As two former McKinsey executives face accusations of insider trading in the US, the report raises further questions about the consultancy giant, examining the damaging influence of McKinsey’s advice on rainforest nations’ forest protection plans. McKinsey is the market leader in advising national governments on Reducing Emissions from Deforestation and Degradation (REDD+) programmes, yet its advice has played a key role in distorting this process to a point where donor money could be used to subsidise the expansion of the logging industry.
“Greenpeace’s report shows the destructive and perverse effects that the McKinsey approach will have when applied to REDD+. Taxpayers in donor nations like the UK have paid McKinsey to advise on cost efficient ways to protect rainforests, and the result is plans calling for subsidies for expansion of the logging industry. That’s not my idea of good value for money.“ said Sarah Shoraka, Greenpeace Forest Campaigner.
As an example Guyana’s plan, written with input from McKinsey, allows logging to increase to 20 times its current rate[1] and the Democratic Republic of Congo (DRC) plan proposes at least an additional 10 million hectares given as logging concessions.[2]
Indonesia’s plan accepts that due to already extensive forest loss in Java and Sumatra ’deforestation will shift to other, still largely forested islands such as parts of Kalimantan and especially Papua’. Papua, Kalimantan, Sumatra, and Sulawesi have been identified by US AID as the geographic terrestrial areas with the highest levels of biodiversity and remaining forest cover, and Kalimantan is home to the endangered Bornean orang utan[3].
The basis for Greenpeace’s report comes from a new study done by University College London’s prestigious Energy Institute. The study shows the inherent flaws of the Marginal carbon Abatement Cost (MAC) curve, used across the world to rank the cost effectiveness of carbon abatement measures including measures to reduce emissions from deforestation and forest degradation (REDD+).
The Greenpeace report also shows how McKinsey’s approach offers an incentive to governments to artificially increase predicted deforestation rates so that later ’reductions’ can secure more compensation. Such inflated projections will ultimately come at the expense of taxpayers from donor countries and the environment.
McKinsey’s cost curve overestimates the benefits of the logging industry and underplays or entirely ignores the costs of biodiversity loss and social upheaval. In some cases reports on which McKinsey advised make recommendations based on wholly inadequate data. In the DRC study, for example, a table is given showing confidence in individual emissions factors.
The table reveals that illegal logging and fuel wood
factors have been reached despite there being ’no exact data available’.
It is unclear what assumptions have been made or analysis done in the
absence of this data[4].
Rainforest nations are currently working to develop proposals for REDD
schemes with $3.5 billion[5] of funding agreed at Copenhagen. McKinsey
received $300,000 for its work in the DRC paid for by a Multi-Donor
Trust Fund overseen by the World Bank and funded by the UK, France,
Belgium, Germany, Luxembourg and the EU[6]. Norway directly funded
McKinsey’s work in Indonesia.[7]
If properly administered, the fund should radically reduce emissions
from deforestation, which currently account for up to a fifth of global
greenhouse gas emissions.
ENDS
For more information and interviews contact:
Graham Thompson, Greenpeace Press Officer, +44 207 865 8126 / 07505 178
489
Sarah Shoraka, Greenpeace Forest Campaigner, + 44 207 865 8216
Pictures available from Greenpeace Picture Desk -pix@uk.greenpeace.org
The Bad Influence report can be downloaded here:
The
UCL Energy Institute report can be downloaded here:
http://www.greenpeace.org.uk/sites/files/gpuk/MACCsACallForCaution.pdf
To speak to the lead author of the report Prof Paul Ekins, Director of Research, call the UCL Energy Institute on +44 207 865 8216.
Greenpeace’s McKinsey-inspired infographics are available print-ready, or as Adobe Illustrator toolkits for you to dismantle, adapt and use as your own graphics, in part or in full.
McKinsey and Redd (37.3MB zip file - PDF and EPS)
McKinsey cost curve (59.4 MB zip file - PDF and EPS)
Notes for Editors
Reducing Emissions from Deforestation and Degradation programmes - or
REDD - are global schemes intended to provide tropical forest nations
with financial incentives not to destroy or degrade their forests. The
concept of REDD has in some forums been subsequently expanded to also
allow for financial support for restoration, reforestation and
afforestation activities (i.e. REDD+).
The 1st meeting of international negotiators after the REDD + framework
agreement at Cancun is currently taking place at the UN intersessional
meeting, 3-8 April, negotiating the implementation of safeguards to
protect biodiversity and uphold indigenous peoples’ rights.
Bad Influence shows that MK-inspired plans may be in violation of these
safeguards. It remains to be seen how fit for purpose this advice has
been or indeed how rainforest nations will reconcile McKinsey’s inspired
plans with public and donor expectations.
http://unfccc.int/meetings/items/2654.php
[1]
Projected rate (4.3% deforestation per year):
http://www.lcds.gov.gy/images/stories/Documents/Low%20Carbon%20Development%20Strategy%20-%20May%202010.pdf
Estimated current deforestation rate (0.1-0.3%):
[2]
http://unfccc.int/files/methods_science/redd/country_specific_information/application/pdf/eng_final_report_exploring_redd_potential_071209.pdf
[3]
http://indonesia.usaid.gov/documents/document/Document/402/FAA_118119__FINAL
[4]
http://unfccc.int/files/methods_science/redd/country_specific_information/application/pdf/eng_final_report_exploring_redd_potential_071209.pdf
[5]
http://www.economist.com/node/15129518
[6]
Republique Democratique du Congo: Fonds Commun Multibailleurs pour le
Renforcement de la Gouvernance Forestière (2010) Rapport Final, August,
pp.1, 9, 11, 14.
[7]
Mogstad, Per (2010) Email to Greenpeace from Norwegian Ministry of
Foreign Affairs in response to freedom of information request, 26
November, 2010.
