The investigation into the value of REDD+ avoided deforestation credits generated using the Verra standard, carried out out by newspapers the Guardian and Die Zeit and investigative non-profit SourceMaterial, has done a good job of making the quality of carbon offsets a topical talking point.
The finding that more than 90 percent of avoided rainforest deforestation credits – which in turn make up 40 percent of all credits verified by Verra – are essentially worthless is as eyebrow-raising as it is timely.
As stakeholders will be keenly aware, this is not the first time such fundamental shocks have been dealt to the offsets industry and it certainly won’t be the last.
Concerns about the structure of an offset program’s ability to deliver additionality go as far back as the Kyoto Protocol’s Clean Development Mechanism, while Australia’s Carbon Credit Units scheme has only just emerged from an independent review that found the program is “essentially sound,” after the former chair of the Emissions Reduction Fund’s integrity committee labeled the scheme an “environmental and taxpayer fraud.”
The California compliance system has also been consistently accused of issuing worthless credits due to its ‘regional averages’ approach, which is used to establish a baseline for assessing the amount of carbon captured by forests in a given area.
In the case of the Verra credits that are now under scrutiny, the baseline against which deforestation credits were issued would have been informed by some sort of modelling that tries to predict how much deforestation would occur without a carbon project being put in place.
The trouble is, it is simply impossible to accurately make this sort prediction across every project.
This is one of the main reasons why Stafford Capital Partners’ Carbon Offset Opportunity Fund does not invest in avoidance credits, principal and carbon offset fund lead Marek Guizot told Agri Investor. The firm pursues afforestation as a means of generating credits.
“We have excluded avoided-deforestation projects from the scope of our own carbon fund,” said Guizot. “We’re not investing into avoided deforestation or REDD+ type projects and one key reason is this difficulty, which can undermine the perceived quality of those credits coming from them.”
Guizot also advises caution in assessing the accuracy of the claims made by the Guardian and its partners, given some weaknesses have already been highlighted in the investigation.
Independent carbon ratings agency Sylvera has pointed out that the assumptions used by the research to arrive at its own baseline were solely based on physical characteristics such as distances from roads, rivers, settlements and so on, but failed to factor in a forest’s “proximity to the active front of deforestation,” which, it said, is an omission that can result in misleading conclusions being drawn.
Questions have also been widely raised about the use of a 2023 research paper (West et al) as one of three key studies on which the investigation leans, which is a paper that is yet to be peer-reviewed.
Sylvera’s own analysis of REDD+ schemes found that only 30 percent were high quality, which is still not good, but is better than the claim that less than 10 percent are valuable, as suggested by the Guardian et al.
One of the impacts this will likely have is to add further impetus to an ongoing trend of buyers shunning avoidance credits in favour of removals credits, which are generated through activities such as tree planting or direct air capture, and can demonstrate additionality more clearly.
Indeed, asset managers Craigmore Sustainables and Gresham House have confirmed to Agri Investor that they have never invested in a project to generate credits from avoided deforestation. Both firms take the view that planting new trees is the best way to remove carbon from the atmosphere.
Given the risk profile that GPs have attached to avoidance credits and the flood of research discrediting their value, market forces may well combine to kill off this strand of the market or, at the very least, stifle demand.
If that means a flight to quality credits that can demonstrate measurable additionality, which will in turn enhance the environmental impact and reputation of the offsets world, that is good news for all concerned.