Part 2 of my 2-part deep dive into REDD+
In September 2019, something significant happened in the world of forest conservation: Norway agreed to pay Gabon $10 per metric ton of carbon to reduce its emissions from deforestation.
The agreement is an example of the global strategy know as REDD+ (reducing emissions from deforestation and forest degradation), where industrialized nations make results-based payments to developing tropical forest countries for curbing deforestation and avoiding the emissions released when trees are destroyed.
REDD+ advocates saw Norway’s offer as a big deal, given that the going price had long been stuck at $5 per metric ton, an amount Costa Rica’s Minister of Environment Carlos Manuel Rodríguez calls “an insult to anyone who is working to stop deforestation.”
“The price was set in unbalanced negotiations by buyer countries or multilateral institutions,” Frances Seymour, distinguished senior fellow at the World Resources Institute (WRI), said via a Skype video call. “It’s basically been: we’ll pay you $5 a ton, take it or leave it.”
Norway’s offer marked a step in the right direction, still it wasn’t enough. A study from last year estimated it would take at least $20 per ton to dramatically slow deforestation. And pricing represents only half of the equation. REDD+ finance remains dwarfed by the underlying drivers of deforestation, the profits that come from large-scale agriculture, mining and other commercial activities. For REDD+ to actually work as it was intended — a mechanism to drive big money into preserving the world’s tropical forests — would not only take a higher price, but a huge increase in sales volume.
More than a decade since REDD+ debuted on the global stage, the demand that would drive such volume wasn’t coming from would-be buyers like Norway, or Germany, or any of the other industrialized countries of the global north. The international community that agreed on REDD+ as a strategy to curb deforestation and forest carbon emissions, making it part of the United Nations Framework on Climate Change (UNFCCC) in 2007, was still bickering in 2019 about the details of the global carbon market meant to pay for it.
However, another group of buyers did seem eager to put its dollars into REDD+: the private sector.
Around mid-2017, companies seeking to offset a portion of their greenhouse gas emissions began pouring money into carbon credits, particularly for reforestation and forest conservation projects. This demand started to accelerate last year, with dozens of large corporations committing to climate targets — aligned with limiting global temperature rise to the Paris Agreement target of 1.5° Celsius (2.7° Fahrenheit) above pre-industrial levels — across their operations and supply chains. “Carbon neutral” became the new green, with commitments from everyone from Amazon to JetBlue to Royal Dutch Shell. A few months after the Norway-Gabon agreement, Microsoft pledged to pay $15 per metric ton of carbon as part of its effort to go “carbon negative.”
To advocates of REDD+, this looked like a lifeline. A strong demand signal from private sector buyers, they believed, could revitalize the enthusiasm expressed by governors and heads of state at the time REDD+ was first proposed. By early 2020, this signal seemed like more of a sure thing than ever.
Then, the coronavirus hit.
Another dashed hope?
For the most part, people who’ve spoken to leading companies that have made carbon-neutral commitments, such as those in the technology and consumer goods sectors, say they appear to be sticking to them, despite the pandemic’s economic fallout.
“But my feeling is that COVID will affect the plans and ambitions of those companies that we were expecting to join the movement, but they had not fully embraced the need for carbon neutrality,” Gabriel Labbate, REDD+ team leader at the United Nations Environment Programme (UNEP), said in an interview. “If you were not convinced that your company was in need of investing in climate mitigation, it will reinforce your tendency to sit idle and do nothing.”
Volume on what’s known as the voluntary markets, where companies that are not government-mandated to reduce emissions (which is the vast majority) buy carbon credits, hit a seven-year high in 2018, jumping 52.6% from just two years earlier, according to the most recent report from Ecosystems Marketplace. This broad-based corporate demand was driven mostly by companies entering the market for the first time, which the report noted was a change from previous years. It also was dominated by interest in nature-based solutions, which include forest conservation and reforestation; restoration of wetlands and grasslands; and regenerative agriculture.
VERRA, one of the main standard-setting bodies for the voluntary markets, recently reported that nature-based solutions represented 72% of its total issuances in 2019, compared with 38% in 2016. (To date, REDD projects comprise the vast majority of this category.)
These voluntary market trends were expected to continue in 2020, and for the first few months of the year they did, according to VERRA’s first-quarter issuance numbers. However, second-quarter data analyzed by Mongabay shows that issuance for that period plummeted by 63% compared with Q1.
It’s unclear whether this drop in demand will turn out to be short-term or last for years. However, considering how devastating the pandemic’s economic impact appears to be, it would not come as a surprise if a large number of companies put buying carbon offsets on the back burner for some time.
An aborted takeoff for airline offsets
Where expected demand looks most likely to disappear is the airline industry, a sector that before the pandemic was on the verge of becoming a key buyer of carbon offsets because of something called CORSIA, the U.N.’s Carbon Offsetting and Reduction Scheme for International Aviation. CORSIA begins a voluntary pilot phase next year — which essentially all major airlines have agreed to participate in — before becoming a compliance market in 2027.
Under the scheme’s original rules, airlines would be required to buy offsets to account for any growth in CO2 emissions above an average of 2019–2020 levels. However, because of COVID, 2020 air travel has plunged, which means so have airline emissions. And due to the severe economic impact of this, the airline industry lobbied for a 2019-only baseline, which the U.N. member council of the International Civil Aviation Organization on June 30 agreed to.
A baseline that uses only 2019 volume means airlines will not have to offset emissions until air travel returns to last year’s levels, and that could take several years.
This is tough blow for REDD+. Because the international community has failed to create a mandatory global carbon market, only a limited number of compliance markets exist. These markets are where companies fulfilling government mandates buy offsets, such as Europe’s Emissions Trading System, and California’s cap-and-trade system. CORSIA and California are the first compliance regimes that look likely to accept the jurisdictional-level REDD+ credits sold by tropical forest countries or states. The California Air Resources Board voted in September 2019 to endorse the California Tropical Forest Standard, a set of rules these countries would need to follow to sell REDD+ credits on the California market.
To be clear: the REDD+ credits currently being sold on the voluntary markets are not the same as jurisdictional REDD+ credits. The credits on the voluntary markets are project-scale credits, sold largely by the nonprofit and private sector developers of hundreds of REDD+ projects, of varying quality, that have been developed over the past decade or more.
The latest debate in the land of never-ending debates
Another challenge still facing REDD+, beyond the prospect of shaky private sector demand, is the unanswered question of how to sell REDD+ credits to the private sector buyers that want them, which has led to a dispute basically over who should be allowed to play the role of the seller.
“Really, there is nobody that makes their lives more complicated than the REDD community,” Charlotte Streck, founder of Climate Focus, said over a Skype video call. Climate Focus is an Amsterdam-based carbon market advisory that works with companies, such as EasyJet, to incorporate quality offsets into their strategies for carbon neutrality.
There are two schools of thought here. One favors a purely jurisdictional approach, where only tropical forest countries and states can sell carbon credits because, proponents of this system argue, curbing deforestation on a large scale usually requires actions only governments can perform. Advocates of this approach say it can help solve a lot of the problems that have made REDD+ so controversial, such as the issue of leakage, where deforestation that’s avoided in one area simply moves to another area. Independent project developers can do little to stop problems like leakage; only governments can enforce the law when forest loss is due to illegal activity, jurisdictional advocates say.
With this approach, individual projects could exist under a country’s national REDD+ policy, but project developers would not be able sell their credits directly to buyers; they would receive their financing through the jurisdiction.
The other school of thought says private sector buyers have already invested in hundreds of projects on the voluntary markets. And given the choice, many companies would prefer to purchase small-scale forest conservation or reforestation offsets in business-to-business transactions with individual project developers, rather than having to engage with governments. So, companies are going to resist any efforts to limit the sale of carbon credits to jurisdictions.
“The projects will not go away … this is how the private sector operates, and how it honestly feels more comfortable,” Streck said. “It looks much nicer if you have it all at the jurisdictional level. But first of all, we have the problem that the governments at the moment generally fail. Second, for the private sector, taking the risk and making it dependent on government performance is toxic. There is so much risk of corruption, and always the risk of policy reversal, look at Brazil. For companies, it’s much better to say we have this piece of forest here and it’s a very credible NGO that gets our money, rather than say we give the money to the government so that they reduce deforestation. This is not realistic at all.”
Streck co-founded Climate Focus 15 years ago, and like other supporters of REDD+ who spoke to Mongabay for this story, she tends to be pragmatic and frustrated with the slow pace of change. To her and others who say they don’t believe a purely jurisdictional approach is practical, good projects could exist under a national REDD+ strategy, and the project developer could sell the credits directly to buyers, as long as the carbon accounting aligns with the jurisdictional-scale accounting and the avoided emissions from the same swath of forest aren’t counted twice.
Jurisdictional REDD+ advocates may have come up with a solution to this problem. In February, the new philanthropy-backed Architecture for REDD+ Transactions (ART) published the world’s first standard for jurisdictional REDD+ credits, basically a set of rules similar to the requirements countries must meet to receive results-based payments from the World Bank’s Carbon Fund. (WRI’s Seymour, who favors a purely jurisdictional approach, serves on the ART board of directors.) Something of a companion to ART is the Emergent Forest Finance Accelerator, which was created to act as an intermediary, a broker of sorts, to facilitate transactions between companies and countries. Purchasing offsets on the voluntary market through a broker is common; dozens of these brokers already exist. And if Emergent proves successful at facilitating transactions between corporate buyers and jurisdictional sellers, others could follow.
While the role of individual project developers hardly seems like the biggest point of disagreement in the long tumultuous history of REDD+, it is important. How to treat legacy projects is one of a number of unresolved disputes that have hamstrung the negotiations around the international carbon market under Article 6 of the Paris Agreement.
Yes, Article 6 still looms
Because of COVID-19, the 2020 climate talks, which would have been the next opportunity for the international community to iron out the details of Article 6, were pushed back to November 2021. It’s still unclear whether REDD+ credits of any sort will be included in the final agreement on an Article 6 market. But advocates of jurisdictional REDD+ hope that if project-based credits are excluded, it will help quell the controversies that have plagued REDD+ since the beginning. Because, they say, these controversies stem largely from bad REDD+ projects.
This hope seems unrealistic. REDD+ is extremely unpopular among grassroots environmental and human rights groups. The idea that you could convince them that governments can be trusted where NGOs and private sector project developers can’t doesn’t seem likely, despite all the progress that tropical forest countries have made in creating strong REDD+ policies and safeguards.
Moreover, even if a consensus is reached on an Article 6 market next year and some form of REDD+ credits are included, given the amount of time it generally takes between climate agreements and climate action, it could take years before a global carbon market is up and running.
The biggest threat to forests is still time. No one understands this better than the REDD+ advocates who continue to push forward despite setback after setback.
Juan Chang, the deputy director of the U.N.’s Green Climate Fund, holds on to a vision of what REDD+ could be if it were to reach scale before it’s too late[CC6] : “For some people REDD+ is a compensation mechanism that pays for not cutting down forests,” he said. “To me that’s the wrong definition. It makes the system fragile and subject to so many changes that it becomes unsustainable. However, if we look at REDD+ as a transition in which you’re providing sustainable livelihoods as opposed to unsustainable activities, then there is a point where you do not depend on the payments that REDD+ provides to sustain your livelihoods and keep the forest. That should be the end goal. REDD+ should be a transition toward resilient and low-emissions development.”
To even begin to transform this idea into a reality will take an unprecedented level of public and private sector cooperation, done with both integrity and speed. The drivers of deforestation are deeply embedded in our global economic system and in global commodities, such as beef, palm oil, soybeans, cocoa, and timber.
Still, Arild Angelsen, an economics professor at the Norwegian University of Life Sciences, who describes himself not as a pessimist but a well-informed optimist, said it doesn’t make sense at this point to say, “OK we tried REDD and it failed, let’s move to the next fad, the next silver bullet.
“It’s hard to change the world,” he said.
This story first appeared in Mongabay.