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Forestry must be key part of climate talks and carbon market

New methodology proposed by Chair of GLOBE International working group.
Forestry is key to tackling climate change. However, new methodologies and trading structures are needed if the sector is to be included in carbon trading schemes in order to slow rates of de-forestation.

Speaking after the conclusion of the UN Climate talks in Ghana, Barry Gardiner MP, Chair of the Forestry Dialogue for GLOBE International, and the UK Prime Minister's Special Envoy on Forestry, said: “I applaud the UNFCCC negotiators for getting forestry onto the agenda and accepted by all parties as a vital part of the climate talks. However, it is crucial we now develop a model which delivers maximum benefits to all countries.”

“This means creating a market which pays for forests – actual standing stock – and not just avoided deforestation, as is the current model. Politicians must regulate the trading structures so that the financial markets can be used to benefit forests, not structure regulations so that forests can be used to benefit the financial markets.”

Mr Gardiner has laid out a set of proposals, contained in an article – Paying for Forests – to contribute to GLOBE International's Commission on Land Use Change & Ecosystems, which will be formally launched at its first meeting to be held in the Mexican Congress in November 2008. One area the Commission will consider is how forestry is currently being addressed within the UNFCCC negotiations.

Mr Gardiner outlined several concerns with the current model of avoided deforestation including problems in measurement and possible perverse incentives to increase rates of deforestation. Instead he proposed a new system of tree-centred financial markets. This would allow countries to be issued credits over a 100-year cycle, more closely reflecting natural life-cycles of forests.

Every year a country's total standing forest should be measured and the country authorised to issue credits corresponding to one per cent of measured stock. This means that over the 100 year cycle the total forest cover will be accounted for.

The link between the forest and the credit is both positive and direct. Deforestation at a higher rate would result in a lower reward the following year. Afforestation or deforestation at a lower annual rate would result in greater reward.

Restricting the release of credits to one per cent also prevents the danger of flooding the market with carbon credits. In addition, credits would be limited to a 10 year life span to avoid traders hedging them long into the future and tightening the opportunities for arbitrage – the older the credit became the potentially less valuable it would become.

Critically, the new credits available would fluctuate each year in proportion to forest cover. Developed countries wishing to offset their carbon emissions by use of these credits would therefore find it less rewarding as forest cover declines but more valuable where forest cover expands. Thus, the market is made to work for forests, not the other way round.

“It is crucial we begin discussing these alternative models now, before the next UN talks in December. What we have to develop is a system which is fair for all countries, not just those with higher rates of current deforestation. We need to equally incentivise those who have already instituted conservation programmes, not penalise them for protecting their own habitats and forest cover. The system we are suggesting works equally well for the Congo, Gabon or Ecuador as it does for Brazil or Indonesia. The talks we have through GLOBE have shown that it is possible to get fair and equitable international consensus on specific agreements, as we have with illegal logging. Now, we must work to do the same for moving forestry into the carbon market,” Mr Gardiner added.

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