Published by: The Jakarta Post, 30 June 2008
On his first official visit to Indonesia, Australian Prime Minister Kevin Rudd has agreed with President Susilo Bambang Yudhoyono to sign a joint Forest Carbon Partnership, supposedly to deal with climate change and its unprecedented consequences.
The agreement was the culmination of intensive discussions consilidated in the 2007 Climate Change Conference in Bali.
This agreement is interesting for the following reasons: First, international negotiations on climate change had been stagnant due to Australia's refusal to ratify the Kyoto Protocol.
Second, this is the first time environmental issues, specifically climate change issues, have become the main agenda in bilateral negotiations between the two countries.
It is also worth noting that the 2007 conference was the first international conference attended by Rudd, while the Kyoto Protocol was the first international document he signed after coming into power.
One would therefore question whether Down Under has shifted its policy on climate change, and the likely corollaries of the bilateral agreement on Indonesia.
Australia has strong interests in being more engaged in climate change negotiations for several reasons. First, much of its prosperous economy proves very polluting, as it is based on the use of fossil fuel, most notably black coal. Around 85 percent of the domestic electricity is generated from this dirty energy source.
In addition, black coal remains Australia's largest export commodity, accounting for nearly 20 percent of total exports -- more than 200 million tons worth around US$20 billion. The exports are expected to rise due to the likely increasing demands, mainly from Asia, not to mention that global oil prices are soaring in recent months.
As such, Australia's per capita emissions of greenhouse gasses, especially carbon, are quite high. In 2003, it was reported that its per capita emissions accounted for 0.8 kg CO2 per dollar of GDP, nearly 200 percent of the average carbon emissions of OECD countries.
It can therefore be understood the reluctance of Kevin Rudd's predecessor to ratify the Kyoto Protocol. It is true that, unlike the Annex A (developed) countries which are obliged to cut their emissions from the 1990 base-year, Australia is only given a "soft" emissions target of 108 percent of its 1990 emission.
Even so, the country has a lot of work to do to meet the 108 percent target, as it is reported that its current emissions remain 25 percent above 1990 emissions. This potentially damages their economy.
Before coming into power, Kevin Rudd commissioned Prof. Garnaut to consider the possible implications of cutting Australia's emissions on the national economy. According to Garnaut, the country's trade is highly sensitive to economic performance in Asian developing countries that are vulnerable to climate change.
Garnaut suggested that while exploring more economically sound mitigation strategies, Australia needed to actively cooperate with neighboring countries to tackle the "common problems".
It becomes apparent that Australia's economic interests are well placed in the forest carbon partnership with Indonesia. The Emissions Reduction from Deforestation and Degradation (REDD) plan is clearly seen as a more cost-efficient mitigation option than dealing with unprecedented economic consequences by reducing the emissions from the uses of fossil fuels.
In the REDD scheme, Indonesia has great potential to be an ideal partner and save Australia's lucrative coal industry and therefore overall economy.
First, the country's emissions from deforestation and degradation are substantial. In Kyoto Protocol and Bali schemes, Indonesia, as a developing country, is not given quantitative emissions reduction targets.
Therefore, "avoided emission" from deforestation and degradation would be an asset which could be sold in the international carbon markets, particularly to developed nations obliged to cut their emissions.
Apparently, Indonesia is much interested in possible compensation on the "avoided emissions". Over the next 10 years, the carbon prices are expected to substantially rise, particularly due to the ambitious emissions reduction targets of European nations up to 20 percent off the 1990 emissions. Some analysts predict that the current carbon price of about $5/ton could rise to $100/ton.
Nonetheless, it will not be such an easy doing for Indonesia. First, Australia and the other Annex-A countries would likely require the carbon seller countries to provide scientific-quantitative evidence for the transactions. This might not be an easy task to deal with as the country is apparently lacking.
Once Indonesia and other seller fellows are able to do so, the compensation could be gone, as it quite difficult to predict the long-term future of this highly political issue.
It is not impossible that over time, considering the magnitude of the problems, developing countries would also be burdened with some commitments to reduce their emissions.
There is sufficient evidence for this. Australia's reluctance to ratify the Kyoto Protocol was partly due to some arguments that China also contributes a large portion of the total global emissions. It is likely that this argument would be continuously advocated by developed nations.
If this were the case, Indonesia would then face serious problems. It is not economic gains that would be enjoyed; instead we will suffer from serious consequences which could be economically damaging. And the developed nations would be ready for the hardly battled victory. From the past emissions, they have enjoyed all of the sweets, and the negative consequences would be borne by all, no exception.
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