By Emma Graham-Harrison
NUSA DUA, Indonesia, Dec 14 (Reuters) - Climate talks in Bali reached a deal on Friday to tackle greenhouse gas emissions from deforestation, hailed as a sign of developing nations' commitment to fighting global warming.
The breakthrough might eventually allow poor but forested nations to turn conservation into a tradeable commodity, with the potential to earn billions of dollars selling carbon credits.
But one of the scheme's key architects warned that, if successful, it will create such large emissions reductions that carbon markets could collapse unless rich nations take on more stringent reductions targets.
Destruction of forests produces about 20 percent of man-made carbon dioxide emissions, so their conservation is vital to limiting rises in global temperatures.
Deforestation had been left out of previous climate deals because of concerns about how to work out which trees were threatened, and that any scheme would reward countries destroying forests rather than those protecting their resources.
"Forests have been the elephants in the corner of the climate change process," said Andrew Mitchell, executive director of Global Canopy Programme, adding that markets were the only way to find the billions of dollars a year needed to protect forests.
"We cannot expect philanthropy or governments to come up with this amount of money sustainably," he said.
The new deal, which has been agreed but is yet to be formally approved, provides a framework for countries to start pilot projects and lay the groundwork for broader programmes.
A planned $300 million World Bank fund will help pay for forest surveys and other groundwork, and finance the first projects but the scheme has been driven by developing nations.
U.S. scientist Peter Frumhoff, Director of Science and Policy at the Union of Concerned Scientists, said the project -- also known as reducing emissions from deforestation and degradation (REDD) -- was a sign of poorer countries' sense of urgency about tackling global warming.
"It sends a very powerful signal to my home country that developed countries are committed to reducing their emissions in a way that we in the United States must also be committed to."
CARBON, DIVERSITY CONCERNS
But Kevin Conrad, executive director of the Coalition for Rainforest Nations and Papua New Guinea's climate change envoy said that when the pace of programmes picked up, they would generate so many credits it would skew carbon markets.
At present under the Kyoto Protocol's Clean Development Mechanism, rich nations can pay for emissions' reducing projects in the developing world and earn credits to put towards domestic quotas. But Conrad said REDD required tighter targets.
"The only way that we are going to bring in new supplies is if there are deeper cuts (for rich nations)," he told journalists on the sidelines of the U.N.-led climate talks.
"We are not going to flood the market and then drop prices for everybody and not be able to overcome any of the opportunity costs," he added.
Activists also say the deal does not contain a strong enough commitment to biodiversity or offer any way to help poor countries pay for conservation of already-protected forest.
"We will need to find a new mechanism that values standing forests," Mitchell said. "Because ultimately if this does its job, (deforestation) should go down to nothing."
Also vital is preventing "leakage" of logging and deforestation to countries outside the scheme, which would make any carbon sequestration worthless. -- For Reuters latest environment blogs click on: blogs.reuters.com/environment/ (Editing by David Fogarty)