Tropical Deforestation and the Kyoto Protocol: a new proposal

COP-9 1st – 12th December 2003

Milan, Italy

1

Tropical Deforestation and the Kyoto Protocol: a new proposal

Márcio Santilli1,2, Paulo Moutinho1*, Stephan Schwartzman3 , Daniel Nepstad1,4 , Lisa Curran5 , and Carlos Nobre6

1. Instituto de Pesquisa Ambiental da Amazônia – IPAM. Av Nazaré, 669, 66035-170 Belém, PA, Brazil. moutinho@ipam.org.br; 55-61-3409992 2. Instituto Socioambiental – ISA. SCLN, 210 Bloco C sala 112 70862-530 Brasília, DF, Brazil. msantilli@socioambiental.org; 55-61-349-5114 3. Environmental Defense. 1875 Connecticut Ave. NW Suite 600 Washington DC 20009,USA sschwartzman@environmentaldefense.org; 202-387-3500 4. Woods Hole Research Center, P.O. Box 296, 13 Church Street, Woods Hole MA 02543-0296, USA dnepstad@whrc.org, 508-540-9900 5. Yale School of Forestry and Environmental Studies, 205 Prospect St., New Haven, CT 06511, USA Lisa.curran@yale.edu, 203-432-3772. 6. Centro de Previsão de Tempo e Estudos Climáticos, INPE, Rod. Presidente Dutra, Km 40, Cx. Postal 01, 12630-000 Cachoeira Paulista, SP, Brazil. nobre@cptec.inpe.br, 55-12-3186-8499

* To whom correspondence should be addressed. E-mail moutinho@ipam.org.br

Stabilizing greenhouse gas concentrations at a level that avoids “dangerous anthropogenic interference” with the climate system is the central goal of the United Nations Framework Convention on Climate Change. If Kyoto Protocol emissions reductions targets are met by 2012, and global emissions begin to decrease, the most disruptive predictable impacts of warming could be avoided1 over the long run. But tropical forests are the wild card in the global carbon emissions budget -- continued deforestation at current annual rates from Brazil and Indonesia alone would equal four fifths of the emissions reductions gained by implementing the Kyoto Protocol in its first commitment period (Table 1), jeopardizing the goal of avoiding dangerous interference. Conversely, were the Kyoto Protocol to include incentives for addressing deforestation, countries such as Brazil and Indonesia might lower their substantial current emissions from tropical deforestation, and others, such as Peru, Bolivia, Columbia and some African nations could avoid future increases in deforestation. We propose the novel concept of “compensated reduction”, whereby countries that elect to reduce national level deforestation to below a 1980-1990 level would receive post facto compensation, and commit to, stabilize or further reduce deforestation in the future. Such a program could create large scale incentives to reduce tropical deforestation, as well as for broader developing country participation in the Kyoto Protocol, and leverage support for the ratification and continuity of Protocol beyond the 2008 – 2012 first commitment period.

Tropical deforestation may be decisive in global efforts to stabilize GHG concentrations at levels that avoid dangerous interference in the climate system. The combined effects of clear-cutting, forest regrowth on abandoned land, and logging may have released from 0.8± 0.2 to 2.2± 0.8 Pg C yr-1 in the 1990’s, 10 to 25% of global,

2

human-induced emissions2. These emissions may be increasing. Forest clear-cutting in the Amazon increased 40% from 2001 to 20023. This upward trend may be expected to continue as all-weather highways are paved into the core of the region and cattle pasture and mechanized agriculture expand4. Deforestation in Indonesia, some 17,000 km² from 1987 – 1997, increased to 21,000 km² in 2003, with carbon emissions similar to those in the Amazon2,5. Continued deforestation at current rates in Brazil and Indonesia alone would equal four fifths of the annual reductions targets for Annex I countries in the Kyoto Protocol (Table 1).

Table 1. Carbon emissions from fossil fuel and tropical deforestation, Brazil and Indonesia, and emission reductions targeted by the Kyoto Protocol.

These estimates do not include the effects of tropical forest fires on carbon emissions, which are much more difficult to measure. When the 1997/98 El Niño episode provoked severe droughts in the Amazon and Indonesia, large areas of tropical forest burned, releasing 0.2 to 0.6 Pg of carbon to the atmosphere16, 17, 18 (Table 1). If droughts become more severe in the future through more frequent and severe El Niño episodes19, or the dry season becomes lengthier due to deforestation-induced rainfall inhibition20 or there are rainfall reductions due to global warming21, then substantial portions of the 200 Pg of carbon stored globally in tropical forest trees could be transferred to the atmosphere in the coming years. Within the Kyoto Protocol of the United Nations Framework Convention on Climate Change (UNFCCC), most industrialized countries have agreed to reduce their greenhouse gas (GHG) emissions to below 1990 levels during an initial commitment period of 2008 through 2012. Developing countries currently have no commitment to emissions reductions. If 55 countries representing 55% of the global GHG emissions ratify the Protocol, it will come into force, which currently depends on Russian ratification. Developing country commitments were already a contentious issue at the New Delhi Conference of the Parties to the Protocol (COP-8). Both ratification of the

Country Source Carbon Emission

(PgC yr-1)

Brazil Fossil Fuel6 0.09 Deforestation7 0.2 ± 0.2 Forest Fire (El Niño year – 1998)8 0.2 ± 0.2 Forest Fire (Non El Niño year -1995)8 0.02 ± 0.02

Indonesia Fossil Fuel9 0.09 Deforestation10,11 0.2 ± 0.2 Forest Fire (El Niño year – 1997/8)10,11 0.4 ± 0.5 Peat Fire (El Niño year – 1997/8)12,13 0.2 ± 0.2

Global Fossil Fuel14 6.3 ± 0.4 Tropical Land Use Change2 (0.8±0.2) to (2.2±0.8)

Kyoto Target15 0.5

3

Kyoto Protocol and its continuity beyond 2012 in a second commitment period may depend on Annex I and developing countries coming to agreement on this issue. Annex I countries are allowed to achieve some emissions reductions by investing in energy and tree planting projects (reforestation and afforestation) that reduce GHG emissions in developing countries through the “Clean Development Mechanism”. But countries undergoing or at risk of large scale deforestation, such as Brazil, Indonesia, Bolivia, Peru, Columbia, Guiana and Suriname, have no incentive to reduce or avoid emissions from deforestation. There is a clear need for substantial incentives for developing countries to meaningfully participate in emissions reductions in the near term, while respecting the UNFCCC commanding principle of “common but differentiated responsibilities.” We present the concept of compensated reduction as a means of both reducing the substantial emissions of carbon from deforestation and facilitating significant developing country participation in the Kyoto Protocol framework. Developing countries that elect to reduce their national emissions from deforestation during the five years of the first commitment period (taking as the baseline the average annual deforestation for the 1980’s, measured with robust satellite imagery techniques) would be authorized to issue carbon certificates, similar to the Certified Emissions Reductions (tCERs) of the CDM, which could be sold to governments or private investors. Once having received compensation, countries would agree not to increase, or to further reduce, deforestation in future commitment periods (provided that Annex I countries fulfill their obligations). Countries with substantial tropical forests, but relatively little deforestation to date (e.g., Peru, Bolivia) might be allowed baselines higher than the 1980’s average deforestation (along the lines of Australia’s “growth cap”) as an inducement to participate and avoid future increases. For heavily logged regions such as Kalimantan, Sumatra an Sulawesi, where 70 – 80% of lowland dipterocarp forest cover has been removed in logged areas and conversion to oil palm plantations is underway a baseline could be expressed in terms of existing carbon stocks in 2003, with crediting for any increase in total carbon stocks between 2008 – 2012, making reforestation or re-growth an alternative to oil palm plantations. Preventing fires in peat forests merits particular attention. Burning peat forests released between 0.81 to 2.57 Pg of carbon and vast amounts of sulfur oxides into the atmosphere in 199722, 23. Peat swamps are low value lands unsuitable for agriculture that sequester enormous quantities of carbon, and peat fires are easily located and monitored via satellite. Can selling forest carbon offsets pay enough to reduce deforestation? One way of approximating an answer is to compare Net Present Value (NPV) of current land use with returns from carbon sales. A hectare of Amazon forest generates from $10 to $200 annual income (low-value cattle pasture vs. soybeans), which at 10% interest rates yields $100 to $2000 NPV. Taking a low estimate of 100 T/C per hectare, at carbon prices of $5/Ton, the carbon value is $500, or at least five times the value of cattle pasture – still

4

the dominant use for which land is deforested. Carbon investments would also offer a better return than most new oil palm plantations in Indonesia.

Tropical country governments can reduce deforestation through adequate funding

of programs designed to enforce environmental legislation, support for economic alternatives to extensive forest clearing (including carbon crediting), and building institutional capacity in remote forest regions, as recently demonstrated in part of the Brazilian Amazon24. Moreover, substantial forest can be saved in protected areas if adequate funding is available25. More developing countries will be likely to use these mechanisms if they have access to the financial resources necessary to pay for them. “Compensated reduction” provides means to remunerate governments (in Brazil and Indonesia, responsible for ~ 70% ~ 80% of forest lands, respectively) forest communities, and private owners for the ecosystem services that forests provide, creating the positive economic value for standing forest, which has been understood as essential for large scale forest conservation for a long time26.

Compensated reduction would produce verified reductions from deforestation that could be gradually used over time for future offsets. Calculating reductions against a national baseline and monitoring system for deforestation addresses the problems of leakage, additionality and permanence that have vexed the CDM. Deforestation does not “leak” into the energy or transport sectors, and national deforestation can be measured at the beginning and end of a commitment period just as can national emissions for Annex I countries. International “market leakage” for timber exports, where a participating country ceases to export timber to get carbon investments, and a non-participating country increases its exports correspondingly, is an issue. But international market leakage is potentially a much bigger issue under current Kyoto Protocol rules – forest sinks, and activities that increase carbon stocks in Annex I countries are credited, but developing country forest destruction is not debited. An Annex I country could cease timber harvests altogether at home and replace them with tropical imports and still receive credit under Article 3.4 of the Kyoto Protocol. Enlisting any tropical forest countries to compensated reduction programs would reduce, not increase, this problem. Eventually, Annex I countries buying compensated reduction offsets might be required to ensure that tropical timber imports were certified as carbon neutral.

In addition, compensated reduction would further the goals of the Biodiversity Conventions. While there are many non-forest options for reducing GHG emissions, conserving tropical forests is essential to maintaining species diversity. Compensated reduction could help to resolve potential conflicts between the Climate and Biodiversity Conventions, as well as suggesting one potential mechanism for implementing the Biodiversity Convention.

The prospect of meaningful developing country participation in international efforts to address global warming and the availability of high quality carbon credits (resulting from reductions already achieved and demonstrated) in the future would constitute a significant incentive for Annex I countries to negotiate a second commitment period, itself an extremely important signal for governments and economic actors. The issue of

5

developing country participation is central to Annex I countries’ concerns over the future of the Protocol, as is the question of the cost of emissions reductions. The principle of compensated reduction suggests new avenues for addressing both issues. Adopting an instrument of this kind in the context of the Protocol would promote the adoption of policies for the control of deforestation in developing countries, preserving their sovereignty in defining means and allocating results, and allowing the tropical nations to take a leadership role in preventing dangerous interference in the climate system. As it has been widely recognized, “Prevention of deforestation should be clearly established within the context of the Kyoto Protocol implementation. It would be paradoxical for climate change mitigation if the Kyoto Protocol mechanisms had the effect of paying for the destruction of pristine forests, which are one of the few genuine actors in climate change mitigation” 27. Acknowledgement: The authors would like to thank the Ford Foundation, NASA Earth Sciences Program (NAG 511335 & NAG 511161) and NSF BE-CNH (0215898) for their support of research related to this paper.

References and Notes 1 . B. C. O’Neill and M. Oppenheimer, Science 296, 1971 (2002). 2 R. A. Houghton, Tellus 55, 378 (2003). But see Clini et al. (2003, Land use change monitoring the framework of the UNFCCC and its Kyoto Protocol – Report on current capabilities of satellite remote sensing technology; Joint Research Centre of the European Commission) for lower estimates (~ 0.8 PgC/year) of global emissions from land use change, but arising only from forest (humid and dry) land cover change in the tropics. See also F. Achard et al., Science 297, 999 (2002) that presents an estimate of maximum global net emissions from land-use change in the tropics of about 0.96 PgC/year. 3 Monitoramento da Floresta Amazônica Brasileira por Satélite: Projeto PRODES (Instituto de Pesquisa Espaciais, INPE, 2003; http://www.obt.inpe.br/prodes.html). 4 D. C. Nepstad et al., For. Ecol. Mgt. 154, 395 (2001). 5 http://www.atimes.com/atimes/Southeast Asia/EG11Ae03.html.

6 International Energy Outlook 2003 (Energy Information Administration, EIA; http://www.eia.doe.gov/oiaf/ieo/tbl_c10.html). 7 R. A. Houghton, et al., Nature 403, 301 (2000). 8 M. C. V. Diaz, et al., O Prejuízo Oculto do Fogo: Custos Econômicos das Queimadas e Incêndios Florestais na Amazônia (Instituto de Pesquisa Ambiental da Amazônia, IPAM, Technical Report, 2002; http://www.ipam.org.br/publica/perdas.php). It is noted this calculation accounts for the estimated carbon emissions due to accidental fires in El Niño years, but does not account for either further losses due to increase tree mortality in subsequent years or carbon assimilation due to forest regrowth. 9 Indonesia Country Analysis Brief (Energy Information Administration, EIA; http://www.eia.doe.gov/cabs/indonesia.html). 10 F. G. Siegert et al., Nature 414, 437 (2001). 11 D. Holmes, Deforestation in Indonesia: A Review of the Situation in Sumatra, Kalimantan, and Sulawesi (World Bank, Jakarta, Indonesia, 2002); M. A. Pinard, W. P. Cropper, J. Appl. Ecol. 37, 267 (2000); P. L. Woomer et al., in Global Climate Change and Tropical Ecosystems, R. Lal, J. M. Kimble, B.A. Stewart, Eds. (CRC

6

Press, Boca Raton, 2000), pp 99-115; Indonesian National Development Planning Agency (BAPPENAS) Final Report Annex 1: Cause, Extent, Impact and Costs of 97/98 Fires and Drought. (Asian Development Bank, Jakarta, Indonesia, 1999); D.O. Fuller, M. Fulk, Int. J. Rem. Sens. 22, 691 (2001). 12 J. T. Houghton et al., Climate Change 2001: The Scientific Basis. J. T. Houghton, Ed. (Cambridge University Press, Cambridge, 2001). 13 J. T. Houghton et al. 2001 op. cite. 14 I. C. Prentice et al., in Climate Change 2001: The Scientific Basis, J. T. Houghton et al. Eds. (Cambridge Univ. Press, Cambridge, UK, 2001), pp. 183-237; http://cdiac.ornl.gov/trends/emis/tre_glob.htm. 15 Carbon emissions forecast for 2010 for industrialized, Eastern European and Former Soviet Union countires (4.610 billion tons) (http://www.eia.doe.gov/oiaf/ieo/tbl_a10.html )) minus the total annual reduction target established by the Kyoto Protocol for the same year (3737 billion tons) (Energy Information Administration-EIA, DOE/EIA-0573/99, DOE/EIA 0219/99). 16 M. C. V. Diaz, et al., 2002 op. cite. 17 . F.G. Siegert et al., Nature 414, 437 (2001). 18 S. E. Page et al., Nature 420, 61 (2002). 19 K. E. Trenberth, T. J. Hoar, Geo. Res. Let. 23, 57 (1996); A. J. Timmerman et al., Nature 398, 694 (1999). 20 M. F. A Dias Silva et al., J Geophys. Res. 107, D20, 8072, doi: 10.1029/20001,D00035 (2002). 21 A. White et al., Global Environ. Change 9, S21-S30 (1999); P. A. Cox et al.. Nature 408, 184 (2000). 22 S. E. Page et al. 2002. op. cite. 23 J. T. Houghton et al. 2001. op. cite. 24 Nepstad, et al. Science 295, 629 (2002); Governo do Estado de Mato Grosso, Fundação Estadual de Meio Ambiente (FEMA), Sistema de

Controle Ambiental em Propriedades Rurais de Mato Grosso (Cuiabá-FEMA, 2001); P. M. Fearnside, Ambio 32, 343 (2003). 25 A. G. Bruner et al., Science 291, 125 (2001); S. L. Pimm et al., Science 293, 2207. 26 C. Kremen et al., Science 288, 1828 (2000); R. Costanza et al., Nature 387, 253 (1997); R. Bonnie et al., Science 288, 1763 (2000). 27 E.-D. Schulze et al., Science 299: 1669 (2003); D.S. Schimel et al., Nature 414, 169 (2001).