Designing ecological fiscal transfer policy using the Regional Incentive Fund (DID), Specific Allocation Fund (DAK), and Village Fund (DD) to realize sustainable forest governance in Indonesia
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Ecological fiscal transfers (EFTs) are useful tools to mitigate the potential trade-off between the economic costs and environmental conservation. If managed properly, they will reward regions for investing in conservation and incentivizing the expansion of ecological areas. In recent years, EFT has been discussed by the Government of Indonesia and has been developed by adding ecological aspects to existing fiscal transfers or specifically employed for environmental uses. This study offers scenarios and simulations for implementing EFT in three existing fiscal transfers: (1) Regional Incentive Funds (DID), (2) Specific Purpose Funds for environment and forestry sectors (DAK LHK), and (3) Village Funds (DD). We find that our simulations distribute the existing fiscal transfer more equitable to regions having better ecological indicators. Also, the EFT system only changes the fiscal transfer’s formulation by adding ecological indicators thus not imposing additional burden on the fiscal budget. We believe EFT enhances the subnational governments’ roles in preservation allowing for better biodiversity and environmental management due to having local knowledge. We suggest in order to support EFT, the collection of various data and information related to ecological aspect is vital.
Keywords: Ecological Fiscal Transfer, Forest Cover, Indonesia, Regional
ID: 3486335