Conserving and restoring forests won’t be cheap and easy after all
The corporate world has fallen for trees. But to be effective, the cost of offsetting CO2 emissions with the sequestration power of forests will have to go up. Are companies willing to pay?
In Dr. Seuss’ "The Lorax," the character who represents industry succumbs to a feverish greed and chops down every last tree in the forest surrounding Thneedville. In real life these days, the corporate world is all about planting them.
From Microsoft to JetBlue to Royal Dutch Shell, an increasing number of companies are seeking to offset a portion of their greenhouse gas emission by investing in forest protection and reforestation. This new corporate enthusiasm for trees could create the boon advocates of programs such as the United Nations’ Reducing Emissions from Deforestation and forest Degradation initiative (REDD+) have longed for. However, if businesses really want to put a dent in Earth-warming emissions by protecting and planting trees, the future of carbon offsetting through forestry will have to look very different from the past.
That’s a very big if, because perhaps the primary reason companies are drawn to trees as a climate solution is how simple and cheap the concept sounds. Trees! How could we not see you were the one? You were right in front of us the whole time! In reality, carbon offsetting through forest conservation and reforestation is far from simple and won’t be cheap — not if real, meaningful emissions reductions are the goal.
To be effective, improvements will have to be made around the verification and monitoring of conservation projects, which have a long history of problems and have produced, at best, mixed results when it comes to reducing emissions. Complicated land-use issues — such as how to restore forests and increase food production by 50 percent by 2050 — also will need to be tackled; and the price of carbon offsets will have to go up. A lot.
"What we need to do, it’s not going to be as cheap as people think is," said Timothy Searchinger, a Princeton researcher who studies land use and climate change. "If all you’re paying is $10 per ton [of CO2], you’re probably not doing it right."
Planting trees is good, but…
The latest science says we need to cut 30 gigatons a year of carbon emissions by 2030 to keep global temperature rise within the realm of the Paris Agreement target of "well below 2 degrees Celsius." Nature can provide roughly one-third of the reductions needed, through better management of agricultural and grazing lands and the protection and restoration of forests and wetlands, according to The Nature Conservancy.
In other words, two-thirds still need to come by transitioning to a clean energy economy and investing in technical solutions to removing carbon. This is something everyone, even the proponents of carbon offsets, stresses: buying offsets or simply planting trees will not fix the climate crisis and should not be a substitute for cutting emissions.
"We have to do all it. We need to protect forests, and we need to reduce energy emissions," Searchinger said. "Offsetting should only be something that’s done when there really is no other option."
This makes how offsets fit into a company’s sustainability plan more important than the extent to which it uses them. Announcing that your organization is offsetting 30 percent of your business’ CO2 emissions with trees, while meeting 100 percent of its electricity and transportation needs by burning fossil fuels won’t help the planet or the company’s public relations.
This is why efforts such as the One Trillion Trees initiative, created by Salesforce CEO Marc Benioff, have come under such scrutiny despite everyone agreeing that planting trees is a good thing. More than 300 companies have signed onto the initiative, which Benioff talked up at The World Economic Forum in Davos, Switzerland, in January.
Put your money where your CO2 is
Fear of the greenwashing label hasn’t quelled corporate interest in forestry offsets.
Volume on what’s known the voluntary carbon 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 percent from just two years earlier, according to a 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 such as reforestation or regenerative agriculture, which soared by 264 percent, and continued to grow in 2019.
Verra, a nonprofit that develops standards for carbon offsetting projects, reported in December that its issuance of voluntary carbon units for forestry and other land-use projects nearly doubled last year compared with 2018.
"It took me by surprise what happened in the last 12 months, that all of a sudden there was so much demand for carbon credits. All of these corporates were reaching out to us," said Charlotte Streck, founder of Climate Focus, an Amsterdam-based carbon market advisory that’s advising EasyJet. The British discount airline in November said it would make forest conservation and reforestation in South America and Africa a central part of its plan to be the first airline in the world to offset all of its carbon emissions.
"Companies were buying up a lot of inventory that’s been verified and is just sitting around," said Jeremy Manion, forestry carbon markets lead at the Arbor Day Foundation, which develops projects in the U.S. and 26 other countries.
For example, following EasyJet’s announcement that it would spend roughly $32.5 million a year over three years supporting forestry, clean energy and community-based efficiency projects, The Financial Times reported this would work out to less than $4 per ton of CO2.
That’s at the low end of the roughly $4 to $10 range that forestry offsets are selling for on the voluntary market, and nowhere near where experts say prices need to be to supplement incomes for landowners and create real, lasting emissions reductions.
The Arbor Day Foundation partners with the GreenTrees restoration project in the Mississippi Alluvial Valley, which has supplied the vast majority of U.S. forestry credits registered on the voluntary market, according to the GreenTrees website. "We’ve been able to be successful to date by piecing together these diversified income streams in addition to the carbon credits," Manion said, including revenues from sustainably harvested timber, fees for hunting, fishing and camping, and funds from the U.S. Department of Agriculture for wetland conservation.
In the United States, a carbon price of $50 a ton would result in roughly 200 million tons of carbon sequestered annually through forest restoration, according to a U.S. Forestry Service report. At $100 per ton, an additional 100 million tons of carbon would be sequestered each year, the report says. In the Global South, a price of as low as $20 per ton dramatically could slow deforestation, especially in Africa, and suck up nearly six gigatons of carbon dioxide, according to another report, published last year in the scientific journal Nature Climate Change.
From surplus to shortfall
It’s unclear what it would mean to, say, the cost of an airline ticket if demand on the voluntary market and pricing on the regulatory compliance markets — currently around $26 per ton on the European Union’s carbon trading system, and $17 on California’s cap-and-trade system — pushes prices on the voluntary market up at some point in the future.
Both EasyJet and JetBlue, which in January became the first major U.S. airline to announce plans to go carbon-neutral on all domestic flights, say they are absorbing the cost. "We are baking the price of carbon into our business model going forward," Sophia Mendelsohn, head of sustainability and environmental social governance at JetBlue, told GreenBiz.
Perhaps these early adopters are betting that upcoming regulation will level out the playing field with competitors. Under the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), most airlines will be required to buy offsets to account for any growth in CO2 emissions above 2020 levels. CORSIA begins a voluntary pilot phase next year and a second mandatory phase in 2027.
With the excess supply selling off, prices on the voluntary carbon market will no doubt rise as companies vie for quality projects.
"We’re coming up on a shortage of supply for reforestation carbon credits," Manion said. "For the GreenTrees project, we’re selling out. We’ll probably be sold out before the next verification in the spring."
As project developers attempt to meet quickly rising demand, it becomes all the more important that projects, particularly REDD+ and other conservation projects, meet strong verification criteria and are diligently monitored.
To result in a true emissions reduction, the protected area needs to stay protected indefinitely. And if deforestation was planned in one area to make way for, say, a cattle ranch, the result of conserving that land can’t be that the rancher simply shifts over to another piece of land and cuts the trees down there instead.
The most difficult issue to solve with forest conservation projects, though, is determining whether the trees were even going to be cut down in the first place.
"A lot of what gets protected wouldn’t have been cut down anyway," said Paul Ferraro, a professor at Johns Hopkins University, who studies the environmental and social impacts of public and private programs. "Say there’s a plot of valuable agricultural land that’s going to be cut down, but protecting that area is politically impossible. What happens is they protect this other area that’s away from the roads, away from the cities, with very few resources to exploit it."We’re coming up on a shortage of supply for reforestation carbon credits.
Ferraro says this is called the "high and far" phenomenon.
Tech to the rescue?
Apropos of the world we’re living in, there is at least one tech startup that believes it can solve these problems.
Pachama uses machine learning on a combination of satellite, drone and lidar images to calculate a project’s potential for sequestering CO2 and keep tabs on it over time. The company sources projects that are approved by existing certification bodies but offers its customers additional high-tech monitoring and management services.
Roughly a year after its launch, Pachema manages 13 projects in the U.S. and Latin America, and it recently raised $4.1 million to create a marketplace where companies can support forest conservation projects.
Founder Diego Saez-Gil said that by looking at the historical data on where deforestation has happened in the past and taking into consideration things like roads, an algorithm can determine the probability that a piece of land will be cleared. "These projections are better than any self-reported projections of what’s going to happen to the forest," he said.
Unsurprisingly, Microsoft is a fan of this tech solution and has signed on as one of Pachama’s early customers. The Silicon Valley giant has agreed to purchase offsets at $15 a ton.