World Bank arm offers $200m in loans to reforest Indonesia

The International Finance Corp (IFC) is offering loans to Indonesian companies that are interested in reforesting degraded land, in an effort to reduce carbon emissions.

The World Bank investment arm earlier this week pledged $75m-$200m (£45m-£120m) for its Sustainable Forestry Program, which aims to create plantation forests on grasslands and marshes over the next three to four years.

The scheme envisages the transformation of degraded land into productive forests through the planting of fast-growing trees. The plantations would be used to supply forest-based products, such as timber. Companies involved in the reforestation project would be eligible to earn carbon credits through the UN clean development mechanism scheme.

Indonesia has about 96 million hectares of degraded land, at least eight million hectares of which is coarse grassland, according to the IFC.

The organisation has a target of reforesting 250,000 hectares of critical land in Sumatra, Kalimantan and East and West Nusa Tenggara provinces over the next five years. If successful, the reforested land mass could could cut annual CO2 by about 90 million tons, said the IFC.

The nation is the world’s third-largest emitter of greenhouse gases, with 85 per cent attributable to deforestation.

“The program has several benefits: reducing greenhouse gas emissions; bringing the land back into productive use; and generating new jobs in rural areas,” said Kenneth MacDicken, IFC Indonesia program manager for sustainable forestry.

Of the country's 120 million hectares of tropical rainforest, nearly half of it – about 51 million hectares – is in critical condition, according to government figures. Officials estimate that widespread illegal logging has already claimed 10 million hectares of forest.

IFC hopes that its new scheme will help preserve the remaining rainforest by providing a source of sustainable wood while providing 90,000 jobs in rural areas.