Big donor Norway welcomes Indonesia forest plan

OSLO, May 20 (Reuters) - Norway welcomed on Friday a plan by Indonesia to impose a two-year moratorium on logging in primary forests despite a five-month delay to the deal.

Norway and Indonesia signed an agreement in May last year under which Jakarta promised to impose the moratorium. In return Norway vowed to pay $1 billion in aid, based on Indonesia's performance in achieving long-term goals to slow deforestation.

"The launch of the moratorium is one important step forward for Indonesia," Norwegian Environment Minister Erik Solheim said in a statement.

"What Indonesia is embarking on is a very serious development choice. Indonesia's efforts to combine the goal of 7 percent economic growth with reducing greenhouse gas emissions by 26 percent by 2020 are commendable," he said.

Some environmentalists have said that the plan fell well short of hopes for protecting forests and peatlands.

The moratorium took effect on Friday after a five-month delay. Indonesia outlined a long list of exemptions to the plan, in a concession to the hard-lobbying plantation industry.

The Norwegian environment ministry said Norway "congratulates Indonesia's President Susilo Bambang Yudhoyono on signing the two-year suspension for issuance of new licences for use of primary forest and peat land."

It said the moratorium would help goals of cutting greenhouse gas emissions and was "an important part of a broader land use reform agenda in Indonesia, though it will not in itself ensure success."

Trees soak up carbon dioxide, the main greenhouse gas, as they grow and release it when they are burnt or rot.

The Norwegian ministry said that setting up a new Indonesian agency for slowing deforestation and monitoring and verifying greenhouse gas emission would be crucial. "The moratorium is one important part of the puzzle," it said.

(Reporting by Alister Doyle; Editing by Maria Golovnina)

FACTBOX-Indonesia's Moratorium on Forest Clearance

May 20 (Reuters) - Indonesia's two-year moratorium on new permits to clear primary forest took effect on Friday, giving developers of plantations, energy resources and projects to cut emissions more clarity on their ability to expand in the archipelago.

The moratorium revealed a long list of exemptions, a concession to the plantation industry in the world's top palm oil producing nation that vexed green groups.

Here are facts about the moratorium:

* The moratorium, an instruction signed by President Susilo Bambang Yudhoyono, orders ministers and government offices to suspend the processing of permits to log and convert forest, including for timber and palm oil, in primary forests and peatlands in the following government categories: conservation forest, protected forest and production forest. Secondary forests, which have been touched by human activity, in these areas can still get permits.

It was not clear if there would be any sanctions if the presidential instruction is not followed, or firms developed land covered by the moratorium ban. This opens up the risk of poor implementation in a country with rampant corruption and weak law enforcement.

* The moratorium is part of a $1 billion climate change deal signed with Norway in 2010 to reduce greenhouse gas emissions from deforestation, though only $30 million of this has been disbursed so far, with the bulk contingent on emissions reductions.

The moratorium lasts two years but could in theory be extended. Its implementation will be overseen by a task force on Reducing Emissions from Deforestation and Forest Degradation (REDD) piloted by reform-minded technocrat Kuntoro Mangkusubroto.

* It includes 64.2 million hectares (158 million acres) of primary forest and more than 30 million hectares of peatlands, some of which are already damaged. No compensation is offered in the moratorium to firms unable to expand in this area, though the government has allocated another 35 million hectares of "degraded forest" as
available for business use.

* It provides for exemptions including:

- Firms that already hold permits or have approval in principle from the forestry minister for permits to log and convert forest. The moratorium is not clear on which kind of the myriad of permits this refers to. But a source familiar with the sector told Reuters this includes Hak Guna Usaha (HGU) permits that allow land use for business. Permits from a local government to secure a location within the moratorium area would still be subject to the ban, the source said.

- The extension of existing permits.

- Projects to develop geothermal and other power plants, oil and gas fields, sugar and rice plantations.

- Ecosystem restoration

* The government will update every six months a map of its forests in a bid to sort out overlapping permits in the sector. The map will be published to help investors clarify which forest areas are still on offer and which are not.