A report released by the Rainforest Foundation yesterday (28 August) has found that using forest carbon markets could actually increase (rather than reduce) the cost of tackling climate change and may not reduce greenhouse gas emissions due to ‘major design loopholes’.

‘Rainforest Roulette? Why creating a forest carbon offset market is a risky bet for REDD’ looks closely at the use of forest carbon markets in offsetting carbon emissions, and finds that rather than reducing emissions, these markets are frequently increasing emissions, and are weighted to favour carbon traders rather than forest communities.

The report comes just days ahead of the United Nations Conference Centre (UNCC) in Bangkok, Thailand, which will include negotiations on the future of reducing emissions from deforestation and degradation (REDD).

According to ‘Rainforest Roulette’: ‘[R]eports on the cost effectiveness of forest carbon trading through REDD, such as those by McKinsey and Company, were based on estimations that only took into account one type of cost… and excluded other unavoidable costs (such as “transaction and implementation costs”). Evidence from on-the-ground projects shows that these latter costs are likely to be over 40 per cent of project budgets.’ The report goes on to add that although McKinsey and Company has ‘stood by’ its reports, it has stated that its figures “do not necessarily reflect the full costs of implementing these initiatives” and some policy options “could be significantly more expensive than [they] suggested”.

Other ‘Rainforest Roulette’ report findings include:

• Between 41 and 55 per cent of costs go back to the private sector, ‘leaving little’ for implementation of projects;
• More research is needed to compare the costs of directly reducing emissions from industry, against the cost of creating emissions and selling credits through a forest carbon market;
• Legal reform under REDD tends to favour carbon traders and not forest communities and ‘REDD-readiness’ efforts focus on infrastructure and technology rather than supporting local communities;
• Least-developed countries are sidelined as major carbon emitters China and India make up 66 per cent of the Clean Development Mechanism’s carbon market projects;
• Trading forest carbon necessitates much more information on the carbon content of trees and its flux with atmospheric carbon;
• Ownership of the carbon stored in forests is contested, unclear and susceptible to fraud (due to the fact that forest carbon trading is virtual rather than physical);
• A forest carbon market might not reduce greenhouse gas emissions due to major design loopholes including the fact that ‘fraudulent REDD projects do no represent real emissions reductions’;
• Alternative, more cost-effective, ways of reducing deforestation, and for raising the necessary funds, exist and are viable, such as increasing efforts to combat illegal logging and introducing a carbon tax.

Simon Counsell, Executive Director of the Rainforest Foundation UK and one of the authors of the report, warned that: “Instead of protecting forests, the use of carbon markets will mostly protect the interests of heavily polluting companies, which would be able to carry on polluting, whilst their payments to offset emissions in poor tropical forest countries will probably be very inefficient and ineffective.”

The Rainforest Foundation also went on to say that governments and companies who favour the use of carbon markets, are ultimately “betting the future of the rainforest on a game of roulette”.

“With the global carbon markets already in crisis, and after a number of high-profile scams involving forest carbon, choosing the market-based approach would be a very risky bet for protecting forests, when there are viable alternatives on the table”, said Nathaniel Dyer, Policy Advisor for the Rainforest Foundation UK.

The report suggests that efforts to restrict imports of illegal timber, improvements in forest governance, and giving recognition to the land rights of people living in the forests, would be more successful.

‘Rainforest Roulette? Why creating a forest carbon offset market is a risky bet for REDD’ is available from the REDD Monitor website.