Effectiveness and legitimacy of forest carbon standards in the OTC voluntary carbon market

<p>Abstract</p> <p>Background</p> <p>In recent years, the voluntary over-the-counter (OTC) carbon market has reached a significant market volume. It is particularly interesting for forest mitigation projects which are either ineligible in compliance markets or confronted with a plethora of technical and financial hurdles and lacking market demand. As the OTC market is not regulated, voluntary standards have been created to secure the social and environmental integrity of the traded mitigation projects and thus to ensure the quality of the resulting carbon credits. Building on a theoretical efficiency-legitimacy framework, this study aims to identify and analyse the characteristics and indicators that determine the efficiency and organisational legitimacy of standards for afforestation/reforestation carbon projects.</p> <p>Results</p> <p>All interviewed market actors consider third-party certification and standards as a crucial component of market functionality, which provide quality assurance mechanisms that reduce information asymmetries and moral hazard between the actors regarding the quality of carbon credits, and thus reduce transaction costs. Despite this development, the recent evolution of many new and differing standards is seen as a major obstacle that renders it difficult for project developers and buyers to select an appropriate standard. According to the interviewed experts the most important legitimating factors of standards are assurance of a sufficient level of quality of carbon credits, scientifically substantiated methodological accounting and independent third-party verification, independence of standard bodies, transparency, wide market acceptance, back-up of the wider community including experts and NGOs, rigorous procedures, and the resemblance to the Afforestation/Reforestation (A/R) CDM due to its international policy endorsements. In addition, standards must provide evidence that projects contribute to a positive social and environmental development, do no harm as a minimum requirement and build a strong track record of successful projects. Project developers require clear, easily and practically applicable standards at lowest possible costs with a high potential in order to achieve good carbon prices, while buyers require that standards are legitimate, credible and that no public criticism arises when carbon credits are purchased from projects certified by a certain standard.</p> <p>Conclusions</p> <p>Despite the fragmented and immature state of the OTC market, standards act as 'market-making' intermediaries and contribute to the quality and transparency of the OTC market. However, the variety of different standards imposes new hurdles for their efficiency and often creates confusion instead of confidence among potential buyers. Despite the lacking legitimacy of the standards, pressures from the institutional environment on standards ensure a minimum quality of carbon credits (including positive social and environmental impacts of carbon credits) that serves as an insurance mechanism for the integrity of standards. Its unregulated nature and the pressure from an increasingly competitive environment provides innovative space to deliver efficient certification procedures without imposing unreasonably high transaction costs on market actors. Furthermore, voluntary standards imply a more innovative certification approach, as one legal authority could do, because standards have to compete for adopters backed by civil society organisations. Thereby, the forest sector in OTC voluntary market bears great opportunities to provide the forest sector with crucial lessons for international climate policy and governmental institutions when designing regulation for forest regulation such as international and national REDDplus schemes.</p

Transparency Permanence Co-benefits Additionality

Special thanks to all people who contributed to this work with their comments, advice, and expert knowledge. Thank you to the University of Canterbury for the support and provision of their facilities. We also would like to thank Climate, Community, &amp; Biodiversity Alliance, CarbonFix, the Plan Vivo Foundation, and the Voluntary Carbon Standard for the use of their documents and their feedback

A methodological framework for assessing agents, proximate drivers and underlying causes of deforestation: field test results from southern Cameroon

The international debates on REDD+ and the expectations to receive results-based payments through international climate finance have triggered considerable political efforts to address deforestation and forest degradation in many potential beneficiary countries. Whether a country will receive such REDD+ payments is largely contingent on its ability to effectively address the relevant drivers, and to govern the context-dependent agents and forces responsible for forest loss or degradation. Currently, many REDD+ countries are embarking on the necessary analytical steps for their national REDD+ strategies. In this context, a comprehensive understanding of drivers and their underlying causes is a fundamental prerequisite for developing effective policy responses. We developed a methodological framework for assessing the drivers and underlying causes of deforestation and use the Fako Division in Southern Cameroon as a case study to test this approach. The steps described in this paper can be adapted to other geographical contexts, and the results of such assessments can be used to inform policy makers and other stakeholders

Options for REDD+ Voluntary Certification to Ensure Net GHG Benefits, Poverty Alleviation, Sustainable Management of Forests and Biodiversity Conservation

Our objective was to compare and evaluate the practical applicability to REDD+ of ten forest management, social, environmental and carbon standards that are currently active worldwide: Climate, Community and Biodiversity (CCB), CCB REDD+ Social and Environmental Standards (CCBA REDD+ S&amp;E), CarbonFix Standard (CFS), Forest Stewardship Council (FSC), Global Conservation Standard (GCS), ISO 14064:2006, Plan Vivo Standard, Programme for Endorsement of Forest Certification (PEFC), SOCIALCARBON Standard and the Voluntary Carbon Standard (VCS). We developed a framework for evaluation of these standards relative to each other using four substantive criteria: (1) poverty alleviation, (2) sustainable management of forests (SMF), (3) biodiversity protection, (4) quantification and assessment of net greenhouse gas (GHG) benefits; and two procedural criteria: (5) monitoring and reporting, and (6) certification procedures. REDD programs require assessment of GHG benefits, monitoring, reporting and certification. Our analysis shows that only the Voluntary Carbon Standard (VCS) treats these three criteria comprehensively. No standard provides comprehensive coverage of the social and other environmental criteria. FSC, PEFC and CarbonFix provide comprehensive assessments of the sustainable forest management criterion. CCBA REDD+ S&amp;E, CCB, and GCS provide comprehensive coverage of the biodiversity and poverty alleviation criteria. Experience in using these standards in pilot projects shows that projects are currently combining several standards as part of their strategy to improve their ability to attract investment, but costs of implementing several certification schemes is a concern. We conclude that voluntary certification provides useful practical experience that should feed into the design of the international REDD+ regime

A bottom - up approach to estimating cost elements of REDD+ pilot projects in Tanzania.

Background: Several previous global REDD+ cost studies have been conducted, demonstrating that payments for maintaining forest carbon stocks have significant potential to be a cost-effective mechanism for climate change mitigation. These studies have mostly followed highly aggregated top-down approaches without estimating the full range of REDD+ costs elements, thus underestimating the actual costs of REDD+. Based on three REDD+ pilot projects in Tanzania, representing an area of 327,825 ha, this study explicitly adopts a bottom-up approach to data assessment. By estimating opportunity, implementation, transaction and institutional costs of REDD+ we develop a practical and replicable methodological framework to consistently assess REDD+ cost elements. Results: Based on historical land use change patterns, current region-specific economic conditions and carbon stocks, project-specific opportunity costs ranged between US$-7.8 and 28.8 tCOxxxx for deforestation and forest degradation drivers such as agriculture, fuel wood production, unsustainable timber extraction and pasture expansion. The mean opportunity costs for the three projects ranged between US$ 10.1 – 12.5 tCO2. Implementation costs comprised between 89% and 95% of total project costs (excluding opportunity costs) ranging between US$4.5 - 12.2 tCO2 for a period of 30 years. Transaction costs for measurement, reporting, verification (MRV), and other carbon market related compliance costs comprised a minor share, between US$ 0.21 - 1.46 tCO2. Similarly, the institutional costs comprised around 1% of total REDD+ costs in a range of US$ 0.06 – 0.11 tCO2. Conclusions: The use of bottom-up approaches to estimate REDD+ economics by considering regional variations in economic conditions and carbon stocks has been shown to be an appropriate approach to provide policy and decision-makers robust economic information on REDD+. The assessment of opportunity costs is a crucial first step to provide information on the economic baseline situation of deforestation and forest degradation agents and on the economic incentives required to halt unsustainable land use. Since performance based REDD+ carbon payments decrease over time (as deforestation rates drop and for each saved ha of forest payments occur once), investments in REDD+ implementation have a crucial role in triggering sustainable land use systems by investing in the underlying assets and the generation of sustainable revenue streams to compensate for opportunity costs of land use change. With a potential increase in the land value due to effective REDD+ investments, expenditures in an enabling institutional environment for REDD+ policies are crucial to avoid higher deforestation pressure on natural forests.NON

A bottom - up approach to estimating cost elements of REDD+ pilot projects in Tanzania.

Background: Several previous global REDD+ cost studies have been conducted, demonstrating that payments for maintaining forest carbon stocks have significant potential to be a cost-effective mechanism for climate change mitigation. These studies have mostly followed highly aggregated top-down approaches without estimating the full range of REDD+ costs elements, thus underestimating the actual costs of REDD+. Based on three REDD+ pilot projects in Tanzania, representing an area of 327,825 ha, this study explicitly adopts a bottom-up approach to data assessment. By estimating opportunity, implementation, transaction and institutional costs of REDD+ we develop a practical and replicable methodological framework to consistently assess REDD+ cost elements. Results: Based on historical land use change patterns, current region-specific economic conditions and carbon stocks, project-specific opportunity costs ranged between US$-7.8 and 28.8 tCOxxxx for deforestation and forest degradation drivers such as agriculture, fuel wood production, unsustainable timber extraction and pasture expansion. The mean opportunity costs for the three projects ranged between US$ 10.1 – 12.5 tCO2. Implementation costs comprised between 89% and 95% of total project costs (excluding opportunity costs) ranging between US$4.5 - 12.2 tCO2 for a period of 30 years. Transaction costs for measurement, reporting, verification (MRV), and other carbon market related compliance costs comprised a minor share, between US$ 0.21 - 1.46 tCO2. Similarly, the institutional costs comprised around 1% of total REDD+ costs in a range of US$ 0.06 – 0.11 tCO2. Conclusions: The use of bottom-up approaches to estimate REDD+ economics by considering regional variations in economic conditions and carbon stocks has been shown to be an appropriate approach to provide policy and decision-makers robust economic information on REDD+. The assessment of opportunity costs is a crucial first step to provide information on the economic baseline situation of deforestation and forest degradation agents and on the economic incentives required to halt unsustainable land use. Since performance based REDD+ carbon payments decrease over time (as deforestation rates drop and for each saved ha of forest payments occur once), investments in REDD+ implementation have a crucial role in triggering sustainable land use systems by investing in the underlying assets and the generation of sustainable revenue streams to compensate for opportunity costs of land use change. With a potential increase in the land value due to effective REDD+ investments, expenditures in an enabling institutional environment for REDD+ policies are crucial to avoid higher deforestation pressure on natural forests.NON

The land-use sector within the post-2020 climate regime

The land-use sector serves key environmental and social functions and supports the livelihoods of around a half of the world’s population. Despite its importance, however, the climate regime fails to formulate a coherent vision or set of incentives for mitigation and adaptation from the sector. The negotiation of a future climate treaty that will take effect in 2020 presents a key opportunity to improve the current system and create an integrated accounting and incentive framework for adaptation and mitigation strategies across all land-uses. This report - conducted by Climate Focus together with UNIQUE forestry and land use - analyses the current status of the land-use sector under the United Nations Framework Convention on Climate Change and its Kyoto Protocol, and formulates options for how various incentives and systems could be harmonized under a future climate treaty

A Methodological Framework for Assessing Agents, Proximate Drivers and Underlying Causes of Deforestation: Field Test Results from Southern Cameroon

The international debates on REDD+ and the expectations to receive results-based payments through international climate finance have triggered considerable political efforts to address deforestation and forest degradation in many potential beneficiary countries. Whether a country will receive such REDD+ payments is largely contingent on its ability to effectively address the relevant drivers, and to govern the context-dependent agents and forces responsible for forest loss or degradation. Currently, many REDD+ countries are embarking on the necessary analytical steps for their national REDD+ strategies. In this context, a comprehensive understanding of drivers and their underlying causes is a fundamental prerequisite for developing effective policy responses. We developed a methodological framework for assessing the drivers and underlying causes of deforestation and use the Fako Division in Southern Cameroon as a case study to test this approach. The steps described in this paper can be adapted to other geographical contexts, and the results of such assessments can be used to inform policy makers and other stakeholders

A Methodological Framework for Assessing Agents, Proximate Drivers and Underlying Causes of Deforestation: Field Test Results from Southern Cameroon

The international debates on REDD+ and the expectations to receive results-based payments through international climate finance have triggered considerable political efforts to address deforestation and forest degradation in many potential beneficiary countries. Whether a country will receive such REDD+ payments is largely contingent on its ability to effectively address the relevant drivers, and to govern the context-dependent agents and forces responsible for forest loss or degradation. Currently, many REDD+ countries are embarking on the necessary analytical steps for their national REDD+ strategies. In this context, a comprehensive understanding of drivers and their underlying causes is a fundamental prerequisite for developing effective policy responses. We developed a methodological framework for assessing the drivers and underlying causes of deforestation and use the Fako Division in Southern Cameroon as a case study to test this approach. The steps described in this paper can be adapted to other geographical contexts, and the results of such assessments can be used to inform policy makers and other stakeholders