ARB Sees REDD in AB32 Future

With the fall of the US federal climate bill, eyes are shifting west to California's Air Resources Board (ARB) as it nears the November release of its cap-and-trade regulations under AB32. On Friday, the Board met with stakeholders about inclusion of reduced emission from deforestation and degradation (REDD). And as far as updates on the latest REDD developments are concerned, ARB and its stakeholders delivered the goods.

The biggest news is that ARB intends to write REDD into its regulatory language - but don't expect too much detail at the outset. Kevin Kennedy, Assistant Executive Officer in charge of ARB's Office of Climate Change explains, "I don't know what level [of detail] we'll have, but do expect to have a fairly clear signal on REDD in language we take to the board." He continues, "We are committed to including REDD in the program overall, as we recognize that the eyes of the world are upon us as we do the cap-and-trade plan."

Among the highlights of the discussion was the announcement that the Voluntary Carbon Standard (VCS) intends to support the Climate Action Reserve's (CAR) development of its Mexico Forest Project Protocol, according to CAR's John Nickerson. Nickerson explained that "the effort between VCS and CAR will operate at project scale to start... and we're excited about what the outcome of this might look like." Also offering an exciting development was Leslie Durschinger from Terra Global Capital, who hinted to attendees that Terra's mosaic REDD methodology submitted to the VCS has completed its first validation - we'll be hearing more about that news item in the coming week. The methodology applies to mosaic-type deforestation - the patchwork quilt kind - where a multiplicity of deforestation drivers converges.

Considering that Terra's methodology is based in part on CDM methodologies for afforestation/reforestation (A/R), it's no wonder Durschinger had a lot to say about the potential for including reforestation under ARB's REDD definition. "There's no reason why we shouldn't be recognizing reforestation under the REDD umbrella. You can ultimately include A/R in a REDD+ framework and many successful REDD project require A/R."

The ARB's stakeholder workshop was intended to gain this kind of insight into this its questions about including REDD language in California's final cap-and-trade regulation. After all, Kennedy admits that forest carbon isn't exactly ARB's "thing": "We recognize that we are moving out of our air quality expertise and want to take the time to make sure we do it right."

While several stakeholders urged ARB to move forward and fast to create market incentives, Kennedy admitted that for this reason ARB is reticent to allow REDD crediting before the second compliance period in 2015. "We are interested in getting programs moving forward as fast as possible and realize the critical timing elements," he admits, "but part of the reason we're talking about 2015 as likely the earliest point for credits is that, as we look at its challenges, that's what seeming realistic."
The challenges that Kennedy refers to were the topics of debate among attending stakeholders, including the following:

What should be the required emissions reductions made by a host state before California emitters can begin using their offsets for compliance (in % below business as usual emissions)? ARB threw out 50% as a starting point for a full crediting baseline and 25% for states to begin creating a portion of their credits for compliance. Many attendees suggested, however, that anything above 10% would be a disincentive for participation. Remarked one stakeholder, "At probably 10%, you start to lose participation. If you require 20% below business as usual, you risk massive opt-out and limited participation. And if we lose that buy-in, the system stops functioning."

Other suggestions from stakeholders included using statistical methods to determine the point at which a state has brought its deforestation rate below historical levels, or to use offset discounting methods.

What's the best way to determine states' reference level - its business as usual deforestation rate? Participants suggesting using verifiable historic averages. One stakeholder suggested using historic information for 80% of the calculation and using the remaining 20% to account for a "turning of the curve" based on the country's political and environmental risk variables. Most could agree there are tools available and a need for reassessing baselines on a regular basis.

Should there be quantitative limits on the number of credits from each sector (like REDD) under the scheme's overall offset limit? Comments to this question were varied, ranging from the notion that limiting demand for REDD credits would dampen supply to the suggestion that international credits - including those from REDD - should be limited but California offsets unlimited.

The details of these and other decisions will be released soon, according to Kennedy: "Assuming we remain on target for the November board meeting, nine weeks from today we will be publishing our regulatory package."

In the mean time, you can comment on these and other questions from the Board between now and August 20th.