18/09/2007 (The Jakarta Post), Jakarta - As the 13th session of the Conference of Parties (COP-13) on climate change scheduled for Dec. 3-14, 2007 in Bali is drawing near, there have been many discussions on the possible schemes for reducing greenhouse gas emissions post 2012 when the current arrangement under Kyoto Protocol is set to expire.

One scheme currently under discussion is the inclusion of market incentives for protecting tropical rainforests, the present deforestation of which contributes to nearly 20 percent of manmade global carbon emissions.

While the inclusion of such a scheme in the future may potentially bring significant benefit to tropical forest country like Indonesia, it is not clear whether the country's economic planners are aware of what they are getting into.

While the event in Bali will increase Indonesia's statue in the international fora and certainly bring the much needed visitors to the island, it would be useful if the country's decision makers are also paying attention to what may transpire in the meeting.

Indonesia is currently the second largest producer of palm oil after Malaysia, and soon to be number one. Recently Indonesia revealed its plans to double crude palm oil (CPO) production by 2025, a goal that requires a two-fold increase in the oil palm yield.

Under one major investment proposal Indonesia would develop about 1.8 million hectares of plantations in the border region in northern Kalimantan. Palm oil has also attracted new interests among investors partly due to its prospect to becoming the main ingredient for producing biodiesel to substitute traditional fossil fuel. Europe is at present the most aggressive region and market for biofuels which include biodiesel and bioethanol.

The use of biofuels in the long run may reduce carbon emissions because during the process of growing biofuel producing plants, carbons from the atmosphere are actually stored in the plants. Contrary to the burning of fossil fuel which simply releases the carbon previously stored underground, the biofuel production-and-use can in itself create a net carbon sink.

However, growing large scale oil palm plantations by converting natural forests is shrinking the carbon sink because plantations do not store carbons as much as natural forests. Additionally, for every drop of increase in palm oil production additional lands need to be occupied, unlike in the fossil oil production operation where only limited drilling sites are used.

The rise of palm oil as an emission reducing substitute for fossil fuel is recently being challenged by environmentalists, not because of the physical property of the palm oil but because of the way the expansion of the palm oil plantations, especially in Indonesia, damaged the natural forests.

Now, back to the post Kyoto climate deal which may put protection of tropical forest to qualify for market incentive, it would just be logical that destruction of the same forests should entail market disincentives. It would be too naive for Indonesia to expect that the new deal would give compensation for protecting the forest without putting any form of penalty or cost for its destruction.

It is only imperative that developed countries, especially Europeans, will only be willing to buy biofuel products which were produced without damaging the natural forests. Debates on this issue has started, and countries like Malaysia which is currently the top producer of palm oil has been persistent in arguing that its oil palm plantations were not destroying its modern-day forested areas. Indeed, most of Malaysia's plantations were built on the old tin mining sites or rubber plantations that have existed prior to 1990 which was the reference year of the Kyoto Protocol.

What about Indonesia? Well, only relatively small areas (around 5,000 hectare) of oil palm plantations existed in North Sumatra, Aceh and Lampung during the colonial era. But plantations expanded to 290,000 hectares by 1980 and to around 5 million hectares now. This means that most of the new plantation development occurred after the Kyoto reference year of 1990.

With remote sensing technology, it would not be too difficult to prove that many of these plantations were built by converting natural forests. It is therefore obvious that Indonesia's palm oil is doomed to be associated with much of the deforestation in the country, and hence may be unacceptable to European markets.

The country's planners need to think and work hard in ensuring that Indonesia's palm oil will not end up having the same faith as our precious wood logs. Our logs have to be smuggled at low price to Malaysia, whose logging industry has better eco-certificates, to be able to reach Europe. As Malaysia has a strong case in its oil palm plantations for not being the cause of recent day tropical deforestation, it would be degrading for Indonesia to be one day smuggling its palm oil to Malaysia to be able to sell it to Europe.

There are a number of aspects that Indonesian planners, resource managers and negotiators need to consider.

First, there is an urgent need for the government to push for a real forestry and a real plantation business. Timber should be sourced from sustainably managed production forest, whereas plantation should be developed on vacant agricultural land and not as a cover for massive logging.

As a matter of principle, this would require that permit to open a plantation is only given strictly in non forested lands. A strong legislation is required to give this policy a credibility.

Second, Indonesia should then fight for the post Kyoto reference year to be moved from 1990 to a later year, ideally to a point in time when major deforestation by unavoidable cause like major forest fires occurred, such as 1997.

This would allow vast deforested areas to qualify for receiving reforestation incentive. Third, there needs to be an accurate accounting on how much area has been deforested by the existing oil palm plantations. The same amount of currently deforested land has to be restored to clear the sin of the existing plantations so their products would be acceptable to the environmentally friendly markets. All of the above efforts need to be included in the negotiations of any future climate deal.