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The American Clean Energy and Security Act of 2009 (ACESA) provides three major sources of funding for reducing emissions from deforestation and degradation. Over the life of the statute the package might lead to the expenditure of between a quarter and a half-trillion dollars to avoided deforestation efforts throughout the developing world, principally the tropics.

The first element, called the Supplemental Pollution Reduction Program, would be the most reliable and certain component of REDD. Its objective is to achieve emissions reductions of at least 720 million tons of CO₂ equivalent by 2020, and cumulative reductions of at least six billion tons by 2025, through the sale of allowances and the investment of the proceeds in international avoided deforestation and degradation. The EPA would allocate a portion of each year's allowances to support the program -- five percent every year from 2012 to 2025, three percent from 2026 to 2030, and two percent in from 2031 to 2050. When sold these allowances would create a fund of $49 billion to $137 billion over the life of the program, assuming the cost of one allowance to be $10-28.

A number of requirements must be met that EPA, with the help of US AID and the State Department, would develop, e. g., qualifying countries will need to enter into a bilateral or multilateral agreement with the US establishing the conditions of participation in the program. It's important to note that not only the eligible country, but also private or public groups or an international fund may receive the allowances. A wide range of activities are covered, but the House pointedly removed support for afforestation and reforestation from the draft bill.

The second source of support for avoided deforestation abroad is built into ACESA's provision for two billion in CO₂e credits for emissions that are offset by acceptable GHG reduction measures. Half of these offsets must come from international activities in developing countries, including avoided deforestation projects. Again, the host nation and the US must be parties to a bilateral or multilateral agreement, and a long list of requirements for credits apply. EPA will be in charge of the program, whereas the Department of Agriculture will administer domestic avoided deforestation offsets. EPA must ensure that the offsets are enforceable and that World Bank-style safeguard policies are in place. It must also encourage profit-sharing with local communities and indigenous peoples. EPA has the discretion to approve offsets for soil carbon losses prevented in forested wetlands or peat lands.

A third, potentially enormous source of international avoided deforestation measures might arise out of the expenditure of proceeds from the auction of allowances that Waxman-Markey directs to be skimmed off the annual allowance budgets and held back and sold if the allowances markets begin to overheat and drive prices out of reach of some covered sources. The "strategic reserve" will hold a total of 2.7 billion allowances. If auctions are necessary, any proceeds can only be used to purchase international offsets from reduced deforestation activities. These offsets would be converted back into emissions allowances and placed in the strategic reserve account (at a 5:4 conversion ratio after 2017, as with other international offsets) to “refill” the reserve to its original size, but once it is replenished any additional allowances from international offsets would be allocated and auctioned as part of the normal allowance auction in a future year. For each of the first five years EPA may auction up to five percent of the emissions allowances established for each year. Beginning in 2017, ten percent of the allowances for a year may be auctioned. For example, since the cap for 2020 is 5,056 allowances, EPA could potentially auction as many as 5.1 million allowances from the strategic reserve. At an auction price of $28 (the floor), EPA would have $142 billion to purchase international offsets from reduced deforestation activities.

International concerns over world food prices and shortages has recently triggered a major fuel-or-fuel debate. A UN official said recently that massive production of biofuels is “a crime against humanity” because of its impact on global food prices. In its April 7 cover story, Time Magazine, blasted the impact increased biofuels consumption may have on climate.  While US Department of Agriculture economists point to a large array of factors contributing to the current constriction in basic food commodities like corn, wheat, and rice, citing regional drought, larger population demand, and increased cost of production because of rising fossil fuel costs, the attention biofuels has attracted means a rough passage for biofuels and may portend badly for their future use.

The Time Magazine article indicts biofuels for “dramatically accelerating global warming” because of clearing of tropical rain forests for cropland for sugarcane, soybeans, or other fuel crops. The article says the US’s increased production of corn for ethanol has caused farmers to plant fewer acres of soybeans. This, in turn, has caused the world-wide commodity price of soybeans to increase, “spurring a dramatic expansion of Brazilian agriculture, which is invading the Amazon at an increasingly alarming rate.” According to Time, deforestation accounts for 20 percent of all current carbon emissions. A Rhode Island-sized area of Brazil was deforested in 2007 alone.

What is most interesting is the intensity of the reaction of UN entities. Concern for food supply has led to what some feel is an overreaction to the role biofuels production may play, as compared to drought, cultivation and transportation costs, and demand. The UN’s Special Rapporteur for the Right to Food Jean Ziegler has warned that the world is headed “towards a very long period of riots” and conflict stemming from food shortages and price increases. He went on to say that in recent months, rising food costs have sparked violent protests in Cameroon, Egypt, Ethiopia, Haiti, Indonesia, the Ivory Coast, Madagascar, and Mauritania.  In Pakistan and Thailand, army troops were deployed to prevent seizure of food from fields and warehouses, while price increases led to a general strike in Burkina Faso. Ziegler called on the International Monetary Fund to change its policies on agricultural subsidies and to stop supporting programs aimed exclusively at debt reduction. He went on to say that “international market speculation on food commodities must cease.”

While Mr. Ziegler’s views may represent an extreme in the current food debate, both he and Time Magazine raise (and at the very least exemplify) issues about biofuels development that must be addressed in the coming months if the promising role biofuels may play in addressing climate, security, and oil dependence is to be realized.

The first is question of whether US biofuels production is causing world food prices to rise dramatically. World Bank President Robert Zoellick seems to thinks so. At a news conference on April 11, he said that demand for ethanol and other biofuels is a "significant contributor" to soaring food prices around the world. The World Bank has projected that food prices will stay high or go even higher over the next couple of years, with biofuels a major factor in keeping them high. "Biofuels are no doubt a significant contributor," Zoellick says. "It is clearly the case that programs in Europe and the United States that have increased biofuels production have contributed to the added demand for food." 

The second question that has been raised is whether the impact of biofuels on the environment may outweigh their benefits. In addition to Time’s concern about global warming, just last week the U.S. Environmental Protection Agency (EPA) felt compelled to address these impacts after a period of relatively benign acceptance of biofuels’ potential environmental impacts. Among the issues are the increased impacts of nitrogen compounds on the environment stemming from use of nitrogen-based fertilizers and higher nitrogen emissions compared to conventional gasoline. According to Inside EPA, “adding to the concern is the expanded renewable fuels standard (RFS) that Congress included in the recently enacted energy law, which boosts the prior RFS of 15 billion gallons by 2012 to 36 billion gallons by 2022.”

We will address the food-or-fuel issue in future blogs, including the promise of fuel from cellulosic ethanol production, favored by the President and leading environmental organizations alike. Cellulosic ethanol feedstocks, such as pine slashings and  switchgrass (the fast-growing plant made famous in the President’s State of the Union two years ago), do not directly compete in food markets. The promise of cellulosic ethanol remains bright, as organizations such as 25X25 have recently begun to reemphasize.