Pay It Forward

NAIROBI—"Climate change is not just an environmental issue, as too many people still believe. It is an all-encompassing threat," declared UN Secretary-General Kofi Annan at the opening today of the so-called High Level Segment of the 12^th conference of the parties to the UN Framework Convention on Climate Change. During the High Level Segment, the world's environment ministers are scheduled to talk about advancing development goals in a sustainable way and about how to realize the full potential of market-based opportunities to combat climate change.

To address the threat of climate change, Annan added that "the primary responsibility for action rests with individual states—and, for now, that means those that have been largely responsible for the accumulation of carbon dioxide in the atmosphere. They must do more to bring their emissions down." He's talking about people living in Europe, the United States, Canada, Japan and Australia.

Annan declared that while climate change particularly menaced the poor living the developing nations, it also provided an opportunity for aiding their development. In particular he noted that the Kyoto Protocol's Clean Development Mechanism (CDM) in which countries and companies that are emitting CO2 in excess of their treaty allocations could finance projects in poor countries that reduced their emissions of CO2. For example, big CO2 emitters such as American Electric Power could finance the construction of a nuclear power plant in India in place of a coal-fired plant that the Indians would otherwise build. AEP would earn offsetting carbon credits and the Indians would get clean electric power.

But there are other ways to possibly offset CO2 emissions. The panelists in climate and forests session strongly advocated for including forests as a way to offset carbon emissions. They claimed that protecting forests and encouraging the planting of new forests could offset as much as 20 percent of global CO2 emissions. Forests act as sinks for CO2, that is, they absorb CO2 from the atmosphere as they grow. Furthermore, deforestation itself releases CO2 into the atmosphere. One estimate suggests that burning forests in Malayasia and Indonesia to clear land for palm oil plantations in 1997-98 released in the atmosphere the equivalent of 40 percent of all fossil fuel carbon emissions globally. One panelist Ian Swingland, founder of the Sustainable Forestry Management consultancy, calculates that at $20 per ton that one hectare would earn between $4000 and $10,000 in carbon sequestration services. And this does not take into account values such as preserving biodiversity and watersheds.

In comparison, a typical hectare of forest cleared for pasture earns between $200 and $500 annually. Swingland noted that the annual rate of deforestation was 12 million hectares per year. So he calculated that it would take $48 billion per year to protect 12 million hectares at $4000 per hectare. In comparison the Global Environment Fund is $800 million, only half which was spent on biodiversity protection. I asked Swingland later why pay $4000 when the marginal cost implied by his pasture example would be $500 per hectare? This would mean that it would take $6 billion per year to protect 12 million hectares of forest. He replied that he was just trying to give a sense of the magnitude of the problem—as GEF spending shows there is nowhere near $6 billion for preventing deforestation.  

Swingland did point out one the perversities of the Kyoto Protocol. Rich countries that have commitments to cut their emissions can count their forests as sinks and get credit for offsetting CO2 emissions. However, poor countries have no incentives not to cut their forests. Thus the incentives under the Kyoto Protocol are to conserve temperate forests in rich countries while destroying tropical forests in poor countries.

In the original negotiations for the Kyoto Protocol, forests were left out as CO2 offsets because of problems with figuring out how much carbon they actually sequestered. In addition, there is the problem of making sure that governments don't take money to leave their forests standing and then cut their trees anyway. Anders Wijkman, a Swedish Member of the European Parliament, argued that "as long as standing forests have no value, it will be difficult to reverse the trend toward deforestation." He dismissed CDM as an effective mechanism for generating enough funds for deforestation avoidance and afforestation projects. He estimated that the CDM would produce at maximum $2 t0 $3 billion for carbon offset projects per year.