Forests should be protected with carbon money – but not through cap-and-trade schemes

There have recently been a few reports in the media about using carbon finance to protect the world’s forests.

Forests provide the world with ‘ecosystem services’ (like biodiversity or absorbing carbon dioxide), which should be valued and paid for. If communities in forested countries can only survive by clearing the forest for timber and farming, it will be impossible to stop deforestation without paying them.

MEPs involved in the EU ETS are arguing that forestry could be protected by giving land owners EUAs if they leave the forest alone. A recent Panorama programme argued something similar – corporations should offset their carbon footprint by paying people to preserve forests.

The CDM has resisted forestry based CERs because it is too difficult to prove the reductions and their additionality. But there is an even better reason why a CDM type approach is wrong: the main market for the forestry credits would be cap-and-trade schemes (i.e. the EU ETS at this stage), so preserving forests would allow increased internal emissions and no net emission reduction.

The right approach would be provisions under the UNFCCC for a forestry fund. Forest owners would receive freely tradable credits when their management of the forest is verified. Anyone would be allowed to sell credits to the fund, either at a fixed price or through regular reverse auctions. Under this system, the market would provide upfront cash to forest owners (assuming we have emerged from financial meltdown, of course).

The fund would be comprised of national donations from rich countries. Those with working cap-and-trade schemes could use their auction revenues – which would effectively mean carbon consumers in rich countries pay for forests to be preserved in poor countries.

That’s what it comes down to: someone just has to pay up.