One of the most promising and challenging initiatives to be discussed at the Forests Asia conference is REDD+ (reducing emissions from deforestation and forest degradation).
REDD+ ranks high on the agenda of the conference, to be held in Jakarta on May 5-6. Discussion forums will be held about the program by the United Nations REDD program, UN Office for REDD+ Coordination in Indonesia, and the United Nations Environment Programme.
The innovative and controversial program is facing a bevy of challenges to match the scale of its ambition. One of the most daunting challenges, outlined in a 2014 report released by the Center for International Forestry Research (CIFOR), is the program’s “disadvantageous economics”.
According to the report by William D. Sunderlin et al., the absence of a binding global agreement on climate change mitigation has largely undermined the stability of the sapling carbon credit market —a major component of the REDD+ initiative.
At its inception, it was anticipated that a great source of REDD+’s strength would lie in the market-based carbon trading approach. Unfortunately, the global demand for carbon credits is currently 13-39 times smaller than the global supply, leaving a large funding gap for the coming years of the program, according to CIFOR.
Another contributing factor to the weakness of the carbon trading market, as well as the larger funding gap for REDD+, is the recent global financial crisis. Because purchasing carbon credits is voluntary, companies suffering from diminishing profits are unlikely to participate. Funding for REDD+ projects from the private sector to date has not been adequate to cover the costs of implementation.
For 2006-2017, REDD+ has received a total of US$6.9 billion in pledged donations from the public sector, which falls short of the estimated funding needs of US$5-12.5 billion annually. In comparison, purchases of REDD+ offsets made by the voluntary market in 2012 totaled only US$70 million.
Until the purchasing of carbon credits from verified emissions reduction programs becomes a component of a general command-and-control strategy to lower greenhouse gas (GHG) emissions, it is unlikely to be considered a necessary cost of doing business, for companies and countries alike. This has discouraged the world of private investment from venturing to make large investments in carbon stocks.
In 2013, one such example of a command-and-control strategy was implemented in one of the world’s largest economies – California, the US. The cap-and-trade program has held five auctions of carbon credits to date, with units consistently selling at above the floor price of US$10.00, according to an article by the Environmental Defense Fund. The first phase of the program focuses on the state’s largest emitters of GHGs, with 80 percent of the state’s economy slated to participate when the program reaches its peak.
Enforceability is a major component of the success of the cap-and-trade program in California. Violators that emit GHGs beyond their allocated cap are subject to a fine of $25,000 per 45 days that they exceed their GHG emissions cap.
The program has thus far been deemed a success, landing it the number one spot on Time’s Top Ten Green Stories list for 2013. It has even proved a practical model for other major US states. On April 28, 2014, Washington’s Governor Jay Inslee announced a similar program would be implemented in the state. Without such a project, according to Inslee, the state would not be able to meet emissions reduction goals set for the coming decades.
Until similar enforceable agreements are reached at international, national, and sub-national levels worldwide, there is little more than a moral entreaty to sway companies into participating in the voluntary carbon market to support REDD+. Moral persuasion has been effective in some environmental campaigns, but where money is concerned businesses are still likely to choose the traditional path — unless external pressure threatens to reduce the profitability of a company.
Such moral entreaties (in combination with external pressures) do seem to be having an impact on the business decisions of large companies in recent years. Asia Pulp and Paper (APP), a long-standing recipient of sharp criticism from numerous NGOs (including Greenpeace and the World Wildlife Fund) regarding its participation in the destruction of forests, announced in February 2013 that it would implement a zero-deforestation policy for the production of its products. One year later, APP also pledged to preserve and conserve one million hectares of Indonesian forest as well as continue to adhere to its 2013 promise.
Such developments are heartening but, with a program as broad in scope as REDD+, public pressure against the drivers of deforestation is difficult to organize and rally, and may not be enough alone to reach the emissions reduction goals outlined in the program.
In the absence of a binding emissions reduction scheme, many REDD+ projects have shifted their focus away from the market-based carbon trading scheme. Instead they have chosen to focus on other aspects of the program, including tenure clarification, restrictions on forest access and conversion, and forest enhancements.
There is still much cause for hope in the carbon trading component of this innovative program. As a new generation of leaders emerges into a more environmentally conscious era, significant moral pressure is being put on businesses to disengage from business activities that drive deforestation. From APP to the local bodega, businesses of all shapes and sizes will need to prove themselves environmentally progressive if they hope to succeed.
Additionally, and perhaps more importantly, California’s cap-and-trade system, as well as others like it, may be a sign that REDD+’s carbon trading scheme can succeed in the absence of a binding global agreement. What seems to be developing could be called a polycentric approach to emissions reductions, and it may be just what REDD+ needs to protect tropical forests from being lost forever.
Laura Deal is based in Bogor, Indonesia.