Commission staff working document accompanying the communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - Addressing the challenges of deforestation and forest degradation to tackle climate change and biodiversity loss - Impact assessment {COM(2008) 645 final} {SEC(2008) 618} {SEC(2008) 2620}
Date: 2008-10-17
Institutions: European Commission
Subjects: EU action, EU environmental policy, climate change, deforestation, environmental monitoring, forest conservation

EN 

EN 

   EN 

 
 
COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 17.10.2008 
SEC(2008) 2619 

COMMISSION STAFF WORKING DOCUMENT 

accompanying the 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

Addressing the challenges of deforestation and forest degradation to tackle climate 
change and biodiversity loss 

IMPACT ASSESSMENT 

{COM(2008) 645 final} 
{SEC(2008) 2618} 
{SEC(2008) 2620} 

EN 

   EN 

 
 
 
 
 
 
 
Executive summary 

On a global scale, net deforestation is most prevalent 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 significant decrease in the deforestation rate has been recorded.  

The  causes  of  deforestation  and  degradation  include  a  combination  of  direct  and  indirect 
economic,  institutional,  political,  natural  or  social  factors:  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 consequences 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  Communication  “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 deforestation and forest degradation, in addition 
to  the  other  measures  put  forward.  Tackling  deforestation  and  degradation  should  also 
safeguard to the maximum extent possible biodiversity and the ecosystem goods and services 
it can provide. Doing so could support local populations, 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 deforestation by at least 50 % by 2020 compared to the current levels. A 
number of options are examined with this aim in mind.  

Business as usual would be unsatisfactory on a number of counts. A first option of promoting 
a Multilateral Environmental Agreement on halting and reversing deforestation is discarded as 
unfeasible  at  present.  A  second  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 responses. 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 Mechanism (Option 3a) generating a financial 
stream through auctioning revenues from emissions 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 

2 

   EN 

 
is  a  combination  of  strengthening 

  existing 
The  preferred  option  until  2020 
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)  could  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  elaboration,  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 
2009.
negotiations 

December 

in 

EN 

3 

   EN 

 
TABLE OF CONTENTS 

Procedural issues and consultation of interested parties .............................................. 5 

Reference to Agenda Planning and Work Programme ................................................ 5 

Chronology and ISG Experience ................................................................................. 5 

Stakeholder consultation .............................................................................................. 6 

Summary of consultation ............................................................................................. 7 

Impact Assessment Board opinion............................................................................... 7 

Problem definition........................................................................................................ 8 

Current forest coverage and loss .................................................................................. 9 

Causes of the deforestation ........................................................................................ 10 

The effects of deforestation........................................................................................ 12 

The baseline ............................................................................................................... 15 

EU right to act and value added by EU actions ......................................................... 23 

Objectives................................................................................................................... 23 

General Policy Objective ........................................................................................... 23 

Specific Policy Objective........................................................................................... 23 

Operational objectives................................................................................................ 24 

Consistency with other EU policies ........................................................................... 25 

Criteria to assess whether the objectives are reached ................................................ 25 

Policy options............................................................................................................. 26 

Baseline option: business as usual ............................................................................. 26 

Option 1: Promote a Multilateral Environmental Agreement (MEA) on Forests...... 26 

Option 2: Tighten existing policies/instruments ........................................................ 26 

Option 3: Raise new funds (via the carbon market) for halting deforestation and 
forest degradation....................................................................................................... 29 

Analysis of impacts .................................................................................................... 36 

Analysis of option 2 ................................................................................................... 36 

Analysis of option 3 ................................................................................................... 36 

The preferred options ................................................................................................. 45 

Next Steps .................................................................................................................. 46 

Monitoring and evaluation ......................................................................................... 48 

ANNEXES ................................................................................................................. 54 

1. 

1.1. 

1.2. 

1.3. 

1.4. 

1.5. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

4. 

4.1. 

4.2. 

4.3. 

4.4. 

5. 

5.1. 

5.2. 

6. 

7. 

8. 

9. 

EN 

4 

   EN 

 
1. 

PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES 

1.1. 

Reference to Agenda Planning and Work Programme  

The  Communication  is  planned  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 parties1 in December 2007, and in February 
and June 2008. Written comments were received and were taken into account in drafting the 
impact assessment and the policy proposals themselves.  

Policy context 

In  January  2007,  the  Commission  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  without  reducing  greenhouse  gas  emissions  from 
deforestation  and  forest  degradation,  in  addition  to  the  other  measures  put  forward.  EU 
Environment  Ministers  adopted  Conclusions  on  the  Communication  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 within the next two to 
three decades.  

In  September  2007,  the  Commission  adopted  a  Communication3  on  Building  a  Global 
Climate Change Alliance (GCCA) with Developing Countries. The Communication identified 
the  reduction  of  deforestation  as  one  of  five  key  areas  for  action.  The  recent  Commission 
paper  introducing  the  Implementation  Framework  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 Convention 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 topics 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 forests and enhancement of forest carbon stocks in 
developing countries”. 

1 
2 
3 
4 

RELEX, DEV, AGRI, ENTR, TREN, AIDCO, TRADE, JRC 
COM(2007) 2 
COM(2007) 540 
SEC(2008)  

EN 

5 

   EN 

 
                                                 
To  streamline  international  commitments  for  biodiversity  conservation  at  EU  level,  the 
Commission  adopted  in  May  2006  a  Communication  on  Biodiversity  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 commitment to reverse the loss of biodiversity in the revised Strategy 
for  Sustainable  Development  and  in  the  recent  UN  Convention  on  Biological  Diversity 
(UNCBD)  Conference  of  the  Parties  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 deforestation 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 degradation in developing countries, means that the 
time is right for policy proposals through which the 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  negotiations  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 countries) will intensify on 
the way towards the Copenhagen conference and the European Commission can play a pivotal 
role in coordinating Member States' actions and pooling resources at European level.  

The  policy  proposal  put  forward  by  the  Commission  addresses  deforestation  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  drivers  and  possible  policy 
responses, and broad and active public participation was recorded.  

An expert meeting was convened on 6 June 2008 to discuss specific technical and financial 
issues  linked  to  the  avoided  deforestation  debate.  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 context of Forest Law Enforcement Governance 
and Trade (FLEGT) VPA processes.  

EC  and  EU  Member  State  contributions  for  the  UNFCCC  negotiations  in  Accra,  during 
August  2008,  are  reflected  in  this  document.  Information  was  collected  during  a  workshop 
organised by the French Presidency in Montpellier, on 7-8 July 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 developing 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 

6 

   EN 

 
                                                 
the forthcoming COP 15 in Copenhagen at the end of 2009. International consultations on the 
Bali Action Plan, including REDD discussions, between the EU, MS and all parties signatory 
to the Convention take place on a regular basis and they are likely to intensify further in the 
run-up to the end of 2009. 

The Commission’s minimum standards for public consultation have been met.  

1.4. 

Summary of consultation 

A  total  of  366  respondents  participated  in  the  online  public  consultation,  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  States.  The  UNFCCC  and  CBD 
processes  are  considered  relevant  to  this  issue  and  the  need  to  reward  carbon  emission 
reduction by halting deforestation and forest degradation is acknowledged.  

Suitable  measures  to  fight  tropical  deforestation  are  identified  at  the  consumer  level 
(purchasing legally and sustainably produced wood products; reducing waste and recycling). 
The  main  perceived  deforestation  drivers  are  land  conversion  for  agricultural  purposes, 
mining and quarrying, unclear land-use policies and tenure rights (ineffective governance in 
general) and little consultation of civil 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% also considered that this target was not 
ambitious enough. The contribution of internal and 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  essential  to  put  in  place  an  effective  monitoring 
system at international level, as well as developing and improving national forest inventories. 
Third party monitoring is supported by 60% of the respondents.  

The  messages  from  the  Green  Week  deforestation  session  in  June  2008  confirmed  what  is 
indicated above; in particular they indicate the need to/for:  

•  support developing countries in improving governance,  

•  incentive  schemes  to  avoid  deforestation  and  to  sequester  carbon  but  also  for 

biodiversity and ecosystem services,  

•  define baselines to quantify deforestation in time and space,  

•  a change in consumption patterns to avoid exporting products in demand leading 

to deforestation.  

1.5. 

Impact Assessment Board opinion 

In  drafting  this  final  report,  the  recommendations  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  deforestation,  on  the  amount  of  funding  that 

EN 

7 

   EN 

 
would be necessary to induce those concerned to refrain from deforestation, as well as more 
discussion  on  non-financial  incentives  and  on  issues  requiring  further  analysis.  More 
precisely, it sought clarification as follows: 

•  Explain what lessons have been learnt from ongoing actions on deforestation (by 

assessing critical success factors for funding and lessons learnt). 

•  Discuss the issue of the uptake of the planned financial incentives. 

•  Develop alternative options (within option 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  Assessment  Report  takes  fully  into  account  the 
recommendations  of  the  IAB.  Section  2.4.1  (bilateral  initiatives  on  forest  conservation) 
contains  an  extended  analysis  of  alternatives  as  well  as  the  lessons  learned.  Section  5.2.2 
contains a more in-depth analysis of the expected uptake and in particular provides detail on 
the  trade-offs  with  alternative  land  uses  in  the  major  countries  and  the  amount  of  funding 
needed. Section 4.4.3 (Item 4 Permanence) includes re-verification and liability 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 CDM 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  environmental  goods  and  services  due  to  forest 
degradation.  

Definitions of deforestation and degradation 

The term deforestation is used quite variably, so it is important to clarify 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  uses"  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 cover 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 avoid deforestation than to deforest and reforest 
subsequently: deforestation leads to some irreversible effects in terms of biodiversity loss and 

6 
7 

UNFCCC (2001): COP-7: The Marrakech accords. (Bonn, Germany: UNFCCC Secretariat) 
Cf FAO, 2005 

EN 

8 

   EN 

 
                                                 
soil degradation for instance. Old-growth natural 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  CO2  than  their  regrowth  will  absorb,  and  even 
mature plantations are almost always net emitters of carbon. Furthermore, the disturbance to 
soil and the previous vegetation caused by commercial logging and replanting causes woody 
debris, litter and soil organic matter to decompose and release carbon (Luyssaert 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  characterised  by  a  reduction  of  tree  cover.  Routine 
management  from  which  crown  cover  will  recover  within  the  normal  cycle  of  forest 
management operations is not included” . 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 and reliable forest inventories. However, all 
the  information  contained  in  this  section  comes  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 restricted 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  forested  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 biomass in tropical rain forests has a particularly 
high carbon stock, holding on average 50 % more carbon per hectare than forests in temperate 
and boreal areas8. 

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 deforestation in tropical regions at 11.3 million ha 
per year). In the past 20 years, no significant decrease of deforestation 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 
9 

Houghton, 2005 
JRC estimate based on FAO data (FAO, 2006) 

EN 

9 

   EN 

 
                                                 
The  ten  countries  with  the  largest  net  forest  loss  per  year  between  2000  and  2005  (Brazil, 
Indonesia,  Sudan,  Myanmar,  Zambia,  United  Republic  of  Tanzania,  Nigeria,  Democratic 
Republic of the Congo, Zimbabwe, Venezuela) had a combined net forest loss of 8.2 million 
hectares per year10.  

2.2. 

Causes of the deforestation  

In  most  cases,  drivers  of  deforestation  are  a  combination  of  direct  and  indirect  economic, 
institutional, political, natural or social factors. 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 interrelated; 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 
11 

FAO, 2007 
Geist and Lambin, 2002  

EN 

10 

   EN 

 
 
                                                 
2.2.1.  Direct causes: Land-use changes 

The diverse drivers of deforestation, many of which 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 needed to grow food and non-food crops and to 
expand pasture for livestock production. A substantial and increasing share of deforested land 
is  also  converted  to  expanding  intensive,  large-scale  production  of  soybeans  and  other  feed 
crops. This is driven mainly by the sharp increase 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 exert further pressure on forest resources. 

Some general trends can be identified at continent level: in Africa, the main drivers of forest 
clearing  are  small-scale  subsistence  farming  and  demand  for  firewood.  In  South  America, 
agricultural expansion is directed towards beef and soya production 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 natural resources is frequently a destructive activity that damages 
forest  ecosystems,  causing  problems  for  people  living  near  to  and  downstream  of  mining 
operations. Large-scale mining operations, especially those using open-pit mining techniques, 
can  result  in  significant  deforestation  through  forest  clearing  and  road  construction  which 
open  remote  forest  areas  and  provide  access  for  settlers  and  small-scale,  sometimes  illegal, 
miners.  Mining  as  a  significant  driver  of  deforestation  has  been  reported  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 

11 

   EN 

 
 
                                                 
Infrastructure development  

Development  of  new,  or  expansion  of  existing,  infrastructures  such  as  roads,  urban  and 
industrial  settlement,  energy  plants  and  lines  contribute  to  the  deforestation  process.  New 
forest roads can also provide farmers with easier access to previously inaccessible land, thus 
extending the agricultural frontier. 

Unsustainable and illegal logging  

Wood demand can be satisfied through utilisation of natural and semi-natural forests by either 
selective  logging  or  clear  cutting,  or  through  forest  plantations.  Unsustainable  and  illegal 
logging,  mainly  targeting  high  commercial  value  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  actors  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 are often unclearly defined; 

Corruption  frequently  undermines  effective  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 country 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 and/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  recognised  that  policies  outside  the  forest  sector,  such  as  land 
planning, infrastructure development, mining/quarrying, 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  deforestation  contribute  to  severe  climate-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  forest-dependent  people 
and  the  supply  of  timber  and  non-timber  forest  products  for  future  generations.  It  can, 

EN 

12 

   EN 

 
however,  also  lead  to  increased  economic  revenues  arising  from  alternative  land  uses,  in 
certain  cases  accruing  benefits  to  a  limited  number  of  people.  These  economic  and  social 
outcomes affect different populations across 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-ground 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 than in non-tropical forests. 
The average biomass of tropical forests is estimated 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  CO2.  But 
uncertainty remains about the exact quantification 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 CO2, slightly higher than the annual 
decrease for the period 1990 to 2000 which was estimated at 5.2 Gt CO2. 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  estimated  net  loss  in  carbon  stock  from  living 
biomass was, according to the FAO, particularly high in South and Southeast Asia (13.6 Gt 
17),  Central  and  South  America  (10.6  Gt  CO2)  and  Africa  (5.1  Gt  CO2).  In  all  other 
CO2
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 CO2. This includes 
emissions from deforestation, decay, peat soils and other sources, having 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 CO2 at the low end to 
10 Gt CO2 at the high end, with an average of 6 Gt CO2

18.  

13 
14 

15 
16 
17 
18 

Millennium Ecosystem Assessment, 2005 
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. 
Houghton, 2005.  
Kindermann et al., 2006 
FAO FRA 2005 report 
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 

13 

   EN 

 
                                                 
Much  uncertainty  remains  on  how  to  measure  gross  and  net  deforestation  and  the  resulting 
emissions of deforestation and forest degradation. This uncertainty is caused by, for instance, 
the  difficulty  of  measuring  degradation  itself,  the  difficulty  of  capturing  in  the  estimates  all 
potential sources and sinks (only above ground or including the soil, only living biomass or 
also decay and peat) and understanding and modelling the correct processes associated with 
these different sources and sinks.  

Nevertheless, it is clear that emissions from deforestation and forest degradation are of great 
magnitude. As such, reducing them is a mitigation option offering significant and immediate 
carbon  emission  impact  in  the  short  term,  because  large  amounts  of  carbon  (about  350-900 
tCO2/ha) would not be released into 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  Brazil,  Colombia  and  Indonesia 
are home to the greatest plant biodiversity in the world.  
The  study  on  the  "Cost  Of  Policy  Inaction  (COPI):  the  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 quantitative terms (using the mean species abundance 
indicator22)  and  in  monetary  terms,  using  valuation  studies  for  biodiversity  and  ecosystem 
services. Overall, it is estimated that tropical forests and tropical woodland will together 
lose  some  13%  of  their  original  biodiversity  by  2050  if  no  preventive  action  is  taken. 
Details are provided in Annex 2. 
Loss  of  forests  translates  into  biodiversity  loss  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  erosion,  water  supply,  local  climate 
regulation and protection from the risk of natural disasters. Besides a climate mitigation role, 
avoided deforestation is also an important climate adaptation measure.  
One  example  of  loss  of  potential  revenues  is  given  by  bio-prospecting:  40-50%  of 
pharmaceutical drugs in the market have an origin 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. 

19 

20 

21 

22 

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) 
Forthcoming  IIASA  and  MNP  study  and  Staff  working  document  accompanying  the  Communication 
“Limiting Global Climate Change to 2 degrees Celsius - The way ahead for 2020 and beyond” (SEC 
(2007) 7) 
See in particular the Economics of Ecosystems and Biodiversity. TEEB. Interim report for analysis of 
biodiversity and ecosystem service impacts. 
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 biodiversity valuation studies. Therefore, its results give 
a representation of the whole knowledge currently available on the topic.  
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 

14 

   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 some 14% greater when placed under sustainable 
forest  management.  In  Mount  Cameroon  (Cameroon),  a  comparison  between  low-impact 
logging  and  land-use  change  found  that  private  benefits  favour  conversion  to  small-scale 
agriculture.  Social  benefits  from  non-timber-forest  products  as  well  as  global  benefits  from 
carbon sequestration were highest under sustainable forest management. Overall, the TEV of 
sustainable forestry was 18% greater than small-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 employment, as can the alternative land uses which 
follow from forest conversion. On the other hand, communities which have traditionally used 
a wide range of forest products for their livelihoods can be adversely affected. Hence, poverty 
and the loss of ecosystems and biodiversity are intertwined.  

Forest  degradation  can  be  a  source  of  intense  conflicts  between  rural  populations, 
governments, commercial interests and, increasingly, 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 are almost wholly dependent on forests for 
their livelihoods.  

Broadly speaking, policies intended to preserve forests and prevent 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 baseline policies currently in place and having an 
impact on deforestation and the baseline scenarios of the models used for analytical purposes, 
which  do  not  take  into  account  all  the  existing  policies,  as  models  are  necessarily  a 
simplification of the reality.  

As  explained  in  previous  sections,  the  Communication  put  forward  by  the  Commission 
focuses  on  deforestation  and  forest  degradation  in  developing  countries,  as  agreed  in  the 
UNFCCC  Bali  Action  Plan.  This  means  that  mainly  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  deforestation.  The  baseline  scenario,  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 conserving wild nature. Science, Vol. 297, 950-953 

EN 

15 

   EN 

 
                                                 
overview  of  bilateral  and  multinational  initiatives  is  provided  below,  with  a  more 
comprehensive review in Annex 3. 

2.4.1.  Baseline policies 

This  section  presents  a  brief  overview  of  bilateral  and  multinational  initiatives  and  policies 
having  an  impact  on  deforestation.  However,  it  has  to  be  emphasised  that  forestry-relevant 
policies  are  not  restricted  to  the  forest  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 conservation 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 international political agenda for the past two 
decades.  Several  processes  and  organisations  are  currently  geared  to  promoting  sustainable 
forest  management  and  reducing  deforestation:  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  Environment  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  prove  possible  to  agree  a  legally  binding 
framework  for  forests.  Instead,  the  Conference  adopted  the  non-legally  binding  Forest 
Principles24  and  Agenda  21  –  a  comprehensive  programme  for  global  action  on  sustainable 
development – which included a chapter on combating deforestation.  

During the 1990s the international community continued to develop global 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 international 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  overall  objectives  of  the  Agreement  are  to 
promote  the  expansion  and  diversification  of  international  trade  in  tropical  timber  from 
sustainably  managed  and  legally  harvested  forests  and  to  promote  the  sustainable 
management  of  tropical  timber-producing  forests.  The  Agreement  does  not  include  specific 
provisions on deforestation or quantitative targets.  

At its sixth meeting in February 2006, the United 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 

16 

   EN 

 
                                                 
forest  management, 

of  which  objective  1,  aiming  to  "reverse  the  loss  of  forest  cover  worldwide  through 
including  protection,  restoration,  afforestation  and 
sustainable 
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  are  non-binding  for  the  individual  country,  agreeing  to  work 
globally and nationally to make progress towards 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  UNFCCC25  are  relevant  to  deforestation.  Article  4,  in 
particular, provides that all Parties 

(a)  taking  into  account  their  common  but  differentiated  responsibilities  and  their 
specific national and regional development priorities, objectives and circumstances, 
shall: […] 

(b)  Formulate,  implement,  publish  and  regularly  update  national  and,  where 
appropriate, regional programmes containing measures to mitigate climate change by 
addressing  anthropogenic  emissions  by  sources  and  removals  by  sinks  of  all 
greenhouse gases not controlled by the Montreal Protocol, and measures to facilitate 
adequate adaptation to climate change; 

(c)  Promote  and cooperate  in the  development, application and diffusion, including 
transfer,  of  technologies,  practices  and  processes  that  control,  reduce  or  prevent 
anthropogenic  emissions  of  greenhouse  gases  not  controlled  by  the  Montreal 
Protocol in all relevant sectors, including the energy, transport, industry, agriculture, 
forestry and waste management sectors; 

(d) Promote sustainable management, and promote and cooperate in the conservation 
and enhancement, as appropriate, of sinks and reservoirs of all greenhouse gases not 
controlled by the Montreal Protocol, including 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  developing  countries,  the  clean  development 
mechanism  (CDM)  established  the  framework  for  financing  projects  to  reduce  emissions  or 
enhance  removals. However,  among  the  potential  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 emissions times 5) for the use of land-use, land-
use change and forestry (LULUCF) projects applies. So far, the use of CDM afforestation and 
reforestation credits has been limited. 32 LULUCF-related methodologies for CDM projects 
have  been  proposed.  11  large-scale  and  3  small-scale  methodologies  have  been  approved. 
Among  the  1157  CDM  projects  registered  by  the  CDM  Executive  Board  in  mid-September 

25 

Articles 3.3, 4.1b, 4.1c and 4.1d 

EN 

17 

   EN 

 
                                                 
2008, only one is a LULUCF CDM project, 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 deforestation 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  the  first  commitment  period  and,  due  to  the 
limitations  and  drawbacks  of  a  project-based  approach,  the  CDM  at  this  stage  is  not  an 
appropriate means to generate incentives for the 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  deforestation  and  forest  degradation  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 international climate change 
agreement  to  be  finalised  by  December  200926.  A  specific  decision  on  reducing  emissions 
from deforestation in developing countries (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; encourages Parties to the UNFCCC to launch capacity-
building, technical assistance and technology transfer in order to support the development of 
these  policy  approaches  in  developing  countries;  and  finally,  encourages  Parties  to  the 
UNFCCC  to  undertake  demonstration  activities  in  the  field  of  reducing  emissions  from 
deforestation  and  forest  degradation  in  order  to  support  the  development  of  the  UNFCCC 
REDD approach. REDD may lead to the development of an international financial mechanism 
to  address  deforestation  and  forest  degradation  and  thereby  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  established  a  special  project  on  climate  and 
forests.  In  Bali,  Norway  has  committed  up  to  US$600  million  a  year  in  the 
period  from  2008  to  2012  towards  efforts  to  reduce  emissions  from 
deforestation and forest degradation in developing countries. 

At  the  Convention  on  Biological  Diversity  COP  9  in  Bonn,  in  May  2008, 
Germany  pledged  €500  million  between  2009  and  2012  for  protection  of 
forests  and  ecosystems  and  an  additional  €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 
27 

UNFCCC Decision 1/CP.13 
UNFCCC Decision 2/CP.13 

EN 

18 

   EN 

 
                                                 
– 

– 

– 

– 

– 

deforestation.  The  aim  is  to  prevent  deforestation  and  enable  emissions 
reduction on a larger scale than project-based activities. 

The  UK  and  Norway  have  launched  a  US$200  million  Fund  for  the  Congo 
Basin  Forest  to  monitor  forest  depletion  and  promote  economically  viable 
alternatives;  

Australia  launched,  in  2007,  a  US$200  million  fund  (Global  Initiative  on 
Forests  and  Climate)  to  support  forestry  in  selected  developing  countries 
(particularly  in  South-East  Asia  and  the  Pacific).  It  focuses  on  reducing 
deforestation,  encouraging  reforestation,  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  payments.  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  emission  reductions  to  a 
special US$200 million Carbon Fund supported by donor countries, as well as 
the private sector and organisations. Nine industrialised 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  Netherlands  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  Conservancy  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 conserve greenhouse gases in forests, agro-
ecosystems and other ecosystems. Through its focus on carbon sinks, this Fund 
that  comply  with  CDM  or  Joint 
finances 
the  carbon  market. 
these  countries  access 
Implementation,  giving 
Accordingly,  this  Fund  has  focused  mainly  on  afforestation  and  reforestation 
projects but also has a window aimed at testing REDD projects. 

the  generation  of  credits 

to 

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  recent  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 years and have gathered valuable experience. 
Several key general lessons emerge from this area. This includes the need for: 

EN 

19 

   EN 

 
(cid:121) 

(cid:121) 

(cid:121) 

(cid:121) 

(cid:121) 

(cid:121) 

long-term  support,  taking  account  of  the  absorption  capacity  of  institutions  and 
communities, especially in remote or sparsely populated areas, 

participatory national processes to develop consensus on policy, 

inter-Ministerial and inter-sectoral coordination, 

political leadership to counter vested interests, 

public awareness and use of media, 

high-quality research to identify and quantify the contribution of forests to people's 
livelihoods  as  well  as  to  quantify,  as  far  as  possible,  the  value  of  public  goods 
provided by forests. 

UN Convention on International Trade in Endangered Species (CITES) 

The  EC  and  Member  States  actively  implement  a  broad  range  of  biodiversity-related 
international  agreements  that  aim  at  protecting  certain  species,  regions  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  regulating  trade  in  species  (including  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  and  other  biodiversity-related  agreements;  for 
example,  the  2010  target  has  been  taken  up  as  a  central  objective  of  the  Convention  on 
International Trade in Endangered Species (CITES). 

UN Convention on Biological Diversity (CBD) 

The EU ratified the UN Convention on Biological Diversity (CBD) in 1993 and is an active 
player in international biodiversity governance on the world stage. In 2002, the CBD adopted 
its  strategic  plan  which  included  the  overall  target  to  significantly  reduce  the  rate  of 
biodiversity loss by 201028. More recently, the EU played a key role in achieving ambitious 
decisions at the Ninth Meeting of the Parties (COP9) to the CBD in Bonn, in May 2008. The 
global  principle  that  the  production  and  use  of  biofuels  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 negotiations. An Ad Hoc Technical 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 possible actions for REDD do not run counter to the objectives of the 

CBD but rather support the conservation and sustainable use of biodiversity;  

28 

Convention  on  Biological  Diversity  Decision  VI/26  Annex  (Strategic  Plan)  paragraph  11,  see: 
http://www.biodiv.org/decisions/default.aspx?m=COP-06&id=7200&lg=0 

EN 

20 

   EN 

 
                                                 
–  means  to  incentivise  the  implementation  of  adaptation  actions  that  promote  the 

conservation and sustainable 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 progress over time. Instead, 
we  must  rely  on  models  to  provide  estimates  of  the  baseline  scenario.  While  being  a 
simplification of the reality, these baseline scenarios are intended to reflect as fully as possible 
the  extent  and  complexity  of  the  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 projections for emissions from deforestation need to be in line 
with estimates of historic emissions. As such they are also subject to a similar uncertainty in 
terms  of  absolute  quantification  of  emissions  from  deforestation  including  the  type  of 
potential sources and sinks they represent. Understanding the baseline projections for rates of 
deforestation is crucial to understanding the amount 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 sources and sinks. These assumptions increase the 
range of uncertainty. Important assumptions relate to the future governance structure in areas 
with remaining forests, evolution of infrastructure in these areas and the value of other land 
uses that can lead to deforestation (mainly agriculture) that are in turn driven by factors such 
as global and regional changes in population, GDP and energy prices.  

Several  baseline  scenarios  exist  for  deforestation  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 Report on Emission Scenarios (SRES) in 2000. It 
concludes  that  the  more  recent  projections  still  indicate  high  global  annual  net  releases  of 
carbon in the near future that will decline over time29. In the time period up to 2030 highly 
diverse  baselines  are  projected,  some  increasing  and  some  decreasing  already  by  more  than 
50% compared to the current level. 

29 

IPCC, Fourth Assessment Report, WGIII, chapter 3 

EN 

21 

   EN 

 
                                                 
Figure: 
different lines refer to different technical scenarios. 

IPPC, Fourth Assessment report, WG III, Chapter 3, figure 3.10, Baseline land-use change and forestry carbon net emissions. The 

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 period from 2000 to 2005 at 13 million hectares per 
year (FAO, 2006).  

A study by IIASA31 sees deforestation rates decreasing to 8 million hectares by 2025, starting 
from  a  similar  level  in  2005.  This  reduces  emissions  from  deforestation  from  4  Gt  CO2  at 
present to 3.2 Gt CO2 in 2025. Halving deforestation by 2020 would thus require protecting 
around 6.5 (12.5 divided by two) million ha/year compared to today. Stopping deforestation 
by 2030 would require preventing deforestation 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  deforestation  rates  in  the  baseline,  i.e. 
Central  and  South  America,  Africa  and  Southeast  Asia32.  Average  annual  projected  gross 
deforestation in these tropical regions for the period 2005-2030 ranges between 10.6 and 11.7 
million  hectares,  resulting  in  emission  equivalent  to  a  range  between  3.2  and  4.7  Gt  CO2. 
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  into  account  current  and  planned 
initiatives  to  combat  deforestation  as  presented  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  demand  for  agricultural  land  and 
hence reduced forest area. 

30 
31 
32 

Grieg-Gran, 2006.  
Kindermann et al., 2006 
Kindermann et al., 2008 

EN 

22 

   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  shall  contribute  to  ‘preserving,  protecting  and 
improving the quality of the environment’, based inter alia on the precautionary principle. 

However,  the  final  responsibility  for  implementation  of  future  policies  and  internationally 
supported activities to halt deforestation and forest degradation lies 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 deforestation 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 and driving role in the 
battle  against  global  deforestation.  The  EU  now  has  the  opportunity  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 biodiversity loss by halting deforestation and forest 
degradation in developing countries.  

Reaching the 2°C objective is unlikely to be achieved without stopping tropical deforestation. 
Given the scale of emissions from deforestation, any climate change deal that does not fully 
integrate  forestry  will  fail  to  meet  the  necessary  targets.  Forestry,  in  particular  reduced 
deforestation, has the potential to make a substantial and relatively immediate contribution to 
a low-cost global mitigation portfolio33.  

Besides  playing  a  part  in  climate  mitigation,  tropical  forests  can  have  an  important  climate 
adaptation  role  as  they  host  more  than  two-thirds  of  the  world's  plant  and  animal  species34. 
Preserving  tropical  forests  will  therefore  have  significant  positive  effects  on  global 
biodiversity and its related goods and services.  

3.2. 

Specific Policy Objective  

The Commission has already addressed, in its Communication on "Limiting 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 achieving its general policy objective of halting 

33 
34 

Stern, 2008 
FAO, Cattle ranching and deforestation, Livestock Policy Brief n°3 

EN 

23 

   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  reducing  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 next 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  objective.  The  deforestation  baseline  against 
which  the  2020  halving  target  will  be  compared  corresponds  to  the  period  1990-2005.  It 
should  be  noted  that  halting  net  deforestation  would  not  necessarily  mean  that  no  more 
deforestation would occur, but that any deforestation 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 hectare 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 which are at risk of extinction. 

This  is  a  measurable  objective  as  recognised  in  the  UNFCCC  negotiations  and  technical 
discussions. Forest monitoring will, however, need to improve in quality and coverage if it is 
to  be  used  to  assess  performance  in  reducing  deforestation  at  a  country  level.  The 
Communication recognises the need to scale up capacities in developing countries in this area; 
technology  advances  are  making  such  monitoring  easier.  Given  that  a  limited  number  of 
countries contain most of the world's tropical forest area it will be possible to develop tailor-
made  policies  for  specific  country  circumstances.  When  this  approach  is  combined  with 
significant financial resources 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  and  instruments  more  compatible  with 
tropical forests conservation and sustainable forest management in developing 
countries; 

Secondly,  to  develop  effective  ways  to  financially  reward  actions  to  reduce 
deforestation  and  forest  degradation  (REDD)  in  developing  countries,  and  to 
provide the necessary support to develop institutional and technical capacity to 
implement the necessary actions.  

35 

(p.12, COM (2007) 2). 

EN 

24 

   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 developing 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 between policies and having a beneficial impact 
on  developing  countries.  The  aim  of  this  proposal  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  the  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 the 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  measures  proposed;  in  other  words,  the  extent  to  which 
different options reduce deforestation 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 depends on the following main factors: 
1.  Additionality:  The  options  satisfy  the  additionality  criterion  if  they  create  reductions  in 
deforestation  that  are  additional  to  any  reduction  that  would  occur  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 avoided deforestation is 
easily and accurately verifiable. 

The efficiency of the different options depends on the following main factors: 
1.  Start-up  costs,  such  as  installation  of  monitoring  equipment  and  associated  training, 
collection of information to establish a baseline, institutional capacity-building, enforcement 
and other preparedness measures. 
2. Running costs, including administrative 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  following  factors  would  have  to  be  considered 

36 

Adopted by the Council, the European Parliament and the Commission on 22 November 2005. 

EN 

25 

   EN 

 
                                                 
although,  in  practice,  this  will  be  largely  determined  by  the  design  and  implementation  of 
policies in those developing 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 options on local and indigenous communities. 

4. 

POLICY 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-financial measures to reduce deforestation and forest 
degradation,  it  is  reasonable  to  expect  steady  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  world  population  growth  (from  around  6  billion 
now to 8-10 billion by 2050) and growing per capita 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 costs, tropical regions are expected to lose out 
in terms of  public economic  benefits, such as provisioning and regulating  services provided 
by forest ecosystems, including carbon storage.  

4.2. 

Option 1: Promote a Multilateral 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  partly  to  the  fact  that,  as  forests  occupy  large 
areas of land, many states are unwilling to be constrained in the use of such land through an 
international instrument.  

Due to the past history and to the ongoing controversy over the promotion of a specific legally 
binding  MEA  on  forests,  this  option  is  discarded  and  not  analysed  further  in  this  policy 
proposal.  Nevertheless,  the  Commission  will  continue  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  negotiations  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  third  countries.  Therefore,  an  improved  and  more  coherent 
approach  to  tackling  deforestation,  which  ensures  synergy  between  actions  for  international 
governance (through multilateral 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 

26 

   EN 

 
                                                 
and consumption as well as economic and development cooperation could potentially reduce 
the rates of deforestation and forest degradation. 

This  policy  option  pursues  three  tiers  of  policy  interventions  targeted  at  improving/re-
orienting relevant policies, without introducing new financial 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 the 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 legislation and policies; 

–  Ex ante impact assessment of new policy proposals 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 additional options to combat illegal logging40;  

–  Prioritising  funding  under  the  ENRTP  instrument  for  projects  targeting  REDD-related 

topics (i.e. capacity-building, pilot activities at national level); 

–  Supporting  the  shift  towards  second-generation  biofuels  and  other  renewable  energy 
sources which are considered as having a limited impact on third countries' forest and other 
environmental  resources.  With  regard  to  energy  uses  of  biomass,  such  as  the  use  of 
woodchips  for  electricity  generation,  the  Commission  proposes  to  develop  a  specific 
sustainability scheme;  

–  Linked  to  the  above,  developing  and  implementing  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  utilise  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 basic material(s): construction, energy, 
paper and printing services, and furniture. Preliminary Green Public Procurement criteria 
for  these  wood-related  priority  sectors  have  been  developed  and  are  available  online 
(http://ec.europa.eu/environment/gpp/toolkit_en.htm); 

–  Investigating  options  of  providing  trade  concessions  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  period  2012-2015.  In  addition,  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 

39 

40 

EN 

“Europe  2007  –  Gross  Domestic  Product 
http://assets.panda.org/downloads/europe_2007_gdp_and_ef.pdf. 
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 
Due for adoption in September 2008 

and  Ecological  Footprint”, 

available 

at: 

27 

   EN 

 
                                                 
–  Strengthening agricultural research and related dissemination of improved knowledge and 
technology  transfer  to  increase  agricultural  productivity  in  Europe  and  in  developing 
countries in a sustainable manner.  

2nd  tier:  Prioritise  strengthening  of  institutional  and  governance  systems  in  third 
countries 

-  The  Commission  could  consider  as  a  priority,  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 regional processes/initiatives.  

-  Beyond  the  current  FLEGT  scheme  the  EU  will  continue  and  strengthen  its  engagement 
with countries such as China, Japan and Russia 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, requiring adaptation and improvement of national 
capacity  to  respect  the  new  standards,  are  also  expected  as  a  response  to  the  recent 
amendments  in  the  relevant  US  legislation  (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 efficiency. A coordinated approach between the EU 
and  Member  States  is  needed  to  pull  together  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  the  UNCBD  AHTEG  (cf.  chapter  2.4.1)  makes  an 
important contribution to discussions 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  Programme43,  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 
42 
43 

http://www.oecd.org/dataoecd/11/41/34428351.pdf  
http://www.illegal-logging.info/uploads/Guzman0608.pdf 
http://unfccc.int/files/methods_and_science/lulucf/application/pdf/080627_fao01_japan.pdf 

EN 

28 

   EN 

 
                                                 
4.4. 

Option 3: Raise new funds (via the carbon market) for halting deforestation and 
forest degradation  

The analysis of baseline 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 agencies indicate an annual average commitment 
to forestry of US$564 million between 1996 and 2004.  

Hence, additional funding will be required if a substantial reduction in deforestation is to be 
achieved. Funds could be raised domestically or through donor countries, they could be drawn 
from  public  financing  or  be  linked  to  a  market  mechanism.  Existing  international  incentive 
channels, including bilateral and multilateral ODA and specific funds, such as the GEF, can 
be used to fund baskets of national measures aimed at addressing local and regional drivers of 
deforestation (such as subsistence farming, firewood collection, non-enforcement of property 
rights), as opposed to the global drivers such as agricultural or timber exports. Option 3 looks 
at  three  crucial  elements  to  be  considered  when  increasing  the  funding  for  avoiding 
deforestation. 

1. 

2. 

3. 

Firstly,  to  assess  the  potential  impact  of  increasing  financial  flows  on  the  rate  of 
deforestation and emissions. 

Secondly, to assess what types of policy instruments in the area of deforestation are 
necessary to distribute these financial flows.  

Finally,  to  assess  from  which  sources  these  additional  financial  flows  could 
realistically come. More specifically, the carbon market is widely seen as a potential 
source  for  such  funding  for  avoided  deforestation.  In  this  context,  two  principal 
options will be further examined, i.e. (i) the use of auctioning revenues and (ii) the 
creation  and  recognition  in  the  carbon  market  of  emission  reduction  credits  from 
reduced deforestation and forest degradation. 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 emission trading system (EU ETS) are largely allocated 
for free. Under the EU climate change and energy package, the Commission proposes to make 
auctioning as of 2013 the general principle of allocation 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 deforestation. Beyond 2012, use of an unquantified 
part of the auctioning proceeds for tackling forest 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 revenues into avoided deforestation are also being 

EN 

29 

   EN 

 
discussed in the legislative proposals 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,  however,  ensure  that  substantial  and  predictable 
revenues would be generated.  

The  Global  Forest  Carbon  Mechanism,  in  principle,  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 other 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 the 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  deforestation  or  forest  degradation.  Afforestation  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  credits  from  reduced  deforestation  and  forest 
degradation  (REDD)  should  build  on  the  lessons  learnt  from  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  for  reduced  deforestation  for  compliance  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 practical design questions 
will need to be addressed. The broad options and issues for these design parameters are set out 
below.  

EN 

30 

   EN 

 
1/ Geographical coverage 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 – while 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 boundaries 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 actors to shift production from one country to 
another  (market  leakage).  Indeed,  if  avoided  deforestation  programmes  are  too  closely 
focused on a set of selected countries, then timber supply may decrease, prices will rise and 
this situation will be partially rebalanced by increased supply (and increased deforestation) in 
non-participating  countries.  However,  it  has  to  be  noted  that  this  possible  international 
leakage is very unlikely to happen between tropical and non-tropical countries. 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 deforestation activities. If the funding mechanism is 
too closely focused on countries with high deforestation rates, these countries might lack an 
appropriate  incentive  to  maintain  low  deforestation  rates  and  may  succumb  to  deforestation 
pressures that  leak from  countries  with new policies  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  stages  of  development  and  thus  face  different 
responsibilities  and  have  vastly  differing  capabilities,  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  least  developed  countries  such  as  Liberia,  Sierra  Leone  and  Solomon 
Islands might not be suitable for emerging economies 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 level of nationally appropriate mitigation action. 
For  many  countries  in  the  other  category,  due  account  will  need  to  be  taken  of  absorption 
capacity  constraints  (e.g.  owing  to  lack  of  qualified  staff)  and  of  the  need  to  ensure  that 
actions to combat deforestation are consistent with development priorities.  

44 

Stern review (2007), page 245. 

EN 

31 

   EN 

 
 
                                                 
Estimation of the financial value per ha of forest would need to take into account a number of 
factors such as the cost of monitoring and protecting the forest 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  financial  resources  for  the  economic  development  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 important part of the Bali Roadmap negotiations is 
the development of a mechanism to reward reduced emissions from deforestation and forest 
degradation. In the coming months, UNFCCC negotiators will have to decide 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  the  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 Commission45 developed country profiles for 12 
selected  developing  countries,  with  information  on  forests,  deforestation,  drivers  of 
deforestation and forest policies. For the selected countries, two to three quantitative scenarios 
for the evolution of emissions from deforestation 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 forest areas): e.g. India, China 

Criteria  for  determining  the  deforestation  baseline,  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  countries  with  a  high  deforestation  rate,  the 
possibility  of  supporting  forest  conservation  activities  in  countries  with  a  low  deforestation 
rate is being explored (i.e. a PES - payment for ecosystem service - type fund, which could be 
a special window under the proposed Global Forest Carbon Mechanism). For countries with 
currently  increasing  forest  area,  and  past  gross  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  financial  incentives  for  developing  countries  to 
maintain  their  tropical  forests,  a  number  of  critical  organisational  issues  will  have  to  be 

45 
(ENV.C.5/FRA/2006/0071), Ecofys Consortium 

SCOPE OF AN INTERNATIONAL SCHEME TO REDUCE EMISSIONS FROM DEFORESTATION 

EN 

32 

   EN 

 
                                                 
resolved, the main one being that for the financial 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 incentive will also have to cover the costs of 
monitoring, reporting and verification as well as law enforcement.  

Financial incentives need to be based on programmes 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  living  space.  Decentralised  and  small-scale 
redistributive  financial  mechanisms  that  work  on  a  national  and  sub-national  scale,  and  are 
supported through international funds, pose a number of challenges. However, there are quite 
a  few  positive  indications  from  different  parts  of  the  world  that  solutions  are  available  to 
address  small-scale  diversity  and  needs,  such  as  through  micro-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 flexibility 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-efficient 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  nationwide  sectoral  scheme  to  change  their  current 
practices.  All  in  all,  national  implementation  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  continued  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  could  be  individual  forest  owners  or  local 
communities.  This  scheme  would  initially  be  easier  to  implement,  would  accommodate 
different  regional  and  local  circumstances,  and  would  take  advantage  of  within-country 
heterogeneity  in  the  capacity  to  implement  projects  for  reducing  deforestation  and  forest 
degradation. However, projects are limited in scale 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,  reporting  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 would 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  build  momentum  among 
local  stakeholders,  country  agents  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 

33 

   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 and is highly likely with respect to land use that is linked to 
globalised markets like timber, cash crops and biofuels. For this, an approach aiming at global 
coverage of tropical forests, including forest areas showing negligible signs of deforestation 
and forest degradation, would have to be developed. 

4/ Permanence 

The CDM experience is relevant on this issue: CDM credits generated by forestry projects are 
temporary and issued ex post once the emission reduction has been monitored, reported and 
certified.  Projects  and  emission  reductions  are  re-verified  every  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 deforestation, be it project-based or national-based.  

In addition, in a UNFCC Annex I country context, liability as regards possible reversals of the 
sequestration  achieved  by  the  national  forest  is  ensured  through  the  continuous  accounting 
over time of the removals and emissions occurring in this national forest. Such a solution can 
also  be  extended  to  the  context  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  situations  other  environmental  co-benefits  like 
preservation  of  biological  diversity,  watershed  protection,  reduced  risk  of  erosion,  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 incentive 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 directing  incentives coming from  the  Global Forest 
Carbon Mechanism or via forestry emission reduction credits towards actions which generate 
the highest co-benefits. Forestry emission reduction credits could, for instance, be labelled in 
accordance with such benefits (‘gold standard’).  

6/ Timing and Frequency of payments  

Another  organisational  issue  concerns  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  payments  is  also  crucial,  as  is  shown  by  the 
experience with all CDM projects. Funding for capacity-building and for up-front investment 
is usually required before the first revenue from carbon credits is generated. Instalments are 
paid  when  progress  of  the  project  is  established  and  verified  (certified)  on  the  ground. 
Another solution is to make payments at the end 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  related  to  permanence  and  liability.  In  general, 

46 

Sukhdev. 2008. The Economics of Ecosystems and Biodiversity. An interim report. Brussels 

EN 

34 

   EN 

 
                                                 
financial  markets  have  found  effective  and  practical  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  and  the  effectiveness  of  the  new  financial 
mechanism,  as  well  as  compliance  and  enforcement  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 Protocol, some elements of the overall governance 
structure  (e.g.  CDM  Executive  Board,  Compliance  Committee)  could  exist  at  international 
level  and  some  at  national  level  but  the  extent  of  their  mandates,  the  financial  coverage, 
management  and  adaptation  to  national  circumstances  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 baselines, 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 developing  countries.  Where  inventories 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  definitions  and  methods  for  collecting  baseline 
information47. Estimates of deforestation rates vary depending on the definition and methods 
used.  Methods  range  from  visual  photo  interpretation  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  monitoring  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 monitoring - or have institutions in place which 
produce consistent and comprehensive data on forest area and land-use 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 series of data. Without consistent and regular 
data on forest area, no accurate estimates on trends of deforestation 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 

35 

   EN 

 
                                                 
Whatever  option  is  chosen,  it  will  be  essential  to  develop  national  strategies  to  build  forest 
policies and legislation, monitoring, reporting and verification capacity, targeting in the short 
term forest-rich countries and countries where 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 could be easily provided for under 
option 3a), the Global Forest Carbon Mechanism, 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 monitoring 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  emissions  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  million  to  just  under  US$1  billion.  These  costs  could  be 
reduced over time by setting up national plans, building up capacity and learning-by-doing.  

5. 

ANALYSIS OF IMPACTS 

5.1. 

Analysis of option 2  

Option  2  consists  essentially  of  an  incremental  building  up  of  existing  policies  - 
increasing  efforts  across  the  board  of  existing  policies  and  making  sure  they  are  better 
integrated,  and  are  adjusted  according  to  experience.  This  makes  sense  –  the  different 
elements should all contribute towards meeting the objectives - but whilst they will contribute 
towards meeting the target, they will be grossly insufficient. 

Particular attention will be paid to building capacity at national 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  for  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,  improving  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  degradation  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 option 2, the following analysis concentrates 
on option 3.  

5.2. 

Analysis of option 3  

5.2.1.  Global and regional potential and marginal costs 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 CO2 removals by sinks at low cost, 
and can be designed to create synergies with adaptation, conservation of biological diversity 
and sustainable development. The IPCC assessed how sinks could be enhanced in the forest 
sector  through  afforestation,  reforestation,  reducing  deforestation  and  degradation,  and 

EN 

36 

   EN 

 
 
concluded that 65% of the total potential is located in the tropics and about 50% of the total 
could be achieved by reducing emissions 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  GtCO2-eq/yr  in  2030,  in  regional  bottom-up 
studies and global top-down studies, respectively, at carbon prices less than or equal to 100 
US$/tCO2,  as  such  reversing  the  net  emissions  from  deforestation  into  a  net  sink.  Regional 
bottom-up predictions give a reduction estimate for the whole forest sector that is only 22% of 
the value given by global top-down studies. The reason 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 
49 
50 

IPCC, Fourth Assessment Report, Technical Summary, WG III, pg. 69 
IPCC, Fourth Assessment Report, Technical Summary, WG III. pg. 69 
Nabuurs et al. 2007. Chapter 9: Forestry. IPCC, AR4. 

EN 

37 

   EN 

 
 
                                                 
The  IPPC  information  therefore  demonstrates  that  halting  deforestation  in  tropical  countries 
would have dramatic positive effects on CO2 global emissions (of around 3 Gt CO2 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  deforestation.  As  mentioned  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,  Cameroon,  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 for 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 between 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  various  types  of  land  use  in  each  of  the  eight 
countries.  The  last  row  shows  the  annual  costs  per  country  for  a  reduction  of  global 
deforestation by 46%. 

Costs of foregone land use (US$2005/hectare)(medium scenario of one-off timber harvesting) 

US$/hectare 
Annual food crops 

Cameroon  DRC  Ghana  Bolivia  Brazil PNG 

Indonesia  Malaysia

774 

774  

51 
52 
53 

Grieg-Gran, 2006. 
An average exchange rate for 2005 of $1.25 per € is used consistently in this document. 
US$ at 2005 price levels 

EN 

38 

   EN 

 
 
 
 
 
 
 
                                                 
346 

346  

1365  1365  

740 

740  

1180  1180  

1180  1180  

1052  

short fallow 
Annual food crops 
long fallow 
Cocoa without 
marketed fruit 
Cocoa with marketed 
fruit 
Oil palm  

Rubber 
Small scale maize and 
cassava 
Beef cattle 

Dairy  
Soybeans 
Tree plantations 
Manioc/rice/perennials 

Smallholder 
subsistence crops 
Rice fallow 
Cassava monoculture 

1515-
2705 

1515-
2705 

2330-
2705 

1071 

1071

390

2135

2-
626
154  
2135  
2614  
2-
239

1737  

26 
18 

26
1053

Total costs (mln 
$/year) 
Source: Grieg-Gran (2006)54 

191 

276

121

247

1678

281

2059 

183

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  baseline  figure  shows  emissions  from  deforestation 
declining from 4 Gt CO2 at present to 3.2 Gt CO2 in 2025. The study compares the net present 
value  from  forest  or  other  uses  of  land  and  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  harvestable  wood  sales  accounting  for  discount 
rates and planting costs. The net present value of agriculture depends on 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 (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 

55 

Grieg-Gran, M. (2006) The Costs of avoiding deforestation, report prepared for the Stern Review of the 
economics of climate change. IIED, London. 
Kindermann et al., 2006 

EN 

39 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
The IIASA (Kindermann et al. 2006) study finds that the amount of rent is US$1.6 per ton of 
CO2  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 prices 56) in 2025.  

Assuming that there will be leakage on a regional 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  three  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, through 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  CO2 
emissions.  Given  differences  in  the  models  as  regards  assumed  carbon  intensities,  with  a 
carbon  price  of  US$10  per  ton  of  CO2,  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  demonstrates  that  complete  reversal  of  emissions 
from  deforestation  is  possible  around  2030  at  carbon  prices  below  US$100  per  ton  CO2. 
Extrapolating  the  results  of  these  models  suggests  that  in  that  case  annual  costs  might  be 
roughly a factor of two to three higher. Halving global forest loss around 2020 is expected to 
reduce  emissions  by  1.5  to  2.7  GtCO2  per  year.  Stopping  deforestation  reduces  these 
emissions by around 3 to 5 GtCO2 per year.  

56 
57 

The GDP deflator has been used to convert 2000 in 2005 prices.  
Kindermann et al., 2008 

EN 

40 

   EN 

 
                                                 
The results of these models are summarised in the table below:  

Study 

Deforestation 
reduction (%) 

Annual cost in billion 
US$ 

Stern 

IIASA 

46 

50 

3-11 (no leakage) 
Average: 6.5 
No leakage: 4.1 
Regional leakage: 34 
Global leakage: 200-250 

Kindermann 

50 

17-28 

Additional costs (monitoring and 
administration) in billion 
US$/year 

0.25 -1 

In conclusion, in order to reduce deforestation by 50% by 2020 the estimates indicate that an 
amount of between US$3 billion and US$250 billion would be needed, depending largely on 
how leakage is taken into account. In the medium 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 billion 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 further 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 through reduced deforestation, the less needs to 
be reduced by other sources, and vice versa. Furthermore 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 deforestation target in the perspective of global 
climate change policies that include also the other sectors. 

Another open issue that would deserve further work is the analysis of the local capacity for 
uptake of financial resources made available through the Mechanism. Land tenure and rights 
over  forest  management  and  exploitation  are  expected  to  play  a  major  role,  besides  local 
governance structures and effective national/regional law enforcement. With the exception of 
Mexico and Papua New Guinea, where indigenous and other local communities respectively 

58 

UNFCCC. 2007. Investments and Financial Flows to Address Climate Change. Table IV.37, pg.83 

EN 

41 

   EN 

 
 
 
 
                                                 
own some 80 % and 90 % of forests, countries with tropical forests have 77 % of forest land 
publicly owned and 23 % under community/indigenous and individual ownership (White and 
Martin)59.  As  described  in  chapter  4.3.3,  these  elements  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 deforestation, this would provide only a 
fraction  of  the  funding  required  to  cut  emissions  from  deforestation  in  half  while 
approximately 20-30 % of all ODA would actually be needed to achieve this goal. Domestic 
investments, however, are a magnitude higher than international investment flows in forestry. 
All  the  above  projections  clearly  indicate  that  halving  deforestation  by  2020  will  require 
financial support that must come in part from developed countries. 

Compared to this, under the proposed 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 climate 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  billion  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 auctioning are not fully recycled in the EU economy, but are transferred 
to developing countries to reduce emissions from deforestation. 

The EU’s contribution to a Global Mechanism would of course depend upon a fair sharing of 
efforts at the international level, e.g. how many countries would make financial contributions 
and  the  magnitude  of  their  contributions.  Financing  of  mitigation  action  in  developing 
countries  is  one  of  the  key  building  blocks  of  the  Bali  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 forest sector. A more detailed 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 

60 

61 

White  A.  and  Martin  A.,  2002  Who  owns  the  world's  forests?  Forest  tenure  and  public  forests  in 
transition. Forest Trends, Center for International Environmental Law, Washington D.C. 
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 agriculture (UNCTAD, 2005) 
2008/0013 (COD), recital 12 

EN 

42 

   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  inflow  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 emissions from deforestation in 2020. The balance of 
the  potential  supply  of  credits  from  avoided  deforestation  and  demand  for  compliance 
mechanisms depends to a large extent 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 forestry credits to the carbon market. 

However, there is much uncertainty as to how many credits could actually be generated, but 
most models conclude that at a carbon price of €30 per ton of CO 2 (US$45 per ton of CO2) a 
very  high  proportion  of  deforestation  could  be  reduced,  in  the  range  of  several  Gt  CO2  per 
year, especially if forest conservation were also to be allowed in the system.  

Compared  to  this,  the  emission  reduction  foreseen  in  the  ETS  in  2020  with  a  proposed 
62.  If  forestry 
emissions  cap  of  around  1720  million  allowances  is  only  around  0.46  Gt  CO2
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 credits from other CDM/JI projects, the magnitude of 
the supply of emission reduction credits could cause a significant drop in the carbon price. In 
such a case a very large part of the reduction effort in the EU ETS would be offset by avoided 
deforestation  credits,  and  the  EU  would  forego  the  expected  significant  co-benefits  with 
respect to innovation, energy security and air quality. To avoid this, it would be necessary to 
set strict limitations on the inflow of such credits. Such restrictions would lead to a skewed 
demand/supply balance that would see a high price paid for only a limited amount of forestry 
credits  that  are  generated  at  much  lower  cost,  leading  to  significant  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 which 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  deforestation  and  forest  degradation  depends  very 
much  on  the  international  agreement  to  be  concluded  in  Copenhagen  in  2009.  This  will 
determine the overall emission reduction commitments, i.e. demand for credits, and the extent 
to  which  such  forestry  credits  can  be  used  for  compliance  with  post-2012  commitments. 
However, even in the case of an international agreement and developed countries committing 
themselves  to  collectively  reduce  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  confirm  this  hypothesis.  Anger  and  Sathaye  (2008) 
estimate that even when accounting for high transaction 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 

43 

   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  would  reduce  its  emissions  from  forests  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 CO2 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  overall  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  economies  towards  a  low  carbon  society.  The  authors 
conclude,  however,  that  allowing  forestry  credits  for  compliance  could  have  the  effect  of 
tightening  the  carbon  constraints  of  developed  countries  substantially  at  similar  levels  of 
mitigation costs.  

Another ‘grey’ study sponsored by Environmental Defense64 predicts around 1.4 Gt CO2 at a 
carbon price of US$30/ton CO2 (around €20/ton of CO 2). This is a huge amount compared to 
the size of the current carbon market, but as in the previous study, this represents only a rather 
limited share of potentially available forestry credits 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  assumes  an  international  agreement  until  2050 
allowing  for  perfect  foresight  of  the  private  sector  until  then,  which  would  result  in  early 
procurement of forestry credits and banking until 2050. 

Finally, the recent impact assessment accompanying 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  because  of  the  impact  on  the  carbon  price  but  also  because  of 
monitoring  and  compliance  problems65.  These  problems  are:  the  temporary  and  reversible 
nature of LULUCF activities, the fact that these projects cannot physically deliver permanent 
emission  reductions,  the  reduction  in  simplicity,  transparency  and  predictability  of  the  EU 
ETS as well as the fact that the quality of monitoring of reporting of LULUCF emissions is, at 
present, not comparable with the emissions covered 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 determined by the domestic legislation and is not 
likely to be known until after the Copenhagen deal has been struck. 

63 

64 

65 

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.  
Environmental  Defense.  2008.  Reducing  emissions  from  deforestation  and  forest  degradation  in 
developing countries: implications for the carbon market. Washington. 
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 

44 

   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  testing  a  separate  “forest  carbon  market”  which 
could  be  financed  as  part  of  the  Global  Forest  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 commitments by Parties after 2012.  

6. 

THE PREFERRED OPTIONS 

The  preferred  option  is  a  combination  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. Although implementation of option 2 could start in 
the short term, i.e. even before the next commitment period starts in 2013, this option is not 
considered  by  itself  sufficient  to  achieve  the  objectives,  and  it  needs  to  be  combined  with 
option 3.  

Only together with option 3 can an effective 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 issues, ranging from the type of sources addressed 
(only above-ground biomass or also soil), the carbon 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 uncertainties 66; 

effective,  in  that  without  new  and  additional  financial  incentives  it  will  not  be  possible  to 
meet  the  target.  Of  course,  to  ensure  effectiveness  additional  funding  should  only  be  made 
available  to  the  developing  countries  concerned  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 the exact balance will be largely determined by 
local  implementation  and  governance,  particularly  whether  payments  would  reach  those 
decision-makers at the local level that 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 Carbon Mechanism is preferred in the context 
of  an  international  agreement  to  be  concluded  in  Copenhagen  in  2009.  Channelling 
revenue  generated  from  auctioning  of  carbon  allowances  to  reduce  deforestation  does  not 
directly impact on supply or demand in the carbon market. As such it is an option that cannot 
destabilise  the  supply/demand  balance  in  the  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 deforestation 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 

45 

   EN 

 
                                                 
envisaged up to 2020 and as such would jeopardise the medium-term stability of the EU ETS. 
If limits are applied, there is a risk that only a limited amount of credits would enter the EU 
ETS  at  high  price  with  high  rents  for  those  who  can  sell  them.  There  would  be  more 
environmental benefit if financial resources could 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,  especially  if  forestry  credits  can  be  used  for 
compliance  within  a  company-based  system.  Finally,  leakage  would  need  to  be  addressed 
otherwise the overall environmental effect could be worse (less reduction in the EU ETS, no 
real reductions in deforestation 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  respected.  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 need 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 level. Both the issue of leakage and the question of 
liability  give  preference  to  some  extent  to  national  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  parallel  “forest  carbon  market”  which  could  be  funded  as  part  of 
option 3a), the Global Forest Carbon Mechanism.  

These  preferred  options  should  be  supplemented  by  appropriate  national  mitigation  actions, 
including co-funding, in the developing countries concerned. 

7. 

NEXT STEPS  

This impact assessment represents only a first step in a longer process. Indeed, if the principle 
of  a  mechanism  for  reduced  deforestation  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 Copenhagen 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  include  a  comprehensive 

EN 

46 

   EN 

 
strategy  for  scaling  up  finance  to  address  climate  change  including  deforestation.  This  will 
include further analysis in order to test the robustness of the results 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 architecture, 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  about  the  best  and  most 
effective  solution.  Some  important  issues  that  will  need  to  be  taken  into  account  in  the 
negotiation of the eventual funding scheme are: 

(1) the recognition of existing schemes and private sector efforts, to avoid double counting or 
exclusion of initiatives;  

(2)  while  targeting  a  fully  functioning  REDD,  starting  a  stepwise  approach  and  using  pilot 
projects  to  facilitate  countries’  readiness  to  enter  into  the  scheme.  These  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.  forest  ecosystem  goods  and  services  and  their 
contribution towards poverty reduction objectives;  

(4) assuring national sectoral commitments from recipient countries, with particular regard to 
governance, social issues and equity distribution of financial resources and benefits generated 
by the mechanism; 

(5) ensuring that an effective and reliable monitoring and verification system is put in place to 
measure progress and assure compliance 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  REDD  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 deforestation and forest degradation. The experience gained 
within  the  "Global  Energy  Efficiency  and  Renewable  Energy  Fund  (GEEREF67)  and  the 
endorsement  and  support  of  the  EIB  in  regard  to  the  Extractive  Industries  Transparency 
Initiative68 - EITI - could provide useful inputs towards this aim. 

67 

68 

An innovative financing instrument proposed by the 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 America, 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 
http://www.eib.org/projects/news/eib-support-for-the-extractive-industry-transparency-initiative.htm 

EN 

47 

   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 tropical forest area changes is important at 
global and regional level. 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  systems,  making  the  best  use  of  remote  sensing  surveys  where 
feasible. This is the foundation of any reliable forestry data on which to build national forest 
policies  for  sustainable  forest  management  and  conservation.  At  the  same  time,  this  will 
enable  countries  to  fulfil  their  international  reporting  requirements,  e.g.  to  the  UNFCCC, 
CBD, UNFF and to FAO global forest resources assessments; 

b) Inconsistencies in forest definitions and inventory methodologies over time, and the lack of 
regular  inventories,  make  it  difficult  to  obtain  reliable  trend  estimates  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  measure  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  remote  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 area in different biomes/ecological zones. 

e)  Global  and  regional  assessments  need  to  be  validated  and  cross-checked  at  regional  and 
national  level  to  ensure  qualitatively  good  estimates,  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  incentives.  This  depends  to  a 
large  extent  on  the  local  capabilities  and  financial  means  available  to  define  reference 
baselines and to carry out adequate forest inventories at national level;  

2. Within the UNFCCC mandate, monitoring and reporting of GHG emissions is fully under 
the  responsibility  of  the  Parties,  with  periodical  independent  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  process  and  a  decision  is  unlikely  to  be  taken 
before the end of 2009. 

EN 

48 

   EN 

 
3. Besides financially supporting the FAO Forest Resources Assessment (FRA) 2010, the EC 
could  explore  possibilities  within  the  Global  Monitoring  for  Environment  and  Security 
(GMES) programme - and appropriate synergies with the ongoing JRC activities - to develop 
an appropriate institutional framework and contribute to a future  REDD  monitoring  system, 
be it entirely or partly delegated at national level.  

EN 

49 

   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 Resources Thematic Programme (EU) 

FAO  Food and Agriculture Organization 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 Forests 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 

50 

   EN 

 
ODA/OA 

Overseas Development Assistance/Overseas Assistance 

RED(D) 

Reduced Emissions from Deforestation (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 tCO2 

EN 

51 

   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  Market.  Discussion  Paper  08-016.  Centre  for 
European Economic Research. Mannheim 

Bonan  G.B.,  2008,  Forests  and  Climate  Change:  Forcings,  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/docrep/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.,  Sohngen,  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. Knohl, D. Hessenmöller, B.E. Law, P. Ciais & J. 
Grace, 2008, Old-growth forests as global 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  options  for  future  monitoring,  Philosophical 
Transactions of The Royal Society B: Biological 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  Well-being:  Synthesis. 
Island Press, Washington DC. 

Obersteiner, M., Kindermann, G., Rametsteiner, E., and Sohngen, B., 2007, Economics of 
Avoiding Deforestation, Paper presented at the conference on climate change mitigation 

EN 

52 

   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 
e166. 
management 
doi:10.1371/journal.pbio.0060166 

retention. 

carbon 

PLoS 

6(7): 

Biol 

for 

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 Ecosystems 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 International Environmental Law, Washington D.C. 

EN 

53 

   EN 

 
9. 

ANNEXES 

Tropical forests and deforestation 

Annex 1 

Figure 1 shows tropical forest cover and Figure 2 relates this to deforestation (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 

54 

   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  modelling  undertaken  using  the  GLOBIO 
model for the OECD, and are broadly consistent with other modelling exercises such as those 
by the FAO.  
Figure 1, Annex 2: Projected biodiversity change between 2000 and 2050 

Biodiversity change (MSA) within biomes
2000-2050

)

%
A
S
M

(
y
t
i
s
r
e
v
i
d
o
i
B

100%

80%

60%

40%

20%

0%

Intensive agriculture

Extensive agriculture

Cultivated grazing

Managed Forest

Natural

2000

2050

2000

2050

2000

2050

2000

2050

2000

2050

Savanna

Grassland and
steppe

Boreal forests

Tropical forest

Tropical
woodland

Source: COPI study, chap.4, p.62 

In  monetary  terms,  if  nothing  is  done  to  stop  biodiversity  loss  in  tropical  forests  (thereby 
meaning  no  action  to  reduce  deforestation),  the  cost  of  biodiversity  loss  between  2000  and 
2050 is expected to grow to € 536 to 3362 billion in 2050 70.  

Losing biodiversity also means losing ecosystem services provided by that biodiversity. The 
following  table  sets  out  the  main  services  which  would  be  at  risk,  many  of  which  are  non-
marketed.  

69 

70 

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. 
The  COPI  study  uses  two  evaluation  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 elements 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 

55 

   EN 

 
 
  
                                                 
Figure 2, Annex 2: Millennium Ecosystem Assessment description of ecosystem services 

Estimates of the value of ecosystem services loss vary. The most 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 Figure 1 of Annex 2 above. The relevant 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 

56 

   EN 

 
 
 
Annex 3 

Most relevant EC policies and instruments  

1/ Development Cooperation 

The Commission’s Communication on a new EU Development Policy71 elevated environment 
and  natural  resources  from  a  cross-cutting  issue  to  a  key  theme  for  EU  development 
cooperation  –  both  for  the  Community  and  for  Member  States.  Provisions  requiring 
systematically  the  development  of  Country  Environmental  Profiles  are  assisting  the 
integration of forest and biodiversity conservation needs into Country and Regional Strategy 
Papers.  In  September  2007,  the  European  Commission  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 interaction 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 decent work, migration, research and innovation, 
information  society,  transport,  and  energy.  The  overall  conclusion  was  that  coherence 
between  EU  policies  and  development  objectives  has  improved  but  more  can  be  achieved. 
Progress was identified in a number of areas, including: 

trade - especially the negotiation of the economic partnership agreements with ACP 
countries (fostering trade and 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 dissemination of information and good practices. 

Although  the  EU  remains  the  leading  donor  and  the  developing  countries'  most  important 
partner, the amount of financial aid fell in 2007 for the first 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 September 2008, and paves the way for the International 
Conference  on  Financing  for  Development  which  will  be  organised  in  Doha  in  December 
2008.  Of  particular  interest  for  the  REDD  debate  is  that  Member  States  are  invited  to  find 

71 
72 
73 

COM(2005) 311 final  
Commission Staff Working Paper, SEC(2008) 434, accompanying COM (2008) 177 final.  
COM(2008) 177 final, 09.04.2008. The EU - a global partner for development. Speeding up progress 
towards the Millennium Development Goals.  

EN 

57 

   EN 

 
 
                                                 
innovative  sources  of  financing  for  appropriate  measures  to  deal  with  the  effects  of  climate 
change.  

The Action Plan on Climate Change in the Context of Development Cooperation puts forward 
a  concrete  set  of  proposals  to  better  integrate  climate  change  into  the  EU's  development 
cooperation  activities.  These  commitments  were  consolidated  at  the  World  Summit  on 
Sustainable  Development  (WSSD)74  and  at  the  2005  UN  Summit75.  Close  coordination 
between the Commission and Member States is already foreseen under the GCCA76, to help 
poor developing countries most vulnerable 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  instruments  that  can  contribute  towards  the 
identification of shortcomings in the management 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 Indonesia, 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 available 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 aside 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 energy, with multiannual implications, announced by 
the Commission in its 2008 Annual Policy Strategy, 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 energy policies abroad in the common interest 
of the Community and partner countries and regions".  

74 
75 
76 

77 
78 

79 

New York, Summit on Sustainable Development in September 2005 
Johannesburg, September 2002 
The Global Climate Change Alliance (GCCA) is an alliance between the EU and developing countries 
to work jointly to integrate climate change into poverty reduction strategies  
This includes only those island states which are recipients of Official Development Assistance (ODA) 
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 needs of landlocked countries and small island developing States  
COM(2006) 20 final of 25.1.2006 

EN 

58 

   EN 

 
                                                 
The  multiannual  programme  for  ENRTP80  provides  for  indicative  amounts  [in  brackets]  for 
the first ENRTP period (2007-2010) targeting: 

(cid:121) 

(cid:121) 

support  for  "activities  that  influence  national,  regional  or  international  policy 
development  affecting  forests  and  promote  lesson  learning  between  decision-
makers(…).". [€71.8 mio] 

support for the "implementation of voluntary partnership agreements (VPAs); 
fund  activities  which  underpin  the  development  of  VPAs,  such  as  regional 
FLEG processes (…) " [€34.8 mio] 

(cid:121) 

actions to raise the policy profile of climate change (…) [€23.3 mio] 

As described in chapter 2.2, many underlying and direct 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  forest  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  sustainable  products.  Bilateral 
Voluntary  Partnership  Agreements  (VPAs)  between  the  EU  and  timber-producing  country 
governments are at the core of the FLEGT Action Plan. These commit both parties to develop 
a  timber  licensing  scheme  under  which  only  legally-produced  licensed  timber  from  FLEGT 
Partner  Countries  will  be  allowed  into  EU  markets.  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,  Liberia  and  Congo  Brazzaville.  More  countries  are 
expected to start negotiations in the near future. 

Under FLEGT VPAs, there is an explicit recognition that some partner countries will require 
considerable institutional strengthening and capacity building to meet commitments in regard 
to enforcing forest law and licensing legal timber. The Commission has highlighted the need 
for ‘capacity building and training in producing countries, including support for governance 
institutions  in  the  implementation  of  new  governance  procedures’.  As  well  as  agreeing  the 
technical  and  legal  aspects  of  VPAs,  negotiations  are  being  used  to  identify  specific  areas 
where  partner  countries  need  financial  assistance.  Over  the  longer  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 illegally harvested timber products. The Commission will adopt81 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 authorities for legal and sustainable wood and 

80

81 

EN 

http://ec.europa.eu/europeaid/where/worldwide/environment/documents/multi_annual_progra

mme_enrtp_en.pdf  
Due for adoption in September 

59 

   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  Communication:  "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  procurement.  With  respect  to  wood  and  wood  products 
the  Communication  identifies  four  priority  sectors  in  which  wood  is  (one  of)  the  base 
material(s): i) construction; ii) energy; iii) paper and printing services; and iv) furniture. The 
Commission aims to develop a process of consultation with the Member States with the aim 
of developing common procurement criteria for each of these sectors and product categories. 
If fully implemented across the EU, public contracts would cover between 10% and 20% of 
the total EU wood products market. 

2/ Trade policy  

The EU has promoted the integration of the environmental dimension into international trade 
(for instance through its work on trade-related sustainability impact assessments - SIA) and in 
global  efforts  to  curb  unsustainable  production  and  consumption  patterns  –  but  with  few 
concrete results for tropical forest conservation to date.  

As  described  above,  a  useful  start  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 oil 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 growth and price rises. Trade 
liberalisation would affect sustainability but in most contexts increased trade alone would be 
unlikely  to  cause  any  significant  direct  negative  sustainability  impact.  However,  trade 
liberalisation  could  accentuate  negative  sustainability  trends  unless  appropriate  forest 
governance  systems  are  in  place  and  enforced.  In  biodiversity  hotspot  countries  such  as 
Brazil,  Indonesia,  the  Congo  Basin  countries  and  Papua  New  Guinea,  possible  negative 
effects  could  be  irreversible.  Developing  countries  whose  forest  industries  are  protected  by 
high import tariffs could incur considerable environmental and social costs due to downsizing 
of  industrial  capacity  and  closure.  Social  costs  may  outweigh  short-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 that would gain from trade liberalisation in 
economic  terms  are  the  same  ones  that  suffer  from  deforestation  and  forest  degradation.  In 
terms  of  sustainability,  agricultural  trade  liberalisation  will  possibly  have  a  much  greater 
impact  than  forest  product  trade  liberalisation  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  SIA  suggests  that  mitigation  and  enhancement 

82 
83 

adopted on 16 July 
http://europa.eu.int/comm/trade/issues/global/sia/studies_wto.htm#dda 

EN 

60 

   EN 

 
                                                 
measures proposed in the Trade SIA of agricultural trade liberalisation should address cross-
sectoral  linkages  with  forestry.  As  regards  mitigation  measures,  it  should  also  be  borne  in 
mind that liberalisation of trade affecting in particular edible oils, beef and animal feed, cocoa 
and coffee is likely to pose risks particularly to forests in Brazil, Indonesia 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  biofuel  production  has  little 
impact  on  current  global  food  prices,  as  biofuels  use  less  than  1  per  cent  of  EU  cereal 
production.  The  European  Council  has  agreed  a  target  of  10%  biofuels  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  the  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 effects, 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.  The  Presidency  Conclusions  of  14  March  2008 
state  "In  meeting  the  ambitious  target  for  the  use  of  biofuels  it  is  essential  to  develop  and 
fulfil  effective  sustainability  criteria  to  ensure  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 conclusions of the 2007 Spring European Council." The 
enhanced support to second generation biofuels can further contribute 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 wood 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 through the international regime to combat climate change. The 
Rainforest  Coalition  offers  voluntary  carbon  emission  reductions  by  conserving  forests  in 
exchange for access to international markets for emissions trading. The approach is based on 
the  elaboration  of  country  reference  scenarios,  with  quantification,  monitoring  and 
verification  of  efforts  made  by  the  country  to  reduce  emissions  from  deforestation  and 

84 
85 
86 

COM(2008) 321 
COM(2008) 19, 23.1.2008 Directive on the use of energy from renewable sources, including biofuels 
Bangladesh,  Belize,  Bolivia,  Central  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,  Madagascar,  Malaysia,  Nicaragua,  Nigeria,  Pakistan,  Panama, 
Papua  New  Guinea,  Paraguay,  Peru,  Samoa,  Sierra  Leone,  Solomon  Islands,  Suriname,  Thailand,  Uruguay, 
Uganda Vanuatu and Viet Nam.  

EN 

61 

   EN 

 
                                                 
crediting  of  the  reductions  achieved  in  comparison  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  for  a  "basket  of  incentives"  that  encompasses 
support for capacity-building as well as the creation 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 evolved over time towards including emissions from 
forest degradation (i.e. depletion of forest carbon stocks that do not lead to land-use change) 
and issues like forest conservation. 

The majority of developing countries are supportive of the general features 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 forest degradation and, to a lesser extent, forest conservation 
in the scope of a future mechanism for Reduction 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  way  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 stop deforestation and increase the area of forest 
in both countries. 

At the 13th Conference of the Parties (COP13) in Nairobi, in December 2006, Brazil tabled its 
own  approach  to  combat  deforestation  under  the  UNFCCC.  The  Brazilian  approach  is  also 
voluntary  and  would  be  implemented  on  a  national  basis.  As  for  the  Rainforest  Coalition 
proposal,  it  is  based  on  verified  performance  of  a  country  to  reduce  emissions  from 
deforestation  assessed  by  comparison  with  a  reference  scenario.  The  country  would  be 
financially  rewarded  for  the  emissions  reductions  achieved  in  comparison  to  the  reference 
scenario. The Brazilian approach, however, differs from the Rainforest Coalition's one on two 
key features: 

•  the scope: the Brazilian proposal 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 forest conservation; and 

•  the origin  of the carbon payments: the Brazilian proposal relies on  additional  funding  by 

developed countries but excludes any direct 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),  endorsed  a  work  programme  for  forest  biological 
diversity  (decision  IV/7),  adopted  an  expanded  programme  of  work  on  forest  biological 
diversity  (decision  VI/22),  urged  the  Collaborative  Partnership  on  Forests  to  consider  the 
Secretariat  of  the  CBD  to  be  its  focal  point  for  forest  biological  diversity  (decision  VI/22), 
and  agreed  that  unregulated  and  unsustainable  use  of  forest  products,  climate  change, 

87 

88

It is to be noted that, at present, there is no single 'global carbon market', but rather a range of sources of funding. 
States  may  buy  credits  under  the  Kyoto  Protocol  to  comply  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 considering the establishment of emissions trading systems. 
Commission des Forêts d'Afrique Centrale. 

EN 

62 

   EN 

 
                                                 
 
desertification, land conversion, habitat fragmentation, environmental degradation, forest fires 
and invasive alien species are major human-induced threats to forest 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 

63 

   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  costs  for  developing  the  system,  the 
former  reflecting  a  long  tradition  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  with  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 plots larger than 10,000 ha (Brown, 2008)90. 

Some further cost estimates at the 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  does  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 

90 

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 
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 

64 

   EN 

 
                                                 
i.e.  ~  0.25  US$  /  km2  (routine  system  which  does  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 million 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 

65 

   EN 

 
Annex 5 

State of play in relation to monitoring at national and international level 

At  world  level,  the  results  of  the  FAO  global  forest  resources  assessments  (FRA)  process 
constitute the main source of global data on forest resources, and are widely used by countries 
and international organisations for policy development and implementation. FAO has carried 
out  these  assessments  at  5  to  10  year  intervals  since  1946.  Since  the  first  assessments,  the 
scope  has  expanded  and  comprises  today  more  than  40  variables  related  to  the  status  and 
trends of forest resources and the goods and services they provide91. In particular, FRA data 
are  used  for  monitoring  progress  towards  the  Millennium  Development  Goals  by  the 
international  environmental  conventions:  UNFCCC,  UNCCD  and  CBD,  as  well  as  by  the 
UNFF and the ITTO.  

At EC level, the JRC has longstanding expertise in the use of remote sensing techniques for 
estimating  tropical  forest  cover  changes.  Initiated  in  the  early  1990s,  the  JRC  TREES 
(Tropical Ecosystem Environment observation by Satellite) project was 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 called FAO FRA 2010 RSS) and JRC will carry out the survey 
over the Tropics and Eurasia92. The programme will lead to scientific and technical outcomes 
(e.g.  estimates  of  forest  cover  changes  at  global  and  regional  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 perform the task of forest cover monitoring. This remains the responsibility 
of individual Governments.  

In addition to these initiatives, GEOSS93 (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 environmental features, the extent of disasters 
due  to  human  activities,  the  impact  of  global  warming,  desertification,  erosion  and 
deforestation.  Regarding  monitoring  of  deforestation  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 
92 
93 
94 
95 

www.fao.org/forestry/fra2005 
Three JRC specific projects are involved: TREES-3, MONDE and FOREST. 
http://www.earthobservations.org/ 
http://www.gmes.info/ 
EC  together  with  France,  US,  Germany  and  several  international  NGOs  in  the  framework  of  Congo 
Basin Forest Partnership 

EN 

66 

   EN 

 
                                                 
Global  Observations  of  Forest  and  Land  Cover  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 
in  Bali.
which 

first  version  was  presented  at 

the  UNFCCC  COP  13 

the 

96 

97 

GTOS:  Global  terrestrial  Observing  System,  programme  for  observations,  modelling,  and  analysis  of 
terrestrial ecosystems to support sustainable development. http://www.fao.org/gtos/ 
http://www.fao.org/gtos/gofc-gold/ 

EN 

67 

   EN 

 
                                                 
Annex 698 

Summary of land-use models 

Global Timber Model (GTM) 

The global timber model was developed over a number 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  agriculture  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  are  specified  for  each  of  the  13  timber  supply  regions  in  the 
model. They either are constant (for temperate regions) or shift over time (tropical regions), 
depending on assumptions about future development of agriculture in each region. 

DIMA (Dynamic Integrated Model of Forestry and Alternative Land Use) 

The  model  is  based  mainly  on  a  global  afforestation  model  and  calculates  the  net  present 
value  of  forestry  compared  to  the  net  present  value  of  agriculture  with  equation.  The  main 
drivers  for  the  net  present  value  of  forestry  are  income  from  carbon  sequestration,  wood 
increments  (timber  sales),  rotation  period  length,  discount  rates,  planting  costs  and  wood 
prices.  Main  drivers  for  the  net  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 constrained. The speed of deforestation 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  model  (Generalized  Comprehensive  Mitigation 
Assessment  Process,  GCOMAP)  built  to  simulate  the  response  of  the  forestry  sector  to 
changes in future carbon prices. GCOMAP's major goal is to make use of detailed country-
specific activity, demand and cost data available, mitigation options and land-use change by 
region. The model permits explicit analysis of the carbon benefits of reducing deforestation in 
tropical countries. It establishes a reference case level of land use based 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)  

EN 

68 

   EN