Special Report

Wanted: hard cash to halt deforestation

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Special Report: The COP 15 climate summit in Copenhagen

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Reducing carbon dioxide emissions from deforestation should be an important part of a new global climate treaty. Catherine Early reports on the ‘REDD solution’

Peatland, Indonesia: © Greenpeace/ John Novis
Peatland, Indonesia: © Greenpeace/ John Novis

Campaigns to save the rainforest have been integral to the environmental movement for 40 years, with celebrities and royalty lending their name to the cause. Now politicians, bankers and policymakers have joined in.

The threat of climate catastrophe has previously uninterested governments and financial institutions sitting up and paying attention to the problem of deforestation. That, and the prospect of tens of billions of dollars flowing from developed to developing countries each year to pay for the proposed global solution, known as reducing emissions from deforestation and degradation (REDD).

The theory is that the only way to guarantee a future for the world’s tropical forests is to make them worth more standing up than chainsawed or burned down. There is widespread agreement that deforestation must be halted, or at least drastically cut, to help reduce the threat of climate change and to protect biodiversity and indigenous peoples.

Advocates of REDD believe it makes sense for developed countries – responsible for most greenhouse gas emissions to date – to pay developing world governments, communities and commercial interests to conserve forests that would otherwise be destroyed. Especially if this is among the cheaper ways of reducing global greenhouse gas emissions.

But REDD comes with  ambiguities, difficulties and risks. The forests might not be conserved effectively and campaigners and protest campaigns could explode if payments compensate loggers, ranchers and plantation growers for ceasing to destroy forest.

Yet the reality is that forests continue to disappear at an alarming rate. An area half the size of the UK (13 million hectares) was deforested every year between 1990 and 2005, according to the UN Food and Agriculture Organisation. The Fourth Assessment Report by the UN Intergovernmental Panel on Climate Change (IPCC) estimates that deforestation causes 17% of annual greenhouse gas emissions, more than the world’s transport sector, even when taking aviation and shipping into account (see p 17).

The IPCC believes reducing deforestation will have the largest and most immediate impact on carbon emissions. It is also seen as highly cost-effective. In his book A Blueprint for a Safer Planet, Lord Stern – the government’s foremost adviser on climate change economics – says halving deforestation would save about three billion tonnes of carbon dioxide equivalent a year. He says this would cost $5 per tonne of CO2 saved, much cheaper than the $20 it is now trading at in the EU emissions trading scheme.

A scheme to reduce emissions from deforestation was rejected at the Kyoto climate talks in 1997 because of doubts over how it would work. But afforestation and reforestation schemes were allowed under the Clean Development Mechanism (CDM), in which developed world organisations buy carbon allowances from emissions-reducing projects in developing countries.

But forestry provides only eight of the more than 1,500 CDM projects to date. And most of those have been registered this year.

In 2005 Papua New Guinea, a major logging country, brought forward the current proposals for enabling payments in return for REDD on behalf of the Coalition for Rainforest Nations. In talks in Bali in 2007, nations agreed in principle to include REDD in a new global climate treaty succeeding the Kyoto Protocol.

Negotiators are now talking about REDD+, which goes further by including conservation and enhancement of carbon stocks in existing forests, not just their sustainable management.

So far, REDD is not a precise plan, but more of a collection of proposals and some working schemes. The World Bank and the UN are running demonstration projects, which several countries have submitted proposals to undertake.

Negotiations on REDD are said to have made better progress than most other issues being discussed in the run-up to the UN  Framework Convention on Climate Change (UNFCCC) summit in Copenhagen. But that is not saying much.

The negotiating text was reduced from 20 to 8 pages during preparatory sessions at Bangkok and Barcelona this autumn. However, a large part of the text has yet to be agreed and NGOs are concerned that key elements are now missing. These include robust language on respecting forest people’s rights, protection of natural forests and the need to tackle the drivers of deforestation.

Plantations were the cause of a major disagreement during the Bangkok talks. They are inferior to natural forests in storing carbon and providing habitat for biodiversity. The draft text had stated REDD would not allow the conversion of natural forests to plantations for crops such as palm oil, but this had been removed. More than 20 countries including Brazil, India and Tuvalu insisted that REDD must at its core be about protecting natural forests and the text should be reinserted.

Economic resource

However, the Democratic Republic of Congo (DRC), on behalf of Cameroon, Congo and Equatorial Guinea stated they need their forest resources for economic development, unless they receive compensation. The EU, led by the UK and Sweden, was the only developed world party to oppose reinserting this text, arguing for further discussion.

A UK energy and climate department spokesman said Britain wants specific language to protect natural forests in the final text agreed at Copenhagen. Commentators believe the EU’s stance reflected a reluctance to reopen discussions and lose progress that had been made in Bangkok. Some text on the issue was reinserted during the Barcelona talks, prompting the DRC to threaten to walk out of the talks on REDD.

Several issues have yet to be raised. The most striking concerns the scope of REDD projects. Some countries want it limited to forests, whereas others have called for agriculture to be included. Some have even called for REDD to cover wetlands and peatlands. The issue is one of the most contentious in the REDD discussions, which is why it has been left out so far.

“The problem with REDD is that everyone is adding their issues onto it because they see it as something that might come up with lots of money,” explains Kate Dooley, REDD campaigner at campaign group FERN, which coordinates NGO activities on forestry at a European level.

Adding in other land-based ecosystems would be an “accounting nightmare”, she said. “Trying to figure out the amount of carbon in a forest that you planned to cut down but didn’t is crazy enough, but to expand this out to every piece of land is even crazier.”

There is now widespread recognition that local communities and indigenous people need to be involved in REDD projects on their land. However, concerns remain about the language in the text. The EU supports the “full and effective participation” of all relevant people in all stages of REDD activities.

However, the EU and other countries such as the US oppose text stating that indigenous people must have “free, prior and informed consent” on REDD, which is enshrined in the UN Declaration on the Rights of Indigenous Peoples. NGOs and the International Indigenous Peoples Forum on Climate Change believe forest permanence is linked to security of land tenure, a theory backed by a recent University of Illinois study.

Another omission is a statement on the drivers of deforestation. Both the US and Tuvalu have proposed text, but it has been removed. “It’s not the top priority of any of the negotiators and that’s in large part to do with an unwillingness to talk about the ugly realities of trade,” says Andrea Johnson, forest campaigns director at the Environmental Investigation Agency (EIA).

The EIA estimates 10% of wood products on the international market are made from illegally logged wood. Despite the fact that it is not the main cause of deforestation, the EIA sees illegal logging as “the first step on a slippery slope” that often leaves forests prone to fire or conversion to plantations. Dealing with it should therefore be an important part of any REDD agreement.

“Illegal logging fundamentally undermines governance and the rule of law, so that’s the biggest reason we think there should be a policy at an international level,” Ms Johnson says.

Several key issues are not expected to be resolved at Copen­hagen, so they will have to be negotiated at subsequent meetings. Finance is one. An informal working group on interim finance for REDD produced a report in September, which stated that €15-25bn was needed to fund REDD between 2010 and 2015. It estimates this could achieve a 25% cut in annual deforestation rates by 2015.

Financing options

The negotiating text contains three options for finance. The first is that REDD credits are traded on a separate carbon market and cannot be used by developed countries to offset their greenhouse gas emissions.

Second, REDD credits should be traded like any other carbon credit on the global carbon markets and can therefore be used by developed countries to offset their emissions. The third idea would see a dedicated fund created to oversee disbursement of funding for REDD. Finance for the fund could be raised by taxes on carbon-intensive activities such as aviation.

Developed countries favour using the carbon markets to create offsets that will make their own emissions reduction targets easier to achieve. But this is opposed by Brazil, where about a quarter of global deforestation emissions occur.

NGOs fear that REDD credits could flood carbon markets, with major emitters in the developed world preferring to buy cheap offsets rather than cut emissions. Research commissioned by Greenpeace found that including REDD credits will lower the carbon price by 60-75%. A report by analysts New Carbon Finance found carbon prices could fall by 40% by 2020.

But in reality this is unlikely because there will probably be restrictions on the amount of offsets developed countries can buy to achieve emission cuts.  The report judged the overall benefits of including REDD in carbon markets as outweighing the risks.

Chris Knight, assistant director of sustainability and climate change at PricewaterhouseCoopers (PWC), which advises clients on REDD projects, believes fears of a carbon price crash are unfounded. REDD projects are so complex and lengthy to develop, they pose no short-term danger to the carbon market, he said.

However, issuing REDD credits on the carbon market raises other concerns. There is already evidence of ‘carbon cowboys’ moving in on the potential multi-billion dollar market. There was a scandal this summer over fake carbon credits in Papua New Guinea and the Indonesian government has warned its local authorities of similar activities.

Another major issue yet to be discussed is monitoring, reporting and verification (MRV). The idea behind REDD is that countries would agree to reduce deforestation or degradation to an agreed level and this would determine the level of cash they receive. But complicated baselines need to be determined for each country so that those that have historically preserved their forests do not lose out to those with high rates of deforestation.

Calculating emissions reductions from avoided deforestation is not only fiendishly difficult but also open to debate. A study of a pilot REDD scheme in Indonesia found it was unlikely to achieve the carbon reductions predicted because the land was not at a high risk of deforestation in the first place. Other areas outside it were much more attractive to loggers and were still suffering high rates of deforestation (ENDS Report 417, p 26).

REDD schemes already under way

While the negotiations continue to thrash out these complex issues, some countries are already planning REDD schemes. Most are being developed through the UN or the World Bank.

The Forest Carbon Partnership Facility (FCPF), a World Bank scheme, was announced at the Bali climate talks in December 2007 and became operational in June 2008. So far 37 countries in Africa, Latin America and the Caribbean and eight in Asia and the Pacific have been selected to join the partnership. It is funded by 14 donors, including the UK and the US.

There are two phases to the FCPF. First, countries must prove ‘REDD readiness’. The World Bank is providing technical and financial support to countries to prepare data on historical and potential future patterns of deforestation and degradation and their emissions, develop strategies for stemming this and establish MRV systems. Guyana and Panama have so far had plans approved under this stage. Indonesia’s plan was rejected.

The World Bank then plans to fund some of these countries to implement REDD schemes through its Carbon Fund. So far, it has raised $50m for this fund towards a target of $200m.

However, many countries including China, Brazil and India are opposed to the World Bank’s involvement. NGOs are concerned the bank is cutting corners on consultation with local people. For instance, it accepted Ghana’s proposal for funding a national REDD plan, even though the idea had not been consulted on.

FERN is worried that the FCPF process will undermine other efforts to deal with deforestation, such as the EU’s Forest Law Enforcement, Governance and Trade (FLEGT) programme, by rushing REDD schemes through far more quickly. Effective consultation on FLEGT takes “absolutely years”, Ms Dooley says.

“You’re looking at three to ten years to do proper consultation, but the World Bank process and certainly the UNFCCC will not acknowledge that kind of timeframe, they want to do it in a couple of months,” she says. The reason 20 years of trying to stop deforestation has failed is that its causes are complex and embedded in the institutions of countries, she says.

The Rainforest Foundation also has doubts about the bank. Nat Dyer, a policy officer focusing on climate change, says the World Bank has exempted the FCPF’s Readiness Fund from its usual rules, including safeguards on the rights of indigenous people.

“Potentially years of World Bank projects involving legislative and policy changes, analyses of the drivers of deforestation, REDD strategy and MRV system will be undertaken without safeguards,” he says.

The World Bank denies these accusations. Benoit Bosquet, lead carbon finance specialist in the World Bank’s environment department, says the safeguards do not apply to the first phase because it is about analysis, not investment.

He admits there is not a strong focus on consultation when countries are accepted into the partnership. But there should be more focus on consultation following this, he says. Ghana, for example, has been told by the FCPF committee it now needs to do more.

“Consultation is not a one-off event, it’s an iterative process,” he told ENDS. “Ideally, you should not stop consultation.”

The UN also has a pilot scheme, known as UN-REDD. Fourteen countries are involved so far including the Democratic Republic of Congo, Indonesia and Papua New Guinea. But it does not have as much funding available as the World Bank. Almost three quarters of its $51.7m pot has already gone to the six countries that have had initial plans approved.

In addition to the pilot schemes going through the UN and World Bank, about 25 REDD schemes are being developed by a diverse group of companies and organisations. These include the Australian investment bank Macquarie, Merril Lynch, the Marriot hotel chain and NGO Conservation International.

PWC is working on a REDD project in Paraguay with the World Land Trust and on a conservation and restoration project with the RSPB in Indonesia. The consultancy’s Chris Knight stressed the difficulty of developing REDD schemes, in particular proving tenure and titles for the forest land involved and getting local community support for the project.

“It seems that there’s a potential goldmine in the forest but when you look at the economics of setting REDD schemes up, that is far from the case,” he says.

Developers and funders of all these pilot schemes will be anxiously awaiting the outcome of the Copenhagen talks. If there is an agreement on REDD, most expect it to be no more than half a page outlining objectives and broad scope. Following a stalemate in the latest climate talks in Barcelona, many are now predicting that an agreement on REDD in principle could become a political figleaf for the lack of progress in the wider climate negotiations.

An agreement on REDD could still go either way, the Rainforest Foundation’s Mr Dyer believes. “It could end up as a loggers treaty where loggers would get paid for doing slightly less damage than they were doing previously,” he says.  “Or it could do what it was designed to do and protect natural forests and the people who are dependent on them.”