LCDS Financing

Nov 02, 2009 Editorial

As we draw closer to the December Copenhagen meeting on Climate Change that will attempt to craft a successor to the Kyoto Protocol, we are receiving increasingly optimistic information that the premises of the LCDS on funding are fundamentally sound.

Brazil, which is home to the largest remaining standing tropical forest, inevitably has a great influence on pronouncing on the viability of schemes that purport to reduce emissions through “avoided deforestation”. It had persistently criticised the “cap and trade” approach that included “forests offsets”; claiming that the developed world were being given a pass, not only to avoid their historical role in destroying the atmosphere, but to continue their high rate of pollution by bribing poorer countries to do their job for them. The moral question such an approach posed, asserted Brazil, was as if a fat man paid a thinner one to diet for him.

The retort, of course, was that the analogy was not entirely accurate. The atmosphere is not like a fat person, who is discrete. The atmosphere is continuous and “fasting” by one country (sequestering carbon by leaving its forests standing) can “offset” eating (pollution) by another.

Brazil has evidently become (partially) convinced by the argument for last week its Environment Minister, Carlos Minc, announced, “In previous meetings Brazil didn’t defend REDD — that position has evolved. But under Brazil’s proposal, REDD should not make up more than 10 per cent of a rich country’s total reduction commitment. Rich countries still have to do their homework.”

While 10 per cent may appear small, because of the enormity of the projected market for carbon offsets, in dollar terms it will amount to hundreds of billions. The approach that the US adopts will be crucial on REDD financing because of the obvious influence they have.

The good news for LCDS is that in both the American Clean Energy and Security Act (ACES) passed by Congress and in the one stalled in the Senate, there is five per cent of carbon credit allocations to fund tropical forest conservation. In 2020 alone, at an estimated carbon price of US$17 a ton, those allocations would be worth almost US$5 billion.

In the US, excepting for sceptics like Greenpeace, support for offsets is widespread but according to one report there are still some lingering concerns on “leakage”, “additionality”, “permanence” and “measurement”. “Leakage refers to displacement of deforestation from one area to another. The drivers of deforestation, such as the demand for timber, or for land to grow soy beans or palm oil or to graze cattle are highly mobile in a global economy.

If deforestation is restricted in one location due to an offset project, it may be difficult to prove part or all of the avoided deforestation (and associated greenhouse gas emissions) did not simply happen elsewhere.

“Additionality” is another issue that is difficult to prove with REDD offsets. It is very difficult to prove that a piece of protected forest absolutely would have been deforested without the offset project. With volatile, dynamic drivers of deforestation, changing politics and economies in developing nations and a host of other factors, assessing additionality often requires shaky predictions and guesswork.

Permanence is also another real challenge for forest credits. Guaranteeing that a given forest, and its estimated carbon value, will stay the same a long period of time (100 years or more) is difficult to do. Tropical forests are dynamic, living ecosystems that are easily affected by changes in politics, human activity, insects, disease, fires and global warming itself.

Finally, simply estimating and crediting carbon values from avoided deforestation is hugely problematic. When trading an avoided deforestation offset for industrial emissions like those from a coal plant, we are comparing apples with oranges. Our ability to come up with a value for avoided deforestation initiatives has improved with advances in technology, but there are still large margins of error when compared with measurement of industrial emissions.”

The administration has already received assistance from the UN to assist in addressing the four concerns and whether the new treaty is consummated in December on in the following year as is being now seen as more realistic the LCDS funding appears quite secure.

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