The Governance Paradox of Climate Finance in Indonesia: Between Fiscal Prudence and Climate Ambition

Abstract

Climate finance is often discussed as a technical issue of mobilizing, allocating, and managing financial resources for mitigation, adaptation, and climate resilience. This article reframes climate finance as a governance problem involving state capacity, legitimacy, accountability, and institutional coordination. Focusing on Indonesia, the study examines how climate finance is governed amid competing fiscal, institutional, and political pressures. Using a qualitative case study and interpretive policy analysis, the research draws on in-depth interviews, policy documents, regulatory materials, institutional reports, and limited observation of relevant policy forums. The findings show that Indonesia’s climate finance governance operates through a layered architecture involving the Ministry of Finance, Bappenas, BPDLH, parliament, technical ministries, civil society organizations, and development partners. However, this architecture remains shaped by three interrelated dynamics. First, climate finance reflects a policy paradox between climate ambition and fiscal prudence. Second, green fiscal instruments such as Climate Budget Tagging, green sukuk, carbon economic value mechanisms, and BPDLH function not only as financing mechanisms, but also as symbols of green legitimacy. Third, institutional fragmentation persists because actors interpret climate finance through different policy logics, including fiscal discipline, development planning, fund management, political oversight, and climate justice. The article contributes to social science debates on climate governance by showing that climate finance is not merely a matter of funding availability, but a paradoxical governance field shaped by competing values, symbolic politics, fragmented authority, and contested accountability.