Shades of REDD+
Two clashing visions for Article 6

14 February 2024 | COP28 failed to produce further guidance on how carbon markets governed by Article 6 (A6) of the Paris Agreement should work. Disagreements were many and concerned larger issues as well as more minute details of the Article 6 rulebook. In an overall charged atmosphere and an unusual -even-for-UNFCCC-negotiations breakdown of trust, the prospect of reaching an agreement on carbon markets became more and more elusive.

What became clear, even though it was never articulated as such, was that negotiating parties are driven by widely disparate visions of the role that the mechanisms formulated under Article 6.2 or 6.4 (A6.2 and A6.4) can play in achieving the goals of the Paris Agreement. On one side are those that see those mechanisms as opening the door to excessive offsetting with all the risks and pitfalls that come with that concept, and on the other side those that see them as opening a door to bolder and more transformative climate finance investments.

More specifically, one group of countries, often led by the European Union, is worried that carbon trading under A6 could undermine the Paris Agreement by creating mitigation outcomes that fail to represent real and additional emission reductions and removals (ERRs). Influenced by the recent debate around the quality of offset credits in the voluntary carbon market, those worried about A6 integrity want to see broad exclusions of project classes and strong top-down controls of projects and resulting mitigation outcomes. This “control position” resonates with suspicions that Parties left on their own will not be able to produce high-quality ERRs and generally casts doubt on the abilities, intentions, or designs of countries participating in A6. According to this view, A6 needs strong centralized steering to avoid subpar credits. However, strong centralized rules also limit the overall role of A6 – which defenders of the control position may not be overly worried about as, in their view, a small A6 reduces the risk that carbon transactions would undermine domestic mitigation policies. What remains is a vision for both A6.4 and A6.2 that is not much different from the design and role of the Clean Development Mechanism (CDM) under the Kyoto Protocol: a mechanism to finance a limited set of smaller projects, but this time with a lot more suffocating bureaucracy.

On the other side, there are countries, most notably the United States, that feel little inclination to elaborate on a second iteration of the CDM but consider A 6 – A6.2 in particular – to be an opportunity to mobilize large-scale private sector finance for transitional investments into larger mitigation programs. An example of this vision is the Energy Transition Accelerator that seeks to forge international partnerships to leverage carbon finance for coal transition projects. Countries taking this “light touch position” measure the success of A6 in the mechanisms’ ability to mobilize flexible finance with maximum mitigation impact responding to specific

Parties’ needs. They emphasize that A6.2 enables Parties to define crediting rule that support their own transformational carbon crediting initiatives. The light touch position argues that moving beyond narrowly defined concepts of project additionality and ERRs accounting is justified if the attempts and investments are just bold enough. Rather than putting the problem of offsetting and carbon accounting into the center of A6, those that promote a light touch approach to A6.2 stress the sovereign and partnership aspects of A6 that see the mechanism as essential tool to channel finance into broader mitigation efforts in the Global South and reject strict top-down UN ruling on the design of such programs.

While the light touch position can live fairly well in the absence of an agreement, the control position needs agreement to further narrow the space for A6 implementation. Existing rules already provide a framework for cooperative approaches under A6.2 and what is missing can largely be defined by participating countries. However, since regulation needs consensus, countries that want to steer implementation top-down need agreement. The result is that activities under A6.2 can move ahead for now, and it is A6.4 that is suffering most harm – and developing countries with fewer capacities who put their hopes on this mechanism.

Regaining trust will not be easy, but it is essential to reach a compromise on A6. A first step to building trust will be countries with differing positions understanding and evaluating the driving visions. Negotiators may need to take a step back and discuss what different countries expect from A6.2 and A.6.4 respectively. That is: how different Parties expect these mechanisms to contribute to the goals of the Paris Agreement, and how they wish to use these mechanisms to achieve their NDCs. In doing so, Parties can think more boldly about their goals and priorities.

It may also be time to reconsider accounting concerns in the context of the Paris Agreement. Transparency and strong inventories are the pillars of integrity of the Paris Agreement. As long as bolder A6 approaches are embedded in robust accounting, their transformational mitigation potential outweighs trade-offs imposed by the absence of centrally supervising each mitigation outcome.

Times have changed, the climate crisis is upon us, and it may be time to put accounting into the service of bold climate action. It may also be time to understand A6 in the context of the bottom-up architecture of the Paris Agreement. That architecture puts its fate into the ability and willingness of countries to contribute what they can to addressing the climate crisis. Honestly, it is all what we have, and positive encouragement is the only way that countries will act. The glue and spirit of this approach is trust – trust in the Parties of the Paris Agreement.

EM Strategic Supporter Feature
Navigating the Carbon Credit Landscape

In the face of an escalating climate crisis, sustainability managers are grappling with a myriad of challenges. From concerns about greenwashing to the intricacies of the carbon credit market, the path to a sustainable future is filled with uncertainties. The events of 2023 have underscored the urgency for immediate action, with both public and private sectors aligning their efforts with the Paris Agreement’s objectives. However, the voluntary carbon market (VCM) remains a complex and daunting terrain due to the lack of clear sourcing and standardized guidance.

3Degrees’ Carbon Action Playbook emerges as a beacon of clarity in this landscape. It offers practical, actionable steps for companies eager to incorporate carbon credits into their decarbonization strategies. Drawing insights from various third-party NGO action frameworks and market guidance, this playbook provides a well-defined roadmap for navigating the VCM. Download the guide to help in your sustainability journey.

The Carbon Action Playbook will help organizations:

  1. Understand the role of carbon credits in a climate strategy – Learn how to shape a comprehensive climate strategy for your organization, including the credible use of carbon credits in achieving global sustainability goals.
  2. Decide which carbon credits to purchase – Discover effective carbon procurement strategies, understand the balance between carbon removals and emissions reductions, navigate carbon credit standards, and implement robust due diligence to make informed procurement decisions.
  3. Make credible carbon claims – Understand the importance of establishing credible carbon credit claims by prioritizing accuracy and transparency, while adopting a strategic communication approach that emphasizes contributions to global climate change mitigation efforts.

 Your sustainability journey starts here.

Download the Carbon Action Playbook: https://bit.ly/41w247t

Opinion
It’s time to stand up and take action – protecting forests is too important to wait

This coming year is the 25th anniversary of my returning to the ground. And having watched our leaders at the latest round of UN climate talks, I feel this tugging on my heart that it’s important for me to speak out publicly again – after more than a decade away from the spotlight. The story that I’ve been blessed to be part of seems to have a life of its own. It is repeated again and again on social media because people care passionately about forests and feel overwhelmed by their destruction. It seems that my story also offers a sense of hope and belief that positive change can happen.

We need this change desperately. Since 1990, the world has lost about 420 million hectares of forest – an area roughly half the size of the US. By 2030, only 10% of the world’s rainforests may remain. This hurts my head and my heart. My heart because I remember feeling such deep devastation when I saw my first ‘clear cut’ – with the trees slashed and burned away. My head because it makes no sense; our species needs forests to survive. The livelihoods of 1.6 billion people depend on them, almost 80% of life on land lives in them, and protecting and restoring them would deliver a third of what’s needed to help meet global climate targets. So, if we can’t come up with a solution to deforestation right now – we are basically saying that future generations do not deserve the right to a healthy planet.

The good news is we have solutions, we just need to turn talking into action.

Even in Luna more than 20 years ago, I was talking about the potential of carbon credits to fund forest protection if done right. The idea, later backed by the UN, is that companies voluntarily purchase credits that represent emissions avoided by forest conservation projects. Today projects like this (known as REDD+ projects) protect over 3 million hectares of forest and reduce emissions by more than 63 million tons a year.

Seems like a win. But instead of celebrating, or at the very least allowing these projects to continue, extreme people drag the world back to just talking and attack the REDD+ system for giving corporations a ‘license to pollute’.

Corporations already have that license to pollute from governments, otherwise they wouldn’t be doing it. If people just want to point fingers and say that there should be no polluters period and anything else is a sellout proposition, then those people should be in the halls of governments lobbying to end pollution.  The sad truth is that for the foreseeable future, corporations are going to be polluting. So while that’s the case, let’s use the money to do something good – not only good but vital – for the future of our planet.

Corporations have even been attacked specifically for investing in REDD+ projects. It is said, no good deed goes unpunished. After all, people said terrible things about me when I began living in Luna, and I always thought – I’m here because I’m showing up for what I care about. What are you doing, besides attacking me?

So to those who have been criticized, I deeply hope you keep standing up for REDD+ projects. You’re doing great work that’s innovative and making a real quantifiable difference in the world. It might not always be perfect because nothing that’s innovative ever will be. But REDD+ projects mean less carbon in the atmosphere, trees stand, wildlife thrive, and some of the world’s most disenfranchised communities are on a pathway to a better life.

And to the “haters”,  if your only contribution to making the world a better place is attacking others, then you’re part of the problem. Some of you are behaving like nothing more than bullies on the playground. As for the rest of us, we can either let the bullies win, or we have to stand up and take action – protecting forests is too important to wait.

REDD can be high quality: Here’s how

The world needs to drastically reduce global emissions. However, decarbonization will take time. One way to progress faster towards a net zero future is for companies to offset hard-to-abate, residual emissions with emission reductions or removals created elsewhere. Forests store carbon and provide multiple biodiversity, hydrological, social, cultural and livelihood benefits. Fossil fuels also store carbon while they remain buried, but keeping them in the ground does not have the same inherent co-benefits as storing carbon in a forest. A question that has been fought over for almost 30 years is whether emission reductions from protecting forests (reducing emissions from deforestation and forest degradation, or REDD) are a credible option to offset emissions from fossil fuels or industrial emissions.

There has been a recent bombardment of reports that credits from protecting forests should be considered worthless (e.g. 1, 2) and that using carbon markets to protect forests harms local populations (e.g. 1, 2). Most recent critiques are leveled at Verra’s Verified Carbon Standard (VCS) Program as the dominant carbon standard in the market, but jurisdictional programs such as ART TREES are also criticized for issuing hot air and disregarding the rights of  Indigenous Peoples and Local Communities (IPLCs).

These problems have arisen in the context of a voluntary carbon market that does not (yet) have adequate infrastructure or governance to meet the needs of a rapidly growing and evolving market. Cracks in the system can grow over time and, when not repaired, lead to problems with integrity and media scandals. The recent criticisms of REDD are like an earthquake that hit a town with weak building codes and insufficient oversight. Some buildings that were constructed properly will be fine, but others that cut corners have been cracked and damaged and will likely collapse or require significant repairs. Just as it would be ludicrous to conclude we should abandon buildings or building codes after an earthquake, it is wrong to conclude from the current media critiques that carbon markets and forest protection are automatically incompatible.

Some of the criticisms of REDD projects and jurisdictional programs and methodologies are debated (e.g. 1 and 2), but the critiques are based on genuine issues that need to be confronted. Problems with the greenhouse gas integrity of REDD credits and the negative social impacts that can occur are unacceptable and need to be addressed. For example, where REDD projects have overstated deforestation risks in their baselines and consequently enormously inflated the claimed emission reductions, such credits are, undeniably, unacceptable as a means to offset emissions.

But it is also wrong to conclude that because of these problems the world should walk away from using carbon markets to finance forest protection. Stopping deforestation by 2030 is estimated to cost $130 billion per year, and multiple policy, financial, and market incentives are needed to halt deforestation. Current funding already falls short, and carbon markets can be one part of the solution to protect forests and mitigate climate change – if the forest protection initiatives can demonstrate environmental and social integrity.

Is it possible to have high-quality, high-integrity REDD credits? Ones that measurably reduce greenhouse gas emissions AND protect critical biodiversity and ecosystems AND strengthen rights and benefits for IPLCs who live in and near forests?

The problems with REDD methodologies were known well before the recent barrage. Verra has been working since 2020 to revise and improve its REDD methodologies.  Verra should have acted faster, but this three-year process has reached an important milestone with a new REDD Methodology that will (eventually) replace all the existing REDD+ methodologies that have come under fire. Some of the authors of this blog have been part of the team working with Verra to produce the new methodology. We believe the new methodology – if implemented well and accompanied by robust validation and verification procedures and strengthened governance to increase transparency of the market and reduce conflicts of interest among its actors – can provide a solid basis to accurately quantify and account for emission reductions from REDD projects.

The most high-profile technical issue for avoided deforestation offsets is that the baselines are often inflated, as illustrated by scientists and ratings agencies. Baselines tell us what to compare forest protection achievements against – in this case, the deforestation that would have occurred without the protection activities. Baselines present a challenge because the moment a project is implemented it becomes impossible to see and measure exactly what would have happened if the project didn’t exist. Inflation in existing REDD project baselines is largely driven by projects choosing inappropriate reference areas to justify what would happen in the absence of the project, and by aggressively modeling rapidly rising rates of deforestation.

Picking a reference region and modeling its future is not necessarily a poor method to estimate a baseline – but it is prone to abuse and creates an inherent conflict of interest, as project developers that inflate their baseline will generate more credits.

The new REDD methodology fixes this by removing project developers from setting the baseline. Under the REDD Methodology Verra will use third-party service providers to determine historical rates of deforestation for whole countries (or very large subnational jurisdictions), then model where in the jurisdiction that deforestation is most likely to occur based on well-documented and defensible indicators of risk. From this model, Verra will present a baseline to each project using this new technical approach. This approach should protect the atmosphere and integrity of emission reductions in the following ways:

  • Rates of deforestation are based on historical averages. In a world in which rates are often rising, a historical average will often underestimate the area of deforestation each year.
  • Verra will use advanced satellite observations and peer-reviewed open-source science-based data to quantify historical rates of deforestation.
  • Projects represent a subset of the total forest area in any given country. Under the new approach, projects are allocated a portion of expected national deforestation. As a result, the sum of all project baselines can never exceed the national total.
  • With Verra taking responsibility for setting the baselines, the risk is substantially lowered that baselines will be manipulated to benefit project developers.

To strengthen IPLC safeguards, Verra released updates to its Verified Carbon Standard Program on 29th August 2023 which includes enhanced environmental and social safeguards. Verra’s changes increase the requirements for free prior and informed consent (FPIC) with stakeholders and strengthen safeguards to promote no-net-harm. While we believe safeguard requirements can still be improved, projects and project developers can also go beyond the standards to implement and support IPLC-led projects and initiatives such as the Peoples Forest Partnership.

It is easy to criticize and there can be no question that accurately accounting for emission reductions by protecting forests, restoring grasslands, or implementing agroforestry practices is complex. But this doesn’t mean we can’t transparently and conservatively estimate nature-based emission reductions.

The changes Verra is making now are like new building codes for REDD. They have the potential to create a higher-integrity REDD credit that can be differentiated from credits generated under the old methodologies. As current projects shift to the new methodology and new projects come online, we expect there will be renewed scope for high-quality REDD projects to enter the market with a new asset. For many projects, there may be fewer credits generated under the new methodology, but we expect the market will recognize the increased integrity and price the new credits accordingly. The new REDD Methodology should be accompanied by ongoing efforts to improve the governance and strengthen the infrastructure of the market, improving estimates of leakage and management of reversal risks, and resolving issues related to overlapping claims – all of which should be subject to continued public and academic scrutiny.  Such steps will ensure REDD remains an important part of the solutions that benefit IPLC stewards, biodiversity, and the climate.

What Lies Ahead for Carbon Markets After COP28?

21 December 2023| When voluntary carbon standards such as Plan Vivo, Gold Standard, and the Chicago Climate Exchange emerged in the late 1990s and early 2000s, they aimed to create transitional mechanisms to test new concepts and support early action until a global regulatory apparatus emerged.

More than 20 years later, that apparatus is still in limbo, and regulation of International Carbon Credits (ICCs) won’t be operational for at least another year – and probably two – after delegates to the UN climate conference in Dubai (COP 28) failed to find agreement on operationalizing Article 6 of the Paris Climate Agreement.

That’s good news for the Voluntary Carbon Market (VCM) because it can continue operating without cumbersome and counterproductive corresponding adjustments.

It’s bad news for the planet because it delays the advent of a global compliance market that could double the climate impact per dollar spent on reducing emissions.

In the week since our last dispatch from COP, we’ve dug into the documents, listened in on webinars, and followed the LinkedIn debates to produce this simple synthesis of the status quo. We’ve chosen not to quote anyone in the piece in an effort to avoid emphasizing views from those who can speak on the record over those who can’t.

More Positive than Initially Reported?

Our reporting from the final day of COP mostly stands, but not all of it.

Countries are moving forward with the piloting of government-to-government transfers, labeled Internationally Transferred Mitigation Outcomes (ITMOs) under 6.2, and they can even execute corresponding adjustments on Emission Reductions and Removals (ERRs) from projects, turning them into ITMOs – although it’s not clear the UNFCCC will recognize those.

What’s changed since our final dispatch is the degree to which market proponents welcome the delayed progress on Article 6.2.

Several pro-market observers concede that another year of negotiations could lead to a clearer and more manageable mechanism without being the cause of delays.

That’s because countries still need time to build their capacities, and there’s s more than enough clarity to move forward under Article 6.2.

The downside: only the most advanced countries are moving forward under Article 6.2, while at least 70 are taking steps to utilize Article 6.4.

To help develop sovereign action on Article 6, Ecosystem Marketplace is working with the US Department of State to develop new carbon credit pricing intelligence tools and support services for developing counties (also known as host countries) through an International Carbon Credits Console.

Article 6: The Component Parts

Under the Paris Agreement, Article 6.2 covers bilateral agreements between countries that have exceeded their Nationally Determined Contribution (NCDs) to the Paris Agreement and those falling short. At the national level, those surplus ERRs don’t need to demonstrate additionality to be transferred as ITMOs; they merely need to represent reductions beyond the selling country’s NDC. At the project level, however, ERRs should meet additionality requirements under a recognized standard.

Article 6.4 covers a centralized credit issuance mechanism for countries that either can’t operate under 6.2 or want the flexibility of using both.  It’s the rebirth of the Kyoto Protocol’s Clean Development Mechanism (CDM), and it’s methodologies must deliver project-level additionality.

Article 6.3 defines ITMOs, which apply to ERRs from both 6.2 and 6.4 when transferred via 6.2.

The Good News

COP 28 opened with a commitment to fund the Loss and Damage Fund, and it closed with an agreement to phase out fossil fuels through a variety of mechanisms – including dramatically ramping up the use of renewable energy, support for energy efficiency, and even carbon removals and Carbon Capture and Storage (CCS).

The Global Stocktake explicitly called for accelerated action on Art 6.

The Bad News

The failure to reach an agreement on Article 6 means there will be no centralized UN-driven mechanism under Article 6.4 for at least another year and probably two.

It also leavies uncertainty around bilateral agreements between countries under 6.2, despite the optimism expressed above, because all of the Article 6 guidance must pass as a package.

That means any delays in guidance for 6.4 will also impact 6.2 – not to mention the UN’s global pact for offsetting airline emissions (CORSIA).

That’s because CORSIA, while it operates outside the Paris Agreement, requires corresponding adjustments. The failure to reach an agreement on the enabling tools for providing transparency and building registries, not to mention the need for corresponding adjustments, could stifle progress on CORSIA.

The Good News About the Bad News

Market proponents are divided over whether the failure to reach an agreement on Article 6 reflects legitimate quality issues or obstructionism by the market opponents – or a combination of the two.

A large minority of proponents said they believe further negotiations can yield a more robust mechanism.

Either way, countries continue piloting activities under Article 6.2, which lets countries like Thailand transfer ITMOs that represent reductions exceeding their NDCs to countries like Switzerland.

Then there’s the VCM, which has emerged more coherent than ever.

Centralized VCM and the Future of Legacy Standards

Those carbon standards that already passed muster under CORSIA[1] announced they’d continue to align around best practices, while the organizations promoting those practices[2] announced they’d work on end-to-end agreement about what works (the standards) and how it’s used (corporate claims).

At the same time, national regulators, such as the US Commodities and Futures Trading Commission (CFTC), and international organizations, such as the International Organization of Securities Commissions (IOSCO), stepped up with rational plans for regulatory certainty of the VCM.

The upshot: we’re getting more clarity on where experts align and where they diverge. This should help to ensure outlier views don’t have an outsized impact on the market.

Article 6: The Problem

The Glasgow Rulebook governs the implementation of Article 6, and it lets countries establish their own rules for implementing Article 6.2 while creating detailed rules for implementing Article 6.4.

In Dubai, talks bogged down over how prescriptive the UN’s rules for 6.2 should be and the role of nature-based solutions under 6.4, among other contentious aspects of what continues to be a highly technical and nuanced climate market.

Article 6, Paragraph 2: Who’s the Boss?

Four issues began bubbling up in technical discussions over the summer and erupted in Dubai:

  1. The degree to which countries can designate which information is considered confidential and which must be disclosed.
  2. The sequencing and timing of reporting obligations before ICCs could be issued.
  3. The degree of consistency among international trading linkages.
  4. The role of registries and the need for linkages among them.

The European Union pushed for more prescriptive language in Dubai, and the United States called foul. Countries then split into two factions – one arguing that the new requirements amount to renegotiating the Glasgow Rulebook and that countries engaged in 6.2 are sophisticated enough to develop their own rules, and the other arguing that lax guidance could lead to abuse and confusion.

There were also provisions in both 6.2 and 6.4 arguing that ITMOs could be canceled after being transferred abroad – provisions some argued would underpin integrity, while others said it would undermine demand.

While the preponderant view is that there’s enough agreement under 6.2 for countries to move ahead, many acknowledged serious risks. Some said corresponding adjustments made now won’t be recognized under the UNFCCC, and others worried that individual trades made now could be canceled later.

Article 6, Paragraph 4: Why Can’t we All Just Agree?

As of December 12, 2023, 67 countries had identified Designated National Authorities for engaging Article 6.4, and the draft agreement asked the Article 6 Supervisory Body (A6 SB) to establish a Designated National Authorities Forum “to facilitate the exchange of information and experience among designated national authorities and the identification of common challenges at the regional and subregional level in operationalizing the mechanism.”

Because Article 6.4 governs a central apparatus, the Article 6 Supervisory Body is charged with developing methodologies that govern transactions, and talks bogged down over two methodological issues: first, whether nature-based solutions (NBS) should be recognized and second, whether Avoidance should be treated as a third category additional to Reductions and Removals.

The European Union became the most prominent opponent of NBS – including both Afforestation/Reforestation/Regeneration (ARR) and Avoided Deforestation and Degradation (ADD) – due to uncertainty over the risk of reversal.

The Philippines became the most prominent proponent of treating Avoidance as a separate category, in part because they see it as a way of encouraging countries like themselves to leapfrog over (avoid) fossil fuels altogether and go straight to renewables. They have argued that such a leap represents a legitimate avoidance that should be treated differently from reducing current fossil fuel use.

Corporate Claims

At COP 27 in Egypt, negotiators agreed to recognize Mitigation Contribution Units (MCUs) for ICCs that don’t require corresponding adjustments, while the leading VCM actors are also aligning around agreement on what claims companies can make.

There appears to be a wide variance in how proponents perceive the new claims guidance. Some argue that if claims are too vague, companies won’t see the value in engaging the market, while others argue that current claims of carbon neutrality are overstated. This issue is not going away any time soon.

Previous Coverage

Piloting to Continue Under Article 6 Despite COP28 Failure

COP28 Update: Progress Towards Agreement on Avoidance Under Article 6.4, but Backsliding in 6.2

African Countries Mobilize for Carbon Markets Despite Article 6 Deadlock

Analysis: Article 6.4 Talks Have Stalled in Dubai. Here’s What’s At Stake

What to Watch for Voluntary Carbon and Article 6 at COP 28

Bionic Planet Podcast

Related Links

This LinkedIn post by Jos Cozijnsen of the Climate Neutral group offers a short and sweet summary of the differences between Articles 6.2 and 6.4, as well as a brief analysis of issues with 6.2 as it currently stands.

This Webinar hosted by Patch took place a few days after COP. It offers a deep dive into the prognosis of the VCM in 2024 and features Alexia Kelly of the High Tide Foundation, Stephen Donofrio of Ecosystem Marketplace, and Emma Parry of McKinsey & Company.

This Webinar hosted by BusinessGreen and sponsored by Sylvera also explores the prospects of the VCM in 2024 and features Ben Rattenbury of Sylvera, Jonathan Shopley of Climate Impact Partners, Simon Puleston Jones of Climate Solutions, Rich Gilmore of Carbon Growth Partners, and Anna Hickey of Phillip Lee LLP.

Footnotes

[1] The American Carbon Registry (ACR), Architecture for REDD+ Transactions (ART), Climate Action Reserve (CAR), Global Carbon Council (GCC), Gold Standard (GS), and Verra/Verified Carbon Standard (VCS).

[2] The Voluntary Carbon Market Integrity initiative (VCMI), the Integrity Council for the Voluntary Carbon Market (ICVCM), the Science Based Targets Initiative (SBTi), the GHG Protocol, the We Mean Business Coalition and CDP (formerly the Carbon Disclosure Project).

Press Release:
Top scientists issue rebuttal to West et al paper

12 December 2023 |Prof Ed Mitchard and colleagues find major flaws in research that claims up to 94% of REDD+ projects are worthless.

This Press Release was originally posted here.

See Space Intelligence blog for more information.

An international group of senior scientists has submitted a rebuttal to the West et al paper to Science for peer review, and urged the retraction or major revision of the study which discredited avoided deforestation projects.

As efforts to recognise the global trade in voluntary carbon credits make headlines at COP28, an international group of scientists including Professor Ed Mitchard, Professor Eric Nowak, Dr Sassan Saatchi, Dr Jason Funk and others released a study stating that the methodology used by the authors to discredit carbon credits contains serious errors.

“The flawed analysis of 24 projects both understates the impact of the projects in the sample, and unfairly condemned all REDD projects, of which there are over 100. It risks cutting off finance for protecting vulnerable tropical forests from destruction when funding needs to grow rapidly,” said lead author Professor Ed Mitchard.

Mitchard, a respected carbon specialist and Chief Scientist of nature data company Space Intelligence that counts Apple and The Nature Conservancy among its clients, was joined by a similarly respected group of co-authors that include satellite data and forest experts at NASA, scientists at the University of Edinburgh and UCLA; and economists at the University of Lugano (USI).

The group analysed the paper published by West et al, published in the journal Science in August 2023, that claimed too many carbon credits had been awarded to the forest carbon projects.

Key Findings of Study

Key flaws found in this group’s review include issues with the comparison sites chosen, the global deforestation datasets used, and the incorrect calculation of carbon benefits from projects.

Inappropriate Comparison Sites

The comparison sites West et al used to estimate what would have happened in the REDD project sites if no intervention was made to prevent deforestation were found to be completely inappropriate. For example, Peru and Colombia project areas were compared to sites on the other side of the Andes mountain range. They were therefore incomparable in universally recognised key factors that influence deforestation such as the biome, crop species grown, and whether there was access to international markets.

Inappropriate Dataset Usage

The global deforestation dataset used was also found to be inappropriate as it inevitably contains random errors and its sensitivity changed through time as available satellites changed. This meant that projects that successfully reduced deforestation were less likely to be detected as such. The authors refer to a large study in sub-Saharan Africa that assessed the deforestation dataset used and found using it would result in a project that was 100% effective only being credited with being 10% effective.

Errors in Calculation of Carbon Benefits

West and colleagues made numerical errors when calculating the carbon benefits of projects their analysis found were effective at stopping deforestation. There were two different calculation errors that together meant the proportion of credits they found that delivered real carbon benefits should be increased by 62%.

Mitchard concluded that the results claimed by the West paper were highly uncertain.

“As such, we believe their paper should be retracted or heavily revised,” he said.

“We call for future studies on the effectiveness of REDD projects to use locally tuned forest change data with known accuracies or point-based sampling approaches to quantify deforestation. Furthermore, analytical approaches must always lead to meaningful comparisons between forests of the same ecological type and legal status, and should consistently pass rigorous validation checks before conclusions are drawn from them.”

### / ENDS

For more information:

Kim McAllister, Communications Lead, Space Intelligence

+44 7740 336 991 [email protected]

About Space Intelligence

Space Intelligence is the leading provider of nature data and digital monitoring systems for nature-based solutions (NbS). They work with project developers and NGOs to identify and develop new NbS projects, and monitor them over time.

They also work with large corporates and asset managers to offer due diligence and digital Monitoring, Reporting and Verification (MRV) for portfolios of NbS projects designed to achieve Net Zero/ESG commitments. Their technologies are created using advanced multi-sensor satellite data fusion and analytics in a machine learning framework, and informed by deep expertise in tropical ecology within their 50+ person team. Learn more at https://www.space-intelligence.com/.

Piloting to Continue Under Article 6 Despite COP28 Failure

13 December 2023 | DUBAI | Countries say they will continue piloting cross-border cooperation under Article 6.2 of the Paris Agreement despite a failure by negotiators to agree on guidance for operationalizing that paragraph and its companion, Article 6.4.

Article 6 governs international carbon credits.

Within it, Article 6.2 provides a framework for countries to cooperate bilaterally or multilaterally, while Article 6.4 provides a centralized mechanism administered by the United Nations. Article 6.8 covers non-market transfers.

Coming into the talks, expectations were high for progress under Article 6.2 and low for Article 6.4, but they would have to pass as a package to operationalize the mechanism. Countries had been piloting cross-border cooperation under 6.2 for several years, and scores of them had already established designated national agencies for engaging 6.4.

“Article 6 is mentioned as an instrument to accelerate work under the Global Stocktake decision,” said Jos Cozijnsen, a former negotiator for the Dutch government now acting as policy advisor to the Climate Neutral Group.

“This would mean that Article 6.2 pilot deals can continue,” he said. “They do not need further guidance, and the Voluntary Carbon Market will keep playing a role in helping host countries meet their targets because no corresponding adjustment is needed.”

The International Emissions Trading Association (IETA) issued a statement condemning the “politicization” of the carbon markets, explicitly citing efforts by the European Union and others to relegate policy discussions, including on the role of REDD+ in Article 6.4, to the Subsidiary Body for Scientific and Technological Advice (SBSTA).

“The Article 6.4 Supervisory Body should not be micro-managed by SBSTA,” they said in a statement.

“The delay of the Article 6.4 mechanism is not a victory for environmental integrity,” added Andrea Bonzanni, IETA’s International Policy Director. “It is a victory for the anti-market agenda.”

IETA also reiterated that Article 6.2 can continue to be implemented without further guidance from the Parties to the Paris Agreement (CMA).

“Market-based cooperative approaches would have benefitted from an Agreed Electronic Format for reporting and clearer rules on the authorization of Internationally Transferred Mitigation Outcomes, but this is not essential,” they said.

Although piloting can continue, there is doubt over whether international carbon credits (ICCs) transferred from government to government will be recognized under the Paris Agreement. Voluntary transactions retain their current status as exempt from corresponding adjustments.

Negotiations on Article 6.2 backslid over disagreements on how much centralized oversight the UN should extend to bilateral and multilateral hubs.

US delegates expressed frustration with efforts by the European Union and others to impose more prescriptive rules on Article 6.2 than had previously been agreed.

Previous Coverage

COP28 Update: Progress Towards Agreement on Avoidance Under Article 6.4, but Backsliding in 6.2

African Countries Mobilize for Carbon Markets Despite Article 6 Deadlock

Analysis: Article 6.4 Talks Have Stalled in Dubai. Here’s What’s At Stake

What to Watch for Voluntary Carbon and Article 6 at COP 28

Bionic Planet Podcast

Countries Reject Proposed Guidance for Article 6

12 December 2023 | DUBAI | Countries have rejected the latest guidance on operationalizing Articles 6.2 and 6.4 of the Paris Agreement.

As the 28th session of the Conference of Parties (COP28) to the United Nations Framework Convention on Climate Change (UNFCCC) entered what were supposed to be its final hours, key discussions on the Global Goal on Adaptation (GGA), the Global Stocktake, and Article 6 were taking place behind closed doors and expected to continue well beyond the scheduled end.

A draft negotiating text on Article 6.4 emerged late on 11 December 2023, with a revival of the avoidance vs removals debate and a request to push the issue of ecological avoidance, including avoided deforestation, down to the Subsidiary Body for Scientific and Technological Advice (SBSTA) until 2028. The specific language states that the COP “requests the Subsidiary Body for Scientific and Technological Advice to continue its consideration of whether Article 6, paragraph 4, activities could include emission avoidance and conservation enhancement activities, as part of the review of the rules, modalities and procedures for the mechanism to be conducted by the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement at its tenth session (2028).”

New draft texts emerged on the evening of the 12th, and while they looked clean, they failed to pass. We will have more details tomorrow.

Article 6.2

Article 6.4

Previous Coverage

COP28 Update: Progress Towards Agreement on Avoidance Under Article 6.4, but Backsliding in 6.2

African Countries Mobilize for Carbon Markets Despite Article 6 Deadlock

Analysis: Article 6.4 Talks Have Stalled in Dubai. Here’s What’s At Stake

What to Watch for Voluntary Carbon and Article 6 at COP 28

Bionic Planet Podcast

Corrections and Clarifications

This story initially referenced REDD+ credits possibly being relegated to SBSTA, but we changed this to “ecological avoidance, including avoided deforestation” to avoid confusion with REDD+ as it exists in the VCM.

COP28 Update: Progress Towards Agreement on Avoidance Under Article 6.4, but Backsliding in 6.2

9 December 2023 | DUBAI | 15:38 GST | UPDATED 1902 GST | Negotiations around the guidance for implementing Article 6 of the Paris Agreement are entering the final days, with the publication of new draft negotiating texts for Articles 6.4 and 6.8 as well as a continuing late-night session on the current text for 6.2.

The current 6.4 text is just seven pages long, with six pages comprising a negotiating text and one page prescribing an option if no agreement is reached.

Although negotiators made progress on Saturday, they still remain far apart on key issues.

“If there is an agreement at the end of this COP, the text will look a lot different than what we have now,” said Andrea Bonzanni, International Policy Director for the International Emissions Trading Association (IETA).

The highlight of the day came in the Saturday afternoon session, when the Philippines, which had been vociferously pushing for avoidance to be treated as a third category in addition to reductions and removals, said they could live with an option stating that “emission avoidance and conservation enhancement may also result from emission reduction or removal activities that meet the requirements of the rules, modalities and procedures for the mechanism, apply other related rules and guidance and an applicable methodology approved by the Supervisory Body.”

The agreement means that avoidance is not treated as a third category but can rather be treated as either a reduction or a removal, if adopted.

Unfortunately, negotiations under 6.2 have backslid after the European Union (EU), the Independent Association of Latin America and the Caribbean (AILAC), and the Alliance of Small Island States (AOSIS) proposed more prescriptive language, while the United States and most other countries argue that 6.2 is a party-driven approach that should leave more rule-making to participating countries.

The current 6.4 draft also recognizes the transition of afforestation and reforestation project activities and programs from the clean development mechanism (CDM) to the mechanism established under 6.4, provided the transition is requested by June 30, 2024.

Negotiations under Article 6.2 are continuing and are slated to run until 2330 GST.

UPDATED at 1902 GST to include the latest on Article 6.4.

African Countries Mobilize for Carbon Markets Despite Article 6 Deadlock

8 December 2023 | DUBAI | Climate negotiations that focus on international carbon credits (ICCs) through Article 6 of the Paris Agreement remain stalled at the 28th Conference of the Parties (COP 28) to the United Nations Framework Convention on Climate Change (UNFCCC), but government pavilions — and especially those of African countries — are buzzing as nations move forward with domestic frameworks and international arrangements, although delegates said the wheel of government also turn lowly.

Article 6 of the Paris Agreement governs international carbon credits, and the implementation of three paragraphs – Articles 6.2, 6.4, and 6.8 – remains in limbo. Article 6.2 provides a framework within which countries can trade among themselves, bilaterally or multilaterally, and Article 6.4 provides a centralized mechanism administered by the UNFCCC. Article 6.8 covers non-market transfers.

With four days of talks remaining, negotiators are stuck on key definitions and how prescriptive the methodological guidance for removals should be under Article 6.4. Those rules will have major implications for whether nature-based credits are recognized under Article 6.4.

“Article 6 is sector agnostic, so it’s not saying from the outset that any sector can’t be included,” said Kelley Hamrick Malvar of The Nature Conservancy. “So if, for example, the guidance were to come out and say anything that has a risk of reversals must ensure permanence for a thousand years, then that would effectively cut out nature.”

Different Countries, Different Speeds

Speaking on a panel, Alick Muvundika, Acting Deputy Director of Zambia’s National Institute for Scientific and Industrial Research, pointed to several advances that his country has made in cooperation with the North Korean government but pointed out that different components of his and all governments work at different speeds.

Kenya, for example, has already updated its Climate Change Act to regulate carbon markets, offering clarity to regulators and project developers alike, while Zambia is working with ad hoc guidelines until legislation can be developed – possibly in the first quarter of 2024, according to Muvundika.

“Right now, we have benefit-sharing requirements, but they’re too subjective,” he said. “Some developers will go to a local chief, give them something, and then leave a bit to the community, but it’s not really a fair arrangement,” he said. “It’s been a headache.”

On the same panel, the think tank Climate Focus said it was finalizing an update to its 2020 publication, “The Landscape of Article 6 Implementation,” in cooperation with Perspectives Climate Group. The update will offer a comprehensive summary of several Article 6 readiness processes. A hard copy shared after the panel confirmed what we’ve seen anecdotally: dozens of governments moving forward with legislation, registries, and cross-border arrangements but reticent to offer too many details until other components of the domestic strategies are finalized.

Not surprisingly, the countries’ states of readiness reflect their past activities. Countries like Ghana, which has been working on REDD readiness since the mid-2000s, are significantly more advanced than others that have kept a more hands-off approach to voluntary carbon markets. The country has established eligibility criteria for projects within its borders and has developed jurisdictional crediting through ART Trees and the LEAF Coalition.

Common Themes

The upcoming Climate Focus/Perspectives document, which bears the same name as the 2020 publication, identifies several themes common to most of the countries it examined – such as steps to create a domestic registry, a willingness to establish eligibility requirements for Internationally Transferred Mitigation Outcomes (ITMOs), which will require corresponding adjustments, and a similar desire to prescribe activities allowed in the voluntary carbon market.

Legislation

African private sector representatives are also here in force, and many expressed mixed feelings about moves to regulate voluntary carbon markets.

Many countries lack legislative frameworks related to carbon credits, even if they hosted significant emission reduction projects. Implementing Article 6 is prompting countries to adopt new regulations and update existing regulations, providing a more secure legal foundation for institutional and administrative arrangements. Legal frameworks are crucial not only for these arrangements but also for addressing the international legal treatment of carbon credits, facilitating standardized documentation for derivatives, and ensuring legal certainty for taxation and accounting purposes.

Rwanda in the Limelight

Rwanda has the highest profile of the countries present – largely because it authorized the first corresponding adjustment associated with an individual project.

To implement its Nationally Determined Contributions (NDCs), the country plans to raise $11 billion, with $5.7 billion for mitigation and $5.3 billion for adaptation measures. Of the total, $6.9 billion will come from international sources.

The country is developing a cap-and trade system, as well as a domestic registry, and it has signed cooperation agreements with Singapore and Kuwait for Article 6 implementation.

More on the Bionic Planet Podcast

For more on COP 28, visit the Bionic Planet podcast. Bionic Planet’s coverage from COP is being sponsored by Ecosystem Marketplace.

Analysis: Article 6.4 Talks Have Stalled in Dubai. Here’s What’s At Stake

5 December 2023 | Six days into year-end climate talks in Dubai (COP 28), we’ve seen promising headlines coupled with disappointing results in the negotiations around Article 6.4 of the Paris Agreement.

On the plus side, we’ve seen more ambitious targets from the United States and China, a concrete Loss and Damage Fund agreement, and a $30 billion dollar United Arab Emirates climate fund.  These events suggest it could be a landmark like the Paris meeting that yielded its eponymous breakthrough treaty by affirming countries’ right to economic development and prodding high-polluting industries.

But inside the halls, we’re hearing that talks have predictably bogged down as negotiations clash over conflicting views on what types of nature-based solutions to recognize in the recently-proposed methodology assessing removals.

As wonky as it may sound, we need the Paris Agreement’s Article 6.4 to make such an equilibrium a reality.

The audit, consultation, and transparency requirements starkly contrast with forest-carbon offset projects offered by some companies, which rested on misrepresented scientific data and cajoling local populations to buy the land necessary for the offsets. Furthermore, there is no agreed-upon international standard. Currently, there are 73 carbon pricing mechanisms globally. This patchwork of initiatives led to the emergence of Compliance Credit Markets (CCM) and Voluntary Credit Markets (VCM).

By 2021, the CCM was valued at $851 billion and the VCM at $2 billion. The combined global market grew to $980 billion last year. The VCM is forecasted to grow to as much as $40 billion by 2030, and the International Swaps and Derivatives Association (ISDA) estimates it could reach $1 trillion by 2038. Others estimate that the global carbon offset and credit market could reach between $1.6 and $2.7 trillion by 2028. The expected demand for carbon credits is forecast to be 200 metric tonnes (mt) of CO2, outstripping supply by as much as 170mtCO2 by 2030. This extremely tight carbon market will require finding high-quality and profitable products while avoiding greenwashing and reputational risk.

Despite the controversy driven by poor ethics, the carbon credit market emerged from a legitimate financial need. Incentivizing projects associated with carbon reduction had a notable impact. According to the Climate Policy Initiative’s 2022 report,  financial commitments needed to increase sevenfold from a 2019 baseline to reach the goals laid out in the Paris Agreement.  While climate finance only doubled between 2011 and 2020, it doubled between 2019/20 and 2021/22 alone. However, according to the latter 2022 report, climate mitigation and climate adaptation finance have been a vast mismatch. Article 6’s clauses were so important that COP 28 president Sultan Ahmed Al Jaber planned to raise it in his meetings with Brazil’s delegation to “incentivize higher mitigation ambition.”

Although the justified focus on carbon reduction might account for this, the United Nations Framework on Climate Change estimates we will have tapped 87 percent of the “carbon budget” to keep us in line with the Paris Agreement by 2030.

The time has come to focus more intently on climate adaptation efforts in the most vulnerable and developing countries with booming energy demands.

Even something as large scale as the Loss and Damage Fund is not enough. Pledges of cash at some undetermined date will not be enough to begin the hard yards of standing up the Article 6.4 framework needed to create a pipeline of projects in which $1.3 trillion of private capital is ready to invest.

Negotiators, whether in plenary sessions or sideline meetings, must move to operationalize the Article 6.4 framework detailed by the Supervisory Body in October. They must also fund its implementation and capacity building.

Article 6 allows countries to create voluntary carbon credits provided they meet specific transparency standards and tie to countries’ Nationally Determined Contributions (NDCs) reducing carbon emissions. Some experts have expressed hope that Article 6’s broad focus on cooperative measures will boost private financing for climate initiatives to avoid a dismal performance of a mere 10 percent reduction in emissions under current commitments.

Article 6.4 specifies that countries should establish said credits through sustainable development involving public and private actors. New regulatory documents issued by the United Nations lay out an extensive process by which governments create 6.4 project umbrellas to which individual “project participants” can then apply. The application involves a detailed plan involving extensive stakeholder engagement and a rigorous verification process to determine whether the project actually meets the country’s NDCs.

Projects must use a standardized baseline or receive authorization from the Article’s Supervisory Body to deviate from approved methodologies. Countries and independent auditors, known as  Designated Operational Entities (DOEs), are responsible for verifying the claims made in project plans (PDDs). Under this new system, those same documents must use the most conservative of available estimates for carbon savings, and the auditors themselves can lose accreditation if reviews by the Article’s main body find their verification techniques sub-par.

The operationalization of Article 6.4 can accelerate blended finance deployment by providing an improved framework. Under these provisions, there will be a steady pipeline of projects, an enhanced focus, and financing. These projects will involve sovereign countries in the approval process, provide an alternative to loans, and improve coordination between multilateral financial institutions, states, private sector projects, and private sector finance.

The effective coordination of these various elements has been identified as a challenge in the Triple B Framework developed by Dr. Gillian Marcelle. She analyzes impeding factors and recommends breaking down psychological and financial barriers to capital deployment, correcting biases, and adequately allocating climate resources. This has proven particularly important for frontline countries where the TBF is being applied.

Private sector engagement and climate finance for frontline communities, such as Ghana’s Environmental Protection Agency’s Public Private Partnership with Integrated Recycling & Compost Plant, LTD (IRECOP), which will generate Internationally Transferrable Mitigation Outcomes (ITMOs) from four composting facilities, have been vital themes leading up to COP 28. The Conference of the Parties can leverage Article 6.4 to integrate global financial capital into climate mitigation and adaptation efforts further. If successful, they will take a significant step forward on a problem that has vexed the international community since the watershed Paris Agreement.

Shades of REDD+
Burdened by unverifiable policy assumptions: The decision on when to apply corresponding adjustments to voluntary carbon markets

4 December 2023 | The debate on whether “Corresponding Adjustments” (CAs) must be applied to VCM transactions has created significant policy and integrity uncertainties that put VCM project and program investments at risk. Insecurities around the impact of VCM projects have led government officials in host countries to re-evaluate their policies and created significant worries as to whether VCM investments could complicate the achievement of host countries’ Nationally Determined Contributions (NDCs). COP28 negotiates the first “Global Stocktake” of carbon emissions. This global accounting raises questions about how emissions are counted and the political and scientific implications of accounting tools, including CAs.

In Climate Focus’ freshly released study on “Double Claiming and Corresponding Adjustments,” we fill a critical analytical gap by identifying and analyzing instances of double claiming of emission reductions and removals (ERRs), analyzing them in the context of mitigation incentives, and discussing CAs as a tool to enhance the overall integrity of carbon markets and mitigation action. Our study reveals that the discussion around CAs is less about accurate accounting and more about differing behavioral and policy assumptions. Where greenhouse gas (GHG) accounting rules are used as political instruments to achieve certain policy outcomes, it is essential to assess the underlying assumptions of the particular project, program, or policy to avoid undesired outcomes (i.e., less climate change mitigation rather than more).

Corresponding Adjustments and the quality of the VCM

CAs are an accounting tool designed to avoid double counting of ERRs transferred under Article 6 of the Paris Agreement. If ERRs are transferred internationally under Article 6, then a CA must be applied to the accounts of the host country to ensure that those ERRs are only counted by one country towards its NDC. While the Article 6 rules do not require the application of CAs to ERRs transferred in the context of the VCM, some stakeholders argue that “double claiming” of ERRs by countries and corporates is unacceptable. Double claiming is a form of double counting where the same ERRs are counted toward two or more different mitigation pledges that are reported under different GHG accounting systems. Other stakeholders argue that applying such adjustments to VCM transactions would create more harm (and less emissions mitigation) than benefits. The problem is that the two camps substantiate their opinions from their vantage point and within the logic of their argument but fail to satisfactorily respond to the concerns of the other camp.

Since obtaining CAs is not easy, the demand for “correspondingly-adjusted” carbon credits in the VCM pours cold water on an already struggling market. The availability of adjusted carbon credits depends on host countries having legal frameworks in place to issue the required authorizations as well as institutions and accounting capabilities to make the adjustments. It also depends on the willingness and capacity of host countries to invest in additional mitigation actions for each of the carbon credits they authorize: the ERRs represented by an adjusted carbon credit cannot be counted toward the host country’s NDC, meaning that the country will need to invest in more mitigation to achieve its NDC.

Consequently, whether investors and policymakers request that host countries authorize CAs for VCM projects and programs has significant policy implications for both for host countries’ NDCs as well as for the functioning of the market.

Accounting should facilitate and encourage climate action; each case is unique

Before rushing to authorize CAs for VCM transactions (or deciding not to), policy makers and VCM participants should consider two key questions:

Question 1. Is there a risk of doubleclaiming?

Many VCM ERRs can be transferred without risk of double claiming, and governments and market participants should analyze whether a risk of double claiming exists. The assumption that the use of carbon credits in the context of corporate GHG goals leads to double counting between the host countries’ NDCs and corporate targets is a simplification of the accounting realities. GHG accounting systems used by governments, corporates, and VCM mitigation activities have different purposes and follow different rules with different baseline and monitoring methodologies, equations, indicators, and parameters to calculate ERRs. This results in GHG reporting overlaps between public and private GHG reporting frameworks.

Whether there is an instance of double claiming depends on whether corporates and host countries indeed report and “claim” the same ERR towards their mitigation targets. The quality of NDC accounting depends on, among other factors, the quality of GHG inventories. The quality of many GHG inventories is low, and while data quality is improving, accounting for emissions often depends on relatively rough estimates. This means that bottom-up VCM project ERRs are often not captured in GHG inventories and, consequently, left out of NDC accounting. The quality of VCM ERRs depends on conservative estimates combined with strong and independent validation of assumptions. This means that while GHG measurements may be more granular at the project level, the integrity of ERRs depends, to a large extent, on conservative baseline setting. Overall, this means that ERRs measured and reported in national inventories and by VCM projects were calculated following distinct approaches and often VCM ERRs are not reported as part of NDC achievement.

Establishing whether there is a risk of double claiming between the VCM and a host country’s NDC is especially relevant for policymakers from developing host countries who may be considering using the VCM as a tool for achieving or exceeding their NDCs. When CAs are offered without sufficient prior consideration, host countries may have to “pay double” for the transferred credit: first in the form of a CA within their NDC accounting and, second, in the form of an additional ERR that needs to be achieved within their NDC. In this way, the application of CAs can place an unnecessary obstacle in a host country’s path to NDC achievement. Table 1 summarizes the likelihood of VCM and NDC double claiming of ERRs.

Table 1. The likelihood of VCM double claiming in the context of NDC accounting.

Question 2. What are the implications of CA authorizations in the context of national policies and circumstances?

Like public climate policy, the accounting rules of the VCM and the Paris Agreement seek to influence the behavior of those using carbon crediting systems. Authorizing CAs sends policy signals that may encourage or discourage enhanced mitigation action. It is therefore important that decision-makers consider CA authorizations in the context of national policies and circumstances.  In contrast to the broad agreement that double counting and double claiming of ERRs between companies or across companies and governments is permissible, opinions are not aligned on the issue of whether CAs should be applied to avoid double counting in the VCM. Table 2 lists arguments for and against using CAs in the VCM.

These arguments cannot be assessed in general terms. Instead, it is important for policymakers and VCM stakeholders to consider the arguments in the context of national policies and circumstances. Whether CAs will incentivize or disincentivize climate change action depends on a country’s NDC, the accuracy of its inventory and measurement, reporting, and verification (MRV) system, and its plans, finances, and progress in implementing national climate policies. Whether CAs should be applied to VCM ERRs also depends on beliefs, assumptions, and hypotheses in relation to the effect that CAs have on mitigation action. These are easier to assess in specific national contexts rather than at the global level.

Table 2. Summary of policy arguments regarding CAs used in the VCM.

The risk of double claiming must be weighed against the risk of forgoing VCM investments

In sum, VCM investors should consider forgoing the option to use VCM carbon credits for compensatory or offsetting purposes – these uses are controversial because they do not generate additional mitigation benefits. However, market participants may establish that there is limited risk of double claiming. Investors should ensure that their engagement leads to additional, scalable, and long-term ERRs and mitigation actions. While the theories and assumptions as to how to achieve this may differ, investors should engage in dialogue with host countries and local actors to ensure that their VCM investments lead to long-term climate benefits. These actions are far more significant than short-term concerns about double claiming of emissions. In the end, accounting rules and mechanisms should facilitate – not create barriers for – mitigation action.

Why we need to invest in natural climate solutions now

There is a growing tide of negative sentiment towards nature-based solutions (NbS). If this groundswell of negativity continues unabated, there is a very real risk that nature-based solutions lose the investment so desperately needed for their success. This would be nothing short of disastrous for the climate, for local ecosystems, and for the people most vulnerable to the effects of climate change.

This article first appeared on the Taking Root website.

This is not just our opinion. The facts are clear. Research shows that nature-based solutions can provide up to 37% of the emissions reductions needed by 2030 to keep global climate goals in reach. If this is to be realised, investments into NbS need to double by 2025, and triple by 2030. As it stands, we need more investment into nature-based solutions, not less. Activities such as forest restoration are not just ‘nice to haves’; they are essential.

Why are nature-based solutions under attack?

Why, then, are nature-based solutions under attack? The answer lies in the human tendency to focus on the bad, rather than the good.

One of the most effective ways NbS have been financed to date is through the carbon markets. In recent years, the voluntary carbon market has experienced a huge influx of investment, having leapt from a value of $520 million in 2020 to $2 billion in 2021. This rapid growth has attracted greater scrutiny and demands for transparency. This is a good thing. Scrutiny and transparency are exactly what’s needed to raise the bar on quality so greater impacts can be achieved.

However, in placing the VCM under the spotlight, it has become apparent that NbS projects vary in type, scope, and quality. There are initiatives that are creating truly meaningful impacts to the benefit of climate, nature, and local communities. Yet they are being overshadowed by those which do not meet the necessary standards, prompting some factions to discount the concept of nature-based solutions entirely.

This is completely the wrong approach. Instead, what society should be doing is recognising those high-quality projects, learning from them, and investing funds so that we can both grow and replicate them. Ultimately, the question should not be whether to invest in nature-based solutions. That should be an unequivocal ‘yes’. Rather, the question should be: what are the right projects to invest in?

What do quality nature-based solutions look like?

That leads us to examine the hallmarks of a high-quality NbS project. From our experience in developing forest restoration projects such as CommuniTree, we know that first and foremost, there must be a focus on improving people’s livelihoods. In building for livelihoods, landowners and land managers are not only incentivised to grow trees, they are also incentivised to keep those trees in the ground. This promotes the durability, and therefore the success, of a forest carbon removal project. When building for livelihoods, equitable benefit sharing is just one of the components that must be delivered, along with mechanisms to provide value over time, be it through access to local value chains or global commodity markets.

Woman wearing a blue top smiles at the camera as she leans against a tree trunk.
Through high-quality forest carbon removal projects, smallholder farmers such as Arminda Troche can improve their livelihoods by growing trees.

Beyond livelihoods, forest restoration initiatives must work in service of nature. That means growing native tree species, encouraging natural regeneration, and carefully selecting land that is suitable for restoration. Interventions should be based on robust science-based carbon forecasting, and progress regularly monitored and reported so that outcomes can be tracked transparently. Third-party validation and verification provide further confirmation as to a project’s legitimacy.

Then there is the matter of variability. Forest carbon removal projects work with people and nature. Trees will die. Parcels will not grow as intended. Landowners will sell up and leave the project. Such situations are entirely normal and do not constitute ‘failures’. What’s important is that the project design accounts for these scenarios to ensure that the impacts claimed are realised.

NbS projects that deliver on these hallmarks of quality achieve so much more than carbon impacts. Yes, removing carbon from the atmosphere is an important outcome. But by investing in nature-based solutions such as forest restoration, funders and investors are also contributing towards a range of socio-economic and environmental impacts in communities and landscapes often most vulnerable to the effects of the climate crisis. This includes rehabilitating ecosystems, improving water security, creating jobs, and promoting biodiversity.

A man stands next to a well full of water.
In photo: CommuniTree farmer Ernesto Cedeño Mendoza next to his well, which he says was “always dry” prior to joining the program.

How do we finance NbS to scale impact?

Having set the standard for quality, the next step is to identify the initiatives that meet this standard and provide them with the necessary funding to facilitate growth and amplify their impact. There are various funding mechanisms available, with carbon financing being one of the most viable options. However, creating high quality carbon removals and reductions through nature-based solutions depends on upfront financing, be it through initial investment or the purchase of ex-ante or forward order credits.

Ex-ante or forward order credits represent a removal activity that will take place in the future. They are often seen as less valuable than ex-post credits, where the removal has already taken place. But the sale and purchase of ex-post credits alone will not enable climate goals to be attained for one simple reason: project economics.

Take a forest restoration project, for example. Depending on the context, it can take 20+ years for carbon sequestration targets to be fully achieved. In the meantime, project developers must cover the cost of establishing a project, managing operations, and providing value to those implementing climate solutions at a local level. Projects need support from corporates and investors to cover these upfront costs to fully commit to local communities over long timeframes. If this support is lost, there won’t be enough money to grow trees and communities may come to see NbS as another failed promise for economic prosperity. So, if we don’t invest in growing trees now, we lose a high-potential solution to the address the climate and biodiversity crises.

A forest.
In photo: A forest grown through the CommuniTree Carbon Program. The impacts created are entirely additional: they would not have happened without upfront financing.

Investing in high quality projects for meaningful impacts

Research shows that companies that engage in the carbon market are nearly twice as likely to be decarbonising their operations year-on-year. Those that use higher quality and more expensive credits have better emissions performance. There is, therefore, a clear correlation between investment, quality, and impact. This reality should not be overlooked as we navigate the growing pains of the nascent voluntary carbon market. We have narrowing window of opportunity to mitigate the worst effects of the climate crisis and restore nature. Nature-based solutions can sequester carbon, restore ecosystems, and improve livelihoods. These solutions are available to us now, with huge potential for scale. If we are to secure a nature-positive future, support must be galvanised for NbS, and that support must be galvanised with immediate effect, for the benefit of us all.

What to Watch for Voluntary Carbon and Article 6 at COP 28

Year-end climate talks are focused on the global stock-take, which involves more than just taking stock of past actions. The primary agenda is to create mechanisms for dramatically scaling ambition up for the next five years.

Earlier this month, the government of Rwanda attached a “Letter of Authorization” to carbon credits purchased by German nonprofit Atmosfair. In it, the government agreed to deduct emission reductions from its national greenhouse gas inventory equal to the number of associated credits exported, and to add those emission reductions to the national account of whichever country buys them.

It marks the first time a “corresponding adjustment” has been applied to an individual carbon project under Article 6 of the Paris Agreement – although similar transactions have occurred between countries, such as Peru and Switzerland.

Under Article 6, corresponding adjustments are required for “Internationally Transferred Mitigation Outcomes” (ITMOs), which are emission reductions transferred from one national account to another. That means in the eyes of the UN they are required for compliance transactions but not for voluntary transactions. That’s because compliance credits are, by their very nature, applied to the emission caps of importing countries, although the exporting, or “host,” country, does have the option of requiring them.

What’s on the Agenda This Year at COP?

On paper, this won’t change at year-end climate talks (COP 28) in Dubai. Negotiators have their hands full with the global stocktake (GST) and pressure to chart a roadmap to significantly deeper reductions by 2028.

While calls for more ambitious targets will inevitably turn to talk about the role of markets, the actual agenda items within the negotiating tracks are limited. A big one is the move to create methodologies for carbon removals under Article 6.4, which is governed by the 24-person Article 6.4 Supervisory Body (A6.4 SB).

The A6.4 SB meets throughout the year, and it serves countries that don’t want to develop their own markets and methodologies. This means it is tasked with the complex task of doing so, but its decisions must also be approved at the COP. They submitted guidance for removals in mid-November.

Most activity is expected to take place through Article 6.2, which covers bilateral transactions among countries. That can involve trading national surplus reductions, or linking Emissions Trading Systems (ETSs), which are already regulated. This makes Article 6.2 simpler.

Article 6.4 credits can also be traded via 6.2, but the issuance of new credits under 6.4 could prove challenging.

“There is a risk that methodologies developed under 6.4 will be too political. Specifically that some methodologies will have to be revisited too often, or that credits will be ‘temporary,’ as was the case under the Clean Development Mechanism (CDM),” says Jos Cozijnsen, a former Dutch negotiator now serving as a carbon specialist with the Carbon Neutral Group.

“They may also decide that carbon removals have to be additional to Nationally Determined Contribution (NDC) targets instead of recognized as a tool for meeting NDCs, and this could delay action on removals, where companies invest in a lot these days, and incentivize countries to make less ambitious commitments,” he adds.

COP President Sultan Al Jaber has explicitly stated that “Better-functioning voluntary carbon markets can also channel additional financing to developing countries and support local economies.”

He has pledged to push for “end-to-end” integrity of all carbon transactions, even as UAE-based project developer Blue Carbon inks massive MoUs with African countries and no discernable methodologies. Al Jaber has also called for dramatic reduction in the use of fossil fuels, even as his own country’s negotiating team stands accused of using the event to forge new oil and gas deals.

Beyond the immediate negotiations, the Voluntary Carbon Markets Integrity (VCMI) initiative is contemplating guidance requiring corresponding adjustments on voluntary carbon transactions, although that won’t happen until next year.

Voluntary Demand: Quality is King

Ecosystem Marketplace’s recent State of Voluntary Carbon Markets Report shows that the overall volume of carbon credits transacted have fallen from a 2021 peak – but at the same time, credit prices rose dramatically. Buyers have shifted away from projects perceived as having lower quality and towards those with less uncertainty around emission reductions and more verifiable co-benefits – a good omen for efforts such as Verra’s SD Vista and the Gold Standard for the Global Goals, both of which aim to quantify impacts related to the Sustainable Development Goals (SDGs).

Forests and Markets

Most participants argue that REDD+ (Reduced Emissions from Deforestation and Degradation, plus enhancements of carbon stocks in developing countries) is included in the Paris Agreement, even though the acronym is nowhere to be found. That’s because of two related Articles: Article 5 recognizes the need to cooperate on forest conservation, while Article 6 recognizes the transfer of mitigation outcomes.

The rules for implementing Article 6 weren’t finalized until six years after the landmark Paris Agreement, at COP26 in Glasgow. Sluggish talks at COP27 in Sharm El-Sheikh the following year left key details undefined and open to interpretation. Agreeing on the practical details remains one of the main objectives of COP28.

Beyond the major question of methodologies for removals under Article 6.4, negotiators will consider rules for linking trading systems under 6.2 and nitty gritty issues such as the creation of reporting templates and how countries will submit transactions to the UN for review.

Experts from The Gold Standard says there are already 40 bilateral Memorandums of Understanding (MoUs) under Article 6.2, but only three country-to-country deals have been authorized – all involving Switzerland as a buyer.

 

Steve Zwick of Bionic Planet is reporting live for Ecosystem Marketplace throughout COP28. Check back for more coverage, and follow EM and Steve (here’s his LinkedIn) on social media.

NEW! State of the Voluntary Carbon Markets 2023 finds VCM demand concentrating around pricier, high-integrity credits

New research published by Ecosystem Marketplace finds evidence of a market-wide shift in the voluntary carbon markets (VCM), with demand concentrating around high-integrity, high-quality carbon credits that have holistic co-benefits beyond the mitigation of greenhouse gas emissions.  

Transaction data analyzed in the report show a massive 82% leap in average carbon credit prices between 2021 and 2022, paired with a drop in overall transaction volumes. These dynamics suggest a market consolidating around a smaller but committed set of buyers willing to pay premium prices for higher quality credits. Demand is particularly high for nature-based credits that are certified for co-benefits and Sustainable Development Goals, according to the report’s authors.  

Key findings from the report: 

  • Average VCM credit prices are higher than they have been in 15 years, while overall trade volumes are down from a 2021 peak. While the volume of VCM credits traded dropped by 51%, the average price per credit skyrocketed, rising by 82% from $4.04 per ton in 2021 to $7.37 in 2022. To date in 2023, the average credit price is down slightly to $6.97 per ton.

  • This price hike allowed the overall value of the VCM to hold relatively steady in 2022, at just under $2 billion.

  • Credits connected to nature-based solutions were a primary driver of high market value. Nature-based projects, including forestry and land-use and agriculture projects, made up almost half of the market share at 46%. From 2021 to 2022, the average price of these kinds of credits increased by 75% and 14%, respectively. Credits from agriculture projects also increased in volume by 283%.

  • Credits that certified additional robust environmental and social co-benefits “beyond carbon” had a significant price premium. Credits from projects with at least one co-benefit certification had a 78% price premium compared to projects without any co-benefit certification. Experts interviewed by Ecosystem Marketplace emphasized that these certifications are increasingly becoming required by buyers, and many are preferentially seeking them out. Projects working towards the UN Sustainable Development Goals also demonstrated a substantial price premium at 86% higher than projects not associated with SDGs – yet another indicator of buyer emphasis on carbon credits that do more for people and the environment.

  • Newer credits are attracting higher prices, indicating that buyers are seeking newer vintages with more robust recent methodologies, or are paying more for credits that align with their current emissions years as much as possible. The premium for carbon credits with a more recent vintage, representing more recent emissions reductions activities, was 57% above older credits, compared with a 38% recency premium in 2021, using a historical five-year rolling cutoff date from the year of transaction.

  • CORSIA-eligible project credits gained market value, driven by a 126% increase in price. This notable growth of CORSIA in the VCM in 2022 indicates a growing relationship between compliance markets and the VCM, a key consideration for market participants because, 1) quality criteria set by CORSIA have been incorporated by the Voluntary Carbon Markets Integrity Initiative (VCMI) until the Integrity Council’s core carbon principles are implemented, 2) CORSIA enters its first compliance phase in 2024, and 3) countries are beginning to implement Article 6 of the Paris Agreement.

According to Stephen Donofrio, Managing Director of Ecosystem Marketplace, “This is a critical moment for the voluntary carbon markets. While the data do not show the same type of growth by volume present in previous reports, our market analysis shows a critical, increased shift in market behavior towards integrity and quality, shown by an impressive uptick in average credit price. Buyers in the voluntary carbon markets are becoming increasingly sophisticated, and they want to know the true impact of their dollars.” 

The new report from Ecosystem Marketplace analyzes self-reported carbon credit transaction data from over 160 respondents to their annual market survey, representing credits from 1,530 projects and over 130 project types traded worldwide. Respondents typically include project developers, investors, and intermediaries. Data on project registrations and credit issuances and retirements were sourced from project registries. 

The full report, Paying for Quality: State of the Voluntary Carbon Markets 2023, is available for download here. 

Shades of REDD+
Harmonized Biodiversity Claims as a Solution for Fragmented Biodiversity Markets

22 November 2023 | Interest in market-based approaches to support of biodiversity conservation and restoration has grown significantly since December 2022, when the Parties to the United Nations’ Convention on Biological Diversity (CBD) adopted the Kunming-Montreal Global Biodiversity Framework (GBF.) The GBF sets a financial target of mobilizing at least USD 200 billion per year by 2030 for biodiversity protection and restoration. Since public finance will fall short of this target, the GBF recognizes that “innovative schemes such as payment for ecosystem services, green bonds, biodiversity offsets and credits, and benefit-sharing mechanisms, with environmental and social safeguards” (GBF Target 19) may be needed to close financing gaps.

In October, Climate Focus published Biodiversity Credits Markets: Charting Pathways for Early Investment and Sustainable Market Growth, a paper that provides guidance to investors by categorizing different ‘biocredit schemes,’ i.e., frameworks that seek to create tradable, non-offset biodiversity certificates. The findings of the paper make clear that, so far, there is no promising emerging approach that could channel significant amounts of private finance to high-biodiversity value ecosystems in the Global South. One way to create incentives for private finance to flow via biodiversity conservation in the light of multiple and mostly localized biocredit systems is the formulation of a set of headline contribution claims that recognize financial contributions to biodiversity. Such contribution claims would be non-tradeable confirmations of financial contributions to biodiversity protection by private actors. Standardized biodiversity contribution claims would allow corporates to communicate and report support for biodiversity protection, and governments could recognize such contributions in support of GBF Target 19.

Challenges and risks of a global biodiversity market

Global markets in certified biodiversity credits modelled after carbon markets has been touted as a solution to mobilize funding from private sources. However, biocredits markets come with important caveats:

  • First, while offsetting environmental harms with environmental goods is contested but often accepted in carbon markets, offsetting is simply unacceptable in global biodiversity markets. Carbon markets trade offsets because reducing greenhouse gas emissions may, to some extent, be fungible, but nature is definitively not fungible. Biodiversity is highly context specific: the loss of species in one place cannot be compensated by creating new habitats in another.
  • Second, finding metrics that apply to conservation or restoration outcomes in widely differing habitats is close to impossible. Therefore, generating biocredits requires the definition of ecosystem-specific indicators, which makes the standardization of a biocredit unit difficult.
  • Third, markets may disproportionately allocate funds to conservation over restoration to prioritize short term crediting of “uplifts” or investments into “charismatic” species’ habitats over long-term conservation goals.
  • Fourth, biodiversity restoration requires engagement over long timeframes, which makes the year-to-year verification and financing required for biocredits challenging.

As an alternative approach to biocredits schemes, biodiversity markets could be tagged to carbon markets and companies could be encouraged to invest in carbon credits with positive biodiversity impact attributes. The advantage of this option is that the Sustainable Development Verified Impact Standard (SD Vista) and the Gold Standard for the Global Goals (GS4GG) already offer certification systems for biodiversity attributes. However, such attribute certifications also limit biodiversity investments to projects that have reducing greenhouse gas emissions or enhancing carbon removals as their primary goals. This means that attribute biodiversity finance will not be able to mobilize financing for the conservation of high-integrity ecosystems because emission reductions or removals credits cannot be generated from projects in ecosystems that are not under threat. Additionally, tying biodiversity investments to carbon markets with their uncertain future also creates risks for the future of biocredits markets.

National and local incentive schemes can be more targeted

An increasing number of national and local payment-for-ecosystem services (PES) systems that value biodiversity investments are emerging. These include government-driven initiatives such as the Australia’s Nature Repair Market Bill or the UK’s Nature Markets Framework, private initiatives such as NaturePlus credits designed by GreenCollar in Australia, and Voluntary Biodiversity Credits designed by Terrasos and ClimateTrade in Colombia. National schemes have the advantage that they can be tailored to specific ecological contexts and promote specific national conservation goals. Government-driven regulatory systems have the additional advantage that they link credit generation to mandatory compensation rules, which create demand for investments into biodiversity by allowing liable entities to fulfill their obligations by purchasing credits. Local PES systems can be even more targeted because they rely on simpler protocols than national schemes or international markets, and can be more specific in the definition of biodiversity-related action. Both national and local systems can be more easily aligned with countries’ policies than international schemes.

A significant disadvantage of local and national systems is that because they are specific to ecological and policy contexts, their metrics are often not comparable, and these systems are unlikely to produce standardized credits that can be transferred internationally. These systems may be limited in scope and scale, and they rarely mobilize international finance. National and local schemes are also confusing for international investors, who have little appetite to appraise dozens of different systems and schemes. Even if investors decide to explore national or local markets, evaluating equivalence between benefits generated in different countries is a daunting task.

Creating internationally accepted claims in lieu of credits

While lacking the versatility of a global biodiversity credit market, a preliminary solution to the biodiversity financing challenge may be the definition of a set of standardized biodiversity claims that recognize investments into biodiversity and contributions to Target 19 of the GBF without requiring the transfer or “use” of biocredits. Such harmonized contribution claims could create incentives for international investors to support a range of approved local or international biodiversity supporting PES or crediting systems. Instead of certifying credits based on biodiversity outcomes, an international governance body could focus on certifying credible biocrediting schemes that meet a set of minimum requirements (e.g., policy alignment, clear definition of biodiversity outcomes, and verification of such outcomes.) In other words, a system of claim governance would focus on accrediting biodiversity supporting systems that could be supported by international investors.

A set of recognized nature-related contribution claims could enhance the appeal to corporates of investments in biodiversity and fill the gap in investment incentives left by the absence of harmonized international biocredit schemes. The proposed claims could be recognized by The Global Goal for Nature as fulfilling nature-positive goals, the Science Based Targets Network as meeting science-based targets for nature, or the Taskforce on Nature-related Financial Disclosures. The claims would ensure international recognition of local biodiversity investments while navigating and avoiding the challenges that come with biodiversity credits markets. The proposed claims could

  • be linked to investments in national biodiversity credits schemes as well as in emerging international systems that meet a set of minimum program requirements set by the contribution claim framework
  • reflect the amounts invested, the approved biocredit scheme, and the country of investment
  • recognize biodiversity investments as valuable contributions to Target 19 of the GBF
  • require the retirement of biocredits that are linked to the proposed claims; should credits be issued by an approved program they would have to be retired
  • be linked to criteria for a company’s biodiversity performance and require companies to demonstrate positive biodiversity outcomes across their value chains as well as mainstreaming of biodiversity concerned throughout the entire organization.

A solution?

In sum, global markets for biodiversity credits face significant, possibly prohibitive, challenges. Encouraging investments in “co-benefits” of carbon projects enhances the value of such projects but is unlikely to mobilize investments into biodiversity at scale and limits investment to a very narrow set of GHG mitigating activities. Investing in emerging national or local systems is unlikely to appeal to international investors because they have to navigate a thicket of different contexts. One way forward may be a set of nature-related claims that are recognized by national governments as positive contributions to the GBF and allow corporates to communicate their commitments to biodiversity conservation and restoration.

The proposed contribution claim approach could be implemented relatively quickly and would avoid multiple entities getting stuck in lengthy, costly, and competitive processes to develop frameworks, registries, and other infrastructure required for biodiversity credits markets. The proposed claims could be reported in a fully transparent and comparable way and reward companies with recognition for their international engagement in biodiversity protection.

Photo credit: Michael Philips

What role can carbon markets play in preserving forests?

14 November 2023 | Ever since REDD+ (reducing emissions from deforestation and forest degradation) burst on to the international scene at the climate change negotiations in 2008, market-based transactions of forest carbon have been envisaged as a way of transferring billions of dollars of climate finance. The hope was that funds would flow not just to the governments of tropical-forested developing countries but further on to indigenous peoples, forest-dependent local communities, and those protecting forests.

THIS ARTICLE FIRST APPEARED IN SDG ACTION

To date, this has not happened. Of the market-based climate finance that has flowed during the past 15 years, it has been primarily through REDD+ projects in the voluntary carbon markets (VCMs). This has not been anywhere near sufficient to ensure the preservation of the world’s great forests biomes. After slowing slightly in 2021, this year’s Forest Declaration Assessment reports that global deforestation rates increased in 2022. Some 66,000 square kilometers of forest were lost, putting the world 21% off track to meet the goal of ending deforestation by 2030 set by more than 140 countries at COP26 in Glasgow (after previous pledges of ending deforestation by 2020 were already missed).

With the rapid increase in companies setting net-zero targets and committing to offset their emissions, there was great hope that VCMs, through REDD+ projects, would drive climate finance to forests. However, since an article published in The Guardian in January this year revealed that “more than 90% of rainforest carbon offsets by the biggest certifier are worthless,” there has been a steady stream of news reports questioning the integrity – indeed, the validity – of REDD+ VCM credits.

In mid-October, The New Yorker published a long exposé on the Kariba mega-project in Zimbabwe – one of the largest REDD+ projects. Forest carbon projects like this are responsible for about a third of all carbon credits certified by Verra, the world’s leading standard setter for VCMs. Now with the reported collapse of the Kariba project and the price of REDD+ project carbon credits at an all-time low, project-level REDD+ offset credits are mortally wounded.

In addition to the issues raised in the press, it is becoming clear that transition plans to net zero that are considered “high integrity” will only allow a small proportion of a company’s value chain emissions to be offset with forest carbon project credits. So, while REDD+ project credits might continue to be developed as offsets for residual emissions within value chains, and while project methodologies, monitoring, and carbon accounting data will continue to improve, such credits are unlikely to be highly rated. What’s more, there will always be questions regarding the integrity of these carbon offsets.

Yet REDD+ is essential if the global community has any chance of meeting the Paris Agreement targets by 2030. There is certainly a need to reward tropical-forest developing countries for the efforts they make in reducing deforestation and forest degradation. Are there market mechanisms other than project credits that can direct desperately needed climate finance to these countries to support their Paris Agreement ambitions (referred to as nationally determined contributions, or NDCs) and help preserve forests?

Jurisdictional REDD+ offset units

Under the United Nations Framework Convention on Climate Change (UNFCCC), REDD+ does not include project-level methodologies. VCM REDD+ projects took off separately while the UNFCCC approach was still being negotiated. The UNFCCC takes a “jurisdictional” approach (J-REDD+), where reductions in emissions from deforestation and forest degradation are measured against national, historical levels based on the government’s national greenhouse gas (GHG) inventory.

Many of the integrity concerns raised with REDD+ VCM credits are better addressed at the jurisdictional level – for example, leakage, inflated baselines, inflated methodologies, or lack of additionality (GHG reductions are not considered additional if they would have happened anyway without a market for offset credits). Moreover, tropical-forest developing countries have been building their capacities to deliver J-REDD+ results for the past 15 years. J-REDD+, therefore, has the potential to supply the largest volume of high-quality, nature-based climate results.

The market for J-REDD+ is just getting going, with the creation of an international standard for J-REDD+ credits called TREES. There has been initial interest from the market for TREES units, as evidenced by the LEAF Coalition. Hopes are therefore high that jurisdictional approaches could be a game-changer in the carbon market, with the potential to deliver large-scale, high-quality issuances.

However, J-REDD+ still faces issues – such as carbon rights and permanence – that make it hard to scale up as offsets. The first TREES units were only issued at the end of 2022 (for Guyana) and these were a particular type of TREES units called “high forest, low deforestation” (HFLD) units – for which there are questions about the appropriateness of using as offsets. No other TREES units have been issued yet. Furthermore, the TREES standard is not universally accepted. The Coalition for Rainforest Nations has tried to introduce competing “REDD.plus sovereign credits”. There have been few buyers for these units, but it has caused confusion and added to the uncertainty about REDD+ in the offset market.

Forest ITMOs

“Internationally transferred mitigation outcomes” (ITMOs) were created under Article 6.2 of the Paris Agreement to allow countries to collaborate on achieving their NDCs (referred to as “cooperative approaches”). What is unique about ITMOs is the requirement to include a “corresponding adjustment” during the transaction – meaning the emissions reductions or carbon removals are deducted from the host country’s NDC when they are added to the purchasing country’s NDC. Some think corresponding adjustments can solve the integrity concerns associated with forest carbon, making J-REDD+ a perfect match either for sovereign buyers needing to meet their NDC targets, or even for companies looking for “Paris compliant” credits.

Blue Carbon, a sovereign-backed private company based in the United Arab Emirates, has actively entered the market looking to buy forest ITMOs. It has signed memorandums of understanding with several African countries and has had discussions with Suriname – the first country to announce it will be putting forest ITMOs on the market (4.8 million tonnes of CO2e HFLD units).

Some debate continues as to whether forests are included within the ambit of an ITMO. This speaks to the esoteric nature of UNFCCC COP decisions. While there are no specific Article 6.2 eligibility limitations, ITMOs still need to meet requirements to ensure the environmental integrity of the mitigation outcome. This includes the requirement that ITMOs are real, verified, and additional – and manage risks of non-permanence. This could make it hard for forest ITMOs to be considered as high integrity.

Although there is currently very little “case law” for either J-REDD+ or forest ITMOs, neither solves the fundamental limitations of forest carbon (especially emissions reductions) being used as offsets. Whether it is a country wishing to use forest carbon offsets to meet its NDC target, or a company wishing to use forest carbon offsets to achieve its net-zero target, both will continue to face the same “greenwashing” risks that have already been exposed with VCM REDD+ projects. It’s hard to avoid the conclusion that forest carbon credits are simply not suitable as offsets.

Beyond value chain mitigation

Is there another market-based approach for forest carbon? There is an emerging concept of “beyond value chain mitigation” (BVCM) contributions as complementary to offsets. BVCM is where a company contributes to the collective global effort to reach net-zero emissions. The mitigation action is not used to offset the company’s emissions. Instead, the buyer makes a “contribution claim,” representing a contribution to both the company’s climate goals and to global mitigation efforts.

The rationale for BVCM is that:

  • companies should be thinking about their role in the global net-zero transition, beyond abating their own emissions
  • companies that do not take clear, credible climate action today – and go beyond commitments, to delivering on targets in line with the goals of the Paris Agreement – risk having their corporate reputation hit
  • there are important sources of emissions outside corporate value chains, such as those linked to subsistence agriculture
  • government policies are not yet sufficiently ambitious to deliver a 1.5°C future

In this way, a company would not be purchasing J-REDD+ credits to offset its own emissions. Instead, it would decarbonize its own value chain and use the purchased J-REDD+ credits to demonstrate that it is making a contribution beyond its own value chain.

This concept is being advocated by the Science Based Targets initiative (SBTi), widely considered to be the main driver of high-integrity, net-zero targets. SBTi states:

“Companies should take action or make investments outside their own value chains to mitigate GHG emissions in addition to their near-term and long-term science-based targets. Examples include purchasing high-quality, jurisdictional REDD+ carbon credits that support countries in raising the ambition on – and, in the long-term, achieving – their nationally determined contributions.”

BVCM is perfect for forests. When J-REDD+ credits are not being used to offset actual value-chain emissions but are being claimed as a “climate contribution,” debates such as whether to use emissions reductions versus carbon removals become moot. It also makes the inherent risks (permanence, baselines) more acceptable and questions such as who owns the carbon rights under J-REDD+ more manageable, as a tradeable, commoditized asset is not created.

It is not yet clear if there is a demand for BVCM, but a strong case can be built if BVCM claims are recognized and rewarded. An analysis conducted by Systemiq for SBTi in 2021 found that almost 70% of surveyed companies felt that the private sector should be doing more than abatement of value chain emissions.

If BVCM climate contributions take off, we may finally have found a role that carbon markets can play in preserving forests – and a way to reward tropical-forest developing countries if they can halt deforestation by 2030.

Punish the Leaders, Reward the Laggards?

9 November 2023 | Imagine you worked for a company where staff were asked to innovate, to bring in new clients, to increase sales, to, in short, make more money and do things better for the company. Now imagine that in that company those people who were trying new things, measuring their successes and failures, and achieving modest gains were punished and called out for not doing enough. All while those who did nothing, who literally sat at their desks, didn’t measure any progress, and continued wasting money as they did before, experienced no repercussions.  

How quickly do you think that company would achieve its goals? Not very quickly I would venture. And yet, that is exactly what we are doing with businesses and their climate commitments. Companies that reduce emissions and go beyond those reductions and use offsets are criticized for not doing enough, or even sued, while their peers who are not doing anything, who continue emitting as they always have, not even measuring their progress, get praised (or at least are not bothered). This is no way to make progress.  

To get a sense of how dysfunctional the offsets debate has become, all one has to do is read recent criticisms of carbon markets in Bloomberg, the Guardian, the New Yorker, or even Last Week Tonight with John Oliver. The criticisms have been flying fast and furious. It has been a tough year for voluntary carbon markets (VCM). There have been accusations that offset projects aren’t real or as good as they claim, criticisms that offsets are just greenwashing, and even lawsuits – the litany is long.  

The effects of this barrage of negativity have been chilling; companies who a few years ago were trying to reduce their emissions have now hit the pause button. Data on activity in the carbon markets indicate that demand has decreased markedly. The thought likely crossing companies’ minds is, “Why bother doing anything if I am likely to be crucified in the press or even sued for my trouble?” It is incredibly discouraging for companies to be leaders in climate action if the leaders get pummeled and the laggards skate on by. And it is certainly heartbreaking to watch.   

Now compare this to recent research on how companies that participate in the VCM actually behave. For instance, earlier this month, Forest Trends’ Ecosystem Marketplace launched their report,  All in on Climate: The Role of Carbon Credits in Corporate Climate Strategies. Overall, they found that companies buying carbon credits are actually doing more to reduce their own emissions than those who aren’t.  

Using available data from thousands of companies, they found that, far from being greenwashing or a distraction, participation in the VCM is a leading indicator of climate action. In other words, companies that participate in the VCM are far more likely to be reducing emissions than their peers. In fact, they spend three times more on emissions reductions than those who don’t participate in the VCM. Not only that, but they are far more likely (3.4 times more likely) to have science-based climate targets, and they are more transparent about their emissions than their peers. This report, and others like it, injects a dose of data and realism into a very fraught space. 

In short, companies involved in offsets and the VCM aren’t the worst actors on climate; they are the best of an admittedly slow bunch. But even if it is a bad bunch, as some might argue, how is that bunch going to get better at reducing their emissions if we keep executing the leaders while the laggards bask in their inaction? Let’s not smother what little progress there is.  

Far from being sued, corporate leaders need to be supported. They need the creative space to take risks, invest in carbon projects, and develop emissions reductions strategies. They need the VCM. We should be pushing them to do more, not beating them into submission such that they ultimately do less. Indeed, we should be shifting our criticism to the laggards instead. Participants in the VCM are at least trying to do something about climate change and, based on Ecosystem Marketplace’s research, many are even succeeding.  

All of this is not to say that offsets and the VCM shouldn’t be criticized. Not at all. We should do better. We NEED TO DO BETTER. In fact, an array of VCM “integrity initiatives” are working hard to come up with ways to do just that. But let’s not cripple or even dismantle this system! It may be, to paraphrase Winston Churchill, “the worst of all possible systems,” but it is better than all the others. I mean, sure, if only we could stop emitting and if only we had functional governments that came up with sensible legislation to address climate change, then maybe all would be great and we could do without offsets or the VCM. But come on, is any of that happening? Who are we kidding? Can we really afford to do without the VCM?  

As we approach the critical deadlines of 2030 and 2050, should we really chide corporate leaders for trying to do something when so many of their peers do less than nothing? Is this a good strategy for progress? Can we really afford to shame those who are doing best at addressing this problem? Lord knows that there is already precious little progress in the battle against climate change. Let’s not smother what little there is. There is too much baby in that bath water.  

New EM Insights Briefing: State of the Voluntary Carbon Markets 2023

In the lead-up to COP28, Ecosystem Marketplace is excited to publish its flagship report covering the latest prices, trends, and insights related to international voluntary carbon markets.

During this webinar on Tuesday, November 28 @ 10 am ET / 1500 GMT+1, EM’s Managing Director, Stephen Donofrio, will present the key findings from its new report, and guest speakers will share their reflections on the analysis, followed by Q&A.

Guest speakers:

Register here:

Support for Ecosystem Marketplace’s State of the Voluntary Carbon Markets work is provided by:

New carbon credit integrity guidelines could boost buyer confidence in agriculture

1 November 2023 | (First published on EDF’s Blog: Climate 411 on 26 October 2023) Voluntary carbon markets are a source of much-needed finance to help the agriculture sector realize its potential for climate mitigation. Still, carbon credit buyers face challenges in differentiating carbon credits that represent real and verifiable climate impact, based on the latest science and best practices in a crowded marketplace. It takes due diligence to get this right, and changes are underway to make the process easier.  

New guidance on high-integrity carbon credits from an independent governance body has important implications for all credit categories, including those generated by the agricultural sector.  

The Integrity Council for the Voluntary Carbon Market, also known as the ICVCM, recently launched its Core Carbon Principles, known as CCPs, a set of definitive global threshold standards for carbon credit quality. Soon, the ICVCM will begin an assessment process to determine whether carbon-crediting programs meet the CCP criteria, and whether certain carbon credit categories can be fast-tracked for CCP-approval or need to be more deeply evaluated to determine their eligibility.   

The ICVCM will issue CCP-approval labels for carbon credits, a demarcation intended to build trust in the voluntary carbon market and unlock investment by making it easier for buyers to recognize and put a price on high-integrity carbon credits. 

While CCP-approval decisions have not yet been made for agriculture credit types, the recently released guidance provides insight into key considerations for making those determinations.

Here’s what their criteria may look like in practice for the agriculture sector.

1. Carbon credits for agroforestry, agricultural soil carbon sequestration, and grassland and rangeland management mitigation activities may be eligible for the CCP-approved label but with elevated safeguards to mitigate the risk of releasing stored emissions. 

The past several years have seen a boom in credit issuance and purchasing for activities that take greenhouse gases out of the atmosphere and store them, including enhanced soil carbon sequestration on agricultural lands. However, buyers should bear in mind that the ICVCM determined that agroforestry, soil carbon sequestration on croplands and grassland/rangeland management — along with strategies to store and protect other natural carbon reservoirs — have a substantial risk of reversal or non-permanence of climate benefits. This could be due to a change in land use or management or uncontrollable climate events such as droughts, floods, warming temperatures and fires.

The ICVCM guidance requires project developers to monitor, report and compensate for reversals for a minimum of 40 years to account for such reversals. This would not play out at the individual farm level, but rather by maintaining and managing an aggregate project-level buffer pool of robust backfill carbon credits, which would be held on reserve as an insurance mechanism against the loss of stored carbon. Per the CCP guidance, buffer pools would need to meet credit composition, transparency and other management requirements.  

Such safeguards against reversals could potentially open the door to the CCP-approval label if other quantification and verification issues are also addressed, giving buyers more confidence in these credit categories. Some crediting programs already follow these requirements, while others will need to make improvements for their credits to qualify for the label.

2. Categories of carbon credits that prevent or permanently reduce methane emissions from livestock operations are likely to be eligible, with a chance of being fast-tracked for CCP-approval.  

Buyers should be aware that there is an urgent need to mobilize capital to fund practices and technologies that avoid livestock methane emissions. Livestock operations are a major contributor to global methane emissions, a potent greenhouse gas that has more than 80 times the warming power of carbon dioxide over the first 20 years after its release. 

Another independent assessment body for carbon crediting methodologies — the Carbon Credit Quality Initiative, a collaborative initiative between EDF, World Wildlife Fund and Öko-Institut  — already found that there is a strong need for carbon market revenues to make projects such as industrial-scaled and household-scaled biodigesters fed with livestock manure financially viable for farmers. 

Given the clear economic need and permanence of these avoided emissions, these credit categories may be eligible for a fast-track to the CCP-approval label.  

There are critical opportunities within the agriculture sector to avoid and remove climate-warming emissions and quality assurance guardrails are essential to creating confidence in a carbon market that works for farmers, credit buyers and all entities in between. By purchasing high-integrity agricultural carbon credits that align with ICVCM’s Core Carbon Principles, credit buyers have the opportunity to help the agriculture sector fulfill its potential as a key climate solution.  

California Aiming to Improve the VCM

24 October 2023 | A primary point of contention within the voluntary carbon market (VCM) centers on its transparency, or the lack thereof. Greenwashing and transparency issues permeate multiple facets of the VCM, spanning the disclosure of base-line calculation methodologies used, the credibility of offset projects, the availability of project performance data, transaction visibility, pricing, and numerous others.

This article first appeared in the Gordian Knot Strategies “Sliced Newsletter

Part of the transparency problem is that companies who voluntarily purchase carbon credits have previously not been required to disclose their purchases.

As of this month, California has initiated measures aimed at addressing that exact detail with the goals of enhancing transparency and combatting greenwashing.

On October 7, California Governor Gavin Newsom approved Assembly Bill (AB) Number 1305. The bill – the Voluntary Carbon Market Disclosures Business Regulation Act (VCMDA) – mandates VCM disclosures. It was written by Assemblymember Jesse Gabriel and co-written by State Senators Lena Gonzalez and Monique Limón.

The new law impacts entities inside the state of California that fall into the following categories:

  • Entities marketing or selling carbon offsets (Section 44475)
  • Entities buying or using carbon offsets and making net-zero or emission reduction claims (Section 44475.1)
  • Entities making net-zero or emission reduction claims (Section 44475.2)

All entities must now provide critical information on their websites, such as details about offset projects (e.g., locations, timelines, protocols, etc.), credit calculation methods, and data for independent verification of emission reduction estimates. The full list of information that must be listed on the entity’s website can be found in Section 44475 here.

It is important to note that these disclosure requirements do not affect entities that:

  • Are not based in or do not operate within California
  • Do not purchase or use carbon offsets within the state
  • Do not make net-zero or emission reduction claims within the state

For context on the scale of activity within the state, the Berkley Carbon Trading Project, as of May 2023, lists 167 carbon offset generating projects in California across the voluntary registries American Carbon Registry (ACR), Climate Action Reserve (CAR), and Verra (VCS).

For anyone who has tried to explore a carbon registry in search of details about credit purchasers and their associated transactions, they often encounter limited information. ACR, for example, which lists approximately 15 Californian project developers and 40 Californian projects (at various stages of development), does keep tabs on the retirement of offsets. However, it does not require offset entities to reveal their identities. As a result, it’s not unusual to come across entities listed under generic identifiers like “Company 974” or “Company 786.”

So, the 15 Californian project developers will now be obligated to provide the essential details on their websites specified by AB 1305. And should an entity like “Company 974” operate within California or purchase credits from a Californian project and assert a reduction in their greenhouse gas (GHG) emissions as a result, it is also required to publicly disclose project-related information.

The law, which goes into effect January 1, 2024, carries a hefty violation fee.

Violators can be charged a penalty of up to $2,500 per day for each day of non-compliance or inaccurate information on their website, not exceeding a total of $500,000. This penalty can be enforced through legal action by the Attorney General or local authorities in California. Disclosures must be updated on the entity’s website at least once a year.

It’s worth mentioning that AB 1305 is in addition to other significant California bills recently signed into law by Governor Newsom. Just this month, he stamped his name on Senate Bill-253 and Senate Bill-261.

California’s Senate Bill (SB)-253 mandates regulators to establish disclosure rules by 2025 for companies with annual revenues exceeding $1 billion, impacting approximately 5,300 corporations, including major players like Apple, Chevron, and Wells Fargo. Starting in 2026, these companies will need to publicly disclose their operational and electricity-related carbon emissions. By 2027, they must also report “scope 3” emissions, including those from their supply chains and customers.

SB-261, will extend these obligations to businesses with over $500 million in yearly revenue, starting in 2026.

California is genuinely stepping up its role. Collectively, these measures hold the potential to substantially enhance aspects of transparency across the VCM. Given California’s frequent position as a trailblazer in advocating policy and regulatory reforms, it’s probable that its initiatives will influence and extend to other states, regions, and countries.

Perhaps Governor Newsom heard our recent call for a global climate finance hero?

Shades of REDD+
Reforming the International Financial Systems to Value High-Integrity Forests

19 October 2023 | Next week, the Republic of the Congo will host the Three Basins Summit of the Amazon – Congo – Borneo – Mekong – Southeast Asia tropical forest basins. These three basins account for 80 percent of the world’s tropical forests, which house two-thirds of terrestrial biodiversity and play an essential role in regulating the global carbon balance. Rarely has there been an event where forests play a more central role than the forthcoming meeting in Brazzaville. The Summit provides a unique opportunity to make the case for a reform of the rules of global public finance to value tropical forests as global climate and biodiversity assets.

The international financial system fails to recognize the value of tropical forest systems as global assets that are essential for a safe and healthy environment for all people.  Countries located in the three basins are developing or emerging economies that face the challenge of combining conservation with development goals. These countries often depend on external finance – private and public – to invest in the institutions, capacities, policies, and infrastructure that are essential components of sustainable development. Such finance often demands investments in activities that promise stable and fast returns. As a result, the international financial system continues to favor short-term exploitation of land and resources over conservation and sustainable use to the detriment of our climate and ecosystems.

A reform that effectively supports vulnerable countries is overdue, and another crisis is looming.

The call for a reform of the multilateral financial system is spearheaded by Mia Mottley, the Prime Minister of Barbados. In September 2022, Mottley issued a passionate warning that vulnerable developing countries were unable to meet the triple crisis of climate change, debt, and increased costs of living. Mottley left no doubt that the international financial system fails small island states that need greater liquidity to react quickly to climate-induced hurricanes and other catastrophic weather events. Multilateral finance organizations do not offer developing countries the tools to effectively respond to crises and invest in sustainable development and human, economic, and climate resilience. Small island states and other developing countries also need increased long-term finance to build climate-resilient economies. Mottley’s call for action resulted in the Bridgetown Initiative. This Initiative advocates for changes to the international finance system with the goal of increasing liquidity and access to resources for countries that suffer from an acceleration in the number and increase of severity of climate-induced disasters.

There is another urgent challenge for which the multilateral finance system needs to find an answer before it is too late. The world can only achieve climate and biodiversity goals if tropical forests are conserved. Protecting and maintaining them cannot be done by forest countries alone; instead, it is a global task that needs to be honored and supported through systems that recognize and value the essential ecosystem services that these forests deliver.

The international community is liable to help countries that face frequent destruction through catastrophic weather events. However, it is also liable to allow countries to pursue sustainable development without clearing their forests.

Global finance needs to be reformed and ‘grey’ finance needs to be ‘greened.’

It will be difficult to impossible to protect tropical forests if mainstream development finance is not reformed to account for climate action and nature conservation. The current multilateral finance architecture fails to value countries’ natural assets as global public goods. In the context of the UN climate and biodiversity regimes and the principle of “common but differentiated responsibilities,” the international financial system must create development incentives linked to the conservation – not the consumption – of forests.

This can be done by adopting the calls by the Bridgetown Initiative with amendments to reflect the needs of countries that administer tropical forests. The following proposed amendments would benefit countries in all three tropical forest basins.

First, since the protection of tropical forests involves safeguarding essential global ecosystem services that all people depend on, multilateral development finance organizations should agree to assign a monetary value to these forests that factors in the roles forests play in stabilizing the global climate, regulating the water cycle, and providing biodiversity resources—among other services. Considering forests to be national (and, in fact, international) assets would drive mainstream financial organizations to invest in long-term conservation. Valuing the roles of forests in the long term could replace the short-term perspective of the current financial system that emphasizes exploitation with a system that incentivizes managing forests as essential government assets.

Efforts to value the forests of the Congo Basin are already underway and can provide important input to the proposed reform of public debt management systems.  Proposed debt reforms call for the international financial system to account for the value of standing forests when establishing the debt limits of countries, their eligibility for finance, and the conditions under which they can access finance.

Second, public sector financing for forest countries — in particular those of the Congo Basin, which are often overlooked when it comes to allocating climate finance — needs to be scaled. This can be achieved by establishing a new funding window under the Resilience and Sustainability Trust administered by the International Monetary Fund. This funding window would provide vulnerable forest countries access to immediate and long-term financing in the face of the climate crisis. The funding window would make large-scale funds available for budget support and policy reform for forest countries to implement forest-friendly development strategies. Such a funding window could offer results-based payments in the form of grants to poorer countries that would be disbursed against the achievements of policy goals in addition to concessional loans with longer-term maturity and grace periods that enable countries to make investments into sustainable infrastructure and land use.

Action is particularly urgent in the Congo Basin

Multilateral finance organizations and other global financial institutions should value all high-integrity tropical forests. However, proper consideration of forests is particularly urgent in the Congo Basin, an expanse of 180 million hectares of forests that includes the world’s largest area of high-integrity forests. Although relatively undisturbed in historical terms compared to other tropical forests, the Congo Basin forests face severe risks. Deforestation in the region is increasing. In 2021, a total of 636,000 hectares were deforested across the six Congo Basin countries, amounting to nearly 10 percent of global deforestation.[1] This represents a 4.9 percent yearly increase in deforestation relative to the average annual deforestation in the Congo Basin in 2018-20 (606,000 ha/year).

Today, the climate and forest finance received by the countries of the region Congo is neither commensurate to the finance needs of the region nor reflective of the ecosystem and climate services that the region provides. Despite hosting the second largest forest area worldwide, the finance for forest and environmental protection in the Congo Basin is just about 4 percent (USD 40 million between 2017 and 2021) of the amount received by the Amazon Basin and Southeast Asia (around USD 1 billion each) in the same period.

Figure 3 – Finance targeting two forestry-related sectors (Forestry and general environmental protection sectors) received by three high-forest regions between 2017 and 2021. Source: OECD Creditor Reporting System (CRS) database.

In sum, the international financial system must be reformed to increase liquidity for developing countries by reducing debt burdens, resourcing climate-resilient economies, providing budget support, and recognizing the economic value of ecosystem conservation. The goals of such reforms are to address shortcomings of the international financial system, which currently make it impossible for developing countries to respond to global climate, biodiversity, and economic challenges, and to ensure sustainable development and green growth. Policymakers convening in Brazzaville should take a deep breath and seriously consider the financial needs of the Congo Basin and other forest countries and design a new fiscal framework that must establish continued incentives to protect those forests that are essential for all of us.

Hero image photo credit: Valdhy Mbemba on Unsplash

[1] Forest Declaration Assessment Partners. (2022).

Carbon markets: Time to listen to Indigenous Peoples and local communities

16 October 2023 | The Africa Climate Summit held in early September has largely been deemed a success, but it was not immune to challenges. The lead up to the summit was dogged by criticism that it had been coopted by Northern based philanthropies, NGOs and consultancies. This was underscored in a letter signed by over 400 Africa-based civil society groups.

As the other regional summits have proceeded, the question of whose voices are included is becoming a topic of interest and concern. While the crucial roles of Indigenous Peoples and local communities are increasingly recognized in addressing climate change and conserving biodiversity, they often remain peripheral to land management discussions amid accelerated global climate action.

It is the same in the case of carbon markets, where their role is no less significant, yet their voice and participation remain marginal. With the recent developments, challenges and volatility in these markets, we need to hear from the real partners on the ground.

This tumultuous year for carbon markets is due in part to transition pains triggered by progress under the Paris Agreement on Article 6, and to media articles that have questioned the value of voluntary market carbon credits. A necessary re-calibration is underway, with ‘high integrity’ becoming the new benchmark.

Voluntary markets and national commitments collide

Voluntary carbon markets, the spectrum of standards-setting bodies and associated private sector actors are trying to carve out a clear role and stake in the rapidly emerging carbon landscape.

Article 6 of the Paris Agreement permits countries to collaborate voluntarily in meeting their emission reduction goals outlined in their Nationally Determined Contributions (NDCs). As countries have independent strategies for realizing their NDCs, this could involve focusing on other sectors or otherwise result in a surplus of land-use sector carbon credits available for trading in domestic or international carbon markets. The sale and export of Verified Carbon Units by project developers understandably raises concerns around the implications of a country falling short of what are meant to be ever more rigorous NDC commitments.

In the Asia-Pacific region, some countries have paused voluntary carbon market project development and market engagement until they can fully assess and confidently engage, while developing a clear, strategic balance between their NDCs, Article 6 bilateral agreements and the voluntary carbon market. Throughout this transition, Indigenous Peoples and local communities are concerned about how, and under which modality, their interests are best served.

Voluntary carbon markets in transition towards integrity

In early 2023, The Guardian and Die Zeit newspapers claimed that over 90 percent of rainforest carbon credits issued by the world’s top certifier Verra had no value as they did not represent real carbon reductions. Verra and other industry experts have attempted to discredit the methodology used in the investigation. Despite rebuttals, the media coverage has resulted in anxiety in the markets, triggering some warranted self-reflection.

These media reports were among the factors that led to a decrease in the issuance and trading of nature-based carbon credits in 2023. In the previous two years, voluntary carbon markets reached record levels of trading. Although demand and transactions have slowly rebounded, trust and credibility in the voluntary carbon markets remain compromised.

Corporations still lack clear guidance on determining the characteristics and credibility of carbon credits, in comparison to the net zero approaches advanced by the Science-Based Targets Initiative. Until recent progress by the Integrity Council for the Voluntary Carbon Market and the Voluntary Carbon Markets Integrity Initiative, there has been no similar alignment on what high-integrity approaches to carbon credits should be. These integrity initiatives conduct multi-stakeholder forums which include actively soliciting the voices of Indigenous Peoples and local communities.

But more must be done to ensure that the voices of forest-based people are integral to the process. This may include creative approaches to engaging, communicating and interacting, as poor internet access and differences in cultural norms around decision-making processes and timelines may hinder meaningful, two-way collaboration.

Where Indigenous Peoples and local communities stand on carbon markets

Today, the voluntary carbon market, like many emerging markets, is fragile and volatile, yet optimistic. The trading of carbon as a commodity is uniquely complex, as the diversity of project types and complexity of social and ecological factors make one ton of carbon equivalent in one location, not fully interchangeable with a ton of carbon equivalent in another area.

Demand by corporates for offsets to drive their net zero targets is undiminished. However, their preferences are shifting from projects that avoid deforestation and associated carbon emissions to afforestation or reforestation projects with strong potential to remove carbon from the atmosphere.

Project developers and other stakeholders in voluntary carbon markets want to see the market survive, which at times may be at odds with the evolution of the Article 6 mechanism. But this should not detract from the important role of voluntary carbon markets as a means of developing tangible projects with targeted benefits to local stakeholders that will ultimately be nested within national accounting systems.

Indigenous Peoples and local communities express varying opinions and preferences when it comes to participating in carbon markets and engaging in carbon-related opportunities. While some are wary of commodifying nature, others see these markets as a lifeline to safeguard their lands, traditions and livelihoods. However, the most vocal discussions, particularly between carbon market supporters and critics, are often led by stakeholders from the Global North, sidelining the voices of the communities most directly affected.

An exception to this was an open letter published by Indigenous-led organizations in May 2023 in support of REDD+ (reducing emissions from deforestation and forest degradation). The letter explained why voluntary carbon markets remain an important and appreciated revenue stream for some of the world’s poorest forest dependent communities. Given the low profits for producers of many commodities in tropical Asian countries, such as approximately USD 162 per hectare per year for maize in Nan, Thailand according to RECOFTC’s assessments, even small flows of additional revenue to local communities can be transformative, offering alternatives to expand agricultural production.

Amplifying voices of Indigenous Peoples and local communities

Pendi is the Head of the Tambagguruyung community forestry group. In the photo, he sun-dries with care the coffee beans harvested from the group's plantation.
Pendi is the Head of the Tambagguruyung community forestry group. In the photo, he sun-dries with care the coffee beans harvested from the group’s plantation.

As Pendi, a man who belongs to a community forestry group in Ciwidey, Indonesia told us: “Our forest is our life…For decades, we have worked so hard to keep them alive as they are our main livelihoods.”

“[Social forestry programs] have opened the way to partnerships with the private sector on forestry through which we have agreements to keep our forests safe and share benefits fairly,” he said. “By working together, building trust and creating a transparent financial process between all stakeholders, we can keep the sustainability of our forests.”

RECOFTC works hard to amplify the voices and interests of Indigenous Peoples and local communities. As a founding member of the Peoples Forests Partnership which backed the open letter, we continue to listen to communities and to discuss the role of carbon and forests as an important source of livelihood and benefits for them.

We do this through our involvement in networks and partnerships, through research and by ensuring that representatives of Indigenous Peoples and local communities can learn from and express their views at key events such as Asia Pacific Climate Week and conferences of parties to the UNFCCC.

RECOFTC is convinced that while voluntary carbon markets are imperfect, they can be an important tool in combatting climate change while also delivering transformative benefits to local communities. But this will require thoughtful design and appropriate social and environmental safeguards.

Indigenous Peoples and local communities can be their own strongest advocates. Project-level REDD+ through the voluntary carbon market can provide opportunities for them to exercise autonomy, build capacities and co-design projects. However, this is dependent on industry ‘integrity’, with respect not only to carbon accounting methodologies but also to robust social standards in the private sector and at different scales of governance. It requires ensuring free, prior and informed consent, based on a well-developed understanding of the full opportunities and risks of such projects while respecting and upholding the rights of Indigenous Peoples and local communities.

As we navigate towards sustainable forest landscapes and robust carbon markets, the deep-rooted wisdom, lived experiences and essential priorities of Indigenous Peoples and local communities are more than beneficial—they’re indispensable.

Banner Photo: RECOFTC archive photo

New Ecosystem Marketplace Price Transparency for UK Voluntary Carbon Market

2023 October 11 | Ecosystem Marketplace has today for the first time released voluntary carbon market prices for the United Kingdom’s domestic carbon units of Woodland Carbon Code and Peatland Code projects covering transactions in 2021, 2022, and in the partial year 2023.

The average price of woodland units has increased from £15 in 2021 to £25 in the first half of 2023. Peatland units were £24 in 2022.

Ecosystem Marketplace collated transaction data from project developers and resellers through our Global Carbon Markets Hub. In total, EM received over 680 recent (2021-2023) transactions, representing over 0.5 Million carbon credits, from project developers and retail aggregators.

We are grateful to market participants who have reported their sales to date and encourage all players to keep reporting sales prices through the Ecosystem Marketplace Global Carbon Markets Hub – interested market participants should contact EM directly to enroll ([email protected]) as well as Woodland Carbon Code: [email protected] and Peatland Code: [email protected].

We will publish updates to this data in 2024 and hope to be able to show any differences in price by type of project, location, co-benefits, type of unit, or first vs onward sales.

Ecosystem Marketplace’s UK Carbon Price Index

Woodland Carbon Code Unit Prices – Volume and Value

   2021 2022   2023 ** Part Year
 Volume  233,022  212,275  60,355
 Spread Price (Difference between highest and lowest reported price)  £27.76  £33.20  £37.50
 Volume Weighted Average Price per PIU – Nominal Terms (ie reported each year)  £14.93  £19.13  £25.36
 Volume Weighted Average Price per PIU – Real Terms (ie adjusted by inflation to 2022 prices)  £15.74  £19.13  £24.15

** Over 99% of units transacted were Pending Issuance Units. Spread Price is max minus min price. Volume Weighted Average is the ratio of the value of credits traded to the total volume traded during a given timeframe ([price x volume summed over all transactions] / total volume). Assumed 5% inflation from 2022 to 2023 based on Bank of England Base Rate in June 2023.

Peatland Code Unit Prices – Volume and Value

   2021 2022   2023 ** Part Year
 Volume  —  11,416  —
 Spread Price (Difference between highest and lowest reported price)  —  £25.00  —
 Volume Weighted Average Price per PIU – Nominal Terms (ie reported each year)  —  £23.95
 Volume Weighted Average Price per PIU – Real Terms (ie adjusted by inflation to 2022 prices)  —  £23.95  —

 ** 100% of Peatland Units transacted were Pending Issuance Units. Spread Price is max minus min price. Volume Weighted Average is the ratio of the value of credits traded to the total volume traded during a given timeframe ([price x volume summed over all transactions] / total volume). Insufficient data reported in 2021 and 2023 to date.

See also:

This work was funded by the ‘Nature-based Solutions for Climate Change at Landscape Scale’ programme, sponsored by Defra and DESNZ.

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New research: Carbon credits are associated with businesses decarbonizing faster

12:01 Eastern Time, 10 October, 2023 | New research published today suggests that companies that participate in voluntary carbon markets (VCM) are leading across a range of measures of robust climate action, accountability, and ambition—across the board, outperforming companies that do not buy carbon credits.

The new study by Forest TrendsEcosystem Marketplace indicates that not only are carbon credits purchases funding rapid climate action, but are also associated with companies that are already addressing climate change in their direct operations and throughout their value chains.

Findings include:

  • Companies engaging in the voluntary carbon market are reducing their own emissions more
    quickly than their peers.

    • They are 1.8X more likely to be decarbonizing year-over-year;
    • 1.3X more likely to have supplier engagement strategies, an indicator that companies buying carbon credits are also actively working with suppliers, employees, and customers to address climate impacts; and
    • The median voluntary credit buyer is investing 3X more in emission reduction efforts within their value chain. They do so by investing in emissions reduction activities for their business and operations, including renewable energy consumption and the purchase of Renewable Energy Certificates (RECs).
  • Voluntary carbon buyers are more likely than non-buyers to have targets to address climate change, and their targets are more ambitious.
    • They are 3.4X more likely to have an approved science based climate target;
    • 1.2X more likely to have board oversight of their climate transition plans; and
    • 3X more likely to include Scope 3 Emissions in their climate target – notable given that Scope 3 emissions constitute the majority (91%) of carbon buyers’ emissions, and also are the hardest for companies to exert control over, as these emissions are generated by the company’s suppliers upstream, customers downstream, and other companies and organizations in the value chain.
  • The market has seen an uptick in demand for pricier, higher quality carbon credits. This suggests companies are willing to pay more to ensure supply-side integrity. The voluntary carbon market was valued at US$2 billion in 2021 and industry experts expect it to grow at least five-fold to between US$10-60 billion by 2030.

The report analyzes voluntary carbon markets transactions and corporate climate disclosures to the CDP (formerly, Carbon Disclosure Project)) by 7,415 organizations, on behalf of 590 institutional investor signatories with a combined US$110 trillion in assets, and 200+ major purchasers with over US$5.5 trillion in procurement spend.

Carbon credits represent a very small share of overall action: the analysis shows that the credits companies are buying represent on average just over 2% of their total emissions.

Stephen Donofrio, Managing Director, Forest Trends’ Ecosystem Marketplace says, “Our analysis indicates that corporate voluntary buyers are using science to backstop their investments into a suite of climate solutions, including project-based carbon credits. As companies are being called on accelerate their efforts to do the hard, but necessary, work of addressing GHG emissions in their value chains and decarbonizing their operations, over the past decade our market analyses have shown remarkably consistent results: that companies investing in voluntary carbon markets are outperforming their peers across a range of key indicators.”

María Mendiluce, CEO, We Mean Business Coalition, says: “This research clearly shows that companies which are investing in carbon markets – far from being laggards or greenwashers – are using carbon credits as part of ambitious, holistic decarbonisation strategies. Participation in high integrity carbon markets is a credible action against climate change and nature depletion.”

Dr. M. Sanjayan, CEO, Conservation International, says, “We are in a race against time, and the global scientific consensus is clear: we must invest in nature to combat climate change. Each and every one of us, from individuals to governments and the corporate sector, must play a role. Carbon credits offer an immediate way for businesses to reduce global emissions right now, and today’s report reaffirms what we’ve long known: carbon credit buyers tend to be leaders in taking climate action. Those criticizing them or lagging on the sidelines should take note.”

Mark Kenber, CEO, Voluntary Carbon Markets Integrity Initiative, says, “Ecosystem Marketplace’s independent analysis of companies engaging with voluntary carbon markets shows that most buyers are using carbon credits judiciously and as part of a transparent, ambitious, and integrated carbon strategy. This will only accelerate progress towards global climate goals. Sadly, corporate leaders have become reluctant to ‘talk their walk’ about carbon market strategies for fear of being type-cast as green-washers but I hope this report will help dispel mistrust and encourage more CEOs to invest and disclose more about their carbon credit investments.”

Dee Lawrence, Founder and Director, High Tide Foundation says, “With time running short to cool the planet, we need all the effective climate solutions we can finance. The data is clear, corporate partners who are decarbonizing the fastest are also supporting mitigation activities. It’s time we give credit to these leaders that are embracing holistic climate solutions with real funding.”

Max Scher, VP of Sustainability Research and Innovation, Salesforce, says, “As we face the devastating impacts of climate change, it’s imperative that companies do more, not less. As this new research shows, companies that are engaging in voluntary carbon markets are at the forefront of climate action. Well-utilized carbon credits can play a vital role in mitigating the impacts of climate change while supporting vulnerable communities and ecosystems.”

Tracy Johns, Carbon Removal Specialist, Meta says, “The IPCC makes it clear that there is an urgent need to do more to address global emissions. As we prioritize decarbonization to reach net zero across our value chain in 2030, supporting the growth of a healthy carbon market allows us to go even further by supporting underfunded priorities such as ecosystem restoration and novel engineered carbon removal. Carbon credits enable companies to accelerate global action today and direct carbon finance to communities most at risk from climate change. It is reassuring to see others following this roadmap by using carbon credits to complement the important internal efforts they already have underway.”

– ENDS –

3 Things We Heard at New York Climate Week

Please note this article was originally published by Forest Trends

Sep 29, 2023 | Last week, members of our team gathered in New York City for New York Climate Week 2023. Actors across the climate action space, from companies and NGOs to indigenous organizations and governments, gathered at the Nature Positive Hub, hosted by Nature4Climate. The focus of the Nature Positive Hub was to align nature and nature-based solutions with global climate goals and to help actors make the leap from ambition to implementation. Our team returned with three clear messages:

1. Partnerships need to focus on shared responsibility, rather than “support” and must be built on trust before finance reaches the ground.

What rang loud and clear from indigenous and local panelists throughout Nature Positive Hub events is that it is time for market actors to step up. At COP26 Glasgow in 2021, $1.7 billion was pledged to indigenous and local communities, yet a year later only 7% of these funds actually reached communities. This New York Climate week marks almost three years since these pledges, and communities are still searching for promised finance on the ground.

These communities are under immense pressure and cannot wait for investors and academics in the Global North to agree on the perfect way forward to keep providing the vital service of forest protection (i.e., the perfect is becoming the enemy of the good). Many agreed during a session hosted by Wildlife Conservation Society that at the end of the day, all actors need to “pony up” and start transacting carbon credits. Josh Tosteson, President of Everland, framed the market as a mechanism both “in service and in responsibility to” indigenous forest stewards.

Roselyn Fosuah Adjei, Director of Climate Change for Ghana’s Forestry Commission and one of Josh’s co-panelists, emphasized the need for a shift from a “support” to shared responsibility mindset in the market, including direct, up-front financing to communities on the front lines of climate change. “We need to see the demand [for carbon credits] actually becoming tangible,” she said. Looking beyond a single, up-front investment is what can enable communities to build more resilient governance and economic initiatives in the long-term.

Panelists of the Nature Positive Hub session, “Achieving scale: How can the VCM support countries to achieve ambitious climate action through REDD+ and meet sustainable development goals,” hosted by the Wildlife Conservation Society. From left to right: Beto Borges, Director of Forest Trends’ Communities and Territorial Governance Initiative; Jorge M. Rodriguez Zuñiga, Executive Director of the National Forestry Finance Fund (Fondo Nacional de Financiamiento Forestal, FONAFIFO), San José, Costa Rica; Daniel Ortega-Pacheco, Co-Chair of the ICVCM; Roselyn Fosuah Adjei, Director of Climate Change for Ghana’s Forestry Commission

Relationships built on trust, especially between indigenous and local communities and governments and/or companies, are particularly important to sustaining integrity and shared responsibility in the market. To this end, during Climate Week, Forest Trends, Everland, and Wildlife Works launched the Equitable Earth Coalition, which, in close partnership with indigenous peoples, local communities, and Global South countries, “is committed to developing a new voluntary carbon market standard and platform to help end deforestation and biodiversity loss by driving finance directly to communities.”

2. Carbon market actors need to counter negative press and greenhushing by sharing their project success stories and amplifying the data that show carbon credits are essential to climate action and ambition.

Market actors throughout Climate Week reported feeling unmoored by a string of recent news stories calling into question voluntary carbon markets effectiveness and the motives of those who engage in the market. Yet as emphasized by Beto Borges, Director of our Communities and Territorial Governance Initiative earlier this year, condemning all carbon markets due to confused data analysis or a few bad actors puts a critical source of funding for climate action at risk, especially for indigenous and local communities who need direct finance to continue protecting and managing their forests.

Moreover, one leading project developer told us that in the absence of a “safe space” to invest in carbon offset projects, investors, like companies, will either keep quiet about their emissions reductions strategies (“greenhushing”) or stop participating in carbon markets altogether. This is a blow to market transparency, climate ambition, and achieving global emissions reductions goals. Like investments in any other economic market, there will always be inherent risk in investing in carbon credit projects, and it remains important that companies feel encouraged to take this risk without being attacked by media, even if the outcome is not perfect the first time around.

One proposed way to start reclaiming the narrative is for the carbon market space to share more success stories from carbon offset projects on the ground. Showing people how their investments in or public support of high-integrity projects affect the lives of people on the front lines of climate change and forest protection could go a long way in making the human connection to carbon markets more obvious for less technical audiences. Just as importantly, we need more than “anecdata” on how companies are really using carbon credits as part of their climate strategies. Ecosystem Marketplace is releasing some major new analysis on this next month (Register for their webinar here).

3. Not going “beyond carbon” is a missed opportunity.

Another message repeated throughout Climate Week, especially from indigenous and local community representatives, is that market actors need to do a better job capturing the whole picture when we think about valuing carbon credits and the activities associated with generating them. Gustavo Sánchez, President of Red MOCAF in Mexico defined looking beyond carbon as valuing people, traditional knowledge, community wellbeing, and biodiversity. Communities are much more than just “beneficiaries” of a carbon project, they’re essential partners. Yet, traditional knowledge is generally not acknowledged or paid for like western concepts of intellectual property rights.

Broadening carbon project focus to include specific community concerns is not just about equity; it helps address the root causes of deforestation and land degradation, such as lack of livelihood opportunities in forest communities and not having the resources to resist illegal incursions on protected land.

Panelists of the Nature Positive Hub session, “Carbon Finance for Indigenous Peoples and Local Communities,” hosted by University of California Center for Climate Justice, Forest Trends, Peoples Forests Partnership, AMPB, and Network of Indigenous and Local Populations for the Sustainable Management of Forest Ecosystems in Central Africa (REPALEAC). From left to right: Aissatou Oumarou, Indigenous Leader of REPALEAC; Francisca Arara, Secretary for Indigenous Peoples of the State of Acre, Brazil; Gustavo Sánchez, Founding Member, Peoples Forest Partnership; Beto Borges, Director of Forest Trends’ Communities and Territorial Governance Initiative; Joseph Mwakima, Community Engagement Manager, Wildlife Works Kasigau Corridor REDD+ Project, Kenya; José Gualinga, Sarayaku Peoples representative; Tracey Osborne, Director, UC Center for Climate Justice

Francisca Arara, Secretary for Indigenous Peoples, State of Acre, Brazil and one of Gustavo’s co-panelists added that “Money can’t change everything, but it is important to complement existing activities in our territories, to improve food security, technology, communication, youth inclusion, and capacity building. [Direct, up-front financing] helps enable us to live how we want to live and strengthen our ways of life.” Engaging communities as equal partners from day one to co-create projects is a good place for any company, project developer, government, or NGO to start.

Companies are also increasingly seeing the consequences of not looking beyond carbon. Carbon-related activities are usually considered “finance” and siloed from activities connected to “nature,” such as water, agriculture, and biodiversity conservation. While these institutional silos can make some big challenges feel more manageable, it limits our ability to employ systems thinking to solve environmental problems, which do not lie neatly within the boundaries we create for our own convenience. The launch of the Taskforce on Nature-related Financial Disclosures’ (TNFD) risk management and disclosure framework during Climate Week is a promising signal that companies, financial institutions, and others are increasingly recognizing the financial risk of not addressing nature loss and are developing ways to better integrate their climate and nature priorities. The TNFD hopes to help companies recognize their nature-related risks, then report these risks in a more standardized, accessible way.

All sectors depend on nature to some degree. Cross-silo thinking and tools to support its implementation in a business environment is what is so desperately needed to generate real, concrete action towards the 2030 targets we are quickly approaching. Focusing on just emissions reductions or species conservation or water access is not cutting it anymore. The world needs systems-level change. As part of the life on this planet and those responsible for climate change, it is our responsibility to work on collaborative solutions that shift how we do business and interact with nature and keep building an equitable future for generations to come. We look forward to building on the momentum we experienced at New York Climate Week as we prepare for COP29 Dubai in a few months-time.

 

New Carbon Market Standard for Community-Centered Forest Conservation
Press Release

19 September 2023, New York – As government and corporate leaders gather for New York Climate Week, founding members of the Peoples Forests Partnership have launched the Equitable Earth Coalition. In partnership with Indigenous Peoples, local communities and Global South countries, the Coalition is committed to developing a new voluntary carbon market standard and platform to help end deforestation and biodiversity loss by driving finance directly to communities.

Michael Jenkins, CEO of Forest Trends, said: “As a longtime champion of trustworthy and accessible carbon markets, we are excited about a process that centers Indigenous Peoples and local communities. We believe this fills a major gap in the carbon ecosystem. Forest Trends is glad to support the Equitable Earth approach, and we look forward to seeing it deliver on its goal of rapidly scaling direct climate finance to communities on the front lines of efforts to safeguard forests.”

The goal of the Equitable Earth Coalition is to provide that solution through a new voluntary carbon market (VCM) standard and platform that is:

  • Developed in partnership with Indigenous Peoples and local communities, with an aim of delivering transformative finance directly to communities to fund their own development ambitions.
  • Founded on transparency, robust science and rigorous due diligence, a standardised approach to measuring carbon, societal and biodiversity impacts, and best practices for IPLC ownership and inclusion.
  • Holistic by driving investment both to stop deforestation, and to restore and steward forest ecosystems.
  • Designed to nest into national forest carbon programs that contribute to global climate commitments.

The founding members of the Coalition include Forest Trends, Wildlife Works and Everland.

Beto Borges, Director of the Forest Trends Communities and Territorial Governance Initiative, will be Chair of the Equitable Earth Indigenous Peoples & Local Communities Advisory Group.

“The voluntary carbon market can help address forest loss at its root, by providing essential finance to Indigenous Peoples and local communities to make conservation a viable development path. But the market has not been designed to meet the needs of the communities on the ground, who hold the key to reducing emissions from deforestation,” Beto Borges said. “A fit-for-purpose solution is needed now. Forests are being destroyed and we have run out of time.”

Also joining the Equitable Earth Indigenous Peoples & Local Communities Advisory Group will be:

  • Francisca Arara, Extraordinary Secretary for Indigenous Peoples in the State of Acre, Brazil, and President of the Regional Committee for Brazil of the Governors Climate and Forests Task Force
  • Gustavo Sánchez Valle, President of the Mexican Network of Community Forest Organizations (Red MOCAF)
  • Mary Allegretti, Anthropologist, President of the Institute of Amazonian Studies
  • Julio Barbosa de Aquino, President, National Council of Extractivist Populations (CNS)

The Coalition is growing rapidly and currently undertaking stakeholder consultations with IPLC leaders; Global South governments; project developers; carbon market participants; scientific and policy experts; and others, with further announcements planned for later this year.

For further information, visit www.eq-earth.com

New EM Insights Briefing Report Launch: The Role of Carbon Credits in Corporate Climate Strategies

Download the report.

The webinar slides and recordings are available in the links below.

Webinar recording:

Webinar slides:

Information on the webinar:

When: Tuesday, October 10th at 10:00 AM Eastern Time (GMT-4:00)

About: This virtual Ecosystem Marketplace Insights Briefing launched EM’s new report, The Role of Carbon Credits in Corporate Climate Strategies. The report serves as the first major update to its landmark “Taking Stock” report series since 2016. It is designed to look specifically at the climate-related behavior of companies that are involved in the VCM versus those who are not. Speakers discussed the key findings from the report. It was be followed by a Q&A session with the audience.

Speakers:
Stephen Donofrio, Managing Director, Ecosystem Marketplace, Forest Trends
Jenny Ahlen, Managing Director, Net Zero, We Mean Business Coalition
Will Turner, PH.D., Senior VP, Natural Climate Solutions, Conservation International
Alexia Kelly, Managing Director, Carbon Policy and Markets Initiative, High Tide Foundation
Mark Kenber, Executive Director, Voluntary Carbon Markets Integrity Initiative
Dee Lawrence, Founder & Director, High Tide Foundation

 

 

 

There are no high-quality REDD+ projects without indigenous and local communities

Carbon markets have historically taken as the primary indicator of project success the volume of carbon sequestered. But there is another barometer, often unevaluated but equally important: whether carbon finance strengthens the rights and livelihoods of indigenous peoples and local communities (IPLCs). Such human-centered metrics are generally referred to in the field as “co-benefits.” In fact, carbon markets’ success may depend on them.

IPLCs are the world’s best stewards of forests and biodiversity, and they should play a central role in nature-based carbon project development and implementation. Many defend their territories from land grabbing and illegal activities like logging, mining, and ranching at great personal risk. Bridging this gap between community well-being and emissions reductions is critical to enable resilient communities and reduce environmental impacts in the long term.

On the heels of Africa Climate Week, and as we approach New York Climate Week and COP28, we wanted to repeat the calls we are hearing from communities.

Carbon co-benefits must be redefined as “core.”

Ecosystem Marketplace recently published a story about the Kasigau Corridor REDD+ Project in Kenya. As Geoffrey Mwangi, the project’s Lead Scientist for Biodiversity and Social Monitoring, told us in an interview, social and environmental outcomes are intertwined. They cannot be separated. Even the term “co-benefits” is misleading. That project’s developers “recognize what [we] are calling ‘co-benefits’ as ‘core benefits,’” he explains.

Such a reframing can push a carbon project to focus more on taking pressure off communities on the front lines of forest protection. Communities suffering from livelihood insecurity and constant threat by illegal actors need support to protect their territories and develop sustainable, forest-based livelihoods. Without alternatives and equitable access to markets and other resources, communities may otherwise have no choice but to base their economies on natural resource extraction. Or they may not have the resources to expel illegal loggers, miners, and other intruders. The types of land management practices and projects that generate desirable co-benefits can help address some of these root drivers of deforestation and poor land use.

Projects that generate co-benefits enable communities “to spend more time on economic activities that are not reliant on natural resource extraction,” said Cara Braund, Conservation Office Manager at Wildlife Works, during a recent Ecosystem Marketplace webinar. Things like access to markets for forest products, such as cacao; adequate water infrastructure; or access to social benefits, like healthcare or education, can make a world of a difference to communities and help ensure long-term success of the projects they help steward.

In Kasigau, for example, Early Childhood Development Supervisor Catherine Simba explains why education is key to reducing deforestation in the long-term. “Before carbon,” she says, “my babies weren’t coming to school.” But with project money, she was able to implement a school feeding program and to subsidize secondary and university education – both of which greatly increased retention. With an education, these children can make a living without poaching or cutting down trees.

The best solutions for carbon markets are not always going to be the best solutions for communities.

Earlier this year, Ecosystem Marketplace led a conversation with partners from the Forest Stewardship Council, the American Forest Foundation, NCX, and Wildlife Works. They discussed a demand for high-quality carbon projects with co-benefits, and how these projects can both curb deforestation emissions and benefit communities. “When it comes to [carbon] projects,” says Zach Parisa, CEO of NCX, “it is tradeoffs all the way down.” In other words, it is important to acknowledge that community objectives often extend well beyond carbon project objectives. Likewise, increased carbon storage does not necessarily also generate enhanced biodiversity conservation or community well-being.

Take a tree replanting effort, for example. Evergreens are some of the most effective carbon absorbing trees (think species such as spruce and fir in the north, and mahogany and eucalyptus in tropical regions). Although large plantings of species like these might absorb the most carbon, they might also be disruptive to the community living on that land. Plantation-style reforestation can outcompete native species, degrade natural habitats, deplete a community’s water supply, and strip essential nutrients from the soil. It can also harm community food systems by removing diverse plants that are essential food sources. Agroforestry can be a more functional approach for communities and ecosystems. This method incorporates a biodiverse mix of native trees and shrubs into agricultural systems, which can increase food security and create market opportunities for food and artisan products.

Yet in the long term, we cannot meet global climate goals without simultaneously prioritizing emissions reductions projects and the long-term social and economic well-being of the communities implementing those projects.

Fitting measures to the community

Co-benefits will also take different forms for different communities, along with case-specific methodologies and quantification. Back in Kasigau, Kenya, the communities that Braund works with have elected committees that identify their priorities and how they will address them. For one community, access to water and education were most important. Through REDD+ funding, community members were able to renovate their local school. The renovation included rain gutters and better-quality roofing, which allowed rainwater to flow from the rooftop into the school interior. These changes improved the students’ learning environment and their access to water. When households are less focused on finding water, they have more time for economic activities that will generate income, and children have time to study in school. Better water access is especially important for women and girls.[1] They are the ones tasked with finding and carrying water back to their families – a time consuming and unsafe job. When water is already nearby, they can spend time working, studying, or socializing.

The small landowners in the United States that Nathan Truitt, Executive Vice President of Climate Funding at the American Forests Foundation, works with as part of the Family Forest Carbon Program have completely different priorities when it comes to co-benefits. Communities in central Appalachia, for example, value long-term sustainability of local timber markets that comes from increasing the health and productivity of the forests on their land. When communities help lead decision-making and receive project benefit funds directly, they are better able to address the issues most pressing to them and steward their lands long term.

A successful climate finance project actively engages community members as equal partners.

Striking that balance means engaging communities as equal partners. The climate space can often be incredibly unwelcoming for IPLCs, and some estimate that as little as under 1 percent of global climate finance reaches them directly.[2] Technical and legal language, complicated project methodologies, and a history of mistrust and abuse between communities and governments and companies make it difficult for communities to participate in projects.

REDD+ is an effective tool for directing funding to communities – when done well. In a recent open letter, Peoples Forests Partnership participants and eight other indigenous organizations from around the globe voiced support for REDD+. They called it one of the most powerful methods to channel direct climate finance to the Global South, adding that many recent criticisms do not paint the full picture. Community experiences and perspectives are often not considered to decide the effectiveness of a REDD+ project. But a growing chorus of voices argues that indigenous needs, knowledge, and ways of life must be metrics of project success. These communities are on the ground actively caring for the land, and they see firsthand the impacts high-quality carbon projects can have; their knowledge is a critical metric for project success. Engaging communities as equal project partners allows them to preserve their cultures, values, and environments and sustainably manage their territories for future generations.

Forest Trends’ Communities and Territorial Governance Initiative is also working with IPLC partner organizations, donors, companies, and others to promote carbon projects and jurisdictional-level funding that are rights-based, equitable, and of the highest integrity. As part of this mission, they launched the Territorial Governance Facility, along with three regional indigenous and local community organizations in Amazonia and Mesoamerica, to promote IPLC access to climate finance. After carefully ensuring community needs were being met, the Facility launched its first pilot projects in six indigenous territories this past June, all led by local leaders. With direct financial and technical support, communities are better able to protect their territories and livelihoods, resulting in increased community well-being, healthy landscapes, and successful carbon projects.

Changing how we do business in the long term is a huge undertaking – and requires a global effort. As we work to meet climate goals for 2030 and beyond, high-quality market mechanisms like REDD+ and the voluntary carbon markets remain important strategies to channel direct climate finance to indigenous forest stewards who are actively protecting their land right now. When IPLC rights, knowledge, and well-being are at the core of a carbon project, it sets up the project and community for long-term success. And as carbon markets increasingly place a higher dollar amount on projects that center these community needs, the higher prices can add immense value for communities and credit buyers and can help preserve our planet for future generations.

[1] Myers, Kim. “What’s in a carbon credit? New tools help quantify the sustainable development benefits of carbon offset projects.” Ecosystem Marketplace, March 8, 2021. Accessed May 9, 2023. https://www.ecosystemmarketplace.com/articles/whats-in-a-carbon-credit-new-tools-help-quantify-the-sustainable-development-benefits-of-carbon-offset-projects/.

[2]Osorio, Karen. “A Renewed Focus on Direct Financing at International Climate Summits.” Rainforest Foundation US, March 16, 2023. Accessed May 8, 2023. https://rainforestfoundation.org/a-renewed-focus-on-direct-financing-at-international-climate-summits/.

Op-Ed: Science vs West: When experts buy bad science

(Originally published 31 August 2023 at everland.earth)

The stakes are too high for forests and communities.

Robust science is built on thorough investigation and rich, diverse debate. Without these fundamental ingredients, we have little hope of achieving an equitable path towards ending deforestation or fighting climate change.

We welcome Calyx’s perspective on our analysis of REDD+ baselines, which explores critical questions about the REDD+ mechanism that should help guide its future as we work to scale it effectively and with the urgency demanded by the climate and biodiversity crises. What is concerning however, is the apparent un-tested ‘buy-in’ of West et al’s report by Calyx, and many others, without the robust scrutiny we would expect of a community of experts who are dedicated to having legitimately strong scientific foundations for our work.

We recognise that West et al’s paper has been peer reviewed and printed in one of the most prestigious journals on the planet. While we, as a community of experts, should be able to rely on that as a strong indication of the quality of the report, it is inherent to the culture and advancement of science to undertake critical reviews of published work. Our review indicates that this work has serious problems that fundamentally call into question the results.

West et al’s findings are based on serious methodological and analytical flaws, as well as data inaccuracies, miscalculations, and a misunderstanding of the fundamental drivers of forest loss and how REDD+ carbon crediting works. When that is accepted as robust science without proper scrutiny, everyone loses. But communities on the frontlines of the climate crisis lose the most.

Everland is preparing a detailed analysis of West et al at the individual project level, which we will publish in due course. However, in the meantime, we feel it is important to point out a few critical errors we have already identified in West et al’s approach.

5 Fundamental Flaws in West et al’s analysis

  1. Basic mathematical error and over-simplified methodology: Inaccurate reporting of project baselines by the authors resulted in their use of significantly higher baseline deforestation rates for analysis than the projects actually operate under and generate avoided emissions in relation to. In one example, West et al appear to have made a basic error in their calculations that resulted in a significant overstatement of cumulative deforestation: While the actual cumulative baseline (2009-2018) reported in the Project Design Document for Madre de Dios REDD+ Project (ID 844) is 21,982.8ha, West et al mistakenly added together the cumulative baseline deforestation numbers for each year – resulting in an inaccurately reported value of a value of 125,501ha. Furthermore, in estimating the project emissions reductions, rather than using the verified values, the authors calculated the emissions reductions themselves using an over-simplified method. This resulted in an overestimation of the actual amount of emission reductions the majority of projects have been credited with. On average, this oversimplification created an overestimation of verified emission reductions of nearly 1Mt of CO2e per project on average, with a total overestimation of >17.6 million tCO2e. Combined with the overstatement of project baselines, this significantly exaggerates the climate impacts that REDD+ projects are actually credited for, undercutting the validity of West et al’s conclusions.
  2. Omission of highly material factors: The authors used a number of variables to identify potential ‘control’ areas that are statistically “similar” to a project area. However, they failed to include four key predictors of deforestation risk; road networks, navigable rivers, population density and proximity to previous deforestation. The authors also failed to account for other critical factors in predicting deforestation rates, comparing projects established in areas that would otherwise be 100% logging concessions to areas with no logging concessions. In another example, two project areas in West et al’s research were located in areas with 0% protected area coverage, but were matched with control areas where more than half the land was covered by legal protection. Deforestation in protected areas is typically much lower than in adjacent unprotected forests. These are highly material omissions that necessarily skew the data towards incorrect conclusions. No doubt this is precisely why the VCS standard requires projects include key indicators that have been missed by West et al.
  3. Misunderstanding of deforestation risk: Furthermore, the authors failed to weight their variables based on the relative risk they pose to deforestation within the context of a specific project. In other words, they failed to account for the specific factors driving deforestation for a given project. As a result, in the majority of cases the project is surrounded by more extreme deforestation than the selected control areas, meaning they’re at greater risk of imminent forest loss. Failure to understand the specific local context underlying deforestation risk is a failure to recognise the foundational baseline scenarios and theory of change underlying REDD+ interventions.
  4. Inadequate data: West et al’s analysis uses open-source geospatial data (Hansen et al 2013) in selecting control sites, validating their model and estimating verified emission reductions. This dataset is known to be highly uncertain in some key areas, including  Sub-Saharan Africa (error: ±79%) and the Democratic Republic of the Congo (error: ±65%) (Tyukavina et al. 2015). Projects are required to use far superior geospatial imagery and on-the-ground verification for baseline setting and monitoring, and account for data error where it exceeds 15% by reducing the number of credits it can issue. Using inadequate data creates an apples-to-oranges comparison that cannot be relied on as robust science. And no discerning buyer would consider this to be robust due diligence.
  5. Lack of transparency of control areas: The authors did not map or otherwise indicate where the selected control areas were in relation to the project areas, providing no way to evaluate the extent to which they are located within socio-economic and biophysical regions that are similar to the project areas. This is required by the VCS standard when project developers select and propose a Reference Area as a control as part of the project validation, which is then independently audited. Without this level of transparency, it is impossible to independently verify the reasonableness of the control sites, which is the underpinning of the study’s methodology and findings.

The flaws in West et al’s approach are so fundamental we do not believe that this study can rightly be classified as ‘robust science’. As an industry, we have a duty of care to ensure we adapt and evolve our standards and methodologies in line with robust, best-in-class scientific findings. This is critical to ensure REDD+ projects continue to work as an effective tool against deforestation.

And that means we have to apply the appropriate level of rigor in evaluating which scientific findings should shape the future of REDD+, and which should not. If we get this decision wrong the implications for communities on the front lines of the climate crisis and our ability to end deforestation globally are both real and disastrous.

(Everland will publish a detailed analysis of West et al in due course.)