|Home > South-East Asia >> Aceh|
Credits lost in tangle of Aceh's forest
Sydney Morning Herald - June 8, 2012
At the same time, climate change was killing John Howard. An Inconvenient Truth was playing on Australian screens, the Stern Review shocked the world and Kevin Rudd was capturing the popular mood that something – anything – must be done.
Howard and Sun both found climate salvation in the same place – the tropical peat forests of Indonesia.
"What are we going to do now, this year or next year, to make a difference?" Sun asks in his documentary, The Burning Season. "Because the forests don't have that long."
Howard's election year silver bullet was his version of a "direct action" pledge, which cleverly skirted his refusal to sign the Kyoto Protocol. Australia would start a global fund to fight forest destruction with the aim of halving the rate of deforestation and reducing greenhouse gas emissions by 3 billion tonnes a year, 10 times the emissions reductions under Kyoto.
That December, the United Nations caught up, agreeing in Bali amid backslapping and cheers to accept REDD – Reducing Emissions from Deforestation and Forest Degradation – as a way of tackling greenhouse gas emissions.
Five years on, the silver bullet has misfired. The REDD schemes in Indonesia, funded with Howard's money, have come under serious criticism for overstating their aims and underachieving. The Greens leader, Christine Milne, recently labelled the largest of them a "total failure".
The private sector has fared even worse. Most of its schemes in Indonesia have faltered or fallen spectacularly, recriminations flying.
Sun's landmark project is one of them. A deal he set up with the government of Aceh to develop a carbon credit scheme has stalled, perhaps fatally, and 770,000 hectares of forest is in limbo.
Sun himself, in the eyes of environmentalists, has sold out. For cash and shares worth millions, he sold half his business to a Canadian goldmining company, whose aim is to turn a forest-clad mountain-top into an open-cut mine using cyanide leaching to extract the riches.
His partner in the effort, former Aceh governor Irwandi Yusuf, was so disillusioned with REDD he accused the global community of using his region as a "carbon toilet".
Five years after high tide, Indonesia remains one of the world's biggest deforesters. Once Australia's best hope for REDD, it is yet to generate a single carbon credit or earn $1 for preserving forests. Credible observers wonder if it ever will.
For the Gillard government, this is more than a historical problem. Labor's carbon-trading scheme, which begins its fixed price period on July 1, needs a big supply of carbon credits sourced from other countries. Without 434 million tonnes of offsets bought offshore a year by 2050, the Treasury believes Australia cannot meet its modest greenhouse reduction targets.
It was believed saving Indonesian forests could supply many of these offshore credits quickly and cheaply. As things stand, even if a global carbon trade materialises, many wonder if Indonesian forests can ever play a part.
"REDD? It's like farting," one local villager says between sips of the famous coffee in Aceh, Indonesia's wild, westernmost province. "It's like selling air. It doesn't make sense."
We are in the heart of the massive Ulu Masen project, where ordinary people probably know more than most about REDD.
In concept, REDD is simple. Every tonne of carbon which is locked up in peat lands or inhaled by trees, and saved from logging or palm-oil plantations, creates carbon credits.
These credits can be sold to big companies who cannot reduce their own emissions for a lower price, and the profits go to the forest communities, local governments and project proponents.
In theory, it's win-win-win: emitters gain access to cheap credits; the forests and their orang-utan, tiger and elephant populations are preserved; and the income replaces the money on offer from the loggers, miners or palm-oil plantations. But these benefits have been excruciatingly slow to emerge.
Anwar Ibrahim is a farmer and a mukim – the leader of several villages – in an area at the edge of the Ulu Masen conservation area. He sits with his family on the wooden floor of a hut in one of his paddocks near the village of Sayeng, chuckling. REDD, it seems, amuses him.
"They're talking about selling air! But it's not whether I agree or disagree with that expression, it's simply that it doesn't exist, it doesn't happen."
Ibrahim has attended multiple meetings – he counts 31 since 2007 – on the concept of REDD. At a recent meeting, they were warned solemnly about potential corruption in a program that does not even exist.
This area was the hardest hit of all in the 2004 tsunami, and non-government organisations of all sorts helped rebuild it. The only ones, Ibrahim says, whose advice has been worthless are the ones spruiking REDD.
"They invite people and then we all go and sleep in the Hermes [Banda Aceh's only luxury hotel] and, after that, nothing happens... It's useless. The story of REDD is just a lie."
Ibrahim is careful to make clear he wouldn't mind being paid to save the forests. He turns to me, grinning broadly, and says: "Australia! Send us your money!"
He insists, however, there is no need for it because the local people have learnt to look after the forest anyway. But about 20 kilometres down the road, the smell of recent burning belies his faith.
Here, near the village of Kayee Lon, the ground is black, the forest devastated. This fire is fresh, was deliberately lit and was designed to clear the forest for palm oil. An 11-man crew, living in an open-sided wooden hut, are clearing the burnt trees then cutting down more. They chop them up for firewood. Their leader, Safari, says they have been working for local landowners since 2007, clearing forests at the rate of about 15 trees a day.
Safari says his team have often seen orang-utans retreating further into the remnants of the tangled, swampy woods as they go about their work.
The ground underfoot is soft. Step too heavily and your foot sinks deep. This is peat and it contains millions of tonnes of carbon dioxide. As long as the water-soaked forest is intact, the carbon remains locked in place. But as soon as it is cut and burnt, then drained via canals for agriculture, the woody mass – which can be metres thick – decomposes, releasing its stores of carbon dioxide into the atmosphere.
Sumatra, Borneo and West Papua contain some of the richest peat forests in the world. Those in Borneo hold up to 70 times the carbon emitted annually by the combustion of fossil fuels worldwide.
The forest in this beautiful, mountainous province remains relatively intact because, for decades, the fierce combatants in the Free Aceh Movement's separatist battle against Indonesia used it for refuge.
But that is changing as people seek economic opportunities. The burning in Kayee Lon is probably illegal. Under national laws, clearing deep peat is prohibited. But good luck getting these laws enforced. On one fire-scarred plot, marked and unmarked police cars unload oil-palm seedlings. Workers tell us "high-ranking officials" from the police own the land.
"Everyone has a permit," says a worker, Syukul, on a neighbouring piece of land.
This may well be true. In rural Indonesia, landownership is rarely clear. Perhaps the local bupati (the equivalent of a mayor) has issued a permit to farmers with claims over these plots. Perhaps the regional government has done so. Someone, somewhere may have been bribed.
When democracy came to Indonesia following the resignation of president Suharto in 1998, the government in Jakarta radically decentralised, conferring significant power on local authorities and regional governments. These local governments have the power to issue permits over land, but have very little scrutiny.
Corruption is rife, and the judges are as bad as the bureaucrats. In Aceh, 20 million rupiah ($2120) is enough to get criminal charges dismissed.
In Indonesia, it's not just the forest that's tangled and impenetrable.
But when Sun first came to Aceh in 2007 and sold the miracle of REDD to his new friend governor Irwandi, none of this seemed like an obstacle and it is not suggested that either has acted dishonestly.
"I did make a lot of promises to him," Sun tells the Herald. "I painted a picture which, I guess, only a naive 29-year-old can do, which was, 'Hey, Gov! Trust in this market which is going to happen and you will be paid for this forest protection'."
Sun and Irwandi's plan was to save 770,000 hectares of the forest, home to 982,000 people as well as orang-utans, elephants and Sumatran tigers. Every year for the next 30 years, 3.4 million tonnes of carbon dioxide emissions would be avoided and the credits sold on the global carbon market.
They even convinced US brokerage firm Merrill Lynch to trade the carbon credits for them in an options deal worth up to $10 million. The deal made modest celebrities of Sun and Irwandi; Merrill Lynch won the 2008 Carbon Finance Transaction of the Year.
Sun is not so naive now. The contractual negotiations were gruelling, and the local politics between the five bupatis was complex. Even an accurate map of the area proved elusive. Then last year, his sponsor, Irwandi, became involved in a fight for his political life which, two months ago, he lost.
A spokesman for Irwandi's replacement as Aceh governor, Zaini Abdullah, would say only that everything to do with Ulu Masen was now under review.
Jeff Carmichael, a businessman and foundation chairman of the Australian Prudential Regulation Authority, has a "seven-figure sum" invested in Sun's project. He remains fully supportive of Ulu Masen, but says the biggest risk had always been Aceh's politics. If the new governor went cold, the project "probably comes to a stop; there's no point putting more money into it," he said.
In Sun's view, the biggest problem was the failure of the global community to come up with a large-scale carbon market for REDD credits.
Carbon credits are bought and sold on what's called the "voluntary market". Airline companies use this to offset the emissions from their flights, as do some manufacturing companies, to paint themselves green.
If a global trading market evolves under the UN's painfully drawn-out processes, it would be a "compliance market" which would be vaster, deeper and able to provide financial incentives to develop REDD schemes. But the only existing market, run by the European Union, does not accept forest credits.
So, as illegal burning and mining continues, Sun's project is becalmed. Forest rangers are employed to protect the trees, but some "still cut the trees themselves", says Firman Hidayat, who once helped train people here in REDD.
Sun says he has not given up, but he has changed his idea of what's possible. He is now focused on "REDD 2.0" – doing direct deals with big companies to protect remnant forests within their concessions.
In Ulu Masen, REDD 2.0 meant ceding a forest-clad mountaintop, Miwah, a half-day trek from the nearest road, to a company that wants to turn it into a 6000-hectare, open-cut gold pit.
In May last year, Sun sold half the shares in Carbon Conservation to the Vancouver-listed miner East Asia Minerals for $US700,000 plus 2,584,210 shares in the mining company. At the time, the shares were worth $13.3 million.
The gold under Miwah is worth $5 billion, but East Asia Minerals does not have a permit to mine it because it lies underneath protected "primary forest".
Environmentalists have accused Sun of allowing the company to improve its chances of gaining government approval by "greenwashing" the venture. But Sun says the deal was a genuine attempt to sacrifice a small part of Ulu Masen to protect the rest. The miner would pay "substantial" royalties to save the forests outside the actual mining zone.
Sun says the gold company's former chief executive Mike Hawkins was sincere in his desire to develop "green gold" – an environmentally friendly product that could be compared to "blood-free diamonds", using green mining techniques.
But East Asia Minerals has changed chief executive twice since then. Late last year, it installed Ed Rochette, a renowned international mining Mr Fixit who told a recent conference in Bali that Indonesia was, "without a doubt, one of the top three places [in the world] for current investment in mineral projects".
Sun concedes that Rochette regards the "green gold" deal as "not really something that he would have done". Any pretence of special mining techniques has also disappeared from the company's releases – Rochette said in January that "the ore [at Miwah] should be able to be processed in a conventional gold cyanidation circuit".
The gold deal has severely dented Sun's reputation in Aceh.
"They heard it and said, 'Oh, we are cheated'," Hadi Daryanto, the secretary-general of Indonesia's forestry department in Jakarta, recalls. One of Irwandi's environment advisers, Wibisono, said: "It just got rid of all the trust we already gave to Dorjee".
"People started to think that... the intention was not to protect the environment, [but for Sun] to occupy all that land and then, later, on-sell it to the mining company or plantation."
Since then, Wibisono says the mining company have tried every method possible to have the forest recategorised.
For his part, Irwandi has become morbidly disillusioned with the failed promise of REDD. Three months after Carbon Conservation inked the Miwah deal, Irwandi issued a permit for a palm-oil company, PT Kallista Alam, to use 1605 hectares of peat swamp for a plantation in the Tripa conservation zone.
When the peat swamp burnt, killing an estimated 100 orang-utans, Irwandi said the environmental disaster was his "pinch" – a wake-up call – to the world.
"The international community think our forest is a free toilet for their carbon," he told the Herald in April. "I wanted some funds to create a livelihood for people who lost their jobs [when the forest was locked up]. The money did not come. REDD or blue I don't care. Where is the international attention on that?"
Sun said he was still on good terms with Irwandi, and argued passionately that the deal with the mining company was pragmatic and necessary.
"In Indonesia... do you think $5 billion of gold would end up never being extracted? Honestly? I knew whether it was them, or a tycoon, or the new governor's brother, or some minister's cousin... someone is going to get that gold," Sun said.
Better that it be exploited by a listed international company with corporate responsibilities to shareholders. He agonised over the deal and agreed it might take 30 or 40 years before we knew if the decision was the right one.
"I'm probably not going to go to environmentalist heaven any more... But far out, man! Shit. I mean, five, six years in Indonesia, you realise that you've got to play the game smarter."