(This is the third in a 10-part series intended to look at some of the issues surrounding Guyana’s bid for funds from the World Bank-administered Forest Carbon Partnership Fund (FCPF) and from Norway, and for the President’s Low Carbon Development Strategy.)
By Janette Bulkan
In 1992 most countries in the world joined an international treaty on global warming – the United Nations Framework Convention on Climate Change (UNFCCC). In 1997, the UNFCCC issued the Kyoto Protocol which laid out target emission reductions of carbon dioxide for developed countries, and instituted some mechanisms by which those targets could be achieved. Rapidly industrializing developing countries like China, India and Brazil resisted emission targets, arguing that the developed countries bore historical responsibility for the accumulation of greenhouse gases (GHGs) in the atmosphere.
Overall, there was little progress made at the Kyoto meeting: firstly, the targets suggested for developed countries to reduce their carbon emissions were voluntary, not mandatory. Secondly, the United States, at that time the most powerful country in the world and the largest emitter of GHGs, signed but did not later ratify the Kyoto Protocol.
Trading mechanisms
Two mechanisms – the Clean Development Mechanism (CDM) and the Joint Implementation Mechanism (JI) – were set up under the Kyoto Protocol to manage the buying and selling of carbon credits between countries. The idea is that global carbon emissions can be regulated and reduced under a cap-and-trade programme: countries submit an inventory of national GHGs, and work out ways of reducing their emissions as part of a concerted global effort to stabilize global warming. Nationally a developed country would identify the principal emitters within its borders, and set individual reduction targets for each factory or industrial sector, with penalties for non-compliance. In turn, the emitter could reduce its greenhouse gas emissions by retrofitting existing GHG-emitting plants. There would be investments in green technologies, etc. An additional measure allowed developed countries to offset their GHG emissions by supporting projects in developing countries that verifiably reduced carbon emissions, measurable in CDM-approved credits. JI emissions reduction schemes are those that take place between two Annex 1 countries, that is, countries with binding GHG emissions reduction targets.
Emissions reductions are measured in Certified Emissions Reduction (CER) units and one CER equals one tonne of carbon. One tonne of carbon (1 tC) is equal to 3.67 tonnes of carbon dioxide (tCO2). The trading of carbon credits through any market mechanism begins with reliable data on emissions plus reliable data on carbon sequestration that are measurable in CERs, and independently verifiable and monitored.
At the time of the negotiations leading to the Kyoto Protocol in 1997, the role played by standing forests in regulating the global temperature was widely accepted. However, the Parties to the Protocol excluded Reduced Emissions from Deforestation and Degradation (REDD) from the offset mechanisms because of (i) uncertainties about the magnitude of deforestation emissions and (ii) the ability to monitor deforestation, especially in countries with endemic corruption and weak capacity for governance.
Instead, the Kyoto Protocol recognized credits from what are labeled AR activities, that is, afforestation and reforestation. Afforestation means growing trees in a previously treeless area; reforestation means growing new trees in a degraded forest area. Two special kinds of CERs can be issued for net emission removals from AR projects under CDM – temporary certified emission reduction (tCER) and long-term certified emission reductions (lCER). These different credits were set up to guard against ‘leakage’ or emissions displacement situations. For example, a forest area might be converted to another form of land use soon after CERs were paid out, or where the supplier country simply transferred destructive or degrading forest activities to another area of forest under the supplier’s control. Credits from AR activities can be used to generate offsets under CDM and JI. However, in the years since Kyoto, only one CDM AR project has been approved. Most of the successful CDM projects are in the energy sector, particularly in China. CDM had a primary market value of US$7.4 billion in 2007.
Developments in carbon
trading under REDD
The outlook for Reduced Emissions from Deforestation and Degradation (REDD) changed at the 2005 Conference of Parties (COP 11) of the UNFCCC in Montreal, Canada. Papua New Guinea and Costa Rica, on behalf of the newly-formed ‘Coalition for Rainforest Nations’, proposed to give forested developing countries access to the carbon market through credits generated from ‘compensated reduction’ activities. Under this approach, developing countries that reduce deforestation rates below a baseline rate generate credits that can be traded on the carbon market. Verification of emissions reductions would be carried out under agreed mechanisms, and no credits would be generated if deforestation rates were not reduced below the agreed national baseline.
REDD was proposed as a market-based scheme for standing forests, to be just as eligible for trading under the UNFCCC as afforestation/reforestation (AR) schemes were. Papua New Guinea and Costa Rica argued that ‘additional’ carbon would be grown in REDD projects: protected forests would store carbon in trees, and act as carbon sinks by absorbing some of the excess carbon dioxide that is warming our planet. Participating countries and projects should be allowed to sell certified carbon credits (that is measurable, and independently verifiable and monitored) to carbon emitters in the global North. In response, UNFCCC launched a two-year initiative to examine the potential of REDD. Those two years culminated at the 13th UNFCCC Conference of Parties (COP 13) in Bali, Indonesia, in December 2007.
Officially, the Bali decision was non-committal. The Bali Action Plan formally listed REDD among other mitigation activities as a potential means to achieve emission targets, and encouraged voluntary action on REDD. The decision of whether and how REDD would fit into the international climate change strategy was put off until COP 15 in Copenhagen, Denmark, in December 2009.
And yet Bali was a turning point because it put REDD on the broader agenda of the UNFCCC Conference of Parties, signaling that the international climate change framework would address the problem of emissions from deforestation and forest degradation in some manner. REDD is widely touted as a win-win scenario: finally, a scheme which simultaneously protects the remaining tropical rainforests, compensating local peoples and other forest users for ‘avoided deforestation’ while reducing at source about 20 percent of global greenhouse gases. The Bali decision on REDD encourages capacity building related to measuring and independently verifying and monitoring stored carbon and the development of pilot projects. In my next column, I shall describe the market and non-market schemes that are under consideration in the lead up to COP 15 in Copenhagen, Denmark, in December 2009.
