One of world's largest paper producers will today announce plans to "drown" 7,000 hectares of its plantations in Indonesia, in an unprecedented step designed to protect the country's carbon-rich peatlands.

Asia Pulp and Paper (APP) will announce it is to immediately retire and restore five areas of its commercial plantations that have been identified as "critical" for carbon storage.

Peatlands are major carbon sinks and when drained for development stored carbon is released into the atmosphere where it forms CO2, contributing to climate change.

APP says it will block manmade canals which it had previously dug to drain the peat bogs in the five identified areas. It will then use pumps to flood the land in an effort to restore the land to its natural state.

The project represents the first effort by any forest commodity company to retire and restore areas of commercial peatland, although efforts have been made in the past to restore peatland in National Parks.

Aida Greenbury, managing director of sustainability for APP, told BusinessGreen the company was "sacrificing" concessions that would have provided up to $50m worth of revenue.

"We're definitely about to drown our investment so we're basically going to count this type of sacrifice as our investment in tackling climate change," she said.

She added the move was a key ingredient in APP's Forest Conservation Policy, which it has designed with a range of green groups and businesses over the past two years.

"When you talk about the environment and climate change, it's priceless isn't it?" she said. "Irresponsible peatland management is detrimental to our business. If it's not managed properly peatland can be the cause of destruction of our plantations including forest fires, so we need to tackle these issues."

Greenbury admitted it had not been easy to convince board members to commit to the pilot project, noting there had been "a lot of yelling".

However, she said the move was further evidence APP was committed to delivering on its Forest Conservation Policy (FCP). Having previously faced fierce criticism from environmental groups for its involvement in deforestation, the company has won plaudits in recent years for its commitment to end deforestation during the last two years, even if some environmental groups have continued to question its environmental track record.

The pilot project represents the first concrete step taken by APP to protect peatland through its FCP. The company has hired researchers from environmental consultancy Deltares to carry out a major mapping exercise over the tropical peatland areas using LiDAR remote sensing technology, which will then provide APP with further conservation advice next year.

The move also forms the latest stage of APP's campaign to encourage the Indonesian government to tighten up its forest protection policies and monitoring of forest areas.

Greenbury said she hoped the pilot project would prove to policy makers that companies can take tangible steps to protect peatland. Logging and peatland drainage is a major source of carbon emissions in Indonesia, accounting for 60 per cent of the country's total CO2 emissions, equal to around 900 million tonnes of CO2 per year, according to the NGO Wetlands International.

According to the Indonesian government, the country's peatland areas and their forests store an estimated 40GtC, which is comparable to the Amazon rainforest - the single largest terrestrial-carbon sink in the world.

The Global Peatland CO2 picture presents an overview of peatland carbon data for all countries and regions of the world (click to enlarge)

Conservation group Wetlands International welcomed the announcement from APP as a potential new avenue for protecting the world's peatlands.

However, Marcel J. Silvius, head of Wetlands International's climate-smart land-use programme, argued the area being restored remained "just a tiny dot" in the "vast landscape" of APP's concessions.

"APP and its subsidiaries currently hold hundreds of thousands of hectares of peatland," he said. "These areas are drained, leading not only to large CO2 emissions, but also to gradual soil subsidence."

He also questioned whether APP was retiring areas that were likely to prove unviable in the future because they had already been drained.

"We welcome APP's statement that the retirement of 7,000 hectares is just a first step in a long process," he said. "However, this is only a small step to address an enormous problem.

"Their hundreds of thousands of hectares of plantations on peat are not only causing major emissions, but also continuously subsiding towards levels where flooding becomes inevitable. It is urgent for APP to take action over entire peatland landscapes to stop greenhouse gas emissions and prevent major flooding disasters."

A spokesman for APP admitted it was unclear precisely how long the areas being retired would have been economically viable, but insisted that currently the plantations were 'very viable'. He also maintained the move will still have a positive impact on the landscape and surrounding forest.

Forest campaigners around the world will now be hoping the latest pilot project from APP proves both successful and a template for other peat-based plantations to follow.