Money from trees

Less than two weeks ago, the California Air Resources Board voted unanimously to adopt the U.S.’ most comprehensive cap-and-trade system. It was intended to provide financial incentives to firms to reduce the state’s greenhouse gas (GHG) emissions, notably carbon dioxide (CO2) emissions, to their 1990 level by the year 2020.

This was a significant event for climate change policy worldwide and for the use of market-based approaches to environmental protection. While not at this stage directly connected to the international market for carbon trading and REDD, it is a strong signal that while it remains transfixed by its economic woes, the U.S. cannot avoid the implications of global warming forever. As California goes, it is said, so will the U.S. – and we hope, the rest of the world.

The U.S. has been the most studious foot-dragger in getting its act together in the final leg to the UNFCCC’s Conference of the Parties (COP 17) in Durban, scheduled for November 28 to December 9.

COP 17 should highlight the visionary role played by President Jagdeo and the government of Guyana in placing carbon sequestration by forests on the global agenda and for monetising such efforts to offer incentives for forest conservation and reclamation – the REDD and REDD+ initiatives.

Among the issues on the agenda for COP 17 are reports of the Transitional Committee for the Green Climate Fund and accelerated access to critical mitigation and adaptation technologies. The Subsidiary Body for Scientific and Technical Advice (SBSTA) will pronounce on vulnerability and adaptation to climate change; methodological guidance for activities relating to reducing emissions from deforestation and forest degradation in developing countries, and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks (REDD). All of these have positive implications for the initiative launched by President Jagdeo and later integrated into the LCDS.

While there are doubters, market-based instruments have been used with considerable success in other environmental domains, as well as for pricing CO2 emissions. The success of the U.S. sulphur dioxide (SO2) allowance trading programme motivated the design and implementation of the European Union’s Emission Trading Scheme (EU ETS), the world’s largest cap-and-trade programme, which focused on cutting CO2 emissions from power plants and large manufacturing facilities throughout Europe. Several other countries have followed suit.

But the debate on including REDD as part of the cap-and-trade approach as it relates to Guyana, raises an interesting point. Dubbed “the principle of additionality”, it was made even more interesting because it is supported by a party on the hustings – the AFC – that one would hope would have worked in the best interest of Guyana.

“Additionality” as a criterion states that countries should only get paid for protecting trees that would have been cut down under a “business as usual” scenario. The problem, of course, lies in the inherently unpredictable nature of the future. Nobody really knows what “would have” happened in a given forested area.

The specific problem for Guyana is that with our huge forest reserves – covering some 80 per cent of our land mass, we have a very historically low deforestation rate.

Traditional additionality requirements would require Guyana to demonstrate our forests are actually at risk in order to monetise our vast carbon resources. When the McKinsey study, commissioned by the government, indicated that economic pressures on the forest could result in a 4.3 per cent deforestation rate, the AFC cried “foul”. They claimed that the billions that Guyana could earn under that scenario was through blackmail just because the president asked, “Should Guyana now cut down its forests?”

As to whether Guyana should be “perversely” punished for its historically low rate of deforestation didn’t move the AFC. Jagdeo showed that while money does not grow on trees, it can be earned from trees. We hope that the AFC will subsume its politicking for the good of Guyana.