Indonesian palm oil producers are eying forest conservation projects as a way to supplement earnings via the nascent carbon market, reports Reuters.
Frank Momberg, Fauna and Flora International’s Asia-Pacific director for program development, told Reuters’ David Fogarty that plantations companies have agreed to forgo converting rainforest areas in West Kalimantan on the island of Borneo in exchange for a share of the revenue generated from the sales of forest carbon credits. Forest conservation is expected to be an important emissions mitigation mechanism under the next global climate treaty, with tropical countries earning carbon credits for reducing deforestation.
Peat forest conversion in Kalimantan, Indonesian Borneo.
Forestry companies are well-positioned to benefit from the potential mechanism, which is known as REDD for Reducing Emissions from Deforestation and Degradation. Logging companies and plantation operators that agree not to develop their existing concessions stand to potentially earn credits for preserving carbon locked up in forest vegetation that would otherwise be released by deforestation. Provided credits could be used by companies and countries to meet emissions reductions obligations, earnings from REDD could be substantial, and in some cases comparable to the proceeds from logging the forest or turning it into plantations, according to a pair of studies published earlier this year in the journal Conservation Letters.
Oil palm plantation and forest in North Sumatra
Fauna and Flora International (FFI) said that Sinar Mas and First Borneo Group are involved in the West Kalimantan project, which is based in a 90,000-hectare tract of carbon-dense peat swamp forest in Kupuas Hulu. FFI estimates the first phase of the project, which covers 46,000 hectares, will avoid 2.8 million tonnes of CO2 a year over a 10-year period. FFI is also developing carbon conservation projects in the Sungai Putri peat swamp in West Kalimantan (60,000 ha) and Papua, on the island of New Guinea (250,000 ha) as well as a separate community forest project in West Kalimantan (30,000-50,000 ha). FFI is involved with the 750,000-ha Ulu Masen project in Aceh, on the island of Sumatra.
(06/04/2009) A new paper by Oscar Venter, a PhD student at the University of Queensland, and colleagues finds that forest conservation via REDD — a proposed mechanism for compensating developing countries for Reducing Emissions from Deforestation and Degradation — could be economically competitive with oil palm production, a dominant driver of deforestation in Indonesia. The study, based on overlaying maps of proposed oil palm development with maps showing carbon-density and wildlife distribution in Kalimantan (Indonesian Borneo), estimates that REDD is financially competitive, and potentially able to fund forest conservation, with oil palm at carbon prices of $10-$33 per ton of carbon dioxide equivalent (tCO2e). In areas with low agricultural suitability and high forest carbon, notably peatlands, Venter and colleagues find that a carbon price of $2 per tCO2e would be sufficient to beat out returns from oil palm.
(03/30/2009) Reducing emissions from deforestation and degradation (REDD) is increasingly seen as a compelling way to conserve tropical forests while simultaneously helping mitigate climate change, preserving biodiversity, and providing sustainable livelihoods for rural people. But to become a reality REDD still faces a number of challenges, not least of which is economic competition from other forms of land use. In Indonesia and Malaysia, the biggest competitor is likely oil palm, which is presently one of the most profitable forms of land use. Oil palm is also spreading to other tropical forest areas including the Brazilian Amazon.
(08/22/2007) This past June, World Bank published a report warning that climate change presents serious risks to Indonesia, including the possibility of losing 2,000 islands as sea levels rise. While this scenario is dire, proposed mechanisms for addressing climate change, notably carbon credits through avoided deforestation, offer a unique opportunity for Indonesia to strengthen its economy while demonstrating worldwide innovative political and environmental leadership. In a July 29th editorial we argued that in some cases, preserving ecosystems for carbon credits could be more valuable than conversion for oil palm plantations, providing higher tax revenue for the Indonesian treasury while at the same time offering attractive economic returns for investors.