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Climate Change: Financing Global Forests Climate Change: Financing Global Forests © Crown Copyright 2008 Climate Change: Financing Global Forests Climate Change: Financing Global Forests © Crown Copyright 2008 The text in this document (excluding the Royal Arms and other departmental or agency logos) may be reproduced free of charge in any format or medium providing it is reproduced accurately and not used in a misleading context. The material must be acknowledged as Crown copyright and the title of the document specified. Where we have identified any third party copyright material you will need to obtain permission from the copyright holders concerned. For any other use of this material please write to Office of Public Sector Information, Information Policy Team, Kew, Richmond, Surrey TW9 4DU or e-mail: [email protected] ISBN: 9780108507632 Printed in the UK by The Stationery Office Limited on behalf of the Controller of Her Majesty’s Stationery Office ID5891314 410404 10/08 Printed on Paper containing 100% post consumer waste and meeting FSC Recycled Certification (SGS-COC-0912) i Climate Change: Financing Global Forests The Eliasch Review Table of contents Preface v Background Papers vii Acknowledgements ix Executive summary xi 1. Introduction 1 1.1 The impacts of climate change 2 1.2 Climate change mitigation 5 1.3 Forests and climate change 6 1.4 Forest communities and ecosystem services 8 1.5 The scope of this Review 10 Part I: The challenge of deforestation 2. Forests, climate change and the global economy 15 2.1 Forests and the carbon cycle 16 2.2 Impacts of human activities on the forest carbon cycle 18 2.3 Impacts of forests on climate change 23 2.4 Modelling future impacts 26 2.5 Conclusion 33 3. The drivers of deforestation 35 3.1 Why are trees being cut down? 36 3.2 Population growth and wealth creation 37 3.3 Growing demand for agricultural products and timber 39 3.4 Current economic incentives for landowners to deforest 41 3.5 Policy incentives 42 3.6 Land tenure 44 3.7 Capacity 45 3.8 Forest transitions over time 47 3.9 Conclusion 48 ii 4. Sustainable production and poverty reduction 49 4.1 Introduction 50 4.2 Land availability 50 4.3 A vision of sustainable production 52 4.4 Sustainable production and conservation 53 4.5 Infrastructure and alternative employment 58 4.6 Forest conservation 60 4.7 Key levers for shifting to more sustainable production 62 4.8 Conclusion 68 5. The costs of mitigation 69 5.1 Introduction 70 5.2 Up-front and ongoing mitigation costs 70 5.3 Ongoing forest emissions reduction costs 71 5.4 Estimating the opportunity costs of avoided deforestation 72 5.5 Estimating the costs of purchasing forest emissions abatement 75 5.6 The benefits of taking action to reduce forest emissions 77 5.7 Conclusion 80 Part II: Forests and the international climate change framework: the long-term goal 6. A long-term framework for tackling climate change 83 6.1 Overall framework for tackling climate change 84 6.2 Criteria for a successful climate change framework 85 6.3 Comparison of options for achieving global climate stabilisation 90 6.4 Rationale for including forests within a global cap and trade system 95 6.5 Four key elements of a long-term framework 98 6.6 Conclusion 99 7. The current international climate change framework 101 7.1 Current international action 102 7.2 The United Nations Rio Conventions 102 7.3 The importance of the Kyoto Protocol 107 7.4 Limitations of the first Kyoto commitment period 111 7.5 Bali Action Plan 117 7.6 Conclusion 117 iii Part III: The building blocks of forest financing: the medium-term approach 8. Transition to a long-term framework 121 8.1 Introduction 122 8.2 Types of transition path 123 8.3 A three-stage transition process: short, medium and long term 125 8.4 Conclusion 127 9. Effective targets for reducing forest emissions 129 9.1 Introduction 130 9.2 Baseline level 130 9.3 Determining the baseline 133 9.4 Baseline trajectories 141 9.5 Conclusion 143 10. Measuring and monitoring emissions from forests 145 10.1 The importance of robust measuring and monitoring 146 10.2 Measuring carbon stocks in forests 147 10.3 Monitoring and verifying emissions and sequestration 155 10.4 International and national approaches to measuring and monitoring 159 10.5 Capacity building: expertise and costs 162 10.6 Conclusion 164 11. Linking to carbon markets 165 11.1 Introduction 167 11.2 Carbon markets: supply and demand 168 11.3 Price impacts of linking forest credits to emissions trading schemes 174 11.4 Scale of carbon market finance for forest abatement 182 11.5 Linking mechanism 184 11.6 Conclusion 189 12. Governance and distribution of finance 191 12.1 Introduction 192 12.2 National-level governance 192 12.3 Distribution of finance 196 12.4 International governance 205 12.5 Conclusion 210 iv Part IV: International action, capacity building and short-term funding 13. The funding gap and capacity building 213 13.1 Introduction 214 13.2 Research, analysis and knowledge sharing 214 13.3 Policy and institutional reform 216 13.4 Demonstration activities 219 13.5 Meeting the funding gap 222 13.6 Coordination and governance of public funding 229 13.7 Conclusion 232 14. Conclusions 233 14.1 Introduction 234 14.2 The forest sector in a global climate change deal 234 Bibliography 241 v Preface This Review was commissioned by the Prime Minister. The Review is an independent report to government, prepared by Johan Eliasch with the support of the Office of Climate Change. It aims to provide a comprehensive analysis of international financing to reduce forest loss and its associated impacts on climate change. It does so with particular refer- ence to the international efforts to achieve a new global climate change agreement in Copenhagen at the end of 2009. The Review focuses on the scale of finance required to produce significant reductions in forest carbon emissions, and the mechanisms that, if designed well, can achieve this effectively to help meet a global climate stabilisation target. It also examines how mecha- nisms to address forest loss can contribute to poverty reduction, as well as the importance of preserving other ecosystem services such as biodiversity and water services. Approach to the Review A range of new research and analysis was commissioned for this Review from the following international organisations and institutes: s AEA s Chatham House s Climate Strategies s CSERGE, University of East Anglia s EcoSecurities s International Energy Solutions (IES) s International Institute for Applied Systems Analysis (IIASA) s International Institute for Environment and Development (IIED) s Judge Business School, University of Cambridge s LTS International s The Met Office Hadley Centre s Overseas Development Institute (ODI) s ProForest s The Royal Botanic Gardens, Kew s School of Biological Sciences, Plymouth University s United Nations Environment Programme World Conservation Monitoring Centre (UNEP/WCMC) This Review also draws on a large amount of previous research in the literature. The subject of carbon finance and global forests is complex and wide-ranging, and not all literature, particularly in some of the specialised subject areas, could be cited in this report. However, where more information is sought on any section of this Review, we recommend referring to the previously published reviews, summary articles and more detailed references that are cited in the report. vi During the Review, the team visited a number of countries to learn from projects and policies on the ground in forest nations, including Brazil, Indonesia, Cameroon and the Democratic Republic of Congo. The team also met with representatives of Papua New Guinea and Guyana. In preparing its analysis the team has consulted broadly. Submissions to the Review were invited in March 2008 and a series of meetings and round-tables were held in May 2008 with representatives from NGOs, academic institutions and business groups who responded to the questionnaire. These included Fauna and Flora International, Green- peace, The Rainforest Foundation, Sustainable Forest Management Ltd, The Prince’s Rain- forests Project, Department for International Development, Global Canopy Programme, Forests Philanthropy Action Network, University of Leicester, Centre for Environmental Research, Quest, University of Reading, Forestry Commission, WWF, Down to Earth and Global Witness About the author Johan Eliasch is the Prime Minister’s Special Representative on Deforestation and Clean Energy. In this role he was commissioned to undertake an independent review on the role of international finance mechanisms to reduce the loss of global forests in tackling climate change. A team from the Office of Climate Change (OCC) supported Johan Eliasch in conducting the Review and acted as its secretariat. The OCC works across HM Govern- ment to support analytical work on climate change and the development of climate change policy and strategy. The executive summary, full report, background papers and further information are available from www.occ.gov.uk. vii Background papers A series of background papers was produced based on the research and analysis commis- sioned for the Review from international academics, experts, organisations and institutes. These papers were used as part of the evidence-gathering process to inform the Review: s Betts, R et al (2008) Forests and emissions: a contribution to the Eliasch Review, The Met Office Hadley Centre s Franco, M (2008) Carbon absorption and storage, School of Biological Sciences, Plym- outh University s Grieg-Gran, M (2008) Costs of avoided deforestation, International Institute for Environ- ment and Development (IIED)
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