Edward Flanagan ’11Journal #1
The first phase of my internship has served as a crash course in REDD — Reduced Emissions from Deforestation and Forest Degradation — which has been a main focus of recent international climate negotiations. Essentially, the program is intended to compensate developing countries for taking steps to reduce deforestation, particularly in the tropics. At the Coalition for Rainforest Nations, we are trying to ensure that the eventual system for allocating REDD funds supports continued economic development in participating countries, delivers real environmental benefits and, perhaps most importantly, functions efficiently in the global market.
I have found my internship drawing on many of the skills that I developed during my first year of study at Columbia. A sound knowledge of finance especially is vital for understanding the nature of REDD projects. REDD projects are similar in many ways to the Clean Development Mechanism carbon projects ushered in under the Kyoto Protocol. However, unlike mainstream CDM projects, such as hydropower and geothermal energy, which generate substantial revenue streams in addition to carbon credits; the viability of REDD projects is tied exclusively to carbon markets. Credits are accrued over a period of many years and their value is linked to the market price of carbon. Given the lingering policy uncertainty surrounding REDD, and carbon emissions in general, accurate financial forecasts are hard to come by. On the other hand, the opportunity costs of REDD, which usually include forgoing timber and agricultural revenues, are all too clear.
As REDD continues to play a prominent role in international climate negotiations, our job at the Coalition has been to somehow make the economics work — for all parties. Given some of the challenges mentioned above, it’s no easy task. At the same time, I feel fortunate to be operating on one of the real frontiers of green business. The next major milestone in REDD negotiations will come in December at the COP 16 meeting of the United Nations Framework Convention on Climate Change in Mexico. This is the follow-up to last year’s Copenhagen Accord, at which a number of nations, including the United States, pledged up to $4 billion for REDD programs. If subsequent negotiations manage to integrate REDD into existing compliance schemes, such as the EU Emissions Trading System or a post-Kyoto agreement, there are some estimates indicating the market for REDD credits would instantly top $10 billion. If this market does materialize, I believe my experience this summer will become a real asset.
Journal #2
My recent work for the Coalition of Rainforest Nations has given me unique insight into the type of behind-the-scenes policy negotiations. The process of arriving at an international agreement on REDD+ (reducing emissions from deforestation and forest degradation) remains exceedingly complex. While all participants in the negotiations share a common goal, there is ongoing disagreement about how to achieve it.
I witnessed this discord firsthand over the past few weeks while drafting a work plan proposal for the REDD+ Partnership, a group that brings together developing and developed countries in an effort to further REDD+ initiatives. The proposal was critical because it essentially set the agenda for the initial deployment of $4 billion in REDD funding that was committed in Copenhagen.
Not surprisingly, the developing countries want to move quickly with ambitious programs to invest in capacity and institutions; while the donor countries are preaching transparency and due diligence. What is unfortunate is that, at times, the negotiators on both sides don’t seem to see the forest for the trees. It is shocking to me that intelligent plans and programs are being held up over issues of semantics and ambiguous understandings of “political mandate.” It may be the nature of multilateral versus bilateral negotiations, but I have also been surprised at the frequent failure to make concessions. As an outsider, I have seen clear examples of divergent positions that, with a few concessions from both sides, could settle in a logical middle ground. Instead of building momentum to achieve this resolution, our work has fallen victim to political posturing from both extremes.
The experience has served as a window into, not just international climate negotiations, but also policy gridlock at the state and federal level. In fact, in reaffirms my view that, particularly in the climate sector, business must emerge as a leader rather than a follower. Waiting for policy “certainty” is an unacceptable excuse for inaction. If businesses take a proactive approach to the climate problem they will have an opportunity to address its challenges through innovation and efficient investment and perhaps shape policy instead of reacting to federal mandates.
Journal #3
The Bonn climate talks are in the books and our proposal for the REDD+ Partnership gained a little bit of traction with the member nations. The donor countries rejected portions of our timeline for being too ambitious, but virtually every initiative we proposed is up for discussion, to some degree.
What the outcome of the negotiations really highlights is the methodical, grinding nature of trying to generate international consensus in the climate arena. We have had to scale back our own agenda significantly to get some of the laggards on board. It makes you wonder at what point have we conceded too much? And, is everyone better off taking unilateral action? With these realizations in mind, I’ll sign off with some parting thoughts on REDD+ and the future of climate negotiations as they relate to land use and forestry.
- Payments for environmental services, like REDD+, make sense theory. They are much more difficult to implement in practice. I still believe that a market solution is the way to go, but creating a market for responsible environmental practices is fraught with complexity. Ambiguity surrounding issues like permanence, additionality and ownership, make large-scale investment risky. Until there is clarity here, unambiguous “command and control” style agreements may be more effective than our preferred market-based solution.
- Involving the private sector is going to be tricky. Right now, most REDD+ deals are being brokered between governments. Companies that have acquired assets and made investments based upon one set of “rules,” are going to be tentative about dealing with governments under a wholly different set of “rules.” The burden of proof required to secure payments for environmental services is not worth the trouble in many cases. With the correct incentives, we’d expect the private sector to be a leader. But, if those incentives are not structured correctly, expect the status quo to continue.
- The COP-16 meetings this November-December in Cancun, Mexico will be vital to the future of REDD+. The recent trend has been for countries to retreat on their climate commitments amid the pressures of the lingering global financial crisis. With the expiration of the Kyoto Protocol looming in 2012, the international community must stand firm in addressing climate change. Incorporating REDD+ into a more comprehensive program is a good first step. At the very least, such a decision will send a clear signal to the market that forestry projects are economically viable and REDD+ can fulfill its promise of reducing global greenhouse gas emissions.
