Getting Paid to Keep Trees Standing

Climate Forests Investments Jan 1, 2001
Adam Davis

On the surface, the upcoming meeting of the United Nations Framework Convention on Climate Change seems like an ocean of acronyms. The Ecosystem Marketplace finds out why this particular book might prove more interesting than its cover would suggest. At first glance, the upcoming Nairobi meeting of the United Nations Framework Convention on Climate Change (i.e. the folks responsible for implementing the world's leading climate treaty—the Kyoto Protocol) looks like a big yawn. The gobbledygook language used on the conference website can lose you in a hurry. In addition to the 12th Conference of the Parties and the 2nd Meeting of the Parties, known as COP/MOP2 (which could be, in funnier circumstances, the name of a bad off-Broadway play) the official United Nations website informs us that, "the conference will also include the twenty-fifth session of the Subsidiary Body for Scientific and Technological Advice (SBSTA 25), the twenty-fifth session of the Subsidiary Body for Implementation (SBI 25), and the second session of the Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG 2)." It could be fun, but it doesn't seem like the Blues Brothers will show up. The main objective for the meeting, from what a casual reader can make of the agenda, seems to be to agree to hold subsequent meetings: "At COP 12, a decision will be required on the date and venue of COP 13, which will be held in conjunction with COP/MOP 3." What that casual agenda reader would miss, however, is the continuing progress on developing a provision that would allow developed countries to pay developing countries for keeping their forests standing. Everyone seems clear, of course, on the financial value of cutting the trees down. And cut they do. According to the Food and Agriculture Organization of the United Nations (FAO) 2005 Global Forest Resources Assessment (pdf), some 13 million hectares of the world's forests are still lost each year, including 6 million hectares of primary forests. Primary forests—forests with no visible signs of past or present human activities—are considered the most biologically diverse ecosystems on the planet. Cutting forests at this rate causes all sorts of problems for biodiversity, water quality and human livelihood; it also destabilizes the climate. CO2 from deforestation comprises 20-25% of all human-caused emissions. [See "New Mechanisms Needed to Address Deforestation"] According to the International Panel on Climate Change, the largest potential source of Greenhouse Gas (GHG) emissions reductions is fossil fuel substitution, but the very next category is reducing the rate of deforestation.

Better REDD than Dead

What makes the upcoming COP/MOP2 more interesting than it appears on surface is the fact that Brazil, the country with the most significant deforestation in the world, recently proposed a scheme that rewards the carbon emissions avoided when trees are conserved rather than cut. Before a September 2006 meeting in Rome, Brazil was opposed to any such mechanism, a position that had stymied past UN talks. "High Source: According to John O Niles, the science and technical advisor for the Coalition for Rainforest Nations, this was a significant step forward for the whole initiative known as 'REDD', or Reducing Emissions from Deforestation and Degradation. "The REDD dialog had been stuck in technical issues regarding baselines, remote sensing, and so on, until Brazil agreed that a payment to reward specific behavior on the ground made sense," says Niles. An agreement to include REDD country targets as a legitimate form of participation in the Kyoto Protocol would have profound implications. While much remains undecided about the exact nature of the commitment, it seems clear that it would move developing countries towards national carbon accounting for emissions from land use change, which represent between 60 and 80% of the total emissions from countries such as Brazil and Indonesia. The only real current means of participation for developing countries, the Clean Development Mechanism (CDM), has proved frustratingly cumbersome for market participants interested in forestry projects. While a total of 358 projects have been registered worldwide under the CDM, only 14 of these have been forestry projects. The CDM currently reduces roughly 90 million tons CO2e per year (source, UNFCCC), while human activities continue to emit GHGs at a rate of something like 32 Billion tons CO2e per year (as of 2000, according to the World Resources Institute's Earthtrends report). The REDD approach is fundamentally different from the CDM; instead of certifying qualified projects one by one, it would require improvements against a forestry baseline on a national level. Emissions reduction targets by developing countries to achieve REDD goals would be the first quantitative voluntary commitment by this group. While there are outstanding and important technical questions about the balance between scientific accuracy and the ability to get something done, the basic premise is that including REDD as a legitimate form of Kyoto compliance could begin to address a quarter of all human caused GHG emissions. The whole issue of how avoided deforestation should be measured is sure to come up in Nairobi as well. Developing countries can make a strong case that stopping deforestation prevents carbon emissions—the basic science is well established—but there is intense debate about how detailed and technical various measurements have to be. Some have argued that measuring against a baseline of what might or might not have happened makes 'avoided deforestation' a slippery subject. Others say that this is true for other qualifying projects under the CDM, too, and that forests are being held to a more stringent standard than those required for methane recovery, hydroelectric power and so on. These devilish details asides, there seems to be real hope that new solutions are on the horizon for those interested in forestry carbon. According to Toby Janson-Smith, director of the Climate, Community and Biodiversity Alliance, "REDD holds the promise that developing countries, for the first time, might have access to a substantial market that will pay them to protect their forests. This would be good news for the forested countries, which would get to maintain their natural resource base and the ecosystem services they generate, including the conservation of productive soil, clean water, and natural pollinators…and for the industrialized world, which will have another tool in its arsenal for mitigating climate change." Ken Chomitz, a senior advisor at the World Bank and lead author of the recently published report At Loggerheads? Agricultural Expansion, Poverty Reduction, and Environment in the Tropical Forests comments, "What distinguishes this meeting is that for the first time the group is trying to harness carbon finance to address climate change and sustainable development by using avoided deforestation. Our new report lays out the logic behind this connection, addresses some of the concerns about the financial approach and suggests some constructive solutions."

From Boredom to Blockbuster

Importantly, including REDD credits in a post-Kyoto framework has the potential to help break the logjam keeping the U.S. out of the international treaty altogether. Since 2001, the U.S. has taken the position that unless China, India and other large developing country economies take commitments to reduce their GHG emissions, the US would be putting itself at a competitive disadvantage by joining the Kyoto Protocol. If developing countries are able to successfully implement REDD, which is the only proposal from this group to take on numerical targets, it would help disarm the American argument that big developing economies aren't taking action on climate change. Such a development might also open the door for numerical targets from other sectors in other countries (e.g. coal in China). Perhaps because it seems like it might really be part of a larger pragmatic solution, interest in the upcoming Nairobi meeting is high. Janson-Smith says, "This topic has generated real excitement. There appears to be widespread support and motivation among developing and industrialized countries, as well as environmental and development groups, for establishing a credible and equitable framework to cover this important sector." Or as Niles puts it, "The REDD initiative represents a move away from a black and white world view where there are simply countries with commitments and countries without commitments." Of course, the underlying context for this whole Nairobi meeting is that basic agreements have not yet been reached for what is known as the second commitment period of the Kyoto Protocol. What this means is that the entire system of requirements and commitments, and the enormous financial momentum built up from the value of greenhouse gas reductions as a result of those commitments, is on hold. Without a continuation of the binding commitments from the year 2012 on, even the modest progress made to date in addressing global climate change is in jeopardy. And here, at last, we stumble upon the real reasons this week's UNFCCC gathering in Naroibi is worth watching. The meeting represents a critical next step in: addressing the source of a quarter of all human-caused emissions, opening the carbon market to new participants, and broadening the Kyoto Protocol's political appeal to holdouts such as the United States and Australia. Indeed, COP/MOP2—freighted down with acronyms as it is—promises to be a blockbuster event. Adam Davis is an environmental economics specialist and ecosystem market participant. He lives in San Rafael, California, and can be reached for comment at First published: November 8, 2006 Please see our Reprint Guidelines for details on republishing our articles.