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By Eron Bloomgarden
Executive Director, Emergent
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Carbon credits have been in the headlines over the past couple of years. Even for those of us who spend our days working on market-based climate solutions, it's been surprising to see this topic break out of our bubble and into mainstream media. If you told me five years ago I'd hear about carbon credits on John Oliver's show, I wouldn't have believed you.
The press on carbon credits hasn't been good. Much of the scrutiny has been on projects that seek to protect specific areas of forest that are under threat. By doing so, they stop carbon emissions from deforestation from entering the atmosphere and contributing to global warming. The carbon credits generated can be bought by companies on the voluntary carbon market to offset their emissions or support wider climate and nature strategies. The criticism has centered on concerns that some of these projects may have overestimated their results, producing credits that don't represent the climate impact they claim.
These are important concerns. But are we losing sight of a much bigger picture? According to data and analysis firm MSCI, all these forest protection projects combined cover around 30 million hectares. That's roughly 2 percent of the 1.3 billion hectares of forest cover reported to the U.N. as being eligible for results-based payments or credits. Even if all additional projects currently under development come online, they will still cover far less than 10 percent of this area.
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As debate rages about the rights and wrongs of these projects, tropical forests continue to disappear at an alarming rate. Roughly 4 million hectares of primary tropical forest were lost last year alone—equivalent to 10 football (soccer) fields a minute. More than 70 million hectares have been lost in the past 20 years.
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There is no way to meet the targets of the Paris climate agreement without halting and reversing tropical deforestation. We need more, not less, private sector finance flowing into forest protection. The risks posed by overestimating the impact of these projects, which currently cover a tiny area of our forests, are miniscule compared with the existential threats we face by failing to direct sufficient finance to drive sustained, global action to protect tropical forests.
The question we should be asking is: "How can we channel billions of dollars of both public and private sector investment to help keep the other 98 percent of forests standing?"
While it's true that not all forest conservation relies on carbon finance, the voluntary carbon market does offer one of the best tools we have available. It brings the opportunity to mobilize funding at a scale to deliver systemic change.
Protecting natural ecosystems, such as tropical forests, is arguably the best and highest use of this market. Forests have no other funding streams or other business plans to keep them standing. Funding is needed to change the misaligned economic incentives that currently drive tropical deforestation. And just as importantly, forests have the potential to provide huge short-term climate benefits, helping put a brake on climate change while we work to decarbonize our industries and economies.
We certainly need to channel more finance to more projects, to produce more high integrity credits that buyers can trust. They have a vital role to play. But projects alone won't solve the problem. We need to use the markets to fund large-scale programs that reduce deforestation across entire countries, or large sub-national jurisdictions, such as Brazilian states. Not only will this deliver the scale we desperately need, it also brings governments directly into play. Many of the actions needed to stop deforestation—such as enforcement, regulatory reform, economic incentives for landowners, and protecting the rights of Indigenous Peoples and local communities—can only be delivered by governments. There are other benefits too. For example, tackling deforestation across a whole country prevents the problem from simply shifting to another area.
But it is scale that is the key. In late 2022, the world's first "jurisdictional" carbon credits were issued to Guyana, whose 18 million hectares of tropical forest cover an area over 50 percent of the size of all projects combined. And the LEAF Coalition, a public-private initiative focused on purchasing credits from these large-scale programs, has already received eligible proposals from more than 25 forest nations, with the potential to protect an area of forest the size of the European Union. Suddenly, we can see how this could work, how it all can add up to make a meaningful dent in deforestation rates.
But right now, we're wasting time worrying about the wrong things, when we could and should be working to unlock the full potential of carbon markets to provide the funding we need at scale to help save the world's remaining tropical forests. We need to think big and act bigger. And we need to start now.
Eron Bloomgarden is CEO of Emergent.
The views expressed in this article are the writer's own.
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