Tag Archives: REDD

Better than Nothing: the Forests Bond

Kasigau Rangers. Image from http://www.coderedd.org/redd-project/wildlife-works-carbon-kasigau-corridor/#.WBoE4vkrLIU

Launched on November 1, 2016, the Forests Bond will provide investors the opportunity to invest in a traditional financial product that offers the unique option of receiving interest payments in the form of environmental impact — in this case, verified carbon credits generated through REDD, an initiative that rewards landholders for protecting forests, thereby reducing carbon emissions that worsen climate change. The development of the bond is a collaboration of the International Finance Corporation (IFC), a member of the World Bank Group, and BHP Billiton with technical support from Baker & McKenzie and Conservation International (CI).

REDD (short for Reducing Emissions from Deforestation and forest Degradation), which offers financial incentives to landholders in tropical countries to keep their forests standing, has met with mixed success since its launch in 2005, in part because the lack of a carbon market left it dependent on voluntary action and bereft of the certainty needed to attract private funding.

“If you look at the scale of the problem, roughly US$ 100 billion to 300 billion needed to cut deforestation by half over the next decade, it’s clear that we need to mobilize private institutional investors, who control vastly greater amounts than public or philanthropic aid can deliver,” said Agustin Silvani, Conservation International’s vice president of conservation finance. “The REDD mechanism has mostly excluded them because it required specific carbon expertise or a specific interest in forests to engage with it.”

The Forests Bond supports a REDD project in Kenya, and investors can choose between a cash or carbon credit coupon (the interest received from the bond), or a combination of both. This unique element of the bond is made possible by the price support that BHP Billiton**is providing, which means that investors can either 1) elect to take the carbon credits to offset corporate greenhouse gas emissions or 2) sell them on the carbon market, or 3) take a traditional financial return instead. This provides the certainty needed to attract institutional investors while still generating verified reductions in deforestation, in the form of REDD credits…

The REDD project that the Forests Bond will support takes place in the Kasigau Corridor in eastern Kenya….Forest protection activities include forest and biodiversity monitoring, funding for community wildlife scouts, forest patrols, social monitoring and carbon inventory monitoring. Community development activities include reforestation of Mount Kasigau; establishment of an eco-charcoal production facility; support to community-based organizations; and expanding an organic clothing facility.

The bond is listed on the London Stock Exchange and has raised US$152 million from institutional investors.

**BHP Billiton is providing a price support mechanism of US$12 million that ensures that the project can sell a pre-defined minimum quantity of carbon credits every year until the Bond matures, whether or not investors in the Bond elect to receive carbon credit coupons.

Excerpt from Bruno Vander Velde  New bond aims to unlock private investment to protect forest, Reuters, Nov. 1, 2016 and BHP Billiton and IFC collaborate on new Forests Bond, Press Release of BHP Billiton, Nov. 1, 2016

Burning the Amazon, greens versus the farm lobby

The Brazilian Amazon is now home to 24m people, many of them settlers who trekked those roads in the 1960s and 1970s, lured by a government promise that those who farmed “unproductive” land could keep it. Chaotic or corrupt land registries left some without secure title. Rubber-tappers, loggers, miners and charcoal-burners came too. The most recent arrivals are 20,000 construction workers building dams on the Madeira and Xingu rivers to provide electricity to Brazil’s populous south. They have attracted some 80,000 camp-followers, many of whom squat on supposedly protected land.

The population of Jaci-Paraná, the nearest town to the Jirau dam being built on the Madeira, has risen from 3,500 to 21,000 in a decade—but it still has just four police. Prostitutes and drug-dealers do well. On payday, says Maria Pereira, a teacher, busloads of construction workers hit town to drink and fight. Knife-killings are common. When the dam is finished, many of the new residents will move on. Behind them, a bit more of the Amazon will be gone.

Brazil’s government no longer encourages cutting down the forest. Nearly half of it now lies within indigenous reserves, or state and federal parks where most logging is banned. Private landowners must abide by the Forest Code, a law dating from 1965 that requires them to leave the forest standing on part of their farms (four-fifths in the Amazon, less elsewhere), and in particular around the sources and banks of rivers, and on hillsides.  But the code is routinely flouted. Less than 1% of the fines levied for failing to observe it are ever paid, because of uncertain ownership and poor enforcement. The Suruí, an Amerindian people, recently mapped its territory in Rondônia, on paper strictly protected. The tribe was shocked to find that 7% had been cleared.  In Brasília 2,000km (1,250 miles) and a world away, politicians are haggling over laws that will affect the fate of the forest. Some legislators are pushing a bill that would give Congress, rather than the president, the power to create new reserves. That would probably mean fewer new ones—a blow for the forest, says Ivaneide Bandeira of Kanindé, a non-profit group in Rondônia. “Indigenous people protect the forest better than anyone else,” she says.

The Senate is poised to vote on a new version of the Forest Code, already approved by the lower house. The president, Dilma Rousseff, wants a final version on her desk before Christmas. Everyone agrees that change is needed. The share of private land that must be set aside has risen since 1965 and farmers who were once in compliance but omitted to update their paperwork can end up lumped in with lawbreakers. Kátia Abreu, a senator who is the president of the main farm lobby, says farmers find such uncertainty “deeply worrying”. Environmentalists dislike it too, since it encourages loggers and land-grabbers by fuelling disrespect for the law.  But the consensus has gone no further. The farm lobby wanted all past land clearance regularised, arguing that if farmers had to replant trees, crop output would fall, food prices soar and poor Brazilians go hungry. Greens countered that an amnesty would fuel future deforestation. So far, at least, the farm lobby is winning. The current draft allows farmers to dodge fines for illegal logging and postpone their obligation to replant by simply declaring that their violations were committed before July 2008 and by enrolling in a vague and leisurely “environmental recovery programme”, to be run by individual states.

“This is an amnesty in all but name,” says Maria Cecília Brito, the head of WWF-Brazil, a conservation group. “Without safeguards, states will be able to postpone forever the requirement to act.” After several years in which the annual rate of deforestation fell, this year it has risen, possibly because landowners think the new code will let them get away with it. Law-abiding farmers are outraged. When Darci Ferrarin bought a large farm in Mato Grosso in 1998, he knew that its riverbanks had been illegally cleared. He paid to replant. “Those who deforested illegally should go to jail,” declares his son, Darci Junior.  The only promising aspect of the new code, thinks Roberto Smeraldi of Amazônia Brasileira, a green NGO, is that it offers benefits such as subsidised loans to landowners who have always stuck by the rules, or who are reforesting faster than the law demands. But he laments the missed opportunity for a grand bargain to align opposed interests. A cap-and-trade system like those used to limit industrial pollution in rivers could have helped farmers short of set-aside to comply with the law by paying neighbours with more than the legal minimum to maintain it. That would both have spared farmers from costly replanting and cut future deforestation by making standing forests financially valuable.

Ms Rousseff promises to veto any amnesty for illegal deforesters. But the figleaf of the “environmental recovery programme” may give her scope to temporise, and with a heavy legislative schedule she may be tempted to do so. If she does, the Amazon’s best hope will lie with the enlightened farmers and indigenous tribes who care for their land better than the state is willing to.

For Mr Ferrarin, the way to halt deforestation is to use existing farmland better. Almost half his farm of 13,350 hectares (33,000 acres) is set aside as forest; the rest supports 3,000 cattle as well as soya and several other crops, farmed in rotation. Innovative no-till methods cut carbon emissions, fertiliser use and labour. The Ferrarins run workshops to teach other farmers about such “integrated farming” techniques. Mr Ferrarin’s daughter, Valkiria, runs a cattle-breeding programme, with an on-site IVF clinic where embryos from prize animals are implanted in surrogates. A productive farm can support an extended family for several generations, he says.

Cassio Carvalho do Val’s father settled in Redenção in Pará in 1959. It was then virgin rainforest: the last 150km of the journey was by donkey, carrying dried meat, rice and beans. Nine-tenths of the 300,000 hectares he was granted has since been sold, but the farm is still vast (the average farm in the United States comprises around 160 hectares), and unproductive, with just one cow per hectare of pasture. But his son has started to fatten his cows with grain and plans to try integrated farming. “It’s the dream of every crop farmer to be a rancher,” he says with a laugh. “It’s so much easier.” But he thinks he needs to keep up with the times.

Some of Brazil’s indigenous peoples are redoubling their efforts to protect the standing forest. The 1,300 Suruí have moved their 25 villages to the borders of their territory to get early warning of incursions. With help from Kanindé and others, since 2005 they have started to reforest where intruders have cleared. To the inexperienced eye, the new trees already look ancient (though to the Suruí the sparser cover is still obvious). Next year the tribe will host other indigenous peoples who want to repair deforestation on their own lands. They hope to start teaching non-indigenous folk, too.

The Suruí are the first Brazilian tribal people to set up a REDD project, an international aid scheme to prevent deforestation. Up to 10% of the income generated will go to local non-Indians, to show them that standing forest can create jobs and income. “We are not saying, don’t use the forest,” explains the chief, Almir Narayamoga Suruí. “We are saying you should think about the medium and long term when you decide how to use it.” That will be easier if the politicians approve a Forest Code that looks to the future, not the past—and then provide the means to enforce it.

Protecting Brazil’s forests: Fiddling while the Amazon burns, Economist, Dec. 3, 2011, at 47

Climate Markets for Forests, growing

Press Release on  The State of the Forest Carbon Markets 2011: From Canopy to Currency (2011). (PDF) This is Ecosystem Marketplace’s second annual report giving readers an in-depth look at what’s happening in today’s market, and what might be happening down the road.    First, 2010 marked a dramatic increase in the volume and value of credits, dramatically outpacing the market activity we observed in our last State of the Forest Carbon Markets report that covered transactions up to mid-2009. The 2010 surge in credit generation has been fueled to a great extent by large Reduced Emissions from Deforestation and Forest Degradation (REDD) projects.

The increasing entry of the private sector as project developers, investors, and buyers is also bringing new blood into the market and may hold a host of new implications for the future of the forest carbon markets as well as their perception in the broader climate policy discourse. From a rising secondary market to a strong boost in volumes due to forward contracting brought about in no small part by newly minted forest carbon methodologies, this report uncovers a host of interesting developments.   Project developers and market players looking into the future were optimistic about market growth, but few predicted the market would reach its current size and even fewer seemed to sense the scale of credits now being developed by hundreds of projects in the pipeline

Congo’s Rainforest: ready to be managed for REDD

The Democratic Republic of Congo (DRC) has entrusted a Canadian company with managing a vast section of its forest, including containing deforestation, the environment ministry has announced.  Ecosystem Restoration Associates (ERA) will handle a project covering nearly 300,000 hectares (740,000 acres) of woodlands in the Mai-Ndombe forest, in western Bandundu province, the statement said.  The project is part of the country’s Reducing Emissions from Deforestation (REDD+) programme.  “For us, it’s about containing deforestation, restoring the forests and making this country a green country in the interest of the international community,” Congo’s Environment Minister Jose Endundo told AFP.  It was also about ensuring the country’s credibility in the fight against climate change, he said.

John Kendall, ERA’s Africa representative, told AFP Mai-Ndombe had been a strategic choice to demonstrate what Africa could do in the fight against climate change.  They would be working with local communities to teach them sustainable farming, such as how to grow their crops without being obliged to burn down woodlands, he added.  The Democratic Republic of Congo has 75 percent of the Congo basin’s forested land and 50 percent of Africa’s.  The REDD+ programme was adopted during the UN climate conference in Cancun, Mexico at the end of 2010.  It offered financial incentives to encourage countries with large tropical forests to manage them in a sustainable way.

DR Congo entrusts forest management to Canada’s ERA, Agence France Presse, Aug. 23, 2011