Carbon Storage in Existing Forests

Potential Carbon Storage in New Forests

CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE

CBO

Deforestation

and

Greenhouse

Gases

JANUARY 2012
Pub. No. 4216
The Congress of the United States O Congressional Budget Office

A

STUDY

CBO

Deforestation and Greenhouse Gases

January 2012
CBO

Notes

All dollar values in this report are 2010 dollars.

Numbers in the text and figures may not add up to totals because of rounding. 

The map shown on the cover of this report is from Adrian Deveny, Janet Nackoney, 

Nigel Purvis, and others, Forest Carbon Index: The Geography of Forests in Climate 

Solutions (Resources for the Future and Climate Advisers, December 2009).
Preface

CBO

Emissions of carbon dioxide, a greenhouse gas, come primarily from the consumption 

of fossil fuels and from deforestation. The destruction and degradation of forestland, caused 

mainly by expanded agricultural activity in tropical developing countries, currently accounts 

for an estimated 12 percent of global greenhouse gas emissions.

This Congressional Budget Office (CBO) study, prepared at the request of the Chairman of 

the Senate Committee on Foreign Relations, examines challenges that affect whether actions 

to preserve forests could make a cost-effective contribution to reducing global emissions 

of greenhouse gases. It also discusses the pros and cons of approaches that the United States 

and other developed countries could take to promote forest preservation. In keeping with 

CBO’s mandate to provide objective, impartial analysis, the study contains no 

recommendations.

The report was written by Natalie Tawil of CBO’s Microeconomic Studies Division, under 

the guidance of Joseph Kile and David Moore (formerly of CBO). Terry Dinan, Daniel Frisk, 

Ron Gecan, Ryan Miller, Bob Shackleton, and Chad Shirley, all of CBO, offered helpful 

comments, as did Molly Macauley of Resources for the Future and Brian Murray of Duke 

University. (The assistance of external reviewers implies no responsibility for the final product, 

which rests solely with CBO.) 

Sherry Snyder edited the edited the report, and John Skeen proofread it. Maureen Costantino 

designed the cover and, with the assistance of Jeanine Rees, prepared the report for publication. Monte Ruffin printed the initial copies, and Linda Schimmel handled the print 

distribution. An electronic version is available on CBO’s Web site (www.cbo.gov).

Douglas W. Elmendorf

Director

January 2012

Contents

CBO

Summary vii

Implications of Deforestation for Climate Change 2

Current Locations and Causes of Deforestation 4

Forests and Cost-Effective Reductions in Greenhouse Gases 6

Cost-Effectiveness of Reducing Forest-Based Emissions 8

Uncertainty About the Cost-Effectiveness of Reducing Forest-Based Emissions 8

Challenges in Reducing Forest-Based Emissions 9

Measuring Changes in Carbon Storage 10

Structuring Incentives to Reduce Forest-Based Emissions 12

Improving Governance in Developing Countries 15

Policy Approaches for Reducing Forest-Based Emissions 18

Assistance to Governments 19

Markets for Reductions in Forest-Based GHG Emissions 20
VI DEFORESTATION AND GREENHOUSE GASES

CBO

Figures

S-1. Government Effectiveness in Countries Responsible for 95 Percent of 

Global Forest-Based Emissions, 1990 to 2005 viii

1. Estimated Distribution of Carbon Storage in Forests 2

2. Estimated Shares of Global Emissions of Greenhouse Gases Caused by 

Human Activity, by Source, 2005 3

3. Ranking of Countries by Their Estimated Contribution to 

Global Forest-Based Emissions, 1990 to 2005 4

4. Estimated CO2 Emissions for the Top CO2-Emitting Nations, 1990 to 2005 5

5. Capability of Developing Countries to Measure Changes in Forest Carbon 13

6. Government Effectiveness in Countries Responsible for 95 Percent of 

Global Forest-Based Emissions, 1990 to 2005 15

Boxes

1. Biofuels and Greenhouse Gas Emissions 7

2. The Role of Local Populations in Forest Preservation 17
CBO

Summary

Human activities produce large amounts of greenhouse gases (GHGs), primarily carbon dioxide (CO2), 

and thus contribute to global warming. The use of fossil 

fuels is the primary source of CO2 emissions, but the 

removal of trees from forested land has also contributed. 

Mature forests, having absorbed CO2 from the atmosphere while growing, store carbon in wood, leaves, and 

soil. That carbon is released when people clear forested 

land and destroy the wood. From 2000 to 2005, the loss 

of forests, primarily in tropical developing countries, 

accounted for approximately 12 percent of global GHG 

emissions. 

Slowing or halting deforestation in developing countries 

is a potentially low-cost way to help reduce global GHG 

emissions. For that potential to be realized, however, 

substantial challenges would need to be addressed—by 

providing technical and financial assistance to governments, by creating demand from private markets, or 

both.

Challenges in Reducing Forest-Based 

Emissions

If actions to support forest preservation are to play a costeffective role in a significant international effort to reduce 

global GHG emissions, three broad challenges would 

have to be met:

 Obtaining useful measurements of changes in the 

amount of carbon stored in forests, 

 Structuring incentives to reduce total forest-based 

emissions, and

 Improving governance in developing countries.

Measuring Changes in Carbon Storage

Establishing programs to reduce emissions of greenhouse 

gases and assessing the effectiveness of those programs 

require methods for measuring emissions. In some cases, 

measuring them is easy—the electric power industry, for 

example, can use systems that directly, continuously, and 

accurately monitor CO2 emissions. 

Measuring emissions resulting from deforestation is more 

complicated, however, because such emissions depend on 

the amount of deforestation and the carbon content of 

the wood that has been destroyed. Researchers can 

combine remote-sensing data about the amount of deforestation with information about the carbon content of 

the wood gleaned from on-the-ground inventories of the 

number and size of trees in sample areas to make such 

measurements. Most developing countries would need 

to improve their technical capabilities to process remotesensing data and conduct inventories in order to effectively implement any program aimed at reducing carbon 

emissions from deforestation.

Structuring Incentives to Reduce Total 

Forest-Based Emissions

To reduce total forest-based emissions worldwide, the 

design of preservation programs must consider not only 

how much additional preservation would result but also 

how much “leakage” would occur—that is, how much of 

a forest program’s direct reductions in GHG emissions 

would be negated by additional GHG releases elsewhere.1

For example, a program that compensates people for 

preservation in one location might prompt a decline in 

1. Concerns about leakage are not unique to forest preservation programs. Leakage can also occur, for example, if sources subject to 

emission limits under national programs to lower greenhouse gas 

emissions relocate abroad to escape those limits, or if they lose 

market share to international competitors not subject to the 

limits.
VIII DEFORESTATION AND GREENHOUSE GASES

CBO

Summary Figure 1.

Government Effectiveness in Countries Responsible for 95 Percent of 

Global Forest-Based Emissions, 1990 to 2005

Sources: Congressional Budget Office based on data from World Bank, “Worldwide Governance Indicators” (2009), http://info

.worldbank.org/governance/wgi/sc_country.asp; and World Resources Institute, “Climate Analysis Indicators Tool (CAIT)” (2011), 

http://cait.wri.org.

Notes: “Government effectiveness” is a governance indicator reported by the World Bank. It measures the quality of public services, 

the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and 

implementation, and the credibility of the government’s commitments to such policies. 

GHG = greenhouse gas; DR Congo = Democratic Republic of the Congo.

the clearing of forested land for agriculture or timber 

production in that area, thus reducing supplies of those 

commodities and raising their prices. Higher prices, in 

turn, could encourage uncompensated landowners 

elsewhere to clear forests to produce agricultural products 

or timber to sell at the higher prices. Consequently, 

programs might need to compensate not only new 

preservation efforts aimed at threatened forests but also 

the continued preservation of forests that would not be 

threatened in the program’s absence. Leakage reduces a 

program’s cost-effectiveness, and significant leakage 

might negate the cost advantages that using forest preservation has in comparison with other approaches to 

achieving GHG reductions.

Improving Governance in Developing Countries

Weak governance—the inability to successfully design 

and implement policies to achieve stated objectives—

undermines any efforts to use forest preservation programs to produce verifiable reductions in greenhouse 

gases. Even if they are motivated to participate in such 

programs, agencies in some developing countries may 

have inadequate authority for that task and may lack 

effective mechanisms for negotiating and distributing 

compensation to those who preserve forests. Also, the 

rights to any potential benefits from preserving forest 

resources may be poorly defined, making the gains from 

deforestation for agricultural and timber production and

Percentile 

Rank

Billions of Metric Tons of 

Carbon Dioxide Equivalent Units

Government Effectiveness Global GHG Emissions

DR Congo

Myanmar

Zimbabwe

Nigeria

Ecuador

Venezuela

Cambodia

Cameroon

Papua New Guinea

Zambia

Honduras

Tanzania

Russia

Peru

Indonesia

Argentina

Brazil

Mexico

Turkey

China

Malaysia

Canada

Bolivia

Guatemala

Philippines

100 75 50 25 0 0 5 10 15 20 25 30 35
SUMMARY DEFORESTATION AND GREENHOUSE GASES IX

CBO

the use of wood for fuel more certain than the gains from 

preserving forests. Finally, government corruption and 

political instability can undermine laws that promote 

preservation.

Improving governance may be the most intractable of the 

three challenges. Of the 25 countries with the largest 

forest-based emissions in recent years, which together 

produced 95 percent of such emissions globally, nearly 

three-quarters rank in the bottom half of all countries on 

a key indicator of a country’s ability to govern—government effectiveness. That indicator measures, for example, 

the quality of policy formulation and implementation 

and the credibility of the government’s commitments to 

its policies. The World Bank, which tracks and reports 

measures of governance, rates the two largest emitters 

of forest-based CO2—Brazil and Indonesia—at roughly 

the 50th percentile in terms of government effectiveness 

(see Summary Figure 1). 

Policy Approaches for Reducing 

Forest-Based Emissions

Approaches the United States and other developed 

countries could take to encourage forest preservation in 

developing countries fall into two broad categories:

 Providing financial and technical assistance to 

governments interested in preserving forests and

 Creating demand in private markets for reductions in 

forest-based greenhouse gas emissions.

The two types of policies might work best together. The 

viability of markets, for example, may depend on having 

in place a reliable program for achieving measurable 

reductions in forest-based emissions—the type of program that financial and technical assistance can help 

establish.

Assistance to Governments

Financial and technical assistance can help overcome 

some of the challenges of pursuing forest preservation. It 

can help support advances in measuring and monitoring 

changes in forest carbon, help ensure that developing 

countries have access to the technologies for doing so, 

and also help counter leakage by offering incentives for 

achieving global reductions in forest-based emissions.

Given uncertain funding and the challenges of improving 

governance in developing countries, the United States 

and other developed countries could consider focusing 

efforts on selected countries—for example, Brazil and 

Indonesia—that have relatively reliable governance, that 

are rich in remaining forest resources, and whose experiences could inform subsequent policy development.

Markets for Forest-Based Emissions

The United States and other developed countries could 

also generate resources for reducing forest-based GHG 

emissions by creating demand in private markets for 

such reductions. They could do that by establishing capand-trade programs or by taxing GHG emissions and 

providing tax credits for those who fund forest preservation activities. The potential for forest preservation in 

developing countries to lower the private-sector costs 

of achieving a goal for global GHG reductions might 

motivate substantial funding from private sources.

CBO

Deforestation and Greenhouse Gases

Emissions of greenhouse gases (GHGs) caused by 

human activity contribute to climate change. In particular, experts attribute most of the warming of the climate 

to emissions of carbon dioxide (CO2). Although the use 

of fossil fuels for energy is the primary source of CO2

emissions, the loss of forests is also a major contributor.

Forests affect the amount of CO2 in the atmosphere in a 

number of ways.1

 As forests grow, they remove CO2 from 

the atmosphere and absorb carbon into wood, leaves, and 

soil, where it can be stored for an extended period. When 

forests are cleared, stored carbon may be released into the 

atmosphere, depending in part on how much of the 

wood is destroyed. For example, using fires to clear 

forested land for agricultural production or other uses 

produces more emissions than does felling timber for 

wood products, which if disposed of in landfills at the 

end of their use will continue to store carbon. 

The vast amount of carbon stored in forests worldwide 

indicates the important role of forests in climate change. 

The trees in forests are estimated to store the equivalent 

of roughly 760 billion metric tons of CO2 worldwide—

over one hundred times the United States’ emissions of 

CO2 and other greenhouse gases in 2009.2

 Most of the 

locations that are rich in forest carbon are in tropical 

countries (see the dark green areas in Figure 1). Preserving forests—by slowing or eliminating the loss of forests 

and the selective removal of trees (a process referred to as 

degradation)—would reduce CO2 emissions. 

Carbon storage in forests also can be increased by growing trees on previously unforested land (the brown areas 

shown in Figure 1). Globally, however, planting trees 

would contribute less to reducing concentrations of 

greenhouse gases in the atmosphere than would forest 

preservation. The potential for new forests to store carbon is limited by biological factors (such as the soil and 

climate conditions on available land) and economic factors (such as the benefits associated with current uses of 

that land that would have to be forgone if forests were 

planted). 

For the same reasons, other forest-based activities—such 

as restoring degraded forests and practicing sustainable 

forest management—have even less potential to reduce 

concentrations of greenhouse gases in the atmosphere. 

Restoring degraded forests involves techniques that stimulate the natural regeneration of trees by reducing the 

intensity of grazing or planting selected areas with mixed 

tree species to help promote growth. Sustainable forest 

management, implemented on lands dedicated to timber 

production, involves practices such as reduced-impact 

logging, which includes limiting the slope of roads to prevent erosion, careful planning to minimize road building, 

and allowing trees to grow larger before harvesting them. 

1. Forests also influence climate by providing a cooling effect 

through evaporation and a warming effect because their relatively 

dark surfaces reflect less solar radiation from the Earth’s surface.

2. Adrian Deveny, Janet Nackoney, Nigel Purvis, and others, Forest 

Carbon Index: The Geography of Forests in Climate Solutions (Washington, D.C.: Resources for the Future and Climate Advisers, 

December 2009), Table A.6, p. 68, www.forestcarbonindex.org/

RFF-Rpt-FCI_small.pdf. The estimate does not include carbon 

stored below ground in tree roots and in soil. Soil alone accounts 

for 49 percent to 84 percent of all carbon stored in forests—

varying with latitude, forest type, and soil type—but not all 

carbon in soil is emitted when forests are destroyed. Carbon from 

soil can account for 10 percent or more of CO2 emissions from 

deforestation and degradation; soil-based emissions are 

particularly important in northern forests and peat swamps. 

See Matthew Fagan and Ruth DeFries, Measurement and 

Monitoring of the World’s Forests: A Review and Summary of 

Technical Capability, 2009–2015 (Washington, D.C.: Resources 

for the Future, December 2009), www.rff.org/Publications/Pages/

PublicationDetails.aspx?PublicatioID=20971; and Environmental Protection Agency, Inventory of U.S. Greenhouse Gas Emissions 

and Sinks: 1990–2009, USEPA 430-R-11-005 (April 2011), 

http://epa.gov/climatechange/emissions/usinventoryreport.html.
2 DEFORESTATION AND GREENHOUSE GASES

CBO

Figure 1.

Estimated Distribution of Carbon Storage in Forests

Source: Congressional Budget Office adapted from Adrian Deveny, Janet Nackoney, Nigel Purvis, and others, Forest Carbon Index: The 

Geography of Forests in Climate Solutions (Washington, D.C.: Resources for the Future and Climate Advisers, December 2009). 

Note: The amount of carbon storage is greater in the dark green areas than in the lighter green areas; the potential for carbon storage is 

greater in the dark brown areas than in the lighter brown areas. Although forest growth is biologically possible in the brown shaded 

areas, planting trees there would not be a cost-effective way to store carbon on much of the land, given the land’s limited potential to 

support forests and its value for other economic activities.

This Congressional Budget Office study examines the 

role of forest preservation in reducing global GHG emissions. It explores the challenges involved in establishing 

cost-effective programs to achieve such reductions and 

discusses policy approaches that the United States and 

other developed countries could take to encourage that 

effort. 

Implications of Deforestation for 

Climate Change

Human activities lead to emissions of four principal 

greenhouse gases: carbon dioxide, methane, nitrous 

oxide, and a group of gases called halocarbons. 

Concentrations of those gases, which accumulate in 

the atmosphere, have increased in the industrial era. 

Carbon dioxide, the most prevalent of the four, accounts 

for roughly three-quarters of the impact of greenhouse 

gases on climate, largely because it is a by-product of 

burning fossil fuels but also because it is released when 

forests are cleared and the wood is destroyed.

One widely cited estimate of the impact of net forest loss 

during the 1990s, for example, put its share of global 

GHG emissions—measured in terms of the impact on 

warming—at 20 percent, within a likely range of 

6 percent to 34 percent.3

 That estimate averaged two 

assessments—one based on ground-level forest inventories (the counting and measuring of trees in sample plots) 

undertaken by countries and reported to the United 

Carbon Storage in Existing Forests

Potential Carbon Storage in

New Forests

3. K.L. Denman and others, “Couplings Between Changes in the 

Climate System and Biogeochemistry,” in S. Solomon and others, 

eds., Climate Change 2007: The Physical Science Basis (contribution of Working Group I to the Fourth Assessment Report of the 

Intergovernmental Panel on Climate Change, Cambridge University Press, 2007), www.ipcc.ch/publications_and_data/ar4/wg1/

en/ch7.html.

The impact of one ton of emissions of a greenhouse gas on climate 

differs depending on how that particular gas affects the balance 

within the Earth’s atmosphere between incoming solar radiation 

and outgoing infrared radiation. To account for that difference, 

researchers report all GHG emissions in terms of carbon dioxide 

equivalent, or CO2e. Because greenhouse gases vary in how long 

they stay in the atmosphere, that equivalence depends on the 

period over which the contribution of a metric ton is measured. 

By convention, CO2e is usually measured over 100 years. A metric 

ton of CO2e is the amount of a given greenhouse gas that makes 

the same contribution to global warming as a metric ton of CO2.
DEFORESTATION AND GREENHOUSE GASES 3

CBO

Figure 2.

Estimated Shares of Global Emissions of Greenhouse Gases Caused by 

Human Activity, by Source, 2005

(Percent)

Source: Congressional Budget Office based on data from World Resources Institute, World Greenhouse Gas Emissions: 2005

(Washington, D.C.: WRI, December 2005), www.wri.org/chart/world-greenhouse-gas-emissions-2005.

Note: The impact on climate of one ton of emissions of a greenhouse gas depends on how that particular gas affects the balance within the 

Earth’s atmosphere between incoming solar radiation and outgoing infrared radiation. To assess the impact of all greenhouse gases on 

an equal basis, researchers report emissions in terms of carbon dioxide equivalent, or CO2e. This figure shows the share of emissions 

from various sources measured in terms of metric tons of CO2e. A metric ton of CO2e is the amount of a given greenhouse gas that has 

the same impact on climate as a metric ton of CO2. (A metric ton equals 1.1 tons.)

a. Fugitive emissions are those associated with the production, processing, storage, transmission, and distribution of fossil fuels such as oil, 

natural gas, and coal (including abandoned underground coal mines).

Nations’ Food and Agriculture Organization (FAO) 

and the other based on data gathered by remote-sensing 

instruments. That 20 percent estimate was later revised 

downward—to 16 percent—reflecting corrected FAO 

data indicating that the amount of tropical deforestation 

during that period was less than originally thought.4

A subsequent assessment, for the 2000–2005 period, 

produced an even lower estimate of the impact of net 

forest loss, putting its share at 12 percent of global GHG 

emissions measured in terms of the impact on warming, 

within a likely range of 6 percent to 17 percent.5

 The estimate was lower than the estimate in the 1990s mainly 

because of higher emissions from the combustion of fossil 

fuels rather than a decline in deforestation.

That 12 percent estimate is similar to the warming 

impact of global GHG emissions from agriculture, 

including methane (from animal waste) and nitrous oxide 

(from the use of fertilizer). That estimate is also similar to 

estimates of effects from global energy use in industry 

and transportation (see Figure 2).

Estimates of the contribution of forest loss to global 

GHG emissions are more uncertain than are estimates for 

many other sources. Electric utilities, for example, can use 

systems that directly, continuously, and accurately monitor CO2 emissions. By contrast, estimates of forest-based 

emissions are made indirectly because there is no way to 

measure the emissions from forest loss. Instead, researchers measure forest loss itself and use that as a basis for estimating emissions. Moreover, measurements of forest loss 

are derived from samples rather than from evaluations of 

the entire forest, so they are subject to error. For example, 

one particular challenge in measuring forest-based emissions is effectively accounting for the degradation of 

Electricity and

Heat

Industry Transportation Other Fuel

Combustion

Fugitive

Emissions

Agriculture Net Forest

Loss

Industrial

Processes

Waste

Management

0

5

10

15

20

25

30

Production and Consumption of Energy (67%) Other (33%)

a

4. G.R. van der Werf and others, “CO2 Emissions from Forest Loss,” 

Nature Geoscience, vol. 2 (November 2009), pp. 737–738.

5. Ibid.
4 DEFORESTATION AND GREENHOUSE GASES

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Figure 3.

Ranking of Countries by Their Estimated Contribution to 

Global Forest-Based Emissions, 1990 to 2005

(Percent)

Sources: Congressional Budget Office based on data from World Resources Institute, “Climate Analysis Indicators Tool (CAIT)” (2011), 

http://cait.wri.org. For details, see World Resources Institute, CAIT: GHG Sources and Methods (Washington, D.C.: WRI, November 

2010), http://cait.wri.org/downloads/cait_ghgs.pdf; and World Bank, World Development Report: Development and Climate 

Change, Selected Indicators, Table A2 (Washington, D.C.: World Bank, 2010), http://siteresources.worldbank.org/INTWDR2010/

Resources/5287678-1226014527953/WDR10-Full-Text.pdf.

Notes: Researchers use regional and global estimates of changes in land use to derive estimates for forest-based emissions of the 25 largest 

national contributors. They typically base the country estimates on a single data point for each year in the period, and errors

associated with the estimates may be substantial.

Emissions of greenhouse gases are measured in terms of carbon dioxide equivalent (CO2e). A metric ton of CO2e is the amount of a 

given greenhouse gas that makes the same contribution to global warming as a metric ton of CO2. (A metric ton equals 1.1 tons.)

PNG = Papua New Guinea.

forests. Selective removal of certain tree species from 

mature forests reduces carbon storage but is difficult to 

detect compared with the changes in land cover associated with more complete clearing of forested land. 

Current Locations and Causes of 

Deforestation

About 95 percent of forest-based emissions come from 

25 countries, most of which are developing countries in 

the tropics (see Figure 3). Researchers estimate that about 

three-quarters of all tropical deforestation stems from the 

clearing of land for agricultural production, ranging from 

large-scale businesses to subsistence farming.6

 In South 

America, for example, large agricultural businesses clear 

forests to raise beef cattle and to grow soybeans and 

other crops for domestic and international markets. 

In Southeast Asia, land is cleared for large-scale farming 

to produce palm oil and coffee for international markets 

and for smaller producers to grow crops for domestic 

markets. Southeast Asia is also an important supplier of 

timber to international markets. 

0

5

10

15

20

25

30

35

40 Top 25 Emitters (95%)

Brazil

Indonesia

Rest of the

Top 10

Rest of the

Top 25

Rest of the

World

All Other

Countries

(5%)

Cambodia, Canada,

Philippines, Peru,

Cameroon, Guatemala,

China, Russia, Tanzania,

Honduras, PNG,

Zimbabwe, Mexico,

Turkey, Argentina

Venezuela, Democratic

Republic of the

Congo, Myanmar,

Nigeria, Malaysia,

Bolivia, Zambia,

Ecuador

6. S. Solomon and others, eds., Climate Change 2007: The Physical 

Science Basis (contribution of Working Group I to the Fourth 

Assessment Report of the Intergovernmental Panel on Climate 

Change, Cambridge University Press, 2007), www.ipcc.ch/

publications_and_data/publications_ipcc_fourth_assessment

_report_wg1_report_the_physical_science_basis.htm.
DEFORESTATION AND GREENHOUSE GASES 5

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Figure 4.

Estimated CO2 Emissions for the Top CO2-Emitting Nations, 1990 to 2005

(Billions of metric tons)

Source: Congressional Budget Office based on data from World Resources Institute, “Climate Analysis Indicators Tool (CAIT)” (2011), 

http://cait.wri.org.

Notes: A metric ton equals 1.1 tons.

CO2 = carbon dioxide.

a. In the United States, a net gain in forest area lowered total estimated CO2 emissions over the 1990–2005 period.

b. Data on forest-based CO2 emissions are not available for members of the European Union, but those countries experienced a net gain in 

forest area over the 1990–2005 period. Data on CO2 emissions other than forest-based emissions are for the 27 countries that belonged 

to the European Union in 2005, even if they had not been members for the entire 1990–2005 period. Those countries are Austria, 

Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, 

Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. 

By contrast, most farming in Africa is done on a smaller 

scale, and it is local communities rather than large businesses that typically encroach on forests as a source of 

farmland. About 70 percent of Africans depend on smallscale agriculture and the harvesting of natural resources 

for their livelihood.7

 In addition, 75 percent of urban 

households and over 90 percent of rural households in 

sub-Saharan Africa depend on wood, crop residues, and 

charcoal as their primary source of energy.8

In South America and Southeast Asia, deforestation in 

Brazil and Indonesia is the principal source of forestbased emissions. From 1990 to 2005, forest-based emissions from those two countries were significant enough to 

place them in the ranks of the top CO2-emitting nations 

in the world—along with the United States, China, Russia, and the nations of the European Union combined 

(see Figure 4). In contrast, on the basis of CO2 emissions 

related to fossil fuel alone, Brazil and Indonesia ranked 

19th and 21st, respectively.9

The economic motivation to clear forests is evident. For 

individual farmers or landowners, increasing agricultural 

production by clearing forested land yields tangible benefits in the near term by providing food for consumption 

and products for sale in local, domestic, and international 

markets. From a national perspective, agriculture 

accounts for a large share of gross domestic product 

(GDP) in tropical developing countries. From 1990 to 

United Statesa European Unionb China Russia Brazil Indonesia

0

20

40

60

80

100

With Forest-Based Emissions

Without Forest-Based Emissions

7. Hilda Munyua, ICTs and Small-Scale Agriculture in Africa: A 

Scoping Study (prepared for the International Development 

Research Centre, 2008), http://web.idrc.ca/uploads/user-S/

12212542261Final_Report_HMunya.pdf.

8. R. Bailis and others, “Mortality and Greenhouse Gas Impacts of 

Biomass and Petroleum Energy Futures in Africa,” Science,

vol. 308 (April 1, 2005), pp. 98–103.

9. World Resources Institute, “Climate Analysis Indicators Tool 

(CAIT)” (2011), http://cait.wri.org.
6 DEFORESTATION AND GREENHOUSE GASES

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2005, agriculture’s annual average share of GDP was 

7 percent (about $47 billion) in Brazil and 17 percent 

(about $31 billion) in Indonesia.10

In some cases, government subsidies add to the market 

incentives that encourage agricultural production. Such 

subsidies reduce the private costs of growing certain kinds 

of crops, increasing the profits available from that production and thereby providing additional incentives to 

clear forests. In Indonesia, for example, government policies have supported production of biofuel feedstocks (the 

main raw materials used in producing biofuels), such as 

oil palm (the trees from whose fruits palm oil is 

extracted), by charging below-market interest rates to 

subsidize loans for developing plantations; by establishing 

mandatory shares of biofuel use in transportation, industry, and electric power generation; and by funding 

research and development. The land most suitable for 

planting oil palm is lowland evergreen tropical rainforest, 

and about 6 percent of land cleared in Indonesia from 

1990 to 2005 was deforested for that purpose.11 More 

generally, policies for reducing GHG emissions that 

promote the expansion of biofuel production but do 

not assign a value to forest preservation could have the 

unintended effect of increasing GHG emissions by 

encouraging deforestation so that land could be cleared 

for producing biofuel feedstocks (see Box 1).

In contrast, the market incentives for preserving forests 

are weak. Unlike the benefits of agricultural production, 

which accrue primarily to producers in the near term, the 

benefits of preserving forests accrue globally over the 

longer term by helping to counter climate change 

and minimize the damage associated with it. Unlike 

agriculture, efforts to preserve forests lack well-established 

mechanisms for compensating those who opt for preserving the forest rather than clearing the land. From 2007 to 

2010, for example, market-based compensation for 

climate-related forest preservation averaged an estimated 

$28 million annually, which was generated through voluntary programs for reducing GHG emissions. That sum 

is equal to only 0.04 percent of the $78 billion that agriculture contributes annually to the combined GDP of 

Brazil and Indonesia.12 And compared with agriculture’s 

annual contribution of approximately $167 billion to the 

combined GDP of the 21 tropical developing countries 

experiencing deforestation, the $28 million in compensation is even less significant—just 0.02 percent.

Governments of developing countries and landowners in 

those countries incur costs when they choose to preserve 

forests. Governments, for example, incur the costs of 

establishing programs to monitor forests and enforcing 

laws that protect them. They may also be reluctant to 

increase forest preservation because of concerns about 

whether the distribution of associated benefits among 

individuals, groups, or regions might create political 

tensions. Landowners incur the costs of not using the 

land in other ways—giving up income from the sale of 

agricultural products, for example. But governments and 

landowners could also benefit from compensation offered 

for maintaining the carbon stored in forests and by 

contributing to efforts to reduce the damage caused by 

climate change. The balance of costs and benefits would 

be a significant determinant in their decisions about land 

use and about participating in an emission-reduction 

program related to deforestation.

Forests and Cost-Effective 

Reductions in Greenhouse Gases

Reducing forest-based emissions in developing countries 

is widely considered to be a relatively inexpensive way to 

reduce emissions of greenhouse gases even though estimates of the cost-effectiveness of that approach are very 

uncertain. Because climate change occurs on a global 

scale, the climate benefits of a reduction in GHG 

10. World Bank, World dataBank, “World Development Indicators & 

Global Development Finance,” http://databank.worldbank.org/

ddp/home.do?Step=12&id=4&CNO=2. 

11. Lian Pin Koh and David S. Wilcove, “Is Oil Palm Agriculture 

Really Destroying Tropical Biodiversity?” Conservation Letters, 

vol. 1, no. 2 (June 2008), pp. 60–64, http://onlinelibrary

.wiley.com/doi/10.1111/j.1755-263X.2008.00011.x/abstract. 

12. See Katherine Hamilton, Molly Peters-Stanley, and Thomas 

Marcello, Building Bridges: State of the Voluntary Carbon Markets

(Washington, D.C.: Ecosystem Marketplace, 2008, 2009, 2010), 

www.ecosystemmarketplace.com. For data for 2007 to 2009, 

see Alexandre Kossoy and Philippe Ambrosi, State and Trends 

of the Carbon Market 2010 (World Bank: Washington, D.C., 

May 2010), http://siteresources.worldbank.org/

INTCARBONFINANCE/Resources/State_and_Trends_of

_the_Carbon_Market_2010_low_res.pdf.
DEFORESTATION AND GREENHOUSE GASES 7

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Box 1.

Biofuels and Greenhouse Gas Emissions

Proponents of policies that promote the use of biofuels argue that substituting those renewable energy 

sources for fossil fuels can help reduce greenhouse gas 

(GHG) emissions. Growing biofuel feedstocks—the 

raw materials, such as corn, sugarcane, switchgrass, 

oil palms, and soybeans, used to produce biofuel—

draws carbon dioxide (CO2) out of the atmosphere in 

amounts equal to the emissions produced when the 

biofuel is burned, whereas using fossil fuels produces 

net emissions of CO2. If policies promote the expansion of biofuels but do not place a value on forest 

preservation, deforestation could spread—increasing 

associated GHG emissions—as land is cleared for 

producing the more profitable biofuel feedstocks. 

Thus, a key factor in assessing the impact of biofuels 

on GHG emissions is accounting for the previous use 

of the land on which the feedstock is grown. If the 

land was converted from peat, grasses, or forest, that 

change in land use would boost GHG emissions. 

Some researchers maintain that it could take decades, 

or even centuries, before the emission reductions 

associated with the use of biofuels compensate for the 

increased emissions from changes in land use. Others 

conclude that the use of biofuels could result in net 

reductions in GHG emissions over shorter periods 

(see the table below).

Estimated Time Required for the Use of Biofuels to Lower Greenhouse Gases 

When Forestland Is Cleared to Grow Feedstocks

Source: Congressional Budget Office, Using Biofuel Tax Credits to Achieve Energy and Environmental Policy Goals (July 2010), 

using information from Timothy Searchinger and others, “Use of U.S. Croplands for Biofuels Increases Greenhouse 

Gases Through Emissions from Land-Use Change,” Science, vol. 319 (2008), pp. 1238–1240; David M. Lapola and others, 

“Indirect Land-Use Changes Can Overcome Carbon Savings from Biofuels in Brazil,” Proceedings of the National Academy 

of Sciences, vol. 107, no. 8 (February 8, 2010), pp. 3388–3393; Renewable Fuels Agency, The Gallagher Review of the 

Indirect Effects of Biofuels Production (study commissioned by the Secretary of State for Transport, United Kingdom, July 

2008); and Joseph Fargione and others, “Land Clearing and the Carbon Debt,” Science, vol. 319 (2008), pp. 1235–1238.

Note: GHG = greenhouse gas.

a. The number of years a biofuel would have to be used before the cumulative GHG emissions associated with that biofuel would 

be lower than the cumulative GHG emissions associated with the use of fossil fuels instead.

Land Cleared Location

Years Until Net 

GHG Reductiona Study

Sugarcane Ethanol

Rainforest Brazil 45 Searchinger and others

Forest Brazil 44 Lapola and others

Forest Brazil 15 to 39 Renewable Fuels Agency

Forest Brazil 17 Fargione and others

Palm Biodiesel

Forest Brazil 86 Fargione and others

Forest Malaysia 18 to 38 Renewable Fuels Agency

Soybean Diesel

Forest Brazil 319 Fargione and others

Forest Brazil 246 Lapola and others
8 DEFORESTATION AND GREENHOUSE GASES

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emissions do not depend on either the location of the 

reduction or the type of source from which it is generated. The cost of that reduction, however, depends on 

both factors. If there were a significant international 

effort to counter climate change, identifying relatively 

inexpensive options for reducing global GHG emissions 

could help lower the total cost of that undertaking.13

The climate policies of other countries and their evolution over time would, however, be critically important to 

achieving an effective reduction in global emissions of 

greenhouse gases. Unless a significant percentage of the 

world’s economy restricted emissions, the beneficial 

effects on climate of any forest-based reduction in 

emissions could be undermined by emissions from other 

sources. Although forest preservation can play an important role in many activities—maintaining biodiversity, for 

example—it is only one strategy among many that would 

have to be used in a comprehensive global effort to reduce 

GHG emissions and avert some of the potential damage 

to the environment and the attendant economic losses 

associated with climate change. 

Cost-Effectiveness of Reducing 

Forest-Based Emissions 

Analyses of cap-and-trade programs that the Congress has 

considered indicate that reducing forest-based GHG 

emissions may be a relatively inexpensive way to reduce 

overall emissions. In such programs, the government sets 

a cap, or limit, on the amount of GHG emissions that 

can be produced over a given period. It then distributes 

rights to emit the gases, or “allowances,” by either selling 

the allowances or giving them away to businesses that 

must comply with the limits. Businesses can comply with 

the limits on GHG emissions by submitting one allowance for each ton of CO2e they emit. Businesses that 

reduce their emissions at a cost below the price of allowances can sell their rights to emit greenhouse gases, and 

those with higher costs can buy allowances. 

Businesses can also comply with the limits by using 

“offsets,” which substitute alternative, less expensive 

reductions in emissions for those from the businesses that 

have to comply with the program. Those alternative 

reductions can be forest-based (for example, from 

preserving forests to minimize releases of CO2), 

agriculture-based (from reducing emissions of methane 

from animal waste), or industry-based (from controlling 

methane emissions from landfills). By changing the mix 

of activities undertaken to achieve the GHG limits, offsets increase the available supply of allowances, lower 

their price, and reduce the total cost of meeting the program’s specified GHG limits. 

The Environmental Protection Agency’s (EPA’s) estimates 

of allowance prices under draft cap-and-trade legislation 

illustrate the potential of offsets, including those from 

forest preservation, to lower the cost of reducing greenhouse gas emissions. In making its estimates, EPA 

assumed that actions to reduce such emissions would be 

widespread and would be taken by developed and developing countries. Allowing offsets from forest preservation 

would reduce the price of allowances (and the cost of 

complying with the proposed caps) by 20 percent, EPA 

estimated.14 Without such offsets, businesses that had to 

comply would increase their own emission reductions 

and purchase more offsets from domestic sources—both 

of which are more expensive methods of compliance than 

is forest preservation in developing countries. 

Uncertainty About the Cost-Effectiveness of 

Reducing Forest-Based Emissions

Estimates by EPA and others of the potential costeffectiveness of a policy that promotes forest-based 

mitigation are uncertain because quantifying the potential of forests to store carbon involves many factors that 

are difficult to assess. Those factors include an estimate of 

what forest-based emissions would be in the absence of 

the policy, the value of the land in alternative uses over 

time, the direct costs of undertaking the conservation 

practices and verifying the results, policies in countries 

around the world, and the impact of climate change 

itself.

Determining potential emission reductions, for example, 

requires a baseline from which to measure those reductions; that is, an estimate of what forest-based emissions 

would be in the absence of the policy. Such baselines are 

uncertain because recent estimates of the contribution of 

13. See Congressional Budget Office, The Costs of Reducing Greenhouse Gas Emissions, Issue Brief (November 2009).

14. Environmental Protection Agency, Office of Atmospheric 

Programs, EPA Analysis of the American Power Act in the 111th 

Congress (June 14, 2010; revised June 30, 2010), www.epa.gov/

climatechange/economics/pdfs/EPA_APA_Analysis_6-14-10.pdf. 

In that accounting, the use of offsets from developing countries 

for compliance would decline by nearly 70 percent.
DEFORESTATION AND GREENHOUSE GASES 9

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forest-based emissions to global GHG releases range from 

6 percent to 17 percent. Lower (or higher) baseline emissions would imply lesser (or greater) potential for reducing emissions from deforestation.

The costs of preserving forests as a way to mitigate climate change are also difficult to assess. They depend on 

the value of the land in alternative uses—that is, the 

opportunity costs, the benefits forgone when forests are 

left standing rather than being cleared for agricultural 

production or the harvesting of timber for wood products 

or for fuel. Opportunity costs change over time depending on economic, social, and institutional conditions 

such as population, technology, income, trade, and government policies. The models researchers use to estimate 

costs ideally would account for those factors over time, 

but assumptions about the future may plausibly differ 

and may have varying influences on cost estimates. 

Estimates of the costs of forest-based mitigation also 

depend on the direct costs of putting preservation practices in place, such as those incurred in patrolling protected forests, and the costs of verifying the results of such 

practices. Verification includes determining whether the 

forest-based reductions in emissions of greenhouse gases 

would have occurred even in the absence of the incentives 

offered by the program, the extent to which the reductions are neutralized by program-related increases in 

emissions of greenhouse gases in other locations, and 

whether they are reliably measured over time. Although 

no standard definition of the costs of verification is 

widely accepted and no consensus has emerged on how to 

quantify or predict them, many experts believe that they 

are not high enough to negate the cost-effectiveness of 

some amount of forest-based mitigation.15

The cost-effectiveness of forest-based mitigation for 

the United States also depends on how other countries 

choose to use forests to achieve whatever goals they 

might have for reducing GHG emissions. Those choices 

could influence the amount of forest preservation that 

developing countries decide to undertake and how much 

developed countries are willing to pay to support that 

preservation—both of which will affect the cost of forestbased reductions in greenhouse gas emissions.

Finally, a changing climate itself would probably have an 

impact on the cost-effectiveness of forest-based mitigation. The location of forests, their species composition, 

and their productivity in storing carbon could be affected 

by changes in temperature, precipitation, and other factors that affect the health of forests. How the various 

effects of GHG emissions will affect forests over centuries 

is very uncertain. Forests could expand in some areas and 

contract in others, depending on the net effect of those 

influences. For instance, the growth rate of trees could 

increase as the amount of carbon dioxide in the atmosphere increases, although rates may eventually plateau as 

trees adjust to the new levels. However, existing forests 

may be threatened by changes in precipitation patterns. 

Those changing patterns and higher temperatures could 

also increase the number of forest fires. Similarly, diseases 

and pests that attack trees could become a greater threat 

in a warming climate.

Challenges in Reducing Forest-Based 

Emissions

Policies aiming to reduce global emissions of greenhouse 

gases by encouraging forest preservation in developing 

countries could impose costs or offer compensation as an 

incentive to reduce emissions. But, having other countries impose costs on developing countries to promote 

forest preservation would be very controversial. Forests 

are resources that many countries—including developed 

countries—have used in pursuing economic development. In addition, many developed countries have per 

capita GHG emissions that are higher than those of the 

developing countries that have large stores of carbon in 

their forests, suggesting that it would be seen as unfair 

treatment of nations that were poorer and had lower 

GHG emissions. Policies providing compensation to 

motivate efforts to preserve forestland would not raise 

such concerns, and the remainder of this section focuses 

on challenges involved in implementing such policies. 

Three challenges would make it difficult to reduce forestbased emissions cost-effectively:

 Measuring changes in the amount of carbon stored in 

forests,

 Structuring incentives to reduce total forest-based 

emissions, and

 Improving governance in developing countries.

15. For more information about the costs of verification, see Congressional Budget Office, The Use of Offsets to Reduce Greenhouse 

Gases, Issue Brief (August 2009).
10 DEFORESTATION AND GREENHOUSE GASES

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Measuring Changes in Carbon Storage

Forest-based mitigation programs need measurements of 

how the amount of carbon stored in forests in a country 

changes over time. Some experts conclude that advances 

in measurement techniques may reduce uncertainty 

enough within the next decade that such measurements 

would be useful for mitigation programs.16

Current Measurement Approaches. The amount of 

carbon stored in a forest depends on the product of four 

factors—the area, volume, and biomass of the forest, and 

the carbon content of the biomass:

Forest Carbon = Forest Area x Forest Volume x Forest 

Biomass x Carbon Content of Biomass.

Area is the amount of land covered by trees, and 

volume—the amount of wood—per unit of area 

depends on the size of the trees. The biomass—the 

living plant material produced from water and CO2 by 

photosynthesis—per unit of volume depends on the 

density of the wood, which is influenced by factors such 

as a tree’s location and species; carbon represents roughly 

half of that biomass.

Area and Volume of Forests. Data for estimating area and 

volume can come from on-the-ground inventories, in 

which trees in sample areas are counted and measured. 

The FAO compiles its Forest Resources Assessment every 

five years using forest inventories provided by individual 

countries. The quality of the country reports varies, however; not all countries identify forests using the FAO’s 

definition.17 Further, some countries may not have the 

resources needed to properly conduct inventories. Among 

the 50 nations with the greatest volume of wood in forests in 2005, 15 reported a loss in forest area between 

1990 and 2005 but no accompanying change in volume 

per unit of area, suggesting that they may have simply 

assumed a constant volume over the 15-year period 

instead of reassessing that figure.18

Instruments mounted on airplanes or satellites also can 

provide data for estimating a forest’s area and volume. 

Researchers can combine the data gathered by such 

remote-sensing activities with information from forest 

inventories to produce their estimates. Remote-sensing 

can cover a broader geographic scope and generate 

data more frequently than can an inventory. Standard 

remote-sensing technologies, which essentially offer a 

two-dimensional view of the forest from above, provide 

relatively good measures of forest area but not of forest 

volume. The U.S. Landsat program, started in 1972, is 

the longest continuously operating satellite system for 

observing the Earth. Landsat produces images using 

visible light and the heat radiated from objects on the 

Earth’s surface. Using those data, researchers can estimate 

a forest’s area with about 80 percent to 90 percent 

accuracy; in contrast, the accuracy of estimates of forest 

volume based on the data can be as low as 40 percent in 

forests with mixed species and overlapping tree canopies.19 An important limitation of the data collected by 

Landsat is that the satellite’s instruments cannot penetrate 

the clouds and smoke that often cover tropical rainforests. 

More advanced and more expensive remote-sensing technologies can provide better measures of a forest’s volume. 

Those instruments transmit pulses of radio waves (in the 

case of synthetic aperture radar, or SAR) or light from a 

laser (in the case of light detection and ranging, or 

LIDAR, technology) that can penetrate clouds, smoke, 

and the tree canopy to gather data on how objects on the 

Earth’s surface reflect the emitted energy. SAR and 

LIDAR deliver a three-dimensional view of a forest and 

can be used to measure the elevation of the underlying 

land and the height of trees, allowing researchers to estimate the volume of forests with greater than 80 percent 

accuracy. Currently, only about nine SAR systems and 

one LIDAR system are operating on satellites, but that 16. Molly Macauley and others, Forest Measurement and Monitoring: 

Technical Capacity and “How Good Is Good Enough” (Washington, 

D.C.: Resources for the Future, December 2009), www.rff.org/rff/

documents/rff-rpt-technical%20capacity

_macauley%20et%20al.pdf.

17. FAO defines a forest as “land spanning more than 0.5 hectares 

with trees higher than 5 meters and a canopy cover of more than 

10 percent, or trees able to reach these thresholds (in place).” See

Food and Agriculture Organization of the United Nations, Global 

Forest Resources Assessment 2010 (Rome: FAO, October 2010), 

www.fao.org/forestry/fra/fra2010/en.

18. P. Kauppi and others, “Returning Forests Analyzed with the 

Forest Identity,” Proceedings of the National Academy of Sciences,

vol. 103, no. 46 (November 14, 2006), pp. 17574–17579, 

http://phe.rockefeller.edu/docs/PNAS-Forests_final.pdf.

19. See Fagan and DeFries, Measurement and Monitoring of the World’s 

Forests. For forest area, “accuracy” refers to the percentage of pixels 

in the imagery that correctly identify the type of land cover; for 

forest volume, “accuracy” refers to the match between predictions 

from remote imagery and actual ground measurements.
DEFORESTATION AND GREENHOUSE GASES 11

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may change; among the current plans that countries 

around the world have for satellite missions between 

2009 and 2016, 25 missions have SAR, two have 

LIDAR, and one has both.20

Biomass per Unit of Forest Volume. Data for estimating 

biomass per unit of volume come from statistical relationships that researchers have established by measuring, 

harvesting, drying, and weighing trees. The relationships 

used to estimate biomass in tropical forests—many of 

which contain 300 or more species of trees—are based on 

a limited sample of trees, and some researchers have suggested that additional sampling by region or ecological 

zone could improve current estimates of biomass. Nevertheless, species-specific relationships may not be needed; 

even in regions with highly diverse species, measuring the 

diameter of any type of tree at a height of about four and 

a half feet provides enough information about the tree’s 

biomass content to explain more than 95 percent of the 

variation in biomass among different species.21

Carbon Content of Biomass. To impute the carbon content 

of biomass, researchers typically rely on broadly accepted 

values of about 50 percent. However, the carbon content 

of forest biomass can vary from 43 percent to 55 percent 

worldwide and from 43 percent to 49 percent in the 

tropics.22

Improving the Reliability of Measurements of Forest 

Carbon. Minimizing the uncertainty around each of the 

four factors used to estimate the amount of carbon stored 

in forests would be costly. Improving the precision of any 

one of the factors by a certain proportion would, however, have an equivalent impact on the precision of the 

final estimate, because the factors are combined multiplicatively to estimate the amount of forest carbon.23 For 

example, correcting a 10 percent error in the carbon content of biomass would have the same impact as correcting 

a 10 percent error in forest area. Thus, information about 

the relative cost of equivalent percentage increases in the 

precision of different factors would help identify costeffective improvements in measuring the amount of forest carbon. The need for such improvements could be 

assessed in light of the standards for accuracy set by any 

policies to reduce greenhouse gas emissions that might be 

put in place in the future. According to existing standards 

for the estimates of forest carbon that are included in voluntary reporting protocols and scientific inventories, 

those estimates should have no more than a 5 percent 

chance of overstating carbon storage.24

Improving the Capability of Developing Countries to 

Measure Changes in Forest Carbon. Even with techniques that could improve estimates of changes in forest 

carbon, developing countries may not have sufficient 

technical capabilities to make such estimates. However, 

those measurements would be needed to determine the 

compensation to be paid for preserving forestland. Those 

countries are unlikely to want outsiders in charge of 

assessing what they have accomplished with their sovereign resources for the purpose of determining the compensation due. Such concerns point to the importance of 

individual countries having the necessary personnel and 

technical capabilities to measure changes in their forest 

carbon rather than having to rely on outside groups to 

make those measurements. 

For 13 of the developing countries that ranked in the top 

25 nations for forest-based emissions from 1990 to 2005, 

some evidence is available about their ability to conduct 

forest inventories, their experience in acquiring and processing remote-sensing data, and their use of detailed

20. Ibid. Fagan and Defries point out that launches of planned satellite missions can fail or be delayed by budgetary and construction 

issues. Also, the operating life of satellites in orbit can be shorter 

than expected.

21. Sandra Brown, “Measuring Carbon in Forests: Current Status and 

Future Challenges,” Environmental Pollution, vol. 116, no. 3 

(March 2002), pp. 363–372.

22. Intergovernmental Panel on Climate Change, 2006 IPCC Guidelines for National Greenhouse Gas Inventories (prepared by the 

National Greenhouse Gas Inventories Programme, edited by H.S. 

Eggleston and others, Hayama, Japan, 2006), Table 4.3, 

www.ipcc-nggip.iges.or.jp/public/2006gl/index.html; Fagan 

and DeFries, Measurement and Monitoring of the World’s Forests;

and Sandra Brown, “Measuring, Monitoring, and Verification 

of Carbon Benefits for Forest-Based Projects,” Philosophical 

Transactions of the Royal Society of London, vol. 360 (2002), 

pp. 1669–1683.

23. Paul E. Waggoner, Forest Inventories: Discrepancies and Uncertainties, RFF Discussion Paper 09-29 (Washington, D.C.: Resources 

for the Future, August 2009). 

24. Molly Macauley and others, Forest Measurement and Monitoring: 

Technical Capacity and “How Good is Good Enough?”
12 DEFORESTATION AND GREENHOUSE GASES

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measurements in reporting carbon stock (see Figure 5).25

That evidence indicates that further capacity-building 

might improve countries’ ability to produce useful measures of changes in forest carbon. Brazil, for example, 

might develop in-country expertise to conduct forest 

inventories that would complement the multiple inventories conducted by international consultants or donors. 

Nonetheless, Brazil is the only one of the 13 countries 

that has used advanced remote-sensing to monitor 

changes in forests and is one of only two that have 

performed their own evaluations of biomass and carbon 

content by forest type for purposes of carbon reporting 

(Mexico is the other one). Indonesia has produced 

only one forest inventory but has done so relying on incountry expertise. Although Indonesia has mapped forest 

area using standard remote-sensing technologies, unlike 

Brazil it has yet to use advanced remote-sensing to monitor changes in forests and has based its carbon reporting 

only on standard values for biomass and carbon content 

assigned by broad forest type. Five of the 13 countries 

have no forest inventories and no experience in acquiring 

and processing remote-sensing data or in reporting 

forest carbon. 26

Structuring Incentives to Reduce 

Forest-Based Emissions

Designing incentives to reduce worldwide forest-based 

emissions is particularly challenging because such incentives generate direct and indirect effects, often in opposite 

directions. The direct effect is the reduced rate of deforestation that is the initial response to the incentives. The 

indirect effects, commonly referred to as “leakage,” consist of responses in world markets to the direct effect and 

tend to offset the direct effect. For example, if incentives 

succeeded in reducing forest loss in countries receiving 

them, the resulting reduction in the supply of agricultural 

and timber products would probably lead to increases in 

their prices. Internationally, land values associated with 

those products would probably rise as a result. If that 

occurred, deforestation would probably increase in countries that were not receiving incentives, thereby reducing 

the cost-effectiveness of those incentives.

An effective incentive program requires projections of the 

amount of deforestation that would occur in the absence 

of the program and procedures that account for and 

minimize leakage. Various approaches to providing 

compensation have different implications both for the 

magnitude of leakage and for the extent to which 

programs end up paying for preservation in areas in 

which forests may not have been at risk of destruction. 

Thus, they can have an important influence on the costeffectiveness of forest-based mitigation relative to other 

ways of reducing GHG emissions. 

Baselines for Measuring Reductions. In general, policies 

that would provide compensation for forest preservation 

require national baselines from which to measure the 

reductions in GHG emissions associated with the 

policies. Consider, for example, a policy in which all 

developing countries would receive compensation for 

reducing their rates of deforestation. Under that policy, 

each country would have a baseline that reflects its historical rate of deforestation, which would be determined by 

the net rate observed over several past years because rates 

of deforestation vary significantly from year to year. Each 

country’s baseline would be used to indicate what its 

behavior would have been in the absence of the policy, 

including the net effects of activities that preserve forests 

and those that destroy them. 

Such a policy could have substantial direct effects in 

countries with high baseline rates of deforestation (such 

as Brazil and Indonesia), and those countries might 

reduce their rates of deforestation in response to the 

incentives offered under the policy. However, countries 

with low baseline rates (such as Gabon and Vietnam) 

would be likely places for leakage to occur because they 

would have little room for improvement and because 

world markets might offer them greater economic benefits from increasing deforestation than they would receive 

from reducing it.

25. Pat Hardcastle and David Baird, Capability and Cost Assessment 

of the Major Forest Nations to Measure and Monitor Their Forest 

Carbon (Edinburgh: LTS International, April 7, 2008), 

www.ibcperu.org/doc/isis/11466.pdf. The 13 countries are 

Bolivia, Brazil, Cambodia, Cameroon, China, the Democratic 

Republic of the Congo, Indonesia, Malaysia, Mexico, Myanmar, 

Papua New Guinea, Peru, and Venezuela.

26. Canada, a developed country with vast forestland, provides a 

point of reference for the capability of developing countries to 

carry out those activities. Canada conducts multiple inventories 

on its own, uses advanced remote sensing, and, in reporting information on biomass and carbon content, differentiates by forest 

type and evaluates the same sample forest plots over time.
DEFORESTATION AND GREENHOUSE GASES 13

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Figure 5.

Capability of Developing Countries to Measure Changes in Forest Carbon

(Number of countries)

Source: Congressional Budget Office based on data from Pat Hardcastle and David Baird, Capability and Cost Assessment of the Major Forest 

Nations to Measure and Monitor Their Forest Carbon (Edinburgh: LTS International, April 7, 2008), www.ibcperu.org/doc/isis/

11466.pdf.

Notes: Information on collecting data and measuring and reporting forest carbon is available for 13 of the 25 countries that made the largest 

contribution to forest-based emissions from 1990 to 2005 (see Figure 3). Those 13 countries are Bolivia, Brazil, Cambodia, Cameroon, 

China, the Democratic Republic of the Congo, Indonesia, Malaysia, Mexico, Myanmar, Papua New Guinea, Peru, and Venezuela. 

Canada, a developed country with vast forestland, provides a point of reference for the capability of developing countries to carry 

out those activities. Canada conducts multiple inventories on its own, uses advanced remote sensing, and, in reporting information 

on biomass and carbon content, differentiates by forest type and evaluates the same sample forest plots over time.

a. Obtaining the most useful information on biomass and carbon content requires differentiating by forest type and evaluating the same 

sample forest over time, but none of the 13 countries had that capability.

No 

Inventory

No

Experience

Multiple Forest 

Area Maps by a 

Nonnational 

Consultant or 

Donor

Multiple 

Forest Area 

Maps by the 

Country

Remote 

Sensing to 

Gather 

Supplementary 

Data or to 

Support 

Inventories

Partial Use of 

Advanced 

Remote 

Sensing to 

Monitor 

Changes in 

Forests

Multiple 

Inventories by a 

Nonnational 

Consultant or 

Donor

One 

Inventory by 

the Country

Multiple 

Inventories 

by the Country

3 1

6 2

1

country

3

2

4

No

Experience

Standard Values 

by Broad Forest 

Type

One-Time Evaluation 

of Biomass and 

Carbon Content, 

Differentiating

by Forest Type

5

6

2

countries

4 countries

Conducting

 Forest Inventories

Acquiring and Processing

Remote-Sensing Data

Using Information on 

Biomass and Carbon Contenta 

Less Capability More Capability Less Capability More Capability

Less Capability More Capability
14 DEFORESTATION AND GREENHOUSE GASES

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Factors That Affect Leakage. In assessing incentives to 

reduce total forest-based emissions, it is important to 

consider several factors that influence leakage. First, less 

leakage would occur if countries representing a greater 

share of the world’s forests participated in the compensation system. 

Second, leakage would be smaller if more of the factors 

that led to deforestation in a country were local. For 

example, if a program led to the preservation of forests 

that would otherwise have been cleared to produce agricultural commodities for local markets, then the prices of 

goods in other countries would not increase. Without 

price increases, there would be no mechanism to prompt 

leakage.

Third, the willingness of people to change their patterns 

of consumption could also suppress leakage. If, for example, forest preservation caused supplies of certain locally 

produced goods to decline, people might purchase other 

goods instead—the production of which did not involve 

deforestation. The reduction in supply attributable to 

forest preservation would be accompanied by a reduction 

in demand, and prices would not change. Thus there 

would be no incentive to destroy forests elsewhere to 

replace the goods that had been locally produced before 

the forest preservation program began. 

Finally, if production shifted to a location having a lower 

rate of greenhouse gas emissions, less leakage would 

occur. The CO2e content per unit of output might be 

smaller in a new location if, for example, agricultural productivity per acre of land was higher there.

Assessing the Impact of Leakage. Leakage reduces the 

cost-effectiveness of programs aiming to achieve global 

net reductions in forest-based emissions.27 When leakage 

occurs, global reductions in greenhouse gases fall short of 

the policy’s intended reductions. In essence, then, leakage 

means that the actual cost of achieving a given reduction 

in global greenhouse gases is higher than it appears to be 

when measured within the limited geographic scope of 

the policy.

Anticipating the impact of leakage is difficult, however, 

because it cannot be easily measured. Measuring leakage 

requires identifying how reduced deforestation in one 

country affected markets for different products in all 

other locations. Researchers estimate leakage using 

economic data and modeling. To date, analyses of leakage 

from forest preservation have yielded estimates of 

emissions displaced to other locations that range from 

single-digit percentages to over 90 percent.28

Refining empirical estimates of leakage in the context of 

specific policies would improve the accuracy of assessments of the policies’ costs. Estimates of the costeffectiveness of forest-based mitigation, for example, are 

based on the assessment that achieving an additional 

reduction in GHG emissions through forest preservation 

is cheaper than doing so through an alternative strategy. 

For that assessment to hold, the direct cost advantage of 

reducing emissions through forest-based mitigation cannot be eliminated by leakage. Suppose, for example, that 

such a reduction suffered 50 percent leakage and that the 

reduction through the alternative strategy suffered none. 

For the forest-based mitigation to be worthwhile, its 

direct cost would have to be no more than half that of the 

alternative strategy. The greater the leakage differential, 

the greater the direct cost advantage needed to make 

forest-based mitigation cost-effective.

Structuring Incentives to Minimize Leakage. Funders of 

preservation programs might expand participation and 

minimize leakage by compensating developing countries 

that had been preserving forests over some period before 

the policy was in effect. For example, a country whose 

emissions from deforestation were less than half the 

global average could be compensated for maintaining 

that low rate. Alternatively, if those emissions were greater 

than or equal to the global average, a policy could compensate that country for lowering them. Because the factors affecting leakage vary across countries, however, policies that did not tailor incentives to the circumstances in 

each particular country might still have substantial leakage even if all countries had some incentives to reduce 

deforestation under the policy. 

27. Leakage is not specific to forest-based mitigation. It can occur 

with any policy for reducing greenhouse gas emissions that fails to 

address all potential emitters. 

28. Brian C. Murray, “Leakage from an Avoided Deforestation Compensation Policy: Concepts, Empirical Evidence, and Corrective 

Policy Options,” in Charles Palmer and Stephanie Engel, eds., 

Avoided Deforestation: Prospects for Mitigating Climate Change

(Oxford, United Kingdom: Routledge, 2009), pp. 151–172.
DEFORESTATION AND GREENHOUSE GASES 15

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Figure 6.

Government Effectiveness in Countries Responsible for 95 Percent of 

Global Forest-Based Emissions, 1990 to 2005

Sources: Congressional Budget Office based on data from World Bank,”Worldwide Governance Indicators” (2010), http://info

.worldbank.org/governance/wgi/sc_country.asp; and World Resources Institute, “Climate Analysis Indicators Tool (CAIT)” (2011),

http://cait.wri.org. 

Notes: “Government effectiveness” is a governance indicator reported by the World Bank. It measures the quality of public services, 

the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and 

implementation, and the credibility of the government’s commitments to such policies. 

GHG = greenhouse gas; DR Congo = Democratic Republic of the Congo.

Instead of basing incentives on differences in forest-based 

emissions relative to historical rates, a more complicated 

incentive formula could be used, incorporating projections about future pressures on forests arising from the 

policy itself, as well as from other economic, social, and 

institutional factors. Finding adequate data on the relevant economic, social, and institutional variables could be 

difficult, as could reaching agreement on which values for 

those variables—from among a range of defensible 

ones—to use in the projections.

Improving Governance in Developing Countries

The quality of a nation’s governance influences its ability 

to implement policies and to deal with forces that undermine that ability, such as political instability and corruption. With inadequate governance, even programs that 

offer payment for reducing deforestation might not result 

in more preservation.

Governments’ Effectiveness. One indicator of governance 

is government effectiveness. That indicator reflects a 

country’s capacity for establishing reliable programs, such 

as those to reduce forest-based GHG emissions. According to the World Bank, which tracks and reports measures of governance, government effectiveness can be 

measured by the quality of public services, the quality of 

the civil service and the degree of its independence from 

political pressures, the quality of policy formulation and 

implementation, and the credibility of the government’s 

commitments to such policies.29

Countries with an ineffective government might have difficulty producing verifiable reductions in emissions, even 

when programs for forest preservation are in place. Of the 

Percentile 

Rank

Billions of Metric Tons of 

Carbon Dioxide Equivalent Units

Government Effectiveness Global GHG Emissions

DR Congo

Myanmar

Zimbabwe

Nigeria

Ecuador

Venezuela

Cambodia

Cameroon

Papua New Guinea

Zambia

Honduras

Tanzania

Russia

Peru

Indonesia

Argentina

Brazil

Mexico

Turkey

China

Malaysia

Canada

Bolivia

Guatemala

Philippines

100 75 50 25 0 0 5 10 15 20 25 30 35

29. World Bank, “Worldwide Governance Indicators” (2009), 

http://info.worldbank.org/governance/wgi/pdf/ge.pdf.
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25 countries with the largest forest-based emissions from 

1990 to 2005, nearly three-quarters rank in the bottom 

half of all countries on measures of effective government 

(see Figure 6); they accounted for 55 percent of the 

world’s forest-based GHG emissions. The two largest 

emitters, Brazil and Indonesia, are at roughly the 

50th percentile for government effectiveness. By 

comparison, the government effectiveness rating for 

Canada, which is also in the top 25 producers of forestbased GHG emissions, is well above the 90th percentile.

In a weak government, the agencies responsible for preserving forests may have conflicting goals or inadequate 

authority for managing land use. For example, some 

countries may designate a forested area for both conservation and production—two competing uses of land. 

Government agencies also may lack effective mechanisms 

for determining the amount of compensation and distributing it to indigenous peoples, local communities, and 

individuals who own forests, thereby undermining preservation efforts (see Box 2). In Brazil, for example, the 

process for determining compensation would be greatly 

improved if the appropriate agencies were able to map 

coordinates from satellite imagery to rural properties for 

which there is clearly established ownership. As of 2008, 

however, the government had only just started a pilot 

project to create that type of mapping and was doing so 

in only one of the nine Amazonian states.30 In Cameroon, 

relatively strong forestry laws have been undermined 

because the local communities have not received 

adequate incentives from the national government to 

preserve forests.31

Poor governance may also mean that the rights to control 

forest resources are not clearly defined, making the gains 

from immediate use by clearing the land for agricultural 

production, timber, or wood for fuel more certain than 

the gains from preserving the forest. In Ghana, for example, landowners do not necessarily hold the right to the 

timber on their property. The lack of clarity about ownership creates incentives for farmers to log trees on their 

land to prevent timber companies with legal access to 

those trees from doing so and, in the process, damaging 

the farmers’ cocoa crops.32 In Brazil, a long-standing land 

statute, recently amended to counter abuse, allowed anyone who made “effective use” of the land to take a first 

step toward owning it, even without prior legal title. 

Forest clearing in that country, usually considered proof 

of such use, is a way to gain formal title to land owned by 

others and a way for landowners to prevent others from 

laying claim to their land.33

In some countries, the traditional claims of local populations that may support forest preservation often give way 

to statutory claims by others seeking to make greater use 

of forests’ resources. In Indonesia, for example, one

nongovernmental organization documented over 

500 ongoing land conflicts between local communities 

and companies involved in producing palm oil.34

Corruption and Political Instability. Other aspects of 

governance, such as corruption and political instability, 

can also undermine efforts to preserve forests. National 

plans classifying forests for preservation might be 

intentionally structured to generate benefits for specific 

interests, but even if they are not, laws to protect forests 

can be ineffective if government officials ignore violations 

so they can personally benefit. 

Little research has been done on the general relationship 

between corruption and forest loss. One study of African 

nations found no significant connection, and a broader 

study of countries across the globe found an association 

between a reduction in perceived corruption and lower 

30. Paulo Barreto, “Implications of the Climate Change Debate on 

Land Tenure in the Brazilian Amazon” (speech for the Conference 

on New Challenges for Land Policy and Administration, World 

Bank, Washington, D.C., February 14–15, 2008).

31. Environmental Audit Committee, Reducing Greenhouse Gas 

Emissions from Deforestation: No Hope Without Forests (United 

Kingdom, House of Commons, June 16 2009), 

www.publications.parliament.uk/pa/cm200809/cmselect/

cmenvaud/30/3002.htm. See also Marcelin Tonye Mahop, 

“Forestry and Environmental Regulations, Legal Protection and 

Enforcement of Community Rights in Cameroon,” IUP Journal 

of Governance and Public Policy, vol. 4, no. 1 (March 2009),

pp. 7–21. 

32. C.P. Hansen and T. Treue, “Assessing Illegal Logging in Ghana,” 

International Forestry Review, vol. 10, no. 4 (2008), pp. 573–590. 

33. Kathryn R. Kirby and others, “The Future of Deforestation in the 

Brazilian Amazon,” Future, vol. 38 (2006), pp. 432–453. 

34. Sawit Watch, “Issues Surrounding Indonesian Palm Oil 

Industry” (memorandum submitted to the Delegation of

the European Commission to Indonesia, July 24, 2009),

http://normanjiwan.blogspot.com/2009_07_01_archive.html.
DEFORESTATION AND GREENHOUSE GASES 17

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Box 2.

The Role of Local Populations in Forest Preservation

Researchers emphasize the role of indigenous peoples 

and other forest-dependent communities in the 

success of efforts to preserve forests. An estimated 

7 percent of public land in developing countries is 

reserved for those groups, who also own an estimated 

57 percent of private lands in those countries. Overall, local populations control an estimated total of at 

least 19 percent of the land in developing countries.1

Local populations can contribute to the preservation 

of forests regardless of whether they have official control over that land. Forestland under national control 

may be difficult to preserve because of corruption or 

lack of resources for enforcement; engaging the participation of local communities might be a better way 

to preserve forests. For example, the Nepalese Forest 

Act of 1993 redirected the Department of Forests 

“from protecting national forests towards building 

forest user groups to manage all of the nation’s 

forestland without interference from outside of the 

community.” One study of the impact of that law 

found that households’ consumption of wood for fuel 

in areas in which user groups were involved in forest 

management was about 14 percent lower than in 

comparable areas without user groups, suggesting 

that harvests were being restrained to promote 

regeneration of degraded forests.2

 Other studies 

have found that territories officially recognized as 

belonging to indigenous peoples have been effective 

in reducing deforestation in the Brazilian Amazon.3

Conversely, preservation efforts may be undermined 

by populations that depend on forests for their 

livelihood. In the absence of incentives for preservation, community-controlled forestland might be converted to agriculture or managed for forest products 

in a way that increased greenhouse gas emissions. 

Forest preservation programs that fail to compensate 

local populations for new limits on their access to the 

resources they have traditionally relied on, or that fail 

to equitably distribute compensation for preservation, could jeopardize the support of local communities. Local populations could oppose new forest 

preservation projects, and social unrest could undermine political support for such projects. For example, 

the Tropical Forestry Action Plan, an international 

forest preservation initiative in the late 1980s and 

early 1990s, lost political support in part because the 

plan was designed without sufficient participation of 

indigenous peoples and other forest-dependent 

communities. It neglected differences between 

national concerns for forest preservation and such 

local concerns as community claims to forest 

resources, community benefits from logging, and 

assistance with economic development.4

 Recent 

international accords, such as the Cancun Agreement 

of the United Nations Framework Convention on 

Climate Change, assert the importance of involving 

forest-dependent communities in making decisions 

and managing forest preservation in a socially 

responsible way.

1. There is much more public land than private land in those 

countries. The Congressional Budget Office made these 

estimates using government data on land ownership in 

18 developing countries that are among the world’s 30 most 

heavily forested countries. The data underlying the estimates 

are from William D. Sunderlin, Jeffrey Hatcher, and Megan 

Lidle, From Exclusion to Ownership? Challenges and Opportunities in Advancing Forest Tenure Reform (Washington, D.C.: 

Rights and Resources Group, 2008), p. 8, Table 1, 

www.rightsandresources.org/documents/files/doc_736.pdf. 

The government data do not reflect the amount of forested 

land actively claimed by indigenous or other local 

communities.

2. Eric V. Edmonds, “Government Initiated Community 

Resource Management and Local Resource Extraction from 

Nepal’s Forests,” Journal of Development Economics, vol. 68, 

no. 1 (June 2002), pp. 89–115.

3. D. Nepstad and others, “Inhibition of Amazon Deforestation 

and Fire by Parks and Indigenous Lands,” Conservation 

Biology, vol. 20, no. 1 (2006), pp. 65–73; and Britaldo 

Soares-Filho and others, “Role of Brazilian Amazon Protected 

Areas in Climate Change Mitigation,” Proceedings of the 

National Academy of Sciences, vol. 107, no. 24 (2010), 

pp. 10821–10826.

4. Alexander Pfaff and others, Policy Impacts on Deforestation: 

Lessons Learned from Past Experiences to Inform New Initiatives

(Durham, N.C.: Duke University, Nicholas Institute for 

Environmental Policy Solutions, June 2010).
18 DEFORESTATION AND GREENHOUSE GASES

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rates of deforestation.35 Some studies document how 

bribery undermines policies that protect forests, and 

anecdotal reports of corruption include cases in which 

timber has been harvested without a legal permit.36 A 

recent report on forest reform in Liberia concluded that 

all existing logging contracts had been granted in violation of national laws; the report also noted widespread 

irregularities in the bidding process.37 In the Democratic 

Republic of the Congo, some segments of the army, in 

addition to militia groups, profited from trade in illegally 

produced charcoal made from the forest resources of a 

national park.38

Political instability also can undermine efforts to improve 

forest governance. Following an unconstitutional change 

in Madagascar’s government in March 2009, for example, 

the United States and other countries suspended all aid to 

that country except humanitarian or emergency aid. 

Observers have noted recent reversals of the forest preservation in that country that had resulted from nearly two 

decades of involvement by donor countries in developing 

management systems for protected areas, promoting 

alternatives to slash-and-burn agriculture, and improving 

environmental practices.39

Efforts to Improve Governance. Countries that donate or 

lend money to developing countries have taken various 

approaches to improve the governance of forests. Those 

approaches include promoting sustainable forestry practices and standards for timber products, making the 

receipt of international lending contingent on reforms, 

funding the formulation of national action plans, and 

reducing the international debt of countries that establish 

conservation trust funds. But there are no quantitative 

evaluations of efforts to improve forest governance, and 

anecdotal evidence is mixed. 

Programs to improve governance may fail because of 

insufficient funding or inadequate design.40 In designing 

programs, for example, policymakers may not pay 

enough attention to the potential for leakage, which can 

undermine a program’s goals. The European Union (EU) 

has been negotiating bilateral agreements with tropical 

countries. In cases in which negotiations have been 

completed, the EU has committed funding to strengthen 

enforcement of laws governing forests.41 Then, following 

an agreed-upon period of investment, the EU will import 

designated wood products from those countries only if a 

certificate confirms the legality of their supply chain. 

However, some evidence indicates that timber from 

participating countries may be delivered to the EU 

through other countries, circumventing the aim of the 

agreements. 

Policy Approaches for Reducing 

Forest-Based Emissions

Approaches that the United States and other developed 

countries might pursue to support forest-based mitigation in developing countries fall into two broad 

categories: 

 Providing financial and technical assistance to governments interested in preserving forests and 

35. Smith and others, “Governance and the Loss of Biodiversity,” 

Nature, vol. 426, no. 6962 (November 6, 2003), pp. 67–70; 

and Edward B. Barbier, Richard Damania, and Daniel Léonard, 

“Corruption, Trade and Resource Conversion,” Journal of 

Environmental Economics and Management, vol. 50, no. 2 

(September 2005), pp. 276–299.

36. Smith and others, “Governance and the Loss of Biodiversity”; 

Anne Casson and Krystof Obidzinski, “From New Order to 

Regional Autonomy: Shifting Dynamics of Illegal Logging in 

Kalimantan, Indonesia,” in Luca Tacconi, ed., Illegal Logging: 

Law Enforcement, Livelihoods and the Timber Trade (London: 

Earthscan, 2007); and Douglas Dewitt Southgate Jr. and others, 

“Markets, Institutions, and Forestry: The Consequences of 

Timber Trade Liberalization in Ecuador,” World Development,

vol. 28, no. 11 (November 2000), pp. 2005–2012.

37. Sustainable Development Institute, Liberia—The Promise Betrayed

(January 2010), www.sdiliberia.org/sites/default/files/documents/

Promise%20Betrayed.pdf. 

38. United Press International, “Charcoal Trade Funds Congo 

Conflict,” UPI.com (July 31, 2009), www.upi.com/

Top_News/2009/07/31/Charcoal-trade-funds-Congo-conflict/

UPI-81621249086595.

39. Andrew C. Revkin, “Madagascar Forest Defenders Send 

S.O.S.,” New York Times, March 20, 2009; and Linda Pressly, 

“Madagascar’s Forests Plundered for Rare Rosewood,” 

BBC Radio 4, Crossing Continents (August 5, 2010), 

www.bbc.co.uk/news/world-africa-10765418.

40. For a review of design issues for efforts to conserve forests, see 

Alexander Pfaff and others, Policy Impacts on Deforestation: Lessons 

Learned from Past Experiences to Inform New Initiatives (Durham, 

N.C.: Duke University, Nicholas Institute for Environmental 

Policy Solutions, June 2010).

41. To date, the EU has agreements with Cameroon, the Central African Republic, Ghana, Indonesia, Liberia, Malaysia, and the 

Republic of the Congo.
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 Creating demand in private markets for reductions in 

forest-based greenhouse gas emissions. 

Providing financial and technical assistance would focus 

directly on addressing the challenges to reducing forestbased emissions. Creating demand in private markets 

could mobilize substantial funding for that effort. 

Although the two strategies can be pursued independently, they might work better in tandem. The viability 

of markets, for example, might depend on having in place 

a reliable program for achieving measurable reductions in 

forest-based emissions—the type of program that financial and technical assistance can help establish.

Assistance to Governments

Financial and technical assistance from developed countries could help address the more tractable challenges—

measuring changes in forest-based greenhouse gases and 

creating incentives for cost-effective global net reductions 

in forest-based emissions. Whether such assistance could 

improve forest governance in developing countries is less 

clear. 

Although the precise amount of assistance currently provided for forest-related activities is unknown, estimates to 

date suggest that providing sufficient funding to substantially reduce deforestation in developing countries could 

be difficult. All types of such assistance averaged roughly 

$560 million annually from the mid-1990s through 

2008, or about $2.8 billion over a five-year period.42

Another rough estimate puts the cost of setting up the 

capacity and infrastructure needed to operate a reliable 

program for reducing deforestation in a developing country that has the political will to carry out such a program 

at about $95 million over five years.43 Together, the two 

estimates suggest that if historical amounts of aid were 

fully dedicated to preparing willing countries to run 

reliable programs for reducing deforestation, they might 

ready as many as 30 such countries to operate such 

programs. 

Additional funds would be needed, however, to compensate those who reduce forest-based GHG emissions, and 

developed countries recognize that need. Six nations—

Australia, France, Japan, Norway, the United Kingdom, 

and the United States—recently pledged to provide $3.5 

billion over three years to encourage forest preservation in 

developing countries. The pledge was in keeping with a 

collective commitment made by developed countries to 

provide an initial $30 billion in resources over the 2010–

2012 period to facilitate the adaptation to and mitigation 

of climate change. Although the commitments are 

explicit, whether they are in addition to existing ones is 

unclear, and whether the funds will be delivered is uncertain because some funds are contingent on the approval 

of the budgets of donor countries.44 Fulfilling those commitments could ultimately depend on the extent to 

which forest preservation reduces the cost of meeting any 

goals that developed countries adopt for reducing emissions and on the competing demands in those countries 

for government funds.

With the challenges of improving governance and the 

potential limitations on funding, an effective strategy 

might be to direct assistance toward selected countries 

that have relatively strong governance and are rich in 

threatened forest resources. Of the 25 countries primarily 

responsible for global forest-based emissions in recent 

decades, Brazil, Indonesia, Venezuela, the Democratic 

Republic of the Congo, and Myanmar were the top five 

emitters, accounting for 69 percent of total forest-based 

emissions. Of the five, Brazil and Indonesia have comparatively strong governance (see Figure 6 on page 15). They 

also have remaining forest resources that account for 

roughly 40 percent of the total forest area in tropical

42. Search of “Query Wizard for International Development 

Statistics” (Organisation for Economic Co-operation and 

Development, Paris), http://stats.oecd.org/qwids. 

43. That very rough estimate is based on the costs of past efforts to 

reform policies and institutions in developing countries. Whether 

the costs of previous interventions are a good indicator of the 

amounts needed for reform is not certain. In addition, the projects 

have not always achieved the desired outcomes. See Eliasch 

Review, Climate Change: Financing Global Forests (prepared by 

Johan Eliasch, 2008), p. 219, www.official-documents.gov.uk/

document/other/9780108507632/9780108507632.pdf; and 

personal communication to the Congressional Budget Office by a 

staff member of Chatham House, Royal Institute of International 

Affairs, United Kingdom, November 20, 2010.

44. A recent agreement at the Cancun conference of the United 

Nations Framework Convention on Climate Change (UNFCCC) 

invited developed countries to submit an annual document presenting information on the resources they have provided to fulfill 

the commitment and on how developing countries obtain the 

resources. See UNFCCC, “Addendum, Part Two: Action Taken 

by the Conference of the Parties at Its Sixteenth Session,” Decision 1/CP.16 (December 2010), p. 16, http://unfccc.int/resource/

docs/2010/cop16/eng/07a01.pdf#page=2.
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developing nations.45 Establishing and supporting successful forest-based mitigation programs in those two 

countries could help preserve a significant proportion of 

tropical forests worldwide and might serve as a foundation for a similar effort encompassing other tropical 

developing nations. Such a broader effort would be 

important if leakage associated with the more focused 

program was significant. Because roughly 60 percent of 

the total forest area in developing tropical countries lies 

outside Brazil and Indonesia, significant leakage could 

occur, which would undermine the potential climate benefits of preserving the forests in those two countries.46

Markets for Reductions in Forest-Based 

GHG Emissions

Funding for forest preservation in developing countries 

might also be available in private markets. To date, markets for forest carbon have been largely voluntary rather 

than prompted by regulation. They exist primarily 

because of individuals’ and businesses’ perceptions of 

social responsibility and efforts to comply with expected 

climate policies even before the policies have been 

announced. Historically, those factors have motivated 

over three-quarters of the transactions in the market for 

forest carbon. Markets directed only about $10.4 million 

in funding to forest preservation in 2009, avoiding 

3.6 million tons of CO2e emissions at an average price of 

$2.90 per ton. They generated more funding for planting 

forests (about $23.6 million at $4.70 per ton) and for 

managing forests (about $11.2 million at $7.40 per 

ton)—activities that have less biological potential to 

reduce emissions than does preservation.47 In 2010, 

encouraged by the attention paid to forest preservation in 

international policy discussions, market funding for preservation climbed to $87.4 million, avoiding 19.4 million 

tons of CO2e emissions at an average price of $4.50 a ton. 

Funding for planting new forests declined slightly, to 

$22.1 million, and funding for managing forests 

increased slightly, to $13.4 million.48

To date, regulations have motivated only about onequarter of the transactions in the markets for forest 

carbon. To increase market funding for preservation, 

forest-based reductions in GHG emissions could be sold 

in markets fostered by cap-and-trade programs or by tax 

credits that might accompany taxes on GHG emissions.49

Such markets might motivate substantial increases in 

funding if forest-based mitigation abroad offered the 

opportunity to comply with required reductions in 

greenhouse gas emissions at a lower cost than that for 

reducing domestic emissions under a cap-and-trade 

program, for example. The more stringent the limit on 

emissions in a cap-and-trade program, the greater the 

potential for generating funding for forest preservation. 

Similarly, forest-based mitigation abroad might generate 

tax credits that could offset the impact of a carbon tax 

imposed on domestic GHG emissions, and the potential 

for generating funding for forest preservation would 

reflect the size of the tax. 

Under either type of program, the potential funding for 

forest preservation would depend on the program’s rules 

related to forest-based mitigation abroad. A cap-andtrade program, for example, might allow all or part of 

participants’ GHG emission reductions to come from 

forest-based activities in foreign countries. It could also 

specify which countries were eligible for generating 

forest-based compliance. Similarly, a tax credit for forest 

preservation could fully or partially offset a domestic 

entity’s related GHG tax liability, and the government 

45. Hardcastle and Baird, Capability and Cost Assessment of the Major 

Forest Nations to Measure and Monitor Their Forest Carbon, 

www.ibcperu.org/doc/isis/11466.pdf.

46. Brazil and Indonesia have slowed their deforestation rates in 

recent years. Estimated annual deforestation in Brazil declined 

from 2.9 million hectares during the 1990s to 2.6 million hectares 

during the subsequent decade. In Indonesia, it declined from 

1.9 million hectares to 560,000 hectares. See Food and Agriculture Organization of the United Nations, Global Forest Resources 

Assessment, FAO Forestry Paper 163 (Rome: FAO, 2010), p. 21, 

www.fao.org/docrep/013/i1757e/i1757e00.htm.

47. Katherine Hamilton and others, Building Bridges: State of the 

Voluntary Carbon Markets 2010 (report by Ecosystem Marketplace, Washington, D.C., and Bloomberg New Energy Finance, 

New York, June 2010), http://moderncms.ecosystemmarketplace

.com/repository/moderncms_documents/vcarbon_2010.2.pdf.

48. David Diaz, Katherine Hamilton, and Evan Johnson, State of 

the Forest Carbon Markets: From Canopy to Currency (report by 

Ecosystem Marketplace, Washington D.C., September 2011), 

www.forest-trends.org/documents/files/doc_2963.pdf.

49. In the United States, such provisions appeared in bills considered 

by the 111th Congress. State and regional programs in the United 

States may provide funding for reducing deforestation in developing countries. Under the Global Warming Solutions Act, for 

example, California is actively considering such provisions. See 

Diaz, Hamilton, and Johnson, State of the Forest Carbon Markets 

2011, www.forest-trends.org/documents/files/doc_2963.pdf.
DEFORESTATION AND GREENHOUSE GASES 21

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could specify the countries in which forest-based 

activities would be eligible for generating credits.

The few existing regulatory programs do not credit emission reductions to forest preservation activities. However, 

some programs allow participants to meet a portion of 

their obligation by planting new forests. They include the 

Regional Greenhouse Gas Initiative (which requires 

power plants relying on fossil fuels in member states in 

the northeastern United States to reduce emissions) and 

the emissions trading systems of the European Union and 

New Zealand (which facilitate compliance with commitments to reduce emissions under the Kyoto Protocol of 

the United Nations Framework Convention on Climate 

Change).50

Even if markets established as a result of regulations 

provide greater financing for forest preservation, they are 

not necessarily well suited to support reliable programs 

for reducing forest-based greenhouse gas emissions. 

Meeting the three challenges—measuring changes in the 

amount of carbon stored in forests, creating incentives for 

cost-effective global reductions in forest-based emissions, 

and improving governance—generally requires up-front 

financing that is not directly linked to the purchase of the 

reductions in greenhouse gases accomplished through 

forest preservation. However, if regulatory programs 

specified the conditions under which they would credit 

emission reductions to forest preservation activities, the 

potential cost savings from use of those credits could 

motivate firms (or groups of firms in industries with high 

greenhouse gas emissions) to make investments to address 

the three challenges. In particular, funding generated by a 

market-based program for reducing greenhouse gas emissions could help pay for improving measurement of forest 

carbon in developing countries or for preserving forests in 

countries where leakage might occur. The potential effect 

of such funding on governance in developing countries is 

less clear; it would depend, in part, on how governments 

would weigh the gains associated with qualifying for market participation against the costs they would incur in 

designing and implementing policies to preserve forests.

For example, concerns that the distribution of associated 

benefits might create political tensions could make 

governments reluctant to increase forest preservation.

50. Under New Zealand’s Emission Trading System, owners of older 

forests have to submit emission allowances for deforestation, but 

they are initially granted adequate allowances for that purpose. 

Owners may choose to sell those allowances if they do not plan to 

clear forests or if they anticipate that they can profit by selling the 

allowances and then—at a future time, when they clear forested 

land—by purchasing replacements at a lower cost.