Killing cuddly animals and REDD updates

Catching up on reading this morning, I came across a couple of stories of interest in relation to recent blog posts.

1. Killing some cuddly animals legally may be the only way to stop all of them being killed illegally, according to the Babbage blog at the Economist. The potential arguments around this have the potential to make the recent controversy over hunting polar bears a stroll in the park. Just because there are strong arguments why a trading ban will not work, that does not mean that lifting it and regulating the trade instead will save the rhino and tiger, so I suspect it will be a brave politician who agrees to legalise such a trade. Nonetheless, I think, these are definitely the right questions to ask, for the present strategy appears to be largely failing.
2. The Guyanese national REDD initiative appears to be the complete opposite of the lack of progress elsewhere, I recently blogged about. Instead REDD in Guyana, and Norwegian support for it seems to have been initiated out of nothing by politicians keen to make an impact. The anti-REDD REDD Monitor implies such lack of context is in itself a bad thing, but I am not so sure. Whilst I imagine this start-from-a-vacuum has not been without its challenges, it seems much better to have strong political leadership searching for technical support to fill in the gaps, than the total lack of political interest that applies in some other countries. Leaders are supposed to lead!

It will be interesting to see how both situations develop in coming months and years.

Hat tip for both stories: Mike Shanahan at IIED

REDD: a good idea donorised and projectised to death?

Chewing the fat with a colleague recently we were musing upon what has happened to REDD. Clearly the biggest problem is the lack of any global agreement to mitigate climate change, and the consequent collapse in the price of carbon on many markets. But even if this were fixed would there be a long queue of sellers about to push carbon credits from REDD on to the marketplace? We didn’t think so.

The problem is that, as I have remarked before, REDD is far from easy. In fact it contains multiple challenges on so many different levels that, we thought, these difficulties had obscured the strategic focus on the hardest problem of all: actually delivering carbon savings.

Firstly there are the technical and technological challenges around MRV (Measuring, Reporting and Verifying the carbon fluxes) and defining appropriate reference points (the business-as-usual scenario) against which to measure progress. Secondly there are the social justice issues: who will benefit from REDD, elites or local forest dwellers? There were genuine fears that REDD could initiate another land grab by governments, reversing the trend in recent decades towards decentralised and community-based forest management. Finally there were fears that mono-specific plantations might prove more efficient at carbon sequestration than existing natural forests, and that biodiversity might therefore take another beating.

All three sets of issues posed serious challenges which urgently needed addressing. Without the capacity to monitor their own forest carbon stocks developing countries would be effectively barred from participating, or, at best, find themselves dictated to by others who had the necessary technological nous. And there is no doubt that, in some countries at least, the technical and institutional gaps were, and largely still are, quite substantial. Similarly, there is a huge amount to be said for getting the social justice issues properly incorporated from the start, because, like the proverbial oil gusher, once the money starts to flow, it might be very hard to bolt on the relevant safeguards later.

To donors and other big aid sector players these multiple technical and social challenges must have appeared rather like stumbling upon a car crash scene for an ambulance-chasing lawyer. “Aha!” they said, “Here is a role for us.” Projects were created left, right and centre, the dollars flowed, and the consultants came and feasted. People were trained in analysing satellite imagery, whilst gender and indigenous peoples experts galore advised on how to ensure REDD delivered benefits to all. I expect there were even strategies drawn up for dealing with HIV/AIDS in REDD.

But where are the carbon savings that all of this work would support? Here we meet what is both the great strength and the great weakness of REDD: it is almost impervious to fudged or sticking-plaster type solutions. In order to succeed in REDD one must not just conserve a patch of forest, but reduce the drivers of deforestation, so that another forest loss (and hence carbon emissions) are not simply displaced elsewhere. This is hard. Seriously hard. Most of the time someone will lose out, whether it is big business intent on industrial-scale logging or adding another oil palm plantation, or poor farmers pushing further into the bush in order to find more fertile soils.

Such challenges are not susceptible to ‘projectisation’ in the standard aid model that works with mid-level managers plus advisers. Instead they require tough political decisions, probably at cabinet level. It is clear that in some countries (Brazil, Indonesia and Guyana come to mind) REDD has reached this level of serious political engagement, even if (in the case of Indonesia) the desired outcomes are not yet secured. However, elsewhere REDD appears stuck a rung or two lower on the government bureaucratic ladder, and thus the actual mechanism by which forest carbon savings will be generated remains either theoretical or entirely undefined. In such a context all the investment in MRV and social justice seems like the football team that plays very pretty football, with lots of neat passing, but too often fails in its primary goal: to get the ball in the actual net.

All is not yet lost, every country’s situation is different, and if the fundamental carbon markets issues do get worked out I expect a decent price should start to act as a pretty big incentive for countries to get serious about REDD. But it will all, no doubt, take considerable time, which, given the urgency of addressing the problems of climate change is worrying. Certainly it is all a far cry from the hope that major forested countries could all start selling REDD-based carbon credits from the beginning of 2013 when the successor to the Kyoto protocol was originally expected to kick in. Donors might like to consider what all good football managers know: all the pretty passing patterns in the world count for nowt if the team still gets relegated at the end of the season; REDD countries will each need a big-name striker to lead the line if they are to succeed.

ps. All this also makes me wonder what other big development initiatives might similarly have been donorised and projectised into ineffectiveness. Anti-corruption efforts seem a good candidate. Suggestions welcomed in the comments.

Insuring against failure

With Rio+20 about to open I have to give a shout out to the idea of iREDD advanced by Corey Bradshaw et al. They propose to address some of the major challenges of REDD by requiring sellers of REDD credits to purchase insurance (that oh-so-cool i on the front of iREDD). One very good point in its favour is that this should massively increase the buyers’ confidence, although, it should be noted that voluntary carbon market standards such as VCS already require project developers to retain substantial buffers of carbon offsets for just such an eventuality. However, I think financial insurance is a stronger option, since one catastrophe – e.g. a massive forest fire – could wipe out a project’s entire carbon achievements with no recourse. Insurance provided by a highly capitalised third party delivers much better cover for such events.

Thus insurance appears a very good way of dealing with the problem of permanence. It should also be fairly easy; there are pretty good data available on wild fires, whilst forest owners who themselves cleared the forest (or allowed someone else to do so) would be guilty of insurance fraud. (Following the logic of my post yesterday, insurers would probably also have to consider political risk, in which the forest owner suddenly finds they are no longer the forest owner.)

But in tackling the other challenges in REDD in demonstrably delivering real net additional reductions in carbon emissions (see here for my previous observations) iREDD seems mostly just to come down to the idea of insuring against the risk that a proposed action does not result in the desired outcome. Here I see a much greater challenge for insurers. How should they quantify such risks? Every project will be unique in some way or another. I foresee great difficulties in developing standard metrics by which these things can be assessed, and where such guidelines could be determined I fear they would tend to favour cookie-cutter style projects and incentivise against innovation.

On the other hand, if these hurdles could be overcome, this seems to me like an idea that has great potential way beyond the REDD arena. How about if donors required every aid project except for the riskiest (which would therefore obviously stand out) to obtain such insurance? That would force project developers to confront major operational risks in a much more explicit manner than at present. Furthermore it could open up innovative approaches to project funding (donors would expect to get some of their money back when projects fail), and could allow private sector operators taking a greater responsibility for the entire project cycle and assumption of risk. This would be in contrast to the current model for involving the private sector in which big consultancies make fat profits for running flawed projects designed by a donor who should have but didn’t know any better.

Owen Barder recently blogged about attempts to extend the still experimental idea of Social Impact Bonds into the international development space*. These also invite private sector players to assume some of the risk of delivery. Insuring projects against failure could be another option to add into the mix.

In practice I can see that it is going to take quite a while for these various different instruments to be put into practice, during which time we can hope – indeed reasonably expect! – that significant numbers of poor people and poor countries will have developed to the point where they are rather less poor and less in need of development assistance. But that could also work in these ideas’ favour: the least developed countries have the least capacity to engage in these kind of risk-sharing models involving the private sector.

So all in all I think it is great to see innovative thinking around conservation and development finance, and I hope that at least some can come to serious fruition. And I look forward to one day filling out an insurance registration for a project I have helped design!

* The various comments echo my points above about some of the practical challenges that would need to be overcome to introduce these as financial instruments worthy of the name.

Standing on principle

If I am to believe what I read in the Anglo-Saxon press, Germany’s admirable but unbending economic principles are in danger of killing the Euro. Low politics will probably once again kill any hope of a deal at the next UNFCCC CoP which starts in Durban in a week’s time. But even if by a miracle something worthwhile were to emerge from it, e.g. a REDD agreement, I fear that, like the Euro, it may contain within it seeds of its own failure in the form of some admirable but infeasible principles.

For those not familiar with all the ins and outs REDD is built on four key principles:

• Emissions reductions need to be real and verifiable. Fair enough. REDD would not amount to much if imaginary emissions reductions were to be allowed, but I fear just such an outcome is possible with a fund-based solution that developing countries want. They want a fund-based approach because (a) gives them much for freedom to spend the money how they want (on dreaming up new emissions reductions in endless workshops), and (b) because it gets them out of the next three principles which are much harder to implement. (See here for my previous musings on fund-based versus transactional arrangements for REDD.)
• Emissions reductions must also be additional, i.e. claimants have to show they would not have happened anyway. This one is the real bugbear for it asks the unanswerable counter-factual question: what would have happened without the REDD project?
• A related requirement to additionality is the stipulation that only net reductions can be claimed: if a project simply shifts deforestation elsewhere it cannot sell carbon offsets. This puts huge burdens on projects to track all the carbon leakage from their activities.
• Finally emissions reductions must be permanent. Obviously it does not achieve very much if you pay someone not to chop down a forest today, and next year they (or someone else) go and chop it down any way. All those emissions savings are immediately lost. Except that this also places an unrealistic expectation on the forest owner. What happens if the forest is struck by lightning next year and burns down?

These four simple ideas give rise to huge complexity in project design; complexity that can rapidly overwhelm a project team. The need to really tackle drivers of deforestation in order to deliver emissions reductions that are both net and additional inevitably pushes one towards working through national governments who have the necessary policy levers rather than at the project level. But equally, anyone who has the power to cut down some trees, has a valid claim to REDD funds, and indeed could wreck an otherwise successful initiative. This pushes one instead to working with local communities who live in and around the forests. In reality there should be enough money to go around to deliver both policy changes and to secure local forest protection – indeed enforcing forest protection would itself likely be part of a successful policy mix – but that requires an awful lot of actors to work well together and to agree amicably on how the cake should be divvied up. I am not optimistic.

All of which begs the question: so what would I do with those apparently ever so reasonable principles. Here’s my answer. Firstly we could do away with the need for permanence by calculating carbon stocks as an accumulation of X years worth of growth. Simply divide the total sequestrated carbon C by X to get an annual payment. If the trees are still standing next year pay them again. A forest owner who wanted more money up front could always borrow on the strength of their future anticipated earnings. This approach would enable to local communities who do not understand carbon markets well to test the waters before committing themselves to major land use decisions.

Then net additionality could be tackled by splitting the requirement for forest protection and reducing the drivers of deforestation, which are two separate activities. A simple 50-50 cut could be used as a rough guide. There would have to be limits on how long forest protection could  be funded without equal leakage mitigation, but forest conservation agencies could make a start on protecting the forest now. In particular the much quicker rate of progress which that would facilitate could start to deliver on the overall goal as well: some forms of leakage may not travel far, so, if all the local forests are effectively conserved, then this may in itself reduce overall deforestation as well as contribute to the wider policy push to combat forest loss.

I do not pretend that the above changes do not contain risks, but I think the benefits of vastly simpler requirements for project development would be worth it. I have heard the odd suggestion that some folks in REDD policy circles are starting to wake up to these issues, but the momentum behind the original principled framing seems unstoppable. Some people I know in project development are starting to get very gloomy, and are writing REDD off before it has even got properly started. That would be a crying shame, because I do really feel that the time has come for REDD. If the world does not start to properly value its forests soon we’ll have lost something that can never be replaced.

REDDoubtable concerns

There’s been a flurry of posts recently on that big new idea in international forest conservation, REDD+, which is struggling to be born, conjoined as it is with all the wrangling over a post-Kyoto settlement.

• Angela Dewan makes the oft-overlooked point that even if forests make a return for local communities that doesn’t change their own aspirations for development which may not be fully compatible with forest conservation. No noble savages here!
• James Mayers reminds us that governance is going to be critical in REDD+ implementation (there needs to be more than just trickle down to local communities), but that it’s not all bad news, and that in many countries local civil society is agitating for the sorts of rights that once would have been up to donors to impose.
• At the heart of these governance concerns is that old chestnut, land tenure: both Indonesia and Mozambique are struggling, and many other countries too I should imagine. Ultimately, I think this is where the REDD+ battle will be won or lost, for it’s over land that REDD+ proponents will face their toughest opponents, few of whom will fight fair.
• Finally, Isilda Nhantumbo has an eight point list on what would make a ‘good’ REDD+ initiative. All are good ideas, but I would caution against over-complicating things. The most important of these ideas should be regulated by governments; others could perhaps be incentivised by the markets. But let us be in no doubt, if you want to scale REDD+ beyond a few NGO-run project islands, then simplicity is the name of the game, and ‘goodness’ needs to be rewarded in the market for anyone to pay any serious attention.

I leave you with a fascinating but depressing titbit of gossip on the international climate change negotiations: of all the countries with something to gain from REDD+, nobody ranks higher than Brazil, and yet, behind the scenes, I hear Brazil are stymieing concluding discussions over the REDD+ component of UNFCCC which could then be finalised and ratified as a standalone treaty, whilst the rest of the stuff drags on. The reason: Brazil already have enough money from donors pouring into their Amazon fund that right now they do not need an international REDD+ treaty, but they (understandably!) do want a global agreement to limit greenhouse gas emissions. I have no idea whether this is actually true, but I trust my source.

REDD Riposte

I’m a big believer in the principles behind REDD, namely:

• Globally, forests are massively undervalued.
• Carbon sequestration is one of those typically vital but undervalued services that forests perform for us.
• Now that at least some people are prepared to pay something to abate carbon emissions, it seems crazy to ignore this possibility to value forests more appropriately.

That said, there are several different sides of the coin that bear more than a moment’s consideration. Here is a great satirical take on what REDD might look like in a more equitable world (I’m avidly awaiting part two). And this is a great golden oldie on the parallels with the mediaeval practice of buying indulgences.

Of course, there are lots of practical problems in implementing REDD too, but those are a topic for another post.

Paternalism in Development

Bill Easterly bizarrely posits feminism as the anti-thesis of paternalism, arguing that paternalism in development is a bad thing, and because he is against paternalism, he must be some kind of feminist. So I’m going to be a bit controversial and suggest that a bit of paternalism is almost essential in many aid projects. Hopefully no-one will interpret that to mean I am an anti-feminist.

First the obvious: paternalistic approaches are inherently condescending and patronising, and can rapidly descend into sexism, racism and probably a bunch of other undesirable -isms too. (Feminism can thus be viewed as a countervailing force to some aspects of paternalism, but that is only part of the story.) Paternalism also comes with a strong current of hubris, and misplaced paternalism explains many of the failures of the past 50 years of international development aid.

But … whilst respect for the knowledge and skills of the community is a minimum requirement for effective development work in any remote, rural community, we must also recognise the following:

1. Said poor people want to become richer people, and to live lives more like ourselves.
2. They tend to be very poorly educated and, as such, do not know much about how ‘our’ world works.

(These arguments hold much less water in poor urban communities who are more exposed to what a modern economy looks like.)

Hence these poor rural communities are often heavily reliant on us advising them and acting upon their behalf, often advocating to other elites what we perceive to be their interests. (A strong trust relationship with the communities we’re supporting is a prerequisite.) And if we’re not doing it you can be sure the various local and national government authorities will be doing so, often, unfortunately, with worse results.

Does doing this make me feel uncomfortable – yes it does! Is there an alternative? Yes, but it involves so much capacity building that it would take a generation before the community are really ready to take on the necessary roles, during which time next to no development would take place. (You can guess which option the poor would go for, though they certainly appreciate the capacity building too.) So in practice we have to make paternalistic decisions on behalf of the communities we support on a fairly regular basis. Sceptics are entitled to call us out for our hubris – indeed I think such questioning plays a vital role in keeping our paternalism in check – but practical alternatives are thin on the ground.

A good example of this in current conservation practice is the desire for full free, prior and informed consent before initiating land or resources based projects such as REDD+. The principles are incredibly important, but there’s a limit to how much you should sensibly invest in such a process before you need to move forward with a project. Anyone who claims a community was 100% fully informed before such a decision was made is deluding themselves; either they’ve over-simplified the situation, or not everyone understood, or (most likely) both.

Two more points bear making. Firstly, I suggest that it is next to impossible for a charitable donation between two people, or groups of people, who do not know each other not to be inherently condescending and tending towards paternalistic. So, if we do not want to dump the whole aid thing altogether, and thus cannot avoid one of the key downsides of paternalism, I think we should also celebrate the potential upsides of a certain degree of limited (!) paternalism.

Finally, is the rejection of paternalism on behalf of poor people not itself paternalistic? Who exactly does the paternalism sceptic think he/she is?

I now look forward to all the contrary comments from those who disagree with me …

Something is better than nothing

A blog on conservation and development surely cannot let the Cancun summit on climate change pass without any comment. On the other hand it does all seem a rather long way from the day to day work in which I am involved. Many of my colleagues made the trip over but I cannot say I am sorry to have missed the whole jamboree. Apart from the odd publicity stunt, I’m really not sure what is the value of all the NGO presence at these summits. Fine, if a government official has invited you along because they actually value your input, but most NGOs seem to go just to be … er … well … seen.

After the complete disaster that was Copenhagen, expectations were so low that any kind of achievement was going to be applauded. And if it weren’t for that chastening experience I would expect far louder complaints about the huge number of holes left to be filled in the Cancun agreement.

Of course, I am disappointed at where we are now; the various pledges made don’t seem to amount to much more than a finger in the dike. But I am also a realist, and too often the environmental movement can sound far too shrill in demanding the infeasible. Sometimes the important thing can be to establish the principle, and then ratchet up the numbers later. The European Carbon Emissions Trading Scheme came in for huge criticism early on for being far too generous, but is now, gradually, making up for lost ground. Yes we need strong incentives to drive the sorts of investments necessary to avert catastrophic climate change, but there is also something to be said for getting the ball rolling; as it picks up steam, and technological improvements come through, the harder challenges will not seem quite so daunting.

REDD+ is one of the few real successes on the UNFCCC negotiations since Kyoto. Here Cancun has at last provided some solid ground for things to start to move forward. However, from where I sit, there is still one major problem if REDD+ is going to make a big difference in Africa; the extremely government centric approach. I think this might work in South America and SE Asia where management capacity is higher, and maybe even some other countries in Sub-Saharan Africa, but where I work I see a big problem. It goes like this:-

Natural resources and environment have hitherto been under-resourced sectors here; not top priority for the government and not top priority for donors. So let’s compare with a sector which is relatively well resourced: health. The health sector in theory reaches into every village with its drug provision programme, but in reality most village drug dispensaries are extremely poorly stocked. This ought to be the easy side of health care provision (in contrast trained employees can get easily tempted by better paid jobs), but the leakage and basic mismanagement are massive and endemic. Why then should we have any confidence that a government-run fund to disburse REDD money to villages protecting their local forests will provide money on time and without taking a huge cut?

Although I well understand the reasons for working at the national level – many drivers of deforestation are best addressed here – I think REDD will have much more impact on actual forest cover in Africa if the regulated market were to be opened up for direct access by the private sector. See also my previous musings about keeping REDD a transaction-based system.

ps. Beyond REDD, am I skeptical about how effective will be those huge sums being bandied around to help developing countries adapt to climate change? You betcha! But that’s just the same old story.

What’s wrong with ICDPs? (Part One)

In my introduction to this blog I criticise Integrated Conservation & Development Projects (ICDPs) without going into much detail, but recently I have been queried on the subject, so here’s the fuller explanation. ICDPs first started appearing about 20 years ago and were a response to the criticism that traditional conservation projects did not take into account the needs and livelihoods of  local people, despite those same people often being central to the problems that the conservation projects sought to address. Poverty was often identified as a root cause of habitat destruction or unsustainable exploitation of natural resources, so conservation practitioners were challenged to try to alleviate this poverty. Unfortunately, as the mainstream development sector knows all too well, poverty alleviation is a deuced tricky thing to pull off, and a bunch of conservation biologists whose primary concern was the critically endangered <insert flagship species> were not likely to succeed where others had failed.

That, of course, is not a reason to abandon hope. If poverty really is the root cause of a conservation problem, and there is enough money behind solving the conservation problem, then it ought to be possible to make at least some serious inroads into local poverty concerns. The bigger error was in designing projects in which the only real integration between the conservation and development work was in the project title. (And presumably some overlap in intervention sites and resource commitments.) So, to take an example, the project might urge the community to protect a local forest, and offer a ‘bribe’ to gain the community’s support in the form of support for alternative income generating activities (which didn’t need forest land or resources) and/or new village infrastructure such as a new school. Now I don’t know about you, but if I was a poor farmer who was given an extra means of earning income, and/or a better school for my kids, I might be grateful, but if that small patch of forest was still the cheapest, easiest and closest source of firewood, then I would still go there to collect my wood fuel. In order to keep the project staff happy I might make some marginal attempt to utilise other sources and/or refrain from blatantly marching out of the forest with a pile of firewood when project staff were around, but unless you directly incentivise me to get my firewood elsewhere I am unlikely to change my practices*. And if you incentivise me negatively I am unlikely to have such a rosy view of your project any more, whilst both positive and negative incentives may well not be sustained beyond the end of the project, assuming they are dependent on external funding.

The fundamental error was committed at project design stage when the conservation and development elements were decoupled. For poverty alleviation to make a meaningful contribution to conservation, it has to be directly in the interests of local people to follow the conservation path. Hence why I have much more faith in the various flavours of Payment for Ecosystem Services strategies (watershed, REDD and biodiversity protection can all be directly rewarded), and community management of hunting concessions (e.g. the much discussed CAMPFIRE project in Zimbabwe). Also in forestry, FSC certification and bee-keeping can be combined with participatory forest management to deliver real benefits to forest conservation, whilst in fisheries, no-catch zones have been shown to increase catches overall by giving target species safe areas in which to reproduce. (Though convincing fishermen of this fact can be rather more difficult.) All of these approaches also contain within them some of the necessary ingredients to address the sustainability problem. But ICDPs as originally developed belong in the dustbin.

* This is the same kind of problem which face anti-corruption drives. Low pay may be a major cause of corruption in the first place, but simply raising peoples’ pay now is unlikely to put them off a lucrative additional earner.

REDD: to transact or not to transact?

I’ve had various conversations with friends and colleagues over the last few days on the subject of REDD. Most commentators seem to agree that REDD is one of  the few things countries did seem able to agree on at Copenhagen, and that some kind of international agreement on it does seem likely to happen. This is all to the good, our concern has instead been the architecture at the sub-national level. This will be driven to some extent by the framework set out at international level (and I won’t pretend to be up to date on all the latest discussions) but individual countries will also have a certain amount of freedom to choose their own solution.

Essentially there are two different kinds of architecture which can be adopted:

1. Transaction based. In this model individual land owners / forest managers make  some changes to reduce deforestation and/or its cousin forest degradation. These changes and the amount of carbon saved are verified, and then the land owner sells these credits (known as Certified Emissions Reductions, or CERs) to the government in their country, who then sell it on to the international market.
2. Fund based. In this model the government undertakes a variety of actions to reduce deforestation and forest degradation. These lead to an overall carbon saving at the national level, at which point it is verified. The government can then sell these as CERs on the international market, the proceeds of which they use to recover the costs of the original activities, but that the implementers of these activities will be paid according to the cost of the activity, not according to the value of the carbon savings achieved as a result.

The astute amongst you will already have noted that both of these architectures rely on the government as the key intermediary between domestic and international markets, and may reasonably question whether many governments, especially but not necessarily only those in the developing world, are well equipped to play such a role. However, since these agreements are being negotiated by national governments we seem somewhat stuck with this situation. The alternative is the voluntary carbon markets on which valuations tend to be an order of magnitude lower. (Nonetheless I know many protagonists who prefer the predictability of these over the uncertainty of the international regulatory market and the intermediation of their government.)

Clearly the transaction-based model is the more economically pure, and should lead to the most cost-efficient outcomes. However, it is also rather more complex to administer since each individual carbon saving must be independently checked and accounted for, no mean task for governments not great at record keeping, and which may impose significant transaction costs. Furthermore, a key issue for REDD is leakage (will conserving one patch of forest simply lead to another patch being felled more quickly?) which is easier addressed at the national level than at the project level, e.g. through a national energy policy to reduce charcoal usage. Finally, efficient markets rely on reasonably well informed participants, something which is likely to be far from the case when those participants are the rural communities who are the de-facto guardians of their local forests. (Trying to explain carbon dioxide, the greenhouse effect, climate change, carbon markets and REDD to people who have barely completed primary school is a serious challenge!) This calls to mind a time when I was sat in a meeting when someone from FAO was presented their proposed project for using Payment for Watershed Services (PWS) as a means to achieve forest conservation in critical catchment forests; his preferred tool was fungible water rights which might be an economist’s nirvana but struck me as being a development worker’s worst nightmare.

So a fund-based model does appear more attractive. Communities can simply be paid for not cutting down trees (this one is relatively easy to explain), the government can tackle leakage issues through broad national policies and implementation programmes, and the total transaction cost should be significantly lower. Not surprisingly many governments like this option (e.g. Brazil’s Amazon fund) because it gives them much more control and freedom of action, and maybe even the possibility to make a nice profit which can boost their tax revenue. Plus for many of the politicians and senior officials responsible for these negotiations it will not have escaped their notice that a fund-based system would bequeath to them vast empires with large budgets, and plenty of opportunity for patronage. A realisation that leads us to the big BUT in all of this. That is donors have been pumping millions of dollars into forest conservation for quite some time now, with mixed results at best. Why, just because now this money is labelled as REDD, should we expect better results?

There are two counter-arguments to this. Firstly the sums of money that will  be available under REDD are several orders of magnitude higher than institutional funding to date. However, though many times financial resources have acted as a significant constraint to forest conservation in developing countries, plenty of very well funded programmes have struggled to make a significant difference, which would seem to invalidate that argument. Secondly, and more cogently, if significant forest conservation gains are not made then the recipient government will soon stop receiving the money. This is a real paradigm shift that holds out the possibility of solving the sustainability problem. Since REDD is paying for results rather for process (as most aid projects have done in the past), governments will have a real incentive to get things right for once, assuming they can actually out-muscle their timber barons, and deliver a sensible, working energy policy.

The question then comes how do governments go about delivering the carbon savings in the face of the last mile problem? Politicians here frequently bemoan and berate civil servants for their laziness and inefficiency (not necessarily unreasonably, though whether the kettle is blacker than the pot is a moot point). Faced with such inflexible and unreactive bureaucracies developing country politicians are apt to reach for panic button which leads to sweeping and rash policy decisions made in a hurry and with little consultation, such as banning agricultural exports in the face of food shortages (rather than keeping markets open to encourage farmers to produce more). This is what has got many campaigners worried; will governments reverse the hard-won gains of the last twenty years in a flash and renationalise forests, disenfranchising local people en masse of their forest rights? For heavily forested developing countries will REDD be any more of a benefit to their citizens than oil has been for ordinary Nigerians? Hence the focus of  many campaigners on “REDD+” or “REDD++” where the pluses stand for social protection and equity, and  biodiversity conservation.

For these reasons, whilst the optimist in me wishes the fund-based model could work, the pragmatist in me says a strong transaction-based architecture is almost certainly going to be required in most cases, and the pessimist in me thinks that we’ll probably end up with mostly fund-based approaches any way. One colleague of mine said he had heard talk of a hybrid approach, but didn’t really understand how it would work. If anyone does I would love to hear about it; please post details in the comments below. Meanwhile I will focus on my next beer transaction.