CONCLUDING REMARKS

Tropical deforestation and global change are two of the most urgent ecological problems facing our planet. The CDM provides a new opportunity within the Kyoto Protocol which has the potential to mobilize billions of dollars of support for tropical forest while effectively mitigating climate change. While, biogeochemical, economic, and political findings support the conclusion that the Clean Development Mechanism has the potential to begin addressing both tropical deforestation and global climate change, it is critical that the CDM be designed carefully to respond to the concerns of the global community before it can be viewed as a viable alternative. Therefore, our recommendations will focus on several elements which should occur within necessary prerequisites for a full and successful CDM. Of critical importance, non-Annex I countries, which have not yet agreed to make any emission reduction commitments, will need to be provided with further economic and political incentives in order to avoid an overall failure of the Kyoto Protocol.

The design of CDM institutions and rules must mitigate project risks and overcome other barriers that might stand in the way of realizing positive market returns, adjusted for risk on investment, for all CDM projects, including LUCF. A successful CDM must contain a transparent and adaptable system for enforcement, monitoring, and evaluation, and overall accountability. We believe that by allowing side payments, the CDM can and should ensure a general consensus among Party members in order to avoid the disastrous economic costs of sub-global coverage or leakage. These side payments could be a critical means toward engaging developing countries in quantitative GHG emissions limits and, thereby, to achieve their participation and alleviate equity concerns. Additionally, to address the concerns expressed by developing countries, some assurances should be given that CDM projects will not count against or undermine other development assistance, which is already in short supply.

However, past emissions cannot be grandfathered in, nor can future pollution rates be ignored. Taking into account overall global emissions limits, national baselines should be set based upon:

• Configuring emission rates from a weighted formula with several variables, for example: Emissions Allowance = B + B₂ Past Emissions + B₃ Population + B₄ Population Employed in Industry Emitters + B₅ GDP + … + E
• Supporting continued and sustainable economic and social development of the non-Annex I nations.
• Recognizing that the protection of the environment is a "luxury good" which most developing countries cannot afford on their own.

The CDM should be designed to offer win-win solutions for both developing and developed nations. The CDM framework should establish clear rules and procedures for cost-benefit analysis which can be used across projects and across regions.

On a national level, CDM projects should match, or at least not undermine, the priorities of the host country. This can be done, in large measure, by establishing rules and procedures for project ownership and responsibility. Projects should make clear that the host country maintains ownership of all the land; however, for the duration of the project, there should be a lien on the property rights. There must be real limitations as to what can be done within a project area in order to ensure that emission reduction targets are reliably reached. Maintenance of the "carbon sink" must be a joint endeavor, with both sponsoring country and host country sharing project "ownership" and responsibility.

As one method to accomplish this, we feel that the CDM structure should be that of a clearing house or project exchange, with some element of a multilateral fund. Such a structure would diversify project type and size, while also helping to minimize the risks for the smaller investors. The CDM would need to ensure clear verification procedures and act as final independent auditor or engage one. Until such time that private insurance can be made available, the CDM should provide that service, while engaging both host and investor as jointly responsible for failures.

Also, the CDM should make a clear reference to land-use changes and forestry (LUCF), thereby confirming that LUCF projects can take part in the CDM. In order to formally incorporate LUCF, the CDM must establish clear and consistent accounting methodologies with clear definitions and procedural rules for treatment of deforestation, reforestation, afforestation, and forest improvement. The aim is that the incentive to deforest should disappear in light of total global limits and national baselines set for all countries.

CDM pricing should be competitive; however, to ensure that innovation occurs, there should be a price floor until such time that the demand equilibrium is reached. This will also help to relieve concerns amongst the developing nations about Annex I countries taking advantage of them by grabbing all their "low-hanging fruit". Furthermore, there should be clear procedures for additionality and baselines -- they go hand in hand. Baselines should be both national and then project by project. Accounting will need to include all forms of biomass, above- and below-ground carbon, and necromass.

Given the above design, the participation of developing countries is absolutely critical. We therefore advise that international environmental groups make sure that non-Annex I nations will get on board the CDM train. Clearly, financial and political incentives will be the ticket to their participation.

On a national level, within the U.S., we face a significant adversary in the form of industry lobbying groups, which are unafraid to mutilate the truth in order to gain influence and leverage. Since the public is already convinced, we can ignore the disinformation campaign against the science of climate change which they present via dissenting scientists, but we must not tolerate misrepresentations of the issue in the mainstream media. We desperately need more cost/benefit analyses, especially for Congress and, in general, to counter industry’s doomsday message. Our case must present how emissions reductions can be low cost and high benefit, especially for future generations, perhaps even likening emissions reductions to deficit reduction. Furthermore, we absolutely must counter the economic doomsday scenario presented by industry coalitions. Detailed economic cost analysis is key to locking in public and Congressional support.

While a half-hearted CDM is more likely to be ratified by Congress, one which does not impose limitations on developing nations, which does not effectively restrict the use of the CDM, one that does not incorporate all of the elements which would protect forests rather than encourage their destruction while contributing towards the ultimate end, such a CDM is actually more detrimental to the environment and should be omitted. In conclusion, no CDM is better for forests than any half-hearted attempt at a CDM.