By Chris Lang
Thomson Reuters Foundation recently reported that, “Norway is doubling the price it guarantees developing nations to keep their tropical forests standing, in a step to slow catastrophic losses and encourage big companies to invest far more in nature to combat climate change.”
Behind this story is a plan to bring REDD back from the dead using billions of dollars of Norwegian oil money. The money is to be funnelled through a group consisting of the following organisations:
- two not-for-profit corporations, both registered in the US state of Delaware (Emergent Forest Finance Accelerator Inc and Forest Trends Association);
- a US-based NGO, registered in New York in 1967, today registered in 16 different US states, the Netherlands, and the UK (Environmental Defense Fund);
- a UN programme that includes the FAO, UNEP, and UNDP (the UN-REDD Programme); and
- the Architecture for REDD+ Transacations (ART), a REDD certification scheme run from a US non-profit organisation named after Winthrop Rockefeller, grandson of Standard Oil’s John D. Rockefeller (Winrock International).
Norway is hoping to increase the price of REDD credits from US$5 to US$10. In 2014, the World Bank’s Carbon Fund said that it was willing to pay up to US$5 for REDD credits. Since then, that’s been the price of a REDD credit. Funny how these market mechanisms work, isn’t it?
In September 2019, Norway signed a REDD deal with Gabon, and agreed to pay US$10 each for credits certified by Architecture for REDD+ Transactions (ART).
Greasing the wheels
Per Fredrik Pharo, director of Norway’s International Climate and Forest Initiative, told Thomson Reuters Foundation that in exchange for the increase in the price of REDD credits, countries must be certified under ART’s The REDD+ Environmental Excellence Standard (TREES).
To be eligible for ART certification, REDD must be at national or sub-national jurisdictional scale, covering at least 2.5 million hectares of forest. So far, the governments of Gabon and Colombia are evaluating whether to get their forests certified under the ART TREES scheme.
Norway’s Pharo is hoping for a flood of private money. He told Thomson Reuters Foundations that “serious companies are now entering the fray,” with Norway “using our money to grease the wheels”.
Pharo said that,
“What we are saying to countries – like Gabon, Indonesia, Colombia – is that ‘You have our price guarantee. If you deliver tonnes under ART TREES we will pay you $10 a tonne, up to some ceiling’.”
The non-profit company Emergent Forest Finance Accelerators Inc was created in August 2019, with the aim of selling REDD credits certified under the ART TREES certification scheme. Emergent is part funded by Norway.
Green Gigaton Challenge
On 19 November 2020, Emergent, UN-REDD, Environmental Defense Fund, Forest Trends, and ART launched the Green Gigaton Challenge.
In a recent newsletter, Forest Trends’ Michael Jenkins described the Green Gigaton Challenge’s goal as “securing funding for one gigaton of emissions reductions transacted from tropical forests every year by 2025”. He added that the coalition behind the Challenge aims to “have some big commitments in hand by next year’s climate negotiations”.
At the launch of the Green Gigaton Challenge, Rupert Edwards, Senior Advisor in the Public Private Co-Finance Initiative at Forest Trends, explained that,
We are now at a very exciting inflection point. A broader coalition of donor governments will be in a position today to leverage materially more private co-funding for REDD+ than has been the case historically, because the corporate focus on transitioning to a net zero world is moving very rapidly. Some sectors need time to make the investments needed for full internal decarbonisation. So new sources of private funding could vastly increase over the next few years, provided REDD+ can demonstrate the ability to scale from current levels.
At the same time, the value of high integrity credits must reflect forest country efforts, taking into account not only implementation and opportunity costs, but if you like a margin of profit also for forest countries to reinvest in further ambition.
So we know on one side the forest countries have visibility on predictable REDD+ revenue streams that amounted to tens of billions of dollars, they’d have the fiscal space to implement ambitious policies and overcome challenges relating to capital investment needs and so on. And on the other side, we also know that if large scale jurisdictional REDD+ credits were available in volumes amounting to gigatons over the next 10 to 15 years, there’d be demand for these credits and at prices we suggest would be a good deal higher than those we’ve seen to date.
During the question and answer stage of the launch, Eron Bloomgarden, executive director of Emergent let slip that his company is trying to sell something that doesn’t yet exist: Jurisdictional REDD+ credits.
On the demand side we’re engaging with a lot of companies and a lot of potential buyers. I think there’s a real interest here on jurisdictional REDD+ credits. I think the corporations that we’re talking to are very interested in the potential transformative impact that a jurisdictional approach has. Frankly, there haven’t been jurisdictional REDD+ credits available on the market and so it’s hard to look at historical data.
But what I can say is we’re engaging several companies, close to about 40 now in what we call Emergent Private Sector Leaders Roundtable. And so there’s a lot of interest. And so I think that will be increasing over time.
There was another question I think about why is Emergent only looking at ART I guess and not VCS JNR and from our perspective we’re watching this very closely although VCS is currently less prescriptive on many aspects compared to ART TREES. And also Emergent and ART TREES are sort of purpose built to drive this market, to increase ambition, increase the level of quality, integrity. You know VCS JNR is in the process of going through a major consultation, public consultation, and a revision. And so we expect that many of these issues should be clear over the coming months.
In response to another question about how ART TREES may affect the fair pricing of REDD credits, Bloomgarden replied,
Yeah, I mean what I would say is I think broadly you know if you look at data coming out of voluntary carbon markets, you know let’s say its in been in the five to eight dollar range historically, over the last few years. And we know that that price is too low for a variety of reasons, right, and you know, we know that in the next ten years according to, you know, World Bank, UN, we need to see prices up to US$100 per ton. Clearly we’re not there yet. But clearly, so the existing prices are too low.
So, what we’re, you know, what we expect with increase in quality, the robustness and the rigour that’s required by ART TREES, plus, you know I think the idea here is that this is in line with the Paris Agreement, no double counting, corresponding adjustments, but there is also a potential opportunity cost for countries that are, there’s a cost of creation for countries to reduce emissions and create these credits, but there’s also an opportunity cost potentially for selling them. And so, you know, we certainly expect the price really the price of these credits to be higher than what we’ve historically seen in the voluntary carbon market.
EDF’s Ruben Lubowski answered a question about the floor pricing of the REDD credits:
So the idea is that Emergent is working with public funders, our main partner right now is the government of Norway, to provide a minimum price for the credits that would be sold. They would be certified under ART TREES and sold through Emergent. So the idea is that the public donors would be buyer of last resort that guarantee a minimum price in case the private demand isn’t high enough. And just a little indication, Norway has signed agreements with the government of Gabon and also with the government of Colombia for a US$10 per ton price guarantee. So that’s an indication of this model, where that’s a minimum price but if private buyers are available above that, prices could be higher.
A little later Lubowski added that,
Going back to the price floor mechanism, the idea here is also for public, or potentially philanthropic funding to be working in a catalytic way that can help leverage the private finance. So they’re not working in competition, just another source of [inaudible] credits but are helping to send that signal of a high enough price to get the jurisdictions mobilised and then hopefully those credits can be sold on to private markets and potentially the floor price funding can be recycled or used to buy even more credits. So it’s a way for these different streams of funding to work together to help catalyse more action rather than, and help drive the market forward rather than potentially competing against itself. So that’s why it’s a really central part of the Green Gigaton Challenge. Thanks.
The launch of the Green Gigaton Challenge ended with Kate Hughes, the Director or International Climate and Energy, at the Department for Business, Energy and Industrial Strategy in the UK. She welcomed the ART TREES and Emergent initiative, and said that,
One important tool for enabling nature based activities at scale is jurisdictional REDD+. And that contribution to global climate goals is explicitly recognised in the Paris Agreement. Now the UK is a long standing supporter of REDD+ with over 23 countries through our international climate finance and our climate partnerships. And we really believe that results based finance at scale can transform forest and land use management in countries that hold the most significant natural carbon sinks. And we’re really excited that many more countries are now nearing the stage of being able to access REDD+ results based finance. For example, under the efforts of the FCPF Carbon Fund. But REDD+ needs more finance if it is to have a chance of delivering on its transformative potential.
Hughes added that,
We need this thriving and connected market ecosystem to protect and restore our forests and to catalyse flows of finance. This market ecosystem includes many in this community who are working on questions on the infrastructure for carbon markets, what quality really looks like, and how markets relate to net zero commitments. These are all really important questions and we know that there isn’t one single answer. And we’re keen to help join the dots between many of these initiatives so that they can amplify each other and are more than the sum of the parts.
Equinor and REDD
Bloomgarden told Thomson Reuters Foundation he was in talks with “a wide range of major companies” with a combined turnover of US$2 trillion.
But the only company he would name was Norwegian oil company Equinor. The Government of Norway is largest shareholder in Equinor with the shares managed by the Ministry of Petroleum and Energy. So we have the Norwegian government pouring money into a dodgy forest offset scheme so that its oil industry can carry on drilling – while giving the impression of doing something about the climate crisis.
Of course, we shouldn’t be surprised that Norway’s Ministry of Petroleum and Energy and Norway’s Equinor are interested in REDD. Norway’s oil industry has been behind REDD from the very beginning. At a meeting in Oslo, back in December 2007, when Norway launched its strategy to prevent deforestation, the Minister of Petroleum and Energy, Åslaug Haga, was one of the people presenting the strategy.