CDM projects ’vital for Indonesia’

CDM projects ’vital for Indonesia’
Published: 01 November 2005

Environmentalists and economists welcomed the government’s move to establish the National Commission on the Clean Development Mechanism (CDM), a national authority to promote Indonesian CDM projects to the world. Former environment minister Emil Salim said the establishment of the commission would help push the business sector to take into account the social and ecological aspects of their activities aside from economic ones. "The existence of the (CDM) projects improve the weaknesses of market-based mechanisms by internalizing social and ecological costs as economic costs," Emil, an expert on sustainable development, said over the weekend.

The government launched last the CDM last week to promote projects submitted by private businesses to help reduce their gas emissions as part of the Kyoto Protocol. The commission will validate private companies that are interested in selling their reduction emission programs to developed countries. Developed countries are obliged under the Kyoto Protocol to reduce the world’s greenhouse gas emissions by 5.2 per cent from 2008 to 2018. If approved, the firms will receive Certified Emission Reduction (CER) credits. Each ton of carbon dioxide reduction will be valued at between US$1.50 and $5.50.

The head of the commission, who is also a deputy to the State Minister of the Environment, Masnellyarti Hilman, projected that Indonesia had the potential to supply two per cent of the global CDM market, or equal to 125 million tCO2e (ton carbon dioxide equivalent). "If we assume that a ton of CER is worth US$6 in the international market, than our economic potential is worth US$750m," she said after the official launch of the commission last week.

The CDM was established under State Minister of the Environment Decree No 206/2005 and consisted of representatives from nine ministries. State Minister for the Environment Rachmat Witoelar said that developed countries like Canada, Denmark and Japan have already expressed their interest in buying the country’s CDM projects.

 However, economist from the Institute of Development of Economics and Finance Iman Sugema doubted that the business sector here would be immediately attracted to apply for the CDM program. "Without assistance funds available, it is difficult to attract industries to participate in the CDM project," he said, referring to the high cost companies needed to bear when applying for the program. According to data from the commission, each company applying for CDM project would have to spend over $50,000 for validation, registration and verification fees. "For example, Indocement has submitted two projects to reduce 3 million of TCO2e. If each ton is worth $6, it will receive $1.8m in return," she said, adding that asides from Indocement, two other companies had also proposed emission reduction projects.