GREEN ECONOMY INDEX – A Step Forward to Measure The Progress of Low Carbon & Green Economy in Indonesia

Indonesia’s emerging economy is expected to consistently grow, giving positive signal for the government to escape the middle-income trap and achieve high-income status by 2045. However, the unforeseen COVID-19 pandemic has created a multidimensional crisis that affects not only the economy, but also our progress in eradicating poverty and ensuring equality. Aside this pandemic, Indonesia has also been battling with another crisis: climate change, which severely impacted physical environment, ecosystem, and human societies. Both crises will hinder Indonesia’s progress to achieve 2030 sustainable development agenda and become a high income country by 2045. Implementing business-as-usual approaches in development will be insufficient to guarantee a long-term sustainable growth in the future. 

Bappenas analysis reveals that economic growth of at least 6% is needed to ensure Indonesia fulfilling the 2045 vision. Therefore, a structural change in economy is necessary, not only to recover from the COVID-19 crisis, but in parallel also fostering the economic trajectory of higher growth in the medium-long term. Bappenas expresses this strategy of economic transformation with Green Economy as one of the ”game changers”, aiming to create advanced and inclusive economic growth while realizing social welfare and maintaining environmental quality. low carbon development and climate resilience policies are designed to be the main instruments or the “backbone” to run a Green Economy strategy. 

Pursuing a Green Economy is envisaged to bring in multiple benefits and lead Indonesia to reach the Net Zero Emissions (NZE) target by 2060 or sooner. One of the key advantages according to Bappenas study includes securing high average GDP growth up to 6.5% annually until 2050. As the concept suggests, the economic growth would not compensate the environment and ecosystem. The study projects almost 100 billion tonnes of CO2eq saved over 2021–2060, reducing emission intensity up to 68% by 2045 before reaching zero by 2060. Moreover, Green Economy is also predicted to offer 1.8 millions of additional green jobs. 

To assure that the economic transformation is effective to head Indonesia toward a Green Economy, a contextual framework with tangible, representative, and accurate indicators to measure the green economic progress is essentially required. Regarding that, Bappenas has developed Indonesia Green Economy Index comprising of a set of multidimensional indictors—15 in total—covering the interlinkages between three main pillars of sustainability: environment, social, and economy. 

Within the ten-year period of assessment, from 2011 to 2020, Indonesia Green Economy Index unfolds a rising trend, indicating the right track for the country toward a Green Economy. The composite Green Economy Index score grows 25%, reaching 59.17 in 2020. Four indicators are identified as the main contributors to this result of which having a very good score exceeding 75: forest cover, managed waste, industrial labor productivity, and life expectancy. We found that several policies i.e., ban on issuing new permits to clear primary forests and peatlands and moratorium on new oil palm plantation licenses drive the forest cover indicator to gain the highest score at 88.9 in 2020. 

When assessing each pillar’s progress individually, pillar of economic indicators are shown to be the most progressive, which prompted mainly by final energy intensity with score more than doubles from 34 to 74 within the span of ten-year. A lower energy intensity value means a more energy-efficient process and technology are utilized to fuel the economy. However, when zooming in each indicator’s progress, both share of renewable energy and poverty rate actually own the best progress among all, despite having the lowest score every year. Regardless dragging down the composite index of environmental pillar, score of share of renewable energy triples from 9 in 2011 to 28.9 in 2020. A more renewables focused electricity planning by the government and supportive regulation on biofuel has pushed this improvement. Meanwhile, poverty rate gradually rises with an average increase of 53% annually, hit a score of 24.8 in 2020. In general, the social pillar has a steady growing trend despite significant fall in 2020 due to the pandemic. 

Green Economy Index marks a new milestone for Indonesia in transforming towards low carbon and green economy by providing a comprehensive and objective analysis between economy, environment and social nexus. With strong commitment by the Government of Indonesia to incorporate green economy, Green Economy Index would serve as a tool for evaluation and strategic development purposes to help the government formulate future planning document and policies.

To get to know better about what is green index economy and how “green” is Indonesia economy, please download and read the document of green economy index through this button:

Source: The Ministry of National Development Planning/National Development Planning Agency (Bappenas) and Low Carbon Development Indonesia in collaboration with UK Foreign, Commonwealth and Development Office (UK-FCDO)