What's Needed for Strong REDD Policy?
Tropical deforestation causes about 10 percent of the world’s global warming pollution. There are proposals for both domestic and international policies to address tropical deforestation, known as REDD (reducing emissions from deforestation and degradation in developing countries). REDD policies offer rewards to developing countries for reducing their deforestation rates. In order for REDD policies to be strong, there are specific factors that must be included to ensure that real emissions reductions are made. Many of those key ideas are explained in the sections below.
A Fundamental Distinction: Stocks vs. Flows
One important distinction to make when talking about tropical forests and carbon is between stocks and flows. The stock is the amount of a substance in a particular place. For example, if a reservoir contains 5 million liters of water, then those 5 million liters is the stock of water it contains. On the other hand, if 800,000 liters of water flows out of the reservoir, over the top of the dam, each year, then the flow of water out of it is 800,000 liters per year. Thus, flows are the amounts of the substance that enter or leave the stocks during a certain period of time.
Why is this relevant to deforestation? Consider the total stock of carbon in all tropical forests (roughly 300 billion tons). Each year, about 1.5 billion tons of stored carbon is converted by deforestation into about 6 billion tons of carbon dioxide, and emitted into the atmosphere. Thus, although the stock of tropical forest carbon is very large, and only about 0.5 percent of it flows from forest to atmosphere annually (1.5 billion/300 billion), this flow into the atmosphere is what matters for global warming.
What matters for REDD—and what is paid for—is not the stock of forest carbon, but the flow from forest to atmosphere: the emissions. The fundamental goal of REDD programs is to reduce those emissions. Thus, REDD pays, either directly or indirectly, for reductions in the flows, measured as tons of carbon dioxide emissions.
Another distinction is closely related—between carbon and carbon dioxide. Although we commonly talk about “the carbon market”, “carbon trading”, and the like, actually it’s a carbon dioxide market, because it deals with emissions. From the point of view of market payments, what matters is the amount of carbon dioxide flowing into the atmosphere. REDD is not a way to preserve forest carbon stocks, but rather a way to reduce carbon dioxide flows—in the same way that the purpose of energy technologies such as hybrid cars, wind turbines and biofuels is not to preserve petroleum or coal in the ground, but rather to reduce carbon dioxide flows into the atmosphere.
Why do these distinctions matter? Don’t maintaining the stock of forest carbon, and reducing the flow of carbon dioxide emission into the atmosphere, amount to the same thing?
An analogy will show why they don’t. Let’s say I discover an enormous deposit of coal under the Pacific Ocean, 5000 meters below sea level. Since I’m an environmentalist and want to stop global warming, I offer to declare this deposit the “Pacific Coal Protected Area”, and guard it so that it will not be mined. In return, I ask you to pay me a modest price of $2 per ton of carbon protected. Would you pay me? Should you?
The answer of course is no, because there is no way to mine coal 5000 meters under the sea—not now, not tomorrow, perhaps not ever. By establishing my “Protected Areas”, I am not reducing the burning of coal, and thus the emissions of carbon dioxide from coal burning, by even one gram. In the terminology of climate change policy, my coal preserve is not “additional” from the point of view of emissions. Converting to energy-efficient light bulbs, putting more insulation in my house, or deciding to walk to work rather than drive to work, all are decisions that actually reduce CO2 emissions—they add to the global reduction of greenhouse gases. My “Pacific Coal Protected Area” does not, and so there is no reason for you to pay me for it.
Thus, the rule of additionality says that emissions reductions programs, including REDD, should only pay for activities that reduce global emissions. If a stock of carbon is not likely to release a flow of carbon dioxide in the coming year, then paying to protect it is not additional—it doesn’t reduce global emissions. Since only about 0.5 percent of the planet’s tropical forest carbon stock is emitted each year, it is clear that for the large majority of the world’s tropical forests, protection would be non-additional, at least for the next few decades.
Ironically, there is another kind of protection activity that is also non-additional by this definition—maintaining protected areas that already exist. For if the area is truly “protected”, not just in law but also in fact, then it is not at risk for emission in the coming year. Thus, maintaining its protection will not reduce global emissions, and thus is non-additional and ineligible for compensation—unjust as that may seem.
Consider another hypothetical situation. Imagine that I win the lottery and, as a dedicated environmentalist, I decide to buy some forest land in Alaska and establishe a private preserve. Knowing the importance of additionality, I choose to buy this land in an area of active deforestation, where loggers are in the process of clearing forest to expand their production. My preserve totals 1,000 acres, that otherwise would have been deforested and emitted 500,000 tons of CO2. Now, should I be able to claim to have reduced emissions from deforestation (additionally!), and ask you to pay me?
Before you write me a check, you need to ask another question. What has happened to those loggers? What if they have not given up the idea of expansion, but have simply gone to a different area of forest—perhaps even just outside my preserve—cleared 600 acres, and cut forest there?
If they have simply deforested the same amount of land nearby, then my preserve has not truly reduced global emissions by 500,000 tons. It has reduced them by 200,000 tons, and just moved 300,000 tons of emissions from the land I bought to other pieces of land. That moving around of emissions does no good for the effort to prevent climate change.
This problem, called “leakage”, is in some ways just another kind of non-additionality. If my activities, although they protect a threatened forest, do not reduce global emissions because deforestation moves elsewhere, then they make no additional contribution to the fight to stop global warming. What matters is not the reduction of emissions on my land, but the overall reduction over the whole planet. Unless my actions make an additional contribution to that global effort, I cannot claim compensation under REDD.
Carbon Market Offsets Make Additionality and Leakage Especially Critical
Monetary sources are important for the additionality and leakage rules. In particular, it’s especially critical to avoid non-additionality and leakage if the funding comes from the sale of carbon market offsets.
REDD credits sold in carbon markets are called “offsets” because they allow offsetting emissions increases by those who buy them. The purchaser—a coal company, electric power plant, or cement manufacturer in an industrialized nation – is buying the right to emit more tons of CO2 than they would otherwise have been permitted. This is okay, because the amounts of the decrease (in the tropical country) and the increase (in the industrialized country) offset each other. One decreases emissions, and the other increases emissions, and by the same amount. Thus, they sum to zero and global emissions remain the same.
Offset reductions must be real, additional, and protect against leakage, or else carbon dioxide emissions may actually increase. For example, if I sell REDD credits for my 500,000 tons of CO2 reduction, but because of leakage the global reduction is only 200,000 tons—then we have a serious problem. The company that buys my credits, will be able to emit 500,000 tons more of CO2. Thus my global reduction of 200,000 tons and their increase of 500,000 tons do not offset as they are supposed to—there is a net increase in emissions of 300,000 tons. By selling my credits in the carbon market, I have actually made the global warming problem worse!
Offsets can also be useful in not only maintaining the level of global emissions, but in actually reducing them. This can happen by only allowing companies to use offsets if they reduce their emissions more than they had promised. For example, a country could make the rule that companies must reduce their CO2 emissions by 10 percent, but if a company wants to accomplish some reductions by using offsets then they must make a 15 percent overall reduction in CO2 emissions. This allows for money to flow to tropical countries, but makes sure that in the end global emissions of CO2 are actually being reduced, instead of staying the same as always but just being shifted around the world.
Consider, on the other hand, what would happen if the money to pay me came from a different source. Imagine, for example, that you too had won the lottery, and being even more dedicated to the environment than me, you were willing to pay me for my 500,000 ton reduction in CO2 without getting to put any more of your own CO2 into the atmosphere. Due to the leakage of 300,000 tons of CO2 you would be overpaying me, since the actual reductions are less than half of what you paid for.
So, we would still have a problem, but that problem would not make global warming worse. It would simply be a matter of wasted money; you would have spent 2 ½ times as much as you should have. We still used our lottery winnings to reduce the problem of global warming—just not very efficiently.
National Baselines Also Help Solve the Problem
Paying from a non-carbon-market-offset source can reduce the danger of actually aggravating the problem of global warming. Another way to minimize this danger is to make the payments to nations rather than individuals. In other words, if I were a Brazilian with a private preserve in the Amazon, instead of paying me, you would pay the government of Brazil, say, for its reductions in emissions. I would need to get the Brazilian government to pass on some of that payment to me (and I would have a valid claim for payment for the 200,000 tons of global reduction that I had really achieved). But Brazil would be paid only for its nationwide reduction, so the 300,000 tons of emissions that “leaked” from my preserve to nearby forests would not be counted. Similarly, if I established my preserve in an isolated area not threatened with deforestation, it would be non-additional and Brazil would not get paid for it.
This approach—using a national baseline rather than sub-national or project baselines to calculate the emissions reductions achieved—partly solves the non-additionality and leakage problems. Brazil, having been compensated for reducing its emissions compared to its national baseline, could use the money in any of a number of ways. For example, it could:
- Pay those people and organizations who establish new protected areas, but only for the amounts of reductions that they made after subtracting the tons that leaked or were non-additional
- Pay those who manage existing protected areas, to continue their protection and insure that they don’t have emissions in the future
- Pay for the establishment of protected areas in isolated regions not currently threatened by deforestation, again as a way to reduce future deforestation
- Use some of the money for national efforts that help reduce deforestation all across the country, for example by strengthening the ability to enforce laws against illegal logging
- Retain some of the money as compensation for the opportunity costs of government actions that indirectly reduce deforestation, such as redirecting plans for road building away from forested regions
- Use some of the money for national priorities that are unrelated to climate change, such as reducing hunger or improving the educational system
Since additionality and leakage have already measured at the national level, the national government can ignore these issues, at least in part, when it distributes the REDD money among its citizens, states and other entities.
Now you see why policymakers must consider all of these ideas when creating strong REDD policy that will lead to real emissions reductions from tropical deforestation and forest degradation in developing countries.