2. Land areas eligible for REDD projects
The REDD Regulation lists (exhaustively) the different types of Indonesian forest areas that are eligible to host REDD projects. Several of these are defined by reference to concessions that may be held by private parties in respect of forest areas, for example Wood Forest Product Utilisation Concessions and Ecosystem Restoration Concessions.
REDD projects may also be undertaken on forested lands that have not been formally designated as forest areas, but are subject to pre-existing land rights (for example agricultural land owned by a private entity for the purposes of developing an oil palm plantation). However, forested land which is not yet subject to any form of land right or other right has not been included in the REDD Regulation's list of eligible land areas, and so will not be able to be used as an Indonesian REDD project site.
3. REDD project proponents
The REDD Regulation requires that both a national (i.e. Indonesian) entity and an international (i.e. foreign) entity are required to act as the proponent for an Indonesian REDD project.
The national entity is defined in the REDD Regulation to be:
a. the relevant concession holder, where the project site is subject to an eligible concession; or
b. where the project site is not subject to such a concession, the entity designated in the REDD Regulation.
The international entity may be a foreign Government, corporation, individual or international organization or charity, and is defined in the REDD Regulation as the party responsible for funding the REDD project. In this way, the REDD Regulation explicitly acknowledges that funding for Indonesian REDD projects will come directly from foreign rather than domestic sources.
4. Approval and implementation of REDD projects
The REDD Regulation requires that REDD project proposals, including (among other documents) a REDD implementation plan, be submitted to the Minister of Forestry for approval. The Minister of Forestry forwards proposals to the REDD Commission for assessment, and if the Minister approves the project following its assessment, the proponent will be issued a REDD implementation licence. Upon issuance of this licence, the REDD project commence within 90 days, and be implemented by managing the relevant forest in accordance with the approved REDD implementation plan.
The maximum duration of Indonesian REDD projects is initially 30 years. This period may be extended, but the rules governing any such extension are currently unclear. In addition, REDD demonstration activities undertaken pursuant to the separate Minister of Forestry Regulation P.68/2008 on Implementation of Demonstration Activities for Reducing Emission from Deforestation and Forest Degradation ("REDD Demonstration Activities Regulation") may be converted into REDD project activities, provided such demonstration activities meet the requirements of the REDD Regulation.
5. The rights of REDD project proponents
The REDD Regulation specifically recognizes the following rights of the proponents of Indonesian REDD projects:
a. The national entity will be entitled to receive payment from its counterpart international entity in respect of greenhouse gas reductions achieved as a result of the implementation of the REDD project.
b. The international entity will be entitled to use the REDD credits it receives for the purposes of compliance by developed countries with their emission reduction obligations.
c. REDD project proponents (presumably both national and international entities) will be entitled to trade REDD credits under any post-2012 international carbon trading framework of which REDD forms a part, for the purposes of implementing developed country commitments to reduce greenhouse gas emissions.
The REDD Regulation assumes that an international legal regime imposing emission reduction obligations on developed countries will be in place after 2012 (i.e. a successor or other equivalent regime to the Kyoto Protocol), and that REDD credits from Indonesian REDD projects will be eligible for compliance with such obligations. Although these assumptions align with the provisions in the REDD Regulation governing the transition to international arrangements (see below), whether they will be vindicated in international negotiations remains to be seen.
6. International linkage and transitional arrangements
The REDD Regulation has been drafted with a view to aligning the Indonesian REDD regime with any international REDD framework that may emerge from negotiations under the auspices of the United Nations Framework Convention on Climate Change ("UNFCCC"). However, prior to the advent of any international REDD framework, the REDD Regulation allows Indonesian REDD activities to be undertaken through:
a. REDD demonstration activities (as separately regulated under the REDD Demonstration Activities Regulation);
b. transfer of technologies; and
c. trading of voluntary emission reduction credits in voluntary carbon markets.
7. Remaining areas of uncertainty
Although the REDD Regulation establishes a clear framework for the implementation of REDD projects in Indonesia, a number of key uncertainties remain. These include:
a. Project implementation mechanics: the articles of the REDD Regulation addressing the mechanics for development and implementation of Indonesian REDD projects lack detail, and have the potential to create confusion amongst prospective project developers seeking to assess REDD project opportunities and structure viable projects.
b. Bundling: the REDD Regulation provides that where two or more REDD projects are located within a single region, regency or province, the projects may be bundled into a single REDD unit. The REDD Regulation does not, however, clarify the mechanics for such bundling, or how bundling will affect the rights and responsibilities of the various project proponents of the REDD projects comprising the bundle.
c. Earlier drafts of the REDD Regulation indicated that the Indonesian Government would be entitled to take up to 30% of REDD credits issued with respect to Indonesian REDD projects, for the purposes of managing its own national and international REDD commitments. However, the REDD Regulation as enacted indicates only that any Governmental levy in respect of REDD project implementation will be addressed in a separate regulation, leaving the quantum of such levy uncertain.