Indonesia needs to refine forest-CO2 rules: lawyers

Mon Sep 7, 2009 8:08am EDT

By Sunanda Creagh JAKARTA, Sept 7 (Reuters)h

Confusing and conflicting regulations are scaring away investors from Indonesia's fledgling forest carbon credit scheme aimed at curbing deforestation, lawyers said on Monday. A U.N.-backed scheme called reduced emissions from deforestation and degradation (REDD) could potentially unlock billions of dollars in annual carbon credit sales for developing nations that protect their forests from illegal logging and other threats.Indonesia in May became the first country to issue a legal framework for REDD, anticipating the scheme's inclusion in a broader U.N. climate pact during a major gathering in Copenhagen this year.However, project developers will struggle for up to five years to attract necessary volumes of private investment to sustain REDD projects without public funding, said Martijn Wilder, a partner at Baker & McKenzie."We are probably three, four or five years away in terms of having a really significant liquid private sector market so the issue is how do we fund it at the moment," he told a forum of REDD project developers and policy-makers in Jakarta on Monday."There is direct funding from governments such as Norway or through the World Bank, but the key issue is how much do we rely on public sector financing or on private sector financing," said Wilder, head of Baker & McKenzie's global climate change and emissions trading practice.Deforestation is responsible for nearly 20 percent of mankind's greenhouse gas emissions.The United Nations, World Bank and numerous governments back REDD projects in developing nations that halt forest loss and pay local communities compensation as well as help them develop alternative livelihoods.In return, rich nations and companies can buy REDD carbon offsets to meet their emissions obligations at home. A U.N.-backed market, though, will only come into force from 2013 if there's a global climate pact and the infant sector is presently supported by the voluntary carbon offset market and donor funding.OVERLAPLuke Devine, a foreign consultant from Hadiputranto, Hadinoto and Partners and a specialist on Indonesia's REDD regulations said the Ministry of Forestry had issued two sets of conflicting regulations that nevertheless have some areas of overlap, creating uncertainty for project developers."Until there's certainty about these issues -- of land tenure, what concession do I have, who is supposed to issue the concession, how long can it be issued for, what's the revenue sharing arrangement -- until these issues are finally determined it is going to be very, very difficult to get access to that private sector financing because it will be a very high-risk investment for investors," he said.Forestry Minister H.M.S. Kaban told Monday's forum that the government was finalising a national strategy on REDD for 2012 and called for patience from project developers.Doddy S. Sukadri, an official from the National Council for Climate Change, asked investors to remember that the legal framework is a work in progress."If someone said that some of the decrees are not matching, I think that's normal. All this will be revisited but at least this is a reflection from the Ministry of Forestry that they are doing something and no other country is doing something," he said. (Editing by David Fogarty)