Branching out: forest restoration and its role in climate change mitigation
In this series of blogs, Kita offers an insight to the variety of carbon removal and emissions avoidance project types contributing credits to the VCM. We describe the carbon removal technique, relate the ways in which the methodology operates within the carbon market, outline the potential risks involved and highlight the ways in which insurance can reduce the risk profile and contribute to progress for the approach in question.
Our aim is to demystify these methodologies and clarify their position within the VCM. We hope that greater transparency and understanding of carbon removal technologies helps to increase confidence and drive investment towards these projects.
In this post, we consider Afforestation/Reforestation.
What do forests do?
Forests cover about 30% of the Earth’s surface. They play a crucial role in contributing to the carbon cycle while also maintaining the stability of the climate, regulating ecosystems, protecting biodiversity, supporting livelihoods, and providing goods and services that promote sustainable development.
Regarding their impact on climate change, forests are a double-edged sword, as they can both contribute to and mitigate greenhouse gas emissions. The Agriculture, Forestry and Other Land Use (AFOLU) sector accounted for 13-21% of the total global anthropogenic GHG emissions from the period 2010-2019, with deforestation being responsible for 45% of these AFOLU emissions. However, forests also represent one of the most important solutions to addressing the effects of climate change. Forests around the world serve as natural reservoirs for carbon by absorbing CO2 from the atmosphere and transforming it into biomass through the process of photosynthesis. The restoration of nearly two billion hectares of degraded land worldwide, an area equivalent to that of South America, offers opportunities for increasing and maintaining forests. Hence, preserving and restoring forests is vital to mitigating the effects of climate change.
Afforestation refers to the establishment of forests where previously there have been none, or where forests have been missing for a long time (50 years according to UNFCCC). Reforestation refers to the replanting of trees on more recently deforested land. Essentially, afforestation involves converting long-time non-forested land into forest, while reforestation involves converting recently non-forested land into forest.
How do forestry projects relate to the carbon markets?
Currently, the vast majority of carbon dioxide removal comes from forestry and conventional management of land and only a small amount comes from technical methods. Based on the “The State of Carbon Dioxide Removal (CDR)” report, 99% of carbon dioxide removal occurs from these conventional methods (roughly 2,000 MtCO2). It was found that natural methods of CDR are viewed more favourably than others. Scientific literature on soil carbon sequestration and afforestation/reforestation covers 38% of the CDR methods. Therefore, it comes as no surprise that forestry projects account for 26% of the total transactions in the voluntary carbon markets, making forestry the largest project type by volume3.
The main categories of forestry options available for carbon credits include afforestation/reforestation, improved forest management, and avoided conversion. Broadly, these can be divided into two varieties of carbon projects: avoidance and removal. Avoidance projects focus on avoiding the release of carbon into the atmosphere, such as the ‘reducing emissions from deforestation and forest degradation’ projects, commonly referred to as REDD. These projects put a price on the carbon stored in forests and ensure it is kept stored there. On the other hand, removal projects such as afforestation/reforestation focus on removing emissions already present in the atmosphere.
There exist multiple global standards that certify these emission reductions such as Verra’s Verified Carbon Standard, the Gold Standard, the American Carbon Registry, the Climate Action Reserve and Plan Vivo. Additionally, the Woodland Carbon Code is a quality assurance standard for woodland creation projects in the United Kingdom.
Industry insights and experts:
Pachama plays a crucial role in the carbon credit market for Avoided Deforestation and Reduced Emissions from Deforestation and Degradation. With its advanced technology and verification processes, Pachama accurately measures and monitors forest carbon offsets, ensuring transparency and credibility. By partnering with local communities and indigenous groups, Pachama promotes sustainable development and biodiversity conservation. Furthermore, Pachama's global carbon marketplace connects project developers, buyers, and sellers, facilitating the trade of verified carbon credits. Pachama's holistic approach to carbon offsetting and reforestation empowers organizations to achieve their sustainability goals while contributing to a greener and more sustainable future.
What are the specific risks in regard to forestry projects?
As identified by these standards, the key risks associated with forestry projects are:
Additionality: Ensuring that the project activity would not have occurred in the absence of the carbon credit revenue, and that the project is making a real contribution to reducing greenhouse gas emissions.
Baseline and monitoring: Setting a credible and accurate baseline for the project emissions and monitoring the project activity to ensure that it is in line with the baseline.
Leakage: Ensuring that the project activity does not lead to increased emissions elsewhere.
Permanence: Ensuring that the carbon sequestered or avoided by the project will be permanently maintained, and not released back into the atmosphere at a later time.
Environmental and social safeguards: Ensuring that the project activity does not have negative impacts on the environment or communities, and that appropriate safeguards are in place to protect local people and ecosystems.
How can insurance help manage these risks?
Insurance can help manage risks associated with these projects in multiple ways:
Unavoidable risks, like natural catastrophes, can have great impact on nature-based solutions. Insurance can build resilience when unexpected occurrences strike.
Avoidable risks, like acts of fraud or negligence by project developers, or the insolvency of the project developer, can happen in carbon projects across multiple types. Insurance can protect buyers of carbon credits against these types of challenges impacting on their carbon purchases.
Carbon risks, like reassessments to baselines or changes/invalidation of carbon standards/methodologies are broader risks factors in the carbon markets that can impact nature-based projects. Insurance can perform a comprehensive assessment of the project, including risk management and compliance with standards, providing financial protection and coverage against these risks.
Conclusion
While nature-based solutions are not a quick fix, they can effectively achieve negative emissions. Reaching the ideal scenario that limits warming to 2°C requires minimising further emissions from deforestation and increasing current forest sinks. When carried out in a responsible manner, in addition to absorbing carbon, forestry can contribute towards the restoration of landscapes, protection of priority habitats, promotion of biodiversity, provision of recreational amenities for local communities, and in some cases, the sustainable production of timber and wood-based products. These approaches have the potential to offset a significant amount of carbon emissions, particularly in sectors where it is difficult to reduce emissions, such as aviation and shipping.
As we strive for a future that relies less on steel, concrete, and plastic, new woodlands can offer a range of benefits beyond carbon sequestration. With continued research and development for more effective and efficient methods of afforestation, reforestation and improved soil carbon sequestration, forestry has the potential to support sustainable development in various ways while ensuring we meet our climate goals.