Momentum Building for REDD+ Global Market for Forest Carbon

Whatever else happened or didn’t happen as a result of the recent Conference of the Parties in Copenhagen, the Global community did take action on slowing the destruction of the world’s tropical forests. Certainly one can argue that we are not doing enough, but getting the “global community” to agree on anything is always a daunting prospect. Consensus does appear to have crystallized around the UNFCCC’s REDD program (Reduced Emissions from the Destruction and Deforestation of the world’s tropical forests). Now termed REDD+, with the addition of sustainable forest management and afforestation/reforestation, momentum continues to build for the use of market mechanisms to slow the destruction of the world’s rainforests.

When a global market for carbon finally emerges, tropical forest offsets will be part of the mix. There are many many details still to be worked out, but the barriers no longer seem insurmountable. As methodologies are refined through use and stakeholder action, I believe forest offsets will come to be accepted carbon reduction instruments, as beneficial for the planet as offsets generated from other sources, such as conversions to renewable energy or less carbon-intensive industrial practices. At the end of the day, it is about living sustainably on the planet. And without the “lungs of the planet”, as the world’s tropical forests are often called, that goal will never be achieved.

A few examples of the positive momentum, as I see it:

CAR Addresses Permanence

Regardless of how fast or how slow the federal government is going to move on creating a US market for carbon, California is moving forward on implementation of AB 32 and the Western States Initiative. The California Climate Action Registry was originally a non-profit entity formed by the State for the purpose of (a) establishing protocols for calculating the carbon emissions of California industries, and (b) being a clearing house for those industries to voluntarily register their baseline emissions in a public database. This entity has evolved into the Climate Action Reserve (CAR), a quasi-governmental agency for establishing methodologies and registering carbon emission offsets (called Climate Reserve Tons, or CRTs) throughout North America.

Offsets from avoided forest destruction and improved forest management in North America are very much a part of the AB 32 initiative. Currently offsets generated from forests in the United States are eligible as CRTs and soon Canada and Mexico will be added. I believe tropical forests will some day come under the ambit of CAR, although the official CAR position, as stated on its website is “as of yet there are no plans to expand to other countries beyond Mexico and Canada...”

CAR has published the third version of its Forest Project Protocol as it continues to address issues raised by stakeholders. Notably in the new v3.1), CAR has taken great strides in addressing the issue of permanence. When credits are generated from avoided deforestation, those credits become meaningless if the forest that was preserved is destroyed at any time in the future (called a “reversal”). This is true whether the reversal is avoidable (such as intentional deforestation for purposes of development or agricultural use) or unavoidable, such as a natural disaster like forest fire. CAR has addressed the permanence issue in two important ways. First it has implemented a system of “buffering” credits to provide a kind of insurance against future loss. In this system, a forest owner is required to set aside a certain percentage of the credits generated from the forest conservation activities. These buffered credits would be used in the future in the event of a reversal. Second, CAR will require forest owners to enter into a Project Implementation Agreement (PIA), with a term of 100 years, pursuant to which forest owners will be legally bound to preserve the forest and insure against reversals. Importantly, the PIA is attached to the land (and not just the owner of title to the property) and would require subordination of any future property interest (such as a mortgage or partial sale).

As the international community takes on developing effective REDD methodologies, the pioneering activities of CAR will no doubt be instructive.

Jane Goodall Institute Begins Developing REDD Credits

Some good news came out of Copenhagen for the Jane Goodall Institute (“JGI”) and its efforts to preserve the Masito-Ugalla Ecosystem in Tanzania, one of the most undeveloped tropical forests in Africa). JGI was awarded a three-year, $2.7 million (USD) grant from the Royal Norwegian Embassy in Tanzania to continue its conservation efforts and, importantly, to begin the process of applying REDD methodologies to ultimately generate and sell tropical forest carbon offsets. From its experience in implementing one of the world’s first REDD projects, JGI intends to assist other NGOs and indigenous groups in protecting tropical forests by marketing REDD credits to generate necessary funds.

As the project is described on the JGI website:

The project will conserve about 70,000 hectares in one of the last large expanses of intact forest in Tanzania, enhancing biodiversity and ecosystem functions such as provision of habitat for chimpanzees. Communities will be eligible to earn credits for the carbon stored in their protected forest areas. The income will help fund future forest management and improve community living conditions. The project will also support secondary use of forest products such as wild honey or medicinal plants.

The JGI-Tanzania project appears to be a model for successful REDD development. Such projects require participation from governmental as well as non-governmental organizations, plus an active role for private finance in the form of REDD credit offtake/purchase arrangements.

Tropical Rainforest Fund

More evidence of this public/private cooperation can be seen in the announcement at Copenhagen that the US and five other countries have pledged $3.5 billion (USD) over the next three years to a program aimed at protecting rainforests. The other countries are Australia, France, Japan, Norway and Britain. The US portion is $1 billion (USD). The money will be available for developing countries that produce ambitious plans to slow and eventually reverse deforestation.

While the creation of this multi-national fund highlights the issue of government vs. private project financing, which still needs to be resolved (and will be the subject of a future blog), the funding commitment is significant.

Conclusion

Destruction of the world’s tropical rainforests accounts for a huge proportion of global greenhouse gas emissions. REDD+ is an international, public/private initiative that is attempting to assist in the preservation and conservation of the remaining rainforests of the world. Momentum has picked up in establishing protocols and developing models that will be employed in an eventual world market for tropical forest carbon. We predict that the momentum will continue to build until (and well after) the market is finally established.

David Niebauer is a corporate and transaction attorney, located in San Francisco, whose practice is focused on clean energy and environmental technologies. www.niebauer.net.