The Profits of Conservation?

So you have listened to the claims of people selling carbon offsets and you decided they are selling snake oil, they have come up with something better than a ponzi scheme, that they are no better than the drunk monks peddling indulgences on carts in the medieval forest- well think again.

A recent article by Michael Casey out of Bangkok, Thailand offers a strong argument that carbon credits just may be the answer to environmental stability- and turning a profit in a tough global economy. Casey reports that selling carbon credits for billions of tons of carbon in Indonesian tropical rain forests may earn as much profit as their other potential fate- turning them into palm oil plantations.

The claim is based on a study in the Conservation Letters. In addition to the equivalent profit claim, the article also states that conserving the 8.2 million acres in Borneo would boost the region’s biodiversity, preserving the habitat and livelihood of 40 of the regions threatened mammals like orangutans and pygmy elephants.

"Our study clearly demonstrates that payments made to reduce carbon emissions from forests could also be an efficient and effective way to protect biodiversity. We now need to see policy discussions catch up with science because at the moment the potential co-benefits of linking forest protection to biodiversity are not getting the attention they deserve," said Oscar Venter, conservation biologist and lead study author.

Quite a sales pitch. Is it really more profitable to leave a rain forest alone than it is to turn it into a palm oil plantation? Palm oil is in everything from cosmetics to ice cream, and demand for it is rising around the world, especially in countries like the United States, China and India. The market is expected to grow as demand for biofuels grows to supply the cleaner energy demand.

87% of the world’s palm oil is made in Indonesia and Malaysia. To get all that palm oil the countries have basically traded in their rain forests. Indonesia currently has over 15 million acres of plantations and is planning to convert more. New climate change mandates that will take over for Kyoto require countries to be compensated for protecting their rain forests, so that is where the potential profits come into play. One plan is to basically pay countries to reduce their emissions from forests by giving them credits to sell on the international carbon market.

Hmm. Somehow that keeps the bounty on their forests in the hands of the “open market.” The study estimates that conserving the forest would be more profitable if credits could be sold for between $10 and $33 per ton. The current rate is $20. For those who don’t know, a carbon market, often called “cap and trade” turns carbon allowances for a company or country into carbon credits. They can then be bought, sold or traded on an open market, much like the stock market.

The World Bank is involved, of course. Tim Brown, a natural resources management specialist, said the study’s findings seem reasonable based on growth projections for carbon markets over the next two decades. But in the end, governments in Indonesia and Malaysia can be pretty sure that palm oil is going to make a lot of money. Convincing them that they will make more by trading carbon credits in an as yet uncreated system will be tough.

"It's not only that the carbon markets are uncertain but the guy trying to access the carbon market is uncertain how to do it," said Brown. “He knows where to go to sell his oil palm. He knows these people. With the carbon market, who does he call? It's not a smooth and frictionless market."

And at the end of the day, money talks and rain forests walk. While that study may be a light in what often feels like an endless darkness, you have to figure a natural resources management specialist for the World Bank knows what he’s talking about, right? I mean, who else would be able to state a good case for the future of climate credits, right? Who else could be in charge of helping people trust and access a new open market meant to protect and manage the natural resources while preserving the banks of the world, right?

Good to hear you’re working hard on that one, Tim.