The environmental group said "notorious industrial rainforest destroyers" such as palm oil and pulp producers intended to manipulate the funds to subsidise further conversion of natural forests to plantations.

The allegations came in a new Greenpeace report called "REDD Alert: Protection Money", expressing doubts about Indonesia's plans to use a UN-backed scheme to reduce carbon emissions from deforestation and degradation (REDD).

It said Indonesia's greenhouse gas (GHG) reduction proposals "may create perverse incentives to clear forests and peatlands, create opportunities for corruption... and actually drive an increase in GHG emissions".

Under a REDD scheme announced in May, Norway has agreed to contribute up to a billion dollars to help preserve Indonesia's forests, partly through a two-year moratorium on new clearing of natural forests and peatlands from 2011.

Indonesia is the world's third biggest emitter of greenhouse gases, due mainly to rampant deforestation by the palm oil and paper industries, fuelled by corruption.

"Expansion plans show that these sectors intend to utilise the Indonesian government's ambiguous definitions of forests and degraded land to hijack the funds and use them to subsidise ongoing conversion of natural forests to plantations," the group said in a statement.

The industries' current expansion plans -- which have support within some government ministries -- seek to treble pulp and paper production by 2025 and double palm oil production by 2020, the report said.

"This expansion, coupled with weak definitions for degraded land in Indonesia, could see REDD funds which are designed to support protection of Indonesia's forests and peatlands actually being used to support their destruction," it added.

The areas earmarked included 40 percent of Indonesia's remaining natural forest -- an area the size of Norway and Denmark combined.

It also risked up to 80 percent of the country's remaining peatland -- which stores massive amounts of carbon -- and nearly 50 percent of the remaining forested orangutan habitat in Kalimantan, on Borneo island.

The forest and peatland carbon at risk amounted to four years' worth of global greenhouse emissions, the report said.

Greenpeace applauded Indonesian President Susilo Bambang Yudhoyono's "progressive vision" on the need to cut emissions of the greenhouse gases blamed for global warming.

But Greenpeace Southeast Asia forest campaigner Bustar Maitar said his plans were being "systematically undermined by the influence of the palm oil and pulp and paper industry".

With increased focus on productivity and higher yields, the palm and paper industry could reach its production targets without further deforestation, he added.

The report also criticised Indonesia for bundling plantation activity up with REDD-funded schemes to "rehabilitate" degraded or "idle" land, leading to forest replacement.

"Consequently, international REDD funds earmarked for forest protection may actually be used to subsidise their destruction, with significant climate, wildlife and social costs," it said.

AFP was unable to reach the Forestry Ministry for comment.

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