Land Use and Climate Change Policy Brief 51754 Land use conversion contributes to high rates of greenhouse gas emissions Deforestation and land conversion have long been issues for Indonesia. The effects are evident not only in deteriorating environmental quality and livelihoods of forest communities, but also in the declining economic returns from forest-based activities. Recently, with growing concern over climate change, Indonesia's record of deforestation and land conversion has regained public prominence. This is because loss of forest cover, forest fires and peat land drainage in Indonesia is contributing high levels of greenhouse gases to the atmosphere. Although there is uncertainty about the exact magnitude of these emissions, all estimates show that emissions from forest and land use conversion are currently much higher than total emissions from combustion of fossil fuels. The level of emissions from deforestation and land use conversion places Indonesia among developing countries with high carbon emissions ­ and thus a country where mitigation measures should take place to prevent further acceleration of climate change. The world's attention on climate change is creating additional pressure on Indonesia to resolve its problems associated with deforestation and land use conversion. Land clearing for oil palm plantation in Sumatra Photo: Heri Wibowo However, at the same time, it is also creating new Analyses are underway to obtain a clearer picture of opportunities to explore solutions, as well as emission levels from forest and land use to help define opportunities for international cooperation. New appropriate mitigation measures. It is known that financial schemes are available and can serve as different types of forests and soils, as well as different incentives for instituting changes in Indonesia's forest methods of deforestation cause varying levels of carbon and land use sectors. emissions. For example, burning contributes emissions more directly and quickly than other land-clearing Poor forest and land use management techniques. Peat land deforestation and drainage have long-term social and economic costs also cause more emissions per unit area than other Forest and land use conversion in Indonesia have been forest types. In production forests, losses occur from addressed by many policy reforms and development poor forest management practices, illegal behavior, programs. Recent data and analysis show lower rates and ineffective law enforcement. While in conversion of deforestation, which indicate signs of progress. forests, deforestation is caused by conversion to pulp However, the reported high levels of greenhouse gas and oil palm plantations, as well as agriculture. A emissions from this sector demonstrate that more portion of forest loss occurs in swamp forest, which work needs to be done in this area. grows on peat soils that contain high concentrations of carbon. Deforestation in even small areas of swamp forests cause a release of high levels of carbon into the atmosphere. Forest & Land Use Sector: Upstream Policies & Distortions Impede Progress and Impose Cost on Society Underlying Policy Costs to Society: Proximate Causes/ & Institutional Symptoms · Disruption of water Issues · Inappropriate land use Watershed quality & quantity and allocation decisions Degradation · Weak legal · Decrease in productivity, & political · Weak legal status of agricultural output, accountability (& forest and peat lands nutrition constituency) · Weak, inconsistent law Drying of Land, · Fires, haze, health impacts enforcement Forests · Policies favoring · Drought, water shortages · Excess industrial large scale processing capacity · Soil quality, productivity, commercial activity nutrition, poverty · Weak, inconsistent Forest Erosion, over SME or CBFM provincial/local Cover & Degradation · Siltation, flooding, urban · Distorted Incentives government forest Peat Loss impacts for timber pricing and land management · Increased social conflicts and transport approaches Resource · Loss of rural livelihoods · Marginalization Scarcity · Weak legal of traditional land · Rural Poverty and framework for stewards Landlessness protecting poor, indigenous land · Opening of new lands, · Lower resilience, encroachment GHG vulnerability users Emissions · Concentration of wealth, · Lost opportunities for · Corruption and elite feeding political cycle capture carbon market payments Modified and expanded from WRI State of the Forest Report 2002, WB Strategic Options for Forest Assistance In Indonesia, 2006 2 Current information indicates that, in fact, much of the deforestation occurring in Indonesia is geographically A MORE SUSTAINABLE INDONESIA is one where: concentrated in only ten provinces in Sumatra and Kalimantan. The ten provinces account for 78 percent · The costs of environmental degradation and climate of dry forest loss and 96 percent of swamp forest loss, change are lowered so that less wealth is diverted from growth; and are thus responsible for most of Indonesia's non- energy greenhouse gas emissions. The provinces · Good environmental management contributes of Riau, Central Kalimantan and South Sumatra to poverty alleviation by reducing impacts on the poor and better sharing of benefits; alone account for over half of forest losses and emissions. · Renewable resources are used sustainably while non-renewable ones are wisely developed for Reducing carbon emissions from forest and land use investment in human and physical capital; and will require improved forest management practices · Citizens are aware of and participating in and law enforcement. Many of the underlying policies environmental issues directly or through their and institutional issues that are responsible for poor representatives and other organizations. forest and land management have been analyzed and discussed by stakeholders over the past two decades. · Restructuring and revitalization of forest sector These policies and distortions are summarized in the industries to improve domestic efficiency, and diagram on the previous page. The diagram shows access international markets; that all environmental consequences associated with deforestation and land use conversion incur · Controlling forest and land fire, to reduce smoke costs to society, in the form of health impacts, social and haze that cause high health costs and conflicts, reduced productivity, and other economic economic losses; losses. · Ensuring equity and transparency in forest/land use decisions to reduce uncertainty and conflict Focused efforts towards better forest that add to costs of business; management · Conducting independent monitoring of legal There are many good economic and social reasons to compliance and participation standards. address deforestation and land clearing by fire, even aside from the important climate benefits. Reducing In addition, it is also necessary to reexamine land deforestation and burning can contribute to economic use licensing mechanisms and the role of local development, poverty alleviation, protection of governments in allocating and creating incentives environmental services, and promotion of good for land conversion. Long-term vision from local governance. governments is critical to achieving better forest and land governance. Some economically beneficial forest management options that should be implemented include: The positive side of geographically-concentrated deforestation is that reform efforts can be focused · Improving forest law enforcement, management in the few provinces that contribute most to and governance to improve asset management deforestation and land use conversion, namely and revenue collection within the sector; Riau, Central Kalimantan and South Sumatra. A · Realigning incentives for timber harvesting and few changes in these places have the potential to processing firms to improve competitiveness and create economic benefits for Indonesia and emissions economic returns; reduction benefits for the entire planet. Expansion 3 For further information, please contact: World Bank Office Jakarta Indonesia Stock Exchange Building, Tower 2, 12th floor Jl. Jenderal Sudirman Kav. 52-53, Jakarta 12190 - Indonesia Ph. 62-21 5299 3000 fax. 62-21 5299 3111 To download the full report "Investing in a More Sustainable Indonesia", visit our website: www.worldbank.org/id into the ten provinces with the highest rates of The international schemes will require the deforestation and land conversion would have even commitment and cooperation of many stakeholders. greater benefits. For example, the role of the local communities, the private sector, the Ministries of Finance and International forest carbon financing Environment, the National Climate Change Council, can benefit Indonesia and BAPPENAS will be needed to help produce solid, In recent years, GOI has allocated significant funds verifiable emissions reductions for sale on the for reforestation and rehabilitation of lands that international carbon market. Careful steps must be have been deforested and degraded. The Ministry taken to select and survey suitable sites, implement of Environment is also developing Indonesia's proper action to modify behavior or change incentives, Second National Communication to UNFCCC on monitor and verify data, and find appropriate buyers GHG emissions, while the Ministry of Forestry is to share both financial benefits and risks. developing a plan and baseline estimates for a In addition to REDD, other sources of carbon carbon market mechanism called Reduced Emissions financing can be tapped as well. Some examples from Deforestation and Degradation (REDD), a Forest include the Forest Investment Program, a multi donor Resource Information System, and a National Carbon fund within the World Bank's Strategic Climate Fund, Accounting System. and bilateral government support (which could The international community recognizes the role provide financing in exchange for verified reduction of deforestation reduction in preventing further of deforestation). The Indonesian Government and carbon emissions. An international forest carbon other stakeholders should familiarize themselves market is under negotiation, and is expected to be with the potential benefits and mechanisms to established in the post- 2012 framework. One of the access the new financing schemes. schemes under consideration is REDD. Through REDD, Indonesia has the potential of earning USD 0.5 ­ 2 Background information on CEA Report billion per year; this, however, will depend on how The Country Environmental Analysis (CEA) report well Indonesia performs in reducing deforestation highlights underlying challenges to Indonesia's and land degradation. REDD payments can create an environment and management of its natural resources. The initial purpose in preparing the report was to guide incentive and a revenue stream that offsets the costs World Bank support to Indonesian institutions for of making changes in the forest and land sectors. more sustainable development. However, the report Indonesia is now pursuing a two track strategy, also provides information that may contribute to the advocating for REDD in the international climate Government's medium term development plans under negotiations and developing a domestic REDD the policies of the new administration. initiative with some donor support. Printed on cyclus offset (recycled paper) 4