The 21st Century climate challenge

3Avoiding dangerous climate change: strategies for mitigationAcross the developingworld, rainforests are beingfelled for gains which, in afunctioning carbon market,would be dwarfed by thebenefits of conservationsquare kilometres a year—an area the size of acountry like Chile. 143 Rainforests are currentlyshrinking at about 5 percent a year. Every hectarelost adds to greenhouse gas emissions.While forests vary in the amount of carbon thatthey store, pristine rainforest can store around500 tonnes of CO 2per hectare.Between 1990 and 2005, shrinkage of theglobal forest estate is estimated to have addedaround 4 Gt CO 2to the Earth’s atmosphereeach year. 144 If the world’s forests were acountry, that country would be one of the topemitters. On one estimate, deforestation, peatland degradation and forest fires have madeIndonesia the third largest source of greenhousegas emissions in the world. 145 Deforestationin the Amazon region is another of the greatsources of global emissions. Data from theInstituto de Pesquisa Ambiental da Amazônia,a research institute in northern Brazil, suggestthat deforestation is responsible for emissionsof an estimated 730 Mt CO 2each year. 146The many drivers of deforestationDeforestation is driven by many forces. In somecases, poverty is the driver, with agriculturalpopulations collecting fuelwood or expandingthe frontier for subsistence agriculture. Inothers, opportunities for wealth generation arethe main engine of destruction.The expansion of national and internationalmarkets for products such as beef, soybeans,palm oil and cocoa can create strong incentivesfor deforestation. In Brazil, devaluation and aFigure 3.9Forests are in retreatAnnual change, 1990–2005 (million ha per year)0-1-2-3-4-5-6-7-8-9WorldSource: FAO 2007.BrazilIndonesiaSudan Myanmar Congo(Dem.Rep. of)30 percent increase in prices for soy exportsfrom 1999 to 2004 gave a boost to forestclearance. In the 5 years to 2005, the statesof Goias, Mato Grosso and Mato Grossodo Sul planted an additional 54,000 squarekilometres of soy—an area slightly larger thanCosta Rica. At the same time, forests are underpressure from commercial logging, much of itillegal. In Cambodia, to take one example,illegal logging of hardwood timbers for exportwas responsible for much of the 30 percentreduction in primary rainforest cover since2000—one of the most rapid losses recordedby the FAO. 147Commercial pressures on rainforestsare unlikely to dissipate in the near future.Croplands, pastures, plantations and loggingare expanding into natural forests across theworld. Population growth, rising incomes andopportunities for trade create incentives fordeforestation—as does market failure on aglobal scale.The scale of market failure is revealed inthe basic economics of rainforest conversion.Across the developing world, rainforests arebeing felled for gains which, in a functioningcarbon market, would be dwarfed by thebenefits of conservation. Consider thefollowing example. In Indonesia, oil palmcultivation generates an estimated value ofUS$114 per hectare. As the trees that stoodon that hectare burn and rot, they release CO 2into the atmosphere—perhaps 500 tonnes ahectare in dense rainforests. At a carbon priceof US$20–30 a tonne, a plausible future rangeon the EU ETS, the carbon market value ofthat release would amount to US$10,000–15,000 a hectare. Put differently, farmers inIndonesia are trading a carbon bank assetworth at least US$10,000 in terms of climatechange mitigation, for one worth US$114, oraround 2% of its value. 148 Even commerciallogging, which generates a higher marketreturn, represents less than one-tenth of thevalue of the carbon bank. And these figures donot include the market and non-market valuesof environmental services and biodiversity.Perverse incentives are at the heart ofa ‘lose–lose’ scenario. The world is losing158 HUMAN DEVELOPMENT REPORT 2007/2008