The short report is titled, “REDD+ Market: Sending Out an SOS”, and can be downloaded here (pdf file, 1.7 MB).
CI estimates that existing REDD projects certified under the Verified Carbon Standard (VCS) could generate a total of 22 million REDD credits. Meanwhile, according to CI, the current demand for REDD credits is only 6.8 million (that figure would be ever lower if forward transactions were excluded).
CI comments that,
Early actions on REDD+ at the site level to reduce emissions from deforestation have not been met by similar progress at the international level in generating demand for forest carbon credits. The result is a near-term oversupply of verified emission reductions from REDD+ projects that has the potential to expand over the coming five years to over 20 times the current market demand.
As 2015 approaches, this mismatch has the potential to reach catastrophic proportions as REDD+ projects reaching verification flood a voluntary market, which is already struggling to maintain demand.
REDD project developers can only sell their carbon credits on the voluntary market, because there is no international agreement on REDD at the UN Framework Convention on Climate Change (UNFCCC). Last year, the average price for REDD credits fell to US$6-7, down from US$12 in 2011. Since 2010, demand for REDD credits has fallen by 65%.
Wil Burns, Associate Director of the Master in Energy Policy and Climate program at Johns Hopkins University, writes about the CI report on his blog, under the headline, “Warning Bells for the REDD+ Market”. In response, Mark Trexler, who worked on the world’s first forest carbon offset project, commented (on LinkedIn):
Having done the first REDD project in 1989, and worked on quite a few others, I’ve been perplexed by much of the recent discussion around REDD.
1. Without functioning carbon markets how can there be a functioning REDD market, and we don’t have functioning carbon markets.
2. A single project developer like Wildlife Works can supply global REDD demand, and yet there are supposedly numerous REDD project developers.
This is not to say that REDD isn’t important. It absolutely is. Indeed, the Kyoto Protocol got it completely backward in excluding REDD and including other forestry approaches. But at this point that’s neither here nor there . . .
CI criticises mechanisms such as the World Bank’s Forest Carbon Partnership Facility, Germany’s REDD+ Early Movers Fund, and the Green Climate Fund as “limited in the level of available finance, geographical scope, and speed of implementation”.
CI proposes two solutions to the problem of over-supply and lack of demand. First, is that governments and companies should make “a strong commitment to purchase credits of suitable standard”. CI suggests,
creating new dedicated REDD+ credit purchasing windows within existing climate funds, the expansion of current voluntary offsetting programs by companies, the creation of Advanced Market Commitments by REDD+ donor countries, and the expansion of existing risk guarantee products to cover market price risk.
In other words, a bail out for the moribund REDD carbon market.
CI’s second suggestion is a public relations exercise, aiming to “cement linkages between multiple benefits and emission reductions” by promoting the “multiple benefits that REDD+ projects deliver”, and “moving away from ‘offsetting’ and towards ‘paying for impact'”.
But in a footnote later in the report, CI acknowledges that in reality little information is available about the economic benefits of REDD projects for communities:
Current information on economic benefits from projects remains limited as only a few have yet sold credits and fully established their benefit sharing mechanisms.
As an example of how REDD can support communities’ land tenure security, CI gives the example of the Oddar Meanchey Project in Cambodia. This is perhaps a surprising choice, given the problems that the project faces. In June 2013, the Cambodia Daily reported that two potential buyers of carbon credits walked away after the Cambodian government missed a deadline to sign off on the carbon credit deal.
In addition to difficulties selling carbon credits, the project faces the problem of on-going deforestation, both around and inside the project area. To protect their forests, villagers have to compete with armed soldiers, land pressure from plantation concessionaires and a corrupt, incompetent government.
CI’s report also refers to the Alto Mayo Protected Forest, a CI REDD project in Peru. Pedro Gamboa, the head of Peru’s National Protected Areas Service describes the project as “a successful conservation intitiative”. But to generate carbon credits from that project, CI cooked the books, dramatically increasing the deforestation rate that they anticipated would take place without their project.
In another footnote, CI points out an important difference between offset projects in general and REDD projects. If the price of carbon falls, REDD projects may become unviable:
Many offset projects developed with a view to sales within the carbon markets have a primary income that is not carbon related, such as sale of electricity from wind farms, which makes a fall in the carbon price less catastrophic to their business model as they have the potential to sustain operating costs while waiting for the price to rebound. Most REDD+ projects do not have this opportunity.
The desperation in CI’s report is all-pervasive. Given the title of CI’s report, it would perhaps be unfair to point out that one of the most famous SOS calls came from the Titanic.