California Law Breathes New Life Into REDD

The winds of change are blowing across the climate change policy landscape. With legislation stalled in the U.S. Senate, attention now shifts to state and regional initiatives.

In California, the Global Warming Solutions Act of 2006, better known as AB32, establishes a statewide mandate for greenhouse gas (GHG) reductions, including participation in a regional cap-and-trade system.

The California Air Resources Board (ARB) is the state agency responsible for implementing AB32, and its been busy readying the emissions trading framework set to take effect in 2012. On July 30, the ARB held a public workshop to discuss the role of Reducing Emissions from Deforestation and Degradation (REDD) in a California cap-and-trade system and offered glimpses of a new pathway to incentivize tropical forest conservation.

With REDD, the carbon sequestration benefits of the trees are monetized and carbon credits are generated. In other words, it attempts to make trees more valuable standing up than cut down. According to Barbara Bamberger, an air pollution specialist from the Office of Climate Change at ARB, "In California, we are focusing on REDD most likely to be the first sector-based offset crediting program out of the gate."

REDD on the Horizon

The emerging California marketplace for REDD credits is certainly getting international attention.

"Many eyes of the world are turning to this room as they see California has the potential to lay the compliance template for REDD," said Brian Murray, director for economic analysis at Duke University's Nicholas Institute for Environmental Policy Solutions.

Although a market for REDD offsets in California would be relatively small by international standards and may not be fully active until 2015, the ARB rule making process certainly has an opportunity to inform other international efforts.

"There's a lot of good people and a lot of good projects trying to do the right thing," said Tony Brunello, senior advisor to the Governors' Climate & Forests (GCF) Taskforce. "Over time, we think that ARB can provide the pathway to be able to develop some language to provide clarity and give [the world] hope that it will set a good template for what needs to be done at larger levels."

Ready For REDD?

Not everybody agrees that creating a compliance market for REDD credits is the best way to achieve climate-change policy objectives. According to Kate Horner, trade and forest policy analyst at Friends of the Earth, carbon offsetting is a Band-Aid solution that fails to address the primary disease.

"International deforestation attempts are not new," she said. "Many are decades old. A lot haven't worked. There is simply too much emphasis on generating new money without addressing the underlying political drivers that cause deforestation. We are concerned that REDD credits will be used by countries to develop in a way that will create even more pressure to deforest."

Horner suggests that a California-based REDD market will limit job creation opportunities and fail to reduce co-pollutants in the state. In addition, Horner says that a number of structural challenges will need to be addressed.

"Avoided deforestation was left out of Kyoto because of technical constraints, such as additionality and permanence," she said. "Good thinking is trying to address these problems, but none are perfect and all represent tradeoffs."

Born in the USA?

Another issue is the location and geographical sourcing of credits. Should there be limits on the use of international offsets in a domestic marketplace? How many dollars from U.S. carbon markets should be allowed to flow overseas?

Given the sizable forestry resources available internationally, the answer to this question could have a material impact on the final market clearing prices for these environmental commodities. A lower price on carbon may be achieved through adoption of REDD, but the realistic supply of offset credits and the potential flow of money from U.S. businesses to tropical forest nations is still unclear.

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