Better REDD than dead

The Economist- A special report on forests, Sep 23rd 2010

Tropical forests’ best hope

NORTH of East Kalimantan’s scarified waste is an area where the extractive juggernaut has not yet reached. Beneath the helicopter’s blades, the woods thicken and the terrain rises to a seam of limestone crag, dripping with trees. Beyond it is the district of Berau, 70% of which is still covered in forest.

It is lovely to behold, its multi-greened canopy like a vast head of broccoli, speckled with orange and yellow where an ironwood tree or a liana has forced itself up to the light. Borneo’s forest has more tree species per hectare than anywhere else. It is also packed with carbon: up to 400 tonnes per hectare. Yet much of this forest is doomed. It provides no tax revenues for the government, which owns it, and only a modest income for the local Dayaks, in rattan, honey and game. Failing a remarkable intervention, it too will get cleared.

To expect deforestation to be halted not only in Berau but across the tropical world takes a big leap of faith. Yet that is what is being attempted under REDD. Envisaged as a giant PES scheme for which over 70 developing forest countries could be eligible, it comes with an ambition to halve deforestation by 2020. So far it is visible, in a couple of dozen countries, mainly in the form of small pilot projects run by the UN and NGOs. But it is gathering pace.
A commitment to launch REDD, with “substantial finance”, was the only obvious success of last year’s Copenhagen summit on climate change. It led to the inaugural meeting in Oslo in May of a 58-nation group, the REDD Partnership, which will hammer out the details for a global REDD deal. To get things moving, half a dozen rich countries, including Norway and Britain, have pledged to provide $4.5 billion by 2012.

How REDD will be funded after that is unclear. It had been assumed that carbon markets would provide, with “forest-carbon credits”, equivalent to a tonne of avoided emissions, being bought to offset industrial countries’ emissions. For the moment the main compulsory market, Europe’s emissions-trading scheme, does not accept forest-carbon credits. But assuming the ETS survives, that is likely to change, and if America ever adopted an equivalent cap-and-trade arrangement, forest carbon would be part of it.

The chances of that have recently receded, following the United States Senate’s failure in July to approve a proposed cap-and-trade scheme. REDD might instead be funded through rich-world carbon taxes. However, it is accepted that REDD’s beneficiary countries must be guaranteed long-term funding, perhaps tens of billions of dollars a year, and that these payments will be performance-based.

How much is required? No one knows, because no one has ever done anything like this before. Countries generally do not stop deforesting until they industrialise and urbanise, reducing their rural population, or they cut down their forests to such an extent that timber scarcity or environmental disasters lead to urgent protection, as in China. Known as the forest transition, this can be visualised as a curve in the shape of a ski-jump, first sloping down steeply and then turning up gently as the forest creeps back. REDD is an attempt to bridge that dip.

Estimates based on the opportunity costs of not felling, which will often make up the bulk of the total, suggest it can be done relatively cheaply. According to the most recent one, by the Informal Working Group on Interim Financing for REDD, an international quango, an investment of $17 billion-30 billion between now and 2015 could cut deforestation by a quarter. That would save 3m hectares of forest, or 7 gigatonnes-worth of carbon emissions, a year.


It’s a gift

This suggests a cost range for REDD of $2-4 per tonne of avoided emissions: a steal. Other estimates are higher. Indonesia’s National Council on Climate Change puts the opportunity cost of forgoing an oil-palm plantation at $30 a tonne. But even that would be cheaper than many other sorts of mitigation. Capturing and storing emissions from power stations is estimated to cost $75-115 per tonne. With REDD as an offset option, industrial countries could therefore be expected to undertake deeper cuts than they would have done otherwise. That is why most developing countries, which previously viewed REDD with suspicion, now support it.

There are many concerns. One of them is that avoided deforestation may not be permanent—especially where there is a risk of climate-induced forest dieback. Another is that REDD money will inevitably flow to the most egregious deforesters, such as Indonesia, which may create an incentive for others to take up their chainsaws. Or demand for forest land, no longer met in Indonesia, may shift to non-participants in the scheme. That is why REDD has to be done on a large scale, even if the payments will vary. Brazil, which has been developing REDD for two years, with $1 billion from Norway, has a payment formula that favours Amazon states with high deforestation rates over those with low ones. But, to reward the virtuous, it also takes into account the states’ record on meeting REDD commitments.

The biggest worry, however, is that REDD may not be possible at all—at least not on the scale that climate modellers assume. Forest conservationists, schooled in failure, rattle off a list of possible reasons why. Forest title, or the lack of it, is one. Unowned forests are unprotected, which is why the grileiros, or land-grabbers, of the Brazilian Amazon rainforest can so easily turn it to pasture. But even where governments claim a forest, the result can be the same; 63% of the lowland parts of West Kalimantan’s national parks were illegally cleared by loggers between 1985 and 2001.

At least it was obvious who was to blame for the clearance. Where forest ownership is contested, because local rights are vague or there are competing title deeds, for example, that becomes more difficult. Unclear ownership also raises a big obstacle to the improvements in land-use planning that REDD must bring about. In Indonesia this would mean putting palm-oil plantations not on forest land but on degraded land, of which it has perhaps 40m hectares available.

That, in turn, will mean facing down the planters, who prefer to bag forest land for a windfall of timber. Between 1990 and 2005 Indonesia planted over 3m hectares with oil palms, over half of it on freshly cleared land. The crop is now coming to Berau. Beneath the hovering helicopter, an ugly mud-orange clearing has been cut for it from the lush green forest.

When the forest is on peat, as in much of central Kalimantan, Sumatra and Papua, the cost of Indonesia’s messy land use becomes epic. Peatland can store over 5,000 tonnes of carbon per hectare, and when drained for cultivation emits it for decades. Frances Seymour, head of the Centre for International Forestry Research (CIFOR), ruefully calls this “the gift that keeps on giving”. Indonesia’s peat-based plantations, a quarter of the total, contribute less than 1% to the country’s GDP but nearly 20% of the national emissions.

With Indonesia committed to doubling its area under oil palm, there is a risk that its emissions could soar—but also an opportunity for REDD. Restricting the expansion to degraded land would achieve a huge mitigation. Assuming REDD delivers, Indonesia has vowed to reduce its forecast 2020 emissions by up to 41%. In May President Susilo Bambang Yudhoyono announced a two-year moratorium on commercial deforestation. In response, Norway promised Indonesia $1 billion for REDD.

There are many other risks to REDD, of which corruption is the most prominent. Much of Indonesia’s forestry ministry—which claims control over 75% of the country’s area—and its logging industry are crooked. That is why wildlife sanctuaries disappear without a whisper. In the 1990s over $5 billion was looted from a national reforestation fund. If that happened to REDD, the effect would be devastating. REDD’s stress on performance should make it unlikely, and Indonesia’s forestry is getting less mucky. But its greedy elite will still try to manipulate the scheme.

Even if the safeguards work, reforming weak states is hard. Land-use planning for oil palm, for example, might involve not only the ministry of forestry but also those of agriculture, finance, energy and infrastructure as well as the army and the police. All have their own priorities, and saving trees is not among them. Kuntoro Mangkusubroto, the boss of Indonesia’s new REDD agency, was previously in charge of rebuilding Aceh after the tsunami. Asked to compare his old and his new job, he says: “‘In Aceh the government had totally collapsed, we were working from zero. That was much easier.”

But his appointment is encouraging. He is Indonesia’s most respected official, which suggests presidential support for REDD. That is essential. For REDD to be sustainable, it will have to be more than life support for the rainforest. It must provide ways for tropical countries to develop growth strategies that do not involve razing forest. In East Kalimantan 39% of jobs are in forestry, mining or agriculture. To bridge the transition, Indonesia will have to create many more jobs elsewhere.


REDD alert

Across the developing world, changes of that kind would entail a complete overhaul of some of the world’s least capable and most corrupt states: to make them rational in their land use, honest in their accounting, responsive to their citizens. That is not going to happen fast, as the sorry history of development assistance suggests. But REDD, provided its design holds firm, can do better. Its rewards must be sufficiently large and long-term to persuade rainforest countries to straighten themselves out. And they must be results-based.

That may be especially difficult to achieve in Africa. For example, Congo’s government does not know, to the nearest million, how many people have died in its continuing civil war. How will it provide an inventory of its forest-carbon stock? Who would buy its subprime credits? It will take it years to bring a national REDD programme to market, and meanwhile its REDD efforts will probably have to be funded with foreign public money. That makes it even more important to push ahead where the way is clearer, in Brazil and even Indonesia. REDD can accommodate such staggered progress.

For now, most REDD projects are small-scale and based on traditional conservation. Given better access to markets for their timber, for example, forest folk are encouraged to harvest less of it. Or they might be supplied with fertiliser and asked to clear less forest for planting maize. These are good ideas. Such projects also slightly mitigate the likelihood that REDD will centralise power. And in Africa, where governments are weak and smallholders are the main deforesters, they may be especially effective. But they do not deal with the commercial drivers of deforestation, and they are prone to leakage.

So REDD needs to encourage both national and local conservation efforts. That might mean letting local governments choose from a range of nationally approved conservation measures. The details have yet to be worked out, but some promising experiments have already been launched. In Berau, for example, the district government is devising its own REDD strategy with help from the Nature Conservancy, an American NGO that provided your correspondent with his aerial view of Kalimantan. Three important parts of this—improving logging practices, pushing plantations onto degraded land and strengthening protected areas—will figure in Indonesia’s national REDD strategy.

The closer you look, though, the clearer it becomes that action is most urgently needed at the national level. Near the village of Muara Lesan, beside a gurgling forest river, bulldozers are clearing 10,000 hectares of rainforest for oil palm. The ethnic Malay villagers gave their blessing to the scheme and say they are pleased with it, having been promised a small rent by the planters. REDD payments might have given them much more. But their weak right to the forest did not extend to its timber or carbon. Having been identified as the forest’s owners, up to a point, these locals cannot profit from it until it is gone.

That makes it all the more striking that three nearby villages have refused permission for a plantation on their 30,000-hectare forest. A local notable, Hang Long, explains the decision: “Oil palm destroys the forest and leaves nothing for our children.” This is heroic but probably futile. So long as it is worth so little to its executioners, this forest, too, may go. REDD looks extremely uncertain, but without it massive tropical deforestation is inevitable.