EN    EN EN 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 17.10.2008 
SEC(2008) 2619 
COMMISSION STAFF WORKING DOCUMENT 
 
accompanying the 
COMMUNICATION FROM THE CO MMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMI TTEE OF THE REGIONS 
 
Addressing the challenges of deforestatio n and forest degradation to tackle climate 
change and biodiversity loss 
  
IMPACT ASSESSMENT  
{COM(2008) 645 final} 
{SEC(2008) 2618} {SEC(2008) 2620} 
 
EN 2   EN Executive summary 
On a global scale, net deforestation is most prev alent in tropical forests,  which cover some 1.7 
billion hectares, i.e. nearly half  of the world's total forest area. During the last five years, 
between 11.8 and 13 million ha of this area has been lost annually. This is an alarming trend and in the past 20 years no signifi cant decrease in the deforestat ion rate has been recorded.  
The causes of deforestation and degradation in clude a combination of direct and indirect 
economic, institutional, politic al, natural or social factor s: for example, demand for 
agriculture or infrastructure development, or  government failure to protect these valuable 
assets. The result is that forests are often lost or degraded even when it is not in the countries’ 
long-term interests.  
High rates of deforestation have severe conseque nces for climate change. Forests play a vital 
role in the global carbon cycle,  storing roughly half the world' s terrestrial carbon. In 2004 the 
forestry sector accounted for 17.4 % of global annual greenhouse gas emissions. This is why 
the targets set in the Commission's Communica tion “Limiting Global Climate Change to 2 
degrees Celsius - The way ahead for 2020 and beyond” are unlikely to be met without a 
reduction in greenhouse gas emissions from defore station and forest degradation, in addition 
to the other measures put forward. Tackling deforestation and degradation should also 
safeguard to the maximum extent possible biodi versity and the ecosystem goods and services 
it can provide. Doing so could support local popu lations, and contribute to tackling poverty.  
The target that needs to be met is to halt global forest cover loss by 2030 at the latest and 
reduce gross tropical deforestatio n by at least 50 % by 2020 comp ared to the current levels. A 
number of options are examined with this aim in mind.  
Business as usual would be unsa tisfactory on a number of count s. A first option of promoting 
a Multilateral Environmental Agreement on halting and reversing deforestation is discarded as 
unfeasible at present. A sec ond option of tightening existing policies/instruments is also 
analysed. The policies examined as part of  this second option include improving policy 
coherence at the EU level, strengthening institutional and governance systems in third 
countries and promoting effective multilateral re sponses. This could have a positive effect but 
will fall well short of the target if not combined with additional measures. 
This is why a third option of raising new funds for halting deforestation and forest 
degradation is examined. This could be done, for example, by  
– setting up a new Global Forest Carbon Mech anism (Option 3a) generating a financial 
stream through auctioning revenues from emi ssions trading, e.g. the EU's Emission 
Trading Scheme, or  
– through revenues coming directly from  the carbon market (Option 3b). 
A number of technical parameters related to  coverage, criteria, monitoring and payment 
mechanisms of such an option are also examined.  
 
EN 3   EN The preferred option until 2020 is a combination of strengthening  existing 
policies/instruments (Option 2)  and creating the Global Forest Carbon Mechanism raising 
new funds through auctioning revenues (Option 3a ). A direct link to the carbon market via 
forest emission reduction credits (Option 3b) co uld be further tested . These options should 
become elements of the global climate change  agreement in Copenhagen in 2009 to which the 
EU would contribute its fair share. 
This Impact Assessment is, though, only one step  in a longer process. The preferred option 
needs further details and elabor ation, particularly in relation to the designing of the Global 
Forest Carbon Mechanism. This will be done in a timely manner to inform the final UNFCCC 
negotiations in December 2009.
 
EN 4   EN TABLE OF CONTENTS 
1. Procedural issues and consulta tion of interested parties.............................................. 5  
1.1. Reference to Agenda Pla nning and Work Programme ................................................ 5  
1.2. Chronology and ISG Experience ................................................................................. 5  
1.3. Stakeholder consultation .............................................................................................. 6  
1.4. Summary of consultation ............................................................................................. 7  
1.5. Impact Assessment Board opinion............................................................................... 7  
2. Problem definition........................................................................................................ 8  
2.1. Current forest coverage and loss.................................................................................. 9  
2.2. Causes of the deforestation ........................................................................................ 10  
2.3. The effects of deforestation........................................................................................ 12  
2.4. The baseline ............................................................................................................... 15  
2.5. EU right to act and valu e added by EU actions ......................................................... 23  
3. Objectives................................................................................................................... 23  
3.1. General Policy Objective ........................................................................................... 23  
3.2. Specific Policy Objective........................................................................................... 23  
3.3. Operational objectives................................................................................................ 24  
3.4. Consistency with other EU policies ........................................................................... 25  
3.5. Criteria to assess whether the objectives are reached ................................................ 25  
4. Policy options............................................................................................................. 26  
4.1. Baseline option: business as usual ............................................................................. 26  
4.2. Option 1: Promote a Multilateral Envir onmental Agreement (MEA) on Forests...... 26  
4.3. Option 2: Tighten existing policies/instruments ........................................................ 26  
4.4. Option 3: Raise new funds (via the car bon market) for halting deforestation and 
forest degradation....................................................................................................... 29  
5. Analysis of impacts.................................................................................................... 36  
5.1. Analysis of option 2 ................................................................................................... 36  
5.2. Analysis of option 3 ................................................................................................... 36  
6. The preferred options ................................................................................................. 45  
7. Next Steps .................................................................................................................. 46  
8. Monitoring and evaluation ......................................................................................... 48  
9. ANNEXES ................................................................................................................. 54 
 
EN 5   EN 1. PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES  
1.1. Reference to Agenda Planning and Work Programme  
The Communication is pla nned under action 254.11-E2 of DG Environment Work 
Programme 2008 and Agenda Planning 2008 N. 20. 
1.2. Chronology and ISG Experience  
The impact assessment was drafted during July 2008 by the Commission services. No 
external expertise was employed since extensive information is available on deforestation and 
its root causes in the policy domain. Inter-service meetings on the Communication and its policy proposals were held with all the interested parties
1 in December 2007, and in February 
and June 2008. Written comments were received a nd were taken into account in drafting the 
impact assessment and the policy proposals themselves.  
Policy context 
In January 2007, the Commissi on adopted a Communication2 “Limiting Global Climate 
Change to 2 degrees Celsius - The way ahead  for 2020 and beyond”. The objectives set out in 
that document will not be reached wit hout reducing greenhouse gas emissions from 
deforestation and forest degradation, in addi tion to the other measures put forward. EU 
Environment Ministers adopted Conclusi ons on the Communicatio n in February 2007, 
emphasising that a global and comprehensive post-2012 climate change agreement needs to 
halt and reverse emissions from deforestation in  developing countries wi thin the next two to 
three decades.  
In September 2007, the Commi ssion adopted a Communication3 on Building a Global 
Climate Change Alliance (GCCA) with Devel oping Countries. The Communication identified 
the reduction of deforestation as one of five  key areas for action. The recent Commission 
paper introducing the Implementation Framew ork of the Global Climate Change Alliance4 
identified the key priorities for each region as  discussed between developing countries and the 
Commission, and described the modalities of implementation of the GCCA, like the EU 
contribution for 2008-2010, the GCCA support facility and the criteria to be  used for selecting 
countries for the 2008 pilot phase of the scheme. 
In December 2007, the UN Framework Conventi on on Climate Change (UNFCCC) launched 
a process known as the Bali Action Plan to work  towards the adoption of a decision in 2009 
on a future climate change regime. Among the t opics to be taken up in this process are “ policy 
approaches and positive incentives on issues relating to reducing emissions from 
deforestation and forest degradation (REDD) in developing countries; and the role of 
conservation, sustainable management of forest s and enhancement of fore st carbon stocks in 
developing countries ”. 
                                                 
1 RELEX, DEV, AGRI, ENTR, TREN, AIDCO, TRADE, JRC 
2 COM(2007) 2 
3 COM(2007) 540 
4 SEC(2008)  
 
EN 6   EN To streamline international commitments for biodiversity conservation at EU level, the 
Commission adopted in May 2006 a Communication on Biodive rsity and its  Action Plan5, 
which sets out an ambitious policy approach to halting the loss of biodiversity by 2010. The 
EU has also renewed its commitme nt to reverse the lo ss of biodiversity in  the revised Strategy 
for Sustainable Development and in the re cent UN Convention on Biological Diversity 
(UNCBD) Conference of the Pa rties in Bonn (COP 9), in May 2008. In October 2010 the 
Convention on Biological Diversity will review progress towards its target of significantly 
reducing biodiversity loss by 2010, and deforestati on is likely to feature prominently in these 
discussions.  
The increasing global acknowledgement of the need to tackle climate change, including 
emissions from deforestation and forest degrad ation in developing coun tries, means that the 
time is right for policy proposals through which th e European Union can contribute to efforts 
to reduce such emissions. In doing so, the EU will also contribute to other global policy goals, 
in particular poverty alleviation and biodiversity conservation.  
The timing  for putting forward new policy proposals is  crucial as negotia tions within the 
UNFCCC Bali Road Map are gaining momentum and a new agreement is expected by the end of 2009 in Copenhagen. Technical discussions on the scope and working mechanisms for a 
REDD scheme to support developing countries (i.e. non Annex I countrie s) will intensify on 
the way towards the Copenhagen conference and the European Commissi on can play a pivotal 
role in coordinating Member States' actions and pooling reso urces at European level.  
The policy proposal put forward by the Comm ission addresses defore station and forest 
degradation in developing countries, as agreed  in the Bali Action Plan. This means that 
mainly tropical and subtropical forested ecosystems are targeted by this proposal.  
1.3. Stakeholder consultation  
A public Internet consultation was launched on 25 June 2008 and closed on 22 August 2008. 
Summary results are described in  chapter 1.4. In addition to this, Green Week 2008 dedicated 
an entire session (5 June 2008) to tropical deforestation, its driv ers and possible policy 
responses, and broad an d active public particip ation was recorded.  
An expert meeting was convened on 6 June 2008 to discuss specific t echnical and financial 
issues linked to the avoided deforestation de bate. The Communication has also taken into 
account submissions made by countries in the context of the UNFCCC reporting as well as 
ongoing consultations on forest policy in the co ntext of Forest Law Enforcement Governance 
and Trade (FLEGT) VPA processes.  
EC and EU Member State contributions fo r the UNFCCC negotiations in Accra, during 
August 2008, are reflected in th is document. Information was collected during a workshop 
organised by the French Presid ency in Montpellier, on 7-8 Ju ly 2008. To a large extent, the 
workshop built upon the proceedings of the UNFCCC workshop in Tokyo, in June 2008, where around 180 participants from 70 countries , international organisations and NGOs met 
to debate methodological  issues relating to reduction of emissions from deforestation and 
forest degradation in developi ng countries. These meetings are the most recent ones organised 
within the UNFCCC but consultation and working groups meet frequently in preparation for 
                                                
 
5 COM(2006) 216 
 
EN 7   EN the forthcoming COP 15 in Copenhagen at th e end of 2009. International consultations on the 
Bali Action Plan, including REDD discussions, be tween the EU, MS and all parties signatory 
to the Convention take place on a regular basis a nd they are likely to in tensify further in the 
run-up to the end of 2009. 
The Commission’s minimum standards for publ ic consultation have been met.  
1.4. Summary of consultation 
A total of 366 respondents part icipated in the on line public consulta tion, 85% from EU 
Member States, 10% from developing countries and the rest from other OECD countries. 
About a third of the respondents answered on behalf of organisations and two thirds as 
individuals. Nearly all respondents consider that combating tropical deforestation is an 
international environmental priority. Most are in favour of multilateral or EU-level efforts 
rather than initiatives on the part of individual Member Stat es. The UNFCCC and CBD 
processes are considered relevant to this issue and the need to reward carbon emission 
reduction by halting defore station and forest degr adation is acknowledged.  
Suitable measures to fight tr opical deforestation are identified at the consumer level 
(purchasing legally and sustai nably produced wood products; re ducing waste and recycling). 
The main perceived deforestation drivers are land conversion for agricultural purposes, 
mining and quarrying, unclear land-use policie s and tenure rights (i neffective governance in 
general) and little consultation of ci vil society and the private sector.  
90% of the respondents indicated that the EU  should pursue the objective of halving 
deforestation by 2020 and stopping it by 2030 but 40% al so considered that this target was not 
ambitious enough. The contribution of internal a nd external EU policies to halt deforestation 
is considered highly relevant. A significant level of funding from 2013 to 2020 for the fight 
against deforestation is expected from the EU  (both EC and MS). Public funds, as well as 
market mechanisms such as carbon markets, are seen as primary sources of funding to combat 
deforestation. Most respondents consider it esse ntial to put in place an effective monitoring 
system at international level, as well as deve loping and improving national forest inventories. 
Third party monitoring is supporte d by 60% of the respondents.  
The messages from the Green Week deforesta tion session in June 2008 confirmed what is 
indicated above; in particular th ey indicate the need to/for:  
• support developing countries in improving governance,  
• incentive schemes to avoid deforestation and to sequester ca rbon but also for 
biodiversity and ecosystem services,  
• define baselines to quantify deforestation in time and space,  
• a change in consumption patterns to a void exporting products in demand leading 
to deforestation.  
1.5. Impact Assessment Board opinion 
In drafting this final report, the recommendati ons contained in the opinion of the Impact 
Assessment Board (IAB) were taken into account . In particular, the IAB asked for more 
information on  current initiatives to prevent defore station, on the amount of funding that 
 
EN 8   EN would be necessary to induce those concerned to  refrain from deforestation, as well as more 
discussion on non-financial incen tives and on issues requiri ng further analysis. More 
precisely, it sought clarification as follows: 
• Explain what lessons have been learnt from ongoing actions on deforestation (by 
assessing critical success factor s for funding and lessons learnt). 
• Discuss the issue of the uptake of  the planned financial incentives. 
• Develop alternative options (within op tion 2, while explaining why CDM cannot 
be harnessed). 
• Indicate which issues should be subject to more detailed analysis in the future.  
The present revised version of the Impact As sessment Report takes fully into account the 
recommendations of the IAB. Section 2.4.1 (bila teral initiatives  on forest conservation) 
contains an extended analysis  of alternatives as well as  the lessons le arned. Section 5.2.2 
contains a more in-depth analysis of the expect ed uptake and in particular provides detail on 
the trade-offs with alternative land uses in  the major countries a nd the amount of funding 
needed. Section 4.4.3 (Item 4 Permanence) includes re-verification and liab ility to ensure that 
funding is performance-based. Section 2.4.1 (United Nations Framework Convention on 
Climate change) and section 5.2.3  explain more clearly why CD M could not be harnessed to 
raise funds for deforestation. Finally, section 5.2.2 explains that a more detailed and in-depth 
analysis of marginal costs of deforestation and the use of any ETS revenues at Community 
level will be part of future work.  
2. PROBLEM DEFINITION  
The problem is the ongoing loss of tropical forests,  particularly in some developing countries, 
due to deforestation, as well as the loss of e nvironmental goods and services due to forest 
degradation.  
Definitions of defore station and degradation 
The term deforestation  is used quite variably, so it is important to cl arify its definition. Here 
we consider the FAO definition of forest which is determined "both by the presence of trees 
and the absence of other predominant land us es" within a "land spanning more than 0.5 
hectares with trees higher than 5 metres  and a canopy cover of more than 10%". 
Deforestation  is then defined as the conversion of forest land to another land use (or 
reduction under 10% crown cover without change in land use). This type of  definition is also 
used in the context of the Kyoto Protocol6 with some flexibility in the selection of the 
minimum forest area (between 0.05 and 1 hectares) and crown c over threshold (between 10 
and 30 percent). 
A distinction is also made between gross deforestation  - the total forested area lost - and net 
deforestation  – gross deforestation minus areas under reforestation and afforestation7. In 
terms of environmental services, it is better to av oid deforestation than to  deforest and reforest 
subsequently: deforestation leads to some irreve rsible effects in terms of biodiversity loss and 
                                                 
6 UNFCCC (2001): COP-7: The Marrakech accord s. (Bonn, Germany: UNFCCC Secretariat) 
7 Cf FAO, 2005 
 
EN 9   EN soil degradation for instance. Old-growth natu ral forests act as large long-term carbon sinks, 
accumulating carbon in soils and woody biomass, and preventing its release. By contrast, young forests frequently produce far more CO
2 than their regrowth will absorb, and even 
mature plantations are almost always net emitte rs of carbon. Furthermore, the disturbance to 
soil and the previous vegeta tion caused by commercial logg ing and replanting causes woody 
debris, litter and soil organic matter to decom pose and release carbon (Luy ssaert et al., 2008).  
The term degradation  is defined by the IPCC as “a direct human-induced loss of forest values 
(particularly carbon), likely to be characte rised by a reduction of tree cover. Routine 
management from which crow n cover will recover within the normal cycle of forest 
management operations is not incl uded” . This concept is more subjective and therefore more 
difficult to quantify. According to  recent studies (Putz et al., 2008), the potential for emission 
reductions through improved forest management is at least 10% of that obtainable by curbing 
tropical deforestation. 
2.1. Current forest coverage and loss 
Consistency over time and countries is an issue when working on forest change data. This is 
mainly due to the fact that deforestation occurs mostly in developing countries, with sometimes limited capacity to undertake frequent a nd reliable forest inventories. However, all 
the information contained in this section come s mainly from the FAO, the source with the 
most consistent reporting available.  
The world forest area is about 4 billion hectares , or 30.3 % of the total land area. More than 
half of the global coverage is found in the Russian Federation, Brazil, Canada, USA and 
China, combined. Tropical forests are mainly re stricted to the land area between the latitudes 
22.5° North and 22.5° South of the Equator, or in other words between the Tropic of Capricorn and the Tropic of Cancer (fig. 1, Annex 1 ). Tropical forests account for some 1.7 
billion ha, i.e. 44% of the total global fore sted area (FAO, 2005). The countries with the 
largest tropical forest resources are Brazil, D.R. Congo and Indonesia, accounting for 40% of 
the total tropical forest cover. Above-ground bioma ss in tropical rain forests has a particularly 
high carbon stock, holding on average 50 % more car bon per hectare than forests in temperate 
and boreal areas
8. 
The annual gross deforestation rate in tropical regions is estimated between 11.8 million ha 
and 13 million ha per year, for the period 2000-20059, with a net global rate of deforestation 
at 7.3 million ha per year (and a net rate of defo restation in tropical regi ons at 11.3 million ha 
per year). In the past 20 years,  no significant decrease of defore station rate has been recorded 
(fig. 2, Annex 1 ).  
The figure below shows the annual net change in forest area by region and provides clear 
evidence of the reduction in forest cover in South America and Africa.  
                                                 
8 Houghton, 2005 
9 JRC estimate based on FAO data (FAO, 2006) 
 
EN 10   EN 
 
The ten countries with the largest net forest  loss per year between 2000 and 2005 (Brazil, 
Indonesia, Sudan, Myanmar, Zamb ia, United Republic of Tanzania, Nigeria, Democratic 
Republic of the Congo, Zimbabwe, Venezuela) ha d a combined net forest loss of 8.2 million 
hectares per year10.  
2.2. Causes of the deforestation  
In most cases, drivers of defo restation are a combination of direct and indirect economic, 
institutional, political, natural or social factor s. The figure below provides an example of the 
main drivers of deforestation and forest degradation11. 
The reasons for continued conversion of tropical forest land are interr elated; their importance 
can vary among countries and regions or within countries and can change over time. Some of the main causes are described below.  
                                                
 
10 FAO, 2007 
11 Geist and Lambin, 2002  
 
EN 11   EN 
 
2.2.1.  Direct causes: Land-use changes 
The diverse drivers of deforestation, many of wh ich originate outside of the forestry sector, 
make it challenging to find a global solution.  
Agricultural expansion  
Agricultural expansion is a leading cause worldwide12 due, inter alia, to population pressure 
and increase in GDP, with more land being ne eded to grow food and non-food crops and to 
expand pasture for livestock produ ction. A substantial and increas ing share of deforested land 
is also converted to expanding intensive, larg e-scale production of soybeans and other feed 
crops. This is driven mainly by the sharp increas e in demand for livestock products especially 
in Asia, where land scarcity has led producers to rely increasingly on imported feed. The 
emerging market for agri-fuels could also ex ert further pressure on forest resources. 
Some general trends can be identi fied at continent level: in Afri ca, the main drivers of forest 
clearing are small-scale subsis tence farming and demand for firewood. In South America, 
agricultural expansion is direct ed towards beef and soya produc tion for export. In South-East 
Asia, oil palm, coffee and timber are the main commodities leading to forest land conversion.  
Mining  
Mining for the extraction of natura l resources is frequently a destructive activity that damages 
forest ecosystems, causing problems for people living near to and dow nstream of mining 
operations. Large-scale mining ope rations, especially those usi ng open-pit mining techniques, 
can result in significant deforestation through  forest clearing and ro ad construction which 
open remote forest areas and provide access for se ttlers and small-scale, sometimes illegal, 
miners. Mining as a significant driver of de forestation has been re ported in Africa (Congo-
gold mining and Ghana), in Central America (Guatemala, Nicaragua), in South America 
(Peru, Ecuador-Intag), and also in Asia (Bangladesh-Phlbari coal mine, and Burma). 
                                                 
12 Geist & Lambin, 2002 
 
EN 12   EN Infrastructure development  
Development of new, or expansion of existing,  infrastructures such as roads, urban and 
industrial settlement, energy plan ts and lines contribu te to the deforest ation process. New 
forest roads can also provide farmers with eas ier access to previously inaccessible land, thus 
extending the agricultural frontier. 
Unsustainable and illegal logging  
Wood demand can be satisfied thro ugh utilisation of na tural and semi-natural  forests by either 
selective logging or clear  cutting, or through forest plantations. Unsu stainable and illegal 
logging, mainly targeting high commercial valu e trees, can contribute to deforestation and 
forest degradation. Degraded forests are more likely to become deforested land as access due 
to logging makes things easier for farmers.  It is on these direct drivers that European ac tors may have the biggest influence, mainly 
through demand for agricultural, forestry and mining products. However, EU policies and 
instruments impacting on tropical forests are not  always fully consistent with the Union's 
environmental goals and further action may be needed in this direction. 
2.2.2.  Indirect causes: Institutional issues 
Governance issues and market failures  
Protecting tropical forests is difficult for several institutional and governance reasons:  
– Land tenure and property rights ar e often unclearly defined; 
– Corruption frequently undermines e ffective law enforcement and policy 
implementation; 
– Law enforcement capacity is generally weak and does not effectively address 
illegal logging; 
– Limited presence of state authorities in  weak and sparsely populated forest 
areas. 
The relevance of these factors varies from c ountry to country. A general underlying cause of 
governance failure, though, is the fact that the major benefits  associated with forest 
conservation and sustainable forest management  are non-marketed externalities, accruing to 
society on a local a nd/or global scale. 
Perverse incentives 
In some countries, governments have put in  place policies which indirectly encourage 
deforestation through agriculture  incentives, transportation and infrastructure development, 
urban expansion, and timber subsidies.  
A number of studies have recogn ised that policies outside the forest sector, such as land 
planning, infrastructure development, mining/qua rrying, agriculture, land tenure, etc. can have 
a large impact on deforestation, often much more substantial than forest policies per se. 
2.3. The impacts of deforestation and forest degradation 
High rates of tropical deforesta tion contribute to severe clim ate-change, as well as causing 
loss of biodiversity, flooding, siltation and soil  degradation. In addition, deforestation and 
degradation pose threats to the livelihoods and cultural integrity of fo rest-dependent people 
and the supply of timber and non-timber forest  products for future generations. It can, 
 
EN 13   EN however, also lead to increased economic reve nues arising from alternative land uses, in 
certain cases accruing benefits to a limited number of people. These economic and social 
outcomes affect different populations acr oss the world in different ways.  
2.3.1.  Global climate impacts  
Forests play a vital role in the global carbon  cycle, storing roughly half of the world's 
terrestrial carbon13. When forests grow, they withdraw carbon dioxide from the atmosphere 
and sequester it in trees and soil. When they are destroyed or degraded, much of this carbon is 
released, either immediately if the trees are burned or more slowly if the organic matter 
decays naturally. A very small fraction is stored for a longer period in houses or other long-
lasting wooden structures. Overall, above-groun d biomass typically holds 20 to 50 times more 
carbon per unit area than the ecosystems that replace them14. Above-ground biomass in 
tropical forests typically stores  50 % more carbon per unit area th an in non-tropical forests. 
The average biomass of tropical forests is esti mated at 129 t C/ha while average biomass of 
non tropical forests is estimated at 45 t C/ha15. 
Deforestation of tropical forest therefore leads to large-scale emissions of CO 2. But 
uncertainty remains about the exact quantifi cation of annual greenhouse gas emissions from 
deforestation.  
FAO estimates put total net deforestation in  the period 2000–2005 at 7.3 million hectares per 
year. The FAO estimated a net decrease in forest biomass in the period 2000 to 2005 of 1.2 Gt of carbon annually for the world or 1.6 Gt  of carbon annually for the tropics.  This value for 
the tropics is equivalent to an annual decrease of 5.8 Gt CO
2, slightly higher than the annual 
decrease for the period 1990 to 2000 which was estimated at 5.2 Gt CO 2. A similar result for 
the 2000 to 2005 period can be found in a study by IIASA16. 
Over this period from 2000 to 2005, the esti mated net loss in carbon stock from living 
biomass was, according to the FAO, particularly high in South and Southeast Asia (13.6 Gt CO
217), Central and South America (10.6 Gt CO 2) and Africa (5.1 Gt CO 2). In all other 
regions carbon stocks increased. 
The IPCC estimated that in 2004 the forestry sector accounted for 17.4 % of global annual 
greenhouse gas emissions or an amount of emission equivalent to 8.5 Gt CO 2. This includes 
emissions from deforestation, decay, peat soil s and other sources, havi ng higher estimates for 
emissions than those stemming from land-use change that take only living biomass into 
account.  
Estimates by the IPCC as regards net emissions from land-use change give a broad range of 
estimates for average annual emissions in the 1990s, ranging from 2 Gt CO 2 at the low end to 
10 Gt CO 2 at the high end, with an average of 6 Gt CO 218.  
                                                 
13 Millennium Ecosystem Assessment, 2005 
14 Exact emissions are difficult to measure and depend on the rates of deforestation and/or degradation, the 
carbon storage capacity of the forest in question, and the resulting land use, among other factors. 
15 Houghton, 2005.  
16 Kindermann et al., 2006 
17 FAO FRA 2005 report 
18 The IPCC report also discusses the issue of the Residual land sink (WGI, chapter 7). Even though land 
use change leads to net emissions, there is still an observed net uptake of CO2 by the total land 
 
EN 14   EN Much uncertainty remains on how to measure gross and net deforestation and the resulting 
emissions of deforestation and forest degradati on. This uncertainty is caused by, for instance, 
the difficulty of measuring degradation itself, th e difficulty of capturing in the estimates all 
potential sources and sinks (onl y above ground or including the soil, only living biomass or 
also decay and peat) and understanding and mode lling the correct processes associated with 
these different sources and sinks.  
Nevertheless, it is clear that emissions from de forestation and forest degradation are of great 
magnitude. As such, reducing them is a mitigat ion option offering significant and immediate 
carbon emission impact in the short term, because large amounts of carbon (about 350-900 
tCO 2/ha) would not be released in to the atmosphere. Reducing these emissions will need to be 
part of the action on mitigation to ensure that  low emission stabilisation scenarios can be 
reached, as confirmed in several studies19. 
2.3.2.  Biodiversity implications and the loss of ecosystem services 
About fifty  per cent of World’ s plant and animal species are found in tropical forests; many 
of these are threatened with extinction20. Forest hotspots in Braz il, Colombia and Indonesia 
are home to the greatest plan t biodiversity in the world.  
The study on the " Cost Of Policy Inaction (COPI): th e case of not meeting the 2010 
biodiversity target "21 assesses how much biodiversity will be lost if no preventive action is 
taken. This assessment is done both in quantitativ e terms (using the mean species abundance 
indicator22) and in monetary terms, using valuati on studies for biodiversity and ecosystem 
services. Overall, it is estimated that tropical forests and tropical woodland will together 
lose some 13% of thei r original biodiversity  by 2050  if no preventive action is taken. 
Details are provided in Annex 2 . 
Loss of forests translates into biodiversity lo ss which in turn translates into the loss of 
ecosystem services. Forests provide important  ecological functions and goods and services 
such as soil protection and reduction of landslides and eros ion, water supply, local climate 
regulation and protection from the risk of natura l disasters. Besides a climate mitigation role, 
avoided deforestation is also an im portant climate adaptation measure.  
One example of loss of potential revenues is given by bio-prosp ecting: 40-50% of 
pharmaceutical drugs in the market have an orig in in natural products, with 42% of the sales 
of the 25 top-selling drugs worldwide either constituting biological , natural products, or 
derived from natural products, some of  which are found in tropical forests. 
                                                                                                                                                         
biosphere, implying that there must be an uptake  by terrestrial ecosystems elsewhere, called the 
‘residual land sink’ (formerly the ‘missing sink’). Recent findings suggest that 15 per cent of the global 
forest area sequester about 1.3 G t of carbon per year (Luyssaert et al., 2008) 
19 Forthcoming IIASA and MNP st udy and Staff working document  accompanying the Communication 
“Limiting Global Climate Change to 2 degrees Ce lsius - The way ahead for 2020 and beyond” (SEC 
(2007) 7) 
20 See in particular the Economics of Ecosystems and Biodiversity. TEEB. Interi m report for analysis of 
biodiversity and ecosystem service impacts. 
21 Cf http://ec.europa.eu/environment/nature/biodiversity/economics/index_en.htm  - The COPI study is a 
meta-analysis based on the whole literature on biodivers ity valuation studies. Therefore, its results give 
a representation of the whole knowledge currently available on the topic.  
22 If the value of the Mean Species Abundance index is 100%, the average abundance of (a selection of) 
the original species of the system investigated is similar to the natural (or only slightly affected) state. If 
the indicator value approaches 0%, the natural system has been converted or degraded almost 
completely. 
 
EN 15   EN A general literature finding on land-use change is that it is often not socially optimal because 
law and policy does not adequately take forests' values into account. This can be seen in the 
work of Balmford et al.23 to quantify the net marginal benefits of different human uses of 
tropical forest areas. In Malaysia (Selangor) unsustainable logging was associated with 
greater private benefits through timber harvesting but reduced social and global benefits. The 
total economic value (TEV) of forests was so me 14% greater when placed under sustainable 
forest management. In Mount Cameroon (C ameroon), a comparison between low-impact 
logging and land-use change found that private benefits favour conversion to small-scale 
agriculture. Social benefits fr om non-timber-forest products as well as global benefits from 
carbon sequestration were highest under sustainabl e forest management. Overall, the TEV of 
sustainable forestry was 18% greater than sm all-scale farming, whereas oil palm and rubber 
plantations had a negative TEV. 
2.3.3.  Impact on local communities 
The loss of ecosystem services has an impact on local communities and forest-dependent 
people in developing countries, but  the net impact is likely to  be mixed. Timber harvesting 
associated with deforestation can create employ ment, as can the alternative land uses which 
follow from forest conversion. On the other ha nd, communities which have traditionally used 
a wide range of forest products for their livelihoods can be a dversely affected. Hence, poverty 
and the loss of ecosystems and bi odiversity are intertwined.  
Forest degradation can be a source of in tense conflicts between  rural populations, 
governments, commercial interests and, increasingl y, sections of the public at large. FAO has 
estimated that forests are home to 300 million people around the World, and another 350 million people who live within or adjacent to dense forests depend on them for subsistence 
and income. About 60 million indigenous people ar e almost wholly dependent on forests for 
their livelihoods.  
Broadly speaking, policies intended to preserve forests and preven t deforestation are likely to 
be advantageous to local communities, if they are well designed and implemented. 
2.4. The baseline 
This section draws a distinction between the ba seline policies currently in place and having an 
impact on deforestation and the ba seline scenarios of the models used for analytical purposes, 
which do not take into account all the existing polic ies, as models are necessarily a 
simplification of the reality.  
As explained in previous sections, th e Communication put forward by the Commission 
focuses on deforestation and fore st degradation in developing countries, as agreed in the 
UNFCCC Bali Action Plan. This means that ma inly tropical and subtropical forested 
ecosystems are targeted. 
Understanding the baseline predictions for rates of deforestation is crucial to understanding 
the amount of effort needed to stop deforest ation. The baseline sc enario, while it is a 
simplification of reality, attempts to reflect the extent and complexity of the deforestation 
process and the range of relevant policies at  Community and international level. A brief 
                                                
 
23 Balmford et al., 2002. Economic reasons for cons erving wild nature. Science, Vol. 297, 950-953 
 
EN 16   EN overview of bilateral and multinational init iatives is provided below, with a more 
comprehensive review in Annex 3 . 
2.4.1.  Baseline policies 
This section presents a brief overview of bila teral and multinational initiatives and policies 
having an impact on deforestation. However, it has to be emphasised th at forestry-relevant 
policies are not restricted to the fore st sector. Other sectors - such as production and 
consumption patterns, trade, energy, agriculture, food security and development cooperation  
- play a major role in contributing to the c onservation and sustainable management of world 
forest resources. A more comprehensive review of the relevant EC policies is provided in 
Annex 3 , together with  the positions of major developing countries on how to tackle 
deforestation and forest degradation, as expressed in the UNFCCC negotiations. 
International Forest policy 
Forest conservation has been a priority on the in ternational political agenda for the past two 
decades. Several processes and organisations ar e currently geared to promoting sustainable 
forest management and reducing deforestati on: United Nations Forum on Forests (UNFF), 
International Tropical Timber  Organisation (ITTO), FAO, UN Convention on Biological 
Diversity (CBD), Forest Law Enforcement and Governance process (FLEG) and the EU 
Forest Law Enforcement, Governance and Trade Action Plan (EU FLEGT). 
In 1992, with the UN Conference on Environm ent and Development (UNCED) seeing the 
opening for signature of the UN Convention on Biological Diversity and the UN Framework 
Convention on Climate Change, it did not pr ove possible to agre e a legally binding 
framework for forests. Instead, the Confer ence adopted the non-legally binding Forest 
Principles24 and Agenda 21 – a comprehensive progr amme for global action on sustainable 
development – which included a chapter on combating deforestation.  
During the 1990s the international community c ontinued to develop glob al policies on forests 
under the auspices of the UN Commission on Sustainable Development, through the 
Intergovernmental Panel on Forests (IPF) from 1995 to 1997 and the Intergovernmental 
Forum on Forests (IFF) from 1997 to 2000. In  2000 the EU and others argued for a 
multilateral convention on forests to be negotiated, but it was not possible to achieve consensus on this proposal. A new internationa l arrangement on forests was agreed, with the 
establishment of the UN Forum on Forests ( UNFF) and a five-year mandate. The issue of a 
forest convention came up again in 2005 and, once more, it did not prove possible to achieve 
consensus.  
In 2006 the International Tropical Timber Agreement was agreed (ITTA 2006). This 
Agreement superseded the ITTA 1994. The ove rall objectives of th e Agreement are to 
promote the expansion and diversification of international trade in tropical timber from 
sustainably managed and lega lly harvested forests and to promote the sustainable 
management of tropical timber-producing forest s. The Agreement does not include specific 
provisions on deforestation or quantitativ e targets.  
At its sixth meeting in February 2006, the Unit ed Nations Forum on Forests (UNFF) agreed 
on a "non-legally binding instrument on all types of forests" containing four global objectives 
                                                
 
24 Non-legally binding authoritative statement of principles for a global consensus on the management, 
conservation and sustainable development of all types of forests 
 
EN 17   EN of which objective 1, aiming to "reverse the loss of forest cover worldwide through 
sustainable forest management, including protection, restoration, afforestation and 
reforestation, and increase efforts to prevent forest degradation ", is of particular relevance for 
the climate change process as well  as for the international efforts to slow and halt the loss of 
biodiversity. The objectives ar e non-binding for the individua l country, agreeing to work 
globally and nationally to make progress towa rds their achievement by 2015. By that time a 
review of the instrument will take place and the possibility of a legally binding instrument 
will once more be put on the table. It should be considered, however, that many governments, 
including some key forest-rich countries like Brazil, continue to oppose the idea of a binding 
multilateral agreement on forests. They in particular insist that legislation and law enforcement are issues of national sovereignty. 
United Nations Framework Convention on Climate Change 
Existing commitments under the UNFCCC
25 are relevant to defo restation. Article 4, in 
particular, provides that all Parties 
(a) taking into account their common but di fferentiated responsibilities and their 
specific national and regional development pr iorities, objectives and circumstances, 
shall: […] 
(b) Formulate, implement, publish a nd regularly update national and, where 
appropriate, regional programmes containing measures to mitigate climate change by addressing anthropogenic emissions by s ources and removals by sinks of all 
greenhouse gases not controlled by the Montreal  Protocol, and measur es to facilitate 
adequate adaptation to climate change; 
(c) Promote and cooperate in the developm ent, application and diffusion, including 
transfer, of technologies, practices and pr ocesses that control, reduce or prevent 
anthropogenic emissions of greenhouse gases not controlled by the Montreal Protocol in all relevant sectors, including the energy, transport, i ndustry, agriculture, 
forestry and waste management sectors; 
(d) Promote sustainable management, and pr omote and cooperate in  the conservation 
and enhancement, as appropriate, of sinks and reservoirs of all greenhouse gases not 
controlled by the Montreal Protocol, includ ing biomass, forests and oceans as well as 
other terrestrial, coastal and marine ecosystems; […]” 
The Kyoto Protocol establishes incentives for the conservation and enhancement of sinks in 
developed and developing countries. For de veloping countries, th e clean development 
mechanism (CDM) established the framework fo r financing projects to reduce emissions or 
enhance removals. However, among the poten tial activities related to land use, only 
afforestation and reforestation are eligible under the CDM. In addition, for the first 
commitment period a cap of 1% (of base year em issions times 5) for the use of land-use, land-
use change and forestry (LULUCF)  projects applies. So far, th e use of CDM afforestation and 
reforestation credits has been limited. 32 LU LUCF-related methodologies  for CDM projects 
have been proposed. 11 large-scale and 3 sm all-scale methodologies have been approved. 
Among the 1157 CDM projects registered by th e CDM Executive Board in mid-September 
                                                
 
25 Articles 3.3, 4.1b, 4.1c and 4.1d 
 
EN 18   EN 2008, only one is a LULUCF CDM pr oject, which started in China in 2006. 20 projects are at 
the validation stage. One of the main problems making it difficult for the CDM to be extended 
to encompass projects aiming at reducing defore station and forest degradation or promoting 
better management of forests is linked to the so-called risk of leakage: as CDM projects are 
restricted to rather limited geographical areas they do not easily account for in-country 
leakage, which is very likely to happen in the case of project-based activities to reduce 
deforestation. This was one of the main reasons why the LULUCF CDM was limited to 
afforestation and reforestation projects for th e first commitment period and, due to the 
limitations and drawbacks of a project-based approach, the CD M at this stage is not an 
appropriate means to generate incentives for th e protection or better management of existing 
forests and to address (gross) deforestation. 
At the UNFCCC COP 13 in Bali (December 2007), however, policy approaches and positive 
incentives to reduce emissions from deforesta tion and forest degrad ation in developing 
countries were included in the Bali Action Plan on long-term cooperative action, which launches a comprehensive negotiation process on the post-2012 internati onal climate change 
agreement to be finalised by December 2009
26. A specific decision on  reducing emissions 
from deforestation in developing co untries (the so-called REDD decision)27 was also adopted: 
it launches a methodological programme of work  to support the development of policy 
approaches and positive incentives to reduce emissions from deforestation and forest 
degradation in developing countries; encourag es Parties to the UNFCCC to launch capacity-
building, technical assistance and technology transf er in order to support the development of 
these policy approaches in developing countri es; and finally, encourages Parties to the 
UNFCCC to undertake demonstration activities in the field of reducing emissions from 
deforestation and forest degradation in or der to support the development of the UNFCCC 
REDD approach. REDD may lead to the developm ent of an international financial mechanism 
to address deforestation and forest degradation and there by become a kind of "CDM for 
deforestation and forest degradation". 
Bilateral initiatives on forest conservation and/or halting deforestation 
• Initiatives with periodical financial commitments:  
– The Norwegian government has establis hed a special project on climate and 
forests. In Bali, Norway has committe d up to US$600 million a year in the 
period from 2008 to 2012 towards effo rts to reduce emissions from 
deforestation and forest degrad ation in developing countries. 
– At the Convention on Biological Di versity COP 9 in Bonn, in May 2008, 
Germany pledged €500 million between 2009 and 2012 for protection of 
forests and ecosystems and an additi onal €500 million every year thereafter. 
Funding will be generated from the proceeds of the auctioning of allowances under the Emissions Trading Scheme. 
• Initiatives with non-periodical financial commitments: 
– The Brazilian Government launched, in  June 2008, a US$200 million rainforest 
voluntary fund to protect the Amazon and adopted national targets to curb 
                                                
 
26 UNFCCC Decision 1/CP.13 
27 UNFCCC Decision 2/CP.13 
 
EN 19   EN deforestation. The aim is to prevent deforestation and enable emissions 
reduction on a larger scale th an project-based activities. 
– The UK and Norway have launched a US$200 million Fund for the Congo 
Basin Forest to monitor forest depl etion and promote economically viable 
alternatives;  
– Australia launched, in 2007, a US$200 m illion fund (Global Initiative on 
Forests and Climate) to support forest ry in selected developing countries 
(particularly in South-East Asia a nd the Pacific). It focuses on reducing 
deforestation, encouraging reforesta tion, promoting monitoring and forest 
assessment technology and methodologies. 
– The World Bank  launched, in June 2008, its US$300 million Forest Carbon 
Partnership Facility  (FCPF), which will pilot projects using a system of policy 
approaches and performance-based paym ents. The facility consists of two 
components: A US$100 million Readiness Fund will provide grants to help countries set up systems and processes to monitor and credibly govern their 
forests. Several countries will also be  able to sell emi ssion reductions to a 
special US$200 million Carbon Fund suppor ted by donor countries, as well as 
the private sector and orga nisations. Nine industrialise d countries have already 
pledged, in December 2007, US$155 million to  kick-start the 10-year initiative
. 
Eighty per cent of these pledges come from EU Member States (Germany 
US$59 million, UK US$30 million, the Ne therlands US$22 million, France 
US$7 million, Denmark and Finland US$5 million each). The remainder comes 
from Australia and Japan (US$10 million each), while Switzerland (US$7 million) and US-based Nature Conserva ncy also pledged US$5 million. With 
23 countries having already applied to the Readiness Mechanism, the FCPF is 
now delivering input to feed into the UNFCCC REDD process in terms of 
methodological needs, strategies and related challenges and problems envisaged by countries. 
– The World Bank BioCarbon Fund
 raised US$54 million for the period 2004-
2007 and a new tranche opened in 2007 with US$ 38 million . This fund 
finances projects that sequester or cons erve greenhouse gases in forests, agro-
ecosystems and other ecosystems. Thr ough its focus on carbon sinks, this Fund 
finances the generation of credits that comply with CDM or Joint Implementation, giving these countri es access to the carbon market. 
Accordingly, this Fund has focused main ly on afforestation and reforestation 
projects but also has a window aimed at testing REDD projects. 
– The European Commission launched, in 2007, the Global Climate Change 
Alliance (GCCA) with initial funding of  €50 million. Halting deforestation will 
be one of the five areas of support of  the GCCA. The Commission is currently 
considering a contribution to the WB FCPF in the region of €5 million
. 
Most of the above initiatives are relatively re cent and hence it is too early to draw lessons 
from them. However, the Commission and EU Member States have been providing 
development assistance for forests for many year s and have gathered valuable experience. 
Several key general lessons emerge from th is area. This includes the need for: 
 
EN 20   EN y long-term support, taking account of the absorption capacity of institutions and 
communities, especially in remote  or sparsely populated areas, 
y participatory national processe s to develop consensus on policy, 
y inter-Ministerial and inter-sectoral coordination, 
y political leadership to counter vested interests, 
y public awareness and use of media, 
y high-quality research to identify and quantify the contribution of forests to people's 
livelihoods as well as to quantify, as fa r as possible, the value of public goods 
provided by forests. 
UN Convention on International Tr ade in Endangered Species (CITES) 
The EC and Member States actively implem ent a broad range of biodiversity-related 
international agreements that aim at protecti ng certain species, regi ons or ecosystems. For 
example, as one of the principal markets for trade in endangered species, the EU has been 
playing a very active role by strictly regulat ing trade in species (i ncluding several timber 
species like mahogany, ramin, afromosia) that are most at risk and by putting pressure on and 
offering incentives to range states to ensure that  trade is sustainable. Progress has also been 
made in creating synergies between the CBD a nd other biodiversity-re lated agreements; for 
example, the 2010 target has been taken up as  a central objective of  the Convention on 
International Trade in En dangered Species (CITES). 
UN Convention on Biological Diversity (CBD) The EU ratified the UN Convention on Biologica l Diversity (CBD) in 1993 and is an active 
player in international biodive rsity governance on the world st age. In 2002, the CBD adopted 
its strategic plan which included the overall target to significantly reduce the rate of 
biodiversity loss by 2010
28. More recently, the EU played a key role in achieving ambitious 
decisions at the Ninth Meeting of the Parties (COP9) to th e CBD in Bonn, in May 2008. The 
global principle that the production and use of bi ofuels should be sustainable in relation to 
biodiversity was established.  
COP9 also set in motion an expert-process for feeding biodiversity considerations into the 
ongoing international climate ne gotiations. An Ad Hoc Techni cal Expert Group (AHTEG) on 
Biodiversity and Climate Change was created to provide biodiversity-relevant information to 
the processes under the UNFCCC. It includes representatives of indigenous and local 
communities and Small Island Developing States  (SIDS). Among the tasks of the AHTEG is 
the identification of: 
– opportunities to deliver multiple  benefits for carbon sequestration, and biodiversity 
conservation and sustainable use in a range of ecosystems,  
– options to ensure that possibl e actions for REDD do not run c ounter to the objectives of the 
CBD but rather support the conservation a nd sustainable use of biodiversity;  
                                                 
28 Convention on Biological Diversity Decision VI/26 Annex (Strategic Plan) paragraph 11, see: 
http://www.biodiv.org/decisions/de fault.aspx?m=COP-06&id=7200&lg=0  
 
EN 21   EN – means to incentivise the implementation of adaptation actions that promote the 
conservation and sustaina ble use of biodiversity. 
The results of the AHTEG will be fed directly into the climate negotiations and also be 
discussed at the Fourteenth Meeting of the CBD's Subsidiary Body on Scientific, 
Technological and Technical Advice  (SBSTTA) in 2010 as well as at the Tenth Conference of 
the Parties to the CBD in October 2010 (CBD COP10). 
2.4.2.  Description of baseline scenarios 
It is difficult to measure the current extent of deforestation and its progr ess over time. Instead, 
we must rely on models to provide estima tes of the baseline scenario. While being a 
simplification of the reality, these baseline scenario s are intended to reflect as fully as possible 
the extent and complexity of th e deforestation process and the range of relevant policies at 
Community and international level. Baseline scenarios represent the hypothetical situation in which current or already agreed  actions would go on but no new initiative would be taken to 
prevent deforestation. Baseline pr ojections for emissions from defo restation need to  be in line 
with estimates of historic emissions. As such th ey are also subject to a similar uncertainty in 
terms of absolute quantification of emission s from deforestation including the type of 
potential sources and sinks they represent. Unde rstanding the baseline pr ojections for rates of 
deforestation is crucial to understanding the am ount of effort needed to stop deforestation. 
Furthermore, baseline projections are driven by other assumptions that can stem from forests 
but are not directly linked to the types of s ources and sinks. These assumptions increase the 
range of uncertainty. Important assumptions rela te to the future governance structure in areas 
with remaining forests, evoluti on of infrastructure in these ar eas and the value of other land 
uses that can lead to deforestation (mainly agri culture) that are in turn driven by factors such 
as global and regional changes in population, GDP and energy prices.  
Several baseline scenarios exist for deforest ation trends and include assumptions on 
population development, economic growth and land use. The recent IPCC fourth assessment report compares recent integrated assessments  of land-use change and forestry carbon 
emissions with those of the IPCCs Special Re port on Emission Scenar ios (SRES) in 2000. It 
concludes that the more recent  projections still i ndicate high global annual net releases of 
carbon in the near future th at will decline over time
29. In the time period up to 2030 highly 
diverse baselines are projected, some increasi ng and some decreasing already by more than 
50% compared to the current level. 
                                                 
29 IPCC, Fourth Assessment Report, WGIII, chapter 3 
 
EN 22   EN 
 
Figure: IPPC, Fourth Assessment report, WG III, Chapter 3, fi gure 3.10, Baseline land-use change  and forestry carbon net emissi ons. The 
different lines refer to different technical scenarios. 
Analysis30 used for the Stern review to assess the financial incentives needed for avoiding 
deforestation implicitly assumed continued constant deforestation rates and used the FAO estimates for gross deforestation for the pe riod from 2000 to 2005 at 13 million hectares per 
year (FAO, 2006).  
A study by IIASA
31 sees deforestation rates decreasing to 8 million hectares by 2025, starting 
from a similar level in 2005. This reduces em issions from deforestation from 4 Gt CO 2 at 
present to 3.2 Gt CO 2 in 2025. Halving deforestation by 2020 would thus require protecting 
around 6.5 (12.5 divided by two) million ha/year co mpared to today. Stopping deforestation 
by 2030 would require preventing defo restation of 8 million hectares  per year that remains in 
the baseline in 2025. 
A more recent study compares results from  three different models and focuses on 
deforestation in tropical areas with high expected deforestatio n rates in the baseline, i.e. 
Central and South America, Africa and Southeast Asia32. Average annual projected gross 
deforestation in these tropical regions fo r the period 2005-2030 ranges between 10.6 and 11.7 
million hectares, resulting in emission equi valent to a range between 3.2 and 4.7 Gt CO 2. 
Halving deforestation would require saving each  year around 5.5 (5.3 to  5.9) million hectares 
of forests.  
Although using different assumptions, parameters  and general set-ups, all models conclude 
that deforestation will continue  in the mid term and at high levels but with a tendency to 
decrease over time. Note that  these models do not take in to account current and planned 
initiatives to combat deforestation as pres ented in section 5.4.1. The main driver is the 
increased demand for agricultural land. Moreover , none of the models presented take into 
account the rising energy and food prices, which increase de mand for agricultural land and 
hence reduced forest area. 
                                                 
30 Grieg-Gran, 2006.  
31 Kindermann et al., 2006 
32 Kindermann et al., 2008 
 
EN 23   EN 2.5. EU right to act and value added by EU actions  
The legal basis for the EU to propose actions to  combat climate change and biodiversity loss 
by halting deforestation/forest degradation is provided by the Treaty Article 174, which states 
that Community policy on the environment sha ll contribute to ‘preserving, protecting and 
improving the quality of the environment’, based inter alia on the precautionary principle. 
However, the final responsibility for implemen tation of future policie s and internationally 
supported activities to halt deforest ation and forest degradation li es at the level of developing 
countries.  
Given the large scale of the problem and the number of issues at stake in tackling climate 
change and biodiversity loss by halting deforest ation in an effective and coherent way, pro-
active determination and leadership on the part of the EU are required to undertake a coherent 
and ambitious set of initiatives. The magnitude and urgency of the problem calls for a 
coordinated EU-wide plan, pulling together actions and resources from the Commission 
budget as well as from Member States to achieve critical mass . The EU is in the forefront of 
the global fight against climate change and should  also play a leading a nd driving role in the 
battle against global deforestat ion. The EU now has the opportuni ty to take the lead in the 
international discussions on a Reduction of Emissions from Deforestation and forests 
Degradation (REDD) mechanism.  
3. OBJECTIVES  
3.1. General Policy Objective  
The general policy objective  is to tackle climate change, reaching the global goal of keeping 
temperature rise below 2°C, and limiting biodiver sity loss by halting de forestation and forest 
degradation in developing countries.  
Reaching the 2°C objective is unlikely to be ach ieved without stopping tropical deforestation. 
Given the scale of emissions from deforestatio n, any climate change deal that does not fully 
integrate forestry will fail to meet the necessa ry targets. Forestry, in particular reduced 
deforestation, has the potential to make a substa ntial and relatively immediate contribution to 
a low-cost global mitigation portfolio33.  
Besides playing a part in clim ate mitigation, tropical forests can  have an important climate 
adaptation role as they host more than two-th irds of the world's plant and animal species34. 
Preserving tropical forests wi ll therefore have significan t positive effects on global 
biodiversity and its rela ted goods and services.  
3.2. Specific Policy Objective  
The Commission has already addressed, in its  Communication on "Lim iting Global Climate 
Change to 2°C – the way ahead for 2020 and beyond", the need for a swift reduction of emissions from deforestation to contribute to ac hieving its general polic y objective of halting 
                                                
 
33 Stern, 2008 
34 FAO, Cattle ranching and deforestation , Livestock Policy Brief n°3 
 
EN 24   EN emissions from net deforestation  within two decades35. Similarly, the Environment Council 
of 20 February 2007 stated in  its conclusions that " concrete policies and actions as part of a 
global and comprehensive post-2012 agreement are needed to halt these emissions (from 
deforestation in developing countries) and reverse them in the next two to three decades while 
ensuring the integrity of the climate regime and  maximising co-benefits, in particular with 
regard to biodiversity protection and sustainable development ". 
Based on the above, a more precise target should now  be explored, aiming at halting global 
forest cover loss by 2030 at the latest and re ducing gross tropical deforestation by at 
least 50% by 2020 compared to the current levels . This corresponds to the Environment 
Council objective to halt deforestation in the ne xt two decades (i.e. by 2030) with, in addition, 
a mid-term target to review  the progress made and make the process smoother and more 
effective, assuming a linear path to the 2030 ob jective. The deforestat ion baseline against 
which the 2020 halving target will be comp ared corresponds to the period 1990-2005. It 
should be noted that halting net deforestatio n would not necessarily mean that no more 
deforestation would occur, but that any defore station would be balanced by afforestation and 
reforestation activities.  
Halving gross tropical deforestation by 2020 will deliver the largest share of the 
environmental benefits. From a climate change perspective, this is needed since tropical 
forests store much more carbon in trees and soils than new planted forests: emission 
reductions delivered by an hectar e of tropical forest saved is quantitatively and timely more 
beneficial to the atmosphere than removals building up over time in new planted forests. And 
from a biodiversity perspective, tropical forests host about fifty  percent of the World's plant 
and animal species, many of whic h are at risk of extinction. 
This is a measurable objective as recogni sed in the UNFCCC negotiations and technical 
discussions. Forest monitoring will,  however, need to improve in qua lity and coverage if it is 
to be used to assess performance in redu cing deforestation at a country level. The 
Communication recognises the need to scale up cap acities in developing count ries in this area; 
technology advances are making such monitori ng easier. Given that a limited number of 
countries contain most of the world's tropical fo rest area it will be possible to develop tailor-
made policies for specific country circumstances. When this approach is combined with significant financial reso urces the target is considered achievable. 
3.3. Operational objectives  
In order to encourage forest conservation and sustainable forest management in developing 
countries, the EU will work towards two operational objectives:  
– Firstly, to render existing EC policies a nd instruments more compatible with 
tropical forests conservation and sustaina ble forest management in developing 
countries; 
– Secondly, to develop effective ways to financially reward actions to reduce 
deforestation and forest degradation (R EDD) in developing  countries, and to 
provide the necessary support to develop institutional and t echnical capacity to 
implement the necessary actions.   
                                                 
35 (p.12, COM (2007) 2). 
 
EN 25   EN 3.4. Consistency with other EU policies 
The conservation and sustainable use of forests is essential to mitigate climate change, help 
stop biodiversity loss, alleviate poverty in develo ping countries and to achieve other benefits. 
The proposals contained in the Communication are in line with  relevant EC policies, as 
described in Annex 3. They also contribute to developing the concept of Policy Coherence for 
Development (PCD), maximising synergies betw een policies and having a beneficial impact 
on developing countries. The aim of this propos al is also in line with the Sustainable 
Development strategy agreed by the European  Council in June 2006, via its focus on the 
protection of natural resources, and with th e European Consensus on Development (also 
referred to as Development Policy Statement or DPS36), which commits the EU to providing 
more and better aid.  
3.5. Criteria to assess whether th e objectives are reached  
Three sets of criteria will be used to compare how the different options are able to reach the 
objectives:  
– the effectiveness of the m easures proposed; in other words, the extent to which 
different options reduce deforest ation and forest degradation; 
– the efficiency of the different options; the more efficient the option the lower the cost 
of achieving a given outcome; 
– the distributional and poverty implications. 
The effectiveness  of the different options depend s on the following main factors: 
1. Additionality: The options satisfy the additiona lity criterion if they create reductions in 
deforestation that are additional to any redu ction that would occu r in the absence of 
implementation of the option.  2. Leakage prevention: The options satisfy this  criterion if they ensure that avoided 
deforestation in one area does not lead to accelerated deforestation in another area.  
3. Permanence/Liability: The options satisfy this criterion if they ensure that avoided deforestation due to the implementation of the option is permanent and guarantees as much as 
possible that deforestation / forest degradation does not occur at a later time. 
4. Verifiability: The options satisfy this criterion if they ensure that av oided deforestation is 
easily and accurately verifiable. 
The efficiency  of the different options depends  on the following main factors: 
1. Start-up costs, such as in stallation of monitoring equipm ent and associated training, 
collection of information to establish a baselin e, institutional capacity-building, enforcement 
and other preparedness measures. 2. Running costs, including administ rative and transaction costs. 
3. Efficiency over time: it is likely that any option's efficiency will improve over time, 
resulting from learning-by-doing.  
The distributional and poverty implications of the different options:  
Options can also help with poverty reduction in the countries concerned. More precisely, the 
implications of an option in terms of the fo llowing factors would ha ve to be considered 
                                                
 
36 Adopted by the Council, the European Parliament and the Commission on 22 November 2005. 
 
EN 26   EN although, in practice, this will  be largely determined by th e design and implementation of 
policies in those de veloping countries:  
1. Distribution of the risks and benefits of  implementing the options among and within 
countries.  2. Distribution of the risks and benefits  of implementing the options over time. 
3. Effects of implementation of the opti ons on local and indigenous communities. 
4. P
OLICY OPTIONS  
4.1. Baseline option: business as usual  
Under this option, no additional policies and financial resources are put in place and, in the 
absence of financial incentives and non-financia l measures to reduce deforestation and forest 
degradation, it is reasonable to expect stea dy or increased deforestation rates in the 
short/medium term. This will happen in response to  the profitability of converting forest land 
into agricultural land for the production of food  and energy commodities, as well as exploiting 
forests for timber production. Continuing wo rld population growth (from around 6 billion 
now to 8-10 billion by 2050) and growing per cap ita consumption (a two to four-fold increase 
by 2050) will increase the demand for commodities in the coming decades. A recent study37 
(see text below) concludes that at baseline an additional 500 million hectares of forest will be 
lost in 100 years. 
While this option does not entail any additional cost s, tropical regions are expected to lose out 
in terms of public economic benefits, such as  provisioning and regulat ing services provided 
by forest ecosystems, including carbon storage.  
4.2. Option 1: Promote a Mult ilateral Environmental Agreement (MEA) on Forests 
As described in chapter 2.5.1, despite a number of attempts it has not proven possible to 
achieve international consensus on a legally binding multilateral framework for forests over the past two decades. This can be attributed par tly to the fact that, as forests occupy large 
areas of land, many states are unwilling to be c onstrained in the use of such land through an 
international instrument.  
Due to the past history and to the ongoing contro versy over the promotion of a specific legally 
binding MEA on forests, this option is discarde d and not analysed fu rther in this policy 
proposal. Nevertheless, the Commission will con tinue to provide the necessary input to the 
existing international fora on forests, such as ITTO and UNFF, and will give further consideration to the post-2015 multilateral ne gotiations for the follow-up to the current 
international arrangement on forests. 
4.3. Option 2: Tighten existing policies/instruments  
The rationale for this option is that Community  internal and external policies can have an 
impact on deforestation in th ird countries. Therefore, an improved and more coherent 
approach to tackling deforestat ion, which ensures synergy betw een actions for international 
governance (through multila teral fora such as UNFCCC , CBD , CITES ), and relevant policies 
such as energy,  agriculture  and forestry , trade  (including bilateral agreements), production  
                                                
 
37 Kindermann et al. 2006 
 
EN 27   EN and consumption  as well as economic and development cooperation  could potentially reduce 
the rates of deforestation and forest degradation. 
This policy option pursues thr ee tiers of policy interventions  targeted at improving/re-
orienting relevant policies, without  introducing new fi nancial measures. 
1st tier: Improving policy coherence at EU level in  all areas likely to have an impact on 
tropical deforestation 
According to recent estimates38 the EU is home to 7.7 % of th e global population and is also 
responsible for 16 % of the global ecological footprint39. The EC can target a reduction in the 
EU's overall impact on tropical  forest resources through: 
– Assessing and quantifying the impact of EC policies on tropical deforestation through ex 
post periodical reviews  of existing legisl ation and policies; 
– Ex ante impact assessment of new policy prop osals in sensitive areas such as agriculture, 
trade, energy, public procurement, development cooperation; 
– Continuing to support efforts to improve forest governance, such as through the 
implementation of the FLEGT action plan , including finalisation of  bilateral VPAs and 
implementation of the new Regulation on additi onal options to combat illegal logging40;  
– Prioritising funding under the ENRTP instrument  for projects targeting REDD-related 
topics (i.e. capacity-building, p ilot activities at national level); 
– Supporting the shift towards second-generation biofuels  and other renewable energy 
sources which are considered as having a limite d impact on third countries' forest and other 
environmental resources. With regard to ener gy uses of biomass, such as the use of 
woodchips for electricity generation, the Co mmission proposes to develop a specific 
sustainability scheme;  
– Linked to the above, developing and implem enting information campaigns targeting EU 
consumers to raise awareness and encourage sustainable consumption practices ; 
– Consulting Member States with  the aim of developing common procurement criteria  for 
each of the sectors that utilis e wood as a base material. With respect to wood and wood 
products, the recent Communication adopted by the Commission (cf. Annex 3) identifies 
four priority sectors, in which wood is (one of) the basi c material(s): co nstruction, energy, 
paper and printing services, and furniture. Prel iminary Green Public Procurement criteria 
for these wood-related priority sectors have  been developed and are available online 
(http://ec.europa.eu/envi ronment/gpp/toolkit_en.htm ); 
– Investigating options of providing trade conc essions for legal and sustainable wood and 
wood products in the context of development of  the next regulation on the General System 
of Preferences for the pe riod 2012-2015. In a ddition, the possibility of providing 
preferential tariffs for legal and sustainable timber can be investigated in the context of 
current negotiations for Regional Free Trade and Association Agreements;  
                                                 
38 “Europe 2007 – Gross Domestic Product and Ecological Footprint”, available at: 
http://assets.panda.org/downloads/europe_2007_gdp_and_ef.pdf. 
39 Estimate based on the production capacity of the EU's  biologically productive area and the area needed 
to supply its current consumption. For details of the methodology see www.footprintnetwork.org 
40 Due for adoption in September 2008 
 
EN 28   EN – Strengthening agricultural research  and related dissemination of improved knowledge and 
technology transfer  to increase agricultural productiv ity in Europe and in developing 
countries in a sustainable manner.  
2nd tier: Prioritise strengthening of inst itutional and governance systems in third 
countries 
- The Commission could consider as a priori ty, within its development cooperation 
programmes and in line with the Paris declaration on aid effectiveness41, increased support to 
developing countries for improving their internal institutional and governance systems 
through bilateral or regiona l processes/initiatives.   
- Beyond the current FLEGT scheme the EU will continue and strengthen its engagement 
with countries such as China, Japan and Russi a through participation in  regional Forest Law 
Enforcement and Governance (FLEG) initiatives in response to G8 statements and through 
bilateral dialogues. 
- Changes in timber market requirements, re quiring adaptation and im provement of national 
capacity to respect the new st andards, are also expected as a response to the recent 
amendments in the relevant US legisla tion (the "Lacey Act's Wildlife provisions"42), 
introducing a national ban on import of trees, timber and wood products in violation of 
foreign law. 
3rd tier: Promote effective multilateral responses 
- The EU will aim at promoting further action to ensure effective multilateral responses , 
limiting overlaps and ensuring maximum efficienc y. A coordinated approach between the EU 
and Member States is needed to pull togeth er resources and ensure complementarity of 
actions at the global level. Reversing emissions from deforestation will  require a heightened 
EU profile in international forest-related processes and a considerably greater effort to combat deforestation through development cooperation instruments.  
- Accordingly, the EC will ensure that th e UNCBD AHTEG (cf. chapter 2.4.1) makes an 
important contribution to discus sions on deforestation. It will nominate experts to participate 
in this group, submit information for discussion  prior to the AHTEG meetings and work to 
ensure that the recommendations in its report are reflected in the substantive EU positions defended in the climate negotiations.  
- The Commission will also explore ways to  develop synergies with the recent UN REDD 
Collaborative Programme
43, involving FAO, UNDP and UNEP . The objectives are to assist 
forested developing countries and to facilitate international cooperation in identifying various 
methodologies, risk management formulae and payment structures in support of the UNFCCC process. 
                                                
 
41 http://www.oecd.org/dataoecd/11/41/34428351.pdf  
42 http://www.illegal-logging.in fo/uploads/Guzman0608.pdf 
43 http://unfccc.int/files/methods_a nd_science/lulucf/applicati on/pdf/080627_fao0 1_japan.pdf 
 
EN 29   EN 4.4. Option 3: Raise new funds (via the carb on market) fo r halting deforestation and 
forest degradation  
The analysis of baselin e policies showed that the amount of  EU ODA fell in 2007 for the first 
time since 2000.  Recent data from the OECD (2005) on the total ODA/OA commitments to 
forestry by OECD countries and multilateral ag encies indicate an annual average commitment 
to forestry of US$564 million between 1996 and 2004.  
Hence, additional funding will be required if a substantial reducti on in deforestation is to be 
achieved. Funds could be raised  domestically or through donor c ountries, they could be drawn 
from public financing or be linked to a mark et mechanism. Existing international incentive 
channels, including bilateral a nd multilateral ODA and specific funds, such as the GEF, can 
be used to fund baskets of national measures ai med at addressing local and regional drivers of 
deforestation (such as subsistence farming, firewood collection, non-enforcement of property 
rights), as opposed to the globa l drivers such as agricultural or timber exports. Option 3 looks 
at three crucial elements to  be considered when increa sing the funding for avoiding 
deforestation. 
1. Firstly, to assess the potential impact of increasing financial flows on the rate of 
deforestation and emissions. 
2. Secondly, to assess what type s of policy instruments in th e area of deforestation are 
necessary to distribute these financial flows.  
3. Finally, to assess from which sources these additional financial flows could 
realistically come. More speci fically, the carbon market is widely seen as a potential 
source for such funding for avoided deforest ation. In this cont ext, two principal 
options will be further exam ined, i.e. (i) the use of au ctioning revenues and (ii) the 
creation and recognition in the carbon market of emission reduction credits from reduced deforestation and forest degradat ion. These two main options are described 
in more detail below. 
4.4.1.  Sub-Option 3a: Use auction revenue to establish a Global Forest Carbon 
Mechanism  
At present, the allowances in the EU emissi on trading system (EU ETS) are largely allocated 
for free. Under the EU climate change and energy package, th e Commission proposes to make 
auctioning as of 2013 the general principle of al location in the EU ETS. This could potentially 
raise substantial revenues. 
Revenue from auctioning of carbon allowances could provide a source of funding for a Global 
Forest Carbon Mechanism set up to  reduce deforestation. Member States can start to auction 
part of the allowances for the period 2008-2012. Germany has earmarked some of the revenue 
from auctioning to reduce emissions from de forestation. Beyond 2012, use of an unquantified 
part of the auctioning proceeds for tackling fo rest degradation is proposed under the climate 
change and energy package. 
Of course, in order for this to be effective other developed countries would have to provide 
their fair share of finance to such a Global Forest Carbon Mechanism. Interestingly, similar 
provisions for the investment of auctioning revenu es into avoided deforestation are also being 
 
EN 30   EN discussed in the legislative pr oposals for a US cap and trade system put forward earlier this 
year in the US Senate.  
This option would not result in emission credits from avoided deforestation being recognised 
for compliance in the EU ETS. It does, howev er, ensure that substantial and predictable 
revenues would be generated.  
The Global Forest Carbon Mechanism, in prin ciple, would pay for the carbon saved on the 
basis of the foregone rents from not cutting the forest. Funding should be  efficiently allocated 
through a competitive public purchase programme, e.g. by auctioning the allocation of funds. 
Such a new Global Mechanism would have to be  coordinated with othe r international public 
and private initiatives in the same area in order to avoid duplication. 
This option is very similar to a proposal by Brazil  that envisages the support of voluntary 
national action on deforestation  through a new funding mechanism financed by developed 
countries without creation and recognition in th e carbon market of emission reduction credits. 
4.4.2.  Sub-Option 3b: Raise new funds by creating and recognising in the carbon market 
emission reduction credits from reduced  deforestation and forest degradation  
Another option would be to create some type  of forest emission reduction credit for action 
that reduces deforestatio n or forest degradation. Afforest ation and reforestation projects are 
already covered under the CDM during the Kyoto Protocol’s first commitment period from 
2008 until 2012, and it is assumed that this will continue after 2012. Only the ceiling for these 
project types will have to be revisited and to be determined for the next commitment period. 
The functioning of a potential new system for cr edits from reduced deforestation and forest 
degradation (REDD) should bui ld on the lessons learnt fr om the Clean Development 
Mechanism and Joint Implementation, and also take account of the ongoing discussions as 
regards possible future sectoral  crediting mechanisms. This forest emission reduction credit 
could then be recognised in the global carbon market and used for compliance by  
• governments of countries that have binding targets under a post-2012 climate change 
agreement and/or  
• companies in trading systems such as the EU ETS.  
Recognising credits fo r reduced deforestation for complia nce purposes would give them a 
commercial value in the global carbon market. 
This option is very similar to a proposal by the Rainforest Coalition  (cf. Annex 3  for details ) 
providing for a crediting mechanism if countries could decrease their deforestation rate below 
an ex ante determined baseline . The credits generated from this voluntary action to reduce 
deforestation below the baseline  would be recognised in the global carbon market and could 
be used for compliance by developed countries. 
4.4.3.  Design parameters for options 3a and 3b  
Whichever of the options 3a and 3b is finally chosen, a number of prac tical design questions 
will need to be addressed. The broad options and issues for these design parameters are set out below.  
 
EN 31   EN  1/ Geographical covera ge and carbon leakage   
More than half of the global land-use carbon emissions occur in only eight countries44. Most 
of the world's tropical forests with net high deforestation rates are concentrated in a relatively small number of countries. Thus, it makes sense to focus efforts on these countries. However, identification of target countries would need to cover both countries with high forest cover 
and those with high rates of deforestation – whil e there is some overlap, these are not always 
the same. Such a list of countries would include,  for instance, Brazil, Democratic Republic of 
Congo, Indonesia, Malaysia, Myanmar, Nigeria,  Papua New Guinea, Sudan, Tanzania and 
Zambia. 
However, such a focused approach may lead to  a situation where many countries will not be 
covered by the scheme for halting deforestation or forest degradation, hence increasing the 
risk of leakage
. Leakage occurs when the activity causing  deforestation in one  project area is 
shifted to a different location outside the boundari es of the project area . International leakage 
can also occur between countries in different parts of the world, when the policy changes in 
one country lead to a change in the supply-and-demand equilibrium for tradable goods like cash crops, biofuels and timber, causing market act ors to shift production from one country to 
another (market leakage). Indeed, if avoide d deforestation programmes are too closely 
focused on a set of selected countries, then timb er supply may decrease, prices will rise and 
this situation will be partially rebalanced by increased supply (a nd increased deforestation) in 
non-participating countries. Howeve r, it has to be noted that  this possible international 
leakage is very unlikely to happen between tropi cal and non-tropical coun tries. Indeed, timber 
and agricultural goods produced in tropical and non-tropical countries are very different and 
can be considered as substitutes only on a very limited scale.  
A related issue concerns countries with quite  large forested areas that have already 
successfully protected their forests from defore station activities. If th e funding mechanism is 
too closely focused on countries with high defore station rates, these countries might lack an 
appropriate incentive to maintain low deforest ation rates and may succumb to deforestation 
pressures that leak from countries with new pol icies in place. A solution would be to assist 
these countries in preserving their forests. Therefore, it seems that no country should be  a priori excluded from the scheme, although 
some kind of prioritisation and a differentiated set of financial incentives may be envisaged.  
2/ Does the scheme apply different  features to different countries
?  
Developing countries are at very different st ages of development and thus face different 
responsibilities and have vastly differing capab ilities, and therefore might need different 
approaches to tackle deforestation. Almost all developing countries face the problems of 
poverty and environmental degradation. However,  measures and incentives which can prove 
appropriate for the leas t developed countries such as Li beria, Sierra Leone and Solomon 
Islands might not be suitable for emerging econo mies such as China, India and Brazil. From 
the latter, it would be reasonable to expect higher mobilisation of domestic resources, in 
human and financial terms, and an ambitious le vel of nationally appropriate mitigation action. 
For many countries in the other category, due acc ount will need to be taken of absorption 
capacity constraints (e.g. owing to lack of qua lified staff) and of the need to ensure that 
actions to combat deforestation are cons istent with development priorities.  
                                                 
44 Stern review (2007), page 245. 
 
EN 32   EN Estimation of the financial value per ha of forest  would need to take in to account a number of 
factors such as the cost  of monitoring and protecting the fo rest as well as the income foregone 
by not converting a forest to an alternative form of land use. Revenues based on the latter 
would help generate financia l resources for the economic de velopment of the countries 
concerned, including for measures to respond to  climate change, which would otherwise be 
based in part on the income or export revenue from alternative land uses.  
In this context it is worth noting that one impor tant part of the Bali Roadmap negotiations is 
the development of a mechanism to reward redu ced emissions from deforestation and forest 
degradation. In the coming months, UNFCCC negotia tors will have to d ecide on a variety of 
REDD design options with implications for the climate regime post-2012 and on the overall governance structure that will need to be put in  place. Independently of the outcome of the 
negotiation process, a key to th e success of any mechanism that will be put in place is the 
commitment on the part of countries subscribing to the scheme to develop and implement appropriate national mitigation strategies, including avoiding deforestation and forest 
degradation.  
An ongoing study contract financed by the Commission
45 developed country profiles for 12 
selected developing countries, with informa tion on forests, deforestation, drivers of 
deforestation and forest policies.  For the selected countries, two to three quantit ative scenarios 
for the evolution of emissions from deforesta tion by 2030 are identified as well as some key 
design options for a future funding mechanism.  
The interim results suggest that there should be  differentiation between three main groups of 
countries:  
– Group 1 countries (with high forest areas  and low deforestation rate): e.g. 
Democratic Republic of Congo 
– Group 2 (high deforestation rate): e.g. Brazil, Indonesia, Cameroon, Colombia, 
Zambia, Tanzania, Papua New Guinea, Mexico, Ghana 
– Group 3 countries (increasing fore st areas): e.g. India, China 
Criteria for determining the deforestation ba seline, the accountable emission reductions as 
well as the pros and cons of each method, are currently being elaborated. Besides funding for 
carbon sequestration and permanence in countri es with a high deforestation rate, the 
possibility of supporting forest conservation activ ities in countries with  a low deforestation 
rate is being explored (i.e. a PES - payment fo r ecosystem service - type fund, which could be 
a special window under the propo sed Global Forest Carbon Mech anism). For countries with 
currently increasing forest area, and past gro ss deforestation, a sectoral crediting approach, 
with a mechanism separate from REDD, will be further explored. The final results of this study will be available by the end of 2008. 
3/ Country level versus project-based incentives
 
In order to implement the idea  of providing financ ial incentives for deve loping countries to 
maintain their tropical forests, a number of critical organisational issues will have to be 
                                                 
45 SCOPE OF AN INTERNATIONAL SCHEME TO REDUCE EMISSIONS FROM DEFORESTATION 
(ENV.C.5/FRA/2006/0071), Ecofys Consortium  
 
EN 33   EN resolved, the main one being that for the financia l incentive to be ultimately effective, it will 
have to reach the decision-maker responsible for land use, be it a forest owner, a farmer or a 
local community. In the long run, the financial in centive will also have to cover the costs of 
monitoring, reporting and verification as well as law enforcement.  
Financial incentives need to be based on progra mmes that target, and are adjusted to, diverse 
and often small-scale local and regional deforestation and forest  degradation contexts. Such 
incentives need to address and reach those people  that cause forest cover changes because of 
subsistence needs such as food, energy or liv ing space. Decentralised and small-scale 
redistributive financial mechanisms that work  on a national and sub-national scale, and are 
supported through internati onal funds, pose a number  of challenges. Howe ver, there are quite 
a few positive indications from different parts of the world th at solutions are available to 
address small-scale diversity and needs, such as through mi cro-finance and payments for 
ecosystem services of forests (Maynard  and Paquin 2004, Pagiola et al. 2005). 
Nationwide implementation  involving the entire forestry sector  allocates ultimate liability to 
governments and implies strong national forestry monitoring and national management of forests. It gives countries flex ibility to decide how to manage  their forest resources, and how 
to devolve responsibility and liability, and it is  the only way to account for in-country leakage. 
However, such a scheme needs to find cost-effi cient ways to limit bureaucratic procedures to 
the necessary minimum while at the same time exerting sufficient external control on specific 
projects and all actors in the forest sector; individual land owners and local communities need 
to receive sufficient benefits from a nationwid e sectoral scheme to change their current 
practices. All in all, national implementa tion requires strong governance capabilities by 
central governments, while, in some cases, it is  exactly the lack of such a strong central 
governing authority that has allowed continue d high rates of deforestation. Sub-national 
(regional) implementation can also  be envisaged, especially in large countries with regional 
disparities. 
Project-based  implementation would essentially be an extension of the existing CDM. 
Funding would go to project managers which c ould be individual fore st owners or local 
communities. This scheme would initially be easier to implement, would accommodate 
different regional and local ci rcumstances, and would take advantage of within-country 
heterogeneity in the capacity to implement pr ojects for reducing deforestation and forest 
degradation. However, projects are limited in sc ale and carry significant transaction costs, and 
thus might not be the most cost-efficient way to  reduce emissions from deforestation. As they 
are restricted to rather limited geographical areas, they do not easily account for in-country 
leakage, for which countrywide monitoring, re porting and verification as well as national 
forest policy and legislation will have to be established in any case. Projects will have to 
guarantee the existence of an entity that woul d accept long-term liability if non-permanence 
of the emission reduction credit were to become an issue or alternative institutional 
arrangements would have to be established (e.g. full buyer liability, insurance, superfunds, 
discounting, temporary crediting).  
Approaches combining  elements of national and project- based systems can be contemplated. 
Pilot projects could facilitate learning and capacity-building and bui ld momentum among 
local stakeholders, country ag ents and investors. However, the CDM experience has shown 
the limitations of a project-based mechanism as regards forestry. Therefore, a country-based 
approach should be preferred. In any case, the decision on whether to pursue national or sub-
national sectoral or project-based implementing measures will significantly affect other 
 
EN 34   EN elements of any incentive mechanism, such as  the design of emission baselines, protection 
against leakage, and ensuring permanence. 
Neither of the two approaches, however, can deal  satisfactorily with international leakage, 
which could occur across borders an d is highly likely with respect to land use that is linked to 
globalised markets like timber, cash crops and biof uels. For this, an approach aiming at global 
coverage of tropical forests, including forest areas showing negligible signs of deforestation 
and forest degradation, woul d have to be developed. 
4/ Permanence  
The CDM experience is relevant on this issue: CD M credits generated by forestry projects are 
temporary and issued ex post once the emissi on reduction has been monitored, reported and 
certified. Projects and emission re ductions are re-verified ever y five years, at which time 
additional credits may be generated. Eventually, the temporary forest credit will have to be 
replaced with a permanent emission credit. The same approach may be envisaged for financial 
incentives to reduce emissions from deforestati on, be it project-based or national-based.  
In addition, in a UNFCC Annex I country context, liability as re gards possible reversals of the 
sequestration achieved by the national forest is ensured through the continuous accounting 
over time of the removals and emissions occurrin g in this national forest. Such a solution can 
also be extended to the cont ext of reducing emissions from  deforestation and forest 
degradation in developing countries.  
5/ Maximising co-benefits: biological diversity, watershed protection, poverty 
eradication, etc . 
Apart from carbon benefits, in many situati ons other environmen tal co-benefits like 
preservation of biological dive rsity, watershed protection, redu ced risk of er osion, and/or 
social benefits like poverty reduction will together  often have a much greater value than the 
carbon value alone46. However, as these are public goods  their benefits are usually not 
reflected in market values. Whatever incentiv e system is being created for carbon, it should 
try to take these co-benefits into account and maximise them where possible. This could be 
done by assessing these co-benefits and directi ng incentives coming from the Global Forest 
Carbon Mechanism or via forestry emission reduc tion credits towards actions which generate 
the highest co-benefits. Forestry emission reduc tion credits could, for in stance, be labelled in 
accordance with such benef its (‘gold standard’).  
6/ Timing and Frequency of payments  
Another organisational issue conc erns the timing and frequency of payments. This is very 
much related to the conditionality criterion for receiving funding, while the timing is also 
related to monitoring issues. Timing of paymen ts is also crucial, as is shown by the 
experience with all CDM project s. Funding for capacity-building and for up-front investment 
is usually required before the first revenue fr om carbon credits is gene rated. Instalments are 
paid when progress of the pr oject is established and veri fied (certified) on the ground. 
Another solution is to make payments at the e nd of the project, after verification, and allow 
only for assistance in the beginning. But this last  option needs further clarification as to the 
issues of project life and the questions rela ted to permanence and liability. In general, 
                                                 
46 Sukhdev. 2008. The Economics of Ecosystems and Biodiversity. An interim report. Brussels 
 
EN 35   EN financial markets have found effective and prac tical solutions for most of these cash-flow-
related problems. 
7/ Governance structure, especially monitoring systems   
Good governance requires transparent accountability  including monitoring systems that verify 
emissions reductions, changes in land cover a nd the effectiveness of the new financial 
mechanism, as well as compliance and enforcem ent mechanisms. Within the context of the 
ongoing UNFCCC negotiations, no common position has been registered so far on these 
issues.  
As with the existing CDM and the Kyoto Protoc ol, some elements of the overall governance 
structure (e.g. CDM Executive Board, Complian ce Committee) could exist at international 
level and some at national leve l but the extent of their mandates, the financial coverage, 
management and adaptation to national circumst ances would have to be defined. There is a 
general and wide international consensus on the need to start capacity-building programmes  
at national level to establish deforestation and forest degradation baselin es, national registries, 
research, technical and legal support, and to  prepare for the deployment of appropriate 
technologies. 
Globally there is a lack of consistent data on forest change . This is mainly due to the lack of 
national capacities in most de veloping countries. Where invent ories are undertaken they are 
infrequent and inconsistent, both within and between countries. Some information regarding 
forest related emissions may be contained in the National Communication submitted to the 
UNFCCC. In general, global forest cover knowledge  is currently weak and there is a need to 
establish standard and globally agreed defi nitions and methods fo r collecting baseline 
information47. Estimates of deforestation rates vary  depending on the definition and methods 
used. Methods range from visual photo interpre tation to sophisticated digital analysis, and 
from wall-to-wall mapping to hot-spot analysis and statistical sampling.  
During the UNFCCC SBSTA 28 meeting in June 2008 in Bonn, the most critical 
methodological issues for estimating and monitori ng changes in forest cover and associated 
carbon stocks - and greenhouse gas emissions - were debated. The role of national monitoring 
systems in facilitating results-based, demonstrable, transparent and verifiable estimates and 
the need for robust, consistent methodologies including forest inventories, ground-based, and 
remote-sensing approaches, were emphasised.  
A recent UNFCCC technical workshop in Tokyo showed that methodologies and technology 
to collect deforestation data exist but there is  a need to make use of existing knowledge to 
initiate forest carbon inventories  in non Annex I countries. In  fact, only a few of these 
countries have established permanent forest mon itoring - or have institutions in place which 
produce consistent and comprehensive data on forest area and land-us e change on a regular 
basis. In certain cases, methods used for the elaboration of national forest inventory have 
changed over time, hampering the comparison of  data provided for different points in time 
and making it difficult to derive consistent time se ries of data. Without consistent and regular 
data on forest area, no accurate estimates on trends of deforesta tion can be produced.  
                                                 
47 "Do trees grow on money"? The implications of deforestation research for policies to promote 
REDD/by Markku Kanninen, Daniel Murdiyarso, Frances Seymour, Arild Angelsen, Sven Wunder, 
Laura German. Bogor, Indonesia: Center for International Forestry Research (CIFOR), 2007CIFOR 
report, 2007 
 
EN 36   EN Whatever option is chosen, it will be essential to develop national strate gies to build forest 
policies and legislation, monitori ng, reporting and verification cap acity, targeting in the short 
term forest-rich countries and countries wher e significant deforestation processes are ongoing. 
On the financial side, it will be important to ensure that resources are available up-front to cover independent verification and monitoring costs. This c ould be easily provided for under 
option 3a), the Global Forest Carbon Mechanis m, but would not be possible under option 3b) 
unless it were to be complemented with a separate funding facility. Annex 4  provides some 
indicative estimates of m onitoring costs in a sample of relevant countries. 
According to the Stern report (Grieg-Gran, 2006), the annual administration costs associated 
with a payment scheme for reducing emission s from deforestation of 6.2 million hectares 
might range from US$25 million to US$93 million in the first year. But the area to be 
monitored would each year increase with an equal amount. By year 10, annual administration 
costs would range from US$250 m illion to just under US$1 bil lion. These costs could be 
reduced over time by setting up na tional plans, buildi ng up capacity and learning-by-doing.  
5. A
NALYSIS OF IMPACTS   
5.1. Analysis of option 2  
Option 2  consists essentially of an increment al building up of existing policies  - 
increasing efforts across the board of existin g policies and making su re they are better 
integrated, and are adjusted according to ex perience. This makes sense – the different 
elements should all contribute towards meeting th e objectives - but whilst  they will contribute 
towards meeting the target, they will be grossly insufficient. 
Particular attention will be pa id to building capacity at nation al level and preparing the ground 
for the implementation of all necessary actions to  tackle deforestation and forest degradation. 
The Commission considers strengthening governance  to be a prerequisite for forest 
sustainability and a necessary condition fo r sustainable trade. Moreover, improving 
governance should not be restricted to forestry but adopted in a wide-ranging approach, i.e. 
addressing reforms of judicial systems, impr oving transparency and fighting corruption in 
public administration, promoting and enforcing better regulation and land tenure reforms, and improving land planning processes.  
In conclusion, option 2 is considered necessary  - but not sufficient - to reach the target of 
halting deforestation and forest degradat ion globally. This option is, though, 
complementary to option 3, which can only be efficiently implemented in conjunction 
with option 2.  Given the incremental nature of opti on 2, the following analysis concentrates 
on option 3.  
5.2. Analysis of option 3  
5.2.1.  Global and regional potential and marginal co sts of reducing carbon emissions from 
forests 
The IPCC’s fourth assessment report concluded that forest-related mitigation activities can 
considerably reduce emissions from sources and increase CO
2 removals by sinks at low cost, 
and can be designed to create synergies with adaptation, conser vation of biological diversity 
and sustainable development. The IPCC assessed how sinks could be enha nced in the forest 
sector through afforestation, reforestation, reducing deforestation and degradation, and 
 
EN 37   EN concluded that 65% of the total potential is located in the tropi cs and about 50% of the total 
could be achieved by reducing emi ssions from deforestation there48. 
The fourth assessment report estimates that the capacity to reduce emissions from the forest 
sector globally could be between 2.7 and 13.8 GtCO 2-eq/yr in 2030, in regional bottom-up 
studies and global top-down studi es, respectively, at carbon pric es less than or equal to 100 
US$/tCO 2, as such reversing the net emissions fr om deforestation into a net sink. Regional 
bottom-up predictions give a reduc tion estimate for the whole forest  sector that is only 22% of 
the value given by global top-down studies. The r eason for this, according to the IPCC, is that 
regional studies tend to use more detailed data , consider a wider range of mitigation options, 
and thus may more accurately reflect regional circumstances and constraints than top-down 
global models49. This highlights the fact that in order to realise the mitigation potential, the 
policy instruments and financial mechanisms in the field will need to cater for regional specificities. 
 
Figure: IPCC, Fourth Assessment Report: Comparison of outcomes of economic mitigation potential at <100 
US$/tCO2-eq in 2030 in the forestry sector, as based on top-down global models versus the regional modelling 
results  
A regional breakdown of the IPCC 4th Assessment Report results50 is shown below. 
                                                 
48 IPCC, Fourth Assessment Report, Technical Summary, WG III, pg. 69 
49 IPCC, Fourth Assessment Report, Technical Summary, WG III. pg. 69 
50 Nabuurs et al. 2007. Chapter 9: Forestry. IPCC, AR4. 
 
EN 38   EN 
 
The IPPC information therefore demonstrates th at halting deforestation in tropical countries 
would have dramatic positive effects on CO 2 global emissions (of around 3 Gt CO 2 per year).  
5.2.2.  Option 3a: Use auction revenue  to establish a Global Forest Carbon Mechanism 
The principal question, of course , is how much funding would be required for a Global Forest 
Carbon Mechanism to effectively reduce defo restation. As mentione d before, the Global 
Mechanism would in principle pay forest owners  or forest users for the foregone rents. A 
review of the literature is presented below, followed by a comparison of the estimated amounts needed for other expenses.  
Literature review 
 
An assessment for the Stern Report51 estimates the costs for eliminating deforestation in 
Brazil, Indonesia, Papua New Guinea, Came roon, Congo, Ghana, Bolivia, and Malaysia 
which would account for a 46% reduction of global deforestation and 70% of land-use 
emissions of carbon. The method fo r estimating the costs is to pay the foregone rent through 
one-off payments to land owners for 30 years if  they do not cut their forests. The funding 
necessary to do so is estimated to be betw een US$3 billion and US$11 billion (€2.4 billion to 
€8.8 billion)52 on an annual basis with an average of US$6.5 billion53 (some €5.2 billion), not 
taking into account costs for administrating and monitoring the scheme. The variance is due to 
taking into account the value of the timber (is it burned or sold) and the value of the crop that 
replaces the forest. The table illustrates the costs of the land values  used for the medium 
scenario and shows the competition with the va rious types of land use in each of the eight 
countries. The last row shows the annual co sts per country for a reduction of global 
deforestation by 46%. 
Costs of foregone land use (US$2005/hectare)(med ium scenario of one-off timber harvesting) 
US$/hectare Cameroon DRC Ghana Bo livia Brazil PNG Indonesia Malaysia
Annual food crops 774 774       
                                                 
51 Grieg-Gran, 2006. 
52 An average exchange rate for 2005 of $1.25 per € is used consistently in this document. 
53 US$ at 2005 price levels 
 
EN 39   EN short fallow 
Annual food crops 
long fallow 346 346       
Cocoa without 
marketed fruit 1365 1365       
Cocoa with marketed 
fruit 740 740       
Oil palm  1180 1180    1515-
2705 1515-
2705 2330-
2705 
Rubber 1180 1180     1071 1071
Small scale maize and 
cassava   1052      
Beef cattle    390 2-
626   
Dairy      154    
Soybeans    2135 2135    
Tree plantations     2614    
Manioc/rice/perennials     2-
239   
Smallholder 
subsistence crops      1737   
Rice fallow       26 26
Cassava monoculture       18 1053
         
Total costs (mln 
$/year) 191 276 121 247 1678 281 2059 183
Source: Grieg-Gran (2006)54 
The report assumes that no leakage at all would take place and that the system would be fully 
additional in reducing global deforestation. An estimate for the monitoring and administration 
of the scheme is put at around US$25 million to  US$93 million (2005 prices) for each area 
protected each year.  
A study by IIASA (Kindermann et al. 2006)55 looks at the emissions from gross deforestation 
and analyses what the cost would be to bring the emissions down by 50% compared to baseline over the period. The projected baselin e figure shows emissions from deforestation 
declining from 4 Gt CO
2 at present to 3.2 Gt CO 2 in 2025. The study comp ares the net present 
value from forest or other uses of land a nd it assesses two potential policy instruments to 
decrease the amount of deforestation. One instrument is to pay to land owners the foregone 
rent for 5 years whereby the value is determined by the carbon stock of the land. Forestry can 
earn income from carbon sequestration and ha rvestable wood sales accounting for discount 
rates and planting costs. The net present valu e of agriculture depends  on population density, 
agricultural suitability and risk-adjusted disc ount rates. These two values are compared 
against each other and deforesta tion is subsequently predicted to occur when the agricultural 
value exceeds the forest value by a certain marg in (for details on forestry models see Annex 
6). These models have limitations in that they lack representation of transaction costs and are 
hampered by other institutional barriers. In addition, they do not yet reflect the impact of 
recent oil price increases and changes in subsidies for biofuels. 
                                                 
54 Grieg-Gran, M. (2006) The Costs of avoiding deforestation, report prepared for the Stern Review of the 
economics of climate change. IIED, London. 
55 Kindermann et al., 2006 
 
EN 40   EN The IIASA (Kindermann et al. 2006) study finds that the amount of rent is US$1.6 per ton of 
CO 2 stock on forest land to be preserved for five  years. However, total costs will greatly 
depend on the assumed amount of leakage:  
– If no leakage occurs, it can be assumed that  only forest area targeted for conversion 
("frontier forests") is to be included in the scheme; it is estimated that a global target 
of reducing deforestation by half could be reached with a minimum payment of 
US$4.1 billion (price level 2000) (around €3.6 billion in 2005 prices56) in 2025.  
– Assuming that there will be leakage on a re gional scale, payments over a larger area 
will increase to US$34 billion (some €30 billion in 2005 prices) per year.  
– Leakage on a global scale, translating into the need to compensate for the continued 
conservation of all standing carbon stocks globally, would cost in the order of 
US$200 billion to US$250 billion per year (which  is equivalent to more than twice 
the current annual ODA flows).  
A more recent study, comparing results from th ree different models and focusing on gross 
deforestation in tropical areas57, estimates the funds necessary to halve deforestation over the 
period from 2005 to 2030 compared to baseline, th rough a policy instrument  that pays forest 
owners for the foregone rent for the period 2005-2030. Achieving a 50% decrease in 
deforestation would require a rent of between US$10 and US$21 per ton of avoided CO 2 
emissions. Given differences in the models as  regards assumed carbon intensities, with a 
carbon price of US$10 per ton of CO 2, a rent per hectare of US$85 to US$250 can be 
assumed. This translates into annual payments  of between US$17 billion and US$28 billion in 
2000 prices (or around €15 billion to €25 billion in 2005 prices) over the period from 2005 to 
2030. The study does not quantify additional costs arising from monitoring and leakage that 
could also increase costs. The study also demons trates that complete reversal of emissions 
from deforestation is possible around 2030 at carbon prices below US$100 per ton CO 2. 
Extrapolating the results of these models suggests that in  that case annual costs might be 
roughly a factor of two to three higher. Halvi ng global forest loss around 2020 is expected to 
reduce emissions by 1.5 to 2.7 GtCO 2 per year. Stopping deforestation reduces these 
emissions by around 3 to 5 GtCO 2 per year.  
                                                 
56 The GDP deflator has been used to convert 2000 in 2005 prices.  
57 Kindermann et al., 2008 
 
EN 41   EN The results of these models are summarised in the table below:  
Study Deforestation 
reduction (%) Annual cost in billion 
US$ Additional costs (monitoring and 
administration) in billion 
US$/year 
Stern 46 3-11 (no leakage) 
Average: 6.5 0.25 -1 
IIASA 50 No leakage: 4.1 
Regional leakage: 34 
Global leakage: 200-250  
Kindermann 50 17-28  
In conclusion, in order to reduce deforestati on by 50% by 2020 the estimates indicate that an 
amount of between US$3 billion and US$250 bill ion would be needed , depending largely on 
how leakage is taken into account. In the medi um range allowing for limited regional leakage, 
a realistic estimate would be US$20-30 billion per annum (or around €15 b illion to €25 billion 
in 2005 prices). Stopping deforestation might be two to three times more expensive. The costs 
of halving deforestation tie in well with the UNFCCC study58 on financial flows (see table 
below), which calculates costs of around US$20 bill ion in 2030 for afforestation/reforestation, 
forest management and reduced deforestation.  
Investments and financial flows into the forest sector to address climate change, UNFCCC (2007) 
 
Further work will be required to look in more detail at the interaction with other greenhouse 
gas mitigation policies. This furt her work will have to be carried  out in preparation for the UN 
negotiations under the UNFCCC in Copenhagen next year. There is  a direct interaction. The 
more greenhouse gas emissions are reduced th rough reduced deforesta tion, the less needs to 
be reduced by other sources, and vice versa. Furt hermore there are indirect interactions, for 
instance through increased demand for biomass and biofuels. This further work will also 
make it possible to test the robustness of the de forestation target in the perspective of global 
climate change policies that include also the other sectors. 
Another open issue that would de serve further work is the analysis of the local capacity for 
uptake of financial resources made availabl e through the Mechanism. Land tenure and rights 
over forest management and exploitation are e xpected to play a major role, besides local 
governance structures and effec tive national/regional law enfor cement. With the exception of 
Mexico and Papua New Guinea, where indigeno us and other local communities respectively 
                                                 
58 UNFCCC. 2007. Investments and Financial Flows to  Address Climate Change. Table IV.37, pg.83 
 
EN 42   EN own some 80 % and 90 % of forests,  countries with tropical fore sts have 77 % of forest land 
publicly owned and 23 % under co mmunity/indigenous and indivi dual ownership (White and 
Martin)59. As described in chapter 4.3.3, these elemen ts will need to be  factored in when 
designing the structure of the Mechanism and its implementation at local level. 
The figures put into perspective   
It has been estimated that , even if all current FDI60 and ODA funding for forestry combined 
were to be redirected to reduction of emissions from defo restation, this would provide only a 
fraction of the funding required to cut emi ssions from deforestation in half while 
approximately 20-30 % of all ODA would actually be  needed to achieve this goal. Domestic 
investments, however, are a magn itude higher than international investment flows in forestry. 
All the above projections clear ly indicate that halving de forestation by 2020 will require 
financial support that must come in  part from developed countries. 
Compared to this, under the propo sed directive to amend the EU ETS61, auctioning, assuming 
a carbon price of €30 per ton of CO 2, would generate annual revenues in 2020 in the order of 
€51 billion, of which 20% is inte nded to be earmarked for climat e change policies. If 3% to 
5% of the total revenues were to be allocated to forests, an  amount of between €1.5 billion 
and €2.5 billion per annum (equi valent to around US$2 billi on to US$3 billion per year) 
would be generated. This would be  a significant contribution on the part of the EU to what is 
supposed to be an international effort involving all countries. It should be noted, however, that 
at the same time, the economic cost of the EU  ETS on the EU’s domestic GDP will be higher, 
if the revenues from auctioni ng are not fully recycled in th e EU economy, but are transferred 
to developing countries to redu ce emissions from deforestation. 
The EU’s contribution to a Global Mechanism w ould of course depend upon a fair sharing of 
efforts at the international level, e.g. how ma ny countries would make financial contributions 
and the magnitude of their contributions. Financing of mitigation action in developing countries is one of the key build ing blocks of the Ba li Action Plan that should result in an 
international agreement on climate change in  Copenhagen in 2009. The finance requirements 
concern a diverse set of sectors, well beyond the fo rest sector. A more deta iled analysis of this 
overall finance requirement needs to be placed in the context of an overall  climate agreement.  
Trade-offs between stopping deforestation with  land use for biofuels and food crops differ 
from country to country (see also section 2.2.1). Beef and soya production competing in South 
America, farming and fuelwood in Africa, and oil palm, coffee and timber in South-East Asia. According to the Stern review, in Brazil and Bolivia soy beans have the highest return on land use. In Indonesia, Malaysia and Papua New Guinea,  the equivalent would be palm oil. In D.R. 
Congo and Cameroon the highest returns might come  from cocoa, fruit, oil palm and rubber, 
and in Ghana from timber. 
                                                
 
59 White A. and Martin A., 2002 Who owns the world's forests? Forest tenure and public forests in 
transition. Forest Trends, Cent er for International Environmental Law, Washington D.C. 
60 The worldwide foreign direct investment (FDI) in  agriculture, forestry, hunting and fishing activities 
combined reached US$ 1.8 billion in the period 2001-03, i.e. US$ 600 million per year, most of which 
is dedicated to agricu lture (UNCTAD, 2005) 
61 2008/0013 (COD), recital 12 
 
EN 43   EN 5.2.3.  Option 3b): Raise new funds by creating and recognising in the carbon market 
emission reduction credits from reduced  deforestation and forest degradation 
The main question for option 3b) is how the in flow of newly established forestry credits 
would affect demand and supply in the carbon market, and whether the demand for credits 
would be sufficient to effectively halve emissi ons from deforestation in 2020. The balance of 
the potential supply of credits from avoi ded deforestation and demand for compliance 
mechanisms depends to a large ex tent on the stringency of the caps set either at national or at 
company level. Unfortunately, none of the peer  reviewed studies, so far, have explicitly 
modelled this option of linking forest ry credits to the carbon market. 
However, there is much uncertainty as to how  many credits could actu ally be generated, but 
most models conclude that at a carbon price of €30 per ton of CO 2 (US$45 per ton of CO 2) a 
very high proportion of deforestation could be  reduced, in the range of several Gt CO 2 per 
year, especially if forest conservation we re also to be allowed in the system.  
Compared to this, the emission reduction fo reseen in the ETS in 2020 with a proposed 
emissions cap of around 1720 million allowances is only around 0.46 Gt CO 262. If forestry 
credits were to be allowed unrestricted into the EU ETS, and if the only demand came from 
the EU (i.e. unilateral case of reducing EU emissions by 20 % in 2020 compared to 1990) 
together with the anticipated inflow of credit s from other CDM/JI proj ects, the magnitude of 
the supply of emission reduction cr edits could cause a significant drop in the carbon price. In 
such a case a very large part of the reduction e ffort in the EU ETS would be offset by avoided 
deforestation credits, and the EU would fore go the expected significant co-benefits with 
respect to innovation, ener gy security and air quality. To avoi d this, it would be necessary to 
set strict limitations on the inflow of such cred its. Such restrictions w ould lead to a skewed 
demand/supply balance that woul d see a high price paid for onl y a limited amount of forestry 
credits that are generated at much lower cost, leading to si gnificant windfall profits. Above 
all, this would be an inefficient use of scarce financial resources as it would also not spur the 
significant transformation in the other sectors of the economy wh ich will be necessary in the 
coming two decades.  
Furthermore, the impact on the EU ETS supply/demand balance of  creating and recognising 
emission reduction credits from reduced deforest ation and forest degr adation depends very 
much on the international agreement to be concluded in Copenhagen in 2009. This will 
determine the overall emission reduction commitme nts, i.e. demand for credits, and the extent 
to which such forestry credits can be us ed for compliance with post-2012 commitments. 
However, even in the case of an internati onal agreement and developed countries committing 
themselves to collectively re duce their emissions by 30 % in 2020 compared to 1990, it is 
unlikely that the demand in the carbon market will be sufficient to reduce deforestation to 50 %. 
Studies from ‘grey’ literature seem to c onfirm this hypothesis. Anger and Sathaye (2008) 
estimate that even when accounting for high tran saction costs the carbon price could fall as 
                                                
 
62 The EU ETS cap in 2020 is set at -21% below 2005  resulting in a cap of around 1720 million ton CO2. 
The difference between the 2005 level and the 2020 level is around 457 million ton CO2. The indicated 
cap does not take account of the proposed increase in the scope of the EU ETS. 
 
EN 44   EN low as €7.2 per ton of CO 2 in 202063. Again this would only give a partial solution to reducing 
deforestation. While Africa woul d reduce its emissions from fo rests by almost two thirds, 
Central America, South America and South-East Asia would do so only by 16 %, 15 %, and 8 % respectively. It is the latter regions where deforestation is predominantly taking place. In 
total, only 1.1 Gt CO
2 of forestry credits would be sold  into the carbon market, which would 
represent only a fraction of the total deforestation emissions. At the same time, these regions would receive €4.6 billion in reve nue, indicating that tackling deforestation emissions via a 
direct link to the carbon market might be over all more costly. In addition, forestry credits 
would displace CERs and ERUs from traditional emission reduction projects in other sectors. 
China, India and Brazil would face revenue losses  of more than two thirds for projects that 
would help in transforming their economie s towards a low carbon society. The authors 
conclude, however, that allowing forestry cred its for compliance could have the effect of 
tightening the carbon constraints of developed countries substant ially at similar levels of 
mitigation costs.  
Another ‘grey’ study sponsored  by Environmental Defense
64 predicts around 1.4 Gt CO 2 at a 
carbon price of US$30/ton CO 2 (around €20/ton of CO 2). This is a huge amount compared to 
the size of the current carbon market, but as in th e previous study, this represents only a rather 
limited share of potentially available forestry cr edits from deforestation which would have to 
be absorbed by the carbon market in 2030. Amounts and marginal costs are higher as in the 
previous study, probably because this study as sumes an international agreement until 2050 
allowing for perfect foresight of the private s ector until then, which would result in early 
procurement of forestry credits and banking until 2050. 
Finally, the recent impact assessment accompa nying the review of the EU ETS recommended 
not to include land use and land-use change and forestry (LULUCF) activities in the third period of the ETS, not only beca use of the impact on the carbon price but  also because of 
monitoring and compliance problems
65. These problems are: the temporary and reversible 
nature of LULUCF activities, th e fact that these projects cannot  physically deliver permanent 
emission reductions, the reduction in simplicity, tr ansparency and predictability of the EU 
ETS as well as the fact that the quality of m onitoring of reporting of LULUCF emissions is, at 
present, not comparable with the emissions co vered currently by the installations included in 
the EU ETS.  
In conclusion, allowing forestry credits into  the carbon market before 2020 requires further 
careful study. Furthermore, whether the use of  temporary forestry credits would also be 
recognised in other domestic trading schemes (US,  Australia, etc.) which are expected to be 
implemented in the years to come will be dete rmined by the domestic legislation and is not 
likely to be known until after the Co penhagen deal has been struck. 
                                                 
63 Anger and Sathaye. 2008. Reducing Deforestation and Trading Emissions: Economic Implications for 
the post-Kyoto Carbon Market. Discussion Paper 08-016. Centre for European Economic Research. 
Mannheim.  
64 Environmental Defense. 2008. Reducing emissions from deforestation and forest degradation in 
developing countries: implications for the carbon market. Washington. 
65 Impact Assessment, Commission Staff Working Document, accompanying document to the proposal 
for a Directive of the European Parliament and of the Council amending Directive 2003/87/EC so as to 
improve and extend the EU greenhouse gas emission allowance trading scheme (COM(2009) 16 
final)(SEC(2008)53), 23/1/2008. 
 
EN 45   EN Because of the great number of  unknowns in the use of forestry credits (e.g. demand/supply, 
transaction costs, monitoring, verification, permanence, liability) and the significant 
uncertainty, one should probably start by tes ting a separate “forest carbon market” which 
could be financed as part of the Global Fore st Carbon Mechanism. In order to encourage 
developed countries to participate in such an experimental “forest carbon market”, one should 
test further whether credits generated under such a specific pilot initiative might also be used 
for compliance with national comm itments by Parties after 2012.  
6. THE PREFERRED OPTIONS  
The preferred option is a combin ation of option 2 and option 3.  Option 2 is necessary 
because it improves the EU policy baseline and guarantees the necessary capacity building 
and technical support to third countries. Alt hough implementation of option 2 could start in 
the short term, i.e. even before the next comm itment period starts in 2013, this option is not 
considered by itself sufficient to achieve the ob jectives, and it needs to be combined with 
option 3.  
Only together with option 3 can an e ffective package be produced that is: 
efficient,  in that avoiding deforestation is a low-cost way of reducing greenhouse gas 
emissions. Of course, there is still much uncertainty over the exact amount of avoided 
emissions from reduced deforestation and forest degradation that can be achieved at any given 
price. These uncertainties relate to many issu es, ranging from the type of sources addressed 
(only above-ground biomass or also soil), the ca rbon content and loss with deforestation, the 
rents from alternative land uses, issues related to governance and issues related to leakage. 
Nevertheless model projections suggest that deforestation could be halved by 2020 
reaching a cost of around €15 billion to €25 billion per year with huge uncertainties66; 
effective , in that without new and additional financial incentives it will not be possible to 
meet the target. Of course, to ensure eff ectiveness additional fundi ng should only be made 
available to the developing countries concer ned on a performance basis, i.e. for proven 
reduced/avoided deforestation and forest degradation. 
Distributional and poverty implications should, in principle, be positive overall for people 
dependent on those forests affected, although th e exact balance will be largely determined by 
local implementation and governance, particul arly whether payments would reach those 
decision-makers at the local level th at are responsible for deforestation.  
With regard to the choice between 3a and 3b,  in the short term, i.e. until 2020, option 3a 
entailing the creation of a Global Forest Carb on Mechanism is preferred in the context 
of an international agreement to be concluded in Copenhagen in 2009 . Channelling 
revenue generated from aucti oning of carbon allowances to reduce deforestation does not 
directly impact on supply or demand in the carbo n market. As such it is an option that cannot 
destabilise the supply/demand balance in th e carbon market. The present scale of the EU 
carbon market is, in fact, not large enough to  allow recognition of emission credits for 
reducing emissions from deforesta tion and forest degradation. In fact, if such forestry credits 
were to enter the EU ETS, its supply would far outreach the levels of emission reductions 
                                                 
66 Most projections use 2000 or 2005 prices in US dollar. In 2000 the exchange rate for $ in € was around 
0,9, in 2005 it was around 1,2. For the purpose of this  estimate the exchange rate was set at 1 € per $.  
 
EN 46   EN envisaged up to 2020 and as such would jeopardis e the medium-term stability of the EU ETS. 
If limits are applied, there is a risk that only a limited amount of cred its would enter the EU 
ETS at high price with high rents for thos e who can sell them. There would be more 
environmental benefit if financial resources coul d be used efficiently without generating these 
types of unnecessary rents over the coming decade.  
In addition, placing limits on the use of forestry credits would not resolve the deforestation 
issue, and additional incentive mechanisms would be needed to address the remainder of the problem. 
Furthermore, liability remains a serious issue, es pecially if forestry credits can be used for 
compliance within a company-ba sed system. Finally, leakage w ould need to be addressed 
otherwise the overall environmen tal effect could be worse (less reduction in the EU ETS, no 
real reductions in deforestat ion in case of leakage). 
As such, generating financial means to avoid deforestation through domestic emission trading 
systems, like the EU ETS, seems much more  suitable in the medium term, through setting 
aside revenues from auctioning of carbon allowances.  
In the medium to long term, i.e. after 2020, the EU position is to consider the recognition 
of forestry credits into the EU  ETS as a complementary tool , provided that criteria such as 
liability and balanced supply/demand are resp ected. Hence, the proposed combination of 
options 2 and 3a – with decreasing importance over time – and 3b – with increasing importance after 2020. The analysis has also shown that practical implementation is not a simple issue. A number of design parameters ne ed to be addressed. For example, leakage is a 
serious problem that needs to be taken into account in the design of any incentive mechanism 
that will have to be tailored to the local leve l. Both the issue of leakage and the question of 
liability give preference to some extent to na tional schemes that can ensure that they are 
addressed at the national level and that incentives are indeed channelled all the way to the local level and the local decision-makers. Thus, it would be desirable to test  a trading system 
in the form of a separate para llel “forest carbon market” whic h could be funded as part of 
option 3a), the Global Forest Carbon Mechanism.  
These preferred options should be supplemente d by appropriate national mitigation actions, 
including co-funding, in the de veloping countries concerned. 
7. N
EXT STEPS  
This impact assessment represents only a first st ep in a longer process. Indeed, if the principle 
of a mechanism for reduced de forestation goes ahead, implementing details will need to be 
discussed thoroughly. These will range from the exact source and timing of the funding to 
discussing the ways in which the money will be used and disbursed on the ground, on how to ensure that it really reaches the population groups  enduring the consequences of avoided 
deforestation.  
Work and negotiations to define the mechanisms  and the type of funds  to be developed are 
ongoing within the UNFCCC fora. The Commission is preparing a Communication 
covering the EU’s mandate for the Copenhage n negotiations to be adopted in January 
2009, and to be discussed by EU Heads of State at the Spring Council in March 2009 . In 
line with the conclusions of the EU Summit in June 2008, it will in clude a comprehensive 
 
EN 47   EN strategy for scaling up finance to address climate change in cluding deforestation. This will 
include further analysis in order to test the robustness of the resu lts of this impact assessment. 
With a view to formulating a common EU position on this matter, the Commission intends to 
launch further studies in the coming weeks.  
In the current absence of a definite REDD arch itecture, with clearly spelled out disbursement 
mechanisms and institutional accountability criteria, the EU can play an important role at global level in acting as a fair and equitable broker trying to bring a bout the best and most 
effective solution. Some important issues that will need to be taken into account in the 
negotiation of the eventu al funding scheme are: 
(1) the recognition of existing schemes and privat e sector efforts, to avoid double counting or 
exclusion of initiatives;  
(2) while targeting a fully functioning REDD, st arting a stepwise approach and using pilot 
projects to facilitate countries’ readiness to enter into the scheme. Th ese projects should be 
compatible with the REDD architecture; 
(3) the inclusion in a REDD design, or in a separate fund running in parallel, of payments for 
the non-carbon values of forests, i.e. fore st ecosystem goods and services and their 
contribution towards poverty reduction objectives;  
(4) assuring nationa l sectoral commitments from recipient countries, with part icular regard to 
governance, social issues and equ ity distribution of financial re sources and benefits generated 
by the mechanism; 
(5) ensuring that an effective and reliable mon itoring and verification system is put in place to 
measure progress and assure complian ce with the disbursement criteria. 
From the Commission's side it will also be useful to fully exploit the possible synergies 
between the ongoing and future FLEGT and RE DD processes so as to maximise public 
spending and simplify the reforms and activities needed at national level.  
Moreover, in collaboration with the European Investment Bank  (EIB), possible new roles for 
the Bank could be explored to support the EU's climate change strategy in regions outside the 
EU, including initiatives to tackle deforestati on and forest degradation. The experience gained 
within the "Global Energy Efficien cy and Renewable Energy Fund (GEEREF
67) and the 
endorsement and support of the EIB in regard to the Extractive Indu stries Transparency 
Initiative68 - EITI - could provide useful  inputs towards this aim. 
                                                 
67 An innovative financing instrument proposed by th e European Commission to maximise the leverage of 
public funds. GEEREF will support regional funds for sub-Saharan Africa, including the Caribbean and 
Pacific Island States, Latin Ameri ca, Asia, North Africa and other EU neighbouring countries. Priority 
is given to investments in countries with energy efficiency and renewable energy policies that are 
conducive to private sector engagement. http://ec.europa.eu/environment/climat/pdf/key_elements.pdf  
68 http://www.eib.org/projects/news/eib-support-for-t he-extractive-industry-transparency-initiative.htm 
 
EN 48   EN 8. MONITORING AND EVALUATION  
Annex 5  describes the state of play  as regards monitoring of deforestation at national and 
international level.  
The lessons learnt so far show that monitoring of tropi cal forest area changes is important at 
global and regional le vel. However, the following shortcomings and knowledge gaps need to 
be addressed if a new REDD funding mechanism is to become fully operational  together with 
an effective accountability system: 
a) Countries should have the  capacity  to establish reliable and high-quality national 
monitoring and reporting system s, making the best use of remote sensing surveys where 
feasible. This is the foundation of any reliable fo restry data on which to build national forest 
policies for sustainable forest management a nd conservation. At the same time, this will 
enable countries to fulfil th eir international reporting requ irements, e.g. to the UNFCCC, 
CBD, UNFF and to FAO global forest resources assessments; 
b) Inconsistencies in forest definitions and i nventory methodologies over time, and the lack of 
regular inventories, make it difficult to obt ain reliable trend estima tes in many developing 
countries; 
c) There is a lack of available information on the current and past rates of deforestation, 
afforestation and natural expansion of forests in  a number of developing  countries. Hence, the 
definition of the country baseline to measur e reduction of deforestation rates is a 
methodological critical issue that  requires technical capacity at  national level and agreed 
standards at international level; 
d) Regional/global assessments based on remo te sensing are better suited than country 
reporting for some forest-related information, such  as forest fragmentation and intact forest 
landscapes, as well as trends in forest ar ea in different biom es/ecological zones. 
e) Global and regional assessments need to be  validated and cross-checked at regional and 
national level to ensure qualitatively good estima tes, harmonised application of definitions 
and general acceptance. 
To address the current shortcomings, future monitoring and verification arrangements should 
consider:  
1. The need to develop , where appropriate, in-country capacity  to effectively measure 
deforestation trends and to account for and report on REDD in centives. This depends to a 
large extent on the local capabilities and fina ncial means available to define reference 
baselines and to carry out adequate fo rest inventories at national level;  
2. Within the UNFCCC mandate, monitoring and repor ting of GHG emissions  is fully under 
the responsibility of the Par ties, with periodical indepe ndent review organised by the 
UNFCCC Secretariat. The Parties’ are obliged  to follow IPCC Guidelines, ensuring that 
reported greenhouse gas emissions and removals  are transparent, consistent, complete, 
accurate, and comparable. For the new REDD mechanism, proposals are currently under 
assessment within the UNFCC negotiations pro cess and a decision is unlikely to be taken 
before the end of 2009. 
 
EN 49   EN 3. Besides financially supporting the FAO Fore st Resources Assessment (FRA) 2010, the EC 
could explore possibilities within the Globa l Monitoring for Environment and Security 
(GMES) programme - and appropriate synergies with the ongoing JRC ac tivities - to develop 
an appropriate institutional fr amework and contribute to a fu ture REDD monitoring system, 
be it entirely or partly de legated at national level.  
 
EN 50   EN Acronyms and conversions 
AR Afforestation (establishing a forest on land that  is not a forest, or has not been a forest 
for a long time) and Reforestation (restocking of existing forests and woodlands which have 
been depleted, with native tree stock) 
BAU Business as Usual CER Certified Emissions Reductions CBD Convention on Biological Diversity CDM Clean Development Mechanism COP Conference of the Parties COPI Cost of Policy Inaction  ENRTP Environment and Natural Res ources Thematic Programme (EU) 
FAO Food and Agriculture Organi zation of the United Nations 
FCPF Forest Carbon Partnership Facility (World Bank) FDI Foreign Direct Investment FLEG(T) Forest Law Enforcement, Governance (and Trade) GCCA Global Climate Change Alliance  GHG Greenhouse Gas 
GIFC Global Initiative on Fore sts and Climate (Australia) 
Ha Hectare GMES Global Monitoring for Environment and Security IIASA International Institute for Applied Systems Analysis 
IPCC Intergovernmental Panel on Climate Change ITTO International Tropical Timber Organisation JI Joint Implementation JRC European Commission Joint Research Centre LUCF Land-Use Change and Forestry LULUCF Land Use, Land-Use Change and Forestry Mt Mega tonne 
 
EN 51   EN ODA/OA Overseas Development Assistance/Overseas Assistance 
RED(D) Reduced Emissions from Defo restation (and forest Degradation) 
UNFCCC United Nations Framework Convention on Climate Change UNFF United Nations Forum on Forests VPA Voluntary Partnership Agreement 
1 tC = 3.67 tCO
2 
 
EN 52   EN References   
Achard F., H. Eva, H.J. Stibig, P. Mayaux, J. Gallego, T.Richards, J.P. Malingreau. 2002. 
Determination of Deforestation Rates of the World`s Humid Tropical Forests. Science  297:999-1002 
Anger,N. and Sathaye, 2008, Reducing Deforestation and Trading Emissions: Economic 
Implications for the post-Kyoto Carbon Ma rket. Discussion Paper 08-016. Centre for 
European Economic Research. Mannheim  
Bonan G.B., 2008, Forests and Climate Change: Forc ings, Feedbacks, and the Climate Benefits of 
Forests, Science 320:1444-1449 
Contreras Hermosilla A., 2000, The underlying causes of forest decline,  CIFOR Occasional 
Paper, 30 
FAO, 2006, Global Forest Resources Assessment 2005 
FAO, 2007,  State of the world forests. http://www.fao.org/docre p/009/a0773e/a0773e00.htm). 
Geist, H.J. and Lambin, E.F., 2002, Proximate causes and underlying driving forces of 
tropical deforestation , BioScience  52(2), 143-50 
Grieg-Gran, M., 2006, The costs of avoiding Deforestation,  Background paper for the Stern 
Review of the Economics of  Climate Change. IIED, London.  
Grieg-Gran, M.,  2006, Is tackling deforestation a cost-effective mitigation approach? 
Sustainable Development Opinion Papers, IIED 
Houghton, 2005, Aboveground forest biomass and the global carbon balance. Global Change 
Biol. Kindermann G., Obersteiner M., Rametsteiner E., McCallum I., 2006, Predicting the 
deforestation trend under different carbon-prices ; Carbon Balance and Management, 1:15  
Kindermann, G., Obersteiner, M., S ohngen, Sathaye, Andrasko, Rametsteiner, 
Schlamadinger, Wunder, Beach, Global Cost Estimates of Reducing Carbon Emissions 
through Avoided Deforestation , PNAS 2008. 
Lepers E., E. F. Lambin, A. C. Janetos, R. DeFries, F. Achard, N. Ramankutty and R. J. 
Scholes, 2005, A Synthesis of Information on Rapid Land-Cover Change for the Period 1981-
2000, Bioscience, 55:115-124. 
Luyssaert S., E.–D. Schulze, A. Börner, A. Knoh l, D. Hessenmöller, B.E. Law, P. Ciais & J. 
Grace, 2008, Old-growth forests as gl obal carbon sinks, Nature,455: 213-215 
Mayaux P., P. Holmgren, F. Achard, H. Eva, H.-J. Stibig and A. Branthomme, 2005, Tropical 
forest cover change in the 1990’s and opt ions for future monitoring, Philosophical 
Transactions of The Royal Society B: Biologi cal Sciences (Phil. Trans. B), 360: 373 - 384. 
Millennium Ecosystem Assessment (2005a) Global Assessment Report 1: Current State and 
Trends Assessment. Island Press, Washington DC. 
Millennium Ecosystem Assessment (2005b) Living Beyond Our Means: Natural Assets and 
Human Wellbeing. Island Press, Washington DC.  
Millennium Ecosystem Assessment (2005c) Ecosystems and Human We ll-being: Synthesis. 
Island Press, Washington DC. 
Obersteiner, M., Kindermann, G., Ra metsteiner, E., and Sohngen, B., 2007, Economics of 
Avoiding Deforestation , Paper presented at the conference on climate change mitigation 
 
EN 53   EN measures in the agroforestry sector and biodiversity futures, 16-17 October 2007, ICTP, 
Trieste, Italy. Available at: http://users.ictp. it/~eee/workshops/smr1811/obersteiner.pdf  
Putz FE, Zuidema PA, Pinard MA, Boot RGA,  Sayer JA, et al. (2008) Improved tropical 
forest management for carbon rete ntion. PLoS Biol 6(7): e166. 
doi:10.1371/journal.pbio.0060166 
Stern N., 2007, The Economics of Climate Change , The Stern Review, Cambridge University 
Press 
Stern N., 2008, Key elements of a global deal on climate change , LSE 
Sukhdev, P et al. 2008. The Economics of Ecosyste ms and Biodiversity-An interim Report. 
64 pages. http://ec.europa.eu/environment/nature/ biodiversity/economics/pdf/teeb_report.pdf  
White A. and Martin A., 2002 Who owns the world' s forests? Forest tenure and public forests 
in transition. Forest Trends, Center for Inte rnational Environmental Law, Washington D.C. 
 
EN 54   EN 9. ANNEXES 
Annex 1  
Tropical forests and deforestation 
Figure 1 shows tropical forest cove r and Figure 2 relates this to de forestation (areas in red in 
Figure 2 indicate areas with ongoing deforestation).  (MEA, 2005; Lepers et al., 2000; Mayaux, 
2005 ).  
Fig. 1 Tropical forest cover  
 
Fig. 2 Tropical deforestation fronts worldwide  
 
 
EN 55   EN Annex 2 
Estimates of Biodiversity Loss – quantification to monetisation  
The graph below presents the changes in  biodiversity index in different biomes69. These are 
taken from the study on the Cost Of Policy Inaction (COPI): the case of not meeting the 2010 
biodiversity target. The estimates are based on mode lling undertaken using the GLOBIO 
model for the OECD, and are broadly consistent with other modelling exer cises such as those 
by the FAO.  
Figure 1, Annex 2: Projected biodiversity change between 2000 and 2050  
Biodiversity change (MSA) within biomes
2000-2050
0%20%40%60%80%100%
2000 2050 2000 2050 2000 2050 2000 2050 2000 2050Savanna Grassland and
steppeBoreal forests Tropical forest Tropical
woodlandBiodiversity (MSA%)Intensive agriculture
Extensive agriculture
Cultivated grazing
Managed Forest
Natural
  
Source: COPI study, chap.4, p.62 
In monetary terms, if nothing is done to st op biodiversity loss in tr opical forests (thereby 
meaning no action to reduce deforestation), the cost of biodivers ity loss between 2000 and 
2050 is expected to grow to € 536 to 3362 billion in 205070.  
Losing biodiversity also means losing ecosystem services provide d by that biodiversity. The 
following table sets out the main services wh ich would be at risk, many of which are non-
marketed.  
                                                 
69 Biomes are defined as the world's major communities classified according to the predominant 
vegetation and characterised by adaptations of organisms to that particular environment. 
70 The COPI study uses two evaluatio n scenarios, a partial estimate and a fuller estimate. The partial 
estimate has fewer gaps filled by transferring values from one biome to another (e.g. forest of one type 
to another), while the fuller estimate includes more benefits transfer. Whilst this is obviously different 
from a 'pure' lower and upper estimate, there are elemen ts of this also present: in particular, the partial 
estimate has a lower estimate for future growth rates of certain values (e.g. food provision and carbon 
prices), while the fuller estimate employs higher rates (e.g. value of provisions rises with GDP). 
 
EN 56   EN Figure 2, Annex 2: Millennium Ecosystem A ssessment description of ecosystem services  
 
Estimates of the value of ecosyst em services loss vary. The mo st comprehensive overview is 
found in the COPI study. These data were used to  calculate the cost to society of the changes 
in biodiversity set out in Figur e 1 of Annex 2 above. The releva nt estimates are presented in 
the table below. 
Annual cost in 2050 from not having halted biodiversity loss at 2000 levels  
Biomes Billion (10^9) 
EUR 
Tropical forest From 536 to 3362 
Tropical woodland From 0 to 707 
Warm mixed forest From 249 to 2332 
World Total (land-
based ecosystems 
excluding ice and hot 
deserts)  From 1891 to 
13938 
 Source: adapted from COPI study, chap.6, p. 131 
 
EN 57   EN  Annex 3 
Most relevant EC policies and instruments  
1/ Development Cooperation The Commission’s Communication on a new EU Development Policy
71 elevated environment 
and natural resources from a cross-cutting issue to a key theme for EU development 
cooperation – both for the Community and fo r Member States. Provisions requiring 
systematically the development of Country  Environmental Profile s are assisting the 
integration of forest and biodiversity conserva tion needs into Country and Regional Strategy 
Papers. In September 2007, the European Co mmission adopted the first report on Policy 
Coherence for Development (PCD). PCD plays a central role in reinforcing the EU's 
contribution to developing countries' progress towards the Millennium Development Goals. 
The aim is to maximise the positive impact of these policies on partner countries and to avoid 
incoherencies; its importance is reflected in  the European Consensus on Development.  
The PCD report highlights the in teraction and complementarity  between development policy 
and twelve other internal and external EU policies that have an impact on developing 
countries: trade, environment, climate change , security, agriculture , fisheries, social 
dimension of globalisation, employment and d ecent work, migration, research and innovation, 
information society, transport, and energy. The overall conclusion was that coherence 
between EU policies and development objecti ves has improved but more can be achieved. 
Progress was identified in a number of areas, including: 
trade - especially the nego tiation of the economic partne rship agreements with ACP 
countries (fostering trade a nd regional integration).  
agriculture - recent reforms of the Common Agricultural Policy are sharply reducing 
the trade-distorting effects of EU farm  support and producing positive social and 
environmental effects.  
Climate change, energy and biofuels were indicated as areas with room to improve 
development potential72. As policy formulation in these three areas is an ongoing process, 
there is a recognised need for continued policy dialogue with developing countries as well as 
support for capacity-building and dissemin ation of information and good practices. 
Although the EU remains the l eading donor and the developing countries' most important 
partner, the amount of financ ial aid fell in 2007 for the firs t time since 2000, dropping from 
€47.7 billion in 2006 to €43.1 billion. Increased development aid, aid effectiveness and a more coherent EU policy approach overall are some of the recommendations contained in the 
recent Communication "The EU - a global partner for development"
73. The document informs 
the development of a common EU position in  light of the High-Level Forum on Aid 
Effectiveness planned in Accra, in Septembe r 2008, and paves the way for the International 
Conference on Financing for Development whic h will be organised in Doha in December 
2008. Of particular interest for the REDD debate is that Member  States are invited to find 
                                                 
71 COM(2005) 311 final  
72 Commission Staff Working Paper, SEC(2008) 434, accompanying COM (2008) 177 final.  
73 COM(2008) 177 final, 09.04.2008. The EU - a global partner for development. Speeding up progress 
towards the Millennium Development Goals.  
 
EN 58   EN innovative sources of financing fo r appropriate measures to deal  with the effects of climate 
change.  
The Action Plan on Climate Change in the Cont ext of Development Cooperation puts forward 
a concrete set of proposals to  better integrate climate change into the EU's development 
cooperation activities. These commitments we re consolidated at the World Summit on 
Sustainable Development (WSSD)74 and at the 2005 UN Summit75. Close coordination 
between the Commission and Member Stat es is already foreseen under the GCCA76, to help 
poor developing countries most vul nerable to climate change - in  particular Least Developed 
Countries (LDCs) and Small Island Developing States (SIDS)77 - to increase their capabilities 
to adapt to the effects of climate change. This is also in line with the MDG of developing a 
global partnership for development78. 
The Commission aims to promote sustainability  and better governance in  the negotiation of 
Economic Partnership Agreements (EPA) to  succeed the Cotonou Agreement with ACP 
countries and to make efforts to  promote, as much as possible,  a regional approach for the 
implementation of FLEGT. The Commission Country Strategy Programmes and Country 
Environmental Profiling are programming inst ruments that can contribute towards the 
identification of shortcomings in the manageme nt of natural resources such as forests.  
With regard to the forest sector , the Commission has supported rainforest conservation for 
many years, including major programmes in Indone sia, Brazil, Central Africa, Sierra Leone 
and Guyana, to mention just a few. It is also considering contributing to the World Bank 
Forest Carbon Partnership Facility ( 80% funded by EU Member States).  
A specific EC Budget Line for Forests was av ailable until 2006, with a total budget of €249 
million for the period 2000-2006. Based on the Communication from the Commission of 25 
January 2006 on External Action79, this budget line was integrated into the Thematic 
Programme for Environment and Natural Resources (ENRTP).  The basic act for the 
ENRTP is the Development Cooperation Instrument  (DCI). It sets asid e an indicative amount 
of €804 million for the ENRTP for the pe riod 2007-2013. The indicative amount for the 
period 2007-2010 is €469.7 million. This includes €85.5 million for two new initiatives related to climate change and renewable en ergy, with multiannual implications, announced by 
the Commission in its 2008 Annual Policy Strate gy, namely an increase of €50 million for the 
Global Climate Change Alliance, and an increase of €35.5 million for the Global Energy Efficiency and Renewable Energy Fund (GEEREF). The Instrument states in Article 134 that 
the objective of this thematic programme is "to integrate environmental protection requirements into the Community's development and other external policies as well as to help 
promote the Community’s environmental and ener gy policies abroad in the common interest 
of the Community and partne r countries and regions".  
                                                
 
74 New York, Summit on Sustainable Development in September 2005 
75 Johannesburg, September 2002 
76 The Global Climate Change Alliance (GCCA) is an  alliance between the EU and developing countries 
to work jointly to integrate climate ch ange into poverty reduction strategies  
77 This includes only those island states which are recipients of Official De velopment Assistance (ODA) 
78 Target 12. Develop further an open, rule-based, predictable, non-discriminatory trading and financial 
system. Includes a commitment to good governance, development, and poverty reduction — both 
nationally and internationally; Target 13. Address the special needs of the least developed countries; 
Target 14. Address the special need s of landlocked countries and small island developing States  
79 COM(2006) 20 final of 25.1.2006 
 
EN 59   EN The multiannual programme for ENRTP80 provides for indicative amounts [in brackets] for 
the first ENRTP period (2007-2010) targeting: 
y support for "activities that influence na tional, regional or international policy 
development affecting forests and pr omote lesson learning between decision-
makers(…).". [€71.8 mio] 
y support for the "implementation of vol untary partnership agreements (VPAs); 
fund activities which underpin the development of VPAs, such as regional FLEG processes (…) " [€34.8 mio] 
y actions to raise the policy profile  of climate change (…) [€23.3 mio] 
As described in chapter 2.2, many underlying and di rect causes of deforestation are generated 
outside the forest sector. However, in a number of countries, illegal and uncontrolled forest exploitation can be a relevant cause of fore st loss and degradation. From the EU side, the 
policy response to this has been the FLEGT Action Plan, adopted in 2003, which sets out a 
series of actions to address illegal logging, with  a particular emphasis on trade. The Plan has a 
range of objectives and outlines a number of policy instruments aimed at combating illegal 
logging and creating markets for verified legal and certified su stainable products. Bilateral 
Voluntary Partnership Agreements  (VPAs) between the EU a nd timber-producing country 
governments are at the core of the FLEGT Acti on Plan. These commit both parties to develop 
a timber licensing scheme under which only le gally-produced licensed timber from FLEGT 
Partner Countries will be allowed into EU ma rkets. By the end of 2008, conclusion of the 
VPAs with Ghana, Malaysia and Cameroun is  expected. Ongoing and recent VPA processes 
are also taking place with Indonesia, Liberi a and Congo Brazzaville. More countries are 
expected to start negotiations in the near future.
 
Under FLEGT VPAs, there is an explicit recogniti on that some partner countries will require 
considerable institutional strengthening and capacity  building to meet commitments in regard 
to enforcing forest law and licensing legal ti mber. The Commission has highlighted the need 
for ‘capacity building and training in producin g countries, including support for governance 
institutions in the implementation of new gove rnance procedures’. As  well as agreeing the 
technical and legal aspe cts of VPAs, negotiations are being used to identify specific areas 
where partner countries need fina ncial assistance. Over the longe r term, it is envisaged that 
the increased resource revenue from legal timber production will enable the control systems introduced to become self-funding.  
The final and crucial element in the FLEGT Action Plan is the development of "additional 
options" to deter trade in ille gally harvested timber products . The Commission will adopt
81 a 
legislative initiative which would rely on the due diligence principle and which would require operators to exercise care in  ensuring that they only place products derived from legally 
harvested timber on the market. 
Public procurement can shape production and consumption trends and influence market and 
trade trends. If significant demand from public au thorities for legal and sustainable wood and 
                                                
 
80
 http://ec.europa.eu/europeaid/where/worldwide/environment/documents/multi_annual_progra
mme_enrtp_en.pdf   
81 Due for adoption in September 
 
EN 60   EN wood products is generated, this  could reduce the impact of timber production on worldwide 
deforestation. 
The European Commission proposes to facilitate  the exchange of experiences among Member 
States in developing guidelines for application of  the Public Procurement Directive to forest 
products. More recently, the Commission Comm unication: "An Action Plan for more and 
better Green public procurement in the EU"82 initiates a series of actions to ensure EU-wide 
harmonised uptake of Green public procuremen t. With respect to wood and wood products 
the Communication identifies four priority se ctors in which wood is  (one of) the base 
material(s): i) construction; ii) energy; iii) pa per and printing services ; and iv) furniture. The 
Commission aims to develop a process of consul tation with the Member States with the aim 
of developing common procuremen t criteria for each of these sectors and product categories. 
If fully implemented across the EU, public co ntracts would cover between 10% and 20% of 
the total EU wood products market. 
2/ Trade policy  
The EU has promoted the integration of the en vironmental dimension into international trade 
(for instance through its work on trade-related sustainability im pact assessments - SIA) and in 
global efforts to curb unsustainable productio n and consumption patterns – but with few 
concrete results for tropical forest conservation to date.  
As described above, a useful st art has been made on efforts to  address the impact of the 
timber trade on tropical forests, but little has been  done to tackle other trade-related causes of 
deforestation – such as the trade in palm o il and soy bean. Some progress has been achieved 
on wildlife trade through active engagement in the Convention on International Trade in 
Endangered Species (CITES). The Trade SIA on forestry undertaken with financial support 
from the Commission83 indicates that, globally, any impact on wood harvesting is likely to be 
small compared to the effects of economic growth, population gr owth and price rises. Trade 
liberalisation would affect sustainability but in  most contexts increase d trade alone would be 
unlikely to cause any significa nt direct negative sustainabi lity impact. However, trade 
liberalisation could accentuate negative sustai nability trends unless appropriate forest 
governance systems are in place and enforced.  In biodiversity hotspo t countries such as 
Brazil, Indonesia, the Congo Basin countries and Papua Ne w Guinea, possible negative 
effects could be irreversible. Developing count ries whose forest industries are protected by 
high import tariffs could incur considerable envi ronmental and social costs due to downsizing 
of industrial capacity and closure. Social costs may outweigh shor t-term economic gains 
unless adequate safeguards were to be adopted. In  such countries, a cautious approach to trade 
liberalisation is recommended, e.g. using a phased approach and/or mitigation measures. Many of the developing and emerging countries th at would gain from tr ade liberalisation in 
economic terms are the same ones that suffer fro m deforestation and fo rest degradation. In 
terms of sustainability, agricultural trade lib eralisation will possibly have a much greater 
impact than forest product trade liberalisati on because the protection rates and subsidies in 
agriculture are much higher than in forestry . In Brazil, a forecast increase in soybean 
production could cause an expansion of land farmed on the margins of the Amazon and 
increase pressure on areas with high biodiversity. Expansion of beef exports is also expected 
to accelerate deforestation. Therefore, the SI A suggests that mitigation and enhancement 
                                                
 
82 adopted on 16 July 
83 http://europa.eu.int/comm/trade/issu es/global/sia/studies_wto.htm#dda 
 
EN 61   EN measures proposed in the Trade SIA of agricu ltural trade liberalisati on should address cross-
sectoral linkages with forestry. As regards mitig ation measures, it should also be borne in 
mind that liberalisation of trade a ffecting in particular edible o ils, beef and animal feed, cocoa 
and coffee is likely to pose risks particularly to  forests in Brazil, Indon esia and West Africa.  
3/ Agriculture (food and non-food commodities)  
In the Communication “Tackling the challenge of rising food prices. Directions for EU 
action”84, the Commission acknowledges that demand for agricultural commodities is also 
influenced by the emergence of alternative market outlets, such as biofuels market. 
Nevertheless, Commission analyses  indicate that current EU bi ofuel production has little 
impact on current global food prices, as biofue ls use less than 1 per cent of EU cereal 
production. The European Council has agreed a target of 10% biof uels in transport fuel by 
2020: such a long lead-time makes it unlikely that this can have had an impact on prices today 
and the sustainability criteria proposed by th e Commission will mitigate the impact for the 
future.  
The Commission’s proposal for a Renewable Energy Directive85 envisages a biofuel 
sustainability scheme, covering greenhouse gas eff ects, biodiversity and land use. It will apply 
to both EU-produced and imported biofuels and is WTO-compatible. The commitment to 
develop renewable energy sources beyond 2010 as a key element in the EU's strategy 
regarding climate change was reaffirmed by the European Council of March 2007. Among 
renewable energies, biofuels are considered to  be of particular relevance to the Policy 
Coherence for Development perspectives. Th e Presidency Conclusions of 14 March 2008 
state "In meeting the ambitious target for the us e of biofuels it is essential to develop and 
fulfil effective sustainability criteria to en sure the commercial availability of second-
generation biofuels, which in the future could also  be considered for the use of other forms of 
biomass for energy in line with the conclusi ons of the 2007 Spring European Council." The 
enhanced support to second genera tion biofuels can further cont ribute to reducing the impact 
on natural resources. Second generation biofuels  are produced from feedstocks other than 
food crops and can be produced not only from w ood and dedicated energy crops but also from 
sources such as recycled vegetable oils, animal  fat, by products of forest based industries, 
solid waste and grasses. 
UNFCCC negotiations: the views of major developing countries  
At the UNFCCC 12th Conference of the Parties (COP12) in Montreal in November 2005, a 
group of 41 developing countries86, the Rainforest Coalition,  proposed an approach to tackle 
emissions from deforestation th rough the international regime to combat climate change. The 
Rainforest Coalition offers vol untary carbon emission reducti ons by conserving forests in 
exchange for access to international markets fo r emissions trading. The approach is based on 
the elaboration of country reference scen arios, with quantific ation, monitoring and 
verification of efforts made by the country to reduce emissions from deforestation and 
                                                 
84 COM(2008) 321 
85 COM(2008) 19, 23.1.2008 Directive on the use of energy from renewable sources, including biofuels 
86 Bangladesh, Belize, Bolivia, Centra l African Republic, Cameroon, Congo, Colombia, Costa Rica, DR Congo, 
Dominican Republic, Ecuador, Equatorial Guinea, El Salvador, Fiji, Gabon, Ghana, Guatemala, Guyana, 
Honduras, Indonesia, Kenya, Lesotho, Liberia, Madagasca r, Malaysia, Nicaragua, Nigeria, Pakistan, Panama, 
Papua New Guinea, Paraguay, Peru, Samoa, Sierra Le one, Solomon Islands, Suriname, Thailand, Uruguay, 
Uganda Vanuatu and Viet Nam.  
 
EN 62   EN crediting of the reductions achieved in comparis on to the reference scenario. From offering 
emission reductions units that could be paid by the global market87, the Rainforest Coalition's 
approach has evolved over time to asking fo r a "basket of incentives" that encompasses 
support for capacity-building as well as the crea tion of funds to support the conservation of 
forests. Initially targeted at deforestation sensu stricto  (i.e. leading to land-use change), the 
Rainforest Coalition's approach has also evol ved over time towards including emissions from 
forest degradation (i.e. depleti on of forest carbon stocks that do not lead to land-use change) 
and issues like forest conservation. 
The majority of developing countries are supportiv e of the general featur es of the Rainforest 
Coalition's approach. However, groups of countries have developed specific regional 
approaches for this concept: the Congo Basin  countries, grouped in the COMIFAC88, insist 
on the importance of including fore st degradation and, to a lesser  extent, forest conservation 
in the scope of a future mechanism for Reductio n of Emissions from Deforestation and forest 
Degradation (REDD). Latin American  countries (Brazil excluded)  seek to maintain a CDM-
like project-based stream as a progressive wa y to expand the implementation of a future 
mechanism to their whole national territory. India and China  are seeking the introduction of 
forest conservation and forest management in  the scope of a future REDD mechanism as a 
way to recognise the efforts already made to st op deforestation and increase the area of forest 
in both countries.  
At the 13th Conference of the Parties (COP 13) in Nairobi, in December 2006, Brazil  tabled its 
own approach to combat deforestation under the UNFCCC. The Brazilia n approach is also 
voluntary and would be implemented on a nationa l basis. As for the Rainforest Coalition 
proposal, it is based on verified performan ce of a country to reduce emissions from 
deforestation assessed by comparison with a reference scenario. The country would be 
financially rewarded for the emissions reductio ns achieved in comparison to the reference 
scenario. The Brazilian approac h, however, differs from the Ra inforest Coalition's one on two 
key features: 
• the scope: the Brazilian propos al targets deforestation sensu stricto  (i.e. land-use changes 
only) and does not contemplate any incentive for countries that also  take action against 
forest degradation or fo rest conservation; and 
• the origin of the carbon payments: the Br azilian proposal relies on additional funding by 
developed countries but excludes any di rect payment from the carbon market. 
UN CBD negotiations  
The CBD's COP has adopted a statement from  the Convention to the IPF on biological 
diversity and forests (decision II/9), endorse d a work programme for forest biological 
diversity (decision IV/7), adopted an expande d programme of work on forest biological 
diversity (decision VI/22), urge d the Collaborative Partnership on Forests to consider the 
Secretariat of the CBD to be its focal point fo r forest biological dive rsity (decision VI/22), 
and agreed that unregulated and unsustainable use of fore st products, climate change, 
                                                 
87 It is to be noted that, at present, there is no single 'glo bal carbon market', but rather a range of sources of funding. 
States may buy credits under the Kyoto Protocol to comp ly with their commitments. The EU has established a 
company-based emissions trading system and allows companies in this system to use certain types of external 
credits up to certain levels. Other countries are consid ering the establishment of emissions trading systems.  
88 Commission des Forêts d'Afrique Centrale.  
 
EN 63   EN desertification, land conversion, ha bitat fragmentation, environmen tal degradation, forest fires 
and invasive alien species are ma jor human-induced threats to fo rest biodiversity that should 
be tackled as a matter of priority (decision IX/5 ). The EC and EU delegations played crucial 
roles in all of these negotiations. 
 
EN 64   EN Annex 4  
Estimates of the costs of monitoring   
The costs of operational monitoring systems using satellite data range from 0.25 US$/km2 in 
Brazil, to 25 US$/km2 in Vanuatu, the latter including co sts for developing the system, the 
former reflecting a long tradit ion and routine system in place at institutional level (Achard, 
200889). The planned global FAO FRA 2010 Remote Sensing Survey will cost 0.15 US$/km2, 
which includes development of the system.  
Satellite monitoring needs to be integrated wi th on-site measures for data validation and 
compliance checking. Additional costs for ground survey show a wide variation, depending on plot size and the targeted accuracy level, from about 330 US$/ha in plots smaller than 10 
ha to less than 1 US$/ha in plot s larger than 10,0 00 ha (Brown, 2008)
90. 
Some further cost estimates at th e national level are provided below. 
Examples of cost estimates at national level  
Vanuatu  Remote sensing survey 
~ 300,000 US$ for 1.2 million ha of Land (80 Islands) 
i.e. ~ 25 US$ / km2 (includes development of the system) 
French Guyana  Remote sensing survey 
~ €670,000 for 8.5 million ha of Land (Biomass assessment: €30,000; area assessment: 
€640,000. It includes development of the system. It is a sampling system with the 
interpretation of 17,000 ‘sites’) 
i.e. ~ 8.4 € / km2 (Most of the costs for area assessment are due to the purchase of SPOT 
imagery for year 2006). 
Indian bi-annual surveys 
~ 1 + 1 M US$ / survey for 330 million ha of Land (1 M US$ for field survey; 1 M US$ for 
RS-based area assessment) 
i.e. ~ 0.60 US$ / km2 (routine system which doe s not include cost of development of the 
system but includes field survey) 
Brazilian  annual satellite surveys (PRODES):  
~ 1 M US$ / year for 400 million ha Forest 
                                                 
89 Deforestation in Tropical countries: use of satellite remote sensing in detecting and monitoring forest 
area change. JRC, presentation at UNFCCC Workshop on Methodological issues relating to Reducing 
emissions from deforestation and forest degradation in developing countries. Tokyo, June 2008 
90 Assessment of the advantages and limitations of ground based surveys and inventories. UNFCCC 
Workshop on Methodological issues relating to Reducing emissions from deforestation and forest 
degradation in developing countries. Tokyo, June 2008 
 
EN 65   EN i.e. ~ 0.25 US$ / km2 (routine system which doe s not include cost of development of the 
system) 
FAO FRA 2010 Remote Sensing Survey 
~ 5 M US$ for 3 billion ha of Land area (corresponding to 30 milli on ha of analyzed satellite 
imagery i.e. a sampling of 1% of the Tropics) 
i.e. ~ 0.15 US$ / km2 (includes development of the system) 
 
EN 66   EN Annex 5 
State of play in relation to monitoring  at national and international level 
At world level, the results of the FAO globa l forest resources assessments (FRA) process 
constitute the main source of gl obal data on forest resources, a nd are widely used by countries 
and international organisations for policy de velopment and implementation. FAO has carried 
out these assessments at 5 to 10 year interv als since 1946. Since the first assessments, the 
scope has expanded and comprises today more th an 40 variables related to the status and 
trends of forest resources and th e goods and services they provide91. In particular, FRA data 
are used for monitoring progress towards the Millennium Development Goals by the 
international environmental conventions: UNF CCC, UNCCD and CBD, as well as by the 
UNFF and the ITTO.  
At EC level, the JRC has longstanding expertis e in the use of remote sensing techniques for 
estimating tropical forest cove r changes. Initiated in th e early 1990s, the JRC TREES 
(Tropical Ecosystem Environment observation by  Satellite) project wa s designed to develop 
forest cover assessment throughout the tropics . The second phase of the TREES project 
(TREES II, 1996-2002) developed a new remote sensing-based approach and produced more 
accurate estimates than previously available, on the state of humid tropical forest ecosystems 
(Achard et al., 2002). 
JRC and FAO  are now collaborating to carry out the Global Remote Sensing Survey in the 
framework of FRA 2010 (so calle d FAO FRA 2010 RSS) and JRC will carry out  the survey 
over the Tropics and Eurasia92. The programme will lead to scie ntific and technical outcomes 
(e.g. estimates of forest cover changes at global and regiona l level) by 2011. The 
methodology and results will be made available to developing countries for capacity-building and will be submitted to national experts for peer review. However, it has to be noted that FAO has an UN institutional mandate to collect national data on forest resources and their changes but not to perfor m the task of forest cover monitoring. This remains the responsibility 
of individual Governments.  
In addition to these initiatives, GEOSS
93 (Global Earth Observation System of Systems) is an 
ambitious programme of information for ecological  security and durable development. It is 
geared to the monitoring and understanding of e nvironmental features, th e extent of disasters 
due to human activities, th e impact of global warming, desertification, erosion and 
deforestation. Regarding monitoring of defo restation and forest degradation, GEOSS is 
planning to launch "GEOSS Forest mapping for Carbon tracking", probably based on 
advanced satellite radar technology. GMES94 (Global Monitoring for Environment and 
Security) is the main European contribution to GEOSS. 
An example of successful EU support95 that could be promoted to other tropical regions is 
OFAC ( Observatoire des Forest d'Afrique Centrale ), a monitoring centre to reinforce 
monitoring of Congo basin forests.  The EC is also actively participating in the work of the 
                                                 
91 www.fao.org/forestry/fra2005  
92 Three JRC specific projects are involved: TREES-3, MONDE and FOREST. 
93 http://www.earthobservations.org/ 
94 http://www.gmes.info/ 
95 EC together with France, US, Germany and several international NGOs in the framework of Congo 
Basin Forest Partnership 
 
EN 67   EN Global Observations of Forest and Land Cove r Dynamics (GOFC/GOLD), an international 
technical panel of remote sensing experts within GTOS96. An ad-hoc group on the REDD 
theme started at the end of 2005 and led to a sourcebook of methodologies for REDD97, of 
which the first version was presen ted at the UNFCCC COP 13 in Bali.
                                                 
96 GTOS: Global terrestrial Observing System, progra mme for observations, modelling, and analysis of 
terrestrial ecosystems to support sustainable development. http://www.fao.org/gtos/ 
97 http://www.fao.org/gtos/gofc-gold/ 
 
EN 68   EN Annex 698 
Summary of land-use models Global Timber Model (GTM) 
The global timber model was developed over a numb er of years and is used widely for policy 
analysis, including conservation policy, carbon  policy, and exchange rates. The model 
maximises the net present value of consumer's  plus producer's surplus in timber markets. 
Because forestry land competes with agricult ure for land, it models the interaction between 
the two markets via land supply functions that  account for the costs of renting forestland. 
These land supply functions ar e specified for each of the 13 timber supply regions in the 
model. They either are constant (for temperat e regions) or shift over time (tropical regions), 
depending on assumptions about future de velopment of agriculture in each region. 
DIMA (Dynamic Integrated Model of  Forestry and Alternative Land Use) 
The model is based mainly on a global affore station model and calculates the net present 
value of forestry compared to the net presen t value of agriculture with equation. The main 
drivers for the net present va lue of forestry are income from carbon sequestration, wood 
increments (timber sales), rotation period le ngth, discount rates, pl anting costs and wood 
prices. Main drivers for the ne t present value of agriculture  on current forest land are 
population density, agricultural suitability and risk  adjusted discount rates. These two values 
are compared against each other and deforestation is subsequently predicted to occur when the 
agricultural value exceeds the forest value by a certain margin. If deforestation occurs the speed of deforestation is constr ained. The speed of deforestati on is a function of sub-grid (0.5 ˚ 
x 0.5 ˚) forest share, agricultural suitability, population density and economic wealth of the 
country. 
GCOMAP Model Description 
GCOMAP is a dynamic partial equilibrium mo del (Generalized Comprehensive Mitigation 
Assessment Process, GCOMAP) built to simulate  the response of the forestry sector to 
changes in future carbon prices. GCOMAP's ma jor goal is to make use of detailed country-
specific activity, demand and cost data availa ble, mitigation options and land-use change by 
region. The model permits explicit analysis of the carbon benefits of re ducing deforestation in 
tropical countries. It establishes a reference cas e level of land use base d on historical trends 
and government plans, absent carbon prices, for the period from 2000 to 2100. It then 
simulates the response of forest land users (farmers) to changes in prices in forest land and 
products, and prices emerging in carbon markets. The objective is to estimate the land area that land users would plant above the reference case level, or prevent from being deforested, 
in response to carbon prices. The model then estimates the net changes in carbon stocks while meeting the annual demand for five timber and non-timber products. Table 1 provides a list of 
the key features of the model, which covers ten world regions. 
                                                
 
98 Source: Appendices of Kindermann et al (2008)