Like in a desolate Edward Hopper landscape, the orangutan was clinging to the one last tree that stood next to the river in Kutai National Park in eastern Kalimantan. The joy of seeing this magnificent primate was spoiled by his destroyed habitat. Under normal circumstances, the orangutan would never venture so far out from trees, but here he was in a beyond-degraded and marginal habitat, probably looking for food that he could no longer find inside the forest.
Although once a jewel of biodiversity in Indonesia, teeming with Sumatran rhinoceroses and bantengs (wild Asian cattle species), and long-portrayed as one of the greatest wilderness areas left on the Indonesian side of Borneo, much of Kutai today looks like a devastation zone. Kilometers deep into its boundaries, the park has been stripped of trees. Despite the fact that the park is nominally a protected area, the trees have been logged for their hardwoods as well as to cultivate palms. The park was also badly affected by extensive fires several years ago. The big dipterocarp trees that are the essence of a Southeast Asian rainforest and on which many animal species depend for survival – and the hardwood of which is unfortunately highly valuable – have been all but eliminated in vast tracks of the park. The one last standing dipterocarp a kilometer deep into the forest has become an attraction to show to tourists. As a result, and also because of hunting, few hornbills are left in much of the park: Over the days we spent there, we saw only three species of hornbills: wrinkled, rhinoceros, and Asian pied. Overall, despite hours and hours in the forest, we could saw few other species of birds and mammals, including those that should be common genera in this kind of habitat, such as bulbuls and broadbills. One of the most common bird species in the park, even as deep into the forest as that which several hours of hiking would bring us, seemed to be the blue-eared barbet, a typical forest-edge species whose prevalence well inside the forest indicated that the forest is destroyed and of marginal quality and resembles more a forest edge, rather than a high-quality lowland growth.
We cut the motor of our canoe to watch the orangutan male, but instead of birds and insects, we continued hearing engines and industrial noise from a major coal mine that churned on nonstop for 24 hours a day right on the edge of the forest. Quite possibly, the mine could actually lie at least partly inside what was once national park. Park boundaries in Indonesia are exceedingly easy to redraw to accommodate mining and logging interests and generate revenues for local officials. During interviews with artisanal loggers in villages inside and around Kutai and in other national parks throughout the archipelago, I was told that local government officials and park managers would occasionally clandestinely encourage or at least tacitly tolerate artisanal logging and mining for gold and coal. The initial opening up of the ecosystem and thereafter its degradation would then allow them to apply to national offices in Jakarta to have parts of the park redesignated as unprotected environmentally-degraded land so they could issue permits for industrial-scale logging and mining concessions or African oil palm plantations, which bring great revenues. As efforts to improve local resource management and governance have produced various rankings of how much revenue local officials raise and “invest” in local communities, few regencies (the local administrative unit in Indonesia equivalent to a county) have an incentive to be saddled with forest that cannot be exploited. Whether the Reducing Emissions from Deforestation and Forest Degradation (REDD+) schemes, discussed below, will succeed in altering the structure of incentives remains to be seen and depends as much on local political-economy structures and power distribution as on their technical and financial feasibility.
The river within which we had canoed was itself clogged by piles of tailings, and spots of gasoline and some industrial runoff floated on the surface with regularity. Two several-hours-long night trips revealed only two buffy fishing owls and three common sandpipers, while no kingfishers or mammals could be sighted. Ornithologist Keith Barnes who has studied birds throughout Africa and Asia commented that until our research trip to Kutai, he had not been on a river in Southeast Asia for more than one hour without seeing at least a squirrel: “There is something seriously wrong with this forest.” For one, vast tracks of the forest are gone, with empty grassland and brambles, and not even secondary forest growth, left in its wake. Indeed, lowland forests throughout Indonesia have been destroyed or are facing tremendous pressures from logging; and even highland forests, such as in Sumatra, Sulawesi, and Halmahera, are increasingly shaved off by logging companies that decide to stomach the logistical expenses of hauling away the timber from steep hills and mountains or by poor artisanal loggers and farmers who desire more land.
Deforestation in Indonesia Going Down?
During the 2000s decade and beyond, deforestation in Indonesia has slowed down, but that is partially because so much forest has already been cut down. Indonesia’s President Susilo Bambang Yudhoyono has won international accolades for promising to reduce greenhouse gas emissions in Indonesia 26% by 2020 through reducing deforestation (even while maintaining a 7% annual growth). Indonesia, one of the world’s largest carbon-emitters, may well come close to succeeding in that goal, but it will be to an important extent because much of its forests have already been commercially logged out, not because conservation efforts have become more robust and effective. Commercially-viable lowland forest in Sumatra is gone, pockets still remain in Kalimantan, and Papua is the hotspot of logging and chainsaw profits.
What is highly disturbing about Indonesia, however, is that the small slivers of forest that are left (often designated as protected areas) continue to be invaded by loggers, poachers, and miners – whether poor artisanal ones who operate illegally or official companies with formal licenses obtained through bribery. Because law enforcement continues to be exceedingly poor and many officers are on the take, even protected areas are far more degraded than similar protected areas elsewhere in Southeast Asia, such as Malaysia or Thailand. These countries too have logged out their forests, but what areas they set aside for conservation, even though small they might be, they tend to protect far better than Indonesia does. Moreover, many of the areas designated as protected in Indonesia, even national parks, are those that had already been commercially logged out and had their biodiversity degraded – the forests of Sulawesi provide a prime example. Setting logged forests aside and protecting them from new encroachment has the potential to greatly boost biodiversity; but whether once species that have become extinct or come close to extinction in a particular area can return and biodiversity be fully restored to its original richness (to that of a primary unlogged forest), no one knows. Many of the tree species and ecosystems they support take several hundred years to grow and reach maturity.
Indonesia’s Law Enforcement and Its Complicity in Illegal Economies and Other Regulatory Problems
Indonesia’s law enforcement and military forces are not only inadequate and under-resourced, they are also deeply complicit in various illicit economies, including illegal logging and mining. The corruption problem goes well beyond many individual officers being in on the take. During the Suharto era, Indonesia’s military had investments in large parts of Indonesia’s economy. Although it was forced to give up many of these past investments, it continues to rely on outside-the-budget revenues for large parts of its income. A decade ago, as much as a third of revenues for the military came off budget, and that dependence and problem has been poorly tackled since and has not fundamentally changed.
Local police officials and military officers not only close their eyes to illegal resource extraction, they at times actively encourage it in order to promote their family businesses. Some representatives of the mill concessions I interviewed in eastern Kalimantan’s business hub Samarinda even claimed that local law enforcement officials would make them accept illegally cut timber for processing or the mills would face raids. “Look, realistically, we have few incentives to comply with regulation,” one of the logging company executives told me. “Getting all the permits and licenses takes a lot of time. You have to pay bribes to local officials and to those in Jakarta. And these days, bribes are complicated and unreliable. If we don’t pay bribes, it will take two years to get a license. And then what? The police or the military will hold up the logs on the river, sometimes for weeks on, until the timbers starts rotting. It’s far simpler just to pay off everyone right away.” He went on to bemoan how corruption used to be far simpler during the Suharto era, with a 10% standard rate for everything. “But these days, the military are angry that the police are getting a cut too, and they’re both jealous of who gets to be paid more. And yes, the coast guard and the navy make money off the coal exports.” Complicity and impunity debilitate regulatory policies. This is particularly so in a deeply corrupt system, such as Indonesia’s, where big violators often hold great political power, including sometimes by being members of Indonesia’s parliament or local administrations, rarely are arrested; and even then can bribe their way out of the law’s punishment.
Strategies to improve natural resource management and protect the environment in the face of seductive vast profits have been undermined in Indonesia not just by poor law enforcement, as key as that is. Efforts to develop effective and equitable regulatory frameworks have also been complicated by overlapping and competing bureaucracies, unclear regulations, poor local management and government capacity, and lack of clear land titles. Poor local administrative capacity and poor local law enforcement capacity are exacerbated by the fact that for a variety of reasons line ministry, law enforcement, and military officials are often rotated out of many postings and areas after a few months. Such short-term assignments guarantee that the officials are in a perpetual catch-up effort to learn local issues, or lead them to simply ignore local contexts. The short-term rotation system is based on the assumption that it limits how deeply involved in local corruption schemes the deployed officials can become. Instead, they often have an incentive to make as much money as fast as possible before they are sent to a less lucrative posting.
Community Ownership as the Solution?
To the extent that law enforcement raids do take place, whether to satisfy Jakarta or silence international criticism, they often target the poorest participants in the illegal economies, such as illegal miners and loggers. Their activities are hardly benevolent; rather, they have significant and highly negative effects on the environment. Overall, their impact may be less detrimental than in the case of large Indonesian or multinational companies, but they often significantly disturb and destroy fragile ecosystems, such as highland forests where commercial logging is unviable and which thus become some of the last strands of forest standing. But the reality also is that the basic livelihoods of artisanal loggers and miners can be profoundly dependent on these illicit economies, and their human security entwined with their participation in illegality. Lacking access to legal livelihoods, microcredit, and titles, they are also far less able to pay license fees and bribes, as well as having little capacity to bribe their way out of being arrested. The sentence of several months or even years in prison may deter some from further illegal logging. But some of the villagers whom I interviewed had been imprisoned for illegal logging and stated that they merely switched to poaching. They could not make ends meet legally and faced lesser sanctions for poaching than for illegal mining and logging. Among the variety of illicit economic activities surrounding resource extraction, Indonesia’s law enforcement frequently makes the most effort to crack down on artisanal illegal mining because large mining companies have an interest in keeping the artisanal loggers out of their way.
Democratization and power decentralization in Indonesia were expected to better align the behavior of local officials with the interests of local communities, strengthening local communities’ rights and improving environmental protection. That promise has not often materialized for a variety of reasons: First, powerful interest groups and large businesses, often linked to local politicians, tend to be far more effective at lobbying than local civil society groups. Indeed, many of the NGOs working in the community rights or natural resource sectors I interviewed throughout Indonesia felt impotent; along with journalists, they would expose violations of laws and regulations, but no one would be punished and behavior would not change. Second, feeling they have poor choices and that most politicians are corrupt anyway, many voters are easily seduced by cheap handouts from politicians before elections. Rather than poorly- performing government officials being voted out of power, they are often reelected or arrange for their family members to be elected. Throughout Indonesia, resource-baron local dynasties have been emerging. Third, decentralization has greatly empowered local officials in Indonesia – in fact, often to the extent that they believe they can get away with a lot in violating edicts from Jakarta and disobeying the national government. Conflicting local and national regulations only further permit escaping desirable regulations.
Furthermore, it is not always clear that local communities are fundamentally opposed to economic exploitation that destroys the local environment. Occasionally, they will resist and protect their land from logging or mining and even do so effectively – such as in the famous case of the Wehea Forest in Kalimantan. The level of social cohesion plays a critical role. In tightly-knit indigenous communities spiritually-linked to a forest, as in the Wehea case, the capacity to resist the lure of short-term profits can well be strong and effective resistance action can be organized. But many communities in Indonesia’s frontier areas such as Kalimantan are transmigrasi migrants. They do not have attachments to the area, they do not necessarily plan to stay there for the long term, they do not know their neighbors in the shack next door, and they often do not have land titles. They have moved to the logging and mining areas precisely to make money. They are in it for the quick buck, and their horizons tend to be very short, even shorter than the horizons of many local government officials. When I questioned the officials about the sustainability of their primary commodity exploitation-led growth, many would delightedly reply that they had coal supplies for twenty years – “a very long time.” And even communities with more established roots in an area but that are struggling with marginal livelihoods are easily tempted to sell their land to big companies for exploitation.
Many resource-extraction companies have also learned that they can get away with unsustainable strategies, not only politically and legally, but also economically. For many years, Indonesia’s timber and mill industry was eating its own tail, slashing the forests at a rate that was unsustainable while the industry was becoming more and more bloated. But instead of suffering the painful effects of having to downsize their operations as Indonesia’s forest shrank and the Indonesian national government became more interested in limiting deforestation (if only to get its hands on the REDD+ money), many companies were able to diversify or altogether switch into African oil palm cultivation or mining.
International Mechanisms to Foster Corporate Social Responsibility and Environmental Sustainability I: REDD+
The Reducing Emissions from Deforestation and Forest Degradation (REDD+) and, more broadly, approaches such as paying-for-ecosystem-services (PES) schemes are based on the idea that if the economic structure of incentives pushes toward environmental degradation because natural ecosystems are not economically valued, one can change the structure of incentives by pricing environmental services, such as carbon capture. These financial transfers pay for an undesirable – such as, environmentally-destructive – economic activity like logging or mining not to take place. Western governments who care about tropical forests not being destroyed or Western companies that need to offset their carbon emissions pay for forests elsewhere not to be cut down and carbon emissions thus not to be released. In the best of outcomes, such schemes will reduce carbon emissions and preserve forests and biodiversity. After several years of tough and protracted negotiations, Indonesia and Norway agreed in December 2012 on such a REDD+ scheme which pays for a protection area to be established abutting the Tanjung Puting National Park in Central Kalimantan, to create an important buffer zone around it. Investors in the Rimba Raya forest include Russia’s giant gas producer Gazprom and a large German financial institution Allianz. The project was originally supposed to start in 2010, but then stalled as the Indonesian government proposed to cut the amount of land devoted to the conservation area because an African oil palm plantation company had overlapping concessions that it was not interested in relinquishing.
REDD+ mechanisms were at the center of the stalled UN climate change negotiations in the latest November 2012 Doha round. And just like the overall climate change negotiations, they too are mired in international political disagreements. The procedure on which to base reference emission levels, i.e., the baseline from which the level of carbon emission that would take place in the absence of REDD+ is counted, is developed; but key emitters, such as Brazil, have refused to submit to international verification and monitoring procedures. In a country with deep corruption and pervasive regulation evasion such as Indonesia, credible external monitoring will be key for making REDD+ and other PES efforts effective.
A second major problem is that the lack of emissions reductions commitments from the United States, China, India, Canada, and Russia raises doubts about how and whether funding for REDD+ will be generated and at what levels. China and India are loath to commit to any emission reductions until the United States makes a move, and perhaps not even then. Nor has it been agreed as to how much of the burden and responsibility middle-income countries like Brazil and Indonesia need to share. Indonesian officials I interviewed often expressed a desire that the REDD+ is used to pay for law enforcement in the national parks and other protected areas, for example; but Indonesia is not so poor that it requires international payoffs to pay its park rangers better. Anyway, the problem often lies as much with actors outside the national park as with the rangers themselves.
And here lies one of the potential difficulties with REDD+. The payoff goes to either the national government or a local government. But surrounding the two and between the two, there are often complex webs of powerful vested economic actors. Even equitable and proportional transfers between the national government and local governments do not guarantee that local government officials will develop the muscle and wherewithal to resist corruption and coercion from powerful economic groups, particularly if those economic groups are the military and police, like in Indonesia. Nor will the money necessarily make its way into the hands of the artisanal loggers and miners. In other words, the domestic payoff transfer and internal distribution of the money and transferred resources will affect the REDD+ effectiveness as much as their international component.
Such problems with government compensation to local forest owners for preserving natural forests have been experienced even outside of the carbon schemes. If monitoring and law enforcement is poor and the local community places little intrinsic value on forest and biodiversity preservation, local communities will often collect the money and log anyway, or in other cases face invasion by logging companies from outside the community. Similarly, if payments are set too much below the value of logging the forest, even compensated owners can be tempted to participate in illegal logging while collecting no-cutting rents. And making sure that the money reaches the forest-dependent communities and is not usurped by corrupt powerbrokers is often a challenge.
Another aspect of REDD+ that could have important effects is developing local capacities to better manage forests. But those better sustainable practices will once again run into local economic interests that either need to be bought via the REDD+ transfers or coerced by law enforcement to comply with regulations. What the REDD+ initiatives have already accomplished in Indonesia is to force officials in the Forestry Ministry – a notoriously corrupt institution which regards its task as making as much money out of forests as possible, rather than preserving forests and biodiversityn – to conduct much better assessments of existing forests and even publish that data. Previous self-monitoring and data collection on deforestation has been rather unreliable in Indonesia.
Critically, the price structure of the payoff schemes will be a significant determinant of their effectiveness not only for capturing carbon, but also of preserving the world’s biodiversity. Surprisingly, a certain price structure could have a negative effect on the preservation of natural forests, and the failure to incorporate biodiversity considerations in forest management designs could be compounded by emerging carbon-for-forest payoff schemes. In some countries and under some circumstances, where there is strong government commitment, successful cooptation of key logging industry stakeholders, and effective law enforcement, such financial transfers can halt deforestation or even expand existing forest cover. But for that to be likely, the compensation payments need to be far greater for preserving natural, and especially primary, forests than for capturing carbon by degraded forests or replanted forests or timber plantations. And these differentials – with by far the most compensation going for primary forests, smaller amounts for secondary forests, and the least for non-native monoculture plantations – need to be sufficiently great to steer government decisions toward keeping forests intact. Without such a price structure in place, with any tree accorded an equal or similar carbon-capture value, governments could be tempted to maximize profits by intensely logging their forests first and then signing up for carbon offsets for halting further deforestation, including from forests that are no longer viable for commercial logging or through biodiversity-poor reforestation and plantations. Even if the logged forest regenerates timber through replanting or natural recovery, it often cannot do so in a manner that will restore its original biodiversity. Without a far greater unit price for carbon captured by intact natural forests rather than by forest plantations and other reforested areas, the carbon schemes thus encourage the preservation of any forests – including monocultures – rather than native primary forests.
International Mechanisms to Foster Corporate Social Responsibility and Environmental Sustainability II: Green and Other Certification
Since the 1990s, certification labeling of the legality and environmental sustainability of harvested timber or African palm oil or of the absence of conflict in the extraction of minerals has emerged as a key mechanism to suppress undesirable behavior associated with economies that cannot be fully prohibited. Certification is supposed to mitigate inherent harms and negative externalities, such as human rights violations, social strife and violent conflict, and environmental destruction. To combat illegal logging, timber certification is meant to designate that the logged and traded timber has been sourced and transported in a legal or environmentally-sound way and that illegal timber has not been mixed in with the legal timber. Ideally, such certification examines and approves the entire custody chain; the traded timber would be certified from the moment it is carefully, legally, and sustainably selected for cutting in the forest to the moment a customer buys a piece of furniture in a Western furniture store. Any gap in controls in the custody chain increases the chance that illegal timber enters the trade and is effectively laundered.
The Forest Stewardship Council (FSC, an independent, international NGO) certification, which tracks timber from forest to the shelf, is often considered the current gold standard of certification labels for timber. However, by the end of the 2000s, the FSC still certified only approximately 220 million acres, of which 110 million are in North America, while there are 10 billion acres of forested land on Earth. Less than 2% of tropical timber was covered by FSC certification. Getting certified is expensive, costing about U.S. $50,000 per concession, and customers are not always eager to absorb the higher costs.
Given the size of the trade and the complexity of certification – as wood changes many hands along trade routes and is processed into many, often minute pieces, over extensive periods of time – the reliability of the process is frequently problematic, with many opportunities for fake certificates, falsification, or timber laundering along the way. The more timber subject to certification, the more challenging it will be to maintain quality and reliable certification. When I asked a logging company representative in Samarinda about whether they were concerned about failing to obtain green certification and whether they altered their practice as a result of increasing desire for such certification in Western markets, he just laughed: “For us, it’s just another bribery item. We pay for the inspectors. And anyway, they go out for two days out of a year – how much can they see?”
Beyond the sheer volume and the previously discussed challenges of law enforcement intensity, fake documentation, and the amount of time it takes to check a sufficient amount of timber to discourage laundering and smuggling, certification schemes are also plagued by other problems: The most important one is that timber may be certified as legal, but may not be harvested sustainably and in an environmentally sensitive way. Some of the legality verification is very limited, confirming only that timber originated in a particular concession area and that the company had the necessary permits. Other legality certification can involve more rigorous evidence of compliance with harvesting regulations and other operational matters.  Even then sustainability may not necessarily be a part of the certification evaluation. Since most legislation mandating certification of wood and wood products, including the expanded U.S. Lacey Act and the European Union’s Timber Regulation due diligence requirements, centers on its legality, as opposed to its sustainability, suppliers have concentrated on precisely assuring timber’s legality but not necessarily sustainability. Moreover, getting a certification for sustainability takes considerably longer and is far more expensive than the legality certification.
Certification problems often start with forest management plans. Both the design and implementation of forest management are often pervaded by serious problems, even though the mere existence of such a plan can qualify the logged timber for certification. Not all forest management plans ensure sustainability and minimal environmental damage, including measures to protect biodiversity. Often forest engineers, large numbers of whom are required to design programs for all the logging operations, are incompetent and corrupt. Moreover, since natural forest regeneration often takes decades in the tropics, there is not any easy way at present to see whether the management programs are effective, and to correct policy if they are not. Thus certification does not always involve all three components: legality, timber sustainability, and biodiversity protection. Certificates are issued only for one or two components of desirable practices, with law enforcement officials and customers having no idea what exactly is being certified and whether the certified timber in fact reflects optimal practices.
In addition, consumer preferences and regulatory requirements for certified wood have given birth to some certification schemes of dubious quality. Many of these certification labels represent simple cases of “greenwashing,” i.e., illegal and unsustainable wood being certified as legal and sustainable. In other cases, major retailers – even in the United States and Western Europe where customers are overall greener and the regulatory oversight greater – have appropriated and advertized green labels, including that of FSC, without ever being certified. At other times, timber and wood product suppliers have obtained FSC’s chain-of-custody certification indicating that they have adequate capacity to check their supply chains without actually handling any FSC certified timber. Extensive unreliability of certification can whitewash consumer conscience and encourage greater, and undesirable, consumer demand. Large numbers of certification schemes also make law enforcement more difficult. Watching the watchdogs, or in this case certificate issuers, and establishing lists of reliable certifiers, is essential for certification to reduce illegal logging.
Critically compounding the limitations of certification is the fact that some of the most important and emerging markets, such as India and China, fundamentally do not care about corporate social responsibility or mitigating the multiple harms that various economic activities can generate. Mining company representatives I interviewed in Sulawesi, Kalimantan, and Sumatra all said how they love