Unintended Effects of Forestry Fiscal Transfers on Deforestation in Indonesia
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Decentralization, Ecological, Fiscal Transfer, Green Funding
Abstract
The largest source of emissions (63%) in Indonesia comes from land use activities as well as forest and land fires. Deforestation is affected by several factors, such as population growth, forest fires, expansion of agricultural land, farming, drought, timber harvesting, and the lack of government attention. As part of its efforts to suppress deforestation, the Indonesian Government has allocated several types of funding for the forestry industry. However, there are disagreements over the most effective funding and implementation difficulties. This research aims to analyze the impact of forestry fiscal transfer on deforestation using spatial autoregressive in Indonesia. The results show that the forestry significantly affects deforestation in Indonesia is Forest Revenue-Sharing Fund with a positive coefficient value (0.65). Other factors that significantly affect deforestation in Indonesia are the Regional Budget for Environment (0.77), population size (–2.21), Gross Regional Domestic Product in the mining sector (0.83), area (0.99), and income per capita (–2.39). The research findings conclude that forestry fiscal transfers contribute to deforestation, instead of mitigating
deforestation. The Central Government should refine ecological fiscal transfer (EFT) schemes by adopting innovative, performance-based models and collaborating with Regional Governments to implement detail-earmarked budgeting, ensuring alignment with conservation goals.
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