In an effort to create a positive impact on the environment, the Ministry of Home Affairs, has released regulation of the Minister of Home Affairs (Permendagri) number 15 of 2024 on guidelines for the preparation of the regional budget (APBD) of 2025 which adopts the Ecological Fiscal Transfer (EFT) scheme or ecological-based fiscal transfer scheme on October 9, 2024.
This is part of a long road of advocacy carried out by PATTIRO and the coalition of Civil Society for Environmental/Ecological funding, which encourages incentives for local governments that have good performance in maintaining the environment in the form of ecological-based fiscal incentives. This scheme allows local governments to obtain transfers from the government at its top level based on performance in Environmental Protection and management.
One of the new provisions in Permendagri number 15 of 2024 is the emphasis on the importance of allocating budgets for Environmental Protection and management efforts. This regulation regulates the obligation for local governments to allocate adequate budgets to support activities aimed at protecting the environment and supporting sustainable development.
This scheme provides legal certainty for regions that have implemented ecological-based fiscal incentives. Currently, 40 local governments—both provinces, districts, and cities-have adopted this scheme. With the legal certainty from Permendagri number 15 of 2024, it is expected that more local governments will follow in this footsteps.
Fiscal incentive schemes are implemented as ecological-based provincial budget transfers (TAPE), ecological-based district budget transfers (TAKE), and ecological-based Kelurahan budget allocations (ALAKE). This policy expands the implementation of special financial assistance through compensation for environmental services that includes compensation between local governments at the same level, as well as to individuals. This step is part of a broader ecological-based incentive strategy to support the protection and optimal management of the environment.
In addition, Permendagri No. 15 of 2024 also confirms the commitment of local governments in supporting national efforts to reduce greenhouse gas emissions, in accordance with law no. 6 of 1994 on ratification of the United Nations Framework Convention on Climate Change and Presidential Regulation No. 98 of 2021 on the implementation of carbon economic value (NEK). Within this framework, local governments will play an important role in achieving Nationally Determined Contribution (NDC) targets as well as managing carbon economy governance.
Through this policy, the government shows its seriousness in integrating environmental aspects into regional budget planning while encouraging regional contributions in achieving national climate targets. The implementation of this policy is expected to improve the quality of people’s lives, mitigate the effects of climate change, and strengthen environmental control measures in a sustainable manner.
