The Role of SAIs to achieve more transparent, accountable and sustainable REDD+ Scheme: The Case of Indonesia

The Role of SAIs to achieve more transparent, accountable and sustainable REDD+ Scheme: The Case of Indonesia


Agriculture, Forestry, and Other Land Use are the main contributor to global greenhouse gases (GHG) emission. About 24% of global GHG emission in 2014 came from this sector (US EPA, n.d). They mainly involve agricultural activities (cultivation of crops and livestock) and deforestation. As forest plays a role in carbon sequestration, conversion of forest to other land uses leads to GHG emission. Conversion of peatland in Indonesian forests, in which methane are accumulated, increase the magnitude of GHG emission. According to the World Bank database, forest cover in Indonesia has continuously declined from 65.44% in 1990 to 54.87% in 2000 and 50.99% in 2013. As a result, CO2 emission has increased from 1.5 Gt in 1990 to 2.6 Gt in 2000 and 5.6 Gt in 2011 (World Bank, 2014).

Thus, Reducing Emission from Deforestation and Forest Degradation (REDD+) is the most promising instrument to cope with GHG emission in Indonesia. REDD+ is currently the most promising instrument to reduce deforestation and GHG emission in Indonesia and in tropical countries in general compared to other instruments such as command and control approach (by penalizing illegal logging activities). By compensating land owners who keep their forest unconverted to other land uses, REDD+ could significantly reduce deforestation because land use changes resulted from human activities were the major contributor for deforestation in the last decade.

However, the accountability, transparency, and sustainability of current design of REDD+ in Indonesia needs to be improved because tropical countries suffer from weak institution. These countries currently depend on support from abroad, especially international experts and fund. Clear, reliable, and sustainable method of baseline setting are crucial for REDD+ to be well-functioning. National resources must be appropriately allocated in the scheme so that they produce the desired results. Therefore, SAI Indonesia is required to play a crucial role for REDD+ to succeed in reducing deforestation and maximizing benefits for the society.

The article begins by identifying the root causes of deforestation in tropical countries in general and specifically in Indonesia. Then, it highlights the key design elements of REDD+ and describes how it has been implemented in Indonesia so far. Later, this paper provides REDD+ success stories from all over the world. However, there are some challenges that needs to be tackled to make it work. Thus, the next section offers the role of SAIs in order to overcome these challenges. The last part provides the conclusion.


In the last decade, it was noticed that the deforestation in tropical countries has largely been driven by agricultural pressures. Vast areas of tropical forests are found in developing countries such as Brazil, the Democratic Republic of Congo (DRC), and Indonesia. Agriculture is one of the growth engines in these countries. In 2014, it contributed to 5.6 percent of GDP in Brazil, 21.2 percent in DRC, and 13.7 percent in Indonesia (World Bank, 2014). Consequently, as their economy expanded, conversion from forests to agricultural land increased. During 1990 to 2000, among 10 percent of stratified random samples of tropical forests, more than 70 percent were converted to agricultural land (Barbier, 2004). In the case of the Brazilian Amazon, 91 percent of the additional deforested areas during 1970 to 1995 were used for cattle ranching (Margulis, 2004).

There are some sources of inefficiencies which lead to an excessive rate of conversion from forests to agricultural land in tropical countries. Firstly, the exclusion of externalities in the decision to cut down the trees is the main source. Besides the economic value of timber, forests also provide other environmental services such as maintaining watershed, protecting biodiversity, and reducing the impact of greenhouse gases (GHGs) on global warming by allowing carbon sequestration. The landowners typically undervalue the cost of converting forests to other land uses by not determining these benefits. Secondly, inefficiency related with perverse incentives for the landowners. In Indonesia, the implementation of One Million Hectare Rice Project in Central Kalimantan by the former president Suharto has led to a huge scale of peat land fires (Tacconi et al, 2007). Lastly, the system of property rights in developing countries also contributes to inefficiency in forest management.

In Indonesia, 50 years of deforestation has been driven by political and economic needs. It started with various legislations for the government which leads to excessive exploitation of the forest such as large-scale of timber concession, plywood and panel-wood industry as well as pulp and paper industry (Indrarto, 2012). In 1998, the diversion of forestry authority to regional heads led to over exploitation of the forest in order to increase regional PAD; locally generated revenue. Another project such as the one-million-hectare peatland mega-project in Central Kalimantan also had an impact on the forest existence. Other drivers of deforestation include smallholder shifting cultivation and subsistence agriculture, mining, logging, aquaculture and forest fires; both natural and human induced to clear land for other uses. Recently, deforestation mainly occurred by the change in function from forest permanent estate into agriculture and estate crops. In fact, the government has released about 4.5 million ha of the forest in 2002 for conversion to oil palm plantation.


As an example of payments for environmental services (PES) scheme, REDD+ basically provides compensation for landowners who choose not to convert their forests to other land uses. The sign ‘+’ means that the scheme includes land conservation, sustainable forest management, and enhancement of forest carbon stocks (United Nations, 2015). The compensation is measured on the basis of carbon sequestration services provided by forests. Through the early 2000s, net deforestation and forest degradation accounted for around 15 percent of all anthropogenic carbon emissions (Venter & Koh, 2012). Baseline emissions, which reflect the level of emission without REDD+ projects, are first determined. If the actual emissions are below the baseline, these reductions generate carbon credits through a process of measuring, reporting, and verification (MRV). By putting a price tag on the carbon credits, REDD+ internalizes forests’ service to store and sequester carbon into the forest management.

Market for REDD+ carbon credits must be sufficiently attractive to create incentive for landowners to keep their standing trees. Global carbon market can be distinguished into compliance and voluntary markets. Compliance markets have been established upon international arrangements such as the European Union’s Emission Trading Scheme (ETS) and the Kyoto Protocol’s Clean Development Mechanism (CDM). REDD+ currently relies on voluntary markets as it is still not incorporated in the CDM. However, these markets generate almost US$ 8 billion for REDD+ (Venter & Koh, 2012) and result in a premium credit price of US$10-$20 (Agrawal et al, 2011). Thus, REDD+ could potentially be implemented independent from the CDM. In addition, the inclusion of REDD+ credits in compliance markets such as EU ETS could considerably increase the supply of traded carbon credits and result in the fall in carbon price and overall emissions reductions.

REDD+ could potentially deliver benefits not only for landowners, private companies or the government, but also for forest-dependent communities and for the ecosystem itself. REDD+ can put biodiversity under threat by replacing native forests with monoculture plantations. To tackle this side effect, as one decision of the 2010 Cancun Conference of Parties (COP), United Nations Framework Convention on Climate Change (UNFCCC) has required REDD+ initiators to adopt biodiversity safeguards (Venter & Koh, 2012). For the forest-dependent communities, REDD+ provides benefits in the form of agricultural diversification, soil and water protection, direct employment, and the use and sale of forest products. Recent REDD+ initiatives were designed to involve local people in forest management so that the benefits are equitably distributed. In DRC, one-third of the national REDD+ committees are civil society and indigenous people. Likewise, Nepal has institutionalized community governance of forests. More than 14,000 community forestry groups (CFUGs) are being involved in managing more than one million hectares of forests (Dulal et al, 2012).


The Indonesian government has established a strategic plan to reduce GHG emission following the commitment of the former President, Mr. Susilo Bambang Yudhoyono (SBY)  in the  G20 summit of 2009. President SBY committed to reduce GHG emission from the business as usual (BAU) level as large as 26% with self-resources and 41% with international support by 2020. In 2011, the President signed Presidential Regulation Number 61 on the National Action Plan for GHG Emissions Reduction (known as RAN-GRK in local language). This regulation emphasizes on the effort to reduce emission without sacrificing economic growth. There are five core sectors to support this effort, which are forestry and peatland management, agriculture, energy and transportation, industry, and waste management. Among these sectors, the Indonesian National Planning Agency gives the highest emission reduction target to forestry and peatland management sector.

As deforestation highly contributed to Indonesia’s GHG emission, the implementation of REDD+ is critical to support RAN-GRK. The development of REDD+ in Indonesia can be categorized into three phases, including preparation, transformation, and contribution. Phase I (2010 – 2013) has been completed by the formation of REDD+ Agency following Presidential Decree Number 62/2013. However, based on Presidential Decree Number 16/2015, the REDD+ Agency had been terminated and its tasks related to GHG emission reduction had been handed over to the Ministry of Environment and Forestry. Phase II targets the institutional and operational readiness of REDD+ implementation, including well-established MRV (Measurement, Verification & Reporting institution and funding mechanism. Phase III pursues full implementation of REDD+ and contribution to GHG emission reduction as promised by President SBY.

The Indonesian government has already completed the reference emission level as the baseline. In December 2014, Indonesian government has released National Forest Reference Emission Level for Deforestation and Forest Degradation in the context of the activities referred to in Decision 1/CP 16. Paragraph 70 (REDD+) under the UNFCCC. The report is a product of collaborative efforts of the teams from BPREDD+, Ministry of Forestry and Environmental, Ministry of Agriculture, LAPAN, BIG, IPB, CIFOR, UNORCID and TNC. The team has calculated Indonesian Forest Reference Emission Level (FREL) at about 0.,441 GtCO2e per year in 2020 with 0.671 million hectares deforestation per year. FREL was calculated by using historical emission data during 2000 to 2012. However, the baseline has not considered three others REDD activities yet, which are conservation, sustainable forest management, and carbon stock. (REDD+ Agency, 2014).


There are evidence that indicate  slowdown in tropical deforestation. During 2005-2009, the deforestation rate in the Brazilian Amazon has significantly declined to 64 percent below its ten-year average. This was partially caused by the protection of indigenous lands and nature reserves since 2004 (Agrawal et al, 2011). The Brazilian direct payment for environmental services scheme, known as Bolsa Floresta, was started in 2007. It provides incentive of USD30 per month to households for their effort to achieve zero net deforestation (Bakkegaard & Wunder, 2014). The program has some strengths, such as the community involvement and equitable distribution of payment, which include payment for individual families, families’ association, social program, and reserve to support future generation’s livelihood (Dulal et al, 2012). In Nepal, the involvement of CFUGs in forest governance since 2008 resulted in the reduction in deforestation rate (Dulal et al, 2012). Established in 2004, a PES scheme in Mexico, named Payments for Carbon, Biodiversity, and Agroforestry Services (PSA-CABSA), not only contributed to the increase in conserved land, but also promoted public awareness for environmental conservation (Corbera, 2010).

Forest protection, as part of REDD+ program, covers not only the forests but also the community welfare. Having analyzed the consumption path and poverty map for the year 2000, of the 4,113 localities which contain the majority of protected areas in the North and Northeast regions of Thailand, Sims (2010) highlighted that the policy to strictly protect forest cover resulted in both constraining forest clearing and in positive socioeconomic impacts for local people which could be explained by increased tourists’ visit to protected regions.


The baseline setting mechanism is currently the major challenge of REDD+. Setting the baseline on countries’ historic emissions level has three limitations. First, countries might experience unanticipated change in their emissions level. Second, this approach provides reward for countries whose deforestation rate was historically high while punishes those who kept their forests unconverted. Third, this method creates little incentive for countries which have high forest cover and low deforestation rate to participate, deforestation might shift to those countries (Venter & Koh, 2012).

However, another option to develop reference level based on forest carbon stocks has a drawback too. This approach provides payment for participants which have large forest cover even though their deforestation rates are low. This method leads to wasted REDD+ funds.

Currently, there is no internationally agreed consensus yet about the baseline setting mechanism. Irawan and Tacconi  suggest that baseline be measured on the basis of a number of variables, including: past emissions and removal rates, forest cover, prediction about future trend and resources to tackle deforestation, which could be approached by the size of the economy.

Determining the authorities to develop the reference levels could also be problematic. Irawan and Tacconi (2009) raised decentralized options in this issue, including: references setting by the national governments, by the local governments, and by national and local governments altogether. Even though the local governments have better information about the underlying causes of deforestation in their region, leaving the references setting solely to them might raise the issue of national leakage when a local government refuses to participate and as a result, deforestation-driving industries move to its region.

Capacity building is another challenge that needs to be solved by REDD+ participants. Measurement on both initial carbon emission and carbon credits generated from a project required technical expertise on data collection, analysis, and reporting. Most REDD+ participants do not have capacity to undergo such process. REDD+ readiness phase should have been an opportunity for them to expand their capacity building. However, as highlighted by the final report of evaluation delivered by a team from UNDP, UNEP, and FAO on July 2014, even though a few countries, such as DRC, Ecuador, Indonesia, and Vietnam, have nearly succeeded in REDD+ readiness phase, sustained and institutionalized capacities are questionable. This is because those countries were highly dependent on international experts to achieve such an ambitious target in the readiness phase. Instead of capacity building, REDD+ readiness phase gave rise to capacity substitution (Frechette et al., 2014).

Not only reliant on technical assistance from abroad, but also REDD+ participants depend financially on the international support. Most financing scheme of current REDD+ projects are funded indirectly through in-kind contributions. Unclear share of provisioning costs creates free-riders and might put future results at risks. Donors might withhold from making contributions in the expectation that others will bear the expense. Having considered this condition, the evaluation report rated the effectiveness of current REDD+ progress as moderately unsatisfactory (Frechette et al., 2014).


As promulgated by International Standards of Supreme Audit Institutions (ISSAI) 12, SAIs could make a difference to the lives of citizens by strengthening the accountability, transparency, and integrity of government and public sector entities (INTOSAI, 2013a). Auditing current REDD+ progress will significantly affect the lives of citizens, especially in Indonesia, because of the environmental and socioeconomic benefit of that scheme.

Even though there are no audits specific on REDD+ initiated by SAI of Indonesia yet, it has conducted audit on climate change mitigation and natural resources management that could provide framework for audit of REDD+.  In 2013, SAI of Indonesia carried out a performance audit about Climate Change Mitigation Activity during 2010-2013 performed by the Ministry of Forestry and related institution. The audit concluded that the activities related to the climate change mitigation performed by the Ministry have not yet been effective in reducing emission. This was partly because of insufficient methods to calculate emission reduction in forestry sector. In addition, the Indonesian government has not appointed coordinating agency responsible for implementing the national program on GHG emission reduction (BPK, 2013).

Further, an audit performed on The Management of Grant/Fund from Foreign Donors for the Climate Change Mitigation and Adaptation found that the grants for improving the Measurement, Report and Verification (MRV) processes have not contributed optimally to reduce the GHG emission at the national scale. As a result, the national percentage of GHG emission reduction could not be verified directly to the data source in district/regional level (BPK, 2014).

Based on SAI Indonesia’s audit experience, it is crucial that SAIs should play a role in improving the institutional arrangement of climate change mitigation, more specifically in REDD+ development. International audit standards, especially on performance auditing, could become the guidance for evaluating current REDD+ progress.

In the future, there are five potential areas in REDD+ scheme which could be evaluated by SAIs. First, it can evaluate the effectiveness of REDD+ design. As stated in previous section, the Ministry of Environment and Forestry has been assigned with the former REDD+ Agency’s tasks. SAI Indonesia needs to assess whether these tasks are transferred smoothly to a specific division in the ministry.

Second, SAI Indonesia could audit the Forestry Reference Emission Level (FREL) calculation which has been submitted to UNFCCC in December 2014. As mentioned in the previous section, there are many challenges in developing the baseline because of the existence of some uncertainties, including different approaches, methods, models, and assumptions. Rent seekers might take advantage of those challenges by setting the baseline too high and thus, rewarding the attempts to reduce deforestation by too much. SAI could use best practices in other countries as criteria. The objective of audit on baseline setting mechanism is to assess the reliability and sustainability of this process. Reliability depends on the inputs (including data and technology) and methodology to calculate the baseline. Sustainability relates to each government’s capability to perform the mechanism by using its own resources. There are several questions that must be raised to meet this audit objective, including:

1.    Does the government have reliable methodology, the one that is generally accepted in other countries, for determining the baseline?
2.    Has the baseline been calculated by using accurate and up-to-date data?
3.    Does the government apply appropriate resources (including human resources and technology) to conduct the calculation?
4.    Is there any unreasonable assumption which highly influences the result?
5.    If the calculation is performed by international consultants, is there any transfer of knowledge to local staff for capacity building?

Third, SAIs could evaluate the MRV process, which is very critical in REDD+ scheme. An MRV agent determines carbon credits generated from a REDD+ project and thus, influences the amount of money generated from that project. Even though it has a significant role in the scheme, this agent has not been well established in REDD+ participants, like Indonesia. The Indonesian Special Task Force for REDD+ (Satgas REDD+) has developed a strategic plan in implementing MRV since 2012. However, there is no information available about the appointed body to act as an MRV agent and about the specific MRV procedures conducted by the agent. The objective of audit would be to assess the transparency, accountability, and sustainability of MRV process. There are some concerns about an MRV process in REDD+, such as:

1.    Is there any appointed body to perform MRV?
2.    Does that body have well-defined standard operational procedure to perform MRV?
3.    Is there any regulation or ministerial decree to support the appointed body and SOP legally?
4.    Is the carbon credit determined reliably (by using reliable data and methodology and competent staff)?
5.    Does the MRV agent use technology such as remote sensing to calculate the impact of REDD+ projects more accurately?
6.    If the calculation is performed by international consultants, is there any transfer of knowledge to local staff for capacity building?
7.    Is the updated information about MRV procedures, on-going process, and results publicly accessible?

Four, SAIs could evaluate the funding mechanism of Climate Change Mitigation. With regard to the audit experience on the Grant Management related to Climate Change Mitigation performed by SAI of Indonesia, it is important for National Government to develop a clear funding mechanism so that ‘the Government to Government’ type of grant from Foreign Governments or other International Organizations could be utilized effectively and any mismanagement by giving directly to the Third Party can be avoided. Thus, SAIs could perform an audit in order to improve the existing funding mechanism used by the Government. Several questions that need to be answered by the audit design may include:

1.    Whether the funds from both National and International are being sufficiently reported?
2.    Whether those funds are properly managed and used effectively by National and Regional authorities?
3.    Was there any sufficient internal control within the mechanism?

Five, SAIs could conduct performance audit on REDD+ output. One principle of performance audit is effectiveness, which answers if a program has achieved its objectives (INTOSAI, 2013b). By comparing the reduction target of deforestation or carbon emission from deforestation and the impact of the REDD+ program, SAIs could assess the effectiveness of the program. Moreover, SAIs could also link GHG emission reduction targeting by REDD+ and the goal related to climate change as mentioned in 2015 Sustainable Development Goals (SDGs). However, the impacts of the program might occur far into the future because the REDD+ institution such as carbon market and regulating bodies takes time to develop. Thus, evaluating the effectiveness of the program shortly after it is implemented might result in a wrong conclusion. Several questions that need to be answered by the audit design include:

1.    Is the carbon emission reduction targeted by the government achievable and sequentially measurable?
2.    Does the government develop annual action plan to achieve that target?
3.    Does the government meet that target? If not, what area could be improved?

Another principle of performance audit that could be taken by SAIs is efficiency. SAIs could evaluate whether the program is efficient or not by comparing sets of different policies aimed to reduce deforestation. A scheme is said to be not efficient if it is not the least cost way to achieve the same amount of deforestation reduction (INTOSAI, 2013b). However, evaluating this is often difficult because we cannot isolate the impact of the scheme alone to the reduction in deforestation. For example, the government implements REDD+ and law enforcement (by sentencing companies associated with illegal logging activities) simultaneously. Therefore, we cannot separate the impact of REDD+ program alone to the reduction in deforestation. Attributing the reduction in deforestation to REDD+ only will overestimate the impact of the program. Basically, the audit must be designed to answer whether the resources have been allocated in the most efficient way (that is no other schemes which cost the same amount of money and result in greater emission reduction and/or no other schemes which cost less and result in the same level of emission reduction).


REDD+ could potentially tackle the main driver of deforestation, human’s economic activity. By providing incentives for landowners who keep their land forest based on the amount of carbon sequestered in the forest, the scheme internalize the environmental impact of the decision to convert forest to other land uses. REDD+ initiatives in Brazil, Nepal, and Mexico show its potential to reduce deforestation in developing countries.

However, REDD+ development faces challenge from the baseline setting mechanism. The measurement of the references levels must consider both the historic national carbon emissions and forest cover to minimize the drawbacks from both approaches. While leaving the baseline setting solely to the local governments could raise a national leakage issue, REDD+ architects should also involve them in the decision-making because they are better informed about the cause of deforestation in their regions.

SAIs could take a role in REDD+ implementation by evaluating the effectiveness of current REDD+ design. In Indonesia, this audit is crucial as the REDD+ Agency was terminated in 2015. SAI Indonesia must ensure the transfer of data and responsibilities from the former agency to the designated division in the Ministry of Environment and Forestry.

Then, SAIs should audit the baseline setting mechanism. The audit objective is to assess the reliability and sustainability of the baseline calculation. In order to evaluate the reliability of the mechanism, the audit focuses on the resources and methodology adopted by the government to determine the baseline. The mechanism is considered to be sustainable if the government institutionalizes the baseline setting mechanism, including use of the local resources to perform that task. In Indonesia, this is auditable since the government has submitted the FREL in 2014.

SAIs could also evaluate the transparency, accountability, and sustainability of MRV process.     Furthermore, SAIs could also evaluate the existing funding mechanism of the Climate Change Mitigation available in the National Government. This audit aims to improve the existing mechanism to function effectively in managing the fund from both National or International.

Lastly, SAIs could conduct performance audit by evaluating the effectiveness and efficiency of the REDD+ program. Effectiveness relates to the desired output of REDD+ scheme, which is to reduce a certain amount of carbon emission. Efficiency associates the output and the input. It answers if the available resources are best used to achieve the reduction in carbon emission.

By performing such audits on REDD+, SAIs could satisfy their role to make a difference in the lives of citizens. As explained on the previous section, REDD+ generates not only benefits for the environment, but also socioeconomic benefits for the society. Transparent, accountable, and sustainable REDD+ scheme is required to maximize those benefits.


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