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Climate change and development are closely intertwined. Poor people in developing countries will feel the impacts first and worst (and already are) because of vulnerable geography and lesser ability to cope with damage from severe weather and rising sea levels. In short, climate change will be awful for everyone but catastrophic for the poor.
Preventing dangerous climate change is critical for promoting global development. And saving tropical forests is essential to doing both. Frances Seymour and Jonah Busch's new book, Why Forests? Why Now?, illustrates how today—more than ever—saving forests is more feasible, affordable, and urgent.
Historically, the responsibility for climate change, though, rested with the rich countries that emitted greenhouse gases unimpeded from the Industrial Revolution on — and become rich by doing so. Now, some of the most quickly developing countries have become major emitter themselves just as all countries are compelled by the common good to reduce greenhouse gas emissions. A major challenge of reaching a global deal on climate change was to find a way for poor countries to continue developing under the planetary carbon limits that rich countries have already pushed too far. That will involve scaling up finance to deploy clean technologies, to adapt to the effects of climate change, and to compensate countries that provide the global public good of reducing emissions, especially by reducing tropical deforestation.
CGD’s research and policy engagement on climate and development has had two aims: to strengthen the intellectual foundation for a viable international accord to come out of the COP 21 in Paris and to provide data, research, and analysis that policymakers and others can act upon even in the absence of an international agreement.
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.
The multilateral development banking (MDB) system is regarded as having been remarkably successful—but is the model still fit for purpose? CGD president Nancy Birdsall and senior fellow Scott Morris delve into a new CGD report's recommendations on how to make MDBs more effective.
In a historic climate agreement last Thursday, countries and airlines gathered at the triennial assembly of the International Civil Aviation Organization (ICAO) in Montreal committed to “carbon neutral growth” in international flights between more than 60 countries after 2021. This means that after airlines flying those international routes cut greenhouse gas emissions within their operations, they would need to offset any residual increase in their emissions by purchasing credits for emission reductions made in other sectors. By 2027 the agreement will extend to international flights between all countries.
As I described in a previous blog post, the ICAO agreement is one of the most consequential events of 2016 for the climate. In the same momentous week, the UNFCCC announced that 2015 Paris climate agreement will enter into force in November, and Canada’s federal government announced a carbon pricing plan; this week governments are meeting in Kigali to amend the Montreal Protocol to phase out hydrofluorocarbons (HFCs).
The ICAO agreement is a mixed bag—it makes some historic steps and defers some important decisions to later, but is also a missed opportunity when it comes to carbon pricing. In my previous post I set out five measures on which I’d judge the ICAO climate agreement. Here’s how I grade the recent agreement on those measures:
Commit to a strong collective target.
The ICAO agreement restates an aspirational goal of “keeping the global net CO2 emissions from international aviation from 2020 at the same level.” Much like the Paris agreement in December, whether you think the ICAO agreement is a glass half-empty or half-full depends on what you think was the alternative. If you think the alternative was massive and immediate emission reductions in one of the most expensive sectors, then holding net emissions steady by purchasing offsets from other sectors looks like a cop-out. On the other hand, compared to the status quo, carbon-neutral growth is a big step forward, even if not quite “the dawn of climate friendly air travel.”
I tend to view half a loaf as better than none. And as with the Paris agreement, an international architecture is now in place that can be reviewed and strengthened over time. Still, I deduct heavy marks for stripping out language matching the Paris agreement on holding global temperature rise to below 2 or 1.5 degrees Celsius. This may reflect that airlines were probably motivated less by a direct concern about climate change as they were by a desire to preemptively avoid a patchwork of country-by-country regulations on emissions.
As of last week, 65 countries, including big emitters China, US, and Europe, had announced that international flights between their airports will be subject to the agreement’s initial voluntary phase from 2021-2027. Other big countries, including India and Russia, have opted out (see a recent blog post by my colleague Kartikeya Singh on evolution of climate commitments by India). Participating countries represent around 80 percent of the expected growth in emissions from international aviation, according to estimates by the Air Transport Action Group and the Environmental Defense Fund), which is good enough for a grade of B-. The agreement leaves room for additional countries to join later, and distressingly, room for countries that are currently in to back out.
I’d hoped to see ICAO develop for the aviation sector the world’s first truly global cap-and-trade program. An international carbon market for aviation would have been the most cost-efficient way for airlines to meet their collective climate goal—without carbon trading some airlines will inevitably cut emissions by too little while others will do so too expensively. An international carbon market for aviation would have given participating airlines two monetary incentives to cut emissions within their own operations: first, any emissions they could reduce cheaply would let them sell excess emission rights to other airlines; and second, cutting emissions would mean they’d need to buy fewer offsets.
But ICAO’s “market-based measure” doesn’t provide the first incentive (there’s no mechanism for one airline to sell emission reductions to another), and the second incentive is heavily diluted (big changes in emissions on the part of an airline are rewarded with only small changes in the amount of offsets it needs to buy). Without getting too technical, that’s because the amount of offsets an airline needs to buy is scaled to its total level of emissions rather than to changes it makes to that level of emissions. After 2030, the incentive slowly gets stronger as an airline’s individual performance begins to play a larger role in its offset requirement. This missed opportunity to enact strong, early price incentives for low-carbon innovation warrants a D grade. As one redeeming factor, airlines do have the incentive to support industry-wide improvements. (Indeed, the agreement requests the ICAO Council to “make further progress on aircraft technologies, operational improvements and sustainable alternative fuels.”)
Look to the forests.
Grade: A (incomplete)
For all its shortcomings, the ICAO agreement will produce a massive new source of paying demand for emission reductions; Environmental Defense Fund’s Annie Petsonk sees international aviation needing to cut emissions by nearly 2.5 billion tons of carbon dioxide between 2020 and 2035. Airlines will be looking for emission reductions that are large, cheap, and with a good story attached—tropical forests can provide all that. As Frances Seymour and I explain in our forthcoming bookWhy Forests? Why Now? The Science, Economics, and Politics of Tropical Forests and Climate Change, keeping tropical forests standing offers large volumes of emission reductions, is comparatively cost-effective, and has many side benefits for clean water, health, and agriculture. A framework for reducing emissions from deforestation (REDD+) was agreed to by the UNFCCC in Paris, but it sorely lacks the funding that airlines’ offset purchases can provide.
While ICAO’s has delegated the process for determining eligible credits to its “Committee on Aviation Environmental Protection,” nothing in last week’s agreement rules out airlines eventually meeting their target by purchasing REDD+ credits. Meanwhile, the ICAO webpage mentions reducing emissions from deforestation (REDD+) as a possibility, and a tweet by ClimateWire’s Camille von Kaenel suggests that ICAO council president Olumuyiwa Benard Aliu is “taking the idea of REDD+ credits for aviation seriously, but working out criteria for emissions units first.”
Use the latest model: REDD+.
Grade: B+ (incomplete)
With so many tons of carbon potentially about to change hands, who decides whether emission reduction credits meet high standards of environmental and social integrity? ICAO agreed to vest this power in the UNFCCC (“emissions units generated from mechanisms established under the UNFCCC and the Paris Agreement are eligible for use in CORSIA, provided that they align with decisions by the Council, with the technical contribution of CAEP, on eligible vintage and timeframe”). This is good—the UNFCCC has the global high ground on legitimacy when it comes to setting climate standards. Such a decision implies a path for REDD+ credits through the Green Climate Fund or the Paris Agreement’s to-be-determined “Sustainable Development Mechanism,” with specific details about eligible credits delegated to the aforementioned committee. The agreement narrowly misses an A grade because it doesn’t state that only the UNFCCC can decide offset standards; this uncertainty leaves the door open to the use of offsets certified, for example, by California or the multilateral Carbon Fund, but doesn’t yet close the door on less legitimate privately operated standards bodies.
Back to school
So what’s next? Lots of homework all around:
ICAO members should reconsider ways to augment incentives for low-carbon innovation by individual airlines, by tying offset requirements more closely to changes in the amount of emissions airlines produce, or by developing a true emission trading mechanism between airlines.
Airlines should cut emissions in their operations, (e.g., through fuel efficiency, newer-model planes, and more passengers per flight), even though the monetary incentives to do so are weaker than would have been provided by inter-airline carbon trading or offset requirements more closely tied to changes in emissions
The ICAO Council should push ahead with developing industry-wide improvements
Countries whose airlines have not already joined the 2021-2027 voluntary phase should do so
ICAO’s Committee on Aviation Environmental Protection should set the stage for eligibility for UNFCCC REDD+ credits
Parties to the UNFCCC should move REDD+ forward from an agreed framework to saleable credits in order to meet a big new source of demand
Since the start of international negotiations under the United Nations Framework Convention on Climate Change (UNFCCC), India helped lead the global South in demanding its rightful share of the global carbon budget, while simultaneously wagging a finger at the developed world for creating and exacerbating the climate problem. India has struggled to do so while accounting for the fact that unabated climate change will continue to inflict devastating impacts on the Indian people, especially those who are poorest and most vulnerable. Yet on October 2, India signaled its serious commitment to climate action by ratifying the Paris Climate Agreement, which is the most promising international climate agreement since the hailed success of the Montreal Protocol agreement from 1987.
India’s ratification will shrink the remaining margin needed for the agreement to enter into force. A total of 55 countries, who produce at least 55 percent of global emissions, is required for the agreement to take effect. Currently, 61 parties have ratified, accounting for 47.79 percent of emissions. India adds another 4.1 percent of emissions, bringing the total to 62 parties and 51.89 percent of emissions.
Changing discourse and the road ahead
The road to ratification has not been easy for a country of over one billion people, nearly 400 million of whom lack access to reliable electricity and over 20 percent of the country lives under the poverty line ($1.90/day). The timeline above highlights major milestones in India’s domestic and foreign climate-related energy policies. A closer examination of these markers reveals a struggle between ideologies and ground realities.
Historically, India has sought compensation from industrialized countries who exploited cheap, carbon-intensive expansion at the expense of the global South’s opportunities for growth. But in an increasingly hot world where India’s summer heat waves are reaching inhospitable temperatures, continuing to pursue a stalwart position on climate action would not even be self-serving at this point. In May of this year, the state of Rajasthan recorded India’s highest temperature ever: 123.8 degrees Fahrenheit. A recent study projected that parts of South Asia and North Africa are experiencing temperature increases at a rate that may make certain areas uninhabitable by the end of the 21st century. This is exacerbated by other major stressors attributed to climate change, such as sea-level rise, desertification, and increasing mortality due to industrial air pollution.
Balancing climate action with growth continues to present a challenge for India’s leadership. Gaining access to energy is key to unlocking economic growth, essential for tackling India’s poverty. India has vast coal reserves and will continue to tap into them to connect millions of citizens to the grid, but the Modi government also aims to increase its mix of renewables to meet 40 percent of the country’s electricity demand by 2030. This makes sense given that India is now the third largest greenhouse gas emitter after China and the US (excluding the EU) and is projected to continue growing steadily with a current economic growth rate of 7.5 percent. Ultimately, India’s political will to emerge as a responsible superpower and mounting pressures to abate the worst impacts of a shifting climate have reshaped its posture as a leader in international climate negotiations.
Domestic policy action
India’s educated middle class is rapidly expanding and will require millions of new jobs, nudging the government to create employment opportunities while ensuring secure energy in the context of a climate-constrained world. The Modi government has announced several national missions that promote greater energy security by developing more renewables at scale. India has also realized its potential to save energy, especially among its fleet of coal-fired power plants. India’s energy efficiency programs and the desire to foster a business environment that supports low-carbon technologies, such as electric vehicles, could make it a leader in both these sectors.
Partnerships for progress
India’s proposed actions to address climate change through a web of policies at the national and subnational levels may serve as a blueprint for nations interested in driving clean energy innovations. However, the country cannot do it alone. India has acknowledged that it will need the help of partner countries to achieve its ambitious energy goals. Rather than developing independent agendas, multilateral development institutions and bilateral partnerships should aim to help India meet its impressive targets. Simultaneously, to make these partnerships productive, India should be more transparent about its progress on achieving its targets. India’s commitment to ratify the Paris Climate agreement sends a strong message, but the leadership’s determination to pull off such a comprehensive and long-term effort demands successively concerted action over the next several years.
The climate and energy challenge is primarily about finding ways to bring clean energy to Rio and Lagos, not to San Francisco or Berlin.
To avoid catastrophic climate change, the world needs a radical transformation in how we produce energy. In fact, the International Energy Agency estimates that generation from renewable energy needs to more than triple by 2040 to have any chance of limiting global warming to two degrees Celsius. And for all of the recent progress in energy technologies, most people accept that we will only achieve sustainable energy patterns with a substantial investment in research and development—from solar, wind, and nuclear through storage and efficient distribution.
The good news is that the international community is committed to finding low carbon technologies to power an increasingly high-energy planet. Mission Innovation is a pledge by major emitting countries to double their investments in clean energy research from its current level of $15 billion over the next five years. Bill Gates and other billionaires have teamed up to create the Breakthrough Energy Coalition to add private support as well, bringing the total expected investment in research to well over $110 billion through 2021.
These efforts should lead to changes in the way North America and Europe generate power in the future. But where the research will take place and where energy will be consumed doesn’t necessarily match up.
Between 2012 and 2040, electricity use by OECD countries is expected to grow by 18 percent; but for non-OECD countries, the projected rise is a whopping 71 percent. Within 25 years, non-OECD countries will account for two-thirds of global energy consumption. To that end, the climate and energy challenge is primarily about finding ways to bring clean energy to Rio and Lagos, not to San Francisco or Berlin.
Developing countries are different from rich countries in more ways than income per head. Most are closer to the tropics, where the majority see lower population density. The overall scale of national energy markets is often orders of magnitude smaller than a country like Belgium or Canada—let alone the US. These and many other factors suggest that the sustainable energy solutions that work in the rich world might not be applicable, or at least will require significant adaptation to be applied, in many parts of the developing world. Take one recent example: how useful is a major breakthrough in carbon capture in Iceland when most developing countries don’t share relevant geological features?
The big push on sustainable energy R&D can only succeed if it takes into account the opportunities and special challenges for bringing energy to the world’s poorest regions. This means that Mission Innovation and the Breakthrough Energy Coalition should be sure they set aside funds not just for sexy projects that will work among the affluent of London or Los Angeles, but that will also find energy solutions that are fitting for the demands of consumers in Manila and Bamako.
To complement the push, an energy pull may also be especially useful. Lessons can be drawn from the pneumococcal vaccine story. Pneumococcal illnesses from pneumonia to meningitis are the globe’s biggest vaccine-preventable killer of children under five. A vaccine developed by Western pharmaceutical companies soon became routine in 35 high- and middle-income countries, but it did not provide protection against the strains most prevalent in the developing world. The Bill & Melinda Gates Foundation along with six governments created an “advance market commitment,” pledging to spend $1.5 billion on a vaccine—that included those strains—if it was developed by pharmaceutical companies.
The strategy worked.
GAVI has now immunized 47 million children with the new vaccine. Perhaps a similar pull mechanism could apply to clean energy?
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.
As people begin to unravel the meaning of the UK vote to leave the European Union, the Brexit vote creates uncertainty but may also open up opportunities. In the short run, the uncertainty about future national policy may discourage private investment in renewable energy and other low carbon technologies. At the same time, the freedom to forge its own climate policy and to step out ahead of the EU may open opportunities for more ambitious action and creative intellectual leadership in UK support to developing countries.
Theresa May: Climate Champion?
In the short run the Brexit vote may not affect the UK’s ambitious commitment to reduce its own emissions. This commitment is embedded in the 2008 UK Climate Change Act which commits the UK to reducing emissions of greenhouse gases to 80 percent below 1990 levels by 2050. This was not imposed by the EU and was adopted with cross-party support in the UK so it should be on firm ground. In fact, the UK has been notable for the consistency of its climate stance even when the leadership switched from Labor to Tory. And the new Prime Minister, Theresa May, is on record as supporting the 2008 Climate Change Act and stating that greenhouse gas reductions will improve national and economic security.
The long-term target is translated into five-year carbon budgets, a series of recommendations from the government’s climate advisors. Interestingly, only a week after the Brexit vote, the UK published its fifth carbon budget, on June 30. The new carbon budget announced an ambitious target of cutting carbon emissions by 57 percent from their 1990 level, above the EU-wide commitments made in the Paris Agreement which was only a 40 percent cut by 2030 on 1990 levels. The new carbon budget has been accepted by Amber Rudd, the UK's Energy and Climate Change Secretary.
Going forward, though, there are some concerns that a new government in Britain could be less committed to climate action. While the Act is legally binding, the UK does not yet have in place all the policies it would need to meet its ambitious targets. Many of the conservatives who had campaigned for Brexit are also climate deniers. If they have more power in a new government, and without the imperative to align with EU policy, it’s possible that climate policy could waver. In Europe some are questioning whether the UK withdrawal from the EU would affect the aggregate EU commitment or slow the EU ratification of the Paris Agreement; countries need to ratify both individually as well as in the EU block as a whole. The UK and the EU have not yet ratified. The impact of Brexit might be more significant within the EU if the balance of forces shift towards lower climate ambition.
International Climate Finance: economic slowdowns, fiscal constraints, budget pressures
The UK has been a generous funder of climate action in developing countries, including being one of the few countries to provide results-based funding for REDD+. It recently increased its contribution to the FCPF Carbon Fund by an additional £ 85 million (approx. $112 million). What impact will Brexit have on the UK’s ability to continue to support developing countries in their efforts to transition to low carbon growth paths and to adapt to the impact of climate change on their economies?
In a recent blog, CGD’s Owen Barder explained the direct consequences for developing countries if the UK economy stalls, as well as the implications for development assistance if the UK abandons its commitment to spend 0.7 percent of GDP on aid. Since much of the funding for climate finance comes from development assistance budgets, a cut in aid would reverberate through to climate finance. The impact of Brexit on the UK fiscal position is not known. It depends on whether Brexit reduces economic growth in the UK and whether the drop in income would exceed the potential savings from reduced transfers to the EU itself. According to one study, if leaving the EU were to reduce national income by just 0.6 percent it would be enough to offset the savings in net contributions to the EU, putting pressure on budgets. The uncertainty could lead the UK to take a more conservative budget stance which could limit its ability to be generous, both in climate finance and development assistance. The silver lining is that an economic slowdown would have a positive impact on the climate because it would likely lead to a sustained drop in emissions, as happened during the 2008 recession when global emissions dropped 1.5 percent.
Beyond public finance, the reverberations of the Brexit vote in UK and global financial markets will increase perceived risk and damage the prospects for mobilizing private finance for the huge investments in green growth that will be needed to put both industrial economies and fast growing emerging markets onto low carbon growth paths.
Impact on Carbon Prices in the EU Emissions Trading System (ETS)
The immediate impact of the Leave vote was a drop in the price of carbon in the European carbon market (ETS). This is bad news for people who hope that regional carbon markets, including in developing countries, will grow and eventually integrate, and thus lead to higher global carbon prices and an incentive to invest in low carbon energy and infrastructure. In the first week after Brexit the EU allowance price dropped 12 percent and it dropped an additional 6 percent in the following week. The Brexit vote is expected to lead to a sustained period of uncertainty over the status of UK participants in the EU ETS. Environmental Finance noted that UK utilities are adopting a 'wait and see' approach to their hedging following the referendum. Prices may fall further if UK firms start to unwind the further-out carbon positions for fear of getting left unhedged if the UK leaves the EU ETS as a result of a Brexit.
According to Energy Aspects , if UK entities remain in the EU ETS, there would be little change to the outlook for market fundamentals. But if UK participants leave the EU ETS, then the forecast is significantly bearish for EU Allowances: supplies could increase as UK industrial entities push allowances into the market, driving prices down.
(An alternative view, by Tim Worstall, at the Adam Smith Institute, is that Brexit “could immeasurably improve British climate change policy …. [We could] Stick on a carbon tax of the appropriate size, declare the problem solved and go off and do something more interesting.”)
So What Should The UK Do Now?
The Brexit vote raises a host of questions about the future of UK, EU and even global climate policy. (For a long list, see the 94 questions raised by Carbon Brief in a recent blog.) As their clever lawyers, and maybe less clever politicians, figure out a way to accommodate the will of the voters while adhering to a modern, progressive leadership role we hope that the UK will continue to take strong climate action at home and to provide technical, financial and policy support for climate action in developing countries at the same high level. To do this, they should do the following:
Continue to maintain ambitious national emission reduction targets, larger than the amounts agreed under burden sharing with the EU.
Immediately register the UK’s own ambitious climate targets (Intended Nationally Determined Contributions) with the UNFCCC, as part of the Paris Agreement, separately from the EU commitment. Quickly ratify the Paris Agreement in Parliament.
Continue to show intellectual leadership in international climate finance. The UK was the primary architect of the Clean Technology Fund and the Climate Investment Funds. It should continue to support innovative approaches to leverage this funding, including the expected reflows, so that the coalition of multilateral development banks can continue to finance low carbon infrastructure in developing countries.
Continue its intellectual leadership on results based approaches for climate finance, especially for REDD+, in the Green Climate Fund and other programs. CGD’s Bill Savedoff explains how in a recent policy paper.
If the UK likes Europe, just not Brussels, it can show the love by supporting multilateral climate finance programs where these are the best solutions but also continuing to channel funds through bilateral programs of individual European countries as it does together with Norway (a non-EU member) through the German REDD+ Early Movers program.
Negotiate to continue to participate in the EU ETS. And while they’re at it, advocate for the EU ETS to include international forest offsets, as we suggested in our Working Group Report Look to the Forests.
In his blog, Owen also noted that Brexit seems likely to diminish the UK’s global “soft power” which it has used in recent years to promote progressive policies in the EU and more broadly on international issues like climate change. The UK has been seen as a leading advocate for ambitious EU climate policy since 1997. The 2008 Climate Change Act strengthened the UK’s leadership internationally by highlighting the role it would take in contributing to urgent collective action to tackle climate change. The UK's energy and climate change secretary, Amber Rudd, vowed that the country will continue to be a leader on climate change post-Brexit, but admitted its path towards decarbonisation had been made more difficult by the shock move. Ms Rudd said the UK had been "central" to the Paris climate change deal and had been a leading voice advocating for climate action more widely. Post-Brexit the UK has the chance to continue—and strengthen—its global leadership on progressive climate policy. It should not squander that opportunity.