In 2015, the United Nations forged the Paris Agreement and launched the Sustainable Development Goals – officially linking climate protection with poverty alleviation, biodiversity conservation, and the empowerment of women. Participants in the voluntary carbon markets said, “At last!” And then they started jockeying for position.
3 June 2016 | In 2006, the nonprofit organization World Vision started helping people in Ethiopia plant trees, and it funded the project by selling carbon offsets for the roughly 22,000 tonnes of carbon dioxide that those trees mop up each year. But World Vision isn’t an environmental group; it’s a humanitarian aid organization, and it launched the forest-carbon project as an environmental means to achieve humanitarian ends.
The organization’s new impact report finds the tree-planting effort has created more than 2,000 jobs while restoring 12 water springs and increasing soil fertility for four out of five families. The result is a dramatic increase in food security.
“Now we eat three times [per day],” explained one cooperative member. “We used to eat twice.”
Those non-carbon “co-benefits” have long been a key selling point of forest-carbon projects like this one, and scores of developers have designed their efforts in accordance with Plan Vivo or the Carbon, Community, and Biodiversity (CCB) Standards in hopes of earning a premium that is often funneled back into those communities.
Our research, however, shows mixed results as to whether the premium is materializing on a meaningful scale, despite the fact that companies investing in forest-carbon offsets tell us they explicitly do so to have a positive impact on biodiversity and local communities.
We examined this disconnect for our latest report, Not So Niche: Co-benefits at the Intersection of Forest Carbon and Sustainable Development, and we found that most developers see this as a communications and benchmarking challenge, and they see a potential solution in the United Nations Sustainable Development Goals (SDG).
The SDGs are 17 goals and 169 targets aimed at solving today’s biggest social and environmental problems, and project developers tell us they have already been working towards many of those targets, and they argue that with more finance, they could do more.
World Vision’s Soddo reforestation project is a case in point: when German climate consultancy CO2OL mapped the impacts of that against the SDGs, they found that it contributed to 11 of the 17 SDGs.
A New and Widely-Recognized Measuring Stick?
Julian Ekelhof, a senior carbon management consultant at CO2OL, touched on this during an Ecosystem Marketplace webinar in March.
“In our experience, it’s crucial to talk about this in a terminology that is understood by the general buyer in the marketplace,” he said. “For us, this would include the Sustainable Development Goals.”
CO2OL and World Vision are not alone. As average prices for offsets on the voluntary carbon markets continue to fall, project developers and retailers are looking for new ways to earn the finance they need to endure in a difficult marketplace. For some, this means trying to quantify and monetize the multiple impacts they have been achieving all along.
Of course, that’s easier said than done. Carbon and co-benefits standards currently provide frameworks for tracking beyond-carbon impacts, but they more or less leave it up to project developers to figure out what, specifically, they’re going to measure. For some impacts, such as employment, the common metrics are relatively straightforward, but for others, such as targeted benefits to marginalized groups, they are anything but.
Towards a Common Language
Many standards on the voluntary carbon markets are grappling with how best to quantify multiple impacts. The American Carbon Registry, for instance, is working on new metrics to quantify water savings and habitat creation alongside the greenhouse gas reductions associated with its rice cultivation methodology.
The Gold Standard is perhaps the most direct about its goal to drive results-based finance for sustainable development outcomes. In the third iteration of its methodologies set to begin piloting at the end of 2016, the standard aims to quantify water, health, gender, and other outcomes and actually get buyers to pay for them, separately from the climate impacts. Gold Standard 3.0 is poised to be less carbon-centric, and its masterminds hope that diversification will inject new finance into the markets.
“Carbon-based results-based finance is tried and tested,” said Peter George, who directs development at the Global Alliance for Clean Cookstoves and spoke at the Gold Standard conference in Zürich in April. “Our new innovation is to look at health benefits such as the reduction of household air pollution.”
One potential Gold Standard 3.0 metric is DALYs, or disability adjusted life years. The concept of DALYs was first developed by the healthcare industry in the 1990s to describe a year of healthy life lost and to compare health outcomes across countries. After touch-and-go success with quantifying the climate impacts of cookstoves projects (offset sales from cookstoves surged in 2012, then faltered), cookstoves developers are wondering if defining common health outcomes might attract new buyers – especially if the metric implies “years of life saved.”
For some companies, new metrics for carbon projects could help make the case that their investment checks off multiple boxes. French beauty brand L’Oréal recently announced its intent to become a “carbon balanced” company, which means offsetting the emissions it cannot reduce by other means. But the company also has additional goals for environmental and social impact: they have a no deforestation commitment; they aim to reduce their industrial footprint across water and waste by 60%; and they want to positively impact the lives of 200,000 marginalized people. Accordingly, L’Oréal has chosen to work with producers within their supply chain – shea butter makers in Burkina Faso, patchouli producers in Sumatra, and quinoa farmers in Bolivia – to reduce emissions while also delivering other benefits.
The Politics of Measuring
However, at the same time as the merging of the climate and sustainable development agendas may create opportunities for the voluntary carbon markets, it may also pose challenges. No one knows for sure how above-and-beyond emissions reductions will or should be “counted” in a world in which (practically) every country has a UN-regulated climate target.
“We can’t say if Gold Standard VERs and CERs will be fungible post-2020,” admitted Gold Standard CEO Marion Verles in Zürich. “But we can’t stop working.”
Emerging compliance markets have historically taken cues from voluntary carbon market participants, and in this sense the experimentation that’s going on now could be informative. Article 6 of the Paris Agreement, the article that sets the stage for transferring “mitigation outcomes” between parties, makes it clear that the goal of any transfers would be “to promote the mitigation of greenhouse gas emissions while fostering sustainable development.”
The mention of both climate and sustainable development in the same breath within the Paris text is seen as a breakthrough for those who have watched contentious negotiations about joining the two. Karen Holm Olsen, a researcher who was involved with the effort to (optionally) incorporate sustainable development reporting within the Clean Development Mechanism (CDM), said that only about 40 projects out of more than 8,500 registered have used the reporting tool, which some countries found threatening. Even the 2014 press release about the tool assures that sustainable development reporting will maintain “the host countries’ prerogative to define their criteria for sustainable development” – a statement that doesn’t exactly lend itself to common metrics.
“When you talk to governments, it’s so diverse what people think about this topic,” Olsen said.
Christof Arens, a researcher at the Wuppertal Institute, agreed that the sustainable development-inclusive Paris text is only the starting line as countries determine what the successor to the CDM will look like. “This is just a headline for now,” he said. “How to operationalize it is up to negotiations.”
And perhaps there is only one place to start.
“We need to start at the end,” said Martin Hiller, Director General of the Renewable Energy and Energy Efficiency Partnership. “What kind of results do we actually want to achieve?”
Allie Goldstein is a Senior Associate at Ecosystem Marketplace. She can be reached at [email protected].
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