ON Sept 21, the World Economic Forum (WEF) and Peatland Restoration Agency (PRA) of Indonesia organised a Peatland Investment Dialogue to discuss a potential business opportunity for the private sector, where companies are urged to invest in the national effort to restore 2,000,000ha of degraded peatland. The restoration is a comprehensive effort to repair the peatland’s hydrological and vegetation condition and revive its primary ecosystem function.
Peatland restoration is an important key to achieving a haze-free Asean by 2020. The approach requires not only a high political pledge and harmonious policies, but also financial commitment and the participation of non-state actors, including the private sector through mobilisation of financial support and investment.
According to the Centre for International Forestry Research, restoration of a hectare of degraded peatland costs around US$2,500 (RM10,500). The PRA states that around US$11.2 billion is needed to restore 2,000,000ha of degraded peatland in the next five years. Making infrastructure development the top priority, the Government of Indonesia has to limit state budget allocation for other sectors, including for environment and forest management. This is where private financing is expected to close the gap, not only to achieve the imperative 2,000,000ha target in Indonesia but also to cover a wider landscape of degraded peatlands in Southeast Asia that in 2006 alone had reached 12,000,000ha.
In addition, the call for private sector contribution is also driven by the public’s desire to hold corporations, especially plantation-based companies, responsible for causing the haze crisis. Companies’ mismanagement and illegal clearing of forests and peatland by drying and burning have been identified as the primary cause of the annual haze in the region.
Based on McFarland’s (2015) analysis and lessons learnt from forest carbon projects in Southeast Asia, particularly in Indonesia, the private sector can participate in peatland restoration financing through four avenues.
First, by developing peatland restoration projects, using the concession for ecosystem restoration (RE). The permit will give the private sector the legal right to manage and use the peatland for environmental or forest carbon project. There is, however, the concern on the complexities of obtaining the RE concession, as it is still a system ridden with rent-seeking practices by corrupt government officials.
Second, the private sector can provide funds to nonprofit organisations, such as those involved in environmental issues, to develop peatland restoration projects.
Third, the private sector can commit to a dedicated fund for peatland restoration and implement sustainable management practices on the concessions that they hold. And the private sector can play the role of carbon offset buyers or fund environmental services project.
There is high expectation in private financing as a mechanism to fund climate change mitigation projects and to stimulate the green economy. However, there is a huge difference between what is expected and the actual financing commitment made. The WEF calculates that by 2020 the world needs to shift US$5 trillion worth of business-as-usual practices into low-carbon-investments. Reports from the United Nations Framework Convention on Climate Change (UNFCCC) shows only 46 per cent of total investment required for climate mitigation were channelled to developing countries annually.
Countries in Southeast Asia suffer from common problems such as unclear spatial planning where there is no clarity in land and forest-zoning system. The Indonesian government has tried to address this through the One Map Policy. A Presidential Instruction supports the policy by giving mandates to various ministries to work together to produce common spatial data. The clarity over spatial planning will provide legal certainty required for the green economy investment to thrive. The next step will be to address social conflicts due to overlapping claims on land with a long history of unequal land struggles between states in the region and marginalised indigenous communities.
The second biggest challenge is weak law enforcement and corruption in the forestry sector. The high rate of deforestation and peatland degradation in the region has been linked to illegal business practices facilitated by corrupt officials. A stronger effort has to be initiated at the national level to reinforce the legal system.
The Indonesian government has started to introduce a multi-door approach, a platform to prevent and apprehend environmental offenders by ensuring that they are held accountable, not only for the environmental degradation caused, but also subjected to investigation based on other laws, such as on money laundering. This approach is expected to adequately punish environmental offenders and reduce the rate of deforestation and peatland fires.
The Indonesian government has also imposed a moratorium on the opening of new plantations and mining sites on peatland until May next year. This will provide time to review private concessions and land disputes and resolve the political economic problems.