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Reducing Emissions from Deforestation in Developing Countries
UNFCCC 26th Meeting of the Subsidiary BoardsBonn – 8th May 2007
Bernardo B.N. Strassburg – [email protected] for Social and Economic Research on the Global EnvironmentSchool of Environmental SciencesUniversity of East Anglia
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Overview
• Section A – The logic behind the Mechanism– Cross-scale analysis of deforestation
incentives– Insights from a dynamic approach
• Section B – The Mechanism– The mechanism– Positive aspects– Issues to be addressed
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Cross-scale Analysis of Deforestation Incentives
• The Evidence from case-studies:
– 14 Case-studies that compared ecosystem benefits with benefits from alternative activities;
– Further investigation classified these ecosystem benefits into national (local/regional) and global scales;
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Evidence from case studies
Country / Region Ecosystem Alternative Use Conclusions
Brazil Trop. Forest Agric./Cattle + Timber Ecos. Total Value > $ Alternative
Peru Trop. Forest Agriculture + Timber $ Alternative > Ecos. Nat. Value
Cameroon Trop. Forest Agriculture Ecos. Total Value > $ Alternative > Ecos. Nat. Value
Malaysia Trop. Forest Timber Ecos. Total Value > $ Alternative ≈ Ecos. Nat. Value
Brazil Trop. Forest Cattle Ecos. Total Value > $ Alternative > Ecos. Nat. Value
Brazil Trop. Forest Average Ecos. Total Value > $ Alternative > Ecos. Nat. Value
Madagascar Trop. Forest Timber + Agriculture Ecos. Total Value > $ Alternative > Ecos. Nat. Value
Sri Lanka Trop. Forest Timber + Agriculture $ Alternative > Ecos. Nat. Value
Kenya Savanna Average $ Alternative > Ecos. Nat. Value
Thailand Mangrove Shrimp Farm $ Alternative < Ecos. Nat. Value
United Kingdom Temp. Forest Timber $ Alternative < Ecos. Nat. Value
Australia Mixed (Kakadu)
Mining $ Alternative < Ecos. Nat. Value
Canada Temp. Wetlands
Agriculture $ Alternative < Ecos. Nat. Value
Scandinavia Boreal Forest Agriculture $ Alternative < Ecos. Nat. Value
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Evidence from case studiesCountry Ecosystem Conclusions
Brazil Trop. Forest Ecos. Total Value > $ AlternativePeru Trop. Forest $ Alternative > Ecos. Nat. Value
Cameroon Trop. Forest Ecos. Total Value > $ Alternative > Ecos. Nat. ValueMalaysia Trop. Forest Ecos. Total Value > $ Alternative ≈ Ecos. Nat. Value
Brazil Trop. Forest Ecos. Total Value > $ Alternative > Ecos. Nat. ValueBrazil Trop. Forest Ecos. Total Value > $ Alternative > Ecos. Nat. Value
Madagascar Trop. Forest Ecos. Total Value > $ Alternative > Ecos. Nat. ValueSri Lanka Trop. Forest $ Alternative > Ecos. Nat. Value
Kenya Savanna $ Alternative > Ecos. Nat. ValueThailand Mangrove $ Alternative < Ecos. Nat. ValueUnited
KingdomTemp. Forest $ Alternative < Ecos. Nat. Value
Australia Mixed (Kakadu) $ Alternative < Ecos. Nat. ValueCanada Temp. Wetlands $ Alternative < Ecos. Nat. Value
[Scandinavia] Boreal Forest $ Alternative < Ecos. Nat. Value
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Evidence from case studies
• Developed Countries– Conservation provides superior benefits even
when only national ecosystem benefits are considered (4 out of 4);
• Developing Countries– National ecosystem benefits still inferior to
those from alternative uses (7 out of 9);– When Global benefits are considered, the
balance tilts towards conservation (6 out of 6);
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Evidence from case studies
“Scale mismatch” between natural and human systems
International Externality
If Nat.Ecos Ben > Alternative
Not a problem(Developed Countries)
If Global Ecos Ben. > Alternative > National Ecos. Benefits
A Problem (Developing Countries)
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The Cross-scale Dynamic Approach
Qpv Qnat Qglob
Costs of Conservation
Private Benefits of Conservation
National Benefits of Conservation
Global Benefits of Conservation
Direction of the Conversion process
Area of Forest
MarginalValue (per ha.)
(Strassburg, 2007)Developed Developing
Increasing Forest CoverQpv Qnat
Decreasing Forest CoverQnat Qglob
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The Cross-scale Dynamic Approach
Qpv Qnat Qglob
Costs of Conservation
Private Benefits of Conservation
National Benefits of Conservation
Global Benefits of Conservation
Area of Forest
Value (per ha.)
A
(Strassburg, 2007)
B
The World gains A + B
The Country loses A
Win-Win Cooperation
If Country opts for QGlob instead of Qnat
If World pays Country A ≤ $ ≤ A+B
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The Cross-scale Dynamic Approach Brazilian Amazon
National Equilibrium = 123 million ha. (30% orig. area)Private Equilibrium = 60 million ha. (15% orig. area)
MEA projections for 7 of 10 most prod. Ecos. Types by 2050 (30-40% orig. area)
Current Forest Cover (as % of the original): Europe (excl. RUS) =33% (21%) Continental Asia (excl. RUS)= 21.5% N. Africa =8.4%
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The Cross-scale Dynamic Approach Brazilian Amazon
Current Total Ecosystem Benefits: US$ 80Conservation Costs: US$ 50Current National Benefits: US$ 18.5Compensation Necessary (A): US$ 4,5 billion/yr
US$ 13,4 / ha / yrEmission Reduction Cost = US$ 3 / t CO2Opportunity Costs: US$ 47.5Op. Costs – Current Nat. Benefits: US$ 29
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Compensation Mechanism - Objective
Fix the Scale-mismatch between
Natural and Human Systems
By internalizing part of the Global Benefits provided by the Ecosystem
Key point: A mechanism that offers developing countries a sustained incentive to change
long-term development strategies;
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Algelsen, 2007 (II Workshop)
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Compensation Mechanism“Building Bridges”
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Some thoughts
• Key point: A mechanism that offers developing countries a sustained incentive to change long-term development strategies;
• Not a 10-20% reduction in deforestation due to increased repression, but a 80-90% reduction due to a sustainable development strategy;
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Compensation Mechanism - Our Proposal
Two-step approach
1) Total Incentive the International Community pays Tropical Countries in a given year t:
TIt = (PGED – GEDt) x $ per t CO2 eq
Where: • TIt = Total Incentive in year t• PGED = Past Global Emissions from Deforestation• GEDt= Global Emissions from Deforestation in year t
Ex: [ 8GtCO2 – 6 GtCO2] x US$ 3/ t CO2 = US$ 6 bi
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Compensation Mechanism - Our Proposal
2)Country Incentive
Key concept: “Expected Emissions” Regardless of its past behaviour, each country is
expected to deforest at the past global average rate
EEt = PGDR x FAt x PEH
WhereEEt = Expected Emissions from deforestation in year t;PGDR = Past Global Deforestation Rate FAt = Country’s forest area in year tPEH = Past emissions per deforested hectare on that country.
Ex: 0.01 x 10.000.000 ha x 500 t CO2/ha = 50 million t CO2
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National Incentive
2)Country IncentiveEmission Credit:
ECt = (EEt – Et) x $ per t CO2 eq
Emission Debit:
EDt = (Et – EEt) x $ per t CO2 eq
Financial Incentive (Country i; yr t)
FIt = (ECt/ ΣECt) x TItWhereFIt = Financial incentive for country in year tECt = Emissions Credit of country in year tΣECt = The sum of all emission credits for that yearTIt = Total Incentive in year t
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d e f = (a) x (d) x
(e)
g h (i) = (g) x (h)
j = (f - i) x (c)
k j - k
Country
Forest Area (year t) (103 ha.)
Past Emissions per Def. ha. (t CO2 eq)
Expected Emissions (year t) (103 t CO2 eq)
Deforested Area (year t) (103 ha.)
Emissions per Hectare (year t) (t CO2 eq)
Deforestation Emissions (Year t) (103 t CO2 eq)
Emission Credit /Debit (year t) (103 US$)
Incentive Received (year t) (103 US$)
Outstanding Credit /Debit (for yr t+1) (103 US$)
A 10.000 700 70.000 50 700 35.000 105.000 94.900 10.100
B 5.000 500 25.000 20 400 8.000 51.000 46.100 4.900
C 7.000 500 35.000 80 500 40.000 -15.000 0 -15.000
TIt = (PGAED – GEDt) x $ per t CO2 eq = (130 – 83) x 3 = US$ 141.000.000Country A Incentive FIit = (ECit/ ΣECit) x TIt = (105/156) x 141 = U$$ 94.900.000Country B Incentive FIit = (ECit/ ΣECit) x TIt = (51/156) x 141 = US$ 46.100.000
(a) Long Term Global Deforestation Rate: 1%(b) Past Global Emissions from Deforestation: 130 Mt/year(c) Incentive per t CO2 equivalent: US$ 3
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Positive Aspects
1)Connects the incentive paid by the International Community to an actual reduction in Emissions from Deforestation
Every $ will have been paid for a real and fixed (e.g. 1/3 t CO2 eq) reduction in GHG emission.
A strong incentive to attract the necessary funding (either public or market);
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Positive Aspects
2)Leakage-Proof Assessment at the global level garantees that a reduction
in one place will not be compensated by an increase in emissions at another (either inside a country or across national boundaries).
Turns one of the most leakage prone sectors into the first leakage proof sector under the UNFCCC.
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Positive Aspects
3)Is Fair– As a “new game” is starting now, it doesn’t
connect incentives to the past behaviour of each country. “Bad behaviour” in the past does not impact future rewards, neither in a negative or positive way;
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Positive Aspects
4) No need for past national baselines– Past national baselines are tricky.
• Absense of information• Unreliable information• Too much inter-annual variability
The global long term baseline is available, credible and more constant;
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Positive Aspects
5) Double “carbon-banking”
– Country can have a outstanding debit or credit• Partially address the issue of “permanency”
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Positive Aspects
6)Diverse mix of incentives to foster positive behaviour6.1)Incentive Connected to Ecosystem Area
• Core of the problem (Part A)• Threat of future Emissions
If reforestation is included, double-incentive:• When Et<0 (due to reforestation), FI • When FAt , FI
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Positive Aspects
6)Diverse mix of incentives to foster positive behaviour6.2)Incentive Connected to Emission from
Deforestation
• Incentive to curb deforestation rates• Incentive to minimize GHG emissions per def. ha.• Incentive to prioritize (original) carbon rich
vegetations
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Positive Aspects
6)Diverse mix of incentives to foster positive behaviour6.3)Incentive partially connected to Emissions
from other Tropical Countries
Strong and potentially very effective incentive for inter-tropical cooperation
– Knownledge sharing (learning-by-doing)– “Peer pressure” (e.g. easier to accept / self-impose
market regulations that limit demand for unsustainable tropical products)
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Positive Aspects
7) Customizable
• Scope: Tropical forests, peatlands, wetlands etc;
• Include or not reforestation
• Biodiversity: Mix with an index for biodiversity (“BioCarbon”);
Also an global benefit provided by ecosystems
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Issues to be addressed
1) Short-termSome sort of adaptation period should be included, so that countries with high-deforestation rates have enough incentive to cooperate;• A debit-free period• Alternative distribution of TI in the adaptation
period
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Issues to be addressed
2) Source of financial IncentivesThe mechanism can be financed by • Public funding (e.g. Tax 0,04% global income to
finance 100% deforestation reduction);• Market
• Two step approach connects $ to a real reduction in global emission;
• ex-post payment increases value (“Get what it pays for)• Necessity of minimum price to garantee long term
incentive to developing countries
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Issues to be addressed
3) Destination of Financial Incentives• Small portion to forest managment (~15%)• 85% of the forests are public owned (FAO)• Incentive will not cover private opportunity
costs (does not include national externalities);
• Should finance sustainable development• e.g Education, Science & Technology,
Ecotourism etc
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Issues to be addressed
4) TechnologyIf current technology precludes the use of “Emissions per hectare” as an endogenous parameter, all formulas can be revised so that it becomes a constant and “Deforestation Rate” becomes the main endogenous parameter;
Incentive for reducing emissions per hectare is lost
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Issues to be addressed
5) Biodiversity – Can not allow original biodiversity
rich/carbon poor vegetation to be converted into homogenous carbon rich vegetations;
– Should not encorage conversion of biodiversity rich ecosystems outside the scope;
– Etc
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Mollicone et al. (2007)
• Intact Forests, non-Intact Forests, non-Forest (each with a CPreservingFactor);
• Global Accounted Preserved Carbon
• High rates > GCB/2 > Low rates– High rates Incentive: Past Def – Current Def.– Low ratesIncentive : GCB/2 – Current Def.
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Mollicone et al. (2007)
• Total Incentive connected with global reduction
• Incentive related to the area
• Improves accuracy with current technology
• Higher reward to past “bad-behaviour”;• Low incentive for intertropical cooperation;
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Mollicone et al. (2007)
• Perfect for “Phase 1”– Maintain Total Incentive connected with global
reduction;– Offers greater rewards to countries that have to make
larger reductions in deforestation rates;– Improved accuracy with existing technology (before
“Emissions per hectare” can be inserted)– The existence of “Phase 2” inserts the incentive for
inter-tropical cooperation already on “Phase 1”;– The higher incentive to past “bad-behaviour” for a
short time may not be a big issue, if countries know that it will dissapear on “Phase 2”.
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Our proposal - Summing up
• Garantees fixed emission reduction for each $• Double “Carbon Banking” • Leakage Proof (National and International)• No need for past national baselines• Is fair• Mix of incentives – connects incentive to
– Remaining forest area [Core (Section A)]– Emissions
• Reduce Deforestation• Reduce Emission per deforested hectare• Prioritize Carbon Rich Vegetations
– Total reduction in Tropical Countries (strong incentive for intertropical cooperation)
– Is Customizable (Scope, Reforestation, Biodiversity)
(Strassburg et al., 2007)
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Reducing Emissions from Deforestation in Developing Countries
UNFCCC 26th Meeting of the Subsidiary BoardsBonn – 8th May 2007
Bernardo B.N. Strassburg – [email protected] for Social and Economic Research on the Global EnvironmentSchool of Environmental SciencesUniversity of East Anglia
Thank You