How Can Indonesia Foster Sustainable Infrastructure Solutions That Deliver Low-Carbon Development and Bring Additional Benefits?

The document argues that Indonesia must shift from carbon-intensive 'grey' infrastructure to sustainable solutions to meet its low-carbon development goals and recover from the COVID-19 pandemic. It identifies key barriers to this transition, including a lack of bankable project pipelines, inadequate valuation methods that ignore ESG risks, and a mismatch between infrastructure and budget planning. The author recommends adopting integrated planning, utilizing the Sustainable Asset Valuation (SAVi) methodology to quantify externalities, and establishing project preparation facilities to attract private investment. The brief also highlights international examples from Malaysia, the Netherlands, Saint Lucia, and South Africa to illustrate successful sustainable infrastructure strategies.

• Indonesia faces a significant infrastructure gap of USD 143 billion and is expected to spend approximately USD 50 billion annually on infrastructure between 2020 and 2024, which constitutes about 20% of the annual national budget.
• Current infrastructure planning in Indonesia is heavily skewed toward carbon-intensive projects; for example, the Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) list of about 250 National Strategic Projects consists primarily of 'grey' projects like roads, dams, and ports.
• Traditional infrastructure valuations are insufficient because they overlook the full costs of ESG risks and climate impacts, such as changing precipitation patterns, and fail to value positive externalities like job creation and ecosystem services.
• The transition to sustainable infrastructure is hindered by a lack of 'bankable' projects, as many sustainable initiatives do not deliver high risk-adjusted returns under current valuation methods or suffer from high transaction costs due to their smaller scale.
• There is a systemic mismatch in Indonesia between infrastructure planning, which is program-based and multi-year (led by Bappenas), and the budgetary process, which is conducted on a yearly basis by the Ministry of Finance.
• The Sustainable Asset Valuation (SAVi) methodology can demonstrate the financial viability of nature-based solutions by treating externalities as revenues; for instance, an agroforestry project in Belgium showed an internal rate of return increase from 1.22% to 27.85% when all externalities were considered.

APA

Bechauf, R. (2021). How Can Indonesia Foster Sustainable Infrastructure Solutions That Deliver Low-Carbon Development and Bring Additional Benefits? International Institute for Sustainable Development. https://www.iisd.org/system/files/2021-07/indonesia-sustainable-infrastructure-solutions.pdf

Chicago

Bechauf, Ronja. How Can Indonesia Foster Sustainable Infrastructure Solutions That Deliver Low-Carbon Development and Bring Additional Benefits? International Institute for Sustainable Development, 2021. https://www.iisd.org/system/files/2021-07/indonesia-sustainable-infrastructure-solutions.pdf.

Wikipedia

{{cite report |last1=Bechauf |first1=Ronja |title=How Can Indonesia Foster Sustainable Infrastructure Solutions That Deliver Low-Carbon Development and Bring Additional Benefits? |publisher=International Institute for Sustainable Development |date=July 2021 |url=https://www.iisd.org/system/files/2021-07/indonesia-sustainable-infrastructure-solutions.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bechauf2021how, author = {Bechauf, Ronja}, title = {{How Can Indonesia Foster Sustainable Infrastructure Solutions That Deliver Low-Carbon Development and Bring Additional Benefits?}}, institution = {International Institute for Sustainable Development}, year = {2021}, month = jul, url = {https://www.iisd.org/system/files/2021-07/indonesia-sustainable-infrastructure-solutions.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }