Two interviews with Jeff Horowitz, the founder of Avoided Deforestation Partners, were published earlier this month. The interviews reveal a great deal about why AD Partners is so interested in carbon trading. For example, Horowitz estimates that “protecting tropical forests will cut the cost of U.S. climate legislation almost in half – saving Americans billions.” This week, REDD-Monitor asked Horowitz some further questions.
Rhett Butler of mongabay.com and journalist Marc Gunther interviewed Horowitz. Butler gushes about a side event that AD Partners held in Copenhagen. Perhaps that’s not surprising, since AD Partners managed to invite more than 20 speakers. The heads of some of the biggest US conservation NGOs were there: Environmental Defense Fund; National Resources Defense Council; Conservation International; The Nature Conservancy; World Wildlife Fund US; and IUCN. They shared a platform with several of the polluting companies who are keen to get their hands on cheap REDD credits: Dennis Welch, Executive Vice President of American Electric Power; Sir Richard Branson, Founder of the Virgin Group; and Jim Rogers, Chairman, President and CEO of Duke Energy.
During the meeting, Tom Vilsack, the U.S. Secretary of Agriculture, announced a US$1 billion commitment to financing REDD readiness activities. “REDD has arrived!” Horowitz told mongabay.com.
Here, then, is REDD-Monitor’s interview by email with Jeff Horowitz.
REDD-Monitor: In your interview with Rhett Butler of mongabay.com you say that “protecting forests is a way to buy time.” But if avoided deforestation is a carbon offsetting mechanism, it will not reduce emissions – the emissions will simply be transfered from one place to another (assuming the problems of baselines, leakage, additionality and permanence are addressed – if not emissions will increase). In other words, this will allow polluting industries to continue business as usual. Coal fired power stations built now (and declared “carbon neutral” because of REDD offsets) will continue to operate for 50 years, thus locking in polluting technology. This is only buying time for industry – not for the climate. How do you respond to this argument?
Jeff Horowitz: We need to reduce emissions from the energy sector as well as emissions from deforestation. It doesn’t matter to the atmosphere if a ton of pollution comes from a coal-fired power plant or a burning forest. Tropical forest conservation is a critically strategic climate change solution because it is more affordable than technologically intensive solutions therefore allowing bigger pollution reductions than would otherwise be economically or politically feasible. We of course agree that reductions from deforestation must be achieved with careful consideration given to issues such as leakage, additionality and permanence. Payments for the reduction of deforestation must only be made in exchange for climate benefits that are real, measurable and verifiable.
A cap is just one legislative tool we have for reducing pollution. To realize the goal of a low-carbon society we need a collection of complimentary policies which include investment incentives in energy efficiency, clean energy standards, requirements to use more wind and solar power, and better management of public and private lands to promote maximum carbon sequestration. Here in California, for example, we have an offset program, but we also have laws which mandate that by the end of 2010, California utility companies are required to provide 20% of their power from non-fossil fuel sources (with stiff penalties for non-compliance). It will take time to achieve a clean energy society but no matter how fast or slow it happens, we urgently need to reduce climate pollution from all sources, as quickly as possible. To do so, we must take advantage of low-hanging fruit solutions such as forest conservation.
REDD-Monitor: The proposed US climate legislation is pathetically weak (3-4% reductions against 1990 levels) and weakened still further by the inclusion of offsets (IRN and RAN calculate that no US emissions cuts would take place until 2026). This isn’t just a problem of “dodgy” offsets (of which there are many), it’s a problem of all offsets. By definition offsets do not reduce emissions. The chair of the CDM Executive Board acknowledged this recently when he said, “[T]he CDM, at its best, is a zero sum game, because its credits are used to offset reduction obligations of Annex 1 countries.” Given all this, why do you think that offsets will help prevent runaway climate change?
Jeff Horowitz: The reductions contained in the House-passed legislation and the proposed Senate legislation are stronger than those percentages referenced in your question. With the supplemental pollution reductions achieved through tropical forest conservation, Waxman- Markey reduces pollution 17-23 percent below 1990 levels by 2020.
We believe offsets achieve significant additional emissions reductions. It is not a zero sum game, because without the ability to leverage credible and environmentally robust REDD offsets, the reduction targets achievable by policy makers would be significantly scaled back. Having a credible offset system enables more ambitious reduction targets, while at the same time achieving real reductions in global GHG emissions in the short term. This combination (steep long term reduction targets and robust offsets) will create the underlying catalyst for the technology we need to transform the existing economy into a low carbon economy and achieve essential short-term emission reductions as well. Ultimately, policy makers must determine what is best, most cost efficient way to achieve the necessary reductions in global GHG emissions, and they are limited by what is politically achievable. If you take offsets off the table, the existing short term reduction targets (which may not in your view be significant) would be even further reduced and the mid and long term policy signal for very steep cuts would be significantly hampered, if not impossible to achieve.
Last point: we agree that the CDM has major flaws and we oppose its use as a financing tool for environmentally destructive projects such as dams. We’ve worked to ensure that the standards for financing in U.S. climate policy are much stronger than those in the CDM – and that they include a more robust role for forestry.
REDD-Monitor: In response to Rhett Butler’s question about activists campaigning against offsets, you responded “We’re working alongside many watchdog organizations to make sure that offsets are being used properly.” Which watchdog organizations is AD Partners working with (or “alongside”)? How, in your opinion, can offsets be “used properly”?
Jeff Horowitz: We need to be careful of private sector investment, just as we must be careful to make sure that government to government direct aid programs work the way they are intended. In short, both options are in need of being watched closely.
Market based solutions to REDD are not the ultimate panacea or the magic solution to climate change and tropical deforestation. The problem is much more complex than that. The problem is that current legal paradigms have been wholly inadequate to address the problem and the level of sustained financing, both from the public and private sectors, is greater than anything we have been able to mobilize to date. Therefore, as part of a broader series of complimentary policies and measures, we believe private investment has an important role to play. We do not see how we can achieve the level of funding needed without an investment system that incentivizes private capital flows toward forest preservation. The bottom line is that trees today are worth more chopped down and/or burned for alternative land uses than they are as the living lungs of the planet. The reason for this is that we as a collective society have not put a price on the carbon emissions that arise from destructive practices or a value on the ecosystem services that our in tact tropical forests provide. As part of several legal, policy and financial steps, we believe that a well-constructed and regulated carbon market is a valuable tool and could work quite well in conjunction with government provided capacity building funding.
Regarding “watchdog” allies, we work mostly with larger organizations so our allies are organizations such as the Sierra Club, Union of Concerned Scientists, NRDC, the Rainforest Alliance, CCBA and others.
REDD-Monitor: There is already a considerable amount of fraud within the carbon markets. In Europe, millions of euros have been lost to carousel fraud and recently internet/phishing fraud. In Papua New Guinea the government appears to have issued fake carbon credits and one indigenous leader says he was forced at gun point to sign a REDD-type agreement. Meanwhile, carbon derivatives are already being trading that are so complicated it’s almost impossible to know what they actually are. This type of complexity was one of the triggers that led to the financial crisis in the past two years. One hedge fund trader estimated in June last year that there is a 30% chance of the carbon market collapsing (and his firm is looking forward to huge profits if it does collapse). Do you really believe that the carbon market can be regulated? Or that it is a reliable way of fundraising when the future of the planet’s rainforests are at stake (and its climate)? What happens to REDD if the carbon market collapses?
Jeff Horowitz: Neither we nor any other credible environmental group would endorse a carbon market that wasn’t subject to rigorous oversight and the highest standards for transparency and integrity. The recent market collapse was a terrible tragedy for many millions around the world but at the same time it was a great wake up call.
But let’s be clear: the only path to secure the $40 billion annually that may be needed to end and ultimately reverse deforestation is through creating incentives for private investment. Governments have shown very little ability to provide sustained funding for conservation – at the first hint of a budget crisis, government funds are raided for other purposes – deficit reduction, tax cuts, or some favored pork barrel project. International spending is in general very vulnerable.
Of course, we can’t save forests with private funds alone, and for that reason we have built a powerful broad-based coalition behind the goal of setting aside five percent of the allowances in U.S. climate policy for rainforest conservation, supplying $3-5 billion per year in U.S. government funding to combat illegal logging, establish national baselines, build capacity in rainforest nations. As a final note, we endorse quantity limits on use of offsets. The legislation under consideration in Congress allows companies to meet only 10-15 percent of their compliance obligation with international offsets.
REDD-Monitor: I understand that payments for REDD are to be performance based, that the money will only be handed over when the avoided deforestation has already happened. But what happens if the payment is made and the forest is cleared the following week (or month, or year)? What happens if carbon credits are forward traded but the project ultimately fails to get the necessary certification as a REDD project? (This is assuming that there will be an international REDD agreement and some sort of international certification system, similar to the CDM, say.) Is it possible to remove those forward traded carbon credits from the market (given that by that time they will have been securitised and packaged up in various sorts of innovative financial instruments)?
Jeff Horowitz: There are a variety of mechanisms in pending U.S. climate legislation that attempt to address this issue. Most importantly, the administrator is required to hold allowances in reserve that are cancelled in the event of a reversal such as a naturally occurring fire or intentional destruction of a forest. In addition, project developers are required to return any allowances credited in the event of intentional reversals and half in the event of unintentional reversals. Finally, most project developers maintain a reserve of extra protected land as part of a project that is set-aside to compensate for any reversals. This is one of the protections we were able to help secure in the legislation.
 ^ Horowitz requested that “Given the complexity of the questions and answers, I would appreciate your keeping my responses complete.” Neither the questions nor Horowitz’s replies have been edited.