Sunday, June 28, 2009

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.

Thursday, June 25, 2009

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.

Saturday, June 20, 2009

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 lawyers 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 monetize 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 purport 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.

Updated: 18.8.09 Spelling adjusted.

Thursday, June 18, 2009

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?

Tuesday, June 16, 2009

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

Monday, June 15, 2009

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".


Thursday, June 11, 2009

The carbon rip-off

While the world considers the possibility of a deal to trade forest carbon in Bonn, back in the forests of Papua New Guinea, unscrupulous entrepreneurs are ripping off the locals over carbon.

No, its nothing to with the government. This time its ordinary conmen travelling from village to village. An Australian forestry worker who has worked in Papua New Guinea for years, and who asked to remain anonymous, says he has uncovered a carbon trading scam being perpetrated in villages around Ponpondetta, which lies in the Oro Province, a coastal area of Papua New Guinea quite close to the capital Port Moresby. Somewhere over 40,000 people live in the Province.

The scam works like a carbon “broker” hires agents to travel from village to village who offers to register them in the province's forthcoming carbon bonanza, which will be worth hundreds of millions of US dollars. Locals are asked to pay 1,110 Kina (£250) for “registration as a shareholder” in a carbon trading company. Of course none of this exists, its all nonsense. But, says one cynical journalist, "this is a country where a conman was able to convince locals to pay 10 kina to look at his magic rock in a bucket".

I've posted a copy of the kind of receipt that is given. I've obscured the surname of the person who fell victim to this scam to avoid any kind of possible unpleasantness. Around 500 people are believed to have signed up to one scheme.

It is perhaps no surprise that the snake oil salesmen who sell cures for every ailment including AIDS, would recognise how easy it to sell hot air. Indeed, it is quite a popular idea in the country right now, the idea that one can simply decide to issue "symbolic" carbon certificates. But it begs the question of if this is what is happening in just one province what could be happening in a population of six million or more broadly around the world.

What is striking about the invention of an avoided forest carbon market is the extent to which it is quickly spawing a variety of imaginative ways of fleecing landowners and indigenous people in the rush for green gold. Whether it is unscrupulous locals, entrepreneurs from the cities or abroad, or even entire regional or national governments, everyone has realised that the avoided forest carbon market is the opportunity of a lifetime.

So how does this inform the international negotiations in Bonn ? Its another warning about being careful. If there is any doubt about my meaning, let me spell it out in the words of one British based forestry analyist: "REDD is an idea dreamt up by economists who have no idea how fucked the developing world is".

Wednesday, June 10, 2009

An odd REDD project in Aitape Lumi

Almost daily, now, I am being sent documents from Papua New Guinea that are worrying and mystifying in equal parts.

The latest comes with regards to a REDD pilot project for Aitape Lumi, which is in West Sepik Province, the north-westernmost province of Papua New Guinea. (Number 19 on the map to the left, and with thanks to Wikipedia.)

This latest letter is from Theo Yasause, executive director of the Office of Climate Change, and is addressed to the managing director of Carbon (PNG) Dev. Corporation on March 24th of this year and says that the Office of Climate Change has no objections to the company developing a pilot REDD project in the area.

The letter, reproduced below, continues “your request to be allocated 50 million voluntary credits (CERs) can be granted subject to the development of the PDD [project documentation] by a third party..”

This is somewhat unexpected as, according to a Reuters report, the Office of Climate Change "suspended in January all plans to sell rights to the carbon stored in its rainforests after deals sparked land ownership disputes". Mr Yasause went on, "All projects are suspended while we get some experience".

I guess Mr Yasause forgot about this one. He also seems to have forgotten something else. The letter continues, “If you agree, I will request South Pole Ltd Carbon Trading Company based in Zurick Switzerland to assist you develop the project to have the credits ready for sale”.

Lets make one thing clear, senior industry figures tell me that South Pole is a very reputable Swiss based firm. So I showed this latest letter to Christian Dannecker, at South Pole, and he said they had never seen this letter, had never heard of Carbon (PNG) Dev. Corporation, and knew nothing about these projects.

Mr Dannecker has some observations and questions of his own. Why does does the letter refer to CER credits? This is a good question, voluntary credits go under the term Verified Emissions Reduction or VER. Where does the value of 50m voluntary credits come from? Another good question, the value of the carbon in any forest is not down to the government to decide. Finally, Mr Dannecker observes that merely a letter of support or approval is satisfactory in such circumstances.

South Pole Carbon is already formulating a complaint to the Office of Climate Change about the use of his company’s name in this context. He adds, “we appreciate that he thinks of us but would like to be informed beforehand”.

Tuesday, June 09, 2009

April Salome

April Salome is a forest of about 521,000 hectares in East Sepik Province, of Papua New Guinea (PNG). The roughly 20,000 people who live there would like to find some way of living sustainably with their forest, without cutting it down.

Kevin Conrad, PNG's climate ambassador, says that a Dutch project in the area was abandoned quite suddenly, leaving the locals high and dry. Schools had no teachers, and clinics had no nurses. And so now the area is a pilot project for REDD. This means that it hopes to meet the eventual qualifications for a project that avoids carbon emissions, and can thus generate credits that can be traded on the anticipated global mandatory market.

In short, the rich world will pay April Salome to keep its forest intact in order to reduce carbon emissions and the landowners will be a little less poor than they are. (For more background on the REDD project read The Economist's green.view column this week)

There are plenty of questions about whether April Salome will qualify for REDD. But lets not get ahead of ourselves, that isn't a question anyone can really answer right now because everyone is still arguing how REDD will work. What is clear is that there is an active voluntary market for carbon credits, and South Pole Carbon, based in Zurich, are working to qualify the forest against the Voluntary Carbon Standard (or VCS). Borrowing words from the VCS standard website, it is intended to provide a... robust, new global standard for voluntary offset projects. It ensures that carbon offsets that businesses and consumers buy can be trusted and have real environmental benefits. So April Salome has two possible ways to sell credits, through the voluntary market which already exists and through the mandatory REDD market if this materialises.

If I as a customer, wanted to buy an option right now on the delivery of future certified credits from April Salome forest right now would that make me criminal or clever? It might be unwisely hasty but it would be legitimate. It might also be a good deal because the options I buy now could be worth a great deal more down the line. The only point at which it becomes a problem is if I pretend my stake is something that it isn't, i.e. I say I own REDD credits. Another possible issue is if I buy into a project like this, and also at the same time am financially involved in the qualification of the credits. The problem here is that there is a conflict of interests. My only incentive would be to qualify the credits and thus increase the value of my options. (N.B. I am not suggesting that either of these things are happening)

The other thing to know about April Salome is the locals want their forest developed this way. This isn't being imposed. South Pole Carbon say that four public stakeholder consultations took place between 4 and 15 May 2009 in Sepik Center of Hope, Wewak, and three villages within the April Salome Area with valuable assistance from the World Wildlife Fund’s (WWF) Sepik River Programme. The entities inviting for this event were The National Office for Climate Change and Environmental Sustainability, the landowner group and Earthsky Ltd.

A Charitable Foundation has been established known as the April Salome Sustainable Forest Management Project Foundation, (ASSFMPF) managed with DNA involvement to distribute the benefits from utilising the UNFCCC (REDD) programme with April Salome Forestry Assets. For more information check out the new website.

That website explains: "South Pole, in cooperation with the PNG DNA [Designated National Authority] office, the landowner groups and the above NGOs, is currently working to address any question or issue raised during that consultation. The stakeholder consultation report, to be published in June, will be available to anyone interested. The project has been endorsed in writing by 163 landowner groups living in the April Salome Forest Management Area. A Benefit Sharing Agreement has been signed where the landowner groups will directly receive the largest share of the net proceeds from this project, while 2% of the proceeds will be donated to the UNFCCC Adaptation Fund and aditional funding will be made available from the project owners to the PNG government in form of project funding (with no cash being disbursed to the government). South Pole is not involved in this revenue sharing agreement and is not responsible for its distribution.

South Pole is contributing to the development of April Salome Sustainable Forest Management project in hope that this and other projects will contribute to further development of the REDD carbon market in order to significantly and reliably contribute to climate change mitigation while generating sustainable development benefits in some of the poorest countries on earth."

Hostage to fortune

Jun 8th 2009
Trading carbon credits based on avoided deforestation

Saturday, June 06, 2009

The Kamula Doso credit

This is a piece of paper that I refer to as the Kamula Doso REDD credit, which is part of a "B" series of credits issued from the Office of Climate Change in Papua New Guinea.

To everyday folk, it looks like it might represent that a certain amount of carbon had been verified as having been stored and verified by the government. Of course, it is well known that all sorts of odd carbon credits are traded on the voluntary market these days, what is peculiar about this certificate is that it claims to have been produced for what is intended to be the mandatory market. It says "pursuant to the United Nations Framework Convention on Climate Change under Reduced Emissions from Deforestation and Degradation (REDD) Initiative".

One problem with this piece of paper is that there is no legal framework for an actual REDD credit to exist. Anyone who knows anything about carbon trading says that this credit cannot possibly exist, because nobody has agreed a framework for this particular type of trade. But then there are many things about this document which are irregular.

I emailed Theo Yasause, executive director of the Office of Climate Change and one of those whose signature appears on the credit (and whose email address in the header). He wrote back:

"Kirks Roberst of NUPAN PNG have been working with the landowners of Kumula Doso and made representation to my Office.

We issued an Interim copy of the Certificate dated 3 Nov 08 on the basis that they will undertake wide stakeholder consultation covering all landowners, provincial and local government before such project can be entertained. The Original Certificate was kept in my Office but someone took that out and leaked it out on circulation. No documentation were submitted with proof that consultation were undertaken and the people are happy with possible carbon trade.

We have since ceased dealing with NUPAN as all landowners are not involved nor does the provincial and local governments in that area. We have stop any direct links with NUPAN since 3rd February. Forestry and ourselves were stoped by Court no to log or undertake carbon trade.

The credits in question were not sold or given to anyone as yet. This is because no Project Documentation were submitted to my satisfaction which would than be submitted to VCS for verifying.

Furthermore, there is a Court Injunction, in place and any dealing will be in contempt of court. Therefore, we have ceased dealing at this stage. from my side no credits were sold nor bought by anyone. Nor have the Office benefited in anyway. "

Mr Yasause mentions another reason why the Kamula Doso credit caused such outrage. The forest is the subject of a court injunction. Until a long-running ownership dispute is settled, nobody can buy or sell anything to do with the forest.

I have not been able to speak with Kirk Roberts, as he is travelling in Indonesia. But for a brief period, Kirk Roberts permitted the Australian carbon management company Carbon Planet to respond to questions about Carbon Planet's role with the Kamula Doso project, and a number of other similar projects.

Jim Johnson, of Carbon Planet, said, "there are in existence a group of certificates issued by OCC to Nupan for Kamula Doso. They are not real certificates. They are symbolic to the fact that Nupan is recognised by OCC as rightful developer to the landowners of Kamula Doso".

Carbon Planet's job is to help develop the Kamula Doso forest into a REDD carbon trade project for Nupan. Over $1.2m (AUS) in project finance was provided for this, and a number of other similar projects, around Papua New Guinea.

This is not unusual. All over the tropical forests of the world, entrepreneurs are doing deals with landowners over the rights to the carbon in their trees. They are speculating that a REDD deal will be done in Copenhagen, and that the value of the carbon will increase when it can become part of the global mandatory market.

Indeed, it is even possible to buy and sell promises to deliver REDD credits in the future. Again, this is perfectly standard. Fourteen percent of the forest carbon traded on voluntary markets right now are based on promises to deliver REDD credits. But an actual credit cannot exist. Its a small and technical detail. But an important one. A promise of something in the future is very different from saying that one already has it.

Has this Kamula Doso REDD credit been sold? No. Mr Johnson said, "there has been no purchasing of carbon credits under any agreement, they have not been put forward for sale or traded". He concluded, "Carbon Planet is putting forward carbon credits for sale from its contracted portfolio, but only subject to certification by one or more of the recognised standards bodies".

So there it is. The Kamula Doso credit was an "interim" or "symbolic" credit. Which raises the question, why were there at least 40 of these symbolic certificates issued? And how many projects these 40 credits represent around the country. Based on Carbon Planet's investment of $1.2m (AUS) into forest projects in Papua New Guinea, with $100,000 for each programme, there could be up to 12. And where are they? It would be great to find out more. And also to find out how it came to pass that the Kamula Doso project got to such an advanced stage with so many unhappy landowners.

Unfortunately, Carbon Planet tells me that it is no longer authorised to speak to me by Nupan, and is bound by a confidentiality agreement. I've asked if I might communicate with Mr Roberts by email or telephone but have not received any reply.

Mr Roberts, you know how to find me if you want to tell me more about these REDD credits.

* updated June 15th: Kamula Duso changed to Kamula Doso throughout.

The carbon credits that should not exist

For the last three weeks I've been working on the most difficult story of my career. Difficult in many ways. Information that is hidden and wants to stay that way. Information that is financially complex and easy to get wrong, and information that is legally difficult to publish.

Today we publish a story about carbon credits that should not exist. Nonetheless they were produced by someone in the government of Papua New Guinea. Reading it now, what strikes me most is of what we could not write rather than what we could.

This is an important story for a number of reasons. A carbon credit puports to represent something real, in other words that carbon has been removed from the atmosphere by some activity. In this case, the activity in question was avoided deforestation. The problem is that it is very easy to print a piece of paper saying something has happened. It is much harder, and takes far longer, to actually do it. And these carbon credits that have materialised in Papua New Guinea very much seem to be claiming they are something they are not, and could not be.

But the fact that they do exist underscores something very crucial, as the world negotiates a deal to formalise the process of avoided deforestation, something called REDD. We need to be careful that we do not spend trillions of dollars on a technology that does not work to lower greenhouse gases. Trees are a carbon removal technology.

And the main problem with them is that those who are eager to sell rights to carbon, whether this is indigenous groups or governments, may not actually have full control of whether or not the trees are cut down. If you cannot defend property, then a property right is meaningless.

There is much more to tell. It is not easy but I will try. If you want to tell me more about this story, please get in touch via The Economist's media directory.

Papua New Guinea and carbon trading
Money grows on trees

Jun 6th 2009
Irregular carbon credits cause upheaval in the government of Papua New Guinea

Tuesday, June 02, 2009

How green is your sushi?

Check out the latest issue of Intelligent Life magazine, the Economist's glossy quarterly magazine, for an article about trying to eat sustainable sushi in London's famous Nobu restaurant.