United States Congress Awareness of Forest Carbon Benefits Low

Jeff Hayward, manager of the Rainforest Alliance’s climate initiative, discusses a recent seminar on perceptions about tropical deforestation and forest carbon.

Last month I attended a seminar discussing a new study on perceptions about tropical deforestation and forest carbon within the United States legislature. Resources for the Future (RFF) surveyed staff members and leadership in the United States House of Representatives and Senate and found that most do not think that international forest carbon will produce real, reliable greenhouse gas reductions.

According to RFF, their sample was culled from the more “climate-informed” representatives. However, researchers determined that there wasn’t a very “deep understanding” about the role of international forests in achieving carbon emissions reductions. A most troubling point — there is an awareness gap among United States policy makers when we most need them to be on top of the subject.

A few of the take home messages from the research are below.

1) There is a widespread skepticism about the ability of developing countries in the tropics to produce real, verifiable and measurable carbon offsets.

2) There is a general perception that reduction of emissions from tropical forests is an international issue, without much room for traction within domestic politics.

3) There is a low opinion, in general, of foreign aid held by these politicians, translating into an equally low opinion of funding foreign carbon projects.

4) There is more interest in supporting domestic forest offsets than foreign ones.

5) There is a belief that conservation organizations are divided about forests and carbon.

These findings are startling. I think anyone who believes that carbon finance can support forest conservation in the tropics just realized that their work is going to be even more challenging. The United States is pivotal in how markets evolve for reducing emissions from deforestation and forest degredation — and we need to make a convincing case for the conservation of forests through payments for carbon.

If you recall, nearly all of the mitigation of carbon dioxide emissions that can come from forestry in this century should come from the tropics and neotropics. Most northern and temperate forests are carbon sinks, and even thought there are regional sequestration benefits from such forests, their role in the fight against climate change is less significant than the role of forests in the tropics. It is fundamentally important for international forest carbon offsets to be supported by United States policymakers, as the United States remains one of the largest emitters in the world.

A Carbon Tax May Not Achieve Necessary Emission Cuts

Shortly after United States President Barack Obama introduced a budgetary plan for an emissions cap and trade system, some journalists and politicians were calling it a ‘tax’ on carbon. You may have read that this would be a tax that anyone who drives a car would have to pay. Yet trading emissions under a cap and trade system is designed specifically not to be a tax. It’s only a tax in as much as any added cost to a business is a tax. Mostly it’s dubbed that as political shorthand by critics opposed to cap and trade.

But a true carbon tax has been proposed by economists as a policy intervention. It’s a different approach than cap and trade. So, how would a carbon tax be different and what might the environmental outcomes be?

A carbon tax would be a fixed price based on the carbon dioxide content of fossil fuels. It would most likely be assessed against the coal, petroleum, and natural gas used in energy generation, transportation, heating and cooling, industrial manufacturing and processing. It is likely that a carbon tax would be applied ‘upstream’ with the primary industries involved in fuel extraction and combustion. The cost would then be transferred ‘downstream’ in the form of higher energy costs and probably higher prices for energy-intensive goods and services.

Proponents of a carbon tax favor it because it would set a fixed price for carbon. This would add certainty and some reliability (as taxes are harder to impose and to change) around an often volatile and moving target — the price of carbon. And that could be advantageous for industry to plan emissions strategies. A carbon tax could be targeted at specific industries and could be levied on imported fossil fuels as a means to address competitiveness when foreign countries choose not to adopt more rigorous reductions targets.

However, a carbon tax offers no guarantee on the amount of emissions that will be reduced. So while the price is certain, the environmental outcome is not. With cap and trade, the amount of emissions are fixed, thus the environmental outcomes (in terms of greenhouse gases emitted) are certain, although the price is variable.

With both approaches, the revenues from the systems could be used to lower other taxes (such as income), to invest in low-carbon technology, or to offer some form of relief for vulnerable industries, businesses or households.

The most critical element to a carbon tax is setting the price. This is also a major complication. Predicting a value will likely be educated guesswork. We do not know how many emissions reductions will be achieved at $10 per ton of carbon dioxide, any more than we can predict the mitigation at $25 or $75 or $100 per ton.

Let’s recall that the goal is to reduce global warming by reducing emissions of greenhouse gases (GHG) in the atmosphere. And it’s the amount of GHGs that determine how much global temperatures will increase. If a carbon tax is not priced correctly, the necessary emissions cuts don’t happen. Establishing certainty on emissions cuts seems more important than price, which is why cap and trade is probably the more effective tool.

Cutting Carbon Dioxide Emissions and the United States Budget Deficit

United States President Barack Obama heralded a challenging era in the United States this week and proposed a sweeping program to cut the nation’s greenhouse gas emissions (GHG) 80 percent by 2050. He aims to see this happen largely through a market-based system of cap and trade. In presenting his hopes for a future United States budget, President Obama also argued that the revenues generated by cutting emissions will help the United States cut its fiscal deficit. The budget plans to raise $80 billion annually from auctioning emissions permits (allowances) from 2012 through 2019.

These are truly bold initiatives linking the United States’ economy and the global climate system. We should applaud this step and vigorously support the adoption of a cap and trade system in the United States. There are many reasons why a cap and trade system is an appealing policy option*, but chief among these are that the climate benefit is certain (emissions reductions must fall beneath the cap, which can be set) and the system creates new assets for those who can innovate (reduce emissions and sequester carbon) more efficiently.

But just how does a cap and trade system work? What are allowances? And how will this auction be run? Below is a brief tutorial.

Cap and Trade

The government sets a limit (cap) on the total amount of GHG emissions permitted each year nationally. This limit would be lowered incrementally on a predictable schedule to reach predestined targets. Over time there would be fewer and fewer GHG emissions, while the cost to emit (pollute) would increase. The cap would be imposed upon the large emitters within the economy, typically power plants, utilities, manufacturing and processing. The firms in these sectors would be assigned a limited amount of emissions by the government.

Allowances

Allowances are equal to the maximum permitted level of GHG emissions. A company may only emit as much carbon as it has allowances for. Once the government sets the number of allowances for a certain sector and for certain companies, these will be sold through auction. Companies will make an economic decision on how best to use their allocated amount. One company may efficiently reduce emissions below the cap and thus can trade its surplus allowances (i.e., carbon credits). Another company may find it too costly to curtail pollution, be above the cap, and need to purchase credits from another company (i.e., approved tradable credits on the market). Trading this way stimulates more cost-effective emissions reductions and cleaner technology.

Auction

While it is possible for the government to issue allowances in a number of ways, or even distribute them freely, the Obama administration’s plan is for 100 percent of the allowances for large emitters to be sold through an auction. The government would set the rules for the auction, but the price would largely be determined by the market and the trade in carbon dioxide credits. With an auction, the companies pay for the allowances up front. The revenue from the auction could then be used to cut taxes or avoid tax increases, to invest in green technology, or otherwise reduce costs.

There are bound to be interesting dynamics once a compliance market in the United States is formed. As with any market, the trade for emissions reductions can be volatile and unpredictable, the price for allowances will fluctuate, and there may be unintended consequences. If the price for allowances was too low to stimulate domestic reduction investments, the government could restrict the amount of allowances or buy back and bank those already granted in order to drive up the price. If the cost was placing too high a burden on economic growth (or recovery), then more credits could be sold at favorable rates to increase supply. The program could also elect to distribute free allowances to individuals, households and small businesses, if they were unduly affected by a pass-through of higher energy costs. It could also be the case that organizations (non-regulated companies or even NGOs like the Rainforest Alliance) could buy allowances and influence the price of carbon.

It’s still a long way before the United States has a functioning cap and trade system, longer still before the at least $600 billion in expected revenue is earned, and only in the far horizon that the goal of 83 percent emissions reductions is met. Nonetheless, this week we witnessed United States climate policy making a progressive step toward brave new territory.

* Cap and trade has some disadvantages and there are other policy options, such as carbon taxes, performance standards, and traditional forms of regulation. We’ll look at these in future posts.

Climate-friendly tourism

There are at least three key elements to comprehensively understanding the emissions associated with any activity. These elements include: getting the data right, accounting for land-use practices and capturing the whole chain (growing, harvesting, shipping, manufacturing, use and disposal of products). In one aspect of our work, we are well positioned to help businesses analyze these elements and everything that goes into understanding their greenhouse gas emissions, as well as to take action to reduce and offset their impact. That area is tourism.

The Rainforest Alliance is a major force in the sustainable tourism industry, particularly well-known for setting the bar (standard) that defines truly sustainable tourism and for training hundreds of operations in how to improve their practices.

An important next step for our best management practices program is in helping tourism businesses measure, reduce and mitigate their carbon emissions. Look for us to explore this area more — taking into account how best to link with current tools offered by Rainforest Alliance and collaborators, how to determine an appropriate inventory scope in this wide-ranging industry and communications — soon.

We look forward to sharpening the existing climate-related aspects of our work and introducing new services in the coming years!

What’s in a carbon label

Jeff Hayward, manager of the Rainforest Alliance’s climate initiative, addresses the complexity behind the term “carbon label.”

A carbon label should measure the emissions embodied in a product or service and communicate that information to the customer. Seems pretty straightforward, right? Yet it’s highly complex to calculate emissions through complicated international supply chains, such as those navigated by the agriculture, forestry, and tourism businesses with which the Rainforest Alliance works.

Current concerns are with the real technical limitations to measurement. Also, the meaning of the messages of ‘carbon-friendliness’ can vary widely and some may not capture the full carbon cost, especially over an entire supply chain.

Let’s consider a simple case: Dutch roses versus Kenyan roses. What’s better from a carbon perspective?

Say you live in London and are concerned about climate change. Should you buy roses grown by a Dutch farmer or those that come by plane from Kenya? A carbon-friendly campaign built on a plank of ‘buy local’ and using a ‘food miles’ calculator as a proxy for carbon might seem to favor the Dutch-grown roses. But there are actually fewer emissions from the Kenyan roses. In both places, heated greenhouses were used; however, in Holland fossil fuels provided the energy, while Kenya utilized geothermal power (Williams 2007). Air transport isn’t always the biggest source of emissions — even if it might be the most apparent. Shipping may cause fewer emissions than other sources, particularly by relatively efficient sea or rail. In other situations, and with other products, transport may cause more emissions and local production may be better. Moreover, it’s important to remember that the carbon label may not say anything about how the roses were grown.

Even if we can compute the carbon cost of roses, and plenty of other goods, will we be able to do this cost-effectively? Will the messages be clear and accurate? Will social and environmental practices be included, somehow, in the calculation? And will small-scale producers in poor countries be able to take advantage of the scheme?

There are a number of technical issues that underlay the complexity of carbon labeling. Here is a brief summary of some of these from Brenton, et al (2008):

1. Getting the data right. Using data measured directly versus estimates and defaults — some blend is needed for practicality and credibility sake. Plus many emissions will have to be calculated by conversion factors.

2. Capturing the whole chain. How narrowly or widely the boundaries of the ‘carbon footprint’ are defined can have a big effect on the end result. Including all the sources to achieve a comprehensive measure is tough math.

3. Land-use practices matter. For food and forest products, the most significant emissions often come from land-use practices. Clearing natural ecosystems and tilling the soil to grow food crops are very high emissions sources. Rainforest Alliance Certified™ farms and forests should offer greater climate care than non-certified practices — with more research, we hope to defend this point rigorously.

Learn more about carbon labels; standards and labeling, and embodied carbon in traded goods.

Earning accreditation with the Voluntary Carbon Standard

There are many carbon standards and programs around today. This adds complexity to an already complicated subject. Making sense of these is an objective of ours.

Currently, the programs with the greatest uptake for conservation-oriented carbon projects are voluntary in nature.

Over the coming decade this will likely change, as most carbon trading will be regulated with mandatory rules. In today’s market, however, one emerging leading system is that of the Voluntary Carbon Standard (VCS).

Approval as a verifier with the VCS is actually outsourced to accreditation firms registered with the International Organization for Standardization (ISO), the world’s largest developer and publisher of international standards. Unlike the Forest Stewardship Council, which handles its own accreditation, the VCS hands the responsibility over to third parties. An organization called the American National Standards Institute (ANSI), based in the United States, is conducting an evaluation of the Rainforest Alliance*. To add another layer of complexity to the matter, we get accredited to ISO standard 14065, which applies to verification bodies who evaluate greenhouse gases, but the scope of our accreditation includes the VCS.

Here’s an overview of the basic process we’ve followed so far and the preliminary results:

1. We compiled a huge packet of our policies, procedures and systems and sent these to ANSI for review. They provided us with a report of that review and suggested we make some clarifications.

2. ANSI auditors came to the Rainforest Alliance’s office in Richmond, VT and evaluated our documented control systems. They also talked to staff about management and the administration of verification services.

3. ANSI shadowed Rainforest Alliance auditors in the field while we conducted a verification audit in Mississippi. It is an ecosystem restoration project turning nearly 2,000 acres (800 hectares) of old corn and cotton fields into mixed species hardwood forests.

4. The next step for us will be to complete our audit report for the Mississippi client and share this with ANSI.

Thanks to everyone who has helped so far with this accreditation process!

* The Rainforest Alliance was accredited as a validator/verifier by ANSI on December 1, 2008.