Examination of Witnesses (Questions 1-19)
MR JOHAN
ELIASCH, MR
JONATHAN BREARLEY
AND MR
GRAHAM FLOATER
9 DECEMBER 2008
Q1 Chairman: Good morning and welcome
to the Committee. This is the start of our inquiry into forestry
so we are very glad to have you here for the first session and
thank you for making the time to come in. Would you like to kick
off by giving us the headline points from your Review so that
we can get the scene set?
Mr Eliasch: I would be very pleased
to do that. First of all let me introduce Jonathan Brearley, who
is the Head of the OCC, and Graham Floater who is also part of
the OCC and is now the Deputy Director and Team Leader of the
Review. The Review itself was an independent review on global
deforestation, its effect on climate change, the costs to the
global economy, the importance of carbon to climates and international
support for reducing deforestation. Its objectives were to assess
the evidence on methods of financing global forests which can
produce carbon emissions from forests, reduce poverty and preserve
biodiversity and other eco-systems. Saving forests is critical
to tackling climate change. Deforestation accounts for somewhere
around 17% of global carbon emissions and if you put this in context
it is roughly the same as what the US emits, now probably overtaken
by China, so you are looking at a big chunk of emissions. What
we have to keep in mind here is that with such a big challenge
this is an area where, if it is not addressed, it is virtually
going to be impossible to meet the targets that we have set for
combating climate change. In that context what the Review found
was that we could have additional climate change damage to the
tune of $1 trillion a year, which is a staggering amount, by the
year 2100. We also found that by tackling deforestation one could
effectively halve the cost of tackling climate change, or alternatively
one could increase the targets by an additional 10% and go deeper,
which is a very important finding in the context of overall climate
change initiatives, and that is by 2030. The curve here is quite
important because this would represent that you could reduce the
total cost by 40% if you go up to 2040[1].
We also found that by 2030[2]
the net benefit, i.e. if you take the net present value of the
savings in terms of damages and the costs of addressing deforestation
would be roughly $3.7 trillion, which is obviously a significant
amount of money in relation to the global economy. We also found
that the target we should aim for is to halve deforestation by
2020 and to make the sector carbon neutral by 2030, and that would
be achieved by reducing deforestation to the tune of 75% and through
aforestation and reforestation projects. We also tried to ascertain
how one could finance this. We found that there are a few building
blocks here which are critical to achieving the mechanism. The
first is that we need to build capacity in these countries so
that the rainforest countries are geared up to tackling the problem.
With that we need advanced measuring techniques. We need to set
the emissions base lines at the national level, and that also
includes new forest growth, so that the forest can be paid for
by the net emissions reductions. We also think that that would
more or less reduce perverse incentives. One of these is that
if you are not careful some countries might think that it could
even be in their interests to induce deforestation because you
would set the base lines at a more advantageous level for them
going forward. We also found that in the medium term we will need
a combination of finance from carbon markets and other funding
initiatives and that is to do with the fact that we need a gradual,
smooth transmission and carbon markets could not on their own
provide the finance, so we will have here a funding gap and the
gap needs therefore to be met through other funding sources which
would have to be predominantly public finance. The other thing
we identified as very important was strong governance and effective
mechanisms for the distribution of finance. We also believe that
it is vital that the forest communities are very much part of
the solution and this is, I would say, a big opportunity to address
poverty reduction in as many as 40 countries. You are looking
at a huge number of people.
Q2 Chairman: Thank you. What has been
the Government's reaction so far? Have they indicated that they
are going to accept your recommendations?
Mr Eliasch: The Government have,
I believe, welcomed the Review. They are obviously looking into
it. What one has to keep in mind here, is that this is very much
a platform for the negotiation phase, that we are in as the lead
negotiator for the European Union and I would not quite expect
the Government to give an official response that might prejudice
future negotiations.
Q3 Chairman: What sort of indicators
have you had from other governments in other parts of the world,
if any?
Mr Eliasch: We have had official
communication from the government of Norway, which is today the
biggest donor country for this area, which was positive. We have
had positive reactions from Indonesia, Papua New Guinea, Costa
Rica and British Guyana, who have made official statements to
the fact that they very much welcome the Review, and we have also
had informal views from a number of organisations and also other
countries.
Q4 Chairman: What about Brazil because
Brazil has had a resistance to using carbon markets in the past
and Brazil is rather crucial to the whole future of this issue?
Have you had any communication on how they view your recommendations?
Mr Eliasch: We have not had any
formal indications of how they view the Review but it is interesting
that last week they announced that they want to set a target to
reduce deforestation to 30% by 2020. It obviously falls short
of our recommended target of 50%[3]
but this is a step in the right direction.
Q5 Mr Chaytor: Can I pursue the question
of the target that you set? What was the basis of the figure of
50% by 2020?
Mr Eliasch: I would start from
the other target, which is to make the sector carbon neutral,
how quickly can we achieve that realistically. That was the starting
point and by working backwards in order to achieve that target
it would be realistic to try to get to 50% reduction in deforestation
by 2020.
Q6 Mr Chaytor: You start with the
carbon neutral target of 2030. Why so long, 22 years? What was
the basis of your figure of 2030 as the earliest point at which
carbon neutrality could be achieved? What are the factors at play
here?
Mr Floater: I think there is a
balance here. Obviously, we would like to see the most ambitious
targets that we can achieve realistically and the modelling that
we did to get to that with the global carbon market was that you
could attain a 75% reduction in deforestation by 2020[4]
and make the sector carbon neutral if you included aforestation
and reforestation as well. In terms of the timing, one has to
balance the stringency of targets with the realities of capacity
building and getting mechanisms in place in countries to be able
to achieve that target, so ultimately it is partly a judgment
but it is a judgment based on the stringency of targets and also
the realities of getting there.
Q7 Mr Chaytor: Of the various factors
you have mentioned—capacity building, the timescale, the
growth of carbon markets, which are the most unreliable factors?
Which issues are most likely to mean that this will not be achieved
by 2030?
Mr Floater: There are a number
of factors involved. There needs to be political will on the part
of the international community because this involves the transfer
of finance and also on the part of rainforest nations themselves
because they are the recipients. Ultimately rainforest nations
need to take a lead on that. There are various factors. The political
factors are probably more important here than the economic factors.
Q8 Mr Chaytor: Just pursuing the
reference to Brazil that was made earlier, Brazil made a statement
last week that it wants to establish a fund and it has announced
a target of 70% deforestation but only Norway has agreed to contribute
to the fund and the fund is for one year at a time, so what is
your assessment of the political will underlying this because
it is okay, as you say, to have a fund but if nobody is contributing
to the fund it does not get very far? What is your assessment
of the Brazilian statement last week?
Mr Floater: I think it shows why
we need a number of different funding mechanisms, as Johan has
set out, including carbon markets.
Mr Brearley: If I could add to
that, at the moment you are right: Norway has made a large contribution.
I think we are reasonably optimistic in the short term on the
capacity building funding we might need, but obviously that is
subject to strong political decisions by a number of countries.
Q9 Mr Chaytor: Could you tell us
a little bit more about reforestation because it does not necessarily
follow that reforestation would fully compensate for a longer
timescale over stopping deforestation, does it, because it depends
on the nature of the reforestation, surely? What is the balance
between the emission cuts that can be achieved by a process of
reforestation as against those which can be achieved by a process
of halting deforestation?
Mr Floater: What we did in the
analysis was to look at emissions rather than rates of deforestation
per se. You have to start with rates of deforestation and
then calculate the emissions that come from that, and equally
look at the different processes of aforestation, reforestation
and restoration and calculate the sequestration rates that come
from that. The figures that we have put forward in the Review
are based on a balance between the emissions reductions from deforestation,
particularly in tropical rainforests, with the sequestration of
carbon dioxide from aforestation and reforestation, and that is
how you get the sector carbon neutral by 2030.
Q10 Mr Chaytor: But this must surely
be unpredictable because it depends on the nature of the reforestation
and the location of the reforestation. Is there a simple methodology
or ratio that people can understand, or is the modelling just
too detailed and too specific and it is not possible for the average
intelligent Guardian reader to appreciate?
Mr Floater: It is not simple in
terms of there is no one simple equation, but what is important
is understanding the different forest types, the amount of carbon
stored in the different forest types, both within the vegetation
but also in the soil, and what carbon emissions the different
land use changes will result in. The IPPC have guidelines for
measuring at different levels of confidence, which is quite a
large guide, but that is basically what we would recommend people
use.
Mr Eliasch: What is important
to keep in mind here is that, if you take Atlantic forests, you
have, let us say, 19 tonnes of carbon[5]
stored per hectare, whereas in the rainforests it goes as high
as 400 tonnes per hectare. What is very important is to get forestry
conducted in a sustainable manner globally and that is something
that follows with the governance. Most countries have requirements
for sustainable forest management plans, and most notably Brazil
have very strict regulations here, but they are not always followed
and it is very difficult to police because you are dealing with
huge land areas which are impossible to patrol, so in the end
you have to rely on the goodwill of the local communities and
the local forestry agencies. In terms of reforestation, if you
take Atlantic forests, of course, you can easily replant trees
in local areas but in the rainforest, once you have clear cut,
a piece of land, that soil is very quickly going to be destroyed
because the sun is so strong, so it is very important that clear
cutting is avoided and that management plans are followed. Usually
you can cut, let us say, a cubic metre per hectare every 20 years
because that does not impact the soil and it does very little
damage if you conduct it in that manner throughout as part of
a management plan. You can achieve a high degree of new trees,
which is important, and at the same time have sustainable forestry
operations which provide jobs for the local communities. It is
about getting the whole balance right.
Q11 Dr Turner: Mr Eliasch, the European
Commission has said that the international negotiations should
not seek to include the forestry sector in carbon markets until
2020. It argues that there are too many risks associated with
these credits and that they could undermine the European ETS.
Can you see a way round those issues and can you design a forestry
credit scheme which would satisfy the European Commission?
Mr Eliasch: Let me start off and
then I will pass over to Graham here who used to work for the
Commission and is very knowledgeable about their position. Yes,
we do believe that if we have the political support and the political
will to make this happen we can come up with a formula that will
work for the financing of forests and also the implementation
of them. It does not make any sense to throw money at something
where you do not have the systems in place to invest the money.
That is why we are saying here that the first step is not to say,
"Okay, from now on the global forests are part of the carbon
markets and we are all going to buy carbon credits with proceeds
that will go to these countries", and that is that. We say
the first step here is to have a proper framework in place and
this includes monitoring and it includes governance mechanisms
because in a lot of these countries you have issues with weak
legal systems, land titles, et cetera. There are many things that
need to come together but once you have a robust, stable system
it is like any other kind of security: if you have a tradeable
which is fungible, which is well defined, which is robust in the
set-up, investors will have confidence in that security and they
will buy. If you look at the European Commission's position here,
it is a question of timing: how quickly can we gear up and get
this done.
Mr Floater: The Commission has
proposed to halt global forest loss by 2030 and reduce tropical
deforestation in gross terms by 50% by 2020, so these are very
similar targets to the ones we set out in the Eliasch Review.
They have also set out the importance of testing the inclusion
of forest credits in the carbon market, so we are pleased about
that. As you say, I think the question here is the same for the
European Commission as it is for ourselves, ensuring that you
have a well designed framework that is achievable. One point here
is the transition. We set out in the Review the importance of
a global carbon market to provide the demand that is needed to
finance reductions in deforestation but you have to get from where
we are now to that point in time and that means a transition.
You can take a big bang approach and just go for a carbon market
straightaway. The problem with that is that you risk flooding
the market with credits. We also looked at alternative funding
mechanisms that did not include the carbon market at all, but
the scale of finance we did not feel was sufficient. So the conclusion
that we came to was a third option, which is a smooth transition
from here to 2030 with certain quantity limits which will first
of all mean that there will be little or no impact on the EUA
price, which is obviously a concern; secondly, that the emissions
reductions are genuine and additional, and that can be done with
national base lines with a proper framework through capacity building
if required, and also reduce the risk of reversals. Again, you
need a proper mechanism in place. We have set these things out
in the Review and one thing that we are in agreement with the
Commission on is that these do need to be set out for a well designed
system.
Q12 Dr Turner: The European Commission
have been really rather unkind about forest credits, likening
them to the sub-prime mortgage market. What would happen to the
carbon market if there was a massive defaulting on forestry credits?
Mr Floater: I think there is an
important distinction to be made here between voluntary credits
that we see at the moment and credits that will be part of a compliance
market. There are a number of very good schemes that are out there
at the moment that are linked to the voluntary market but there
have been some concerns over other projects. We have set out in
the Review that first of all you need national base lines in order
to ensure net emissions, taking account of deforestation and also
aforestation and reforestation, are taken account of at the national
level, and that payment in arrears means that you can see the
real reductions that you are paying for.
Q13 Dr Turner: That is one of the
reasons why we are so keen on avoiding deforestation. It is not
simply the emissions that are directly involved by burning off
large tracts of forests but the function of the rainforests as
the world's most important carbon sink. On the other hand, of
course, there is the very real possibility that the rainforests
themselves may be damaged and lost through climate change. Are
we taking an undue risk in relying too much on the sink capacity
of rainforests?
Mr Floater: The calculations that
we do in the Review are based solely on emissions from deforestation
and sequestration from aforestation and reforestation and restoration.
We did not take account of the sink effects in the modelling because
of the scientific uncertainties that currently exist, but clearly
forests have an important part to play with the sink effect and
we showed that if, under business as usual, deforestation rates
continue, the atmospheric CO2e concentration will rise by about
30 parts per million. We are already at 433 parts per million
based on 2006 figures. If we are going to meet a target to get
anywhere close to keeping temperature rises below or around two
degrees we really have to act and act quickly to address the problem
of deforestation.
Mr Brearley: These uncertainties
are not unique to forest credits and the carbon market. Under
any system you will have to have a robust way of understanding
and banking the emissions savings that we are making. One important
thing for you is between the financing mechanism, how the money
gets there, and the governance system you need to have in place,
no matter where your funding comes from. Essentially, under any
funding mechanism we will have to be sure of the emissions savings
that we are making and we have set out in the Review the way you
might do that. If we do not make that work, a dual finance system,
the task of us tackling global climate change becomes much more
difficult.
Q14 Dr Turner: I take all the points
you make on the finance systems; that is good. I just come back
to the question of how important you assess the risk of actual
damage to the rainforest itself by changing weather patterns resulting
from global warming. If rainfall over Brazil decreased catastrophically,
for instance, the rainforest may not maintain itself and so on.
How great do you feel these risks are?
Mr Floater: The point I was trying
to make was that if we do not address deforestation then those
sorts of risks will increase, so this should be an added reason
for us acting urgently on reducing deforestation.
Mr Eliasch: What you see in the
Amazonas today is not a threat to the rainforest itself but what
happens is that on the one hand you get a much more impactive
hurricane season and it can be plotted against deforestation activity
in the area. The other part of it is that you get droughts in
the southern half of South America as a consequence and that has
to do with the change of weather patterns and how cloud formations
break up when they get to the Amazonas with the prevailing winds
there. You can already see this but it does not impact on the
rainforest itself.
Q15 Martin Horwood: It is common
ground that the development of what you call a robust saving system
and effective governance is absolutely essential, but how will
those necessary changes in governance be made? What are you suggesting
there?
Mr Eliasch: It is a question of
lots of building blocks that need to be put in place in countries
with rainforest. I would say it differs greatly from country to
country. Some countries have strong judicial systems. Some countries
have more people already in place equipped to be part of the solution.
It is not one size fits all here. It is very much about adapting
to different regions, different countries and cultures. What we
know is that you need proper measuring techniques. You need ways
to measure the reductions in a universally recognised way. There
are a number of things here where we know we have common objectives.
The implementation of other parts will differ depending on the
region you are in.
Q16 Martin Horwood: Who is going
to pay for all this quite fundamental structural change, all this
advice and expertise and development to take place in advance
of the system itself being set up?
Mr Eliasch: That is for public
funding, governance, to do over the next few years and before
we do that the process of actively reducing deforestation in our
opinion will clearly take place.
Mr Brearley: Our point in the
Review is that this capacity building, this funding phase that
we talk about, is absolutely fundamental to the success of our
scheme. There are a number of things you have to do around measuring
and monitoring but also around how we are going to manage funds.
We have set out some examples in the Review but this has to be
part of the international discussions. We have set out some costs
on how much that might be. It is not really our job to say exactly
where that money should come from but if that money does not come
forward then the rest of that process, whether you do it with
public funding or through Parliament, is very much a threat, and
if that is a threat then your ability to tackle global climate
change is a threat.
Q17 Martin Horwood: It would be interesting
to hear how you think it can be funded given that it is such a
critical building block in the whole plan. Have you got any particular
opinions on that?
Mr Floater: We have said that
that we need up to $4 billion over five years to fund capacity
building in 40 forest nations. These sorts of estimates are difficult
and Chatham House and their associated colleagues have done a
very good job of producing the background paper that provided
those figures. Norway has already committed $2.5 billion to reducing
deforestation emissions over five years. There are a number of
other countries, donor countries, who are committed to helping
this process. The UK is one. Others include Australia and Germany,
so there is a will out there but these are significant amounts
of funding.
Q18 Martin Horwood: Given the scale
of the challenge do you think it is realistic for this significant
change to be achieved in time for the new ETS Phase III?
Mr Floater: With the political
will, yes. We should not underestimate the challenges here. There
are three fundamental aspects to this. It needs to be part of
a wider development policy. Some of the issues cannot be tackled
simply by looking at deforestation alone. Secondly, it needs full
participation of forest communities; and thirdly, it needs the
necessary political will, as I said, from forest nations and also
from the international community. It requires strong incentives
from the international community for the rainforest nations to
have the confidence that there is a financing mechanism that will
work.
Q19 Martin Horwood: If we were in
a position in 2013 where some nations were ready and others clearly
were not and we went ahead with some would we not have this traditional
issue of leakage that you might find more rapid deforestation
in the countries that were not included, so in a sense it would
undermine the whole scheme? Would that be right?
Mr Floater: I think it is important
that the international community through negotiations in Poznan
and next year in Copenhagen get as comprehensive a deal as possible
in order to make sure that it can happen.
1 Note by Witness: The year should be 2050,
not 2040. Back
2
Note by Witness: The year should be 2200, not 2030. Back
3
Note by Witness: The recommended target should be 25%
by 2030, not 50%. Back
4
Note by Witness: The 75% reduction in deforestation should
be attained by 2030, not 2020. Back
5
Note by Witness: There are in fact 90 tonnes of carbon
stored per hectare, not 19. Back
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