Duncan Marsh The Nature Conservancy Inter-American Development Bank June 7, 2007 Reducing Deforestation in Developing Countries: Critical Issues and Directions Forward

Why deforestation matters Climate Change: % of global GHG emissions Biodiversity: 2/3 terrestrial fauna and flora live in forests Poverty: 90% of people living in extreme poverty depend on forests Water: 70% of people rely on forests for drinking water

Deforestation Rates > 4% per year 4% 3% 2% 1%

Carbon Potential

Year Change in temperature (°C) Observed Coral extinction Potential collapse of Amazon 25-50% species extinctions 80% bird habitat loss on US coasts Biodiversity Impacts of climate change Unknown risks

Why this matters to TNC TNC’s lead scientists have identified climate change as the number one threat to the Conservancy’s mission Climate change a clear priority across the organization Merges climate, biodiversity, economic and social development interests TNC: Deep on-the-ground experience tackling climate change and deforestation simultaneously Strong resources and fundraising abilities

TNC Forest Carbon Activities

Forest Carbon Projects $36 million  1.7 million acres  17.5 million tons CO2 Conservation & Restoration Projects in the US, Belize, Bolivia & Brazil Research and project development in six other countries Measuring carbon storage

Noel Kempff Climate Action Project, Bolivia Preventing further industrial timber extraction Avoiding slash and burn agriculture through community development projects Carbon Monitoring and Verification Long-Term Conservation Finance First forest emissions reduction project to be fully certified using rigorous standards based on those used in the Clean Development Mechanism

Lessons from TNC Project Experience 1.Emissions reductions from activities that reduce deforestation can be credibly measured, validated, and verified. 2.Transaction costs can be reduced and leakage can be captured in REDD activities at larger scale, particularly at the national. 3.Sustained long-term financing is critical. –Markets are most effective revenue generators; but need sustained policies.

Context for Action Today Avoided deforestation not included in Kyoto’s Clean Development Mechanism, following extensive debate In 2005, issue resurfaced in UNFCCC, led by Coalition for Rainforest Nations COP-11 in 2005 established two-year dialogue Considerable uncertainty remains on technical and policy issues Developing nations requesting capacity building and technical assistance to monitor emissions and establish baselines, Calls for pilot activities to develop and test methodologies and policy approaches

Technical and methodological questions remain: –Carbon accounting systems – measurement techniques –Reference levels or baselines –Definitions and scope e.g., should degradation be included? –Permanence –Leakage The Need for Testing, Demonstration and Capacity

Policy Issues Policy issues: creating incentives; ensuring performance and cost- effectiveness National vs project-level approaches –Benefits of national-level initiatives: Minimize leakage Economies of scale Opportunity to utilize government policies and programs to maximize benefits Funding: Market vs non-market (eg, donor-funded)

TNC’s Forest Carbon Partnership  Conduct outreach, public education and advocacy to ensure that policies on climate change and forest conservation reflect the carbon and other benefits of biodiversity-rich forests  Develop tools and methodologies to measure and reduce carbon emissions from deforestation Conduct research that addresses key issues slowing negotiations and implementation of forestry carbon markets  On the ground capacity-building and pilot projects:  Test and demonstrate how these methodologies and corresponding policy frameworks can be used in up to 10 developing countries to show how valuing carbon and other benefits of intact forests dramatically increases conservation and promotes sustainable development

Capacity-building and pilot projects  Grants and technical assistance: To help up to ten developing nations build the scientific, regulatory and governance capacity necessary to participate in future forest carbon markets.  Carbon accounting systems  Strategies to reducing deforestation  Supporting analysis  Participate in pilot projects to develop and test incentive approaches

 Demonstrate how sound accounting methodologies and performance-based incentive mechanisms can work to assist developing countries’ efforts to reduce deforestation and promote sustainable development Catalyze development of a sustainable and dramatically enhanced financing stream for forest conservation and economic development Deliver emission reductions at competitive costs while promoting sustainable development Strengthen existing biodiversity and forest management programs Anticipated Results

Conclusions Forest carbon project experience suggests that national scale will be most effective; markets can work, but need sustained policy drivers Capacity building is essential Need to resolve outstanding technical uncertainties –Research and pilot activities essential Need for additional leadership to build capacity in LAC region

Thank You Duncan Marsh