The UNFCCC developments are occurring alongside potential progress in the United States - where the proposed cap and trade scheme in the Kerry-Boxer Climate Change bill before the Senate also includes a mechanism for supporting REDD activities. There have been calls for the bill to be scaled down and for the cap and trade element to potentially be delayed in favour of focusing on energy reforms. Senators Kerry, Lieberman and Graham are developing a compromise version of the bill and have stressed that cap and trade will be a key part of that bill. If the cap and trade scheme with the original REDD elements does go through, the American market will be a key driver for REDD, and perhaps the best option for recognition of early action projects.
Other countries are making their own way to drive REDD forwards. Indonesia, Brazil and the Democratic Republic of Congo have each focused on REDD as one of their nationally appropriate mitigation actions (NAMAs) in their submissions to the UNFCCC. Indonesia is one of the first countries to develop a regulatory regime for REDD, upon which we have frequently been asked to advise. Our work also on projects in Africa and Latin America enables us to quickly target the key local diligence issues for a project such as the identification of analogous forestry or environmental conservation concessions in countries where REDD regulations are yet to be developed.
Copenhagen has highlighted the need for answers to key questions around REDD which our international teams are regularly considering and advising on, including:
- What developments need to occur before there is the possibility of REDD activities generating credits capable of use within existing and proposed cap and trade schemes?
- What role will early action REDD projects under voluntary emission reduction standards play under the developing REDD mechanisms?
- How will committed funds be allocated and what other models for combined public and private sector finance can be used to protect forests?
- How can proactive developing countries devise nationally appropriate REDD strategies that attract private sector support?
- How will the “immediate establishment” of a REDD mechanism be effected, particularly without a legal framework?
A selection of our recent advisory work includes:
- Advising on afforestation and reforestation CDM projects (including tracking proposals to reform the rules relating to such projects, particularly the temporary nature of credits).
- Advising on several plantation projects in Australia, involving the generation of credits for use in Japan’s voluntary emissions trading scheme, and advising on the structuring, documentation and regulatory aspects of BP’s first investment by its emissions asset business in Asia Pacific.
- Acting for private land holders and managed funds on forestry transactions in relation to the purchase of freehold title and registered forestry rights (both from a grantor and grantee perspective).
- Acting in respect of several current REDD projects being developed in Asia (including the world’s first commercially financed avoided deforestation project), South America and Africa, including advising on project documentation, due diligence issues and off-take arrangements.
- Providing strategic advice on the likelihood of credits from REDD projects becoming capable of use for compliance purposes under US, European and Australian trading schemes.
- Tracking developments under the UNFCCC negotiations relating to REDD as a dedicated service for clients.
- Assisting in the design of innovative financing mechanisms to combine public and private sector finance for REDD activities.
- Assisting with the development of methodological standards for voluntary REDD projects.
- Assisting in the design of appropriate regulatory structures for REDD project activities within forest nations.
- Advising on to the potential establishment of a forest conservation fund in a host country with biodiversity and carbon sink benefits which would compensate owners who cease harvesting timber and clearing land.
Our client base in this area includes:
- Carbon originators
- Early stage financial investors
- Service providers in areas such as remote sensing
- National governments and regulatory authorities.
Our team is also actively engaged in a range of forums focused on ensuring any REDD mechanism is appropriately designed to achieve its environmental goals, including the Carbon Markets Investors Association, the International Emissions Trading Association and the World Economic Forum working groups.