Waxman-Markey and REDD

By David Niebauer

In late March Congressmen Henry Waxman and Ed Markey released the first draft of a climate bill that presents three mechanisms designed to provide funding for reducing tropical deforestation: offsets, a supplemental pollution reduction program, and strategic reserve auctions. Full text of bill can be found at:

The bill would permit 2 billion tons of CO2e reductions to come from offsets, one half of which could be generated from international sources. The number (2 billion), while presumably not arbitrary, could be increased or decreased upon the President’s recommendation, allowing for adjustments due to market factors or where the cap is ultimately set. Of these international offsets, reduced emissions from deforestation and degradation (REDD) credits are specifically mentioned and permitted. A conversion would be applied of 1.25 offset credits in lieu of an emission allowance – the discount apparently designed to ensure that real reductions are achieved from the offsetting activity, and that the credits are accounted for in a conservative manner. The use of offsets will be increased and phased in such that a covered entity could satisfy 15% of its emission reduction obligation using offsets in 2012, progressively increasing to 33% by 2050. Certain relatively strict criteria would be applied to REDD credits, including agreements between the US and the developing country from which credits would be generated, monitoring and measurement capacity, and establishment of national deforestation baselines. The bill takes a “sector” approach, or country by country, as opposed to a strictly project-by-project approach.

The supplemental pollution reduction program would provide additional incentives for tropical forest preservation. From 2012 through 2025, EPA would set aside emission allowances to be used to support reduced deforestation in developing countries. The bill provides that EPA would transfer these allowances to countries that enter into and implement unilateral (with the US) or multilateral agreements or arrangements relating to reduced deforestation.

Finally, the Waxman Markey bill provides for what is termed strategic reserve auctions.
The reserve would be made up of allowances that are banked by the system and would be additional to regular emission allowances. Reserve allowances could be purchased at auction by covered entities to meet a small portion of their emission reduction obligations. The proceeds from this special auction would be used to purchase and retire international offset credits issued for reduced deforestation activities.

Size and Scope

To some extent, Waxman-Markey can be seen as a response to scientific data on the role of tropical forests in climate change. A recent report published in the journal Nature and reported in Science Daily provides some sense of the scope of the problem. The Intergovernmental Panel on Climate Change (IPCCC) reports that globally human activity emits 32 billion tonnes of CO2 each year – roughly half stays in the atmosphere; the other half is absorbed by the oceans and on land in vegetation and soils – mostly in tropical forests. Tropical forests remove approximately 4.8 billion tones of CO2 emissions from the atmosphere each year.

Tropical forests cover 17.8 million km2 worldwide. Approximately 50% of the world’s tropical forests are in South America, 30% in Africa and the rest elsewhere, mostly in SE Asia. The IPCC shows that land-use change, which is mostly tropical deforestation, emits 5.9 billion tonnes CO2 per year (20% of all human CO2 emissions).

A US cap-and-trade legislation that includes tropical avoided deforestation credits, despite its many methodological challenges, is critical in addressing global climate change. We will watch the progress of this bill with great interest.

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.

5 replies
  1. Ekaterina
    Ekaterina says:

    Carbon constraints (climate change legislation and a greenhouse gas cap-and-trade program) are coming into effects soon. Most immediately, the EPA just relased its proposed mandatory GHG reporting rule for organizations that emit more than 25,000 tons of CO2e a year. And when it comes to GHG emissions reporting, there needs to be a common system of standards on measuring, monitoring and managing carbon footprints. CSA just launched the GHG CleanStart™ Registry based on ISO 14064. It is a great resource for information on establishing an organization’s baseline carbon footprint and defining carbon offset projects.

  2. Anonymous
    Anonymous says:

    A new report (http://www.internationalrivers.org/en/node/4223) by two environmental groups that have closely monitored the CDM and REDD type programs just issued a new report about the shortcomings of the bill with regards to offsets. This is what it had to say regarding REDD:"The third strategy for international offsets outlines a new system based on the goal of reducing tropical deforestation. Policy development in this arena is even more contentious than industrial sector approaches, given tropical forests’ ecological complexity and the major differences between forests in different places in terms of ecological types, carbon fluxes, threats from human disturbance, and local socioeconomic realities. Forests are also subject to complex issues surrounding unresolved land tenure rights, weak governance, huge variations in estimates of carbon stocks and fluxes, and uncertainties over how to monitor emissions and the impacts of policies upon rates of deforestation and emissions. Forest credits also have a well recognized potential to destabilize carbon markets by introducing large volumes of cheap offsets. ACESA envisions offset credits for “sustainable forestry practices,” a widely abused term that is too often a cover for expanded industrial logging into primary tropical rainforests. Unless forest degradation is included, even heavily logging a forest, which would result in large emissions, could still generate offset “credits” because full deforestation was avoided."What would your response be to this? Would you trust the checks and balances in the new bill to prevent perverse incentives and non-additional projects?

  3. Adam Cherson
    Adam Cherson says:

    I have the same concerns as Anonymous at 11:52AM. There are enormous administrative, technical, and scientific obstacles involved in a REDD system. The areas are vast and variable. Nevertheless, as we well know, we need to do something, and may need to accept a tradeoff of less than complete knowledge and accuracy. So here is how I envision this moving forward: I would suggest that the only way to make a REDD system work at the necessary scale is to implement a satellite based system of carbon stock measurement (see here: http://politicalecology.xyvy.info/2009/04/19/mapp…. Using such a system, we could start with a baseline reading and then compare that to annual readings. Now, how do we integrate this information into a REDD? First, I suggest that we give credit for carbon stock accumulations (that is additions to carbon stock) using the same ratio as the emission credits (e.g., 1 tonne = 1 credit). Carbon stock reductions, likewise, produce a negative or reversal credit. Second, we need to have a system that rewards the preservation of the initial (baseline) carbon stock in order to incentivize forest conservation. For this I suggest a one time, indefinitely bankable allocation of carbon credits equal to the carbon stock tonnage. I suggest that the same 1 tonne/credit basis be used here, but allowing only a fraction of the credits to be withdrawn from the bank in any given year. This limitation is important so as to balance the need to preserve forests with the need to avoid flooding the market with credits which would palliate the carbon emissions reduction effort.

  4. Anonymous
    Anonymous says:

    What would be the impact of the US including REDD in its climate change efforts and the international community not finding agreement around REDD (e.g., COP15 produces no REDD regime or market)? Assuming the US joins in post-Kyoto, how would the different treatment of REDD interact?

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