Indonesian forest law misjudges the climate

"May you live in interesting time" is said to be an ancient Chinese proverb and subtle curse. Whatever its origins, there’s no doubt these are interesting times for anyone engaged in environmental public policy-making. Especially when it involves Indonesia, forests and climate change.

A case in point is the unusually assertive debate sorrounding the government’s recent rulings on non-forest revenue derived from state forest lands.

The regulation (PP No. 2/2008) has caused a mild uproar among civil society and academia and earned the wrath of local governments. It’s heartening to see such vigorous debate in a young democracy, especially when the demands to revoke the law are coming from the general public as well as experts who know the finer details.

Regulation No. 2/2008 was meant to determine non-tax government revenue for non-forestry activities on state forest lands. For example, open mining in "protection forests" and highway construction in "protection forests" were set to be taxed Rp 1.2 to Rp 3 million (US$120-$300) per hectare per annum.

The public outcry was inevitable. And it was no surprise to see the government quickly explain the regulation was not designed to target people going about their daily livelihoods, but rather the large-scale activities of 13 large mining companies operating in protection forests. However, in so doing, it also placed an onerous tax on essential infrastructure development by local governments, including highway building.

The law was launched only two months after the highly political discussions concerning forests at the UN Climate Change Conference in Bali. Delegates from more than 180 countries agreed at the convention that emissions reductions from deforestation and forest degradation were among the most cost-effective measures for mitigating climate change.

The upshot is delegates at the convention agreed payments to developing countries to reduce emissions from deforestation and forest degradation (REDD) should be part of any future revision to the Kyoto Protocol. Given forest loss and degradation account for 20 percent of global carbon emissions, environmental policy decisions that affect forests are going to attract more not less attention, as we are seeing so vividly right now.

Developing countries that harbor tropical forests, like Indonesia, could possibly implement, and financially benefit from, REDD schemes, provided they can demonstrate accountability and legitimacy.

Accountability is little more than a technical issue, relating to the ability of host countries to collect and monitor quality data. Legitimacy, on the other hand, is in no way a technical trifle. Legitimacy in this case is all about political will: the courage and preparedness of a government to avoid further deforestation.

The general public, practitioners and investors are on a steep learning curve as they grapple with the nitty-gritty details of REDD and its expected introduction once the current Kyoto Protocol expires in 2012. Before the Bali convention, many people in Indonesia believed they would get through the next five years on autopilot. But such tranquil notions have been completely rocked by the disputed regulation.

The new regulation sends the wrong message to the public. Their trust is eroded. As for potential investors, the law has created even more uncertainties, making REDD in Indonesia less attractive. REDD is about incentives to preserve, while Regulation No. 2/2008 is about permits to destroy.

The new regulation’s terms covering infrastructure development, among others, provide loopholes that are an open invitation to violate the law.

Indonesia’s international friends, including its fellow 11 Rainforest Coalition countries, may be confused by the decision. But of course, revoking the regulation, as demanded within Indonesia, could be politically embarrassing and leave unresolved the original aim of tackling issues surrounding mining companies on protected lands.

Nevertheless, something must be done.

Charging forest rent of not more than $300/ha/annum (Rp 3 million) as stipulated in the regulation is roughly equivalent to $1 per ton of carbon at the most. This is comparable to the certified emission reduction market price of the clean development mechanism but could potentially create perverse incentives, as environmental services are free. Such a policy would harm the rural poor and forest-dependent communities whose livelihoods rely to varying degrees on these free services.

One way of dealing with such negative impacts would be to charge large companies more for the environmental services they use. However, given Indonesia is not renowned for its transparency, there is no guarantee additional charges will be used properly and go to the poor forest dwellers unless civil society is involved. No matter the cost, public trust needs to be restored.

If designed well, the socioeconomic benefits of REDD are beyond carbon and can be exponentially huge. This can be arranged to create close links with the poor rural livelihoods strongly reliant on free access to forest goods and services. To commit to this now gives Indonesia five years for a pilot scheme, during which time the activities would have to be subject to public scrutiny.

For Indonesia, hosting the recent UN Climate Conference has had a tremendous impact in terms of public awareness. Such huge social capital should not be wasted. The public’s eyes are now wide open to any public policy that could potentially erode their interests.

The momentum gained from Bali should be used to guide the development and implementation of REDD, which is still in its infancy. No solution is perfect unless every stakeholder has room to participate and it is in their interest to improve it rather than to destroy it. Remember, 2012 is not that far away, and the times between now and then are sure to be interesting.

The writer is senior scientist at the Center for International Forestry Research (CIFOR), Bogor