Tropical Deforestation Report Release Transcript
Moderator: Glenn Hurowitz
May 26, 2010
Glenn Hurowitz: Welcome, everyone. I’m Glenn Hurowitz, the Washington director of Avoided Deforestation Partners, which works to protect tropical forests as part of the solution to climate change.
Thank you, all, for joining us. We have a ground-breaking new report to discuss today and some real leaders in the agriculture and parts products industries along with us to help. Roger Johnson of the National Farmers Union, the cosponsor of this report; Donna Harman, the President of the American Forest & Paper Association; Keith Romig of the United Steelworkers; and Fred Yoder of the Ohio Corn Growers Association and past president of the National Corn Growers Association.
This report is the product of more than 8 months of work, and before we start, I want to acknowledge the tenacity of the report author, Shari Friedman of David Gardiner & Associates, as well as Jonah Bush in movement with Oste, her collaborators, who helped with a lot of the economic modeling as well as all the reviewers.
It’s also one of a series of joint efforts we’ve made with the agriculture and forest products community over the last several months, including a joint letter on climate, agriculture and forest policies, a video explaining the issue and a major ad campaign we launched with the Ohio Corn Growers Association. All of these resources, a PDF of the report and many other items are available on our Web site, at www.adpartners.org/agriculture.
Now I’d like to turn it over for a brief background to Jeff Horowitz, the founder of Avoided Deforestation Partners, a global network dedicated to halting tropical deforestation through effective climate policies in markets, who’s played an enormous role in helping make the United States an emerging leader in tropical forest conservation. At the conclusion of the speakers, we’ll have time for questions.
Jeff Horowitz: Well, thank you, Glenn and to everybody for joining this call. Before we dive into this new report that is ground-breaking, I want to set the scene for what’s happening around the world and – regarding deforestation and climate change.
Tropical rainforests are one of the most important ecosystems on the earth. Forests are the lungs of the planet. They teem with life, and as a result, they store an immense amount of carbon. They also provide a home for 1.6 forest-dependent people. But as you'll hear today, unsustainable and often illegal overseas agriculture, ranching and logging operations are destroying these forests at a terrifying pace.
It’s estimated that we’re losing an acre of tropical rainforest a second. This deforestation sends more carbon pollution into the atmosphere than all the cars, trucks, ships and planes in the world combined. We simply cannot solve the climate crisis without solving the deforestation crisis.
It’s also very important to understand that protecting tropical forests is an extremely affordable and fast way of reducing carbon emissions. It’s about half the cost of domestic emission reductions. And finally, reducing pollution by protecting forests will give us the time that we need to transition to a low-carbon clean energy economy. For these reasons we think of ending deforestation as a win-win-win; it’s a win for the environment, for the U.S. economy and all Americans and people around the world.
So to advance these benefits, Avoided Deforestation Partners has convened and coordinated a wide array of distinguished organizations and companies in support of tropical forest protection policies. Our partners range from groups as diverse as the Sierra Club, NRDC, EDF, The Nature Conservancy to energy companies like American Electric Power, Duke Energy and PG&E. Other corporate leaders include Marriott, Disney, Starbucks, not to mention the support of labor unions, and of course the agriculture and forestry organizations like those represented on this call.
United we have called for strong public and private incentives to protect forests through a climate policy, government appropriations and international financing efforts. So to date, our Unity Coalition has had significant success. In particular, we helped ensure that practical and effective international forest protection policies were included in the Waxman-Markey House Climate Bill, that one that was passed last June, and we continue to work with Senators Kerry and Lieberman and their staff to ensure that their final climate bill will include what is needed to effectively halt tropical deforestation.
Today we’re pleased and honored to be joined by a wide range of groups in support of this critical report and its findings. We offer our many thanks to everyone participating on this call, and we look forward to working closely with all of you as we strive to protect our forests, our climate, and to level the playing field for American farmers, ranchers and workers.
Glenn Hurowitz: Now we’re going to first hear from Shari Friedman to go through the report results who’s the report author.
Shari Friedman: Thank you. As Jeff had mentioned, the rapid destruction of tropical forests is significantly accelerating global climate change. In many cases, the land is deforested, the timber is sold, and the land is then converted to produce crops that compete on the world market. In this study, “Farms Here, Forests There,” we analyze the impact that conserving tropical forests could have on U.S. agriculture and timber markets.
For many countries, converting the lands in tropical forests to pastures or plantations is the least-cost option method for commodities such as palm oil, soybeans and beef. In some cases, such as palm oil in Indonesia and Malaysia, timber sales fund the initial investment in the plantation, making deforestation even more economical.
The United States is a significant producer of soybeans, beef, timber and oil seeds. U.S. farmers, therefore, compete with the commodities grown in a land that was deforested to grow the crops. If farmers and ranchers in the tropical forest countries work to conserve the forests rather than cut them down and grow crops, we could expect to see a decrease in the inexpensive commodities entering the international market and competing against U.S. goods. Income to the tropical forest country would flow to the landowners, but they would not produce low-cost commodities that compete with U.S. products.
This study is a first step to understand the potential impact that gradually ending deforestation could have for U.S. producers of soybeans, oil seed, beef and timber. We found that reduced deforestation could result in revenue increases for the U.S. agriculture and timber industries in the range of 140 to 200 billion between 2012 to 2030.
We made our projections of expected gradual deforestation on the basis of anticipated impacts of U.S. and international climate policies financing of tropical forests conservation, including the goals of having deforestation – having it by 2020 and ending it entirely by 2030 included in the House-passed American Clean Energy and Security Act.
Of course, reducing the financing would diminish the impacts in this report. These numbers are based on a partial equilibrium analysis using a model built by Jonah Bush of Conservation International. Our analysis includes ranges based on high and low estimates of the elasticity of U.S. and global markets.
I’d like to run through the results of different commodities and focus on cattle as an example of how this works. Ranching operations in Brazil and other parts of the tropical world cut tropical rainforests in order to increase production of low-cost beef and leather in the world market. The availability of free or cheap land through cutting down tropical rainforests is a principle driver of this increased production, and it may be accelerating.
With 60 to 80% of Brazilian deforestation caused by cattle ranching, the Brazilian government has pledged to double its share of the global beef market by 2018, a move that could have significant consequences for U.S. cattle producers. If Brazilian beef production continues on the same trajectory, the increase will be achieved by further deforestation and expanding ranching operations onto formerly forested lands. The land is then grazed until it can’t support cattle, and then operations pushed further into the rainforests within about 5 to 10 years.
Protecting tropical forests will allow Brazilian ranchers to gain income through forest conservation instead of deforestation while bolstering revenue to the United States. Based on our calculations, by gradually ending deforestation, prices go up, leading to total revenue increases of 52 to 67 billion between 2012 and 2030, depending on the elasticity of the U.S. and world markets. States that currently produce the most beef that can gain from these increases include Texas, Nebraska, Kansas and Oklahoma.
These results are similar for other commodities. For palm oil, the greatest driver of deforestation in Asia is palm oil cultivation. The growth in palm oil production is largely a result of growing demand for food, cosmetics and biofuels. Seventy-seven percent of palm oil is used for food, but demand for the fuel source has risen, especially in Europe.
Indonesia and Malaysia are the major producers of palm oil and related products. They're accounting for about 88% of total world palm oil production. Over half the new palm oil plantations between 1990 and 2005 in Indonesia and Malaysia were established on newly deforested land. This is partially because, as mentioned before, logging regenerates revenues that cover initial cost of establishing a plantation. Deforestation from palm oil mainly explains why Indonesia is the world’s third largest emitter of greenhouse gases, right after China and the United States.
It’s also having an effect on wildlife like orangutans, which are being pushed toward extinction by palm oil plantations. Palm oil directly competes with and is easily replaced by other oils, including canola, canola oil, safflower oil, cottonseed oil and soybean oil. Most products containing palm, palm kernel oil or derivatives such as palmitate, frequently exchange these and other edible oils depending on small variations in price and availability. You can see this on ingredients labels that include palm oil as one among many options.
While the United States does not produce any palm fruit, it ranks fourth in production of other oil seeds noted above. Given existing yields and market conditions, we estimate that ending deforestation would reduce business as usual supply of palm fruit by about 5 million tons. If we reduced deforestation gradually between 2012 and 2030, prices and production would increase gradually, and total benefits to the U.S. would be about 17 to 40 billion between 2012 and 2030, with the biggest gains based on existing production to Iowa, Illinois, North Dakota, Minnesota, South Dakota and Indiana.
The picture is similar with soybeans. A variety of sources have significantly expanded soybean production in the Amazon at the expense of the rainforests. Development of new soybean variations more tolerant of rainforest climates, highway construction through pristine forests, poor law enforcement and a variety of external market forces, have all contributed to deforestation for soy. I addition to directly driving deforestation, soybean operations often move into areas previously deforested by logging and ranching, providing additional economic incentives for these activities.
From 1999 to 2004, production of soybean in closed canopy forests in the Amazon increased 15% per year. Gradually ending deforestation will increase revenue to U.S. soy producers between 52 and 67 billion between 2012 and 2030, with the biggest benefits based on existing production to Iowa, Illinois, Minnesota, Indiana, Nebraska, Missouri, Ohio and South Dakota.
Finally, with timber- natural forests are mostly not cleared exclusively for timber, but logging increased the profitability of deforestation. Many tree species exist in natural tropical forests, often more than 100 on a single hectare and over 1000 in a single region. Not all of these trees have commercial value, and not all the wood of commercial value makes it to the market. In the Amazon, timber has not traditionally been a primary driver of deforestation.
However, logging often involves road construction that enables less well capitalized cattle and agriculture operations to move in behind timber. An estimated 12,000 to 19,800 square kilometers of the Brazilian Amazon are logged every year. However, much of the wood from the forests is not extracted for export but is lost collateral damage for roads or is burned. The main timber export for the Amazon is mahogany, which can be found throughout diverse forests. Other types of woods are logged and exported from the Amazon, but data was sparse, and so for the Amazon we only considered mahogany in this analysis.
Southeast Asia timber sales are more closely linked to deforestation, but still not the singular driver. Often, the returns on timber sales finance plantations, making a standing forest financially attractive for agricultural conversion.
More high-end exportable wood is extracted from natural forests in Southeast Asia than in the Amazon. In 2007, Malaysia led the world tropical hardwood exports, accounting for 35% of the volume of tropical wood exports. Some of this production was from natural tropical forests, and some of it was from tree plantations. In this analysis, we tried to only include that which was from the natural tropical forests.
The market for particular timber types and qualities are largely driven by consumer demand, which has set economic conditions as well as marketing and trends. The top five products made in the U.S. from tropical hardwood species are doors, molding, cabinets, decking and flooring, while some tropical woods like Ipe have unique characteristics. Most of them are readily – have readily available American substitutes that can be used if tropical hardwoods become less available or prices increase.
I do want to note that we only looked at hardwood timber and not at the significant supply of pulp and paper coming from tropical countries. So the actual effects could be larger. If we end tropical deforestation, prices in U.S. production will increase, yielding a net benefit to the U.S. of between 36 and $60 billion between 2012 and 2030. Hardwood production is focused in the eastern part of the U.S., so the biggest benefits would likely be Pennsylvania, Tennessee, Florida, Virginia, North Carolina, West Virginia and Kentucky.
In addition to these direct benefits, if international forestry is allowed in climate change legislation, the agriculture and timber industries could see additional benefits. Because international forestry offsets are relatively inexpensive, including them in climate legislation reduces permit prices for energy and fuel producers. Reduced permit prices mean less impact on electricity, fuel, fertilizer and other input costs for U.S. agriculture, ranching and forest production industries.
Climate Advisors provided an analysis that savings for these industries could be about 49 billion between 2012 and 2030. Combining the savings from lower energy prices with the direct revenue increases, agriculture, ranching and timber industries could benefit by between 190 and 270 billion between 2012 and 2030.
Glenn Hurowitz: Thanks so much, Shari, for that great rundown, and just to reiterate, we’ll have questions at the end. Now I would like to hand it over to Roger Johnson, the president of the National Farmers Union.
Roger Johnson: Thank you very much, and thanks to all of you for joining. I think the rest of us are going to be much briefer and just make a few comments each. I’d like to start by reporting that just over a month ago I, along with a number of other folks in the U.S., had the privilege of going down to Brazil and looking at agriculture and the deforestation interface and sort of the northern parts of Brazil just a couple of degrees below the Equator.
And one of the very interesting parts of that trip that I think we all came away from having learned was that Brazil, for many years, has had this economic development policy that was really based upon promoting deforestation of the rainforest, and it was, for reasons that you've just heard described in the report, they recently are reversing course and doing what they can to try and stop the deforestation. But obviously, there are very, very powerful economic incentives at play. And so one of the big issues they're dealing now with is sort of the illegal activity associated with that deforestation.
The point I want to make here is that it’s very important for us to get the policies right so that – so that we have the right kinds of incentives to stop the practices that we think are harmful for the environment and harmful for the atmosphere, harmful for this world we live in, and policies that will support or enhance those that are beneficial.
And this is one of those examples. If we can have offsets as a part of a climate change bill, that’s enormously important, including some component of them for international offsets to deal with this deforestation issue, gives us two really significant benefits.
As you've heard in the report, it has the potential of increasing revenues for all the reasons that were just described to farmers and ranchers of somewhere in the area of $200 billion over the time horizon that this study encompasses while at the same time it has the added benefit of lowering the cost of production to farmers here in the U.S. somewhere in the range of close to $50 billion in that same timeframe. So we see a higher income, we see lower expenses if we get the policies right.
Our farmers and ranchers know the importance of being good stewards of the land, and they know it’s important that we get public policy that not only recognizes that, supports that stewardship ethic that all of us know is so important. A lot of farmers have been struggling, fighting to hold onto their land because the economic conditions in agriculture, as in nearly perfectly competitive economic system, are always very intense.
And so again, this is about making sure that we get the policies right and to make sure that we end up with policies that aren’t going to result in us being undercut by irresponsible practices like deforestation, or even illegal practices like deforestation. So the essential point that I want to underscore is we need to get the policies right, international offsets that are going to work to limit, reduce and then stop deforestation are very important.
And the final thing I’d say is that there is a lot of politics around this issue, as everyone knows, and it’s very important that if we’re going to get the policies right, that we have very sound data on which to base those policies, and hopefully this report is going to be able to contribute to some of that sound data.
Glenn Hurowitz: Thank you so much, Roger. That was great. Now I’d like to hand it over to Donna Harman, President and CEO of the American Forest and Paper Association.
Donna Harman: Thank you, Glenn. We’re delighted to be able to participate in this call today as well. The American Forest and Paper Association represents companies that manufacture forest products, paper, wood products, and also some companies that own timberlands here in the United States.
We have long had a concern over tropical deforestation, particularly because of the impact from illegal logging with the tropical deforestation. And in fact, we’ve worked in Congress to have legislation passed in 2008, the Lacey Act Amendments, that made it illegal to import wood that had been harvested in violation of the laws of that particular country.
So everyone involved in the international forest product supply chain recognizes the importance of sustainable forest management, both domestically here in the United States as well as in developing countries, and we all have a responsibility to protect this way of life for future generations.
Illegal logging, as we’ve heard already from the report’s author, not only contributes to deforestation, but it also undermines the viability of legally harvested and traded forest products, and it’s a serious detriment to our industry’s sustainability.
So we are pleased with this report being released today because it actually builds on some analyses that we conducted back in 2005 that found up to 10% of the global timber production could be of suspicious origin and that illegal logging depresses world legally harvested wood prices by 7 to 16% on average, depending on the product. The AF&PA report also established that if there were no illegally harvested wood in the global market, the estimated value of U.S. wood exports could increase by over 460 million each year.
Today, we were a part of a launch of a Forest Legality Alliance, which I think is very complimentary to this effort and what we’re trying to accomplish here. This new alliance is a worldwide initiative that’s open to public and private institutions with an interest in legal forest product supply chains, and it will provide some ongoing support for the private sector efforts and policies directed at curbing trade in illegally harvested wood products.
We also, obviously, as has been discussed previously, have an interest in the offset policies that are being discussed and debated, as Congress considers climate change legislation and efforts to reduce greenhouse gas emissions. There are some important issues here. Forests, obviously as it was stated at the outset of our call, are the lungs of the earth.
And it’s important that forests and their sequestration value, the ability of forests to sequester carbon, both here domestically as well as internationally are recognized, and obviously having more opportunities for offsets will help reduce the cost of energy and will help companies make better decisions as they're trying to address some of the greenhouse gas issues, and I think those were well highlighted by the report’s author.
Also, I just wanted to mention that AF&PA also supports the REDD-plus, Reducing Emissions from Deforestation and Forest Degradation as part of the international climate conversations that are going on. So with that, I think I’ll stop here and be happy to answer questions later.
Glenn Hurowitz: Thanks so much, Donna. I also wanted to acknowledge Donna’s expertise and partnership and support over the last several months on this effort.
Now Keith Romig is the strategic issues representative of United Steelworkers, which represents tens of thousands of pulp paper and forestry workers. He’s a leading authority on a range of labor issues and a fierce advocate for American workers and has partnered with a variety of environmental groups, companies and others to reduce illegal logging.
Keith Romig: Thank you very much. I don't think I need to add much to that introduction, and if I did it would probably detract. So basically, we – the United Steelworkers is here because, even though we’re called steelworkers, a very large proportion of our members work in the pulp and paper industry, and we, in fact, are the largest paper workers union in the entire world.
Illegal logging has been detailed by the previous speakers and as not as an environmental catastrophe. As it has been said previously, the forests are the lungs of the earth, and the lungs are being constricted by deforestation and illegal logging. In addition to the other purely economic impacts talked about by the other speakers, I would point out that illegal logging has been a contributing factor to the loss of tens of thousands of USW jobs in the wood and paper industry.
A couple of examples I would like to cite are a large mill in Luke, Maryland that makes coated paper where two paper machines and approximately were shut down over the past 3 years, and approximately – half the workforce, then numbering about 1400 people, was basically kicked to the curb.
In Kimberly, Wisconsin, another coated paper mill employing about 1000 of our members was completely shut in 2008, in part due to pressures from illegal logging. And those are only two examples of the many, many situations in which our members have lost jobs because of illegal logging. We estimate the impact is possibly upwards of 10 or 20,000 jobs just in the past 3 years.
Obviously, this needs to be dealt with, and the report that has been released today is a fine example of the kind of work everyone who has a legitimate dog in this hunt needs to do to convince our legislative authorities and our trade negotiators who work together to help curb this problem. What specifically our organization is doing is, in 2006, we filed, with the support of the Sierra Club and of the paper industry, an illegal logging trade case against coated paper from Indonesia, South Korea and China.
Among our arguments was that illegal logging amounted to an illegal trade subsidy. That has never been argued before, to my knowledge, at least not successfully, but the Department of Commerce actually upheld our case and agreed that there was that illegal logging was, in fact, an illegal trade subsidy.
It was the first time ever, to our knowledge, that a U.S. government agency has declared illegal logging as an illegal trade subsidy. Unfortunately, at that time, the mills that I cited and other mills had not yet closed. As a result, the International Trade Commission threw out the case because not enough mills had closed and not enough workers had been shoved out on the street.
While we – 3 years later in 2009, last year we re-filed the case. The trade situation hasn’t gotten that much worse, I suppose, but now the thousands of jobs are gone, the several mills are closed, and now we can prove that we’ve been injured. We put illegal logging as part of the case. We still have the support of the environmental community on this.
We think we have a, in a preliminary way, the Department of Commerce and the International Trade Commission have accepted the case, and we think we have a much greater chance of success this time, although I’ve got to say that I’m very unhappy about the reason we have a greater chance for success.
We worked – I want to point out that we worked closely with the BlueGreen Alliance on this issue. The BlueGreen Alliance has its own report on illegal logging, mostly in Indonesia, and why we talk about Indonesia a lot I’ll make more clear a little later. It’s called “Devastating the Environment and Destroying U.S. Jobs.” And it can be found at www.bluegreenalliance.org.
Illegal logging not only costs union jobs in the United States, but we found when some of our representatives went to the Bali meeting in Indonesia on climate change that we were able to meet with Indonesia’s largest forestry workers union, Kyoto, and they pointed out to us that not only does illegal logging devastate the environment in their country, but it costs good union jobs there.
In other words, illegal logging not only costs union jobs in the states and other jobs, it costs legitimate and union jobs in Indonesia because the union workers are displaced when the illegal loggers come in, and contingent workers, workers who have no benefits, workers who are paid peanuts, workers who are not paid at all, take those jobs and just make what they can.
The union doesn’t blame these workers. I mean unemployment is high there. A lot of workers have to work in the informal sector anyway. But the problem is illegal logging is causing the loss of union jobs not only in the United States, but in Indonesia, no doubt in Malaysia and in Brazil and other countries where this goes on.
Another thing we were doing is we worked with the American Forest and Paper Association and the Sierra Club and many other organizations to help pass the 2008 revisions to the Lacey Act, which is a law dating from the early parts of the 20th Century that regulates plant importation, and what we did was we passed an amendment strengthening that law so that it could be used to attack all illegal logging and related issues.
Unfortunately, as usual, the devil is in the details, and we are in an ongoing discussion with the Animal and Plant Health Inspection Service over implementation and working to ensure that paper products and a sufficient range of wood products are included in the enforcement mechanism that the effect of the revisions that all these organizations worked so hard to product will, in fact, be significant.
Also, we are working closely with congress about ensuring that there’s sufficient funding from the Lacey Act so that when the regulations are correct and ready to go, that there will be the funding to actually implement them. Finally, we are working closely with the BlueGreen Alliance and with other allies to get tropical forest protection back in the climate bill.
And I think this is probably a good place for me to start – stop, and I’ll be happy to take questions when it’s time.
Glenn Hurowitz: Thank you so much, Keith. Now I’d like to introduce Fred Yoder, who’s representing the Ohio Corn Growers Association today, one of our closest partners in the efforts to protect tropical rainforests and one of the most forward-thinking people when it comes to the interaction of agriculture and tropical forests and climate change. He grows soybeans and wheat near Plains City, Ohio and is the past president of the National Corn Growers Association.
Fred Yoder: Thank you very much. I’m glad to be on the call today. I just want to begin by stating that I too went on a trip – not the same trip that Roger did. We went last summer to Mato Grosso in the Amazon Basin, and then I returned this February for another trip to deal with – the reason we went originally was to see about the indirect land use changes for the effects of U.S. production of biofuels and to see what first hand whether that was really affecting it at all.
And what we found when we visited there is they hadn’t a clue what we were doing here, and they were clearing land, the rainforests basically because of economic reasons. In fact, most of what we saw was done by squatters illegally, but the government does look the other way because the land is actually worth more at this point in time clear and growing crops and cattle than it is to stay in forests.
So those farmers, we worked closely with them. In fact, they had returned here to Ohio, and we entertained them there and got to know them real closely, and we had many more things to discuss– that are the same than they were different, and basically we do have the same type of things. So what they did tell us is that in the Amazon Basin, the new law says that 80% of the land has to remain in forest, and 20% can be cleared. But that’s not happening. I mean it’s hard to keep that.
So what they asked us to do, and they're very willing, is help provide some kind of incentive for those forestry acres to stay in forest, and the logical thing for me that I saw there was the fact that we can help them do that because the enormous capacity that Brazil, just as one country, has to compete with the U.S. in agriculture as far as exports and providing the world with grain and meat is absolutely enormously.
And so even if a farmer doesn’t believe in the whole climate change thing, at least for economic reasons a farmer needs to look at the fact that economic productivity here is going to be greatly affected if, indeed, that the rainforest continues to be – continues to be eroded. And that’s why I made the statement that rainforest saving is not for tree-huggers anymore; it’s for everyone. And all farmers should really be looking at this.
I was very involved in trying to work with an international agreement. I was at the Copenhagen U.N. meeting last winter, and it’s clear that the only way we’re going to get developing countries to come up with some sort of agreement is to – is to work with these countries and give them some sort of incentive to keep from deforestation.
Wouldn't it be great if we could turn some of the world’s biggest emitters of greenhouse gases as one of the best solutions to reducing emissions of greenhouse gases, and we can do that just by giving some sort of incentive to let those lungs, if you will, like it was said before, breathe and continue to clean the air as we know it.
So I’m really coming out from two different things; the enormous capacity that we continue to erode the competitiveness of the United States in this agriculture and also other industries if we don't stop it, and number 2, it puts the U.S. at a terrible disadvantage if we go ahead and pass climate legislation in this country that doesn’t include provisions to ensure that the rest of the world is following in our footsteps.
You know we need to provide a leadership position in this, and therefore you know we would be put at a disadvantage if we are you know cleaning up our act and the rest of the world is not. So I think it’s to our advantage to all look at this and take ownership of this issue and try to do what we can to ensure that we stabilize the force we have and keep it from happening, and the United States will be much better off if we do this.
Question & Answer Section
Operator: We’ll take our first question from Charlotte Howard with “The Economist” Magazine.
Charlotte Howard: Hi, everyone. Thanks for holding this call. I just want to hear a little bit more from you about how your findings interact with the debate over ethanol and indirect land use. I know that you have a small section on this in your report, but it would be great to hear some further thoughts. Thanks.
Glenn Hurowitz: Yes, thanks, thanks for the question. One of the things that we have realized in working with both the agricultural community and environmentalists is that protecting rainforests through climate finance and other policies can help reduce the concerns about indirect land use impacts. So you know on the one hand, you have some environmental groups who have been really critical of ethanol you know and claim that it causes deforestation.
On the other hand, as Fred mentioned, corn growers and ethanol manufacturers you know see the deforestation being driven by lack of governance you know market incentives to deforest and other forces. But what both really agree on is that if you can protect rainforests through other means, there will be, at least a far diminished or no indirect land use impact. If the rainforests are still standing, nobody can say that ethanol is causing deforestation. And so it’s a real area of commonality.
Fred Yoder: I agree with whatever you've been saying. The one thing that we’ve found was if anybody should be concerned about indirect land use change, it would be the cattlemen because most of that land that we saw was being converted into pasture to raise grass-fed beasts.
And I mean one of the things that they did say that they would love to see all of the issues that we’re having with livestock issues in the United States, and they would love to be the exporter of our beef and the supplier of our beef.
So again, without the regulations that we have to live with here in the United States, they can obviously undercut us in price. But at the same time you know we are severely going horrible economic or environmental damage. So it’s important to understand that we all have to play by the same rulebook, and you know we we’ve got to make sure that we can’t let some other country be able to do some things, and not on the same playbook that we do.
So again, we just didn’t see the impact of our biofuels industry here in the United States to have an (effect up here). I came away with the fact that we have to help in this. I mean I don't know how a farmer could possibly say that he does not support of stopping of deforestation, even if it’s in his own interest that he’s going to have to ensure that the future is solid, with everyone playing by the same kind of rules.
Roger Johnson: I agree with both the statements that were made earlier. I would underscore maybe two things. One is, it’s been said that it’s a governance issue, and that clearly is the case. When we were down there, I mean one of the huge issues that they have is that they really have not had a long established; in some cases they still have no established effective governance in the interior part, certainly, of the rainforest. And so helping to establish that governance and to bring sort of the rule of law there and enforcement is very, very important.
The second thing I would say is that for a long time the Brazilian government – and I don't know if this is true in other rainforests, so I’m just going to talk about what was the case in Brazil, where we visited, that they have had this very, very powerful economic incentive that basically said for many years if you clear half of the land we’ll give you that much land plus an equal amount of land for yourself.
And so it was really not unlike the economic development policies that this country has followed over the early part of our existence 2 and 300 years ago. And so they have recently begun to change that, and now it’s an enormous issue of how you enforce the law.
So the drivers have really not been corn production and the indirect land use relative to ethanol as much as they have been we just want the land cleared, and we want to develop it. That seemed to be the overriding issue, and I think it was said, somebody earlier said, and this fits with what we learned in Brazil, that about 80% of the demand for cleared land is really going into cattle.
And the policies that have been employed over the years have been you take the revenue from selling the forest products and clearing the land to buy the cattle, you raise your cattle herd, you sort of use up the land because their management practices are very unsophisticated, at least on the edge of the frontier, if you will. You ranch it for a few years, and then you move on and clear more land.
And so again, that pattern is sort of what we did a couple hundred years ago. And so anything we can do to get the right incentives in place and to get higher management practices in place, those are all very good things for all of us in this world.
Operator: And we’ll move to Chris Clayton with DTN.
Chris Clayton: I want to just follow-up on, again, the incentives that would reduce this deforestation because each of you have used language like illegal logging, illegal squatters, and illegal deforestation. It seems that, as you said, the governance isn’t there. So what would be different then? How would the economic incentive be so much different that it would just suddenly stop?
Roger Johnson: Well certainly, Chris, if you have, and what this report tries to focus on is the use of international offsets, which essentially is an economic incentive that will bring more value to the standing forest than to the destroyed forest. That ultimately is what you have to do, and when you get those kinds of policies put in place, you don't have the potency of this argument or this incentive for illegal deforestation to occur.
So it’s about making sure that you get policies that allow sort of the marketplace to help direct some of these activities and steer them away from the illegal activities, and the reason we’re using those terms, Chris, is because in Brazil, for many years the government had very proactive policies encouraging deforestation.
Very recently, in the last several years, they have reversed those policies and made it illegal to deforest under lots and lots of different kinds of circumstances. And so the continuation of the deforestation practices, in many cases, in the majority of cases where we were, were, in fact, illegal deforestation activities. And there are lots and lots and lots of issues surrounding governance and it’s kind of the Wild West in parts of Brazil that we visited.
Fred Yoder: Just let me say this: one of the things that I’m concerned about – and when the Kerry-Lieberman bill was rolled out last week, one of the things that I read in it that was troublesome to me is it severely limits the use of international offset credits.
And I understand why some of the language put in, and one of the things that they said was that the only way you could use international credits is if that country had a national you know climate policy. I understand the reason for that, they're saying, well, if you have one state that is going gung ho and is doing offset credits, and the adjoining state is still deforesting, then there’s leakage. It’s not real. And I understand that reason for that.
But when you take something as large as Mato Grosso, I’m concerned that we’re losing a great opportunity to do something really, really positive and good here, and talking to those farmers from Brazil and the Mato Grosso area you know we talked about incentives. There’s not going to be any incentive from the government to do that.
So we were basically trying to figure out what would it take you know for an offset, and they said you know anywhere from 10 to $12 a hectare or acre – I can’t remember if it was hectare or acre. But anyway, it was very reasonable. So if we would just let American institutions have access to that to go ahead and give them the incentive so we could go ahead and do work here.
So if we go down this road of you know of limiting and reducing the greenhouse gas in the world, then it’s just going to have to be a global effect, and this is one way that we can incentivize the developing countries to participate and do their fair share.
Glenn Hurowitz: I just wanted to add a couple of points to that. First, to you know put some meat on the bone in terms of land use in the tropics. Although the value of land in the tropics varies widely, it averages about 200 to $500 a hectare for deforested land. In contrast, each hectare of rainforest stores somewhere around 500 tons of carbon dioxide equivalent per hectare.
If you look at carbon prices right now in the European carbon market, it’s about $20 a ton. So if you add that up, it’s worth $10,000 for its carbon and 200 to $500 for agriculture or timber, and so it’s a huge opportunity being lost. A World Bank report called “At Loggerheads” put it best. It said, “Farmers are destroying a $10,000 asset to create one worth $200.”
And then on the governance question, our coalition has advocated, in addition to the offset discussed in the report and elsewhere, is some government support from the United States to help these countries enforce their laws against illegal logging and illegal land conversion. We believe that’s an important complement to the offset and one that will both help countries get to the point where they can reduce deforestation nationally and not just you know states or on a project basis.
Well, thank you, everyone, for participating, and please get in touch with us if you have any questions. My e-mail is glenn@adpartners.org and the report and associate resources are available at adpartners.org/agriculture.
Thanks so much to all the participants and to everyone participating on the call.
END