* Comes into law after delay from planned Jan start
* Part of $1 billion climate deal with Norway
* Palm firms worry on compensation, green groups not satisfied (Updates with quotes, details)
By Olivia Rondonuwu
JAKARTA, May 19 (Reuters) - Indonesia’s President Susilo Bambang Yudhoyono inked into law on Thursday a two-year moratorium on new permits to clear primary forests , part of a $1 billion deal with Norway that could spur projects to cut emissions and slow expansion of plantations.
The moratorium ordered a freeze on new permits to log or convert primary forests and peatlands — worrying palm oil, timber and mining firms in Southeast Asia’s biggest economy — but not going far enough for environmentalists.
“We mean business when we say we would like to reform our forest and peatland management. There will be no new permits on 64 million hectares,” Agus Purnomo, Indonesia’s presidential advisor on climate change, told Reuters Television.
“We mean business in the sense that we are continuing to grow our economy, because we allocate 35 million hectares of degraded forest for agriculture, mining and other development uses,” he said in an interview.
The moratorium was due to start on Jan. 1 but has been delayed because of wrangling between government ministries over how much forest to include, a symbol of the long-running tension between a nationalistic business old guard and more internationally minded reformers in the government.
The dispute showed how difficult it will be for Indonesia to reach a target of slashing emissions by at least 26 percent by 2020 while still spurring economic growth, as the G20 member earns billions each year from cutting down forests.
Plantation and mining firms opposed the moratorium, which could slow the expansion of firms such as Astra Agro Lestari in the world’s top palm oil producing nation, and delay coal and mining projects worth $14 billion by firms such as BHP Billiton .
The details of the final version are expected to be released on Friday. A previous draft seen by Reuters said it would exempt the extension of old permits, projects given permits in principle by the forestry ministry, and issuance of permits to log secondary non-peatland forests or convert degraded land.
The draft version also exempted projects to develop energy supplies such as geothermal power, as well a huge food plantation project in the lushly forested Papua province, since both energy and food security are seen as critical by Yudhoyono.
Andreas Prasetiya, head of investor relations at Gozco Plantations , said the palm oil firm had permits for 70,000 hectares out of a total 124,000 hectares, but the moratorium could affect the remaining 44 percent of its its landbank, in a greenfield area on Borneo island.
“I don’t see the benefits of it just yet. We are receiving a $1 billion contribution from the Norwegian government... two or three years ago maybe it seemed like big money, but with crude palm oil prices now, $1 billion doesn’t seem like big money,” he told Reuters.
“They say if your area is affected with the moratorium, they will give you another replacement area — come on, let’s be realistic. Everybody is competing for land — who is going give up their land?”
The details will also be scrutinised by green groups and Norway, which has pledged $1 billion if Indonesia can reduce greenhouse gas emissions from deforestation. Norway’s environment ministry was not immediately available for comment.
The moratorium’s implementation will be a test of bilateral climate deals, after the five-month delay mirrored the inability of nations to agree a pact to limit global greenhouse gas emissions beyond 2012 at U.N. talks so far.
Forests soak up large amounts of carbon dioxide, the main greenhouse gas blamed by scientists for causing global warming.
The fact that Yudhoyono actually managed to sign it was welcomed by some, hopeful it will be a catalyst to develop projects to reduce carbon emissions from the forestry sector.
“It’s a stepping stone towards fixing long-standing problems of land conflict, forest governance and other issues,” said Dharsono Hartono, whose firm is developing a project to protect a large area of carbon-rich peat swamp forest in Central Kalimantan on Borneo.
The forestry ministry has defined primary forest as forest that has grown naturally for hundreds of years, of which there is estimated to be around 44 million hectares in a sprawling tropical archipelago where illegal logging is common.
The devil may be in the implementation as well as the details, in a country where institutional corruption is rampant and legal enforcement often weak.
Nils Hermann Ranum, head of policy at the Oslo-based Rainforest Foundation, estimated the presidential plan only extended protection to an extra 16 million hectares and fell far short of past commitments if it covered just “primary” forests.
“It looks like Indonesia is now making a serious limitation of the scope of the moratorium,” said Ranum. (Additional reporting by Djohan Widjaya and Michael Taylor in Jakarta, David Fogarty in Singapore and Alister Doyle in Oslo; Editing by Neil Chatterjee and Daniel Magnowski)