Modest carbon price could save Borneo forests: study

David Fogarty, Reuters 4 Jun 09;

SINGAPORE (Reuters) - Tropical forests in Borneo under threat of conversion to palm oil plantations could be more profitable left standing if carbon credits were priced between $10 and $33 per tonne, a study has found.

Forests soak up vast amounts of planet-warming carbon dioxide each year and are crucial in the fight to curb climate change.

Many governments and scientists want to put a price on the carbon locked away in forests as an incentive to curb deforestation, which contributes nearly a fifth of mankind's greenhouse gas emissions.

Researchers led by Oscar Venter of the University of Queensland in Australia studied data from 808 concessions in Kalimantan, Indonesia's part of Borneo island, covering 8 million hectares (20 million acres).

Of this area, they found 3.3 million hectares of forest within the concessions remained uncleared and was under imminent threat of being converted to oil palm plantations.

"They are not meant to be clearing forest for palm oil development. It's pretty clear that forests are being felled for oil palm," said Venter, a conservation biologist and lead author of the study published on Friday in Conservation Letters.

Venter, speaking to Reuters from Brisbane in Queensland state, said the team conducted an economic analysis by asking how much it would cost the concession owners to stop clearing the forest and how to pay for lost revenues.

They looked at the role of carbon credits under a U.N.-backed scheme that aims to reward developing nations for preserving forests in return for tradeable carbon offsets.

The scheme, called reduced emissions from deforestation and degradation, or REDD, is likely to be included in a broader U.N. climate pact to be negotiated in December.

A new climate pact from 2013 could usher in a multi-billion dollar trading scheme for REDD credits that rich nations could buy to help meet emissions reduction targets.

COUNTING CARBON

Venter and his team used data from ground and satellite surveys to calculate the amount of carbon stored in the 3.3 million ha and then calculated how much carbon would be released over 30 years if all of the forest was cleared.

They found that 2.1 billion tonnes of CO2, or more than three times the annual carbon emissions of Australia, would be released over three decades.

The team, which included researchers from The Nature Conservancy, Center for International Forestry Research and the Great Ape Trust of Iowa, then looked at a variety of palm oil planting scenarios on the 3.3 million ha and compensation levels of 100 percent or 50 percent.

"It might sound like a strange concept to someone used to growing oil palm that they could instead grow carbon credits," said Venter. "But if the numbers add up, I assume that it's a message they'd be open to at least consider."

Based on a large-scale planting scenario and maximum compensation, carbon credits would need to be $33.44 per tonne to make it worthwhile for a palm oil firm to leave a forest in tact.

For selective planting on land of higher quality and 100 percent compensation, credits would need to be $19.62 per tonne. At 50 percent compensation, the price drops to $9.85.

Venter said the study also showed there were major benefits for endangered species, such as orangutans and pygmy elephants.

The study showed 40 of Kalimantan's 46 threatened mammals occurred in the areas slated for palm oil development.

"What we really wanted to get at was biodiversity implications. The areas where the cheapest carbon emissions are found are actually twice as high in the number of endangered mammals," he said.

"So it's a really nice win-win for those two global objectives of carbon and biodiversity conservation."

(Editing by Michael Urquhart)

Study finds potential profits in conservation
Michael Casey, Associated Press Yahoo News 5 Jun 09;

BANGKOK – Selling credits for the billions of tons of carbon that are locked in Indonesia's tropical rain forests could be as profitable as converting these areas into palm oil plantations, a study released Friday found.

The study, in the current issue of the peer-reviewed journal Conservation Letters, also found that conserving the 3.3 million hectares (8.2 million acres) that are slated to become plantations on Kalimantan, on the island of Borneo, would boost the region's biodiversity. The 800 proposed plantations that were studied contain 40 of the region's 46 threatened mammals including orangutans and pygmy elephants, the study found.

"Our study clearly demonstrates that payments made to reduce carbon emissions from forests could also be an efficient and effective way to protect biodiversity," said Oscar Venter, a conservation biologist at the University of Queensland in Australia and the study's lead author. "We now need to see policy discussions catch up with science because at the moment the potential co-benefits of linking forest protection to biodiversity are not getting the attention they deserve."

Under an international climate change agreement which would replace the Kyoto Protocol in 2012, governments are expected to create a framework allowing countries to get compensated for protecting their forests.

Among the scenarios being considered are providing countries with direct financial assistance for reducing their emissions from forests or allowing them to gain credits, which they could sell on an international carbon market to companies that have exceeded their allotted carbon cap.

Under the latter scenario, the study concluded that conserving forests would be more profitable than clearing them for palm oil if the credits could be sold for $10 to $33 per ton. Currently, the rate per ton is around $20, the study said.

A carbon trading market — or "cap-and-trade" system — works much like any commodities market except that traders make their fees selling a ton of carbon dioxide instead of corn or copper. At this point, the carbon dioxide traded for the most part comes from industrial sources.

Countries that agree to reduction targets are given permits for an amount of allowable carbon dioxide emissions which are passed onto businesses. Companies can choose to cut their emissions by retrofitting a factory and selling their permits for a profit — or continuing to pollute and buying additional units of carbon dioxide on the open market.

The World Bank's Timothy Brown, a natural resources management specialist in Indonesia, said the calculations seemed reasonable based on the expectation of growth within the carbon markets over the next 10 to 20 years.

But he said there still remains many questions about setting up the system known to avert deforestation and convincing local governments and companies to abandon the much greater certainty of gaining profits from palm oil for the much less certain prospect of earning money trading carbon credits.

"It's not only that the carbon markets are uncertain but the guy trying to access the carbon market is uncertain how to do it," Brown said. "He knows where to go to sell his oil palm. He knows these people. With the carbon market, who does he call? It's not a smooth and frictionless market."

Palm oil can be found in half of supermarket products from cosmetics to ice cream, according to the industry, and demand has risen sharply in China, India and the United States. The industry is also expected to grow as countries mandate the use of biofuels as part of a cleaner energy mix.

But as its profile has risen so has the controversy surrounding the methods used to farm palm oil. Plantation companies in Indonesia and Malaysia — which together produce 87 percent of all palm oil — have come under fire for leading to deforestation that contributes to the demise of animals like orangutans and Sumatran elephants.

Indonesia, where already 15.1 million acres are covered by plantations, has aggressive expansion plans.

Frances Seymour, director general of the Center for International Forestry Research in Indonesia which also took part in the study, said the new data should help make the case that forest have to be part of the solution to reducing greenhouse gas emissions.

"Ultimately, our goal is to help fashion an agreement that will allow tropical forests to become a part of a more comprehensive climate agreement — one that will reduce emissions, as well as produce co-benefits," she said in a statement.

Other groups that took part in the study included The Nature Conservancy, the Great Ape Trust and the Consultative Group on International Agriculture Research.

Rainforest is worth more standing
Victoria Gill, BBC News 5 Jun 09;

The Indonesian rainforest is worth more standing than felled say researchers.

A new analysis has shown that payments to reduce carbon emissions from the forests could generate more income than palm oil production on deforested land.

Protecting the forests could become profitable under a proposed scheme called Reduced Emissions from Deforestation and Degradation (Redd).

In the journal Conservation Letters, they say this scheme will help protect threatened forests.

Palm oil, an ingredient in products including food and soaps, has become an important feedstock for biodiesel.

This has created controversy because in Indonesia and Malaysia, which are its major producers, companies clear and often burn swathes of forest to grow their crops.

These ecologically-rich forests are home to a huge variety of species, including endangered orangutans, and to very carbon-rich peat swamps.

Oscar Venter from the University of Queensland led the study that focused on Kalimantan, in Indonesia - just one forested region where deforestation has stirred environmental concern.

The aim was to find out if protection of the forests could be as profitable as palm oil.

Forest custodians

Under Redd, oil palm companies could be called on to protect the forested areas they own, and sell "carbon credits" for the amount of carbon contained in that forest.

"Despite their rich biodiversity, we haven't been able to protect these forests with conservation funds," said Dr Venter. "So we looked at what Redd would be able to do and what that would mean for biodiversity."

He and his team looked at the financial reports of palm oil companies to see how much money they earned from oil production, and from selling timber.

They compared these earnings to the predicted carbon emissions from planned palm oil projects, and calculated that if carbon credits could be sold for $10 (£6) per tonne, conserving the forest could be more profitable than clearing land for oil palm.

"This is the break-even price if oil palm can only be grown in areas that are at least moderately suitable, or if some oil palm can be relocated to already [deforested] areas. Any price over [that] means Redd becomes more profitable than oil palm," explained Dr Venter.

"Carbon markets, while they fluctuate, are where the price of carbon is currently established. So we compared our prices to prices on major global markets, which at the time were selling carbon for around $30 per tonne of CO2."

Redd is a UN-led programme, introduced in 2005, to create a practical financial system to protect the rainforests.

Dr Venter hopes this research will strengthen the case to include it in the of the climate agreement that replaces the Kyoto accord, which is set to be decided upon at a meeting in Copenhagen later this year.

"If Redd does become part of the next international climate agreement, it will have the potential to fund forest protection in areas slated for oil palm conversion," said Dr Venter.

He said the findings showed that it was possible to create "financial incentives to ensure that the world's tropical forests last into the next century, instead of becoming a memory of the past".

"Tropical forests are disappearing at an incredible pace - the equivalent of 50 football fields a minute, imperiling biodiversity and creating massive carbon emissions that are degrading our global climate," said William Laurance, a scientist from the Smithsonian Tropical Research Institute in Panama.

But Dr Laurance told BBC News that palm oil production would be "very tough to stop" because it is so profitable.

"At present prices for carbon, we won't be able to stop rainforest destruction for oil palm," he told BBC News.

"Redd will only be competitive for slowing destruction of peat forests, which are jam-packed with carbon and become massive sources of greenhouse gases when cleared.

"But we can pressure the worst companies and fight to protect the highest-priority areas," he told BBC News.

"Redd is probably our best chance to invest billions of dollars into forest conservation, and to help developing nations make a reasonable profit from their forests."