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Global Fund Would Provide Effective Means To Fuel REDD+ Climate Program: Experts
Source: Wed, 19 Jun 2013 03:06 AM . Efforts to stop an increase in global temperatures can succeed if policymakers put in place a broad governance structure to oversee REDD+ from which money would trickle down through state-level funding to local projects, according to a new research paper . How best to govern REDD+ — a UN-backed framework for reducing emissions caused by deforestation and degradation — is politically disputed, particularly over what role financial markets and governments should play in the scheme. “ National Governance Structures for REDD+ ”, co-authored by Norwegian University of Life Sciences professors Arild Vatn and Paul Vedeld, examines four potential national REDD+ architectures that could be funded directly by a compliance market or by a global fund supported by both public and private sources. The options outlined in the research paper consider strengths and weaknesses of channeling economic support from the global to the country level through financial-market directed intermediaries, a separate national fund, a fund in a national state administration, or conditional budget support that would direct resources into local projects, national programs or sector policies. “The main idea is to open up the box and start to think about wider governance structures, rather than just thinking about it as a market, which has been the preferred mechanism up until now,” said Vatn at the “ Options for National REDD+ Architectures ” conference in Norway. “The way funding is organised will have a decisive impact on its capacity to deliver reduced carbon emissions, improved local livelihoods and protect biodiversity.” LAYING THE GROUNDWORK REDD+ assigns financial value to carbon stored in trees, creating a disincentive to cut them down. If policymakers were to set up a global fund paid for by carbon markets, it would mean that countries and businesses could receive carbon credit payments as Certified Emissions Reductions (CERs), by an issuance from the fund as an alternative to the international carbon market, Vatn said. Currently, carbon credits in the form of CERs are issued by the Clean Development Mechanism (CDM) Executive Board, approved under the rules of the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC), an international treaty that sets binding obligations on industrialised countries to reduce emissions of greenhouse gases (GHG). They pave the way for investments in emission-reduction projects in developing countries. So far, because REDD+ is still in preliminary stages — referred to as the “readiness phase” — most of the $ 17.2 billion funding pledged for projects to protect standing forests has been made available to developing countries through the Forest Carbon Partnership Facility (FCPF) of the World Bank and the UN-REDD Programme . The funds are meant to create national capacity and strategies for REDD+ based on country-specific causes of deforestation. However, the scheme, intended to establish global climate policy, faces many challenges, according to Vatn. “In early discussions, everybody thought about developing compliance projects financed by firms like in the CDM,” Vatn said. “While we see some strengths with that, there are also some clear weaknesses, so we need to think about alternatives.” TRICKLE DOWN FUNDING OPTIONS The authors propose that REDD+ could be based on a CDM-like system, becoming in part a market-based carbon-trading system made up of buyers in the form of firms that need to reduce emissions and sellers who own — or have the right to use — tropical forests. “Given that a post-Kyoto agreement includes substantial cuts and accepts trade in emission permits, the market could raise significant revenues to invest in forest protection — this is seen as one of the strengths of a market-based solution,” Vatn said. “However, there are many problems with CDM, concerning such issues as additionality (the net positive difference resulting from economic development interventions) and transparency.” An international fund agreed by governments that would issue CERs to firms responsible for emission cuts, could be at least as effective in raising funding, he said, adding that it could also do away with problems encountered in the market-based solution by increasing transparency and including measures directed at lessening potential for fraud. Using an international perspective, several alternatives for a national REDD+ architecture could take shape. One alternative would be to set up a national fund outside of the state administration, where resources would flow from a global fund to national funds based on the level of reduced emissions from forests in each individual country. The national fund could be governed by an independent administrative board that would operate as an intermediary between forest owners — or users — and the international fund. The board could include representatives from the private sector, civil society and public authorities. Another option would involve a fund managed by the state administration. The money received would be allocated by a REDD+ -designated board made up of members from government, civil society and the business sector. It would function independently of a government budget, but have the capacity to use existing state administration to organize programs and coordinate among different sectors of society. While it has several of the strengths of the independent fund, an added advantage is that it would have the capacity to use existing public systems, and could ensure that such important sectors as agriculture and energy also get involved, Vatn said. The final option proposed by the authors would channel money from a global fund in the form of conditional budgetary support. While this solution would use existing administrative systems – it could also offer resources to make them more effective, and is expected to reduce transparency compared to both of the proposed national fund options. “While principally the best system for democratic accountability and potentially best at intersectorial coordination, the present situation concerning public misuse of money, may hamper its functionality in many countries,” Vatn said, adding that a separate fund within the present state administration may seem to offer the best solution in many contexts. “What stands out are the many challenges that organizing REDD+ at the national level will face,” the authors conclude, adding that their analysis of all options indicates the weakest option is the market-based system. ENHANCING TRANSPARENCY The main appeal of such a system has been its capacity to attract private funding, but it also raises the question as to whether international trades over government-owned forest lands are appropriate. In the market-based system, transparency can be reduced because traders can claim that information must be protected for business reasons, according to the paper. The analysis showed that it seems problematic to establish a system for combating deforestation and forest degradation that is separated from state decision-making and administrative bodies, leading the authors to suggest that considering local conditions is of paramount importance when choosing a feasible option. “We still need to define who are the carbon buyers, who are the sellers and define the relationships between them,” Vatn said, adding that all four funding models are open to corruption due to REDD+ delivering large amounts of money to developing countries, which could attract organizations and people who are after the money, rather than supporting the REDD+ ideals. “Obviously governance issues and rent-seeking behaviour — characterized by pursuit of the money — aren’t only important when it comes to the actual set up of a REDD+ system, but these factors are at play in most forest resource-rich countries, and can hinder any kind of major policy changes if actors from state bureaucracy and business profit from current business-as-usual”, said Maria Brockhaus, an economist and policy analyst in forestry and agricultural sciences at the Center for International Forestry Research (CIFOR). For more information on the issues discussed in this article, please contact Maria Brockhaus at m.brockhaus@cgiar.org This research is part of the Global Comparative Study on REDD+ , which forms part of the CGIAR Research Program on Forests, Trees and Agroforestry . It is supported by the Norwegian Agency for Development Cooperation, AusAid, the UK Department for International Development and the European Commission. Continue reading
Institutional Trees… A New Species?
June 14, 2013 Sustainable Asset Management (Investorideas.com renewable energy newswire) It has long been understood that trees are a very important part of our planet and they remain one of the few natural resources that touch all our lives on a daily basis, whether a piece of wood in the home, the floor we walk on, a book we are reading, or even the feint rustle of leaves in the air as we stroll along; we all benefit from trees. We need them, and yet we all know they are under threat. Despite the efforts over the years of governments, politicians, business magnates and even celebrities, the growing commercial demand for timber, crop land for food and biomass, combined with other demands on forest resources & related products, mean that large natural forests remain under serious threat; some of the most treasured species are in danger of extinction. More recently trees and timber have become a mainstream part of our everyday investments. Hedge funds and pension funds have long been investing in forestry & timber plantations along with their associated supply chains; these have even outperformed stock markets for over a century. During the last decade pioneering companies like Asia Plantation Capital have made plantations and trees more accessible to both large and smaller investors who can now buy plantations and have them managed on their behalf to reap the future returns from this amazing natural resource . In fact many analysts, the United Nations and a growing number of those same business magnates now agree on one common solution that always succeeds; “Show a man how to make money from a problem and let the money solve it”. One shining example of this is the threatened agarwood tree. Harvested in the wild to near extinction due to traditional uses now exasperated by modern trends and high global demand for fine fragrance and medicines produced from this rarest of trees and the natural oil it produces, Oud. Despite the fact it was made illegal to harvest in the wild by international convention (CITES) more than ten years ago, commercial demand today has the species as a wild natural tree teetering on extinction. A combination of science, research, practical experimentation and a huge amount of investment has been salvation for the agarwood tree, now a shining example of an international environmentally successful and commercial project which has the ability to; safeguard and protect the species; supply global demand in a sustainable way whilst generating revenue; guarantees the future of a rare species whilst benefiting the economies of fragile forest communities often dangerously driven to illegal logging simply to feed and care for their families. Asia Plantation Capital (APC) has not only become the market leaders in sustainable agarwood, along with other plantation industries such as teak, but also major campaigners, lobbyists and educators to the global markets on its importance. Sponsoring and supporting related industry events such as IFEAT (the International Federation of Essential Oils and Aroma Trades) annual conventions, and reintroducing the agarwood species to Sri Lanka where it had all but been wiped out in the wild by illegal loggers, as well as taking the largest promotional stand at the recent UN World Teak Conference held in Bangkok showcasing their advanced plantation monitoring systems. One company that has spotted APC, and more importantly studied and researched its agarwood plantation model, is Singapore based Sustainable Asset Management. After almost six months of due diligence, inspection visits, meetings with end users and Institutional Investors, Sustainable Asset Management (SAM) has developed what they believe is one of the most carefully structured and balanced forestry investment products available today for HNWI and institutional investors looking at exposure to the asset class as part of a risk balanced portfolio; that’s right, trees are now a risk assessed asset class! Adam Sprague, Head of Risk Analyses at SAM, clarifies “we decided some time ago that we wanted to find a solid and structured investment wrapper for forestry and plantations which meets all the criteria of stringent institutional and high net worth sophisticated investors. We are working on teak projects, biomass, palm oil and various other proven forest sector and timber related assets; but whilst they are good none of them had the credentials of directly protecting an endangered species as with the agarwood story, and as part of the process creating a new sustainable industry which benefits the investors at the top of the chain all the way down to the local communities on the ground; a net new economy in fact. Whilst most investors will confirm it’s the bottom line that really matters, i.e. how much return you can get for your buck, being able to invest in a product that not only provides all the required financial benefits and security but becomes a real force for good is hard to find.” What SAM have done is listen to their institutional clients and create a product that mixes limited numbers of mature CITES approved agarwood trees, in themselves relatively hard to find and valuable from the outset, with new plantings thereby creating a 7 to 8 year investment horizon which has capital growth and income throughout. A unique financial product in a sector where returns are usually either annual and low, or long term and potentially high. This is a balanced structure of income and future returns creating a risk weighted portfolio product with an income of around 8% and variable final IRR of 12 to 24%. The product is available to funds and sophisticated HNWI investors only in minimum tranches of US$500,000 and presently SAM have access to around US$50million in inventory only which will be managed by APC with leverage from their proven from soil to oil programme. About Sustainable Asset Management: Sustainable Asset Management is a private Singapore based company funded by Africasia Private Equity. Africasia focus on providing seed capital and funding for companies within the agricultural domain. Sustainable Asset Management now advises on and deals with all the project evaluation and due diligence of businesses Africasia considers investing in, as well as offering the same service to private investors, institutions and alternative fund managers. www.sustainable.com.sg About Asia Plantation Capital Asia Plantation Capital is an owner and operator of a diverse range of commercial plantation and farming businesses across the Asia-Pacific region and globally, part of the Asia Plantation Capital Group of associated companies. Their focus is on multicultural and diverse plantation projects geared to the domestic and commercial demands of the countries in which they operate. Working closely with and supporting fragile local communities is an underlying core principle of the APC business, providing social and cultural support as well as investment to move these communities away from traditional deforestation and illegal logging activities as a main income source. Established officially in 2008, although operating privately since 2002, the group now has plantation and agricultural projects on four continents with operational projects at various stages in Thailand, Malaysia, Laos, India, Cambodia, Sri Lanka, Mozambique, The Gambia, North America and Europe. www.asiaplantationcapital.com For further information please contact: Mark Wills – Managing Director Sustainable Asset Management Park View Square, 600 North Bridge Road, #12-04, Parkview Square , Singapore 188788 Tel: +(65) 6299 4998 // Email: mark@sustainable.com.sg // www.sustainable.com.sg Stuart Andrews – Public Relations at Sustainable Options Ltd 1 Bromley Lane, Chislehurst, Kent , BR7 6LH , United Kingdom Tel: +(44) 7921 264557 // Email: info@sustainableoptions.eu SUSTAINABLE OPTIONS LTD 1 Bromley Lane, Chislehurst, Kent , BR7 6LH , United Kingdom Tel: +44 (0)7921 264557 www.sustainableoptions.eu Disclaimer: The following news is paid for and /or published as information only for our readers.Investorideas.com is a third party publisher of news and research. Our sites do not make recommendations, but offer information portals to research news, articles, stock lists and recent research. Nothing on our sites should be construed as an offer or solicitation to buy or sell products or securities . All Investment involves risk and possible loss of all investment. Disclaimer in full , Investorideas.com Disclosure Please read individual disclosures for featured stocks. Continue reading
Glimmer Of Hope For Carbon Markets
Eco-Business looks at the state of play in the first of a new series on the global carbon markets The UN’s Clean Development Mechanism has issued 2.4 billion carbon credits so far and generated billions of dollars in revenues for businesses in developing countries. It has supported 6,556 carbon market projects and $356 billion in investments. Image: UNFCCC Carbon markets suffered a heavy setback recently when the European Parliament rejected a plan to boost the flagging price of carbon in the region’s emissions trading scheme (ETS). But while carbon trading worldwide has been floundering, experts say carbon markets have a permanent role in combating climate change and are predicting an industry revival in the coming years. The controversial plan called ‘back-loading’ – which is now being reworked and put to the vote again on 2 July – was meant to temporarily withdraw a huge supply of carbon allowances from the ETS to prop up prices, which peaked around 30 euros per tonne in 2008 but have since plunged to new lows of 2 to 3 euros. Prices of United Nations-issued carbon credits under its Clean Development Mechanism (CDM) similarly have plunged some 98 per cent from their peak in 2008 to 39 euro cents per tonne. Carbon market players were looking to the European plan to restore confidence in the market and revive investments into carbon projects. The ailing markets in the past year or so have forced many carbon companies to consolidate or go out of business and dried up financing for further investment into clean energy projects. The underwhelming performance is the result of a combination of factors, including a lack of clarity from governments on the future of the Kyoto Protocol, a global agreement which binds developed countries to reduce their carbon emissions, and a weak global economy that has reduced demand for carbon credits. The market also suffers from a crisis of confidence stemming from questionable credits being issued by the CDM board, and its approval process that has been criticised for being bureaucratic and opaque. KPMG director for climate change and sustainability services, Rahul Kar, however, noted that despite the setbacks, carbon markets are here to stay. “It’s now in a transformational stage. We need to weed out the deficiencies, make the system more realistic in terms of affordability and eligibility criteria,” he told Eco-Business in an interview this week. “Even though the carbon markets are depressed today, chances are it will be hot again in about three years’ time,” noted Kar. This is because new regional carbon markets are emerging, such as in China, Australia and the United States, which would revive demand for carbon credits on the international markets, he added. “ The innovation, energy and farsightedness among the people developing these national and sub-national systems that convinces us at the World Bank that carbon pricing is emerging and carbon markets have a future Rachel Kyte Recent reports issued by institutions such as the World Bank and the Center for American Progress affirm the view that carbon markets have a key role to play in addressing climate change. Policymakers continue to recognise the importance of putting a price on carbon – regarded the culprit for climate change – and there are 40 national and 20 sub-national jurisdictions that are implementing carbon markets or putting a price on carbon, noted the World Bank in a report released last month, called ‘Mapping Carbon Pricing Initiatives – developments and prospects’. World Bank vice president for sustainable development, Rachel Kyte, noted it is the progress at country level that gives hope. “The innovation, energy and farsightedness among the people developing these national and sub-national systems that convinces us at the World Bank that carbon pricing is emerging and carbon markets have a future,” she said. The new initiatives build on previous experiences and valuable lessons learned, developing a range of novel design features, such as pricing stabilization mechanisms, which make them flexible and adjustable to new economic realities, the report noted. These emerging pricing schemes can make an important dent in greenhouse gas emissions. Today, countries with implemented and scheduled carbon pricing mechanisms emit the equivalent of roughly 10 gigatonnes of carbon dioxide per year, equal to about 20 per cent of global emissions. To gain efficiencies and benefits from larger markets, linkages and agreements are being put in place, such as the one between the EU ETS and Australia’s Carbon Pricing Mechanism. Team leader of the report, Alexandre Kossoy, senior financial specialist at the World Bank said: “There may not be a one-size-fits-all, but it is clear that the foundation of the first generation of market-based instruments is informing what will constitute the future landscape of carbon pricing,” Indeed, the Center for American Progress and Climate Advisers in an April report outline how, despite the rocky road for carbon markets, they have catalysed climate action in major countries. Titled ‘Carbon Market Crossroads – New Ideas for Harnessing Global Markets to Confront Climate Change’, the report noted that the sale of the 2.4 billion CDM credits issued so far has generated billions of dollars in revenues for businesses in developing countries, which has in turn spurred even more local economic activity by providing jobs and wages that benefit local businesses. The CDM has supported 6,556 carbon market projects and $356 billion in investments in emission reductions, it said. These projects have helped to create an ecosystem of climate entrepreneurs and elicited millions of dollars in government spending on climate. Each of the 10 developing nations that participated most actively in global carbon markets over the past decade are today out front experimenting with new, more ambitious climate policies, noted the report. China, South Korea, Mexico, Brazil, and India, for example, are establishing domestic carbon markets largely because of their positive experiences with the CDM. Lead author of the report and president of Climate Advisers, Nigel Purvis, noted that critics and defenders of international emissions trading have “missed the big picture”. “The developing nations that participated the most in global carbon markets are now taking the lead in adopting domestic carbon-pricing policies. The benefits of helping to spur climate policies in these major emerging economies greatly outweigh whatever environmental benefits or problems early carbon projects may have produced,” he said. The report’s authors also had a few recommendations that offered solutions for restoring global carbon markets, including: • The World Bank and International Monetary Fund convening an emergency climate summit to agree on new measures • Countries making political commitments to increase demand for global carbon-market credits, either through a new specialized fund at the World Bank or through coordinated but decentralized bilateral actions • Countries should establish a new International carbon-market coordinating body to encourage carbon markets to converge on the same high standards and help nations link their markets KPMG’s Rahul Kar says intervention by multilateral institutions such as the IFC or ADB can help lift the carbon markets by buying up credits in the short- to medium-term. In the longer term, the market will stabilise when regional trading markets give their demand projections and pricing for carbon. “ In terms of reliability and quality, the CDM is still far superior Rahul Kar, KPMG Meanwhile, carbon entrepreneurs awaiting the markets to spark back to life have either put their business and projects in cold storage, or moved into developing clean energy projects where carbon credits are a side product and not a main revenue generator. Singapore-based Blue World Carbon managing director for Southeast Asia, Joost van Acht, told Eco-Business that companies that depended on selling carbon credits for revenues have gone out of business. Projects that have multiple revenues, such as power generation, have been able to weather the storm. “Reform of the entire system is now urgently needed to make the markets work again,” he said, adding that the CDM board needed, for example, to remove controversial projects such as on air conditioning coolants known as HFC-23 or large hydropower projects to restore confidence in the process. Critics have questioned if these projects achieved the aim of cutting emissions. There is also the voluntary market, which is still thriving despite the current woes, where companies have bought carbon credits of differing standards directly from project developers as part of their social responsibility efforts. Carbon companies have also increasingly turned to consumers to generate demand. The explosion of social media and online “crowd-based” finance may prove a sustainable alternative source of demand while the regulated markets are still being reformed. Kar pointed out, however, that such credits will remain on the fringe. Besides administrative difficulties, the level of scrutiny that each project goes through under the UN’s CDM is much more rigorous than any voluntary scheme. “In terms of reliability and quality, the CDM is still far superior. So perhaps the UN may come up with a piece of legislation which allows CERs to be used for voluntary purposes, and this would put some life back into the global carbon markets.” What are carbon credits? Each carbon credit allows the holder to emit one tonne of carbon dioxide equivalent. Carbon trading is the buying and selling of these credits. The credits are created in two ways – one is based on allowances, which are given to developed countries emitters who set a quota on their pollution. The second is created under the United Nations’ Clean Development Mechanism, which verifies and approves projects in developing countries that permanently reduce greenhouse gas emissions. Owners of the project can then sell the credits to developed country buyers. The CDM was created as part of the Kyoto Protocol, the only global agreement that binds developed countries to cut their emissions. The credits are traded on exchanges and through financial institutions, which buy up credits from projects across the world and sell them on to end-buyers. There are also companies that sell carbon credits to companies and individuals on a voluntary basis. These credits may be verified by third party standards such as the Verified Carbon Standard. Continue reading
