Page 1 INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Report No.: AC5770 Date ISDS Prepared/Updated: 12/15/2010 I. BASIC INFORMATION A. Basic Project Data Country: Indonesia Project ID: P120619 Project Name: Indonesia Forest Carbon Trust Fund Program Task Team Leader: Juan Martinez Estimated Appraisal Date: Estimated Board Date: March 1, 2010 Managing Unit: EASIS Lending Instrument: Technical Assistance Loan Sector: Forestry (80%);General agriculture, fishing and forestry sector (20%) Theme: Climate change (80%);Environmental policies and institutions (10%);Other environment and natural resources management (10%) SPF Amount (US$m.): 0.00 GEF Amount (US$m.): 0.00 PCF Amount (US$m.): 0.00 Other financing amounts by source: Borrower 0.00 Trust Funds 6.84 6.84 B. Project Objectives [from section 2 of PCN] The trust fund's development objective is to develop good practice for financing incentive payments to reduce deforestation and forest degradation to prevent further carbon emissions from this source. This would initially be done for sustainable practices at different stages of the design and implementation of the KFCP (Kalimantan Forest and Climate Partnership), through payment distribution mechanisms to be designed as an activity under the KFCP. Outcomes will include reduced greenhouse gas emissions from the KFCP site, lessons and a working model for the effective management and conservation of tropical peat forests, with potential application throughout Indonesia's extensive peat lands, and co-benefits in the form of livelihood options, biodiversity conservation, reduced health impacts and economic losses from smoke, and clarified land tenure and property rights for local communities. C. Project Description [from section 3 of PCN] The Governments of Indonesia and Australia are cooperating through the Indonesia-Australia Forest Carbon Partnership (IAFCP) to test and demonstrate approaches to Reducing Emissions from Deforestation and Forest Degradation (REDD). One component of the IAFCP is the Kalimantan Forests and Climate Partnership (KFCP), a four-year learning activity in which Page 2 technical, scientific, and institutional innovations are tested, refined, and communicated to add to the body of REDD knowledge and experience. The activity is financed by a A$ 30 million grant provided and implemented by AusAID, which will be supplemented by a proposed A$ 8.4 million stand-alone trust fund also financed by AusAID but administered by the World Bank as a financial intermediary. The Bank- administered trust fund will channel incentive payments to individuals and organizations participating in the KFCP's emissions reduction strategies and activities. Activities to be Financed. Investments for readiness and incentives to encourage sustainable practices would be financed primarily through grants to Indonesia-based partners and institutions. Incentives will take two forms: - Input-based: immediate remuneration or other direct benefits linked to adopting and implementing interventions, such as building check weirs, planting trees, or eliminating fire use on peat soils. - Performance-based: This will include two types: (i) Output based: annual payments for sustaining interventions so as to achieve the desired results, such as maintaining check weirs to ensure desired water table levels are maintained, protecting forest from encroachment, or reducing the incidence and extent of fire; and (ii) Outcome-based: payments commensurate with greenhouse gas emissions reductions, initially as a proxy for a future forest carbon market but possibly later based on tradable credits in a real carbon market. The first two types of payments (input and output-based) are more conventional and can be undertaken using standard systems. During the earliest stages of the project, incentive payments will be exclusively input-based, and relate to the activities required to support the stabilization and rehabilitation of the KFCP site. This includes the construction of check weirs to block drainage canals that were constructed by the Mega Rice Project in the late 1990s which are draining the area, and heightening the risk of fire; reforestation activities; livelihood interventions; and fire management activities. Some investment and readiness costs associated with these interventions will also be financed through the trust fund. As the KFCP advances, incentive payments will become increasingly tied to performance against certain indicators, such as maintenance of check weirs, maintenance of reforested land, and reduced incidence of fire. Once the project is sufficiently advanced, payments will be set on an outcome basis so that they will be commensurate with verified reductions in greenhouse gas emissions. However, it is expected to take some time to prepare for outcome-based payments around the KFCP site, so the initial focus of the trust fund will be on input-based and output-based incentives. Triggers for three types of incentive payments will be elaborated in line with the KFCP monitoring and evaluation framework and the design of project payment distribution mechanisms. Moreover, the activities under the KFCP will consist of: - Blocking canals to raise the water table and re-wet the peat. The canal blocking will use locally available materials, such as compacted peat overburden from the canal banks, burnt trees salvaged for bracing, and replanting with seedlings and saplings from the forest. The KFCP has Page 3 analyzed different options and cost implications for building more than 360 barriers and small palisade dams in different configurations. No access roads will be constructed to transport the construction materials. - Conserving and protecting the largely intact, but mostly logged-over forest area in Block E from illegal logging and fires. - Reestablishing tree cover in highly degraded areas by encouraging natural regeneration and replanting. This will help raise soil moisture levels and humidity, thus further reducing fire risk, especially in dry years. An area of approximately 27,500 hectares will require complete replanting using the principle that the key to a successful program is to replant with species adjusted to the present circumstances, and so to assist the development of forest cover along a line of succession. - Introducing livelihood interventions and incentives to adopt sustainable agricultural options or other productive activities equally accessible by women and men that do not involve illegal logging or require drainage or burning in peatlands. - Creating systems and conducting studies to capture and communicate knowledge about reducing emissions from deforestation and degradation of forests and peatlands. - Establishing a local GHG emissions measurement and monitoring program that feeds into the national Forest Resource Information and Carbon Accounting Systems. - Developing local capacity for managing REDD+ activities. - Documenting the positive and negative social and economic impacts of the REDD+ demonstration on participating communities, especially focusing on the results of KFCP's community-targeted interventions that include an emphasise on gender fairness. - Demonstrating how to effectively manage and conserve tropical peat swamp forests based on state-of-the-art scientific knowledge, with the potential to apply these techniques throughout Indonesia's extensive peatlands. - Producing co-benefits in terms of providing livelihood options and cash payments for REDD+ services to target villages, conserving biodiversity, reducing health impacts and economic losses from haze and smoke, and clarifying the land tenure and property rights of communities, thereby providing a basis for economic security while reducing the threat of conflict. - Contributing to strengthening Indonesia's REDD+-enabling environment by identifying policy options, clarifying institutional responsibilities and capacity-building requirements, and outlining options for the socialization of REDD+ and related issues. D. Project location (if known) The KFCP will be implemented within a single peat dome of approximately 120,000 ha in the northern part of the Ex-Mega Rice Project (EMRP) area in Central Kalimantan. The northern half of the dome is covered by relatively intact peat swamp forest. The southern part of the area is heavily degraded. Canals constructed to support the Mega Rice Project and secondary canals, constructed by the local residents and other resource users for other purposes, are steadily draining the area, resulting in the ongoing oxidation of peat, increasing fire risk in the area and related greenhouse gas emissions. The project site is sparsely populated, with approximately 20,000 mostly Dayak Ngaju residents living in 14 villages along the banks of the Kapuas River (outside the project site). The deforestation of large areas of land since 1996 has greatly reduced livelihood opportunities in the area. E. Borrower’s Institutional Capacity for Safeguard Policies [from PCN] Page 4 National institutional capacity for the monitoring and implementation of safeguards is weak in the Ministry of Forestry. At the provincial level, the government agencies (including those attached to the Ministry of Forestry) often do not have the equipment that would allow them to monitor social and environmental impacts and their staff lacks training. An action plan for a capacity building strategy on Safeguards will be prepared by KFCP which will comply with World Bank social and environmental safeguards, as well as those of the Indonesian and Australian Governments. Given the close link between the KFCP and the proposed World Bank administered trust fund to promote the development of a REDD financial mechanism, the two are considered a single operation from a safeguards perspective, and as the project is in a region with existing, significant, and interrelated environmental problems, and the project could have significant (though most likely positive) region-wide impacts, a Regional Environmental and Social Assessment (RESA) will be prepared. In parallel with the RESA process, the KFCP is preparing to carry out the environmental impact assessment (AMDAL) required under Indonesian law. Completion of the RESA and AMDAL will satisfy the environmental and social assessment requirements of the World Bank's safeguards policies. The main objective of Bank policies is to avoid and minimize adverse impacts and enhance positive impacts. The RESA and AMDAL will complement each other, with the RESA identifying region-wide and cumulative environmental impacts and addressing social safeguard issues in line with World Bank safeguards policies, whereas the AMDAL will focus more on site-specific environmental impacts, as mandated by Indonesian legislation. The RESA will provide: - plausible development scenarios for the program area under both (i) a business-as-usual scenario (without project) and (ii) with project scenario; - identification and prediction of the cumulative impacts of the selected scenarios; - assessment and description of the significance of these impacts and the likelihood of occurrence; - the social and environmental distribution of these impacts to determine priority issues; - an overview of the biological and hydrological state of the program area; - trends in natural resource use and expected status of all resources in Kabupaten Kapuas (the administrative district in which the project is located); - major expected conflicts between resource uses (local villages, conservation NGOs, local governments, etc.); - description of expected institutional arrangements for control and enforcement of development in the project area and their expected adequacy to deal with the priority issues; - identification of priority issues/areas requiring management action as seen by different levels of government (national, district, village), agencies such as the Ministry of Forestry, relevant NGOs, and local communities; and - identification and description of the current legislative, regulatory and policy framework, including a gap analysis of the AMDAL process vis-a-vis the RESA requirements. The safeguards framework consists of: Page 5 - Environmental Codes of Practices for each type of physical intervention (e.g. canal blocking, etc.) and an Environmental Management Framework (EMF) for the whole project - Indigenous Peoples Plan and Social Assessment - Resettlement Process Framework - Physical Cultural Resources Management Plan F. Environmental and Social Safeguards Specialists Mr John R. Butler (EAPCO) Mr Andrew Daniel Sembel (EASIS) Mr Virza S. Sasmitawidjaja (EASIS) II. SAFEGUARD POLICIES THAT MIGHT APPLY Safeguard Policies Triggered Yes No TBD Environmental Assessment (OP/BP 4.01) X The project is situated in a region with existing, significant, and interrelated environmental issues, and the project could have significant (though most likely positive) region-wide environmental and social impacts(i.e. reduction of forest fires; reforestation of critical lands). Although the project aims to provide positive impacts to the environment, however, identification of potential negative impacts will be assessed through the provision of an AMDAL (that consists of environmental management and monitoring plans/EMP for each identified impact). The AMDAL will be prepared according to Indonesian regulations, it will be complemented by a stand-alone Regional Environmental and Social Assessment. The RESA preparation process will broaden the scope for environment and social assessments and lead to the preparation of additional implementation framework and planning instruments mandated by the World Bank's environment and social safeguards policies. The RESA will provide environmental and social safeguards instruments (as an attachments), that include: Environmental Codes of Practice for each type of physical intervention, an Environmental Management Framework for the entire project, an Indigenous Peoples Plan and a Social Assessment; a Resettlement Process Framework; and a Physical Cultural Resources Management Plan; all of them become part of the operation manual of the KFCP program Environmental Codes of Practices will be developed for each type of physical intervention (e.g. canal blocking, etc.). It is important to note, as described in the project description that no access road will be built. Natural Habitats (OP/BP 4.04) X The demonstration activities will take place in tropical peatland in a river delta of 1.4 million hectares dominated by more than 900,000 ha of peat with roughly 450,000 ha being more than 3 m deep. Current land cover is estimated to consist of a mix of healthy and degraded forest (37%), severely degraded forest and woodland (14%), shrub land (22%), grassland, ferns and recently burnt land (15%) and agricultural land (12%). Peat swamp forest with high biodiversity value is found in the northern part of the project area. Potential impacts to natural habitats from the project (expected to be positive) and mitigation of negative impacts (if any) will be addressed in the EMF (as well as the AMDAL that consists of environmental management and monitoring plans/EMP for each identified impact). Forests (OP/BP 4.36) X The project will affect the way the local populations utilize forests and use fire to clear peat land. Tree planting activities will also take place in concert with efforts to rehabilitate the Page 6 Safeguard Policies Triggered Yes No TBD peatland through canal-blocking and re-wetting. The project will promote the efficient use of naturally available seedlings and natural succession with enhancement of native tree species. These will be assessed in the EMF and further potential impacts will be covered under the AMDAL that consists of environmental management and monitoring plans/EMP for each identified impact. Pest Management (OP 4.09) X The project will not procure any pesticides. Physical Cultural Resources (OP/BP 4.11) X The project has identified presence of Physical Cultural Resources (PCR) in the project area. Any potential impacts on these PCR will be assessed by RESA and if necessary a Physical Cultural Resources Management Plan will be prepared. Indigenous Peoples (OP/BP 4.10) X The project area is sparsely populated by approximately 9,000 local residents (mostly Dayak Ngaju), who make use of the peat lands for productive purposes, live in 14 villages along the banks of the Kapuas River (one bank of which defines an edge of the project), and is outside the core rehabilitation target area. The deforestation of large areas since 1996 has greatly reduced traditional livelihood opportunities (such as fishing). Moreover, canals constructed by GOI to support the Mega Rice Project and secondary canals, constructed by a range of resource users, are draining the area, resulting in the ongoing oxidation of peat, increasing fire risk. To enhance the economic recovery process for local communities, whilst encouraging sustainable activities that will help return the ecosystem to its more natural state, a series of activities (proposed by communities) have been discussed to varying degrees in collaboration with local social development partners (Care International). A pilot project has begun in one village focused on improving earnings from rubber production. In addition, economically useful local species, which can be harvested sustainably, are being considered for livelihood restoration projects with local villages, which have increasingly become involved in rubber and paddy rice (largely outside the peat dome area). An IPP will be developed as the IP communities that are affected by the project are known. The development of an IPP for the 14 IP Dayak communities that both allow them to benefit from the project and support maintenance and restoration of the areas original ecology will be prepared prior to appraisal. Involuntary Resettlement (OP/BP 4.12) X The land is state land and currently undergoing a process of reclassification, though the outcome and timeframe for this is unknown. The GOI intends to reclassify the project area (peat dome) from "production forest" to "protection forest". Although much remains unclear about the change in resource use rights, there will still be extraction rights. There would be no authority to resettle people (communities are located outside the project area). No involuntary physical resettlement is expected. Fortunately, areas where access might be restricted within the peat dome area have very little agricultural or timber extraction potential due to very poor soil potential and logging over in previous years. Consultants are currently evaluating possibilities for Community-Based Conservation areas and a process framework, developed and agreed with local community users, for access restriction in certain areas will be prepared. Safety of Dams (OP/BP 4.37) X The Bank lead dam safety specialist has advised that OP 4.37 will not be triggered, as structures to be built are check weirs, not dams. Page 7 Safeguard Policies Triggered Yes No TBD Projects on International Waterways (OP/BP 7.50) X Projects in Disputed Areas (OP/BP 7.60) X Environmental Category: A - Full Assessment III. SAFEGUARD PREPARATION PLAN A. Target date for the Quality Enhancement Review (QER), at which time the PAD-stage ISDS would be prepared: N/A B. For simple projects that will not require a QER, the target date for preparing the PAD-stage ISDS: 02/14/2011 C. Time frame for launching and completing the safeguard-related studies that may be needed. The specific studies and their timing 1 should be specified in the PAD-stage ISDS. All safeguard-related studies will be completed by February 2011 and the specific timing will be specified in the PAD-stage ISDS IV. APPROVALS Signed and submitted by: Task Team Leader: Mr Juan Martinez 11/15/2010 Approved by: Regional Safeguards Coordinator: Mr Panneer Selvam Lakshminarayanan 12/01/2010 Comments: Sector Manager: Mr Franz R. Drees-Gross 11/29/2010 Comments: My comments have been incorporated. Approved. 1 Reminder: The Bank's Disclosure Policy requires that safeguard-related documents be disclosed before appraisal (i) at the InfoShop and (ii) in-country, at publicly accessible locations and in a form and language that are accessible to potentially affected persons. Page 8