BALI – The Peat Restoration Agency (BRG) has developed an innovative funding mechanism to restore peatland which is targeted to reach 2.4 million hectares throughout Indonesia by 2020. One of the innovative funding mechanisms is the mixing of peat bonds and private investment.
AlueDohong, Deputy of Construction, Operations and Maintenance of BRG, explained that based on regulation, which is under the legal protection of BRG, the target that should be reached in this programme is around 2.4 million hectares. “Of that amount, 1.4 million hectares are private concessions, and the rest is under government jurisdiction,” he said at the International Conference on Oil Palm and Environment (ICOPE) 2018 conference in Bali, Friday (27/4).
According to him, to achieve the target requires innovative funding mechanisms to attract private funding. “For 1 million hectares of peat restoration under the jurisdiction of the government, 350 thousand hectares is under construction. While 650 thousand hectares is not yet allocated,” he said.
One of the innovative funding mechanisms, he continued, is the issuance of peat bonds. “Through the peat bond funds, we keep in mind the profit aspect and invite the public and private sectors to make investments. We are trying to encourage investment from these bonds to cover 20% of our needs. We are aware that the private sector emphasises sustainable commodities and profit, so there should be other incentives like carbon. This is the idea behind the peat bonds,” he said.
Alue also explained that in the future, BRG will facilitate conservation projects to be developed in line with peat restoration. “For incentives, the proposal is two-fold. First, the mechanism of sustainable commodities in peat. Second, there is great carbon potential in peat management,” he explained.
In order to support such incentives, a national registration system is needed to validate the peat restoration that will be exchanged to carbon trade incentives. “For the payment of environmental services in the form of carbon trade, we must have a national registration system to validate the incentives. In the future, incentives from the social aspect should also be considered,” he said.
Meanwhile, Agus Sari, CEO of Landscape Indonesia PT BentangAlam Indonesia, added that the restoration program of 2.4 million hectares of peatland is estimated to require funding up to US$ 2.5 billion. “Landscape Indonesia is tryingto bridge and assist BRG in thepeat investment funds for bonds, so that we have the funds to leverage private investment. The main ideaisso that peat restoration can be invested in,” he explained
By looking at the need for substantial funding, he added, required efforts to attract foreign investment. “We must have a leverage fund that takesthe risk into consideration. It should be a combination of bonds and private investment,” he explained.
With a standard like the RSPO, according to him, there is an opportunity to make that investment. In the RSPO, companies have been prohibited from deforesting since 2005. “It’s an opportunity. Palm oil companies and their liabilities can fund peat restoration,” he said. (*)