WorldCity Business Magazine

(2) Business Plan: Saving the Rain Forest one carbon credit at a time

by Karen-Janine Cohen

Cutting trees and selling wood isnt the only way to make money from forests. Erica Courtney thinks investors will get an even better return from protecting them.

Erica Courtney, a recent MBA graduate from Florida International University, is betting that her fledgling firm Biodiversity and Co. can help preserve Ecuadors Choc rainforest while also offering investors a profitable path into the global carbon credit market that has flourished since the signing of the United Nations Kyoto climate change treaty. We have a great concept, said
Courtney. If you dont want to appeal to the bleeding hearts, we have a business opportunity to offer.

Biodiversity plans to reforest and protect some 72,000 acres of rainforest over 20 years. The Choc forest, located in northern Ecuador near the Colombian border, is rich in rare plants and animals. Like many other rainforests of the world it is threatened by logging and farming.

Funds for this project would come by selling carbon offsets or carbon credits generated by reforestation. Courtney calculates that Biodiversitys Choc forest project will prevent the release of 12 million tons of carbon dioxide into the atmosphere. Carbon dioxide is one of the primary greenhouse gases implicated in global warming.

At the current market price of about $14 a ton for so-called carbon credits, which could be sold on the international market, Courtneys project could generate more than $150 million. Those proceeds would fund the reforestation, as well as the development of eco-tourism initiatives, scientific research, and education and health projects for the local Chachi tribe and others living near the forest. Courtney emphasizes the importance of the social investments. She notes that lack of attention to local populations has undermined similar projects in the past.

Biodiversity and Co. already has a strong connection with the Chocs indigenous groups. Courtneys mother, Patricia Jo Terrack, a former Peace Corps volunteer and a co-founder of
Biodiversity, has lived and worked in the area for 18 years. She has been involved in a number of conservation and education projects for groups including the Rainforest Alliance and the
Norfolk Botanical Garden in Virginia.

The Biodiversity project has garnered plenty of kudos. Last year Biodiversity took the grand prize in the annual New Venture Challenge Business Plan Competition at FIUs College of Business Administration. And this March, Courtney, 36, walked away with second place in the Socially Responsible Business Plan Competition sponsored by the Washington D.C.-based William James Foundation, a group promoting a sustainable global economy.

But the real challenge for Courtney will be to find investors who will step forth to fund her project by purchasing carbon credits. In an initial stage, she hopes to raise about $500,000 to undertake the third party certification process called for under Kyoto.

Without formal documentation that efforts to preserve the Choc forest will indeed result in less carbon dioxide being released, there is no way to issue sellable carbon credits. Once given the stamp of approval by a United Nations accredited agency, Biodiversity will look for carbon credit buyers to fund its ongoing operations. Courtney figures Biodiversity will need about $12 million to get various initiatives underway.

Courtney is betting that there will be plenty of demand for the carbon credits, as developed countries become increasingly receptive to the idea of paying developing nations to preserve and restore their tropical forests.

Such deals are already underway. Washington D.C.-based Conservation International, for example, has an Ecuador reforestation project in the coastal plains and Ricoh, a large Japanese copier and consumer electronics firm, agreed, for an undisclosed sum, to purchase credits for the 80,000 tons of carbon dioxide that the reforested area will absorb.

These kinds of schemes have flourished since the 1997 signing of the Kyoto accord. Though the United States did not sign the agreement, European countries, Japan and many developing nations did. Under its terms, developed countries agreed to cap emissions of greenhouse gases. Countries told their industries they could only release a set amount of gases. Factories that emitted less pollution than their prescribed limit could sell their credits to those that exceeded their limits. Thus was born the global carbon credit markets.

Last year this market grew to $60 billion, up 80 percent from 2006, according to a March report by Point Carbon, the Oslo-based consulting and research firm.

Forestry projects like Courtneys fall under what the Kyoto Protocol refers to as the clean development mechanism. They are poised to garner more attention as the world looks beyond Kyotos 2012 expiration. Its likely that any new global agreement will emphasize more conservation. The reason is clear. Forest destruction, especially worrisome in the tropics and subtropics, accounts for an estimated 20 percent of greenhouse gas emissions.

I think forestry is going to emerge as one of the main avenues for carbon reduction, said Yuda Saydun, who heads the Melbourne, Fla., office of AgCert, a global firm that develops emission reduction projects around the world. The company also shepherds projects through the carbon offset certification process.

Private companies, non-profit organizations and even governments have initiated forest projects that could generate carbon credits, he said, adding that AgCert is working on several such projects not yet at the certification stage. This is a new field, he said, noting that its an investment different from others because forests take a long time to grow. Its a long-term endeavor that requires a long-term commitment both from a regulatory perspective and from a business perspective.

Despite big growth projections, however, not everyone is sold on carbon credit markets. The young financial sector has seen problems, including its share of fraud. David Kelly, who specializes in environmental economics at the University of Miamis business school, argues that without a world-wide emissions cap (though limits would vary by country) polluting activities that disappear from one industry in a poorer country can surface in another. And developed countries sometimes buy offsets for projects that a country or company would have undertaken anyway.

Forestry as clean development is fraught with difficulties, Kelly said. One problem is that credits are sometimes issued to preserve land that is unusable because of its slope or terrain, while crucial acreage continues to be logged or farmed.

Erica Courtney is well aware of the problems that could derail her strategy to save the Choc. The business plan is careful to enumerate a variety of risks, from political upheaval to rising fuel costs. These issues werent lost on the FIU panel that evaluated the Biodiversity plan. Ana Harris, a local attorney who has judged the competition for several years, said that Courtneys knowledge and thoroughness were impressive. But it could take some heavy lifting to actually turn the plan into a profitable business. Its a challenge, but everything is doable, Harris said.

Courtney is used to accepting challenges. A former Army helicopter pilot, her military career, which spanned 11 years, included overseeing the deployment of more than 2,400 soldiers and their equipment to places like Iraq and Afghanistan on 48 hours notice. Courtney left the Army in late 2004 and, after starting her MBA, took a job with Miami-based logistics firm Magno international. She later set up her own consulting business. A Florida native, Courtney now lives in Dania Beach with her husband, Chris also a former military officer and pilot and their two small children. Meanwhile, Courtneys mother, 55, plans to return to Ecuador this summer in part to acquire the government licenses necessary for Biodiversity to get its projects underway.

Conserving the Choc rainforest and its people, the Chachi tribe, has been my passion and priority since 1990, said Terrack. And now its her daughters passion, too. Courtney, however, has more than altruism in mind. She hopes not only to do good by preserving the rainforest and combating climate change but to also generate a profit for her fledging firm and its would-be
investors. WC