There is global consensus that the fight against climate change cannot succeed without finding a way to protect the forests. The key to achieving this goal, now described as “reducing emissions from deforestation and forest degradation” (REDD), is to create an environment in which the forests have greater value standing than cut down. The 2007 Bali Climate Change Conference authorised investigation into financial compensation for developing countries for the loss of revenue resulting from preservation of their forest cover.

Forest burning for pasture, Central African Republic, CFU000204 © Roberto Faidutti / FAO

All parties appear supportive of this broad approach. It seems likely that a strategy to implement REDD will be a prominent feature of any international climate change agreement to replace the Kyoto Protocol which expires in 2012. However, almost every detail of REDD is fraught with difficulty, adding to risks of delay in climate negotiations.

The issue of greatest concern to environmentalists is the prospect of rewarding activities which might include an element of logging or which equate forest regeneration and plantation with the value of primary rainforest. Low impact logging and replanting is often presented by the timber industry as "sustainable forest management." The precise scope of REDD is therefore contentious.

For donor governments, wary of years of disappointing outcomes to aid for deforestation, the central issue is verification of results. They will seek clear evidence that deforestation has not occurred, either in the recipient country or deflected elsewhere through “leakage”. They also want to be sure that the protection represents real change (additionality) and that it remains permanent.

There are further worries about the moral hazard of rewarding the cessation of an activity which is often already illegal. And it is unclear how to compensate those countries, such as Costa Rica, which have already brought deforestation under reasonable control.

Phaeomeria Magnifica, Brazilian forest, CFU000507 © Roberto Faidutti / FAO

The science of measuring forest inventory for the purpose of baseline and progress evaluation is embryonic and difficult. Rainforest countries vary considerably in their institutional capacity and standards of governance necessary to convince the donors. No single prescription can apply to all.

The most likely outcome would involve an initial phase of capacity building to “get ready for REDD”, combined with pilot projects to explore the logistical issues. To an extent this process is already under way, led by the World Bank’s Forest Carbon Partnership Facility (FCPF), the UN-REDD Programme, Norway’s International Climate and Forest Initiative and many other REDD initiatives.
REDD Finance

Tentative targets suggested by the UN envisage a 25% cut in the rate of deforestation by 2015, costing around $15 billion pa, about 15% of current foreign aid budgets. Brazil has pledged to halve deforestation in the Amazon by 2020.

The cost of delay is very significant. The influential Review on the Economics of Climate Change prepared by Sir Nicholas Stern for the UK government pointed out that, if worldwide deforestation remains unchecked, its carbon emissions for the years 2008-2012 alone would exceed those of the entire history of aviation up to the year 2025. Stern also concluded that addressing deforestation is one of the most efficient and cost effective ways of tackling climate change, quite apart from its contribution to poverty reduction and biodiversity.

Illegal deforestation for soy production in Brazil © Greenpeace International

Whilst this assessment is not disputed, the mechanism for financing REDD is more problematic. In return for their payments, governments and the private sector will expect to be granted carbon credits which could be offset against their emissions targets.

Finance through carbon markets, as opposed to taxation and aid, is unpopular with climate activists. Groups such as Friends of the Earth and Greenpeace argue that offsets allow “business as usual” consumption and that the disgraced traders of the banking sector should not be entrusted with climate change mechanisms. There are also technical difficulties in merging the value of forest credits with existing carbon markets. In this context the European Union has decided that REDD credits will not be accepted in the European Carbon Trading Scheme until 2020.

The disadvantage of relying on aid to finance REDD is that donor countries will fail to commit to sufficient funds to save the forests. The outcome may therefore see a combination of both public and private sector approaches.

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