Customer Logins

Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.

Customer Logins

Democratic Republic of the Congo calls for $100/mt forest carbon offset prices

26 April 2021 Keiron Greenhalgh

A 20-fold increase in the price of forest carbon offsets is needed to keep the world's second-largest tropical rainforest safe from farmers and loggers, according to Democratic Republic of the Congo President Felix Tshisekedi.

Speaking on Earth Day at the Leaders Summit on Climate convened by President Joe Biden, DRC's Tshisekedi said protection of the forests of the Congo Basin will require a $100/mt price for offsets, not the approximately $5/mt price he said is currently available for retention of trees across the basin's six nations — Cameroon, Central African Republic, DRC, Republic of the Congo, Equatorial Guinea, and Gabon.

Forest carbon offsets allow landowners to be compensated for making long-term commitments to storing carbon on their lands. Deforestation and forest degradation account for approximately 11% of carbon emissions, according to the UN. The Reducing Emissions From Deforestation and Forest Degradation (REDD+) program is the UN-backed scheme to protect forests, launched in 2008.

There are three major types of forest carbon projects: afforestation — the creation or reestablishment of forests; avoided conversion — for forests that are likely to be lost through agriculture or development; and improved forest management, whereby storage is increased through a rise in age or productivity.

The current price is "neither fair nor realistic," Tshisekedi said, adding that achieving carbon neutrality would not be possible without the conservation and regeneration of forests given how much CO2 they remove from the atmosphere and store.

According to OPIS by IHS Markit data, vintage 2017 through vintage 2021 voluntary REDD+ offset assessments averaged between $6.583/mt and $6.708/mt 23 April.

"Existing financial mechanisms are not sufficient to achieve the objectives of the Paris Agreement, neither in terms of their mechanisms, nor in terms of their implementation costs," Tshisekedi told the summit, adding: "A fair price for forest carbon that incorporates foregone opportunities should be at least $100/mt. It is important that the [leaders summit] accelerates the mobilization of additional financial resources and these should be substantial."

Is $1 billion/year enough?

At least some support for forest protection on an international scale is emerging. Last week saw the launch of the Lowering Emissions by Accelerating Forest (LEAF) Coalition. LEAF is a public-private initiative designed to accelerate climate action by providing "results-based finance" to countries committed to protecting their tropical forests.

The LEAF initiative aims to raise up at least $1 billion in financing annually to support emissions reductions from tropical and subtropical forest countries, which they hope will reduce and then end deforestation.

"Bringing together government and private-sector resources is a necessary step in supporting the large-scale efforts that must be mobilized to halt deforestation and begin to restore tropical and subtropical forests," said US Presidential Special Climate Envoy John Kerry in the statement unveiling LEAF.

LEAF was launched by the governments of Norway, the UK, the US, and companies such as Amazon, Airbnb, Bayer, GSK, Nestlé, and Unilever.

The initial backers expect to add more countries and companies to their venture "in the months ahead." The final list of supporters and the total financial backing will be revealed when emissions reduction purchase agreements are signed with tropical forest countries "by the end of the year," LEAF said in a statement.

Gabon seeks more support

But that may not to be enough, say some of Africa's leaders. Tshisekedi was joined in exhorting attendees of the summit to pay closer attention to the Congo Basin by Gabon President Ali Bongo Ondimba, who told the summit: "The Congo Basin, one of Earth's lungs, safely sorts billions of tons of carbon. We must be prepared to preserve it if we are to restrict global warming to 1.5 degrees" Celsius.

And Ondimba keyed in on one of Biden's 2020 campaign pledges and exhortations since assuming the mantle of leading the world's second-largest GHG emitter — the job opportunities available in combatting climate change.

"By investing in sustainable forestry, we can create a green economy that generates jobs and livelihoods whilst preserving forests — the nature-based solution to fight climate change with massive co-benefits for biodiversity and climate," said Ondimba.

Tshisekedi added that the illegal use of timber and other raw materials as well as the uncontrolled use of energy was threatening the "world's second lung." The leaders of the continent and world could improve the lives of the people living in the Congo Basin by combating corrupt activities and by implementing sustainable energy production as well as better agricultural practices, he added.

"Climate change negatively influences social and economic development, peace, and security, thus jeopardizing the wellbeing of populations and future generations," said Tshisekedi.

Between 2001 and 2020, the total area of tree cover in the DRC decreased by 8%, or 15.9 million hectares, according to Global Forest Watch, a nongovernmental agency.

The DRC plans to restore its forest cover through what Tshisekedi called an "intergenerational reforestation program" which aims to plant 1 billion trees by 2023.

Stopping the burning

Planting trees is one way to protect the rainforests; another is to stop developers and farmers burning the forests, which also cuts the amount of GHG emissions released into the atmosphere.

While fires can occur naturally, the encroachment of the cultivation of soybeans and palm oil as well as the farming of beef often leads to forested areas being cut back and burnt. Countries including Indonesia and Brazil have been in the spotlight for such practices.

Over the past couple of decades, Indonesia saw extensive forest fires and peat fires on an almost annual basis, with the smoke or haze sometimes so widespread it can be seen from space, leading to flights being cancelled, schools closing to protect the health of children, and residents being advised to stay indoors due to the pollution.

The most notorious of these occurrences came in 2015, when Indonesian forest fires — specifically on the islands of Sumatra and Kalimantan — burned from June of that year onwards and the haze blanketed large parts of Brunei, Indonesia, Malaysia, Singapore, Thailand, Vietnam, Cambodia, and the Philippines.

A study, led by experts in public health and atmospheric modeling from Harvard and Columbia universities, estimated that 91,600 people in Indonesia, 6,500 in Malaysia and 2,200 in Singapore may have died prematurely in 2015 because of exposure to fine particle pollution from the burning forests.

Daily emissions from Indonesia's fires in October 2015 exceeded the emissions from the entire US economy, according to the World Bank.

The haze of 2015 led regional governments to call on their Indonesian counterparts to crack down on "slash and burn" tactics. The Indonesian government announced it would halt drainage and development of peatland, launch a program to restore degraded peatland, and adopt a more prevention-focused approach to managing fires.

As recently as the 1960s, about 80% of Indonesia was forested, but just under half of the country's original forest cover now remains, environmental group Rainforest Action Network said.

According to fellow environmental group Greenpeace, cultivation of land for the production of palm oil continues to be one of the leading drivers of deforestation, and Indonesia is the largest producer globally of palm oil. Indonesia has the third-largest tropical forests in the world, according to Greenpeace.

Luhut Pandjaitan, Indonesia's coordinating minister for maritime affairs and investment, told the climate summit 22 April that the administration of President Joko Widodo permanently halted progress on new logging and peatland licenses in 2019.

In 2020, the deforestation rate was reduced by 82%, Pandjaitan said. In addition, there were 64,602 hectares of forest fires in July 2020, compared with around 170,000 hectares of forest fires a year earlier, he said.

Earlier in the day at the climate summit, Brazilian President Jair Bolsonaro said Brazil would achieve climate neutrality by 2050. Bolsonaro said the neutrality pledge would be achieved by measures such as eliminating illegal deforestation by 2030, "with full and prompt enforcement of the Brazilian forest code."

The pledge came after data from the Brazilian National Institute for Space Research showed 11,088 square km of the country's rainforest was denuded between August 2019 and July 2020, an increase of 9.5% year on year, and the largest amount of deforestation since 2008. Brazil is home to 60% of the Amazon, the world's largest tropical rainforest.

Bolsonaro, who took power 1 January 2019, has been the subject of pointed criticism from environmentalists for encouraging deforestation. He's accused of favoring business interests, including cattle farmers and soy producers, instead of protecting rainforests. Brazil has an estimated 214 million cattle, more than any other country. Its beef industry, worth $124 billion, accounts for 8% of the country's GDP, according to nonprofit Amnesty International.

Not everyone's on board

Using offsets has its critics though. Scott Kirby, CEO of United Airlines, told CERAWeek by IHS Markit conference attendees in early March that companies seeking to reach net-zero emissions status need to look beyond offsets. In what he described as a controversial view on offsets, Kirby said such offsets will only aggravate emissions problems rather than solve them.

"We emit 4,000 times as much carbon as we did in the pre-industrial era … but we cannot plant 4,000 times as many trees as existed during the pre-industrial era. There's simply not room on the planet. And it is too easy for a corporate executive to say I am going to write a check, check the box that I have done my part for carbon, and I am done. And if we all keep doing that, we are not going to solve the problem, which is why we are going to start talking about things beyond the carbon offsets," he said.

United is taking an alternative approach. In December 2020, the airline said it planned a "multimillion-dollar investment" in direct air capture (DAC) in order to meet a net-zero emissions pledge by 2050 while also developing sustainable aviation fuel.

The company said its DAC investment would go to 1PointFive, a partnership between Occidental Petroleum unit Oxy Low Carbon Ventures and Rusheen Capital Management seeking to build a DAC plant that would permanently sequester 1 million mt of CO2 a year.

Posted 26 April 2021 by Keiron Greenhalgh, Editor, Energy and Natural Resources Group, IHS Markit

Explore

Follow Us

Filter Sort