Indonesia Could Net US$2 billion From Forest Conservation

Indonesia Could Net US$2 billion From Forest Conservation

30 November 2007

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Jakarta, Indonesia — If it is rapacious business interests that are destroying our forests, then perhaps it might be ingenious business responses that could help save them — especially if such “commercial conservation” can generate as much money as exploiting the forests.

In the Indonesian context, there may be up to US$2 billion in potential annual revenues that could be generated just by preserving the country’s forests and offering them as a carbon-dioxide (CO2) “sinks” on the global carbon-trading market.

“We should think of forests beyond timber, rattan and minerals. The most valuable aspect of a forest is actually its ability to retain and absorb carbon (CO2). That’s what many people don’t quite grasp yet,” Laode M. Kamaluddin, regional director of the non-profit Borneo Tropical Rainforest Foundation (BTRF), said during a workshop on forest carbon-trading Thursday.

“So, our forests should be seen as manageable and durable asset, and no longer just as an exhaustible commodity.” Building on this “business-like mind-set” regarding the carbon value of forests, Laode said Indonesia should not miss out on the already existing — and growing — carbon trading market to raise funds for better managing and conserving its forests, and doing so in a “business-like manner”.

This includes establishing professionally managed bodies for forest conservation projects, which could work closely with local communities, and ensure that the projects turned out as profitable as if the forests were used for commercial purposes.

“The aim is to show that the benefits of conserving forests are comparable to those of exploiting them,” Laode said. Studies show that a hectare of preserved forest can provide a sink for between 90 and 400 tons of CO2, while a ton of CO2 can fetch between US$3 and $20 on the carbon market. If calculated using median figures, Laode pointed to how just one million hectares of forest in Kalimantan, Aceh, Papua or any other of Indonesia’s provinces could fetch up to Rp 18 trillion (US$2 billion) alone.

As a rough comparison, the government only expects to take in Rp 2.3 trillion in royalties and fees from forestry concessions. Royalties and fees from mining, some concessions for which are located in forest areas, are expected to come to Rp 4.8 trillion.

Indonesia has some 88 million hectares of rainforest, the world’s third largest area, yet is estimated to be losing up to 1.8 million hectares each year due to illegal logging and forest fires. Such risks mean that forest-related carbon projects in Indonesia are only worth between US$5 and 10 per ton of CO2 reduction.

The Swiss-based BTRF, Malinau regency in East Kalimantan and the U.K.-based Global Eco Rescue (GRE), have entered into a public-private partnership to conserve 325,000 hectares in the area worth an initial 325,000 euros. The Malinau project is expected to serve as a pilot project in setting a more accurate “carbon value baseline” for others in Indonesia. It comes on the heels of BTRF’s and GRE’s one-million-hectare project in Brazil’s Amazon forest, and 500,000-hectare project in Malaysia’s Sabah.

Malinau regent Marthin Billa said the project was also expected to promote a culture of preserving forests and benefiting from their resources, as shown by the Dayak people, who only remove as much wood and rattan as they need, and clear forest land using responsible methods.

Forest conversation projects can at present only be offered through the voluntary carbon market (VCM), as they are not part of the Kyoto Protocol’s clean development mechanism (CDM), which only includes reforestation as an emissions reduction method.

The carbon market was born from the CDM, which allows developed nations to invest in green projects in developing countries in exchange for their required emissions reduction quota.

The international conference on climate change, which Indonesia will host next week in Bali, is expected to discuss the inclusion of the proposed Reducing Emissions from Deforestation and Degradation (REDD) mechanism for the 2012 post-Kyoto Protocol agreement on emissions reduction — combining reforestation methods with conservation.

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