INTRODUCTION: ASSEMBLING THE FOREST BIOECONOMY

As the COP28 negotiations kick off in Dubai, it feels like carbon markets are in a moment of reckoning. An onslaught of public criticism from high profile sources this year, such as The Guardian and The New Yorker, have been calling into the question the validity of carbon credits. In the face of bad press, companies have been very shy to report their engagement in the voluntary carbon markets to help meet their net zero commitments, and are even dialing back that engagement.

Yet a pair of new market research reports from our Ecosystem Marketplace team offer evidence for optimism that an emphasis on integrity in carbon markets is delivering results. The latest State of the Voluntary Carbon Markets 2023 report finds the market consolidating around a smaller but committed set of buyers willing to pay premium prices for higher quality credits. A second study provides compelling evidence that companies that participate in voluntary carbon markets are leading across a range of measures of robust climate action, accountability, and ambition—outperforming companies that do not buy carbon credits.

The stakes are high. But it’s important to remember carbon is not the only tool we have to protect forests and natural ecosystems. Carbon finance is one of a diverse array of “bioeconomy” approaches that can put an economic engine behind conservation and restoration. Carbon markets are among the more mature of these approaches, but they’re far from the only game in town.

So we’re dedicating this Resilience Dispatch to the bigger picture: a fuller suite of strategies for building the new forest bioeconomy. Here you’ll find insights on a set of emerging strategies that Forest Trends supports for delivering finance to stop deforestation and drive restoration—from carbon finance, to watershed investments, to agroforestry value chains, to investments in risk mitigation, to wood innovations, to biodiversity finance.

We’re working to demonstrate bioeconomy delivery mechanisms themselves, and thinking about portfolio approaches to connecting them – by, say, helping to forest based supply chains that shore up biodiversity, or finding new ways to tag carbon claims on to non-timber forest products, or stacking multiple investment streams to make a project viable. And there’s a lot to do to build the enabling market infrastructure – including simply articulating the full set of opportunities; taking advantage of new data and technological advances, especially when they can benefit indigenous peoples, local communities, and smallholders; developing a shared and standard vocabulary for talking about the benefits of projects; and creating enabling conditions in terms of the policy, investment atmosphere, and social license. A broad and unusual coalition is needed to put all of these pieces together.

And we want to never lose sight of the foundation: the communities and land managers on the ground. Any new bioeconomy needs to work for them, or it doesn’t work at all.

The COP and government actions are vitally important. Carbon markets are vitally important. But our planet’s forests are incredibly diverse. Our strategies for protecting them can be, too.

Best,  

Michael Jenkins

New research published this week by Ecosystem Marketplace finds evidence of a market-wide shift in the voluntary carbon markets, with demand concentrating around high-integrity, high-quality carbon credits that have holistic co-benefits beyond the mitigation of greenhouse gas emissions.

Transaction data analyzed by Ecosystem Marketplace show a massive 82% leap in average carbon credit prices between 2021 and 2022, paired with a drop in overall transaction volumes. These dynamics suggest a market consolidating around a smaller but committed set of buyers willing to pay premium prices for higher quality credits. Demand is particularly high for nature-based credits that are certified for co-benefits and Sustainable Development Goals, according to the report’s authors.

INSIGHTS: NEW RESEARCH SHOWS CARBON CREDITS ARE ASSOCIATED WITH BUSINESSES DECARBONIZING FASTER

Recent analyses from Ecosystem Marketplace shows that companies participating in the voluntary carbon markets (VCM) are leading the way in emissions reductions, rather than lagging behind.

Specifically, they are establishing and disclosing emissions reductions targets that are achievable, time-bound, and science-based – one of the most important steps a company can take towards achieving emissions reductions targets. Moreover, our analysis shows that VCM buyers are spending more on emissions reductions activities, decarbonizing faster than non-buyers, and are achieving most emissions reductions through their own activities.

Forest Trends and the Arbor Day Foundation will expand their partnership through a new initiative, the Arboredo Project, to plant one million trees in the Ribeira and Paraíba Valleys of the Atlantic Rainforest in São Paulo State. They will work in direct partnership with indigenous and local communities, family farmers, local cooperatives, and NGOs, such as CooperCentral VR, Coobio, and Akarui. The project will focus on native species of the Atlantic Rainforest including açaí and local fruits, such as Cambucá and Grumixama, that create new economic opportunities and increase food security, forest carbon storage, and biodiversity in indigenous and family farmer territories.

On November 1st and 2nd, 2023, Forest Trends, our partners, and Colorado Front Range leadership gathered at the Wildfire and Forests Innovation Summit in Denver. Catastrophic wildfires profoundly threaten Colorado’s quality of life, economy, and future opportunities. The goal of the Summit was to bring together an unusual group of stakeholders around innovative models to get forest restoration work done faster and at larger scale. Here’s a recap of key insights from the Summit.

Global markets in certified biodiversity credits modelled after carbon markets has been touted as a solution to mobilize funding from private sources. Forest Trends through its BBOP initiative laid an early foundation for developing biodiversity credit markets. But so far, no approach has emerged that could channel significant amounts of private finance to high-biodiversity value ecosystems in the Global South.

Charlotte Streck makes the case for a new approach: Instead of certifying credits based on biodiversity outcomes, an international governance body could focus on certifying credible biocrediting schemes that meet a set of minimum requirements (e.g., policy alignment, clear definition of biodiversity outcomes, and verification of such outcomes.) Read it at Ecosystem Marketplace.