What lessons from Indonesia’s moratorium on forest concessions can be applied to the effort to meet the anti-deforestation commitment made at COP26? Ben Groom, Charles Palmer and Lorenzo Sileci demonstrate that the policy delivered cheap but modest reductions in carbon emissions – and call for new policies as well as sources of finance to drive further cuts to emissions from deforestation globally.  

Land-use change, principally that involving deforestation and agricultural conversion, is one of the three major sources of global greenhouse gases, alongside power generation (electricity and heat) and transport. A failure to address all three sources concurrently would likely mean that global temperature rise cannot be kept below 1.5°C, and perhaps not even 2°C, this century – missing the Paris Agreement targets. Yet at present there is unequal investment in mitigating these three sources, with the majority of funding going to energy systems and transport. A little over 2% at most of the around US$600 billion of climate investments in 2019–20 went to forests and land use or, more specifically, efforts to reduce emissions from deforestation and forest degradation, otherwise known as REDD+. What’s more, the $600 billion is only a fraction of the estimated $4.5–5 trillion needed annually for both climate change mitigation and adaptation.

At the COP26 climate summit last November, a global commitment was made to halt and reverse deforestation by 2030. This declaration was made by countries that collectively control and manage 90% of the world’s remaining forests, many of them economically dependent on the production and consumption of most if not all the major agricultural commodities produced in tropical forest areas, including beef, palm oil and soya. Funding pledges totalled almost $20 billion, from both public and private sources. This is unlikely to prove sufficient to halt deforestation, and a realistic and coherent vision of how the commitment might be achieved in practice is also lacking.

Indonesia is a signatory to this commitment. One of the world’s largest greenhouse gas emitters, resulting from the deforestation, forest degradation, peatland decomposition and peat fires taking place on its territory, it introduced a moratorium on palm oil, logging and timber concessions in 2011. However, in our research on the carbon emissions reductions associated with this moratorium, we find that its impacts were relatively modest .

Insufficient monitoring and enforcement?

Much of the future effort to address emissions from deforestation at scale is likely to centre on supporting and expanding area-based conservation incentives and policies, such as protected areas, financed by, for example, the Lowering Emissions by Accelerating Forest finance (LEAF) private–public coalition.

Indonesia’s moratorium on forest concessions was in effect an area-based policy. Unlike the country’s protected area network, at 69 million hectares the moratorium covered most of the country’s forest estate when it was established in 2011. Given its huge scale, there were initially high hopes that the moratorium would go some way to addressing the almost half of Indonesia’s forest loss identified as being driven by the demand for timber and palm oil. Our empirical analysis, however, revealed a small impact on reducing emissions from deforestation, at least relative to the ambitious size of the moratorium. Between 2011 and 2018 there was an emissions reduction of only 87 million tons, estimated to account for just 4% of Indonesia’s pledge, in its Nationally Determined Contribution (NDC), to reduce its emissions by 29% between 2020 and 2030.  

A larger impact might have been possible if the monitoring and enforcement of the moratorium had been improved. However, that would have likely led to greater incentives for concessionaires to locate their logging activities and plantations in forest areas outside the moratorium region instead of within it – causing a so-called ‘spillover effect’. Although our study suggests little evidence of localised spillover effects in the case of Indonesia’s moratorium (likely due to the small size of impact estimated), the potential for spillovers could be better addressed by monitoring the behaviour of concessionaires and commodity supply chains. Indeed, policy efforts to remove deforestation from commodity supply chains, and address the demand for commodities produced in tropical forest areas, have gathered pace in the last 10–15 years, albeit with a mixed record of success.

A perverse incentive to accelerate deforestation?

Regardless of the policies adopted to address deforestation, halting all deforestation by 2030 is a less likely outcome than a slowdown in the rate of forest loss, which is what Indonesia’s moratorium achieved between 2011 and 2018.

Slowing down deforestation now does not remove the possibility of more deforestation in the future but by preventing the immediate release of emissions it at least provides short-term climate benefits. By contrast, the commitment to halt deforestation by 2030 could in fact generate incentives to bring forward plans to clear forest – in advance of new policies and regulations implemented to honour the commitment. Thus, in the short run, the 2030 commitment could potentially speed up rather than slow down deforestation rates.  

Scale – and willingness to pay

To transition from slowing down to halting global deforestation, scale is critical. Indonesia’s moratorium was established at the necessary scale. However, the small estimated impact shown by our study illustrates that far greater funding is needed to address deforestation.

The moratorium itself was the centrepiece of a REDD+ partnership with the Norwegian government, in which Norway offered a carbon price of $5 per ton in exchange for emissions reductions. On the basis of this price, the emissions reduction of 87 million tons achieved between 2011 and 2018 is valued at over $400 million. For Indonesia to get anywhere near meeting its NDC via reducing emissions from deforestation, as it plans, would therefore require multiple billions of dollars, far more than the $1 billion Norway originally earmarked for its partnership with Indonesia. Moreover, this estimate of the value of aggregate emissions reductions rises with the carbon price.

Reducing emissions from deforestation has long been promoted as a cost-effective climate mitigation strategy. We have demonstrated that Indonesia’s moratorium delivered cheap emissions reductions. However, given estimates of the social cost of climate change that range between $40 and $200 per ton, a carbon-rich yet poor country like Indonesia arguably could claim a higher price than $5 per ton. Indonesia terminated its REDD+ partnership with Norway in 2021 but still plans to drive forward a climate agenda, with reducing deforestation central to its plans to meeting its NDC. Such plans will require new policies as well as sources of finance. Although the global community clearly recognises the critical importance of tropical forests for meeting climate goals, it remains to be seen whether the COP26 commitment to halt deforestation by 2030 will be matched by a sufficient global willingness to pay for forests’ climate benefits.

The authors’ paper ‘Carbon emissions reductions from Indonesia’s moratorium on forest concessions are cost-effective yet contribute little to Paris pledges’ was published in PNAS on 1 February 2022. The views in this commentary are those of the authors and do not necessarily represent those of the Grantham Research Institute.

Keep in touch with the Grantham Research Institute at LSE
Sign up to our newsletters and get the latest analysis, research, commentary and details of upcoming events.