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The growth of REDD: A green light for forestry offsets?

One of the standout statistics from this year’s report on the state of the voluntary carbon markets by Ecosystems Marketplace was the meteoric rise of carbon credits from REDD projects (Reduced Emissions from Deforestation and forest Degradation) which generate offset credits from the protection of forest or woodland. 

REDD projects constituted 29% of the number of credits transacted in the voluntary carbon markets in 2010, more than all credits from renewable energy (20%) or methane destruction (20%). Such credits are being generated by large scale forestry projects in diverse locations such as Kenya, Indonesia and Canada. 

The increase is linked to two things. 

Firstly, the increase of credits purchased by corporations (such as consumer goods companies) buying to voluntarily offset their green house gas emissions. 

This increase marks a reversal in the fortunes of forest carbon; popular in the early years of carbon offset deals, they steadily lost market share due to a lack of accepted third-party standards. Many voluntary standards avoided accrediting forestry offsets because of their inherent inability to guarantee permanent and additional emission reductions. 

In 2010, however, the Verified Carbon Standard (VCS) approved for use its first methodologies for developing REDD projects, alleviating some of the concerns of buyers who had been wary of forestry schemes due to their reputational risks. The VCS is one of the cheaper voluntary standards averaging $4.7 per tonne in 2010, so it is likely that these factors combined instigated an increase. 

The second reason is signals that REDD credits may soon be accepted in regional cap-and-trade schemes. Although a US-wide cap-and-trade program looks unlikely in the near term, proposals by individual states for their own cap-and-trade programmes are moving much more quickly. The most advanced of these is California’s trading scheme, due to be implemented in early 2012. Although legal uncertainties still abound, REDD offsets are the most favoured offsets for the California scheme. 

Memorandums of Understanding have already been signed with the states of Chiapas in Mexico and Acre in Brazil to develop REDD crediting. By 2015, these may be the world’s first REDD credits given access to a compliance market. Many buyers are now taking a long-term view and purchasing REDD credits from the voluntary market in preparation.

But despite this rapidly growing market for forest offsets, some parties remain unconvinced that offsetting is the mechanism by which we should invest in forest protection.  

One of the most significant criticisms of current mechanisms is the potential for negative social impacts resulting from forced land grabs and the displacement of indigenous communities. Friends of the Earth has been highly critical of REDD projects and the role of the World Bank, through its Forest Carbon Partnership Facility (FCPF), in promoting them. They say that their involvement raises alarms due to ‘its marginalisation of communities from consultative processes’. 

The VCS is currently the only third party standard available for REDD credits and does not measure (and therefore does not hold projects accountable for) wider environmental or social impacts. 

Independent carbon advisor CarbonPositive says, “Because the wider environmental and social impacts are not directly covered by the standard, it won’t serve every project developer’s needs in demonstrating full credibility of activities. As such, credits verified to this standard do not attract as high a price as standards covering all impacts.” 

The REDD system has also been shown to be open to abuse by weak law enforcement, government corruption and corporate conflicts of interest. One of the biggest REDD deals announced to date is between Norway and Indonesia, worth $1bn. As part of the deal, the Indonesian president recently signed a moratorium on new logging permits that aims to avoid deforestation in the Indonesian rainforest. However environmental groups revealed that plantation companies continue to illegally clear areas of peat swamp forest meant to be protected

Not only that, but the Norwegian sovereign wealth fund has a significant shareholding in the parent company of the plantation firm accused of doing the illegal logging. So Norway actually stands to profit from the illegal destruction of rainforest that was meant to be protected under its own REDD deal.  

It’s clear that forests need increased protection one way or another, for a number of reasons including mitigating climate change. Greenpeace say that the decisions made around REDD “will in large part determine whether REDD will strengthen or weaken the global effort to avert catastrophic climate change.” 

But the issues thrown up by forest conservation are much wider and more complex than just ensuring emission reduction. Which begs the question, are offset credits, which measure only reductions in greenhouse gasses, really the best way to fund their vital protection? And, as REDD offset credits are unable to provide a reliable risk-free way to reduce emissions, are they even useful for companies wanting to offset their emissions? Unfortunately, for now, we think the answer to both of these questions is no. 

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