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Credits for sinks – Understanding the case against

Mark Nicholls

Many environmental NGOs remain opposed to awarding carbon credits to forest projects – either because they believe it will encourage bad projects, or simply because they consider it bad climate policy.

Many environmental NGOs remain opposed to awarding carbon credits to forest projects – either because they believe it will encourage bad projects, or simply because they consider it bad climate policy. In the first of two articles on sinks, The Ecosystem Marketplace looks at the case against (for the case for carbon sinks click here). On the face of it, it must be hard for outside observers to understand. Concentrations of greenhouse gases (GHGs) in the atmosphere are rising, contributing to climate change. Forests absorb carbon dioxide from the atmosphere, as vegetation within them grows. And forests require financing if they are to survive and thrive. One would think, therefore, that environmentalists would be in favour of using forests as 'carbon sinks', in an effort to slow global warming at the same time that money is channeled to growing and conserving forests. And yet, when it comes to awarding tradable 'carbon credits' for carbon stored in growing forests, many environmental NGOs -particularly those outside the Americas- are vehemently opposed. This opposition expressed itself recently in the rules by which international credits could be imported into the European Union's planned emissions trading scheme (ETS), which begins operating in January (click here for an in-depth look at this issue). Despite the fact that the 1997 Kyoto Protocol allows forestry projects in developing countries to claim carbon credits under its Clean Development Mechanism (CDM), the so-called Linking Directive expressly forbade the use of credits from forestry sinks in the first phase of the EU ETS, which runs until the end of 2007. This is not, of course, the same as arguing that forestry sinks are not important. All environmentalists recognise the vital role that the world's forests play in moderating climate, and place a high premium on protecting old-growth forests. But many environmentalists draw a sharp distinction between protecting existing forests, and awarding carbon credits for, to use the words of Article 3.3 of the Kyoto Protocol, human-induced afforestation and reforestation since 1990. "Historically, there's been a schism between NGOs in the Americas, who are generally pro the use of sinks, and those in the rest of the world, who are generally anti, especially when it comes to the Kyoto Protocol," explains John Lanchbery, head of climate change policy at the Royal Society for the Protection of Birds (RSPB), one of Britain's largest conservation groups. For some NGOs, the difference in perspective can be explained by whether the objective is to get good projects into emissions trading schemes, or to keep bad projects out. "We don't mind sequestration if it's a question of awarding credits for the carbon stored by restoring old growth forests," says Lanchbery. The danger is that the most attractive types of forestry project from a carbon credits point of view are industrial-scale monocultural plantations. Such projects bring with them a laundry list of environmental and socio-economic problems. A key concern for many environmentalists is that the economic imperative of earning carbon credits could lead to the 'industrialisation' of huge swathes of the developing world's forests. "The question is, will sequestration be maximised to the expense of other social and environmental objectives," asks Brett Orlando, climate change advisor at the IUCN-World Conservation Union in Switzerland. "Carbon sequestration is just one of the services that forests provide." The IUCN is broadly supportive of sequestration projects, if they are environmentally sound and socially equitable. But Orlando points out that, with low demand for carbon credits (largely due to the US withdrawal from Kyoto), and therefore low prices for carbon, there is a danger that only large-scale commercial plantations are likely to be economically viable. Compared on a like-for-like basis with old growth forest, plantations typically have much lower biodiversity benefits. If the main priority of the land-owner is to maximise revenues from carbon sequestration, they would likely favour fast-growing mono-cultural plantations, environmentalists argue, which do little to promote native species. Such plantations can have other unwelcome environmental impacts: Eucalyptus, for example, is fast growing and hardy, but can make heavy demands on water resources. Monocultural plantations can require intensive preparation of the soil -which in itself can release carbon stored in the ground- mechanical or chemical weeding, and heavy use of fertilisers and pesticides. Environmentalists are also concerned about the introduction of invasive species, or even worse, genetically-modified organisms. Their concerns were not assuaged by the latest UN climate change meeting, Cop 9 in Milan last December. There, a deal was struck on the rules for forestry sinks in the CDM which left decisions on invasive species and GMOs to the government hosting the project. In addition, large-scale plantations can often adversely impact local communities -and indigenous forest peoples are often vulnerable to large land-owners. "In many countries, land tenure is often fuzzy and traditional in nature," says Jason Anderson, a Brussels-based energy specialist at Climate Action Network (CAN) Europe, a coalition of climate change NGOs. "And the final buyer of the credits won't know if the plantation owners displaced indigenous people." He offers, by way of example, the controversial Plantar project in Brazil. It is not a sequestration project as such. It is claiming credits under the CDM, some of which have been sold to the World Bank's carbon funds, for avoided fuel switching, in that it is using locally-sourced charcoal rather than switching to hitherto cheaper coke. However, the plantations from which the charcoal is obtained are at the heart of a long-running dispute over land ownership, Anderson says. "The [World Bank's] Prototype Carbon Fund certainly didn't go in with evil intent, but it shows the complexity of the issue," he says. "They had no idea of the history." Forestry sinks also pose particular problems of 'leakage' -that is, that the implementation of a project will influence emissions outside of the project boundaries. For example, the transformation of agricultural land into a plantation could simply result in the clear-cutting of old-growth forest elsewhere to provide new arable or grazing land. CAN Europe also suggests that carbon sequestration-related plantations could lead to a glut of timber, depressing its price and encouraging plantation owners to shift production to less carbon-intensive uses, such as pasture. For some environmentalists, sequestration projects that avoid the problems above could and should be granted credits for the carbon they store. The difficulty is in drawing up rules that will keep bad projects out. "We lobbied frantically on projects in the CDM, with US groups such as the Nature Conservancy," says Lanchbury at the RSPB. "But we weren't able to keep the bad stuff out." But for other NGOs, the very concept of awarding carbon credits to biological sequestration projects is fundamentally flawed. The first, and most obvious, problem with forestry sinks is that they aren't necessarily permanent. Emissions reduced, by implementing an energy efficiency programme, for example, or avoided, by switching a coal-fired power station to run on natural gas, means that an amount of carbon simply never enters the atmosphere. Forests, on the other hand, can release the carbon stored in any number of ways: they can burn down, be destroyed by pests, or the company charged with maintaining the forest could simply go out of business, and the use to which the land is put may be changed. Advocates of the use of sinks in the CDM argue that this issue was addressed -in a characteristically complicated fashion- at Cop 9. At that time, agreement was reached on introducing two new types of temporary credits to be awarded to forestry projects under the CDM. These temporary or long-term certified emission reductions (tCERs or lCERs) are only to be issued for a prespecified period -of five years for tCERs, and 20 for lCERs- with the latter requiring 5-yearly recertification to ensure the carbon they represent remains sequestered. When they expire, they must be retired and either be replaced by another sink credit, or with a credit from a permanent reduction. "The parties have recognised the problem, but the solution doesn't really address the permanence issue," says Jutta Kill, a climate campaigner with the Forestry Environmental Resource Network (FERN) in the UK. "It is simply postponing the issue." She also argues that a logging company, for example, could simply rotate every five years the parts of its plantations for which it is claiming credits. But even if the permanence issue could be addressed, Kill continues, there are profound questions over the physical amount of carbon stored by forests. Sinks advocates argue that measuring techniques have progressed dramatically over recent years -but their opponents say they haven't, and cannot, progress enough. "Scientists have tried to develop patches to address the problem, but the fluctuations in carbon stored in forests are huge, and that won't change," Kill says. What should the appropriate baseline be, she asks, when carbon storage varies dramatically year-on-year, noting that during dry years forests tend to emit carbon, while during wet years they sequester. One answer would be for the adoption of conservative accounting procedures, whereby the uncertainty in the amounts of carbon stored is reflected in the number of credits the developer is allowed to earn. Again, according to a FERN report, "uncertainties relating to the methodology used could be bigger than the carbon stock changes measured." Furthermore, climate change itself will change how forests absorb carbon, scientists believe. Two decades ago, according to Friends of the Earth, Canadian forests were absorbing carbon. Global warming means that they have now become a net source of co2 "The stark reality is that climate change could result in sinks becoming sources," the group says. Some of those opposed to sinks would probably concede that, given enough scientific effort, conservative accounting and, most importantly, considerable time negotiating tighter rules, these problems could be overcome. But, given the glacial progress in the international climate negotiations since 1997, they ask, is it worth devoting valuable time and resources to this issue? "In general, having sinks soak up carbon is better than not. Greens are not against trees," says Anderson at CAN Europe. "But do you want to prioritise them? We've already been slowed down in the climate negotiations. There are lots of other things to prioritise, and our position is that we should go for projects that deliver more climate certainty." Indeed, to some extent this argument fits with a wider philosophical opposition within many green groups -especially the more radical ones- to industrial development and current paradigms of economic growth. The priority, they believe, is not to find ways that allow us to continue our polluting ways, but to engineer a shift to less-resource intensive modes of economic production- and, further, to an altogether less materialistic way of life. Indeed, as Friends of the Earth puts it simply, "common sense would have us reduce emissions at source". Beyond such fundamental concerns with the issue, some argue that international markets in sinks credits would further exacerbate the exploitation of the South by the industrial North. They say that locking up land for decades as forestry sinks -simply so the North can continue its profligate use of fossil fuels- places developing countries at a disadvantage by eliminating development options further down the road. They could also suffer when -or if- they take on emissions reduction targets of their own, if their forestry resources were already accounted for. Again, this is addressed within the CDM rules by placing the onus on the host government for deciding whether a project meets its sustainable development objectives -but some NGOs are concerned that cash-strapped developing countries have no real freedom of action over the issue. However, for all the NGO opposition to sinks, the issue has, to some extent, gone on to the back burner. Despite their concerns, the CDM is yet to generate a flood of sinks projects. "It's not as big an issue as we thought," admits Lanchbery at the RSPB, "partly because the US has pulled out, and there's much less demand for credits." This doesn't mean it's gone away for good. Any future international climate regime involving the US -which, after all, is responsible for one quarter of global greenhouse gas emissions- will almost certainly include provisions for forestry sinks credits. And precedents set now, some believe, are likely to make themselves felt for years or even decades to come. Mark Nicholls, a regular contributor to The Ecosystem Marketplace, is the London-based editor of Environmental Finance magazine, and consulting editor to its sister publication, Carbon Finance.

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