FOREST GUMPTION

While governments are spending millions trying to tackle carbon emissions, one entrepreneur is getting right to the root of the problem. Erik Jaques reports.

At just 27, Dorjee Sun had it made. A charismatic law graduate and serial entrepreneur, he’d banked his first millions by selling web-based recruitment and remote-tutoring businesses, and dabbling in creative media. But his next idea was an audacious leap beyond his comfort zone: save the world’s rainforests through brokering carbon trading deals.

His business plan was simple: corporations that need to meet greenhouse gas emissions targets pay governments and farmers to protect forests instead of clearing them for cash crops. In return, investors get the trees’ carbon dioxide tonnage, which is then converted to carbon credits and sold to other businesses at a profit.

“I was passionate about the environment, and that was where the challenge began,” says Sun, who was born and raised in Australia, the son of Chinese-Tibetan immigrants. “How do you make money from doing a good thing?”

Deforestation is responsible for 18%–20% of greenhouse gas emissions, more than transport and aviation combined, and climate change’s economics bible, The Stern Review, suggests that reducing deforestation is the “single largest opportunity for cost-effective and immediate reductions of carbon emissions”.

Yet back in 2006, when Sun’s obsession with the idea took hold, few were showing enough gumption to facilitate any truly resonant deals or persevere with what is only now becoming a commercial reality.

Support for the UN REDD-plus (Reducing Emissions from Deforestation and Forest Degradation) was one of the few successes of last December’s UN Climate Conference and while funding details remain fuzzy, six countries – the US, the UK, France, Japan, Australia and Norway – have pledged €2.5bn over the next three years. Yvo de Boer, executive secretary for the UN Framework Convention on Climate Change, calls REDD “oven ready”.

Things were far less certain when Sun began his mission, driven by a belief that he was on to something big and that political reticence on “avoided deforestation” would be exploded at the UN Climate Conference in Bali the following year. “For me it seemed clear that by the end of 2007 the world would have to recognise forests,” he recalls. “I felt I had this unique opportunity to lock down all this beachfront property before it was gone.”

His research soon led him to the The Carbon Pool, a small company in Lismore, New South Wales, which was in the process of negotiating one of the world’s first notable deforestation deals with Rio Tinto, which would create 1.25 million carbon credits from protecting 13,000ha in Queensland, Australia. “I just thought what they were doing was amazing,” Sun marvels.

After a few meetings, Sun met the board, mapped out his vision, and offered to buy the company. “These guys, without being too derogatory, were kind of ex-hippies that had found a way to get involved in environmentalism,” he explains. “I told them I want to take this equation global.” The Carbon Pool was acquired in April 2007 by Carbon Conservation, a new trading entity created by Sun and backed by 20 angel investors and high-net-worth individuals.

Sun’s first stop was Indonesia – a country that, astonishingly, ranks as the planet’s third largest CO2 culprit after the US and China due to the widespread burning of forests to make way for agriculture and, in particular, palm oil plantations. Several whirlwinds of virtuosic negotiation later, and the governors of the provinces of Aceh, Papua and Papua Barat signed an agreement giving Carbon Conservation rights to seek carbon credits to minimise deforestation across 50 million ha of land.

However, the hard work had only just begun – working 20-hour days and living out of hotel rooms, Sun embarked on a worldwide bid to convince risk-averse investors to cough up cash for a conceptual scheme riven with uncertainty and dependent on governmental whims. Finally, “at the 206th attempt”, investment-bank behemoth Merrill Lynch saw the light.

Following REDD developments at the UN conference in Bali, including the formation of the World Bank’s Forest Carbon Partnership, the world’s first major commercially financed avoided-deforestation contract was inked in April 2008. Developed by Carbon Conservation, with conservation organisation Fauna & Flora International, the groundbreaking deal involves Merrill Lynch paying to protect 750,000ha in the Ulu Masen forest in Aceh, a post-conflict region scarred by decades of civil unrest and the December 2004 tsunami. Financing includes a guaranteed €6.6m, with a ceiling contingent upon the volumes and value of carbon credits and ecosystem benefits transacted over the project’s lifetime.

Over 30 years, the deal could prevent 100 million tones of CO2 emissions (the equivalent of 50 million flights from London to Sydney) from entering the atmosphere, reduce deforestation in the forest by 85% and generate up to €317m in carbon financing.

Abyd Karmali, global head of carbon emissions at Merrill Lynch, noted at the time of the deal that even if a post-Kyoto agreement failed to recognise the credits, the project could “stand on its own two feet” through the voluntary market. “The benefits from this project extend beyond carbon to include community economic development, poverty alleviation, species protection and biodiversity conservation,” he declared. “It will also make a significant contribution to the emerging knowledge base on how to commercially structure avoided deforestation projects.”

Spurred on by his success, Sun brought Aceh’s governor to meet his Californian counterpart, Arnold Schwarzenegger. In November 2008, they signed a Memorandum of Understanding to reduce forestry related greenhouse gas emissions – the first state-to-state sub-national agreement of its kind in the world.

The frenetic lead-up to and euphoric execution of both of these deals is vividly captured in the Hugh Jackman-narrated documentary and film festival hit, The Burning Season (a version of which was broadcast on the BBC, with a full cinema release due in US and the UK later this year). Towards the end of the film an exhausted Sun turns to the camera and announces: “I feel like I’m coming down with something, and it could be hope.”

Impressed by what she saw, The Burning Season director Cathy Henkel sees her protagonist as a business visionary in the mould of a young Bill Gates. “He is audacious, cheeky, and can be focused and driven to the point of relentlessness. A lot of people have great ideas but don’t get it done, but Dorjee’s getting the job done.”

Not everyone is a cheerleader for Sun’s methods though. Some environmental groups are concerned that carbon trading of rainforest credits will degenerate into a cheap offsetting ruse for business to continue polluting at home, and that it is simply another way of commodifying and exploiting the environment.

Sun is not insensitive to these views, but remains adamant his company is a part of the solution. “The vast major of people think, ‘Wow, this is really innovative. Good on ya – let’s see you do it’,” he says. “To this point I’ve never seen anyone walk away going, ‘That guy’s an idiot and he’s just trying to ruin the world’.”

Since The Burning Season premiere, Carbon Conservation has kept a relatively low profile, with the board making a conscious decision to minimise publicity surrounding new projects. Although the financial crisis has scotched significant opportunities, and there was a brief scare when Merrill Lynch agreed to be bought by the Bank of America, Sun says the company is in good health.

Ten forest-related projects are on the books, mostly in Indonesia, but the firm has also developed technology-based projects that qualify carbon credits in countries such as Mongolia and Bhutan. From its Singapore HQ and offices in New York and Sydney, Carbon Conservation aims to operate at near losses in the short term to seize as many opportunities as possible. “If it all comes on stream the way that it should [compliance markets accept forestry-base credits], then overnight, literally, the markets will produce billions of dollars for this stuff,” he predicts.

That sea change could result in a significant windfall for Carbon Conservation, which earns a percentage of carbon credits sold in addition to revenue from associated technical services. Sun talks excitedly of stock market floatation in the near future, and hopes of becoming one of the world’s top five carbon companies, although he believes success in this field will be measured in different terms – a form of “collaborative capitalism”. Either way, he says, he is in for the long haul: “We will always have a place in the value chain because the governments and the carbon buyers and traders don’t have the intention or the capacity to provide the technical carbon, forestry, land management, marketing, financing and brokering services we do. Carbon is a natural resource and it needs proactive management or ‘farming’ similar to most other natural assets.”

“Even if everything goes to hell, I know that I’m going to keep trying to make this happen. It’s not about just money. If it was I would have been long gone, but it is something that I truly believe is a tipping point for whether our world in 20 years time is a cesspool with civil unrest or a world that is starting to become sustainable.

“The more I learn…” He pauses. “Things have to change, you know – it’s what I’ve gotta do.”