Does Carbon Trading Damage Forests?

The World Bank is so concerned about the lack of forests remaining in the small country of Armenia that they have warned that it could one day become a desert.

The loss of the country’s forests can be traced back to their energy crisis in the early 1990s. Since then the Massachusetts based Armenian Tree Project has been replanting the country’s forests.

Like many similar organisations the group has recently started to consider raising funds by selling carbon credits. However, questions persist regarding whether it is beneficial to apply carbon finance to forestry projects when taking into account the environment and the community where the trees are planted.

“The thing about forestry and carbon, obviously it is very new, and it is complicated,” said Jason Sohigian, deputy director of the Armenian Tree Project.

“The reason why people want to invest in it is they understand trees and carbon have a relationship, so it is easy for the public to make an association between climate change and trees.”

According to the UN deforestation is responsible for an estimated 20% of global greenhouse gas emissions. And yet is has been proven that forests absorb huge amounts of carbon dioxide and this can be quantified and bought as credits by countries and companies to offset their pollution. So it seems slightly bizarre that currently carbon offsets purchased from reforestation projects represent only a fraction of global carbon markets.

A reason for this is that under an arrangement from the Kyoto Protocol, which allows developed countries to buy carbon credits from projects in developing countries called the Clean Development Mechanism, few projects have gained approval.

“The verification process is quite rigorous to go through and satisfy the questions, especially on how you measure emissions,” said Alexander Rau of the Helsinki-based Climate Wedge, a carbon management and investment advisory firm.

There is also a ban in place from the European Union’s Emissions Trading System on buying forestry offsets from developing countries.

Forest offset growth is now hinging somewhat on whether the US passes legislation that prioritises forestry as part of a federal cap and trade market. Also despite the fact that talks in Copenhagen last year didn’t result in a legally binding global agreement to cut greenhouse gases there was enough financial and political support of a UN plan to reduce emissions from deforestation and degradation (REDD).

Unfortunately the cost of even becoming certified on voluntary markets is too expensive for small non-profits like the Armenian Tree Project.

“That is one of the problems with forests,” Sohigian said. “With most systems, you don’t get the money until after you sequester the carbon. So how do you even get off the ground without the money up front?”

Revenue generation can still be difficult even after a project is certified. It is unfair but true that the price of offsets in voluntary markets is considerably lower than those traded in regulated markets. The result being that more trees need to be planted in order to make any money.

Jutta Kill of FERN, a Brussels based environmental group said that “the risk is very big” when projects sell credits in advance based upon the projected amount of carbon the trees will absorb over time.

“You have a lot of obligations for a very uncertain return of revenues,” said Kill. “Some involve signing a very long-term contract, guaranteeing your trees will be standing for the next 100 years.”

There is a small risk that if something happens to the trees, such as a fire, the organisations and communities that have planted them will then be responsible for replanting or buying offset credits from other projects to replace those that were lost.

“Most of the contracts are not public, which puts a lot of the communities at a disadvantage,” Kill told CNN. “They have no way to know whether they are being offered a fair deal. When you have a project that involves local communities, it is interesting to see if it would benefit or if it would suffer from presenting itself as a carbon project,” Kill said.

According to Sohigian in combination with their efforts to replant trees across the country the Armenian Tree Project has made huge inroads to engage the support of the local communities. They have begun poverty alleviation programmes as well as environmental education initiatives.

One disadvantage to their becoming an offset project is that their concentration will need to be focused on measuring the carbon absorbed by the forest, which will take most of their attention from the local people who will be vital in the future to ensuring that the trees are not cut down.

“If you are helping families and reducing poverty, that reduces pressure on forests and increases the likelihood the forests will be able to survive,” Sohigian said.

In early April an article published in ‘Science’ warned that REDD could put governments in charge of forest management, which would reduce the rights of the local communities charged with managing the trees.

The possibility of fraud is also a concern as some critics point out, as voluntary markets are unregulated.

“I call it the Wild West mentality of carbon offsets,” said Scott Jones, executive director of the Forest Landowners Association, a U.S.-based group that lobbies for private landowners rights. “There are no rules right now, so if you can figure out a way to go make money and show social responsibility, then go ahead.” He added.

However, others are more optimistic about the future of forestry and carbon offsetting.

“This is an evolving market and mistakes will be made,” said Jim Lyons, a lecturer at Yale University’s School of Forestry and Environmental Studies and former under secretary for natural resources and the environment in the Clinton administration.

“I feel confident smart people can work out the details, and the market will evolve into a market that will prove much more viable than the existing market for cutting down trees,” Lyons said.