| dc.description.abstract | AKMA YENI MASRI. Climate Finance Transformation Model: A Generic Decision-Support Framework for Mitigation Financing. Supervised by RIZALDI BOER, MUHAMMAD FIRDAUS, and LILIEK SOFITRI.
Climate change has intensified the need not only to mobilize climate finance but also to evaluate whether it effectively delivers greenhouse gas (GHG) mitigation outcomes. Existing research has primarily focused on estimating future investment needs, with limited attention to assessing the effectiveness of realized climate finance. In Indonesia, this gap is reflected in two complementary but disconnected systems: Climate Budget Tagging (CBT), which records climate-related public expenditure, and the national Monitoring, Reporting, and Verification (MRV) system, which documents verified GHG emission reductions. The absence of an analytical framework linking these systems constrains the evaluation of climate finance effectiveness and the development of performance-based financing strategies.
This dissertation aimed to develop a Climate Finance Transformation Model (CFTM) as a generic decision-support framework for improving climate finance effectiveness through the integration of empirical evidence, mitigation performance, financing characteristics, and institutional capacity. Although the empirical development and demonstration of the model were undertaken using Indonesia's transportation sector, the proposed framework was designed to be conceptually applicable across sectors and adaptable to different national contexts. Specifically, the study sought to: (1) identify international best practices in climate finance; (2) evaluate the effectiveness of realized climate finance by linking expenditure with verified GHG emission reductions; (3) develop a generic climate finance transformation model for identifying appropriate financing pathways for mitigation actions; (4) demonstrate the application of the model using Indonesia's transportation sector, and (5) formulate policy recommendations for strengthening climate finance governance.
The research adopted a sequential analytical framework consisting of four interrelated stages. The first stage employed a systematic literature review using the PRISMA approach to examine international best practices in climate finance, with a more detailed assessment of financing strategies that support transport decarbonization. The review synthesized evidence on financing mechanisms, governance arrangements, institutional frameworks, and policy instruments to identify the fundamental components required for an effective climate finance system.
The second stage established the empirical foundation of the research through an evaluation of climate finance in Indonesia's transportation sector using realized expenditure and verified GHG emission reduction data for the period 2018–2022. To bridge the gap between financial accounting and mitigation performance, this dissertation developed the Realized Expenditure Attribution Pathway (REAP), a novel analytical framework that systematically attributes realized climate-related expenditure to verified mitigation outcomes. REAP integrates expenditure information derived from climate expenditures with verified emission reductions recorded in the national MRV system, enabling climate finance to be assessed based on observed implementation rather than projected investment requirements. The analysis also introduced the Cost of Verified Emission Reduction (CoVER), which estimates mitigation costs using realized expenditure and verified GHG reductions under actual implementation conditions. The framework further distinguishes between direct mitigation actions that generate measurable emission reductions and enabling mitigation actions that establish the institutional and infrastructural conditions necessary for long-term decarbonization.
Building upon these empirical findings, the third stage developed the CFTM as a generic analytical framework rather than a sector-specific model. The model integrates financing requirements, mitigation potential, implementation timeframe, institutional capacity, and financing instrument characteristics into a multidimensional decision-support framework for identifying appropriate financing pathways for mitigation actions. Through a structured compatibility assessment, the model aligns the characteristics of mitigation interventions with the comparative advantages of available financing instruments. The framework is conceptually independent of any particular sector or country, allowing it to be adapted to different mitigation contexts while maintaining a consistent analytical structure.
The fourth stage demonstrated the empirical implementation of the CFTM using Indonesia's transportation sector as a case study. The model successfully identified financing pathways that correspond to the characteristics of individual mitigation actions and generated policy recommendations for strengthening climate finance governance through improved institutional coordination, greater integration of public and private finance, expanded use of blended and market-based financing mechanisms, and a transition from expenditure-based budgeting toward performance-oriented climate finance management.
This dissertation advances the climate finance literature in five principal ways. First, it shifts the focus of climate finance evaluation from estimating investment needs to assessing how realized climate finance contributes to verified GHG emission reductions. Second, it introduces the REAP framework to systematically link realized climate expenditure with verified GHG emission reductions. Third, it develops the CoVER approach to estimate mitigation costs based on observed implementation rather than projected assumptions. Fourth, it proposes the CFTM as a generic decision-support framework, empirically demonstrated in Indonesia's transportation sector and adaptable across sectors and national contexts. Finally, it establishes an evidence-based climate finance policy architecture to strengthen financing governance and support more effective climate mitigation.
Overall, the findings demonstrate that improving climate finance effectiveness requires more than increasing financial resources. It depends on aligning financing instruments with mitigation characteristics, institutional readiness, and implementation requirements within a coherent governance framework. The central conclusion of this dissertation is that public finance initiates climate finance transformation, institutional capacity enables its implementation, and diversified finance sustains its long-term effectiveness.
Keywords: climate finance transformation; decarbonization; greenhouse gas mitigation; realized expenditure; verified emission reduction | |
