SINGAPORE - The Norwegian government has agreed to pay Indonesia for carbon emission cuts after a dramatic drop in deforestation in 2017 and will continue to make payments if the trend continues.
The payments are part of a US$1 billion (S$1.35 billion) scheme Indonesia and Norway signed in 2010 that aims to reward Indonesia for efforts that reduce deforestation, improve forest preservation and cut emissions of planet-warming carbon dioxide (CO2).
No details were provided on the payment amount, although green groups estimate the figure to be more than US$20 million.
Norway said the first payment would be for approximately 4.8 million tonnes of CO2.
Indonesia has the world's third-largest expanse of tropical forests, which are a key tool in fighting climate change because they soak up large amounts of CO2. But clearing and burning the forests stokes global warming by releasing huge amounts of carbon pollution.
For years, Indonesia has had one of the world's highest deforestation rates because of clearing for agriculture, particularly oil palm plantations. But the government of President Joko Widodo has tried to rein in forest clearing, especially after devastating fires in 2015.
"Indonesia has embarked on bold regulatory reforms, and it is showing results," Norway's Minister of Climate and Environment, Mr Ola Elvestuen, said during a recent press conference in Jakarta.
"It may be too early to see a clear trend, but if deforestation continues to drop, we stand ready to increase our annual payments to reward Indonesia's results and support its efforts," he said.
Speaking at the same event, Indonesia's Minister for Environment and Forests, Ms Siti Nurbaya Bakar, said the two countries have agreed on the rules for results-based emission reduction payments from Norway.
According to Global Forest Watch, Indonesia's tree cover loss fell sharply in 2017, including a 60 per cent decline in primary forest loss.
Primary forest loss in protected peat areas went down by 88 per cent between 2016 and 2017, reaching the lowest level ever recorded, said Global Forest Watch, a partnership which includes Washington-based World Resources Institute (WRI), the French Development Agency (AFD) and Airbus.
Norway and green groups pointed to reforms that have reduced deforestation and fires.
"Multiple factors contributed to the sudden downturn in Indonesia's forest loss and associated emissions in 2017," said WRI Senior Fellow Frances Seymour. "Favourable weather reduced the risk of repeating the catastrophic forest fires of 2015. Low prices for palm oil dampened incentives to expand oil palm plantations into forests.
"Nevertheless, the Indonesian government can legitimately claim that its efforts contributed to the decline, having strengthened forest protection through new policies and enhanced enforcement."
She pointed to a 2016 presidential regulation that imposed a moratorium on the commercial development of carbon-rich peatlands even in areas already licensed for conversion to oil palm or timber plantations.
Last year, President Joko also announced a policy to drive future increases in palm oil production from existing plantations instead of opening new forest areas.
But it remains unclear if the trend of reduced deforestation will continue.
"We want to see from Indonesia that this is a trend and not a one-year event," Mr Oyvind Eggen, director of the Oslo-based Rainforest Foundation Norway, told the Thomson Reuters Foundation.
Dr Seymour also voiced caution in a blog post on Thursday (Feb 21).
"Maintaining the lower rate of forest loss this year could pose a particular challenge, as scientists predict that 2019 will be an El Niño year, with high temperatures and dry conditions increasing the risk of wildfire.
She also said the presidential election in April raised uncertainty about the continuation of current policies.
"In a recent presidential debate, both candidates expressed support for ambitious palm oil-based biofuel mandates which, if not managed properly, could increase pressure on forests."
Nonetheless, she believed the payments from Norway could be a very positive focus for the government and underscore the benefits of better forest management.