INTERVIEW - Degraded land rules key to Indonesia climate goal

SINGAPORE Wed Jun 23, 2010 3:28pm IST

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SINGAPORE (Reuters) - Indonesia needs to quickly settle rules for deciding what is degraded land and spell out how much is available to palm oil and timber firms in order to strengthen investment certainty, an environmental expert says.

Such a move would also boost a $1-billion climate deal signed last month by Indonesia and Norway.

The deal involves a two-year moratorium from January 2011 on conversion of natural forests and peat land with the intent of using degraded land to allow Indonesia's multi-billion dollar palm oil industry to keep expanding.

The deal is a key part of Indonesia's pledge to slam the brakes on greenhouse gas emissions from deforestation and forest fires in order to fight climate change.

Indonesia has no formal definition of degraded land, however.

"If you read different reports you get different estimates, varying from 6 to 76 million hectares (15 million to 190 million acres). People are talking about different things," said Moray McLeish of the World Resources Institute, an environment think tank based in Washington.

McLeish is manager of Project POTICO (Palm Oil, Timber and Carbon Offsets), a WRI project designed to switch planned palm oil plantations in Indonesia from forests to degraded land.

He said a definition of degraded land should encompass environmental, economic, social and legal factors as well as the creation of a database of degraded land.

"This will offer certainty to the industry for it's expansion plans," he told Reuters in an e-mail message.

About 75 percent of Indonesia's land is legally, centrally controlled forest estates, McLeish said, despite parts of it now being devoid of trees, with little prospect of natural recovery.

A key question now is whether the Ministry of Forestry will release degraded areas of forest estate for agricultural use.

"This implies a change from business as usual and is a key opportunity for demonstrating government commitment to the spirit of the Norway deal," McLeish said.

THREAT TO FIRMS' LANDBANKS?

The palm oil industry, dominated by the likes of Singapore's Wilmar, Malaysia's Sime Darby and IOI Corp, is worried, as players have built up large landbanks.

And many planters, foreign and Indonesian, have been given licences prior to the climate deal to clear forested land.

The government is talking about swapping forest concessions with degraded land or compensating concession owners to keep intact the remaining forest and peatlands.

"Some plantation companies may take the Indonesian government to court if their landbanks are taken away from them. And a land swap will never be in the interest of the companies," said a Malaysian planter who has expanded into West Kalimantan.

"We may end up getting less fertile land or land located further away from the majority of our plantations," added the planter, who did not want to be identified because of the sensitivity of the situation.

Palm oil plantations sprawl over about 7 million ha in Indonesia, producing about 20 million tonnes a year.

The government says the goal is to double palm oil output but green groups and other governments criticise the industry for driving deforestation.

"If the goal is expansion for a sustainable palm oil industry we should not just talk about land that is biophysically degraded -- deforested and unlikely to recover," said McLeish, adding that about half the land now under palm oil used to be forested.

"We should also ask is this land economically viable for palm oil, is a new plantation acceptable and beneficial to local people and is the land available from a legal point of view?"

Project POTICO has been leading a group of people to come together to define degraded land and then try to map it.

He said there were good chances of success in shifting development on to degraded land from next January, but those for land swaps were less clear.

Plantation firms had no reason to object to getting concessions on degraded land, he added. "Our experience in the field indicates there are degraded lands that are suitable, viable, acceptable and available for palm oil expansion."

(Additional reporting by Niluski Koswanage in Kuala Lumpur; Editing by Clarence Fernandez)

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