Nicholas Stern spoke to us at Forest Day to underline why it’s important to take on the challenge of stopping deforestation.  An outline of Stern’s speech is as follows:

Why? If we want to reduce the risks of climate change, the lowest cost option is stopping deforestation. Estimates from the Stern Review halving deforestation will cost around $15 billion per year-but we won’t know the actual number until policies are closer to implementation. 

Issue: leakage.  Leakage is an issue that is universal around the world. Addressing leakage simultaneously can help keep costs down.

Issue: Pricing. At $5-10 per tonne, forestry credits are cost competitive. But prices could be a lot lower if countries around the world act in unison to address leakage.

How can we implement a plan to address the challenge of combating deforestation?

1. Sharing costs is crucial. Forestry policy has to be designed by countries where the trees stand, as local governments understand the situation and structures the best.   But governments that are addressing tropical deforestation should share the costs they incur with developed countries. Developed countries have the responsibility for incurring these costs as well as reducing their demand for timber.

2. Deforestation has to be integrated with development priorities.  

3. Prices-not at the end of this list because it’s minor, but because of the logical structure in the process. We can’t build prices and markets unless the rest of the deforestation regime makes sense. We have to be thinking about the whole development story in order for the market structure to work out. 

Since deforestation is a development issue, public money must be allocated in the early days of a deforestation regime. Over time, private money and carbon markets can be included in the regime.

Ministers of Finance are very cautious about using public money and they are under greater pressure because of the global economic crisis than they have been in a very long time. Therefore, the case for public money has to be made, and made very strongly.  Some of this public money should be debt funding. At Copenhagen, we all need to look very hard for setting aside proper funding to address deforestation.

How much? At least $15 billion by 2015 will be needed to enforce a regime set up to fight deforestation. 

To get this money, we need to look across the board at all of the options available: auctioning of permits, debt instruments, taxation of things which aren’t yet taxed such as aviation and maritime, special drawing rights, transaction taxes. One of outcomes needed to be worked out this week in Copenhagen is a serious finance package. 

Conclusion: Build up markets, make trees more valuable, recognize that investment from public money has to take place and be serious about where it comes from.