A half-century ago, more than three-quarters of Indonesia was blanketed in plush tropical rainforest. But in the rush to supply the world with commodities, half of those trees have now been cleared. Dita Alangkara/CIFOR.

It’s being touted as a way to reduce deforestation in Indonesia: Give investors — who have already been issued permits to convert forests and peatlands into plantations — degraded land instead. Still, the country has a long way to go before this is possible, including figuring out what incentives are needed to make these land swaps a reality.

The assets of the forests, for one, are often used to fund the operations of palm oil or pulp and paper plantations. Lack of clarity about land rights issues is also likely to make investors nervous.

Another big stumbling block is that government institutions – including the land agency, the ministry of forestry, and the ministry of agriculture – have different definitions for “degraded land,” said Nirarta Samadhi, who is helping the country coordinate efforts to reduce emissions from deforestation and forest degradation (REDD+).

Until that’s reconciled, it won’t be possible to draw up a comprehensive map and database for degraded lands, which would pave the way for these exchanges.

A half-century ago, more than three-quarters of the sprawling archipelagic nation was blanketed in plush tropical rainforest. But in the rush to supply the world with commodities including logs, pulp and paper and more recently palm oil, and other economic uses, half of those trees have been cleared, making deforestation and land use change the biggest contributor to Indonesia’s total emissions.

Though President Susilo Bambang Yudhoyono has pledged to cut greenhouse gas emissions by 26 percent from business-as-usual by 2020, Indonesia also has to increase food production and export to keep up with an economy that is growing at 6.2 percent last quarter, making it the fastest among G-20 countries after China.

The President believes in the benefits of the land swap scheme.

“New policies and incentives will be on the table for those who would turn unproductive grasslands into high-yielding and productive assets,” Yudhoyono told business leaders in Jakarta in April last year. “The success of this program is critical to our success in pursuing a green economy.”

But it’s an uphill battle.

More than half of the 22 million hectares of land slated by the Ministry of Forestry for plantations is forested, according to the Center for International Forestry Research’s study Reducing Forestry Emissions in Indonesia, which warned it’s a plan that could result in huge carbon deficits for decades to come.

Developing plantations on degraded lands is critical, the 2010 study said, pointing as well to the need for accurate spatial planning data.

Most of Indonesia’s greenhouse gas emissions come from land use change, particularly from deforestation and clearing of peatlands. This prompted Indonesia to try REDD+, a global scheme that aims to slow climate change by compensating developing countries that protect their forests.

But while the land swap proposal is being heavily promoted, degraded lands are likely to be less attractive to timber and oil palm investors because there are no forest assets to liquidate to fund plantation operations, said authors in CIFOR’s study on Indonesia’s forestry emissions.

“Incentives for land swaps and plantation mosaics must be introduced and implemented,” they said.

Abetnego Tarigan, the national executive director of environmental group Walhi, warned that many areas that may be earmarked as degraded lands have already permits on them. With this uncertainty, companies that hold concessions with forests would not agree to do the land swap.

Another option is to encourage companies with permits to develop plantations on forested areas to change their concession into a conservation license, said Samadhi. This is a business that will still generate income through selling carbon credits to the voluntary markets and conserve the forests at the same time, he said.