The things money can buy

Global warming poses a significant threat to our future. That much is now widely accepted. Less certain is what we need to do to arrest the process. When the United Nations Framework Convention on Climate Change (UNFCCC) drew up the Kyoto Protocol, the decision was taken to ignore deforestation, although it accounts for over a quarter of man-made carbon emissions. That was a mistake.

As concluded at the High-Level Meeting on Climate and Forests in Sydney in July, we can no longer afford to overlook the role forests play. This is why proposals for Reducing Emissions from Deforestation and Degradation - REDD, in the jargon - will be high on the agenda at the meeting of the UNFCCC in Bali.

Several influential reports have suggested that paying countries not to cut down forests could become a highly cost-effective way of reducing emissions. Needless to say, this has created high expectations among carbon traders, forest conservationists and forest-rich developing countries. At Bali, the world’s environment ministers will have to decide whether REDD needs a separate protocol, what the deal should include, and where the money should come from.

Yet so far, the billions of dollars spent on tropical forest conservation have done little to reduce deforestation rates. So why throw good money after bad by doing more of the same?

One answer is that recent experiences with performance-based payments for environmental services give grounds for optimism. Deforestation is mainly driven by agricultural expansion: as far as many landowners and nations are concerned, it makes good economic sense to convert forests to cropland. By providing conditional payments for leaving forests intact, landowners can be directly compensated for foregoing the profits of development. Such schemes are becoming increasingly commonplace and effective, especially in Latin America.

All the same, paying landowners - or nations - to keep their chainsaws idle will be a complicated business. You only have to look at the two big elephants in the deforestation jungle - Brazil and Indonesia, which throughout the 1990s accounted for almost 40 per cent of global net deforestation - to see the obstacles that REDD deals are likely to face.

For one thing, both these large countries have strong provincial governments. In Indonesia, decentralisation has been far-reaching and in some areas it has led to an increase in timber harvesting and forest clearing. It is doubtful whether the central government in Jakarta has the power, transparency and capacity to administer a centralised system of regional REDD quotas and payments. In Brazil, two large federal states have already spearheaded autonomous REDD efforts, which will be presented at Bali. This could lead to future clashes of authority over who owns the right to sell carbon credits.

A key problem in most remote forest regions is weak governance. Certain areas in Indonesia have been beset by lasting ethnic conflicts, sometimes created by government resettlement programs, and parts of Amazonia have some of the highest homicide rates in the world. Institutional reforms in these “wild west” areas tend to take time, and they may meet powerful resistance from local tycoons who benefit from forest clearance. Furthermore, poor migrants could easily lose out if REDD projects prevent them from clearing forest land. This could make for bad international headlines.

Another problem relates to land tenure. In tropical forests, secure land tenure is the exception, rather than the rule. In rural Indonesia, most forest land is owned by the state, although communities often have de facto customary rights. However, such rights often overlap between communities, or control of access are disputed - a blatant drawback to schemes involving payments to conserve forests.

In Brazil, approximately half of the Amazon is weakly protected state land, and deforestation is a major pathway to privatising it. Again, this means that international REDD transfers will not always find a legitimate and functional land user to receive carbon-protection payments. And paying the wrong people could create perverse incentives to threaten to clear even more forest.

If deforestation is to be successfully tackled some fundamental changes are needed in countries where land has been traditionally viewed as a cheap resource. Governments will have to abandon resettlement policies that are designed to alleviate demographic pressures or counter the unequal distribution of land. They will have to convince agribusinesses that they should increase production through costly land intensification, rather than cheap forest clearance. Judges must be encouraged to convict cattle ranchers who illegally clear forest, rather than let them off free, as they did in the past.

Environment ministers may enthusiastically subscribe to REDD deals in Bali, but the real challenge will lie in convincing the ministers in charge of agriculture, transport and finance, and society at large, of the need for change.

None of this is to say that we - and the decision makers in Bali - shouldn't make every effort to encourage REDD payment schemes. The cause itself - mitigating global warming - is noble enough; and the commercial margins could be attractive. There's also more to this than carbon and cash. Other environmental services, such as biodiversity and watershed protection, will benefit too, along with the people and cultures of forest lands.

If REDD schemes are to be credible, we will need internationally consistent methods for measuring carbon stocks, and the savings made by leaving forests intact. We will also need to establish a variety of pilot projects, at various scales, including perhaps bilateral deals resembling debt-for-nature swaps. Working directly with governments at the national scale may influence domestic land-use policies more efficiently than isolated projects. Only by experimentation can we learn what sort of investments will make the most sense.

The chances are that many of the early efforts will fail, and some tropical countries will realise that this isn't for them. The process of establishing cash-for-conservation schemes will probably be much more complicated than anyone envisaged at the negotiation table on a sunny afternoon in Bali. But the failure to make REDD a reality would be a disaster, not just for the climate, but for forests and forest-dwelling people. The stakes at Bali are that high.