Opinion: The Name Of The Carbon Market Game

Opinion: The Name Of The Carbon Market Game - Carbon Herald
Torrey Sanseverino, Research Manager, Sustainable Development Goals. Image: BeZero Carbon

By Torrey Sanseverino, Research Manager (Sustainable Development Goals) at BeZero Carbon

Carbon markets need to give avoided deforestation projects a chance so we don’t lose out on finance for sustainable development.

I am constantly asked why I run. What drives me to wake up at 6am to hit the pavement. I’m an avid runner, but I don’t run just to run. I run because of the many non-running benefits. The adrenaline rush, a sense of achievement, mental health, camaraderie running in groups, exploring new areas … the list goes on.

Similarly, carbon projects, activities which mitigate carbon emissions, are not always developed for the most obvious reason. Often they are actually developed for the benefits not in the name such as, improving local biodiversity, increasing local job opportunities, and supporting education. We call these non-carbon impacts, co-benefits. Despite their importance, all impacts of carbon projects are challenging to calculate, especially in the unregulated Voluntary Carbon Market (VCM). 

Project developers calculate the amount of carbon credits, or units which represent a tonne of carbon avoided or removed, generated by their project via methodologies laid out by standards bodies. Standards bodies create the methodologies and check that the developers followed their methodology correctly. But the system isn’t perfect. Calculating the carbon avoided or removed is a complex challenge limited by scientific developments and capacity to account for outlier events such as a wildfire burning down a forestry project. 

The accuracy of the reported carbon impacts of avoided deforestation projects in particular has been questioned in the media recently. Avoided deforestation projects are activities that protect a forested area that otherwise would have been cut down. In the VCM, between 2008 and November 2023, avoided deforestation projects made up about 20% of all issued credits, almost twice that of the next most popular sub-sector, wind projects (14%). 

But, we can’t afford to “cancel” avoided deforestation projects. Their co-benefits are essential for progressing sustainable development, which requires both carbon emissions mitigation and biodiversity protection, economic development, social justice etc. Analysis of Sustainable Development Goal (SDG) claims highlights the significant co-benefit impacts of avoided deforestation projects. 

SDG claims are a common way to communicate the co-benefit impacts of carbon projects. The UN SDGs, though originally designed for country-level use, have been adopted by the VCM. Developers tag their projects with the SDGs relevant to their projects’ co-benefit impacts. For example a project which increases job opportunities in a local community may tag their project with SDG 8 (Decent Work and Economic Growth). SDG claims can vary in integrity as there is a wide range of evidence reported behind claims, the quality of the impacts, the durability of those impacts, and the related safeguards in place. But, SDG claims nonetheless signal the potential existence of co-benefit impacts. 

Between 2008 and November 2023, over a fifth (21%) of the credits issued with SDG claims are from avoided deforestation projects. Therefore, if avoided deforestation projects were removed from the equation, the VCM’s overall impact on non-carbon objectives would severely decline. Unfortunately, the risk of that happening may be increasing. 

Finance for avoided deforestation projects is rapidly decreasing in the VCM. In 2022, avoided deforestation projects issued half of the volume of credits issued in 2021. The negative press avoided deforestation has received regarding inaccurately reported carbon impacts likely contributed to this decline in demand.

But, the reduction in finance for avoided deforestation projects has severe social, environmental, and economic consequences. Developing countries already face a $3.9 trillion dollar sustainable development financing gap. This will only be exacerbated by the decrease in finance for VCM avoided deforestation projects. A decrease in finance for avoided deforestation projects also means a decrease in finance for these co-benefits as well as important carbon emissions mitigation. 

Finance for co-benefits shouldn’t suffer due to the past mistakes of avoided deforestation projects regarding carbon efficacy. Avoided deforestation projects can learn from their mistakes and improve their carbon efficacy via two new developments in the space. 

Firstly, guidance on carbon accounting is improving. Several of the largest standards bodies have already updated their relevant methodologies, including one of the largest, Verra. These new versions could improve the accuracy of carbon accounting for avoided deforestation projects. 

Secondly, developers can learn from the insights of relatively nascent carbon credit ratings. Carbon ratings agencies provide an opinion on the quality of carbon projects (including avoided deforestation), and thus increase transparency in the market. A carbon rating reflects the likelihood that a project avoids or removes a tonne of CO₂e. Stakeholders can learn from the successes and weaknesses of projects outlined in carbon ratings assigned to past projects.

Avoided deforestation projects need to be given the opportunity to embrace these new methodologies and learn from the insights of carbon ratings. BeZero Carbon’s ratings of avoided deforestation projects range from very high likelihood of achieving 1 tonne of CO₂e avoidance or removal (AA) to the lowest likelihood (D). The range in quality demonstrates that avoided deforestation projects are capable of delivering high integrity carbon mitigation. Allowing projects to improve will set the VCM on the path to refine carbon accounting while supporting the finance needed for co-benefits and carbon mitigation.  Supporting sustainable development requires us to mitigate both carbon and non-carbon crises such as biodiversity loss, poverty, and human health. Therefore, avoided deforestation projects need to be valued for both their carbon mitigation impacts and their co-benefits. In the fight against climate change, sustainable development is the name of the game, not only carbon mitigation.

The views and opinion expressed are those of the author and do not necessarily reflect the official policy or position of Carbon Herald.

Read more: Unified Carbon Standard Coalition Announced At COP28

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