Indonesian Climate Change and CO2 Emission
The world is getting hotter because of fossil emissions everywhere. Many
countries with rapid economic
activity and economic growth cause a rapid increase in CO2 emissions without realizing it (Hadad,
2023). CO2 emissions are the burning
of fossil fuels and factories that produce carbon dioxide (produced while consuming
solid, liquid, liquefied gas and combustion gas) (Sasana, Kusuma, & Setyaningsih, 2019, p. 1). This can be
seen from the extreme weather that has
occurred recently. These extreme weather events are related to frequent climate
changes, such as El Nino, heat waves,
floods, and forest fires. This period was recorded as producing the hottest temperature degrees
ever (including Indonesia, which also experienced it). So, more than 200 countries were asked about
their plans to reduce emissions by 2030 to keep global
warming well below 2C and target 1.5C to avoid disaster (this is part of the content of the Paris Agreement).
This also applies to Indonesia, which envisioned achieving net zero emissions
by 2050 (Hadad, 2023).
Fig 1 : Global Fossil CO2 Emissions
Source : Nature Climate Change
The increase in the growth value of CO2 emissions shows that the value has increased after adopting the Paris Climate Agreement for approximately five years. This is also the impact of the Covid-19 pandemic, which has changed the trajectory of CO2 emissions globally. The impacts of activities that use fossil fuels require special attention regarding new policies on maintaining existing activities without causing CO2 emissions. The data in Figure 1 Part A shows that there has been a decrease in CO2 emissions (fossil emissions, to be precise) of 34GtCO2 with a total decrease of 2.6GtCO2 in 2020. This decrease is estimated to be caused by the actions and policies taken. Implemented during a pandemic to reduce the speed of the virus' spread COVID-19. The reduction value is estimated to be around 7% below the value stated in 2019. Based on analysis by The Global Carbon Project, reducing CO2 emissions to a value of 2.6 GtCO2 is rare because it has never happened before. However, to avoid warming of between 1.5 °C to well below 2 °C, a reduction of 1–2GtCO2 per year is needed. This is the content of the Paris Agreement's ambition to address climate change caused by human activities ( Quéré , et al., 2021,p. 197).
Overall, 99 countries in the upper middle-income group contributed 51% of global emissions in 2019. Also, countries included in this group experienced the most significant increase in emissions, namely 30%, with average growth in 2005 and 2019. Moreover, Indonesia is one of the countries with upper-middle income ( Quéré , et al., 2021, p. 198).
Fig 2 : Global Fossil CO2 Emissions
Source : Nature Climate Change
As seen in Figure 2, out of a total of 99 countries in the upper middle-income group,
there are approximately 30
countries that recorded a reduction in global emissions during 2016–2019 compared
to 2011–2015. This shows that many countries
are paying attention to this field, in the sense that they work together to reduce global emissions that occur in their country.
Interestingly, the many laws and policies regarding climate
change (more than 2,000 laws worldwide)
were essential in limiting emissions growth in the last five years before
COVID-19, namely a decrease of
0,000—8GtCO2 (−5%) in 2020 (Figure 1, Part B) ( Quéré , et al., 2021, p. 199).
Climate Financing
In addition to impacting everyone's well-being and health,
climate change also affects the economy and financial systems
(Giglio, Kelly, & Stroebel, 2021, p. 16) Therefore, financial
economics also teaches how to manage and assess risks that may occur in
the future. So that in the future,
this knowledge can help society predict and respond to risks that may arise due
to climate change. One of the fuels that is very important
for the continuity of activities in the world
is the use of fossil fuels. Fossil fuels are a vital material
in production. Moreover,
economic growth will always be accompanied by increased
production. So, this economic growth results in an increase in greenhouse gas emissions. These emissions then cause
climate change. However, on the other hand, without
realizing it, climate
change has the potential to provide sizeable
negative feedback on future economic activity.
Climate change funding, according to the United Nations Framework Convention on Climate Change (UNFCCC), is "funding whether local, national or transnational financing originating from government funding, international organizations, banks, capital markets, the business world, public, private and development banks multilateral to support mitigation and adaptation efforts to climate change. This effort can be made by making an economic transition with low carbon emissions. The government, companies, and households must complete this joint task (Hong, Karolyi, & Scheinkman, 2020, p. 1011). Apart from that, Climate Finance also involves financing projects, programs, and initiatives. So, it can reduce greenhouse gas emissions, promote renewable energy, increase energy efficiency, and build resilience to the impacts of climate change. Then, these funds are channeled through international climate funds, green bonds, and climate-focused investment funds (Hadad, 2023).
IFRS S2
IFRS S2 is a newly published standard effective for
annual periods starting on or after January
1, 2024. IFRS S2 aims to require an entity to disclose information regarding
risks and opportunities due to the
impact of climate change. This is useful for people who use its financial reports to make decisions regarding
the availability of resources for the entity's
units. In this case, IFRS S2 requires entities to provide cash
flows, access to funding, or costs of entities' capital in the short, medium, or long term affected
by climate change. In particular, IFRS S2 applies to the risk of climate
change impacts in the form of physical
threat, transition risk, and the resilience of a company's
strategy and business
model to climate-related changes, developments, and uncertainties (IFRS Sustainability, 2023).
Conclusion
The existence of IFRS S2 helps many entities to continue carrying out
production while still considering its impact on the climate.
Increased economic growth is characterized, among
other things, by increased
production and economic activity in a country. This is what causes climate change. Climate change has many impacts
that we can immediately feel right now. One of them is increasing temperature or air temperature. This is a CO2
emission that is felt globally. On the other
hand, climate change threatens people's health and welfare without realizing
it. One solution we can do is use
climate finance. The funding provides material contributions and pays attention to its impact on climate change.
This is closely related to the presence of IFRS S2, released in June 2023. In the future, these solutions will help
a country to grow without causing excessive
emissions impacts. Instead, They will tend to lead to a global reduction in
emissions in line with Indonesia's target, which has just exceeded
the Net Zero Emissions
target by 2050.
References
Giglio, S., Kelly, B., & Stroebel, J. (2021). Annual Review of Financial Economics. The Annual Review of Financial Economics.
Hadad, M. D. (2023). Principle of Sustainable Finance & Global Update. Jawa
Barat: Sustainable Finance
Public Lecture Series-FEB UIII.
Hong, H., Karolyi, G. A., & Scheinkman, J. A. (2020).
Climate Finance. Oxford University Press on behalf
of The Society for Financial Studies.
IFRS Sustainability. (2023).
IFRS S2 - Sustainability Disclosure Standard: Accompanying Guidance on Climate-related Disclosures. INternational
Sustainability Standards Board.
Sasana, H., Kusuma, P., & Setyaningsih, Y. (2019). The Impact of CO2 Gas Emissions on Government Expenditure of Health Sector in Indonesia. ICENIS.
Quéré , C. L., Peters, G. P., Friedlingstein, P., Andrew, R. M., Canadel, J. G., Davis, S. J., Jones, M. W. (2021). Fossil CO2 emissions in the post-COVID-19 era. Nature Climate Change.
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