The International Finance Corporation (IFC), a private arm of the World Bank, has offered loans to local companies interested in re-greening their critical land.
The IFC launched its sustainable forest program Tuesday with a hard target of reforesting 250,000 hectares of critical land in Sumatra, Kalimantan and East and West Nusa Tenggara provinces over the next five years.
It said replanting the 250,000 hectares could help absorb about 90 million tons of carbon dioxide emissions, which could then be traded under the clean development mechanism (CDM) regulated under the Kyoto Protocol.
"The program has several benefits: Reducing greenhouse gas emissions, bringing the land back into productive use, and generating new jobs in rural areas," Kenneth MacDicken, IFC Indonesia program manager for sustainable forestry, said Tuesday at a press conference.
He added the projects were a promising alternative for the future, since demand for forest-based products, including timber, would keep increasing.
"Expansion for new forests will grow less and less due to pressure on the high deforestation rate in Indonesia," he said.
Asked about the companies interested in developing the projects, MacDicken said, "We have approached 15 companies and 10 of them have expressed interest in the financing scheme."
The IFC plans to invest between US$75 million and $200 million in the project.
MacDicken said the replanting projects could be implemented on low-carbon stock areas, such as grassland, by planting fast-growing trees.
There are currently about 96 million hectares of critical land in Indonesia, 8 million hectares of which are coarse grassland.
MacDicken said the projects were expected to generate 90,000 jobs in rural areas.
Indonesia is one of the world's largest forest nations, with about 120 million hectares of tropical rainforest.
Forestry Minister Zulkifli Hasan previously said 51 million hectares of forests were in critical condition, with the forest degradation rate reaching 1.8 million hectares over the last three years.
The government is prioritizing the rehabilitation of at least 500,000 hectares of barren forest land over the next five years.
MacDicken said many plantation companies were reluctant to replant their critical grassland due to the high production cost.
The IFC earlier suspended funding to an international palm oil company operating in Sumatra and Kalimantan, following protests by local environmental activists.
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