A hotbed of energy waits to be tapped in Indonesia

Sitting on some 500 volcanoes - the world's highest concentration, known as the "ring of fire" - Indonesia could generate enough geothermal energy to electrify the entire country.

By using steam generated by lava flows under inactive volcanoes, geothermal power in the sprawling archipelago could generate more than 20,000 megawatts of electricity - an estimated 40 percent of the world's total geothermal reserves.

Instead, Indonesia's geothermal generation is just 800 megawatts, as leaders have focused instead on the country's hefty reserves of lucrative fossil fuels.

This, in theory, could change in the wake of the long-awaited ratification of the Kyoto Protocol by Russia last month, which set the stage for the global treaty to go into effect. But early signs suggest that the treaty's incentives are not luring renewable-energy investment in places like Indonesia, prompting efforts to fix the system's flaws.

The protocol assigns targets for greenhouse-gas emissions that are considered a major factor in global warming. Countries that exceed their targets can either reduce domestic emissions or buy credits from other countries. One of the ways they can purchase these credits is by funding environmentally friendly projects in developing countries under the so-called Clean Development Mechanism (CDM).

This would make renewable-energy efforts like geothermal, which has languished in Indonesia and elsewhere due to concerns over expense and risk, a potential magnet for millions of dollars in new investment.

But the initial reception of project proposals and emissions-credits trading show that many renewable-energy projects that reduce CO2 are not those most favored by the market. Instead, development dollars are chasing cheaper projects that reduce methane, nitrous oxide, or fluorocarbons - leaving unfunded the projects that may have the most long-term benefits for a country's citizens.

"From the CDM point of view, renewable [energy] is not attractive," says Agus Pratama Sari, executive director of Pelangi, an environmental think tank in Jakarta. "The aim of renewables is CO2 reduction and people who have business sense are going to go for things like methane.... I think this is the result of a strategic mistake that the [protocol designers] realized after."

Some organizations and individuals who have realized this have scrambled to find ways to close what they say are loopholes in the protocol and increase the incentive for CDM projects that have the added benefit of promoting carbon-reducing, renewable-energy development before the treaty goes into effect Feb. 16, 2005.

One of the solutions is the application of a "gold standard" to projects that not only fight global warming but also include such benefits as the promotion of renewable energy and participation by local communities. Supporters hope that more money will flow to those projects with the support of groups like the World Wildlife Fund, which launched the gold-standard label.

Another solution is to get governments on board. So far, countries like Indonesia have been reluctant to set up the necessary approval processes to get such projects off the ground for fear of losing their own exemption from emission targets. Officials in some developing countries are also proposing high fees for the projects in an effort to get a piece of the investment pie.