Sydney Morning Herald
Tuesday 8/12/2009 Page: 4
AS AUSTRALIA equivocates on an emissions trading scheme, Indonesia is set to release its draft climate change policy which would establish a carbon tax, roll out geothermal energy and protect forests. The potential carbon tax, part of the Indonesia "green paper" on climate change, will apply to the combustion of fossil fuel and start at $9 a tonne of CO2 rising 5% annually until 2020. The tax could be coupled with reduced energy subsidies to coal- and oil-generated power to try to drive clean energy in the one of the world's fastest growing economies.
The policy paper, commissioned by the Indonesian Ministry of Finance and circulated last week, was to be formally released at climate change negotiations in Copenhagen which started yesterday. The World Bank estimates Indonesia is the third largest emitter of greenhouse gases, mainly the result of deforestation and burning of peatlands. Indonesia's climate change strategy aims to cut emissions by developing geothermal power, driving energy efficiency and reducing deforestation.
An Australian economist, Frank Jotzo, said the Indonesian Government would rely heavily on selling carbon credits to developed countries to offset their emissions to stop deforestation. Dr Jotzo, the deputy director of the Australian National University's climate change institute, helped prepare the policy paper. He said the proceeds from selling the offsets would be passed on to regional governments for climate change mitigation programs.
The Indonesian Government will develop a detailed plan to tap the country's massive geothermal potential - it has 40% of the world's hot rock resources. The geothermal strategy aims to partially offset a 7% increase in energy demand every year. The plan includes a geothermal tariff, with which the Government would subsidise the purchase of clean energy by electricity retailers. Dr Jotzo said geothermal had obvious potential in Indonesia, but just 3% of the resource had been tapped. Development stalled during the global financial crisis.
The green paper was commissioned by Indonesia's Finance Minister, Dr Sri Mulyani Indrawati, when he was in Australia last year. AusAid and the Australia Treasury helped to prepare it. President Susilo Bambang Yudhoyono has committed Indonesia to emissions reduction targets of 26% on business-as-usual levels by 2020, rising to 41% if the international community commits to climate change funding for developing countries. These targets represent emissions cuts of 6% and 24% respectively on 2005 levels by 2020.
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