Current Carbon Markets Encourage Global Warming Through Deforestation

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Forests remove carbon dioxide from the atmosphere where it contributes to warming the planet. So protecting and planting more forests is a good way to lower the temperature. However, a new report in the journal Public Library of Science Biology finds that the structure of the current carbon market under the Kyoto Protocol actually encourages deforestation. The problem is that countries with high forest cover and low rates of deforestation (HFLD) have no way to earn carbon credits under current UN schemes. Therefore the PloS Biology report notes,

Without the opportunity to sell carbon credits, HFLD countries would be deprived of a major incentive to maintain low deforestation rates. Since drivers of deforestation are mobile, deforestation reduced elsewhere could shift to HFLD countries, constituting a significant setback to stabilizing global concentrations of greenhouse gases at the lowest possible levels.

Reuters reports:

The Kyoto treaty and other talks on global warming focus on so-called carbon credits for countries and companies that plant new trees where forests have been destroyed. Trees and other plants absorb carbon dioxide, a greenhouse gas emitted by petroleum-fueled vehicles, coal-fired power plants and humans.

At this point, there is no credit for countries that keep the forests they have, the study said.

"The countries that haven't really been the target of deforestation have nothing to sell because they haven't deforested anything," said Gustavo Fonseca, one of the study's authors.

I highlighted this problem in my reporting on the U.N. climate change conference in Nairobi:

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…

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."

For those of us who favor carbon taxes, incorporating carbon credits for protecting and planting forests is a difficulty. Perhaps carbon emitters could earn tax credits by purchasing carbon sequestration services from private and public owners of forests? It is clear that forests must be included in whatever carbon control system that is eventually adopted.

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  1. Ron,are you talking a world wide carbon tax?Besides soverty issuse,some countries won’t be able to pay at the rate of others.Africa’s a mess,China and India wiil do what’s in their best intrest regardless,same with Russia,the middle east sells oil,and South America is a mixture of all three.that leaves Europe and the U.S.Not enough to effect change.I’m not sure a global carbon tax would pass constitutional muster.

  2. Obviously, what we need to do is subsidize golf courses, which have lots of trees, and provide a public service. That mayor dude in Mississippi that Reason is always beating up on is showing the way.

  3. Obviously, what we need to do is subsidize disc golf courses, which have lots of trees, and provide a public service.

    Fixed that for you.

    If they insist on taking my money, they can at least spend it on something I like.

  4. I recently heard a limiting cases exercise (excuse me for losing the reference) where complete forestation and deforestation were considered. They found that completely forested landmass would result in a warmer planet with lower CO2 levels, whereas a completely deforested planet would be cooler with higher CO2 levels. The contributing factor there was reflectance of solar radiation, identical to the cooling mechanisms of terrestrial ice. It seems the effect of forestation on climate change, like so many other things, is murky.

    And another thing, us terrestrial creatures tend to be obsessed with the paltry 30% of the unsubmerged earth. 30% of atmospheric CO2 is dissolved in ocean surfaces almost immediately, with 85% eventually residing in surface waters. This produces a chemical equilibrium shift towards carbonic acid, effectively acidifying the oceans. This only exacerbates the commons problem of fisheries. As for forests, we can all agree vegetation is very beneficial for waterways, not only in reducing local CO2 levels, but filtering out all the agricultural runoff from our subsidized farms.

    Thirdly, the whole palm oil operation is absurd. Domestic biodiesel producers only source palm oil from “sustainable” areas, being defined as land which has been cleared for at least five (!) years. Anyone up for burning a forest (cheap) for the ’12 palm oil crop ($$$)?

    Ron, I agree these externalities are very difficult to internalize. Carbon taxes seem to be the way to go, not as a cure-all, but as the least intrusive way to balance the market.

  5. Michael Pack: Nope, not a global carbon tax, but globally harmonized carbon taxes. The revenues would go to national governments and ideally offset income taxes.

    At the risk of trying your patience, I refer you to my article on the topic.

    KingHarvest: You are right. There are differences in the effects of boreal, temperate and tropical forests on temperature. In this case, forest protection generally refers to protecting and expanding tropical forests which models suggest cool the planet.

  6. Yeah Ron,it would off set income taxes.I have a bridge in Minnesota I’ll sell you.

  7. Ron, thanks for highlighting the usually overlooked importance of ecosystem services. I hope more people are reading this than are commenting.

  8. @Michael Pack

    Why do hardcore libertarians express such distrust with revenue-neutral tax schemes?

  9. Once you show me a revenue-neutral tax scheme that stayed revenue-neutral, then we can have a discussion about their efficacy. New avenues for taxation have always been turned into four-lane highways eventually.

    Although, I hope Michael will state his personal objection as well.

  10. Yeah Ron,it would off set income taxes.I have a bridge in Minnesota I’ll sell you.

    Unfortunately, Michael, that bridge collapsed under the weight of government oversight. Seems we didn’t purchase enough maintenance offsets.

  11. Why do hardcore libertarians express such distrust with revenue-neutral tax schemes?

    Aside from the revenue-neutrality being questionable I “distrust” any tax scheme that seeks to coerce behavior. Taxes should be solely for revenue not a means of control.

  12. I’m not a hard core liberian,I’m self employed.That tends to sour one on goverment fees.

  13. Ron,are you talking a world wide carbon tax?

    Touches on the reason that the global warming issue should be fascinating to anarchists and libertarians. Any real solutions are going have to come from markets and voluntary change, not through government.

  14. So protecting and planting more forests is a good way to lower the temperature.

    Not really. Trees only temporarily sequester carbon, subject to very definite limits and with very substantial offsetting effects.

  15. I’ve yet to see the libertarian who criticized the revenue-neutral versions of the flat tax or the fair tax on the grounds that they wouldn’t be revenue-neutral.

    Of course, they create incentive structures related to goals – such as wealth creation – that libertarians generally like. Hence, the distinction.

  16. joe, it is interesting that you often try to characterize “libertarians” as collective group engaging in monolithic groupthink, put words into the mouth of this entity that exists only in your head, then argue with those words. What about seeing each libertarian as an individual with his or her own point of view? At least some of the time you bother to find an actual individual who is actually expressing the opinion that you are hoping to argue with.

  17. What are you, my editor?

    I didn’t accuse anyone of engaging in groupthink. I described the beliefs and positions that are common or definitional to libertarianism.

    And yes, it is possible to talk about a self-defined group with a coherent ideology and frame of reference without denying anyone’s individuality.

    Liberals support environmental regulation. See? Anarchists don’t like government. Libertarians don’t think the government should regulate hiring practices.

    It’s cute the way you appropriated the “in your head” phrase I use, but you’ve misused it. The positions I’ve ascribed to libertarians actually do apply to libertarians.

  18. I’m your worst nightmare, joe. (Oh, wait. That would probably be the conservatives.)

    There isn’t any huge set of beliefs and positions common or definitional to all libertarians. Liberty is a very good thing. That’s about it. Any elaboration on that is a particular school of libertarianism.

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