Policies to Reduce Emissions from Deforestation and Degradation ...

Baselines Discussion
Historic, remotely sensed data can be used to set baselines. However, because of heterogeneity
in countries’ recent patterns of deforestation and in the availability of forest carbon inventories,
it will be difficult to find a single baseline methodology that is appropriate for all would-be participants.
Target Band
Employing a target band instead of a threshold baseline appears to accommodate the greatest
range of forest change histories. However, a target band will make it difficult to generate full-value
credits and identify leakage. A target band might not be accurate enough to ensure environmental
integrity.
Threshold Baselines
Threshold baselines will facilitate the generation of full-value credits. When constructing threshold
baselines, it is important to balance universal methodological principles with the circumstances
of individual countries. Additionally, it is important to consider the effect on individual countries
and the effect on the environment.
Leakage
IPCC’s Special Report on Land Use, Land-Use Change and Forestry defines leakage as “the unanticipated
decrease or increase in GHG benefits outside of the project’s accounting boundary … as a result of
project activities” (Watson et al. 2000, 5.3.3). In the context of the REDD debate, there is much concern
over “negative leakage,” in which reducing deforestation in one area would simply shift the
deforestation activity to another area. If leakage occurs, benefits from a REDD project would be diluted
by increased deforestation and increased emissions elsewhere such that there would be little
or no net decrease in emissions at the national or global scale. Although leakage is a concern
when considering REDD, leakage can occur in any sector affected by GHG mitigation. For example,
in France, the cost of production for carbon-intensive products has increased because regulations
in Europe limit carbon emissions. As a result, prices of some exports such as cement and steel
have increased. Construction companies in Singapore may choose to purchase materials from
China rather than France because China currently has no regulations limiting carbon emissions,
making these products cheaper. As a result, the benefits from reduced carbon emissions in France
would be diluted by increased carbon emissions in China. As with leakage in other sectors, leakage
in the forest sector can be eliminated only by developing a global policy framework that applies
everywhere.
The specific characteristics of the forestry project and the market driving deforestation will
affect whether the risk of leakage is large or small. Generally, stopping deforestation driven by
subsistence activities will risk smaller leakage than stopping deforestation driven by commercial
markets. In the latter example, supposing the forest would be cleared for timber, decreasing deforestation
may cause the market price for timber to increase just enough to make it cost-effective
for others to cut down forests that they had previously conserved. This is called market leakage
and is hard to manage because the price on the international market changes as supply and
Policy Design Issues 45