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Who takes the credit? The risks of double-counting in a REDD carbon trading mechanism

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“UN finalises forest protection initiative at Bonn climate talks.” That’s the headline of an article by Ed King on the RTCC website. But while the REDD negotiations are now finished, this does not mean that the world’s forests are protected.

The end of the technical REDD negotiations doesn’t even mean that REDD is finalised. There is still no agreement on where the billions of dollars needed to finance REDD are to come from. Part of the agreement in Bonn leaves open the question of whether REDD is financed through a market mechanism or a non-market mechanism.

As Stephen Leonard points out on the CIFOR Forests News Blog,

This meeting made it crystal clear that there is further work to be done related to finance and access to REDD+ results based payments and much of the text related to REDD+ in the Geneva Negotiating Text relates to finance.
 
It would be fair to say that finance for REDD+ is the next frontier.

Another issue still unresolved is raised in a report published by FERN and Third World Network last week. Written by Jutta Kill, the report, “Who takes the credit? REDD+ in a post-2020 UN climate agreement“, asks questions about who will be allowed to claim emissions reductions if REDD is a carbon trading mechanism.

For example, if Indonesia sells REDD credits to Germany then only one of these countries can count the emissions reductions against its UNFCCC emission reduction targets. Obviously, if both countries count the emissions reductions, that would be double counting.

Kill’s report refers to a report published last year by the Stockholm Environment Institute, titled, “Addressing the risk of double counting emission reductions under the UNFCCC“. As the title implies, the report looks at the risk of double counting and suggests ways of addressing this risk. SEI’s report is clear about the risks of double counting:

“Avoiding double counting of mitigation efforts is an important issue discussed among Parties to the United Nations Framework Convention on Climate Change (UNFCCC). If emission reductions are double counted, actual global greenhouse gas (GHG) emissions could be higher than the sum of what individual countries report. As a result, countries could appear to meet established mitigation pledges, while total emissions exceed these levels.”

Kill’s report outlines four possible double-counting scenarios:

  1. A tropical forested country reports to the UN that emissions from deforestation have been reduced during the relevant reporting period. The tropical forested country sells REDD+ credits (worth one tonne of carbon dioxide equivalent (CO2e) per credit) to an industrialised country (or companies in an industrialised country), which also reports on its emissions limits to the UN. The industrialised country includes the reduction it bought from the tropical forested country in its UN emissions balance sheet, but the tropical forested country does not deduct the reduction from its own balance sheet. When they send their progress reports to the UNFCCC, both countries claim the same reduction.
  2. A tropical forested country reports to the UN that emissions from deforestation have been reduced during the relevant reporting period. A forested province within the tropical forested country sells REDD+ credits to the World Bank Carbon Fund. If the Carbon Fund then sells the credits to a country that counts them on their UN emissions balance sheet, the reductions will be double-counted if the tropical forested country does not deduct an equivalent number of emission units from its balance sheet.
  3. A tropical forested country reports emission reductions from forest loss in its national UN emissions balance sheet. One or more provinces or other sub-national jurisdictions with forest cover in the tropical forested country are also part of an initiative on REDD+ between sub-national jurisdictions from tropical forested and industrialised countries. The so-called ‘governors’ initiative’ has been developed outside the UNFCCC, but the jurisdictions are covered under the national emission commitments in both the tropical forested and industrialised countries. As part of the governors’ initiative, the forested province in the tropical forested country makes an agreement to sell REDD+ credits to companies in the industrialised country. The industrialised country includes the companies’ emissions reports (including the purchased REDD+ credits) in its UN emissions balance sheet. Even though the trading of the REDD+ credit happened outside the UNFCCC, the reduction could be counted by both the tropical forested country and the industrialised country.
  4. A tropical forested country reports emission reductions from forest loss in its national UN emissions balance sheet. The country proposes mainly using satellite images showing forest cover to calculate REDD+ reductions. Several private-sector REDD+ projects take place in the tropical forested country, but the country does not keep track of how many exist, how many REDD+ credits these private-sector projects sell, or to whom they are sold (probably in an international voluntary market). Therefore it does not deduct emission reductions equivalent to the private REDD+ credit sales from its balance sheet. The buyer of the REDD+ credits from the voluntary market thus claims the same REDD+ emissions reductions that the tropical country is also claiming. Such double-claiming would not affect industrialised country reporting to the UN because the sale was in a voluntary market not linked to the UN climate agreement. Buyers of the REDD+ credit in the voluntary carbon market, however, may feel cheated if they pay for emission reductions that the tropical forest country also includes in its emission balance sheet it sends to the UN.

Parties to the UNFCCC are considering a new market mechanism. The issue of double-counting has been raised in discussions about the new market mechanism, but the issue has not been resolved. Meanwhile several sub-national, national, and regional market mechanisms have been established around the world, some linked to the UNFCCC, others not.

In its report, SEI puts forward a series of proposals for the design of market mechanisms and for the accounting of carbon credits, that could address double-counting.

The SEI report suggests that countries buying and selling credits could agreed to share the credits. To continue the earlier example, if Germany bought REDD credits from Indonesia, it could use half of the credits for compliance and transfer the other half to a cancellation account. Indonesia could then use half of the credits towards its own emissions reduction target.

This though, is only a suggestion from SEI. It has not been agreed at the UN level. Tough negotiations lie ahead.

Writing on RTCC, FERN’s Hannah Mowat argues that the UN climate negotiators should be aiming for two global goals: to reduce fossil fuel emissions to near zero; and to protect and restore existing carbon stocks in natural ecosystems.

Twin goals are needed because of the fundamental differences between fossil and terrestrial cycles, (CO2 released from fossil fuels is a permanent emission, whereas sequestration from land and forests is reversible), it is not possible to directly compare them, so they can’t be part of the same goal.
 
A two-fold global vision is also the best chance we have at an equitable solution as it will enable more attention to be paid to food security.

Kill’s report makes clear that although it only deals with the issue of double-counting, the report should not be taken as an endorsement of REDD. Kill sources a series of reports as evidence that “tradable REDD+ credits are not beneficial for forests, the people who live in them, or the climate”:

And Kill has some advice for the governments of REDD countries:

If tropical forested countries cannot agree to industrialised
countries taking the credits for their REDD+ emissions reductions, they ought not agree to REDD+ being funded by an international trading mechanism.

 


Full Disclosure: REDD-Monitor has received funding from FERN. Click here for all of REDD-Monitor’s funding sources.
 

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