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September 21, 2017

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Forest conservation markets slowly turn to REDD

WASHINGTON -- As U.N. talks keep failing to agree how to raise money to protect forests, private investors are testing a trade in credits to slow the deforestation that emits as much carbon as all the world's cars, ships, trucks and planes.

French bank BNP Paribas is one of a handful of financial institutions and investment funds entering the risky but potentially lucrative market for REDD "credits" — units representing one ton of carbon dioxide not emitted because a forest was left standing.

Last September, BNP's commodities derivatives arm provided US$50 million to Wildlife Works, a conservation project developer designing a portfolio of projects to reduce deforestation and degradation (REDD) in Africa.

In that deal, BNP also acquired the rights to buy up to 1.25 million carbon credits over the next five years from Wildlife Works' flagship project in Kenya's Kasigau corridor.

This scheme aims to protect over 500,000 acres (202,400 hectares) of forest, secure a wildlife migration corridor between two national parks and bring sustainable benefits to local communities through education, jobs for rangers, and an "ecofactory" to produce organic cotton clothing.

But such carbon credits have only found demand in a small, thinly traded voluntary carbon market, as countries struggle to agree new, binding emissions cuts under U.N. climate talks where acrimony lingers after the failed Copenhagen summit in 2009.

"There is growing impatience with the multilateral process, not only from practitioners such as myself, but more importantly, from many forest countries themselves," said Christian del Valle, environmental markets and forestry director at BNP Paribas.

"Thus far the multilateral process has not delivered meaningful on-the-ground results, and forests continue to be lost because the only accessible price signal today indicates they are worth more cut down than standing," added London-based del Valle, who is driving the bank's investment in forest protection in Africa and Latin America.

A full U.N. climate deal could create a market through which rich polluting countries can buy carbon credits, paying for forest protection in the process, just as they pay for clean energy projects now under the Kyoto Protocol's existing carbon offset market, the Clean Development Mechanism (CDM).

So far the only demand for forest carbon credits has been in the voluntary carbon market, worth US$424 million last year, which lacks the binding rules that underpin the CDM.

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