Local government must lead zero-deforestation efforts at jurisdictional levels

Véu de Noiva Waterfall in the state of Mato Grosso, Brazil | Photo credit:Robert L. Dona via Wikipedia comms

Major consumer goods companies that have pledged to eliminate deforestation from their supply chains need support from their local governments to accelerate and scale up the implementation of their commitments, according to analysis from Environmental Defense Fund published in the latest journal from the European Tropical Forest Research Network (ETFRN).

Deforestation is a major contributor to climate change, and hundreds of consumer goods companies that purchase soy, palm oil, timber & pulp, and beef—the big four commodities that contribute significantly to deforestation—committed to eliminating deforestation from their supply chains.

But a vast majority haven’t yet acted on their zero-deforestation commitments or reported their progress—and leadership from local government can help.

Why local government leadership is needed

One way companies are trying to reduce deforestation in their supply chains is by using global certification processes. But because the processes didn’t include local governments when designing their certifications, the certifications have not solved the underlying governance issues at the heart of deforestation. 

Global certification processes have not solved the underlying governance issues at the heart of deforestation

A more inclusive and comprehensive solution to illegal deforestation focuses on resolving deforestation from all activities located in a state, province, or within national boundaries, i.e. a “jurisdiction”, instead of focusing solely on the supply chain of one commodity or company. This means the local government leads a multi-stakeholder process including producers, purchasers, civil society, and other relevant actors.

Leading multinational private sector companies such as Unilever, Marks & Spencer, and Mondelez have adopted the jurisdictional approach to implement their zero-deforestation commitments.

Mato Grosso: an example of local government leadership

Mato Grosso’s jurisdictional approach, known as Produce, Conserve, and Include (PCI), provides a good example of how local governments can take the lead.

Launched in 2016, the initiative encapsulates the state government’s ambition to decrease deforestation while increasing agricultural production. The government is collaborating with local soy and beef producer associations, soy buyer Amaggi, beef packer Marfrig, and civil society organizations to grow the agricultural economy, improve incomes and services for the state’s small farmer families and maintain the 60% of the state under native vegetation cover.

While economic and political turmoil have slowed progress on implementing the ambitious strategy, it may nonetheless already be making a contribution to reducing deforestation: in 2016, deforestation decreased by 6% in Mato Grosso, while Brazil’s national deforestation increased by 29%.

How a jurisdictional approach should be implemented

In the analysis, EDF proposes a blueprint of how a jurisdictional approach should be implemented. Specifically, it provides guidance on:

  1. Which actors need to be involved and their roles
  2. Important definitions to be decided upon such as what is deforestation in the local context
  3. Process infrastructure needed such as a robust multi-stakeholder platform
  4. Where to find the funding for implementation

To move forward with zero-deforestation efforts, companies must build on the existing platform of global certification processes and speed up local governance solutions. Local governments must be involved and lead the process to tackle deforestation.

The new ETFRN journal serves as a timely guidebook for companies to work together with local governments and other stakeholders to accelerate and scale up the implementation of zero deforestation commitments. EDF will continue to work with our corporate and government partners to implement these lessons.

Posted in Brazil, Deforestation| Leave a comment

Is Brazil stepping back from environmental leadership, just when it’s needed the most?

Michel Temer in April 2016. Credit: Fabio Rodrigues-Pozzebom/ Agencia Brasil via Wikimedia Commons.

Every conversation I have with my Brazilian friends and colleagues these days starts off with a discussion of whose political crisis is worse. It’s a hard question. But Brazil’s President Temer has the chance to show a little real leadership June 19th if he decides to veto a blatant giveaway of a large swath of protected Amazon forest to land grabbers and environmental lawbreakers.

U.S. and Brazilian presidents: The 19th-century take on development and the environment

Wildly unpopular U.S. President Trump was elected by maybe a third of eligible voters, with a substantial minority of votes cast. He is doing everything he and his staff can think of to roll back environmental protections in the United States and stymie progress on climate change globally. His ill-conceived scheme to pull the United States out the Paris Agreement would have us abdicate international leadership and surrender the enormous economic opportunity of the new, renewable, energy economy to China and other competitors.

Wildly unpopular Brazilian President Temer was put in power by an even more wildly unpopular Congress in an ultimately failed bid to shut down judicial investigations that are sending herds of them, and their business associates, to jail for massive graft and corruption. He (and his predecessor, who mismanaged the economy into the worst recession in Brazil’s modern history) has totally dropped the ball on controlling Amazon deforestation, which, in the absence of budget for enforcement has increased for two years running for the first time since 2004.

Brazil’s Amazon at risk

Since the weight of corruption scandals Temer is personally implicated in has him clinging to power by his fingernails, the yahoos in the “rural caucus” of the Congress (the voting bloc of big ranchers’ and agribusiness’ representatives) are taking the opportunity to run hog-wild with proposals to gut forest protections and roll back indigenous territories – two of the major reasons why Brazil became the world leader in reducing greenhouse gas emissions by decreasing deforestation by about 80% from 2004–2014.

By June 19th, Temer has to decide whether to veto measures that would deliver 600,000 hectares in an Amazon protected area to land-grabbers – and rampant deforestation. It's not just 600,000 hectares of forest at stake – caving to a flagrant play to carve up a federal conservation area to benefit slash-and-burn land grabbers is a terrible precedent for all of the Amazon protected areas.

All of this is rapidly eroding Brazil’s international climate leadership, and is bad news for the Paris Agreement. Brazil’s demonstration that a major emerging economy could reduce large-scale emissions while growing its economy and bringing millions out of poverty was a beacon of light in the climate negotiations that is dimming by the moment.

Brazil’s President Temer can show a little real leadership if he vetos a blatant giveaway of a large swath of protected Amazon forest to land grabbers and environmental lawbreakers

The abandonment of Brazil’s successful deforestation control program by President Temer and former President Dilma, if continued, will only hinder Brazil’s economic prospects in the 21st century global economy – like President Trump’s radical misreading (or ignorance) of the economic implications of the Paris Agreement for the United States. Increased deforestation will likely cause Brazil to lose market share as major commodity traders and consumer goods companies that have committed to zero-deforestation beef and soy supply chains curtail market access. Rampant violence and human rights abuses against indigenous peoples and grassroots environmental activists will expose public-facing companies to increasing reputational risk – and send them looking for lower-risk places to source.

On the other hand, support for sustainable development first movers such as Acre state and agriculture powerhouse Mato Grosso could make Brazil the go-to supplier for zero-deforestation commodities worldwide. And, as Amazon states, civil society and green business leaders have consistently advocated, if Brazil opened up to carbon market crediting for reduced deforestation in emerging international markets, it could unlock the finance needed to end deforestation in the Amazon and Brazil’s other mega-diverse biomes; make family and industrial agriculture 100% sustainable; and create sustainable prosperity in the 200 million hectares of indigenous territories and protected areas of the Amazon.

It’s hard to say whose loss is worse under U.S. and Brazil’s lamentable current policies, but maybe even harder to say whose gain would be greater if Trump and Temer would wake up and recognize the real opportunities in the 21st century economy.

Posted in Brazil, Deforestation, Indigenous peoples, News, REDD+| Leave a comment

California Legislature holds key to protecting health of Californians and our climate

The California Legislature is in the midst of a critically important discussion right now: how can the state do more to clean the air for all residents and address climate change?

As a native of South Los Angeles with deep roots in the environmental justice community, I’ve seen first-hand that there’s still more that needs to be done to improve our air quality. At the same time, California is a longtime leader on climate issues, in large part due to its cap-and-trade program that’s successfully limited climate pollution.

Assemblymember Cristina Garcia’s bill, AB 378, though still a work in progress, would provide incentives for major greenhouse gas emitters to reduce localized air pollution, on top of extending a key tool to keep their carbon emissions below a certain limit.

Right now, AB 378 is the only bill in the California Legislature that is seeking to both improve air quality in the most impacted local communities and fight climate change globally. Here’s why we think the Legislature must pass it as soon as possible.

 How we should extend cap and trade

The question we must ask ourselves is not whether we should extend cap and trade – we should, as I explain next – but rather how we can extend it. Three things need to happen for California’s cap-and-trade program to be successfully extended beyond 2020:

  1. The cap-and-trade program itself, which is succeeding in its goal of reducing carbon emissions, should be strengthened. This includes ensuring jobs are created across California neighborhoods – an issue the Legislature is working to address in other proposals – as well as better meeting the needs of rural communities.
  2. Air quality concerns in California’s environmental justice communities must be addressed. There are many suggestions of how this can be done, but this public health issue cannot be ignored.
  3. Cap-and-trade should be passed with a supermajority of votes (2/3 of both the state Assembly and the Senate) this session. That will provide it the greatest legal certainty in a post-2020 program, and inoculate cap and trade from further “illegal tax”-type challenges.

Why we should extend cap and trade now

The best way to continue California’s climate leadership and successful climate policies, is for the Legislature to extend cap and trade beyond 2020 this year with a 2/3 vote.

EDF is advocating for this extension because California’s cap-and-trade program:

  • Provides the certainty needed for a strong and stable climate program. Eliminating post-2020 uncertainty by voting on a cap-and-trade extension this year limits market volatility and creates greater price and revenue predictability. This in turn helps local businesses plan investments, hire new employees, and adopt the next groundbreaking technology.
  • Demonstrates that protecting the environment need not come at the expense of economic growth. California has added over a million jobs since cap and trade launched in 2013, far surpassing the national average. This includes blue-collar jobs in parts of the state plagued by high unemployment. California has also grown to be the sixth largest economy in the world.
  • Reduces greenhouse gas emissions. California is on track to meet its 2020 target of reducing these emissions to 1990 levels. Our 2030 goal is even more ambitious – 40% below 1990 levels – and to be successful we need to start aiming for that target now.

Remember why clean air and a healthy climate matter

There will be important policy to discuss in the coming weeks, but for now let us remember why we are pressing forward on climate and clean air legislation in the first place.

California has many communities that suffer disproportionately from poor air quality caused by major emitters. As someone who grew up in South Los Angeles, I understand the impact dangerous air pollution has on daily life. Like much of San Joaquin Valley, many of California’s most vulnerable communities struggle with some of the worst air quality in the country. More must urgently be done to deal with this public health crisis.

At the same time, all of California, and indeed the world, are facing the unprecedented threat of global climate change. This demands immediate and prolonged action, especially now.

That’s why we must continue California’s renowned climate leadership and pass – as soon as possible – legislation like AB 378 that can provide solutions for both local air pollution and global climate change.

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California carbon auction sells out after auctions upheld by appeals court, allowances sell above the floor

Tower Bridge in Sacramento. Photo: public domain via pixabay.

Auction results from the May California-Quebec carbon auction showed increased demand after a California Court of Appeal upheld the legality of California’s auction design last month.

These auction results should send a clear message to legislators that California has a strong carbon market design that can weather legal challenges and the inevitable bumps of the political process.

They also indicate it’s high time to extend, adapt, and strengthen the cap-and-trade program as the backbone of California’s effort to meet its ambitious 2030 target – something the California legislature has an opportunity to do by June 15 in concert with the governor’s budget.

Results from the May 16 auction

  • The auction offered more than 75 million current vintage allowances (available for 2017 or later compliance) and all of them sold at a price of $13.80, 23 cents above the minimum floor price. This is the first time the auction has cleared above the floor since November of 2015.
  • Allowances held by the utilities, Quebec, and ARB sold with over $500 million expected for California’s Greenhouse Gas Reduction Fund (GGRF).
  • Almost 10 million future allowances were offered that will not be available for use until 2020 or later; a little over 2 million of those allowances sold. This is significantly higher than the 600,000 that sold in February but future allowances tend to have the most variability in demand.

Demand increased significantly from February, but why?

1. The market has clearly reacted positively by increasing demand in the wake of the Court of Appeals ruling. The appeal to the California Supreme Court and uncertainty about cap-and-trade’s future after 2020 may still be impacting market behavior, however.

2. Regulated businesses need a certain number of allowances to cover their emissions. Demand for allowances is in part driven by this simple reality, and since businesses have been laying low the last few auctions, it makes sense they would need to buy allowances this quarter. Economist Chris Busch describes why these “market fundamentals” led him to predict that at least 50-65 million allowances would be sold in this auction.

3. The stabilizing forces built into California’s program prevent big price swings when the market reacts to new developments. We can see this through California’s private secondary market, which shows daily allowance prices, and acts as a kind of barometer for how and whether the market is reacting to particular events. For example, after the California Court of Appeal on April 6 upheld the legality of California’s auction design, prices on the secondary market went up by 54 cents. When the California state senate on May 1 introduced SB 775, which would have overhauled the current cap-and-trade program and eliminated the auction allowances after 2020, the market dipped by roughly 20 cents – but recovered May 10 after the bill did not come up for a vote as anticipated. This means price shifts have been very small – mostly less than one dollar.

What will happen in the auctions if the legislature extends the cap-and-trade program?

An extension of the cap-and-trade program would lead to more robust demand for allowances — leading to a rising allowance price that better reflects the cost of a ton of carbon pollution reductions, taking into account the 2030 target that was put into law last year. With the price likely rising above the floor, we would expect to see future auctions being fully subscribed — translating into significantly more revenue for the GGRF to invest in projects that reduce carbon pollution.

Some observers have painted a dire picture of allowance prices spiking overnight. But that’s not how we’ve seen carbon markets behave in the past — and there’s no reason to think it will happen now. Instead, we’d expect a gradual strengthening of the allowance price over time, as compliance entities weighed the current price of allowances against the anticipated cost of reducing emissions in the future as the cap becomes more ambitious.

What’s more, the system already has a number of design features in place to protect against such a surge in prices, including offsets, the ability to draw on allowances “banked” from previous years, and a reserve pool of allowances (the “allowance price containment reserve”) that would be released into the market if prices rise high enough.

The governor is pushing hard for a deal on cap and trade by the budget deadline of June 15, so I’m hopeful the next auction will give us much to celebrate.

Posted in California, Emissions trading & markets, United States| Leave a comment

California’s cap-and-trade program doesn't need an overhaul

(Source: cropped photo from Flickr/ Zoe-Rochelle)

Today Senator Bob Wieckowski, supported by Senate President Pro Tem Kevin de Leon, proposed what amounts to a complete overhaul of California’s cap-and-trade program after 2020 in amendments to SB 775.

Pro Tem de Leon in particular has been a tireless champion of effective climate policies that are benefiting California’s communities and making the state a global leader on climate action. California would not be where it is today without his leadership especially on investments in disadvantaged communities and strong renewable and energy efficiency targets. This particular proposal, however, contains provisions that risk undermining the enormous progress the state has made.

Rather than scrapping the current system and starting over with an unproven approach, the state should build on success, keeping what is working well while strengthening the program by doing more to address local air pollution and environmental justice.

With President Trump seeking to take the country in reverse, California’s leadership is needed now more than ever. We can – and must – forge a post-2020 program that benefits communities in the state while leveraging progress here at home to spur greater ambition globally.

What’s at risk in this bill?

We still need to do a full assessment on the language of the bill, which was amended today on the Senate floor, but we know certain key policies are at risk:

  • Setting a hard ceiling on allowance prices, without any provision to ensure that California would meet its climate targets if that price ceiling were exceeded, opens a loophole that could undermine the program’s environmental integrity and California’s climate leadership. While the specific price ceiling envisioned in the bill is high enough that it may not be triggered, it represents an approach that is counter to the signature feature of the cap-and-trade program: the guarantee that California will meet its emission target.
  • This price ceiling also supplants a carefully designed cost-containment system that has operated effectively and works in harmony with California’s environmental goals. For example, this bill would prohibit firms from banking allowances, denying them a key source of flexibility that allows them to reduce emissions at the lowest possible cost over time. The bill would also ban the use of offsets, which help California achieve high integrity, hard-to-reach reductions outside the cap while keeping costs under the cap in-check and extending California’s climate diplomacy.
  • This bill could put California’s existing and future partnerships and linkages at risk by overhauling California’s approach to cap-and-trade and then asking partners to quickly fall in line. International linkages strengthen California’s leadership position and allow the state to leverage its program to spur greater ambition globally. Turning inward now would cede global leadership just when the world needs it most.

Today’s proposal is just one step in the complex legislative process, not a final bill proposal. Decision makers must balance many policy priorities as they navigate how to extend California’s cap-and-trade program. We believe there is plenty of room to adapt and strengthen California’s policy package while hewing to the framework that has served California well in reducing carbon pollution so far.

How California can chart a path to a strong cap-and-trade extension

California’s cap-and-trade program is working to bring carbon pollution down while the economy thrives. Even with this success, we recognize California needs to be doing more to address the very serious air pollution issues in local, environmental justice communities. EDF is committing to working on this with legislative leadership and our partners to ensure that the air is safe for all Californians to breathe wherever they live, while recognizing that climate policy – which affects issues as serious as our access to water – is critical to our continued future.

California needs policies that – in addition to improving local air quality – will continue to build on the successful reductions of GHG emissions; secure national and international partnerships vital to the state’s progress as a climate leader; and continue to support strong economic growth.

Rather than a wholesale change of a program that is meeting its goals, we should preserve what’s working and strengthen the parts that aren’t doing enough by designing and implementing policies that will directly improve air quality, especially in environmental justice communities.

This Senate bill comes as Governor Brown is urging the Legislature to pass an extension through the budget process with a two-thirds vote, and after two proposals introduced into the Assembly on how to extend the cap-and-trade program.

It is important that the Senate has now entered this debate and is recognizing the importance of passing a cap-and-trade extension with a supermajority vote. EDF looks forward to working with Senator Wieckowski, President Pro Tem de Leon, Assembly leaders, the Governor, and other stakeholders as California charts a path to a strong post-2020 climate policy.

With the Trump Administration abandoning its leadership role on climate at home and on the international stage, it is more important than ever that California continues to model successful climate policy that ensures that the state will meet its ambitious carbon pollution reduction targets, while promoting better local air quality and supporting a thriving economy.

Posted in California| 1 Response

What to expect from Ontario’s first carbon auction

This post originally appeared on ipolitics.ca.

Air pollution in Toronto. Photo credit: Flickr/ United Nations Photo

On Apr. 3, the Ontario government will announce the results of its first ever auction of pollution permits under its new cap-and-trade program aimed at cutting the emissions that contribute to global warming. As historic and newsworthy as the event may be, it would be wrong to read too much into the results as a measure of the success of the overall environmental program.

Ontario’s cap-and-trade program, launched on Jan. 1, requires emitters such as power plants to surrender a “carbon allowance” for every ton of pollution they produce. The ‘cap’, or limit on emissions, will be reduced over time, ensuring continuing reductions of emissions. The ‘trade’ — allowing emitters to sell excess allowances on the market — provides emitters with a flexible, cost-effective path to going green.

The Ontario government will auction many of these carbon allowances, as they did this month, and the new climate law requires all proceeds to be reinvested in public transit, green technologies and other environmental endeavors that reduce carbon pollution.

The actual auction was held Mar. 22, and offered for sale a total of 28 million allowances at about $17 each. Theoretically, that means the final result announced in April could be hundreds of millions of dollars raised by the province for investments in green projects.

History suggests the actual sum could be considerably less.

Results from recent California and Quebec auctions, which could influence Ontario’s results, have varied widely; those auctions sold 88 per cent and then 18 per cent of available allowances in the two most recent auctions.

There’s a number of reasons why cap-and-trade programs can get off to a relatively slow start.

Relatively soft auction results in the early stages of a cap-and-trade program may simply indicate that the system is working exactly as it was designed.

In the initial stages, for instance, many polluters can find relatively simple ways to cut their emissions enough to meet their cap for the year and thereby avoid having to buy allowances. Or, since they have a few years before they are required to turn in the required allowances, they could simply wait to purchase them.

Many allowances also will be provided to businesses for free — especially those energy-intensive businesses that have competitors in other jurisdictions not subject to similar climate regulations.

Relatively soft auction results in the early stages of a cap-and-trade program may simply indicate that the system is working exactly as it was designed — by allowing industries to make a gradual transition to lower emissions without causing undue economic upheaval or job losses.

Cap-and-trade programs already are showing that economic prosperity and ambitious climate action can go hand in hand. Ontario’s system is modeled after the joint program between Quebec and California, which have both seen carbon pollution decline even as their economies thrived in their first four years of cap-and-trade. In fact, in the first four years of California’s program, emissions under the cap declined while jobs were added faster than the national average — and California’s GDP grew to make the state the fifth largest economy in the world.

The Ontario scheme is designed to achieve similar environmental and economic results by easing consumers, businesses and industries gradually into the new cap-and-trade regime which will put the province on track to a low-carbon economy.

Ontario was able to develop and implement a rigorous but flexible emission-reduction program in less than half the time it took California and Quebec, an example of how climate giants can spur faster and more ambitious action by working together.

A significant feature of Ontario’s plan is that it includes a proposed linkage with Quebec and California’s market. That would mean carbon allowances could be used interchangeably in all three locations, and that Ontario would begin auctioning allowances at the same time as California and Quebec, who held their last auction in February.

Ontario has a rich history of environmental innovation, and its cap-and-trade program is poised to be a key component of its larger climate policy.

As tempting as it may be to judge the Ontario cap-and-trade program by the revenues it will generate, by far the more important measure of success is what it will do for the environment.

Posted in Canada, United States| Leave a comment
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