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COP27 boosts carbon trading and ‘non-market’ conservation: But can they save forests?

  • For the first time ever at a climate summit, the final text of this month’s COP27 included a “forests” section and a reference to “nature-based solutions,” — recognizing the important role nature can play in curbing human-caused climate change. But it’s too early to declare a victory for forests.
  • By referencing REDD+, the text could breathe new life into this UN framework, which has so far failed to be a game-changer in the fight against deforestation as many hoped it would be.
  • COP27 also took a step toward implementing Article 6.4 of the Paris agreement, a mechanism that some see as a valid market-based climate solution, though others judge it as just another “bogus” carbon trading scheme.
  • Many activists are pinning their hopes instead on Article 6.8, which aims to finance the protection of ecosystems through “non-market approaches” like grants, rather than with carbon credits.

SHARM EL SHEIKH, Egypt — As politicians, activists and journalists celebrated the historic breakthrough to create a loss and damage fund at COP27 and bemoaned the failure to call for a phase-down of fossil fuels, few noticed that the summit took a step — albeit a very controversial one — toward preserving forests and other ecosystems via pledges made by carbon-polluting countries and companies trying to meet their climate goals.

Decisions issued at COP27 set a timeline to implement all parts of Article 6 of the Paris agreement, which regulates carbon trading between the parties, as well as non-market investment in conservation. Also included in those decisions is a verification mechanism that could see countries sell “sovereign carbon credits” for preserving ecosystems. With an area the size of Ireland deforested globally last year, it’s a pressing issue.

Many COP participants now see carbon markets as the best way to amp up investments in ecosystem preservation to benefit the climate, especially carbon-rich rainforests in the global south. Others worry the carbon trading focus could encourage dubious carbon accounting and offsetting, and argue instead for “non-market approaches,” which also got a step closer to reality at COP27.

“It is too optimistic to say that this is a victory for forests,” said Diego Pacheco Balanza, Bolivia’s lead negotiator and a key voice on Article 6. “We are opening several venues for supporting forests financially to help keep them alive, but those are resisted by developed countries. They only want to push the commodification of forests, which of course is a fatal scenario.”

Officers of the United Nations Framework Convention on Climate Change applaud the final decisions agreed to at the COP27 closing plenary. Image courtesy of COP27 Presidency.

First time inclusion of “Nature-based solutions”

COP27’s incremental achievements reflect a growing recognition that ecosystems provide vital carbon sinks as well as havens for wildlife, and that protecting them simultaneously addresses the global climate and biodiversity crises. Primary forests, for instance, both absorb carbon from the atmosphere and store it in a way that enhances resistance to wildfires and disease. So, say negotiators, countries and companies deserve rewards for conserving them.

This year’s COP cover text enshrined the import of “ensuring the integrity” of forests, the ocean, and the cryosphere, and underlined a need for “protecting, conserving and restoring nature and ecosystems” to meet the Paris agreement goal of limiting warming to 1.5° C.

The final text also included a dedicated section on forests for the first time, which referenced “nature-based solutions” — actions to protect ecosystems while easing global warming.

A similar reference to “nature-based solutions” was rejected at COP26 in 2021 in Glasgow. But the final cover decision text approved at COP27 in Egypt, reflects only a partial victory, say campaigners. That’s because the final text only “encourages” signatories to consider such solutions. In the jargon of the UN Framework Convention on Climate Change, this is a weaker signal to a country or company updating its climate policies than “invites,” “urges,” “strongly urges,” “requests,” or “instructs.”

Marshall Islands delegate Tina Stege and other members of the High Ambition Coalition call for the COP27 text to include loss and damage and a phasing out of fossil fuels. Image by Alec Luhn.

New life for underperforming REDD+

The other item addressed in the forest section, though controversial, has been hailed by some as a win for climate justice. It quoted a section of the Paris agreement that urged parties to implement REDD+, or Reducing Emissions from Deforestation and Forest Degradation, enshrining a mechanism for sustainable management of forests in developing countries.

The REDD+ framework was originally designed to evaluate, quantify, and support avoided emissions via the preservation, rather than the exploitation, of carbon-storing ecosystems including forests. The COP27 text could allow developing nations to sell vetted sovereign carbon credits, making it more profitable to keep ecosystems intact rather than disrupting them for timber, minerals or agriculture.

Honduras negotiator Malcolm Stufkens told Mongabay and other journalists during a break in the late-night overtime talks in Sharm El Sheikh on Saturday that his country, which is 48% covered by forest, was pushing for a REDD+ reference to be included in the text so that his nation’s trees would have “more value standing than not standing.”

“We’ve been working a lot on protection and conservation, so we’re here to see that the mechanism has to build up also to [nations getting] paid for all the [preservation] activities we’re doing, and [for] protecting our forest,” he said.

Kevin Conrad (holding paper), Ève Bazaiba (center) and Malcolm Stufken (fourth from left) speak with Wael Aboulmagd (far left), special representative to the COP27 president, during the negotiations in Sharm El Sheikh. Credit: Emilio Sempris, Twitter.

Kevin Conrad, director of the Coalition for Rainforest Nations and a negotiator for Papua New Guinea who was instrumental in developing the framework back in 2005, held up the negotiations in Glasgow in 2021 in a failed push for REDD+ to be included in the text. This year it also seemed REDD+ would get left out. Ève Bazaiba, the deputy prime minister of the Democratic Republic of Congo, even flew into Sharm El Sheikh at the last minute to rally parties for its inclusion.

Ultimately, the nod to REDD+ made it into the final COP27 text, as did a significant footnote stipulating that not only countries, but also private companies, could buy sovereign carbon credits.

“What developing countries are concerned about is being trapped into commitments that the poorest countries can’t implement,” Conrad said. “They didn’t cause the [climate] problem, but they’re willing to help, as long as there’s sufficient finance, and that’s the [private corporate] link we need.… We don’t want just to rely on some public finance.”

Projects implemented under the framework so far have shown mixed results, and academics have even wondered if “REDD+ is dead.” But some forest activists see it as the lesser evil.

“We compromise on REDD+ with results-based payment to keep it outside of carbon markets,” said Souparna Lahiri of the Global Forest Coalition.

UN Secretary General Antonio Guterres speaks with European Union delegates at COP27. Image by Kiara Worth / UNFCCC.

Climate financing or offsetting?

Article 6 of the Paris agreement is meant to help countries cooperate to reach their climate targets, and COP27 took steps toward finally putting it into action.

The first item — outlined in Article 6.2 — allows one country to pay for an emissions reduction in another country and count it towards its own net zero goal. Article 6.2 working rules were agreed to at COP26, and are beginning to be implemented. At this year’s summit, Ghana and Switzerland authorized the first-ever “internationally transferred mitigation outcome” under Article 6.2.

In that landmark agreement, Switzerland installed efficient lighting and cleaner stoves in Ghana so up to five million households there will no longer need to burn carbon-polluting wood for cooking. Switzerland can now count those emission cuts in Ghana toward its own goal of halving Swiss greenhouse gas output by 2030. It has signed similar agreements  with 10 other low-income countries.

The next key section, Article 6.4, allows the trading of carbon credits on an open market, rather than under an agreement between two countries. A text issued at COP27 moves that process forward, asking a technical committee to issue recommendations before the next COP on what qualifies to be sold as carbon credits. It also requests parties to weigh in on whether those credits can be applied to countries’ net zero targets.

At issue is “emission avoidance,” an ill-defined term that applies when nations keep carbon-storing ecosystems intact, “regardless of any evidence that such carbon would [ever] be released to the atmosphere,” said Caroline Prolo of LACLIMA, a Brazilian network of climate law experts.

A supervisory body has not yet finished its recommendations on how to address the risk of carbon storage reversals, such as when a forest already sold as a carbon credit burns down. This lack of detail has left critics complaining that elements of Article 6.4, as agreed to at COP27, feel rushed and may “fail on delivering the high level of integrity that is expected,” Prolo said.

Big emitters like the United States have pushed for the creation of carbon markets, arguing that they make the fight against climate change profitable and add incentive, rather than just relying on public-minded donors to invest in mitigation in another country.

However, these kinds of markets have long been criticized for shoddy accounting. Eighty percent of credits traded on an early carbon market under the Kyoto Protocol climate agreement were ”almost completely bogus,” undermining a third of the European Union’s claimed emission cuts. There’s also the fear of double counting: Experts feel that the Article 6 rules discussed at COP27 could allow both the country that sold a carbon credit, and a company that bought it, to count it toward their net-zero goal.

Carbon markets are ultimately a form of offsetting, say some critics, which can allow bad actors to pay their way to net zero, never reducing their own high emissions, while buying credits for reductions elsewhere. The voluntary carbon markets that already exist are contributing to “net-zero greenwashing” by countries and companies due to a lack “standards, regulations and rigor,” a report commissioned by UN Secretary General Antonio Guterres said this month.

Diego Pacheco Balanza, center, and members of the Bolivia delegation speak at COP27. Image courtesy of Cintia Vargas.

Non-market approaches

“At the very best, [with carbon markets] you just get a cancellation of emissions, just a balancing out, but that rarely happens in practice because you have so many issues, so many assumptions that have to happen for that to be real,” said Catalina Gonda of FARN, an environmental law NGO based in Argentina.

To head off that problem, Balanza and others demanded during the Paris agreement negotiations that Article 6 also include Article 6.8, which affords emission reductions through “non-market approaches.” These are essentially grants rather than credits.

The CLARA network of conservation and land rights groups, for instance, has suggested placing levies on oil drilling, stock trading and air travel that could fund projects to protect and restore forests.

Article 6.8 remains the ugly stepchild of Article 6, given little shrift by carbon polluters focused on offsets, as well as activists focused on big-picture issues like loss and damage. Opponents say the forces of supply and demand will do better at creating value for climate action. But forest campaigners argue 6.8 can effectively match donors to promising mitigation and adaptation initiatives, all without creating incentives for shady accounting.

COP27 president Sameh Shoukry gavels through the final decision text at COP27. This year’s summit left much to be decided at COP28 next December in Dubai in the United Arab Emirates. Credit: COP27 Twitter.

COP27 offered a major breakthrough on Article 6.8, analysts said. Decisions in Egypt finally put it on a timeline for implementation in 2023-24, by asking experts to start identifying non-market approaches and who can participate.

“6.4 is creating a trading mechanism that Shell and Total and [big] airlines can continue,” said Peter Riggs of Pivot Point, an NGO. “Whereas with 6.8, 100% of the benefit will accrue to the developing country that hosts the activity.”

Once implemented, Article 6.8 could be a way of regulating the many international investments in preserving ecosystems announced annually, including those under the Glasgow Forest Declaration. At COP27, the UK said $2.7 billion had been paid out under that forest pact, with a total $12 billion pledged.

But, say analysts, a lot of international finance has failed to make it to the places where deforestation is occurring on the ground, such as in the Democratic Republic of Congo. To avoid that fault, the funds should be vetted and monitored under a UNFCCC mechanism like Article 6.8, proponents say.

Asked why he supports voluntary carbon cuts over the quid pro quo carbon markets for climate mitigation, Balanza pointed out that significant political will has already emerged to protect the Amazon rainforest through initiatives like the Amazon Fund, by which Germany, Norway and Brazil finance inspectors to fight agriculturally driven deforestation.

“There is a pathway, a real pathway, to start working seriously on how we should address the climate crisis,” he said, “with cooperation of parties, and opening an alternative to mercantilism.”

Mongabay contributor Alec Luhn is on assignment at COP27 in Egypt.

Activists picket outside the negotiating room on the last night of COP27. Image by Alec Luhn.

Banner image: “We are in the fight of our lives, and we are losing. Greenhouse gas emissions keep growing, global temperatures keep rising, and our planet is fast approaching tipping points that will make climate chaos irreversible. We are on a highway to climate hell with our foot still on the accelerator,” said UN Secretary General Antonio Guterres, speaking in Sharm el-Sheikh, Egypt at COP27. While progress was made at this year’s summit, the meeting did little to move the world off its trajectory toward climate catastrophe. Image by Kiara Worth / UNFCCC.

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