July 2 (Reuters) - The U.N. is due to report on proposed carbon-trading schemes that would make it more rewarding for countries to preserve their forests rather than cut them down. The report on "Reduced Emissions from Deforestation" (RED) will be presented at a climate change meeting in Bali, Indonesia, in Dec. 2007.

Here are some key facts on RED:

WHY IS IT NEEDED?

-- Deforestation, especially in the tropics, contributes about 20 percent of man-made global carbon emissions, some two billion tonnes of carbon per year. Trees are 50 percent carbon and release carbon dioxide (CO2) when they rot or burn. Forests soak up vast amounts of CO2 and clearing the land erodes soils that are also carbon stores.

-- Forests contribute more to the global emissions tally than the entire transport sector (14 percent) but they are not included under the existing emissions reduction framework, the Kyoto Protocol, which focuses on industrial and transport-related emissions.

-- The influential Stern climate change report suggested preventing emissions from deforestation would be cheaper than some other methods of emission reductions. It also predicted emissions from deforestation could reach 40 billion tonnes of CO2 between 2008-2012 if not stopped.

WHO BACKS THE IDEA?

-- Ex-World Bank chief economist Sir Nicholas Stern. He suggests avoided deforestation measures be included in the post-2012 commitment period under Kyoto. He urged pilot schemes to begin as soon as possible in his Stern Review on Climate Change published in Oct. 2006.

-- The World Bank is positioning itself as the lead agency on avoided deforestation. It has proposed a Forest Carbon Partnership Facility to be part of its new NGO and private sector led mega-fund, the Global Forest Alliance, scheduled to start operations in early 2008.

HOW WOULD IT WORK?

-- Various schemes propose compensating government, the private sector and forest owners for protecting forests, and giving economic investments to counter economic drivers of deforestation, such as palm oil expansion, industrial tree plantations and conversion to agriculture.

-- RED schemes would be run via national carbon accounting and verification, rather than being project-based. Remote sensing technology and "ground truthing" checks would verify reductions and monitor their "additionality" (a net reduction) and "leakage" (man-made damage to forest carbon stores).

WHAT DO CRITICS SAY?

-- Schemes are vague about who would be compensated. They could create incentives for governments and business to displace millions of forest peoples to capture carbon funds, further disenfranchising communities by increasing state control of forests at the expense of collective customary land rights.

-- Global carbon trading is contradictory and ethically problematic. Its premise, that companies which invest in carbon trading schemes buy the rights to continue polluting elsewhere, can create serious costs to the environment, and indigenous people's well being.

HOW MUCH MONEY COULD BE INVOLVED?

-- Payments could range from $200 to $10,000 per hectare of forest, the World Bank says. It estimates using avoided deforestation to reduce the annual deforestation rate in developing countries by 20 percent would cost between $2 and $20 billion annually -- or $100 billion to halt it altogether.

-- The Stern Review estimated it would initially cost around $5 billion a year to protect forests in the eight countries responsible for 70 percent of emissions from land use. Sources: Reuters, Stern Review (www.hm-treasury.gov.uk/media/8AC/F7/Executive_Summary.pdf), Forest Peoples, Seeing "RED"? (www.forestpeoples.org/documents/ifi_igo/avoided_deforestation_r ed_jun07_eng.pdf) ((Writing by Gill Murdoch, Singapore Editorial Reference Unit, gill.murdoch@reuters.com, Reuters Messaging gill.murdoch.reuters.com@reuters.net; +65 6870 3922))

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