Presentation Overview

Transcription

1 Developing Frameworks for Reducing Deforestation in Developing Countries Outside the Kyoto Carbon Market Ned Helme, President Matt Ogonowski, Sr. Policy Analyst Center for Clean Air Policy ****** CCAP Future Actions Dialogue 2-4 July 2007 London, UK Presentation Overview Forests are critical to post-2012 climate policy:» Key policy issues to resolve» Pros and cons of current proposed market and fund-based mechanisms CCAP s Hybrid Proposal to combine best elements of leading proposals for Reducing Emissions from Deforestation and Degradation (REDD)

2 Figure 1. Global GHG emissions to meet 2 C increase with 50% probability (EC, 2007a) Importance of Post-2012 REDD Actions European Commission modeling to achieve target of holding temperature increases to 2 C assumes that cost effective path would include near-elimination of emissions from deforestation in 2020 Deforestation and land-use change account for up to 25% of global carbon emissions Two year discussion of policies/mechanisms for reducing emissions from deforestation already underway in UNFCCC» Rome 2006 and Cairns 2007 workshops» Cairns submissions represent over 60 countries and 15 NGOs

3 Post-2012 REDD Policy Challenges: Crosscutting Needs Effective incentives for participation of both developed and developing countries Development of accurate inventories and baselines» Agreement on methodology, historical or virtual Capacity building and monitoring» Inclusion of countries at different stages of development Avoiding destabilization of global carbon markets Solutions to leakage and permanence Consistent and adequate funding (Stern Review estimates $5 billion annually) Market Mechanism Proposals: Advantages Supported by most countries, combined with a separate implementation fund; (Congo Basin adds a Stabilization Fund) Premised on tough Annex I targets to create sufficient demand for forest credits Pros» Can leverage significant private and public sector money by linking to carbon market» Not dependent solely on govts, empowers many players» Can generate lower-cost offsets, market-based

4 Market Proposals: Disadvantages Cons: Large potential to destabilize carbon markets, create price volatility Baseline difficulties magnified when linked to carbon market Leakage due to non-participation and lack of mechanism to score negative performance May not encourage broad systemic solutions (e.g., agricultural policy reforms) Non-Market Approaches: Advantages Examples include Brazil REDD mechanism which is modeled on Sustainable Development Policies and Measures (SD-PAMs) concept Implementation/Capacity Building funds Pros» Does not threaten stability of carbon market» Can fund implementation directly» Easier to include systemic solutions that may be more costly» Tracks both reductions and increases in deforestation and rewards only net reductions

5 Non-Market Approaches: Disadvantages Cons» Source of and incentives for funding unclear (contributions voluntary)» Likely to be less attractive to Annex I nations and to private sector than CDM and thus unlikely to produce comparable funding to market approaches» Govt-driven programs on both investor and supplier sides» Requires new administrative structure and selection criteria» Lumps all developing countries together in single program no incentives for policy competition Alternative: CCAP Hybrid REDD Approach The REDD system would be a new and separate market from the current Kyoto carbon market Developing and developed countries commit to establishing and reporting national LULUCF inventory annually, to include tree cover by biome type, land-use changes, and emissions/sequestration.» Could include net carbon flows to establish basis for long term monitoring. Capacity building funding provided up-front to incentivize data collection Annex I countries commit to dual post-2012 targets:» 1) GHG reduction target via domestic action and flexible mechanisms and» 2) a CO 2 equivalent reduction from contributions to reduced deforestation in developing countries,» For example, Europe might commit to -25% below 1990 levels from KP system and -5% through REDD by 2020 (30% total)» REDD goal (eg, 5%) would be a maximum, not minimum, share

6 CCAP Hybrid Approach (con t) Annex I (A1) countries can meet their REDD targets through government funds, through mandates on companies, or combination Developing countries (DCs) have no-lose option to create programs but A1 countries can switch support to other countries if programs falter IF REDD programs do not produce desired reductions, A1 countries/companies can shift portions of their REDD target at end of commitment period to Kyoto caps/cdm COP would decide the maximum reductions to come from REDD» A1 countries prohibited from increasing their REDD share, but decide how much they will play CCAP Hybrid Approach (con t) After each commitment period, COP assesses dual targets system and makes necessary revisions Precedents exist for dual markets in CO 2 reduction trading plus policies and measures - CAFÉ, RPS etc. Countries can borrow of credits to make up shortfalls» Borrowing within or between commitment periods (latter would help prevent sudden rise in carbon market prices at end of 1 st period if REDD reductions lower than needed)

7 CCAP Hybrid: Advantages REDD credits would not be fungible with carbon market: this combined with maximum share avoids destabilization of carbon market Can help reduce compliance costs in developed countries Establishes some minimum global demand for REDD buyers can only shift to carbon mkt at end of CP Hybrid can leverage private sector investment Likely to encourage significantly more investment than non-market approach CCAP Hybrid: Advantages (con t) Funds capacity building, could fund systemic solutions Developing countries compete to produce most attractive, well managed, and highest integrity programs Creates incentive for early REDD actions and developing country program development Separate markets gives REDD market time to develop Baseline and monitoring issues less problematic because program not linked directly to carbon market allows learning by doing in DCs w/ less capacity

8 CCAP Hybrid: Disadvantages Some countries could dominate the REDD market as in compensated reduction approach, less likely in non-market option Separate REDD market may not achieve targets, slow progress toward global stabilization goals May be harder to get significant REDD targets from A1 countries because of domestic opposition to transparent transfer of money to DCs for REDD (e.g. current Canada and U.S. administrations opposition to CDM) Investment may be comparable to or less than that under compensated reduction Creation of dual REDD and carbon markets can create distortions Risks of Dual REDD and CDM Program Markets Implementation costs (and final market prices) of REDD projects likely to be low relative to carbon market» Supply of potential REDD credits likely to be large, while many lower-cost carbon options will already have been taken A1 purchases of REDD units will thus be restricted to prevent drop in carbon market demand REDD program design can address these risks

9 Conclusions Preferred approach couples Annex I targets for reductions in domestic GHG emissions with commitments for new REDD investments in developing countries By combining key elements of market and non-market proposals, the new CCAP approach can avoid destabilizing the carbon market while ensuring adequate and consistent funding and support for REDD actions Short-term actions (capacity building, pilot projects, cost and co-benefits research) coupled with CCAP s long-term approach can encourage reductions in deforestation and help meet global GHG stabilization goals post-2012 THANK YOU For more information, visit our website: Ned Helme President nhelme@ccap.org

10 CCAP Hybrid: Operational and Design Questions Bottom up or top-down approach for setting total (Annex I-wide) and individual national REDD targets Would minimum REDD commitments be required of each A1 country? Total A1 REDD purchases capped to protect CDM REDD market price floor could be set to assure market develops Would REDD targets be specified within the UNFCCC or in a subsequent agreement? Maximum limits specified in agreement, but countries when and how re target levels Should provisions for discounting credited reductions in early years to adjust for uncertainty of LULUCF reductions and M&V, ensuring reduction targets are met? Operational and Design Questions (con t) Interest rate for borrowing of credits Linking REDD market with Kyoto/CDM over time after one or two commitment periods Role of companion fund to address gaps in program» Could support efforts in countries bypassed by market, higher cost projects, forest fire prevention, completion of abandoned REDD projects, etc.» Reductions credited back to A1 s in proportion to contribution

11 Pre-2012 Goals for Building REDD Program Regardless of final mechanism design, important actions should be undertaken now: Encourage unilateral REDD actions in developing countries by estimating REDD costs and co-benefits Build capacity of DCs not yet ready to participate» Target high priority areas, including development of comprehensive LULUCF forest and emission inventories Encourage near-term actions such as developing methodologies and monitoring Implement pilot projects» E.g., relocation of cattle, palm oil to degraded lands» Intensification of agricultural production Near-Term Role of Developed Countries Elaborate REDD program structure and determine appropriate incentives for Annex I involvement, aiming for comprehensive inclusion in post-2012 regime Work with developing countries to identify actions they can take unilaterally» Policy-based lending could design policy options» Specific research projects and studies of REDD mitigation potentials and costs can support this Use national ODA and IFI funding for development of inventories, capacity, implementation of pilot projects