Policies to Reduce Emissions from Deforestation and Degradation ...

Results from such case studies are not necessarily transferable because of the different scale
of forestry projects, carbon characteristics of forests, drivers of forestry activities, mobility of capital
in Annex 1 countries, and lack of mobility in non-Annex 1 countries. The examples do illustrate
that leakage can be estimated based on the characteristics of the REDD project. It follows that
projects could be selected based on leakage risks, and discount rates could be applied to the project
credits to account for leakage. These discount rates could be adjusted as the project matures
and actual leakage rates are measured.
Leakage and Scope
The decision of whether REDD policies will be project-based or national-based will affect how leakage
is accounted for and mitigated.
∫ Under a project-based REDD policy, the risks of within-country leakage would have to be accounted
for when issuing credits. Project leakage can be modeled and accounted for; however, the implementation
of some REDD projects suggests that it is better to focus on the prevention and minimization
of sources of leakage through understanding the drivers and agents of deforestation
(Brown 2002). International leakage would also be an issue.
∫ Under a national-based REDD policy, within-country leakage is incorporated into the national accounting
and credit generation (Schwarze et al. 2002; Santilli et al. 2005). International leakage to
nonparticipating countries would still be an issue; however, it may be impractical to account for
international leakage because a participating country cannot be penalized for the capacity of another
country to resist deforestation pressure. In general, higher levels of participation internationally
would reduce leakage, since there would be fewer recipient countries that would allow
deforestation to leak across their borders.
Leakage Discussion
Leakage is a risk for REDD projects, as it is for any GHG-mitigating project. The magnitude of the
risk depends on the project design, the market forces driving deforestation, the policies and market
pressures affecting surrounding land, and the level of international participation in REDD
programs.
Project leakage can be minimized through project selection, project design, and complementary
measures that increase agricultural production intensity in other operations in nonforested
areas. It may be possible to control most activity-shifting leakage through design measures that
address the unique drivers of deforestation in each project area. Market leakage at the national
level can be estimated using models that incorporate forest and market characteristics; however,
data are lacking for some developing country forestry markets. In the Noel Kempff case, Brown
(2002) found that it was better to prevent and minimize leakage from the outset than to quantify
and account for it once it had taken place. For this reason, she recommends focusing on specific
groups of people and dynamics rather than broader issues and geographic statistics.
Leakage can be incorporated into REDD accounting measures. The Voluntary Carbon Standard
suggests that leakage be estimated and deducted from the number of credits available for sale. At
the national level, leakage is incorporated into national accounting. Within-country leakage is not
4 Policies to Reduce Emissions from Deforestation and Degradation in Developing Countries