Barking up the right tree

One of the curious aspects of the story about irregular carbon credits is how many people have emerged offering more "information" about the story. One of the first was someone who went only by the name of Treble Cleff, but otherwise remained anonymous. Treble Cleff was certain that I should stop writing about Kamula Doso, which he said was doing a lot of damage to the landowners. He wanted me to pay more attention to another aspect of the story. He also wanted to know what I knew. This sort of anonymous dialog is tough to handle, who are they and what is their agenda? Impossible to say.

In this context, on June 8th, shortly after I wrote about irregular carbon credits in Papua New Guinea, I was approached by an academic called Colin Filer at The Australian National University. He offered a copy of a soon-to-be published scientific paper on the PNG "carbon cargo cult", written by Dr Filer and some colleagues. It should, he wrote, explain part of what was going on. When it arrived, (titled “Deforestation and Forest Degradation in Papua New Guinea”), the manuscript argued that official deforestation rates in Papua are too high, and that countries have an incentive overestimate deforestation. This was interesting but when I asked how this was relevant to the story I was mysteriously told it was "just background" and that Dr Filer was hanging onto some “juicy stuff” on this until he could get more verification.

But Dr Filer had also told me that he knew something about Kamula Doso. So I asked him what he knew. At the same time I asked, "please forgive me for asking but given your long professional experience in this region, may I check whether you have any personal or financial ties with this story please?” He wrote back: “Of course I'm connected to some of the players, but
like any good journalist, I don't reveal my sources.”

Lets just stop for a moment and recap. Dr Filer has contacted me as an academic who knows about a huge story of international significance and it turns out that he has some other non-academic connection that he is now refusing to disclose. Astonishing. So I wrote to tell him why this was wrong.

Essentially, I pointed out that academic employees are generally expected to either be independent or openly disclose any financial ties they may have that may be relevant to their work. I ended, “If there is any uncertainty about the request I am making, or you wish to decline this second opportunity to disclose your involvements, the only route open to me is to contact the vice-chancellor's office, explain the situation and make a formal request that these questions are answered immediately through the press office.” He replied, “I don't respond to threats.”

Well as it turns out, his boss the VC took a different view, and after a little email abuse from Dr Filer, “you're out to lunch with the wrong end of the stick”, I finally got my declaration—albeit prefaced with “let’s get this straight”. So who does Dr Filer work for? He has worked for Carbon Planet, one of the companies that is integral to the story. Dr Filer's job was to write reports about the institutions that might be used to distribute landowner benefits from REDD projects.

Being contacted this way, seemed sufficiently unusual to ask the university for a statement. I suppose I had been expecting something a bit more robust than “the University encourages its academic staff to take part in constructive public debates in areas of their expertise. Dr Filer is a long-standing academic expert on PNG's forestry sector, and as such has a right to comment. The University does require staff to disclose sources of funding for research, and Dr Filer has now done that, albeit somewhat belatedly.”

Of course the existence of a consultancy isn't evidence of any wrongdoing. But not being open about one's consultancies is unusual, particularly in such a sensitive case such as this, and when asked directly about them.

Having received my disclosure, I returned to the university and Dr Filer and asked for more information about Kamula Doso, but sadly Dr Filer didn't want to talk to me any more. When I questioned this, the university replied that while it "encouraged academic staff to engage in constructive public debate, we don't require that they do so.... ”

I'm not sure that telling journalists that they are "out to lunch" when they request a disclosure of commercial interests, and then going off into a sulk, really qualifies as constructive public debate, but there you have it. In the meantime, I've also heard that a friend of Dr Filer has been telling another journalist that I'm "barking up the wrong tree".

I'm not so sure. The tree for me is merely that there are certain standards of transparent behaviour that are expected from academics, and they need to stick to them because they are employed by the public.

The broader issue here is about the disclosure of commercial consultancies in forestry. Forestry workers may be beavering away on dry academic information about biomass, growth rates, satellite imagery, regrowth rates or even tenure in traditional communities. But increasingly these studies are becoming fundamental to arguments about huge amounts of real money in the forest carbon market. Academic studies are what underpin estimates of value. On the basis of a report from a consultant, a forest can be deemed to sequestering a particular amount of carbon, and then this can be sold as a valuable offset worth millions of dollars.

While much money and attention is rightly being put into governance issues in poor countries that must handle REDD projects, it is worth noting that transparency is necessary everywhere if this market is ever going to work. It doesn't matter whether everyone is honest, it needs to be transparent to work because the market will not work well with lots of asymmetric information.

For example, it really does matter when someone comes to buy $20m of carbon credits who has verified that they exist. In medicine, disclosure of consultancies is the norm. I think forestry consultants everywhere are going to have to start paying more attention to disclosure and transparency, particularly in relation to work done for carbon brokers and traders.

Letters from the field

Papua New Guinea is not the only country in the world with a problem with its forest carbon. In other parts of the world such as Liberia and Guyana, there are deals that are causing deep local unease and concern. One carbon trader wrote to me recently about Colombia:

On my last trip to Colombia I was contacted by various "brokers" or "in-betweens" that offered me "500'000 ha of virgin Amazonas forest" or similar areas to "buy oxygen". Prior to these meetings, they had "secured" the "oxygen sales rights" from native people's forests. I tried hard to explain them how things work but the carbon bonanza there seems strong. Other carbon companies in Latin America seem to face the same problems. I understand there was even an MP of the Colombian parliament that referred to oxygen credits (instead of CO2 credits) when proposing draft legislation on climate change."

It is a depressing vision. While politicians at national and local levels wrestle each other for control of the carbon markets in their countries, and argue about how these schemes will work, on the ground, fraudsters are muscling in and buying up sketchy rights to forest which at best could tie up forest carbon deals in legal red tape for years. At the same time, many of the countries that would sell the industrialised world carbon from their forests are struggling to contain illegal forestry, despite the fact that the international community has poured money into this goal for years. If we have not been able to incentivise the prevention of illegal forestry--which costs developing countries tens of millions a year in lost revenue--what hope is there for avoiding deforestation through carbon credits? The World Bank et al. seem to think the answer is better governance. Good luck with that.

Does the international community's checklist for selling REDD credits go like this?:

1. Sort out corruption
2. Establish rule of law
3. Free and fair elections
4. Trade forest carbon

I met earlier today with a forestry analyst, based in the UK. She said something interesting and slightly depressing. The only reason the industrialised world is interested in reducing emissions through deforestation (REDD), she said, was as a cheap way of generating cuts in emissions. But this assumes that REDD can be made to work cheaply, which may not be the case. It may be so costly, with so many rules, that it is almost impossible to implement.

This may leave REDD as a fringe mechanism, only used by a small number of countries and schemes that are able to qualify. Equally, if the rules for REDD are set too weakly, in order to attract more participation, then there is a very real risk that the credits sold through these schemes are valueless.

What happens if REDD falls through? What happens to all these forests that have done deals for the carbon rights? Discussions about REDD have incentivised a green gold rush, with carbon traders investing large amounts of money in financing projects that they expect to make money come a deal on forest carbon trading in Copenhagen this December. If REDD fails, do they try and recoup some of their lost finance by logging? Wouldn't it be hugely and depressingly ironic if discussing a way of avoiding deforestation actually ended up kicking off a global wave of deforestation? The stakes seem very high.

The unusual 'A' series of Papua carbon credits

Over the past few weeks the government of Papua New Guinea has been embroiled in a scandal about the issuance of irregular carbon credits in a “B” series. So what is the A series?

The Office of Climate Change in Papua New Guinea recently added to the story by issuing a statement about a company called Climate Assist saying:

"This company sought to negotiate Carbon Credits in the market places that were not issued by this Office. This Office has had no dealings with this company in respect of credits issued. We were aware of this some months ago. We have our laywers pursuing this matter with foreign law enforcement agencies as a matter of fraud. As such we cannot comment further on it." Climate Assist, too, is keeping silent at this stage.

So what is this certificate shown here? Luckily, I managed to ask Gregory Corby of Climate Assist about the A series of credits a few weeks ago. I asked him about the certificate reproduced here and another (which specifies a monetary value of $20m). He said, the credits had changed dramatically over the years, and these early credits were used to start his business. “We couldn't get them into trade or anything like that. And I had to go back to Papua New Guinea, it was 2007 and get others issued, and then I went back in 2008 and we got the last original ones issued.”

The credit shown is signed by a government minister on behalf of the government. On the bottom of the certificate it says it represents “ownership in carbon sinks”. Mr Corby went on, “the Papua New Guinea government gave us the credits and made us the brokers to monetarise the credits.” In addition, Mr Corby said he had a long-standing relationship with the Prime Minister. However the PM’s press secretary denied this when I asked her a few weeks ago.




















Another document appears to back up Mr Corby's statement that he was empowered to "make and sell" carbon credits on behalf of the government. I've also been given a letter dated 24th October 2005, sent to Climate Assist and signed by the same government minister, says:

“the Prime Minister has accepted that Papua New Guinea (PNG) has carbon credits and they are tradable commodity.

The Prime Minister and I have accepted that Climate Assist (PNG) Ltd acts as Brokers on behalf of the Independent State of PNG to buy and sell carbon credits.

The carbon credits have been assigned to Climate Assist (PNG) Ltd through our certificate and monetization that will finance designated projects within PNG.

Therefore, this letter sets to acknowledge the role of Climate Assist (PNG) Ltd and advise that the Government of the Independent State of PNG unconditionally guarantee all actions undertaken for the monetization of these credits”.

Are all these documents what they puport to be? I think at this stage the arguments are best left to lawyers, and I'd like to edge carefully out of this blog, trying not to knock over any words as I leave.

Media round up

Other parts of the media are also picking up on this difficult story about the issue of irregular carbon credits in Papua New Guinea. All credit to the journalists who are digging.

Reproduced in full is the latest from AAP, published in Australian paper The Age. Ilya Gridneff seems to have had a run in with the silver-tounged Jim Johnson of Carbon Planet.


Eco firm pays out for PNG carbon trading
Ilya Gridneff
June 18, 2009 - 4:09PM

An Australian-based environmental company has paid $1.2 million to develop carbon trading projects in Papua New Guinea where no policy or legislation exists to facilitate such deals.

South Australian-based Carbon Planet, with offices across Australia and in London, promotes itself as a leading force in the global 'carbon economy'.

An Australian Securities and Investment Commission (ASIC) document obtained by AAP shows Carbon Planet's financial statement to the end of June 2008 reporting a $A1.2 million payment for development of carbon trading in PNG.

Carbon Planet chairman Jim Johnson refused to comment when asked by AAP about the funding in PNG.

"I've got nothing to talk about," he said.

"I am really sick of you people casting aspersions on my company.

"No payment has been made to PNG, your information is incorrect."

AAP read out ASIC's Carbon Planet statement which says: "Payments include $1.2 million of advanced funding on origination projects in PNG which the company expects to recoup in the 2009 financial year."

Johnson responded: "I am not explaining at all. I am not having this conversation," before hanging up.

PNG has the world's third-largest rainforest and the government has great interest in turning the asset into carbon trading revenue, but at present no such policy or legislation exists in PNG, nor under UN guidelines.

Earlier this week, PNG's Office of Climate Change (OCC) director Dr Theo Yasause denied that his office accepted money from foreign companies or made any deals despite, leaked documents suggesting otherwise.

AAP understands Carbon Planet is working on one scheme with Nupan PNG, run by Australian Kirk Roberts, who has developed potential projects in PNG's Kamula Doso regions, in Western Province.

In November 2008, the OCC issued a contract for one million tonnes of voluntary carbon credits to Nupan for the Kamula Dosa project.

Dr Yasause said the OCC document issued to Nupan was a "sample" and was now null and void.

Also, an ongoing court battle with Kamula Dosa landowners restricts any business dealings in the 80,000ha of pristine forest.

Carbon Planet's literature predicts the global voluntary carbon market will be worth around $US9.9 billion-$US17.1 billion ($A12.5 billion-$A21.5 billion) per year by 2012.

They expect the global compliance market to be worth $US2 trillion ($A2.5 trillion) by 2020.

But while carbon trading has the potential to be a lucrative business, Carbon Planet has other financial issues.

KPMG partner Gary Savage in a Carbon Planet audit flagged the company's $4.6 million after tax loss by the year ended June 30 2008, and by October net losses had reached $6 million.

"These circumstances indicate the existence of a material uncertainty which may cast significant doubt about the company's ability to continue as a going concern..." Savage wrote.

ASIC would not comment.
© 2009 AAP

And other stories...

PNG carbon racket dupes landowners Radio New Zealand International

PNG in hot seat: claims of false carbon credits The Canberra Times

PNG Climate Change Office says carbon credit report based on stolen documents Australia Network News

Carbon credit fraud inquiry

There is a lot of mudslinging going on inside Papua New Guinea. Some of it involves sideswipes at the media. Seeing as there are only a small number of journalists are actively working this beat at the moment, I have to feel that complaints about media coverage must be partly directed towards me. The Office of Climate Change has referred to "misinformation in the media done deliberately to create sensationalism and drama with a view to destroy the Office of Climate Change and what it has achieved so far and what it stands to achieve for this country".

So before I write more about the irregular carbon credits from the government of Papua New Guinea, it might be useful for me to state my opinion about carbon markets, reducing carbon emissions through avoided deforestation (known as REDD) and Papua New Guinea.

I have been a long advocate for payments for ecosystem services and wrote a long piece about this very subject for the Economist many years back, which was the basis of a memorable cover we ran (shown above). It still graphically sums up what everyone is talking about right now. (The original piece is now behind our subscriber wall, so I've linked to a copy posted on the web.) And I've written many times in support of property rights in the solution of environmental problems.

Given the current threat of climate change, the idea of reducing deforestation as a way of reducing carbon emissions is a good one. I'm uncomfortable with the idea that the main aim of reducing this deforestation seems to largely be as a way for developed countries to avoid making meaningful cuts in emissions. We should be making those cuts in emissions and paying to reduce deforestation.

That said, everyone knows that we need to find a way of stopping people cutting down so many trees, and that some kind of incentive is necessary. Further, that this incentive is going to involve money. The devil, though, is in the details. Whether it will be possible to set up a system that is not open to massive abuse, is the big question. As for Papua New Guinea, I've no agenda towards anyone or any institution other than to discover the truth. Such an agenda will not suit everyone, which is just tough.

But I digress. The main point of my post is to pick up on a press statement published by the Office of Climate Change in a number of newspapers on Tuesday. I have a copy of one of these which was published on page 7, of The National. There must be about 1,500 words in this vast statement, which contains some bizarre and and a few ill-advised statements.

The press statement is signed by Leo Tale, acting executive director, of the Office of Climate Change on June 15th, but must have been submitted to the newspaper at least the day before on the 15th. This is very curious because on that day, Theo Yasause was also giving a press conference as the director of the Office of Climate Change. Who is running Papua's Office of Climate Change right now? I'll let you know when I have an answer on that.

Until then, if you happen to be part of the international community of donors (Norwegians, Australians, UN, World Bank) currently rushing to thrust money on Papua New Guinea in order to improve "governance" so that REDD will work... you might just want to make sure you know who is running the Office of Climate Change before you write the cheque. Indeed, if you can get a good answer to that question I'd be delighted to know. Until then, you have been warned.

Finally, I'll turn to the most interesting part of this recent press statement. It reads:

"2. Climate Assist PNG Pty Ltd: -
This company sought to negotiate Carbon Credits in the market places that were not issued by this Office. This Office has had no dealings with this company in respect of credits issued. We were aware of this some months ago. We have our laywers pursuing this matter with foreign law enforcement agencies as a matter of fraud. As such we cannot comment further on it."

I'm no lawyer but I would imagine that such a statement would be pretty damaging to Mr Corby's business interests and he might be somewhat miffed to be accused of fraud by someone who may, or may not, be the head of the office of climate change. Indeed, I just spoke with Gregory Corby, of Climate Assist, a few hours ago and he says he has made a complaint to the Attorney General in Papua New Guinea, and his lawyers have told him not to say anything.

There is a lot more to say, but it is late in the UK, and it will have to wait another day. Suffice to say that what everyone is referring to is an "A series" of carbon credits that were mentioned in passing in my piece for The Economist. (As opposed to a "B" series which were discussed more extensively.)

The A series date back to 2005, prior to the creation of the Office of Climate Change. So it could well be technically accurate to say that the office of climate change had "no dealings with this company in respect of credits issued". But if these carbon credits do exist, as the statement acknowledges, who, exactly, in government authorised their production?

It is hardly credible that Mr Corby would simply decide to print off a whole bunch of carbon credits from Papua New Guinea and try to sell them without any government knowledge.

So who in government knew about, and who approved, the "A" series of Papua carbon credits?

In search of stolen carbon credits

According to a report by by Ilya Gridneff, of the Associated Press, on Monday of this week Theo Yasause, head of the office of climate change in Papua New Guinea, “emphatically” denied any wrongdoing in relation to the existence tens of millions of tonnes worth of carbon credits created by the office of climate change. By way of explanation, sample credits were created merely "to see what it looked like".

Yasause announced yesterday that a criminal investigation would be conducted to find who stole the "sample" documents. Yet Jim Johnson, of Carbon Planet, went on the record recently to tell me that the documents were, "issued by OCC.”

If the Papua New Guinea government really does intend to start a criminal investigation over the credits held by Nupan and Carbon Planet, one would think that a quick call to Carbon Planet would be the first port of call. That would clear up any questions about how these credits got out of the Office of Climate Change.

Carbon Planet will no doubt be more than delighted to remind the government firstly that these "symbolic" credits that are in existence were indeed issued by the government and not leaked or stolen. And secondly, one might easily imagine that Carbon Planet might also point out that any indication by the government that the possession of these sample credits is improper in any way is defamatory, and potentially actionable.

Update: Ilya Gridneff's report of Monday's press conferece:

"Sample" documents blamed for PNG carbon deals
By Ilya Gridneff, Papua New Guinea Correspondent PORT MORESBY, June 15 AAP - Papua New Guinea's Office of Climate Change (OCC) director has emphatically denied any wrongdoing amid reports he issued up to 39 false multi-million-dollar carbon trading deals.

Dr Theo Yasause told reporters in Port Moresby on Monday stolen documents leaked to the media were "samples" not designed for official use.

Documents obtained by The Economist magazine and available on the web show a series of what appears to be multi-million-dollar carbon trading deals with foreign companies in various regions of PNG. "I've not sold or made any money out of this process," Yasause said. "I've done no deals, or sold any credits."

Yasause said even though the leaked documents appear to carry his signature, the OCC's official seal and another colleague's signature, they did not represent real deals. "It's not a false document but a sample," he said. Asked why he would make sample documents, he said: "We want to see what it looked like." "It's speculation by certain individuals who have no regard for the process," Yasause said. "They should have asked before they released this kind of statements," he said. "It was a sample stolen from my drawer, we were looking at several types of project," he said.

Yasause said a criminal investigation would be conducted to find who stole the "sample" documents, along with a review of the OCC. "We never received any funding from foreign entities," he said. "We have not issued any credits to anyone," he said. PNG has the world's third-largest rainforest and great interest in turning the asset into carbon trading revenue, but at present no such policy or legislation exists in PNG, nor under UN guidelines.

On Friday an industry insider told AAP conmen were scamming PNG villagers by selling fake carbon trading schemes that relied on the community's confusion and belief in "sky money". AAP ig/jl/de

Carbon con, reloaded

Imitation is the best form of flattery.

Ilya Gridneff, journalist for the Associated Press in Port Moresby, Papua New Guinea, published this very nice piece on June 13th, in the Sidney Morning Herald.

Carbon conmen selling the sky

Ilya Gridneff in Port Moresby

June 13, 2009

PAPUA NEW GUINEAN landowners are being ripped off by conmen travelling village to village offering fake carbon trading deals and promising big returns from "sky money".

The crude carbon trading racket has duped at least 500 villagers since late last year around Popondetta, Oro province, on the north-west coast, an industry insider said.

The unknown con artist hired agents to offer "brokerage" in the province's coming carbon trading windfall.

Locals pay 1110 kina ($510) for "registration as a shareholder" in a carbon trading company with promises of big dividends from the millions expected from PNG's carbon trading.

A receipt is given, and that is the last time villagers see the agent and their money.

This scam is a thumbnail of the broader concerns plaguing PNG's efforts to best utilise their lucrative rainforests, the third largest in the world.

Dave Melick, of the PNG arm of the conservation group WWF, said confusion in the provinces was one concern, while credibility, corruption and carbon trading complexities were other hurdles PNG faced. "People in the bush are calling it 'money bilong sky' [sky money] or 'selling the air' or 'selling the gas above'.

"Some have asked WWF, 'Who pays for the transport costs?' when they cut their tree, burn the logs and bring the carbon to Port Moresby," Mr Melick said. "A lot of people think you sell the gas over the forest canopy and they're not quite sure how to capture it. There is real confusion.'

Problems associated with PNG's infamous logging industry translated into moves towards a carbon market, he said. "We're telling people not to sign anything as there is no policy or legislation."

This month Reuters news agency and the magazine The Economist reported a series of anomalies with PNG's Office of Climate Change. It appears the office has been offering millions of dollars worth of carbon credits while no legislation or policy exists in PNG or under UN guidelines.

Betha Somare, a spokeswoman for the Prime Minister, Michael Somare, said a review was being conducted into the "apparent irregularities".

AAP