Reduced Emissions from Deforestation and Degradation (REDD)

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1 Reduced Emissions from Deforestation and Degradation (REDD) Juha Siikamäki Resources for the Future Fifth ECP Seminar THE FINANCIAL ARCHITECTURE FOR THE POST-2012 PERIOD Brussels, 30 September

2 Deforestation and forest degradation The second largest anthropogenic GHG source Deforestation contributes about one fifth of all global GHG emissions (e.g., in the 90s on average 5.8 GtCO2 a year) Greater source of GHGs than transportation sector Mainly in tropical forests due to logging and conversion to agriculture Top emitters Brazil, Indonesia, Malaysia, DR Congo Incentives to reduce emissions from tropical deforestation are limited or absent in UNFCCC, Kyoto Protocol, and current emission trading systems Failure to address deforestation can undermine other GHG reduction efforts Forests and forests soils contain more carbon than is in the atmosphere Large portions of forest-related carbon is more or less unmanaged under the current climate policy regime Current emissions already large associated with % tropical deforestation rates Even small changes in deforestation rates have large GHG implications 2

3 Drivers of deforestation Proximate causes Agriculture Logging Transport expansion Underlying drivers Economic factors Policy and institutional factors Technological factors Demographic and cultural factors 3

4 REDD Proposals Purpose to provide economic incentives by compensating tropical countries /landowners for reducing deforestation Potential co-benefits include biodiversity conservation, other environmental services, human development Offers potentially inexpensive near term GHG mitigation alternatives The opportunity cost of reducing deforestation by 10% and 50% may be as low as $2-5 and $10-21 per tco 2, respectively (Kinderman, Obersteiner, Sohngen, et al. PNAS, 2008) Reduce the cost of achieving GHG reduction targets, or alternatively, achieve more ambitious targets for certain cost Buy time to develop low carbon technologies 4

5 Potential for low-cost offsets Marginal cost of avoided deforestation in 2020 with predictios of three models (Source: Kinderman, Obersteiner, Sohngen, et al. Global cost estimates of reducing carbon emissions through avoided deforestation, PNAS July 28, 2008) 5

6 Deforestation within the UNFCC, Kyoto, and other climate policy regimes General obligations regarding forestry apply to all member countries Promote sustainable forest management, conservation and enhancement of forests as sinks and reservoirs of GHGs Promote afforestation and reforestation Consider forests as part of national GHG inventories Credits from reducing tropical deforestation were excluded under Kyoto Afforestation and reforestation projects in principle admissible as CDM or JI projects, but only one project has been approved EU ETS excludes REDD offsets However, the Bali Action Plan sets a goal to address Policy approaches and positive incentives on issues relating to reducing emissions from deforestation and forest degradation in developing countries ; US climate policy proposals generally open to forestry and other land-based offsets E.g. Lieberman-Warner: max 15% use of offsets, max 10% from international offsets Current discussion mostly not about whether deforestation should be included, but how to best include it and how to create a market for forest carbon 6

7 Barriers to the inclusion of REDD What constitutes a reduction in deforestation (baseline issues)? Does reducing deforestation in one location simply divert deforestation elsewhere (leakage)? How permanent carbon benefits from REDD? How does one measure carbon sequestered? How does one monitor GHG emission reductions? Recent findings suggest that monitoring and measurement costs may not be very high (depending on precision, from a few cents to $5-10 per ha Limited institutional capacity in the host countries 7

8 Proposals to include REDD Papua New Guinea-proposal National accounting, baselines Permanent credits Host-country liability Focus on deforestation Joint Research Centre-proposal National accounting, baselines Temporary credits Buyer liability Focus on both deforestation and degradation Nested approach (Pedroni and Streek) Project and national accounting, baselines Temporary credits at project level Permanent national credits 8

9 Recent developments COP Bali Action Plan Decides to launch a comprehensive process to enable the full, effective and sustained implementation of the Convention in order to reach an agreed outcome and adopt a decision at its fifteenth session, by addressing, (e.g): (iii) Policy approaches and positive incentives on issues relating to reducing emissions from deforestation and forest degradation in developing countries; and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries; World Bank Forest Carbon Partnership Facility Forest Carbon Fund (especially capacity building) Trading offsets in the voluntary market E.g. Chicago Climate Exchange Relatively small in volume, but growing fast Provides a learning platform 9

10 Examples of RFF work Forestry Program (Roger Sedjo, others) Climate Change Program (Ray Kopp, others) RFF discussion paper reviewing the topic (Myers) RFF s Forest Carbon Index (under preparation) Provide information on the potential of different target countries/areas to generate REDD credits Examine biological potential, readiness, opportunity cost of land, economic and political risks Target audiences: investors, international organizations, NGOs Efforts proposed to undertake extensive work in policy outreach and fundamental research to address REDD 10

11 Some research needs Design of international markets for REDD credits Project-based vs. national baselines Permanent vs. temporary offsets Monitoring Potential for creating co-benefits from REDD projects Biodiversity Ecosystem services (e.g., water quality & quantity control, soil erosion control, air quality) Development, human welfare Contracting and cost-effective targeting of REDD investments under limited and asymmetric information Costs and benefits are heterogeneous and known with little precision Under such conditions, the cost-effectiveness of alternative approaches to targeting REDD investments likely varies Seller-buyer information asymmetries 11

12 More information Policies to Reduce Emissions from Deforestation and Degradation (REDD) in Tropical Forests: An Examination of the Issues Facing the Incorporation of REDD into Market-Based Climate Policies, Erin C. Myers. RFF Discussion Paper 7-50, December Conserving the Climate: Scaling Up Global Markets for Forest Carbon, Nigel Purvis and Erin Myers, RFF Discussion Paper, June Carbon Credits for Avoided Deforestation, Roger A. Sedjo and Brent Sohngen, RFF Discussion Paper, 07-47, October

13 Thank you Juha Siikamaki 13

14 Forests vs. other sources of GHGs Forestry, deforestation, 17.4% Other, 2.8% Energy Supply, 25.9% Agriculture, 13.5% Transport, 13.1% Industry, 19.4% Residential and Commercial Buildings, 7.9% Share of different sectors in total anthropogenic GHG emissions in 2004 in terms of CO2-eq. Source: IPCC

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