On the Future of REDD+ and the Carbon Market, by David Ellison

Our guest author is David Ellison, Senior Researcher & LULUCF Specialist (Institute for World Economics, Hungarian Academy of Sciences), who joined us as an external expert at the LULUCF lab MAPS held in Iquitos, Peru from the 25th to the 27th of September 2012.

Within the Mitigation Action Plans and Scenarios (MAPS) programme, Brazil, Chile, Colombia, Peru and South Africa are considering the potential role of forests in their overall climate change mitigation action plans. The most recent MAPS meeting addressing the role of forest took place recently in Iquitos, Peru. The rate of deforestation in many of these countries (in particular Argentina and Brazil) calls for strategies that could rapidly and effectively put an end to this process. Other countries in the region, however, have been less strongly affected by the deforestation trend and some have even exhibited increases in forest cover and total carbon stock (e.g. Chile).

REDD+ is one of the principal internationally driven tools, but not the only one, for promoting both forest preservation as well as increases in forest cover and thus interests multiple countries in the region. REDD+ aims to provide new incentives to avoid deforestation, mitigate forest degradation and also to increase re-forestation and afforestation. However, problems with funding the program are slowing its progress. According to the Ecosystems Marketplace Report on State of Voluntary Carbon Markets 2012, the market for REDD projects collapsed by 59% in 2011 compared to the previous year (which in turn was a record setting year that witnessed expansive, rapid growth in the REDD market).

Thus, the big question that should be on everyone’s mind is what is driving this decline in the REDD market and will it be able, in future to provide a meaningful source of funding for forest preservation and renovation projects?

The answer to this question is not clear. Certainly the failure to conclude a successful and legally binding greenhouse gas emission reduction agreement at the last three Conference of the Party (COP) meetings in Copenhagen, Cancun and Durban provides few incentives for countries throughout the world to engage in the carbon trading markets and to invest in programs such as REDD+. Further, several important dropout countries now number the list of prior Kyoto participants (Canada, Japan and Russia), and the US never succeeded in ratifying its original Kyoto Protocol commitment made in 1998. More countries have considered joining the list of dropouts (e.g. New Zealand), though some countries have also recently considered getting back in (Japan).

 

The framework for incorporating land use, land use change and forestry (LULUCF) into the international carbon trading framework likewise remains highly underdeveloped. To-date, only the voluntary forest-based carbon market and the California Forest Protocol provide meaningful frameworks for promoting and funding REDD+ opportunities. On the European side, forest-based carbon offsetting is discouraged by the fact that the EU’s emission trading scheme (EU ETS) does not permit the use of forest-based Clean Development Mechanism (CDM) credits in the EU ETS.

Commitment to incentivizing the world’s forests in the context of a carbon trading framework likewise remains weak. Ellison et al. (2011; forthcoming) demonstrate that the vast majority of the world’s forests remain outside the carbon accounting framework and thus at best are only very weakly incentivized in the carbon accounting and carbon trading framework. The EU is currently taking small steps to improve at least part of this situation. A proposal for the future harmonization of land use, land use change and forestry (LULUCF) carbon accounting across the EU Member states has been introduced to the Council and European Parliament for consideration. But the next step in this process—the integration of LULUCF into the EU climate policy framework—is still many years off and no timetable has yet been set. Moreover, future modifications to the EU forest-based CDM framework are not part of these discussions.

 

Finally, the global economic recession has likewise had a significant impact on REDD+ funding. Moreover, the global recession has influenced the carbon offsetting and trading market in ways not adequately understood. Most of the advanced economies have witnessed significant drops in their annual emissions as their economies have declined. In Europe, this drop has been significant enough to bring the EU quite close to its 2020 Kyoto goal of reducing emissions by 20% compared to 1990 (see EEA, 2012). This “success” certainly will not last. Despite the bumpy road, one can hopefully expect the economies to return to more stable economic growth in the next year or two. The result of economic decline and falling emissions, however, has been a glut in the market for carbon credits, thereby reducing incentives for many countries to invest in alternative carbon offsetting venues such as the CDM market.

Thus much uncertainty shrouds the future of the Kyoto process and the likelihood that Parties to the agreement will even have an interest in trading forest-based carbon credits. Despite ongoing efforts to link carbon trading regimes across the EU, Australia and possibly also the US (see e.g. Zetterberg, 2012; and the European Commission’s DG Climate website), the fragile state of international cooperation poses an ever present risk of disintegration. In this sense, future prospects for the development of REDD+, the provision of adequate funding and the struggle against deforestation are not bright, potentially leaving much of the developing world to their own devices. The most optimistic scenario is that more progress will be made at the upcoming COP meetings in Doha, Qatar. But this too is certainly not guaranteed, leaving one to wonder when the big emitter countries will finally step up to the plate and play their role as exemplary leaders toward the low carbon future?

By David Ellison, Senior Researcher and LULUCF Specialist at the  Institute for World Economics, Hungarian Academy of Sciences –

 

For further reading, see:

EEA (2012). “Greenhouse gas emission trends and projections in Europe 2012 – Tracking progress towards Kyoto and 2020 targets”, Copenhagen: European Environment Agency.

Ellison, David, Mattias Lundblad and Hans Petersson (2012). “Open Letter to Mr. Asger Olesen and DG Climate Action”, EurActiv.com.

Ellison, David, Hans Petersson, Mattias Lundblad and Per-Erik Wikberg (forthcoming). “The Incentive Gap: LULUCF and the Kyoto Mechanism Before and After Durban”, Global Change Biology – Bioenergy.

Ellison, David, Mattias Lundblad and Hans Petersson (2011). “Carbon Accounting and the Climate Politics of Forestry”, Environmental Science & Policy. 14, 1062-1078.

Zetterberg, Lars (2012). “Linking the Emission Trading Systems in EU and California”, FORES Study 2012:6, Stockholm: FORES.

 

 

 

1 thought on “On the Future of REDD+ and the Carbon Market, by David Ellison

  1. Thanks to our guest author David Ellison, Senior Researcher and LULUCF Specialist at the
    Institute for World Economics, Hungarian Academy of Sciences!

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