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Making forests pay in a warming world Add to ...

Deep in the flooded jungles of southern Borneo, muddy peat oozes underfoot like jello, threatening to consume anyone who tries to walk even a few yards into the thick, steaming forest.

Hard to imagine this brown, gooey stuff could become a new global currency worth billions a year, much less an important tool in the fight against climate change.

Yet this is a new frontier for business, says Bali-based consultant Rezal Kusumaatmadja, and a new way to pay for conservation efforts in a world facing ever more pressure on the land to grow food and extract timber, coal and other resources.

He and his fellow Indonesian business partner Dharsono Hartono are trying to preserve and replant a peat swamp forest three times the size of Singapore in Central Kalimantan province in Indonesia’s part of Borneo. And in the process, draw in local communities by boosting livelihoods and curb encroachment

They are at the vanguard of a global effort to slow climate change by trying to create a new market that puts a value on preserving forests, or avoiding deforestation.

The effort brings together a diverse cast of characters: environmental entrepreneurs such as Kusumaatmadja and Hartono; investment bankers trying to create a carbon market; companies seeking to buy carbon credits in that market; activists trying to ensure some of that money flows to rainforest communities; and bureaucrats whose task will be to somehow monitor and enforce the ambitious scheme, and not divert the proceeds into their pockets. Rainforest preservation has become central to U.N. talks on a tougher climate pact and is a focus of a major climate conference in Cancun, Mexico, that began on Nov. 29.

The key is carbon. Forests, and particularly deep peat forests in the tropics, soak up and lock away lots of carbon dioxide, the main greenhouse gas, acting like giant filters for the atmosphere. Cut down the forests and drain the peat, and they can release even more. Deforestation and burning account for more than half Indonesia’s greenhouse gas emissions, making it leading carbon polluter.

How, then, to put a price on that carbon and trade it?

That’s the puzzle and the lure for many investors who want to capture the benefits forests bring, from locking away carbon, to being watersheds for rivers and storehouses of countless species.

“You can’t solve the climate change issue unless you simultaneously tackle deforestation,” said Abyd Karmali, global head of carbon markets for Bank of America Merrill Lynch. That means preserving what’s left and driving investment in rainforests in Brazil, Democratic Republic of Congo and Indonesia, which have the three largest areas of remaining tropical forests.

But the plan pits powerful business interests in the palm oil, logging and mining sectors against public and private sector efforts to support greater forest protection and potential carbon credit payment systems. It also means reforming powerful bureaucracies and weeding out entrenched corruption, strengthening land ownership and land use rules, improving monitoring and law enforcement and enshrining the rights of local forest communities.

PEAT PRESERVATION

In some countries, including Indonesia, the reform process is under way, and daunting though the challenges may be, rich nations such as Norway have already pledged in total about $4-billion (U.S.) for pilot programmes to drive such reforms.

Studies such as the 2006 Stern Review, and investors such as George Soros, say saving forests is a cheap way to buy mankind a little more time in the switch to less polluting economies.

The scale of the challenge -- and the potential benefits -- is vast.

Borneo, the world’s third largest island, has lost half its forest cover in a matter of decades. Every year, peat swamp forests and soil storing up to 1 billion tonnes of CO2 are destroyed in Indonesia. U.N. data shows the annual rate of deforestation in Indonesia is about 700,000 ha a year, less than half the level from the 1990s, but still 10 times the size of Singapore.

To give a sense of scale, 12 per cent of Indonesia’s land area is peatland. Yet this area is a repository for more than 40 billion tonnes of carbon (more than 100 billion tonnes of CO2 if released), according to Dutch research institute Deltares.

This is more than twice mankind’s annual -- and growing --greenhouse gas emissions. It highlights the threat posed by clearing peat swamp forests, and why Indonesia has become a key player in the efforts to revalue forests in poorer nations.

“Carbon credits from forestry is a new way to finance conservation efforts, such as restoration, or preservation,” Kusumaatmadja told Reuters in the trading town of Sampit in Central Kalimantan during a recent trip to the 227,000 ha (570,000 acre) peat forest conservation project in Katingan regency (county).

“You also need to work with communities to build up livelihoods so they don’t encroach,” he said.

Ultimately, the battle will come down to forests being worth more standing than cleared for a plantation -- and then getting buy-in from local communities.

“What you need to have is proof of concept,” says Kusumaatmadja, 40, the son of a former Indonesian environment minister and who trained as an urban and regional planner in the United States. “This means we deliver the emissions reductions and get compensated. Then we can start talking about the competing values for the land. Because right now there is no value. It’s a frontier. It’s like people take a leap of faith that this is actually making money.”

Land tenure and the new science of carbon accounting, are additional challenges, he said, pointing to the need to have clear legal title to the carbon stocks in a forest and a legally enforceable process to resolve conflicts over land use.

Getting the carbon measurements right also will be crucial if investors are to trust a project’s CO2 reductions.

READY FOR REDD?

At a point marked “D206” inside the Katingan forest, Kusumaatmadja, his team and this reporter gingerly make our way to a sampling site under several feet of water.

The site is to be one of about 400 planned across the Katingan project, with the aim of taking regular samples of peat depth, the amount of carbon stock above ground, such as trees, and the depth of the water that helps preserve the peat. The muddy, tiring work in mosquito-infested waters has shown the peat depth to be from one metre to about 12 metres across the project, shaped like an oval and 120 km (70 miles) end to end.

More than one billion of tonnes of carbon could be sitting underground, the result of millennia of carbon accumulation by the forest. But this could be undone in a matter of decades by clearing and draining the tea-coloured swamps and burning the peat.

The resulting forest fires, blamed on oil palm plantation companies and local slash-and-burn agricultural practices, create a choking haze that regularly blights great swathes of Southeast Asia, much to the irritation of Indonesia’s neighbours.

The Katingan project could generate about 100 million carbon credits over 30 years, depending on final carbon stock measurements. That’s the same as 100 million tonnes of CO2 being locked away

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