Common Questions Source: Point Carbon

Forest Carbon Makes Mitigation Too Cheap”

Problem: At first glance this objection is hard to understand. Cheapness, as noted, is a virtue. Getting people, firms, and countries to take actions for global benefit is easier if those actions are cheaper. What drives this objection is a fear that introducing forest carbon into the Kyoto Protocol would swamp the emerging carbon market—driving prices toward zero and reducing industrial countries’ incentives to shift to clean energy.

But that outcome would arise not from overly cheap mitigation. Rather, it would be the result of a timid, ineffective mitigation goal. The Kyoto Protocol currently places only moderate limits on green- house gas emissions from participating industrial countries. The limits for 2008–12 are perhaps a billion tons a year (CO 2 equivalent) less than would be emitted in the absence of the agreement.Countries can try to reduce their emissions by this amount, or they can buy offsetting emission reductions abroad. Either way, the total Kyoto limit is still met. Developing countries can reduce CO2 emissions, for instance, by switching from coal to wind power—then sell the reductions.

This approach creates a market for emission reductions. The Kyoto emission limits determine the demand for these reductions, and opportunities for switching fuels and increasing efficiency in the developing world largely determine the supply. The Kyoto Protocol doesn’t allow developing countries to create emission reductions from avoided deforestation. But suppose it did and that countries could instantly create the institutions needed to reduce deforestation and that the protocol did not change its limits on total CO 2 emissions. In this unlikely set of contingencies, the supply of emission reductions would increase and their price would fall. The Kyoto emission limits would still be satisfied, and the cost of meeting them would be reduced. But the resulting low prices for CO2 reductions would provide little benefit to developing countries and little stimulus for energy research and development.

But because the Kyoto limits are so slack, this scenario is not very relevant to policy. As it stands, Kyoto is just a pilot program. If all industrial countries (currently participating or not) met the negotiated Kyoto limits, it would merely delay the buildup of greenhouse gases by a few years. To limit CO 2 buildup to prudent levels, reductions of tens of billions of tons a year are needed by mid-century. To attempt meaningful mitigation of climate change, the protocol would have to drastically limit emission allowances. But doing so might drive the price of compliance so high that countries would refuse to sign on.

Solution: This is where cheapness comes in. By incorporating avoided deforestation into the global climate strategy, the world could afford to set a more ambitious goal for reducing CO2 buildup. In the Kyoto context, that would mean tightening emission allowances while allowing avoided deforestation as a source of emission reductions. By increasing both demand and supply, the price can stay around acceptable levels for all parties, but the climate impact is greater.

“Deforestation Avoidance Has to Be Permanent to Be Useful but It Is Impossible to Secure Permanence”

Problem: Buyers of forest carbon want permanent agreements, while sellers want temporary ones. For buyers the problem is this: Because mitigating climate change requires stabilizing CO2 concentrations, many people assume that every project to reduce CO2 emissions must have a permanent effect. Many energy projects do have permanent effects. Replacing a diesel generator with a windmill today means that less fuel will be burned this year. Even if the windmill breaks and the generator is put back in service next year, CO 2 emissions will have been reduced—the atmosphere is a little cleaner than it would have been without the windmill. But forest conservation is riskier. Forests can burn.

Climate change may imperil tropical forests if temperatures rise and rainfall decreases. And drastic changes in politics or markets may lead the heirs of today’s forest owners to repudiate decades-old conservation commitments. Given these risks, buyers worry that it is impossible to sign an agreement today that securely guarantees carbon sequestration into the distant future. And without such a guarantee, they see no benefit from sequestration or reduced deforestation. Sellers, on the other hand, may not want to sign such an agreement precisely because it closes off future options. Agricultural technologies and markets change rapidly, and expanded transport networks can transform development possibilities for once remote regions. So forest owners may not want to commit to conservation forever.

Solution: Recognize that avoided deforestation is valuable even without a guarantee of permanence. Carbon sequestration doesn’t have to be permanent to be part of a climate change mitigation program. There are three ways that temporary commitments to carbon sequestration buy time to act on climate change:

1) Temporary sequestration buys insurance against catastrophe in the face of uncertainty. The climate system is unstable. Small changes can trigger large and irreversible impacts, such as those that apparently shifted the Sahara from being heavily vegetated to desert (Foley and others 2003; Schneider 2004). There is a fear that too much CO2 in the atmosphere, or too rapid a rise in CO2, could have the same kind of catastrophic effect. But we don’t know the thresholds beyond which such a catastrophe could occur. In the face of such ignorance, it is prudent to buy insurance—that is, to try to keep CO2 levels low and rising slowly. Gitz, Hourcade, and Ciais (2006) show that forest carbon could be a crucial, cost-effective part of a long-term climate change mitigation program. In their model, inexpensive forest carbon offers insurance over the next few decades—after which the world may be better able to assess the risk of catastrophe. If a dangerous threshold is then imminent, the world could continue to rely on forests as a carbon sink, or step up investments in geological carbon sequestration. Temporary sequestration could be a bridge to a clean energy future. Under Kyoto rules, industrial countries need to meet limits on total carbon emissions. They can park their carbon in trees temporarily, but when their storage contracts are up, they need to put that carbon someplace else—or reduce emissions someplace else. This strategy will work nicely if, at the end of the contract term, there are new, cheaper opportunities for storing carbon or reducing emissions.Translated from the project to global scale, this suggests that a temporary, renewable decision to protect forests could buy time for technological advance. The strategy would be to protect threatened forests with low opportunity costs. Over time those costs might rise if there is pressure for agricultural expansion. Development of emissions-reducing technologies would then allow the option of substituting emission reductions for continued forest maintenance. (But, as the next section suggests, forestholders at that time might choose not to exercise that option.)

 For the global community it makes sense to approach climate change mitigation through a program that uses not-necessarily-permanent avoidance of deforestation as one way to buy time for more effective investments in energy research and development. There is no need to tie the two approaches at a project level, but rather to move toward simultaneous global implementation of avoided deforestation and more vigorous research and development. The faster that cheap emissions-reducing technologies are developed, the less time has to be bought through temporary sequestration—potentially allowing forest owners to exercise their option of forest conversion.

 2) Temporary sequestration could become permanent. However, the history of the forest transition suggests that “temporary” sequestration could bridge the trough of the transition and end up being permanent. Many places face temporary pressures to convert forests for small gains. A 20- to 40-year effort to halt deforestation would not involve large opportunity costs, so equitable compensation could be arranged. At the end of that period, rising wages and appreciation of biodiversity values could prompt a reevaluation of the desirability of forest conversion. The forest owner and the host country may not want to exercise their option for conversion at that time. Thus temporary efforts to avoid deforestation provide a valuable climatic service and may end up being permanent.

“If You Protect One Forest, Someone Will Just Cut Down Another” (Leakage)

Problem: Does it really do any good to protect a forest plot from conversion to agriculture, or to reforest a working pasture? Won’t market pressures just push someone else to deforest some other plot, to meet demands for food and employment? This problem is called leakage or slippage, and it occurs in many contexts where a project acts locally but has distant repercussions. It’s a concern in policies that seek to retire farmland to in order to prevent erosion or shore up commodity prices—do the farmers retire one field and open another? It also occurs in projects intended to reduce energy use and associated carbon emissions: switching a city from coal to wind power nudges down the price of coal slightly. Elsewhere, millions of people respond by increasing their coal consumption a bit. such effects can add up to a large proportional diminution of the putative gains at the project site.

Solution: Leakage from forest protection isn’t necessarily hectare for hectare (Chomitz 2002), as a naïve view would suggest. Suppose that a forested property is about to be converted to pasture, but is protected instead. The immediate effect is to drive up the price of beef a scintilla and to send a small amount of capital and a smaller amount of labor looking for other opportunities. One possibility is that the cowboys and ranchers move to an adjacent forest plot and set up a ranch there. But it is also possible that another ranch, possibly a distant one, intensifies a bit, adding a few animals and farmhands. This is especially likely if the protected forest would have been used for low-intensity grazing. In addition, the slight upward pressure on beef prices may nudge some consumers toward chicken. In sum, leakage will be smaller if other parts of the economy can intensify production and absorb the freed capital and labor; and if consumers are sensitive to the price of beef (or whatever commodity is affected by the forest project).

Leakage can be moderate even without any effort to control it. The U.S. Conservation reserve Program pays farmers to re-vegetate erosion-prone land. Wu (2000) found leakage of about 20 percent in terms of area and 9–14 percent for erosion prevention. In other words, for every 5 hectares of land put into the program, 1 hectare of forest was converted to agriculture outside it. But the newly converted land was less erosion-prone than the protected land. Murray, McCarl, and Lee (2004) simulate the impacts of a hypothetical U.s. program that would protect forestland from agricultural conversion, putting it under sustainable timber management instead. depending on where the program was implemented, carbon leakage ranged from –4 percent (implying a gain in carbon sequestration outside the program) to 73 percent. The different outcomes could be due to differences in whether the system responds through extensification (land conversion) or intensification (higher productivity). The solution to leakage, then, is to neutralize it by encouraging sustainable agricultural intensification in nonforest areas—intensification that soaks up the workers, commodity supply, and capital diverted by forest protection. And of course it is important to seek intensified systems that do not produce environmental burdens such as agrotoxic or nitrogen emissions.

“It is Too Expensive to Monitor Carbon”

Problem: It takes a fair amount of effort to measure the amount of carbon in a tree, let alone on a farm. Measuring changes over time makes things even more complex. Is it affordable to gauge the impact of carbon sequestration efforts?

Solution: Measuring forest carbon, in a district or a nation, involves two steps (to oversimplify a bit). The first is estimating how much carbon there is in a tree of a given size, based on its volume and characteristics. The second involves counting the number of trees of different sizes and multiplying by the amount of carbon in each tree. The second step could be done by tallying every tree—difficult even in a small forest. But technology is making this approach cheaper. For instance, it is possible to take aerial pictures and have computers recognize trees and estimate their volumes. still, the cost per tree or hectare is significant, as the airplane must cover the countryside in many low-altitude swaths. Statistical techniques offer potentially huge economies of scale in carbon measurement (Chomitz 2002). statistics can be used to estimate the number or volume of trees based on a sample. And statistical methods have a remarkable property, familiar from household surveys: the accuracy of an estimate depends on the size and representativeness of the sample, not the size of the population being sampled. With 2,000 interviews it is possible to accurately assess mean household income—for a city, province, or nation. hence there are huge economies of scale, in costs per ton, of measuring changes in carbon stocks at a national rather than project level. Although the statistical issues in drawing appropriate samples can get complicated, the principle is clear: enlisting a few statisticians can drastically reduce the number of fieldworkers or aircraft needed to measure carbon.