supply “utility” is compromised. Although globally the scientific evidence to support a strong relationship between deforestation and water flow remains weak, residents and studies in both Aceh and in North Sumatra have reported around 50% reduction in water discharge in as much as 80% of the rivers as a perceived result of deforestation, with some 20% being completely dry compared to before.


Loss of water supply is critical as it jeopardizes irrigation agricul- ture and hence food security, with major drops in rice yields. In addition, deforestation has been argued to cause the occurrence of more floods, which in the last decade impacted over 500,000 people in Aceh alone. To this is added the effect of peat burning or land clearing, which resulted in almost 500 fires between 2000 and 2010 in the Tripa peat swamp forests alone. Te costs of such fires to human health and the overall economy are extremely high. Te fires in Indonesia in 1997 and 1998 exposed some 20 million people living in the south-east Asian region to harmful smoke and affected economic development. Te cost of the 1997/1998 fires in terms of their negative impact on tourism and transportation, destruction of crops and timber, increased health care expenses and others have been estimated at approximately USD 10 billion.


Deforestation also directly affects orangutans. In 1990, over 1,000 orangutans remained in the Tripa rainforest. With the current rate of forest loss, it is feasible that orangutans could become locally extinct in the Tripa area by 2015.


A major issue related to the expanding deforestation on peatland is the increase in emissions of carbon dioxide and methane (two major greenhouse gases). Peatlands, where the highest densities of orangutans are found, are among the most important carbon sinks on the planet – Indonesian peatlands store 54 Gt of car- bon, more than any other tropical country while ranking third in the world for carbon storage in peatlands.


Te carbon value of forests on non-peatlands is estimated at USD 3,711 – 11,185 per ha for a 25-year period. Tis value is higher than that for all other land uses assessed (agroforestry, sustainable logging and coffee, among others) except for oil palm, which has a value in the range of that of carbon (Net Present Value of USD 7,832 per ha). For forests on peatlands the range of net present values for carbon credits from avoided deforestation (USD 7,420 – 22,090 per ha for a 25-year period) are sufficient to offset the opportunity costs for the conversion of primary forest to oil palm plantation. Including the value of other ecosystem services (USD 3,735 per ha for a 30-year period) in the comparison could make forest conservation even more competitive than that of all alter- native land uses. Tus strong economic growth may be achieved through prioritizing forest conservation while meeting the in- creasing demand for oil palm and other agricultural products by enhancing yields and steering new agricultural development to- wards already low current use value lands.


An opportunity cost analysis for the Tripa swamp and the Batang Toru mountain forests where orangutans occur indicates that to offer an alternative to the most profitable land use change


14


(from undisturbed forest to oil palm), a carbon market price of approximately USD 10 per tonne of carbon dioxide equivalent (tCO2


e) would be required. Although carbon prices are depend- ent on a number of factors, USD 10/tCO2e is well within the


range of voluntary market prices that have been achieved to date by REDD projects (USD 9.43 – 17.00/tCO2


e).


Te results indicate that the move towards more sustainable forms of development based on a consideration of the full value of ecosystem services provided by forests and other ecosystems may not reduce the relative proportion of income opportunities for governments although an increase in economic opportunities for local communities is foreseeable. Improving human well-be- ing and social equity, while significantly reducing environmental risks and ecological scarcities are central to shifting towards a Green Economy, the UNEP initiative introduced in 2008 that seeks to improve human well-being and social equity, while sig- nificantly reducing environmental and ecological scarcities.


Te Government of Indonesia (GoI) has already taken important steps towards this end: In 2010, the GoI signed a letter of intent on REDD with the Government of Norway and pledged a two- year suspension on new concessions to convert forest and peat. Many important details need yet to be determined, however, and the national carbon emission and land use change monitoring, reporting and verification system is currently under development.


It is crucial, however, that steps are taken to ensure that any funds for forest protection are used as intended. A key challenge here lies not only in the domestic cross-sectoral and geographi- cal complexity of forest and land management in Indonesia, but also in the fact that much of the logging is illegal and involves transnational criminal activity, which goes beyond the jurisdic- tion of any individual national law enforcement agency.


Tese illegal networks both siphon off resources from Indonesia, and jeopardize avoided deforestation and greenhouse gas emis- sion reduction goals. Calculations made for this report indicate that illegal logging was responsible for the loss of 380,000 ha of forest annually from 1985-2007, or comparable to an avoided deforestation carbon value of approximately USD 1 billion an- nually for the island of Sumatra alone. Te positive gains seen in Indonesia from enhanced law enforcement may remain short- term if transboundary criminal networks continue to operate unchallenged, as they may shift areas of operation and can re- turn after a temporary absence, thus off-setting gains in forest conservation and reduced emissions by losses elsewhere.


Given the extent of illegal activities, it is important that the sup- port and valuation of ecosystem services, and payment for such, through carbon markets or otherwise, are closely followed by monitoring and law enforcement on the ground. A fully strength- ened effort on organized crime by linking to other initiatives such as FLEGT (Forest Law Enforcement, Governance and Trade) and other relevant UN agencies including INTERPOL, as cer- tain illegal activities threatening forests cannot be addressed solely through law enforcement at the national level.


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