RESPONSES OF INDONESIA ERPD TEAM TO THE

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1 RESPONSES OF INDONESIA ERPD TEAM TO THE CFPs s COMMENTS (Nov 14, 2018) Comments Carbon Accounting High risk of reversal due to the pattern of recurring extreme fire events, particularly in El Nino years. A possible solution could be to attribute part of the emissions in the El Nino years to non-anthropogenic causes and exclude them from both the REL and the reporting period. In line with this we suggest to exclude 50% percent of emissions in El Nino years from the REL and reporting. By doing this, the currently disproportional impact of the extreme years is reduced while significant incentive still exists to minimize the impact even in extreme years. (open for discussion). Responses There were 4 El Nino (ENSO) years included in the Reference Period: 2006, 2009, 2014, ENSO events occur on average every 3-7 years, so this is slightly more ENSO events that would normally be expected in a 11-year period. Analysis of annual fire and emission data from the Reference Period indicates that fire emissions from forested lands in non-enso years are approximately 37% of emissions from ENSO years, so if there is to be an adjustment made to past and future emissions in ENSO years, we would propose 37% of emissions assumed to be anthropogenic rather than 50% (unless there is some other rationale for 50% of which we are unaware of). See the figure below for a comparison of historical areas of area burned by cover class. With respect to the context for the historical estimates of area burned in 1982/83 and 1997/98, we will clarify in the text that (1) the 1982/83 estimates were from a time when E Kalimantan was larger due to inclusion of additional provinces, and (2) the previous estimates likely used a broader definition of forest than used in the ERPD, so it might be better to compare total areas burned rather than forest. Using the definition of forest in the ERPD, most fire during the reference period occurred was not in natural forest that caused the deforestation and forest degradation, but mostly in non-forested land. Thus, part of emission from burning of non-forested land is not taken into account in the development of REL. Nonetheless, there is a risk that future extreme fire

2 Percentage of Area Burnt Percentage of Area Burnt events could impact remaining forests and this contributes to the anticipated risk of reversal. 100% 120,000 90% 80% 70% 60% 50% 40% 30% 20% 10% 100,000 Savana & Bareland Shurbs 80,000 Agriculture land 60,000 Estate Crops Forest Plantation 40,000 Secondary Forest Primary 20,000 Forest Savana & Bareland Shurbs Agriculture land Estate Crops Forest Plantation Secondary Forest Primary Forest 0% Provided TAP with background data necessary to validate emissions from deforestation and degradation: confidence intervals and detailed data regarding Land Cover Changes, documentation of the processing of activity data, literature sources and background data for different EFs Conduct a thorough uncertainty analysis especially of activity data (accuracy assessment) but also the other areas as pointed out by the TAP. (Appendix 8.3 should provide the method for the estimation of the uncertainty of land cover analysis is missing Address possible double counting issues in degradation monitoring due to various The requested information is available and will be made accessible to the TAP. The team is currently conducting the requested uncertainty analysis of the activity data (uncertainty of land use cover change) and the method will be provided. We avoid double counting the emission from fire by excluding the emissions from those fires that lead to a change from primary to secondary forest, as these

3 methodologies applied (Map, Proxy) and elaborate, how the risk is mitigated, e.g. double counting of the degradation emissions sources Clarification on how degradation type 1 (conversion of primary forest to secondary forests) would not overlap with degradation types 2 4 (fire, peat decomposition and logging) - further clarity on the Annex 7.1 emissions are already accounted for through the change in land cover. Only emissions from fire that occur within the secondary forest class are counted. For logging, to avoid double counting, we only include the calculation of emissions from change of primary forest to secondary forest only from non-production forests. The logging activities by the concession only occur in the production forest. This assumption is adopted, as non-production forests (conservation and protection forest) by regulation will not be possible to be converted into logging concession even it has been degraded (Government Regulation Number 104/2015). The ERPD states that only 1% of emissions come from degradation of primary forests (p. vi), yet this is included in accounting (change from primary forest to secondary forest). In addition, subsistence agriculture was listed as a driver, yet to what extent this causes degradation in primary/secondary forests has not been included. Further analysis and explanations would therefore be useful The assumption, that selective logging in forest concession causes forest degradation. We would assume that logging plans for natural forest logging concessions work within the parameters of Sustainable Forest Subsistence agriculture causes the degradation of forest. Heavy disturbance due to community encroachment may change the land cover into shrubs or mix agriculture with shrubs. In the development of REL, the emission from this is accommodated in the deforestation as shrubs and mix agriculture with shrubs are considered as non-forest. Detail explanation is provided in Annex 7.1 on degradation. The assumption about selective logging is correct; however, as has been demonstrated in Indonesia, this type of logging still leads to significant emissions from forest degradation which can be reduced through the application of RIL. The inclusion of RIL in the REL is to account for the reduction of degradation of forest from logging activities by improving the harvesting technique. The methodology employed has been a peer-reviewed methodology (Griscom et al.,

4 Management, allocating possible logging quantities based on annual regrowth Provide more background regarding the following assumptions: "All deforestation within logging concessions that did not result in a new land use, can be attributed to poor management of the concession." P37 For example, can this be attributed to normal road construction? "The deforested area of shrub outside of concession and estate crop boundaries was used as a proxy for illegal logging." P37 Couldn t this also be from disturbances that are unrelated to logging? The TAP assessment also suggested that in certain districts they have developed methods for measuring degradation and we would be interested to hear how far this work has come and whether it would be feasible to implement this at province level 2014). The protocol for auditing the carbon emission performance from logging in forest concessionaires is already available. Yes. As noted in the document, these and other broad assumptions were made for the purpose of that specific analysis of drivers of deforestation. The analysis identifies the major drivers and, as noted on page 33, activities that can address deforestation in East Kalimantan. Land use change to road construction is not part of the poor management. Thus, the deforestation within concession could be resulted from illegal activities such as illegal logging (please see Table 4.3 and 4.4 page 34). With regards the second concern, the deforestation outside concessions (timber plantations and estate plantations) is mainly due to illegal logging. Yes, at present the local government with support from WWF has developed methods for measuring degradation in secondary forest. The method is able to monitor the different levels of degradation of secondary forest including shrubs using landsat with visual interpretation. The method is possible to be applied at provincial level and national level given the availability of dedicated human resources, finance and infrastructure. The use of visual interpretation method requires experienced analysts with deep field experience that is still lacking. On the other hand, the carbon stock data for each degradation level is also not available yet. Thus there is a need to develop sample plots to measure the carbon stock in different degraded forests. The degradation level of the secondary forest can be categorized as lightly and heavily degraded and shrubs also into two categories as old shrubs (forest regrowth) and shrubs. In this regards, the forest regrowth can be categorized as forestland but shrubs as non-

5 How the estimate of accuracy from logging on p99 was conducted. Could the uncertainty come from variation in baseline emissions estimates from other papers, not necessarily from the un-accessed area of logging? What is the reason for the high peak in deforestation 2016 in East Kalimantan? Other international data, e.g. Global Forest Watch, don t confirm this trend. Fire data does not show any significant peak in forest fires in forestland as it takes many years to regenerate naturally. With this categorization, we will be able to measure emission from degradation of secondary forest. The country considers that adoption of this approach is possible in the next two years (2021) before the first verification, thus the recalculation of REL may be applied. The implication of this approach, the contribution of emission from deforestation and degradation to REL will change. The emission from fire causing degradation of forest will also change, as part of area of shrubs will be defined as forest (i.e. forest regrowth). As defined, most area affected by fire is shrub, thus the burnt of the old shrubs (forest regrowth) will be included in the calculation of emission from the degradation and this may elevate the REL. In addition, the emission from RIL may be shifted to sustainable of forest management instead of putting the emission under the forest degradation and this will be in line with national policy. Thus in the resubmission of REL before the first verification, the REDD+ activities included will be deforestation, degradation and sustainable forest management. In the preparation of the adoption of the approach, the government is preparing the establishment of new permanent sampling plots in different level of degradation of the secondary forest as well as training of technical staffs. The team is not sure what is meant by variation in baseline emissions estimates from other papers and would like to request clarification of the comment. Further analysis of the data indicates that the 2016 spike in deforestation occurred mainly on areas allocated to estate crops and timber plantations. The GFW data also shows a spike in deforestation in 2016 though not of the same magnitude (352k ha in 2016, vs 232k ha in 2015 and 168k ha in 2017). Differences are likely due to the different definition of forest. GFW does not count change to brush as deforestation. The cause of the deforestation are

6 mainly due to clear cut of the forest as many of this areas have been granted with permits prior to 2016 while the sustainable plantation policies has not been applied in that year yet. To improve plantation sustainability, the East Kalimantan Government has prepared a Provincial Regulation on Sustainable Plantations in 2017, and has been agreed as Number 7 of the Year In the regulation, there are rules regarding the protection of forested areas in the estate crop permit area. Table to be clarified include units, and made clear how the numbers relate to the expected emissions for the whole programme (total 38.5 mtco2e referenced elsewhere in the document) Dryland forest includes lowland, upland, and montane forests. Have Indonesia determined to what extent these may differ in carbon content? Please provide clarification on a minor inconsistency in the reference level, which may be a typo, on page 86. the reference period selected for the ERPD is from 2007 to However, as we understand the reference period is from Also, please update the link on the process for analysing satellite data to monitor the land/forest cover changes, as it was not working when we tried to access it (p.86) The table will be revised accordingly. No, we apply the same carbon content to all dryland forest types (lowland, upland and montane). The National Forest Inventory combined all the carbon stock for the same forest type It is not a typo as the available satellite data is from The other data is The calculation of the annual deforestation rate during the period is by dividing the area of forest loss during the period by three. Following the MF, we only use 10 years of deforestation data, thus we start from The link sometimes does not work. The East Kalimantan Government plans to develop a system connected to the national system to ensure that the information is always accessible.

7 In light of the forthcoming guidance on technical corrections to Reference Level, please clarify whether new methods/approaches to estimate degradation and/or burnt areas are expected to be used during the ERPA period. If so, explain how this will be taken into account in the estimation of the FREL and MRV. The adjustment for inherited emissions from peat decomposition may be problematic. Per TAP suggestions, the Reference Level can be calculated with the average emissions of the historical period from peat decomposition, if in the monitoring period the emissions from this activity also start from zero and neglect the inherited emissions. The Government is now improving the methodology for estimating the burnt area which is expected to have lower uncertainty and to be part of the NFMS (National Forest Monitoring System). For the Government of Indonesia, this is not so much a technical issue as it is a policy issue. GoI concern is that, while the area and impact of peat forest is relatively small in the ERPD project area of East Kalimantan, it is much larger and important in the rest of the country. GoI is concerned that whatever approach taken in E Kalimantan might set a precedent for treating inherited peat emissions in the rest of the country, for other projects involving other donors. Specifically, neglecting inherited emissions during the ER Performance Period would set a precedent of a significant disincentive for protecting peat lands in the rest of Indonesia. The Methodological Framework allows for upward adjustments above historical emissions for unusual National Circumstances. GoI suggests that the case of inherited peat emissions is such an unusual National Circumstance. The adjustment proposed is very small (0.13% of total emissions from all sources and much less than 0.1% of total C stocks), and would retain an important consistency between the ERPD, they national FREL, and the national approach to accounting for greenhouse gases. In summary, this is a very modest adjustment for a special case of C pool (inherited C emissions). This would enable GoI to affirm to other potential

8 projects and donors that a precedent exists to count inherited emissions in any project that seeks to reduce emissions from peat forests. Clarification on this recommendation has been requested to the TAP. The issue of peatland degradation was not considered during the development of the Methodological Framework. Considering Indonesia has peat forest, in which the emission from peat forest that have been deforested will continue to emit CO2 due to drainage which is called as inherited emission, with the inclusion of this emission, the RL can be higher than the historical average. Following the suggestion from the TAP, in the case that no possible rewetting of the deforested peatland in the future, the emission from inherited emission can be set to zero, simply exclude the emission from the decomposition. In the case that there is possible to rewet the deforested and degraded peatland in the future, then the RL should include the emission from peat decomposition in which the rate under the BAU should be the same as the rate at last year of reference period. Under the ERPD, this is being proposed. However, this is not consistent with the national FREL since the part of the deforestation in the future under the BAU may still occur in the peat forest, therefore in the development of RL, the inherited of the emission is included by taking historical trend, meaning that under the RL, part of deforestation still occur in the peatland forest at the same rate with average annual historical deforestation. Thus, there will be ERs coming from stopping deforestation of the peat forest although no restoration/rewetting implemented in the already deforested or degraded forest at the last year of reference period. View from the Government of Indonesia, the treatment of emission from peat decomposition for the ERPD should be consistent with the national. Thus the inherited emission is included, meaning that the RL will be slightly higher than the average annual historical emission during the reference period. Adopting this view, the indicator 13.1 will not be met. With the spirit of the need to consider the specific national circumstances, this view should be considered by the CFP.

9 Explain how the Reference Level will achieve consistency with the national GHG inventory. At present the RL and the national GHG Inventory use the same activity data and Emission factors. The GHG inventory uses gain-loss approach, while the RL uses a stock-change approach to estimate emissions. The ERPD-RL is consistent with the national FREL, but the carbon stock after the conversion is not taken into account in the calculation of the National FREL in which carbon stock after conversion is assumed to be zero. As noted above, consistency with the national GHG gas inventory and national FREL would be enhanced by CFP agreement to allow a small upward adjustment to the historical emission level, to account for the unusual National Circumstance of inherited emissions from peat deforestation and degradation. Safeguards Indonesia has undertaken important steps but most important elements are very much work-in-progress (ESMF, FGRM, SIS). The TAP points to several issues that have to be resolved to make the Safeguards section meet the MF criteria especially in relation to FPIC and FGRM. There is also a need to include the development of instruments like an RFP Resettlement Planning Framework and an IPPF Indigenous People Planning Framework into the ERPD. Work on the ESMF, SESA, and FGRM has been progressing rapidly and a IP Planning Framework has been drafted. The revised safeguards section will reflect these developments.

10 It will also be interesting to know why the ERPD uses the World Bank definition of FPIC Free, Prior and Informed Consultations and not the UNDRIPs definition of FPIC Free, Prior and Informed Consent since the Government of Indonesia have endorsed UNDRIP- United Nations Declaration on the Rights of Indigenous Peoples. The East Kalimantan Government has plans to implement FPIC, as defined by UNDRIP next year. The document uses the WB definition to indicate fulfilment of the WB safeguards requirements. The ERPD needs to demonstrate: How the Safeguards Plans will adequately address environmental and social risks identified through the SESA process; The safeguards section is being revised accordingly. See also comments below. Documentation of all consultation processes and disclosure plans for safeguards will also be reflected in the revised ERPD. That they are being developed through a participatory process, and; How they are going to be disclosed publically to stakeholders. What is the current status of the SESA? Is it on track to be finalised this year? The SESA is currently being finalized, with additional data collection to strengthen understanding of contextual environmental and social risks. Complete and consulted drafts of the SESA, and its follow-on ESMF which incorporates IPPF, RPF and FGRM will be submitted as part of the final ERPD package in mid-

11 November. These safeguards instruments are expected to be finalized and cleared by the World Bank prior the World Bank s appraisal, expected in early SESA enrichment includes identification of additional environmenal and social risks based on spatial analysis and analysis of secondary data (reports of previous REDD+ lessons learned, research and data from TNC, DDPI, P3SEKPI). These additional risks may be categorised as low-priority (low probability of occurrences), but wil be needed to be considered in the subsequent ESMF formulation. Social risks such as potential access restriction and social/gender exclusions were identified. Environmental risks such as pest management, potential changes in water quality (due to aquaculture), and potential overlap with endangered species habitat (ten species are listed) are identified. Consequently, methods such as FPIC and HCV were included as means for mitigating the social and environmental risks, respectively. Additionally, a public consultation on SESA and ESMF was held in Balikpapan on October 10 and 11. Inputs and additional data were collected from stakeholders at provincial level. Consultation at district level is scheduled for late November or early December This consultation session will be organised by DDPI. Indicative timeline for SESA East Kalimantan is as follows: Revised Draft of SESA: Nov 17, 2018 Revised Draft ESMF (including IPPF, FGRM): Nov 17, 2018 Revised Chapter 14 ERPD based on SESA: Nov 17, 2018 Consultation at district level: 17 Nov 18 Dec, 2018 (will be synchronised with DDPI s plan for socialisation)

12 What are the lessons learnt in the ongoing SESA process and what the emphasis by the local communities, and how will Indonesia take this into account in the National SIS? On page 153, Section Environmental and social risks and impacts, and mitigation measures it states that the ER Program triggers some of the World Bank Operational Policies (OPs). Can you provide more information as to why select OPs were not Test FPIC at district level (three districts will be sampled): 17 Nov-18 Dec, 2018 (will be synchronised with DDPI s plan for socialisation) Revision of SESA, ESMF based on district consultation and FPIC try out: Dec, 2018 Review of SESA, ESMF by World Bank/FCPF: 18 January 2019 Revision of SESA, ESMF: January 31, 2019 Finalising SESA, ESMF: February 22, 2019 The vast jurisdiction where the ERP will be operating has added a layer of complexity in understanding E&S risks across multiple sectors and institutions. Constant and dedicated involvement from key stakeholders from East Kalimantan, particularly under the leadership from DDPI and through collaborative efforts from development partners in EK, notably the GGGI to support the overall SESA process represents a key element to enable local ownership as well as inclusive participation of a broad range of actors under the ERP, including community representatives. In addition, government procurement of a consulting firm has been reported to have delayed the finalization of the SESA and ESMF. The SIS will be used and linked to the ESMF as a monitoring instrument for safeguards during ERP implementation. To ensure that local context are considered, SES REDD East Kaltim (previously established by Stakeholders in East Kalimantan) can be considered as an alternative mechanism for ensuring safeguards monitoring. Regulatory framework for designating the most appropriate safeguard instrument will be needed. OP 4.37 is not triggered as the project will not finance the construction of new dams and/or rehabilitation of dams or dams under construction- for large and small dams- under OP 4.37 s definition and it will be stipulated in the negative list of the ESMF of this project. For OP 7.60, Kaltim and Jambi are not located in the disputed area. For OP 4.03, the main executing agencies is not private sector as per defined by para 3 and 4 of the OP 4.03 and the future involvement of

13 included in this list, such as OP 4.03 Performance Standards for Private Sector Activities, OP 4.37 Safety of Dams, and OP 7.60 Projects in Disputed Areas or other OPs not included? There is a mention of more detailed description in Annex 14.2 and 14.3 but we could not locate this annex, only a summary table of the gap analysis of existing safeguards in annex Are there broader initiatives strengthening transparency across involved government agencies part of the program? Issue was raised by NGOs and in Safeguards Workshops. Sustainable Program Design and Implementation We strongly encourage GoI to make clear, direct links between planned interventions (and the feasibility of interventions, e.g. revoking licenses) and the drivers of deforestation and forest degradation to ensure that programme implementation is effective in delivering environmental, regulatory and socioeconomic objectives. See Annex 1 for more detailed comments on particular subcomponents. Please elaborate on mitigation actions in place to reduce reversal risk. Peaks in possible private sector partners are already covered in OP 4.36 with regards to forest estate or plantation developments. To be addressed based on the workshop. Results of current interviews and dicussions suggest the requirement of transparency regarding benefit sharing mechanism. The section on activities will be revised to more clearly show the links to the drivers. See also comments below. The revised document will include an analysis of the 2016 spike in deforestation and will elaborate on mitigation actions to reduce the risk of reversal.

14 Deforestation like show that the reversal risk is high and are not explained sufficiently in the ERPD The ERPD needs to contribute more on assessment of land and resource tenure in the accounting area Resolving overlapping title is identified as an important component of the program, but the process for licensing and revoking licenses for mining/forestry/ag/estate crops, and how this interfaces with the tenure reform element of the program is needed. The principle activity both in terms of budget allocation and expected emissions reductions is sustainable management for estate crops (palm oil). The programme offers technical assistance and will increase monitoring, but the incentive for private companies to change behaviour and adopt sustainable practices is unclear. Request financial analysis that demonstrates evidence of the benefit of adopting sustainable practices. A high proportion of the programme budget is allocated to social forestry and village level activities, however these activities are only expected to generate a small proportion of The section on land and resource tenure is being revised accordingly. More information on this issue will be provided in the section on land and resources tenure. The main approach to reducing emissions linked to estate crops is a regulatory approach (implementation of the mandatory ISPO certification, implementation of the recent plantation regulation). The social forestry and village level activities are critical for achieving lasting emissions reductions as they form a key part of the strategy for addressing underlying drivers, including land governance. The NCBs for these activities will be outlined more clearly.

15 the ERs. Currently there is no analysis demonstrating that income can be increased for these activities. Request that non-carbon benefits associated with these activities are outlined more clearly, and some analysis on the potential market for the specific activities. The BSP section is currently just short description on arrangements and the benefit sharing mechanism is still under development. We would like to see more advanced BSP included at this stage. No assessments have been made on how concrete monetary income from benefit sharing will be used, or how concrete benefits will be distributed. Under these circumstances, it is not possible to assess whether the benefits, both monetary and non-monetary, will be distributed to the right people and groups. This will have to be followed-up closely in the coming months, including the consultations on the BSP. Furthermore, the BSP section needs to better explain the criteria and process for The BSP section is undergoing significant revision and strengthening. The BSP will be generated from communication process and consensus amongst stakeholders. The consensus will be put in agreement and it will cover some issues, such as role of each stakeholder, the proportion of benefit sharing based on the role, the planning activities the etc. The distribution of REDD+ incentive will be based on MRV result in sub national level and after verified by MoEF. Based on the recommendation from Provincial Government, through the Provincial Environmental Service, the BPDLH will request Custodian Bank to distribute the incentive directly to REDD+ entities (in level 1). REDD+ entities in level 1 will continue to distribute the incentive to REDD+ entities in level 2 and REDD+ entities in level 2 will continue distribute the incentive to REDD+ in level 3 based on their performance. The beneficiaries of REDD+ program will refer to the criteria already developed (see Annex 15 BSM). At this point, there will be agreement in each level of beneficiaries to ensure that the incentive is distributed and used in the REDD+ framework. The agreement will cover some issues, inter alia, role of each stakeholder, BSP, proposed use of benefits, and etc (see Annex 15). The incentive distribution will be given to the beneficiaries that meet the criteria or requirement of it (see Annex 15 BSM). Referring to the beneficiaries and its

16 identifying/selecting beneficiaries, particularly when the benefits are distributed to the site level (e.g. village governments, communitybased organizations, etc.). The criteria should include the proposed use of benefits, in particular how it will empower women and girls at the village and community level a non-carbon benefit which can also be included in section Please include information on the BSP adoption process, and the modalities for ER Program stakeholders to participate in the development and to approve the BSP terms. Provide more clarity on the principles and scope of any subarrangements along with clear provisions on who qualifies and what the terms would be for the transfer of title to ERs. The Advanced Draft ER-PD outlines key aspects of the institutional and governance structure however, the Environmental Fund Management Agency (BPDLH) on which the BSP is to rely is not yet operational. Benefit sharing mechanism on financial flow for carbon proceeds is lacking. The roadmap for completion of the benefit sharing criteria, it can be seen the type of beneficiaries and scoping of their activities regarding the REDD+ program. The finalization of the BPDLH is progressing and is expected to be on target. After the issuance of Perpres No. 77/2018 on Environmental Fund Management, it is expected that the BPDLH can be established by the end of A draft Ministerial Decree on BPDLH s structure has been prepared by the Ministry of Finance and operational instruments of BPDLH (governance of BPDLH and strategy business of BLU) have been developed by MoEF in collaboration with MoF. The benefit sharing mechanism is still expected to be finalized over the next months. The roadmap will be updated and better justified in the document.

17 mechanism seem too optimistic, aiming for a final design by December The overall architecture of the non-carbon benefit sharing component of this program seems relatively well thought through in terms of institutional distribution of funds but the detail about how resources will be allocated on the ground is very light would definitely agree with the TAP report s assessment of this area. The set of indicators in 16.2 are fairly good. Two key areas for further work are: Tightening up definitions: for example, is there s a standard way of measuring frequency and intensity of floods, fires and landslides or fire hotspots? Clear and consistent methodologies for collection and calculation: For example, increased income of community members and value of NTFPs are both solid measures but, unless there s a very good estimating administrative data set, this can require some considerable primary data collection to measure over time. Whilst the non-carbon benefit indicators in 16.2 capture the outcomes, section 4.3, also Agreed. This will be reflected in the revised BSP section. Noted. The team will reevaluate the indicators and improve them where feasible. These will be monitored as part of the programs M&E which is linked to the indicators included in the detailed program design (Annex 4.4).

18 outlines a clear set of outputs for each set of activities it would be good if some of these could be monitored on an ongoing basis to more clearly link programme activities to outcomes. Please provide more information regarding activity on enforcing implementation of RIL policy at the field level. We see it included in Annex 4.4: Detailed Program Design but did not see much detail in the ERPD. For example, who will monitor for implementation of best practices? The document does not refer to the National Peatland Restoration Agency (BRG) in the list of partner agencies and organizations involved in the ER program (pg.2). BRG s role has been vital in developing national peatland map and in restoring and rehabilitating the degraded peatland, therefore it should be part of this ER program. Component 1: Improving land governance: Since the amendment of Agrarian Law is still being discussed, the dynamic of land ownership and property rights will remain high. The involvement of Ministry of Agrarian and Spatial Planning (MASP) and Ministry of Home Affairs (MOHA) is highly recommended Monitoring will be done by the Forest Management Unit responsible for the respective concession. The team will consider including the BRG as a partner. It should be noted however, that the BRG is focused on the provinces with large areas of peatlands and does not have any programs in East Kalimantan. The sections on land governance are being revised accordingly.

19 to mitigate the risks. The other relevant issue that needs to be considered is to improve the procedure on how the forest tenure can be shifted to the customary land tenure and to the non-forest tenure (APL) along with associated rights. Component 3: Reducing Deforestation Linked to Oil Palm Expansion: The proposed activities in this component should also consider enforcement of land use planning and environmental management laws, especially for protecting the HCV forest. Developing fiscal disincentives can help preventing forest conversion. Having a comprehensive intervention from upstream to downstream policies will offer maximum benefits to reduce deforestation. The main approach to reducing emissions linked to estate crops is a regulatory approach (implementation of the mandatory ISPO certification, implementation of the recent plantation regulation). The ERPD mentions a recent draft declaration to restore 640,000 ha of natural forests and 50,000 ha of peat land inside estate crop concessions by (This draft has been circulated to district governments and is waiting for district approval). What is the current state of draft? Will the declaration be legally binding for estate crop license holders? The draft declaration has been consulted in 7 districts. The initial proposed forested areas inside allocated estate crop areas are being consulted with district stakeholders. The declaration will be legally binding for estate crop license holders. The process of building commitment with district governments and the private sector is ongoing. This commitment is expected to be obtained in December 2018, and in 2019 a joint commitment will be made.

20 Given the high amount of Forests and HCV Forest within concession areas, according to the ERPD the MOEF has issued a number of regulations to support protection of HCV Forest Area in concession areas. At some point, the ERPD says that the companies holding concessions will work on identifying HCV within their concession, and those companies will protect those forests from conversion. Who will oversee these actions? Is there a legal basis for protection inside existing concessions? Does there exist, at least preliminary, a spatially identification of the HCV in East Kalimantan? There is a small funding shortfall in the first period, prior to any ER payments being received. How are you planning on meeting this shortfall? The participation of different stakeholders in BSP development is unclear and to what extent the input has been integrated? (TAP p39) Fund distributions from BPDLH will require that the beneficiaries of REDD+ have a legal status, and 7 main beneficiaries of REDD+ and the ER Program are listed. Given the The implementation will be overseen by Forest Management Units for forest concessions (Natural and timber industry plantation). The legal basis includes: - Ministerial Letter of Agraria and Spatial Plan/Head of BPN No 10/SE/VII/2015 concerning Issuance of Permits on HCVF Areas - Ministerial Regulation No. P.12/Menlhk-II/2015 about HTI Development analysis of identifying IUPHHK-HTI area in this regulaion is referred to HCVF requirements - Ministerial Regulation P.14/PHPL/SET/4/2016 Sustainable Forest Management An initial assessment of HCV areas (HCV5 and HCV6) has been conducted for East Kalimantan by Mulawarman University (2017). Other funding sources are being sought. Fore example, MoEF is currently in discussions with the Catalytic Fund. The BSP is being developed with the participation of stakeholders. Agreement is being sought over key issues, such as the role of each stakeholder group, and the principles and criteria for benefit sharing. Funding arrangements for the BDPLH have been discussed and consulted within Ministries and also with the Provincial Government of East Kalimantan. Also see below. The BSP is currently undergoing revision and a key aim is to ensure that adat communities without formally recognized title can receive benefits. GoI is currently evaluating the option of reserving a portion of ER payments for adat

21 general lack of recognized legal status for local communities in Indonesia, this requirement is a concern and can become an obstacle for adequate benefit sharing. In addition, more information is requested on what the share of people in formally recognized adat communities / people in not formal recognized adat communities in the program area is? How will adat communities without a formally recognized status be able to participate in the program activities and in the benefit sharing? ER Program Transactions Transfer of Title: no legal certainty on carbon rights defined by existing law. The current arguments presented in ERPD are not sufficient to provide confidence and needs to be clarified. Legality issues around titles / licences, recognition of rights in Adat communities needs to be clarified It is also not clear if there are any issues with nesting, or if there generally are potential claims from stakeholders to the legal rights of ER. Please clarify whether the existing emission reduction projects within the Accounting Area (Berau, Satuan Tugas) and/or the existing communities. Funding would most likely flow through the village administrations in which the communities are registered and/or located. GoI has confirmed that Ministry of Finance (MoF) will engage with the ERPA Process and sign the ERPA. The legal basis for this has been clarified and will be provided in the document. Further consultation with legal experts has confirmed that the proper legal basis for carbon rights (including ER title) in Indonesia does not exist yet. The Program Entity is aware of this legal gap and considering to incorporate legal principles and scope of carbon rights (including associated rights and obligations of all parties associated with tenure rights and natural resources licensing) in the upcoming Presidential Regulation on the Implementation of Nationally Determined Contribution (NDC). It plans to start a series of technical meetings on this incorporation by December In order to establish an alternative to the reference to existing legal and regulatory frameworks, the Program Entity decides to engage all relevant stakeholders of REDD+ FCPF under private agreements/arrangements. These will include agreements between: 1) the Program Entity and the Government of East

22 ecosystem restoration licenses (IUPHHK-RE) will be nested in the ER Program. When will Indonesia confirm which ministry will engage in the ERPA process and sign the ERPA? Kalimantan Province; and 2) Benefit Sharing Agreements between BPDLH and all relevant stakeholders of REDD. Both Program Entity and the East Kalimantan Province are still discussing intensively some legal principles and scopes of the ERs title-related components under Benefit Sharing Agreement (along with the concept of Benefit Sharing Mechanism under the auspices of BPDLH itself). Until this moment, there is no discussion yet on the nesting issues. Indeed, the working area of Berau Forest Carbon Program ( BFCP ), PT Global Green and Orangutan Habitat Restoration Program ( RHOI ) are situated within the accounting area of REDD+ FCPF Program. However, the jurisdiction approach taken by BFCP will always be in line with the REDD+ national and regional policy. Since the beginning of the development of REDD+ FCPF Program, both TNC and Berau District Government have stated their commitment to support this program. They guarantee that any carbon generated by BFCP will only be transacted on at the REDD+ FCPF Program. In the context of the existing IUPHHK-RE holders, RHOI states that it would not conduct any activities of emission reduction project (by itself) at least until the completion of REDD+ FCPF Program. It also states that it does not have interest on the claim to the legal right of ERs. Meanwhile, PT Global Green has not continued its performance and obligation as the IUPHHK-RE holder since couple years ago. Nevertheless, from a legal perspective, the REDD+ FCPF Program still need a legal protection from potential claims from these entities. Therefore, the Program Entity and Government of East Kalimantan Province will engage them under the Benefit Sharing Agreement. With regard to the issue of recognition adat rights, the program will support the formal recognition of adat rights, but this process is not expected to be completed during the program period. However, benefits from the ER Program are not conditional on formal recognition of land rights. Under the revised BSP, adat

23 communities which have not been formally recognized, will receive benefits that will be channeled through the respective village governments. Annex 1. Further comments on Sustainable Program Design and Implementation Revoking overlapping and non-clean and clear permits, and enforcing the licensing moratorium 809 out of 1404 mining permits are being revoked. What assessment has been made of the other 595? Are these confirmed as sustainable? This focuses on producers with permits. Do producers operate in the programme area without permits? Similarly, what fallout is expected from revoking permits? Could producers continue to operate? Is the enforcement framework in place to prevent this? The concept of clean and clear will be described further in the document. The 595 permits that are not being revoked have passed a number of legality requirements as defined under Ministerial Decree of Mining and Minerals No. 43/2015 on Evaluation Standard on the issuance of Mining and Mineral concession. The companies are classified as clean and clear if they have fulfilled the requirements as follows: a) Completed administration b) No overlapped permits (territory) c) No technical issue (exploration report and feasibility study) d) Environment (fulfilled environmental standards); and e) Finance (no delay tax or royalty payment) Producers without permits, or those whose permit has been revoked are subject to law enforcement. The program is currently evaluating furhter options for supporting strengthened law enforcement.

24 Sub-component 3.1 Protecting remaining forests within oil palm estates On what grounds will concessionaries be willing to engage with this? What is the link between the declaration by district governments and private companies? What is private companies do not make a commitment to SFM? There is a focus on ensuring activities are implemented, is there a penalty for not doing so? The programme is providing technical support but is this support enough for target companies to adopt new practices? Can financial analysis be used to demonstrate how the programme makes sustainable production more profitable than previous practices? This is especially important given the amount of ERs expected to be delivered through this intervention. What are the key risks preventing the transition to SFM? How does the programme design mitigate these? Additional information on the commitment to protect remaining forests will be included in the revised document. ISPO is one of the requirement for OP companies to market their products. Financial analysis has not been conducted. However, keeping the natural forests inside the concessions will provide a long sustainability of the forest in the future. This include non-carbon benefits such as wildlife and ecosystem services. Key barriers to SFM include lack of financial incentives, higher costs, and ineffective law enforcement. The program will provide technical support for RIL- C, thereby decreasing the costs for producers. The program will support FMUs to increase monitoring and enforcement.

25 Subcomponent 3.2 Strengthening the capacity of smallholders to implement sustainable estate crops Would be good to see which stakeholders will be engaged. What is the incentive for producers to adopt sustainable practices? For example, has work been done to assess the price premiums associated with SFM? The small holders here are oil palm farmers with small areas of oil palm plantation. The farmers will be facilitated to obtain ISPO certificates so that their products will be accepted by both national and international markets. Subcomponent 4.3 Incentives for sustainable forest management Monetary and non-monetary incentives are listed as an activity however there doesn t look like there has been much thinking on this. Some indicative analysis of potential options should be presented so that we can understand the potential impact and additionality of this component. Well noted. Potential options will be included in the revised draft. Incentives will include technical support for RIL-C to forest concessions. Subcomponent 5.1 Social forestry What is the estimated ha coverage of this? The target is 70 business plans developed by 2024 what work is being The social forestry program in East Kalimantan will cover 660,000ha.

26 done to source private sector investment for these plans. Subcomponent 5.3. Strengthening village sustainable livelihoods This section focuses on the facilitation of sustainable practices at the local level. What s not clear is how these activities will be financed. Training on micro finance will be provided but do famers have access to capital? Where is the evidence they will be willing to take upfront risk associated with adopting new practices? There will be access to small grant programmes but is this sufficient? Will smallholders have access to the right markets to sell produce from new practices? If there are not the right opportunities for a premium, what the incentive to adopt sustainable practices? Village s budget for FCPF ER Program is the largest portion of total cost ER program in East Kalimantan. The livelihood activities including trainings and technical assistance will be financed through village budgets that have been allocated by the Ministry of Villages. Small grant programs will be used to demonstrate the new practices effectively not only to reduce emissions but also to increase community incomes. Market identification will be a key component of business plan development. The province and district government will support communities in marketing their products (e-market).