Reducing deforestation rates 10% could generate $13B in carbon trading under REDD
February 25, 2008

Cutting global deforestation rates 10 percent could generate up to $13.5 billion in carbon credits under a reducing emissions from deforestation ("REDD") initiative approved at the U.N. climate talks in Bali this past December, estimate researchers writing in Philosophical Transactions of the Royal Society B. But the researchers caution there are still substantial obstacles to overcome before carbon-credits-for-rainforest-conservation becomes a reality.

Reviewing the potential for REDD, Johannes Ebeling and Mai Yasué warn that the climate change mitigation strategy will face numerous challenges, including overcoming difficulties with implementation and poor governance in tropical countries; ensuring permanence of emission reductions; addressing international "leakage", whereby forest conservation in one country drives deforestation in another; establishing baselines for determining past rates of forest loss; and providing sufficient incentives to end deforestation. Ebeling and Yasué note that carbon markets alone will not save forests — the underlying drivers of deforestation and forest degradation must be addressed. Still the authors are hopeful that REDD "could help achieve substantial co-benefits for biodiversity conservation and human development."

Scenarios for potential global market value of RED credits at variable carbon prices and reductions in deforestation rates. Bars display global potential market value, and diagonal lines represent the contributions of Amazon countries. Carbon price €/tCO2: open bars, €5; grey bars, €15 and black bars, €30.
They write that the effectiveness of REDD will hinge on "how successfully a market-based RED mechanism can contribute to climate change mitigation, conservation and development will strongly depend on accompanying measures and carefully designed incentive structures involving governments, business, as well as the conservation and development communities."

Given a scenario, Ebeling and Yasué estimate that REDD in the Amazon — which accounted for 26 percent of global deforestation and 46 percent of related global carbon emissions between 1990 and 2005 — could generate vast sums for forest conservation.

For a 10 percent reduction in the annual deforestation rate, Ebeling and Yasué calculate that Amazon forest countries could see $1-6.2 billion (€690m-4.2b) in carbon finance, depending on the price of CO2 credits (the authors use a range of €5-30 [$7.50-45] per ton of CO2). A 50 percent reduction could generate $5.2-31 billion (€3.5-20.7b) in annual finance. Globally the authors project a 50 percent reduction could yield $11.3-67.5 billion (€7-45 billion) in carbon trading volume each year.

"Linking RED to international carbon markets could create a real opportunity to tackle an important source of GHG emissions at comparably low costs and could overcome the funding constraints that have hampered forest conservation for many years," they write. "While it is important not to raise unrealistic expectations about RED, overcoming the current challenges offers a historic opportunity of saving the remaining tropical forests while mitigating climate change."

Johannes Ebeling and Mai Yasué (2008). Generating carbon finance through avoided deforestation and its potential to create climatic, conservation and human development benefits [FREE OPEN ACCESS]. Phil. Trans. R. Soc. B, DOI: 10.1098/rstb.2007.0026

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CITATION: (February 25, 2008).

Reducing deforestation rates 10% could generate $13B in carbon trading under REDD.