Local banks still shy to fund green projects: UN

Adianto P. Simamora, The Jakarta Post, Jakarta | Thu, 09/02/2010 9:59 AM

Indonesian banks and financial institutions are reluctant to finance carbon trading projects — despite the government’s drive to cut emissions and fight climate change, says a UN report.

The report shows that Malaysia has 83 registered projects promoting clean development mechanisms (CDMs), surpassing 48 projects registered in Indonesia.

The Malaysian government has 176 approved CDM projects, Thailand has 133 and Indonesia has 131, the report said.

“We are very eager to see the local banking system finance CDM projects,” National Council on Climate Change (DNPI) CDM unit head Dicky Edwin Hindarto said Wednesday.

Dicky said that the investment climate was far more favorable in Malaysia, where the local banking system supported CDM projects.

Clean development mechanisms were developed under the Kyoto Protocol to allow companies in developing countries to develop emission reduction projects.

The Kyoto Protocol required rich nations to cut 5 percent of their emissions from 1997 levels and allowed rich nations to finance emission reduction projects in developing countries.

Governments in developing countries approve CDM projects before forwarding them to the UN executive board for approval, Dicky said.

The CDM executive board will issue certificates for approved projects that can be traded on the international market for US$10 per ton of emissions.

CDM projects can take the form of energy saving initiatives that promote the shift from coal-based fuels to more ecologically-friendly sources.

Countries with forests can also fund reforestation with CDM programs, but none of Indonesia’s 131 projects involve forests, Dicky said.

“It is all energy-related projects,” Dicky added.

Indonesia’s 120 million hectares of rainforests make it the world’s third largest forested country. The nation is promoting emission reduction under the UN’s defo-restation and forest degradation (REDD) scheme, which is expected to replace CDM forestry projects.

The UN executive board currently has 2,347 registered CDM projects. China and India had the most projects, recording 959 and 527 respectively. China has also several forestry-related CDM projects.

Dicky said that the UN had issued certificates to six projects with a total of 346,000 tons of emissions per year.

Tinamitra Mandiri president director Shana Fatina said there are difficulties in convincing banks to finance environmental projects.

Tinamitra Mandiri, which was created in March 2010, will develop a CDM project by shifting 571 public buses in Cirebon from diesel to natural gas, Shana said.

“We are still calculating the total emission that can be saved by shifting fuels,” she added.

The company will supply converter kits for the buses.

“It needs a lot of investment because we will replace all buses made before 2005,” said Shana, a 23-year-old recent graduate of the Bandung Institute of Technology (ITB).

She said that the company would set up its own gas stations in Cirebon to ensure the gas supply.

“We will integrate it with auto repair shops and the monitoring system,” she said.