CARBON DUMPS IN THE SOUTH

• World Bank Carbon Finance in Brazil: New funding source for industrial tree plantations
• Indonesia: Going for business with the CDM
• Laos: EcoSecurities helps ADB provide carbon subsidies to the pulp industry
• World Bank Carbon Finance Funds unlikely to contribute to poverty alleviation in Uganda
  

- World Bank Carbon Finance in Brazil: New funding source for industrial tree plantations

The World Bank Prototype Carbon Fund’s (PCF) Plantar project has been heavily criticized by NGOs and civil society movements ever since it first emerged as the first industrial eucalyptus tree plantation to claim carbon sink credits from the Kyoto Protocol’s Clean Development Mechanism. The Plantar project involves 23,100 hectares of monoculture eucalyptus plantations for the production of charcoal, which will be used in pig iron production. The project is one of the largest in the PCF, claiming 12.8 million credits over 21 years, more than the total amount being claimed by all 13 renewable energy projects currently listed on the PCF website. Plantar argues that without additional income from carbon credits charcoal production would be uneconomical and the company would have to switch to using imported coal. In addition to this “avoided fuel-switch” component, the project also claims credits for the carbon that will be taken up by the new plantations. According to the project documents, the revenue from these carbon sink credits are essential to securing the necessary bank loans to finance replanting.

The grounds for concern about the project are manifold, and include the negative environmental and social impacts of the project as well as the project's seeming ability to shape-shift to meet changing rules of the Clean Development Mechanism. The environmental and social problems associated with the project have been highlighted in several previous bulletin articles (WRM Bulletin 74, 63). In this article we will explore some of the deeper layers that emerge from underneath the surface of this PCF project:

The World Bank support for the Minas Gerais plantation industry predates the PCF and its prototype Plantar project. Between 1987 and 1996 the Bank provided US$48.5 million of the US$100 million Minas Gerais Forestry Development Project, which aimed to increase industrial wood and charcoal production. In as late as 2000 this fund provided a small loan to Plantar. Only three years after the formal closure of the Forest Development Project the Bank established the PCF, the Bank’s vehicle to develop projects under the CDM. Plantar was one of the first projects developed, and according to the Plantar Project Appraisal Document (PAD) of April 2002 (www.prototypecarbonfund.org), the Bank hopes that it will open the door for other pig iron producers in Minais Gerais to make similar use of carbon finance. This raises the question about financial sustainability of a plantations sector that appears to be financially viable only when provided with subsidies: until mid 1980s, plantation establishment was subsidized heavily through state subsidies in Brazil. When subsidies were discontinued, some pig iron producers switched to coal and those who did not, argue that only the prospect of additional carbon credit income made them hold on to charcoal. Many question the credibility of this claim but if this is indeed the case, then economic viability, assumed when Forest Stewardship Council certificates for well-managed plantations are issued, is not ensured. This in turn casts further doubt on the long-term storage of carbon in the plantations used for charcoal production: what will happen to the stored carbon when subsidies dry up?

The reality of the Plantar project is in sharp contrast to the World Bank’s rhetoric about the social and environmental benefits of sinks projects. The World Bank claims that “carbon sequestration offers the greatest convergence between the carbon market and sustainable development, and between climate change, adaptation, and poverty reduction”. Yet Plantar - the PCF’s only current carbon sink project - is promoting unsustainable development that does nothing to combat climate change while exacerbating local environmental problems and the social inequalities, local tensions and access to land problems already existing in the region.

A comparison of the Plantar project with the World Bank’s dedicated carbon sinks fund – the BioCarbon Fund – also illustrates how supposedly high-quality sinks projects are merely "greenwash" and that any significant use of carbon sinks will inevitably involve industrial tree plantations. The World Bank has been at the forefront of selling carbon sinks and has tried to counter concerns about the carbon market being flooded by plantation-derived credits. PCF Fund Manager Ken Newcombe’s presentation at a Paris workshop in April 2003 specifically addressed the later concern, arguing that plantations would not be widespread because they would be unable to satisfy additionality requirements – ironic given that the PCF is the only player in the market currently developing a non-additional plantation sink project - Plantar. Yet the Plantar-BioCarbon Fund comparison is telling: the entire BioCarbon Fund – CDM, Joint Implementation and non-Kyoto projects combined - will generate less credits that Plantar’s plantation component alone.

Moreover, by developing the first plantation sinks project the World Bank is making it easier for similar projects to be developed in the future by showing how it is done. And despite the World Banks’ recent public assurances that plantation projects would not be commonplace in the CDM, it always saw the Plantar project as a template that would encourage others to be developed. The 2002 Project Appraisal Document for Plantar is explicit: "The project is expected to prepare the ground for similar projects in the future". That is, projects based on industrial monoculture tree plantations whose credit generation would dwarf the carefully packaged public relations efforts of the BioCarbon Fund and similar greenwash funds.

The CDM Executive Board’s Methodologies Panel has recently warned that approval of a methodology that Plantar uses to make a case for its CDM registration – the so called baseline methodology - represents a “moral hazard”. The Panel was commenting on the similar V&M do Brazil project, also in Minas Gerais, which uses the same line of argument that without carbon credits the company would have to switch to using coal instead of charcoal in the pig iron production process. Given the projects use the same methodology to make this point, the comment is directly applicable to Plantar.

Despite all this, the project is still seeking CDM registration and, surprisingly, retains the support of its supposedly anti-sinks European governmental investors. Public withdrawal from the Plantar project is overdue and failing to do so will support a prototype that is set to turn the Clean Development Mechanism into a Mechanism for Continued Devastation.

By: Jutta Kill, SinksWatch, e-mail: jutta@fern.org ; web page: http://www.sinkswatch.org

top

- Indonesia: Going for business with the CDM

The Clean Development Mechanism (CDM) of the Kyoto Protocol under the United Nations Framework Convention on Climate Change may be totally useless to address climate change, but it may prove to be good business for some parties. The assumption is that in return for investment in a project that cuts or reduces emissions in a southern country, companies will earn certified emission reductions (CERs) that industrialized countries may use to meet Kyoto Protocol commitments.

Indonesian official authorities and even an NGO --Pelangi-- are eager to obtain money from the “sale” of good forest management and geothermal power plants, which would allegedly provide the country with some US$ 500 million. Under this trade off, the buyer would be allowed to keep its level of greenhouse gas emissions, which would be “compensated” with the reduction undertaken by Indonesia.

It may be difficult for sensible people to understand why a northern company would have the right to pollute in one country by paying another country for doing what it should be doing anyway –managing forests adequately and using cleaner sources of energy. Furthermore, the whole issue is misleading, because under the “good forest management” disguise, afforestation and reforestation programs are introduced. Afforestation is a direct activity to change non-forest areas into tree plantations, while reforestation implies planting trees in areas that were originally forested. In fact, this means opening up the door to large-scale monoculture tree plantations, which --as Indonesian local peoples already know-- are usually implemented at the expense of forests and/or local peoples' agricultural lands.

No wonder Pelangi director Agus P. Sari was quoted in the press recognizing that potential conflict between local people and the local authorities would emerge when the latter reverted the current areas into tree plantation schemes. Local people know too well the harmful impacts of plantations on their livelihoods.

Indonesia is a country ravaged by socially and environmentally destructive projects like pulp and paper mills which pollute and deforest (UPM Kymmene, APRIL, Indorayon) monoculture plantations which replace agricultural lands and forests (oil palm, acacia, eucalyptus) or destructive mining (PT Kem, PT Freeport, gold mine at Irian Jaya). Before trying to sell its "emissions reductions", the government should try to put the house in order and listen to the demands of its own people regarding sustainable and equitable development. This would at the same time lead to true reductions of greenhouse gas emissions.

The same is applicable to the prospective buyers of those alleged "emissions reductions." What they should be doing is reducing emissions in the country they operate in and thus providing people with a cleaner environment, while at the same time addressing climate change.

However, money is money and clearly the Clean Development Mechanism has nothing to do with clean development and all to do with business. Neither climate, nor the Indonesian people, nor the people from the buyers’ home country will benefit from this project, but money will certainly disappear in the pockets of power. Has someone changed the definition of "sustainable development"?

Article based on information from: “RI may annually earn $500m from carbon trade”, Moch. N. Kurniawan, The Jakarta Post, Jakarta, May 28, 2003, at http://www.angelfire.com/nt2/fipa/FIPA/News%20&%20Events/INCL%206-22a%201%20June%202003.htm#RI may ; “Indonesia to ‘sell’ carbon emissions”, Jakarta Post, September 8, 2003, at http://www.cdm.or.id/en/news/?nid=10

top

- Laos: EcoSecurities helps ADB provide carbon subsidies to the pulp industry

The Asian Development Bank (ADB) has big plans for plantations in Laos. World Rainforest Movement has obtained a leaked report of a recent ADB mission to Laos which describes how the Bank hopes to attract international pulp and paper companies to invest in Laos.

Over the past ten years, the ADB has funded an area of approximately 12,000 hectares in Laos through its $11.2 million “Industrial Tree Plantations Project”. Under its planned “Forest Plantations for Livelihood Sector Project” the Bank intends to finance 30,000 hectares of plantations.

As part of the preparations for this project, an ADB mission visited Laos from 19 June to 4 July 2003. In the leaked mission report, the Bank argues that “the best way to develop the plantation subsector is to attract and facilitate the entry of MPCs [Multinational Plantation Companies] to establish LCPs [Large Commercial Plantations].” The ADB plans to establish a “package of incentives” to encourage multinationals to establish 500,000 hectares of plantations. In addition, the ADB hopes companies will build two $1 billion pulp mills, each with a capacity of one million tons a year.

According to the ADB's mission report, several multinationals are already interested in establishing plantations in Laos, including Stora Enso (Finland-Sweden), Riau Andalan (Indonesia), and Phoenix Pulp and Paper (Thailand). The Bank plans to hold an international investment seminar which “will provide a good opportunity to the interested firms to better understand the significant potential of establishing large commercial plantations in the country,” according to the Bank's mission report.

The ADB's mission also proposed establishing a Lao Plantations Development Corporation, which would facilitate investment in plantations in Laos. The Bank is “already exploring” possible funding for the Corporation from the French government and the Nordic Development Fund.

Another possible incentive for plantation development in Laos is funding through the Clean Development Mechanism of the Kyoto Protocol. Through the CDM, Northern countries can obtain “carbon credits” (effectively permits to continue polluting) by funding plantation (and other) projects in the South that are supposed to reduce or absorb carbon emissions.

However, calculating how much carbon will be absorbed by a plantation, and for how long, involves many assumptions. In order to calculate how much carbon would be absorbed by a plantation, a comparison is needed with what might have happened without the plantation. Once planted, a plantation might burn down. The fire might spread into neighbouring forests. Pests might wipe out large areas of the plantation. Droughts or floods might affect growth rates and therefore the rate at which trees absorb carbon. Villagers might decide to cut the trees down to reclaim their land. They might clear another area of forest to replace farmland lost to the plantations.

Luckily, a new breed of clairvoyant expert is at hand to gaze into the future for us. Louise Aukland, a "carbon sequestration specialist", was one of the consultants on the ADB's mission to Laos. At the time Aukland worked with EcoSecurities, a consulting firm which “specialises in advising on strategy regarding global warming issues”. Among the services offered by EcoSecurities is advice for clients on designing projects in order to increase the chances of obtaining funding under the CDM.

Aukland has now left EcoSecurities and her colleague, Jan Fehse, has taken over responsibility for her work. Fehse is an expert: a “specialist in forestry and land use carbon projects” with “in-depth knowledge of global climate change policy in relation to land use, land use change and forestry,” according to EcoSecurities' web-site.

I asked Fehse how EcoSecurities attempts to determine how much carbon a plantation might absorb, how EcoSecurities calculates what might happen if the plantations were not planted and how EcoSecurities determines what might happen to the plantations in, say, 100 years' time.

Fehse did not answer my questions. Instead, he explained that the questions are “about methodologies for the setting of baselines, the determination of the project boundary, the modelling of carbon dynamics within the project boundary and without (leakage).” He added, “I suggest you should first read the Marrakesh Accords.”

The Marrakesh Accords were agreed at the seventh Conference of the Parties (COP7) held in Marrakesh in 2001. The issues covered are highly technical. Fortunately, as Fehse pointed out, “EcoSecurities has a great deal of experience with these highly technical issues.” Unfortunately, Fehse appears unwilling to explain these highly technical issues.

EcoSecurities may argue that it is in the business of providing funding for sustainable development for poor countries. However, through their involvement with the ADB's plantations projects in Laos, the company is helping to provide subsidies for the international pulp and paper industry, an industry responsible for major environmental and social problems in neighbouring Thailand.

In 1995, Thai economist Pasuk Pongpaichit wrote: “Economic theory tells us it's all right to subsidize education because it benefits the whole society. But while eucalyptus and pulp and paper industries earn profits for some, they cause problems for society. Therefore, economic theory tells us, they should be taxed. But instead the government does the opposite.”

The ADB is intent on providing subsidies to the pulp and paper industry - without the benefit of a comprehensive discussion in Laos about the impacts or whether converting vast areas of the country into monoculture plantations really is “sustainable development”. Pasuk's conclusion about subsidies in Thailand is equally relevant to Laos: “This is a matter of influence and power.”

By: Chris Lang, e-mail: chrislang@t-online.de

top

- World Bank Carbon Finance Funds unlikely to contribute to poverty alleviation in Uganda

Earlier this year, several officials of the Ugandan government received large concessions for land suitable for afforestation and reforestation under the Kyoto Protocol’s Clean Development Mechanism (see WRM Bulletin 74). Whilst the Ministry of Water, Lands and Environment, responding to public pressure, issued a statement arguing that these land allocations were to be seen as part of a process by the ministry to ‘revitalise’ degraded forest reserves by releasing them for private development through the Department of Forestry, the ministry failed to mention the likely connection to the Clean Development Mechanism, which offers carbon sinks credits to companies that plant trees.

It is too early still to expect any concrete projects emerging from these land allocations, but these allocations are indication of a worrisome trend – namely that carbon sinks credits will speed up private sector involvement in Uganda’s forestry sector. Evidence to this also emerges from the fact that communities in the vicinity of the areas to be allocated also applied for the concessions but were left empty-handed. This bias in allocation towards private entities could have a doubly negative effect. First, it does deny local communities active involvement in restoration of these areas and secondly allocation of these public lands to private enterprises is likely to curtail – previously free - public access to these areas, thus exacerbating the already precarious situation of many of Uganda’s rural poor.

It is difficult to see how the World Bank’s Carbon Finance Funds, which have chosen Uganda and Kenya as key countries for their funds, will contribute to poverty alleviation if the emerging trend of privatization of hitherto free access public lands will continue and be rewarded through CDM projects backed by the World Bank’s Carbon Finance Funds.

By Jutta Kill, SinksWatch, e-mail: jutta@fern.org ; web page: http://www.sinkswatch.org

previous page

top