Indonesia applies for World Bank forest CO2 scheme

SINGAPORE Wed Mar 4, 2009 2:13pm EST

A view of a destroyed rainforest in Kotawaringin Timur district in Indonesia's central Kalimantan province October 9, 2007. REUTERS/Hardi Baktiantoro

A view of a destroyed rainforest in Kotawaringin Timur district in Indonesia's central Kalimantan province October 9, 2007.

Credit: Reuters/Hardi Baktiantoro

SINGAPORE (Reuters) - Indonesia has applied to join a World Bank program that supports developing nations' efforts to fight deforestation and help them earn cash through the sale of tradable carbon credits.

The Bank's $350 million Forest Carbon Partnership Facility aims to support developing states design and create projects under a U.N.-backed scheme that could eventually earn poorer nations billions of dollars a year by protecting their forests.

A Bank official in Jakarta said on Wednesday the Indonesian government this week submitted a lengthy submission to apply to join the Bank's partnership.

The Bank backs the United Nations' forest carbon scheme called Reduced Emissions from Deforestation and Degradation, or REDD, which the U.N. hopes to formally bring into a broader climate pact to replace the Kyoto Protocol from 2013.

Guyana and Panama have already applied to join the Bank's program but Indonesia is by far the largest to date and among the most crucial nations given the size of the country's remaining forests as well as the rapid rate at which they have been lost.

Indonesia is developing separate REDD regulations and is expected to issue them by mid-year, a top government official has said. About 20 REDD schemes are at various stages of development in Indonesia, the Bank has said, and has become a leader in developing rules governing the scheme.

SLASH AND BURN

Slash-and-burn farming and clearing for oil palm and other plantations have triggered vast fires in Indonesia, particularly on peat land, accelerating the amount of carbon dioxide in the atmosphere, scientists say.

Scientists say deforestation is responsible for 20 percent of mankind's greenhouse gas emissions.

The submission says between 1997 and 2000, Indonesia's deforestation rate was 2.8 million hectares per year, falling to 1.2 million hectares in 2000 to 2005.

It says the main drivers are extensive forest harvesting by pulp, paper and palm oil firms, expansion into rainforests and peat land by agriculture and forest plantations as well as encroachment by low-income communities into forest lands.

It also says REDD could be a major driver for investment.

"REDD-related incomes could also support a substantial investment in peat land restoration and broadly-based, rural and village level forest enterprises.

"Such an investment could result in alternative and sustainable livelihoods for many of Indonesia's 10 million lowest income families who currently survive on uncontrolled harvesting of forest and expansion of slash and burn agriculture."

The submission also explores the cost competitiveness of REDD versus palm oil and timber plantations.

It says the opportunity cost for deforestation for palm oil on degraded forest land on mineral soil was $3,963 a hectare, while clearing that land would release 184 tonnes of carbon-dioxide equivalent per hectare.

Carbon credits would have to be priced at $21.54 (27 euros) a tonne to be competitive to deter such plantations.

By comparison, the costs for planting on carbon-rich peatland were $4,265 per ha, while credits would only be $4.19 (5.25 euros) a tonne because emissions from peatland would release 1,018 tonnes of CO2-equivalent per hectare if cleared.

(Editing by Sue Thomas)

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