28 October 2020 | Critics of REDD+ have long questioned the legitimacy of “avoided deforestation” projects as tools for reducing tropical deforestation on the grounds that deforestation halted in a project area simply moves someplace else through a phenomenon known as “leakage.” Some go so far as to argue that only a national system satisfactorily addresses leakage, while others dismiss carbon markets for REDD+ and avoided deforestation altogether. Proponents of project-level REDD+ counter this argument by pointing to the slow progress of national REDD+ and the essential contributions that projects can make, including in the context of national emissions accounting.

The polemic discussion around leakage alienates investors interested in tropical forest conservation and thwarts efforts of forest communities and projects to secure support through carbon payments. While leakage can pose a risk to mitigation efforts that need to be taken seriously, generalizations and misunderstanding can discourage real and effective efforts to reduce deforestation.

What Does Leakage Mean?

Activities geared towards reducing greenhouse gas (GHG) emissions can have positive or negative spillover effects: they can lead to an increase or decrease of emissions outside of the intervention area. Leakage can be positive or negative: positive if an activity triggers more greenhouse-gas (GHG) emissions reducing action, and negative if an activity leads to additional or displaced GHG emissions.

Deforestation leakage can be triggered by a displacement of people, technology, or capital from an area that is newly protected or covered by a REDD+ policy to another area that is not covered by that protection or policy. The direct movement of deforestation agents (or drivers) is called activity leakage. Deforestation is also highly sensitive to market dynamics, and deforestation can be displaced because of a change in land values and rents, or because of increased pressure on forests in reaction to a change in commodity prices. These phenomena are two different types of market leakage. The risks of displacement are also affected by governance, including institutional collaboration and enforcement, information and communication, culture, and motivation (see Meyfroidt et al 2020 for a detailed discussion of the different drivers of leakage).

Leakage in the Context of REDD+

Negative experiences with leakage in forest conservation date back to the establishment of protected areas in regions with weak governance and limited opportunities for prosperous rural livelihoods. Protected areas have a mixed record and often lead to an increase in deforestation outside of the area’s boundaries. However, projecting the outcomes of ill-planned and ill-managed protected areas on all REDD+ projects fails to recognize the conceptual differences between activities that address drivers and the fencing of natural ecosystems.

It is true that activity leakage remains a challenge of REDD+ activities, in particular where drivers of deforestation are highly mobile and able to move from one forest frontier to another.  If agro-industrial companies or land speculators face a restriction on their activities—such as a deforestation moratorium—in one region, they are likely to move their operations to another region or country. Such leakage is structural and hard to avoid as large industrial players operate at a national or even global scale. An example of such leakage is the Soy Moratorium in the Brazilian Amazon, which has led to a 31 percent increase of soy production—and deforestation (increasing by 13 percent)—in the nearby Cerrado.

It’s even more difficult to capture leakage that doesn’t involve the movement of humans, but of capital streams and investments. Deforestation is strongly influenced by globalized flows of commodities, information, capital, and people. Such market leakage often comes with a time lag and is influenced by a confluence of compounding factors, which makes it hard to attribute and even harder to avoid. The globalization of commodity trade means that displacement effects are increasingly driven by distant markets, such as a growing urban consumer class in emerging markets. About a quarter of all deforestation is associated with international demand for agricultural commodities (2005-13). This facilitates international leakage, in particular where markets are integrated. Such leakage is significant, but difficult to assess.

Does the Scale of Implementation Reduce Leakage?

No. Leakage occurs at the project, regional, national, and international levels. While REDD+ puts the emphasis on achieving emissions reductions through government action at the national scale, the problem of displaced emissions does not disappear by emphasizing larger-scale solutions. In fact, in national programs, the causes of leakage and the associated emissions can be at scales larger than projects.

What is true, however, is that larger-scale GHG accounting can capture leakage effects within the boundary being monitored. Considering the significance of national and international leakage effects, ideally, leakage management would include interconnected monitoring at the intervention, investment, and consumption levels to capture spill-over effects and attribute GHG properly.

What to do About Leakage?

Accounting rarely solves a problem, it merely captures the problem in a spreadsheet. As a first priority, leakage should be avoided through the smart design of projects and programs. All major forest carbon standards demand project developers to actively address leakage and anticipate the increase in GHG emissions linked to the project interventions. Leakage management generally requires (1) consideration and reduction of potential leakage in the project and program design, (2) monitoring and accounting of leakage in a sufficiently large monitoring area, and (3) discounting of any leakage from GHG benefits claimed.

Considering that leakage management at the project level is hardly possible in the cases where deforestation is caused by industrial agriculture or large-scale investors, these drivers cannot be addressed through REDD+ projects. Deforestation by larger corporate players has to be addressed by host governments through regulation and law enforcement, by importing countries through standards and technical assistance, and by companies through responsible corporate policies.

The experience of protected areas and leakage risks has led most REDD+ projects to focus on engaging communities rather than merely hiring armed guards to protect forests. Good REDD+ projects find alternatives for local communities and farmers to change practices (away from those that result in forest loss). In return, they benefit by receiving ecosystem-service payments, or technical and financial support to improve agricultural yields and practices. Examples include the Tambopata project in Peru which engages local communities in agricultural projects around the buffer zone a conservation area that protects primary rainforest, or COMACO’s Landscape Management Project in Zambia, which established Community Conservation Areas covering over 1 million hectares, while creating new income sources for farmers, such as beekeeping and community poultry farming, alongside payments for conservation efforts from carbon sales.

How to Deal with Leakage: Recommendations

Activities that address deforestation are urgently needed, on all scales and by all actors that have the means to reduce forest loss:

• Governments should build national systems, both to account for emissions and to adopt sustainable forest and land-use policies.
• Projects can provide a line of defense against tropical forest loss, empower communities and attract finance, particularly where government programs are absent and the forest is under immediate threat.
• Forest carbon standards should continue to impose requirements on project developers to undertake activities to tackle leakage—the design of such activities, with communities, to reduce leakage can support and inspire national systems.
• Standards should also continue to refine how leakage is assessed and require projects to deduct credits for residual leakage. However, project-level accounting does not replace national monitoring, which remains essential.
• All countries and companies should consider ways to reduce the risk of international leakage. Policies that seek to reduce emissions domestically can drive emissions at the other end of the world. It is essential that consumer and producer markets start cooperating in addressing deforestation and that consumers take responsibility for GHG leakage effects.

It is also essential to highlight positive leakage effects: Most local GHG programs and projects have positive displacement effects—interventions lead to learning and spreading of activities. They can change the culture and increase acceptance of conservation activities. Law enforcement in one area may affect behavior in non-targeted areas. This also applies to governments, as positive experiences in reducing deforestation while continuing to grow an economy may encourage other countries to adopt similar policies. Similarly, a change in attitude towards deforestation in one country can change the attitudes of producers, investors, and consumers in distant countries.

In summary, leakage should not become an excuse for inaction.  Some have suggested that leakage is a reason to avoid forest carbon projects.  However, the opposite can also be true—that well-designed REDD+ projects can create positive leakage impacts that benefit forests and the climate.

How You Can Participate in this Series

This is the first in a continuing series of articles focused on REDD+. We invite you to post comments or propose your own submissions as the series evolves.

You can propose submissions by contacting the EM News Desk at [email protected]. Please write “REDD+ Series Submission” in the subject header.

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