Better carbon credits needed | Opinion

Carbon credits have been in the headlines for the past few years. Even for those of us who work daily on market-based climate solutions, it’s been amazing to see the topic move out of our comfort zone and into the mainstream media. If you’d told me five years ago that I’d be hearing about carbon credits on John Oliver’s show, I wouldn’t have believed you.

Carbon credits have not received good press. Much of the scrutiny has been directed at projects that seek to protect specific forest areas under threat, thereby preventing carbon emissions from deforestation from being released into the atmosphere and contributing to global warming. The carbon credits generated can be purchased by companies in voluntary carbon markets to offset their emissions or support broader climate and nature strategies. Criticism has centered on concerns that some of these projects may be overstating their results, generating credits that do not reflect the climate impacts they claim.

These are important concerns. But are we missing the bigger picture? According to data and analytics firm MSCI, all these forest protection projects together cover an area of ​​about 30 million hectares. That’s roughly 2% of the 1.3 billion hectares of forest area reported to the United Nations as eligible for performance-based payments or credits. Even if all the additional projects currently under development were to come online, they would still cover far less than 10% of this area.

As debate rages over the merits of these projects, tropical forests continue to disappear at an alarming rate. Nearly 4 million hectares of primary tropical forest were lost last year alone – the equivalent of 10 football fields every minute – and more than 70 million hectares have been lost in the past 20 years.

There is no way to achieve the goals of the Paris Climate Agreement unless we halt and reverse tropical deforestation. We need more private finance flowing into forest protection, not less. The risks of overestimating the impacts of these projects, which currently cover only a tiny fraction of forests, are tiny compared to the existential threat we face by not committing enough funds to drive sustained global action to protect tropical forests.

The question we should be asking is: How can we redirect billions of dollars of investment from both the public and private sectors to sustain the remaining 98 percent of forests?

While it is true that not all forest conservation relies on carbon finance, voluntary carbon markets offer one of the best tools available to us: an opportunity to mobilize large-scale capital to effect systemic change.

Protecting natural ecosystems such as tropical forests is perhaps the best and most advanced use of this market. Forests have no other source of funding or business plans to sustain them. Money is needed to change the imbalanced economic incentives that currently drive tropical deforestation. And, just as important, forests can have huge near-term climate benefits, helping to reverse climate change while we work to decarbonize our industries and economies.

We certainly need to put more money into more projects and generate more reliable credits that buyers can trust. Projects have a vital role to play. But projects alone won’t solve the problem. We need to use markets to fund large-scale programs to reduce deforestation across entire countries, or large local jurisdictions like Brazilian states. This will not only achieve the scale we so desperately need, but it will also directly involve governments. Many of the measures needed to stop deforestation—law enforcement, regulatory reform, economic incentives for landowners, protecting the rights of indigenous and local communities—can only be implemented by governments. There are other benefits, too: tackling deforestation across an entire country can prevent the problem from simply shifting to another area.

But it’s the scale that matters: In late 2022, the world’s first “jurisdictional” carbon credits were issued to Guyana, whose 18 million hectares of tropical forest represent more than 50% of the area of ​​all the projects combined. And the LEAF coalition, a public-private initiative focused on buying credits from these large-scale programs, has already received eligible proposals from more than 25 forested countries, potentially protecting forests an area the size of the European Union. Suddenly we see how this works, and how all this can add up to make a meaningful dent in deforestation rates.

But right now, we are wasting time worrying about the wrong things. We should and should be working to unlock the full potential of carbon markets to provide the financing we need at scale to save the world’s remaining tropical forests. We need to think big and act big. And we need to start now.

Eron Bloomgarden is CEO of Emergent.

The views expressed in this article are the author’s own.