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Getting Back to Our Roots: The Renewed Interest in Forestry Carbon Offsets

The forestry sector was left out of the European Union Emissions Trading Scheme and faced restrictions under the Kyoto Protocol. Bur recent developments indicate forestry may play a key role in addressing climate change, while a new survey suggests offset buyers have a positive view of those originating in forestry projects.

Back in 1997 when the Kyoto Protocol was being signed, forest carbon conservation was a hot topic and expected to play a critical role in addressing climate change and tropical deforestation.

Sadly, less than 1 percent of the projects registered under the Clean Development Mechanism (CDM), which allows emissions reduction projects in developing countries earn tradable offset credits, are now in forestry. This can be attributed to substantial barriers created by three primary influences.

First, the Kyoto Protocol banned projects related to reducing emissions from deforestation and degradation (REDD) from the CDM.

Second, the Marrakech Accords in 2001 further compromised the remaining project areas -- afforestation and reforestation -- by assigning them temporary credits (tCERs and lCERs) that require replacement and therefore are not fully fungible with the rest of the market. Given the unknown and unpredictable state of market and policy conditions at those future points, little, if any, private capital flowed to these project types.  The few projects that have emerged have mainly been sponsored by development banks or governments.

Third, the European Union Emissions Trading Scheme (EU ETS) prohibited forestry CDM credits from entering the system as a viable offset. This is unfortunate because forestry is both a cost-effective carbon mitigation activity and the most likely way the least developed countries can engage in the market. In addition, forestry projects often have substantial positive co-benefits for local sustainable development and biodiversity.

Now more than a decade later, negotiators are still hotly discussing whether and how to include forest carbon credits in an international climate change framework. This time, glimmers of hope appear to be shining through.

At the U.N. negotiations in Bonn, Germany, a few weeks ago, tentative language was proposed that would support the reintroduction of REDD projects into the list of eligible land use, land use change, and forestry (LULUCF) project types under the CDM. Significant issues remain, particularly with respect to ensuring permanence, improving the quantity and quality of data upon which to base crediting, and addressing issues of temporary crediting to enable private capital flow to commence.

Despite this policy progress, the clear gap between the potential of the market and the current existing need has driven a number of groups to develop carbon-based projects in the forestry sector, but in the voluntary market only, as opposed to the regulatory CDM environment.  

EcoSecurities, in cooperation with, Conservation International and the Climate, Community and Biodiversity Alliance (CCBA), recently undertook a survey to better understand how the voluntary market has responded in closing the gap between forest carbon market potential and demand.

Interestingly, the results of "The Forest Carbon Offsetting Survey 2009," based on more than 140 organizations covering a wide variety of geographies and industrial sectors, showed that in 2008, many carbon buyers decided to buy forestry offsets for the first time. Respondents purchased at least 2.7 million carbon credits in 2008, with at least 850,000 credits -- nearly a third -- coming from forestry.  As a result, interest in forestry offsets has significantly increased, as have expectations about the role the sector will play in combating climate change.

In North America, carbon offset buyers were upbeat about forestry, while in Europe, many still had mixed perceptions. In part, this could be due to cultural differences, but it may also be related to the lingering legacy of the polarized debate during the original Kyoto negotiations. So far, North Americans have been less hesitant than their European cousins in accepting the solutions that robust carbon standards (such as the Voluntary Carbon Standard (VCS) and the Climate, Community and Biodiversity Standards (CCB Standards) offer to ensure permanence of offsets, guarantee reliable monitoring, and reassure buyers that the projects benefit local communities and the environment.

The survey also found that buyers looked to invest their money in sustainable offset projects. At a macro-level, organizations were conscious of contributing to a solution for a global problem which includes climate change, deforestation and depletion of the world’s biodiversity.

At a granular level, buyers were keen to support the sustainable development of communities from which the offsets originate. European buyers tended to prefer offsets from projects in tropical developing countries, often managed by NGOs who guarantee the validity of the contribution to local communities. North American buyers found these goals equally appealing, but also had some preference for offsets created closer to home.

Some organizations were prepared to make up-front payments for projects that provided future carbon benefits. Companies also indicated that they were willing to invest and pre-finance project development. Some even expressed interest in non-carbon related value (i.e., biodiversity conservation and water services), although these interests were much more closely aligned to the organization’s CSR objectives than to tradable emission reduction credits.

In sum, the survey results indicate a positive picture of voluntary forestry offsets, and demonstrate support for their inclusion in the “toolbox” of climate solutions. The survey results also demonstrate the substantial amount of private capital ready to be deployed into forestry projects, and the degree of excitement and interest in doing so. As market participants get back to their forestry “roots,” we have a key role to play in helping re-engage our forests as the important climate change weapon they are.

The voluntary market can help build the momentum that could translate into the next generation of official climate policy, but forests must comprise both a larger slice of the CDM pie and a significant part of U.S. climate policy in the years to come.

Aimee Barnes is senior manager of U.S. regulatory affairs at EcoSecurities, a company working to mitigate climate change through projects that reduce greenhouse gas emissions globally.

"Forest" -- CC licensed by Flickr user mike138.

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