Carbon Credits for Preserving Forests: How Does It Work?

What is REDD?

REDD (for Reduced Emissions from Deforestation and forest Degradation) is a system of financial incentives designed to counter the destruction of forests or their degradation through environmental stresses. The basic goal is to preserve trees that would otherwise be cut down and thus release carbon dioxide, the most commonly emitted greenhouse gas, into the atmosphere. And the way to ensure that they are not cut down is to make them more valuable standing. In an effort to preserve trees, REDD enables companies, conservation groups, and countries to invest in forests as offsets for carbon emissions.

At this stage, elements of a REDD system are in place and overseen by the United Nations' Clean Development Mechanism -- notably, by offering credits for the reforestation of already degraded land.

The concept was debated before the Kyoto Protocol but ultimately dismissed. A group calling itself the Coalition of Rainforest Nations brought it up again at the Conference of the Parties 11 (COP11) in 2005. It was then written into the Bali Action Plan in 2007 following climate talks there, which set up a time frame of two years for getting it implemented for COP15 in Copenhagen.

That did not happen, in part because no formal climate agreement came out of Copenhagen. But those working closely with forest offset preservation projects are operating on the assumption that they will be included in any binding agreement to come out of COP16 in Mexico at the end of 2010.

Are there clear land rights regarding who owns the forests and who should benefit from the credits they generate?

In developing countries, determining land ownership can be a challenge. Indigenous populations have historically been the stewards of forestland under communal holdings, many of which have never been demarcated, much less issued titles to establish ownership. When land titles are established, they often vary from country to country. In Indonesia, for example, it is commonplace for the government to issue a land title for timber rights and then issue another title to the same land for a different resource, such as petroleum or minerals.

In Papua, New Guinea, individuals purporting to represent a whole tribe have cut deals offering their land rights, without consent from the rest of the group. In parts of Brazil, there are six times as many land claims as there is land. In many countries, the issue of this new property right, owning carbon credits from the trees, is still very much unresolved.

Are all forests created equal in terms of how much carbon they sequester?

Trees can include as much as 50 percent carbon dioxide. The precise percentages, though, vary, depending on where the forest is located and the types of trees in the forest. Some forests absorb more carbon dioxide, based on how much water they use and how much sunlight they reflect back into the atmosphere. For example, because boreal forests are covered with snow most of the year, the sunlight is reflected, and the trees absorb less carbon, says Dr. Robert Jackson, a biology professor at Duke University.

"The farther north you go, the less certain our knowledge is of the forests," he says.

How can the carbon stored in trees be accurately measured?

Obtaining an estimate of the carbon content in a tree involves a sequence of mathematical extrapolations. Measuring the height and circumference of a tree and the acreage of the overall protected area, scientists try to estimate how much carbon each tree contains and the tree's rate of growth over the anticipated life of the REDD project. Much less is known about how much tree roots and surrounding soil can store. Dr. Jackson and his lab are studying how to more accurately measure the carbon dioxide stored in soil, but sometimes, he says, this can depend on how fertile the soil is.

How do you verify that the forest projects are actually absorbing as much carbon dioxide as the project developers claim?

Often, the emissions verification comes from a third-party certifier. There is a group of international auditing firms that are certified by the UN to do the measurements, and they are expected to play a similar role in the evolving American offset system. The main factors that certifiers are supposed to take into account include the following:

• Demonstrating that the forest is actually threatened. This factor is known as "additionality." Developers need to establish that the forest was imminently threatened by deforestation, based on projections of past deforestation rates in the same area. (Additionality is described in more detail later.)

• Demonstrating with some clarity that the entity behind the project has legitimate claim to the land.

• Demonstrating that there is sufficient monitoring and oversight of the project to ensure that deforestation is not happening inside the protected reserve, and that it is not simply moving to a neighboring forest (known as "leakage.")

A key area of controversy has been accurate calculation of the emission reductions from forest offset projects. Read Mark Schapiro's story in Harper's magazine scrutinizing the speculative side of the offset market, and also the certification, insurance, and financial accounting for such projects.)

Are REDD projects capitalizing on forests that would have been left standing anyway?

It is important to establish whether a landowner would have cut down the trees without any incentives to keep them standing, that is, the likelihood of "additionality." For example, in his research of forests in Costa Rica (pdf), Duke University professor Alexander Pfaff saw instances in which farmers were paid not to cut down forests -- even though they would not have cut them down anyway. Pfaff says, "If you weren't going to clear the forest and I still pay you, [the project has] changed nothing."

To make it worthwhile for landowners to participate, the payment for an intact tract of land must be higher than what a landowner would make from cutting down the trees or replacing them with grazing fields or crops.

How do you make sure reducing deforestation in one area doesn't lead to more deforestation in another area?

Known as "leakage," this is one of the major challenges of REDD development projects. It is difficult to prevent farmers or loggers from simply moving out of the preserved area and on to adjoining unprotected land. Stopping leakage requires enforcement. However, leakage can be tracked by using sophisticated satellite imagery, and diligently recording and monitoring land use change and activity in and around designated conservation areas -- as is being done in Brazil (pdf).

When the potential for leakage can be measured and factored in (pdf), it creates a more accurate calculation of overall emissions reductions from a project.

How can we be sure that credits earned will be permanent and that the forests will be left standing in perpetuity or for the decades-long lifespan of a project?

Unlike a refinery, where carbon emissions can be measured with relative precision, a forest ecosystem is dynamic and subject to variations in temperature, rainfall, and soil fertility.

"REDD [programs are an] early effort to standardize the way carbon is evaluated in the forests," says Dr. Malcolm North, a U.S. forest service scientist for the Pacific Southwest research station. "One of the problems is that carbon in forests is a leaky asset -- it is very easy to lose it." Threats to forests include fire, disease, drought, and the effects of climate change. Experts say that climate change is weakening the vitality of the forest ecosystem and its ability to absorb carbon.

Such factors can theoretically be addressed through offering discount rates on carbon sequestered in forests. Legislation passed by the U.S. House of Representatives, for example, includes a 10 percent discount -- or buffer -- for forest projects. It means that a forest offset project that is certified to contain 50 million tons of carbon would only get credits from 45 million of those tons so that uncertainties such as fire, disease, and drought can be accounted for.

What is the difference between RED, REDD, and REDD+?

When forests were brought up again for discussion at the UN Climate Conference in Montreal in 2005 (after being dismissed by the Kyoto agreement), the focus was only on afforestation and reforestation. Afforestation is planting a forest where there wasn't one before. Reforestation is replanting trees in what used to be a forest. Currently, the only type of forestry offset projects that are accepted under the UN's Clean Development Mechanism are afforestation and reforestation projects, included under RED, or Reduced Emissions from Deforestation.

In the next round of climate talks in Bali in 2007, it became clear that forest degradation also needed to be included in attempts to reduce forest emissions, so the second "D" was added. Then, in Poland in 2008, at COP14, the "+" was added to prevent negative forest practices like deforestation and degradation, but also to enhance positive changes, like sustainable management and the conservation of biodiversity. The United States is attempting to add a new component to the program, called "avoided deforestation," which involves obtaining credits from preserving existing forests that are threatened.

Why does biodiversity matter? Don't trees absorb the carbon regardless of the ecosystem?

Planting a monoculture (or single species) of tree is an unproductive way to sequester carbon, says North, who also teaches in the Plant Sciences department at the University of California, Davis.

"If you push [forests] too far and try to simplify them, you lose the very thing you are trying to improve upon," North says.

Attaching a value to biodiversity helps ensure that financial instruments include the vital services a healthy ecosystem provides, rather than simply paying for sucking carbon out of the atmosphere. These services include maintaining soil stability and preserving habitats for endangered plant and animal species.

Some plant scientists are concerned about the proliferation of eucalyptus plantations. Even though eucalyptus, compared to other types of trees, absorb a larger volume of carbon, their runoff water is very acidic and can harm surrounding plant and animal life.

North warns that a policy focusing only on removing CO2 from the atmosphere -- rather than also encouraging a biodiverse system -- will lead financial markets to push for monocultures of pines or eucalyptus trees. "[This is what] we've done in agriculture, and it is a disaster for forest ecosystems," he says.

How do forest conservation projects affect the people who live in the forests?

This is another criticism that many have lodged against REDD projects -- they can prevent people who depend on the forest for food, fuel, and other goods from accessing the natural resources that "belong" to them. Preliminary UN language for REDD+ projects includes a provision for "free, prior, and informed consent" by indigenous forest dwellers, but the feasibility of enforcing such provisions is unclear at this stage.

Tropical forest countries also are home to many nonindigenous people who live in the forest but cannot claim ancestral rights to the land. Watch The Carbon Hunters to see how some local communities have been affected by carbon preservation projects in Brazil.