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New report on deforestation reveals problems of forest carbon payment schemes

December 07, 2007

A new study by one of the world's leading forestry research institutes warns that the new push to "reduce emissions from deforestation and degradation," known by the acronym REDD, is imperiled by a routine failure to grasp the root causes of deforestation. The study sought to link what is known about the underlying causes of the loss of 13 million hectares of forest each year to the promise-and potential pitfalls-of REDD schemes.

Based on more than a decade of in-depth research on the forces driving deforestation worldwide, the report by researchers at the Center for International Forestry Research (CIFOR) found that there is ample opportunity to reduce carbon emissions if financial incentives will be sufficient enough to flip political and economic realities that cause deforestation.

The report was released today at the United Nations Conference of the Parties (COP-13) in Bali, where environment ministers from 190 countries are meeting to plot a long-term strategy for combating global warming. High on the agenda is reducing the 1.6 billion tons of carbon emissions caused each year by deforestation, which amounts to one-fifth of global carbon emissions and more than the combined total contributed by the world's energy-intensive transport sectors.

"After being left out of the Kyoto agreement, it's promising that deforestation is commanding center-stage at the Bali climate talks," said CIFOR's Director General, Frances Seymour. "But the danger is that policy-makers will fail to appreciate that forest destruction is caused by an incredibly wide variety of political, economic, and other factors that originate outside the forestry sector, and require different solutions."

In other words, Seymour said, stopping deforestation in Indonesia caused by overcapacity in the wood processing industry is a completely different challenge from dealing with deforestation stemming from a road project in the Amazon or forest degradation caused by charcoal production in sub-Saharan Africa.

According to CIFOR, careful examination reveals that complex, indirect forces are often more important than the logging and slash and burn activities popularly understood as the main causes of deforestation. Forces such as fluctuations in international commodity prices; agricultural and, more recently, biofuel subsidies; and roads and other infrastructure projects can encourage forest clearing. Deeply ingrained and routinely corrupt government practices often favor large corporate interests over community rights to forest resources.

Seymour said the CIFOR analysis, which draws on a range of studies of the economic, social and political conditions affecting the world's most vulnerable forests, seeks to ensure that any initiatives to stem deforestation that might emerge in future climate change agreements are firmly grounded in reality.

Most importantly, CIFOR advises decision makers to learn from the past and look beyond the confines of the forestry sector to the array of market failures and governance failures that spark a chain of events culminating in deforestation.

For example, according to the study, Indonesia, which is estimated to lose 1.9 million hectares of forest each year, has emerged as one of the world's leading sources of carbon emissions in part due to a global spike in prices for palm oil and a surge in China's demand for wood pulp. Together, these forces have pushed deforestation into carbon-rich peatlands that are being cleared and drained to make way for oil palm and pulpwood plantations. Limiting deforestation in Indonesia's peatlands should be a high priority because the carbon losses per hectare are substantial.

Meanwhile, CIFOR notes that in South America, the loss of 4.3 million hectares a year is driven in part by meat consumption that encourages conversion of forests to pasture lands throughout the region. In Ecuador, road building has been a major cause of deforestation. In sub-Saharan Africa, fuelwood extraction and charcoal production are factors behind the continent's loss of 4 million hectares a year.

Markku Kanninen, one of the authors of the report, said that "Policies that seek to halt deforestation will need to be crafted to address diverse local situations and target activities in areas such as agriculture, transportation and finance that lie well beyond the boundaries of the forest sector."

"The perverse subsidies that provide incentives for clearing forest must be removed and efforts to secure property rights for local forest communities should be encouraged," Kanninen said.

The report also sees promise in the increasingly popular notion that deforestation can be addressed with financial incentives that compensate landowners for "environmental services." Seymour said discussions in Bali to fight deforestation by compensating forest stewards for protecting the carbon-storage capacity of forests through what is now a multi-billion dollar global market for carbon credit are potentially powerful.

"Such payments to individual land-users have the potential to "flip" financial incentives from favoring forest destruction, as they now do, to favoring conservation," Seymour said. "But the key question is whether or not REDD incentives will be sufficient to flip political and economic decisions at the national level that drive deforestation."

Appealing as they are, Seymour said it's critical to understand that, due to decades of inattention to the rights of forest dwellers, new payment streams tied to conservation could intensify the severe poverty that now afflicts the majority of rural forest communities in the developing world.

"Since forest property rights are often very unclear, payment for carbon services could end up providing incentives for corrupt officials or local elites to appropriate this new forest value from local communities," she said. "We've seen this happen before in similar situations, and there's every reason to believe, given the kind of money now being paid for carbon credits, that it could happen again."

Seymour said such problems can be avoided if policy makers enter the process of designing REDD strategies with a clear understanding of potential pitfalls and what can be done to avoid them. The report advises that reducing carbon emissions from forests will require strengthening the weak governance mechanisms that have long proven unable to enforce many existing prohibitions on forest clearing.

Finally, the report calls for ensuring that the REDD process is fair to poor forest communities.

"We need to temper the desire for maximum reduction in forest-based carbon emissions with regard for the legitimate rights of forest communities to realize the income potential of their forestlands," Seymour said. "At times there will be trade-offs between reducing carbon emissions and reducing poverty."

Consultative Group on International Agricultural Research