Green Banks: Paying Countries to Keep their Trees

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At first, skeptics also fretted that countries with high rates of deforestation — Indonesia, the Congo, Nigeria — tend to rank high for corruption, making them less-than-reliable partners. "The environmental community developed a distaste for forest offsets, for a lot of valid reasons," says Bill Stanley, director of TNC's Global Climate Change Initiative.

More than a decade after Kyoto was signed, however, that opposition has eased. (The holdouts, like Greenpeace, tend to be skeptical of market-based solutions to climate change in general, not just REDD.) That's partly thanks to a better understanding that "if deforestation is 20% of the problem, it should be 20% of the solution," according to Benoit Bosquet, team leader of the World Bank's Forest Carbon Partnership Facility, which helps developing countries prepare for REDD projects. Tree-spotting has improved; Japan's alos satellite uses cloud-penetrating radar to detect deforestation even in the rainy Amazon, making projects cheaper to police.

Most importantly, the tropical nations that stand to benefit most from avoided deforestation began to make their voices heard in international climate talks, thanks to innovative leaders like Papua New Guinea's Kevin Conrad, one of TIME's Heroes of the Environment. That has prompted big rain-forest nations like Indonesia and Brazil, which were initially suspicious of exposing their sovereign forests to an international carbon market, to rethink REDD. Last month, representatives from a handful of Indonesian and Brazilian states signed a memorandum of understanding with several large U.S. states — including California, which has already adopted a carbon cap of its own — to explore avoided deforestation projects. The possibility of tapping into California's rich carbon markets has tropical nations salivating. "Until now, no one has said to [rain-forest nations] 'We'll give you a market for your credits,' " says Dorjee Sun, CEO of the avoided-deforestation group Carbon Conservation, which helped broker the deal. "This is the next step."

Advocates have been busy refining avoided deforestation to answer early criticisms. Because firms investing in carbon credits need to estimate how much deforestation would have happened without a scheme, REDD projects can only work in countries with high rates of deforestation. That alleviates concerns that money will be spent to protect forests under no threat. To address fears that protected forests might be lost through a fire or logging, brokers build in reserves — selling, for example, only 80% of the carbon actually contained within a forest, and tapping the remainder if some part of the protected area should be lost. To prevent leakage — the possibility that protecting one place will only move deforestation down the road — TNC in Bolivia measured the baseline rate of deforestation in the country to know just how much difference their efforts would make, and monitors the edges of Noel Kempff for forest loss. Third-party verifiers like the Climate, Community and Biodiversity Alliance and the Voluntary Carbon Standard help assure companies that their credits are worth the carbon and that local forest communities are helped and not harmed by the potential flood of REDD financing.

It may be that avoided deforestation's biggest obstacle will be its own success. If REDD is enshrined in the next global climate-change deal, set to be negotiated by the end of 2009, there is likely to be a sudden spike in demand for avoided deforestation projects, as developed countries angle to meet new carbon caps and tropical nations start to turn their forests into cash. But doing a REDD project right isn't easy, points out Zoe Kant, TNC's carbon markets manager and the brains behind the Noel Kempff project: experts are few, locales are remote and most countries lack the technical capacity to run schemes on their own. Some places will be tempted to take shortcuts. "We have to make sure our standards are credible, and we're not just delivering money that ends up in the bank accounts of central governments," says nrdc's Schmidt. "We need to change behavior on the ground, not just tomorrow but for the long term."

For those who care about forests and the climate, the promise of REDD is undeniable. The truth is that weaning the world off fossil fuels will be a monumentally difficult and expensive process, one that will demand technological innovations we haven't yet thought of. But halting deforestation, while not cheap — Britain's Stern Review in 2006 pegged the price at $5 to $15 billion a year — is doable now, provided we have the political will. If you want to know why, visit Noel Kempff. Its biological value was incalculable, but to the people who lived in the forest, its only financial value lay in dead logs. REDD changes that — and with 29% of the carbon revenue from the project promised to local communities, it can change their lives too. "We finally have a way to pay countries for protecting forests," says TNC's Marsh. That's good news for all.