Saving forests is not like installing a traffic light

This blog post is one of a series of updates from Friends of the Earth representatives at the United Nations Framework Convention on Climate Change in Bonn, Germany.

By Kate Horner, Friends of the Earth U.S.

June 13, 2011

In the first UN negotiating session on new financing options for forest protection since the ill-fated Cancun decisions, a delegate from Guyana said, “Cars kill people. Cars kill people every day but we don’t ban cars.  We put in place safety systems like traffic lights and speed limits.” The Guyana delegate then went on to say that there are also risks associated with forest carbon trading, but that we can put in place safety systems, like robust provisions for measuring and verifying carbon reductions, to control them. Well, we certainly agree that there are grave risks — risks that may seriously affect the lives of people who live in and depend on the forests. But protecting forests is not as simple as installing precautionary safety measures like traffic lights for driving. And when it comes to forest carbon trading, we simply don’t need to go down this dangerous and ineffective road.

Last week, Friends of the Earth, with our allies at FERN, Greenpeace and Rainforest Foundation UK, published a report examining some of the common arguments in favor of forest carbon trading.  Not surprisingly, we found that support for carbon trading as an appropriate tool for financing forest protection relies on outdated or false assumptions. Here’s a smattering of what we found.

Much support for REDD+ comes from those who believe that the momentum gained by including forests in the UN climate agreement will finally push countries to deliver the money needed for forest conservation. However, deforestation is a complex socio-political and economic problem that cannot be solved by cash alone. There are many cases where substantial international funds have been allocated to saving forests, but to no effect. What is needed is genuine political will to identify and implement effective action to halt deforestation and forest degradation, but currently most draft national REDD+ strategies have focused on the technical aspects of measuring forest carbon while ignoring the need for fundamental governance reforms. Unless the underlying drivers of deforestation are addressed, the threat to forests will continue.

The scientific data currently available on measuring carbon stocks and fluxes from land-based emissions are anything but rigorous and verifiable, and certainly do not match the level of accuracy needed for carbon to be traded on a compliance market. The use of default values in offset project calculations is widespread and estimates of carbon volumes stored in the various forest areas varies considerably. Error levels of 50 percent or more are not uncommon, with 30–40 percent being the average range of uncertainty reported from measuring land-use change emissions in European Union countries. The proposal that “uncertainties can be dealt with through conservative accounting” is called into question in light of the scale of uncertainties that arise in forest carbon accounting.

And as we have been saying for years now, if carbon markets were to grow to the size anticipated by many, the speculative nature of the secondary carbon markets could create a carbon bubble and spur the development of subprime carbon. “Subprime” carbon credits would be futures contracts to deliver carbon that would carry a relatively high risk of not being fulfilled, and could collapse in value. Subprime carbon is most likely to come from offset projects. Offset projects carry high risks because sellers can make promises to deliver carbon credits before the credits are issued for a project, or sometimes even before reductions in greenhouse gases have been verified. A carbon bubble could also set the stage for the kind of financial innovation (e.g. complex securitised products) that might unwittingly spread subprime carbon through the broader marketplace. When the bubble bursts, the collapse in carbon prices would have destabilizing consequences for compliance buyers (companies) and for the larger financial system.

In fact, forest carbon trading is nothing like driving a car. We simply do not need to create a system to trade forest carbon and put any dangerous forest carbon “on the road.” Instead, we need significantly scaled up resources from innovative sources to address the drivers of deforestation, including the ever-increasing consumption of wood and agricultural products that drives deforestation, as well as the failed governance approaches that refuse to recognize the rights of indigenous peoples and local communities.