Double-counting: What if both Brazil and California want Acre’s REDD credits?

Carlos Klink, secretary of the climate change unit at Brazil’s environment ministry, recently told Bloomberg that Brazil would use REDD credits generated in the country to meet its own emissions targets. Where does that leave California, which is considering using REDD credits from the Brazilian state of Acre?

California adopted its climate legislation (Assembly Bill 32, or AB 32) in 2006. Jeff Conant of Friends of the Earth US has described it as “one of the most forward-thinking pieces of climate legislation in the country”, but one that is undermined by the use of carbon offsets. California launched its cap and trade scheme in 2013, but has not yet reached a decision on whether to allow REDD credits into the scheme.

The obvious problem with using REDD credits is that it would create a loophole in AB 32 allowing continued pollution in California.

California is considering REDD

On 18 November 2008, the Brazilian states of Amapá, Amazonas, Mato Grosso, and Pará were among the signatories of a Memorandum of Understanding with the U.S. state of California, aimed at future trading of REDD credits to meet California’s climate regulations.

Two years later, on 16 November 2010, the State of Acre, the State of Chiapas in Mexico, and the State of California signed another Memorandum of Understanding about REDD.

On 28 October 2015, California Air Resources Board released a White Paper about the possibilities of including REDD credits in AB 32. The Air Resources Board is accepting comments from the public about the idea of including REDD until 16 November 2015.

Brazil wants to keep its REDD credits …

Klink’s comment about Brazil not exporting its REDD credits is set out in Brazil’s Intended Nationally Determined Contribution, which was issued to the UNFCCC a month before California’s White Paper was released.

Brazil’s INDC includes the following paragraphs about carbon markets and REDD:

Use of markets: Brazil reserves its position in relation to the possible use of any market mechanisms that may be established under the Paris agreement.

Brazil emphasizes that any transfer of units resulting from mitigation outcomes achieved in the Brazilian territory will be subject to prior and formal consent by the Federal Government.

Brazil will not recognize the use by other Parties of any units resulting from mitigation outcomes achieved in the Brazilian territory that have been acquired through any mechanism, instrument or arrangement established outside the Convention, its Kyoto Protocol or its Paris agreement.

Brazil, then, will not recognise other countries’ use of REDD credits generated outide of the UNFCCC.

… to offset its own emissions

Brazil has not made this decision because it opposed the use of REDD credits to offset continued burning of fossil fuels. Brazil wants to keep any REDD credits within Brazil, in order to offset the emissions from Brazil’s expanding oil industry.

In order to generate lots of REDD credits to offset its own pollution (and, no doubt, its own continued deforestation), Brazil asks in its INDC for “adequate and predictable results-based payments” on “a continuous basis”:

Specifically concerning the forest sector, the implementation of REDD+ activities and the permanence of results achieved require the provision, on a continuous basis, of adequate and predictable results-based payments in accordance with the relevant COP decisions.

A carbon trader gets it right!

A Bloomberg article about this story includes a quotation from Louis Redshaw, founder of carbon trading firm Redshaw Advisors:

“The risk is that the carbon reductions get double counted.
[ . . . ]
“If California can find a way to make this work when Europe hasn’t, then I’d be surprised. The danger here is there may be better ways to protect forests than via markets.”

It’s not every day that REDD-Monitor agrees with a carbon trader, but in this case Redshaw is spot on. Of course, he could have added was that carbon trading doesn’t reduce emissions and that leaving fossil fuels in the ground does.

If California decides to use REDD credits from Acre to meet its climate legislations, Brazil will not recognise this use of its credits. Brazil will use the credits to offset its own emissions regardless of whether the carbon credits have already been used elsewhere. It’s a very clear illustration of the issue of double-counting. Legally, this could be an interesting battle.