Carbon values drive forest investment

A new environmental focus is driving momentum in the forestry sector, with new demand for wood to replace coal and natural gas in Europe, and emerging markets for carbon offsets.

But a focus on the carbon benefits of trees has exposed differences between some green groups and investors on what counts as "sustainable" forestry.

Growing awareness of the environmental value of plantation forests is overdue, say managers.

"When you see 'think carefully before you print this email' that's just silly," said Liane Luke, chief timber officer at the $550 million, London-listed Phaunos Timber Fund.

"The more plantations there are the more carbon you're sucking out of the air. People need to get less sentimental about forests, it's like growing corn," she said.

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Burning wood to produce energy emits less carbon than burning fossil fuels, especially if the trees are replanted, because plants trap CO2 from the air as they grow.

And because trees trap carbon dioxide, plantation owners may also be able to sell carbon offsets to polluters who have to meet tough emissions caps under prospective climate laws.

Green groups are concerned on how the rules are written for rainforests -- for example whether owners could earn offsets and still extract trees -- and are worried new interest in wood fuel could add pressure on ancient natural forests in Europe.

A new, global U.N.-led climate deal should add clarity to rules in talks which resume next week in Barcelona, in an ongoing effort to agree a deal in Copenhagen in December.

SUSTAINABLE

Indonesia and other south-east Asian countries have a long track record of destroying virgin rainforest to plant palm for the production of oil for the food and biofuel industries.

Reputable timber firms, their investors and green groups agree that landowners shouldn't be able to destroy rainforests and then earn carbon offsets for re-planting them.

But more nuanced rules for "sustainable" forest management are far from written, said Barry Gardiner, chair of a commission on forestry, under a group of lawmakers worldwide called GLOBE.

Liane Luke's Phaunos defines sustainable management of plantations as cutting no more trees than you plant. Natural forests including rainforests can also be selectively logged with little damage, under the right rules, said Gardiner.

But the Rainforest Foundation's Simon Counsell rejected selective logging of rainforests, which he said resulted in far bigger carbon losses than simply from the felled trees, for example from the damage caused by heavy machinery.

"It's a nonsense that these should be eligible for carbon credits, it should be carbon debiting," he said.

Draft climate laws in the United States and Australia are raising expectations of carbon offset markets there.

"As uncertainty recedes we think it will see substantial growth," said Caelim Parkes from Westbury, a manager of alternative investments launching a forestry product. A draft U.S. climate bill being considered in the Senate would allow polluters to buy 1.5 billion tons of carbon offsets annually.