Indonesia: Environmental Issues

Introduction
Between 1980 and 2001, the population of Indonesia grew 46%, from 147 million to 215 million. This made it the fourth most populous country in the world (after China, India, and the United States) in 2001. As a result of rapid, trade-led industrialization, Indonesia's real gross domestic product (GDP) grew even faster than its population during the same period. Real GDP increased an average of 3.3% per year between 1980 and 2001, from $194 billion to $561 billion.* During this period of demographic and economic change, a broad array of environmental and natural resource legislation was enacted. Because it was not rigorously enforced, however, Indonesia experienced significant environmental degradation during the 1980s and 1990s.

The Asian financial crisis of 1997 and 1998 worsened Indonesia's environmental problems. In an effort to try to rejuvenate local enterprises, Indonesia set aside its regulations on industrial behavior. This led local firms to pursue cheaper but more environmentally damaging production and harvesting methods. Indonesia's tumultuous political situation also has complicated environmental protection. The lack of clear authority among Indonesia's central, regional and local governments helped produce weak regulatory institutions. This problem intensified after the fall of President Suharto in 1998. For example, in 2002, President Megawati Soekarnoputri dissolved the Environmental Impact Control Agency (Bapedal) without clearly delineating which body(s) would take over its responsibilities. In theory, the Office of the State Minister for the Environment assumed the duties, but it was not given law enforcement powers.

The scope of Indonesia's environmental problems is large. According to the Jakarta Post, a report compiled by Indonesia's State Minister for the Environment states that the natural environment is deteriorating on all fronts. The report cites illegal logging of Indonesia's forests as one of the largest problems facing the country. This problem derives from the relative poverty of much of Indonesia's population, the abundance of timber (Indonesia contains 10 percent of the world's forest cover, and has the third largest tropical rain forest) and the weakness of enforcement.

Logging impacts Indonesia's environment in many different ways. The deforestation that results from unregulated logging has been closely linked with floods and landslides. One such landslide caused the deaths of at least 150 people in November 2003. Illegal logging is also linked to Indonesia's very serious air pollution problem. The slash and burn tactic exacerbate already high levels of emissions from industry and motor vehicles, leading to levels of smog and air pollution that have affected neighboring countries. Deforestation is also associated with industrial runoff that pollutes Indonesia's water supply.

Air Pollution
Air pollution is perhaps Indonesia's most severe environmental problem. According to an official at the World Bank office in Jakarta, "air pollution imposes costs of at least $400 million on the Indonesian economy every year." It also has very a serious impact on public health. For example, inflammation of the respiratory tract, which is directly linked to air quality, was the sixth leading cause of death in Indonesia (after accidents, diarrhea, cardiovascular disease, tuberculosis, and measles).

Motor vehicles are one of the chief sources of air pollution in Indonesia. Between 1995 and 2001, the number of vehicles in Indonesia grew from 12 million to almost 21 million. Many of these vehicles are motorcycles or scooters, which lack the catalytic converters required for cleaner emissions. Moreover, almost no motor vehicles in Indonesia use unleaded gasoline. Instead, the vast majority of these vehicles rely on either leaded gasoline or diesel fuel, leading to unhealthily high concentrations of airborne lead.

The air in Jakarta had especially high concentrations of lead prior to the government-mandated phasing out of leaded gasoline in 2001. This was one of the few successful environmental initiatives in recent years. Before the ban, a study by the U.S. Centers for Disease Control found that over a third of the children examined had blood lead levels high enough to potentially adversely affect cognitive development.

Efforts to extend the ban on leaded gasoline throughout all of Indonesia by the end of 2003 were not successful. One of the reasons why wider inhibition of leaded gasoline has proven difficult is that Pertamina, the state-owned oil company, has very limited refinery capacity. Pertamina would have to upgrade at lest one of its refineries to produce sufficient quantities of unleaded fuel. Finding sufficient funding for the upgrade became a serious problem after the financial crisis and remains a major problem. In the meantime, there is resistance to authorizing private refiners to either produce or import unleaded gasoline. It is not expected that Indonesia will be free of leaded gasoline until at least 2005.

Despite the phasing out of leaded gasoline, Jakarta's air remains among the dirtiest in the world. The concentration of particulate matter is high, as are the levels of carbon dioxide, hydrocarbon, sulfur dioxide, and nitrogen dioxide. In July 2003, the Jakarta Post placed much of the blame on the fact that city authorities can only force public vehicles to comply with emissions standards. At that time, public vehicles accounted for only 315,000 of the almost 5 million vehicles in the city.

Forest fires also contribute to Indonesian air pollution. Often these fires result from illegal logging of Indonesia's rain forests. During 1997 and 1998, the fires were especially severe. Nearly 10 million hectares burned, producing a haze that impacted all of Southeast Asia. The World Bank's Indonesia Environment Monitor, 2003 states that the costs of 1997-8 fires exceeded the combined legal liabilities assessed for the Exxon Valdez oil spill and the Bhopal chemical disaster.

Indonesia's industrial sector, which contains chemical, petroleum, coal, plastic and rubber products, and food industries, also is a significant polluter. Unfortunately, there is limited quantitative data on their overall impact. The Blue Sky Program was initiated by the Ministry of Environment in 1992 to improve air quality in Indonesia's five largest cities: Jakarta, Bandung, Semarang, Surabya, and Medan. The Blue Sky Program imposed controls on 20 industries.

Water Pollution
Indonesia's water quality is deteriorating. One of the most serious problems is the lack of sewerage systems in urban areas. The Indonesia Environment Monitor notes that Indonesia ranks among the worst countries in Asia in sewerage and sanitation coverage. Few Indonesian cities possess even minimal sanitation systems. For example, according to a 2002 World Bank report, less than 3% of Jakarta's population is connected to a sewer system. The absence of an established sanitation network forces many households to rely upon private septic tanks or to dispose of their waste directly into rivers and canals. The commonality of the latter practice has led to significant contamination of Indonesia's surface and groundwater, as well as to repeated epidemics of gastrointestinal infections. As of 2001, an estimated 90% of Jakarta's shallow wells were polluted by domestic waste.

Indonesia's relative absence of controls on industrial emissions also has led to the degradation of water resources. The forthcoming report by Indonesia's State Minister for the Environment is reported to acknowledge that many factories continue to dump their liquid waste into rivers without treatment. A lack of regulations on agricultural chemicals has led to damage of water resources in Indonesia's farmlands. In large part because the growing numbers of artisanal and small-scale mines operate with little or no environmental precautions, Indonesia's mining sector is an increasingly large source of water pollution.

Indonesian coastal waters are highly polluted, especially in high traffic areas such as the Malacca and Lombok Straits, the major shipping pathway between Asia and the Middle East. Unsustainable fishing practices (e.g. blastfishing), industrial effluent, sewage, and agricultural discharges also have placed the ecosystems of Indonesia's reefs, the most biologically diverse in the world, in jeopardy. According to a 2002 report by the World Resources Institute, 86% of Indonesia's reef area (19,700 square miles) is at medium or high risk.

Energy Use and Carbon Emissions
In 2001, Indonesia consumed 4.6 quadrillion Btu (quads) of energy and released 87.1 million metric tons (mmt) of carbon dioxide, accounting for 1% of the world's total energy consumption and 1% of the world's total energy related carbon emissions. In the past two decades, Indonesian energy consumption and carbon emissions grew very rapidly. Between 1980 and 2001, they increased 315% and 271%, respectively. This rapid growth reflects Indonesia's industrial development during the period.

Indonesia derives the vast majority of its energy consumption from fossil fuels. Oil accounts for 47% of energy consumption (2.2 quads); natural gas contributes 30% (1.4 quads); and coal makes up 20% (0.9 quads). Together, hydroelectric and non-hydroelectric renewables (e.g. geothermal, wind, solar) account for the remaining 3% (0.15 quads) of Indonesian energy consumption.

Energy and Carbon Intensity
Indonesia's energy consumption per dollar of GDP (energy intensity) increased significantly during the 1980s and 1990s. In 1980, Indonesia consumed 5,760 Btu per $1995-PPP. In 2001, Indonesia's energy intensity had risen to 8,250 thousand Btu per $1995-PPP. Compared to other Asian nations, Indonesia's energy intensity is fairly low.

Relative to other Asian nations, the level of Indonesia's carbon emissions per dollar of GDP (carbon intensity) is moderately high. This likely reflects Indonesia's almost complete dependence on fossil fuels. Between 1980 and 2001, Indonesia's carbon intensity grew from 0.12 metric tons of carbon per thousand $1995-PPP to 0.16 metric tons of carbon per thousand $1995-PPP. In 2001, Indonesia's carbon intensity was higher than India's (0.09 metric tons per thousand $1995-PPP), Japan's (0.1), and Thailand's (0.14), but less than China's (0.18) and South Korea's (0.18).

Per Capita Carbon Emissions and Energy Consumption
Indonesia's per capita energy consumption and carbon emissions remain low, especially in comparison to more industrialized countries. In part, this reflects the large proportion of Indonesia's population that continues to live in areas with little or no electricity. In 2001, Indonesia's per capita energy consumption was 21.5 million Btu. This was significantly less than the most economically developed areas in the region like South Korea (170.2 million Btu per capita) and Taiwan (181.5), but higher than India (12.6) and Vietnam (9.6).

Indonesia's per capita carbon emissions grew significantly between 1980 and 2001, rising from 0.16 metric tons per person to 0.41 metric tons per person. Much of this growth likely stemmed from the rapid increase in motor vehicles. Despite their rapid growth, Indonesia's 2001 level of per capita carbon emissions was still significantly lower than in South Korea (2.55), Taiwan (3.18), and Thailand (0.77). Indonesia's per capita carbon emissions are higher than India's (0.25), however.

Renewable Energy
Because Indonesia is a large oil and natural gas producing country, most of its energy needs are met through fossil fuel combustion (77%). However, economic crisis, depletion of oil reserves and environmental needs are leading Indonesia towards greater exploitation of renewable energy sources.

The World Bank has contributed to several large-scale renewable energy projects, including the "Solar Home System" project that aims to electrify remote areas through renewable energy. Solar/PV technology is an attractive option in Indonesia because the country is fragmented among numerous small islands, making a comprehensive grid difficult to construct.

Indonesia possesses significant hydroelectric potential, but has done little to exploit it. There is a government-built, 5,600-megawatts (MW) hydropower plant in Irian Jaya to support economic development. Java also has several hydropower facilities. Their combined installed capacity is 2,550 MW.

Indonesia has significant geothermal energy potential. The "Ring of Fire," the world's most active volcanic zone, stretches along the southern coast of the islands of Sumatra and Java. Exploitation of geothermal resources remains highly tentative, however. According to a February 2002 report by the U.S. Embassy in Jakarta, Indonesia had developed 787 MW of geothermal capacity. This represented only 4% of its estimated geothermal potential of 20,000 MW. About 40% of this potential is located in Java and Bali, the two most populous islands in the Indonesian archipelago.

Prior to the financial crisis, the Indonesian government awarded contracts for 11 geothermal projects that would have had a generating capacity of 3,400 MW. Due to the tight fiscal constraints imposed by the crisis and the political change that followed, 7 of these projects were suspended. One possible source of the funds necessary to develop Indonesia's geothermal resources may be the Kyoto Protocol's Clean Development Mechanism (CDM) or other initiatives aimed at reducing greenhouse gas (GHG) emissions. Should Kyoto come into force, the CDM would allow energy providers from developed countries to invest or purchase "GHG emission reductions" credits from renewable projects in developing countries as a way of offsetting GHG emissions elsewhere.

Environment Outlook
Indonesia possesses a remarkable and valuable natural environment. The country is home to the world's largest reef system and one of the world's largest rain forests, both of which are home to thousands of unique species. Moreover, Indonesia's huge forests function as one of the world's main "carbon sinks" (natural means of sequestering world carbon emissions). The preservation of such sinks is an important aspect of avoiding climate change.

Two decades of rapid economic development, significant population expansion, and regulatory neglect have placed much of Indonesia's environment in jeopardy. As the country recovers from the economic and political turmoil of the late 1990s and early 2000s, the Indonesian government faces the challenge of enacting and enforcing stricter environmental legislation. The legal system in Indonesia will have to improve enforcement of environmental regulations against the intentional setting of forest fires and the use of leaded gasoline. While the Indonesian government already has had some environmental, such as the elimination of leaded gasoline in Jakarta, considerable scope for improvement remains. In particular, Indonesia will have to address the infrastructure-related problems of deforestation, renewable energy, and inadequate sewerage.

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* GDP figures are based on OECD figures using purchasing power parity (PPP) exchange rates.