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Asia's carbon trade flourishes in slump

September 7, 2009

Although global trade remains subdued, the carbon trading market doubled in 2008, says the International Emission Trading Association (IETA).

"Despite the economic problems that the world has faced during the past year or so, the carbon trading market has seen tremendous growth," said Henry Derwent, the IETA chief executive.

The carbon trade market swelled to US$126.14 billion in 2008, from only $63 billion in 2007, according to World Bank figures.

"This is not a textbook idea anymore and instead it is a growing and vibrant market, while the size continues to grow," he said.

Asia, one of the world's fastest-growing regions, has also dramatically increased its share of the carbon-trade market.

"China is a leader in this - both in terms of volume and the number of projects - while India is catching up, along with other countries such as Sri Lanka, Vietnam, Malaysia, Thailand and others," said Mr Derwent.

Asia and the Asia-Pacific account for most of the carbon trade among emerging economies.

Asia was responsible for 92% of the $126 billion in confirmed transactions in the primary clean development mechanism (CDM) market in 2008, he said.

Certified emission reductions (CERs) have increased in price as well as volume thanks to continuing demand from their established market in the European Union.

"This means that there is room for further growth in Asian CERs," he said.

If the apparent recovery in most economies is real, then the carbon trade is set to grow further, he said.

Buyers and suppliers in Asia's CER market are scheduled to meet at Carbon Forum Asia, a regional carbon trade meeting in Singapore on Oct 26-27. The organisers of the annual gathering predict increased participation this year due to a surge in demand for CERs from the region.

The event takes place about a month ahead of the UN Climate Change Summit in Copenhagen, Denmark, and is set to be a battleground for establishing a framework for replacing the Kyoto Protocol.

The protocol's global standards for greenhouse gas emissions are set to expire in 2012.

The UN Framework Convention on Climate Change (UNFCCC) will also stage its eighth CDM World DNA Forum in conjunction with this year's Carbon Forum Asia Trade Fair and Conference.

The CDM World DNA Forum is considered a key event in the build-up to the UN Climate Change Summit. About 150 designated national authorities (DNAs) are expected to attend.

The two-day Carbon Forum Asia - which is being held in collaboration between IETA, Koelnmesse and the Sustainable Energy Association of Singapore - is expecting 20% more participants and 40% more projects.

Ralph Hendrich, the general manager for Koelnmesse, said the event expected participants from 80 countries. Last year's event brought together 109 exhibitors, 60 project developers and nearly 100 industry leaders, DNAs and government officials.

"Carbon Forum Asia is one of the main events in the region and Asia is the 'hub' of clean development mechanism (CDM) projects," said Mr Hendrich.

Demand for CERs in Asia is rising and the UN summit will determine which projects are eligible, said Mr Derwent.

"There has never been a more crucial time for promoters of carbon-cutting projects to study the future," he said.

Asia's CDM market is on the brink of profound change - likely to be triggered by the Copenhagen summit and the United States' increasing enthusiasm for the issue - and is set to increase significantly, he said.

Australian parliament rejects carbon trade plan

August 17, 2009

Australia's parliament rejected a plan for the world's most ambitious emissions trade regime as expected on Thursday, bringing the nation closer to a snap election and prolonging financial uncertainty for major emitters.

Conservative lawmakers holding the largest block of votes in the Senate joined with Greens and independents to defeat the Carbon Pollution Reduction Scheme set to start in July, 2011 and aimed at reducing emissions in the biggest per-capita emitter in the developed world.

But the government renewed its pledge to push through the scheme before a December U.N. meeting in Copenhagen, where world nations will try to hammer out a broad global climate pact and where Canberra is eager to take a leading role.

"This bill may be going down today, but this is not the end," Climate Change Minister Penny Wong told the Senate. "We will bring this bill back before the end of the year because if we don't this nation goes to Copenhagen with no means to deliver our targets," Wong said before the vote.

Greens wanted tougher emissions targets, while conservative opponents are divided on the need for a scheme and want it delayed until after Copenhagen, fearing Australia will be disadvantaged if other nations fail to act on climate change.

In a sign some major industrial emitters are fearful of months more uncertainty over the scheme's A$12 billion ($10 billion) estimated cost, the second-largest power retailer warned of a possible energy supply crisis without a speedy resolution.

"The ongoing uncertainty surrounding the (carbon-reduction) legislation is delaying both the investment necessary to meet Australia's long-term baseload electricity needs and the investment in lower-carbon technology required to gradually reduce Australia's emissions," Origin Energy said.

"We remain convinced the CPRS legislation provides the framework for a good, workable scheme," it said.

ELECTION ON CLIMATE CHANGE?

Surveys show Rudd well ahead in opinion polls and that most Australians favor action to combat climate warming. Elections are due in late 2010.

Rudd has promised emissions cuts of 5-25 percent on 2000 levels by 2020, with the higher end dependent on a global agreement to replace the U.N.'s Kyoto Protocol.

But if the Senate blocks or rejects the legislation a second time, after an interval of three months, it will hand Rudd a trigger for an early poll likely to be dominated by climate change.

Some analysts said the legislation had become a victim of political point scoring that undermined efforts to fight climate change or reform the economy.

"Of more concern to future negotiations, the range of reasons for opposition to the scheme (within the Senate) is so wide as to make meaningful responses to all objections almost impossible," said Julie Toth, a senior economist with ANZ bank.

Rudd told parliament the defeat of his emissions trading plan had "put Australia's future on climate change in grave jeopardy". Scientists say Australia, the world's driest continent and prone to drought, faces a rapid rate of climate warming.

Australia's scheme is similar, but wider in scope, to one introduced in Europe four years ago that requires big industrial emitters to buy permits for producing carbon dioxide, or sell them if they invest in clean technology reducing emissions.

About 1,000 of Australia's top polluting companies will have to buy CO2 permits, covering 75 percent of national emissions.

Australia is the world's biggest coal exporter, and relies on coal for about 80 percent of electricity generation, prompting industry warnings some coal mines and coal-fired power stations will be forced to close under the carbon-trade regime.

But rich nations such as Australia are under pressure to firm up their emissions reductions targets to help seal a post-Kyoto pact. Big developing nations, such as India and China, which are not bound by emissions curbs under Kyoto, are already taking steps to tackle their growing CO2 pollution.

GREENS OFFER CARBON DEAL

The Australia Greens, who control five crucial Senate swing votes, wrote to Rudd and Wong after the rejection to promise future support for the 11 CPRS bills if the government hardened its reduction targets and backed renewable energy.

"We invite the government to immediately engage in constructive discussions with the Greens on this proposal, so we can together create meaningful action on the climate crisis," Greens leader Bob Brown said.

Conservative opponents offered no such olive branch, but called on the government to delink the scheme from widely supported laws pushing a 20 percent renewable energy target. A vote on those laws is likely within days.

If that vote succeeds, it would unlock a potential $22 billion in planned renewable investment.

Business leaders, academics and carbon market experts all called on the government and its political opponents to end the domestic political squabbling and agree on a emissions scheme.

"It is now time to forge an agreement on climate change policy. An agreement is needed in the interests of business certainty," said Australian Industry Group chief executive Heather Ridout.

Climate bill could cause energy revolution If passed, legislation would affect lives in number of ways

July 31, 2009

Congress has taken its first step toward an energy revolution, with the prospect of profound change for every household, business, industry and farm in the decades ahead.

A flock of geese fly past a smokestack in this Jan. 10 file photo at the Jeffery Energy Center coal power plant near Emmitt, Kan. Sweeping legislation to curb the pollution linked to global warming and create a new energy-efficient economy is headed to an uncertain future in the Senate after squeaking through the House.

It was late Friday when the House passed legislation that would, for the first time, require limits on pollution blamed for global warming — mainly carbon dioxide from burning fossil fuels. Now the Senate has the chance to change the way Americans produce and use energy.

What would the country look like a decade from now if the House-passed bill — or, more likely, a watered-down version — were to become the law of the land?

“It will open the door to a clean energy economy and a better future for America,” President Barack Obama said Saturday.

But what does that mean to the average person?

Energy touches every corner of the economy and in countless ways can alter people’s lives.

Such a law would affect how much people pay to heat, cool and light their homes (it would cost more); what automobiles they buy and drive (smaller, fuel efficient and hybrid electric); and where they will work (more “green” jobs, meaning more environmentally friendly ones).

Job killer or job shifter?

Critics of the House bill brand it a “jobs killer.” Yet it would seem more likely to shift jobs. Old, energy-intensive industries and businesses might scale back or disappear. Those green jobs would emerge, propelled by the push for nonpolluting energy sources.

That could mean making or installing solar panels, repairing wind turbines, producing energy-efficient light bulbs, working for an environmental engineering firm or waste recycler, making equipment that harnesses carbon from coal burning and churning out energy-saving washing machines or air conditioners.

Assembly line workers at factories that made gas-guzzling cars might see their future in producing the next generation of batteries or wind turbine blades — an emerging shift, though on a relatively small scale today. On Wall Street, commodity brokers would trade carbon pollution credits alongside oil futures.

Farmers would see the cost of fertilizer and electricity go up. More windmills would dot their pastures. And a new source of income could come from selling pollution credits by planting trees or changing farming methods to absorb more carbon dioxide.

Energy would cost more because it would become more expensive to produce. For the first time there would be a price on the greenhouse gas pollution created when coal, natural gas or oil are burned. Energy companies would have to pay for technologies that can capture the carbon emissions, purchase pollution allowances or shift to cleaner energy sources.

It all costs.

Investors would see a new line item on companies financial reports: the cost of carbon permits.

Some increases would be reflected in the prices of goods and services, economics say. It might mean shelling out more for a toy because plastic, a petroleum-based product, is more expensive, or paying more for a house because of new efficiency requirements.

Not all the higher energy cost would show up in people’s utility bills. Households, as well as business and factories — including those, for example, making plastic for toys — could use less energy, or at least use it more efficiently. The poorest of homes could get a government check as a rebate for high energy costs. That money would come from selling pollution allowances for industry.

Energy experts in government and industry say a price on carbon pollution would lead to new ways to make renewable energy less expensive, while emphasizing how people can use it more wisely.

Potential changes to how homes are built and even financed seem likely as energy efficiency is taken into account in building codes and the cost of mortgages. With the cost of energy increasing, homeowners and businesses would have greater incentive to use more energy-efficient lighting, windows and insulation.

Coal not going anywhere

But don’t think that the traditional sources of energy would disappear.

Coal, which today accounts for half the electricity produced, would continue as a major energy source, though a less polluting one, energy experts forecast. That would mean capturing the carbon released when coal is burned.

It’s a technological hurdle with a complication: “not in my back yard” complaints over what to do with the billions of tons of carbon dioxide captured from power plants and pumped beneath the earth. Would people feel comfortable having it stored near or under their homes, factories and businesses?

Scientists studying climate change say carbon capture from power plants is essential if the country is to take up the challenge against global warming.

The cleaner energy economy also put nuclear energy front and center. Does the U.S. build new power plants? If so, where, and where does all the waste go? Nuclear energy makes up about one-fifth of the nation’s electricity today.

The House-passed bill contains provisions to make it easier to get loan guarantees and expands the nuclear industry’s access to loans for reactor construction. An Environmental Protection Agency analysis that shows modest future costs from a low-climate energy world assumes a significant expansion of nuclear energy. The Senate could add more incentives for the nuclear industry.

The new energy world would rely more on natural gas. This abundant fossil fuel emits carbon but is relatively clean when compared with coal. But people would have to decide whether to accept new pipelines that are needed to ship the gas around the country — just as they would have to deal with the need for new power lines to move solar and wind energy to where it’s needed.

Brazil wants C02 cuts based on historic emissions

July 24, 2009

Brazil wants historic emissions to be the basis for greenhouse gas pollution targets, slated for discussion during December climate talks in Copenhagen, Brazil's top climate negotiator said in an interview.

Jose Miguez, who heads Brazil's Interministerial Commission on Global Climate Change, said Brazil is not yet proposing targets for emissions cuts under the second phase of the Kyoto Protocol because developed nations should take the lead.

"The greenhouse effect is not caused by emissions, it is caused by the accumulation of emissions in the atmosphere," he said. "We are proposing that the second period of (Kyoto Protocol) commitments be based on the historic responsibilities of each country."

Miguez said China, India and South Africa will back the historic emissions proposal in the United Nations talks aimed at reining in warming that the U.N. climate panel says will cause more droughts and crop failures and raise sea levels.

In China, which scientists say has surpassed the United States as the world's biggest carbon polluter, a state think tank this year proposed a greenhouse gas trading plan to reflect the historic emissions of rich and poor nations.

Miguez said Brazil opposes "carbon intensity" proposals that measure emissions per dollar of GDP because they favor bigger economies and risk allowing continued increases in global emissions as economies grow.

"It's the proposal backed by the U.S., Japan and Germany, it's good for countries with big GDPs," said Miguez.

Brazil will play a key role in the December negotiations for the 2008-2012 period of the Kyoto Protocol because of Amazon rain forest deforestation. Some 20 percent of greenhouse gas emissions caused by humans are linked to deforestation.

The government of President Luiz Inacio Lula da Silva has promised to halve Amazon destruction over the next decade. Miguez said that deforestation releases 700 million tonnes of carbon dioxide per year, or about half Brazil's total emissions.

Lula last month said Brazil was open to adopting targets for greenhouse gas emissions if rich countries did more to curb climate change.

Conservation International on Thursday said the number of rare plant species unique to Brazil is four times higher than the government has estimated and argued for greater environmental protection measures.

FORESTRY CHALLENGE

Environmental groups have increasingly eyed the possibility of using Brazil's rain forest for forestry-based carbon offset projects under the U.N. Clean Development Mechanism, or CDM, but Miguez says this is unlikely under current conditions.

Brazil opposes selling credits through a scheme known as Reduced Emissions through Deforestation and Degradation (REDD), in which developed countries buy rights to carbon stored in trees as they grow to offset their own emissions.

Selling emissions credits from such projects would increase total atmospheric carbon, Miguez said, because ensuring forests remain standing would only keep carbon out of the atmosphere until the trees die and release it again.

"Our position is that we're opposed to carbon markets for preventing deforestation," he said. "People confuse this by saying we want to continue deforestation, which is false."

He said REDD projects would also assign higher land values to states where the Amazon is being used for cattle farming or soy cultivation, he said, effectively rewarding Brazilian state governments that have done the least to protect forests.

REDD projects should be done without tradable carbon emissions through direct financing mechanisms, he said, such as the Amazon fund Brazil created last year that has already received a $1 billion donation from Norway.

Brazil supports carbon projects for reforestation of degraded Amazon areas, a methodology approved by the U.N.'s carbon offset program, but those projects are stalled because Europe has not allowed for trade of such credits.

This is partly on concern that replanted forests could be cut down after the credits were already sold.

"Basically it's a question of liability," he said. "If someone comes along and cuts down the forest, what happens to the carbon credits?"

Brazil is the world's third-largest seller of carbon credits through the CDM, with some 400 projects either approved or in the pipeline. CDM projects in operation have cut Brazil emissions by 7 percent, Miguez said.

Around 25 percent of approved projects are agricultural methane collection operations mostly for pork or cattle businesses, according to U.N. data. Another quarter are biomass energy projects, with a heavy focus on cellulosic ethanol.

Temporary carbon credits revived in US climate bill

July 17, 2009

The US Congress has stepped on to uncertain ground over land-based carbon offsets in its landmark cap-and-trade bill, passed in the House of Representatives on June 26. Hasty eleventh-hour negotiations saw its proponents embrace temporary carbon offset credits for domestic forestry and agriculture. It’s an approach that has proven unworkable internationally after the unhappy experience of temporary CERs in afforestation and reforestation in the UN Clean Development Mechanism (CDM).

There is also unease among some green groups at the country’s peak environmental regulator, the Environmental Protection Agency (EPA), being dealt out of local land-use carbon offset oversight in favour of the federal Department of Agriculture (USDA).

Carbon offsets figured highly in frenzied last-minute concessions to farm-state congressmen in order to get the Waxman-Markey bill over the line in the House of Representatives late last Friday night. With the bill only passing by a narrow margin, 219 votes to 212, a package of amendments opening up wide-ranging carbon credit opportunities for US farmers in soil carbon management and crop-based biofuel production was key to winning a majority for the bill. The amendments largely apply to domestic tree-based carbon preservation and sequestration as well.

Congressman Collin Peterson from Minnesota, also chairman of the House Agricultural Committee, was instrumental in securing measures designed to increase access to carbon revenues in the nation’s farm belt. Analysts are still digesting the 1400-page legislation and detail is missing in many instances given the last-minute changes.

While there is solid support for the approach to international offsets, designed to promote the potential for forest carbon markets around reducing deforestation, it’s a different story with the domestic offsets measures. Whether they make for a workable carbon market around land and tree-based credits or environmentally-credible emissions reductions within the US is in question. Analysts are still digesting the 1400-page legislation and detail is missing in many instances given the last-minute changes.

The Clean Energy and Security Act now proceeds to the Senate where it faces a tougher challenge, needing a 60 per cent majority to become law and facing more wavering Democrats. Significant further amendment is inevitable if it’s to pass but success would create the world’s biggest carbon market, eclipsing the EU ETS.

And it’s clear generous offset limits are here to stay. Hearings in the upper house have already begun and US agriculture secretary Tom Vilsack told the Senate’s Environment Committee the bill wouldn’t succeed unless there remained a major role for farmers and foresters in land-based sequestering of carbon in soils and trees. "I believe it is crucial that we engage the participation of farmers, ranchers and forest land owners," Vilsack said.

The offset provisions allow for a massive two billion tonnes of offsets to be used by US companies to offset their own emissions every year – one billion sourced domestically and another billion internationally. This would provide a huge demand stimulus to both domestic and international carbon project markets in farming and forestry.

Market analysts Point Carbon estimated this week that there are unlikely to be more than 25 million tonnes of offsets that can be generated within the US in year one of the scheme, 2012. It’s not yet clear how much the scope for domestic offset quantity is raised by the farm-lobby amendments but they do widen potential opportunities in soil and forest carbon, says carbon brokerage Evolution Markets.

Key to winning the support of the farm lobby were amendments that allowed farmers and foresters to avoid tying up their land in long-term commitments of up to 100 years in order to earn carbon offset revenue, EvoMarkets analysts say. The federal bill draws on California’s Climate Action Reserve standard, which demands a 100-year easement on forest offset project land, as something of a blueprint for land-use carbon offset projects.

But in a hastily worked-up compromise, it would seem the US legislators grabbed a lifeline from UN CDM rules governing afforestation and reforestation (A/R) projects. These create different classes of CER offset credits for forestry to those applying to energy and industrial offset credits. Instead of being permanently-issued, A/R credits are expiring. The main type are called temporary CERs (tCERs).

The US bill now offers “term offsets” along similar lines. It appears that, like tCERs, US term offsets would last five years but could be re-issued upon a successful re-verification of the project, that is, when it can be shown that the trees are still standing and the emissions reductions from carbon sequestration are still intact.

The concept was no doubt attractive to farm-state legislators because it offered farmers an early income stream from carbon with no long-term commitment of land. What may not have been initially well understood is that temporary credits attract much lower prices. More importantly, if farmers later decide to change the land use the liability for claimed emissions reductions does not disappear with the trees.

According to its reading of the amendments, Evolution Markets says US companies buying term offsets would have to provide “financial assurances” that liabilities will be covered after expiration. This usually means buying more expensive permanent offsets generated elsewhere as a replacement. The CDM experience shows that when this liability hangs over buyers of forest carbon credits, many just won’t buy them in the first place.

These are among the complexities that has seen CDM A/R largely fail to deliver and project developers walk away from the UN scheme in favour of the simpler voluntary market offering permanent forest offset credits (where the liability remains with the supplier).

The farm lobby also won a major concession in having the USDA replace the EPA as the overseer of the domestic land-based offsets programme. The bill initially had the EPA managing offset activities across all sectors.

The EPA and the farm community don’t see eye to eye over biofuels after the regulator determined that crop-based ethanol be assessed on the wider indirect environmental impacts rather than just their local impacts. For example, take into account the impact on land-clearing in other countries for increased corn and soybean crop production needed to replace those in the US turned over to biofuel.

Now the USDA would administer farm and forest offsets and any provision to consider the indirect impacts of biofuels is delayed at least five years while the USDA, EPA and the Department of Energy study the issue further, US agriculture newspaper Capital Press says. This makes the bill more palatable for farmers who might expect a more sympathetic managing of offsets by the USDA generally.

Of course, the offsets provisions of the cap and trade bill are open to further change in the Senate. Indeed, as the implications of the land-based offset rules become clear this is one area where movement is likely - for better or worse for US farmers, foresters and the environment.

Kenya: Going Green With Redd

July 10, 2009

Nairobi — To combat the effects of climate change by reducing carbon emissions, the United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation or simply REDD, has come up with a programme to compensate countries geared towards the process.

REDD is expected to spur a massive flow of funds to tropical countries, help preserve rainforests and deliver economic benefits to impoverished rural communities.

It is is already in place in Kenya and Brazil.

In Kenya, the Wildlife Works has initiated the Wildlife Works Carbon at Rukinga Ranch in Taita district of the Coast Province, situated in the dry arid scrubland between Tsavo East and West in southeast Kenya.

It is a vibrant ecosystem, home to elephants, lions and fifty other species of large mammals besides the bird and plant life.

The ranch has an organic greenhouse to provide local farmers with cash-generating citrus trees and free agro-forestry trees to use for building and fuelwood.

Since the land is not conducive for agriculture, the local population sees the dryland forest as a source of fuelwood and charcoal and where applicable clear it for habitation or subsistence agriculture.

This is a problem repeated throughout the continent.

In Kenya's Rift Valley Province, the country's largest catchment area, the Mau Forest, is under threat from human habitation and illegal loggers. In the Democratic Republic Congo of Congo, traditionally forests have been seen as "valueless" and hence their unabated plundering.

Forests have largely been ignored in national development strategies and their wanton destruction has had far reaching consequences such as the drying up of major rivers and the consequent effect of low water levels in dams for power generation such as the recent closure of the Masinga Dam in Eastern Kenya; loss of biodiversity and livelihoods leading to more poverty, soil erosion, drought, other climate change effects and emissions of greenhouse gases leading to global warming.

In February, Wildlife Works Carbon in collaboration with the Kenya Forest Service, announced East Africa's first carbon offset projects to take advantage of the emerging global carbon markets covering REDD. The Kenya Forest Service is the national focal point for REDD projects.

Alfred Gichu, the chief forest officer said that the forest service intends to forge strong partnerships with the private sector.

"We welcome the entrance of Wildlife Works Carbon into the market, to assist us and Kenya's rural landowners in managing the technical complexity of the global carbon market, to engage the global carbon offset buyer in our efforts to protect our wilderness heritage and to contribute to global efforts in climate change mitigation."

Already, a group in the Amazon has signed up for the new venture.

In the Amazon Forest, which covers 1.57 million square kilometres of rainforest, the local community who are members of the Juma Sustainable Development Reserve Project, the Amazon's first independently validated project under REDD, are being rewarded for protecting their forests and reducing carbon emissions in the process.

Mike Korchinsky of Wildlife Works Carbon said he got interested when "A few months ago, a friend trading in carbon credits suggested l look into REDD because it is about protecting trees we already have." It wasn't an easy to implement because of the stringent standards set by the Voluntary Carbon Standards which allows for participation in the global carbon markets covering REDD.

The implementation programme is complex, expensive and time consuming.

It involved documenting Rukinga's carbon value by counting all the trees in order to calculate the carbon emissions if the forest was not there.

The land was divided into grids, with teams of men recording the height and width of the canopies, and the tree species, compete with their location using the global positioning system.

"It's a bit futuristic and speculative because you have to work out what would happen if you weren't there to protect the trees. Historical evidence shows that deforestation is rampant. But you have to also include other parameters for the next 20 years such as population pressure, the estimate consumption of fuelwood among others. You have to make a case for the auditors."

One has to also provide evidence that while you may be protecting your forest, you're not moving the problem of deforestation elsewhere.

The stringent criterion is necessary to keep unscrupulous people from exploiting the carbon trade market.

"Wildlife Works has been a leader in using the power of the consumer market place to conserve biodiversity and protect forest habitat, and we see the emerging Voluntary Carbon Marketplace as a logical and exciting extension of our 10 year history," says Mr Korchinsky.

Wildlife Works Carbon will help local landowners in the developing countries gain financially from their forest and biodiversity assets whether they are communities or private landowners.

If the REDD venture takes hold in Africa and other parts of the developing world, it may help save the last of the ancient forests by placing a true economic value on them from where the local people can directly earn carbon credits.

It may give them the much need incentive to invest their time in protecting the forests versus cutting them down for charcoal or for farming.

In an article in the March 2009 edition of the International Institute for Economic Development (IIED), Virgilio M. Viana, director-general of the Amazonas Sustainable Foundation and an IIED Visiting Fellow, writes that deforestation is not simply a result of poverty or ignorance but of expected economic benefits for the people exploiting it. "It is the result of a perverse system that financially rewards land grabbers, illegal loggers and agribusiness.

Cattle farming, for instance, is a highly profitable enterprise. From 1996 to 2006, numbers of cattle in the Brazilian Legal Amazon -- that part of Brazil within the Amazon basin -- rose from 37 million to 73 million."

Viana further writes that the biggest challenge under the REDD venture is not how to reduce deforestation, but how to finance the reduction. The global carbon market reached $118 billion in 2008 but very little of it was invested in protecting tropical rainforests.

He continues his argument by stating that if the nature of the battle is predominantly economic, irreversible success will come only with sustainable finance -- public, private and non-profit programmes aimed at stopping deforestation for carbon stored, biodiversity conserved, water supply protected or poverty eradicated.

Financing a new development paradigm in the Amazon is relatively low in cost compared to the environmental services produced by its standing forest ecosystems.

Take water for instance, every year, Amazonian forests pump out eight trillion tonnes of it into the atmosphere.

There is no price tag on that yet, but it has clear economic significance for Amazonian agricultural production, electricity generation and industry that generates over $1 trillion a year.

According to Viana, REDD financing mechanisms should be flexible so they can incorporate both inter-governmental funding (at national scale) and market-based funding (at project level).

It should be allowed in the carbon credit market with a quota to avoid flooding the market.

Even a small quota of 10 per cent would generate more resources than any other international financing mechanism for tropical forest conservation and poverty.

Finally to ensure appropriate benefit sharing for indigenous peoples and local communities, REDD funding should use instruments such as certification and validation.

As a relatively new alternative method for reducing emissions, REDD is now much in the spotlight, and is expected to feature prominently at the Conference of the Parties to the UN Framework Convention on Climate Change in December in Copenhagen, where the post-Kyoto regime is due to be designed.

New Zealand: Carbon credits may pay more than farming

July 3, 2009

An ambitious high country carbon project is being investigated which, if it proves successful, those involved say could be the start of a new era for high country families, reports Sally Rae.

Jim Morris likes referring to the orangutan theory.

A chap in Borneo, having read about the money to be made in palm oil, heads out to cut down a patch of rainforest to plant palm oil trees.

He is just about to strike the first blow with his axe when the local regional council officer arrives and tells him he will get a carbon credit if he puts the axe away.

Some time later, the officer returns to visit the man and the two go for a walk in the rainforest.

They see orangutans have returned - so he gets an ecosystem credit.

Then a rare butterfly, which has not been seen for years, returns.

A stream which used to be muddy is now pristine.

The man gets more credits.

As Mr Morris, from Ben Avon Station in the Ahuriri Valley, near Omarama, says, the man in Borneo is now sustainable.

And he is "farming" the ecosystem.

The high country carbon project - the recent recipient of funding of $185,000 for two years from the Ministry of Agriculture and Forestry's Sustainable Farming Fund - was a project born from concerns Mr Morris had about the profitability of farming in the high country.

As he told a group of Federated Farmers High Country members recently, traditional stock farming was not paying the bills.

Another product was needed and the obvious choices were carbon and eco services trading.

For many farmers, the carbon tax they would have to pay in the future could be offset by plantings of exotic forestry.

However, that was not an option for many in the high country, where district plans forbade or severely curtailed such plantings on land designated as "outstanding landscapes".

A paper, written by 13 scientists, estimated that in 1997 the economic value of the world's ecosystem services averaged $US33 trillion, while the global gross national product was only $US18 trillion.

"In global economic terms, therefore, by protecting my patch of matagouri, I have achieved almost twice the value of ploughing it to grow grass for stock," Mr Morris said.

The project team's aim is to quantify what is happening in the carbon sequestration world with native scrublands, tussock grasslands and wetlands under different management regimes.

While it was already known that sequestration rates in natives tended to be low, the sheer size of the high country meant "an awful lot of carbon".

At 10% of total land area, South Island high country lands were integral to New Zealand climate change solutions.

However, very little information existed on the amount of carbon stored in tussock grasslands or potential management actions to increase carbon storage.

The project would provide the necessary information for high country land managers to mitigate climate change and access new business opportunities while improving the sustainable use of landscape resources.

Those driving the project include Mr Morris, Melanie Schauer and Phil McGuigan, from Environment Canterbury, Larry Burrows (Landcare Research), Matthew Clark (Land Information New Zealand) and farmers Hamish Ensor, Kerry Harmer and John Aspinall.

Mr Burrows, a plant ecologist, described the project as a "fantastic idea", saying it was quite innovative and forward-thinking.

The research needed to be done and was something that had been"bandied around".

In New Zealand, there was very little information on the topic, especially in relation to high country farming.

In time, it could have an effect on high country land use and the economic and social issues around the high country as well.

There was a long way to go but the funding from the Sustainable Farming Fund was a good start and would "kick things off", he said.

Financial support has also been received from ECan, Federated Farmers High Country, Merino Inc, Linz, Doc and Mr Morris, while philosophical supporters include the Forest and Bird Society, Federated Mountain Clubs, Central South Island Fish and Game, QEII National Trust and Waitaki District Council.

While the end result was unknown, if the research "comes up trumps", it could be the start of a new era for high country families, Mr Morris said.

"Their reliance on meat and wool for their only income and the vulnerability that comes with that position may become a thing of the past," he said.

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