Towards Low Emission Development: Prospects of Applying MBIs in the Industrial Sector of Central Java, Indonesia

In dealing with pollution or emission, including in encouraging Low Emission Development (LED) as an acceptable strategy for climate change mitigation, Indonesia applies Command and Control (CAC) approach through regulations on environmental and pollution standards. However, the enforcement is characterized by weak monitoring and controlling due to aspects like non-compliant industries and lack of personnel and equipment of the corresponding agencies. Introducing Market Based Instruments (MBIs) can help better achievement in LED as evidenced in the USA, Australia, Taiwan, South Korea and Thailand. This study aims to answer the question "how can the Central Java Provincial Government (CJPG) facilitate better LED through the application of MBIs in the industrial sector?" The approach is qualitative through in-depth interviews with key persons from the CJPG and manufacturing industries with high rate of greenhouse gas emissions in Semarang and Surakarta metropolitans as the two largest industrial centers in Central Java. The results show that the CJPG cannot apply MBI approach in its purely theoretically forms. Instead, it is the principle, which is in accordance with the Equity-Based Development model that should be integrated into the CAC application, i.e., the polluters pay principle. The existing programs, like PROPER, should be refined conceptually and enforced more widely to accommodate ‘internalizing the externality’ principle better. More industries should be encouraged to participate in such programs.