The real value of carbon credits and why nature is more than a carbon sink

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Anderson Tanoto, Managing Director, RGE

• Debates on carbon credits at COP26 highlighted how difficult it is to apply a global standard to complex regulatory and nature, especially physical landscapes across diverse geographies.
• When it comes to protecting nature, carbon credits should not be viewed in isolation: the forests, biodiversity and communities nature-based climate solutions support are an essential part of the equation too.
• Restorasi Ekosistem Riau is not only one of the last intact peatland forests, it is also an example of successful integration of biodiversity, community and climate strategies and actions.

Carbon credits are a commodity to be valued and traded. They are also a bell weather of rates of investment in climate and nature. Debates on carbon credits at the COP26 meeting in Glasgow were ultimately inconclusive, but they highlighted how difficult it is to apply a global standard to complex regulatory and physical landscapes across diverse geographies.

Too often, discussions about carbon credits miss this broader point. Whether they are the product of avoidance, reduction or removal, carbon credits should not be viewed in isolation: the forests, biodiversity and communities nature-based climate solutions support are an essential part of the equation too.

When forests retain more carbon than they emit, they become a carbon sink. Carbon sinks serve as a store of carbon that can be measured and valued, and then potentially offset against emissions generated by activities elsewhere.

But that’s just half the story. In landscapes like Indonesia’s tropical swamp forests, where the protection of natural forests is vital to biodiversity and wildlife, sustaining the communities who rely on forests for ecosystem services and livelihoods is also an imperative. While the relationship between the two is complex in science, carbon, biodiversity and community are indivisible on the forest floor.

Landscapes that deliver multiple benefits

APRIL Group’s peat swamp forest restoration project, Restorasi Ekosistem Riau (RER), is an example. The project has been registered with Verra and is potentially one of the world’s largest carbon projects, generating approximately 6.8 million tonnes of carbon credits per year. But at more than 150,000 hectares – an area the size of greater London – situated on the Kampar Peninsula and neighbouring Padang Island in Riau Province, RER is an entire landscape delivering multiple benefits. https://open.spotify.com/embed/episode/1eOLhssFFIxT5Uy0n39GIu?utm_source=generator

Following many years of forest restoration work and active protection in partnership with organisations including Fauna & Flora International, the real benefits to biodiversity that comes from taking a landscape approach have emerged. These include increasing species count with 823 species of plants and animals recorded in the restoration area in 2020 – many of which are classified by the IUCN as being of conservation concern. This figure was up from 797 the previous year. Sumatran tigers, including one rescued and reintroduced to the landscape last year following a multi-stakeholder operation, and other rare indigenous wildlife, such as the flat-headed cat, have been spotted and studied on camera traps.

Communities living in and around the restoration forest play a vital role, backed by respectful engagement and education. From improving fishing practices to maintaining livelihood catches while increasing water quality inside the restoration area, to the sustainable production of forest honey and other forest products for commercial sale, to providing employment as forest rangers to guard against encroachment, wildlife poaching and fire, RER has its own economic and ecological ecosystem, where communities are engaged as active partners.

There is also the potential for RER to provide a unique location to facilitate groundbreaking scientific research. Its eco-research camp and other facilities set up on the borders of the restoration area provide access to scientists from all over the world to carry out their own research. The site can serve as a laboratory for tropical peatland science, leveraging on and enhancing existing data around greenhouse gas emissions, hydrology, and flora and fauna surveys performed at the landscape level.

Protecting and restoring the forest area contributes to multiple values, and stored carbon will make an important contribution to financing this important work. RER’s production-protection approach, where the conservation area is surrounded by a ring of plantations, means sustainable plantations support the technical and financial capabilities needed for conservation and restoration at scale. In this instance, the value generated from this carbon store will be reinvested in restoration work and additional conservation.

Catalyst for landscape protection

The reason that RER is so important is not only because it is one of the last intact peatland forests. It is also an example of the successful integration of biodiversity, community and climate strategies and actions, and private-public-NGO partnerships.

Unfortunately, biodiversity does not have a commitment like the 1.5-degree Celsius climate target or a ‘net zero’ equivalent unifying goal. This makes monitoring and assessing progress in a globally accepted way more difficult. The Convention on Biological Diversity’s Post-2020 Global Biodiversity Framework and the work of the Science Based Targets Network to align SBTs with the Framework and the Sustainable Development Goals may provide more answers. But this is not a reason to delay action. Restoring and protecting forests is widely recognised as one of the most cost-effective methods of reducing carbon. And the benefits of well-managed forest protection and restoration for biodiversity are clear.

What are voluntary carbon markets?

Activities that demonstrate their capacity to remove CO2 from the atmosphere or prevent CO2 from being emitted are verified by an independent standard and issued as carbon credit certificates (representing one metric ton of carbon dioxide equivalent).

Standards are organizations, usually NGOs, which certify that a particular project meets its stated objectives and its stated volume of emissions. Some of the most prominent standards include the UN Clean Development Mechanism, Verra, the American Carbon Registry, Climate Action Reserve and Gold Standard.

Carbon credits can be grouped into three large categories: avoidance projects (they avoid emitting greenhouse gasses altogether), reduction (they reduce the volume of greenhouse gasses emitted into the atmosphere) and removal (they remove greenhouse gasses directly from the atmosphere).

Forestry avoidance projects or programmes known as REDD+ (Reduced emissions from deforestation and forest degradation) prevent deforestation or wetland destruction. Other examples include soil management practices in farming that limit greenhouse gas emissions — such as projects aiming to avoid emissions from dairy cows and beef cattle through different diets.

Carbon removal from the atmosphere can include afforestation and reforestation projects and wetland management, which, as they grow, turn CO2 into solid carbon stored in their trunks and roots.

The reduction category includes projects that mostly centre on reducing the demand for energy efficiency, including cookstove projects, fuel efficiency, or the development of energy-efficient buildings.

International voluntary carbon markets (VCM) provide a platform for individuals and organizations to offset/balance their unavoidable and residual emissions by purchasing and retiring (cancel in a registry after which it can no longer be sold) carbon credits issued by sellers who have a surplus carbon budget — either because they’ve avoided emissions or undertaken some additional activities that reduce or removed emissions.

While compliance markets are currently limited to carbon credits from a specific region, voluntary carbon credits are significantly more fluid, unrestrained by boundaries set by nation-states or political unions. They also can be accessed by every sector of the economy instead of a limited number of industries. The Taskforce on Scaling Voluntary Carbon Markets estimates that the market for carbon credits could be worth upward of $50 billion as soon as 2030.

Carbon credits can be a catalyst for landscape protection and restoration, funding additional forest conservation and restoration as well as offsetting emissions from business activities. While the value of carbon credits may be expressed in dollar terms, equal consideration to nature’s biodiversity and community health unlocks the real value and commitment to conservation. It is the investment in restoration and conservation that generates carbon value and delivers a return in biodiversity gain where the two are deeply interconnected. Entirely decoupling carbon from its context – treating it as a commodity – may undermine the biodiversity and community engagement that maintain and grow its value.