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THEWORLDTODAY.ORG DECEMBER 2007 PAGE 26 BALI CLIMATE CONFERENCE: FORESTS Joy Hyvarinen and Jade Saunders JOY HYVARINEN AND JADE SAUNDERSare Associate Fellows of the Energy, Environment and Development Programme at Chatham House. Forests will be one of the hottest topics at the international climate change negotiations in Bali next month. This is partly because the host, Indonesia, has one of the world’s largest areas of tropical forest, and deforestation to match. It is also because trees store carbon which is released when they are destroyed and research suggests that deforestation is responsible for around twenty percent of the world’s annual greenhouse gas emissions. sOFARDEFORESTATIONINDEVELOPINGCOUNTRIES has beenleft outsidetheKyotoProtocol for technicalandpoliticalreasons.Butforestshave recently been pushed up the international climateagendabyasurpriseproposal,madein 2005,byagroupofdevelopingcountriesledby PapuaNewGuineaandCostaRica. The proposal, by the Coalition for Rainforest Nations, which includes Indonesia and countries such as El Salvador, Ghana, Thailand, and both Congos, argues that ‘avoided deforestation’ in developing countries should be included in the Protocol. The plan is to create a revenue stream which would pay developing countries to protect standing forests rather than allowing them to be logged for profit. The concept is known as Reducing Emissions from Deforestation and Degradation – or REDD. The proposal has opened up the climate negotiations in an unprecedented way, engaging a range of previously disinterested countries and highlighting a potential path towards agreement in the period after 2012, when the current set of Kyoto Protocol targets come to an end. In June the G8 leading industrial countries pledged support, and even the United States is showing an interest. Australia, usually not a progressive country on climate change, has set up a new $200 million fund in response to the proposal. In theory, the proposal offers a sustainable development win-win solution; potentially making a major contribution to slowing climate change and loss of tropical forests, while channelling funds to developing countries. There has been much optimism about the possibilities. The biologist Thomas Lovejoy, writing in the International Herald Tribune on September 25, argues that this is the time for ‘a great global bargain about forests’ and that the urgency of avoiding as much further climate change as possible requires Trees Co moving aggressively on both forests and energy use. But a number of serious practical and political barriers remain if a credible REDD mechanism is to be developed. MEASURMENT MINEFIELD It is only possible to design a system to pay for avoided deforestation if there is agreement on a method for measuring what has been avoided. The thorny issue of setting baselines has dogged discussions about forests and climate change. There is a risk of a conservation project in one part of a country simply displacing deforestation to another area of the same country – known as ‘leakage’. Only some forest planting projects are allowed under the Kyoto Protocol’s Clean Development Mechanism. The difference is now that the REDD discussions have focused mainly on national baselines, against which project activities could be judged. However, in the absence of reliable historical data, agreeing a baseline which captures both the total forest resource and the annual rate at which it is declining, is a technical and political minefield. National baselines would remove some concerns about leakage, but the risk of an international leak would remain, unless there were safeguards. Another challenge is countries with low deforestation rates, such as in the Congo Basin. How can they be discouraged from beginning the process? FINDING FUNDS REDD will only be a realistic option for poor countries if an international mechanism can create enough revenue to cancel out the profits from logging or farming that will have to be forgone. Two main options are available to the negotiators; a fund, or a trading system which would put a price on carbon and allow forest owners – private or government – to ‘charge’ for the avoided emissions. Brazil, a powerful player in these negotiations because of its enormous rainforest, has proposed the international fund option, where a central finance mechanism would pay countries for avoiding deforestation. The challenge would be establishing the amount needed for the fund and then – the main obstacle – finding the money and apportioning it fairly. In reality, deforestation is a highly complex phenomenon, | INDEPENDENT THINKING ON INTERNATIONAL AFFAIRS
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THEWORLDTODAY.ORG DECEMBER 2007 PAGE 27 Count resulting from subsistence farming, commercial logging, agribusiness, the collection of wood for fuel and a myriad of other human activities. Each of these has its own opportunity cost and a different set of actors are involved. Establishing a global ‘cost’ for avoided deforestation would be a serious undertaking. Current estimates vary widely but the review by Sir Nicholas Stern put it at around $5 billion per year. On the other hand, the Coalition for Rainforest Nations has argued for a market-based approach. Avoided deforestation would generate credits, which developed countries would be able to buy to help meet their greenhouse gas-reduction targets. This approach would allow markets rather than politicians to set the global value of forests. It has the potential to generate funding on the scale required to change behaviour if demand, and thus the price of carbon, is high enough. But this will only happen if developed countries are willing to take on ambitious reduction targets. In the end, a compromise is likely, and some combination of the two options will be set up – for example a capacity building fund phasing into a market-based system, or parallel options for countries with different capacity levels. Once in place, a REDD financing mechanism will only maintain credibility with those who pay into the system – developed country governments or private sector investors – if the countries that wish to claim from it can effectively demonstrate that forests are being protected. Some nations with the largest forest resources face serious governance challenges – from a lack of clarity about the legal ownership of forest land, to an inability or, in some cases an unwillingness, to enforce land use or forest management laws. Poverty, poor capacity and corruption all play their part in this problem; as does the historical willingness of consumers in Europe and America to turn a blind eye to the source of their imported timber or agricultural products. However changes are afoot in timber markets in Europe, Japan and the US, which may suggest options for countries wishing to demonstrate their achievements in protecting forests. First, demand for timber from independently certified forests is growing fast, driven by corporate social responsibility policies and government purchasing. Second, the European Union (EU) is negotiating forest agreements with key development partners which link investment in forest law enforcement with market access under the EU Forest Law Enforcement Governance and Trade Action Plan. Both such agreements and certification rest on a number of principles that could underpin credibility in avoided deforestation and are likely to be a fundamental part of any effective REDD system: clarity of land tenure; local community engagement, system auditing and third-party monitoring. THE BIG THREAT This may be a unique opportunity to make avoided deforestation in developing countries part of the international climate arrangements. Progress may be possible towards a postKyoto climate agreement, while addressing a major source of greenhouse gas emissions. However, decision-makers need to keep in mind that, while tropical deforestation and the emissions it releases must be dealt with, the main problem remains energy use in developed countries, and it must be tackled as the priority in a post-Kyoto agreement. Chatham HouseEvents December 2007 DECEMBER 4 America and Europe from 9/11 to the 2008 Presidential Election James Rubin, former US Assistant Secretary of State DECEMBER 5 How Pakistan Works Professor Anatole Lieven, King’s College, London DECEMBER 7 Does the Foreign Office Have a Future? Lord WilliamWallace, Deputy Leader, Liberal Democrats, House of Lords Chatham House has a worldwide reputation for furthering the understanding of international issues. An impartial research and membership organisation, independent of government and vested interests, it brings together people of all nationalities and from all walks of life. Membership: +44 (0) 20 7957 5721 Meetings: +44 (0) 20 7314 3636 Conferences: +44 (0) 20 7957 5754 e-mail: contact@chathamhouse.org.uk FLICKR.COM/PHOTOS/STEFANSPROGRAMS

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THEWORLDTODAY.ORG DECEMBER 2007

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resulting from subsistence farming, commercial logging, agribusiness, the collection of wood for fuel and a myriad of other human activities. Each of these has its own opportunity cost and a different set of actors are involved. Establishing a global ‘cost’ for avoided deforestation would be a serious undertaking. Current estimates vary widely but the review by Sir Nicholas Stern put it at around $5 billion per year. On the other hand, the Coalition for Rainforest Nations has argued for a market-based approach. Avoided deforestation would generate credits, which developed countries would be able to buy to help meet their greenhouse gas-reduction targets. This approach would allow markets rather than politicians to set the global value of forests. It has the potential to generate funding on the scale required to change behaviour if demand, and thus the price of carbon, is high enough. But this will only happen if developed countries are willing to take on ambitious reduction targets. In the end, a compromise is likely, and some combination of the two options will be set up – for example a capacity building fund phasing into a market-based system, or parallel options for countries with different capacity levels. Once in place, a REDD financing mechanism will only maintain credibility with those who pay into the system – developed country governments or private sector investors – if the countries that wish to claim from it can effectively demonstrate that forests are being protected. Some nations with the largest forest resources face serious governance challenges – from a lack of clarity about the legal ownership of forest land, to an inability or, in some cases an unwillingness, to enforce land use or forest management laws. Poverty, poor capacity and corruption all play their part in this problem; as does the historical willingness of consumers in Europe and America to turn a blind eye to the source of their imported timber or agricultural products. However changes are afoot in timber markets in Europe, Japan and the US, which may suggest options for countries wishing to demonstrate their achievements in protecting forests. First, demand for timber from independently certified forests is growing fast, driven by corporate social responsibility policies and government purchasing. Second, the European

Union (EU) is negotiating forest agreements with key development partners which link investment in forest law enforcement with market access under the EU Forest Law Enforcement Governance and Trade Action Plan. Both such agreements and certification rest on a number of principles that could underpin credibility in avoided deforestation and are likely to be a fundamental part of any effective REDD system: clarity of land tenure; local community engagement, system auditing and third-party monitoring.

THE BIG THREAT This may be a unique opportunity to make avoided deforestation in developing countries part of the international climate arrangements. Progress may be possible towards a postKyoto climate agreement, while addressing a major source of greenhouse gas emissions. However, decision-makers need to keep in mind that, while tropical deforestation and the emissions it releases must be dealt with, the main problem remains energy use in developed countries, and it must be tackled as the priority in a post-Kyoto agreement.

Chatham HouseEvents December 2007

DECEMBER 4 America and Europe from 9/11 to the 2008 Presidential Election James Rubin, former US Assistant Secretary of State DECEMBER 5 How Pakistan Works Professor Anatole Lieven, King’s College, London DECEMBER 7 Does the Foreign Office Have a Future? Lord WilliamWallace, Deputy Leader, Liberal Democrats, House of Lords

Chatham House has a worldwide reputation for furthering the understanding of international issues. An impartial research and membership organisation, independent of government and vested interests, it brings together people of all nationalities and from all walks of life.

Membership: +44 (0) 20 7957 5721 Meetings: +44 (0) 20 7314 3636

Conferences: +44 (0) 20 7957 5754 e-mail: contact@chathamhouse.org.uk

FLICKR.COM/PHOTOS/STEFANSPROGRAMS

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