Avoided Deforestation

Prospects for Mitigating Climate Change

Charles Palmer, Stefanie Engel

• Publisher: Taylor & Francis
• Year: 2009
• Print ISBN: 9780415447126
• eBook ISBN: 9781134063109
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Avoided deforestation can be characterized as the use of financial incentives to reduce rates of deforestation and forest degradation, with much of the focus on forests in tropical countries.

While avoided deforestation, as a policy issue, is not new, the current debate in academic and policy circles on including it in future climate change mitigation strategies such as the Clean Development Mechanism is gathering pace – and this debate is only likely to intensify as negotiations continue over what should be included in the successor agreement to the Kyoto Protocol, which is set to expire in 2012.

Up until now, however, the debate in terms of the scientific and economic implications of avoided deforestation has not been brought together. This book aims to bring together important research findings in the area along with their policy implications, whilst linking avoided deforestation to political economy as well as to the latest developments in environmental and natural resource economics.

1 Introduction

Reducing CO₂ emissions through avoided deforestation?

Charles Palmer and Stefanie Engel

Evidence for anthropogenic warming of the climate system as a consequence of greenhouse gas (GHG) emissions, including CO₂ (carbon dioxide), into the earth’s atmosphere is unequivocal (IPCC, 2007). Annual CO₂ emissions from deforestation in tropical and sub-tropical countries accounts for up to one-fifth of global emissions (Baumert et al., 2005). Conserving carbon stored in biomass could be a cost-effective strategy to mitigate future climate change impacts (see Chomitz et al., 2006; Stern, 2007). Reducing emissions from deforestation was, however, excluded from the climate change regime that resulted from the Kyoto Protocol negotiations, held during the 1990s. The first commitment period of Kyoto is due to end in 2012. At the Bali Conference of the Parties (COP-13) in December 2007, countries agreed to reconsider emissions reductions through reducing deforestation as a potential component of a post-2012 climate change regime (UNFCCC, 2007).

Following COP-14 held in Poznan in December 2008, more precise rules and modalities are still to be developed by COP-15, which is due to take place in Copenhagen in December 2009. Many open questions remain on how reducing deforestation could be credibly incorporated into a climate regime. There is, therefore, a need to take stock and consider the merits of such a mitigation strategy and how it might be implemented on the ground. This is the motivation for the present volume, which aims to assess the potential of so-called ‘reducing emissions from deforestation and degradation’ (REDD)¹ mechanisms from the perspective of economics and policymaking.

Forests and climate change

According to widely cited data published by the World Resources Institute (see Baumert et al., 2005), global anthropogenic GHG emissions, dominated by CO₂ (carbon dioxide), are mainly given off via the burning of fossil fuels and from agriculture and land-use changes. Emissions from deforestation and forest degradation occur as carbon stock is depleted and released to the atmosphere through changes in forest and other woody biomass stock, forest and grass land conversion, the abandonment of managed land and forest fires. A 20 per cent decrease in forest area since 1850 has contributed to 90 per cent of emissions from land-use changes (IPCC, 2001). Throughout the 1990s around 1.5 billion tons of carbon (GtC) was released annually through deforestation (Gullison et al., 2007). Two countries, Indonesia and Brazil, dominate CO₂ emissions released through deforestation and as a result are, respectively, the third and fourth largest GHG emitters in the world, behind the United States and China (Houghton, 2003; cited in Baumert et al., 2005).

Impacts of climate change

Anthropogenic interference in the climate system is a real and growing threat to people, economies and the environment (Chomitz et al., 2006). On current trends, the average global temperature could rise by 2–3°C within the next 50 years. This rise is likely to change the earth’s climate rapidly, for example, leading to rising sea levels and a higher frequency of heatwaves and heavy precipitation (IPCC, 2007). Business-as-usual or ‘baseline’ climate change implies increasingly severe economic impacts if action is not taken to mitigate the worse effects.

Climate change can perhaps be characterized as the world’s largest ‘market failure’ (Stern, 2007). The earth’s atmosphere, into which anthropogenic GHG are emitted, is a global public good, i.e. it is non-rival and non-excludable. These emissions are an externality in that those who produce them impose social costs on the world and future generations but do not face the full consequences of their actions. The actual source of emissions, whether producer or consumer, rich or poor, is irrelevant to the overall growth in global GHG stocks and the corresponding, future changes in the climate. Nevertheless, the worst impacts of climate change are expected to fall disproportionately on people living in some of the poorest regions of the world. People living in these regions are the most vulnerable to adverse changes in, for example, food production and water resources.

Climate change policy

The global causes and consequences of climate change imply the need for international collective action for an efficient, effective and equitable policy response. The first global attempt to put a price on the social costs of emissions by stabilizing the amount of GHG in the atmosphere was seen in the formation of the United Nations Framework Convention on Climate Change (UNFCCC). Ratified by 182 parties as of May 2008 (UNFCCC, 2008), the Kyoto Protocol of the UNFCCC originally entered into force in 2005. It committed Annex I, mainly industrialized countries to reducing their collective GHG emissions by about 5 per cent below their 1990 levels by 2008–2012. In fulfilling these commitments, countries are able to achieve reductions in their emissions through several mechanisms including the clean development mechanism (CDM). The CDM allows entities in non-Annex I countries to develop ‘offset’ projects leading to verified reductions in GHG emissions emitted from Annex I countries. So-called certified emissions reductions (CERs) are then transferred to Annex I countries at a price set by the carbon markets.

Reducing GHG emissions in order to stabilize the climate requires the deployment of a portfolio of GHG emissions-reducing technologies along with the application of appropriate and effective incentives (IPCC, 2007). These include adaptation and mitigation measures such as carbon storage and capture and reducing deforestation, all with varying, generally uncertain, costs. None of these measures on its own, for example, the halting of all deforestation, would achieve the UNFCCC’s goal (Pacala and Socolow, 2004). But conserving forest carbon could likely be an important part of the climate change solution, particularly if it proves to be cost effective compared to other mitigation options (see Chomitz et al., 2006; Stern, 2007). Negotiations on the types of admissible project in Kyoto included a range of options for increasing forest stock and removing carbon from the atmosphere. Reducing emissions from deforestation was discussed, but was finally excluded from the CDM (see later).

Forests as carbon sources and sinks

The Forest Resources Assessment (FAO, 2006) estimated that one-third of the earth’s land surface, up to 4 billion hectares, is covered by forest. Of this, around half is located in the tropics and subtropics. The largest intact tropical forests are found in the Amazon Basin (Brazil), the Congo Basin (Democratic Republic of the Congo) and in the Indo-Malayan region (Indonesia, Malaysia and Papua New Guinea). These forests provide important traded and non-traded environmental goods and services, including carbon. Tropical forests have particularly high carbon stocks, perhaps holding as much as 50 per cent more carbon per hectare than forests in other regions (Houghton, 2005). In terms of economic value, even relatively low traded carbon values have been found to comfortably dominate the non-market values of other tropical forest environmental services (see Pearce et al., 2002). These include direct use values, although perhaps excluding the returns from unsustainable timber extraction.

Over the past century, tropical deforestation and forest degradation have increased dramatically. The former occurred at an average rate of 13 million hectares per year, between 1990 and 2005 (FAO, 2001, 2006). Brazil and Indonesia accounted for, on average, around 40 per cent of annual deforestation by area over this period. The causes of the continuing loss and degradation of tropical forests are many, varied and complex (Chomitz et al., 2006; Geist and Lambin, 2002; Kaimowitz and Angelsen, 1998). However, understanding these is important for the design and implementation of policy to reverse their effects, whether related to policy to reduce CO₂ emissions or not. This requires identifying the underlying market and policy failures and understanding how these relate to activities both inside and outside the forest sector. The latter include those related to agriculture, migration and infrastructural development. Recent government and non-government efforts to slow down or reverse overall deforestation and degradation trends, either through forest policy or policy made in other sectors have been relatively unsuccessful for various reasons (see Bulte and Engel, 2006). Given the many interlinked pressures on forests, the challenge now for climate policy is to design a strategy for capturing the carbon value of natural forest stock that is not only effective but also efficient and equitable.

Avoided deforestation and climate change policy

Without effective policies to slow deforestation, business-as-usual tropical deforestation could release up to 130 GtC by 2100 (Houghton, 2005). ‘Avoided deforestation’ is a concept where countries are compensated for preventing deforestation that would otherwise occur (Chomitz et al., 2006). Reducing emissions by slowing deforestation could be a substantial and important component of climate mitigation policy, and has been discussed as such by researchers and policymakers for a number of years (see, for example, Brown et al., 1996; Schneider, 1998). The available evidence shows that potential carbon savings from slowing tropical deforestation could contribute substantially to overall emissions reductions. Moreover, forests protected from deforestation could persist in the coming decades despite ‘unavoidable’ climate change (Gullison et al., 2007). Possible side benefits from the realization of natural forest carbon values include other forest environmental values such as biodiversity.

Avoided deforestation projects were excluded from the 2008–2012 first commitment period of the Kyoto Protocol’s CDM due to a number of concerns revolving around sovereignty and methodological issues (Fearnside, 2001; Laurance, 2007). The former arose as a consequence of forests per se not being considered as a global public good despite the public good nature of some forest services. Since exclusion, discussions have been ongoing to try to resolve these concerns through, for example, the UNFCCC’s recent 2-year initiative (Subsidiary Body on Scientific and Technical Advice or SBSTA). This has acted as a useful forum for assessing new policy approaches and incentives for REDD in developing countries. Meanwhile, tropical forest nations such as Brazil, Costa Rica and Papua New Guinea have been floating various initiatives to protect forests through utilizing their value as carbon sinks.² Forest carbon finance has also been endorsed by the United Nations, the World Bank, and the majority of nation states, with the Bank’s forest carbon partnership facility (FCPF) aiming to attract US$300 million in donor funding for pilot REDD schemes (World Bank Carbon Finance Unit, 2008). With support from Australia, Indonesia is hoping to be the first country to develop and host a REDD project, beginning in late 2008 (Jakarta Post, 2008).

Avoided deforestation: prospects for mitigating climate change?

The Bali and Poznan COPs are part of an ongoing process that will carry on through 2008 and 2009. It is hoped that a post-2012 international climate regime will be agreed by the end of 2009 at COP-15 in Copenhagen. Whether or not avoided deforestation or REDD will be included in a final framework agreement and what this arrangement might look like is beyond the scope of this volume.³ Instead, and for the most part, it looks at what might be gained from including REDD as a feasible option in a post-Kyoto agreement and at how some of the challenges of such inclusion could be tackled from the perspective of economics and policymaking.

Part I, consisting of three chapters, looks at the costs and benefits of avoided deforestation as a climate change mitigation strategy utilizing different approaches and sets of assumptions. Building on background research carried out for the Stern Review (2007), Maryanne Grieg-Gran examines the cost effectiveness of avoided deforestation in Chapter 2, using data collected in eight tropical forest countries. In Chapter 3, Michael Obersteiner, Georg Kindermann, Ewald Rametsteiner and Brent Sohngen summarize the results from a scenario-modelling analysis of the potential effects of financial mechanisms to avoid deforestation. Brent Sohngen utilizes a global timber market model to examine the potential for avoided deforestation to provide credits due to reductions in carbon emissions in Chapter 4. Overall, these three chapters make an important case for including avoided deforestation as a climate change strategy in any future international climate regime. However, certain barriers would need to be overcome for ensuring cost effectiveness, among ot...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• List of contributors
• Acknowledgements
• List of abbreviations
• 1 Introduction: reducing CO2 emissions through avoided deforestation?
• PART I Cost effectiveness of avoided deforestation
• PART II Policy and institutional barriers to avoided deforestation
• PART III Insights for effective and efficient avoided deforestation policy