Change in Aceh hinders carbon plan

Michael Bachelard
Sydney Morning Herald, June 9, 2012

A HUGE Australian-owned forest-carbon project in Indonesia has stalled and may need to be abandoned entirely because of a recent change of government in the province of Aceh.

Australian businessman and former chief of the Australian Prudential Regulation Authority Jeff Carmichael has outed himself to The Saturday Age as a seven-figure investor in the Aceh project run by Dorjee Sun, environment entrepreneur and star of the 2009 documentary The Burning Season.
But Dr Carmichael acknowledges that, due to ''political risk'' in Indonesia, he might lose the money he's already spent.

Villagers from Kayee Lon, Aceh, are paid to clear the forest from a local peat swamp. Photo: Michael Bachelard

The project, called Ulu Masen, is just one of a number of forest carbon projects which have faltered or been abandoned in Indonesia as the early hype over REDD - Reducing Emissions from Deforestation and Forest Degradation - proves vastly exaggerated.

Publicly funded REDD schemes in Indonesia have also come under fire recently, with Greens leader Christine Milne proclaiming an AusAID project in Kalimantan that has already cost $30 million ''a failure''.
Ulu Masen was designed by Mr Sun and then Aceh governor Irwandi Yusuf in 2007 to preserve 770,000 hectares of prime Aceh forest, including carbon-rich peatland. It was intended to generate millions of carbon credits to be sold on the world market.

The money would go back to the Aceh government, the project's proponents and to local people to help preserve the forest from oil-palm plantations, loggers and miners.

But so far no carbon credits have been generated or sold and the project has not achieved verification from independent certifying bodies.

Dr Carmichael said he had pledged a "seven-figure sum" of his own money to help Ulu Masen gain certification. However, that process had stopped because, since Mr Irwandi was ousted in elections two months ago, the new governor, Zaini Abdullah, has not agreed to a meeting. A spokesman for Mr Zaini told The Saturday Age that the project was "under review".

Dr Carmichael conceded he may lose the money he has spent so far.

''Subject to having a governor that confirms to us that he's committed to seeing it through, we're committed to staying with it,'' Dr Carmichael said.

''If he's not, it probably comes to a stop. No point putting money into it. We would lose every penny that we've put into it, absolutely.''

Since 2007, Indonesian forests have been at the centre of Australia's hopes for an international trade in REDD credits. But now, on the verge of the carbon tax being implemented, there are serious doubts about whether REDD can ever work on a large scale in Indonesia.

Dr Carmichael said he remained convinced that REDD was a legitimate means of offsetting industrial emissions, but agreed that ''political risk'' could make it difficult in Indonesia, which has one of the highest deforestation rates in the world.

''Indonesia probably wasn't my first choice of country because I have worked there in the past and I know the difficulties,'' Dr Carmichael said.

''But Aceh under Governor Irwandi seemed to have all the right credentials.''

Mr Sun said Australia did have a chance to help Indonesia by using its carbon price - which at a starting price of $23 a tonne is higher than the global price - to encourage Aceh.

''If Australia could step in and say, 'Hey, we're going to buy carbon from REDD, but we're going to focus on bilateral arrangements' … that could single-handedly give us a reason why the new governor of Aceh would step up and say … 'We're going to have Aceh-ready credits for export in a year's time','' Mr Sun said.