Reducing emissions from deforestation and forest degradation (REDD) is a mechanism designed under the United Nations Framework Convention on Climate Change (UNFCCC) to enhance the role of forests in curbing climate change (UNFCCC 2007). The UNFCCC and its bodies have expanded the concept to include forest conservation and human activities that increase carbon stocks, or REDD+ (UNFCCC 2007, 2009). REDD+ has the potential to alter the incentives for deforestation and land use change and instead to encourage sustainable forest management.

Significant official development assistance (ODA) has already been committed to create the policy conditions for REDD+ and demonstration projects in...

The GoI, aware of the benefits that REDD+ can bring to Indonesia, has become a major participant and contributor to the international REDD+ negotiations, and its role in shaping decisions on REDD+ has been widely acknowledged (Jakarta Post 2010b, Republika 2010a, Investor Daily 2010, Antara 2010b). The GoI is introducing a wide range of national policies to create the policy environment for REDD+. Multiple demonstration projects are also underway.

Indonesia has selected what is known as a ‘nested approach’ to REDD+. A nested approach is the most flexible mechanism for implementing REDD+, compared with a purely national or a purely...

Indonesia has more than 90 million ha of forest cover, as well as extensive peatlands. Deforestation is the largest contributor to Indonesia’s greenhouse gas emissions. REDD+ promises to create a potentially significant role for Indonesia’s forests in mitigating climate change, as well as a new source of revenue for the country. However, it will operate in the existing forest governance context. The GoI is aware of the risk of corruption and is taking steps to curb it.

Corruption is generally defined as the abuse of public office or entrusted power for private gain (World Bank 1997, Lambsdorff 2007). In Indonesia,...

The REDD+ policy formulation process in Indonesia is highly dynamic and multi-layered, and it has become more so with the signing of the Letter of Intent (LoI) and partnership agreement with Norway. The President has announced his commitment to reversing unsustainable practices and placing Indonesia on a path towards a more secure and sustainable development approach, by adopting ‘pro-poor, pro-job, pro-growth and proenvironment’ objectives and translating them into national development targets and selected priority implementation programmes (GoI 2010, Jakarta Post 2010f).

Several policies may shift Indonesia’s development path towards a more sustainable future and shape the success of the REDD+...

The REDD+ readiness phase in Indonesia already involves large and growing amounts of public, primarily donor, funds and private investment. Successful use of these funds for policy reform and a shift to low-carbon development will require cooperation amongst agencies (Verchot et al. 2010). The LoI between Indonesia and Norway states that ensuring coordination with all other REDD+ initiatives is one of the general approaches and principles in the cooperation between two countries (LoI 2010).

Poor or non-existent coordination creates immediate risks of misuse of donor funding as well as the risk that individual agencies will adopt policies that favour specific...

The main idea behind REDD+ is that developed countries can offset their emissions by paying developing countries and project developers for reducing emissions from deforestation and forest degradation. A wide array of arrangements is emerging to manage donor pledges (WRI 2010) or developing countries’ own forest- and climate-related funding allocations.

One of the main questions in both international and national discussions on REDD+ finance today is how the finance can be effectively delivered to and within countries. The main concerns are that REDD+ finance will not be coordinated, not owned by the respective national governments and not aligned with national...

An important – and in the long run critical – element of a REDD+ regime will be the distribution of benefits across scales and amongst participants. Several factors determine the importance of a revenue distribution mechanism. REDD+ is intended to be performance-based, which implies that payments are contingent on performance or on the amount of additional, real and measurable reductions in carbon emissions from deforestation and forest degradation. A distortion of the contingency of the payments for performance in terms of emission reductions or structural flaws that fail to ensure additionality or real emission reductions would lead to underperformance or...

Many entities – the GoI, provincial governments, donors, companies, NGOs and communities – are involved in a wide range of REDD+ demonstration or pilot projects in Indonesia. More than 30 such projects were underway by mid-2010 (see Table 1), and their number has been growing rapidly (Kanninen 2010). How these projects are licensed under REDD+ is another area susceptible to potential, likely petty, corruption.

Regulations and authorities for issuing licences and permits function as instruments to implement land use policies. According to MoF Regulation P.30/ Menhut-II/2009, REDD+ developers can – and should – use the existing licensing processes and apply...

REDD+ offers potentially large inflows of money from conserving remaining forests and rehabilitating degraded forests. Assuming a carbon price of US$5 per ton, Purnomo et al. (2007) estimate that a 5% reduction in the deforestation rate from the business-as-usual level could potentially generate annual REDD+ payments to the value of US$765 million. This is about twice the size of the MoF’s 2009 annual budget (Republik Indonesia 2009). If the targeted emission reductions and associated payments actually materialise, the amounts would be sufficient to offset the potential loss in ministry revenues incurred from cessation of activities associated with the exploitation of...

The GoI has made significant progress in preparing for REDD+ by introducing policies and regulations, creating coordinating mechanisms and initiating demonstration projects. The GoI is taking steps to curb corruption and money laundering generally and in the forestry sector specifically by strengthening legislation and involving independent agencies in monitoring forest-related activities and institutions. Nevertheless, the risk of corruption in REDD+ remains. Efforts to curb corruption are relatively recent in Indonesia, and the nation’s legal framework and institutions – such as the KPK and the PPATK – are still young.

The readiness phase in Indonesia involves a wide range of reforms...