Connect with us

SPECIAL REPORTS AND PROJECTS

Coalition for Rainforest Nations announces sale of 6,106 REDD credits from Papua New Guinea to Blackstone Energy Services

Published

4 years ago

on

On 29 March 2021, REDD-Monitor wrote about a REDD deal that Kevin Conrad, the Executive Director of the Coalition for Rainforest Nations, signed with Papua New Guinea. Conrad claims the deal will mark “the very first time that (carbon) credits that have been approved by the UNFCCC are being marketed to an open forum to our consumers”. Conrad’s REDD deal was signed on 17 March 2021.

The Papua New Guinea newspaper, the Post Courier reported Conrad as saying that,

“Once we get everything signed up we are going to do a transaction next week, probably just a small one, about US$10,000, just to show and announce that the system is up, and all consumers need to show a transaction to bring other people in.

“We have a company in Canada called the Blackstone Energy, who will be the first company to buy from PNG and their idea is just to get the game started.”

This is a top down REDD deal, with little or no transparency. No process of free, prior and informed consent was carried out before Conrad signed the REDD deal with Wera Mori, PNG’s Minister for Environment, Conservation and Climate Change, and Ruel Yamuna, Managing Director of the Climate Change Development Authority.

Where the money from the carbon credit sales will end up is far from clear. PNG has not yet produced a REDD benefit sharing agreement.

A two-year-old “new report”

On 30 March 2021, the Coalition for Rainforest Nations put out a press release under the headline, “Papua New Guinea Slows Rainforest Deforestation after a Decade, According to New UNFCCC Report”.

The “New UNFCCC Report” is a report published by Papua New Guinea’s Climate Change and Development Authority and submitted to the UNFCCC.

The Climate Change and Development Authority’s report is Papua New Guinea’s First Biennial Update Report to the UNFCCC. It is dated December 2018.

The Biennial Update Report states that PNG achieved REDD+ results in 2014 and 2015 of 9,003,314 tCO2e. But in both 2014 and 2015, PNG emitted almost 40 million tCO2e from deforestation and forest degradation. The country can only claim REDD+ results because PNG, with the help of the FAO, created a Forest Reference Level that increases every year. As long as PNG’s forest destruction remains under the Forest Reference Level, PNG can continue to destroy its forests and claim millions of carbon credits from “REDD+ results”.

Meanwhile, of course, governments have not yet completed negotiations at the UNFCCC on Article 6 of the Paris Agreement. Article 6 involves the rules about creating a new carbon trading mechanism.

On 9 April 2021, REDD-Monitor received the following message from Mark Grundy of the Coalition for Rainforest Nations:

Subject: [REDD-Monitor] Contact
Name: Mark Grundy
Email: mark@cfrn.org
Website: https://redd-monitor.org/
Comment: Dear Chris,

Please correct your article about Blackstone’s purchase of nationally-issued REDD+ forestry carbon credits. The transaction was for 6,100 credits

You can view the deal on CFRN.org

Best
Mark

Sure enough, a Coalition for Rainforest Nations press release dated 8 April 2021 announces that Blackstone Energy Services has bought 6,106 carbon credits from Papua New Guinea.

Here are the Coalition for Rainforest Nations’ two recent press releases (neither of which mentions the ongoing negotiations about Article 6 of the Paris Agreement):

News: Papua New Guinea Slows Rainforest Deforestation after a Decade, According to New UNFCCC Report

Nine million UNFCCC-verified, forestry carbon credits issued for sale by sovereign government.

March 30, 2021, Port Moresby, Papua New Guinea

Papua New Guinea’s rainforest conservation efforts successfully slowed the pace of deforestation in 2014-2015, after bringing annual deforestation levels down to an annual average of 0.5% over a thirteen-year period, according to a report published by United Nations Framework Convention on Climate Change (UNFCCC). As a result of these efforts, UNFCCC verified 9 million metric tonnes (mt) of carbon reductions for this period. The results were posted on UNFCCC REDD+ Information Hub along with four other prerequisites to UNFCCC REDD+ verification:

  • National REDD+ Strategy
  • National Forest Reference Level
  • National Forest Monitoring System
  • Safeguards Information Summary.

Highlights:

  • Deforestation: Between 2000-2013, Papua New Guinea saw an average loss of 0.5% of its national rainforest annually or 197,000 hectares of forest. The highest annual deforestation figures came in 2013 with a loss of 39,676 hectares. Loss was primarily due to conversion of forests to croplands for both non-commercial agricultural needs of its population (63%) as well as commercial agriculture (30%).
  • Degradation of remaining rainforests, primarily for commercial logging was also a major concern. Peaking in 2012 with 240,000 hectares, government action led to steadily declining degradation from 2013 onwards. 2014 and 2015 showed a marked decline in deforestation in both drivers.
  • Reforestation and forest rehabilitation activities: Conversely, efforts to enhance forest cover through reforestation and forest rehabilitation activities were limited, despite ambitious goals set out within Papua New Guinea’s Vision 2050 to establish 800,000 hectares of forest plantation by the middle of this century.

“These results are a testament to over two decades of national action and leadership – and are a fitting and timely tribute to the late Sir Michael Somare who pioneered global rainforest conservation. The data from 2014-2015 clearly show that Papua New Guinea has now turned a corner in our battle to stop deforestation,” said, Ruel Yamuna, Managing Director of the Climate Change and Development Authority.

Papua New Guinea’s 9 million mt of carbon reductions will become the first nationally issued REDD+ forestry carbon credits to go on sale to corporations and consumers. This comes after a decade of international negotiation to establish Reducing Emissions from Deforestation and Degradation and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries (REDD+) as a global conservation mechanism under the Paris Agreement on climate change – which was achieved in 2015.

The REDD+ mechanism, the brainchild of late Sir Grand Chief Michael Somare – founding father of Papua New Guinea, was started by Papua New Guinea and the Coalition for Rainforest Nations in 2005 under the UN Framework Convention on Climate Change (UNFCCC). The government of Papua New Guinea intends to set up a national biodiversity and climate change trust fund to manage and distribute the wealth accumulated from the revenues of nationally issued REDD+ forest carbon credits and other grants and donations. This will be announced in PNG Parliament in April.

A signing ceremony of the Memorandum of Understanding (MOU) took place on Wednesday March 17 in Port Moresby between the government of Papua New Guinea and REDD.plus to permit the sale of the forest carbon credits. Wera Mori, Minister of the Environment, Conservation & Climate Change and Kevin Conrad, Chief Executive of REDD.plus signed the agreement.

“Today’s agreement constitutes a significant milestone for the REDD+ story and for Papua New Guinea. People and companies will be able to purchase forest carbon credits that reward a country’s successful conservation efforts as well as count towards the Paris Agreement and the global carbon budget,” said Kevin Conrad, Executive Director, Coalition for Rainforest Nations. “Buying nationally issued REDD+ forest carbon credits is a powerful way to support global efforts to tackle the climate emergency.”

While Papua New Guinea’s nationally determined contribution under the Paris Agreement in which targets for emissions reductions in the land use and forest sector have not been identified beyond 2015, mitigation actions from its national policies, Vision 2050 and the Medium-Term Development Strategy 2030 have been set out.

Papua New Guinea’s nationally issued REDD+ forestry carbon credits were made available for purchase today on REDD.plus registry – provided by IHS Markit and trading platform by CBL. REDD.plus is currently managed by not-for-profit, Coalition for Rainforest Nations.

About

Climate Change and Development Authority, Independent State of Papua New Guinea

The Climate Change Development Authority is mandated under the Climate Change (Management) Act 2015 with the responsibility to contribute toward global efforts in mitigating greenhouse gas emissions, through low carbon development that fosters economic growth and social welfare for the people’s wellbeing and prosperity. It is based in Port Moresby, Papua New Guinea. Learn more at PNG REDD+

Coalition for Rainforest Nations

The Coalition for Rainforest Nations is US 401c3 not-for-profit established by forested tropical countries to collaboratively reconcile forest stewardship with economic development. Its assists tropical governments, communities and peoples responsibly manage their rainforests. It is the architect of the REDD+ mechanism and is headquartered in New York.

REDD.plus

REDD.plus is the first digital platform enabling carbon neutrality under the Paris Agreement, and provided by IHS Markit and trading platform by CBL. It is a central registry and exchange for nationally issued carbon reductions or REDD+ Results Units from rainforest nations, certified by the United Nations. REDD.plus is owned and managed by the Coalition for Rainforest Nations.

 

News: Blackstone Energy Services Buys First Sovereign Government Issued REDD+ Forestry Carbon Credits to Save Papua New Guinea’s Rainforests

Toronto, Canada, April 8, 2021, 07.00pm

Blackstone Energy Services, Canada’s leading energy services company made the first commercial purchase of UNFCCC-verified, REDD+ forestry carbon credits or REDD+ Results Units (RRUs), issued by the sovereign government of Papua New Guinea (PNG) today. Blackstone’s pilot purchase of 6,106 metric tonnes of forestry carbon credits is intended to both offset its historical carbon footprint back to 2003, and its estimated emissions up until to and including 2030. Beyond this pilot purchase, Blackstone plans to offer sovereign government issued carbon credits from rainforest nations to its portfolio of North American clients with a collective annual energy spend over US$2.5 billion.

“The sale sets a precedent for corporations wishing to achieve net-zero targets from carbon reductions directly linked to country efforts under the Paris Agreement and the global carbon budget,” says Ryan Duffy, Chief Executive Officer, Blackstone Energy Services. “The fact that these carbon credits represent UNFCCC-verified emissions reductions from national conservation efforts which have happened– and not future promises – is important to us and our clients.”

Blackstone bought carbon reductions created by PNG’s tropical rainforests from a two-year period of impact. The United Nations Framework Convention on Climate Change (UNFCCC) verified that Papua New Guinea’s government, its agencies and local communities had successfully slowed the pace of deforestation across its 113.8 million acres (about the area of California) of rainforests. The credits came from a tranche of 9,003,314 metric tonnes of carbon emissions reductions issued by the sovereign government two weeks ago. To achieve these results, the government introduced a series of domestic initiatives and policies over a 15-year period, and also satisfied the UNFCCC verification process by submitting: a national conservation (REDD+) strategy, a national online forest monitoring system, forest reference levels, and other safeguards.

With Papua New Guinea being the current Coalition for Rainforest Nations Chair, Honorable Wera Mori, Minister for Environment, Conservation and Climate Change, was pleased to witness the first commercial transaction of nationally issued REDD+ credits and thanked Blackstone Energy Services for taking the lead as a responsible corporate citizen:

“The world is currently facing a climate emergency and PNG is mitigating the effects of climate change through rainforests and REDD+. This is also captured in PNG’s revised National Determined Contributions that was submitted last year to the UNFCCC, including the National Sustainable Development Goals (SDG) 13 Climate Action Roadmap (2020 – 2030),” says Minister Mori.

Unlike project-based REDD+ carbon credits, which have been available on the voluntary carbon markets for over a decade, Blackstone’s purchase marks the first commercial transaction of nationally issued REDD+ credits or REDD+ Results Units. The Reducing Emissions from Deforestation and Degradation (REDD+) Mechanism, the brainchild of late Sir Grand Chief Michael Somare – founding father of Papua New Guinea, was started with the Coalition for Rainforest Nations (CfRN) in 2005 under the UNFCCC. It took a decade of international and domestic climate policy work as well as in-country capacity building and technical training to forestry commission teams across the world before the first carbon credits could become available today.

“This is a healthy milestone for the UNFCCC REDD+ mechanism. Both Blackstone’s purchase today and others in the pipeline offer encouraging early signs of corporate demand for this new carbon credit. We expect to see REDD+ Results Units playing a platinum role within both the compliance markets and as an Internationally Transferred Mitigation Outcome (ITMOs), qualifying for international transfer of carbon reductions for countries under the Paris Agreement,” says Kevin Conrad, Executive Director, Coalition for Rainforest Nations.

Papua New Guinea’s REDD+ results were reported in a technical annex on REDD+ results to the biennial update reports and underwent technical analysis by UNFCCC. To view these reports and all UNFCCC requirements and safeguards, see Lima REDD+ Information Hub. Papua New Guinea’s REDD+ Results Units (RRUs) are available on REDD.plus platform, provided by Markit and trading platform by CBL. The government of Papua New Guinea intends to set up a national biodiversity and climate change trust fund to manage and distribute the funds accumulated from the revenues of nationally issued REDD+ forestry carbon credits and other grants and donations. This will be announced in PNG Parliament this month.

Blackstone Energy Services

Blackstone is an independent energy management firm that delivers purposeful change for clients by guiding large private and public-sector businesses on their journey to net-zero consumption. Their custom energy management solutions cover cost, consumption, and carbon improvements. With a client portfolio representing over 1 million tonnes of CO2e each year for scope 1 and 2 emissions, it is their vision to take all their clients to net zero by 2050. Blackstone is based in Toronto, Canada.

Contact: Darlene Remlinger, VP Communications: dremlinger@blackstoneenergy.com
Tel. 416-628-2828 ext. 101

Climate Change and Development Authority, Independent State of Papua New Guinea

The Papua New Guinea Climate Change Development Authority is mandated under the Climate Change (Management) Act 2015 with the responsibility to contribute toward global efforts in mitigating greenhouse gas emissions through low carbon development that fosters economic growth and social welfare for the people’s wellbeing and prosperity. It is based in Port Moresby, Papua New Guinea. Learn more at PNG REDD+

Contact Mr. Ruel Yamuna, Managing Director: ryamuna959@gmail.com

Coalition for Rainforest Nations

The Coalition for Rainforest Nations is a US 401c3 not-for-profit established by forested tropical countries to collaboratively reconcile forest stewardship with economic development. Its assists tropical governments, communities, and peoples to responsibly manage their rainforests. It is the co-architect of the UNFCCC REDD+ mechanism and is headquartered in New York. REDD.plus is owned and managed by the Coalition for Rainforest Nations. It is the first digital platform enabling carbon neutrality under the Paris Agreement, and provided by Markit and trading platform by CBL. It is a central registry and exchange for nationally issued carbon reductions or REDD+ Results Units from rainforest nations, verified by the UNFCCC. REDD.plus is owned and managed by the Coalition for Rainforest Nations.

Original Source: REDD-Monitor

 

Related posts:

30 civil society organizations have written to the World Bank Group demanding to publicly disclose the Africa Energy Approach paper. The Glasgow Declaration on Forests is far from “unprecedented”. It’s just another in a long line of meaningless UN declarations Tropical forests in Africa’s mountains store more carbon than previously thought—but are disappearing fast The Rush for Carbon Concessions: More Land Theft and Deforestation Solar energy capacity to reach 200MW next year

Related Topics:
Continue Reading

SPECIAL REPORTS AND PROJECTS

How Carbon Markets are Exploiting Marginalised Communities in the Global South Instead of Uplifting them

Published

2 weeks ago

on

December 11, 2024

By

The billion-dollar fiction of carbon offsets

Carbon markets are turning indigenous farming practices into corporate profit, leaving communities empty-handed.

For Janni Mithula, 42, a resident of the Thotavalasa village in Andhra Pradesh, cultivating the rich, red soil of the valley was her livelihood. On her small patch of land grow with coffee and mango trees, planted over decades with tireless care and ancestral knowledge. Yet, once a source of pride and sustainability, the meaning of these trees has been quietly redefined in ways she never agreed to.

Over a decade ago, more than 333 villages in the valley began receiving free saplings from the Naandi Foundation as part of a large-scale afforestation initiative funded by a French entity, Livelihoods Funds. Unbeknownst to Janni and her neighbours, these trees had transfigured into commodities in a global carbon market, their branches reaching far beyond the valley to corporate boardrooms, their roots tethered not to the soil of sustenance but to the ledger of profit and carbon offsets.

The project claims that it would offset nearly 1.6 million tonnes of carbon dioxide equivalent over two decades. On paper, it is a triumph for global climate efforts. In reality, the residents’ lives have seen little improvement. While the sale of carbon credits has reportedly fetched millions of dollars for developers, Janni’s rewards have been minimal: a few saplings, occasional training sessions, and the obligation to care for trees that she no longer fully owns. These invisible transactions pose a grave risk to marginalised communities, who practice sustainable agriculture out of necessity rather than trend.

Also Read | COP29: The $300 billion climate finance deal is an optical illusion

The very systems that could uplift them—carbon markets intended to fund sustainability—end up exploiting their resources without addressing their needs.

Earlier this year, the Centre for Science and Environment (CSE) and Down To Earth (DTE) released a joint investigative report on the functioning of the voluntary carbon market in India. The report critically analysed the impacts of the new-age climate solution, its efficacy in reducing carbon emissions, and how it affected the communities involved in the schemes.

The findings highlighted systemic opacity, with key details about the projects, prices, and beneficiaries concealed under confidentiality clauses. Developers also tended to overestimate their emission reductions while failing to provide local communities with meaningful compensation. The report stated that the main beneficiaries of these projects were the project developers, auditors and companies that make a profit out of the carbon trading system.

Carbon markets: The evolution

On December 11, 1997, the parties to the United Nations Framework Convention on Climate Change (UNFCC) convened and adopted the Kyoto Protocol with the exigence of the climate crisis bearing down on the world. The Kyoto Protocol, revered for its epochal impact on global climate policy, focused on controlling the emissions of prime anthropogenic greenhouse gases (GHGs). One of the key mechanisms introduced was the “Clean Development Mechanism”, which would allow developed countries to invest in emission reduction projects in developing countries. In exchange, the developed countries would receive certified emission reduction (CER) credits, or carbon credits as they are commonly known.

One carbon credit represents the reduction or removal of one tonne of CO2. Governments create and enforce rules for carbon markets by setting emission caps and monitoring compliance with the help of third-party organisations. For example, the European Union Emissions Trading System (EU-ETS) sets an overall cap on emissions and allocates allowances to industries. A financial penalty system was also put in place to prevent verifiers and consultants from falsifying emissions data. The impact of these renewable projects is usually verified through methods such as satellite imagery or on-site audits.

Companies such as Verra and Gold Standard have seized this opportunity, leading the designing and monitoring of carbon removal projects. Governments and corporations invest in these projects to meet their own net-zero pledges. The companies then issue carbon credits to the investing entity. Verra has stated that they have issued over 1 billion carbon credits, translating into the reduction of 1 billion tonnes of greenhouse gas emissions. However, countless case studies and reports have indicated that only a small fraction of these funds reach the local communities practising sustainability.

Article 6 under the Paris Agreement further concretised and regulated the crediting mechanism to enable countries interested in setting up carbon trading schemes. However, the parties failed to reach a consensus regarding the specifics of Article 6 at COP 27 and COP 28. So, climate finance experts and policymakers were very interested in the developments taking place at the COP 29 summit in Baku, Azerbaijan. Unlike its predecessors, the COP 29 summit has seen a diminished attendee list, with major Western political leaders including Joe Biden, Ursula von der Leyen, Olaf Scholz, and Emmanuel Macron failing to make it to the summit due to the increasingly turbulent climate within their own constituencies.

From a post-colonial perspective, carbon markets have been viewed as perpetuating existing global hierarchies; wealthier countries and corporations fail to reduce their emissions and instead shift the burden of mitigation onto developing nations.

From a post-colonial perspective, carbon markets have been viewed as perpetuating existing global hierarchies; wealthier countries and corporations fail to reduce their emissions and instead shift the burden of mitigation onto developing nations. | Photo Credit: Illustration by Irfan Khan

Sceptics questioned whether this iteration of the summit would lead to any substantial decisions being passed. However, on day-two of the summit, parties reached a landmark consensus on the standards for Article 6.4 and a dynamic mechanism to update them. Mukhtar Babayev, the Minister of Ecology and Natural Resources of Azerbaijan and the COP 29 President, said: “By matching buyers and sellers efficiently, such markets could reduce the cost of implementing Nationally Determined Contributions by 250 billion dollars a year.” He added that cross-border cooperation and compromise would be vital in fighting climate change.

India has positioned itself as an advocate for the Like-Minded Developing Countries (LMDCs) group, with Naresh Pal Gangwar, India’s lead negotiator at COP 29, saying, “We are at a crucial juncture in our fight against climate change. What we decide here will enable all of us, particularly those in the Global South, to not only take ambitious mitigation action but also adapt to climate change.”

The COP 29 decision comes in light of the Indian government’s adoption of the amended Energy Conservation Act of 2022, which enabled India to set up its own carbon market. In July 2024, the Bureau of Energy Efficiency (BEE), an agency under the Ministry of Power, released a detailed report containing the rules and regulations of the Carbon Credit Trading Scheme (CCTS), India’s ambitious plan for a compliance-based carbon market. The BEE has aimed to launch India’s carbon market in 2026.

CSE’s report highlighted the challenges and possible strategies that the Indian carbon market could adopt from other carbon markets around the world. Referring to this report, Parth Kumar, a programme manager at CSE, pointed out how low carbon prices and low market liquidity would be prominent challenges that the nascent Indian market would have to tackle.

The Global South should be concerned

Following the landmark Article 6.4 decision, climate activists called out the supervisory board for the lack of discussion in the decision-making process. “Kicking off COP29 with a backdoor deal on Article 6.4 sets a poor precedent for transparency and proper governance,” said Isa Mulder, a climate finance expert at Carbon Market Watch. The hastily passed decision reflects the pressure that host countries seem to face; a monumental decision must be passed for a COP summit to be touted as a success.

The science behind carbon markets is rooted in the ability of forests, soil, and oceans to act as carbon sinks by capturing atmospheric carbon dioxide. This process is known as carbon sequestration, and it is central to afforestation and soil health restoration projects. However, the long-term efficacy and scalability of these projects have been repeatedly questioned. The normative understanding of carbon markets as a tool to mitigate climate change has also come under scrutiny recently, with many activists calling the market-driven approach disingenuous to the goals of the climate movement.

From a post-colonial perspective, carbon markets have been viewed as perpetuating existing global hierarchies; wealthier countries and corporations fail to reduce their emissions and instead shift the burden of mitigation onto developing nations. Olúfẹ́mi O. Táíwò, Professor of Philosophy at Georgetown University, said, “Climate colonialism is the deepening or expansion of foreign domination through climate initiatives that exploit poorer nations’ resources or otherwise compromises their sovereignty.” Moreover, the effects of climate change disproportionately fall on the shoulders of marginalised communities in the Global South, even though industrialised nations historically produce the bulk of emissions.

There have also been doubts surrounding the claiming process of carbon credits and whether the buyer country or the country where the project is set can count the project towards its own Nationally Determined Contributions (NDCs). Provisions under Article 6 of the Paris Agreement state that countries cannot use any emission reductions sold to another company or country towards their own emissions targets. However, this has become a widespread issue plaguing carbon markets. The EU has recently been criticised for counting carbon credits sold to corporations under the Carbon Removal Certification Framework (CRCF) towards the EU’s own NDC targets. This has led to concerns over the overestimation of the impact of mission reduction projects.

Also Read | India needs climate justice, not just targets

Carbon offset projects, additionally, alienate local communities from their land as the idea of ownership and stewardship becomes muddled with corporate plans on optimally utilising the land for these projects. For example, in 2014, Green Resources, a Norwegian company, leased more than 10,000 hectares of land in Uganda, with additional land being leased in Mozambique and Tanzania. This land was used as a part of afforestation projects to practise sustainability and alleviate poverty in the area. However, interviews conducted with local Ugandan villagers revealed that the project forcibly evicted the local population without delivering its promises to improve access to health and education for the community. These concerns highlighted how the burden of adopting sustainable practices is placed on marginalised communities.

While carbon markets are rightfully criticised, they remain a key piece of the global climate adaptation puzzle. Addressing the issues surrounding transparency and equitable benefit-sharing with local communities could lead to carbon markets having a positive impact on climate change. The system must ensure that larger corporations and countries do not merely export their emissions, but instead implement measures to reduce their own emissions over time. It is also imperative to explore other innovative strategies such as circular economy approaches and nature-based solutions that are more localised, offering hope for a just and sustainable future.

Adithya Santhosh Kumar is currently pursuing a Master’s in Engineering and Policy Analysis at the Delft University of Technology in the Netherlands.

Source: frontline.thehindu.com

Related posts:

Finnish carbon offsetting firm Compensate finds 91% of carbon offset projects fail its evaluation process. Of course the remaining 9% will also not help address the climate crisis A new destructive business: Carbon credits from tree plantations East Africa poised to monitor carbon emission The Rush for Carbon Concessions: More Land Theft and Deforestation Uganda: Local communities claim they are not benefiting from Green Resources’ subsidiary’s carbon credit initiative; incl. company’s comments
Continue Reading

DEFENDING LAND AND ENVIRONMENTAL RIGHTS

Statement: The Energy Sector Strategy 2024–2028 Must Mark the End of the EBRD’s Support to Fossil Fuels

Published

1 year ago

on

September 27, 2023

By

The European Bank for Reconstruction and Development (EBRD) is due to publish a new Energy Sector Strategy before the end of 2023. A total of 130 civil society organizations from over 40 countries have released a statement calling on the EBRD to end finance for all fossil fuels, including gas.

From 2018 to 2021, the EBRD invested EUR 2.9 billion in the fossil energy sector, with the majority of this support going to gas. This makes it the third biggest funder of fossil fuels among all multilateral development banks, behind the World Bank Group and the Islamic Development Bank.

The EBRD has already excluded coal and upstream oil and gas fields from its financing. The draft Energy Sector Strategy further excludes oil transportation and oil-fired electricity generation. However, the draft strategy would continue to allow some investment in new fossil gas pipelines and other transportation infrastructure, as well as gas power generation and heating.

In the statement, the civil society organizations point out that any new support to gas risks locking in outdated energy infrastructure in places that need investments in clean energy the most. At the same time, they highlight, ending support to fossil gas is necessary, not only for climate security, but also for ensuring energy security, since continued investment in gas exposes countries of operation to high and volatile energy prices that can have a severe impact on their ability to reach development targets. Moreover, they underscore that supporting new gas transportation infrastructure is not a solution to the current energy crisis, given that new infrastructure would not come online for several years, well after the crisis has passed.

The signatories of the statement call on the EBRD to amend the Energy Sector Strategy to

  • fully exclude new investments in midstream and downstream gas projects;
  • avoid loopholes involving the use of unproven or uneconomic technologies, as well as aspirational but meaningless mitigation measures such as “CCS-readiness”; and
  • strengthen the requirements for financial intermediaries where the intended nature of the sub-transactions is not known to exclude fossil fuel finance across the entire value chain.

Source: iisd.org

Download the statement: https://www.iisd.org/system/files/2023-09/ngo-statement-on-energy-sector-strategy-2024-2028.pdf

Related posts:

Signs of harmful projects with financing from development institutions are spotted in Uganda… Breaking: over 350,000 acres of land were grabbed during Witness Radio – Uganda’s seven months ban. EBRD launches new agribusiness strategy 30 civil society organizations have written to the World Bank Group demanding to publicly disclose the Africa Energy Approach paper. Over 600 million Africans lack electricity despite huge renewable energy potential
Continue Reading

SPECIAL REPORTS AND PROJECTS

Will more sovereign wealth funds mean less food sovereignty?

Published

2 years ago

on

April 13, 2023

By

In November 2022, word got out that Ferdinand Marcos Jr, the freshly minted president of the Philippines, wanted to set up a sovereign wealth fund. People scratched their heads. What wealth? The Philippines is mired in debt! It was quickly understood that this was a kind of vanity project, meant to improve the image of a man who came to power because of his family name.
Marcos’ father ruled the Philippines from the mid-1960s to the mid-1980s with an iron fist. Known more for kleptocracy and the brutality of martial law, the Marcos name needed a face-lift, local media put it. Marcos boasted that a sovereign wealth fund would boost investor confidence and attract resources to fund big projects in infrastructure or agriculture. He even dubbed it “Maharlika Fund”, a nod to the mythical warrior figure that his father claimed to personify during World War II.
Vanity aside, Marcos’ proposal raised fears of graft and corruption. After all, not long ago, Malaysia’s sovereign wealth fund (known as 1MDB) was exposed as a multi-billion dollar money laundering scheme for the personal benefit of Prime Minister Najib Razak, who now sits in jail. Yet, Marcos managed to get his proposal onto his country’s legislative agenda in a matter of weeks, and brought it to international investors in Davos and Tokyo for their approval as well.
What are these “sovereign wealth funds”? How are they being used? What link, if any, do they have with people’s struggles around food sovereignty, land grabbing and today’s deepening climate crisis?
Rise of sovereign wealth funds
The first sovereign wealth funds were set up in the 19th century, and grew slowly throughout the 20th. The idea, at first, was rather simple. If a state has excess resources – perhaps mineral wealth or a sudden boom in foreign exchange from exports – these should be tucked away for future use for the benefit of society.
Norway is the classic example. In the late 1960s, oil was discovered off its coast. Overnight, the country become unfathomably rich. After much debate, the government decided to set up a wealth fund – basically a piggy-bank belonging to all Norwegians. It is fed by a tax levied on the oil and gas extracted from Norway’s seabed, plus the revenues of Norway’s state-owned oil and gas companies.
This wealth is meant to be used “for present and future generations”. To ensure this, no one is allowed to touch the underlying pot of money itself, but the interest it earns each year goes into the national budget to pay for things like public health care, generous parental leaves, retirement pensions and public infrastructure. In concrete terms, Norway’s wealth fund contains $1.1 trillion. That money is invested in 9,000 publicly-listed companies across 70 countries around the world. The investments generate a return of about 3% a year, which is what goes into the national budget to provide everyone in Norway with those public services. It has become a source of national pride and unity across the political spectrum.
Many sovereign wealth funds were set up with a similar logic. The “wealth” may come from diamonds (Botswana) or copper (Chile), foreign currency reserves (China) or export earnings (Saudi Arabia). Even the state of Texas in the United States wrote into its constitution back in the 1850s that “available public lands” should be used to finance public schools. To do this, lands were either sold outright or were leased with the proceeds feeding a Permanent School Fund (a sovereign wealth fund) run by a trio of local civil servants. In all of these cases, the funds are created with resources that arguably belong to everyone and serve a public interest objective such as guaranteeing social rights (e.g. retirement for all in Norway) or covering national budget deficits in times of crisis (e.g. as happened with Covid-19 in Peru) or providing children with access to education (Texas).
Recently, however, governments have started diverging from this logic. Increasingly, sovereign wealth funds are being set up with no resources or wealth or sovereign character to speak of. Indonesia’s sovereign wealth fund, which was set up in 2021, is more like a “development” fund. It aims to secure foreign investment from companies, banks and funds in order to build local infrastructure and energy projects. Not much different from what the government already does. The Philippines’ proposal is more like a “public-private partnership” fund, as foreign investors will be asked to do joint ventures with the state or with local businesses. At one point, the government was proposing that the fund should be handed over to the private sector and listed on the stock market! Quite a number of small countries with no surpluses to speak of have set up sovereign wealth funds by offering citizenship to wealthy individuals (leading to corruption scandals as well).
Over the past two decades, the number of sovereign wealth funds has surged (see graph) and there are now more than 100 sovereign wealth funds around the world.[1] Collectively, they hold $10 trillion – which makes them the third largest economy, after the US and China, if they were a country. That figure is expected to reach $17 trillion by 2030. While most sovereign funds are national in scope, some are sub-national. The state of Queensland, in Australia, has one. Palestine has one. Even the city of Milan has one.
Some of these funds invest only abroad, some invest only at home and some do both. Key sectors they put their money in, to capture earnings, include energy, technology, health, finance and real estate. All told, sovereign funds are so massive that most people have probably had some connection to them, as they own bits of Alibaba, Flipkart, Uber, Slack, Grab, major airports, the world’s top football teams and social media like Twitter. Anyone paying for these is actually helping sovereign wealth funds take money home.
And while it seems to be a trend among political elites these days to think that setting up such structures can bring funds into the global South, 80% of sovereign wealth fund assets is currently parked in Europe and North America. In fact, one-third is in the US alone.
Agriculture: a critical concern
In dollar terms, food and agriculture represent just 2-3% of all sovereign wealth fund investments. While that sounds small, it is a politically sensitive and strategic sector for many governments. Contributing to national food security has been a historic role for sovereign funds, and it is a vital one for those of Singapore and the Gulf states.
At least 42 sovereign funds are currently invested in food and agriculture (see table). Some are major players, but many are less visible (see box). Their investments may be in largescale farmland acquisitions and production, such as orange groves in Brazil, cattle ranches in Australia or vertical pig farms in China. Some take the form of ownership stakes in global food commodity traders that ship grains, oilseeds and coffee across our oceans, like Bunge, COFCO or Louis Dreyfus. Yet others are positions in food retail systems like supermarket chains or delivery services, and the digital technologies that these operations increasingly rely on.
A handful of actors form the centre of gravity of global agricultural investing by sovereign funds. They are Temasek and GIC in Singapore; PIF in Saudi Arabia; Mubadala and ADQ in UAE; QIA in Qatar; RDIF in Russia; and COFIDES in Spain (see map). The Singaporeans and the Gulf states invest with their own food needs as a priority. RDIF brings big investors into Russia to help finance its export-oriented agribusiness sector. And COFIDES funds food projects around the world with one catch: a Spanish company must be directly involved in and profit from it, such as Borges with almond production in Europe or Pescanova with fish farming in Latin America. (Actually, there is a second catch: all of COFIDES’ overseas food and agriculture investments are loans.[2])
Quite a number of sovereign wealth fund ventures in agriculture are linked to concerns about land and water grabbing, whether directly and indirectly. In December 2022, Abu Dhabi’s government-owned ADQ, which has $110 billion in assets, got hold of 167,00 hectares of farmland in northeast Sudan.[3] It plans to grow sesame, wheat, cotton and alfalfa there, while it builds a massive new port nearby to ship the goods out. ADQ already owns:
  • 45% of Louis Dreyfus Company, with its massive land holdings in Latin America, growing sugarcane, citrus, rice and coffee;
  • a majority stake in Unifrutti, with 15,000 ha of fruit farms in Chile, Ecuador, Argentina, Philippines, Spain, Italy and South Africa; and
  • Al Dahra, a large agribusiness conglomerate controlling and cultivating 118,315 ha of farmland in Romania, Spain, Serbia, Morocco, Egypt, Namibia and the US.
Therefore, the concerns are quite serious. Al Dahra stands accused of draining aquifers in Arizona, just so that it can produce hay to transport back to UAE to feed local dairy herds.[4]
Saudi Arabia’s Public Investment Fund (PIF), one of the world’s top ten sovereign wealth funds in terms of assets, has $13.7 billion invested in agriculture. It owns several massive agribusiness conglomerates focused on livestock, dairy and fisheries. In 2021, it took 100% control of the Saudi Agricultural and Livestock Company (SALIC) which is engaged in meat and cereal production in Canada, Ukraine, India, Brazil, Australia and the UK.[5] The scale is enormous. In India, PIF produces its staple, basmati rice.
From Brazil, it gets its beef. In Australia, it operates 200,000 ha for sheep grazing and also buys lamb and mutton directly from producers. In Ukraine, it has 195,000 ha growing wheat, barley, maize and rice. PIF also owns 35% of Olam Agri, a major palm oil producer, and is building the largest vertical farm in the entire Middle East and North Africa region.[6] It is very strange, then, to learn that PIF’s new green financing instrument will explicitly exclude funding for any projects or expenditures associated with industrial agriculture or livestock![7] It shows the doublespeak of investors that expand intensive industrial food systems while needing to flash climate credentials.
Another very big player is Qatar. Its sovereign wealth fund has massive land holdings in Australia, through a stake in the 4.4 million ha Paraway Pastoral Company dedicated to livestock production. The fund allows Qatar to source its organic food supplies through Canada’s Sunrise Foods, which operates in Turkey, Netherlands, Russia, Ukraine and US. It owns poultry and seafood companies in Oman, and is now developing agriculture supply chains in East Africa. The Qatari wealth fund is connected to a Russian oil company which owns 50% of Agrokultura, which operates 200,000 ha of farmland in Russia. It also owns 14% of AdecoAgro with its 472,862 ha hectares under production in Argentina, Brazil and Uruguay. It is now going into Kazakhstan for the same purposes – and in direct competition with the UAE.[8]
It is important to note that many of these arrangements between sovereign wealth funds and global agribusiness involve political guarantees. Qatar is one of the biggest investors in Glencore, with whom it has a deal to ensure its access to grains and shipping services in case of need. The same is true with Qatar and Turkey’s Tiryaki Agro Group. The fund’s agricultural arm, Hassad Food, has its own agreement with Sunrise Foods which ensures that in the event of any shortage in the Qatari market, the country’s need for grain, oilseeds and wheat will be met on a priority basis.[9] Similarly, when Abu Dhabi’s ADQ bought 45% of Louis Dreyfus – the world’s third largest commodity trader – it signed a side deal giving it priority access to food shipments in times of global crisis, as the world experienced recently during both Covid-19 and the Russian invasion of Ukraine.[10]
It is fair to say that the political strategy of leveraging sovereign wealth to get access to global food supplies works. What is never mentioned is at what cost. For many of these big investment projects expand and entrench largescale corporate agribusiness, with its contingent slew of land conflicts, water pollution, indigenous rights abuses, labour violations and spiralling climate emissions. And when it comes to the Gulf states or Singapore, these are very small populations draining the resources of much bigger ones. With sovereign funds, scale is baked in. Even when they do try to reckon with social and environmental contingencies, as in the case of PIF, their attempts at making investments green or socially responsible are shallow at best. Only Norway’s stands out as making strong commitments to scrutinise and withdraw from agribusiness companies associated with social and ecological crimes, as it has done with meat packers and soy producers in Brazil (Minerva, Marfrig, SLC Agricola and JBS) as well as rubber giant Halcyon Agri.[11]
So, to answer the question: what do these funds have to do with food sovereignty? The answer is: it’s twisted. They do provide food security for a few countries. And political elites increasingly like to use the term food sovereignty to characterise these missions, as it serves their nationalist, territorial and militarist frameworks.[12] But sovereign wealth funds crush real visions of food sovereignty as they take resources away from local communities and push a capitalist, industrialist food system – be it green or not.
Putting the public interest first
Sovereign wealth funds can be a good idea if they really are sovereign (run by the people), if the resources they harness are democratically sourced and organised, and if they have a genuine public welfare mandate. We actually need more commitment to public approaches to reverse the growing inequality and privatisation that is undermining people’s rights to healthcare, housing, transportation, food, education and retirement in most countries around the world.
But there is a danger. There are increasing calls to set up sovereign wealth funds to solve government problems – from building a new capital city in Indonesia to plugging an alleged deficit in France’s pension system. But these newer funds are just tools to channel money into government coffers or private enterprises. They are not built on any collective resource or aimed at protecting a public wealth for the benefit of future generations. They seem to have little to do with traditional sovereign wealth funds, apart from the name. For that reason, they should be scrutinised and if they don’t genuinely serve the public interest they should be stopped. Similarly, those that contribute to land or water grabbing should be challenged and stopped, too.
Agriculture may not be the number one sector that these funds gravitate towards to generate wealth. But politically, geopolitically and strategically, food security is a core concern of theirs and will continue to be, requiring our critical scrutiny as well.
We need good public services that provide for public well-being. Sovereign wealth funds – despite their name – need to be put to a more scrupulous test to see if they have a role to play in that agenda.
Less visible players: Big players aside, many sovereign wealth funds participate in financing the direction of food and agriculture.[13]
• Angola’s sovereign wealth fund is investing in food and agriculture in Africa through a private equity fund that is targetting the production of maize, beans, soybeans, rice and cattle.
• Australia’s sovereign wealth fund has a Future Drought Fund since 2019. Currently holding A$4.5 billion, its sole aim is to “provide secure, continuous funding to support initiatives that enhance the drought resilience of Australian farms and communities.” Its investments must deliver returns of 2-3% above the consumer price index.
• Bolivia has a sovereign wealth fund that was set up in 2012 with state surplus funds and a loan from the central bank. It invests domestically in both public and private enterprises involved in honey production, fruit processing, aquaculture, dairy, quinoa and stevia.
• Brunei’s new sovereign wealth fund is considering investing in agriculture, in partnership with the Malaysian Investment Development Authority.
• Not much is known about how China’s sovereign wealth funds invest. The China Investment Corporation has $1.3 trillion, making it the largest in the world. It invests in agriculture overseas and reported a remarkable return of 14.27% on its overseas holdings in 2021. Equally remarkable, alternative investments, which include private equity and farmland, are said to account for 47% of its overseas portfolio. China’s National Social Security Fund is also a sovereign wealth fund and is invested domestically in agriculture through its private equity portfolio.
• France’s sovereign fund is known to be a big investor in agriculture and food, both domestically and abroad. One very controversial foreign project it is connected to is led by Arise IIP, a subsidiary of Olam, in Chad.[14]
• Gabon’s sovereign wealth fund, built from oil revenues, runs a private equity fund that invests in the food and agriculture sector. It also invests directly in agriculture and farmland projects at home.
• The National Development Fund of Iran has some $24 billion, most of it from oil and gas revenues and all of it invested domestically. According to some sources, 1% is invested in water and agriculture, including farmland ownership, a sector the fund wants to invest more in.
• Ithmar Capital, a state investment company, serves as Morocco’s sovereign wealth fund. Details are lacking but their strategy is to co-invest in Moroccan agribusiness operations with foreigners such as Spain’s COFIDES or Gulf state investors.
• Nigeria, like Abu Dabhi and Spain, has its sovereign wealth fund investing in fertiliser production. This is a very strategic concern.
• Palestine’s sovereign wealth fund is a public company that does local impact investing. Its initial funds came from the Palestinian Authority. It is invested in a 50 hectares seedless grape farm, looking into investing in animal feed production and helping set up a National Agriculture Investment Company.
• Türkiye Wealth Fund has 2% of its investments in food and agriculture, as of 2019.
• In the US, the states of Texas, New Mexico and Alaska have sovereign wealth funds that are heavily invested in farmland, whether directly or through private equity funds. The agribusiness operations they fund are in some cases domestic and in others overseas (usually in the Southern Cone of Latin America or Australia).
• Vietnam’s State Capital Investment Corporation is invested in agriculture/farmland through a joint venture with the State General Reserve Fund of Oman, showing how co-investing is a common strategy of sovereign funds.
Sovereign wealth funds invested in farmland/food/agriculture (2023)
Country
Fund
Est.
AUM (US$bn)
China
CIC
2007
1351
Norway
NBIM
1997
1145
UAE – Abu Dhabi
ADIA
1967
993
Kuwait
KIA
1953
769
Saudi Arabia
PIF
1971
620
China
NSSF
2000
474
Qatar
QIA
2005
450
UAE – Dubai
ICD
2006
300
Singapore
Temasek
1974
298
UAE – Abu Dhabi
Mubadala
2002
284
UAE – Abu Dhabi
ADQ
2018
157
Australia
Future Fund
2006
157
Iran
NDFI
2011
139
UAE
EIA
2007
91
USA – AK
Alaska PFC
1976
73
Australia – QLD
QIC
1991
67
USA – TX
UTIMCO
1876
64
USA – TX
Texas PSF
1854
56
Brunei
BIA
1983
55
France
Bpifrance
2008
50
UAE – Dubai
Dubai World
2005
42
Oman
OIA
2020
42
USA – NM
New Mexico SIC
1958
37
Malaysia
Khazanah
1993
31
Russia
RDIF
2011
28
Turkey
TVF
2017
22
Bahrain
Mumtalakat
2006
19
Ireland
ISIF
2014
16
Canada – SK
SK CIC
1947
16
Italy
CDP Equity
2011
13
China
CADF
2007
10
Indonesia
INA
2020
6
India
NIIF
2015
4
Spain
COFIDES
1988
4
Nigeria
NSIA
2011
3
Angola
FSDEA
2012
3
Egypt
TSFE
2018
2
Vietnam
SCIC
2006
2
Gabon
FGIS
2012
2
Morocco
Ithmar Capital
2011
2
Palestine
PIF
2003
1
Bolivia
FINPRO
2015
0,4
AUM (assets under management) figures from Global SWF, January 2023
Engagement in food/farmland/agriculture assessed by GRAIN
[1] Important sources used for this report include: Javier Capapé (ed), “Sovereign wealth funds 2021”, IE University, Madrid, Oct 2022, https://docs.ie.edu/cgc/SWF%202021%20IE%20SWR%20CGC%20-%20ICEX-Invest%20in%20Spain.pdf; Global SWF, “2023 Annual report”, New York, Jan 2023, https://globalswf.com/reports/2023annual; the websites of Global SWF (https://globalswf.com) and SWF Institute (https://www.swfinstitute.org/) as well as Preqin Ltd.
[3] Reuters, “Sudan to develop Red Sea port in $6-bln initial pact with Emirati group”, 13 Dec 2022, https://www.farmlandgrab.org/31347.
[4] Ella Nilsen, “Wells are running dry in drought-weary Southwest as foreign-owned farms guzzle water to feed cattle overseas“, CNN, 27 Nov 2022, https://edition.cnn.com/2022/11/05/us/arizona-water-foreign-owned-farms-climate/index.html
[5] See SALIC website: https://salic.com/
[6] AeroFarms, “PIF and AeroFarms sign joint venture agreement to build indoor vertical farms in Saudi Arabia and the wider MENA region”, 1 Feb 2023, https://www.aerofarms.com/2023/02/01/pif-and-aerofarms-sign-joint-venture-agreement-to-build-indoor-vertical-farms-in-saudi-arabia-and-the-wider-mena-region/
[7] Public Investment Fund, “Public Investment Fund Green Finance Framework”, February 2022, https://www.pif.gov.sa/Investors%20Files%20EN/PIF%20Green%20Finance%20Framework.pdf
[8] See Hassad Food, “Hassad signs MoU with Baiterek to discuss investment projects that supports food security”, 12 Oct 2022, https://www.hassad.com/2022/10/12/hassad-signs-mou-with-baiterek-to-discuss-investment-projects-that-supports-food-security/ and Global Sovereign Wealth Fund, “Gulf funds drawn into soft power battle over Kazakhstan”, 25 Aug 2021, https://globalswf.com/news/gulf-funds-drawn-into-soft-power-battle-over-kazakhstan
[9] See Hassad Food, “Strategic local and international investments along with global partnerships to satisfy the market needs from grains and wheat”, 28 Mar 2022, https://www.hassad.com/2022/03/28/strategic-local-and-international-investments-along-with-global-partnerships-to-satisfy-the-market-needs-from-grains-and-wheat/
[10] Reuters, “Commodity group Louis Dreyfus completes stake sale to ADQ”, 10 Sep 2021, https://www.reuters.com/world/middle-east/commodity-group-louis-dreyfus-completes-stake-sale-adq-2021-09-10/.
[11] See Fabiano Maisonnave, “Norway oil fund omits meatpacker JBS from deforestation watch list “, Climate Fund News, 4 Apr 2018, https://www.climatechangenews.com/2018/04/04/norway-oil-fund-omits-meatpacker-jbs-deforestation-watch-list/, Earthsight, “World’s largest pension fund dumps shares in beef firm in wake of corruption scandal”, 24 July 2018, https://www.earthsight.org.uk/news/idm/worlds-largest-pension-fund-dumps-shares-beef-firm-wake-corruption-scandal and Paulina Pielichata, “Norway sovereign wealth fund divests Halcyon over environmental concerns”, Pensions & Investments, 27 Mar 2019, https://www.pionline.com/article/20190327/ONLINE/190329915/norway-sovereign-wealth-fund-divests-halcyon-over-environmental-concerns
[12] “L’Afrique sur le chemin de l’autosuffisance alimentaire”, Seneplus, 27 Feb 2023, https://www.seneplus.com/developpement/lafrique-sur-le-chemin-de-lautosuffisance-alimentaire
[13] Main sources for this box are each fund’s respective website, news clippings and Preqin Ltd.
[14] Arise, “Bpifrance and Arise IIP establish a partnership to foster agricultural materials processing and co-industrialisation projects on a pan-African scale”, 15 February 2023, https://www.ariseiip.com/bpifrance-and-arise-iip-establish-pan-african-partnership/ , and Benjamin König, “Arise IIP, la firme qui dépouille les paysans africains”, L’Humanité, 4 April 2023, https://www.humanite.fr/monde/tchad/arise-iip-la-firme-qui-depouille-les-paysans-africains-789407
Source: Grain

Related posts:

Food Sovereignty is the only solution and way forward. La Via Campesina calls on States to exit the WTO and to create a new framework based on food sovereignty The United Nations Food Systems Summit is a corporate food summit —not a “people’s” food summit Food Sovereignty: A Manifesto for the Future of Our Planet CORPORATE AGRIBUSINESS GIANTS SWIM IN WEALTH AS MORE POOR PEOPLE GO HUNGRY AMID THE BITING COVID PANDEMIC.
Continue Reading

Resource Center

Legal Framework

READ BY CATEGORY

Facebook

Newsletter

Subscribe to Witness Radio's newsletter



Trending

Subscribe to Witness Radio's newsletter