OPIC Signs First Insurance Contract for REDD Carbon Reduction Project
November 9, 2011
(OPIC)
Parternship with Terra Global Capital, LLC will protect 64,318 hectares of
forest in Cambodia, sequester 8.7 million metric tons of CO2
WASHINGTON, D.C. – The Overseas Private Investment Corporation (OPIC) has
executed the first political risk insurance contract for a Reduced Emissions
from Deforestation and Degradation (REDD) project that will protect 64,318
hectares of forest in Cambodia and sequester approximately 8.7 million metric
tons of CO2e.
OPIC is providing $900,000 in political risk insurance to Terra Global Capital,
a U.S-based leading land-use carbon development and investment company that has
invested in the project. The Royal Government of Cambodia will work with
implementing partners and local communities to prevent deforestation and
degradation in Cambodia’s Oddar Meanchey province, and will validate the project
according to the Verified Carbon Standard and Climate Community and Biodiversity
Alliance Standards. The carbon credits will then be sold by Terra Global Capital
in international carbon markets.
Revenues from the sale of the carbon credits will be used to fund activities
that reduce deforestation, including community forestry patrols and fire
control, community-based water resource development projects, strengthening and
clarifying land-tenure, sustainable farming systems, agricultural
intensification and fuel efficient stoves.
As a result, rural communities in Cambodia will gain legal tenure over local
forests and generate a 30-year income stream that will significantly enhance
household livelihoods and natural resource management capacity. The project will
also preserve and increase carbon stocks in the area, enhance hydrology in the
upland watersheds of the Tonle Sap Basin, as well as conserve endangered
biodiversity.
"This project represents a milestone in the development of the forest carbon
sector,” said OPIC President and CEO Elizabeth Littlefield. “Tens of thousands
of hectares of forest will be preserved while creating new opportunities – such
as training in forest management, the establishment of microfinance
organizations, as well as the creation of 355 new jobs – that will support both
local communities and the environment at the same time."
Leslie Durschinger, Founder and Managing Director of Terra Global Capital, said,
“Given the long-term nature of our investment, we believe it is prudent to
reduce our exposure to future changes in national and local governments and laws
by executing this insurance policy.” Durschinger also stated that the value of
having political risk insurance as a mechanism to reduce investors’ risk cannot
be overstated in this emerging sector, as the political risk insurance will
help to improve the investment profile for private capital investments in REDD
projects.
The project is also supported by the Danish International Development Agency,
the Clinton Climate Initiative through a grant from the Rockefeller Foundation,
and the John D. and Catherine T. MacArthur Foundation. Pact, a Washington,
DC-based nonprofit corporation and an implementing partner in the project, has
supported the project since December 2008.
Oddar Meanchey is one of Cambodia’s least-developed provinces, and has
experienced steady deforestation since the fall of the Khmer Rouge-controlled
central government in 1979 due to a failed industrial logging concession system,
demand for timber and agricultural land, and human settlement. Forest cover in
the province is being lost at an average annual rate of 2.1 percent, the highest
in the country.
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