Indonesia Could Earn Billions from Well-Designed Deforestation-Reduction Program, Finds Study

Source : Mongabay – January 12, 2012

Indonesia could have earned $5 billion in revenue and avoided 1 billion tons of carbon dioxide emissions between 2000 and 2005 had a reducing emissions from deforestation and degradation (REDD+) program been in place, reports an assessment published in the journal Proceedings of the National Academy of Science.

Jonah Busch, a forest economist for Conservation International, and colleagues used economic models to estimate the emissions reductions and potential revenue under different REDD+ policies and found that a mandatory, Indonesia-wide system that relied on international carbon payments of $10/ton of carbon dioxide would have resulted in the greatest avoidance of deforestation and generated the highest profit for the country. In contrast, a site-by-site payment for ecosystem services approach would have reduced emissions by only 310 million tons of CO2 at a net cost to Indonesia of some $31 billion dollars. The effectiveness of the second approach would be partly undermined by “leakage” or displacement of deforestation from one part of Indonesia to another.

A third approach — a voluntary system with revenue and responsibility sharing between national and subnational governments and payments for emissions reductions to districts or provinces, rather than individual sites — would have been nearly as effective as the first scenario, reducing emissions from deforestation by
875 million tons and generating a profit of about $1.7 billion over the period.

The authors say the results indicate the importance of how Indonesia structures the economic incentives of its REDD+ program. “We find that Indonesia’s choice of policies for REDD+ will greatly affect the level and cost-effectiveness of greenhouse gas reductions, as well as the distribution of the costs and benefits within the
country,” said Busch in a statement. “Using cap-and-trade rather than simple voluntary incentives can make the difference between a program that reduces national emissions by 8% and costs $6.2 billion (USD), and a 26% reduction with $1 billion in revenue. A well-structured voluntary program could bring about a 22%
reduction with $330 million in revenue.”

Indonesia is presently developing a national REDD+ strategy under President Susilo Bambang Yudhoyono’s commitment to reducing greenhouse gas emissions by at least 26 percent from a projected 2020 baseline. The emissions reduction target, which rises to 41 percent with international support, is heavily dependent on cutting
degradation of peatlands, deforestation, and logging in carbon-dense primary forests, activities that generate up to 80 percent of Indonesia’s greenhouse gas emissions, but account for a substantially smaller share of economic activity. As a first step, last year Indonesia implemented a two-year moratorium on new forestry concessions in peatlands and primary forest areas.

But resistance to low carbon development remains strong, especially among powerful interests in the forestry sector, which successfully weakened the moratorium so that it now includes substantial loopholes. Nevertheless there have been recent signs of progress, with the President Susilo Bambang Yudhoyono reiterating his
climate commitment and a handful of private sector companies voluntarily restricting conversion of high carbon landscapes.

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