A New Perspective on Climate Policy
The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development
Edited by Valentina Bosetti, Carlo Carraro, Emanuele Massetti and Massimo Tavoni
Chapter 5: Climate Policy and the Forestry Sector: The Role of Non-energy Emissions
While it is broadly agreed that policies to reduce emissions from deforestation will be critical for fighting climate change, the linkage of international forestry and other land sectors to compliance markets for greenhouse gas (GHG) emissions reductions remains a critical policy issue.1 Policies for Reducing Emissions from tropical Deforestation and Forest Degradation (REDD) offer the opportunity to mitigate a major share of global GHG emissions at low estimated costs based on existing technologies. Investments in REDD are also a potentially attractive ‘wooden bridge’ for reducing nearterm emissions while buying time to reengineer other sectors of the economy (Chomitz, 2006). A key policy question is how to balance funding of lowcost emission reductions from tropical forest conservation and other landbased activities that are available in the near-term with investments to drive technological innovation in energy, transport, and industrial sectors over a longer time period. While the framework for limiting greenhouse gases under the Kyoto Protocol excluded mechanisms to reduce deforestation, there is a growing consensus on including REDD as a critical element of a future global climate policy regime. The Copenhagen Accord of December 2009 calls for immediately establishing a mechanism to finance REDD and other forestry sequestration activities in developing countries (UNFCCC, 2009). The Accord specifically calls for exploring both public and private market-based financing approaches, but the details remain to be determined. Governments and other organisations have put forth multiple proposals for financing REDD activities, including market-based approaches with different degrees of fungibility between forest carbon credits and GHG reductions in other countries and sectors. Policymakers in the United States are also considering multiple means of financing international forest carbon activities within emerging regional compliance markets for GHG reductions as well as in recent legislative proposals for a cap-and-trade system at the Federal level.