Would “Carbon Market” Save Forests?

“Š we all thought that carbon markets would win,
but after Bali there are more and more voices
saying, ‘maybe the market doesn’t work that well

“But perhaps the biggest fear among sceptics is
that an endless stream of deforestation credits
will simply allow companies in the developed
world to pay a little extra and pass costs on to
consumers without otherwise changing their

Vol 452
6 March 2008


Scientists and policy-makers will meet in Bonn
this June to discuss one of the most pressing
concerns to come out of December’s United Nations
climate meeting – how to manage the world’s
tropical forests. Jeff Tollefson examines some of
the proposals.

Save the trees

Rainforest nations walked away from the United
Nations (UN) climate meeting in Indonesia last
December with pretty much all they had hoped for:
a place at the negotiating table and an
acknowledgement that deforestation belongs in a
future global-warming treaty. The landmark
decision in Bali was accompanied by an outpouring
of concern – and in some cases money – from the
international community.

Little more than a month later, however, the
European Commission released a proposal that
would ban forestry credits of any kind from the
world’s largest carbon market until 2020. The
document highlights old divisions over whether to
integrate forestry issues into the cap-and-trade
programme for reducing greenhouse-gas emissions
or to tackle problems such as deforestation
separately through government programmes. Rather
than open up the European market, the commission
proposes funnelling a portion of the proceeds
from the carbon market into deforestation

Advocates of rainforest conservation have in the
past focused on issues of biodiversity and the
preservation of indigenous communities. The
climatic implications of deforestation, which
releases the carbon stored in plants and soils
into the atmosphere, both heightens the urgency
and opens the door to potential solutions. Yet
although the Bali declarations endorse the idea
of including forest protection in the next
climate agreement, they say nothing about which
avenue to take – an issue that is now being hotly

Monitoring emissions

The discussions kicked off in Kyoto in 1997, when
the United States pushed to make forestry part of
the market-based cap-and-trade programme. Europe
eventually accepted the programme, but was
sceptical about including deforestation,
unconvinced that the technology was advanced
enough to monitor and quantify emissions
resulting from deforestation. Reforestation
projects were included in the final agreement,
but avoiding deforestation was left out.

Ten years later, with the scientific community
generally agreed that satellite monitoring is
ready for prime time, rainforest nations banded
together in favour of a market-based approach
tied to national baselines – similar to the way
developed nations would certify industrial
emissions. Brazil seemed to be out in the cold
last year when it continued to push for the
creation of an international fund, independent of
an eventual carbon market, that could be tapped
in support of programmes to halt deforestation.

In the end, however, UN negotiators failed to
settle the issue. “When we went into Bali, we all
thought that carbon markets would win, but after
Bali there are more and more voices saying,
‘maybe the market doesn’t work that well here’,”
says Fred Stolle, a researcher with the World
Resources Institute, an environmental think-tank
based in Washington DC. Stolle says the European
proposal puts the whole idea of a market-based
forestry programme “on shaky ground”, because
where Europe
leads, others may follow.

This dilemma has advocates of a market-based
approach looking to the United States for
leadership. The leading global-warming
legislation in the Senate would set aside 2.5% of
the credits in an eventual cap-and-trade system
for forestry and deforestation projects. A
coalition of businesses and environmental groups,
represented by the lobbying firm Covington and
Burling, based in Washington DC, is pushing to
expand that and other provisions that would allow
forestry to play a greater role.

An international fund such as that backed by
Brazil might be useful to help pay for
infrastructure issues as nations develop the
expertise to track and police deforestation,
sceptics argue, but the resources necessary to
address such a problem can be raised only if
avoiding deforestation becomes a private economic
enterprise. “In global markets, forests are worth
more dead than alive, and this is what we need to
turn around,” says Andrew Mitchell, director of
the Global Canopy Programme in Oxford,

After more than a decade of work, scientists say
today’s  computer models could allow virtually
any nation to monitor deforestation rates and
participate in some kind of international treaty.
Greg Asner, who studies rainforests at the
Carnegie Institution in Stanford, California,
says the latest validation on his model suggests
an error margin of about 0.5% for broad
deforestation; that margin increases to around
10% for selective logging.

The question faced by delegates at the next
United Nations climate talks will be how to
translate such information into a workable system
that rewards countries for reducing
deforestation. The Coalition for Rainforest
Nations, led by Papua New Guinea and Costa Rica,
has proposed national baselines to ensure that
problems do not migrate from one region to

Costa Rica, India and other nations are pushing
for ways to reward countries that have already
halted or prevented deforestation, including
building a tourism industry around the natural
resource. Advocates say this would ensure the
problem doesn’t move from one country to another
while providing additional assistance for
countries that are managing their resources

All of these countries will probably need to
build up expertise in running their own
monitoring programmes, but Asner says his
computer model is simple enough for him to be
able to train his technicians in a couple of
months. “I think that the key is planting the
seed and building the scientific capacity within
these nations,” he says.

Moreover, having developing nations sign up to
cap-and-trade commitments in the forestry sector
will build momentum and increase pres- sure on
countries such as China as well, says Stuart
Eizenstat, a partner with Covington and Burling
who served as chief negotiator for the US
delegation to Kyoto. “This could open up a way of
breaking this impasse between devel- oped and
developing countries.”

To market

But perhaps the biggest fear among sceptics is
that an endless stream of deforestation credits
will simply allow companies in the developed
world to pay a little extra and pass costs on to
consumers without otherwise changing their
policies. Artur Runge-Metzger, who is in charge
of climate issues at the European Commission,
says deforestation accounts for 5-6 gigatonnes of
carbon dioxide annually, compared with 2
gigatonnes in the entire European trading scheme.
“That would flood the market,” he says, revealing
a major reason behind Europe’s stance. “We want
to see real emissions reductions in Europe.”

Eric Bettelheim, executive chairman of
Sustainable Forestry Management in London, calls
this logic “nonsense”, saying forestry projects
will come online over time as countries develop
their monitoring systems, link up to the
international system and work through projects.
Moreover, as some 20% of global greenhouse-gas
emissions come from deforestation each year, from
a theoretical standpoint, deforestation can’t
make up more than 20% of the solution if it
represents only 20% of the problem. “It is not
the purpose of a market to punish industry,” he
says. If reducing emissions through deforestation
is the cheapest option, “it’s the logical thing
to do”.

Kevin Conrad, director of the New
York-basedCoalition of Rainforest Nations, plays
down the European Commission’s move to bar
forestry projects, expressing confidence in the
UN talks. He says developing nations would be
suspicious of any new non-market initiative, such
as the millennium development goals for
deforestation, that would be perennially
under-funded and bureaucratic. “Developing
countries are trying to test the sincerity of
developed countries, saying ‘Don’t try to fool us
dangling some new-fangled fund in front of us’,”
Conrad says. “What we want is just our right to
be at the table in the markets that are already
in the tens of billions of dollars per year.”

How much money would flow into this sector
ultimately depends on the actual cost of curbing
deforestation, and for this there is a range of
estimates. Doug Boucher, director of the tropical
forests and climate initiative for the non-profit
Union of Concerned Scientists based in Cambridge,
Massachusetts, is in the process of compiling and
analysing various studies on the issue. He says
the numbers vary from a few dollars per tonne of
carbon dioxide for individual projects to $10-30
per tonne for some of the economic models. For
perspective, carbon dioxide credits are currently
trading at more than $30 per tonne in Europe,
although they have been much lower in recent

In principle, Boucher says, the calculation is
easy: saving a forest costs at least as much as a
person would have earned cutting it down. And
there will be additional costs for developing
monitoring systems, administering programmes and
enforcing laws, many of which already exist. Such
aspects could benefit from traditional
international aid, especially as countries gear
up. Brazil recently sent a special police unit
into the Amazon as part of an effort to bring
illegal clearing under control – and to
demonstrate its commitment to the problem.

Others are looking at financing mechanisms,
including some form of carbon insurance that
could be activated if a project that had been
paid for turned sour for any reason. New
financial institutions would be needed to link
the global capital markets to people on the
ground. Annie Petsonk, an attorney with
Environmental Defense, a non-profit advocacy
group in New York, says farmers might even be
able to take out a project loan from “forest
carbon” banks. “Could you use all of the learning
that has been developed in the past 10-15 years
in micro-finance?” she asks. “Could you apply
that to carbon?”

But developed nations contribute to the emissions
too. The expansion of palm-oil plantations in
Indonesia, driven in part by European demand for
biofuels, is a primary cause of deforestation.
When it comes to timber, it is perfectly legal to
ship illegally cut logs to the United States and
Europe (although efforts are under way to change
that). Cattle ranching is a leading cause of
deforestation in the Amazon, and two-thirds of
Brazil’s beef goes to Europe, says Mitchell of
the Global Canopy Programme. “Europe’s markets
are causing these emissions and, more and more,
the developing world is saying that it doesn’t
want to be blamed.”

But a well-designed and focused programme could
markedly affect global deforestation. More than
half of the emissions from deforestation come
from two states in the Brazilian Amazon and one
province in Indonesia, according to a preliminary
analysis of deforestation trends between 2000 and
2005 by the World Resources Institute and South
Dakota State University in Brookings. Whether
such a programme could garner the political will
and international backing to succeed remains to
be seen.


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