The Growth of REDD: A Green light for Forestry Offsets?

By Jane Burston: Founder and Director of Carbon Retirement, a company that has pioneered an innovative and ethical approach to carbon offsetting

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 provide offset credits for the protection of forest or woodland.

REDD projects made 29% of voluntary offset credit volumes transacted in 2010, more than all offset credits generated from renewable energy projects (20%) or methane destruction projects (20%).

Such credits are being generated by large scale forestry projects in diverse locations such as Kenya, Indonesia and Canada.

The increase can be 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 the inherent inability of forest projects 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 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, and REDD and REDD+ offsets look likely to be accepted by such schemes, including California’s, which is due for implementation in 2012. Many buyers are now taking a long-term view and purchasing REDD credits from the voluntary market in preparation.REDD

So there certainly is more confidence in the market around REDD credits.  But it seems many of the criticisms using forestry projects to generate offset credits remain and buyers should be wary of these.

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’.

Social risks are enhanced by the fact that the VCS is the only third party standard available for REDD credits and the VCS does not measure (and is therefore not accountable for) wider environmental or social impacts – this is the reason that Voluntary Carbon Standard credits are cheaper than other credits.

CarbonPositive, an independent advisor on carbon, states, “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.”

Considering the biggest reason that companies chose to voluntarily offset their emissions is their reputation, companies should be aware of the risks when purchasing REDD credits only accredited to VCS standard.

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 yet announced 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 have revealed that plantation companies continue to illegally clear areas of peat swamp forest meant to be protected. And there is an added twist. It turns out that 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. 

A recent article on the REDD Monitor described the situation succinctly: “Many of the countries hoping to implement REDD are riddled with corruption, illegal logging and a failure to respect land rights and indigenous peoples’ rights. Pouring money into these countries in the hope that it will help reduce deforestation is like pouring water into a leaky bucket.”

For voluntary offsetting purposes the risks are still high, with discussions now going beyond whether protecting an area of forest can ever be considered to create a permanent or additional carbon reduction.

The recent rise of REDD may have masked these initial concerns, but it has also brought new questions into the frame from  social and wider environmental impacts of the current REDD mechanism.

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.