan approval based on the
feasibility analysis of a potential KUR recipient. KUR debtor who had received and paid off KUR
are allowed to submit a new KUR request, as long as the debtor is not yet bankable.
The distribution mechanisms of KUR can be carried out in three different ways: (i) directly to
MSME from participating banks, (ii) indirectly through linkage institutions by executing patterns,
and (iii) indirectly, through linkage institutions by channeling patterns as shown in the figure below:
84 http://www.tnp2k.go.id/en/frequently-asked-questions-faqs/cluster-iii-2/credit-for-businesses-Program-kur/
Incentivize Landscape Scale LEDS P a g e | 124
1. Direct distribution to MSME from participating
banks
a Bank carries out individual assessment on
prospective KUR debtor. When debtor is assessed
as feasible and approved by the participating bank,
the KUR debtor signs a credit agreement
b Bank applies for a guarantee to guarantor company
2. Indirect distribution through linkage institutions85 by executing patterns
a. Linkage institution applies for credit/financing to
participating bank
b. Participating bank checks debtor information
system and conducts feasibility analysis. When
considered feasible and approved, the
participating bank signs credit/financing
agreement with linkage institution.
c. Participating bank applies request for credit/financing guarantee to guarantor company.
d. Linkage institution distributes credit/financing received from participating bank to MSME
from linkage institution.
e. MSME debtor repays credit/financing obligation to linkage institution.
Linkage institution is responsible for the KUR repayment to the participating bank.
3. Indirect distribution through linkage institutions by channeling patterns
a. To obtain credit/financing from a participating
bank, MSME authorizes the board of linkage
institution to submit a credit request and offers
collateral to the participating bank.
b. Linkage institution representing MSME submits
credit request to the participating bank.
c. Participating bank checks debtor information system and conducts feasibility analysis.
When MSME (Usaha Mikro Kecil Menengah Koperasi, UMKMK) is considered feasible
and approved by the participating bank:
d. Based on the authority of the participating bank, the linkage institution signs
Credit/Financing Agreement with MSME.
e. Based on the authority of the MSME, the linkage institution signs a credit/financing
agreement with the participating bank.
f. Bank submits guarantee request to guarantor company.
g. Linkage institution forwards the credit/financing loan received from the participating
bank to MSME debtor. MSME debtor pays the payment obligations to the participating
bank through the linkage institution. MSME is responsible for the KUR payments to the
participating bank.
Source: (TNP2K n.d.)
85Linkage institutions are secondary cooperatives, primary cooperatives (savings and loan cooperatives, savings and loan
cooperative units), village credit agencies (BKD), Baitul Mal Wa Tanwil (BMT), Syariah/people’s credit banks (BPR/BPRS), non-
bank financial institutions, venture groups, micro finance institutions.
Annex 4. Questionnaires for LESTARI Site Visit
Background Info
REDD+
REDD+ stands for Reducing Emissions from Deforestation & Forest Degradation. The concept
aims to achieve a measurable improvement of forest management. The improvement shall be
incentivized by benefits towards people who make local decisions on land use (e.g. landholders,
communities) to reduce deforestation and degradation. The incentives can be improvements of
infrastructure of health, education or financing for economic activities without deforestation
(alternative income) or in form of direct payments – Payment for Ecosystem Services.
PES
Ecosystem Services are benefits people derive from healthy ecosystems, such as fertile soils,
clean water & air, climate regulation, recreation, pollination, timber, foods, medicinal plants and
other non-timber forest products. They benefit both local people and people from far away and are
the basis for a healthy economy and society. Economic activities for livelihood of people or
monetary profit can threaten to degrade Ecosystem Services (e.g. deforestation). As Ecosystem
Services are not much regulated and not valued in monetary terms, their degradation is not
accounted as a loss. This creates the issue that monetary profits based on ecosystem degradation
are private to the land user, but the loss of the Ecosystem Service is public to the society.
Payment for Ecosystem Services tries to re-balance this issue by putting a monetary value to
Ecosystem Services. The concept is aims to achieve a measurable improvement of ecosystem
management. The improvement shall be incentivized by benefits towards people who make local
decisions on land use (e.g. landholders, communities). In a PES the incentive is a pre-agreed
payment to the land user when it was verified that ecosystem management is good.
Local Organization. Area: _______________________/Name: ________________________
General Information:
1. What is the focus of your organization?
2. How many employees do you have in your organization? Where do they come from? Can you
tell me a little bit about their background?
3. What is your organization structure? (get the organogram, if possible)
Experiences in Sustainable Landscapes, PES and REDD+:
4. What was previous work of your organization related to Agriculture and Forestry?
5. Have you worked on transfer of benefits to communities and landholders in return for
environmental management?
6. Has your organization carried out activities related to transfer of benefits to communities and
landholders in return for environmental management (PES and REDD+)? (YES/NO)
If YES, continuo to A, if NO – stop here.
A. If YES,
Questions Forests Monetary transfer

Information on Activities
ACTIVITIES
a. What kind of activities that
have been done?
b. What type of services (water,
carbon, ecotourism,
biodiversity, natural beauty,
geothermal, etc.)
c. When?
d. Implementation period
e. Target of activities (break
down based on phases of
activities/Deliverable, if any)
f. Location
ACTORS (Stakeholders):
a. Service provider
b. Beneficiaries (user)
c. Third parties (facilitator,
legislator, mediator, verifier)
d. Financial manager (bank,
cooperative, other org.)
e. Donor, if applicable
f. Others
TRANSCATION MECHANISM:
Note: Information needs to be
supported by documentation,
such as contract, transaction
record, audit report, etc.)
Questions Forests Monetary transfer
Payment:
a. What is the unit of
measurement of the service?
b. What is price per unit service?
c. How does payment being
done (via bank, cooperative,
etc)
d. When payment is done?
Payment distribution:
e. How does money (incentive)
is distributed to the service
providers?
 Unit of service provider
(individual, household,
organization, village)
 Period of distribution
 Who does the distribution?
MONITORING:
a. Are there any documents of
measurement to determine
the payment?
(payment or purchase receipts
minutes of meeting)
b. Who is responsible for
monitoring and keeping the
documentation?
What would you like to do better if
you would start such a program
again?
Organization’s specific Information
What is your organization’s specific
role in this activity?
What are the targets to be
achieved of your organization in
that particular activity?
Based on the targets that have
been set, do you think this activity
is classified as success? Why?
 If it is a SUCCESS, what are
the lessons learned?
 It is NOT SUCCESS, what are

the challenges?
Additional Capacity Assessment:
7. Does your organization have experience in preparing proposals related to sustainable

landscapes, forests, PES/REDD+? Please tell me a little more
8. Does your organization have experience in preparing reports, including financial reports on
projects related to sustainable landscapes, forests, or PES/REDD+? Please tell me a little more
9. What kind of training (if needed) will be useful to improve organizations’ skills and qualification in
implementing project activities related to sustainable landscapes, forests, or PES/REDD+?
10. Do you have any other comments/opinions related to capacity of your organization in
implementing to sustainable landscapes, forests, or PES/REDD+?
Questionnaire 2
LESTARI Regional Office: ___________________________________________
Work Plan
Do you have a work plan for the next 5 years? (YES/NO, YES but annual plan instead of 5 year-
plan)
1. If YES, what are the focuses (thematic and area) in year 1, 2, 3, 4, and 5? (ask for a copy of
work plan if possible)
2. If NO, why? When do you think the work plan will be ready?
Relation to Local Government

3. What are the government institutions relevant to LESTARI activities in your area? Do they
provide funding? (follow this table)
Institutions Theme/topic Funding Contact Name Phone/Email

(Y/N)
4. What are the local government regulations related to/regulating benefit transfer for
environmental management activities applicable to your stakeholders in your area?
Potential Implementing Organizations
5. Which organizations (both national and local org) do you think have the potential to implement
project/program related to benefit transfer for environmental management in your area? What do
you think about their capacity (i.e. human resources, reporting skills both on financial and non-
financial contexts, performance, etc.)
Organization Focus Capacity Assessment Contact

(topic and area) (Human Resource, Reporting Skills, Past (Name,
Performance, etc)
Phone, Email)
Consortium Partners operating in this area

6. Who are LESTARI’s consortium members operating in your area?
Organization Specification/Focus and Area Contact (Name, Phone,
Email)
Additional Info - important notes from this area:
Questionnaire 3
Government. Level: ________________________Institution:
________________________
1. What are the institutions/organizations with a mandate to implement benefit transfer for
environmental management (PES/REDD+) in your area? (both government and non-
government organizations). Please elaborate the function of each organization (fund
provider, implementer, facilitator, etc.)
2. What is the mechanism for benefit transfer for environmental management (PES/REDD+)
activities in your area, if any? (some districts may not have mechanism in place)
3. (this includes regulations that are still currently under development)
4. Is there funding from government or donors in your organization (or other institution that
you know) that can be utilized to fund benefit transfer for environmental management (PES
and REDD+) activities in your area?
(Note: if funding exists, please separate pure government funding from non-government
funding)
Government Funding Mechanism: How is fund being allocated

and distributed?
Non-government Funding Mechanism:
5. Were there any activities of benefit transfer for environmental management (PES/REDD+)
in your area? YES/NO
If YES, fill the following table (PES/REDD+ experience may be separated activities)
Questions REDD+ PES
When? (period)
What kind of services?
What are the

context/activity?
Who were involved?
 Service provider
 Beneficiaries (user)
 Third parties (facilitator,
legislator, mediator,
verifier)
 Financial manager
(bank, cooperative,
other org.)
 Donor, if applicable
 Others
What was the target to be
achieved for that activity?
Do you think that activity
was classified as success?
Why?
 If it is a SUCCESS,
what are the lessons
learned?
 It is NOT SUCCESS,
what are the
challenges?
6. Additional info. Opinions/comments on PES and REDD+?
Annex 5. List of Stakeholders Consulted
List of stakeholders consulted in Central Kalimantan
No Name Organizations Contact

1 Ozzy LESTARI
2 Domingus Provincial Government
Forestry Office
3 Ismail BPDAS Kahayan 081931754999
082311555758
4 Iman Rusmana BP2HP 081385012030
imanrusmana_phhi@yahoo.com
5 Rahmat KPH Gunung Mas 085249799664
6 Ibu Yuna BPKH Palangkaraya 081347367667
7 Mursyid BLH Provinces 0816280989
8 Adib Gunawan Sebangau National Park 08115451118
Agency
9 Virasadi Nursu’i BBBR Agency 081345494257
10 Hap Baperdo BLH Katingan 0811520490
11 Kiwok BPBD 081251668957
12 Restono Dinas Kehutanan Pulang 0822507432
Pisau
13 Kartie Vitamery Yayasan Tambuhak Sinta 081349190041
Lia Anggraeni (YTS) 081251606426
14 Dedi YCI
15 Siti Maimunah Muhammadiyah University 081366109055
16 Atit & UNDP REDD Division 082168513039
08136086101
17 Hendro Provincial Government 085252701119
Tourism Agency
List of stakeholders consulted in Papua
No Name Organizations Contact

1 Priyo Cenderawasih University 08124850271
2 Amsal Provincial Government Forestry 081247235600
Office
3 Zaenal Arifin BPDAS Memberamo 08129304305
Elizabeth Sapulele 0811482099
4 M. G. Nababan BKSDA 08125405080
Dahlan Iskan 081344007142
Yani 081380811132
5 Gerald BP2HP Papua 08124809136
6 Sance Theresa Dinas Kehutanan Palangkaraya 081248833836
7 Kitty (Amalia) BLH Kota Palangkaraya 081344182686
8 Hirosi Marchel Suebu 085244182519
9 Andre Lim Fort Mumbai Green 081344048112
10 John Rumbiah Dinas Kehutanan Mimika 0811495019
11 Yohan Lorentz National Park Agency
12 Andi Yapeda
13 Edo LEMASCO 081354033468
Annex 6. Government Regulations Related To PES And REDD+
Table 18: REDD+ related regulations at the national level

Key components
No Regulations Remarks
Objectives Focus activities Institutions 86 Time Authorities
1 Presidential To reduce GHG emissions in  GHG emission reduction activities in Bappenas as 2011- Bappenas
Regulation No. Indonesia by 26%/41% by the following sectors: (1) Forestry Coordinator; Line 2020
61/2011 on the 2020 against a BAU and Peat Land, (2) Agriculture, (3) Ministries and
national action plan baseline. REDD+ represents Energy & Transport, (4) Industry, (5) provincial
on GHG emission a very important element of Waste. government as
reductions (RAN- RAN-GRK with 88% of the implementer
 Focus activities related to REDD+:
GRK). envisioned reductions
Forest and land fire control, network
related to REDD+ activities
system and water management,
RHL (forest and land rehabilitation),
HTI (Industrial Plantation Forest), HR
(Community Forest), Illegal logging
eradication, Deforestation
prevention, Community
empowerment
2 Presidential The Regulation mandates Development of: MoEF as 2011 MoEF
Regulation No. different bodies of the 1. Accounting Process and Coordinator; Line
71/2011 on the government to produce Procedure of GHG Inventories; Ministries to
national GHG national, local and corporate develop individual
2. Task & Authorities of Governments
inventory system GHG inventories on an GHG inventories
at Central as well as Provincial and
annual basis. The GHG
Municipal/regency Levels;
inventory as part of MRV
system is prerequisite of the 3. Verification and Reporting
successful REDD+ processes
86 Institutions involved or to be created
Key components
implementation
3 President Decree Continuation of Presidential Formulation of REDD+ national REDD+ Task Until 31 Fund
No. 25 of 2011 on Decree No. 19 of 2010. strategy and national action plan on Force Dec comes
the Task Force for To develop REDD+ greenhouse gas mitigation (RAN- (discontinued).  2012. from APBN
Preparation of the readiness and prepare for GRK). Line ministries: and
REDD+ Agency the REDD+ Agency. Preparation for REDD+ MoEF, Norway-
UKP4 Agency. Formulation of REDD+ BAPPENAS, Indonesia
(discontinued). finance mechanism. Preparation for MOF, MoA, LoI.
MRV agency. Formulation of criteria MEMR, etc.
for pilot provinces. UKP4. BPN
4 Presidential The REDD+ Managing Defined tasks of the REDD+ Agency REDD+ n/a President
Regulation No. Agency is aimed to support including the development of the Managing
62/2013 on the the President to implement REDD+ National Strategy; the Agency
establishment of REDD+ activities in framework for social, environmental
the national Indonesia. and financial safeguards; REDD+
REDD+ Agency to policies; and instruments and
implement REDD+ mechanisms for REDD+ funding and
objectives. benefit distribution
5 PR No. 62 of 2013 To achieve REDD+ Coordination and planning for REDD+ REDD+ Agency REDD+ Stakeholde
on the REDD+ objectives in Indonesia by development and implementation in (discontinued). Agency r
Agency (which was developing relevant policies Indonesia, which includes developing: Line ministries: (ministry- committee
integrated into the and implementing REDD+  The REDD+ national strategy MoEF, ranking, but to be
MoEF through PR projects (addressing BAPPENAS, now established
No. 16 of 2015) deforestation, forest  REDD+ safeguards   MoFa, MoA, discontinued . Funds for
degradation and peatland  Actions to mainstream   MEMR, etc. ). REDD+
degradation). UKP4. BPN. Indonesia
 REDD+ in the development agenda to be
 Financial benefit distribution established
mechanism .
 Improving capacity, law enforcement
and MRV
Key components
6 Constitutional Restoring indigenous forest Judicial review of Law No. 41 of 1999 Constitutional 2012 Constitutiona
Court Decision No. management to the on national forest management and Court l Court
35/2012 on indigenous people utilization. After review, indigenous
indigenous forest people have the right to occupy and
management cultivate forest land for the fulfillment
of personal needs.
7 MoFor Regulation To develop REDD Developing REDD methodology, MoEF (WG on 5 years MoEF
No. 68 of 2008 on demonstration activities. technology and institutions. Climate Change),
the international
Implementation of organizations,
Demonstration forest concession
Activities for holders,
Reducing customary forest
Emissions from managers.
Deforestation and
Forest Degradation
8 MoFor Regulation To prevent and reduce Conducting forest management Independent 30 years MoEF This MoFR
No. 30 of 2009 on emissions from deforestation activities as part of REDD Appraisal (to be (license is no
the Implementation and forest degradation. implementation. Setting the reference created). REDD issuing).  longer valid
of the Procedure emission level prior to REDD Commission (to Local since the
for REDD implementation. Conducting be created – now governments creation of
monitoring. Submitting a monitoring discontinued with (issuing the REDD+
report to the MoF. Distributing responsibility recommenda Task Force
financial benefit based on relevant lying with the tions). (and
regulations. MoEF). MoEF. eventually
the REDD+
 National registry
Agency) by
(to be created).
the
 Provincial president.
governments. The
 Local REDD+
governments. Agency
Forest license has how
holders. been
Key components
International discontinue
organizations. d
9 MoFor Regulation To improve the efficiency  Carbon accounting in forest areas.  MoEF. Berau Not MoEF. MoEF to
No. 47 of 2011 on and effectiveness of the Bupati. Malinau available. Berau provide
a Partial Transfer government’s delivery of  MRV preparation.  Bupati. additional
Bupati. Kapuas
of Authority on public services in the forest  REDD readiness activities. Hulu Bupati. Malinau budget to
Forestry sector, particularly Bupati. respective
 Transfer of Authority on Forestry
Governance Kapuas Hulu local
Governance from the MoF to the Bupati. governmen
Bupatis of Berau, Malinau and ts.
Kapuas Hulu under the
Framework of REDD+
Demonstration Activities
10 Government The Forest reclamation The Forest Reclamation Guideline MoEF n/a MoEF
Regulation No. 21 guidelines is meant to provides guidance on the following
of 2011 on Forest provide a reference for forest topics: Location inventory, Decision on
Reclamation reclamation activities. The location, Planning, Execution,
Guidelines87 objective is to ensure that Institution, Technical monitoring and
forest reclamation will be assistance, Reporting mechanism,
carried out in accordance Sanction, Erosion or sedimentation,
with general patterns, Location altitude, Types of vegetation
standards and criteria.
Presidential To establish a Peatland a. Peatland area of approx. To be developed: 2016 - President The head
Regulation No. 1 Restoration Agency in order 2,000,000 ha Peatland 2020 of Agency
Year 2016 on to accelerate the peatland b. Annual target area: 30% in 2016, Restoration was just
Peatlands recovery of the region and 20% in 2017, 20% in 2018, 20% in Agency; appointed
Restoration the return of hydrological 2019, and 10% in 2020 Lead in Jan
Agency functions as a result of peat implementation: 2016.
c. coordinating and facilitating the
87 http://faolex.fao.org/docs/pdf/ins107031.pdf
Key components
land and forest fires restoration of peat land in the MoEF
province of Riau, Jambi, South
Sumatra Province, West
Peat land area of approx.
Kalimantan, Central Kalimantan
2,000,000 ha.
Province, South Kalimantan and
Annual target area: 30% in Papua Province.
2016, 20% in 2017, 20% in
d. Implementation and strengthening
2018, 20% in 2019, and 10%
policy coordination
in 2020
e. restoration of peat land;
f. mapping hydrological unity of peat
land;
g. zoning protection and
h. aquaculture activities;
i. rewetting peat and accessories;
j. rearrangement of burning peat
areas management;
k. socialization and education on peat
restoration;
Source: HPI’s compilation based on (CIFOR 2015)
Table 19: REDD+ related regulations at the sub-national level
Key components
No Regulations
Objectives Focus activities Institutions 88 Time Authorities Remarks
1 SRAP Aceh The purpose of the Regional (1) Reduce GHG emissions from MoEF 2011- MoEF
(2013) Strategy and Action Plan on REDD land users and amendments sector (Directorate 2030 (Directorate
+ is divided into three stages: and forestry (Land Use, Land Use General for General for
1) short-term: improvement of the Change, and Forestry/LULUCF); Climate Change Climate
condition of the overall forest (2) Increasing carbon storage; Control (DJ- Change
governance so that the province can PPI)) Control (DJ-
(3) Enhance the conservation of
contribute to the achievement of PPI))
biodiversity; and
Indonesia's commitment to cutting
(4) Increase the value and
emissions by 26-41% by 2020.
sustainability of the economic
2) Medium-term objective: functions of forests.
sustainable practices, mechanisms
2 SRAP of governance and forest tbd MoEF MoEF
Central management are widely established (Directorate (Directorate
Kalimantan and developed General for General for
Climate Change Climate
3) Long-term goal: The forestry
Control (DJ- Change
sector in the province becomes a
net sink sector. In addition, PPI)) Control (DJ-
sustainable economic and PPI))
3 SRAP Papua ecosystem services are supported. (1) Increasing the capacity of forest MoEF 2011- MoEF
(2013) management and land-based low- (Directorate 2020 (Directorate
carbon management General for General for
(2) Optimizing the regulatory and Climate Change Climate
institutional framework for forestry Control (DJ- Change
sector PPI)) Control (DJ-
PPI))
(3) Ensure the active participation
of indigenous people in the forest
and land-use management
* Sectoral share of total GHG emissions in 2010 in the respective province

Key components
No Regulations
Objectives Focus activities Institutions 88 Time Authorities Remarks
4 RAD-GRK The RAD-GRK adjusts national and (1) Agriculture and Forest & Individual 2013 - Bappeda
Aceh sectoral policies and instruments Peatland (93%*) provincial 2020
originating from RAN-GRK and is to (2) Energy & Transport (6.1%*) government
be used in conjunction with the institutions
(3) Industry & Waste Management
RAN-GRK to improve coherence
(1%*)
between the sub-national and
5 RAD-GRK national levels, especially with (1) Land-based (99%*) Individual 2013 - Bappeda
Central regards to data relevant to GHG (2) Energy (0.8%*) provincial 2020
Kalimantan inventories and emissions government
scenarios. Waste Management
institutions
(3) (0.2%*)
6 RAD-GRK (1) Land-based (99.7%*) Individual 2013 - Bappeda
Papua (2) Energy (0.2%*) provincial 2020
government
(3) Waste Management (0.1%*)
institutions
Source: HPI’s compilation
Table 20: PES related regulations at the national level
Key components
Objectives Forest area eligible Focus activities Institutions 89 Time Authorities
1 Government To formulate Production forest Incorporating MoF (now 25 years Article 19.b
Regulation No. 6 of forest planning management units environmental MoEF), forest
2007 on Forest as part of forest (KPHP). Protection services  as forest license holders.
Planning and the management in forest management
sector activities,
Formulation of Indonesia. units (KPHL).
Forest Conservation forest including:  water
Management and management units utilization, nature-
Utilization Plans (KPHK). based tourism,
(as revised by GR biodiversity
No. 3 of 2008) conservation,
environmental
protection, carbon
sequestration and/or
storage.
2 MoFor Regulation To develop  Production forests: Protection, enrichment MoEF, Max. of 65 MoEF
No. 61 of 2008 on ecosystem 14,000– 200,000 and maintenance, corporations, years
the Procedures for restoration in ha.  Biodiversity forest (extension:
Obtaining Permits production conservation, NTFP concession  35 years)
for the forests.  IUPK.  holders.
utilization.
Utilization of  Environmental
Timber Products in service concessions
Ecosystem (IUPJL). Logging
Restoration concessions
Activities in (IUPHHK).
Production Forests
(as revised by
MoFor Regulation
No. 50 of 2010)
Key components
3 Law No. 32 Year to reduce and TBA Includes regulations on TBA TBA TBA Article 42,
2009 on avoid the  Planning; 43, and 44
Environmental pollution and as basis of
Protection and damage to the  utilization; PES
Management environment  control; activities in
and to establish Indonesia.
an effective  maintenance;
environmental  supervision; and
management
 law enforcement
system
on environmental
protection and
management
4 MoFor Regulation To develop  Environmental Forest carbon MoEF (DG of MoEF, Funds can
No. 36 of 2009 on forest carbon services concession sequestration and Planning, FG governor come from
the sequestration in production forests storage as part of the Forest and bupatis/ internal
Implementation of and storage (IUPJL-HP).  environmental service Production). Fo mayors corporations
the Permit activities. activities in production rest license (license (concession
 Logging concession and protection forests, holders),
Issuance holders. issuing).
in natural forests which include a series CSR, donor
Procedure for
(IUPHHK-HA). of activities under agencies.
Carbon
Plantation forest sustainable forest
Sequestration
concession management.
and/or Carbon
(IUPHHK-HT).
Storage Business
Activities in  Community forest
Production and concession
Protection Forests (IUPHHK-HKm). 
 Community
plantation forest
concession
(IUPHHK-HTR).
 Ecosystem
restoration
Key components
concession
(IUPHHK-RE).
 KPHs
 Conservation forest.
 Customary forest.
 Rights forest.
 Village forest.
5 MoFor Regulation The objective of TBA Regulates the national MoEF 15 years MoEF PES related
No. 42 Year 2009 this regulation is watershed management to water
on General to coordinate, as a whole including managemen
Pattern, Criteria, integrate, guidance on planning, t as part of
and Standard synchronize implementation, watershed
Watershed and synergize monitoring and managemen
Management; and watershed evaluation of related t.
Ministry of Forestry management in activities.
Regulation No. 37 Indonesia
Year 2012 on
Watershed
Management
6 MoFor Regulation To implement  Production forests. Demonstration activities MoEF (i.e. WG Not MoEF
No. 20 of 2012 on forest-carbon and/or full on Climate available. (license
 Protection forests.
Forest Carbon activities in implementation, Change). Forest issuing).
Implementation accordance with  Conservation consisting of:  license holders.
sustainable forests.
 nursery and planting
forest
management  forest-carbon
principles. enrichment
 protection of forests in
 logging concessions
 biodiversity
conservation
Key components
 sustainable forest
 management
 sustainable forest
 protection
management
 forest conservation
 management
 community
 empowerment
 carbon baselining,
MRV
 boundary mapping
and
 establishment
7 MoFor Regulation To provide Nature based tourism Activities to provide MoEF. Nature- 20 years MoEF
No. 22 of 2012 on guidance for service providers nature-based tourism based tourism (license
Guidance on nature-based (IUPJLWA-PJWA). services. Activities to providers. issuing). 
Environmental tourism Nature based tourism provide nature-based Local
Service Tourism activities. facility providers tourism facilities. governments
Activities in (IUPJLWA-PSWA). (extending
Protection Forests licenses).
8 Draft of TBA TBA TBA TBA TBA TBA Under
Government development
Regulation on .
Environmental
Economics
Instrument
Source: HPI’s compilation based on CIFOR Occational Paper 132: Forest and land-use governance in a decentralized Indonesia - A legal and policy review, 2015,
http://www.cifor.org/publications/pdf_files/OccPapers/OP-132.pdf
Table 21: List of PES and REDD+ related regulations in Aceh
Regulation Theme Key points
Governor of Aceh Organization Structure and Operation PES function is the
Regulation No. 20 of 2013 of Technical Implementing Unit (UPT) responsibility of KPH,
at the Provincial Government Forestry under the Forest
Office (Dinas Kehutanan Propinsi) Protection and Natural
Conservation Unit
Provincial Regulation Environmental Management Article 16 and 19
(Qanun) No. 2 of 2011
Provincial Regulation Forestry Management in Nangroe Article 15, 16, 17 and
(Qanun) No. 14 of 2002 Aceh Darussalam Province 38
Provincial Regulation IUPJL Permit Issuance Article 6, 7, 10
(Qanun) No. 15 of 2002
Governor of Aceh Provincial Strategic Action Plan Historical
Regulation No. 3 of 2014 (SRAP) Document deforestation data is
provided, for Aceh
Province
Ministry of Forestry Leuser National Park
Decree No. 276/Kpts-
VI/97 (23 May 1997).
Ministry of Forestry Rawa Singkil Wildlife Reserve
Decree No. 166/Kpts-
II/1998
Source: HPI own elaboration
Table 22: List of PES and REDD+ related regulations in Central Kalimantan
Governor Regulation Management of High Conservation

No.41/2014 Area (HCA) for plantations in Central
Kalimantan
Governor Regulation Provincial Strategy and Local Action

No.10/2012 Plan for Reducing GHG emissions
(RAD-GRK)
Provincial Regulation Sustainable Management of

No.5/2011 Plantation Businesses
Governor Regulation No. Guideline on Plantation Management

17/2011 Permits
Provincial Regulation No.5 Forest fire or land control

of 2003
City of Palangka Raya Forest and land fire prevention and Article 18, clause 3
Regulation No. 7 of 2003 mitigation in Palangka Raya
Source: HPI own elaboration
Table 23: List of PES and REDD+ related regulations in Papua
Provincial Regulation No. 21 Sustainable forestry management in Article 55 and 56

of 2008 Papua Province
Law No. 21 of 2001 Special autonomy of Papua Province –
Provincial Regulation No. 23 Spatial planning of Papua Province –

of 2013
Mimika Regency Regulation Authority of Mimika Regency –

No. 2 of 2008
Mimika Regency Regulation Protection and Management of –

No. 12 of 2014 Mangrove Ecosystem
Mimika Regency Regulation Spatial planning of Mimika Regency –

No. 15 of 2011
Draft Jayapura Regency Protection of Sentani Lake –

Regulation
Draft Jayapura Regency Cyclops forest and mountain –

regulation protection
Government Regulation No. Tariff on state revenue from non Entrance fee for Lorenz
59 of 1998 taxation National Park90
90 http://ahabdul.blogspot.co.id/2013/05/tarif-masuk-taman-nasional-lorentz.html
Annex 7. Indicative Work Plans
This workplans will need to be refined through further discussions with LESTARI
2016 2017 2018 2019 2020

Activities
M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J
Recommendation - Incorporating PES in to Local Funds
Phase 1 - Design of the Approach
Phase 2 - District Level activities
Phase 3 - Village/community Level activities
Phase 4 - Replication
2016 2017 2018 2019 2020

Activities
Recommendation - Access NORAD funds & GCF
Phase 1 - Design of the Approach
Phase 2 - Consultations with National Level Stakeholders (MoF,
Phase 3 - Selection of Partners and Eligible Activities
Phase 4 - Proposal development and stakeholder consultation
Phase 5 - Proposal submission and presentation
Phase 6 - Support Funding Rollout, Implementation, Replication
2016 2017 2018 2019 2020

Activities
Recommendation - Supporting the Climate Change BLU
Phase 1 - Workshops
Phase 2 - Capacity building
Phase 3 - Support for Project Implimentation
2016 2017 2018 2019 2020

Activities
Recommendation - PES design and study
Current institutional and ecosystem landscape
Basic PES design sucture
Nagotiation stage
Implementation
Monitoring and evaluation framework
Implemetation/Pilot
LESTARI
Wisma GKBI, 12th Floor, #1210

Jl. Jend. Sudirman No. 28, Jakarta 10210, Indonesia.
Phone: +62-21 574 0565 Fax: +62-21 574 0566

Email: info@lestari-indonesia.org

Usaid-Lestari Pes Redd Finance Assessment

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Usaid-Lestari Pes Redd Finance Assessment

Uploaded by

Copyright:

Available Formats

FINAL ASSESSMENT REPORT

PES/REDD+ FINANCE ASSESSMENT AND

JAKARTA, MARCH 31, 2016

The period of this contract is from July 2015 to July 2020.

JAKARTA, MARCH 31, 2016

To be able to access increased financing from government agencies, LESTARI needs to

Payment for Environmental Services (PES) concept

Figure 1: Ecosystem services from forests

HPI’s activities in accomplishing the SOW objectives

(i) Sub-national Development Planning Agency (BAPPEDA Propinsi and BAPPEDA

Table 1: Financial barriers, types and mechanisms

Source: (ECN/Ecofys 2014); adapted

Figure 4: Government management of foreign funding

Activities under the central government authority (ministries/agencies) are financed

2.1.1. The Indonesia Climate Change Trust Fund (ICCTF)

Eligibility CSOs, NGOs, private sector, universities/academies and

2.1.2. Forest Management Unit (FMU) Fund

Eligibility All types of FMUs/KPHs: FMU Conservation (KPHK), FMU

Table 2: Sources of existing FMU development funding

Source: (PKPPIM 2015)

Special Allocation Fund (Dana Alokasi Khusus – DAK)

Deconcentration Fund (Dana Dekonsentrasi)

Sub-national Government Budget (APBD)

The Sub-National Government Budget (APBD) comes from intergovernmental fiscal

2.1.3. Shared Revenue Fund (Dana Bagi Hasil – DBH) on Forestry

Eligibility All district/city governments

Table 3: Shared Revenue (DBH) distribution

Central government 20% 20% 60%

Other districts/cities in the

Source: (PKPPIM 2015)

4 To be used for forest and land rehabilitation.

Eligibility All villages

Despite stipulations in the Ministry of Villages, Underdeveloped Regions and Transmigration

2.1.5. National Community Empowerment Program (Program Nasional

Eligibility Villages in and around forest areas

Funding Mechanism Budget transfer (from central and district government to

Size of Funding Variable

Eligibility Micro, small and medium enterprises (MSME) and

The implementation of the KUR program is supported by three pillars: government,

Table 4: Plan for the 2016 sectoral KUR feature

Between IDR 500 million – IDR 30 billion (~ USD 38,000 –

Source: (Coordinating Minister for Economic Affairs 2015)

2.1.7. Timber Harvesting Postponement Credit (Kredit Tunda Tebang - KTT)

Eligibility  Farmer groups, cooperatives (those receiving loans from

10Requirement and application form can be downloaded at http://www.dephut.go.id/uploads/files/perkaP2H_p01-

2.1.8. Watershed Fund (Dana Daerah Aliran Sungai - Dana DAS)

Eligibility Local community groups/organizations, villages

According to Government Regulation No. 37, 2012 on Watershed Management

Strengthening Community-Based Forestry and Watershed Management (SCBFWM)

The Strengthening Community-Based Forest and Watershed Management (SCBFWM)

Eligibility Local government

Funding Disbursement Yearly as part of government budgeting process

2.1.10. National Park Fund (Dana Taman Nasional)

Eligibility National Park Agency

National Parks in Aceh

Climate change mitigation and species conservation in the Leuser ecosystem

Protection of Aceh Selatan Singkil Strategic Area

National Parks in Central Kalimantan

Sebangau Conservation Project

Developing a Productivity Model of Local Responsibility in Ecosystem Restoration in

2.2. Internationally operated financial support

Internationally operated development finance available to PES/REDD+ activities in

Figure 10: Total commitments to REDD+ by donor type, 2009-2014

Mr. Daniel Simanjuntak  Ms. Laksmi Dhewanti