Carbon Forestry in Costa Rica

Based on the research of Javier Baltodano, FoE-Costa Rica

Costa Rica has always been one of the countries in Latin America keenest to host carbon forestry projects and other “environmental services” schemes. In the mid-1990s, looking for new ways to derive value from its forests, it decided to become the first country to bring its own government-backed and -certified carbon forestry credits into the global market, and even before Kyoto was signed was selling them to the Norwegian government and Norwegian and US corporations.

To work on the scheme, Costa Rica hired Pedro Moura-Costa, a Brazilian forester with experience on early Malaysian carbon forestry projects backed by The Netherlands’s FACE (see earlier blogs in this series) and New England Power of the US. Moura-Costa in turn convinced Societe Generale de Surveillance (SGS), one the world's leading testing, inspection, and certification companies, to use Costa Rica as a test site for learning how to make money as a carbon credit certifier, and on the back of his own experience set up a new carbon consultancy, EcoSecurities. An early Costa Rican project called CARFIX –implemented by the voluntary organization Fundacion para el Desarrolllo de la Cordillera Volcanica Central and funded by US Aid for International Development (USAID), the Global Environmental Facility and Norwegian financiers – earned its North American sponsors carbon credits by promoting "sustainable logging" and tree plantations on "grazed or degraded lands", claiming to provide locals with
income they would otherwise have to earn through forest-endangering export agriculture and cattle production. Following the emergence of the Kyoto Protocol in 1997, Costa Rica pushed for the same certification techniques it had pioneered to be adopted around the globe, and signed further carbon deals with Switzerland and Finland.

-- Q. Costa Rica’'s enthusiasm for carbon offset projects seems to suggest that
there are a lot of benefits in this carbon forestry market for the South, after
all.

The enthusiasm is not unanimous, even in Costa Rica. In fact, the boom in carbon
forestry fits into an existing trend of support for monoculture tree plantations
that has aroused much concern among local environmentalists. Between 1960-85,
about 60 per cent of Costa Rica’s forests disappeared due to cattle farming.
Then there was a “wood shortage” scare, and the government subsidized
monoculture tree plantations extensively between 1980-1996. Helped by
government incentives, over 130,000 ha has been covered by monoculture tree
plantations over the past 20 years, with the total plantation area in 2000
standing at 178,000 ha (well over three per cent of Costa Rica’s territory).

The CDM, Costa Rican environmentalists fear, may help spread monoculture tree
plantations even further. In the late 1990s, a government official active in
the climate negotiations helped promote a new law supporting monocultures. Half
of a 3.5 per cent fuel tax went into an “environmental service programme”
designed largely to give incentives to private landowners to be “green” in a
country in which 20 per cent of the land is national parks, a few percent
indigenous territories and the rest private land. Under the programme, a
landowner might get, for example, US$90 per hectare per year to conserve
forest, or $500 per hectare over five years to establish a plantation. In
return, the state gets rights to the carbon in the plantation, which it can use
to bargain with in international negotiations.

-- Q. How much of this tax money goes to forest conservation, and how much to
plantations?

Most payments under the environmental services programme go to forest
conservation, but 20 per cent is used to subsidize monoculture plantations and
agroforestry. This has roused objections from ecologists, academics, indigenous
peoples who argue that monoculture plantations, often lucrative in themselves,
can damage the soils, water and biodiversity that the programme is supposed to
protect. The programme may also soon be supported by a tax on water and
electricity.

-- Q. Still, twenty percent is a pretty small proportion, isn’t it?

Overall, Costa Rica is today putting US$1.5 million annually into financing
4-6,000 ha per year of new plantations. That may not seem much, but Costa
Rica’s total territory is only a bit over five million ha. A UN Food and
Agriculture Organization consultant’s study has suggested that the country set
up even more plantations, up to 15,000 ha per year, using carbon money. Another
study estimates that, during the period 2003-2012, some 61,000 hectares of
monoculture plantations, or 7,600 a year, could be established in so-called
“Kyoto Areas”. That’s well above the current rate,3 implying that plantations
could start competing aggressively with land that might otherwise be given over
to secondary regeneration and conservation of native forest.

In addition, because CDM forestry projects, for economic reasons, would probably
have to cover 1000 ha and up (see below), they could well threaten the land
tenure of people carrying out other forest projects in Costa Rica. The average
landholding in the country is less than 50 ha, with most parcels belonging to
families, although of course huge corporate farms also exist. Land
concentration in connection with monoculture tree plantations is a familiar
phenomenon from around the world, including areas of Costa Rica where pulpwood
plantations have been set up.4

-- Q. But again, sacrifices do have to be made for the climate, don’t they?

Ironically, one of the things that the Costa Rican case reveals is the
impossibility of determining whether the climate in fact would benefit from a
policy of pushing such projects – or even of fulfilling the conditions set out
in the Kyoto Protocol and the Marrakech Ministerial Declarationv for
reforestation and forestation carbon projects.

Take, for example, a study on carbon projects done by the Forest and Climatic
Change Project (FCCP) in Central America, jointly executed by the Food and
Agriculture Organization of the UN and the Central American Environmental and
Development Commission (CCAD).vi

Research done for the FCCP report shows that available soil use maps are not
precise enough to show how carbon storage in prospective carbon sink areas (or
Kyoto Areas) has changed since the 1990s, and are also hard to compare with
each other. That would make accounting for increased carbon storage over the
period since then impossible.

The study’s conclusions also suggest that it would be impossible to show to what
extent Kyoto carbon projects were additional to “those that the country
implements as part of its forestry development projects”: “it is not possible
to predict in what exact proportion these activities will be in or out of the
Kyoto Areas and any assumption in this respect is enormously uncertain”. In
addition, Kyoto carbon projects could find it hard to factor out the
anthropogenic activities to encourage natural seed nurseries that are being
promoted and funded without carbon finance. One example is landowners’
protection of their lands against livestock and fires that has been paid for
since 1996 by the National Fund for Forestry Financing (FONAFIFO).

The FCCP study reveals, above all, the tensions between accounting convenience
and accuracy in measuring carbon. For example, it considers that measurements
of soil carbon before and after the start of any carbon forestry project would
be too costly, even though such measurements are widely held to be a key to
carbon accounting for plantations, which disturb soil processes
considerably.vii Similarly, the study accepts for convenience a blanket carbon
storage figure of 10 tonne/ha for grassland sites that could be converted to
carbon forestry. However, Costa Rica boasts too wide a variety of grasslands
and agricultural systems – most of them comprising a lot of trees – for such a
figure to be used everywhere.viii

--Q. But can’t you cover such unknowns just by taking the amount of carbon you
think you might be sequestering and reducing the figure by a certain
percentage, just to be on the safe side?

That’s what many carbon accountants do. The FCCP study, for example, suggests a
20 per cent deduction from the figure designating total potential of carbon
sequestered to compensate for political and social risks and a 10 per cent
deduction to compensate for technical forestry risks.

The problem with such “risk-discounted” figures is that carbon sequestration is
characterized by far more than just risk. This goes back to a distinction first
made by the economist Frank Knight 80 years ago between risk and uncertainty
(see succeeding blog: Global Warming and the Ghost of Frank Knight).

In situations characterized by risk, all possible outcomes are known in advance
and their relative likelihood expressed as probabilities. In such situations,
it makes sense to talk about “margins of error” and safe levels of
discounting.

Where the probabilities of outcomes are unknown, however, you’re faced with a
situation of incalculable uncertainty.

The situation is even more serious when not even all the possible outcomes are
known. Such conditions of uncertainty and ignorance, and not simply risk, are
the typical realities that biological carbon accounting has to cope with. In
these conditions, it’s impossible to be sure whether any particular numerical
risk factor is conservative enough to compensate for the unknowns involved.

In Costa Rica, for instance, most monoculture tree plantations are less than
twenty years old, with a trend toward planting just two species – Gmelina
arborea and Tectona grandis. Pest or disease epidemics can therefore be
expected, but their extent is incalculable at present. Furthermore, El Niño
climate events may propagate enormous fires whose extent, again, cannot be
calculated in advance. During the dry season of 1998, in the humid tropical
zone where uncontrollable fires had never been reported before, over 200,000
hectares were burned. Part of this territory is under monoculture tree
plantations. Given such realities, it’s unsurprising that the FCCP carbon
project study could give no reasons for its low “technical” risk figure of 10
per cent. There is in fact no scientific basis for the assignment of any such
number.

At present, there is also little basis for guessing how much carbon sequestered
in Costa Rican trees will re-enter the atmosphere and when. The FCCP study
simply assumes that 50 per cent of the carbon sequestered by a given project
will remain so once the timber has been sold and used. However, the most common
plantation species in the country (Gmelina arborea) is logged at least once
every 12 years and most of the timber is used to manufacture pallets to
transport bananas. The pallets are thrown away the same year they are made and
probably – though no one has done the empirical studies necessary – store
carbon no longer than a few years.

The FCCP study also assumes that anthropogenic activities to foster natural seed
nurseries will result in secondary forests that will be in place for at least 50
years. Accordingly, they make no deductions for re-emission of carbon. However,
although current forestry law prohibits transforming forests into grasslands,
both legal changes and illegal use could result in large re-emissions whose
size would be impossible to determine in advance.

-- Q. It seems that one of the big problems with doing the accounts for forestry
“offset” projects is that you can’t store carbon permanently in trees.

The impermanence of tree carbon isn’t necessarily itself a problem, but rather
the fact that you can’t verify how impermanent it is.

Everyone knows that the carbon stored in trees has a different lifespan from the
carbon left underground in coal, oil and gas deposits. Over historical time
spans, the carbon in fossil deposits will stay pretty much where it is unless
somebody disturbs it. You don’t need to worry too much about it leaking out to
the atmosphere. But once carbon enters the above-ground system consisting of
the air, oceans, trees, grass, soil, fresh water, and so forth, things change.
No part of the above-ground pool of carbon can be permanently separated from
the atmosphere. It belongs to a system in which carbon is always cycling into
and out of the air in hard-to-predict ways.

So when you try to “sequester” this carbon in trees – to separate it from the
atmosphere – you know this separation is going to be temporary compared to the
separation between underground fossil carbon and the atmosphere. Eventually the
carbon in the trees is going to go into the air. The only question is when. The
carbon in grass or a tree trunk, in the top seven inches of soil, in furniture
or paper or a cigarette, may all be separated from the atmosphere for a while,
but in a way much harder to predict than the way the carbon in coal deposits a
kilometer underground or in carbonate rock dozens of kilometers beneath the
surface is separated from the air. To put it another way, fossil carbon flows
into the biosphere/atmosphere system are essentially irreversible over
non-geological time periods, while those from the atmosphere into the biosphere
are easily reversible and not easily controlled.

But storing carbon for even a short time in biological systems can still delay
carbon buildup in the atmosphere and therefore delay climate change. So
biological carbon, even though temporary, is still highly relevant to climate
change and should be preserved wherever possible. Accordingly, carbon forestry
projects needn’t be permanent to be useful.

-- Q. Exactly! So why can’t we just figure out how much temporary carbon storage
in trees is equivalent to keeping X amount of fossil fuels in the ground?

That’s the unjustified leap that many technicians and politicans make. They
assume that just because trees are good for climate, there has to be a way of
measuring how many trees equals, in climatic terms, how much fossil fuel
emissions.

The officials and diplomats responsible for the CDM, for example, have committed
themselves to the claim that a world that closes a certain number of fossil fuel
mines ought to be equivalent to a world that leaves them open but plants a
certain number of new trees. They have embedded in the Kyoto Protocol the
doctrine that planting a certain number of trees can make industrial emissions
"climate-neutral" or “carbon-neutral”.

What has arisen is what scholar Eva Lovbrand calls a “political requirement” to
“determine the long-term fate of carbon stored in biomass and soils”xi and to
commensurate it with underground fossil carbon. To meet this politics,
technicians have been busy coming up with accounting methods for trying to
tackle the problem that carbon stored in trees may be re-emitted to the
atmosphere at any time.

The Global Change Group of the Tropical Agronomic Centre for Research and
Teaching (CATIE), for example, has been assessing ways of putting non-permanent
biological carbon in the same ledger with fossil carbon emissions, so that the
two can be added and subtracted, in ways relevant to Costa Rica and Central
America.

-- Q. It sounds like a great idea. What’s the problem?

Well, let’s look at one proposal for biological carbon accounting surveyed by
CATIE. This is “tonne-year” accounting.

The first step in tonne-year accounting is to determine the period that a tonne
of carbon has to be sequestered in order to have the same environmental effect
as not emitting a ton of carbon. Because the lifetime of greenhouse gases in
the atmosphere is limited, this time period should be finite. If the
“equivalence factor” is set at 100 years, then one tonne of carbon kept in a
tree for 100 years and then released to the atmosphere is assumed to have the
same environmental effect as reducing carbon emissions from a fossil-fuelled
power plant by one tonne.

The second step is to multiply the carbon stored over a particular year or
decade by the complement of this equivalence factor to find out what the
climatic benefits are of that project for that year, and to limit the carbon
credits generated accordingly. So the forestry project doesn’t have to be
permanent to generate carbon credits, it will just generate fewer credits the
more short-lived it is.

-- Q. You still haven’t mentioned any problems.

The first problem is that you still have to measure the carbon stored by a
project over a particular year or decade. That runs into the same problems with
ignorance, uncertainty and all the rest mentioned above. Second, no one knows
how long the “equivalence time” should be. Figures ranging all the way from 42
to 150 years have been mentioned.xiii Another difficulty is that even if one
settles on a figure of, say, 100 years, it does not necessarily follow that
carbon sequestered for ten years will have 10/100th of the climatic effect of
being sequestered for 100 years. Again, the problem is not that any given patch
of trees is temporary, but that there’s so much uncertainty and ignorance about
how to measure its relevance to climate. It’s not a matter of calculable
“risk”, but something far more recalcitrant to market accounting.

In addition, tonne-year accounting can make what allowances it does make for
uncertainty only at the cost of generating carbon credits very slowly. That
makes it unattractive to business. It also militates against small projects.
The CATIE study found that at prices of US$18 per tonne, the tonne-year
methodology allows for profitability only in projects of over 40,000 ha.

-- Q. Aren’t there other possible accounting methods?

CATIE surveyed several, but they all run up against similar problems of
uncertainty, scientific ignorance and the impossibility of reconciling cost and
verifiable climatic effectiveness.

For example, a method called “average storage adjusted for equivalence time”
(ASC) gives you more credits more quickly, but only at the cost of making
unwarranted assumptions about how long biological carbon can be verifiably
sequestered.

Then there are the UN’s “temporary” CERs, which expire at the end of the Kyoto
Protocol’s second commitment period and must be replaced if retired for
compliance in the first commitment period; and “long-term” CERs, which expire
and must be replaced if the afforestation or reforestation project is reversed
or fails to be verified. These beg the question of how such credits are to be
verified in the first place and also involve complex accounting and high
economic risk to business.

In the end, CATIE came to the conclusion that CDM forestry projects had to be
big in order for it to be worthwhile to fulfil all the accounting and other
requirements. Out of a total of over 1500 simulated scenarios, only eight per
cent made it possible for projects under 500 ha to participate. The mean size
of a project for the sale of carbon to be profitable was 5,000 ha. One way out
would be to bundle smaller projects together and employ standardized
assumptions and procedures, but again that would magnify accounting mistakes
and also would be hard to achieve given the Costa Rican land tenure system.

-- Q. You’ve talked a lot about how much harder it is to measure how much carbon
is sequestered in tree projects than simply to keep fossil carbon in the ground.
But maybe we don’t need to compare carbon sequestered in trees with carbon
stored for the long term in fossil deposits. Isn’t it true that about a quarter
of the excess CO2 in the atmosphere comes from deforestation? The atmosphere
doesn’t care whether its carbon dioxide has come from burning coal or from
burning forests. We should think of forestry carbon projects like Costa Rica’s
as replacing carbon released from forests, not as replacing carbon released
from fossil fuel combustion. The point of carbon forestry should be to help
stabilize biospheric carbon releases to the atmosphere by returning more carbon
from the air to the land, not to compensate for fossil fuel use. This should
solve the measurement problem, since all we have to do is compare biotic
carbon with other biotic carbon.

No, that has no effect on the measurement problem. It’s impossible to quantify
verifiably the effect any particular forestry project has on the climate,
whether the project is taken to be “compensating” for fossil fuel burning or
“compensating” for forest destruction elsewhere.

What makes comparison between biospheric and fossil carbon impossible is that
the whole above-ground carbon system is fluid, with relatively weak boundaries
between trees, atmosphere, water and so on, compounded by the inclusion of all
these things within social systems. Unfortunately, the same characteristic –
fluid boundaries and entanglement with social systems – also makes it hard to
verify how much carbon is being saved as a result of a particular project, and
thus whether a project is changing the balance of the above-ground carbon
complex.

Yes, climate change can be addressed by trying to conserve forests just as it
can be addressed by keeping fossil fuels in the ground. But it can’t be
verifiably addressed by burning forests and then “compensating” for this
burning with biospheric projects any more than it can be verifiably addressed
by mining fossil fuels and then “compensating” for their transfer to the
biosphere with biospheric projects.

-- Q. What’s the future for Costa Rican carbon forestry projects?

The government has recently declared that it will put more effort into
non-forestry projects such as windmills and hydroelectric schemes on the ground
that they are less complicated and yield higher-priced carbon credits. On the
other hand, companies such as the US-based Rainforest Credits Foundationxiv
continue to be eager to set up new carbon schemes in Costa Rica, often without
much prior consultation with the government.

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From a compilation being produced by the Dag Hammarskjold Foundation, Uppsala,
Sweden. For further information: larrylohmann@gn.apc.org.