Reducing Emissions from Deforestation in Developing Countries COP-11 Agenda Item #6

1. Reducing Emissionsfrom Deforestation in Developing CountriesCOP-11 Agenda Item #6 UNFCCC Workshop August 31, 2006 www.RainforestCoalition.org

2. PNG Overview • Forests:The island of New Guinea has the world's third largest rainforest, after Amazonia and the Congo. PNG has about 35 million hectares of tropical forests. • Climate:As a Small Island Nation, we will feel the adverse effects of climate change, including the terrible consequences of sea level rise. • Diversity:PNG is a land of tremendous diversity: • 820 living languages - not dialects, languages - more than any other country in the world. • Tremendous biological diversity - with 750 bird species and the greatest floral richness of any island on the planet. • 7.5% of global biodiversity on less than 1% of landmass.

3. Papua New Guinea

4. PNG Experience:Multilateral Cooperation Multilateral Efforts: In 1972 the world held its first global conference on the environment in Stockholm. Since then, two other such conferences were held in 1992 in Rio de Janeiro and in 2002 in Johannesburg. Continued Decline: Over past 34 years, and in spite of these international efforts, our world remains hampered by a steady and significant decline in its natural environments, and the goods and services those environments provide to its inhabitants. Trends: The trends in air and water quality, crop production, global fisheries, infectious diseases, traditional economies, and social stability are all negative.

5. PNG Experience:ODA Outcomes Poor: ODA has brought very little with regard to poverty alleviation or reduction in deforestation rates. Good: ODA has been successful in supporting analysis and technical capacity. Mixed: Good evidence that ODA efforts to reduce ‘illegal logging’ activities are taking effect. However, poor results delivering benefits of ‘fair trade’. Developing Countries still receive only a small fraction of logging values.

6. Deforestation Drivers • Agriculture:Soya, Coffee, Cocoa, Sugar, etc. • Logging: Low value exports, unsustainable practices. • Development:Roads,power-lines, social services, etc. • Population:Urbanization + growth drives above. Perverse Incentives!

7. Climate Change:Multilateral Cooperation Common but Differentiated Responsibilities • Industrial to Developing: Maintain philosophy of mandatory reductions that finance voluntary instruments by developing nations. Support Sustainable Development. • Amongst Developing: Immense difference between developing countries. Need flexible ‘basket’ of voluntary emissions reduction instruments – in present form, CDM alone is not enough. Must consider National Circumstances. North to South Flexible Incentives

8. Questions for the Future:Expansion of Annexes • Annex vs. Non-Annex:Likely not sustainable if global climate stability targets are to be achieved. • Multi-Staged Expansion of Annexes:We must consider staged expansion of Annexes, considering economic, governmental and social conditions. • Balance mandatory ‘reductions’ against new ‘supply’ • Possible to integrate by sector and/or country. ‘Black & White’ → ‘Full Color’

9. COP-11 Agenda #6:Policy Approaches • Leverage Experience • Local Community Participation & Buy-In • Sustainable Forest Management Incentives • Promote increased productivity for land use – agriculture, ranching, among others. • Strengthen National Institutions and Legal frameworks • Expand concept to pay for environmental services • Integrate National Development Plans • Increase political status of conservation activities • Capacity Building • Credit for Early Action • National Level Pilots • 2007 Deadline

10. COP-11 Agenda #6:Positive Incentives Flexible Basket of Voluntary Incentive (Diversity of National Circumstance) • Official Development Assistance Approach (ODA) • Voluntary National Approach (Voluntary ‘Annex C’?) • Flexible Scale Approach – National Circumstance • Aggregate under UNFCCC: Bilateral and/or Multilateral Funds and Emissions Trading Agreements • Optional Protocol within UNFCCC Voluntary Multi-Staged Not Mutually Exclusive

11. COP-11 Agenda #6:Positive Incentives Official Development Aid Approach • Supplimental Funds for Capacity Development • Special Climate Change Fund & GEF • Up-front funds - debt for nature, revolving funds... • Public-Private Partnerships • Tax on carbon-intensive commodities • Prioritize Actions under Adaptation Fund

12. COP-11 Agenda #6:Positive Incentives • Voluntary National Approach:Developing countries could participate in a “Voluntary Annex C” for deforestation: voluntarily adopt a negotiated emissions reductions approach for forestry sector – could generate a REDD Credit. • Develop a robust national ‘reference period’ • Fully fungible with AAU/ERU emissions allowances (JI as precedent.) • Credit could for activities in advance of the 2nd Commitment Period. • Flexible Scale Approach: Certain countries face issues, such as political instability, that may limit ‘national’ implementation.

13. COP-11 Agenda #6:Positive Incentives • Aggregate under UNFCCC: Aggregate bilateral or multilateral emissions reduction efforts and funds to support emissions reductions from deforestation in developing countries -- Australia, UK, US States, ETS, etc. • Optional Protocol:Bilateral and/or multilateral agreements could also be aggregated to a new “Optional Protocol” under the UNFCCC. Credits would be fungible.

14. COP-11 Agenda #6:Price vs. Reductions • CER • Positioned as ‘cheap’ mechanism • Carries ‘performance’ risk – buyer must replace credit • Lower ‘atmospheric value’ – supplemental credit • AAU/ERU • National ‘Cap & Trade’ • Fixed targets • Minimal transactional risk • Higher ‘atmospheric value’ • REDD (Annex C?) • Voluntary Reductions • National Scale • Performance Risk minimized • Higher ‘atmospheric value’ • Higher ‘Social value’

15. COP-11 Agenda #6:Additional: Deeper Cuts  AAU --- JI --- CDM  KP1 (- 6%) Additional  AAU --- JI --- CDM  REDD KP2 (- 10%?) + REDD - 5%? + New Total: -15%? NEW CREDITS = DEEPER CUTS

16. COP-11 Agenda #6:Social Benefit • Significant source of carbon emissions currently outside frameworks. • Increases the role of developing countries through a ‘national’ approach. • Significant new revenue streams to addresses poverty in rural areas with clear metrics to access effectiveness. • Underpins MDG objectives related to environment, poverty, gender equality, health, etc. • Major biodiversity conservation benefits • Supports efforts against desertification and soil erosion • Leads to watershed protection and potable water supply

17. Key Messages • Drivers:Leading drivers are identifiable. Must overcome perverse incentives and opportunity costs of alternative land uses -- both locally and internationally. In most cases, higher carbon ‘incentives’ will drive greater emissions reductions from deforestation. • Solution Possible:Technology, methods and markets available now to accurately measure changes in carbon stocks and trade relevant credits at a National scale. Challenge is implementation (standards, policy, etc.)

18. Key Messages • Policy & Incentives:Diversity of ‘national circumstances’ justifies a flexible set of positive incentives -- ODA may be important to get started quickly, but markets are likely the best sustainable finance solution. • Future:Deforestation must feature prominently in future climate stability actions. Continue cross-regional consensus -- Bolivia, Central African Republic, Congo, Costa Rica, Dominican Republic, DR Congo, Gabon, Ghana, Guatemala, Honduras, Indonesia, Kenya, Lesotho, Nicaragua, Panama, Peru, Papua New Guinea. International funding needed immediately for analysis, capacity building, & pilot market activities.