Tag Archives: tropical forests

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

Demand for Gold Causes Deforestation

gold mine

The global gold rush, driven by increasing consumption in developing countries and uncertainty in financial markets, is an increasing threat for tropical ecosystems. Gold mining causes significant alteration to the environment, yet mining is often overlooked in deforestation analyses because it occupies relatively small areas. As a result, we lack a comprehensive assessment of the spatial extent of gold mining impacts on tropical forests.

The study Global demand for gold is another threat for tropical forests published in Environmental Research Letters provides a regional assessment of gold mining deforestation in the tropical moist forest biome of South America. Specifically, we analyzed the patterns of forest change in gold mining sites between 2001 and 2013, and evaluated the proximity of gold mining deforestation to protected areas (PAs)….Approximately 1680 km2 of tropical moist forest was lost in these mining sites between 2001 and 2013. Deforestation was significantly higher during the 2007–2013 period, and this was associated with the increase in global demand for gold after the international financial crisis….In addition, some of the more active zones of gold mining deforestation occurred inside or within 10 km of ~32 PAs. There is an urgent need to understand the ecological and social impacts of gold mining because it is an important cause of deforestation in the most remote forests in South America, and the impacts, particularly in aquatic systems, spread well beyond the actual mining sites.

Excerpt from Abstract, Global demand for gold is another threat for tropical forests

Deforestation: the mixed picture

slash and burn agriculture

In a new study of the Centre for Global Development (CGD), a Washington think-tank, Jonah Busch and Kalifi Ferretti-Gallon look at 117 cases of deforestation round the world. They find that two of the influences most closely correlated with the loss of forests are population and proximity to cities (the third is proximity to roads). Dramatic falls in fertility in Brazil, China and other well-forested nations therefore help explain why (after a lag) deforestation is slowing, too. Demography even helps account for what is happening in Congo, where fertility is high. Its people are flocking to cities, notably Kinshasa, with the result that the population in more distant, forested areas is thinning out.

Two of the countries that have done most to slow forest decline also have impressive agricultural records: Brazil, which became the biggest food exporter of all tropical countries over the past 20 years; and India, home of the green revolution. Brazil’s agricultural boom took place in the cerrado, the savannah-like region south and east of the Amazon (there is farming in the Amazon, too, but little by comparison). The green revolution took place mostly in India’s north-west and south, whereas its biggest forests are in the east and north.

But if population and agricultural prowess were the whole story, Indonesia, where fertility has fallen and farm output risen, would not be one of the worst failures. Figures published inNature Climate Change in June show that in the past decade it destroyed around 60,000 sq km of primary forests; its deforestation rate overtook Brazil’s in 2011. Policies matter, too—and the political will to implement them.

The central problem facing policymakers is that trees are usually worth more dead than alive; that is, land is worth more as pasture or cropland than as virgin forest. The benefits from forests, such as capturing carbon emissions, cleaning up water supplies and embodying biodiversity, are hard to price….The most successful policies therefore tend to be top-down bans, rather than incentives (though these have been tried, too). India’s national forest policy of 1988 explicitly rejects the idea of trying to make money from stewardship. “The derivation of direct economic benefit”, it says, “must be subordinated to this principal aim” (maintaining the health of the forest). In Brazil 44% of the Amazon is now national park, wildlife reserve or indigenous reserve, where farming is banned; much of that area was added recently. In Costa Rica half the forests are similarly protected. In India a third are managed jointly by local groups and state governments.

Top-down bans require more than just writing a law. Brazil’s regime developed over 15 years and involved tightening up its code on economic activity in forested areas, moratoriums on sales of food grown on cleared land, a new land registry, withholding government-subsidised credit from areas with the worst deforestation and strengthening law enforcement through the public prosecutor’s office. (The most draconian restriction, requiring 80% of any farm in the Amazon to be set aside as a wildlife reserve, is rarely enforced.)

Two developments make bans easier to impose. Cheaper, more detailed satellite imagery shows in real time where the violations are and who may be responsible. Brazil put the data from its system online, enabling green activists to help police the frontier between forest and farmland. Its moratoriums on soyabeans and beef from the Amazon, which require tracing where food is coming from, would not have worked without satellites…

The Forestry Ministry of Indonesia, [on the other hand] is rated the most corrupt among 20 government institutions by Indonesia’s Corruption Eradication Commission in 2012. Some within government are hostile to anti-deforestation schemes, which they see as “foreign”, says Ade Wahyudi of Katadata, an Indonesian firm of analysts. Perhaps the biggest problem is the lack of a single, unified map including all information on land tenure and forest licensing: efforts to create one have been slowed by unco-operative government ministries and difficulties created by overlapping land claims.

Excerpts from Tropical Forests: A Clearing in the Trees, Economist,  Aug. 23, 2014, at 56