Climate mitigation finance in leveraging private investments in Indonesia

This paper identifies and reviews arrangements by which climate mitigation finance taken from official development assistance (ODA) is used to leverage private-sector investment in Indonesia’s greenhouse gas (GHG) emission reduction. It analyses eleven principal mitigation projects taken from 2010–2015 OECD Creditor Reporting System data, using an institutional analysis and development framework. The results show that within Indonesia’s complex private-sector history and strong patronage system, mitigation finance has been deployed to support a number of early engagement activities with the private sector at the policy and administrative levels, with a less focus on the political level. Engagements to leverage private investment are initially made through research, prefeasibility studies and capacity-building. At later stages, mitigation finance offers the private sector opportunities to undertake pilot activities. Some pilot activities have had successful outcomes, with private sector entities acting as co-financiers and self-investors in large-scale infrastructure projects via arrangements such as public-private partnerships. Greater understanding of the history and political context of Indonesia’s private sector is expected to improve donor and recipient strategies for leveraging private investment in risky projects, developing bankable business plans as well as providing accountability for the use of public finance in business-related international development activities.