Lord Goldsmith and the $700 Billion Question

The UK’s International Environment Minister Zac Goldsmith has published an opinion piece in The Telegraph promoting the UK’s new international approach on the environment.
 
Lord Goldsmith lays out the UK’s environmental diplomacy on deforestation. There is much to be lauded in the UK’s new approach, but there is also much that is in need of constructive criticism.
 
To the good first.
 
The UK has “launched a world-leading consultation on a due diligence requirement on big companies to remove deforestation from their supply chains.”
 
This is, no doubt, a positive. The UK appears to be undertaking meaningful consultations with partner countries on the supply chains of imported commodities.
 
The positive – which we have mentioned before – is that DEFRA, which is leading the consultation, now appears to understand that deforestation is complicated. It is not simply a matter of assuming that all deforestation is the domain of large cattle ranchers in Brazil; it’s also undertaken by farmers operating on 2ha in remote parts of Indonesia. It should also be underlined that not all deforestation is bad; illegal deforestation is bad. But if a developing nation needs to cut forests to plant crops and feed its people, this cannot be considered ‘bad’.
 
Companies like Unilever learned years ago that attempting to eradicate deforestation completely from a supply chain also means eradicating the livelihoods of these small farmers.
 
DEFRA and its partners in Indonesia appear to be getting this message. The UK’s Department of International Trade also appears to realise that setting unilateral rules that disrupt trade – and without meaningful consultation — leads directly to the WTO.
 
They also appear to realise that agreeing on what is ‘sustainable’ as opposed to ‘legal’ is complicated.
 
The UK doesn’t import much in the way of palm oil. A surprisingly large amount comes from Papua New Guinea, which is part of a fully segregated RSPO certified supply chain established owned by Malaysian conglomerate, Sime Darby.
 
This bodes well for palm oil in the UK, particularly when compared with the EU’s approach. Rather than coming up with ways to ban palm oil outright, the UK appears to be on track to allow standards such as RSPO and ISPO to be part of the policy mix.
 
And now for the bad.
 
Globally, agriculture causes 80 per cent of deforestation, mostly for growing commodities like palm oil, soya, and cocoa.
 
This is only partly true. It’s now widely recognized that beef and livestock is the main cause of deforestation, but Lord Goldsmith doesn’t mention this. And nor is it as simple as Lord Goldsmith suggests.
 
As stated above, not all deforestation is ‘bad’. It is cutting trees and changing the land use from forest to something else. It could be agriculture. It could be housing and urban expansion. And the drivers for all deforestation – legal or illegal – are complicated.
 
These drivers vary in every context. In Africa, deforestation is mostly associated with small-scale and smallholder agriculture as well as fuel wood. In Brazil, most deforestation is associated with expansion of pasture, which leads into soybean cultivation. In Indonesia and across Asia it’s a mix of both small-scale and large-scale agriculture.
 
As we’ve hinted above, there’s a reason that developing countries are expanding their agricultural areas: they are poor. Land is one of the assets they can use to feed their populations through either production for domestic consumption or cash crops for export. There’s still a strange disconnect between the world’s wealthy countries and precisely how poor developing countries are.
 
By way of comparison, protein intake in the UK per capita is nearly double that of Indonesia. Almost 9 million Indonesian children – roughly equivalent to the population of London – suffer from chronic malnutrition.
 
These malnutrition problems will not necessarily be solved by expanding agricultural land and production in Indonesia. However, it’s not surprising that it’s the first impulse of many Indonesian stakeholders. It’s this balancing act between economic development and forest conservation that make deforestation much more complicated than simply ‘removing’ it from the West’s supply chains.
 
And finally to the ugly.
 
If the top fifty food producing countries follow our lead in replacing their land use subsidies with a system that rewards farmers for environmental stewardship, $700 billion a year – around four times the world’s aid budget – would shift to support nature.
 
As noble as this pursuit is, this is not new territory from anyone in Europe or the UK.  As we’ve done before, let’s rewind to the UNFCCC Conference in Copenhagen in 2009.
 
At that conference, most developing economies made forest climate pledges in the billions to save the world’s forests. For the period from 2009 to 2012, countries pledged USD3.5 billion for Reduced Emissions from Deforestation and Forest Degradation (REDD). This was the idea of making forests worth more standing than felled.
 
At the time, the EU estimated that around USD100 billion would be needed annually – by 2020 — to fulfill this aim. Some estimates were smaller, but other more ambitious estimates of financing biodiversity targets are in excess of USD400 billion.
 
Over the period from 2009 to 2014, a total of USD6 billion was pledged, but only some USD3.7 billion was actually committed. Average annual REDD pledges fell to around USD800 million annually.
 
There are myriad reasons that REDD+ hasn’t lived up to its expectations (for a decade-long account of REDD’s many failures, see Chris Lang’s unparalleled redd-monitor.org blog). The chief of these in our view is that deforestation was not clearly understood in the first place, and nor were the complications understood. Western climate policy advocates assumed that basics – such as land tenure systems – were straightforward. Then it became apparent that the ‘simple’ idea of REDD would involve political complications of land reform.
 
This is not designed to detract from Lord Goldsmith’s worthy goal. But it is here to pose a question: ten years ago, the world was promised a simple solution for saving the world’s forests. Why is the 2020 promise different?
 
Currently, the EU pays its farmers a USD65 billion subsidy annually, based on the area of land owned. The UK – as Lord Goldsmith states – is attempting to break from this by re-naming the payments as environmental stewardship and ‘public good’ payment. Is this a step in the right direction? Arguably not. When the EU started the renewable energy directive it was partly based on the idea that fodder crops – such as rapeseed – could be used as the basis for a renewable fuel rather than for an agricultural subsidy. This was viewed at the time as an environmental or public good, but it was nothing more than a subsidy dressed up as environmentalism. Will the same types of mistakes be repeated?
 
These are the $700 billion questions for Lord Goldsmith and the UK government.
 
Maybe first start with his own backyard.

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