in Indonesia

The Asian Development Bank on REDD: “Riddled with many complexities”

Indonesia fireA few weeks ago, REDD-Monitor took a look at how the Asian Development Bank appears to have changed its tune on REDD. In 2010, the ADB was promoting the region’s “huge potential to benefit from REDD+”, but by 2015 the ADB acknowledged the “considerable uncertainty about the actual contribution that REDD will make”.

The second quotation comes from an ADB report released at the end of 2015, titled, “Southeast Asia and the Economics of Global Climate Stabilization”. The 191-page report looks at the economic implications of mitigating climate change in five countries (Indonesia, Malaysia, the Philippines, Thailand, and Viet Nam) that together account for 90% of Southeast Asia’s emissions. REDD is mentioned almost 500 times in the report.

Referring to CIFOR’s 2014 report, “REDD+ on the ground: A case book of subnational initiatives across the globe”, the report notes that,

[T]he performance of REDD demonstration activities has been mixed, which raises considerable uncertainty about the actual contribution that REDD will make.

What’s wrong with REDD?

The ADB report includes a box on REDD, which starts by pointing out that emissions from deforestation and land-use change are the largest sources of greenhouse gases in Southeast Asia. It emphasises the importances of address deforestation and outlines the REDD negotations at the UNFCCC.

And then the ADB report explains in three succint paragraphs what is wrong with REDD:

Although conceptually simple, REDD implementation is riddled with many complexities. REDD is envisaged to have performance-based payment, so that financing is only provided after emission reductions have occurred. However, determination of REDD-attributable emission reductions is challenging. Reduction from a “reference level” projection is the basis of attribution, but “reference level” determination has not yet occurred for many countries, and different projections may lead to different “reference levels.” The definition of forests differs among countries, so that forest loss is not consistently defined. Benefit-sharing mechanisms between those who already have good stewardship of forests, such as indigenous local communities, and those entities responsible for forest destruction, are yet to be fully developed.

No agreement yet exists on financing of REDD and envisaged size of market-based mechanisms. While it is generally accepted that REDD will be partially financed through sovereign financial contributions from developed countries into multilateral funds that can be accessed by developing countries, inclusion of REDD in international emissions offset markets remains more controversial, partially due to fears that REDD credits could depress international carbon prices.

More fundamentally, REDD rests on the assumption that the provision of additional formal financial flows to government entities can change incentives that are often driven by informal incentives and the interests of politically connected actors. At present, forestry sector policies often forgo opportunities to collect greater revenues from public forest resources, as much timber is offered to concessionaires at below market prices. It is not clear if governments will respond to financing opportunities for averted deforestation, as REDD proponents envisage, when governments already ignore substantial opportunities to increase revenue generation from the forestry sector. To do so will require substantial institutional reform in many countries.

This is a pretty good overview of some of the main problems with REDD. The third paragraph describes a fundamental, structural problem for REDD. But while the report notes the problems with REDD, it also relies on REDD to meet emissions reduction targets in Asia.

The ADB report models the future for Southeast Asia using different targets and assumptions. The most ambitious target aims at keeping greenhouse gas concentrations below 500 parts per million, which the Bank says “is likely to avoid warming of more than 2°C”.

The report explains that “Reducing emissions from deforestation and forest degradation (REDD) was included and excluded from the scenarios.” One scenario is based on a fictional world where REDD doesn’t exist. Another scenario is based on an equally fictional world where REDD works perfectly. And a third scenario is called the “low REDD” case:

In the “low REDD” case, the cost of implementing REDD activities is assumed to increase by 150% with respect to opportunity costs alone. This increase takes into account additional possible transaction costs, potential project failures, and leakage that could result from overoptimistic reference levels or from REDD activities that simply displace deforestation, or a substitution effect.

Indonesia: “Progress has been limited”

Most of the reductions from REDD are anticipated to take place in Indonesia, and REDD “accounts for a majority of emission reduction through 2030 to 2040”. But when the report takes a closer look at REDD in Indonesia, it admits that “progress has been limited”:

In 2009, the Government of Norway offered $1 billion of funding for REDD in Indonesia. Despite some promising measures that resulted, such as restrictions on new concession allocation, progress has been limited, and the vast majority of the funding remains undisbursed. Long before REDD, Indonesia domestically collected nearly $6 billion for reforestation from wood royalties, but actual progress on forest regeneration remains limited (Barr et al. 2010).

Nevertheless, the ADB remains optimistic that REDD can be easily and cheaply implemented in Indonesia, thanks to the “large areas of unproductive degraded grasslands” in the country:

REDD is critical to medium-term mitigation costs, especially in Indonesia. Deforestation reductions can be made at low opportunity cost, as Indonesia has large areas of unproductive degraded grasslands, where land-demanding industries, such as plantation agriculture, could still be developed were natural forest clearance more limited. This could allow Indonesia to sustain negligible policy costs, while exporting hundreds of billions of dollars of carbon credits. In the medium term, this would lead to positive effects on consumption and living standards for Indonesia, as well as reduced policy costs for the region.

Of course the ADB didn’t come up with the idea of using Indonesia’s degraded land for expanding oil palm plantations. In May 2010, shortly after the US$1 billion REDD deal with Norway was signed, then-President Susilo Bambang Yudhoyono travelled to Norway for the Oslo Climate and Forest Conference. “We have a policy to use degraded land … for the continuation of the palm oil industry in Indonesia,” he announced at a press conference. Since when, progress has been, er, limited.

The ADB seems to be anticipating that REDD credits will be double counted. If Indonesia sells REDD credits internationally, the emissions reductions from reduced deforestation will be counted as reductions in the country that buys the REDD credits, and not in Indonesia. If Indonesia were to make “hundreds of billions of dollars” from exports of REDD credits, the country would have to dramatically reduce its emissions from fossil fuels in order to stand a chance of meeting the ADB’s target of 2°C warming.

To REDD supporters, that may sound like a win-win. But the countries buying the REDD credits will use them to continue burning fossil fuels. Apart from the injustice of rich countries being allowed to continue polluting while the Global South has to reduce its emissions, this means that the climate will continue to get warmer. And as the climate warms, forests are losing their capacity to store carbon.

The fires last year in Indonesia illustrate the importance of stopping deforestation and the destruction of peatland. The fires also illustrate how dangerous it is to rely on forests to store carbon.

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