Wednesday, May 27, 2009

Trees for sale

Around the world trees are busily going about their business sucking up carbon. They do a good job at it. So good, in fact, their loss through deforestation contributes to about 20% of the overall greenhouse gases entering the atmosphere. Bright minds around the world are focused on avoiding this deforestation as a way of lowering the world’s carbon emissions.

So far so good. But avoiding deforestation means that many landowners must forego their rights to sell timber in order that the world has the benefit of the services that these trees provide when they are not used make tables. So it has been suggested that reducing deforestation and degradation (known by the acronym REDD) become a formalised international process that will lower carbon emissions. The crucial point, though, is that money should exchange hands from those who are providing the carbon storage, i.e. the landowners, to those who emit it, i.e. all of us.

The “all of us” bit actually means governments, corporations and of course individuals if we decide to make such payments. And the currency of such negotiations is the carbon credit. Thus, if I own an acre of forest that I decide not to chop down but to keep, then I will be paid for the amount of carbon that this forest stores. Each tonne of carbon my forest stores will be equal to one carbon credit. These carbon credits can then be sold by me, to someone else, who may decide to sell them on to someone else again. Thus there is a market for carbon credits based on avoided deforestation, and an incentive to landowners not to cut down trees.

One of the things that the world is negotiating at the moment is how this system will operate, and what rules will govern it. The international negotiators at meetings around the world, the next of which is Bonn in June, need to settle issues such as “additionality”.

This is an idea that is important for any payment for avoided deforestation. Say my forest had planning controls on it that prevented me from chopping the trees down. I owned the forest, and the trees, but my use of it was constrained to basically walking through it and enjoying it. If this is the case, then nobody should be able to pay carbon credits to me, for the simple reason that there is no avoided deforestation because I would never have been allowed to cut them down in the first place.

But there is sufficient deforestation around the world to make this potentially very big business indeed. If the international community agrees to REDD during Copenhagen, it will jump-start a very big market. The thing is, that many companies are not content to wait for official rules and regulations, they want to get in on the action early and sew up a good deal. Fortunes may well be made in this race, but they may also be lost. Because, and going back to the example of the forest, in some countries in the world it would be very easy for me to lie and say that I have the right to sell the carbon in my trees because I have the right to chop the trees down and sell them. And if I did have the right to chop down my trees, it would be even easier to sell the rights to the carbon in them, even if I had no intention to do so.

Over the next few weeks, I want to write in this blog about this business of REDD. Because of the concise nature of the publication that I write for, The Economist, its not possible for me to write everything that I have learned about this industry so far in its pages. Instead, I’ll use this blog to write about what I have discovered. There is an urgent need for clarity and transparency about the trade of carbon credits for avoided deforestation. If you want to email me with questions, or answers, please do so by filling out this form.