Palm oil companies trade plantation concessions for carbon credits from forest conservation

24 July 2009

Indonesian palm oil producers are eying forest conservation projects as a way to supplement earnings via the nascent carbon market, reports Reuters.

Frank Momberg, Fauna and Flora International's Asia-Pacific director for program development, told Reuters' David Fogarty that plantations companies have agreed to forgo converting rainforest areas in West Kalimantan on the island of Borneo in exchange for a share of the revenue generated from the sales of forest carbon credits. Forest conservation is expected to be an important emissions mitigation mechanism under the next global climate treaty, with tropical countries earning carbon credits for reducing deforestation.

Peat forest conversion in Kalimantan, Indonesian Borneo.
Forestry companies are well-positioned to benefit from the potential mechanism, which is known as REDD for Reducing Emissions from Deforestation and Degradation. Logging companies and plantation operators that agree not to develop their existing concessions stand to potentially earn credits for preserving carbon locked up in forest vegetation that would otherwise be released by deforestation. Provided credits could be used by companies and countries to meet emissions reductions obligations, earnings from REDD could be substantial, and in some cases comparable to the proceeds from logging the forest or turning it into plantations, according to a pair of studies published earlier this year in the journal Conservation Letters.

Oil palm plantation and forest in North Sumatra

Fauna and Flora International (FFI) said that Sinar Mas and First Borneo Group are involved in the West Kalimantan project, which is based in a 90,000-hectare tract of carbon-dense peat swamp forest in Kupuas Hulu. FFI estimates the first phase of the project, which covers 46,000 hectares, will avoid 2.8 million tonnes of CO2 a year over a 10-year period. FFI is also developing carbon conservation projects in the Sungai Putri peat swamp in West Kalimantan (60,000 ha) and Papua, on the island of New Guinea (250,000 ha) as well as a separate community forest project in West Kalimantan (30,000-50,000 ha). FFI is involved with the 750,000-ha Ulu Masen project in Aceh, on the island of Sumatra.

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