By Climatico Contributor: Nick Oakes

REDD+ technicalities agreed, finance not. (Source: Oxfam International)

Recalling last week’s benchmarks for the success of REDD+ negotiations at COP17, we can take each in turn and assess state of the negotiations on each topic. As expected, much of the discussion has been focussed on the MRV text (and addendum) from the SBSTA, which has now been presented to the COP for adoption this week.

There’s agreement that forest countries should be able to choose whether to use Reference Emission Levels (RELs) or Reference Levels (RLs). Forest countries will also be permitted to use RELs or RLs in different regions and aggregate up to a national level, allowing some much desired flexibility to the mammoth task of national accounting of forest carbon.

On the verification of emissions reductions, the text does not specify a body that is responsible for the verification. This could be forest countries, donor countries or third parties. Given the political element to verification – namely the protection of national sovereignty – it seems likely REDD+ could proceed down the same lines as the CDM, meaning forest country bodies approved by the UNFCCC will verify emissions reductions, although we will probably have to wait another year before there is clarity on this issue.

The text puts forward requirements for the reporting of safeguards. Controversially, and attracting criticism from many observers, it does not do enough to measure how safeguards will be respected, and in the event that they are not respected, detail the punitive measure faced by those in violation of those safeguards.

The concern here seems to largely relate to social safeguards – ensuring the rights of local communities are respected and penalties enforced, and their inclusion in the benefits of REDD+. The current text asks only that forest countries submit information on how they are implementing safeguards, which can be compared against standards set for their implementation. It does not require that forest countries submit information on the impacts of REDD+ on local communities, or to put it another way, whether the safeguards that have been implemented are fit for purpose. As Louis Verchot, climate change scientist at the Centre for International Forestry Research noted, “what has been put forward here are standards for reporting, not standards for performance, and we need to see decisions on performance standards to move forward with REDD+.”

The AWG-LCA has drafted a note on the outcomes of a number of working groups, but for the REDD+ working group, tasked with looking in to finance options, the text, unsurprisingly, does not show much in the way of material progress. At the moment the text seems to simply push back a decision on finance by asking the secretariat to provide financing options before the thirty-eight meeting of the SBSTA.

The remainder of COP17 will see the final adoption of the text presented to the COP by the SBSTA, possibly with some more clarity on a timescale and focussed discussions on the possibilities for finance options. With much of the technicalities agreed, however, getting REDD+ off the ground is now intimately dependent on reconnecting it back with discussions of international agreements and finance, to which the remainder of COP17 will be devoted.

Emerging patchwork of supply important for REDD (source: Ken Bosma)

Last month, the second edition of State of the Forest Carbon Markets,was released. All in all, the report painted a positive picture for the forest carbon markets: the volumes, transaction value and average prices in 2010 were all up on the previous year at, respectively, 30.1MtCO₂e, $178 million and $5.50/tCO₂e.

Notably, REDD based transactions dominated the total volume contracted in the primary market – 67% of the 29MtCO₂e primary market, due to the methodologies developed for the voluntary market – whilst afforestation/reforestation projects declined in transactions across every primary and secondary market.

Moving away from multilateralism

Latin America contracted more than half of all projects in 2010, with the EU as the largest source of demand. Of interest, however, is the increase in localised demand: outside of Europe, most of the demand for a region’s credits was from within that region. In North America, for example, demand nearly equalled supply from the region.

This to be expected, if considered in the context of the wider move towards a patchwork approach to climate policy. The patchwork approach is the increasing preference to enact a patchwork of policies to tackle climate change on a sub-national, national and regional level. These efforts are, arguably, being prioritised over the global, multilateral efforts to address climate change by many countries. It seems that forest carbon is no exception; indeed this approach is becoming increasingly important for REDD.

A patchwork of supply

The report finishes by projecting a growth in supply to 373.1Mt over the period 2011-15, of which REDD projects will supply 335.3Mt, stating that the emerging picture is “fundamentally about a small—but growing—cadre of forward-looking buyers and investors making big bets on the future of the forest carbon markets.”

This is true; the bets are certainly “big”. However, with many countries moving towards a patchwork approach to climate policy, the international compliance market-mechanisms look increasingly unlikely to create significant demand – and in turn supply – for REDD, any time soon. In the Panama climate talks, for example, the focus of discussion still appeared to be on the how market-based mechanisms for REDD are to be included, if at all; demonstrating the absence of globally coordinated efforts to source REDD finance and the gap in financial mechanisms.

It’s possible, then, that “bets” are being made on the growth in REDD supply coming almost entirely from the voluntary markets and a patchwork of non-UNFCCC led unilateral or bilateral compliance mechanisms. The voluntary market is already seeing some significant movement in this area, as the report above demonstrates. In the case of unilateral or bilateral compliance mechanisms, however, the growth is more difficult to envision, precisely because it is a patchwork of mechanisms providing supply, but also because their existence is dependent on the need to offset emissions, i.e. the presence of an emissions cap.

The Governors’ Climate and Forests Taskforce (GCF) is attempting to create such a mechanism. The purpose of the GCF is to create compliance grade REDD credits, such that the entity complying with a cap will buy those emissions reductions in the future. This type of mechanism, whereby the sub-national or national entity that intends to cap emissions helps create methodologies for REDD project types, will become increasingly important for REDD over the coming years. This is because the GCF should, hopefully, demonstrate how REDD can work for projects in the compliance markets, but most importantly, it does so in the context of the emerging patchwork approach.

From the perspective of international climate policy, it may look ungainly, and be more difficult to quantify the emissions reductions on a global scale, but if national and sub-national entities with emissions caps and offsetting rules begin to create similar bilateral mechanisms to that being attempted by the GCF, the REDD market will develop far beyond that offered by voluntary markets alone, bridge some of the finance/supply gap left by the absence of a multilateral mechanism, and do so in the context of the bottom-up, patchwork growth in the REDD space.

Rimba Raya Project in Rapid Decline (Source: Timothy G. Laman, National Geographic)

Indonesia’s flagship Rimba Raya REDD project was registered this year under one of the Voluntary Carbon Standard’s REDD methodologies, aiming to preserve “91,215 hectares of tropical peat swamp forest,” equivalent to an emissions reduction of 104,886,254 tonnes of CO₂e over the crediting period of 30 years, according to the registration documents.

The project has long been an exemplar of early action on REDD, hoping to bring the field in to the carbon markets. Indeed many expected it to be the first to issue REDD based carbon credits in the voluntary markets, but this title was taken by the Kenya Kasigau Corridor Project earlier this year. Despite the early success, a recent report by Reuters outlines how hopes for the Rimba Raya project have declined rapidly over the course of the past year.

Back-pedalling and contradictions

At the heart of the controversy is a decision by the Indonesian Ministry of Forestry to cut the project area in just over half, and grant development rights to a palm oil company for some, if not all, of the newly available land, resulting in the economic viability of the project  now coming under review.

The reason for the decision is, unsurprisingly, unclear, but interviews by Reuters suggest that land ownership and competing potential uses of land were root causes for the sudden reversal. Indeed Reuters reports that the decree allocating the project’s land area to the REDD project developers was never formally signed by a Minister, allowing the original claimants – PT Best, a palm oil company – the development rights of the land that was originally allocated to them.

Most of those involved seem to be genuinely startled by the sudden turnaround of the government, particularly given the decision’s seeming opposition to the government’s purported stance. It appears to highlight deep divisions between the national government and the civil service, or perhaps even amongst ministers themselves, on the level of action needed to stop deforestation.

It all comes down to price

More importantly, however, it draws attention to the magnitude of the political risk faced by those investing in a new, politically unstable market, and demonstrates with painstaking lucidity the potential losses facing an investor, should a project either not sit well with the government or should there be more profitable, competing uses of the land. And herein lies the fundamental problem: the existence of more profitable uses for land often result in REDD offset credits being unable to compete with the alternative uses of land, since profits are dependent on a low carbon price.

The number of participants, presence of willing buyers and the involvement of Gazprom all seem to suggest that, over the 30 year crediting period, the project is likely to be profitable. But the Ministry of Forestry seems to disagree, exemplified by the Secretary-General of the Ministry of Forestry, asking “who will pay for the dream of Rimba Raya? Who will pay? Nobody, sir!” Although a legitimate question to ask, this apparent rationale does beg the question of how the government expects the project to pay for itself if it is slashed in half.

Nevertheless, it seems that the Rimba Raya project may have fallen victim to the whims of political infighting. Irrespective of the reason, the presence of an economic case that argues against the implementation of a REDD project will never sit well with governments handing out permits. Perhaps more importantly, it allows any number of potentially illegitimate reasons for derailing the halt of deforestation to mask behind this inconvenient – albeit legitimate – concern.

Finally, turning back to the price, it is worth reiterating an obvious but important point: if the carbon price were at a level that demonstrates clear economic viability for REDD projects over and above alternative environmentally destructive uses of the land, these kind of problems would be far less likely to arise in the first place.

Commodities Futures (Image by: Lars Plougmann)

As already discussed on Climatico, using REDD+ as a private sector offsetting mechanism runs the risk of creating perverse incentives, exposing land to market price volatility and causing supply-induced price suppression. However, for the purposes of a deeper exploration into the market-related issues of REDD+, let’s assume these problems are solved and that forest carbon can, in theory, be commoditised and traded. This begs the question of whether forest carbon can be treated and traded like any other commodity.

A report by the Munden Project earlier this year attempts to answer this question. The authors’ conclusion was that forest carbon is not suitable for commodity trading. In response, trade association the Carbon Markets and Investors Association (CMIA) this month issued a response to the report.

Don’t commoditise forest carbon

Turning initially to the findings of the original report, first, the report highlights the risk of creating a monopsony structure, largely due to the limited number of organisations capable of verifying carbon measurements to IPCC standards. This results in the homogenisation of prices offered by the credit buyer to a project developer. More importantly, it also diverts the benefits of REDD+ away from communities and towards the middle men, in contrast to REDD+’s stated developmental objectives, whilst increasing the costs of REDD+.

Second, the high level of complexity and uncertainty surrounding forest carbon greatly increases the delivery risk for buyers. In short: there is no universally agreed process for carbon accounting; the costliness of an accounting method influences its use and consequently the mass of carbon that’s measured; and baselines can be manipulated. This affects the volume of credits that can be used to meet contractual obligations, whilst also leaving traders somewhat befuddled on the exact nature of the underlying physical asset.

Third, the uncertainty arising from the issues highlighted above, combined with the unavoidably high margin of error inherent in carbon measurements, is unacceptably high for commodity trading. If forest carbon transactions are executed on an exchange, they will be cleared by a clearing house, the latter of which takes on the counterparty risk. A clearing house will ensure that it can cover 99% of potential losses on a single day. However, the margin of error in carbon measurements is an order of magnitude higher than the uncertainty tolerated by a clearing house. Therefore, forest carbon will either not be exchange traded or a sub-standard commodity will be created instead.

Do commoditise forest carbon

Turning now to the CMIA’s responses, the CMIA first argue that primary market prices will not be homogeneous since the demand for credits is determined by the size and design of a compliance regime that permits offsetting via REDD+. And since any compliance regime has more than one compliant entity, there will always be more than one buyer. There is ample evidence from existing carbon markets to support this contention.

The Munden report is correct, however, to point out that there are only a limited number of organisations capable of verification to IPCC standards. This will almost certainly lead to higher costs and price manipulation by a limited number of organisations, subsequently diverting money away from communities and inflating the total cost of REDD+.

In response to the Munden report’s conclusion that uncertainty and complexity in verification causes problems meeting contractual obligations, the CMIA stresses this can – and currently is, in existing carbon markets – mitigated by the prices and volumes stipulated in the contract. This is true, but mitigation to the level of accuracy that a clearing house demands, this is unlikely. However, the assumption by the Munden report authors that primary market transactions need to be cleared via a clearing house is incorrect.

Copycatting the CDM

It is far more likely that primary market transactions will be executed in the same way as those in the CDM. This means that the delivery risk will be taken on by the two parties that drew up the contract, and that the transaction is very unlikely to be executed on an exchange and cleared through a clearing house. Meeting the high level of accuracy demanded by a clearing house is therefore immaterial.

This leaves a somewhat more familiar landscape. A compliance market will create demand from multiple buyers and result in price differentiation. The high level of uncertainty regarding the potential volume of issuable credits will be accounted for in the unique structure of each contract, and the transaction will be cleared bilaterally. The secondary markets can then trade a commodity that, crucially, already exists – since it has been issued and contains no delivery risk – on an exchange, using a clearing house.

It seems that the Munden report is correct in highlighting the risk of inflated costs caused by there being only a narrow group of capable verifiers, and the consequent diversion of benefits away from communities and the increased costs of fighting deforestation. It fails, however, to properly appreciate the primary-secondary market distinction that currently exists in the carbon markets, and how this is likely to be replicated in a private sector compliance market for REDD+, should one ever exist.

Remembering the rainforests (Image by: Ben Britten)

As the number of public sector financial mechanisms targeting REDD+ has increased, and consequently the volume of money flowing in to REDD+, observers are increasingly pointing out that the public sector alone cannot supply the huge sums of money needed to combat deforestation. The private sector is thus needed to share the cost and supply some of the money.

The most commonly proposed mechanism of engaging the private sector is via some sort of carbon market offsetting scheme. However, the world’s largest emissions trading scheme (ETS), the EU ETS, explicitly disallows the use of REDD+ offsets as compliance units in the EU ETS, and seems unwilling to allow offsetting for REDD+ on a large scale before 2020.

This is largely because the EU ETS is concerned that monetising the huge sums of carbon stored in tropical forests could quickly flood the carbon markets with credits, pushing down the price of carbon and further compounding the EU ETS’ ongoing price issues.

Despite this objection, there is still a large drive to engage the private sector in REDD+ financing as soon as possible. Much of the discussion for attracting private finance has focused on creating investable conditions for private actors. High transaction costs, political and regulatory risk, and the absence of any clarity on the monetary value of credits within a compliance carbon market post-2012 must be mitigated, it is said, before private money will flow to REDD+.

However, much less attention has been given to the safeguards that must be put in place to ensure that private sector engagement does not compromise the environmental integrity of a project, credit, or damage the reputational issues of the financial mechanism.

Reputational and Functional Problems

The CDM is an example of how these exact problems have materialised. The reputation of the CDM has been compromised by private sector participants that previously increased the generation of pollutant gases – and subsequently destroyed them – in order to generate more credits. Moreover, the environmental integrity of the credit has been undermined since the credit is treated – although not necessarily priced – in the same way as a credit generated from a project that is genuinely contributing to sustainable development.

Although the specific problems with the CDM are not directly transferable, abstract slightly from the CDM, and the potential for similar problems with a market-based REDD+ mechanism become fairly evident.

First, should perverse incentives exist, they will be exploited. For example, assuming that REDD+ payments can override the opportunity costs of logging, palm oil, mining, etc., there still remains the possibility that virgin forest could be logged and replaced with trees that have higher carbon content, are easier to measure or have a dual revenue stream, such as plantations. The proper restrictions must be in place to ensure the forest’s existence prior to monetisation.

Second, exposing deforestation reductions to market price volatility – often subject to the whims of speculative traders – can quickly result in the revenue gained from a REDD+ project shifting in favour of alternative forms of revenue generation. This causes investors to pull out of projects and private sector funding to slow down. Indeed this is happening right now in the CDM: the exchange-traded price is dropping below the price that project developers are willing to sell the credit, squeezing profit margins for buyers of credits and halting new funding of CDM projects.

Third, limits would need to be put in place to avoid supply-induced price suppression. Limitless offsetting via REDD+ would result in an oversupply as developers attempt to monetise the vast volume of carbon stored in existing forests, causing the exact problem that the EU ETS is concerned with, and resulting, again, in alternative uses of land becoming more profitable. A REDD+ based crediting scheme would thus require a carefully thought-out limit on REDD+ offsets so as to not depress the price of carbon – and in turn deter additional REDD+ projects – simply by its inclusion.

The momentum behind the discussion on the private sector’s inclusion in REDD+ finance is gaining. However, without serious attempts to mitigate the problem highlighted above, the momentum can quite easily be turned on its head. It therefore seems sensible to posit that REDD+ will be reliant on public sector funding for some time, not just because the private sector is hesitant about investing in an unknown market, but because the regulators are unsure of how to adequately overcome these concerns.

(Image by: Green Antilles)

In recent years the transfer of climate finance has emerged as a policy response to equitably addressing climate change mitigation and adaption in developing countries. Much attention has been given to setting up the multilateral or bilateral mechanisms needed to classify, transfer and disburse the funds pledged by donor countries. Of those that have sprung up, thirteen out of the twenty-four major funds focus on REDD+ as the sole or a major objective.

For some observers it has been difficult to keep track of the progress made by the new funds, not least because all thirteen emerged in the space of three years. Nevertheless, using the UK government’s recently commissioned analysis of existing REDD+ targeted funds as a springboard, some preliminary analysis on the progress made by the REDD+ targeted funds can be carried out.

What is being financed?

As a starting point, progress can be defined as the stage at which the most funding for REDD+ has been applied. The three phases that denote the proximity of a country to full implementation of REDD+ based emission reductions are readiness, demonstration and roll out at scale.

At present there has been very little funding applied beyond phase one, with only three countries – Norway, Australia and the USA – targeting phase two, and one country – Norway – targeting the final phase. Rather than an inherent unwillingness to fund beyond readiness, however, this is likely a result of the fact that both the bilateral and multilateral mechanisms have a strategic focus largely on the first two phases.

How much has been spent?

The level of disbursement at each phase perhaps gives a greater insight in to the progress being made. For the multilateral funds the disbursement has a range from zero to twenty per cent of the funds committed, with the Global Environment Facility at zero and the UN-REDD programme at twenty per cent, with all other multilateral funds lying in-between.

The multilateral fund to which the largest amount has been pledged, the Forest Investment Programme, has disbursed a total of £2 million or 3% of the total £335 million pledged. The World Bank’s flagship REDD+ fund, the Forest Carbon Partnership Facility, with its Readiness Fund dedicated to investing in phase one and the Carbon Fund dedicated to investing in phases two and three, has spent 11.4% of its Readiness Fund and none of its Carbon Fund as of FY10.

When considering the rates of disbursement, it is worth remembering that disbursement does not necessarily mean expenditure. As an example, take the UN-REDD programme. Funds are disbursed to the forest country offices of the United Nations Environment Programme, Food and Agriculture Organisation and United Nations Environment Programme, who then administer expenditure on behalf of the UN-REDD programme.

The move away from multilateralism

Possibly in response to the slow progress made by multilateral mechanisms, or perhaps due to domestic political motivations, bilateral approaches seem to be emerging as the preferred funding channel for REDD+. According to the UK government’s analysis, to date 67% of committed REDD+ funding has passed through bilateral mechanisms.

The implementation of phases II and III also appears to be moving ahead much quicker through bilateral mechanisms. Take Norway’s Internal Climate and Forest Initiative as an example: it’s currently developing a results-based payment scheme whereby the government of Guyana can receive up to US$250 million over 5 years from 2010 for REDD+ based emissions reductions.

Scratching at the surface

The reasons for low funding levels and the move towards bilateralism are unclear. Multilaterals often cite poor forest governance and a difficulty in establishing clear monitoring, reporting and verification (MRV) guidelines as the prime reasons for the low funding follow through. The move away from multilaterals is often attributed to ill-equipped organisations with anachronistic disbursement procedures.

However, the greater speed of implementation of phases II and III through bilateral mechanisms, the apparent preference for bilateral funds and the slow progress made by multilateral funds suggest that the reasons above only scratch at the surface. Moreover, they hint towards the idea that determining the real reasons may require some introspective analysis by the funds themselves.

Article by Guest Contributor: Natalie Antonowicz

Deforestation in Capixaba, Acre, Brazil (Image source: visionshare)

Launched in 2008, The UN’s Reducing Emissions from Deforestation and Forest Degradation programme aims to enable developing countries to reduce rates of deforestation via financial stimulation. Updated to REDD+, the program now encompasses conservation, sustainable management of forests and enhancement of forest carbon stocks. The program currently maintains nine pilot projects in Africa, Asia and Latin America.

Ahead of the Cancun Conference, the Environment Committee of the European Parliament has called upon the EU to support REDD+. Stressing the role of forests in addressing climate change, the European Parliament has passed a resolution calling for increased action against deforestation and forest degradation.

As described by German MEP Karl-Heinz Florenz, deforestation represents a common responsibility, as “deforestation, illegal logging, burning off of the rain forests in Brazil, Indonesia and other countries cause about 6 billion tons of CO2 annually”, and is responsible for 25 per cent of global greenhouse gas emissions. This acknowledgement is key, as developed-developing country cooperation – and their clear commitment – are vital for the success of REDD.

At COP15, states did not agree on what type of finance ought to be used for REDD- related activities and initiatives. As such, it remains to be decided how a previously proposed fund for all climate activities would be managed, and whether REDD would be included in it. Additionally, varied proposals exist regarding the scope of REDD+, and clarification of this is needed. The same is true for social and environmental safeguards for REDD, which have been discussed at previous climate conferences, but have not been definitively agreed upon. Specifically, the issue of how to hold funders and recipients responsible for safeguards remains ambiguous.

Significant progress on issues related to deforestation and forest degradation is expected at COP16. While pundits remain doubtful about the prospect of reaching an agreement about accounting and financing, as it pertains to REDD, many are optimistic about general REDD-related progress at the conference, and some have gone as far as to dub the conference ‘REDD-COP’.

Ultimately, delegates must tie the loose ends, and settle outstanding debates about REDD and REDD+, to ensure that states are able to adequately address environmental issues arising from deforestation and forest degradation.

On 11 March 2010 French President, Nicolas Sarkozy, opened an international conference on deforestation in Paris. The main focus of the International Conference on the Major Forest Basins was funding for REDD+ (reducing emissions from deforestation and forest degradation in developing countries, plus conservation, sustainable management of forests, and stock enhancement) activities during 2010-2012.

France and Norway are leading this effort to foster new climate partnership in 2010.

“Forests are in danger,” France’s Ecology Minister, Jean-Louis Borloo, said at a press conference. France intends to play a major role in saving the world’s forests, Borloo said, thanks to its “expertise in science and forestry.”

“The idea is to establish a partnership of everyone who wants to be included [in safeguarding forests], stated Norway’s Environment Minister, Erik Solheim. According to Solheim, the initiative will be transparent and “it will be open to everyone, even if you don’t contribute one single dollar, even if you don’t have a single tree.”

The conference brought together representatives from 54 countries, representing the main forest basins in the world as well as potential donor countries. The major focus was on the collective pledge for nearly US$3.5 billion in initial funding for REDD+ over the period 2010-2012 by Australia, France, Japan, Norway, the UK and the US (made in Copenhagen in December 2009).

Not many details on this first conference are available, but there is expectation the throughout a series of conference mechanisms will be established to go through the United Nations, the World Bank, and bilateral channels. Norway has existing bilateral agreements, which may serve as a model in the process. For example, Norway plans to include up to $1 billion for Brazil from 2008-2015, up to $280 million for Guyana from 2010-2015 and about $83 million for Tanzania. But, each of these contributions schemes also come with strings attached, depending on performance.

During the Conference, participants engaged in three sessions on: pledges of initial funding and action for forests; coordination of initial funding and action for forests; and organization of long-term international action concerning REDD+. A second conference will be organized in Oslo, Norway, in May 2010

Many developing countries with forests to protect seem pleased with the arrangement of having France and Norway in a leadership role. Norway has a strong donor performance for forest issues, while France, and President Sarkozy in particular, has been an advocate for partnerships and open dialogue in REDD+ negotiations, before and after Copenhagen (e.g. France-Brazil initiative in November 2009).

Author: Jennifer Helgeson

Deforestation and uncontrolled grazing leads to erosion (Image by: treesftf)

As negotiations continue, Reduced Emissions from Deforestation and Degradation and Enhanced Carbon Stocks (REDD+) is viewed as one of the only mechanisms expected to be agreed upon during the ongoing climate change talks in Copenhagen.  But an excellent point is being made – a successful REDD+ program requires a strong global CO2 target.  Without a global objective, any framework agreed for REDD+ will continue to allow deforestation without a clear finish line in view.  So, before we can even approach the complexity of the REDD+ mechanism itself, we require: a CO2 limitation target, a full understanding of the carbon stocks and governance structures for forests, and a sense of the financial commitments available, among other things.  The debate around REDD+ has been focused on issues of methodology, local communities, and indigenous people, as well as finance mechanisms.

That is a lot to settle in the one remaining week of COP15!

Running up to Copenhagen, REDD+ was often lauded as a sort of silver bullet towards addressing large-scale CO2 output reductions.  Draft REDD+ text coming into Copenhagen included a global objective for halving deforestation by 2020 and totally halting net forest loss by 2030.  The UNFCCC had assumed that forests account for about 20 % of global CO2 output, but Dutch researchers recently reported that the maximum level is likely closer to 12 % (Van der Werf, et al., 2009.

Surprisingly, discussions of REDD+ do not appear to have been damaged too much by this report.   “Even with lower emissions, avoiding deforestation remains the cheapest and quickest way to realize huge reductions,” says Herbert Christ from the Congo Basin Forest partnership (CBFP), a platform of ten Congo Basin countries.

Sure, a global REDD+ objective can help the world stay at or below 2C warming, but this does not come free of charge.  It is vital that developed countries commit to the level of funding consistent with realizing the goals of a REDD+ plan.  All this week, the potential socio-economic outcomes of REDD+ have been discussed at multiple side-events to the official negotiations.  It is stressed that REDD+ can simultaneously reduce emissions and alleviate poverty through rewarding local communities for forest conservation efforts.  But realizing side benefits depends heavily on significant and reliable streams of funding.  And well, once funds are secured, how they are distributed and monitored is a major concern.

All aspects of the Copenhagen negotiation package require funding, e.g. technology transfer, adaptation, mitigation; thus, it is hard to imagine that REDD+ will come off fully-funded with ease.  The “Copenhagen Launch Fund” was announced by Prime Minister Gordon Brown at the summit of Commonwealth Leaders last week in Trinidad & Tobago.  But the proposed 10 billion USD funding (meant to come from donations by the UK and other developed nations) to help poor countries adapt to the impact of climate change is not enough, says Solomon Islands Permanent Representative to the United Nations, Ambassador Colin Beck.

Throughout the week , this has been the ardent position of the developing nations.  Thus, when adaptation funding offered is barely ten-percent of what developing nations require (110 billion USD), how can REDD+ expect to be fully financed (by the 11 donor countries) in a totally separate pool of money?

However, there has been impressive movement by some developed nations on setting the framework of REDD+ and the associated Land Use, Land Use Change and Forestry (LULUCF).  Thursday, France clashed with other EU states in advocating strong baselines under this system for all nations.  French climate ambassador, Brice Lalonde, called accounting methods proposed by EU nations most dependent on forestry “sloppy, and even fraudulent.”  He went on to state that “the EU cannot embrace fraudulent methods and then turn around and ask developed countries to accept something that they are not willing to impose on themselves.” Lalonde.  Coming up to Copenhagen, France worked with REDD+ countries (especially those of South America) to establish viable methods for that program as well (click here to read more).

There were a number of side events concerning REDD+ throughout this first week of COP15.  Many of these events highlighted REDD+ pilot projects in some of the 37 nations covered under the plan.  Naturally, the implementation of a final REDD+ system will be complex due to differences in country and local-level needs in forest conservation.  But the general idea to which many negotiators are distilling REDD+ to over the last days is a system whereby developing countries are rewarded with carbon credits for sustaining their forests.  The same concerns were voiced by nation after nation.  Primarily, concerns fall under two themes: 1) protection of indigenous peoples’ rights; and 2) distribution of funds from federal government to localities.

Throughout the week, Guyana stressed the need to implement standardized Readiness Preparedness Proposal (RPP) procedures for countries covered by REDD+.  There is an evident capacity gap in the understanding the extent of deforestation in many countries, especially when left to self-report.  There is temptation to overlook some illegal logging, and without GIS technology, it is difficult to be accurate; chances of non-additionality and leakage are extended as well.  To this point, Guyana has also discussed a National Inventory Process that would be supported and standardized under REDD+.

Though many countries seem convinced that they will benefit from the REDD+ program, indigenous voices continue to warn that money from national-level carbon credits might not make it to them.  In this view REDD+ is intertwined with human rights laws.  To this point there has been discussion of adopting “pro-poor policies,” that protect the most marginal of indigenous peoples.  Yet, that seems to be a cloaked way of calling for total national reform to protect indigenous people in 37 countries, some of which qualify as the most unstable in the world.  And well, some of those nations still hope to get credits for forest plantations that are not cut but used for generation of products, like palm oil.

So many loose ends seem apparent… So, the real question is—does REDD+ put the cart before the horse?  Are all the discussions tailoring details without a solid and viable holistic vision of REDD+?  Not to mention PINC?

For a more comprehensive overview of all proposals on REDD+ and PINC, see the Little REDD+ Book.

Author: Kelly M. McManus

REDD+ is considered as one of the more actionable items on the COP agenda, and it is predicted that a binding agreement on forests may be one of few substantive outcomes of the Copenhagen summit. However, REDD+ is widely criticized by most stakeholders, from broad calls for the three “E”s-equity, efficiency, and equality, concerns that have carried over from Poznan, to admonition of REDD+ as “carbon colonialism” by indigenous peoples who have seen their lands and livelihoods usurped in the name of the CDM.    Despite these criticisms, an acknowledgement of the critical need to halt deforestation, which garners support not only on the basis of emissions reductions, but also as a strategy for protecting biodiversity and providing essential ecosystem services, drives the REDD+ process along.

But can REDD+ deliver on its essential task of reducing emissions? New research suggests that deforestation probably accounts for around 12% of global carbon emissions, both because deforestation rates have decreased in real terms and other sources of carbon emissions have increased in proportion to deforestation emissions (Van der Werf, et al., 2009).   The significant challenges of implementing REDD+ mean that actual emissions reductions from deforestation will be somewhat less than this. Substantial issues have been raised in determining appropriate baseline levels of deforestation, developing methods to prevent “leakage“-i.e. deforestation displaced from forests under REDD+ governance to those which are not , and ensuring that compensation is only given to projects that are truly additional, that is, forests that would be deforested without the injection of REDD+ monies.   None of these are simple questions, and what is appropriate in one nation or for one driver of forest conversion, may be disastrous in another.

Furthermore, long-term ecological modeling studies in the Amazon suggest that under conditions of drought and higher average temperatures, forest dieback may switch the forest from being a carbon sink to a carbon source (Cox et al., 2004).

The uncertainties on REDD+ extend beyond emissions reductions.  REDD+ represents the largest potential financial investment into mitigating deforestation that has ever been undertaken.  This investment will be delivered to developing nations for avoided deforestation (RED), forest degradation (REDD), maintenance of existing forest stocks (PINC), and/or enhancement of standing forest carbon stocks (REDD+), or some combination of these options, depending upon which proposal is ultimately adopted.  If REDD+ (or RED or REDD) prioritizes carbon storage above all other currently non-market forest services (e.g. biodiversity, hydrological and nutrient cycling), it will create trade-offs between these services that may prove to be ecologically-and economically, if the critical role of water and nutrient cycling are to agriculture and human systems-unsound.    

To counter these very real challenges, we have added ‘D’s and ‘+’s and ‘PINC’s and a plethora of caveats to what started as a relatively simple economic, though potentially dangerous, economic tool. We have created a REDD giant.

Given the high stakes and high uncertainty associated with REDD+, it is necessary that we critically evaluate the potential  that the current market-based proposed REDD+ mechanism may ultimately cost too much, do too little, and have adverse impacts on biological and social systems.

These are not easy questions, and the political momentum behind REDD+, after literally years of negotiations and consensus-building, makes it unlikely that delegates will want to reopen this Pandora’s box.  But if they were to just take a quick peek inside, they might be well advised to consider one aspect of deforestation that is becoming increasingly more clear-the increasing proportion of deforestation that is caused by export-driven commodity markets, namely cattle ranching, soya production, and oil palm plantations.  If the problem with deforestation were narrowed to simply commercial markets for these commodities (albeit admittedly leaving the smaller but important problem of poverty-based deforestation for another, perhaps aid-based, mechanism) deforestation could conceivably be addressed through a trade-based, demand-side solution, akin to the EU’s Forest Law Enforcement Governance and Trade (EU FLEGT) Program.  Perhaps the market that needs to be regulated is not the one that does not yet exist for forest carbon, but the very well established markets for global “deforestation” commodities.   The thought of changing course so late in the game may seem the type of thing to send a delegation into a frenzy, but fear not, we merely need to add on a consonant. Ladies and gentlemen, meet REDD+T.