Avoided Conversion in the Pematang Gadung Peat Swamp Forest

Avoided Conversion in the Pematang Gadung Peat Swamp forest

Project Description, Verified Carbon Standard (VCS)

Contents

1. Project details ...... 1 1.1. Summary description of the Project ...... 1 1.2. Sectoral scope and project type ...... 2 1.3. Project proponent ...... 2 1.3.1. Implementing partner: Fauna and Flora International...... 3 1.3.2. Roles and responsibilities of the project proponent and implementing partner ...... 3 1.4. Other entities involved in the project ...... 3 1.5. Project start date ...... 4 1.6. Project crediting period ...... 6 1.7. Project scale and estimated GHG Emission Reductions or Removals ...... 6 1.8. Description of the project activities ...... 7 1.8.1. Establish community-based land management rights ...... 7 1.8.2. Develop forest management workplans ...... 8 1.8.3. Obtain a license for carbon credit trading ...... 9 1.8.4. Participate in government spatial planning activities ...... 9 1.9. Project location ...... 11 1.10. Conditions prior to implementation ...... 14 1.10.1. Land use status prior to initiation ...... 14 1.10.2. Condition of peatland ...... 16 1.10.3. Condition of the forest ...... 16 1.11. Compliance with Laws, Statutes and Other Regulatory Frameworks ...... 19 1.11.1. Laws, statutes and other regulatory frameworks relevant to the project ...... 19 1.11.2. Compliance of the project with relevant local, regional and national laws, statutes and regulatory frameworks ...... 21 1.12. Ownership and other programs ...... 22 1.12.1. Right of use...... 22 1.12.2. Emissions Trading Programs and Other Binding Limits ...... 22 1.12.3. Participation under Other GHG Programs ...... 22 1.12.4. Other Forms of Environmental Credit ...... 22 1.12.5. Projects Rejected by Other GHG Programs ...... 23 1.13. Additional information relevant to the project ...... 23 1.13.1. Eligibility criteria for grouped projects ...... 23 1.13.2. Leakage management ...... 23 1.13.3. Commercially sensitive information ...... 23 1.13.4. Further information ...... 23 2. Application of the methodology ...... 24 2.1. Title and Reference of Methodology ...... 24 2.2. Applicability of methodology ...... 24 2.2.1. Condition A: Tropical, undrained peat swamp forest in southeast Asia ...... 24 2.2.2. Condition B: Baseline approach ...... 25 2.2.3. Condition C: avoided conversion, not avoided degradation ...... 25 2.2.4. Condition D: avoided planned conversion ...... 25 2.2.5. Condition E: Avoided conversion by large corporate entities...... 25 2.2.6. Condition F: Net peat drainage depth shall be calculated using a depth of one meter .... 25 2.2.7. Condition G: Exclusion of the dead wood and litter carbon pools ...... 25 2.2.8. Condition H: Project area does not include human settlements ...... 26 2.2.9. Condition I: Forest biomass is steady-state or increasing at the start of the project...... 26 2.2.10. Condition J: Volume of trees extracted upon conversion is assumed to be the total volume above a minimum diameter threshold ...... 26

2.2.11. Condition K: The project boundary shall be hydrologically intact ...... 26 2.2.12. Condition L: The project area was not zoned for conversion to generate additionality for REDD 26 2.3. Project boundaries ...... 26 2.3.1. Geographic project boundaries ...... 26 2.3.2. Sources, sinks and reservoirs (carbon pools) ...... 29 2.3.3. Emission sources included in the project boundary, other than those resulting from changes in carbon pools ...... 30 2.4. Baseline scenario ...... 31 2.4.1. Step 1a &b: Identify credible alternative land use scenarios ...... 31 2.4.2. Step 1c: Selection of the most plausible baseline scenario ...... 35 2.4.3. Step 2: Investment Analysis ...... 39 2.4.4. Step 4: Common practice analysis ...... 39 2.4.5. Conclusion of the additionality and baseline assessment ...... 40 2.5. Methodology deviations...... 40 3. Quantification of GHG emission reductions and removals ...... 41 3.1. Methodology Step 5: Stratification ...... 41 3.1.1. Step 1: Stratification according to pre-existing conditions and baseline projections ...... 41 d) Site specifications for each stratum and supplementary sampling ...... 41 e) Final stratification of baseline scenario...... 44 3.1.2. Step 2: stratification according to the project activity ...... 47 3.1.3. Step 3: Final ex-ante stratification ...... 47 3.1.4. Step 4: Leakage stratification ...... 47 3.2. Methodology Step 6: Procedure for determining the baseline scenario ...... 48 3.3. Methodology Step 7: Procedure for demonstrating additionality ...... 48 3.4. Methodology Step 8: Baseline emissions ...... 49 3.4.1. Methodology step 8.1: estimate of carbon stock changes in the aboveground biomass . 49 Increase in carbon stocks due to aboveground biomass growth in baseline land-use (8.1.3) ...... 52 3.4.2. Methodology step 8.2: GHG emissions from peat ...... 55 3.5. Methodology Step 9. Ex ante net avoided GHG emissions ...... 57 3.6. Methodology Step 10. Leakage ...... 57 3.6.1. Market leakage ...... 57 3.6.2. Activity displacement leakage ...... 58 4. Monitoring ...... 59 5. References ...... 62

Table of Figures

Figure 1: Process of Obtaining Hutan Desa Concession License ...... 10 Figure 2: Location of the project area, West Kalimantan, Indonesia ...... 12 Figure 3: Location of project geographic boundaries, Ketapang District, West Kalimantan, Indonesia ...... 13 Figure 4: Production (HP) and Conversion (HPK) land use zones, and boundaries of Initial License granted to PT Ghoniyu and PT Prana Indah Gemilang ...... 15 Figure 5. Photographic evidence of illegal logging in the project area ...... 17 Figure 6. Disturbances in and around the project area: logging tracks and historical fire hotspots ...... 18 Figure 7 Example of “shrub” vegetation in the project area ...... 27 Figure 8 Preliminary measurements of a peat drainage canal adjacent to the project area (draining into the main river) ...... 28 Figure 9 Extent of drainage impact (subsidence) with increasing distance from a canal ...... 29 Figure 10. Measured peat thickness and WI Peat Atlas peat thickness used as inputs for constructing a the project peat depth strata ...... 42 Figure 11. Peat depth strata used in GHG emission calculations ...... 42 Figure 12. Map of aboveground biomass strata in the project area...... 44 Figure 13 Operational mask showing annual sequential areas expected to be converted from peat swamp forest to oil palm in the baseline scenario ...... 46 Figure 14 Stratification of above ground biomass in project leakage area ...... 48 Figure 15. The ICRAF allometric equations and fitted carbon equation for estimation of oil palm biomass and carbon sequestration ...... 53

Tables List

Table 1 Summary of key attributes of the project area ...... 1 Table 2 VCS project scope, category and sub-category ...... 2 Table 3: Key information about the project proponents and partners ...... 3 Table 4. Summary of entities involved in the project ...... 4 Table 5. Chronologically of establishing Management Rights for the project proponents ...... 5 Table 6. Overview of the temporal boundaries of the project ...... 6 Table 7. Estimated emission reductions expected over the first 10 years of the project ...... 7 Table 8. Jurisdiction boundaries that overlap with the project area ...... 11 Table 9. Summary of oil palm licenses approved in the project area prior to project initiation...... 14 Table 10. Summary of laws, statutes and other regulatory frameworks relevant to the projects ...... 19 Table 11. Summary of project compliance with laws, statutes and regulatory frameworks relevant to Hutan Desa ...... 22 Table 12: Selection of Carbon Pools examined in baseline scenario and for the project (adapted from Table A, VM0004, pg 6 – 7) ...... 30 Table 13: GHG emissions by sources and sinks (adapted from Table B, VM0004, page 7 – 8) ...... 31 Table 14 Summary: Assessment of alternative land use scenarios ...... 32

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Table 15 Reasoning and evidence that the project activity is performed without being registered as a VCS AFOLU project is not plausible ...... 36 Table 16 Reasoning and evidence that the conversion to oil palm is a plausible land-use scenario in the absence of the project activity...... 38 Table 17. Peat depth strata ...... 43 Table 18 Summary of information on annual area converted from peat swamp forest to oil palm in West Kalimantan...... 45 Table 19: Error Matrix of assessment of above ground biomass strata classification accuracy ...... 47 Table 20 Default values used in calculation of GHG emissions from biomass burning for land clearing ...... 50 Table 21. Summary of calculations for estimating carbon stock in above-ground biomass per hectare, per plot ...... 51 Table 22. Monitoring activities time periods and frequency of monitoring detection, survey and reporting ...... 60

1. PROJECT DETAILS

1.1. Summary description of the Project Table 1 summarises the key geographical, biophysical and socio-economic attributes of the Pematang Gadung peat swamp forest.

Table 1 Summary of key attributes of the project area

Project area 28,051 hectares Geographic Latitude: 1.83 South to 2.00 South position Longitude: 110.35 East to 110.12 East Forest type Secondary peat swamp forest

Soil type Peat soil with dominant soil types: Tropofibrists, Troposaprists, and Tropoquents Degradation Previously selectively logged by commercial forestry companies and status local communities, Degradation in some of the project area as a result of fire Current Zoned for conversion forest, and production forest. There are two development approved oil palm concessions. In addition, there is a government status transmigration allocation zone adjacent to those licenses Legal land use Conversion forest, Hutan Produksi Konversi classification Primary threat Conversion to oil palm plantation

The 28, 051 hectare (ha) Pematang Gadung peat swamp forest is located in Ketapang District, West Kalimantan, Indonesia (see Figure 2).The project area is located within the sub-district of South Hilir, approximately 20 kilometres South-East of the district capital, Ketapang city, and is contained within three different Desa (village) boundaries; (i) Pematang Gadung; (ii) Sungai Besar; (iii) Sungai Pelang (see Figure 3). Under Indonesia’s land use classification system, the Pematang Gadung peat swamp forest is zoned for conversion to a non-forest land use (i.e.: zoned as Hutan Produksi Konversi, HPK), and production forest. In the absence our project interventions, we believe that a licence for conversion of the project area to oil palm plantation, especially in conversion forest zone would have already been granted for the site. The objectives of this project are to:

 Prevent conversion of the site to oil palm plantation

 Restore the vegetation to its original condition

 Improve the well-being of the local communities surrounding the project area

 Quantify avoided emissions associated with conservation of this iconic wetland and peat swamp forest

 Sell Verified Emission Reductions (VERs) generated by the project

1.2. Sectoral scope and project type The project fits within the following Verified Carbon Standard (VCS) Agriculture, Forestry and Other Land Use (AFOLU) project scope, categories and sub-categories: Table 2 VCS project scope, category and sub-category

Scope Category Activity

14, Agriculture, Forestry and Other Peat Rewetting and Conservation of Undrained Peatland Land Use (AFOLU) Conservation (PRC) (CUP) & REDD

1.3. Project proponent Three local villages (Desa) that have been granted Hutan Desa within their village jurisdiction are, jointly, the project proponents. These villages are; Pematang Gadung, Sungai Besar, and Sungai Pelang. See also Section 1.9. The project will be managed through an inter-village institution established according to Indonesian Law pertaining to the establishment of Hutan Desa (see also Section 1.11.1). The inter-village institution is in the currently process of being established. FFI signed a Memorandum of Understanding with the Indonesian Ministry of Forestry in 2010 pertaining to the “development and facilitation of community forests” (Hutan Desa) in Ketapang district, West Kalimantan (see supporting documentation). Therefore, FFI is considered an implementing partner and is responsible for operating the project activity in partnership with the Desa. A summary of key information about the project proponent and partners is provided below.

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Table 3: Key information about the project proponents and partners

Project proponent

Name Hutan Desa Pematang Gadung, Sungai Besar, dan Pelang

Organisational category Legal entity of community forest

Address Desa Sungai Pelang, Ketapang, West Kalimantan

Contact person Jaswadi

Contact details +62 81352276427

Implementing partner

Name Fauna & Flora International (FFI)

Organisational category Non Governmental Organisation (NGO)

Address Komplek Laboratorium Universitas Nasional (UNAS), Jl. Harsono RM No. 1, Ragunan, Jakarta 12550, Indonesia.

Contact person Darmawan Liswanto

Contact details +62 21 7800 981 [email protected]

1.3.1. Implementing partner: Fauna and Flora International FFI is the world’s longest-established international conservation organisation. FFI’s vision is to create a sustainable future for the planet where biodiversity is conserved by the people living closest to it. FFI aims to do this through the conservation of threatened species and ecosystems worldwide, choosing solutions that are sustainable, based on sound science and take account of human needs. FFI has significant experience in implementation of forest conservation projects in over 40 countries where there is little capacity to conserve endangered and threatened habitats and species. FFI has been active in Indonesia since 1996 and has a significant regional presence, including a field office in Ketapang, which employs local staff that are familiar with the regional ecology and understand the social issues unique to the project area.

1.3.2. Roles and responsibilities of the project proponent and implementing partner The Hutan Desa Pematang Gadung, Sungai Besar, and Pelang is the principal project proponent and with help from FFI as project implementer are responsible for the design and operation of the project activity.

1.4. Other entities involved in the project There are number of other entities that assist with project development. These are outlined in Table 4.

Table 4. Summary of entities involved in the project Entities Involvement Contact information Deltares Deltares is responsible for advice Rotterdamseweg 185, Delft, The regarding establishment of the Netherlands peat subsidence monitoring P.O. Box 177 program 2600 MH Delft, The Netherlands tel: + 31 (0)88 335 8273 fax : +31 (0)88 335 8582 [email protected] Tanjungpura Peat depth sampling and Dwi Astiani, Department of University aboveground biomass sampling on Forestry. [email protected] project site 2010 - 2011 Dinas Kehutanan Approval of Rights and verification Dinas Kehutanan Kabupaten (Ministry of Forestry of boundary. Ketapang – Provincial office) Monitoring of Hutan Desa Jl. Letkol M. Tohir No. 11 Ketapang, and District office) workplan Tel: (0534) 32401 Fax. (0534) 32724 Forest Carbon Development of spatial outputs PT Forest Carbon Consultants from remote sensing data Jl. Kemang Selatan VIII, No. 5A Jakarta Selatan 12730 Indonesia [email protected]

1.5. Project start date Section 3.2.1 of the VCS AFOLU Requirements document states that: “the project start date of an AFOLU project shall be the date on which activities that lead to the generation of GHG emission reductions or removals are implemented. Such activities may include preparing land for seeding, planting, changing agricultural or forestry practices, or implementing management or protection plans.” (p.7) By this definition, and in the context of this REDD project, activities that lead to the generation of GHG emission reductions or removals include activities implemented to progress the transfer of land Management Rights from the Indonesian Government to the local villages (Desa) for the sustainable management of natural forest areas. This is because the change in designated management rights from the Ministry of Forestry to the project proponents ultimately prevents the conversion of peat swamp forest to oil palm in the project area (see Section 2.4). There are complexities in this definition with respect to the project site, because; 1. There are numerous administrative steps in the process of altering land management rights within the project boundary (see Figure 1 and Table 5);

2. There are four ‘subdivisions’ in the spatial designation of the Management Rights within the project area, whereby the associated Management Rights for each sub-area are separately designated and approved1 (see Figure 3 and Section 1.8.1 for further explanation). Table 5 below outlines the chronology of establishing land Management Rights for the project proponents, and denotes ‘step 4’ as the appropriate project start date.

Table 5. Chronologically of establishing Management Rights for the project proponents Chronologically of establishing Date Supporting Evidence Management Rights establishment 1. FFI started advocating REDD 2009 FFI REDD Pilot Project activities in Kalimantan, Proposal to the David Lucile including for Hutan Desa as a Packard Foundation and REDD mechanism subsequent grant received. 2. Hutan Desa license Desa Pematang Gadung– August Proposal letters submitted by application process was 2009 the Desa to the Bupati. initiated by the project Desa Sungai Besar – January 2009 proponents (see also step 2 in Figure 1) Desa Sungai Pelang – April 2010 3. FFI MoU was signed with MoF July 2010 FFI-MoF MoU (note: there is as a joint agreement to no site specific reference to develop Hutan Desa as a Pematang Gadung in the REDD mechanism in Ketapang MoU) District 4. PROJECT START DATE: Desa Pematang Gadung– 17 Feb Official letters from the MoF Ministry of Forestry approval 2010 to the Bupati. of the Hutan Desa Working Desa Sungai Besar – 11 Oct 2011 Area (step 6 in Figure 1) and District Government approval Desa Sungai Pelang – 24 August Decree for designation of a 2011 Conservation Area (see also Section 1.8.1 and Figure 3)

5. Date of approval of Hutan In progress - not yet approved Desa Management Rights by the Governor (see step 14 in Figure 1).

1 Note: After approval of Management Rights to communities in the project area, the project area will be managed collaboratively under one joint village institution.

1.6. Project crediting period The total project crediting period is 35 years, which is the same number of years as the duration of the Pematang Gadung Hutan Desa licence. There is a possibility that the crediting period could be extended, pending the possible extension of the Pematang Gadung Hutan Desa license (see also Section 1.10.1.) An overview of the project temporal boundaries is summarized in Table 6 below. Table 6. Overview of the temporal boundaries of the project

Project start date October 2009

Crediting period start date October 2013

Duration of crediting 35 years to match the Pematang Gadung Hutan Desa license duration. period Possible extension of the crediting period with possible extension of the Pematang Gadung Hutan Desa license

Date the project baseline 10 years. However aspects of the baseline may be revised sooner in will be revised the likely event that new information and/or technologies improve the accuracy of the baseline forecast

Frequency of monitoring Annually or biannually for the first ten years of project

1.7. Project scale and estimated GHG Emission Reductions or Removals This project is not considered a mega-project. A summary of estimated GHG emission reductions for the first 10 years of the project is provided in Table 7. These calculations assume a 10 % risk buffer allocation, as described in the ‘‘Non Permanence Risk Report’ provided in the supporting documentation.

Table 7. Estimated emission reductions expected over the first 10 years of the project Crediting year Year ending Estimated Estimated ERs ERs after risk buffer (t CO2-e) deduction (t CO2e)

1 1 490,000 441,000 2 2 600,000 540,000 3 3 700,000 630,000 4 4 930,000 837,000 5 5 1,030,000 927,000 6 6 960,000 864,000 7 7 1,030,000 927,000 8 8 1,030,000 927,000 9 9 1,000,000 900,000 10 10 990,000 891,000 Total ERs over 10 years 8,760,000 7,880,000 Average annual ERs 880,000 790,000

1.8. Description of the project activities Each key project activity is described below, including how the activities will achieve net GHG emission reductions and the lifetime of the activities. Note: No project activities will be implemented that will lower the water table, in accordance with Section 4.2.12 of the VCS AFOLU Requirements.

1.8.1. Establish community-based land management rights In the baseline scenario the Indonesian Government (via the Ministry of Forestry) would have formally approved conversion of parts of the project area to oil palm plantation, in accordance with land use zone designations in government-approved spatial plans (see Section 1.10.1). This would most likely have also resulted in the subsequent conversion of the remaining project area to oil palm, and subsequent emissions from deforestation of the majority of the project area (see Section 2.4). Project activities will avoid this scenario via the establishment of new land management rights that both empower and legally oblige the Desa (Villages) to maintain natural forests in a sustainable manner across the project area. These changes in land management rights are being established across the project area via two mechanisms; (i) establishment of Hutan Desa areas via licenses; and (ii) establishment Hutan Desa via a Bupati (District Government) Decree. Each of these mechanisms is discussed below.

Establishing Hutan Desa via license approval from the Ministry of Forestry Establishing Hutan Desa license areas ultimately transfers land rights from the Indonesian Ministry of Forestry (baseline scenario) to the Desa (villages)2 for the duration of the license. The process of establishing a Hutan Desa license involves a number of steps of administrative requests and approvals; these are outlined in Figure 1. According to Hutan Desa regulations, a Hutan Desa license must be allocated to an individual Desa (i.e. it is not possible to have one Hutan Desa license granted across multiple Desa jurisdictions). Therefore; each Desa in the project area has applied separately for a Hutan Desa License that covers the portion of the Pematang Gadung Peat Swamp Forest area within their jurisdiction. Subsequently, the project area over which the Hutan Desa licenses will be established has 3 sub- boundaries, one for each Desa (see Figure 3). Three Hutan Desa license applications have now been verified by the Ministry of Forestry (Step 6, Figure 1) and approval of Hutan Desa Management Rights by the Governor (Step 14, Figure 1) is anticipated in April 2012. The duration of each Hutan Desa licenses and management rights is 35 years. Establish a Hutan Desa via a Bupati Decree – part of spatial plan process The Ministry of Forestry did not approve and verify a portion of the area that was originally proposed by the Villages to be included within the Hutan Desa licenses for the Desa Sungai Besar and Desa Sungai Pelang. FFI sought further information on the reason for this, and found that it was due to changes in land use zone designations that are currently in progress. In particular, a portion of the project area zoned as HPK is now in the process being re-designated to an Areal Penggunaan Lain (APL) (other land use) as part of revisions to the District Spatial Plan. Land areas zoned as APL in government spatial plans formally fall under the jurisdiction of the District Government. Therefore, the portion of the project area that is being rezoned from conversion forest (HPK) to other land use (APL) for the development of the new District Spatial Plan is now considered as under the jurisdiction of the Ketapang District Government, and subsequently the Ministry of Forestry no longer has the authority to approve Hutan Desa licenses over this land area because of its classification as an APL zone. Approval of Hutan Desa via the establishment of a Bupati/District Decree is now being pursued by FFI on behalf of the project proponents (see supporting evidence), and it is anticipated that this decree and relevant provisions will be approved by the District Government Parliament in April or May 2012.

1.8.2. Develop forest management workplans In accordance with regulations governing Hutan Desa licenses (see Section 1.11.1), a 35-year long term workplan, accompanied by an annual workplan, will be developed by the three Villages (Desa) as the basis for sustainable management plans of the natural forest within the project area. Workplan activities will include marking the boundary the Hutan Desa areas and establishment of routine forest protection activities. FFI is already supporting the initial development of forest protection activities within the project area. To date this has included development and delivery of a training program for community- based forest protection patrols in 2011 (see training materials in Supporting Evidence).

2 Desa (or Villages) are the smallest administrative jurisdiction unit, after Province and District (sub-province) and sub-District jurisdictions.

The project proponents will also be legally obliged to report on the progress of workplan activities to the Ministry of Forestry.  Zoning areas within hutan desa; restoration zone, utility zone (NTFPetc.) – in accordance with Hutan Desa regulations / management plan  Boundary mapping demarcation in the field; partially complete – needs to be adjusted based on new verification map from moF; also in compliance with Hutan Desa regulation  Protection patrols – protection system needs to be developed, SOP for forest patrolling will be used as a basis for this (also combined with biodiversity monitoring). Patrolling; illegal logging, fire, poaching, encroachment/settlement. o Arcus – funding for protection patrols for Orangutan o USFWS – orangutan, o BBC – organgutan o Plan to combine different types of forest monitoring o Monahan foundation – philanthropic donation for orangutan  Economic activities / sustainable livelihoods – alternative livelihood development; need to discuss further with Ema, fishing in canal, ecotourism – bird-watching, primate-watchign etc., wallet/bird-nest industry  Tree planting / forest restoration - nurseries established under GTC, native trees being planted in project area  Education/ conservation awareness raising -  Potential sustainable timber harvesting – in compliance with regulations  Monitoring

1.8.3. Obtain a license for carbon credit trading After the approval of the Rights of Management by the Governor, FFI will also facilitate the three Villages/Desa to (jointly) obtain an Ijin Usaha Pemanfaatan penyimpanan dan penyerapan karbon (Utilisation Permit for Carbon Sequestration and Storage) from the Government, which will entitle them to generate and trade carbon credits and ultimately generate revenue to fund project activities and alternative livelihood activities in the long term.

1.8.4. Participate in government spatial planning activities FFI and local communities are working with all levels of Government (National, Provincial, District, sub-District) to address deforestation at the legal and institutional level. A key part of this work has been participation in spatial planning activities. Spatial planning activities aim to reduce short term deforestation pressure by supporting and influencing Government spatial planning processes. Evidence of FFI’s involvement in Ketapang District spatial planning processes is provided in the supporting documentation.

Figure 1: Process of Obtaining Hutan Desa Concession License Process of Obtaining Hutan Desa Licenses

2 3 Submit Recommendation Recommended Working for Hutan Desa Working Area Area of Hutan Desa Village Government Bupati / Walikota Ministry of Forestry 7 6 Socialization Approval of Working Area

1 5 8

11 Recommendation 10 Request for 4 Village People Village Regulation Right of Management

Verification Team 9 Governor

13 Creation of Village Institution for Hutan Desa 14 Management Approval of Hutan Desa Recommendation Management Rights 12

Verification Team

Procedure of Stipulation of Hutan Desa working area

Procedure of Obtaining Hutan Desa Management Rights

1.9. Project location The project location is located in Ketpang District, West Kalimantan, Indonesia (see Figure 2). The project area is located within in the sub-district of South Hilir, approximately 20 kilometres South-East of the district capital, Ketapang city, and is contained within three different Desa (village) boundaries; (i) Pematang Gadung; (ii) Sungai Besar; (iii) Sungai Pelang (see Figure 3) . A summary of the relevant jurisdictional boundaries associated with the project area is provided in Table 8.

Table 8. Jurisdiction boundaries that overlap with the project area Jurisdiction administrative Jurisdiction name(s) ‘level’ Province West Kalimantan Province District Ketapang District Sub-district South Hilir Desa (i) Pematang Gadung (village-level jurisdiction) (ii) Sungai Besar; (iii) Sungai Pelang

Project geographic boundaries The project geographic boundaries are derived from the Pematang Gadung Hutan Desa boundaries, as approved by the Indonesian Ministry of Forestry for each of the Desa, and also the boundaries of the anticipated Hutan Desa area to be approved by the District Government (see also Section 1.8.1 above). These boundaries are shown in Figure 3. Further details of how the land areas within these boundaries were spatially segregated and used in ex-ante carbon accounting calculations are described in Section 2.3.1

Figure 2: Location of the project area, West Kalimantan, Indonesia

Figure 3: Location of project geographic boundaries, Ketapang District, West Kalimantan, Indonesia

1.10. Conditions prior to implementation

1.10.1. Land use status prior to initiation Prior to project implementation, most of the land within and around the project area was designated as Conversion Forest Hutan Produksi Konversi and Production Forest (Hutan Produksi) in the District and Provincial Governments’ Spatial Plans (see Figure 4).

Under Indonesian law, areas of land zoned as HP and HPK are managed and regulated by the Indonesian Ministry of Forestry (MoF). Production forest (HP) can be legally used for timber extraction, and conversion forest can be legally zoned for deforestation and conversion for oil palm or pulp plantations.

The Ketapang District Land Office (Kantor Pertanahan Kabupaten Ketapang) approved two Initial Licenses (Izin Lokasi), within the HPK land use zone within project area. These are summarized in Table 9 below (see also Supporting Evidence; Oil Palm conversion). The Indonesian Ministry of Transmigration also designated a transmigration zone adjacent to oil palm concessions. Transmigration zones are areas to be allocated to settlers migrating in from outside the district; in this case to facilitate the provision of labor for oil palm companies. Presently these land use designations are being re-zoned as part of REDD project activities, to secure community forest status (Hutan Desa) within the project area (see also Section 1.8).

Table 9. Summary of oil palm licenses approved in the project area prior to project initiation Company Initial License identification Date Total area PT. Prana Indah Gemilang SK Perubahan No. 299 31-07-2008 12,230 ha PT. Ghoniyu SK Izin Lokasi No. 77 27-03-2009 11,000 Source: see Supporting Evidence / Plantation Development Activities for Ketapang District, 2009 (Penyebaran Kegiatan Pembangunan Perkebunan).

Figure 4: Production (HP) and Conversion (HPK) land use zones, and boundaries of Initial License granted to PT Ghoniyu and PT Prana Indah Gemilang

Source: see Supporting Evidence for documentation of initial licenses and oil palm concession boundaries.

1.10.2. Condition of peatland The project area contains sections of three peat domes (Figure 11). A more detailed description of these peat domes and their hydrology within the project area is provided in Section 3. Drainage canals were established in the Pematang Gadung area prior to project initiation. This includes a network of agricultural canals on the western boundary of the project area, and a canal extending north from the Kepulu River (see Figure 6 and Figure 8). In accordance with the methodology Applicability Conditions, areas of drained peatland surrounding these canals have been identified spatially using GIS, and excluded from the project area boundary (see Section 2.2 for details).

1.10.3. Condition of the forest Forest in the project area predominantly consists of Peat Swamp Forest. This includes areas of relatively intact forest areas, and degraded forests. These forest types and their spatial distribution in the project area are described in further detail in Section 3.1. Logging has occurred in the area from the 1950s as part of the Retna Julianta concession. Selective logging has also occurred more recently, evidenced by the presence of light rail logging trails and small canals are used to transport timber (see Figure 6).

Former logging tracks are present across the project area, see Figure 5 below. Such tracks have also been mapped as the occurrence of unnaturally linear water features, based on interpretation of Landsat imagery detected in the area (see Figure 6). Selective logging is still occurring in the project area.

Forest degradation as a result of fire is also evident in the project area, as evidenced by observations made during field data collection. Analysis of FIRMs/MODIS imagery (1km resolution) has also revealed that areas within and around the project area been affected by fires prior to project initiation (see Figure 6).

Figure 5. Photographic evidence of illegal logging in the project area

Source: Astiani, 2011

Figure 6. Disturbances in and around the project area: logging tracks and historical fire hotspots

Statement to confirm the project was not implemented to generate GHG emissions for the purpose of their subsequent reduction, removal or destruction Fauna Flora International is a well-respected conservation NGO with a proven track record of managing complex projects. Using the sale of carbon credits to finance forest destruction runs counter the principals and mission stated within the FFI charter. Local villages participating in the project will derive a number of environmental benefits from the preservation of the forest and have committed to conserving the forest for this reason. The establishment of an REDD and distribution of benefits project in areas around Pematang Gadung will strengthen conservation not finance deforestation.

1.11. Compliance with Laws, Statutes and Other Regulatory Frameworks

1.11.1. Laws, statutes and other regulatory frameworks relevant to the project Relevant local, regional and national laws, statutes and regulatory frameworks are outlined in Table 10 below. Table 10. Summary of laws, statutes and other regulatory frameworks relevant to the projects Relevance Laws, statutes and regulatory frameworks General  Ministry of Forestry Republic of Indonesia Decree Number: P. 30/Menhut-II/2009 regarding the Procedures for Reducing Emission from Deforestation and Forest Degradation (REDD)  Ministry of Forestry Republic of Indonesia Decree Number: P. 36/Menhut-II/2009 regarding Procedures for Licensing of Commercial Utilization of Carbon Sequestration and/or Storage in Production and Protected Forests  Government of Indonesia Regulation No. 6, 2007 on Forest Regulation and Development of Forest Management Plan and Utilization of Forests  Ministry of Forestry Republic of Indonesia Decree Number P61/Menhut-II/2008 regarding Provisions and Procedures for the Granting of Business Permits for the Utilization of Products of Wood Forest Ecosystem Restoration in Natural Production Forests thru Application.  Ministry of Forestry Regulation No P.68/Menhut-II/2008 on the Implementation of Demonstration Activities on Reduction of Emission from Deforestation and Degradation  Decree of the Minister of Forestry No. SK.455/Menhut-ii/2008 on Working Group on Climate Change in the Department of Forestry  Ministry of Forestry Regulation Number: P.50/Menhut-II/2010, concerning Procedures of granting and expansion of work area of business licenses for timber forest product utilization (IUPHHK) in natural forest, IUPHHK ecosystem restoration  Decree of Minister of Forestry no. 259/Kpts-II/2000 regarding harmonization of Central and Provincial Spatial Plans  Decree of Minister of Forestry and Plantation 376/Kpts-II/1998 regarding criteria to control forest areas for oil palm plantations  Regulation of the Minister of Forestry Number P.13/Menhut-II/2004 on the Organization and Work Procedure of the Department of Forestry, as several times updated, last by Number P.64/Menhut-II/2008  Government Regulation Number 44 of 2004 on Forestry Planning (State Gazette of the Republic of Indonesia of 2004 Number 146, State Gazette of the Republic

of Indonesia Number 4452);  Government Regulation Number 45 of 2004 on Forest Protection (State Gazette of the Republic of Indonesia of 2004 Number 146, State Gazette Supplemental of the Republic of Indonesia Number 4452);  Government Regulation Number 6 of 2007 on Forest Management and Formulation of Forest Management and Forest Utilization Plan (State Gazette of the Republic of Indonesia of 2007 Number 22, State Gazette Supplemental of the Republic of Indonesia Number 4814);  Government Regulation Number 38 of 2007 on the Division of Governmental Affairs Between the Government, Provincial Government and Regency/Municipal Government (State Gazette of the Republic of Indonesia of 2007 Number 82, State Gazette of the Republic of Indonesia Number 4737;  Law Number 5 of 1990 on Conservation of Biological Resources and Their Ecosystem (State Gazette of the Republic of Indonesia of 1990 Number 94, State Gazette Supplemental of the Republic of Indonesia Number 3419);  Law Number 32 of 2010 on Environmental Management (State Gazette of Republic of Indonesia Year 1997 Number 68, State Gazette Supplement Number 3699);  Law Number 41 of 1999 on Forestry (State Gazette of the Republic of Indonesia of 1999 Number 167, State Gazette Supplemental Number 3888) as amended by Law Number 19 of 2004 on the Determination on Government Regulation In Lieu of Law No. 1 of 2004 on Amendment on Law No. 41 of 199 on Forestry to be Law (State Gazette of the Republic of Indonesia of 2004 Number 86, State Gazette of the Republic of Indonesia Number 4412);  Law Number 32 of 2004 on Regional Government (State Gazette of the Republic of Indonesia of 2004 Number 125, State Gazette Supplemental of the Republic of Indonesia Number 4437);  Law Number 26 of 2007 on Landscaping (State Gazette of the Republic of Indonesia Number 68 of 2007 State Gazette Supplemental Number 4725) Legalisation  Law No. 5 of 1960 regarding Basic Agrarian Law (September 24,1960) of the  Law No. 41 of 1999 regarding Forestry (September 30, 1999) baseline  Law No.18 of 2004 regarding Plantations (August 11, 2004) activities  Law No. 26 of 2007 regarding Spatial Planning (April 27, 2007)  Government Regulation No.7 of 1999 regarding the Implementation of Environment Impact Assessment (May 7, 1999)  Decree of Minister of Forestry and Plantation 376/Kpts-II/1998 regarding criteria to control forest areas for oil palm plantations  Government Regulation No.45 of 2004 regarding Forest Protection (October 18, 2010)  Ministry of Forestry Regulation No.P.6/Menhut-II/2009 regarding the Area of Forest Management (January 30, 2009)  Ministry of Forestry Regulation No. 31/Menhut-II/2005 regarding Releasing the Forest Area in order to Develop the Cultivation of Plantation (October 25, 2005)  Ministry of Forestry Regulation No.P.22/Menhut-II/2009 regarding Amendment of Ministry of Forestry Regulation No. 31/Menhut-II/2005 regarding Releasing the Forest Area in order to Develop the Cultivation of Plantation (April 7, 2009)  Ministry of Forestry Regulation No.P.61/Menhut-II/2008 regarding the Provision and Application Procedure for Granting of Business License for Forest Wood Utilization of Natural Forest in Production Forest (October 28, 2008)  Ministry of Agriculture Regulation No.14/Permentan/PL.110/2/2009 regarding

the Guidance to Use the Peat Land for Cultivation of Palm Oil (February 16, 2009)  Ministry of Agriculture Regulation No.26/Permentan/OT/140/2/2007 regarding the Guidance of Plantation Business Licensing (February 28, 2007)  Ministry of Forestry Decree No.146/Kpts-II/2003 regarding the Guidance on Evaluation of Utilization of Forest/Ex-Forest Area for Developing the Cultivation of Plantation (April 22, 2003)  Joint Decree of Ministry of Forestry and Ministry of Plantation No.376/Kpts- II/1998 regarding the Criteria of Providing the Forest Area for the Cultivation of Palm Oil Plantation (April 8, 1998)  Joint Decree of Ministry of Forestry, Ministry of Agriculture and Head of National Land Authority No.364/Kpts-II/1990:519/Kpts/hk/050/7/1990:23/VIII/1990 regarding the Provision on Releasing the Forest Area and Granting the Exploitation Rights (“HGU”) for Developing the Agriculture Business (July 25, 1990) Obtaining  Article 33 (3) Constitution of Republic Indonesia 1945. Hutan Desa  Law No.41 of 1999 regarding Forestry (September, 30, 1999) (“Law 41/99”).  Law No. 32 of 2004 regarding the Local Government (October 15, 2004).  Government Regulation No. 6 of 2007 regarding the Management and Planning of a Village Forest (January 8, 2007) (“GR 6/07”).  Ministry of Forestry Regulation: P49/Menhut-II/2008 regarding Village Forest (“Permenhut 49/08”) (August 25, 2008).  Ministry of Forestry Regulation: P14/Menhut-II/2010 regarding amendmentofPermenhut49/08 regarding Village Forest (“Permenhut 14/10”) (March 31, 2010).

1.11.2. Compliance of the project with relevant local, regional and national laws, statutes and regulatory frameworks Compliance with the laws, statutes and regulatory frameworks is evidenced by District and Central Government support for the project as well as through a lack of convictions or court cases in the Indonesian courts system. Further, REDD is an allowable activity under the bundle of rights afforded to the villages with Hutan Desa. A village can develop a REDD project in a hutan desa license area by including this activity in the work plan for the hutan desa. Further details of how this project is compliant with laws, statutes and regulatory frameworks relevant to obtaining a Hutan Desa license and Right of Management is summarised in Table 11 (see also Figure 1)

Table 11. Summary of project compliance with laws, statutes and regulatory frameworks relevant to Hutan Desa Law Key legal requirements related to obtaining a Explanation of compliance Hutan Desa license and Right of Management Article 23 Approvals necessary for obtaining a hutan Approvals for obtaining a Hutan Desa Permenhut desa concession include: License and Right of Management for Desa 49/08 and a) Approval of the Working Area for Hutan in the project area are being progressed Article 28 according to these requirements for desa by the Ministry of Forestry; Permenhut approval.

49/08 b) Approval of Right of Management of Hutan desa by the Governor; See Section 1.8 and Figure 1. c) Approval of The Wood Forest Product Utilization License (Izin Usaha Pemanfaatan Hasil Hutan Kayu or IUPHHK) by the Ministry of forestry. Article 5 of  A ‘village institution’ must be created as A village institution is in the process of Law 41/99 the managing body for the hutan desa. being established as part of project The village institution is located within the activities (see Section 1.8). village organizational structure, and

reports to the head of village (Kepala Desa).  The Right of Management for a hutan Natural forest management activities are in desa is restricted to natural forest the process of being established in management activities which in turn must anticipation of compliance with the Right be based on sustainable forest of Management (see Section 1.8). management principles.

1.12. Ownership and other programs

1.12.1. Right of use The Hutan Desa and the associated Rights of Management meet the following VCS definition of a right of use; “*A+ right of use arising or granted under statute, regulation or decree by a competent authority”

1.12.2. Emissions Trading Programs and Other Binding Limits At present, this issue is not applicable. GHG emission reductions are not currently expected to meet binding limits on GHG emissions. However it is possible that such emission reductions may be used to meet legally binding limits in future, in which case FFI would notify the VCS Association.

1.12.3. Participation under Other GHG Programs Not applicable. The project has not been registered, nor is it seeking registration under any other GHG programs.

1.12.4. Other Forms of Environmental Credit Not applicable. FFI ascertains that no other form of environmental credit has been generated from this project. It is possible that FFI or its implementation partners may wish to generate other forms

22 of environmental credits (such as biodiversity credits) from the project area at some point in the future, but this is not presently being considered. In any case, these credits would not be related to energy or GHG crediting or offsetting, and therefore there is no risk of double-crediting. FFI will provide the VCS Association with full information about the generation of any biodiversity or other non-energy/GHG related environmental credits, should this occur in future.

1.12.5. Projects Rejected by Other GHG Programs Not applicable. FFI can confirm that the project has not been rejected under any other GHG program.

1.13. Additional information relevant to the project

1.13.1. Eligibility criteria for grouped projects Not applicable. The project is not a grouped project.

1.13.2. Leakage management Refer to project activities outlined in section 1.8.1 above.

1.13.3. Commercially sensitive information Some commercially sensitive documents were provided to the auditor. Such documents are marked confidential in the document list at the beginning of this document, as well as on the file name of the document itself.

1.13.4. Further information Not applicable.

2. APPLICATION OF THE METHODOLOGY

2.1. Title and Reference of Methodology The project will follow the Verified Carbon Standard’s (VCS) double approved methodology number VM0004 entitled “Methodology for Conservation Projects that Avoid Planned Land Use Conversion in Peat Swamp Forests, v1.0”. The methodology was developed by Infinite Earth, Ltd and was approved by the VCS on August 23, 2010. This methodology was designed for the Rimba Raya peat swamp forest located in Central Kalimantan, an ecosystem which shares many of the biophysical characteristics of the Pematang Gadung Peat Swamp Forest. The VCS Tool VT001 entitled, ‘Tool for the Demonstration of Additionality on VCS Agriculture, Forestry and Other Land Use (AFOLU) Project Activities’ was used as the criteria to assess the projects’ additionality. The VCS Module VMD0005 entitled, ‘Estimation of carbon stocks in the long-term wood products pool (CP-W) was used to guide the calculation of emissions related to timber harvesting.

2.2. Applicability of methodology A description of how the project satisfies each of the applicability condition specified in the methodology is described below.

2.2.1. Condition A: Tropical, undrained peat swamp forest in southeast Asia Project must prevent land use change The baseline scenario for the project is conversion to an oil palm plantation. Peat must be undrained at project inception The project boundary has been determined based on factors including the distribution of undrained peat swamp forest. The project boundary excludes local areas of peat swamp forest that were drained prior to project initiation (see also Section 1.9). Forest must be tropical peat swamp forest The field inventory data and remote sensing images provide evidence that the site contains peat swamp forest. Species identified during the aboveground biomass inventory are typical of a tropical peat swamp forest, and full species lists are provided along with the field sheets accompanying this document. Project must be located in southeast Asia As described in Section 1.9, the Pematang Gadung peat swamp forest is located in the Ketapang District, West Kalimantan Province, Indonesia, in South East Asia. Peat must be defined in accordance with the Methodology The Methodology defines peat as organic soils with at least 65% organic matter and a minimum thickness of 50 cm. This definition was used for the identification and mapping of peat in the project area (see also Section 3.1). Areas of peat that are less than 50cm deep were classified as ‘non peat’.

2.2.2. Condition B: Baseline approach In accordance with Kyoto Protocol Decision 5/CMP.1, paragraph 22, the baseline approach considered most applicable for determination of the baseline scenario is approach (c); changes in carbon stocks in the pools within the project boundary from the most likely land use at the time the project starts. This approach is considered most appropriate due to the fact that the baseline deforestation driver is planned. See also Section 2.2.4 below for further details of supporting evidence.

2.2.3. Condition C: avoided conversion, not avoided degradation The project avoids the likely complete conversion of peat swamp forests to another known land use (palm oil plantation). See also Section 0 for further details of supporting evidence.

2.2.4. Condition D: avoided planned conversion Preventing planned land use conversion in known, discrete parcel(s) of peatland, that are officially and legally designated for and under direct threat of such conversion As evidenced by the spatial land use plan for West Kalimantan, the Pematang Gagdung peat swamp forest was zoned for conversion to an alternative land use, in accordance with a number of regulations including the Decree of Minister of Forestry and Plantation 376/Kpts-II/1998 (see also Section 1.11). Further, two initial licenses (Izin Locasi) for oil palm development were approved by the district government in 2008. These initial licenses cover discrete parcels of land within the project area (see also Section 1.10.1 and Figure 4). Planned deforestation must be projected to occur within ten years of the project start date The temporal analysis of oil palm development case studies in Indonesia undertaken by FFI in 2012 demonstrates that the time taken to achieve all required approvals from un-licensed HPK through to commencement of conversion activities, is typically three years or less3. Therefore it is likely that the two companies with Initial Licenses approved for oil palm development in the project area in 2008 would have obtained all relevant permits required for initiating oil palm development activities within a 3 year timeframe from when the Initial Licenses issued, were it not for project activities implemented to date.

2.2.5. Condition E: Avoided conversion by large corporate entities The Initial License holders, PT Ghoniyu and PT Prana are considered as large corporate entities. Further, large corporate oil palm groups hold all the oil palm licences in the District.

2.2.6. Condition F: Net peat drainage depth shall be calculated using a depth of one meter Assumptions in GHG calculations were consistent with this condition (see Section 3).

2.2.7. Condition G: Exclusion of the dead wood and litter carbon pools Carbon stocks in dead wood and litter can be expected to further decrease (or increase less) in the absence of the project activity during the time frame that coincides with the crediting period of the project activity.

3 This analysis can be made available to the auditor on request.

Data collected and analysed by FFI from the Dinau Siwan Peat Swamp Forest in Kapuas Hulu, West Kalimantan provides supporting evidence for the exclusion of the dead wood and litter carbon pools. This data can be made available to the auditor on request.

2.2.8. Condition H: Project area does not include human settlements The project boundary has been determined such that any human settlements are excluded from the project area (see also Section 2.3 below).

2.2.9. Condition I: Forest biomass is steady-state or increasing at the start of the project The biomass of vegetation within the project boundary is expected to begin increasing from the start of the project as a result of the initiation of project activities (see Section 1.8). Monitoring project GHG removals by vegetation can therefore be conservatively neglected, however this will be measured as part of the long term monitoring program (see Section 4).

2.2.10. Condition J: Volume of trees extracted upon conversion is assumed to be the total volume above a minimum diameter threshold In the project carbon calculations, all trees above a 30cm Diameter at Breast Height (DBH) are assumed to be harvested and then sold in the local timber market, in accordance with the minimum legal diameter limit for harvesting in Indonesia (In accordance with P.11/Menhut-II/2009 Article 8).

2.2.11. Condition K: The project boundary shall be hydrologically intact The boundaries of the project area have been determined such that local areas of peat drained prior to the project start date are excluded from the project area (see also Section 2.3 below). In particular, the project boundaries are located no less than 1 km from pre-existing peat drainage canals in local area. Scientific evidence suggests that this is the maximum zone of influence of the canals on the condition of the peatlands (see Section 2.3 below for further details). The areas of peat swamp forest within the project boundaries are considered to be hydrologically intact.

2.2.12. Condition L: The project area was not zoned for conversion to generate additionality for REDD The area was zoned for conversion before significant international discussions in regard to REDD+ commenced. This is evidenced by the 2000 Spatial Land Use Plan for West Kalimantan. This evidence implies that the project area was not zoned for conversion to generate additionality for REDD.

2.3. Project boundaries

2.3.1. Geographic project boundaries The project boundary is shown in Figure 3, and a shapefile of the project boundaries is provided in supporting documentation. As per the Methdology Applicability Conditions, the project boundary is defined as the area of land within the Pematang Gadung Hutan Desa license area, excluding; (i) non-forest areas not qualifying as meeting the definition of a peat swamp forest; and (ii) peatland areas that are already affected by drainage canals. The method used to determine the project boundary, such that each of these exclusions are observed in accordance with the Methodology Applicability Criteria, are described further below.

Exclusion of areas that are not Peat Swamp Forest In accordance with the Methodology Applicability Condition A (see Section 2.2.1), the project area must consist of tropical peat swamp forest. Classification and stratification of above ground biomass strata in the project area identified areas of peat swamp forest (degraded and moderate) as well as areas of ‘shrub/fern’ and ‘bare soil’ (see Figure 12). Field observations indicate that most of the vegetation classified as ‘shrub/fern’ is highly degraded peat swamp forest (see Figure 7). Further, this vegetation class is considered to have potential to regenerate back to peat swamp forest within the project lifetime, if it is sufficiently protected from local drivers of degradation. Therefore this vegetation class has been considered as meeting the applicability criteria of a peat swamp forest.

Figure 7 Example of “shrub” vegetation in the project area

Source: FFI January 2012

Areas classified as “bare soil” were considered as non-forest areas and were excluded from the project area. To take into account potential error in vegetation classification, a conservative 200m buffer around the perimeter of each “bare soil” polygon was also excluded. Areas of vegetation occurring on mineral soil were also excluded from the project area, based on digital mapping of the peat dome extent (see Section 3.1.3 and Figure 11). Conservatively, areas of the peat strata E (see Figure 11 and Table 17) with a peat depth of less than 50cm were also excluded on this basis. Exclusion of drained peatlands As noted previously in the document, drainage canals have already been constructed in peatland adjacent to the project area. In accordance with the Methodology Applicability Condition A (see Section 2.2.1), the project boundary can not include drained peatlands. Results of recent hydrological modelling by Deltares (see van der Vat et al 2011) suggest that measurable drainage impacts (in the form of peat subsidence) can typically extend up to 1 km from a canal, although impacts decrease rapidly with increasing distance, and become negligible at more than 500m from a canal (see Figure 9). On the basis of this modelling, all peatland areas within a 1km buffer of the existing canals were excluded from the project boundary.

Note: Preliminary measurements of the main drainage canal dissecting the northernmost peatdome in the project area indicate canal dimensions of approximately 3 meters deep and 5 meters wide (see also Figure 8). FFI is also currently in the process of pursuing a more detailed expert assessment of the spatial extent of drainage impacts on the surrounding peatland from this canal, in conjunction with a proposal for the construction of canal blocking dams. In the case that the spatial extent of peatland drainage as a result of this canal is determined as greater than 1km from the canal, the project proponents will make revisions to the project boundary prior to validation.

Figure 8 Preliminary measurements of a peat drainage canal adjacent to the project area (draining into the main river)

Figure 9 Extent of drainage impact (subsidence) with increasing distance from a canal

0 Negligible impacts over 30 years within 0.5 – 1km of a canal 1

2 Significant impacts over 30 years within 0.5km of a canal 0m from canal

3 100m from canal subsidence subsidence 200m from canal 4 500m from canal

1000m from canal (meter below (meter original surface) 5 0 10 20 30 40 50 year

Source: Modified from Deltares (2011) for FFI

Project buffer zone The full extent of the three peat domes within and around in the project area may be considered as a discrete hydrological boundary (see Figure 11). However, the project boundary covers most but not all of the full extent of the peat domes. Therefore; based on the requirements of the Methdology4 it is considered most appropriate to establish the buffer zone based as the areas of peat that extend beyond the project boundary up to the edge of each peat dome (see peat dome extent boundary demarcated on Figure 3).

2.3.2. Sources, sinks and reservoirs (carbon pools) The GHG sources, sinks and reservoirs that have been measured for the baseline and project scenario are those that are specified in Section 4 of the Methodology, as summarised in Table 12.

4 In particular; The width of this buffer area around the project boundary shall be determined as the edge of the peat dome or 3 km from the project boundary, whichever is smaller (pg 8).

Table 12: Selection of Carbon Pools examined in baseline scenario and for the project (adapted from Table A, VM0004, pg 6 – 7) Selected Carbon Pools Justification / Explanation of Choice Yes/No Above ground Yes Major carbon pool subject to the project activity tree biomass Aboveground No Non-tree above ground biomass (NTAGB) was conservatively excluded from non-tree biomass baseline calculations as de minimus carbon pools. Field data collected by FFI from the Dinau Siwan peat swamp forest in West Kalimantan supports the assumption that the NTAGB pool is a not significant carbon pool. FFI can provide this data on request. Below ground No It is assumed that belowground biomass is included in the peat component. biomass Additionally, root to shoot ratios for peat swamp forests are highly uncertain. Deadwood No Conservative approach under applicability condition. Litter No Conservative approach under applicability condition. Peat Yes Major carbon pool subject to the project activity Soil Organic No The soil component is included in the peat component Carbon Wood Products Yes Removal of timber is associated with deforestation in the baseline, and significant quantities of carbon can be stored in long term wood products rather than being emitted into the atmosphere. Thus the quantity of live biomass going into long-term timber products in the baseline scenario is included.

2.3.3. Emission sources included in the project boundary, other than those resulting from changes in carbon pools The project boundary includes emission sources other than those resulting from carbon stock changes in the carbon pools. These are listed in Table 13 below.

Table 13: GHG emissions by sources and sinks (adapted from Table B, VM0004, page 7 – 8) Sources Gas Included/Excluded Justification/ Explanation of Choice Carbon stock decreases due to burning are accounted CO Excluded Burning of 2 as a carbon stock change aboveground biomass CH4 Included CH4 is produced in significant amounts during burning.

N2O Included N2O is produced in significant amounts during burning.

CO2 Included Main gas from this source Drainage has been shown to have a small effect on CH Peat oxidation 4 CH Excluded emission budgets; the highest proportional CH flux forms from drainage 4 4 only 0.2% of the CO2 emissions in drained peat soils.

N2O Excluded Potential emission is negligibly small.

CO2 Included Emissions are accounted for using an emission factor

CH4 Included Emissions are accounted for using an emission factor Burning of peat N2O is not typically a measured trace gas emission

N2O Excluded from peat burning: potential emission differential between natural and burned peat is negligible.

2.4. Baseline scenario In accordance with the Methodology, the baseline or ‘without project’ scenario is assessed using the VCS approved ‘Tool for the Demonstration and Assessment of Additionality in VCS Agriculture, Forestry and Other Land Use (AFOLU) Project Activities’ (‘the Tool’) (v1), as described below.

2.4.1. Step 1a &b: Identify credible alternative land use scenarios The list of possible land use scenarios for the Pematang Gadung peat swamp forest are outlined below (step 1a), in terms of their compliance with relevant laws and legislation and their plausibility (step 1b) in Table 14.

Table 14 Summary: Assessment of alternative land use scenarios Alternative land use scenarios Alternative land-use scenario description and Consistency with enforced mandatory applicable laws and (Sub-step 1a) justification of credibility regulations (Sub-step 1b) Continuation of the pre-project The PGFC stays zoned as a combination of production Both logging and agricultural conversion would be land use and conversion forest with inactive license holders. considered illegal in accordance with Indonesian law. Selective logging and small-scale agricultural conversion However these laws are routinely not enforced, as evidenced continue. in the literature, for example see: Tacconi, 2007, Obidzinski, Selective logging has occurred in the project area within 2006, Casson and Obidzinski, 2007, Wadley and Eilenberg, the last 10 years, and is therefore considered a credible 2005, Casson and Obidzinski, 2002. scenario. Project activity is performed Hutan Desa and Rights of Management are established Hutan Desa Licenses may be granted under Indonesian Law without being registered as VCS by Desa in the project area, in the absence of REDD. (see Section 1.11.2). AFOLU project. Forest management and conservation activities are

successfully implemented according to Hutan Desa legal

requirements, in that absence of financing from carbon credits. Activities similar to the Protection of the forest under Indonesian legislation Indonesian laws exist for the protection of areas of deep proposed project activity, preventing the conversion of deep peat greater than 3 peat, for example, Kepres 38/1990 states that conversion of resulting from legal meters deep. deep peat areas (i.e. areas with peat greater than three requirements metres in depth) is illegal.5

However, there is widespread evidence that the regulation is generally not enforced for example, see: Casson, 1999, Couwenberg et al., 2009, Giesen, 2004, Hooijer et al., 2006, Parish et al., 2008.

5 Other legal references to deep peat in Indonesia include Presidential decree No 32/ 1990 on management of conservation area; Decree No 376/Kpts-II/1998, in regards to the soil criteria for palm oil plantation.

Alternative land use scenarios Alternative land-use scenario description and Consistency with enforced mandatory applicable laws and (Sub-step 1a) justification of credibility regulations (Sub-step 1b) Activities similar to the Protection under Indonesia’s new moratorium on Indonesia signed an agreement in 2010 on REDD with the proposed project activity conversion of peat swamp forests. Government of Norway, committing to a two year resulting from extrapolation of moratorium on allocation of new licences for conversion of observed similar activities in the native forests, including peat swamp forests.6 The geographical area, that have Moratorium was signed by the Indonesian President on 20 occurred in the period beginning May 20117. ten years prior to the project Protection of areas of deep peat (greater than 3m) due RSPO certification for oil palm companies is not required by start date current and/or prospective oil palm license holders’ law in Indonesia, however an oil palm company seeking certification under the Roundtable on Sustainable Palm certification to the RSPO would (theoretically) not be Oil (RSPO). allowed to convert most of the Pematang Gadung peat swamp forest, as deep peat is considered HCVF.9 The RSPO was formed in 2004 and oil palm plantation companies in Indonesia have been certified to meet the RSPO Principles and Criteria8.

6 Available at: http://www.forestsclimatechange.org/fileadmin/photos/Norway-Indonesia-LoI.pdf. . 7 An English translation of the moratorium is available at http://www.daemeter.org/downloads/papers-publications/. 8 For more information, see http://www.rspo.org. 9 See Criterion 5.2 of the RSPO Standard

Alternative land use scenarios Alternative land-use scenario description and Consistency with enforced mandatory applicable laws and (Sub-step 1a) justification of credibility regulations (Sub-step 1b) Other realistic and credible Establishment of a commercial logging concession for A commercial logging concession can be granted under land-use scenarios that would timber production within the project area. Indonesian law in Hutan Produksi zones, as delineated in have occurred in the absence of Government-approved spatial plans. This would require that A portion of the land area inside the project boundary the project activity there be an application for a production concession license was classified as Hutan Produksi (HP) in the 2008 to be made. District Government Spatial Plan (see Figure 4). However, non-compliance with Indonesian law is commonplace and evidenced by prior examples of illegal conversion for oil palm development in areas designated as Hutan Produksi (HP) that are adjacent to areas classified as conversion forest (HPK) (see also Section 2.4.2). Conversion to oil palm. As described in Section 1.10.1, This scenario would be in compliance with legislation that two “initial licenses” for oil palm development were legalizes oil palm conversion in land areas designated for legally approved and awarded to Oil Palm development conversion (HPK) in Government-Approved Spatial Plans. companies. The licenses cover a proportion of the Further, there is evidence based on prior examples that the project area. HP zone adjacent to area classified as conversion forest (HPK) within the project boundary would also have been converted to oil palm (see also Section 2.4.2). *Scenarios for (iii) are considered based on knowledge of legal requirements other those associated with the establishment of a Hutan Desa License and Right of Management, as this is the same as scenario (ii).

2.4.2. Step 1c: Selection of the most plausible baseline scenario

Continuation of the pre-project land use: not plausible This scenario can only exist if the site would not be converted to oil palm plantation. This is highly unlikely given that; a) Initial Licenses were already granted within the boundaries of the project area; and b) Pursuance of relevant permission from Government authorities for establishing oil palm conversion concessions would be in compliance with Indonesian legislation (see also Section 1.11), with the exception of areas of deep peat greater than 3 meters deep; and c) It is unlikely that areas of deep peat would be successfully conserved given non-compliance with relevant legislation is commonplace (see Table 14).

Project activity is performed without being registered as VCS AFOLU project: not plausible This alternative scenario is considered not plausible based on the reasoning and evidence presented in Table 15 below.

Table 15 Reasoning and evidence that the project activity is performed without being registered as a VCS AFOLU project is not plausible Reasoning Evidence REDD incentivizes the Ministry of . Indonesian regulations allow REDD to be implemented in Forestry to approve and verify Hutan areas with a Hutan Desa license (see Section 1.11.1). Desa license applications because of . Indonesian regulations specify that the MoF will receive a the potential for the MoF to receive proportion of any income generated from the sale of carbon finance from REDD. carbon credits from REDD activities within Hutan Desa licensed areas. . Akiefnawati et al (2010) conducted a simple analysis of stakeholder positions to the relevance of REDD in the emergence of Hutan Desa agreements in Indonesia and concluded that “Without (or before) REDD expectations, the national and provincial discussions may have tended towards blocking the proposal [for Lubuk Beringin Hutan Desa in Jambi Province, Sumatra, Indonesia - the first village in Indonesia to secure a Hutan Desa agreement+”. . Raharjo (2010) also suggests that carbon markets are one of the few means to finance Hutan Desa licenses. Under the banner of REDD FFI has . FFI was successful in receiving REDD-related grant secured funding and have provided applications and implemented work on REDD in Kalimantan critical support to the Hutan Desa since 200810. FFI’s REDD-related activities implemented applications for the Pematang under these grants were initiated prior to the first proposal Gadung Hutan Desa. In the absence letters from the villages to the District Government for the of this support, the Hutan Desa Pematang Gadung Hutan Desa (see also Section 1.8.1). application for the Pematang Gadung . FFI’s activities directly associated with the establishment of community forest area would not the Pematang Gadung Hutan Desa for REDD include (see have been successful. also Supporting Evidence); o FFI hosted Workshop seminar in Ketapang on “Hutan Desa and REDD”; o FFI made recommendations to the District Government spatial planning process (2009), which included a proposal for Hutan Desa; and o The development and signing of an MoU11 between FFI and the Ministry of Forestry in 2010, which includes a cooperative agreement to facilitate the management of Hutan Desa (village forests) for community carbon pools for REDD12.

10 See Supporting Evidence for further information 11S459/BPS-3/ Fasilitasi pengembangan hutan desa dan hutan kemasyarakatan di kabupaten ketapang, provinsi kalimantan barat (Fascilitating the development of Village forests and community forestry in Ketapang District, West Kalimantan), 15 July 2010 (see supporting evidence) 12 See paragraph 2(d), ibid.

Reasoning Evidence Without carbon finance there would . The Hutan Desa Right of Management may be revoked if not be sufficient funding and the Desa do not fulfill their legal obligations associated with resources for the Desa to fulfill their this Right. Obligations include; demarcation of boundaries, obligations under the Rights of development of an annual workplan and annual reporting Management of Hutan Desa, and to the Governor, MoF and Bupati; forest protection; and thus their Rights would be revoked. rehabilitation and planting trees. . There are prior examples of community-based forest conservation projects in Indonesia that have failed in the absence of carbon finance due to insufficient resourcing of forest protection activities13. . Given that the first Hutan Desa license was granted as recently as 2009, there is not yet any precedent for Hutan Desa license revocation in Indonesia. However, it can be expected that in the (hypothetical) circumstance whereby the Pematang Gadung Hutan Desa Rights of Management were revoked, by law the the land use rights would be reverted back to the Ministry of Forestry and District Government.

Activities similar to the proposed project activity, resulting from legal requirements: not plausible Given that large areas of the Pematang Gadung peat swamp forest contain peat deeper than three metres, theoretically the project site (or part thereof) should be protected pursuant to this regulation. However, it is highly likely that given the widespread industry practice and routine non- enforcement of this regulation, conversion of the project area would proceed in the baseline scenario. Furthermore, even when deep peat areas are identified prior to conversion, this does not necessarily mean the area will be protected. This is due in part to enforcement agencies not performing routine checks of peat depth prior to peat areas being approved for conversion, and a lack of accurate information as to locations of deep peat areas. Extrapolation of observed similar activities to the proposed project activity (i) The Indonesian Logging Moratorium: not applicable The moratorium is only applicable to new licenses. Given the fact that the project area already had licenses initiated prior to the moratorium (see Section 1.10.1), it is unlikely that it may have been protected from conversion during the two year moratorium period. Further, based on the timing of the Moratorium, the VCS AFOLU Tool does not require this scenario to be taken into account14.

13 For example the Ijin Hutan Kemasyarakatan (HKm) project in the Gunung Palung national park buffer-zone LTFE; and the ICDP-KSNP’s protection programme, in Lulk Beringin (see Akiefnawati et al 2010) 14 As per Page 2 and 3 of the Tool which states that: “Laws, statutes, regulatory frameworks or policies implemented since 11 November 2001 that give comparative advantage to less emissions-intensive technologies or activities relative to more emissions-intensive technologies or activities need not be taken into account *in the baseline+”

Extrapolation of observed similar activities to the proposed project activity (ii) RSPO: not plausible The companies holding Initial Licenses (Izin Lokasi) in the project area (PT Ghoniyu and PT Prana Gembilang, see also Section 1.10.1) are not RSPO members nor is either company seeking certification under the RSPO15. RSPO Non-compliance of companies certified and/or in the process of being certified under that RSPO have also been observed in Indonesia. Other realistic and credible land-use scenarios that would have occurred in the absence of the project activity (i) Establishment of a commercial logging concession for timber production within the project area: Plausible, but highly unlikely This scenario is considered unlikely given evidence of non-compliance with Indonesian law resulting in commonplace conversion of areas classified as production forest (HP) adjacent to Oil Palm conversion concessions (see also Table 16). Other realistic and credible land-use scenarios that would have occurred in the absence of the project activity (ii) Conversion to oil palm: Plausible This scenario is considered plausible given the following reasoning and evidence provided in Table 16.

Table 16 Reasoning and evidence that the conversion to oil palm is a plausible land-use scenario in the absence of the project activity Reasoning Evidence Part of the project area was zoned for conversion Official Government Spatial Plan 2000 (HPK), and the remaining, adjacent proportion of the area zoned as production forest (HP) in the District/Provincial Spatial Plan in 2000. Within the area zoned as HPK within the project The Ketapang District Land Office (Kantor area, initial license(s) (Izin Lokasi) had already Pertanahan Kabupaten Ketapang) approved two been approved (see also Section 1.10.1 and Initial Licenses (Izin Lokasi) see Supporting Evidence Figure 4) for a map of Plantation Development Activities for Ketapang District, 2009 (Penyebaran Kegiatan Pembangunan Perkebunan).

Illegal conversion of natural forests in zones Supporting evidence demonstrates an example of designated for production forest (HP), adjacent where land zoned as HP in Ketapang District has to land use zones designated for conversion been converted to oil palm plantation by GY forest (HPK), have been observed in the Plantations, based on FFI analysis of Landsat imagery Ketapang district. over the site. Approximately 1,477 hectares were converted to oil palm plantation in a zone officially designated as HP between 2005 and 2007 (see Supporting Evidence). Further, existing drainage canals have been constructed in the vicinity of the project area and extend into land zoned as HP (see Figure 4 and

15 Based on search of the RSPO online list of members for Indonesia (see: http://www.rspo.org/countrystat/Indonesia) and list of membership applications open for public comment (see: http://www.rspo.org/page/call4comment), March 2012.

Figure 6), providing evidence that there was clear intentions to drain and convert land within the HP zone of the project area to oil palm. Presently, modification of spatial planning land Supporting evidence demonstrates an example of use zone designations to retrospectively ‘legalise’ where land previously zoned as HP in the 2000 oil palm conversion concessions can take place. Spatial Plan was modified in to an APL land use zone in a revision to the Tatas Batas (draft updated Spatial Plan revision) in 2005. This modification was made after ISK Pada converted an area of forest to oil palm within the area where the zoning was changed from HP to APL.

Final outcome of step 1c: On the basis of the analysis described in Table 14 above, conversion to oil palm plantation is considered the most plausible baseline scenario.

2.4.3. Step 2: Investment Analysis This project produces no financial benefits other than revenue from carbon sales. “Financial benefits” are here defined as profits/finance received by the project developer. Project development activities have been funded with objective of developing community carbon pools and emissions reductions etc. No returns are expected. Local communities around the project area may receive indirect financial benefits, e.g. increased sales of NTFP.

2.4.4. Step 4: Common practice analysis This step involves analysis of the extent to which similar forest conservation activities have been undertaken in the region, but excluding those activities conducted in association with carbon markets. Hutan Desa: common practice analysis Relevant literature provides evidence to suggest that forest conservation under a Hutan Desa license is not likely to be commonplace in the absence of carbon finance. The first Hutan Desa license in Indonesia was granted as recently as 2009 for Lubuk Beringin Hutan Desa in Jambi Province, Sumatra, Indonesia. Akiefnawati et al (2010) conducted a simple analysis of stakeholder positions to the relevance of REDD in the emergence of Hutan Desa agreements in Indonesia and concluded that “Without (or before) REDD expectations, the national and provincial discussions may have tended towards blocking the [Lubuk Beringin Hutan Desa] proposal”. Raharjo (2010) also suggests that carbon markets are one of the few means to finance Hutan Desa licenses. Further, based on FFI’s knowledge, REDD is proposed as the primary mechanism for sustainable finance of the forest management activities under most, if not all, hutan desa lience applications, and therefore this project is not a comparable non-carbon baseline activity. It can be concluded that forest conservation under the hutan desa license is not commonplace in the absence of carbon finance. Protection of areas of deep peat: common practice analysis Evidence of enforcement of Indonesia’s legislation against conversion of deep peat should be evident in cases of prosecutions under this law. However, Indonesia does not maintain a legal

39 database of convictions under relevant laws. A web search was conducted to see if any oil palm companies had been prosecuted under the deep peat law. Examples of alleged illegal practices have been exposed by environmental NGOs (e.g. Greenpeace, 2009, Milieudefensie, 2007, Milieudefensie and WALHI, 2009), however no evidence was found that any of these companies have actually been formally prosecuted under Indonesian law. The fact that not even these high-profile cases appear to have been prosecuted suggests that protection of deep peat under Indonesian regulations is not ‘common practice’. Protection under the Roundtable on Sustainable Palm Oil (RSPO): common practice analysis To assess whether any Indonesian companies have protected areas of peat swamp forest in the process of seeking certification to the RSPO, a review of the RSPO public audit reports was conducted by FFI.16 This review found only one example of conversion of an estimated 753 ha area of peat to oil palm plantation among RSPO certified companies in Indonesia (PT Musim Mas). Another oil palm company, Cargill: PT Hinidoll, conserved an area of deep peat for the purposes of achieving certification to the RSPO. However, this single incidence cannot be considered ‘common practice’. Also, the area of peat was only 87 hectares, which is a significantly smaller the project area. Therefore it can be concluded from this analysis that it is not common practice to conserve large areas of peat swamp forest for the purposes of achieving certification to the RSPO.

2.4.5. Conclusion of the additionality and baseline assessment On the basis of the analysis above, it can be concluded that the most likely baseline land use for the Pematang Gadung peatland area is legal conversion to an oil palm plantation in areas designated for conversion forest (HPK) and illegal conversion to oil palm plantation in areas designated as production forest (HP).

2.5. Methodology deviations Not applicable.

16 As of 29 May 2011.

3. QUANTIFICATION OF GHG EMISSION REDUCTIONS AND REMOVALS

In this section, a description of each step in the Methodology is provided. This section should be read alongside the Methodology and the accompanying calculation spreadsheet (see Master Spreadsheet GHG Calculations). For ease of auditing, the headings provided in the Methodology are used, rather than the more general headings specified in the VCS PD template.

3.1. Methodology Step 5: Stratification

3.1.1. Step 1: Stratification according to pre-existing conditions and baseline projections The preliminary stratification was not undertaken d) Site specifications for each stratum and supplementary sampling A final stratification of the project area was conducted based SPOT 4 (May 2010) and SPOT 5 (July 2009) satellite images of the project site. A description of the stratification system for the vegetation types, peat depth and land use zonation are described below. Peat depth strata

Peat depth strata were derived from a combination of peat depth measurements taken on the site (see Astiani 2011) and the Wetlands International Peat Atlas map17, drawn from an expert study conducted by Deltares for FFI (see supporting evidence: Deltares/van der Vat et al 2011, Section 3.2). Thickness contours were determined manually on the basis of the peat depth measurements taken in the field18. Where appropriate, the Peat Atlas peat extent boundary has been followed. Some deviating depth measurements had to be excluded to achieve a ‘smooth’ peat depth map. The result is more accurate than existing maps, but it is still imperfect. Figure 10 shows the Peat Atlas map, and Figure 11 shows the measurements and the new map, which has been used as input for the emission modeling.

17 The Peat Atlas map was found to be more accurate than the RePPProt map, for this site 18 Total of 204 peat depth profiles were measured in the area with peat depth range from 40 cm to 1120 cm.

Figure 10. Measured peat thickness and WI Peat Atlas peat thickness used as inputs for constructing a the project peat depth strata

Figure 11. Peat depth strata used in GHG emission calculations

Table 17. Peat depth strata

Stratum: A B C D

Peat stratum depth range: > 3.15m 3.15 – 1.80m 1.80 – 0.75m 0.75 - 0.5 m

Actual (conservative) 4 – ≥8m 4 –2m 2 – 1m 1 – 0.5m estimated depth range per

peat depth strata: (as per Figure 11):

Depth insufficient to be burnt N/A N/A N/A Yes (does not allow for 40cm ‘dry zone’ above the water table)

Depth sufficient to be burnt to Yes Yes Yes No depth of 34cm (0.34m)

Depth sufficient to allow for Yes Yes No No initial subsidence of 1.42m in the first five years after drainage.

Depth sufficient to allow for Yes No Yes Yes ongoing subsidence at a rate of 0.05484m yr-1

Time period of emissions from subsidence (years)

Initial subsidence (up to 1.42m) 5 5 0 0

Ongoing subsidence at >25 0 7.48 9.12 0.05484m per year

Aboveground biomass strata For this project, the classification was conducted using high resolution SPOT 4 (May 2010) and SPOT 5 (July 2009) satellite images. Geo-referenced datasets including plot data, remote sensing imagery and secondary datasets were used as inputs. eCognition software was used to segment the image into a number of spectrally similar ‘objects’, comprised of agglomerations of statistically similar pixels. A semi-automated supervised classification of these objects was then conducted using visually identified land cover classes as training regions. In order to differentiate peat swamp forest from lowland forest, the classification incorporated an SRTM digital elevation model (DEM) to rule out areas of high slope and classify them as lowland forest. A map of the aboveground biomass strata is provided in Figure 12 below.

Figure 12. Map of aboveground biomass strata in the project area

e) Final stratification of baseline scenario Baseline land use strata were modelled by creating a number of masks within ArcGIS, according to the management practices that would have been adopted by the baseline agent of deforestation. A final ‘operational mask’ was subsequently created for the analysis of impacts on the aboveground biomass and peat over the project lifetime. Operational mask It was conservatively assumed that the agent of deforestation would actually comply with the regulations of Presidential Decree No 32/1990, by having a buffer of 100 m around ‘large’ rivers (i.e. those with a width of greater than 50m) and lakes and 50m around ‘small’ streams (i.e. with a width of less than 50m).

Therefore the aboveground biomass mask was created by buffering waterways in accordance with these requirements, along with exclusion of areas of bare soil. A conservative buffer of 200m around all areas identified as bare soil was also excluded. A conservative conversion rate of conversion of 1,000 hectares per year in the baseline was estimated based on rates specified in valid and verifiable plans, as outlined in Table 18 below. It was considered that conversion would initially occur in the vicinity of areas designated for conversion (HPK zone) (see Section 1.10.1), followed by illegal conversion in the HP land area zone, with each land parcel annually area cleared approximating 1,000 ha. The resultant ‘operational area’ mask defined the area that would have been sequentially cleared and converted to oil palm over an approximate 20 year time-frame is shown in Figure 13.

Table 18 Summary of information on annual area converted from peat swamp forest to oil palm in West Kalimantan Oil Palm Relevance to project area Average annual Source of information: Concession conversion rate valid verifiable plans PT Kapuas Agro Oil Palm conversion in West 2,500 ha per year Environmental impact Mandiri Kalimantan (Kapuas Hulu assessment (AMDAL) District) documentation PT Agro Citra Oil Palm conversion in West 2,000 – 2,900 ha Environmental impact Kalimantan (Kapuas Hulu per year assessment (AMDAL) District) documentation PT GY Plantations Illegal clearning of oil palm in 1,477 ha over 2 FFI observations based HP zone years (~740ha per on interpretation of year) satellite imagery (see supporting evidence).

Figure 13 Operational mask showing annual sequential areas expected to be converted from peat swamp forest to oil palm in the baseline scenario

3.1.2. Step 2: stratification according to the project activity Project activities are defined in Section 1.8. It was assumed that all peat swamp forest areas zoned as HPK and HP would have been converted to oil palm, except for the buffer areas around waterways. Because these areas coincide with the baseline activities as described above, there was considered no need to create a separate stratum for project activities.

3.1.3. Step 3: Final ex-ante stratification The final ex-ante stratification of the vegetation is shown in Figure 12 and of the peat is shown in Figure 11. Verification of the boundary of each stratum was done by assessing the accuracy of the stratification. The accuracy of the aboveground biomass strata were assessed strata were assessed by comparing the spatial classification to qualitative land cover data recorded in the field, across the project area (see Section 3.1.1). A total of 158 points were evaluated against the land use classification, with the majority of the plots falling within forested rather than shrub areas. An ‘error matrix’ summarising the overall accuracy of the classification of forest and non-forest classes was developed, and of the 158 field observation points used in the assessment, 141 (89%) were found to correctly correspond to the LULC classification (see Table 19).

Table 19: Error Matrix of assessment of above ground biomass strata classification accuracy Field observations % correct class to LULC Classification Non-forest Forest point Non-forest 21 5 80.8% Forest 12 120 90.9% Total 89.2%

The overall project boundary cannot be verified in the field, as it is also an artificial construct with no physical boundary yet marked. Marking of the Hutan Desa boundary is planned as part of project activities (see Section 1.8).

3.1.4. Step 4: Leakage stratification The leakage area was determined based on factors as described in Section 3.6. Strata within the leakage area were identified based on classification of SPOT imagery. The strata include; secondary mangrove forest, primary and secondary dryland forest, primary and secondary swamp forest (see Figure 14 below).

Figure 14 Stratification of above ground biomass in project leakage area

3.2. Methodology Step 6: Procedure for determining the baseline scenario This step has already been described in Section 2.4 of this document.

3.3. Methodology Step 7: Procedure for demonstrating additionality This step has already been described in section 2.4 of this document.

3.4. Methodology Step 8: Baseline emissions The calculation procedures applied are summarised below, according the steps described in the Methodology.

3.4.1. Methodology step 8.1: estimate of carbon stock changes in the aboveground biomass

Estimation of GHG emissions from timber extraction before land clearing (8.1.1)

Estimate of the area cleared and logged The area available for conversion was defined by the following equation:

Whereby; = Areas as defined in the Methodology. The estimated area cleared and logged is

(conservatively) assumed to be the same as the area logged. = Areas zoned as HP and HPK within the project boundary (see Section 1.10.1) = 100m buffer area adjacent to the rivers in the project area, in accordance with Indonesian law (see Section 3.1.1) = Areas of non-peat and/or areas of peat with no forest overstorey and therefore areas that do not qualify as peat swamp forest, as required by the Methodology (see Section 2.3.1).

Estimation of the biomass logged The size class that would have been extracted in the project area prior to clearing is assumed to be all trees greater than 30cm diameter. This estimate is in accordance with the minimum legal diameter limit for harvesting in Indonesia.19

GHG emissions from biomass burning for land clearing (8.1.2) While the practice of burning peatlands in order to cultivate oil palm plantations is illegal in Indonesia, the practice is still widespread across Indonesia. As specified in the methodology, all biomass not extracted as timber is assumed to be burned, and the proportion burned in the baseline is assumed to be equal to 1. GHG emissions from biomass burning for land clearing were calculated in accordance with equations 12 – 16 in the methodology, and using IPCC defaults as summarized in Table 20.

19 In accordance with P.11/Menhut-II/2009 Article 8.

Table 20 Default values used in calculation of GHG emissions from biomass burning for land clearing Parameter Default value Source The timber biomass Allometric Calculated by applying an allometric equation to for each stratum equation the field data (see below). Biomass combustion 0.50 IPCC default value for primary moist tropical efficiency forest of (used in equation 13) Nitrogen-carbon ratio 0.01 Table 3A.1.15, IPCC Good Practice Guidance for Land Use, Land Use Change and Forestry (GPG4LULUCF) Emission ratio for N20 0.0007 t CO2e/tC Crutzen & Andreae (1990) in: IPCC GPG4LULUCF Emission ratio for CH4 0.0007 t CO2e/tC Crutzen & Andreae (1990) in: IPCC GPG4LULUCF Global Warming 298 t CO2e/ N2O Recommended value in IPCC Fourth Assessment Potential for N2O Report 2007 Global Warming 25 t CO2e/ CH4 Recommended value in IPCC Fourth Assessment Potential for CH4 Report 2007

Mean carbon stocks in aboveground biomass (8.1.2.1) Estimation of mean carbon stocks in aboveground non-tree biomass The non-tree biomass was conservatively shown to be zero – see Section 2.2.7. Estimation of mean carbon stocks in aboveground tree biomass The allometric equation method was used to calculate the carbon stocks of aboveground biomass. This involved the following steps: Allo Step 1: Measure DBH Tree diameter at breast height (DBH) was measured in a series of nested plots. All trees above 20cm were measured in the plot 20 x 100m in dimension (2,000m2). Trees of 5 – 19cm diameter were measured in a nested plot of 5 x 40m dimension (200m2). The location of sample plots are shown in Figure 10. Allo step 2: Allometric equation An allometric equation developed specifically for peat swamp forests was used to estimate aboveground biomass (Istomo, 2002). The original allometric equation was developed from a peat swamp forest in Riau, Indonesia. No other allometric equations specifically for peat swamp forests in Indonesia could be found, and therefore this was considered to be the most locally appropriate allometric equation for the site. Inclusion of wood density within an allometric equation is considered to reduce the uncertainty associated with an allometric equation (van Breugel et al., 2011). Therefore, the equation was modified by adding wood density according to the procedures specified in (Ketterings et al., 2001). The modified allometric equation used for calculation of aboveground biomass is: AGB (t dm ha-1) =0.1886*Wood Density*(DBH2.3702)

The allometric equation was developed for all trees with a diameter of greater than 10cm.20 Therefore all trees measured in the field sampling that were smaller than this diameter were conservatively excluded from AGB calculations (See spreadsheet: AGB Calculations). Wood density The wood density figure used in the allometric equation was based on the weighted average of all species found onsite with a diameter of greater than 30cm, as these species were considered to contribute the greatest proportion to carbon stock. Only species identified more than three times throughout the inventory were used for the weighted density calculation, and density was weighted according to the number of times the particular species was observed in the plots. The wood density values in the database maintained by the World Agroforestry Centre (ICRAF) were used for the calculations,21 which are summarised in the ‘Wood Density’ worksheet in the Plot Calculations spreadsheet. Where a range rather than a mean wood density value was reported, the range was assumed to be the 90% confidence interval.

Allo Step 3&4: Estimate carbon stock in above-ground biomass per hectare The calculations used to estimate the above ground biomass per hectare, per plot are summarised in Table 21. Table 21. Summary of calculations for estimating carbon stock in above-ground biomass per hectare, per plot

Parameter Calculation Method

Above ground biomass per Allometric equation (as per above). tree

Carbon Fraction (CF) IPCC Default factor 0.5tC/t-1

Above ground carbon stock per Multiply the above ground biomass per tree and tree the carbon fraction.

Carbon stock per plot Sum of trees per nested plot.

Plot expansion factors 5 and 50 respectively for the plot (0.2ha) and nested subplot (0.02ha), as per equation 31 of the Methodology. Total carbon stock per hectare, Sum of the per-hectare carbon stock for all per plot nested plots

Allo Steps 5: Calculate mean carbon stock within each stratum

20 This is stated in paragraph 1, section 3, on page 35 of the Istomo paper, (i.e. paragraph commencing “Persamaan alometrik untuk tingkat.....”. The translation of this paragraph is: “Allometric equations for trees with diameter > 10cm. For this purpose, the species name, diameter, branch free height and total height, and wet weight of all parts of the tree diameter> 10 cm were measured and recorded above the soil surface in the primary forest the size of 20 x 20m, and the conversion of dry weight in the laboratory” 21 http://www.worldagroforestry.org/sea/Products/AFDbases/WD/Index.htm

The average carbon stock for each stratum was calculated by averaging the carbon stock for all plots in that stratum, as per equation 39 of the Methodology.

Calculation of carbon stock in long term wood products The Methodology was not prescriptive about how the percentage of industrial roundwood going to long term wood products should be calculated. As a result, the procedures specified in the VCS approved module titled ‘Estimation of carbon stocks in the long-term wood products pool’ (version 1.0) were used for this purpose, assuming the harvested timber is primarily processed as sawnwood.22 This module draws heavily on developing country default values for allocation of wood products to the ‘wood waste’, ‘short life fraction’ and ‘additional oxidised fraction’ as described in (Winjum et al., 1998). The resultant fraction of wood products with a 100+ year service life was calculated to be 10%.

Increase in carbon stocks due to aboveground biomass growth in baseline land-use (8.1.3) As per Section 2.4, the identified baseline land-use is oil palm plantation. This section describes how carbon sequestration and subsequent harvesting of the replacement oil palm plantation was accounted for. The rate of increase in oil palm was derived from a study conducted by ICRAF (Dewi et al., 2009). The researchers then developed a linear function predicting palm biomass relative to palm age, of the form: Palm Biomass (t dm ha-1) = 5.0141(age) + 15.947 (r2 = 0.8752) To enable the ICRAF allometric equation to be used for this project, it was converted into a carbon function by multiplying the biomass value at each age, by the carbon fraction of oil palm of 0.45 t C/t dm-1 (Henson, 2004). These values were then plotted in Excel, and modified such that the regression line was forced through the origin (signifying zero biomass at zero age), resulting in the following modified carbon equation as follows: Palm Biomass (t C ha-1) = 2.6785*Age The resultant annual rate of sequestration (2.6785 t C per annum) was derived from the slope of the modified carbon equation, as per equation 42 of the Methodology. A graph of the original ICRAF and the fitted carbon equations are shown in Figure 15.

22 Available at: http://www.v-c-s.org/sites/v-c-s.org/files/VMD0005%20CP-W%20Wood%20products.pdf

Figure 15. The ICRAF allometric equations and fitted carbon equation for estimation of oil palm biomass and carbon sequestration

The resultant annual rate of carbon sequestration (2.6785 t C per annum) was derived from the slope of the modified carbon equation, as per equation 42 of the Methodology. To calculate the total annual increase in carbon stock due to growth of oil palm on the project site, the annual carbon sequestration rate was multiplied by the area planted, and then multiplied by the 44 ratio of molecular weight of CO2 to carbon ( /12), in accordance with equation 40. The area planted with oil palm was conservatively assumed to be the area cleared. While some areas used for roads and buildings are typically cleared and not planted, to minimise complexity of accounting, these areas were assumed to be planted as well.

GHG emissions from harvesting aboveground biomass of baseline land use (8.1.4) Typically in Indonesia, oil palm plantations are harvested 25 years after planting (USDA, 2007). Since the project crediting period is 30 years, then the carbon calculations need to account for this eventual harvest. Equations 47 – 53 were used for this purpose. As per the assumptions listed in the Methodology, the entire oil palm plantation was assumed to be cleared and burnt, rather than used for wood products. The same combustion efficiencies as previously described were used to estimate emissions from burning. The remainder of the input values to these equations were calculated during previous steps.

3.4.2. Methodology step 8.2: GHG emissions from peat The calculation of emissions from peat involves accounting for emissions from two main sources: 1) Oxidation due to drainage; and 2) Due to burning of the peat at the time of oil palm establishment. While burning of peat in Indonesia is illegal, this process is commonplace in West Kalimantan, Indonesia. The steps involved in the calculations are described below in accordance with the methodology.

Methodology step 8.2.1: GHG Emissions from peat drainage Due to the difficulty of directly measuring peat emissions (which involves costly and complex equipment such as gas flux chambers), peat scientists have developed some proxy variables that allow for indirect measurement of emissions from oil palm. At the time of writing, the most reliable short-term proxy variable is considered to be water table drainage depth, e.g.: (Hooijer et al., 2006, Couwenberg et al., 2009, Jaenicke et al., 2008, Parish et al., 2008).

Depth of peat drainage (8.2.1.1) The default value of peat drainage depth of 0.8m for large-scale plantations was conservatively assumed, as permitted in the Methodology and reported in Hooijer et al (2006)23. The Methodology requires that in cases where total peat depth is between 0.5 and 1.0 metres, the drainage depth should conservatively assumed to be maintained at 50% of the total peat depth for conversion to large-scale plantations. The rate of emissions due to the halved drainage depth was assumed the same, as has been observed under best practice water management regimes (Hooijer, personal communication)

Time dimension of peat drainage (8.2.1.2) Revised peat subsidence estimates were used to align with the latest developments in peat science. This resulted in revisions to Methodology equation 59, which are described in the ‘Strata’ tab of the Master GHG calculations spreadsheet. The depth of peat in the project area is variable, as shown in Figure 11. Therefore estimation of peat depth were made according to strata, as described in Section 3.1.1. These strata and the number of years of assumed subsidence for each depth strata are summarized in Table 17.

23 FFI has undertaken preliminary measurements of the drainage canal adjacent to the project area which indicate a drainage depth of > 2m. see Figure 8.

Methodology step 8.2.1.3 Area of peat drainage The Methodology assumes that the area of peat drained each year in the baseline scenario is equal to the area cleared and planted for the new land use. This assumption is not correct for this project, because some areas contain peat of insufficient depth to allow for drainage to occur for the duration of the crediting period. Table 17 summarises the area of each peat stratum, and the operational implications of each depth strata.

Methodology section 8.2.1.4 Relationship between CO2 emissions and drainage depth As stated in the methodology “Improvements to this regression model *equation 58+ should be made as new data emerge” (p.35). The peat emission relationship for the project was defined based on relevant new data published in Hoojer et al 2011. The carbon emission rates in this study were shown to be higher than might be estimated using the default emission relationship specified in the Methodology. This has resulted in the generation of a new peat emission relationship which has been used for calculation of emissions from peat in this project. The revised peat emission relationship is defined as:

24 -1 -1 Emissions during first five years after drainage = 178 t CO2 ha yr 25 -1 -1 Emissions more than five years after drainage (t CO2 ha yr ) = 21 – (69*WD) Where WD = Water Depth Drawdown (-m), equivalent to negative depth of peat drained (-0.8m) Full research methods and analysis applied to develop these rates can be found in Hoojer et al 2011. Methodology step 8.2.2: Estimation of GHG emissions from peat burning The depth of peat burned was assumed to be 34cm as per the suggested value in the methodology. Methodology step 8.2.2.2 Estimation of area of peat burned As described in Table 17, the area burned was considered equal to the area of peat Stratum A, B, and C. Peat that is shallower than 0.75 m (i.e. Stratum D) was assumed to be too shallow to allow for peat burning, as it would not allow a 40cm ‘dry zone’ above the water table. Methodology step 8.2.2.3 Estimation of peat bulk density As allowed by the methodology, the value of 0.14 g cm-1 was use for bulk density ex ante baseline calculations. This value will be replaced with ex post measurements taken in the project area.

24 See Table 2 and body text of report, Hooijer et al (2011). Also based on recommendations from the author (A. Hooijer, pers.comm, 2011). 25 See equation 7, Hooijer et al (2011)

Methodology step 8.2.2.4 Estimation of CO2 and CH4 emission factors The emission factors for peat combustion at the lower temperature (smouldering stage: 480 degrees celcius) were used in ex ante baseline estimates in equations 61 and 62, as required by the methodology.

3.5. Methodology Step 9. Ex ante net avoided GHG emissions In accordance to this Methodology, the total net avoided emissions due to the project are equivalent to the net baseline emissions. The only emissions by sources within the project boundary are those resulting from transport of project staff for implementation of project activities, and these emissions are excluded from the methodology.

3.6. Methodology Step 10. Leakage

3.6.1. Market leakage A key consideration in assessing market leakage for the project site is that the forests in Pematang Gadung are highly degraded and are likely to have much lower biomass than the areas where logging activities are displaced to. To calculate the leakage factor, PMP must be compared with the same proportion of harvested biomass in the forest type to which the market effects leakage is most likely to occur, known as ‘PML’ in the Methodology. It was considered that market effects could displace timber harvesting to anywhere in Indonesia. To calculate the ratio of merchantable biomass to total forest biomass for commercial forests in Indonesia, the per hectare growing stock volume (130.20 m3 ha-1) from Indonesia’s Country Report to the Food and Agriculture Organisation (FAO) 2010 Global Forest Resources Assessment (FRA) was used (GoI, 2010). To calculate average commercial volume, average growing stock volume was multiplied by the average proportion of species in East Asia that are commercial (0.4), as reported in the 1995 FAO FRA for East Asia26. The resultant commercial growing stock volume of 52.08 m3 ha-1 was converted to biomass using the appropriate Biomass Conversion and Expansion Factor (BCEF) as reported in the IPCC Guidelines (i.e. a value of 2.05 m3/t dm-1). To calculate the proportion of total forest biomass, Indonesia’s growing stock volume as reported to the FRA was multiplied by a BCEF of 1.30 m3/t dm-1, appropriate for a growing stock volume of 130.20 m3 ha-1. The resulting ratio of PML to PMP was 0.41, which corresponds to a Leakage Factor of 0.20. The total emission due to displaced timber harvests was then multiplied by the Leakage Factor using equation 67.

26 No average value specific to Indonesia was reported in the FRA or the publicly available scientific literature

3.6.2. Activity displacement leakage For the purposes of monitoring activity displacement leakage the baseline agent is not considered as the individual oil palm companies holding initial licenses for the conversion concessions in the project area (as described in Section 1.10.1). Rather, the agent of deforestation is considered as the regional pressures that ultimately result in the designation of natural forest areas for oil palm conversion, including;  Oil palm companies actively engagement with Government processes to seek prospective sites to expand to and/or create pressure (illegal or otherwise) to expand development of oil palm beyond designated concession areas; and  Government entities involved in spatial planning, that are under pressure to facilitate regional development and economic growth, resulting in spatial planning that favors regional oil palm development. On this basis, the area leakage area has been determined as a local region subject to such pressures. The area has been defined as a 100 km buffer from the project area (see Figure 14), based on the fact that palm oil cultivation is relatively local in scale due to the rapid decomposition of Crude Palm Oil, which generally must be processed within 24 hours of harvest. The increase of both legal and illegal forest clearance for oil palm within that 100 km buffer will be monitored within areas that had not been allocated to oil concessions prior to 2005 (see also Figure 14), will be monitored and accounted for according to the Methodology. More information about spatial planning activities is provided in supporting documentation.

4. MONITORING

The primary purpose of monitoring is to ensure that the estimates of GHG removals presented within the Project Document are met. The monitoring plan is also designed to identify and quantify reductions in project area carbon stocks, increases in project emissions, or leakage outside the project area. The monitoring activities will consist of direct field measurements, analysis of remote sensing data, and other appropriate data sources.

The monitoring will be hierarchical in nature and shall employ a number of different mechanisms to monitor any events which effect carbon stocks within the project area. At the largest scale a GIS database comprising satellite imagery, land use classifications and other spatial data will be kept, analyzed and continuously updated. Medium resolution imagery (10-30m) and derived products shall be used to monitor forest degradation, regrowth, land use change and forest fire. This approach will allow for the identification of potential risk areas using readily available satellite imagery as well as MODIS derived fire hotspots. When deforestation and degradation are identified more in depth analysis will be conducted either through the review of higher resolution imagery, aerial surveying and/or targeted field sampling. For accurate field monitoring, a random sample of the plots used in the biomass inventory will be used as permanent plots and assessed every three years. It is also recommended that high number of more spatially distributed plots be placed within both the CAA and buffer zone. A three year interval is suggested because VCS requires that the baseline estimate be redone every ten years; therefore, three measurements would have taken place, the minimum needed to spot trends that would support a revised baseline at year ten. In order to obtain sight specific data on peat subsidence, subsidence measurement poles will be positioned at the start and end of the sample plots, driven into the ground ensuring at least 50cm penetrates mineral soil below the peat layer. These pipes will have a dual purpose of marking the boundaries of the plots and monitor the possible occurrence of subsidence and its extent over time. Table 22 summaries monitoring activities that will be conducted.

Table 22. Monitoring activities time periods and frequency of monitoring detection, survey and reporting

Times Remote sensing data, Field Monitoring Monitoring Detection Reporting and resolution, coverage survey Component Activity frequency Frequency Periods and years Frequency

Routine patrols Year- Quarterly Landsat 30m and high 1 patrol Quarterly Forest and as-needed round resolution imagery quarterly Protection intervention. collected for boundary and as and strata monitoring. needed

Detection and Year- Semi Landsat 30m for 2-3 field Annually area calculation round Annually detection plus targeted surveys of land change high resolution annually Land Change caused by imagery (aerial or agents other satellite with 1-5m than logging or resolution) as needed fire to support analysis and field surveys.

Detection of fire Year- Monthly, MODIS thermal 2-3 field Annually ignitions, round weekly, imagery (1km thermal surveys calculation of with daily band detects fires as annually 2 Fire burn areas increased small as 100m .) This activity data is collected daily. during dry season

Mark in Field Year End Annually N/A 1 field Annually using survey permanent annually stakes Boundary Patrol Year 1 – Landsat 30m + field Year 30 data + sample high resolution imagery (1- 5m) every 2 years starting in Year 2

Land cover Year-end Annually Landsat 30m +field 1 field Annually classification: data + sample high survey Year 1 conduct resolution imagery (1- annually initial 5m) for accuracy stratification as assessment in Year described in 1,3,5 etc. Full coverage Stratification section 2.4 and high resolution 4.2. Year 2-3, imagery + field data refine every other year. classification. Year 4-3,0 apply finalized classification system.

New Permit Year- Quarterly N/A N/A Annually Activity round (first five years of project 2010- Leakage 2015) Spatial Analysis End of Annually Landsat 30m for palm None Annually of new palm oil year (first oil boundary in areas of five years interpretation and possible leakage of project delineation 2010- 2015)

Survey of above Year-end None Linked to high 1 field 10-year ground biomass resolution aerial survey baseline Biomass Plot originally imagery (1-5m) every 3 reports Surveys conducted for years the baseline carbon assessment

Detection and Year- Semi- High resolution 2-3 field Annually area calculation round Annually imagery (1-5m) as surveys of deforestation needed. annually caused by logging. Logging Detection and High resolution survey of imagery (1-5m) and transport canal- ground data. building associated with logging.

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