Rampant deforestation fuels almost 85% of Indonesia's carbon emissions, and local economic interests have made it tough for the government to reverse that trend.
The country has been severely criticized for allowing rampant industrial clearcutting to make way for palm plantations. Because of this forest destruction as well as its carbon-rich peatlands, Indonesia, home to the third largest expanse of tropical forest, is also the third biggest greenhouse gas emitter in the world.
The government is trying a new approach to conserving these lands through the use of carbon credits.
In early December, it approved a conservation program that sets aside about 200,000 acres of forest and peat marshes as part of the Rimba Raya Biodiversity Reserve that is at risk of clearcutting for palm oil plantations. The area is home to many rare animals, including endangered orangutans.
That acreage will be preserved as companies invest by purchasing tradable carbon credits. The credits can be sold for profit or can be used by companies to offset the impact of their carbon emissions. Money raised will also be used to help local communities develop sustainable livelihoods.
The idea has been four years in the making but ran into trouble when a big palm oil plantation company made claims on some of the land.
But several powerful Indonesian businesspeople and politicians intervened to get things back on track, and news of the approval emerged during the latest UN climate talks in Doha, reports Reuters.
"We hope projects like Rimba Raya will lead the way in proving that conservation can address the rural development needs of the communities and also preserve our forests for generations to come," says Indonesia's Forestry Minister Zulkifli.
Rimba Raya is organized under the UN framework, REDD, which stands for Reducing Emissions from Deforestation and Degradation. Its goal is to show that forests can pay for themselves and don't have to be decimated by by powerful palm oil, mining and timber interests.
Over its life, this project will generate an estimated 104 million credits – each represents one metric ton of carbon. The financial value of the credits ranges from $390 million to $650 million, based on current market rates for REDD carbon offsets.
Russian energy company Gazprom and German insurance firm Allianz are backing the project, which is being developed by conservation group InfiniteEARTH. The credits will become available in early 2013.
"This is a small but significant step in terms of contributing to the government's efforts to reduce carbon emissions and showing that larger volumes of forest carbon credits can be sold to credible buyers," Andrew Wardell, program director, forests and governance for the Center for International Forestry Research in Indonesia, told Reuters.
Last year, Indonesia began a two-year moratorium on deforestation and this year, adopted incentives to encourage geothermal and solar projects.
The US has given the country over $600 million for its "green prosperity" program as part of a billion dollar commitment to reduce deforestation worldwide. The funds are intended to spark economic development through clean energy and sustainable management of Indonesia's natural resources, which will reduce both poverty and emissions.
ALEC has been trying hard to get the US EPA to approve palm oil for use as a "renewable fuel," which would devastate Indonesia's forests.