Policy Update: The forest consensus

Although the USA has failed to enact comprehensive climate legislation, the country has pioneered the development of model policies for financing tropical forest protection and restoration. The USA has also created a powerful political consensus around the idea that protecting forests is an essential part of fighting climate change. This consensus offers hope for policies other than comprehensive climate legislation to deliver emissions reductions that meet or exceed the 17% targets committed to by the USA under the Copenhagen Accord. It also provides a potential model for other developed countries that want to tighten emissions goals in an affordable way.

In December 2008, Nobel Peace Laureates Wangari Maathai, Al Gore and dozens of environmental leaders, Fortune 500 CEOs and development experts gathered in New York City, USA in order to discuss how to save the world’s rainforests. This event was conceived of and organized by a newly-formed organization, Avoided Deforestation Partners (ADP), specifically created to bring for- and nonprofit groups together to advance policies to protect forests and thereby our climate.

The discussions acknowledged that saving tropical forests would be an enormous task. Apart ftom a few years in the 1980s as the cause célèbre of American environmentalists, rainforests had mostly fallen off the country’s radar. A few pioneering companies were starting to invest in rainforest conservation in the hopes of generating credits for the voluntary carbon market, but policy-makers in Washington, DC, USA mostly looked at forests as a fringe issue, if they thought about it at all.

This was a problem: Congress might finally be ready to pass comprehensive climate legislation, but if Members of Congress were not aware of the importance of protecting rainforests, and did not see political support for it, chances were slim that tropical forests would be included in legislation. At the time, a survey by Resources for the Future found that just a third of congressional staffers with responsibility for climate change knew, for example, that tropical deforestation accounts for approximately 15% of global carbon emissions [1].

In addition to a lack of awareness, there were also competing proposals for rainforest protection. Although the problem of deforestation urgently required a solution, what exactly that solution should be was the source of bitter debate. The CEOs and business-friendly environmental groups who were present at the ADP discussion believed in a market-based system for protecting forests. This system enabled companies to gain carbon credit in America for investing in protecting rainforests overseas, providing them with a very cost-effective method of reducing climate pollution (the low cost of tropical land means that tropical forest protection costs less than half that of domestic emissions reductions).

Conversely, the grassroots environmental groups who had come to this discussion had doubts about allowing major polluters to offset their emissions merely by conserving land thousands of miles away. Although they agreed that protecting forests was essential to solving climate change – as well as protecting the orangutans, tigers, birds of paradise and people that lived in the forest – they thought that there might be other options beyond carbon credits. Indeed, many of the groups had just won a major victory in the fight against deforestation when Congress passed – and President Bush signed – amendments to the Lacey Act [101]. These banned the importation of illegally logged wood and paper products into the USA. As a complement to these efforts, the groups favored having the government set aside allowances under a cap and trade system and then use those funds to reduce deforestation.

Despite the differences, many people in the room agreed that as long as the different players quibbled, policy makers would remain confused – and that a united front was necessary.

The unity agreement: the forest consensus

In order to reach a solution, the companies and organizations agreed to participate in a negotiation process convened by ADP. At the end of this process, the groups achieved a major breakthrough: instead of choosing either a government-driven approach or a market approach, they realized that a combination of both would have the greatest benefit for forests and climate. It was, in short, the double-barreled shotgun solution, appropriately titled, ‘The Unity Agreement’ [102].

Part I: private investment

These disparate groups agreed to support carbon credit for investments in protecting tropical forests (also known as offsets), subject to rigorous conditions: first and foremost, carbon credit would only be given on a pay-for-performance basis, once emitters could demonstrate that their investments had actually reduced emissions. Second, reduced deforestation had to occur on a national scale, not merely project-by-project, so that deforesters would not just shift their deforestation to another part of the country. Recognizing that national scale measurements would not be immediately possible in some countries, everyone agreed to a transition period in which projects in small countries would be eligible, as would emissions reductions achieved at the state level in large countries.

The Unity Agreement’s allowance for private investment was critical – after a thorough examination of the issues, negotiation participants realized that private investment was the only way to generate anything close to the approximately US$40 billion needed annually to end global deforestation.

Part II: public financing

At the same time, participants in the process agreed to support setting aside 5% of allowances for the protection of tropical forests as part of the recognition that private finance alone could not get the job done: many rainforest nations needed public financing support in order to train the people and launch the satellites needed to accurately monitor deforestation. In addition, instability in some rainforest nations would probably preclude major private investment – but did not mean that it was not important to save those countries’ forests. Finally, public funds could be used to fully enforce bans on illegal logging that were already starting to produce results.

The unusual coalition of environmental groups and companies took the agreement to Congress and the White House, and received a warm reception. Ultimately, this forest-climate ‘Unity Agreement’ dramatically influenced not only the authors of the Waxman-Markey Climate bill but the White House as well.

Outside of good politics, the coalition was delivering something policy makers desperately needed: low-cost emissions reductions. Since forest protection and restoration is so affordable, policy makers were able to deliver stronger emissions reductions than would otherwise have been politically or economically possible. As a result, the House-passed American Clean Energy and Security Act [103] included very strong rainforest protections that were championed by Energy and Commerce Chairman Henry Waxman, Majority Leader Steny Hoyer and many others.

Increasing support for protecting forests

Of course, climate legislation did not end up going beyond the Environment and Public Works committee in the Senate. However, along the way, the need to protect tropical forests picked up important support from a whole new constituency – farmers, ranchers and timber producers. Illegal logging and unsustainable agricultural practices in tropical countries have taken a toll on legitimate producers in both the USA and in rainforest nations by flooding the global market with illegal and unsustainably produced goods, making it harder for responsible farmers, ranchers and timber producers to compete. At the same time, these practices have had a devastating impact on indigenous and forest-dependent people in rainforest nations, and have hindered the development of more sustainable and profitable agriculture and logging in these countries. For these reasons, human rights groups, and even the Indonesian timber union Katuhindo, have called for a shift in production to degraded lands and restored, sustainably managed forests [104].

In March 2010, a wide variety of agriculture and forest products groups including the National Farmers Union, the American Forest and Paper Association, the Ohio Corn Growers Association, and many others, joined utility companies and environmental groups in calling for tropical forests to be included in climate legislation [2].

This alliance may be crucial. In the wake of the apparent demise of climate legislation, climate change has not disappeared – and neither has deforestation. Nonetheless, given the obstacle of obtaining 60 votes in the Senate, most observers believe it will be difficult to pass comprehensive energy and climate legislation in the next 2 years. The question that now presents itself is how to finance forest protection and restoration on a grand scale, even in the absence of climate legislation.

Alternatives to comprehensive climate legislation

There are several promising steps that could pay great dividends for forests around the world. As much discussion as there has been regarding the consequences of stalled climate legislation, this has not stopped the US Environmental Protection Agency (EPA) from going ahead with plans to regulate carbon pollution under its Clean Air Act authority (ratified in the 2007 Supreme Court decision [3]), although exactly how the EPA intends to regulate carbon pollution remains to be seen.

One of the fundamental choices facing the EPA is whether to impose command and control regulations, or to employ the same market mechanisms (such as cap-and-trade) it has used for the past 2 decades to phase out ozone-destroying CFC’s, leaded gasoline, and to reduce sulfur dioxide pollution. Among the many challenges with a command and control approach is that it limits emissions reductions to only on-site improvements, which is not an appropriate approach for globally mixed pollutants such as carbon dioxide and other greenhouse gases. It precludes the use of far more affordable means of reducing pollution including forest conservation and restoration that have the same climate benefits. It also excludes options such as carbon-sequestering agricultural improvements such as shifting to organic agriculture. Since command and control will make it more expensive to meet pollution standards, it also politically limits the EPA’s ability to impose the strongest possible emissions reduction targets. Finally, it excludes landowners and farmers from participating in the solution to climate change.

Essential to persuading the EPA to include forests in its regulations is demonstrating that the agency has the legal authority to do so. A recent legal analysis of the Clean Air Act’s greenhouse gas authority conducted by NYU Law School’s Institute for Policy Integrity concluded that the Clean Air Act gives the EPA enormous flexibility to regulate motor vehicle fuels and any pollution that is damaging to the stratosphere [4]. This suggests that even if the EPA sets a standard for reducing pollution based on what can be achieved with the ‘best available control technology,’ it can still leave emitters several different choices in how to meet those standards.

Perhaps the most promising legal pathway for including forests and other land systems is through the Clean Air Act’s New Source Performance Standards. Section 111(b) of the Clean Air Act [105] defines a performance standard as one that “reflects the degree of emission limitation achievable through application of the best system of emission reduction which (taking into account the cost of achieving such reduction…) the administrator determines has been adequately demonstrated.” This mandate to consider the greatest emissions possible while taking into account costs suggests a need for affordable mechanisms, such as forest conservation and protection.

Aggressive pursuit of incentives for forest conservation and restoration through EPA action are essential, but they are not sufficient. The World Resources Institute recently estimated that the combination of EPA and state government action would reduce US greenhouse gas emissions by 6–14% by 2020, depending on how aggressive it is [5]. Including market mechanisms would help the administration to reach the higher end of this range.

What other actions can bridge the gap? One of the most promising options is tax credits for land-based carbon sequestration, such as forest (including international forests), wetland and prairie protection and restoration, as well as agricultural improvements. Essentially, it would provide tax credits of US$10 or US$20 per ton for activities that were treated as offsets under climate legislation, but with one big difference: since these tax credits would not be offsets, in the sense that they would not be offsetting pollution from other sources, any emissions reductions achieved in this way would be entirely additional. If 2 billion tons of tax credits were made available annually, that could result in net US emissions reductions of up to a third, an enormous achievement. Politically, of course, it is far easier to pass tax cuts than new regulations.

Under current pay for performance rules in place in Congress, lost revenue from any tax cuts would have to be made up through spending cuts or other tax increases. In a conservative Congress, tax hikes are unlikely to occur, but there is great potential for spending cuts. The Green Scissors report, put together annually by Taxpayers for Common Sense and environmental groups, recommends cutting US$200 billion annually in wasteful and environmentally destructive Federal government spending [6]. Cutting just a tenth of that amount could entirely finance these tax credits – and achieve enormous pollution reductions.

Much of the policy and legislative work on these tax credits has already been done. The pay-for-performance accreditation model could be taken directly from the popular offsets title of climate legislation. In addition, two bills from previous Congresses – the International Carbon Conservation Act [106] and the Carbon Sequestration Investment Tax Credit Act [107] – provide a template for conservation tax credits.

In addition to EPA action and tax credits, there are other smaller steps that could provide major gains for forests. At last year’s UN climate change meeting in Copenhagen, Agriculture Secretary Tom Vilsack pledged that the USA would provide US$1 billion in financing over 3 years for tropical forest protection. That funding is essential to kick-starting large-scale conservation work across the rainforest world by building capacity for forest monitoring and enforcement – and financing large-scale pilot projects. Congress can also fully fund the Lacey Act, which prohibits the importation of illegally harvested wood, paper and other forest products into the USA. A recent report from Chatham House concluded that the Lacey Act and other anti-illegal logging policies have produced an approximate 33% global decline in illegal logging, reducing pollution by 1 billion tons annually [7]. This is one of the smallest investment–biggest impact policies available.

All of these approaches continue an American tradition of climate policy innovation – and can provide a model for other developed countries. If credit for tropical forest protection is included in the European Emissions Trading System, for instance, this could allow Europe to tighten its emissions reduction targets to 30% below 1990 levels by 2020, without much additional economic or political cost. At the same time, this move would provide the financing that rainforests need to survive. Similar policies could make strong action in Australia, Japan, Canada and elsewhere far more feasible.

It is clear that the political consensus for forests exists in different forms around the world, and that protecting forests provides a viable, cost-effective solution to climate change. Now it just needs the right vehicles to be implemented.

Financial & competing interests disclosure

Glenn Hurowitz, a contributor to the article, has been funded in part by a grant we received from NORAD. The author has no other relevant affiliations or financial involvement with any organization or entity with a financial interest in or financial conflict with the subject matter or materials discussed in the manuscript apart from those disclosed.

No writing assistance was utilized in the production of this manuscript.