A new World Bank report launched today highlights the upstream policy challenges that Indonesia faces in attaining environmental sustainability, and thus freeing up funds for better development outcomes. The Country Environmental Analysis examines the economic costs of environmental degradation and offers options on how best to address priority issues of environmental governance and climate change mitigation and adaptation. The report was compiled through extensive consultations with the Indonesian government, non-government organizations and research institutes.
According to the analysis, the costs of environmental degradation to Indonesia’s economy can be summarized as follows:
- Natural capital constitutes about one quarter of total wealth in Indonesia but is being rapidly depleted and not being offset by adequate investments in human or produced capital.
- Climate change will result in a number of negative impacts on Indonesia, including reduced crop production, greater risks of flooding, and further spread of vector-borne diseases, with economic costs projected to reach 2.5-7.0 percent of GDP by 2100.
- Poor sanitation is estimated to have led to major health, water, tourism and other welfare costs worth more than $6 billion in 2005, or more than 2 percent of GDP that year.
- Outdoor and indoor air pollution is estimated to have led to health impacts worth about $5.5 billion per annum or about figure is 1.3 percent of GDP (2007).
- Deforestation since 2001 reached over 1 million ha per year, This is reduced from historical highs over 2.5 million ha per year, but still very high compared to other tropical forested countries. Forest loss and peat land conversion cause environmental degradation, health and biodiversity losses, and greenhouse gas emissions.
“Environmental degradation has a high cost for Indonesia. However, with the recent passing of new laws in environment, electricity and solid waste management, Indonesia is clearly on the path towards a more environmentally sustainable future,” said Joachim von Amsberg, World Bank Country Director for Indonesia. “The next step in this transformation is to match this legal framework with adequate capacity and incentives at all levels of government, while at the same time take the appropriate adaptation and mitigation measures to address climate change.”
Indonesia has been identified as one of the countries in Asia most vulnerable to climate change hazards. Drought, floods, sea-level rise, and landslides are among the hazards that will affect mainly poor communities living on the coast and dependent on agriculture, fisheries and forestry for their livelihoods. However, with the right adaptation measures, the annual benefit of avoided damage from climate change is likely to exceed the annual cost by 2050 without adaptation investments.
“Climate change raises the stakes for achieving sustainable development, but also brings opportunities for lower carbon growth and climate finance for mitigation and adaptation. More importantly however, as evidenced by President Yudhoyono’s recent G-20 speech, Indonesia is deeply committed to achieving sustainability and is taking action,” said Timothy H. Brown, Senior Natural Resources Specialist for the World Bank in Indonesia. “International partners like the World Bank stand ready to help Indonesia achieve greater sustainability and realize its ambition of low carbon growth.”
At the G-20 Leaders Summit in Pittsburgh, President Susilo Bambang Yudhoyono among other things announced that Indonesia was willing to reduce emissions by 26 percent by 2020 from Business As Usual ; planning a billion ton CO2 reduction by 2050; aiming to make forestry a net sink sector by 2030; continuing its fuel efficiency policy; and working to make public transportation more environmentally friendly over the next 10 years.
FACTSHEET
Country Environmental Analysis: OptionsExpanding Access to Environmental Governance
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