Comments on: Forest talks at a standstill as Copenhagen ends without an agreement http://www.redd-monitor.org/2010/01/26/forest-talks-at-a-standstill-as-copenhagen-ends-without-an-agreement/ Analysis, opinions, news and views about Reduced Emissions from Deforestation and Forest Degradation Fri, 30 Jul 2010 04:50:54 +0700 http://wordpress.org/?v=2.9.2 hourly 1 By: R Webster http://www.redd-monitor.org/2010/01/26/forest-talks-at-a-standstill-as-copenhagen-ends-without-an-agreement/comment-page-1/#comment-12642 R Webster Tue, 26 Jan 2010 13:49:24 +0000 http://www.redd-monitor.org/?p=4005#comment-12642 Richard You seem to overlook one basic and rather central feature of markets: competition in supply reduces prices. A competitive market for forest carbon credits would therefore tend to drive down the price of forest carbon. Given that the potential supply of putative 'avoided deforestation' credits is to all intents and purposes infinite in relation to current demand for such credits, it is likely that the price would quickly be driven very low, and indeed this is already happening. President Jagdeo of Guyana, for example, has already said that he can undercut the price of carbon to $1 per ton for forest credits from his country. Maybe PNG will sell them for $0.50 cents, and DR Congo for $0.10 cents... The point about this is that the cost is likely to be driven below the level at which any meaningful investment in real avoided deforestation could happen, and would certainly not be able to compete with the land opportunity cost of logging, cattle ranching, soy beans or palm oil. They will, in fact, be purely 'paper credits', and so the question of 'leakage' will be somewhat irrelevant - as there will be no actual avoided deforestation to 'leak' elsewhere. RW Richard

You seem to overlook one basic and rather central feature of markets: competition in supply reduces prices. A competitive market for forest carbon credits would therefore tend to drive down the price of forest carbon.

Given that the potential supply of putative ‘avoided deforestation’ credits is to all intents and purposes infinite in relation to current demand for such credits, it is likely that the price would quickly be driven very low, and indeed this is already happening. President Jagdeo of Guyana, for example, has already said that he can undercut the price of carbon to $1 per ton for forest credits from his country. Maybe PNG will sell them for $0.50 cents, and DR Congo for $0.10 cents…

The point about this is that the cost is likely to be driven below the level at which any meaningful investment in real avoided deforestation could happen, and would certainly not be able to compete with the land opportunity cost of logging, cattle ranching, soy beans or palm oil. They will, in fact, be purely ‘paper credits’, and so the question of ‘leakage’ will be somewhat irrelevant – as there will be no actual avoided deforestation to ‘leak’ elsewhere.

RW

]]> By: richard wineberg http://www.redd-monitor.org/2010/01/26/forest-talks-at-a-standstill-as-copenhagen-ends-without-an-agreement/comment-page-1/#comment-12640 richard wineberg Tue, 26 Jan 2010 13:25:14 +0000 http://www.redd-monitor.org/?p=4005#comment-12640 Your article suggests that leakage was and still is one of the more intractable problems facing REDD's successful implementation. Wouldnt leakage best be addressed by allowing a forest carbon competitive market in emission reduction offsets to drive the value of forests everywhere up... to become too valuable to cut. This principal seems empirically sound to me. Carbon taxes and forestry fiats will never be able to curb logging activities or land-use conversion the way land values can, especially from the point of view of indigenous peoples, come to think of it... Your article suggests that leakage was and still is one of the more intractable problems facing REDD’s successful implementation.
Wouldnt leakage best be addressed by allowing a forest carbon competitive market in emission reduction offsets to drive the value of forests everywhere up… to become too valuable to cut. This principal seems empirically sound to me. Carbon taxes and forestry fiats will never be able to curb logging activities or land-use conversion the way land values can, especially from the point of view of indigenous peoples, come to think of it…

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