House of Commons - Environmental Audit Committee

Reducing greenhouse gas emissions from deforestation: No hope without forests - Environmental Audit Committee Contents

Memorandum submitted by Global Witness

Global Witness is a UK-based NGO which seeks to end human rights and environmental abuses around the world, in particular natural resource-linked conflict and corruption. Global Witness' work has been both a catalyst and driving force behind the major international initiatives established to address these issues, including the Kimberley Process and the Extractive Industries Transparency Initiative (EITI).

Global Witness aims to achieve sustainability in the forest sector by targeting illegality. Global Witness has been working on illegal logging, forest governance and transparency issues since its formation in 1994. Our work in Cambodia on illegal logging, including an official role working with the government as Independent Forest Monitor from 1999-2003, played a critical part in the establishment of the regional Forest Law Enforcement and Governance (FLEG) and EU FLEGT processes.

Global Witness has campaigned against illegal and destructive logging practices in Burma, Cambodia, Cameroon, the Democratic Republic of Congo (DRC), Honduras, Liberia and Nicaragua. In addition, we are currently working on forest and climate change issues and the destructive practices of industrial scale logging companies.

SUMMARY

— Global Witness supports the creation of an international fund, financed by industrialised countries, to make payments to tropical forest countries, to keep forest standing, as part of a strengthened international deal on climate change.

— Such a fund must take into account the need to reduce emissions from deforestation and degradation and the global environmental services provided by forests such as carbon storage and sequestration.

— Payments could be related, in part, simply to the area of forest that a country oversees rather than on complex carbon accounting.

— Forest carbon credits must not be included in the carbon market.

— Industrial scale logging companies and plantations must not benefit from forest carbon finance.

THE ROLE FINANCIAL MECHANISMS MIGHT HAVE IN HELPING TO ADDRESS EMISSIONS FROM LAND USE CHANGE

Forest-carbon storage, sequestration and emissions

1. To date, the forest climate debate has been, by and large, narrowly focussed on Reducing Emissions from Deforestation and Forest Degradation (REDD). Recent United Nations Framework Convention on Climate Change (UNFCCC) discussions in Bali and Accra have concentrated on forest carbon emissions, as have the World Bank Forest Carbon Partnership Facility[12] (FCPF) and United Nations Collaborative Programme on REDD in Developing Countries[13] (the UN-REDD Programme) initiatives.

2. Such a focus is understandable: The Stern "Review on the Economics of Climate Change", issued on 30 October 2006, found that: "Emissions from deforestation are very significant—they are estimated to represent more than 18% of global emissions, a share greater than is produced by the global transport sector."[14]

3. However, a limited discussion about REDD de facto excludes countries and peoples that currently manage their natural forests responsibly. It also fails to take into account the value of forests, in countries that do have a deforestation and degradation problem, that are not under immediate threat. This could create a perverse incentive for landowners and governments to increase the rate of deforestation and degradation, in order that they might benefit from REDD payments at some point in the future. To be successful therefore, any forest climate change strategy must consider the value of the essential global environmental services that natural forests provide, including carbon storage and sequestration.

Legal and illegal sources of forest-carbon emissions

4. The forest-climate debate has so far failed to pay adequate, if any, attention to the specific measures required to halt and reverse tropical deforestation. This is perhaps not surprising, given that the discussion is primarily taking place during post-Kyoto negotiations between climate change experts who know little, if anything, about forests, forest governance, or the people who live in and depend upon them.

5. Governments own almost all forest in Africa and Asia and the majority in Latin America. Most deforestation is planned by governments, which sanction the clearance of natural forest to make way for agricultural land, pasture and infrastructure expansion. For example, in early 1980 the government of Indonesia slated 30 million hectares of forest for conversion. By 2002 an equivalent area of forest had been lost.

6. In addition, most forest degradation takes place as a direct result of government policy; it is wholly predictable. 350 million hectares of the world's tropical forests are zoned for timber production, about half currently under government concession. Logging, even selective logging, degrades the forest, a situation made worse in most countries by a lack of government oversight in the field. Logging operations provide easy access for farmers, and others, whose activities may lead to further degradation and, ultimately, to deforestation.

7. Corruption at national, provincial and local levels is almost invariably bad for forests. Uncertainty as to tenure, confused, contradictory or overlapping laws, discretionary powers and lack of transparency all exacerbate the problem.

Financial support for ending deforestation and degradation

8. Global Witness supports the Stern review's recommendation that poor countries that are rich in forests "should receive strong help from the international community, which benefits from their actions to reduce deforestation." Any credible forest climate strategy must include the provision of finance to help bring and end to illegal and legal forest destruction.

9. Significant levels of finance, from industrialised countries, should be made available to forest-rich nations to lift some of the financial and domestic political pressure to convert their forests to industrial agricultural uses, or to log them on an industrial scale.

10. Money should also be targeted at those countries with significant illegal deforestation and degradation problems, to pay for institutional, policy and legal reform, increased transparency and enforcement activities.

11. Such funds could usefully be invested in the following:

— Good governance and successful action to address corruption.

— Increased mapping of community resources, securing legal title to land, and access and user rights for forest dependent people.

— Ensuring that forest policy reform is centred on the improvement of local livelihoods and advances the rights of forest dependent communities.

— Ensuring that forest dependent communities participate fully in forest sector reform, and in the forest management decisions that impact them directly.

— Ensuring that commitments made by countries participating in the regional Forest Law Enforcement and Governance (FLEG) initiatives are implemented in full.

— Ending the direct financing of logging companies, and sector reform initiatives that favour industrial-scale logging.

— Dismantling industrial-scale logging operations, reducing timber-processing capacity and managing the political transition as established interests are displaced.

— Pro-poor forest-based alternatives to industrial scale logging.

THE ENVIRONMENTAL AND SOCIAL RISKS AND BENEFITS OF USING SUCH FINANCIAL MECHANISMS

Carbon markets will not stop global warming

12. In the light of recent global financial turmoil relying on market mechanisms, to reduce greenhouse gas emissions and hence the rate of global warming, would appear at best, reckless in the extreme. Global climate security must not be placed in the hands of the bankers and speculators responsible for near financial meltdown. At the time of writing, bailing out the so-called "casino capitalists" has cost governments in excess of $2 trillion. The cost of failing to stop global warming however will be measured not just in monetary terms but also in real physical hardship for billions of people, mass migration, regional instability and increased instances of violent armed conflict.

13. To date, carbon markets, including the European Emissions Trading Scheme (ETS) (the World's largest) and the "cap and trade" system under the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC), have delivered little in terms of greenhouse gas emission reductions. It is arguable that the market approach has in fact delayed the critical move to a zero-carbon economy. Global Witness does not therefore consider carbon trading to be the most effective, or indeed equitable, means of reducing greenhouse gas emissions.

14. This position is supported by the likes of George Soros, chairman of Soros Fund Management and the Open Society Institute, Jeffrey Sachs, the distinguished American economist and special advisor to United Nations Secretary-General Ban Ki-Moon, and many NGOs.[18]

15. It is Mr Soros' view that the "cap and trade" approach to reducing greenhouse gas emissions has been adopted for reasons of political expediency rather than because it is more effective than, for instance, a tax on carbon emissions. In his opinion it will be possible for the unscrupulous to make a great deal of money out of carbon trading, "without actually dealing with the problem that it's designed to cure."[19]

16. Professor Sachs does not believe that the current international architecture for reducing greenhouse gas emissions has achieved much. He has argued that the "Wall Street approach" to carbon, with the associated design of complex financial instruments, should be replaced by more simple mechanisms. Professor Sachs argues that carbon taxation is better placed to deliver the finance necessary to combat climate change. Although, according to Sachs, there is little economic difference between a tax and the auctioning of tradable permits, he thinks that the tax option as simpler to administer and easier to adjust as required.[20]

17. Clearly, the main risk associated with a market-based approach to climate change is that it will fail to deliver the desired results, before we reach the point where positive feedback sets in. That is, when the warming of the earth's atmosphere results in change, such as the loss of ice cover and thawing of permafrost, that causes further (potentially runaway) global warming.

Carbon markets will not stop deforestation or degradation

18. As with global warming, the danger of adopting a market-based approach to reducing deforestation and forest degradation is that it simply will not work. This will result in serious negative impacts on 90% of the 1.2 billion people living in extreme poverty who depend on forests for their livelihoods. Significantly, forests contribute directly to the natural environment that supports agriculture and food production for almost half the population of the developing world. Relevant ecosystem services that would be lost as forests are cleared and degraded include watershed protection, soil stabilisation, rainfall generation, climate buffering, and pollination services. In addition, the 90% of terrestrial biodiversity found in the world's forests, a disproportionate share being found in the forests of developing countries, would be at risk.[21]

Government funding is the most appropriate source of finance to pay for combating deforestation and forest degradation

19. For forest protection to work, the funding required must be dependable and long-term. As recent events demonstrate, markets are inherently volatile and unreliable: billions have been wiped off the value of shares and the price of oil, for example, plummeted from a high of almost $150 a barrel in July 2008 to $80 in October 2008.

20. For this, and other reasons (please see below) Global Witness supports the creation of an international fund to keep forest standing, as part of a strengthened international deal on climate change. Parties to the UNFCCC decided to launch formal negotiations on such a deal in Bali, in December 2007. Negotiations are scheduled to conclude by the end of 2009 at the Climate Change Conference in Copenhagen.

21. The Brazilian government also favours a fund-based approach to forest protection. More than three million hectares of forest are lost in Brazil each year, almost a quarter of the global total. Clearly, if the international community is to successfully address deforestation and forest degradation it is essential that the Brazilians support the chosen financing mechanism.

22. Significantly the European Commission considers public funding to be the most appropriate source of revenue with which to combat deforestation in the medium-term.[22], [23]

23. In Stern's opinion curbing deforestation "is a highly cost-effective way of reducing greenhouse gas emissions." Norway however, is the only country that has so far committed significant funds to help reduce deforestation and forest degradation in the tropics: up to US$560 million each year for the next five years. If European Community member states were to commit a similar proportion of their combined GDP this would amount to about US$23 billion per annum. Interestingly, this is of the same order of magnitude that Sir Nicholas Stern has suggested is necessary to halve greenhouse gas emissions from forests in the next 10 years:

24. It is Global Witness' view that the essential global environmental services that forests provide, including carbon storage and sequestration, should also be accounted for, so that the next international deal on climate change also benefits the countries and peoples that currently manage their natural forests responsibly (please see above). By providing sufficient funds, Annex 1 countries would go some way to convincing developing nations that they are serious about combating global warming.

THE USE OF LAND USE CHANGE CREDITS IN CARBON MARKETS AND IN MEETING EMISSION TARGETS

25. A far simpler approach than forest carbon accounting is required to ensure fair payments to forest-rich-but-poor countries for the essential global environmental services, including carbon storage and sequestration, that their forests provide. For example the international community could consider payments to these countries based simply on the area of natural forest that they oversee. In addition, it may be considered desirable to make increased payments for forests which support local peoples' livelihoods and, or, high biodiversity. Forests slated for conversion or under concession agreements with industrial logging companies, on the other hand, would receive no such payments.

26. Forests must be kept out of the carbon market. Bringing forests into an international carbon market—enabling countries and companies to buy and trade forest carbon credits in exchange for permission to continue polluting the atmosphere—will neither reduce carbon emissions nor halt deforestation. The purchase of forest-carbon offsets could provide a low-cost option, for industrialised countries and polluting industries, to reducing emissions directly and create a disincentive for investing in the development of clean energy technologies.

27. The Kyoto Protocol's Clean Development Mechanism (CDM) has failed to reduce greenhouse gas emissions and its contribution to sustainable development, a key objective, has been negligible. In an increasing number of cases, CDM projects have exacerbated the plight of poor people by providing additional finance to polluting industries, whose activities are a considerable risk to local livelihoods.[25]

28. The CDM is not designed to deal with key issues relevant to forests, such as permanence of carbon storage, complex land-use change patterns, land tenure, poverty alleviation, indigenous peoples' rights, and corruption.

29. Many countries with significant areas of tropical forest, such as those in the Congo Basin, have such poor governance records that potential investors would most likely be deterred from investing. Carbon markets cannot create the conditions necessary for the market itself to function effectively, for example: security of tenure and clear legal rights, and a functional administration and judiciary. Only government-government direct assistance is ever likely to bring these conditions about.

30. The fact that the European Commission has decided not to include forests in the ETS for at least a decade, and then only after certain issues have been satisfactorily resolved, is a very welcome development.[26] It is Global Witness' view that issues such as monitoring, verification and liability, let alone "additionality"[27] and permanence, are unlikely ever to be resolved to the degree necessary for forest carbon trading operate effectively.

31. Arguments in the Eliasch Review that in the long term a cap and trade system, for achieving reductions in deforestation and forest degradation, performs best against the criteria of effectiveness and equity are far from convincing.[28] REDD on the cheap would appear to be the primary consideration.

THE WORLD BANK'S FOREST CARBON PARTNERSHIP FACILITY

32. Please see attached documentation:

Appendix 1: 7 September 2007, NGO letter to Mr. Benoit Bosquet

Appendix 2: 14 November 2007, NGO statement on the FCPF

THE ROLE OF TECHNOLOGIES SUCH AS REMOTE SENSING IN THE VERIFICATION OF LAND USE CHANGE CREDITS

33. It has been estimated that a global network for forest monitoring, using medium resolution satellites would cost only $12 million to create. Despite this, only Brazil and India regularly monitor and report changes in forest cover using remote sensing. The FAO Forest Resource Assessment remote sensing survey (FRA RSS), using high-resolution satellite data, is restricted to 10% of the world's tropical forests. Significant improvements are planned for the FRA RSS 2010, however the results will still not be representative at a country level. Mexico has compiled detailed forest inventories over time, but again this is an exception that proves the rule. Reaching a consensus on the rate, location, and extent of global forest loss and decline is therefore problematic, and any estimates should be treated with extreme caution. Estimates of deforestation in the dry forests and savannahs of Africa, for instance, vary by a factor of 10.

34. It is interesting to note that 146 of the 228 countries and territories, taking part in the FAO FRA 2005, provided exactly the same net annual forest cover change figures for 2000-05 as for 1990-2000. This is odd, given that net change is the sum of four variable processes: annual deforestation, forest loss due to natural disasters, afforestation and reforestation. It is also interesting to note that for the 79 participants that reported a decrease in net forest cover, between 1990 and 2000, only three (Cambodia, Malaysia and Brazil) reported a significant increase in annual net forest cover loss for 2000-05. Two other countries, Namibia and Argentina reported increased net annual losses, each up by 1,000 hectares. Again this is a rather strange result given the increased pressure on forests due, in particular, to an increase in demand for agricultural land to feed a growing and more affluent global population. For more information please see Appendix 3 Draft Document Avoiding Deforestation.

35. In Asia, Indonesia is currently losing almost 1.9 million hectares each year, followed at some distance by Burma (over 450,000 hectares), the Philippines (over 250,000 hectares), Cambodia and Malaysia. In Africa, Sudan experienced the greatest change losing almost 590,000 hectares, closely followed by Zambia (about 450,000 hectares), Tanzania (over 410,000 hectares), the DRC (almost 320,000 hectares) and Zimbabwe (over 310,000 hectares). In South America, Brazil, with well over half the forest, lost more than all other South American countries combined. Between 2000 and 2005 Brazil lost an average 3.1 million hectares of forest each year, followed by Venezuela (almost 290,000 hectares) and Bolivia (270,000 hectares).

36. Of these, only two, the DRC and Bolivia were included in the Bank's list of 14 "ready" for REDD: six in Africa (the DRC, Gabon, Ghana, Kenya, Liberia, and Madagascar); five in Latin America (Bolivia, Costa Rica, Guyana, Mexico, and Panama); and three in Asia (Nepal, Lao PDR, and Vietnam).

THE SUCCESS OR OTHERWISE OF GOVERNMENT EFFORTS IN REDUCING EMISSIONS FROM INTERNATIONAL LAND USE CHANGE

37. Global Witness is not aware of any UK government efforts, to reduce emissions from international land use change, other than the commitment of funds to as yet untested international initiatives such as the FCPF.

THE INTERACTION OF CARBON FINANCE MECHANISMS WITH THE TIMBER TRADE

38. The UK government must ensure that industrial scale logging companies do not benefit from forest-climate funds. Degradation of tropical forests by industrial logging is a significant source of carbon loss. The carbon stock of forests subject to commercial logging, even of a selective nature, is on average significantly less than the carbon stock of natural, undisturbed forests.[29] Furthermore, roads and other infrastructure built to facilitate industrial-scale logging often open up the forest to further exploitation, leading to deforestation and permanent conversion.

39. Forest-living people "want an ample subsistence base, which can also provide means of fulfilling their social and cultural needs, rather than short-term economic benefits from industrial logging and related activities, which may risk their subsistence base in the longer term".[30] In Global Witness' experience, industrial scale logging, rather than reducing rural poverty, has had an entirely detrimental effect on local livelihoods. In countries as diverse as Cambodia and Cameroon, Indonesia and Papua New Guinea (PNG), the poor have become poorer, communities alienated, and the incidence of local conflict increased. In countries, such as Liberia and DRC, where management and control capacity in the field is all but absent, these problems are even more acute, and have in the past been associated with violent armed conflict and regional instability.

40. Making the industrial scale logging concession system work has been a major preoccupation for the World Bank and others, including European governments, in many countries.

41. In Cambodia the Bank funded the Cambodia Forest Concession Management and Control Pilot Project from 2000-05. This project was subsequently the subject of an Inspection Panel investigation, as were Bank activities in the forest sector in DRC. The Cambodia Inspection Panel Investigation Report (IPIR), issued in July 2006, found that: "... one could hardly overemphasise the negative effects of the logging on ... very poor and vulnerable rural communities and indigenous peoples." The Inspection Panel also found that concession logging had "contributed to significant degradation of Cambodia's natural forests and has hastened the conversion of forests to other forms of land use."

42. David Kaimowitz, the former Director General of the Center for International Forestry Research (CIFOR), has described concession logging as "a system that has consistently proved itself to be problematic" and one for which there is "inadequate information about how to make it work properly".

43. That the industrial scale-logging paradigm has failed is not just the view of forest management experts and it is not limited to Cambodia. On 25 July 2006 for example, Baroness Amos, the UK Government's House of Lords spokesperson on international development said: "There is a growing consensus that the traditional concession-based industrial logging model does not generate the desired economic, social and environmental benefits."

44. Even the World Bank has stated recently that "Industrial timber production has a poor record in Africa. Over the past 60 years, there is little evidence that it has lifted rural populations out of poverty or contributed in other meaningful and sustainable ways to local and national development."[31]

45. The Independent Forest Sector Review team in Cambodia concluded that, "the main gainers from the concession system were those allocated concession rights in the first instance." More often than not this has been the case wherever industrial loggers have operated and must not be repeated with respect to forest carbon finance.

GOVERNMENT SUSTAINABLE PROCUREMENT OF FOREST PRODUCTS

46. For information relating to the problems associated with forest certification please see for example: http://www.fsc-watch.org/. The Forest Stewardship Council is probably more credible than the other certification schemes accepted by the UK government as proof of sustainability.

THE SUCCESS OR OTHERWISE OF THE EU FOREST LAW ENFORCEMENT, GOVERNANCE AND TRADE (FLEGT) ACTION PLAN, AND GOVERNMENT SUPPORT FOR IT

47. FLEGT and the associated Voluntary Partnership Agreements (VPAs) can help address illegal deforestation, degradation and forest sector governance. Lessons learned from the FLEGT programme could and should inform the debate about how forests, and the people, who live in and depend upon them, can help in the fight against global warming. Minimum requirements for meaningful consultation developed in the context of negotiating VPAs may provide valuable guidance.

48. It should be noted however that there is a danger that FLEGT will further entrench the failed industrial scale logging paradigm, making degradation and deforestation more likely.

49. It should also be noted that after prevaricating for over five years, the European Commission decided, on 17 October 2008, not to make it illegal to import illegally harvested timber into Europe. The long-awaited proposal for a regulation, "Laying down the obligations of operators who place timber and timber products on the market", instead adopts a systems-based approach.

50. Under the proposed regulation operators have to exercise due diligence to minimise the risk of placing illegally harvested timber and timber products on the market. In turn, it is envisaged that competent authorities in member states will carry out checks to verify if operators are complying with the provisions of the regulation. This is likely to detract from efforts to detect illegal timber imports. In the event of non-compliance operators maybe required to carry out corrective measures.

51. Assessing whether or not a timber trader has exercised due diligence is inherently subjective. Unless being caught in possession of illegal timber is treated as de facto proof of a failure to comply, this legislation is very unlikely to provide a deterrent to the determined illegal operator.

52. By way of contrast, legislation passed in the U.S. on 22 May 2008, makes it illegal for a person or company to "import, export, transport, sell, receive, acquire, or purchase" timber or timber products" illegally "taken, harvested, possessed, transported, sold or exported."[32] The beauty of the U.S. Lacey Act is that it is entirely objective, if you are caught with illegal timber you have committed an offence.

53. The Lacey Act creates a number of offences depending on the operator's degree of knowledge at the time of the offence. Knowingly engaging in prohibited conduct could result in a fine of up to $500,000 for a company, $250,000 for a person or twice the maximum value of the transaction. In addition they face a possible prison sentence of up to five years and forfeiture of the goods. Being required to undertake "corrective measures" is unlikely to be as effective a deterrent as the prospect of five years in prison.

54. Timber and timber products from VPA countries will be considered legal for the purposes of the proposed regulation. Effectively this means that timber illegally logged in a third country can be laundered into the system via a partner country and enter Europe accompanied by a valid legality licence, thereby compounding the problems associated with the Commissions earlier directive on illegal logging.[33]

55. As it stands, this legislation is unlikely to have much impact on the illegal timber trade in Europe. In coming months it is essential therefore that the European Parliament and Council of Ministers agree to the changes that are necessary to make this legislation effective.

PLANTATIONS ARE NOT THE SAME AS NATURAL FORESTS

56. The UNFCCC defines a forests as, "a minimum area of land of 0.05-1.0 hectares with tree crown cover (or equivalent stocking level) of more than 10-30% with trees with the potential to reach a minimum height of 2-5 metres at maturity in situ. A forest may consist either of closed forest formations where trees of various storeys and undergrowth cover a high proportion of the ground or open forest. Young natural stands and all plantations which have yet to reach a crown density of 10-30% or tree height of 2-5 metres are included under forest, as are areas normally forming part of the forest area which are temporarily unstocked as a result of human intervention such as harvesting or natural causes but which are expected to revert to forest."

57. It is Global Witness' view, and that of many other NGOs, that plantations should not be included in the UNFCCC's definition of forest. It is widely accepted that a plantation does not have the same characteristics as a natural forest. Plantations contain only a fraction of the carbon and biodiversity that natural forests have. Monoculture plantations in particular deplete soil quality and water resources, and have many adverse environmental and social impacts. Positive incentives aimed at sustaining standing forests must not end up profiting plantations.

20 October 2008