TNC Thought Leadership

Forum

Lex Hovani

Terrestrial Program Advisor

The Nature Conservancy

Valuing Indonesia’s

Forests

25 July 2013

“We cannot choose between economic growth and sustainability – we must have both.” Paul Polman, CEO of Unilever

Major trends in business and environment are driving smart companies to incorporate sustainability into their core business strategies

Trend Risks Opportunities

Natural resource depletion

Reduction in supply of raw materials, increase in cost

Increase resource efficiency for competitive advantage

Increase in protected areas

Reduced access to land for production

Increase spatial efficiency

Improving technologies

Increased transparency and information flow on sustainability performance

Companies that have high performance gain competitive advantage in license to operate

Increasing environmental regulation

Compliance costs increase and costs of adapting to changing regulations are high

Progressive companies can shape reforms and anticipate changes to adapt with less cost

Energy insecurity

Energy costs increase and land-based energy drives up competition for land

Energy innovation and long-term planning

Climate change Increases in temperature, extreme weather events, and sea levels will disrupt businesses

Anticipating climate impacts and developing adaptation strategies

From The Economics of Ecosystems and Biodiversity (TEEB) for Business

Indonesia’s forests are crucial to the country’s sustainable development

“I will dedicate the last three years of my term as President to deliver enduring results that will sustain and enhance the environment and forests of Indonesia” President Yudhoyono

freshwater habitat

livelihoods

climate

Valuing terrestrial carbon storage Emissions from land use change, mainly deforestation, account for around 20% of global greenhouse gas emissions

Valuing watershed protection benefits from forests

6,316 people affected in East Kalimantan

Connection between forests and water varies geographically, but forest often provide:

Erosion prevention Flood reduction Water quality protection

Fishing in East Kalimantan requires clean water

10,581 people displaced in South Kalimantan

Millions of people in Indonesia depend on forests for food, medicine, and materials

Indonesian forests are among the most biodiverse and charismatic on earth

One of the world’s last remaining Sumatran tigers. Photo: Mike Griffiths/RAN

Orangutan female with juvenile in TanjungPutting National Park. Photo: Lex Hovani

Sumatran elephants, a subspecies of the wider ranging Asian elephant, are endangered by habitat loss caused by the palm oil and pulp and paper industries. Photo: David Gilbert

freshwater

habitat livelihoods

climate

Are natural forests still valuable after logging?

From: Sustaining Tropical Forests with Forestry F. E. Putz, T. Synnott, M. Peña-Claros, M. A. Pinard, D. Sheil, J. K. Vanclay, P. Sist, S. Gourlet-Fleury, B. Griscom, J. Palmer, R. Zagt, and P. A. Zuidema

Tropical secondary rainforest (“degraded”) have high timber, carbon, and biodiversity values

Do palm oil plantations have the similar biodiversity and carbon values as forests?

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Land use systems

Indonesia’s development plans for oil palm, mining, and timber still involve substantial impacts on forests

Land cover 2010 Issued licenses 2011

44% (2.57 mil ha) of licensed area for oil palm, timber plantation and coal mining are still covered by forest. About 0,5 mil ha is primary forest. If all is converted, planned deforestation in East Kalimantan will reduce forests by more than 20%

Indonesia’s forests are facing a critical decade, with competing forces and high uncertainty—multi-stakeholder solutions are needed more than ever

Increasing demand for land for food, fiber, minerals, energy Constitutional Court reducing Ministry of Forestry control of Forest Estate and increasing recognition of communities Green development pressure from inside and outside of Indonesia

LARGE LANDSCPE PLAN Integrated map of assets and conservation priorities to use in evaluating development plans and conservation investments:

Natural capital assessment Forest carbon Watershed services Biodiversity

Community conservation priorities

Avoid conversionoonDevelopment planning and licensing g

Reduce impactsttsImprove site-management practices to reduce emissions peeeeeeeeeeeemmmmmmmmmmmmmmmmiiiiiiiiiiiiisssssssssssssssssssssssssee ss

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Forests important for people and nature

Offset Unavoidable impacts

MITIGATION HIERARCHY

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TNC works with governments, private sector, and local communities to find pragmatic solutions balancing economic, environmental, and social objectives

Community-based natural resource management

How we work with communities: Link to the existing government planning framework Lengthen the planning horizon Support community tenure efforts Provide additional support for natural resource management and livelihoods

“Set Asides”

• Restrict logging in High Conservation Value Forests (~10% of concession area)

• Do not log in 20-meter riparian buffer zones.

• Do not log on slopes > 40 %

Logging Efficiencies

• Reduce average haul road meters.

• Replace bull-dozers with mono-cable winch skidding.

• Do not fell hollow or defective trees. 34% of trees felled are left in forest because hollow.

Supporting companies to minimize impacts from natural forest logging

With improved practices it is possible to reduce emissions by~30% without reducing harvest levels

Development by Design: supporting improved mitigation planning

1. Setting Priorities: Develop a landscape conservation plan

2. Projecting Impacts: development plans and resources

3. Identifying Best Options: mitigation, restoration, offsetting

4. Measuring Progress: contribution to conservation goals

Project-level analysis

Landscape-level analysis

Example: Working with BP and other companies on offset design for cumulative impacts associated with oil and gas development in the Wyoming Basins

Positive Impacts

Economic

Formal/informal $ of license permits Jobs Taxes Multiplier effect of $

Social

Roads & bridges Buildings Schools Clinics Churches

Environmental

Replant degraded areas Stabilize land cover change Protect & manage set asides

Negative Impacts

Economic

Foregone income from REDD potential Delayed income $ shortage for food

Social

Reduced food security Loss of poly cropping system Increased land tenure insecurity Influx migrants Horizontal conflict OHS Human rights

Environmental

Forest loss & C stock reduction Biodiversity loss Sedimentation Worsened floods & drought River pollution Indirect LUC

Positive Impacts

Economic

Taxes More jobs SH income Export revenues Downstream development Investment wealth

Social

Improved basic infrastructure Better education Better services Acquisition of business skills Improved land tenure

Environmental

Replant degraded areas Stabilize land cover change Protect & manage set asides Net (+) carbon footprint

Economic

Cost of reduced environmental services Cost of pollution Cost of increased worker OHS issues

Social

Worsened food insecurity Worsened insecurity over land tenure More migrants Social disintegration Unresolved conflicts/violence

Environmental

Worsened forest loss & GHGs LUC Increased GHG from POM Increased water, air & noise pollution Water shortage Worsened OHS

Negative Impacts

Decisions on

Manage-ment

Decision to Develop Oil Palm

The oil palm sector in Indonesia will definitely expand, which can either be a good or bad thing

TNC is starting to apply its non-confrontational approach working with oil palm companies

Key objectives:

Areas of suitable land zoned for agriculture are expanded, and spatial planning and development planning are better aligned

Forested land in the agricultural zone is under effective conservation management

Land used for oil palm is managed in a way that achieves high productivity and delivers social benefits to meet production targets and development objectives from a smaller land base

Cargill-TNC partnership for responsible soy

Supporting producers with more than 3 million hectares in production to comply with the Brazilian Forest Code Jointly supporting soy moratorium banning deforestation for soy expansion

“Cargill and the Conservancy's partnership demonstrates that critical areas of biodiversity can be protected while the development of responsible agricultural production continues,” said Mark Murphy, assistant vice president, Cargill Corporate Affairs. “We want to help ensure that the world’s increasing appetite for soy is met through environmentally sustainable agriculture that protects the Brazilian Amazon.”

Berau Forest Carbon Program (BFCP

• 800,000 hectares of forestland

under effective management • 10 million tons of CO2 emission • Conserving critical watersheds • Protecting

orangutans • Creating improved economic

outcomes for local communities • Generating experience for

national/regional/global application

Supporting development of an integrated example of green development for Indonesia