October 4, 2010 / 7:59 AM / 9 years ago

Indonesian plantation giant signs forest CO2 deal

* Indonesian paper giant APP to preserve Sumatran forest

* Aims to sell carbon credits on voluntary market

* Sceptical greens point to APP plans to log elsewhere

By Sunanda Creagh and David Fogarty

JAKARTA/SINGAPORE, Oct 4 (Reuters) - Indonesian pulp and paper firm Asia Pulp and Paper (APP), accused by green groups of large-scale deforestation, has signed a deal to protect a large area of forest in return for carbon offset revenue.

The deal is the first privately funded project turning a pulpwood plantation concession into a carbon reserve, said APP.

The deal with APP and Singapore-based Carbon Conservation, which helps governments protect areas of forest, is to set aside 15,640 hectares (38,650 acres) of peat forest in a 33-year pilot project aimed at encouraging plantation firms to become greener.

The land on the Kampar Peninsula on Indonesia’s Sumatra island had been earmarked for clearing by concession holder PT Putra Riau Perkasa, a supplier to APP, but the two firms have agreed to work with authorities to preserve the forest instead.

APP said the deal was the first for the company as a way to save the forest and boost livelihoods from the sale of carbon credits.

Greens and analysts criticised the deal, saying the area protected is tiny compared with the amount of land APP and its pulp suppliers have cleared or is under threat of clearance.

APP and other plantation firms have become embroiled in a dispute with environmentalists over the destruction of Indonesia’s rainforests. French retail giant Carrefour has stopped buying certain products from APP, citing environmental concerns.

Forests play a key role in fighting climate change by soaking up huge amounts of planet-warming carbon dioxide emitted from burning fossil fuels such as oil and coal.

APP is part of the Sinar Mas empire founded by the Widjaja family, which also runs Golden Agri-Resources, the parent company of palm oil firm PT SMART Tbk.

The APP project covers an area about a fifth the size of Singapore, rich in plant and animal species and sitting on top of peat that, if cleared, would release large amounts of carbon.


“The Kampar Carbon Reserve is a gift from Indonesia to the world,” said Aida Greenbury, sustainability director for APP.

Greenbury said the area would be audited to calculate the amount of carbon and how much could be locked away annually based on a plan that would include protection from fires and illegal logging and enlisting help from communities in the area.

Greenbury and Dorjee Sun, CEO of Carbon Conservation, said the goal was to design the project to meet rules laid out by the respected Voluntary Carbon Standard, which aims to make forest carbon projects transparent and credible for investors.

“We actually think this is a huge opportunity to create a working commercial pilot so that everyone can see that good behaviour need not be a loss-making endeavour,” Sun told Reuters.

He said he recognised there were risks but felt it was better to engage APP and try to improve industry practices.

He estimated it would be at least two years before the project would produce CO2 credits for the voluntary market.

Conservationists said the deal, backed by the Ministry of Forestry, was a start but wouldn’t improve APP’s image overnight.

“While we support the conservation of the Kampar, this project in no way makes up for the tremendous amount of damage that APP and its affiliates are having on rainforests and peatlands across Indonesia,” said Lafcadio Cortesi of U.S.-based Rainforest Action Network in emailed comments to Reuters.

Sinar Mas and APP have had a major role in generating carbon emissions through conversion of natural forests and peatlands, said Christopher Barr, a forest industry analyst with U.S. consultancy Woods & Wayside International.

He said Sinar Mas and APP had been expanding pulp and paper capacity in both Indonesia and China in recent years.

Greenbury said of the 2.5 million hectares in concessions managed by APP pulpwood suppliers, about 1 million had been set aside for a wide range of uses, including conservation areas, community use and indigenous species development. (Editing by Robert Birsel)

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