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British-Liberia 'Forest-Saving' Scheme Exposes Perils of Carbon Credit Plans

British deal to preserve Liberia's forests 'could have bankrupted' impoverished West African nation

by Felicity Carus

A British company's proposal to rent out one-fifth of Liberia's forests for carbon offsetting could have bankrupted the impoverished West African state, according to a former government adviser. The claim came as the Liberian government yesterday announced an interim statement on its inquiry into alleged "improprieties" surrounding the $2.2bn deal.

City of London police are assisting the Liberian authorities with the investigation launched by President Ellen Johnson Sirleaf into the deal. Police last month arrested Mike Foster, a 53-year-old British businessman from Widnes, Cheshire, on allegations of bribery after an investigation by campaigning NGO Global Witness. He was later released without charge.

Under the proposed deal seen by the Guardian, 400,000 hectares of Liberia's forests would have been granted as a concession to Carbon Harvesting Corporation (CHC), a company based in the north-west of England. CHC changed its name in 2008 from Elton Gaming Limited, which manufactured Kentucky Derby and Racing Dolphins fairground games.

Inquiry head Negabalee Warner said in a statement in Liberian capital Monrovia yesterday: "The president's communication to the committee suggested that certain procedural requirements relative to the granting of such [a] concession might not have been followed. For example, the proposal was recommended to the inter-ministerial committee without any open competitive bidding process.

"The committee has since started a rigorous review of all procedures and circumstances surrounding the awarding of the proposed carbon credit concession, including allegations of bribery and other improprieties."

Liberia is a densely forested country, a resource it could potentially use as a major source of revenue as part of a UN scheme to pay poor countries to protect their forests and reduce emissionsas the country recovers from decades of civil war. Deforestation produces around 17% of global greenhouse gas emissions and the UN's Redd (Reducing Emissions from Deforestation and Degradation) scheme is viewed as an effective way to cut emissions by buying carbon credits, or "offsets", from developing countries who keep their forests standing.

Carbon Harvesting Corporation first proposed a deal in 2008 that was later rejected by Liberia. The company says it requested the government's Forest Development Authority (FDA) to carry out an "initial survey report", which it said calculated that 423 tonnes of CO2 would be stored in each hectare of forest. This would have been worth 162m carbon credits to Liberia, and roughly the total C02 equivalent emitted by Venezuela.

But Thomas Downing, a financial expert employed by Liberia's anti-corruption body the Governance and Economic Management Assistance Programme (GEMAP), called the figure "unreasonably high" and advised the FDA to reject it.

He said the proposed contract was flawed to the extent that it had "no commercial value" for Liberia and advised the Forest Development Authority to reject it in 2008. He added that the estimate of emissions credits from the 400,000 hectares appeared to have been exaggerated.

But this year it emerged that a similar proposal is under consideration. Last year Downing wrote a memo to the acting head of the FDA, Kederick Johnson, in June 2009, saying: "I had understood that the Carbon Harvesting proposal had been definitively rejected. Thus I was surprised to hear that it still enjoyed some support. The proposal, if adopted, would be quite damaging to the FDA. Indeed, it could cost [Liberia] hundreds of millions of dollars. It's important that you and other decision-makers appreciate its nature."

"If the project produced less than 162 million tonnes of credits (and ... failure appears likely), Carbon Harvesting could force the FDA to purchase the shortfall in the open market. This could cost hundreds of millions of dollars."

Under the contract, if Liberia's forests had failed to deliver the full estimated number of carbon credits, based on a minimum target price of around $13.5 per tonne of CO2, it could have been liable to make up the difference to a maximum of $2.2bn. The west African country, which is recovering from decades of civil war, had an estimated GDP last year of $1.6bn, according to the IMF.

Moses Wogbeh, the managing director of the FDA, said that while the review was ongoing, he was unable to comment on the reasons why the agency continued negotiations after warnings from GEMAP.

The review led by Warner is expected to be completed next month.

A spokesman said Foster denied any intention to expose Liberia to large-scale financial liabilities and declined to comment in response to Warner's statement, adding that he still considered the deal as "live" and hoped to resume negotiations with the Liberian government once the inquiry there was complete.

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