AT a low-key meeting with Indonesian President Susilo Bambang Yudhoyono’s most trusted advisers at the UN General Assembly in New York this month, Australia strengthened its commitment to one of the world’s most ambitious environmental ideals.
The $70 million funds that so far have been pledged by Australia are only a token figure in a plan that could transform Indonesian social and economic life.
The goal is to use carbon trading markets to revolutionise land management across the Indonesian archipelago, to conserve pristine forests, rebuild degraded lands, improve agricultural productivity, protect threatened wildlife and deliver economic empowerment directly to impoverished communities.
When combined with similar efforts in the Republic of Congo in Africa and the Amazon Basin it is a market that could be worth an estimated $15 billion a year.
Australia has already helped to map by satellite the forest cover across the entire Indonesian archipelago for 2000 and last year. Work is well under way to build the independent institutions needed to guard against corruption and make sure that investors from the developed world get the carbon stores they are paying for and that rural landowners are not exploited in the rush.
The challenge, too, is to find how best to communicate the scheme to village and community leaders who know nothing about climate change or carbon but can recognise that organic bush honey is a better proposition than honey contaminated by nearby plantings of palm oil.
Several pilot programs are under way across Indonesia but it will be some time before the floodgates of international funding are opened.
For Indonesia, the potential is enormous. A UN report released this week concluded that conserving Indonesian rainforests could generate three times more revenue than clearing them for palm oil plantations. The report estimates the carbon value of peat-rich forests ranges from $US3711 ($3800) to $11,185 a hectare across a 25-year period.
Two-thirds of Indonesia’s carbon dioxide emissions profile comes from deforestation and Yudhoyono has committed the country to cutting carbon emissions by 26 per cent or 44 per cent with assistance from the developed world.
Any carbon stored in addition to the 26 per cent pledge can be sold by Indonesia into a regional or international carbon market to help fund the land use changes. Investing Australia’s carbon funding offshore has been criticised by Opposition Leader Tony Abbott.
Australia is establishing an equivalent but smaller carbon market through its carbon farming initiative.
But when Australia’s planned carbon tax changes to a fully fledged cap-and-trade scheme after 2015 there will be a pressing need for a deep pool of carbon permits from which to draw.
For Australian businesses, investing in the environmental health and social wellbeing of Indonesia may be the most economically rational way to deal with their climate change obligations under any future national, regional or international carbon abatement scheme.
The potential multilayered opportunities from stopping forest degradation in Indonesia and Papua New Guinea was identified by former Howard government environment minister Malcolm Turnbull.
Under Labor, Australia remains deeply committed to helping Indonesia prepare for the emergence of a regional or global carbon trading scheme. It has established the Kalimantan Forest Climate Project, located in the Kuala Kapuas district in Central Kalimantan, to demonstrate trees can become more valuable alive than dead.
Next year, Australia will co-chair with the Republic of Congo the UN collaborative program Reducing Emissions from Deforestation and Forest Degradation in Developing Countries or REDD-plus.
Progress in REDD-plus negotiations is expected to be a key feature of the upcoming UN Climate Change Conference in Durban in November, which is likely to be best remembered for its failure to reach agreement on a global replacement for the Kyoto protocol that expires next year.
Addressing a conference in Jakarta this week, Australia’s climate change ambassador Louise Hand said 18 per cent of global emissions were attributable to deforestation and up to $15bn annually would be required to drive the necessary global change in the forest sector.
“This is the size of the investment needed to make forests worth more alive than they are dead,” she said.
Australia has donated $273m to an International Forest Carbon Initiative, which is designed to create a market for carbon sequestration, REDD-plus.
Hand says public finance is necessary to set up the playing field but, in the long run, the private sector will provide most of the players. “The whole idea of REDD-plus is to change the incentive frameworks so that saving forests makes good business sense,” she says.
The evidence is there that Indonesia’s biggest timber companies have already got the message. Asia Pulp & Paper has developed a carbon store project and helped create the world’s first UNESCO-recognised biosphere in Riau province that is viewed as a “laboratory for excellence in sustainable development”.
The reserve is considered a guarantee of future water quality, a refuge for wildlife including the endangered Sumatran tiger and a business opportunity for local communities to reduce illegal and unsustainable activities.