December 21, 2005

British Biologist Uses Carbon Trading to Grow Forests

By Clarence Fernandez

KUCHING, Malaysia -- British biologist Ian Swingland took up the idea of trading commodities to fund afforestation programs after he witnessed the devastation caused by logging in the Malaysian rainforests of Borneo in 1998, two decades after his first visit there.

Swingland lived alone for two years in the 1970s on the coral atoll of Aldabra in the Indian Ocean. There he studied the giant tortoises, numbering around 154,000, the island's only other inhabitants.

Now his company has bought about 10,000 hectares (25,000 acres) of Kangaroo Island, Australia's third-largest island, to demonstrate that afforestation can offer a major investment opportunity through trading in carbon credits.

"Conventional conservation is a disaster story," Swingland, the founder of Britain's Durrell Institute of Conservation and Ecology at the University of Kent, said in an interview.

"What isn't a disaster is where you make a business of it, and everybody's lives are improved by it, and we give them ownership of their own future."

Kangaroo Island, off the state of South Australia, is home to two nature reserves with koala populations, but about 34,000 hectares (85,000 acres) of native bushland exists on privately held land.

"We are going to reforest the area with pine and eucalyptus species that are indigenous to the island," said Eric Bettelheim, chairman of Sustainable Forestry Management Ltd, the company he and Swingland have set up with a third partner.

Carbon trading is a key part of the European Union's strategy to cut emissions of heat-trapping gases under the Kyoto Protocol.

The EU Emissions Trading Scheme, launched this year, covers 11,500 European manufacturing plants and power stations and lets companies that emit below their limits sell credits into the market where they trade as a commodity. Under the scheme, 230 million tons of carbon dioxide, which is blamed for global warming, have been traded. Industry groups forecast the value of business this year at $5.3 billion.

A major initiative in trading of emission credits is the clean development mechanism that gives companies credits for funding environmentally friendly projects in developing nations.


Other scientists welcomed Swingland's initiative at the meeting in Sarawak, one of the two Malaysian states on the island of Borneo, which teems with luxuriant plant and animal life.

"I think it's a win-win situation," said Mick Poole, former chief of Australia's CSIRO Center for Environment and Life Sciences and an expert on how climate change affects farming.

"Not only do you put in trees, it has other benefits, such as improving soil salinity, and the watershed, and so on."

New South Wales is the only Australian state where carbon is traded, said Noel Ryan, a climate change analyst with the Wilderness Society. But other states and national territories are in talks to establish a national emissions trading system.

"There's a lot of opposition from the federal government at the moment, but everybody expects that there will be carbon trading everywhere in the future," Ryan said.

Analysts say Australia's federal government, which is not a signatory to the Kyoto Protocol, believes that putting caps on emissions of gases would hurt industry, and curb job growth.

Sustainable Forestry Management, which has similar projects in 13 countries from Brazil to Morocco and Tanzania, chose Australia for its mature financial and forestry sectors and experienced local partners who could meet Western standards of accountability and transparency, Bettelheim said.

Trees in tropical countries store far more carbon than those in more temperate zones, offering Asia an edge in the carbon storage business, said Bettelheim, a lawyer who worked on derivatives trading contracts in Chicago.

"There's a lot of rain, a lot of sunshine, and it never freezes," he said. He estimated that a tropical tree could absorb up to 15 tons of carbon from the atmosphere each year, against just one ton for a tree in a temperate zone.

Sir Peter Crane, director of the Royal Botanic Gardens at Kew, agreed with Bettelheim. "I could believe that," he said. "It's quite likely that you have a lot more biomass locked up in lowland forests. I could believe certain types of forests in the tropics, not all forests, but certain types of forests."

Bettelheim said his company had 24 investors, mostly individuals, who had poured in tens of millions of dollars. But he gave no names or sums.

The firm hopes to start operations in Asian countries such as Malaysia or India once they begin to frame legal and financial rules to permit carbon trading, he added.

Malaysian officials are examining carbon trading regimes across the world to understand how they could benefit.

Sarawak forestry official Cheong Ek Choon said the state was studying different nations' schemes but had made no decision.

"Some types of plantations qualify, some don't," he said. "At least now there is some monetary value being placed on trees."

Chief Minister Mahmud Taib said it was a tough balancing act to weigh Sarawak's development needs against conservation aims, and only the prospect of concrete benefits would spur people to protect the environment.

"As you know, this carbon sink scheme has never taken off the ground very much," he said. "If you don't even have incentives, how can you get people to look after the environment?"