INNOVATIONS FOR FINANCING WISE USE OF PEATLANDS IN INDONESIA. Marcel Silvius. Wetlands International, Wageningen, The Netherlands

Transcription

1 INNOVATIONS FOR FINANCING WISE USE OF PEATLANDS IN INDONESIA Marcel Silvius Wetlands International, Wageningen, The Netherlands ABSTRACT In December 2006, Delft Hydraulics and Wetlands International s Peat CO2 report reported an average annual emission of 2000 million tonnes of CO2 emissions from the degradation of peat swamp forests areas in South-east Asia, and particularly Indonesia (Hooijer et al 2006). The data put Indonesia in the third place of global carbon emitters. This created much discussion among policy makers, scientists and in the press, both nationally and internationally, which contributed to a tremendous increase of awareness on the issue. The paper presents a new overview of Land Use and Land Use Change and Forests emissions, incorporating data from the recently published Assessment on Peatlands, Biodiversity and Climate Change (Parish et al, 2008). At UNFCCC CoP 13 several new initiatives were launched, including new funding mechanisms such as Reducing Emissions from Deforestation and Degradation (REDD), which focuses on a national "wall to wall" approach for reducing emissions from deforestation. This approach may provide a solution for remaining peat swamp forests, but it requires a sound baseline and complex and thorough monitoring schemes that will be difficult to establish and accomplish in Indonesia with its mega biodiversity, complex socio-economic problems and decentralised planning and decision making. Capacity needs to be build for managing and guiding the required databases and monitoring processes. In addition, the system can only work if it can effectively remove the root causes of the problem, which includes poverty. It is therefore important that communities and their sustainable development are made part of the solution. Questions have been raised whether or not deforested peatlands can benefit from the REDD mechanism, as the REDD resolution refers specifically to forests and forest carbon stocks. Remaining peat-based carbon stocks are after deforestation no longer associated with forests and therefore may not be considered forest carbon stocks anymore. An interpretation is provided of the UNFCCC definition of what constitutes a forest that shed some new light on this. However, non-forest peatlands clearly fall outside of the REDD scheme. It is argued that the Climate Convention can not seriously ignore the largest carbon stock in the world, and solutions possibly even the most cost effective climate change mitigation opportunity should not be hampered by legalistic constraints. The paper also mentions an alternative and private sector based mechanism: the Global Peatland Fund (GPF). It was launched by Wetlands International in partnership with BioX at the UNFCCC CoP 13 in Bali. The GPF will use a project by project approach, focusing on peatlands and supporting actions by local stakeholders, including communities, NGOs, private sector and local government. It will generate VERs, for sale on the international carbon market to generate a sustainable financing flow for peatland conservation and restoration. This paper provides information on these different approaches and analyses their limitations and opportunities

2 Peat-CO 2 : Since publication of the PEAT-CO 2 Report by Wetlands International, Delft Hydraulics and Alterra Wageningen University (Hooijer et al 2006), there has been much discussion regarding the extraordinary carbon emissions that are derived from the degraded tropical peatlands in South-east Asia. Especially the fact that the peat emissions place Indonesia in the top-five CO 2 emitters in the world contributed tremendously to awareness on the issue, both nationally, in South-east Asia and internationally. Over 13 million ha of peatlands have been deforested and drained in Indonesia and Malaysia, covering less than 0.1% of the global land surface but contributing annually an estimated minimum of 2000 million tonnes CO 2 (0.56Gt C/yr), or an equivalent of 8% of global fossil fuel emissions. This estimate includes an assessment of average annual CO 2 emissions derived from drainage and oxidation, which amounts to 632 Mt CO 2, and an average minimum estimate of 1400 MtCO 2 from fires (based on data from 10 years) (Hooijer et al 2006). Over 90% can be contributed to peatlands in Indonesia. There are various reasons why peat emissions could reach in Indonesia such a magnitude, which relates to the rapid oxidation of the organic peat material under tropical conditions, the vast extent of peat swamp forests, the tremendous impacts over the last decennia from logging and transmigration projects that opened up and drained millions of hectares for agriculture, as well as new drivers of deforestation such as palm oil and pulp plantation developments. The transmigration schemes and agricultural development on peatland often failed and created millions of hectares of idle and degraded land. However, the new drivers - while perhaps environmentally not sustainable - are often economically successful and provide significant prospects for local entrepreneurs and government. An other reason for the demise of the South-east Asian peatlands relates to lack of awareness and knowledge in the region on the vulnerable eco-hydrology of peatlands and the related special management requirements. On top of that, Indonesia has gone through a rapid process of decentralisation of land use planning and development. Where capacity for science-based development of peatlands was limited at national level, such capacity was virtually absent at local levels. As peat swamps often were the last remaining vast stretches of lowland forest under government jurisdiction, they became the predominant habitat to be allocated to prospective concessionaires. These developments still continue. The rate of deforestation of tropical peat swamp forest has been 1.5% per annum since 2000, which is twice the rate of deforestation of other forest habitats. As the remaining peat swamp forests provide the easiest and quickest option for creating large and contiguous estates, over 50% of newly planned palm oil plantations are allocated on peat (Sargeant 2001), often on deep peat. The millions of ha of degraded idle lands in Indonesia, often referred to as Alang-alang fields for the grass species that tends to dominate these areas, are much less of interest to the plantation developers as they come with land tenure issues that take many years to sort out. In addition, the remaining peat swamp forests still have considerable timber resources that provide a welcome start capital or wind fall for the developers. Also smallholder estates are often developed on peat, replacing the remaining peat swamp forests. Areas on the fertile alluvial soils along the rivers have generally already been developed, but the potential to grow a successful palm oil crop on peat is now opening up the possibility to extend in a profitable way beyond the alluvial soil boundary. A lot of these peat swamp forest areas can be claimed as community land according to local adat customs. As the local communities, have no access to heavy equipment, the smallholder developments come with another major threat to the peat carbon stocks: Fire. The communities have little option but to clear the land with fire, which is generally repeated for several years before the oil palms are planted. Also large plantation development often goes hand-in-hand with use of fire. This form of land preparation contributes high amounts of CO 2 and creates also for huge risks of uncontrolled fires in adjacent often still forested and sometimes protected peat areas. It is rather cynical that much of the palm oil boost is related to the expected surging international biofuel market, including recent European policies for adding biofuels to diesel and subsidies for use of palmoil for Green Energy production. Too few planners and policy makers realise or are willing to accept the fact that development of palm oil on peat will lead

3 to substantially increased emissions (Silvius 2007). Most policy and decision makers seem to be unaware of the fact that, unfortunately, the drainage of peatlands for growing useful plantation crops such as oil palm, Acacia pulp or rubber inevitably also contributes to peat soil subsidence and substantial CO 2 emissions, and may impact on areas far beyond the specific project boundaries. LULUCF However, not only in South-east Asia are peatlands threatened and contributing to climate change. The recent publication of the UNEP-GEF Assessment on Peatlands, Biodiversity and Climate Change (Parish et al, 2008) has shed further light and has further raised the interest in the role of peatlands in relation to GHG accounting globally, as well their role in preserving biodiversity and their importance for local economies. The Assessment mentions that peatlands globally store twice the amount of carbon as found in the world s forests. The report presents an estimate of the whole global amount of drainage related peat carbon emissions of 0.9 GtC/yr (or 3.3 Gt of CO 2 annually), which means that besides the peat based emissions in South-east Asia another 0.34 Gt C/yr is emitted by other peatlands world wide. A review of the main publications on GHG emissions from land-use change and deforestation (Achard et al 2004, Canadell et al 2007, De Fries et al 2002, Fearnside 2000, Houghton 2003, IPCC 2001) shows that these exclude data and information from recent publications on peat degradation related emissions ( Page 2002, Schimel and Baker 2002 and Hooijer et al 2006 ). While there is largely agreement that land-use change and deforestation results in carbon emissions equivalent to 22% of global fossil fuel emissions, this estimate does not include peat based emissions (Dobmeijer et al, in press). If peat-based emissions are included in this equation, the LULUCF, including deforestation and peat based emissions amount to an equivalent of 35% of global fossil fuel emissions, with land-use change and deforestation covering 22%, SE Asian peat based emissions 8% and emissions from other peatlands 5%. If shown as a relative contribution to total global carbon emissions, the full LULUCF (including deforestation and peat-based emissions) will cover 26% (fig 1), with peat-based emissions covering 9.3% of global emissions. It is also apparent that global peatland emissions are a considerable source compared to other LULUCF emissions, and contribute an equivalent of 36% of total LULUCF. This is especially noteworthy if we consider that only 3% of the global land surface is covered by peatlands. South-east Asia s degrading peatlands cover about 13 million ha, or less than 0.1% of the global land surface; yet they are contributing 30% of global LULUCF related emissions. 16.5% 5.8% 3.5% 74.2% Global fossil fuel emissions Land-use change & deforestation (1990s) from IPCC SE Asian peat (fires + drainage) Carbon emissions from other peatland degradation Figure 1: Relative contribution of fossil fuel combustion, land-use change and deforestation, South-east Asian peatland degradation and degradation of peatlands in other regions to global carbon emissions.

4 REDD: The huge contribution and relative concentrated area of degraded peatlands in South-east Asia, and particularly Indonesia, makes them one of the lowest hanging fruits in terms of priorities for climate change mitigation. One would expect that this would not go unnoticed by the climate convention UNFCCC and that the mechanisms that are being put in place in support of addressing LULUCF for climate change mitigation would specifically incorporate options for these peatlands. This is, unfortunately, not the case. The REDD Resolution refers to forests and forest carbon stocks only, and nowhere to peatlands, despite the fact that they represent the largest carbon store of the world (Parish et al 2008) and are rapidly degrading. Still this newly emerging funding mechanism may offer options for various pilot schemes in degraded peat swamp forest areas, including the option of carbon fund payments to national & local governments which need to be based on a national baseline monitoring, and the option for payments to private and community stakeholders and beneficiaries for their environmental services. As peatlands cut across all forest management, conservation and land use (production, industrial and agricultural crops) types, maintaining the welfare of traditional local communities in peat swamp forests regions is seen as a major concern of the donor community, and currently a variety of donors, including the Netherlands, Norway, Australia, Germany and the World Bank have indicated interest to finance REDD pilot initiatives in Indonesian peat swamp forests and degraded peatlands. Particularly deforested and drained tropical peatlands have high CO 2 emissions, in the order of 90 tonnes/ha per year at 1 meter drainage levels (Wösten et al 1997; Wösten and Ritzema 2001). In many of the Indonesian degraded peatlands the drainage levels reach well over 1 meter, often up to 2 or 3 meters. Restoration of an area of 100,000 ha could thus result in over 10 Mt CO 2 per year, not taking into account reduced emissions resulting from fire prevention and control. The donors and scientists are, however, struggling with the development of methods and mechanisms that can result in accredited CO 2 emission reductions and that can link carbon financing to biodiversity conservation and poverty reduction. There are no long-term emissions data series from peatlands in various stages of deforestation, drainage and development, and the irregular nature of fire occurrence makes it difficult to establish a proper baseline. Although the interrelationships between drainage, CO2 emissions and fire hazards are relatively clear (Wösten et al 2006), the accuracy of baselines and monitoring data needed for current development of VERs from reduced emissions of peatlands is lacking. This issue needs to be urgently addressed as a research priority. Eligibility of deforested peat swamp forest areas: Whether or not a deforested peat swamp forests area can be eligible for REDD funding with the current REDD ( resolution depends on the definition of two items: 1. What is a forest: Defined under the Kyoto Protocol as: A minimum area of land of ha with tree-crown cover (or equivalent stocking level) of more than % with trees with the potential to reach a minimum height of 2-5 m at maturity in situ. A forest may consist either of closed forest formations where trees of various storey and undergrowth cover a high proportion of the ground or of open forest. Young natural stands and all plantations that have yet to reach a crown density of % or tree height of 2-5 m are included under forest, as are areas normally forming part of the forest area that are temporarily un-stocked as a result of human intervention such as harvesting or natural causes but which are expected to revert to forest What constitutes a forest carbon stock: The REDD resolution specifically refers to forests and forest carbon stocks. A definition of the latter has not yet been developed, but it is generally accepted that this includes the below-ground carbon, such as peat. This is underpinned by the fact that the REDD resolution refers in clause 6 to:

5 "Parties not included in Annex I to the Convention are encouraged to apply the Good Practice Guidance for Land Use, Land-Use Change and Forestry". ( These guidelines include for forest land (Annex 1 table 5a) under the implied emission factors: the net carbon stock change in soils per area. Question is if this forest carbon stock suddenly stops being a forest carbon stock when the forest cover is removed. The REDD resolution does not clarify how it should be associated. Most logical would seem that there should be an ecological connection, but should this be current or historical - and if the latter, what is the time limit? The definition of forest does shed some light on this where it includes "areas normally forming part of the forest area that are temporarily un-stocked as a result of human intervention such as harvesting or natural causes but which are expected to revert to forest". In addition it includes "Young natural stands and all plantations that have yet to reach a crown density of % or tree height of 2-5 m are included under forest" In many of the degraded idle peatland areas, such as the Ex Mega Rice Project (EMRP) area in Central Kalimantan, we do see that substantial parts are still covered with > 10-30% crown cover. Even in fully deforested or burned areas we often see a natural recovery of the forest with "Young natural stands [ ] that have yet to reach a crown density of 10-30% or tree height of 2-5 m". There are other areas that do not show such natural regrowth, particularly areas that have been regularly cleared or areas that have been repeatedly burned and lost so much of the peat that the decreased soil levels now result in lengthy periods of inundation in wet periods that prevent (rapid) natural regeneration. Still, such areas could still fall under "areas normally forming part of the forest area that are temporarily un-stocked as a result of human intervention such as harvesting or natural causes which are expected to revert to forest". Wetlands International and partners have in limited areas successfully replanted various indigenous peat swamp forest tree species, using methods in which the seedlings are planted in areas with artificially raised soil levels. In relation to the above, policy becomes crucial, as policy may eventually define whether or not a degraded area can be expected to revert to forest. The role of policy: The Indonesian government has put in place various policies to curb further deforestation and degradation of peatlands. Already in 1990 a presidential decree was issued (KEPRES # 30/1990) which states that peatlands deeper than 3 meter should not be developed. Unfortunately this decree, though much quoted, was never seriously implemented by government (Silvius & Suryadiputra, 2005). Still, it represents an important policy that is well known with planners and implementers of development. In early 2007 the Indonesian president issued an official Instruction, InPress 2/2007, which states that the EMRP area will be target of sustainable development and restoration, including conservation of the peatlands. In the end of 2006, the Governor of Central Kalimantan requested the Netherlands government assistance with the development of a Master Plan for the EMRP area, with a focus on conservation and sustainable development. This plan is expected to be finalised in September The Minister of Agriculture recently issued a notice forbidding further issuing of palm oil concessions on peatlands in Indonesia. The current public and political awareness in Indonesia on the impact of deforestation and peatland degradation is huge, particularly following the UNFCCC CoP 13 in Bali, as well as the many publications, national and international press attention for the emissions that are derived from the degraded peatlands of Indonesia. There is a clear political interest in Indonesia to work on climate change mitigation and adaptation, and concrete plans are being developed. E.g. The Indonesian Ministry of Home Affairs has developed in 2006 a Strategy for Sustainable Peatland Management. A Strategy for Tidal Lowland Development is currently being developed with support from the Netherlands. To enable mainstreaming of these strategies in sectoral development a Presidential regulation is currently being drafted for peat

6 management in all provinces. In addition, a specific policy and regulations are being developed for implementation of REDD, including for peatlands, which is expected to be finalized by July Indonesia also strives to establish a low carbon economy by development of clean and renewable energy resources, including sustainable biomass. Also at provincial levels there are many developments that focus on improving sustainability of e.g. forestry practices and development of palm oil plantations, and international cooperation and technical assistance is welcomed by the Governors of Papua, Central Kalimantan, as well as some key peat provinces in Sumatra. Indonesia has started making considerable investments itself in these areas of sustainable development and conservation. With such a drive and commitment for peatland conservation, restoration and sustainable development, it would be a crime if this would be hampered by a legalistic interpretation of eligibility of deforested peatlands under REDD. There are clearly sufficient reasons, justification and logic to include any degraded or deforested peatland area under REDD. However, this will require the development and implementation of pilot projects that can help develop experience in dealing with a number of crucial constraints that are not yet covered by local policies, including the need for guarantees, assurances and permanence. Carbon concessions need to be long-term and should span multiple governance periods and require commitments over several generations. This requires solid backing by and embedding in policy and legislation. There may also be a need for new insurances (e.g. indemnity against fire). First of all there is a need for common standards and criteria, that also relate to the special qualities of peatlands and the complex socio-economic conditions. Whereas pilots are needed, some caution is required for too hastily developed projects that will carry risk of failure, lack of political and social imbedding, and lack of integration with current experience and expertise. Needs and options for a community-based approach and development Various projects carried out in Indonesian peatlands have indicated the importance of a community-based approach to peatland conservation and restoration. Small pilots have been tried in the field with regard to building capacity at the community level for fire prevention and control, building and maintenance of dams in drainage canals for reflooding of peatlands, as well as regreening/reforestation of degraded peatlands after hydrological restoration. The pilots have shown that local communities not only have a role to play, but that their involvement is essential for the long-term success of the interventions, and that there is much to gain with an integrated approach of conservation, restoration and socio-economic development, linking poverty-reduction, biodiversity conservation and climate change mitigation. It has thus become increasingly clear that mechanisms such as REDD should incorporate a pro-poor approach, be rights-based and put community-based approaches central. The current government to government REDD funding schemes pose huge risks of failure to generate the necessary income and incentives to local stakeholders. Therefore new international and local finance mechanisms are needed to involve local stakeholders in a meaningful way and capture the potential of REDD for an integrated Win4All approach linking (1) poverty reduction, (2) biodiversity conservation, (3) improved water management and halting of land degradation, and (4) carbon store conservation and restoration. Without appropriate economic incentives it will be impossible to maintain and manage conservation areas or invest in rehabilitation of degraded peatlands. Without cash flows in poor regions, there is no local or national solution. People must have a livelihood before being able to refrain from over-exploitation of natural resources. Governments have to generate sufficient economic growth before being in a position to care about the environment. Incentives for short-term unsustainable development, including also uncontrolled logging, remain high. Development therefore is key to peat swamp forest conservation and the sustainable management and rehabilitation of degraded peatlands. Considering the declining incomes from agriculture and forestry there is a pressing need to enhance alternative income opportunities to the rural populations. In the meantime it is important to ensure that their lands and resources are no longer degraded and where agriculture on peat is practiced it is optimized in terms of sustainability. In this regard there is

7 an urgent need to review local policies that require regular land clearance in order for land owners to maintain tenure (Silvius and Suryadiputra, 2005). Without sufficient revenues from the land this creates a perverse incentive to the use of fire (which is cheapest). Alternative income sources from peatlands can involve a variety of options, including carbon trading, water, biodiversity and tourism. Oil palm, pulp or rubber plantations could under certain conditions help to promote sustainable development of deforested and degraded peat areas, but in view of the related CO 2 emissions such development should preferably be contemplated for non-peat areas. The millions of hectares of alang-alang fields in Indonesia are crying out for such development (Diemont et al, 2003). For large scale developers these areas do however pose significant constraints as they are already under tenure of local people, and purchasing such land in sufficiently large blocks will bring a variety of administrative nightmares and headaches. In addition, they would loose the windfall profits derived from conversion (logging) of peat swamp forests. In terms of local economic development, however, it would re-enfranchise the local owners of these idle lands in the emerging development processes and could thus contribute more to poverty alleviation. Many small-holder palm oil developments do show this benefit in situations where smallholders have sufficient organization experience and capacity to negotiate and deal with the larger investors and buyers. Another option that may be contemplated (and to some extent is being investigated by RAPP in the Kampar peninsula, Riau) is the development of plantations at the fringes of the peat domes, on shallow peats. With optimal hydrological management impacts on the hydrology of the peat dome may be minimized. The plantations can bring an advantage as buffer zone for the deeper peat areas and high-conservation value forests by reducing access and decreasing related fire risks. Consideration should, however, also be given to the fact that the shallower peat swamp forests tend to have higher species diversity and form part of the eco-hydrological unit of the peat dome system. When affected by drainage this will have impacts on the other parts of the dome. Expansion of small scale agriculture on peat should generally be avoided as it creates higher risks. First of all, it creates perverse incentives for using fire for seasonal land clearance. Secondly, most crops which can grow relatively well on peat, such as corn, Alue vera, pine apple and various kinds of vegetables, will require drainage, thus resulting in (increased) CO 2 emissions. There are some exceptions, and some developments of peatlands may well be integrated with carbon store conservation. Wetlands International has been experimenting with community-based fisheries development in drainage canals that were blocked by dams for restoration of peatland hydrology. This involves natural restocking of these fishponds in the wet season through natural flooding, and then harvesting the fish later in the dry season. Whereas dams are often frowned upon by communities as they block transport options, the fisheries revenues may provide a sufficient economic incentive for the communities to support the building of dams and maintaining them, thus contributing to the conservation of the carbon store. Some prospects for agricultural and tree crops that require no drainage may also be investigated. Under the Central Kalimantan Peatlands project, over 1500 ha of hydrological restored degraded peatlands have been replanted with indigenous peat swamp forest tree species, such as the Jelutung (Dyera sp.), a species which produces a latex used for various purposes including the production of chewing gum. Although these first results are promising, they require proper monitoring over longer periods to enable an assessment of their long-term prospects and sustainability. Need for new mechanisms: The option for a community-based service sector for biodiversity, forest and carbon conservation catering for the emerging carbon market would provide substantial opportunity for linking climate change mitigation to poverty reduction. It also enhances options for other types of strategies or combinations, particularly relevant to countries with no substantial agricultural subsidies, for instance the development of innovative financial instruments such as Bio-rights (Silvius et al, 2002). The Bio-rights approach involves establishment of business contracts, providing micro-credits for sustainable development in exchange for the conservation or rehabilitation of globally important biodiversity or environmental values. The business partners are the global community (represented by a broker, e.g. NGO or bank) and a local partner, e.g. a local community or a major community-based stakeholder group. The local (community) business partner will pay interest over the micro-credit not in the form of money, but in terms of biodiversity conservation or environmental restoration services

8 defined by mutually agreed environmental or biodiversity related indicators. An indicator frequently used by Wetlands International is for instance the survival rate of planted seedlings after 5 years of reforestation. The micro-credit level is linked to the opportunity costs of sustainable use and conservation of the natural resource base and biodiversity. As such, the Bio-rights approach removes the incentive for unsustainable development and allows the public value of key biodiversity wetland/peatland areas to be transferred over time to local stakeholders as a direct economic benefit. The incentive can be increased by allowing the credit itself also to be repaid through such services, enabling the development of communitybased revolving funds for sustainable development. This again can trigger community-based monitoring, as the whole community will stand to gain if the business is successful. The Bio-rights approach can of course also include such indicators as carbon store conservation and carbon sequestration, as well as the maintenance of wider ecosystem services such as water management and biodiversity values. As the micro-credit levels in the Bio-rights approach are directly related to the opportunity costs of sustainable development and conservation, the approach does not require lengthy and complex economic valuation of biodiversity or the ecosystem services that are maintained. This distinguishes it from Payments for Environmental Service (PES). Bio-rights schemes are operational in the buffer zones of the Berbak National Park and Ramsar Site in Jambi province, Sumatra, one of Indonesia s foremost peat swamp forest reserves, and are also used in many other community-based wetland restoration projects in Indonesia, such as in the Tsunami hit region of Aceh (involving over 70 community based Bio-rights projects for sustainable coastal development and mangrove reforestation) (See and ). Potential key role for the private sector There are numerous private sector initiatives which indicate a strong interest in investment in avoided emissions through peatland rehabilitation and reforestation as a means to compensate for industrial emissions elsewhere. Some investors even see opportunities for trade in VERs and Carbon futures. To enable rapid action for the rehabilitation of degraded peatlands, Wetlands International and BioX have launced at UNFCCC CoP13 the Global Peatland Fund. The vision of the Global Peatland Fund is to support projects that are able to avoid large quantities of CO 2 emissions by protecting and restoring peatlands and promoting sustainable development. These projects will guarantee Voluntary Emissions Reductions and emissions removals (VER s). At the same time the Funds investments will reverse trends of rapid globally important loss of biodiversity and support alternative livelihood development in some of the poorest regions in the world. VER stands for "verified emission reduction". A verified emission reduction is a reduction in greenhouse gas emissions that has been verified or checked by an independent third party. This third party verifier acts in a similar way to an auditor and is responsible to checking the emission reduction estimates and calculations are correct. This is often done against emission reduction quality control standards and measured in the standard unit of tonnes of CO 2 equivalent. VERs also represent a bundle of legal rights that can be defined by contracts and which can be bought and sold. The main focus will be on peatland areas in Indonesia; later also in other developing countries. As peatland destruction is a large problem, but is also occurring in a relatively concentrated area, involving around 13 million hectares we believe that it is problem that can be addressed easier that the much wider spread problem of global emissions from deforestation. It creates the potential to reduce a significant source of CO 2 emissions through targeted restoration and protection of peatlands. The Fund will invest in peatland restoration and conservation projects. More specifically, this will entail the following types of peatland projects: a. re-flooding previously drained peat forests and deforested peatlands by building dams in the drainage canals; b. regreening and reforestation of deforested peatlands using native species; c. protection of remaining peat forests from deforestation; d. fire management plans to prevent and control peat fires.

9 The Fund will not operate peatland projects itself, but tender out peatland restoration and conservation projects to interested third and preferably local parties. Sustainable socioeconomic development projects involving local communities must form an integrated part of the peatland projects, and will be financed by the Fund through grants or micro-credits. Peatland projects will be selected on the basis of a number of eligibility and quality control criteria adopted by the Fund. The peatland projects will lead to significant CO 2 emission reduction. The emission reductions achieved will be monitored in accordance with independently verified methodologies, so that they can be classified as Voluntary Emission Reductions and Emission Removals ( VERs ). The Fund will purchase VERs from the peatland projects through Emission Reduction Purchase Agreements ( ERPA ). These will be entered into at an early stage of the project development and include advance payments for peatland project development and the provision of technical advice. 100% of the VERs generated by the peatland projects will be delivered to the Fund until the advance payments have been recovered, and the Fund may also purchase additional VERs generated by the projects. The Fund will sell VERs on the international carbon markets, which should generate a return for the investors in the Fund. However, this will be capped at around 15%. The remaining profits of the Fund s operations, in line with the broader goals of the Fund, will be invested into community development projects in the areas in and around the GPF projects. The VERs generated by the Fund will thus come with an added value: not only will they guarantee greenhouse gas emission reduction, they will also significantly contribute to socio-economic development in some of the poorest regions in the world, as well as the conservation of globally important biodiversity. This may provide for additional potential for investments from Corporate Social Responsibility (CSR) programmes. The geographical focus of the Global Peatland Fund will initially be on Kalimantan (the Indonesian part of Borneo) and Sumatra, where Wetlands International, its partners as well as some other organisations have successfully carried out community-based peatland conservation and restoration projects in cooperation with local governments. This will allow an efficient and limited risk implementation of the Fund s first projects, both from a technical point of view and from a local stakeholder perspective. Literature cited: Achard F, Eva HD, Mayaux P, Stibig HJ, Belward A Improved estimates of net carbon emissions from land cover change in the tropics for the 1990s. Global Biogeochemical Cycles 18: GB2008, doi: /2003gb Canadell JG, Le Quéré C, Raupach MR, Field CB, Buitenhuis ET, Ciais P, Conway TJ, Gillett NP, Houghton RA, Marlandi G Contributions to accelerating atmospheric CO2 growth from economic activity, carbon intensity, and efficiency of natural sinks. Proceedings of the National Academy of Sciences of the United States of America 104: DeFries RS, Houghton RA, Hansen MC, Field CB, Skole D, Townshend J Carbon emissions from tropical deforestation and regrowth based on satellite observations for the 1980s and 1990s. Proceedings of the National Academy of Sciences of the United States of America 99: Diemont, W.H., Joosten, H., Mantel, S. Murdiyarso, D., Noordwijk, M. van, Rieley, J.O., Veldsink, J.W., Verhagen, A., Wakker, E., Wind, J., Setiadi, B., and S.H. Limin Poverty alleviation and wise use of peatlands in Indonesia. International Peat journal 11 (2003) Dobmeijer, S. Silvius, M., Tol, S. and M. Trivedi. In press. Carbon Emissions from Peatlands. Wetlands International, The Netherlands. Fearnside PM Global warming and tropical land-use change: greenhouse gas emissions from biomass burning, decomposition and soils in forest conversion, shifting cultivation and secondary vegetation. Climatic Change 46: 115.

10 Hooijer A, Silvius M, Wösten H, Page S PEAT CO2, Assessment of CO 2 emissions from drained peatlands in SE Asia. Delft Hydraulics report Q3943 (2006). Houghton RA Revised estimates of the annual net flux of carbon to the atmosphere from changes in land use and land management Tellus Series B, 55: IPCC (Intergovernmental Panel on Climate Change) Climate Change 2001: The Scientific Basis. Contribution of Working Group I to the Third Assessment Report of the Intergovernmental Panel on Climate Change. Houghton JT, Ding Y, Griggs DJ, Noguer M, van der Linden PJ, Dai X, Maskell K, Johnson CA, editors. Cambridge, UK, and New York: Cambridge University Press. 881p. Page, S.E., Siegert, F., Rieley, J.O., Boehm, H.V., Jayak, A and limin, S The amount of carbon released from peat and forest firs in Indonesia during NATURE, Vol 420, Parish, F. Sirin, A., Charman, D., Joosten, H., Minyeva, T. and Silvius, M. (eds) Assessment on Peatlands, Biodiversity and Climate Change. Main report. Global Environment Centre, Kuala Lumpur and Wetlands International Wageningen. Sargeant, H.J Oil palm agriculture in then wetlands of Sumatra: destruction or development? Report, Forest fire prevention and control project; Government of Indonesia, Ministry of Forestry & European Union. Schimel D, Baker D The wildfire factor. Nature 420: Silvius, M.J., Setiadi, B., Diemont, W.H., Sjarkowi, F., Jansen, H.G.P., Siepel, H., Rieley, J.O., Verhagen, A., Burnhill, L. and S.H. Limin Financial mechanisms for povertyenvironment issues; The Bio-rights System. 19pp. Alterra publication 617, ISSN: Silvius, M.J. & Nyoman Suryadiputra Review of policies and practices in tropical peat swamp forest management in Indonesia. Wetlands International, Wageningen, The Netherlands. Silvius, M Palm oil expansion could boost carbon: The growing use of palm oil for biofuels production is often in conflict with environmental concerns. Bioenergy Business, Vol 1, Issue 2. pp Wösten, J.H.M., A. B. Ismail and A.L.M. van Wijk Peat subsidence and its practical implications; a case study in malaysia. Geoderma 78: Wösten, J.H.M., Ritzema, H.P. (2001) Land and water management options for peatland development in Sarawak, Malaysia. International Peat Journal 11: Wösten, J.H.M., Van den Berg, J., Van Eijk, P., Gevers, G.J.M., Giesen, W.B.J.T., Hooijer A, Idris A, Leenman P.H., Satriadi Rais D, Siderius C., Silvius M.J., Suryadiputra N, Wibisono I.W. (2006) Interrelationships between Hydrology and Ecology in Fire Degraded Tropical Peat Swamp Forests. International Journal of Water Resources Development 22: