SAO PAULO Feb 3 Donor nations, rainforest-rich
countries and multilateral institutions will have to spend tens
of billions of dollars in the next few years to ensure that
nations undergoing deforestation will have incentives to halt
the practice, a report released on Monday said.
Without the money to buy forest-based emissions reductions,
the mechanism known as REDD+ (Reducing Emissions from
Deforestation and Degradation) will be largely undermined,
restricting incentives to keep trees standing, it said.
Deforestation is a major producer of heat-trapping gases in
the world, accounting for around 15 percent of global emissions.
Brazil, Indonesia and Nigeria are among the largest emitters
of carbon dioxide from deforestation.
REDD is the main program to combat forest destruction. It is
being evaluated at the United Nations convention on climate
change and will be part of the next global deal on climate, due
to be signed next year.
But since that agreement take effect only in 2020, demand
for forest-based emissions reductions would for a while be
limited to companies looking to neutralize their emissions and a
few carbon funds.
Compliance markets, such as the EU's Emissions Trading
System, do not accept forest-based offsets.
"There is currently no source of demand that will pay for
medium to long-term emission reductions from REDD+ in the period
between 2015 and 2020," says the report produced by the Global
Canopy Programme, the Amazon Environmental Research Institute,
Fauna & Flora International, and the United Nations Environment
"This problem seriously threatens the successful
implementation of REDD+, because without interim demand there
will be little or no incentive for forest countries to
participate and redirect resources towards REDD+, or for the
private sector to invest," it said.
The authors of the study ran some calculations using a
European Union proposal for a 50 percent cut in global
deforestation by 2020.
Hypothetically, if that target were to be achieved, the
market for emissions reductions from avoided deforestation would
become heavily oversupplied.
The report estimates, assuming acceptance of the 50 percent
target, that supply of forest-based emissions reductions could
be up to 39 times greater than demand in the 2015-2020 period.
That would be equivalent to a shortfall of up to 48 billion
in transaction volumes, assuming a carbon price of $5 per tonne
The report says the intervention would use donor country
government capital to purchase REDD emissions reductions.
It would also set a floor price for REDD credits to reduce
market uncertainty and help lure the private sector to invest in
It cites initiatives in other sectors that were successful,
such as policies to stimulate renewable energy when a price for
the energy was guaranteed by a government at a certain level,
providing predictability for investment.
(Reporting by Marcelo Teixeira; Editing by Eric Walsh)