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Reducing Emissions from Deforestation:
global mechanisms, conservation and
livelihoods

December 2007

The United Nations Environment Programme World Conservation Monitoring Centre
(UNEP-WCMC) is the biodiversity assessment and policy support arm of the United
Nations Environment Programme (UNEP). The centre has been in operation since 1989,
combining scientific research with practical policy advice.

UNEP-WCMC provides objective, scientifically rigorous products and services to help decision
makers recognize the value of biodiversity and apply this knowledge to all that they do. Its core
business is managing data about ecosystems and biodiversity, interpreting and analysing that data to
provide assessments and policy analysis, and making the results available to international decision-
makers and businesses.

Prepared by
Lera Miles

Disclaimer: The contents of this report do not necessarily reflect the views or policies
of UNEP-WCMC or contributory organisations. The designations
employed and the presentations do not imply the expressions of any
opinion whatsoever on the part of UNEP-WCMC or contributory
organisations concerning the legal status of any country, territory, city or
area or its authority, or concerning the delimitation of its frontiers or
boundaries.

Citation: Miles, L. 2007. Reducing Emissions from Deforestation: global
mechanisms, conservation and livelihoods. UNEP World Conservation
Monitoring Centre, Cambridge, U.K.

Acknowledgements: UNEP-WCMC’s work on the linkages between reducing emissions from
deforestation, livelihoods and protected areas has been financially
supported by the Department for International Development (UK), the
Federal Ministry for the Environment, Nature Conservation and Nuclear
Safety (Germany), UNEP and WWF UK.

Many organisations and individuals provided ideas and input for this
paper. We are grateful for such input to discussions at and the members of:
the Cambridge Conservation Forum; the Poverty Environment Partnership;
the Poverty Conservation Learning Group; the NERC QUEST
programme; the Convention on Biological Diversity; and in particular to
Katie Bolt, Alison Campbell, Sarah Clark, Lauren Coad, Jerry Harrison,
Jon Hutton, Valerie Kapos and other colleagues at UNEP-WCMC; An
Bollen at UNEP ROAP; Bernardo Strassburg at UEA; Dilys Roe at ITED;
and John Lanchbery at RSPB.

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Contents

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Reducing Emissions from Deforestation: global mechanisms,
conservation and livelihoods

Introduction

This briefing considers the implications for biodiversity conservation and local people’s
livelihoods of the current discussion on reducing emissions from deforestation in developing
countries (RED-DC, henceforth RED) under the UN Framework Convention on Climate
Change (UNFCCC). The potential for RED to deliver multiple benefits for biodiversity
conservation, livelihoods and other ecosystem services is well documented (UNEP-WCMC
2007). But it is important to note that RED could also have negative impacts on biodiversity
and local livelihoods, for example as a result of the displacement of deforestation.

The UNFCCC is concerned with stabilizing greenhouse gas concentrations in the atmosphere
at a level that prevents dangerous interference with the climate system'. Decisions made
under UNFCCC can therefore be expected to focus on stabilizing emissions, and not
necessarily to make explicit provision for delivering other benefits of reduced deforestation.
Parties’ national sovereignty over their own resources is a fundamental principle of the
Convention, and may limit the extent to which prescriptive methods for RED may be
described. However, most Parties to the Convention have made commitments on conserving
and restoring the non-carbon values of forest under other environmental agreements. It is
therefore important that in phrasing any decision on RED, Parties take the implications for
multiple benefits into account, and consider the decision’s effects on other forest values.
Similarly, care needs to be taken in the formulation of guidance for the implementation of any
decision, including any future update of the JPCC Good Practice Guidance for Land Use,
Land-Use Change and Forestry (Penman et al. 2003) and Guidelines for National
Greenhouse Gas Inventories (IPCC 2006).

The form of any decision and associated guidance will strongly influence the total area,
geographical spread, conservation status and types of forest retained as a result of RED, with
consequent implications for the number and location of people gaining or losing. Whilst a
given reduction of emissions from deforestation will have the same climate change mitigation
impact regardless of location, the spatial distribution of avoided deforestation will have a
strong influence on the other benefits (and losses) resulting. In biodiversity terms, an outcome
that conserves a more heterogeneous mix of different forest types over a wider area is likely
to deliver greater conservation gains for the same climate benefits.

National-scale decisions will determine the scale of RED within each participating country,
and the actions undertaken at a national to local scale will influence the degree to which
multiple benefits are attained. Unless preventative steps are taken, non-forest ecosystems and
their carbon stores are likely to be negatively affected as pressures shift to new locations
(UNEP-WCMC 2007). Suggestions from some Parties that the RED pilots established prior to
the 2012 period are evaluated in terms of their co-benefits as well as in terms of carbon
success are welcome; if this evaluation is extended to impacts on other ecosystems, a more
complete picture of the carbon and other benefits of pilots would be obtained.

But the overall scale and impact of RED depends upon agreements made between Parties.
The total finance, of whatever form, available for RED will set the upper limit on the area of
threatened forest (and therefore the number of forest-dependent people) that can benefit,

' within a time frame sufficient to allow ecosystems to adapt, ensure that food production is not

threatened, and enable sustainable economic development.

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whilst any decision text and guidance adopted will determine the type and condition of
eligible forests.

Influences on the scope and co-benefits of RED

Incentives for early action

Deforestation and forest degradation usually result from the exploitation or conversion of
forests for financial or other gains. Given that measures to reduce the rate of deforestation are
being seriously discussed, there is a strong incentive for those who benefit from deforestation
to step up the pace before barriers come into place. This would be especially true if a national
RED programme was expected to reward those actors who have been recently deforesting, for
refraining from future deforestation. This type of response to anticipated regulation has been
observed in the heightened trade in endangered species in the run-up to Convention on Trade
in Endangered Species (CITES) uplisting (Rivalan et a/. 2007), and in cases of increased
forest exploitation in response to the possibility of protected area designation (Infield &
McNamara 2001, Xu & Melick 2007).

However, early action to reduce deforestation rates, including through pilot projects, is likely
to help participating countries to benefit from the first available RED funds in the post-2012
period. If RED credits were also made available to cover reduced emissions during the early
action period, as some Parties propose, this would help to counter the incentive to deforest
now. There is some precedent in the Clean Development Mechanism, in which credits were
allowed to accrue from 2000 against the 2008-2012 commitment period.

Scale of financial mechanism

The total finance available in the system for RED credits will place an upper limit on the area
of threatened forest that can benefit from RED. If an international RED market were
developed as originally proposed by the Coalition of Rainforest Nations, more stringent caps
on greenhouse gas emissions by Annex I Parties would be necessary. This would have a dual
benefit for biodiversity and ecosystem services, both increasing the area of forest conserved
and decreasing the rate of global warming. If a fund rather than a market is established, many
Parties feel that it may be difficult to negotiate substantial and replenished payments. Other
Parties feel that the deforestation avoided through a fund mechanism would provide
additional carbon benefits to those committed to by Annex | Parties, and that the risks
associated with reducing emissions from deforestation would not be linked to emission
reduction targets.

International displacement and countries with low deforestation rates at present

The more non-Annex I Parties participate in RED, the lower the likelihood of displacement
(leakage) of deforestation pressures to a non-participant country. Displacement of
deforestation has clear adverse consequences for conservation and for carbon storage.
However, the magnitude and distribution of these consequences may vary because carbon
value and the biodiversity value of individual areas of forest are not necessarily related. The
biodiversity value includes the forest’s relative uniqueness and rarity in comparison with the
suite of other forests still in existence; there is no equivalent consideration for carbon. From a
biodiversity perspective, the spatial distribution of displacement could be more critical than
from a carbon perspective; for example, if displaced pressures are concentrated in low-carbon
forests, a distinct set of species and ecosystem services will be affected.

Certain methods of distributing credits for successful RED on the basis of changes in global
deforestation rather than national rates alone have been proposed (Mollicone et a/. 2007,
Strassburg et al. in prep.). The aim is to increase equity and to limit international
displacement of deforestation. The principle here is that in addition to rewarding non-Annex |

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Parties for decreasing their deforestation rates, those non-Annex I Parties with existing low
deforestation rates would be rewarded for continuing to have low emissions. Payments would
factor in the area of forest remaining. These precise ideas have not been adopted by any
Parties to date; but there are proposals for a separate fund-based mechanism to compensate
for conservation. Some Parties have suggested that this could be financed through a tax on the
RED market, others that it be sourced from voluntary contributions from Annex I Parties.

Accounting for ‘undisturbed’ forest

The IPCC Good Practice Guidance for Land Use, Land-Use Change and Forestry (Penman
et al. 2003) and Guidelines for National Greenhouse Gas Inventories (IPCC 2006) indicate
that countries may define specific areas of forest either as managed or undisturbed. Forest
lands, including protected areas, are defined as ‘managed’ if practices for stewardship and
use have been planned and implemented. This definition can change between years if forests
are brought into or removed from management. Only emissions from managed forest need be
reported.

“Natural, undisturbed forests should not be considered either an anthropogenic
source or sink and are excluded from national inventory estimation”. (Penman et al.
2003)

With perfect knowledge of national land cover change, deforestation within ‘undisturbed’
areas would not be an issue for RED reporting, as the Good Practice Guidance also indicates
that all deforested areas should be reported. However, if a Party chooses to designate an area
as ‘undisturbed’ and therefore does not monitor emissions from this area, there is a risk of
unrecorded anthropogenic carbon losses, such as those resulting from illegal logging or land
clearance.

It may therefore be necessary to revisit the Good Practice Guidance and inventory guidelines
prior to the launch of any RED mechanism, with the aim of ensuring that all deforested areas
are captured. The anticipated pilot phase from 2008 to 2012 offers an opportunity to assess
the effectiveness of the current guidance in this new context.

Emissions estimation

It is likely that RED payments through the fund or market mechanism will be made on the
basis of estimated avoided greenhouse gas emissions from deforestation, rather than avoided
deforestation itself. Thus the unit of measure is carbon dioxide-equivalent emissions, rather
than hectares of forest loss. Forests and other ecosystems vary in both the amount of
carbon per hectare they store in their biomass (carbon density), and the carbon
immobilised in other parts of the ecosystem, such as the soils (FAO 2006). Therefore, the
type of forest and method of deforestation have a strong influence on the total amount and
the rate of carbon loss resulting.

Two major questions on emissions estimation are relevant in understanding the likely scale of
cobenefits from RED: whether forest degradation is also included (often referred to as
Reducing Emissions from Deforestation and Degradation, or REDD); and how changes in soil
carbon are accounted. In principle, both these issues are tractable, but there are some concerns
about the availability of historical and future data to support relevant estimates. The Good
Practice Guidance does provide methods for estimating emissions from fire, felling,
fuelwood gathering, and other impacts on forest carbon storage short of deforestation; and for
carbon losses from different broad forest types and from mineral and organic soils.

Large carbon emissions can be generated from forests by tree removal and other degradation
processes that do not cause them to pass the forest definition thresholds used at a national

scale or within FAO reporting (FAO 2006, Mollicone er a/. 2007). The likely impact of these

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pressures on forest integrity and emissions is clearly higher under a RED than a REDD
agreement. From a climate and a conservation perspective, it would be beneficial to account
for and reduce emissions from these sources; however, from a livelihoods perspective, it is
often crucial to maintain sustainable access to forest products. Landscape-scale planning
approaches can help to balance climate change, conservation and livelihoods needs.

The accounting of soil carbon is most relevant to forest on organic soils, although mineral
soils can also hold substantial biomass. In particular, if emissions from deforestation of
peatlands are not well understood, then the full value of avoided deforestation may be
underestimated. The Good Practice Guidance offers default values for estimation of soil
carbon content to 30 cm depth, for use where no national data are available. These will
certainly underestimate soil carbon content in tropical swamp forests, where the peat depth
can be up to 20 m (Page er al. 2002). Losses resulting from drainage or fire could therefore be
substantially greater than the default values would indicate. It would be advantageous for
countries seeking to control deforestation on peatlands to measure baseline and ongoing
emissions from their soils as accurately as possible.

Whilst attaching a higher carbon value to peatland forests offers clear climate benefits, the
biodiversity implications are more complex. If some forests are valued much more highly
than others for their high carbon content, then they may attract the lion’s share of RED
finance. This indicates an even greater need to direct conservation finance towards forests
with lower carbon content, such as tropical dry forest (Miles & Kapos, in prep).

Tackling deforestation

Whilst the UNFCCC discussions relate to an international fund or emissions market for
reducing overall deforestation in developing countries at a national scale, implementation will
inevitably involve site-scale land-use decisions. Concerns have been raised that RED could
have negative as well as positive impacts on biodiversity conservation and livelihoods
(UNEP-WCMC 2007; Griffiths 2007). Changes in national land use policy and associated
restrictions could affect the livelihoods both of peoples dependent upon forests and upon the
conversion of forest. Involvement of local people in planning and implementation of RED,
and ensuring sharing of the benefits from RED finance is likely to result in a more sustainable
long-term solution to deforestation, providing the necessary positive incentives at local scale
(Clark et al. in prep, Coad & Campbell in prep).

The success of RED will also be influenced by the scale of the pressures exerted upon forests.
In the period up to 2050, the demand for arable crops is projected to double. This is a
combined result of the increasing global population, which is projected to reach around 9
billion people by 2050 (UN 2007), and the increasing proportion of grain-fed meat in the
average diet (Comprehensive Assessment of Water Management in Agriculture 2007).
Meanwhile, the global proportion of road-transport energy supplied by biofuels has been
projected to increase by 2030 from the current 1% to between 4% and 7% (IEA 2006). This
trend is already stimulating conversion of carbon-rich peatland forest in Southeast Asia
(Hooijer et al. 2006). Whilst some crop yield improvements are feasible, these pressures
combined will substantially increase the demand to convert forests and other native
ecosystems into arabie fields or plantations. The extent to which this demand can be
countered by RED is dependent upon the funds available, the unit price placed upon carbon,
the capacity of countries to implement RED, and the ability to increase agricultural efficiency
in the face of a slowly changing climate.

Protected area policy

Protected areas could have a role to play in reducing national-scale deforestation, through
strengthening forest protection within existing parks and reserves, and/or declaring new forest
areas. Conversely, protected areas could be ruled ineligible for support under the mechanism,

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if it were argued that as existing national commitments to protect forests, their lands would
not meet an additionality criterion. This could result in a perverse incentive for conservation,
reducing protected area designation and even resulting in de-listing of existing areas. As some
Parties refer directly to protected area designation as a mechanism for decreasing
deforestation, and others are calling for compensation for existing forest conservation efforts,
the outlook is generally positive for protected areas in participating countries. However,
countries not participating in the mechanism may find that external pressures on their forest
protected areas increase, with a resulting increase in the cost of effective management.

Temperate and boreal forest conservation

If a RED mechanism will only financially support measures by non-Annex I Parties, mainly
those in tropical regions with high carbon forests, forests outside these regions could come
under additional pressures. The risk that some deforestation and forest degradation pressure
will be displaced to temperate and boreal forests is compounded by some uncertainty over the
net climate benefits of retaining these forests. Whilst a recent large-scale modelling exercise
has indicated that boreal forests have a net climate warming effect (Bala et al. 2007), the
model does not account for the major carbon storage function of forested boreal peatlands.
The certification of sustainably managed forests in these biomes will become even more
important in a RED world.

Key considerations for pilot projects and future negotiations

Based on the findings described above on the different factors influencing the potential
cobenefits derived from a RED mechanism, the following points are highlighted:

e Credit for early action could decrease perverse incentives for deforestation prior to
2012, though any programme would need to be managed carefully to ensure net
climate benefits.

e The IPCC Good Practice Guidance for Land Use, Land-Use Change and Forestry
and Guidelines for National Greenhouse Gas Inventories provide an agreed basis for
monitoring emissions. Such standardised guidance is essential. The lack of a
requirement to report carbon stock changes in ‘undisturbed’ forests is a major
concern, because of the risk of unrecorded forest loss.

e Estimating and accounting for emissions from both forest degradation and soil carbon
losses could substantially increase payments to implementing countries.

e In testing the implementation of RED at a national to site scale, pilot projects could
explicitly aim to supply evidence to allow an evaluation of the Good Practice
Guidance and inventory guidelines, and any need for revision. This could help to
ensure complete coverage of deforestation in both managed and unmanaged forests,
and better estimation of emissions from forest degradation and soil carbon losses.

e Achievement of co-benefits from RED for biodiversity, local livelihoods and other
values can be increased by planning for them from the start of pilots, by including
clear environmental and social safeguards, and especially through the active
involvement of local communities and other forest stakeholders. Efforts should be
made to avoid and monitor displacement of pressures.

e Monitoring of co-benefits in pilot projects, for example using a standard assessment
framework, would help to establish which implementation methods were most
efficient at delivering these cobenefits. An added advantage would be that Parties
could demonstrate their achievement of goals committed to under other international
agreements.

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