Canada’s burning forests remind us why we need carbon crediting
Companies that are material users of carbon credits decarbonize twice as fast as those that do not use carbon credits.
Image: Unsplash/Marcus Kauffman
Candace Vinke
Some people believe that we shouldn’t use carbon markets to support healthy forests because forests can burn.
Tools such as non-permanence buffer pools, which account for potential unexpected loss of carbon stocks, ensure the net impact remains positive, even if some forests burn.
Research suggests that companies that are material users of carbon credits decarbonize twice as fast as those that do not use carbon credits.
Driving through the charred remains of forests in British Columbia and Alberta, it’s impossible to escape the heartbreaking reality that none of this had to happen. Scientists long warned that human activity was changing the planet in dangerous ways, and by 1979 it was already clear that we’d flipped the world’s forests from being a natural carbon sink to a net source of greenhouse gas emissions.
The Intergovernmental Panel on Climate Change (IPCC) tells us we must flip those land systems back to being sinks if we’re to meet the climate challenge, and carbon markets can help do that.
Unfortunately, an argument has taken hold in some circles – namely, that we shouldn’t use carbon markets to support healthy forests because forests can burn.
The debate over carbon credits
The argument has its roots in two perspectives. The first relates to a disconnect between the lifecycle of CO2 and the lifespan of forests, while the second reflects a distorted perception of how voluntary carbon credits are used.
To the first point: carbon dioxide stays in the atmosphere for 300 to 1,000 years after being emitted. Some argue against using forests to absorb industrial emissions because we can’t guarantee any individual forest will be around that long. But this only makes sense if you ignore the IPCC’s dire warnings about the need to save forests now or risk finding none left centuries from now.
Verra’s Verified Carbon Standard (VCS) aims for a century’s worth of impact, which buys enough time to get us well beyond 2050, by which point we need to reach net-zero emissions. We have created a variety of mechanisms for achieving this, and one is to require that all forest carbon projects contribute credits to our “non-permanence buffer
The contributions are based on the project’s risk of having a loss in the next 100 years. If a fire, hurricane or other catastrophe causes a reversal, credits equal to the size of the loss are canceled from the pool to compensate the atmosphere and ensure the environmental benefit of the issued credits is maintained.
Only one project has suffered a loss in the current conflagration so far – a 40,000-hectare project called the BigCoast Forest Climate Initiative. It contributed just over 15% of its credits to the buffer pool and may have lost as much as 100 hectares, or 0.25% of the project area.
To put this into perspective, that is a tiny fraction of the 8 million hectares of Canadian forests incinerated in 2023, which have pumped more than 600 million tons of carbon dioxide into the atmosphere so far this year.
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Once we know the exact size of BigCoast’s loss, the emissions will be deducted from the next tranche of issued credits. If the project cannot cover the loss on its own, credits from the buffer pool will be canceled, and the project will need to pay back the buffer for any credits used exceeding the project’s previous contribution.
The big question in all of this is how risk is calculated, and this is also changing as science evolves. When the buffer pool concept was created more than a decade ago, there was no scientific agreement on how to estimate future risks of climate change with numerical precision. Then came two IPCC initiatives: the Special Report on the Ocean and Cryosphere in a Changing Climate (SROCC) and the Working Group I Contribution to the Sixth Assessment Report: The Physical Science Basis (AR6).
These efforts infused more science into risk analysis, and the result is something called the “climatic impact-driver” (CID) approach to estimating risk. CIDs synthesize the analysis of sector resilience plans and impacts, as well as the assessment of risk management literature, to categorize the risk into 33 distinct drivers, such as extreme heat, extreme cold and drought, in specific areas.
Three years ago, we began exploring means of incorporating future climate impacts into Verra’s risk assessments. We engaged a consulting team that included leading climate scientist Daniel Ruiz-Carrascal, who served as lead author on IC’s AR6. Working with more than two dozen independent reviewers, Ruiz-Carrascal and the team helped develop a digital tool that estimates climate impacts on projects under several mid-term climate change scenarios. A consultation on the proposed update was held in February 2022, and the final tool will be available in August 2023.
In short, forests do burn, but the global buffer pool ensures the net impact remains positive.
To the second point: it’s an article of faith among some that companies buy voluntary credits to buy themselves out of a problem rather than address it head-on, but research has long shown the opposite to be true. The most recent evidence comes from Trove Research. They compared the reductions achieved by companies that use carbon markets to those that don’t and found that “companies that are material users of carbon credits decarbonize twice as fast as those that do not use carbon credits.” That doesn’t include the additional reductions they finance through carbon credits.
What’s more, it shows that a growing number of companies follow the “mitigation hierarchy” that Verra advocates. These companies both abate their emissions in alignment with a 1.5°C warming scenario and accelerate global reductions further by using the VCM for emissions that can’t be reduced immediately. This aligns with new guidance from the Voluntary Carbon Markets Integrity Initiative on claims and will be further supported in Verra’s upcoming claim guidance.
The bottom line is that Earth’s living ecosystems are hemorrhaging carbon, and the IPCC has warned that we must stop the hemorrhaging immediately. We cannot withhold treatment until a perfect solution comes along, and history shows that’s unlikely to happen. Instead, we need realistic, science-based treatments to stabilize the planet at net-zero emissions. Carbon markets and investing in protecting forests are one of the best treatments we have.
The innovative climate finance model that has protected over 120 million hectares of ecosystem
Climate finance needs to be doubled in order to protect nature.
Image: Reuters/Bruno Kelly
Carter RobertsPresident and CEO, World Wildlife Fund in the US
Rosa Lemos de SáCEO, Brazilian Biodiversity Fund (FUNBIO)
Climate finance needs to be doubled in order to protect nature.
The Project Finance for Permanence (PFP) model offers more guarantees to investors that governments will meet environmental commitments.
Brazil's ARPA for Life PFP, protecting 62 million hectares in the Amazon, demonstrates the model's long-term potential.
More and more governments around the world recognize that the climate and nature loss agendas are inextricably intertwined. One cannot be solved without the other. The challenge is financing.
Annual financing for nature-positive efforts stands between $124 billion and $143 billion from all sources. The UN Environment Programme calls for a doubling of finance flows to restore the nature on which we all depend. This will only be possible by supporting ambitious international, national and community commitments, and by combining all types of finance: public and private, domestic and international, and innovative new funding models including high-quality nature-based carbon solutions, debt restructuring and payments for ecosystem services. While all public and private actors mobilize more financial resources, all governments should revert, eliminate and phase out perverse incentives, subsidies and policies that are harmful to biodiversity. Doing so would substantially decrease the cost of conservation and restoration.
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We see a premium being placed on initiatives that are grounded in places and communities, that support local leadership and rights, and that are benchmarked against performance-based mechanisms with real accountability.
Consider some of the most recent climate and nature platforms gaining momentum globally. Take, for example, the Forest and Climate Leaders’ Partnership, launched last year at COP27 to help make good on a pledge by 145 countries to halt and reverse forest loss by 2030, with the US and Ghana serving as co-chairs this year. It emphasizes accountability and annual reporting with independent assessments of progress toward the partnership’s goals.
A climate finance model that works
At last month’s Paris Summit for a New Global Financing Pact, an array of global leaders called for a new and scaled use of creative financial instruments. They range from high-integrity, trusted nature-based solutions, to debt restructuring to relieve the burden of debt on developing countries and convert it to a stream of conservation finance, to payments for ecosystem services, and more.
We’re excited about one model in particular: Project Finance for Permanence (PFP). PFP is a tool to enable governments and local communities, in partnership with funders and NGOs, to take advantage of an array of financial instruments and secure long-term management and financing for networks of conservation areas. They are designed to withstand changes in national leadership and are adapted to the social, political and environmental context of the particular place.
Here’s how PFP agreements typically work. A national government presents investors with a plan to effectively manage its protected areas. The investors then create a “bridge fund” to help the government gradually assume the full cost of conservation over a period of at least 10 years. The government has to achieve a series of performance-based milestones to keep drawing from the fund. And the fund doesn’t go into effect until investors gather enough commitments to close the government’s funding gap, which means no investor risks backing a plan destined to fall short of its goal, and the government knows it has reliable funding as long as it keeps meeting the milestones.
This model has already been applied to conservation initiatives in Bhutan, Brazil, Canada, Colombia, Costa Rica and Peru. Together, these projects have financed the protection of over 120 million hectares – all to the benefit of local communities, biodiversity and the climate.
New proof of results
The most striking proof of the durability of the PFP model comes from Brazil. There, a PFP called ARPA for Life, launched in 2014 to fund the Amazon Region Protected Areas programme has withstood political changes over time. The programme covers 62 million hectares in the Amazon, an area larger than France. That makes it the world’s largest initiative for tropical forest conservation. The PFP agreement established in 2014 delivered $215 million to secure the long-term protection of the conservation areas covered under ARPA. It is the backbone for conservation across the country, enabling the value of nature to supersede partisan political views. It ensured that the sovereign pride communities have in their great ecosystems endured through elections and shifting political priorities.
According to a recent study published in the journal Biological Conservation and conducted by researchers from the Federal University of Minas Gerais (UFMG), WWF-Brazil, Fundo Brasileiro para a Biodiversidade (FUNBIO) and the University of Bonn, significant areas of the Brazilian Amazon have continued to see lower levels of deforestation in the face of immense pressures and threats. The authors look at the impact of the ARPA program on reducing deforestation and avoiding CO2 emissions in the Brazilian Amazon between 2008 and 2020.
The study reveals that during the monitored period, protected areas and Indigenous lands in the Amazon reduced deforestation by 21% (based on the difference between observed deforestation and estimated deforestation that would have happened if the areas were not protected). The protected areas supported by ARPA prevented nearly 260,000 hectares of deforestation. That’s the same as preventing 104 million tons of CO2 emissions, roughly equivalent to Belgium’s total emissions in 2021.
The secret to achieving this consistency is the combination of government commitments, corresponding closing and disbursement conditions for funding, and a vibrant local Brazilian institution, FUNBIO, that holds funds and disburses them based on progress over time – not just on the protection of nature, but also the provision of benefits and resources and jobs to local communities.
Scaling up to protect nature
The World Economic Forum estimates that transitioning to a nature-positive economy could generate annual business opportunities worth $10 trillion and create 395 million jobs by 2030. What we need is to design and implement innovative financial mechanisms to help secure landscapes and seascapes on the scale required to realize these benefits. It is time to scale up performance-based mechanisms like PFPs, and platforms like the Enduring Earth partnership have been established to help. Our organizations stand ready to collaborate with national leaders interested in protecting their natural heritage.
If we work with willing governmental partners to put these agreements in place, we are more confident than ever they will stand the test of time. And we will, ultimately, deliver the long-term results needed to protect nature and turn the tide on the climate crisis.
This piece represents a shared vision from the following global conservation leaders:
Climate finance needs to be doubled in order to protect nature.
Image: Reuters/Bruno Kelly
Carter RobertsPresident and CEO, World Wildlife Fund in the US
Rosa Lemos de SáCEO, Brazilian Biodiversity Fund (FUNBIO)
Jul 31, 2023
Climate finance needs to be doubled in order to protect nature.
The Project Finance for Permanence (PFP) model offers more guarantees to investors that governments will meet environmental commitments.
Brazil's ARPA for Life PFP, protecting 62 million hectares in the Amazon, demonstrates the model's long-term potential.
More and more governments around the world recognize that the climate and nature loss agendas are inextricably intertwined. One cannot be solved without the other. The challenge is financing.
Annual financing for nature-positive efforts stands between $124 billion and $143 billion from all sources. The UN Environment Programme calls for a doubling of finance flows to restore the nature on which we all depend. This will only be possible by supporting ambitious international, national and community commitments, and by combining all types of finance: public and private, domestic and international, and innovative new funding models including high-quality nature-based carbon solutions, debt restructuring and payments for ecosystem services. While all public and private actors mobilize more financial resources, all governments should revert, eliminate and phase out perverse incentives, subsidies and policies that are harmful to biodiversity. Doing so would substantially decrease the cost of conservation and restoration.
Have you read?
Climate finance: What are debt-for-nature swaps and how can they help countries?
How green accountability can create more equitable climate finance
We see a premium being placed on initiatives that are grounded in places and communities, that support local leadership and rights, and that are benchmarked against performance-based mechanisms with real accountability.
Consider some of the most recent climate and nature platforms gaining momentum globally. Take, for example, the Forest and Climate Leaders’ Partnership, launched last year at COP27 to help make good on a pledge by 145 countries to halt and reverse forest loss by 2030, with the US and Ghana serving as co-chairs this year. It emphasizes accountability and annual reporting with independent assessments of progress toward the partnership’s goals.
A climate finance model that works
At last month’s Paris Summit for a New Global Financing Pact, an array of global leaders called for a new and scaled use of creative financial instruments. They range from high-integrity, trusted nature-based solutions, to debt restructuring to relieve the burden of debt on developing countries and convert it to a stream of conservation finance, to payments for ecosystem services, and more.
We’re excited about one model in particular: Project Finance for Permanence (PFP). PFP is a tool to enable governments and local communities, in partnership with funders and NGOs, to take advantage of an array of financial instruments and secure long-term management and financing for networks of conservation areas. They are designed to withstand changes in national leadership and are adapted to the social, political and environmental context of the particular place.
Here’s how PFP agreements typically work. A national government presents investors with a plan to effectively manage its protected areas. The investors then create a “bridge fund” to help the government gradually assume the full cost of conservation over a period of at least 10 years. The government has to achieve a series of performance-based milestones to keep drawing from the fund. And the fund doesn’t go into effect until investors gather enough commitments to close the government’s funding gap, which means no investor risks backing a plan destined to fall short of its goal, and the government knows it has reliable funding as long as it keeps meeting the milestones.
This model has already been applied to conservation initiatives in Bhutan, Brazil, Canada, Colombia, Costa Rica and Peru. Together, these projects have financed the protection of over 120 million hectares – all to the benefit of local communities, biodiversity and the climate.
New proof of results
The most striking proof of the durability of the PFP model comes from Brazil. There, a PFP called ARPA for Life, launched in 2014 to fund the Amazon Region Protected Areas programme has withstood political changes over time. The programme covers 62 million hectares in the Amazon, an area larger than France. That makes it the world’s largest initiative for tropical forest conservation. The PFP agreement established in 2014 delivered $215 million to secure the long-term protection of the conservation areas covered under ARPA. It is the backbone for conservation across the country, enabling the value of nature to supersede partisan political views. It ensured that the sovereign pride communities have in their great ecosystems endured through elections and shifting political priorities.
According to a recent study published in the journal Biological Conservation and conducted by researchers from the Federal University of Minas Gerais (UFMG), WWF-Brazil, Fundo Brasileiro para a Biodiversidade (FUNBIO) and the University of Bonn, significant areas of the Brazilian Amazon have continued to see lower levels of deforestation in the face of immense pressures and threats. The authors look at the impact of the ARPA program on reducing deforestation and avoiding CO2 emissions in the Brazilian Amazon between 2008 and 2020.
The study reveals that during the monitored period, protected areas and Indigenous lands in the Amazon reduced deforestation by 21% (based on the difference between observed deforestation and estimated deforestation that would have happened if the areas were not protected). The protected areas supported by ARPA prevented nearly 260,000 hectares of deforestation. That’s the same as preventing 104 million tons of CO2 emissions, roughly equivalent to Belgium’s total emissions in 2021.
The secret to achieving this consistency is the combination of government commitments, corresponding closing and disbursement conditions for funding, and a vibrant local Brazilian institution, FUNBIO, that holds funds and disburses them based on progress over time – not just on the protection of nature, but also the provision of benefits and resources and jobs to local communities.
Scaling up to protect nature
The World Economic Forum estimates that transitioning to a nature-positive economy could generate annual business opportunities worth $10 trillion and create 395 million jobs by 2030. What we need is to design and implement innovative financial mechanisms to help secure landscapes and seascapes on the scale required to realize these benefits. It is time to scale up performance-based mechanisms like PFPs, and platforms like the Enduring Earth partnership have been established to help. Our organizations stand ready to collaborate with national leaders interested in protecting their natural heritage.
If we work with willing governmental partners to put these agreements in place, we are more confident than ever they will stand the test of time. And we will, ultimately, deliver the long-term results needed to protect nature and turn the tide on the climate crisis.
This piece represents a shared vision from the following global conservation leaders:
Carter Roberts, President and CEO of World Wildlife Fund in the US (WWF-US); Avecita Chicchón, Program Director, Andes-Amazon, the Gordon and Betty Moore Foundation; Rosa Lemos de Sá, CEO, Brazilian Biodiversity Fund (FUNBIO); Jennifer Morris, CEO, The Nature Conservancy (TNC); Carlos Manuel Rodríguez, CEO and Chairperson, the Global Environment Facility (GEF); Cristián Samper, Managing Director and Leader for Nature Solutions, the Bezos Earth Fund; and Sue Urahn, President and CEO, The Pew Charitable Trusts.
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