Climate Change, Forests and Fiscal Transfers in Indonesia


Event details


Date & time

Monday 14 September 2009


Seminar Room 1, Crawford School of Public Policy, #132 Lennox Crossing, ANU


Silvia Irawan


Emma Aisbett
The Parties to the UN Climate Change Convention are negotiating a ?Reducing Emissions from Deforestation and Degradation? (REDD) mechanism to provide assistance to developing countries to conserve and rehabilitate forests. Indonesia?s participation in this scheme is crucial due to its contribution to global greenhouse gas emissions. This study considers options for the design of REDD in Indonesia, with a focus on the distribution of REDD revenues through intergovernmental fiscal transfers.
Most of the forest land in Indonesia is controlled by the state. Local governments play a significant decision making role in forest management and land-use change. Forest exploitation and conversion generate revenues needed by local governments to provide basic public services. Intergovernmental fiscal transfers from the national to the local level are suggested as a suitable instrument to provide incentives for local governments to increase their interest in forest protection and to achieve an efficient and equitable allocation of forest resources.
This study proposes that the distribution of revenues generated from REDD can be allocated to the participating regions using existing fiscal instruments. This would include conditional and unconditional grant transfers as well as a revenue sharing mechanism. Each instrument entails different characteristics related to the distribution formula, the conditionality factor that regulates how funding should be spent at the local level, as well as the accountability and reporting system.

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