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Tropical Forest Conservation in Waxman-Markey

Posted by Andrew Stevenson on June 9, 2009

Originally posted on RFF’s climate policy blog Weathervane.

For many environmental advocates, the generous forest conservation provisions in the Waxman-Markey energy bill (summary here) are a no-brainer. They target one of the world’s largest—20 percent of the global total—and most cost-effective—about half the world’s deforestation at under $10 per-ton—sources of greenhouse gas emissions reductions while protecting some of the world’s most treasured natural places.

It seems these provisions provide something for everyone, as they have found support from a broad coalition of stakeholders. U.S.-regulated entities like the potential cost-containment benefits from offsetting up to 1.5 billion tons of their emissions by paying for cheaper reductions in developing nations, and that forest conservation does not create competitiveness concerns. The global development community likes the possible poverty reduction benefits of channeling an additional $10 billion per year by 2015 in what could be seen as U.S. foreign aid to tropical forest nations. Climate policy wonks like that this forest financing will strengthen U.S. participation in ongoing global negotiations.

Is it possible, therefore, that these provisions could survive attacks from equally-strong skeptics of offsets, foreign aid, and climate action during House and Senate debates?
As the debate unfolds, expect three key issues to come into play:
1) Whether the uncertainties in Waxman-Markey’s forest “set-aside” provisions can be clarified.

Currently the bill allocates 5 percent of allowance values (Section 753(b)(1)) for the purchase of “supplemental emissions reductions”—not offsets—solely from international forest conservation. This “set-aside” must be used to purchase 720 million tons of emissions reductions per year from 2020 to 2025 and 6 billion tons overall from 2012 to 2025, and the EPA administrator is required to increase the allowance allocation if necessary to meet this target.

Based on reasonable assumptions about the size of the cap-and-trade program and cost of forest tons, including analysis done by EPA, the U.S. will be lucky to purchase half that amount (about 300 million) with the current 5 percent set-aside. Meeting the required amount may require saving up money in the initial years to spend later, but even this approach cuts it close, and will take away funds from needed capacity building in early years. Does the EPA have the authority or the will to actually follow-through with this requirement? Where will these allowances come from (they’re certainly not going to come without a fight)? 
2) Whether the U.S. can demonstrate a plausible pathway to delivering offset tons from forests when cap-and-trade kicks off in 2012.
Forest carbon transactions in voluntary carbon markets accounted for about 7.5 million tons in 2007. With the relatively stringent requirements in the bill for developing countries’ participation in U.S. carbon markets—and the current low levels of market-readiness in many of these countries—how will they be ready to potentially deliver 1 billion or even 100 million tons in 2012? One answer is that they need funding for policy-planning and capacity building, on the order of several billion dollars per year between 2010 and 2012.

The good news is that these needs are being addressed by international negotiators in Bonn as we speak—including a strong U.S. forest team—and through other initiatives. The question is, will it be enough? Should the U.S. allocate substantial additional funds in its FY10, FY11 and FY12 foreign aid budgets to specifically target this issue? Or is there another innovative solution out there?
3) Whether the institutional structure that manages these forest programs can be strengthened.
Currently, the bill places authority to manage the forest set-aside and offsets programs with the EPA, in consultation with the State Department and several other departments. This is not ideal for several reasons. First, although the EPA has expertise in environmental markets, these forest programs will require much greater on-the-ground international development and conservation experience, and international environmental negotiation experience than it possesses. With the amount of funding on the table—about $10 billion per year, as stated before—and the need to get the most bang for the buck, it may make sense to create a specialized agency with expertise in all of these key areas. What should this agency look like? How should it be structured to most effectively manage these new funds and programs?
These are some of the key questions that academics and environmental organizations—including RFF’s climate and forest carbon policy teams—will be seeking to answer over the next several months. If policymakers are going to continue to support strong forest conservation provisions in U.S. climate policy, which many stakeholders would argue are absolutely essential from a scientific and economic perspective, these salient questions will need good, robust answers.

Posted in Climate Change, Deforestation, Legislation, Uncategorized | Tagged: , , | 1 Comment »

I drink your MILKSHAKE

Posted by Andrew Stevenson on April 7, 2009

Reading this article I couldn’t help but think of Daniel Day-Lewis’ outstanding performance as the oil tycoon Daniel Plainview in There Will be Blood. There’s this liquid substance under your property, and we’re going to pay you just for the right to drill and take it out for you. You won’t even have to lift a finger! Or, in 2009:

“There’s an odorless, colorless gas that is sucked out of the air by your trees, and somebody’s going to pay you for that.”

I don’t want to be overly cynical (although it does seem to be a theme of this blog), but when most Washingtonians or New Yorkers read about people like Justin Maxson who are using market mechanisms to promote sustainable forestry (and that’s what we’re all about here on CT), the only green they can think of isn’t the kind growing on trees.

Continuing on Danny’s and Josh’s week o’ offsets, I think stories like this (and the issue of offsets in general) really illustrate the difficulty many “environmentalists” still have in using “economics” to achieve their goals. Is it morally wrong to support something that will do a lot of good but that people are only interested in because they can make money? Many climate activist-types I know are seriously angry with the huge amount of offsets in Waxman-Markey. Shouldn’t they be happy because more reductions will be achieved at a lower total cost? Or is that not really the goal here? Do we really want to cause the power companies some pain and make them take clean energy more seriously? But, you say, those costs will just get passed on to the consumer anyway…and on it goes.

Of course, I’m not about to resolve this debate right here, but I do know that it’s a really important one to keep having. Oh, and when you’re finished with all that arguing, there is A LOT OF GREEN to be made for whoever gets forestry right in the U.S. (if the EPA allows domestic forests as an offset category). To the tune of 150 million metric tons…just in Wisconsin.

Posted in Cap and Trade, Climate Change, Deforestation, Forestry | 4 Comments »

A tree falls in the forest…and it definitely makes a sound

Posted by Andrew Stevenson on April 1, 2009

Some interesting news on the artist formerly known as REDD (Reducing Emissions from Deforestation and Forest Degradation) the last couple days. First a new report commissioned by Greenpeace claiming that full inclusion of REDD in a global emissions trading scheme will drop the price of credits by 75%. They think this is undesirable, since it will reduce the incentives for developed countries to make the transition to a new, sexy “clean energy economy”. Therefore, Greenpeace is arguing that tropical forest conservation should instead be financed through a separate fund.

However, many developed countries (aka the U.S.) think this may not be so bad after all. Case in point: the Senate just passed an amendment 89-8 stating that cap-and-trade will not increase energy or gas prices (with a clarifying Boxer amendment to the amendment), the highly influential U.S. Climate Action Partnership is all about forests (presumably for similar reasons), and the Waxman-Markey behemoth makes REDD a key piece of its massive offset strategy. Market flooding? Why not! Credit price crashing? No problem! Unsurprisingly, the EU has been taking a more conservative position.

So what’s the right solution? Funds? Markets? Dual markets? Triple markets?!? Given that similar debates about REDD have been going on between countries and within the environmental community for decades, I’m just not sure that there will ever be a one-size fits all solution that everybody can agree on. At least in the short term, in order to get this off the ground (because from a scientific standpoint, it’s vital), I think we’ll have to be satisfied with a disjointed system. Developing countries will have their national baselines and funding for capacity building from developed countries (from foreign aid or through the UNFCCC), Brazil will have its Amazon Fund (which someone besides Norway may eventually give money to), the U.S. will have its offsets (in all honestly I think Waxman-Markey is pretty good on this issue), and the EU will keep trying to find a good solution that doesn’t involve its Emissions Trading Scheme (unless it bumps its target from 20% to 30% by 2020, then they’ll definitely take the offsets). I think this is an outcome we can be satisfied with, and once REDD has been going for a few years and we see how it works in practice, then it’s time to go back to the drawing board for a comprehensive system. Now it’s all about getting it up and…sequestering.

Posted in Climate Change, Deforestation, Offsets, Uncategorized | 1 Comment »

Money doesn’t grow on trees per se…

Posted by Danny Morris on October 22, 2008

Full disclosure: I love the Christian Science Monitor. Not only was it founded by an ornery, possibly crazy old woman and is one of the only newspapers in the country that most of its own reporting instead of relying on wire reports, but it also has a fantastic editorial board. First, they advocated a carbon tax last fall before Congress had even begun seriously discussing cap-and-trade schemes. They dropped another rhetorical gem today, coming out in favor of assigning an monetary value for the world’s forests. Some of the best lines include:

Today, trees are worth more dead than alive. This despite the fact that they stash away billions of tons of carbon in their soil and themselves and constantly inhale more carbon from the atmosphere. They also help regulate the earth’s climate in other ways, influencing rainfall patterns far away, including in the US. And they contain unique plant and animal life, the economic value of which is only beginning to be understood…

If developing countries earned credits for preserving forests, the pace of deforestation might be cut by 75 percent by 2030, the report says. Saving forests, in turn, could reduce the cost of cutting the world’s greenhouse-gas emissions by half…

Talk of adding forest protection into carbon-market schemes does spotlight an important fact: Forests have a value that so far has not been fully reflected in the world economy. Until it is, trees will be cut in favor of other land use.

As you can see, they are talking about climate change and reducing emissions through deforestation and forest degradation (REDD) projects, but there is a less than veiled reference to ecosystem services in the first paragraph of the quote above. Now, the CSM is not exactly the most influential paper in the nation. I, however, think it’s pretty cool that reputable news organizations are discussing REDD and ecosystem services, even in the middle of electoral pandemonium. Speaking of which, if anyone’s looking for a new investment that won’t drop like John McCain’s Intrade value, I have a sandalwood grove in Indonesia to sell you…

Posted in Deforestation, Forestry | Leave a Comment »

Dude, where’s my cow?

Posted by Rich Sweeney on June 9, 2008

This week’s Economist has a good article on the recent surge in deforestation in Brasil. I wanted to point out two things. First, the blurb in the world this week section says, “After three years during which it slowed down, deforestation in Brazil’s Amazon rainforest is rising again, according to government figures. Carlos Minc, the newly appointed environment minister, said the government would impound cattle grazing on illegally cleared pasture.” For some reason impounding cattle just sounds ridiculous. Although I guess you can’t simply put the boot on them.

Also, if you click on the article above, you’ll see this picture, which is pretty amazing.

From the article: “Brazil’s Indian agency released aerial pictures of painted men with bows and arrows who have had little or no contact with modern civilisation.” Can you imagine trying to explain climate change to these men?

Posted in Deforestation | Leave a Comment »