Chapter 12
Innovative Financing for Peatland
Restoration in Indonesia
Agus P. Sari, Alue Dohong, and Budi Wardhana
Abstract Indonesia harbors the largest area of tropical peatland globally, with a
total area of approximately 15 million hectares (Mha) and store about 45–65 G t C
which is strategically important for controlling global climate change. However,
Indonesia’s peatland experiences an alarming rate of degradation in recent decades
due to anthropogenic activities such as logging, conversion to industrial timber
and agriculture, fires, and drainage associated with these land use changes. Peatland degradation imposes socio-economic, environmental consequences, and health
costs to the country. In order to reverse the peatlands degradation pace, President
Joko Widodo enacted a Presidential Regulation Number 1 of 2016 concerning the
establishment of Peatland Restoration Agency or Badan Restorasi Gambut (BRG).
The newly ad hoc governmental agency is tasked to coordinate and facilitate stakeholders in implementing peatlands restoration of 2.0 Mha target in seven provinces
up to 2020. The 2.0 Mha target is then revised and updated based on certain criteria
to a new target of 2.49 Mha. Of the 2.49 Mha target, about 1.40 Mha is located
within private concessionaire licensed areas; meanwhile, the remaining 1.09 Mha
is allocated in non-private licensed areas. A substantial budget is needed to achieve
restoration target aforementioned. The currently available funding from both state
budget and bilateral donor countries remains inadequate to fill in the funding needed,
which is an estimate of total US$ 1.70 billion for the whole 2.49 Mha target. Hence,
strategic and innovative funding sources need to be created and tapped in order to
address the funding gap. This chapter aims to present business cases for peatland
restoration and to propose a potential innovative financial instrument to finance the
restoration activities in Indonesia. The creation of an investment instrument is necessary by means of structuring a peat bond where a combination of cash and carbon
asset returns can be gained by investors.
A. P. Sari
Landscape Indonesia, Jakarta, Republic of Indonesia
A. Dohong (B)
Indonesian Ministry of Environment and Forestry, Jakarta, Republic of Indonesia
e-mail: aluedohong@gmail.com
B. Wardhana
Peatland Restoration Agency, Jakarta, Republic of Indonesia
© Springer Nature Switzerland AG 2021
R. Djalante et al. (eds.), Climate Change Research, Policy and Actions in Indonesia,
Springer Climate, https://doi.org/10.1007/978-3-030-55536-8_12
247
Innovative Financing for Peatland
Restoration in Indonesia
Agus P. Sari, Alue Dohong, and Budi Wardhana
Abstract Indonesia harbors the largest area of tropical peatland globally, with a
total area of approximately 15 million hectares (Mha) and store about 45–65 G t C
which is strategically important for controlling global climate change. However,
Indonesia’s peatland experiences an alarming rate of degradation in recent decades
due to anthropogenic activities such as logging, conversion to industrial timber
and agriculture, fires, and drainage associated with these land use changes. Peatland degradation imposes socio-economic, environmental consequences, and health
costs to the country. In order to reverse the peatlands degradation pace, President
Joko Widodo enacted a Presidential Regulation Number 1 of 2016 concerning the
establishment of Peatland Restoration Agency or Badan Restorasi Gambut (BRG).
The newly ad hoc governmental agency is tasked to coordinate and facilitate stakeholders in implementing peatlands restoration of 2.0 Mha target in seven provinces
up to 2020. The 2.0 Mha target is then revised and updated based on certain criteria
to a new target of 2.49 Mha. Of the 2.49 Mha target, about 1.40 Mha is located
within private concessionaire licensed areas; meanwhile, the remaining 1.09 Mha
is allocated in non-private licensed areas. A substantial budget is needed to achieve
restoration target aforementioned. The currently available funding from both state
budget and bilateral donor countries remains inadequate to fill in the funding needed,
which is an estimate of total US$ 1.70 billion for the whole 2.49 Mha target. Hence,
strategic and innovative funding sources need to be created and tapped in order to
address the funding gap. This chapter aims to present business cases for peatland
restoration and to propose a potential innovative financial instrument to finance the
restoration activities in Indonesia. The creation of an investment instrument is necessary by means of structuring a peat bond where a combination of cash and carbon
asset returns can be gained by investors.
A. P. Sari
Landscape Indonesia, Jakarta, Republic of Indonesia
A. Dohong (B)
Indonesian Ministry of Environment and Forestry, Jakarta, Republic of Indonesia
e-mail: aluedohong@gmail.com
B. Wardhana
Peatland Restoration Agency, Jakarta, Republic of Indonesia
© Springer Nature Switzerland AG 2021
R. Djalante et al. (eds.), Climate Change Research, Policy and Actions in Indonesia,
Springer Climate, https://doi.org/10.1007/978-3-030-55536-8_12
247