Reducing emissions-from-deforestation

213 views

Published on

Published in: Environment, Technology
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
213
On SlideShare
0
From Embeds
0
Number of Embeds
6
Actions
Shares
0
Downloads
1
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Reducing emissions-from-deforestation

  1. 1. ReducingEmissionsfromDeforestationand DegradationinnonAnnex1countries RomainPirard InstitutduDéveloppementDurableetdes RelationsInternationales (IDDRI) BreakingtheClimateDeadlock BriefingPaper
  2. 2. ‘BreakingtheClimateDeadlock’isaninitiativeofformerUKPrimeMinisterTonyBlair andindependentnot-for-profitorganisation,TheClimateGroup. Itsobjectiveistobuild decisivepoliticalsupportforapost-2012internationalclimatechangeagreementinthe leaduptothe2009UNClimateChangeConferenceinCopenhagen. Itsparticularfocus isonthepoliticalandbusinessleadersfromtheworld’slargesteconomies,particularly theG8andthemajordevelopingcountries. TheinitiativebuildsonMrBlair’s internationalleadershipandadvocacyofclimatechangeactionwhileinoffice,and TheClimateGroup’sexpertiseinbuildingclimateactionprogrammesamongstbusiness andpoliticalcommunities. ThisbriefingpaperanditscompanionswerecommissionedbytheOfficeofTonyBlair andTheClimateGrouptosupportthefirstBreakingtheClimateDeadlockReport– ‘AGlobalDealforOurLowCarbonFuture’–launchedinTokyoonJune27th 2008. Written byrenownedinternationalexpertsandwidelyreviewed,thepapers’purposeistoinform theongoinginitiativeitselfandprovidedetailedbutaccessibleoverviewsofthemain issuesandthemesunderpinningnegotiationstowardsacomprehensivepost-2012 internationalclimatechangeagreement.Theyareanimportantandaccessibleresource forpoliticalandbusinessleaders,climatechangeprofessionals,andanyonewanting tounderstandmorefully,thekeyissuesshapingtheinternationalclimatechange debatetoday. Theviewsexpressedandinformationprovidedinthispaperarethesoleresponsibility oftheauthor.TheClimateGroup,theOfficeofTonyBlairandthestaffofBreakingthe ClimateDeadlockInitiativeacceptnoresponsibilityforanyerrorsoffactortheopinions containedherein. Forfurtherinformationsee:www.breakingtheclimatedeadlock.com Aboutthe‘BreakingtheClimate Deadlock’Initiative Copyright©TheClimateGroup2008.Allrightsreserved.
  3. 3. • DeforestationandforestdegradationinnonAnnex1countriescontributeto approximately20percentofglobalcarbonemissions. • Reducingtheseemissionsisdeemednecessaryinordertoachievesignificant mitigationglobally.Moreover,thesereductionsareassumedtoberelativelylow costinmanycases. • TheREDD(ReducedEmissionsfromDeforestationandDegradation)mechanismis beingnegotiatedintherun-uptoCOP15inCopenhagen,andwouldbechargedwith organizingfinancialtransfersfromAnnex1countriestosupportsuchemissions reductioneffortsinnonAnnex1countries. • Severalapproachesarepossibletosupportvirtuousendeavoursindeveloping countries.Theyrangefromrewardstogovernmentsinproportiontodemonstrated quantifiedreductionsagainstanagreedreference,tosponsorshipofbroad policiesandmeasuresagainstdeforestation. • Whiletechnologiestomeasurecarbonemissionsfromdeforestationand degradationareimprovingconstantly,theestimationofemissionsreductions necessarilyreliesonthesettingofareferencelevel.However,various methodologicalchallengesmakeitdifficulttosetthisreferencelevelwith accuracy. • Whatevertheselectedmethodologiestoestimatereferencelevelsandthe selectedapproachestosupportvirtuousendeavoursindevelopingcountries, itwillbenecessarytotakeintoaccountthenationalcircumstancesofeach participatingcountry.Indeeddeforestationpatternsvarywidelyamong themajorcountries. • REDDisseenasapowerfulmeanstoraiseunprecedentedfinancialresourcesin Annex1countries(“carbonfinance”).Theseresourcescanberaisedinvarious ways,includingcarbontrading,auctioningofallowances,proceedsfromtaxation, bindingfinancialcontributions,andothers. • Ahybridmechanismcouldhelpfinancebothappropriatelongtermpoliciesand measures,andurgentlocalactions.OntheonehandpublicfundsfromAnnex1 countrieswouldbeavailabletosupportandfinancereformsandthedesirablelong termpoliciesandmeasuresdeemedabletocounterdeforestationdynamics.On theotherhandprivatefundswouldbedirectedtourgentactionwithmeasurable impactsonGHGemissionsfromdeforestationandforestdegradation. • REDDhasthepotentialtoprovideglobalenvironmentalbenefitsthatother mitigationeffortscannot(e.g.biodiversityconservation),whichisastrong argumenttosupportitsimplementation. • EquityoutcomesareaconcernifREDDisappliedatalargescale.Inappropriate financialcompensationstolocalagentsofdeforestationthatbearopportunity costs,isariskthatdependsondomesticredistributionsystems. • Technicalassistanceandconditionalitieswouldhelpensurethatpoliciesand measuresinhostcountriesobeytominimalstandardsintermsofsocialimpacts, acknowledgmentofindigenousrights,faircompensationstostakeholderswho loselivelihoodsopportunities • ReadinessisamajorandnecessarycomponentforanyREDDstrategytocounter deforestationandforestdegradationinthetropics.Thisencompasses institutional,technicalandpoliticalmeasures. Recommendations • InclusionofREDDinpost-2012agreementsshouldbepartofaglobalclimatedeal withmoreambitioustargetsforemissionsreductionsoverall.Ratherthanrelying onREDDtomeetexistingcommitmentsatalowercost,theAnnex1countries shouldpreferablyuseREDDfornegotiatingdeepertargets. • ThefungibilityofREDDwithothercarbonmarketsshouldbeviewedwithcaution, atleastuntilglobalmarketsaresufficientlymature.Twomainrisksareassociated withfungibility:destabilisationofmarkets,andlackofenvironmentalintegrityif creditsdonotrelatetorealemissionreductions. • ThefungibilityofREDDwithothercarbonmarkets,ifandwhenithappens,should resultinmorestringentGHGcommitmentsforAnnex1countriesassuggestedby theEuropeanUnion(20%targetmightbecome0%ifaglobaldealisachieved),in ordertosecureadditionalglobalemissionsreductions. ExecutiveSummary Breaking the Climate Deadlock Briefing Paper
  4. 4. • Ashiftofparadigmwouldbeusefulregardingcarbonfinance.Effortshavebeen focusedsofaronthewaystosolvebarrierstocarbontradingandfungibilityof REDDwithglobalcarbonmarkets.Effortscouldexpandtoalternativeand innovativeschemesthatalsogeneratecarbonfinanceandprovideincentives toachieveperformance. • TheEuropeanUnioncouldtaketheleadinproposingandtestinginnovativefunding schemesbasedontheEUETSmarket.Theoptionofusingproceedsfromauctioning ofemissionallowancesispromising. • Earlyactionforreadinessisaprerequisitewhateverthefuturedecisionsregarding thedesignofREDD.Itencompassesinstitutional,technicalandpoliticalmeasures thatmightimprovethecapacityofthedevelopingcountriestoparticipatein themechanism. Breaking the Climate Deadlock Briefing Paper
  5. 5. Forestscoverathirdoftheworld’slandsurface.Theystore50-100percentmorecarbon thaniscurrentlyintheatmosphere,and–togetherwithotherterrestrialecosystems– absorbbilliontonnesofcarbonannually1 .Theyarealsosensitivetoclimatechange. Forestsofferfourmainopportunitiestomitigateclimatechange:increasedforestland; increasedcarbondensityofexistingforests;substitutionoffossilfuelsandother carbon-intensiveproductsbysustainablyproducedforestproducts;andreduced emissionsfromdeforestationandforestdegradation.Thelastofthesehasthegreatest potentialtomakeabigdifferencequickly–deforestationanddegradationaccountfor 15–20percentofhuman-inducedgreenhousegasemissions.Thevastmajorityofthese emissionsoccurinthetropics.RecentNASAdataapportionresponsibilityfor deforestationemissionsinthehumidtropicsbetween2000and2005asfollows:roughly 60percentintheAmericas(especiallyBrazil),percentinAsia(especiallyIndonesia) and5percentinAfrica2 . TheSternReviewpointstoreduceddeforestationanddegradationasanopportunity tocutglobalemissionssignificantly,quickly,andrelativelyinexpensively.TheUN FrameworkConventiononClimateChange(UNFCCC),followingitsannualmeetingin BaliinDecember2007,isnowconsideringhowtodevelopamechanismforReduced EmissionsfromDeforestationandDegradation(REDD).Theopportunityisgreat,but thetechnicalandpoliticalissuesthatneedtobeaddressedarechallenging. Thispaperpresentstheoptionsandchallengesinreducingemissionsfrom deforestationandforestdegradationinnonAnnex1countries,withafocusonseveral coreissuesthatareawaitingpoliticaldecisionsatCopenhagen.Thepaperisstructured asfollows: • TherationaleandprocessforREDD • Basicfactsandfiguresondeforestationandclimatechange • Methodologicalupdate • Keyissuesfornegotiations • Coststoreduceemissionsfromdeforestationanddegradation • Theequityissue • Recommendations–guidingprinciples TherationaleandprocessforREDD TherationaleofREDDistofinanceforest-relatedemissionreductionsindeveloping countriesatalargescale.TheprincipleofREDDwasofficiallyadoptedintotheUN negotiatingprocessattheClimateConferenceinBali.There,countriesdecidedthat duringthetwoyearsuntiltheDecember2009ConferenceinCopenhagen(andpossibly after),demonstrationactivitieswouldtakeplaceinanumberofdevelopingcountries, withtheirapproval.Pendingmethodologicalissuesarebeingdebatedamongst countriesundertheUNFCCC’sscientificandtechnicalsubsidiarybody.Basedon outputsfromthisentireprocess,decisionswilleventuallybemadeconcerningthe design,scopeandperiodforapplicationofREDD. Adecadeago,negotiationsaroundtheKyotoProtocol’sCleanDevelopmentMechanism (CDM)failedtoinclude“avoideddeforestation”intheCDM’sscope,inparticularbecause ofsignificantrisksof“leakage”(theriskthatemissionsreductionswithintheproject boundarieswouldgeneratemoreemissionselsewhere).Nonetheless,whenPapuaNew GuineaandCostaRicaproposedtoputtropicaldeforestationontheclimateagenda againin2005,itwaswidelyagreedthatemissionsfromsuchdeforestationhadtobe addressedinordertostabilisetheclimate;REDDwasthentackledasatechnicalissue. ReducingEmissionsfrom DeforestationandDegradation innonAnnex1countries Breaking the Climate Deadlock Briefing Paper
  6. 6. Overthepasttwoyears,allcategoriesofstakeholders(includingcountries,research centres,thinktanksandNon-GovernmentOrganisations(NGOs))havedraftedand disseminatedavarietyofproposalsonREDD.Suchbrainstorminghasbeenimmensely useful.Thispaperfocusesonseveralissuesthatweviewasthemostimportantinthe debate,andthatrequirepoliticaldecisionsintherun-uptoCopenhagen. Basicfactsandfiguresondeforestationandclimatechange Forestecosystemsinteractcloselywithclimatechange Ontheonehandhighertemperatures,droughts,floods,andotherclimateevents affectforesthealthandcomposition,withresultingneedsforadaptationmeasures. Ontheotherhandchangesinforestcoverleadtocarbonemissionsorremovals.Forest plantationsestablishedonlandswithoutforestcoverarecarbonsinksbecausethey sequesternetamountsofcarbon .Undisturbedmatureforestsemitaboutasmuch carbonastheyabsorb.Forestdegradation,throughcommercialtimberproduction forinstance,generatescarbonemissionswhosemagnitudedependsontheforest managementsystems .Lastly,forestconversionforalternativelandusesgenerates thegreatestamountsofcarbonemissions–overall,aswellasperhectare. Tropicaldeforestationisresponsibleforonefifthofcurrentglobalemissions LatestofficialfiguresreleasedbytheIntergovernmentalPanelonClimateChange5 (IPCC),indicatethatlandusechangecontributedtomorethan20percentofglobal carbondioxideemissions,ofwhichtropicaldeforestationverylikelymakesthelargest part.A2005study6 estimatesthatforestconversion,forestdegradationandshifting cultivationaltogetherwereresponsibleforcarbonemissionsequivalentto15–5 percentoffossilfuelemissionsinthe1990s.Whilethesefigureshavealargedegree ofuncertainty,theystresstherelevanceofincludingeffortstocombatdeforestation inclimatenegotiations. Tropicalcountriesshowcontrastedpatterns:deforestationratesandcarbonstocks Whiledeforestationisaconcerninmosttropicalcountries,historicdeforestationrates showdisparities.Asiaincludescountrieswithupto2percentannualnetdeforestation (Indonesia)andcountrieswithanetincreaseinforestcover(China,India).TheAmazon BasinisahotspotfordeforestationandBrazilalonelostmorethanmillionhectares annuallyinrecentyears(about0percentofthenetlossofforestcoverintheworld). TheCongoBasincountriesshowrelativelylowratesofdeforestation(lessthan0.5 percent),butmightcontributeincreasinglytotropicaldeforestationoverallduetothe verylargeremainingforestareasinCentralAfricaandthedevelopmentdynamicsin theregion. Tropicalforestsgenerallycontainlargecarbonstocksperhectare,yetwithdisparities betweenforestbiomes.AccordingtotheUN’sFoodandAgricultureOrganisation(FAO)7 carboninlivingbiomassamountsonaverageto110tC/hainSouthAmerica,77tC/hain SouthandSouthEastAsia,and155tC/hainSouthandCentralAfrica. Tropicaldeforestationisnotexpectedtodecreasesignificantlyinthecomingyears DeforestationratesmightincreaseinCentralandWesternAfricawhenthepolitical contextandbetterinfrastructureprovideamoreattractiveenvironmentformassive investmentsintheforestryandagriculturalsectors.Sofardeforestationhasbeen limitedbyseveralfactorsthatmightpartiallydisappearinthefuture.Yetforest degradationisamajorissueinthisregion,asreflectedbythefactthatCentral AfricancountriespushedforitsinclusionintheREDDagenda8 . IntheAmazonBasinandSouthEastAsia,pressuresonnaturalforestsarefarfrom fading,withgrowinginvestmentsinthetimberandagriculturalsectors.Brazilsends contradictorysignals:ontheonehandithaslaunchedambitiousinitiativestocounter illegalloggingactivities(suchas“OperationArcofFire”);ontheotheritprovides undisputedpoliticalsupportfortheestablishmentofvarioustypesofplantations (soy,sugarcane)andextensivecattleranching.InIndonesiaclear-cuttingofnatural forests,toenableexpansionofthepulpandpaperandbiofuelindustriestosupport developmentgoals,istolerated. Breaking the Climate Deadlock Briefing Paper
  7. 7. Overallcarbonemissionsfromdeforestationanddegradationcouldpossiblyremain atcurrentyearlylevels,althoughanypredictionishighlydebatable.Twoforcesarelikely topushinoppositedirections.First,foresttransitionsleadingtolowerdeforestation, eithercausedbythescarcityfactor(lessforesttoaccess)orthedevelopmentfactor (EnvironmentalKuznetsCurve)areobservedinanumberofcountries9 .Second, structuralfactorsleadingtomoredeforestationarelikelytostrengthen:population growth,roadinfrastructures,agriculturalcommodityprices,andsoon10 . Methodologicalupdate Technologiesareassumedavailabletoprovideestimationsofemissions fromdeforestation Technologieswillprovideaccurateestimatesofdeforestationinagivencountry,once definitionsof“forests”and“deforestation”areagreedupon(e.g.specificthresholds fordeforestation).Itwillbefeasible,mostlywithremotesensingimagery,tomonitor thegrossdeforestation(i.e.notincludingreforestation,afforestationornatural regeneration)whichisthefirstbestmeasureforREDD. Emissionfactorsforagivendeforestedareacanbeobtainedatdifferentlevels,or Tiers,ofdetailandaccuracy:Tier1reliesondefaultvalues(e.g.thoseprovidedbythe IPCC);Tier2oncountry-specificdata;andTieroncompletenationalinventorieswith repeatedmeasurements.Atrade-offisrequiredbetweenthecostsofobtainingthe data(prohibitiveforTier)andthenecessitytoprovidereliableestimates.TheTier2 approachwillcertainlybepreferred,usingmeasurementsofcarbonstocksinanumber offorestbiomesforeachparticipatingcountry. Thesettingofreferencelevelsiscontroversial Anyestimationofemissionsreductionsrequirescomparisonofactualemissionswith areferencelevel,whichtypicallyreferstowhatwouldhavehappenedinaworldwithout REDD(“business-as-usualscenarios”).Inotherwords,reductionsofdeforestation ratesmustbeassessedadditionaltothereferencescenarioinordertobeeligiblefor recognitionbyREDD.Thisisnecessarybothtopreservetheenvironmentalintegrity ofthemechanism,andtoachieveahigherlevelofefficiencyandequityamong participatingcountries. Thisadditionalityrequirementistheweakestlinkinapproximatingtheperformance achievedbyhostcountriesandinassessingthepaymentstheydeservefortheir initiativestocombatdomesticdeforestation.Stateofthearttechnologiestomonitor actualcarbonemissionsareofnouseiftheyarenotbasedonarelevantsettingof referencelevels.Yettropicaldeforestationreactstonumerousstimuli,involvesmany agents,resultsfromhumanandnaturalcauses,andthusappearsdifficulttomodel andpredict.Itishardtostatequalitativelytheimpactsofpoliciesandincentiveson deforestation,letalonequantifytheseimpacts. Inordertobypassthismajorimpedimenttothedeterminationofbaselines,andthus toreliableestimationsofemissionreductions,acommonlyproposedalternativeisto considerhistoricaldeforestationrates.Thisoptioniscontroversial:somecountries havehadhighlyfluctuatingrates,thusmakingitdifficulttochoosetheappropriate referenceperiod(Brazil);somehavehadverylowratescomparedtolikelyfuture trajectories,thusmakingithardtogainanythingwithREDD(DemocraticRepublic ofCongo);andothershavehadveryhighratesthatwilldiminishinany circumstance(Malaysia). Inclusionofforestdegradationmightbeanincentiveformoreconservation InclusionofforestdegradationintotheREDDmechanism,inadditiontodeforestation, isanoutstandingissuethatposesconsiderablechallengesintermsofmeasurements. Thishasmostlybeenadvocatedbyproponentsofsustainableforestmanagementinthe CongoBasincountries,basedontheassumptionthatforestmanagementplansallow timbercompaniestoreduceemissionscomparedtoconventionalloggingtechniques. Infact,itisyettobeproventhatthesereductionsaresignificant,andevenReduced ImpactLoggingtechniquesmightyieldmarginalgains.Thedebatehasthereforeshifted fromsustainableloggingversusconventionallogging,toconservationversuslogging. REDDmightthereforeprovideanincentivetostopanykindoflogging. Breaking the Climate Deadlock Briefing Paper
  8. 8. Keyissuesfornegotiations Amongthenumerouspointsaddressedindiscussionsaboutsuchacomplex mechanism,therearethreeoutstandingissueswhoseoutcomesarelikelyto shapeREDD. Howtosupportvirtuousendeavoursindevelopingcountries? AssumingAnnex1countriesarewillingtofinanceforest-relatedemissionsreductions indevelopingcountries11 ,thereismuchdebateonhowtoallocatethesefinancial resources.Thereareessentiallytwoways,withconsiderablepossibilitiesfor combinations:governmentsarerewardedonthebasisofdemonstratedquantified reductionsagainstanagreedreference,ortheyaresponsoredforimplementing relevantpoliciesandmeasures. Rewardsbasedondemonstratedquantifiedreductions DebatesonREDDinpublicfora,inthegreyliteratureandinacademicjournalshavebeen givingprioritytotherewardofquantifiedemissionsreductionsfromdeforestationand degradationagainstareferencelevel.Thisorientationisclearlyconnectedtotheriseof paymentsforenvironmentalservices,ontheconditionthatsuchservicesaredelivered effectively.Furthermore,thisapproachhasbeenpromotedinparallelwiththeriseof globalcarbonmarketsthatrequireverifiedemissionreductionsasatradable commodity.Athirdfactoristhatpastexperienceswithdevelopmentassistanceand programmesaimedatcurbingtropicaldeforestationhaveyieldedpoorresults. Proponentsofthisapproacharguethatitshouldideallybeappliedatanationallevel,i.e. withnationalaccountingofemissionsreductions,inordertominimiserisksofleakage (wherebyemissionsaredisplacedratherthansuppressed).Therearesimilaritieswitha cap-and-tradeapproachinthesensethatparticipantcountrieswouldbefreetoreduce emissionsbyanymeansoncethereisagreementonthereferencevalue(the“cap”).Asa consequence,though,thismightimplylessmonitoringbythirdpartiesoftheactions eventuallyundertakenbyparticipantcountries:somewouldbeconcernedthatthis wouldallowundesirableorinequitablepoliciestobeputinplaceinordertocapture REDDrewards.Ontheotherhand,ofcourse,otherswouldarguethatsuchautonomy ofpolicymakingisunavoidable,orevendesirable,forreasonsofsovereignty. Concernswiththisapproachalsostemfromthefactthatquantificationsofemissions reductionsfromdeforestationanddegradationrequirereferencelevelstobeset,which isacontroversialmatter(see“MethodologicalUpdate”above).Itislikelythatreference levelswilleventuallybeanoutcomeofnegotiationswithrepresentativesofparticipant countries.Thisprocesswasobservedinthepast,whenforestcreditingcapswereadjusted forsomeAnnexIpartiesintheMarrakechAccords12 .YetinthecaseofREDD,participant countriesmightnothavebindingtargetswithassociatedsanctions.Rewardswouldonly bedistributedforemissionsreductions,andtheserewardswouldbebasedonreal reductionsforthesakeofenvironmentalintegrityandtheoptimalallocationofscarce financialresources.Whiletheparticipationofthemajortropicalcountriesshouldbe securedtotheextentpossible,itiscriticalthatreferencelevelsarenotsettoohighin ordertoavoid“hot-air”13 situationsthathaveplaguedthefirstcommitmentperiodof boththeKyotoProtocolandtheEuropeanUnionEmissionTradingScheme.Furthermore, inthecaseofREDD,laxobjectivesriskprovidingincentivesfornotdoingmuchagainst deforestationifthestipulatedreductionsaretooeasilyachievable. Sponsoringrelevantpoliciesandmeasures Analternativeapproachwouldconsistinsupporting(ratherthanrewarding)activities deemedabletocounterdeforestation.Thisapproachcouldbelabelled“successful efforts-based”,inthesensethateffortsaresupportedaslongasbeneficiaries demonstrateperformancetosomeextent(qualitativelyratherthanquantitatively). Withfinancialsupportthatdoesnotattempttobeproportionaltoanassumed quantificationofemissionsreductions,itwouldbeeasiertofinancepoliciesand measureswhoseimpactsarehardlymeasurable,especiallyintheshortterm.Whileit isdifficulttoimputevolumesofemissionsreductionstospecificpoliciesandmeasures, itmightbepossibletoassesswhethertheseinitiativeshaveapositiveimpacton deforestationdynamicsoverall.Financialsupportcouldbeprovidedforlandreform, landuseplanningandidentificationoflandswithoutforestcover,technicaland Breaking the Climate Deadlock Briefing Paper
  9. 9. financialassistancetoagricultureintensification,andcontrolandmonitoringofillegal logging–aslongasscientificassessmentsconfirmthepositiveoutcomesofthese actions.Arecentstudyprovidedmethodologicaloptionsforsuchassessments1 . Althoughthisisdebatable,wearguethatmakingrewardsproportionaltoquantified emissionsreductionswouldbringmoreconstraintsthanbenefitstotheREDD mechanism.Rather,allowingproposalstogobeyondastrictperformance-based approachwouldallowthemechanismtocapturetheadvantagesofbothapproaches: theincentivetoachieveresults,andtheflexibilitytolaunchambitious(whilenot immediatelymeasurable)activitiesagainstdeforestation. Howtoraisefinancialresources? REDDisseenasapowerfulmeanstoaccessunprecedentedsourcesofmoneyto combatdeforestationforclimatechange.Thebeautyofcarbonfinanceisthatit providesmanywaystoraisefunds,asitencompassesallfinancingschemesthat convergetowardscarbonemissionsreductionsintheforestrysector,including salesofcredits,auctioningofemissionsallowances,loansandtaxes. Asnocertaintyexistsaboutwhichavenuecarbonfinancewilleventuallytake,weset outsomealternativesbelow,withoutjudgingtheirrelevanceorpracticability:weprefer nottoopposemarkettonon-marketfinancingmechanisms,ascombinationsofboth arelikelytooptimiseoutcomes.Weshouldnotealsothatmarketsarenotlimitedtothe tradeofcarboncredits,andthatcandidatecountrieswillcompeteforanyallocation offunds. ThepurchaseofcarboncreditsbyAnnex1countries Carboncreditswouldbeissuedforcarbonemissionsreductionsagainstan agreedreferencevalue.Thesecreditscouldbetradedoncarbonmarketsandused byAnnex1countriestomeettheirGHGcommitments,inthesameveinastheflexibility mechanismscreatedbytheKyotoProtocol.Asanoption,tradingcouldbelimitedto aseparatemarketduringapreliminaryphase(“dual-marketapproach”)witheither separatecommitmentsbyindustrialisednationstopurchasecertainamountsof REDDcredits,oraglobalcooperativetrustfundthatwouldbuybackREDDcredits. Thisalternativeisbasedentirelyonthetradingofcarboncredits,whichhas twoimportantconsequencesfortheincentivestotakeactioninthetropical forestednations: • Financialresourceswouldlogicallyberaisedaccordingtothepayment-upon- deliveryprinciple,whichimpedesinitialinvestmentsbyhostcountriesand increasesrisk • TheproceedsfromREDDcreditsaleswouldremainuncertainuntilreductions areassessedandsalesconcluded. ThesebarriersseriouslylimitREDD’spotentialincandidatehostcountries.However, donoragenciesandthebanking/insuranceindustrywouldcertainlyproposeproducts toovercomethesebarriersbasedonexpertforecastsofREDDcreditsvolumeandvalue. Inadditiontoincreasesintransactioncosts,theseremediesmightplayaroleinthe negotiationprocessforsettingreferencevaluesthatreducerisksofinsolvency(i.e.lax referencevalues). ProceedsfromauctioningofGHGemissionsallowancestoAnnexIpartiesunderKyoto Protocoland/orindustrialcompaniesundernationalcap-and-tradeschemes Emissionsallowancesareeitherallocatedfreeofchargetoindustrialcompanies accordingtothe“grandfathering”approach,orauctioned.Thelattercaseisincreasingly beingconsideredandthedomesticemissiontradingschemesaremovinginthis directioninbothEuropeandNorthAmerica.Allocatingafractionoftheproceedsof theseallowanceauctionswouldensuresustainableandsignificantcarbonfinanceto supportREDDactivities.Itisworthnotingthatraisingfundsthroughtheauctioningof allowances(insteadofissuanceofcarboncredits)isawaytoavoidanyinterferencewith existingcarbonmarkets.Thiswouldenhancethestabilityandeffectivefunctioningof thesemarkets. Breaking the Climate Deadlock Briefing Paper
  10. 10. BindingfinancialcontributionsbyAnnex1countries Currentnegotiationsonpost-2012emissioncommitmentsfortheindustrialisedworld willcertainlyleadtomoreseveretargetsandhighermitigationcosts.REDDispartof thenegotiationsonaglobalclimatedeal,ofwhichoneobjectiveistoachieveglobal reductionsatthelowestpossiblecost.Annex1countrieswouldmoreeasilyaccept deeperemissionreductioncommitmentsiftheycouldachievetheseatareasonable cost.Assumingthatemissionsreductionsfromdeforestationarerelativelylowcost, theremightbeagreementonasystemthatallowsAnnex1countriestocarveoutx percentoftheirdomesticcommitments,whichwouldbemonetisedanddeposited inaFundforREDD. Proceedsfromtaxation Thisisavariationonthepreviousoption,stillbasedontheprinciplethatdeeper commitmentsinAnnex1countrieswillgeneratenewcoststobeborneinthese countries.Anewtaxmightbesetupinternationallyorrestrictedtoanumberofparties, andfocusedonspecificsectorsorappliedtoabroadrangeofproductionactivities, inordertoprovideincentivesfordomesticindustriestoloweremissions.Proceeds fromthesetaxescouldbeusedinvariousways,oneofwhichwouldbetocontributeto reductionsabroadthroughfinancingofactivitiesagainstdeforestationindeveloping countries.Themostprominentoptionsareacarbontaxandanaviationtax. CreationofalevyontransactionsamongPartiesintheinternationalcarbonmarket ThissystembuildsontheexistinglevyonCDMprojects(2percent)thatflowstoaFund foradaptationtoclimatechangeindevelopingcountries,andfinancesadministrative costsassociatedwiththeoperationoftheCDMExecutiveBoard.Therationaleisto capturepartofthe“benefit”thataccruestoindustrialisedcountrieswhen,toachieve theircommitmentsatlowercost,theyusetheKyotoProtocol’sflexibilitymechanisms toexternaliseemissionsreductions. Voluntarycontributionsbydonors ThisalternativewouldentailthescalingupofexistinginitiativesbyStates,international organizations,NGOs,andotherbodiesthatfinancecapacitybuildingorprojectsfor forestconservation.ExceptforTrustFundsthatsecurelongtermfinancialflows,these voluntarycontributionsarecommonlycriticisedfornotensuringsustainablefinancing andthusforachievingmixedresults. ShouldREDDbefungiblewithinternationalcarbonmarkets? FungibilitywouldmeanthatAnnex1countriescanachieveapartoftheir commitmentswiththepurchaseofcarboncreditsfromREDD.Twomainarguments havebeenadvancedinpromotingfungibility:first,thatcarboncreditsmarketswill ensuresustainableandsignificantamountsofcarbonfinance;andsecond,thatthey willincreaseefficiencyintheuseofavailablefinancialresources.Thesearguments werequestionedinthetwoprevioussections:thereareinfactseveralwaystoaccess carbonfinanceinAnnex1countriesinasustainableway,justasthereareseveral waystosupportvirtuousendeavoursindevelopingcountries. Negotiatorsmightbecautiousaboutfungibilityforanumberofreasons.Someofthese arespecifictoREDD,whileothersapplytoanyprematureextensionofexistingcarbon marketstodevelopingcountriesoutsideAnnex1: Riskofmarketdestabilisation Thecostsandmagnitudeofachievableemissionsreductionsfromdeforestationand degradationindevelopingcountriesareunknown.Consequently,destabilisationof marketsisarisk,andsafeguardsarenecessarytoatleastminimisethisrisk.Onthe onehand,marketfloodingandadropinthepriceofcarboncreditsmightoccurif referencevaluesarelax(asdiscussedabovein“Rewardsbasedondemonstrated quantifiedreductions”)orifdeforestationratesaresignificantlyreduced.Thismight resultinlowincentivesforAnnex1countriestoreduceemissionsdomestically,andfor developingcountriestopursuevoluntaryefforts.Ontheotherhand,carboncredits wouldbescarceifdeforestationratesremainedclosetoorhigherthanreferencelevels, inwhichcaseAnnex1countrieswouldfaceproblemsinachievingtoughercommitments thathadbeennegotiatedwiththeexpectationthatREDDwouldfunctionasa flexiblemechanism. Breaking the Climate Deadlock Briefing Paper 10
  11. 11. Barrierstoaccurateestimationsofemissionsreductions Thebarrierstoaccurateestimationsofforest-relatedemissionsreductionsin developingcountriesareamajorconcern.Indeed,thecompensationprovidedbyREDD carboncreditsforhigheremissionsinAnnex1countriesmustbeassessedaccuratelyin ordertoensureenvironmentalintegrityatagloballevel.Ontheotherhand,theprovision oflimitedcompensationunderaconservativeapproachmightsignificantlyreducethe financialrewardseventuallydeliveredtodevelopingcountries.Negotiatorsshould thereforecarefullybalancethecostsandbenefitsoffollowingthefungibilitypath. Coststoreduceemissionsfromdeforestationanddegradation Coststoreduceemissionsfromdeforestationaremadeupofthecostsofstrengthening hostcountries’capacitytoparticipatetoREDD(“readiness”);administrationcosts;and opportunitycostswhenforestsarenotearmarkedfortimberproductionorconversion intoalternativelanduses. TheSternReview15 ontheeconomicsofclimatechangeaddressedtheopportunity costs16 ofavoidingdeforestation,whichisviewedasapromisingoptioninglobal mitigationefforts: “Asubstantialbodyofevidencesuggeststhatactiontopreventfurther deforestationwouldberelativelycheapcomparedtoothertypesofmitigation”. Therestofthestatementisofimportance,asitstressestheneedto“[putinplace] therightinstitutionalstructures”andthereforegoesbeyondthescopeofpayments forprotectedareas.Thereportestimatesopportunitycoststoavoiddeforestation, ineightcountriesresponsiblefor70percentofglobalemissionsfromlanduse,tobe approximately$5billionperyear.Thisfigureisbuiltoncalculationsofnetpresentvalues perhectarein0yearsforlandusesthattakeplaceafterforestconversion.Asthe authorsacknowledge,estimationsofcostsatsuchascalemustrelyonover-simplistic assumptionssuchaszeroleakage,fulladditionality,andscalingupofcostsperhectare forahandfuloflanduses. Whilemoststudiesconsidertheconceptof“opportunitycosts”,fewofthemsharea commonmethodologytomakecalculations.Inparticular,theseopportunitycostsare sometimesassumedequaltoprofitsgeneratedperhectare,butinothercasesthecosts includeallexpensesthatanactivitygenerates.Thiscreateshugedifferencesinvalue foragivenlocationandlanduse.Muchdependsonthescaleoftheopportunitycost estimation–individual,localornational–becausecapitalisscarceandmightmove toothersectorsorlocationsifinvestmentscannottakeplaceinforestedareas.For instance,preventingtheestablishmentofapulpwoodplantationafterconversionof anaturalforestinIndonesiacouldleadeithertodisplacementoftheplantationinto nearbybareland,toinvestmentsinothersectorsoftheIndonesianeconomy,orto investmentsabroad.Outcomesintermsofforegonerevenues,profits,employment, canbecontrastedatthelocalandnationallevels17 . Anotherproblemwithcalculationsofopportunitycostsasavailableintheliterature istheirstaticstance.Mostanalysesdonotconsidertheincreasingpressureonhigh- carbon-densitylandastheworldneedstoproducemoreandmorefood,fibreandfuel overthenextdecades.Notonlyisglobalpopulationprojectedtoincreasedramatically, butconsumptionpatternsassociatedwithhigherlivingstandardswillprovidestrong incentivestoconvertforestsintopasturesoragriculturalfields. Tosummarize,opportunitycoststoreduceemissionsfromdeforestationand degradationcouldbeanywherewithinabroadrangeofvalues($/tCO2).Thelowerend ofthisrangewouldapplytocultivationbysmallholders(e.g.cassava,ricefallow),and thehigherendtolarge-scaleindustrialagricultureandplantations(e.g.oilpalm,soy, cattleranching). Itisalsodebatablewhetherthecostsofconservationequaltheopportunitycosts. Indeed,localagentsofdeforestation,especiallywhentheyarevillagerslivinginor nearbytheforest,mightnotstoptheirusuallivelihoodsandactivitiesoncetheyreceived compensation.Additionalactionisrequired,suchassupervision,control,orthe Breaking the Climate Deadlock Briefing Paper 11
  12. 12. provisionofalternativeeconomicactivities,inordertoensureforestconservation inthelongterm.Moreover,itisunlikelytobefeasibletomakeregularadjustments oncompensation(withtheassociatedtransactioncosts)toreducetheriskof compensatedpeoplebecomingtrappedinpoverty.Inotherwords,thesearchfor low-costsourcesofemissionreductionsfromdeforestationgeneratesrisksof socialinequityatthegloballevel.Weaddressthisissueinthenextsection. Theequityissue Themainforesteddevelopingcountriesmighthaveanincentivetoconserveadditional millionsofhectares,andmightbeabletogainbillionsofdollarsfromREDDoverfive- yearperiods(seeExhibit1),Itisthuslegitimatetoquestiontheconsequencesinterms ofequity.Indeed,anylandusechangegeneratesgainsandlossesforvariousagents, andforestconservationmightenrichcountriesthroughthefinancialtransfersfrom REDDbutsimultaneouslyimpoverishgroupsofagentsbecauseoflostopportunities. Inotherwords,REDDislikelytogeneratesignificantandcontrastingeconomicimpacts onthedomesticagentsintropicalforestedcountries. Exhibit1 Orderofmagnitudefor potentiallandusechanges andfinancialtransfers overonefive-year creditingperiod Source FAO2006 Totalforestloss With10%reductiondeforestation With30%reductiondeforestation With50%reductiondeforestation 2000–2005(1,000ha) and$5/tC and$10/tC(million$) and$20/tC(million$) Forest Financial Forest Financial Forest Financial conservation transfer conservation transfer conservation transfer (1,000 ha) (million $) (1,000 ha) (million $) (1,000 ha) (million $) Brazil 15,515 1,551 85 ,65 5,120 7,757 17,066 Indonesia 9,55 95 60 2,806 2,161 ,677 7,20 DR Congo 1,595 159 12 78 72 797 2,72 WithrespecttoREDD,thenationalauthoritiesinforesteddevelopingcountrieswill haveadualrole.Theywillsell“avoideddeforestation”throughREDDandaccesscarbon finance;andtheywillbuy“avoideddeforestation”bycompensating(ornot)impoverished agents.Dependingonwhichpoliciesandmeasuresareimplemented,theywillbuy beforeselling,throughincentivisationandPaymentforEnvironmentalServices(PES) schemes;ortheywillsellbeforebuying,throughregulationswithorwithoutcompensation. Equityoutcomeswilldependbothonwhichpoliciesandmeasures,andwhich redistributionmechanisms,areimplementedinparticipantcountries.Redistribution mechanismscontainthreedimensions,whichincombinationswilllikelyyield contrastingresultsintermsofequityoutcomes: Redistributionprinciple(natureoffundutilization) Thechoicehereisbetweenindividual(includingcorporate)compensation; anddevelopmentactivitiesatahigherlevel(localtonational).Whileindividual compensationsarepresumablybetterdesignedforensuringequityofredistribution, thewelfareofimpoverishedagentscouldbenefitmorefromdevelopmentprojects, providedtheserequiredempowermentandtraceabilityoffunds. Institutionalarrangement(fundcollectionandallocationdecisions) Thechoicehereisbetweenthemanagementofaspecialfundunderanindependent authority,whetheratlocal,regionalornationallevel;andtheinclusionofREDD paymentsinthestatebudget.FactorssuchasthepoweroftheParliamentandthe capacityoftheindependentauthorityinchargeofaspecialfund,arekeytothe equitableuseofREDDpayments. Levelofdevolution(implementationandspendingofpayments) Essentially,finalusersofREDDpaymentscanbesplitbetweennational,regionaland locallevels.Intuitively,itcanbeassumedthatthedeeperthedevolution(andthelonger thechaintothefinalusers),thegreatertheopportunitiesforembezzlementand illicitcapture. Breaking the Climate Deadlock Briefing Paper 12
  13. 13. Politicallandscape TheissuespresentedinthisBriefingPapershapeapoliticallandscapewithcontrasting stancesamongPartiesbothinthedevelopingandindustrializedworlds.Inparticular thereareopposingviewsontherolethatthefungibilityandcarbonmarketsshouldplay. ThemostprominentadvocateoftheglobalmarketoptionisPapuaNewGuinea(PNG) whosepositionisinfluencedbytheCoalitionforRainforestNations.Countriesthat sharePNG’sviewincludeGuyana,andIndonesiaaswellasothersfromtheCongoBasin andCentralAmerica.Thesecountriesarguethatcap-and-trademarketinstruments wouldprovideusefulincentivesforconservation.Accordingtotherationaleofany marketapproach,itprovideshostcountrieswithopportunitiestocapturenetfinancial gainswithforestconservationifopportunitycostsarelessthanthesellingpriceof carboncredits. BrazilfavorsthecreationofaFundsupportedbycontributionsfromindustrialized countriesaspartoftheirbindingGHGemissionreductioncommitments.Brazilrejects thenotionthatdevelopingcountriesshouldshareasignificantpartoftheglobal mitigationburden,andopposesproposalsthatwouldallowAnnex1countriestoreplace domesticreductionsofGHGwithcarboncreditsissuedthroughREDD.Sovereigntyis saidtobeanotherargumentforsuchanapproach,becausehostcountrieswouldnot havetoreportemissionsreductionsortoallowexternalmonitoringandverificationon theground.Infact,itcouldbethereverseifconditionalitiesareassociatedtothe financialsupporttopoliciesandmeasures. TheCommissionfortheForestsofCentralAfrica(COMIFAC)givesspecialsupporttothe inclusionofforestdegradationintheREDDmechanism.TheseCongoBasincountries, backedbyFrance,arguethatForestManagementPlansshouldberewardedagainst conventionallogging. Breaking the Climate Deadlock Briefing Paper 1
  14. 14. Breaking the Climate Deadlock Briefing Paper 1
  15. 15. • Griffiths,T.O,2007: Seeing‘RED’?‘AvoidedDeforestation”andtherightsofIndigeneousPeoplesand localcommunities, ForestPeoplesProgramme. • Kanninen,M.,Murdiyarso,D.,Seymour,F.,Angelsen,A.,Wunder,S. etL.German,2008: Dotreesgrowonmoney?Theimplicationsofdeforestationresearchforpoliciesto promoteREDD, ForestPerspectives,CIFOR,Indonesia. • Pirard,R.andA.Karsenty,2009(forthcoming): Climatechangemitigation:Should“avoideddeforestation”(REDD)berewarded? JournalofSustainableForestry,Vol28(-). • RubioAlverado,X.andS.Wertz-Kanounnikoff: Whyareweseeing“REDD”?Ananalysisoftheinternationaldebateonreducing emissionsfromdeforestationanddegradationindevelopingcountries, CollectionAnalyses,Iddri,Paris. FurtherReading Breaking the Climate Deadlock Briefing Paper 15
  16. 16. Breaking the Climate Deadlock Briefing Paper 16
  17. 17. Annex1: Listofdevelopedorindustrialisedcountrieswithbinding commitmentsundertheKyotoProtocol CDM: CleanDevelopmentMechanism CO2 : Carbondioxide COP: ConferenceoftheParties EUETS: EuropeanUnionEmissionTradingScheme FAO: FoodandAgricultureOrganization FCPF: ForestCarbonPartnershipFacility GHG: GreenhouseGas IPCC: IntergovernmentalPanelonClimateChange PES: PaymentforEnvironmentalServices REDD: ReducedEmissionsfromDeforestationandDegradation UNFCCC: UnitedNationsFrameworkConventiononClimateChange GlossaryofTerms Breaking the Climate Deadlock Briefing Paper 17
  18. 18. Breaking the Climate Deadlock Briefing Paper 18
  19. 19. 1 Forestsaretheterrestrialcarbonsink’smaincomponent.J.CanadellM.Raupach‘ManagingForestsforClimateChange Mitigation’Science,13June2008,Vol320 2 MatthewC.Hansenatal.(2008).Humidtropicalforestclearingfrom2000to2005quantifiedbyusingmultitemporaland multiresolutionremotelysenseddata.PNASJuly8,2008vol.105no.279439-9444. 3 Forestplantationsmightnotsequesternetamountsofcarbonwhenestablishedonlandswithforestcover.Indonesiaisthe perfectexample,wheretheestablishmentofAcaciaplantationsonpeatlandforestshasgeneratednetemissionsoverall. 4 Shiftingcultivationisaspecificcasethatmaybeconsideredasdegradationordeforestation:inthetropicsshiftingcultivation leadstorapidvegetationregrowthoncecultivatorsmovetoanotherplot. 5 Denman,K.L.,Brasseur,G.,Chidthaisong,A.,Ciais,P.,Cox,P.M.,Dickinson,R.E.,Hauglustaine,C.,Heinze,E.,Holland,D.,Jacob, U.,Lohmann,S.,Ramachandran,P.L.,daSilvaDias,D.,Wofsy,S.C.andZhang,X.2007.CouplingsBetweenChangesintheClimate SystemandBiogeochemistry.In:Solomon,S.,Qin,D.,Manning,M.,Chen,Z.,Marquis,M.,Averyt,K.B.,Tignorand,M.andMiller, H.L.(eds.)ClimateChange2007:ThePhysicalScienceBasis.ContributionofWorkingGroupItotheIPCC. 6 Houghton,R.A.,(2005).TropicaldeforestationasasourceofGHGemissions.In:Moutinho,P.,Schwartzman,S.(Eds.),Tropical DeforestationandClimateChange.AmazonInstituteforEnvironmentalResearchandEnvironmentalDefense,Belém,Brazil,pp. 13–22. 7 FAO,(2006).GlobalForestResourcesAssessment2005.Progresstowardssustainableforestmanagement.FAOForestryPaper, vol.147.FoodandAgricultureOrganization,Rome. 8 See,e.g.,thereportTheforestsoftheCongoBasin:Stateoftheforest2006,availableonhttp://carpe.umd.edu/2006-state-of- the-forests-reportforinformationonforestdynamicsintheregion. 9 Forexample,see:Rudel,T.K.,Coomes,T.K.,Moran,E.,Archard,F.,Angelsen,A.,Xu,J.,Lambin,E.,(2005).Foresttransitions: towardsaglobalunderstandingofgloballandusechange.GlobalEnvironmentalChange15,23–31. 10 Forareviewofthecausesofdeforestationsee:Geist,H.J.,Lambin,E.F.,2001.Whatdrivestropicaldeforestation?LUCCReport Series,vol.4.UniversityofLouvain. 11 By“developingcountries”wemeannonAnnex1countries.WeareawarethatcountrieslikeBrazilorChinawouldbetterqualify as“emergingcountries”. 12 TheMarrakechAccordswereagreedbyKyotoProtocolPartiesin2001.Theyestablishedanddefinedtherulesarisingoutofthe basicprinciplessetoutintheProtocol. 13 ‘Hotair’referredoriginallytotheconcernthatsomecountrieswouldbeabletomeettheirtargetsforgreenhouse-gasemissions undertheKyotoProtocolwithminimaleffortandcouldthenfloodthemarketwithemissionscredits,reducingtheincentivefor othercountriestocuttheirowndomesticemissions. 14 CombesMotel,P.,Pirard,R.and.Combes,J-L,2008,Amethodologytoestimateimpactsofdomesticpoliciesondeforestation: CompensatedSuccessfulEffortsfor“avoideddeforestation”(REDD),EcologicalEconomics,InPress. 15 Stern,N.2006.Sternreviewontheeconomicsofclimatechange.UKGovernmentEconomicService.London,www.sternreview. org.uk. 16 Administrationcostswereroughlyestimatedintherange$4to$15/haforexistingprojectsandnottakingaccounteconomies ofscale. 17 Pirard,R.,2008,EstimatingopportunitycostsofAvoidedDeforestation(REDD):Applicationofaflexiblestepwiseapproachto theIndonesianpulpsector,InternationalForestryReview,Inpress. Endnotes Breaking the Climate Deadlock Briefing Paper 19
  20. 20. Breaking the Climate Deadlock Briefing Paper 20
  21. 21. ThankstoMatthieuWemaëre,CyrilLoisel,BernhardSchlamadingerandRalphAshton fortheirthoughtsandcomments. Theviewsexpressedinthispaperarethoseoftheauthoranddonotnecessarilyreflect thepositionorviewsoftheBreakingtheDeadlockProject,TheClimateGroup,orthe OfficeofTonyBlair.Anyfactualerrorsarethesoleresponsibilityoftheauthor. Acknowledgements Breaking the Climate Deadlock Briefing Paper 21

×