Centre for Development, Environment and Policy MSc Environmental Management SEPTEMBER 2014

DISSERTATION

REDD+ IN THE POST-KYOTO ERA AN ANALYSIS OF OPPORTUNITIES AND TRENDS FORECASTING THE FUTURE OF THE VOLUNTARY CARBON MARKET.

BY LORIS PALENTINI

Dissertation submitted in partial fulfilment of the requirements for the MSc in Environmental Management for Distance Learning Students of the University of London, Centre for Development, Environment and Policy (CeDEP), School of Oriental and African Studies (SOAS)

Supervisor: Prof. Iain Fraser, School of Economics, University of Kent

ABSTRACT

This paper offers an analysis of opportunities and trends forecasting the future of the

voluntary carbon-market through an extensive literature review complemented and

deepened by a limited number of semi-structured interviews and questionnaires with key-

informants.

A total of 34 candidates were identified and invited for a 30 to 60 minutes interview or to

answer a questionnaire where oral interview was impossible. A total of 6 candidates were

successfully interviewed (including a panel discussion with 3 key-informants altogether)

while one questionnaire was compiled.

A general introduction of the climate change and anthropogenic emissions of greenhouse

gasses concepts helps contextualise the architecture of the Kyoto Agreement evaluating

potential designs for a post-Kyoto treaty expected to be defined by and agreed at COP21

(Paris - 2015).

The role of REDD+ programmes in the carbon-market arena, as opposed to – but with

potential for integration with – the compliance market complements the analysis. An attempt

to forecast an optimal price for carbon credit and the potential for CO2 market has been

used to analyse the ‘carbon crisis’ and predict risks and limitations of the sector.

The concept of the carbon-grab is introduced as an emerging and highly polemical issue,

which may impact the effectiveness of different programmes through a new-borne

generation of land-grab and eviction, the cost of which is borne by local communities and

indigenous minorities while the benefits flow largely to private companies and colluded

governments. A recommendation for integrating land tenure and indigenous rights to any

future treaty is advocated.

Key words: carbon credits, REDD+, carbon-grab, Kyoto Agreement, post-Kyoto, climate change, VERs, CERs, GHGs, and COP21.

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ACRONYMS AND ABBREVIATIONS

BRICS Brazil, Russia, India, China and South Africa

CCBA Climate, Community & Biodiversity Alliance

CCS Carbon Capture and Storage

CDM Clean Development Mechanism

CERs Certified units of Emissions Reduction

CH4 Methane

CO2 Carbon Dioxide

COP Conference of Parties

CSR Corporate Social Responsibility

ETS Emissions Trading Scheme

FCPF Forest Carbon Partnership Facility

GCF Green Climate Fund

GHGs Green House Gases

GMST Global Mean Surface Temperature

GW Global Warming

ha Hectares

IPCC Intergovernmental Panel for Climate Change

JI Joint Implementation

KA Kyoto Agreement

LDCs Least Developed Countries

LMICs Low and Middle Income Countries

LULUCF Land Use, Land-Use Change and Forestry

MAC Marginal Abatement Cost

MD Marginal Damage

MRV Measuring, Reporting and Verification

MST Mean Surface Temperature

MtCO2e Metric tonnes of Carbon Dioxide (CO2) equivalent

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NGO Non-Governmental Organisations

ODA Overseas Development Assistance

OECD Organization for Economic Co-operation and Development

REDD Reduced Emissions from Deforestation and forest Degradation

REDD+ Add to REDD the conservation and expansion of forest carbon stocks

UN United Nations

UNEP United Nations Environmental Programme

UNFCCC United Nations Framework Convention on Climate Change

USA United States of America

VCS Verified Carbon Standard

VERs Verified units of Emissions Reduction

WMO World Meteorological Organisation

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TABLE OF CONTENTS

1. INTRODUCTION ........................................................................................................1

1.1. AIM AND OBJECTIVES ................................................................................................ 3

1.2. RESEARCH PROCESS ................................................................................................. 3

2. LITERATURE REVIEW ................................................................................................4

2.1. PAST – WHAT LED TO THE KYOTO AGREEMENT ......................................................... 4

2.1.1. IPCC – THE BEGINNING OF A NEW ERA ................................................................. 4

2.2. PRESENT – NARROWING THE PATH FROM KYOTO AND BEYOND ................................. 5

2.2.1. OFFSETTING MECHANISMS................................................................................... 5

2.2.2. OPTIMAL LEVEL OF POLLUTION AND THE GLOBAL DISTRIBUTION MECHANISM ........... 5

2.2.3. FORESTS: THE BIG ABSENT FROM ‘KYOTO’ ............................................................ 6

2.2.4. REDD+ AND THE MECHANISMS FOR ITS INCLUSION IN THE ‘POST-KYOTO’ ............... 7

2.3. FUTURE – THE POST-KYOTO ERA AND THE POTENTIAL FOR REDD INCLUSION ............ 8

2.3.1. REDD+ IN A FAILING CARBON-MARKET ............................................................... 9

2.3.2. LAND RIGHTS AND THE EMERGENT ‘CARBON-GRAB’ ........................................... 10

3. METHODOLOGY ..................................................................................................... 12

3.1. LITERATURE REVIEW – GATHERING OF SECONDARY DATA .......................................... 12

3.2. PREPARATION OF INTERVIEWS – PRIMARY DATA COLLECTION ................................... 12

3.3. INTERVIEWS AND QUESTIONNAIRES WITH KEY-INFORMANTS ...................................... 13

3.4. REFINEMENT OF THE RESEARCH AIM AND OBJECTIVES ............................................. 14

4. RESULTS .............................................................................................................. 15

4.1. WHAT IS LEADING THE ‘POST-KYOTO’ DEBATE? ........................................................ 15

4.2. CARBON-MARKET AND THE ROLES OF REDD+ .......................................................... 16

4.3. NGOS, INDIGENOUS MINORITIES AND THE EMERGENCE OF ‘CARBON-GRAB’ ................ 18

5. ANALYSIS ............................................................................................................. 20

5.1. BACKGROUND ANALYSIS .......................................................................................... 20

5.2. THE EMERGING SCENARIO TOWARDS A POST-KYOTO AGREEMENT .............................. 21

5.3. ROLE OF REDD AND THE VOLUNTARY CARBON-MARKET ........................................... 23

5.4. THE EMERGENCE OF THE ‘CARBON-GRAB’ ................................................................. 25

5.5. CARBON-MARKET .................................................................................................... 26

Table 1: Comparison of key literature review vs. key-informants’ opinions .............. 28

6. CONCLUSIONS ...................................................................................................... 29

6.1. THE ROAD TO ‘PARIS’ .............................................................................................. 29

6.2. POTENTIAL FOR REDD+ TO SCALE UP AND REVITALISATION OF CARBON-MARKET .... 29

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6.3. CARBON-GRAB AND FOREST PEOPLE’S RIGHTS ....................................................... 30

6.4. LIMITATIONS ............................................................................................................ 30

7. REFERENCES ........................................................................................................ 32

8. BIBLIOGRAPHY ...................................................................................................... 38

9. WEB SITES OF RELEVANCE .................................................................................... 42

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1. INTRODUCTION

The last thirty years have been marked by continuous discussions about global warming,

greenhouse gas (GHG) emissions and increased mean surface temperature (MST).

The greenhouse effect is a phenomenon caused by the capacity of atmospheric gases to let

short-wave solar radiation enter the atmosphere while partially trapping long-wave radiation

reflected back by the earth’s surface. It is this natural occurrence that allows life on earth by

increasing the mean surface temperature from the potential -18°C to a global mean of 15°C.

However, anthropogenic (human-induced) greenhouse gas emissions increase the retention

of solar radiation within the earth’s atmosphere inducing an excessive increase of the global

mean surface temperature (GMST) known as global warming (GW).

The first major international step taken to globally reduce anthropogenic GHG emissions was

embodied in the Kyoto Agreement (KA) (signed in 1992) which, for the first time, included the

provision for a binding emissions reduction target for the period 2008 – 2012 for the signatory

parties, namely Annex I countries1. At the treaty expiration, a successive agreement was

supposed to be negotiated. However, for various reasons, primarily political and economic, a

post-Kyoto agreement is still far from being reached. Nevertheless, encouraging

developments emerged at the 19th UNFCCC (United Nation Framework Convention on

Climate Change) Conference of Parties (COP19) held at Warsaw in November 2013, leading

to the new target of COP21 in Paris at the end of 2015. It is still largely unclear what to expect

from it, but all parties hope for a new treaty to come into effect by 2020 ending the gap

between the expiration of the KA and the definition of any post-Kyoto agreement.

While the KA gave specific provision for three offsetting mechanisms2, a gap was deliberately

left concerning emissions from deforestation and degradation of tropical forests. Despite GHG

1 ‘The group of countries included in Annex I (as amended in 1998) to the UNFCCC, including all the OECD countries and economies in transition. Under Articles 4.2 (a) and 4.2 (b) of the Convention, Annex I countries committed themselves specifically to the aim of returning individually or jointly to their 1990 levels of greenhouse-gas emissions by the year 2000. By default, the other countries are referred to as Non-Annex I countries.’ Cited from Annex I of the Working Group III contribution to the 4th IPCC Assessment Report (Metz, 2007, p. 809). 2 1. ETS – Emissions Trading Scheme; 2. JI – Joint Implementation; and 3. CDM – Clean Development Mechanism. The three mechanisms are thoroughly described in section 2.b.

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emissions from deforestation and forest degradation accounting for about 14 (Harris et al.,

2012) to 20 percent (IPCC, 2007) of the global emissions, a strong lobby from activists and

NGOs advocated for their exclusion from the treaty, leaving a gap to be filled in respect to the

actions addressing this major component of global emissions. It is in this uncertain scenario

that the UN-REDD (Reducing Emissions from Deforestation and forest Degradation in

developing countries) programme was first developed, with the initial objective of reducing

emissions from deforestation and forest degradation in tropical countries. The objectives were

later modified to include the conservation and expansion of forest carbon stocks, known as

REDD+.

While the general carbon-market – commonly known as the compliance market3 – is

governed by the three KA offsetting mechanisms, a voluntary market was developed offering

a viable alternative for projects and programmes aimed at conserving natural tropical forests

through carbon offsetting – mainly falling under the umbrella of the REDD+ programme – but

excluded from the KA. The voluntary market, where VERs (Verified units of Emissions

Reduction) are traded, is thus opposed to the compliance market with its CERs (Certified units

of Emissions Reduction). The evident limitation is that the compliance market, regulated under

the KA, offers a marketplace for governments and private companies which legally need to

reduce their emissions (i.e. signatory parties of the KA with their commitments for emissions

reduction), while the voluntary market consists primarily of companies and governments which

are genuinely committed to curbing climate change, or want – particularly in the case of big

multinational companies – to greenwash their name. Though REDD carbon credits are

leading the voluntary market, an inclusion of its VERs within any post-Kyoto agreement is

seen as inevitable despite the fact that the role and form that it may take is far from clear.

3 A Compliance Market is a market for carbon offsets created by the need to comply with a regulatory act. In a Cap-and-Trade emissions reductions market, actors buy and sell carbon offsets to comply with the cap or limit imposed on their emissions. Cited from: http://rainforests.mongabay.com/carbon-lexicon/Compliance-Market.html

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1.1. AIM AND OBJECTIVES

This dissertation offers ‘an analysis of opportunities and trends forecasting the future of the

voluntary carbon-market’ and the role of REDD+ in the post-Kyoto era. An analysis of the

present situation is deemed necessary to identify actors involved and gaps, while a forecast of

future scenarios and market trends will be suggested.

The research focused on an in-depth analysis of three main areas of interest (i.e. policy

analysis; market forecast; and role of the different actors involved), purposely developed to

respond to the set research questions.

o Which jurisdictional process can be expected for the coming period and shall lead to the

definition of any post-Kyoto agreement? Will REDD+ be finally included to the

compliance market and gain its role among the other offsetting mechanisms?

o How will the market react to the post-Kyoto treaty to be agreed upon at COP21 and

what is expected to be the trend of the carbon-market in ‘the interim period’ (2015 to

2020)?

o What can be the role of the different actors (i.e. NGOs) in the perspective of a new and

revitalised voluntary carbon-market? Will the introduction of the new financial

mechanisms be enough to fill the gap until the market will regain power?

1.2. RESEARCH PROCESS

The research is based on an extensive literature review complemented by a limited, but highly

relevant to the aims and objective, set of semi-structured interviews and questionnaires with

key-informants. A critical analysis of primary data, gathered through the opinions of key-

informants, against the secondary data, from the literature review, allowed for the

development of an informed opinion anticipating the future trends for REDD+ inclusion in

“2015-agreement” as well as of the voluntary carbon-market.

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2. LITERATURE REVIEW

2.1. PAST – WHAT LED TO THE KYOTO AGREEMENT

Although Svante Arrhenius in his 1896 paper ‘On the influence of carbonic acid in the air upon

the temperature of the ground’ (Arrhenius, 1896) prophesised an increase in global mean

temperature due to the anthropogenic emission of greenhouse gases (GHGs), no action was

taken by the international community for almost a century. It was only in the late 1970s that

the World Meteorological Organisation (WMO) raised concerns about the connection between

global warming and the anthropogenic increase of GHGs, mainly in the forms of carbon

dioxide (CO2) from the burning of fossil fuels, and methane (CH4) due to agriculture, coal and

oil extraction, biomass burning and waste disposal in landfills.

2.1.1. IPCC – THE BEGINNING OF A NEW ERA

Concern grew throughout the 1980s leading the United Nations Environmental Programme

(UNEP) and WMO to collaborate in creating the Intergovernmental Panel for Climate Change

(IPCC) in 1988 with the aim of investigating and reporting, within a scientific perspective,

climate change and possible international responses for its mitigation. The establishment of

the IPCC, and particularly its first assessment report (1990), poses the basis for later

agreements and led, in 1991, to the drafting of the United Nations Framework Convention on

Climate Change (UNFCCC) signed by 166 countries at the Earth Summit in Rio de Janeiro in

1992 which came into force in 1994. Total signatory parties to the ‘convention’ are 192 – 191

countries and the EU – while the US signed the Convention but did not ratify the Protocol and

Canada withdrew from it in 2011.

However, the UNFCCC does not include any specific target for the reduction of GHG

emissions and a debate emerged soon after, inflaming the Conference of Parties (COP). The

first significant step came at the third conference of parties (COP3) held in Kyoto (Japan) in

1997 where a solid and sound agreement was reached – the Kyoto Agreement (UN, 1998) –

which for the first time had specific and binding emissions reduction targets.

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2.2. PRESENT – NARROWING THE PATH FROM KYOTO AND BEYOND

2.2.1. OFFSETTING MECHANISMS

The Kyoto Agreement establishes GHG reduction targets for developed countries across the

period 2008 – 2012 through three specific mechanisms:

• Emission Trading Scheme (ETS) which allows international trade in emission

allowances (the most famous of which is the European Union Emission Trading

Scheme – EU-ETS);

• Joint Implementation (JI) which allows emission saving investments in other Annex I

countries (developed countries, signatories of the KA, for which binding GHG

emissions have been agreed within the KA);

• Clean Development Mechanism (CDM), the only mechanism, recognised under the

KA, which allows saving emissions in developing countries by developed countries.

The establishment of the latter mechanisms for trading emissions reduction has been seen as

an opportunity for non-Annex I (developing) countries for investment in renewable energies

and technologies transfer (Craft, 2013). Yet, it has also been strongly criticised, particularly by

activists and environmental groups and organisations, as a way to allow Annex I countries to

keep polluting (Ervine, 2013, p. 654). According to these groups, the three mechanisms allow

a ‘greenwash’ mask to polluters, permitting them to keep on polluting in the name of investing

in reduced emissions elsewhere.

2.2.2. OPTIMAL LEVEL OF POLLUTION AND THE GLOBAL DISTRIBUTION MECHANISM

The principle behind the three KA mechanisms is the global distribution of GHGs. If

emissions, despite their location, are to be considered as part of a ‘global’ system,

investments in emissions reduction have to be thought of on the same scale. Therefore

investment in emission reduction across countries, developed or developing, where the

investment per unit of emission reduction is less, are preferable and more efficient assuming

the global distribution. In this respect, and following a general environmental economics

principle, it is globally advantageous to reduce emissions in Annex I countries only up to the

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optimal level of pollution (OLP). At this level, the investment is still offset by the market –

described as the point where the Marginal Abatement Cost (MAC) curve intersects the

Marginal Damage (MD) curve – since a further investment is not beneficial to the society as

the costs outweigh the benefits (Stern, 2007, pp. 25-26). Further emissions reduction could

thus be achieved through investment in other – non-Annex I – countries for the remaining

component of emission reduction up to the binding limit agreed under the Kyoto Agreement by

each signatory party (Dalsgaard, 2013). At this point, the question might be obvious and refer

to ‘how can pollution ever be optimal?’, with the ‘optimality’ of pollution regarded exclusively in

economic terms in this context (Fullerton and Stavins, 1998).

2.2.3. FORESTS: THE BIG ABSENT FROM ‘KYOTO’

Despite the fact that the Kyoto Agreement has been recognised by all parties as one of the

most successful treaties ever reached, it still has a profound limitation with respect to the

inclusion of forests and landscape actions amongst its mechanisms. Formally included within

the Land Use, Land-Use Change and Forestry (LULUCF) sector, actions addressing GHG

emissions due to forest activities have been divided into two main categories: the forest as a

carbon sink; and the forest as an emitter of GHGs (CarbonCreditControversy, 2011). While

the first category, including afforestation and reforestation, has been included in the KA since

the beginning; the second, responsible for 14% (Harris et al., 2012) to 20% of global GHG

emissions (IPCC, 2007, Buizer et al., 2014), has been deliberately omitted from the

negotiation (Kość, 2014, Butler, n.d., Kill and Fenton, 2010, p. 69).

Marketable credits from CO2 offset from REDD+ projects are thus neither eligible under the

‘protocol’ nor tradable under most of the emissions trading scheme mechanisms (i.e. EU-ETS,

Australia’s Carbon Pricing Mechanism, New Zealand’s ETS), limiting the role of REDD+ and

voluntary credits among the global carbon-market (Gomera et al., 2012, IFF, 2014). VERs

(Verified units of Emissions Reduction) are therefore consigned to the voluntary segment of

the market, primarily supported by public funds and with only limited interest from the private

sector. The latter is made up primarily of companies interested in ‘greenwashing’ and ‘green

branding’, Corporate Social Responsibility strategies or what Cashore defined the ‘social

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license to operate’ (Cashore et al., 2006, p. 11).

2.2.4. REDD+ AND THE MECHANISMS FOR ITS INCLUSION IN THE ‘POST-KYOTO’

REDD+ has been considered for inclusion in the post-Kyoto protocols since COP11, at

Montreal in 2005, where the idea of reducing GHG emissions through forest protection

officially took the name of REDD – Reducing Emission from Deforestation and forest

Degradation in developing countries. However, the first decision in this regard has been

postponed to COP13 in Bali (2007) (Clémençon, 2008) with the Decision 1/CP.13, 1.b.III of

the Bali Action Plan calling for ‘policy approaches and positive incentives on issues relating to

reducing emissions from deforestation and forest degradation in developing countries [REDD],

and the role of conservation, sustainable management of forests and enhancement of forest

carbon stock in developing countries’ (UNFCCC, 2008). REDD was later modified at COP16

as REDD+ by (1) adding new components specifically addressing the conservation and

expansion of forest carbon stocks, and (2) expanding the scope of protecting forests in all

countries (Bodansky and Diringer, 2014c).

Following from Bali, REDD and successively REDD+ gained an increasingly prominent role in

the international scenario. At Copenhagen (COP15) in 2009, the Decision 4/CP.15

‘Methodological guidance for activities relating to reducing emissions from deforestation and

forest degradation and the role of conservation, sustainable management of forests and

enhancement of forest carbon stocks in developing countries’ (UNFCCC, 2009a), widely

considered as the only remarkable achievement of the highly criticised conference, shapes

the first concrete building block for the development of a solid strategy (UNFCCC, 2009b).

At COP19 in Warsaw (2013), for the first time, a strong emphasis was given to the need of ad

hoc technical and especially financial mechanisms to ensure that ‘the activities [….] are

undertaken in the context of the provision of adequate and predictable support, including

financial resources and technical and technological support to developing country Parties’

(UNFCCC, 2014a, Decision 11/CP.19, article 1). A clear framework of action with its 7

decisions has been finally agreed, taking the name of Warsaw Framework for REDD-plus

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(UNFCCC, 2014b, Decision 9-15/CP.19). Unlike the previously adopted mechanisms, the new

framework builds on the concept of result-based finance (Decision 9/CP.19) and emphasises

the role of developing countries in monitoring (Decision 11/CP.19) and involvement in the

Measuring, Reporting and Verification (MRV) of internal actions (Decision 14/CP.19).

Further major achievements of COP19 are the revitalization of the Green Climate Fund (GCF)

(Goldstein, 2013) and the increased portfolio of the BioCarbon Fund of the World Bank’s

Forest Carbon Partnership Facility (FCPF) (EcosystemMarketplace, 2014). Although the

impact of these instruments is still far from being evaluated, the side effects of this

unexpected source of funding could potentially be more negative than positive on the

commitment and willingness of many low and middle income countries (LMICs) to participate.

The available funds could, in fact, become an attraction more than a pushing factor towards

the reduction of GHG emissions. The allocation of public funds – from both international

agencies (UN agencies, World Bank) and governments (ODA) – in favour of the REDD+

mechanisms may be seen as an instrument to revitalize the sector while the market regains

its role or, at the same time, as an incentive for developing countries to adhere, with limited or

no commitment, to a new form of subsidy (Mundy, 2013).

2.3. FUTURE – THE POST-KYOTO ERA AND THE POTENTIAL FOR REDD INCLUSION

With the Kyoto Agreement expired as of 2012 and no other agreement reached to fill the

normative gap, the climate change stage is open to speculation. Owing to its dramatic impact

on greenhouse gas emissions and the recognition by the majority of the original opponents –

mainly environmental activists and NGOs4 (TropicalForestGroup, 2007) – of the need for a

single and strong approach, the inclusion of REDD programmes in any eventual post-Kyoto

treaty has to be seen as inevitable. However, the modalities of their inclusion and the type of

new or revised offsetting mechanisms to be developed are still far from being identified (Anger

and Sathaye, 2008).

4 These NGOs include FERN, Friends of the Earth, Greenpeace, Global Witness and Rainforest Foundation among many others.

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2.3.1. REDD+ IN A FAILING CARBON-MARKET

Following the dramatic falls of the carbon-market in the last few years (BW|BusinessWorld,

2014), a rapid analysis is evolving around the falls of EU-ETS (Lang, 2014, Stephan et al.,

2014) and consequently the so called ‘back-loading’ process the EU is undergoing by (ICAP,

2014). After an initial pick which fired-up the market to its maximum of €25 per metric ton of

carbon dioxide equivalent in 2008, the market has since collapsed to an insignificant €0.35 in

2013 (Ervine, 2013) As the first and most ambitious ETS under the KA, the European

Emission Trading Scheme (EU ETS), while having contributed to the collapse of the market,

also serves as a lesson for most emerging emission trading schemes (i.e. Australia, Brazil,

California, Canada, China, Korea and Japan) to best model their own path and estimate the

potential for market revitalisation in the 2020 scenario (Anger and Sathaye, 2008, pp. 12-23).

Due to the collapse of the global carbon-market, the market for REDD+ credits (VERs) also

fell, leaving an incredible amount of unsold tonnes of CO2e (MtCO2e) (IFF, 2014, Zwick,

2013b, Manibo, 2014). It is estimated that if REDD+ programmes have, as anticipated,

contributed to a reduction of 50% of annual deforestation, an amount up to 9,900 MtCO2e will

be available on market. At the same time, the estimated amount of carbon credits to be

absorbed by the market in the period 2015 to 2020 (‘the interim period’) stands at only around

253 MtCO2, representing less than 3% of the total potentially available volume (IFF, 2014, pp.

11-13). The impact of the oversupply of carbon credits to the final market price was therefore

inevitable. There has been significant discussion since Bali (UNFCCC, 2008), but the ground

is still open for debate on how REDD+ credits will gain a role amongst the compliance market

and, more recently, on how the gap between supply and demand for credits will be filled-in

(IFF, 2014, EcosystemMarketplace, 2014, Denier and Lawrence, 2014).

While the eligibility of REDD+ credits to be traded among the compliance market will enhance

their robustness, it will also increase the supply of credits in a market already suffering from

an over-supply juxtaposed to a dramatic under-demand (Lang, 2014, IFF, 2014). Therefore,

there is no opportunity for a productive inclusion of REDD+ within the compliance market

unless a solid and long-term solution to revitalize the global carbon-market is identified

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(Cowling, 2013).

How the market for CO2 credits will be reshaped in the coming years, particularly in regard to

the so-called ‘interim period’ (2015 to 2020) is difficult to forecast. Since Warsaw COP19,

many speculations have been made with most of them referring to the estimate for 2014

(McCrone, 2014) and to the analysis of the recent new emission trading schemes (ICAP,

2014). Despite forecasting a market trend for CO2 – often considered a speculative rather than

a commodity market (Chan, 2009, Thomas, 2010, Button, 2008) – is very complicated, the

commitments taken, or still under negotiation, by different actors (e.g. EU) may help in

estimating the future market (McGarrity, 2014). These commitments are based on the plans

for reduced emission in the post-Kyoto era as well as the immediate actions to be taken from

now to COP21 (Kość, 2014, Chitre, 2013) and through to 2020 (Friedman, 2014, Anger and

Sathaye, 2008, pp. 9-12).

How a potential new mechanism enabling REDD+ credits to be traded within the CO2

compliance market will work and when and where this argument will be reviewed and

discussed are key issues still to be agreed upon (Zwick, 2013a, Denier and Lawrence, 2014,

FCMC, 2013).

2.3.2. LAND RIGHTS AND THE EMERGENT ‘CARBON-GRAB’

While interest surrounding REDD+ and the potential – though controversial – market for VERs

within the forthcoming post-Kyoto era is generally growing, a new phenomenon is appearing:

the carbon-grab (Lewis, 2014).

In the race to the emerging ‘carbon-market’, many governments are approaching Carbon

Capture and Storage (CCS) considering the CO2 as a mineral resource, therefore separate

from tenure rights recognised to local communities and Indigenous Peoples (Luttrell et al.,

2013). A new form of top-down management of international funds (i.e. GCF, BioCarbon

Fund) is seen as having potential for an unethical backward step in the land rights process of

many developing countries (White, 2014, RRI, 2014). The effect that an increase in REDD+

financing and the emerging phenomenon of ‘carbon-grab’ may have on land tenure and the

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rights of communities living off forest resources is not fully understood. However, the analysis

of how this phenomenon may weaken the effectiveness of REDD+ and the rights of forest

communities remains of primary importance and needs to be addressed (Tickell, 2014). The

potential for a form of protection of the ‘rights’ of forest peoples to be included in any post-

Kyoto treaty is left to governments but binding safeguarding obligations are to be encouraged

(Wallbott, 2014, Savaresi, 2013).

How any post-Kyoto resolution will look is still a matter of speculation. Many have attempted

to analyse any possible scenario in recent years (Ullal, 2013), but most relevant papers are

still only proposing assumptions on the basis of an analysis of past studies, resolutions and

documents (Bodansky and Diringer, 2014a, Bodansky and Diringer, 2014b, Bodansky and

Diringer, 2014c, Morel and Shishlov, 2014, Morel et al., 2014) and present rumours,

speculations and hypotheses.

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3. METHODOLOGY

3.1. LITERATURE REVIEW – GATHERING OF SECONDARY DATA

The dissertation has been based on an extensive literature review of available publications

(i.e. journal article, studies, and official documents), identifying policy and project documents

for content analysis, review and analysis of the findings. Due to the topicality of the study

object, despite the enormous amount of existing information, circumstances are changing

rapidly and availability of referenced updated information is not always sufficient to allow a

comprehensive framing of the picture. Most of the information regarding a hypothetical post-

Kyoto agreement is yet to be on journal and thus sectoral and organisations’ websites and the

press supplemented academic secondary data.

The literature review was used as a tool for analysing all accessible information and allowed

designing a matrix of the complex scenario surrounding REDD+ and the carbon-market, with

an attempt of forecasting the trend over the interim period to 2020.

Electronic databases (i.e. JSTOR, ScienceDirect, EBSCOhost, ProQuest) were searched

using key words, with the principle purpose of identifying published papers related to the

research questions. Websites of international agencies and organisations (see the section

‘Web Sites of Relevance’ for reference) were searched as well to retrieve documents and

reports on progress, challenges and achievements of global strategies and programmes.

A first review of the literature available has allowed narrowing the research questions and the

main goal of the study, leading to the refining of the overall project design.

3.2. PREPARATION OF INTERVIEWS – PRIMARY DATA COLLECTION

To complement the secondary data and deepen the analyses and arguments reviewed from

the literature, a number of semi-structured interviews with key-informants were planned. A

topic-guide for interviews and a related questionnaire to be used when oral interviews were

not possible were developed. Questions were grouped under three main subjects according to

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the expertise of the informants (i. Policy analysis; ii. Market forecast; and iii. Role of the

different actors involved) to facilitate the categorisation of relevant information. Main issues

addressed during the interviews referred to:

- Availability of data and research studies on the foreseeable development for REDD+ and

the voluntary market in the post-Kyoto scenario;

- Positive and negative impact of the inclusion of REDD+ among compliance market for CO2;

- Market forecast for both voluntary and compliance credits in the interim period (2015 to

2020) and beyond;

- Potential role of NGOs and sectorial organisations in REDD+ programmes.

3.3. INTERVIEWS AND QUESTIONNAIRES WITH KEY-INFORMANTS

A total of 34 candidates, representing 24 different institutions, were identified and invited for a

telephone interview of 30 to 60 minutes or to answer the questionnaire where oral interview

was impossible. Key-informants were identified among authors and referees of studies or

research analysed as secondary data during the literature review; editors and contributors to

websites and the press in general. According to their expertise, candidates were asked

questions from one or more of the set subjects ensuring a good level of data gathering for all

three main categories of questions. Priority was given to telephone interviews while written

questionnaires were used as a back-up option whenever the candidate was unable to attend

the interview or the interview itself was impossible (i.e. bad network, impossible to find a

suitable time). All telephone interviews were recorded, upon the candidate’s consent, and

quick notes were taken to complement.

As expected, not all key-informants accepted to take part in the interview. Six candidates were

successfully interviewed (including a panel discussion with three key-informants

simultaneously) while one questionnaire was compiled. A further four candidates agreed to

compile the questionnaire, but never submitted their opinions despite numerous solicitations.

Only one candidate immediately refused to participate in the study, while a large number

never replied to the request despite having been contacted at least twice and being sent an

13

information sheet with general research information to introduce the principal investigator and

share in advance the aims and objectives of the study. A consent form, to be signed and

returned to the principal investigator, has been sent to all candidates as well.

3.4. REFINEMENT OF THE RESEARCH AIM AND OBJECTIVES

Primary data retrieved through interviews has been integrated and critically discussed against

secondary data collected through the literature review to allow a comprehensive analysis of

the research question.

The retrieval of both primary and up-to-date secondary data revealed that the dissertation

argument was far too wide and thus a refinement of the study objectives was necessary to

ensure a significant analysis of opportunities and trends of the voluntary carbon-market in

general and its REDD+ component in particular, main focus of the research.

14

4. RESULTS

This dissertation – based on a desk review of available literature and media source data –

aims at investigating the potential ways forward from the ‘Kyoto’ era and towards COP21, and

the subsequent climate change agreements, mainly in relation to a possible inclusion and

related regulations of REDD+ programmes in the global picture. Primary data, collected

through questionnaires and interviews with key-informants, have allowed narrowing the

discussion –initially focused on a wide carbon-market analysis – on the specific target of the

role of REDD+ among the voluntary market for carbon credits and its potential and implication

in curbing climate change, promoting tenure rights and well-being of forest people and

contributing to sustainable development, in the post-2020 scenario.

4.1. WHAT IS LEADING THE ‘POST-KYOTO’ DEBATE?

The ongoing debate forecasting future policies (focus of the first research question) appears

to be increasingly speculative, despite the fact that the deadline of Paris 2015 (COP21) is

approaching. Being unclear on the final position of the biggest actors (e.g. United States,

Russia, Canada) as well as the stance of most LDCs, the new OECD members (Chile, Korea

and Mexico) and the BRICS countries (Brazil, Russia, India, China and South Africa), a proper

analysis of any possible ‘post-Kyoto’ agreement seems by now purely abstract and highly

hypothetical. It is certainly true that the amount of information, speculation and projection has

being growing in the last months – particularly after Warsaw (COP19) – while approaching

‘Paris’, helping to clarify the evolution on the political arena; however it has also led to a

certain level of confusion among parties, delivering a message of increasing hesitation around

a common understanding and consequently the long attended agreement, which will definitely

replace ‘Kyoto’.

According to Lin (2009, p. 5), and confirmed by some key-informants, there is no way of

getting a binding agreement to replace Kyoto. The major challenge of the KA has always

been the exclusion of one of the biggest polluters (USA), which criticised and contested the

treaty alluding to the exclusion of non-Annex I countries from any form of binding emissions

15

reduction target (TropicalForestGroup, 2007). Many favourable and a similar number of

unfavourable hypothesis could be argued in this regard, but it is a matter of fact that the

United States of America would have never ratified, although they did initially sign, the

agreement mainly due to Byrd–Hagel5 resolution passed by the Senate in July 1997 by a 95–

0 vote (Hovi et al., 2012, p. 130).

Discussions around the post-Kyoto agreement have been enriched by the polemic around the

pollution-intensive BRICS countries that Annex I countries push to commit for emissions

reduction schemes. Moreover, lately, the BRICS argument has widened to developing

countries, with the main scope of reviewing their determination in maintaining the same status

recognised within the KA.

4.2. CARBON-MARKET AND THE ROLES OF REDD+

In regards to the market analysis (focus of the second research question), the review of the

published and un-published literature indicates that the market for carbon is dominated by

speculation and driven by new markets that have emerged over the past years, with the new

California cap-and-trade and six new Chinese emission trading programmes leading the

debate. Very limited room seems left for a voluntary market, as appeared from the analysis of

the literature. Moreover, despite acknowledging the limited number of key-informants

interviewed, it is worth mentioning that the majority of them confirmed what was reported by

the literature and proved to be very sceptical about the effective role voluntary credits – and in

particular those coming from REDD+ programs – may have on the market. Among the others,

two key-informants attempted to forecast an ideal price for unit of carbon dioxide equivalent

within the ‘interim period’. The first, in line with the indication emerged at the 10th Carbon Fund

meeting (Bonn, June 2014), indicated 5 US$ per tonne of CO2 as the most likely price

expected during the interim period (2015 – 2020). The second, more focused to the REDD

market and its overall tradability, affirmed that a price of 20 US$ per tonne would be realistic.

5 ‘Byrd–Hagel’ resolution stats that: ‘the United States should not be a signatory to any protocol ... which would (A) mandate new commitments to limit or reduce greenhouse gas emissions for the Annex I Parties, unless the protocol ... also mandates new specific scheduled commitments ... for Developing Country Parties within the same compliance period, or (B) result in serious harm to the economy of the United States.’

16

Meanwhile, he added that a 1:1 influx of REDD+ credits to other carbon-markets is unlikely to

occur purposing a coupled market where REDD+ credits could be exchange for a higher

number of carbon certificates.

It seems highly improbable that voluntary credits will be traded in the compliance market and

even less probable that a single mechanism will be developed to combine VERs (Verified

units of Emissions Reduction) and CERs (Certified units of Emissions Reduction). According

to the majority of the key-informants, what may be expected is a likely reshape of the

voluntary sector to accommodate the emerging certification standards (i.e. VCS, CCBA, Gold

Standard) more than the improbable inclusion of VERs into the compliance market.

In the last few years the carbon-market experienced all the symptoms of a crisis. The price fell

to the lowest level ever seen, of 0.35 €/ MtCO2e in 2013, and scams discovered across

different countries further discouraged and hindered the market. The sole European Trading

Scheme (EU-ETS) lost 80% of its value in a semester, passing from €30 per ton of CO2 in

June 2008 to €7 at the beginning of 2009 (Taschini and Gregory, 2014). The offset market for

REDD+ credits confirms the trend. According to the ‘State of the Voluntary Carbon-Markets

2014’, despite a two-fold increase of the market in 2013 compared to the previous year (22.6

million tonnes of carbon dioxide emissions equivalent (MtCO2e) of REDD+ offsets were

purchased in 2013 compared to the 9.6 million traded in 2012 (Peters-Stanley and Yin, 2013,

pp. 21-22)) the market price has dropped from nearly $7.4 per tonne of CO2 equivalent

(tCO2e) in 2012 to an average of $4.2/MtCO2e in 2013. The price in 2014 dropped even

further to below $1 per tonne (Peters-Stanley and Gonzalez, 2014). To complete this picture,

the many REDD+ projects, promoted and emphasised by NGOs, lobbying groups and media

coverage, resulted in an over production of credits to be sold on the market. ‘Producers’,

being communities, governments and development projects, appear unwilling to sell their

credits at an extremely low price, preferring to keep them out of the market waiting for a more

favourable future. The market crisis and the depicted phenomena gave rise to the oversupply

of carbon credits experienced since the beginning of 2013 and described by Zwick as a

‘Supply-Side Success, Demand-Side Dilemmas’ (Zwick, 2013b).

17

4.3. NGOS, INDIGENOUS MINORITIES AND THE EMERGENCE OF ‘CARBON-GRAB’

One of the original pillars of this dissertation was meant to analyse the potential role of NGOs

in the promotion, management and regulation of REDD+ programs (focus of the third

research question). The interviews conducted with key-informants revealed that NGOs’ roles

are very different from country to country, influenced by local policies and long-term

commercial agreements, and are thus impossible to be summarised in a common framework.

Countries like Indonesia for example, that are investing effort and capital to reduce their

deforestation through adherence to REDD+ programmes, are binding themselves to long-term

contracts with logging companies. This results in ambiguous resolutions taken by the

government through which on one hand it endorses – Ministerial Decree No. 63/2014 – the

adherence to REDD+ while on the other it confirmed the original plan to clear 14 million

hectares (ha) of degraded forest from 2010 to 20206.

One aspect of REDD that was not included in the initial assertions, but clearly and remarkably

emerged from the media, particularly in the first semester of 2014, refers to the impact on

local communities and indigenous minorities and their rights to land. REDD is about forest and

forests are ‘… about people, and how trees can serve people’ (Westoby, 1987, p. 302), those

usually among the weakest rings in the entire ‘social chain’. Forest people, being indigenous

minorities or communities who clear forestland for their livelihood (i.e. farming, cattle

ranching), live in the forest and have their livelihood secured through the forest (Wunder et al.,

2014). According to the majority of key-informants interviewed, a further simplification is held

vital for the REDD+ strategy to scale up if the inclusion of local communities and indigenous

minorities is to be reached. In this regard, the general opinion is that REDD+ programmes

cannot compete with other more lucrative operations (e.g. logging, palm oil plantations) in

favour of these communities, the strategy therefore has to focus on local commitment on one

hand and subsidies (e.g. ODA, BioCarbon Fund, Green Climate Fund) on the other.

Although some governments are recognising land rights of local communities (e.g. Brazil,

6 Forestry Ministry secretary-general Hadi Daryanto said that “Deforestation is inevitable [for development], but we will allocate the land for better use” (TheJakartaPost, 2014)

18

Mexico and Guatemala), a complex dispute is surrounding the extractive rights. As is

happening for most underground natural resources, the right to the land is not automatically

extended to the extractive resources. Therefore communities legally owning the right to

cultivate their land do not automatically own the right to the underground resources.

With an increased interest in programmes supporting the principle of ‘reducing emissions from

deforestation and forest degradation’, the ancient dilemma of land rights vs. the right to

extractive resources is – if possible – even more vibrant. Carbon sequestration is being

considered as a natural resource and thus some governments are separating the right to land

from the right to CO2 offset through the forests. It is believed that the availability of funds (e.g.

Green Climate Fund, BioCarbon Fund) to support REDD programmes now, and the potential

for a sound carbon-market in the future, may represent the driver for a new dimension of land-

grab explicitly called ‘carbon-grab’. In support to the many REDD+ programmes, often

accused of disenfranchising the local community by attracting with their funds other actors –

governments and private companies –, a recent publication by the World Resources Institute

and Rights and Resources Initiative asserted that there is a positive correlation between local

communities and indigenous groups land ownership and good land stewardship (Stevens,

2014, p. 3), incentivising a more pro-community approach in REDD+ interventions.

Not all informants agreed with the ‘carbon-grab’ idea. The majority of them describe the wave

of protests more as a speculation from activists and indigenous rights’ organisations, although

the number of articles and debates are increasingly voicing minority spokespeople and

inflaming the debate (Tickell, 2014).

The last dilemma regards the genuine behaviour of governments pursuing REDD+ funds. It is

difficult to estimate how many are honestly committed to the principle of avoiding

deforestation and forest degradation in their countries and how many others are just seeing

those funds as an opportunity for extra ODA funds: the tribute of the ‘Warsaw Framework for

REDD-plus’. Most of these funds are still a promise for the coming years since a limited

amount has been made available to date.

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5. ANALYSIS

5.1. BACKGROUND ANALYSIS

The overall architecture of the Kyoto Agreement with its three mechanisms to mitigate global

emissions is based on the assumption that GHGs naturally exist and anthropogenic emissions

– mainly in form of CO2 and methane (CH4) – are part of the ‘global commons’, citing from

Hardin (1968). Therefore the introduction of these three mechanisms (ETS, JI and CDM)

should have been seen as a panacea to mitigate the global emissions rather than being

criticised since the ‘agreement’ signing, as has happened.

Today, nearly fifteen years after the KA endorsement, the scenario is not very different from

the original one. The general public is more informed and concerned about the possible future

climate change scenario, while activist groups are widespread: though it is general opinion

that much of the common interest is more easily explainable with the fear for what we are

leaving in inheritance to the future generations rather than with the real concern for the impact

human beings are having on the planet. Arguably, the same concept of sustainable

development is applied to the climate change scenario as the broader definition of

“development that meets the needs of the present without compromising the ability of future

generations to meet their own needs” (WCED, 1987, p. 45).

Combining the three concepts of ‘sustainable development’, ‘climate change’ and ‘global

commons’, through the foundation of the KA, will bring the reader to the economics paradox of

the ‘optimal level of pollution’. This helps to understand why at least a certain amount of

pollution is, at present, inevitable and therefore embrace the overarching principle sustaining

the KA mechanisms.

If in principle the concept is absolutely solid, for the public opinion – made primarily by the

general population with limited technical knowledge of climate change, environmental

economics and meteorology – It may sound like a licence to pollute granted to the

industrialised (KA Annex I) countries. But though this is generally true for global

20

anthropogenic GHG emissions, it seems controversial while considering emissions from

deforestation and forest degradation. A fourth concept may be considered at this point, still in

relation to the sustainable development definition: ‘biodiversity conservation’. It is possible to

find the connection between the two concepts and identifying in the conservation of

biodiversity a solid principle for protecting natural forests from deforestation and

anthropogenic degradation, but once again it can be read in economic terms.

As natural forest degradation and deforestation is the source of between 14% (Harris et al.,

2012) and 20% (IPCC, 2007) of the global CO2e emissions, it would be enlightening to

understand how much could be saved in terms of global investments in emission reductions in

Annex I countries through investments to reduce emissions from deforestation and forest

degradation in non-Annex I countries. In other words, an estimation of the investment needed

to reduce by 20% the global CO2 emissions from reducing the burning of fossil fuels

compared to investment in REDD+ programmes, which have in addition the advantage of

enhancing biodiversity conservation and ecosystem services.

According to Clive Richardson’s comment to the article that appeared on July 3, 2014 on red-

monitor.org (redd-monitor.org, 2014), the market cost of CO2 emissions from liquid fuels,

calculated according to the amount of CO2 produced by using crude oil, is about $45.95/t

CO2e. Assuming the accuracy of this calculation, and looking at the current market for CO2

credits in general and for REDD+ credits in particular, it is clear why countries with high costs

for reducing emissions would be interested in investing in developing countries still

contributing to the curbing of their domestic emissions.

5.2. THE EMERGING SCENARIO TOWARDS A POST-KYOTO AGREEMENT

How this emerging scenario reflects on an eventual post-Kyoto agreement is still pure

speculation. The path to COP21 in Paris is very uncertain though the coming months, towards

COP20 in Lima (December 2014), should help in refining the different ideas and ascertaining

the most ideal scenario for the future protocol. The position of the KA non-Annex I countries

will play an essential role in defining the agenda and will help scouting for opinions among

21

Annex I countries. One of the most pressing current issues is in fact the introduction of

binding emissions reduction for BRICS countries and the level of inclusion of developing

countries in the global picture; the lead argument of the USA for not signing the KA

(Halvorssen, 2007). While the issue of setting emission reduction targets for developing

countries has been on the agenda since Kyoto, the renewal of binding targets for Annex I

countries seems increasingly unlikely to happen despite the fact that possible alternatives to

this are still far from being clear. In this respect, the overall opinion of the key-informants was

very clear and leaving no doubt. If a general agreement involving the majority of parties is to

be anticipated, there is no way for any binding agreement to be reached. While the exclusion

of the United States from the KA has been compensated for by the strong position taken by

the European Union, a new deadlock on the same principle of ‘double standard’ is expected

to have a much more negative impact than in the past.

According to Nikhil Ullal, developing countries – and the largest emitters (e.g. India, China,

Brazil) in particular – must be included in the protocol and have a binding target (Ullal, 2013,

pp. 27-29) cancelling the long-standing distinction between developed and developing

countries. Ullal’s opinion is based on the analysis, supported by Green, that the growing

GHGs emissions in developing countries is predicted to exceed those of developed countries

by 2020 (Green, 2009).

According to Joy Hyvarinen – FIELD (Foundation for International Environmental Law and

Development) Executive Director – the post-Kyoto agreement is not the only issue on the

table of COP21 but the pre-2020 target needs a thorough discussion as well. While any post-

Kyoto agreement will be effective only after 2020, the ‘interim period’ still represents a critical

milestone for developed countries to show their commitment before insisting that developing

countries demonstrate theirs and to ensure the containment of GHG emissions before it is too

late (Hyvarinen, 2014b).

Looking at any possible scenario, an interesting analysis comes from Morgenstern (2009) with

what he described as a “Two Protocols Approach”: a combination of an amended Kyoto

22

Protocol for the signatory parties plus a new agreement, under UNFCCC, for any other new

signatory party. The “Two Protocols Approach” intends avoiding an eventual backtracking risk

due to a complete KA replacement. According to Morgenstern the complete replacement of

KA could potentially lead signatory parties to backtrack leading to a tedious and expensive

renegotiation phase. An amended KA will potentially minimize this risk, while enabling a scale

up to a new level of commitment. On the other hand, a new agreement for the “non-Kyoto”

countries has to be negotiated from scratch to ensure a global commitment to the reduction of

GHG emissions, ideally aimed at harmonizing the two agreements in the future. The dualism

of Morgenstern’s approach may solve in part the long-term issue of how to harmonize present

signatory and non-signatory parties, while at the same time could be penalized by the high

cost and complexity of a treaty duplication (Ullal, 2013, p. 37).

Alternatively, Joy Hyvarinen promotes a reconciliation process rather than a liability one, to

allow all parties to play their role in the negotiation towards and beyond the “2015 agreement”

(Hyvarinen, 2014a). This approach may help in overcoming the limitations of KA, and in

particular the binding target reduction that, despite being the main innovation and peculiarity

of the agreement, has clearly been the biggest barrier to its endorsement by some highly

relevant parties, leading – for example – to the exclusion of the USA.

5.3. ROLE OF REDD AND THE VOLUNTARY CARBON-MARKET

In this uncertain post-Kyoto scenario, the role of REDD+ appears clearer than ever. All parties

acknowledged the initial mistake made in lobbying for its exclusion from the KA and the

inclusion of REDD+ programmes seems now inevitable in any “2015 agreement”. What

remains still unclear is the future for VERs and its inclusion in the compliance market, partially

due to the collapse of the global carbon-market coupled with the complex certification process

of carbon credits from deforestation and forest degradation.

As strongly emphasised by the majority of key-informants interviewed, there is no way for the

two markets – compliance with its CERs and voluntary with its VERs – to merge and this is

generally seen as a positive point, rather than a limitation. One respondent, in particular,

23

suggests there could be fragmented markets under a common reporting system. Under some

systems, certain VER types and vintages may be accepted, albeit discounted. The supply-

demand gap recently experienced revealed the substantial risk of overproduction versus a

limited market demand, and in this respect merging the two carbon markets may only worsen

the current situation. At this stage, the most ambitious and realistic question is whether the

market is ready to accept REDD+ credits and what will be the risk of the price remaining at an

unattractive level, discouraging therefore the overall sector. The goal of the carbon-market is

ultimately the global reduction of GHG emissions. This has to be kept in mind while analysing

this issue, since the overall assumption behind the REDD concept is to create an incentive-

based strategy to reduce emissions from deforestation and forest degradation, and thus GHG

emissions, and consequently contribute to the curb of climate change. The market for REDD+

credits may thus become an excellent tool to contribute to the reduction of one of the biggest

emitters of GHGs.

Considering recent studies (IPCC, 2013, pp. 19-20), the increase of the mean surface

temperature (MST) by 2°C expected by the end of the century has to be considered as more

than an overly optimistic target. Therefore, the need of reducing GHG emissions remains and

will have an increasingly central role in the coming years. As emphasized by Hyvarinen, the

pre-2020 is – if possible – even more important than the following period and no country is in

the position to wait another five years before taking action.

In this view, the voluntary market for carbon credits may be seen not only as an economic

alternative to deforestation and to promote biodiversity conservation, but as playing a central

critical role in the overall reduction of GHG emissions through sequestration, carbon stocking

and reduced emission from deforestation and forest degradation. The role for REDD+ within

the “2015 agreement” may thus be not only inevitable but central, and the market for VERs –

or any other future mechanisms to be included in – will be vital to the definition of any future

treaty. In this regards, the future and the role of forest people need to be addressed as well.

24

5.4. THE EMERGENCE OF THE ‘CARBON-GRAB’

The increasing potential market for carbon credits, despite the oversupply and collapse of the

unit cost being of concern in the international arena, is attracting the attention of decision-

makers and putting pressure on the most fragile segments of the society. Among these,

people living off forest products may eventually have significant benefits from forest

conservation and at the same time evident losses from a new generation of eviction and

exploitation of land tenure re-baptized ‘carbon-grab’.

The ‘carbon-grab’ phenomenon has recently attracted attention and speculation. It may be

difficult judging whether the contrasting opinions come from a hidden agenda or rather a

genuine frustration and concern aimed at protecting the interests of those who do not have

the power to speak and defend their own rights. The number of articles and opinions gathered

generally indicate an increasing awareness about the new generation of land grabbing and

eviction by private companies and colluded governments conceding extractive permits in

areas traditionally owned by local communities and indigenous minorities (Lyons and

Westoby, 2014). According to Andy White – Rights and Resources Initiative (RRI) – since the

REDD came to the scene, a slow-down in land recognition and community rights was

experienced compared with previous decades (White, 2014). Yet, a recent report from the

World Resources Institute shows a positive correlation between community or indigenous-

owned land and good land stewardship (Stevens, 2014). If proved, this could lead to a

revisited perspective for the scale-up of REDD+ programmes in favour of community-owned

areas.

Despite the large amount of published and unpublished information in this regard, the majority

of key-informants interviewed agree that the carbon-grab concept is mainly speculation by

activists. Directly citing one of them ‘carbon as a commodity has no value for the

communities’, since the financial benefits from the carbon-market or from REDD have never

been considered at their disposal.

Perhaps, a specific provision for land and community rights within the ‘2015 agreement’ will

25

help increase the effectiveness of REDD+ intervention protecting the fragile segments of the

society otherwise at severe risk of further exploitation.

5.5. CARBON-MARKET

While the committed funds, mainly Green Climate Fund and BioCarbon Fund, are supposed

to stimulate the REDD sector growth, the revitalisation of the market is deemed necessary to

ensure its sustainability in the long term. An eventual post-Kyoto agreement should therefore

encourage the promotion of a development model free from subsidies and the creation of

innovative mechanisms capable of revitalising the market and more friendly to all society

segments (i.e. indigenous minorities in particular and forest dweller communities in general).

REDD is significantly less valuable than the majority of the activities undertaken in the same

area (i.e. logging, farming, palm tree plantation, bioethanol). Therefore, it is essential for

REDD+ to represent an added value for local community, government and the society as a

whole in order to win the hard competition. While the integrity of the forest with its biodiversity

has its weight on this scale, it cannot be the only added value to promote its conservation and

to overtake other more remunerative activities.

If, as purposed by Richardson (redd-monitor.org, 2014), the price of carbon credits – being

CERs or VERs – were allowed to benchmark the daily cost of crude oil, and considering the

release of 0.32 tCO2e per each barrel of crude oil (Bliss, 2008), a unit cost per tCO2e of about

US$ 45.95 (amount subject to fluctuation due to the market cost of crude oil) could be

assumed.

Unfortunately the reality is far more bitter and while the actual cost is lower than US$ 1per ton,

the current willingness of the participants of the 10th Carbon Fund meeting (CF10) – held in

Bonn in June (2014) – was ‘to pay up to US$5/t CO2e’ (redd-monitor.org, 2014), which is nine

times less that the estimated cost based on the market for crude oil on the same day.

Confirming the difficulties of forecasting a ‘carbon’ price, among the key-informants only two

anticipated a hypothetical price for the interim period. The first, in line with the Carbon Fund

26

proposal, indicated 5 US$ per tonne of CO2 as the most likely price we should expect during

the interim period. The second, more focused to the REDD market and its overall tradability,

affirmed that a price of 20 US$ per tonne would be realistic. He added that a 1:1 influx of

REDD+ credits to other carbon-markets is unlikely to occur. At best, there will be a coupled

market, e.g. 1 REDD+ credit will be exchange for every 5 carbon certificates. This would

reduce the unit cost to a hypothetical 4 USD per tonne for REDD+ credits if compared to the

CDM.

In practical terms, the revitalization of the carbon-market – and of the voluntary market, in

particular – would be facilitated by the definition of a fair price able to incentivize companies

and governments to reduce GHG emissions on one hand and to empower the market of

credits on the other, but this is unlikely to happen. If the price is not increased to a minimum

reasonable price, the overall risk may be having an excellent theoretical tool with no practical

applications and irrelevant potential for scaling up. Moreover, the likely risk of collapse for the

many programs already active may leave many communities, as well as developing country

governments, with no other means than returning to the traditional use of forest resources

with a potential increase of slash-and-burn agriculture and logging to cope with the failed

investment they believed could have given a sustainable alternative to their livelihood.

27

Table 1: Comparison of key literature review vs. key-informants’ opinions

Literature review √ X Key-informants’ opinion

→ COP21 as the platform for reaching the ‘2015 agreement’

Paris will probably see the new ‘2015 agreement’ but it is improbable that a sound agreement will be developed and there is no room for a binding one.

√ The feasibility of an agreement is not at all

a precondition for having a solid treaty and even less for having a new binding agreement.

→ Inclusion of REDD in post-Kyoto agreement

There is no means for exclusion of REDD from any new treaty, although any offsetting mechanisms is still far from being identified.

√ The majority of the actors involved in

REDD are seeing its inclusion into any post-Kyoto agreement as inevitable.

→ Emergence of ‘carbon-grab’ phenomenon

There is general agreement on the negative impact the carbon finance is having to local communities and indigenous minorities

X

Oppose to the general opinion, the majority of the respondents were very sceptical about the real impact of the phenomenon describing it as a speculation.

→ Inclusion of voluntary market into compliance market

There is scepticism among the literature regarding the two – voluntary and compliance – markets and the possibility of a merge under the post-Kyoto scenario.

√ There is no way to incorporate the

voluntary market into the compliance. A new market mechanism has to be developed.

→ Forecast of carbon price

To forecast the price of carbon credit for the coming period is by now just highly hypothetical due to its dramatic fell in the last period.

√ Only two proposed what they defined the

‘most likely price’ for the interim period, highlighting the unlikeness of being possibly a measure of market.

Agreement between sources √

Disagreement between sources X

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6. CONCLUSIONS

6.1. THE ROAD TO ‘PARIS’

There is still considerable confusion around the definition of whichever instrument will take

over from the Kyoto Agreement, despite time shortening for agreement on the right

compromise, which eventually will involve developed, transition and developing economies.

Although the deadline for a new agreement has been delayed to COP21 in Paris (2015) since

COP17 (Durban – 2011), still too many speculations are surrounding the potential for a sound

‘2015 agreement’ capable of tiding together all parties and uncertainties seem to govern the

scene.

The complex issue of renewing the approach adopted within the KA of having binding

emission reduction targets for developed and highly polluting countries appears very weak,

particularly considering the USA’s exclusion from the KA and the later withdrawal of Canada.

The possibility of a “Two Protocols Approach”, as purposed by Morgenstern, looks attractive

and at the same time may help narrow the expectation of all parties, regardless of the extra

costs linked to a treaty duplication that involved parties are unlikely to be prepared to pay.

Despite numerous speculations based on few solid signs, it is generally believed that a new

agreement will be drafted in Paris. It is unlikely to contain binding emission targets, but will

likely design the patch for the post-2020 climate change agenda.

6.2. POTENTIAL FOR REDD+ TO SCALE UP AND REVITALISATION OF CARBON-MARKET

As per the ‘2015 agreement’, the shape to be taken by the REDD+ sector is also highly

blurred, despite it seeming inevitable that it will play a vigorous role within the climate change

arena and the carbon-market, and eventually a prime role in any new treaty.

The future of VERs seems very unpredictable and not deemed compatible for merging with

CERs, but rather confined to the voluntary market. The role of this market is unclear, since it

is governed by speculation and limited to a very narrow segment of the society. In this regard,

29

and accepting that the ‘global commons’ are governed by economic principles, it may be

possible for a new treaty – emerging in the coming period towards Paris – to redefine an

incentive-based mechanism centred on the cost of polluting and the eventual paradox of

investing in emission reduction through REDD+ financing interventions.

The revitalisation of the carbon-market appears to be a feasible opportunity, despite the

tremendous fall in credit price, representing at present one of the biggest speculative factors

in regards to the efficiency and effectiveness of REDD+ operations.

6.3. CARBON-GRAB AND FOREST PEOPLE’S RIGHTS

The emerging phenomenon of the carbon-grab is, although controversial, an issue of critical

importance while discussing the future development and strengthening of REDD+.

As highlighted by some of the interviewed key-informants, to successfully scale up any REDD

programme and the voluntary carbon-market, a simplification and harmonisation of procedure

is deemed necessary. Therefore, if an integrated vision has to be promoted – with the post-

Kyoto agreement playing a prominent role in this regard – a provision for land rights and

tenure for indigenous minorities and local forest communities has to be discussed for its

integration into the treaty immediately. This will help to support the acceptability of REDD and

the overall understanding and appreciation of the carbon-market also to those who are still

sceptical about the concept of ‘granting a permit to pollute’. Moreover, it will support the

survival and the livelihood of those who live in and protect the forest and its biodiversity as a

means of supporting their livelihoods, implicitly boosting the REDD+ sector’s effectiveness.

6.4. LIMITATIONS

As for any literature review, the main limitation of the study refers to the predominant use of

secondary data and in particular of information retrieved from the internet and/or press. The

use of semi-structured interviews was deemed necessary to reduce, as much as possible, the

bias given by controversial information and, at the same time, allow for personal interpretation

and speculation on the matter narrowing the discussions to key essential points of concern.

30

As expected, contradictory information represents a large portion of the overall secondary

data.

Despite the significant amount of data analysed, the topicality of the study object – and the

related information in favour and against the proposed opinions – makes any final assertion

complex and open for critics, at least until COP21 in Paris when hopefully a new agreement

will be reached eventually ending any speculations regarding the ‘post-2020’ situation.

31

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STERN, N. 2007. The Economics of Climate Change: The Stern Review, Cambridge University

Press.

SUTCLIFFE, J. P., WOOD, A. & MEATON, J. 2012. Competitive forests - making forests

sustainable in south-west Ethiopia. International Journal of Sustainable Development &

World Ecology, 19, 471-481.

THOMPSON, M. C., BARUAH, M. & CARR, E. R. 2011. Seeing REDD+ as a project of

environmental governance. Environmental Science & Policy, 14, 100-110.

VARADARAJAN, D. B. 2014. REDD, Climate Change and the Rights of Tribal Communities in

India. Journal of Studies in Dynamics and Change (JSDC). 1, (1), 15-22.

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9. WEB SITES OF RELEVANCE

Bloomberg New Energy Finance http://about.bnef.com/

BW | BUSINESSWORLD http://www.businessworld.in/news/business/environment/

Carbon Credit Controversy http://carboncreditcontroversy.wordpress.com/

Carbon Planet http://www.carbonplanet.com/

CIFOR http://www.cifor.org/

Climate Focus - REDD+ http://www.climatefocus.com/pages/redd_plus

Code REDD http://www.coderedd.org/

Conservation International http://www.conservation.org/

Cornerstone Mag http://cornerstonemag.net/

Eco-Business http://www.eco-business.com/

Ecosystem Marketplace http://www.ecosystemmarketplace.com/

Environment & Energy Publishing – eenews http://www.eenews.net/

FCMC http://www.fcmcglobal.org/

Forest Carbon Asia http://www.forestcarbonasia.org/

Forest Climate Change http://www.forestsclimatechange.org

Foundation for International Env. Law and Development http://www.field.org.uk/

Forest Carbon Partnership Facility – FCPF http://www.forestcarbonpartnership.org/

Forest Carbon Portal http://www.forestcarbonportal.com/

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Intergovernmental Panel for Climate Change – IPCC http://www.ipcc.ch/

International Institute for Environment and Development http://www.iied.org/

Mongabay http://rainforests.mongabay.com/redd/

REDD+ Community http://reddcommunity.org/

redd-monitor.org http://www.redd-monitor.org/

Responding to Climate Change http://www.rtcc.org/

Rights and Resources Initiative – RRI http://www.rightsandresources.org/

SNV World – REDD+ http://www.snvworld.org/redd

The Ecologist http://www.theecologist.org/

The Global Canopy Program – GCP http://www.globalcanopy.org/

The Nature Conservancy – TNC http://www.nature.org/

The REDD Desk http://theredddesk.org/

Tropical Forest Group http://www.tropicalforestgroup.org/

UN-FAO http://www.fao.org/

UN-REDD program http://un-redd.org/

UNFCCC – Framework Convention on Climate Change http://unfccc.int/

Wildlife Conservation Society – WCS http://www.wcs.org/

World Resources Institute – WRI http://www.wri.org/

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