Indonesia Seeks $5 Billion to Cut Carbon From Shrinking Forests

Jun 26, 2014 10:00 pm ET

June 27 (Bloomberg) -- Indonesia needs about $5 billion in aid to hit its target for reducing emissions, according to the agency set up to protect rainforests and peatlands.

Norway’s commitment of $1 billion in 2010 is just the beginning of what is needed in Indonesia, ranked as the world’s third-largest emitter because of its shrinking forests, said Heru Prasetyo, head of the agency for Reducing Emissions From Deforestation and Forest Degradation, known as REDD+.

“To assure successful REDD+ programs, we can’t limit ourselves to the sole support from the Norwegian government,” Prasetyo said in June 25 interview. “We need to be open for new investors.”

Indonesia’s target is to cut greenhouse-gas emissions by 26 percent using its own funds or as much as 41 percent with international aid. That compares with projected emissions of 2.95 giga tons by 2020 if the nation takes no action. The nation started dozens of demonstration projects for REDD, a program sponsored by the United Nations to measure the climate benefits of slowing deforestation and awarding credits based on each ton of emissions prevented by saving forests or peatlands.

More foreign investment is expected to support REDD projects if Indonesia can better enforce its laws, Prasetyo said. Investors purchased about 23 million REDD credits worldwide last year, more than double the number in 2012, as prices fell to about $4.20 per ton of emission reduction, according to Forest Trends’ Ecosystem Marketplace, a Washington- based organization tracking voluntary carbon markets.

The unrelenting burning of Indonesia’s peatlands, mainly to clear land for agriculture, as well as illegal logging, corruption and weak law enforcement may prevent Indonesia from meeting this target. Indonesia has imposed a moratorium on new permits to develop peatlands and primary forests until 2015 as part of the agreement with Norway.

Kalimantan Credits

Rimba Raya, an REDD project in Central Kalimantan set up to protect 64,977 hectares of forests, is quantifying emission reductions under the Verified Carbon Standard, according to data from the project posted on its website. The project has generated 11 million credits to date, it said.

Degradation of forest and peat lands account for 60 percent of the country’s emissions, while the rest comes from energy and transportation, industry and agriculture, according to data from the agency. Better land management could achieve a 63 percent reduction in emissions to 1.89 gigatons, according to Prasetyo’s agency.

Presidential candidates Joko Widodo and Prabowo Subianto, who will contest a July 9 election to run Southeast Asia’s largest economy, have made no campaign pledges on greenhouse gas targets or the country’s forest moratorium.

Funding Risk

Indonesia needs to have a system in place by 2016 for measuring its greenhouse gases or risk losing its funding from Norway, Prasetyo said. Norway has disbursed $170 million so far.

“Norway’s support is a performance-based investment, and we want to make sure we provide proof to channel funds to our country,” he said.

The agency is working with 11 provinces to agree on a methodology for measuring emissions, Prasetyo said. The country’s estimated emissions were 1.7 billion tons in 2000 and 2.12 billion in 2005, according to agency data.