Reducing Emissions from Deforestation in Developing Countries COP-11 Agenda Item #6

1. Reducing Emissionsfrom Deforestation in Developing CountriesCOP-11 Agenda Item #6 the katoombagroup São Paulo, Brazil October 4, 2006 www.RainforestCoalition.org

2. Papua New Guinea

3. Carbon-Neutral while fulfilling our social and economic priorities. Land Use: Net rates of deforestation must be slowed, halted and reversed – Costa Rica, China Transportation: Replace carbon intense fossil fuels with clean-burning technology and renewable bio-fuels – Brazil, Holland. Energy: Sufficient hydro potential and natural gas to fuel our economic growth aspirations. Climate Objective Environmentally and Socially Sustainable Economic Growth

4. Problem UNFCCC and KP: No Meaningful Solutions • Deforestation: No incentive to Reduce Emissions from deforestation • Transportation: No real incentive for National transition to clean and renewable fuels in transportation • Energy: CDM offers too much red-tape and low carbon prices to facilitate energy shifts at small scale.

5. Emission Sources

6. Obstacles

7. Deforestation Drivers • Agriculture:Soya, Coffee, Cocoa, Sugar, etc. • Logging: Low value exports, unsustainable practices. • Development:Roads,power-lines, social services, etc. • Population:Urbanization + growth drives above. Perverse Incentives!

8. Rainforest Coalition • Bolivia • Central African Rep. • Chile • Congo • Costa Rica • DR Congo • Dominican Republic • Fiji • Gabon • Guatemala • Nicaragua • Panama • Papua New Guinea • Solomon Islands • Vanuatu

9. Rainforest Coalition CfRN Interregional Policy Development & Consensus

10. COP-11 Agenda #6:Summary • Deforestation:Real Threat to Climate Stability • Emissions:Resulting Emissions are Significant • Policy & Incentives: Seek flexible basket of ‘voluntary’ instruments to accommodate national situations. Market forces drive most deforestation and Emissions Markets may hold key to solution. • Process:Parties refer to SBSTA with goal to reach recommendations by 2007

11. Climate Change:Multilateral Cooperation Common but Differentiated Responsibilities • Industrial to Developing: Maintain philosophy of mandatory reductions that finance voluntary instruments by developing nations. Support Sustainable Development. • Amongst Developing: Immense difference between developing countries. Need flexible ‘basket’ of voluntary emissions reduction instruments – in present form, CDM alone is not enough. North to South Flexible Basket of Positive Incentives

12. COP-11 Agenda #6:Positive Incentives Flexible Basket of Voluntary Incentive (Diversity of National Circumstance) • Official Development Assistance Approach (ODA) • Voluntary National Approach (Voluntary ‘Annex C’?) • Flexible Scale Approach – National Circumstance • Aggregate under UNFCCC: Bilateral and/or Multilateral Funds and Emissions Trading Agreements • Optional Protocol within UNFCCC Voluntary Multi-Staged Not Mutually Exclusive

13. Support Objective Voluntary National Base Scenario Credit / Debit System Questions Demand Pricing Logic ODA – cash flow stability The Brazil Proposal:General Observations

14. CER Positioned as ‘cheap’ mechanism Carries ‘performance’ risk – buyer must replace credit Lower ‘atmospheric value’ – supplemental credit AAU/ERU National Fixed targets Minimal transactional risk Higher ‘atmospheric value’ REDD (Annex C?) Voluntary Reductions National Scale Performance Risk minimized High ‘atmospheric value’ Higher ‘Social value’ Organic or Fair Trade COP-11 Agenda #6:Price vs. Objectives Price Atmospheric & Social Objectives

15. COP-11 Agenda #6:Value → Social Benefit • Significant source of carbon emissions currently outside frameworks. • Increases the flexibility of developing countries through a ‘national’ approach. • Significant new revenue streams to addresses poverty in rural areas with clear metrics to access effectiveness. • Underpins MDG objectives related to environment, poverty, gender equality, health, etc. • Major biodiversity conservation benefits • Supports efforts against desertification and soil erosion • Leads to watershed protection and potable water supply

16. COP-11 Agenda #6:Additional: Deeper Cuts  AAU --- JI --- CDM  KP1 (- 6%) Additional  AAU --- JI --- CDM  REDD KP2 (- 10%?) + REDD - 5%? + New Total: -15%? NEW CREDITS = DEEPER CUTS

17. Key Messages • Drivers:Leading drivers are identifiable. Must overcome perverse incentives and opportunity costs of alternative land uses -- both locally and internationally. In most cases, higher carbon ‘incentives’ will drive greater emissions reductions from deforestation. • Solution Possible:Technology, methods and markets available now to accurately measure changes in carbon stocks and trade relevant credits at a National scale. Challenge is implementation (standards, policy, etc.)

18. Key Messages • Policy & Incentives:Diversity of ‘national circumstances’ justifies a flexible set of positive incentives -- ODA may be important to get started quickly, but markets are likely the best sustainable finance solution. • Future:Deforestation must feature prominently in future climate stability actions. Continue cross-regional consensus -- Bolivia, Central African Republic, Congo, Costa Rica, Dominican Republic, DR Congo, Gabon, Ghana, Guatemala, Honduras, Indonesia, Kenya, Lesotho, Nicaragua, Panama, Peru, Papua New Guinea. International funding needed immediately for analysis, capacity building, & pilot market activities.