Other Requirements for Success: Private Sector Engagement

by Mark Proegler on February 27, 2014

REDDIn Professor Moomaw’s article, “From Failure to Success: Reframing the Climate Treaty,” he presents a compelling case for addressing climate change and also acknowledges governments’ failure to develop sufficient policies to address it, which is a prerequisite for significant action. However, in his description of Restorative Development as part of the solution, he is missing a key element for success, especially for the forestry sector: a durable market incentive for private sector investment.

According to the UN, deforestation and forest degradation through agricultural expansion, conversion to pastureland, infrastructure development, destructive logging, fires, etc., account for nearly twenty percent of global greenhouse gas emissions—more than the entire global transportation sector and second only to the energy sector. Accordingly, reducing CO2 emissions from the forestry sector needs to be a priority to reach global emissions reductions targets. In addition to the large contribution of deforestation and forest degradation to global emissions, combating both has also been identified as one of the most cost-effective ways to lower emissions.

The primary existing mechanisms for addressing forestry emissions include REDD (Reducing Emissions from Deforestation and forest Degradation in developing countries) and REDD+, which goes beyond deforestation and forest degradation, and includes the role of conservation, sustainable management of forests, and enhancement of forest carbon stocks. These mechanisms have gained progressive importance in UNFCCC (United Nations Framework Convention on Climate Change) negotiations: REDD was formalized at the thirteenth Session of the Conference of the Parties (COP-13) in Bali, and REDD+ was formally adopted at COP-16 in Cancun in 2010. The details of a REDD+ mechanism continue to be debated under the UNFCCC, and the considerable financial needs for full-scale implementation have not yet been met.

The REDD+ agreement that Professor Moomaw refers to is one of the outcomes of COP-19 in Warsaw in November 2013. The Parties concluded negotiations with a package of decisions that establish a framework for REDD+, including decisions on steps to be taken, approaches to MRV (Measurement, Verification and Reporting), and finance. However, REDD+ will require additional decisions if it is to produce tradable units for emissions offsets or reductions (to spur investment). Implementation will require many more steps, including finance, before it becomes fully operational.

REDD+ and Private Sector Investment

A key to REDD+ success is a balanced investment/finance approach that includes public and private sectors. Public and non-governmental institutions can contribute financial resources and technological and technical expertise to support partner REDD+ countries. However, the mobilization of private sector participation, e.g. via a carbon market (demand for tradable instruments) can provide a significant source of investment. In 2012, according to a recent report by Forest Trends, forest carbon markets were valued at $216 million; the private sector was the largest source of demand, responsible for 20 million tonnes of carbon, or seventy percent of the market. However, given the scale of the global challenge—reducing annual deforestation by fifty percent by 2020 amounts to 3,300 to 9,900 million ton of carbon for all forest and land-use activities—a much stronger framework is needed to encourage significant investment.

Fortunately, ideas for possible policy elements for an effective REDD+ framework have recently been developed by a coalition comprising industry groups (International Emissions Trading Association (IETA); Climate Markets & Investment Association (CMIA)); think tanks (Global Canopy Programme); nonprofits (Code REDD); and NGOs (Environmental Defense Fund). This group proposes building on the progress achieved under UNFCCC to date, and working towards the development of a market-friendly approach to address REDD+. Their REDD Declaration details specific policy elements, which include: 1) a strong price signal; 2) environmental and social safeguards; 3) REDD+ crediting using a jurisdictional and nested approach; 4) risk management related to REDD+ programs and projects; and 5) administrative and oversight recommendations.

Following these proposed policy guidelines could help achieve success—significant REDD+ emissions reductions—by enabling the private sector financing that is so critical to this effort.

 

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This piece is part of The Fletcher Forum of World Affairs’ 2014 Global Risk Forum. The Global Risk Forum is an effort to convene conversations around some of the most pressing issues we face as a global community in the year ahead: the breakdown of climate change negotiations; the spread of sectarian violence in the Middle East; the credit crisis and economic slowdown in China; the growth of cyber espionage; and the unraveling of Africa’s economic boom. We encourage you to read the conversations, participate with written responses or on social media, and help us work together to produce constructive ideas that will reduce the aggregate risks we face. 

 

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