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Should companies use credits for avoided deforestation to meet net-zero goals?

Avoided deforestation credits represent a reality that doesn’t exist. Removing them from net-zero strategies, while still funding them under a different scheme, can avoid this problem.

Rainbow between the trees

Can carbon markets make REDD+ work? Or should companies move one? Image by Jesse Klein/GreenBiz.

There is no way to hold global temperature increases to 1.5 degrees Celsius of warming without protecting existing forests and preventing more deforestation. But every week seems to bring news of an avoided deforestation project that overpromised and underdelivered, calling into question the value of credits issued by it.

One of the most recent illustrations came when The Guardian claimed that over 90 percent of Verra’s avoided deforestation projects (also called Reducing Emissions from Deforestation and forest Degradation, or REDD) are systematically overissuing credits. The article calls into question not just a one-off project but the entire registry and crediting system.

Verra has strongly pushed back against the claims, taking issue with the methodologies used by The Guardian and its investigative partners, SourceMaterial and Die Zeit. Verra wrote in a blog post that the methodologies "do not consider site-specific drivers of deforestation," and that Verra uses real control areas compared to the synthetic controls used by The Guardian. According to Verra’s post, the analysis done by The Guardian compares the project to a control scenario adjusted by factors contributing to deforestation instead of looking at a real control area. The organization also announced a Verified Carbon Standard (VCS) Program Advisory Group in late February that will work to ensure the highest integrity and quality methodologies. 

The reputation of carbon credits for avoided deforestation has taken a beating for the past few years, and the damage may be too deep to reverse. A growing number of companies might not be willing to risk the potential reputational damage associated with investing in avoided deforestation credits and becoming the center of another Bloomberg or ProPublica investigation. 

Some leaders in corporate climate action have already started to focus most of their efforts on investments in methods of carbon removal, rather than buying credits for projects that avoid additional emissions. Frontier, the partnership among Alphabet, Meta, McKinsey Sustainability, Shopify and Stripe that commits to buying into carbon removal projects ahead of time, has concentrated its money and efforts on investing in technologies and methods that store carbon for over 1,000 years. Microsoft is also prioritizing carbon removals, although its 2022 Carbon Call report still lists improved forestry management as an area of activity. It wasn’t clear if those efforts were related to avoided deforestation. (Microsoft and Shopify both declined to comment for this story.) 

Getting credit without carbon credits

The fact remains that we desperately need to protect forests and figure out a business incentive that inspires those investments. But in the voluntary carbon market, avoided deforestation will always have to be compared to a counterfactual — an imagined future in which the avoided deforestation project was never funded. This is a reality that doesn’t exist, which makes basing carbon accounting and net-zero claims off it very difficult. 

It’s possible that avoided deforestation credits are just too squishy, murky and difficult to validate for the carbon commodity market. Indeed, Gold Standard, the other big carbon credit registry, won’t issue avoided deforestation credits and only focuses on removals and nature-based solutions that include sequestration, such as reforestation. 

The Corporate Climate Responsibility Monitor from Carbon Market Watch, released in February, notes that "forestry-related projects account for most offset credit procurement, despite the fundamental unsuitability of these projects for offsetting claims."

In order for companies to become more comfortable investing in protecting forests, they might need to separate that strategy from their net-zero plans. Why not make protecting forests part of an entirely different goal within corporate sustainability commitments, such as investing in improving biodiversity, something that has become the newest focus for sustainability professionals. 

"There are clearly challenges in the voluntary carbon market — particularly when it comes to REDD+ credits," said Matthew Potts, chief science officer at Carbon Direct, a carbon management firm. "These raise questions that must be answered about whether the REDD+ mechanism is the best approach. Getting it right requires designing the right regulatory and financial incentives to ensure the realization of real climate benefits."

Some companies have already started this shift in mindset. In 2020, Microsoft committed to protecting more land than it uses by 2025. And while the tech company’s land footprint is relatively small, just 11,000 acres for its offices and data centers and other real estate, that pledge was made outside of the company’s carbon-negative emissions commitment, and it is not collecting carbon credits on these projects.

We should be open minded to wider financing methods including blended finance models, supply-chain climate and nature finance, grants, collaborative finance models.

Salesforce likewise has a goal to support the growth and conservation of 100 million trees by 2030 through its partnership with 1t.org, a commitment outside of its carbon crediting strategy, according to the company. And Salesforce’s Ecosystem Restoration and Climate Justice Fund, which funds nonprofits around the world working on ecosystem restoration and climate justice, is another effort that doesn’t explicitly count toward the company’s net-zero plan. 

Walmart likewise placed its land usage strategy squarely in the philanthropic realm by using The Walmart Foundation to protect, manage or restore at least 50 million acres of land and 1 million square miles of ocean by 2030. International Paper is working to conserve and restore 1 million acres of forestland, and doesn’t have a net-zero goal anywhere on its website. Ikea’s forest-positive agenda does not collect carbon credits for the deforestation work. 

Despite these high-profile examples, however, some organizations are still pushing for a combined approach that allows emissions avoided from conservation work to be applied to a company’s net-zero goals.

Shidan Gouran, co-founder of Bluesphere, a carbon credits exchange platform, wrote in an email: "A combination of approaches, including conservation goals, policy measures and market-based mechanisms, may be necessary to effectively address deforestation and its impacts on the environment."

The Science Based Targets Network is creating Forest, Land and Agriculture Guidance that gives businesses the ability to connect their forest management and conservation work with climate accounting for the first time.

The finances linked to carbon credits have been important levers for creating a way to value the positive climate impacts of forests over the material value of the timber. But as more companies set net-zero goals and flock to credits to fulfill them, there is an opportunity to take advantage of the system and the model doesn’t include reliable safeguards to feel secure in the investments leading to emissions savings. 

"Rather than singularly focusing the conversation on how we improve [measurement, reporting and verification] in REDD+ credits, we should be open minded to wider financing methods including blended finance models, supply-chain climate and nature finance, grants, collaborative finance models between organizations, and other solutions we may not yet have thought of," Dan Magrath, corporate responsibility manager at Gold Standard, wrote in an email.

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