The way forward ►► R educing E missions from D eforestation & D egradation in Developing Countries Michael Dutschke bio carbon consult Offenburg / Germany UNFCCC SB 26 GTZ Side Event on Capacity Development for REDD

Comparing approaches RS Not consideredRS Monitoring Not consideredYesNot consideredYes Early action Not consideredOpenContracted priceOpen Price formation ODA, GEF, Adaptation Fund Market & non- market Voluntary fundOpen Financing Not considered B&B Liability HistoricalPotentialHistoricalOpen Reference level A/R, FMD,D, FMDDD Scope Compensated Conservation / IN &CH REDD & Stabilization / Congo Basin RED Fund / BRCompensated Reductions / CfRN

Will a sectoral target solve methodological problems? Leakage: Only international Permanence: Preferably banking & borrowing Uncertainties: Conservative statistical treatment using IPCC standards Market stability Long-term Annex B targets for e.g REDD adder-on on defined targets Inclusion of new sectors

Voluntary sectoral targets may eventually end up in binding country targets Long-term market stability depends on the willingness to talk about an agreed emission reduction path (C&C) Tech “hardware” suppliers may loose relative weight Concerns of important actors

Options for post-2012 Over the long term, emission permits need to be perceived as finite goods –Ambitious long-term target (e.g. 2050) combined with 5-year commitment periods (C&C) –Bilateral and multilateral compliance partnerships between industrialized and developing countries –Banking allows the use of reduction potentials that will not be available in the future –Adder-on deforestation target for Annex B

What’s the cost? Initial opportunity costs of main deforesting countries estimated at 5 – 10 billion US$ per year Adding up costs for administration, law control & enforcement Annual 10 billion US$ can make a difference This amount is equivalent to 0.02% of world GNP or 13% of worldwide ODA

Who pays the bill? Optimal: Market mechanism linked to agreed GHG emissions cap Tax on bunker fuels of around 15 US$ per ton CO2e Compliance mechanism of approx. 1 US$ per tCO2e AAU allocated after 2012 to be paid by committed countries upfront –Compliance security is paid back in case of compliance –Refinanced by the sale of REDD credits during the subsequent CP –(Necessary precondition: Banking allowed)

Revolving compliance mechanism Annex I governments pay upfront fee per post-2012 emission allowance (AAU) Annex I enterprises pay for post-2012 REDD credits

Open issues Separate protocol –Will not lead to market liquidity –Will loose time over negotiations Market or non-market –Old discussion – tax vs. cap –Long-term voluntary payments unrealistic Including A/R and FM –Integral view on land management –Resemblance Kyoto Art. 3.3 / 3.4 –May risk biodiversity if unchecked Early action avoids perverse incentives (2008+)

The way forward REDD is time-sensitive Ideological discussion wastes time 2ºC target cannot be achieved without quick inclusion of REDD “Stable and predictable availability of financial resources” needed –No infinite N-S subsidies for conservation Integral view on mitigation & land use –LULUCF mitigation in DCs is fragmented –Bioenergy may aggravate D Long-term view –Contraction & Convergence –Future binding commitments for DCs

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