**1. Introduction**

Poor peatland management practices in Indonesia have led to large areas of degraded peatlands, which are causing increasing environmental and socioeconomic problems. Deforestation and canalization for agricultural development have drained the naturally water-logged peat swamps and have left behind dry, carbon-rich land that is extremely prone to fire [21, 52]. Recurrent fires on peatlands cause environmental destruction, greenhouse gas (GHG) emissions, and health impacts from toxic haze pollution, which translates into high socioeconomic costs [28, 53]. The 2015 fire episode has pushed Indonesia to the third place for global GHG emitters and led to an estimated damage of IDR 221 trillion [17, 53]. Besides fires, the decomposition

of stored organic matter in the drained peatlands also contributes substantially to Indonesia's total GHG emissions [21, 54] and leads to irreversible land subsidence [9, 20, 21, 33, 35]. As the majority of the underlying mineral soils are below sea level, this land subsidence will result in the future flooding of land [21]. Additionally, mineral soil contains acid sulfate soil, which turns acid when exposed and tends to be extremely infertile [34]. Thus, continuous peat degradation and subsequent flooding will prevent the productive use of land for agriculture or for other purposes.

As a result of the failed "Mega Rice Project" (MRP) that deforested and drained peat swamp forests to develop rice paddies, a large part of Central Kalimantan's peatlands is degraded.1 This results in regular fires that are linked to the El Niño Southern Oscillation climate phenomenon (ENSO). In so far, a lack of anticipatory fire responses has made the province of Central Kalimantan one of the most affected by fire and haze [13, 24, 45]. The 2015 fire episode burnt an estimated 429,000 hectares and caused a financial loss of 233 million Indonesian rupiah [53]. Deforestation and canalization under the MRP have paved the way for further exploitation of the region and pressure on the peatlands is increasing as a result of migration to the area, the opening up of new land for smallholder and industrial plantations, and slash and burn farming practices [15, 42, 52]. Rapid agricultural development, in particular palm oil expansion, is one of the main drivers of deforestation and peatland degradation in Central Kalimantan and deforestation and palm oil expansion rates are now among the highest in Indonesia [1, 45, 48, 49]. As palm oil and other conventional cash crops require drainage for cultivation, the peatlands are continuously degrading, which leads to an increase in fire vulnerability and land subsidence in Central Kalimantan [13].

In light of the serious environmental, social, and economic impacts of degraded peatlands, restoration and sustainable peatland management is critical in order to reduce emissions, maintain biodiversity, and ensure a long-term solution to the recurring fire and haze problems in Indonesia [1, 9]. This requires a revision of land management policies and land use planning of these areas. The Indonesian government has taken up several regulations on peatland management and has committed to restore 2 million ha of peatlands [53].<sup>2</sup> Besides reducing social hazards and economic costs from peat fires, peatland restoration can lead to a large reduction of GHG emissions from fire and peat decomposition and in this way assist Indonesia in reaching its GHG emission reduction target of 29% compared to business as usual levels by 2030 [1, 9]. However, in addition to these policies, the government is also looking to expand its agricultural production and has pledged to double its palm oil production by 2020 [1]. Despite sustainability concerns, there is a large economic interest in the conversion of the degraded peatlands into plantations and large areas have already been licensed to pulp or palm oil companies [29]. Hence, the conflict between the social and environmental benefits of peatland restoration and

**77**

**2. Method**

**2.1 Study area**

*Applying Systems Analysis to Evaluate Options for Sustainable Use of Peatlands...*

ICRAF's Reducing Emissions from Land Use (REALU) in Sumatra [13].

the existing fire and haze problems and the availability of the KT-GEM.

While many small-scale efforts of paludiculture development have been implemented, no large scale attempts have been tried so far. This study aims to provide an initial investigation on the impacts of the large scale use of paludiculture development, as an effort to restore degraded peatlands. It will do so by modeling the impacts of jelutung development and other peatland management strategies in Central Kalimantan using an extended version of the Kalimantan Green Economy Model (KT-GEM) [3, 43, 44]. This model is a regional application of the Indonesia Green Economy Model (I-GEM) that was developed to inform, strengthen, and facilitate long-term policy planning and financing within the transition toward a Green Economy by evaluating the trade-offs between conservation and development scenarios [43, 44]. Central Kalimantan was chosen for this study because of its large areas of degraded peatlands,

With the use of the KT-GEM, we review the outcomes of different policy scenarios for peatland use in order to assess whether the Jelutung approach of peatland restoration holds social, environmental, and economic benefits. This study further aims to provide a better understanding of the impacts of different policy decisions for peatland restoration, focusing on the most crucial issues of degraded peatlands: hotspots, GHG emissions, and economic development. Building on previous efforts of peatland restoration and paludiculture, the study provides a basis for further research into paludiculture development for peatland restoration in Indonesia.

Central Kalimantan is the third largest province in Indonesia and covers approximately 15.4 million hectares (Mha), of which around 3.47 Mha is peatland [27] and Government of Central Kalimantan [14]. The province has a tropical climate and its forests and peatlands are part of the biodiversity hotspot of Borneo that provides vital ecosystem services [48, 49]. Around 2.7 million ha is degraded in one form or the other. In 2015 alone over 429,000 ha burnt. In 2014, the province had a total population of 2.4 million inhabitants, with a population density of 16 inhabitants/

the economic benefits of industrial crops needs to be addressed in order to achieve

An option that can offer a solution to this problem is paludiculture, which is the cultivation of native wetland crops on peatlands [13] and is currently being promoted by the Government of Indonesia [11]. Peatland restoration is not an easy process and requires careful consideration of the relationship between the native vegetation, hydrology, and peat soil [10]. Since paludiculture species can be commercially planted on rewetted peatlands, while maintaining the natural conditions of the peat, they can be effectively used in rehabilitation efforts and offer an alternative to the production of conventional commercial crops [13]. Restoring the peatlands this way is in line with Indonesia's ambitions to transit toward a "Green Economy," an economic framework that improves both human welfare and the environment by fully incorporating the value of natural capital [55]. In Indonesia, an estimated 60–80 species have been identified as having potential for paludiculture development, one of which is Jelutung (*Dyera* sp.), a native tree species that naturally grows in peatlands and can be used for latex and timber production [13, 56]. Over the last 20 years, planting Jelutung to rehabilitate peatlands has been tested by the Kalimantan Forests and Climate Partnership (KFCP) initiative, the Central Kalimantan Peatland Project (CKPP) of Wetlands International, and in

*DOI: http://dx.doi.org/10.5772/intechopen.85677*

effective peatland restoration.

<sup>1</sup> The Mega Rice Project was a government project initiated in 1996 that aimed to convert 1.7Mha of unproductive and sparsely populated peat swamp forest into rice paddies by deforesting and canalizing the area. However, the project was unsuccessful and was eventually abandoned after severe environmental damage had already occurred. The deep drainage of the peatlands. Has resulted in annual fire hotspots during the dry season (see.e.g. [18, 19, 47]).

<sup>2</sup> For regulations on peatland see for example Government Regulation (Perpes) No. 71/2014 on the Protection and Management of Peatland Ecosystems and Presidential Instruction (Inpres) No.8/2015 on the postponement of the exisiting moratorium on the conversion of peatlands and primary forest. President Joko Widodo has also called for a moratorium on new peatland concessions and a cancelation of existing concessions that have not been developed, thereby halting the legal conversion of peatland and peat swamp forests into agricultural land ([53], 23 October Statement).

*Applying Systems Analysis to Evaluate Options for Sustainable Use of Peatlands... DOI: http://dx.doi.org/10.5772/intechopen.85677*

the economic benefits of industrial crops needs to be addressed in order to achieve effective peatland restoration.

An option that can offer a solution to this problem is paludiculture, which is the cultivation of native wetland crops on peatlands [13] and is currently being promoted by the Government of Indonesia [11]. Peatland restoration is not an easy process and requires careful consideration of the relationship between the native vegetation, hydrology, and peat soil [10]. Since paludiculture species can be commercially planted on rewetted peatlands, while maintaining the natural conditions of the peat, they can be effectively used in rehabilitation efforts and offer an alternative to the production of conventional commercial crops [13]. Restoring the peatlands this way is in line with Indonesia's ambitions to transit toward a "Green Economy," an economic framework that improves both human welfare and the environment by fully incorporating the value of natural capital [55]. In Indonesia, an estimated 60–80 species have been identified as having potential for paludiculture development, one of which is Jelutung (*Dyera* sp.), a native tree species that naturally grows in peatlands and can be used for latex and timber production [13, 56]. Over the last 20 years, planting Jelutung to rehabilitate peatlands has been tested by the Kalimantan Forests and Climate Partnership (KFCP) initiative, the Central Kalimantan Peatland Project (CKPP) of Wetlands International, and in ICRAF's Reducing Emissions from Land Use (REALU) in Sumatra [13].

While many small-scale efforts of paludiculture development have been implemented, no large scale attempts have been tried so far. This study aims to provide an initial investigation on the impacts of the large scale use of paludiculture development, as an effort to restore degraded peatlands. It will do so by modeling the impacts of jelutung development and other peatland management strategies in Central Kalimantan using an extended version of the Kalimantan Green Economy Model (KT-GEM) [3, 43, 44]. This model is a regional application of the Indonesia Green Economy Model (I-GEM) that was developed to inform, strengthen, and facilitate long-term policy planning and financing within the transition toward a Green Economy by evaluating the trade-offs between conservation and development scenarios [43, 44]. Central Kalimantan was chosen for this study because of its large areas of degraded peatlands, the existing fire and haze problems and the availability of the KT-GEM.

With the use of the KT-GEM, we review the outcomes of different policy scenarios for peatland use in order to assess whether the Jelutung approach of peatland restoration holds social, environmental, and economic benefits. This study further aims to provide a better understanding of the impacts of different policy decisions for peatland restoration, focusing on the most crucial issues of degraded peatlands: hotspots, GHG emissions, and economic development. Building on previous efforts of peatland restoration and paludiculture, the study provides a basis for further research into paludiculture development for peatland restoration in Indonesia.
