Citola Blog
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Dancing The Cancun
So what are the prospects for Cancun, and the UN climate-change conference in December? Here are the few certainties we can ascertain from the evidence available to us here at Citola.
First and most obvious is that the political grandstanding will still dominate. If we were to stand outside the conference hall selling t-shirts bearing the legend “Cancun: Attitude Capital Of The World”, we might not sell a lot of them – but we might also be in line for a prize for nailing the eco-conference dynamic in a single, snappy PR line.
That said, we see evidence of serious, multi-lateral intentions to produce something more concrete. For example, NIgeria has signed up, just recently, to the much-criticised accord produced in Copenhagen in December. It failed, however, to sign up to any specific provisions for cuts in emissions. If only Nigeria, whose government recently banned the football players representing it in the South African World Cup from representing the country for the next two years, were as serious about ecology as soccer.
Optimistic noises are also coming out of India. Again, given that India is one of the biggest polluters on the planet, one imagines that they can only improve on present performance (just our take – and we do appreciate the Asian argument that they should have the right to develop as the West did before the green debate became a global issue). Here’s a typical report, uncritical and if anything positive, about the prospects for Cancun.
And so to Russia, where the leading Russian-domiciled English-language newspaper, The Moscow Times, opines that the Kyoto Protocol (soon to expire, but never mind that) is not strange or unrealistic (see the end of the piece). But Russia has for so long been far from the ecological debate that the publishers of this article feel the need to explain what it means (and to insist that it is not some sort of Western demon designed to inhibit economic progress) before coming to a broadly positive conclusion.
Last of all come the Canadians, who have been hosting the G8 and G20 meetings of leading economies. It may just be that they’re all nice people who are naturally optimistic, but we do begin to see some sort of consensus emerging that progress is possible.
Let’s hope so.
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Citola Affiliate Program Launch
Citola is pleased to announce the launch of the Citola Affiliate Program.
The Citola Affiliate Program provides a mainstream channel for individuals and organisations to offer their users the ability to calculate and offset their carbon footprint.
"The large majority of people offsetting today are passionately green-focused and offset through traditional channels that are often static websites that provide a limited user experience," explains Angus MacNee, CEO of Citola. "With climate change and global warming becoming more 'top of mind', the Citola widget and affiliate program can reach a much broader audience."
The carbon calculator widget allows users to quickly calculate the carbon footprint of their lifestyle activities and offset the environmental impact through the purchase of verified carbon offsets from Citola Projects.
Citola Affiliates are able to easily customise the size, colour and calculator type of the widget and place it on their website, blog or social network profile (grab and paste HTML snippet). Citola Affiliates are able to support sustainable forestry projects, take positive environmental action and make money through a 7.5 – 10% commission on every sale made through their site.
Further information about the Citola Affiliate Program is available Here.
Registration is available Here.
Contact our team if you have any queries about the program, or would like further information at affilates [at] citola.com.
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Woodland Investment: Show Us The Assets!
As promised, we’ve been monitoring at the prospects for the UN Cancun conference, and will report back later in the week. By the way, if you hear a funny noise as you’re reading this – something like cicadas calling softly into the night air – it’s probably the sound of people slithering off the record. Nevertheless, we’re beginning to see a pattern as expectations solidify, and we’ll report back later in the week.
In the meanwhile, we thought we’d take a look at something which is less subject to facile political pronouncements than the orgy of posturing that surrounds the UN climate talks. We’re talking about the personal taxation of woodlands and forestry.
This varies from country to country, of course. For the purposes of this blog, we’ll restrict ourselves to the United Kingdom. Many Citola shareholders are based in the UK, and we thought we’d put forward the investment arguments for forestry as an asset class. Whether or not the UN agrees a new protocol to follow Kyoto (we see the mess this issue has created in Brazil, where reform is a political football), whether or not there’s a carbon-offset bonus to be had (we note how the European Union is dithering on carbon taxation generally), whether or not there are tax incentives for arrested deforestation and reforestation (REDD) projects, one thing is true: forestry is a respected and valued asset class in many countries across the world.
A UK investor going into forestry has a number of financial advantages. First off, woodlands are benignly treated under the terms of Britain’s Inheritance tax (IHT). IHT is designed to curb the creation of dynasties. Wealth can cascade down the generations, but the state wants a share, and takes it using IHT.
We won’t belabour you with boring fiscal detail here, but the fact is that IHT means that someone leaving a two-bedroom flat in a moderately prosperous part of London is also leaving a tax bill. The inheritors might have to sell a flat to pay the bill, since the threshold at which the tax kicks in is £325,000. But forestry is well treated: the tax bill can be deferred through what’s called “rollover relief”. As long as you hold the asset, the tax isn’t payable. So fiscal policy here has a conservationist, green tinge to it.
The Capital Gains Tax (CGT) position is under review right now, as the UK government debates its first Budget under the new Conservative-Liberal Democrat coalition government. The good news is that the new administration is well disposed to forestry investment, and is being kind to entrepreneurs who build businesses. The general thrust of policy seems to be that CGT will be charged at low rates to those who – excuse the vagueness - make things better (entrepreneurs and forestry investors seem to come into this category). The legislation is still being debated, and we are watching carefully.
The Income Tax (IT) treatment of short-term (under ten years) timber croppers is interesting. It’s treated as trade income, but this is beneficial in many ways, as the expenses of culling the timber can be offset against income.
And now you’re wondering how this isn’t political – well, of course, it is. But the benefits are real, and locations such as the UK play pretty fair and don’t change tax laws retrospectively.
It would be wrong to be premature on this one, but we are looking very closely at this area and this country. The UK is very much a space to watch.
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Forestry Land Use - A Chorus of Rusty Cogs
There aren’t many beards in evidence at Citola’s offices, but we hope you’ll know what we mean when we say we’ve been doing a lot of beard-stroking when it comes to the issue of the UN climate change talks. The media dust has more or less settled on the Bonn conference, which ended last week, and what we’re left with isn't a vison but a sound: the persistent squeaking of rusty cogs.
The rusty cog syndrome is well known: It’s the troublemaker in class who gets special attention from the teacher. The troublemaker may have no special talent, other than creating fuss, but to make that problem go away, the troublemaker receives unique treatment. The rusty cog gets the oil.
Sadly, that’s what we’re hearing from Bonn: a chorus of rusty cogs. The United Nations Framework Convention on Climate Change has suffered from too many countries wanting special treatment. There are general expressions of good will, but so many parties withdraw that good will as soon as they see another country opting out, seeking an exemption or other special privilege. The rusty cogs have found a lowest common denominator that inhibits anything that might reasonably be called progress. There was a laudable attempt to move things along from Kyoto (the protocol on emission levels is due to run out within two years, and there is nothing to replace it as yet). But the latest text put forward by the chairman received robust criticism from many quarters.
There’s another round of talks scheduled for August, ahead of the Cancun conference in December. Substantial progress needs to be made behind the scenes, if the Mexican event is not to be as frustrating as last year’s event in Copenhagen.
An interesting side-effect of the slow-down in the global economy has been the spurious claiming of good carbon citizenship from the countries whose economies have been worst affected. Few would argue that the old Eastern Bloc countries in Europe have industrial processes much more sophisticated than the antediluvian. Russia, Bulgaria and Poland were particularly notorious in this respect, with legendarily filthy coal-dependent manufacturing industries. However, lower demand has resulted in lower emission levels from these and other countries - and this has been used as a bargaining chip at the talks. This demonstrates the uselessness of over-depndence on statistics: they measure industrial emissions, but they do not describe them. The processes themselves, of course, need to be reformed.
Related to this issue is land use, land-use change and forestry, known by the ugly epithet LULUCF. This area, of course, is of interest at Citola. The matter is being dealt with at a high level by the Intergovernmental Panel on Climate Change (yes that IPCC, complete with controversial data-gathering methods). Working with other divisions of the United Nations, the IPCC has been attacking this area for years.
Key challenges to getting a meaningful agreement in place include getting a consensus from the global community regarding methodologies, finance mechanisms and emission reduction commitments and dealing with the issue of felling timber. The New Zealanders, for example, place carbon liabilities for Kyoto-complaint forestry that is subsequently felled. This influences future plantation processes and can ensure more sustainable forestry management.
Or so we’d like to think. We’ll be back with more on this as and when there are concrete developments.
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Politicians' Promises - And What People Want
The ebb and flow of rumour and counter-rumour continues. The famous budget of $30 billion, agreed in principle after the COP 15 Copenhagen climate conference last December, may be partly made up of “funny money”.
No-one can ever said to be truly impartial or financially disinterested (someone, somewhere, always pays the wages), but London’s International Institute for Environment and Development (IIED) seems to have fewer axes to grind than most. The IIED has just produced a paper that counsels extreme vigilance when examining the pledged cash from richer countries to help poorer countries develop in a way that will, amongst other things, help in the avoided deforestation (REDD) and the reforestation process so dear to our hearts here at Citola.
The paper, in essence, argues that the pledges could be met by tactics such as that of rich countries turning monies previously advanced as grants into loans. The authors of the report argue that there are no real baselines to the COP 15 budget promises, and say that the ongoing United Nations climate talks on Bonn, preparing for the next big conference in Cancun, are in jeopardy of producing no concrete outcome.
Meanwhile, the new head of climate change at the UN, Christiana Figueres, has conceded that the situation is pressing, and that everyone really is going to have to do better following the explosion of exasperated rage which some say was the only true outcome of the COP 15 talks. She has talked to reporters at the Bonn conference, and has admitted that errors have been made – and that the talks towards the end of the Copenhagen conference between emerging nations and richer, better developed ones (essentially when the provisional agreement for the $30 billion budget was hammered out) were lacking in both in certainty and transparency.
Can Ms Figueres do better? Specifically, can she make the big countries stump up the cash and behave better? Let’s hope so. The protesters outside the Bonn talks consistently berate the United States, China and Canada as the bad boys of a fossil-fuel world. And the pressure from within these countries for a greener climate change policy is growing, as papers such as the recent Yale Project on Climate Change demonstrate.
We continue to watch and wait.
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Road To Cancun Paved With Good Intentions
How about these for elusive goals? In no particular order: Truth in advertising, honesty in politics, certainty in climate change negotiations.
We’re at a critical juncture of the climate change conference in Bonn. After the stalled session of self-protection and lobby gridlock that we saw in the COP 15 conference in Copenhagen last December, there are strenuous efforts, as we’ve remarked before, at trying to avert a similar situation in Cancun, Mexico, at the end of this year.
The preparatory talks in Bonn are teeing things up reasonably well, it seems. But it’s not yet sure that we’re going to see the major breakthrough that some commentators are talking about.
Outgoing officials often have a kind of refreshing honesty in their statements. The pronouncements of Yvo de Boer, the retiring head of the secretariat dealing with climate change at the United Nations, falls into that category. He set the Bonn conference this question, for example. The treaty he’s talking about is the Kyoto Protocol, which is due to expire in 2012:: “Are we working towards a new treaty, or a set of decisions, or both?”
Mr de Boer insists that greater clarity as to motives, purpose and willingness to spend towards action on climate change is required amongst the leading, developed nations. If that clarity isn’t achieved, Cancun looks set to be another Copenhagen, albeit with somewhat better weather.
Some things are clear, though. One is that reforestation and avoided deforestation (REDD) is seen as a key weapon to push through the reduction in atmospheric greenhouse gases. Documents tabled in Bonn make that fairly evident.
Another is that the $30 billion in funding dedicated to the purpose of protecting forests amongst developing countries is going to be provided in the form of a grant, not a loan. Some might argue that this signifies a guilty conscience (similarly, some say that allocated carbon permits are a right to pollute rather than an additional environmental benefit). But at Citola, we feel it’s a sign of good intentions. As such, it is to be welcomed.
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UN Climate Talks - A Holy Alliance?
There’s a popular saying in the Middle East: “My enemy’s enemy is my friend.” In politics, that sort of combination, where people and organisations gang up for a negative purpose, is popularly styled an “unholy alliance”.
We’re seeing the flip side of that coin now, with the ongoing United Nations climate change talks in Bonn (the pre-meeting for the Mexico COP 16 conference). Organisations such as the World Wildlife Fund have sent representatives to Bonn to lobby for the cause of preserving wildlife and its habitat – with particular attention to stopping deforestation.
Put that together with events in the world of reforestation and avoided deforestation (REDD) and carbon reduction and carbon trading outside the Bonn talks, and you have what can be thought of as a holy alliance.
Consider the New Zealanders’ determination to go ahead with their own carbon-credit scheme at the beginning of next month. The Kiwis have been super-hot on REDD-type schemes, with draconian penalties for anyone who cuts a tree down on a carbon-accredited site, and are pushing ahead with their own trading scheme – despite the fact that the Australian equivalent is on hold until at least 2013.
Meanwhile, we hear that the European Commission wants to slash a full 30 per cent (based on 1990 levels) from emissions by member countries by 2020. This won’t be cheap, if it’s achieved, with cost estimates of some $50 bullion per annum the price for achieveing this target.
While we don’t fully share the World Wildlife Fund’s excitement at what’s going on in Bonn (though we too hope the stage is set for a major breakthrough), and elsewhere, we do think that there are grounds for optimism.
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REDD Is Colour of Bonn's Low-Hanging Fruit
Whisper it gently – very gently indeed – but there are signs of life in the political world. Some even say there are signs of leadership. Whatever next?
Some news on reforestation and avoided deforestation (REDD) schemes seems to be the answer. After the much-criticised outcome of the COP 15 Copenhagen climate conference, there’s real desperation among the political classes to be seen to do something.
So what they’re doing at the Bonn UN climate talks – a preparatory meeting for the next big talkfest in Mexico – is to reach for (if you’ll forgive the management-speak cliche) some low-hanging fruit.
The outcome of the Oslo climate and forest (basically, REDD) conference we featured in a recent blog, was an increase in the financial package offered by developed countries to encourage developing countries to grow in a sustainable way. There are a few ifs and buts, as there always are when large sums of money are involved, but the broad thrust of things is that, after the REDD-plus Partnership Agreement, some $4 billion is now available to encourage developing economies to prevent deforestation.
A junior minister of the new UK government attended the Oslo conference, and got all excited about it: Greg Barker is Britain’s climate change minister: “The interim REDD-plus Partnership Agreement puts the world on course to delivering scaled up early action to tackle deforestation and represents a real breakthrough in making progress on keeping global temperatures below 2C,” he said.
“The onus is now on all of us to support real action on the ground in rainforest nations to stop vast acres of forests disappearing. This means that finance must also be scaled up in the long term and that this can only be achieved in partnership with the private sector.”
This will feature prominently in the UN talks at Bonn, where a serious attempt to get a tightly worded, binding agreement is being prepared, judging from the papers now being tabled for discussion in Mexico.
But not all the developing countries like what’s being offered. The already mighty and fast-growing economy of India is probably not really a “developing” economy any more. However, with a gross domestic product increase of seven per cent for the last year, it’s certainly expanding fast. A popular view in India appears to be that the country has had enough of colonialism. The British relinquished political control after the Second World War, and many in India simply do not want economic imperialism in the form of being told when and how they can develop their own industry – even if the developed countries are happy to pay to have their policies implemented.
A middle view of the way forward is the plea for a two-tier REDD development plan, as clearly delineated in this Times of India article.
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A Marriage Made In... Oslo
Here’s a secret we bet you never knew. We’re really relationship counsellors here at Citola.
A recurring theme of our blog output is the importance of a happy and stable marriage – the marriage, specifically, between ecological best practice and good commercial sense.
Good intentions and policy-making are important and, indeed, laudable. But without making hard-headed financial sense, most plans to improve the environment will take a long time to get off the ground (if they ever do). That pantomime of pious aspiration, otherwise known as the COP 15 climate conference in Copenhagen at the end of last year, is a case in point.
The COP 15 conference failed to come to anything like a satisfactory conclusion, other than achieving a vague consensus that there was definitely an environmental problem that someone should do something about. A non-binding agreement was reached that richer countries should create a fund of $30 billion by the end of 2012, with the intention of helping lesser-developed countries make ends meet without depleting their natural resources.
The key epithet here is “non-binding”. Without compulsion, many countries tend to fail to act. They need motivating – and if the motivation is commercial success, that’s fine with us.
So let’s hear it for the prime minister of Norway, Jens Stoltenberg, who’s been hosting the Oslo Climate and Forest conference this week – and been talking some good sense there, too.
Talking of the $30 billion plan to preserve forestry and generate new forests, Stoltenberg gave it to us, plain and simple: “There is no way to mobilise that much money without mobilising the private sector…. Reducing deforestation and forest degradation can provide the largest, fastest and cheapest cuts in carbon emissions."
Stoltenberg forest-related programmes could account for "a third of the cuts in carbon emissions needed by 2020”.
The Oslo conference is being attended by delegates representing 52 countries. It’s agreed a way to funnel monies into REDD schemes, with milestones to be achieved along the way. In essence, this means that the capital will keep flowing, provided that the targets are achieved for acreages and volumes of carbon credits, generated by the forestry carbon sinks.
Yes, the agreement is “non-binding”, but the attitudes demonstrated are encouraging. Stoltenberg is encouraging the conference to reach out to the private sector, not to shun it. Some commentators, such as World Bank chief, Robert Zoellick, are even suggesting that there may one day be a comprehensive agreement of the kind that COP 15 so singularly failed to achieve.
The next talks are in Bonn in June. We’re encouraged by the progress from Oslo, but we’re not holding our breath on Bonn producing the outcome we all want. Still, the partnership between policy wonks and the real world of companies generating the carbon sinks we all need constitutes progress – we’re looking forward to a long and happy relationship.
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Carbon Forestry Politicos - "Could Try Harder"
When it comes to carbon offsets, you can fault some politicians for effort. In fact, when you look at what happened to the Australian CPRS, it would be wrong not to call them to account for a) effort and b) outcome. Others, however, deserve a little praise for doing what they can.
So here’s some good news in the REDD (reforestation and avoided deforestation) area. While forestry management and timber outcome together make for an attractive business offering, that constitutes thinking with our heads here at Citola. Carbon regeneration is very much where our hearts lie.
Although Citola's project monetisation strategy is versatile, carbon offset generation will prove very profitable – both financially and, of course, ecologically. First off, there’s the voluntary market. There are more and more corporations pursuing the “one-off” strategy of “adopting” forests and generating Kyoto-compliant carbon credits (as the Marriott hotel chain has done).
Beyond that, there are several significant and laudable efforts to get sensible structures in place for REDD schemes. According to a recent report from the Centre for International Forestry Research (CIFOR) direct payments to forest owners in key countries such as Brazil could be very effective in preventing deforestation.
And – whisper it gently – there may even be some progress from the United Nations. A major meeting in Oslo, Norway, on Thursday could take the process of making such payments a reality. Six developed countries, including the US, Australia and Britain, have committed in principle to pay $3.5 billion by 2012 to “under-developed” countries as recompense for preserving their rain forests rather than converting them to timer or farmland.
The Oslo meeting will deal with implementation, and making sure that the money reaches the right quarters with a proper audit trail.
More immediate and more definite is a bilateral agreement between Germany (one of the developed nations in the UN scheme) and Indonesia. The Forest and Climate Change Programme (FORCLIME) sees Germany provide financial support for Indonesian efforts to reduce greenhouse gas emissions from the forestry sector. A small step, but an example to the international community.
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