The “Rulebook” is actually a collection of seven decisions that together provide guidance on how countries can harvest available data to create reliable snapshots of their forests over time and to use these snapshots to create deforestation reference levels that will be recognized by the UNFCCC.
The decisions govern, among other things, modalities for monitoring national forests, addressing the drivers of deforestation and forest degradation, and measuring, reporting and verifying activities designed to reduce greenhouse gas emissions.
It’s still, however, not clear what sort of payoffs that data will yield long-term, and for that there’s a work program for developing results-based finance in support of REDD and a new set of arrangements between the COP and the Green Climate Fund. The decisions also include a mechanism for helping developing countries deal with loss and damage from climate change.
The final decision reached is the one covering institutional arrangements for REDD finance moving forward.
We covered the COP from beginning to end, with a narrow focus on REDD and those issues still under discussion. Here is the bulk of our coverage, with a few breaking stories omitted.
Demand For Forest Carbon Offsets Rises As Forestland Under Carbon Management Grows sets the stage for Warsaw with a deep dive into the state of forest carbon markets around the world.
REDD, CDM Likely To Find A Place In New Climate Agreement: UNFCCC Executive Secretary Christiana Figueres offers hope that the troubled CDM market and REDD projects will be included in the international climate deal expected to be finalized in 2015.
Understanding Carbon Accounting Under The UN Framework Convention is a work in progress designed to explain in simple terms the complexity of carbon accounting under the emerging “REDD Rulebook”.
Indigenous Leaders Stand Up For Active Role In REDD relates what indigenous leaders expect from forest-carbon finance
REDD Reference Levels Share Stage With Broader Land-Use Issues In Warsaw outlines the issues on the table at the beginning of the talks.
In Warsaw As In California, Forest Carbon Carrot Needs Compliance Stick explores the need for compliance drivers to boost demand for forest carbon offsets.
Forest, Ag Projects Can Combine Adaptation And Mitigation: CIFOR Study highlights the missed opportunities to link multiple benefits in projects that aim to tackle the impacts of climate change.
Dutch Platform Turns Landscapes Talk Into REDD Reality examines a new platform unveiled in Warsaw that could serve as a model for future public-private partnerships for financing REDD+ projects.
The REDD Finance Roundtable: A Quick Chat With EDF, WWF, and UCS takes stock of the talks on the eve of the final REDD agreement.
For REDD Proponents, No Regrets examines the early success of REDD pilot projects despite sluggish progress made in securing policy and financial support at the national and international levels.
US, UK, Norway Launch Next-Stage REDD Finance Mechanism Under World Bank examines a financing mechanism designed to support performance-based payments down the road.
After the talks, we began digging into the decisions and themes of the two-week talk, and will be rolling these stories out as they take shape.
Unpacking Warsaw, Part One: The Institutional Arrangements explores the last-minute deal that lays rules for governing REDD finance through 2015.
Unpacking Warsaw, Part Two: Recognizing The Landscape Reality explores the thinking behind the growing emphasis on “landscape thinking” in climate finance.
Unpacking Warsaw, Part Three: COP Veterans Ask, ‘Where’s The Beef?’ explores the reaction of carbon traders to the Warsaw outcomes and offers a peek into the year ahead.
Further stories in this series will explore the impact of individual decisions within the rulebook, the role that the rulebook can play in helping existing projects nest in jurisdictional programs, and the impact of the rulebook on the private sector
6 December 2013 | WASHINGTON DC |“Can I say it was disappointing?” asked Charlotte Streck, director of Climate Focus. “Probably not, because that would mean that I had expectations.”
Streck’s question and answer prompted nervous laughter from a full house at the Wednesday night debrief that Ecosystem Marketplace, McGuireWood LLP and the International Emissions Trading Association (IETA) held in Washington, DC to take stock of the 19th international climate conference, which concluded in Warsaw on November 23. Her reaction was a far cry from the euphoria that enveloped Warsaw after the “REDD Rulebook” (see sidebar, right) was approved.
“At the end you have decisions,” Streck acknowledged. “And that gives hope, at least for a moment. Until you read the decisions and you say Oh god, there’s actually nothing written in it.”
In Warsaw, seven decisions on REDD+ (the UN framework for reducing emissions from deforestation) finally opened up the possibility for results-based financing to flow to countries that reduce deforestation. However, Streck was critical of the guidance on reference levels – the baseline levels of deforestation that countries must determine before being able to reduce against them – which she said was not rigorous enough to attract the kind of pay-for-performance funding needed to save endangered forests on a meaningful scale. Ecosystem Marketplace will explore this issue specifically in more detail later in this series.
IETA CEO Dirk Forrister shared Streck’s disappointment about the overall outcomes from this year’s Conference of Parties (COP19), but said his organization was gearing up for a busy – and, hopefully – productive 2014 as negotiations shift from the technical issues to larger, binding reduction targets.
“I think it’s going to be a really big year,” he said. “The target-setting begins next month. The European Commission will put its initial proposal together the 21st of January. The real games begin in Lima next year.”
Marnie Funk, Senior Government Relations Advisor for Shell Oil company, was discouraged by the lack of discussion of carbon capture and storage (CCS) and an international carbon price at COP19, but she nevertheless found some silver lining.
“You at least didn’t come out with a weakagreement,” she said. “You preserve the option of potential meaningful progress at a future COP.”
Protestors at COP19 held signs – and even formed letters with their bodies – to ask negotiators WTF? By which they meant, “Where’s the finance?” (Among other sentiments.)
It was a good question. The end of COP19 yielded $100 million worth of commitments to the existing Adaptation Fund and another $280 million to REDD+ jurisdictional efforts.
“That’s not a ‘B’; it’s an ‘M’,” Forrister said to clarify one of his slides, making the point that climate finance that is in the millions rather than billions of dollars is rather unambitious.
The ongoing struggle to ensure the flow of sufficient funding raises the question of whether the UNFCCC is in fact the right forum to discuss what could be a massive transfer of wealth from developed countries – the historical emitters – to developing ones that are now experiencing billions of dollars of loss and damage from climate-change-intensified storms and slow-onset sea level rise.
The fact that Typhoon Haiyan tore through the Philippines right before the COP heightened the issue of loss and damage, Forrister said, with Filipino negotiator Yeb Sano holding a hunger strike right outside of the lunchroom. Despite significant disagreements on this issue, negotiators nailed down text that recognizes loss and damage and agreed to work on an international mechanism to provide the most vulnerable countries with protection. But the fundamental divide between developed and developing countries over the funding of the mechanism has yet to be resolved.
“Is the UNFCCC the platform of choice to address what is really becoming an economic issue?” asked Vikram Widge, the Head of Climate Finance and Policy at the International Finance Corporation. “Whether it’s loss and damage or emerging markets, many of the discussions [at the COPs] are now around economics and finance.”
Streck agreed that the strength of the UNFCCC as a forum may be in convening technical experts rather than financial ones. The idea of a multilateral environmental treaty in which countries come together to jointly ‘manage the global commons’ may be an idealistic relic of the 80s, she said.
Discussions around the Green Climate Fund (GCF), through which developed countries agreed to funnel $100 billion annually by 2020, progressed slowly. A ministerial leader’s summit in September may decide the GCF’s fate, though Widge said that his sense is that the fund won’t be capitalized until 2015. COP19 brought to light the need for monitoring, reporting and verification around MRV itself, he added.
Though panelists expressed mixed feelings about the efficacy of the UNFCCC process, the show will go on – in Lima next year and then Paris the year after that. And even for the most jaded COP veterans, there is at least the sense that things will get more interesting over the next two years.
Though the “outcome with legal force” isn’t due until 2015 in Paris, the next installments of the Intergovernmental Panel on Climate Change (IPCC) report will come out over the coming months, and the expectation is that the adaption assessment in particular will strengthen climate science and the urgency of its implications. The IPCC report will at the least serve as a sobering backdrop as countries develop their proposed “contributions” for emissions reductions.
While the premise of the UNFCCC is to keep the global average temperatures from rising more than 2 degrees Celsius – the maximum warming that scientists agree can occur without risking catastrophic consequences – the panelists observed that current negotiations seem less connected to this line in the sand. "I don't think we are going to make 2 degrees," Widge said. "We're trying to avoid 4 degrees at this point."
But even the fight leading to the inclusion of the word “contributions” in the final text reflects the fact that every comma and word matters when negotiating the text of an international treaty. Forrister described how even the discussions over setting a timetable to ensure that outcome is reached were particularly hung up on word choice.
“They couldn’t agree on the word ‘target’ because that’s a loaded term that might imply…something,” he said. “They couldn’t agree on ‘commitments’ – which has been used in the past – because ‘commitments’ are something under the Framework Convention that developed countries do. They couldn’t use ‘actions’ because that’s something developing countries do. So ‘contributions’ is something that encompasses maybe all of the above.”
5 December 2013 | You couldn’t escape it if you attended year-end climate talks in Warsaw this year. After all, Indonesian Deputy Minister Heru Prasetyo talked about it incessantly, as did World Bank Vice President Rachel Kyte. Peter Holmgren, who heads the Center for International Forestry Research (CIFOR), built the two-day Global Landscapes Forum around it, and the United States, United Kingdom, and Norway launched the Initiative for Sustainable Forest Landscapes (ISFL) to make it a reality. Even official negotiators meeting under the auspices of the under the auspices of the United Nations Framework Convention on Climate Change (UNFCCC) held a two-day workshop on it.
The “it” is the “landscapes approach” to reducing greenhouse gas emissions from fields, farms, and forests. But what exactly does that mean?
Several speakers described it as a “holistic” approach that aims to go beyond reducing emissions from deforestation and forest degradation (REDD) and even beyond REDD+ (which incorporates more activities) by shifting the focus beyond just capturing carbon in trees and towards a complete re-engineering of the rural economy that incorporates people, places, and culture.
It's the kind of monumental aspiration the UN is great at articulating but horrible at achieving – until you stop to consider that this "shift" actually reflects what's already happening in the voluntary carbon markets, and it's being led by foresters, farmers, and project developers.
Indeed, voluntary REDD projects like Brazil’s Surui Carbon Project and Kenya’s Kasigau Corridor REDD Project work by jump-starting sustainable agriculture programs that involve organic farming and the harvesting of non-timber forest products like Brazil nuts. Our most recent State of the Forest Carbon Markets Reportshowed that these two projects were typical of programs being implemented around the world.
The excitement in Warsaw over landscapes took two forms: some were relieved to finally see it front-and-center, while others were pleasantly surprised and even shocked to see that these approaches existed at all.
Those dual reactions highlight a disconnect that has always existed between the UNFCCC and the voluntary carbon markets. As early as the Bali climate talks in 2007, and probably long before that, REDD project developers warned that the negotiators charged with creating a REDD governing regime were ignoring the way REDD was taking shape on the ground.
“These people think REDD is about putting a fence around the forest,” said former Cargill executive David Pearse*, shaking his head. “But REDD will only work if you look at it as an ‘embedded option’ in a larger portfolio that involves sustainable land-use.”
Eric Bettelheim*, who now runs forest-carbon project developer Floresta Group, offered a similar appraisal.
“Most deforestation is caused by small-scale farmers who are acting out of need,” he said. “If you don’t involve those people in your project, you won’t get any results."
Five years on, the track record in voluntary carbon bears that out: with few exceptions, voluntary REDD projects work by helping local people develop sustainable livelihoods. The few exceptions are usually related to wilderness conservation efforts in northern borneal forests, and not to tropical forests populated by forest people.
In theory, the experiences of the voluntary markets will be used to inform the compliance markets, and that’s why the organizers of the Landscapes Forum blended Forest Day and Agriculture, Landscapes and Livelihoods Day into one two-day forum that generated a 9-page list of recommendations to be fed into formal negotiations in years to come. Those recommendations are exhaustive, but the gist is that the UNFCCC needs to put more emphasis on the drivers of deforestation.
Beyond that, there is little agreement as to how the UNFCCC can incorporate the lessons emerging in the landscapes approach – or even if formal incorporation is necessary. After all, the voluntary markets embraced the landscapes approach because it proved to be the most effective way to reduce deforestation, and not because they had a mandate to do so.
The upshot is that, while everyone at the Warsaw talks seemed to welcome the focus on landscapes, they remain divided into two camps: one that wants to bring the pay-for-performance model to bear on all aspects of landscape management, and one that seems content to let the landscapes paradigm serve as a guiding vision for REDD finance.
Indonesia’s Prasetyo pitched his tent somewhere between the two camps. He sees the landscapes approach to carbon finance as part of an overall transition to a more sustainable agriculture regime, but in the short term he sees it more as a tool for communicating the dynamics of REDD to a wider audience.
“For too many people, REDD is just an abstract financing tool,” he explains. “But landscapes – which include the fields and the farms, the ranchers and farmers – those are things that people can see. If we tell them that we’re preserving the landscape, and that REDD is just one tool to help us pay for it, that they understand.”
Over the long term, he says, REDD simply won't mobilize enough funding to overhaul an agricural economy the size of Indonesia's. At most, it can get the ball rolling and open a few minds to the possibility that forests can be utilized without being harvested and destroyed.
If you survey the landscape for environmental finance, you'll have no trouble seeing why people want to unify it. Beyond REDD, there are scores of practices designed to incentivize good land stewardship – from carbon-based payments for no-till farming to watershed payments for reduced runoff to mitigation banking that supports habitat protection and restoration. Each of them has promise, but sometimes that promise is more catalytic than conclusive.
Two years ago, for example, we wrote about David Ongoro, who was participating in a pilot project built around soil carbon; and earlier this year, we met Chege Mwangi, who was participating in a pilot project built around payments for watershed services. Both are Kenyan farmers, and both earned payments for ecosystem services by implementing sustainable agriculture practices.
More importantly, both said the payments themselves paled in comparison to the benefits they received in the form of higher yields – a point the World Bank’s Kyte made in Warsaw while telling delegates about John Obuom, another Kenyan farmer who boosted his yields by participating in a pilot project designed to measure the impact on emissions of various farming practices.
Experiences like these illustrate both the allure and challenge of shifting to a landscapes approach. From a scientific and economic perspective, the fields, farms, and forests are all connected, but from a regulatory perspective they are almost always in different silos, and those silos are often fragmented and contradictory. The Brazilian state of Acre has created a regulatory framework built on ecosystem servicesand could theoretically serve as a template for a landscapes approach, but so far it stands alone and remains unproven.
For these and other reasons, long-time REDD proponents remain divided over the wisdom of bringing the landscapes approach into the UNFCCC. Some, like Prasetyo, say it never hurts to give negotiators a more accurate governing paradigm. Others, like Bettelheim, agree – but only to a point. He’s worried the UNFCCC will become so fixated on trying to measure the new activities that it will never move forward.
The Kenyan experiments make it clear that, when it comes to farming, the environmental payments alone aren’t always high enough to incentivize change. Those payments, however, could be aggregated to fund larger-scale education campaigns, with the payments based in part of estimated emission-reductions from farms or even from avoided deforestation.
That’s the direction the United States, United Kingdom, and Norway are heading with their ISFL initiative. The payments will be based on reduced emissions from deforestation, but the activities funded will range from training in sustainable agriculture to a guarantee fund for green businesses. The lion’s share of the economic incentive will come in the form of buy-in from agricultural giants like Unilever, which the donors hope will agree to pay extra for sustainably-harvested products.
That approach, however, can only go so far because not all forested countries are suited to sustainable agriculture. For some, the only solution may be simply to pay for forest conservation. For them, it's not clear how much value a landscapes approach will ultimately offer.
*NOTE: Interestingly, I did not feature the quotes from Bettelheim or Pearse in the stories I wrote then, but their statements informed my understanding of REDD and I have cited them quite often elsewhere. Pearse was speaking in a private conversation on the side of the COP, while Bettelheim was participating in a panel discussion at the Carbon Expo.
2 December 2013 | It might not be immediately apparent why insurance giant Allianz, retailer Marks & Spencer, energy company Eneco, airline Qantas or Brazilian cosmetics producer Natura Cosméticos would invest their money in forest carbon offsets – sometimes from projects on the other side of the world – but they do.
Our most recent State of the Forest Carbon Markets Report tracked 19.7 million tonnes of forest carbon offsets that companies had purchased voluntarily. These companies are not required by law to reduce carbon emissions, yet they purchase enough offsets to cancel out the annual emissions of a small country like Honduras or Niger.
Their motivations are myriad, but the common denominator, according to the report, is that on some level these companies connect with the idea that forest ecosystems are some of the last remaining large-scale carbon sinks, and investing in those sinks is essential to efforts to mitigate climate change.
“People have a lot of faith that forests are a viable part of the solution,” says Jena Thompson Meredith, Director of Corporate Partnerships at The Conservation Fund. “It’s a holistic vision when we’re starting to think about all of climate change.”
That vision may be holistic, but it’s not universal: the same report found that tens of millions of forest carbon offsets went unsold last year, and it warned that scores of projects underway now may be forced to scale back if demand doesn’t materialize. To solve this problem, we must understand demand.
In an attempt to pull back the curtain on what inspires private companies to invest in forest carbon projects, we caught up with four companies that have taken a leadership role in their respective sectors. Here’s a taste of what’s to come:
While not a scientifically representative sample of forest carbon buyers, these four case studies tell stories of corporate offsetting that resonate with boardrooms and sustainability teams all over the world. They are stories about grappling with big questions – questions like what are our annual emissions?that appear innocuous but are iceberg-like in their hidden complexity. And they are stories about connections – unlikely links between carpets and trees, CEOs and smallholders – that are being forged for the first time.
Voluntary buyers paid an average price of $7.7/tonne for forest carbon offsets last year – a $1.8/tonne price premium on average transaction prices across all project types. Why are companies willing to pay more for emissions reductions that come from forests versus, for instance, landfill methane capture or destruction of ozone-depleting substances?
There are as many answers to this question as there are offset transactions, but oftentimes it has to do with the many benefits forest projects offer beyond carbon sequestration – from providing new or alternative livelihoods to a local community to maintaining water quality for downstream drinkers to conserving habitat for spider monkeys. Those co-benefits have both inherent and market value. In 2012, offsets certified as both Verified Carbon Standard (VCS) and Climate, Community, and Biodiversity Standards transacted at 30 cents more per tonne than those that earned only VCS. A full 61% of transacted forest carbon offsets were certified not just for carbon sequestration, but also other environmental and social gains.
The price premium may also have to do with the fact that forestry projects are relatively easy to explain to the un-indoctrinated. For retailers that want to communicate climate benefits to companies, and for companies that want to relay the importance of offset purchases to customers, tangibility is key. People like to be able to imagine their dollars making a difference on a specific landscape, and forest projects are ‘photogenic’ in that way.
“Forestry is the most intuitive of all offset categories: you plant a tree and you sequester carbon. [Conceptually], it’s pretty straightforward,” explains Mark LaCroix, a Senior Sustainability Officer at The Carbon Neutral Company. “But there’s a lot of complexity with ensuring that. Lots of corporate entities are making very specific claims regarding carbon reductions based on these offsets, so we need to make sure an offset we sell today is still an offset tomorrow.”
For many companies, forest carbon offsets are part of a ‘portfolio’ approach to offsetting that includes both lower-priced ‘commodity’ offsets – such as those from wind energy projects – as well as ‘boutique’ offsets from forestry. This gives companies the ability to support some higher-impact (and therefore higher-priced) projects while still purchasing the volume of offsets they need to meet their emissions reduction target, and staying within budget.
But another important reason companies invest in forests over other offset types is because though offset purchases are voluntary, they are not necessarily altruistic. As climate change impacts hit companies’ supply chains and operations, investments in natural infrastructure and carbon sequestration begin to make business sense. The top buyer sectors other than the carbon market itself – energy, agriculture & forestry, transportation, and food & beverages – have something in common: these sectors in particular depend on place-specific natural resources and forest-based ecosystem services (e.g. clean water) to do what they do.
Our State of reports survey the project developers and retailers that transact offsets to buyers. These sellers are constantly taking the pulse of buyers, so they have a good sense of their motivations – and reservations – about investing in forest projects. But talking to the buyers themselves offers a higher-res picture. For most corporations offsetting their emissions voluntarily, the offsets they purchase are just one piece of a larger sustainability strategy.
In most cases, a forest offset transaction is the result of a complex decision-making process that involves quantifying emissions, setting reduction targets, and then figuring out how to meet those goals – through energy efficiency measures; switches to renewable energy or less carbon-intensive fuel; streamlining production processes or supply chains; rethinking product design; engaging employees around energy use and travel; and/or offset purchases. Even the offset purchase itself is the final chapter of a choose-your-own-adventure story full of decision points about standards, project types, contract terms, volume and value. For many companies, creating a sustainability strategy requires a hard look in the mirror for the first time.
“The real challenge for industry is to radically change how they perceive the environment and climate change and then to take courageous action to correct what they can about their processes that improves their situation,” said Bill Barry, a sustainability consultant for publisher Macmillan, which has a goal of reducing its emissions 65% by 2019.