Trevaylor

REDD plus people

This the text of my article in  the latest EU magazine 'Forest Matters'.   Magazine can be ordered from the EU FLEGT site (I think).

‘REDD plus’ can work, but only if the ‘plus’ means People

Dominic Elson

5th August 2011

Deforestation, particularly from forests in developing countries, accounts for around 17% of global greenhouse gas (GHG) emissions, more than the global transportation sector and second only to the energy sector.  The forestry sector was thus always going to be an important component of any global deal to constrain emissions, but in the event it has become the most prominent sector.  The United Nations Framework Convention on Climate Change (UNFCCC) meeting at Cancun in December 2010 established an incentive mechanism to reduce emissions from deforestation and forest degradation, conserve and enhance forest carbon stocks, and promote sustainable forest management. This scheme is known as ‘REDD+’.

Forests were already useful for many things before their role in climate control became an issue.   Forests support the livelihoods of 1.2 billion of the world's poorest people and are home to more than 50% of the world's species diversity. They provide a vast range of foods, animal fodder, fuel, building materials and medicines for the largely rural population, while protecting watersheds replenishing soil nutrients.  Besides timber, many of the world’s most valuable commodities come from forests: including major crops such as coffee and cocoa as well as specialist resins and aromatic roots.

If forests are so useful, one may wonder why they are under threat at all. So understanding the dynamics behind forest clearance and degradation is essential if REDD+ is to succeed.  A simplified answer is that forest clearance is correlated with economic progress - as was the case in Europe and USA.  As we recall from our history lessons: forests are cleared, timber sold, and the wealth used to ‘improve’ the land so that it may support crops or pasture.  But analysis has shown that this  correlation does not mean causation.  There are many factors that drive economic growth and the formation of capital, and clearing forests may not always be the straight line route to riches.  One does not have to look too hard to find evidence: Haiti is almost completely deforested yet unremittingly poor, meanwhile Vietnam has been growing its forest estate throughout its period of rapid economic growth. Indeed, in the 20 years to 2010, 59 countries actually expanded their forest estate, many of them developing countries. 

Where deforestation is occurring, it is often because the political economy of that country is bound up in the capture of ‘rents’ from high value timber and the release of cheap land for plantations.  In some cases, sudden rises in deforestation can be predicted based on election cycles, as politicians reward financial backers with forest clearance permits.  Tackling this system when it is so institutionalized in certain countries will be a daunting challenge for REDD+.  Perhaps the only sure way to succeed is to link payments to results (so a country will only get the payments if the forest estate has improved), but this is complicated to administer and delivers the cash only after the event.  For many of the target countries, the money is needed up front if there is to be any chance of changing the system. 

REDD+ is an unprecedented attempt to deliver ‘payments for performance', combining carbon, biodiversity and poverty alleviation goals.   Some are skeptical that any project that relies for its success on the intricate workings of social and political processes in developing countries can be wholly successful without having some unintended consequences along the way.  There is a danger that in attempting to control the system, REDD+ will centralize power and threaten the recent progress that has been made in recognizing the rights of local people over the forests they inhabit. This would be unfortunate, for it is now clear to some experts that for REDD+ to succeed at all, it must be structured around the needs of rural communities and forest dwellers.

 Look after the people that look after the trees

 When we talk of 'virgin forest' we imply the land is somehow unsullied, pure, a stranger to the human stain.  But this is misleading.  Forests - especially tropical forests - are human landscapes.  They contain communities, boundaries, tribes, clans and households.  They may not look like our fields and hedgerows, fences and walls, but most forests are in fact delineated in complex ways.

 In the mosaic landscapes that encompass forests, people are engaged in a range of activities - such as agroforestry - that rely on a diverse and delicately balanced ecosystem.  Some of these lands are deemed to be 'primary forest', and some are not thought to be forest at all, despite the presence of various types of trees and palms. The only way that REDD+ can be successful in regulating carbon emissions is by encompassing all these landscapes, and this requires an understanding of how people currently use them.

 When we look at the forest - and landscapes with trees - as a place for people, we see abundant opportunities for improving livelihoods. For instance by building a viable enterprise sector, that allows rights-holders to exercise command over the natural resources in their domain in an equal partnership with capital investors, rather than as subordinate to outside interests. This approach will still satisfy our needs to constrain emissions. In fact, an extensive survey found that when local people were granted greater autonomy over forest areas, combined with sustainable economic options, the carbon performance of those landscapes was greater than in areas controlled by governments, NGOs or donor projects. 

 The key factor that determines this success is land tenure reform.  China and Vietnam have both experienced a significant expansion of their forest estates through granting property rights to local people, stimulating investment in tree planting and helping to restore local ecosystems. The evidence shows that where people obtain unambiguous, exercisable rights over forests, within the context of clear responsibilities, they feel empowered to invest their own labour, time and capital in improving the landscape to achieve long term goals.  In most cases, this leads to land management that is more 'climate smart'; achieving multiple goals of economic, social and environmental sustainability.

 Starting with the people, and the enterprises that they can form, is not only more satisfactory from a rights point of view, it is also a superior method in pragmatic economic terms. In short, it is more efficient.  Investment in the holistic economy of forest landscapes could set the conditions for low carbon growth, for instance using renewable energy and low-carbon infrastructure.  Investment in agricultural technology and addressing value chain constraints could raise yields, boost smallholder incomes and thus alleviate pressure on the forest frontier.

 Many governments already see the benefits of tenure reform and a rights-based approach to the economics of landscape management. For instance, at a conference on tenure reform held in Indonesia in July 2011, Kuntoro Mangkusubroto, a senior government figure, declared that:

            'At the utmost land and forest tenure reform is about increasing people’s welfare and living standard, reducing poverty by providing jobs, and living in harmony with the environment'

 The result of this people-based approach to REDD+ will be more equitable economic growth, whereby previously marginalized people become active citizens, with autonomy to conduct their own process of transition to the modern world at their own pace and on their own terms.  Land reform has been proven to be the defining condition of countries that seek to become modern, wealthy, liberal democracies.  Of course social and economic development is difficult, expensive and often has unforeseen outcomes.   One should not underestimate the costs and complexity of managing the kind of political and institutional development that would be required for effective tenure reform.  But REDD+ is going to involve significant expense on building institutions in any case, so why not build those institutions in a manner that most benefits human welfare, rather than becoming too fixated on technocratic projects that rely upon the counting of trees, carbon and money.

 -  END -

Further reading

Gregersen, H., El Lakany, H., Bailey, L. and White, A. (2011) The Greener Side of REDD+, Rights and Resources Initiative, Washington DC

Elson, D. (2011) The Economic case for Tenure Reform in Indonesia’s Forestry Sector, Rights and Resources Initiative, Washington DC

 

Style and Perfection

Steve Jobs never allowed the opinions of others to drown out his own "inner voice". For instance, when the Apple design team presented Jobs with the first version of the iPod. He looked at it for a while, turned it over and over, weighed it in his hand and then said: "It's too big." The engineers protested that it was a miracle of state-of-the-art miniaturisation – 1,000 songs packed into that tiny space. Jobs walked over to the fish tank in the corner of his office and dropped the prototype into the water. He then pointed to the bubbles that floated from it to the surface and said: "That means there's still some space in it. It's too big." End of conversation.

(h/t to John Naughton in the Guardian)

The Jakarta Post makes an interesting typo

At last week's CIFOR conference, Andrew Steer (the World Bank’s special envoy for climate change) made an important point about the role of forests and plantations in Indonesia's GDP, and how the sector needs to be kept in proportion.  

He said: "Forestry and oil palm are relatively small elements of the economy. Forests account for 0.7% of GDP and non-food crops – that’s all the estate crops including oil palm – at 2.1% of Indonesia’s GDP. If these sectors had not grown at all in 2010, Indonesia’s growth would have been 1/20th of one percentage point lower. So instead of being 6.1%, it would have been 6.04%"
(The full transcript of his speech can be found here.) 

This is consistent with the report we published earlier this year, which pointed out that the political footprint of the forestry and palm oil sector is much larger than its real economic footprint.  This was partly to refute the absurdly hysterical claim by the Chamber of Commerce (KADIN) that the forest conversion moratorium would cause an 8% reduction in GDP by 2014. 

However, when the Jakarta Post reported Steer's speech, it reported his comment as follows:

“If forestry and the palm oil sector had not grown, Indonesian growth would have been one-twentieth of 1 percent, instead of the 6.1 percent recorded last year,” he said.

Which gives the impression that forestry and palm oil were responsible for almost all of Indonesia's GDP growth in 2010, which of course is the opposite of what Steer actually said.  Placing the Steer comment in "quote marks" is a little misleading.  Either Steer mangled his words (in which case World Bank staff should have ensured journalists were properly briefed and Jakarta Post is not to blame), or this is lazy journalism.  Or else the Jakarta Post really does not understand the issues, which may be possible, given the number of times they publish Oxley's public relations efforts for APP masquarading as Op Ed. 

With reporting like this, it is not surprising that the oligarchs get such an easy ride over the democratic process, and that anyone suggesting an improvement in land use management and equity is pilloried as being 'anti-development'.

 

No further testing required - Community forestry is safe for policy makers and has few negative side effects

In my latest report on the economics of forest tenure (see previous post), I headed one section 'experiments in community forestry'.  I meant to convey the idea that Indonesia has set targets to do community forestry at scale, yet the actual achievements seem to resemble half-hearted experiments.  I did not mean this in a positive way.  So it was interesting at the RRI Lombok conference to hear a senior official from the Ministry of Forestry refer to 'our experiments in community forestry' as if this indicated brave steps in policymaking.

The community forestry program (HTR) was not supposed to be a mere experiment. Indeed, with evidence mounting around the world about the effectiveness of locally controlled forestry in achieving the 'triple bottom line' of environmental, social and economic goals, there is no need for further laboratory tests. This remedy is ready to be safely prescribed.

The section from the report is as follows:

Experiments in community forestry

After a few false starts in facilitating community forestry, the 2007 road map for revitalizing the forest sector proposed the ‘people’s plantation’ scheme (HTR), whereby individuals and cooperatives would be encouraged to invest in planting timber on degraded forest land. This was an important part of the target of establishing an additional 9 million hectares of plantations by 2016, 5.4m ha from HTR and 3.6m from industrial plantations. The financing would come from a revolving fund using capital from the Reforestation Fund.

 To date the project has been far from successful. The target was to have almost 2 million hectares established by the end of 2010, which would then be producing pulpwood for industry from 2015 onwards. However, by December 2010 less than 45,000 hectares of HTR plantations had actually been approved, although local district governments have identified almost 640,000 hectares of suitable plots of land.

At this rate of progress the scheme will achieve only 120,000 hectares of community-managed plantation by 2016, a cumulative shortfall of over five million hectares (see Chart below). This under-performance will have serious implications for future timber supply and thus forest usage and tenure. The Forestry Ministry has been working from projections (in the 2007 Road Map) that assume the HTR plantations will be meeting 30-40% of the total lumber demand from 2016. If such a significant portion of expected supply does not materialize then something has to give: either supply must be found elsewhere or industrial output must decrease. This may lead to more pressure to over-extract or convert natural forest.

An economic case for tenure reform in Indonesia's forests

Trevaylor and RRI published a report on 12th July to coincide with the second day of the Rights and Resources Initiative conference on forest tenure in Lombok.

It is a re-boot of the more comprehensive report I wrote earlier this year for the UK Climate Change Unit on the economics of moving to a low carbon economy in the land use sector.  This new report concentrates on the role of tenure, and attempts to determine why tenure reform seems stuck in neutral in Indonesia, and how this reflects an economic paradigm that is leading Indonesia towards choppy waters in the medium term.  It is perhaps dangerous to generalize too much about such a large economy from just one sector (forestry), but the evidence does point to an over-reliance on natural resources in Indonesia.  This point has also been made by Harvard Kennedy School, although the World Bank seems to be more muted on the matter.

In writing this report I needed to consider how to take the stance of the 'critical friend' to Indonesia.  The report was not released before the conference as there seemed no good reason to make waves before the event had even started, especially as the Ministry of Forestry was the host.   On the other hand, institutional development does not happen in a vacuum. Good manners become an impediment to safety if a passenger deems it impolite to draw the crew's attention to the looming iceberg.

It is not uncontroversial to remark that the data show Indonesia has managed its natural assets poorly. Perhaps liquidating some non-renewable assets may be justified in the name of achieving development.  However, what if the value of the development is less than the price paid?  Fans of the Kuznets curve argue that environmental degradation is inevitable, but over time the environment will recover as society moves through the transition from primary extraction towards a higher-function economy comprising a materially affluent middle class.  But what if the economy was geared towards capture by oligarchs, and a viable middle class (with both political and economic power) failed to emerge?  In such circumstances, the Kuznets theory will not work - the country will be be saddled with the costs of degradation, but without winning the socio-economic development.  There is evidence that Indonesia is stuck in such a rut at the moment, and that until the political economy changes, the prospects for forests, biodiversity and REDD projects look grim. (More on this in a separate post).

The report can be found here.

Abstract

'A new briefing paper by RRI and independent analyst Dominic Elson summarizing the struggle for tenure rights and current measures to decrease deforestation and emissions across the world, with particular reference to Indonesia. The paper takes into consideration the multiple actors at play in government and civil society who are trying to place these changes in political and livelihoods contexts – too often from conflicting vantage points. This analysis draws on information from various sources to present the current “state of play” in Indonesia—which has emerged as a key country in the global effort to reduce forest-based emissions. Much attention has been given in the global debate to the argument that reducing carbon emissions from forests could greatly slow economic growth in developing countries across the globe. This analysis presents provocative evidence showing that, in fact, the opposite may be true: in countries where equitable tenure regimes are supported, new pathways to a “low-carbon” economy emerge.'

 

 

Unaffordable tax cuts for rich main cause of US deficit shock

According to the non-partisan Center on Budget and Policy Priorities, the curious fondness for extending the tax cuts for the wealthiest Americans is based on voodoo economics with no basis in fact.  The tax cuts did not stimulate growth (growth was lower than trend average over the period), and thus did not raise overall tax receipts.  In fact, by 2019 a major part of the deficit will be attributable to the tax cuts.  They are, in a word, unaffordable.  So why are they still in place?  A mixture of ideology, wishful thinking and old-fashioned greed, I guess.

So hats off to the group of so-called patriotic millionaires who recently wrote to the Congressional Republicans asking that their taxes be raised.

via www.cbpp.org:

Some lawmakers, pundits, and others continue to say that President George W. Bush’s policies did not drive the projected federal deficits of the coming decade — that, instead, it was the policies of President Obama and Congress in 2009 and 2010. But, the fact remains: the economic downturn, President Bush’s tax cuts and the wars in Afghanistan and Iraq explain virtually the entire deficit over the next ten years (see Figure 1).

The 'blundering arrogance' of extraction companies

On our regular Sunday morning walks up the 'Ramos-Horta Hill', a couple of us here in Timor-Leste have been discussing the Woodside debacle, and how it may hold lessons for extractive industries in general, in terms of the best approach for forming strategic partnerships with small countries like TL. Rather than just talk about it, Mandy Whyte actually sat down and wrote it up as a paper, and it has been published on the La'o Hamutuk blog.

I think my only contribution was the phrase 'blundering arrogance', and in case Woodside is looking for someone to sue I thought it would be good to explain what I meant. The 'arrogance' refers to the way these kinds of companies enter into negotiations. I am not sure if shareholders would be alarmed by the idea that extraction companies tend to enter negotiations in a robust manner, confident in the knowledge that the target country needs to enter into agreements with companies that have the technical expertise and access to capital to exploit the natural resource in question.

However, the 'blundering' refers to the way these companies are often ill-prepared for the task in hand, with sketchy information about the country and no interest in learning more. It is not a promising foundation for a future partnership. Woodside also probably made the 'killer assumption' that because Timor-Leste is a poor country, it must be hungry to extract the natural resources as soon as possible. But TL has a sovereign wealth fund and is doing a reasonable job of saving some of the proceeds of the extraction of non-renewable resources (This prudence is by no means guaranteed to continue - about which I will blog separately). Therefore in theory TL can happily leave oil and gas under he sea bed and make as much return as if it were invested in US Treasury stock (a syndrome known as Hotelling's Rule). So Timor-Leste's negotiating position was much stronger than Woodside assumed. Afterall, have you ever tried to buy a house from someone who did not need to sell it?

 

Former Woodside rep blames their "blundering arrogance" for Sunrise impasse

La'o Hamutuk has just published Cowboys, Ogres and Donors: A Decade of Corporate Social Responsibility in Practice by Mandy White, who represented Woodside in Timor-Leste in 2007-2008. The paper sharply criticizes Woodside's "ogres at the helm" and "sycophantic senior staff" for taking a Public Relations approach to Social Responsibility, "not making even tokenistic efforts" to develop Timor-Leste. Whyte describes the company's "blundering arrogance" in the negotiations over the Greater Sunrise  oil and gas fields:  "Woodside steadfastly refused to regard the Timor-Leste Government as a partner in the development of the Sunrise fields, seemingly characterising them not only as a 'thorn in the side,' but also as devious and untrustworthy. ...  [D]riving forward to a final investment decision without the Timor-Leste Government demonstrates an arrogant lack of regard for the relationship."

via laohamutuk.blogspot.com

Writeshop on Investing in Locally Controlled Forestry | Growing Forest Partnerships

London was the venue of the 7th event on Investing in Locally Controlled Forestry. The idea and the need of a two day writeshop was developed as a follow up to the field dialogue in Kenya in December 2010.

Drawing on the results of previous TFD ILCF initiative and the background paper on the principles of ILCF, a group of 15 experts is tasked to develop the structure and describe the main elements of a guide to supporting investment in locally controlled forestry, and plan its completion and implementation.

via www.growingforestpartnerships.org

What Indonesia Stands to Gain

From World Bank / PROFOR site:

Many countries are interested in addressing climate change and promoting green growth. But lack of information on associated costs and benefits (including the potential welfare and development impacts of climate change mitigation and adaptation measures) make it difficult for countries to take effective action. 

Development consultant Dominic Elson of Trevaylor Consulting presented a report commissioned by the UK Climate Change Unit of the British Embassy, Jakarta, that seeks to address some this knowledge gap in the case of Indonesia. Elson found that Indonesia could stand to gain by changing its 'business as usual' approach to land use (especially regarding forestry and oil palm) and by reducing emissions. Indonesia could do this while improving the welfare of millions of rural Indonesians and setting the economy on a path of higher productivity and more resilient prosperity.

The rest of it (with links to the report and Elson's presentation to the World Bank in Washington DC on 21st April) is here.

 

 

 

PROFOR Investment forum background papers now on-line

We will be at the Investment Forum in Nairobi next week. Around 100 people have signed up to participate -- a good mix of private sector, public sector, and civil society organizations -- and we are honored that Hon. Minister Stanislas Kamanzi, Rwandan Minister of Environment and Lands, will be addressing the Forum as its keynote speaker.

There are several background papers which have been prepared for the Forum. These are available on-line at the www.profor.info website. Dominic Elson is co-author of paper 3, which can be downloaded from this link:

• Background Paper 3: Opportunities and constraints for investing in forests and trees in landscapes

Abstract

Investment in land and forestry simply to raise yields for fibre, food and fuel, perhaps by achieving economies of scale, is a narrow objective that fails to account for the long term ecological, economic and social consequences of land use change.  Forests and landscapes, particularly in Africa, are populated by people who have certain rights over the land and the resources it provides.  'Climate-smart' investment needs to account for the role local people play in the landscape, particularly if the drivers of deforestation are to be tackled.  Fortunately, there is great investment potential in releasing the latent energy of the small and medium sized enterprise (SME) sector.  Locally-controlled enterprises can manage (and restore) landscapes in a manner which better reflects the need for achieving social, environmental and economic objectives, thus satisfying the needs of investors that are seeking an attractive rate of return combined with sustainable and socially responsible impact.

However, there are constraints to investing in such enterprises, such as low capacity, unclear tenure and weak institutions. These constraints can be overcome if 'soft' investment - from donors, multilaterals and governments - precedes 'hard' investment in order to improve the enabling environment and reduce transaction costs. For instance through supporting institutional reform and financing intermediaries that are often so crucial in helping SMEs overcome their isolation from markets, investors and political influence.

Building a partnership between different types of investors, intermediaries and SMEs takes trust, patience and transparency.  Certain steps are needed in the process to ensure a clear understanding of goals, and the means by which issues such as benefit sharing and quality improvement can be handled in a business-like manner.  This paper argues that investment is not made into 'trees and landscapes', but in people and enterprises that have a value proposition and the wherewithal to carry out their plan.  This vision of 'climate-smart' investing is optimistic about the opportunity to restore forests and landscapes whilst also stimulating grassroots economic and social development.