East Kalimantan Environmentally Sustainable Development Strategy

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38 Exhibit 17 Significant financial resources are required to reduce emissions from the palm oil sector Emissions reduction per tCO 2 e is relatively cheap… Reduction cost 1 USD per tCO 2 e 30 25 20 15 10 5 0 0.2 -5 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 -10 Reduction potential 2 -15 MtCO 2 e per year -20 -25 -30 0.6 1.1 8.9 SOURCE: JP Morgan, EMRP Masterplan, Ministry of Forestry, Wetlands International, team analysis 9.9 High cost estimate Low cost estimate 1 utilizing a 4% discount rate 2 The width of each bar represents the volume of potential reduction. The height of each bar represents the cost to capture each reduction initiative 28.5 2 High cost estimate Low cost estimate … but given the size of the total abatement potential, annual costs would be significant Projected implementation costs USD millions DRAFT 3 4 1 Zero burning - oil palm 39 13 26 Use degraded land - oil palm 112 37 75 plantation buy out 35 12 23 yield improvement - oil palm 0 1 0 Water management - oil palm 1 2 3 4 5 6 3 2 1 peat rehabilitation - oil palm low cost estimate high cost estimate The proposed pilot projects could yield as much as 375 MtCO2e of avoided emissions by 2030. The increased use of degraded land could alone result in an avoided deforestation of 250,000 ha. The immediate emission reduction resulting from zero burning and water management will be relatively small with annual avoided emissions of 14 MtCO2e and 2 MtCO2e respectively however, the accumulated avoided emissions will become significant at 280 MtCO2e and 40 MtCO2e respectively by 2030. A moratorium on new licenses on forested areas and peatland is a proposed national policy 10 and could accelerate the above pilots. GDP Potential The GDP contribution from palm oil is growing from the expansion of concessions, yet there is potential to increase growth above business-as-usual from raising productivity and capturing more downstream activities. The expansion of oil palm plantations will result in a tripling of current GDP contribution under a business-as-usual scenario. Improving yields and developing downstream manufacturing could provide an IDR 1.1 trillion of GDP in 2030, equal to 60 percent of the business-as-usual forecast for palm oil GDP (EXHIBIT 18). 194 65 129 Total Cost 3 Current palm oil yields can be improved by 9 percent. Average CPO yields in East Kalimantan’s plantations are 3.1 tons per ha at present, which is below Indonesia’s average of 3.5 tons of CPO per ha. 11 Lower yield rates are partly a result of lower natural soil fertility than other in provinces, e.g. the volcanic soils in Sumatra, but also a result of better inputs, such as fertilizers, and practices in those plantations. There are substantial productivity differences within East Kalimantan whose independent smallholders have much lower yields regardless of 10 On May 28, 2010, a REDD+ partnership between Indonesia and Norway was announced, in which Norway pledged USD 1 billion towards REDD+ readiness programs and as a contribution in return for verified emissions reductions. At the same time, Indonesia committed to a two-year suspension of new concessions on forested land and peatland 11 BPS – Indonesian palm oil statistics 2009
39 Including financial transfers for REDD, GDP from palm oil could increase to IDR 2.8 trillion by 2030 East Kalimantan’s real GDP forecast IDR Trillions 3.0 2.5 2.0 1.5 1.0 0.5 0 2005 SOURCE: team analysis 10 15 1 Including REDD payments for reduced land conversion 20 25 2030 Environmentally Sustainable Development Strategy 1 Business as usual CAGR location. Raising yields in East Kalimantan up to Indonesia’s average would result in 9 percent higher production from a given hectare of oil palm plantation, which would represent a significant additional contribution to GDP.Yield improvements might also be seen as a way to decrease the demand for converting land into oil palm plantations, which could result in lower emissions from the conversion process. However, yield improvements will not result in additional employment , as the number of employees needed within the labor-intensive palm oil sector is more directly related to area planted than output. DRAFT Box 1 discusses a 10-step approach to palm oil productivity improvements in Harapan Sawit Lestari Estate in West Kalimantan. Several opportunities exist for investing in the downstream manufacturing of CPOderived products, which range from food oils and biofuels to oleochemicals. 12 Our conversations with potential investors have largely ruled out downstream manufacturing in food oils as companies prefer to process these near their consumer markets. We have focused on increasing the production of oleochemicals but, according to investors, a number of regulatory and fiscal obstacles discourage new investments in this area. Whereas Malaysia uses differing export duties to promote refined palm oil products over crude palm oil, Indonesia does not. In addition, good transportation is important for downstream processing. The lack of seaports with refined palm oil handling capacities and sufficient roads to enable fast transportation to centrally located refineries, also act as a disincentive to downstream manufacturing (EXHIBIT 19). We have identified improved infrastructure as a requirement to attract further investments in downstream refining. 10% 8% Exhibit 18 Biofuels might be a sizeable opportunity as demand is rising fast, especially in Europe. The European Union has recently released new criteria that oil palm plantations have to meet if they 12 Oleochemicals are used in soap products such as detergent, toothpaste, shampoo, and face soap
Page 1 and 2: East Kalimantan Environmentally Sus
Page 3 and 4: 3 East Kalimantan Environmentally S
Page 5 and 6: 5 Contents Preface 7 Acknowledgemen
Page 7 and 8: 7 Preface A broad global consensus
Page 9 and 10: 9 Acknowledgements The DNPI and the
Page 11 and 12: 11 Executive summary East Kalimanta
Page 13 and 14: 13 1. The development of coal-bed m
Page 15 and 16: DRAFT 15
Page 17 and 18: 17 Kaltim Green Program The Governm
Page 19 and 20: 19 1. The context for East Kalimant
Page 21 and 22: 21 This resource development pathwa
Page 23 and 24: 23 Both Berau and Malinau are large
Page 25 and 26: 25 In the BAU scenario, CO 2 e emis
Page 27 and 28: 27 TOP 5 ABATEMENT INITIATIVES Top
Page 29 and 30: 29 Kalimantan’s shift to a climat
Page 31 and 32: 31 The sector’s 57 MtCO2e of net
Page 33 and 34: 33 Outside of the sector’s need f
Page 35 and 36: 35 The greatest expansion is expect
Page 37: 37 improving water management in on
Page 41 and 42: 41 after the identified abatement m
Page 43 and 44: 43 The Case of Oil Palm Permits and
Page 45 and 46: 45 Emissions from the forestry sect
Page 47 and 48: 47 across Kalimantan in 1997 and 19
Page 49 and 50: 49 Utilizing concession buyout sche
Page 51 and 52: 51 Pilot Projects Pilot projects ha
Page 53 and 54: 53 GDP Potential The economic decli
Page 55 and 56: 55 Downstream manufacturing would i
Page 57 and 58: 57 downstream manufacturing as it w
Page 59 and 60: 59 Swidden agricultural practiced b
Page 61 and 62: 61 Although East Kalimantan has far
Page 63 and 64: 63 Reaching average national yields
Page 65 and 66: 65 farmers . We have identified sev
Page 67 and 68: 67 Many mining operations are locat
Page 69 and 70: 69 Unlike timber or oil palm planta
Page 71 and 72: 71 exploration and production conce
Page 73 and 74: 73 The Economic Opportunity of Post
Page 75 and 76: 75 Entering downstream value chain
Page 77 and 78: 77 Current Context The oil and gas
Page 79 and 80: 79 granted in 2008-2009 and contain
Page 81 and 82: 81 Emission from flaring is declini
Page 83 and 84: 83 Satellite images can help monito
Page 85 and 86: 85 Under business as usual, relativ
Page 87 and 88: 87 BERAU Berau is the third largest
Page 89 and 90:
89 350,000 ha of Kutai Timur is cat
Page 91 and 92:
91 substantial natural resource ext
Page 93 and 94:
93 Borneo conservation area as well
Page 95 and 96:
95 agricultural processing. As Pena
Page 97 and 98:
97 Range of climate related risks t
Page 99 and 100:
99 predict increased precipitation
Page 101 and 102:
101 In addition to the refinery and
Page 103 and 104:
103 The greatest economic risks fro
Page 105 and 106:
105 change issues. In December 2009
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107 Proposed BFCP governance and ma
Page 109 and 110:
109 the lack of a strong system, th
Page 111 and 112:
111 Carbon Accounting, Standards, a
Page 113 and 114:
113 EXAMPLE INITIATIVES REQUIRING C
Page 115 and 116:
115 for example, includes represent
Page 117 and 118:
DRAFT 117
Page 119 and 120:
119 Sources • 2010, Kesiapan Kali
Page 121 and 122:
121 • Badan Perijinan Dan Penanam
Page 123 and 124:
123 • Daniel Murdiyarso et al, Me
Page 125 and 126:
125 • Marcus Colchester et al, Pr
Page 127 and 128:
127 • Yosep Ruslim et al, STUDY O
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East Kalimantan Environmentally Sustainable Development Strategy

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