Brazil’s Rainforest Success May Curb CO2 Market: Chart of Day

 Brazil’s success slowing the rate of deforestation in the Amazon may help keep the world’s forests out of a global carbon market, law firm Norton Rose LLP said.

The CHART OF THE DAY shows Brazil lost the smallest area of forest since at least 1988 in the year ended July 31, according to data released by the National Institute for Space Research last week. The government has reduced clearance using fines and tying farmers’ access to credit to environmental standards. President Luiz Inacio Lula da Silva said the decline has been “extraordinary.”

The Brazilian approach may reinforce the view that direct government action will be more successful than including forests in a global carbon market, where credits are awarded for protecting trees, Andrew Hedges, a partner at London-based Norton Rose, said in an e-mail.

The world’s nations meet in Copenhagen next month to negotiate a climate-protection treaty to replace the Kyoto Protocol. Governments have yet to agree on the role forests should play in the accord.

A United Nations program called Reducing Emissions from Deforestation and Forest Degradation in Developing Countries, or REDD, is aimed at using carbon-market incentives. The removal of trees, which absorb carbon dioxide, may account for as much as 20 percent of manmade greenhouse-gas output, according to 2007 estimates by the Intergovernmental Panel on Climate Change.

A well designed REDD mechanism “could generate scaled up finance across a number of countries,” Hedges said. “It would be unfortunate” if Brazil’s successful approach meant that the use of carbon markets was limited as a way to reduce deforestation, he said.

A market mechanism and national government intervention are both needed to ensure forests are protected, Thais Juvenal, director of the Brazilian Forestry Service said by e- mail yesterday. A market approach would allow “governments and local societies to strengthen the policies that increase the forest value,” he said.