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About the Authors
Stefanie Engel is Professor of Environmental Policy and Economics at ETH Zurich and a member of IED. She holds a Master of Science degree in Agricultural and Resource Economics from the University of Arizona (USA) and a PhD degree in the same field from the University of Maryland (USA), as well as a Habilitation (Post-doctoral degree) in Resource Economics and Development Economics from the Faculty of Agriculture, University of Bonn, Germany. She has held positions as a lecturer and research fellow at Universidad de Los Andes in Colombia. Before joining ETH in April 2006, she was senior researcher and group leader at the Center for Development Research of the University of Bonn, Germany. Stefanie Engel has published widely in international refereed journals in the areas of environmental economics, new institutional economics, and development economics. E-mail
Dr. Charles Palmer is currently a Senior Researcher at the Chair of Environmental Policy and Economics at the IED. He works in the fields of environmental and development economics, has published widely, and has, in the past, worked for a number of international organisations including the United Nations Development Programme (UNDP) and the Center for International Forestry Research (CIFOR). E-mail
Stefanie Engel and Charles Palmer
Evidence for anthropogenic warming of the climate system as a consequence of greenhouse gas (GHG) emissions, including CO2, into the earth’s atmosphere is unequivocal. On current trends, the average global temperature could rise by 2–3 ˚C within the next 50 years. This rise is likely to rapidly change the earth’s climate, for example, leading to rising sea levels and a higher frequency of heat waves and heavy precipitation. Business-as-usual or ‘baseline’ climate change implies increasingly severe economic impacts if action is not taken to mitigate the worse effects.
Climate change can perhaps be characterised as the worlds largest ‘market failure’. The earth’s atmosphere, into which anthropogenic GHG are emitted, is a global public good, i.e. it is non-rival and non-excludable. These emissions are an externality in that those who produce them impose social costs on the world and future generations but do not face the full consequences of their actions. The actual source of emissions, whether producer or consumer, rich or poor, is irrelevant to the overall growth in global GHG stocks and the corresponding future changes in the climate. Nevertheless, the worst impacts of climate change are expected to fall disproportionately on people living in some of the poorest regions of the world. People living in these regions are the most vulnerable to adverse changes in, for example, food production and water resources.
The global causes and consequences of climate change imply the need for international collective action for an efficient, effective and equitable policy response. The first global attempt to put a price on the social costs of emissions by stabilising the amount of GHG in the atmosphere was seen in the formation of the United Nations Framework Convention on Climate Change (UNFCCC). Ratified by 182 Parties as of May 2008, the Kyoto Protocol of the UNFCCC originally entered into force in 2005. It committed Annex I, mainly industrialised countries to reducing their collective GHG emissions by about five per cent below their 1990 levels by 2008-2012. In fulfilling these commitments, countries are able to achieve reductions in their emissions through several mechanisms including the Clean Development Mechanism (CDM). The CDM allows entities in non-Annex I countries to develop ‘offset’ projects leading to verified reductions in GHG emissions emitted from Annex I countries. So-called Certified Emissions Reductions (CERs) are then transferred to Annex I countries at a price set by the carbon markets.
According to widely-cited data published by the World Resources Institute, global anthropogenic GHG emissions, dominated by CO2, are mainly given off via the burning of fossil fuels, and from agriculture and land-use changes. Annual CO2 emissions from deforestation in tropical and sub-tropical countries account for up to a fifth of global emissions, the second largest source of all GHG emissions. Emissions from deforestation and forest degradation occur as carbon stock is depleted and released to the atmosphere through changes in forest and other woody biomass stock, forest and grass land conversion, the abandonment of managed land, and forest fires. Over the past century, tropical deforestation and forest degradation have increased dramatically. The former occurred at an average rate of 13 million hectares per year, between 1990 and 2005. Throughout the 1990s around 1.5 billion tons of carbon (GtC) were released annually through deforestation. Two countries, Indonesia and Brazil, dominate CO2 emissions released through deforestation and as a result are, respectively, the third and fourth largest GHG emitters in the world, behind the United States and China.
The causes of the continuing loss and degradation of tropical forests are many, varied and complex. However, understanding these is important for the design and implementation of policy to reverse their effects, whether related to policy to reduce CO2 emissions or not. This requires identifying the underlying market and policy failures and understanding how these relate to activities both inside and outside the forest sector. The latter include those related to agriculture, migration and infrastructural development. Recent government and non-government efforts to slow down or reverse overall deforestation and degradation trends, either through forest policy or policy made in other sectors have been relatively unsuccessful for various reasons. Given the many inter-linked pressures on forests, the challenge now for climate policy is to design a strategy for capturing the carbon value of natural forest stock that is not only effective but also efficient and equitable.
Reducing GHG emissions in order to stabilise the climate requires the deployment of a portfolio of GHG emissions-reducing technologies along with the application of appropriate and effective incentives. These include adaptation and mitigation measures such as carbon capture and storage (CCS) and reducing deforestation, all with varying, generally uncertain costs. None of these measures on their own, for example, the halting of all deforestation, would achieve the UNFCCC’s goal. But conserving forest carbon could likely be an important part of the climate change solution, particularly if it proves to be cost-effective compared to other mitigation options. Negotiations on the types of admissible projects in Kyoto included a range of options for increasing forest stock and removing carbon from the atmosphere.
Without effective policies to slow deforestation, business-as-usual tropical deforestation could release up to 130 GtC by 2100. ‘Avoided deforestation’ or RED (Reducing Emissions from Deforestation) is a concept where countries are compensated for preventing deforestation that would otherwise occur. Reducing emissions by slowing deforestation could be a substantial and important component of climate mitigation policy, and has been discussed as such by researchers and policy-makers for a number of years. The available evidence shows that potential carbon savings from slowing tropical deforestation could contribute substantially to overall emissions reductions. Moreover, forests protected from deforestation could persist in the coming decades despite ‘unavoidable’ climate change. Possible side benefits from the realisation of natural forest carbon values include other forest environmental values such as biodiversity.
Avoided deforestation projects were excluded from the 2008-2012 first commitment period of the Kyoto Protocol’s CDM due to a number of concerns revolving around sovereignty and methodological issues. The former arose as a consequence of forests per se not being considered as a global public good despite the public good nature of some forests services. Since exclusion, discussions have been ongoing to try to resolve these concerns through, for example, the UNFCCC’s recent 2-year SBSTA initiative (Subsidiary Body on Scientific and Technical Advice). This has acted as a useful forum for assessing new policy approaches and incentives for avoided deforestation in developing countries. Note that the SBATA process included discussions about emissions from forest degradation, thus expanding the scope of potential policy mechanisms from RED to REDD (Reducing Emissions from Deforestation and Degradation). Meanwhile tropical forest nations such as Papua New Guinea, Costa Rica and Brazil have been floating various initiatives to protect forests through utilising their value as carbon sinks1. Forest carbon finance has also been endorsed by the United Nations, the World Bank, and the majority of nation states, with the Bank’s Forest Carbon Partnership Facility (FCPF) aiming to attract US$ 300 million in donor funding for pilot REDD schemes.
Perhaps most importantly, countries agreed to create a mechanism for REDD as a potential component of a post-2012 climate change regime, at the Bali Conference of the Parties (COP-13) held in December 2007. These countries included both major industrialised emitters and major tropical deforesters2. More precise rules and modalities are to be developed by COP-15, which is due to take place in Copenhagen, in December 2009. Many open questions remain on how reducing deforestation could be credibly incorporated into a climate regime. There is therefore a need to take stock and consider the merits of such a mitigation strategy and how it might be implemented on the ground. This is the motivation for the edited volume, ‘Avoided Deforestation: Prospects for Mitigating Climate Change’, which assesses the potential of REDD mechanisms from the perspective of economics and policy-making. A new IED Working Paper by Stefanie Engel and Charles Palmer introduces the role of forests in mitigating climate change and summarises some of the key issues and research covered in Palmer and Engel’s ‘Avoided Deforestation: Prospects for Mitigating Climate Change’ to be published in 2009. The authors look at what might be gained from including REDD as a feasible option in a post-Kyoto agreement and at how some of the challenges of such inclusion could be tackled from the perspective of economics and policy-making.
1 For example, at the COP-11 in Montreal in 2005, a coalition of 15 rainforest nations led by Papua New Guinea and Costa Rica floated a proposal to allow CDM-type credits, bought by industrialised nations, in exchange for reducing deforestation.
2 Incorporating deforestation could provide an opening for the active participation of developing countries in emission reduction efforts under an international climate change regime.
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