Ecological Fiscal Transfer: Calculation of Blue Carbon Still Minimal

Ecological Fiscal Transfer (EFT) III national conference in Yogyakarta discussed the opportunities and challenges of the Carbon Economic Value (NEK) policy. IOJI specifically examines the calculation of the value of mangroves and seagrass beds which are much debated in various blue carbon discussions.

“Lost-and-found,” said the Director of WS2 IOJI Stephanie Juwana summarizing the data collection and calculation of the value of mangroves and seagrass beds on the Indonesian coast.

The value of both is still often debated in various discussions. Not immediately determined, let alone able to be reclaimed by the local community. In fact, mangroves and seagrass beds are the vanguard in the restoration of blue carbon ecosystems.

Coastal blue carbon assessments, he said later, “only reflect 15 percent of the total available.”

Reviewing the Benefits of NEK

Co-founder IOJI, Stephanie Juwana, spoke about blue carbon in EFT III. (Screenshot from EFT III conference YouTube).

According to Stephanie, data collection and calculation of mangrove and seagrass values “are still lacking when compared to terrestrialbased carbon [absorbers]. In addition, the understanding of the people in the regions regarding the Economic Value of Carbon (NEK) is also “not evenly distributed.”

This condition occurred, he said later, “sometimes due to the disconnection of information from the central [government] to the regional [governments]. At the same time, people’s access to global carbon markets is still low.

IOJI sees the importance of the government ensuring a fair distribution of NEK benefits to the community because “they are actually the main beneficiaries of NEK benefits,” said Stephanie.

Stephanie’s reminder sparked at the third national Ecological Fiscal Transfer (EFT) conference. The conference which will be held in Jakarta on 14-15 November 2022 focuses on studying the opportunities and challenges of NEK.

The NEK was established through Presidential Regulation (Perpres) Number 98 of 2021. The government hopes that the Presidential Decree can support the achievement of targets for reducing greenhouse gas (GHG) emissions which are in line with the 2016 Paris Agreement for climate change control.

Mangrove Destruction is Increasingly Worrying

In the forum, the Chief Executive Officer of IOJI, Mas Achmad Santosa, or who is fondly called Mr. Otta explained “the management of blue carbon ecosystems is increasingly important in Indonesia”. What’s more, Indonesia is a country with the largest mangrove area in the world. Currently Indonesia contributes 17 percent of the world’s total blue carbon reserves.

Blue carbon ecosystems can absorb carbon 10 times that of tropical forests, with an economic valuation of around US$2 million-50 million. Unfortunately, said Pak Otta, “the destruction of mangroves is increasingly worrying in Indonesia.” He noted that 52,000 hectares of mangrove forests are damaged every year in Indonesia. In the last three decades, “Indonesia lost around 40 percent of its mangrove forests.”

Damage to the mangrove ecosystem is mostly caused by anthropogenic pressure. For example the development of economic infrastructure, utilization of mangrove areas for residential areas, fish and shrimp ponds, and illegal logging.

Mr. Otta also noted several challenges in managing EKB in Indonesia.

First, Indonesia does not yet have a specific legal framework regarding EKB management (currently EKB management is regulated in various sectoral laws). The 1945 Constitution as the basis for the direction of legal development in Indonesia also does not describe the existence of urgency and emergency regarding the importance of protecting EKB.

Second, there are several government agencies that have authority over EKB management, resulting in unclear functions and duties.

Third, community participation in EKB management is not optimal.

Fourth, the national legal framework still provides for the possibility of setting aside EKB protection instruments based on the interests of a National Strategic Project, for example in the core zone of a water conservation area.

Fifth, monitoring, supervision and law enforcement against activities that damage EKB are still weak. Seventh, the low success rate of mangrove planting in Indonesia.

Furthermore, Mr. Otta provided several recommendations for improving EKB governance in Indonesia.

First, the legal and policy framework needs to stipulate EKB as Critical Natural Capital (CNC) and followed by the establishment of strong protection instruments and no exception clauses.

Second, the rehabilitation target of 600,000 hectares needs to be reviewed and the government needs to focus more on conservation efforts.

Third, to regulate the division of authority to manage EKB between ministries and institutions more clearly.

Third, genuine public participation is implemented to avoid formalistic community involvement practices.

Fourth, optimizing community-based legal supervision and monitoring.

Fifth, implementing preventive and repressive law enforcement, as well as curative or restorative law enforcement that provides a deterrent effect.

Strong and Fair Ecological Indicators

EFT has been around since the early 1990’s. Initially, a number of countries such as Brazil, Portugal, France, China and India implemented the EFT scheme by allocating a certain percentage of state revenue according to priority environmental protection programs per region whether it be a state, province or city.

In the past, the volume and direction of these transfers were often based on certain indices – geographic, social and economic or formulas determined by the country’s fiscal authorities – but, contrary to their name, the schemes rarely included environmental variables.

The EFT scheme has also gradually changed. Now, countries around the world are gradually including ecological indicators into the fiscal allocation formula which is expected to be strong and fair, both for people’s welfare and environmental conservation.