The issue of avoided deforestation hit the headlines at the United Nations Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP) 11 in Montreal in November 2005. This was the result of a proposal by Papua New Guinea for developed countries to pay tropical developing countries to limit deforestation as a way of reducing greenhouse gas emissions and tackling climate change.  A two year process was initiated, and the issue was to be addressed by the Subsidiary Body on Scientific and Technical Advice (SBSTA). This advises the Convention and Protocol on technical matters and meets twice a year.  It is expected to report back at COP13 to be held in December 2007.  

This article takes stock of the progress that has been made on this issue during the recent negotiations in Nairobi, during COP12.  Given that we are half way through the two-year process, it is perhaps not surprising that very few concrete decisions came out of the negotiating chamber at COP12.  The main discussion was over the agenda for a workshop to be held before the next meeting of the SBSTA in May 2007.  This will cover:

• the discussions of ongoing and potential policy approaches and positive incentives
• the technical and methodological requirements related to their implementation;
• assessment of results and their reliability;
• improving the understanding of reducing emissions from deforestation in developing countries.
  

It was also agreed that based on this meeting the SBSTA will:

• consider elements that could be included in its report at its twenty-seventh session (December 2007) on this agenda item, including any recommendations to the Conference of the Parties at its thirteenth session;
• consider, at its twenty sixth session (May 2007), ways to move the process forward, including the possible need for background papers, a third workshop, expert meetings and/or informal consultations to be initiated before its twenty-seventh session."
  

The most interesting aspect was what has been going on outside the formal negotiations.  As is often the case, once such issues show signs of having some international significance, a range of Inter Governmental Organisations (IGOs), Non Governmental Organisations (NGOs) and national and state government initiatives begin to emerge.  Such activities are still in their early stages. Most of the debate is over the technicalities involved in putting avoided deforestation schemes in place and the policy implications of different mechanisms to do so (a theme of a recent ODI Forestry Briefing).

A number of pilot avoided deforestation schemes have now been announced. This means that we are likely to see some action on this issue whatever the outcome of the negotiating process.

• The World Bank, for example, is planning a pilot scheme which is likely to cover about eight tropical countries;
• The Brazilian State of Amazonas has launched its own voluntary initiative ahead of the national (federative) government, which has its own ideas on its approach to this issue; 
• The UK has also announced that it “will be working over the coming months in partnership with other governments including Brazil, Papua New Guinea, Costa Rica and the Coalition of Rainforest Nations, with Germany as Presidency of the G8 and the EU, and with the World Bank and other interested parties, to explore ways of mobilising international resources to assist developing countries in forestry management”.
  

Many organisations are calling for rapid implementation of a range of pilot schemes to improve our knowledge of how they might work.  One caveat is that, unless there is some well-coordinated action, a fragmented market might result, as has happened with the Clean Development Mechanism (CDM).  Some developing countries would be likely to lose out in such circumstances.

Most developing countries are in favour of bringing avoided deforestation into the climate regime but there are some major differences over the type of mechanism that should be used.  The mechanisms so far proposed can be broadly broken down into two categories with a divide between the positions taken by groups such as the Coalition of Rainforest Nations and Brazil.

Trade-based schemes
Trade-based schemes would function on the basis of a market mechanism with developing countries selling emissions credits to developed countries.  In such systems the rate of deforestation compared to an historic baseline would be calculated.  Using standard methodologies (which are still debated) changes in rate can then be converted into a figure for avoided greenhouse gas emissions.  Each tonne of emissions avoided would have a monetary value and could be bought and sold as part of an international trading scheme that would register and track the movements of each unit.  Key features of such a system would include:

• It would probably be part of post-2012 framework for the Kyoto Protocol and if so would be reliant on tightening the emissions caps of developing countries in order to ensure demand for credits.
• The trade-based nature means it would probably have to be legally binding.  This might put some countries off, as they might have concerns about the productive nature of deforested land.
• To ensure buyer confidence the system would have to be very accurate.  Differences in country capacity could give rise to serious leakage concerns.
• An emissions baseline would have to be specified, most likely based on historic deforestation rates at a national level.
  

Most proposals are based on extensions of the ‘compensated reduction’ proposal outlined in another recent ODI Forestry Briefing.

Fund-based schemes:
Fund-based schemes would most likely function in a similar way to existing development or environment assistance. Payments might be made to developing countries via a central trust fund managed by an international organisation or through bilateral or multilateral partnerships. Features of fund-based schemes include:

• They avoid the problem of developed countries setting lower targets for their own emissions.
• Most studies indicate that they are less likely to provide sufficient funds to cover opportunity costs.
• They could be implemented in conjunction with trade-based approaches.  They could, for example, be reserved for situations where countries cannot meet the stringent requirements needed to allow trading.
  

The main proponent of fund-based schemes is currently Brazil, which announced its proposal for a form of international trust fund to support efforts to curb deforestation.  The concerns it has over trade-based schemes include:

1. whether targets can be met;
2. whether it is in the country’s best interest to significantly reduce deforestation rates when it gains significant economic benefits from deforested land and
3. whether it would have to take on other commitments in a post-2012 Kyoto Framework.  

The fact that Brazil is now considering some form of avoided deforestation scheme has been taken as an indication of progress in itself, and some think that it might be a step toward an agreement which would include tradable elements.  (Earlier this year Brazil was refusing to consider any proposal that made reference to anything that might imply tradable commitments.)

Looking forward
The debates over avoided deforestation in Nairobi go much deeper than the technicalities involved in getting a scheme up and running.  Avoided Deforestation brings into question the exact definition of the one of the underlying principles of the UNFCCC, that of “common but differentiated responsibilities”.  Any trade-based proposal will rely on developing countries taking on quantified targets for emissions reductions in the future.  There has been some concern from developing countries that targets which start off as voluntary will become mandatory in the future, and this could put them at a disadvantage in terms of development.  However, if developing countries were to take on quantitative targets, it could solve one of the greatest hurdles of the Kyoto negotiations in that it would then bring the US and Australia on board. Both countries currently argue that ratifying the Protocol could put them at a competitive disadvantage if developing countries do not take on some form of commitment.

Could an agreement over avoided deforestation help with a solution to this problem?  Unfortunately, this question is itself dependent (at least within the formal negotiations) on decisions about the future of the Kyoto Protocol after 2012, on which discussions are still ongoing.

Ensuring pro-climate is pro-poor

• The agenda for the upcoming meeting on this issue illustrates that it is still very much dominated by high level technical discussions.  As the issue develops there is need for more systematic work on the impacts that schemes of this scale might have on the poor and exactly what additional benefits such schemes offer over more traditional approaches to curbing deforestation rates.
• Pilot schemes are a necessary step in trying to establish how avoided deforestation schemes might work in practice.  However, there is need for careful coordination between pilot schemes and more consideration about exactly how they can influence the international process.  There is a danger that technocratic approaches combined with increasing concern about the need for more urgency in tackling climate change may result in approaches that marginalise the interests of the poor.
• Trade based approaches certainly appear most promising in terms of the financial flows that they can mobilise, but from the perspective of the poor this does not guarantee that such mechanisms will bring more benefits.  Developers of mechanisms for trade-based avoided deforestation should consider carefully the problems faced by Clean Development Mechanism.  In this case issues such as market access due to the technical demands of the market have so far seriously hindered its contribution to sustainable development in the least developed countries.