In what the State Government has hailed as a national first, Integral Energy is to fund the rehabilitation of an endangered ecological woodland on crown land in Sydney's south-west.

Only 7 per cent of the endangered Cumberland Woodland remains in the Sydney basin. Under an historic deal struck between State Forest and Integral, five hectares of paddocks will be replanted with plant species which were once native to the region.

The commercial deal heralds a fundamental revolution in the management of ecosystems, with the State Government planning to regenerate rare habitats using incentives of carbon and biodiversity credits.

While the initial sum paid is small - an upfront commitment of $30,000 - the deal gives Integral the carbon rights for the five hectares. This is measured by the amount of carbon the growing plot of trees consumes - in this instance 50 tonnes a year - which in future years will have a tradeable value.

This new concept of credits is based on the idea that a company can compensate for environmental damage or pollution in one area by repairing another place.

As well, Integral Energy gets to advertise its commercial commitment on a billboard installed on crown land and has the contractual right to use the ecosystem which it paid to have created for its own marketing purposes.

Acting as the broker is State Forests, which instead of being paid to harvest native forests, will be paid to keep trees.

The landmark agreement is to be announced by the Minister for Energy and Forestry, Mr Yeadon, today to coincide with Western Sydney Environment Week.

The State Government hopes the agreement will be the first of many in which the corporate world recognises the opportunity to make money from being green and to pay to grow forests if it intends to pollute.

"This is the first time an agreement such as this has been struck and hopefully it is the first of many," Mr Yeadon said.

"Just last week the Global Ministerial Environmental Forum of the United Nations Environment Program met in Sweden and identified climate change, land degradation and loss of biodiversity as the earth's major environmental problems.

"This project in western Sydney, although small on a world scale, addresses all these issues."

Under the carbon credit scheme, a Japanese power company, TEPCO, has already paid State Forests $30 million to plant an initial 10,000 hectares to partially compensate for pollution it causes in Japan.

It also has an option to contract State Forests to plant 40,000 hectares, which would be worth $130 million.

The chief executive officer of Integral Energy, Mr Richard Powis, said the company had made progress in cutting greenhouse gas.

"This greenhouse forest provides an important impetus to the efforts being made to build business commitment for green investment," he said. Error: Unable to read footer file.