Introduction
The State of Global Forests and Deforestation
Forests: A Vital Part of the Solution
Carbon Offsets from Forestry
Reservations about Forest Carbon Sinking
Forestry and Future Climate Change Policy

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Introduction
Loss of forests contributes as much as 30 percent of global greenhouse-gas emissions each year—rivaling emissions from the global transportation sector. The Kyoto Protocol's offset mechanisms, explained in a CFR Backgrounder, allow credits to be given for replanting trees or establishing new forests, which capture carbon dioxide through photosynthesis. But the current policy regimen does nothing to prevent existing forests from being cut down in the first place. With Kyoto set to expire in 2012, a new round of talks is under way in Bali to develop the next framework for climate change. Experts believe a policy to avoid further deforestation will be a major topic at the conference. But some environmentalists remain wary of forestry climate policy, fearing it will draw attention away from the need to reduce emissions caused by fossil fuels.

The State of Global Forests and Deforestation
The world currently has about ten billion acres of forest. According to the UN Food and Agriculture Organization's (FAO) 2007 report on the world's forests, the world lost about 3 percent of forest area between 1990 and 2005, and the net rate of loss (PDF) has declined since 2000 (the world loses on average 32 million acres per year). Growth in northern hemisphere forest has helped offset tropical deforestation. There is disagreement, however, on the extent to which increases in temperate-zone forests offset the loss of carbon sinking in tropical zones.

Deforestation is caused by exploitation of natural resources—including expanding populations, logging, agriculture, biofuel production, and wildfires. Clearing forests for the production of biofuels is causing major concern, as experts contend that it has a significant negative impact on forests without doing much to reduce greenhouse gas emissions.

The FAO report shows that the greatest overall loss is occurring in Africa, followed closely by Latin America and the Caribbean. Indonesia has the fastest deforestation rate of any single country in the world. When emissions from loss of forests are taken into account, Indonesia could be considered the world's third-largest emitter (PDF) of greenhouse gases, according to a recent World Bank report. Indonesia recently has made a show of planting 80 million trees ahead of the Bali conference, but some question the country's long-term commitment to slowing exploitation of its valuable resources, such as stemming illegal logging.

China's rapid growth in the production of manufactured goods that need wood also poses challenges. The country's consumption of forest products leads the world. According to Forest Trends, a nonprofit research group, China's increasing demand (PDF) has lead to unsustainable and sometimes illegal logging practices in many of the countries seeing significant deforesting activities, such as Indonesia and Papua New Guinea. "China has a seemingly limitless appetite for cheap wood," says Don J. Melnick, a conservation biology professor at Columbia University. Products made from this timber often wind up in U.S. and European markets. Richard Z. Donovan, chief of forestry for the Rainforest Alliance, an advocacy group, says that right now China is not only adding to climate change by burning large amounts of fossil fuels that emit greenhouse gas but also by being a "non-discriminating buyer" of wood.

Forests: A Vital Part of the Solution
Trees capture carbon dioxide by taking it into their cells through photosynthesis. They then store the carbon in their bodies; a tree is comprised of about 50 percent carbon. Some carbon gets released back into the atmosphere through respiration, but the net effect is tremendous carbon storage. The Union of Concerned Scientists estimates that U.S. forests absorb between one million and three million metric tons of carbon dioxide each year, perhaps offsetting between 20 percent and 46 percent of the country's greenhouse-gas emissions.

The Union of Concerned Scientists estimates that U.S. forests absorb between one million and three million metric tons of carbon dioxide each year, perhaps offsetting between 20 percent and 46 percent of the country's greenhouse-gas emissions.
When trees are burned, harvested, or otherwise die, they release their carbon back into the atmosphere. The 2007 forest fires in the United States, for example, are estimated to account for between 4 percent and 6 percent of North American greenhouse-gas emissions for the year. Some environmental experts believe climate change may be a contributor to decreasing rainfall in some areas, thus increasing the likelihood of wildfires.

Carbon Offsets from Forestry
The offset mechanisms set up by the UN's Kyoto Protocol allow a small fraction of the total credits each country is allocated for offsetting greenhouse-gas emissions to come from reforestation (forest restoration) and afforestation (the planting of new forests) projects. None are allowed for deforestation. To date, out of sixty-five projects submitted worldwide, only one project located in China has made it through the entire Kyoto process (others are at various interim stages). The process for getting a registered project is complex and expensive. "The reality is that very few local communities have the capacity to maneuver through the process," says Celia A. Harvey, senior adviser for forest carbon projects at Conservation International, an environmental advocacy group. These credits also are set to expire after a few years, which makes them less profitable than other Kyoto offsets, experts say.

One requirement of the UN credits mechanism presents particular difficulties for forestry projects. Roger A. Sedjo, a forestry expert for Resources for the Future, an environmental think tank, says Kyoto's "additionality" requirement—proof that project emissions outcomes would not have occurred without intervention—encourages "crummy projects" that are less effective and difficult to approve. It is extremely difficult to prove that these emissions reductions would not have occurred anyway.

Reservations about Forest Carbon Sinking
Some environmental advocates remain cautious about including forest management in climate-change protocols because they worry it will distract from mitigating emissions caused by fossil fuels. Others worry that forest carbon sinking is difficult to monitor. Still others are concerned that the logistics of compensating people for not doing something is problematic. Projects are by jeopardized by forest fires, bug infestations and diseases, illegal logging, and even human malice. The European emissions trading scheme, for example, does not give credits to forestry projects, in part because of such concerns. Forest projects, however, are beginning to generate credits sold on the Chicago Climate Exchange, a voluntary carbon market.

Others environmentalists are concerned that forestry projects will lead to less biodiversity and an erosion of rights for indigenous forest dwellers. In Uganda, for example, a reforesting project became embroiled in a battle (Fortune) over land access between the government and local farmers living at the forest's edge. Donovan says the best way to prevent such problems is to make sure indigenous groups are allowed to participate in negotiations on policy for their area.

Some environmental advocates remain cautious about including forest management in climate-change protocols because they worry it will distract from mitigating emissions caused by fossil fuels.
On biodiversity, Harvey notes that the majority of forestry projects so far have focused on fast-growing, mono-species plantations. These trees present known quantities for growing and carbon measurements, making them more attractive projects, while native trees have potential that still needs to be assessed. Donovan argues that allowing plantation projects to be included in the Kyoto process may have provided a "perverse incentive" to cut down existing forests in order to have the opportunity to replant them. Both Harvey and Donovan agree the first priority should be to conserve current forests, which provide more benefits than just carbon mitigation, such as protecting natural habitats.

Currently, "avoided deforestation" remains outside the climate policy mix. But without avoided deforestation, some experts say that efforts to reduce greenhouse gas from other sectors will be more expensive and take twice as long. Some experts believe that deforestation rates in Indonesia and Brazil alone are enough to undo 80 percent of the emissions reductions designated under the Kyoto Protocol. Experts also say avoided deforestation is a less expensive option for reducing emissions when compared to options such as upgrading power plants.

Forestry and Future Climate Change Policy
Lowering deforestation has become a high priority and is expected to figure prominently in discussions on the next international framework for climate change. An Intergovernmental Panel on Climate Change (IPCC) report points out (PDF) that the most sustainable policy for use of forestry as a climate-change tool is one that maintains or increases forest carbon stock while sustaining timber yields. That means slowing the rate for deforestation while providing enough timber and agricultural land to meet the world's growing appetite. Cutting deforestation rates by 50 percent over the next century would provide about 12 percent of the emissions reductions needed to keep carbon dioxide concentrations to 450 parts per million, a goal the IPCC argues is necessary to prevent significant increases in global temperatures. Experts predict that ahead of any final policy on avoided deforestation, more projects will begin trading on the voluntary market, similar to what happened before the Kyoto Protocol went into its enforcement period.

Experts point out a successful deforestation program lies in its design. Two major "flash points" will complicate the deforestation policy debate—accounting for emissions reductions and paying for conservation. Some advocates would like to see emissions-reduction accounting by project, while others believe the only way to prevent deforestation from moving outside project areas is to account for emissions reductions countrywide. Experts say the assumption is that deforestation efforts will join the credit-trading system already underway. However, some people are pushing for a fund that governments would pay into for designated forest conservation. Melnick notes that a fund would be less effective than a market-based mechanism because governments would never put enough money into the fund. "We can't get money into funds for starving children and people with AIDS," Melnick argues. "So getting money for trees is complete fantasy." In a CFR.org Podcast, Joshua Busby, an expert on climate change politics, also notes there is debate about whether avoided deforestation monies will be dispersed to governments, large corporations or local communities.

With carbon credits selling at about twenty dollars per ton on the European market, experts say a market-based mechanism would provide enough incentive to avoid deforestation. Donovan says timber and agriculture opportunities from forest land often provide less than a dollar per acre. One exception may be biofuel production; as costs for ethanol increase, experts expect to see greater pressure on forests, even with market credits in place. And some people worry that adding deforestation credits to the market will depress current carbon prices, although other note that plans to expand emissions caps to more industry sectors and the possible inclusion of the United States may increase the need for credits.

Other issues also need attention, such as reducing the complexity of the UN's project accrediting system to open it up to more people. Another issue is whether avoided deforestation will be included within the current UN mechanisms or if a new type of mechanism will be created. Setting baselines—how much emissions reductions—for avoided deforestation projects also need to be decided. And some people are pushing for carbon sequestration from wood products, such as furniture, to be included. But Harvey contends that may be too complex.