Indonesia's peatlands may offer U.S. firms global warming offsets

Indonesia's peatlands may offer U.S. firms global warming offsets
How to Convince a Company to Protect Peatlands and Climate
Rhett A. Butler, mongabay.com
August 29, 2007

The following is modified version of a letter I've used to pitch U.S. companies on the concept of carbon finance in Indonesia's peatlands. Discussions are slow and the critical December U.N. climate meeting is fast approaching, so I'm posting this as a tool to help you get American firms interested in avoided deforestation offsets. Please feel free to use, modify, and distribute this letter widely.

Indonesia's peatlands as carbon offsets

Climate change presents serious risks to Indonesia, including drought, flood, and sea-level rise. However proposed mechanisms for addressing climate change, notably carbon credits, offer an unparalleled economic opportunity for the country. It's time for Indonesia and other countries that will bear the brunt of climate change to reap some of the rewards of their valuable ecosystems.

Indonesia: peat swamps and carbon emissions

Peat swamps in Indonesia store large amounts of carbon. The destruction and degradation of peat swamps is estimated to release 2 billion tons of carbon -- about 8 percent of global emissions -- each year, according to Wetlands International. Much of this destruction is caused by conversion for oil palm plantations which produce palm oil, increasingly used as a biofuel. While oil palm can be grown sustainably, this is rarely the case in Indonesia, where Wetlands International estimates that production of one metric ton of palm oil will result in an average emission of 20 tons of carbon dioxide from peat decomposition alone, not including emissions resulting from production or combustion. Oil palm plantations have also been linked to social injustices like debt bondage. Nevertheless, oil palm plantations are presently the best economic option for much of rural Indonesia.

Avoided deforestation

Carbon finance could change all this. Preliminary work suggests that carbon offsets through "avoided deforestation" mechanisms -- whereby landowners and communities receive payments for preserving ecosystems that would otherwise be converted -- could generate income comparable to that of oil palm plantations. The potential benefits are numerous:

forests are protected, emissions are offset
ancillary benefits of preserving biodiversity (i.e. orangutans live in peat forests), watersheds, and other ecosystem services (some of which may also result in payments for landowners in the future)
protects "option" value of forests
allows landowners to pursue other sources of income including ecotourism and sustainable collection of non-wood forest products (i.e. rattan, nuts, fruit)
helps Indonesia diversify its economy and reduce risk of "palm oil price shock"

A number of prominent scientists support "avoided deforestation". The U.N., World Bank, and Indonesian government have also expressed optimism about the concept.

Orangutan in Kalimantan (Indonesian Borneo). By Rhett A. Butler

There are currently no offset programs for Indonesia's peatlands. There is a lack of leadership and lack of understanding about the mechanisms. However the carbon market is real (even in the U.S. where carbon is traded on the Chicago Climate Exchange (CCX)) and it is likely that avoided deforestation will be incorporated as an emissions offset during the next UN round, especially if projects are proving that it is viable. An important climate meeting is scheduled for Bali, Indonesia in December. This could be an ideal forum for show-casing Indonesia's successful development of carbon finance mechanisms. Done properly, the carbon market could increase transparency for Indonesia, boost tax revenue, and improve the livelihood of rural populations, some of whom are among the poorest in the world.

How Company X can be involved

Indonesia is one of the most populous countries on Earth. Its population is young and Internet use is growing.

Through successful pioneering of a carbon finance program (an initiative that could eventually bring billions of dollars a year to the country), Company X could be known as the mover who made the concept happen, establishing a solid basis for its brand. Importantly, with a relatively small commitment, financial or technical, Company X could trigger a movement that helps alleviate poverty, improve health, fight climate change, end "haze" pollution, and conserve resources and biological diversity.

Other potential benefits to Company X

Company X establishes itself as a leader in carbon finance tied to poverty alleviation
Company X diversifies its carbon offset portfolio at a relatively low cost (perhaps offset a small office or data center)
Tie-ins with rural health (malaria, dengue, dysentery all major problems in Borneo) and biodiversity conservation (orangutan, Sumatran rhino, proboscis monkey)

How it would work

If Company X were interested in financial involvement, buying carbon offsets in Indonesia via the Chicago Climate Exchange would be one possibility -- details can be developed. The beneficiaries would be global climate and Indonesia's forests and people. The opportunity does not stop with Indonesia. Avoided deforestation is applicable in any tropical country where deforestation is occurring.

Seriously interested corporate parties can contact Rhett A. Butler at mongabay.com for more information. Rhett does not have any financial interest in this effort but can help connect interested parties -- serious inquires only please -- to contacts working on these issues in Indonesia. Beyond the initial introduction, Rhett would not be involved in the process.

Alternatively, interested parties can do research on avoided deforestation and look for potential deals with landholders in Indonesia. Prior to entering into any agreements, beware that official mechanisms for avoided deforestation offsets have yet to be established (as of August 29, 2007) under any regulatory framework.

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