Rights to carbon and payments for services rendered under REDD+: Options for the case of Mexico

Mexico is relatively advanced in its preparation for international policy on Reduced Emissions from Deforestation and forest Degradation (REDD+) and has many of the pre-conditions needed to support a community approach in the implementation of a national REDD+ programme, particularly as regards tenure of forests and experience with community forest management and PES schemes, although these conditions do not pertain everywhere. One critical issue that is yet to be resolved concerns rights to carbon credits and distribution of the financial benefits flowing from REDD+. We demonstrate that attribution of carbon credits from reduced deforestation and degradation at the community level is virtually impossible from a technical viewpoint, since these credits are counterfactual. Payments based on assessment of performance of each community in terms of such reductions would moreover be inequitable and inefficient. Flat rate payments in return for agreed improvements in management are likely to be more motivating and much easier to administer. However, increases in carbon stock (forest enhancement) can be physically measured on site, and could be more easily attributed to each individual community. We therefore propose a system in which reduced deforestation and degradation are considered environmental services, with credits accruing to national government. The financial value of the credits may be used to finance flat rate payments to communities who agree to implement improved management. On the other hand, credits for forest enhancement, which reflect measurable increases in carbon in the communities’ trees, would be considered environmental goods. These should be considered the direct property of the owners of the forest (in the same sense as wood or poles) and it would be possible for communities to sell these credits themselves. We acknowledge however that many other problems face implementation of REDD+ in Mexico, and provide a number of important examples.     

The Australia clause and REDD: a cautionary tale

If a binding agreement can be reached on a post-2012 international climate regime, it is likely to include the phased introduction of a market-linked mechanism for reducing emissions from deforestation and forest degradation in developing countries (REDD). Under such a scheme, countries that reduce net REDD emissions below a pre-set baseline would receive credits that could be sold in carbon markets and used by purchasing nations to meet their international mitigation obligations. This paper draws on the Australian experience with deforestation to identify some of the issues that might obstruct progress on REDD. For the past 20 years, Australia has had the highest rate of deforestation in the developed world; ~416,000 ha of forests were cleared annually between 1990 and 2009, resulting in the emission of almost 80 MtCO₂-e/yr. It is also the only developed country that will rely on reduced deforestation emissions as the primary way of meeting its quantified emissions target under the Kyoto Protocol. Australia’s approach to deforestation issues provides valuable insights into the difficulties an international REDD scheme might encounter.     

Financing REDD in developing countries: a supply and demand analysis

Reducing emissions from deforestation and forest degradation (REDD) in developing countries has been at the centre of negotiations on a renewed international climate regime. Developing countries have made it clear that their ability to engage in REDD activities would depend on obtaining sufficient and stable funding. Two alternative REDD financing options are examined to find possible ways forward: financing through a future compliance market and financing through a non-offset fund. First, global demand for hypothetical REDD credits is estimated. The demand for REDD credits would be highest with a base year of 1990, using gross—net accounting. The key factors determining demand in this scenario are the emission reduction targets and the allowable cap. A proportion of emission reduction targets available for offsets lower than 15% would fail to generate a sufficient demand for REDD. Also examined is the option of financing REDD through a fund. Indirectly linking the replenishment of a REDD fund to the market is a promising mechanism, but its feasibility depends on political will. The example of overseas development assistance for global health indicates the conditions for possible REDD financing. The best financial approach for REDD would be a flexible REDD mechanism with two tracks: a market track serving as a mitigation option for developed countries, and a fund track serving as a mitigation option for developing countries.     

Institutional dimensions of the developing REDD+ process in Cameroon

The reducing emissions from deforestation and forest degradation (REDD+) initiative has emerged in recent years as a mechanism to simultaneously address climate change, biodiversity, and poverty reduction challenges at the margins of tropical forests. Congo Basin countries, including Cameroon, have embraced the opportunities that REDD+ provides, with great expectations. Yet, it needs to be investigated whether the enabling institutional environment, which is required for implementing REDD+, is present. Understanding is still limited on how to build adequate and strong institutional relations that could shape the reforms towards the establishment of efficient emissions reductions schemes. Furthermore, uncertainty remains on the operational mechanisms of REDD+, suggesting that, to catalyse effectiveness, there is a need to come up with a governance model nested in relevant policy frameworks. This study builds on a modified ‘4Is’ framework – Institutions, Interests, Ideas and Information – to analyse REDD+ and explore stakeholders' perceptions on the local forest governance potential. A structural implementation model to optimize the effectiveness of REDD+ is developed. Findings suggest that governments need to review existing policies to take into account participation, local people rights, and information access as a way to stimulate actors' willingness to contribute to emissions reductions and carbon stock increases under REDD+ regimes.     

Lessons from carbon markets for designing an effective REDD architecture

Consideration of incentives for reducing emissions from deforestation and forest degradation (REDD) is now formally part of the post-2012 climate change negotiations. A significant amount of financing will be required to make REDD a success, but the design of the REDD architecture can determine the availability of capital. Therefore, in negotiations this should be considered at the same time and on an equal basis with methodological and political considerations. Detailed consideration is given to the type of commitment, the financing mechanism, the level of incentive allocation, and the fungibility of carbon credits, in the context of experience from existing carbon markets. We conclude that a financially successful REDD mechanism would be based on a strong regulatory framework with mandatory targets, market-based, with some degree of project-level crediting, creating fungible REDD credits, subject to a cap.     

Policy learning in REDD+ Donor Countries: Norway,Germany and the UK

REDD+ has been evolving since 2005, yet its outcomes and effectiveness in reducing deforestation and/or achieving co-benefits are still unclear. The academic literature has focused a great deal on the politics and performance of REDD+ recipient countries and on-the-ground implementation, but less so on REDD+ donor countries and not on the question of how REDD+ donor countries learn in the process of implementing REDD+. We examine the three major REDD+ donors Norway, Germany and the UK and find that their funding objectives and approaches have broadened from the original simple and focused idea of financially rewarding tropical forest countries to keep forests standing and carbon stored to land-use, co-benefits and global efforts of transformation. Modalities of learning have not kept up with the rapid changes in terms of problem definition and characterization (as ‘super wicked’), let alone the transformative organizational or even paradigmatic changes identified as needed. The experience with REDD+ is demonstrating that merely adjusting the system in incremental ways will likely not solve the problems at hand. Instead, novel modes of learning to facilitate such a transition are needed.     

What makes a ‘REDD’ country?

Despite remaining uncertainties, Reducing Emissions from Deforestation and forest Degradation in developing countries (REDD) projects are being planned and implemented across the tropics, primarily targeting countries with high forest cover and high deforestation rates. However, there is growing recognition that REDD planning requires a broadened approach; a future REDD mechanism should incentivise emissions reduction in all developing forested countries, and should address critical non-carbon dimensions of REDD implementation—quality of forest governance, conservation priorities, local rights and tenure frameworks, and sub-national project potential. When considering this broader suite of factors, different REDD priorities can emerge, including in countries with low forest cover that would be overlooked by conventional site selection criteria. Using the Philippines as a case study, the paper highlights the importance of an enabling environment to REDD implementation, and presents a more comprehensive and inclusive approach for thinking about what comprises a “REDD country.”     

Targeting areas for Reducing Emissions from Deforestation and forest Degradation (REDD+) projects in Tanzania

Reducing Emissions from Deforestation and forest Degradation (REDD+) has gained momentum as a climate mitigation strategy that can be implemented at multiple scales. Sub-nationally, REDD+ projects that aim to capture carbon funding are implemented throughout tropical countries. A spatial targeting approach for optimal REDD+ project landscape is demonstrated using Tanzania as an example. This study used GIS-based Multi-criteria Decision Analysis to identify potential areas for REDD+ projects development incorporating different combinations of criteria. The first approach, efficient targeting, focuses on areas with high forest carbon content, high deforestation risk and low opportunity cost. The second approach, co-benefits targeting, aims at areas with high biodiversity and high poverty rate on top of criteria in efficient targeting. The resulting suitability maps displays areas of high, medium and low suitability for future REDD+ projects development based on the targeting approaches. Locations of current REDD+ projects in Tanzania were also overlaid with suitability map to visually inspect how they match up. This approach allows decision-makers to prioritize preferences for various site-selection criteria and make informed decisions about REDD+ projects locations.     

Forest protection and tenure status: The key role of indigenous peoples and protected areas in Panama

Using recent land cover maps, we used matching techniques to analyze forest cover and assess effectiveness in avoiding deforestation in three main land tenure regimes in Panama, namely protected areas, indigenous territories and non-protected areas. We found that the tenure status of protected areas and indigenous territories (including comarcas and claimed lands) explains a higher rate of success in avoided deforestation than other land tenure categories, when controlling for covariate variables such us distance to roads, distance to towns, slope, and elevation. In 2008 protected areas and indigenous territories had the highest percentage of forest cover and together they hosted 77% of Panama's total mature forest area. Our study shows the promises of matching techniques as a potential tool for demonstrating and quantifying conservation efforts. We therefore propose that matching could be integrated to methodological approaches allowing compensating forests’ protectors. Because conserving forest carbon stocks in forested areas of developing countries is an essential component of REDD+ and its future success, the discussion of our results is relevant to countries or jurisdictions with high forest cover and low deforestation rates.     

Escaping the climate policy uncertainty trap: options contracts for REDD+

Climate policy uncertainty significantly hinders investments in low-carbon technologies, and the global community is behind schedule to curb carbon emissions. Strong actions will be necessary to limit the increase in global temperatures, and continued delays create risks of escalating climate change damages and future policy costs. These risks are system-wide, long-term and large-scale and thus hard to diversify across firms. Because of its unique scale, cost structure and near-term availability, Reducing Emissions from Deforestation and forest Degradation in developing countries (REDD+) has significant potential to help manage climate policy risks and facilitate the transition to lower greenhouse gas emissions. ‘Call’ options contracts in the form of the right but not the obligation to buy high-quality emissions reduction credits from jurisdictional REDD+ programmes at a predetermined price per ton of CO₂ could help unlock this potential despite the current lack of carbon markets that accept REDD+ for compliance. This approach could provide a globally important cost-containment mechanism and insurance for firms against higher future carbon prices, while channelling finance to avoid deforestation until policy uncertainties decline and carbon markets scale up.

Key policy insights

• Climate policy uncertainty discourages abatement investments, exposing firms to an escalating systemic risk of future rapid increases in emission control expenditures.

• This situation poses a risk of an abatement ‘short squeeze,’ paralleling the case in financial markets when prices jump sharply as investors rush to square accounts on an investment they have sold ‘short’, one they have bet against and promised to repay later in anticipation of falling prices.

• There is likely to be a willingness to pay for mechanisms that hedge the risks of abruptly rising carbon prices, in particular for ‘call’ options, the right but not the obligation to buy high-quality emissions reduction credits at a predetermined price, due to the significantly lower upfront capital expenditure compared to other hedging alternatives.

• Establishing rules as soon as possible for compliance market acceptance of high-quality emissions reductions credits from REDD+ would facilitate REDD+ transactions, including via options-based contracts, which could help fill the gap of uncertain climate policies in the short and medium term.

     

Creating incentives for avoiding further deforestation: the nested approach

Since 2005, Parties to the UNFCCC have been negotiating policy options for incentivizing reductions of (greenhouse gas) emissions from deforestation and degradation (REDD) in a future climate regime. Proposals on how to operationalize REDD range from market-based to pure fund-based approaches. Most of the current proposals suggest accounting for REDD at the national level. Accounting for emission reductions and implementing policy reform for curbing deforestation will take time and imply high levels of technical and institutional capacity. Therefore it is essential that developing countries receive sufficient support to implement national REDD programmes. To save time and ensure prompt action in reducing deforestation, a REDD approach is proposed that integrates project-level and subnational REDD schemes into national-level accounting. This ‘nested approach’ can achieve meaningful reductions in GHG emissions from improved forest governance and management, while allowing for an immediate and broad participation by developing countries, civil society and the private sector.     

Agricultural soil carbon accumulation in North America: considerations for climate policy

The Kyoto Protocol introduces the possibility that changes in carbon stock on agricultural and forest land and soils may be counted against countries’ commitments to reduce their greenhouse gas emissions. Including activities related to land use change and forestry in the international climate change agreement may stimulate new incentives for soil-conservation practices domestically. However, a primary criteria for their inclusion relates to the level of accuracy and transparency with which carbon stock changes can be assessed. Parties will also be concerned with the wider environmental impact of different sequestration practices, and the impact of offsets on overall emissions targets. This paper examines these issues for agricultural soils, considering recent research in North America. It is argued that incentives for carbon sequestration practices may need to be implemented independently of actual stock changes because farm-level soil monitoring would be very costly. In the USA, priority should be given to establishing incentives for cover crops and to expanding conservation tillage programs. These activities provide a range of ancillary environmental benefits. In contrast, improvements in biomass yield tend to rely on higher fertilizer inputs with their related environmental costs. Carbon accumulated through any of these activities is easily lost if the practices are discontinued, and so assessment procedures are needed that would avoid overestimating sequestration. Annual accumulation in agricultural soils could be equivalent to about 10% of Annex I carbon dioxide emissions, and therefore options for limiting sink credits from soils should be considered.     

REDD herrings or REDD menace: Response to Beymer-Farris and Bassett

Norwegian funded REDD+ projects in Tanzania have attracted a lot of attention, as has the wider REDD+ policy that aims to reduce deforestation and degradation and enhance carbon storage in forests of the developing countries. One of these REDD+ projects, managed by WWF Tanzania, was criticised in a scientific paper published in GEC, and consequently in the global media, for being linked to attempted evictions of communities living in the Rufiji delta mangroves by the Government of Tanzania, allegedly to make the area ‘ready for REDD’. In this response, we show how this eviction event in Rufiji mangroves has a history stretching back over 100 years, has nothing to do with REDD+ or any policy changes by government, and is not in any way linked to the work of any WWF project in Tanzania. We also outline some of the broader challenges faced by REDD+ in Tanzania.     

Mitigation options for the Bangladesh forestry sector: implications of the CDM

The Clean Development Mechanism (CDM) under the Kyoto Protocol has expedited various global warming mitigation opportunities that allow Bangladesh to receive investments from those Annex I countries wishing to offset their emissions of greenhouse gases. Bangladesh has a special interest in strategies for combating global warming because its large areas that need to be planted represent a potentially large carbon sink, and at the same time its high rate of deforestation represents a huge carbon source. To properly assign carbon credits within the forestry sector of Bangladesh, a number of important issues and uncertainties need to be examined and resolved. Afforestation and reforestation (A/R) offers opportunities for carbon credits, which is subject to the end-use of the forest products. A/R may be the best option, as well as conserving the existing carbon sink offered by Bangladesh for mitigating global warming. This article discusses the legal issues raised in combating global warming; the potential of the Bangladesh forestry sector to combat global warming; implications of the forestry options for different land uses; and issues to be settled regarding carbon credits. Future policy and governance issues are considered which will enable the Bangladesh forestry sector to mitigate global warming and to obtain carbon credits.     

Forest tenure reform in the age of climate change: Lessons for REDD+

Numerous authors have stressed the importance of guaranteeing and protecting the tenure and human rights of indigenous and other forest-based communities under schemes for reducing emissions from deforestation and forest degradation (REDD, or REDD+); and important international indigenous organizations have spoken out strongly against REDD+. This article examines two specific issues that present risks for local communities: rights to forests and rules for resource use. It draws on the findings of a study conducted by the Center for International Forestry Research (CIFOR) on forest tenure reforms in selected countries in Asia, Africa and Latin America from 2006 to 2008. The study underlines the numerous obstacles faced by communities after rights are won, in moving from statutory rights to their implementation and to access to benefits on the ground. It argues that there is currently little reason to expect better results from national policies under REDD+ without binding agreements to protect local rights.     

Biological carbon sequestration and carbon trading re-visited

Biological activities that sequester carbon create CO₂ offset credits that could obviate the need for reductions in fossil fuel use. Credits are earned by storing carbon in terrestrial ecosystems and wood products, although CO₂ emissions are also mitigated by delaying deforestation, which accounts for one-quarter of anthropogenic CO₂ emissions. However, non-permanent carbon offsets from biological activities are difficult to compare with each other and with emissions reduction because they differ in how long they prevent CO₂ from entering the atmosphere. This is the duration problem. It results in uncertainty and makes it hard to determine the legitimacy of biological activities in mitigating climate change. Measuring, verifying and monitoring the carbon sequestered in sinks greatly increases transaction costs and leads to rent seeking by sellers of dubious sink credits. While biological sink activities undoubtedly help mitigate climate change and should not be neglected, it is shown that there are limits to the substitutability between temporary offset credits from these activities and emissions reduction, and that this has implications for carbon trading. A possible solution to inherent incommensurability between temporary and permanent credits is also suggested.     

Community perceptions of REDD+: a case study from Papua New Guinea

REDD projects have received considerable attention for their potential to mitigate the effects of climatic change. However, the existing literature has been slow to assess the impacts of proposed REDD projects on the livelihoods of forest communities in the developing world, or the implications of these local realities for the success of REDD+ initiatives in general. This study presents ethnographic research conducted with communities within the April-Salomei pilot REDD+ Project in Papua New Guinea (PNG). Several cases of institutional biases and uneven power relationships have been exploited by local elites to prevent landowners from making free and informed choices about their involvement in the project, although landowners and local communities are well positioned to capture forthcoming project benefits. By underestimating the scale and impact of traditional shifting cultivation practices, the credibility of the REDD+ project design and the value of any future carbon credits are critically undermined. Based on the actual practices found in PNG, the authors' radical proposal is to call for a halt on REDD development in PNG while institutional enabling conditions are improved, comprehensive landowner consultations conducted, and detailed mapping and genealogical surveys of landowners completed. Without these developments, future REDD+ projects in PNG are unlikely to benefit either the global climate or local development.     

An incentive mechanism for reducing emissions from conversion of intact and non-intact forests

This paper presents a new accounting mechanism in the context of the UNFCCC issue on reducing emissions from deforestation in developing countries, including technical options for determining baselines of forest conversions. This proposal builds on the recent scientific achievements related to the estimation of tropical deforestation rates and to the assessment of ‘intact’ forest areas. The distinction between ‘intact’ and ‘non intact’ forests used here arises from experience with satellite-based deforestation measurements and allows accounting for carbon losses from forest degradation. The proposed accounting system would use forest area conversion rates as input data. An optimal technical solution to set baselines would be to use historical average figures during the time period from 1990 to 2005. The system introduces two different schemes to account for preserved carbon: one for countries with high forest conversion rates where the desired outcome would be a reduction in their rates, and another for countries with low rates. A ‘global’ baseline rate would be used to discriminate between these two country categories (high and low rates). For the hypothetical accounting period 2013–2017 and considering 72% of the total tropical forest domain for which data are available, the scenario of a 10% reduction of the high rates and of the preservation of low rates would result in approximately 1.6 billion tCO₂ of avoided emissions. The resulting benefits of this reduction would be shared between those high-rate countries which reduced deforestation and those low-rate countries which did not increase their deforestation over an agreed threshold (e.g., half of “global” baseline rate).     

Replacing carbon lost from forests: an assessment of insurance,reserves, and expiring credits

Abstract

Concern over the “non-permanence” or reversibility of carbon sequestration projects has been prominent in discussions over how to develop guidelines for forest project investments under the Clean Development Mechanism (CDM) of the UNFCCC Kyoto Protocol. Accordingly, a number of approaches have been proposed that aim to help ensure that parties do not receive credit for carbon that is lost before project obligations are fulfilled. These approaches include forest carbon insurance, land reserves, and issuance of expiring credits. The potential costs of each of these different approaches are evaluated using a range of assumptions about project length, risk and discount rate, and a comparison of costs is ventured based on the estimated reduction in value of these credits compared with uninsured, and permanent credits. Obstacles to participation in the different approaches are discussed related to problems of long-term commitments, project scale, rising replacement costs, and low credit value. It is concluded that a system of expiring credits, which could be coupled with insurance or reserves, could guarantee obligations that span time-scales longer than that of conventional insurance policies while maintaining incentives for long-term sequestration.     

CDM potential in the power-generation and energy-intensive industries of China

Reducing emissions from deforestation and forest degradation (REDD+) has emerged as an important carbon governance mechanism. However, forest governance is weak in most REDD+ countries, which undermines efforts to establish REDD+. This study analyses the factors that enable national REDD+ processes in the context of weak governance using a two-step ‘qualitative comparative analysis’ (QCA) of 12 REDD+ countries. Assuming that actor-related factors can be effective only if certain institutional preconditions are met, six factors were divided into two categories that were analysed separately: institutional setting (pressure from forest-resource shortage; forest legislation, policy, and governance; already initiated policy change) and the policy arena (national ownership; transformational coalitions; inclusiveness of the policy process). The factors were analysed to determine their role in efforts to establish comprehensive REDD+ policies that target transformational change. The results reveal path dependencies and institutional stickiness in all the study countries. Only countries already undertaking institutional change have been able to establish REDD+ policies in a relatively short period – but only in the presence of either high pressure from forest-resource shortages or key features of effective forest legislation, policy, and governance. Furthermore, where an enabling institutional setting is in place, the policy arena conditions of national ownership and transformational coalitions are crucial.Policy relevance Although the aim of REDD+ is to provide performance-based payments for emissions reductions, the outcomes in terms of actual emission reductions or co-benefits are not yet observable. Most REDD+ countries are still at the design and implementation stage for policies and measures. Indicators and criteria to measure progress in this phase are required to identify which factors enable or hinder countries' performance in delivering necessary policy change to provide targeted financial incentives to support countries' efforts. This study analyses the factors that shape national REDD+ processes in the context of weak governance using a two-step QCA of 12 REDD+ countries. The results show a set of enabling conditions and characteristics of the policy process under which REDD+ policies can be established. These findings may help guide other countries seeking to formulate REDD+ policies that are likely to deliver efficient, effective, and equitable outcomes.