[Table of Contents]

[Global Issues and International Impact]


Carbon Market Initiatives:
Can They Benefit Tropical Forests?


Among the many benefits that forests provide, there is growing appreciation of their role as major repositories of carbon. The biomass of trees and vegetation in forests harbours vast reserves of carbon that help to keep in balance the carbon cycle on which life on Earth depends.

Industrial emissions are the major culprit of carbon buildup in the atmosphere that is contributing to "global warming" and climate change. The 1997 Kyoto Protocol of the United Nations Framework Convention on Climate Change paves the way to mechanisms that would allow industrial countries and major polluters to offset their carbon emissions by paying developing countries to preserve their tropical forests, thereby "sequestering," or storing, vast amounts of carbon.

Projects such as this are an attractive prospect to many people who believe that conservation of tropical forests will be difficult unless the environmental benefits they provide are, like other services for society, properly valued through payment schemes.

Much of this research on this issue has focused on technical aspects of making carbon markets feasible, such as methodologies for measuring carbon and evaluating the cost of emission-reduction projects. In contrast, CIFOR in 1998 explored social and environmental issues related to carbon markets – aspects that so far have received little attention.

In 1998, CIFOR worked with the University of Maryland to lay the groundwork for an international dialogue that will consider carbon sequestration projects and devise guidelines for ensuring that they provide positive social and environmental impacts. Unlike most other policy initiatives in this area, the dialogue will include the views of representatives from a broad array of groups with a direct stake in tropical forest use.

The results of the conference will provide important background information for efforts in the year 2000 to decide mechanisms for implementing the carbon sequestration provisions of the Kyoto Protocol. The findings should also be of considerable interest to the many forestry, environmental and economic development institutions involved in this important policy issue.

With funding from the U.S. Agency for International Development, CIFOR undertook two studies in 1998 that provided insights from host country and investor perspectives that should be useful in efforts to design and promote adoption of carbon sequestration initiatives. In both of the projects, CIFOR scientists collaborated with researchers from the Tropical Agronomy Teaching and Research Centre (CATIE) and the Centre for Social and Economic Research on the Environment (CSERGE) at University College London.

The first study investigated the effects of an innovative national programme in Costa Rica that gives private landowners periodic payments for ceding to the government the right to "sell" the environmental services their forested land provides (including carbon sequestration). The researchers interviewed forest owners and others in the Cordillera Volcanica Central Conservation Area, which is covered by the programme. A number of ecological, social and economic criteria and indicators were devised by which to analyse perceptions about benefits of forest protection and regeneration and forestry plantations in areas covered by the compensation programme, as compared with the most common land use alternative: extensive cattle ranching.

The researchers found that the Costa Rican programme offered a model that could enable host countries to take advantage of the funding opportunities provided by carbon markets without distorting their own national land use plans. They cautioned, however, that the model may not be appropriate for poorer countries that, unlike Costa Rica, are unwilling or unable to tax their people to finance such a programme, or for countries where forest conservation is not high on the list of national priorities.

The second study was designed to determine the motivations and concerns that influence decisions to participate in carbon sequestration projects. Those interviewed were 27 major pioneering investors in the emerging market of carbon sequestration services, including investors, brokers, project developers, fund managers and government agencies in the United States, the United Kingdom and Europe.

Although those surveyed indicated that public relations was the main reason for participating in a carbon market programme, cost effectiveness was nonetheless an important primary consideration. The researchers say their findings suggest that an unregulated, purely market-driven approach is likely to focus on carbon efficiency and ignore social and environmental considerations, despite encouraging signs that pioneer investors give some importance to environmental and social benefits.

Based on the studies, the researchers concluded that initial assessments of carbon markets as a "win-win" situation for all stakeholders may have been overly optimistic. Their analysis of this work identifies some of the conditions under which forestry carbon sequestration projects may be appropriate and highlights aspects where safeguards may be required.