The Kyoto Protocol, whose future or obituary is under construction in Bali, set the first framework for a global carbon market with the Clean Development Mechanism (CDM) in 1997 (although it did not actually come into operation until the Protocol came into force in 2005). Critics of the CDM are not hard to find, but the substance of their objections varies enormously. They range from NGOs like the International Rivers Network which says it opens the door to huge scams, to multi-million dollar companies which want to make CDM work but say it has been hobbled and risks losing credibility altogether.
I spoke to a player in one of the latter, EcoSecurities co-founder and President Pedro Moura Costa, shortly before he left his Oxford office for Bali.
In the 1980s Moura Costa left behind a promising career as a surfer and semi-professional musician in Rio de Janeiro to become a penniless doctoral student of forestry and plant biotechnology in Britain. Some twenty years later he runs a company with one of the largest portfolios of emission reduction projects in the world, focussing specifically on the CDM.
One of the issues at the top of Moura Costa’s mind is deforestation, which is not included in the Kyoto Protocol in 1997 even though it accounts for something like 20% of global emissions. As Peter Goldmark said to Chris Littlecott in a previous post on this blog, momentum to include deforestation in the international system that might succeed Kyoto ‘1’ is building. Some estimate it could deliver many tens of billions in hard currency to developing nations.
For Moura Costa the push to include deforestation is a welcome development but long overdue and laced with historical irony. He thinks it should have been included from the start, but that an unholy alliance of convenience between powerful international NGOs in northern countries and the government of Brazil put paid to this. Ten years down the line, he estimates, around one hundred billion tonnes of carbon dioxide has been emitted because of tropical forest clearance.[The estimate is based on an annual deforestation rate of about 13 million hectares,with a about 750 tonnes of CO2 per hectare in pristine rainforest]. Compare that to the 2bn tonnes per year of CO2 mitigated under the EU’s Emission Trading Scheme, says Moura Costa; it’s a tragic lost opportunity for emissions reduction, not to speak of the protection of biodiversity and watersheds.
Moura Costa says that a major reason that the NGOs opposed inclusion of deforestation in 1997 was because they were keen to promote investment in renewable energy technologies, and there was a perception that conservation forestry would swamp the market. There was also a pious horror about the idea that governments should be rewarded financially for what was the right thing to do anyway.
The position taken by Brazil – the only rainforest nation to oppose inclusion of deforestation in 1997, but by far the largest and most powerful – was more Machiavellian, says Moura Costa. One could speculate aboutthe precise reasons. First, a certain snobbishness on the part of the Brazilian power elite: the sense that country didn't need financial assistance to protect its forests; it needed technological development. Second, a knee-jerk nationalism hanging over from the time military rule that was suspicious of foreign interference and the potential precedent that the Amazon was somehow a ‘global’ resource.
Third, Costa Rica had just announced the most sophisticated greenhouse gas mitigation project in the world, all of it based on avoided deforestation, and Brazil could not tolerate such a small country getting theprestige of taking the lead. Fourth, Brazil recognised that one day it would have to take on emission reduction targets. With around 75% of the country’s emissions coming from deforestation, that ‘asset’ should be guarded carefully until –with pristine rainforest an increasingly scare resource – its valueincreased. Meanwhile, it was believed, Brazil should develop the Amazon frontier as fast as possible in order to build up the conventional economy.
So how had we arrived at the point where an international system of incentives for avoided deforestation is almost orthodoxy? Moura Costa says the Stern Review, which reasoned it was ludicrous to leave out deforestation, played an important role by influencing UK and in turn the EU position. The Coalition of Rainforest Nations including, finally, Brazil had put their weight behind it. And Indonesia, hosts of the Bali climate conference, were pushingfor it. And, at last, northern NGOs understood the threat that biofuels posed to rainforests.
But - the cliché is irresistible – we’re not out of the woods yet if the CDM is to prove itself a useful tool and a model for a more ambitious future emission reduction regime. Moura Costa says that unless the CDM performs much better before 2012 it risks being labelled ineffective andanother vital opportunity will have been lost. Most urgent, he says, is a full review of how the CDM isstructured. This should start with the professionalisation of its ExecutiveBoard which at present is a group of part time political appointees.
The UNFCC and Point Carbon estimate that 3.25bn to 3.3bn tonnes of CDM credits are needed for all parties to reach their Kyoto targets to 2012. At present there areabout 2,700 projects in the UNFCCC pipeline, aggregating to 2.4 bn tonnes. The CDM Executive Board and the parties to the Protocol tend to assume that this means we are about two thirds of the way there. What they do not take account of, says Moura Costa, is their own data showing that projects to date have only delivered an average of 38% of the credits envisaged. So that 2.4bn on paper is more likely to be 0.88bn – less than a third of the way towards the requirement. Meanwhile, the window or investment up to 2012 is shrinking quickly. There is no room for complacency.
