Uncertainty in the VCM I: Recent Public Reporting

In recent days, the voluntary carbon market has received a lot of criticism, coming from the number of carbon credits issued under the REDD+ project type, which initiated an intense exchange between various players of the VCM and members of the public. To provide an overview of this debate, VNEEC would like to quote an article by Eszter Bencsik published on the cCarbon page on February 14, 2023 (https://www.ccarbon.info/uncertainty-in-the-vcm-i-recent-public-reaporting/)

In the following series of articles, we will be reflecting on the impact on the voluntary carbon market (VCM) that recent public reporting by news outlet such as The Guardian and Follow the Money might have. We shall summarise the claims made by these news sources, consider the key tenets of the debate via studying the responses of the VCM bodies under scrutiny and assess the avenues open to the VCM to react to the heightened critical attention. The first piece of the series serves as an introduction to the debate.

Key Takeaways:

• The VCM has been shaken by recent high-profile public reporting
• The debate hinges on highly contentious technicalities about offset project accounting
• Irrespective of the accuracy of the reporting, the increased public scrutiny will be sure to influence the VCM in the year ahead

The VCM has been off to a tumultuous start of the year in 2023. On the 18th of January, a high-profile investigative article appeared in news outlets The Guardian, Die Zeit and SourceMaterial claiming to have revealed that as much as 94% of avoided deforestation (REDD+) credits issued under Verra’s Verified Carbon Standard (VCS)  are not providing any climate benefits. Later, in the last days of January, another article by Follow the Money reported on the uncertainties and severe accounting flaws surrounding the flagship REDD+ project of one of the biggest carbon project developers globally, South Pole. Both articles claim that the projects under scrutiny reported much higher volumes of carbon offsets in virtue of exaggerating the rate of deforestation they are meant to prevent (a widely acknowledged risk of REDD+ projects called ‘baseline inflation’).

These reports initiated an intense exchange between various players of the VCM and members of the public. Some decried the utility of REDD+ offset credits and were calling for an abolishment of avoided deforestation credits altogether. Others claimed that the findings of the report were based on heavily flawed methodologies and therefore provided no reason for concern. As always, the truth lies somewhere in the middle. However, regardless of exactly how reliable the research on which recent public reporting has been based, the passionate debate it has evoked will have a lasting impact on the VCM for a long time to come. How this debate will play out is a crucial question and one which will be influenced by a number of factors. In what follows, we shall briefly summarise the key points of consideration and statements made by some of the most important players in the VCM in response to the articles and assess how the discourse is likely to affect the future of VCM in general and REDD+ projects in particular.

Key Considerations and Public Statements

To begin with, REDD+ is a framework created by the United Nations Framework Convention on Climate Change (UNFCC) to guide activities to reduce emissions from deforestation and degradation in the forest sector. The idea behind these projects is that defending forestland from deforestation is a crucial task in the fight against climate change, and one which requires considerable funding to cover the opportunity cost of missing out on farmland, timber or firewood. This funding can come from carbon markets through which large companies such as Shell or Microsoft can offset some of their emissions that they are unable to cut.

The Paris Agreement (Preamble and Article 5) recognises the crucial role forest preservation plays in achieving net zero. Yet, between 2000 and 2020 the world lost 100m ha of tree cover, releasing 170Gt of carbon emissions. The VCM currently has 84 registered REDD+ projects which have been supported by some $2bn of capital from the corporate sector. Other studies show the private sector provides 20% of global funding to support avoided deforestation.

Put this way, it looks like as long as governments or supranational bodies are not willing to protect forestlands at their own costs (which is definitely not yet the case), financing forest protection via the voluntary carbon market is crucial for forestland conservation. Therefore, regardless of the recent public backlash, REDD+ projects are unlikely to disappear until 2030 the very least, by which date some 140 countries agreed to end deforestation (an agreement made at COP26). Protecting forestland by all possible means is especially urgent as growing concerns around food supply in the wake of the Ukraine war and an impending global recession is making competition for land more fervent than ever.

However, for them to work, operators and verifiers of REDD+ projects must make sure that they are not over-issuing carbon credits for a particular project. In other words, the accounting of how much forest is being saved relative to a counterfactual scenario where deforestation goes on as business as usual must be accurate. The ongoing debate hinges on this highly contentious facet: external evaluators such as investigative journalists and academics claim that the counterfactual scenario is being misjudged in a vast number of existing REDD+ projects.

Compiled by Trinh Nam Phong

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