Carbon Trading and Office of Climate Change and Environment Sustainability in Papua New Guinea

Leader of Opposition*
PO Parliament House Waigani
National Capital District Papua New Guinea
Tel: 3277 631 Fax: 3277 632
Statement by Opposition Leader
15th July 2009

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Mr Speaker,

Our country has the world’s 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 lion’s 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 Minister’s 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 PM’s 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 Office’s 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 Bank’s 15% would be very handsome income indeed.

And then we have the controversial Kumula Doso concession in Western Province. Despite the ongoing court case over this concession between the Eco Forestry Forum on behalf of landowners and Rimbinan 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 Director’s 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 people’s 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

* Sir Mekere Morauta is the Opposition Leader in the Papua New Guinea National Parliament.

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