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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