ieta letter on redd provisions

8/9/2019 IETA Letter on REDD Provisions

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IETAInputonProvisionstoReduceTropicalDeforestationinEnergyandClimate

Legislation

July21,2010

P a g e |2 InternationalEmissionsTradingAssociation

Geneva–Washington–Brussels–Toronto

www.ieta.org

Whilethereareanumberofdifferentapproachestosettingbaselinesthatwouldbealigned

withthefactorsjustnoted,noneofthemaimtoequatecreditingbaselinesandpolicygoals.

Indeed,REDDtechnicalexpertsandspecialistpolicy-makershavebeenconsideringpossible

methodsfor determiningREDD crediting baselinesfor thepast severalyears,yet nothing

similartothisideahaseverbeenseriouslyconsidered.Annex2containsasampleofdesign

optionsthathavebeenconsideredrecently,includingshortdescriptionsofeach;IETAwill

gladly pass on longer descriptions at your request. Peer reviewed studies have also

demonstrated the importance of setting crediting baselines based on national

circumstances,showingthattheyarecriticaltodeterminingwhetherornotcountries“opt-

in”toREDDoffsetsprograms.2

IETA understands the inclination to link baselines, and therefore compensation, with the

achievement of REDD policy goals, and we believe that it is possibleto come upwith a

workable approachfor doing so. As such, weare open toconsidering awide varietyof

possiblemethodologiesforthedeterminationofcreditingbaselines.

Forexample,wesupportthe intentoftherecentamendmentsenttoyoubyTheNature

Conservancyon18July2010.Inparticular,wecouldsupporttheestablishmentofnational

baselinesforaninitialperiodatorlowerthantheaverageannualhistoricaldeforestation

emissionsofthenationduringarecentperiodofatleast5years,withadjustmentsmade

taking intoaccountthe driversof deforestationandother factors, toensureadditionality.

We could also support the periodic lowering of those baselines, partly based on recent

achievements.

As an additional safeguard, we also suggest that the legislation mandate the

Administratortoreviewthebaselinetrajectoryandachievementsforeachcountrytwentyyearsafterthedateonwhichthenationaldeforestationbaselinehasbeenestablished.

The Administrator could be given the authority to determine whether to maintain the

baseline,re-adjustthebaseline,ordiscontinuecrediting.3

2. Given the current limitations on project-based crediting for REDD, it is essential that

afforestation, reforestation and revegatation (A/R/R) either be included as a separate

categoryofeligibleinternationaloffsetactivities,orreceiveaminimum15-yearcrediting

periodforinitial,project-basedactivitiesinbothlargeandsmallemitters.TreatingA/R/R

like REDDwillmake investmentsin A/R/R largelyunviable andwill have a detrimental

2Buschetal.,“ComparingClimateandCostImpactsofReferenceLevelsforReducingEmissionsfrom

Deforestation,”EnvironmentalResearchLetters ,Vol.4.No.4,Oct.2009. 3 In general, IETA strongly believes that a firm 20-year cut-off date for crediting is unlikely to be

appropriate forREDD activities in any country, regardless of how the baseline is set. REDDactivities

require a relatively long lead-time to plan and implement, and time is needed for REDD economic

incentivesto help bringaboutthechanges inlandand resource usethatareneeded toreduce forest

lossandpermanentlychangeland-usebehaviors.Inaddition,REDDactivitiesareverylikelytorequire

additional, if diminished, finance to ensure the permanence of land-use changes in later years by

continuingtopromoteactivitiesthatincreasesequestrationonceforestecosystemshavestabilized.




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impactontheeffectivenessoftheREDDprogramoverall.CreditableA/R/Ractivitiesare

crucial to successful REDD efforts; they enable the use of integrated land management

approachesthathelpcontrolleakagearoundprotectedforestsbyalleviatingthepressures

todeforest.

A/R/R activitiesare fundamentally different fromtraditionalREDDprojects, since they

sequester, rather than avoidemissions. A/R/R projects have substantially higher upfront

costs – forpreparingland, purchasing andplanting seeds, andmaintainingforests during

maturation— and generate offsets only as trees grow slowly over-time, both of which

greatlyextendthepaybackperiodoninvestment,whencomparedwithREDD.

Graph1 inAnnex3 depictsa typicalproject-level A/R/Rcarbonstockcurve,showingthat

sequestrationand,thus,crediting,onlybeginstotakeoffatyear5.(Graphs2-4,takenfrom

university studies, support that assertion.) Graph 1 also demonstrates the impact on

crediting that will occur given an 8-year crediting period. Thisgraph shows that the vast

majorityofemissionssequesteredthroughtheprojectoccurinlateryearsandwillthusgoun-credited, orwillbe subsumedina nationalscheme.Giventheuncertainty surrounding

theimplementationofnestedcreditingduringtheearlyyearsoftheprogram,thisissimply

not a situation in which private investors willprovidethe upfront financeneeded to get

projectsup-and-running.

3. There-inclusionofproject-basedcreditingfor"smallemitters"isanimportantstepinthe

right direction, but IETAbelieves that the legislationshouldextenda limited periodof

project-based crediting to large emitters aswell. Allowing project-based crediting in all

countriesforalimitedamountoftimewouldkick-startREDDactivitiesandprotectforestsin

thenear-term, until nationalgovernmentscan build thenecessary capacity to do so and

gainthetrustofmuch-neededprivateinvestors.

Projects serve two essential purposes. First, they permit local communities to gain direct

financeforREDDactivities,givingthemthefreedomtoprotecttheirhomesandlivelihoods

inatimelymannerwhengovernmentsareunabletodosoquicklyorreliably,whichisthe

currentsituationinthemajorityofforestnations.

Second, project-based crediting serves as a hook that draws much-needed private

investment to REDD initially, hopefully convincing investors to maintain and deepen

investments as countries move to national baselines. The initial period of project-based

crediting should serve as an ‘incubation period’ that acclimates private investors to the

REDD space, giving them time to become comfortable financing activities that require

harmonizedpublic/privateapproachesinunconventionalinvestmentsituations,wheretheir

investmentsfacesignificantsovereignrisk.

ExistingREDDprotocolsdevelopedinconjunctionwithhighlyrespectednon-governmental

conservation organizations establish additionality, set crediting baselines and address

concerns about leakage, permanence,and non-carbon social and environmental benefits.

Giventheadditional,extensivesafeguardsforproject-basedactivitiesalreadyincludedin

the draft legislation, IETA believes that restricting an initial period of project-based

creditingtosmallemittingcountriesisarbitraryandunnecessarilyslowsREDDeffortsby




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severely limiting theflowofprivatefinancing in largeemitters,where thepressures to

deforestarehighest.

4. IETAbelievesthatreductionsinillegaldeforestationmustremaineligibletoreceiveoffset

credits,attheproject-based,subnational,andnationallevels.Whileprecisedataonthe

scopeof illegalforestactivitiesis notavailable,organizationssuchas theWorldBankand

ChathamHouse estimate that between50-80% of deforestation is illegal, which makes it

clear that denying funding from activities to halt illegal deforestation would completely

undermine REDD efforts. Moreover, concerns about the possibility of crediting illegal

actorsfornotundertakingillegalactivities,whichwouldclearlycreateasituationofmoral

hazard, are unfounded and reflect misunderstandings about the differences between

planned and unplanned deforestation and the actors that would be eligible to act as

project participants and gain direct access to credits. IETA would gladly explain these

differencesingreatdetail,ifneeded.

OnbehalfofIETA’smembercompanies,Iwouldliketothankyouforyourattentiontothisletter.Pleasedonothesitatetocontactme,orKimCarnahan<[email protected]>inourWashingtonD.C.Office,

withanyquestionsthatyoumayhave.

Sincerely,

HenryDerwent

PresidentandCEO,IETA




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Annex1:




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Annex2:

ReferenceLevel/CreditingBaselineDesignOptions

ASampleofProposalsfromExistingStudies

Designoption Reference Description

“Nationalhistorical” Santillietal.(2005) Referencerateishistoricalforall

countries.Referenceperiodsetto

theaveragedeforestationrateof

thelast10years,updatedevery3

years.

“Higherthanhistoricalfor

countrieswithlow

deforestationrates”

Molliconeetal.(2007);da

Fonsecaetal.(2007)

Referencedeforestationrateis

0.3%forlow-deforesation

countries;Baselineishistoricalforhighdeforestationcountries.

“Weightedaverageof

nationalandglobal”

Strassburgetal.(2008) Referencerateis0.6*global

averagerate+0.4*historicalrate

forallcountries.Different

scenarioscanbegeneratedby

differingtheweightsputon

historicalglobaldeforestationand

national deforestation.

“Flowwithholdingand

stockpayment”

Cattaneoetal.(2008) Referencerateishistoricalforall

countries;30%“withholding”onflowpaymentstopayforstock

payments.

“Uniformfractionofat-risk

stock”

Ashtonetal .(2008) Referencelevelis1%ofat-risk

forestforallcountries;80%of

totalforestisassumedtobeat-

riskinallcountries.

“Halftheglobalaverage” JointResearchCenter

proposalofArchardetal.

(2005)

Useshistoricalglobal

deforestationratestoset

individualcountrybaselines.

Countrieswitharateof

deforestationlowerthanhalfthe

globalaverageusethatasa

nationalbaseline,whilecountries

withhigherdeforestationrates

useanationalhistoricalbaseline.

“DevelopmentAdjustment

Factor”

CoalitionforRainforest

Nations

Inordertotakeintoaccount

nationalcircumstances,countries




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withlowlevelsofGDPpercapita

willgetmoregenerousbaselines.

Thisisjustifiedbecause:(i)the

poorestcountriesarepresumablyatanearlierstageinforest

transition,andtherefore

deforestationislikelytoaccelerate

ratherthanslowdowninaBAU

scenarioand(ii)thecapacityto

implementREDDmaybeinversely

relatedtoGDPpercapita,and

largertransfersareneeded.

“EconomicModelsof

NationalDeforestation”

AngelsenandKaimowitz

(1999)

Factorsincludingpopulation

densityandgrowth,forestarea,

economicgrowth,commodity

prices,governancevariables,and

location(tropicalandregional)

couldallbeincludedinaformula

forsettingbaselines.

“CorridorApproach” Schlamadingeretal.(2005) Increasespercentageofreductions

beingcredited.Forexample,a

reductionindeforestationand

degredationfrom0.8%to0.7%per

year(ortheequivalentinGHG

emissions)givescarboncreditsworthonly20%oftheestimated

emissionsreductions,while

reductionsfrom0.7%to0.6%give

creditsequivalentto40%ofthe

estimatedreductions,andsoon.




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Annex3:

Graph1:IETADepictionofTypicalProject-LevelA/R/RCarbonStockCurve




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Graph2:StudyfromUniversityofIdaho,Moscow(March2008)4

4O’Laughlin,J."CarbonSequestrationintheForestSector."PolicyAnalysisGroupIssueBriefNo.

11.UniversityofIdaho,CollegeofNaturalResources.March2008.Sourcesforthescientificclaims

anddataforthefigurescanbefoundinthePAGIssueBriefdocumentat

www.cnrhome.uidaho.edu/default.aspx?pid=106665.




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Graphs3and4:StudyfromUniversityofWashington(June2003)5

5Lippke,B.,J.P.GarciaandC.Manriquez."ExecutiveSummary:TheimpactofForestsandForest

ManagementonCarbonStorage."RuralTechnologyInitiative,CollegeofForestResources,

UniversityofWashington.June2003.

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