Current Status of REDD

By David Niebauer

The Center for International Forestry Research (CIFOR), a forest policy think tank, recently (December 2008) released a report on the proposed REDD (reducing emissions from deforestation and degradation) mechanism for slowing climate change.

The report, titled “Moving ahead with REDD: Issues, Options and Implications”, (the “Report”) reviews the challenges facing REDD and makes policy recommendations to make the mechanism more agreeable to climate negotiators.

It is estimated that emissions from deforestation and forest degradation in developing countries constitute approximately 20 percent (20%) of the total global emission of greenhouse gases annually. A system that would reward developing countries for reducing emissions from deforestation and forest degradation through the carbon offset mechanism currently being implemented under the Kyoto Protocols has great appeal. Numerous obstacles exist, however, that need to be overcome before a REDD program can be undertaken on a global scale. This article will review some of those obstacles and provide some insight into the prospects for REDD in a post-2012 climate regime.

Cost

Cost is always an important consideration, but in terms of “bang for the buck” an effective functioning REDD program would appear to have advantages over other mitigation options. The Report cites cost estimates that range from USD 7 to 28 billion per year for cutting deforestation levels in half. Initially, much of this would have to come from public funding to build out capacity, but eventually the sale of carbon credits could easily defray all of the costs while continuing to pay for the reduced emissions over time. Funds could also be generated through auctioning of emission allowances or from a tax on carbon trading.

Leakage

The Report uses a hypothetical to describe the leakage problem:

“…a farm-level payment for environmental services (PES) programme may reward the landowner for not deforesting the PES-enrolled forest plot A during five years. However, if the owner shifted all planned deforestation from plot A to another, non PES-enrolled plot B, mitigation would be entirely offset by leakage or ‘displacement of emissions’, as the phenomenon is called in the Bali Action Plan (Thirteenth Session of the Conference of the Parties-COP 13). If the landowner further used all PES funds to buy chainsaws to enable additional clearing and cattle to graze on the land, medium-run leakage may well exceed 100 percent of mitigation – implying leakage also has a time dimension, depending on how quickly economic and biophysical processes work. Conversely, if the landowner invested the money in ecotourism or agroforestry and stopped all clearing, leakage would be reversed, crowding in off-site mitigation gains beyond target plot A.”

Because climate change is a global phenomenon, leakage may occur at any geographic level. For example, even though Annex I countries are reducing emissions through implementation of the Kyoto cap and trade mechanism, if those emitting activities are simply moved to non-Annex I countries, leakage occurs and the emission reduction “gains” are illusory.

Leakage in the REDD context is an especially vexing problem and will need to be managed, not controlled entirely. Monitoring and setting realistic parameters appears to be the best approach. However, even if leakage is safely quantifiable through monitoring, the Report indicates that it may still be advisable to discount benefits from any REDD program or bank ‘reserve credits’, ensuring that only net emission reductions are rewarded.

Ensuring Permanence and Assigning Liability

The Report asks these fundamental questions about any REDD program: “How can we make sure that a forest area saved today will not be destroyed tomorrow? Who should be held liable if that happened? How can REDD contracts and financial mechanisms be designed to ensure permanence?”

There are numerous risks to permanence and various proposals to mitigate these risks. The Report lists the following risk areas: natural/ecological (fires, etc.); climate change-related (climate change itself my bring with it yet-unknown risks); demand-side (demand for agricultural crops may outweigh the price paid for carbon sequestration); failure of project partners (financial or otherwise); and political (change of political structure, corruption, etc.).

Proposed mitigation, or “liability management” as it is termed in the Report, is as complex and varied as are the risks. The solutions range from making credits temporary until permanence can be guaranteed, to commercial insurance, to some form of shared liability with developed (Annex I) countries.

Clearly, in order to generate fungible REDD credits that could be traded with other allowances and offsets will require a solution to the risk of impermanence that is uniquely relevant to avoided deforestation credits. While complex, solutions are available that would put REDD on an equal footing with other certifiable emission reduction projects.

Monitor, Report, Verify

The Report points out that carbon offsets are excluded from forestry projects under the current regime largely because of the difficulty in monitoring, reporting and verifying (MRV) actual reductions in emissions. The authors of the Report make a case that advances in the application of remote sensing technologies combined with new accounting methodologies open the way to eventual REDD implementation.

Like other areas of REDD, there are a number of challenges to adopting effective MRV standards. In most cases, repeated monitoring is needed to ensure all forest changes are accounted for. Competing accounting methodologies exist on a scale from lower accuracy and lower cost to higher accuracy and higher cost. Ultimately, any system will need to combine measurements of changes in forest area with carbon density values with an acceptable and consistent level of accuracy.

The authors of the Report point out that many developing countries lack access to data as well as the technical infrastructure and capacity for consistent, transparent data analysis and management. It may take 10 years or more to build up this capacity, although a transition period with varying levels of participation will likely emerge.

REDD at Poznan and Beyond

There was some hope that an agreement of the parties at COP-14 in Poznan would get the REDD mechanism on track for inclusion into the framework that will succeed the Kyoto Protocol after 2012. For the most part, these hopes were not realized. Although a provisional agreement was reached to include forests in future climate treaties, the agreement fell short of expectations. See “Deal on Forests Falls Short”.

The provisional agreement failed to mention indigenous rights (an important political issue still to be resolved), took no strong position on biodiversity and did not include peatlands, which are large carbon sinks. It is also still not clear whether “net” or “gross” emissions will be assessed: a “net” approach would make it possible for some countries to continue chopping down existing forests and replacing them by planting new trees. Such a process would lead to large-scale loss of habitat and biodiversity.

Conclusion

There are many obstacles, both technical and political, to a REDD program that would effectively reduce emissions from deforestation and degradation of forests. The need from a global warming perspective is acute and the problems won’t be easily resolved. The general consensus from those close to the talks seems to be that while REDD can and should be included in future climate mechanisms, much work still needs to be done.

David Niebauer is a corporate and transaction attorney, located in San Francisco, whose practice is focused on clean energy and environmental technologies. www.niebauer.net.

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