On the front lines of carbon offsets

A really nice article in the New York Times about paying Brazilian farmers to not clear forests and plant soybeans.
QUERENCIA, Brazil — José Marcolini, a farmer here, has a permit from the Brazilian government to raze 12,500 acres of rain forest this year to create highly profitable new soy fields....

Mr. Marcolini says he cares about the environment. But he also has a family to feed, and he is dubious that the group’s initial offer in the negotiation — $12 per acre, per year — is enough for him to accept.

“For me to resist the pressure, surrounded by soybeans, I’ll have to be paid — a lot,” said Mr. Marcolini, 53, noting that cleared farmland here in the state of Mato Grosso sells for up to $1,300 an acre.

....Deforestation, a critical contributor to climate change, effectively accounts for 20 percent of the world’s carbon dioxide emissions and 70 percent of the emissions in Brazil. Halting new deforestation, experts say, is as powerful a way to combat warming as closing the world’s coal plants.

But until now, there has been no financial reward for keeping forest standing. Which is why a growing number of scientists, politicians and environmentalists argue that cash payments — like that offered to Mr. Marcolini — are the only way to end tropical forest destruction and provide a game-changing strategy in efforts to limit global warming...

Both the most recent draft of the agreement and the climate bill passed by the House in late June in the United States include plans for rich countries and companies to pay the poor to preserve their forests.

The payment strategies may include direct payments to landowners to keep forests standing, as well as indirect subsidies, like higher prices for beef and soy that are produced without resorting to clear-cutting.

...But getting the cash incentives right is a complex and uncharted business.

...Brazil and Indonesia lead the world in the extent of their rain forests lost each year. The forests are felled to help feed the world’s growing population and meet its growing appetite for meat. Much of Brazil’s soy is bought by American-based companies like Cargill or Archer Daniels Midland and used to feed cows as far away as Europe and China. In Indonesia, rain forests are felled to plant palms for the palm oil, which is a component of biofuels.

...Last year, with a grant from Norway that could bring the country $1 billion, it created an Amazon Fund to help communities maintain their forest. National laws stipulate that 80 percent of every tract in the upper Amazon — and 50 percent in more developed regions — must remain forested, but it is a vast territory with little law enforcement. Soy exporters officially have a moratorium on using product from newly deforested land.

I have a hard time seeing how U.S. farmers can do much carbon offsetting. But it's a different story for places like Brazil and Indonesia.

But carbon offsets like this raise lots of difficult (and interesting) economic questions. Even if Mr. Marcolini takes $12/acre to preserve his forest, and preservation is somehow perfectly enforced, what's to prevent him or someone else from plowing down a forest of the same size somewhere else? Restricting deforestation on the fringe just pushes commodity prices higher and encourages more deforestation. This problem, called "leakage" or "slippage" in policy and academic circles, is the key issue not raised by the NY Times article.

I cannot envision how to prevent leakage of offsets without taking a more comprehensive approach. For this kind of thing to work we need to count, and put a price on, ALL the carbon.

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