Carbon Offsets for Planting Forests and Avoiding Deforestation

We spent a couple of sessions this week learning the ins and outs of forestry credits. Basically, the idea is that trees absorb a lot of carbon dioxide via photosynthesis on a global scale. When they are planted at large scale, or simply not cut down at large scale, it's a huge piece of the climate change solution. So lots of companies or people who want to claim that their actions are carbon neutral (offsetting their emissions from their business or from a flight they might take), are essentially paying people in developing countries to plant trees or engage in agricultural or forestry practices that create or leave more trees standing. The amount of carbon saved from the atmosphere is verified by scientists and economists who model what they think might have happened if the project did not happen vs. what they think will happen now that project went forward. And therein lies the source of my skepticism about these types of projects. While encouraging sustainable land use and stopping deforestation are an incredibly important (and probably absolutely necessary because of their relatively low cost) pieces of the climate change solution, I simply don't have a lot of confidence in the modeling that goes into these projects. It seems based on sketchy measurements and all sorts of assumptions that may or may not be accurate. I've been told that experts are developing methodology to attempt to stop people from skewing the numbers, and I have never been presented with how these methodologies work, but as of now, I'm not convinced these are reliable or real numbers. When a profit motive is introduced, I really worry that developers are incented to game the system and their modelling to produce more credits. What's more, there is a significant risk of "permanance" - whether carbon saved in trees today will be cut down and burned next year.

Does that mean we shouldn't invest in them? Not necessarily. I'd like to see these things develop and models and measurements get more precise and reliable. We saw some great projects described that are really having wonderful impacts in Africa - helping farmers use the land better and earn income while storing more carbon - win/win/win. But I think we need to be very careful before using these methods. Currently they are mostly just used in what are known as the carbon "voluntary" markets - which means people buy them to offset their emissions because they want to...not because the government is mandating them to get a certain amount of emission allowances. The "compliance" markets often have much higher prices per ton of carbon avoided than the voluntary markets, and a number developing countries like my fellow fellow Guntur's Indonesia, which has a lot of deforestation, really want the next international climate to have a deforestation offset that is fairly easy to get. The current credit for forest projects under the Kyoto Protocol's Clean Development Mechanism addresses the permanance risk by granting only "temporary" credits five years after a project starts, subject to verification 10 years after it starts. The EU also doesn't allow companies to buy these credits to meet their EU cap and trade obligations. As such, they are essentially risky "second class credits,"no one wants to buy them, so there is only one certified forest project under Kyoto right now. There are no credits at all under Kyoto for projects that claim to stop deforestation. The advocates of easing restrictions on forestry offsets haven't convinced me yet...but I'm keeping an open mind and hoping someone figures out a way to solve these problems in a way gives me confidence that the projects are really offsetting carbon in a cost effective way. At one level, the marginal cost of forest projects might be relatively low when compared with building a solar PV plant (and they have important poverty-reducing functions), but I'm very worried about the transaction costs of verification and the modeling risks.