Policies to Reduce Emissions from Deforestation and Degradation ...

demand shifts. Activity shifting leakage occurs when the actual agents of deforestation go somewhere
else. Activity-shifting leakage is easier to manage because the agents of deforestation are
geographically bound. Activity-shifting leakage and market leakage are discussed in further detail
in the following sections.
Chomitz (2006) argues that even where leakage is large, it is probably less than 100 percent.
For example, for every 20 ha of forest protected from agricultural clearing, forest elsewhere may
be cleared, but the area cleared will likely be less than 20 ha. Note that if leakage was greater than
100 percent, the project would be creating more harm than good by increasing the concentration
of environmental carbon. It is possible that leakage can be minimized through project design and
measures that encourage agricultural intensification in nonforested areas that can soak up the labor,
commodity supply, and capital diverted by forest protections (Sohngen and Brown 2004;
Chomitz 2006).
Activity-Shifting Leakage
Activity-shifting leakage occurs when the activity that caused the deforestation in a project area
is displaced to a location outside the project boundaries. For example, farmers inside a conservation
project area might shift operations and clear forests outside the project area. Activity-shifting
leakage can be largely controlled at the project level through project selection and project design
measures that address both the proximate causes of deforestation (land-use change and forest conversion)
and the underlying drivers (e.g., poverty, agricultural policies, and land tenure) (Schwarze
et al. 2002; Sohngen and Brown 2004).
The risk of activity-shifting leakage is a function of the physical mobility of the activity (including
labor and capital) as well as the physical availability of forested land. For example, if capital
is not available to invest in new deforestation activities, or if additional forest is not available
to cut down, activity-shifting leakage will be less likely than if these circumstances were reversed.
Project design measures to minimize activity-shifting leakage would integrate forest conservation
with sustainable development activities that would address the socioeconomic drivers of
deforestation. For example, the Noel Kempff Mercado forest conservation project in Bolivia controlled
activity-shifting leakage by pairing equipment retirement schemes (addressing the proximate
causes of deforestation) with sustainable sources of firewood and local employment (addressing
the underlying drivers) (Schwarze et al. 2002; Sohngen and Brown 2004). Thus it is
possible to develop design standards and protocols to minimize the risk of activity-shifting leakage
for a REDD project.
The Voluntary Carbon Standard (VCS)—a standard under which REDD projects selling credits
in the voluntary market receive accreditation if they have met certain stringent criteria—outlines
methodologies for calculating and accounting for leakage (VCS 2007). Under the VCS, predicted
leakage must be calculated in the “leakage belt” and then subtracted from the potential number
of credits generated (VCS 2007). The VCS requires that projects account for activity-shifting leakage,
any increases in emissions due to measures implemented to prevent leakage, and increases
in emissions due to the increased consumption of fossil fuels for implementing forest protection,
monitoring, and surveillance tasks within the leakage belt (VCS 2007). Areas subject to leakage
must be monitored throughout the duration of the project.
4 Policies to Reduce Emissions from Deforestation and Degradation in Developing Countries