20 May 2015

Why the Paris climate summit will boost REDD+

An agreement in Paris could build on the achievements of the Warsaw Pact for REDD+ Action, and could prove a game changer for forestry, argues Mariama Vendramini

REDD+ could become one of the major instruments available to tackle climate change

2015 is set to be a decisive year for forests and initiatives that reduce emissions from deforestation and forest degradation (REDD+).

Loss of forests and land use change is responsible for approximately 20% of total greenhouse gas (GHG) emissions, but has been poorly covered by mandatory carbon reduction schemes.

The Kyoto Protocol only considers reforestation as valid, disregarding many other forestry activities such as improved forest management (IFM) and avoided deforestation. Even its support of reforestation was via restrictive methodologies that inhibited it from properly taking off as a sector.

The combination of the Warsaw Pact for REDD+ Action and the expected Paris Agreement in December will be a game changer for forestry.

The former set REDD+ as an official tool to mitigate climate change, while the latter will, hopefully, reach a binding agreement that will drive widespread emissions reductions.

In a scenario in which all major players are bound to reduce emissions, and deforestation is recognised as a heavy emitter, REDD+ becomes one of the major instruments available to tackle climate change, as it maintains and improves biological carbon sinks while protecting native and threatened ecosystems.

There are different types of arrangements for achieving REDD+ results: private-private, public-private, NGO-public, as programmes within a subnational jurisdictions, or federal governments' public policies. All have in common an aim of undermining economic incentives that drive deforestation.

With decisions taken only via consensus, the UN climate talks' outcomes are powerful but shallow

Brazil is an example of a success story - it reduced emissions from deforestation by almost 80% between 2005 and 2014. The federal government's action through nationwide command-and-control policies were, at first, highly effective in controlling forest loss and emissions. But to tackle residual deforestation consistently over time, it is imperative to establish economic positive incentives through private sector engagement.

Let's look at an average Amazonian private landowner. He has economic incentives to let the forested area he must protect by law – set as 80% by Brazilian legislation – to be invaded by squatters backed by the informal timber industry. It is expensive and dangerous to stand against these squatters alone, besides the fact that the landowner may even be able to share some of the profits from this activity.

Regarding the remaining 20% of his land, he has the right to exploit it as he chooses, and will do this usually by raising cattle or developing any other non-forest related economic activity with a high return on investment. 

Climate finance is critical to close this gap. Within the UN climate talks, parties are discussing how money will flow between them. It is defined by the Warsaw REDD+ Platform that carbon finance will be based on results-based payments, with the Green Climate Fund (GCF) set to be the main allocating body.

So far, countries have pledged $10.2 billion to the GCF, of which half should be channeled to mitigation, the category REDD+ falls into.

Nonetheless, forestry and land use emissions account for several gigatonnes a year: from 2001 to 2010, the IPCC AR5 report points out those emissions ranged from 4.3 – 5.5 GtCO2e annually.

Considering a $20 abatement cost per tonne (a bottom limit cost assumed by the same report for the year 2030) the magnitude of investments needed to eliminate forest and land use emissions is in the region of $100 billion a year, significantly more than current absolute pledges for mitigation as a whole. It is clear that public multilateral finance has limited reach.

Meanwhile, potential large-scale results-based finance is being incubated by subnational, private and non-governmental entities. Pieces of a potential mandatory framework for REDD+ are maturing at the hands of impact investors, traditional and indigenous communities, landowners, project developers, subnational jurisdictions, NGOs, certification bodies and leading companies.

One example comes from the Governors Climate and Task Force, a coalition of 26 states and provinces from Brazil, Indonesia, Mexico, Nigeria, Peru, Spain, and the US to advance jurisdictional programmes and link REDD+ activities with emerging GHG compliance regimes and other pay-for-performance opportunities.

California, as one of the participating jurisdictions, offers an outstanding example of linking national forestry offsets – including IFM and avoided deforestation – to its mandatory emissions trading scheme. As a leading member, the Golden State envisaged to expand this connection to foreign lands with the Brazilian State of Acre and Mexico's Chiapas.

Although not currently effective, the effort could form a basis to be replicated in other schemes.

Brazil reduced emissions from deforestation by almost 80% between 2005 and 2014

Brazil, for instance, could run one of these schemes. An initiative to link Brazilian forestry offsets to an emerging national GHG compliance regime was proposed by IPAM and Biofilica under Global Canopy Programme's  Interim Forest Finance programme. The proposal builds on the fact that the 2008 Brazilian National Policy on Climate Change sets a Brazilian Emissions Reduction Market as a tool to tackle emissions, and that Brazil holds a large amount of unfinanced REDD+ emission reductions. Mirroring other cap-and-trade systems, covered entities would be able to partly meet the cap by financing reductions in the Brazilian Amazon.

One important step towards the establishment of such a market is a voluntary pilot programme comprising more than 20 corporations, organised by the Brazilian leading school of management's centre for sustainability studies, GVCES, and The Rio de Janeiro Green Exchange (BVRio). It will sow the seed of a future ETS in the country.

From a company's perspective, there is growing effort from the voluntary market, the New York Declaration on Forests and the Consumers Goods Forum. Voluntary REDD+ purchases from companies acting mostly for corporate social responsibility turned over $94 million in 2013, according to Ecosystem Marketplace's State of Voluntary Carbon Markets report, in a year of tough competition to low priced CERs.

In parallel, Kellogg's, Asia Pulp and Paper, McDonald's, Marks & Spencer, Barclays, Nestle and Cargill are joining other companies to back the NY Declaration, a UN call for action aiming at a high-level goal to end deforestation by 2030. If met, it is estimated it would be equivalent to taking all of the world's cars off the road.

The Tropical Forest Alliance, a subgroup of the Consumer Goods Forum, is another forum through which companies are engaging. Heavyweights such as Procter & Gamble and Unilever are working to reduce deforestation related to key agriculture commodities by 2020.

In summary, there is an immense effort coming from diverse sources that could be strengthened by improving coordination, sharing learnings and building scale.

The multilateral arena is poised to deliver nationwide commitments, setting the direction in which the ship should sail. The forestry sector will benefit from a Paris Agreement because the Warsaw REDD+ Framework will then become functional as means to meet overall reductions.

With decisions taken only via consensus, the UN climate talks' outcomes are powerful but shallow. An important next step is to set complimentary bilateral arrangements and subnational policies to ensure that correct incentives reach the forest ground. The private sector must be considered as investors and businesses, rather than as donors, building on existing corporate initiatives and market schemes.

Finance will then flow, turning conservation engines on, promoting the strongest results.

Mariama Vendramini is a Director at Biofilica