By Pia A. Gaarder
Photo: Jørn Stave/Norwatch
The English translation of this story was published on 12 June 2009.
The Ministry of Finance has recently signed contracts for the purchase of about 400,000 quotas from the reforestation project Idete in Tanzania. The seller is Green Resources Limited, previously known as Tree Farms.
In 2000 Norwatch visited, among others, the mentioned Idete project in Tanzania, which at that point was in its initial phase, and wrote the report pdf Carbon Upsets -Norwegian 'Carbon Plantations' in Tanzania . Today the company is leasing a 7330-hectare savanna area in Idete from the Tanzanian government for 99 years.
The emission reduction is to be achieved by storing carbon in the biomass at the plantation. The project is under evaluation – that is, independent control of the project’s contribution to reduced emission. The prerequisite for the government’s purchase of quotas from Green Resources is that the project is approved by the UN and by Tanzania.
The decision to purchase quotas from the Norwegian company was made even though the project has been criticised on the basis of several fundamental points by the consultancy firms Point Carbon and Perspectives. They were appointed by the Ministry of Finance, which has now published the report “CDM Due Diligence. Idete Reforestation Project in Tanzania” and made it available on Internet.
State Secretary Geir Axelsen has told the Norwegian newspaper VG that he knows that the company has been criticised previously and that the Ministry therefore chose to obtain a new, independent report on the project before signing the sales contract.
On a series of decisive points the Idete project is characterised by the report as a “high-risk project”, and the analysts question whether the quotas will be approved by the UN at all.
Reduced Leasing Price
The Point Carbon/Perspectives report examines the project with regard to the possibility of being qualified to sell quotas. However, it also examines a series of other conditions. Among other things, it appears that the lease that Green Resources pays to Tanzania today is 2.3 Norwegian kroners a hectare, or 500 Tanzanian shillings yearly (26 euro-cents).
When Norwatch visited the area in 2000, however, the lease was 1500 shillings a hectare yearly. Nine years later, in other words, the yearly leasing earnings for Tanzania have decreased by two thirds. Mr. Odd Ivar Løvhaugen, the managing director of Tree Farms at that time, told Norwatch in 2000 that the company wanted the leasing price of the Tanzania project to be further reduced in order that the project risk would be as low as possible.
Tree Farms’ subsidiary, Escarpment Forestry Company Ltd. (EFC), stated at the time that it was actively trying to reduce the leasing prices. The managing director of EFC, John P. Haule, told Norwatch that the authorities ought to stimulate private investments by reducing the yearly leasing charges by 50%, to 750 shillings.
The leasing price is now down to 500 shillings a hectare. In Norwegian currency the lease has thus decreased from 16 to 2.3 Norwegian kroners (1.8 to 0.26 euro-cents) in 9 years.
Ground Prices Too High
Green Resources now believes that this price development indicates that the land price has been too high in Tanzania.
“The land price is determined by Tanzanian authorities and not by us. But it is interesting to note that the demand for land in Tanzania is very low and that there is little development within forestry and agriculture. The conclusion can only be that the price of land is too high,” Mr. Mads Asprem, administrative director and chief owner of Green Resources, wrote to Norwatch.
Asprem was absent and answered by e-mail with regard to queries about the price development. He said that the company has still not earned any money on the project.
“Unfortunately, we have not earned anything on our operation, and carbon financing is necessary to make this function,” Asprem wrote.
The company’s administrative director moreover does not like Norwatch’s and Point Carbon’s reports.
“The report you wrote 9 years ago was an extremely biased and incorrect report. And I was shocked at how you related to reality and ignored our help and comments,” Asprem said, but he has still not clarified what he meant.
“With regard to the price of land and the profitability of our project, Point Carbon’s analysis was completely incorrect. It was carried out by someone who lacks elementary economic insight and who had 1 year’s experience in this kind of work,” he added.
Asprem confirmed, nevertheless, the leasing price of 1500 shillings a hectare in 2000 and 500 shillings a hectare in 2009.
Tanzanian Authorities on the Board
In Point Carbon and Perspectives’ report it is also evident that, according to the Tanzanian investor guide for quota projects, Tanzanian authorities must be on the board of all companies that apply to have CDM projects approved.
“This may possibly entail a large intervention in the company’s ownership structure and may affect how great a share of the quotas the project company will receive if the project is implemented successfully,” the report stated.
Asprem has still not commented on how the company will solve this problem.
The revised Project Design Document (version 4 - written by Green Resources after the Point Carbon-Perspective-Due Diligence-report) is now found on the UNFCCC website: Reforestation at the Idete Forest Project in the Southern Highlands of Tanzania - Project Design Document Form for Afforestation and reforestation project actitivites (CDM-AR_PDD)
12 th june 2009
Green Resources AS was established in 1995 and was previously known by the company names Fjordgløtt AS (until March 2000) and Tree Farms AS (until August 2007). It is a privately owned Norwegian company. Mads Asprem is, according to the Norwegian Registry of Business Enterprises, the largest shareholder, with 30% of the shares; the next largest is Verbena Investment Holdings with 10.3%. According to the company’s web site , it employs more than 3000 persons and has since the upstart invested 250 million kroners (28.2 million euros) in its African projects. Green Resources is present in Tanzania, Uganda and Mozambique.
The Norwegian Ministry of Finance has recently signed contracts for the purchase of 6 million quotas. In addition to Green Resources’ reforestation project in Tanzania, the quotas come from a series of wind farm projects in China, a composting project in Chile and a biomass power plant in South Africa. See the Ministry of Finance’s media release of 22 May this year.
CDM – Clean Development Mechanism
These projects are included in what is called CDM (Clean Development Mechanism) or “the green development mechanism”. This is to be a stamp of quality for on official quota that will both guarantee a reduction of emissions and support sustainable development in developing countries.
CER – Certified Emission Reduction
The official name of the quotas is CER (Certified Emission Reduction). CER means that the reduction in the emission of greenhouse gases has occurred when the quota is issued and the effect has been documented. This entails that a reduction in the emission of greenhouse gases equivalent to 1 ton CO2 has been carried out in an approved CDM project.
tCER and ICER – Temporary and Long-Term Certified Emission Reduction
Tree-planting projects fall into another category of quotas. Carbon binding in wood is only temporary, and the risk is great, among other things because of the danger of fire, which would emit large amounts of CO2. Time-limited certificates are therefore issued; these have to be renewed after a certain number of years. These are called either TCER or LCER and have different periods of validity.