Tag: Article News Analysis

This month, Ecosystem Marketplace publisher Forest Trends launched an interactive map and database tracking and categorizing over 2,000 payments for ecosystem services in Brazil called the Brazilian Matrix of Ecosystem Services. In other news, a diverse national water quality trading network released a program-building guide.

This article was originally published in the Water Log newsletter. Click here to read the original.

29 June 2015 | Greetings! Brazil holds more than 12% of the world’s freshwater, but citizens in some parts of the country – most notably Sí£o Paulo – have been suffering unprecedented drought this year, in part because of past failure to appreciate the linkages between forests and water supplies. In some quarters, however, the drought has led to a second look at the interlocking services Brazil’s vast natural resources provide: the carbon that its forests keep locked up as they regulate water and the thousands of species of plants and hundreds of species of birds and freshwater fish in its Canada-sized Cerrado, among others.

Brazil’s incredible natural heritage is the raison d’íªtre for a boom in innovative market-based mechanisms to preserve the country’s natural capital. We’re excited to announce a new initiative launching this month from Ecosystem Marketplace publisher Forest Trends with the support of Brazilian non-profit organization Fundo Vale and the Good Energies Foundation: the Brazilian Matrix of Ecosystem Services (Matriz Brasileira de Serviços Ecossistíªmicos), an interactive map and database of more than 2,000 payments for ecosystem services programs across Brazil categorized by type: water, carbon, biodiversity, sustainable agriculture, livestock, and bundled projects.

The Matrix, which has been more than three years in the making, can act as an information and decision-support tool for Brazilian market-makers: “It’s essential for us to understand that all ecosystem services are interconnected if we’re to develop a new and innovative market,” said Mauricio Moura Costa, Executive Director of Bolsa Verde do Rio, an Brazilian organization promoting market mechanisms for environmental compliance.

In other news this month, leaders continue to connect the dots between agriculture, water risk, and supply chains. Start with a look at a new report from Ceres that examines the blind spots between corporations and the farmers in their supply chains. South African Breweries is chipping away at the problem with a new sustainable barley program; meanwhile a new initiative in Gujarat, India, will pay farmers to install solar-powered irrigation pumps in an effort to lessen pressure on groundwater.

Speaking of supply chains, we’re hiring! Ecosystem Marketplace’s Supply Change initiative is seeking a research assistant to help us track corporate commitments to reduce ecological impacts in supply chains.

Finally, water quality trading in the United States got a boost this month with a new publication from the National Network on Water Quality Trading for stakeholders wondering whether and how to build a trading program. The guide breaks down key decision points and design options, bringing much-welcomed clarity to a technical and complicated process. Learn more and get a copy here.

— The Ecosystem Marketplace Team

For questions or comments, please contact [email protected]

Additional resources

29 June 2015 | Wyoming is a land of wide skies and open fields – of country-sized ranches, ugly energy pits, and massive wind farms. It’s also one of 11 US states and 2 Canadian provinces where the humble (and going-extinct) greater sage-grouse resides.

Like the people of Wyoming, the sage-grouse likes its space – it needs 230 square miles to thrive – and that’s the problem. While the sage grouse can live alongside cattle and other grazing animals, it perishes in the fragmented habitat left by farming, energy development, and urban expansion, according to the US Fish and Wildlife Service (FWS). These threats, combined with other perils like invasive plants and wildfires, are driving the sage grouse toward extinction.

The FWS listed the sage-grouse as a candidate species under the Endangered Species Act (ESA) with plans to announce a listing decision in September. Because an ESA listing intends to bring a species back from the brink of extinction, the regulations are rigid. Western developers worry an ESA listing on a species with such a wide range will severely deter economic growth, said Theo Stein, a Public Affairs Specialist for sage-grouse at the FWS.

In an effort to proactively conserve and restore the sage-grouse to healthy populations without ESA regulations, the Sweetwater River Conservancy (SRC) opened the first conservation bank for the greater sage-grouse in March. Although it contains just 55,000 acres of prime sagebrush, the Conservancy owns 700,000 acres, a land mass the size of Rhode Island that spans three mountain ranges. The bank has plenty of space to expand should demand for sage-grouse credits require it.

The greater sage grouse’s requirement of large amounts of contiguous prairie also makes the SRC’s bank the largest in the US. Aside from the relatively new conservation banks for another grouse – the lesser prairie chicken – species banking is typically done on smaller scales involving animals that don’t require as much space.

It’s important to conserve on the proper scale, said Brian Kelley, a wildlife biologist at the Conservancy. “Instead of an acre here and 50 acres there, this sage-grouse conservation bank could signal a paradigm shift in the way conservation is done,” he said.

Three Decades of Decline

“Greater sage-grouse is a species that doesn’t like change,” said Stein. Nevertheless, the bird has struggled with an altered landscape for over a century as its historic range has been cut by over half, according to the Bureau of Land Management (BLM). Once numbering in the millions, the Department of Interior population estimates vary from 200,000 to 500,000, which is roughly a 30% decline since 1985. The only reason the bird wasn’t listed in 2010 was because the FWS said it lacked capacity to implement the listing status.

Western interests saw this as an opportunity to thwart a listing. They launched a massive proactive conservation movement that spanned energy companies, federal and state agencies and ranching and farming operations. Wyoming was one of the leaders, Stein said. It set up a state-wide conservation strategy that includes prime habitat spots preserved for conservation known as core areas.

Building a Bank

In this pro-sage-grouse political climate, Jeff Meyer, SRC’s co-founder and Managing Partner, purchased thousands of acres in central Wyoming with the intention of building a wind farm. He was correct in thinking the region has vast potential for wind power, Stein said. But what he didn’t realize was the spot was also right in the middle of a core area for sage-grouse conservation. And renewable energy is part of the energy development that harms the bird, according to the FWS.

SRC then switched to establishing a conservation bank. Initially, the company had performed intensive high-tech data-collection on the property to determine its wind power potential and found the land had great potential to generate mitigation credits.

Also, this region of Wyoming is home to a number of historic cattle ranches. SRC soon realized that pastureland, if managed sustainably, could operate in harmony with sage-grouse populations.

“The nature of the ranch landscape really leant itself to what this species needs: big, open and un-fragmented land,” said Kelly.

This means the bank requires grazing management plans that incorporate both livestock production and sage-grouse goals with activities such as vegetation monitoring factored in. Keeping the ranches in operation is an important part of the bank’s success because it incorporates local interests, Kelly said.

“Open spaces are important to Wyoming residents but maintaining their economic base is important also. A bank fits into this nicely because it allows for open space and for economic development through mitigation,” he said.

A Market requires Demand

The sage-grouse bank is opening up for business with roughly 32,000 credits to sell. “The next step is attracting clients,” said Stein.

The question of demand for these credits is a major one. A candidate species listing drives some demand, but an ESA listing drives most of it, said Mark Sattelberg, the FWS Wyoming Field Office Supervisor. However, new incentives are springing up.

Wyoming’s sage-grouse conservation strategy follows the mitigation hierarchy, according to its summary document, where development is encouraged outside core areas and requires mitigation for all projects that must occur within habitat strongholds.

On top of the state-wide mandate, the BLM and the Forest Service recently released an updated version of its sage-grouse conservation efforts. Included in it is a mitigation component requiring developers follow the mitigation hierarchy and compensate for unavoidable impacts. This is significant because together the agencies manage two-thirds of sagebrush lands. And last year, the DOI launched a new mitigation strategy referencing the hierarchy and calling for landscape-level activity.

Environmental NGO The Nature Conservancy’s announcement to establish a sage-grouse conservation bank in Nevada in partnership with gold mining company, Barrick Gold, is further evidence of a blossoming market for sage-grouse credits.

The Environmental Defense Fund’s-another environmental NGO- habitat exchanges are also in the works in Colorado, Wyoming and Nevada. These ventures focus on land management incentives to ranchers in exchange for sage-grouse conservation.

Sattleberg said he knows of three ranchers looking into conservation banking. “They’re looking into what it would take and it takes quite a bit upfront,” he said, noting interest from some ranchers will remain as interest and nothing more.

Quality Products?

At the core of all these conservation measures must be quality and they must deliver a net-benefit for the species, said Deborah Mead, the National Conservation Banking Coordinator with the FWS.

“If these initiatives aren’t established to compensatory mitigation standards, then you have to ask if the species still warrants a listing,” she said. And while this will surely frustrate those involved in the voluntary proactive activities, the interest of the species must be put first, she said.

It’s an important point to make with the various versions of conservation offered. If the FWS decides the sage-grouse does require a listing status, the current conservation activities will be assessed or re-assessed through an ESA lens, Mead said. “It’s good that people are getting out in front and taking voluntary actions on the landscape, but it should be clear whether these actions meet regulatory standards or not,” she said.

At any rate, Eric Holst, Senior Director of Working Lands at EDF, said the momentum for conserving the sage-grouse is a positive thing. “I see this as an opportunity to assemble the federal and state agencies, energy interests and other private-sector parties together to grow sage-grouse populations,” he said.

Kelly said: “It’s a different way of thinking about conservation and a new way of applying the tools we have.”

24 June 2015 | BONN/BARCELONA | Indigenous leader Juan Carlos Jintiach says he was ecstatic when governments around the world pledged $1 billion to end deforestation at last year’s climate summit in New York. He especially liked Norway’s pledge of $20 million per year to help indigenous people secure their rights. But he also knew what would happen next, as NGOs around the world quickly submitted proposals, and Norway issued a short-list of 53 finalists.

“In the end, only five indigenous organizations were invited to present final proposals,” says Jintiach, who at the time had just stepped down as Director for Economic Development of pan-Amazonian indigenous federation COICA.

“That’s how it always is,” he says. “We’ll be talking to governments directly, and asking them why they always have these bilateral government-to-government discussions, and then we’ll see $100 million change hands, and we’ll say, ‘What’s that for?’, and they’ll say, ‘That’s for indigenous people.'”

Chris Meyer of the Environmental Defense Fund (EDF) says that at least $50 million in funding linked to reduced deforestation or “REDD+ finance” has already been allocated for indigenous people, but it’s in limbo, scattered among the Forest Carbon Partnership Facility, the UN-REDD Program, and the Forest Investment Program – and that’s after he deducts 20% for administration and overhead.

“It’s not that the programs are doing anything nefarious,” he says. “It’s just that they’re bureaucratic and need to see a lot of things happen before they can release money.”

“I understand their reasoning,” says Jintiach. “They can’t just dump a bunch of money on us – I understand the need for accountability – but I think we can deliver that accountability.”

The Birth of the Indigenous Amazon Fund

In the last few years of his tenure, Jintiach had a front-row seat at the “grant games”, as COICA teamed up with NGOs like EDF, Woods Hole Research Center, and even Ecosystem Marketplace publisher Forest Trends to secure direct funding from large donors like the United States Agency for International Development (USAID), which is supporting COICA and a consortium of NGOs (including Forest Trends) under a program called AIME, which among other things helps indigenous people position themselves for REDD+ finance.

Current COICA director Edwin Ví¡squez Campos has been working to ready the organization and its members for REDD+ finance, and at mid-year climate talks in Bonn, COICA’s head of Environment, Climate Change and Biodiversity, Jorge Furagaro Kuetgaje, announced the creation of an Indigenous Amazon Fund, which is the brainchild of COICA consultant Roberto Espinoza and is designed to act as a kind of central bank for indigenous people across the Amazon.

Two weeks later, Campos announced that COICA would also seek to establish a more forceful presence in multilateral organizations like the Governors’ Climate and Forests (GCF) Task Force, which is a network of subnational governments and governors working to address climate-change multilaterally.

At the GCF annual meeting in Barcelona, COICA was joined by Central America’s AMPB, the Mesoamerican Alliance of Peoples and Forests.

“We’re at the Table”

“We believe we share many common characteristics and core beliefs with the jurisdictions represented in the GCF,” the AMPB declaration stated. “We actively participate in the region´s REDD+ processes, emphasizing the importance of community forest rights, and offering our experiences as key lessons and cornerstones for addressing deforestation in our jurisdictions.”

COICA’s statement was more prescriptive and called for active indigenous participation in the development of national climate action plans, or INDCs (Intended Nationally-Determined Contributions), and asked for a signed agreement with the GCF recognizing COICA participation in strategic planning and implementation.

The Evolution of the Amazon Indigenous Fund

Jintiach, who now is an analyst in COICA’s Economic Development Cooperation, says the Indigenous Amazon Fund is being created based on feedback from donor nations and with support from EDF and other NGOs.

“Juan Carlos raised this issue with us last year, when we were working with him on the indigenous mapping project [which was announced at climate talks in Lima],” says EDF’s Meyer. “He’s been working with us ever since to see how we implement it, and also talking to donors to get a better feel for what they look for.”

The fund proposal will be refined at a series of COICA meetings, beginning in August, but Jintiach and Meyer both say some basic ground-rules have already been established.

“One thing is clear: COICA won’t be running it,” says Jintiach. “We’re spearheading it, but we’re not a bank, and we don’t want to become one, and donors won’t want that, either.”

Based on donor feedback, COICA and others are now suggesting the creation of a non-profit entity, with an independent board of directors as well as an advisory board, says Meyer.

“This is still nebulous and to be determined, but there is this window in the next six months for indigenous leaders to consult among themselves and figure out what they want,” he says. “With COICA, we need to help to build a lot of capacity to understand how these administrative mechanism funds work, based on existing intermediary funds like Funbio (the Brazilian Biodiversity Fund), and we can then help them create a proposal that’s hopefully good enough for Norway to say, ‘OK, we’re going to put whatever is left [of the $100 million pledged] directly into this indigenous fund, and hopefully get other countries to contribute to it as well.'”

“Once the fund exists, if donors want to give to indigenous peoples, we can say, ‘Here is a fund for indigenous peoples,'” says Jintiach. “If they need to see transparency, we can say, ‘Here are the books.'”

Beyond REDD+

Although REDD+ finance was the impetus for creating the fund, it’s ultimately designed to handle banking, loans, and other financing operations.

“Something like Canopy Bridge, which is a platform for indigenous producers to market their products, could be supported through the fund,” says Meyer.

“Exactly,” adds Jintiach. “In Ecuador, we developed an indigenous cacao cooperative, but the benefits go to intermediaries, because the banks, they ask for lots of requirements that we as indigenous people find difficult.”

He says an Indigenous Amazon Fund would better be able to assess indigenous programs for their viability because it would be run by people who understand indigenous business practices.

“We need a financial institution that understands how our economies work on the ground,” he says. “Our people need to develop their own economies.”

Jintiach expects to have a formal proposal by the end of August, and Meyer estimates the start-up costs at less than $1 million.

“This is really for the next generation,” says Jintiach. “For my generation, this kind of finance was all new to us, but kids today understand its importance. They’re the ones who will move this forward.”

Additional Resources

Read COICA’s statement (Spanish) to the GCF here.

24 June 2015 | A Dutch court today ruled that the country’s government failed to protect human rights by not implementing policies that would reduce greenhouse-gas emissions by at least 25% by 2020.

“Based on the State’s current policy, the Netherlands will achieve a reduction of 17% at most in 2020, which is below the norm of 25% to 40% for developed countries deemed necessary in climate science and international climate policy,” the court said in the official English translation of its decision, available online here.

In a test of human rights tort law, the three-judge panel sided with the Urgenda Foundation, which filed the lawsuit on behalf of 866 citizens who accused the government of negligence for “knowingly contributing” to policies that would send global temperatures spiraling upward and flood the low-lying country. Urgenda had argued that the country was obligated to meet minimum requirements to protect its citizens, and it had the support of several signatories to the Oslo Principles, which were formulated in March by legal experts and high-court justices from around the world – including the Netherlands and the United States.

In April, Jaap Spier, Advocate-General to the Dutch Supreme Court, told the Dutch daily newspaper Trouw that, because of the Oslo Principles, “Courts can force countries to adopt effective climate policies.” He added, “Court cases are perhaps the only way to break through the political apathy about climate change.”

A similar case is underway in neighboring Belgium.

Greater sage-grouses living in the US West received good news with Colorado announcing new voluntary conservation measures and the Bureau of Land Management rolling out landscape-level protection strategies. However, a new funding bill in the Senate aims to block a listing decison for another year. And on a separate note, Brazil passed a law granting easier access to Amazonia’s natural resources.

This article was originally posted in the Mit Mail newsletter. Click here to read the original.

22 June 2015 | Greetings! On the US plains, the spring mating season for the Greater Sage-Grouse is winding down. Meanwhile, the humans sharing turf with the grouse can’t decide whether to make love or war over the bird.

An order by Colorado governor John Hickenlooper to establish a sage-grouse habitat exchange represents hope that cooperation will be enough to keep the bird off the Endangered Species List. Members of Congress are being a little more bellicose, with a proposed military bill that would block listing of the bird on national security grounds and a rider in the Senate Appropriations Committee’s new funding bill for the Department of the Interior and Environmental Protection Agency that blocks a decision on sage-grouse listing (currently scheduled for September) for another year.

Meanwhile, ten Western states have developed resource management plans (RMPs), creating high quality, science-based conservation in sagebrush ecosystems. In late May, the Bureau of Land Management (BLM) in partnership with the US Forest Service (USFS) rolled out their amendments. Following a three-month review process, the finalized plans will serve as governing guides for sagebrush ecosystems that fall on BLM and USFS lands.

“The RMPs require mitigation, which is a key piece of developing the market demand needed for conservation banking,” Theo Stein of the US Fish and Wildlife Service (FWS) tells Ecosystem Marketplace. Conservation banks for the greater sage-grouse are already starting to appear in Wyoming and Nevada, a sign that the ‘cooperation’ camp may be winning. As summer heats up, may the cooler heads (and workable solutions) prevail.

Last month also saw passage of a controversial law in Brazil allowing businesses easier access to Amazonia’s natural resources, even in indigenous areas, and cancelling $70 million in “bio-piracy” violations for a state-owned agriculture research firm. The government’s brushed off worries about fair compensation for indigenous people. India, meanwhile, has a law on the books requiring companies making use of biological resources for pharmaceuticals and other products to pay a biodiversity fee. But as the Hindu reports, the law is largely ignored.

We’re hiring! Ecosystem Marketplace’s Supply Change project, which tracks corporate commitments to reduce ecological impacts in commodity supply chains, needs a research assistant. Click the link to learn more and apply.

Cheers,

—The Ecosystem Marketplace Team

If you have comments or would like to submit news stories, write to us at [email protected].

Additional resources

29 June 2015 | Wyoming is a land of wide skies and open fields – of country-sized ranches, ugly energy pits, and massive wind farms. It’s also one of 11 US states and 2 Canadian provinces where the humble (and going-extinct) greater sage-grouse resides.

Like the people of Wyoming, the sage-grouse likes its space – it needs 230 square miles to thrive – and that’s the problem. While the sage grouse can live alongside cattle and other grazing animals, it perishes in the fragmented habitat left by farming, energy development, and urban expansion, according to the US Fish and Wildlife Service (FWS). These threats, combined with other perils like invasive plants and wildfires, are driving the sage grouse toward extinction.

The FWS listed the sage-grouse as a candidate species under the Endangered Species Act (ESA) with plans to announce a listing decision in September. Because an ESA listing intends to bring a species back from the brink of extinction, the regulations are rigid. Western developers worry an ESA listing on a species with such a wide range will severely deter economic growth, said Theo Stein, a Public Affairs Specialist for sage-grouse at the FWS.

In an effort to proactively conserve and restore the sage-grouse to healthy populations without ESA regulations, the Sweetwater River Conservancy (SRC) opened the first conservation bank for the greater sage-grouse in March. Although it contains just 55,000 acres of prime sagebrush, the Conservancy owns 700,000 acres, a land mass the size of Rhode Island that spans three mountain ranges. The bank has plenty of space to expand should demand for sage-grouse credits require it.

The greater sage grouse’s requirement of large amounts of contiguous prairie also makes the SRC’s bank the largest in the US. Aside from the relatively new conservation banks for another grouse – the lesser prairie chicken – species banking is typically done on smaller scales involving animals that don’t require as much space.

It’s important to conserve on the proper scale, said Brian Kelley, a wildlife biologist at the Conservancy. “Instead of an acre here and 50 acres there, this sage-grouse conservation bank could signal a paradigm shift in the way conservation is done,” he said.

Three Decades of Decline

“Greater sage-grouse is a species that doesn’t like change,” said Stein. Nevertheless, the bird has struggled with an altered landscape for over a century as its historic range has been cut by over half, according to the Bureau of Land Management (BLM). Once numbering in the millions, the Department of Interior population estimates vary from 200,000 to 500,000, which is roughly a 30% decline since 1985. The only reason the bird wasn’t listed in 2010 was because the FWS said it lacked capacity to implement the listing status.

Western interests saw this as an opportunity to thwart a listing. They launched a massive proactive conservation movement that spanned energy companies, federal and state agencies and ranching and farming operations. Wyoming was one of the leaders, Stein said. It set up a state-wide conservation strategy that includes prime habitat spots preserved for conservation known as core areas.

Building a Bank

In this pro-sage-grouse political climate, Jeff Meyer, SRC’s co-founder and Managing Partner, purchased thousands of acres in central Wyoming with the intention of building a wind farm. He was correct in thinking the region has vast potential for wind power, Stein said. But what he didn’t realize was the spot was also right in the middle of a core area for sage-grouse conservation. And renewable energy is part of the energy development that harms the bird, according to the FWS.

SRC then switched to establishing a conservation bank. Initially, the company had performed intensive high-tech data-collection on the property to determine its wind power potential and found the land had great potential to generate mitigation credits.

Also, this region of Wyoming is home to a number of historic cattle ranches. SRC soon realized that pastureland, if managed sustainably, could operate in harmony with sage-grouse populations.

“The nature of the ranch landscape really leant itself to what this species needs: big, open and un-fragmented land,” said Kelly.

This means the bank requires grazing management plans that incorporate both livestock production and sage-grouse goals with activities such as vegetation monitoring factored in. Keeping the ranches in operation is an important part of the bank’s success because it incorporates local interests, Kelly said.

“Open spaces are important to Wyoming residents but maintaining their economic base is important also. A bank fits into this nicely because it allows for open space and for economic development through mitigation,” he said.

A Market requires Demand

The sage-grouse bank is opening up for business with roughly 32,000 credits to sell. “The next step is attracting clients,” said Stein.

The question of demand for these credits is a major one. A candidate species listing drives some demand, but an ESA listing drives most of it, said Mark Sattelberg, the FWS Wyoming Field Office Supervisor. However, new incentives are springing up.

Wyoming’s sage-grouse conservation strategy follows the mitigation hierarchy, according to its summary document, where development is encouraged outside core areas and requires mitigation for all projects that must occur within habitat strongholds.

On top of the state-wide mandate, the BLM and the Forest Service recently released an updated version of its sage-grouse conservation efforts. Included in it is a mitigation component requiring developers follow the mitigation hierarchy and compensate for unavoidable impacts. This is significant because together the agencies manage two-thirds of sagebrush lands. And last year, the DOI launched a new mitigation strategy referencing the hierarchy and calling for landscape-level activity.

Environmental NGO The Nature Conservancy’s announcement to establish a sage-grouse conservation bank in Nevada in partnership with gold mining company, Barrick Gold, is further evidence of a blossoming market for sage-grouse credits.

The Environmental Defense Fund’s-another environmental NGO- habitat exchanges are also in the works in Colorado, Wyoming and Nevada. These ventures focus on land management incentives to ranchers in exchange for sage-grouse conservation.

Sattleberg said he knows of three ranchers looking into conservation banking. “They’re looking into what it would take and it takes quite a bit upfront,” he said, noting interest from some ranchers will remain as interest and nothing more.

Quality Products?

At the core of all these conservation measures must be quality and they must deliver a net-benefit for the species, said Deborah Mead, the National Conservation Banking Coordinator with the FWS.

“If these initiatives aren’t established to compensatory mitigation standards, then you have to ask if the species still warrants a listing,” she said. And while this will surely frustrate those involved in the voluntary proactive activities, the interest of the species must be put first, she said.

It’s an important point to make with the various versions of conservation offered. If the FWS decides the sage-grouse does require a listing status, the current conservation activities will be assessed or re-assessed through an ESA lens, Mead said. “It’s good that people are getting out in front and taking voluntary actions on the landscape, but it should be clear whether these actions meet regulatory standards or not,” she said.

At any rate, Eric Holst, Senior Director of Working Lands at EDF, said the momentum for conserving the sage-grouse is a positive thing. “I see this as an opportunity to assemble the federal and state agencies, energy interests and other private-sector parties together to grow sage-grouse populations,” he said.

Kelly said: “It’s a different way of thinking about conservation and a new way of applying the tools we have.”

Norway broke new ground in supporting the Governors’ Climate and Forests Task Force this week when the country announced $25 million in financing to the initiative over a 4-year period. While the funds have potential to plug significant funding gaps, they could also encourage other countries to follow Norway’s example.

18 June 2015 | BARCELONA | During this week’s annual Governors’ Climate and Forests Task Force (GCF) meeting here, Hanne Bjurstrom emphasized the importance of markets as well as on-the-ground activities that require subnational support.

“Last year we saw the importance of subnational leadership in driving the international agenda,” said Bjurstorm, Norway’s special envoy on climate change. She also cited subnational commitments such as the Rio Branco Declaration, an agreement among 13 rainforest nation governors to slash deforestation by 2020, during her speech at the GCF event.

These comments were perhaps expected as the GCF is a collaboration of states and provinces from seven countries with the shared goal of reducing emissions from deforestation and forest degradation (REDD) using jurisdictional approaches.

A more surprising comment was what Bjurstrom announced shortly afterward: 200 million Norwegian krone (roughly USD $25 million) in financial support to the GCF fund. The money flows through the Norwegian Agency for Development Cooperation (NORAD) and will be distributed over a 4-year period, Bjurstrom said.

“We realized the important work being done at the subnational level and wanted to support it,” said Bjurstrom. “This is the right moment to act.”

It’s the most significant amount of finance the fund has received to date, Bjurstrom said. It is also noteworthy because the funds flow directly to GCF member states and provinces. The ability of the GCF member states and provinces to directly access funds is key, she said.

“This money is specifically for the GCF Fund with no strings attached,” Bjurstrom said.

The direct access to funds makes Norway’s contribution special, agreed Danae Azuara, a Project Manager in Mexico with environmental NGO the Environmental Defense Fund,. “It is recognition to the subnational action that is incentivizing innovative solutions.”

More details on this announcement are expected but Bjurstrom said she hopes Norway’s action will encourage other countries to step up and do the same.

In terms of allocation, typically, 80% of all funds flow to capacity building (technical assistance and training, institutional structure and policy framework among other activities) said Ben Ayade, the Governor of Nigeria’s Cross River State, a GCF member. However, he stressed the importance of on-the-ground activity.

“Capacity building is great, but not more important than planting trees. Success in forests can only be measured by forest cover,” Ayade said.

Bjurstrom noted this point as well in highlighting on-the-ground progress and her support of subnational approaches to deliver deforestation reductions. During her GCF speech, she cited jurisdictions as having the potential to improve agriculture’s sustainability and productivity while at the same time protecting and restoring remaining tropical forests.

17 June 2015 | “Those are things of your white people,” says Richard Baalow when I ask him how he plans to sell his carbon offsets to corporate leaders.

Baalow is a member of a hunter-gatherer group called the Hadza, known as the “last of the first” – the approximately 1600 remaining members of the first known people to live in what is now Tanzania. He’s traveled from his homeland, the Yaeda Valley, to Arusha to speak to me via Skype.

“Us Africans know that our side of the world is clean,” he says. “Meanwhile, you white people know that your side of the world is spoiled, because you’re destroying the environment. That’s why you bring the carbon market to us. That’s why we say, ‘Welcome, Carbon Tanzania, and bring money!’ That’s the long and short of it.”

But the long story is worth telling, too.

Yaeda Valley Under Pressure

Even before Baalow met Marc Baker and Jo Anderson of the Arusha-based non-profit organization Carbon Tanzania, he had heard about REDD through the Dutch’s government’s presence in Tanzania. The acronym stands for “reduced emissions from deforestation and degradation” of forests, and it’s applied to a broad range of activities that cut greenhouse gas emissions by saving endangered rainforest. Communities like his can earn money for the carbon they keep locked in trees, and Baalow was eager to learn how the Hadza could participate.

The Hadza, whose culture can be traced back 40,000 years, have lost about 90% of their traditional homelands. As a non-aggressive hunter-gatherer group, “their response has always been to move. Just get out of the way,” explained Baker. The Hadza moved out of the way 3,000 years ago during the Bantu expansion throughout West Africa. They moved out of the way again about 300 years ago, for the Maasai.

Today, pressure is coming from Sakuma farmers and Datooga pastoralists, or herders. Habitat for the mammals that the Hadza hunt with bows and arrows – everything from giraffe to zebra to baboons to bats – is dwindling. The Hadza needed a plan, and getting paid to conserve the natural resource base they live off of sounded like a good one.

“There is a new food for the world, and it’s called REDD,” Baalow said.

Land Rights for a 40,000-Year-Old Culture

Before the Hadza could earn money for the carbon stored in the Yaeda Valley, they had to prove that they owned the land they had been living off of for millennia – and establishing that ownership could provide benefits well beyond the carbon income.

“Before this project, nobody had any rights,” Baalow said.

Land reforms of the 1990s led the Hadza to formalize two “villages” so that they could secure communal land rights under the Ministry of Lands. But by 2009, so many outsiders had moved into the villages that the majority of the representatives on the Village Council were non-Hadza. Baalow began working alongside legal advisor Edward Lakita at the Ujaama Community Resource Team on a different solution.

They decided to try a legal instrument called the Certificate of Customary Rights of Occupancy (CCRO) that had previously been used in Tanzania to formalize land rights for individuals. The Nature Conservancy (TNC), another partner in the project, paid for lawyers and meetings. It took years, but the Hadza eventually convinced the Tanzanian government to issue a CCRO to an entire community. In 2011, the Ministry of Lands issued the first-ever group CCRO, and the Hadza’s ownership of 20,000 hectares was finally on the books.

“Without that security of land tenure and resource tenure, you couldn’t begin to think about a 20-year carbon project, because at the current rate we’d have pastoralists moving all through this system,” said Matt Brown, TNC’s Africa Director. “The Hadza basically would have lost a lot more of their homeland, so securing the land legally through these CCROs is just absolutely critical.”

Baalow has traveled to several international indigenous peoples forums to speak about the process, and the Ujaama Community Resource Team has since worked with about 20 communities in Northern Tanzania to secure community land rights in the same way. Several of those CCROs went to the Sakuma and the Datooga – the neighboring groups who themselves were being pushed into Hadza territory partly because of insecure land rights.

“There’s this chain reaction,” said Brown.

REDD as Land-Use Planning

The CCRO serves as the first-ever land-use plan for the Hadza.

“As I see it, the CCRO has designated rights for different community user groups – the hunters, the farmers, and the pastoralists,” Baalow explained.

The various land-use rights are based on practical considerations. Flat areas with higher organic soil content and less exposure to easterly winds are designated for agriculture. Wooded areas around important water sources are designated as protected. And so on. These “zones” do not impose on the Hadza’s way of life – they are still no fences, no permanent settlements – but they do guide decision-making around land-use within the Yaeda Valley, and they give the village governments parameters when granting farming areas to outsiders.

“REDD is the distinction between plan and no plan,” Baker said. “It’s about getting land use planning in place so when the wave of agriculture or charcoal hits, people have got rights, they’ve got value, and they’ve got an understanding of how the law works so you can actually plan where the deforestation is going to happen.”

The REDD-based land-use plan now covers more than 27,000 hectares. It would take a few days to walk across the project area.

Carbon Counting 

Now that the Hadza had secured their land rights, the next step was quantifying the carbon in the Yaeda Valley landscape. This was where TNC offered the most technical assistance – and where things get a little geeky.

The TNC team started with Landsat aerial imagery of the valley available through the U.S. Geological Survey, which captures the landscape at 30-meter resolution. For some areas, they used Google Earth to fill in gaps. TNC then sent out a team to take photographs at 100 different sites on the ground and manually classify them as different types of land uses: woodlands, agriculture, etcetera. They used the photographs to “train” a computer program to classify the entire map.

“We did that for 2013 and then we used the same points and looked at the 2000 imagery and basically were able to figure out what areas had gone from natural grassland or natural forest into some degraded state,” said Brown.

The verdict? The rate of forest loss in the Hadza territory was about on par with forest degradation in Tanzania as a whole – about 1% per year. This is the baseline for the “business-as-usual” scenario.

The Carbon Tanzania team followed up this work with a carbon stock assessment that involved going out into the field and measuring trees to figure out the amount of carbon stored in the African savannah woodland forest. It hadn’t been done before, so the team developed a new statistical program to determine the carbon stored in different tree species. The Hadza helped with the physical tree measurements and with identifying plants.

At the end of the study, they estimated that, at the current degradation rate, the landscape would release more than 15,000 tonnes of carbon dioxide (CO₂) into the atmosphere annually. The majority of the aboveground carbon in the Yaeda Valley is stored in these acacia trees, according to Baker, so the fact that land-use planning protects and maps these trees can result in “a massive carbon saving.” Through REDD, the Hadza could earn sellable “offsets” for preventing that loss.

Offsets for Sale

The Yaeda Valley Carbon Tanzania project is developed under the Plan Vivo carbon standard, which focuses on community-led projects benefitting smallholders. To date, the project has earned 48,033 Plan Vivo certificates, each representing one tonne of CO₂.

Buyers include National Geographic Travel and Abercrombie & Kent, as well as local tourism companies such as Dorobo, Map’s Edge, and Nature Discovery that do safaris or adventure treks in the region. Carbon Tanzania also works with international carbon offset retailers, including U.S.-based Native Energy and Sustainable Travel International and Sweden-based ZeroMission. The not-for-profit is in the process of hiring a business development manager who will focus full-time on sales now that the project is up and running.

“For the vast majority of projects, like ours, the sales element is critical,” Baker said. “If we can’t make payments, then of course the model starts to disintegrate.”

Under the Plan Vivo standard, at least 60% of revenues from the carbon sales go directly to the community. The remaining 40% is split between project monitoring and overhead. REDD payments reach the Hadza through M-PESA, a mobile phone money transfer system used widely in Tanzania. The most recent revenue of 21,550,000 Tanzania shillings (about $10,200 USD) from carbon offset sales between May and October of 2014 was split evenly between the two villages in the project area – Domanga and Mongo wa Mono. Going forward, Carbon Tanzania expects to generate $60,000 for the communities annually.

The Hadza use the money to pay the wages of 20 scouts that patrol the protected area, gathering data and documenting any illegal poaching or land incursions, as well as two village coordinators. Between 2013 and 2014, these scouts dealt with nine instances of cattle incursion and seven instances of poaching – though poaching instances involving guns have been reduced to zero. Aside from the scout salaries, the communities meet every six months to decide how to collectively spend the remainder from the carbon payments – usually on maize meal and school fees. They’ve also set up a medical fund that acts as community insurance, covering medical expenses for first-time mothers.

“The biggest benefit to come from Carbon Tanzania is that the communities have seen the value of environmental conservation and are able to earn money by conserving nature,” said Baalow.

The Future

Now that the project is in its fourth year, the Hadza have gained confidence that REDD payments actually will flow – and that monetizing carbon has led to many other outcomes that have non-monetary values such as land security, biodiversity protection, and a reduction of conflict between farmers and pastoralists, according to Baker.

“The money has value to the Hadza in terms of reducing stress on the culture,” he said, comparing it to a pension fund in Western terms. “They feel secure.”

Carbon Tanzania is in the process of expanding the Yaeda Valley project to cover more land area and is also working on a new REDD project in the Makame Wildlife Management Area, with the Maasai.

“We are not sitting around waiting for some global agreement to emerge,” he said, referring to the international climate talks coming up in Paris this December. “It’s far too important to wait for governments to do anything.”

Tabitha Muriuki contributed to this story.

11 June 2015 | BONN | Germany | Even before climate negotiators here signed off on the last stubborn bits of text needed to complete the REDD+ package under the United Nations Framework Convention on Climate Change (UNFCCC), governors of the states comprising Brazil’s portion of the Amazon warned that economic pressures and poor governance were endangering the country’s stunning 70% reduction in greenhouse gas (GHG) emissions. It’s an argument they’ve made before, but this time they have the backing of more than 30 environmental non-governmental organizations (NGOs).

The governors made their case on May 29, on the eve of mid-year climate talks began in Bonn, when the nine-member Forum of Governors of the Legal Amazon (Fórum de Governadores da Amazônia Legal) issued the “Cuiabá Letter,” which will be delivered to President Dilma Rousseff this month.

The letter calls for direct state access to international funds for REDD+, recognition of the stock-flux approach for sharing REDD+ benefits in Brazil, and more state participation in the construction of the National REDD+ Strategy, which has been in limbo since 2010.

Then, on June 10, the penultimate day of the Bonn talks, the Brazilian Climate Observatory (Observatório do Clima / OC) – a coalition of 30 NGOs – threw its support behind the governors and issued a scathing attack on Brazil’s REDD+ strategy. The OC’s statement – headlined “Brazil, a Role Model for Redd+… Not!” – was broader in scope than the governors’ letter, but it also warned that the country’s stunning reduction in deforestation was in danger of backsliding if its approach to REDD+ isn’t overhauled.

Both documents praise Brazil’s 70% reduction in emissions from deforestation, which the documents attribute in part to participation in and anticipation of early-start, voluntary REDD+ programs funneled through the Amazon Fund.

“The Brazilian leadership on REDD+, as well as the fate of its accomplishments in the Amazon, is in jeopardy, for a number of reasons,” said the OC release. “President Dilma Rousseff’s administration is doing a poor job on safeguarding forests, on protecting the rights of indigenous peoples and traditional communities, on allowing cash flows to subnational governments and on ensuring transparency and accountability in REDD+ rules.”

We’ve Done Our Part, Now Show us the Money!

The Cuiabí¡ Letter is subtitled “Pact For The Valuation of the Forest and Reduction of Emissions from Deforestation (REDD+) in the Brazilian Legal Amazon,” and it was signed by representatives from nine states: six governors – Tií£o Viana of Acre, Pedro Taques of Mato Grosso, Waldez Gí³es of Amapí¡, José Melo de Oliveira of Amazonas, Marcelo de Carvalho Miranda of Tocantins and Maria Suely Silva Campos of Roraima – and three deputy governors: Carlos Brandí£o of Maranhí£o, Daniel Pereira of Rondí´nia and José da Cruz Marinho of Parí¡.

It echoes the 2009 Cuiabí¡ Declaration, which preceded the Copenhagen climate talks that enshrined REDD+ in the UNFCCC. That Declaration was also signed by all the governors of the Amazon states, and it also called for a more decentralized approach to REDD+ governance. But REDD+ did not yet exist under the UNFCCC at the time.

Much of the letter focused on Fundo Amazí´nia (the Amazon Fund), to which the government of Norway has already committed US$1 billion this year, with additional money coming from the German Government and Petrobras. Of the Norwegian money, US$882 million has already been disbursed to finance emission reductions, using a default value of US$5 per tonne, or roughly 206 million tons of carbon dioxide (CO2), which the letter said is the equivalent of just 4.9% of total REDD+ generated in the Amazon.

The Missing REDD+ Strategy

Both the governors and the OC said the federal government was blocking participation in the creation of a national REDD+ Strategy.

“It has been promised three times by the government since 2010, and the last draft of such strategy was leaked to civil society in December 2012,” the OC’s statement said. “Since then it has not seen the light. The government plans to launch it as a Federal Decree without any previous public consultation.

Without the national strategy (dubbed “ENREDD+”), the summary of information on safeguards becomes little more than a piece of paper, with low technical consistency according to UNFCCC rules, it continued. “Without ENREDD+, public officers can pick and choose among actions to be evaluated on REDD+ safeguards. Government programs that cause deforestation, such as road and dam building in the Amazon, can be comfortably left outside scrutiny. How’s that for a safeguard?”

On to Manaus, By Way of Barcelona

This was the first time the Forum of Governors has met since 2009, but several of the governors will also be attending a meeting of the Governors’ Climate & Forests (GCF) Task Force in Barcelona next week. The GCF is a global association of states in larger nations that have committed to reducing GHG emissions, largely by saving forests. The governors also agreed to reconvene later this month in Manaus, but a date has not been set.

The governors’ meeting was preceded by a morning meeting of the state secretaries of environment. During that meeting, Secretary Ana Luiza ívila Peterlini set the tone by reiterating both the accomplishments and the cost of these efforts.

“The Brazilian Amazon has made a significant contribution to the reduction of deforestation in their forests,” she said. “But we have not obtained financial compensation equivalent to our efforts.”

Mariano Cenamo, director of environmental NGO organization IDESAM (Institute for the Conservation and Sustainable Development of Amazonas/Instituto de Conservaçí£o e Desenvolvimento Sustentavel do Amazonas), speaking on behalf of GCF, said REDD+ finance for Brazil could reach R$135 billion.

“The country has been a global player in REDD+,” he said. “It reduced emissions by more than 4.2 billion tons of CO2 in eight years (2006-2013), but these efforts were not rewarded as the Amazon Fund raised only 5% of the potential generated by REDD+ – somewhere around R$3 billion.”

The letter points out that those 4.2 billion tonnes of CO2 are locked in 8.7 million hectares of forest that the states protected from development – in accordance with a federal decree, and in anticipation of REDD+ funding.

“This [emission-reduction] mark surpasses the reduction of any country – developed or developing, with or without binding targets,” the letter said. “Achieving these reductions is expensive, and currently these costs are being paid almost exclusively with public funds from local, state and federal governments, as well as individual efforts of farmers, traditional communities and indigenous peoples of our Amazon region.

“However, we have reached the ceiling in our budget investment capacity, particularly in the current Brazilian economy,” the letter continued. “The logic of creating the Amazon Fund was to raise funds through the REDD + mechanism to compensate positive results in emission reductions by developing countries.”

The Math

The letter states that, based on emission reductions already received, the country should be receiving roughly R$61 billion (US$20 billion) already, and more to come.

“Basically, they generated 4 billion tons and could sell only 200 million to Norwegians,” said Cenamo. “We still have potential of 95% of the whole amount, and the states want to find a way to sell it or get compensated for it. So if we’re not getting better performance with the Fundo Amazonia, they want to find ways to reach donors.

“If we can achieve the goal of reducing deforestation by 80% in the Amazon by 2020, we should generate additional emission reductions of 5 billion tons, totaling roughly R$135 billion by 2020,” the letter said. “We understand that the raising of funds to achieve this potential should come from a joint effort between individual states and the federal government, to maximize our chances of success and new partnerships and means of receiving financial rewards for our efforts.”

Members of the Brazilian delegation to Bonn said they were not authorized to comment on either letter.

Specific Demands

Here is a list of the specific demands featured in the governors’ letter:

1. Adopt the stock-flow methodology to allocate the reductions of avoided deforestation among the Amazon states and the federal government, proposed by the Forum of Environment Secretaries of the Brazilian Legal Amazon, in the context of the National REDD+ Strategy discussion, delivered to the Civil House of the Presidency and the Ministry of Environment at a meeting held at the Presidential Palace on 19/09/2012,
2. Define, urgently, the National REDD+ Strategy together with the Amazon States, as this process has been stalled since 2012;
3. Support the fundraising of external resources by the Amazon states to reduce deforestation and to protect the forest;
4. Promote the modification of art. 1 of the Decree 6.527/2008 authorizing the BNDES to operate the Amazon Fund, replacing the word Amazon Biome with “Legal Amazon”, since the mobilization of financial resources from the Amazon Fund is supported by the reduction of deforestation monitored by PRODES/INPE, which are produced in the Legal Amazon and not in the Amazon Biome;
5. Develop support programs and economic, fiscal and financial incentives for consolidation and maintenance of protected areas in the Amazon states;
6. Create mechanisms to compensate the Amazon States that have more than 50% of its territory under protected areas and indigenous lands.

This article has been updated with exact translations from Portugues to English of text from the Governors’ letter.

Additional resources

This article was originally posted on Mongabay.

10 June 2015 | “I think the transition period of the last six months has been quite heavy,” the minister, Siti Nurbaya, said at the inauguration event in Jakarta on Friday. “We persevered through a difficult time,” she added.

Notable appointments include Climate Change Oversight Director-General Nur Masripatin, Environmental and Forestry Spatial Planning Director-General San Afri Awang and Social Forestry and Environmental Partnerships Director-General Hadi Daryanto, all of whom have held various Forestry Ministry positions before Jokowi combined it with the Environment Ministry upon taking office last year.

The Climate Change Oversight Directorate-General will take the reins of Indonesia’s climate change agenda in place of the now-defunct REDD+ Task Force (BP REDD+) and National Council on Climate Change (DNPI).

Earlier this year, Jokowi dissolved BP REDD+ to streamline the government, though some activists and officials have criticized the move, fearing Indonesia’s conservation agenda will languish under the weight of the ministry’s bureaucracy.

BP REDD+ was the world’s first cabinet-level institution dedicated to implementing REDD+, which refers to the global Reducing Emissions from Deforestation and Forest Degradation mechanism.

Nur’s appointment “effectively confirms that the entire climate change agenda will be managed by the Directorate-General of Climate Change Oversight,” Siti said at the inauguration.

The new department will handle climate change adaptation and mitigation; measuring, reporting and verification of progress; and forest fire control, according to the minister.

To preserve the institutional independence and objectivity of Indonesia’s cooperation with Norway, under which BP REDD+ was established in 2013, the ministry will establish a Steering Committee on Climate Change, led by Sarwono Kusumaatmadja, an environment minister during Suharto’s New Order regime. The committee will also include NGO representatives, other senior bureaucrats and foreign technical experts.

As head of the Social Forestry and Environmental Partnerships Directorate-General, Daryanto is in charge of realizing Jokowi’s promise to allocate 12.5 hectares to “social forestry” or “community-based forestry” schemes, which put land management in indigenous and local communities’ hands through community logging, village forest and other arrangements.

The new director-generals line up at their inauguration last week. Photo: Sapariah Saturi

Greenpeace forest campaigner Bustar Mitar noted that most of the appointees were old faces from the Forestry Ministry, and he urged them not to operate in the “old style.” In 2012, Indonesia’s Corruption Eradication Commission (KPK) named the Forestry Ministry one of the country’s most corrupt institutions.

Agrarian studies expert Noer Fauzi Rachman also expressed reservations about holdovers from the previous administration, including Awang and Daryanto.

“This is not a sign of change,” Noer said.

“If the attitude is still toward centralized and elitist decisionmaking that is not open to the people’s participation, these changes won’t mean anything,” he added.

The director-generals are all echelon I officials. The ministry now has to name echelon II, III, and IV officials. There will be 18 echelon I as well as 86 echelon II, 316 echelon III and 769 echelon IV officials.

The newly inaugurated officials:

1. Bambang Hendroyono, ministry secretary-general
2. San Afri Awang, environmental and forestry spatial planning director-general
3. Tachrir Fathoni, ecosystem and natural resources conservation director-general
4. Hilman Nugroho, watershed and protected forests director-general
5. Ida Bagus Putera, sustainable production forest management director-general
6. M.R. Karliansyah, pollution and environmental damage control director-general
7. Tuti Hendrawati, toxic waste materials management director-general
8. Nur Masripatin, environmental and forestry spatial planning director-general
9. Hadi Daryanto, social forestry and environmental partnerships director-general
10. Rasio Ridho Sani, environmental and forestry law enforcement director-general
11. Iman Hendargo Abu Ismoyo, ministry inspector-general
12. Bambang Soepijanto, head of the ministry’s Natural Resources Development Agency
13. Henry Bastaman, head of the ministry’s Research, Development and Innovation Agency

Additional resources

15 June 2015 | When Sean Kinghorn started his new job as a senior sustainability manager at the software company Intuit, he wasted little time in proposing an ramped-up emissions reductions goal to the company’s executives.

His plan involved cutting emissions 20% under a 2012 baseline by 2020 and targeting both direct and indirect emissions, categorized as scope 1, 2 and 3 emissions. He also suggested using offsets to deepen the impact beyond this 20% reduction.

“Since I was two months into the honeymoon phase, I kind of put my neck out there and said, ‘I do not believe in us investing in offsets unless we’re going to set a science-based goal and be incredibly aggressive for all of our scopes.’ And they said yes,” Kinghorn said, speaking during a panel discussion at the Sustainable Brands conference in San Diego last week.

Since then, the maker of TurboTax and QuickBooks has purchased enough offsets to make the company carbon neutral across all three scopes. It buys from avoided deforestation projects in Borneo and Madagascar, a biomass project in Brazil, and wind, cookstoves, and biomass projects in India – as well as two projects in the United States.

Volcom, the lifestyle brand that markets apparel to surfers, skateboarders, and snowboarders, also practices “offset-inclusive carbon management,” purchasing tonnes from Wildlife Works’ Kasigau REDD+ project that protects 200,000 hectares of dryland forest in Kenya.The brand uses offsets to neutralize the emissions of its sporting events while parent company Kering offsets all scope 1 and 2 emissions on the business side. In addition, Kering has set a target of directly slashing carbon emissions 25% by 2016 across all of its brands, using 2012 as a baseline.

“Our carbon mentors came from within,” said Derek Sabori, Volcom’s VP of Global Sustainability. “For us, the idea of carbon offsets was introduced to us thanks to our parent company Kering.”

Quiet Leadership

Intuit and Volcom are in good company. Fourteen percent of corporations reporting emissions data to CDP engage in carbon-inclusive carbon management, according to recent Ecosystem Marketplace research. Far from “greenwashing,” these offset buyers – which include major consumer-facing brands such as Coca-Cola, Toyota, Delta Air Lines, Clorox, Sony, and many others – invest in direct emissions reductions activities such as energy efficiency and low-carbon product design at a higher rate than companies that don’t offset. Offset-buyers spent a collective $41 billion on these carbon-cutting activities in 2013 and were five times more likely to use an internal price on carbon.

However, both Kinghorn and Sabori admit that they haven’t yet done much marketing around their companies’ offsetting programs – or even sustainability in general – something that Kinghorn sees as a big miss.

“We’ve built up a good inventory of sustainability stories,” added Sabori. “Now we have to figure out how to tell those.”

Tell it From the Treetops

Recent social media attuned initiatives such as Stand for Trees and NatureBank are beginning to bridge the communication gap around carbon offsetting.

Since its launch in February, Code REDD’s Stand for Trees initiative has facilitated 35,000 tonnes worth of carbon offset sales from a dozen avoided deforestation projects across Brazil, Cambodia, Colombia, the Democratic Republic of the Congo (DRC), Indonesia, Kenya, Madagascar, Peru, Zambia, and Zimbabwe. The Stand for Trees website mimics an online shopping experience and allows individuals to purchase offsets in tonne or half-tonne increments, for $10 or $5, respectively – and then share the purchase on social media channels.

“What we really wanted to do is take this wonky, technical REDD mechanism and this crazy acronym and translate it into something that made sense for people on a human level, on a personal level,” said Gina Angiolillo, Communications Director at Code REDD.

NatureBank, an online platform being developed by British Columbia-based carbon offset originator Offsetters, also aims to use technology and social media to make carbon offsetting more accessible. Offsetters CEO James Tansey describes the platform as akin to Facebook or eBay for nature. Users will be able to earn “nature coins” by clicking through different forest carbon projects, pick a line on a map and watch footage from a drone as it flies through a rainforest, and buy “digital rights” to certain hectares of land conserved through a carbon investment.

“What people get emotionally connected to and excited about is the idea of conserving some of the almost priceless assets in terms of forest natural capital,” said Tansey. “People don’t get excited about something as abstract as carbon offsets.”

NatureBank will be operational next month, with the goal of mobilizing $1 billion in conservation carbon finance by 2018.

Going Viral

As part of the ongoing Stand for Trees campaign, Code REDD reached out to the Saint Louis-born rap artist and activist Prince Ea to see if he’d be interested in getting involved. Prince Ea visited the Kasigau Corridor REDD project in Kenya and the Mai Ndombe REDD project in the DRC. The result was the provocative video “Sorry” in which the rapper apologizes to future generations for destroying the planet – then flips a switch on his message halfway through to say it’s not too late. The video was released on Earth Day of this year and was viewed 12 million times in the first 12 hours. It has since reached more than 66 million views on Facebook.

“How do you get people to care? Well, you have to care,” Prince Ea, whose real name is Richard Williams, said during a plenary session at Sustainable Brands, where he got a standing ovation.

Stand for Trees is early proof that corporate offsetting programs have brand value, Angiolillo said. “We can talk to companies and say, we know that consumers get it – we had 20,000 of them purchase a tonne on our site,” she said.

The “gaming” aspect of NatureBank also aims to make the concept of offsetting more approachable – even fun.

“The inspiration here is that if you can get millions of people to buy FarmVille and Angry Birds, then surely you can do something on the gamification front with conservation,” Tansey said.

Ramping up Demand

Demand for carbon offsets on the voluntary market grew 14% last year to 87 million offsets, according to Ecosystem Marketplace’s Ahead of the Curve: State of the Voluntary Carbon Markets 2015 report, released last week. However, average prices fell to an all-time low of $3.8/tonne as offset suppliers faced a buyer’s market. Suppliers such as Offsetters and Code REDD’s Stand for Trees remain hopeful that the percentage of companies that engage in offsetting will grow.

“Any lightbulbs that needed to be changed should have been changed by now,” said Angiolillo, referring to the increasing sophistication of companies’ sustainability efforts. “So I think now that we’ve moved along far enough in this space, we are opening up a whole new potential set of offsetters who have done the things they need to do on their own side first, and now they have no more excuses.”

Indeed, scope 3 emissions accounted for three-quarters of offset buyers’ emissions, according to Ecosystem Marketplace’s analysis of public CDP disclosures – the elephant in the room in terms of companies’ true climate impact. Since these emissions occur upstream in a company’s supply chain (e.g. land-use change associated with the procurement of raw materials) or downstream in customer’s use products (e.g. the energy used when a consumer plugs in a company’s phone or refrigerates their food products), they are difficult to tackle in the short-term. Offsetting is one way to address these indirect emissions immediately.

Intuit’s measures to cut emissions include upgrading equipment to enhance energy efficiency in the company’s data centers, installing solar panels on its California buildings, increasing video conferencing capabilities to cut down on employee travel, and innovating towards “digital distribution” of all of its products to avoid packaging and shipping emissions. But all of these things take time.

“We need to invest in offsets now because I believe the planet can’t wait,” said Kinghorn.

Whatever drove them, climate negotiators here celebrated the inauguration of their headquarters in the repurposed “World Conference Center Bonn” with a draft agreement on how to slow climate change by reducing deforestation in developing countries. The agreement (available to the right) resolves all of the outstanding technical issues on how to Reduce Emissions from Deforestation and Degradation of forests (called “REDD+” within the UNFCCC), and it provides a clear set of standardized rules for developing REDD finance, but it also leaves the larger policy issues of how finance will flow to these activities open until year-end climate talks in Paris.

“Today’s breakthrough was unexpected, and countries should be praised for their hard work over the last decade,” wrote Gustavo Silva-Chí¡vez, who manages the Forest Trends REDDX tracking initiative, in the Forest Trends blog. “While REDD+ is finished on paper, the Paris global deal must provide the policy certainty to implement REDD+ on the ground.”

• Confused by REDD+? Click here to learn where it comes from and what it means for indigenous people.

The Nitty-Gritty

The new draft was finalized last night by the Subsidiary Body for Scientific and Technical Advice (SBSTA) and approved by the REDD+ Working Group this morning. It provides clarity on how safeguards and non-carbon benefits are addressed, as well as on how non-market approaches are implemented. These were the three issues that SBSTA was charged with addressing at this session, and they complement the “REDD Rulebook” that was adopted at year-end talks in Warsaw.

The new draft won’t officially be enshrined in the UNFCCC until it’s approved by high-level negotiators at year-end talks in Paris, just as the Rulebook was approved at the end of 2013 in Paris. The two-year-old Rulebook covers issues related to carbon accounting, such as how to monitor national forests, how to address the drivers of deforestation and forest degradation, and how to measure, report and verify activities designed to slow deforestation. The issues resolved today were considered stickier than those enshrined in the Rulebook, and many had expected them to be punted to the Paris talks – largely because even pro-REDD countries were perceived to be holding the mechanisms as bargaining chips.

“I think this will increase the confidence of everybody – both donors and the forest countries – that REDD can be done in a transparent and inclusive way with environmental credibility,” said Duncan Marsh, Director of International Climate Policy at The Nature Conservancy. “The fact that countries in these REDD negotiations were able to get to an agreement here two days before the conference ended is a great signal for Paris.”

What Happens Now?

With REDD+ completed, countries can more aggressively incorporate it into their national climate action plans, or “Intended Nationally-Determined Contributions” (INDCs), although they won’t know until Paris how such inclusion will be recognized.

So far, only eight countries have submitted INDCs, and none of the industrial emitters have included the use of REDD+ to meet their reduction targets; but Pipa Elias, also of TNC, points out that Mexico has offered to use REDD+ internally to reduce emissions and seems to be floating the idea of attracting REDD finance to beat them.

In its INDC, the country already said it would unconditionally reduce its emissions to a level 25% below the business-as-usual scenario by 2030, but it said it would set a more ambitious target of 40% if it received financial resources and technology – possibly through REDD finance.

“They’ve basically said, ‘We’re going to implement REDD+ internally to help us meet our domestic pledge, but we can also reduce more emissions if we get the money for this,” says Elias. “So, REDD+ also could be put forward – maybe by a middle-income or lower-income country – to say, ‘This is something we can do, but it needs to be financed.’”

She points out that the UNFCCC Secretariat is creating a REDD+ Info Hub for countries to begin listing their reference levels and other technical criteria as determined under the Rulebook, but the new agreement makes it possible for them to list their safeguards and non-carbon benefits as well – activities that could speed the flow of finance.

What Were the Sticking Points?

The breakthrough on all three outstanding issues came swiftly, and involved compromises that had been in the air for years, leaving veteran observers pleasantly perplexed.

“Maybe they really did just get tired of looking at each other,” says Silva-Chí¡vez, without a hint of sarcasm. “After all, they’ve been at it for ten years.”

Then he turned to the glass wall separating the outer lobby from the old Bundestag, which now serves as the mail plenary. Through the glass, you could see the core text being reworked in track-changes mode on giant screens.

“You also have to realize that they’ve got about 90 more pages of core text to work through in there,” he says. “I can just hear the bosses saying, ‘REDD+ is 98 percent done, let’s just close it out so we can move on to this other stuff.’”

Of the three outstanding issues, the easiest to resolve involved non-market payments, where just one country, Bolivia, had been holding out for inclusion of its “Joint Mitigation and Adaptation Mechanism”. The JMA welcomed REDD+ payments, but not through market mechanisms, and it prevented other market mechanisms from being implemented. The final text leaves the door open to both market and non-market approaches, with countries free to choose which they prefer.

The second issue* involved payments for non-carbon benefits (NCBs), such as protection of watersheds and biodiversity. In low-deforestation jurisdictions like Acre, Brazil, such additional benefits have been handled ad hoc – making them difficult to quantify and also difficult to communicate. African countries wanted to create a more standardized environment with detailed “methodological guidance” for NCBs, in part because their historic deforestation type is not the “frontier ” deforestation common in Latin America, but rather “mosaic” deforestation that’s less aggressive and therefore less lucrative from a carbon finance perspective.

“In Ghana, where I come from, we don’t talk about carbon anymore, at least not when talking to farmers,” says Yaw Osafo, who negotiated on behalf of the African Group.

“Farmers know that if they clear the forest they can grow crops, but they also know it will effect the rivers and streams,” he says. “So if you provide them with something that will allow them to keep most of the trees and still support a living, they’ll get behind it – and we wanted to be able to clearly communicate that.”

The compromise agreement provides “guidance”, but not “methodological guidance”, which Osafo says gets the job done.

On the issue of safeguards, donor countries – and NGOs within them – had been demanding clear minimum mandatory requirements, which some rainforest nations derided as unnecessary and prohibitively expensive. In the compromise agreement, safeguards have to be clearly communicated, with higher financing tied to higher rates of protection.

CORRECTIONS and CLARIFICATIONS

*This story initially reported that the African Group wanted to make NDB reporting mandatory for all countries.

8 June 2015 | BONN | Germany | By now, most of us know that REDD stands for “Reducing Emissions from Deforestation and Degradation”, and that it generally uses carbon finance to save endangered forests.

But how does it work, and where did it come from – and what is the new “Indigenous REDD” initiative being spearheaded by the Latin American indigenous federation COICA (Coordinadora de las Organizaciones Ind­genas de la Cuenca Amaz³nica)?

To answer these questions, we’re rolling out a series of easy-to-read articles focused on “Indigenous REDD”. Written in plain English for a general audience, these stories should bring you far enough into the weeds to understand the issues without getting in over your head – and they’ll provide a solid foundation for understanding our coverage as it unfolds between now and the year-end climate talks in Paris.

If you’d like to keep up on this series as it unfolds, please subscribe to the Ecosystem Marketplace eNewsletter by following this link. Subscribe to the Marketplace eNewsletter to receive a monthly summary of all Ecosystem Marketplace original content, or to the Forest Carbon Newsletter to receive our forest-related contentent, as well as content aggregated from other sources.

If you only want to receive the stories relevant to our Indigenous REDD series, send an e-mail to Steve Zwick at [email protected].

Here, meanwhile, are the stories we’ve published so far. Scroll down to the bottom for the booklet.

REDD Dawn: The Birth of Forest Carbon looks back at the genesis of REDD, which was conceived in 1988 by the World Resources Institute. It offers a brief introduction to the science of carbon accounting and an overview of REDD within the climate talks.

Indigenous People Explore Many Shades of REDD looks at how REDD has evolved on indigenous territories to-date, and how indigenous leaders believe it must change to truly deliver on its potential.

Choc³-Dari©n: What Projects Can – and Cannot – Achieve offers a deep dive into a project developed by the Afro-Colombian Tolo River People – and a primer on how REDD plays out on the ground.

Indigenous Life Plans and Carbon Finance: Two Sides of the Same Coin? examines the symbiotic relationship between indigenous “Life Plans” and REDD.

The Surui Forest Carbon Project: Lifeline For A Life Plan offers a detailed glimpse inside a pioneering indigenous project built on an indigenous Life Plan. Initially posted in 2013, it’s a bit dated, but still a good read.

Jurisdictional REDD: Long Deferred, Soon Delivered examines the state of “jurisdictional” REDD programs – government-to-government programs that are designed to reduce deforestation across an entire state or country.

REDD+ And Green Supply Chains: The Yin And Yang Of Saving Forests examines role that REDD finance can play in helping to purge deforestation from corporate supply-chains.

Click here to download Full Circle: REDD and Indigenous People – Past, Present, and Future, which is a PDF containing several of these stories.

Meeting the objective of $100 billion in climate finance by 2020 can be achieved, according to a new World Resources Institute (WRI) study. The NGO released the study, which lays out multiple methods that harnesses public and private sources to meet the target, at climate talks this week in Bonn.

This article was originally a WRI press release.

5 June 2015 | New analysis from World Resources Institute finds countries can achieve the goal of mobilizing $100 billion per year in international climate funding by 2020. The new paper finds the goal can be reached through multiple pathways and will require bringing in funding from various sources, including the public and private sectors.

Getting to $100 Billion: Climate Finance Scenarios and Projections to 2020 is one of the first quantitative analyses of funding scenarios to achieve the $100 billion goal. WRI’s paper finds greater clarity and stronger commitments will be necessary to reach the funding target, but if all considered sources are included, climate finance could total $109 to $155 billion in 2020 under projections of low/medium growth and leverage.

“An international climate agreement at COP21, including agreement on finance, depends on developed countries providing a credible pathway to honor their commitments with strong provisions for predictable and adequate climate finance,” said Athena Ballesteros, director, sustainable finance initiative, World Resources Institute. “While $100 billion is not sufficient on its own to create a low-carbon transformation, it is an important political goal to signal developed countries’ are committed to scaling up climate finance.”

Four public and private financing sources that might count toward the $100 billion goal are grouped into potential funding scenarios and projected forward from 2012 to 2020, using various growth rates and assumptions about how much private investment could be leveraged by public dollars. All four potential pathways require steady increases in public finance and inclusion of new funding sources to reach the $100 billion by 2020 goal:

• Scenario one, which includes developed country climate finance alone, will not reach $100 billion by 2020, unless it grows at an annual rate of 25 percent.
• Scenario two, which adds the private sector finance leveraged by developed country climate finance, could meet the target only under a high growth/high leverage projection.
• Scenario three, which includes developed country climate finance and MDB climate finance and private sector investment leveraged by both these sources could meet the $100 billion target under a medium growth/medium leverage projection.
• Scenario four, which combines developed country climate finance and MDB climate finance and private sector leverage and climate-related ODA, could reach the $100 billion under a low growth rate/low leverage projection.

“Forging an agreement on the path to $100 billion is essential to build trust and bring countries together ahead of the Paris climate conference in December,” said Michael Westphal, senior associate, WRI and the paper’s lead author. “We urge negotiators to use the report’s recommendations as a political middle ground to move the world toward the $100 billion goal.”

Getting to $100 Billion outlines three key recommendations to achieve a credible and politically feasible path forward:

• Developed nations should commit to increasing all public funding flows above current levels to 2020 – as of 2012 climate-specific finance totaled $17 billion.
• Developed countries should consider using new and innovative sources of finance including redirection of fossil fuel subsidies, carbon market revenue, financial transaction taxes, export credits, and debt relief – many of which have so far been underutilized to mobilize climate finance.
• Parties should clarify the definition of climate finance and development of methodologies, including those for calculating and attributing leveraged private sector investment, to improve accounting and reporting

“As stated by President Hollande, we can’t secure an agreement in Paris without an agreement on finance,” said Pascal Canfin, senior advisor for international climate affairs, WRI. “Therefore, showing a credible and balanced pathway towards the $100 billion goal is an issue of strategic importance for the upcoming G7 summit.”

Additional resources

5 June 2015 | Brazil holds more than 12 % of the world’s freshwater, but citizens in some parts of the country – most notably Sí£o Paulo – have been suffering unprecedented drought this year – in part because of a failure to appreciate the linkages between forests and water supplies. That failure, however, has led to a renewed appreciation of the interlocking services its vast natural resources provide: the carbon that its forests keep locked up as they regulate water and the thousands of species of plants and hundreds of species of birds and freshwater fish in its Canada-sized Cerrado, among others.

The country is also home to thousands of programs that use payments for ecosystem services (PES) to fund conservation by recognizing the value of those services. In Brazil, the best-known form of PES is REDD – an acronym for programs that conserve endangered forest by harnessing carbon finance to “Reduce Emissions from Deforestation and Degradation”, but the most advanced programs cover water – often by restoring forests that regulate rivers.

For such programs to deliver on their potential, decision-makers have to know what works and what doesn’t – but until recently, that information was scattered in isolated pockets across the country. It changed last week when Ecosystem Marketplace publisher Forest Trends unveiled the Brazilian Matrix of Ecosystem Services (Matriz Brasileira de Serviços Ecossistíªmicos), with the support of Brazilian non-profit organization Fundo Vale and the Good Energies Foundation. The Matrix is a database of more than 2,000 PES programs across Brazil categorized by type: water, carbon, biodiversity, sustainable agriculture, livestock, and “multiple”. The “multiple” category refers to those that bundle several ecosystem services into one payment plan or embed the service cost into a product price such as certified timber.

“The most visible aspect of the Matrix is the interactive map, which we call the ‘visualizer,’” says Beto Borges, who spearheaded the effort within Forest Trends. “We also summarized the key findings in a booklet called ‘Economic Incentives for Ecosystem Services in Brazil’ (Incentivos Econí´micos para Serviços Ecossistíªmicos no Brasil), and we made them available on a poster, which you can find if you go to the Matrix home page and click on ‘documentos’, but it’s really huge.”

“It’s essential for us to understand that all ecosystem services are interconnected if we’re to develop a new and innovative market,” said Mauricio Moura Costa, Executive Director of Bolsa Verde do Rio, an Brazilian organization promoting market mechanisms for environmental compliance, speaking at the event. “The concept of the Matrix is what distinguishes the work that’s been developed by Forest Trends.”

Makings of the Matrix

Fundo Vale first approached Forest Trends after seeing Ecosystem Marketplace’s Global Matrix, a similar database of ecosystem markets, but on a worldwide scale. The two organizations developed the Brazilian Matrix jointly over more than three years, with support from the Good Energies Foundation.

Developers plan a second phase, which will include work with the Brazilian Biodiversity Fund, a non-profit organization, and possibly government ministries as well.

Although designed as a decision-making tool for use within the country, the Matrix can also provide an opportunity for people outside the country to understand the country’s rich blend of programs – and not just the isolated few that have received international attention, says Borges.

“Acre is not the only thing happening on PES, and the Surui REDD project isn’t the only carbon project,” he says. “Water is actually more developed than carbon.”

Fulfilling a Need

The Matrix was primarily created to fill the knowledge gaps and gain a deeper understanding of ecosystem services and the payment mechanisms meant to protect them. Developers of the tool intend to address issues such as social benefits, scale, effectiveness, challenges and opportunities.

And with Brazil’s vast ecological assets combined with the country’s heavy involvement in innovative compensation programs, potential for PES is huge.  In an early proposal document, Borges said these practices – PES – can drive significant investments for a true green economy that alters the existing paradigm which promotes development at the cost of the environment.

As the landscape of ecosystem markets is constantly changing, an ultimate objective of the Matrix is establishing a roadmap for stakeholder engagement, according to the 2012 proposal document – which also describes the tool as a ‘living’ database that evolves with the market but its inclusive analysis can provide stability and guidance. The matrix creates a simple and direct way to visualize and follow global and regional trends of environmental markets in Brazil, the web page reads.

A Joint Public Private Effort

Cristina Maria do Amaral Azevedo, Deputy Secretary of Environment for the State of Sí£o Paulo, said the initiative could reduce transaction costs and draw in the private sector.

“With government resources alone, it will not be possible to make viable any PES public policy” she said. “Dialogue and cooperation among the private sector, civil society and governments will provide the answer for how to advance with PES in Brazil at scale.”

The information the Matrix provides offers a bridge between the public and private sectors. PES can harness private dollars for conservation in a sustainable way and fill the funding gap that exists currently as conservation activities are largely publicly funded. The Matrix allows for a healthy progression and incorporation of compensation schemes into land-use strategies and regulatory development, the booklet reads.

The accompanying report was authored by environmental researchers Carlos Eduardo Frickmann Young and Leonardo Barcellos de Bakker, who note that PES doesn’t let government off the hook. Instead, they say, it requires strong environmental policy that supports sustainable development. Government must still enforce protection on protected areas as well as other environmental regulation, they say. The Matrix simply makes everyone’s role more visible and transparent.

“The Matrix developed by Forest Trends allows not only the acceleration of the decision-making process, but also provides an opportunity for convergence between the private sector, the public sector and civil society,” said Walter Lazzarini,  President of the Environmental Council at FIESP (Federation of Industries of Sí£o Paulo/ Federaçí£o das Indíºstrias do Estado de Sí£o Paulo).

Impact on Legislation

The matrix identifies strengths and weaknesses of existing PES projects while also analyzing synergies among the various entities and best approaches for them to work together. Comments streaming in regarding the Matrix note the growing belief that the tool could influence a more comprehensive national PES law in Brazil. The nation has an existing law that defines ecosystem services and mentions PES.

“The discussion of payments for environmental services has not yet led to a consensus in Brazil,” said Francisco Gaetani, Executive Secretary of the Ministry of the Environment. “The Brazilian Matrix developed by FT can contribute to the drafting of a law that’s denser, more robust, and more likely to succeed, because it reflects the reality of more than 2,000 field initiatives.”

Additional resources

The voluntary carbon markets have served as the testing ground for compliance programs all over the world, even moving forward when efforts to implement mandatory cap-and-trade programs stalled. This has led to the voluntary markets having an influence that extends well beyond the nearly one billion offsets transacted over the last decade, according to Ecosystem Marketplace’s latest State of the Voluntary Carbon Markets report.

3 June 2015 | Washington, D.C. | When the international negotiations take center stage in Paris this December in the hopes of reaching an agreement to rein in climate change beginning in 2020, negotiators will be able to draw on the lessons learned in the voluntary carbon markets, according to a new report from Forest Trends’ Ecosystem Marketplace.

Companies, governments, and individuals voluntarily spent just under $4.5 billion to purchase nearly one billion carbon offsets from projects that halt deforestation, install renewable energy, promote energy efficiency, distribute cleaner-burning cookstoves and more, according to Ecosystem Marketplace’s Ahead of the Curve: State of the Voluntary Carbon Markets 2015 report.

National and subnational government officials have leaned on the experiences of the voluntary markets in building their compliance programs, meaning the voluntary markets have influence that goes beyond their relatively small size. For example, the offset component of California’s cap-and-trade program was largely built on project methodologies initially tested in the voluntary markets, which paved the way for pre-compliance offsets to flow into the regulatory program despite a year-long postponement to the program’s launch. And South Africa’s carbon tax, currently scheduled to begin in 2016 after also being delayed, will welcome domestically-sourced carbon offsets generated under the Gold Standard and the Verified Carbon Standard (VCS) – stalwarts of the voluntary markets.

“However, while compliance markets have turned to the voluntary markets for inspiration on project types, standards and more over the years, this relationship is a two-way street in that the voluntary markets take demand cues from developing compliance markets and proposed legislation and regulation,” said Kelley Hamrick, Carbon Program Associate at Ecosystem Marketplace and Lead Author of the report.

This is most clearly reflected in the pricing of voluntary carbon offsets, which has experienced peaks and valleys driven by policy signals (or lack thereof). The global average price peaked at $7.3/tonne in 2008 as momentum appeared to be building toward the United States implementing a national cap-and-trade system to reduce these emissions. But prices began to decline in subsequent years as carbon trading legislation faltered in the U.S. Senate. The global average price has consistently fallen since 2011, when it became clear that nations would fail to ratify another phase of the Kyoto Protocol, to reach an all-time low of $3.8/tonne. Historically, the average price of voluntary offsets is $5.8/tonne over the decade Ecosystem Marketplace has tracked these projects.

“With few positive policy signals in the carbon markets in 2014, the year witnessed the voluntary market’s lowest average price per tonne on record – sending a clear signal to policymakers in the lead-up to the Paris talks,” Hamrick said.

An evolving market

From year to year, the project type most in demand has evolved, driven by policy signals and supply-demand fundamentals, according to the report. In 2009, landfill methane projects experienced the highest transaction volumes as U.S. buyers bet on these projects becoming eligible for the national cap-and-trade market being debated at the time or in California’s developing cap-and-trade market – a gamble that failed to pay off on both counts and created a major oversupply of these offsets. In 2011-2012, wind projects topped the charts due to their relative cost-effectiveness compared to other project types – the price differential being critical to European buyers, the primary purchasers of voluntary offsets, who were trapped in a major economic crisis at the time.

In recent years, however, REDD (Reduced Emissions from Deforestation and Forest Degradation) offsets have overtaken wind as the dominant project type, trading at an all-time high of 25 million tonnes in 2014, in large part due to funding from public sector entities in Germany and Norway committed to avoiding deforestation in tropical countries. Through the “REDD Early Movers” program, these European governments are funding avoided deforestation in Brazil’s Acre state and nationally in Ecuador and Colombia. These “payments for performance” are not offsets, meaning countries cannot deduct the reductions from their own emissions, but they rely on traditional carbon market infrastructure, and represent the kind of government-to-government deals that may become increasingly common. These agreements contributed $90 million to 2013-2014 market value.

“I think that (public-sector involvement) is something that is going to continue, which is good,” said Agustin Silvani, Managing Director of Carbon Finance for NGO Conservation International. “But what worries me is that many of these initiatives say they want to attract the private sector and they want to work with the private sector, but there is no mechanism for the private sector to engage, which is frustrating for the project developers. It’s worrying because if not designed correctly it could crowd out whatever private finance is there instead of seeking ways to leverage it.”

Deforestation contributes up to one-fifth of global emissions annually, and hundreds of companies are committing to purge deforestation from their supply chains. As international climate negotiators debate the potential inclusion of REDD offsets in a potential agreement emerging from the Paris talks, it is noteworthy that REDD offsets now have a slight edge on the list of most transacted voluntary project types with 84.5 million tonnes compared to the 84.3 million offsets transacted from wind projects over the last decade, according to the report.

“Whatever comes out of Paris will most likely not be super robust in terms of a globally legally binding agreement,” Silvani said. “It’s going to be a series of pledges and contributions, but nothing top-down like Kyoto. How does REDD form part of that? I think that remains to be seen, but it will be a big part of some countries’ national contributions and everything is positive for REDD to continue.”

2014 in the spotlight

In 2014, the volume of offset transactions rose 14% from the previous year to reach 87 million tonnes, from the 76 million tonnes tracked by Ecosystem Marketplace the previous year. However, the overall value only rose 4% to $395 million, according to the report, as a result of the average price shrinking to $3.8 per tonne from $4.9 per tonne in 2013. Offsets from household devices (cookstoves and water filtration) retained the highest average price by project type at $6.4 per tonne – although the price of these offsets also declined from the previous year’s $8.7 per tonne average.

Avoided deforestation offsets led the pack in 2014, guided by the $50 million to reduce deforestation in Ecuador through the REDD Early Movers program. Renewable energy projects were also in demand with nearly 14 million offsets transacted last year, according to the report.

The road to Paris

Countries that will play critical roles in the Paris talks have received notable shares of the voluntary financing pie for carbon offset projects. Over the last decade, the United States took the gold in terms of voluntary offset transactions, with the largest volume at the highest prices of any country (136 million tonnes of offsets valued at nearly $700 million), owing partially to the preference that domestic buyers such as automaker General Motors have for U.S.-based projects. Brazil, which will play a key role in the discussions on REDD, takes the silver (40 million tonnes valued at $233 million) due in part to the commitment of the government of Germany – another major player in the Paris talks – to pay the state of Acre to avoid deforestation in its jurisdiction. Turkey – not expected to be a major player in the international talks – takes the bronze (32 million tonnes at $207 million) as home to most of the renewable energy offsets supplied to European buyers – the largest regional purchaser of voluntary offsets over the last decade.

Several least developed countries have also benefitted from voluntary carbon finance, including Cambodia (4.3 million tonnes valued at $40 million) – home to Terra Global Capital’s Oddar Meanchey forestry project, which has received financing courtesy of software giant Microsoft’s internal carbon fee program. The Democratic Republic of Congo – home to the second-most forested area in the world after Brazil – has also benefitted from voluntary carbon finance (4.6 million tonnes worth nearly $21 million).

Additional resources

The upward slant continues to this day, while the zigzags reflect the rhythm of farms and forests in the Northern Hemisphere coming alive in summer, when they sponge up CO₂, and falling dormant in the winter. If this natural rythm had such a pronounced effect on the atmosphere, scientists began to wonder, what impact does rampant deforestation have? How much of our greenhouse gasses come from industrial emissions, and how much form chopping trees?

Scientists had known about the greenhouse effect since the early 1900s, when Swedish scientist Svante August Arrhenius dubbed it the “hot-house” effect, but Keeling’s curve showed that CO₂ levels were rising faster than most believed. As the curve continued to climb over the ensuing decades, so did interest in climate change.

Trees and Climate Change: An Early Defense

By the early 1970s, scientists were beginning to see climate change as a very real but distant threat – one that would eventually force us to completely restructure our industrial economy. Physicist Freeman Dyson was one of those who decided to get ahead of the challenge by looking for workable solutions.

“Suppose that, with the rising level of CO₂, we run into an acute ecological disaster,” he wrote in a 1977 article entitled “Can We Control the Carbon Dioxide in the Atmosphere?“, published in the journal Energy. “Would it then be possible for us to halt or reverse the rise in CO₂ within a few years by means less drastic than the shutdown of industrial civilization?”

His conclusion: yes, it would be possible to slow climate change by planting trees – but not as a permanent solution. Instead, he saw trees as a short-term, stopgap measure that would slow the process long enough for technology to catch up.

“The long-term response, if such a catastrophe becomes imminent, must be to stop burning fossil fuels and convert our industry to renewable photosynthetic fuels, nuclear fuels, geothermal heat and direct solar-energy conversion,” he continued. “But a world-wide shift from fossil to non-fossil fuels could not be carried out in a few years… An emergency plant-growing program would provide the necessary short-term response to hold the CO₂ at bay while the shift away from fossil fuels is being implemented.”

Trees and Sustainable Agriculture

Meanwhile, in 1974, humanitarian organization CARE had launched a program called Mi Cuenca (My Watershed) to help Guatemalan farmers save their topsoil – in part by planting rows of trees on steep farmland to capture runoff and create natural terraces. The project soon became an unqualified success, and farmers across the region were clamoring to join, but by 1988 CARE was running out of money, and the project was on its last leg.

That same year, the United Nations launched the Intergovernmental Panel on Climate Change (IPCC) to explore the science of global warming, while an energy executive named Roger Sant started looking to expand his company’s output – preferably by building wind farms. A proponent of green energy in the Carter Administration, Sant had co-founded a company called Applied Energy Services (AES), in part with the objective of making green energy work.

Rural Development and Reduced Greenhouse Gas Emissions

Wind-farm technology, however, wasn’t what it is today, so Sant asked the World Resources Institute (WRI) if there was a way to offset his emissions by reducing them somewhere else – a radical concept at the time. WRI picked up Dyson’s idea – which other scientists had since moved forward – and suggested he plant trees across the United States. That quest found its way to Paul Faeth, an agricultural engineer with the International Institute for Environment and Development (IIED), which was in the process of merging into WRI.

Faeth knew of Mi Cuenca’s plight, and he proposed killing two birds with one stone: by planting trees in Guatemala, he said, AES could help both the environment and the rural poor.

Intrigued, AES began working with WRI to explore the science of carbon accounting – science that had, ironically, been perfected by timber companies to estimate the amount of wood in a forest. It was a simple but labor-intensive process that involved measuring trees at chest-height and then applying “allometric equations” based on the trees’ species and circumference to see how much wood they contained. From there, it was simple math to extrapolate the amount of carbon: basically, divide the wood by two.

But there was more to it than just the carbon in the newly-planted trees.

Deforestation and Climate Change

Researchers at the time were estimating that deforestation contributed about 20% of global greenhouse gas emissions – estimates that have since been confirmed by the IPCC. That meant you could reduce greenhouse gas emissions faster by saving endangered forests than by planting new trees, which would need decades to get big enough to matter. Plus, living forests provide habitat for endangered species and deliver “ecosystem services” such as water filtration and climate control. On top of that, saving forests seemed inexpensive.

WRI had just hired a policy analyst named Mark Trexler, who pointed out that any trees they planted on the slopes would also save endangered forest further up, because farmers wouldn’t have to keep abandoning their land for greener pastures. That, he argued, was more important from a carbon perspective than planting trees – especially if many of the newly-planted trees ended up being cut down to supply farmers’ immediate needs. He proposed focusing their attention on saving the trees

In the end, AES decided to spend $2 million to save and expand Mi Cuenca to offset 2 million tons of its own internal CO₂ emissions. CARE re-named the project “Mi Bosque” (My Forest), and today their experiment is considered by some to be the world’s first REDD project. Although a later analysis found it drastically over-estimated the amount of carbon that was kept out of the atmosphere, it sparked the decade of experimentation that led to the creation of today’s rigorous carbon standards.

Climate Talks Begin

The project caught the eye of The Nature Conservancy, and pilot projects started proliferating across Latin America. The term “REDD” wouldn’t enter the vernacular for another 15 years, but NGOs began developing structured, methodological approaches to “Avoided Deforestation” (AD), which became a hot topic at the Rio Earth Summit in 1992, as well as at the First Conference of the Parties (COP 1) to the United Nations Framework Convention on Climate Change (UNFCCC) in Berlin in 1995.

As climate talks progressed, analysts like Trexler and ecologists like Tia Nelson of The Nature Conservancy argued for the inclusion of REDD in the UNFCCC framework as a critical means of immediately dampening the rise in greenhouse gases.

On the REDD front, proposals ranged from “project-based” frameworks like Mi Bosque to “national baseline frameworks” using a country’s historic rate of deforestation as a performance baseline and then offering payments for beating it.

Politics and Science: the Great Divide

The proposals, unfortunately, found little traction – for a variety of reasons. To begin with, few climate negotiators had a forestry background, so the science was lost on them. Furthermore, “offsetting” had become equated with “incentivizing industrial reductions”, and most environmental organizations were horrified by the idea of cheap offsets, which they feared would flood the market and remove the incentive to change industrial practices. Finally, developing countries – still mindful of their recent colonial past – feared that REDD would cost them control of their forests. On top of all that, no one really agreed on how best to determine which forest was in danger and which was not.

As a result, when the Kyoto Protocol emerged from COP 3 in Kyoto, Japan in 1997, REDD was off the UN table and relegated to voluntary markets, where it continued to evolve at the pilot scale under real-world conditions.

Voluntary Carbon Markets

Over the next 15 years, standard-setting bodies like the Verified Carbon Standard and the American Carbon Registry emerged to provide ways of determining which forest was endangered and which procedures can be used to save it. At the same time, the Climate, Community & Biodiversity Alliance emerged to ensure indigenous rights, and forest communities that embraced REDD found themselves able to earn income from their stewardship of the land.

Within the UNFCCC, however, REDD remained on ice until 2005. That’s when Papua New Guinea wrangled it back onto the agenda at Climate Talks in Montreal (COP 11). In 2010, REDD was the sole bright spot in the otherwise dismal Copenhagen Accord. By 2011, governments around the world were harvesting the lessons of voluntary REDD pilot project developers and offset buyers to launch larger-scale regional REDD programs that accounted for avoided deforestation at the “jurisdictional” scale but still allowed early pilot projects to generate emissions reductions and earn offsets and revenue (i.e. “nest”) within their borders. The UNFCCC and World Bank, however, steered clear of anything involving offsets and drifted toward purely jurisdictional approaches that left individual projects in limbo. (If that seems like a lot to swallow, keep reading the articles that follow.)

Then, at the 2013 climate talks in Warsaw, the UNFCCC finally agreed on a REDD Rulebookfor jurisdictional REDD. Technically, it’s not a book, but a collection of seven decisions that provide guidance on how countries can harvest available data to earn REDD income. The Rulebook’s provisions for program development are significantly less rigorous than the standards imposed on voluntary projects, but the payments into jurisdictional programs aren’t offsets – meaning countries can’t claim to have reduced their own carbon footprint. Instead, jurisdictional programs are increasingly seen as “payments for performance” that could slow deforestation by supporting sustainable agriculture – while at the same time creating a framework within which more rigorous individual projects can address specific local challenges.

At the head of the line is Frazier Guisao, a young Afro-Colombian whose ancestors settled along the Tolo River after the abolition of slavery in 1851. His brother Eusebio follows a few steps behind, along with three other community members – all of whom spent their youths in exile after fleeing in the late 1990s, when mercenaries hired by rich land owners ruled the region through torture and murder.

Today, police and army soldiers patrol both the streets and the countryside, but former mercenaries still live in town. Yet the Tolo River crew is not afraid to perform the forest patrols. They go for their daily perimeter checks, armed only with cameras and GPS-enabled cell phones, looking for evidence of illegal logging. When they find what they’re looking for – a recently-cleared patch of forest, or logging tracks – Ferney Caicedo photographs it and records the coordinates. The slender 21-year-old recently completed a professional forestry course, and aims to make this his life’s work.

“This wood is worth around three million pesos ($1,500 USD),” says Frazier, gesturing toward a smaller tree in front of him and applying the knowledge he learned when he first came home – when he was forced to earn his living chopping the forest he now protects.

All of these men could easily make more money as loggers, but they’ve chosen to protect the forest instead – a choice made possible by the Chocí³-Darién Forest Conservation Project, a trailblazing REDD project that began coalescing in 2005, when community leader Aureliano Cí³rdoba took advantage of a critical provision in the 1991 Constitution that allowed indigenous and Afro-Colombian forest communities to claim their ancestral lands. By securing collective title to the land for his people, Cí³rdoba was able to begin rekindling the attachment to the forest that many of his people lost while in exile.

“I used to be afraid,” says Cí³rdoba. “But no more. I have 1,500 people behind me now. If something happened to me, the entire community would stand to defend me.”

“Our only defense is that we are organized and determined enough to seek our rights,” says Eusebio.

The Downside of the Peace Dividend

With civil war hostilities waning and his people in clear possession of title to their land, Cí³rdoba began to look for ways to create jobs as his community recovered. He initially explored logging, but soon found that his people weren’t the only ones flooding into the territory after the danger subsided – outside loggers were coming for trees, and cattlemen along the perimeter were quietly expanding their ranches illegally.

Instead of just harvesting the forest, Cí³rdoba realized, he should be saving it if his people were going to maintain their quality of life – but how? His own people needed to make a living, and many were either logging or working on cattle ranches, which were owned by wealthy and well-connected businessmen.

To address the challenge, he developed – and won support for – a long-term sustainability strategy that would help his own people meet their needs by harvesting non-timber forest products and working at peripheral ranchers, but he also needed to keep the outside ranchers and loggers at bay.

The Genesis of REDD

In 2008, Cí³rdoba met an anthropologist from Stanford University named Brodie Ferguson, who was studying the civil war’s impact on indigenous people and Afro-Colombian communities. Both Cí³rdoba and Ferguson had heard about REDD, which at the time functioned only in voluntary carbon markets but was gaining traction in global climate talks as something to be used on a wider scale. Ferguson had asked members of the indigenous Arhuaco for their opinion, and got a surprising answer.

“Do we want to be paying the youth of our community to conserve the forest?” asked Danilo Villafaí±e, an Arhuaco chief. “Shouldn’t they be doing this anyway out of appreciation for the forest and the community traditions … just because it’s the right thing to do?”

It was a question that went to the heart of Ferguson’s PhD research, which showed that forest people, whether indigenous or immigrant, don’t want to chop the forest beyond what they needed to survive – but in the face of displacement and armed struggle, they often find themselves losing their connection to the forest. At the same time, for many of them, paying people to conserve is akin to buying a child’s affection: it turns a profoundly spiritual experience into a financial transaction.

The Economics of REDD

But Ferguson had looked into the economics of REDD, and he knew that income from selling carbon offsets couldn’t compare to any of the alternative ways to use their land: cattle ranching, cacao plantations, and gold mines. A recent study estimated that only a price above around $30 USD per ton of carbon dioxide could make a forest more valuable standing than cleared, and even then, only in some circumstances. From Ferguson’s perspective, REDD wasn’t an incentive to save forests; it was an enabling mechanism that, when done right, could bring in enough money to jump-start new activities that could take the pressure off the forest for the long term.

“It should be spent on things like education, creating environmental awareness, improving healthcare, empowering women,” he says. “Even if 100 percent of the profits go to the community – the best- case scenario – if they are not spent the right way, we are not achieving what we should be.”

Cí³rdoba realized that, in Ferguson, he had a kindred spirit.

“We don’t want the money so we can get rich,” Cí³rdoba says. “We want to develop organizationally. That way we can protect our territory, maintain peace, and improve our lives.”

Illegal Deforestation and the Myth of the Carbon Cowboy

Both men had heard horror stories of ruthless “carbon cowboys” scouring the planet in search of forests to commandeer, but most of those stories revolved around one man: a serial swindler named David Nilsson, who tried to con indigenous people in Peru by masquerading as a project developer. Most of the indigenous people he targeted, however, wouldn’t sign with him; and the contracts he did sign were declared invalid. He was roundly ignored by everyone who knew anything about conservation-based climate solutions, and he’s been rightly barred from ever entering Peru again, according to media reports.

But the mythic hordes of speculators decending on the region to gobble up forest for their carbon content turned out to be just that: myths, and for a variety of reasons.

To begin with, there were the lessons of early pilot programs, which underlined the importance of involving indigenous people in a successful REDD program. Then there were the emerging carbon standards, which required the “Free, Prior, and Informed Consent” (pronounced “F-Pic”) of indigenous people before a program could proceed. And, finally, there were the economics: anyone ruthless enough to commandeer a forest wouldn’t settle for the little bit of money he could earn by saving it; he’d chop it up – as, in fact, loggers and cattlemen were already doing across the Amazon – in part because it was so cheap and easy to do so.

In countries where land is expensive and property rights are enforced, ranchers keep cows in relatively small spaces and feed them “silage” – fermented fodder produced from grass and maize – which lets them raise up to three animals per hectare, according to the Food and Agriculture Organization.

But in Colombia, ranchers average just one cow per hectare of land. That means the cows always have waist-high grass on which to graze, but only because ranchers illegally clear and fence off small plots near the edge of the forest. Global demand for commodities like palm oil, soybeans, and cattle is driving deforestation all around the world – and nearly half of that deforestation is illegal, according to a 2014 Forest Trends report called Consumer Goods and Deforestation: An Analysis of the Extent and Nature of Illegality in Forest Conversion for Agriculture and Timber Plantations.

Cí³rdoba was leery of antagonizing the cattlemen who provided jobs for so many of his people, but he also knew the ranchers could easily double their production without gobbling up more forest. He ultimately concluded that the ranchers needed workers as much as the workers needed ranchers.

REDD, he concluded, could provide a bulwark against illegal deforestation by providing money for forest patrols, with any profit going into a general fund for education and health care.

The two men then agreed to build a REDD project together.

Carbon Standards

First, they had to decide which carbon standard they wanted to use. Standards dictate everything from how you measure the carbon captured in trees to how you determine which parts of the forest are truly in danger to how you treat the people living there.

They chose the Verified Carbon Standard (VCS), which was then called the Voluntary Carbon Standard, and the CCB Standard, intended for carbon projects with exceptional benefits for wildlife and communities.

To get the ball rolling, Ferguson sold his condo and created a company called Anthrotect to act as project developer.

Free, Prior, and Informed Consent

FPIC requires disclosure, discussion and agreement – a process involving far more than just a few meetings between community leaders and a project developer.

FPIC means that project developers must offer information to the community, ensure they understand it through a feedback loop, allow them time for private discussions, hold meetings to answer questions, and organize focus groups to gather women’s or youth’s perspectives. It is an expensive process, involving sociologists or anthropologists, and it can take years.

Although new research from the World Resources Institute and the Rights and Resources Initiative indicates that REDD programs tend to strengthen the rights of forest people, that is not a foregone conclusion, and many forest peoples lack the legal protection that the Tolo River community enjoys. In many other countries, forest dwellers do not own the land or the forest they have lived in for centuries.

From the beginning, Cí³rdoba aimed to exceed even the stringent requirements of FPIC and to involve the whole community in the design of the project — an approach that he believed would ultimately strengthen the project by making it more attuned to the needs and desires of his people, and therefore more likely to succeed. In that spirit, he put his neice, Everildys Cí³rdoba, in charge of explaining the process to the community.

“I had to take a complex subject and try to make it simple,” she says. With the remainder of the community now on board, the Tolo River people turned their attention to measuring the carbon stored in their forests.

Measuring the Carbon Content

Ferguson sold his condo and borrowed money to bring in outside consultants like biometrician Kyle Holland of Ecopartners LLC and ílvaro Cogollo from the Medellin Botanical Garden, whose team spent three months in the Tolo River community forest studying the biodiversity and carbon it contains. They selected random plots, identified the tree species within them, and then measured their height and circumference. Using allometric equations, they calculated that one acre of the communal rainforest could contain up to 300 tons of carbon – multiples of the average carbon content in one acre of an Amazonian forest.

Since much of a forest’s carbon is found in the leaf litter and soil, the team also took soil samples and analyzed their carbon content. The samples had to be shipped to the United States, because there were no laboratories in Colombia equipped to carry out the analysis. The team then repeated the process for trees and soil in cattle pastures in order to know how exactly much carbon is left in the landscape after ranchers clear forests for pasture.

The Reference Level

After estimating the carbon stocks in the forest, the team had to ascertain how much carbon would be released if business continued as it was going. First, they looked at the trend in historical rates of deforestation to see how much of their forest would likely be chopped down for pasture if business continued as usual. Then, using satellite imagery, they compared the forest with other unguarded forested areas nearby and concluded about 170 hectares per year (5,000 hectares total) would be lost to cattle ranching, agriculture, and selective logging if defensive actions weren’t taken immediately.

Referring back to the species composition of the forest and the trees’ average height and width, they team pegged the total greenhouse gas emissions from encroachment by ranchers at 2,800,000 tons of carbon dioxide over the next 30 years. This is equal to about 90,000 tons of carbon emissions per year.

The data collection and the analysis took the better part of 2011, and then they wrote up their analysis in a Project Description (PD) and submitted it to the VCS for a rigorous process of peer-review known as “validation” – the phase in which the VCS determines if a project’s design is, in fact, valid.

If they passed that, they’d have to then go through a process of verification – meaning they had to show they were actually taking the steps outlined in their project’s plan.

Verifying the Results

In July 2012, Pablo Reed, an independent third-party auditor, came to the Tolo River community forest to verify the carbon offsets. Reed was working for the international certification firm Det Norske Veritas (DNV), and had special experience in land-use carbon projects such as REDD+.

Reed recalls that just getting to the GPS-marked forest plots in the Tolo River community was an adventure, involving a charter flight, a boat ride, a motorcycle, a horseback ride — and then finally a trek on foot into the forest following the patrol. Reed observed Caicedo and other trained community members perform the tree measurements and then compared the numbers to what they had measured in the initial inventory.

After a reviewing the project’s documents and visiting the site, Reed and his team concluded that the forest patrols and other project actions had saved more than 500 hectares of at-risk forest. Had the forest been cleared for pasture, it would have released more than 100,000 tons of carbon dioxide into the atmosphere, or the equivalent of 20,000 cars.

Finally, in December 2012, the Verified Carbon Standard authorized the issuance of 104,000 verified emissions reductions (VERs) for listing in the Markit Environmental Registry, which is a global database of carbon projects created to ensure that offsets aren’t counted twice.

Plans for the Money

Revenue from the first tranche of credits was used to cover the cost of setting up the project as well as administrative and operating expenses like the forest patrols.

As in most community projects, the Tolo River People do not receive individual cash payments from the sale of carbon credits. “Giving out money to not cut the forest makes people lazy,” says Frazier Guisao.

Instead, they plan to use future revenue to improve the community healthcare services, send young people to universities, and strengthen the community organization, with some kept in reserve for emergencies. Beyond that, the proposals are endless.

One recent day after a morning patrol through the forest, the crew relaxed under the shade of a sun shelter that Guisao built from palm trees, waiting for the afternoon heat to pass.

“We should fix up the village school and offer professional courses for adults,” suggested one member.

“We should build an aqueduct to pipe down clean water from the hills to the village,” another offered.

Some want to use the money to subsidize struggling farmers, while others want to improve the dirt road to the village, and still others want a cell phone tower to enhance phone service in this remote region. One person mentions start-up funds for a food-delivery service by a women’s collective. Another dreams about building a community center.

In any case, as has been true throughout this particular project’s journey, the entire community is involved in how any profits will be spent.

When Deforestation Moves Down the Street

Isolated REDD projects have been used to rescue endangered patches of forest around the world, but often the loggers and cattlemen who are denied access in one location simply move down the road – an activity that carbon accountants call “leakage.” Project developers do account for it, and in theory they subtract the leakage from their total offsets, but the only way to eliminate leakage is to spread carbon accounting and control across entire states or countries.

“That’s how it was always supposed to be,” says Dan Nepstad, Executive Director and Senior Scientist at the Earth Innovation Institute. “No one ever wanted all these scattered, isolated projects dotting the forest, and even in the 1990s, it was a given that we needed jurisdictional programs to have a real impact.”

Many indigenous REDD programs are, in fact, built on a jurisdictional model – but more importantly, they are also built on an indigenous model. Like the people of Tolo River, indigenous people across the Amazon have been developing formal plans for their forest. Just as REDD was a means to an end – rather than an end in itself – for the Tolo River people, so is it for indigenous people across the Amazon. Most have spent decades developing long-term development plans called “Life Plans”, and most are finding them difficult to get off the ground. Is REDD the answer?

Tanya Dimitrova holds a masters degree in energy and resources from University of California, Berkeley. She lives in Texas and works as a freelance science and environmental journalist.

For Further Reading

This story has been adapted and condensed from a four-part series by Tanya Dimitrova. You can view the full series here:

Part One: How The Tolo River People Of Colombia Harnessed Carbon Finance To Save Their Rainforest provides an overview of the project.

Part Two: The Forest, The Farms, And The Finance: Why The Tolo River People Turned To Carbon Finance examines the drivers of deforestation in and around the Tolo River Community.

Part Three: The Tolo River Community Project: The Importance of Inclusion follows the development of the project itself – its conception, its implementation, and its challenges.

Part Four: Getting Down To Business: The Tolo River People Shift From Building Their Carbon Project To Selling The Offsets tells the surprisingly challenging story of finding and cultivating offset buyers.

1 June 2015 | Roughly 2,500 years ago, people of the Amazon Basin started blending charcoal with pottery to create a thick, rich soil called terra preta (dark earth) – evidence of a now-lost system of sustainable agriculture that enhanced rather than depleted the soil. The practice eventually spread across the continent, and it appears to have sustained indigenous civilizations for centuries.

Terra preta began disappearing shortly after Europeans arrived in the Amazon 500 years ago – an arrival that sparked migration and conflict well beyond their early coastal and river settlements.

Chief José Maria’s knows little of this ancient history, but he knows that by the time his people, the Shawí£dawa, were officially contacted by Brazilian authorities in the 1900s, they’d abandoned their ancient practices in favor of migratory slash-and-burn agriculture. After contact, decimated by war and disease, they became dependent on modern farming methods that kill the forest, deplete the soil, and poison the rivers.

In 2008, Chief José Maria heard that the government of Brazil’s state of Acre wanted to learn his people’s ways and the ways of neighboring people like the Ashaninka and Yawanawa. The government’s goal was to re-create the long-lost practices that worked so well for so long, and to support them through a legal framework called the System of Incentives for Environmental Services (Sistema de Incentivos a Serviços Ambientais / “SISA”).

SISA, he learned, would even pay his people to improve the way the forest functioned – the way it filtered water, captured carbon, and fortified the soil. It would pay them, in other words, to keep Acre’s agricultural system functioning for centuries to come.

In 2011, he began participating in workshops designed to implement SISA and its “Payments for Ecosystem Services” (PES), but by late 2013, he was tired of talking and anxious to get to work.

“When will PES arrive?” he asked wearily. “We’ve held about five different meetings …”

The answer came in early 2014, when the state paid R$3.6 million ($1.6 million) to the Acre Association of Indigenous Agroforestry Agents (Associaçí£o do Movimento dos Agentes Agroflorestais Indí­genas do Acre/AMAAIAC) to reverse decades of degradation caused by the shift from forestry to cattle farming and other practices that destroy the forest.

“PES is difficult to understand, but it is not rocket science,” says Charamaxa Huni Kuin of the Huni Kuin people. “These are the things that indigenous agroforestry agents have been doing, and the work is getting stronger.”

In April of last year, the government put up an additional R$3 million ($1.34 million) to support and implement indigenous Life Plans across the state. Deployment was delayed until later in the year because of anti-corruption laws that prevent big payouts too close to an election, but money is now being doled out in payments ranging from as low as R$50,000 ($22,390) to as high as R$210,000 ($94,000), and it’s being used for a broad range of activities – from strengthening land management to promoting associations and communities to generating income for women.

It’s all part of the world’s first large-scale “jurisdictional REDD” program.

What is “Jurisdictional REDD”?

In some ways, a jurisdictional REDD program is a lot like an individual REDD project, but scaled up to cover an entire jurisdiction – which could be an entire country, or a state within a country, or a region, like Ghana’s cocoa-producing area.

The basic concept is the same as a project: buyer and seller haggle over how much forest would be lost if business continued as usual, and they agree on a “reference level” that represents a business-as-usual scenario. Then the buyer agrees to pay for activities that reduce deforestation below that reference level.

From a carbon-accounting perspective, the biggest challenge is getting enough random samples over a long enough period of time to offer carbon-stock estimates that are 95 percent certain, which is what the Intergovernmental Panel on Climate Change (IPCC) recommends. That can be costly, because, despite all the advances in satellite and even drone technology, it still requires sending teams out into the forest with tape-measures. Then someone in the jurisdiction – usually in the forestry department – has to blend those findings with satellite images going back decades to document the jurisdiction’s land-use change over time – how much forest has been converted to field and then to farm, and sometimes back again.

Once a jurisdiction has this, it’s actually more straightforward to establish a reference level for an entire jurisdiction than it is for a small patch of land – even if that jurisdiction is a hodgepodge of palm trees, maple trees, farmers’ fields, and gulfs and valleys. That’s because things average out over a large scale, so a jurisdiction can use its prevailing rates of deforestation as is reference level – a practice that climate negotiators enshrined in the REDD Rulebook in Warsaw at the end of 2013, after eight years of haggling.

The Indigenous Component

Although the basic concept of payments for reduced emissions is the same the world over, every jurisdiction has its own challenges and its own philosophy about how to combat deforestation – which means that each state has a different philosophy about how to spend the money.

In Acre, the money goes into a fund administered by the state, which has promised to funnel at least 70 percent of it to people it defines as providers of environmental services, including rubber-tappers and indigenous groups.

Like Igarapé Lourdes, most of Acre’s indigenous territories currently have little or no deforestation. But while Igarapé Lourdes sits on the Arc of Deforestation, many of Acre’s territories are so isolated that they’d find it hard to prove they’re endangered under classic REDD carbon mechanisms – despite illegal incursions by loggers that have left several indigenous leaders dead. Here, indigenous impacts can more accurately be measured in terms of habitat conservation and water management, with carbon stocks being a byproduct. SISA, in this case, acts as a conduit between international REDD+ payments and local payments for watershed improvement, riverbank restoration, and scores of other activities.

“International REDD+ payments come into the state denominated in carbon, but the state distributes the money internally via payments for watershed services, payments for habitat restoration, and payments for any number of other actions that are consistent with SISA,” says Rebecca Anzueto, a former Program Manager with the Communities and Markets Initiative at Forest Trends. “As long as the state meets its REDD+ emissions-reduction targets, the REDD+ payments should continue to flow.”

The projects are being selected by the government according to a criteria established by SISA’s Indigenous Working Group (GT-Indí­gena).

“GT-Indí­gena was created to guide the implementation of the indigenous component of SISA, to figure out, for instance, how to distribute funds and other benefits to local indigenous communities – to answer questions like, ‘How will money strengthen land tenure rights? How will this money strengthen the management and governance of territories that have been demarcated?’” says Beto Borges, who heads the Forest Trends Communities and Markets Initiative and sits on the board of GT-Indí­gena.

“We’re talking about 2.4 million hectares of forest being managed by indigenous peoples,” he says. “That’s 15 distinct ethnicities dispersed among 35 indigenous territories. Their traditional territories have been demarcated. They’re official. Now, the new funding from SISA will strengthen the management and conservation of their forests.”

Who Pays?

For Acre, the German government stepped up with R$50 million ($24.2 million) through 2018 in exchange for the state taking actions designed to save xx hectares of forest and reduce carbon dioxide emissions by xx tonnes, but the state has several other options for the future.

The state has Memorandums of Understanding with the cities of Rio de Janeiro and Sí£o Paulo, and it’s a founding member of the Governors’ Climate and Forests Task Force (GCF), which then-California Gov. Arnold Schwarzenegger created in late 2008. The GCF launched with linkages among states in the United States, Brazil, Mexico, and Indonesia in a worldwide, sub-national, emission-reduction network. It’s since expanded to include states in Nigeria, Spain, and Peru.

Last year, GCF members signed the Rio Branco Declaration, formalizing their commitment to reducing deforestation by 80% by 2020 – but reiterated that the commitment is contingent on adequate funding. Such a reduction would prevent four billion tonnes of carbon dioxide emissions (tCO2e) from entering the atmosphere.

“It’s basically saying, ‘Listen, we did what we said we’re going to do … we’ve brought emissions down more than 3 billion tons’ – that’s bigger than any nation has been able to accomplish,” says Dan Nepstad, Executive Director and Senior Scientist at the Earth Innovation Institute. “Hidden in those words is the idea, though, that we can’t sustain this agenda forever unless there’s some recognition and finance flowing into our states and provinces. [The Declaration] has got to be seen as the beginning of a process of negotiation and alignment … we can’t do it alone.”

Through the GCF, individual REDD projects within Acre may one day be able to sell offsets to emitters under California’s cap-and-trade program – and, because they’re embedded in a jurisdictional program, they won’t have the sticky problem of leakage that isolated project face when a tree-chopper just moves down the road.

Members of the Yawanawa People at a SISA workshop in their territory. Photo: Laura and Tashka Yawanawa Members of the Ashaninka People take stock of their natural capital at a workshop in their territory. Photo Credit: Flavia Cunha

Nesting

By embedding individual projects in a jurisdictional program, project developers can avoid the sticky issue of leakage – or what happens when deforestation just moves down the road. To do so, however, they need to carefully document the emission-reductions that their projects create and differentiate them from emission-reductions that would have happened anyway.

This is a process called “nesting,” and Acre is piloting VCS’s Jurisdictional Nesting REDD+ (JNR) framework. Released in 2012, the JNR offers the only comprehensive framework for jurisdictional accounting and verification at this point.

As a state, Acre must also nest its reductions in those of Brazil – which has vowed to slash deforestation 80 percent by 2020, and has been tapping the Amazon Fund to do so.

“When we talk about setting an integrated approach for REDD+ for the Amazon states that is nested at the national level, it might seem difficult, but it’s actually much simpler than trying to set the baseline for a project or smaller area,” says Pedro Soares, Climate Change Program Coordinator for Manaus-based NGO Instituto de Conservaçí£o e Desenvolvimento Sustentí¡vel do Amazonas (IDESAM), which was recently hired by the Brazilian state of Rondí´nia to help it advance a jurisdictional REDD program there.

The Brazil Advantage

Most developing countries are still struggling to develop carbon inventories, but Brazil’s National Institute for Space Research (Instituto Nacional de Pesquisas Espaciais, “INPE”) has been tracking the Amazon from the sky since the 1970s, and its state forestry departments have measured millions of trees. As a result, Acre can document that it lost an average of 0.30 percent of its forest annually from 2000 to 2013, and it can also convert that to carbon stocks with 95 percent certainty.

For Acre to earn REDD income, it had to come up with a plan to get its deforestation rate below 0.30 percent, then it had to find a buyer who believed in their plan and committed to it, and finally, it had to execute the plan – and prove that it did so.

This is essentially the same sequence that jurisdictions around the world are following, although most jurisdictions aren’t anywhere near as advanced as Brazil. They’ve done no carbon inventory, which means they don’t know how much carbon is in their forests, and they don’t really know the rate at which their forests are being converted to farms and fields.

“REDD Readiness”

Now that the REDD Rule Book exists, countries interested in using REDD finance know exactly what’s required of them to get ready for REDD. The Norwegian government has spent billions of dollars on REDD readiness round the world, but the World Bank’s Forest Carbon Partnership Facility (FCPF) has created a formal process for doing so. A country that wants to go through this process begins by submitting an Emission Reductions Program Idea Note (ER-PIN) to the FCPF’s Carbon Fund, which gives them the money they need to take stock of their carbon flows and create an Emission Reductions Program Document (ER-PD), which is the equivalent of a PDD in the voluntary carbon world, but much less rigorous. At that point, “readiness” ends, and “performance-based payments” like Germany’s payments to Acre begin. Under the World Bank program, buyer and seller execute an Emissions Reduction Purchase Agreement (ERPA) with the Carbon Fund.

At this point, no countries have gone all the way through the World Bank’s process, but Norway, the United States, and the United Kingdom have launched a financing mechanism for jurisdictional REDD initiatives that support commodity-certification programs at the Warsaw climate talks. This program works by leveraging REDD to link initiatives on the ground with emerging efforts to attack the ultimate drivers of deforestation: us, the global consumers of beef, soy, and palm oil.

This story has been adapted from:

Jurisdictional REDD: Getting to Scale, which appeared in Ecosystem Marketplace on March 24, 2015,
Millions Of Dollars Now Flowing To Indigenous Ecosystem Service Programs In Brazil, which appeared in Ecosystem Marketplace on May 6, 2014
and
Acre and Goliath: One Brazilian State Struggles To End Deforestation, which appeared in Ecosystem Marketplace on May 5, 2014.

Parties with an interest in regulations falling under the Clean Water Act are still sorting out the implications of the recently finalized Clean Water Rule. Meanwhile, green infrastructure scored several victories this month as New York City, Detroit and Xiamen contemplate using the practice to manage stormwater overflows.

This article was originally published in the Water Log newsletter. Click here to read the original.

29 May 2015 | After a year of controversy and debate among environmentalists, farming interests, landowners and legislators, the US Environmental Protection Agency and Army Corps of Engineers released a new rule this week which seeks to clarify which wetlands and streams are protected under the Clean Water Act. The rule has likely impacts on a number of regulatory programs – and a high likelihood of meeting future litigation as permittees, environmentalists, and others sort out its implications.

In other stories this month, interest in green infrastructure and low impact development (LID) by cities is picking up rapidly, if the volume of news is any indication. New York City published monitoring results from three demonstration projects showing a better-than-expected 20% cut in stormwater flow to sewers, while cities from Xiamen to Detroit are also getting on board.

It’s about time. As a recent white paper from Veolia and the International Food Policy Research Institute points out, even under the best case scenario, “water quality is still projected to deteriorate dramatically” globally in the coming years, and especially in Asia. Despite the bad news, the paper’s conclusions are noteworthy. The authors call for new infrastructure investment but also soft-path solutions: watershed-scale approaches, better management of rural and upstream areas, and water quality trading.

The search for solutions to water quality challenges is evident in a flurry of recent news on trading mechanisms. Progress is underway on a new trading program in Arkansas, while the city of Santa Rosa, California, will pay $330,000 to a vineyard for nutrient offset credits. Meanwhile, nutrient trading is being floated in basins from the Baltic to India’s Ganga River, as a cost-effective strategy to manage enormous water pollution challenges.

As always, you don’t have to wait til next month to get the latest on natural infrastructure finance and trends. Subscribe to us on Twitter, and check out our daily news feed.

— The Ecosystem Marketplace Team

For questions or comments, please contact [email protected]

Additional resources

29 May 2015 | Last spring the US Environmental Protection Agency (EPA) and the US Army Corp of Engineers released a proposed rule aimed at clarifying which waters are protected under the Clean Water Act (CWA). What followed was a contentious year with opponents hailing from the legislative, agriculture, energy and property development spaces launching a fierce campaign to prevent the proposal from becoming regulation.

Nevertheless, the two government agencies released a final version of the Clean Water Rule this past Wednesday.

“Protecting our water sources is a critical component of adapting to climate change impacts like drought, sea level rise, stronger storms, and warmer temperatures – which is why EPA and the Army have finalized the Clean Water Rule to protect these important waters, so we can strengthen our economy and provide certainty to American businesses,” said EPA Administrator Gina McCarthy in a statement.

The EPA insists the rule does not expand CWA jurisdiction and will not mandate any additional permitting requirements but precisely defines the wetlands and streams protected under the CWA, which would lead to a faster and more predictable permitting process. The rule is in part a response to ambiguous language in the CWA that has led to US Supreme Court cases that resulted in more questions than answers, according to the agencies.

“By and large, the rule is good,” said Adam Riggsbee, President and co-founder of RiverBank Ecosystems, a Texas-based ecosystem restoration and mitigation banking company. “But anytime you develop a regulatory program, there is risk.”

In the case of this new rule, Riggsbee sees increased potential risk of undermining the act. “Outside of the occasional court case, there wasn’t a whole lot of effort to challenge the CWA before this new rule,” he said. “Now we might see some more legislative zeal.”

The Clean Water Rule, which is grounded in science, is clear on its protections of smaller bodies of water that function as a system and impact downstream waters. This includes parts like shallow wetlands called prairie potholes, coastal prairie wetlands in Texas and western vernal pools in California. Vernal pools are small seasonal wetlands that provide valuable habitat. Also, navigable waterways and their tributaries are protected because of their potential impact downstream.

However, water types like groundwater and ditches not connected to streams aren’t covered. Neither are subsurface flows or tile drains.

Suzy Friedman, the Director of Sustainable Agriculture at NGO Environmental Defense Fund, pointed out the need for much further participation and cooperation-particularly from the private sector-outside of federal regulations to protect and maintain the country’s waters.

“To drive real change, we need the private sector to create strong market demand for clean water,” Friedman said.

For Riggsbee, the big question is how the rule will impact mitigation. In theory, this rule would increase demand as waters with vague regulations receive the full protection the CWA has to offer. However, Riggsbee is skeptical that this will lead to more demand within the marketplace.

“In my experience, when compliance gets more expensive you get fewer players willing to pay the price,” he said.

Developers and farmers will simply bypass the entire process of mitigating their impacts and accept the risk that comes with breaking the rules, Riggsbee said. He believes, then, that this rule will likely come down to compliance enforcement, which varies heavily geographically.

As the rule was just finalized, comments continue to filter out from affected industries and interests. The National Farmers Union, an advocacy organization for farmers and ranchers, has come out in favor of the new rule. While not perfect, a statement said, the finalized version is much improved over last year’s proposed rule and does offer certainty regarding regulation over ditches-a long-time murky issue. “The final rule puts bright-line limits on jurisdiction over neighboring waters, offering farmers increased regulatory certainty and mitigating the risk of enforcement or litigation,” the organization said.

However, a statement from the National Association of Home Builders wasn’t supportive because the organization believes the rule’s clarifying definitions are actually expansions of their traditional meanings. The result is a federal overreach adding more regulatory burdens on the building industry, according to the association. “Regrettably, as a result of these overly broad definitions, this rule will soon wind up in the courts yet again,” it said.

The rule will go into effect 60 days after publication in the Federal Register.

The US Bureau of Land Management on Thursday released its final environmental reviews of land-use plans containing greater sage-grouse habitat. As the plans make use of compensatory mitigation, those in the mitigation space are viewing the strategy as a potential driver to increase demand for market mechanisms like habitat exchanges and conservation banks.

29 May 2015 | Conserving the greater sage-grouse is a complex endeavor. The bird’s range spans 11 US Western states covering both public and private land alike with some of the bird’s most prime habitat falling on property slated for energy development. Conserving such a species has led to a multitude of approaches aimed at preserving the bird’s rapidly declining population without stunting energy growth and development in the region.

Several Western states have developed what’s called resource management plans (RMPs), creating high quality, science-based conservation in sagebrush ecosystems. Over the past four years, these plans have been submitted to the Department of Interior’s Bureau of Land Management (BLM), the nation’s largest land manager.

And today, the BLM in partnership with the US Forest Service (USFS) rolled out their amendments of these plans which came from 10 western states. The finalized plans will serve as governing guides for sagebrush ecosystems that fall on BLM and USFS lands.

The plans span a land mass the size of South Dakota; 50 million acres of sage-grouse habitat. “Conserving the greater sage-grouse must be done at a landscape-scale,” said Theo Stein of the US Fish and Wildlife Service (FWS).

The plans address primary threats, such as habitat fragmentation and invasive species, facing the sage-grouse and sagebrush ecosystems. They focus on three approaches to alleviating these threats: minimizing new or additional surface disturbances, improving habitat condition and reducing the threat of rangeland fire.

Included in these plans is a compensatory mitigation component which carries significant implications for conservation banking as well as other versions of market mechanisms for species conservation. Wayne White, the former president of the National Mitigation Banking Association, discussed the time the association spent with the BLM and other federal agencies on shaping a mitigation component of the plans.

“We focused on high standards and equivalency throughout all forms of mitigation,” White said.

The BLM will require and ensure mitigation that provides a net conservation gain to the species by avoiding, minimizing and compensating for unavoidable impacts from development, the document reads.

“The RMPs require mitigation, which is a key piece of developing the market demand needed for conservation banking” Stein said.

Conservation banks for the greater sage-grouse are already starting to appear. The Sweetwater River Conservancy Greater Sage-Grouse in Wyoming, marks the nation’s first. In Nevada, The Nature Conservancy and gold mining company, Barrick Gold, along with the BLM are collaborating on a bank .

The Environmental Defense Fund’s (EDF) Eric Holst sees mitigation in this context as an endorsement of EDF’s market-based habitat exchanges. These exchanges allow development interests to offset their unavoidable impacts by purchasing mitigation credits.

“By requiring mitigation on millions of acres of vital sagebrush habitat, these agencies are unlocking the vast untapped conservation potential of America’s working lands,” Holst, Senior Director of Working Lands, said in a statement.

The plans now enter into a review process lasting over three months.

Outside the BLM’s announcement are ongoing legislative efforts impacting the grouse’s conservation. Late last year, Congress attached a rider onto the 2015 appropriations bill prohibiting FWS funding to be used toward proposing a listing status. There is also a defense policy bill that passed in the House earlier this month, which is attempting to curb sage-grouse conservation by arguing it would put military operations at risk.

While last year’s rider didn’t prevent conservation initiatives from moving forward, Stein says the defense bill could allow governors to overturn these BLM plans.

These congressional tie-ups only result in further habitat loss and fragmentation which increases the possibility the sage-grouse will require a listing status, Stein says. “Kicking the can down the road is only going to make matters worse for this species.”

Additional resources

With no trading of allowances since mid-January, businesses regulated by South Korea’s cap-and-trade program have made their dislike of the carbon markets well known. That stand-off will likely end next year, as the first compliance deadline approaches, but analysts warn that a scarce supply of offsets may increase the costs for companies then.

May 28 2015 | The last-minute passage of South Korea’s cap-and-trade bill made headlines back in 2012, when it set the stage for the world’s second largest emissions trading system (ETS).

A year later, as details of the ETS emerged, the program once again made the news – this time for the dubious honor of the world’s most (potentially) expensive carbon market. Under the country’s penalty scheme, non-compliant companies can be fined at three times the average price of allowances for that compliance year, with a cap at KRW 100,000 (USD $90) per tonne.

Since the initial allocation of allowances and launch of the market, there has been growing talk of an allowance shortage. Sungwoo Kim, an official advisor to the government through consulting firm KPMG, gave greater insight during a panel at the Climate Action Reserve’s Navigating the Amiercan Carbon World conference in Los Angeles last month. He estimated there will be a 57 million tonnes of carbon dioxide equivalent (MtCO2e) shortage during the first phase of the ETS (2015-2017) – which could increase the costs for covered entities to meet their requirements.

Despite the expensive consequences, companies have shown little interest in trading allowances since the program’s launch at the beginning of January. Only four allowance trades have occurred (as of May 29) at a volume of 1,380 tonnes. With the last trade registered in mid-January, companies have given no indication that will change soon.

The carbon stakes are high

While the penalty is high for non-compliance, most companies are placing an even bigger bet: that the government will distribute additional allowances.

The largest opponent has been perhaps the Federation of Korean Industries (FKI), an economic organization in Korea for members earning annual sales of 50 billion won or more. FKI recently released its annual economic outlook survey, which found that – behind a drop in domestic demand – the cap-and-trade program remains the next largest concern for businesses.

In reality, though, the program mainly affects the country’s largest corporations, with 10 companies responsible for an estimated 76% of emissions covered under the ETS.

These organizations have the most to lose from penalties. As a result, many companies (or rather the companies’ membership organizations) have taken the fight to the courts over allowance volumes. The grievance specifically revolves around the way allocations were determined because the Korean government averaged entities’ emissions from 2011 to 2013. For organizations that saw a decrease in emissions during those three years, it is likely that they will remain beneath their allocation while the opposite is true for companies with a higher emissions trend.

A continuous battle

This isn’t the first time that South Korea’s industry has pushed back against the carbon market. Though the bill passed with near unanimous support across Korea’s political parties, there was significant resistance from the Ministry of Industry and industry associations.

“The first fight is between the Ministry of Environment and the Ministry of Industry,” said Kim, who explained that the fight occurred over several years. “The Ministry of Industry keeps communicating with the industry people, with the companies, that this system will not go on. So the companies are receiving the wrong signal. They think that they don’t have to prepare for this emissions trading scheme… But the Ministry of Environment won that fight and they started the ETS.”

The government has already compromised on several aspects of the ETS prior to this, including delaying the start of trading from 2013 to 2015. However, the government has held firm against other demands, including another delayed implementation through 2020.

An April article by the news agency Nikkei Asian Review quoted Lee Hyung-sup, senior deputy director of the Environment Ministry’s climate change mitigation division, on the matter: “We believe the amount of permits was appropriately made,” he said. “It is in the nature of the emissions market that the government takes a mandatory top-down approach, as it sets the national target and makes the allocations accordingly.”

Offsetting – a silver lining or insubstantial air?

Barring government action, compliance entities could fill the allocation gap by offsetting up to 10% of their emissions reductions.

While the response to offsets has been better than that of allowances (with five transactions as of May 29, totaling 279,658 tonnes), analysts at research firm Point Carbon warn that offsets, too, are in short supply as the compliance market only allows for the use of domestic offsets. The Ministry of Environment began issuing Korean domestic offset units (KOCs) from pre-existing Certified Emissions Reductions (CER) offsets in April, meaning questions remain about the size and scope of offsets to be issued.

So far, the ministry has converted around 1.9 million CERs. A total of 91 domestic Clean Development Mechanism projects might be converted to provide 42 MtCO2e, according to Kim. But analysts at Point Carbon estimate only 20 million offsets could make the cut (excluding HFC 23 and N20 adipic acid projects, which are offset types that other governments have ruled problematic and excluded from use).

This potential shortage could change in Phase III of the ETS (2021-2025), when up to 50% of total offsets allowed may be international in origin.

In the meantime, Kim predicts that the use of offsets will become more widespread next year after compliance entities have sorted out the allowance issue since offsetting is really the only option for large emitters to meet their targets without sacrificing business growth.

“For now, since we just implemented the emissions trading scheme, big companies are busy fighting to get more allowance-based emissions reductions,” he said. “But they will turn their face to project-based emissions reductions related to the offsets at the end of next year.