The announcement took the Norwegian government and campaigners by surprise and came days before a moratorium on new palm oil concessions lifted

A villager walks in a plantation covered by haze from fires near burned peatland in an oil palm concession (Photo: Muhammad Adimaja/ Greenpeace/Flickr)

The future of forest protection in Indonesia has been put into doubt after the government abruptly ended a decade-long funding agreement with Norway.

Under the $1 billion payment-by-results deal signed in 2010, Norway agreed to pay the Indonesian government for curbing its emissions by conserving peatlands and forests.

After setbacks and delays, the two countries were discussing the first payment of $56 million when Jakarta unilaterally terminated the accord.

In a statement dated 10 September, Indonesia’s foreign ministry said the decision was based “on the lack of concrete progress” in Norway delivering the money and followed “a series of thorough inter-ministerial consultations”.

It insisted the decision “will in no way to affect the Indonesian government commitment to reduce greenhouse gas emissions”.

But campaigners in Indonesia are concerned the move threatens the country’s climate goals. It removes any incentive to protect the forests just as a moratorium on new palm oil concessions lifts and the government is allocating large swathes of land to farming in a food security push.

Kiki Taufik, who heads Greenpeace’s Indonesia forest campaign, told Climate Home News the decision was significant. “Ending the agreement means deforestation control will be loosened,” he said, adding that the government’s ambition to cut emissions was “questionable”.

Indonesia’s forests are under pressure from demand for land to produce palm oil, paper, timber and food.

The coronavirus pandemic disrupted food supply chains, putting Indonesia’s reliance on imports in the spotlight. Temporary regional shortages of key commodities including rice in 2020 prompted the government to announce a series of “food estate” initiatives, allowing for trees to be cleared for agriculture.

Greenpeace and other forest NGOs have warned that almost two million hectares of forest are threatened by the farming push, an area roughly the size of Wales or New Jersey. “Similar projects in the past were thinly veiled land grabs that offered massive profits to the timber and palm oil industries while doing little or nothing to improve food security,” they wrote in March.

While primary forest loss has significantly decreased since 2017deforestation rose at the start of the coronavirus pandemic and the government rolled back environmental protections to facilitate business and reboot economic development.

On 19 September, a three-year moratorium on new permits for palm oil concessions came to an end. The government has given no indication it plans to extend the ban.

The collapse of the agreement took the Norwegian government by surprise on the eve of its parliamentary election.

Responding to the announcement, Norway’s environment ministry said both governments had been engaged in discussions on a legal agreement for the transfer of the funds and the talk were “constructive and progressing well”.

A spokesperson for the ministry told Climate Home that a few issues remained “but we strongly believe they could have been resolved”.

Under the 2010 agreement, both countries agreed that the detailed terms and conditions for the payment would be agreed between Norway and a bespoke Indonesian Environment Fund to receive the money.

The spokesperson said Norway was notified the fund had become operational in early June and “quickly intensified discussions”. He added that Norway had already allocated the money in its budget and was looking forward to disbursing it.

Despite the incident, Norway said it had “full confidence” in Indonesia’s emission reduction calculations, describing the nation as “a world leader in combating tropical deforestation”. It said it stood ready to support its efforts to protect its forests and peatlands.

Tørris Jæger, director of Rainforest Foundation Norway, told Climate Home negotiations on the formalities for payments had been “difficult” and included disagreements on the conditions required by Norway for the money to be disbursed.

Jæger described the end of the partnership as “a setback” but said he did not consider this to be “a signal that deforestation and forest degradation are on a reverse agenda”.

But campaigners say Indonesia’s lack of transparency in its forest management and increasing land conflicts with indigenous peoples under president Joko Widodo likely contributed to tensions.

Marcus Colchester, the senior policy advisor of the Forest Peoples Programme, told Climate Home: “It is not so surprising that discussions were protracted. Demonstrating positive results is quite difficult, especially as there is still a lack of transparency about forestry and palm oil concessions and indigenous peoples’ rights are still not upheld.”

Colchester said the end of the partnership would threaten the government’s social forestry programme, which aims to grant local communities rights to manage 12.7 million hectares of forests and help to reduce deforestation.