Thursday, July 16, 2009

Nupan unveiled

Congratulations to Ilya Gridneff of the Associated Press in Port Moresby in Papua New Guinea who has diligently followed the trail of the Kamula Doso carbon credit story right back to its roots. A few hours ago he filed a story on the wires about the elusive Australian businessman, Kirk Roberts. Mr Roberts is the man behind the company Nupan Trading--which had a relationship with Theo Yasause, formerly at the Office of Climate Change. Nupan Trading is also behind this website.

As Gridneff reports, Mr Roberts is a colourful character. A disgraced former horse trainer, he is currently working in the cock fighting industry in the Philippines (and currently under investigation by the immigration department in this country). In 2007, he was fined $2,800 by the Australian Securities and Investments Commission for failing to assist liquidators and failure to provide reports to the liquidator. Mr Roberts told Gridneff, "I am the most beneficial foreigner to this country (PNG) right now."

Mr Roberts is undoubtedly referring to his work all around Papua New Guinea signing up landowners for big carbon trading deals in advance of negotiations to trade forest carbon as offsets between countries. Although Mr Roberts declined to offer more details about where his forest carbon deals are to be found in Papua, we know there could be a number of them. Carbon Planet previously revealed that it provided $1.2m Australian dollars of project finance to develop carbon trading projects around the country, with $100,000 in finance for each deal. Of course the one deal that we do know about is Kamula Doso.

The story so far sheds a spotlight on the impact that international discussions over avoided deforestation are having on forests around the world. Avoided deforestation markets will not just include the UN's REDD credits. The climate bill passing through Congress at the moment also allows for the trade in credits generated by avoided deforestation.

Some of those involved speak of an orderly arrival of this market. Nonetheless, the absence of a deal does not stop the private sector from speculating that a deal will be done, or even trading on the basis that they will do. In 2008, REDD projects made up 14% of the forest carbon credits traded on voluntary markets. So even though REDD credits do not formally exist, a way is being found to trade them as options. REDD “credits” trade at a lower price than other kinds of forest carbon credits, a signal that the market recognises their risk.

Economists would see nothing wrong with this, and might well argue that such advanced trading is stimulating investment in avoided deforestation projects. The problem is that the information vacuum over forest carbon deals puts landowners at a serious disadvantage.

Landowners who don't really understand what is going on, and who really cannot be expected to fully understand, feel pressured into signing confidential agreements. In the absence of an international consensus about how the profits of such deals should be shared between landowners, local and national governments and traders, how can landowners negotiate a fair deal?

Buying up forest carbon rights is popular at the moment. Even if forest fails to make the cut for REDD credits, there are Waxman Markey credits--which could quite possibly have more relaxed rules. And even if these newly purchased forests don't qualify for either of these mandatory carbon trading schemes then there is always the growing voluntary market to fall back on. The voluntary market in forest carbon is likely to get a boost from a deal in Copenhagen. Corporations and individuals will want to get in on avoided deforestation credits. Its going to be a bonanza.

But its all good, surely? It is all going to result in less deforestation? Not necessarily. The patchwork of discussions and deals under way currently offer little but uncertainty at the moment. Will the avoided deforestation projects really avoid deforestation or would they have been saved anyway? How will they avoid 'leakage' with loggers simply finding new areas of forest to cut down? If they cannot address the drivers of deforestation in Brazil and Indonesia such as demand for beef and palm oil, how will it actually work? Questions, questions, questions.

By Ilya Gridneff
PORT MORESBY, July 16 AAP - A former Australian horse trainer who ran a Philippines cock fighting business is involved in carbon deals central to an inquiry into Papua New Guinea's suspended climate change boss.
Kirk William Roberts denies any wrongdoing in his carbon dealings in PNG and claims former business associates are running a smear campaign against him.
"I am a loveable larrikin," Roberts said from his Port Moresby home.
"I've done nothing wrong, we're doing good things.
"I am the most beneficial foreigner to this country (PNG) right now."
But Roberts' role in a series of carbon deals is now at the crux of PNG's carbon trading woes that includes an investigation in Dr Theo Yasause's role as director of the country's Office of Climate Change (OCC).
Yasause gave Hong Kong based company Forest Top and Roberts, a director of another company called Nupan PNG, an official mandate to trade carbon after Roberts locked in local landowners for potential carbon deals.
But documents show Yasause issued the mandate when he was the PNG prime minister's chief of staff, signing documents as interim director of OCC on May 12, 2008, one month before he was officially appointed director.
The documents show Yasause allowed Roberts to go to the world market offering lucrative carbon credits in PNG.
On the same day Roberts and Yasause also signed a memorandum of understanding with Forest Top director David Leamey to facilitate international carbon credit deals.
Forest Top then gave Australian company Carbon Planet the exclusive rights to broker the credits and provide technical and scientific input to verify the credits.
Forest Top was to be the body that distributed carbon credit sale proceeds to the stakeholders like Nupan, Carbon Planet and landowners.
An Australian Securities and Investments Commission (ASIC) document shows Carbon Planet last year gave $1.2 million for projects in PNG which were associated with Nupan and Forest Top.
Carbon Planet 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, with the global compliance market worth up to $US2 trillion ($A2.5 trillion) by 2020.
Carbon Planet chairman Jim Johnson said they still stood by their PNG deals but declined to comment further.
The deal between Yasause and Roberts' company Nupan became public last month, and as PNG does not have any carbon policy nor legislation for such ventures, the PNG government sidelined Yasause and launched a full investigation into the OCC.
The prime minister's media secretary Betha Somare said any of the deals struck were not valid. The new acting director of the OCC, Wari Iamo, is expected to make a similar statement this month.
"As Nupan (PNG) Trading Corporation is the power-of-attorney for numerous incorporate land groups, it is inappropriate for us to comment on any media speculation at this time," Roberts said.
Nupan and Forest Top are now in dispute and Leamey and Roberts are locked in various legal battles over wide ranging allegations centred in the Philippines, where Roberts is under investigation by the Philippine immigration department.
"I want nothing to do with carbon credits and nothing to do with Kirk William Roberts," Leamey said.
Roberts, equally as frosty in his opinions of Leamey, was involved in what is considered the Philippines' national sport of cock fighting, running an operation in Olongapo, 130km northwest of the capital Manila.
"Cock fighting in the Philippines is the equivalent to pokies in Australia," he said.
Roberts said jealous cock fighting rivals, former business partners and competitors were running a smear campaign against his efforts to help PNG.
That smear campaign includes details of his time as a thoroughbred trainer in NSW, when his horse Yobro won the 1997 Auckland Cup and came second in the Brisbane Cup the following year.
But in March 2002 NSW Thoroughbred Racing Board stewards charged Roberts for verbally threatening his vet, Dr Darren Gibbins, during a December 2001 telephone call.
Roberts was given a six months disqualification after being found guilty of asking his vet to withhold records from an inquiry.
Previously Roberts had a six-month ban for administering a prohibited substance to a racehorse.
An ASIC prosecution report for July to September 2007 shows Roberts also was fined $2,800 under the Corporations Act for failing to assist liquidators and failure to provide reports to the liquidator.
AAP ig/mo/bwl

Monday, July 06, 2009

Knights in shining armour

Who will save Papua New Guinea's forests? A year ago, Prince Charles launched his project to help save the rainforests. In doing so he described an "an astonishing level of public consensus in the developed world that tropical rainforest destruction must be stopped if we are serious about reducing the levels of carbon dioxide in the atmosphere". Shame, then, that on July 1st, to dismay among environmentalists, mummy (the Queen), gave a knighthood to megawealthy Tiong Hiew King, founder of giant Asian logging conglomerate Rimbunan Hijau, for services to deforestation, I mean, commerce.

Rimbunan Hijau is the Malaysian conglomerate which is the biggest extractor of tropical timber from Papua New Guinea. It is also the parent company of the subsidiary Wawoi Guavi Timber, which is engaged in a legal battle over the logging rights to the forest of Kamula Doso in Papua. Kamula Doso is one of the largest blocks of unlogged rainforest in the country, containing hundreds of millions of dollars worth of timber and strategically placed for access to all the other remaining forests in Western province.

Rimbunan Hijau would very much like to cut the forest of Kamula Doso, and the rest of the region, down to stumps. So that it can be turned into something useful like Australian barbeque trolleys, while locals scratch around wondering where future went. Indeed, the only reason Kamula Doso is still standing today is because of a lengthy court battle being fought by local NGO Ecoforestry Forum over the way the concession was awarded and the teensy weensy issue of whether logging rights had actually been acquired from local landowners before the concession was granted.

But others now realise there is money to be made by avoiding deforestation. So while the loggers and the NGOs tussle over who has the legal right to cut it down, others are tussling over who has the legal right to not cut it down. In other words, who has the rights to any carbon credits for avoided deforestation, should they exist.

The Kamula Doso forest has been an ongoing issue in the country. These days it is linked with the creation of irregular carbon credits, which have appeared in the hands of Australian carbon brokerage, Carbon Planet. On the same day that the Chainsaw King got his gong from the Queen, Papua New Guinea finally suspended Theo Yasause, director of the Office of Climate Change in relation to the printing off symbolic carbon certificates (some of which relate to the carbon in Kamula Doso). His suspension was reported by Ilya Gridneff of Associated Press and came after weeks of feverish rumour and speculation. An internal investigation of the office appears to be underway (although this has been said before), and in the meantime, Dr Wari Iamo has become acting director.

Significantly Gridneff reports that AusAID has announced a corporate planning adviser will be placed in the OCC office for three months as part of the $3 million pledged under the Australia-PNG carbon initiative. Great move Australia. Now the question is whether other parts of the international aid community (World Bank Forest Carbon Partnership Fund, the Norwegians and UK's DFID) will apply safeguards to REDD projects here and in other parts of the world or lumber on regardless?

Last but not least, Kevin Conrad was passing through London today, and spoke at a meeting on the politics of climate change at Chatham House in London. Although much of what takes place at Chatham House is usually on a non-attributable basis, Dr Conrad was one of those who spoke publicly at the meeting--so I am able to report what was said here. He reflected on some of the governance issues in relation to avoided deforestation, particularly in relation to countries that have struggled to control both logging and illegal logging. And also on some of the governance issues as faced by Papua New Guinea. On the latter issue he said:

"We found that because Papua New Guinea was advocating a regime shift in forests, we had every carbon cowboy in the world descend upon Papua New Guinea and try to get a deal with some landowners to they could go back and say they were working in Papua New Guinea and that somehow gave them some credibility.

We then, at the same time, had a group of governors who understood our law very well and understood that if the government got all of the money in a consolidated budget that they under our law would then receive 100% of it because it was an export oriented activity.

We have what is called a derivation grant, so money comes in as consolidated revenues and if it is an export it goes to the state. So what they did was rattle the cages, try to destablise the regime as it were, try to bait the government into signing saying that all the REDD money goes to the government first. Surprisingly it then ends up in the governor’s pockets.

But it was a serious issue we had some irregularities, so cabinet had to suspend our executive director, we have to launch an independent review, and we want it to be transparent. But we want to learn from this.

Papua New Guinea is the first of many upcoming instances, whether it is in... Peru. Whether...whenever there is prospective of oncoming wealth there is a tendency for the small to become overrun by the strong. That is something we as a global society have to guard against and that is why we have to hold back market forces, until made the necessary infrastructural and capacity investments in each country."

On the broader issues, Dr Conrad said: "That is the question of transforming a development pathway in developing countries and the understanding that that means significant capital needs to be invested. What we are already seeing globally is that when stakeholders see a gravy train on its way, many of them try and restructure the local system using information and misinformation to try and position themselves at the front of the line. Now that is normal human behaviour. But it is important.

What we have to understand we need to first invest in absorptive capability. You can’t just drop money into a third world country and expect that to solve a problem, can’t build a road and provide a car and expect that will solve a villagers challenge of getting product to market. Because it rains and guess what the road disappears the car runs out of fuel, spare parts don’t make it and after half a year they are back at square one and the money has been lost.

The question is how do we invest first, before we introduce market forces? How do we first invest in the analysis, the institution building the capacity building, the strengthening of governance? All of these things in developing countries to varying levels, there are some like Costa Rica that have a head start on that. There are some countries in Africa that have a further way to go and there are many are in between, and Papua New Guinea is one of those."

It would be nice to think that the suspension, the investigation and the new acting director for the Office of Climate Change will draw a neat clean line under this episode and allow everyone to move on. But Dr Wari Iamo is very unlikely to be able to do this. For one thing he is a very curious choice for the Office of Climate Change as he was involved in the original allocation of the disputed Kamula Doso forestry concession to Rimbunan Hijau, in 1999. In 2002, Dr Iamo was criticised by a subsequent investigation by Papua's Ombudsman Commission, which said among many things that he did not “give proper consideration to environmental matters” and his “conduct was baffling and negligent”.

Is it really not possible to do better than this in the search for champions for the world's third largest rainforest?