Carbon markets would collapse if forest protection credits were to be included in international emissions trading, Greenpeace warned world leaders gathering for the first official round of UN climate talks in Bonn.
Launching a new report in the sidelines of the meeting yesterday (30 March), the green NGO said carbon prices would crash by up to 75% by 2020, falling from €16.05 per tonne of carbon to €3.9, under current reduction targets, if "relatively abundant" forest offset credits are included in the carbon markets. Even if the number of credits were more limited, the price of carbon would still devalued by 60%, it stated.
According to Greenpeace, a strong carbon price is essential to stimulate investment in clean and renewable technologies. Low prices would delay necessary infrastructural changes needed to keep global warming below 2°C, the NGO said.
This would be particularly true in developing countries, which could initially benefit from selling credits to industrialised nations looking for a cheaper way of paying for their emissions. However, they would suffer in the long term, as failed efforts to mitigate climate change would ultimately destroy the forests.
The report demonstrates that unrestricted supply of forest credits would halve the production of credits from energy and industrial emissions reductions in China, India and other developing countries. It stressed that China alone would lose around $10-100 billion per year in clean energy and technology investments.
The NGO has taken a strong stance by insisting that developed countries should meet three-quarters of their emissions reduction obligations at home. It said the ongoing global climate negotiations, set to culminate in a new international agreement for the post-2012 period in Copenhagen in December, have been increasingly occupied with reducing emissions from deforestation and forest degradation in developing countries.
The EU has adopted a wary approach to using forest credits as part of international carbon trading. Instead, the European Commission has proposed the development of a Global Forest Carbon Mechanism, a financing mechanism whereby developing countries would be compensated for their efforts to reduce deforestation and forest degradation (EurActiv 20/10/08).
In an interview with EurActiv, Artur Runge-Metzger, the Commission's chief climate negotiator, said the Commission is "very critical" about including forest credits to the EU Emissions Trading Scheme (EU ETS) (EurActiv 23/02/09). "We think we should keep forestry aside for the moment, and see how we can structure an incentive scheme, which will also give money to forest owners in developing countries," he said.
The European Parliament, on the other hand, has pushed for including forests in the EU ETS (EurActiv 10/10/08). Its resolution on the role of deforestation in tackling climate, scheduled for adoption in April, maps out its contribution on the issue for the climate negotiations (EurActiv 16/02/09), including a favourable approach to forest credits in the carbon market to address climate change, provided that reliable monitoring mechanisms are ensured.