The voluntary forest carbon sector continued to expand last year despite its fast-emerging avoided deforestation segment hitting significant growth obstacles, the 2009 State of the Voluntary Carbon Markets report shows.
The volume of forestry and other land-use emissions reductions in the over-the-counter (non-exchange) market increased 14 per cent to 5.7 million tonnes of CO2 (
MtCO2e). Forestry projects delivered 5.2 MtCO2e of this volume. One tonne of emissions reduction generates one offset credit, known as a Verified Emissions Reduction (
VER).
Single-species afforestation/reforestation (A/R) plantations, mainly for conservation purposes, accounted for 3.4 Mt or 65 per cent of the forestry volume. Avoided deforestation, or
REDD, projects made up 14 per cent, multiple-species A/R 12 per cent and forest management 8 per cent.
Whereas forestry credits were almost entirely from reforestation activity five years ago, the sector is diversifying, particularly into REDD but also to improved forest management practices. Somewhat surprisingly, however, the volume of REDD credits generated in 2008 halved to 700,000 tonnes from 1.4 Mt the year before. Despite the surge in interest in carbon offsetting around avoided deforestation in the past two years, it appears the difficulties in validating projects to the range of social, legal and environmental requirements involving many stakeholder interests has slowed its growth, the report finds.
The overall outlook for the forest carbon sector is for continued growth despite the world recession and REDD obstacles. The main factor driving growth is the emergence of a very large mandatory carbon cap and trade market in the US. Forestry has always been a far more accepted offset activity in North America than Europe and the latest proposed emissions trading bill in Congress favours both domestic and international forestry activities for carbon offsets in large volumes.
The US impetus in the carbon market was to some degree reflected in a huge jump last year in voluntary forestry offsets generated on the Chicago Climate Exchange, from 200,000 tonnes to 7 million CO2e. While an overall increase in interest in carbon offsetting in the US was undoubtedly a factor, the CCX also attributes the growth to a beefing up of its forestry offsets program; more forestry activities allowed (REDD, afforestation, improved forest management, long-lived wood products), more verifiers and an expanded oversight committee.
The study found 63 VER transactions in the forestry sector in 2008, generating average prices of $6.30 per credit for REDD activities, $6.40 for afforestation and reforestation plantation with sustainable harvest, $7.50 for A/R for conservation only and $7.70 for improved forest management. A/R harvest plantation was the only category to see average prices decline, down 28 per cent.
Prices seen for forestry VERs so far in 2009 are lower, in line with the recession prices that have impacted across the carbon offsets market.
The State of the Voluntary Carbon Markets report was compiled by Ecosystem Marketplace and New Carbon Finance.
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