Memorandum submitted by WWF-UK
1. SUMMARY
WWF has focussed primarily on the following:
1.1 The environmental and social risks and
benefits of using financial mechanisms to address emissions from
land use change
WWF believes that REDD mechanisms should:
— Recognise that forests provide a
wide range of values and services;
— Contribute to development goals and
poverty reduction strategies;
— Actively involve all stakeholders
in policy formulation and planning; and
— Ensure that benefits, including funds,
are equitably distributed.
1.2 The use of land use change credits in
carbon markets and in meeting emissions targets
WWF believes it is important to consider the
full range of options further and to understand the implications
of different funding mechanisms in order to assess which are most
appropriate, based on:
— Environmental integrity and the overall
ambition of emissions reductions.
— Carbon market effect: eg compliance
costs, effect on net global emissions.
— Scale and flexibility of funding.
2. THE ROLE
FINANCIAL MECHANISMS
MIGHT HAVE
IN HELPING
TO ADDRESS
EMISSIONS FROM
LAND USE
CHANGE
2.1 The economic incentives for unsustainable
forest management or to convert forest into agriculture land are
often greater (at least in the short-term) than the incentives
to conserve or responsibly manage forests. In part this is due
to a failure to value the long-term economic goods and services
that forests provide. Therefore, WWF recognises that providing
financial incentives for forest-carbon has the potential to make
forest conservation more economically viable and, therefore, to
address emissions from land use change.
2.2 An international regime to reduce emissions
from deforestation will need developed countries to provide support
to cover the costs of REDD over the long-term. One area for further
discussion is whether funding should cover the full associated
costs or whether some developing countries should be partially-compensated
consistent with the principle of common but differentiated responsibilities.
Support for capacity building and readiness is an immediate priority,
to enable countries to prepare for a REDD mechanism in post-2012.
2.3 In addition to the funding for REDD,
it is vital to consider how funds will be managed and distributed,
including the governance and flow of funding.
3. THE ENVIRONMENTAL
AND SOCIAL
RISKS AND
BENEFITS OF
USING SUCH
FINANCIAL MECHANISMS
3.1 Forests provide a range of values and
services, such as protecting water catchments, improving air quality,
protecting soil and biodiversity and providing resources which
support the livelihoods of people. Measures to reduce emissions
from deforestation and forest degradation can provide "co-benefits"
as conserving natural forests helps maintain wider environmental
and social values and services. However, preventing access to
these resources would create potential conflict and increased
pressure on forest resources in other areas. Therefore, policies
for REDD must recognise the multiple values and uses of forests
and accommodate the food and resources requirements of the human
population.
3.2 Activities aimed at maintaining forest
carbon could result in local communities and indigenous people
losing access to land. For example, there are concerns that REDD
funds might be used by countries to reinforce state and private
sector control over forests. Also with potentially high rates
of return from carbon offset projects, opportunities may be seized
by the most powerful. Local communities often lack the secure
tenure and resource rights to stake their claim. Similarly REDD
funds might fuel land speculation and the appropriation of community
land—either by external actors or by more powerful individuals
or groups within a community.[3]
3.3 These issues raise institutional and
policy challenges to ensure the benefits and costs are fairly
distributed. The issues require policies to be developed which
address administration of the forest, tenure rights etc, which
should be liked to national and local strategies such as poverty
reduction strategies. It is important to see poverty reduction
strategies as a means of tackling deforestation and unsustainable
land use. Rights and livelihoods of indigenous peoples and local
communities must be integral to any REDD policies and programmes.
This can only be achieved through involving all local stakeholders
in the development of REDD. The Stern Review[4]
recognises that this requires a participatory approach to policy
formulation and planning, involving stakeholders at local, sub-national
and national levels.
3.4 Policies for REDD must be consistent
with other international conventions and agreements (including
the Convention on Biological Diversity). To protect the rights
of indigenous people and local communities, REDD mechanisms must
respect, build upon and integrate the rights and needs of these
people and communities.
3.5 REDD mechanisms need to contribute to
development goals and ensure that benefits, including funds, are
equitably distributed, for example, by:
— Clarifying or enforcing land tenure
and developing clear "carbon tenure".
— Improving governance and enforcement,
eg through similar processes to those employed for the Voluntary
Partnership Agreements under the EU Forest Law Enforcement, Governance
& Trade Action Plan.
— Developing legal and institutional
frameworks to address distribution of funding, including in particular
an appropriate and effective administration to implement these
frameworks.
— Ensuring active stakeholder involvement
in the development of policies and programmes for REDD, eg through
multi-stakeholder roundtables.
3.6 Ensuring governance, administration
and local community involvement is integral to developing effective
and appropriate REDD mechanisms. This will ensure any activities
to maintain forest carbon avoid negative impacts on other goals,
such as poverty reduction and biodiversity conservation.
4. THE USE
OF LAND
USE CHANGE
CREDITS IN
CARBON MARKETS
AND IN
MEETING EMISSION
TARGETS
4.1 The post-2012 UN climate agreement should
provide a framework that ensures sufficient and sustainable incentives
are provided for REDD as an integral component of the agreement.
At this point, WWF believes it is important to consider the full
range of options for finance further.
4.2 A range of financial mechanisms have
been proposed, which fall into the following categories:
(a) Inclusion in carbon markets / fungibility
(either with unlimited or limited access), as an offset mechanism
for Annex I emissions reduction targets.
(b) Market-linked mechanisms, such as (i) auctioning
of allowances, for all allowances or specific sectors; (ii) dedicated
auction revenues from national, regional or international emissions
trading systems; and (iii) a levy on all or some emissions.
(c) Voluntary funding, such as public funds additional
to development aid, eg the Norwegian forest fund.
Environmental integrity
4.3 One concern voiced with fungibility
of REDD credits (and other land use and land use change and forestry
(LULUCF) credits) is the risk associated if either leakage occurs
(ie deforestation is displaced to other locations) or emissions
reductions are non-additional (ie emissions reductions would have
been delivered without additional action) or non-permanent (ie
the possibility that carbon stored/sequestered will be released
into the atmosphere in the future due to forest clearance, fire
or disease).
4.4 Concerns over environmental integrity
of credits is not specific to REDD—eg a report by the Öko-Institut
concluded that approximately 20% of Clean Development Mechanism
credits are likely not to be additional.[5]
Potential ways of addressing concerns with fungibility of REDD
include:
— Excluding REDD credits from carbon
markets and using only market-linked or voluntary mechanisms to
fund REDD.
— If REDD credits are included within
the carbon markets; putting conditions or restrictions in place,
by limiting the amount of REDD credits, discounting, or not including
activities from countries which currently have low emissions from
forests within carbon markets, unless there is demonstrable additionality.
Ambition
4.5 In addition to the environmental integrity
of any emissions reductions, the ambition of the overall emissions
reductions is vital. To prevent catastrophic climate change we
must keep the global average temperature rise as far below 2 degrees
centigrade as possible. The IPCC 4th Assessment report suggests
that Annex I parties should take on greenhouse gas reduction targets
of between 25% and 40% below 1990 levels by 2020.[6]
In addition to this reduction in Annex I countries, some major
non-Annex I parties need to "substantially deviate"
from their projected future emissions.
4.6 Therefore, to achieve the ambition of
the reductions in emissions which are needed to stay below 2 degrees
rise, emissions reductions from REDD (and other mitigation activities
in non-Annex I countries) must be additional to action in Annex
I countries. To achieve this through inclusion in the carbon market,
Annex I countries must commit additional targets, on top of the
25-40% range agreed for the second phase of the Kyoto Protocol
in Bali. Market-linked mechanisms and voluntary funding are not
an alternative to emissions reductions from Annex I countries,
as such emissions reductions from REDD would be additional.
4.7 A number of additional elements should
be applied if REDD credits are fungible:
— National approaches (eg national-level
accounting, regulatory frameworks, reference levels, monitoring
and enforcement systems) need to be in place in order to reduce
transaction costs, address domestic leakage and ensure the integrity
of baselines.
— Measures must be put in place to
minimise and account for leakage, the risk of non-permanence,
and to ensure the integrity of baselines.
— Activities in countries with low
emissions from forests should not be included within carbon markets,
unless there is demonstrable additionality, for example, in countries
with increasing deforestation rates.
Carbon market effect
4.8 REDD is often cited as a relatively
low cost mitigation option, and therefore, integrating REDD into
emissions trading is predicted to decrease costs of achieving
emissions reductions.[7]
While this can be beneficial in bringing down the overall costs
of emissions reductions (which is one objective of the carbon
markets), it may also reduce the carbon price and consequently
diminish incentives for investment in potentially more costly
industrial emissions reductions, such as replacing coal with renewables.
However, in the long-term REDD is not likely to be less expensive
than industrial emission credits, as land is a fixed good, and
any REDD mechanism must ensure that a long-term incentive is provided
to prevent forest conversion and degradation.
4.9 One possible option for reducing this
effect would be to apply a discount factor to credits that enter
the market—eg a 3:1 ratio, where 3 REDD credits would equate
to 1 tCO2 emitted by the purchaser. This approach would also help
in addressing concerns around leakage and non-permanence; and
would increase the overall emissions reductions achieved through
the market. If applied, it would be important to ensure the discount
factor still makes REDD an attractive option in developing countries
(based on the revenue generated as compared with the costs).
4.10 A related concern is the scale of potential
credits from REDD and the risk of large volumes of credits "flooding
the market". This could reduce the incentive for addressing
industrial emissions in general, because a substantial proportion
of emissions reduction targets could be achieved by purchasing
REDD credits. In addition to increased targets for Annex I countries,
potential mechanisms for reducing the risk of flooding the market
include applying a discount factor and limiting access to REDD
credits—either as part of the overall limit on the effort
that can be achieved through non-domestic efforts or as a specific
limit on REDD credits.
A phased approach
4.11 If fungibility of forest-carbon credits
is considered, a phased approach might be preferable, where initially
REDD has limited fungibility (eg through a discount factor or
firewall). As countries meet conditions demonstrating their ability
to deliver monitored and verified REDD credits, the fungibility
coefficients for their credits could increase, depending also
on broader elements of the overall architecture, including the
emissions reduction commitments by Annex I countries.
Permanence and liability
4.12 If inclusion of REDD in the carbon
market is considered, the approach used to address permanence
in REDD credits is crucial in influencing "market interest"
for these credits and to achieve a sufficient price for these
credits. In addition, it is vital that there is a mechanism to
address the risk of non-permanence and, therefore, the issue of
liability for any non-permanence needs to be considered. Permanence
and liability are also important elements for consideration with
market-linked mechanisms and voluntary funding if we are to achieve
sustainable emissions reductions.
Scale of funding
4.13 One of the main advantages frequently
cited for including REDD in the carbon market is the fact that
large amounts of reliable funding can be provided. The carbon
market is generating $30 billion/year and is projected to reach
$100s of billion or more (these figures refer to the value of
the whole carbon market, not specifically support to developing
countries through CDM).[8]
This indicates that there is the potential for sufficient and
sustainable funding to be generated for REDD by including it within
the carbon markets.
4.14 Market-linked approaches, such as auctioning
allowances or setting aside a proportion of allowances, offer
the potential for achieving the scale of funding required. As
one example, Norway has proposed that a portion of allowances
from national emissions trading systems should be withheld. The
equivalent value would be provided for international activities.
With 20% of emissions reductions below 1990 levels for all Annex
I countries and just 10% of the allowances set aside (and a carbon
price of $30/t), this has been estimated to raise $63 billion
annually (though recognising that this would not all go towards
reducing deforestation).
4.15 Indeed, within the EU ETS the current
proposal is for all allowances to be auctioned by 2020 by which
time the European Commission estimates that revenues could amount
to around €50 billion per year across the EU.[9]
The Carbon Trust estimates that the revenues from auctioning to
the UK Government could be between €4 billion and €6
billion per year during the third phase (2013 to 2020).[10]
These are new funds which could not have previously been anticipated
before the inception of the EU ETS. The UK already plans to auction
a minimum of 7% of the allowances under phase II (2008 to 2012)
which could bring in around €2 billion between now and 2012.
Flexibility of funding
4.16 While inclusion in the carbon market
might be considered appropriate in certain conditions, there are
likely to be a number of scenarios/circumstances where carbon
markets will not provide the required financial support or incentive.
Inclusion in the carbon market would only be appropriate for activities
and countries where there are verified emissions reductions, and
therefore, for example, this source of funding would not be appropriate
for capacity building and support for readiness which will require
alternative funding sources.
4.17 Given that only two countries (Brazil
and Malaysia) are predicted to be ready for early entry to a REDD
mechanism based on emissions, capacity and interest,[11]
this indicates a need for funding options outside the carbon market
over the short-medium term. Support will be needed for countries
who are building capacity for REDD or do not have sufficient capacity
for monitoring, reporting and verifying emissions reductions under
a national baseline.
4.18 A further group of countries that may
not be eligible for inclusion in the carbon market are those countries
with high forest cover but currently low rates of deforestation
or forest degradation (such as Guyana). This is due to questions
about the additionality of any actions to maintain these low deforestation
rates. While there may be a number of potential approaches for
developing baselines for these countries, market-linked mechanisms
provide a valuable alternative which might generate greater scales
of funding and avoid risks of undermining the integrity of the
carbon markets.
5. THE INTERACTION
OF CARBON
FINANCE MECHANISMS
WITH THE
TIMBER TRADE
5.1 Given the risk of non-permanence and
the economic factors that often drive deforestation and forest
degradation, it is vital that carbon finance mechanisms support
sustainable measures to reduce emissions from forests. Therefore,
carbon finance mechanisms must be underpinned by commitments to
sustainable forest management. Tackling illegal logging and encouraging
sustainable forest management are essential in ensuring forest
resources are used in a way that allows us to meet current needs
while retaining the integrity of the forest's resources and production
capacity for the future. Carbon finance is a potential tool to
aid those nations which suffer from deforestation to generate
income to tackle poor forest security, inappropriate forest management,
and over-harvesting or clearance of forests. If implemented in
this way, there is the possibility for carbon finance to encourage
sustainable forest management within the timber trade.
5.2 In addition, REDD mechanisms in the
post-2012 UN climate agreement should be considered as one approach
to address deforestation and forest degradation, alongside further
initiatives outside the UNFCCC, for example to deal with demand-side
issues and to outlaw trade in illegal timber.
6. GOVERNMENT
PROGRESS ON
TACKLING ILLEGAL
TIMBER SINCE
THE EAC 2006 REPORT
ON SUSTAINABLE
TIMBER
6.1 The UK government is pro-active in supporting
European legislation and providing support including funding,
for other elements of the FLEGT Action Plan, such as the VPA in
Indonesia. However, there has been no tangible progress on tackling
illegal timber since the EAC report, as implementation of the
FLEGT Action Plan has been insufficient.
7. GOVERNMENT
SUSTAINABLE PROCUREMENT
OF FOREST
PRODUCTS
7.1 There has been no tangible progress
on sustainable procurement of forest products by UK government
departments as a whole. Once again, this is down to lack of practical
action to address the problem and inadequate resourcing to meet
sustainable procurement policy commitments. There is a gap between
administrative and political agendas, and apart from the CPET
(Central Point of Expertise on Timber Procurement) mechanism,
which has struggled to deliver change or appropriate engagement;
no specific efforts have been made to bridge this gap. It is not
a government priority at an operational level and does not specifically
figure in local authority goals for action on sustainability.
8. THE SUCCESS
OR OTHERWISE
OF THE
EU FOREST LAW
ENFORCEMENT, GOVERNANCE
AND TRADE
(FLEGT) ACTION PLAN,
AND GOVERNMENT
SUPPORT FOR
IT
8.1 The UK government has been active in
support for the FLEGT programme, and the provision of specific
resources to drive FLEGT has been important to its progress. However,
this needs to be supported by Europe wide legislation on illegal
trade in forest goods to have any real meaning. Standards agreed
in the VPAs are critical to success, and to ensure that FLEGT
does not lead to more confusion in the market over the comparability
of legal standards and assurances.
13 October 2008
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/08/80&format=HTML&aged=1&language=EN&guiLanguage=en
3 Griffiths (2007) Seeing "RED"?: "Avoided
deforestation" and the rights of Indigenous Peoples and local
communities Back
4
Stern Review, 2006, The Economics of Climate Change Back
5
O²ko-Institut, 2007, Is the CDM fulfilling its environmental
and sustainable development objectives? Back
6
IPCC, 2007, Full working group III report, chapter 13, Page 776,
http://www.ipcc.ch/pdf/assessment-report/ar4/wg3/ar4-wg3-chapter13.pdf Back
7
Strassburg et al, 2008, An Empirically-Derived Mechanism
of Combined Incentives to Reduce Emissions from Deforestation Back
8
Schwartzman et al, 2007, Getting REDD Right Back
9
"Boosting growth and jobs by meeting our climate change commitments"
European Commission press release announcing the release of the
climate and energy package, January 2008 Back
10
"Cutting carbon in Europe-the 2020 plans and the future of
the EU ETS" Carbon Trust, 2008 Back
11
Boucher, in press Back
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