What’s Next for Indonesia-Norway Cooperation on Forests?

In May 2010, Norway agreed to contribute up to $1 billion towards reducing deforestation and forest degradation and loss of peatland in Indonesia, which now account for more than 80 percent of the country’s greenhouse gas emissions. The “Letter of Intent” is a promising first step, yet the two countries must still settle key details of the agreement. Below is WRI’s analysis of the Letter of Intent and recommendations for what should be addressed next.

Deforestation and forest degradation in Indonesia have led to greenhouse gas (GHG) emissions and biodiversity loss of global significance. The recently announced Indonesia-Norway Letter of Intent (LOI) on “Cooperation on reducing greenhouse gas emissions from deforestation and forest degradation” aims to support Indonesia’s national strategy to reduce emissions from the land use sector, and to contribute to the international forest and climate dialogue. The effective implementation of this phased strategy can help protect Indonesia’s carbon- and biodiversity-rich tropical rainforests while promoting local prosperity.

The initiative proposed in the Letter of Intent will be funded by Norway with US $1 billion, with $100 million paid up front and the rest as contributions-for-delivery. Implementation will occur in three phases:

1. A preparatory steps phase to be achieved by January 2011, including:
Development of a national strategy to reduce emissions from deforestation and forest degradation (known as REDD+);
Establishment of a special coordination agency;
Formation of an independent institution for monitoring, reporting and verification (MRV);
Establishment of a funding instrument based on payment for emissions reductions; and
Selection of a province-wide pilot project.

2. A readiness phase starting in 2011 and lasting 3-4 years, including:
Capacity building, policy development and implementation in 1-2 pilot provinces;
Legal reform to address land tenure conflicts, compensation claims and law enforcement;
A two-year suspension of new forest conversion concessions;
Creation of a degraded land database; and
Development of an independent international verification mechanism.

3. A contributions-for-verified-emission-reductions phase beginning in 2014 which will allow Norway and potentially others to pay for emission reductions through a fund mechanism.

The phased approach and payments based on deliverables is a promising strategy. Additionally, emphases on alignment with international processes, coordination with other REDD+ initiatives (both multi- and bi-lateral), participation of all stakeholders, and full transparency are important. However, because of the inherent briefness of such a LOI, ultimate success will depend on the details.
Next Steps for Protecting Forests

Over the coming months, Norway and Indonesia will write a document detailing the deliverables of this agreement, planned for release in October 2010. If it is to fulfill its potential for reducing greenhouse gas emissions from deforestation, forest degradation, and peatland conversion in Indonesia, the agreement that emerges should address at least five critical objectives:

Coordinate agencies. The LOI mentions two new institutions, a “special agency reporting directly to the president” and an “independent institution for a national monitoring, reporting and verification system”. The roles and responsibilities of these institutions relative to those of the already existing National Climate Change Council (DNPI) and National Development Planning Agency (BAPPENAS) will need to be clarified. The roles of these four institutions also will have to be clarified in light of the new Climate Change Center announced during the G-20 meeting in Toronto as part of the U.S.-Indonesia Comprehensive Partnership. In addition, the new institutions will need to be coordinated with the horizontal (between ministries) and vertical (national, provincial and district government) decision-making structures of Indonesia.

Clarify definitions. Point VII.C of the LOI introduces a degraded land database as a pillar of a strategy to expand agriculture development onto degraded areas instead of into forests. However, a clear definition of “forest,” “degraded land” and “peat” is missing. Definitions are important; for example, defining peat based on depth can result in very different definitions of peatland as peat depth varies considerably. Similarly, the screening criteria to classify land as degraded or suitable for agriculture are not mentioned. Environmental, economic, legal and social factors should be taken into account in these definitions. Without clear definitions, the push to utilize “degraded land” could result in the clearing of high value secondary forest or agro-forests important for communities, or even incentivize the “creation” of new degraded land, which then becomes available for development by virtue of its legal status.

Develop a low carbon land use strategy. The forest monitoring system mentioned in the LOI (the monitoring, reporting and verification system or “MRV”) will be a tool to measure greenhouse gas emissions and inform where emissions occur, but will not actively reduce emissions. Thus, Indonesia first should develop a low carbon land use strategy that targets development onto lands with low carbon content (for example, zoning tree-less areas as candidates for agricultural development), while incentivizing protection or other sustainable uses in dense forest areas. With all the pressures on forests from oil palm, timber, pulp and paper expansion, mining and other activities, a spatially-explicit national land use strategy vetted and integrated with all horizontal and vertical agencies will be a critical step in reducing emissions from the land use sector.

Address existing concessions. Although the announcement of a two year suspension of “new concessions for conversion of peat and natural forest” in 2011 is an important step to lower greenhouse gas emissions, this suspension does not address existing concessions. Many companies already have been issued clear-cut licenses for agricultural or timber-plantation development on forested areas that have not yet been converted, and more concessions may be issued between now and the end of 2010. The government has suggested this problem may be addressed through “land swaps” implemented on a voluntary basis in cooperation with civil society and industry. However, since no specific policies have been announced, it is unclear that the moratorium will result in reduced deforestation in the short term. It is essential that a final agreement include plans for the existing, but not yet exercised licenses that are not addressed by the moratorium.

Define the emissions reference level. The LOI says that in phase 3 (point VIII.A), payments will be based upon a reference level and Indonesia’s pledges. This refers to the pledge to reduce greenhouse gas emissions by 41 percent below a historical baseline with international assistance. However, historical reference levels can vary considerably by choosing different data sources or choosing different time periods on which to base the reference level (e.g. the 1990-2000 deforestation rate was 1.8 million ha/yr, while the 2000-2005 deforestation rate was 0.7 million ha/yr according to Hansen et al. 2009). In order to achieve desired reductions in greenhouse gas emissions, the reference level should be set to encourage continued reductions below current emissions levels.
A Good Start

The LOI demonstrates significant support for Indonesia’s national strategy to reduce emissions from the land use sector. In order to be successful, the forthcoming agreement should include further clarification of institutional arrangements, define key terms such as “degraded land,” incorporate plans for low carbon land management, clarify what will fall under the conversion suspension, and determine which reference level will be used. If these elements are clarified, the partnership between Norway and Indonesia holds great promise for achieving reduced emissions from deforestation and forest degradation.