East Kalimantan Environmentally Sustainable Development Strategy

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improving water management in one area, the deep center for example, will not be productive if
drainage continues in another, the shallow periphery for example. 8 Such measures are relatively
low cost at less than USD 1 per abated tCO2e. In addition, good water management can help
reduce the risks of flooding in the wet season and drought in the dry season and therefore result in
higher crop yields.
Yield improvements can act both as an abatement measure (3.3 MtCO2e) as well as a tool
to increase the sector’s economic contribution. In terms of abatement, yield improvements
would allow the use of a smaller plantation area to achieve the same CPO production target,
and thus could potentially reduce the area under cultivation, assuming good planning. If East
Kalimantan reaches a similar yield level to Indonesia’s national average, it could reach a production
of 3.8 million tons of CPO 9 with 100,000 fewer hectares of plantations than at current yield levels.
Yield improvements in isolation are unlikely to cause a decrease in plantation expansions; in fact,
they could encourage expansion as palm oil becomes even more profitable. Therefore, yield
improvements must be done in conjunction with strict planning on the use of lands for palm oil,
targets set on production and not planted lands, and classical REDD payments to protect forests
that would have otherwise been needed for palm oil expansion.
Avoiding emissions from deforestation and forest degradation through a concession
buyout scheme could provide 3.2 MtCO2e of abatement annually. The idea behind
concession buyouts is that local communities and concession holders would be paid for not
starting or continuing economic activities that result in deforestation or forest degradation. While
REDD+ payments could be part of the above initiatives, concession buyout payments would
focus only on buying out a palm oil concession when there are no other options to relocate the
palm oil plantation, Concession buyouts can be extremely expensive if concession holders and
local communities insist on being compensated for the full opportunity cost of the lost palm oil
plantation. Such an approach would cost approximately USD 16,000 to 21,000 per ha or USD 19
to 28 per avoided tCO2e depending of oil palm yields and avoided emissions. It should therefore
only be applied in areas where few alternative opportunities for economic development exist, or to
prevent the conversion of areas with high carbon and conservation value, such as primary forests
and peatland or areas of cultural heritage for the province’s indigenous peoples.
Costs for reducing carbon emissions within the palm oil sector are, with the exception of a
plantation concession buyout, relatively cheap if calculated on a per ton of abated CO2e basis.
However, given the sheer seize of the overall abatement captured, total costs reach considerable
levels of up to USD 200 million per year (EXHIBIT 17).
DRAFT
Pilot Projects
Pilot projects will help to identify and overcome existing challenges and showcase the
potent combination of emission reduction and economic growth. Pilot projects should
be developed to achieve quick and significant emission reduction as well as further economic
development. Pilot projects need to be selected with local stakeholders and be based on several
criteria, including the potential abatement as well as the level of support of stakeholders with
land tenure and land-use rights. We have identified preliminary pilots by using the first criteria of
abatement potential. Three recommended pilot project are as follows: work with the 10 largest
holders of oil palm location permits (izin lokasi) in the province to relocate onto degraded land;
implement a zero burning policy in areas historically prone to fire; and improve water management
standards on peatland with the five largest active oil palm concession holders.
8 Peat domes are in the center of a coherent hydrological system and are normally areas with the highest
peat thickness, which control the water flow within the peatland
9 East Kalimantan’s business-as-usual production level at current yield rates is 3.8 million tons of CPO with
1.25 million ha under production