1. INDONESIAN THEMATIC RESEARCH ON UTILIZATION OF ECONOMIC INSTRUMENTS: Case Study on Pulp and Paper Industry Ministry of Environment Indonesia

2. Objectives To support the development of cost effective solutions to achieve the sustainable use of natural and environmental resources To support the development of cost effective solutions to achieve the sustainable use of natural and environmental resources To institute a multi-stakeholder process in identifying and implementing economic instruments. To institute a multi-stakeholder process in identifying and implementing economic instruments. To stimulate decision-makers to take a proactive role in formulating country and sector specific’ economic instruments To stimulate decision-makers to take a proactive role in formulating country and sector specific’ economic instruments To enhance coordination among institutions in the use of economic instruments To enhance coordination among institutions in the use of economic instruments

3. Why Industry sector? Industrial development significantly contributes to the national income Industrial development significantly contributes to the national income The need to solve environmental pollutions and degradations caused by the industrial activities. The need to solve environmental pollutions and degradations caused by the industrial activities. Utilization of economic instruments to encourage the sustainability of natural resources and to control the pollution Utilization of economic instruments to encourage the sustainability of natural resources and to control the pollution

4. related to other activities such as forestry management & policies, air & water pollution control, and the use of energy efficiency related to other activities such as forestry management & policies, air & water pollution control, and the use of energy efficiency an interrelation from upstream to downstream industry an interrelation from upstream to downstream industry Why Pulp and Paper industry?

5. to identify, analysis, and Select appropriate economic instruments to encourage the sustainable use of natural resources and to Internalize environmental Impact of pulp and paper industry resulting from trade liberalization and increasing export growth What’s Scope of the Study?

6. Identify Process of Production Methodology Assess Impacts on the Environment Review Pulp and Paper in trade liberalization Analysis Policy Instruments Identify Policy Recommendations

7. Review Pulp and Paper in trade liberalization How’s Pulp & Paper Industry in Indonesia?

8. YearCapacityProductionImportExportApparent Consumption 1995 1996 1997 1998 1999 2000 4.472.500 5.595.280 7.168.290 7.479.530 9.097.180 9.116.180 3.425.800 4.120.490 4.821.600 5.487.260 6.720.560 6.849.000 140.110 197.700 261.000 130.130 143.800 212.630 924.520 1.198.220 1.800.000 2.833.960 2.950.800 2.837.210 2.641.390 3.119.970 3.282.600 2.783.430 3.913.560 4.224.420 Statistics of Paper & Paperboard 1995-2000 (Million tones) Source: Indonesian Pulp & Paper Industry Directory 2001

9. Performance of Pulp & Paper Industries 1997 - 2000 Commodities1997199819992000 Installed Capacity (tones per annual) Pulp Paper Waste Paper (WP) 4.266.600 7.168.290 3.282.600 4.323.600 7.479.530 2.783.430 4.543.600 9.097.180 3.913.560 5.228.100 9.116.180 4.224.420 Production (Metric tones) Pulp Paper Waste Paper Recovery 3.058.450 4.821.600 1.224.000 3.430.000 5.487.260 1.355.000 3.694.630 6.720.560 1.917.650 4.089.550 6.849.000 1.679.265 Utilization (%) Pulp Paper Waste Paper Recovery Rate of WP 71,70 67,30 54,10 37,30 79,30 61,80 48,70 81,32 73,13 58,80 49,00 77,34 75,13 60,00 39,00 Source: Indonesian Pulp & Paper Industry Association (2001)

10. Export Growth of Pulp and Paper (1996-2000) Export Growth of Pulp and Paper (1996-2000) Source: Indonesian Pulp & Paper Association, 2001

11. Identify Process of Production Review Pulp and Paper in trade liberalization How to make pulp and paper?

12. MAIN POINT PROCESS STEP POTENTIAL ENVIRONMENTAL IMPACT Raw Material HANDLING RAW MATERIAL Solid Waste, Forest Degradation & Biodiversity Chemical Energy PULPING (RECOVERY) Gaseous Material, Water Vapor, Energy use Water WASHING Dissolved Material, Residual Chemical, Water use Energy SCREENING Solid Waste, Energy use Chemical Energy BLEACHING Dissolved Material, Residual Chemical Energy DRYING Energy Use Efficiency Energy, Water, Chemical PAPER MACHINE Solid Waste, Dissolved Material, Residual Chemical Water use, Energy Use

13. Identify Process of Production Assess Impacts on the Environment Review Pulp and Paper in trade liberalization Any Impacts on the Environment?

14. Preliminary Assessment of the Environmental Impact

15. Identify Process of Production Assess Impacts on the Environment Review Pulp and Paper in trade liberalization Analysis Policy Instruments How about the policy instruments?

16. Matrix Economic Instruments Analysis

21. Identify Process of Production Assess Impacts on the Environment Review Pulp and Paper in trade liberalization Analysis Policy Instruments Identify Policy Recommendations What instrument for what purpose?

22. Identification Potential Recommendation of Economic Instruments Note: X = suitable applied XX= most suitable applied

23. each of EIs has a specific best practice  each of EIs has its nature to cope with the potential environmental impacts each of EIs has a specific best practice  each of EIs has its nature to cope with the potential environmental impacts to choose the most appropriate of EIs requires further study, to assess: to choose the most appropriate of EIs requires further study, to assess: Effectiveness Effectiveness Economic Efficiency Economic Efficiency Equity Principle Equity Principle The Administrative Cost-Effectiveness Principle The Administrative Cost-Effectiveness Principle Institutional Concordance Institutional Concordance