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Net-zero emission can help Indonesia escape middle income trap: Bappenas

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Jakarta Globe - April 21, 2021

Jayanty Nada Shofa, Jakarta – The National Development Planning Agency, or Bappenas, revealed that achieving net-zero emission would help Indonesia save the environment and escape the middle-income trap in hopes of becoming the world's top economies in 2045.

Bappenas has prepared four scenarios of when Indonesia would reach net-zero – namely, 2045, 2050, 2060, 2070. The earlier the deadline is, the more robust Indonesia's efforts should be to reduce emissions. But a more ambitious target would result in larger economic benefits for Indonesia.

"Our scenarios illustrate that green economy and a low carbon development can spur a sustainable economic growth in the future and help the country escape the middle-income trap by 2045," Bappenas chairman Suharso Monoarfa told a virtual summit held by the Foreign Policy Community of Indonesia (FPCI) on Tuesday.

The World Bank defines a high-income economy as a country with a gross national income (GNI) per capita of more than $12,535. Last July, the World Bank classified Indonesia as an upper-middle income country as their 2019 GNI stood at $4,050 – slightly higher than the lower end of the $4,046-12,535 threshold.

Indonesia, however, fears they will fall back to their lower-middle-income status, as their economy contracted by 2.07 percent amid the pandemic-stricken 2020.

Bappenas predicted if Indonesia chooses the most ambitious route, the country's income per capita will reach $14,019 in 2045. The country would also be able to surpass the high-income threshold before its centennial. In comparison, Indonesia would only reach an income per capita of $13,024 in 2045 under the 2070 scenario.

Bappenas' calculations showed that a net-zero emission in 2045 and 2050 could spur a total real gross domestic product (GDP) growth rate of around 6.21 percent and 6.06 percent, respectively (2021-2045). The 2070 scenario can bring a total real GDP growth rate of 5.82 percent within the same time frame.

Bappenas analysis also revealed a net-zero scenario could increase the annual GDP by 2 percent higher and boost income per capita by up to 2.5 times higher than business as usual.

"This results from higher productivity and fewer costs from the negative externalities towards the environmental capacity such as air pollution," Suharso said.

According to the minister, the push towards net-zero would also require the government to roll out environment-saving fiscal policies.

"An extremely unpopular example is to slash fuel subsidies by up to 100 percent at least in 2030. We must start gradually soon. As well as implementing a carbon tax, we will gradually increase up to 50 percent in 2030," Suharso said.

Also, at the same conference, FPCI urged the government to act more swiftly.

The think-tank's chairman Dino Patti Djalal hoped the president would choose the earlier scenarios – 2050 or even 2045 – as planet Earth is in a dire state.

Last month, the Environment and Forestry Ministry announced its plan to achieve net-zero emission by 2070. Dino then expressed his disappointment at the ministry's less ambitious goal, as they should have been the ones to champion the movement.

"Do not think of the easiest resolution because the time window is only the next 30 years," Dino said.

"The formula is to cut emission globally by 50 percent until 2030 and another 50 percent until 2040. Also, slash another 50 percent until 2050 to keep global warming below 1.5 degrees celsius."

Source: https://jakartaglobe.id/business/netzero-emission-can-help-indonesia-escape-middle-income-trap-bappena

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