Carbon finance in Papua New Guinea: Scam, savior, or seed of potential?

The Pacific island nation of Papua New Guinea makes up just 1 percent of the world’s land mass but hosts almost 7 percent of its biodiversity.

Its jagged mountainous interior contains a wide variety of rainforests, grasslands, wetlands and mangrove forests, with high levels of endemism in flora and fauna. This wealth of natural resources has made the country a target of logging and mining operations – and, in recent years, of carbon finance schemes, too.

Forest carbon credits could well be a boon for the relatively cash-poor country – if it can earn an adequate and appropriate income by keeping these ecosystems intact, rather than exploiting them.

But many such projects don’t seem to stand up to scrutiny. Earlier this year, the Australian Broadcasting Corporation (ABC) published a confronting investigation, ‘Carbon Colonialism,’ which laid out a litany of concerns.

The investigators honed in on the practices of an American company called NIHT Inc., which operates a carbon finance project in the isolated north-eastern province of New Ireland.

The initiative operates in the voluntary carbon market, which means the credits are bought by companies and individuals seeking to offset their emissions voluntarily, rather than being sold through mandatory national or international carbon reduction regimes through what are known as compliance markets.

The NIHT project promises to prevent commercial timber harvesting in its designated area, whilst helping alleviate poverty. But after traveling by boat to the province, the investigators found a vastly different story on the ground. Commercial logging was taking place within the project area, apparently permitted by Papua New Guinea authorities – and with NIHT’s knowledge.

Broken promises

What seems to have happened is that the company promised local communities considerable infrastructure – schools, health centers, housing, roads, etc. – as well as a regular income to replace potential earnings from logging the forests.

But after community leaders signed up to the project – with little understanding of how it would work, and no access to independent legal advice – they received only minimal payments (around USD 80 per community member) and none of the promised infrastructure. So, they signed up for a logging operation in the same area.

Following the ABC investigation, the NIHT project has been suspended from trading by its certifier Verra – the largest such body in the world – and landholders are now taking the company to court.

Verra itself has been shouldering serious concerns about its practices since The Guardian published an investigation claiming that forest carbon offsets approved by the certifier are “largely worthless” in terms of creating genuine emission reductions.

Since then, though, a long list of experts on climate mitigation have urged the global community not to ‘throw the baby out with the bathwater’ and give up entirely on carbon markets. They say carbon finance still has an important role in helping mitigate climate change, preserve biodiversity, and recognize and value the role of Indigenous Peoples in keeping the world’s remaining tracts of carbon-rich primary forest intact.

“Carbon offsetting is often presented as either a panacea or as ‘greenwashing’ which constitutes a dangerous distraction from the difficult task of reducing greenhouse gas emissions,” said Robert Nasi and Pham Thu Thuy, respectively the CEO and a senior scientist at CIFOR-ICRAF, in an op-ed responding to the Guardian article.

“In reality, it is neither one nor the other. It is a tool. No particular policy instrument stands out as a ‘silver bullet,’ but improving the coherence and complementarity of the policy mix across government levels can enhance the effectiveness of policies – both individually and in combination.”

Can carbon markets be inclusive?

Earlier this year, a group of Indigenous-led organizations based in the Global South working in more than 40 countries released an open letter in support of high-integrity, inclusive carbon markets, which they say are currently one of the only ways to directly access climate finance.

“As it stands now, there are very few ways for our communities to access the finance that we are due for our efforts and successes in protecting nature,” the letter reads.

Carbon finance projects “provide one of the only proven avenues available to our communities to access the finance required to not only conserve and protect our environments, but also to drive sustainable development for our communities that are shaped by our traditions and values,” say the authors.

“Recent criticisms … have ignored these positive benefits and have put this critical source of finance at risk – ultimately putting the well-being of our communities at risk.”

Beto Borges, Director of the Communities and Territorial Governance Initiative at conservation finance nonprofit Forest Trends, agrees.

“When the media chooses to focus on the negative aspects of [carbon crediting programs] to prove a point, it directly harms communities and perpetuates their exclusion from the conversations and decisions they have a right to participate in,” he said in a recent article on the topic.

Back in Papua New Guinea, the government last year imposed a moratorium on new voluntary carbon schemes and has now created regulations attempted to better govern its voluntary carbon market. However, it has been criticized by local green groups for breaching its own rules in this process by not carrying out proper consultation, and there’s still considerable concern about its capacity for enforcement.

But challenges like these seem to call for more careful international engagement in the voluntary carbon market, rather than a reason to give up on the quest entirely.

As the authors of the open letter state, “we need immediate and steadfast support from Global North governments and buyers – they must keep responsibly engaging with the voluntary carbon market and other REDD+ crediting programs as they continue to evolve and ensure finance continues to flow to the Global South.”