McKinsey Work Lets Congo, Guyana Get Aid, Cut Trees, Greenpeace Says

McKinsey & Co. is helping rainforest nations such as Indonesia and Guyana safeguard their logging industry while gaining access to millions of dollars in funds intended to protect trees, Greenpeace said.

Forest management plans by Guyana and the Democratic Republic of Congo based on McKinsey advice include inflated projections for logging rates, allowing them to claim aid for undershooting those levels while increasing the number of trees they chop down, Greenpeace, an environmental pressure group, said in a report today. McKinsey said it stands behind its work and disagrees with Greenpeace’s findings.

The report raises questions about a program that aims to allow developing nations to tap at least $4.6 billion of forest protection aid from donors including Norway and Britain. Negotiators from more than 190 nations agreed to develop the program, called Reducing Emissions from Deforestation and Forest Degradation, in December in Mexico.

“REDD is supposed to prioritize the protection of natural forests and McKinsey’s advice does the opposite,” Sarah Shoraka, a U.K. campaigner for Greenpeace, said in a telephone interview. “It could lead to increased deforestation and increased emissions.”

Preventing deforestation is one of the key planks of the UN program to combat global warming, since clearing trees that absorb greenhouse gases increases the concentration of heat- trapping substances in the atmosphere by about 17 percent.

Loggers Protected

McKinsey’s work for Papua New Guinea and Indonesia may protect logging companies and hurt subsistence farmers, Greenpeace said. Greenpeace, with its headquarters in Amsterdam, says it has 2.8 million supporters and offices in 40 nations.

“This shows the difficulties involved in setting a baseline for measuring avoided deforestation, which is one of the key reasons why UN forestry talks have progressed slowly,” said Marisa Beck, a carbon market analyst in London at Bloomberg New Energy Finance. “Even small changes in the methodology could have very large effects on the effectiveness of a mechanism in achieving real climate protection and channeling international funds to forest conservation in developing countries.”

Cost Curves

Part of the problem lies in cost-curves developed by McKinsey that lay out the price of cutting emissions per ton of carbon and the amount of greenhouse gases saved, which use measures ranging from forestry to nuclear power and insulating buildings, Greenpeace said. The assumptions underlying the curve aren’t transparent enough to allow them to be checked, Greenpeace said.

McKinsey said Greenpeace misinterpreted its work.

“We disagree with the report’s findings and stand firmly behind our work and our approach,” McKinsey said in an e-mailed statement. “In our work for public-sector clients, we provide a fact-base on the emission-reduction potential from forestry and land-use measures, which can be used to inform complex national debates on equitable low-carbon economic growth strategies.”

Forests contain an estimated 638 billion tons of carbon, more than all the carbon in the Earth’s atmosphere, according to the UN Framework Convention on Climate Change, which coordinates the climate talks.

Rules and Negotiations

Negotiators are working to set rules to value emissions savings made by reducing deforestation and channel funds from donors to recipients. In the Cancun Agreements negotiated last year in Mexico, envoys dropped a mention of an option that would allow using carbon markets within the REDD program.

A December 2009 report by the Democratic Republic of Congo that cites “analytical support” by McKinsey suggests companies should be paid for at least doubling logging rates by 2030 because that represents a cut from the tripling that would take place under a business-as-usual scenario, Greenpeace said.

The study “clearly attempts to obscure the role of industrial logging in destroying rainforests and to ensure a future for the logging industry at the expense of small-scale farming,” Greenpeace said. “Far from reducing and eventually eliminating deforestation, it proposes a significant increase in concessions.”

Congolese Environment Minister Jose Endundo said in a telephone interview that allowing for industrial exploitation of the forests can help protect them from illegal loggers.

Congo’s View

“We want to protect all the forests, and we want to do it in a way that it gives financial benefits for Congo, creates jobs and brings social benefits,” Endundo said. “We have adopted the McKinsey scenarios, and we want to do better than the scenarios described.”

Guyana’s forest-protection plan involves the country being paid to retain forests on the basis of their economic value if they were cleared at a rate of 4.3 percent a year, about 20 times current levels, Greenpeace said.

For Papua New Guinea, documents on which McKinsey worked allow for commercial logging to continue and reject a moratorium on new tree-felling concessions, according to the study.

“It is very complex to end rural poverty, reduce carbon emissions, conserve biodiversity and safeguard local and indigenous community rights -- all simultaneously,” Papuan climate change envy Kevin Conrad said in an e-mailed reply to questions. While McKinsey helps collect and analyze data, the consultant isn’t setting policy, which is “the sovereign responsibility of the government and people of Papua New Guinea,” he said.

Papua New Guinea

Greenpeace is also welcome to help his country devise solutions for the fight against climate change, Conrad said.

A McKinsey cost-curve used by Indonesia is biased in favor of protecting the interests of forestry and agricultural businesses, Greenpeace said. The analysis makes it seem 30 times cheaper to reduce emissions by displacing small farmers than by stopping the spread of new plantations, according to the group.

“McKinsey studies repeatedly use tricks of data presentation to protect or promote industrial logging and large- scale agricultural interests at the expense of subsistence farming,” Greenpeace said.

Indonesian Climate Ambassador Agus Purnomo declined in an e-mail to comment on the study because he hasn’t seen it. Indonesia’s REDD strategy hasn’t been finished, he said.

Guyana’s forestry commissioner, James Singh, didn’t reply to an e-mail and telephone query to his office.

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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