- Under Vietnam’s proposed carbon for forest ecosystems services (C-PFES) program, the country’s 100 largest emitters, primarily cement manufacturers and coal-fired power plants, would pay forest communities and landowners to protect and expand forests.
- C-PFES, which appears to be the first national plan that puts a price on carbon and funnels those dollars specifically to forest conservation, is modeled on Vietnam’s existing PFES program, under which hundreds of hydropower plants, as well as some municipal water and ecotourism companies, have paid more than $500 million to thousands of rural households since 2011.
- Under C-PFES, cement manufacturers would pay $1.35 per ton of CO2, and coal plants would pay $2 per ton, well below the price called for by the Intergovernmental Panel on Climate Change of $40 to $80 per ton by the end of this year.
- Coal continues to provide nearly 40% of Vietnam’s energy generation. Under current plans, the country ranks third in the world, behind only China and India, in scheduled additional capacity.
For nearly a decade now, Vietnam has made “payment for forest ecosystem services” its key strategy for protecting forests and improving the lives of poor rural communities. Now, it plans to use the same model to help rein in greenhouse gas emissions.
The fast-growing Southeast Asian country is on the verge of piloting a unique program that would require large polluters — primarily cement manufacturers and coal-fired power plants — to pay forest communities and landowners for conservation and restoration efforts. Dubbed carbon payment for forest ecosystem services (C-PFES), the plan is billed as an environmental policy triple threat. Its supporters say it would protect and expand forests, support economic development in poor areas, and help Vietnam meet its Paris Agreement climate pledge to reduce greenhouse gas emissions by 8% by 2030.
C-PFES appears to be the first national program of its type, in that it puts a price on carbon dioxide emissions and funnels that money specifically to forests. C-PFES is modeled on Vietnam’s existing PFES program, financed largely by the United States Agency for International Development (USAID), which requires hydroelectric companies to pay for watershed protection. Since Vietnam launched PFES nationally in 2011, hundreds of hydropower plants, as well as some municipal water and ecotourism companies, have paid more than $500 million to thousands of rural households, according to a December 2019 program update on the USAID website.
Requiring companies that benefit from nature’s “services” to pay for them — and improve the lives of the people protecting the area — is nothing new. Research published in the journal Nature Sustainability in 2018 found 550 payment for ecosystems services programs (commonly abbreviated as PES) active around the world and more than $36 billion in annual transactions. Programs designed to protect watersheds, like Vietnam’s PFES, are the most common.
Whether schemes that incentivize forest conservation in the interest of ensuring services such as clean water, habitat for wildlife, and carbon storage actually deliver environmental and socioeconomic outcomes is another matter. Globally, PES has a mixed record, the Nature Sustainability researchers found, as did a Mongabay study a year earlier. Vietnam has only just begun to measure the impacts of its program.
Demonstrating positive outcomes has been particularly difficult for programs that involve carbon offsetting, such as the U.N.’s REDD+. An investigation published by ProPublica last year found that carbon offsetting schemes failed to offset the amount of pollution they were supposed to; or they made gains that were quickly reversed; or their gains couldn’t be accurately measured to begin with. “Ultimately, the polluters got a guilt-free pass to keep emitting CO₂, but the forest preservation that was supposed to balance the ledger either never came or didn’t last,” the ProPublica article notes.
Nothing like REDD+
Though C-PFES is, at its core, a carbon offsetting program, it won’t attempt to meet the criteria used to measure whether programs like REDD+ are working. The trickiest among these is “additionality,” or making sure the area of forest you’re paying someone to protect was actually in danger of being cut down in the first place.
Instead, boosting funding for Vietnam’s forest conservation and economic development objectives under PFES — more than emissions reductions — appears to be the main concern of the country’s government.
C-PFES “is very different from a REDD+ program,” Nguyen Ba Ngai, the former deputy director-general of Vietnam’s Administration of Forestry (VNFOREST), now retired, said in a Skype interview. “In our program, we are concerned about the forests, how to maintain it and increase it. Our main criteria is the area of forest protected and planted. Every year, we measure how many hectares have been protected and planted.”
Given that Vietnam still relies on coal for its growing energy needs, the argument that carbon offsetting programs give polluters carte blanche to carry on polluting can’t be ignored. That said, there is an urgent need for forest protection and reforestation, and funding for these efforts has been notoriously scarce, so a national initiative that seeks to significantly boost forest conservation funding is worth a look.
Pushback on price: How low can you go?
C-PFES has its origins in Vietnam’s Forest Law of 2017, which says that emitters of “large amounts of greenhouse gases must pay for the environment services of removing and storing carbon.” As originally conceived, the policy was meant to contribute to the $1 billion needed by 2030 to fund the country’s “proactive climate change policies and its Nationally Determined Contribution (NDC) to the Paris Agreement.”
Following a feasibility study in early 2018 by USAID’s Green Annamites project, USAID led the development of the initial C-PFES proposal, which called for a system that would incentivize large emitters to cut their emissions by increasing reduction targets over time. This proposal laid out two pricing scenarios: $18 per ton of CO2, considered a middle-ground figure, and $5 per ton.
Under C-PFES, Vietnam’s 100 largest emitters would make payments to the national Vietnam Forest Protection and Development Fund (VNFF), which currently oversees the PFES program and backed the C-PFES proposal. The state would then distribute those funds to rural communities that agree to protect existing old-growth and mangrove forests. Landowners and companies that manage timber production in areas designated as “sustainably certified forests,” as well as large timber plantations with rotation of more than 10 years, would also receive payments.
With the support of provincial leaders, USAID developed a pilot program involving 20 companies in four provinces, which was slated to kick off in the third quarter of 2019. However, the launch was delayed when the companies pushed back on pricing. In the end, the price was dropped to $1.35 per ton for cement manufacturers and $2 for coal plants to get the companies on board. A document laying out the details of the proposed pilot shows that polluters would pay an annual amount based on an emissions reduction target of 8%.
“The messages I got from them was that they are willing to pay if the prime minister approves the plan, but they wanted to delay the pilot process because … they were afraid losing competitiveness,” Pham Thanh Nam, a climate change specialist for USAID Green Annamites during the project’s development, told Mongabay in an email.
The proposal for the pilot is now making its way through the approval process. People familiar with the proposal say a final decision from Prime Minister Nguyen Xuan Phuc is expected at any time. Slated to run for a year, the pilot was expected to raise $11 million (at $2 per ton of CO2), to be distributed to 5,000 forest protectors and landowners, according to the feasibility study conducted by USAID. If the pilot is deemed successful, beginning in 2021, the program would be scaled up nationally to include the 100 large emitters. At this level, C-PFES would raise an estimated $50 million to $60 million annually, paid to 300,000 forest protectors and landowners.
To meet the temperature goals of the Paris Agreement in a cost-effective manner, the Intergovernmental Panel on Climate Change has called for a carbon price somewhere between $40 and $80 per ton by the end of this year.
Vietnam is by no means alone in falling short of this measure.
Currently, of the 57 national and subnational carbon pricing initiatives implemented or scheduled for implementation around the world, less than 5% are priced at such a level, according to the World Bank’s State and Trends of Carbon Pricing 2019 report, and roughly half of the emissions covered under pricing schemes are still priced below $10 per ton. Polluters in Sweden pay the most, with a carbon tax of $127 per ton. Vietnam’s price would be among the lowest.
Some trees are more equal than others
Vietnam has made significant progress in increasing forest coverage, though much of that progress happened before the national PFES program got going. According to the U.N.’s Food and Agriculture Organization (FAO), the country used to have the lowest rates of forest area and wood stock per capita globally, with forest cover plummeting to roughly 30% by the mid-1990s. But between 1990 and 2015, the FAO consistently listed Vietnam’s forests as moderately expanding, and in recent years it has continued to maintain forest cover in the neighborhood of 45%. Still, the FAO’s highly detailed 2015 Global Forest Resources Assessment shows that much of the growth in Vietnam’s forest cover has been in the form of timber plantations, while old-growth forests have shrunk.
C-PFES prioritizes natural forest restoration (for both coastal and inland forests), planting timber plantations, and developing agroforestry systems, over natural forest protection. The areas C-PFES will pay communities to protect are already classified as protected areas, which are threatened by illegal logging and agriculture, for example, the planting of rubber and cassava crops. However, predicting where deforestation will most likely occur is a trick in itself.
If you’re paying forest protectors who aren’t the actual drivers of deforestation it may not do much to stop forest clearing and the resulting carbon emissions. On the other hand, if poor smallholder farmers in the Central Highlands, for example, are converting forest into cassava plantations, payments large enough to convince them to stop cutting down trees might make a difference. The key is payment size.
Sometimes, payments can add up
Vietnam is one of only a handful of countries — China and Costa Rica are others — that have made ecosystem payments a national policy. Vietnam’s ruling Communist government wrote PFES into law in 2010. USAID has financed and supported the development of the program since the beginning.
Under PFES, hydropower plants pay rural communities to protect watersheds, so they have a stable water supply to produce electricity. These companies pay 36 dong per kilowatt–hour — a price that has increased over the years from 20 dong but still amounts to less than one-tenth of a U.S. cent — into the forest protection fund. The state then distributes the money to communities and companies tasked with protecting forests.
PFES tries to prioritize payment to poor families, specifically ethnic minorities. By the end of 2017, there were more than 450,000 ethnic minority households participating in and benefiting from the PFES policy, of which nearly 200,000 were poor households, with income less than $35 per person per month. Roughly 73,000 were near-poor households, with income less than $50 per person per month.
Payments have varied because of the nature of watershed protection. In some areas, there is more money coming in and fewer recipients than in other areas.
“In some places it’s a relatively modest amount, $30 to $40 over the course of a year,” said Jennifer Norfolk, associate director in the forestry and natural resource management unit at Winrock International, which implements the PFES program on the ground. “In other places it’s several hundred dollars per year.”
That can really add up for poor families, she said.
In the past, the program did not measure the environmental or social impacts it had. However, in 2019, USAID, the VNFF and Winrock developed a comprehensive monitoring and evaluation system. They are now working to finalize guidelines and expect to deploy the system nationwide in 2020.
What little research that’s been done on PFES itself shows varying outcomes. One study published in August 2019, conducted in Quang Nam and Thua Thien Hue provinces in central Vietnam, found that poor households with PFES have slightly higher (but not statistically significant) income than what they would have had they not participated in PFES, while the income of non-poor households with PFES was significantly higher than those without. The study’s authors concluded that there is not enough convincing evidence to show that the PFES policy has a positive impact on the livelihoods of poor people.
Likewise, the researchers couldn’t make a definitive call on how well PFES had protected forests, saying PFES policy may have been responsible for a slight increase in forest area and forest cover and reduced natural forest loss. However, they noted that significant areas of natural forest still experienced loss during the PFES period.
Another study published a year earlier looked at PFES in the Central Highlands’ Lam Dong province, where the program was introduced at the pilot stage in 2009. It found that following implementation, average tree cover increased significantly and PFES participants saw their income grow significantly more than that of non-participants.
Anecdotal evidence cited in these studies and found in various reporting over the years suggest that forest communities in Vietnam tend to support PFES.
“The forest owners, they like it very much,” said Ngai, the former deputy director-general of VNFOREST. “The people who get money from PFES, these people will protect their forest forever, because if their forest is lost or destroyed that means they cannot get money from the PFES program. Therefore, this program changes the attitude of the forest owner. In the past, the forest owner cannot get anything from developing forest, and now [this program] increases his income to care for and protect the forest. This is reality.”
Globally, indigenous peoples and local communities have long resisted PES programs, particularly those involving carbon offsetting. Among the many criticisms is that they simply don’t work.
In 2017, Mongabay examined 38 studies that represented the best evidence available on PES programs globally. The more rigorously designed of these showed very modest reductions in deforestation, generally just a few percentage points. Meanwhile, the majority of the available evidence suggests that payments were often too low to cover the opportunity costs of agricultural development or other profitable activities that the land could have been used for.
Perhaps, expecting forest conservation programs to do more than simply conserve forests is too much to ask.
“For at least two and a half decades people have been hoping that avoided deforestation could be a vehicle for both ecosystem protection and greenhouse gas mitigation, but the barriers are high, and it’s not clear that it’s achievable,” said Paul Ferraro, a professor at Johns Hopkins University, who studies the environmental and social impacts of public and private programs. “We have single cases where very charismatic, hard-working people have made it work, but the idea is that it’s a scalable solution to both forest conservation issues and greenhouse gas emissions mitigation is hard to believe given what we know now.”
C-PFES’s soot-covered elephant
Then there’s the elephant in the room: Vietnam’s continued dependence on coal to meet its growing energy needs. The country’s economy, one of Asia’s fastest-growing, expanded by 6.8% in 2019, and the government aims to continue that pace and to double power generation by 2030.
Coal continues to provide nearly 40% of Vietnam’s energy generation. Under current plans, the country ranks third in the world, behind only China and India, in scheduled additional capacity, with 9,705 megawatts under construction and 32,610 MW in pre-construction — a nearly 250% increase over current levels, according to data from the Global Coal Plant Tracker.
While an argument can be made for using carbon pricing mechanisms to incentivize industries such as cement and steel to decarbonize more quickly, market-based approaches to tackling the climate crisis are often decried as simply extending the use of fossil fuels by allowing polluters to continue to emit greenhouse gases. This is especially true for the fossil fuel companies themselves, coal most of all.
C-PFES “is about keeping the Vietnamese fossil fuel economy, which like China’s is largely an export economy, going for the production of cheap goods for industrialized countries,” said Larry Lohmann, a leading critic of carbon offsetting, who has spent 20 years studying these programs. “It’s an internationally approved way the Vietnamese government might get a few bucks for their forestry department from a nontraditional source.”
Because of its planned coal infrastructure, Vietnam has come under significant pressure to reduce its dependence on coal and rethink plans to build new plants.
Indeed, new plant construction has been vexed by regulatory delays, local opposition, and dwindling investor interest. Recently, 12 organizations specializing in environmental health called on Vietnam to scrap plans for the construction of 14 new plants, VnExpress International reported in January 2020. Seven of the plants have already faced considerable public backlash, while one project has been delayed for eight years, and investors of two others are undetermined.
For their part, government officials appear to get the message. Over the last few years, the country’s solar installation has surged, and it plans to increase its proportion of renewable energy to 15-20% of capacity by 2030. Wind and solar have almost achieved their current goal of providing 10% of power, a decade ahead of schedule.
Globally, CO2 emissions from existing coal plants are enough to breach the carbon budget for an average temperature rise of 1.5° or 2° Celsius (2.7° or 3.6° Fahrenheit). To meet these goals would mean no new coal plants and closing 20% of the current fleet early, according to one recent study. All unabated coal plants would have to close by 2040 to stay “well below” the 2° C mark, according to the International Energy Agency.
Banner image: A butterfly in the forests of Vietnam. Photo by Rhett A. Butler.