Carbon markets play a key role in the transition to a low carbon economy, by enabling activities that reduce greenhouse gas emissions to be part of the economy. Within the next few decades we will have enough technology for society to live in a world with minimal greenhouse gas emissions. But until then, we need to make an effort to avoid global environmental collapse.
The regulated carbon market was established shortly after the ratification of the Kyoto Protocol in 2005, and the voluntary carbon market has also gained space over the year. Both markets have enabled thousands of projects that reduce GHG emissions and further boost the development and enhancement of low carbon technologies.
REDD+ (Reduced Emissions from Deforestation and Forest Degradation) is a mechanism that conserves forests and generates carbon credits. These credits can be sold on the carbon market to companies and individuals that wish to offset their greenhouse gas emissions and contribute to forest preservation. The carbon credits produced by REDD+ projects globally are mostly privately owned, and the credit transactions are conducted on the voluntary carbon market. However, governments are increasingly getting involved and trading their national emissions in what is called the regulated market.
At 22 verified and trading projects on the VCS Registry, Brazilian voluntary-market REDD+ represents an impressive 24,996 km2 of preserved forests – an area 18% larger than the country of Wales – and carbon emissions reductions of 8.0 Mton per year – a volume approximately equivalent to the 2019 emissions of Paraguay or Costa Rica (European Commission data). These figures make a strong case for the critical importance of voluntary REDD+ projects in Brazil. This is further emphasized by the void in forest conservation left behind by government, leading to a recent spikes in deforestation (Reuters, BBC).
So how does REDD+ work? Because the mechanism preserves existing forests rather than planting trees, a simulation of the deforestation that would have occurred if the project proponent had not conserved those forests is necessary. This is known as the baseline of deforestation. As such, REDD+ projects must simulate the baseline, on the basis of the location of drivers of deforestation, such as roads, existing areas that have already been cleared of forest, and waterways. This is a complex technical procedure carried out by Geographical Information Systems (GIS) professionals. Deforestation baselines are an example of counterfactual estimates, a type of methodology which is common in economics (link), psychology, and many other realms.
The hypothetical baseline deforestation levels projected at the time of a REDD+ project development are not expected to be perfect. Monitoring or verification events, which are conducted 1 to 5 years down the line, and continually throughout the project lifetime, compare the ex-ante projections to what actually happened (i.e. ex-post). Verification through a third-party audit is what guarantees the reliability of carbon credits, known on the voluntary market as “VCUs”, which can be created and traded between a seller and a buyer.
The methodologies to develop REDD+ projects on the voluntary carbon market are defined by Standards, the leading platform of standards for forest carbon projects today being the Verra (formerly known as VCS Standards). The development of a REDD+ project is highly technical and takes a specialized team approximately six months to complete, after which it is subject to independent audit by an accredited entity, known as a DOE (Designated Operational Entity).
The discussion on the precision of deforestation baselines, and ways to improve them, is ongoing (Mongabay). Although there are valid criticisms of baselines and their methodologies are constantly improving, voluntary carbon market actors maintain that this does not invalidate REDD projects in any way (link).
Of course, REDD+ is not just about carbon, because preserving forests also brings benefits in terms of biodiversity, ecosystems, communities and their livelihoods. This is what the “+” in “REDD+” refers to: the additional benefits that forest carbon projects can, and should, deliver.
The mechanism had its origins in the Kyoto Protocol, when tropical forest nations (known as ”non-Annex I”) proposed that they should be compensated for keeping their forests standing, while developed nations (known as “Annex I”) had deforested their own forests long ago. Initially, the inclusion of REDD+ in international mechanisms was too difficult to achieve, and only simpler plantation mechanisms were included in Kyoto’s Clean Development Mechanism.
This left standing tropical forests, including the Amazon, and Indonesia’s and Africa’s forests – among the largest terrestrial carbon reserves on the planet – unaccounted for by carbon markets. Thus, the voluntary REDD+ market was born: its advocates felt that standing tropical forests urgently needed to be monetized, in order to compete with the economic activities that threaten them.
Since then, the mechanism has evolved, with the most prominent international platform being the annual UN Conferences of the Parties (COP). Notably, in 2015, the Paris Agreements (COP 21), laid the groundwork for countries to trade their emissions, including forest offsets. For example, a famous deal has recently been struck between Peru and Switzerland (link), to offset the European country’s emissions using Peru’s forest carbon credits. Some countries, including Brazil, have also stated that they will have regulated (or national) carbon markets, which will include forest offsets (Exame). This is big news for REDD+!
Learn more here:
In defence of REDD projects in Brazil. https://beta.documentcloud.org/documents/20475769-in-defense-of-redd-projects-in-brazil_v3-general-audience
About the author
Ms. Jana Dallan M.Sc. is CEO of CARBONEXT, a company specializing in carbon markets. CARBONNEXT acts directly in the coordination of development and implementation of carbon credit projects (VCS, REDD, CDM, etc). Ms. Dallan has a Bachelor in Forestry and a Master’s in Business of the Environment. She has worked with carbon market issues since 2002, when she worked with the Center for Advanced Studies on Applied Economics at the University of São Paulo whilst participating in two projects directed by the Ministry of the Environment. Since 2013 she has been a member of the UNFCCC’s (United Nations Convention on Climate Change) Registration and Issuance Team. Ms. Dallan has managed CDM projects and Carbon market activities for many companies, such as Golder Associates, Global Energy Partners, Orbeo/Societé Generale, One Carbon and Ecofys.