Indonesia delays forest-carbon rules

By David Fogarty, Climate Change Correspondent, Asia

SINGAPORE (Reuters) - Indonesia has delayed releasing complete regulations on using carbon credits to protect rainforests, preferring to fine-tune rules that could earn the country billions of dollars and curb the pace of climate change.

A report sponsored by the World Bank and Britain's Department for International Development says up to 84 percent of Indonesia's carbon emissions come from deforestation, forest fires and peatland degradation.

The rules, believed to be the first of their type, have been through numerous drafts over the past year to govern a surge of investment in projects that aim to save millions of hectares of forest in return for tradable carbon credits.

The World Bank says there are now nearly two dozen Indonesian forest-carbon projects under various stages of development under the U.N.-backed scheme called REDD, or reduced emissions from deforestation and degradation.

But the Ministry of Forestry has not finalized all the rules on how to share revenue from forest-carbon projects or how to link the various layers of government and has ordered a review.

Investors had hoped the minister would sign all the rules in December. Instead, the ministry issued a set of preliminary regulations covering demonstration activities, and also created a working group on climate change.

"We are still discussing how to differentiate between private investment and public investment," said Wandojo Siswanto, a senior adviser to the forestry minister.

"For example, if a private company wants to sell its REDD credits, where does the money go? To the local government, to the provincial government, the federal government?" he told Reuters.

The brief, preliminary rules were signed on December 11.

"Demonstration projects are an investment designed to show how you can reduce carbon emissions by managing forest land, such as reducing deforestation, preventing forest fires, restoring degraded forests," said Josef Leitmann, Environment and Disaster Management Coordinator at the World Bank in Jakarta.

The government, holders of a license to use timber-forest products, private forest owners and traditional forest managers can conduct these projects, which have to be approved by the ministry, said Luke Devine of Baker & McKenzie's member firm Hadiputranto, Hadinoto & Partners, in Jakarta.

The ministry has yet to formally sign the remainder of the regulations, which in earlier drafts enshrined the creation of a REDD commission that will review and approve projects. Sorting out how to share revenues from projects has been passed to the finance ministry, which will issue a separate decree.

The Indonesia Forest Climate Alliance estimates that REDD revenues could range between $500 million and $2 billion annually.

The ministry is also finessing which type of forests are suitable for REDD projects, methods to monitor the forests to ensure they remain standing and how to verify CO2 reductions.

"There are 20 different REDD demonstration projects at various stages of development around the country. The market is clearly responding," said Leitmann.