(This article was originally published in The Edge Malaysia Improving carbon markets can help finance large-scale climate action; rejecting them outright means potential is lost)
By Ivy Wong Abdullah & David Stone / theedgemalaysia.com
Supporters of forest-based carbon markets will point to the continual improvements made to methodologies as science advances, the increasing use of precision technologies to monitor impacts, and the opportunity they provide for transferring climate finance from the global north to the global south, as among reasons to use high quality credits as one of a package of tools to drive climate, biodiversity and local community gains.
That last point is worth stressing. Climate action has no single silver bullet; it requires a lot of different solutions happening together. Carbon markets are an important means of directing finance towards climate-positive initiatives, but they should never replace rapid decarbonisation.
Critics, meanwhile, usually cite two important concerns, which must be overcome if the climate solution is to scale effectively.
First, on the project developer’s side, questions are asked as to whether the carbon credit used to offset emissions caused elsewhere, really represents one tonne of avoided emissions. There are certainly projects that have overstated the level of deforestation threat to their protected area, which has resulted in exaggerations in the emissions that those projects generate. (Although it is important to remember, forest project methodologies have generally been conservative in their approach.)
The assertion that overcrediting is widespread, however, is not based on valid scientific analysis. A widely cited paper that was used in the media to undermine forest carbon projects has been heavily criticised by a group of scientists from institutes around the world. (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4661873)
This perhaps says less about the scientific process than it does about the zeal with which some journalists and non-governmental organisations (NGOs) favour cherry-picking findings that support their narrative over a more balanced approach of reporting on context within scientific findings.
Second, there is a longstanding concern that allowing organisations to offset their emissions discourages internal action on operational and supply chain decarbonisation. This argument is often repeated, yet there is no compelling evidence to support it. Moreover, recent analysis finds that companies that offset are also more likely to cut their own emissions (https://www.ecosystemmarketplace.com/articles/new-research-carbon-credits-are-associated-with-businesses-decarbonizing-faster/).
The argument also relies on a poor understanding of how businesses generally work. When emissions from a company are cost-free, there is no internal pressure to reduce emissions, but as soon as you introduce a cost, then there will be someone in the company whose job is to reduce costs, including this one.
Before unpacking these two concerns further, there should be a number of points that anyone who is serious about addressing climate change and protecting forests should be able to agree upon, regardless of their position on carbon credits:
- Everyone is at risk from climate change and there are two main causes: Burning of fossil fuels and land use change. With land use change, the best chance for an impact is in the fast-growing tropical regions of the global south, and this should result in a transfer of climate finance from the global north to the global south.
- Global climate action must include the protection and regeneration of nature, especially carbon-rich landscapes like tropical forests, grasslands, mangroves and peatlands.
- Forest protection requires substantial funding. The drivers of deforestation, and the destruction of the natural environment more generally, are many and complex, but they frequently stem from the financial incentives of extraction and conversion of the land. Protected forests must outcompete the alternative.
- Any organisation committed to a serious climate target must start with a detailed understanding of its scope 1, 2, and 3 emissions, and then design and deliver on an aggressive and science-based strategy to rapidly cut emissions to help meet the Paris Agreement target. At the risk of losing some purists, I’d add that, despite our best efforts, we will always find it hard to abate all emissions; therefore, there should be some form of compensation outside an emitter’s value chain i.e. high quality carbon credits.
If the above points are broadly accepted, then the solution must be a system that drives finance towards activities that demonstrate forest protection and regeneration. This finance should be sufficient to reward the efforts involved, to support the people most directly affected, and competitive enough to incentivise protection over the destructive alternatives.
Which brings us back to forest carbon markets.
On the issue of trust in credit integrity, the low point came at the beginning of 2023, with articles in The Guardian and Die Zeit claiming more than 90% of forest carbon credits were worthless.
While the studies did highlight some important failings with a small proportion of projects, the headlines were factually incorrect.
First, they were based on analysis that only applied to unplanned deforestation (i.e. invasions, illegal logging, fires, etc) and not to projects that avoid planned deforestation, such as forest management concessions, like Malaysia’s Kuamut Rainforest conservation project.
More importantly, though, the conclusions journalists made did not fit with the analysis in the underlying scientific studies. And since they were published, experts in forest carbon analysis have published detailed rebuttals that highlight serious flaws in the papers, and the underlying scientific analysis, which have been used by the journalists. (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4661873)
The original authors have still yet to respond to the rebuttals, suggesting their conclusions cannot be substantiated.
Media scrutiny is an important part of the checks and balances for rooting out and exposing poorly performing projects, but it says much about aspects of the media when stories that are reported mostly cover the negative activities, and very rarely cover the majority which are successful.
There is a substantial body of evidence confirming the climate benefits of forest projects.
The Kuamut project, for example, has been independently assessed by the two leading carbon market ratings agencies globally, and scored among the highest in the market for its climate benefits.
Such projects are proof of concept that when designed and run well, forest protection can deliver measurable carbon benefits. If the market is abandoned outright, as some NGOs are calling for, projects like these — which are preventing deforestation, safeguarding biodiversity and improving the lives of local people — do not have a future. Instead, these are the models that must be replicated.
The second issue concerns how the credits are used by buyers. That corporations are taking climate action seriously should never be taken for granted, which is part of the reason why independent scrutiny by journalists and watchdogs is such a powerful tool for exposing greenwashing and climate inaction.
But the market is also tightening its own rules, with various multi-stakeholder initiatives setting out how and when high quality credits might be used, alongside other mitigation activities and what claims businesses can make about their credit use. These rules are not yet enforceable, but they are publicly recognised, so that it is clear for anyone to see when they are not being followed.
That the market for carbon credits has flaws — not unlike every other sector on Earth — should not be enough to reject a climate solution that has the potential to transform how we value and interact with the natural world.
Instead, it should be a reason for anyone serious in addressing the twin crises of climate change and environmental destruction, to come together and work constructively to ensure its continual improvement.
Ivy Wong Abdullah is the CEO (chief executive officer) of Permian Malaysia, and David Stone is the head of communications at Permian Global. Together with the Sabah Forestry Department and Rakyat Berjaya Sdn Bhd of Yayasan Sabah, Permian Global is developing and providing the investment for the Kuamut Rainforest conservation project in Sabah.
For more news from Permian Global: HERE
