October 20, 2008 / 12:25 PM / 10 years ago

Putting a price on nature can save forests, rivers

SINGAPORE (Reuters) - Putting a price on nature by creating tradable credits can the limit the loss of forests, wetlands and rivers from the expansion of agriculture, the head of an international forestry investment firm said on Monday.

Visitors take a walking tour at a mangrove forest on the Indonesian resort island of Bali December 6, 2007. REUTERS/Yusuf Ahmed Tawil

Carbon, water and biodiversity were emerging as the three main environmental market forces this century, said David Brand, managing director of New Forests, and his company was developing projects in all three areas to yield saleable credits.

“If the remaining ecosystems aren’t priced then they are basically traded as free input to the expansion of agriculture,” Brand said from Sydney.

“So the objective here is to give them a price that slows that process and makes alternatives to conversion more economically attractive.”

Earlier this year, Sydney-headquartered New Forests signed a deal with the government of Indonesia’s Papua province and Indonesia-based Emerald Planet, which advises and invests in green projects.

The aim of the Papua project is to save two tracts of forest from development in return for carbon credits estimated between US$4 and $10 a ton per year.

The two areas, each about 100,000 ha (250,000 acres) in Mamberamo and Mimika regencies and largely in pristine state, had been previously surveyed for oil palm, cassava and sago palm plantations and about half in total had been slated for clearing over the next 10 years.

By preventing that, Brand said, initial estimates showed the project could save between 20 million and 40 million tons of carbon dioxide being emitted over 15 to 20 years.

A major portion of money from the sale of the credits would go to the local community to be managed through an independent, perpetual endowment fund.

MONEY FROM WATER, ENDANGERED SPECIES

Brand said the project was in the process of applying for licenses and then validation under the internationally recognized Voluntary Carbon Standard before emissions offsets would be available for sale, possibly by early 2010.

New Forests, which says it manages $200 million in assets throughout Australia, New Zealand, the United States and the Asian region, has also helped develop the Malua BioBank in Malaysia’s Sabah state on the island of Borneo.

The project involves the protection and restoration of 34,000 hectares (80,000 acres) of orangutan and clouded leopard habitat for 50 years.

The scheme has generated 1.36 million of biodiversity credits, a new class of environment product for sale by emissions markets, and each credit covers 100 square meters of forest.

So far, 21,500 credits have been sold at US$10 each to Malaysian firms and Brand said his company was in negotiations with a few large firms to sell sizeable blocks of Malua credits.

“We see forests as having an intersection with the three major environmental issues of the 21st century, which are climate change and the carbon cycle, biodiversity and conservation and fresh water,” he said.

“We’re trying to create a set of initial deals that demonstrate the monetization of carbon, water and biodiversity.”

He said New Forests was working on a couple of water deals and expected to make an announcement early next year.

Rather than spend billions on secondary water treatment, it was better to clean up catchment areas fouled by excessive fertilizer use or salt or silt through deforestation, he said.

In particular, Brand pointed to rampant fertilizer use from booming corn ethanol developments along the Mississippi River that was creating a vast dead zone in the Gulf of Mexico. Australia’s Great Barrier Reef was also being damaged by silt run-off from nearby rivers draining sugar and other plantations.

One idea was to figure out the cost of such damage and, if possible, create a trading scheme that encouraged farmers reduce fertilizer use or soil loss.

“We can act as the intermediary bringing capital to aggregators who will build pools of these nitrogen or phosphate reductions, and pay them and we can sell them in bulk,” said Brand, but declined to give details on water deals under discussion.

Editing by Clarence Fernandez

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