Indonesia to revise forest CO2 revenue rules: official

JAKARTA Thu Apr 15, 2010 4:38pm BST

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JAKARTA (Reuters) - Indonesia will rewrite rules on how developers of forest preservation projects that earn valuable carbon credits must share their profits with the government and local communities, a finance ministry official said on Thursday.

Under a U.N.-backed scheme called reducing emissions from deforestation and degradation (REDD), developing countries can be paid not to chop down trees, which absorb planet-warming carbon dioxide as they grow.

Large-scale efforts to curb or halt deforestation have the potential to slow the pace of climate change.

A REDD market could eventually be worth billions of dollars a year to developing nations, particularly for major forest nations such as Indonesia and Brazil, which have large tracts of tropical forests.

Indonesia has several pilot REDD projects that aim to demonstrate how REDD would work if the scheme and trading of forest carbon credits is formally agreed as part of a broader U.N. climate pact to expand or replace the Kyoto Protocol.

Indonesia's Forestry Ministry released a decree last year under which REDD project developers would have to share between 20 and 70 percent of profits with local communities, depending on the type of forest, while between 10 and 50 percent of profits would be shared with the government.

"We have asked for this decree to be revised because some articles in it should be discussed more intensively between the Minister of Finance and the Minister of Forestry," said Noeroso L. Wahyudi, a senior Finance Ministry official. "We need to justify this formula so it can be implemented properly."

Analysts and industry players expressed surprise when the Forestry Ministry released the decree last year as many had expected revenue sharing to fall under the purview of the Finance Ministry.

Wahyudi said it was possible the percentages in the formula could change but could not say how.

"At the latest, the review should be finished by the end of the year," he said.

A source in the REDD development industry, who asked not to be named, said the government should also clarify whether carbon rights should be taxed as a commodity or a service and who exactly holds the rights to carbon stored in a forest.

"The benefit sharing has to be equitable for everyone," said the source, adding he could accept keeping only 60 percent of profits. "What we are looking for is certainty."

The Forestry Ministry announced in March it was reviewing three REDD decrees in an attempt to remove overlapping rules.

(Editing by David Fogarty)

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