Financing the Green Transformation How to Make Green Finance Work in Indonesia

Planetary boundaries and a scarcity of natural resources will require a significant boost of investment into clean and renewable energy and a more efficient use of resources in developing, emerging and advanced economies alike. In this context, the financial sector will have to play a key role in providing 'green finance' for sustainable investment and development. Against this backdrop, this book investigates the challenges for developing and emerging economies in enhancing green financing for sustainable, low-carbon investment, using Indonesia as a case study. Based on surveys in the Indonesian banking and corporate sectors and expert interviews, the book devises innovative policy recommendations for governments to develop a framework conducive to fostering green investments.

Ulrich Volz, Senior Lecturer, SOAS, University of London and Senior Research Fellow, German Development Institute.

Judith Böhnke, Economist, KfW Development Bank.

Vanessa Eidt, Economist, KfW Development Bank.

Laura Knierim, Economist, KfW Development Bank.

Katharina Richert, Lecturer, Department of Economics, University of Heidelberg.

Greta-Maria Röber, Financial Sector Expert, Financial Systems Development Competence Centre, GIZ German Technical Cooperation.

1. Introduction
2. Financing The Green Transformation – Market Failures, Government Failures And The Role Of The State
2.1 The Economic Rationale For Public Intervention – Addressing The Obstacles To Green Finance
2.1.1 Market Failures
2.1.2 Government Failures
2.1.3 Balancing Public And Private Interest
2.2 Measures And Instruments To Enhance Green Finance
2.2.1 Creating A Conducive Policy Framework
2.2.2 Extending The Supply Of Green Finance
2.2.3 Fostering The Demand Side
3. The Green Transformation In Indonesia
3.1 The Need For A Green Transformation
3.2 Policy Goals And Initiatives
3.3 Emission Reduction Potentials, Investment Needs And Financing Sources
3.3.1 Potential GHG Emission Reductions In The Energy Sector
3.3.2 Investment Needs
3.3.3 Potential Sources Of Green Finance In Indonesia
4. Empirical Analysis Of Supply Of And Demand For Green Finance In Indonesia
4.1 Supply Side: Bank Survey And Interviews
4.1.1 Methodology: Sample Selection, Hypotheses And Questionnaires
4.1.2 Findings
4.2 Demand Side: Company Survey And Interviews
4.2.1 Methodology: Sample Selection, Hypotheses And Questionnaires
4.2.2 Findings
4.3 Summary Of Findings
5. Policy Recommendations
5.1 A Three-Phased Approach To Fostering Green Finance
5.2 Defining Green Finance
5.3 Capacity Building
5.4 Energy Service Companies
5.5 Soft Loan Schemes
5.6 Credit Guarantee Scheme
5.7 Utility Finance
5.8 Vendor Financing
5.9 Summary
6. Summary And Conclusions