By Nick Mathiason
    The Observer UK

    Sunday 14 October 2007

Nick Mathiason on misplaced optimism over climate change initiatives.

    Industrial clearance of rainforests accounts for 20 per cent of greenhouse gases. Every second of each day a portion of jungle the size of a football pitch is destroyed. As timber is carted off for export, giant agribusinesses often move in. And so spins the nightmare cycle: a growing release of carbon dioxide into the atmosphere which in turn alters weather patterns and destroys delicate ecosystems.

    Climate-change economists believe that slowing the speed of rainforest destruction is the most cost-effective way to fight global warming. In his Treasury report into the economics of climate change last year, Sir Nicholas Stern said $5bn a year was needed to provide rainforest nations with funds to ensure what remained was kept intact. But many people say Stern is unduly optimistic and put the real price at $15bn.

    Even so, that seems a small cost for what appears to be a solid proposal to fight climate change. But the issue facing countries such as Brazil, Indonesia and Sudan is how to replace the huge cash windfalls they get from the 13 million hectares of jungle destroyed every year. For instance, logging in the Congo, which has the second largest rainforest after the Amazon, rose significantly after relative stability returned to the region five years ago. It was encouraged by the World Bank, which saw deforestation as a route to economic stability.

    However, in seven weeks, world leaders will start work in the Indonesian island of Bali on a framework to replace the UN Kyoto climate change agreement. Bali is crucial if the world is to stop a catastrophic 2C rise in average global temperature. Encouragingly, there are signs that a rainforest breakthrough may be within reach.

    But, when asked how close a global deal was to incentivise countries to protect rainforests, British Environment Secretary Hilary Benn preferred to spell out the dilemma: "Congo has just emerged after a desperate period of war. It now has a democratically elected government and needs revenue to create stability."

    Any optimism is mainly due to an initiative by Papua New Guinea and Costa Rica nearly two years ago, which has grown into a coalition of more than 20 rainforest countries. It wants to develop a mechanism to enable carbon saved through reduced deforestation in developing countries to be traded internationally. A country would establish a national baseline rate of deforestation and reductions below the baseline could then be sold under Kyoto or other carbon markets. No trading would be allowed if emissions were above the baseline. The idea has been accepted by most rich nations, including the US. It traditionally opposes climate change measures, but insiders say it dare not do so this time, as it came from developing countries and the US would incur international ridicule if it did.

    But not all countries are united around the idea. Brazil wants a specific fund, paid for by rich nations, to be channelled to rainforest countries. Many believe that rich countries will not commit to this and it seems that Brazil is being isolated after the World Bank last week said it was preparing to establish carbon trading funds worth $600m, specifically targeted at rainforest nations. But it admitted the funds had not yet had cash allocated to them.

    In a statement, the coalition warned: "If these outcomes cannot be attained together, it is unlikely that either objective will be attained individually."

    There is concern about whether governments in fragile democracies will have the resources to ensure forests are properly managed and if they can create sustainable forest industries.

    There are other potential solutions. In the next few days a major, as yet unnamed, bank will begin research into assessing if it is possible to launch a bond on the back of incomes derived through sustainable forestry. The scheme is being developed by Simon Petley, a former bond trader, now head of EnviroMarket, who believes this model could contribute "hundreds of millions of dollars" which would go to rainforest countries to replace lost timber revenues. "The aspiration is that the work we're putting into this process - forest-backed securities - can be duplicated," he says.

    Chatham House associate fellow Duncan Brack has spent eight years working on policies to combat illegal logging. He argues that governments must use their power as bulk purchasers of timber products to demand proof that the wood comes from legitimate sources. The UK is one of six European countries that have opted to do this.

    Brack reckons governments should also make it a requirement for the building industry and retailers to use timber from sustainable forests. He says firms such as Balfour Beatty, Ikea and John Lewis are beginning to do this, but the government failed to include this agenda in its new house-building programme.

    Most experts still pin increasingly forlorn hopes on including rainforest nations in a carbon trading scheme. John Lanchbery, principal climate change adviser with the Royal Society for the Protection of Birds, says: "This is not going to solve the problem, but it's our last hope. It's not perfect, but there's nothing else."