Gabon Pitches New Funding Model to Protect Africa's Amazon
(Bloomberg) -- Gabon is the world’s second-most forested nation, yet its economy is almost fully reliant on revenues from oil extraction. Environment Minister Lee White hopes to turn some of its trees into a source of income so the country can cut its dependence on fossil fuels.
The African nation “is looking to find a development strategy that maintains the forests,” White said in an interview this month. “We’re trying to push the idea, rather than pay us for reducing emissions, pay us for absorbing emissions.”
The government is working with the African Conservation Development Group, founded by Alan Bernstein and part owned by descendants of U.S. industrialist Henry Clay Frick, to pitch Gabon’s forests as a green investment. ACDG has been given the right to use about 700,000 hectares of forest—about 3% of the country’s land—so it can be developed “sustainably.”
ACDG plans to declassify a third of the land as a logging concession, generating carbon offsets for protecting that forest in the process. Logging will take place on another third, but workers will harvest trees over a 25-year cycle and allow natural growth to exceed the amount of timber removed. The area will also contain a 100,000 hectare cattle ranch that will include wildlife conservation and tourism, a 23,000-hectare sugar plantation and a port for exports.
The livestock and forestry programs are underway, while the tourism operation and timber processing facility are expected to start next year. All told, the project is expected to cost as much as $250 million in its first five years. Bernstein thinks some of the money can be raised through a green bond, alongside traditional project finance and equity sales.
The plan isn’t to simply repay the green debt with profit from the activities. Instead, Bernstein said, they’ll use the carbon offsets to generate more revenue and use that to pay back part of the borrowed money, thus combining two finance mechanisms that have boomed in the climate age.
Gabon is home to lowland gorillas and diminutive forest elephants, which roam its share of the Congo Basin — a crucial natural carbon store second only to the Amazon rainforest. It’s also a valuable resource for companies and governments looking to balance their emissions ledgers. They can pay Gabon for credits based on its pledge to protect the trees, and use those certificates to offset their own ongoing pollution.
But these types of forest protection projects have come under criticism, with studies showing that most overestimate the carbon benefits. Even if deforestation slows in one area, it can shift to nearby unprotected forests instead. That’s why White and Bernstein are proposing a larger-scale approach that combines forest protection, economic development and nature conservation.
The project won’t rely on verification bodies such as Verra to certify offsets from the tree-protection project, said Martijn Wilder, a partner at climate advisory firm Pollination Group that’s working with ACDG. The organizers are looking to go beyond conventional offsets based on preventing deforestation by monetizing the growing interest in protecting biodiversity through its conservation program.
Because of the unique approach, ACDG is setting up a panel of international academic and technical experts to verify the offsets that the project will generate. It plans to hammer out the details in the next few months and make an announcement before the United Nations’ climate summit in Glasgow, Scotland in November.
If Gabon’s plan works, the project could be a model for other developing countries to raise funds to protect their natural landscapes. But there are reasons for investors to be cautious. The country of 2.2 million ranks 129th on Transparency International’s Corruption Perception Index, along with Russia and Azerbaijan, and has been the source of environmental controversy in the past.
The World Rainforest Movement has accused Singapore’s Olam International Ltd. of devastating pristine forest as it established one of Africa’s biggest palm oil operations in a joint venture with the government. The company has denied the allegations. White and Bernstein say they hope the ACDG plan will set Gabon apart on a continent where palm oil plantations, illegal logging and slash-and-burn farming are devastating forests and lack of rainfall is driving the Sahara desert toward the West African coast.
Gabon banned the export of logs about a decade ago and is now seeking to process more of its wood to boost earnings and create jobs. The nation’s 23 million hectares of forests support only 27,000 jobs, compared with the 320,000 people in Malaysia who derive a living from 21 million hectares of forest, White said.
On Tuesday, Gabon received $17 million from the Central African Forest Initiative for reducing deforestation and forest degradation in 2016 and 2017, relative to the average loss between 2006 and 2015. It’s the first payment of a potential $150 million that the country can receive for protecting its forests over the next 10 years.
The success of the new program hinges on building trust with investors that Gabon will deliver the environmental benefits promised. For Wilder, it’s worth the risk as rainforests continue to disappear at alarming rates. Gabon “needs to find new revenue sources,” he said. “It’s a great example of a country that’s small enough to experiment, to make this happen.”
©2021 Bloomberg L.P.