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EXECUTIVE SUMMARY

Over the past ten years, scientific study of greenhouse gas (GHG) emissions and global warming has gradually moved towards the conclusion that human activities are having an inexorable effect on the world's climate system. While there remains a great deal of uncertainty in the details, most analysts believe that future climate shifts will have damaging environmental, social and economic impacts on a global scale. Posited effects include the rising of sea levels, dramatic changes in weather patterns, accentuation of tropical disease patterns and a wide variety of accelerated biodiversity losses. However, assessments of who would suffer what kind, and what levels, of damage remain conjectural, leaving policy with little definitive gui dance.

These uncertainties are further compounded by a conundrum of relative responsibility. Developing country governments point, rightly, to the historic responsibilities of the OECD nations for dumping greenhouse gases in the atmosphere since the industrial revolution. Industrial countries counter with compelling evidence of an inexorable rise of emissions forthcoming from the developing world - a rise that will eventually dwarf industrial emissions if left unchecked. As carbon emissions have traditionally been a fairly good benchmark of economic development, few countries are willing to take unilateral restrictive actions that could hamper the ir future economic competitiveness.

A proposed policy solution, that might bridge the impasse, is emissions trading. In emissions trading, companies or countries with emissions liabilities would be free to seek out the most cost-effective means to reduce emissions. Groups likely to come under such liabilities are likely to be found in OECD nations. Under the widest proposed form of emissions trading, these parties could potentially leave their own country or industry in order to do so. Because GHG emissions mix uniformly in the atmosphere, it is argued that this would be economically efficient and environmentally appropriate. Investments in projects that prove they reduce emissions could earn "credits" that offset other liabilities by lowering net emissions. Whether it is appropriate for developed countries to simply "buy" their way out of the need to immediately reduce emissions at home remains a major bone of contention. However, under the recent Kyoto protocol, steps towards official policy validation of these types of transactions have moved forward dra matically.

In participating in these transactions, developing countries could use their inherent ability to reduce emissions to finance a host of initiatives in pursuit of sustainability. These types of transactions, albeit on a small pilot scale, have already assisted in the implementation of energy efficiency, renewable energy, sustainable forestry (including varieties of reforestation, biodiversity-driven forest conservation and low impact logging techniques) and other innovative projects in more than a dozen countries around the world. This review describes the growing pains of this nascent business, the initiatives that have formed to support it, and the pilot projects that have been proposed and implemented, in order to demonstrate the emissions transactio n paradigm.

In no sector is the concept more controversial than in forestry, where debates range from technical issues of whether increased carbon absorption can be measured accurately, to whether land-use projects are an eco-colonialist plot of industrial nations to gain control of rainforest resources. This paper examines the various forestry projects that have emerged in these early years, to evaluate whether early returns lead us to conclude that emissions transactions are likely to be a boon, or a bane, in the sought-after transition to sustainable forestry in the tropics. We conclude that despite potential for abuses, the overall benefits from these types of investment transfers are worth pursuing, provided that policies and institutions emerge sufficient to foster the effectiveness and equity of these transactions.

• climate change, global warming
• sustainability, environment
• wood, lumber, timber