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New Studies Challenge Basic Assumptions of REDD: Time for

Mid-Course CorrectionsIndependent Civil Society Advisory Group

UN-REDD ProgrammeSixth policy Board Meeting

Da Lat, Vietnam22 March 2011

Structure of Presentation

New Analyses of Assumptions that Frame REDD

1. Who Drives Deforestation?- Fundamental to stopping deforestation*

2. What Countries Are Achieving Protection and Restoration at a National Scale?

- Reversing deforestation and achieving national scale restoration

3. Will there be a market for Forest Carbon?- Promised investment from private sector depends on it

* Also opportunity cost and its application

Findings from Four Studies1. Who Drives Tropical Deforestation? Jane Bryant, Phil

Shearman et al. Forthcoming, RRI.

2. Does the Opportunity Cost Reflect the Real Cost of REDD+? Rights and the Realities of Paying for REDD+. Hans Gregersen, Hosny El-Lakany, Alain Karsenty, Andy White, 2010, RRI.

3. The Greener Side of REDD: Lessons for REDD+ from countries where forest area is increasing. Hans Gregersen, Hosny El-Lakany, Luke Bailey. Forthcoming, RRI.

4. REDD and Forest Carbon: Market Based Critique and Recommendations. The Munden Project 2011

Direct and Indirect Causes of Deforestation

AGENTS OF DEFORESTATION • Logging/loggers

• legal and illegal logging• Commercial agriculture/agriculturalists, ranchers

• local, national and global market focused• Infrastructure developers • Mining companies•“Poverty agriculture”/migrant and other poor farmers• Etc.

INCENTIVES WITHIN A GIVEN POLICY ENVIRONMENT SET BY GOVERNMENTS

* Incentives or motivation to deforest come from:• Market forces/profit potentials• Govt. (national/local) development goals• lack of, or poor enforcement of policies/laws

DEFORESTATION AND FOREST DEGRADATION

Responding to:

Results in:

GOVERNMENTS ARE THE BIGGEST

DEFORESTERS

• Industrial Logging

• Industrial Agriculture

• Poor enforcement of policies

• Illegal logging

- Actual REDD country proposals focus on identifying direct agents in deforestation process- Easier to identify – mostly identified by government officials

- Little attention to deal with underlying policy failures and associated incentives that actually drive the actions of agents of deforestation- Governments not prone to assessing themselves, may even

directly benefit

What REDD Projects are Identifying As Drivers of Deforestation

- Merely eliminating the current direct causes of deforestation will not achieve permanence. There are reasons why they deforest.- We could get rid of all the current direct agents – that would

change nothing in the long run.

- If the enabling policy environment and its associated incentives to deforest remain new agents will enter the arena and continue deforestation.

- Need to shift attention to enabling policy environment and the associated incentives for permanent impact.

Implications for REDD

Opportunity cost provides a theoretically satisfactory indicator of what will be needed in a well-functioning, competitive market economy to entice entities that intend to deforest to reverse their decisions.Some questions about its applicability to REDD:

– What is a legal use and what is illegal (in absence of clarity of tenure – a difficult question to answer)– Currently (since governments claim ownership of most of forests), both – a shifting cultivator and an illegal logger are at par – estimate of benefits foregone will not be accurate and justifiable– governments themselves are biggest deforesters – who do you pay – governments to change policy or concessionaires who are beneficiary of the policy

What About Opportunity Cost?

1. In 2007 emissions from deforestation and degradation were estimated as some 20% of global carbon emissions; (subsequently revised to 12-18%)

2. A recent report by Winrock International estimated contribution of forests to overall emissions is now as low as 8%;

3. Clearly the global deforestation is declining, industrial emissions are going up, while the world is still struggling to develop REDD.

While REDD is being Developed

1. Recently released UN figures show that from 1990 to 2010, 76 countries with more than 200,000 hectares of forests were either maintaining or increasing their net forest area;

2. 58 of these countries are adding forests;3. 62% of the 76 countries, by IMF classification, are

emerging or developing countries while 8% are classed as Highly Indebted Poor Countries;

4. Countries - rich and poor –are protecting and restoring forests long before REDD.

Which Countries are Protecting & Reforesting?

1. The attention and sustained support of government is needed at the highest levels - Building up the forest sector is not a one-time event that occurs in a short period of time;

2. Improvement in forest governance is usually needed before the pieces can be put in place for the forest transition - most afforesting countries went through positive adjustments in their governance structures and processes during the period of the forest transition

3. Forest-tenure reform and efforts to secure the rights of forest dwellers are needed in most countries - crucial in keeping countries on the net-forest-adding path over the long term

4. Investment in Reforestation, Restoration, and Employment in Forest Areas - a market-based approach based on outputs rather than carbon offset credits

What Lessons Reforesting Countries Provide

A new study by the Munden Project shows that a global forest carbon market can’t work for the following reasons:1.Poorly defined asset – forest carbon is ill defined to the point of being unacceptably risky - scientifically unreliable;

2.Unclear ownership of assets – do the people selling forest

carbon have a right to do that;3.Intermediaries will obtain monopsony power - bulk of benefits from forest carbon will not go to REDD projects, the communities that

live within them or the countries where they are located,4.Unsolvable clearing problems - will result in the creation of a substandard, risky and ultimately destructive forest carbon

Will Private Sector Investment in REDD Materialize?

1. REDD is dealing with agents of deforestation rather than altering the incentive structure and policy environment that attracts these agents;

2. Monetary compensation based on opportunity costs will not work in many real cases and may end up as a perverse incentive;

3. Many countries – rich and poor – are reversing deforestation trends without REDD;

4. Promises of huge private investment in forest carbon market are unlikely to materialize in the present situation.

Key Conclusions

1. Focus on incentives within a given policy environment set by governments rather than proximate causes of deforestation;

2. Build on what has worked – government commitment, improvement in forest governance; forest tenure reform, and investment in other market-based approaches based on outputs;

3. (1) and (2) will lay the foundation for future investment in forests , from local owners, private investors in forest products and services (including carbon);

Time for Mid-course Corrections