REDD in fragile states: Pouring water into a leaky bucket?

Many of the countries hoping to implement REDD are riddled with corruption, illegal logging and a failure to respect land rights and indigenous peoples’ rights. The forestry ministries in these countries are often among the most corrupt institutions in the government.

Pouring money into these countries in the hope that it will help reduce deforestation is like pouring water into a leaky bucket.

Of course there is a lot of talk about “governance”, “monitoring” and “safeguards” in the REDD debate and these are supposed to patch up the holes. But what if the bucket really is beyond repair? In a recent paper in Forest Policy and Economics, Alain Karsenty and Symphorien Ongolo ask the question, “Can ‘fragile states’ decide to reduce their deforestation?” They argue that the theory behind REDD ignores the political economy of the state:

The state is supposed to behave as any economic agent; it is supposed to take rational decisions by comparing the relative prices of available alternatives, then to act by taking effective measures to reduce deforestation and alter its development path.

This relies on two assumptions: (i) that fragile states are capable of deciding to change their development path “on the basis of long-term cost-benefit calculations including a financial incentive”; and (ii) that when the decision is made, payment for REDD would “enable a state in crisis to implement appropriate measure to reduce or stop deforestation”.

The OECD defines fragile states as countries where there is a “lack of political will and/or capacity to provide the basic functions needed for poverty reduction, development and to safeguard the security and human rights of their populations”. Karsenty and Ongolo comment that

Such a definition emphasizes the two issues we want to address: the will and the capacity to implement public policies that would tackle vested interests for changing the existing trends favoring deforestation.

They note that characteristics of fragile states relevant for forest-related policies include all forms of law enforcement being undermined and the inability to implement harvest limits, silvicultural prescriptions or protect conservation areas. In addition, governments are unable to comply with the international agreements or Conventions they have signed relating to natural resources management. This may be beginning to sound familiar to many in the countries involved in REDD. Karsenty and Ongolo give some concrete examples:

It is difficult to believe that Brazil (which is not a fragile state) could suddenly break with its development model, which is based on the development of agro-exports which, in turn, are based on national capitalism; it is also unlikely that Indonesia (a state more fragile than Brazil) would be able to enforce a forest law in provinces that have been empowered since the late 1990s; it is also unlikely that the Democratic Republic of Congo (the archetype of a fragile state) and other countries in the Congo Basin (or in South-East Asia) would give up state ownership of forests that allow governments to enjoy monetary and political benefits through the allocation of forest concessions and lands.

The paper raises a series of criticisms of the way REDD has developed so far. If the price of oil and mineral resources continues to rise, there is a risk that REDD payments may not be adequate to prevent governments (or the militias and/or army units that often control natural resources in fragile states) from deciding to open up new mines or oil fields in forests. Meanwhile, the price of palm oil is linked to climate policies if those policies promote the use of biofuels, driving up the price of biofuels such as palm oil and making clearing forests for oil palm plantations more economically attractive.

Under the sub-heading “Strategies of weak states: negotiating complacent rules rather than taking tough measures,” Karsenty and Ongolo point out that,

the most rational attitude for a government with little concern for collective interest is, first, to negotiate the worst possible scenario in deforestation terms for setting the best possible reference (that is to say, which allows a high rate of deforestation) and, once this goal has been achieved … to do nothing.

The most obvious example of this is in Guyana where the government, in its US$250 million REDD deal with Norway, has managed to negotiate a baseline rate of deforestation of 0.275% per year. While this is well below the rate of 4.3% suggested by McKinsey, it is also significantly higher that the annual average deforestation rate of 0.03%[*] between 2000-2009 estimated by Pöyry Forest Industries.

The problem that governments may not be able to control the rate of deforestation is not limited to fragile states. In a box in the paper, Karsenty and Ongolo consider Australia. They quote from a report published by the Australian Institute in 2010:

The difficulty that Australia has experienced in controlling deforestation should serve as a warning about the potential obstacles that stand in the way of an environmentally effective international REDD scheme. If a country like Australia finds it hard to halt deforestation, what is the outlook for developing countries with less advanced institutional, governance, monitoring and economic systems?

Karsenty and Ongolo suggest an alternative option, which includes addressing the structural causes of deforestation and degradation. They write that this

calls for a rethinking of the mechanism, changing its initial ambition to make it “performance based” (measured as reduced deforestation) so that it can be used as an investment instrument for funding policies on specific and ambitious programs able to tackle the major structural problems that underlie much of deforestation in such countries: agriculture, land, the means and the functioning of justice and of the administration of control.

CORRECTION – 28 July 2011: The figure of 0.03% was originally mis-typed as 0.3%. Thanks to everyone that pointed this out. Here’s the passage about Guyana from Karsenty and Ongolo’s paper:

Although the deforestation rate is very low (for the ten-year period 2000–2009, the annual average deforestation rate was estimated at 0.03% by a Pöyry Forest Industries report), at the end of 2008, Guyana proposed a baseline scenario (developed by McKinsey and very significantly entitled, “Economically rational land-use scenario”) for the conversion of 90% of its forests into industrial crops over the next 25 years (i.e. a deforestation rate of 4.3% per year) — in order to maximize its chances of being paid for less deforestation (Guyana, 2008). The opportunity cost of avoided deforestation (on the basis of this scenario) was estimated by McKinsey to be $580 million per year. This “offer”, which many considered to be an ecological form of blackmail, had no takers, but Guyana has Norway’s commitment to pay up to $250 million for implementation of policies and measures to conserve forests, provided that the national deforestation rate does not exceed 0.275% per year — leaving the country some leeway given the current (lower) rate.

Reference:
Guyana (Republic of), 2008. Creating incentives to avoid deforestation. Office of the President, Booklet on Avoided Deforestation, Georgetown.