A shared revenue system known as the Ecological Fiscal Transfer (EFT) has recently grown to become an impactful innovation in the area of state budget mechanisms to address Climate Change.

The EFT has been partially adopted in Indonesia for years now to distribute revenues to subnational governments based on ecological indicators. Now, UNDP, through its Kalimantan Forest Project (KALFOR), is attempting to bring the issue to forefronts by facilitating ways to distribute the EFT to village levels.

It is a logical move given the fact that much of the millions of Indonesia’s forested communities live in villages. Also, more forest initiatives in forest protection and conversation could be benefitted from this move. But before taking this initiative further, more needs to be done to enhance the current implementation of the EFT.

A recent UNDP’s KALFOR webinar aims to delve into this topic. The webinar also provided an opportunity for stakeholders to examine certain aspects of policymaking that may preclude the government from fully implementing the EFT. Discussions were centered on ways to enhance the government’s performance on policy and budget expenditures, as well as on how to place a greater emphasis on the ecology and environmental issues.

One thing is certain when it comes to the EFT: the government has been nothing but responsive. Several sub-districts have also recorded milestones on the EFT. The Kotawaringin Barat sub-district of Central Kalimantan province, for example, recorded a milestone when it passed Regent’s Decree towards the ecological based development approach on its region, which includes 6 regencies and 72 villages.

Kotawaringin Barat District Head, Hj. Nur Hidayah, noted that protecting the environment through regulations benefits the community at large. ”In our district, there is a sense of urgency to maintain the forest, particularly the surrounding areas. The process has involved the  creating economic opportunities for our community while also considering the future of the environment, particularly for the next generation. By implementing the EFT on the district level, we will be able to incentivize and provide guidance of how to thrive in today’s economy while also protecting our forests,” she said.

The initiative will boost the district’s priorities, such as tourism, sustainable agriculture, and infrastructure, as well as close monitoring of land use and spatial plans. Furthermore, the decree will prioritize ecological needs of forests and explore solutions for appropriate land use for agriculture. It has also paved the way for ecologically sound management of green open space.

Three other districts in the province of West Kalimantan -Kutai Timur, Ketapang, and Sintang - are also in the process of enacting similar regulations that are tailored to each district’s needs. These three districts are also part of the KALFOR project’s pilot initiatives.

Agus Prabowo, Head of UNDP Indonesia’s Environment Unit, explained why it is critical to forests is important “It is easier for us to maintain forests within national parks because we already have all of the system and regulations in place,” he said. “However, we need more effort and collaboration to maintain the remaining forests outside the forest area because there are people living in the surrounding areas. The EFT implementation will help regional governments in monitoring and implementing an ecological approach on the budget instrument to make sure no one is left behind,” he added

The Ecological Fiscal Transfer (EFT) will support the national target to reduce the carbon emission by 29 percent in 2030. Currently, UNDP is ensuring the feasibility of the EFT implementation to reach deeper into the village level of its pilot projects area.

The KALFOR project has been supporting a series of discussions at the national level with the Directorate for Forest Inventory and Monitoring, Ministry of Environment and Forestry and other potential partners. The Central Kalimantan government has expressed interests and hopes to move further in implementing the EFT at the provincial level.

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Written by Enggi Dewanti

Edited by Tomi Soetjipto and Ranjit Jose