Offset Providers Ink Deal over Landmark Forest Conservation Project In Acre, Brazil

24 January 2013 | Today, Maryland-based project developer CarbonCo, LLC announced the validation of its pilot project to reduce emissions from deforestation (REDD) in Brazil’s Acre state. It also announced its first contract to deliver carbon credits to London-based The CarbonNeutral Company. Situated on 34,702 hectares of tropical rainforest, the Purus Project also supports endangered species and a range of ecosystem services – putting the “+” in its “REDD+” moniker.

The Purus Project validation is the latest in a string of headlines from Acre, which is leveraging a Verified Carbon Standard (VCS) framework to account for REDD from statewide activities – to meet the needs of California’s cap-and-trade program buyers.

The deal is a significant milestone for the forest carbon market, where daunting questions remain as to how private projects will “fit” into larger-scale state-administered REDD programs. Like, will the state receive carbon credits for all achievements in its jurisdiction, and then distribute the credits or proceeds to land owners? Will private sector project developers get credits for early projects, before knowing the rules of the game? Will the state issue rulings related to what kind of entities can buy and sell REDD credits?

The fact that Acre itself is only now exploring these questions didn’t stop CarbonCo from advancing its REDD+ project, now dually validated to the VCS and the Climate, Community and Biodiversity Standards (CCB). Brian McFarland, Carbon Project Developer for Carbonfund.org Foundation – of which CarbonCo is a subsidiary – says that the state actually offered active support for project development.

“The state of Acre helped us immensely when it came to discussing forest carbon inventories, giving guidance on how to structure the project baseline and grievance mechanisms, among a lot of other issues,” says McFarland. “Add to that the fact that they’re working with VCS and other states that could facilitate the market and purchase these credits – and it demonstrates how dedicated they are.”

The Acre program’s nascent stage also didn’t stop The CarbonNeutral Company from jumping into the ring as an early financial supporter of the project. In fact, the state’s positive signals and active engagement in market and project development propelled their investment.

“In Acre, at the state level, it’s great that things are moving forward to create a state-wide jurisdictional approach,” says Zubair Zakir, The CarbonNeutral Company’s Global Carbon Director.

“That’s certainly been a reason to feel confident about the future of the project we’re investing into and the future of the market infrastructure in Acre for allowing this project and hopefully others to flourish.”

I’ll take the bottom, you get the top…

Market participants say that regulatory risk remains the largest barrier to project development and investment in REDD countries, where an Ecosystem Marketplace report found that the volume of REDD credits contracted for delivery to voluntary buyers dropped significantly in 2011.

While risks remain even in jurisdictions like Acre, Zakir and McFarland both emphasize the importance of the state’s willingness to engage with market participants in early stage project activities – as opposed to reinventing the wheel with its state-wide REDD program. This cooperation enhanced investor confidence and ensured that, in the words of Acre’s Climate Change Institute, “The Purus Project is… fully aligned with the State’s System of Incentives for Environmental Services (the SISA).”

Zakir points out that it also gives project-level REDD+ actors an opportunity to finance and implement results-based climate action immediately, while Acre sorts out the details of its scaled-up program – thanks in part to project’s inherently shorter timelines to implementation.

“Project-level REDD activities continue to really demonstrate how deforestation can be avoided today and how carbon markets can play a pivotal role in making that possible,” he says.

California here we come… someday

McFarland foresees that credits from CarbonCo’s Acre REDD+ project – and several others in their regional pipeline – will be primarily sought by voluntary buyers for the immediate future. This includes the clients of The CarbonNeutral Companies of the world – which help corporates source offsets to meet their voluntary climate commitments.

An alternative buyers market is emerging in California, where the state’s cap and trade program is newly underway. There, regulators have signaled that emitters may one day be able to buy and surrender REDD credits to meet their GHG obligations. California has already signed MOU’s with Acre, Brazil, and Chiapas, Mexico, to support the development of such a mechanism.

McFarland admits that California’s signal was a huge impetus for the choice of project sites, and that having multiple market options would be ideal for CarbonCo’s growing pipeline – where projects are mostly of an equivalent size to Purus.

“While these credits might be more of a voluntary play right now,” he says, “once the REDD process is revealed in California, we’ve worked closely with the state to place these projects in best possible position for acceptance into a California regime.”

The Purus Project represents CarbonFund.org Foundation’s second major foray into the forest carbon space, the first being the Tensas River National Wildlife Refuge Reforestation Project – the first reforestation project in North America to be validated to both the VCS and CCB.