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Report: Forest-razing biomass plant in Indonesia got millions in green funds

Mongabay - June 2, 2023

Philip Jacobson – A renewable energy project that received millions of dollars in climate financing from the Indonesian government is bulldozing rainforest in the nation's Papua province, according to a new article by a London-based journalism nonprofit.

Indonesia's Medco Group, which owns the project – a biomass power plant and wood plantation – has said it will clear 2,500 hectares (6,200 acres) of land to meet the demands of the plant, billed as a way to help the country kick its fossil fuel habit.

But the area to be cleared is highly likely to be carbon-storing forest, according to the report, published this week by The Gecko Project.

Satellite imagery indicates Medco, whose core business is oil and gas, has already razed 187 hectares (462 acres) of natural forest since an infusion of state funding apparently enabled it to resume operations after years of inactivity.

"The Indonesian government's backing for the project reflects a yawning inconsistency in its plans to tackle climate change," The Gecko Project wrote in the article.

Really renewable?

Indonesia's rapid deforestation in recent decades has made the nation of 270 million people a leading contributor to global warming.

In 2007, the Southeast Asian nation produced more greenhouse gas emissions than any country but the U.S. and China, with most of it coming from deforestation and changes in land use as commercial plantations spread across the archipelago.

Two years later, Indonesia pledged to cut greenhouse gas emissions by 26-41% over projected business-as-usual levels by 2020, with the higher end of the range contingent on international aid. President Joko Widodo, elected in 2014, subsequently revised the target to 29-41% by 2030.

He also permanently banned new permits for companies to clear primary forest, though existing licenses, such as Medco's, were grandfathered in.

Indonesia's deforestation has since slowed significantly. But the nation has also increased its reliance on coal, with the fossil fuel accounting for more than 60% of its energy mix in 2022.

Under a $20 billion deal reached last year with the G7 group of industrialized countries, Indonesia aims to generate more than a third of its energy from renewable sources, including biomass, by 2030, as a means of weaning itself off fossil fuels.

But while some, including Medco, argue that burning timber for electricity is more sustainable than coal or petroleum, others say it undermines environmental goals if that wood comes from destroying rainforests, which hold huge amounts of carbon and biodiversity.

Indonesian think tank Trend Asia has warned that the country's plan to ramp up biomass production could result in the clearance of more than 1 million hectares (2.5 million acres) of tropical forest in the coming years.

A $9.4 million lifeline

Medco's biomass project was initially geared toward producing wood chips for export. From 2010-2014, the company cleared some 3,000 hectares (7,400 acres) of rainforest, establishing a timber plantation in its place, according to The Gecko Project's report.

In 2014, however, Medco halted expansion of the project because, it said, it was losing money.

Three years later, the project received a lifeline in the form of 60 billion rupiah (then worth about $4.5 million) from PT Sarana Multi Infrastruktur (SMI), a company controlled by Indonesia's Ministry of Finance that has a mandate to fund renewables.

The money supported the construction of the biomass power plant, allowing the project as a whole to pivot to the domestic market.

In 2021, a Medco executive said in a webinar that the project had received a second tranche of financing from the Indonesian Environment Fund, bringing the total to 140 billion rupiah ($9.4 million).

The fund, known as the BPDLH, is another Ministry of Finance agency, this one tasked with managing funds related to environmental protection and conservation in Indonesia. This includes money from international donors such as the U.N.'s Green Climate Fund, which approved a $103.8 million payment to Indonesia in 2020, and Norway, which agreed to pay $56 million into the BPDLH last year.

A BPDLH director confirmed that Medco had received BPDLH financing, but stressed that international climate funds would only be used in ways approved by donors. Norway said its money had not gone to Medco's project.

Medco – whose late founder, Arifin Panigoro, served on a key advisory body to President Widodo until his death in 2022 – told The Gecko Project in a written statement, seen by Mongabay, that it intended to clear an additional 2,500 hectares of "land" to supply the biomass plant.

While the firm did not directly address whether this land would be rainforest, it did say it reserved the right to legally clear natural forest, adding it would prioritize wood from its tree plantation due to cheaper acquisition costs.

The Gecko Project says its analysis of Medco's deforestation to date and of the extent and location of forest remaining in its license area, based on satellite imagery and government land cover maps, indicates the company will continue to target rainforest, possibly including old-growth "primary" forest and carbon-rich swampland in addition to regenerating "secondary" forest.

Medco also said it planned to nearly triple the capacity of the biomass plant from its current 3.5 megawatts, which would increase demand for wood and raise the risk of deforestation, the report says.

The company's area of operation lies in the Trans-Fly region, whose savannas, grasslands and rainforests are home to dozens of rare animal and plant species and Indigenous communities.

Source: https://news.mongabay.com/2023/06/report-forest-razing-biomass-plant-in-indonesia-got-millions-in-green-funds