NEWS

Can the carbon market save the rainforest?

05/08/2008

Lisa Friedman, ClimateWire reporter

If only protecting tropical trees and putting a cork in global warming were as simple as the bumper sticker slogan "Save the Rainforest" suggests.

Trees, after all, absorb and trap carbon dioxide, the main greenhouse gas that causes climate change. But in countries like Brazil and Indonesia, forests are being burned or cut down at a swift pace for farming, illegal logging and cattle grazing. Experts say more carbon is spewed into the atmosphere from such deforestation than from every car, bus and truck on the road in the world.

Global leaders agree that stopping the destruction of forests should be a central plank in U.S.-passed climate change legislation, as well as any post-Kyoto Protocol agreement.

An illegal logging trail in the forests of Indonesia. The World Bank estimates that illegal logging results in $10 billion to $15 billion in timber sales worldwide. The Nature Conservancy estimates that in Indonesia as much as 70 percent of all timber exports are illegal. Photo courtesy of Mark Godfrey of the Nature Conservancy.

But saving the rainforests will take big money and the legal clout to make it happen, two ingredients that promise to make the quest anything but simple.

"We’ve got the science. The real challenge is the politics," said Kathleen Kennedy Townsend, Maryland’s former lieutenant governor, this week to a crowd of conservationists meeting under the auspices of Avoided Deforestation Partners, a Washington, D.C., research group focused on market-driven solutions.

"Unless you have a strong constituency, ideas—good as they are—just fall on deaf ears," Townsend said. "This is a fight."

With major climate change legislation coming to the Senate floor next month, some environmental advocates believe they have found a solution: harnessing the $60 billion carbon market and making it work for the trees.

Supporters say allowing forested nations to tap into the trading scheme—something they cannot now do under the Kyoto Protocol—would release the billions needed to ensure the survival of forests. Compensating governments and individual landowners for protecting the forests, most agree, is the only way to ensure the forests’ survival.

"Very simply, people cut down forests because it pays money to do so. If you can pay money to keep them standing, [countries] will keep them standing," said Laurie Wayburn, president of the San Francisco-based Pacific Forest Trust.

Yet many within the environmental community are cautious. There are too many uncertainties, skeptics say, and too many ways to game the system. The feared results: a market flooded with cheap credits, and no accurate way to measure if forests are really being saved or if emissions truly are going down.

32 million acres of forest are lost annually

On the importance of forests there is no dispute.

The world loses about 32 million acres of forest cover each year to the timber trade; crops like palm oil, soybeans and corn; and cattle grazing. In Nigeria, for example, the country’s National Forest Conservation Council has estimated forests there will be cleared entirely in 12 years at current rates because of a heavy reliance on wood for fuel.

Conservationists say the global destruction rate is about 100 acres a minute. So by the time you finish reading this article, a swath of land about the size of New Jersey’s Giants Stadium will be most likely be gone.

According to the Intergovernmental Panel on Climate Change, deforestation releases more than 1,700 million tons of carbon each year, accounting for more than 20 percent of global greenhouse gas emissions. While ecologists note the irony of protecting forests for the carbon—Thomas Lovejoy, president of the H. John Heinz III Center for Science, Economics and the Environment, likened it to "valuing a computer chip for its silicon"—they also say protection is critical.

"We cannot solve the problem of climate disruption unless we address the deforestation problem," said John Holdren, a professor of environmental policy at Harvard University.

But the job is not cheap. Sir Nicholas Stern, former World Bank chief economist, estimates that halting half of the world’s deforestation could cost at least $10 billion annually.

There is some money in foreign aid. Activists, however, say it will not be enough to convince rainforest landowners that it is more profitable to save trees than to destroy them.

The upcoming Senate debate on climate change has given new urgency to the task of finding funding. While few people expect the Senate to approve a global warming bill this year—much less President Bush to sign one—there is a general acknowledgement among policymakers that whatever bill language dies in 2008 could be reincarnated to pass in 2009.

The climate change legislation sponsored by Sens. Joseph Lieberman (I-Conn.) and John Warner (R-Va.) does include a fund that allocates 2.5 percent of all emissions allowances toward international forest carbon activities.

"That’s not small change," said Barbara Bramble, senior adviser for international affairs at the National Wildlife Federation. She estimated the fund could come to $2 billion to $3 billion and could be used for a range of pilot projects.

Emissions trading might produce the billions needed to save trees

The potential big money, though, is in the carbon markets.

If the United States sets up a cap-and-trade system, regulated companies will likely be allowed to offset a certain percentage of their emissions by purchasing foreign credits. Those offsets could pay for any number of clean energy or emissions-reducing projects, like a wind farm in Uganda or a methane recovery project in Mexico.

The Lieberman-Warner bill allows regulated entities to satisfy 15 percent of their compliance obligations with allowances from foreign greenhouse gas emissions trading markets. Forest projects are not currently part of the mix, and many environmentalists want to change that.

Stuart Eizenstat, who headed the U.S. delegation in the negotiation of the 1992 treaty, is now leading the charge to specifically allow credits for avoided deforestation in the Lieberman-Warner bill. He makes a forceful argument that putting a market-based system to work on behalf of the world’s forests is the best way to raise the billions of dollars that the trees will need to survive.

At the same time, he said, opening the market would lower the cost of compliance for companies and other regulated entities, making global warming legislation more palatable for the business community.

"It is the single most important thing that can be done in this debate," Eizenstat told Robert Menendez (D-N.J.), who chairs the Senate Foreign Relations subcommittee on environmental issues.

James Rogers, chairman and chief executive of Duke Energy Corp., agreed. Speaking this week on a deforestation panel, he also argued that forming carbon-trading alliances with rainforest nations—almost all of which are among the world’s poorest—will be key for building support for climate change legislation.

Duke Energy, he told the crowd—which included climate scientists, environmental activists and 2004 Nobel Peace Prize winner Wangari Maathai—is the third largest greenhouse gas emitter in the country and the 12th largest in the world. If his company was a country, he acknowledged, it would be the 41st biggest emitter.

"I share that with you not to brag," Rogers said to a roar of laughter.

The point, he said: "We believe that credit for avoided deforestation is really critical. It’s a way to bring the developed countries into an agreement in solving the problem."

Menendez, who convened a hearing on Earth Day on protecting tropical forests (E&ENews PM, April 22), said he plans to offer just such an amendment to the Lieberman-Warner bill. Sen. John Kerry (D-Mass.) also expressed support for the measure.

Wanted: a credible accounting system that can spot ‘leakage’

A cadre of environmental groups, however, are urging Congress to go slowly.

They worry that it is not yet possible to prevent foreign officials from raking in money for saving one forest, only (with a wink and a nod) to sanction the destruction of another. That phenomenon—known as leakage—undermines the whole point of avoided deforestation, which is to reduce overall emissions.

Many forested nations have haphazard law enforcement systems that cannot control illegal logging. Those that can control it have not developed a national baseline of carbon emissions. That makes it difficult to even measure how much carbon is being reduced nationwide.

Under a cap-and-trade system in which regulated industries can buy foreign allowances, it is far cheaper for a company to protect a forest in, say, Papua New Guinea or Bolivia than to reduce its own greenhouse gas emissions. Activists worry that letting companies satisfy their obligations too inexpensively would translate into a license to pollute while sending the wrong signal to investors in new technologies. If forest credits are going to be available, they warn, the offsets must have credible accounting systems to back them up.

"At this point, I don’t think the forestry sector can withstand that," David Hayes, senior fellow at the World Wildlife Fund and former deputy secretary of the Interior in the Clinton administration, warned lawmakers recently.

"There can be unintended consequences if we don’t design the program soundly," Hayes said.

Fred Krupp, president of the Environmental Defense Fund, suggested starting with individual projects that can be measured and slowly phased in that would eventually allow entire nations to jump into the game.

"We need to be very careful. When we make a mistake designing a trading system, it gives a bad name to the whole system," he said.

Rainforest countries, though, say they are eager to participate and work toward national standards.

"We’re ready to do it," said Kevin Conrad, executive director of the Coalition for Rainforest Nations. "We want access to markets. If factories are allowed in, why can’t we be allowed in when it’s exactly the same thing?"

While questions persist, the loudest voices speaking on deforestation say there is little time to lose.

"The higher soybeans are, the more forests that get cut down in the Amazon," Eizenstat said. "By the time we come around to a perfect solution, there won’t be anything left to save."

He agreed that a strong system needs to be in place but noted that working language into a Senate climate change bill that passes in 2009 would give policymakers and scientists until 2012 to create a strong framework. In the meantime, he and others said, Congress needs to act quickly in sending a signal that it cares about saving tropical trees.

Otherwise, he warned, "We’re going to have whole areas deforested that we’ll never get back."