Menu
FR
search
Publications

Key elements and challenges in monitoring, certifying and financing forestry carbon projects

7 November 2018 - Climate Brief - By :

The amount of finance for forest carbon projects has never been as high as in 2015 when it reached USD 888 million (Goldstein & Ruef, 2016). In most cases, a reliable monitoring, reporting and verification (MRV) of carbon removals or emissions reductions is necessary to access most carbon payments.

After an overview of forest carbon finance, this Climate Brief presents the different options and challenges associated with forest carbon MRV.

First, projects developers face three key choices:

  • The definition of th project scope (carbon pools to be considered, geographical perimeter and the related leakages),
  • The different techniques and tools for forest carbon monitoring (field measurements, modeling or) remote sensing)
  • The baseline definition and additionality demonstration.

Despite the different tools and guidelines available to help projects developers trigger impactful mitigation action, six main technical and political challenges are identified:

  • The non-permanence risk and carbon debt: while standards provide tools (eg. buffer account, ex-ante credits) to deal with this challenge, finding the right balance between environmental integrity and project profitability remains delicate.
  • Monitoring uncertainty is often put forward as a barrier to the implementation of carbon pricing in the forestry sector. Reduce uncertainty is costly and the interest of doing so depends on whether carbon pricing is voluntary, on the importance of information asymmetry and on projects profitability.
  • The risk of windfall effects: additionnality can never 100% guaranteed. There again, striking the right balance between avoiding both the “false positives” (non-additional projects getting registered) and the “false negatives” (additional projects that are shut out by the cost and risk of the additionnality demonstration) is delicate.
  • Verification costs: verification can weight up to half the MRV costs and cannot usually be internalized.
  • Low carbon prices: typical MRV costs for forestry projects are around 0.15-1.4 € per tCO2e which is substantial when carbon prices average around 3 € per tCO2e on voluntary markets. How to combine a robust certification with the financial viability of carbon projects in this context is challenging.
  • The double-claiming of climate action issue: the Kyoto Protocol safeguards against double-counting between countries have been adapted by some voluntary carbon standards to prevent that a private entity and a country claim the same emission reduction. This has slowed down projects implementation in Annex I countries, but several standards, including the Gold Standard, are moving towards a new paradigm for voluntary carbon markets.

Key elements and challenges in monitoring, certifying and financing forestry carbon projects Download
To learn more
  • 03/03/2023 Foreword of the week
    World Bank’s reform: almost a new pilot onboard

    After the sudden resignation of David Malpass, the World Bank’s Trump-appointed President, mid-February, Washington surprised the world again last Thursday, with the nomination of Ajay Banga, long-time Mastercard CEO, as his potential successor. Not only was the timing very rapid, but the controversial profile of the nominee also generated some sense of puzzlement. His limited […]

  • 03/01/2023
    Supporting financial institutions in developing countries in their alignment journey with climate goals

    This report co-written with NewClimate provides practical guidance for international financial institutions to support financial institutions’ alignment with the Paris Agreement goals, and to more broadly contribute to transforming local financial systems. This guidance is developed around three pillars: a harmonised alignment assessment; the alignment of financial intermediaries; and the alignment of financial systems at the national level.

  • 02/17/2023 Foreword of the week
    Climate transition plans for banks: European legislators on a razor’s edge

    The proposal for mandatory climate transition plans for banks is slowly making its way through the regulatory debate. Proposed by the European Commission and confirmed by the EU Council, this proposal has now also been taken up by the European Parliament. This obligation could be a game-changer for financial risk management and the alignment of financial flows with the transition to a low-carbon economy. It could lead banks to limit their activities in climate-damaging activities, adjust their business models, review their strategies as well as their governance and risk management procedures.

See all publications
Press contact Amélie FRITZ Head of Communication and press relations Email
Subscribe to our mailing list :
I register !
Subscribe to our newsletter
Once a week, receive all the information on climate economics
I register !
Fermer