From the Editors
The Ecosystem Marketplace's Forest Carbon News
Tracking Terrestrial Carbon
Protecting the world's forests has gained greater visibility as countries battle the often deadly consequences of a warming climate. Demand for carbon offsets earned from forest protection or renewal grew 17% last year as companies and governments invested $192 million in efforts to plant trees, improve forest management, support "climate-smart" agriculture, or avoid deforestation, according to Ecosystem Marketplace's State of the Forest Carbon Markets 2014 report. The report was launched to a full house on November 21 at the World Bank and is available for download here.
The forest carbon market surpassed a critical milestone last year by topping $1 billion in cumulative value. "That brings up the big question of whether $1 billion is enough, and the obvious answer is no," said Allie Goldstein, Ecosystem Marketplace's Forest Carbon Associate and co-author of this year's report. "Although deforestation rates have declined since the early 2000s, deforestation and other land-use change still accounts for 14% of greenhouse gas emissions (GHG) in the world. That's more than fossil fuel use in Africa, Central and South America combined."
Though global markets for offsets from agriculture, forestry, and other land-use projects transacted 32.7 million tonnes (MtCO2e) in 2013, tying 2010 for the highest demand, these offsets were sold at an average of $5.2 per tonne – down from $7.8 per tonne in 2012 – as offset issuances more than tripled. Though private sector buyers hailed from diverse industries on almost every continent, only 11% of buyers were "new" to the market in 2013, indicating that the influx of supply was not met by a corresponding influx of demand.
More than 80% of offsets transacted from projects that reduce emissions from deforestation (REDD), and the majority of those were sourced from Latin America, with Brazil and Peru alone supplying more than half of forest carbon offsets globally. Avoided deforestation projects now cover almost 30 million hectares, about the size of the forest area of Malaysia.
An early example of public sector "payment-for-performance" for REDD was evidenced in the state of Acre, Brazil, which secured a $40 million agreement with German development bank KfW for 8 MtCO2e in emissions reductions. Dozens of other jurisdictional REDD programs are under development.
"What we are seeing is definitely a shift in focus toward going to a jurisdictional scale and going to scale," said Ellysar Baroudy, Lead Carbon Finance Specialist for the World Bank, which manages several funds dedicated to supporting efforts to implement national REDD+ programs on several continents.
Voluntary offset buyers purchased the majority (89%) of forest carbon offsets in 2013, led by energy utilities and food and beverage companies seeking to meet corporate social responsibility commitments or demonstrate industry leadership on climate change. Compliance-driven buyers in California and Australia purchased the remaining tonnes, but emerging carbon pricing regulations in places such as China and South Africa – as well as the scale-up of California's cap-and-trade program – could carve a larger role for compliance markets in the future.
Developers and other stakeholders are also carefully watching the United Nations Framework Convention on Climate Change (UNFCCC) process to see what kind of policy signals emerge from the next round of Conference of Parties (COP) negotiations in Lima next month and in Paris in 2015. Agreement on the REDD Rulebook – the guidance on how to harvest available data on forests to create deforestation levels to be recognized by the UNFCCC – at last year's Warsaw COP was a positive development, but only a first step, said Rick Saines, Principal with law firm Baker and McKenzie.
"We're not there yet on REDD to actually create the means by which financing, public and private, can really invest at the scale so that when we meet in a few years from now we're not talking about $200 million – we're talking exponentially greater than that," he said. "That's what the promise is. That's what the obligation is of all of us in the space to make sure it happens."
Inquiries about the report can be directed to the report co-authors Allie Goldstein (firstname.lastname@example.org) and Gloria Gonzalez (email@example.com). Also look for us at the Global Landscapes Forum in Lima on December 6th, where we will be launching the Spanish-language Executive Summary and talking more about the report findings.
More news from the forest carbon markets is summarized below, so keep reading!
—The Ecosystem Marketplace Team
If you have comments or would like to submit news stories, write to us at firstname.lastname@example.org.