It has been more than 10 years since developing and developed countries embarked on a journey to save the world’s forests and to make a significant contribution to global mitigation efforts. This common goal is more relevant than ever today. The next decade must deliver rapid, transformational and synergistic action to prevent further damage to and loss of our forest ecosystems.
In the decade since the UN-REDD Programme began, the partnership between developing and developed countries has advanced considerably. Several agreements for REDD+ Results-Based Payments (RBPs) are moving forward. Some countries have already accessed payments. These efforts have put in place the necessary foundations to achieve the mitigation potential of forests, if we choose to scale up. There are now two critical areas necessary to ensure forests achieve their mitigation potential: price and quality of forest carbon.
The Value of Forests, Carbon Prices and REDD+
At the beginning of October, the price of a carbon allowance in the European emissions trading systems (ETS) was around $26 US/tCO2eq; in South Korea, it was $32 US; in California, about $17 US and in New Zealand $15 US. In contrast, the price paid for REDD+ RBPs is at $5 US/tCO2eq. Discounts and buffers push real prices much lower, sometimes to half the nominal value.
The price of REDD+, or the price of avoiding the emission of a ton of CO2 from deforestation, was set at $5 US/tCO2eq more than half a decade ago, when the first negotiations on RBPs began. At that time, the nominal price of $5 US was an important signal that reflected a commitment to make REDD+ a reality. Let us not forget that those were the times when the price of the carbon allowance in the European ETS was trailing around $6 US/tCO2eq.
But that was then. Can the current price of forest carbon unlock an all-out effort to diminish deforestation and increase carbon sequestration with the scale demanded?
Unfortunately, the answer is no. At current prices, forest conservation is not even close to being an alternative to other land use options, like beef and soy production. And while it is true that in some places, opportunity costs are below current nominal prices, these are low hanging fruit that will soon be exhausted and are mostly concentrated on avoiding deforestation. Forest and landscape restoration show costs consistently above $5 US/tCO2eq.
This is not to argue for payments that compensate, dollar per dollar, the necessary abandonment of unsustainable activities that decimate forests, degrade landscapes and derail climate goals. Rather, this is a call to match the value of forests with the price offered for RBPs.
Not All Carbon is Born Equal
Achieving the Paris goals will not be possible without strong partnerships and a shared effort. For those on the demand side, the effort will require increasing the price of forest carbon to levels compatible with ambitions. For those on the supply side, however, the effort will demand that the quality of forest carbon meets expectations. There exist genuine doubts about leakages, reversals, the strength of forest reference levels and the accuracy of results reported. If left unaddressed, these doubts will continue to negatively affect the flow of investment into conservation and sustainable use of forest ecosystems. Increasing quality does not mean reinventing the wheel, but rather improving existing methods and protocols.
A Partnership Built on Shared Responsibilities and Efforts
While a higher price and increased quality of forest carbon are not silver bullets, they are nevertheless important factors. I consider them necessary, though perhaps not sufficient, conditions for success. Here are some potential solutions to strengthen global efforts around forest conservation and restoration:
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First, countries would commit to an increase in the price of forest carbon for REDD+ RBPs. This price should respond to the costs of forest conservation and by the end of 2021, should be at or above $15 US/tCO2eq.
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Second, in order to ensure that this commitment holds, the REDD+ RBP window at the Green Climate Fund (GCF) should be endowed with enough resources to meet all expected country demands for higher RBP prices. Should this be the case, the GCF would act as a de-facto anchor that sets the price floor for forest carbon. It would also send a strong price signal to players in the voluntary carbon market.
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Third, non-carbon benefits should be reflected in a price differential for RBPs. These benefits include biodiversity, soil conservation, water regulation and others. They are becoming increasingly important, not least because of their contribution to adaptation goals.
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Finally, the quality of forest carbon must meet expectations. Standards for RBPs already exist and we can improve them. One standard many countries are familiar with is the GCF’s. This standard could be made more stringent. Developed and developing countries are represented on the GCF’s board which might help in reaching agreements. A more stringent standard, however, should still carry reasonable transaction costs.
The forthcoming COP25 in Madrid provides an opportunity to strengthen the partnership between developed and developing countries for forest conservation. A joint declaration by a selected group of countries would send an unmistakable signal that having forests is a blessing and that protecting them can bring tangible national and global benefits.
