Forest carbon needs climate deal: Study

Afforestation and reforestation (A/R) activity to restore tree cover, a key component of the REDD+ mechanism and overall fight against climate change, risks grinding to a halt in the next two years in the absence of a new global climate agreement. This is one of the key findings of a study of the voluntary forest carbon market by researcher and industry consultant Eduard Merger. In “Status and Future of the Afforestation and Reforestation Carbon Sector”, released today and published by Carbon Positive, Merger provides a detailed snapshot of the A/R segment of the market and identifies the key issues facing its project developers.

The survey identifies 118 projects worldwide, underway or planned, across the period 1995 to 2015 from 70 project-developing organisations. These project activities cover a total area of 655,000 hectares. The survey shows rapid growth in recent years with over 70 per cent of projects across the 20-year period beginning in the last five years. There were just 21 projects in operation in 2004 but the number is set to reach 102 in 2010.

But this growth appears destined to be short-lived. The survey sees new A/R project commencement petering out rapidly after 2012. While project developers wouldn’t normally be expected to plan project commencements too far into the future anyway, the survey results show quite a dramatic tailing off. The study puts this down to the uncertainty brought on by the lack of a new UN global climate accord, needed for an international REDD+ agreement, and delayed domestic cap-and-trade action in developed countries such as the US.

Project developers are not planning much longer than a year in advance, the report states. “But the number of new forestry projects commencing post-2012 could be much higher if positive signals from international climate negotiations emerge.”

From the 118 current projects identified, 140 million tonnes of forest carbon sequestration is expected over the next 50 years. Most of this is measured initially in ex-ante carbon credits for upfront project financing. This volume is a drop in the ocean in terms of the global emissions reductions required by mid-century. More importantly, it’s only a fraction of the sequestration potential that could be supplied from the forest sector, which is currently contributing at least 12 per cent of total global emissions.

The survey has also reaffirmed the investment barriers in forestry carbon and suggests further development of innovative financing methods to raise incentives for potential investors.

Significantly, the survey found that 83 per cent of all A/R projects seeking carbon finance will plant native or mixed species as opposed to purely exotic and monoculture plantations - a statistic that will be of interest to environmental organisations.

The author says the study shows the need for more NGO, and perhaps governmental involvement, in helping project developers navigate the array of third-party standards now proliferating in the voluntary forest carbon market. “Greater harmonisation of the third-party standards environment would increase the confidence of the investors and developers in A/R project activities in the voluntary over-the-counter market. This may be achieved through reciprocal partnerships and strategic alliances between the standards.”

Overall, the report provides useful data for sector participants:

• informing potential buyers on the supply and volumes of A/R credits
• characterising A/R projects that are coming on-stream
• identifying what contractual arrangements project developers require for their A/R projects
• identifying what project developers require from forest carbon standards
• determining the relative popularity of the various forest carbon standards