Indonesia Calculates GDP of the Poor in Fight Against Climate Change

Indonesia image 1 Indonesia took a key step towards its ambitious goal of transitioning towards a green economy. The country tested a new model that shows policymakers how their development decisions can help or hinder the green transition. The Indonesia Green Economy Model (I-GEM) also shows how development interventions can affect the incomes of poor people who are largely reliant on natural resources for their livelihoods -- revealing this often unseen capital of the poor for the first time.

Indonesia is among the world's top emitters of greenhouse gases (GHG). The country's emissions from energy and industry, however, are relatively small, albeit growing. Instead, deforestation and forest fires, often deliberately lit by farmers or plantation owners, contribute significantly to Indonesia's emissions. Meanwhile, ancient carbon-storing peat forests are releasing carbon dioxide as these swamp lands are drained for agricultural purposes.

Indonesia image 2The Government is determined to take action. In 2009 it pledged to cut GHG emissions by 26 percent domestically and up to 41 percent with international support by 2020 against "business-as-usual" level. Transitioning to a green economy is a key approach being pursued by the Government, says Verania Andria, Programme Manager of the United Nations Development Programme's (UNDP) environment unit in Indonesia. "This is a new way of pursuing development – one that ensures economic growth while avoiding environmental degradation, loss of biodiversity, and unsustainable use of natural resources," she explained.

A key step towards making this transition was taken when the country began testing the new I-GEM. This model allows policymakers to measure the impact of development proposals. It can be used to see how interventions made under 'business-as-usual' scenarios compare with green economy actions. Specifically, policymakers can see the impacts in a particular province on poor people's incomes; the depletion or degradation of natural resources; and the availability of decent green jobs.

Indonesia image 3Green GDP is an alternative measure of GDP that takes into account the loss of natural capital. Along with the Decent Green Jobs indicator (developed by the International Labour Organization), Green GDP has been widely used around the world. But, I-GEM also incorporates a new 'GDP of the Poor' indicator that reveals, for the first time, the impact of certain policy interventions on poor people's incomes, whose living often depends on nearby ecosystem services.

"I find it really exciting," Ms. Andria said. "This indicator shows how dependent the poor are on natural resources: it can be a river, a mountain, a forest, or a coastal eco-system," she said. "Usually, this is an invisible element, but when, for example, you know that the GDP of a poor community is 70 percent reliant on their nearby forest, you can weigh the real costs and the impact to the poor of turning this resource over for other uses. If that is the case, you can hardly say that the development is pro-poor."

While studies into measuring the GDP of the Poor have previously been done in India, Indonesia, through the UNDP Low Emission Capacity Building (LECB) project, is the first country to actually develop and test such an indicator as part of the I-GEM development process.

Indonesia image 4I-GEM was developed over a six-month period. Two international consultants led the process and it involved a wide range of stakeholders, including government officials at national and regional levels as well as academics, students and civil society organizations.

In Central Kalimantan, many communities are heavily reliant on their surrounding tropical forests from which they produce rattan, resin and other products. Using a scenario based on the development plan for Central Kalimantan, the model showed that the significant percentage of the population reliant on local natural resources would not see an increase in incomes over the next 20 years, but would become more vulnerable to poverty and disaster.

The team then ran the green economy scenario. This envisaged the promotion of sustainable agriculture, fish stock management, and reforestation starting in 2015. Under this scenario, the model showed that the GDP of the poor, across all villages typology, actually increased.

Indonesia image 5Such an analysis is extremely important for local officials who are responsible for creating development in Central Kalimantan and who often find it difficult to contextualize environmental preservation within jobs creation and revenue generation," Ms. Andria said.

The next step is to replicate similar processes in other provinces with different topography, Ms. Andria said. Once these are completed, Indonesia will have a representative set of provincial green economy models, thereby planting the seeds for implementing a green economy across the country.

Key Messages

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As one of the world's highest GHG emitters, Indonesia's challenge is maintaining economic growth for all, while also reducing the country's carbon footprint. The Government has set ambitious GHG reduction targets, and transitioning to a green economy is seen as a key way of achieving this goal.

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The groundbreaking Indonesia Green Economy Model (I-GEM), incorporating measures for green GDP, green jobs, and the never-before-used 'GDP of the Poor' indicator, was developed by the LECB project team in close collaboration with government, relevant sectors, universities and civil society.
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I-GEM has the potential to support Indonesia to make the transition to a green economy under its Third National Medium-Term Development Plan (2015-2019).

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