Countries must establish market scenarios and decision criteria to position the forests as part of the solution and benefit the well-being of the communities that coexist with the woods
During the United Nations Climate Change Conference (COP27) held in Egypt this November, forests were the subject of intense discussion within the market and non-market mechanisms. The conference, which seeks globally agreed upon climate change solutions, proposed a surreptitious transition, creating ways to finance forest management within the framework of the Paris Agreement.
Providing money for countries or other jurisdictions to demonstrate progress on cutting their emissions by reducing forest loss is an excellent tactic. The management of wild forests in the context of climate change is widely represented through the Warsaw Framework on Reducing Emissions from Deforestation and forest Degradation (REDD+) — a set of climate convention decisions that describe how to bring financing to conserve and sustainably manage forest areas by being part of the solution to the changing climate.
It took about 10 years to structure REDD+ in its version of the Warsaw Framework. In parallel, spending similar time, an independent but homonymous mechanism in the voluntary carbon market exists through the relevant participation of the private sector, which can offer an alternative way of showing the results of climate change mitigation through forest management. Through these two different approaches and with a series of steps and technical requirements, REDD+ finally came to life and was financed through multilateral funds. The peak moment in which REDD+ shined at the climate conference was during the allocation and investment of resources from a specific window in the Green Climate Fund, whose financing was executed from 2018-2022. However, despite the call for the COP27 REDD+ funding decision, the reinjection of funds has not yet been defined, potentially awaiting the results of how forests will fall within the regulations of Article 6 of the Paris Agreement. When REDD+ matures, two related events will determine its future: the Paris Agreement implementation, which includes a new version of international markets, and the increase in demand for voluntary results. Consequently, while negotiating the operational details of the Paris Agreement—which happened recently in Egypt—REDD+ needs to address a new challenge: how are the forests and the performance of their care being placed in the world’s new toolbox used in the fight against climate change? In the context of REDD+, Article 5 of the Paris Agreement calls for maintaining its financing. However, there has been no political support for specific decisions over Article 5, based on the predominant argument that REDD+ is already resolved under the rules of the Warsaw Framework. It then comes down to the market and non-market mechanisms in Article 6 for the discussion to take place, since forests could generate mitigation results that are subject to international transactions. Alternatively, forest management could continue to be financed from a non-market perspective. During COP27, the framework decision emphasized that REDD+ should continue to be financed in its version of the Warsaw Framework without proposing anything new. However, some versions of the previous Article 6 texts included mentions of REDD+, but these mentions were conflicting. REDD+ appeared to be supported by the position of some countries that have large extensions of tropical forests in Asia and Africa. They saw the opportunity to secure financing from the operation of the new version of international carbon markets. In opposition, another group of countries within Island States, Latin America, the Caribbean and the European Union stated that an explicit REDD+ mention, without technical details, could lead to the inclusion of low-quality results in international accounting, due to the high uncertainty and sensitivity in the measurement of mitigation results from forests. In other words, if the means of measuring and what to include in terms of forestry is not well defined, the international market could be filled with poor or false results. This would instead reduce the effort for mitigation in critical categories such as energy, to the extent that it is assumed to be offset in large volumes by the forestry sector in the context of national and international carbon markets. Following the final COP27 texts, the best conclusion has been to avoid naming REDD+ specifically and to consolidate a structure that can include performance in forest management as part of international transactions and non-market-based financing. Mandates are given to the subsidiary bodies of the convention (technical instances) or Subsidiary Body (A6.4) providing inputs for the next operational and conceptual design details under a framework of environmental integrity relating to the inclusion of forestry/REDD+ activities. These mandates are:
In the Rules, modalities, and procedures for the Article 6.4, the COP27 decision invites parties and admitted observer organizations to submit their views on activities involving removals, including appropriate monitoring, reporting, accounting for removals and crediting periods, addressing reversals, the avoidance of leakage, and the avoidance of other negative environmental and social impacts.
In the Rules, modalities, and procedures for Article 6.2, the COP27 decision requires consideration as to whether Internationally Transferred Mitigation Outcomes (IMTOs) could include emission avoidance.
The elaboration of further guidance in relation to corresponding adjustments for multi-year and single-year Nationally Determined Contributions (NDCs) in a manner that ensures the avoidance of double counting on methods for establishing an indicative trajectory, trajectories, or budget and for averaging – including with respect to relevant indicators—and for calculating cumulative emissions by sources and removals by sinks.
The consideration of whether ITMOs could include emission avoidance.
The description of how the cooperative approach is minimizing the risk of non-permanence of mitigation across several NDC periods and how or when reversals of emission reductions or removals occur – the cooperative approach will ensure that these are addressed in full. If REDD+ overcomes the technical challenges to achieve the COP27 requirements regarding removals, emissions avoidance, trajectories and permanence, REDD+ will have a long life but with different versions of itself (see the figure below). Countries will have the option to disburse resources for forests without claiming their results, as a continuation of the Warsaw Framework rules in a version of implementation within the framework of non-market mechanisms (Article 6.8 of the Paris Agreement). REDD+ could also be part of agreements between countries where the buyer claims the mitigation results for its accounting. In parallel, the actors of the voluntary market have established an agenda and steps through centers of thought and technical activism so that the existing private certification programs can operate or participate in the market mechanisms of the Paris Agreement. Another option is using methods for their operation as projects are established in Article 6.4. The last possibility is that REDD+ remains the primary category in voluntary carbon markets in tropical countries.
These paths of REDD+ diversify the opportunities to generate mitigation results from the forestry sector and to receive financing, contributing to a stable climate. For each country and jurisdiction where REDD+ is feasible, the challenge of determining which avenues to choose and how to reassemble a functional REDD+ structure remains. These countries must establish market scenarios and decision criteria that analyze the opportunities and solve the potential accounting issues under a holistic carbon markets approach to position the forests as part of the solution and benefit the well-being of the communities that coexist with the woods.