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How the Asian Development Bank changed its tune on REDD: From “huge potential benefit from REDD+” to “considerable uncertainty about the actual contribution that REDD will make”

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ADB and REDDAt the beginning of May 2016, the Asian Development Bank will be holding its 49th Annual Meeting. The meeting will take place in Frankfurt, Germany. Over the next few weeks, a mini-series of REDD-Monitor posts will look at the ADB’s involvement in REDD, and its record in the forests of Asia.

In 2010, the Asian Development Bank and the Bangkok-based NGO RECOFTC (The Center for People and Forests) put out a report titled, “National REDD+ Strategies in Asia and the Pacific: Progress and Challenges“. The report is optimistic about what REDD might achieve:

Studies have shown that the Asia and Pacific region offers huge potential to benefit from REDD+ because its forests and peat lands are significant carbon sinks and are also currently important sources of carbon dioxide emissions.

The authors of the report, David S. McCauley (Principal Climate Change Specialist at the ADB), Rowena Soriaga (Project Coordinator for the ADB Technical Assistance Activity on Capturing the Economic Benefits of Ecosystem Services), and Ben Vickers (Senior Programme Officer at RECOFTC) write that,

The prospect of REDD+ payments has breathed new life into efforts to address the old problem of forest conservation which has been plagued by governance constraints, and it holds the promise of supporting truly sustainable forest management practices.

US$2.8 billion for REDD in Asia?

The authors estimate that 10 countries in the region with high to moderate forest cover and high deforestation rates “could generate around $2.8 billion in REDD+ revenues from even a modest forest carbon market, if their historical deforestation rate were reduced by half.”

The authors were sufficiently clairvoyant to price REDD credits at US$5 per tonne. In 2014, at the tenth meeting of the World Bank’s Carbon Fund, rich countries announced that they were willing to pay up to US$5 per tonne for REDD.

Here’s the ADB and RECOFTC’s authors came up with the figure of US$2.8 billion, which would be paid over a five year period from 2015 to 2020. The authors use FAO deforestation data, assume that the rate of deforestation can be reduced by half, and that someone, somewhere will pay US$5 for the carbon that therefore did not go into the atmosphere:

US$2.8 billion

The authors point out that improved coordination is needed between the various banks and aid agencies. The REDD+ Partnership “holds considerable promise”, they write.

Of course they couldn’t know that only four years later the REDD+ Partnership would have failed to achieve anything much, although it did manage to get through US$6 million.

The authors write that,

There has been a notable increase in the share of registered forestry projects at the Chicago Climate Exchange, from 1% of total projects in 2007 to 22% in 2008.

Of course, they couldn’t know that the Chicago Climate Exchange would close at the end of 2010, not long after their report was published. Here’s how the New York Times reported its collapse:

Though celebrated by climate activists at its launch in 2003, CCX became plagued by a flood of credits from offset project generators that collapsed the CFI market, sending exchange prices to a nickel per unit. Highlighting this collapse, many in the U.S. carbon trading community openly questioned the legitimacy of the system itself, putting founder Richard Sandor and his team on the defensive at periodic carbon market conferences held in Washington, D.C., and New York.

Progress on REDD in the region is encouraging, the authors note, but “immense governance challenges remain”. That, I think we can quite safely say, is an understatement.

The ADB changes its tune on REDD

Over the years, the ADB has lost some of its early enthusiasm for REDD. In a 2012 report for the ADB, Jeffrey D. Sachs and Shiv Someshwar from Columbia University write,

The potential for adverse impacts on local communities from REDD+ programs in areas of poor governance and uncertainty in access are other areas of high equity concern. Barr et al. (2009) note “inequitable distribution of REDD payments could increase disparities in the forestry sector, and could displace and impoverish forest-dependent peoples.”

By 2015, the ADB was beginning to sound distinctly sceptical about REDD. A report about Southeast Asia and the economics of global climate stablisation, states that,

Reducing Emissions from Deforestation and Forest Degradation (REDD) is an approach included in the [Paris] Agreement that allows emission reductions from averted forest destruction to be counted toward emission reduction commitments, and to receive international support for such reductions. However, the performance of REDD demonstration activities has been mixed (Sills et al., 2014), which raises considerable uncertainty about the actual contribution that REDD will make.”

And in a box explaining REDD, from the same report (page 19), the authors question the basic premise of REDD:

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.

The ADB’s opinion of REDD in the Paris Agreement

While many observers and REDD proponents hailed the Paris Agreement as a breakthrough for REDD, the ADB’s view of REDD in the Paris Agreement is that overall the outcome was weak:

Reducing emissions from deforestation and forest degradation. Article 5 of the Agreement addresses reducing emissions from deforestation and forest degradation (REDD), and recognizes the role of conservation, sustainable management of forests and enhancement of forest carbon stocks, joint mitigation and adaptation approaches, and non-carbon benefits of REDD. Regarding REDD finance, results-based payments are encouraged, while Article 55 of the Decision calls for coordination of support for REDD from public and private, bilateral and multilateral sources such as the GCF. However, there is no mention of any explicit links to market mechanisms through which developed countries could, for example, offset their emissions through payments to developing countries for REDD activities. This was done to overcome resistance by some countries to the employment of market mechanisms for REDD. Also, most countries with a high potential for REDD would likely prefer to discount domestic REDD activities from their own growing fossil fuel-based emissions. Overall, the Paris outcome on REDD is regarded as weak.

 

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