Climate Change: Financing Global Forests

We thank the many organisations who provided analysis for the Review

• AEA• Chatham House• Climate Strategies• CSERGE, University of East Anglia• EcoSecurities• Integrated Environmental Solutions (IES)• International Institute for Applied Systems Analysis (IIASA)• International Institute for Environment and Development (IIED)• Judge Business School, University of Cambridge• LTS International• The Met Office Hadley Centre• Overseas Development Institute (ODI)• ProForest • The Royal Botanic Gardens, Kew• School of Biological Sciences, Plymouth University• United Nations Environment Programme World Conservation Monitoring Centre (UNEP/WCMC)

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Emissions from forests are significant

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Global GHG emissions by sector

Sources: IPCC Fourth Assessment Report (2007), IPCC GHG inventory (2007) and IEA World Energy Outlook (2007)

What if the world does nothing?

Unlikely that the world could avoid the worst

effects of climate change without reducing

deforestation

Effects of deforestation on climate change could lead to additional global damages of $1 trillion a year by 2100

Serious disruption to communities, destruction of

biodiversity and damage to water systems

Sources: Hope (2008)

The lives and livelihoods of millions of people would be affected

Sources: World Bank (2003) Sustaining Forests; World Bank (2006) At Loggerheads?

Disappearanceof homes

Reduced farm-land fertility

Livelihoodsthreatened

Almost 70 million people, many indigenous,live in remote areas of closed tropical forests

Forests directly contribute to the livelihoods of90% of the 1.2 billion living in extreme poverty

Half the developing world’s food supplies comefrom land nourished by forest ecosystemservices

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• More efficient and sustainable agricultural production• Sustainable plantations and forest management• Infrastructure expansion properly managed• Alternative employment opportunities• Protected areas with full participation of communities• Payments for ecosystem services• Sustainable biofuels

A step change in how land is used and

commodities produced

Forests more valuable standing than cut

The vision: what needs to be done

Delivering the vision

Carbon finance

Consumer awareness &

regulation

Policy incentives in forest nations

Poverty reduction

Protection of biodiversity & water

systems

Substantial emissions reductions

Lower costs of tackling climate

change

How do we deliver this? The benefits

A step change in howland is used and

commodities produced

Forests more valuablestanding than cut

A new global deal for climate change

The forest sector included fully within a new climate change

agreement.

Around 96% of deforestation emissions

are in developing countries. They will gain most from full inclusion.

Forests(mitigation)

Technology Transfer

(mitigation)Adaptation

Developing world participation and support

Effective globaldeal at Copenhagen

Financing mechanisms

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A global carbon market can deliverGl

obal

cos

ts o

f aba

tem

ent (

%)

Emissions reductions

Forest sector carbon neutral: up to 3.5 GtCO2 of forestry abatement by

2030

Forestry excluded

Forestry included

Forestry excluded

Forestry included

Lower costs of tackling climate

change

Costs of tackling climate change reduced by up to

50%

Source: Modelling for the Eliasch Review

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Four building blocks will be needed to access carbon finance

Effective targetsNational baselines, inclusive

of all countries

Robust measuring

Forest credits based on real reductions in forest emissions

Linking to carbon finance

Carbon markets and other funding initiatives

Governance

International standards and full participation of forest

communities

The transition to a global carbon market

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Global cap and trade

2030 target: carbon market finance could fund a 75% cut in deforestation emissions and make the sector carbon neutral

Funds from partial access to carbon markets

Short term Medium term Long term

Funding

2012

Funding gap: $11-19 billion per year in 2020

2020 projection: carbon market finance could be $7 billion per year and fund a 22% cut in deforestation emissions

Source: Modelling for the Eliasch Review

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Governance: participation of forest communities

Full participation of forest communities and indigenous peoples will

make reforms more likely to succeed and benefit the poor

Devolution of responsibilities and revenues

Governments should devolve some responsibilities and rewards to local actors (authorities, companies, NGOs, communities) to support national-level action.

Managing credit revenues

Forest nations may choose to manage carbon revenues through a special fund with broad-based participation to help promote transparency, accountability and financial management

UN Declaration on the Rights of indigenous Peoples

Articles 18 and 19 require nations to consult indigenous peoples on matters affecting their rights. FLEGT and the National Forest Programme are good existing models.

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Governance: international reporting and standards

Emissions reductions and payments will need to occur undera transparent international framework

Premium credits

Forest credits could be generated against international standards designed to guarantee high levels of poverty reduction and biodiversity protection. There are likely to be forest credit purchasers who would pay a premium for such credits. CDM credits generated against the existing Gold Standard received a 15% premium in 2007.

Reporting

Annex I countries have to provide information on the policies and measures used to reduce emissions, which are peer reviewed. The same should be true for forest nations, who should also consider establishing a financial transparency mechanism similar to the Extractive Industries Transparency Initiative.

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Immediate action: mobilising international funds for capacity building

Investment in early action

Policy reforms

Research & analysis

• National drivers of deforestation

• Solutions and strategies• Development of baselines

• Reform of policy and legal framework

• Land tenure reform• Measuring and monitoring

capability • Institutional strengthening

• Demonstration activities• Major practical programmes

UNREDD

FIP

FCPF carbon fund

Mechanisms proposed

Capacity building costs estimated at up to $4 billion over 5 years

Source: Hoare et al (2008)

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Key recommendations

• The international community should aim to support forest nations to halve deforestation by 2020 and make the global forest sector carbon neutral by 2030, with emissions from forest loss balanced by new forest growth.

• Reducing emissions from deforestation should be fully included in any post-2012 deal at Copenhagen.

• Forest nations should develop their own strategies to combat deforestation, including establishing baselines, targets and effective governance and distribution of finance.

• Access to finance from carbon markets as well as funding from other initiatives will be required.

• The international community should provide support for capacity building. Total capacity building costs are up to $4 billion over 5 years for 40 forest nations.

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