PNG government does not support Voluntary Carbon Agreements

On 16 July 2009, Mekere Morauta, the leader of the opposition in Papua New Guinea, made a statement in Parliament about carbon trading and the role of the Office of Climate Change. Having received no answers to his questions, he produced a new media statement at the end of August 2009, repeating his questions to the prime minister.

In a recent statement, Wari Iamo, the Acting executive director of the Office of Climate Change states that “Voluntary Carbon Agreements (VCA) are not currently supported by the Government.” All three statements are reproduced below.

As Natasha Loder, a journalist with The Economist, points out, that doesn’t make the whole series of voluntary carbon deals that have been set up in PNG illegal. At least not necessarily. “The laws that allow forest carbon trading are as simple as those that allow me to sell you any piece of property that I own,” writes Loder. But while PNG has clear laws about who owns the land in the country, Iamo’s statement makes clear that any carbon deals are taking place in something of a legal vacuum.

Iamo notes that in forest areas covered by Forest Management Agreements the timber resources belong to the State. These areas of forest are especially interesting in terms of any REDD deals, because these are precisely the areas of forest that are threatened by logging. But, whether the carbon stored in the trees in areas covered by Forest Management Agreements also belongs to the State is not clear, because there is, as yet, no legislation covering forest carbon in PNG. Iamo states that “Carbon trading agreements cannot be legally signed over these lands [covered by Forest Management Agreements] until the Government has put in place an appropriate policy and legal framework.”

Meanwhile, as the carbon trading fiasco continues, the PNG government is in crisis. At the end of July, the government narrowly avoided a vote of no confidence by adjourning the session until November. PNG’s leader of Government business, Paul Tiensten, explained that the Parliament building had to be closed for “much needed refurbishments”. Needless to say, the opposition party wasn’t particularly happy with this decision. “MPs hurled abuse at each other across the chamber,” writes Australia Associated Press journalist Ilya Gridneff.

A week later, Tiensten changed his mind about why Parliament had to be closed. It was closed “to defuse the political tension and assure foreign investors their money was safe”, ABC News reports.

Morauta’s statements follow. Some of his questions have in fact been answered (although not by the government). For example, Carbon Planet’s Dave Sag recently explained to China Dialogue journalist Tan Copsey where the money went that his company has invested in PNG:

“We have invested $1.2 million [Australian dollars, or nearly US$1 million] in Papua New Guinea,” Sag said, “but we haven’t given it to the government. We’ve spent money on everything from plane fares to taxis to local translators to consultants to illustrators. Right now, we also employ a lot of very hard-core scientists who go out into the jungle. These are not armchair scientists; these are real people doing real work, and it is expensive and it is complicated.”

Statement in Parliament by Mekere Morauta, leader of the opposition, 16 July 2009 and run in the Post Courier on 20 July 2009:

Carbon Trading and Office of Climate Change and Environment Sustainability

The following is statement to Parliament on Thursday July 16 2009 by Leader of the Opposition Rt Hon Sir Mekere Morauta.

Mr Speaker,

Our country has the worlds third largest rain forest. We note and applaud the part Papua New Guinea is playing as a member of the Coalition for Rainforest Nations (CRN), a body set up to encourage the reduction of emissions from deforestation and forest degradation (REDD) and to convert forest assets into revenue without timber or other commercial exploitation.

At the same time, however, we note the paradox between these efforts and the very close connections between the Somare Government and timber companies, as well as the paradox between these efforts and our fiscal regime for forestry, and with logging practices throughout the country. Paradox might, Mr Speaker, be seen to be a polite word for hypocrisy.

While the Opposition applauds the CRN initiative, we would like the PNG Government to give us more information about the CRN Secretariat whether for example the PNG Government is contributing funds to the Secretariat, or whether any Secretariat staff are in any way connected to commercial transactions that the Government is entering for the sale of carbon credits from tracts of land in Papua New Guinea.

Of course climate change conferences are popular in 2009, but it would be hard for anyone (apart from perhaps our own Prime Minister) to match the globe-trotting of Kevin Conrad and Co or indeed the theatrics they are performing. Last week at Chatham House in London Mr Conrad attempted to defend what he called “irregularities” in PNG Government actions over REDD.

Mr Speaker, we note the alarming developments that have recently come to light in relation to premature carbon trading, and the most unusual agreements that the Government appears to be entering with a large number of individuals and companies to represent and trade carbon on our behalf, without proper scrutiny and without regulatory policy or legislation in place.

On behalf of the Opposition I wish to caution the Prime Minister and his Government and say that we trust that they will ensure that carbon revenue derived in respect of our country will be for the people, not for a few individuals or companies here or abroad.

I deliberately say “trust”, Mr Speaker, because if we are not careful, cowboys operating behind the scenes, using our name and wearing our cloak, will reap the lions share of carbon revenue. Even Mr Conrad has admitted that, quote, “we had every carbon cowboy in the world descend upon Papua New Guinea and try to get a deal with landowners”.

Mr Speaker it appears that the Prime Minister and his henchmen, including the Minister for Planning and more recently the Director of the Office of Climate Change, have been hawking these potential assets around the world to all and sundry, including some of Mr Conrad’s “carbon cowboys”.

As far back as 2005, long before we had an Office of Climate Change, the PM and one of his kitchen circle were dabbling in carbon trading. On 24th October 2005, Hon Paul Tiensten, then Minister for Trade and Industry wrote to a company called Climate Assist (PNG) Ltd.

Mr Speaker it absolutely amazes me that a minister of state could sign such a letter as this to anyone. The lack of policy or process reflected in and by the letter is astounding.

I quote:

“The Prime Minister has accepted that PNG has carbon credits and they are trad[e]able commodity. The Prime Minister and I have accepted that Climate Assist (PNG) Ltd acts as brokers on behalf of the Independent State of PNG to buy and sell carbon credits.

The carbon credits have been assigned to Climate Assist (PNG) Ltd through our certificate and monetization that will finance designated projects within PNG.

Therefore, this letter sets to acknowledge the role of Climate Assist (PNG) Ltd and advise that the Government of the Independent State of PNG unconditionally guarantee[s] all actions undertaken for the monetization of these credits.”

In the years since 2005 Climate Assist (PNG) has been actively pursuing the deal it struck with Mr Tiensten. It seems that last year, 2008, the PNG Office of Climate Change signed memos with Climate Assist and another company called Earth Sky, whereby these companies would advance $10 million to the Office of Climate Change in return for the rights to sell $500 million carbon offsets, retaining 20% for themselves. Mr Speaker, that 20% is worth $100 million.

A search of Climate Assist (PNG) Ltd with the Australian Securities and Investment Commission (ASIC) reveals it to be a one dollar company based in Rockhampton with its sole director, Mr Gregory Corby, providing an address in Toowoomba. We wonder what credentials this company has, Mr Speaker, to be appointed as broker for the state by the Prime Minister and Minister Tiensten. We also wonder what connections it might have to associates of the Mirigini kitchen cabinet.

Recent media reports have revealed that another Australian company, Carbon Planet, last year advanced the Office of Climate Change $1.2 million. This payment was reported by Carbon Planet in its 2008 financial statement to ASIC as quote “advance funding on [PNG] origination projects in the 2009 financial year”, that is, money which will be recouped from profits from PNG carbon trading.

It is interesting to note that Carbon Planet says that it expects the voluntary carbon market to exceed $20 billion by 2012, just three years away. As with Climate Assist, Mr Speaker, the Opposition wonders what connections Carbon Planet and its Chairman, Mr Jim Johnson have with the Prime Minister or the Prime Ministers associates.

We also wonder why, when questioned about this payment by an AAP reporter, Mr Johnson would say so defensively (quote): “I am not explaining at all. I am not having this conversation”.

We wonder what this payment was for, who this payment was made to, and what commitments either the Prime Minister or the Office of Climate Change has given to Carbon Planet in return for this money.

The three cases I have already cited Mr Speaker are not the only examples of premature carbon trading conducted by the Government. Apparently last year, the Office of Climate Change authorized a Swiss based broker, South Pole Carbon Asset Management, to market 1 million tonnes of avoided carbon dioxide emission per annum from a PNG logging project based in the Sepik , April Salome.

A close relative of the Prime Minister is involved with yet another company, Pacific Carbon. The media alleges the PMs relative has been urging people in East Sepik to sign away rights to land for trading carbon to this company.

The Governor for Eastern Highlands brought more anomalies to light at the Regional Conference on Climate Change held in Goroka in May. Hon Mal Kela Smith asked the Director of Climate Change why foreigners were controlling the millions of kina being poured into the Office. He asked why the Offices Advisory Board was demanding a percentage of income raised, rather than having a fixed budget like any other government agency.

He asked why a company based in the British Virgin Islands, Earth Sky, was being used as an agent, and who the real owners of the secretive Virgin Islands company were. Governor Smith drew attention to the checkered track record of Kevin Conrad in Papua New Guinea, and his close association with both the failed multi million kina POSF housing scheme (where K17 million disappeared, unaccounted for) and the demise of ANGCO, which resulted in PNGBC having to write off 35 million kina.

Understandably the Governor for Eastern Highlands was concerned about the financial probity of the Office of Climate Change. Taking his lead, the Conference resolved to request the Public Accounts Committee to examine the Climate Change Office and the Auditor General to audit the books of the Office immediately.

To my knowledge neither action has yet taken place. Not to be outdone by lesser known companies, Macquarie Bank seems to have also entered the arena. Macquarie Bank has been in discussions with the Office of Climate Change, offering to broker carbon trade deals and retain 15% of profits. If the voluntary carbon market turns out to be worth billions of dollars in the next couple of years, as predicted by a number of players, the Banks 15% would be very handsome income indeed.

And then we have the controversial Kamula Doso concession in Western Province . Despite the ongoing court case over this concession between the Eco Forestry Forum on behalf of landowners and Rimbunan Hijau, it seems that Carbon Planet has hooked up with a company called Nupan PNG Ltd, to trade carbon credits in respect of this land – all sanctioned by the Office of Climate Change. When asked why the Office had issued certificates authorizing such trade, the Directors lame excuse was that the certificates all 39 of them were not real certificates, they were “samples”.

Mr Speaker, it is obvious that the whole situation in relation to carbon trading in our country is a complete and utter mess. Instead of developing an appropriate policy and legal framework that ensures protection of the interests of landowners and the state, the Prime Minister, Ministers and the staff of the Office of Climate Change have been criss-crossing the globe, appointing “brokers” on who knows what terms, and basically selling peoples and national assets at whim.

Mr Speaker the Opposition wants to know whether Cabinet has approved all of these schemes. We want to know what the purpose of these so-called advance payments is. We want to know whether these monies were paid to Consolidated Revenue or directly to the Office of Climate Change or its agents.

If the funds have not been paid to Consolidated Revenue, we want to know how are they being accounted, and what authority the Office of Climate Change has to raise or to spend these funds. Above all, we want to know why the Government is promoting all these deals, when there is no regulatory policy or legislation for carbon trading in Papua New Guinea.

Thank you Mr Speaker.

Rt Hon Mekere Morauta, KCMG MP

Media statement by Mekere Morauta, subsequently posted on Masalai Blog, 31 August 2009:

On 16 July 2009, I made a Parliamentary Statement on the Office of Climate Change and Carbon Trading. In that statement I raised a number of questions about the actions and accountability of the Prime Minister, Minister Paul Tiensten and the Director of the Climate Change Office in relation to reports of carbon trading deals going back to 2005.

Since August 2009, various newspapers have carried an advertisement by the Prime Minister entitled “The Prime Minister’s Parliamentary Statement – Carbon Trading and Office of Climate Change and Environmental Sustainability”. A rather misleading title given that the Prime Minister did NOT make a statement in Parliament on Carbon Trading in either “session” of Parliament held in July 2009.

The PM’s advertisement is however apparently a response to the Statement I made in Parliament on 16th July. The Prime Minister provides a long-winded account of climate change dangers to PNG, the establishment of the Office of Climate Change, the funding and establishment of the Coalition for Rainforest Nations Secretariat and his view that his friend Ambassador Conrad has “greatly advanced the intellectual, economic and diplomatic well-being of Papua New Guinea”. That’s quite a claim! A gigantic claim! No comment.

The PM acknowledges that the Government has “concerns” about carbon trading and the role of the Office of Climate Change and says that he has instituted an “independent review” of the Office. The review is to be undertaken by the Acting Secretary for Personel Management supported by Central Agencies. This NOT an “independent review”. It is an in-house review – quite a difference.

The Prime Minister declined to answer the specific questions I posed about carbon trading deals. The questions all related to past actions of Ministers and officials. They need to be answered. So I ask them again:

1. Did Minister Paul Tiensten make Climate Assist (PNG) Ltd the beneficiary of 33,333,333 million metric tonnes of carbon credits on 26 July 2005, as evidenced by a certificate bearing his signature?

2. Did Minister Tiensten have your authority when he wrote to Climate Assist on 24th October 2005 saying that you as Prime Minister and he had (quote) “unconditionally guaranteed all actions undertaken for the monetization” of the carbon credits assigned to the company?

3. What expertise does Mr Greg Corby, the director of this one dollar company “Climate Assist” have to “broker” for the Government in carbon trading?

4. What did this stupendous volume of carbon credits assigned to Climate Assist translate into, in Kina terms?

5. Did the Office of Climate Change (OCC) sign as a memorandum last year with Climate Assist and another company called Earth Sky, whereby the companies would advance $10 million to OCC in return for the rights to sell $500 million carbon offsets?

6. What was to be the distribution of this $500 million? How much was to be kept by Climate Assist and Earth Sky, and how much by the Office of Climate Change?

7. Did the Office of Climate Change authorize a Swiss based broker, South Pole Carbon Asset Management, to market 1 million tonnes of avoided carbon dioxide emission per annum from a project in the East Sepik, April Salome?

8. What other companies are involved in the April Salome project and what rights have they been given?

9. What expertise does the South Australian company Carbon Planet or its director Jim Johnson have to offer the Government?

10. How has the $1.2 million advanced last year to the Office of Climate Change by Carbon Planet been spent?

11. What conditions did this carry?

12. What commitments has the Government given to Carbon Planet in return for the $1.2 million advance?

13. Did the suspended Director of the Office of Climate Change give a mandate to a Hong Kong based company Forest Top and Nupan PNG to trade carbon while he was still Chief of Staff of the Office of the Prime Minister?

14. What are the connections between Carbon Planet, Forest Top, Nupan PNG Corporation?

15. What expertise does Mr. Kirk William Roberts of Nupan PNG have? He claims, quite fantastically, that he is currently (quote) “the most beneficial foreigner to PNG”!

16. Why is the Somare Government hawking to Mr. Roberts carbon credits relating to Kamula Doso, when there is a court injunction in place restraining both the Office of Climate Change and the Lands Department from dealing with this land?

17. Where have the monies from Carbon Planet, Climate Assist, Earth Sky and other companies been paid? – to Consolidated Revenue, to OCC, or to an array of individuals?

18. If the funds have not been paid to Consolidated Revenue, where are they and how are they being accounted?

19. What authority does OCC have to raise or to spend these funds?

20. Why is the Somare Government promoting, approving and receiving money from these deals, when it has not put in place any regulatory policy or legislation for carbon trading?

Prime Minister, whoever wrote your statement needs a rapid short course on the structure and operations of Public Finance. All income payable to the State must come to Consolidated Revenue. I was not suggesting that direct landowner or other non-government income should come to Consolidated Revenue. I was saying that any money payable to the Office of Climate Change should come to Consolidated Revenue.

I have made the same point about IPBC in the past. All dividends payable to the State from Bank of South Pacific, Oil Search, commercial statutory authorities such as Telikom, PNG Ports or Air Niugini should be paid to Consolidated Revenue, NOT to IPBC.

Prime Minister, the nation awaits answers to these questions.

Rt. Hon Sir Mekere Morauta, KCMG MP

Leader of Opposition & Member for Moresby North-West

Media statement by Wari Iamo, Acting executive director of the Office of Climate Change, subsequently posted on Masalai Blog, 31 August 2009:

This statement is in response to recent media reports on agreements being entered into by land owners and certain companies, with respect to rights over carbon.

The Government recently acted to suspend the Executive Director of the OCC and to have a review undertaken of the OCC operations, partly to deal with serious issues such as carbon trading agreements.

Currently PNG does not have an institutional framework that regulates carbon trading. The Government intends to wait until the global community rules for forest carbon trading under the Reduced Emissions from Deforestation and Degradation (REDD) initiative are developed before drafting policies and legislation. The United Nations Framework Convention on Climate Change meeting should determine the types of rules countries can apply for carbon trading under the REDD.

Furthermore, the Prime Minister recently released a a Media Statement that clarified the Governments position on carbon trading. The Government’s goal is to have the role of tropical rain forests formally recognized in future climate arrangements. The Prime Minister is strongly arguing that PNG should wait for the development of formal mechanisms under the Reduced Emissions for Deforestation and Degradation (REDD) initiative before entering into carbon trading initiatives.

Until such time as the Government develops a formal carbon trading framework there is no policy or legal guidance for the pursuance of carbon trading except under the Clean Development Mechanism (CDM) of the Kyoto Protocol. The CDM only allows for afforestation and reafforestation projects. The agreement reported in the media many of which cover areas logged after 1990 and intact forested lands under the Authority of the Forestry Act are not able to be registered under the CDM.

Voluntary Carbon Agreements (VCA) are not currently supported by the Government as they fall outside formal REDD arrangements and are highly unlikely to deliver high carbon prices. PNG would be selling its forests cheaply by going down the VCA path.

Finally, the Government wishes to provide clarity on the issue of agreements over areas under the authority of the Forest Act, in particular Forest Management Agreements (FMA). In the process of developing an FMA, landowners vest the right in the timber resources with the State.

Carbon trading agreements cannot be legally signed over these lands until the Government has put in place an appropriate policy and legal framework. This will not be done until after the completion of the investigation in the the OCC and following review of the outcomes of the critical global climate change meeting to be held in Copenhagen during December 2009.

In the event that disputes arise with respect to carbon trading agreements signed by landowners with carbon traders outside of areas under the Authority of the Forestry Act, the government may be unable to assist in resolving any conflicts.

The Government strongly advises landowners not to enter into any agreements with private companies relating to carbon until the rules for carbon trading have been agreed by the global community and the policy and legal framework for carbon trading has been determined.