Skip navigation
Share via:
This proposal was moved here from Carbon Pricing 2018

Pitch

Integrating forest protection, agricultural production and wider economic objectives for large scale GHG mitigation efforts


Description

Summary

Increasing urgency required to prevent catastrophic climate change requires the integration of all greenhouse gas (GHG) mitigation options and sectors in parallel. Land use practices have the potential to generate large volumes of GHG mitigation at relatively low prices. There is the concern that REDD+ units could be priced so low as to invalidate the financial incentive to create them.

A possible solution would be to create a future global carbon market regime that includes Reducing Emissions from Deforestation and Forest Degradation (REDD+) in its mix, by adopting separate but complementary markets to ensure that forest protection, land use production, and decarbonisation of other economic sectors occur in parallel. An integrated protection, production and decarbonization market – “Integraded REDD+”.­ REDD+ units would be negotiated in a pool of other REDD+ units, so not to affect the pricing of other mitigation options. At the same time, nations or entities should not be allowed to meet their targets solely through the use of a single mechanism, but by adopting a combined approach.

A series of positive impacts could be expected by adopting this approach:

  • the separation of markets would not affect the price of other mitigation options;
  • by ensuring that non-REDD+ options receive the necessary financial resources to direct investment in R&D and investment in low-carbon infrastructure, the process of innovation and decarbonisation of industrial, transportation and energy complexes would continue;
  • including REDD+ units as a complement to these measures, though, would reduce the average cost of GHG abatement and enable countries/entities/sectors to adopt more ambitious targets; and
  • the inclusion of REDD+ in markets, at the same time, would ensure access to financial incentives to tackle this important source of emissions.


Is this proposal for a practice or a project?

Project


What actions do you propose?

It is proposed here the design of a future global carbon market regime that includes Reducing Emissions from Deforestation and Forest Degradation (REDD+) in its mix, by adopting separate but complementary markets to ensure that forest protection, land use production, and decarbonisation of other economic sectors occur in parallel. An integrated protection, production and decarbonization market – “Integraded REDD+”.­

Increasing urgency required to prevent catastrophic climate change requires the integration of all greenhouse gas (GHG) mitigation options and sectors in parallel. The creation of a carbon price is essential for the decarbonization of energy generation, industrial processes, transportation modes, land use and agricultural production, and consumer patterns.

The process of price formation, however, breaks down if an oversupply of cheaper mitigation options is mixed with measures that require higher carbon prices to compete. This has been the dynamic between land use mitigation options (in particular REDD+) in relation to industrial- and energy-based options. There is the concern that the inclusion of REDD+ in markets could result in an oversupply of mitigation credits and reduce prices to an extent that there would be no financial incentive for promoting investment in industrial improvements, energy efficiency, or renewable energy.

Looking forward, it is essential that developing countries secure financial resources in order to ensure forest protection in order to meet their GHG emission reduction targets under the Paris Agreement. The emission reduction targets (Nationally Determined Contributions – NDCs) of many tropical forest countries are heavily reliant on the reduction of deforestation and ensuring land use sustainability. If REDD+ was linked to international markets, the large volumes of emission reductions with potentially lower unit cost would reduce the average costs of abatement and provide an incentive for countries to adopt more ambitious reduction targets.

There is an urgent need to conciliate the tensions and requirements of creating a carbon price for both REDD+ and other sectors of the economy, and secure long-term financial support for the protection of forests on a large scale. This integration of forest protection, production and wider economic objectives would make it more cost effective and feasible to promote large scale GHG mitigation and global decarbonisation with the participation of all sectors of the economy.

Land use practices have the potential to generate large volumes of GHG mitigation at relatively low prices. Global demand for GHG reductions, however, remains restricted due to lack of binding commitments of international agreements. While the Paris Accord points in the right direction, it does not create binding commitments.

Any market with an unbalance of oversupply and restricted demand reacts by reducing prices. There is the concern that REDD+ units could be priced so low as to invalidate the financial incentive to create them. And, at the same time, this could derail international efforts of putting a price on carbon, required to decarbonize the industrial, energy, agricultural and transportation sectors.

There is a need to manage the supply of different mitigation options in markets, so that it does not affect market prices for REDD+ and other mitigation options. If managed properly, the relatively lower cost of REDD+ could enable the adoption of more ambitious targets and involve all sectors of the economy.

Given that the inclusion of emission reductions from REDD+ in the same market as other mitigation options could result in market unbalances, a possible solution would be to create two distinct but complementary markets. REDD+ units should be negotiated in a pool of other REDD+ units, so not to affect the pricing of other mitigation options. At the same time, nations or entities should not be allowed to meet their targets solely through the use of a single mechanism, but by adopting a combined approach.

For instance, a minimum tranche of a country’s target should be met by adopting internal decarbonization measures and/or non-REDD+ offsets. Provided that this ‘quota’ is met, this same country could complement its targets using REDD+ offsets (see Figure 1).

Figure 1: Integrated REDD+ concept: separate but complementary carbon markets, so that REDD+ units do not affect the price levels of other mitigation mechanisms. Supplementarity requirements are adopted both in terms of domestic abatement measures and external offsets, but also between REDD+ and other types of mitigation mechanisms.

A series of positive impacts could be expected by adopting this approach:

  • the separation of markets would not affect the price of other mitigation options;
  • by ensuring that non-REDD+ options receive the necessary financial resources to direct investment in R&D and investment in low-carbon infrastructure, the process of innovation and decarbonisation of industrial, transportation and energy complexes would continue;
  • including REDD+ units as a complement to these measures, though, would reduce the average cost of GHG abatement and enable countries/entities/sectors to adopt more ambitious targets;
  • the inclusion of REDD+ in markets, at the same time, would ensure access to financial incentives to tackle this important source of emissions;
  • given that the abatement profile of reducing deforestation is frontloaded (as opposed to tree planting or the replacement of energy infrastructure, for instance), it would accelerate the climate benefits associated of mitigation, ‘buying time’ for other measures to enter into force.

 

Domestic or regional markets could also adopt a similar approach and could serve as building blocks for a global market. In Brazil for example, high emission sectors such as cement and transport could have emission reduction targets combined with a quota for REDD+ offsets. This would also work in tune with other sustainable development goals: reduction of poverty and inequality.


Who will take these actions?

The Integrated REDD+ market model is a policy proposal to be considered at the international level. It could be adopted at the UN level, or in regional markets. 


Where will these actions be taken?

Internationally, by coalitions of countries willing to create functional carbon markets that include the use of land use offsets as a means of reducing average costs of abatement of industry and economy as a whole


In addition, specify the country or countries where these actions will be taken.

No country selected


Country 2

No country selected


Country 3

No country selected


Country 4

No country selected


Country 5

No country selected


Impact/Benefits


What impact will these actions have on greenhouse gas emissions and/or adapting to climate change?

The impact of this proposal is dependent on the size of the jurisdiction that adopts it. Land use practices have the potential to generate large volumes of GHG mitigation. Globally, land use is responsible for ca. 24% of global GHG emissions and plays a vital role in biodiversity conservation, water flows, and livelihoods.

At the country level, implementation of the new Brazilian Forest Code has the potential to conserve over 250 million ha of native vegetation in Brazil, storing ca. 100 GtCO2e – the equivalent of 45 years of the European Union’s industrial complex operating without caps. Tropical peatland, in turn, currently store carbon equivalent to 5-9 years of global GHG emissions while their degradation is responsible for ca. 10% of global emissions. While the numbers in these examples do not equate the volumes of offsets that can be derived from these activities, they give an indication of the levels of magnitude of the potential mitigation impact of land use options.

Since the outset of the Kyoto Protocol in 1997, REDD+ has been excluded from markets, denying a source of finance to this important GHG mitigation option. With no carbon pricing on its support, however, significant levels of deforestation and GHG emissions occurred from 1997 to date. The exclusion of forests, therefore, resulted in a missed opportunity to create financial incentives for promoting the reduction of deforestation.


What are other key benefits?

The promotion of REDD+ in a large scale will generate a series of co-benefits, at an unprecedented scale: forests play a vital role in biodiversity conservation, water flows, and supporting livelihoods.

Additionally, the adoption of the Integrated REDD+ market has the potential to catalyse the transfer of financial resources to the land use sector, while ensuring that non-REDD+ options continue to receive financial resources for the process of innovation and decarbonisation of industrial, transportation and energy complexes. Given the lower unit cost of REDD+ units, its inclusion in markets would reduce the average cost of GHG abatement and enable countries/entities to adopt more ambitious targets.

Furthermore, this cost reduction would reduce burden to countries and make it more feasible that non-REDD+ options receive the necessary financial resources to direct investment in R&D and investment in low-carbon infrastructure, the process of innovation and decarbonisation of industrial, transportation and energy complexes would continue.


Costs/Challenges


What are the proposal’s projected costs?

The impact of this proposal is dependent on the size of the jurisdiction that adopts it. The cost of creating new carbon market, however, is relatively low. It involves international negotiations, creation of rules, and market control infrastructure. All these components, however, already exist in existing carbon markets, such as the UN’s CDM, California, and even the voluntary markets. In this case, the creation of this new market segment would only require adapting the existing frameworks to accommodate this new asset class. There is also an opportunity to have it included in the market architecture that is been developed for new markets, such as the CORSIA (Carbon Offseting and Reduction Scheme for International Aviation) program of the aviation sector.

The introduction of REDD+ in the suite of offsets available for industry, however, would greatly reduce mitigation costs. In the case of Brazil, for instance, the Environmental Defense Fund estimated that the use of REDD+ offsets could generate up to U$ 72 billion in revenues for Brazil, covering the costs of the country meeting its NDC.


Timeline

Given that the rules and design of a series of new GHG regulatory schemes are currently under development, there is a window of opportunity between now and 2020 for this proposal to be incorporated into such schemes.


About the author(s)

This proposal was written by Pedro Moura Costa (BVRio -www.bvrio.orgRonaldo Seroa da Motta (UERJ), Mariano Cenamo (IDESAM -www.idesam.org.brPedro Soares (IDESAM), Virgílio Viana (FAS -www.fas-amazonas.orgVictor Salviati (FAS), Paula Bernasconi (ICV -www.icv.org.brAlice Thuault (ICV), Plinio Ribeiro (Biofilica -www.biofilica.com.brfrom the Brazilian REDD+ Alliance.

The Brazilian REDD+ Alliance was created by BVRio Environmental Exchange, Biofílica Investimentos Ambientais, Fundação Amazonas Sustentável (FAS), Instituto Centro de Vida (ICV), Instituto de Conservação e Desenvolvimento Sustentável da Amazônia (Idesam), Instituto de Pesquisas da Amazônia (IPAM -www.ipam.org.brEnvironmental Defense Fund (EDF -www.edf.organd Instituto do Homem e Meio Ambiente da Amazônia (Imazon -www.imazon.org.brwith the objective to promote the use of REDD+ as a tool to combat deforestation and generate financial resources to support the government, rural producers, traditional and indigenous communities.


Related Proposals


References

Moura Costa, P., Seroa da Motta, R., Cenamo, M., Soares, P., Viana, V., Salviati, V., Bernasconi, P., Thuault, A., Ribeiro, P., 2017: REDD+ Integrado com mercados para atingir as metas do Acordo de Paris. Alliança REDD+ Brasil. www.bvrio.org/publicacoes

Moura Costa, P., Seroa da Motta, R., Cenamo, M., Soares, P., Viana, V., Salviati, V., Bernasconi, P., Thuault, A., Ribeiro, P., 2017: Integrated REDD+ markets: a financial model to support forest protection, agricultural production and decarbonization effort. www.bvrio.org/publicacoes

EDF, 2016: Cost-Effective Emissions Reductions beyond Brazil’s International Target: Estimation and Valuation of Brazil’s Potential Climate Asset. Pedro Piris-Cabezas, Ruben Lubowski, Steve Schwartzman, Alexander Golub and Nathaniel Keohane of the Environmental Defense Fund (EDF).

www.icao.int/environmental-protection/Pages/market-based-measures.aspx

The average price of tonne of CO2 stored in forest for sale for Forest Reserve Credits (CRAs) in the Amazon is US$0.12/tCO2e, based on the prices landowners asked to forego the right to legally deforest their legal reserves (see www.bvrio.com). Indeed, the use of CRAs as a vehicle to compensate farmers for avoided deforestation was proposed by BVRio Institute (www.bvrio.org/2016/06/28/climate-value-for-money-2-gtco2-storage-for-u-250-million-forest-legal-reserve-credits-in-brazil-2/) and Forest Trends (Edwards, R., 2016: Linking REDD+ to support Brazil’s climate goals and implementation of the Forest Code. www.forest-trends.org).