EU carbon trading: tropical forests poised to win credits

The EU looks set to bring rainforests into its emissions trading scheme

The exclusion of tropical forests from the world’s largest carbon market could soon be reversed as European policy-makers consider amendments to the current rules.

The European Parliament’s Environment Committee’s review of the EU Emissions Trading Scheme (ETS) is scheduled to discuss the inclusion of forest-related credits on October 7.

Forest conservation groups and forest-rich developing countries are lobbying for forest-based carbon credits. They already scored an early success when the Parliament’s Industry Committee gave its support for such credits early in September.

Andrew Mitchell, executive director of the Global Canopy Programme, an alliance of 38 scientific institutions studying tropical forests, believes a “yes” vote could release billions of dollars for forest protection. “This is the single largest and most immediate opportunity that the world has for generating large-scale funding for tropical forests as a means for mitigating climate change,” he says.

Integrating existing forests into global climate change initiatives would certainly be timely. Tropical deforestation is reckoned to cause 20% of all carbon emissions, more than the entire global transport sector.

Hurdles and solutions

Methodological concerns, however, have so far persuaded the ETS to fight shy of including tropical forests. Hurdles centre on the difficulties in obtaining verifiable data on key questions, such as the precise carbon capture capacity of forests.

Forest advocates point out that the United Nations Reducing Emissions from Deforestation and Degradation (REDD) scheme is helping resolve many of these methodological issues. REDD is slated for adoption under the Kyoto Protocol in 2009.

Science is also catching up. For example, UK-based Canopy Capital (an affiliate of the Global Canopy Programme) has secured a large, undisclosed sum from ten private investors to price the “ecosystem services” of standing forests. These services include forest attributes such as climate regulation, rainfall production and water storage.

Canopy Capital’s five-year deal was announced last year and the project is based in Guyana, 85% of which is still covered with tropical forest. South America’s third smallest state would be one of those best set to benefit from the inclusion of forest-based carbon credits in the ETS scheme. Efforts by the country’s president, Bharrat Jagdeo, to monetise Guyana’s standing forests by backing a market for ecosystem services have so far failed.

“We need solutions … which address the fundamental reality that deforestation is a result of a market failure that makes trees more valuable dead than alive,” Jagdeo said in a recent statement.

Carbon sink fears

However, there are some environment groups, such as Greenpeace, that fear credits for anti-deforestation initiatives could open the door to credits for commercial reforestation.

Critics of commercial forests, often called “carbon sinks”, argue that it is difficult to guarantee the longevity of planted forests and therefore their carbon benefits. Carbon sinks are also blamed for negatively impacting local biodiversity and indigenous groups. “We acknowledge that something has to be done about protecting forests, but we do not support a market-based approach that doesn’t take into account biodiversity and human rights,” says Joris Den Blanken, European climate change policy director for Greenpeace.

Forest-based credits are not the only solution to deforestation on the table. Also under debate is the possibility of auctioning future ETS emission allowances and earmarking a proportion of the resulting windfall for forest preservation. Under the present system, such allowances are allocated for free.

EU member states, however, are understood to be opposed to Brussels dictating how such funds should be spent.

Potential changes to the ETS will be discussed by European heads of state at mid-October’s Council meeting and a final vote by the European Parliament could take place as early as December.

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