Macquarie, IFC agree forest carbon investment fund

SINGAPORE Thu Jul 7, 2011 6:10am EDT

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SINGAPORE (Reuters) - Australia's Macquarie Group, World Bank member the International Finance Corp and a forest management firm said on Thursday they had raised $25 million for forest carbon projects in poorer nations.

The money comes on top of other funding schemes by the World Bank, United Nations and rich nations including Norway in support of a U.N.-backed program that rewards poorer nations that preserve and replant carbon-rich tropical forests.

The program, called reduced emissions from deforestation and degradation, could eventually trigger a global trade in REDD forest carbon credits worth billions of dollars a year if nations agree on a new U.N. climate deal. Norway has already signed a REDD deal with Indonesia potentially worth $1 billion.

Under the investment deal announced on Thursday, Macquarie Group firm BioCarbon Group said it had agreed the terms with fellow investors the IFC and U.S.-based Global Forest Partners LP for total equity financing of $25 million.

The money would be used to invest in REDD projects in poorer nations, with the first project expected to be in Indonesia, where the government says there are 44 REDD projects at various stages of development.

Macquarie is developing 3 REDD projects in Indonesia in partnership with global conservation group Fauna & Flora International and is looking to expand. BioCarbon is the financial vehicle for those projects.

"We are very confident we have raised sufficient capital here for us to succeed to have a significant footprint of forest carbon projects," Macquarie Global Investments associate director, Brer Adams, told Reuters.

He said the first recipient of funding was likely to be a 40,000 hectare (100,000 acre) project in Kapuas Hulu in West Kalimantan. Most of the project is on carbon-rich peat swamp forest.

"We're actively exploring other opportunities in Southeast Asia, South America and Africa," Adams said.

Forests, particularly peat swamp forests, soak up and store large amounts of carbon, acting as a brake on global warming. To reward poor nations, tradable carbon offsets can be generated under the REDD scheme for proven emissions reductions from projects that protect forests and replant degraded areas.

Offsets have started to be issued for the voluntary carbon market under strict standards.

But some projects still face huge hurdles and no Indonesian project has been issued with a final license by the government, a key step before the issuance of REDD credits.

The most advanced Indonesian REDD investment, Hong Kong-based InfiniteEARTH's Rimba Raya Conservation project covering 89,000 ha in Borneo, has been held up for a year in a dispute with the forestry ministry because of overlapping claims by a palm oil development firm that wants part of the project.

The palm oil company, PT Best, has been granted licenses to develop peat swamp land.

(Reporting by David Fogarty; Editing by Clarence Fernandez)

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