California outpaces UN on REDD carbon market
ARB, AB32: UN climate talks in Cancún balked at the question of carbon markets for the finance of an agreed global forest protection system, leaving further uncertainty over the role of carbon markets after 2012 and whether forests will be a part of them. But meantime California is forging ahead on a cap and trade scheme that looks set to kick-start international REDD carbon market action.
UNFCCC negotiations in Cancún produced a formal framework for REDD+, or reducing emissions from deforestation and enhancement of forest carbon stocks. But the use of market finance to drive it remains a hotly contested issue; Bolivia strongly opposes carbon markets for reducing deforestation and pushed for language that would exclude market use in REDD+ negotiations under the Ad-hoc Working Group on Long-term Cooperative Action (AWG-LCA) track. The final agreed text calls for the AWG-LCA to explore financing options, deferring a decision to at least next year’s climate conference in Durban, South Africa.
California moves ahead
While the UNFCCC has put off any decisions on REDD financing to a future session, California in the United States is moving ahead of the international negotiating process by allowing offsets from international forest carbon into its cap-and-trade scheme, set to start 1 January 2012. The regulations allowing for REDD crediting will go before the regulatory agency’s Board for approval in Sacramento this Thursday, 16 December.
The California program will allow for linking agreements between California and host jurisdictions in other countries to deliver REDD credits from programs managed at a provincial level. Over the next year, regulations are expected to be developed with the support of an international working group that will focus on requirements to deliver compliance-grade offsets from sub-national REDD programs. This approach got a nod from the UNFCCC REDD decision, which allows for interim reference emission levels or forest carbon reference levels at the sub-national level. These provisions allow states and provinces to move ahead in implementing REDD programs in a more flexible, timely fashion than if REDD was only permitted at a national level.
Chiapas and Acre link to California
Cancún was abuzz with news of two such pioneering programs, stemming from California’s partnership with Acre in Brazil and Chiapas in Mexico. A memorandum of understanding (MOU) was signed among the states last month at the third annual Governors’ Global Climate Summit in Davis, California.
At a side event during the UNFCCC meetings hosted by the International Emissions Trading Association (IETA), the Secretary for Government Affairs of Acre, Fabio Vaz, explained his state’s plans to develop an Agency for Development of Environmental Services, which could channel funding from the private sector, carbon credits and other sources.
The Acre agency will be developed under the recently approved legislation for a System of Incentives for Environmental Services (SISA, for its Portuguese acronym), which aims to produce credits through programmatic environmental and sustainable development initiatives, including REDD and reforestation. At another side event, the former Minister of the Environment for Brazil and Senator, Marina Silva, connected the California and Acre advancement with an imperative for the negotiations: “We need to lower emissions, not lower expectations.”
Chiapas Governor Juan Sabines joined the Governors’ Climate & Forests (GCF) Task Force reception, addressing the state’s new membership to the group and noting Chiapas’ programs to address deforestation, low carbon development and biodiversity in facing climate change. The GCF was spearheaded by California Governor Arnold Schwarzenegger in 2008. The group now has sixteen member states and provinces from the United States, Brazil, Mexico, Indonesia and Nigeria.
Demand for REDD credits
At a high-level event on REDD+, in a discussion panel introducing “the world’s first compliance REDD market,” the Secretary for the California Environmental Protection Agency, Linda Adams, spoke to the demand from California businesses to include forestry offsets within the burgeoning market. The ability of REDD programs to deliver compliance credits at volume will be critical as analysts predict a shortfall of credits needed to meet demand from California’s covered entities. The program will allow approximately 75MtCO2e of REDD credits from 2012 to 2020 to meet compliance obligations.
As global carbon markets see the first concrete prospect for REDD, William Boyd, the lead of the GCF Secretariat, remarked that the California, Acre and Chiapas MOU is just the first of many partnerships that could emerge for REDD markets at the sub-national level, independent of, or in parallel with, a UNFCCC commitment to REDD.
MaryKate Hanlon is a senior analyst at New Forests Advisory Inc, which invests in timberland and associated eco products, such as carbon, biodiversity and water, for institutional and private equity clients.