SCENESETTER FOR CEQ CHAIRMAN CONNAUGHTON VISIT TO

UNCLAS SECTION 01 OF 02 JAKARTA 002194 SIPDIS SIPDIS SENSITIVE FOR CHAIRMAN CONNAUGHTON AT EMBASSY BEIJING FROM AMBASSADOR HUME E.O. 12598: N/A TAGS: EFIN EINV ECON ENRG KCOR PGOV ID SUBJECT: SCENESETTER FOR CEQ CHAIRMAN CONNAUGHTON VISIT TO INDONESIA ¶1. (SBU) Summary. Embassy Jakarta welcomes you to Indonesia. You are coming to Indonesia at a time when the country is under increasing criticism for its rapid rates of deforestation, something to which the Government of Indonesia (GOI) is increasingly sensitive with the approach of the 13th United Nations Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP) meeting in Bali. Your trip follows a visit by OES Assistant Secretary Claudia McMurray and will be a good opportunity to reinforce U.S. policy on climate change and the upcoming COP-13. Your Indonesian interlocutors will want to hear more about the President's September conference for major economies. They will also want to hear specifics regarding: 1) how the President's proposal addresses deforestation; 2) how developing countries will have affordable access to clean technologies; and 3) how the President's proposed framework will fit with COP-13. End Summary. INDONESIAN PARTICIPATION IN THE NEW FRAMEWORK -------------- ¶2. (SBU) GOI officials, NGOs and other climate change stakeholders have welcomed President Bush's climate change framework proposal as a positive development. Each group has emphasized the need to address forestry as a component of any climate change framework (see paragraph 3). The GOI will focus on three issues relative to the President's plan: stakeholder involvement, attention to forestry and linkages to technology transfer. Dr. Emil Salim, the Senior Environmental Advisor to President SBY, has cautioned that Indonesia would not participate in the new framework without understanding its incentives and obligations. CLIMATE CHANGE AND FORESTRY IN INDONESIA -------------- ¶2. (U) Indonesia is the world's number three emitter of greenhouse gases, with emissions resulting from deforestation and forest fires accounting for five times the emissions from non-forestry sources. Indonesia records the world's fastest rate of deforestation, an average of 2.1 million hectares - an area the size of Maryland - per year (Indonesia lost an estimated 21 million hectares between 1990-2000). The World Bank estimates most forests in Sumatra and Kalimantan (Borneo) will be gone in a decade. This is due to illegal or unsustainable logging practices, a weak judicial system, and large scale land clearing for agri-business ventures, mainly oil palm, much of which ironically goes into biodiesel. Illegal logging constitutes as much as 82 percent of total consumption. Companies engaged in illegal logging process most timber domestically before exporting it. THE BIOFUELS DEBATE -------------- ¶6. (SBU) Indonesia's greatest potential source of biofuel development, the oil palm, is ironically also one of the major contributors to deforestation (and hence greenhouse gas emissions). Logging and oil palm plantations are a $7 billion industry in Indonesia. The GOI is continuing its ambitious five-year, multi-billion dollar investment plan to boost biofuel production. The GOI has announced several biofuel policies, including a $108 million fund to create incentives for biofuels investments and $1.08 billion to improve agricultural and rural infrastructure. The GOI has also signed 58 tentative agreements reportedly worth $12 billion with foreign and domestic investors (mostly Chinese, Japanese, and Malaysian firms). Even though the Presidential Decree on biofuels requires that investors only plant on degraded land, there are sufficient loopholes to allow good quality forest to be lightly exploited until it becomes classified as degraded. There is a need in Indonesia to promote economic alternatives to unsustainable oil palm development. ACCESS TO CLEAN ENERGY -------------- ¶10. (U) Indonesian climate change stakeholders have also expressed concerns about access to affordable clean technology. One of the bottlenecks in reducing greenhouse gas emissions in Indonesia is the lack of capital investment. The GOI is attempting to save money by investing in cheaper (and dirtier) coal technologies from China to address its rapidly growing energy needs. We have communicated that the President's proposal includes a component to have the multilateral development banks prioritize clean energy investments, but the stakeholders with whom you meet will want to hear more details, particularly on affordability. Stakeholders have also stressed the strategic priority to leverage the country's vast potential for renewable, zero-emissions geothermal power and biomass power. COP-13 JAKARTA 00002194 002 OF 002 -------------- ¶11. (SBU) As the host of December's COP-13 meeting, the GOI is hesitant to participate in any negotiations they perceive will distract from the COP. Although you will be in Jakarta to discuss the President's proposal, you may find that your audiences will try to change the subject to COP-13 or will want specific details on how the President's proposal will complement COP-13 and contribute to its success. HUME