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Q+A-Indonesia issues draft rules on forest clearing

Friday, July 09, 2010

Press release from the issuing company

Jakarta - Indonesia has drafted rules for a two-year ban on permits for forest clearing, after signing a $1 billion climate aid deal with Norway aimed at avoiding greenhouse gas emissions from deforestation.

The plan has implications for resource firms looking to expand in the world's largest producer of thermal coal and palm oil, such as Wilmar, Indofood Agri Resources and Bumi Resources.

Here are some questions and answers on the draft rules:

The moratorium is expected to take effect in January. Several draft presidential decrees to implement the plan have been prepared. They will not need to be passed by Indonesia's parliament, home to vested interests.

Political risk analyst Kevin O'Rourke said the draft decree on peatlands said the moratorium could be applied for five years.

One of the draft decrees states a two-year moratorium on new permits and permit extensions will apply to converting peatland, natural forest, conversion forest, protected forest, production forest, and production forest that is convertible and "outside (these) areas".

Existing permit holders for natural forests will be required to "apply environmentally friendly technical management practices".

The decree states that permits to convert peatland and natural forests that have already been issued will continue to be valid but another section says: "There will be an assessment of the economic impact and revocation of permission to convert peatland and cessation of issuing new permits."

"Permits that have already been issued in peatlands with big potential for greenhouse gas emissions will possibly be compensated in accordance with the land area size allocated," the decree states, leaving uncertainty for existing permit holders.

In May, an official said there may be compensation for permit holders whose licences had been revoked.

Former environment minister Emil Salim -- who helped write one of the draft decrees -- said the government would encourage holders of existing permits in primary forest areas or deep peatlands to swap to degraded land.

"We cannot force them to move," he told Reuters, but added that uncooperative firms could face a social backlash.

The decree also says there will be research on opportunities for revenue and trade in carbon credits from protecting peatlands. It is not clear who would get these revenues.

One of the draft presidential decrees says projects of national significance "such as geothermal, oil and natural gas" will be exempt from the moratorium. Salim said the exemption did not apply to mining.




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