There are two main methods of certifying forest credits
1 . One of the methodologies focuses on the conservation of large forestry areas (REDD projects, or “reduction in emissions from deforestation and forest degradation”), which, by avoiding deforestation, avoids the emission of GHG. Indirectly, REDD projects protect the carbon stock in the forest biomass (the certification of such massive areas is more expensive, complex and time-consuming).
2 . Another methodology focuses on the certification of the carbon sequestration of the air made by the reforestation of completely devastated areas (equally important, faster to certify, but much more complex to execute - the forest is replanted as it was originally, which takes several decades). In this second method, that of reforestation, one acquires a completely devastated area of 1500 to two thousand hectares (one hectare to give an idea of a measure is more or less equivalent to a football field). This is a simpler, cheaper to certify and quick certification methodology compared to that of protecting the standing forest, but more expensive, complex and time consuming after certification due to the planting of the trees, with a high degree of difficulty.
The question of who owns the land is fundamental: it must be considered that, as they are very long-term projects, from 20 to 30 years, it is important that the manager who certifies and starts the project is there in 20 to 30 years from then. It is also essential that during the project there is no complication of disputing the ownership of the land or any legal questioning of the ownership of the credits. The credits eventually audited are registered with global registries, which are non-profit foundations that act as regulatory bodies for this market, and are responsible for the registration and certification of carbon credits. Independent environmental auditors are hired. The certifier analyzes the property and the project and verifies the validity of the property titles, whether they are formally from the project proponent, and studies the potential growth of the native forest in that deforested land. The certifier determines what type of biome originates from the area in question and checks the planting plan of the project owner for the next 20 to 30 years.
After the project is certified and validated, the manager sows native seedlings in the region. Let’s say it is an area of Atlantic Forest in Brazil for example, a biome that was almost completely devastated. The project manager sows the original species in his areas and in 20 years they have a forest (given the accelerated growth of tropical forests). In this process, the certifiers calculate pro rata the amount of credits that will be generated by the growth of the forest in that area. It is important to note that forests that are growing sequester significant amounts of CO2 from the air, as they are forming their stems, trunks and leaves, and as carbon is stored in the soil. Remember that CO2 works as the raw material in the formation of plants.
Actually, amazingly enough, it is a fallacy to say that the Amazon is the lung of the world. It would be more accurate to say that the Amazon is actually the world’s carbon stock and air conditioner, as the forest regulates the regional and global climate via its water vapor flows and currents. The reforestation projects of devastated areas would be more appropriately called the lungs of the world, as there are plants growing and sequestering a lot of carbon, which in turn is accumulating in its trunks (along with other elements such as nitrogen, hydrogen and oxygen). If someone cuts or burns that plant, these elements will be emitted into the air as greenhouse gases (CO2, methane - which is 20 to 30 times more greenhouse effect intensive than CO2). In reforestation projects, it is estimated how much the growth of the original forest over the next 20 years will sequester CO2 from the air (in the range of 7 to 10 tons of CO2 per hectare). Let’s say there are 10 tons per hectare and the project will sequester 20 thousand tonnes per year. In other words, in 20 years the project will have sequestered 400 thousand tons of carbon, generating CO2 certificates.
To say that the Amazon is the lung of the world would be to say that the Amazon sequesters carbon from the atmosphere during the day and does not return it at night, which is not entirely true. The Amazon is a mature forest. In the status quo, that is, assuming that, from one hour to the next, all deforestation and burning ends, the Amazon takes CO2 during the day via photosynthesis, but at night it returns that CO2 via the respiration of its plants.
Therefore, in the case of huge areas that aim to protect forests and certify them for carbon, the idea is to protect the CO2 stock in biomass by preventing deforestation. These projects are large areas of 150 thousand to 200 thousand hectares.
In the case of large conservation areas, the first requirement is that the area is threatened or close to the agricultural frontier. The concept here is that an area right in the middle of the Amazon is not threatened with deforestation or burning, given that humans are very far away and that it is very difficult to get there in the middle of the dense forest.
Then the project proponent has to be able to buy an area of forest larger than the city of New York on a farm that (normally) has a single continuous area and that has the indisputable property right. Well, anyone who has had some experience in agriculture and livestock in Brazil knows that finding an area with ownership rights and / or uncontested property title is something difficult and rare to find. There are usually several legal complications in determining land ownership.
Let’s say that the proponent of the project buys an area and that five other owners do not appear, that is, that the purchase process does not get stuck in court, being questioned for decades. This bidder will spend an enormous amount on an area of this magnitude. Imagine buying an area the size of the city of São Paulo in the middle of Amazonas or Acre: this area will cost around 100 dollars per hectare, that is, the total value will be 15 to 20 million dollars.
Once the land is purchased, the certification process begins, which is highly rigorous. As in the past it was not such a rigorous process, the pendulum went the other way and there is a certain exaggeration in the requirements for certification today. Ten years ago, the registries were numerous in a highly fragmented sector: there were more than 50 different voluntary registries, and since it was very cheap to certify and lack of rigor in the certification, there were many cases of fraud. There were projects that managed to certify credits in six months (which should have lasted and now takes several years). Nowadays the process is much longer and lasts three or four years, it costs from 300 to 500 thousand dollars depending on the area and the characteristics of the forest. They require 20 to 30 years of satellite imagery and various geolocation data, geological data and historical deforestation records.
With this set of data above in order, the certifier takes current images of the forest via drone or jet flight to attest to the current state of the forest. Then the forest is sampled. The certifiers determine sample areas and cut and examine trees that are representative of the entire forest. To determine the sample biomass, they study the size of the typical tree trunks in the region, and finally make a rule of three (extrapolate) to determine the number of tons of carbon in the entire forest.
Let’s say the number for a 200-thousand-hectare forest is 200 million tons. Let’s also say that the certifiers determined that in the last 20 years or 30 years, 6 percent was deforested. It is assumed for the project that, if nothing is changed or improved, 12 million of that stock of 200 million tons (6 percent of 200 = 12 million tons) will be lost in the next 30 years. If the project manager manages to lower that rate to something less, say 1 percent, the project captures the delta, between 6 and 1 percent of the 200 million, that is 10 million (the difference between 12 and 2 million tons).
The project manager requests the registration of these certificates of 10 million credits in one of the global registries, which perform an audit to verify that the Global Certification Protocols were strictly followed.
If the process is conducted correctly, the global registry allows the certification of 10 million tons on its platform. It also reserves a high percentage of these potential credits (usually 30 to 40%) to keep in a “buffer”, or a type of “guarantee fund”, so as to guarantee the ledger and permanence of credits in the case of deforestation after the project has ended. The net 6 million tons are certified in 30 years and lead to potential annual flows of roughly 200 thousand tons per year in this example. An audit is carried out every year that costs between 30 and 50 thousand dollars. This audit checks whether deforestation was greater or lower than the assumptions made for the project estimates (the baseline, or “BAU” – business as usual scenario).
If deforestation has been greater in the past year, future flows are adjusted and are smaller than originally projected. And if deforestation has been lower, the forest has been more preserved than was being stipulated, and the future flow is increased - that is, the manager is completely aligned to reduce the forest deforestation to the maximum, because she literally makes money with each hectare that she manages to avoid deforestation.
Finally, the credits, once audited, indicate that the emission of one ton of carbon equivalent was avoided in a certain year. This avoided emission becomes an asset that does not expire, since (i) one cannot change the past and since (2) the global credit buffer guarantees ledger for eventual reversion of captured carbon credits due to fires or deforestation after the end of the project.
This certificate will last until it is consumed by a carbon intensive company or individual for personal compensation. But if the project or a compensator (company or individual) holds the credit for 100 years, 100 years from now that asset will exist, and it can be sold to another company or person who wants to compensate for their own GHG emission.
Voluntary Carbon Credits are therefore dollarized and digital assets that do not expire, like crypto assets - with the advantage that carbon credits are backed by the certification and audit of the issuer’s activities, so that the forestry activity is determined to be sustainable and that the project’s activity is guaranteed to have prevented deforestation.
That certificate is therefore unquestionable and performed, even if the forest eventually disappears (as it is guaranteed by the global buffer) - the certificate guarantees that a certain quantity of GHG emission has been avoided in the past.
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