Tag: Special Interest Law Policy

23 April 2014 | California has adopted ambitious – some would argue too ambitious – goals for reducing its greenhouse gas (GHG) emissions. It needs emission reductions from carbon offset projects to get there without putting too much of a financial strain on businesses regulated in the state, according to regulators.

In 2006, then-California Governor Arnold Schwarzenegger signed into law Assembly Bill 32 (AB 32) – a landmark piece of legislation that outlined the state’s efforts to reduce climate change. The legislation featured targets for reducing California’s GHG emissions to 1990 levels by 2020 and 80% below 1990 levels by 2050.

One of the ways the state chose to pursue its 2020 target was to adopt a carbon trading program that allows emissions reductions from projects in unregulated sectors such as agriculture and forestry. State regulators see these carbon offsets as a vital element of the program because the price of carbon in the state could double by 2020 without them, said Rajinder Sahota, Chief of the Climate Change Program Evaluation Branch of the California Air Resources Board, the agency overseeing AB 32 implementation.

California’s cap-and-trade program already welcomes carbon offsets generated from livestock, forestry and urban forestry projects. But market participants see opportunities for more land-based offsets – emissions reductions generated via agriculture and forestry projects – to be added to the system, including avoided grassland conversion, wetland restoration, composting, rangelands and rice cultivation projects.

“Needless to say this is an interesting time for carbon markets and land-based offsets,” Belinda Morris, Program Officer, Climate and Land Use Subprogram, The Packard Foundation, said at the Navigating the American Carbon World conference in San Francisco last month.

For a more in-depth look at potential land-based carbon offsets that could be included in California’s cap-and-trade program, please visit the Forest Carbon Portal.

17 April 2014 | – Sick and tired of waiting for the US and Canadian federal governments to lead on climate issues, the US states of California, Oregon and Washington and the Canadian province of British Columbia decided last year to reinvigorate a regional partnership aimed at tackling the climate challenge.

“We just can’t wait for the federal government,” Matt Rodriguez, Secretary of the California Environmental Protection Agency, said at the Navigating the American Carbon World conference last month. “The situation is too dire.”

The Pacific Coast Collaborative, originally formed in 2008, had the potential to be nothing more than a symbolic gesture. But in October 2013, the four partners signed the Pacific Coast Action Plan, an agreement – albeit one that is not legally binding – to cooperate on climate issues.

The wide-ranging agreement committed the four West Coast jurisdictions to a number of climate actions, including harmonizing their targets for reducing greenhouse gas (GHG) emissions by 2050 and cooperating with other governments around the world to press for an international climate agreement in 2015.

Quite noticeably, the first tenet of the agreement commits the jurisdictions to account for the costs of carbon pollution within their borders. Among the four partners, British Columbia is the frontrunner, having implemented a revenue-neutral carbon tax in July 2008 that increased every year by $5 per tonne through July 2012. California officially launched its cap-and-trade program regulating GHGs in January 2013 after years of extensive consultation and development, with 2014 allowances clearing at a price of $11.48 per tonne in February.

In the agreement, both British Columbia and California pledged to maintain their existing carbon pricing programs, while Oregon vowed to build on existing programs to set a price on carbon emissions and Washington agreed to set binding limits on carbon emissions and deploy market-based programs to meet those limits, which could build on previously established voluntary carbon offset programs in these states such as the Climate Trust. The four jurisdictions then promised to link their programs whenever possible to establish consistency and predictability across the region and expand opportunities to grow the region’s low-carbon economy.

“Not everyone has to have a cap-and-trade program,” Rodriguez said. “There are a number of ways you can put a price on carbon. What’s important is that you put the price on carbon.”

To tax or to trade?

Oregon does not have a preference for either a carbon tax or a carbon trading program, but Governor John Kitzhaber signed a bill in August 2013 to research a British Columbia-style carbon tax, said First Lady Cylvia Hayes of Oregon, who has worked as a consultant on climate and sustainability issues. The non-partisan legislative research agency is due to issue its final report on November 15.

In 2009, Washington State came within one vote in the legislature of joining California in the Western Climate Initiative’s (WCI) cap-and-trade program, said Jay Manning, a partner with Cascadia Law Group who served as Chief of Staff for former Washington Governor Christine Gregoire from 2009 to July 2011. The WCI was designed to be a cross-border carbon trading program and previously counted seven US states and four Canadian provinces as members, but only British Columbia, California and Quebec remain active in the program, with California and Quebec linking their trading programs earlier this year.

“It was a hard-fought battle,” he said. “It was very disappointing that we did not join, but it was the front end of the recession. It probably was the deciding factor that scared enough legislators. Then we plunged into the recession and that’s all we worked on for the second term. All environmental issues receded into the background.”

But Manning seems certain that current Washington Governor Jay Inslee will make progress on carbon pricing, given his relentless focus on climate issues. He famously advocated for a national cap-and-trade program as a member of Congress and has prioritized a broad range of climate-related items as governor, including joining his other Pacific Coast neighbors in putting limits on carbon emissions.

However, both Oregon and Washington have legislatures with divided political representation — a major obstacle to the establishment of a carbon pricing program. In Oregon, one factor that works in favor of a carbon pricing program is that there is bipartisan interest in the legislature in revenue reform, Hayes said.

In Washington, it’s not just Republicans who are hesitant about pricing carbon, but also progressive Democrats concerned about market manipulation, Manning said.

“It won’t surprise me if ultimately it will be necessary to go to the people on this issue to be successful in Washington,” he said.

A Role for Carbon Offsets?

Given that carbon pricing has not yet been established in Oregon and Washington, it is unclear whether any eventual programs will carve out a role for carbon offsets – instruments that represent the reduction, avoidance or sequestration of one metric tonne of carbon dioxide equivalent – as British Columbia and California have.

The Canadian province established the Crown corporation Pacific Carbon Trust in 2008 to deliver carbon offsets – in the energy efficiency, fuel switching and sequestration categories – in service of the province’s carbon neutrality goals. But the trust was nixed last year in favor of folding its responsibilities into the Climate Action Secretariat within the Environment Ministry.

California regulators have so far issued more than 7.5 million offsets in their carbon offset program, but market participants are urging the California Air Resources Board (ARB) – the agency charged with overseeing the cap-and-trade program – to pick up the pace at which they approve voluntary carbon offset project types. The state’s roster of offset project types is currently restricted to forestry, urban forestry, livestock and ozone-depleting substances protocols, but that could soon change with the ARB scheduled to consider adding a coal mine methane project type on April 25.

In Oregon, the Climate Trust was created in 1997 in response to the passage of the Oregon Carbon Dioxide Standard, which required that new power plants built in the state reduce their carbon dioxide emissions to a level 17% below those of the most efficient combined-cycle plant, either through direct reduction or offsets. The Climate Trust has a portfolio that includes eight offset project types and 21 active projects that are anticipated to offset 4.25 million metric tonnes of carbon dioxide.

In February 2014, the Climate Trust released a report prepared for the Oregon legislature evaluating potential carbon pricing mechanisms. The report examined carbon pricing programs in Australia, British Columbia, California, the European Union and the US Northeast. Of the programs studied, California’s cap-and-trade program has perhaps the clearest applicability for Oregon given the similarities shared by the states such as strong agricultural and technology sectors and strong energy efficiency and zero-emission vehicle initiatives, the report found. But Oregon’s legislature should establish clear guidelines for the management, use and retirement of offsets if it pursues the cap-and-trade route, the report suggested.

“It is likely that any cap-and-trade system Oregon may institute would borrow heavily from California’s framework to ease the potential for linkage between the two markets,” the report stated.

Giving the feds a little nudge

One of the primary goals behind the Pacific Coast partnership is to support positive federal action on climate change, including President Barack Obama’s Climate Action Plan. Despite their unwillingness to wait, the state officials did cite some promising signs that the federal government is finally ready to take action, most notably proposed regulations from the US Environmental Protection Agency that would regulate carbon emissions from existing power plants, due in June. Rodriguez called the discussions on the program, which would be established under the federal Clean Air Act, a “hopeful sign.”

Federal officials have been carefully watching California’s efforts and its early success in the cap-and-trade program breeds confidence that a carbon pricing program can work well, the officials said. “Fortunately, I can’t think of any mistakes that have occurred in the cap-and-trade program so far,” Rodriguez said.

Additional resources

14 April 2014 | Offering its residential customers a chance to minimize the impact of their lifestyles and electricity usage on the environment has been the focus of the Sacramento Municipal Utility District’s (SMUD) Carbon Offset Program since it launched in 2007. Now SMUD, the public utility for Sacramento County and parts of nearby Placer County in California, is diving deeper into the carbon markets by helping to pay for the development of a new carbon offset project type that focuses on the restoration of wetlands in the state. SMUD is taking this step because the cap-and-trade program that it is regulated by enters its second phase in 2015, and many experts say its narrow palette of recognized offsets won’t meet projected demand starting in 2015 through the life of the program.

SMUD – one of the 10 largest publicly-owned utilities in the United States – allows its customers to lower their contributions to climate change with a $10 per month added charge on their bills. The charge has financed the purchase of carbon offsets from projects registered under the Climate Action Reserve (CAR), – an offset registry that supports projects to reduce greenhouse gas (GHG) emissions – including offsets generated by a dairy digester.

The utility joined forces last year with the American Carbon Registry (ACR), a different offset registry organization, and other partners on the development of a new method (or protocol) that would count the GHG emissions reductions created from projects that restore California deltaic and coastal wetlands and turn those into offsets for both the voluntary and eventually, they hope, for California’s regulated carbon market.

SMUD set out to identify voluntary offset protocols that are good candidates for acceptance by the California Air Resources Board (ARB), – the regulatory agency overseeing the state’s carbon market – that have potential to deliver GHG emissions reductions within California and that also deliver co-benefits – social, economic and environmental benefits beyond carbon reductions. The utility started out with a list of 12 project types and narrowed the list down to six after research and discussions with stakeholders, Obadiah Bartholomy, SMUD’s Senior Project Manager, told attendees at the Navigating the American Carbon World conference in San Francisco last month.

The list of offset project types that could be added to the state’s roster – which currently includes forestry, urban forestry, livestock and ozone-depleting substances protocols originally developed in the voluntary market – and would benefit from a demonstration project or further development includes avoided conversion of grasslands, nutrient management, rangelands soil carbon sequestration and enteric fermentation, he said. Rice cultivation, which the ARB could approve in September, was also on the list.

However, the protocol that caught SMUD’s attention was wetlands restoration, with the partners tailoring an ACR protocol already developed for the Mississippi Delta to suit California. The California version is still under development and has a long ways to go before producing offsets for the state’s regulated market, likely not until 2018, assuming California regulators adopt the protocol, he said. But the protocol has the potential to produce a significant amount of offsets – anywhere from seven to 26 million tonnes of avoided carbon emissions, according to ACR estimates – and has the attractive co-benefits that SMUD is actively looking to support.

“The others, other than rice, seemed a little farther out with even more barriers to expanding supply, not to say that we shouldn’t pursue them,” Bartholomy said. “We have to keep in mind that this is a very long-term endeavor that we’re embarking on.”

What’s the Rush?

To date, the ARB has issued more than 7.5 million offsets, which should be plenty for the first phase of the program given that some organizations, particularly smaller entities, regulated by the cap-and-trade program have been slow to embrace offsets, market experts said.

SMUD, which is regulated by the cap-and-trade program because of its natural gas facilities and power imports, is one of the entities that have so far hesitated to make use of offsets to fulfill its compliance obligations, Bartholomy admitted.

“SMUD is one of those that’s kind of on the bubble,” he said. “I think we are going to make use of our 8%, but it takes some internal education and discussion and some willingness for us to bite the bullet.”

What the experts are concerned about is what they say is the likelihood that there will be a shortage of offsets in the middle and latter years of the program. California entities are allowed to meet up to 8% of their compliance obligations using offsets, meaning that the maximum demand during the second phase of the program in 2015-2017 is 91.8 million offsets. While many experts say the 8% maximum will never be exhausted, they are concerned that there will simply not be enough offsets generated under the four project types currently allowed in the program.

“My view is that the offset supply will be extremely short,” said Derek Six, CEO/CFO of offset project developer Environmental Credit Corp. “I think we’ll be short for a very long time.”

Consultancy Alpha Inception projects that total demand for offsets will only be about 50% of the possible maximum demand, meaning that the market should come out of the first compliance period with a pretty big surplus, but could be short in the second and third phases depending on what else happens in the market, said Founder and Manager Director Andre Templeman.

Another concern is that it takes time – usually several years – to get through the ARB’s rigorous evaluation process, the experts noted. In fact, the rice cultivation protocol, as well as one for coal mine methane projects, have been delayed several times as top regulators have sent their staff back to the drawing board for further examination and development.

“They are being extremely conservative and with good reason,” Templeman said. “They don’t want any holes to be opened up, especially in these early years of the program.”

California’s cap-and-trade program is currently scheduled to end in 2020, but there are discussions about how to meet the state’s 2030 target for reducing GHG emissions, with continuing the program –including the offsets component — being an option on the table.

“In those types of timeframes, expansion of supply through additional protocols is quite viable,” Bartholomy said.

What’s the Problem?

California’s offset market has been plagued by a host of regulatory and legislative disruptions that have had the effect of restraining the development of offset projects, Templeman said. For example, a bill introduced into the California legislature last year by Senator Ricardo Lara sought to exclude all offsets outside of the state. The bill, which is likely to resurface this year, eventually was amended to focus its restrictions on international offsets because of arguments that California’s stringent environmental regulations would severely limit in-state offset development, he said.

“That’s the reality,” Templeman said. “If you took all of the out-of-state offsets out, you wouldn’t leave very many behind. That would be an interesting bill were it to pass because I think that would affect supply quite dramatically and in essence create a massive shortage.”

“That pressure is not going to go away,” he added. “There will be a bill at some point that will basically seek to say ‘we’re paying for it, we want some of the benefits to be local’.”

Another proposal not specific to the offset program would exempt the transportation sector that is scheduled to be phased into the cap-and-trade program in 2015 from its grasp by instead implementing a carbon tax on fuels. While the odds of the proposal making it into law are not strong, that bill if adopted would have a dramatic impact on the offset market because removing the transportation sector would have the effect of turning a market that is projected to be short into one that could be oversupplied by a factor of two, Templeman said. The mere proposal is problematic because “even if the bills themselves die, there are reasons these bills come up,” he said.

And then, of course, there are the so-called buyers’ liability provisions of California’s cap-and-trade program, which allows the ARB to invalidate offsets that the agency deems problematic and forces the buyers of these offsets to take responsibility for replacing them. The risk adds to the cost of buying offsets and makes them a less attractive option for smaller entities, Templeman said.

“You really have to be over a certain size before it really makes a lot of sense in today’s current market design,” he said, adding that he expects products to emerge during the second and third compliance periods that will address the invalidation risk for a cost.

Other concerns that have kept smaller entities out of the market, including the potential of getting stuck with offsets they did not need to purchase, should subside after the first few years of the program, Bartholomy said.

“I think that fear will recede as the market continues to demonstrate success,” he said.

What’s the Solution?

Aside from adopting protocols from SMUD’s list of potential candidates, the ARB could also amend their rules to maximize the supply generated from the protocols already eligible. The costs of verifying the emissions reductions generated by livestock projects, for example, under current ARB rules are so high that they essentially exclude more than 95% of the dairies in the United States from participating in the program, Six said.

And the ARB could revisit voluntary offset protocols that it has previously rejected, such as pneumatic valves in the oil and gas sector, nitric acid production and organic waste digestion, in part because of the view that some of these activities are already regulated even if the specific emissions reductions associated with them do not fall under the carbon cap, Bartholomy said.

“Unfortunately, the logic behind that is still kind of murky,” he said. “I think we can hold out some hope that maybe if there is a shortage they may be willing to expand the offset supply.”

Additional resources

This article was originally published in the Forest Carbon newsletter. Click here to read the original.

10 April 2014 | California carbon market watchers on the lookout for any sign that the US state is still on a path to accepting international offsets from Reduction of Emissions from Deforestation and Degradation of forests (REDD) got a pretty good one when a California Air Resources Board (ARB) official stepped up to the plate at the Navigating the American Carbon World conference in San Francisco last month. In front of a packed and eager crowd, the ARB’s Jason Gray stated publicly that the agency will continue considering allowing REDD offsets into its cap-and-trade program.

“The world is watching to see if California is going to implement REDD or not,” said Daniel Nepstad, Senior Scientist and Executive Director of the Earth Innovation Institute.

REDD project development and accounting frameworks have matured in the voluntary market over the last five years, with $70 million worth of transactions in 2012, according to Forest Trends’ Ecosystem Marketplace’s State of the Forest Carbon Markets 2013 report. However, supply of REDD offsets still far outstrips demand, and experts such as Nepstad say that a compliance market’s inclusion of REDD would have a “magnifier effect” in terms of sending the signal to developing countries that their efforts to reduce deforestation will indeed be compensated. In July 2013, California signed a memorandum of understanding (MOU) on REDD with the states of Acre, Brazil and Chiapas, Mexico.

“California is obviously not going to buy all of Brazil’s credits, but putting a signal that says there is a compliance carbon market out there that accepts this and here’s what the rules look like would be enormously powerful,” said Steve Schwartzman, Director of Tropical Forest Policy at Environmental Defense Fund.

Eighty percent of the world’s REDD offsets originated in Latin America in 2012. According to Forest Trends’ REDDX Initiative data, the Andean countries of Colombia, Ecuador, and Peru are among the countries where the highest percentage of committed REDD funding has actually been dispersed. Of the more than $111 million pledged to these three countries from international agencies, domestic governments, foundations, and companies, nearly half has been delivered. In Peru, where almost half of greenhouse gas (GHG) emissions come from deforestation, a nested (or jurisdictional) approach could give coherence to the 41 REDD projects that currently exist.

Forest Trends’ Katoomba XX event in Peru on April 22-23 will serve as an important precursor to the upcoming United Nations climate negotiations in Lima, where countries will build on last year’s progress in developing a REDD+ Rulebook. Titled Climate, Forests, Water, and People: A Vision of Development for Tropical America, the event will bring together a unique cast of characters to identify opportunities for climate policy and finance to align with other public and private investments in forest carbon and other ecosystem services. If you’re able to make it to Lima for the public event, you may register for Katoomba XX here, through April 11.

More stories from the forest carbon markets are 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].

INTERNATIONAL POLICY REDDy when opportunity knocks Protecting and restoring forests may not only represent an important strategy to mitigate climate change, but also an opportunity for the private sector to drive a transition to a green economy, especially in Latin America. In an op-ed in the Huffington Post, Renat Heuberger of South Pole Carbon writes that “countries such as Mexico and Costa Rica are already moving ahead with laws that are putting a price on carbon, which will ultimately increase the attractiveness of low-carbon investments.” Voluntary purchases are indeed catching on: The Forestal San José / South Pole reforestation project was the first in Colombia to be certified under CarbonFix (now Gold Standard), and NOEL, a Colombian cookies and chocolates company, bought offsets from the project. NATIONAL STRATEGY AND CAPACITY Are we there yet? Though Luis Guillermo Solis, Costa Rica’s newly elected president as of Sunday, announced early this year on the campaign trail that the country could not reach its carbon neutrality goal by 2021, the Ministry of Environment and Energy declared last week that Costa Rica was actually within 19% of the target. The progress towards neutrality comes mainly from forest protection and reforestation, with forests covering more than half of Costa Rica’s land area, offsetting 81% of the country’s emissions. René Castro, Minister of Environment, estimates that the remaining 19% could be achieved by reducing emissions from transportation and industry. PROJECT DEVELOPMENT Forest focus in humanity’s birthplace Ethiopia has big dreams: to become a low-carbon and middle-income economy by 2025. REDD is a part of that strategy, and last week the country launched a two-year capacity-building project to use satellite imagery to measure carbon absorption capacity across 900,000 hectares and to train personnel in monitoring, reporting, and verification (MRV). The €400,000 project will be carried out by Ethiopia’s Ministry of Forestry in collaboration with German partners Blackbridge, Remote Sensing Solutions GmbH, and Gesellschaft fí¼r Internationale Zusammenarbeit (GIZ). The government has renamed the Environmental Protection Agency the Ministry of Environment and Forest, reflecting the new focus on forest protection. FINANCE AND ECONOMICS Let’s bond A recent publication by Forest Trends proposes a new mechanism called Jurisdictional REDD Bonds that aims to jump-start the infusion of much-needed REDD+ capital to forest conservation projects. The paper illustrates how payments of $5 per tonne of carbon dioxide equivalent over 10-15 years for meeting emissions reduction targets in Brazilian states would cover the interest rates that states would have to pay to bondholders. “Our proposal is that Jurisdictional REDD+ Bonds would have the yield and risk characteristics that investors are used to seeing in Brazilian or Colombian or other sovereign bonds,” Rupert Edwards, one of the report authors, wrote. Countries with poorer credit ratings would need additional protection for investors from a financial body such as the World Bank. SCIENCE AND TECHNOLOGY Degradation decoded It’s no April Fools’ joke: Researchers at Winrock International have developed a unique method for estimating carbon emissions from forest degradation caused by selective logging in tropical forests –published in the academic journal Environmental Research Letters on April 1. While methods for estimating emissions from deforestation exist, this is the first robust methodology for forest degradation. Based on extracted volume, it considers the country context, incidental damage to the surrounding forest, and logging infrastructures such as roads. The methodology has been tested in six countries and “belies the notion that all REDD+ accounting must be based on remote sensing,” said co-author Sandra Brown. Average emissions from degradation are about 12% of those from deforestation, the study finds, though the range is wide (6-68%). Cool and smart The Cool Farm Institute’s Cool FarmTool allows farmers to calculate emissions savings online by entering parameters such as the farm and field area, planted crops, and fertilizer and machinery use. The tool was originally developed by Unilever and the University of Aberdeen. The institute and the Gold Standard Foundation have signed an MOU to make the tool eligible as a carbon accounting methodology for climate-smart agriculture. “Farmers will be able to evaluate not only which practices are more efficient and more climate smart than others, they can directly reward their efforts by obtaining Gold Standard carbon credits,” said Pieter van Midwoud, Business Director of Gold Standard Land Use & Forests. Details on when and how the combined tool could be used are to come. HUMAN DIMENSION Happy 1st Birthday Launched in April 2013, REDD+ Community, an online learning platform through the World Wildlife Fund’s (WWF) Forest and Climate Programme has grown to 650+ members in more than 50 countries. The platform includes monthly webinars, and any member can post a conversation topic. “We need to ensure that ideas (individual and collective) are made explicit, clear and accessible to the collective,” Breen Byrnes of WWF program wrote in the Huffington Post last week. “For example, we need to make sure that a case study from a REDD+ project in Nepal can be shared with a policymaker who is negotiating at an international policy conference, and use it as evidence of something that does or does not work in the real world.” REDD war or peace? In a recent op-ed, Janpeter Schilling of KlimaCampus and Janani Vivekananda of International Alert argue that “REDD+ is still a fairly new mechanism, but so far, it pays too little attention to its potential contribution to peace or conflict.” REDD+ could contribute to peace by strengthening community land rights and reducing poverty, sometimes by providing employment to local residents as forest monitors and guards. The flip side is that the opportunity for short-term monetary gains could aggravate existing conflicts over land ownership and forest access. For instance, in Bangladesh, community representatives say that any restrictions on use of the Sundarbans mangrove forest puts stress on their livelihoods. STANDARDS AND METHODOLOGY Seeding the inner cities Urban trees play an important role in sequestering carbon. California allows urban forestry projects to produce offsets for its cap-and-trade program, but development has been virtually non-existent in both the voluntary and compliance markets due to substantial costs and other challenges. The Climate Action Reserve (CAR) is hoping to change that by revamping its urban forestry protocol to expand the scope of eligible projects beyond street trees and establish a set of environmental and social co-benefits for projects by public entities, among other things. CAR is accepting comments on the proposed revisions through April 25. VCS on fire Some forest carbon projects may cross all their t’s and dot all their i’s, but as forest fire risks increase with climate change, there is still the chance that they will (literally) go up in flames. To incentivize fire management practices such as controlled burns, the Verified Carbon Standard (VCS) last month released its New Fire Management Methodology for public comment. Developed by Value for Nature Consulting on behalf of the Mpingo Conservation and Development Initiative with funding from the Royal Norwegian Embassy of Tanzania, the methodology applies to the Eastern Miombo woodlands in Tanzania and Mozambique. The comment period on the methodology is open through April 24. In step with ‘insetting’ A video from Plan Vivo Standard introduces the concept of carbon ‘insetting’ – or creating emissions reductions projects within a supply chain or business network. “This new approach is an example of shared value creation. It’s based on the idea of forming new positive relationships, but seeks to create carbon reductions from within an existing network,” Richard Tepper of Ecometrica explained in the video. One company example is Source Climate Change Coffee, which is working with 30 communities of mestizo and Mayan Plan Vivo farmers in Mexico to plant trees, therefore neutralizing the carbon footprint of the coffee production. Grazing for soil Australia’s Carbon Farming Initiative program has released a proposed methodology that would allow soil carbon sequestration projects in grazing systems. Developers would have to estimate sequestration by measuring changes in soil carbon stocks based on specified soil sampling and analysis techniques. Eligible land management activities could include converting from cropland to permanent pasture, changing pasture species composition or changing grazing patterns. But the methodology specifically excludes some activities such as certain types of tillage that would result in significant GHG emissions and undermine the project’s soil carbon sequestration. The proposal is open for public consultation until May 6. PUBLICATIONS Business savvies in the Amazon A new report entitled Lessons from the edge: What companies can learn from a tribe in the Amazon portrays the big challenges that businesses face in today’s economy and how these could be successfully addressed by following the example of the Surui, a tribe of the Brazilian Amazon. Published by the Deloitte Center for the Edge, the report looks at how the Surui have thrived by ‘cultivating their talent’, ‘leveraging their resources’, and ‘staging their moves’. Since Chief Almir first saw his tribe in the context of Google Earth in 2007, the tribe has forged more than 50 partnerships – including ones with the US Agency for International Development and Natura, the cosmetics giant that bought carbon offsets from their forest project. CliffsNotes for REDD A new manual, The Knowledge and Skills Needed to Engage in REDD+: A Competencies Framework, aims to break down the complexities of REDD into a simple document that makes sense even to those who do not live and die with these projects. The manual, compiled by a coalition of NGOs, breaks REDD+ down into 10 themes, each of which builds on the one before it, and provides just enough information to frame the issues central to each theme before closing with links to resources available on the Internet. Survival of the best prepared The policymaker summary of the climate change ‘impacts, adaptation, and vulnerability’ section of the International Panel on Climate Change’s Fifth Assessment Report was approved at a workshop in Yokohama, Japan in late March. The verdict? Climate change is here and will be here, and we need to adapt – especially in the most vulnerable regions. Major world crops such as maize, which has trouble at temperatures above 38 degrees Celsius, will suffer, but agroforestry techniques could play an important role in cooling fields. Bolsa Floresta flourishing A recent study published on Bolsa Floresta, a program that pays families for conservation and sustainable community development, showed a decrease in deforestation and livelihood improvement in the communities where it has been implemented. The authors of the study – officials with the Center for International Forestry Research, Fundaçí£o Amazonas Sustentí¡vel, and Zentrum fí¼r Entwicklungsforschung – advise that the program could be developed in other communities as long as it is adjusted to their particular situations. JOBS Portfolio Manager – ClimateCare Based in Oxford, United Kingdom, the Portfolio Manager will play a key role in management of ClimateCare’s Verified Emission Reduction portfolio, also covering some other offset types and helping to tailor bespoke carbon portfolios for new and existing clients. The successful candidate will have strong Excel skills, a commercial and proactive approach, excellent interpersonal skills, and the ability to manage a high work load effectively and independently. Read more about the position (and others from ClimateCare) here REDD+ Governance Manager, Zambia –BioCarbon Partners Based in Luangwa Valley, Zambia, the Governance Manager will be responsible for developing relationships with local stakeholders and engaging community-based forest governance organizations. The ideal candidate will have a master’s degree or equivalent, at least five years experience in resource management, REDD, community development or rural outreach, and be a Zambian citizen. Read more about the position here Junior Analyst – Face the Future Based in Amsterdam, Netherlands, the Junior Analyst will support Face the Future’s Investment Management Team’s efforts and initiatives to expand their portfolio and raise capital. This will include research on strategic investment activities, helping to implement a business development strategy, and negotiating and carrying out due diligence to manage the investment process. The successful candidate will have one to two years of previous work experience in management consulting or a related area, hold an advanced degree in business administration or a similar field, and be fluent in English. Read more about the position here REDD+ Team Leader – Österreichische Bundesforste AG Consulting Based in Togo, the team leader will support REDD+ readiness and forest rehabilitation in the country. The successful candidate will have at least eight years of work experience in forest inventories through remote sensing; have a detailed knowledge of REDD MRV, reference levels, and safeguards; and be fluent in French. Read more about the position here ABOUT THE FOREST CARBON PORTAL The Forest Carbon Portal provides relevant daily news, a bi-weekly news brief, feature articles, a calendar of events, a searchable member directory, a jobs board, a library of tools and resources. The Portal also includes the Forest Carbon Project Inventory, an international database of projects including those in the pipeline. Projects are described with consistent ‘nutrition labels’ and allow viewers to contact project developers. ABOUT THE ECOSYSTEM MARKETPLACE Ecosystem Marketplace is a project of Forest Trends, a tax-exempt corporation under Section 501(c)3. This newsletter and other dimensions of our voluntary carbon markets program are funded by a series of international development agencies, philanthropic foundations, and private sector organizations. For more information on donating to Ecosystem Marketplace, please contact [email protected].

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April 9, 2014 | The Yurok tribe has seen first-hand the devastation that deforestation wreaks on trees and plant and animal species living on its tribal lands. Now, with a big stamp of approval from California regulators, the tribe is hoping to tap into the carbon markets to help reverse these devastating trends.

The California Air Resources Board (ARB) on Wednesday announced that the Yurok Tribe/Forest Carbon Partners CKGG Improved Forest Management Project was the first to be issued offsets under its compliance forestry protocol. The improved forest management (IFM) project will guarantee long-term forest protection, improve forest habitat diversity, provide benefits to salmon and steelhead populations, and generate revenues for the Yurok Tribe. IFM projects are those in which existing forest areas are managed to increase carbon storage and/or to reduce carbon losses from harvesting or other silvicultural treatments.

“We have lost many of our old trees to deforestation, and numerous native plant and animal species, especially deer and elk, are struggling because of it,” said Thomas P. O’Rourke, Sr., Chairman of the Yurok Tribe. “This forest carbon project enables the Tribe to help transition these acres back into a tribally managed natural forest system where wildlife and cultural resources like tanoak acorns, huckleberry, and hundreds of medicinal plants will thrive.”

The ARB’s compliance protocol was developed based on a version originally created by the Climate Action Reserve (CAR), which acted as the Offset Project Registry for the Yurok project.

Click here to continue reading on the Forest Carbon Portal.

About 13 million hectares of tropical forests are being lost every year – despite the best efforts of many committed stakeholders. California could take efforts to combat this trend to the next level by allowing projects that reduce emissions from deforestation and forest degradation to count as offsets in its carbon market, according to supporters of these projects. But is the US state ready to take that step?

8 April December 2014 | Tropical forests are being cleared, often illegally, to make room for the production of paper and other products, a deforestation trend that is directly responsible for an estimated 16% of greenhouse gas (GHG) emissions globally – more than the 12% caused by the transportation sector. A possible solution to reverse this destructive trend lies in the form of what is known as REDD projects, which stands for reducing emissions from deforestation and forest degradation.

“If we don’t tackle tropical forests (loss), we’re not going to be able to solve the climate crisis,” said Toby Janson‐Smith, Director of the Agriculture, Forestry & Other Land Use program for the Verified Carbon Standard – an organization that develops methods to account for carbon mitigation. “This is where REDD comes in.”

Some individual REDD projects have flourished, thanks to the committed efforts of major global corporations such as software giant Microsoft and entertainment conglomerate The Walt Disney Company that are propelling forest conservation efforts by paying high prices – often much higher than the prices for other kinds of emissions reductions– for the offsets generated by these projects.

“We’re seeing (demand) a lot in the corporate social responsibility space with companies that not only want to mitigate their climate impacts, but also care about broader social and environment benefits,” Janson‐Smith said at the Navigating the American Carbon World conference in San Francisco last week. “And conserving forests can be a very compelling story.”

But REDD projects have yet to achieve the necessary scale to put a significant dent in the deforestation trend, in large part because their development is subject to the whims of voluntary carbon offset buyers, rather than driven by the demands of a regulated carbon market.

“REDD is indeed happening at a very large scale and in a very significant way, but not unfortunately yet at the scale and in the form that we need to deliver on the promise of this idea to stop tropical deforestation for good,” said Steve Schwartzman, Director, Tropical Forest Policy for environmental NGO Environmental Defense Fund.

However, in a positive sign for REDD projects, regulators in the state of California have publicly expressed their commitment to consider allowing the offsets generated by these projects into their carbon market. California may not be the only game in town for supporters of REDD projects, but in some respects it is the most important potential player.

“We all strongly agree that California should embrace REDD+ in a domestic compliance market and set a strong example for the world,” said Karin Burns, Executive Director of Code REDD, a nonprofit organization designed to support and scale REDD+.

However, California regulators refused to commit to a timeline for the possible incorporation of these offsets into their compliance market, as REDD still faces political and logistical hurdles in the state.

For an in-depth analysis, visit the Forest Carbon Portal’s coverage of the California market.

Urban forestry helps keep US cities green and their air clean. For this, urban foresters can earn carbon offsets that reflect their pro-climate contributions. Though these offsets could be sold to voluntary buyers or even into California’s carbon market, urban forestry offset projects have been underutilized due to high costs and technicalities. The Climate Action Reserve is hoping to change that.  

27 March 2014 | Urban trees play a host of important roles. They’re air conditioners. They’re crime-stoppers. They remove tens of metric tons of particulate matter from cities. And they’re carbon sequesters: The US Forest Service estimates that urban trees in the United States sequester 25.6 million tonnes of carbon annually, at an estimated value of $2 billion – based on government projections of the social cost of carbon.

But this value isn’t always accounted for in public and private planning activities as cities often struggle to build and maintain urban canopy because of the costs of planting and caring for trees. The Climate Action Reserve (CAR) – an organization that develops methods (or “protocols”) to account for carbon mitigation – is trying to change that by making their urban forestry protocol more user-friendly.

CAR’s protocol guides the quantification of greenhouse gas (GHG) reductions from urban tree planting and maintenance activities by municipalities, educational institutions and utilities, and has been available in various forms since 2008. In October 2011, the California Air Resources Board (ARB) approved urban forestry as one of four offset project types eligible to produce carbon offsets for its cap-and-trade program.

But only one project – to plant 1,000 trees by the City of Santa Monica – has ever made any significant progress, and no compliance-eligible urban forestry offsets have been granted by the ARB. CAR officials have received consistent feedback that the current version is too challenging to facilitate project development of any significance.

“That’s problematic—we want our protocols to be used,” John Nickerson, CAR’s Director of Forestry, said Wednesday during the Navigating the American Carbon World 2014 conference in San Francisco.

So, with support from the California Department of Forestry and Fire Prevention (CalFire) and the US Forest Service, CAR embarked on a review and proposed update of the urban forest protocol that would address some of these issues by:

• Expanding the scope of eligible urban forest projects beyond “street trees” to include trees located in parks, private lots, open spaces and other areas not currently eligible.
• Eliminating a costly requirement to inventory every tree (that’s right, every tree) within and outside the project area.
• Making urban forest management projects commit to increasing existing inventories relative to baseline levels eligible to generate carbon offsets.Currently, only urban tree planting activities are eligible under the protocol.

And there are many more issues the protocol addresses including covering for unavoidable reversals and establishing environmental and social co-benefits.

Read about the specifics of ‘The Makeover’ on the Forest Carbon Portal.

On a separate note, it’s last call to respond to our survey informing the State of the Voluntary Carbon Markets report.

Returning survey-goes can login HERE (http://survey.ecosystemmarketplace.com/carbon2014/) to report on 2013 offset transactions and/or project developments.

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Contact Allie at [email protected] with any questions about the survey. We look forward to hearing from you!

March 21, 2014 | Though the weather outside the Newseum in Washington D.C. on Wednesday was dull, the mood inside was spirited and at times contentious at the Fifteenth Dialogue on Forests, Governance & Climate Change, hosted by the Rights and Resources Institute (RRI). About 100 panelists and audience members came together to discuss the issue of ‘carbon rights’ in the wake of the recently passed Warsaw Agreement on Reducing Emissions from Deforestation and Degradation of forests (REDD+).

“For the large trade to take place and large flow of money from developed countries to developing countries to take place, it’s extremely important that two things are very clear,” said Arvind Khare, Executive Director of RRI. “Who is the seller and who is the owner? And what is the commodity you are trading?”

It’s a question that could be phrased in an even more fundamental way: namely, is a payment for conservation performanceever really a commodity? REDD+ programs emerging under the United Nations Framework Convention on Climate Change generally work by supporting climate-safe agriculture and involve no tradable carbon credits, at least not yet. Regional programs like California’s do have provisions for offsetting that would create tradable credits, and the REDD Offsets Working Group (ROW) has recommended safeguards for indigenous people participating under that mechanism.

Much of the debate focused on the continuing lack of clear land tenure for indigenous people, but Charles Di Leva of the World Bank’s Environmental and International Law Unit warned that a myopic focus on ownership could harm the communities it’s designed to help.

“If we were to require title resolution as a prerequisite, we might be excluding communities who want to participate in REDD activities,” he said.

In the voluntary market, which works at the project level instead of the jurisdictional level, project developers – indigenous or not – often don’t own the land on which they are operating, and REDD+ credits are often retired instead of traded. Increasingly those credits are contingent on the involvement of local communities. Andrew Hedges, the REDD+ Vice-Chair of the Climate Markets & Investment Association, noted that many buyers on the voluntary market now expect projects to have both Verified Carbon Standard (VCS) and Climate, Community, and Biodiversity Standard (CCB) certification – which places the emphasis on the efficacy of those standards rather than on strict adherence to requirements to title.

But Niranjali Amerasinghe of the Center for International Environmental Law disagreed.

“I would posit that you really shouldn’t separate carbon from land rights,” she said.

For a full summary of the debate, visit The Forest Carbon Portal.

19 March 2014 | Part of the solution to the climate problem may lie within the 2.7 million acres of rice cultivated in the United States last year. Rice growing is the third largest source of methane emissions in the United States’ agricultural sector. When rice fields are flooded, the organic matter decomposing sans-oxygen below releases methane gas, a climate pollutant that has 21 times the strength of carbon dioxide.

A proposed protocol being considered by California’s Air Resources Board (ARB) – the regulatory agency that oversees the state’s cap-and-trade program – could offer incentives for farmers to reduce these emissions and monetize carbon offsets that could then be sold to companies capped under the law. Through the rice cultivation offset protocol, rice growers in California and the Mid-South could reduce methane emission reductions through small but important tweaks to their cultivation practices, such as dry seeding or draining the standing water from fields earlier than they otherwise would.

None of these methane-reducing rice cultivation practices are considered ‘business as usual.’ Paul Buttner of the California Rice Commission estimated that only 1-2% of farmers are currently doing dry seeding, mostly because of the inherent risk of moving away from established practices.

“The early drain practice is experimental, it’s viewed by most growers as too much of a risk,” said Buttner. “The most important thing to them is maintaining the quality of the rice. We do have studies showing that maybe they can drain those fields a little earlier…but without a program, very few growers would expose themselves to that risk.”

The ARB estimates the methodology could produce between 500,000 and 3,000,000 tonnes of greenhouse gas reductions through 2020, the current end-date for California’s cap-and-trade program.

The protocol was developed based on standards tested in the voluntary carbon markets, those outside of California that are not motivated by regulation. The American Carbon Registry’s (ACR) rice protocol was released in May 2011, with the Climate Action Reserve following with its protocol in December 2011. To coincide with the ARB workshop, the ACR on Monday announced the expansion of its previously California-specific protocol to the Mid-South states. It also unveiled the first rice project listed on its registry, which aggregates rice growers over a 5,000-acre area in California’s Sutter, Colusa, and Glenn Counties to reduce the equivalent of 6,700 tonnes of carbon dioxide emissions (tCO2e).

If approved by an ARB vote in September, the offsets would be eligible for the state’s cap-and-trade program starting on January 1, 2015.

Read a more in-depth (read: wonky!) version of this story on the Forest Carbon Portal

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This article was originally posted on the World Resources Institute website. Click here to read the original.

13 March 2014 | As countries negotiate a new international climate agreement for the post-2020 period—including at this week’s intersessional meeting in Bonn, Germany—the key choices for putting the world on a secure pathway to a low-carbon future should be front-of-mind. The new agreement will be essential for putting in place the policies beyond 2020 that ensure a shift from high-carbon to low-carbon and climate-resilient investments. To do this, the agreement will have to send the right signals to governments and businesses about the trajectory we need to be on.

With that in mind, a central question facing the international community is: What will the time frames be for countries’ post-2020 emissions-reduction contributions?

Now is the time to begin answering this question, as countries are required to propose their emissions-reduction contributions by March 2015. Getting the time frames right is essential to ensuring that the international climate agreement is both effective and ambitious. Should these contributions—which will begin in 2020—cover a period of five years to 2025? Or a period of 10 years to 2030? Or some combination? And should the agreement also include a long-term collective goal, such as phasing out greenhouse gas emissions by 2050?

The answers to these questions hold significant consequences for the future of climate change action. It’s imperative that countries take them into account—both in Bonn this week and at future UNFCCC meetings.

What Emissions Pathways Do We Need in the Short-, Medium- and Long-term?

To consider the pros and cons of various time frames, it’s essential to keep in mind the emissions levels that allow us to meet the UN Framework Convention on Climate Change’s (UNFCCC) goal of keeping global temperature rise below 2 °C (3.6 °F). Exceeding this target would put the world at an increased risk of forest fires, extreme weather, and other climate change impacts.

According to the U.N. Environment Programme’s recent Emissions Gap Report, global emissions in 2020 should be 44 GtCO2e on average for a likely chance of meeting the 2 °C target. In 2025, emissions should be 40 GtCO2e on average and drop to 35 GtCO2e by 2030. (A decline of 5 GtCO2e is equivalent to eliminating emissions from all of the world’s cars, buses, and trucks in 2005). By 2050, emissions levels should fall to 22 GtCO2e in order to stay within 2 degrees of warming. For context, emissions in 2010 were roughly 50 GtCO2e.

The scientific community is clear about what needs to be done by when, but what time frame for national contributions is best to put us on the right path and achieve the necessary emissions reductions?

Based in part on research gathered for the GHG Protocol’s Mitigation Goals Accounting and Reporting Standard, we outline the pros and cons of a 2025 versus 2030 contribution time frame, as well as the possibility of an alternative that combines the two. In a later blog post, we’ll also look at the issue of a longer-term collective goal, such as for 2050.

Pros and Cons of a 2025 End Date

The 2025 end date has a number of pros and cons. Some of the positives include:

• It can mobilize investment and planning for emission reductions, particularly for investments that operate based on relatively short investment horizons (such as some renewable energy investments). It can also encourage a quicker phase-out of inefficient practices and technologies.
• It also may be more consistent with the timing of some low-carbon development strategies (e.g. China’s Five Year Plans), and, relatedly, it could be easier to get buy-in from domestic constituencies, especially if the 2025 contribution is in line with commitments already made domestically. Accordingly, a 2025 end-date could provide greater certainty of targets being achieved given that they may build on efforts already underway to meet countries’ 2020 commitments and other existing policies.
• Importantly, the 2025 end-date provides more certainty of the emissions trajectory and, in turn, the carbon budget being used up. Short-term contributions can also help prevent emissions from rising continuously during the contribution period and then decreasing sharply in the target year.
• It avoids lock-in of low ambition targets for too long a period. If the level of effort Parties put forward for the 2015 agreement are not significantly ambitious, it may be better to have a shorter-term commitment while greater political will is built for the next round.

However, a shorter time-frame is not without disadvantages:

• It may not facilitate longer-term investments for large, structural changes because the time frame may not be sufficient to include the lifecycle of large-scale capital investment projects.
• While a 2025 end-date could facilitate learning by doing through an evaluation of efforts, it may not be consistent with longer-term, low-carbon strategies.
• Further, it does not provide long-term guidance for future policymakers, nor guarantee a long-term commitment for emissions reductions. It could reopen negotiations prematurely, potentially distracting from implementation and posing risks to reaching agreement on a next set of contributions.
• Perhaps most problematic, a short-term time frame may not lead to significant additional ambition if policies and technologies already required for 2020 commitments continue to deliver substantial emissions reductions by 2025. And it may drive political leaders to commit to only modest levels of emissions reductions because they are the ones accountable to meeting those commitments (as opposed to more aspirational commitments on a longer-term time frame, when they will no longer be in office).

Pros and Cons of a 2030 End Date

A medium-term time frame could last a decade or so. In the context of post-2020 contributions, 2030 could be considered a medium-term time frame. Advantages and disadvantages of a medium-term time frame are in many ways the opposite of those of a short-term timeframe, but some unique aspects also come into play.

On the plus side:

• A 2030 end date would better facilitate long-term planning for large, structural changes and capital investments and provide greater certainty for businesses and other stakeholders about the longer-term policy and investment context.
• It could mitigate the risk of unpredictable events, like an economic downfall, during any given year, making achievement of the commitment easier. And it may allow for more energy, time, and resources devoted to implementation, rather than continuous negotiations of short-term contributions.
• A medium-term time frame could also lead to greater ambition, as policymakers may be willing to make more ambitious commitments for dates farther in the future.

However, there are a number of possible disadvantages of the 2030 time frame:

• It could encourage later phase-outs of less efficient practices and/or technologies, as it may not provide sufficient incentive for quick mobilization of investments if the emissions-reduction goals are considered to be too far in the future and not an immediate concern.
• It may also not provide sufficient detail in the short term for some investments. As a result, it may not encourage early adoption of efficient technologies that could yield greater aggregate emission reductions over the contribution period.
• A medium-term time frame also runs the risk of not being adopted by future political leaders. Additionally, it may not be consistent with the time frame of low-carbon plans and policies, which may span a shorter number of years.
• Importantly, it may not ensure a pathway that leads to significant annual reductions if reductions don’t occur until the very end of the time frame (e.g., if single year targets are adopted, such as with a target that limits emissions in only one year (e.g. 2030) as opposed to multiple years (2026-2030), Parties can make a steep decline in emissions at the end date of the target period but still contribute significant emissions levels during the period leading up until then. While this is still the case for a short-term time frame, there is less time for emissions to build up in the interim years.

Best of Both Worlds? Coupled 2025 and 2030 Contributions

While both time frames have considerable advantages and disadvantages, one potential solution—taking the best of both approaches—is to encourage countries submitting both short- and medium-term contributions, one for 2025 and one for 2030. Given the strengths of each time frame, this approach could, in fact, be the likeliest to yield robust outcomes.

There is precedent for the adoption of coupled targets, as some countries currently have both 2020 and 2050 goals. For example, as part of its domestic climate policy, the UK has embraced a series of short-term targets on the way to meeting a long-term goal of reducing its emissions at least 80 percent below 1990 levels by 2050. Coupled short-, medium-, and long-term contributions can help ensure that a certain emissions pathway is met, which can in turn limit cumulative emissions to the atmosphere over time.

If Parties were to pursue coupled short- and medium-term contributions, Parties might decide to have one target be fixed and the other indicative. For example, a 2025 contribution could be the one that is more formally inscribed under the agreement, but the 2030 contribution is indicative of the emissions pathway of the country, with a provision for later adjustment if they are in a position make even more ambitious emissions cuts. This could have the advantage of providing investors with long-term signals, while also allowing decision-makers to adopt a more ambitious medium-term target than they otherwise would because there would be a longer period to put needed policies in place. The risk may be that politicians create distractions by putting forward ambitious indicative targets—which may be subject to change—and draw attention away from meager, short-term targets.

Or one could take an alternative approach—making the 2025 contribution an indicative milestone along a pathway toward the 2030 contribution, which the Party is accountable for. The question that remains is whether Parties would be ambitious today with a 2030 contribution, especially considering that countries’ current emissions-reduction commitments fall far short of the necessary reductions for limiting warming to 2 °C. Would a better outcome be reached if the global community negotiated the medium-term targets or revised them upwards at some point in the future if they are in a position to take more significant action?

A third choice is for the 2025 and 2030 targets to have equal standing as fixed commitments, given the risks inherent in indicative targets. While Parties may not be as ambitious as they would be with an indicative contribution, there would be more certainty. And there could be a mechanism built into the UNFCCC that enables—and encourages—Parties to come forward with increased ambition over time if they are in a position to do so. The idea of a mechanism to continuously ratchet up ambition over time is currently under discussion in the UNFCCC negotiations and should be considered together with the time frames.

Also, it is worth noting that while the spotlight regarding the post-2020 mitigation contributions is focusing on the 2025 versus 2030 timeframe, it is essential that commitments for even longer-term time frames be secured if we are to embrace a roadmap that will shift the world toward a low-carbon future. Indeed, significant dialogue has now begun on how to entirely phase out net greenhouse gas emissions by 2050, which has been found to be technically and economically feasible (watch for our forthcoming blog post on this topic).

It is our hope that these considerations will be taken into account by negotiators when determining the next set of contributions. After all, this is the critical decade for preventing some of the most dangerous climate risks from being locked in for future generations.

Kelly Levin is a Senior Associate with WRI’s emerging economies objective. She can be reached at [email protected]. David Waskow is the Director of WRI’s International Climate Initiative. He can be reached at [email protected].

Left for dead for years, the Regional Greenhouse Gas Initiative (RGGI) soared to record heights after a major overhaul of the program gave market participants new confidence in its longevity. RGGI could receive another major boost if the US Environmental Protection Agency decides that the cap-and-trade program can be used for compliance with its upcoming greenhouse gas regulations for existing power plants.

13 March 2014 | While many of the hopes and dreams of carbon market advocates in the US were squarely focused on California’s developing cap-and-trade program in 2012, officials in the Regional Greenhouse Gas Initiative (RGGI) were busy plotting its comeback.

The Northeast carbon trading market had been weighed down for three years by an overabundance of allowances that forced credits to trade at the market’s floor prices. But the participating RGGI states, with the exception of New Jersey which pulled out of the program at the end of 2011, committed to overhauling the program, an effort that appears to be paying off in a big way.

In the first auction since the planned changes went into effect, held on March 5, RGGI allowances sold at a record $4 per ton. This surpassed the previous $3.51/t high, set during the March 18, 2009 auction, the first auction held during the program’s initial compliance period (2009-2011). Also noteworthy was the fact that RGGI exhausted its back-up supply of allowances for 2014 after triggering their sale by hitting that magic $4 mark.

“I think it’s a true market at this point,” Collin O’Mara, Secretary of the Delaware Department of Natural Resources and Environmental Control and Vice-Chair of the RGGI, Inc. Board of Directors, told Ecosystem Marketplace. “The market is functioning as a true market.

The $4/t price for RGGI allowances, while low in comparison to the roughly $11/t prices seen in the now-linked California and Quebec cap-and-trade programs, represents a more than doubling of the allowance price before the February 2013 announcement of the planned changes. And for long-time followers of the RGGI program, it sends an important message: RGGI is real and is here to stay.

“The main takeaway is growing confidence in the RGGI market,” said Peter Shattuck, director of market initiatives for NGO Environment Northeast.

The Comeback

The winter that refuses to end, with the infamous Polar Vortex, may have played a role in driving the robust demand for allowances seen in the latest auction. But the biggest factor in reviving the RGGI program has been the lowering of the emissions cap.

After thoroughly reviewing the program in 2012, RGGI officials decided to reduce the 2014 emissions cap by 45% to 91 million tons, with additional cuts taking into account the bank of allowances that had been acquired by private entities during the program’s down years. This decision sparked renewed interest in the market last year, with allowances selling for $2.80/t in the March 13, 2013 auction, well above the $1.93/t floor price the allowances cleared at the previous auction. Allowance prices dipped up and down for the rest of 2013 as the RGGI states all had to go through their respective regulatory or legislative processes to officially implement the proposed cap adjustment.

“You could say there was some uncertainty to whether that change was actually going to get made,” Shattuck said. “This is the first auction since the change was fully in effect and prices have continued to come up.”

Deflating the Cushion

The triggering and exhausting of the program’s cost containment reserve (CCR) was a historic and unexpected development. Cap-and-trade programs for greenhouse gases (GHG) often include mechanisms – a CCR being one such mechanism – to add flexibility or establish price certainty in response to concerns that the costs of complying with the program will spiral out of control. After conducting the program review, RGGI officials decided to add a new mechanism that would release more allowances if auction prices reached a certain point, set at $4/t in 2014. That price point was triggered in the March 5 auction, which emptied out all five million of the CCR allowances available for sale in 2014.

“It operated exactly as it was intended – it suppressed prices,” O’Mara said. “It’s a very nimble mechanism for mitigating price impact, particularly as a lot of entities were buying for future use, not just the immediate quarter.”

If fundamental factors begin to shift, for example, if a warming weather trend takes hold over the summer or natural gas prices rise significantly, shifting more electricity back to coal sources, market participants will not have a CCR to cushion them from major price spikes for the rest of the year.

“I think some parties view a $4 price as a relative bargain right now,” said William Shobe, an economist and professor at the University of Virginia who helped design the original RGGI program.

Return of the Players

When RGGI was languishing at the floor price, traders and bankers were not buying allowances. But these market speculators have returned to the program with a vengeance. The latest auction results showed that compliance entities and their affiliates purchased only 45% of the available allowances, meaning that market speculators and other entities actively participated in this auction.

“My take on that is that there are plenty of players out there who think that the price is going to continue to rise,” Shobe said. “It’s good for the market. There are going to be plenty of counterparties for trading for the compliance entities. But it also indicates that there are people out there who think this is a good investment for the future.”

Rising RGGI allowance prices also beg the question of whether there could finally be development of carbon offset projects for RGGI compliance, which has not occurred to date with prices hovering at the floor for so long.

“With the firming of the price, you would expect to see some activity for generating offsets,” Shobe said. “The very fact that the cost containment reserve is gone is a signal to people who might invest in offsets that there is going to be more opportunity to sell offsets into this market than might have been expected before this auction.”

RGGI officials developed a new protocol that aimed to replace the afforestation project type included in the original RGGI model rule. Some of the participating RGGI states have adopted the new forest protocol, which covers improved forest management, avoided conversion and reforestation activities.

The idea was to bring RGGI’s forestry protocol in line with the Western Climate Initiative (WCI), the program under which California and Quebec have linked their cap-and-trade programs. But that could mean that project developers interested in selling into a compliance market would remain focused on the WCI because prices in the program are still nearly triple RGGI allowance prices.

“We don’t anticipate offsets coming into the market until a time, if ever, allowance prices are significantly higher,” O’Mara said. “We’re not anticipating the results of this auction having a significant impact on RGGI offset activity, at least for the near future.”

Offset project developer Environmental Credit Corp would not be inclined to even look at the RGGI program until allowance prices exceed $10/t, which is unlikely in the next couple of years because of the price points that trigger the CCR, said CEO/CFO Derek Six. Even if the market reached $10/t for the allowances, there are obstacles that would make offset development difficult such as technical problems with the RGGI protocols and the state-by-state administration of offset projects in the program, he added.

A Bright Future

In June 2013, US President Barack Obama directed the US Environmental Protection Agency (EPA) to propose rules to regulate GHG emissions from existing power plants by June 1, 2014, with final rules due a year later.

RGGI officials have been working behind the scenes over the past several months talking about the economics of their market-based program and why the EPA should recognize the RGGI model as an effective system of GHG emission reductions for the power sector.

Many experts believe that RGGI will be accepted as a compliance mechanism by the EPA and that would likely have a positive impact on the program. That expectation could have been a factor in boosting demand for RGGI allowances in the latest auction, but it’s difficult to know for certain.

“I think there is a bet on the future of RGGI under the EPA rules,” Shattuck said. “I would be surprised if (the EPA) didn’t leave enough room for RGGI.”

“There might be some gambling going on that RGGI allowances could be a more valuable commodity under heightened federal rules on climate change,” Shobe observed. “But the risk works the other way as well. We don’t really know what EPA is going to do. There’s some risk that RGGI cap-and-trade program wouldn’t satisfy the requirements of EPA rules. I just don’t see that as a huge driver of current prices under RGGI. It could be happening, but that’s a very speculative bet right now.”

Expectations that RGGI would comply with the EPA’s program have driven an increasing awareness among non-RGGI states of its cost-effective, market-based approach, O’Mara said. While no state has said it wants to join RGGI tomorrow, several have been carefully studying the RGGI approach, he said. A benefit for other states is that RGGI has already worked through all of the potential kinks of a market, including ensuring a smooth auction and monitoring for potential manipulation. As more states focus on planning for compliance with the upcoming EPA rules, O’Mara expects an even greater focus on RGGI and potentially a decision by some states to join the program.

“It’s going to be an exciting next 12 months,” he said.

The Backstory

The Regional Greenhouse Gas Initiative (RGGI) is the first cap-and-trade program implemented in the United States to reduce greenhouse gas (GHG) emissions in the power sector. It was established in 2005 by 10 states in the US Northeast – although the state of New Jersey dropped out of the program in December 2011— and held its first auction of carbon dioxide (CO2) allowances in September 2008. Under the cap, the RGGI states will achieve an almost 50% reduction in CO2 emissions in the power sector from 2005 levels by 2020.

RGGI officials engaged in an extensive revamp of the program in 2012, with the changes taking effect in January 2014. Those changes included:

• Reducing the 2014 cap by 45% from 165 million tons to 91 million tons of carbon dioxide, with additional decreases of 2.5% per year from 2015-20.
• Adding a new cost containment reserve that releases allowances if auction prices reach a certain pre-determined pricing points: $4/t in 2014, $6/t in 2015, $8/t in 2016, and $10/t in 2017, rising by 2.5% in each of the following years.
• Adding a new forestry protocol that covers improved forest management, avoided conversion and reforestation activities, bringing RGGI’s protocol more in line with California’s forest protocol, which has spurred development of forestry projects across the US.

Brazil aims to slash its greenhouse gas emissions 38% by 2020, with more than half of those reductions coming from an 80% reduction in Amazon deforestation. That makes REDD finance more important than ever – and bureaucratic deadlock more damaging. Amazon states say the whole process can be smoothed by splitting revenues and responsibilities 80/20 between the states and Brasilia.

12 March 2014 | Before relapsing in 2013, Brazil had slashed deforestation rates six years running – an achievement that meant 3.5 billion fewer tons of carbon dioxide escaping into the atmosphere than would have happened if they’d continued on their previous pace. That’s roughly 1/3 of the total amount the country has promised to reduce by 2020, but its winning streak ended when deforestation rates surged 28% last year.

The country still, however, says its deforestation rate will be 80% lower in 2020 than its average rate was from 1996 through 2005. In fact, it’s counting on that reduction to deliver more than half of its promised 38% reduction in greenhouse gas emissions. To achieve such a dramatic reduction in deforestation, it plans to harness incentive payments for Reducing Emissions from Deforestation and forest Degradation (REDD).

But while individual Brazilian states have stepped up with concrete strategies for implementing REDD finance, the federal government has been slow to move – prompting the Governors’ Climate and Forests Task Force (GCF) last month to propose a REDD readiness strategy that would divide both revenues and responsibilities between the states and the federal government.

Outlined in a report entitled “Contributions to the National Strategy for Emissions Reduction from Deforestation and Forest Degradation (REDD+): A Proposal for Allocation Between States and the Union”, the proposal was developed by the finance ministries of Acre, Amapí¡, Amazonas, Mato Grosso, Parí¡ and Tocantins with technical support from Brazilian non-governmental organization IDESAM (Institute for the Conservation and Sustainable Development of Amazonas/Instituto de Conservaçí£o e Desenvolvimento Sustentavel do Amazonas).

Bridging the Federal/State Divide

Brazilian states have long advocated for control over direct payments for REDD, and the federal government has long argued for the creation of a central fund to manage any income. The new proposal represents a compromise that would create something called “REDD+ Units” (U-REDD+), 80% of which would be divided among the states and 20% of which would go to the federal government. They said such units would not be administered by the federal government, but by a new agency operating independently of both the states and the federal government.

“It is important to stress that the division of U-REDD+ to the states does not signify a ‘pass-through’ or use right to the state governments,” the report states. “It is understood as a fundamental premise that each state should establish a specific regulation (per example the states of Acre and Mato Grosso) that determines how REDD+ should be managed at the state level and how its potential benefits would be divided among all relevant stakeholders, such as traditional and indigenous populations, rural producers, municipalities, residents of conservation units, etc.”

Acre has created a unique System of Incentives for Environmental Services (SISA), while Mato Grosso created its own REDD+ System last year. The states of Rondí´nia, Amapí¡ and Amazonas are also in the process of developing their regulations through public consultations and needs assessments, among other activities.

The Federal Framework

The federal government has launched several initiatives to prepare for REDD, primarily the National Climate Change Policy (PNMC), the National Plan on Climate Change (NPCC) and the Plan for the Prevention and Control of Deforestation in the Legal Amazon (PP-CDAM). A National REDD+ System (SisREDD+) is ready to launch pending the approval of two legislative decrees, while a National REDD+ Strategy being developed under the Ministry of Environment (MMA) has bogged down in bureaucratic and political inertia.

The NPCC established the 38% emission-reduction target across all sectors, and expects more than half of that target – 55% –to come from halting deforestation. The Ministry of Science, Technology and Innovation, however, anticipates that emissions from energy, agriculture, manufacturing and waste management will increase over the same period – putting more pressure on REDD in particular and efforts to reduce deforestation in general.

Resolving the Reference-Level Jam

The state proposal aims to spread U-REDD+ among all the Amazonian states, based on each state’s reference levels. It is not clear whether U-REDD+ will allow transactions through market-based mechanisms (offsets) or though funds and domestic investments. That will largely depend on how federal legislation regarding the treatment and recognition of offsets evolves.

For a full summary of the methodology of the stock and flux mechanism for allocation of U-REDD+ between states, download the full report.

Additional resources

10 March 2014 | After a relatively silent auction of carbon allowances in December 2013, demand for carbon allowances in Quebec soared in the first auction after it officially linked its cap-and-trade program to California’s system.

Quebec sold 98.7% of the more than one million 2014 vintage allowances available for sale in the March 4 auction, with allowances clearing at the CAN$11.39 per metric ton floor price. In addition, 84.2% of the 1.5 million 2017 vintage allowances also sold at the floor price.

This represents a significant increase from Quebec’s first auction in December when only 34% of the current vintages and 27% of the future vintages available sold at the then-price floor of CAN$10.75/t.

“These results reflect growing interest and demand in this burgeoning carbon market after it officially linked with California’s program at the beginning of 2014,” said Erica Morehouse, an Environmental Defense Fund attorney who focuses on the policy and legal aspects of implementing AB 32, the legislation underpinning the state’s cap-and-trade program.

The first cross-border compliance trading program to reduce greenhouse gas (GHG) emissions in North America officially took off on January 1 when California and Quebec joined their carbon trading programs. The linkage between California and Quebec’s carbon markets is the first tangible fruit of the Western Climate Initiative (WCI), formed in 2007 to design a regional cap-and-trade program to limit carbon pollution and curb climate change. At one point, the WCI counted seven US states and four Canadian provinces as members, but only California and Quebec have put a trading program in place.

The two jurisdictions are not holding joint auctions yet, but are planning to do so later this year, meaning the two markets will completely align with a uniform price for both sets of allowances, she said.

“Until then, given that Quebec’s program is much smaller and has had less time to develop, the California auction prices and market conditions are more predictive of what the linked program will look like once joint auctions begin,” Morehouse said.

Prices and demand are lower in Quebec than California in part because companies regulated by the US state that do not have a Canadian presence have to wait until the joint auctions to buy allowances directly from Quebec’s environment ministry, she said. In addition, there were just 16 participants in the Quebec auction compared to 71 participants in the last California auction.

Unlike California entities that must turn in allowances to cover a portion of their compliance obligations at the end of this year, covered entities in Quebec do not have to turn in their first batch of allowances until 2015 – one of the few small differences between the programs.

“These entities aren’t feeling the same sense of urgency to acquire allowances as California entities,” Morehouse said.

A group of experts convened to address issues surrounding the upcoming climate conference in Peru at the Bogotí¡ Regional Exchange hosted by Valorando Naturaleza and the Initiative for Conservation in the Andean Amazon. The Exchange took place February 27th and 28th.

25 February 2014 | As the region prepares for hosting the 20th climate negotiations of the UNFCC in Peru at the end of the year, with ambitions of clearly defining the role of land use and forestry in the agreement on global greenhouse gas emissions, there is a need to translate decisions from Warsaw’s COP19 into clear actions and implementation strategies. These actions will affect and involve efforts of many regional actors from governments, business leaders, donors, scientists, NGOs and community leaders, who all want to contribute to the process.

Forest Trends’ Valorando Naturaleza (VN) and the Initiative for Conservation in the Andean Amazon (ICAA) have organized a regional exchange called “Reviewing the COP19 results on climate change and the state of economic incentive programs for ecosystem services”. The event starts February 27th and will end tomorrow in Bogota, Colombia. It will be live streamed here on VN.

This event will also launch our platform of information on environmental services for Latin America, ValorandoNaturaleza.org, Spanish langurage sister site to Ecosystem Marketplace.

A collection of articles recently published on our website are now available in our first Insights booklet called ‘Forest carbon in 2014: Implications and opportunities for Latin America.

Perspectives and objectives

The event will focus on current critical issues for the region. One of the main objectives regarding forest carbon will be to better understand the implications of the decisions made during the COP19, and to integrate stakeholders goals to the steps towards COP20 in programs and projects at the national, sub-national and private level.

Given the strong participation of Latin America in the voluntary carbon market and the prevalence of REDD+ projects in the region, the exchange provides a key opportunity for those present to propose ways to improve financing and implementation of such projects in the dynamic context surrounding REDD+ in these early months of the year. And to do so while taking into account that successful initiatives are those that include holistic strategies that measure carbon sequestration capacity or water quality, but also have activities focused on people, the environment and processes related to governance and finance.

Close to eighty experts from 11 countries in Latin America, United Kingdom and United States, including officials from national and regional governments, indigenous peoples, bilateral and multilateral support institutions, project developers, associations, producers, NGOs, and representatives of the private sector will participate in the exchange.

In order to multiply the capacity of the South-South exchanges without increasing our carbon footprint, we will broadcast live from our website. The discussion will be facilitated via twitter and Facebook where participants will have the opportunity to ask questions remotely.

After the event, ValorandoNaturaleza.org will publish articles on key topics of the discussion, linked to presentations and panel discussions, and interviews with the attendees.

Structure of the discussions

Priorities of the group will be defined through discussion panels placed after stimulating presentations divided into the following four modules:

Module 1: Results from COP19 and implications for Latin America introduced by the following presenters:

• Jenny Wong and Willy Alarcí³n from the UNFCCC secretariat
• Milagros Sandoval, Manager of the Environmental Policies, Conservation International Peru
• Regional REDD negotiators Elvira Gí³mez, MINAM – Peru, Iví¡n Valencia, MADS – Colombia, and íngel Valverde, MAE – Ecuador.

Module 2: Financial flows monitored in Colombia, Ecuador and Peru for REDD+ through the REDDX Initiative, presented by:

• Roberto Leí³n Gomez from Fundacií³n Natura – Colombia
• Martha Echavarrí­a from EcoDecisií³n
• José Luis Capella from the Peruvian Society of Environmental Law.

And a special presentation by Sarah Lowery from Public and Private Finance Initiative of Forest Trends, covering examples of comprehensive finance for low emission rural development.

Module 3: Innovative initiatives and lessons learned on ecosystem services development and finance in Latin America will begin with a presentation by Phil Covell, of Forest Trends, highlighting findings from two annual reports on the state of water investments and biodiversity. This will be followed by highlights from four countries in the region:

• Rosa Marí­a Vida, Pronatura Sur – Mexico
• Felipe Carazo, Fundecor – Costa Rica
• Marta Echavarria, Ecuador and
• Cecilia Sandoval, CONDESAN – Peru.

Galo Medina, TNC Ecuador, will lead the discussion panel of the module.

Module 4 aims to better understand the different perspectives of state governments, indigenous and local communities, and the private sector regarding the use of economic incentives for conservation and management of ecosystems in Latin America.

Module 4 starts with insights into projects and initiatives from Brazil with

• Pedro Soares of IDESAM and Alberto Tavares of the Development of Ecosystem Services Company, presenting on two leading states in the Brazilian Amazon, Acre and Amazonas, and the first indigenous project to sell REDD credits in Brazil.
• Plinio Pizango from AIDESEP will talk about the indigenous perspectives on REDD, considering the priorities and goals of the groups he represents;
• Hoovert Carabalí­, Representative of the Community Council of Mí¡laga Bay will discuss a forests and fisheries project in Colombia;
• Josefa Mesí­as, President of the Moyobamba Project Management Committee will describe her experience leading this community based water initiative; and finally
• Erwin Palacios of Conservation International Colombia will talk about his experience with biodiversity, water and forest management programs in Colombia, Peru, and the rest of the region.

Luis Fernando Jara of PROFAFOR Ecuador will chair this discussion.

Module 4b will end this section with presentations focused on stakeholders from the private sector, with the participation of

• Juliana Lopes, Director, Carbon Disclosure Project in Latin America
• Zubair Zakir, Carbon Neutral Co.
• Christian Dannecker, South Pole Carbon; and
• Lucio Pedroni, of Carbon Decisions, linking activities in the private sector with the progress made in nesting and REDD+ jurisdictional work in the region.

Roberto Gí³mez Charry, Fundacion Natura Colombia will chair the discussion.

Alliances and Expected Outcomes

In the closing session, attendees will take the findings of the topics addressed in the event to prioritize actions so that funding, policies and strategies can increase the impact of initiatives, forest carbon programs, and other ecosystem services in the region. This will lead to the identification of key points for COP20 and areas where regional actors can create alliances and make contributions.

Watch the exchange online at Valorando Naturaleza or ICAA and participate with your questions and thoughts!

REDD+ projects are progressing even as uncertainty surrounds how this transition to later phases will be financed. ForestsClimateChange, an information hub on global climate issues, asks a group of individuals working within the forestry realm who should step up. Here is an introduction to the debate.

This article was originally published on the ForestsClimateChange website. Click here to read the original.

24 February 2014 | Emissions from deforestation and forest degradation are said to account for 10-17 percent of global emissions. of the most quick and cost-effective ways to reduce greenhouse gas emissions.

It was under this premise that in 2007, the UN Framework Convention on Climate Change agreed to develop a mechanism to see money channeled to tropical forested countries to incentivize them to adopt practices that reduce emissions from deforestation and forest degradation (known as REDD+).

Over the years, REDD+ finance has come from many different sources – international funding from aid budgets, private sector involvement in low-carbon development projects, national budgetary support, investments addressing deforestation drivers and various other multilateral and bilateral channels.

But as countries transition from REDD+ Phase I (readiness) and Phase II (demonstration) to Phase III (results-based actions), payments and other forms of compensation need to be offered for verifiable emission reductions. These payments will require significant sums of additional funding.

REDD+ projects are already starting to generate credits. But demand is low. And supply is expected to grossly exceed market demand in the next five years.

Cutting off finance sends a strong signal of indifference and uncertainty to projects that may be reducing deforestation and delivering multiple social and environmental benefits. It may also discourage countries to press on with the complex, long-term governance reforms that REDD+ has catalyzed.

The right incentives need to be in place for forest country governments and the private sector, who can then commit the necessary financial, human and political capital.

So does the task for driving demand fall to governments? Or should other actors step up and put their money where their mouth is?

We send our debaters into The Ring.

Michelle Kovacevic is the Editor of ForestsClimateChange.org. She can be reached at [email protected].

Additional resources

March 21, 2014 | Though the weather outside the Newseum in Washington D.C. on Wednesday was dull, the mood inside was spirited and at times contentious at the Fifteenth Dialogue on Forests, Governance & Climate Change, hosted by the Rights and Resources Institute (RRI). About 100 panelists and audience members came together to discuss the issue of ‘carbon rights’ in the wake of the recently passed Warsaw Agreement on Reducing Emissions from Deforestation and Degradation of forests (REDD+).

“For the large trade to take place and large flow of money from developed countries to developing countries to take place, it’s extremely important that two things are very clear,” said Arvind Khare, Executive Director of RRI. “Who is the seller and who is the owner? And what is the commodity you are trading?”

It’s a question that could be phrased in an even more fundamental way: namely, is a payment for conservation performanceever really a commodity? REDD+ programs emerging under the United Nations Framework Convention on Climate Change generally work by supporting climate-safe agriculture and involve no tradable carbon credits, at least not yet. Regional programs like California’s do have provisions for offsetting that would create tradable credits, and the REDD Offsets Working Group (ROW) has recommended safeguards for indigenous people participating under that mechanism.

Much of the debate focused on the continuing lack of clear land tenure for indigenous people, but Charles Di Leva of the World Bank’s Environmental and International Law Unit warned that a myopic focus on ownership could harm the communities it’s designed to help.

“If we were to require title resolution as a prerequisite, we might be excluding communities who want to participate in REDD activities,” he said.

In the voluntary market, which works at the project level instead of the jurisdictional level, project developers – indigenous or not – often don’t own the land on which they are operating, and REDD+ credits are often retired instead of traded. Increasingly those credits are contingent on the involvement of local communities. Andrew Hedges, the REDD+ Vice-Chair of the Climate Markets & Investment Association, noted that many buyers on the voluntary market now expect projects to have both Verified Carbon Standard (VCS) and Climate, Community, and Biodiversity Standard (CCB) certification – which places the emphasis on the efficacy of those standards rather than on strict adherence to requirements to title.

But Niranjali Amerasinghe of the Center for International Environmental Law disagreed.

“I would posit that you really shouldn’t separate carbon from land rights,” she said.

For a full summary of the debate, visit The Forest Carbon Portal.

17 February 2014 | California’s Yurok people and Australian project developer New Forests yesterday announced that they have successfully registered the first forest carbon project developed under the California Air Resources Board’s (ARB) protocol for US forests. Located near the Klamath River, the Improved Forest Management project over 7,660 acres of Douglas fir and mixed hardwood will issue 704,520 offsets, destined for California’s compliance carbon market.

“Our partnership with New Forests will provide the Tribe with the means to boost biodiversity, accelerate watershed restoration, and increase the abundance of important cultural resources like acorns, huckleberry and hundreds of medicinal plants that thrive in a fully functioning forest ecosystem,” said Thomas P. O’Rourke Sr., Chairman of the Yurok Tribal Council.

On the voluntary side, the last installment of Ecosystem Marketplace’s buyer series explores why the National Geographic Society – perhaps best known for the stunning photos featured in its magazine – has been investing in forest carbon. Nat Geo purchases offsets from a reforestation project in Panama, an avoided deforestation (REDD) project in Brazil, and another REDD project in the Yaeda Valley of Tanzania to neutralize the impact of various aspects of its operations.

“Some people are not going to be comfortable using carbon offsets to counter their greenhouse gas (GHG) emissions,” National Geographic’s Chief Sustainability Officer Hans Wegner admits. “But we feel they are a viable way to deal with those emissions we cannot eliminate in our operations. So long as they are third-party certified, audited, and properly accounted for, we consider them an important tool.”

In global news, the United Nation’s (UN) Millennium Development Goals are set to expire in 2015, and countries are hard at work coming up with some new resolutions to rudder global development over the next generation. Forests are one of 32 themes addressed in the Sustainable Development Goals (SDGs), which a 30-member UN Open Working Group discussed in Indonesia last week.

Peter Holmgren, the Director of the Center for International Forestry Research (CIFOR), made a presentation to the group, highlighting the fact that forests are relevant to many of the other items on the world’s to-do list, from poverty eradication to food security to sustainable agriculture to water. Unlike the Millennium Development Goals, which were sector-specific, the SDGs will be set more holistically – lending themselves to a ‘landscape approach,’ Holmgren says. He suggests nine specific forest metrics that could be used to track progress going forward.

Market participants have been growing increasingly pessimistic about the possibility of offsets from projects that reduce emissions from deforestation and forest degradation (REDD) making it into California’s cap-and-trade program. But REDD credits may yet have a fighting chance, as officials with the California Air Resources Board confirmed that they will continue considering adding international sector-based offsets to the program.

13 February 2014 | Major doubts have been expressed recently about whether offsets from reduced emissions from deforestation and degradation (REDD) will ever make it into California’s cap-and-trade program. But state regulators affirmed this week that REDD credits are still on their radar.

Political opposition has been one of the major factors driving the growing reservations that REDD would ever be allowed into California’s program . In February 2013, State Senator Ricardo Lara introduced Senate Bill 605, a proposal that would have limited offsets to anywhere in the US and possibly within the Western Climate Initiative, which includes Quebec but not states outside of North America. The bill did not pass the California Assembly before the end of last year’s legislative session, but could be reconsidered in its new form this year and remains a threat to the role of international offsets in California’s program, observers say.

But the California Air Resources Board (ARB), the agency charged with overseeing the cap-and-trade program, appears to be committed to considering the offsets in spite of that political opposition. In a proposed update to the AB 32 scoping plan, the outline governing California’s compliance with its landmark greenhouse gas (GHG) emissions reduction law, the ARB clearly states that the agency still views international offsets as potentially playing a role in the program and will continue considering them.

“As the cap-and-trade program continues to help achieve our long-term climate goals, it will be increasingly important to bolster the offset program,” the ARB said in the document. “There are real challenges to identifying in-state offset protocols, but ARB is committing to pursuing those that are workable. Part of the strategy to ensure sufficient offsets are available is to continue to consider international sector-based offset programs.”

The ARB specifically mentioned the REDD placeholder featured in the cap-and-trade regulations, but did not provide a timetable for starting a REDD rulemaking, which would need to happen before the credits are allowed into the program.

The agency also cited the safeguards recommended by the REDD Offsets Working (ROW) Group, which limit accepted offsets to those from jurisdictional REDD+ programs. ROW released its technical and policy recommendations to California and Acre, Brazil and Chiapas, Mexico, the US state’s partners in a memorandum of understanding, in July 2013. The document also referred to the Governors’ Climate and Forests Task Force, a coalition of 22 subnational jurisdictions contemplating programs and policies such as REDD.

“Continued evaluation of REDD and other sector-based offset programs further demonstrates California’s ongoing climate leadership and could result in partnering on other mutually beneficial and low emissions development initiatives, particularly those in Mexico,” the ARB said in its proposed update.

Leading By Example

California’s Global Warming Solutions Act of 2006 (AB 32) sets a goal of reducing state-wide GHG emissions to 1990 levels by 2020 and reducing emissions 80% below 1990 levels by 2050. The proposed update recognizes that the US state must continue to lead at the international level by planning for emissions reductions after 2020 – the scheduled last year of the trading program – and by continuing collaborations with other states, provinces and countries taking action on climate change, said Erica Morehouse, an Environmental Defense Fund attorney who focuses on the policy and legal aspects of implementing AB 32.

“The proposed update identifies international sectoral offsets, such as REDD, as a potential key opportunity for California to help curb deforestation, the cause of roughly 15% of the world’s greenhouse gas emissions, while efficiently meeting the state’s domestic emission reduction targets,” she said in a blog post. “The state’s engagement on REDD, along with the ongoing collaborations with China, Mexico, and other U.S. states, is a building block of meaningful global climate leadership.”

Companies that must reduce their emissions under California’s cap-and-trade system may use offsets for up to 8% of their compliance obligations. However, the program restricts the use of international offsets to 2% of a regulated entity’s compliance obligation in the second compliance period (2015 – 2017) and 4% in the third compliance period (2018 – 2020).

California’s program already allows offsets from domestic forestry, urban forestry, livestock and ozone-depleting substances (ODS) projects. ARB officials have pledged to continue evaluating additional offset protocols, with an emphasis on in-state opportunities. The agency has already proposed a coal mine methane protocol and is also developing a protocol to reduce GHG emissions from rice cultivation.
More than 3.6 million offsets have been issued by the ARB under the ODS protocol, while more than 1.6 million have been issued under the forestry and nearly 83,000 under the livestock protocol, as of February 12, according to the ARB. Credits have yet to be issued under the urban forestry protocol, which is not expected to contribute major volumes to the program.

“With just the envisioned six compliance offset protocols, it is clear there will not be enough offsets to meet the 2013-2020 maximum offset demand if every entity chose to use the maximum number of allowable offsets,” the ARB said in the document. “It should be noted that the cap-and-trade program is designed so that offsets will play a larger role in cost containment in the later years of the program.”

Additional resources