Circular Economy Organizational Governance

The Way We Think About Carbon Markets Is About to Change

What has been sorely needed is an agreed-upon international framework that broadly establishes who can sell carbon credits; who can buy them and for what purpose; and what constitutes a quality carbon credit. COP26 took a major step towards such a framework.

Sponsored Content | / This article is sponsored by American Forest Foundation | By American Forest Foundation | Published 3 years ago | About a 4 minute read

Image: Samuel Theo Manat Silitonga/Pexels

Like many others, we at the American Forest Foundation closely followed the discussions at COP26. As a national conservation organization working to address our biggest environmental challenge through our Family Forest Carbon Program, discussions around carbon markets are critical to how we conduct our work with landowners and carbon credit buyers.

While carbon markets have been operating since the early 2000s, each forest carbon project has been created independently. Standalone efforts on large, 5,000-plus acre tracts of industrial forestland — each project had its own, complex way of operating and measuring the carbon sequestered. Overall, these projects have been fractured, inconsistent and limited.

In response, corporate carbon-credit buyers have had to conduct lengthy due diligence to evaluate projects. Even basic terms such as ‘carbon credits’ or ‘climate mitigation’ were interpreted differently by different projects. As a result, every deal was done privately. This limited market participation seeded doubt and criticism and kept the broader community from learning and advancing critical work together to address climate change.

COP26 took a major step towards such a framework, as negotiators came to an agreement on Article 6 of the Paris Agreement that lays an outline for an international carbon market. While the agreement focuses its attention on establishing a global compliance market across countries, overall themes can be applied to the voluntary carbon as well.

Below are three takeaways from the Article 6 agreement that will positively affect the climate, project developers, carbon market buyers and, most importantly, the landowners and communities whose livelihood depends on forests:

1. Carbon markets are a legitimate tool in our global effort to avert catastrophic global warming.

Perhaps the most salient takeaway is the agreement on Article 6 means international leaders and stakeholders acknowledge carbon markets are a necessary conservation-finance tool that can truly help improve the health of our forests and increase their carbon potential. While these markets are not the only tool and should be used alongside other action, they are a cost-effective mechanism for combatting climate change.

2. Climate finance has a path to support and empower rural communities and smallholders.

Historically, small land holders and family forest owners were blocked from enrolling in and financially benefiting from carbon markets. Now, Article 6 will enable the growth of a market under which rural communities can gain access to significant and steady flows of funding in exchange for transitioning to more sustainable land management practices.

Already, we at AFF — with our partner, The Nature Conservancy (TNC) — have developed one such program that specializes in supporting rural American forest owners: the Family Forest Carbon Program. The Family Forest Carbon Program empowers family forest owners to manage their forests in ways that sequester and store more carbon. Our program provides companies with an opportunity to purchase verified carbon credits from an authentic and inclusive source. While we are actively growing, our reach to forest owners is limited by our access to capital to finance an expansive presence. This limits our carbon credit supply to buyers. Now, proper investments in climate innovation will be accelerated.

3. The quality of carbon credits is key.

For carbon markets to work, carbon credits must represent real, additional and permanent reductions in the concentration of CO2 in the atmosphere. The negotiators at COP resolutely held to this belief. Like other organizations, such as the Taskforce on Scaling Voluntary Carbon Markets and the Science Based Targets Initiative, leaders are signaling the paramount importance of establishing rigorous and transparent standards of the climate mitigation of carbon projects. All of us — NGOs, carbon developers, carbon buyers and academic institutions — must rise to this standard if our efforts are to truly have a meaningful impact in fighting climate change.

Through the Family Forest Carbon Program, AFF and TNC are innovating to raise the bar on credit integrity. We have developed a new carbon-accounting methodology that uses an observed, dynamic baseline — advancing the accuracy and transparency of our verified carbon credits. We have also made clear commitments to long-term monitoring and continuous support for our program enrollees well after their participation in our program. We challenge others to join us to innovate and evolve, so that all stakeholders are confident that one carbon credit represents one ton of real, additional and permanent CO2.

The delegations at COP26 have done their job. It’s now up to the players — both the sellers and the buyers — to demand and deliver on this framework for the benefit of the climate and the world’s rural communities.