Nations see REDD in rush for carbon credits

In the far north of Indonesia's Sumatra island lies a vast stretch of forest brimming with orangutans and rare Sumatran tigers and elephants.

In a quirk of fate, a decades-long insurgency in Aceh province prevented illegal loggers from stripping the place bare.

Apart from its wildlife and timber, though, the forest is rich in another resource; the carbon locked up in the soil and very trees coveted by loggers - legal and illegal. Keen to earn money from the forest, called the Ulu Masen ecosystem, the government of Aceh province joined a leading conservation group and the financial market to save it.

In return, the province is set to earn millions of dollars through the sale of carbon credits to investors, with a portion of the cash flowing to local communities to encourage them to halt illegal logging and pay for alternative livelihoods.

"I strongly believe there should be a market for carbon credits and forests. It's about the only mechanism that could provide local incentives," said Frank Momberg, project director for international NGO Fauna and Flora International, the group at the heart of the Ulu Masen forest conservation project.

The model is being studied and repeated across Indonesia and other tropical developing nations as the world turns to saving the remaining rainforests in the battle against climate change. The U.N.-based scheme, called reduced emissions from deforestation and degradation, or REDD, could be worth tens of billions of dollars a year for developing nations, with rich nations buying forest credits to meet mandated emissions curbs.

With so much money potentially at stake, banks and carbon trading firms are ramping up their interest.

But much has to be sorted out, such as how to ensure the forests aren't cut down, how to accurately measure the amount of carbon saved over time, the best method to trade REDD credits and how to ensure local communities get a fair share of the money. Satellite monitoring as well as developing national carbon accounting systems will be key, and so too will be avoiding "leakage" in which preventing deforestation in one area causes logging to occur in another.

REUTERS