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  • Archive for January, 2010

    Is jatropha to good to be true?

    2010 - 01.29

    Jatropha has been touted in India as a miracle crop. An eco friendly answer to India’s growing energy needs but is really all it is hyped up to be?

    Jatropha is a wild plant that can flourish in any kind of soil making it ideal for planting in India’s drought prone nation. It produces non-edible oil that once blended with diesel can make a biofuel able to power the country’s cars.

    But new research has indicated that jatropha, which is part of government efforts to cut carbon emissions and combat climate change, yields less than experts had first predicted and is now being grown on fertile farmland. Obviously this is undermining its two biggest selling points.

    “Jatropha is being talked of as a crop that will grow on marginal and uncultivated land, and which will not compete with mainstream cultivation,” said Sharachchandra Lele, a senior fellow at ATREE, an Indian environmental research group promoting sustainable development. “But this is not what is happening in practice. Some state governments are promoting its cultivation on regular agricultural land, where it will displace existing crops, including food crops,” said Lele. “We are basically subsidising the urban elite’s petrol consumption at the cost of rural livelihoods and food production.”

    The Indian government has set a policy that dictates that by 2017 all petrol and diesel fuel must contain 20% of biofuel. To do this the Indian government has aggressively promoted production of the crop, setting its sights on 11 million hectares (27 million acres) of plantations nationwide by next year.

    K.D. Gupta, chairman of the Institute of Applied Systems and Rural Development, one of the staunchest backers of jatropha for biofuel, denied that good agricultural land was being used to cultivate the crop. “Farmers are not going to plant jatropha, because other crops are yielding more returns,” said Gupta.

    Initially two Indian research institutes reported that under irrigated conditions jatropha could yield up to 7.5 tonnes of seeds per hectare, which is three tons per acre. In 2007 another report was conducted by National Oilseeds and Vegetable Oils Development Board (NOVOD) this report predicted that jatropha would produce yields of three to five tonnes per hectare.

    However a recent research conducted by ATREE that under normal conditions the predicted yields were less than one tonne per hectare. The report raised concerns that the jatropha crop could ever yield as much as previous research had suggested.

    Despite this less than favourable outlook the hopes of business keen to promote this plant are not dashed.

    “It all depends on how you manage the crop,” said Subhas Patnaik, chief operating officer of Mission Biofuels, which started cultivating jatropha in 2007 and currently owns around 130,000 hectares in five states. “The whole challenge is how to get better yields from this crop and once you’re able to prove that to the farmer and to everybody then definitely it is going to be a miracle crop,” said Patnaik.

    Already over two million jatropha saplings have been planted in over 1,300 hectares of northern India by the Institute of Applied Systems and Rural Development. Gupta, the institute’s chairman, said that it is too early to judge the crop as it takes years to fully develop and produce desirable results.

    But ATREE’s Lele remains unconvinced. “Neither for energy security nor for mitigating carbon emissions is jatropha cultivation by any means the first option,” he said. “Much more could be achieved through investments in public transport and reductions in private vehicle use.”

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Climate change isn’t going to wait for a political solution

    2010 - 01.28

    In 2008 Greenfleet, a non-profit tree planting organisation from Melbourne was awarded the right to display the Australian Federal Government’s Greenhouse Friendly logo. They were congratulated at the time by the Climate Change Minister, Penny Wong.

    “Greenfleet’s biodiversity forest projects will not only result in a reduction of greenhouse gases, they will also provide valuable habitat for native fauna and assist in the regeneration of the Australian landscape,” Senator Wong said.

    Sara Gipton the chief executive of Greenfleet says that they won the accreditation title after a long and expensive process. Greenfleet was also the first non-profit organisation to achieve the Greenhouse Friendly award as an ‘approved abatement provider’.

    It looks like the time and money spent gaining the Federal Government accreditation was worth it though. Any operation trading in Australia’s fledging voluntary carbon offsets market relies on its reputation to convince investors to buy its offsets so having the accreditation goes a long way towards this.

    Unfortunately no good thing lasts forever and barely a year after Greenfleet were given the accreditation Senator Wong announced that the Greenhouse Friendly program would be discarded. Instead it would be superseded by the Government’s centrepiece green policy, the Carbon Pollution Reduction Scheme and replaced by a new national carbon offset standard.

    Under this new scheme Greenhouse Friendly will be officially terminated on June 30th at which point the carbon offset standard will come into play. While the standard is supposedly designed to compliment the reduction scheme it is uncertain whether permissions for the scheme will be granted by parliament in time for June 30th. If it isn’t ready in time for June 30th with no scheme in place a situation is created whereby there is a regulatory vacuum for Greenfleet and its peers.

    Meanwhile, regulations governing forestry are unlikely to be released until after the scheme’s legislation is put to the Senate. So when Greenhouse Friendly goes, so will any national, Government-backed method of accrediting forestry carbon offsets.

    ”At the moment we have massive regulatory uncertainty,” Ms Gipton says. ”If the legislation doesn’t pass, and Greenhouse Friendly is still being shut down on the 30th of June, we have a problem because we don’t have a standard which we can tell our supporters, with certainty, that we operate to. It’s very important that we have that; people want to be assured that we are operating credibly.”

    The problems don’t end there. The emissions that Greenfleet offsets with forestry, which is an abatement method covered by the Kyoto protocol. The danger is that Greenfleet’s forestry projects could be counted towards Australia’s overall emission reduction target.

    The consequences of this would be that for Greenfleet’s supporters there would be less of an incentive to reduce their emissions. As the offsets generated by them would not be additional to the emission cuts Australia is committed to then they would in reality be helping the pollution of the big emitters.

    A possible solution to this problem would be for Greenfleet to opt in to the scheme and retire its permits so they cannot be counted towards the national target. There are two obvious problems with this easy sounding solution. The first is that they would need to retire these permits on a registry that hasn’t been established yet and secondly Greenfleet can not participate in something that doesn’t exist.

    This conundrum is an example of how the Government’s repeatedly delayed reduction scheme has created confusion among participants in the voluntary carbon market.

    ‘Regardless of what happens in Canberra, Greenfleet will continue to plant trees, and those trees will continue to pull carbon dioxide from the air no matter what form of scheme passes Parliament – if one passes.. ”The longer we wait on climate change, the harder the task, and climate change… isn’t going to wait for a political solution.” Ms Gipton says.

    A spokeswoman for Senator Wong said: ”The Government is working through the implementation of the national carbon offset standard with stakeholders.”

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    “Green lane” to European forestry

    2010 - 01.27

    At invest timber, we have had some request recently for more coverage of forestry investment markets  and general timber related news from Asia.  Point taken and eager to please,  I scoured the internet this morning to see what’s new,  and I’ll try to keep an eye out for forestry news as it breaks from now on.  Anyhow,  I came across a green article in the “Business Times” with regard to plans for Malaysia to make inroads into European timber markets via a  so called  “Green Lane”.


    A quick summary… Malaysia will use the “green lane” to the European market next year,  in line with the implementation of the European Union’s timber trade legislation,  according to the EU ambassador Vincent Piket.

    Malaysian Timber Certification Council chairman Datuk Dr Freezailah Che Yeom said negotiations will come to an end possibly within this quarter. and stated    “Malaysia has to strike a delicate balance but nonetheless, we have a strong commitment (to the plan) and where there is a will there is a way”.

    Dr Freezailah, who is adviser to the Ministry of Plantation Industries and Commodities on the negotiations with the EU, said the talks involve consultations between over 100 stakeholders, including industry players, the government and non-government organisations.

    The “grey” zone is to strike the boundary, between legality and sustainability.

    Wood product exports to the EU have risen from RM2 billion to RM3.3 billion in 2006, with the growing trend towards increased sourcing of furniture and joinery products from the far east.

    In 2006, the EU imports of Malaysian wood products comprised RM1.2 billion of wood furniture, RM1.1 billion of sawnwood and RM414 million of plywood.

    The main European markets are the UK, Netherlands, Belgium, Germany, France and Italy.

    Over the last five years, there has been particularly strong growth in European imports of Malaysian wood furniture, plywood and mouldings. Peninsular Malaysia was the main source of the wood furniture, while Sabah accounted for sawn timber and Sarawak mostly for plywood.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Growing ‘carbon sinks’ in Ghana

    2010 - 01.25

    Amid mounting concern about the impact of deforestation on climate change which was the main theme at December’s UN conference in Copenhagen ambitious plans are already underway to grow 24 million trees to soak up carbon dioxide and restore the rainforest in Ghana.

    It is estimated that Ghana has lost four fifths of its rainforest in the past 50 years. Globally tropical deforestation is estimated to contribute to over one fifths of all greenhouse gas emissions.

    The first million seedlings are being planted in a pilot scheme in an area that has been heavily logged in recent years. The trees are all tropical hardwoods, mostly indigenous, and it is believed this project could eventually become the largest of its kind.

    The company behind the reforestation project is ArborCarb, a British firm. They hope that by growing trees and locking up the carbon inside them, they will be able to sell carbon credits.

    The director of ArborCarb Mike Packer was recently quoted as saying that: “There is a huge market of individuals and companies who will pay for this project to be implemented by buying the carbon credits. They need those carbon credits to offset their carbon emissions.” He is optimistic that the scheme is being launched at the right time and could over its lifetime; soak up more than nine million tonnes of carbon dioxide.

    However this forestry offset scheme and others like it have attracted criticism because the precise amount of carbon absorption is difficult to quantify. In response Mr Packer said the plantations would be audited independently every year and that the plan would take into account the carbon cost of the plantation work and of the trees dying naturally.

    Critics are also worried that this forestry scheme could exclude the local people or even deny them the chance to grow food. Mr Packer reassured them that ArborCarb would not seek to own any land but would work with the local landowners and farmers and offer them a share of the carbon credits.

    However that reassurance wasn’t enough as in the run up to the Copenhagen conference environmental groups objected to the developed world using forestry to reduce emissions. In particular ForestWatch Ghana, a coalition of more than 30 non-governmental organisations, criticises the basic principle of carbon offsetting.

    According to the coalition’s co-ordinator, Kingsley Bekoe Ansah, “it feels fundamentally wrong. The developed world has had the benefits of industrialisation and now wants to shift the burden of responsibility onto the poor communities.”

    Mr Ansah also said that involving the markets in carbon-reduction projects could “lead to massive land grabs and further entrench poverty. Since the markets are volatile and unstable, the prices of carbon would be affected by events in the larger business world and this is not good for developing countries and their rural communities.”

    The ArborCarb plans involve plantations in several different areas of Ghana. The pilot scheme, near the border with Ivory Coast, was set up with one of the country’s largest timber companies, John Bitar.

    The company’s owner, Ghassan Bitar, said attitudes to forests – and their sustainability – were shifting. “During the days of my father they were not aware – there were lots of forests around. Now that the population is encroaching and there is deforestation because of various reasons – agriculture, lumbering and whatever – people are aware and want to change.”

    Suddenly the fate of some of the remotest forests is moving up the international agenda.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Forestry news from Brazil

    2010 - 01.20

    There has been some steel/forestry related news coming out of Brazil that had somehow slipped through my invest-timber net.  Forestry related news that will have some massive repercussions in the forestry investment world,  if what I have been reading comes to fruition,  which seems a cast iron  certainty( forgive the pun).

    Steel production, which has been fueled by heavy carbon based  fossil fuels such as coking coal will be based exclusively on eucalyptus grown charcoal.

    Brazilian President Lula  stated

    “We will work for the utilization of charcoal and not mineral coal”

    No ambiguity there then.

    How about:

    The proposal presented by the Ministry of Environment aims to produce the “green steel”, which uses charcoal from afforested areas, instead of coal, to produce the pig iron (steel with impurity). As a result of the Brazilian proposal, the iron and steel industries will commit to use only charcoal in their high temperature furnaces” .


    Thats seems unequivocal enough. But this is no temporary political fix to help elect a new president or keep environmentalists (which I consider myself  to be incidentally) content for a while.  This strategy will be enacted into Brazilian law. So a sizemic change as regards the use of trees to make steel.  In environmental terms,  this is great news. Plantation forestry of which I remain a huge believer in, will take the strain from the worlds insatiable hunger for steel,  yet avoid eating up the natural forests or spewing out tons of carbon to destroy the delicate ecosystem.

    Words directly from the president referring to the new law. After the Copenhagen summit talks the President said:

    “this is no longer the will of President Lula. Now, whoever is governing this country will have to comply with it”.


    And finally for good measure:

    For the steel industry, we want to adopt the green steel and stimulate the utilization of charcoal from reforestation, improvement of the energetic efficiency and use of green certification programs”.

    This is from Dr Suzan Kahn,  Brazil’s Secretary for Climate Change and Environmental Quality at the Ministry of the Environment.

    So it looks like Eucalyptus plantations will feed the Brazilian steel makers, via the charcoal supply chain,  for the foreseeable future.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Forestry matters at Copenhagen

    2010 - 01.12

    There had been such a build up to the Copenhagen Climate change summit talks, so many hopes and expectations.  Now all the hullabalo has died down,  it seemed fitting to put something down on where we stand now, what the conclusions finally arrived at were and how will the forestry investment world will be affected, if at all,  by the agreements made at Copenhagen.

    From the many articles I have read, it seems quite hard to get a clear handle on what the implications of the Copenhagen Accord are. The Accord itself is a political agreement between six heads of state (Brazil,  China, India, Maldives, South Africa, United States).  But the accord is not a binding legal agreement. The carbon emissons from the developed countries do not seem to have been addressed, mainly due to the fact that negotiations were stopped when the Heads of State turned up.  As far as forestry  goes, the re is no real clear statement I can pick up on unfortunately. The Accord identified the need to create a mechanism to reduce emissions fron deforestation (REDD) but hasn’t done so. That is a disappointment,  but there are meetings scheduled for the year ahead when we hope these will be finally nailed down.
    So, it seems to me that the jury is still out to make any definite conclusions.  Frustrating,  but there is nothing to be done except wait. Hopefully there will be some new agreement on forestry accounting rules in the pipeline,  but we will just have to wait alittle longer to see what comes of the meetings scheduled for this year in Germany and Mexico.

    Patience needed.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Forestry investment perpective – Uruguay

    2010 - 01.11

    Just back from a visit to Uruguay, where I have spent  a number of years in the past involved in  the forestry business there.  So it was interesting to see how the forestry market has matured over the years.  Some figures and perspective on Uruguayan forestry below.

    Uruguay expect exports to surpass 4.5 million cubic metres of wood this year.

    The forestry industry has had a major influence on Uruguay in recent years.  As a rough guide, before 1987,  there were only 100,000 hectares of plantation forests. Following changes to the law in 1987,  this has now risen to nearly one million hectares in 2009,  of the 3.3 million hectares approved for forest plantations by the Agriculture Ministry.  Native forests cover about 750,000 hectares.

    The growth of the forestry  industry,  with the  accompanying growth in inward investment in forestry projects,  has been criticised by some  green campaigners who claim damages to the soil and depletion of water reserves have been caused by the  explosive growth in plantations. This is an area of some contention amongst the forestry community,  but until another option to satisfy the ever growing global demand for timber is found,  I am yet to hear  of a better solution to address the problem of timber supply/demand, without causing massive destuction of the  natural forest.

    The Uruguayan forestry industry already employs  around 6,000 workers in the western border provinces. But within the next four years, another 2,000 jobs are expected to be created.  New investment projects are in the pipeline too, so the visibilty for a sustained period of growth seems to be  clear.  In July 2004, a “good forestry practices” code was brought in as a means for the “transformation and modernisation of labour relations in the area.”    However,  many  trade unionists cite the real benefits for forestry workers occurred in December 2008 when a new law was enacted that prescribed an eight-hour workday, providing half hour work breaks for all forestry workers.

    The forestry industry generates one job for every 30 to 35 hectares, whereas  the agriculture and livestock  business traditionally the main drivers of the Uruguayan economy , employ one person for every 500 hectares.  Workers who stay on the forestry  plantations are generally  given accommodation, food and heating.  Forestry workers earn better on average than other agricultural labourers, however much of  the work is seasonal, with spring and fall being the busier seasons.  Many workers are given specific areas of responsibilty ie  ground preparation, planting, maintenance, etc  but these jobs produce a variety  in wage payments,  with the workers being  paid according to their levels of experience and ability.

    In the western provinces in particular,  investment in forestry the industry is expected to be in excess of US$2.5 billion, with additional  spending on infrastructure such as transportation links likely to provide further employment to local workers.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Timber markets strong

    2010 - 01.05

    Timber Investment news from New Zealands Timber Federation….A huge boom in China’s construction markets is cited as the main driver behind  increasing timber demand in New Zealand..According to the Federation, the cost of building timber in New Zealand will rise by up to 10 per cent,  due to extreme supply shortages and growing timber demand.

    The Chinese building regulations have recently changed policy to encourage the use of timber constructions for house building. With up to 20 million people migrating to the cities each year in China from the rural areas, this will certainly be placing a strain of the supply of lumber to the region with timber price rises almost invevitable.  A massive increase in log exports to China is underway….In 2007,  nearly 15 per cent of New Zealand logs went to China, this now stands at 60 per cent.

    The Federation goes on to say that substantial cuts in production as a result of plant closures have more than offset last years reduction in home building…….  quoting directly from the Federation.

    “Prices in both the domestic and export markets are now rising steadily with a number of price increases in the range of 5 per cent to 10 per cent already announced for the domestic market in February and March. Although export prices and margins have been squeezed by the exchange rate, export volumes have actually lifted by about 10 per cent as firms have chased cash to ease liquidity pressures. Lifting production would be difficult in the face of log shortages and expected tough economic conditions in the first half of this year. There is now a huge reliance on, and vulnerability to, China as a result of the biggest and fastest restructuring of our forestry trade in its entire statistical history.”

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here