European Union has an influence on Indonesia’s environmental policies – this is a preliminary, yet very important, finding revealed by a recent study conducted by researchers from the Monash European and EU Centre. The degree of EU influence differs depending on the particular policy field. The degree of environmental policy adoption has increased in recent years with many European environmental policies and standards adopted either voluntarily (via indirect influence) or by direct influence through various European Union’s external environmental actors. The variation in the policy adoption patterns were observed in relation to the hierarchy, network and market governance modes of EU external governance.
The study found that a strong and effective control of EU influence is present when a policy area is subject to hierarchical governance mode. However, there is a considerable time lag for any individual policy field to reach the hierarchical level. It was found that some policy fields were subject to network and market governance modes before being influenced under the hierarchical governance or when the hierarchical governance is not available. Therefore, it was evident that EU influence starts with a softer and indirect form (market governance) and then strengthens through the constant dialogue (network governance) between parties until the policy becomes stronger and more influential (hierarchy governance). The signing of a Forest Law Enforcement Governance and Trade Voluntary Partnership Agreement (FLEGT VPA) between EU and Indonesia in September 2013 followed several years of negotiations under network governance, whereby now this VPA requires Indonesia to change its domestic policies on deforestation and timber-based products to facilitate tracing responsibly produced sustainable timber. Importantly, this reflects the EU policy being present in Indonesian domestic environmental policies.
There are also other important areas with respect to Indonesian government’s environmental policies where hierarchical governance is in action:
(1) The standard of the Roundtable on Sustainable Palm Oil (RSPO) certifications – palm oil production that needs to comply with the sustainability criteria laid out in the EU-Renewable Energy Directive (EU-RED);
(2) The European Commission entered into mutual recognition agreements (MRAs) with Indonesia on certain aspects of air services;
(3) The EU Regulation to prevent, deter and eliminate Illegal, Unreported and Unregulated (IUU) fishing;
(4) The increase accountability clauses are incorporated in to the Indonesia’s new environmental management Act (EMA) of 2009;
(5) A new requirement for companies to carry out an Environmental Risk Analysis or obtain an Environmental Permit requiring environmental audits to be carried out since 2011.
The EU’s influence on environmental policies of Indonesia through the market governance instruments is indirect, voluntary and somewhat softer. Market instruments are mainly based on the motivation of European market access. Market instruments were observed as the initial steps in EU influence on Indonesian environmental policies. Indonesian firms interested in participating in the EU market need to follow the EU’s environmental policies in order to get the market access to the European Union or attract EU Direct Investment (FDI) to Indonesia. This affects the exporters, business associations, and the central and local governments in Indonesia to incorporate environmental concerns into their operations.
The EU influence on environmental policies of Indonesia is especially carried out through the following market governance instruments:
(1) Corporate Social Responsibility (CSR) initiatives;
(2) The EC’s eco-labelling program requires Indonesia to change their forestry and agricultural practices;
(3) The presence of number of testing and certification agencies or the EU Directives companies offer Environmental services for Indonesian companies; and
(4) The Socially Responsible Investments (SRI) initiatives taken by Indonesia are part of their strategy to attract foreign investments from EU.
The network form is used by the EU when the market instruments are ineffective and hierarchical instruments are not available. The network governance instruments are effective at both the inter-regional and national level, especially through ASEAN and ASEM for trans-border environmental issues such as air pollution at the regional level and water pollution at the national level. The hierarchy governance is often not effectively enforceable on Indonesia as in the case of European neighbouring countries and candidate countries since Indonesia’s sole motivation is only the EU market access (and not to become an EU member).
All three categories of hierarchy, network and market environmental governance modes are required to be present in a specific environmental policy area for the EU influence to be fully effective on Indonesian environmental policies. This process of integration of EU environmental policies with those in Indonesia provides the European Union with the unique opportunity to achieve its aspirations as a global leader in environmental governance. At the same time, this process also helps Indonesia to achieve a sustainable development and preserving its environment, while also providing Indonesia with the opportunity to enter into deeper cooperation agreements with the EU by readying environmental policies that form an integral part of such agreements.