A new report by the NGO Conservation International assessing the state of REDD+ markets would be an excellent student reading. It provides a good overview of the exigencies driving REDD+, the promise and perils of voluntary markets for carbon credits, and the need for stronger price signals to ensure the viability of the mechanism for the longer term.
Among the conclusions of the report:
- Annual investments of $15-45 biIlion are required in order to halve levels of deforestation by 2020, which would ensure a meaningful role for forests in climate policymaking;
- Early action on REDD+, largely supported by international donors and NGOs, has enhanced management of 14 million ha of forests. Beyond reducing greenhouse gas emissions by 5MtCO2e, these projects have delivered social and environmental benefits, including ecosystem and species protection and providing livelihood opportunities for many communities;
- Serious storm clouds are on the horizon for REDD+, with potentially issued credits from REDD projects reaching 10-20 MtCO2e by 2020, while demand in voluntary markets may be less than 6.8 MtCO2e. As a consequence, prices may plummet to unsustainable levels or prevent projects from getting off the ground;
- Institutional efforts to date to increase demand have proven inadequate. For example, the Forest Carbon Partnership Facility isn’t likely to begin purchasing credits until 2015, and only one Verified Carbon Standard REDD project falls under the rubric of potential FCPF investments; very little of the financial resources of the World Bank’s FCPF Carbon Fund and Forest Investment Program have been disbursed to date;
- The collapse of REDD+ projects could result in serious immediate pressure on 14 million ha of forests and threaten a knowledge and experience base that would be difficult to re-establish. It would also undermine political support for such projects;
- Among the potential ways to bolster the prospects for the REDD+ system are Advanced Market commitments; expansion of risk insurance instruments; dedicated funding windows by pertinent institutions, including FCPF, UNREDD and the Forest Investment Program under the Strategic Climate Fund, and movement away from viewing REDD+ projects as “offsetting” to “paying for impact,” including contributions to delivering sustainable development outcomes. This could attract funds from major private sector groups, e.g. the Consumer Goods Forum.
Among the discussion questions that this article could generate are the following:
- Would resolution of the outstanding questions associated with REDD under the UNFCCC/Kyoto Protocol enhance the viability of the mechanism over the next decade?;
- How do we weigh the opportunity costs associated with funding REDD projects v. other potential programs to reduce greenhouse gas emissions?;
- How does one value the alleged ancillary benefits of REDD projects, e.g. species protection or contribution to sustainable livelihoods?