While the provisions of the Kyoto Protocol envisage a reduction in greenhouse gas emissions on the part of the richer annex 1 countries, it offers them the option of emissions trading with lesser-polluting developing countries. Another mechanism – termed the Clean Development Mechanism (CDM) – allows richer countries to offset their emissions by buying carbon credits generated by emission reduction projects in developing nations. The CDM is also supposed to help developing countries deal with climate change mitigation and adaptation through technology transfer and the Adaptation Fund respectively. The resources of the Adaptation Fund are provided by a two per cent cess on CDM transactions. However, neither the Fund nor technology transfer has materialised.

Executive Secretary of the UNFCCC, Yvo de Boer, articulated as much in his opening press conference on December 2, where he admitted that the big agenda in Bali was the initiation and facilitation of technology transfer and the Adaptation Fund.

Efficiency projects

The CDM has also come under criticism from several African countries as the mechanism awards credits for offsetting emissions through efficiency projects and emission reductions, thereby discriminating against countries with low industrial and emission bases to start with. What parts of Africa and South America do have are forests – but forests are not covered under the terms of the Kyoto Protocol. However, Mr. de Boer has urged delegates at the Bali Conference to work towards building a possible consensus on incorporating Reduced Emissions by Deforestation (and Degradation) in Developing countries (REDD) to help developing preserve forests.

Emissions from deforestation in the Global South are estimated to contribute about 20 per cent of anthropogenic greenhouse gas emissions. However, the deforestation issue is likely to be extremely contentious with some groups and countries asking for a purely commodity driven approach to preserving the world’s forests, while others fear for the rights of those dependent on the forests for their livelihoods.

Bali: As the UNFCCC World Climate Change Conference crossed the 10,000-attendee mark, delegates braced themselves for what could be one most difficult and divisive issues of what could constitute “The Bali Breakthrough.” “The working group on Reduction of Emissions by Deforestation (and Degradation) in Developing Countries (REDD) was constituted and has begun work today,” stated UNFCCC Executive Secretary Yvo de Boer in his daily press briefing at the World Climate Change Summit on Thursday.

The working group is tasked with arriving at a mechanism to incorporate deforestation reduction into the framework of the Kyoto Protocol and the carbon market.

At present, forests store about 686 gigatonnes (GT) of carbon — about 50 per cent more than the atmosphere — and are being cleared at an average rate of about 13 million hectares per annum. This makes deforestation responsible for between 20 and 25 per cent of global green house gas emissions.

The risks of exacerbation, and opportunities presented by the possible control of deforestation, has led delegates to propose several possible models. The debate revolves around the fact that governments across the world have been largely incapable of or are unwilling to tackle the problem. Recent reports suggest that stopping the destruction of our forests is clearly more than a law and order problem. Estimates vary, but at least one well-regarded report, The Stern Report, suggests that tackling deforestation in the 8 countries that account for 70 per cent of the destruction shall cost between $5-10 billion a year; a sum that few governments can afford.

Accordingly, several possible models are being considered. On the one hand, some suggest a purely government-centric model where richer Annex-1 countries and donor bodies compensate developing countries for safeguarding their forests. This would fall under the scope of “Adaptation Measures” under the Kyoto Protocol and could be funded by the Adaptation Fund. However, other countries, such as India, have pointed out that the Adaptation Fund is yet to be operationalised; even if it is, it would have only about $5 billion by 2012. Thus India proposes that forests be kept separate from the mechanisms of the Protocol and can be financed by separate financial instruments developed by the UNFCCC.

Carbon markets

Another approach envisages integrating REDD into the existing carbon markets. The idea is to come up with a system of carbon credits for forest cover – thereby allowing developing countries to trade their credits on the carbon market and hence generate funds for conservation. However, experts warned that such a system shall require deliberation.

“Opening up forests to the market in one fell swoop shall have unpredictable effects on the functioning of the carbon market,” explained Bill Hare of GreenPeace and the Potsdam Institute for Climate Change Impact, “The sudden supply of credits could result in the price of carbon credits bottoming out,” Mr. Hare said.

Hybrid model

Hare and Greenpeace have proposed an alternative hybrid model that envisages pivotal roles for states and markets. They are also problems with compliance, monitoring and permanence. “What happens if you sell forest credits on the market, and then destroy them five years later?” asked a member of the audience in one session. The answers, it seems, are yet to be worked out.