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Jonah Busch is a visiting fellow at the Center for Global Development. He is an environmental economist whose research focuses on climate change and tropical deforestation.
Busch is the co-author of Why Forests? Why Now? The Science, Economics, and Politics of Tropical Forests and Climate Change (Frances Seymour and Jonah Busch, Center for Global Development, December 2016). He is the lead developer of the OSIRIS model for analyzing and designing policies for reducing greenhouse gas emissions from deforestation. His research on climate and forests has been published in academic journals including Science, Proceedings of the National Academy of Sciences, Review of Environmental Economics and Policy, Land Economics, and Environmental Research Letters. He has also published on the economics of penguins, pandas, and surfers. He serves on the editorial board of Conservation Letters.
Busch has advised on climate and forests for the President of Guyana, the governments of Norway, Indonesia, Bolivia, Suriname, Colombia, the United Kingdom, and California, the Global Environment Facility, and the Forest Carbon Partnership Facility. He is a research fellow at the Center for Effective Global Action at the University of California, Berkeley and a visiting scholar at the College of Environmental and Resource Sciences of Zhejiang University in Hangzhou, China.
Prior to joining CGD Busch was the Climate and Forest Economist at Conservation International. Previously he served in the Peace Corps (Burkina Faso, ‘00-‘02) as a high school math teacher. He speaks French, Spanish, Indonesian, Mooré, and Chinese with varying degrees of proficiency and has traveled in more than sixty-five countries.
Carbon pricing policies are once again on the upswing, as evidenced by a flurry of news in the past two weeks. Canada’s federal government issued a carbon pricing plan that would see that all states implement either carbon taxes or cap-and-trade programs, starting in 2018. The Paris climate agreement will enter into force this November, with its promise of “internationally transferred mitigation outcomes.” And the International Civil Aviation Organization (ICAO) recently inked an agreement through which airlines will purchase billions of tons of emission reduction credits.
Might one or more of these carbon pricing policies finally address tropical deforestation—the second-largest source of climate emissions? And if so, how many emission reductions could tropical forests provide at what cost? In light of all the recent policy movement, now is a good time to take stock of supply and demand for tropical forest carbon.
A supply curve for tropical forest carbon
Protecting and restoring tropical forests could potentially supply up to 24-30 percent of climate mitigation, but what does the supply curve for this mitigation look like? That is, how many emission reductions could be provided at what cost? Multiple lines of evidence support the conclusion that reducing tropical deforestation is a comparatively cost-effective climate solution:
Government expenditures. The restrictive actions taken by Brazil to impressively cut deforestation cost the national, state, and local governments less than $5 per ton of carbon dioxide. This is from a recent published study in Ecological Economics that divided the $2 billion cost of government program expenditures—roughly one-third of the cost of the Rio Olympics—by a rough-cut estimate of how much carbon was saved.
This implies that a payment of $5 per ton would be sufficient to make it worthwhile for forest country governments to reduce deforestation, at least insofar as other forest country governments could replicate what Brazil achieved. Of course this doesn’t consider opportunity costs of landholders within Brazil who would like to deforest to grow beef or soy, whether legally or illegally, and now aren’t able to do so.
International pay-for-performance agreements. For more than six years, the government of Norway has been paying the governments of Brazil and Guyana $5 for every ton of carbon dioxide they keep out of the atmosphere by protecting their forests. The 11-donor Carbon Fund of the Forest Carbon Partnership Facility may soon pay a similar price for emission reductions in several dozen states within forest countries attempting to subscribe to the program. This level of supply is non-negligible, but it doesn’t come anywhere close to all of the more than 50 countries in the REDD+ readiness pipeline. Furthermore, Indonesia and Norway never set a price for their pay-for-performance agreement, but we’re not seeing evidence of successful forest conservation at $5 per ton. All this implies that an international carbon price of $5 is sufficient to motivate participation by some governments, but not most. A price higher than $5 per ton would be needed to motivate other forest countries to supply.
Forest conservation programs and projects. Within tropical countries, the small number of cost-effectiveness analyses to date suggest that programs or projects to conserve forest can produce relatively large carbon benefits for relatively low costs. A randomized controlled trial (RCT) in Uganda by Seema Jayachandran and her co-authors determined that payments to villagers to delay deforestation kept carbon out of the atmosphere at a cost of around $1 per ton. A study by the World Resources Institute concluded that securing indigenous land tenure in three Latin American countries could avoid emissions for $2-12 per ton, based on analysis of the budgetary cost of land titling programs and generous assumptions about carbon savings. And a dozen or so site-level REDD+ projects are selling forest carbon credits to voluntary offset buyers for $10 per ton, suggesting that their costs are lower than this.
Partial equilibrium models. For the last decade or so researchers have built marginal abatement cost curves projecting how much forest carbon could be kept out of the atmosphere at what carbon price, using partial equilibrium models based on estimates of opportunity cost. A price of $10 per ton gets anywhere between 0.5-3.5 billion tons of carbon dioxide per year, depending on the model (see chart below). Estimates by McKinsey and Company come in at the most optimistic end, in part because they include reforestation. A model I built with Jens Engelmann produced the most conservative numbers, in part because it accounted for how land users actually responded to changes in agricultural prices. Even at the conservative end, reducing deforestation is four to five times cheaper than a comparable level of emission reductions in the United States or Europe.
Demand for tropical forest carbon
So, that’s supply. What about demand? Who might be willing to pay for reductions in emissions from tropical deforestation? There are a growing number of possibilities.
Regulatory offsets. Ever since the failed Copenhagen climate agreement in 2009, California’s cap-and-trade program has been the best hope for forest carbon offsets to enter a compliance market. With aggressive climate targets recently signed into law, there is once again a path for California to let companies buy tropical forest offsets during the program’s third compliance period from 2018-2020. If this happens, the amount of offsets bought by California companies would be small. But by legitimizing the market California could open the gates to buyers from Quebec, Ontario, or other provinces or states.
Voluntary, industry-wide offsets. The recent ICAO assembly in Montreal resulted in a commitment of “carbon neutral growth” for international flights between more than 60 countries starting in 2021, and between all countries by 2027. The Environmental Defense Fund estimates that meeting this target will require airlines to curtail their planned emission growth by 2.5 billion tons over 15 years. Tropical forests could help them meet this demand—a 10% reduction in tropical deforestation could more than cover the difference.
Paris pathways. The UNFCCC provides several potential pathways for countries to purchase national or state-level reductions in emissions from deforestation and forest degradation (REDD+). The Paris climate agreement enables trading between countries through “Internationally transferred mitigation outcomes” (ITMOs). The Green Climate Fund could pay for performance in reducing emissions, much like the multilateral Carbon Fund, though ideally with fewer aid barnacles than the World Bank. And a “Sustainable development mechanism” could become a successor to the Kyoto Protocol’s Clean Development Mechanism in verifying offset credits.
Domestic carbon price policies. Some large middle-income countries, including Brazil, China, Chile, Korea, Mexico, and South Africa, have either started or are mulling domestic carbon pricing. Forests could be included in these markets, either as offsets or as a regulated sector as they are in New Zealand’s carbon market, e. Even without a carbon market, tropical countries could create a de facto fiscal incentive for forest conservation by basing internal transfers of tax revenue to states on the protection and restoration of forest cover, as India has done.
Including tropical forests in carbon markets lowers the cost of meeting any given climate target. And because meeting the target is cheaper, the target can be made stronger. But if including tropical forests in carbon markets is so beneficial, why hasn’t it been done yet? There have been a few hesitations.
Monitoring challenges. In the past, monitoring changes in tropical forest cover was expensive and difficult. This meant that emission reductions could realistically only enter through discrete projects in small areas, raising concerns about the effects beyond the project boundaries. “Avoided deforestation” was excluded from the Kyoto Protocol’s Clean Development Mechanism for this reason. But recent breakthroughs in satellite monitoring mean that it’s now possible to consistently track emissions from tropical deforestation over large areas and long time periods, making REDD+ at the national or state level one of the tracks of international climate negotiation that reached consensus most quickly.
Flooding the market. Ironically, tropical forests’ low cost of mitigation was not a selling point for the European Union Emission Trading Scheme (ETS). In 2008, EU regulators prohibited REDD+ credits from entering the ETS before 2020, based on the concern that cheap offset credits from tropical forests could “flood” the European carbon market, driving down the domestic carbon price and reducing incentives to cut carbon in European industries. However, the entry of forest carbon credits into carbon markets need not be all-or-nothing. Regulators could place quotas on their use, as in California, or could apply an offset trade ratio as in 2009-2010 unpassed US federal climate legislation.
A variety of other technical and social issues were systematically worked out through years of international negotiations, policy research, and advocacy, as explained in Frances Seymour’s and my forthcoming book, Why Forests? Why Now? The Science, Economics, and Politics of Tropical Forests and Climate Change.
In short, for tropical forests and carbon markets, supply is plentiful, new sources of demand are arising, and obstacles to market transactions are falling.
In what could be the most consequential meeting on climate change in 2016, the world’s airlines are gathering next week in Montreal for the 39th triennial assembly of the International Civil Aviation Organization (ICAO). There they will consider a proposal to cap carbon dioxide emissions from international flights and let participating airlines trade the rights to emit. An ICAO-sanctioned cap-and-trade program could lead to airlines achieving their goal in part by buying credits for the protection of tropical forests.
Coupling airlines and forests would be a match made at cruising altitude. Airlines will need lots of emission reductions to meet their goal of growing business without growing emissions. Meanwhile, tropical forest protection offers a big and affordable potential source of emission reductions, but requires large and reliable funding, as Frances Seymour and I describe in our forthcoming book, Why Forests? Why Now? The Science, Economics, and Politics of Tropical Forests and Climate Change. Indeed, as described below, airlines could make the growth in international flights carbon neutral for 20 years by paying for just a 10 percent reduction in future emissions from tropical deforestation.
The vast bulk of climate emissions are dealt with internationally through the United Nations Framework Convention on Climate Change (UNFCCC), through which the Paris Agreement on climate was successfully agreed last year, and through which voluntary national climate pledges were made. However, a few other international forums handle for greenhouse gas emissions too. The International Maritime Organization are responsible for emissions from international shipping; the Montreal Protocol takes care of CFCs and HFCs. And ICAO, a consortium of national governments and airlines, is responsible for emissions from international flights (domestic flights are covered by countries’ commitments through the UNFCCC).
International flights currently produce around 2 percent of all greenhouse gas emissions, but the International Energy Agency has projected these emissions will more than triple by 2050. ICAO set an aspirational goal back in 2010, reiterated in 2013, to cap future emissions after 2020, with “carbon neutral growth” from then onward. This means that between 2020 and 2040, by ICAO’s estimates, the industry would need to prevent the release of around 10 billion tons of carbon dioxide—roughly the amount emitted by Australia over the last 20 years. Now ICAO is discussing how to meet that target.
Greenhouse gas emissions harm everyone, but they harm the world’s poorest people first and worst. Here’s how airlines meeting in Montreal can do their part for a stable climate:
Commit to a strong collective target. First, representatives in Montreal should look for ways to strengthen their previously stated collective goal of carbon-neutral growth post 2020, compatible with limiting the world’s temperature increase to well below 2 °C or even 1.5 °C. A target in which emissions are capped at a lower level is stronger, for example; so is a target in which emissions ramp down over time rather than just avoiding future growth. If the Paris pledging process is any indication, we may be repeating the phrase, “half a loaf is better than none.” That is, let’s get started with a goal that’s politically ambitious, in the hope that emission cuts will then become cheaper and easier than anticipated, leading to larger cuts consistent with scientific necessity. Like the Paris Agreement, the ICAO proposal includes a periodic review to strengthen commitments.
Maximize participation. An agreement at ICAO to cut emissions appears likely to be voluntary rather than mandatory, at least for the first few years starting in 2021. So the success of the agreement depends on how many countries’ airlines choose to participate. Competitiveness is even more of a concern for airlines in Montreal than it was for countries in Paris; no company wants to be placed at a disadvantage relative to its competitors in other countries. Thus to be successful the agreement needs to be joined by countries’ airlines representing a high percentage of total industry-wide emissions. Exemptions are justified for airlines from the poorest countries, and may be ceded to landlocked or island states as well. But other countries should follow the lead of the United States, China, Indonesia, Canada, Mexico, Singapore, the Marshall Islands, and 44 European countries that have already announced their airlines are in.
Trade carbon. Representatives at ICAO are looking to establish a “market based mechanism,” whereby the rights to emit carbon dioxide would be capped, allocated, and traded among participating airlines. Airlines that can reduce emissions cheaply could sell unused emission rights to other companies that find it more difficult to do so. This is a smart set-up. All airlines would have a financial incentive to reduce their emissions, and carbon trading represents the cheapest, easiest way to meet a climate target, thereby minimizing fare increases on flyers. Cap-and-trade has now been tested and refined though experiences in Europe, New England, California, and elsewhere. Many observers hoped to see a global carbon market emerge from the Copenhagen climate summit in 2009. ICAO can now succeed in taking cap-and-trade global where national governments failed seven years ago.
Look to the forests. Airlines should do what they can to reduce emissions in their own operations (e.g., fuel efficiency, newer-model planes, and more passengers per flight). However, aviation is one of the most expensive sectors for reducing emissions. Even if airlines roll out operational improvements and new aircraft technology, ICAO still foresees airlines falling somewhere between 6.1-8.2 billion tons short of their collective target from 2021 to 2040—roughly the amount emitted by Turkey or Ukraine over the last 20 years. One of the best ways to close this gap is for airlines to purchase credits for reducing emissions from tropical deforestation. Emission reductions from tropical forests are potentially sizable, with tropical deforestation projected to emit around 94 billion tons over the same time period. They are affordable—Brazil slashed Amazon deforestation over the last decade by around 80 percent, for around one-third the cost of the Rio Olympic Games. And they are up for grabs—for the most part they are not already included in forest countries’ unconditional climate pledges; rather these countries are waiting for potential buyers to show them the money.
Use the latest model: REDD+. A commitment to buying offsets from tropical forest protection brings up question of which standards to use. Airlines may be tempted to go with what they know, for example tree planting projects certified through the Kyoto Protocol’s Clean Development Mechanism. When CDM was established in 2001, credits for avoiding tropical deforestation were deliberately excluded due in large part to technological inability to measure them. However, in the decade-and-a-half since the UNFCCC excluded forests from the CDM, satellite monitoring has experienced a technological revolution. It's now possible to consistently and accurately monitor deforestation over large areas and long time periods. As we describe in Why Forests? Why Now?, these technological advances led to political breakthroughs at the UNFCCC, reflected in Article 5 of the UNFCCC Paris Agreement, which endorses payments for verified national- or state-level reductions in emissions from deforestation (REDD+). ICAO should ideally specify REDD+ among the list of allowable options for offset supply; at the very least it should not foreclose this promising option. Specific methodological details can be saved for later meetings.
Forests are a great match for airlines, but airlines are a great match for forests too. Previous REDD+ initiatives have yet to generate the large, predictable demand for protecting forests that tropical countries are craving. Bilateral deals between Norway and Brazil, Guyana, and Indonesia have successfully established proof of concept in paying for reduced emission reductions; the Carbon Fund may also do so soon while the Green Climate Fund may do so eventually. But these publicly funded programs are fundamentally limited by aid levels and conditionalities, as described in the CGD working group report Look to the Forests. California’s cap-and-trade program, if it accepts tropical forest credits, is vitally important for setting high standards for regulatory offsets, and could grow to include other states such as Quebec and Ontario, but is not expected to produce large demand initially.
ICAO, on the other hand, has the potential to bring large and predictable funding for forest protection. If airlines purchased REDD+ credits to cover half their 2021-2040 gap, at a modest price of $5 per ton, it would provide countries that reduce deforestation with more than $1.5 billion annually—substantially more than the $1 billion or so currently going toward REDD+ every year. If airlines paid $10 per ton to cover their entire gap, forested countries would receive in excess of $6 billion a year.
An alliance between airlines and tropical forests has vast potential to protect the climate—ICAO should signal all clear for takeoff.
From 2004-2013, Brazil reduced climate emissions by more than any other country on earth, thanks to its success cutting Amazon deforestation by 80 percent. Now, a new study in Ecological Economics finds that actions to protect the Amazon were affordable too, costing Brazilian governments at the federal, state, and local levels just $2.1 billion over nine years—one-third the estimated $6.2 billion price tag of the 2016 Olympic Games in Rio de Janeiro.
Felipe Arias Fogliano and the paper’s other authors arrived at this finding by estimating the incremental budget increase in dozens of government programs once forest conservation efforts began in earnest after 2004. Their analysis of actual government expenditures adds an important new strand of evidence to a large body of published research suggesting that conserving forests is one of the lowest-cost ways to reduce climate emissions. (Previous evidence has come from opportunity cost-based models, integrated assessment models, and site-specific case studies.)
The authors crudely estimate that Brazil’s forest protection policies benefited the climate at a cost of just $1.09-3.25 per ton of avoided carbon dioxide emissions. That’s lower than the $5 per ton that Brazil has been receiving from Norway through the Amazon Fund. It’s also far lower than the costs of reducing emissions in industrial sectors; at the opposite extreme “clean coal” is expected to cost more than $100 per ton. Last year Jens Engelmann and I estimated that achieving large-scale reductions in emissions from tropical forests though carbon pricing would cost less than a quarter of what it would cost to cut emissions from industrial sectors in the US or EU by the same amount.
Of course, the relatively low government expenditures documented by Fogliano and colleagues are only part of the story. The opportunity costs to land-users from forgoing clearing for potential new cattle pastures and soy farms are likely far higher, considering that most of the measures Brazil used to curb deforestation involved restricting agricultural expansion in some way: protected areas, indigenous territories, forest law-enforcement backed by satellite monitors, suspension of rural credit to high-deforesting municipalities, soy and beef industry-imposed moratoria on purchasing from high-deforesting farms, and so forth.
Still, while Brazil’s policies constrained agricultural expansion, they did not crimp the growth of agricultural production. Over the same time 2004-2013 period that Amazon deforestation fell 80 percent, soy production rose by 65 percent and cattle production rose by 21 percent nationwide. This occurred largely thanks to greater production on already-deforested lands in the Amazon, and to a lesser extent, an increase in clearing of the wooded savanna of the Cerrado.
While Brazil’s achievement is extraordinary, it has some caveats. The amount of forest Brazil clears every year remains high by world standards. And in the face of political and economic crises, the gains of the last decade appear increasingly under threat (Paulo Barreto presents a detailed and balanced outlook here). Still, what Brazil has achieved on climate, thanks to conserving the Amazon, puts it as far ahead of other countries as Katie Ledecky’s 11-second margin of victory in the 800-meter freestyle.
Can Brazil’s success be replicated elsewhere? Ruth DeFries and her colleagues have argued that the Brazilian experience will be tough for other countries to replicate, due to Brazil’s exceptionally strong capacities for governance and forest monitoring. Frances Seymour and I are more optimistic, as we explain in our forthcoming bookWhy Forests? Why Now? The Science, Economics, and Politics of Tropical Forests and Climate Change. The Amazonian frontier was once arguably as lawless as anywhere in the tropics, but that changed rapidly with presidential attention. Forest monitoring can be outsourced in whole or in part, as in the case of Guyana. And many other countries also have a backlog of low-carbon lands on which agriculture can expand.
Furthermore, it is only in hindsight that Brazil’s circumstances can be considered preconditions for success. No one would have suggested in 2004 that Brazil’s conditions meant the Amazon was about to undergo the rapid transformation it did. While Brazil offers valuable lessons, we should be cautious about extrapolating too much from the experiences of a single country. Success stories of reducing tropical deforestation in other countries may result from policies and enabling conditions different than those of Brazil, reflecting the wide diversity of tropical countries.
Brazil’s gold-medal achievement in reducing deforestation for more than a decade makes it the Usain Bolt of protecting the climate. But if the world is to see other tropical countries join Brazil on the medal podium, international finance is key, especially in countries where payments can go even farther than in Brazil.
Rich countries should increase their support for tropical forest conservation through results-based payments for reducing emissions from deforestation (i.e., REDD+). Opportunities to do so include not only publicly funded initiatives such as the Amazon Fund and the World Bank-facilitated Carbon Fund, but also carbon markets such as California’s, currently in a battle for extension beyond 2020.
When it comes to protecting the climate, tropical forests offer a bargain of Olympic proportions.
Last week, 800,000 citizens of Uttar Pradesh—India’s most populous state—planted more than 49 million trees in 24 hours. This impressive feat shatters the previous record set in Pakistan (850,000 trees) and likely lands the volunteer tree-planters in the Guinness Book of World Records alongside the world’s oldest cat (Creme Puff, age 38) and the most surfers riding a single surfboard (66, last year in Huntington Beach, CA). But given the global climate benefits those trees will provide, shouldn't the tree-planters earn more than just recognition? Shouldn’t they earn some performance-based payments too?
Photo by Yann
Planting trees is good on many levels. For those who plant trees, rolling up one’s sleeves and gently placing a small seedling into the soil provides a sense of satisfaction. For people who live nearby, trees can provide fruit, firewood, shade, erosion control, and more. Kenya’s Green Belt Movement has been planting trees for years, responding to the needs of rural women.
On a larger level, restoring forests can provide benefits for entire regions. Forests provide clean water for drinking, cleaning, or irrigating crops. Restoring high-altitude cloud forests can improve the functioning of downstream hydroelectric dams, providing energy to more people. As my colleague Anit Mukherjee told the Christian Science Monitor, planting trees “addresses many of the big issues for India.”
In recognition of the many public benefits of forests, last year the Indian Parliament enacted an innovative tax reform to financially reward forest conservation. Following the recommendation of its 14th Finance Commission, it added forest cover to the formula used to determine how much nationally collected tax revenue is distributed to each state. This means that Indian states can now expect to see their share of tax revenue go down if they’ve deforested, or up if they’ve replanted. By my back-of-the-envelope calculations, the tree planters in Uttar Pradesh may have just upped their state’s share of future national tax revenue by as much as US$5 million (assuming 1,000 trees planted per hectare, $120 per hectare, and 80 percent tree survival).
As good as planting trees is for the climate, protecting existing forests is even better, as illustrated in the figure below from Frances Seymour’s and my forthcoming book, Why Forests? Why Now? Even if planted trees survive—which they often don’t—it can take decades or even centuries for replanted forests to recapture the carbon lost instantaneously from deforestation. Reducing deforestation in India by a mere 2,000 hectares a year—that is, by a mere quarter of a percent—would be as good for the climate as planting 49 million trees (assuming 50 metric tons of aboveground carbon per hectare and 800,000 hectares of forest loss per year).
Because the benefits of planting and conserving forests are global, people around the world should be willing to pay tropical countries and states like Uttar Pradesh that protect or restore forests. Between 2006-2014, rich countries programmed about $9 billion toward conserving tropical forests, of which nearly half was performance-based, meaning that rich countries only pay if satellite monitors show success has been achieved. Still, this number really ought to be several times higher considering that conserving tropical forests is such a cost-effective way to fight climate change. Reducing emissions by conserving tropical forests would cost less than one-quarter of what it would cost in the European Union or the United States to reduce emissions from industrial sources by the same amount.
Uttar Pradesh’s tree-planting effort is well worth a Guinness World Record. Now it’s time for countries and states in the rich world to put up equally record-worthy amounts of finance for protecting and restoring tropical forests. Last December in Paris, Germany, Norway, and the United Kingdom pledged $5 billion for tropical forests in one day. That record was made to be broken.
A showpiece “clean coal” project in Kemper Country, Mississippi is three years behind schedule, four billion dollars over budget, faces swirling allegations of contracting scandals and shoddy construction, and has yet to capture or store any carbon, as brought home on Tuesday by a 5000-word exposé in the New York Times. Whenever I read articles about Southern Company’s “clean coal” boondoggle (Grist and Politico published similar exposés in recent years), I remember that safe, cheap, natural carbon-capture-and-storage (CCS) is already available at large-scale—in the form of forests. In fact, this is one of the key messages in our forthcoming book, Why Forests? Why Now? to be published later this year.
So, why forests, why now? Let’s look at the facts.
Safe. There are hardly any good places to put carbon dioxide. Excess carbon dioxide in the atmosphere is unsafe because it causes climate change. Around one-quarter of carbon dioxide emissions end up in the ocean; this is unsafe too because it acidifies the sea, dissolving the shellfish and corals on which much of humanity depends for food. Storing carbon dioxide in underground rock formations, as envisioned at Kemper, is still risky and unproven. Turning carbon dioxide into solid rock, as recently achieved in Iceland, sounds extraordinarily promising, but has a long way to go before it’s ready for prime time. However, storing carbon in the living biomass of forests and other ecosystems is not only safe but provides many side-benefits for health, water, electricity, and agriculture.
Natural. Recall that as trees and other plants grow, they absorb carbon dioxide from the air and turn it into solid carbon. This process—photosynthesis—has been honed to perfection over millions of years. Even mature forests absorb carbon dioxide, socking it away as carbon in the soil as shown in the figure below. One logical way to fight climate change is to accelerate this process by protecting and restoring forests, but we’re still doing the opposite, clearing a Maine-sized area of tropical forests every year.
Click to view full-size image.
Available at large scale. No action can stop climate change single handedly—not “clean coal,” not forest conservation. Still, the potential to fight climate change by protecting and restoring tropical forests is vast. Halting and reversing tropical deforestation could counteract up to 24-30 percent of annual greenhouse gas emissions.
Cheap. While “clean coal” might cost more than $100 per ton of avoided carbon dioxide emissions, preventing deforestation can protect the climate at far lower cost. Paying farmers in Uganda to keep trees standing costs less than $1 per ton of avoided emissions, according to a new NBER working paper. An avoided-deforestation project in Alto Mayo, Peru costs $2-3 per ton, according to its proponents.[i] And bilateral agreements with Brazil and Guyana have cost the government of Norway $5 per ton. (These latter government-to-government agreements are most similar in form to the UN-agreed mechanism for reducing emissions from deforestation, or REDD+.)
Match spending to opportunity. I’m of two minds about “clean coal.” On one hand, rapidly growing economies in India, Indonesia, and elsewhere are heavily reliant on coal, while China is trying to wean itself off coal-dependency. If “clean coal” ever actually existed it would do a world of good in enabling these countries to develop without crippling air pollution.
On the other hand, it’s folly to spill so many billions on a longshot technology that might never see the light of day while letting a safe, cheap, natural, available source of carbon-capture-and-storage starve for cash. Funding “clean coal” or funding forest conservation is not an either-or choice, of course; I’d just like to see each funded at a scale commensurate with its respective opportunity.
As US taxpayers, let’s spend more on protecting tropical forests than we spend cushioning Southern Company from cost overruns at Kemper.
[i]Agustin Silvani, Conservation International, Personal Communication, May 25, 2015.
UPDATE: The Carbon Fund has provisionally approved the first two REDD+ programs in DRC and Costa Rica. See comments below for further details.
Next week in Paris, the Carbon Fund will decide whether to approve its first two results-based payment programs for conserving tropical forests. After eight years writing a charter, negotiating a rulebook, and vetting proposals, it’s long past time to finally do so. Saying yes to Costa Rica and the Democratic Republic of Congo (DRC)—the two countries that have submitted emission-reduction program proposals—would not only be a boon to those two countries, but it would also send a welcome signal of encouragement to other countries waiting in the wings. Further delaying acceptance could see energy around climate and forest finance drift away to other initiatives.
The Carbon Fund of the Forest Carbon Partnership Facility is an 11-donor, $750 million fund for conserving tropical forests, housed at the World Bank. Unique among multilateral funds, the Carbon Fund is entirely results-based, that is, it pays participating forest countries for each ton of emissions from deforestation they avoid. The Carbon Fund was set up to be both a conduit for public donations and a bridge to potential market finance. It has the goal of generating experiences from early trial programs from which to learn for bigger climate finance post-2020. With the successful Paris climate agreement last year highlighting the central role of protecting and restoring tropical forests—which offer up to one-third of the solution to climate change—channeling finance for results-based funding for forest conservation is more important than ever.
I was involved in the Carbon Fund from 2012-2013 as a technical advisor during the negotiation of the fund’s rulebook for programs, or “methodological framework,” as I blogged about at the time. After those negotiations finished I was enthusiastic about the prospect that forest countries could soon begin reducing emissions in return for results-based funding. More seasoned colleagues warned me not to get my hopes up.
Indeed, two and a half years later I find myself frustrated by the extent to which the fund’s donors have asked forest countries not just to produce results in the form of emission reductions, but also to run a gauntlet of preliminary program documents, workplans, and assessments. My colleague Bill Savedoff calls this behavior on the part of donors “double demanding”— offering to pay for results but then holding up disbursements until upfront conditions are met.
Carbon Fund Approvals: A Pipeline Process?
The Carbon Fund refers to its approval process shown in the figure below as a “pipeline”—implying a fluid progression from start to finish. But by making every proposed program please 11 donors plus the World Bank at every stage, the process is slower, more burdensome, and more uncertain than other sources of results-based finance that have fewer cooks in the kitchen. The haphazard obstacle course that the consortium of donors is asking forest countries to navigate reminds me of the game Snakes and Ladders.
Steps in the Carbon Fund Process. Source: Forest Carbon Partnership Facility
In the ancient Indian board game, as in the later version appropriated by Milton Bradley as “Chutes and Ladders,” players roll a die to advance from square to square toward a treasure at the end. When they land on a ladder they jump ahead in the queue; when they step on a snake the prize slips further out of reach.
Snakes and Ladders. Copyright: Artisticco/shutterstock.com
Can Costa Rica and DRC Get to the Finish Line?
Eighteen countries are currently playing this game—flowing through the pipeline—advancing in fits and starts toward the prize of participating in a roughly $50 million results-based program. That’s Step 8 in the picture above. The two countries furthest along are Costa Rica and the Democratic Republic of Congo, which have both reached Step 6.
Costa Rica has long been a pioneer in tropical forest conservation. It’s famous for paying its landowners for the ecosystem services their forests provide (PES), along with a longstanding ban on deforestation and an economy built on eco-tourism. Forest cover in the country has been increasing for decades, from a low of 21 percent in 1983 to more than 60 percent by 2013, including tree plantations. Costa Rica is seeking results-based funding to accelerate the regrowth of the country’s forests, as described in a 200-page program document.
DRC’s proposed program has received more scrutiny, but as home to the world’s second largest tropical forest it also has greater potential for climate and development benefits. While the Jamaica-sized area of forest that it lost in 2014 is small relative to DRC’s large forest area, deforestation more than doubled between 2001 and 2014, and is likely to keep accelerating.
At the same time, more than three-quarters of the population of DRC—50 million people—lived on less than $1.90/day as of 2012. Widespread poverty makes it imperative for forest conservation to have an economic rationale; external payments can help with this. As described in a 300-page program document, DRC seeks results-based funding to develop economic alternatives to logging, fuelwood collection, and slash-and-burn agriculture in the Bangladesh-sized Mai Ndombe province, leveraging another $75 million or so in upfront funding from other multilateral and private sources.
Can DRC pull off this ambitious task with the modest resources offered? For that matter can Costa Rica? I don’t know and I’m not sure anyone does; indeed, nobody is naïve about the challenges. Donors are right to ask tough questions and insist on independent fiduciary management if needed. However, not all solutions needs to be figured out in advance. The best place to work out tough issues is in the forests of Central Africa and Central America, and the best way donors can support forest countries’ efforts is by rewarding success. If forest countries don’t reduce emissions, donors don’t pay. If they do reduce emissions, the money spent will be a bargain in the fight against climate change. No matter what happens, the world will learn much more from efforts in the forest than it will from paperwork.
Upcoming Carbon Fund Meeting: A Ladder for Forest Countries
The upcoming meeting of Carbon Fund donors will test the model of climate finance by consortium. Further delaying agreement on emission-reduction programs would bite post-Paris momentum like a snake. I’d expect to see enthusiasm for forest and climate finance drift elsewhere, perhaps to bilateral agreements like the Amazon Fund, or eventually to carbon markets like those in California. It would set an unfortunate precedent for the Green Climate Fund, which is years behind the Carbon Fund in setting up multi-donor results-based payments for forests and risks falling into its own game of snakes and ladders.
On the other hand, if the Carbon Fund approves the programs next week, it will not just offer a ladder to Costa Rica and DRC. Rather, it will be an encouraging sign to many other forest countries that post-Paris commitment on climate change is real and here to stay. It will also show that the Carbon Fund is up to the critical and urgent task of channeling results-based finance for tropical forest conservation. Germany’s recent announcement to contribute an additional 50 million Euro into the Carbon Fund makes me hopeful that this will happen.
Tropical forests are critical for achieving a stable climate. And results-based finance is key to keeping those forests standing. Accessing that finance needs fewer snakes and more ladders. After eight years of deliberations, it’s time for the Carbon Fund to move from assessing to accepting.
This Earth Day, more than sixty heads of state gathered in New York to sign the Paris Agreement on climate change. The agreement declared in December the unanimous aim of 196 governments to work toward the near-elimination of greenhouse gas emissions by the second half of this century. The agreement sent a powerful signal that governments want a low-carbon future: energy without fossil fuels; agriculture without deforestation.
Although the New York ceremony represents another high-profile sign of political support for stabilizing Earth’s climate, significant challenges remain. Even if all countries fulfill their current climate pledges, the world would still warm far above governments’ 2 °C (3.6 °F) temperature target, causing rising seas to inundate low-lying island nations and hundreds of American coastal cities. To narrow the substantial gap between individual national pledges and the collective goal established in the Paris Agreement, governments should look to tropical forests. Tropical forests are an attractive climate solution for scientific, economic, and political reasons. The missing piece, however, is funding.
About 10 percent of annual greenhouse gas emissions result from the burning of tropical forests, making this activity more damaging to the atmosphere than the European Union’s pollution on an annual basis. Forests, however, can play an even larger role in mitigating climate change, for unlike power plants and cars, forests can actually remove carbon dioxide from the atmosphere. Halting tropical deforestation, while letting damaged and cleared forests grow back, could reduce annual global emissions by as much as 24 to 30 percent.
Reducing tropical deforestation is a relatively low-cost climate solution. In the next 35 years, the world is on track to lose an area of tropical forest equivalent to the size of India. Much of that deforestation, however, can be avoided cheaply. Reducing emissions by conserving tropical forests would cost less than one-quarter of what it would to reduce emissions in the United States or Europe by reducing fossil fuel use by the same amount. Tropical forests provide many other benefits too: cleaner water, cleaner air, and habitats for two-thirds of the world’s plants and land animals.
Dozens of tropical nations have already committed to halving deforestation by 2020, with the aim of ending it completely by 2030. By comparison, widespread efforts to phase out fossil fuels, as critical as these efforts are, face greater resistance and may take at least two decades longer.
Tropical forests, therefore, figure prominently in the Paris climate agreement. Article 5 of the agreement encourages tropical countries to reduce deforestation and wealthy countries to pay them for the resulting emission reductions if satellite images show that tropical countries have indeed kept their forests standing. For tropical nations, results-based payments transform forest conservation from an economic burden into an economic opportunity. So far, the concept has been tested in Brazil, Guyana, and Indonesia, with some encouraging results.
For decades, the Brazilian Amazon was ground zero for deforestation. Since 2004, however, deforestation has fallen by nearly 80 percent, even while soy and beef production have grown. By reducing deforestation, Brazil has cut its greenhouse gas emissions by more than any other country. Brazil’s remarkable turnaround has been achieved through aggressive forest law enforcement backed-up by bi-weekly satellite monitoring of deforestation, protected areas and indigenous reserves, and self-imposed deforestation moratoria by the soy and cattle industries. These domestic deforestation protection efforts have been bolstered by $1 billion in results-based funding paid by Norway into Brazil’s Amazon Fund since 2008.
In 2010, Indonesia signed a similar $1 billion agreement with Norway. Among other efforts to reduce deforestation, the government in Jakarta stopped granting licenses to oil palm and paper companies to clear rainforests. Yet, deforestation in Indonesia has shown no signs of abating. In late 2015, deliberate land-clearing forest fires raged across the archipelago. The smoke and haze created a public health catastrophe and, on some days, released more daily greenhouse gas emissions than the entire United States economy. Indonesia’s agreement with Norway has not yet been successful in reducing emissions, but the results-based funding aspect of the accord has functioned as it was designed: because Indonesia’s deforestation rates have not fallen, Norway has not paid.
Guyana is the third early test case for results-based funding. In the face of mounting pressure from gold mining and logging companies, this small South American rainforest nation has kept deforestation extremely low relative to other tropical countries. For its success, Guyana has received close to $200 million from Norway. However, the funding has been held in escrow by multilateral development banks seeking to ensure compliance with fiduciary safeguards designed with traditional development projects in mind. The slow pace of disbursement has dampened enthusiasm within the country for low-carbon development.
Experiences with results-based funding for forest conservation in these three countries have been sufficiently positive that more countries are looking to enter, or fund, agreements of this sort. At the Paris conference, Germany, Norway, and the United Kingdom pledged $5 billion in funding for tropical forests, mostly through results-based frameworks. Furthermore, Liberia, Peru, Colombia, and Ecuador have all signed agreements to reduce deforestation in exchange for results-based funding. More than 50 other tropical countries have signaled their intention to participate in similar deals if results-based funding becomes available.
Funding is the missing piece in tropical countries’ fight to reduce deforestation. To make good on the promises made in Paris, three things should happen. First, more wealthy nations should fund tropical forests through their public budgets, either through bilateral agreements or international institutions like the new Green Climate Fund. While contributions from Germany, Norway, and the United Kingdom are welcome, they are only enough to keep international funding for tropical forests at roughly current levels for the next five years. More public funders are needed to reinforce these pledges.
Second, more tropical countries should devote domestic financial resources to combating deforestation. India, for example, reformed its tax system last year so states that maintain more forest cover receive more tax revenue. The roughly $6 billion per year in tax revenue that India distributes is a larger amount of results-based finance for forest conservation than has been allocated by any other country in the world.
Third, and most importantly, carbon markets should open up to tropical forests. International carbon trading—which involves one country transferring its right to release a ton of carbon dioxide into the atmosphere to another country— brings down the cost of fighting climate change by encouraging greater climate efforts from those countries that can afford to cut their emissions most cheaply. In July, California’s Air Resources Board will vote on whether it will allow companies participating in California’s carbon market to meet a portion of their legal emission-reduction obligations by buying credits from tropical states that reduce deforestation. A ‘yes’ vote would lower costs for California companies and consumers while providing a critical new source of results-based funding for forest conservation by tropical countries. Purchases would initially be limited to the state of Acre in Brazil, but could broaden if other states and provinces follow California’s lead. The decision to allow international offsets into California’s carbon market could galvanize forest conservation efforts in tropical countries, many of which are currently wondering if market demand for reduced emissions from deforestation will ever materialize.
Watching world leaders sign the Paris climate agreement this Earth Day was thrilling. But it will take results-based funding for tropical forests, our cheapest, fastest hope of stopping climate change, to deliver.
2015 marked a historic turning point for action on climate change. The year began with high expectations—see my “12 Reasons for Climate Optimism” from last year at this season. And it closed with those expectations exceeded in Paris, where 200 governments agreed to ramp down greenhouse gas emissions to near-zero by the second half of the century. In the words of United Nations Secretary-General Ban Ki-Moon, “what was once unthinkable has now become unstoppable.”
Here are twelve stories from every month of 2015 that show how fast and how far the tide has turned on climate.
January: Climate Leadership in a Dry State. With California facing historic drought and record-low levels of water and snow, Governor Jerry Brown declared a state of emergency on January 17. The governor’s executive leadership didn’t stop there. In April he issued an executive order for California to cut its emissions 40 percent below 1990 levels by 2030, and in October he signed a bill mandating that the state obtain half its electricity from renewable sources by 2030. California’s climate actions won’t stop at its own borders; in October California’s Air Resources Board set the ball rolling on financing further emission reductions from tropical forests. If the history of American environmental legislation repeats itself, the standards set by California may soon be followed by other states and provinces.
February: India’s Big Climate Move. One of the largest and most innovative stories in climate finance happened in February when India’s 14th Finance Commission reformed the tax revenue distribution system to allocate US$6 billion a year to states on the basis of how much forest area they maintain. With a stroke of the pen India created the world’s largest results-based finance system for forest conservation. By May India would be gripped by a pavement-melting heatwave that left hundreds dead. Seeing the domestic costs of climate change, India committed in its climate pledge in October to growing renewable energy to 40% of electricity production by 2030, even while pushing ahead with coal. In the same climate pledge India also announced a plan to reforest an area the size of New Zealand, backed partly by the incentives created by its tax revenue reform.
March: China Under the Dome. For one week in March China was rocked by Under the Dome, a powerful documentary film about air pollution by investigative journalist Chai Jing. The video went viral, viewed online by 200 million people before it was ordered down by government censors. But the genie can’t be put back in the bottle. Air pollution concerns are driving China’s coal use into decline, with the last four coal-fired power station in Beijing scheduled to close in 2016. And not a moment too soon—in December Beijing issued its first-ever red alert for severe air pollution. Switching from coal to imported natural gas from Russia, a critical public health move, will have big benefits for climate as well.
April: King Coal Dethroned in the UK. On April 14 Bloomberg Business reported that for the first time renewable energy surpassed fossil fuels in new worldwide electricity generating capacity, with projections that renewables’ lead will widen as their costs continue to fall. Perhaps nowhere symbolizes this trend better than the United Kingdom, once the coal-powered cradle of the industrial revolution. A flight from coal in the UK has contributed to an 8% year-on-year drop in emissions even while the economy grew its fastest rate since 2007. Britain’s last coal mine closed in December. The coup degrâce came in November when Energy Secretary Amber announced a plan to move the UK off of coal power entirely by 2025.
May: Changing Climate in Canada. The frozen north isn’t as frozen as it used to be. Arctic sea ice has retreated so much that National Geographic has had to redraw its maps of the region. The political climate has changed rapidly too. On May 5, voters in the oil-rich Canadian state of Alberta tossed out the Progressive Conservatives after 44 years in power, electing by a landslide the New Democratic Party with a pro-climate platform. Six months later the new state government announced a sweeping climate plan, featuring a carbon tax and a direct rebate of billions of dollars to Alberta citizens. Canada was filled with other good climate news in 2015: Québec, Ontario, and Manitoba all agreed to create and link carbon markets, with each other and with California. British Columbia’s revenue-neutral carbon tax inspired a ballot measure for a similar policy in Washington State. And in October Justin Trudeau’s Liberal Party swept national elections, promising a return to climate leadership on the international stage. Shortly thereafter President Obama denied a permit for the Keystone XL pipeline to carry oil from Alberta’s tar sands.
June:Laudato Si, Our Common Home. The turning point moment within the turning point year took place on Jun 18, when Pope Francis’ Vatican released Laudato Si. In the 184-page encyclical, the Pope exhorted readers “to hear both the cry of the Earth and the cry of the poor,” and to replace the use of fossil fuels without delay. The Pope has inspired Catholics and non-Catholics alike with his moral leadership on climate change; researchers have attributed a shift in American public sentiment on climate change to the Pope’s teachings. In September the Pope reiterated his climate message in a victory lap through the United States ahead of the launch of the Sustainable Development Goals, which prominently include a goal on climate.
July: Climate in the Courtroom. On July 20 the New Zealand Supreme Court rejected the petition of Ioane Teitota, a husband and father of three from the Pacific Islands nation of Kiribati, to become the world’s first climate refugee. With rising sea levels threatening to inundate Kiribati and neighboring islands, this may be the first such lawsuit, but it won’t be the last. Elsewhere climate fared better in the courtroom. In June a Dutch Court ruled that the Netherlands government must accelerate its actions to prevent climate change in response to a lawsuit brought by hundreds of citizens, including children. Pakistan followed suit in October when its High Court of Justice ordered the government to uphold its national climate policy. In November in Washington State a judge ruled that children had standing to sue the state to act on climate change, though she found that the state government was already doing so. And in New York the Attorney General launched an investigation into whether Exxon misled the public and its investors about climate change, in a closely watched development with echoes of the landmark tobacco settlement two decades ago.
August: Barack Obama’s Climate Legacy. August 3 marked the release of the Clean Power Plan, which would reduce carbon dioxide pollution from power plants in the United States by one-third by 2030. It would providing flexibility to states on how to meet carbon standards, including through trading. The Clean Power Plan was just one piece of President Obama’s executive leadership on climate in 2015, which also included a pledge to reduce greenhouse gas emissions by 26-28% by 2025, and high-level diplomacy with Presidents Xi, Modi, Rouseff, and Widodo. President Obama’s personal attention to ensuring a global climate agreement in Paris will be a crown jewel in his legacy. Still, there’s only so much Obama can do in the face of congressional intransigence. The Administration’s commitment of US$3 billion to the Green Climate Fund has faced hurdles in Congress, leaving prospects of continued American financial support for conserving rainforests uncertain.
September: Brazil’s Flying Rivers Run Dry. September 3 brought worrying news from Brazil when independent satellite data from Global Forest Watch showed that deforestation in the Amazon had ticked upward by 16% in the last year (this finding was corroborated nearly exactly by official data two months later). Brazil succeeded in reducing deforestation by almost 80% between 2004 and 2012, while increasing soy and cattle production, but gains appeared to have stalled since then. Continuing deforestation is blamed for contributing in part to Brazil’s record breaking drought, as deforestation and fires disrupt the “flying rivers” that convey rain from the Amazon to the Brazilian breadbasket. Still, Brazil’s achievements add up to more emission reductions than any other country, which helped it put forward a climate pledge that is ambitious by any standard—reduce emissions by 37% below 2005 levels by 2025, end illegal deforestation by 2030, and reforest an area the size of Nicaragua.
October: South Africa Inspires on Climate. October 1 brought a raft of national climate pledges from developing countries. One of the most inspiring came from South Africa, which pledged to bring its emissions to peak before 2025 and a decline a decade later. They will do so by introducing Africa’s first carbon tax, potentially including offsets for reforestation. Even in South Africa, where the needs for energy are pressing, citizens state that they prefer developing renewables to expanding production of fossil fuels. South Africa’s greatest contribution to climate in 2015 may have been not in the realm of policy, but of culture. When the French hosts of the December climate summit needed to bring fractious ministers to agreement, they turned to a traditional Xhosa and Zulu conflict-resolution mechanism called the indaba. References to Nelson Mandela came early and often at the climate summit as well.
November: Indonesia on Fire. In spite of welcome progress around the world, Earth’s climate continues to smash new records. Carbon dioxide in the atmosphere passed 400 parts per million permanently this year; 2015 will almost certainly be the hottest year in recorded history. To top it off 2015 was an El Niño year, delivering even hotter and drier conditions to the Western Pacific. Indonesia was at the heart of the inferno. Annual fires set deliberately to clear lands for agriculture turned into cataclysmic forest fires, causing a public health emergency affecting the lungs of millions. A meeting between Jokowi and Obama on Indonesia’s fires yielded disappointing results, as described by my colleague Frances Seymour. But new regulations prohibiting clearing of flammable peat lands offer reasons for hope, and in December the United States anted up $70 million for Indonesia’s forests. To incentivize forest protection efforts across the famously decentralized island nation, Indonesia could look to India’s tax revenue distribution reform (see February).
December: The World Unites for a Low-Carbon Future. The crowning achievement of 2015 came in December in Paris. In the face of atrocious attacks just two weeks earlier, nearly 150 heads of state attended the Paris climate summit in a show of solidarity and hope. By the end skillful French diplomacy succeeded where twenty previous conferences had failed. Two hundred governments put in writing that the future they want is low-carbon: energy without fossil fuels; agriculture without deforestation. There was a lot of other good stuff in the deal as well: a 1.5 °C target, a five-year cycle for reviewing and strengthening national pledges, carbon trading, and recognition of the critical role of tropical forests. Of course words on paper aren’t enough on their own ensure a safer, cooler climate. We’ll all have our work cut out for us in the years to come ensuring governments live up to and exceed their promises. But for now this New Year’s Eve we can all enjoy a delicious French champagne.
Truly 2015 marked a turning point year on climate. Happy holidays to all, and here’s to an even better 2016.
In this paper we combine fourteen years of high-resolution satellite data on forest loss with individual-level survey data on malaria in more than 60,000 rural children in 17 countries in Africa, and fever in more than 470,000 rural children in 41 countries in Latin America, Africa, and Asia. We did not find that deforestation increases malaria prevalence nor that intermediate levels of forest cover have higher malaria prevalence.
What if international development finance paid for outcomes, like children educated or diseases avoided, rather than inputs like classrooms built or medicines procured? That’s the premise of CGD’s longstanding work on Cash-on-Delivery Aid. By paying only for the verified progress on measured outcomes, donors are assured of value for money, and recipients have the flexibility and incentive to innovate. This idea is taking hold in education, health, and other sectors.
Download our full report, Assessing Performance-Based Payments for Forest Conservation: Six Successes, Four Worries, and Six Possibilities to Explore of the Guyana-Norway Agreement, here.
Perhaps in no arena is the Cash-on-Delivery idea further advanced than in tropical forests and climate change, where the concept of rich countries paying poor countries for reducing greenhouse gas emissions from deforestation (REDD+) has gained broad currency since its inception in 2005. My colleague Frances Seymour has described Cash-on-Delivery Aid and REDD+ as siblings separated at birth.
More than $3 billion has now been committed to performance-based payments for reducing deforestation, through agreements between Norway and Brazil ($1 billion), Guyana ($250 million), Indonesia ($1 billion), Germany’s REDD Early Movers Program, (EUR 56 million) and the Forest Carbon Partnership Facility’s Carbon Fund ($465 million) and BioCarbon Fund ($280 million). Understanding what’s working and what isn’t in these programs can provide valuable insights for the future expansion of performance-based payment systems in other countries and other sectors, especially if negotiations under the United Nations Framework Convention on Climate Change (UNFCCC) lead to the development of international carbon markets that include tropical forests by 2020.
One of the longest-running of these agreements is in Guyana, a South American country of fewer than a million people where more than 85% of the Kansas-sized land is covered in lush rainforest. In 2009, Guyana created a Low Carbon Development Strategy to develop economically while keeping its entire forest intact, and signed a Memorandum of Understanding with Norway under which it would receive annual performance-based payments in the tens of millions of dollars in return for continuing to keep nationwide deforestation at a near-zero rate.
So, how well are performance-based payments working? Nancy Birdsall and I set out to find out last month by visiting Guyana. Returning to the pleasant tropical breezes of Georgetown, Guyana’s capital, felt a bit like a homecoming to me, as I had been seconded to the Office of former President Bharat Jagdeo for six weeks during 2009 while Guyana was developing the Low Carbon Development Strategy and the pay-for-performance agreement with Norway (an experience I wrote about here). Nancy and I had conversations with twenty-five experts, including President Donald Ramotar, about how the agreement has been working since then.
We found some noteworthy successes. The performance-based payment system has functioned as designed: Guyana has built an excellent national system for monitoring deforestation, and Guyana’s continued low rates of deforestation are being assessed relative to a reference level that is appropriate for a country with high forest cover and low deforestation rates. Three tranches of performance-based payments of about $115M have been approved, of which about $65M has been delivered. Payments have been lower in years when deforestation emissions are higher, consistent with a credible contingent payment system. Furthermore, buy-in for the principles of the Low Carbon Development Strategy is broadly shared, and some notable strengthening of institutions of forest governance has taken place.
However, we found some worrisome developments as well. The agreement was designed so that money from Norway passes through an entity called the Guyanese REDD+ Investment Fund (the GRIF) to finance programs and projects in support of low-carbon development in Guyana. But the delivery of money from the GRIF to planned spending in Guyana has been painfully slow, putting at risk local support for forest preservation in the face of growing commercial pressures to increase deforestation for gold mining and logging. The World Bank and the Inter-American Development Bank had been brought in as “partner entities” in executing specific projects in large part to ensure compliance with standard fiduciary, social and environmental safeguards. But the banks’ concerns about procurement processes in Guyana have delayed money from flowing to projects, and their focus on compliance may have eclipsed these institutions’ potential contribution to broader policy and program ideas for tackling deforestation.
Based on what we saw in Guyana, we have several ideas on how partners to the payment-for-performance agreement could get benefits flowing more quickly, at least for some activities:
alternative instruments to the conventional investment project, such as the World Bank Program-for-Results instrument and small, targeted policy-based loans;
disbursements that do not need to go through government procurement, e.g. a universal annual per-person cash transfer, and/or a sovereign wealth fund from which interest could eventually be distributed or invested;
a separate fund for the recipient government to buy advice from an agreed positive list of consultants, non-profits, or other entities and agencies;
shifting of application of some safeguards from upfront hurdles to ex post auditing and independent evaluations (ie. “trust but verify”), as has been done for consultations, monitoring of carbon, and governance indicators.
expansion of the list of partner entities to include delivery partners from civil society that can more rapidly translate funding into action and understanding on the ground
In the larger context, it would help to have the Organization for Economic Cooperation and Development (OECD) and the new Global Partnership for Development Cooperation recognize the distinction between traditional official development assistance (ODA) and transfers in support of global public goods (GPGs). With ODA, taxpayers justifiably seek assurance that their money is used well and does not directly or indirectly cause harm. With transfers for GPGs, buyers would pay for the verified delivery of a service. As long as the service is delivered, the service provider would then have complete discretion in how funds are deployed. Such a distinction would greatly facilitate the inclusion of REDD+ in a post-2020 global climate agreement.
There’s good reason to want these conclusions to be true. If strengthening legal recognition of indigenous peoples’ or local communities’ rights to land really does lead to less deforestation, then this represents a simultaneous win for people and a win for forests, and a convenient alignment of social and environmental agendas. As my colleague Frances Seymour discusses here, the indigenous rights agenda is important on its own terms. And halting tropical deforestation is critical for maintaining a safe and stable climate.
It's worth examining these arguments with a critical eye, however, because in the past some other conveniently agenda-aligning hypotheses have not held up well to scrutiny. I’m thinking here about claims like “agricultural intensification is sufficient to spare forest from conversion to cropland” (challenged here) and “once people’s incomes rise they will become less interested in clearing forest” (challenged here).
Kalifi Ferretti-Gallon and I recently looked at the connection between indigenous peoples, local communities, and deforestation, as part of a much broader meta-analysis of what drives deforestation and what stops it. We analyzed the relationship between about 40 different variables and deforestation, by aggregating the results from all 117 spatially explicit econometric studies of drivers of deforestation published in peer-reviewed academic journals from 1996-2013. Unlike a literature review, a meta-analysis systematically takes into account all the available evidence on a particular topic. And unlike comparisons of deforestation rates inside vs. outside of particular areas, spatially explicit econometric studies are able to control for confounding factors like remoteness or suitability for agriculture that can account for the difference in deforestation rate between areas. Meta-analyses have their weaknesses too—they are fundamentally limited by the quality and geographic scope of their component studies. Ours is no exception; more than half of the 117 studies in our database were conducted in just six countries. For more about our study see our CGD Working Paper, policy brief, Wonkcast, and open-access database.
So just how good are indigenous peoples at preventing tropical deforestation? Our database includes variables related to both indigenous territories (which have legally recognized boundaries and rights) and indigenous populations (where this may not always be the case). On the whole indigenous peoples’ forests were associated with slower deforestation three times as often as they were associated with faster deforestation—a statistically significant difference (Figure 1). On this point our findings agree with those of the WRI/RRI report: indigenous peoples’ forests are associated with less deforestation.
Figure 1. What Drives Deforestation and What Stops It? A Meta-Analysis (Source: Ferretti-Gallon and Busch, 2014)
Given that indigenous peoples’ forests incur significantly lower deforestation both where territorial rights are legally recognized as well as where they are not, can we necessarily conclude that stronger legal recognition of indigenous rights leads to lower deforestation? There’s every reason to believe that this is so, and yet we haven’t come across any econometric studies that directly prove this. Only one study in our database actually had the time-series data on deforestation necessary to analyze changes in deforestation rates within sites before and after official recognition of indigenous peoples’ territorial rights. This particular study found no significant change, probably because deforestation in such areas was very low both before and after legal recognition. This study was from Brazil, where the national space agency has been a pioneer in making annual data on the spatial distribution of deforestation publicly available. Now that WRI’s Global Forest Watch has made similar data from Matt Hansen and colleagues available for the entire world, it is possible to conduct studies everywhere on the effect of recognition of indigenous territorial rights on deforestation. Proving that stronger legal recognition of indigenous land rights forestalls deforestation, either through time series studies or matching studies, should be a priority for future research.
Now, let’s turn to local communities.
The WRI/RRI report doesn’t actually define what it means by “local communities,” which is problematic since in the absence of context this term could be taken to mean almost anything, from a hunter-gatherer village to a logging camp. In-the-know readers might intuit that the authors of the WRI/RRI report have used “local communities” to refer to forest communities with a historical and cultural connection to the land and a tradition of sustainable resource use. But even the two organizations involved in the report seem to have different understandings. In the video of the report launch event, RRI Coordinator Andy White defines “local communities” at 7:35 as, essentially, indigenous peoples in countries where the term “indigenous” has no recognized legal status. But WRI President Andrew Steer refers to “community forests” in his Yahoo! News op-ed and his speech starting at 11:15 without mentioning indigenous peoples.
Because no definition of “local communities” is made explicit, news articles on the report have ranged widely in their interpretation of the report’s findings. Several news outlets grasp that the WRI/RRI report authors’ findings relate primarily to indigenous communities (e.g. Scientific American). But other articles neglect to mention indigenous peoples, referring instead to community-based management, strengthened land tenure (The Guardian), or “letting local people into the forests with the legal right to control what happens there” (New Scientist).
Let’s examine these various interpretations of local communities in turn, starting with community-managed forests. In our meta-analysis, we used the term “community forestry” to refer to variables related to cooperative forest management, or other common property or collective management arrangements, such as ejidos in Mexico. We found that on the whole community forestry areas were slightly more likely to be associated with lower deforestation than with higher deforestation, but this difference was statistically indistinguishable from what would be expected by repeatedly flipping a coin (Figure 1).
We found a similar result when we looked at “land tenure security,” which encompassed variables related to more legally secure land ownership rights and duration of occupancy, either for communities or individuals. Forests with more secure tenure were slightly more likely to be associated with lower deforestation than with higher deforestation, but again, this difference was statistically indistinguishable from a coin flip.
What about multiple-use protected areas? We found that protected areas were associated with lower deforestation six [FN] times as often as they were associated with higher deforestation (as you’d expect, this result is statistically significant). This category includes “strict” protected areas such as national parks that prohibit most forms of exploitation, as well as “multiple-use” reserves that permit some economic activities but not others. Both types of protected areas are associated with less deforestation far more frequently than more deforestation, by lopsided margins. An active literature exists on which type of protected area is more effective. This debate is clouded by the fact that strict protected areas are generally designated in less accessible, less productive locations than multiple-use protected areas, and thus have lower baseline threat of deforestation. Studies like this one that compare the two types of protection only within areas of similar baseline threat are rare.
Are studies of community forest management only finding what they are looking for? It’s probably worth mentioning that our meta-analysis showed a marked divergence in findings between studies where community forestry was the variable of interest vs. studies where it was included only as a control variable. In studies where community forestry was the explicit variable of interest, community forestry was associated with lower deforestation 15 times and associated with higher deforestation only once. But, in studies where community forestry was merely included as a control variable, community forestry was associated with lower deforestation 22 times and associated with higher deforestation 28 times. We found a similar divergence in studies of land tenure. This suggests that the literature on these topics might be affected by selection bias, in which places with more successful outcomes are more likely to have been studied.
So does this mean that community forest management doesn't slow deforestation? Not at all. It means that community forest management is associated with slower deforestation in some cases (as found by studies from here and here, from Mexico), but not in others (like studies from here and here, also from Mexico). A productive research agenda would be to figure out why community forest management works well in the places where it does, and whether these factors can be replicated elsewhere, rather than taking as dogma that community forest management will always slow deforestation.
Rich countries should pay for forest protection. Indigenous peoples’ management and protection of forest keeps millions of tons of carbon dioxide in trees and out of the atmosphere. Rich countries have recognized this service through international agreement on a results-based climate mechanism called REDD+, though finance for the mechanism has been slow in coming. Encouragingly, the $1B pay-for-performance partnership between Norway and Indonesia is making indigenous peoples more visible and recognized than ever before. As Mina Setra, Deputy Secretary General of Indonesia’s Indigenous Peoples’ Alliance of the Archipelago (AMAN), describes in a CGD Wonkcast.
For indigenous peoples, forest is everything. Many indigenous communities think of the forest as their mother, their blood, their livelihood, the source of everything, the life of the people … for ages, indigenous peoples have been protecting the forest … so actually, REDD+ is not a new thing for indigenous peoples. (2:00)
When REDD+ started, it created controversy for indigenous peoples … but for us, we see REDD+ as an opportunity for us to be seen. You know, ten years ago, no one talked about indigenous peoples, or about their rights. We were trying hard to bring up issues of indigenous peoples’ rights at the national level. It didn’t really work. We tried, in different ways. But when the international community started talking about forests, and about REDD+, then we had the opportunity to say, we do exist! Come on, people, when you talk about forests, you can not escape talking about us ... Nothing about us, without us. (7:20)
It’s also the responsibility of other countries, rich countries, developed countries, to support us and our efforts ... and reduce their own emissions in their own countries. (16:10)
Which variables are associated with lower deforestation?
Indigenous territories: YES
Indigenous populations without recognized territorial rights: YES
Recognition of indigenous territorial rights: Presumably, but few direct econometric studies to date
Community forest management: Sometimes
Strengthened land tenure: Sometimes
Strict protected areas: YES
Multiple-use protected areas: YES
Strict vs. multiple-use protected areas: Unclear
In sum, there really does seem to be something special about the way Indigenous Peoples maintain their forests that doesn’t necessarily transfer to other communities or individuals just because they are “local.”
I’ll discuss these and other findings of our meta-analysis in a webinar hosted by the World Wildlife Fund on Thursday, August 28 at 12pm ET. Register here.
 Our evidence base on indigenous peoples comes from 94 regression outputs from 12 studies from Bolivia, Brazil, and Mexico
 Our evidence base on community forestry comes from 132 regression outputs from 17 studies from Mexico, El Salvador, Ethiopia, and Guatemala.
 Our evidence base on land tenure security comes from 74 regression outputs from 14 studies from 9 countries on 3 continents.
 Our evidence base on protected areas comes from 228 regression outputs from 35 studies from 19 countries on 4 continents.
 Across all regression outputs, protected areas identified as “strict” are associated with lower deforestation 50 times and higher deforestation 2 times. Protected areas identified as “multiple use” are associated with lower deforestation 42 times and higher deforestation zero times. Variables associated with other aspects of protection besides strict or multiple use are associated with lower deforestation 75 times and higher deforestation 27 times.
[FN] An earlier version of this blog post stated an incorrect ratio.
Here we are, deep in the throes of summer, which hopefully means you have finished your planned holiday books and are in need of another good read or two! But what should you choose? We asked CGD experts to share their recommendations. Check out the list below to find what fits your mood, whether that's a deep dive into migration policy, a surprising look into Machiavelli's life, or a techno-utopian, time-traveling adventure (I know what gets my vote!).
If you'd like to get more reading recommendations from CGD, you can also sign up for our weekly Friday "What We're Reading" newsletter.
"A love story set amidst the colonial evils of Dutch-ruled Indonesia. Transcribed from stories the author told his fellow inmates while a political prisoner in the 1970s, and beautifully translated. At once vivid historical fiction and haunting social commentary." – Jonah Busch
"This book makes the migration policy crisis comprehensible through the epic journalistic feat of personally accompanying one Syrian man from Egypt all the way to Sweden. If you have policy ideas about how to address the crisis, see if they survive reading Kingsley's deeply engaged account." – Michael Clemens
"Beckert explores the early stages of globalization and the industrial revolution through the lens of the cultivation, processing, and trade of cotton and cotton textiles. He also focuses on the links to the slave trade in the early days of the cotton trade, and the changing fortunes of India, China, and other developing countries as their roles in the 'cotton empire' shifted over the centuries." – Kimberly Ann Elliott
"I'm not normally a fan of sci-fi, so I wasn't expecting to get into this time-travel/alternate-reality book, but I did. In this novel, Tom Barren runs into a time-travel mishap when he leaves his techno-utopian, idealistic 2016 world of flying cars and moving sidewalks behind and changes history so that he ends up stranded in our 2016. Mastai's piece is a thought-provoking, funny, and entertaining novel that's a perfect read for any vacation." – Rebecca Forman
"Fictional short stories about people haunted by abrupt failure in the wake of rapid success. The most famous story concerns Lonesome Rhodes, who rises from itinerant Arkansas guitar picker to local media rabble-rouser to TV superstar and political king-maker. Whether you read the book or not, you must see the movie, A Face in the Crowd, directed by the amazingly talented Elia Kazan, which underscores the role of the media in electing our most prominent politicians and invites viewers to draw parallels to the current situation in the United States." – John Hurley
"Alexievech documents ordinary Russia after the fall of the Soviet Union and their experience with revolution, capitalism, and Putin. It reads less like a history book and more like an oral history—unassuming, frank, and raw. It's a fascinating investigation into modern Russia, and it contains all these insightful nuggets on democracy, capitalism, and revolution that are surprisingly relevant for American politics." – Jared Kalow
"A fascinating account of Machiavelli's life and lifelong struggle to restore Florence as a republic. He emerges as a more complex figure than you might think from reading The Prince—as interested in justice, freedom, and the rule of law as in power. On his deathbed, he is said to have claimed he'd rather be in hell with Plato, Plutarch, and Tacitus than in a heaven that banished them." – Nancy Lee
"The late-night TV host tells the stories of his childhood in the slums of Johannesburg where, being racially mixed, he belonged to no group. He finds his way through to his teenage years through tenacity, the unwavering support of his mother, and a preternatural sense of the absurdity of societal norms. It is a very funny and touching book. I listened to the book, rather than read it. Noah himself narrates and his theatrical vocal presence was the icing on the cake. Great for a long car trip!" – Mark Plant
"Haasse tells the remarkable story of Charles d'Orléans, a celebrated medieval French poet and prominent nobleman. Head of a family caught up in bitter dynastic strife at thirteen, English prisoner of war at twenty-one, Charles spends much of his life struggling against forces far beyond his control. And yet, even as his life's joys are snatched from him and his freedom denied for 25 years, the poet finds a way to live his life with dignity and grace. A stunning meditation on nothing less than the meaning of life itself, Haasse's work presents the vibrant, tumultuous world of the later Middle Ages with rare compassion and understanding." – Mallika Snyder
The Intergovernmental Panel on Climate Change (IPCC) is an extraordinary undertaking. Hundreds of scientists volunteer to put their professional lives on hold for months or years at a time. They synthesize the findings of thousands of peer-reviewed scientific articles to provide policymakers and the public with the best current scientific understanding of climate change. Thousands more experts review and provide comments on sections of the report (I was one of these thousands).
On Friday in Stockholm the IPCC released the first of a series of four reports comprising its Fifth Assessment Report (AR5), documenting the “physical science basis” of climate change. You won’t see any direct mention in this report of fires, floods or hurricanes; those topics will be covered in a companion report on “impacts, adaptation and vulnerability” to be released in March. A report to be released in April on “mitigation of climate change” will include renewable energy, energy efficiency and reduced deforestation. And a synthesis report will be released next October.
Here are twelve takeaway messages from Friday’s IPCC report. (The titles are mine; the quoted text and italicization is taken directly from the report’s 36-page Summary for Policymakers).
1. Climate change is undeniably occurring.
“Warming of the climate system is unequivocal, and since the 1950s, many of the observed changes are unprecedented over decades to millennia. The atmosphere and ocean have warmed, the amounts of snow and ice have diminished, sea level has risen, and the concentrations of greenhouse gases have increased.”
2. We’ve never seen anything like this before.
“The atmospheric concentrations of carbon dioxide (CO2), methane, and nitrous oxide have increased to levels unprecedented in at least the last 800,000 years. CO2 concentrations have increased by 40% since pre-industrial times, primarily from fossil fuel emissions and secondarily from net land use change emissions.”
3. Humans are the cause.
“Human influence on the climate system is clear. This is evident from the increasing greenhouse gas concentrations in the atmosphere, positive radiative forcing, observed warming, and understanding of the climate system. This evidence for human influence has grown since [The IPCC’s Fourth Assessment Report, released in 2007]. It is extremely likely that human influence has been the dominant cause of the observed warming since the mid-20th century.”
4. Climate change will continue.
“Continued emissions of greenhouse gases will cause further warming and changes in all components of the climate system. Limiting climate change will require substantial and sustained reductions of greenhouse gas emissions.”
5. Get ready for more heat waves…
“It is very likely that heat waves will occur with a higher frequency and duration.”
6. …more and bigger storms…
“Extreme precipitation events over most of the mid-latitude land masses and over wet tropical regions will very likely become more intense and more frequent by the end of this century, as global mean surface temperature increases”
7. …less ice and snow…
“It is very likely that the Arctic sea ice cover will continue to shrink and thin and that Northern Hemisphere spring snow cover will decrease during the 21st century as global mean surface temperature rises. Global glacier volume will further decrease.”
8. …higher sea levels…
“Global mean sea level will continue to rise during the 21st century. Under all RCP scenarios the rate of sea level rise will very likely exceed that observed during 1971–2010 due to increased ocean warming and increased loss of mass from glaciers and ice sheets.”
9. …and acid oceans.
“The ocean has absorbed about 30% of the emitted anthropogenic carbon dioxide, causing ocean acidification…Further uptake of carbon by the ocean will increase ocean acidification.”
10. These changes will be with us for a long time.
“Cumulative emissions of CO2 largely determine global mean surface warming by the late 21st century and beyond. Most aspects of climate change will persist for many centuries even if emissions of CO2 are stopped. This represents a substantial multi-century climate change commitment created by past, present and future emissions of CO2.”
11. How bad things get is up to us.
“Limiting the warming caused by anthropogenic CO2 emissions alone with a probability of >33%, >50%, and >66% to less than 2°C since the period 1861–1880, will require cumulative CO2 emissions from all anthropogenic sources to stay between 0 and about 1560 GtC, 0 and about 1210 GtC, and 0 and about 1000 GtC since that period respectively. These upper amounts are reduced to about 880 GtC, 840 GtC, and 800 GtC respectively, when accounting for non-CO2 forcings.”
12. It’s irreversible* (but there’s an asterisk).
“A large fraction of anthropogenic climate change resulting from CO2 emissions is irreversible on a multi-century to millennial time scale, except in the case of a large net removal of CO2 from the atmosphere over a sustained period.”
Two weeks ago I joined CGD as a Research Fellow. I am thrilled to join colleagues who follow the science of climate change closely, and who have made the case for years that climate change and the challenges of development are inextricably entwined. The impacts of climate change hit the poor first and worst (see publications by Bill Cline, here and David Wheeler, here). Most emissions have historically come from rich countries, coloring how finance for adaptation to climate change should be transferred (see policy paper by Nancy Birdsall and Michele de Nevers, here). However, the profile of emitting countries has changed rapidly so that mitigating climate change requires new approaches to cooperation between rich and poor nations, as suggested in a new book by Arvind Subramanian. Nancy Birdsall and Bill Savedoff have promoted making foreign aid more efficient and accountable by paying for development outcomes rather than inputs (see their book, “Cash on Delivery,” here). Applying the same principle to performance-based payments for reducing tropical deforestation could provide one of the most cost-effective, politically accepted methods to stabilize the climate, as described here by Frances Seymour.
You can expect to see more on climate and forests from CGD in the coming months. For now, here is one final takeaway from the IPCC report—a message to skeptics seizing upon a slow-down in the rate of increase in surface temperature in the short-term as an excuse to ignore larger trends:
13. Keep your eye on the long-term trends, not on cherry-picked time periods.
“Due to natural variability, trends based on short records are very sensitive to the beginning and end dates and do not in general reflect long-term climate trends. As one example, the rate of warming over the past 15 years (1998–2012; 0.05 [–0.05 to +0.15] °C per decade), which begins with a strong El Niño, is smaller than the rate calculated since 1951 (1951–2012; 0.12 [0.08 to 0.14] °C per decade).”
An area of tropical forest the size of India will be deforested in the next 35 years, burning through more than one-sixth of the remaining carbon that can be emitted if global warming is to be kept below 2 degrees Celsius (the “planetary carbon budget”), but many of these emissions could be cheaply avoided by putting a price on carbon.
These are the findings of my new CGD working paper with Jens Engelmann. We projected future emissions from deforestation by combining 18 million satellite-based measurements of forest loss from 2001 to 2012 with tropics-wide information on topography, accessibility, protected areas, crop suitability, and forest carbon stocks. We then estimated how tropical land users would respond to forest conservation policies based on how land users responded to changes in agricultural commodity prices in the recent past.
The bad news and the good news
First the bad news. Our projections show a steady rise in deforestation through the 2020s and 2030s and then an acceleration in the 2040s. Unchecked, these trends mean 2.9 million square kilometers (one-seventh the area of the world’s tropical forests circa 2000) will be cleared by 2050. That’s the size of India, or one-third of the entire United States. The carbon dioxide emitted by that destruction will be 169 billion tons—that’s like running 44,000 typical coal plants for a year.[i]
Now the good news. Many of those future emissions from deforestation could be avoided if countries rapidly put a price on carbon. The 169 billion tons of future emissions would be reduced by about one-quarter in response to a $20-per-ton carbon price in tropical forest countries (equivalent to a $9-per-ton average cost to land users, as explained below), or by nearly half in response to a $50-per-ton carbon price ($21-per-ton average cost).
Why reducing tropical deforestation is a bargain
Our numbers suggest that reducing tropical deforestation offers a large and cheap way to fight climate change relative to other sources of emissions. Tropical deforestation produced nearly as many annual emissions as the European Union from 2001 to 2012. But whereas the EU could cut emissions by only about 5 percent at $20-per-ton in 2020,[ii] reducing tropical deforestation could cut emissions by 4.5 times as much at that price. That means reducing emissions by conserving tropical forests costs about one-fifth of what it costs to reduce the same amount of emissions in the EU. Relative to California, another jurisdiction with carbon pricing in place, reducing tropical deforestation offers about 55 times as many low-cost emission reductions (see figure 1) [iii]..
Figure 1: Reducing tropical deforestation is a bargain for fighting climate change
Of course, carbon pricing is just one policy for reducing deforestation. Governments might find other policies cheaper or easier to implement, often by imposing restrictions on land users. Brazil tamed Amazon deforestation using satellite monitoring, law enforcement, new protected areas and indigenous territories, restrictions on rural credit, and moratoriums on unsustainable soy and cattle production. As a result of these restrictive measures, Amazon deforestation fell by nearly 80 percent since 2004 even while Brazil’s soy and cattle production increased. In our paper we considered Brazil’s restrictive policy approach as an alternative to carbon pricing. We project that if all tropical countries put in place anti-deforestation policies as effective as those enacted by Brazil in the Amazon in the last decade, one-third of future tropical forest loss and associated emissions would be avoided. Combining restrictive measures with a $20-per-ton carbon price would cut future emissions in half.
Tropical forests: a win for both climate and development
That tropical forests offer so many low-cost emission reductions shows the potential benefits of international carbon payments, whereby rich countries pay tropical countries for keeping their forests standing. Rich countries would fight climate change more cheaply; forest countries would receive a new, green source of income that could be used to alleviate poverty. Win, win. International carbon payments have been pioneered in Brazil and Guyana at a carbon price of $5/tCO2, as well as in Indonesia and through the multilateral Carbon Fund. Our research suggests such efforts have lots of room to grow.
It is worth noting that the average cost to land users of reducing emissions is considerably lower than the hypothetical carbon market price—a $20/tCO2 carbon price implies a $9/tCO2 average cost, while a $50/tCO2 carbon price implies a $21/tCO2 average cost. In a pure carbon market the difference between the (lower) cost and the (higher) price would go as profit to land users who supply emission reductions. In practice the distribution of profits and costs from reducing emissions depends on whether forest countries’ policies favor carrots or sticks, as well as the volume of carbon payments from rich countries to forest countries.
Let’s put these costs in perspective. Not only are the costs of reducing deforestation low relative to the costs of reducing emissions in other sectors, they’re also low relative to climate damages from deforestation. The United States government’s official estimate of the social cost of carbon is around $40/tCO2 and rising; if climate change negatively affects economic growth then the cost could be several times higher. This is even before considering other domestic costs arising from deforestation—dirtier water, drought, and the like.
Our paper is not the first to estimate the marginal abatement costs of reducing deforestation (see here, here, here, here, and here from 5 to 10 years ago). But ours is the first to use groundbreaking annual satellite data on forest loss from 2001 to 2012 rather than the haphazard numbers that countries self-report to the Food and Agricultural Organization every five years. While previous studies projected that tropical deforestation will gradually decline under business as usual, patterns visible in the satellite data of how deforestation has historically spread non-linearly lead us to project that tropical deforestation will accelerate in coming decades as currently remote forest areas come under increasing pressure. And while our cost estimates are more conservative than previous studies, we still find that reducing tropical deforestation represents a sizable and relatively low-cost option for mitigating climate change.
Land users deforest more when agricultural prices are high, and they deforest less when agricultural prices are low; this empirical relationship underpins our model. This relationship varies from year to year and from place to place (higher responsiveness to prices in Asia and lower responsiveness in Latin America, according to our analysis). Importantly, land users’ responsiveness to prices is malleable through policy—land users in the Amazon were less responsive to agricultural prices after Brazil put its anti-deforestation policies in place. How much deforestation we can expect in the future depends to a large degree on future agricultural prices. These and other nuances of the analysis are discussed in greater detail in the working paper.
Encouragingly, 89 percent of the future low-cost emission reductions are in tropical countries that have already signaled their intention to reduce emissions from deforestation in exchange for performance-based finance (REDD+), see figure 2 below. Sixty-three percent of low-cost emission reductions are in the seven countries that have signed pay-for-performance agreements with Norway or Germany to reduce deforestation (Brazil, Colombia, Ecuador, Guyana, Indonesia, Liberia, Peru). Another 26 percent of low-cost emission reductions are in 40 additional countries that have joined a multilateral program for REDD+ (FCPF, UN-REDD, or FIP).
From commitments to finance
This is a big year for the climate, with a United Nations summit in December in Paris. Many tropical countries have committed to reduce deforestation if finance is made available (through the UN climate agreement as well as commitments such as the New York Declaration on Forests and the Lima Challenge). Now it’s time for rich countries to match these commitments with performance-based finance. Reducing tropical deforestation can cut nearly five times as many emissions as Europe can at the same price—that’s a deal for the climate that’s too big and too cheap to pass up.
Figure 2: Avoided emissions from deforestation and peat degradation (tCO2/ha) in response to a carbon price of $20/tCO2, 2016–2050
[i] Authors’ calculations based on Greenhouse Gas Equivalencies Calculator, Environmental Protection Agency http://www.epa.gov/cleanenergy/energy-resources/calculator.html
[iii] Authors’ calculations based on Air Resources Board (2010). Updated economic analysis of California’s Climate Change Scoping Plan. Air Resources Board, California Environmental Protection Agency. Sacramento, California.