Implementing REDD in Papua, Indonesia

An Introduction to New Forests Pty Limited

Implementing REDD in Papua, Indonesia
Presentation to ANU SeminarJune 16, 2008

Marisa MeizlishDirector, Advisory [email protected]

Presentation Overview

Introduction to New Forests Pty Limited

Conservation as an alternate business model

New Forests work in Papua

Implementing a REDD project with the Government of Papua

Next steps

Remaining questions

New Forests Pty Limited
Forest investment management and advisory services company headquartered in SydneyOpening Asian office in Kota Kinabalu, Sabah in June 2008Most of New Forests investments include forestry plus eco-assets but increasingly focus on eco-assets as direct investmentsSpecialize in Australia, New Zealand, the Asia-Pacific region and the United States; approximately $200 million in assets under managementRaised $100 million Eco-Products Fund in 2007 (source of Funds for project in Papua)

Valuing natural forests
Global forest conversion in tropical regions soy, palm oil, beef, timber Biodiversity, carbon stocks, watershed management are being lost International move towards pricing nature carbon markets, biodiversity investment models, water/salinity credits

The International Carbon Market is Growing Rapidly

Global Carbon Market in 2007

Conservation in Global Carbon Markets
Kyoto trading mechanisms only allow for reforestation/afforestation projectsEU ETS does not allow forestry offsets of any typeEmerging market in California allows reforestation/afforestation, improved forest management and conservation U.S. Lieberman-Warner bill has provision for set asides under the domestic cap for investment in international forest conservationAustralia ETS rules not yet defined but national efforts to reduce regional deforestation have been initiated

> general trend toward greater inclusion of forestry project types and commitment to forest conservation

Potential Value of Conservation 2007 became a watershed year
Avoided deforestation remerged as part of global Kyoto negotiations Culminated in the Bali Roadmap (Kyoto COP13) policy incentives and positive incentives to reduce deforestation World Bank Forestry Carbon Partnership Facility Government commitments (i.e. Australia, Norway) looking at options for funding tropical forest conservation Voluntary Carbon Standard market entry for high-quality REDD credits

New Forests Study: Conservation as an alternate business model

Chart1

91500

91500

90463

88950.5

87043.5

84806.375

82290.25

79536.25

76578

73443

70153.875

66729.875

63186.875

59538.75

55797.375

51972.875

48074.125

44133.5

40190.5

36245.625

32299.5

28352.375

25441.5

23005.5

20963.625

19251.625

17818.375

16622.875

15631.5

14816.75

14156.125

13630.25

13223.375

12921.625

'000 tonnes CO2-e

assumed saleable avoided deforestation CO2-e t

Convert

CO2-e stored in a 250,000 harvestable area assuming harvesting over 20 years and subsequent degradation

Disclaimer

Quantification of carbon position for avoided deforestation in Papua (Indonesia)

Prepared for Fung Wingah

Copyright New Forests Advisory, 2007

DISCLAIMER

This analysis has been prepared by New Forests Advisory on behalf of Fung Wingah.

Any forward looking statements, financial projections, estimates of carbon credit prices and other assessments in this report may be based on a number of assumptions, any of which could prove to be incorrect. The recipient should use their own judgement i

This model has been produced for the exclusive use of Fung Wingah and should not be circulated or released publically without the permission of New Forests Advisory. New Forests Advisory does not endorse the use of this report by any other party.

Model assumptions

Model assumptions

1. Crop type data

Harvesting schedule

Total area250,000haPapua currently unlogged HPH estate assumed to be cut over in 20 years

Rate/yr5.0%to 2040

Fate of land

Convert100%- land use changes to grassland due to fire and other activitycan assume 100% converts as only easiest 1/3 of resource has been cleared

Revert0%- land use reverts to native vegetation after harvest

Conversion assumptions

decay rate0.3/yr

initial stock366t CO2-e /ha

minimum stock50t CO2-e /ha

loss rate from fire0.1/yr

Intial %

remaining standing65%

remaining pushed25%

removed from site10%MC approx 20 m3 of logs harvested multiplied by 1.5 expansion factor to get to t CO2e

Reversion assumptions

decay rate0.3/yr


Intial %


remaining pushed25%

removed from site15%

2. Revegetation costs

EstablishmentYear 0Year 1Year 2Year 3Year 4privateMirroolBB swampchannelsMI reveg

Rip$85011111

Weed control$120$12011111

Watering$100$10011111

Fencing$2,61610.50.250.750.25

Seedlings$50011111

Planting$60011111

Feral control$100$10001111

Refilling$10001111

Firebreaks01111

Contingency01111

Other operational costsCostYearprivateMirroolBB swampchannelsMI reveg

Item 1$0001111

Item 2$0001111

Ongoing (annual) costsCostprivateMirroolBB swampchannelsMI reveg

Weed control$501111

Feral/pest plant$501111

Fire control$1001111

Fencing maintenance$201111

2. Carbon pool costs (accounting, establishment and ongoing management)

Accounting specifics

Uncertainty factor85%

Risk buffer90%

Registration fee$0.15per NGAC

Brokerage fee$0.10per NGAC

Accreditation date1/1/08intital vintage2008proportion of year1.00

Carbon pool establishment

Preliminary investigations (sunk costs already committed)

NFA stage 1$23,450

NFA stage 2$48,200

Grapevine sampling$13,450

Estimation/accounting

Plantation inventory data$3,000

Revegetation inventory data$3,000

Vineyard inventory$10,000

Orchard biomass sampling$15,000

Orchard inventory$4,000

Age class assessment/verification$3,000

Accounting system (+ uncertainty)$14,000

Accreditation/legal

Legal - carbon pool structure$20,000

Legal - landowner contracts$20,000

Systems development - record keeping$10,000

Accreditation documentation$7,000

GGAS verification as ACP$25,000

Registration of CS rights (MI)$500

MI internal development

Carbon pool program development$20,000

Ongoing carbon pool management

Independent verification$0annually, with additionalevery 5 years while selling NGACs

Inventory costs$0annually

Carbon accounting & reporting$0while selling NGACs, thenevery year after that plusevery 5 years

Revision to growth models$0in year

Additional biomass work$0in year

Nick O'Brien:ACP = abatement certificate provider

Nick O'Brien:marketing to landowners, payments to landowners,general development

Financial assumptions

Financial assumptions & results

Assumptions

US$

CPI0.0%not currently usedKyoto18

Discount rate for NPV15.0%real

Accreditation date1/1/08

Avoided deforestation carbon priceVintage20092010201120122013201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040

Scenario 1: forward sale spread over five years2.952.952.952.952.95

Scenario 2: annual sale one year after avoidance; voluntary then Kyoto10.0010.0010.0010.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.0018.00

Scenario 3: sale at end of 5 year intervals; Kyoto starting 2012-17 period18.0018.0018.0018.0018.00

Nick O'Brien:Delivery Feb of following year

Financial summary

Financial summary

NPVType200820092010201120122013201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040

Scenario 1: forward sale spread over five years

Scenario 2: annual sale one year after avoidance; voluntary then Kyoto

Scenario 3: sale at end of 5 year intervals; Kyoto starting 2012-17 period

REVENUE ACCOUNT

Carbon revenue

Scenario 1042626541426265414262654142626541426265410

Scenario 2010370000151250001907000022371250452902504957200053248500564300005920425061632000637740006566625067344750688410007017750070931250709740007100775071030250710482505239575043848000367537503081600000000000

Scenario 300000000024480900000003176212500000422961750000027507600000000000

OPERATING EXPENSES

Estimated as 10% of carbon revenue

Scenario 1042626544262654426265442626544262654000000000000000000000000000

Scenario 2010370001512500190700022371254529025495720053248505643000592042561632006377400656662567344756884100701775070931257097400710077571030257104825523957543848003675375308160000000000

Scenario 30000000002448090000003176212500004229617500002750760000000000

NET CARBON REVENUESNPV15%

Scenario 112860170003836388738363887383638873836388738363887000000000000000000000000000

Scenario 222693477609333000136125001716300020134125407612254461480047923650507870005328382555468800573966005909962560610275619569006315975063838125638766006390697563927225639434254715617539463200330783752773440000000000

Scenario 313842729700000000022032810000002858591250000380665575000024756840000000000

NET REVENUES in US$millions

Scenario 1129

Scenario 2227

Scenario 3138

150000000

150

5000000

15000000

25000000

35000000

45000000

55000000

65000000

75000000

85000000

95000000

105000000

115000000

125000000

135000000

145000000

155000000

165000000

175000000

185000000

195000000

205000000

$31,296,657.37

Carbon

Estate carbon statistics

Stocks as at beginning of year

Year020082009201020112012201320142015201620172018201920202021202220232024202520262027202820292030203120322033203420352036203720382039204000000000000000000000000000000000000000000000000000000000000000000000000000000000

Baseline carbon stock (CO2-e t)

Stock at start of calendar year020082009201020112012201320142015201620172018201920202021202220232024202520262027202820292030203120322033203420352036203720382039204000000000000000000000000000000000000000000000000000000000000000000000000000000000

CroptypeAgeclassArea (ha)CO2-e (t)

Convert2008125004575000457500035380003062500266800023378752058875182100016167501440000128587511510001032000926875833625750500676250634375632000630125628875627875627125626500626125625875625625625500625375625250625250625125625125625125

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Convert20121250045750004575000457500045750004575000457500035380003062500266800023378752058875182100016167501440000128587511510001032000926875833625750500676250634375632000630125628875627875627125626500626125625875625625625500625375625250

Convert201312500457500045750004575000457500045750004575000457500035380003062500266800023378752058875182100016167501440000128587511510001032000926875833625750500676250634375632000630125628875627875627125626500626125625875625625625500625375

Convert2014125004575000457500045750004575000457500045750004575000457500035380003062500266800023378752058875182100016167501440000128587511510001032000926875833625750500676250634375632000630125628875627875627125626500626125625875625625625500

Convert20151250045750004575000457500045750004575000457500045750004575000457500035380003062500266800023378752058875182100016167501440000128587511510001032000926875833625750500676250634375632000630125628875627875627125626500626125625875625625

Convert201612500457500045750004575000457500045750004575000457500045750004575000457500035380003062500266800023378752058875182100016167501440000128587511510001032000926875833625750500676250634375632000630125628875627875627125626500626125625875

Convert2017125004575000457500045750004575000457500045750004575000457500045750004575000457500035380003062500266800023378752058875182100016167501440000128587511510001032000926875833625750500676250634375632000630125628875627875627125626500626125

Convert20181250045750004575000457500045750004575000457500045750004575000457500045750004575000457500035380003062500266800023378752058875182100016167501440000128587511510001032000926875833625750500676250634375632000630125628875627875627125626500

Convert201912500457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500035380003062500266800023378752058875182100016167501440000128587511510001032000926875833625750500676250634375632000630125628875627875627125

Convert2020125004575000457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500035380003062500266800023378752058875182100016167501440000128587511510001032000926875833625750500676250634375632000630125628875627875

Convert20211250045750004575000457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500035380003062500266800023378752058875182100016167501440000128587511510001032000926875833625750500676250634375632000630125628875

Convert202212500457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500035380003062500266800023378752058875182100016167501440000128587511510001032000926875833625750500676250634375632000630125

Convert2023125004575000457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500035380003062500266800023378752058875182100016167501440000128587511510001032000926875833625750500676250634375632000

Convert20241250045750004575000457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500035380003062500266800023378752058875182100016167501440000128587511510001032000926875833625750500676250634375

Convert202512500457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500035380003062500266800023378752058875182100016167501440000128587511510001032000926875833625750500676250

Convert2026125004575000457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500035380003062500266800023378752058875182100016167501440000128587511510001032000926875833625750500

Convert20271250045750004575000457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500045750004575000457500035380003062500266800023378752058875182100016167501440000128587511510001032000926875833625

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Total stocksYear200820092010201120122013201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040

ConvertConvert91500000915000009046300088950500870435008480637582290250795362507657800073443000701538756672987563186875595387505579737551972875480741254413350040190500362456253229950028352375254415002300550020963625192516251781837516622875156315001481675014156125136302501322337512921625

Revert0000000000000000000000000000000000

000 tonnes CO2eTotal91500915009046388951870448480682290795367657873443701546673063187595395579751973480744413440191362463230028352254422300620964192521781816623156321481714156136301322312922

Maximum carbon stocks91500

Baseline carbon emissions (CO2-e t)

Emissions during calendar year0200820092010201120122013201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040

Avoided emissions in the previous year00103700015125001907000223712525161252754000295825031350003289125342400035430003648125374137538245003898750394062539430003944875394612539471252910875243600020418751712000

00000000000000000000000000

20 year period from 2012

Scenario 1 CO2722483751444967514449675144496751444967514449675

Scenario 2 CO272248375103700015125001907000223712525161252754000295825031350003289125342400035430003648125374137538245003898750394062539430003944875394612539471252910875243600020418751712000

Scenario 3 CO27002600013600500176456252349787515282000

charts

charts

charts

91500

91500

90463

88950.5

87043.5

84806.375

82290.25

79536.25

76578

73443

70153.875

66729.875

63186.875

59538.75

55797.375

51972.875

48074.125

44133.5

40190.5

36245.625

32299.5

28352.375

25441.5

23005.5

20963.625

19251.625

17818.375

16622.875

15631.5

14816.75

14156.125

13630.25

13223.375

12921.625

'000 tonnes CO2-e

assumed saleable avoided deforestation CO2-e t

Convert

CO2-e stored in a 250,000 harvestable area assuming harvesting over 20 years and subsequent degradation

Croptype

Crop type data

Trend in CO2-equivalent stock (t/ha)

Year0123456789101112131415161718192021222324252627282930313233343536373839404142434445464748495051525354555657585960616263646566676869707172737475767778798081828384858687888990919293949596979899100101102103104105106107108109110111112113114115116117118119120

Crop type0123456789101112131415161718192021222324252627282930313233343536373839404142434445464748495051525354555657585960616263646566676869707172737475767778798081828384858687888990919293949596979899100101102103104105106107108109110111112113114115116117118119120

Convert366283245213187165146129115103928374676054515150505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050505050

Revert366290276266259255252251251252253255257260262265267270273276278281284287290293296299302305307310313316319322325328331334337340343346348351354357360363366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366

Forest conversion - assumes proportion removed & pushed, rest degraded through illegal activity and fires

decay rate0.3/yr


minimum stock50t CO2-e /ha

loss rate from fire0.1/yr

Intial %


remaining pushed25%


year0123456789101112131415161718192021222324252627282930313233343536373839404142434445464748495051525354555657585960616263646566676869707172737475767778798081828384858687888990919293949596979899100101102103104105106107108109110111112113114115116117118119120

remaining standing237.9215.3194.8176.2159.5144.3130.6118.1106.996.787.579.271.764.858.753.150.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.050.0

remaining pushed91.567.7850.2237.2027.5620.4215.1211.208.306.154.563.372.501.851.371.020.750.560.410.310.230.170.120.090.070.050.040.030.020.020.010.010.010.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.00

removed from site36.6000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000

Forest reversion - assumes proportion removed & pushed, rest reverts back over 50 years

decay rate0.3/yr


Intial %


remaining pushed25%


year0123456789101112131415161718192021222324252627282930313233343536373839404142434445464748495051525354555657585960616263646566676869707172737475767778798081828384858687888990919293949596979899100101102103104105106107108109110111112113114115116117118119120

remaining standing219.6223225228231234237240243246249252255258261264266269272275278281284287290293296299302305307310313316319322325328331334337340343346348351354357360363366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366366

remaining pushed91.567.7850.2237.2027.5620.4215.1211.208.306.154.563.372.501.851.371.020.750.560.410.310.230.170.120.090.070.050.040.030.020.020.010.010.010.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.00

removed from site54.9000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000

Croptype

Convert

Revert

Stand age (years)

Carbon stock (t/ha CO2-equiv.)

Implementing a Voluntary REDD Project in Papua
New Forests presented a paper at Bali Kyoto COP in Dec. 2007 comparing conservation scenarios to returns from land uses driving deforestation

Developed methodologies & baselines that supported hypothetical REDD projects

Made acquaintance with Gov. Barnabus Suebu through research work, Bali COP and Emerald Planet (Indonesian counterparty)

Conceptualized a REDD project for Papua with governor, NGOs and forestry department

Signed Memorandum of Understanding in May 2008

MOU: New Forests & Government of Papua
PurposeCreation of a REDD project that provides a commercial basis for forest conservation and sustainable development to the people of PapuaTermsNew Forests will be granted a 10-year lease (Environment Forest Services Utilization License IUPJL) for the purposes of developing the project and marketing carbon credits - implementation phaseSubsequently, land will be placed under a perpetual conservation lease maintenance in perpetuity

Project 1. site selection have world heritage biodiversity value Development(CI Hot Spot), under Development immediate threat of deforestation or conversion

Project 2. consult with stakeholdersDevelopment3. establish a Conservation Management Plan, operating plan and monitoring plan4. develop a Project Design Document (carbon methodology)5. develop a carbon business plan6. execute legal agreements7. attain VCS & CCBA accreditation and register credits8. market and sell carbon credits

Legal & FinancialEstablish a perpetual Trustee responsible for monitoring and enforcing the Conservation Management Plan.

Carbon revenues endow a trust that will make annual distributions as conservation objectives are met (20% of gross carbon revenues)

Distributions will finance monitoring and management in perpetuity and provide financial support to local communities, i.e. health, education and economic development.

Profits after endowment and project costs split between the Papuan Government, New Forests and Emerald Planet.

Immediate Next Steps
Site selection

Pre-marketing by New Forests has begun to develop business plan already have interested buyers but conditional on VCS accreditation

Achieve VCS accreditation & registration 12-month process but buyers willing to engage in conditional purchase contracts because of high demand

Develop endorsements/partnerships with NGO and scientific community

Establish synergies with national government and other forest conservation efforts in Indonesia

Remaining Questions for REDD
New Forests Advisory business has been researching legal, commercial and technical issues in REDD project design

Seeking to continue development of architecture for REDD project developmentbusiness as usual models for carbon loss from logging and oil palmintegration of project-based and national level baselinescommercial modelling of project investment structures, credit release schedules and credit pricingstudies of the social impacts/benefits and management of endowment funds associated with REDD projectsstudying the supply/demand dynamic of REDD investments, including potential maximum supply rates of REDD credits and relative supply of REDD against different pricing scenarios & project types in ETS

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www.newforests.com.au

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Documents

Implementing REDD in Papua, Indonesia