EarthTrends April 2008 Monthly Update

Before climate change dominated the environmental agenda, deforestation was a central concern for many reasons besides carbon. Forests contain 70 percent of the world's biodiversity, provide vital ecosystem services such as flood control and soil protection, and support the subsistence livelihoods of up to 300 million people, most of whom are poor. To date, efforts to combat deforestation have failed to stop rapid global forest loss, despite some localized successes. Between 2000 and 2005, roughly 13 million hectares of forest disappeared each year, with the largest losses occurring in the biologically rich tropical forests of the developing world (FAO, 2005).

The threat of climate change has created a new imperative--and renewed hope--to protect the values and services rendered by tropical forests. The Intergovernmental Panel on Climate Change (2007) estimates that deforestation contributes 15-20 percent of global greenhouse gas emissions (see Figure 1), yet the forestry sector was largely excluded from the Kyoto Protocol's first commitment period. With negotiations underway for a post-Kyoto agreement set to start after 2012, reduced emissions from deforestation in developing countries, popularly known as REDD, has emerged as a key issue.

However, questions of how to design and implement a mechanism to acheive REDD are proving exceptionally complex and controversial, inspiring uncertainty that it will generate real benefits for the global climate, forests and forest communities. This monthly update will explore the opportunities, challenges and options surrounding current REDD discussions, while also highlighting potential policy alternatives that lie beyond the international climate change framework.

Figure 1: Emissions from Land Use Change & Forestry (LUCF), 2000

Source: EarthTrends, 2008; using data from the Climate Analysis Indicators Tool, 2008

Forest Ecosystems and the Global Carbon Cycle

Forests play a vital role in the global carbon cycle, storing roughly half of the world's terrestrial carbon (Millennium Ecosystem Asessment, 2005). When forests grow, they withdraw carbon dioxide from the atmosphere and sequester it in trees and soil. When they are destroyed or degraded, much of this carbon is released, either immediately if the trees are burned or more slowly if the organic matter decays naturally. A very small fraction is stored for a longer period in houses or other long-lasting wooden structures.

Overall, forest vegetation typically holds 20 to 50 times more carbon per unit area than the ecosystems that replace them (Houghton, 2005), but exact emissions are difficult to measure and depend on the rates of deforestation and/or degradation, the carbon storage capacity of the forest in question, and the resulting land use, among other factors.

Recent advances in remote sensing technology have dramatically improved our ability to quickly and accurately assess deforestation, typically defined as the removal of more than 90 percent of tree cover. Anything less than 90 percent is classified as degradation, which is more difficult to assess and measure but contributes significantly to CO₂ emissions and biodiversity loss. Even if deforestation and degradation rates can be determined, calculating resulting CO₂ emissions is an additional challenge, since forests have varying carbon sequestration and storage capacities. Tropical forests, for example, store 50 percent more carbon per unit area than do non-tropical forests (Houghton, 2005). Finally, exact emissions also depend on how the cleared or degraded forest land is subsequently used (see Figure 2).

Figure 2: Carbon Lost to the Atmosphere by Selected Forest Conversions or Uses

*Plantations may hold as much or more carbon than natural forests, but a
managed plantation holds less because it is repeatedly harvested

Source: Houghton, 2005

Global and Regional Deforestation Trends

Humans have reduced global forest area by nearly half over the last three centuries. Today, net forest area in most North American and European countries is stable or increasing, thanks to the expansion of forest plantations as well as natural regeneration. On the other hand, most developing countries continue to experience large net losses and lack adequate institutions to reverse this trend. The world's remaining frontier forests--those intact, natural forest ecosystems that are undisturbed and large enough to maintain all of their biodiversity--are in decline in developed and developing countries alike.

Figure 3: Net Annual Forest Loss by Region

*Relatively small annual net loss in Asia reflects
massive growth of forest plantations in China

Source: EarthTrends, 2008; using data from FAO, 2007

The Diverse Drivers of Deforestation

The diverse drivers of deforestation, many of which originate outside of the forestry sector, make it challenging to find a global solution. Agricultural expansion is a leading cause worldwide, implicated as a factor in 96 percent of cases assessed in the most comprehensive study of deforestation to date (Geist & Lambin, 2002). Infrastructure expansion (i.e. roads and settlements) and wood extraction are also major contributors, although all three factors often occur simultaneously in a given forest.

Driving these proximate causes are the underlying drivers of deforestation, including government-supported agricultural and timber policies, weak governance and institutions in the forestry sector, and international markets for agricultural and forest products, which continue to expand with population growth and rising urban incomes.

Complicating matters even more, deforestation drivers vary between countries (see Figure 4). Half of the net deforestation occurring worldwide is concentrated in Indonesia and Brazil, but stopping deforestation caused by wood processing and oil palm production in Indonesia is a separate challenge from curbing deforestation resulting from road construction within the Brazilian Amazon. Coping with this diversity demands a regionally sensitive approach to policy design.

Figure 4: Extent of Leading Causes of Deforestation by Region
*Data based on 152 deforestation case studies spanning time periods from 1880 to 1996

Source: EarthTrends, 2008; using data from Geist & Lambin, 2002

A New Role for Forests in Climate Change Mitigation

When the United Nations Framework Convention on Climate Change (UNFCCC) drew up the Kyoto Protocol to combat global warming in 1997, the decision was made to exclude emissions from tropical deforestation. Many believed that the challenges and uncertainties inherent to quantifying forest sector emissions would weaken the overall strength of the climate regime, and developing countries worried that a plan to reduce deforestation would threaten their sovereignty over land use decisions, and subsequently their right to develop.

However, the forestry sector was not completely excluded from the Protocol; the Clean Development Mechanism (CDM) allows industrialized countries to earn carbon credits from reforestation and afforestation projects in the developing world. To date, this mechanism has not greatly favored forestry projects--only one afforestation project has been approved of the CDM's 1,016 projects to date, although there are roughly 100 more in preparation (UNFCCC, 2008).

While planting new forests is a useful mitigation tool, preserving existing ones presents a much larger opportunity in terms of the sheer magnitude of emissions (see Figure 5). Furthermore, avoiding deforestation keeps ecosystems intact that deliver benefits such as biodiversity conservation, local climate regulation, watershed and soil protection, and sustainable incomes for forest communities. These vital services provide resilience against climate change, often to the communities most vulnerable to its impacts. Recent studies also suggest that reducing deforestation may be a relatively inexpensive climate change mitigation option, comparing favorably with the costs of lowering emissions in other sectors, although this remains uncertain (Myers, 2007).

Figure 5: Emissions / Absorptions of CO₂ from Select Forestry Activities

Source: EarthTrends, 2008; using data from Baumert et.al., 2005

REDD: Reduced Emissions from Deforestation in Developing Countries

REDD initiatives, as they are currently being discussed within international climate negotiations, propose to pay developing countries for the carbon value of their forests. It is believed that these payments could shift the balance away from the economic incentives currently favoring deforestation, thus making sustainable forest management a more profitable alternative. However, issues surrounding the design and implementation of such a mechanism are complicated and contentious. Among several outstanding questions is how to pay for REDD, since it will undoubtedly require substantial resources to be transferred to developing countries if it is to generate meaningful emissions reductions.

The global carbon market established under the Kyoto Protocol--now valued at over $30 billion worldwide--has recently generated excitement as a potential payment mechanism. A 2005 proposal by the countries of Papua New Guinea and Costa Rica formalized interest in a system known as "Compensated Reduction" (CR), whereby developing countries are awarded credits, tradable on the international carbon market, for reducing national deforestation rates below a baseline level. Proponents of CR, including many developing countries and several major environmental organizations, see a market-based REDD regime as the greatest potential source of funding for forest conservation and the best way to capitalize on the cost-effectiveness of lowering global emissions through reduced deforestation.

Although cost estimates vary, a conservative carbon value of $10 per ton suggests an annual revenue of up to $12 billion (Kanninen et.al., 2007), which is equivalent to nearly 15 percent of the official development assistance received by developing countries in 2005 (EarthTrends, 2008). The extent to which these financial flows are realized, however, will depend on the strength and integrity of the REDD mechanism in place as well as the ability of individual countries to reduce emissions from the forestry sector.

Box 1: Payments for Forests: Examples from Costa Rica and the World Bank The concept of making payments for environmental services is not new. One of the largest and most well-known programs exists in Costa Rica, where the national government compensates land owners for keeping forests intact and reforesting degraded areas. Introduced in 1996, the payments range between $210 to $537 per hectare and are paid over a five year period (Mongabay.com, 2007). In December of 2007, the World Bank launched the $250 million Forest Carbon Partnership Facility (FCPF), meant to build capacity for REDD in developing countries while providing a pilot program to test Compensated Reduction. Carbon credits earned through reduced deforestation are currently not eligible for trading within the international carbon market established under the Kyoto Protocol, so FCPF credits are expected to be traded on the voluntary market.

Design and Implementation Challenges for REDD

A carbon market-based funding mechanism, such as Compensated Reduction, is the current forerunner among various REDD proposals, but numerous technical issues pose significant obstacles to design and implementation (see Box 2). Although these issues represent a challenge to any policy attempting to curb deforestation, they are particularly problematic under a market-based REDD regime. If they are not fully resolved, a market-based REDD could fail to achieve positive outcomes, or even increase global emissions if developing countries are allowed to sell carbon offsets from reduced deforestation that do not correspond to actual emissions reductions.

For these reasons, non-market options for funding REDD must also be considered, such as using existing development assistance, creating a new dedicated fund, or even redirecting revenues from a carbon tax or national cap and trade programs. But even if outstanding issues can be resolved, there is a real possibility that neither a market-based nor a non-market REDD program will yield desired outcomes when it comes to mitigating climate change or protecting forest services and communities, meaning that other policy alternatives must also be considered.

Box 2: Major Technical Issues Facing REDD Scope: Should policies be project-based or national-based? A national-level approach provides countries with flexibility to manage their collective forest resources and also avoids the problem of in-country leakage. Project-based policies would be initially easier to implement and better accommodate within-country heterogeneity, but present challenges when it comes to leakage and liability. Decisions about scope will influence thinking on many of the following issues. Monitoring: The technical capacity now exists to monitor deforestation via satellite, but cost-effectiveness remains an issue, as does monitoring degradation and quantifying actual carbon flows with high precision. Accurate monitoring will require internationally agreed definitions, methodologies, and consistent characterization of emissions from deforestation and degradation. Baselines: How should baseline rates of deforestation be set to promote equity and encourage participation, and should they change over time? Most national-level proposals set baselines in part based on a country's historic rate of deforestation, and offer carbon credits for reducing the national deforestation rate below this reference level. However, some countries feel this approach does not capture their need to develop, and it also neglects countries that have already lowered their deforestation rate, thereby failing to incentivize continued conservation. Leakage: The leakage problem is most apparent in a project-based approach, where the conservation of one forest can simply displace deforestation activity to another area. However, in a national-level system where country participation is voluntary, this concept can easily apply across borders from participating to non-participating countries. This issue highlights the need to address the underlying socioeconomic drivers of deforestation, such as international demand for wood, agriculture, and energy products, in order to reduce the global deforestation rate. Permanence: Can reduced emissions from deforestation be considered permanent? Unlike other sectors, emissions reductions from forestry can be undone, either through future deforestation or natural causes such as fire. This threat is particularly acute where governance structures and land tenure are weak--a common problem among countries with rapid deforestation. Potential tools to address permanence include awarding credits post-facto and holding a fraction of earned credits in a reserve account, serving as a buffer against a sudden increase in deforestation rates above the baseline.

Alternative Policy Options

The international community agrees that emissions from tropical deforestation must be reduced in order to avoid dangerous warming. It remains unclear, however, whether funding REDD based on a forest's carbon value will actually reduce emissions, let alone address the underlying drivers of deforestation or protect the non-carbon values and services rendered by forest ecosystems. For example, payments to reduce national deforestation rates could prove ineffective in the short-term if countries lack the capacity and governance structures necessary to regulate their domestic forestry sectors. Furthermore, they may not sufficiently tackle rising international demand for agricultural and forest products, which lies beyond the control of the developing countries that supply them.

It is likely that policy measures beyond current REDD discussions and outside of the international climate regime will be necessary to realize positive outcomes for the global climate, biodiversity, and sustainable development. Some of these tools may include traditional approaches such as certification schemes or demand-side management, whereas others will need to be developed. No matter what, developing countries will require substantial resources and support from the developed world. To make these resource flows sustainable, the chosen policy or suite of policies must be equitable and efficient, attentive to the underlying factors driving deforestation, and closely linked to the needs of biodiversity conservation and local forest communities.

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RELATED LINKS:

Kyoto Protocol website

Center for International Forestry Research (CIFOR)

Forestry Department of the UN Food and Agriculture Organization

Woods Hole Research Center

EarthTrends

Data: Climate Change

Data: Forests

Map: Carbon Storage in Above- and Below-Ground Vegetation and Soils

Map: Net Flux of Carbon to the Atmosphere from Land-Use Change, 2000

Monthly Update: Forest Certification and the Path to Sustainable Forest Management

Article: Fragmenting Forests, the Loss of Large Frontier Forests

Other Publications

State of the World's Forests 2007
(FAO, 2007)

IPCC Fourth Assessment Report on Climate Change: Summary for Policy Makers
(IPCC, 2007)