PAPUA, Indonesia -- Barnabas Suebu, the governor of this
remote and wild province, recalls flying over parts of Indonesia a decade
ago and being appalled by what he saw below. A major island in the
archipelago, once home to massive virgin rain forests, had been stripped
bare for development and plantations.
"I felt so sad," Mr. Suebu said. "This kind of damage must
be avoided in Papua."
Until recently, similar destruction in Papua seemed
inevitable. The Indonesian government has long wanted to hack through its
rain forest to make way for agricultural development. In the past year,
Chinese and Indonesian companies have unveiled plans to spend billions of
dollars on huge palm-oil plantations, hoping to feed demand for biodiesel.
Papua appeared on the verge of its first-ever investment rush.
In an interview in Papua's capital, Jayapura, Mr. Suebu, 61
years old, acknowledged that his impoverished province needs the economic
boost development might bring. But rather than allow Papua to follow the
same course as many other Indonesian islands, Mr. Suebu is trying to chart
a new direction. In effect, he wants Papua to be paid not to cut down its
His proposal: Have Papua become an active player in the
world's emerging carbon markets -- a series of exchanges that let
investors and companies buy and sell the right to pollute. By setting
aside a portion of the earmarked land for conservation, he believes Papua
could attract companies who wish to gain carbon "credits." These valuable
commodities, traded on various types of exchanges, allow investors to
offset their carbon-dioxide emissions elsewhere. Credits on the European
Union's trading system are currently worth about $27 per ton of carbon
The plan for Papua came to the governor's attention by way
of Dorjee Sun, a 30-year-old Australian who became a millionaire
developing Internet software. Under Mr. Sun's model for Papua, European
and U.S. investors would put money into an offshore carbon fund. The money
would then flow to local governments if they keep their promises not to
cut forest land. In return, investors stand to receive credits based on
how much carbon dioxide would have been emitted if the forests were
burned. Compliance would be monitored via satellite technology.
If successful, the Papua approach could help influence
anti-global warming efforts in Indonesia and elsewhere.
"We need to show Papua that there is an alternative to
plantations," said Mr. Sun on a recent visit to the island. "This is the
Rain forests play a key role in maintaining the world's
environmental balance. Trees and plants soak up carbon dioxide through
photosynthesis. Ancient forests store more than new plantations.
Protecting them also means reducing one of the chief causes of harmful
carbon-dioxide emissions: fires set to clear the forests for other
According to the World Bank, roughly 22 million acres of
rain forests are lost globally each year when they are cleared by fire for
alternate use. These fires account for about 20% of the world's
carbon-dioxide emissions -- more than the total from all vehicles,
airplanes and ships. Such fires make Indonesia the third-largest emitter
of carbon dioxide after the U.S. and China -- even though it has the
world's 22nd-largest economy.
Curbing forest destruction is gaining more attention as a
strategy to combat global warming. The Kyoto protocol, the global treaty
intended to cap emissions, allows companies to earn the right to pollute
by funding emission-reducing projects in developing nations. Credits to
pollute are traded around the world. Major buyers include heavy-emitting
companies in Europe and Japan, which are subject to Kyoto-related emission
Currently, the treaty allows companies to generate credits
by planting new trees. But it doesn't cover efforts to preserve existing
trees -- the sort of plan now being pursued in Papua. Even so, most of the
Kyoto-sanctioned projects have focused on cutting pollution from industry;
only one has involved planting trees.
But now, as diplomats begin debating a new international
agreement to succeed the Kyoto Protocol when it expires in 2012, there's
increasing talk of changing the rules to allow tree-preservation -- also
dubbed "avoided deforestation" -- to produce emission credits that can be
bought and sold.
Messrs. Sun and Suebu concede that their project is
unlikely to interest companies that must meet official emissions-reduction
targets under the current Kyoto treaty. But they believe change is
In December, the United Nations' Climate Change Conference
will meet on the Indonesian island of Bali to discuss whether to include
"avoided deforestation" projects in the successor treaty to Kyoto. At the
meeting, the World Bank will detail its plan to spend $250 million over
the next year in a pilot program to reward nations that protect their
Even if Kyoto standards remain ironclad, Messrs. Sun and
Suebu see potential.
They suspect that the Papua fund will also appeal to
investors who want to get in on the growing number of unregulated, ad-hoc
markets dedicated to the voluntary trade of carbon credits. These markets,
including the Chicago Climate Exchange, sell different types of credits to
companies that want to offset their carbon emissions -- sometimes going so
far as to be "carbon neutral" -- for public-relations reasons. Some of
these companies are in countries that have ratified Kyoto and want to go
beyond what the treaty requires. Others are in countries that haven't
ratified Kyoto, like the U.S., and want to voluntarily invest in
"In my mind, we have to save the forests of Papua and make
money from that," said Mr. Suebu.
Still in the planning stages, the Papua project faces other
hurdles -- starting with jurisdictional issues over who controls the land
in question. Indonesia's powerful Forestry Ministry says it has the power
to determine the fate of Papua's forests, a claim Mr. Suebu strenuously
And Messrs. Sun and Suebu have yet to calculate how much,
financially, Papua would benefit from the project. Specific figures won't
be determined until more scientific analysis is performed on the land and
its carbon stash.
Many global warming experts say paying governments to
protect forests needs to become part of the arsenal to stop climate
change. Papua's plan could offer an attractive alternative for countries
such as Brazil and the Democratic Republic of Congo that have huge
tropical rain forests but need substantial investment.
Mr. Suebu has proposed to protect more than half of the
Papua land targeted for development to see if such a plan can work. In the
meantime, he has applied heavy brakes to the plantation companies'
expansion aims, so far refusing to grant them permission to proceed with
their planned developments.
The plantation companies in Papua aren't giving up,
however. The only four-star hotel in Jayapura is swarming with Malaysian
and Indonesian plantation executives hoping for an audience in the
governor's mansion. The companies are proffering large investments in
roads and ports and the creation of local jobs -- attractive incentives to
the province's 2.5 million residents. Many people here still hunt wild
animals for food and 40% live on less than $14 a month, according to the
The companies may yet persuade Mr. Suebu to free up huge
tracts for development, especially if Mr. Sun's plan fails to get off the
ground. Even if the plan does take off, Mr. Suebu may decide to allow a
mix of plantations and preservation to reap the maximum economic
Papua is the size of California and takes up the western
half of the giant island of New Guinea. (The other half is the separate
country of Papua New Guinea.) Indonesian Papua is almost entirely covered
by vast stretches of virgin rain forests. Its central mountain range is
capped by glaciers. The only large development in the province is a copper
and gold mine owned by Phoenix-based Freeport-McMoran Copper & Gold
Mr. Suebu, a large man quick to break into a broad smile,
was born on a small island on a lake near Jayapura. After law school, he
founded a business conducting surveys for public-works projects. He became
a member of the political party of Indonesia's former president and strong
man, Suharto. In 1988, he was appointed Papua's governor.
After Mr. Suharto's fall in 1998, Mr. Suebu moved to
Jakarta as an advisor to the president's successor, B.J. Habibie. Shortly
after, Mr. Suebu was appointed Indonesia's ambassador to Mexico, where he
learned how nations such as Costa Rica were earning money from protecting
forests. A decade ago, Costa Rica was a pioneer of so-called
debt-for-nature swaps in which developed countries wrote off loans made to
the republic in return for specific forest conservation measures. "I
thought, 'This is great' because here you protect the forest but money
still comes in," Mr. Suebu said.
He returned to Indonesia in 2002, becoming an adviser to
the World Bank. In July 2006, he was elected governor, the first time the
post had been filled by popular vote.
On taking office, Mr. Suebu pledged the local government
would make decisions about Papua's forests -- not the central government
The governor's powers had changed dramatically from his
earlier stint in the job. A 2001 law granted a large degree of autonomy to
Papua, including greater say over how forests and other natural resources
are parceled out to investors. It also gave the provincial government 80%
of the revenues from natural-resource-based industries such as mining and
forestry -- a gusher of cash that has allowed Mr. Suebu to hand out
$10,000 to every village in the province.
But a few weeks into his tenure, Mr. Suebu says he was
called to Jakarta by Indonesian President Susilo Bambang Yudhoyono. Mr.
Yudhoyono explained how the government hoped to attract billions of
dollars in investment and create 3.5 million jobs in the country from
developing plantations of oil palms, cassava and sugar cane -- the raw
material for biofuels.
The Forestry Ministry, which argues it still has the final
authority over Papua's forests, had in 1999 earmarked land roughly the
size of Portugal for agriculture. The president asked Mr. Suebu to
immediately open up five million acres of that land for conversion to
plantations. Plantation companies from Indonesia to Malaysia were running
out of space elsewhere in the country and wanted to expand to the
Mr. Suebu balked. In the past, he says, small-scale
palm-oil ventures in Papua have cut down and exported valuable tropical
hardwood but, in many cases, failed to develop plantations on the cleared
land. In other cases, workers on the plantations were brought in from
Indonesia's main island of Java, sparking social conflict with locals.
Papua's forests in the past several years also have become
a rallying point for environmentalists as Indonesia's other virgin forests
disappear. The country has the world's fastest rate of deforestation,
losing an area the size of Belgium annually. In provinces such as
Kalimantan and Sumatra, the U.N. estimates that lowland forests will be
wiped out by 2022, putting the survival of species like orangutans and
elephants at risk. Mr. Suebu didn't want Papua to be next. "We're not
doing that," he said he told the president.
But the pressure on him only increased. The government of
Malaysia, the world's largest palm-oil producer, invited Mr. Suebu to see
for himself how plantations can spur economic growth. Then, in January,
Indonesia's central government said it had signed preliminary deals to
develop biofuel projects worth a combined $12.4 billion.
China National Offshore Oil Corp. and its Indonesian
partner, PT Sinar Mas Agro Resources & Technology, announced they had
agreed with Jakarta to invest $5 billion over eight years to develop
palm-oil plantations in Papua.
"It's a matter of communicating the benefits to these
people," said Rafael Concepcion, executive director of investor relations
at Sinar Mas Agro, in an interview. Of the Papuans, he added: "I think
they are tired...They live like nomads."
That same month, Mr. Sun, the carbon-trading proponent,
made his first trip to Indonesia from Australia to discuss how to counter
the threat from plantations.
In Indonesia, Mr. Sun met LeRoy Hollenbeck, an American
adviser to the governor of Aceh, an Indonesian province at the other end
of the country from Papua. The governor, Irwandi Yusuf, was looking for
ways to make money by protecting forests. Mr. Sun offered to use his
business expertise to raise money for a carbon fund that would pay for
preservation. Mr. Hollenbeck, who had known Mr. Suebu since the 1980s,
approached Papua's governor to see if he would be interested in joining
the effort. Mr. Suebu said yes.
In April, the two governors held a summit in Bali, backed
by the World Bank. In a formal declaration, they offered to stop forest
destruction, and called on the global community to step up with financing.
Mr. Suebu agreed to protect three million acres for carbon trading from
the land Jakarta wants to convert to agriculture. That could rise to 12
million acres if the initial carbon-trading plan is successful, he
Soon after the Bali declaration, Mr. Sun bought a
controlling stake in the Carbon Pool Pty. Ltd., a small Australian company
that in 2006 did one of the world's first avoided-deforestation trades. In
that project, Carbon Pool bought out farmers' rights over 30,000 acres in
Queensland, in the northeast of Australia, and sold the resulting carbon
credits to Anglo-Australian mining company Rio Tinto Ltd. The terms of the
deal were not disclosed.
Mr. Sun hopes to get Rio Tinto to invest in his new venture
for Papua and Aceh. Rick Humphries, head of climate-change strategy for
Rio Tinto's aluminum division in Brisbane, says the company is "keen to
look at other opportunities" in forest-protection projects, but didn't
specifically comment on Papua.
In July, Mr. Sun traveled for the first time to Papua for a
meeting with Mr. Suebu in which they discussed strategies for selling the
Papua fund. Mr. Sun then flew directly to the U.S. to hold preliminary
meetings with investors, including hedge funds, companies and rich
individuals, he says. He declines to release a tally of the fund-raising
Write to Tom Wright at email@example.com