Deforestation in Indonesia: Impact on Emissions and Steps Taken for Mitigation

Indonesia, an energy and manufacturing powerhouse in Southeast Asia, is home to around 276 million people. While being the 16th largest economy in the world, Indonesia’s economy is arguably still developing with a GDP per capita of US$4,788 with much of the economy based on extractive sectors and industry. Given its recent rapid growth—with nominal GDP nearly doubling from 2010 to present day—it comes as no surprise that Indonesia has also emitted increasing greenhouse gas (GHG) emissions over this period.

From 2015 to 2021, annual CO2 emissions in Indonesia increased by 80 million metric tons—the 2nd highest emissions growth in Southeast Asia behind that of Vietnam. Recognizing the threat of increasing emissions, Indonesia has set several environmental commitments to the UN. As they progress toward decarbonization, there is a great opportunity for long-term sustainable growth. However, first and foremost, Indonesia must focus on reducing CO2 emissions in the most polluting sectors. Key industries that have contributed to the emissions include Land Use Change & Forestry (34%), Electricity & Heat (17%), and Agriculture (10%). 

One industry stands tall from the rest: Land Use Change & Forestry 

Land Use Change & Forestry, principally deforestation, accounts for GHG changes from conversions in land use from Forest Land, Cropland, Grassland, Wetlands, and Settlements. The importance of conserving the forests in Indonesia cannot be understated, as Indonesia’s rainforest cover is one of the largest globally. Saving the forests in Indonesia will not only help to reduce GHG emissions, but it will also preserve the health of one of the most diverse ecosystems in the world. To assess some of the key issues and potential solutions, let’s dive into the effects of deforestation on emissions, causes of deforestation in Indonesia, and the efforts different governments have made to limit deforestation activities.

How does deforestation affect emissions?

Source: IPCC

Forests are crucial to life on earth, as trees absorb carbon dioxide and convert it to oxygen through photosynthesis. They are essential to decarbonization, acting as carbon sinks, which absorb carbon dioxide from the atmosphere. In fact, forests absorb 2.6 billion tonnes of carbon dioxide a year! However, deforestation flips the role of forests from acting as a carbon sink to becoming a carbon source which releases CO2 into the atmosphere.  

Trees gain a surplus of carbon as they grow, and store the carbon in tree trunks and roots (Carbon Sequestration). Through deforestation, trees that are cut down and burned release the stored carbon back into the atmosphere, which contributes to global warming. Indonesia is home to the 4th largest rainforests globally, which emphasises the importance of limiting deforestation in the region. To better understand the causes of deforestation in Indonesia, let’s look at its main drivers and learn more about the policies the country has introduced to tackle associated emissions.

Main Causes of Deforestation in Indonesia (2001 - 2016)

Palm Oil Plantations

Palm oil can be found in almost 50% of packaged goods products in supermarkets, which range from chocolate and pizza to shampoo and lipstick. Indonesia is the largest producer and exporter of palm oil globally, accounting for around 60% of worldwide production in 2022. As a result, palm plantations are a significant driver of deforestation as they account for 23% of total deforestation in the country.

While emissions from the Indonesian palm oil industry decreased from its peak in 2012, it has since been increasing two years in a row. Key progress was made from 2016 to 2020, where annual deforestation from new or expanding palm oil plantations decreased by 90% from more than 1 million hectares to 115,000 hectares per year. Similar trends are also reflected by the actions of major palm oil corporations, their strategy, and their involvement within Indonesia. In 2013, Wilmar International, the global market leader in the palm oil industry set a “No Deforestation, No Peat, No Exploitation,” policy. Additionally, while Indonesia recognizes the economic advantage from their palm oil production, they have also set out to cut down on associated deforestation as they aim to make forest lands a net carbon sink by 2030. Their efforts are demonstrated through the select policies below.

Palm Oil – Related Policies & Actions

1. Moratorium on new plantation permits from 2018 – 2021: This policy was aimed at alleviating problems within the palm oil industry regarding deforestation, land conflicts, and labour abuse. The official freeze of new permits has now expired, but the government is trying to incorporate the freeze of new permits permanently into national law.

2. Forest regeneration 2023: 200,000 hectares of land previously used as illegal palm oil plantations will be converted back into forests.

3. Palm oil rejuvenation program: Replantation of 53,000 hectares of deforested land with palm trees to increase palm oil production at small-scale plantations.

Progress has been made by the Indonesian government via the introduction of policies to control development of the palm oil industry. Regardless, given that the country is a global leader when it comes to palm oil supply, there is still a conflict of interest between maintaining the health of the economy and ensuring the health of their forests.

Grassland/Shrubland Conversion

Grassland conversion accounts for 20% of deforestation in Indonesia. The island of Kalimantan has been the most severely affected, where substantial amounts of grasslands have been converted for cattle farming. The source of CO2 emissions here not only includes the decrease in net carbon sinks of CO2 from the clearing of land, but also the actual emissions from the burning of grasslands to improve grazing for livestock. In 2019, 176 million tons of CO2 was emitted due to grasslands and croplands, while grazing livestock associated with the grasslands also contributed 30 million tons of green-house gas emissions.

Given that Indonesia is a Muslim country, beef and goat are the main sources of red meat. Due to the growing middle class, demand for red meat is looking to rise. Currently, domestic beef production only satisfies 45% of national demand. The rest is met by beef imports from Australia, India, and New Zealand. This poses a threat to forests as grassland conversion is needed to meet the growing demand.

Timber plantations and Logging

Since Indonesia is the 4th largest wood pulp exporter globally, it comes as no surprise that 18% of deforestation in Indonesia is caused by logging activity. Logging activity includes both timber production as well as logging road clearance, with both industries on the rise on par with global demand.

Regulation within the industry is very challenging, as the government has very little control over logging activities. While the Indonesian government owns 55% of forests used for production in the country, most are under the direct management of private enterprises. This is because of the decentralized nature of the government, which lends to significant influence from external stakeholders. Illegal logging accounted for 80% of total timber exports at its peak in the mid-2000s. Due to the high levels of illegal activity within the industry, it has historically been very challenging for the government to enforce rules and regulations. Therefore, strict initiatives to register timber producers are essential to limit deforestation in this sector.

The Timber Legality Verification System (Sistem Verifikasi Legalitas Kayu, SVLK) introduced in 2009 is a verification system to check the legality of timber producers. However, although there are efforts to regulate the legality of logging, enforcement of regulations has been weak. Given that Indonesia has only recently started to combat illegal logging activities throughout the country, the fight to eliminate deforestation from the logging industry still has a long way to go.

Costa Rica’s Success in Combating Deforestation

Agriculture, Forestry, and natural resources will continue to be significant to the Indonesian economy. However, this does not mean that harnessing this economic advantage must be accompanied by emissions. Costa Rica is an excellent case study for a nation that was able to reverse deforestation and its associated emissions, while still preserving the economic value from these resources.    

Costa Rica provides many practices that Indonesia can learn from. The Land-use Change and Forestry sector has a net negative contribution to GHGs, as the country has continuously reforested its land. In 2020, Land-use Change and Forestry accounted for -7.32 million tons of GHGs, which offset emissions from industries such as transportation and agriculture. On a per capita basis, Costa Rica produces 2.8 tons of GHG emissions, compared to 7.5 tons for Indonesia.

Costa Rica’s initiative to advance their forests into a net carbon sink was a purposeful transformation achieved by some innovative policies.

Payments for environmental services (PES)

PES is a financial mechanism introduced in 1996 that helps forest conservation and combats land degradation. Within the program, landowners get paid when they adopt sustainable forest management techniques. Landowners are typically tied to 5 or 10-year contracts that require them to conduct forest conservation strategies.

This initiative has positively influenced land use in more than 1.3 million hectares of forest, and has attracted a total of more than US$500 million worth of investments. The success of this program has reforested Costa Rica beyond pre-WWII coverage, which is when extreme deforestation began in the country.

Eco-tourism has benefitted greatly from PES and contributes financially to support the system. Before the pandemic, more than 2.5 million people visited Costa Rica annually and brought in US$4.3 billion in revenue. Revenue from the tourism industry is reinvested into the conservation of the national parks and forests which maintains a sustainable revenue generation cycle. The revenue generated from eco-tourism also reduces financial pressure on natural resource industries. By providing alternatives to activities such as logging or agriculture, ecotourism helps to reduce deforestation.

National Forestry Financing Fund (FONAFIFO)

This fund supports sustainable forestry management and conservation projects. It works in conjunction with the PES program to provide additional financial resources for afforestation and reforestation efforts.

Costa Rica sets the example of establishing a financial ecosystem that encourages investments in forest maintenance. Actions made by the government have ensured that the economy develops sustainably. All these actions contribute positively to the reduction of CO2 emissions in the country, as they have successfully reduced the share of CO2 emissions from land use change and forestry from 22% in 1990 to -99% in 2020.

Indonesia still has a way to go to replicate the levels of success comparable to Costa Rica. Since Costa Rica has successfully reversed deforestation, Indonesia can take inspiration from the former as well as practices of other nations to limit the extractive industries that are destroying the forests. By shifting attitudes and creating a more sustainable economy, Indonesia can make strides towards reaching their environmental targets. With that being said, Indonesia’s future looks positive given the government’s awareness of the consequences of deforestation and the need of introducing policies to mitigate them. As the country with the most tropical forests in Asia, Indonesia has a great responsibility to limit deforestation to cut down on GHG emissions and to limit global warming. We look forward to seeing what next steps the country adopts to advance decarbonization efforts!