Assessing the impacts of fiscal policies in green forestry and renewable energy sectors on poverty reduction and job creation in Indonesia

In 2009, Indonesia has committed itself to reduce GHGs emission by 41% by 2020 with international assistances. Over all sectors, about 80% of total GHG emissions in Indonesia come from land use, land use change and forestry (LULUCF). In line with this, Indonesia also started implementing "a green economy" in several major sectors such as forestry and renewable energy sectors, to achieve sustainable economic growth in future. For the forestry sector, Indonesia has started a fiscal policy to boost green investment and to support the implementation of a green economy through REDD+ and Japanese credit mechanism schemes. For renewable energy sector, Indonesia has started to remove the subsidy on energy sector and to invest more on renewable energy. This study examines whether fiscal policies regarding the green sectors- mainly forestry and renewable energy- have positive impacts on poverty reduction and job creation in both and urban areas in Sumatera, Kalimantan and Papua. This study employs the social accounting matrix analysis, using the 2005 Indonesian inter-regional social accounting matrix table with the extension of the green sectors. To identify the green sectors in Indonesia, this study follows the green sector classification based on the 2013 ILO green jobs mapping study. The results of this study show that regions Java and Bali play an important role as major suppliers to other regions; the green sectors have a strong backward linkage to the economy. Also, the fiscal policies implemented on green forestry, green oil palm plantations and the green renewable energy sector in Java and Bali has a positive impact on the economy.