Timberland Investment

Multinational researchers this week divulged the results of a study of Colombia’s western Andes, one of the world’s most threatened ecosystems, that confirmed that letting cattle land regrow as forest “carbon farms” could remove significant amounts of carbon dioxide from earth’s atmosphere without damaging local economies.

Environmental scientists have focused on reforestation as a climate mitigation technique since the introduction of the UNFCCC’s Reducing Emissions from Deforestation and forest Degradation (REDD) strategy over nine years ago. The Andes study casts an important and useful light on the economics of transformation of cattle land to carbon farm as it relates to current agricultural practices. It provides real-life measurements on the benefits to farmers of growing carbon instead of cows.

The researchers surveyed carbon stocks, biodiversity, and economic values in the western Andes. Currently, the main use of land in this part of Colombia is cattle farming, but its economic benefits are minimal. The study found that farmers could make the same money, or more, by allowing their land to serve as forest. With a functioning carbon offset economy, they would get paid to change the land use to carbon farming, receiving around $1.99 per ton of CO2 that the trees remove from the atmosphere. The study also found that letting forests regenerate would have a massive impact on threatened species and biodiversity.

In the past year, Latin America’s forests saw progress and setbacks that will shape ecosystem health with implications for forest policy in 2013. Here’s a look at issues to watch in the year ahead.

Colombia plans to double its cultivated acreage from one million to two million hectares by 2020, according to Rubén Darío Lizarralde, the country’s Minister of Agriculture and Rural Development.
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Lizarralde sees timber plantations as a primary contributor to this expansion. Even more ambitiously, the government has announced a goal of 1.5 million hectares of planted timberland by 2025, significantly higher than the estimated 370,000 hectares of timberland plantations as of 2012. With its various altitudes and warm climate, Colombia has the potential to be a substantial destination for investment in teak, eucalyptus, pine and other species.
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To achieve the government’s aggressive goals, Colombia must rely on private investment, much of which will have to come from foreign sources. The government currently has two primary tools applicable to timberland to meet its objectives: (i) direct reimbursement and subsidy of planting and growing expenses, and (ii) an exemption from income tax for new forestry plantations.
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The direct reimbursement program, the Certificate of Forestry Incentive (known by its Spanish acronym “CIF”), provides a subsidy of up to 50% of the national average of plantation costs in year one, and of maintenance costs in years two through five, for qualifying new plantations on land that was not naturally forested during the previous five years.
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Alternatively, investors can elect to qualify for the exemption from tax on income derived from new plantations made on or after January 1, 2003. This exemption cannot be combined with the CIF subsidy.
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In addition, on May 22, the Ministry of Agriculture announced a plan to propose legislation that would formalize legal title to two million hectares of rural land that currently suffer from informal or dubious legal title.

Interpol’s first international operation against illegal logging and forest crimes has resulted in nearly 200 arrests and the seizure of millions of dollars’ worth of timber and some 150 vehicles across Latin America.

During the period from September 17 to November 17, 2012, law enforcement agencies in 12 countries in Central and South America worked together under the auspices of Interpol’s Environmental Crime Programme.

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Seizures of wood and other forest products during the operation are estimated at more than 50,000 cubic meters of seized wood, enough to fill 2,000 trucks, with a total value of roughly US$8 million.

But that is a small fraction of the global illegal timber trade, which David Higgins, manager of the Environmental Crime Programme at Interpol, estimates to be worth between US$30 billion and 100 billion annually.