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Memorandum by the Joint Nature Conservation Committee (FOR10)
Summary of key points
1. With regard to the potential for REDD-related carbon offsets, tropical forests, including soils as well as biomass, are of greatest interest. Tropical ecosystems, home to most of the world's terrestrial biodiversity, a source of basic needs and income for millions of the world's poorest people as well as timber for international trade, also suffer the highest rates of deforestation.
2. With pressure on tropical forests coming from a variety of sources, the potential for carbon markets to improve protection for tropical forests will depend on the ability of REDD funds to successfully support the development and application of institutional measures. Which should address the needs of all forest stakeholders, especially local people but also diverse commercial interests as well as various levels of government administration.
3. The significant potential environmental benefits and risks of carbon set-aside forests derive from the multiplicity of ecosystem goods and services that forests can provide. The potential complementarity of managing for carbon and other ecosystem services holds promise of a wide range of benefits. Risks include the displacement of demand ('leakage'), shifting management objectives and climate change, all of which could jeopardise the permanence of forest reserves.
4. Social benefits and risks, also potentially significant, would stem from the sheer volume of funds that might be mobilised and their application. The poverty of forest-dependent peoples could be significantly reduced, their skills enhanced and jobs created through well-targeted development projects. Risks include further impoverishment, if such schemes bar local people from access to traditional forest resources, result in land grabs by the state and/or local elites, or foster conflict over the newly more valuable forest resources.
5. To the extent that wood products are, in effect, static carbon sinks, the timber trade and the forest products industry have an opportunity to play an important role in this new commercial environment. Innovative management paradigms that include carbon storage objectives would need to be underpinned by renewed political commitment to work with local communities, to fight corruption at every level and to ensure sustainable forest management.
6. Assuming institutional mechanisms can be established that secure improved forest protection, the success of REDD-related carbon offsets in achieving climate change mitigation will turn on whether a) in the time available, the scale of the effort will be sufficient to make significant impact, and (b) such schemes will divert attention from desperately needed behavioural changes across all sectors and in all societies. House of Commons Environmental Audit Committee inquiry Forests: the future role of
carbon markets in their protection
Memorandum by the Joint
Nature Conservation Committee,
The Joint Nature
Conservation Committee (JNCC) is the statutory adviser to Government on
Our submission focuses on the environmental risks and benefits of using financial mechanisms to protect forests globally, in particular through reducing emissions from deforestation and forest degradation (REDD).
1. Forests and carbon
1.1 Photosynthesis, nature's means of capturing carbon, provides the basis for plant growth and reproduction. Forests, some of the most varied and complex assemblages of plant and animal species, presently cover just under a third of the Earth's total land area and contain about 60% of the carbon held in terrestrial ecosystems, half as much again as the atmosphere[1]. The distribution of carbon within the ecosystem differs by forest type however. In boreal forests, soils hold as much as five times the amount of carbon as above-ground biomass, whereas in tropical systems the ratio is closer to one[2].
1.2 On the basis of data
collected over the past decade, scientists estimate that human-caused emissions
from deforestation amount to about a fifth of total global carbon emissions - the
third largest source of emissions after energy and industrial processes and
more than the entire world's road transport[3].
With over 90% of deforestation occurring in tropical forests,
1.3 Although total forest area continues to decrease globally, the actual rate of annual net loss, now just over 7%, is decreasing[5]. The protection of forests through reserve and certification schemes is becoming more commonplace and in some regions forest cover is actually increasing. Tropical forests have the greatest primary productivity (consequently storing more carbon than others) and the greatest biodiversity. However, these forests are the most affected by encroachment and conversion and are disappearing at a rate of about 5% per decade[6], as they exist generally in countries whose populations are predominantly poor and desperately in need of development infrastructure, especially clean water supply, health clinics, education and electricity. From society's perspective forests are not only the source of economic and non-economic goods and services but also landscape elements of important historical, social and cultural significance. 1.4 Farming and ranching account for three quarters of forest conversion, or deforestation[7]. From an economic perspective, preserving forests is often not a very attractive business proposition given the length of time needed to recover a return on this investment. Consequently, forests are converted to other land uses even though the financial returns from these alternatives often appear not very high[8]. Thus, the Stern report concluded that "Curbing deforestation is a highly cost-effective way of reducing greenhouse gas emissions and has the potential to offer significant reductions fairly quickly. It also helps preserve biodiversity and protect soil and water quality...."[9].
2. Carbon markets
2.1 Carbon trading
mechanisms, including forestry measures, have been operating under various
auspices since 1997. In December 2007 the international conference in
2.2 Although the potential cost of reducing emissions by averting deforestation and forest degradation vary[11], it is estimated the cost of conservation would be a small fraction of the price of other, non-forest related, carbon securities. The simplest approach may be to incorporate REDD-related carbon credits into the existing UN carbon trading mechanisms. Some would argue, however, that this would flood the system with cheap credits and thus reduce their price. If this happens, there is the danger that industrialised countries would be able to meet emission control targets with cheap REDD offset credits and would avoid making any real emission reductions at home[12]. While the concept of paying for forest carbon and thus forestalling deforestation is an attractive concept from several perspectives, there remains the difficulty of insuring that the money gets to the people who actually affect the fate of the forest, in which case transaction costs may become a serious consideration.
3. Potential role of carbon markets in protecting forests
3.1 Deforestation stems from diverse demands on forest resources, in particular the demand for land expansion of agriculture, establishment of orchards and plantations, construction of hydroelectric dams and village growth. Conversion of forest to alternative land uses has been a part of nation-building for millennia. Countries rich in forest seek to transform what they perceive as their natural capital into assets more directly capable of meeting national needs. Without effective measures to restrain deforestation, it is estimated that the clearing of tropical forests will release an additional 84 to 130 gigatonnes of carbon, roughly equivalent to more than a decade of global fossil fuel emissions (at current rates)[13].
3.2 Carbon markets, which can provide significant investment funds, offer the possibility of moderating demands on forests while providing the means to reach development goals. Carbon markets, however, are unlikely to eliminate pressure on forest land completely.
3.3 Increased climate variability and change will pose a profound threat to forest ecosystems and render many forests susceptible to a variety of man-made and natural calamities, including wild fire, pests and invasive species. Contrary to previous assumptions, recent research indicates that the ability of both terrestrial and marine systems to sink carbon will likely be compromised by changing climatic conditions. Global warming and related impacts will very likely overwhelm any fertilising impacts of CO2 and further reduce carbon sequestration[14]. Illegal and unconstrained logging will only exacerbate the impacts of climate change. Carbon markets will not be able to eliminate this threat.
3.4 Because of the range of threats facing forests, consideration should be given to setting aside a greater area than that enabled by carbon financing alone. In addition to the need for carbon sequestration, there is a need to protect the biodiversity that underpins the other ecosystem services provided by forests from the impacts of climate change. Consideration should be given to enabling REDD mechanisms to provide greater support for forest restoration, enhancement, and resilience strengthening, as well as research on innovative forest management systems.
3.5 Apart from the issues of sovereignty and monitoring associated with the establishment of REDD-related carbon finance mechanisms, there will be significant challenges in organising schemes that ensure that environmental and socio-economic benefits are persistent, even permanent. Without doubt, the key to a successful environmental outcome will be getting the socio-economic measures correct.
4. Environmental benefits and risks
4.1 While the potential environmental benefits of carbon markets for forest set-asides are clear, the risks may be less so. Forests set aside as carbon offsets could become de facto nature reserves offering protection of ecosystem services, for example, those related to soil and water. Without addressing the underlying drivers of deforestation, however, we risk shifting legitimate demand for agricultural land and forest products onto other forest areas, perhaps areas more environmentally vulnerable. Thus, environmental risks may arise from displaced demand ('leakage') as the pressure on forest resources is transferred to new locations, or from market instability. To the extent that carbon offsets would limit raw materials reaching the market, set-asides may drive up prices for timber and other forest products, especially locally. Should carbon markets prove very volatile or unreliable as a regular source of income, or fail altogether, these erstwhile nature reserves could be at particular risk. As population increases, the demand for cropland will grow. Unremunerative forests risk becoming once again subject to uncontrolled logging and land-use conversion.
4.2 There has also been some discussion about limiting REDD-related payments to those areas under greatest threat of deforestation and degradation. While this is a laudable objective, there is also a risk that such criteria may generate perverse incentives that actually foster deforestation. It might be possible to limit eligibility, but the result would probably increase transaction costs.
4.3 Finally, it should be noted that presently the interest in the protection of natural forests centres on their carbon stores. In future, carbon sequestration, as opposed to stores (the process as opposed to the product), may become of greater interest. To the extent that focus shifts to the cultivation of plants especially efficient, either naturally or artificially (genetically enhanced), in 'sinking' carbon, the pressure for forest land conversion may re-emerge.
5. Social benefits and risks
5.1 From the social perspective the benefit of carbon markets for REDD offsets stems from the potentially very large amounts of money that could be raised for supporting development projects for the people traditionally dependent on forest resources. Theoretically the monies raised through this mechanism could fund action by the participating recipient countries to meet the Millennium Development Goals, while reducing pressure on forest resources. Whether the money available through carbon markets actually provides funding for critical infrastructure development, social services and job creation for the rural poor will depend on the institutions established and their management.
5.2 Certainly the success of the market for forest-related carbon storage and sequestration will have as much to do with who will reap the benefits as how much those benefits will be. Insuring that all stakeholders benefit is crucial. Non-governmental organisations and others with field experience stress the importance of REDD revenues reaching the rural poor who rely on the forest for their livelihood[15]. In many developing countries undefined, vague or ill-defended land ownership and use rights are the biggest impediment to sustainable forest management. It is axiomatic that markets, such as proposed for the REDD mechanism, only work if resource ownership is well-defined and if the payments get into the hands of actual land-use decision makers.
5.3 Decisions to manage tropical
forest landscapes for carbon have significant implications for the communities
that depend on the forests and associated production systems. Maintaining a development
trajectory that improves human well-being in a socially equitable manner while
maximising carbon storage, maintaining biodiversity and ecosystem services, and
facilitating adaptation to climate change will be challenging. There is the risk
that millions of poor people who depend on the forest for their basic needs (food,
fuel, building materials and natural products that can be sold or bartered for
other necessities) will be denied access to traditional resources, pushed
further into penury, or forced to relocate. For many poor people, essentially
the socially and economically
marginalised, the forests provide the only 'social
security' (or 'national insurance') they know. During the economic downturn in south-east
5.4 The problems that plague sustainable forest management in the tropics, including uncertain tenure rights, weak institutions, lax law enforcement, and inadequately resourced administrations, would also afflict carbon forest management schemes. Indeed, with a REDD-inspired carbon market increasing the value of the forest, there is a risk that abuses over land rights may increase. In anticipation of large payouts, both state as well as elite private interests could attempt to seize control of forest assets at the expense of local communities. In this way REDD could quite possibly lead to the loss of land, the further disenfranchisement of local people and increased conflict over resources.
6. Potential impacts of REDD-related carbon markets on the timber trade
6.1 Over the past couple of decades commercial forestry has evolved from an activity of mainly the temperate and boreal forests to one of tropical and subtropical regions. With the rapid expansion of area under forest plantations, it is now estimated that by the middle of the 21st century as much as 75% of all industrial roundwood will be commercially grown[17]. Global wood requirements, it is said, could be met by only 2% of the world's total forest area[18]. If this is correct, then there should be considerable potential for carbon reserves without significant adverse affects on forest industry and trade.
6.2 Trees are both a mechanism for sinking as well as sequestering carbon, in short, the factory and the warehouse. The trade in timber, the raw material of the wood products industry, could be considered as trade in 'sunk carbon'. Although wood recovery from timber harvesting operations could be improved in many regions, increased efficiency in wood processing over the past few decades has led to better recovery of raw material, giving rise to new products and the increased use of factory waste as fuel stocks. Bioenergy production from forestry residues and the substitution of wood products for fossil-fuel intensive materials could further increase the sector's contribution to climate change mitigation[19].
6.3 The
6.4 To capitalise on significant potential, forestry will need to refine existing management regimes for producing multiple goods and services to reflect new priorities, including carbon storage. It would be hoped that REDD-related funding will be available to support increased forestry research to enhance the knowledge base needed to meet the new objectives. Institutional innovation and better governance, as promoted by the EU's Forest Law Enforcement, Governance and Trade (FLEGT) programme, are essential if the forest sector is to meet expectations. Broad international resistance to illegally harvested timber is needed not only to support sustainable forest management but to counter political regimes that finance their existence with conflict timber. Reduced-impact harvesting systems would permit less environmentally disruptive timber production with increased employment opportunities, more varied outputs and reduced carbon emissions. Such options may be attractive to local communities seeking to maintain traditional culture and lifestyles.
7. Conclusions
7.1 There has been considerable interest from diverse quarters in formalising the institutional arrangements associated with investments in carbon offsets aimed at reducing deforestation and forest degradation. REDD-related carbon offset investments have the potential to accomplish diverse environmental goals and provide extensive social benefits. However, care should be taken not to exaggerate potential benefits, for as one study cautioned, areas of "highest biodiversity threats and human development needs may exist in countries that have limited income potential"[23]. Moreover, although many successful projects have been undertaken since trading in emissions units began, other authors suggest that given the piecemeal approach characteristic of the carbon markets currently emerging, it is unlikely that REDD-related investments will succeed in reducing greenhouse gas emissions to the extent required in the time available[24].
7.2 It should be noted that to the extent that REDD schemes foster a perception that the emissions problem can be solved elsewhere, that is, in developing countries, as opposed to becoming a joint, global effort, they risk becoming counter-productive. From the perspective of many in society as well as the political arena, such investments overseas, seemingly almost beyond our control and prone to uncertain outcomes, may actually contribute to a sense of increased vulnerability and insecurity. The business community seems to prefer a multi-pronged approach, i.e., investment in innovation, new technology and revised operational procedures, as well as carbon offsets, both domestic and international. Successful REDD initiatives will undoubtedly require a combination of government interventions and concerted actions by both producers and consumers of forest products and global co-operation. It is widely agreed that any significant reduction of greenhouse gas emissions will definitely require the participation of all economic sectors, especially forestry, energy and agriculture - sectors often at the core of the economic and political structures of many countries.
7.3 Recognising the motivating ability of markets, we should be alert to the opportunity afforded by REDD-related carbon trading to develop a wider appreciation of the variety of environmental services provided by forest ecosystems. Reserving forests with the objective of reducing carbon emissions will give humanity time to develop the technology needed for 'decarbonising' energy and industrial production. If, in the future, the market for carbon were to decline, it may be advantageous, both from an environmental as well social perspective, to be able to maintain the flow of this funding to many countries as payments for other environmental services, such as water regulation or biodiversity conservation.
7.4 Clearly there are many potential pitfalls in the path of developing REDD-related financing. It presents, however, an excellent opportunity for mobilising multi-national, cross-sectoral concerted action on two related, very important topics, namely climate change and forest conservation. Such efforts will be buoyed by considerable support generated for REDD at a time when deforestation rates are beginning to slow and the concept of climate change is increasingly receiving wider acceptance.
13 October 2008
[1] Streck C. et al. 2008. Climate change and forests: emerging policy and market opportunities.
[2] Ibid. [3] IPCC. 2007. Climate Change 2007: The Physical Science
Basis. [4]
Food and Agriculture Organization (FAO). 2006. [5] Ibid. [6] Ibid. [7] Geist, H.J. and E.F. Lambin. 2001. What drives tropical deforestation. Louvain-la-Neuve: LUCC International Project Office. [8] Strassburg, B. et al. 2008. An empirically-derived mechanism of combined incentives to reduce
emissions from deforestation. CSERGE Working Paper ECM08-01. Centre for
Social and Economic Research on the Global Environment, [9] Stern, N.H. 2006. The Stern Review: The Economics of Climate
Change. [10] World
Bank.
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