Indonesia to get first payment from Norway for cutting forest emissions

The deal is part of Norway’s pledge to help protect Indonesia’s tropical forests, with payments linked to the Southeast Asian nation’s progress on lowering emissions from felling trees, which release carbon when they are burned.

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Deforestation for palm oil plantations in West Kalimantan, Indonesia. Image: Rainforest Action Network, CC BY-NC 2.0

It’s taken nearly a decade, but Indonesia is finally set to receive the first part of a $1 billion payment pledged by the Norwegian government for preserving some of the Southeast Asian country’s vast tropical rainforests.

Indonesia’s environment minister, Siti Nurbaya Bakar, and her Norwegian counterpart, Ola Elvestuen, made the announcement in Jakarta on Feb. 16. The payment, whose amount is yet to be determined, is for Indonesia preventing the emission of 4.8 million tons of carbon dioxide equivalent (CO2e) through reducing its rate of deforestation in 2017.

“Indonesia has embarked on bold regulatory reforms, and it is showing results,” Elvestuen said. “It may be too early to see a clear trend, but if deforestation continues to drop we stand ready to increase our annual payments to reward Indonesia’s results and support its efforts.”

The two countries signed the $1 billion pact in 2010, under the REDD+ (reducing emissions from deforestation and forest degradation) mechanism. In exchange for the funding, Indonesia would have to slow its emissions from deforestation, which accounts for the bulk of its CO2 emissions.

That it’s taken so long for the first payment to be announced is due to a combination of the structuring of the agreement and a change in the Indonesian government since the 2010 signing.

The partnership is led by the Norwegian International Climate and Forest Initiative, under which the oil-rich Scandinavian country has pledged to underwrite tropical forest conservation programs in Indonesia as well as Brazil, Liberia, Tanzania, the Democratic Republic of Congo and Guyana.

The cooperation between the countries is divided into phases, in which the first two phases are about getting the rainforest countries ready to stop deforestation through changes in national legislation and frameworks.

Phase three starts when the rainforest countries manage to reduce deforestation, and that’s when the fund starts paying out, based on reduced emissions.

Indonesia was mired in the two initial phases following a setback in 2015, when President Joko Widodo, who took office a year earlier from Susilo Bambang Yudhoyono, disbanded BP REDD+, the agency his predecessor had set up to coordinate the scheme.

Widodo delegated the agency’s duties and powers to the Ministry of Environment and Forestry, headed by Siti. (The move was part of a wider restructuring headlined by the merger of the previously separate ministries of forestry and of the environment.)

It also took long for Indonesia to prepare a comprehensive integrated measurement, reporting and verification (MRV) system necessary to account for its progress in reducing emissions, further delaying the transition into phase three.

It may be too early to see a clear trend, but if deforestation continues to drop we stand ready to increase our annual payments to reward Indonesia’s results and support its efforts.

Ola Elvestuen, Minister of Climate and Environment, Norway

‘A matter of life and death’

Environmentalists have lauded the latest development, which mark’s Indonesia’s entry into the phase at which it’s starting to roll back emissions from deforestation. The funding serves as both an acknowledgement of the years of efforts to reach this stage of protecting the country’s forests, and an incentive to boost measures to combat deforestation.

“This is fantastic news for the climate, for the world’s animal and plant species, and for the millions of people who depend on these forests,” said Øyvind Eggen, director of the Rainforest Foundation Norway, an NGO.

Indonesia is home to the world’s third-largest span of tropical rainforest, after Brazil and the Democratic Republic of Congo. When these rainforests are destroyed or degraded, large amount of CO2 emissions are released into the atmosphere.

Indonesia is already the fifth-largest emitter in the world, largely through its forestry sector. That makes preserving Indonesia’s rainforests pivotal for the world to prevent catastrophic climate change, experts say. Saving these forests is also critical for the survival of the rich biodiversity they host.

“Saving this rainforest is a matter of life and death, and is important to us all,” Eggen said.

Quantifying emissions reductions

Now that Indonesia’s MRV protocol is in place, it has to convince Norway about the integrity of the system in verifying that reductions in CO2 emissions really are being achieved.

“We’ve been discussing this MRV protocol [with Norway] since last year because it will affect the calculation of carbon emissions that we’ve reduced,” said Ruandha Agung Suhardiman, the Indonesian environment ministry’s head of climate change.

The country initially measured its progress in reducing emissions from deforestation by using as its baseline the deforestation rate in 1990, which was inordinately high. That would inflate the apparent progress being made toward reductions, Ruandha said.

Both countries subsequently agreed that Indonesia’s results should be measured against a 10-year average level of emissions for the 2006-2016 period. Annual emissions during that period were estimated at 237 million tons CO2e from deforestation and 42 million tons from forest degradation.

“The government then started to issue regulations aimed at lowering emissions,” Ruandha said. “[Norway] wouldn’t have accepted not having such regulations in place, because then we might have lowered our emissions based on sheer luck, for example because of weather factors.”

Defining deforestation

Norway’s acknowledgement of Indonesia’s MRV system marks another important development in Indonesia’s forest management, says Arief Wijaya, a senior manager for climate and forests at the World Resources Institute (WRI) Indonesia.

Indonesia has for years courted controversy over the definition of what counts as deforestation.

The term is almost universally understood to mean the conversion of natural forest cover to other land-use categories. That includes clearing forests for the cultivation of industrial plantations: acacia and eucalyptus for pulpwood, for instance.

The Indonesian government, on the other hand, doesn’t take that view. It counts man-made plantations, including industrial pulpwood plantations, as forested areas. That means that when non-forested areas are planted with acacia and eucalyptus, they are considered forest.

The WRI, a Washington-based think tank with an office in Indonesia, has cautioned that the disparity may hamper Indonesia’s bid to seek foreign funding to support its initiatives to reduce emissions from deforestation and forest degradation.

Without a universally agreed-on definition of deforestation, it might be difficult for Indonesia to cite its own data to claim funding.

But Norway’s acceptance of Indonesia’s MRV system indicates that Jakarta has abandoned its own definition, at least for the purposes of the deal with Norway, according to Arief.

“It’s up to Indonesia to report its deforestation rate in accordance with its own definition,” he said. “But look — Norway only considers emissions reductions from deforestation in natural forests. It means that when natural forests are converted into industrial plantations, deforestation has happened, according to this bilateral agreement.”

Arief said this made Indonesia’s published data on emissions reductions more accountable.

“It means it’s true that Indonesia has indeed managed to reduce 4.8 million tons of CO2e,” he said, “especially since the figure accounts for uncertainties. I’m quite confident about the number.”

He said the 2017 reduction was the equivalent of preventing the deforestation of 100 square kilometers (38 square miles) of forest, on the assumption that a hectare of tropical forest in Indonesia holds an average 132 tons of CO2e.

“A hundred square kilometers seems very small, compared to the forestry ministry’s data on declining deforestation, which was very high,” at 1,510 square kilometres in 2017. “But the ministry’s figure counts industrial plantations,” Arief said.

Money matters

While the first tranche of the payment has been agreed to, there’s still some way to go before the money is actually released.

First, both countries need to agree on the amount. Ruandha said the Indonesian government wanted a high valuation for each ton of CO2e reduced to be high, more than what Brazil earned under its own deal with Norway.

“Of course we want Indonesia to get a higher price,” he said. “It takes tremendous effort to reduce deforestation and forest degradation in Indonesia. It doesn’t happen overnight. And how would we compensate for people’s livelihoods? If they can’t cut down trees, what’s the compensation [for them]? That’s why we don’t want a low price.”

Brazil earns $5 for each ton of CO2e it reduces through preventing deforestation, according to Arief. Between 2009 and 2016, it earned an average of 925 million krone ($108 million) a year from Norway, with the money channeled to the Amazon Fund, set up by Brazil as part of its initiative to reduce deforestation.

Based on that price, Indonesia would receive $24 million from Norway for its 2017 efforts — a valuation that Ruandha called “very low.”

Another missing piece of the puzzle is the lack of official funding mechanism in Indonesia, akin to Brazil’s Amazon Fund.

When BP REDD+ was still in charge, it worked on a funding scheme called Financing REDD+ in Indonesia (FREDDI). Its purpose was to distribute financial assistance via grants, investments and trade intermediaries. But the scheme was scrapped along with BP REDD+. In its place, the government moved to establish a new funding instrument that would underwrite all environmental initiatives, not just those under REDD+.

The office of Indonesia’s coordinating minister for the economy plans to establish the new funding instrument, known by its Indonesian acronym, BLU, sometime this year.

The existing funding instrument under the forestry ministry will be integrated into the new BLU, according to Siti, the minister.

“It’s not easy [to establish the BLU], but we’re currently trying to find a model that’s the easiest for us,” she said.

As both countries work on the details of the payout, environmentalists have urged Indonesia not to get sidetracked by the money and to focus on tackling addressing the litany of tasks needed to improve its forest governance.

Anggalia Putri Permatasari, a researcher at the NGO Madani Foundation for Sustainability, said the spirit of REDD+ and the bilateral partnership wasn’t meant to be financial. “[The money] is an incentive to mobilize actions [to reduce deforestation],” she said.

Through the deal, REDD+ is expected to serve as an entry point for a slew of improvements to land and forest management, including good governance, transparency, and anti-corruption measures, Anggalia said. She said lack of transparency still dogged Indonesia’s forest management, citing the land ministry’s decision to withhold data on right-to-cultivate permits for plantation and farming businesses, known as HGU permits.

Each HGU permit includes details such as land boundaries, coordinates and the area of the concession, as well as the leaseholder’s name. The HGU documents are vital because withholding them enables land-grabbing, with companies often laying claim to community lands without having to show their concession maps.

Arief said that while Indonesia had implemented a number of critical reforms and actions in the forestry sector over the last few years, including a ban on destroying primary forests and peatlands, and increased law enforcement action against forest crimes, there were still some areas rich in rainforests at risk of deforestation, such as the easternmost region of Papua.

“Law enforcement has to be strengthened because we’re seeing a serious threat against rainforests in Papua and West Papua provinces,” Arief said. “Recently, more than 300 containers of illegally logged timber from Papua were confiscated. There’s also ongoing forest clearing in Boven Digoel district. Land clearing due to palm oil expansion has also intensified in Teluk Bintuni district.”

Fluctuating by the year

Arief said Indonesia could stand to learn from Brazil’s experience in its REDD+ deal with Norway, including the importance of being consistent in efforts to reduce deforestation.

In 2017, he said, Norway’s rainforest payment to Brazil was dropped to 350 million krone ($41 million) as a result of increased deforestation in the Amazon the previous year.

“This means that all efforts to reduce deforestation and forest degradation must continue,” Arief said. “Since the largest amount of [Indonesia’s] emissions come from forest fires and deforestation, the government needs to make sure there are no more fires if they want to keep getting paid.”

During the particularly dire dry season of 2015, forest fires in Indonesia raged so intensely that they generated huge clouds of toxic smog that spread as far as Singapore and Malaysia, sparking a diplomatic spat. In Indonesia alone, the smoke sickened half a million people, according to government figures.

The 2015 fires razed 26,000 square kilometers (10,038 square miles) of land across Indonesia, but since then the problem largely abated. In 2017, the area burned was just 6 percent of the 2015 total, allowing Indonesia to claim an emissions reduction of 24.4 percent from the business-as-usual scenario.

In 2018, however, there was a significant uptick of forest fires, with 5,100 square kilometers (1,970 square miles) of land scorched — three times the size of area burned in 2017 — thanks to a more intense dry season than in the previous two years.

Fires in peat forests alone in 2016 emitted 96.7 million tons of CO2, according to government figures. The final figure for 2018, not yet published, is expected to far exceed that, given that peat fire emissions in the first eight months of the year already hit 76 million tons.

Crucially, emission reductions from peat degradation and peat fires aren’t included in Indonesia’s REDD+ deal with Norway. But they are expected to be included in the accounting mechanism as estimates improve.

“The 2018 fires were quite bad and so our emissions reduction will decrease again,” Ruandha said. “But we still have until 2030″ to meet a target of cutting emissions by 29 percent from business-as-usual projections.

“The point is that if we can prevent fires from breaking out, and manage our peat forests well, then our climate target will be met.”

This story was published with permission from

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