McKinsey's REDD role

In November last year, Rainforest Foundation UK published a briefing showing how the influential management consultants McKinsey & Company had given advice to rainforest nations that could lead to destruction of natural forests and have negative impact on forest peoples livelihoods. At the time, McKinsey disputed Rainforest Foundation UK's research and defended their approach, however, this week a new document has come to light which shows they have done an about-face and now recognised that the main points of RFUK's briefing were correct.

The original RFUK briefing - ‘McREDD: How McKinsey ‘cost-curves' are distorting REDD' - examined how advice given by McKinsey to the governments of Brazil, Indonesia, Democratic Republic of Congo (DRC) and Guyana in the context of a global plan to reduce emissions from deforestation and forest degradation (REDD) was based on flawed analysis that hid key costs and could lead to greater destruction of natural forests by logging and agribusinesses, further marginalisation of millions of poor farmers and the weakening of environmental regulations.

The statement from McKinsey's "McKinsey's greenhouse gas abatement cost curve - setting the record straight", acknowledges that RFUK's critique of the cost curve methodology was correct in important respects, stating that "the abatement costs shown in the cost curve across a range of emissions reductions initiatives do not necessarily reflect the full costs of implementing those initiatives". Responding to one specific concern of the RFUK's - that the likely costs of preventing deforestation by millions of subsistence farmers was likely to be much more expensive than indicated in the cost curve - McKinsey's acknowledges that "implementing this abatement initiative could be significantly more expensive than suggested by the cost curve as the transaction costs of addressing millions of farmers across a large geographic expanse would be substantial".

The McKinsey cost-curves are still having a real and tangible impact on how REDD is being rolled out and the fate of forest peoples.

"What is at stake is what actions governments will undertake as part of their national plans to reduce deforestation as part of REDD and whether these will allow logging companies and large agribusinesses to profit whilst continuing their destructive practices or whether it will offer genuine alternatives that will protect natural forests and the people who live in them", said Nat Dyer, Policy Advisor: Climate Change and Forests, Rainforest Foundation UK.

Simon Counsell, Executive Director of the Rainforest Foundation UK comments, "It is important that McKinsey's have now recognised that their cost curves for climate change abatement probably substantially underestimate the real cost of reducing carbon emissions from deforestation, particularly in terms of dealing with the activities of poor farmers. Policy makers now need to start basing their priorities for tackling climate change on real estimates of cost , rather than one-size-fits-all economic models which could lead to disastrous results. REDD may not prove to be the low-hanging fruit of climate change abatement that many have hoped for and speculated on."

This casts significant doubt over the way in which REDD is being prioritised in the international climate negotiations - the latest round of which are currently underway in Bangkok, Thailand - and the credibility of the REDD scheme as a ‘cheap and easy' solution in tackling climate change.

Also today, Greenpeace International have launched a new report entitled "Bad Influence: How McKinsey Inspired Plans lead to Rainforest Destruction", which focuses on McKinsey approach to advising rainforest nations on how to reduce carbon emissions from deforestation and forest degradation. This new report, reported in Bloomberg today, draws heavily on Rainforest Foundation UK's briefing acknowledging it as "a comprehensive resource showing how advice given by international consultants, McKinsey & Company, to governments of forested nations could harm the scheme to stem destruction of the rainforest, known as REDD."

› Download 'McREDD How McKinsey ‘Cost-Curves’ Are Distorting REDD'

› Download 'McKinsey Abatement Cost-Curve - Setting The Record Straight'