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What Indonesia Stands to Gain

Many countries are interested in addressing climate change and promoting green growth. But lack of information on associated costs and benefits (including the potential welfare and development impacts of climate change mitigation and adaptation measures) make it difficult for countries to take effective action. 

Development consultant Dominic Elson presented a report commissioned by the UK Climate Change Unit of the British Embassy, Jakarta, that seeks to address some this knowledge gap in the case of Indonesia. Elson found that Indonesia could stand to gain by changing its 'business as usual' approach to land use (especially regarding forestry and oil palm) and by reducing emissions. Indonesia could do this while improving the welfare of millions of rural Indonesians and setting the economy on a path of higher productivity and more resilient prosperity.

In this report, Elson argues that:

  • The annual cost of meeting the President's target of 41% reduction in emissions by 2020 could cost the equivalent of about 1% of GDP, but the direct financial benefits would be likely to exceed this cost.
  • ¬†Abatement costs are dwarfed by transaction costs and the cost of reforming the institutional environment.¬†
  • ¬†The opportunity cost of shifting development away from peatland and primary forests is negligible or even negative.¬†
  • Reforming tenure and improving the spatial planning process by provincial and district governments are at the heart of efficient land use and enhancing rural livelihoods while reducing emissions.¬†¬†¬†
  • Sensible management of Indonesia's landscapes in the context of global carbon markets has great potential to release some of the 'utility' value that reflects the true economic, social and environmental value of the forest and peatland, not just the short term extraction value.

The report (Cost-Benefit Analysis of a Shift to a Low Carbon Economy in the Land Use Sector) and the presentation he gave on April 21, 2011 at a PROFOR-supported talk at the World Bank are both available on this page.

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