New report on carbon markets: What you need to know

© Onmer Cenepo

The market for carbon offsets must be scaled up globally to make a sufficient dent in climate change, according to a new report that lays out a path toward a high-quality global carbon market. 

What does any of this mean? Let’s take you through it.

Why is this report important?

The report was released by the Taskforce on Scaling Voluntary Carbon Markets, led by United Nations Special Envoy for Climate Action Mark Carney. It lays out principles and recommendations for bolstering and regulating — on a global scale — the market for voluntary carbon offsets, an increasingly popular tool for companies trying to neutralize some of their emissions of climate-warming carbon. 

What are ‘offsets’ again? 

The idea behind offsets is this: A company (or government or individual) can buy or trade a “credit” worth 1 metric ton of carbon, representing a portion of their emissions that they’re trying to neutralize by reducing carbon somewhere else. So revenue from that credit would go either toward the protection of a prescribed area of forest, for example, or toward an equivalent amount of carbon sequestered by carbon-capture technology, an as-yet underdeveloped method for removing carbon from the atmosphere. (More on that later.)

Aren’t offsets controversial?

Voluntary carbon markets have come under scrutiny, particularly nature-based offset projects, because in their early days, they did not always deliver their hoped-for climate impacts. Major advances have been made in the past decade in ensuring their long-term effectiveness, however. There are some remaining unresolved issues related to structures and standards, though — issues that are potentially holding back additional investment in carbon markets — and that’s what the task force’s report addresses directly. 

So offsets are useful?

Even for companies looking to reduce their carbon footprint — as many are! — nature-based offsets represent one of the only immediate and effective ways for some high-emitting industries (airlines, cement manufacturers and more) to abate hard-to-cut emissions, while continuing to reduce emissions elsewhere in their operations. 

So why are new standards and rules needed? 

Good question. Let’s bring in an expert. 

“Demand for offsets is surging, but it is stymied by the fact that the voluntary market for carbon offsets … has a panoply of different rules, strictures and standards,” said Agustin Silvani, a conservation finance expert at Conservation International. 

To that end, the report calls for stronger governance, in the form of a body to establish and monitor standards, repair faulty validation and verification processes, and prevent fraud. All in all, the report is trying to ensure “high-quality” carbon offsets.

What do ‘high-quality’ projects look like?

Two examples for you. 

On a national level, Costa Rica slashed deforestation rates through a tax that pays landowners to keep forests standing. The Central American country monitors deforestation rates to know whether they are getting results across the whole country or simply displacing (or delaying) deforestation. Through this system, Costa Rica generates US$ 30 million a year for forest conservation and has conserved or restored close to 1 million hectares (2.5 million acres). They’re now looking to sell the carbon credits generated through this program to international buyers.

On a site-specific level, through a project in Peru’s Alto Mayo Protected Forest — which despite its protected status saw deforestation fueled by agricultural encroachment and illegal logging — Conservation International helps to provide local farmers with economic alternatives to deforestation. Families in this area pledge not to cut down trees in return for technical and financial benefits; these agreements are partially funded through carbon credits. Now, Conservation International is working with governments to include the credits generated by this project to become part of Peru’s national program to meet its carbon-reduction commitments to the U.N.

(Site-specific projects like Alto Mayo are important for contributing to national-level outcomes, according to Conservation International expert Maggie Comstock, who says it is essential that these on-the-ground activities are recognized as part of the national forest carbon program and accelerate national-scale implementation.)

What about that ‘as-yet underdeveloped’ carbon-capture technology you mentioned?

Carbon capture and storage (CCS) technology is — as its name suggests — a technological method for capturing carbon from the atmosphere and storing it. Instead of using the carbon to grow wood, as trees do, most CCS systems bury captured carbon into the ground. (A useful primer on CCS is here.) While this technology has captivated investors and policymakers, it’s not deployed at anywhere near the scale to make a dent in the climate (and in fact the only CCS facility in the United States closed this week). 

So this is why we still need forest-carbon projects? 

We’ll let the expert answer that.

“Natural climate solutions are not only desirable, they’re necessary if we want to stabilize the climate,” says Conservation International’s Silvani, noting that protecting and restoring nature can provide at least 30 percent of all global action necessary to avoid worst-case climate scenarios. 

Not only that, he notes, nature-based offsets provide additional benefits that go beyond simply a reduction in carbon emissions, including wildlife habitat, freshwater regulation and sustainable livelihoods.

What’s next?

The task force’s report lays out a series of recommendations for next steps (you can find them here); now it’s up to policymakers, companies and U.N. climate negotiators to begin to put them into motion. 

The stakes are high: As Silvani pointed out, the demand for offsets is clearly there, as is the need — the task force report estimates that voluntary carbon markets would need to grow more than 15-fold this decade to keep average global temperature rise within the 1.5-degree C (2.7 F) “safe” zone. Trillions of dollars in private capital is beginning to trickle in, so ensuring that it is invested in projects that are efficient and effective is paramount, Silvani said. 

“To say that the task force’s report is necessary,” he says, “is an understatement.” 

 

Agustin Silvani is the senior vice president of conservation finance at Conservation International. Bruno Vander Velde is senior communications director at Conservation International. Want to read more stories like this? Sign up for email updates here. Donate to Conservation International here.

Cover image: The Alto Mayo Protected Forest, Peru Onmer Cenepo)


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