REDD+ AND THE CLEAN DEVELOPMENT MECHANISM: A COMPARATIVE PERSPECTIVE

The program, ‘Reducing Emissions from Deforestation and Forest Degradation’ (REDD), which operates within the international climate change policy framework, is projected to emerge as one of the key climate change mitigation mechanisms for developing countries. The existing Afforestation/Reforestation (A/R) mechanism, operating under the Clean Development Mechanism of the Kyoto Protocol to the United Nations Framework Convention on Climate Change, may prove useful for drawing lessons for the emerging REDD program, since both mechanisms represent flexible means for developed countries to achieve compliance with their mitigation targets under the Kyoto Protocol. The possible means include CDM as the basis for a project-based approach for the implementation of REDD (if adopted) or the inclusion of REDD within CDM. This article compares the features of A/R CDM and REDD, identifies similarities and differences, and analyses the extent to which the former can provide guidance for the development of a carbon governance mechanism for REDD.


International Journal of Rural Law and Policy
2013 Special Edition REDD+ and the legal regime of mangroves, peatlands and other wetlands: ASEAN and the world was not straightforward.In fact, the eligibility of LULUCF projects under CDM was one of the most controversial issues at the sixth session of the UNFCCC Conference of the Parties (COP-6) held at The Hague in November 2000.A compromise position was finally proposed: (1) designate avoided deforestation and combating land degradation and desertification in Non-Annex I Parties as adaptation activities eligible for funding through the Adaptation Fund but not through the sale of carbon credits; (2) allow only afforestation and reforestation projects in CDM, with measures to address non-permanence, social and environmental effects, leakage, additionality and uncertainty. 6e 2001 Marrakech Accords restricted the eligibility of LULUCF projects under CDM to afforestation and reforestation (A/R) projects during the first commitment period (2008-2012). 7For the purpose of CDM A/R activities, the terms 'forest', 'afforestation' and 'reforestation' are defined as follows: 8 'Forest' is a minimum area of land of 0.05-1.0hectare with tree crown cover (or equivalent stocking level) of more than 10-30 per cent with trees with the potential to reach a minimum height of 2-5 metres at maturity in situ.A forest may consist either of closed forest formations where trees of various storeys and undergrowth cover a high proportion of the ground or open forest.Young natural stands and all plantations which have yet to reach a crown density of 10-30 per cent or tree height of 2-5 metres are included under forest, as are areas normally forming part of the forest area which are temporarily unstocked as a result of human intervention such as harvesting or natural causes but which are expected to revert to forest.'Afforestation' is the direct human-induced conversion of land that has not been forested for a period of at least 50 years to forested land through planting, seeding and/or the human-induced promotion of natural seed sources.'Reforestation' is the direct human-induced conversion of non-forested land to forested land through planting, seeding and/or the human-induced promotion of natural seed sources, on land that was forested but that has been converted to non-forested land.For the first commitment period, reforestation activities will be limited to reforestation occurring on those lands that did not contain forest on 31 December 1989.
A cap is also set on an industrialised country's inclusion of CDM A/R CERs in its emissions accounting, that is one per cent of its base year emissions times five. 9her forestry activities such as deforestation and avoided degradation are excluded from the Kyoto Protocol (and CDM).This was partly due to the sovereignty concerns of developing countries who refused to consider forests as a global public good, 10 and who did not want to cede their control over land use decisions.The challenges and uncertainties inherent to quantifying forest sector emissions as well as methodological issues posed other major hurdles. 11ere are a limited number of A/R CDM projects compared to other CDM projects.Of the more than 1000 CDM projects to date, only a few A/R project proposals have been submitted and approved/registered with the UNFCCC, including those listed in Table 1.There are several reasons for the limited number of A/R CDM projects.These include the limited scope of such projects (restricted to A/R activities), high transaction costs due to complex rules and methodologies, registration costs, issues related to measurement and monitoring, and lack of transferability of the temporary credits assigned to projects etc. 14 The calculation of real emissions removals presents a major problem due to issues concerning permanence, additionality and leakage; these three terms are briefly discussed below.
A/R CDM projects create a new sink that grows and absorbs atmospheric carbon, but it will cease to absorb carbon at some point in time. 15The achieved sequestration may also be reversed, in which case the reduction of carbon in the atmosphere is nullified. 16In order to address the non-permanence issue, temporary credits or tCERs (which expire at the end of the commitment period) or long-term expiring credits or lCERS (which are valid for the crediting period) are issued for A/R projects.Their price value is only a fraction of the value of 'permanent credits' and they have to be renewed or replaced when they expire. 17Karsenty identifies several reasons for the reluctance of private operators to buy such credits, including the availability of a number of permanent credits at a moderate price on the CDM market. 18The decision of the European Union (EU) to exclude A/R CDM credits from the EU Emissions Trading Scheme (ETS) also imposed a considerable constraint in market opportunities for mitigation activities from the forestry sector in developing countries. 19______________________________________________________________________________________ International Journal of Rural Law and Policy 2013 Special Edition REDD+ and the legal regime of mangroves, peatlands and other wetlands: ASEAN and the world The additionality of an A/R CDM project can be assessed by comparing its activities with a reference scenario20 consisting of the course of host country activities (which needs to be defined) that would occur without the project. 21Various authors have shown that a certain percentage of CDM projects are simply not additional. 22Decision 19/CP.9defines leakage as the increase in greenhouse gas emissions by sources, which occurs outside the boundary of A/R CDM project activity, and which is measurable and attributable to the A/R project activity. 23Leakage is inevitable given the project-based approach adopted by CDM projects.These three concerns (impermanence, additionality and leakage) have seriously undermined the effectiveness of A/R CDM projects.

REDD+ and CDM: The way forward?
Like CDM, Reducing Emissions from Deforestation and Degradation (REDD) is a carbon mitigation mechanism within the UNFCCC framework.In recent years, the idea has evolved from REDD in the Bali Action Plan, 24 to REDD Plus (or REDD+).REDD+ is REDD with conservation and enhancement of forest carbon stocks, and sustainable management of forests added.
Given the purported success of CDM in meeting the carbon mitigation commitments of developed countries through activities undertaken in developing countries, comparisons between CDM and REDD+ were inevitable.It is argued that CDM experiences can facilitate the future development of REDD+.The inclusion of REDD+ in the CDM framework has also been proposed.For example, a report of the High-Level Panel on the CDM Policy Dialogue (September 2012) highlights the potential benefits of including REDD+ activities in CDM as follows: [P]romoting sustainable development; shifting the distribution of CERs towards a more equitable balance among countries (as several forested developing countries do not have many opportunities in other sectors); creating further options for generating cost-effective reductions; and facilitating learning-by-doing for how to include REDD+ in carbon markets'. 25cording to the report, the inclusion of REDD+ in the CDM could also 'create a stable, low-cost source of future CERs'. 26Although the report does not dismiss the potential risks of including REDD+ activities in CDM, 27 most of which have been discussed above, it suggests 'careful design' as the method to mitigate many of these risks. 28According to the report, the inclusion of 'limited project-based REDD+ and/or largerscale (sub-national or national) pilot activities into the CDM' can 'create important learning-by-doing opportunities for the international community in anticipation of future REDD+ mechanisms, which may accelerate their development'. 29It further states that the inclusion of REDD+ in CDM 'would also help direct CDM projects and programmes toward nations that might not otherwise participate in the sustainable development benefits of the CDM and might not otherwise gain experience with carbon markets'. 30The report then suggests that '[I]nstead of taking up all activities within the scope of REDD+, development of those activities already covered by the CDM in afforestation and reforestation should be pursued further'. 31 the other hand, concerns have also been raised about the trend drawing parallels between CDM and REDD+.Table 2  Some of the issues confronting A/R CDM projects and REDD+ activities appear to be similar, for example permanence, additionality and leakage, and it may be argued that they can be resolved in a similar manner.Critics will, of course, point to the fact that some aspects of these issues have not been (and cannot be) fully resolved.Further, a number of other outstanding issues need to be discussed before determining the extent to which A/R CDM projects can provide the basis for operationalising REDD+.This section highlights some of these issues.

Definitional concerns
The term 'forest' needs to be defined for the purpose of REDD+ given the fundamental difference between the scope of forestry activities under CDM and REDD+.The other terms that require definition include 'sustainable management of forests' and 'enhancement of carbon stocks', which form the building blocks of any REDD+ framework. 32Given the differences in the nature of forests in different countries, these definitions are more likely to evolve at the national level rather than at the international level, as was the case for CDM.Further, the interactions between REDD+ activities and the drivers of deforestation such as agricultural expansion, wood extraction and infrastructure extension must be taken into account.

Scalar issues 33
There is considerable difference of opinion about the right scale for REDD+ activities.The three commonly discussed possibilities are: (i) At the national level, where direct support is given to national governments of developing countries and the whole forest area of the host countries is covered.
a. Advantages: allows pursuit of a broad set of policies, addresses domestic leakage, and creates country ownership.b.Challenges: only feasible for a few countries (in short-to medium-term), does not work well in situations susceptible to governance failures, and less likely to mobilise private sector investment and local government involvement.
(ii) A subnational/project approach, where international/external financing is based on individual projects.This is similar to CDM.
a. Advantages: early involvement, wide participation and attractive to private investors.b.Challenges: leakages, failure to address broader forces driving deforestation and forest degradation.
(iii) A hybrid/nested approach.34model for pilot purposes in the interim, it is unlikely to survive when national REDD programmes get fully operational because most governments prefer to keep the REDD programme in their own hands rather than allowing projects to be individually funded and from outside. 36

Leakage
Leakage refers to the shifting of deforestation from the site where REDD+ activities are being undertaken to another location. 37According to Madeira, this may take place directly, where deforestation agents shift their equipment and labour to a nearby patch of forest, or indirectly where the market price of timber, livestock and crops increases as a result of REDD activities. 38She recommends the buffer approach to minimise leakage where 'leakage can be accounted for by requiring that a percentage of a project's REDD credits be held in reserve and not be sold.In this manner, the reserve account would offset or neutralise the leakage that was assumed to have taken place.' 39

Additionality
It is more difficult to assess additionality (that is, what would have occurred in terms of deforestation without REDD+) at the national level than at the project level (as in the case of A/R CDM projects) because of the co-existence of a much larger number of variables, including the man-made and natural causes of deforestation. 40Ongoing pilot/demonstration REDD activities have also been criticised for their failure to satisfy the additionality criterion.For example, it has been argued that the Meghalaya REDD pilot project does not meet the additionality requirement because the local communities were undertaking carbon mitigation activities anyway although they were not known by this name. 41The additionality requirement may also deprive countries that have already taken actions to prevent deforestation from REDD+ incentives.It has been argued that countries with low rates of deforestation should be rewarded (outside the REDD+ mechanism) to avoid creating perverse incentive for these countries to increase deforestation in order to then qualify for REDD incentives. 42

Baselines
In order to assess the effectiveness of a REDD+ activity and the allocation of emissions reduction credits, it is necessary to determine the 'baseline' or 'a level of emissions that would occur in the absence of a forest carbon policy and is used as a reference case for quantifying mitigation performance'. 43Different methods are available in order to determine the baseline including the 'national circumstances' approach and calculating historical (national/global) deforestation rates based on existing remote sensing imagery.However, many regions and countries argue that historic rates do not indicate the current risk of deforestation.One example is countries that have a low rate of deforestation because they are experiencing political instability, which limits access to forests and markets.But an improvement in the political situation may result in an increase in deforestation, in which case historic baseline underestimates the real pressure on the forests. 44____________________________________________________________________________________ 2013 Special Edition International Journal of Rural Law and Policy REDD+ and the legal regime of mangroves, peatlands and other wetlands: ASEAN and the world natural and anthropogenic disturbances. 46The non-permanence issue in REDD+ can be resolved by discounting the carbon stored in trees, thereby taking into account that some of it might be lost; 47 or putting some carbon profits into an insurance fund to compensate for non-permanence. 48The scale at which REDD+ activities are implemented also influences the risk of non-permanence.For example, there is no requirement to maintain forest carbon in any one specific location as one moves from project-scale to sectoral-scale activities, and increases in deforestation in one place can be offset with reducing deforestation at another location. 49

Use of market-based instruments
REDD+ activities in developing countries would at least partially be eligible for offsets in developed countries.Proponents of market-based instruments argue that markets provide incentives and generate enough resources to actually stop deforestation.But there is great opposition to the use of market-based instruments in the context of REDD+ compared with CDM.According to the opponents, however, if REDD+ credits were fungible and could be traded, the amount of supply generated would eventually flood the regulatory market with cheap credits. 50This would deflate CER prices, endanger the credibility of the CDM market and remove the incentives for developed countries to generate domestic reduction credits, 51 or develop lowcarbon technologies such as carbon capture and storage.According to Lederer (2011), however, this seems exaggerated because the generation of such credits is subject to the implementation of REDD+ projects by developing countries, which will first require considerable capacity development. 52As a result, at present, the credits generated from REDD activities can only be traded on voluntary markets, such as the Chicago Climate Exchange, or paid for using designated carbon funds, such as the World Bank's Forest Carbon Partnership Facility (FCPF).

Rights of indigenous communities
REDD+ exerts stronger influence on local governance issues than CDM.Unlike A/R CDM projects, which are mostly developed on private lands, the focus of REDD+ is government-owned forests in developing countries where security of tenure and unclear and contested land ownership rights is a major issue.As a result, REDD+ activities have a far greater potential to harm local communities and indigenous groups if not implemented with appropriate safeguards. 53The implementation of REDD+ activities is dependent upon answers to questions such as: Who owns forest carbon?Who gets compensated?How much each stakeholder should receive?Will the benefits reach the communities bearing the burden of forest stewardship?How will the priorities of forest-dependent communities and indigenous peoples be satisfied?The answers to these questions are difficult in the absence of clear and legally defined ownership structures.
The conflict can be illustrated by considering the situation in India where the Government of India has enacted the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act 2006 to recognise the rights of these historically marginalised forest-dependent communities.At the same time, the government has actively endorsed and is promoting REDD+ as a carbon mitigation mechanism.This is a very contentious issue and there is widespread concern that the interests of forest-dependent communities may be subsumed in order to grab land to accommodate the large private players who would be interested in REDD+ activities once they are successfully operationalised.
Further, unlike CDM, REDD+ requires much more input-oriented legitimacy given that the participation of indigenous peoples and local communities is imperative in several cases.This, in turn, may lead to stronger trade-offs with effectiveness of REDD+ as co-benefits, namely poverty alleviation, carbon mitigation and stemming biodiversity loss may not materialize easily. 54REDD+ also has to address issues relating to forestry sector governance.These include built-in perverse incentives for corruption in emissions offsets programs 46

Validation procedure/criteria and sustainable development
Similar to CDM, countries may be required to develop procedures and criteria for validating REDD+ projects.Article 12 of the Kyoto Protocol stipulates that CDM projects must contribute to sustainable development in host countries.Host countries are responsible for defining sustainable development criteria and ensuring that projects adhere to these criteria as a condition for CDM project registration.Therefore, countries have to define a procedure for project approval.Most countries developed simple checklists often consisting of social, environmental and economic benefits.The lack of a common standard or benchmark for sustainable development criteria has led to an inadequate consideration of sustainable development in CDM projects. 56he legitimacy of REDD+ activities will depend considerably on the ability of national governments to determine validation procedures/criteria.

Conclusion
Forests form the core of A/R CDM projects and REDD+ activities, and some of the issues incorporated by the two frameworks are common, such as leakage, additionality, permanence and baselines.However, the potentially multi-scalar nature of REDD+ activities is likely to raise a number of additional issues.The limited scope of A/R CDM projects precluded concerns relating to governance of forests in developing countries but forest governance reform is critical for the success of REDD+ activities.Further, protection of rights of indigenous communities and sustainability of forest use must form an integral part of REDD+ activities unlike A/R CDM projects, which have largely failed to fulfil their goals of promoting sustainable development in developing countries while generating CER credits for developed countries.
The lessons learnt from operationalising A/R CDM projects -for example the reasons for the limited marketability of credits generated -are useful to keep in mind when considering the appropriate financial mechanism for REDD+ activities, but the existing CDM framework cannot form the basis for REDD+ activities in the future.Nor is it possible to automatically include REDD+ activities in the CDM framework.It is also important to remember that while consensus has been generated in some quarters regarding the potential of REDD+, the resolution of a number of outstanding issues is a pre-requisite before the implementation of REDD+ activities as a part of the international climate change mitigation framework.
a. Advantages: most flexible mechanism.b.Challenges: harmonisation.The limited success of A/R projects suggests that a project-based REDD approach cannot simply replicate the CDM model. 35As argued by Skutsch and Trines, while it may be possible to use the project-based REDD _______________________________________________________________________________________ International Journal of Rural Law and Policy 2013 Special Edition REDD+ and the legal regime of mangroves, peatlands and other wetlands: ASEAN and the world 6 53  See, eg, Tom Griffiths, 'Seeing 'REDD'?: Forests, climate change mitigation and the rights of indigenous peoples and local communities' (Forest Peoples Programme, 2008). 54Lederer, above n 1, 1905._______________________________________________________________________________________ International Journal of Rural Law and Policy 2013 Special Edition REDD+ and the legal regime of mangroves, peatlands and other wetlands: ASEAN and the world setting baseline levels, reconciling project and national credits in nested model, and long-term monitoring and enforcement. 55 12

_____________________________________________________________________________________ 2013 Special Edition International Journal of Rural Law and Policy REDD+ and the legal regime of mangroves, peatlands and other wetlands: ASEAN and the world 5Table 2 : Difference between CDM and REDD+ CDM REDD+
shows the differences between these two carbon mitigation mechanisms.
Madeira, above n 38, 12. 47 Ian Fry, 'Reducing emissions from deforestation and forest degradation: opportunities and pitfalls in developing a new legal regime' (2008) 17 Review of European Community & International Environmental Law 166. 48Charlotte Streck, 'Financing REDD: A Review of Selected Policy Proposals' (Climate Focus, 2009). 49Myers, above n 42. 50Paul Leach, 'Carbon Sunk?The Potential Impacts of Avoided Deforestation Credits on Emissions Trading Mechanisms' (Rainforest Foundation UK, 2008).