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by Sigit Ardianto, Gita Syahrani and Ahmad
Clean Development Mechanism (CDM) has
not received enough priority within Indonesia's legislation after its Kyoto
Protocol ratification in 2004. Despite the "Bali Action Plan" and the
3rd Meeting of Parties to the Protocol in Bali in December 2007, no governmental
effort has been made on this issue. With no prevailing regulations in place to
regulate potential CDM issues, progress by non-state actors on CDM
implementation may be impeded.
Clean development mechanism
(CDM) is still striving to receive priority within the framework of Indonesia's
national legislation following ratification of the Kyoto Protocol by the
country in 2004. Even after the "Bali Action Plan" was agreed upon at
the 13th Conference of the Parties (COP 13) and the 3rd Meeting of the Parties
to the Kyoto Protocol (MOP3) in Bali, Indonesia in December 2007, there has
been virtually no significant effort from the government to address this issue.
To date, the government has not promulgated any public regulation specifically
addressing CDM that forces the implementation of CDM in Indonesia to rely on
existing regulations governing related areas. With a few exceptions, those
regulations were not created and issued by the Legislature with the CDM concept
in mind. On a practical level, the fact that prevailing regulations are not
constructed to regulate potential issues in relation to CDM might impede the
progress of CDM implementation by non-state actors in Indonesia.
CDM in Geothermal Business
Under the current government structure, the
Designated National Authority (DNA) to approve CDM projects within Indonesia is
the National Commission for Clean Development Mechanism (NCCDM). Up to June
2011, the Commission has approved 122 CDM projects. However, apart from the
establishment of the NCCDM, prevailing Indonesian laws provide practically no
reference to private involvement in CDM. On the other hand, Indonesian law has
never been intended to prevent non-state actors from operating business in
areas which will allow them to earn credits (in the context of CDM, Certified
Emission Reductions (CERS)), while at the same time developing growth in the
said areas. This perspective is expressly shown in various regulations related
to natural resources, including geothermal. In relation to geothermal business,
the law encourages involvement of a private entity in geothermal production.
Participation by foreign entities with the generous limitation of up to 95% is
even welcomed. The government has also increased the price for electricity
generated from geothermal to induce investors.
Despite the significant geothermal potential and the support given by the
government, the development of geothermal industry in Indonesia has not shown
any noteworthy progress. Over the span of 20 years, Indonesia developed only
787 MW of geothermal power, a mere four per cent of Indonesia's 20,000 MW
strong geothermal potential. Until September 2010, only four CDM projects which
have been requested and registered in the UNFCCC (a German secretariat named
for the United Nations Framework Convention on Climate Change, and established
to implement that treaty) are based on geothermal power. Only one project
(Darajat Unit III Geothermal Project - Chevron Limited) successfully received
CERS issuance in 2009. [footnotes omitted]
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Sigit Ardianto, Gita Syahranim, and Ahmad
Fikri are practicing lawyers of the law firm DNC Advocates at Work,
Jakarta, Indonesia. They are directly involved in the climate change and
emission trading practice area, with a list of clients that includes the
Ministry of Finance of Indonesia, DFID-UK, and the World Bank.