Nepal's forests: Selling carbon credits

Nepal, like any other developing country, now could sell carbon credits in the global market by way of reducing its contemporary deforestation and degradation rates and by way of forest conservation and enhancement. It sounds too good to be true? No, surely not. The world has now conceptually moved pretty ahead in terms of rewarding the developing countries for carbons with those origins. Thanks to the inherent character of the forests which is both the source and sink of carbon dioxide—the major culprit of climate change. Thanks also to the global UNFCCC initiative which has prepared to take a great leap from its original Kyoto position (1997) that had limited its reward domain to the carbon generated from new plantations. Both the UNFCCC sponsored specialized group (AWG-LCA) and the much controversial Copenhagen have ratified the concept. It can thus be predicted that the forthcoming convention of parties (COP15) scheduled in Cancun in November 2010 would approve the case.

The said international provision may open several windows of opportunity for Nepal. First, the country can benefit from checking or retarding its deforestation trend which currently stands at 1.7 per cent annually. Alongside it might benefit from checking the forest degradation whose rate, though not yet known, is believed to be even higher. The second range of benefits might come from community forests which is found to sequestrate 1.8 ton per ha/ year. Likewise, increasing the forest carbon through new plantations might have some scope all over the country. The composite term for all these regime types is called REDD.

The seemingly attractive opportunities are characterized by a host of challenges at all stages ranging from production of carbon stock to its measurements and ultimately in making claims. Challenges in production are not easy to deal particularly in the Terai. This owes mainly to the large opportunity cost of carbon compared to other land uses including agriculture. The fluid political situations combined with lack of employment opportunity also pose unprecedented pressure to the forestland.

Hills as the situation stands today, may be more promising areas for carbon trade at least in relative sense. Challenges in measurement, the essential prerequisite towards making ultimate financial claims, may be difficult in all regions of the country, but is more acute in the higher altitudes owing to its access difficulties and the entailed higher costs. Monitoring degradation is much more difficult both due to lack of baseline data and the paucity of affordable measurement technique.

Selling the hard earned carbon credits, the ultimate thing in the REDD business, may be even trickier than the preceding actions. The credit buyers would favor more extensive, cheaper and predictable carbon than the small, costly and less predictable ones. Though Nepal’s community forestry has proven itself for a successful case of carbon sequestration, their small and dispersed location and lack of predictability may deter aspiring buyers. Those may instead be attracted to countries with extensive and contiguous tropical forests like Brazil and Indonesia owing to host of reasons including economy of scale, compliance ease and better visibility.

It is thus obvious that Nepal has to take necessary measures all way from carbon production through measurement leading ultimately to the sale if it has to take any benefit from the global provision. For efficient production, the first thing to address involves bigger challenge of addressing the poverty which is so rampant in the country. Government’s unilateral efforts to conserving the forest will be a futile exercise as shown amply by history. Devising an appropriate tenurial regime and better forest governance and inclusive mechanism that insures justice between all tiers of stakeholders ranging from local to national and from proximity to distance are needed.

The mindset and the capacity of the Department of Forest Resource and Survey must be addressed in a way that all types of measurement, reporting and verification (MRV) may be done domestically without having to rely too much on the expensive expatriate service. The task of seeking potential buyers can be even more daunting. Given the smallness of potential size of carbon credits, the buyers may not be too stimulated to buy carbon from Nepal. Weaker governance and vacillating forest policy may further add up to the problem. However, there is little reason to despair. Nepal’s forests do not simply produce carbon but produce a number of important co-benefits ranging from conservation of biodiversity, protection of watersheds, and supporting people’s livelihoods. In this light we may have little problem in selling our carbon provided that we can convince the world with these hard realities. It may be hoped that the ongoing REDD strategy development process will pay proper attention over these areas so that a just and effective carbon trading can become a reality for Nepal.