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Financial Policy for a Green Economy in a Resource-Rich Emerging Economy

Author

Listed:
  • Arlyana Abubakar

    (Bank Indonesia, Indonesia)

  • Prayudhi Azwar

    (Bank Indonesia, Indonesia)

  • Riris Shanti Fransiska Pardede

    (Bank Indonesia, Indonesia)

  • Salman Fathoni

    (Bank Indonesia, Indonesia)

  • Noer Aida Triandini

    (Bank Indonesia, Indonesia)

Abstract

This paper analyzes policies aimed at fostering a green economy in a resource-abundant, megadiverse nation such as Indonesia. This study use Delphi and Analytic Network Process methodologies, grounded in the perspectives of regulators, academics, experts, and practitioners in the green economy, to identify the determinants of green financial policies, revealing that fiscal instruments are of paramount importance. Furthermore, both the case and the respondents are Indonesian. This underscores the necessity of instituting incentives in environmentally sustainable sectors and disincentives in carbon-intensive industries. Therefore, the suitable allocation of green budgets within fiscal policy is essential for addressing market failures and expediting the green transition. Moreover, prudential and monetary measures are essential. Asset-based prudential instruments may stimulate demand for green financing, while capital-based prudential instruments could enhance supply. Furthermore, the policy interest rate is crucial for sustaining price and financial stability during a seamless green transition.

Suggested Citation

  • Arlyana Abubakar & Prayudhi Azwar & Riris Shanti Fransiska Pardede & Salman Fathoni & Noer Aida Triandini, 2025. "Financial Policy for a Green Economy in a Resource-Rich Emerging Economy," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 28(2), pages 229-260, July.
    • Handle: RePEc:idn:journl:v:28:y:2025:i:2d:p:229-260
    DOI: https://doi.org/10.59091/2460-9196.2328
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    Keywords

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    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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