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JAKARTA/SINGAPORE (Reuters) - When U.S. President Barack Obama flies over the vast Indonesian archipelago next week, he will see first hand the size of two of the nation's greatest and most threatened resources: its forests and seas.
Both are widely expected to be at the heart of efforts to boost ties between the United States and Indonesia and to step up the fight against climate change, officials and sources say.
Indonesia has some of the world's most complex and diverse forests but also one of the highest deforestation rates.
Saving them from illegal logging and unsustainable clearing for agriculture and mining could help Indonesia meet its goals to cut greenhouse emissions -- the third highest globally according to the World Bank when taking into account deforestation and land use.
It would also help the United States in its aims to fight climate change, and help Indonesia become a source of tradable forest carbon offsets that would help polluting U.S. industries meet future targets to cut emissions.
The reasoning is simple. Forests, particularly tropical rainforests, soak up huge amounts of planet-warming carbon dioxide, acting as a brake on climate change. Clearing and burning forests accelerates the pace of global warming.
During his trip, Obama could announce how some of the $700 million allocated to Indonesia by the Millennium Challenge Corporation can be used to fund climate change and forest conservation programmes, a source said.
The MCC is a U.S. foreign aid agency set up under the Bush administration.
"It will be quite substantial. It's safe to say it will be north of $100 million on an annual basis," said the industry source. That comes on the heels of Norway's $1 billion climate deal with Indonesia announced earlier this year.
"The U.S. doesn't want to compete directly with the Norwegians but they do want similar big headline news."
The visit could also reveal details about implementing a four-year programme worth between $35 million and $40 million on fighting deforestation, reducing loss of biodiversity and improving land use management. The scheme was announced earlier this year.
Details may also emerge on a further $20 million pledged for marine conservation, a source said, while steps to promote clean-energy development could also be announced.
USAID, the overseas aid agency, is working on a proposal to fund a programme named the "Indonesian Forestry and Climate Support Project" to run until 2014 and the presidential visit could generate details on the project's implementation as well.
Among the project's aims are halving the rate of forest degradation and loss from conversion, illegal logging, over-harvesting and fires for at least 6 million hectares (15 million acres) in targeted areas.
It also plans to boost training, funds for forest management, development of low-carbon growth plans in at least 8 districts and steps to improve management of high-conservation value forests that also include large areas of orangutan habitat.
Indonesia needs cash to save its dwindling forests and sees a natural role as a major player in a future carbon market trading forestry carbon credits. The country is also under intense international pressure to fight deforestation and the burning of its forests that regularly smothers its neighbors in smoky haze.
The United States could eventually become a major buyer of forest carbon offsets under a U.N.-backed scheme called reducing emissions from deforestation and degradation (REDD).
REDD aims to reward developing nations for protecting, restoring and sustainably managing rainforests. Projects that set aside large areas of forest for decades would earn tradable credits for the CO2 locked away by the trees -- a trade potentially worth billions of dollars a year.
The U.S. has an interest in protecting Indonesia's forests not just because of the valuable role they play sucking greenhouse gases out of the air, but also as a key part of a potential future forest offsets trading industry, observers say.
"They are trying to find a way to protect their future offsets but they have also seen how important Indonesian forests are for the global climate crisis," said Jakarta-based Greenpeace forest campaigner Bustar Maitar.
"Indonesian forests are as important as forests in the Amazon and the Congo."
The climate bill passed last year by the U.S. House of Representatives allowed imports of REDD credits but the legislation has been since been shelved.
Undeterred, the United States, Norway, Japan and dozens of other countries created a REDD partnership worth about $4 billion earlier this year aimed building up REDD pilot projects and national institutions in developing nations over the short term.
Indonesia's seas are also a key resource, its coral reefs some of the richest in the world and vital for fisheries but also under threat from overfishing and warming seas.
U.S. cash is also likely to help the Coral Triangle that stretches from the Solomon Islands northeast of Australia to Bali, Borneo and the Philippines.
Editing by Andrew Marshall