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Merrill Lynch & Carbon Conservation Sign First Commercially Financed Avoided Deforestation Agreement
LONDON, April 14, 2008 — Merrill Lynch International and Australian company Carbon Conservation announced the signing of an agreement for the world’s first commercially financed Avoided Deforestation project in Ulu Masen, Aceh, Indonesia.
The initiative will provide innovative carbon financing to benefit the Ulu Masen ecosystem, an area of important biodiversity and habitat to several endangered species. The financing is particularly timely given that Aceh is a post-conflict region emerging from decades of civil unrest and more recently from post-disaster concerns after the tragic tsunami of December 2004 and will soon see the withdrawal of dozens of aid organisations over the next year. The carbon finance project will preserve a last refuge for endangered Sumatran rhinoceroses, tigers, orangutans, elephants and clouded leopards. Almost 75 percent of the remaining Sumatran orangutans are in Aceh.
The key components of the carbon financing deal include a pre-payment for exclusivity, a guaranteed offtake agreement for carbon credits over the first four years, a call option for further carbon credits over six years, incentives for all parties to ensure alignment of objectives, and an upside sharing agreement. The financing resulting from this deal includes a guaranteed $9 million with a ceiling that is contingent upon the volumes and value of carbon credits and ecosystem benefits transacted over the 30-year project lifetime. Carbon Conservation and NGO partner Fauna and Flora International will play critical enabling roles.
Merrill Lynch’s intention is to structure and distribute the carbon credits to clients in its investment banking, commodities and wealth management businesses.
Abyd Karmali, global head of Carbon Emissions at Merrill Lynch, said: “The benefits from this project extend beyond carbon to include community economic development, poverty alleviation, species protection and biodiversity conservation. It will also make a significant contribution to the emerging knowledge base on how to commercially structure avoided deforestation projects and will therefore be an important input to the U.N. climate change negotiations. According to the IPCC, land use change and deforestation represents 18 to 25 percent of annual global greenhouse gas emissions. We look forward to working together with Carbon Conservation, Fauna & Flora International and other partners on this landmark project.”
Dorjee Sun, CEO of Carbon Conservation, said: “After last year’s U.N. climate change negotiations in Bali unequivocally indicated that avoided deforestation would be included in future markets, the forests seem to be losing momentum. If we are truly going to save the world’s forests and reduce climate change by avoiding deforestation emissions, then we must be policymakers not takers. This project is part of a broader Aceh Green Initiative and is possible only with the courageous support of Governor Irwandi. It will protect 750,000 hectares of pristine forests and avoid the emissions of over 100 million tonnes of CO2. That is the equivalent to offsetting 50 million flights from Sydney to London.”
The deal, which is a first in terms of size and complexity, provides carbon financing and structuring on the world's first independently validated avoided deforestation project. It is compliant with the standards stipulated by the Community, Climate, Biodiversity Alliance (CCBA). Merrill Lynch expects to begin offering participants in the voluntary carbon markets an opportunity to secure CCBA VERs from the Ulu Masen carbon finance project later this year.
About Merrill Lynch
Merrill Lynch is one of the world's leading wealth management, capital markets and advisory companies, with offices in 40 countries and territories and total client assets of almost $2 trillion. As an investment bank, it is a leading global trader and underwriter of securities and derivatives across a broad range of asset classes and serves as a strategic advisor to corporations, governments, institutions and individuals worldwide. Merrill Lynch owns approximately half of BlackRock, one of the world’s largest publicly traded investment management companies with more than $1 trillion in assets under management. For more information on Merrill Lynch, please visit www.ml.com.
About Carbon Conservation
Carbon Conservation has pioneered successful land use models and completed multimillion-dollar avoided deforestation carbon sales to Rio Tinto Aluminum in Australia. Now working on a billion-dollar pipeline of land use projects in Aceh, Papua and Papua Barat in Indonesia, Carbon Conservation has entered into partnership engagement agreements with the Provinces for the development of commercially and environmentally sustainable land use.
In December 2007 at UNFCCC Bali Meeting COP 13, Carbon Conservation convened the Governor's Green Gala involving the Governors of Aceh, Papua, Papua Barat (three Indonesian provinces) and Amazonas (Brazil), together representing around 200 million hectares of the world's remaining tropical rainforests. The goal is to create and value a global infrastructure of forest factories, producing oxygen and absorbing carbon dioxide.
About Aceh Green
With sustainable soft commodity production and carbon finance, this project will provide the revenue required to reclassify areas that are currently zoned for logging as permanent protection forests and community-managed limited production forest areas. This means that 750,000 hectares will be designated as "Carbon Forests," and buffer zones will be reforested for permanent protection. The project will also use carbon finance to assist reforestation of mangroves, fruit tree gardens, coffee plantations and woodlots.
The scale of the opportunity is once in a lifetime. The need to develop poverty-alleviating jobs alongside the preservation of biodiverse standing forests containing watersheds, carbon and endangered species is critically important and recognized by the green leadership of the Governor of Aceh.
Contact Media Relations:
Alexandra Walker 44.20.7996.3496
alexandra_walker@ml.com
