This Week In V-Carbon: UN Negotiators Consider “Nesting” of Current Forest Carbon Projects

Project developers responding to our just-released 2013 State of the Forest Carbon Markets report estimated that they could deliver 1.4 billion tonnes of carbon dioxide emissions reductions in the next five years. However, demand on this scale would have to come from compliance markets – markets that hinge on methodologies currently being hashed out in Warsaw.

Project developers responding to our just-released 2013 State of the Forest Carbon Markets report estimated that they could deliver 1.4 billion tonnes of carbon dioxide emissions reductions in the next five years. However, demand on this scale would have to come from compliance markets – markets that hinge on methodologies currently being hashed out in Warsaw.

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

18 November 2013 | After surveying project developers and market experts across our canopied planet, Ecosystem Marketplace launched the 2013 State of the Forest Carbon Markets report in London on November 6, to a packed house. The panel was moderated by Christopher Webb, Director at PricewaterhouseCoopers and included Alfred Evans, CEO of Climate Change Capital; Eric Bettleheim, CEO and Founder of Floresta Group; and Kars Riemer of Face the Future. Two of the report authors, EM’s Associate Director Molly Peters-Stanley and Senior Associate Gloria Gonzalez, presented key findings.

The report tracked some big numbers: $216 million flowed to 162 forest carbon projects in 58 countries in 2012. Since we began keeping tabs in 2009, carbon finance has supported the management of 26.5 million hectares of the world’s most critical forests – this impacted area is greater than all of the forested acres of the Democratic Republic of Congo combined. You can read the press release about the report here and download the full report and executive summary here.  

But perhaps the biggest number in the report is 1.4 billion. This is the volume of tonnes of carbon dioxide emissions reductions (tCO2e) that forest carbon project developers estimate they could deliver in the next five years – if (and this is a big if) there is demand for those offsets. Getting these projects growing will require a multi-billion dollar cash infusion up to 10 times the total funding that has flowed to voluntary forestry projects to date. Last week’s panelists say that compliance markets have the capacity to drive this demand.

“We need a market with real demand, demand that is measurable, demand that is driven by large commercial players needing to comply,” Bettleheim said at our London launch. “…Until we have a compliance market, we’re going to continue to struggle to find a financing model which is robust and consistent.”

Negotiators convening in Warsaw yesterday for the United Nations (UN) climate talks are expected to agree on methods for measuring existing rates of deforestation in developing countries – baselines that will set the stage for how hundreds of millions of dollars of performance-based funding will flow to halt deforestation and promote climate-smart agriculture under the United Nations Framework Convention on Climate Change (UNFCCC). Whether and how existing projects will be incorporated under emerging frameworks through “nesting” is a major question that project developers are eager to have answered. Read Ecosystem Marketplace’s coverage here.

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Many more groundbreaking stories from the forest carbon marketplace are summarized below, so keep reading!

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—The Editors

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V-Carbon News

Voluntary Carbon

Being a good sport

The Sochi 2014 Organizing Committee announced this month that next year’s Olympics will be the first to mitigate not only direct emissions from the Games, estimated at 360,000 tCO2e, but also emissions from spectator and media travel, estimated at 160,000 tCO2e. Dow Chemical Company, the “Official Carbon Partner” of the Games, will pay for the offset purchases, sourced from the Bikin Tiger project in Russia as well as projects in Brazil and South Korea, where the next two Olympics will be held. Nick Nuttall, communications director at the United Nations Environment Programme, said highly visible sports events like the Olympics provide an opportunity to “push the barriers” of climate neutrality.

Read more about how the Olympics is going carbon neutral
Read remarks by Nick Nuttall

United crunches the numbers

An enhanced carbon emissions calculator released this month will allow United Airlines customers to more easily calculate their shipping emissions, based on origin and destination of flights and shipment weight. United Cargo says that the calculator will help them efficiently respond to shipping request-for-proposals, which more and more often require emissions data. After calculating their emissions, customers can choose to offset them through United’s current project portfolio, which includes a forest conservation project in California’s redwoods, a wind project in Texas, and an avoided deforestation (REDD+) project in Belize.

Read more in the Wall Street Journal

Carbon as the new cash crop?

A pilot project in North Dakota will store carbon under the newly approved Avoided Conversion of Grassland and Shrublands Methodology by the American Carbon Registry (ACR). The project brings together 114 landowners to employ no-till practices across 50,000 acres of land, though grazing and haying may continue. “Basically, you’re farming carbon while running a normal diversified agricultural operation,” said Adam Chambers, of the US Department of Agriculture’s (USDA) Natural Resources Conservation Service, one of the project partners, along with Ducks Unlimited. The pilot project is funded by a $161,000 USDA grant, though the hope is that it will lead to carbon finance to stop grasslands conversion and its associated emissions of 20-75 MtCO2e per acre.

Read more from the USDA
Read more from Ducks Unlimited

A royal shame

The UK government’s Insolvency Service has closed down 19 companies involved in a carbon credit scam that duped more than 1,500 people out of 24 million pounds (US$38 million). The victims – many of them elderly people investing their retirement savings – were told that their money was going towards carbon credits that would then be purchased at a premium by companies like British Airways and Marks & Spencer (who were not actually involved), yielding up to 40% returns. In fact, the volumes of credits they held were too modest to trade. Eco Global Markets Limited, Aglo-Capital Partners Ltd and Cavendish Jacobs Ltd were among the scammers.

Read more from BBC

Seeing the landscape for the trees

In concurrence with the opening of the UN climate negotiations in Warsaw, the Gold Standard yesterday announced its Land Use & Forests Framework and Requirements for afforestation and reforestation projects. “Rather than just paying people to stop cutting forests, this approach recognises that for genuine and long-lasting success, governments and other buyers of carbon must consider and address the drivers of deforestation and the nexus of energy, water, land use and development – reflecting the integrated nature of human activity,” the press release explains. Forest projects in Uganda, Panama, and Costa Rica have already transitioned to the land-use approach, with five new projects – in Honduras, Peru, China, Nicaragua, and Hawaii – currently being developed under the framework.

Read more about the Framework
Check out the Gold Standard’s COP19 side event

EOS corporate partners put GHGs on ice
EOS Climate today launched their Refrigerant Asset System (RAS) that will for the first time allow businesses to manage refrigerants – a major contributor to global warming – as assets, using mobile technology to keep track of every pound as it moves through the supply chain. The technology allows companies to optimize refrigerant use; they can catch leaks early and avoid buying new refrigerant before they need it. Whole Foods and Whirlpool are already piloting the technology. Common types of refrigerants have a global warming potential nearly 4,000 times that of carbon dioxide, so EOS is working with standards organizations to develop a methodology for quantifying the emissions reductions from RAS, for possible monetization as carbon offsets. Developing the methodology could take a year.

Read the press release
Read the article in GreenBiz

Christmas comes early for carbon wonks: new report

The International Emissions Trading Association (IETA) today released its annual publication, IETA Greenhouse Gas Markets 2013, that analyzes major developments in carbon markets worldwide. Under current projections, within a couple of years almost a quarter of the world’s emissions will occur in jurisdictions where there is a carbon pricing policy in place, the report finds. Its chapters, all written by different authors, examine existing and emerging domestic carbon markets; the design of these markets, including ideas on how to align them; and current tools for financing low carbon development. Contributors included Shell, Rio Tinto and the US government.

Read the press release
Download the report

Climate North America

Carbon in the Bolsa

Mexico’s stock exchange, the Bolsa Mexicana de Valores (BMV), last Friday announced the launch of an electronic platform to trade carbon credits. The exchange will offer United Nations Certified Emissions Reductions (CERs) as well as voluntary market-certified offsets. The move comes on the heels of the fiscal reform bill that passed in the Mexican Senate last week, introducing a new carbon tax on fossil fuels which, if changes pass the lower house, will go into effect in 2014. Companies with shares in the BMV will also be invited to set emissions reductions targets outside of the tax. An upcoming presentation in Mexico City on Nov. 26 will offer more details on the carbon exchange.

Read more

Feds adapt to the situation

US President Barack Obama issued an Executive Order that directs government agencies to draft plans to prepare for the impacts of climate change. Federal money in the past has covered replacing structures after storms but not “upgrades,” but the Executive Order may make it easier for states and communities to design infrastructure like roads, bridges and flood control with future climate conditions in mind. A high-level task force of governors, mayors and other local leaders will help identify hurdles to building resilience. Though the focus on adaptation marks a shift in federal policy, the United States remains committed to its goal of reducing greenhouse gas emissions 17% under 2005 levels by 2020.

Read more in the New York Times

Kyoto & Beyond

The fast after the storm

Yeb Sano, the head of the Philippines delegation at the UN climate talks, announced that he will stop eating until negotiators make “meaningful” progress. He says his fast is in solidarity with the thousands of Filipinos struggling to find food and water after Typhoon Haiyan made landfall on Nov. 8. Preliminary estimates are that 10,000 people died in the storm, which was the strongest tropical cyclone on record to hit land. The Philippines government has connected the typhoon with climate change. “The energy that is stored in the waters off the Philippines will increase the intensity of typhoons and the trend we now see is that more destructive storms will be the norm,” Sano said.

Read more about Typhoon Haiyan
Read more about Sano’s fast

CDM’s tenuous afterlife

John Kilani, director of the sustainable development mechanisms division of the UNFCCC, says that many governments’ proposals for a 2015 agreement mention the use of CERs. Despite crashing CER prices, parties to the Convention are moving beyond the “rigid view” that the Clean Development Mechanism (CDM) is tied to the Kyoto Protocol, Kilani says. However, as the pipeline for emissions reductions projects slows, the CDM board called for a $5.5 million budget cut for 2014, putting their budget at $32.9 million.

Read more about the CDM after Kyoto
Read more about the CDM budget cut

Holding back

EU member states tentatively agreed on Friday to withhold 900 million CERs from the market until later this decade. The “backloading” provision is meant to address the oversupply of credits on the European Union Emissions Trading Scheme (EU ETS). Member states still need to formally ratify the proposals, with a final agreement expected in the next two weeks. Poland and Cyprus are reportedly the only two countries that still opposed backloading at last week’s talks. Former skeptics such as Greece have come around to the idea. However, analysts say that it may be years until European carbon prices rise to 40 euros per tCO2e, the estimated price level needed to incentivize companies to switch to renewable energy or invest in energy efficiency.

Read more

Global Policy Update

China caps it off

After launching its carbon market in Shenzhen in June, China plans to expand emissions trading to Beijing, Shanghai and Guangdong province as early as the end of the year. Planned carbon markets in Tianjin, Chongqing and Hubei are farther behind. So far, the Shenzhen market, which covers 635 industrial facilities, has traded fewer tonnes than anticipated – 113,000 tCO2e, worth a total of 7.25 million yuan (or US$9.16 million). The Shenzhen market is considered a pilot and will inform China’s national emissions trading scheme, expected to begin as early as 2016. Chinese credits are expected to trade at $5/tCO2e, at least at first.

Read more about emissions trading in China
Read more about credit prices in China

We’ll pay you back

The British government has allocated 250 million pounds (US$400 million) over the next two years to help companies pay for indirect costs associated with carbon policies; 16 million pounds (US$25.5 million) have been paid out so far. Tata Steel, Celsa Steel and chemical company Ineos Chlor Vinyls are among the 17 companies that have received payments. Britain’s domestic carbon tax is 4.94 pounds per tonne, set to rise to 18.08 pounds per tonne in 2015 and then again to 30 pounds per tonne in 2020. The tax is meant to drive investment in low-carbon power generation, while the compensation is meant to shield industrial facilities from higher energy bills.

Read more

Offsetting at home

Documentation from September’s workshop on domestic offset schemes, held in Zí¼rich, Switzerland, is now available for download – just in time for the UN Climate Talks in Warsaw. The workshop featured presentations about domestic offset programs in Switzerland, France, Spain, Australia, and California and considered offset programs of varying scale and stringency. “With the declining importance of the two multilateral flagship schemes – the Clean Development Mechanism and the Joint Implementation Tracks – the focus of the offset market rapidly shifts towards the domestic offset schemes,” a press release about the workshop states.

Check out conference documentation

Carbon Finance

Another inconvenient truth

Just because something is invisible doesn’t mean it doesn’t have implications for investment. This is the gist of a recent op-ed by former vice president Al Gore and senior partner David Blood, both now of Generation Investment Management, in the Wall Street Journal. The op-ed explains that a “carbon asset bubble” has formed as investors confuse unquantifiable “uncertainty” with quantifiable “risk,” – incorrectly assuming that climate change impacts fall into the former category. The authors argue that investors should consider at least two-thirds of fossil fuel reserves to be “stranded carbon assets”…lest we be left cleaning up a popped carbon bubble mess.

Read more

Science & Technology

Invisible price tags

“Tax” is often seen as a dirty word. But a recent Organisation for Economic Co-operation and Development (OECD) study finds that market-based mechanisms such as carbon taxes and emissions trading are the cheapest ways to reduce CO2 emissions. And yet, higher-cost policy measures – such as subsidies and feed-in tariffs – are often used instead simply because their costs are less obvious. For example, the study found that feed-in tariffs reduce emissions at 169 euros per tonne while emissions trading systems produce the same result for a fraction of the price – about 10 euros per tonne. “Countries are pricing carbon in a multitude of ways, not always the most effective,” said OECD Secretary-General Angel Gurrí­a.

Read more

A scary leak

The thousands of scientists on the International Panel on Climate Change (IPCC) try to keep their work under wraps until the official release date of their report, now in its fifth edition. But with drafts flying back and forth over the interweb, sometimes things get leaky. This is just what happened earlier this month, when a draft of the impacts and adaptation section slipped out before its scheduled March 2014 publication. The draft suggests that global warming could reduce agricultural production by 2% every decade, even as demand rises as much as 14% per decade. These findings have serious implications for global land use and could further threaten the forests that remain the few remaining sinks of carbon dioxide.

Read more

All roads lead to Rome…but some have fewer tolls

A study by researchers at MIT and Tsinghua University compares provincial cap-and-trade programs in China (which is what the country is currently developing) to a national scheme (a future possibility). Published in Energy Economics this month, the study found that either method could get China to its goal of reducing CO2 intensity 17% by 2015, relative to 2010 levels. However, a national emissions target, with trading across provinces, would result in a 20% lower welfare cost by allowing industry to pursue the lowest cost abatement measures across the entire country. Future research by the MIT/Tsinghua group will compare different designs for emissions trading programs.

Read more about the study
Download the study

Featured Jobs

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Based anywhere, the two new members of the Technical Advisory Committee will provide expert advice and strategic input to The Gold Standard, with a specific focus on climate-smart agriculture and land use & forestry. Candidates must have 5-10 years experience in applied agricultural science; experience with Fairtrade Standards is an asset. Committee members are expected to commit at least 5% of their time to Gold Standard activities.

Read more about the position here

Senior Manager, Policy and Markets – Carbon Trust
Based in London, the Senior Manager for Policy and Markets will manage large-scale technical assistance programs for low-carbon development, energy and sustainability. The position requires extensive international travel, and the successful candidate will have excellent communication, problem-solving, management and quantitative analysis skills. Proficiency in Spanish would be a plus.

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MRV Specialist – Terra Global Capital

Based in Malawi, the MRV Specialist will manage the implementation of carbon development work plans for the USAID-funded integrated REDD Demonstration Program. The position requires managing field surveys, collecting and analyzing spatial data, coordinating training sessions in communities, and communicating with the Terra Global Capital team in San Francisco. Candidates must have an advanced degree in a relevant field, 8 years of work experience in the natural resources sector, at least 5 of which must be in Africa, preferably Malawi.

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Executive Director – Global Call for Climate Action

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Carbon Markets Analyst Intern – IDEAcarbon

Based in London, the Carbon Markets Analyst intern will work with IDEAcarbon’s publication team starting in December. The position involves delivering the core content for IDEAcarbon’s daily and weekly carbon markets investment research products. The successful candidate will have degree-level education, knowledge of climate change policy, advanced Excel skills, and IT literacy.

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