New accounting methods could rebuild confidence in forest carbon markets

Forest carbon accounting can learn from impact evaluation methods but should include a greater focus on the stewardship of Indigenous Peoples.
Forest scenery of Gede Pangrango, Indonesia. Photo by Ricky Martin/CIFOR-ICRAF

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Forest carbon markets have a vital role to play in helping fund greenhouse gas (GHG) emission reductions in order to meet the goals of the Paris Agreement.

When companies or individuals purchase credits to offset their carbon footprint, the money is often used to finance projects that are intended to also deliver environmental and social benefits on the ground in developing countries. This means that impacts on local environmental and social conditions from these projects need to be evaluated.

However, even evaluating the impact of forest carbon offset projects on emission reductions is a challenging task and involves a complex set of rules and requirements, which were subject to media scrutiny earlier this year. This is why reliable, verifiable accounting procedures and a consolidated methodology are needed to measure, report and verify changes in GHG emissions so that effective forest-based mitigation policies can be developed.

On 8 June 2023, a group of experts took part in a side event at the Bonn Climate Change Conference (SBSTA 58) to discuss ways of developing methods that satisfy the demand for high-integrity forest carbon credits, specifically from the REDD+ projects and programmes that have been operating on voluntary carbon markets.

The event was jointly organized by the Center for International Forestry Research and World Agroforestry (CIFOR-ICRAF), the European Forestry Institute, and the Norwegian University of Life Sciences.

At CIFOR-ICRAF, forest carbon markets and projects are considered to have high integrity when they meet certain criteria, which are embedded in its research on the impact evaluation of REDD+ projects:

High-integrity forest carbon markets require realistic baseline data to assess the impact of REDD+ initiatives and establish additionality, meaning that emission reductions or removals wouldn’t have taken place without revenue from the sale of carbon credits. Furthermore, carbon credits should be discounted if they only postpone rather than permanently avoid emissions, and if emission reductions in one place lead to emission increases elsewhere – a concept known as carbon leakage.

“There is essentially a contract involved where some parties promise to reduce forest carbon emissions, and other parties promise to provide recognition, rewards, or compensation for that, so we need an accounting system to implement the contract,” said Erin Sills, a professor of forest economics at North Carolina State University and a CIFOR-ICRAF senior associate. “But we equally need an impact evaluation system set up to evaluate how much those contracts are actually helping the climate.”

During the session, Sills delivered a presentation that compared and contrasted methods for accounting systems and impact evaluations of REDD+ initiatives, illustrated by CIFOR-ICRAF’s Global Comparative Study on REDD+, which collected data from 150 villages in six countries across Africa, Asia, and Latin America.

The market should use impact evaluation studies to promote confidence in carbon offsetting as a viable mechanism for conservation as crediting standards evolve to be better and more forward looking, according to Sills.

Kevin Brown of the Wildlife Conservation Society (WCS) presented the Forest Landscape Integrity Index, which integrates data on observed and inferred forest pressures and lost forest connectivity. Based on a collaboration between a range of universities, institutes and non-governmental organizations, the index has found that only 40 percent of the world’s forests have high integrity.

“REDD isn’t a utopia – it’s an emergency response,” Brown said in his presentation. “Questions of scale and speed are equal to integrity. New voluntary carbon market approaches dramatically advance the prospect for integrity at scale.”

Brown also outlined the importance of achieving impact at scale through a new consolidated REDD methodology, thereby removing cost and time barriers to project startup while increasing investor confidence in revenue projections.

Verra is a Washington-based organization that aims to provide quality assurance in voluntary carbon markets through its Verified Carbon Standard (VCS) programme. It is now developing a new REDD methodology to ensure the integrity of greenhouse gas accounting for individual projects within a jurisdiction, using the most up-to-date science, data, and technologies.

Basanta Gautam, who manages REDD+ technical innovation at Verra, described how measuring the impact of emission reductions is challenging and that refining the methods requires patience, reflecting new insights and learning from the ongoing process.

The methods are steadily refined over time, thereby strengthening confidence in forest carbon accounting, he said.

The new methodology would help engage jurisdictions and governments by establishing relevant jurisdictional baseline activity data and aligning project accounting at the jurisdictional level, according to Gautam.

Jurisdictional approaches are the focus of REDD+ implementation in the Paris Agreement and can form the basis of compliance-based carbon markets instead of just voluntary ones. They are expected to be scaled up and learn from local projects, whose experiences have been compiled in CIFOR-ICRAF’s Global Comparative Study on REDD+.

Equitable outcomes are also a key component of high-integrity forest carbon markets and involve the Indigenous Peoples who manage more than a quarter of the world’s land surface.

“For carbon to be high-integrity, it must recognize that Indigenous Peoples deserve the right to ownership of the land, including the carbon, and the right to be informed in a language that they understand,” said Asami Segundo, who belongs to the Kalanguya-Ikalahan Indigenous cultural community in the Philippines and provides technical assistance to the International Land Coalition.

If Indigenous Peoples cannot access carbon finance due to their effective forest management, what other options do they have? she said.

Segundo said there was a need to create funding mechanisms for areas where there are high forest conservation and low deforestation/degradation rates.

She described how two Indigenous territories in the Philippines last year tried to enter the carbon market but were paradoxically disqualified from REDD+ because they had too low deforestation and degradation rates due to their effective stewardship of the land. Today’s crediting standards don’t provide an approach to demonstrate the additionality of their existing stewardship.

“Carbon credits should be ethical. In a sense, high-integrity carbon is ethical carbon. There is no climate justice without human rights,” she said.

Sven Wunder, principal scientist at the European Forestry Institute and a CIFOR-ICRAF senior associate, presented the results of a meta-study on the effectiveness of REDD+ and found that the forest impacts were statistically significant but modest in size, just like for other conservation tools.

REDD+ could have more impact if activities spatially targeted high-threat, forest carbon-dense areas, he said. These may include any high forest area under imminent threat, such as in the “Arc of deforestation” of the Amazon (e.g. Mato Grosso, Acre, Para, Rondonia) or at other forest-agricultural frontiers (e.g. parts of Kalimantan, Papua), according to Wunder.

“REDD performs at least as well – or as poorly – as other conservation tools, but there is little analysis of its cost-effectiveness,” he said. “Our research points to various design and implementation recommendations to make REDD+ actions more effective, which would also be needed in its currently ongoing scale-up to the jurisdictional level.”

This research is part of CIFOR-ICRAF’s Global Comparative Study on REDD+. The funding partners that have supported this research include the Norwegian Agency for Development Cooperation (Norad, Grant No. QZA-21/0124), International Climate Initiative (IKI) of the German Federal Ministry for the Environment, Nature Conservation, and Nuclear Safety (BMU, Grant No. 20_III_108), and the CGIAR Research Program on Forests, Trees and Agroforestry (CRPFTA) with financial support from the CGIAR Fund Donors.

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