By Chris Lang
The Katingan Peatland Restoration and Conservation Project covers an area of about 150,000 hectares in Central Kalimantan, Indonesia. The project was created in 2007 by an Indonesian company called PT Rimba Makmur Utama. The director of the company is Dharsono Hartono.
Hartono studied at Cornell University, and worked in real estate at JP Morgan. In 2007, Rezal Kusumaatmadja, a friend of his from Cornell, told Hartono about the possibility of making money out of protecting rainforest. In 2016, Hartono told PRI,
“Suddenly my JP Morgan head blipped and said, ‘This is just like real estate. If you manage it properly, there will be value, there will be appreciation, you can make money out of it.’”
Together, they set up PT Rimba Makmur Utama and the Katingan project. Kusumaatmadja is Chief Operating Officer of the company. The project today is a partnership between PT Rimba Makmur Utama, Wetlands International, Puter Foundation, and Permian Global (more on Permian Global later).
Hartono had hoped to be selling carbon credits within two years. But the Ministry of Forestry only approved the Ecosystem Restoration Concession in October 2013 – and even then the concession covered about 100,000 hectares, around half of the area the company had applied for. Three years later, the Department for Environment and Forestry approved a second concession covering almost 50,000 hectares.
In November 2016, the project was verified and validated under the Verified Carbon Standard (VCS) and the Climate, Community and Biodiversity Alliance (CCBA). Hartono told PRI,
“It has almost been nine years and we are still not making revenue. If I would have known that this was going to be this complex, I would have walked away.”
The first carbon credits from the project were issued in May 2017, ten years after the project started. Two recent announcements suggest that the project could at last make some money:
- In April 2019, Shell announced that it would spend US$300 million on natural climate solutions to offset emissions from people using Shell petrol and diesel in the Netherlands. One of the projects that Shell buys carbon credits from is the Katingan project.
- In September 2019, Volkswagen announced that it would buy carbon offsets from the Katingan project.
REDD: “Totally absurd”
Recently, Daphné Dupont-Nivet, a Dutch journalist with Investico, and Indonesian journalists, Gabriel Wahyu Titiyoga from Tempo and Aqwam Fiazmi Hanifan from Narasi, took a closer look at the Katingan project. Dupont-Nivet’s articles (in Dutch) are available in the Dutch newspapers Trouw, and De Groene Amsterdammer, and on the Investico website. Indonesian articles are due to be published soon.
The journalists studied reports about the project, spoke to scientists, conservationists, project developers, and certifiers, and with the help of experts they analysed satellite images of the concession area.
Dupont-Nivet spoke to Hilda Stroot, biodiversity programme director at Greenpeace. Stroot is critical of REDD:
“We are ten years ahead and have to conclude that we are not going beyond the obstacles…. It just doesn’t work. It is hard to be in favour of this. We see so many mistakes on this file.”
Mucahid Bayrak, a geographer at the National Taiwan Normal University has been researching the impact of forest protection schemes on local communities and has visited offset projects in Vietnam. “REDD+ will go down in history as a totally absurd project,” he says.
Esther Turnhout, a professor at Wageningen University, published an overview study of REDD in 2016. She is also critical of REDD:
“The scientific literature clearly shows that it is not an effective mechanism. The calculation methods are very complex and often impossible, the system is based on problematic assumptions and works unfairly. And it does not contribute to the reduction of CO2.”
One of the key problems with REDD is permanence. The emissions from Shell’s or Volkswagen’s drivers immediately go into the atmosphere where they help contribute to the climate crisis. Part of that CO2 will stay in the atmosphere for centuries.
As Alain Karsenty, a researcher at the Centre for International Cooperation in Agricultural Research for Development (CIRAD), pointed out recently, to offset emissions from fossil fuels, forests would have to remain standing forever. Karsenty writes that, “In fact, a complete neutralisation of emissions would require almost perpetual storage. But who can provide such a guarantee?”
And even in this theoretical best case scenario, there is no reduction in emissions.
Fires and Katingan: “The burnt area is huge”
This year, the forest fires in Indonesia have been the worst since 2015, when they cost the country US$16 billion and 500,000 people suffered respiratory ailments. In 2015, more than 9,000 hectares of the Katingan project area burned down.
The October 2016 project monitoring report includes a map of the areas burned in 2015:
This year, most of the Katingan project area has not gone up in flames Dupont-Nivet finds. She and experts in Brazil, Indonesia, USA and the Netherlands look at downloaded data from NASA’s Fire Information for Resource Management System (Firms).
But in the area around the reserve they find more than one thousand hotspots and 179 hotspots inside the project boundary.
Landsat photos from the end of October 2019 reveal dark brown “fire scars” inside the project area, covering a total of 1,900 hectares.
The Indonesian journalists Titiyoga and Hanifan travel to the project area. “The burnt area is huge,” Titiyoga says. “I walked about two miles and still can’t see the end of the fire scar.”
“This year was one of the worst burning years in five years. I expect we have lost millions of dollars,” Hartono tells Dupont-Nivet.
Land conflict
The Indonesian journalists found dozens of agricultural plots inside the project area. A handmade wooden board reads, “This area is controlled by the Dayak”. The individual plots are marked wooden signs with the names of villagers. They set fire to the forest so that they could grow vegetables and rice on the land.
Hanifan describes the southern border as consisting of, “Charred peaty soil and tree stumps, with wooden signs placed every few metres with names of villagers.”
The conflict over land in the area of the project goes back many years. In 2014, the governor of Central Kalimantan agreed that every Dayak family would be allowed five hectares of land to cultivate. But the exact location of the land was not agreed.
In 2016, PRI reported a conflict over land tenure in the project area:
The Katingan Project manages the land. The government owns it.
But some residents in the surrounding towns have long considered portions of it theirs in a traditional land tenure system. The combination of new conservation laws and the presence of the Katingan Project has cut people off from what they consider to be their land.
“Now I can’t do anything with my land,” says a man named Masdansyah, who lives in a riverside village built on stilts and boardwalks.
The Katingan project has not evicted the Dayak villagers, “to avoid a fight,” Dupont-Nivet writes. “The reserve prefers to keep the peace and opts for cooperation with the local population,” Hartono tells her.
There are about 40,000 people living in 34 villages around the project area. Five hundred villagers have been trained as firefighters under the project.
The project offered local communities 100 million rupiah (about US$10,000) a year for training and educational projects, aimed at getting them to work the land without using fire or chemicals. Four villages refused, saying the money was not enough.
A large oil palm plantation is to the east of the project area. The journalists also saw burned trees there. In 2015, Hartono told Mongabay that the concession should never have been awarded to the palm oil company, PT Persada Era Agro Kencana, because planting oil palm will involve draining the peat. The concession should have been prohibited under the moratorium agreed between Indonesia and Norway in 2011.
Hartono told Mongabay that,
“The impact of their land clearing will be very detrimental to us, because it’s one ecosystem. If they open land in a massive way, it will interfere with what we’re doing.
“In the short term, the impact will not be severe. But in the long term, the peat dome in the region will be affected, and there is potential for wildfire.”
Katingan’s counterfactual baseline
In order to issue carbon credits, REDD project developers have to create a story about how bad deforestation would have been in the absence of the project.
“The more deforestation they predict in their baseline, the greater the CO2 gain they can claim and the more credits they can sell,” World Rainforest Movement’s Jutta Kill points out. “The entire revenue model is based on a story about the future that they themselves have devised.”
In the case of the Katingan project, the project description explains that,
The Katingan Project conserves a vast ecosystem of mostly intact peat swamp forest which would have been converted to industrial acacia plantations in the absence of the project.
Shell states that it will only buy carbon credits “that have been independently verified under recognised norms and standards”. The Katingan project is verified by Verra (previously called VCS).
When Dupont-Nivet asks Verra about the problem of the fires this year in the Katingan project area, Naomi Swickard, head of market development at Verra, explains that a percentage of the credits are held back, as a buffer for credits lost elsewhere.
“It’s like risk insurance. The project pays a ‘premium’, which goes into a buffer pool and which is again managed by us, the insurer.”
Dupont-Nivet asks whether Shell’s carbon credits will remain valid even if all of Shell’s “climate forest” goes up in smoke? “Correct,” Swickard replies. “We have done extensive analyses with scenarios and models to ensure robustness.”
“The companies that sell the credits may have insurance, the atmosphere does not,” WRM’s Jutta Kill responds. In well over a decade REDD has failed to reduce either the concentration of CO2 in the atmosphere, or the rate of deforestation.
Kill says,
“I often hear that this system is better than nothing, but it’s worse than nothing. Companies present it as a first step and we applaud. But this is how we give them a license to keep extracting oil from the ground. Consumers continue to fly, continue to buy unnecessary items.”
Permian Global and the Luxembourg tax haven
In 2013, PT Rimba Makmur Utama entered into a partnership with a UK registered company called Permian Global, “to ensure the long-term financing” of the Katingan Project. Permian Global’s job is selling carbon credits and raising finance.
Gerry Elias, a managing partner at Permian Global tells Dupont-Nivet about satellite monitoring, and fire fighting in Indonesia. Unfortunately, he doesn’t go into detail about the corporate structure of Permian Global. Dupont-Nivet describes Permian Global as a “British company [that] develops projects for CO2 storage in rain forests”. Which is true, as far as it goes.
But Permian Global is a little more complicated than that.
There are three companies registered in the UK with the words Permian Global in their names:
- Permian Global Research Limited was registered as Permian Limited in January 2007. The name changed to Permian Capital Limited in April 2010, and to Permian Global Research Limited in February 2012. The company’s first director was Stephen Rumsey, an investment manager who worked at Barclays and Merrill Lynch before setting up his own company, European Credit Management Ltd.
- Permian Global Advisers LLP was registered as Permian Investment Management LLP in May 2010. The name changed to Permian Global Advisers LLP in February 2012. Stephen Rumsey and David Moss are directors of the company. Moss is a corporate finance lawyer, who was previously a partner at Kingsley Napley.
- Permian Global Finance Indonesia Limited was registered in June 2018. Stephen Rumsey is the sole director.
While all these companies have an address in London, that’s not where most of the financial action takes place.
On its website the company explains that the Permian Global Fund (the “Master Fund”) is domiciled in Luxembourg. “The Master Fund and respective feeders are intended to provide non-retail investors with an interest in a diverse portfolio of Permian Global projects.”
Permian Global has set up four companies in Luxembourg: Permian Global General Partner S.à r.l. (registered 2 February 2015); Permian Global Holdings S.à r.l. (registered 5 January 2017); Permian Global Management S.à r.l. (registered 16 February 2015); and Permian Global S.C.A, SICAV-SIF (registered 16 February 2015).
PHOTO credits: Narasi / SaveOurBorneo.
Thanks for highlighting this Chris.
The original article published in De Groene Amsterdammer is the outcome of a lengthy series of discussions with Permian Global.
Disappointingly, the journalist chose to misrepresent large parts of these discussion, omit important details and in places include inaccuracies, which we had previously highlighted.
Of course, 2019 has been a devastating year with fires across Indonesia, but the project managed these exceptionally and with very little fire impact (as the journalist at one point concedes).
I want to include below a summary that I sent to the journalist, as it highlights some of the main concerns we have the original article that they published by De Groene Amsterdammer earlier this week.
Thanks
David Stone
Permian Global, response to the article The climate forest goes up in smoke, in De Groene Amsterdsterdammer, 10.12.19
1.First, the lead photograph is not of our project. This straight away is misleading for readers.
2.The Katingan Mentaya Project has not gone “up in smoke” as the title suggests. There were extensive fires across Indonesia during the 2019 dry season. And while there was considerable fire damage in the areas surrounding the Katingan Mentaya Project, only two fires managed to cross over into the project. That fire incidents were limited to two, demonstrates the effectiveness and hard work of the project teams, both those on the ground and those providing constant remote monitoring. Furthermore, the area where the two fires did occur, were mostly non-forest. The article later confirms, that “most of the area has unmistakably been spared”.
3.The carbon accounting that recognizes the average 7.5 million tonnes of CO2e per year represents avoided emissions from deforestation and peat oxidation. A negligible amount (less than 10,000 per year) is generated from negative emissions from reforestation. The project so far has conservatively not quantified nor claimed, negative emissions from replanting and sequestration.
4.The article states avoided emissions to be equal to the annual emissions of France. While this is true over the lifetime of the project, you are comparing annual emissions from France to a 60-year crediting period from the project, which is misleading. This is stated without referencing the devastating level of emissions caused by peat oxidation, something we were particularly clear about in our conversations with the journalist. Combatting these peat emissions is critical for the global battle against climate change and also critical for all the people in south-east Asia, who are impacted by the smoke, known as the haze.
5.In the text, the journalist misleadingly conflates UN REDD+ with forest carbon projects. “A decade later, however, doubt has struck. According to the international conservationist WWF, REDD + is now “at a critical point” where “we and others must demonstrate effectiveness and demand.” In May 2018, the General Audit Chamber of Norway concluded that “the results of REDD+ have been delayed and uncertain to date”. The Center for International Forestry Research stated last October that “REDD + initiatives have not stopped deforestation of tropical areas so far.” This is very much in reference to government-led, national programs, and not private sector implemented projects. This quote is referencing Norway criticising the flaws in their own work and not that of specialists such as the Katingan Mentaya Project.
In addition to conflating UN REDD with project level REDD, there have been several “voluntary” standards and jurisdictional ones with varying degrees of success.
The perceived failure of the REDD+ scheme as a whole doesn’t thereby mean all REDD+ projects have been a failure. We agree that to date, REDD+ has not been successfully implemented to the extent many had hoped. This however is no reflection on the individual success of some projects, including the Katingan Mentaya Project.
6.Forests and natural environments are vulnerable everywhere. Projects such as the Katingan Mentaya Project work to limit the risk as far as possible. The article describes the external threats to the forest in detail. The fact that almost the entire project area remained unaffected by the fires that have devastated surrounding areas demonstrates the effectiveness of the project management.
7. “The buyer gets the benefit in advance, while it takes a century before the debt is fully repaid.” This statement is in reference to new forest growth. As the article has already acknowledged, the Katingan Mentaya Project protects an existing carbon sink. One credit represents one tonne of avoided C02e that would be lost if the forest was converted or destroyed and the underlying peat drained and oxidized. These forests would have been destroyed and the peat swamps would have been drained, without the project.
8. “The increase in orange and red can only mean one thing, right. “Yes, fires have raged there”. Later in that paragraph, “the number of dots does not say much. It could also have been very small fires or a false alarm, when a satellite catches a reflective roof or other heat source”. Understanding the hotspot analysis requires consideration of various criteria and factors as well as on the ground surveillance. The Katingan Mentaya Project takes every alert of hotspots seriously, but it is not correct to assume that many rows of dots next to each other indicates a large fire.
9. Both Verra and Permian Global explained to the journalist the significance of NASA FIRMS hotspot data in detail. As per our conversation with the journalist, the hotspot data and analysis used in the article relied upon inaccurate data along with sub-par processing methods. As per our conversations, the NASA FIRMS system provides both “near real time” and “archive” datasets. As per their website’s explanation included in the link below, the “near real time” data is produced on the fly for early warning systems (as used by Katingan Mentaya Project) but have location inaccuracies (of up to multiple kilometers) as well thermal anomaly confidence inaccuracies.
When using the refined NASA FIRMS hotspot dataset (ie “standard” version) the total number of hotspots in the project area goes down to 37. As per recommended processing methods, this number is further reduced to 17 hotspots when filtering out those with low confidence scores.
Link to FAQ page: https://earthdata.nasa.gov/faq/firms-faq
10. Measuring burns scars also requires qualification, as Permian Global explained to the journalist. The depth of burn scar, the area’s burn history and the length of time the fire lasted must be considered to understand the volume of effected carbon within the peat.
11. Finding agricultural markers does not necessarily indicate incursions into the project area nor land that has been attempted to be claimed. However, the concession boundaries are legally confirmed and consultations with all local communities are documented in the VCS Project Development Document and subsequent annual monitoring reports. All modern smartphones (and most digital cameras) embed GPS coordinates in each photo they take. We requested the coordinates from the journalist several times so we could check the validity of the claims, but they did not provide them.
12. Along the canal there are various plots that have been designated for agroforestry work. These are collaborations between the project and community members to grow sustainable crops. But there has been no annexation of land in the project area.
13. No fires originated within the project area. The satellite monitoring data confirms this.
14. “How do project developers know for sure that the trees that they are protecting were actually cut down without the project?” The article has already described the external threats to the forest. The Katingan Mentaya Project provided the journalist with an extensive account of the baseline calculations and articulated the level of certainty of land conversion that would have taken place had the project not intervened. Permian Global also invited the journalist to research the baseline calculations described in the Project Development Document, which demonstrates the conservative assessment that the project’s additionality is based upon. We have not based our calculations on “gloom future scenarios” but well researched, conservative estimations. The calculations for these are provided in the Project Development Document, which is publicly available. We provide the journalist with the link to this.
15. We take any loss of carbon from the project extremely seriously. All emissions incidents are robustly assessed, and the appropriate adjustments are made for our overall carbon accounting. The project management activities that are in place have ensured that since the project began, the integrity of the forest has been maintained. The Katingan Mentaya Project is currently undergoing a thorough analysis of the 2019 fires, which will include third-party auditing and necessary carbon stock adjustment within the 2019 Monitoring Report, but the initial assessment found that the two fires that managed to break through into the project area will have resulted in emissions that will be substantially lower than those that would have occurred in 2019 had the site been undergoing conversion to plantations.
16. “Because even when so much forest burns down on Borneo that the reserve cannot provide these ‘verified’ CO2 credits, there is still nothing formally going on”. The project exists to prevent the destruction of the forest and as the article acknowledges, despite two incidents of fire in 2019, it is doing an effective job at safeguarding the project.
Once calculated and verified, the emissions from fires this year, as with those in 2015, are expected to be less than those being prevented, so despite the damage caused the site is still experiencing less emissions than it would have without protection. That difference is of course much bigger in years without forest fires.
18. “CO2 compensation does not address the underlying political and economic causes of deforestation”. This is factually untrue. The Project Development Document (…during the conversation between Permian Global and the journalist, the journalist claimed to have read the PDD) includes extensive analysis in the drivers of deforestation in the region and details the methods of mitigating them, including vocational training, supporting non-destructive livelihoods and the issuing of microfinance loans.
REDD MONEY IS BLOOD MONEY . IT IS FASKE .
Dear David,
Thank you for explaining your perspective. I’d like to point out that the article in De Groene Amsterdammer does not merely concern the Katingan Mentaya-project; it discusses REDD+ as a broader phenomenon. I’d also like to stress that during the research for the articles we’ve interviewed over 20 experts and people involved in this topic, including both supporters and critics of REDD+, which creates a balanced story, and we’ve read dozens of articles and over 20 reports, analyses from the sector and academic papers on the topic. Permian Global and Mr. Stone must be aware that the trade of CO2 in existing forests in Indonesia and elsewhere is not an undisputed activity. The reason why we chose to zoom in on the Katingan Mentaya project as a specific case study was guided by Shell, that now offers every-day consumers the option to invest one cent per liter gasoline in this specific REDD+-project, among others. The articles underline that Permian Global and PT RMU are doing a lot of work at Katingan Mentaya. However, the articles also show that REDD+ does not guarantee the full protection and preservation of these kinds of Co2-projects – as consumers might think. Both Shell and Permian Global are extensively quoted in the article. All quotes have been authorized by the interviewees. With the exception of Mr. Stone, Investico has not received any complaints about the articles.
Best wishes,
Daphné Dupont-Nivet, Platform Investico
Redd+ , carbon offsets the whole shebang is fraught with inaccuracy and hopeful story telling. It’s just corporate entities washing their hands with wilful negligence rather than actively pursuing true entrepreneurial innovation when it comes to directing budgets. There is a reason why there has been less than 20 registered private sector REDD projects referenced above to date – VCS / GS / CDM etc. They are based on fictional PDD writing and DOE (auditors) turning of the head the other way to enable issued credits. I could go on but i know it would be to no avail…….