By Angela Dewan
A binding deal on the REDD+ scheme to conserve the world’s forests has never been so close. How to finance REDD+ is still under debate, but experts in Cancun have reiterated that a combination of financing mechanisms will be needed to ensure adequate REDD+ funding.
Pavan Sukhdev, special advisor and head of the United Nations Environment Programme’s Green Economy Initiative, stressed that REDD+ absolutely needed a market and that criticisms of a market-based financing mechanism were unfounded.
One common argument is non-fungibility – the idea that one type of carbon credit will have different value to another, and therefore can’t be exchanged.
“The reason I’m not worried about this is because I see that the oil market has for years traded two completely different benchmarks. There’s WTI, West Texas Intermediate, and there’s Brent crude, north sea oil. These two benchmarks have traded quite happily with a spread between them.”He said that carbon offsets were not optional, but a mechanism to ensure a correct carbon pricing was needed to strengthen the market.
This, he said, could be achieved by raising the cap levels under cap and trade schemes.
“Carbon prices are not where they ought to be because caps are too lenient. If caps are too lenient, then you can trade away till kingdom come but you will not get the right price because you’ve created too much supply. It’s a little bit like a central bank flooding the market with too much money – you won’t get the right interest rates.”
Melinda Kimble, who oversees the International Bioenergy Initiative at the United Nations Foundation, said that a market alone would not provide enough funds to tackle deforestation.
“There are still huge gaps in knowledge. Carbon values are so imprecise at the moment, that it is difficult for a market to emerge. We will still need donor support well into the next decade,” Kimble said.
It would cost $51 billion, she said, to achieve the 17-20 gigatonne reduction in carbon emissions needed to give the world a 50-50 chance of keeping global warming within 2 degrees Celsius by 2020.
“Fiscal purses are not infinite,” Sukhdev said.
“The reality is that at some point you have to telescope that demand down to the constituents, which means corporations and private interests, who will then have to within various mechanisms pay for these offsets, and that is the right way forward.”