The connections between climate change, deforestation and the growth of palm oil plantations are pretty clear. What to do is another thing. While it is easy enough to demand that the Indonesian government stop creating palm oil plantations this is an unrealistic objective. Caught between a rapidly increasing fiscal account deficit and its stated development goals, palm oil production is, like it or not, here to stay.

There are signs however that changes is afoot. To increase revenue, the Indonesian government would like to expand exports of palm oil to new markets, with Eastern Europe particularly targeted for expansion. However this runs into a major problem: from 2010, the EU will require biofuels to achieve a net carbon dioxide saving over oil of 35%. At present only one out of 300 listed producers do this, primarily because of the huge amount of carbon released into the atmosphere when clearing land away.

Furthermore, echoing one of the conclusions of the Economy and Environment Program for South East Asia (EEPSEA) report, fears about increases in floods and landslides due to deforestation have led the State of the Environment to instruct local administrations to cancel plans to convert natural forest into commercial areas. While putting the emphasis for action on the local administrations Masnellyarti Hilman, from the environment ministry, states that ‘It is time for local administrations to think in the long term rather than simply focus on the economic benefits of the short term, because the threat of natural disasters will most likely increase with climate change in the future’.

A solution? Use degraded land

This has the potential to not only help Indonesia’s economy but provide jobs and potential carbon offsets. Project POTICO (Palm Oil, Timber & Carbon Offsets) aims to rehabilitate 1.25 million acres of degraded land into palm plantations over three years. Created by the WRI (World Resources Institute) and NewPage Corporation, this new scheme was formed partially in response to changes in the US Lacey Act banning the use of paper from illegally harvested trees.

The link between illegal logging and palm oil plantation creation is primarily economic: as it takes four years from planting to generating an income from oil production, the revenue from the cleared timber helps offset costs. POTICO aims to counter this by creating up to three potential revenue streams:

• potential carbon offsets under REDD;
• a sustainable palm oil certification scheme to generate long-term cash flows;
• timber certification whereby oil palm companies with current timber concessions, are paid not to use the timber concessions until the palm oil plantation starts commercial production.

The potential for this is huge: Indonesia has 15-20 million hectares of degraded land. As Jonathan Lash commented “Project POTICO will relieve pressure on Indonesia’s virgin tropical rainforests, reduce greenhouse gas emissions from forest clearing, and prevent the loss of biodiversity in forests slated for conversion to oil palm plantations.”  While hurdles remain to be overcome, especially in how to demarcate degraded land from rainforest, this project suggests a way where palm oil production can increase while reducing greenhouse emissions and stopping deforestation.

A recent report from the Economy and Environment Program for South East Asia (EEPSEA) makes grim reading for anyone concerned about the effects of climate change in South East Asia generally and Indonesia in particular. Combining hazard maps for five climate-related risks (tropical cyclones, floods, landslides, droughts, and sea level rise) with population density and adaptive capacity data, major points of alarm include:

• Climatic ‘hotspots’ in western and eastern parts of Java (see figure 1.);
• Java is one of least ecologically protected areas in South East Asia, primarily because it is the most densely populated island in the region;
• Adaptive capacity to climate change higher than Laos and Cambodia but lower than Malaysia, Thailand and Vietnam;
• Parts of western Java and western Sumatra are extremely vulnerable to climate change;
• Jakarta is the most vulnerable area in the whole of South East Asia.

These alarming findings confirm an earlier Environmental Ministry report declaring that sea-level rise could put parts of Jakarta permanently under water, including the international airport. Given these disturbing conclusions what can be done?

Tackle Primary Causes: Deforestation

Well it is always good to try and tackle the causes of climate change. One of the key contributors is rapid deforestation, with Indonesia experiencing a ‘boom’ primarily in palm oil cultivation. Perceived incorrectly as a clean bio-fuel, palm oil plantations not only destroy the natural habitat of vulnerable species like the Sumatran tiger and Orangutans, but also adversely affect the local population through land loss. Indeed, altogether deforestation pumps over 2.6 billon tonnes of CO2 into the atmosphere, making Indonesia the third biggest source of CO2 in the world.

Reality Bites

This is exactly what the REDD scheme is all about, making money available to prevent deforestation. However as reported in my last blog there has been confusion who will control the inflow of money from donors as well as the disbursements to various sectors. Two further factors suggest government inaction is the way forward. Firstly, the price of palm oil has risen by 70% in the last year making it an integral part of the Indonesian economy. There are plans also to create a palm oil exchange market in Indonesia suggesting that palm oil will be become more important, not less, with time.

Secondly, the Indonesian government has delayed releasing rules aimed at governing the billions of dollars of investment expected to flow into the country in return for carbon credits. Expected in December, these rules were meant to decide who benefits from the selling of REDD credits as well as which forests would be suitable for the scheme. An integral part of REDD is to share the benefits with the local populace which is only to be applauded. But given that it has now been put out for review with no new deadline for release, concern is rising that REDD implementation is stalling in Indonesia and even if implemented will benefit central government over local people.