U.S. and Indonesia link up on forest carbon credits

SINGAPORE Wed Nov 19, 2008 6:38am EST

An Acehnese vendor rides a motorcycles through the new road at a forest near the Indonesia town of Calang June 19, 2005. REUTERS/Beawiharta

An Acehnese vendor rides a motorcycles through the new road at a forest near the Indonesia town of Calang June 19, 2005.

Credit: Reuters/Beawiharta

SINGAPORE (Reuters) - California and two other U.S. states signed a pact late on Tuesday with Indonesia's Aceh province that could see forest carbon credits from Aceh accepted into U.S. emissions trading schemes.

The pact, the first of its kind, marks a major step in global acceptance of carbon credits derived from projects aimed at halting the destruction of the developing world's remaining forests, which soak up vast amounts of planet-warming carbon dioxide.

The governors of Aceh, California, Illinois and Wisconsin signed the pact in Los Angeles. It commits the three states to working toward accepting avoided deforestation carbon credits from a major forest reserve in Aceh into their emissions schemes.

"This MoU (Memorandum of Understanding) will wake up the world to reducing emissions by stopping the destruction of our forests," said Aceh Governor Irwandi Yusuf.

"This will open up a door to robust, verified forest carbon credits being accepted into American markets," he said in an SMS to Reuters from Los Angeles.

The United Nations has backed a pay-and-preserve scheme called Reduced Emissions from Deforestation and Degradation (REDD) in which rich nations buy carbon credits from developing nations in return for keeping their rainforests standing.

Deforestation counts for about 20 percent of mankind's greenhouse gas emissions.

The scheme, which is still being developed, could be worth tens of billions of dollars a year and could transform how developing states value their remaining forests.

But there have been concerns about how best to measure and verify a forest remains in tact for the long term and how best to calculate a forest's carbon stock.

The United Nations hopes to include REDD into the successor of the Kyoto Protocol from 2013 but for the moment a number of avoided deforestation projects are being developed to yield verified emissions reductions, or VERs. These usually trade between $4 and $10 for a tonne of carbon saved.

REAL AND ROBUST

In Aceh, Yusuf has backed the preservation of a 750,000 ha (1.88 million acres) forest reserve named Ulu Masen. Australia-based Carbon Conservation has helped develop a plan to protect and rehabilitate the forest and linked up with Merrill Lynch to sell carbon credits from the project.

The aim was to produce the first batch of more than 500,000 VERs in the second half of next year, said Carbon Conservation CEO Dorjee Sun.

"There's no trading scheme in the world which currently accepts international REDD credits," Sun told Reuters from Los Angeles after the deal was signed.

"The goal is to make sure the quality of the emissions reductions from Indonesia are on par with those that are being issued in America. So there's got to be a large amount of synchronization of standards to make sure that credits created in Aceh are real, robust, verifiable and accountable," he said.

U.S. President-elect Barack Obama has pledged to create a national emissions cap-and-trade system but already there are state-based schemes under development.

California is part of the Western Climate Initiative, set for launch in 2012, while Wisconsin and Illinois are part of the Midwestern Regional Greenhouse Gas Reduction Accord, set for launch in 2010.

Sun said the next step was to ensure the Ulu Masen project could produce robust credits to match the requirements of California's Global Warming Solutions Act (Assembly Bill 32).

He said his team will conduct an extensive survey of Ulu Masen's carbon stock by satellite monitoring and on the ground and have developed a sampling method.

"In order to verify it, we've been taking remote sensing, satellite photography. However, to do the actual verification, it is not enough to show people photos of forests."

A key part of the project was applying newly released accounting rules governing voluntary market REDD projects under the globally recognised Voluntary Carbon Standard.

"We need to synchronize all the information against the standard and then have it independently verified," Sun said, adding he hoped to complete the verification by around June next year.

(Editing by James Jukwey)

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