Tag: Article News Analysis

Representatives from states and provinces in seven countries spread across Europe and North and South America yesterday committed to slashing per-capita greenhouse-gas emissions to less than two tons of carbon-dioxide equivalent – a cut of up to 95% – by 2050.

20 May 2015 | A dozen states and provinces representing 100 million people from seven countries yesterday committed to dramatically reduce their greenhouse gas emissions. The commitment is part of a growing momentum on climate action in the lead-up to the UN climate talks that will be taking place in Paris this December. Environmental Defense Fund (EDF) hosted the event commemorating the official signing of the “Subnational Global Climate Leadership Memorandum of Understanding” in Sacramento, where founding signatories committed to cut total emissions by 80-95% percent below 1990 levels or to cut per-capita emissions to below two tons, by 2050.

The twelve jurisdictions that signed the memorandum of understanding (MOU) come from three continents and represent about $4.5 trillion in combined GDP (gross domestic product). More state, regional and city governments are expected to sign the agreement in the coming months.

“This agreement is further proof that states, provinces, and cities are forging ahead with climate solutions, not waiting for others to act,” said EDF President Fred Krupp. “By taking this bold step, California and the other partners will not only secure significant emissions reductions but also demonstrate that climate action and prosperity go hand in hand. As we look ahead to the climate conference in Paris at the end of the year, yesterday’s announcement sets a strong example for countries to follow.”

Yesterday’s event was convened by California Governor Jerry Brown and attended by six other of the agreement’s founding signatories, including Acre, Brazil (Magaly Medeiros, President of the Institute on Climate Change); Baden-Wí¼rttemberg, Germany (Winfried Kretschmann, Minister-President);  Baja California, Mexico (Francisco Vega, Governor); Catalonia, Spain (Santi Vila, Minister of Territory and Sustainability); Jalisco, Mexico (Aristí³teles Sandoval, Governor); and Ontario, Canada (Glenn Murray, Minister of Environment and Climate Change).

The UN Development Program estimates subnational governments’ decisions can influence 50-80% of greenhouse gas mitigation and adaptation initiatives needed to address climate change.

“These subnational leaders understand first-hand that the future of people and the planet are at stake, and they are committing to concrete measures that will help us turn the corner in the fight against climate change,” said Derek Walker, EDF’s Associate Vice President, U.S. Climate and Energy Program. “Today’s agreement demonstrates how dynamic climate leaders can create solutions that can be replicated elsewhere and can pave the way for more ambitious action.”

The agreement is being referred to as the “Under 2 MOU” for both its goal of limiting emissions to below 2 tons per capita by 2050, and the goal of limiting global temperature rise to under 2 degrees, which Intergovernmental Panel on Climate Change (IPCC) scientists say is needed to avoid dangerous climate change.

To reduce greenhouse gas emissions, signatories have committed to: establishing emissions reductions targets for 2030 or earlier that will be achieved through their regional actions and plans; increasing energy efficiency and renewable energy; and coordinating on specific areas, including science, short-lived climate pollutants, and monitoring, reporting and verification of emissions.

The subnational governments also committed in the Under 2 MOU to working on adaptation and resilience, and to carrying out strategies to implement and achieve their goals and targets.

With these subnational governments working together and building on their existing agreements, the agreement says, “subnational governments, together with interested nations, can help to accelerate the world’s response to climate change and provide a model for broader international cooperation among nations.

California’s offset market was the source of about nine million compliance offset transactions in 2014, according to an Ecosystem Marketplace analysis. However, that number could have been even higher if the evaluation of early action carbon offset projects by California regulators had not moved at a snail’s pace, according to stakeholders.

19 May 2015 | When California regulators announced they would give certain voluntary carbon offset projects an opportunity to transition into their compliance market, it was seen as a potential reward to the innovators and risk takers who invested in these projects early on before a clear compliance signal was sent. In reality, those actors are now being penalized because their projects are being sent to the back of the line, stakeholders said.

Ecosystem Marketplace tracked nine million compliance offsets specifically transacted for the California program in 2014 – a volume that would have been higher had it not been for the slow issuance of offsets to early action carbon projects, according to project developers and investors speaking at the Climate Action Reserve’s (CAR) Navigating the American Carbon World conference in Los Angeles last month.

To date, the California Air Resources Board (ARB) has issued about 19.5 million offsets from 120 projects. Forestry projects account for the largest volume by project type at more than 9.6 million offsets issued to 17 forestry projects – 10 of which were early action projects.

“Early action projects, particularly forestry, have been very slow to transition,” said Roger Williams, President of Blue Source, which develops forestry projects. “We have situations where we have projects that have been kind of stuck in the queue for over a year. That certainly has been frustrating for us because these are projects that have been reviewed by verifiers, by registries, by a second verifier, prior to landing on ARB’s desk. We really need that to accelerate because there are deadlines coming up after which these projects can’t transition.”

The Backstory

Early action offset projects are voluntary projects that have been issued offsets by approved voluntary registries for emissions reductions that occurred between January 1, 2005 and December 31, 2014. Projects developed under five approved ARB compliance protocols are eligible to transition to the compliance regime.

The first step in the process, according to the CAR web site, is to list the early action project with the ARB, which has approved the listing of 109 early action projects to date. They must then undergo regulatory verification, including an assessment of conflict of interest and a desk review to confirm the validity of the initial verification. After that, developers may request that ARB issue offsets to the project, which triggers a full review by the ARB of all project documents.

To transition, these projects had to be successfully listed under a compliance protocol with an Offset Project Registry (OPR) by February 28, 2015. The projects have to complete the early action conversion process by an August 31, 2016 deadline or they will lose the ability to receive ARB offsets under this pathway. However, there are no mandated deadlines for the ARB to complete its evaluation of early action projects.

“The challenge is that for the early action projects, many of which were done a long time ago, there’s no clock,” said Greg Arnold, Managing Partner of CE2 Capital Partners. “Trying to make sure those get expedited in some meaningful fashion is really the challenge of creating the offset supply.”

In contrast, there is a 45-day deadline for the evaluation of offset projects undertaking the ARB’s compliance pathway – meaning the project was developed under a compliance offset protocol established by the ARB – although the process can be extended if ARB staffers require more information.

In practice, this has resulted in developers who took an early risk on voluntary projects that may or may not have been allowed to transition into the compliance regime being forced to sit on the sidelines and wait for their projects to be evaluated. But these pioneers should be rewarded for their willingness to take risks early in the process so it should be high on the ARB’s priority list to get those projects through the approval process rather than subjecting them to a discouraging slow conversion process that could fail to result in the issuance of offsets, said Julian Richardson, CEO of Parhelion Underwriting.

“I think speed is a huge challenge for the market,” he said.

“We understand the concern, but expect to complete our review of all early action projects prior to any deadlines in the regulation,” an ARB spokesman said.

Moving at a Snail’s Pace

The slow regulatory approval of early action projects, combined with the invalidation risk that continues to plague the market (see “Invalidation Risk Still Shadows California Offsets Market”), is a primary area of needed improvement, Williams said. And there is a solution – namely for the ARB to rely on the work done by verifiers and registry officials during a verification process that has been in place for years, he said. In trying to re-verify the work already done, the ARB is unnecessarily increasing the risk and uncertainty for landowners – already subject to 100-year permanence requirements under the ARB’s forestry protocols, forestry stakeholders said.

“We feel like there is a little bit of a duplication of efforts in this overall process to getting credits issued,” Williams said. “I think it’s our hope in this next phase that will pull back a little bit.”

“Otherwise, in our minds, why are we paying $50,000 for verification if that’s going to be done over again at the level of ARB,” he added.

Stakeholders do not doubt that ARB staffers are working incredibly hard to evaluate these early action projects, but the number of employees focusing specifically on the offsets program is small. And that small team is charged with working on amendments related to the offset program, such as the planned inclusion of Alaska-based forestry projects into the program, evaluating and developing new protocols, and issuing offsets to compliance and early action projects.

“They are working hard and need more help,” Arnold said.

However, Williams believes the staffing challenge could be resolved by directing a portion of the allowance auction revenues or adding an issuance fee of about 10 cents per offset that developers would happily pay to hire staff and speed up the process. The agency is always open to input, but commenting on these suggestions would be premature, the spokesman said.

Sharing the Load

Outside of staffing up, the ARB could also enlist the voluntary registries to perform more functions to quicken the evaluation process. Standards that have been designated as OPRs – the American Carbon Registry, the Climate Action Reserve and the Verified Carbon Standard – already perform such tasks as conducting the conflict of interest evaluation of verifiers and reviewing verification reports for projects on the compliance pathway. But the OPRs have almost no role in processing early action projects even though they originally issued the offsets on the voluntary side, meaning that it is “solidly on the ARB’s plate to move those projects forward,” said Rachel Tornek, CAR’s Vice President of Programs.

“I think it’s probably difficult for ARB to allow an outside body to administer part of their program,” she said. “I think there is a reasonable level of hesitancy. Any manager knows it’s difficult to delegate, but it’s something you have to do.”

With the passing of the end of the listing deadline, there is a new sense of urgency to get these early action projects through the pipeline before they lose the opportunity to convert these projects, because if they don’t make that August deadline, they won’t be able to convert and be issued offsets under the early action pathway.

“We really do need to get moving to get those credits to market,” Tornek said. “And I think there will be opportunity for us to streamline the processes with ARB and a little more willingness to allow the work of the OPRs work to stand on its own.”

The annual National Mitigation and Ecosystem Banking Conference happened this month with the incoming National Mitigation Banking Association (NMBA) president citing low standards and a lack of equivalency in mitigation products as the fundamental challenges facing the industry today. Meanwhile, outside of the US, researchers explore integrating biodiversity into REDD+ in Indonesia.

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

18 May 2015 | This month hundreds came to Orlando for the National Mitigation and Ecosystem Banking Conference. The conference is always an opportunity to reflect on the state of the industry: the past year’s successes, key regulatory developments, and new opportunities.

Outgoing NMBA President Wayne White chatted with Ecosystem Marketplace about his tenure, citing work with Department of Interior agencies on implementing Interior’s new, more ambitious mitigation strategy as a significant achievement this year by the NMBA. Another success was a new approach to supporting NMBA members in local efforts to push for full enforcement of the 2008 Final Compensatory Wetland Mitigation Rule.

Incoming NMBA president Mike Sprague says he’ll focus on opportunities for new growth and continued outreach: “There is a different tone this year and one that is much more cooperative than in the past,” he tells EM. He’ll also push for continued high standards for mitigation. “Banking sells a high quality product. So the risk to our industry is what I call the race to the bottom.” It’s the risk that the cheapest, lowest quality mitigation solution becomes the preferred mitigation alternative. Unfortunately, you can see that risk in some of the programs and offsets today in the US: a lack of standards or poor quality standards combined with a lack of equivalency for mitigation methods.”

High standards are also the subject of a new framework of ecological restoration principles that aim to set a global standard. We’ve also got stories on how to integrate biodiversity into REDD+ in Indonesia and biodiversity tipping points in the Amazon. And in the United States, recent decisions – on declining to list a greater sage grouse sub-population and on judicial review of Clean Water Act jurisdiction assertions by the Corps – may signal which way the wind will blow as these issues play out at a bigger scale in the coming months.

Read on,

—The Ecosystem Marketplace Team

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

Additional resources

The decision by California regulators to invalidate carbon offsets generated at an incineration facility in Arkansas last year continues to cast a dark cloud over the North American carbon markets. The invalidation risk for offsets bound for the U.S. state’s program remains a barrier in completing deals, with more invalidations potentially on the horizon, as stakeholders made clear at the Climate Action Reserve’s carbon markets conference.

18 May 2015 | Invalidation. It was a word that was mentioned early and often, almost always in a negative context, during the Climate Action Reserve’s (CAR) Navigating the American Carbon World (NACW) conference in Los Angeles last month.

The California Air Resources Board’s (ARB) review and subsequent invalidation of 88,955 ozone-depleting substances (ODS) offsets generated at the Clean Harbors Incineration Facility in El Dorado, Arkansas was for many NACW attendees the major source of disruption in the state’s offset program in 2014. After a lengthy inquiry that began in late May, the ARB proceeded in November with the invalidation of these offsets generated by a project from developer EOS Climate because the facility was out of compliance with its federal operating permit.

The invalidation inquiry was “one of the lowlights” in the California offsets program last year, said Julian Richardson, CEO of Parhelion Underwriting, which provides an insurance product that covers the invalidation risk in the California program.

“What we do know is that there will be further invalidations, but we don’t know when they will be and we don’t know which projects,” he said.

The ARB’s decision to invoke the so-called buyers’ liability provisions was blamed for a lack of liquidity in the offsets market. However, Ecosystem Marketplace research shows that ODS projects, despite the cloud cast by the inquiry, still comprised nearly 60% of the compliance offset transactions that reported a project type in 2014, with an average price of $9.7/tCO2e.

Still, project developers and financiers say the lingering uncertainty caused by the invalidation risk is scaring potential participants away from participating in California’s cap-and-trade program, which will ultimately throw the supply of offsets out of balance. The maximum offset demand during the program’s second compliance period (2015-2017) is nearly 92 million offsets – well above the roughly 19.5 million offsets issued by the ARB to date.

But only a limited number of regulated entities are expected to use the full 8% of offsets they are allowed to use to meet their compliance obligations, due largely to the invalidation risk and a lack of available offsets. For example, regulated entities could have used up to 11.6 million offsets to meet their 2013 compliance obligations by November 2014, but only 1.7 million offsets were actually surrendered.

“We’re seeing that firsthand from landowners who are truly interested and want to participate and are willing to take that long-term commitment, but are really nervous about that liability,” said Roger Williams, President of Blue Source, which develops forestry projects.

Where’s the Risk?

For participants in the California offsets market, the key issue was not the volume of offsets ultimately invalidated by the ARB, which represented a miniscule percentage of the offsets issued by the regulators.

“The invalidation risk in practice to date has really been very, very small,” said Greg Arnold, Managing Partner of CE2 Capital Partners. “The difficulty is with the construct of the buyers’ liability itself. I understand some of the reasoning behind why it’s been done, but it’s probably a market construct that, hopefully as the ARB gets more comfortable, can be relaxed.”

The main cause for concern is the lack of clarity over where the ARB staff will draw the line on what truly constitutes a violation rising to the level of invalidation. The ARB attempted to provide some clarity in a February guidance document, including by defining the scope of the invalidation with regard to each eligible project type. For forestry projects, for example, the ARB specified that the invalidation provisions would come into play if there were any violations of environmental, health and safety requirements associated with activities within the project area that directly affect carbon stocks. The ARB specified that these activities included planting and harvesting, among others, but not external activities such as transportation of logs to mills. However, the document raised many more questions than it answered for some stakeholders.

“We’re supportive of the invalidation rule,” said Brian Shillinglaw, Associate Director, Investments and Operations, Carbon Investments & Policy for developer New Forests. “We think ARB did the right thing. However, there is an extreme lack of clarity as to the scope of that risk.”

Under the ARB’s current guidelines, for example, an entire reporting period worth of offsets can be invalidated due to a violation lasting only a single day. This creates particular challenges for forestry projects as the majority of the value of offsets derived from those offsets could be generated during the first reporting period, putting the entire project in jeopardy, Williams said.

“We think that’s not necessary and a bit of an overreach and should be corrected,” he said.

While not able to address the specific issues raised by Williams and others, the ARB has committed to providing additional clarity in Frequently Asked Questions documents on this topic as warranted, an ARB spokesman said.

“We are not considering any changes to buyer liability,” he said.

Stakeholders cited the length of the invalidation inquiry as another inherent risk in the process. The Clean Harbors investigation began in late May, with a preliminary decision issued in October and a final decision released the following month.

“It was long and drawn out,” Richardson said. “It didn’t necessarily create the certainty that we wanted. We were all looking forward to seeing what an invalidation event would actually look like. And it provided some clarity, but it also created some additional questions.”

The length of the investigation can be blamed partly on the competing priorities of the ARB staff, which is also tasked with reviewing and issuing offsets for submitted projects, a process that can be excruciatingly slow for developers of early action projects (see story).

Managing Invalidation Risk

Multiple contract structures have developed in response to the buyers’ liability provisions featured in California’s program, including Golden California Carbon Offsets (CCOs) in which the seller bears the risk of replacing an offset with an allowance or replacement offset if the original offset is invalidated. Ecosystem Marketplace’s research shows that Golden CCOs generated a premium price 12-13% higher than the other contract structures, albeit in a small sample size of responses.

Another option is to purchase an insurance policy that indemnifies the owner of the offset for the replacement cost of an invalidated offset, a policy first offered by Parhelion in partnership with CAR.

“We’ve had a very good uptake on this, particularly since Clean Harbors,” Richardson said.

The Canadian province of Quebec – California’s partner in the Western Climate Initiative (WCI) cap-and-trade program – has developed its own method of managing the risk of invalidations for the offsets submitted for compliance in its program. The province sets aside 4% of offsets to cover reversals or invalidations.

“It’s effectively a buffer pool that’s been created, which is a perfectly legitimate way to manage that risk,” Richardson said. “What it does is take some liquidity out of the market by having those offsets tied up in a buffer pool. That is an asset the Quebec government is effectively sitting on. It’s fine, but it’s not the most efficient way to go. I don’t think it would actually draw any more players into the California market.”

In contrast, California’s buffer pool only covers the unintentional reversal of offsets generated by forestry projects in limited circumstances where it is clear that the reversal occurred due to no fault of the developer or landowner, for example, in situations where there is a beetle infestation or forest fire.

Causing Friction

The invalidation risk continues to create friction in the development and sales process despite the best efforts to manage it, Arnold said.

“Investing in these projects is a difficult business,” he said. “Those regulatory guidelines give investors pause. It makes it harder to sign up project sponsors. It makes it harder to want to invest because at the end of the day, you really don’t have a clear perception of how many credits you might receive once you’ve made your investment. Until that happens, we’re going to have an offset market that functions like this: it makes progress, but it never fully reaches its potential.”

And there are regulated entities that consider and ultimately reject the opportunity to purchase offsets for compliance due to the invalidation risk, as farming firm JG Boswell decided, because the price differential between Golden CCOs and allowances offered at auction by the ARB is not wide enough to encourage them to take on the invalidation risk.

“We won’t participate in buying offsets until that risk is eliminated,” a company official said at the NACW conference.

“It doesn’t surprise me to hear you say that,” Richardson responded. “We’ve talked to some compliance entities with some pretty substantial obligations and they are saying it’s pretty difficult to get into the offset market.”

As California keeps the door open to additional WCI partners – Ontario recently announced its intention to join California and Quebec’s carbon trading program – stakeholders expressed concern the buyers’ liability provisions could be a barrier to such linkages.

“As other jurisdictions think about joining this program or creating other programs, there’s clearly a point of view that there should be no invalidation risk,” Arnold said. “No buyer liability is really the term and that will help the free flow of capital into the markets and provide more liquidity and really make it easier for this to be a more functional market than it is today.”

Additional resources

After three years of preparation and four years of development, the Tolo River community of Colombia in 2013 began earning carbon offsets for saving their endangered rainforest. For the project to deliver on its potential, they must now sell the offsets and manage the income.

12 May 2015 | “I feel pain when the forest is hurt,” says Eusebio Guisao, who is part of the Tolo River community in Colombia. “We are born here, and we love nature the way we love our grandchildren.”

Guisao and the others in his community are not the only ones who suffer “when the forest is hurt.” By developing their REDD project – technically known as the Chocí³-Darién Forest Conservation Project – the Tolo River community are keeping neighboring ranches from converting half of their ancestral community rainforest into cattle pastures. That means they’re preventing about 2.8 million metric tonnes of carbon dioxide (CO2) from going into the atmosphere over the next 30 years – and earning 2.8 million offsets in the process.

In climate terms, it’s as if they’d prevented 15,000 railcar-loads of coal from being incinerated, but financially the community doesn’t earn those offsets all at once. Instead, offsets are released as their actions and impacts are verified over the 30 years of the project. Even after all that, the project won’t translate into income if they can’t sell their offsets – a job that has fallen mostly on Brodie Ferguson, whose company, Anthrotect, acted as project developer.

An anthropologist by training and a natural people person, Ferguson says he nonetheless underestimated the challenge of becoming a salesman.

“When we got the verification in late 2012, we thought we could just make a few phone calls and sell the issued credits,” he says. “But we found it was a lot more work than that.”

Prospecting

Like any good salesman, Ferguson began with his Rolodex. He sought advice from Colombian mentors and colleagues from the days of his doctoral research on land tenure and conflict, especially Manuel Rodriguez at the University of the Andes, who served as Colombia’s first Environment Minister in the 1990s.

“The first thing we did was reach out to everyone and say, ‘We hit these milestones. We’ve got these credits for sale – if there’s anyone you know, let us know. It’s a great project,’” Ferguson says. “You start spreading the word, and eventually people get back to you and say, ‘It sounds interesting; send me more info.’”

But the only “info” he had was a stack of technical documents that they’d created as part of the verification process, and those were dense reading even for experts. So he distilled the essentials into brief project profiles that were easier to digest.

“Most decision-makers would only give us a few minutes to summarize what amounted to two to three years of work, and we’d only move on to the details once they showed an interest,” he says. “If they were interested, the process was more straightforward: setting up calls, meeting face-to-face whenever possible – we learned to be ready to present the project on a moment’s notice.”

For larger sales, and especially tenders, you’ll be asked to write up a formal proposal.

“It can feel like a never-ending process,” he says. “A colleague might put you in touch with a company that’s looking to offset. The Sustainability Director gets excited and wants your help pitching it to the Vice President. Then you support the management as they present it to the Executive Board. Later there are the accountants, the lawyers, the shareholders, and the consumer. We have to find ways to streamline these processes if we’re going to have an impact at a global scale.”

What Buyers Want

One thing he learned quickly enough: companies that aren’t already thinking of their climate impacts won’t give offsetting a second glance.

“Companies usually purchase offsets as part of a broader sustainability strategy that starts with measuring and reporting their carbon footprint before reducing and offsetting,” he says. “You can present an amazing project to them with a very compelling story, but if they haven’t made the decision to measure their [carbon] footprint, then you’re out of sync with them.”

The Pitch

Once it was clear that a buyer was serious about their carbon emissions and at least vaguely understood offsetting, Ferguson would shift the story to the Tolo River community and what the project meant to them.

“Being one of the first REDD+ projects in the world gave us an edge, but it’s really the community engagement that sets the project apart for our buyers,” he says. “It’s so difficult to live and work in a remote, neglected place like the Chocí³, that most youth end up leaving. The REDD+ project has allowed one community to reverse that dynamic and put the conflict behind them, and that’s very important for the Colombian organizations that support our project.”

Independence Drilling

Their first buyer was a Bogota-based, family-owned oil services company called Independence Drilling. The company had launched a sustainability strategy in 2012 that included measuring its carbon footprint. It began reducing its emissions by shifting to electric drilling machines, but that still left it with over 20,000 tonnes of CO₂ emissions for 2013. Juan Camilo Padilla, sustainability officer at the time, understood the role offsets could play and contacted Ferguson.

“I had been in touch with Juan Camilo previously about a reforestation project when he reached out from Independence,” says Ferguson. “I was impressed with their sustainability work and their ambition to really lead their sector.”

But he still faced a tough negotiating process before the deal was done.

“There was a lot of back and forth over volume, pricing, and the terms of the contract itself,” he says. “It was a good three or four months of presentations, negotiations, and review before we signed the deal.”

After months of discussions, company president Rose-Marie Saab signed off on the agreement to offset their annual emissions, and Independence became the first carbon-neutral company in the Colombian oil-and-gas sector, at least for that year.

Brokers vs. Sales Force

The Independence commitment would only cover about 20% of the total annual credits generated by the project, so Ferguson set out to build a network of salespeople and brokers to sell the remainder.

“Individual sales associates are good for bringing in potential buyers, but they don’t save as much time as you’d like since the project management and the community still need to accompany the sale,” he says. “Brokers, on the other hand, can be very effective – with the downside that you may not always know who your end buyer is.”

Ferguson says community sales associates can also be part of the solution.

“Two of our recent sales were led by Everildys and her team in Acandí­,” he says. “They always have all the info they need to present the project, and they can tell the story from a first-hand perspective.”

Stand for Trees: Retail Delivers

A recent development for the Choco-Darien REDD project has been its participation in a group called Stand for Trees, which is a retail sales platform through which individual consumers – not companies – support forest conservation by buying carbon credits. Consumers can choose which particular project to support – including that of the Tolo River community. Ferguson found Stand for Trees through Code REDD, a marketing organization that supports REDD projects.

Ferguson is cautiously hopeful about the future of sales. “Stand for Trees has a lot of potential. The forest carbon market is still tiny, maybe 250 million a year. Stand for Trees could help us reach the million or so in revenue that our project needs each year, and help give REDD projects more visibility overall.”

Now, the project is gearing up for auditors to verify a second lot of nearly 200,000 tonnes that correspond to the project’s activities from 2012 to 2014. “We’re almost sold out of the first batch of 104,000 tonnes that were verified in 2012,” Ferguson says. “That means we’re only now seeing the revenue for activities we carried out over three years ago. This is the enormous challenge we’ve had to face.”

Plans for the Money

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 Guisao, who now works as a forest ranger. Instead, the group’s communal funds can only be used for jointly-decided projects or emergencies – which means some tough decisions have to be made.

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.

The proposals are endless, and range from using the money to subsidize seeds for struggling farmers, improve the dirt road to the village, and get a cell phone tower to enhance phone service in this remote region. One mentions start-up funds for a food-delivery service by a women’s collective. Another dreams about building a community center.

“We could hire a rural nurse and buy some medical supplies,” says Guisao, whose son was born by C-section 25 years ago – a procedure that today would require evacuation to a larger city after public services in the region collapsed in the 1990s.

No roads exist between this part of Chocí³ and the rest of the country. Most people would take the boat to the nearest city – three hours of turbulent bouncing in the Caribbean Sea, which may even prove fatal for a sick patient. If the family could afford it, one could take a 45-min charter flight to the regional capital, but few Tolo River community members have this option. The airfare costs more than the monthly salary of a forest patroller. The community fund could pay for emergency medical evacuations.

“We feel like the central government doesn’t think we are part of Colombia,” says Guisao. Without government support for social services, many of the locals feel they are completely on their own.

“Power to the People”

The forest conservation project has improved the lives of Tolo River community members in many ways unrelated to the carbon savings and climate benefits to the world. In addition to the jobs it has directly created, it has helped them protect their natural resources for the generations to come and secure their pristine water supply. It has provided them with a renewed sense of place, of land ownership and a community. They hope that soon it will also provide them with means to fund their own development in a direction they choose.

“Our organization gives power to the people, not cash,” says Everildys Cí³rdoba, the project coordinator. “I wouldn’t work in it if we were distributing money instead of information.”

By “information,” she is talking about community members’ legal rights. A few years ago, before the REDD project started, her brother hurt himself while walking through the forest one day. A branch snapped back and gravely injured his eye. He had to be evacuated by boat and needed surgery to save his vision. But the doctors ignored him for more than a week and he lost the eye.

When a person knows his rights – in this case, the right to medical care — he can press for medical attention, says Cí³rdoba, and insist on the proper level of care. “How much power is in the simple question, ‘Why?’” she says.

The greatest benefit of this forest conservation project, according to Cí³rdoba, is that it teaches people how to demand their rights, such as successfully defending their land tenure against expanding cattle ranchers, as the Tolo River community has done.

And such empowerment is not the sole social benefit of forest conservation. Running such a project requires a strong and well-organized management team; Cí³rdoba and her colleagues have received training and experience in administering the community organization, handling international investment and dealing with legal issues. In a region where until recently violence was a part of daily life, being part of a strong organization can make all the difference in the world.

In the 1990s – the worst years of social unrest for Chocí³ – everyone lived in fear. Paramilitaries – mercenaries hired by rich land owners – ruled the region through torture and murder. If you were caught on the street after curfew or in the forest, they would accuse you of supporting FARC, Colombia’s rebel organization, and simply kill you. National law enforcement was non-existent.

Even worse, they would come to your home, kidnap and kill your children and force you to sell your land, Tolo River community members recall. Hundreds of people went in exile, or “displacement.” Everyone lost family members.

In the past decade, life has improved a lot in Chocí³. Today police and army soldiers patrol both the town streets and the countryside. But the former paramilitaries still live in town.

Yet the Tolo River crew is not afraid to perform the forest patrols. The Guisao brothers, young Ferney Caicedo and the others go for their daily perimeter checks, not carrying weapons, ready to face whomever they may come across.

“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 Forest Is Its Own Reward

For Guisao and his brother, Frazier, the REDD project has already delivered tangible benefits: both are now employed as forest rangers, and both say you can’t put a price on the value of the forest itself.

“The forest is like a precious mine,” says Eusebio Guisao, describing the ecosystem services provided by the forests. “It gives us water, food, regulates our climate. If we destroy it, we can’t get these things out of it.”

Indeed, the Tolo River community forest harbors an astounding natural richness. A carbon inventory performed two years ago revealed that a plot of just 1,000 square feet could contain as many as 20 distinct tree species. Botanists on the inventory team identified hundreds of different trees, many of them new to science. In addition, the forest is home to unique birds, mammals and insects, such as the critically endangered cotton-top tamarin and the Baird’s tapir, listed as “vulnerable” in the Red List of the International Union for Conservation of Nature.

In addition to being a sanctuary for wildlife, the Tolo River forest plays a critical role for both the community and the surrounding cattle ranches: it provides them with a steady supply of clean stream water through the Tolo River and its tributaries. Community members, cattle ranchers and scientists are unanimous in attributing water security to the standing trees.

“We are really happy here as a community,” says Guisao. “If we could show this to others, they would understand that it’s not money that resolves problems. It’s self-determination.”

Tanya Dimitrova holds a masters degree in energy and resources from the University of California, Berkeley. She lives in Texas and works as a freelance science and environmentalist journalist. This piece was edited by Ann Espuelas.

11 May, 2015 | Christiana Figueres has made a promise.

Figueres, Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC), has promised officials from the US state of California, the Canadian province of Québec and other subnational jurisdictions that they will not be shunted off to a side event during the upcoming UNFCCC negotiations in Paris in December. Instead, they will have a place on the main agenda – a reflection of the leadership that officials in these subnational jurisdictions have shown in addressing climate change while the international talks have progressed at a snail’s pace.

“Two years ago when we were talking about carbon markets, people were talking about the eventual end of the carbon market,” David Heurtel, Minster of Sustainable Development, Environment and the Fight against Climate Change in Québec, said at the Navigating the American Carbon World conference in Los Angeles last week.

But “the noise that we made [during the Lima climate talks in 2014] was so overwhelmingly heard that now there is absolutely no choice but to hear what we have to say and take into consideration what we’re doing,” he added.

Though subnational, these jurisdictions can have a disproportionally large effect on the global climate: California constitutes the 7^th largest economy of the world and the provinces of Québec and Ontario – which recently announced it would join the California-Québec carbon market–collectively cover 62% of Canada’s entire population.

The participation of the provinces is especially noteworthy considering the Canadian federal government’s climate policy. Canada pulled out of the Kyoto Protocol in 2011 after increasing emissions rather than meeting its reduction targets. More recently, the country failed to submit its Intended Nationally Determined Contribution (INDC) ahead of the United Nations’ March 31^st deadline.

In light of this inaction by the federal government, the Premiers of Ontario and Québec issued a joint statement on climate change addressed to Canadian Prime Minister Stephen Harper’s government late last month: “We strongly believe that good environmental policy is good economic policy. But so far, almost all of the progress Canada has made on climate change is the result of provincial action. Once Ontario’s new system is implemented, more than 75% of Canada’s population will be covered by carbon pricing.”

The provincial leaders invited the federal government to participate in developing an ambitious contribution from Canada ahead of the Paris talks, with the country’s INDC now expected in June.

Earning a Seat at the Table

Leadership isn’t the only reason for the inclusion of subnationals on the Paris agenda. Central to their visibility has also been the success of their programs. The California and Québec cap-and-trade programs, which have been in place since 2013, have reported both economic gains and emissions reductions through the first two years of compliance.

California’s program, a result of the state’s 2006 Global Warming Solutions Act, came online with a goal of reducing greenhouse gas (GHG) emissions to 1990 levels by 2020. In the two years since the compliance market was implemented, California’s Gross Domestic Product (GDP) grew by 2% while emissions of capped sectors dropped by 3.8%, according to a report by the Environmental Defense Fund. The success spurred California Governor Jerry Brown last week to issue a new executive order to lower the state’s GHG emissions 40% below 1990 levels by 2030.

“We’re demonstrating in California that we can take the steps to reduce carbon emissions while advancing our economy at the same time,” he said. “We know where we have to go and we look to (carbon market participants) to help us get there.”

More than 92% of compliance offset transactions in North America in 2014 were directed toward California’s cap-and-trade market, which allows compliance entities to use carbon offsets from five eligible project types – forestry, urban forestry, livestock methane, coal mine methane and ozone-depleting substances – to satisfy up to 8% of their compliance obligations. The average price of California-compliant offsets was $9/tonnes of carbon dioxide equivalent (tCO2e), making offsetting a cost-effective compliance option compared to California allowances, which cleared at auction at prices in the range of $11.3/tCO2e to $11.9/tCO2e in 2014, according to a recent analysis by Ecosystem Marketplace.

Meanwhile Québec’s program, which linked to California’s market through the Western Climate Initiative (WCI), will raise an expected C$3 billion between 2013-2020 to be channeled into a green fund to support public transit, research and innovation, among other initaitives.

While Heurtel acknowledged the program been successful, “I think we need to put more emphasis on communicating that. We’ve been collectively talking to each other about this but we’re preaching to the choir. We need to do much more to explain and have real examples.”

Those real examples are something he thinks subnational jurisdictions can bring to Paris later this year. The conversation won’t be just about polar bears and small islands – he can speak to the St. Lawrence River Basin’s decline in water levels, which is predicted to continue to fall over this century due to climate change. He can also highlight success stories in the province, including a company called Biothermica that developed an offset project under California’s coal mine methane protocol and earned $900,000 by selling the offsets.

Joining Forces

The WCI cap-and-trade market’s success has been a bright spot in North America and has attracted interest from other jurisdictions working on their own climate plans. Most notably, Ontario announced its intention to join the cap-and-trade program. Though details of the market mechanism are expected in another six months, the long-term goal is to join the region’s bilateral carbon market.

Glen Murray, Minister of the Environment and Climate Change in Ontario, stressed the role of those “infra-nationals” in influencing Ontario’s recent announcement, highlighting the work done by Governor Brown, former California Governor Arnold Schwarzenegger and Québec Premier Philippe Couillard.

“Ontario would not be here if there wasn’t someone else who had actually stood up,” Murray said.

The province has experienced job and GDP growth despite shutting down all its coal plants (which previously contributed 1/3^rd to its energy mix).

“If you want to understand why [carbon pricing] is a good idea, just try to shut down your coal plans without a carbon price – very expensive,” he said.

Minister Murray is optimistic that the new cap-and-trade plan will only bolster the economy. With emissions more than double that of Québec, the Ontario government is estimating C$1.5-C$2 billion annually generated by a similar cap-and-trade program to facilitate the transition to a low-carbon economy.

Outside of Canada, California has also pursued linkages with Mexico and China in the form of Memorandum of Understandings (MOUs). Formalized in late 2013, the MOU between the California Air Resource Board (ARB) and Chinese equivalent called the National Development and Form Commission (NDRC) lays out cooperation between the two agencies on key issues, including: mitigating carbon emissions, strengthening performance standards to control greenhouse gas emissions, designing and implementing carbon emissions trading systems, sharing information on policies and programs to strengthen low-carbon development, and researching clean and efficient energy technologies. Meanwhile, the California-Mexico MOU, signed in 2014, agreed to work together on a range of actions to address climate change, including pricing carbon pollution.

The state has most recently worked with the German state of Baden-Wí¼rttemberg to advance the “Under 2 MOU.” This MOU is designed for subnational states and regions to make commitments prior to Paris to either agree to reduce their GHG emissions 80-95% (a goal for developed countries) or limit to emissions to two metric tons CO2e per capita by 2050 (the target for developing regions) – with the first round of signatories announced later this month.

“Each of these is really aimed at Paris and beyond,” said Ken Alex, Senior Policy Advisor to Governor Brown. “Our hope is to represent a significant chunk of world GDP by the time we get to Paris. Regardless of what happens in Paris, there will be a very significant set of subnationals around the world committed to doing aggressive action.”

While not all 3,000+ subnationals will be able to sit at the table in Paris, officials in California and Québec hope collective initiatives such as their linked programs and MOUs will capture the attention of the international negotiators.

“We need to see Paris as a beginning, not an end,” Heurtel said. “Especially to recognize that the infra-national governments not only have a role to play but actually are the key players.”

When the US state of California developed its high-profile cap-and-trade program, it drew on (and supported) voluntary markets across North America. Many thought that when the state’s compliance market kicked in, the voluntary markets would quietly fade away. Instead, an Ecosystem Marketplace analysis of 2014 offset transactions across North America shows there is more than enough room for both – with voluntary volume even higher than compliance volume.

4 May, 2015 | The voluntary carbon offset markets in North America paved the way for compliance markets in the region, particularly California’s cap-and-trade program for greenhouse gas emissions. But rather than displacing the voluntary markets, compliance activity in the region complemented what was happening in the voluntary realm in 2014, albeit at much higher price levels, according to Ecosystem Marketplace research presented last week at the Navigating the American Carbon World (NACW) conference in Los Angeles.

For the first time this year, Ecosystem Marketplace tracked voluntary and compliance offsetting activities across all project types in the United States and Canada to offer a more thorough picture of offset transactions in the region, and found volumes both healthy and evenly split: of 24 million offsets tracked in 2014, 12.5 million tonnes transacted on the voluntary markets and 11.5 million on the compliance markets.

Yin and Yang

“Compliance markets can work nicely hand in hand with the voluntary markets,” said Brian KillKelley, Director of Project Origination for NativeEnergy. “At the very least, it’s providing more awareness. Any kind of presence or advertising or just general publicity around the carbon markets is always a good thing for the overall market, voluntary and compliance.”

The overall average price was just over $6 per tonne of carbon dioxide equivalent (tCO₂e) across voluntary and compliance markets in the region. Separating the two markets, however, reveals a significant price deviation, with voluntary offsets in North America selling at an average of $3.5/ tCO₂e while the average price of a compliance offset was $9.7/ tCO₂e. Due to the higher prices, the compliance markets’ overall value of $82.7 million dwarfed the $40 million generated on the voluntary markets in the U.S. and Canada.

The fundamentals of the North America compliance markets often made offsetting a more attractive option for regulated entities. The Canadian province of Alberta became the first jurisdiction in North America to impose a carbon compliance system in July 2007, requiring facilities that emit more than 100,000 tonnes of CO₂ equivalent a year to reduce emissions intensity by 12%. Regulated entities in Alberta can comply by reducing their emissions, paying a $15/tCO2e fee into a technology fund or purchasing less expensive offsets from other sectors that have voluntarily reduced their emissions under protocols approved by the Alberta government

Charisma Carries Weight in Voluntary Markets

On the voluntary side, projects with attractive co-benefits or local community benefits often garnered a higher premium compared to their less marketable counterparts. Forest carbon offsets in the voluntary market in North America, for example, garnered an average price of $8.7/tCO₂e although only about 585,000 forestry offsets were transacted for a 6.6% market share.

Renewables projects comprised of the largest share of the voluntary market at 40%, followed by methane projects at 31%, but both project types fetched a lower average price of $3.7/tCO₂e and $2.8/tCO₂e, respectively. Efficiency and fuel switching took a 9% share of the North American voluntary market, with gases comprising of 3% of the markets.

“Landfill offsets tend to be the least interesting for companies to brand around and we don’t usually get many requests for such projects unless the goal is the lowest price offset,” said Patrick Nye, Senior Consultant, Carbon & Renewable Energy, Bonneville Environmental Foundation. “Wind energy offsets are becoming much more popular and several wind projects that used to produce RECs (Renewable Energy Credits) have converted over to producing offsets because of more favorable pricing from offset markets. We’re also seeing companies that used to only purchase RECs look to support both RECs and offsets when they can find offsets from renewables projects.”

California Leads the Compliance Pack

More than 92% of compliance transactions in North America in 2014 were directed toward California’s cap-and-trade market, which officially launched in January 2013 and allows compliance entities to use carbon offsets from five eligible project types – forestry, urban forestry, livestock methane, coal mine methane and ozone-depleting substances – to satisfy up to 8% of their compliance obligations.

The average price of California-compliant offsets was $9/tCO₂e, making offsetting a cost-effective compliance option compared to California allowances, which cleared at auction at prices in the range of $11.3/tCO₂e to $11.9/tCO₂e in 2014.

“The pricing we’ve seen is between $8.50/t and $12/t and we can get a lot of projects done in that range and we are,” Roger Williams, President of project developer Blue Source, said at a NACW session.

The volume of California-related transactions reached nearly nine million offsets in 2014 despite lengthy delays in the issuance process. The wait was particularly excruciating for developers of early action projects, which were originally developed under voluntary market protocols and transitioned to the compliance realm, because of the absence of firm deadlines for issuing these offsets. This differs from the compliance pathway, in which offsets are developed directly under the California Compliance Offset protocols developed by the Air Resources Board (ARB), which have concrete timelines that must be adhered to.

“It was a good incentive to bring what would have been voluntary projects over as a way to kick start the whole compliance market, so I’m glad they allowed early action projects,” said Tres Altman, Director of Sales and Marketing for project developer Green Trees. “I just think that no one, unless you’ve done it, realizes how much paperwork and review of the reports there is. It’s a big process to go through. And of course it’s early in the market and they want to make sure they’ve gone through everything with a fine-tooth comb and not missed anything. I think that added some time – just wanting to make sure they got it right on these first few projects coming through.”

The other 8% of North American compliance transactions were conducted under British Columbia’s carbon emissions reduction program and Alberta’s cap-and-trade program. The average price of those offsets was $11.7/tCO₂e.

Ecosystem Marketplace did not track any compliance offset activity under the trading program of California’s Western Climate Initiative partner Quebec nor under the Regional Greenhouse Gas Initiative, the carbon trading program of nine Northeastern states, where allowance prices are roughly half of what they sell for in the California program.

Voluntary and Compliance Markets Existing in Unison

The complementary aspect went beyond simply raising awareness. Particularly in the forestry sector, developers of small acreage carbon offset projects – generally below 5,000 acres – that have difficulty achieving the scale necessary to comply with California’s protocol requirements continue to see opportunities in the voluntary market, especially as buyers focus on projects with attractive co-benefits. But voluntary buyers have to be willing to pay a premium for offsets from forestry projects also eligible for California’s program, as demonstrated by Ecosystem Marketplace’s research.

“Heading into California’s compliance program, it’s been tough to find reasonably priced forestry projects,” Nye said. “This has had an impact on the voluntary side – if a voluntary buyer wants forestry or something else that might qualify for California, they must be willing to pay a fairly steep premium compared to other types of offsets that do not qualify. This becomes a barrier as technologies such as forestry are most popular with voluntary buyers and easily understood by their consumers and stakeholders.”

And while some developers have left the voluntary markets in favor of compliance markets with higher prices, others are contemplating or actually operating in both markets.

“We are focused on the compliance market for obvious reasons,” Altman said. “There’s a buyer at the end of the line and there’s certainly an appetite for compliance credits. That being said, we got into the business because we were looking for viable options for companies to invest in conservation. We just spoke recently about taking another look at the voluntary market. It just comes down to whether or not there are buyers wanting credits. Personally, I think there are buyers out there and I think they do want to invest in conservation-based projects.”

Additional resources

22 September 2015 | Fast-food companies get a bad rap, but with good reason. Their beef often comes from farms and fields that were tropical rainforests just a few short years ago, as does the soy they feed their chickens and the palm oil they use to make their shortening bread. Even their coffee and the paper they use to package their products often come at the expense of forests – and let’s not even talk about the Styrofoam. But “often” isn’t the same as “always”, and ultimately, it’s we, the consumers, who drive demand – because we do have a choice.

McDonald’s, for example, stopped buying beef from the Brazilian Amazon a decade ago, and on Earth Day of this year, it announced that all of its beef, poultry, coffee, packaging, and palm oil would be “deforestation free” within the next five years. On top of that, scores of other companies signed the New York Declaration on Forests late last year, vowing to cut deforestation in half by 2020 and end it by 2030.

But do such pledges matter? And how do we know which ones work and which ones don’t? Holly Gibbs of the University of Wisconsin-Madison says there’s evidence that voluntary, large-scale moratoriums work – and work faster than still-emerging public finance forest protection under the right circumstances. Ecosystem Marketplace initiative Supply-Change.org shows that some individual voluntary efforts are, in fact, delivering as well – while others are just beginning to take root, and the basic answer is: “it’s complicated”.

To begin with, consumer-facing companies like McDonald’s and Wal-Mart don’t raise their cows and soybeans themselves – they buy from middlemen which most of us have never heard of: like Brazilian meatpacking giant JBS (a $45-billion-per year behemoth that’s the largest meat-processing company in the world) or Marfrig Global Foods (Brazil’s third-largest meatpacker, with a still-stunning $8 billion in yearly sales).

Then there’s the legal framework. Brazil has pretty good laws backed by a world-class space agency for monitoring from the sky, but a Forest Trends study showed that about half of all deforestation globally happens illegally – making it hard for companies to know what’s clean and what isn’t, even if they really want to. For cash-strapped developing countries, policing the forests isn’t a top priority.

To address the challenge, a mosaic of market-based mechanisms and legal interventions is emerging, enabled by new technologies and growing consumer awareness. Some of these efforts are already delivering results, while others need to be nudged along – and that may be where performance-based financing like REDD comes into the picture.

Promises Kept

Earlier this year, the Global Canopy Programme published the Forest 500, a list of the 500 entities – private and public – that have the power to end deforestation, and it ranked them according to their deforestation pledges. Shortly afterwards, Ecosystem Marketplace published Supply-Change.org to help everyone track the actual actions that companies are taking to meet those pledges. While these two initiatives are shining a light on individual efforts, Gibbs published research on the effects of two massive, voluntary moratoriums on beef and soy from the Amazon. These weren’t individual – and often undefined – promises like the New York Declaration, but binding moratoriums with clear deadlines and means of verification.

The first study looked at the effects of a voluntary 2006 moratorium on chopping trees in the Amazon to plant soy. It was published in January and showed that only 1 percent of new soy production in Brazil came at the expense of the forest. “Before the moratorium, 30 percent of soy expansion [in the Brazilian Amazon] occurred through deforestation, and after the moratorium, almost none did,” said Gibbs.

The second study, published in May, looked at the effects of a 2009 moratorium imposed by consumer-facing meat buyers and less well-known but equally critical meatpackers like Brazil’s Marfrig Beef. Under the agreement, the meatpackers agreed to stop buying from ranchers who chop the forest, and Gibbs found that deforestation had, in fact, plunged dramatically on participating ranches – but it also increased elsewhere.

Plugging the Gaps

Taken together, the two reports demonstrate the power that demand-driven actions can have – as well as the limitations. In the case of soy, deforestation plunged dramatically within the Amazon under the moratorium, but it increased in the Cerrado grasslands and savanna east of the Amazon. In the case of beef and cattle, some deforestation simply moved down the supply chain – to farms that raise calves and sell them to “fattening farms”, which then sell them to slaughterhouses.

“In practice, the agreements regulate only direct purchases from supplying farms, thus ignoring calving ranches and other indirect parts of the supply chain,” the beef report says. “Cattle fattened on noncompliant properties with deforestation can leak to slaughterhouses that lack full monitoring systems; these cattle can also be laundered by moving them to a compliant ranch for direct sale to a slaughterhouse.”

The biggest problem, however, isn’t cattle from deforested land “leaking” into participating slaughterhouses; it’s simply the fact that even the global buyers now participating in the moratoriums don’t have universal reach – as evidenced by the fact that 80% of Brazil’s beef is consumed domestically.

“We monitor more than 8,000 suppliers, but we’ve cut 2,000 of them off because they don’t meet our criteria,” says Mathias Almeida, Sustainability Manager at Marfrig Beef, which is a signatory to both moratoriums. “So, we eliminated 2,000 ranches, but they’re all, as far as I know, still in business – because someone else has stepped up to buy from them.”

For Dan Nepstad, that’s where public finance for regional forest protection comes in – as we’ll see in a bit.

From Trickle to Torrent

A forester by training, Nepstad has been working in the Amazon for 30 years and now runs the Earth Innovation Institute, an environmental NGO focused on sustainable forest management and rural economics.

“It’s great that companies are taking on ambitious goals like zero deforestation supply chains, but when they start implementing that, they bump up against the limits of the farm-by-farm approach,” he says. “It’s really expensive, and if you have to segregate your product – meaning you’re dealing with soy, palm, beef, etc. in separate streams – then it’s more expensive.”

He says sustainability officers are just now beginning to wrestle with that expense – and the complicated nature of supply chains in general – as they seek to keep the promises their bosses have committed to.

Gibbs agrees on the complication front, but she says the cost of monitoring has been overstated.

“In both the case of soy and cattle, we don’t see that these agreements are limiting production or limiting economic growth,” she says. “For example, following the soy moratorium, the soy area planted doubled. Following the cattle agreement, JBS’ profitability more than doubled, and the number of slaughterhouses in the Amazon increased by 350% – from 9 slaughterhouses in 2008 up to 32 in 2015.”

If companies are continuing to invest, she says, it’s because the cost of monitoring isn’t much of a burden; but there are, she adds, other challenges that smaller suppliers are struggling to meet – challenges that are about to explode, if early analysis of data from Supply-Change.org is any indication.

That analysis, published as Corporations, Commodities, and Commitments that Count, shows that most of the few companies that have successfully reduced their impact on forests needed more than five years to do so. The new wave of companies scrambling to get green have set goals that are long on ambition but short on know-how. Most of them, for example, are keying off of the year 2020 – which is already less than five years away.

“It’s the dawn of a new decade,” the report notes. “It’s a nice even number. For the 65 companies that made new commitments in 2014, a commitment year of 2020 was five whole years away. For those stepping up to the plate in 2015, it’s only four years away. Then three years in 2016, two in 2017, and so on – until companies should logically consider later target years. But until now, only three in 198 companies report post-2020 goals.”

And, the report notes, the number of “goals” with no target date has tripled since 2009 – indicating a lot of talk but little walk. On top of that, roughly 85% of companies making zero-deforestation pledges believe they can simply buy products that are certified low-deforestation.

“That’s disturbing,” says Nepstad. “It shows a demand for simple, low-cost solutions – but if you look at the complexity of the supply chain and the challenges that a company like JBS (Brazil’s largest meatpacking company) is facing, you realize how hard it is to meet that demand.”

He’s proposing an approach somewhere between the biome-wide a moratoria that Gibbs tracked and the farm-by-farm certification programs currently underway.

Jurisdictional Certification: a Partial Solution?

Nepstad would like to see states or even sub-regions within states (i.e. “jurisdictions”) use public climate finance to build regional certification programs, so that buyers can trust purchases of several commodities from thousands of suppliers in a given region.

“This way, a company like Marfrig doesn’t have to do the farm-by-farm filtering itself, and a buyer in Europe doesn’t have to try and understand this complex process,” says Nepstad. “Instead, they would know that if they buy from this jurisdiction or that, then they’re safe.”

Gibbs sees the allure, and says that public finance could help supplemental programs costs down the road, but she’d rather see an immediate focus on more moratoria.

“REDD+ (acronym for public forest conservation finance), particularly at the jurisdictional level, is still developing, and shouldn’t be viewed as a replacement for farm-by-farm filtering that has been demonstrated effective for soy and cattle in the Brazilian Amazon,” she says. “Jurisdictional REDD+ could be an ‘add-on’ for supply-chain solutions, but the farm-by-farm monitoring of the Soy and Cattle Moratoria have been demonstrated to lead to changes within months, whereas REDD+ has been a very slow boil over many years.”

Low-Emission Rural Development

Beyond the Brazilian Amazon, the governments of Norway, the United States, and the United Kingdom are using public finance for avoided deforestation to support sustainable agriculture through the Initiative for Sustainable Forest Landscapes, which funnels these payments through the World Bank’s BioCarbon Fund to smaller forest countries or to individual states within larger nations, beginning with Ethiopia’s Oromia State and Zambia’s Luangwa Valley. The activities they cover include everything from certification of sustainably-harvested commodities to community conservation, and the amounts are based on how much the countries can reduce their greenhouse gas emissions from deforestation and forest degradation.

Like Acre, the payments aren’t offsets – none of the countries will use the reductions to lower their own footprints – and Nepstad advocates the use of the term “LED” (Low-Emission Rural Development). It’s a term that The Nature Conservancy and others have also used, and which Nepstad broadly defines as the use of carbon finance to “improve rural livelihoods, create jobs, improve services, increase market access and investment, and protect and restore natural capital.”

A Mosaic of Solutions

Peruvian indigenous leader Juan-Carlos Jintiach says low emissions development is a cornerstone of his “Indigenous REDD” initiative.

“If you look at a state like Acre, you see that they used REDD income to support indigenous land-use practices,” he says. “I think we can apply a similar strategy in Igarapé Lourdes (the indigenous territory shared by the Arara and Gaviao of Rondonia), but we still have some work to do.”

The key, he says, is identifying low-cost, high-impact activities that can nudge a state’s agriculture sector in a more sustainable direction – and that probably means a mosaic of market-based mechanisms and legal interventions, all enabled by new technologies and growing consumer awareness.

Targeted Spending

Gibbs is leery of regional certification programs, which she says can end leading to pockets of intensified destruction.

“The jurisdictional approach could reward municipalities that could easily comply,” she says. “For example, a municipality with little remaining forest or with strong NGO involvement in recent years could be seen as a model, low-risk jurisdiction. The problem is that the high-risk municipalities closer to the forest frontier and with less governance will continue with business as usual, while the moratoria led to change across the entire Amazon including those high risk locales”.

She’d rather see public forest conservation finance directed into programs that help small ranchers develop simple technologies that can help them become more efficient.

“We’ve been encouraging producers to stop clearing forests by intensifying production for years, and they always respond with, ‘How?’” she says. “They’ve repeatedly asked for ‘more technical know-how and more financing,’ so in my mind, that’s something that jurisdictional REDD could provide.” Almeida agrees.

“We have huge amounts of degraded land in the Amazon that can be recovered both for cattle production in a more intensive way or crop production,” he says. “REDD can be used to promote technical systems and technology for producers who are engaged in land recovery and intensification.”

He also said he’d like to see financial guarantees for take-off agreements to encourage long-term purchasing arrangements with ranchers who follow good practices.

“Right now, all of our purchases are short-term – like week-to-week,” he says. “If we need to buy, or if a rancher needs to sell, we pick up the phone and call around. He sells to the highest bidder, and we buy from the lowest.”

Like Nepstad, he also advocates jurisdictional efforts, and offered the state of Parí¡’s Green Municipalities Program (Programa Municí­pios Verdes) as an example. Developed in partnership with municipalities, NGOs, and the private sector, the program helps entire municipalities develop green supply chains by offering tax incentives and also withholding subsidies – which are, to many, the elephant in the deforestation room. A working paper by the Overseas Development Institute identified nearly $500 billion in agricultural subsidies worldwide, compared to just $8.7 billion committed to avoiding deforestation.

Laws and the Cost of Compliance

Many countries have laws to protect their forests, but the challenge is finding the money to enforce them. Under Brazil’s Forest Code, for example, landowners in the Amazon can only deforest 20% of their land, while those in the Cerrado can only clear 35% for agriculture. The same law requires all private lands be listed in the Rural Environmental Registry (Cadastro Ambiental Rural, or CAR), and it restricts finance in municipalities with less than 80% of the properties registered.

“Public enforcement of environmental laws is a formidable task in the Brazilian Amazon, which covers an area six times the size of Texas,” says Gibbs. “But these market-based interventions are leading to rapid changes in the beef industry within a period of months, even in very remote areas.”

In 2013, The Nature Conservancy used satellite data to compare deforestation rates Sí£o Félix do Xingu, a municipality in the Brazilian state of Parí¡, to CAR registration rates and found higher registration correlated with lower deforestation.

Gibbs found the same correlation – but she also found surprising results when she looked to see who was cheating and who was playing fair.

“Only 115 people out of several thousand soy farmers have violated the Soy Moratorium since 2006, but over 600 of them have violated the Forest Code,” she says. “So, this same group of farmers is five times more likely to violate the governmental policy than they are to violate the private sector agreement.”

She sees a role for public forest conservation finance in helping governments build up their capacity to monitor the forest – a role that it is already playing, in Brazil and around the world – and adds that the one thing everyone agrees on is that no one has all the answers.

“We have a lot of tools now, and none of them are extraneous or irrelevant,” she says. “I’m sure there is a need for all of these polices or approaches – but the question is: where and how?”

The United States and the European Union both excluded market-based mechanisms to reduce emissions in the national climate plans they submitted to the United Nations. But negotiators say a framework for international emissions trading is needed, even if many countries won’t use it (yet).

30 April 2015 | Implementation, balance, inclusiveness. Those are the three words Gao Feng, China’s Foreign Ministry’s Special Representative for Climate Negotiations uses to describe his hope for an international climate agreement to be negotiated this December in Paris. Speaking on a Center for Climate and Energy Solutions’ (C2ES) panel last week, officials from China, the European Union, Gambia and New Zealand grappled with the question of how market-based mechanisms for emissions reductions might be included in the Paris agreement – among other issues.

Gao is doubtful that emissions trading will be a significant part of an international climate deal under the United Nations Framework Convention on Climate Change (UNFCCC), at least in the short term.

“I don’t see sufficient demand to drive the so-called global carbon market right now,” he said, citing the fact that both the United States and the European Union (EU) – two of the largest potential government buyers – excluded market-based emissions reductions from the first drafts of their Intended Nationally Determined Contributions (INDCs). “If a contribution is to be determined nationally, then in theory you may not have the demand at home because every country may calculate the exact amount that it can do,” he said.

Of the eight INDCs submitted so far, only Switzerland’s and Liechtenstein’s mention market-based instruments that would allow investments in emissions reductions abroad to be counted against a national target. Norway plans to use international carbon offsets only if it cannot secure a collective agreement with the EU. The United States and the EU both took a pass on using international offsets to meet their targets, though their climate plans do not preclude the use of domestic carbon markets to lower emissions.

View the Video, or Scroll Down to Continue Reading

Leaving an Open Door

The EU plans to cut emissions 40% under 1990 without purchasing offsets from outside the region. Nevertheless, the Paris agreement should ensure that those countries that want to use carbon markets to reduce emissions can do so in an accountable way, said Jake Werksman, Principal Adviser for DG Climate Action of the European Commission. This would include some kind of regulatory framework to prevent double counting of emissions reductions, he said. (For instance, if Switzerland finances a wind power project in Mexico and then counts those emissions reductions against its total, Mexico could not also count those reductions domestically.)

The European Union launched the EU Emissions Trading Scheme (EU ETS) in 2005 to reduce emissions in the bloc, also providing a mechanism for handling offsets – mostly anticipating the Kyoto Protocol’s Clean Development Mechanism (CDM), which came into effect in 2008, but also to handle offsets from other cap-and-trade initiatives. Entities covered by the EU ETS have historically been the major source of compliance demand for carbon offsets, but oversupply of allowances in the EU ETS has caused CDM prices to plummet below the $1 mark, and a plan to link the EU ETS with Australia’s fell through after Australia repealed its carbon tax.

“We’ve had great experience in terms of running a carbon market domestically, but we’ve had difficulty managing the relationship between that domestic carbon market and international carbon markets in a way that ensures environmental integrity and a good carbon price at home,” said Werksman. “So we’re really focusing on getting our domestic house in order at the moment.”

New Zealand enacted emissions trading in 2008 under its Permanent Forests Sink Initiative, but the market has been so flooded by lower-priced CDM offsets that domestic forest project developers have been hard-pressed to find buyers for their tonnes. Nevertheless, the country is very interested in an international carbon market and would welcome a framework establishing minimum standards and guidelines, said Jo Tyndall, Climate Change Ambassador for New Zealand’s Ministry of Foreign Affairs and Trade.

“In New Zealand’s case we have got some challenges around how much we can reduce our emissions domestically and the ability to purchase emissions reductions elsewhere allows us to be much more ambitious than we would otherwise be able to be,” she said, emphasizing that emissions trading should be a voluntary tool available to governments.

Reality Check

Developing countries that would likely be on the receiving end of carbon offset investments have mixed views on market-based mechanisms. In its INDC, Mexico actually proposes two different targets, committing to a 25% reduction in emissions by 2030 without international assistance, and raising the ante to a 40% cut conditional on “fully functional bilateral, regional and international market mechanisms.”

Other countries, such as Bolivia, oppose market-based mechanisms that allow developed countries to meet targets through offsetting.

The question remains as to how the UNFCCC’s Green Climate Fund (GCF), to which industrialized countries are supposed to provide $100 billion per year by 2020, will distribute its money for mitigation and adaptation. Some funder countries are advocating for “payments for performance” for avoided deforestation and other carbon-cutting initiatives – meaning that the money only flows if the emissions reductions are achieved. (This concept is also central to carbon markets.)

The GCF was capitalized at $10 billion during last year’s negotiating session in Lima, Peru, but it will only be able to start spending if additional contributors meet an April 30^th deadline to sign their contracts. The U.S., for instance, said it would not meet the end-of-month GCF deadline due to its budget cycle.

Pa Ousman Jarju, who has the wide-ranging title of being Gambia’s Minister of Environment, Climate Change, Water Resources, Parks and Wildlife, criticized the U.S. for dragging its feet on financial disbursements.

“It’s beyond imagination that the United States of America [would have] people in Congress and some so-called scientists denying what is happening in the world,” he said. “This is money that is going towards really supporting those who are in dire need.”

Paris or Bust?

While the upcoming Conference of the Parties of the UNFCCC has the same objective as before – to limit global temperature rise to no more than two degrees Celsius – the bottom-up approach currently underway is starkly different from the top-down Kyoto Protocol that aimed to limit emissions from developed countries.

“One of the big challenges that negotiators have had in this process is how to describe the agreement that is beginning to emerge in terms of an existing legal format,” said Valli Moosa, South Africa’s former Minister for Environment and the co-chair of C2ES’s ‘Toward 2015’ dialogues. “They’ve found it really difficult to do so.”

“The main difference between Kyoto and what we will see in Paris is that the numbers will not necessarily be in the printed protocol,” said Harald Dovland, the former co-chair of the UNFCCC’s Ad Hoc Working Group on the Durban Platform, and the other Toward 2015 co-chair. “I foresee that what negotiators and parties can agree on is that there will be a core agreement of a legally binding nature but there will be a lot of important material in the supporting decisions, declarations, or whatever [they’re] called.”

Another key difference? After more than twenty years at the table, many negotiators see Paris as their last chance.

“The current generation of chief negotiators – and I know a number of them – they seem to have a sense of mission,” said Moosa. “They know that if we fail in Paris, it will be a big blow in a number of ways. One is that the global climate agreement could then possibly happen outside of the UNFCCC framework.”

A scenario in which a global climate deal was left up to heads of state rather than hammered out under the UNFCCC process “would not necessarily make it easier,” he added. “I am on tenterhooks and extremely worried that this process might not succeed, notwithstanding the fact that all the ingredients are in place for success.”

30 April 2015 | LIMA, Peru | The alpacas of Peru are prized for their soft, fluffy wool, and farmers have been raising them on the steep puna grasslands high in the Andes above Lima for millennia. Alpacas also have soft, padded hooves; the bottoms of their feet are more like house slippers than like street shoes, which means they can plod around on the grass without stampeding the absorbent dirt into an impenetrable hard surface. Cows and sheep, however, are a different animal completely: their hard hooves compress the dirt, and when they graze, they yank the grass out of ground rather than snipping it with their teeth the way alpacas do. This all results in grasslands that repel water rather than absorb it, contributing to a feast-or-famine cycle in Lima, which is the world’s second-largest desert city after Cairo.

In the wet season, the rivers that flow down from the Andes break their banks, while in the dry season, they slow to a trickle – and those cows and sheep are one reason for that. On top of that, the soils are carbon-rich, and as they’re degraded, carbon is released into the atmosphere.

Then there are the natural swamps and bogs that, like the soils, have traditionally absorbed water in the wet season and released it in the dry season. Over the last century, they’ve been drained so animals can graze, and that makes the downstream wet seasons wetter, and the dry seasons even drier.

Earlier this month, the city’s water utility, SEDAPAL (Servicio de Agua Potable y Alcantarillado de Lima), announced it would funnel nearly 5% of the water fees it collects from users into addressing this issue. Some of the money will go into programs that help farmers better manage their livestock – in part by rotating their animals, but also by keeping fewer – but fatter – cows. Other funds will go to close the drainage ditches so that wetlands can replenish their stored volumes, and deep infiltration of surface water regulation processes will recover, while some will go to restore pre-Incan “amunas” that siphon water off high-altitude streams in the wet season and funnel it into the mountain itself, where it filters down through the rocks over several months and emerges from springs in the dry season. Of the activities, restoration of amunas will likely provide the greatest impact and at the lowest cost, according to a cost-curve analysis carried out by Ecosystem Marketplace publisher Forest Trends and Consorcio para el Desarrollo Sostenible de al Ecorregií³n Andina (CONDESAN).

“As the regulatory agency of Water and Sanitation in Períº, it is our responsibility to protect and preserve the river basins,” says Fernando Momiy Hada, President of national water regulator SUNASS (Superintendencia Nacional de Servicios de Saneamiento). “‘Gray infrastructure tools,’ like pipes and sewers, have their place, but we need to restore and protect the watershed, and re-grout the amunas to preserve and increase the quality and the quantity of water in the river basins.”

The funds will be divided between two activities: 1% of the total water tariff, or PEN 70 million (USD 23 million), will go explicitly to green infrastructure; while 3.8%, or PEN 266 million (USD 89 million) will be used for climate change adaptation and disaster risk reduction more generally.

The PEN 70 million investment is more than any other Latin American city or water utility has ever committed to green infrastructure.

Lima’s challenges are far from unique. Due to extreme water shortages, California is imposing dramatic water use reductions and, as a result of an extreme drought, Sí£o Paulo, Brazil, the world’s fourth-largest city, is contemplating similar measures. The water crisis is front page news every day these days – and Lima is taking a very important and big step into the right direction.

“Latin America is a hotbed of innovation when it comes to tackling the global water crisis, and Peru is a leading country in Latin America,” says Michael Jenkins, President and CEO of US NGO Forest Trends, which conducted the cost-curve analysis. “This is exactly the kind of leadership and creativity we need if we’re going to confront similar challenges around the world.”

SUNASS tentatively approved the proposal on March 26 followed by a public hearing that took place this month. Based on the public hearing, SUNASS anticipates it will be approved next month with no changes to green infrastructure and climate change adaptation funds.

Lima’s water utility, SEDAPAL, had submitted a proposed budget that included a plan for investing PEN 12 million (USD 4 million) in green infrastructure for the city. The approved budget is nearly six-fold that proposal.

Soot and smoke no longer blanket London and other Western cities like they once did, but these and other forms of “black carbon” continue to plague families in developing countries. Now a new Gold Standard methodology will offer clean cookstoves projects the chance to access a new source of funding for reducing these emissions.

23 April 2015 | While carbon dioxide (CO₂) is currently the dirty word of climate change, another pollutant – black carbon – has been chugging out of tailpipes and charcoal grills. A key component of soot, black carbon is pure carbon that results from incomplete combustion. It doesn’t stay in the atmosphere for centuries like CO₂ does, but it’s deadly for those who breathe it, and it contributes to climate change when it settles on reflective surfaces such as glaciers. Its danger is so clear and present that Congress actually came together in 2009 to regulate it in the United States. But while these measures have helped reduce black carbon in the U.S., the pollutant remains pervasive elsewhere in the world and disproportionally affects the poor.

Poorly-burned fuels account for an estimated 25% of all black carbon emissions globally, and 84% of that comes from households in developing countries. These small particles have a large impact: the World Health Organization estimates that nearly 4.3 million people, mostly women and young children, die from indoor air pollution annually.

Black Carbon: The Challenge of Measuring

Because of its short time in the air, black carbon is classified as a “short-lived climate pollutant” (SLCP), which means it’s not among the six global warming pollutants covered by most climate policies. A 2013 study, however, found that black carbon is second only to CO₂ as a leading cause of global warming – largely because its warming impact is 460-1,500 times higher in the short term. As a result, governments and public organizations have become more interested in addressing black carbon’s impacts – and, most recently, funded a new methodology for dealing with black carbon.

• For a simple, concise summary of Black Carbon and Short-Lived Climate Pollutants, visit this page, created by the Climate & Clean Air Coalition and hosted by the United Nations Environment Programme

Certification ≠ Offset

Released by the Gold Standard Foundation (GSF) and developed by a group of cookstove organizations – including Project Surya, The Energy and Research Institute, the Global Alliance for Clean Cookstoves, Nexleaf Analytics and the University of California at San Diego – the new methodology will award a certification to organizations that reduce black carbon.

The certification shouldn’t be confused with carbon offsets: companies that emit recognized greenhouse gases like CO₂ can’t reduce their carbon footprints by reducing black carbon elsewhere. Certification will, however, let projects earn recognition for the black carbon it eliminates, which in turn may attract new buyers or qualify it for additional funding.

Since it is first-of-its-kind, the initial methodology will only be available to cookstove projects that have also measured their carbon dioxide emissions reductions. It will serve as a test run for future work in the field – and set the stage for an additional financing source besides carbon offsets.

Opening a New Path to Finance

Unlike many carbon offset project types, such as wind or solar, cookstove projects rely heavily on changing human behavior – first by marketing and selling the stoves, then by following up for training and maintenance. Though cookstove carbon offsets often sell for some of the highest prices in the voluntary carbon markets (at an average of $10.4 per tonne of carbon dioxide equivalent last year), the profit often isn’t enough to cover the full costs of the project.

“The reality is, Verified Emission Reductions (VERs) aren’t enough,” said Owen Hewlett, Chief Technical Officer at GSF. “There’s a gap for the more advanced cookstoves.”

With the new methodology, project developers can continue to sell their carbon offsets to private buyers, but can use additional certification for black carbon reduction to attract separate financing – most likely from public sources.

“In the early days, I suspect [buyers] will be mostly bilateral donors” since they understand black carbon, Hewlett said.

Hewlett was referring to the Climate and Clean Air Coalition, which was started by the governments of Bangladesh, Canada, Ghana, Mexico, Sweden and the U.S., along with the United Nations Environment Programme (UNEP) in 2012 to address SLCPs. Since then, as recognition of the need to reduce SLCP has grown, membership has exponentially increased to 44 members, the European Commission, and 54 non-state actors like UNEP.

There is also potential for private sector investment, according to Nithya Ramanathan, another methodology participant who is President of the nonprofit technology company Nexleaf Analytics and Co-Lead of Project Surya, a cookstove project based in India that focuses specifically on reducing black carbon, methane and ozone emissions. “We don’t have confirmed buyers yet. I think initially, in the first month or two, donors and countries who are motivated to reduce particulate emissions may be a good fit to help catalyze this market, but private sector buyers would be needed almost immediately in order to help establish a healthy price for the certified outcomes.”

Nexleaf plans to target possible early adopter organizations that have already shown an understanding of black carbon, but recognized that eventually the organization will need to start educating carbon offset buyers unfamiliar with black carbon.

Black Carbon Finally in the Spotlight

Addressing black carbon emissions would improve the chances of global temperature rise remaining below the maximum target of 2 degrees Celsius set under international climate negotiations, according to a study by UNEP.

So why hasn’t black carbon been addressed before now?

The answer lies in the relative permanence of SLCPs compared to other climate pollutants. Black carbon typically persists in the atmosphere for a few days. In contrast, CO₂ molecules may remain in the atmosphere for decades – about a quarter of the CO₂ emitted today will still be in the atmosphere 1,000 years from now. This means that cutting CO₂ emissions was long considered a more urgent problem, since once a tonne is emitted into the atmosphere it’s not easily removed. However, slashing SLCPs would have a more immediate impact, with the potential to prevent 0.6 degrees Celsius of warming by 2050.

“SLCPs haven’t really been considered under the international negotiations,” said Mike MacCracken, Chief Scientist for Climate Change Programs at the Climate Institute, a non-profit organization that has focused on climate protection since 1986. “There was a sense at the time [back in the early climate negotiations] that CO₂ emissions would really get addressed, so the concern focused on long-term prospects of climate change control.”

MacCracken has seen that interest change in recent years as the international negotiations have failed to produce a global commitment on climate change. But for all its potential for emissions reductions, SLCPs lack the scientific research and standards devoted to CO₂.

“It’s not as well established in the scientific community as a tonne of CO₂, for example. So there’s less research, less data,” said Hewlett.

Cooking up a Certification Scheme

Since black carbon’s lifespan is measured in days, its impact is highly localized depending on the region, season and local weather. So, unlike CO₂, it matters where in the world it is emitted. That makes it more difficult to include in a global carbon trading mechanism. For instance, a farm in the U.S. would not be able to offset black carbon in India. Even if the units were the same, the climate impact could differ depending on such details as the cloud cover in each location or whether the winds carried the black carbon higher into the atmosphere.

Given the scientific uncertainty surrounding impact, the GSF methodology focuses on simply measuring the emissions reductions and will provide a ‘certified outcome statement’ that confirms the project’s “Black Carbon Equivalent (BCe) Emissions Reductions,” alongside Gold Standard VERs. Since BCes are not a carbon dioxide equivalent, they cannot be substituted with VERs. The certification is meant only as an additional element of a project’s verified impact, not a replacement for the carbon offset.

“The key of it really is that definition of impact – that’s the bit we’re hoping to explore more, and extend into further,” Hewlett said. “[Black carbon] is well established as a climate forcer that operates on a short timescale, but the scientific community is still establishing the impact of black carbon. It could be very different from Nepal to India or Greenland, due to the local climate conditions.”

For example, in India, black carbon has been linked to disrupting monsoon rainfall patterns and affecting millions of livelihoods, while in Greenland, black carbon that lands on surface snow absorbs more of the sun’s heat and increases snowmelt.

Hewlett is particularly interested in exploring the health impacts of reducing black carbon emissions, but cautioned that such a methodology would require even more technical advisory committees.

“Part of the balance to strike here is maintaining technical rigor,” he said. “What we’d like to do with the Gold Standard is move towards measuring health impacts in a detailed way, to establish governance and technical advisory committees and get members on board with that,” he said. “We want to make sure the right people would look at it.”

Thus, for now, the new methodology focuses only on quantifying the black carbon emissions reductions – not the co-benefits of those reductions. “What the methodology isn’t attempting to do in this first pass is to actually quantify the impact… We’re staying on our toes to see the best direction to take this because there’s a number of impacts you could look to quantify.”

The “best direction” will largely depend on the market’s response to black carbon, according to Ramanathan.

“At this stage, because black carbon is relatively new from a carbon market perspective, we thought it best to start as a certified outcome and test the market to see what people are willing to pay,” she said. “As and when we have more data on that, we’d have a better case to move forward.”

Additional resources

Individuals have traditionally been a miniscule source of demand in the voluntary carbon markets. A new company called Sustain:Green is hoping to change that by offering consumers a credit card that makes over the traditional customer reward structure to allow them to finance the purchase of carbon offsets.  

27 April 2015 | Would you like some carbon offsets with those fries?

It may seem like a silly question, but if Sustain:Green has its way, some of the money generated from the purchases made by its customers – even French fries – will find its way into the voluntary carbon markets.

Sustain:Green hopes to utilize customer rewards structures typically offered by credit card companies, like cash back, and direct the funds toward purchasing certified carbon offsets.

Sustain:Green CEO Arthur Newman previously worked on Wall Street and focused on the cap-and-trade market in the United States and the use of carbon offsets to offset carbon footprints as a former partner for Carbon Capital Advisors. He cites this experience working with large organizations in the carbon market as inspiration for the development of the credit card.

Newman recognized the limited scope of individual actions in the offsets market, and wanted to create an opportunity for individuals to take action like organizations do. Once individuals have taken basic steps to reduce their carbon footprint by, for example, changing out old lightbulbs for new, more efficient lightbulbs, it becomes incrementally more difficult and expensive to reduce their environmental impact.

Untapped Market?

Individual offset purchases have been minor contributors to the overall volume of voluntary carbon market transactions. In 2013, Ecosystem Marketplace found that just over 200,000 tonnes of carbon dioxide equivalent (tCO₂e) were transacted by individuals, with an average price of $17.4/tCO₂e. For comparison, the overall carbon offset market transacted 76 million offsets in 2013, with an average price of $4.9/tCO₂e.

When asked about the relatively small size of the individual market, Newman is quick to point out the challenges for connecting individuals to the carbon market. He notes that offsets have not been marketed to consumers in a successful manner.

“Some airlines offered offsets after you purchased a plane ticket, but we feel that in a price sensitive purchasing transaction like airline tickets, this the wrong time to be asking a consumer to spend more money,” he said.

Additionally, the ability to purchase offsets from different companies based on different verification standards can be confusing to those not well-versed in the nuances of carbon offsets. Questions about transparency and what was being purchased may have also stymied the market.

“People often have had little transparency into what their offsets were going to fund and how the money was to be used,” Newman said. “Transparency was not high in many instances a decade ago when the market was born.”

Quick and Easy

The company started with the idea to of making offsets convenient and free, he said. What Sustain:Green is trying to do with its credit card and the individual consumer is to make offsetting as easy, transparent and cheap as possible.

While offsets aren’t free for Sustain:Green, they have gone as far as they can to make purchasing offsets free for its customers. “The difference with the Sustain:Green card is that we are giving these offsets away for free as a reward,” Newman said “People are not charged additionally for them, and there is no annual fee for having the card. Additionally, the rewards are automatically tied to spending.”

To do this, the card, which is financially backed by Commerce Bank, offers what works out to be the equivalent of 2.7% cash back on purchases, not including the 5,000 pounds that users receive upon the first purchase. But instead of consumers receiving cash back to purchase individual offsets, the money will be used by Sustain:Green to purchase offsets through the American Carbon Registry (ACR). ACR is a nonprofit enterprise of Winrock International focused on developing carbon offset standards and methodologies, and also serving as a clearing house to register, verify, and oversee offsets projects, and issue offsets from projects.

“I do really like the concept in that people don’t really have to do anything,” said Mary Grady, Director of Business Development for ACR, who secured and has already used a Sustain:Green card. “All they are doing is living their normal lives and shopping and while they’re doing that, they’re offsetting. I think it’s really interesting and I’m hoping it will be successful.”

As more consumers sign up for and start using the card, Sustain:Green will “fill up a ‘bucket’ of money to provide seed funding to get projects going.” Once the bucket is full enough, Winrock International and ACR will suggest projects for Sustain:Green to invest in. Cardholders will also be allowed to suggest projects that will be vetted by ACR, and then all the information will be put up on the Sustain:Green website and cardholders will be able to vote for projects they want to fund.

The card has the other added environmental benefit of being biodegradable. This was something Sustain:Green specifically pursued, because Newman says “people overlook the amount of credit cards that get thrown away each year – it’s about half a billion credit and debit cards every year.”

The new card is marketed as biodegradable, but compostable may be a better term. “It takes about six months to biodegrade, and just has to come into contact with soil bacteria, all you have to do is cut it up and bury in the dirt,” He said.

Getting Those Pounds of Carbon

Digging into the numbers, the Sustain:Green MasterCard offsets two pounds of CO₂ for every one dollar spent by the consumer, and will offset an additional 5,000 pounds of CO₂ if the first purchase is made within 90 days of opening the account. In addition, if consumers spend $1,250 within any given quarter, Sustain:Green will retire 2,500 pounds of offsets as a bonus, for up to a total of 10,000 additional pounds of CO₂ per year. The bonus would be in addition to the offsets earned by the consumer for making purchases on the card.

For comparison, if carbon offsets were purchased separately by consumers through the SustainGreen offset store, an equivalent amount of carbon offsets would cost the consumer $136 based on the $15 per tonne price offsets sell for in the online store.

Just do it (to Save the Rainforest)

Sustain:Green partnered with Mata no Peito, a coalition initiative to support organizations and communities to protect and replant forests throughout Brazil. Mata no Peito is funded through the retirement of Nike carbon offsets, the originators of the project. When Sustain:Green, or any of the other participants, purchases and retires certain carbon offsets, all of the money is donated to the Mata no Peito fund, which provides seed investments to projects in the Brazilian rainforest.

“It’s kind of a double win,” Grady said of Sustain:Green’s participation in Nike’s Mata no Peito.

Newman describes the organization as “effectively a Kickstarter for the Brazilian rainforest. They come up with market-based solutions for deforestation. In other words, they’re looking for the root causes of deforestation, and trying to develop projects that address causes of deforestation and some of the impediments to reforestation. Money that is donated gets the projects off the ground, and projects are designed to generate their own offsets, which are then sold to provide continuous financing.”

The card is still relatively new, and is gaining users who will ultimately fund the conservation projects in the Amazon. Newman hopes that users will see the benefit of using the credit card to purchase their necessities and carbon offsets at the same time.

By using the card, not only are consumers offsetting their carbon footprint but they are also helping to fund rainforest preservation without having to change their behavior much beyond choosing which card to use for purchases.

“This is a way to commit to doing something, and it happens automatically, seamlessly,” he said. “You don’t have to worry about the funny rules with cashback cards. Automatic is a really nice way to say I’m making a commitment, this is something I think is important, and I’m using this card as a way to do it.”

Katy Sater was previously a research assistant for Ecosystem Marketplace.

Today marks our 45th Earth Day – 45 years of watching vertebrates die to the point that we now have half as many as we did in 1970, and 45 years of watching greenhouse gas concentrations soar, to the point that temperatures are now inching menacingly upwards. But in the past year, we’ve also seen a surge in awareness of our own dependence on our planet’s living ecosystems – an awareness that may, just may, spark the kind of action needed to get us out of this mess.

22 April 2015 | Two days after posting what may be the first rap song about ecosystem services, spoken-word artist Prince Ea has drawn nearly 25 million visitors to the video of his song “Sorry”, which begins as a hypothetical apology to future generations but mutates into a call to action inspired by visits to forest carbon projects in Africa: Kenya’s Kasigau Wildlife Corridor Project and the Democratic Republic of Congo’s Mai Ndombe Forest Conservation Project.

“Trees are amazing,” he says. “We literally breathe the air they are creating. They clean up our pollution, our carbon. They store and purify water. They give us medicine that cures our diseases, food that feeds us, which is why I’m so sorry to tell you that we burned them down.”

To save them, he adds, “We must…realize that we are not apart from nature; we are a part of nature, and to betray nature is to betray us. To save nature is to save us.”

After the ode to ecosystem services ends, Ea implores his fans to “balance the amount of pollution that you yourself give off” by purchasing offsets through the Stand for Trees program, which aggregates forest-carbon offsets from across Africa, Latin America, and Asia. Judging by his Facebook page, people are getting the message. “You nail it once again,” wrote James Cleave of London. “Thank you. I’ve donated.”

Purists will argue that offsets aren’t really “donations”; they’re “payments for ecosystem services” (a subtle but important distinction that underlines the value of nature, rather than the goodness of the giver), but it’s still reassuring to see an entertainer reaching out to a mainstream audience with a challenging message that goes beyond the usual bromides and broadsides we’re accustomed to. Can it be that the innovative financing mechanisms pioneered in the 1970s are also finally beginning to resonate among the larger community?

Here’s a few reasons why the answer may be “yes”.

Water conservation and management. In Peru, the Ministry of Environment has been working in partnership with Ecosystem Marketplace publisher Forest Trends to develop the Watershed Services Incubator, which promotes cost-effective methods to maintain watershed services and keep the water flowing in Lima, one of the world’s largest desert cities. The program works with Lima’s water utility, SUNASS, implementing highly innovative solutions to the dire problem of sustaining our water supply.

Protecting the forests that store carbon – with finance, not fences. The financing mechanism called REDD (Reducing Emissions from Deforestation and Degradation) supports the protection of “ecosystem services” (living forests, for example, which suck carbon out of our atmosphere). One such recent REDD success story comes from the Madre de Dios region of Peru, where the Tambopata REDD Project aims to support 1,100 farmers on sustainable cocoa production and protect a biodiverse national reserve, with help from a $7 million investment by Althelia Climate Fund.

Supporting the stewards of the forests. A consortium of nine environmental and indigenous organizations called AIME (Accelerating Inclusion and Mitigating Emissions) tackles some of the thornier parts of climate change – and offers real hope. Indigenous people and other local communities control about 33 percent of forest tenure in Latin America. Their stewardship of these swaths of trees – which absorb the carbon emissions of our planet – is a vital tool in the fight against climate change. AIME is exploring the possibility of harnessing indigenous Life Plans to secure carbon finance for indigenous people and embedding indigenous conservation efforts in jurisdictional programs supported by global carbon finance.

Supply chains and sustainability. Our demand for palm oil, soybeans, and beef is driving illegal deforestation around the world, but more and more companies are promising to deliver “deforestation-free” products. Supply-Change.org lets you see which companies are keeping their promises and which are not.

Promotion of non-timber products from the forest. One way to keep forests intact is to make sure they’re worth more alive than dead. That’s what REDD aims to achieve, but we can also promote demand for sustainably-harvested non-timber forest products. The communities of indigenous people working to conserve their forests and generate alternative sources of income are a key part of controlling climate change, and such trade provides vital support for these communities.

Biodiversity protection. According to the International Union for Conservation of Nature Red List of Threatened Species, agriculture impacts over 8,000 threatened species globally. The forestry sector impacts just under 8,000. A recent study looks at how to promote a solution called a “four-step mitigation hierarchy” to implement biodiversity protection in these sectors. The strategy seeks first to avoid impacts, then to minimize those impacts that are deemed unavoidable, then to restore the areas impacted, and finally to offset damages by restoring comparably habitat nearby.

Earth Day remains relevant. This week, President Obama will celebrate Earth Day by heading to the Florida Everglades to talk about his administration’s commitment to climate change mitigation. Brian Deese, senior advisor to the president, said, “We’re far beyond a debate about climate change’s existence. We’re focused on mitigating its very real effects here at home.”

Real solutions do exist, and maybe this will be the year we start paying attention to them.

The argument over voluntary approaches to conserve at risk-species like the greater sage-grouse isn’t waning. Meanwhile, new research applying the mitigation hierarchy to the agriculture and forestry sectors finds net positive impacts for biodiversity are possible and a separate report finds commodity subsidies driving deforestation vastly outweigh conservation finance to protect forests.

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

21 April 2015 | Greetings! In honor of those Mitmail readers whose next few weeks are dominated by preparing for exams or handing in dissertations, we thought we’d provide you all with some homework.

Your mission, if you choose to accept it, is to brush up on one of the “Three Cs”: commodities, candidate species, and carbon. Each is an emerging force that’s poised to radically change business-as-usual for biodiversity conservation and finance. So if you normally skim over these issues as you read our news briefs, this month pick a “C” to take a few minutes to get up to speed on.

If you choose commodities: Read our latest on applying the mitigation hierarchy to the agricultural and forestry sectors. Then get some background on the challenge: learn how commodity subsidies driving deforestation vastly outweigh conservation finance to protect forests, and how questions are emerging regarding the effectiveness of sustainable commodity roundtables. Finally, read about a new way to pair conservation finance and commodities, in which the Althelia Climate Fund is helping a sustainable cocoa project in Peru use carbon finance as collateral against loans to get the project off the ground. The project will then shift over time to sustainable cocoa production as its main revenue stream.

If you choose candidate species: Start with this piece introducing the concept of Habitat Exchanges, which help entities that impact imperiled – but not yet federally listed – species to pay to restore and protect critical habitat elsewhere, in order to keep those species from further decline. (Though arguably the system is set up for the energy and mining industries – not so much other sectors like agriculture.) Sounds good in theory, right? But as the first conservation bank for the greater sage-grouse prepares to open its doors in Wyoming, it’s beating back attacks from both sides of the political spectrum over whether voluntary mitigation really is the right mechanism to keep the grouse off the Endangered Species List.

If you choose carbon: You’ll also want to read the article on how a sustainable cocoa project in Peru is using carbon finance to leverage start-up capital but isn’t exactly a carbon project. Then for a counterpoint, check out Mongabay’s reporting on efforts to get carbon projects going in Brazil’s Cerrado, which illustrates the larger point that carbon storage and biodiversity values don’t always go hand-in-hand. But! A carbon market that assigns higher values to biodiversity-rich areas could help undo fifty years of biodiversity decline on land, according to a new study. You have the weekend to ponder this challenge, dear reader.

Finally, Forest Trends is hiring a Senior Communications Associate and a Research Assistant for Ecosystem Marketplace’s new Supply Change initiative. Scroll down to the Job Openings section for descriptions.
Cheers,

—The Ecosystem Marketplace Team

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

21 April 2015 | Africa generates very little in the way of greenhouse gas emissions, but it’s especially vulnerable to droughts and flooding from climate change, which threaten to disrupt food and water supplies. Poor infrastructure, high poverty rates and little access to capital only enhance the continent’s vulnerability, the United Nations says.

To avert disaster, African countries are already gearing up for the 21^st Conference of the Parties (COP 21) to the UN Framework Convention on Climate Change (UNFCCC), which takes place in Paris at the end of the year. At last week’s Africa Carbon Forum (ACF), delegates called for stronger emphasis on results-based climate finance for both mitigation and adaptation to climate change, and they reiterated their support for market-based mechanisms like the Clean Development Mechanism (CDM), which allows emissions-reducing projects to earn certified emissions reduction (CERs) that can be traded to meet overall national reduction goals.

“Participants particularly highlighted the usefulness of the CDM’s established rules in measuring, reporting and verifying results and its possible role to help define and clarify the content of INDCs,” the UNFCCC said in a press release. “The workshop also concluded that African countries could look at how best to link and leverage finance through the Green Climate Fund at the same time as increasing use of the CDM.”

“I agree with Ministers that the last 10 years in the implementation of the Clean Development Mechanism is a very valuable asset and that market mechanisms can play a significant role in raising the level of ambition, and supporting climate action,” said Hakima El Haite, the Delegate from Morocco’s Ministry of Environment.

Clean Energy, Green Agriculture

Roughly 730 million people across Africa rely on traditional forms of cooking using wood, which harms health and destroys forests, according to the International Energy Agency Africa Energy Outlook 2014. This report also found 625 million Africans lack secure access to electricity. ACF participants urged addressing this issue with the CDM, along with other tools that leverage private sector money.

“There is a great opportunity for the private sector to invest in a low carbon future for Africa, using market forces to bring innovative technologies so that the continent can develop in a sustainable way,” said Dirk Forrister, the President and CEO of International Emissions Trading Association, a business organization focused on greenhouse gas emissions trading. “The Paris agreement can help facilitate this by setting the right parameters for business to invest, including rules and guidelines for carbon markets.”

Preserve and Improve the CDM

Delegates repeatedly called for the CDM to not only be preserved, but improved to include climate-smart agriculture and urban development and build a more sustainable economy overall, according to the UNFCCC’s summary of the event. Forum participants noted the importance of addressing these key issues in African countries’ Intended Nationally Determined Contributions (INDCs), the post 2020 climate action plan each nation intends to take. The plans are submitted to the UNFCCC ahead of COP 21.

“In these last eight months before Paris, the focus must shift from restating negotiating positions to finding common ground solutions,” said UNFCCC Deputy Executive Secretary Richard Kinley. And according to another participate at the ACF, John Christensen of UNEP (United Nation Environment Programme). “African countries are ready to contribute and agree to a fair and balanced international agreement.”

Water brings life, but torrential downpours bring sludge and sewage overflow – contributing pollution around the world. In the United States, the Environmental Protection Agency is under pressure to regulate more aggressively, but, increasingly, NGOs and local authorities are moving ahead with cost-effective stormwater management plans of their own.

20 April 2015 | Stormwater, the dirty water that flows off pavement, rooftops and other impervious surfaces, is one of the biggest sources of water pollution in the United States. The U.S. Environmental Protection Agency (EPA) is charged with managing this pollution, but the agency is failing to enforce its own rules, according to many environmental groups.

The Conservation Law Foundation (CLF) and the Natural Resources Defense Council (NRDC) are suing the EPA – in separate lawsuits – in relation to the agency’s enforcement of stormwater regulation and the effectiveness of those rules.

Such legal actions have traditionally been the main recourse for environmentalists looking to promote better management of stormwater runoff, but legal action alone often creates a situation where the party with the best lawyer wins – or at least the lawyers do. And the actual cost of compliance is seen as a fraction of the cost of litigation. For that reason, several environmental organizations have been bringing carrots to accompany their sticks.

The Voices of Opposition

“EPA’s hearing very loudly from polluters in the development industry that oppose stronger stormwater requirements,” said NRDC attorney Rebecca Hammer.

Companies often equate the cost of compliance with the cost of construction or they view procedures to account for stormwater runoff flowing into waterways as an unknown – and frightening – liability. However, compliance costs make up a fraction of the overall cost of a development project, and Hammer argues that building things like permeable pavement, green roofs, and rain gardens – now called “green infrastructure” – saves companies money in the long run.

The stormwater rushing off impermeable surfaces dumps far more pollution into waterways than porous pavements that absorb and filter toxins. The result of these impervious areas is a contaminated pool of dirty water draining into rivers and streams, the CLF said in a statement speaking specifically about the Charles River watershed in Massachusetts. Gray infrastructure, then, equals a greater stormwater discharge cost for a property owner.

There is growing evidence supporting this concept that green infrastructure is in the business owners’ best interest. American Rivers, a conservation organization restoring US rivers, published a report in 2012 which found that these nature-based solutions can lower capital costs and operational expenses while increasing energy efficiency so energy costs are reduced. It also leads to an increase in property value and reduced costs associated with flooding.

And last year, the EPA projected a green infrastructure plan to manage stormwater for Lancaster, Pennsylvania could save the city $660,000 per year by lessening the treatment of wastewater. It also has the potential to deliver $4 million worth of energy, air quality and climate-related benefits.

But despite this mounting evidence on the benefits of green infrastructure, it isn’t typically incorporated into core business practices or investment strategies, a study by The Nature Conservancy, an environmental nonprofit, found. And as it stands, the key drivers for implementing green solutions are regulations. Brian Van Wye of the District of Columbia Department of the Environment (DDOE), notes how much farther along green programs with regulatory drivers are over the DDOE’s voluntary programs. “The regulated area is 10 times the size of the area that we’re able to touch with our voluntary programs,” he said.

Cities Leading the Way

But while the majority of businesses and places aren’t particularly supportive of nature-based solutions, there are a few areas where developers and local decision-makers are. A good example is Philadelphia, where the city’s water department has linked stormwater fees to the amount of impervious pavement on a property. More concrete means a higher bill.

The pricing structure incentivizes businesses to green their property and even includes a provision that allows property owners to write off their upgrade costs against future stormwater fees. However, that write-off could take years to materialize and doesn’t eliminate the upfront costs for companies.

Nonetheless, Philadelphia’s program spreads awareness on the importance of stormwater management, the lack of which Hammer called part of the problem. Developers aren’t aware of the benefits and don’t take advantage of the opportunities, she said.

Washington, D.C. is one city taking advantage of the opportunities. The city created the Stormwater Retention Credit (SRCs) trading program to provide flexibility in complying with new stormwater standards issued to D.C. through the EPA’s MS4 (Municipal Separate Storm Sewer System) permit. The program, which is the first stormwater retention trading program in the U.S., allows property owners to generate SRCs for voluntarily implementing green infrastructure that reduces stormwater runoff. They can then trade their SRCs with others needing to meet regulatory requirements.

Van Wye credits the “progressive-minded development community” as one of several reasons D.C.’s program has met with success thus far. The MS4 permit is also unique to D.C. in that the city receives clean water rules directly from the federal government while most U.S. cities typically receive these rules from their states. The DDOE was looking for the best methods to meet these new standards that dealt with stormwater retention in a way that was both effective and fair to the regulated group, Van Wye said.

“In terms of trading, we realized we could allow a lot of flexibility to development while at the same time generating as good or better benefits for the water bodies,” he said.

Like in Philadelphia, the D.C. program incentivizes property owners to upgrade gray infrastructure to green. And these property owners are eligible to receive discounts on their stormwater fees down the line. The trading aspect of D.C.’s program also creates a revenue stream that can lead to installing more green stormwater controls.

Last fall, the SRC program transacted its first trade – 11,013 SRCs worth $25,000. The seller of these credits was a property manager, Ann Benefield for condominiums in Northwest D.C. As the city’s first group of development projects becomes subject to the stricter stormwater regulations, program developers are expecting demand to emerge.

More Innovation on the Horizon

Ecosystem Marketplace’s latest State of Watershed Investments report also highlighted the potential of another innovative approach: public-private partnerships to harness finance for green infrastructure. The private partner provides upfront capital and assumes implementation and financial risks while the public participant funds the project over the long term and manages maintenance.

In the Chesapeake Bay, where regulation regarding stormwater controls is tightening, project developers expect these types of partnerships to leverage hundreds of millions of dollars in the coming decades. That money is much needed in a place where implementing necessary stormwater controls is estimated to be as high as $15 billion.

Projects like the Re.invest Initiative, partially funded by the Rockefeller Foundation, are encouraging these public-private partnerships as a means to build more sustainable stormwater systems. The project is a collaboration among eight U.S. cities – Honolulu, Milwaukee, New Orleans, El Paso, Hoboken, Miami Beach, Norfolk and Virginia Beach – and engineering, law and finance firms to create public-private partnerships that will build resilient infrastructure.

Innovative projects such as the Re.invest Initiative, along with what is being done in Philadelphia and Washington, D.C., are moving forward despite the legal entanglements and slowdowns at the federal level. Hammer emphasizes this progress in saying local governments can step up and enforce the type of standards NRDC would like to see at the national level.

Additional resources

The Tambopata REDD, based in Peru, aims to pair carbon finance with sustainable cocoa production with help from a $7 million investment by Althelia Climate Fund. Rather than rely on carbon finance long term, the project is designed to use offset sales as the start-up capital to set up the sustainable cocoa production – which over time will become the main revenue stream for farmers.

This article was originally posted in the Forest Carbon Newsletter. Click here to read the original.

17 April 2015 | “You have two options for avoiding deforestation,” said Paul Ramirez. “One is to put fences and rangers to keep people out – this option in the long-term is not sustainable. The other, which is actually the good one, is to work with people to change their practices.”

Ramirez is a project manager at the Peruvian NGO Asociacií³n para la Investigacií³n y Desarrollo Integral (AIDER) that is working in the buffer zone of a national reserve in Madre de Dios, known as the “Biodiversity Capital” of Peru. There, the Tambopata National Reserve and the Buhuaja-Sonene National Park provide habitat for threatened species such as the black caiman, harpy eagle, and giant otter.

But, despite its protected status, the forest itself is threatened by migratory agriculture and illegal logging, both of which accelerated when construction of a new highway through the region began in 2006. An estimated 1,189 hectares are being chipped out of the 570,000-hectare protected area every year.

AIDER aims to change this by pairing carbon finance with sustainable cocoa production. Fueled by a $7 million investment by Althelia Climate Fund, the organization helped found a farmer’s cooperative focused on harvesting, processing and commercializing fine aromatic cocoa. This year, the cooperative is starting with 300 planted hectares, with plans to scale up to 4,000 hectares by the end of the decade. The cooperative aims to produce 3,200 tonnes of cocoa each year – enough to create annual revenues of nearly $10 million, if cocoa prices hold at 2014 levels.

Until then, the Tambopata REDD (Reducing Emissions from Deforestation and Degradation of forests) project will lean on revenues from carbon offset sales. Four Dutch companies – development bank FMO, carpet maker Desso, and energy competitors Eneco and Essent – have provided early carbon finance, as has the Peruvian insurance company Pací­fico Seguros.

Farmers receive financing “on the condition that they won’t deforest anymore and that a share of revenues will go to investors,” Ramirez explained.

The REDD offsets are used as collateral against Althelia’s loan. Rather than rely on carbon finance long term, the Tambopata project is designed to use offset sales as the start-up capital to set up the sustainable cocoa production – which over time will become the main revenue stream for farmers.

Althelia’s Latin America Director Juan Carlos Gonzalez Aybar also sees carbon finance as a gateway for companies to begin thinking more holistically about the impact of their supply chains.

“For example, Desso today makes carpets and tomorrow probably they will be sourcing – I hope – some materials, for example latex, from reforestation projects,” he said. “For companies to start buying offsets is important for the offset itself, but also for the contacts with the projects and the business opportunity it brings.”

The Tambopata REDD project has issued 108,335 offsets to date under the Verified Carbon Standard (VCS) and is expected to avoid the emission of 4.5 million tonnes of carbon dioxide into the atmosphere over its lifetime.

The full story in Ecosystem Marketplace is here. And more news from the forest carbon marketplace is summarized below, so keep reading!

—The Ecosystem Marketplace Team

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

Additional resources

Several U.S. states are considering joining existing cap-and-trade programs such as the Regional Greenhouse Gas Initiative to comply with pending carbon rules from the federal government. However, a major obstacle in doing so is the tight deadlines that federal officials have set for states to submit compliance plans.  

17 April 2015| Want to join an existing cap-and-trade program in the United States? The nine Northeastern states participating in the Regional Greenhouse Gas Initiative (RGGI) are ready to welcome with open arms any of their counterparts who want to use the carbon trading program to comply with upcoming regulations from the United States Environmental Protection Agency (EPA).

“The waters are warm – dive on in,” Janet Coit, Director of RGGI member Rhode Island’s Department of Environmental Management, said at an event hosted by nonprofit think tank Center for Climate and Energy Solutions (C2ES).

Not so fast.

Literally, time is a major obstacle for states wanting to join existing carbon trading programs such as RGGI or California’s cap-and-trade program as a compliance mechanism, according to state regulators speaking at the C2ES event.

The EPA announced its proposed Clean Power Plan to limit carbon pollution from existing power plants last June, with a final rule scheduled to be released this summer. The rule will mainly affect coal-fired power plants, with the goal of cutting emissions from electricity generation 30% below 2005 levels by 2030. States must submit compliance plans to the EPA in the summer of 2016 – either complete plans or initial plans with requests for 1-year or 2-year extensions. States would be eligible for a two-year extension to June 2018 – with a progress report due in June 2017 – if their compliance plan is part of a multi-state plan.

For the RGGI states, those deadlines are “completely doable because we have already been through that process and we have a system that works,” Coit said. “If people wanted to join RGGI, depending on what the rule says, they might be able to declare their intentions in time. But would we be able to work through how to bring in a state within the timeframe is the question.”

It took the RGGI states five years to develop and launch the program, followed by another few years of public consultations and analysis that underpinned the 2014 revamp of the program. So there might not be enough time for new states to join RGGI as a compliance option if the EPA remains strict about the summer 2016 deadline. Even a June 2018 extended deadline could be tough to meet given RGGI’s rule-making process.

The EPA outlined several potential compliance options for states, including market-based programs to reduce carbon, investments in existing or new energy efficiency programs or expansion of renewable energy initiatives – or a combination of these strategies. Market-based programs would allow regulated entities to trade emissions reductions units to reduce the cost of compliance, as long as the state met an overall cap. The agency explicitly mentioned that the emissions reductions generated by RGGI and California’s cap-and-trade programs would be approved under EPA’s guidelines – a concrete recognition of regional market-based programs.

The emissions of capped sectors in California have dropped 3.8% in the first two years of the compliance program. RGGI states have achieved 40% cuts in emissions in the power sector since 2005.

“EPA has given the states a gift by giving us all this flexibility,” said Martha Rudolph, Director of Environmental Programs for the Colorado Department of Public Health & Environment. “Yet, there’s so much flexibility that trying to figure out what we’re going do in a short timeframe is very difficult.”

The tight deadlines, if left unaltered, could even have the “unintended consequence of discouraging people from exploring regional solutions, and I think that would be a shame,” she said.

The Trail Leads Northeast

There has been a movement in the Virginia state legislature and among NGOs for the state to join RGGI as an “off-the-shelf solution” to complying with the EPA’s regulation. So joining RGGI is one of the options, said David Paylor, Director of the Virginia Department of Environmental Quality.

“But we don’t know what RGGI is going to look like in the context of the Clean Power Plan yet,” he said. “It’s our view that RGGI is going to have to be reformed a little bit and that is something that we would look at, along with all of the other options, to see what makes the most sense. Market-based solutions are likely to make a lot of sense.”

Joining a regional carbon trading program could gain momentum in the state if companies support this compliance approach, Paylor said.

“When it comes to carbon pricing, I would say in Virginia that’s going to have more legs the more the business community gets behind it,” he said. “And we’re finding that much of the business community is still in the ‘we’re not quite sure’ stage.”

Businesses and individuals are reticent about policies such as carbon pricing that could increase energy costs for consumers, particularly in states that currently have low costs, even if implementing a carbon pricing program would be more cost effective in the long term, the regulators observed.

“Even though it’s the least cost, it doesn’t feel that way to them,” Paylor said.

But the Trail Goes Cold out West

Rudolph sees a different hurdle for Colorado in joining a regional cap-and-trade program such as RGGI or California’s program – which is currently linked to the Canadian province of Quebec and could eventually be linked to Ontario – to comply with the pending EPA rules. Her state has a diverse energy mix, more than half of which comes from coal-fired power plants, and gets its energy from two investor-owned utilities, several municipal utilities and rural electric associations, which creates significant challenges in developing a carbon pricing program in the state.

“Frankly, I think it’s going to be difficult for us to pursue that, although if it comes to us we certainly won’t say no,” she said. “The amount of time the rule gives to set up any kind of plan is very short and the type of plans, like RGGI or the California plan, would be frankly in the timeframe nearly impossible for us to set up.”

But there are “smaller, less complex trading programs that caught my eye” such as a state-only plan that allows regulated entities to trade credits with each other, Rudolph said.

“That is a more modest type of trading proposal that I think may have legs in states like Colorado,” she said. “We have not talked about that as an option, but that is something I’d be putting on the table for consideration.”

Paylor suggested a solution could be to start with an intrastate carbon trading program that transitions into an interstate approach. “And we’re having discussions with other states now to try to keep the maximum number of options open as we go forward and see what the rule looks like,” he said.

For many land-use sectors, the mitigation hierarchy is an effective way to manage the possible loss of biodiversity that comes with development. However, it isn’t used in several significant sectors like agriculture and forestry. That may be changing as new research finds that using the hierarchy can lead to net positive impacts for biodiversity within some of these missing sectors.

17 April 2015 | Agriculture impacts over 8,000 threatened species globally, according to the IUCN’s (International Union for Conservation of Nature) Red List of Threatened Species. The forestry sector isn’t far behind, impacting just below 8,000.

Despite the impact these sectors have on biodiversity, the IUCN finds that companies active in forestry and agriculture tend not to participate in conservation efforts that apply the four-step mitigation hierarchy: namely, seek first to avoid impacts, then to minimize those deemed unavoidable, then to restore the areas you impact, and finally to offset your damages by restoring comparably habitat nearby.

Contrast this with the extractive industries like mining and fossil fuels as well as the infrastructure sector. The global metals and mining corporation, Rio Tinto, for example, works with NGOs Flora and Fauna International and BirdLife International on its biodiversity strategy. And BHP Billiton, a multinational mining company, is in partnership with Conservation International. So these spaces have been involved with elements of the mitigation hierarchy since at least the early 2000s.

The reasons why agriculture and forestry are lagging behind are many, according to Deviah Aiama, a program officer in IUCN’s Global Business and Biodiversity Program. Primary challenges stem from the complexities of their supply chains and the sheer size of commercial agriculture and forestry operations, he says.

But these challenges can also offer opportunity. And in the fall of 2013, IUCN’s Global Business and Biodiversity Program convened with private sector and biodiversity experts to figure out how the mitigation hierarchy could be applied to the agriculture and forestry sectors. The outcome of that informal meeting is the report, No Net Loss and Net Positive Impact: Approaches for Biodiversity, published this week.

No Net Loss (NNL) and Net Positive Impact (NPI) are methods applied to development projects that either balance out negative biodiversity effects (NNL) or outweigh adverse activities (NPI) so the end result is a biodiversity gain. These approaches follow the mitigation hierarchy but since there aren’t any existing agriculture and forestry projects applying it, IUCN’s study uses hypothetical scenarios to demonstrate possible outcomes of NPI in these two sectors.

We wanted to gain a better understanding of the process and the context behind how NPI is applied in the extractive sector and then to tease out that process, says Stephen Edwards, a Program Manager within IUCN’s Global Business and Biodiversity Program. “Can we take that very same process and try and test out its application in agriculture and forestry?”

In short, the five steps of a NPI approach are: identifying priority biodiversity values, establishing a baseline or reference point, apply the mitigation hierarchy, implementation and monitoring. The study then applies this approach to three hypothetical landscape scenarios: existing managed lands, degraded lands and legal expansion into green fields.

As this research is essentially drawing from uncharted territory, Edwards along with Aiama, a lead author of the study, note the report isn’t meant to be comprehensive but a starting point to explore this area more. “This was an initial hypothetical exercise on getting practical experience from a collaborative partner and business perspective on the feasibility of applying NPI in a landscape, a farm field, a woodlot and a forest,” Aiama says.

Both Aiama and Edwards recently spoke with Ecosystem Marketplace about the creation of the paper and implications of NPI in the agriculture and forestry sectors.

EM: What were the main reasons for initiating this paper?

Stephen Edwards (SE): So we’ve seen net positive commitments to biodiversity from the mining sector and oil and gas sector increasing over the past 10 years. It started with work done by Rio Tinto and others back in the early 2000s and there has been a fair bit of progress made in terms of understanding what the commitments are and what the implications are. But the groups that are notoriously absent from those discussions are agriculture and forestry. These sectors-among others-have significant land impacts. Therefore, we thought that it was important to try to stretch our understanding to see if the agriculture and forestry sectors could consider a NPI approach.

Deviah Aiama (DA): It was timely to start exploring this subject. While we aren’t seeing net positive commitments in agriculture and forestry, we are seeing commitments to sustainability through recent initiatives that focus on taking deforestation out of supply chains, for instance. Also, agriculture and forestry have experience with sustainability standards that actually predates some of the NPI efforts in the extractives. It goes back to the 1990s when FSC (Forest Stewardship Council) was born. So we see efforts in these sectors that basically have biodiversity benefits.

It’s important to note also that the NPI’s five stage process itself is meant to be broad enough that it can be applied to a multitude of sectors and the way the five step process is presented in the paper isn’t specific to agriculture and forestry. It’s broad and generic enough that it’s applicable to tourism and so on.

EM:  Can you elaborate on why implementing NPI in agriculture and forestry is more difficult than in other sectors?

DA: There are difficulties and also opportunities. First, it’s not exactly a concept that has emerged in these sectors although arguably, there are linkages; for example, sustainable forest management standards. But agriculture and forestry aren’t as exposed to the financial sector and financial standards like IFC (International Finance Corporation). Also these sectors operate on larger spatial scales so production areas can be across entire landscapes compared to, for instance, a spatially limited mining scale. There are also differences concerning the temporal scale. Typically, forestry and agriculture are permanent land conversions. These areas are under production for the long-term. Of course, mine sites can be up to 50-100 years long but there is often a closure and rehabilitation phase which may not be there particularly in agriculture.

Broadly speaking and noting some exceptions, another difference is that agriculture and forestry usually involve a greater number of stakeholders. Agriculture, in particular, often deals with a range of producers, smallholder farmers, large contract farms, big industrial farms and so on. To coordinate action across a range of producers can be difficult. And finally, there’s the economics. Typically there is more upfront capital available in a mining project in part because of access to large loans through IFC for instance. Whereas in agriculture and forestry, they have smaller capital investments upfront and smaller revenue returns over the long-term. The marginal gains are smaller.

On the positive side, agriculture and forestry are often dealing with more dynamic landscape. That’s particularly true with forestry. A sustainably managed forestry operation has an opportunity to set a portion of its land aside to host wildlife so it’s easier to have restoration approaches implemented in a forestry landscape, as opposed to a mine.

EM: How significant are the agriculture and forestry sector to achieving the Convention on Biological Diversity’s (CBD) goals by 2020?

DA: If you look at the data from the IUCN Red List of Threatened Species in terms of threats, agriculture and forestry are essentially sectors that pose the highest threat to species primarily because of habitat loss, conversion and fragmentation. That’s also why IUCN is looking at these sectors. One of the CBD goals (Target 5) talks about no net loss of natural habitat by 2020. Without engaging the agriculture and forestry sectors on no net loss approaches, meeting that CBD goal won’t be possible.

EM: What particularly are you hoping to achieve?

SE: One: IUCN is hoping to gain a better understanding of the possible application of a NPI approach to different sectors beyond the extractives and to explore how might that be done. As Dev said, as of yet we don’t know of specific cases where this has been tried so we had to use hypothetical scenarios. The report documents that process and shows some possible avenues within those scenarios where a NPI approach might work and others where it won’t.  Going forward, the main recommendation of the working group is to pilot the NPI approach in specific agriculture and forestry landscapes in order to develop a better understanding and assessment of its practical application.

That’s what we want to achieve in the shorter term. Obviously, in the longer term, we’re hoping that all sectors reduce their biodiversity impact and generate the best possible returns for conservation.

EM: Is there a certain audience you’re hoping to reach?

SE: IUCN is trying to reach a broad range of audiences. We are reaching out to the business sector to gain a better understanding of these issues. We’ve been pleasantly surprised actually by the level of commitment and uptake of the mitigation hierarchy and these kinds of issues in the oil and gas and mining sector, as well as in the finance sector. Another important audience is the finance sector because of the leverage that they wield in terms of some of their performance standards, which are important. The NGO community is also key because it functions both as a civil society watchdog/advocate and as a support organization for businesses, finance institutions and governments. And, government is the one party that is going to have to apply regulations for these types of practices. In a voluntary realm, I think there’s only going to be limited amounts of traction.

EM: What are the key takeaways?

SE: IUCN believes that it’s critical that issues regarding conservation are looked at in a broader landscape level. Until we look at the broader landscape level, we’re not going to achieve global goals.

Where we’re most interested in looking when it comes to discussions around NPI is ensuring that there are clear credible and measurable biodiversity benefits coming out of it. While we’re in support of any efforts to improve biodiversity and conservation performance, we need to be cautious of throwing around claims without having them strongly based in science and done in ways that are clearly measurable, credible and transparent.

Additional resources

Australia drew the ire of the environmental community when it backed away from its carbon pricing program last year and established a nearly AU$2.6 billion Emissions Reduction Fund in its place. With the first auction coming up this week, critical issues still need to be resolved, including whether the funding will be sufficient to incentivize new emissions reduction projects.

14 April, 2015 – To many environmental and business leaders, Australia had a solid climate policy in place, centered around the country’s carbon tax and a planned emissions trading system (ETS). But in scrapping the country’s carbon tax last year, these leaders now believe the government reversed the progress the country was making in contributing to an international solution to the climate challenge.

“It’s certainly been disappointing to see it unfold that way,” Simon Bradshaw, Climate Change Advocacy Coordinator for Oxfam Australia, said of the government’s abandonment of its carbon pricing program.

The Liberal Party of Australia, led by Prime Minister Tony Abbott, replaced the carbon tax with an Emissions Reduction Fund (ERF), which maintains the objective of helping achieve Australia’s emissions reduction target of 5% below 2000 levels by 2020. The government has provided nearly AU$2.6 billion to establish the ERF and plans to buy offsets from competing sellers in a reverse auction.

“Australia is firmly committed to our 2020 emissions reduction target,” a spokesperson for the Department of the Environment said. “It is ambitious and comparable to other developed countries’ targets.”

But officials from energy-intensive industries, local government, carbon offset project developers and other stakeholders believe that emissions reduction target is not strong enough as it stands, according to a poll conducted by the Carbon Market Institute (CMI), which assists Australian businesses in managing risks and opportunities in national and international carbon markets, in Australia in September 2014. Seventy-six percent of respondents supported Australia adopting a stronger 2020 emissions reduction target.

“The government really doesn’t care about climate change,” said Martijn Wilder, an Australia-based Partner with law firm Baker & McKenzie. “The government came up with this stupid Emissions Reduction Fund policy at a time when it was under a bit of pressure. It’s just an alternative to an emissions trading scheme and now they are sort of stuck with a bad policy.”

The first test of this new policy comes on Wednesday at 9:00 am Australian Eastern Standard Time when the first ERF auction – scheduled to last for two days – is set to begin.

An Invisible Price

The real uncertainty relates to the offset price the government will accept under the ERF. The regulator will apply a benchmark price – the maximum amount it will pay for emissions reductions – for each auction and only bids below the benchmark will be considered. Indeed, the lowest-cost projects will be selected at auction and proponents will not be able to see what others are bidding.

The AU$23 carbon tax incentivized significant pre-compliance offset purchases in 2012 – five million tonnes of carbon dioxide equivalent (MtCO2e) developed for the CFI, according to Ecosystem Marketplace’s State of the Voluntary Carbon Markets 2013 report. The AU$23 carbon tax meant that offsets priced at the regional average of $8.8 per tonne reported that year or $14.2 per tonne last year were a cost-effective compliance option. Now, without a set emissions cap and carbon price, the price could plummet.

If the bidding price of offsets sold at auction remains high, however, the AU$2.6 billion funding for the ERF could quickly be exhausted, given the volume of existing projects expected to bid in. The Clean Energy Regulator says additional funding will be considered in future budgets, but environmental experts such as Bradshaw are not optimistic that the fund will be replenished. They see the new policy as expensive compared to the cost-effective market solutions that would have been implemented under the previous policy.

Legacy Offsets

Even prior to the legislated policy shift from carbon pricing to the ERF, Australia implemented changes impacting carbon offset projects. The country included improved forest management (IFM) within the national accounting submitted to the United Nations Framework Convention on Climate Change (UNFCCC). That meant that any offsets issued to voluntary IFM projects, such as the Tasmania forestry project developed under the Verified Carbon Standard (VCS) would, from January 1, 2013 and beyond, be double counted and so are no longer eligible to generate voluntary offsets, observed Jerry Seager, Chief Program Officer for the VCS.

Existing projects initially developed under the Carbon Farming Initiative – a legislated offsets scheme adopted in 2011 to allow farmers and land managers to earn carbon offsets by storing carbon or reducing greenhouse gas emissions on forest or agricultural land – were automatically registered under the ERF. Under the new ERF policy, the federal government will purchase Australian carbon credit units (ACCUs) from legacy CFI projects, which will allow existing participants to secure a return from eligible projects – if the offsets are competitive at auction.

The fund will build on the CFI by offering emissions reduction opportunities to a range of sources beyond the land sector, including energy efficiency improvements in the commercial building sector, according to the Clean Energy Regulator.

“The legislation around the offsetting hasn’t really changed other than expanded to include more projects,” Wilder said. “That’s a positive sign.”

This raises the question of whether the fund will only support existing projects or drive investment in new projects. Only 21% of the 245 individuals surveyed by CMI believed the ERF would provide opportunities to fund their emissions abatement projects, with 50% disagreeing or strongly disagreeing with the notion. The survey, completed before the ERF legislation was officially passed, found that 40% of respondents believed the ERF should not be implemented at all while another 39% advocated for implementation with more funding, according to CMI.

“The way Australia has implemented the Emissions Reduction Fund is not using markets so much as just using government money, which can provide support to some projects, but is not fully harnessing the market and directing private capital into markets,” Seager said. “Certainly, there may be opportunities for the fund to support some projects, but it’s not going to be a fully scaled-up solution that is fully harnessing the power of private capital. That’s the challenge.”

Keeping Emission Reductions Safe

The ERF will come equipped with a safeguard mechanism aimed at ensuring emissions reductions paid for by the ERF will not be offset by significant increases in emissions elsewhere in the economy. It will encourage large emitters not to exceed historical emissions levels, with the baselines set using data already reported under the National Greenhouse and Energy Reporting Scheme (NGER). The safeguard mechanism is scheduled to start on July 1, 2016, and will apply to roughly 140 entities that emit more than 100,000 tonnes of carbon dioxide each year – roughly half of the country’s emissions.

The safeguard mechanism has yet to be designed, with the government planning to release rules for the mechanism in October. But the new approach means that industry has no obligation to reduce its emissions, and it’s uncertain that the ERF can have a positive impact on reducing emissions without a cap.

Australia Versus the World

Australia has been on the wrong end of climate initiatives, observers say, aside from its AU$200 million over four years pledge to the Green Climate Fund (GCF), made during the UNFCCC negotiations in Lima, Peru in December. But there is concern that the GCF pledge will be Australia’s only contribution to the $100 billion per year promised by developed countries to the developing world by 2020.

“I think (the GCF pledge) was a sign they were feeling pressure from the international community and Australian civil society,” Bradshaw said. The GCF pledge was a welcome sign, but “I think the risk is that it’s seen as Australia’s overall commitment to climate finance.”

The Australian government committed to a review of its emissions reduction targets this year as part of its preparations for the UNFCCC negotiations in Paris at the end of 2015, with plans to publish its proposed climate plan, known as its Intended Nationally Determined Contribution (INDC), mid-year. A taskforce has been established to advise the government on the INDC. Setting a post-2020 emissions reduction target will be the focus of that process.

Oxfam has calculated a fair contribution for Australia would include a cut in domestic emissions by at least 40% by 2025 and at least 60% by 2030. The fair contribution refers to the country’s share of the global ‘carbon budget’ – a total tolerable amount of global carbon pollution, beyond which the risks for people and planet are unacceptable, according to Oxfam.

The CMI respondents highlighted the importance of China, the United States and the European Union, with about 80% saying Australia should look to the targets and actions of each of these nations or blocs in calibrating its post-2020 target.

“The Australian government knows that other countries are doing things, but it will do what it thinks is best for Australia,” Wilder said. “And we have a really, really hard right-wing, anti-climate government.”

Australia became the first country in the world to repeal its carbon price just as other countries such as China and South Korea have implemented or are moving toward national ETS programs. And, regardless of what other countries are doing, the government has no plans to revisit the possibility of a carbon pricing mechanism — a mechanism that created a market worth $6.6 billion in its first year of operation, according to CMI’s State of the Australian Carbon Market 2013 report.

“The Australian Government is determined to reduce emissions, but without a carbon tax,” the spokesperson said.

Bradshaw observed that the government has been “fairly defiant” about repealing the carbon price.

“Australia, for reasons we may never understand, is swimming against international trends,” he said. “They really did paint themselves into a corner with this and they may regret that” as the need to reduce emissions becomes clear. “It’s hard to see how that’s not going to involve carbon pricing.”

10 April 2015 | In the heart of the Peruvian Amazon, indigenous people are harvesting sacha inchi — as they have been for 3,000 years. And on screens around the world, Dr. Oz, among others, touts the nut-like seed for its high nutritional value and delicious flavor. It’s fast becoming a grocery store favorite: roasted, covered in chocolate, tamari-flavored, or pressed into oil.

Three thousand years, however, is a long time to wait for anything, especially in a global market hungry for the next “super food,” the next quinoa. And for many similar products from the Amazon, the wait is getting a lot shorter, thanks to a project called “Putting Amazon Indigenous Producers on the Map.”

The online database aims to connect indigenous farmers of sustainable natural products with buyers (like food or cosmetic companies), investors, and donors. “Putting Amazon Indigenous Producers on the Map” comprises a catalog and interactive map of community enterprises, ranging from the production of well-known commodities like cacao, coffee, Brazil nuts, and palm hearts to products new to the global market, like Peruvian sacha inchi and camu camu, an Amazonian fruit that contains 30 to 60 times more vitamin C than an orange.

Four organizations — Forest Trends (publisher of Ecosystem Marketplace), the Environmental Defense Fund (EDF), EcoDecision, and the Coordinator of Indigenous Organizations of the Amazon River Basin (COICA) — are developing the catalog and the map to help improve access to markets and finance for Amazonian indigenous communities, making it easier for buyers, funders, and other allies to find suppliers and products.

Across the Amazon, indigenous communities have long harvested non-timber forest products and cultivated traditional crops, both for their own consumption and for sale. Responsible trade in this vast array of products can have profound impact on two fronts. First, such transactions can make a significant contribution to indigenous communities working to conserve their forests and generate alternative sources of income. The conservation efforts of these communities have impact far beyond the forests in mitigating climate change, as a study released jointly by the World Resources Institute (WRI) and Rights and Resources Initiative (RRI) revealed last year. The report found that indigenous people in forest communities and their management of these forests are critical to controlling and eventually diminishing carbon emissions in the atmosphere.

Second, more investors and donors are looking to provide finance to these communities and are seeking viable ways to do so. Plus, for buyers of products like sacha inchi, such trade aligns with a growing body of corporate commitments to deforestation-free sourcing. (For further information on these commitments and other sustainability and supply-chain issues, go to Supply-Change.org.)

This kind of far-reaching success can be found in the relationship between the Yawanawa people of Brazil and the beauty company Aveda. Since Aveda started sourcing the pigment of the urukum plant — commonly known as annatto and once used as war paint — from the Yawanawa more than 20 years ago, it has been a win-win situation for both. For the Yawanawa, the income and support from Aveda has enabled them to reestablish and strengthen their traditional culture, which had been nearly wiped out from the devastation wrought by rubber plantations, the influence of missionaries, and old-world diseases against which the native Americans had no resistance. The community is now thriving, working toward sustainability and economic independence. For Aveda, working with indigenous communities has become a central link in its supply chain, as well as a key part of its brand identity.

For many companies seeking to follow such a model, however, the initial hurdle of even connecting with a producer can be a challenge. Often, companies have difficulty identifying and evaluating partners for investment and sources of supply because community enterprises can be small scale, dispersed, and relatively inexperienced in using the Internet and other tools to enhance their visibility. That’s where “Putting Amazon Indigenous Producers on the Map” comes in, making that vital first connection.

The database and interactive map includes information gleaned from direct contact with Amazon indigenous producers, with input from Amazon indigenous organizations belonging to COICA, from development partners across the region, and from a unique crowd-sourced mapping tool (http://indigenousmap.canopybridge.com/). The database includes:

• The characteristics and contact information for producer organizations
• A listing of products (linked to the online platform CanopyBridge.com)
• A profile of producers’ capacity and experience
• A description of how enterprises contribute to conservation objectives.

The first phase of “Putting Amazon Indigenous Producers on the Map” includes data collection through August 2015, with database information to be available on a searchable, map-based platform online as well as through detailed profiles of producers on the CanopyBridge.com platform.

Support for “Putting Amazon Indigenous Producers on the Map” comes from the United States Agency for International Development (USAID) as part of a 5-year program called Accelerating Inclusion and Mitigating Emissions (AIME), involving a partnership of nine environmental and indigenous organizations, led by Forest Trends. The AIME program supports empowerment of forest-dependent communities to more fully contribute to and directly benefit from climate-change mitigation efforts.

So even as sacha inchi flies off the shelves of Whole Foods, this kind of investment points to a much bigger picture, more far reaching than simply providing a tasty snack for adventurous eaters. The global market for Amazonian products could have powerful impact on some of the most pressing issues of our time, like fighting climate change and women’s empowerment.

Just ask the people at the Association of Waorani Indigenous Women of Ecuador, a cooperative in the Ecuadorian Amazon. They stopped selling bush meat – which placed unsustainable pressure on the community and the environment – and started growing cacao in 2010. Since then, they have revitalized their community. Their sustainable farms – all run by women — have restored the jungle cover and the animal population that was destroyed by bush meat production. The Waorani now have better access to health, education, and housing resources, with women especially benefiting. The cooperative aims to build a bridge between Waorani traditional ways and the contemporary world.

Thanks to the database “Putting Amazon Indigenous Producers on the Map,” it may get a lot easier for you to enjoy their chocolate — and support this community.

Ann Espuelas is a writer for Forest Trends.

10 April 2015 | With historic droughts playing out in different parts of the globe, it seems that water is at the top of everyone’s mind. For the first time ever, groundwater legislation was introduced in drought-plagued California, shortly followed by mandatory water restrictions. Meanwhile, Sao Paulo, Brazil and Taiwan run dry – perhaps waiting for better water resource management.

But just how to manage this increasingly scarce resource is the constant question among those working in the water space. And the answer continues to evolve as policymakers, practitioners and scientists account for new factors like more people and a changing climate.

Center to the issue of water management is cities-hubs of not only water consumption but food and energy also and key to the water-energy-food nexus. A recent breakthrough regarding water management in cities came in the form of Lima, Peru’s new water tariff. The bill allows for nearly 5% of collected water fees to be devoted to green infrastructure, climate change adaptation and disaster risk reduction. Over a 5-year period, an estimated $112 million will be collected to address these issues. It’s a significant step forward in terms of not only actual progress made but also a huge show of leadership on the side of Peru’s water regulator-SUNASS (National Sanitation Service Superintendence), said Gena Gammie, a Manager in NGO Forest Trends’ Water Initiative

So it’s also a milestone cultivated in part by Forest Trends (publisher of Ecosystem Marketplace) over the past three years through its Watershed Services Incubator, a partnership with the Peruvian Ministry of Environment to develop cost-effective methods that would keep the water flowing in one of the world’s largest desert cities.

One such method under consideration by SUNASS is basically restoring pre-Incan canals, called amunas, which allow water to trickle slowly down the Andes Mountains arriving at the bottom just in time for Lima’s dry season. The amunas funnel water across the mountains instead of directly down. What’s more, a Forest Trends report found that amuna restoration – among other green solutions – is more cost-effective than the gray approaches assessed. And with the significant funding directed to initiatives such as this through the water tariff, the odds are in favor of moving the work on the amunas forward.

The water tariff will show how these green infrastructure approaches can address water scarcity, Gammie said. “It’s one part of the solution that’s been underutilized, but we’re now seeing the policy and mechanisms that can make a difference.”

Every Three Years

It’s a message Gammie plans on taking to the World Water Forum, a major convening of private and public representatives aimed at improving sustainable water resource management, happening this week from the 12-17 in Daegu, South Korea.

Hosted by the World Water Council, an international platform for the future of water, the World Water Forum is a big deal. Occurring every three years, it’s a high-level ministerial meeting that attracts CEOs and other top actors from the private sector as well.

This time, the forum was organized using a participatory process where all participants in the forum develop what are called ‘implementation roadmaps.’ These roadmaps are frameworks clarifying the activities and objectives pertaining to water management that governments and private companies are working on. They all feed into the forum’s four themes: Water Security for All; Water for Development and Prosperity; Water for Sustainability: Harmonizing Humans and Nature; and Constructing Feasible Implementation Mechanisms.

Forum events will address these themes through solutions and new data. For instance, one event addressing the fourth theme will discuss closing a finance gap estimated at trillions of dollars. It’s the gap in finance needed to fix existing water infrastructure that’s decaying and then also to construct new infrastructure that ensures the developing world has access to clean water. The panel will specifically look at identifying indicators to determine the role green as well as multi-purpose infrastructure plays in filling this gap. The indicators can then be used to evaluate finance for sustainable water management, according to the event description.

Tough Questions

What will the top topics of this World Water Forum be? It’s likely the current water shortages will come up in many discussions. “Hopefully, the forum will be able to identify and share some solutions that cities can use to mitigate these crises,” Gammie said.

Another topic related to current events that is sure to make its way into the forum’s dialogues is the Sustainable Development Goals (SDGs) negotiations. The United Nations is set to establish them this year with a singular goal focused on water, among other objectives relating to water.

“The World Water Forum will definitely be informed by those negotiations to help direct its own implementation roadmaps,” Gammie said.

Participants like Gammie expect the SDGs to be a key subject among high-level policymaker discussions asking questions such as how should water be positioned within the SDGs Because of the forum’s focus on water management, ensuring the SDGs adequately encompass all matters surrounding water management to achieve sustainable development will also most likely be debated.

“It’s a big year for the world,” Gammie said, referring to the SDGs. It’s fitting then that the World Water Forum is happening this year as well.

It’s also fitting that Fernando Momiy Hada, the President of SUNASS, will be on hand to discuss the groundbreaking water tariff, which has implications for other cities struggling with their own versions of water stress.

Additional resources

9 April 2015 | Last November, a group of Dutch business leaders found themselves far away from their desks, standing damp but happy in the Peruvian rainforest. Representatives from development bank FMO, carpet maker Desso, and energy competitors Eneco and Essent were visiting the forest they’d paid to save.

The trip brought them to a 570,000-hectare protected area spread across the Tambopata National Reserve and the Buhuaja-Sonene National Park in the Madre de Dios region, known as the “Biodiversity Capital” of Peru. It earns its nickname by providing critical habitat to threatened species such as the black caiman, harpy eagle, and giant otter. A recent government census puts the human population of Madre de Dios at just under 110,000 – more than 20 times what it was in the 1940s, when gold mining began to draw migrants from the South Andes.

Though they are technically government-protected areas, the forest cover in Tambopata and Buhuaja-Sonene is dwindling, with an estimated 1,189 hectares lost every year. The construction of the South Interoceanic Highway, which started in 2006, has accelerated gold mining, wood extraction, and slash-and-burn agriculture. Migration to the region has also increased, with the city of Puerto Maldonado swelling.

“What is so depressing is I came to Puerto Maldonado 31 years ago,” said Mark Meyrick, who heads Eneco’s carbon desk. “That town has not changed materially in terms of development in that time. It’s still pretty dusty, still pretty rundown, still doesn’t have much going for it, and yet there has been a huge amount of environmental damage done in that area and I ask myself, to what end? Who has got rich on this? And it’s very difficult to see that anybody has.”

Meyrick’s company has invested in a program that might not make people rich, but will at least help them make ends meet while taking pressure off the valuable forest: the Tambopata REDD project.

Enter REDD

REDD stands for Reducing Emissions from Deforestation and Degradation of forests, and the Tambopata REDD project aims to spur economic activities that are based on the forest’s conservation rather than its destruction – activities such as cocoa production, chestnut harvesting, small-scale fish farming, and low-impact logging.

The project took about three years to get off the ground. Project developers first had to identify which portion of the forest was in danger and calculate the deforestation that would occur with and without intervention. They created a detailed project design document that underwent an audit to ensure it met the requirements of the Verified Carbon Standard, the body that would eventually issue offsets, each representing a tonne of carbon dioxide kept out of the atmosphere (delineated as tCO2e).

“Our goal is to avoid the deforestation of almost 12,000 hectares in both natural protected areas in the first 10 years of the project, and contribute to biodiversity conservation and socioeconomic development in the buffer zone,” said Paul Ramirez, the project manager.

But generating the offsets is only the first step. Then they have to sell them.

The market for REDD offsets is currently valued at around $100 million per year, according to Ecosystem Marketplace’s 2014 State of the Forest Carbon Markets report. Governments are currently negotiating how avoided deforestation might be including in an international climate change agreement, but until then the REDD market is entirely dependent on voluntary buyers. Though REDD offset sales are growing, prices are dropping, and last year project developers reported taking home less than 70% of the revenue they needed to keep projects afloat long-term.

A Lifeline

The Althelia Climate Fund had an idea: Why not use REDD offsets as collateral against loans but also design projects to produce deforestation-free products, therefore creating multiple revenue streams? The Fund has raised more than 100 million euros to date from private investors and has attracted the attention of the US Agency for International Development, which last year announced it would guarantee Althelia up to $133.8 million to de-risk avoided deforestation projects.

The Tambopata REDD project was first conceived in 2010, when Althelia was just an idea. Ramirez, then a business manager at the Peruvian sustainable development NGO Asociacií³n para la Investigacií³n y Desarrollo Integral (AIDER), met Christian del Valle and Sylvain Goupille on a scoping trip to Paris to meet with companies interested in carbon finance. At the time, del Valle was the Director of Environmental Markets and Forestry at the French bank BNP Paribas, while Goupille was BNP’s Head of Carbon Finance.

A year later, the pair left BNP to start Althelia.

Althelia’s first investment was in Wildlife Work’s Taita Hills project in Kenya. But soon after, Juan Carlos Gonzalez Aybar, who did a brief stint at AIDER before becoming Althelia’s Latin America Director, started advocating for the project in Peru.

In September 2014, Althelia announced its $7 million investment in the Tambopata REDD project as part of a $12 million initiative. The Peru-U.S. debt swap fund “Fondo de las Americas” committed another $2 million in co-financing.

No Fences Around This Forest

While dozens of avoided deforestation projects are currently being developed around the world, Tambopata is among a subset of REDD projects that explicitly builds sustainable commodities into its business model.

“You have two options for avoiding deforestation,” explained Ramirez. “One is to put fences and rangers to keep people out – this option in the long-term is not sustainable. The other, which is actually the good one, is to work with people to change their practices.”

SERNANP, the national protected areas authority of Peru, awarded AIDER a 20-year contract to manage Tambopata and Bahuaja-Sonene – an agreement that allows the non-profit to attract private investment for conservation. Through the REDD project, AIDER aims to work with 1,100 farmers in 19 villages around the buffer zone of the protected regions. These farmers practice migratory agriculture, moving from plot to plot over time and sometimes clearing sections of the Reserve. AIDER seeks to break this cycle by helping them intensify agricultural production on land outside of Tambopata and Bahuaja-Sonene, as well as by planting crops that are lucrative enough that farmers can earn a long-term livelihood from a finite land area.

The NGO helped to form a farmer’s cooperative called Tambopata Candamo, founded in October 2014 with an original 21 members. The cooperative is focused on harvesting, processing and commercializing cocoa, with a goal of maintaining 4,000 hectares of fine aromatic cocoa trees. With AIDER’s help, they’ve invested in infrastructure such as warehouses, dryers and fermentation facilities, and trucks that will transport the processed product to market. Between the chocolate trees, farmers will also plant other cash crops such as bananas and beans.

AIDER is starting small, with a goal of planting just 300 hectares in this first year of the project – a proof of concept that they hope will convert skeptics. The biggest challenge so far has been communicating the concept of payment for performance to local farmers, according to Ramirez.

“It’s [hard] to make them understand that this is not a donation project, because they are used to NGOs coming with projects as grants and they don’t have to give anything back,” he said. “I think that’s why many projects don’t have the impact that they should have: Because people have machines and they don’t take care of the thing because it didn’t cost them. So this is a different project. It’s not a grant project, it’s a business project.”

Business Means Business

Farmers receive financing “on the condition that they won’t deforest anymore and that a share of revenues will go to investors,” Ramirez explained.

In exchange for that promise, the project will pay to get them up to speed for certification by Fairtrade, which ensures fair labor practices and establishes a floor price of $2,000 per tonne of cocoa. Ecotierra, a Canadian-Peruvian company, supports the cooperative with finding a “route to market” – helping overcome the most common barriers facing cocoa farmers in Peru. The real money, however, will come on the back-end.

The cooperative will receive the majority of the revenues from what AIDER hopes will eventually be at least 3,200 tonnes of cocoa produced each year, certified as both organic and Fairtrade. AIDER expects farmers to earn a $500 premium over the market price because of their organic and Fairtrade certifications.

Premium or not, though, the cocoa industry in Peru is booming. Exports reached $146 million in 2013 and were forecast to rise 20% by 2014, according to the USDA’s Food and Agricultural Service. If cocoa prices hold at 2014 levels of $3,100 per tonne and if the project achieves 3,200 tonnes of annual cocoa production, this would translate into estimated revenues of almost $10 million per year for the cooperative.

The goal for the Tambopata project is to create a roughly equal split between the revenue streams from cocoa and carbon. But the project may lean more heavily on carbon sales in the beginning as the cooperative slowly expands its cocoa production and undergoes the organic and Fairtrade certification processes. Cocoa trees usually take three years to produce their first fruit and eight years to reach peak production. In the meantime, the revenue from the carbon offset sales begins to repay Althelia’s investors.

“We are entering into a mechanism which is like any other business,” Gonzalez Aybar explained. “So for the first time, we actually have carbon finance working. You have a carbon asset which is pledged for collateral for a loan and then you have companies that are buying the carbon from the project which serves to pay back the loan – and to make profits on top of that which are shared among the partners.”

The Tambopata REDD project has issued 108,335 offsets to date under the Verified Carbon Standard and is also validated under the Climate, Community and Biodiversity Standard. In addition to the Dutch companies that visited Tambopata last November, a Peruvian insurance company, Pací­fico Seguros, has also purchased offsets from the project, which is expected to avoid the emission of more than 4.5 million tCO2e by 2020.
Today, Carbon. Tomorrow, Commodities?

The trip to Madre de Dios left an impression on the representatives from the Dutch companies.

“I’ve been in the carbon market for 11 years now and the whole reason I came into it in the first place was because of my concern about the loss of biodiversity in the world,” Meyrick said. “So being able to actually get involved in a real project that protected some really key area of the world to me was absolutely massive.”

Gonzalez Aybar admits that a company buying 100,000 carbon offsets “won’t change the world” – nor will it fully support the Tambopata project. But he sees carbon offset purchases as a gateway for companies to begin thinking more holistically about their supply chains and their impact on the environment.

“For example, Desso today makes carpets and tomorrow probably they will be sourcing – I hope – some materials, for example latex, from reforestation projects,” he said. “For companies to start buying offsets is important for the offset itself, but also for the contacts with the projects and the business opportunity it brings.”

The Althelia Climate Fund is set to mature in 2021, at which point investors will be repaid and cocoa production is projected to be in full swing.

“We really try to set up projects where we can catalyze a change into sustainable land use so that when we exit, when we are not there anymore, the project is self-sustainable,” said Edit Kiss, Director of Business Development and Operations at Althelia. “In the case of Tambopata, we estimate that from year six the project will have enough revenues from the cocoa and the carbon revenues will be much less needed, and we really hope that it’s going to be very successful.”

6 April 2015 – The race against deforestation is being won or lost hectare by hectare in the tropical rainforest countries that also provide the majority of the world’s agricultural commodities. But subsidies for commodities that drive deforestation may be undermining the efficacy of financial incentives for conserving forests and their carbon content, according to a new working paper by the Overseas Development Institute (ODI), a United Kingdom-based think tank.

Agricultural subsidies worth at least $486 billion in 2012 dwarf the $8.7 billion total that developed countries have committed towards Reducing Emissions from Deforestation and Degradation of forests (REDD+) since 2006, the report finds. However, financial incentives for avoiding deforestation would be much more effective if countries address the heavyweights on the other side of the scale, the researchers, Will McFarland, Shelagh Whitley and Gabrielle Kissinger, argue.

“Instead of raising the cost of GHG (greenhouse gas) emissions or penalizing activities linked to forest loss and degradation, the balance of government support is in the form of subsidies to the production and consumption of the key commodities that are driving forest loss,” they write.

The Big Four deforestation drivers

Alongside population growth and rising incomes, global appetites for deforestation-driving commodities – namely beef, soy, palm oil, and timber – is set to expand over the next few decades, according to research by Forest Trends, Ecosystem Marketplace’s publisher. Agriculture accounts for 70% of deforestation in tropical countries.

The economic signals for clearing forests to make way for agricultural commodities are strong. Brazil is the world’s largest beef producer, with exports contributing $7 billion to the economy – 3% of total export income. Soy covers more than a third of Brazil’s arable land and exports to China, the European Union, and elsewhere earned $26.2 billion in 2010. In Indonesia, palm oil covers a fifth of agricultural land and exports reached $17.6 billion in 2012, with timber contributing another $10 billion.

As the top two deforesters in the world by land area cleared annually, Brazil and Indonesia are ground zero for figuring out how REDD+ financing can work with existing policies. Deforestation currently accounts for up to a fifth of global GHG emissions and preventing further deforestation is one of the most effective levers to pull to mitigate climate change in the short term, according the United Nations Framework Convention on Climate Change (UNFCCC).

Competing incentives

Governments have various motivations for putting subsidies in place, the ODI study finds. Subsidies may aim to ensure food security, create energy security by encouraging homegrown biofuel production, or serve as temporary buffers against commodity price shocks. But once in place, subsidies are difficult to remove – even if they have outlived their original purpose. Interest groups that benefit from subsidies lobby for their persistence, and governments often keep subsidies in place to garner political support, the researchers find.

Subsidies may accelerate environmental degradation in various ways, the ODI paper argues. They may draw more investment to industries such as beef and palm oil than the market would otherwise support. They may lower the cost of consumption of agricultural products, leading to overconsumption. They may remove incentives for natural resources industries to operate efficiently. And, if commodities are sold below market price, they may deprive domestic governments of tax revenue that could otherwise be invested in enforcing conservation regulations.

The working paper identifies eight beef and 16 soy subsidies in Brazil and 19 soy and 10 timber subsidies in Indonesia.

Brazilian cattle farmers have access to loans worth an estimated $218 million per year, and the below-market interest rates are credited with significantly reducing costs for producers. Brazilian soy growers have benefitted from about $540 million annual investment in roads, railways, and ports that help them get their product to market.

In Indonesia, developers benefit from about $800 million in annual concessional loans to develop commercial plantations for pulp and paper, with a government goal of establishing plantations across nine million hectares by 2016. Subsidies for smallholders palm producers led to the proliferation of palm oil plantations over an additional two million hectares between 2000 and 2009. A domestic mandate to produce fuel with at least 7.5% biofuel content is also encouraging palm expansion.

Overall, “levels of REDD+ finance stand in stark contrast to domestic subsidies, with average annual domestic agriculture subsidies in Brazil and Indonesia exceeding REDD+ finance by factors of 70 and 164 times, respectively,” the ODI paper finds.

Reweighting the scales

REDD+ financing could be used in part to reform subsidies to key commodities in a way that avoids further forest loss, the ODI paper suggests. In fact, the researchers identify examples of subsidy reforms that have already addressed the drivers of deforestation. The most successful example, according to the paper, is Brazil’s reform of its rural credit system in 2008 to require compliance with legal and environmental requirements. This resulted in an estimated $1.4 billion not loaned to out-of-compliance farmers between 2008 and 2011. The majority of this finance would have gone to supporting illegal beef production, leading to an estimated 15% increase in the rate of forest loss during those years.

There are also opportunities for subsidies to work harder in forests’ favor, according to ODI, particularly when it comes to intensification, or producing the same yields on less land area and with fewer inputs. Indonesia’s current palm oil yields of 3.8 tons per hectare fall below Malaysia’s yields of 4.6 tons per hectare. Smallholders in particular lag behind the productivity of private or government-owned plantations, indicating that with technology and financial support, smallholders could increase output without expanding plantations into the forest.

The ODI paper argues that these opportunities to shift the economic incentives around agriculture and forests should be an essential part of REDD+ process, both by phasing out or reforming subsidies that encourage deforestation and by designing any new incentives for REDD+ so that they complement other domestic efforts to shape private investment.

“There is current momentum on subsidy reform,” the authors write, citing countries’ emerging climate plans under the UNFCCC as well as the UN Sustainable Development Goals being developed for post-2015 as potential opportunities to rejigger agricultural subsidies to align with low-carbon development objectives.

Another key opportunity comes with the pending disbursement of the $10.2 billion in developed country pledges to the Green Climate Fund (GCF) established under the UNFCCC to support emissions reductions projects in developing nations. Norway, a major donor country, sees the GCF as an important channel for distributing REDD+ finance.

Thus far, finance for REDD+ “readiness,” or activities that will prepare countries to receive payments on the condition of successfully reducing deforestation, have not focused on changing subsidies connected to deforestation. However, this doesn’t have to be the case, the ODI paper argues.

“REDD+ finance could be used as a resource to support transparency, and as a lever to encourage subsidy reform,” the authors write.

Additional resources

When Oregon-based The Climate Trust (TCT) was tasked with identifying and securing offsets back in 1997, there were precious few to find. This challenge shaped the organization as it stands today: TCT continues to trailblaze with new methodologies and innovative financing solutions, including a potential green bond to fund carbon offset projects.

2 April 2015 | With all eyes turned to California, it’s easy to forget that the state’s northern neighbor actually passed the first state-level legislation to curb carbon dioxide (CO2) emissions in the United States (US).

The Oregon Carbon Dioxide Standard, passed in 1997, requires new energy facilities in the state to meet an emissions standard 17% below the best-existing plants in the US. Effectively, this means that power plants have to either adopt mitigation technologies on-site or purchase offsets generated from off-site projects.

As might be expected, the new power plants were hardly pleased about venturing outside their expertise and into the nascent carbon market of that time. In response, the state offered a third option: a “monetary path”, where plants could provide funding to a state-recognized non-profit that would select and manage carbon reduction projects on their behalf.

To date, every regulated entity has chosen this path, which marked the beginnings of The Climate Trust (TCT).

Starting from Scratch

TCT has been the only non-profit to take up Oregon’s offer to work as a recognized carbon offset manager. Yet even without competition, trust officials had their work cut out for them, as carbon projects were more of an idea than actuality back in the 1990’s.

When the organization received its first contract from a new power plant back in 2001, it had only two years to commit $600,000 to projects. There was only one problem: “When we first started getting money, there wasn’t a lot [of projects] out there,” said Sheldon Zakreski, Director of Programs.

TCT’s unique funding structure meant that the organization “sees part of our role as improving capacity building. Through the Oregon program, we are in a position where we can afford to look at new standards.” This unusual combination of guaranteed funding, but quick turnaround demands resulted in an organizational culture that embraces trailblazing to this day.

Yet while the monetary pathway offers a windfall of cash, there’s a catch: the funding only appears with the construction of a new power plant. “It’s a boom-and-bust cycle,” said Dick Kempka, Vice-President of Business Development. “We went two to three years without money; then two facilities were announced, and we were flush with money again.”

Given this particular challenge, TCT decided to start consulting and looking into other revenue sources about four years ago. Those sources were easy enough to find: corporate buyers had expressed interest in offsets, believing that if they were good enough for a regulated market, they were good enough for voluntary purchases. But it was California’s announcement of an offset market that sealed the deal for TCT’s expansion. It created demand outside of Oregon, and, starting back in 2008, the organization began to actively invest in projects located beyond the state’s boundaries.

Now, the organization has invested in over 40 projects and delivered more than two million tonnes of emissions reductions. A number of these projects have introduced new methodologies into the marketplace, including a wetlands methodology in the US Gulf Coast and biochar methodology now recognized by the American Carbon Registry (ACR).

However, the trust doesn’t work on the ground on these projects. Rather, the organization enters into a contract with the project developer and provides upfront, early stage, or pay on delivery financing. That early-stage financing carries a risk – especially with untested methodologies – but the organization’s 15 years of experience has come in handy in picking successful projects.

So far, TCT has a 3.9% default rate for all of its Oregon program contractual commitments. In these cases, a “default” was defined as instances where the upfront funding provided wasn’t recouped in cash paid back and/or offsets supplied. The Blue Heron Energy Efficiency Project is one of six such projects, with TCT providing $500,000 in upfront financing and receiving only 70% of the contracted offsets once the mill filed for bankruptcy.

Seeing the Grasslands for the Ducks

TCT’s latest collaboration typifies recent projects as it involves a new methodology and collaboration across organizations. In this case, TCT partnered with Ducks Unlimited, Bonneville Environmental Foundation and Chevrolet.

Ducks Unlimited, the non-profit organization dedicated to preserving waterfowl and their habitat, had dabbled in carbon finance in the early 2000s. But it wasn’t until 2008 that the organization really started looking into scaling up its Prairie Pothole Avoided Conversion of Grasslands and Shrublands project. Officials engaged with local livestock landowners to increase the area of the project and then looked into developing a protocol.

Partnering with TCT made sense, said Billy Gascoigne, Economist/Environmental Markets Specialist at Ducks Unlimited, because the organization was waddling into unfamiliar territory. Ducks Unlimited’s primary expertise is, well, ducks. Not carbon pricing or marketing. And the organization made too much of a substantial investment into the project for it to fail because the offsets couldn’t be sold.

TCT knew how to work with a project from start to finish. The finish was especially important for the voluntary market, given that project developers often need to do a lot of legwork to find a buyer. Those were key components, Gascoigne said, especially since The Climate Trust knew how to market offsets and talk with the registries.

The connection was made through Dick Kempka, Vice-President of Business Development at TCT, who previously worked at Ducks Unlimited. He believed in the project’s potential to scale up, and its marketability for corporate buyers. Kempka’s belief in the project paid off when nearby Bonneville Environmental Foundation approached with an interest in securing offsets on behalf of Chevrolet.

Chevrolet didn’t provide money upfront, but the early expression of interest helped Ducks Unlimited with other financing. The methodology still took three more years before it was approved by ACR.

Officials at the automotive company weren’t surprised by the length of time required. Though primarily a buyer, Chevrolet had also ventured into methodology development with its Campus Clean Energy Campaign (spawning the similarly named Verified Carbon Standard-approved Campus Clean Energy and Energy Efficiency methodology), which took two years to gain approval. David Tulauskas, director of sustainability for General Motors, Chevrolet’s parent company, said the automaker prefers to buy from first-of-its-kind projects and those with an impact on local communities – boxes that the Ducks Unlimited project checked.

The Next Frontier: Green Bonds

Despite the success of this and other new projects, Kempka said, “I think we’ve transitioned our philosophy where it’s not as likely we would get as involved with this early-stage methodology development anymore.”

The organization wants to lessen its vulnerability to boom-and-bust financing cycles. When Executive Director Sean Penrith joined back in 2013, he was tasked with determining a new path for The Climate Trust. After two years of introspection, he decided that TCT had three exceptional skills: scoping investable projects, stewarding projects to completion, and commercializing projects.

“In short, I realized that we are very good carbon fund managers,” he said. So instead of investing in new projects as usual, Penrith has his eye on funding something more novel: green bonds.

With $25 million ready to invest, The Climate Trust would be able to attract investors to create a larger pool of money. The organization would then channel the proceeds into the forestry, grassland conversion and other landscape carbon offset projects that TCT excels at via bonds, which typically last for 5-10 years. The organization would sell carbon offsets into the compliance and voluntary carbon markets and thus repay its purchasers.

The Climate Trust is now actively exploring the possibility of a green bond as Penrith believes that the timing is ideal. Bond rates are low, and green bonds are predicted to balloon to $100 billion this year (compared to $35 billion last year, according to Bonds and Climate Change: The State of the Market in 2014). Existing green bonds are typically oversubscribed and sell out within a few hours.

“The reason we ended up with a climate bond is we see it as a large, fairly untapped reservoir of willing and interested capital,” Penrith said. “It’s an amazing intersection between the environment and institutional capital demand. It’s low interest, and it’s pretty timely given the current bond market rates.”

For next steps, the organization plans to use 2015 as a pilot year. TCT plans to invest some of its own capital in addition to partners’ capital, with the hope of demonstrating a successful proof of concept. “If that’s successful, we would look at tripling or quadrupling that size in the subsequent year and thereon. We want to get to the point where we’re managing issuances of $250 million per issuance.” Penrith said.

“We’re really taking a bet – we are not cavalier, very prudent, but what we’re saying is that the currency of carbon is going to increase in its value, it’s going to become increasingly common, widespread, used, managed, monitored and exchanged. We really believe that in the next five years, the time for carbon currency has come.”

Additional resources

As countries submit their plans to cut greenhouse gas emissions – commitments known as Intended Nationally Determined Contributions, or INDCs – ahead of this year’s international climate negotiations, the role of forests and land use in this agreement is still developing. This article will be updated often to offer summaries of how land use is included (or not) in INDCs as they are submitted to the United Nations Framework Convention on Climate Change (UNFCCC).

If you want to read the INDC documents, they are all available here.

GABON*

INDC submitted: April 1, 2015

Notable because: It’s the first African country to submit an INDC.

The basics: Gabon will cut emissions by at least 50% by 2025 compared to a business-as-usual scenario.

Inclusion of land use: Gabon notes that 88% of its land area is covered by forests and the country therefore acts as a net carbon sink, absorbing four times the carbon dioxide it emits. Since 2000, Gabon has adopted a Forest Code, created 13 national parks that ban logging across large areas, and created a National Land Use Plan that identifies carbon-rich forests. However, the country notes that it does not want to rely on international carbon finance to preserve its forests, stating that these market mechanisms hinder its sovereign economic development.

*This INDC was submitted in French and has been roughly translated.

RUSSIA*

INDC submitted: March 31, 2015

Notable because: Russia’s submission means that two-thirds of industrialized nations covering 80% of emissions from developed countries have now released their climate plans.

The basics: Russia will limit emissions to 70-75% of 1990 levels by 2030, on one condition…

Inclusion of land use: Russia’s commitment is conditional on the “maximum consideration” of forests in emissions accounting under the UNFCCC. The country notes that it houses 70% of the world’s boreal forests and 25% of the world’s forests overall. Protecting these forests is the “most important element” of Russia’s climate policy, the INDC states.

*This INDC was submitted in Russian and has been roughly translated.

UNITED STATES

INDC submitted: March 31, 2015

Notable because: The United States is the second largest emitter in the world.

The basics: The U.S. will reduce emissions 26-28% below 2005 levels by 2025.

Inclusion of land use: The U.S. does not intend to use international carbon market mechanisms to meet its targets – a move that would appear to exclude mechanisms such as Reducing Emissions from Deforestation and forest Degradation (REDD+). However, it will account for emissions from the land sector using a “net-net” approach, which in UNFCCC-speak means subtracting the net emissions in the accounting period from the net emissions in 1990, the base year for most countries. This land-use carbon accounting will include emissions by sources and removals by sinks as reported in the Inventory of United States Greenhouse Gas Emissions and Sinks, including everything from cropland to forest land to wetlands to rice cultivation.

NORWAY

INDC submitted: March 27, 2015

Notable because: Norway has been an early and consistent supporter of international efforts to reduce deforestation through payments for performance to REDD projects. Its International Climate and Forest Initiative has funding up to three billion Norwegian Krones ($517 USD) per year pledged to avoided deforestation efforts, from the Brazilian Amazon Fund to the Congo Basin Forest Fund.

The basics: Norway will cut emissions at least 40% by 2030 compared to 1990 levels.

Inclusion of land use: Accounting emissions from the land-use sector remains a question mark for Norway. “Net removals” of greenhouse gases by forests accounted for 10.1 million tonnes of carbon dioxide equivalent (MtCO2e) in 1990 – about a fifth of Norway’s total emissions in that year. As forests grow, Norway projects that the land-use sector will account for 21.2 MtCO2e in net removals by 2030. The country does not currently have a final position on land-use carbon accounting, but plans to work with European Union member states to come up with one. Depending on the outcome, “the commitment would need to be recalculated to ensure that the ambition level stays unchanged,” according to the INDC.

MEXICO

INDC submitted: March 30, 2015

Notable because: Mexico was the first developing country to submit an INDC.

The basics: Mexico will unconditionally reduce its emissions 25% under the business-as-usual scenario by 2030. With access to financial resources and technology under an international agreement, the country has set a more ambitious “conditional” target of a 40% emissions cut.

Inclusion of land use: Mexico’s INDC states that the country will reach zero deforestation by 2030 and focus reforestation efforts in riparian zones, to promote ecosystem-based adaptation in important watersheds.

EUROPEAN UNION

INDC submitted: March 6, 2015

Notable because: It covers 28 Member States and sets the tone for an entire region.

The basics: The European Union and its Member States will reduce domestic emissions at least 40% by 2030 compared to 1990 levels.

Inclusion of land use: The EU’s INDC states that “Policy on how to include Land Use, Land Use Change and Forestry into the 2030 greenhouse gas mitigation framework will be established as soon as technical conditions allow and in any case before 2030.” A previous EU decision sets rules for how to account for carbon emissions from the land use sector, but is just a first step.

The United States published its eagerly anticipated national climate action plan to the United Nations web site on Tuesday, highlighting an economy-wide target of reducing greenhouse gases by 26-28% below 2005 levels by 2025 – a target that will not be reached through the use of international carbon market mechanisms. The plan, known as its Intended Nationally Determined Contribution (INDC), also lays out the country’s carbon accounting approach for the land sector.

31 March 2015 – The United States has set an “ambitious” goal to reduce its greenhouse gas (GHG) emissions as part of a new international climate agreement aimed at stemming the rise of global temperatures – a goal that does not rely on the use of international carbon market mechanisms.

Nearly 200 governments are planning to reach a new climate deal in Paris in late 2015. The anticipated agreement will take effect in 2020 and seeks to prevent global warming rising 2 degrees Celsius above pre-industrial levels and to adapt societies to existing and future climate change.

The U.S., one of the largest emitters in the world, has committed to an economy-wide target of reducing GHGs by 26-28% below 2005 levels by 2025 as part of this international effort, according to its Intended Nationally Determined Contribution (INDC), submitted to the United Nations Framework Convention on Climate Change (UNFCCC) on Tuesday. The emissions reduction target is not a surprise given the bilateral climate deal that the U.S. reached with China in November 2014, which uses the same numbers.

“The target is fair and ambitious,” the United States said in its INDC. “The United States has already undertaken substantial policy action to reduce its emissions, taking the necessary steps to place us on a path to achieve the [interim] 2020 target of reducing emissions in the range of 17% below the 2005 level in 2020.”

The U.S. highlighted several regulatory actions already implemented, including the adoption of fuel economy standards and energy conservation standards for building emissions. The country also observed that several federal agencies are engaged in additional regulatory actions designed to further drive down GHG emissions, including the Environmental Protection Agency’s proposed regulations to cut carbon pollution from new and existing power plants and to address methane emissions from landfills and the oil and gas sector.

Achieving the target set out in its INDC will require a further emission reduction of 9-11% beyond its 2020 target compared to the 2025 baseline and a substantial acceleration of the 2005-2020 annual pace of reduction to 2.3-2.8% per year, approximately double the current pace, according to the INDC.

“The U.S. proposal demonstrates real leadership, and should encourage other countries to put forward solid offers in the run-up to Paris,” said Alden Meyer, Director of Strategy and Policy for the Union of Concerned Scientists (UCS). “While the United States can and should do even more to reduce its emissions over the next decade, the U.S. offer is quite ambitious, given Congress’ unwillingness to take any action to deal with climate change. It underscores President Obama’s continued commitment to making full use of his existing authority to address the climate crisis.”

“This is a serious and achievable commitment,” said Jennifer Morgan, Global Director, Climate Change Program for the World Resources Institute.

The organization’s research has determined that the United States can reach its proposed target to cut emissions 26-28% from 2005 levels by 2025 under its existing federal authority, she added.

While the U.S. has pledged its best efforts to achieve a 28% reduction, the country does not intend to utilize international market mechanisms to implement its 2025 target at this time, according to the INDC. That would appear to exclude mechanisms such as REDD+ (Reduced Emissions from Deforestation and forest Degradation).

However, several observers highlighted the positive role of state-level market mechanisms in reducing carbon pollution in the United States.

“Carbon pricing programs in nine Northeast states and California have reduced emissions and generated investments in clean energy and energy efficiency, which are helping save consumers money,” said UCS President Ken Kimmell said, referring to the Regional Greenhouse Gas Initiative and California’s cap-and-trade program.

Considering the land sector

The U.S. also laid out its accounting approach for the land sector in its INDC. The country intends to include all categories of emissions by sources and removals by sinks, as reported in the Inventory of United States Greenhouse Gas Emissions and Sinks. This includes everything from cropland to forest land to wetlands to rice cultivation.

The INDC also specifies that the U.S. will account for the land sector using a “net-net” approach, which in UNFCCC-speak means subtracting the net emissions in the accounting period from the net emissions in 1990, the base year for most countries. This is in contrast to the “gross-net” approach, which considers net emissions from the land sector without comparing them to a baseline year.

Consistent with Intergovernmental Panel on Climate Change (IPCC) guidance, the U.S. will use a “production approach” to account for emissions from harvested wood products. This means accounting for emissions from wood product exports but not those from imports, as the “stock change approach” does.

The U.S. may also exclude emissions from natural disturbances, consistent with the IPCC guidance, according to its INDC. These may include wildfires, insect and disease infestations, and extreme weather events that are “beyond the control of, and not materially influenced by” the country in question.

“There are material data collection and methodological challenges to estimating emissions and removals in the land sector,” the U.S. stated in its INDC. “Consistent with IPCC Good Practice, the United States has continued to improve its land sector GHG reporting, which involves updating its methodologies. The base year and target for the U.S. INDC were established on the basis of the methodologies used for the land sector in the 2014 Inventory of United States Greenhouse Gas Emissions and Sinks and the United States 2014 Biennial Report.”

The big picture

Two thirds of industrialized countries covering 65% of GHG emissions from the industrialized world have now established their climate plans for the new agreement, with many of these contributions also reflecting plans to increase the ambition of emissions reduction over time, observed Christiana Figueres, UNFCCC Executive Secretary.

“Over the coming months we expect many more nations to come forward to make their submissions public,” she said. “The pace at which these contributions are coming forward bodes well for Paris and beyond.”

The European Union, Switzerland, Norway, Mexico and the U.S. – the first five jurisdictions out of the gate with their INDCs – account for nearly one third of global emissions.

More industrialized countries are expected to come forward with their INDCs over the next few months, followed by many developing countries. An effort is underway to assist developing countries to prepare their INDCs for submissions, with governments including Australia, Germany, France, the United Kingdom and the U.S. providing financial, technical and other assistance to about 100 developing countries. The French government, for example, has committed around three million Euros to support the preparation of INDCs of about 20 Least Developed Countries, including Small Island Developing States.

Other major players include the Global Environment Facility and the UN Environment Programme; the European Union through programmes such as Clima South, Clima East or ClimDev; Germany through the GIZ; and the U.S. through various channels including the Low Emission Development Strategies partnership.

“It is most encouraging to witness this government to government cooperation and how bilateral and multilateral organizations have stepped up and coordinated support to developing countries to ensure they get maximum benefit in preparing INDCs,” said Don Cooper, head of the UNFCCC’s Mitigation and Data Analysis programme.

In October, the UNFCCC will produce a synthesis report aggregating the impact of all the submitted INDCs, Figueres said.

“The initial INDCs will clearly not add up to the emissions reductions needed to keep the global temperature rise under 2 degrees C, which is one reason why the Paris agreement must factor in a long-term emission trajectory based on science,” she said.

In addition, the Paris talks will need to outline how finance will be mobilized and scaled up to support the action and ambition of developing countries now and over the decades to come, Figueres said.

Additional resources

The Green Climate Fund (GCF) was celebrated at last year’s international climate negotiations for securing more than $10 billion worth of pledges from developed and developing countries. But only four countries whose commitments total $80 million have actually signed contribution agreements ahead of an April 30 deadline, raising uncertainty over when the GCF will be able to start spending money on projects.

31 March 2015 | The 9^th meeting of the Green Climate Fund (GCF) featured a packed agenda, with several items geared toward the goal of getting the fund operational and positioning programs and projects for potential consideration by the GCF Board by October. But a potential problem came to light when the status of financial contributions to the GCF was presented at last week’s meeting.

To much fanfare, total pledges to the GCF surged past the $10 billion mark during the international climate negotiations in Lima, Peru in December. These commitments were celebrated, particularly because developing countries such as Colombia and Peru were among the contributors despite bearing little historical responsibility for the escalation of global greenhouse gas emissions.

The GCF’s authority to commit funds only becomes effective when 50% of the contributions pledged by the November 2014 pledging meeting – about $9.3 billion of the total pledged funds – are guided by fully executed contribution agreements received by the Secretariat by no later than April 30. Of the 21 countries that pledged this $9.3 billion, only the Czech Republic, Denmark, Luxembourg and Panama have signed contribution agreements totaling $80 million.

GCF Board members questioned the legal implications of missing the April 30 deadline, with some expressing optimism the deadline will be met, others asking for a “Plan B,” and still others preferring not to enter into discussions that “preempt failure,” according to a GCF Bulletin published by the International Institute for Sustainable Development.

GCF Board Co-Chair Henrik Harboe said earlier interventions indicated that countries were on track to meet the April deadline and observed that formulating a Plan B could signal reduced ambition. At his request, board members gave the co-chairs a mandate to assess the situation and take timely action if necessary. However, a board member stated that the co-chairs would then have to bear responsibility if the deadline is missed and no fallback strategy is in place.

Norway, Germany and Sweden expressed confidence they would meet the deadline while France, Switzerland, Italy, Spain and the Netherlands noted they are actively working toward their agreements. However, the United States said it would not meet the deadline, given its national budget cycle, and Japan, the United Kingdom and Australia said they are working through internal political processes, according to the bulletin.

If agreements with nine additional countries, currently in progress, are signed, 55% of the funds pledged by the November 2014 meeting would be secured, said GCF Executive Director Héla Cheikhrouhou.

The Secretariat plans to create a pledge tracker on the website, to be updated weekly. All contribution agreements will also be made publicly available online in the interest of transparency, Cheikhrouhou said, responding to concerns that these agreements may include earmarking. Australian officials famously claimed that the country’s $166 million contribution was contingent on the fund’s being spent on regional priorities, but GCF officials and stakeholders have indicated that countries do not have the authority to direct their contributions.

Signs of Progress

In more positive news, board members accredited seven entities, which allows them to begin developing and submitting project proposals for consideration at the October GCF Board meeting.

“Once proposals are accepted, these institutions will be able to start delivering funding to the communities most vulnerable to the impacts of climate change,” a World Resources Institute (WRI) blog posted noted. “This funding will support a range of activities that reduce emissions or foster resilience such as installing renewable energy, enabling subsistence farmers to grow drought-resistant crops, and reducing or avoiding deforestation.”

The accreditation process is important because it ensures that the selected entities are capable both of strong financial management and of preventing unforeseen environmental or social harm, according to the WRI post, written by Louise Helen Brown and Athena Ballesteros.

Particularly significant is the accreditation of two national institutions from Senegal and Peru, one regional entity from the highly vulnerable Pacific region, and one development-focused impact investment fund, proving that smaller and less conventional actors can meet some of the world’s toughest standards for accessing funds, the authors observed.

The accredited entities are: Centre de suivi écologique, Senegal; Fondo de Promoción de las Áreas Naturales Protegidas del Péru; Secretariat of the Pacific Regional Environment Programme; Acumen Fund, Inc.; Asian Development Bank; Kreditanstalt für Wiederaufbau; and the United Nations Development Programme. Read more about these entities on the WRI site.

“Together, these seven institutions represent an excellent starting point for scaling up low-carbon, climate-resilient projects in developing countries around the world,” the authors stated. “However, the Fund’s work to accredit institutions has just begun. In order to truly have impact at the scale and depth necessary, the GCF will need to ensure that it continues to accredit a diverse range of institutions, including those in developing countries. Ultimately, every developing country should be in a position to work through its preferred institutions to access funds that will shift economies towards low-carbon, climate-resilient growth paths.”

Her uncle, Aureliano Cí³rdoba, had championed the Tolo River community’s foray into carbon finance, and she’d spent three years working to educate her people on its complexities. She’d answered questions about protecting the trees and selling the offsets; she’d explained that nobody would lose access to the wood for building their homes; and on this notable Sunday, she and 100 other community representatives from surrounding villages gathered at the central square in Peí±aloza, the largest of the community’s nine villages in Chocí³ Province, Colombia.

The date was October, 9, 2010, and they were meeting for a General Assembly of their small Afro-Colombian community organization, COCOMASUR (Black Communities of the Tolo River and South Coast). If they voted for the project, she believed, they would save their forest. If they voted against it, the forest would be gone.

Free, Prior, and Informed Consent

The plan was to save their forest and earn offsets for the carbon captured in trees under a financing mechanism know as REDD (Reducing Emissions from Deforestation and Degradation), but REDD project standards require a “Free Prior and Informed Consent” (FPIC, pronounced “F-pic”) by the local people, a measure that 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.

From the beginning, Aureliano 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 Everildys in charge of explaining the process to the community.

“I had to take a complex subject and try to make it simple,” she says.

A Child of the Forest; a Woman of the World

Everildys’s entire life is closely related to this community. She was born and grew up in Peí±aloza, but in 1995 paramilitaries forced her to flee to the South. She was only 26, with two young daughters, and she spent the next 15 years in exile raising them on her own. When the violence subsided, she moved back to Chocí³ to help her community recover.

“When you have a difficulty in life, you have two choices,” she says. “Sit down and cry that things are bad or get busy fixing them. I am of the second type of person.”

Long before that Sunday meeting, Everildys’ determination and positive attitude had gone far in achieving the kind of community involvement and consensus necessary on a REDD project like the one Aureliano envisioned.

Sunday’s vote was a long time coming: In the case of the Tolo River community, FPIC took three years.

A Cause for Celebration – For Some

After lengthy deliberations that day, the General Assembly voted to approve a forest conservation project that would ban commercial logging and the clearing of forest for cattle pasture. The day ended with food, music, and dancing.

But not everyone was celebrating. Not long before, just a mile down the dirt road from Peí±aloza, another young woman, Johanna, was sitting in the shade of a beautiful white mansion. The house overlooks hundreds of cows grazing on the surrounding 10,000-acre cattle farm, one of the largest ranches bordering the Tolo River community forest. It belongs to Amado Willes, a wealthy businessman who lives in the capital for most of the year. In his absence Johanna’s husband manages the business.

Johanna explained that in the past couple of years, the ranch has not been able to clear more forest for pasture and expand. “All of this land is now a reserve,” she said, waving her hand toward the forested hills in the distance—Tolo River community land.

Johanna’s not alone in thinking that land is better used for raising cattle than letting it stay forested. Global demand for commodities like palm oil, soybeans, and cattle is driving deforestation all around the world—and nearly half of it illegal, according to research by Forest Trends.

In Chocí³, deforestation rates are higher than they’ve ever been — which spurred Aureliano and others to turn to the prospect of developing their own conservation project — and to consider a finance mechanism like REDD as their structure.

The Eyes of the Forest

After the General Assembly’s decision, Everildys and the rest of the Tolo River community members got busy. On October 18, a few days after the meeting in Peí±aloza, the forest patrol started its work, an ongoing part of the project. Frazier Guisao, an ex-logger, was one of the first men hired full-time by the community organization to perform daily perimeter checks in the forest and ensure no clearing for pasture or commercial logging took place. Community members are still allowed to harvest timber for building their houses but not for selling it.

Nine other men work with Guisao, patrolling the forest always in teams of at least four. They are not armed. The only evidence or announcement of their authority is the colorful printing of “COCOMASUR” on their T-shirts. Their only tools of the trade, handheld GPS devices and small digital cameras.

“The forest patrol is the eyes of COCOMASUR,” says Guisao. “When we encounter somebody doing something they should not be, we simply ask them who gave them authorization to be there. We inform them that this is our territory.”

They look for cut-off trees or newly cleared areas, take photos, record the coordinates, and then report them back to the community office for investigation. Ferney Caicedo, a slender 21-year-old, works with Guisao on the forest patrol. Caicedo, born and raised in Peí±aloza, has completed a professional forestry technician course and is an expert in Geographic Information Systems (GIS). After every forest patrol, he uploads the GPS coordinates of the patrol route and logs any incident from that day on the office computer.

Tackling VCS: Establishing Carbon Credits

In addition to the forest patrol, the REDD project required the community to begin the lengthy and complicated process of earning certification and validation from the Verified Carbon Standard (VCS), the leading carbon standard on the voluntary carbon market. The team followed a protocol based on the carbon calculation methodology established by the VCS.

First, the team had to ascertain how much carbon would be released if they continued business as usual. Specifically, they looked at historical rates of deforestation to see how much of their forest would likely be chopped down for pasture, and then they started measuring the amount of carbon in their forest and in pasture land – using methods that had, ironically, been developed and perfected by timber merchants.

Measuring the Carbon in the Forest

With help from a conservation biologist from the region’s capital, the team began by randomly selecting 10 forest plots of 1,000 square feet each, and counting all the trees within them. Then the team identified the tree species, measured their circumference and used allometric equations to calculate how much carbon was contained in each plot. The team also took soil samples and analyzed their carbon content in the ecology lab. The team did the same for cattle pastures, which is what the forest would have become without the patrol

Caicedo and the forest patrol, along with a conservation biology team from the Medellin Botanical Garden and anthropologist Brodie Ferguson, spent months in the forest.

The data collection and the analysis took the better part of 2011. The results yielded a certain number of carbon offset credits, to be submitted for approval and certification.

Finally in July 2012, Pablo Reed, an independent third-party auditor, came to the Tolo River community forest to verify the carbon offset credits. Reed works for the multinational consultancy company DNV, specializing in certifying emissions reduction projects such as REDD.

Verification and Validation

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—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.

As a result of Reed’s report, Verified Carbon Standard issued 100,000 carbon offset certificates and listed them in a public registry.

Next Steps: The Sale

Armed with the offset certificates, the community now just needed to find someone to purchase them. They found a buyer in a family-owned company that chose to go carbon-neutral: a Colombian oil services firm called Independence. Its business is drilling and managing oil wells as a sub-contractor for fossil fuel corporations such as BP, Occidental, and Petrogas. It is in charge of 30 percent of the oil production in Colombia, which recently reached 1 million barrels of oil per day.

“Of course it’s a contradiction,” says Gaelle Espinosa, the company’s environmental coordinator, from the 19th floor of her modern office in downtown Bogotí¡, referring to the company’s core business and its interest in being carbon-neutral. “But we as a single company cannot be responsible for everything in the industry or in the world. So I think we move with the market.” Espinosa used to work at World Wildlife Fund (WWF) Colombia and considers herself an environmentalist.

As part of the company’s sustainability strategy, Independence first measured its own carbon footprint — 90 percent of the emissions came from burning diesel to operate the machinery on the rigs. The second step was to reduce these emissions as much as possible, and the company renovated the drill engines with more fuel efficient ones.

The third step was to offset whatever emissions they could not reduce, which amounted to 10,000 tons of carbon for 2012. So “move with the market” they did, purchasing the Tolo River community’s credits.

The years of hard work of achieving FPIC and VCS validation were paying off, it appeared. The Tolo River community’s REDD project was viable. But more work lay ahead, as credits were sold and the community began to make tough decisions about where their new revenue would go.

This piece was editied by Forest Trends writer Ann Espuelas. Tanya Dimitrova just graduated from University of California, Berkeley, with a masters degree in energy and resources. She lives in Texas and works as a freelance science and environmental journalist.

This article was originally posted on the AnthropoZine. Click here to read the original.

30 March 2015 | Mexico and Norway last week submitted their “Intended Nationally-Determined Contributions” (INDCs) to the United Nations web site. Mexico’s is available here, and Norway’s is here. All submissions are being posted to the UN’s INDC page, which you can find here, and they are also being summarized on the World Resource Institute’s CAIT Paris Contributions Map (see below) in a way that’s designed to offer comparability and transparency.

Praise for Mexico

Like Indonesia and several other emerging countries, Mexico isn’t using a baseline year, but instead proposes to reduce its emissions to a level 25% below a “business as usual” scenario by 2030, with that target increasing to 40% below business as usual if it receives technical and financial support within the context of a global agreement.

“Mexico’s leadership in making this announcement confirms that we are in a new era, in which all nations have a role to play in the collective fight against climate change,” said Nathaniel Keohane, Vice President for International Climate at the Environmental Defense Fund (EDF). “Since the Copenhagen conference in 2009, there has been a lot of talk about ‘bottom-up’ climate action — but nobody has really known what that looks like. Now the contours of the ‘bottom-up’ world are beginning to come into focus: Countries are taking on ambitious national commitments, supported by bilateral and regional ties — such as the strong relationship between the US and Mexico.”

“While the devil is in the details, Mexico’s plan to peak its emissions by 2026 is particularly encouraging and should inspire others to follow a similar course, said Jennifer Morgan, Global Director, Climate Program, World Resources Institute. “As a country that enacted a groundbreaking, comprehensive climate change law in 2012, Mexico clearly understands the threat of climate change and the economic benefits of smart action for its citizens and is now going further.

Additional resources