The green gold rush
By Giles Parkinson | Business Spectator | 8 Sep 2009
The fight against climate change has created possibly the biggest run on Fedora hats since Michael Jackson first snapped one to his head while performing Billie Jean in the early 1980s.
In the past few years dozens of investment bankers, carbon traders and carbon funds, lawyers, accountants and conservation groups, have been giving a passable impersonation of Indiana Jones as they traipse through the world’s remaining jungles seeking deals to protect the forests.
They are chasing what has been described in some circles as the next great gold rush.
In the attempt to reduce greenhouse gases, and save the planet’s biodiversity, the protection of the world’s rainforests seems essential. And how else to do it unless a value is ascribed to those forests remaining in place, rather than being cut down and sold to be turned into cardboard boxes and toilet paper.
This has been the driving philosophy behind the push to reach international agreement on the so-called REDD credits (Reducing Emissions from Deforestation and Degradation) at the climate change talks in Copenhagen in December.
If such agreement is reached, it could create a new market worth tens of billions of dollars, but for it to work effectively it must overcome massive hurdles, mostly the overwhelming complexity of building a mechanism that provides for the effective monitoring, verification, and governance of a REDD project. And all this in developing countries where such concepts can be tenuous at best.
It’s a situation highlighted by the unfolding drama in PNG, where the head of the department of climate change has been stood down, there are allegations of false certificates and disputed land ownership, and the opposition leader Sir Mekere Morauta has called for an official investigation into the “carbon cowboys” descending on the country in search of a quick dollar and some of the deals allegedly struck by the government.
Just how attractive those projects are to developers was revealed recently by Carbon Planet, the Australian carbon management firm that has been caught up in a dispute over forest tenure in PNG.
In documents released along with its proposal to make a back-door listing on the ASX by taking over the IT company M2M, Carbon Planet said it has exclusive rights over 25 REDD projects in PNG, which it said could generate up to $1 billion a year in carbon credits for the project owners.
Carbon Planet says its commission from these projects ranges from 2 to 10 per cent, depending on the nature of the projects and the degree to which it has managed the verification process. It estimates its average take at 5 per cent.
Reports in PNG suggest that some developers have been asking for commissions of up to 15 per cent. With carbon trading firms such as the UK-based EcoSecurities estimating the global supply of REDD credits could be somewhere between $US5 billion and $US45 billion annually – Carbon Planet says it could be $20 billion by 2012 – it’s not just a gold mine, it’s a licence to print money.
But reaching an agreement on REDD is important to developed countries such as the US and Australia. President Barack Obama is supporting an emissions trading scheme that would allow half of a nation’s carbon reduction targets to be sourced internationally, such as through REDD.
Prime Minister Kevin Rudd and Climate Change Minister Penny Wong are also keen on striking an agreement on REDD. Their proposed Carbon Pollution Reduction Scheme allows for unlimited access to international carbon markets.
It is also important for developing countries such as Indonesia, which has said it could cut its emissions by 40 per cent over 2005 levels within 20 years if it could use REDD to protect its forests, replant trees and maintain peat lands.
The debate in Copenhagen will be fascinating. Despite embracing the concept of a market-based solution to reduce greenhouse gases, many green groups are now deeply suspicious about the idea including rainforests in a global carbon trading scheme, and its ability to achieve its environmental goals and remain socially just – i.e. not just a money making scheme for traders and governments.
Their suspicions have been deepened by proposals – mostly through forestry industries – to allow the definition of forests to be extended in such a way that would allow plantations that replace native forests to also generate carbon credits.
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