The Year in Forest Carbon: Supply-Side Success, Demand-Side Dilemmas

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By Steve Zwick

30 December 2013 | This year began with an underappreciated tailwind from the 2012 climate talks in Doha, which provided a clear set of forest-carbon issues for UN negotiators to work through in 2013. The result was a series of productive meetings that culminated with agreement on sticky issues that had long been hindering the creation of financing mechanisms that Reduce greenhouse gas Emissions from Deforestation and forest Degradation (REDD) under the United Nations Framework Convention on Climate Change (UNFCCC).

At the same time, private-sector conservationists were securing endangered rainforest at an unprecedented rate – in part because they thought the UNFCCC would be further along now than it is. As a result, the year ended with global agreement on how to move forward with REDD in under the UNFCCC, but with more than 150 private projects struggling to find buyers and a handful of regional initiatives in various states of development.

Landscapes on the Horizon

Our own coverage began with a flurry of stories from guest authors exploring the growing recognition of REDD’s role as a key financing component in larger sustainable agriculture programs – the “landscapes approach” to climate-safe land-use practices. Jan Borner and Sven Wunder examined the synergies between forestry and agriculture, while Tony La Viña, Leticia Labre, Lawrence Ang and Alaya de Leon examined the specific ways that REDD was being used to support climate-safe farming, and Liem Dang Thanh and Linda Rosengren went local with an examination of Vietnamese villagers who are using community carbon pools to get ready for REDD+.

Later in the year, we examined the implications for FLEGT and REDD+ of small-scale illegal logging In Vietnam, and then guest authors Todd Gartner, James Mulligan, Rowan Schmidt and John Gunn offered a detailed examination of the science, the finance, and the business case for meeting the challenge with new investments in forests and green infrastructure within the United States.

At year-end climate talks, the Center for International Forestry Research (CIFOR) unveiled a new study exploring the synergies between REDD and biodiversity, and a coalition of Netherlands-based corporates and the Dutch government launched an initiativeexplicitly designed to harness REDD funding for biodiversity conservation.

Nesting and Nurturing

With so many private-sector projects underway and little consensus over how they may or may not fit into emerging compliance regimes, we returned to Vietnam to examine three pilot projects in the provinces of Dien Bien, Kon Tum, and Lam Dong which are testing methods of “nesting” private projects in the country’s emerging compliance regime.

We then shifted to Latin America, where two Brazilian states – Mato Grosso and Acre – moved forward with their ecosystem service regimes. Specifically, Mato Grosso implemented its new REDD+ law, and Acre received a cash infusion to support its comprehensive system of payments across all ecosystem services, and it did so just as Maryland-based CarbonCo and London-based CarbonNeutral Company reached major milestones on projects underway there.

Staying in Latin America and digging deeper into the issue of nesting, we examined formal agreements that Costa Rica and Chile signed with the Verified Carbon Standard (VCS) to explore means of nesting projects in those two countries.

We also dissected two discussion papers focusing on new financing mechanisms that might help support private conservation efforts until public programs get up to scale.

Building on research from Ecosystem Marketplace and others, Conservation International published a report showing how governments signaled green-minded entrepreneurs that they'd be rewarded for taking action on climate change by saving endangered forest, but how these same governments are now leaving some of the most productive projects in limbo. At year-end talks, many of those same entrepreneurs were showing no regrets about their actions, but reiterated earlier calls for policymakers to deliver regulatory drivers.

Money and Expertise

While private-sector projects were delivering results but looking for money, public-sector money was piling up in search of results. Costa Rica became the first country to access performance-based payments through the World Bank’s Carbon Fund as developed nations funneled more funds toward the Bank’s Forest Carbon Partnership Facility (FCPF).

As more donors put money on the table, attention shifted to the need to develop rigorous carbon accounting regimes in recipient countries. WWF and the University of California at San Diego (UCSD) stepped up with a new training program designed to help develop the expertise needed to support those regimes. We then examined the science behind measuring carbon-emissions from changes in land-use by showing how researchers from two separate institutions measured carbon emissions from deforestation globally using different techniques and came to the same number: 3.0 gigatons per year from 2000 through 2005.

Later in the year, the Forest Trends’ REDDX initiative and the Overseas Development Institute’s Climate Funds Update launched a collaborative series exploring existing efforts to provide transparency to REDD finance flows.

Perceptions and Distortions

REDD finance found itself in the public eye in 2013 – but that eye often seemed to be viewing the mechanism through a glass darkly.

The Chiapas office of Amigos de la Tierra México, which is the Mexican affiliate of Friends of the Earth, for example, posted an error-riddled story that implied the Mexican state had “cancelled” its plans to develop a statewide regulatory regime for REDD. The story was especially perplexing because it came one day after indigenous leaders from around the world had joined environmental NGOs and "green" corporates in endorsing the recommendations of the REDD Offsets Working Group (ROW), a scientific advisory panel that was highly positive towards the Chiapas program.

In Canada, British Columbia’s Auditor General issued an equally distortive critique of the Nature Conservancy of Canada’s Darkwoods REDD project. Although our own coverage showed the Auditor General’s report to be seriously flawed, the AG’s report received widespread media attention.

Later in the year, a small Indonesian consultancy called Greenomics claimed that a major REDD project there had failed to secure usage rights for its project – a claim that proved to be unfounded. Finally, as the year drew to a close, the normally reliable Atlantic Monthly posted a story that rehashed nearly a decade of poor reporting on REDDwhile failing to explore the mechanism as it exists in reality.

Private-Sector Demand, Public-Sector Doubt, and Regional Initiatives

With voluntary demand in doubt, we examined Microsoft’s policy of charging itself an internal carbon fee that it uses to buy offsets around the world. Guest author Brian McFarland examined the ways REDD+ can be used to accelerate business sustainability.

As the year wound down, we began a look at four entities that have taken a leadership role in their respective sectors: carpetmaker Interface, logistics group Deutsche Post, publishing giants National Geographic and Macmillan. This series will continue in the new year.

Turning to the issue of corruption,guest author Thomas Hubert examined the role that implementing a REDD+ program in the Democratic Republic of Congo could play in governance by triggering policy change and reform as well as providing much-needed financial assistance.

With UN talks quietly moving forward in Bonn, we examined regional efforts that are emerging – and merging – around the world.

The Peru Carbon Fund’s new PCF Standard aims to generate something it calls “Carbon Capture Certificates” for people who plant native trees on previously deforested land. It’s a novel approach that allows for landowners to reforest and harvest while accessing carbon payments, and we spoke with PCF Executive Director Alessandro Riva about the new organization’s work within the region.

At the same time, three Peruvian states joined the GCF, which means that the collaboration of states and provinces aiming to curb deforestation and reduce carbon emissions is now active within 20% of the world's tropical forests.

On the downside, California’s efforts to include international offsets in its program are still facing political opposition.

Risk Management

With risk becoming an ever more critical question, California’s CAR, and insurer Parhelion joined forces to cover California offset invalidation risk.

We also examined political risk coverage and how it can help finance carbon offset projects.

The California Air Resources Board (ARB) signed off on a proposal to shift the invalidation risk away from forest owners to the buyers of offset credits from approved forestry projects. The regulators are aiming for consistency, but at least one major emitter is concerned that making buyers responsible for the risk will make it more difficult to purchase forestry offsets.

Supply-Side Success

In June, two high-profile REDD projects achieved major milestones. Brazil’s Paiter-Surui people became the first indigenous people in the world to generate REDD+ credits, and an audit of Indonesia’s Rimba Raya Biodiversity Reserve Project showed that it had prevented the emission of roughly 2.2 million tons of carbon dioxide into the atmosphere over the year ending in July, 2010 – a finding that auditors stand by despite a challenge by local consultancy Greenomics.

The Gold Standard was taking steps to expand its forest-carbon coverage into REDD, while in Germany, Forest Carbon Group and Forest Finance Group decided to pool their sales operations to market their forestry-based emission-reduction projects to commercial and private customers across Europe, with a portfolio of products verified under the Gold Standard and the Verified Carbon Standard.

Finally, on the eve of year-end climate talks in Warsaw, we released our Covering New Ground: State of the Forest Carbon Markets 2013, which showed that private conservation efforts had managed to protect 26.5 million hectares of forest. That's more than all the forests of the Democratic Republic of Congo combined.

Warsaw: The Main Event

Climate talks opened in Warsaw on 11 November, and ultimately yielded global agreement on a REDD “Rulebook”, which is actually a collection of seven decisions that together provide guidance on how countries can harvest available data to create reliable snapshots of their forests over time and to use these snapshots to create deforestation reference levels that will be recognized by the UNFCCC.

The decisions govern, among other things, modalities for monitoring national forests, addressing the drivers of deforestation and forest degradation, and measuring, reporting and verifying activities designed to reduce greenhouse gas emissions.

It’s still, however, not clear what sort of payoffs that data will yield long-term, and for that there’s a work program for developing results-based finance in support of REDD and a new set of arrangements between the COP and the Green Climate Fund. The decisions also include a mechanism for helping developing countries deal with loss and damage from climate change.

We covered the COP from beginning to end, with a narrow focus on REDD and those issues still under discussion. Among our more popular posts from Warsaw was this chat with Pipa Elias of the Union of Concerned Scientists, Chris Meyer of the Environmental Defense Fund (EDF), and former Mexican negotiator Josefina Brana-Varela, currently of WWF (World Wildlife Fund). We sat down right after Norway, the US, and the UK unveiled a new financing initiative designed to save endangered rainforests by promoting climate-safe agriculture in developing nations, and the three offered insight into the future of REDD, the role of landscapes, and the potential for nesting.

The repercussions from Warsaw are still coming to light, and through January we will be unpacking those findings in this series of articlesa> examining the more intricate aspects of the decisions as 2014 emerges as one of the busiest ever.

Indeed, with the Warsaw Rule Book now in place and donors finally stepping up with real money, you can expect to see plenty of activity on the recipient-country side, led by Peru, home to this year's global talks in November.

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Steve Zwick is Managing Editor of Ecosystem Marketplace. He can be reached at szwick@ecosystemmarketplace.com.
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