It is a well-known fact that China and the United States are the two most prolific emitters of carbon into the atmosphere, and hence the worlds biggest contributors to global warming. Less well known, and perhaps more surprising, is the country that ranks third on the list: Indonesia. The Southeast Asian archipelago nation has earned this dubious distinction nowhere nearly so much from industrialization as from deforestation. Since 1950, when the country was down near the bottom of the list, Indonesia has lost a staggering 40 percent of its tropical forests to logging, agriculture, and other commercial ventures. Deforestation there continues to accelerate.

We tend to think of climate change as just a matter of what comes out of smokestacks and tailpipesan energy issue. In fact, according to the World Resources Institutes careful tabulations, tropical deforestation accounts for 20 percent or more of all carbon emissions into the atmosphere. That, says the World Wildlife Fund, is “more than the combined emissions of every car, truck, ship, plane or train on the planet.” The reason is not hard to understand. Plants remove carbon, in the form of carbon dioxide, from the atmosphere and turn it, via photosynthesis, into organic matter: leaves, bark, roots, and so on. This “fixing” process is most intense in dense tropical forests, which cover only 7 percent of the earths dry land but store (in the plants themselves and in the rich soils below) about 45 percent of all terrestrial carbon. Chopping down the rainforests removes this carbon-absorbing buffer while releasing vast amounts of stored carbon into the air as the brush is burned off.

The alarming role that deforestation plays in climate change, and what might be done about it, is the subject of this special report. In particular, the report addresses the quest for financial systems in which the owners and residents of tropical forest properties can make more money from the standing forest than from its removal, which may be our best hope for reining in deforestation and its contribution to climate change. The term of art for this concept is REDDReducing Emissions from Deforestation and Forest Degradation. REDD encompasses a variety of ways in which substantial funds to protect tropical forests and stimulate sustainable development might be generated, either through carbon market mechanisms or direct payments from public and private sources.

The REDD concept is gaining traction among environmentalists, scientists, and in the halls of power. In fact, the key climate change legislation now in play in Congress, the Waxman-Markey bill, contains language that would bring tropical forest conservation into a proposed national cap-and-trade system. In effect, the legislation would allow U.S. companies to “offset” the carbon they emit by paying tropical countries and their citizens not to cut down their rainforests. A market-based system that includes REDD is also expected to be prominently on the agenda at UN-sponsored talks in Copenhagen this December, where representatives hope to hash out a new climate change treaty to replace the 1997 Kyoto Protocol, which expires in 2012.

T here are many strong arguments, in addition to carbon sequestration, for protecting the worlds tropical forests, and scientists and environmentalists have been making them for years. The trees act as anchors, inhibiting erosion. They do much to regulate local and regional climates by collecting, storing, and then releasing ample quantities of water. Clouds form, and rain ensues; when there are fewer trees, there is less rain and the region is drier and warmer. Germ plasm from wild plants protects many common food plants from disease and viruses. The remarkable biodiversity within tropical foreststhe greatest anywhereincludes millions of plant and animal species we have not even discovered, let alone examined for their prospective contributions to human well-being.

Using such arguments, many conservationists of the late twentieth century tried to save the tropical forests by walling them off from human use. International organizations gave park rangers boots and rifles. Attempts were made to control logging by certifying hardwoods and other forest products as having been sustainably harvested, and to restore lands degraded as deforestation spread and “agricultural frontiers” advanced. Ecotourism ventures dependent on forest preservation were launched. The worlds of international conservation and development assistance crackled with talk of tropical forest action plans, integrated conservation and development projects, extractive reserves, and restoring the rights and management responsibilities of indigenous people dependent on forests for food and medicine. Top-down partnerships were formed between ranchers, conservationists, governments, and aid donors, with beleaguered forest dwellers occasionally making their way to the big table.

As human pressures mounted on lightly populated lands, such initiatives have met with only partial success. Ultimately they have failed to stem the tide of ongoing tropical forest loss, which roars on at the rate of one acre a second. For every Costa Rica, a plucky little country whose economic strength rests largely on a pedestal of careful land use, there is a larger-scale counterexample such as Indonesia where blatant connivance between illegal loggers and government officials stripped many forests and where oil palm plantations are now carving ever deeper into forest lands. At current rates, the world will lose about 70 percent of all remaining forestsalmost all of this in tropical developing countrieswithin the next 200 years.

The old remedies have failed to slow deforestation because they have not sufficiently altered the basic economic fact that there is often more money to be made in cutting rainforests down than in leaving them standing. The appeal of REDD is that it can fundamentally change that equation. The idea has its roots back in the 1980s, when environmentalists began persuading Western banks to write off some Latin American debt in return for those countries agreeing to preserve tracts of rainforest, in what became known as debt-for-nature swaps. It evolved in the 1990s, when the Clinton administration created tax incentives for U.S. power companies to invest in tropical forest conservation projects in return for “carbon credits” that could be traded on the open marketan early, voluntary test of the kind of REDD mechanism that the Waxman-Markey bill would make mandatory.

These nascent efforts showed promise. But when United Nations negotiators met in 1997 to craft the Kyoto Protocol, they pointedly excluded deforestation from the carbon-trading scheme that was established there. Diplomats worried, not without reason, that measurement and monitoring would be extremely difficult. Environmentalists protested that the system would make it easy for polluters to avoid cutting back their emissions, by allowing them to use forest-based credits as offsets.

I n the twelve years since Kyoto, opinions have changeda shift Rhett Butler describes in his centerpiece article on REDD (“Big REDD“). The growing threat of climate change and the failure of other methods to stem deforestation have turned environmental groups like the World Wildlife Fund from opponents of market-based REDD initiatives into advocates. Also, improvements in procedures and new technologies like GPS systems have given scientists and diplomats more confidence that a complex carbon-offset market for tropical forests can be successfully monitored and enforced.

For all this progress, there is no guarantee that negotiators in Copenhagen this December will agree on the terms of a REDD-type forest conservation initiativeor indeed on anything at all. As David Adam notes (“From Kyoto to Copenhagen“), the politics going into the negotiations are treacherous, many technical complexities with the REDD idea remain unresolved, and the chances that final negotiations will be pushed off beyond this year are growing. Reflecting continuing skepticism in some quarters about REDD, Marcelo Leite (“The Brazilian Dilemma“) describes an alternative approach now under way in Brazil: a government-sponsored fund that receives grants from overseas and distributes them itself, thus avoiding sovereignty concerns and the uncertainties surrounding market-based financing mechanisms.

As if carving out a long-term climate change regime that encompasses deforestation werent challenging enough, there is also a desperate need to find ways to adjudicate conflicting pressures over land use so our food and fuel needs can be met without invading ever deeper into the tropical forests. In these pages, Mark Rice-Oxley reports on the search for more forest-friendly “second generation” biofuels (“Algae Soup“), while Michael Grunwald (“The Case for Big Ag“) makes the case for why industrial-style agriculture, stripped of its least sustainable qualities, might actually benefit the developing world and its forests.

All of these new treaties, technologies, and methods will take time to perfect and put in place. Yet, as Paul Brown explains (“The Long Hot Summer“), time is not on our side. New scientific research shows that global warming could devastate our forests, causing the vegetation to dry up and gradually die off. As a result, these rich ecosystems would stop absorbing vast quantities of carbon and begin to release billions of tons instead. This, in turn, would accelerate global warming, causing the forests to die off fastera vicious cycle with devastating consequences for the planet.

Put another way, our forests, whose capacity to sequester carbon has made them our greatest ally in the battle against climate change, could become one of our greatest liabilities. Whether this happens depends entirely on the choices we make now.

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