Palming off climate responsibility

Indonesia has one of the world’s largest rainforest areas, but the asset is under threat from the country's lucrative palm oil sector.


East Asia Forum

Climate change poses a grave threat to Indonesia’s nature-based economy, including its land-use and forestry sector. But it is also likely to provide good opportunities, especially in the incentives created to support the overall REDD program (Reducing Emissions from Deforestation and Forest Degradation plus) in Indonesia.

Based on the projections of the Intergovernmental Panel on Climate Change in its Fourth Assessment Report, a tropical nation like Indonesia is likely to experience an increase in temperature, resulting in adverse effects on vulnerable terrestrial ecosystems, biodiversity and forest-dependent people.

This includes an increase in the intensity and frequency of droughts, flooding, forest and land fires and trans-boundary haze, adding to the already severe existing environmental disasters that are a result of continuous deforestation and forest degradation.

Indonesia, therefore, has a significant stake in ensuring that global negotiations on climate change produce a credible agreed instrument, applicable to all countries, that stabilises and eventually reduces the concentration of greenhouse gas emissions in the atmosphere.

It is also crucial that Indonesia opt for a policy or approach that not only safeguards it against the threat that climate change poses to its economic development, but for one that offers it a chance to seize the economic opportunity that climate change presents, such as from REDD .

Indonesia needs to grow its economy, alleviate poverty and increase the employment rate, all the while protecting the environment and contributing to climate change mitigation. Therefore it is imperative for the country to decouple its economic growth from GHG emissions.

In the land use and forestry sector, adopting such an approach means that Indonesia needs to find a policy that allows a balancing act. Using the country’s forests as an engine of economic growth must be sustainable, which means that addressing deforestation and peat cover loss needs to be at the centre of Indonesia’s development policies and programs.

Indonesia has one of the world’s largest rainforest areas. In 2009, data from the Indonesian Forestry Ministry and the Centre for International Forestry Research showed that Indonesia had 132.4 million hectares of forest area, and that of these only 90.1 million hectares were covered by forest vegetation.

The same data revealed that forest areas covered 71 per cent of the total land area; of this roughly one-third was covered by primary forests, one-third by logged-over areas and one-third by vegetation other than forests.

With regards to peat lands, the Indonesian government’s National Working Group on Peatland Management estimated that in 2006 Indonesia had around 20 million hectares of peat lands or 50 per cent of the world’s total tropical peat lands, distributed mainly in Sumatra, Kalimantan and Papua.

Forests have long served as a source of economic growth. Commercial exploitation of natural forests began in 1967 and was one of the main drivers of the Indonesian economy from the 1980s to 1990s. During these periods, Indonesia secured a substantial global market share in tropical timber products through its exports of logs, sawn timber, plywood and other timber products.

The Forestry Ministry has recorded that the export value of forestry products in 2006 reached $US6 billion in 1999 (about 16 per cent of the value of total non-oil and gas exports) and $US6.6 billion in 2003, having increased from about $US1.2 billion in 1985.

Accelerated development activities in the forestry sector, however, have been perceived as directly linked to forest cover loss. A 2008 study by a team from Utrecht University argued that the loss is mainly due to logging (timber extraction). This practice, for instance, often leads to opening up previously unexploited forests (‘primary’ or ‘virgin’ forests), leading to further forest degradation and outright deforestation.

The gradual reduction of forest areas also contributes to the decline in the forestry sector’s proportional contribution to the country’s GDP. When forested areas are lost, other commercial activities in the land-use sector, especially estate crops development, take over.

As a result, over the past two decades estate crops, mainly palm oil, have emerged as one of the most significant contributors to Indonesia’s economy, topped only by oil, gas and mineral products.

In 2009, Indonesia surpassed Malaysia to become the world’s biggest palm oil producer, following big increases in production in recent decades. The change is relatively dramatic: in 1967 Indonesia’s production of crude palm oil was 105,900 tons, increasing to 6.4 million tonnes in 1999, as reported by the Directorate General of Estate Crops. By 2010, production had soared to 19.8 million tons.

This growth has been marked by the expansion of plantation areas and has been followed by an equivalent expansion in Indonesia’s crude palm oil exports and revenues. These have increased significantly in recent decades, from 3.8 million tonnes (valued at $US1 billion) in 1999 to 17.85 million tonnes in 2010 ($US10.03 billion), according to the same report. The report reveals that Indonesia also possesses the largest area of land in palm oil plantations in the world – about 7.8 million hectares in 2010.

Rapid expansion of palm oil plantations has contributed to the conversion of a significant area of forests and peat lands. Several studies argue that palm oil is the greatest immediate threat to biodiversity, forests and peat swamps in Southeast Asia.

Sustaining the management of large remaining forests and peat lands, and protecting or conserving these areas, requires strong political will, policy transformation, institutional reforms, innovative economic instruments and behavioural changes.

In a big, democratic and decentralised country such as Indonesia, this means the government needs all the support it can get to ensure that the desired changes take place on the ground. That support is needed particularly from local governments and sectoral ministries as well as local communities and the private sector.

Hence an institution like the new national REDD agency, introduced by President Yudhoyono, is confronted by a huge task, particularly in being seen to be inclusive, taking into account the voices of both the winners and losers from REDD policies. It must also demonstrate its integrity in carrying out its policies, ensuring the conservation and sustainable management of forests and peat lands. If this does not happen, the development of REDD may not yield an effective outcome. This will undermine the country’s overall climate change mitigation and adaptation programs, and weaken future efforts to save Indonesia’s remaining forests.

With the 2014 general election not far away, issues of climate change mitigation and forest protection should be in the mainstream economic debate. Potential Indonesian leaders and the public should be reminded that this archipelago’s economy could be in jeopardy if responsible development is not chosen by the present and future government.

Fitrian Ardiansyah is a PhD scholar at the Australian National University and the recipient of Australian Leadership Award and Allison Sudradjat Award.

This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘Indonesia’s choices‘.