Forest Protection and Climate Change Integrated Approach through Market Based Mechanisms

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1 Scientific Papers ( Journal of Knowledge Management, Economics and Information Technology Forest Protection and Climate Change Integrated Approach through Author: Cosmin BIRJARU, Transilvania University, Brasov, Romania, Currently it is unfolding the United Nations International Year for Forests. This underlines the recognition of forests importance for the contemporary and future society and envisages raising awareness on several aspects to be considered by the variety of stakeholders for forestry. Meanwhile, the rate of deforestation halted its increase although remain high with more than ten million tropical forest being destroyed in each year. Deforestation economics is more than explanatory in this respect and supportive for urgent and effective policy action that could improve incentives for sustainable forest management instead of conversion or logging. REDD+ is among the latest and most challenging policy tools developed within a global approach addressing both climate change and forest protection in an integrated manner underpinned by the convergence of interests in these two major environmental areas. The paper envisages to explain the interdependencies and to highlight progresses made in implementation. Keywords: climate change, forests, ecosystem services, REDD+ Forests importance for the wellbeing of humans is hardly questionable. Nevertheless, the loss of forest cover heads the environmental agenda for decades. This paradox suggests that despite significant progresses in the theory and practice of forest management and environmental protection a number of pressures are not properly addressed. The currently unfolding International Year of Forests (IYF) indicates that 1

2 the United Nations (UN) recognizes this gap and urges action toward a more effective forest protection. Climate change is another broadly recognized environmental issue that is to be mitigated for a safe future of humans. Again, we are facing a dilemma: more than a decade of specific policy action has little chance to enforce the changes needed for accomplishing emission reduction targets. Moreover, the post-kyoto climate policy outlook is biased by sterile negotiations [1] with key players that are reluctant to assume clear commitments for emission reductions. At this point, it should be emphasized that environmental issues are not discrete, they being outlined for management purposes that seek effectiveness. Thus, the above-mentioned issues are interwoven and wise policy design could harness the interdependencies and improve both the progress in climate change mitigation and forest protection. This specific area is to be explored by our paper, which will discuss deforestation economics, the ecosystem service perspective and its implication for forest management, eventually focusing on the policy mechanism developed in this area at global level: Reducing Emissions from Deforestation and forest Degradation (REDD+). Thus, it will be created a comprehensive and explanatory picture on how forest protection is an important climate change mitigation tool. Global forest resources The state of forest resources is subject of an intense monitoring effort, which provides periodically reports on various indicators and their trends. According to the latest assessments [2], the total area of forestcovered land is about four billion hectares representing around one third of the total land area. For each inhabitant of the Earth corresponds 0.6 hectares of forest. Five of the forest rich countries (the Russian Federation, Brazil, Canada, the United States of America and China) account for more than half of the forest area. Deforestation is occurring for a variety of reasons depending on the interplays of economic and social factors at local level, but also as a result of the global interactions. Rate of deforestation halted its increase, but it remains to high to be considered acceptable. The annual forest loss was of 13 2

3 million hectares in the last decade being lower compared to the previous decade (16 million hectares per year). Brazil and Indonesia recorded important reductions in deforestation rates, while in Australia severe drought and wildfires increased the rate of loss. Nevertheless, the effect of forestry and environmental policies are burgeoning in an increase of a forestation rate, which reduces the net loss of forest to 5.2 hectares annually. The world s forests stock 289 Giga tones of carbon and it is estimated that due to the reduction of global forest area this stock is decreasing with 0.5 Giga tones annually. From the total forest area, 36% is represented by primary forests (forest of native species where there are no clearly visible indications of human activities and the ecological processes have not been significantly disturbed). These forests are the most important in terms of biodiversity preservation with the bulk of the contribution in case of tropical moist forests. Planted forests area is increasing and represents 7% of the forest cover (264 million hectares). Most of this increase is determined by afforesting efforts in China. Three-quarters of all planted forests consist of native species while one-quarter comprises introduced species. Forests that are primarily designated for biodiversity protection account for 12% of the total area and are increasing. Productive forests represent 30% and provide wood and non-wood forest products. The annual wood removal is of 3.4 billion cubic meter equivalent of 0.7% of the total growing stock. Its value, estimated on the base of industrial round wood, is about US$ 100 billion. This figure could be higher if a fuel wood removal could be more precisely measured. Protective forests represent 8% of the total and are used for soil and water conservation, avalanche control, sand dune stabilization, desertification control or coastal protection. Deforestation economics Forests are ecosystems that played an important role in the economic arena for centuries. This role was shaped mainly by the main products to be harvested from forests: wood, fur, fruits, fish, medicine plants etc. Forests were maintained in order to secure these products as long as opportunity costs from other options remained below the benefits obtained from selling them. Increasing population resulted in a higher food demand, which in 3

4 case of small improvements agricultural techniques in terms of productivity and converted more and more forested land to crop land. Additional pressures aroused then the exchange value of some products increased sharply. For instance, at certain moment the value of wool was high enough to deforest almost entirely the territory of the United Kingdom in order to give room for pastures. Although this occurred in a historical timeframe that is quite different the patterns could be easily recognized in many developing countries today. In essence, deforestation economics is very simple. The value of harvested wood added or not with the value of benefits gained from land conversion is exceeding by fur the value of benefits obtained by sustainable forest management. This fact is the basic explanation for the high rate of deforestation. The issue is complicated if ownership is considered and distributional effects explored. Thus, the benefits of deforestation could be high, but the largest share is not harnessed by proprietors. Nevertheless, this does not prevent these pressure factors to occur. More detailed insights on deforestation economics are as follows [3]: Higher prices for farm output induce forest conversion and benefit farmers; Richer farmers are better able to finance deforestation; Good land is cleared first; Higher off-farm wages discourage deforestation in marginal areas; Agricultural technology promotes growth with implications for deforestation; Roads provide the path to rural development - and forest clearance; Tenure is good for landholders, but has uncertain effects for deforestation. It guarantees benefits for the right holders, whatever it is; Higher timber prices put pressure on old-growth forests, but create incentives for new ones only when tenure is clear for long-term gains; Sustainable timber management is often less lucrative than other options; In old-growth rainforests with diverse, slow-growing species, biological diversity and financial considerations could push landholders away from sustainability; 4

5 Even low-return pasture or staple crops offer higher returns to landholders; The value of harvested wood per hectare equals a CEO salary for a year in temperate forests. If no other factors interfere, these facts create incentives for a deforestation rate that is beyond forests regeneration capacity. Preventing such situation is the main purpose of forest policy, which is enforced by using a variety of tools. Traditionally, regulation and state ownership are the most widespread instruments of forest policy. The current state of forest, with high rates of deforestation, illegal logging and corruption within empowered institutions indicate that other approaches need to be considered for improving forest protection. Ecosystem service a concept to foster economic approaches in ecosystem management The recent emphasis on the economic dimension of environmental issues is most easily to be noticed in case of nature conservation or fight against biodiversity loss. In this area, in no more than a decade a concept was advanced, checked, debated, and up taken in policy framework. This concept is ecosystem service and is defined as benefits obtained by humans from ecosystems. These include providing, regulation, support, and cultural services [4]. Although it was proposed in the very early age of environmentalism, it becomes a subject of intensive research only in the late 1990s. Today, ecosystem service is a common place in the policy documents. Projects like Millennium Ecosystem Assessment, TEEB (The Economics of Ecosystems and Biodiversity), and GEM-CON-BIO (Governance and ecosystems management for the conservation of biodiversity) had an important contribution in this respect. The concept reflects a quite obsolete anthropocentric nature-human mind map, which is based on the perception that the value of nature reflects only its utility. Despite the theoretical basis, there are already great expectations to create markets for the ecosystem services. 5

6 Reducing Emissions from Deforestation and forest Degradation (REDD+) According to the one of the earliest and also most comprehensive definition, payments for ecosystem services (PES) are represented by any arrangements through which the beneficiaries of ecosystem services pay the providers of those services. The PES could be enforced for single or multiple services. The most common PES target water quality, carbon sequestration, removal of invasive species, and biodiversity protection. PES rational is quite simple. It is based on the need for funding for protection of ecosystems and for biodiversity preservation. This funding is justified as a contribution to social goals that will bring in benefits. If benefits are to be produced on the behalf of the society then society has to pay for them. Since not all social actors share equal benefits from ecosystem services it worth to identify the ones who do so and create a mechanism that allows them to pay. Their payment will produce the funds needed for protection (fig.1). Source: TEEB (2009) Figure 1: Funding the provision of ecosystem services PES varies in the scale of application too. The project to Reduce Emissions from Deforestation and Forest Degradation (REDD) was designed at global level as part of the post 2012-regime for climate change mitigation. Its contribution was estimated to 18-20% greenhouse gas emission reduction from tropical deforestation and related land-use change. Other PES are applied only on local scale (e.g. northern Ecuador for water quality). 6

7 Considering the level of governmental implication, most of PES depend on such arrangements. Nevertheless, there are PES based only on private agreements. The implication of non-governmental organizations is welcomed in this area too. PES are applied in different forms in many countries by using national and regional systems. Among the most prominent systems there are the ones implemented in Costa Rica, Japan and France. In Costa Rica a national system of payments for environmental services was implemented in The services to be rewarded are carbon sequestration, watershed protection, biodiversity and landscape preservation. The system cover a hectares area of forest and forestry plantations which is owned by proprietors. The scheme comprised a direct payment of 64 USD/ha/year or an 816 USD/ha/10 years. The funds to cover these payments are represented by grants from the World Bank, Global Environmental Facilities, the German Aid agency, but they are also gathered by the fossil fuel tax. Further, individual agreements with water users completed the financial resources. The carbon finance it is also envisaged as a potential revenue source for the fund. The scheme has very positive assessments. Nevertheless, there is criticism related to its effective contribution in lowering the path of deforestation. It is argued that other factors had more important contributions. The scheme implemented in Japan was initiated by the Kochi Prefecture in It is designed as forest environmental tax or water and green forest management tax. Each prefecture levies a 5-10 USD per inhabitant and USD per business to fund restoration and enhancement of forest ecosystem services (excluding timber production). An important feature is that forest owners are rewarded only then the effort is proved after at least ten years. REDD is a program proposed by the United Nations that aims to fight climate change, but along with this broad goal there are also pursued biodiversity and poverty reduction targets in developing countries. The program is underpinned by the fact that in these countries deforestation is the main source of greenhouse gas emissions. It intends to use funds from 7

8 the developed nations for avoiding deforestation in developing ones by using complex financial mechanisms. The collaborative program will have two components: (i) assisting developing countries prepare and implement national REDD strategies and mechanisms; (ii) supporting the development of normative solutions and standardized approaches based on sound science for a REDD instrument linked with the UNFCCC. The program will help empower countries to manage their REDD processes and will facilitate access to financial and technical assistance tailored to the specific needs of the countries. Source: UN-REDD Program Figure 2: REDD partner countries The partnership comprises 29 countries to be supported with financial resources. These are divided according to the way of how the support is made available (fig.2). Thus, there are 12 countries, which receive direct support, and other 17 countries participating as observers to the Programme's Policy Board, and through participation in regional workshops and knowledge sharing. The donor countries supposed to be the developed ones. Until date there are not many to be found on this list. In fact, there are only three: Norway, Denmark, and Spain. The first and largest contributor is Norway with almost 150 million USD contributions, which represent almost 93% of the total contributions. Less than half (76 million USD) of the total 8

9 contribution is allocated for supporting projects in developing countries as approved budgets. Nevertheless, not all this amount is transferred yet, and only around 7 million is the expenditure recorded to date. Countries that have approved budgets, ordered by the size of this budget (fig.3), are: Democratic Republic Congo, Papua New Guinea, Indonesia, Panama, Paraguay, Bolivia, Zambia, Viet Nam, Tanzania, Cambodia, Solomon Island, and Philippines. Until now, only in two of the countries were recorded expenditures and these are Congo and Viet Nam. Since its implementation, REDD was carefully watched by the scientific community which made reports on its implementation progress, potential to bring in benefits, barriers to be overcame, and outcomes. Source: UN-REDD Programme Figure 3: REDD countries by their budgets The literature review [5] on the subject revealed the potential benefits, but also the drawbacks of the program. These are the followings: Potential benefits: The prospective immediacy of its benefits; Cost-effectiveness, relative to other mitigation options; Support of biodiversity conservation and delivery of other environmental services; 9

10 Contribution to poverty reduction and improved rural livelihoods. Potential drawbacks: Implementation arrangements could deny the rights of indigenous and forest-dependent peoples over their territories and resources and prejudice progress towards more decentralized, locallyempowering modes of forest governance. For example, indigenous peoples agency in REDD+ negotiations remains problematic (Schroeder, 2010), and there is continued disagreement on what constitutes a REDD+ eligible forest ; A focus solely on forest carbon will override concerns about biodiversity conservation, particularly if the definition of forests eligible for REDD+ credits does not distinguish between natural forests and plantations and encourages replacement of the former by the latter; The additional feature, leakage, and permanence of forest-based emissions reductions compared to those of other sectors. The most powerful reason to support REDD is that storing carbon in forest, in addition to its co-benefits in terms of biodiversity preservation and poverty alleviation, could buy time to prepare a more comprehensive climate strategy. Such action is needed considering the difficulty in making progress in climate negotiation, case that is illustrated by the happening of the Copenhagen Conference. Conclusions Environmental issues are interwoven in a complex network of interdependencies, which are decomposed to a certain extent for improving the effectiveness of mitigation efforts. Nonetheless, there are instance then these interactions could be harnessed for the same management purposes. The paper explored such a case and developed and argument for the integrated approach of forest protection and climate change mitigation. The state of world forest is far from the one that could be considered sustainable, but there are several areas there significant improvements were achieved: deforestation rate, designation of forests for biodiversity preservation, and compensation of forest cover loss by 10

11 plantations. The economics of deforestation reveals that the economic drivers create very powerful incentives, which should be considered more seriously in policymaking. Adopting market-based mechanisms could be an important complement and their design allows and integrated approach that will lead to progress in climate change mitigation too. Thus, the REDD+ program could help both, reduction of net forest loss and climate change mitigation by carbon stocks and emission reduction. References [1] F. Bran, I. Ioan, Copenhagen Conference regarding climate change requests, accomplishments and failures, Quality access to success, 11, 4:46-49, 2010 [2] FAO, Global Forest Resource Assessment Key findings, 2010 [3] M. Ahmad, Can We Manage and For Agricultural Production, Carbon Sequestration and Conservation of Bio-diversity? CGIAR Science Council Meeting CIFOR, Bogor, Indonesia presentation, 2009 [4] MEA (2003), Ecosystems and human well-being. Current state and trends, volume 1, Island Press [5] Kanowski, P. J, McDermott, C. L., Cashore, B.W., Implementing REDD+: lessons from analysis of forest governance, Environmental Science and Policy, article in press, 859,