Floresta Project Shows Private-Sector Investment can Provide a Healthy Return at a
A private company is working with governments in Brazil and Indonesia to establish timber
plantations on degraded land in an effort to supply biomass for producing electricity. Two Floresta projects in Acre, Brazil, and Aceh, Indonesia,
intend to reduce logging of virgin forest while providing a renewable, local source of power. It is
hoped that the timber plantations will provide jobs and combat poverty. Floresta seeks to
demonstrate that private-sector investment can improve local livelihoods, conserve the environment,
and provide a healthy return, all at the same time.
- 220,000 hectares of timber plantations planned
- 290 megawatts of electricity to be generated
- 50,000 green jobs expected to be created
Economic activity has long revolved around logging in Acre of the Amazon region in Brazil’s far
northeast, and in Aceh on the northern end of the island of Sumatra in Indonesia. But in both regions,
there’s a growing need for sustainable timber – in Aceh after a ban on logging since 2005, and
in Acre as wood consumers are increasingly demanding sustainable products. Additionally, both regions lack
a reliable and affordable energy source, while local governments are encouraging a transition away from
Floresta is relying on long-term concessions and harvest-sharing agreements to establish its tree
plantations in Acre and Aceh. As it develops its commercial timber and biomass plantations, Floresta is
also negotiating with major energy producers in Brazil and Indonesia to supply stocks of biomass for the
generation of electricity.
Although it’s received some funding from development banks, Floresta is mostly privately financed.
It’s expecting to be able to turn a profit, from management fees and advance carbon sales, as early
as two years after starting. Investors can hope for returns in the mid-to-high teens.
Helping the planet
Floresta’s subnational-scale forest carbon projects are intended to reduce deforestation of primary
and secondary forest – 5.5 million hectares in Acre and 2.2 million hectares in Aceh. Forces in Acre
have been working on building a green economy since Chico Mendes and his rubber-tapping union in the 1980s.
The forests of Aceh are home to among the last breeding populations of a number of iconic species,
including the Sumatran tiger, rhinoceros, and elephant.
Floresta’s tree plantations, planned for already degraded land, will reduce logging of virgin forest
and help conserve the regions’ ecology and biodiversity. The biomass plants amount to a
carbon-neutral energy source that provide a renewable, local alternative to fossil fuels. Floresta also
intends to participate in forest restoration.
Floresta’s activities represent a labor-intensive branch of green industry, and are expected to
create 50,000 jobs over time. These jobs created are suitable for the most vulnerable segments of society:
women, poor rural communities, landless laborers, and ex-combatants (particularly in Aceh, which has a
history of conflict).
Low-income households will be trained in sustainable farming, while collectively owned plantations and
regularization of land tenure for small farmers within forest concessions will also help build financial
security for local communities.
Since Floresta’s model relies not on land acquisition but rather leasing, it’s relatively light
on capital, and thus more easily replicable. This also makes it scalable. Floresta is already in
discussions with commercial partners to extend its business model to other areas. Floresta’s business
model, which seeks to resolve conflicts between economic development and conservation, is based on
real-world economics, which could increase its broader appeal to the private sector.
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