At the Cop26 UN climate summit in Glasgow in 2021, governments around the world made a striking new pledge on saving the world’s forests. The $12bn (£9.8bn) commitment to protect and restore forests was hailed as a historic step – the “largest ever public climate finance pledge of its kind”, said the UK’s Lord Goldsmith.
Protecting forests, which store about 400 gigatonnes of carbon, is essential to staving off the worst ravages of the climate crisis, and keeping global temperatures to within 1.5C of pre-industrial levels.
Deforestation rates, despite serial pledges over years to reduce them, are still staggering, and the impacts of global heating are now compounding the problem, drying out swathes of the remaining forests so that they store less carbon, in a vicious feedback loop.
But achieving the commitment to protect forests will actually cost an estimated $393bn annually by 2055. The amounts committed by governments and multilateral development banks so far are “a drop in the bucket”, says Nat Keohane, the president of the Center for Climate and Energy Solutions in the US.
That is why many climate experts are pinning their hope on the global carbon markets to provide the funding needed to halt, and even reverse, deforestation in the most vulnerable countries.
Globally, the voluntary carbon markets – so-called because they are not regulated by governments, which in some regions issue permits or credits for companies to produce carbon – are worth only about $2bn a year today, mainly driven by companies seeking to offset their greenhouse gas emissions through the purchase of carbon credits.
But according to the consultancy McKinsey, they have the potential to provide a steady stream of much higher income, of more than $50bn a year by 2030.
Those funds will be essential, as governments are unlikely to provide anything like the sums needed. “We need to use every channel we can for funding,” says Keohane. “We can’t leave anything on the table. We know that we will not be able to meet even 2C if we do not end tropical deforestation.”
The big problem is that so far, carbon credits and offsets do not have the best record. “There have been legitimate concerns about the voluntary market,” says Keohane. “The quality has been uneven.”
That is an understatement. For nearly two decades there have been innumerable cases of malpractice, from the outrageous – projects that never existed, forests that were being cut down, trees that had died or were being counted twice or several times over – to the legal but disreputable, such as companies re-selling high-priced offsets based on “hot air”, carbon credits granted almost for free by governments.
Where forests are concerned, there are extra layers of complexity. Carbon credits are awarded for keeping forests standing that would otherwise be under threat of destruction, a concept known as “additionality”.
But it is often hard to say whether a forest is under genuine threat, and this is complicated still further as some projects allow a limited amount of logging to occur in areas where carbon credits are being claimed – a seeming contradiction, but justified on the basis that the income from credits alone is not enough to compensate for foregoing the logging value of the forest.
Annette Nazareth, a trained lawyer with experience of regulating public markets, is now co-chair of the Integrity Council for the Voluntary Carbon Markets (ICVCM), and hopes she can tidy things up, bringing “transparency and credibility” to the markets.
“We need more standardisation of what a high-quality credit looks like,” she told the Guardian. “We want to take out the uncertainty and create a market of high integrity, so that there can be much greater confidence and corporations can invest.”
New technology will help, it is hoped. High-resolution imaging of tropical forests from satellites is now so advanced that experts can look under the forest canopy, and pinpoint almost to the level of individual trees, to check on the status and health of forests and try to cut down on fraud.
But Keohane says it is also critical to tackle the demand side – to ensure that companies are not using offsets as a “get out of jail free” card, so that they can carry on emitting as much as ever, while claiming carbon neutrality by buying cheap credits. “Carbon credits should be complementary, not a substitute [for cutting emissions],” he says.
A robust standard would ensure that companies have to show they are taking action to bring their emissions down, and that offsets are covering only a minor – and diminishing – proportion of their emissions.
Nazareth believes that the standards system to come from the ICVCM will be “regulator-like”. But the system is voluntary, not overseen by governments – so why not?
That would take too long, she says. Governments have failed over three decades to act, so unless companies are encouraged to act, it will be too late. “Time is of the essence,” she says. “We don’t have the luxury of waiting.”
And that is the heart of the problem. It may never be possible to say whether a tree would have been cut down, if not for the protection provided by a carbon credit, or to prevent every fraudster out to make a quick buck from a nonexistent project, or to eliminate every greenwashing company.
The most worrying thing of all is that waiting for more perfect ways to keep the world’s increasingly threatened and fragile forests standing may be an unaffordable luxury.
