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A Report by Forest Trends’ Ecosystem Marketplace

Molly Peters-Stanley, Gloria Gonzalez, and Daphne Yin

Contributors: Allie Goldstein and Kelley Hamrick

November 6, 2013 Copyright and Disclaimer:

This document was prepared and based upon information supplied by participants in a market survey conducted by Ecosystem Marketplace. Ecosystem Marketplace does not represent or warrant the accuracy, suitability, or content of the survey responses or the results of that survey as set out herein. It is the sole responsibility and obligation of the reader of this report to satisfy himself/herself as to the accuracy, suitability, and content of the information contained herein. Ecosystem Marketplace (such term taken to also include their respective affiliates, officers, directors, partners, and employees) make no warranties and shall have no liability to the reader for any inaccuracy, representation, or misrepresentation set out herein. The reader further agrees to hold Ecosystem Marketplace harmless from and against any claims, loss, or damage in connection with or arising out of any commercial decisions made on the basis of the information contained herein. The reader of this report is strongly advised not to use the content of this report in isolation, but to take the information contained herein together with other market information and to formulate his/her own views, interpretations, and opinions thereon. The reader is strongly advised to seek appropriate legal and professional advice before entering into commercial transactions.

Acknowledgments:

This report is a compilation of insights and data from a wide range of organizations across several continents. It would not be possible without the more than 200 individuals who shared valuable information about their organizations. The creation of this report has also required time, support, and review from dozens of people. They include Duncan Abel, David Antonioli, Bob Antonopolis, Rebecca Asare, Steve Baczko, Marc Baker, Elly Baroudy, Bill Barry, Marie-Claude Bourgie, David Brand, Harold Buchanan, James Bulinski, Benjamin Dappen, Peter Dewees, Roberto León Gómez Charry, Trish Chartrand, Taylor Clayton, Pedro Moura Costa, Christian del Valle, Dhanush Dinesh, Natalie Dorrenboom, Joanna Durbin, Gary Gero, Jay Gillette, Justin Glass, Mary Grady, Sylvain Goupille, MaryKate Hanlon, Buddy Hay, Joanne Hochheiser, Andres Huby, Harmke Immink, Robert Lee, Scott MacDonald, Brian McFarland, Baudouin Michel, Matt Ramlow, Camille Rebelo, Adrian Rimmer, Garrett Russo, Alessandro Riva, David Rokoss, Michael Sahm, Richard Saines, Kazuyoshi Sasaki, Mirko Serkovic, Daniela Spießmann, Almir Narayamoga Suruí, Mia Swainson, Naomi Swickard, Anne Thiel, Gareth Turner, Pieter van Midwoud, Mariama Vendramini, Chandler Van Voorhis, Jun Watanabe, Sean Weaver, Hans Wegner, Justin Whalen, Peter Weir, Vicky West, Charlie Williams, Gareth Wishart, Zubair Zakir, Christopher Zink, and Steve Zwick.

A special thank you also to Michael Jenkins for his guidance and the staff at Forest Trends and Forest Trends’ Ecosystem Marketplace for their support.

Cover, layout, and graphics by Eszter Szöcs of Visilio Design (www.visilio.com). design v Executive Summary e or 70% of 2 e). 2 O e) and 92% of value ($198 million), 2 e) but fell from the prior year, while State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State 2 e of these sales were from projects seeking projects from were sales these of e 2 e of offsets transacted from forest carbon projects, carbon forest from transacted offsets of e 2 land- use footprint and associated risks. use footprint and associated risks. land- national, in regulations in California, China, and the inclusion of forestry offsets, domestic and inter- the like organizations as and solutions; REDD regional resilient private support for carbon-managed forests, Project be gan to shed new light on the private sector’s sector’s private the on light new shed to gan be Project behavior change among producers. behavior change offsets came as public decision-makers weighed Early-stage activities, in particular, tted benefi from which speaks to mounting dence confi in projects’ ability to deliver verifi ed carbon assets and incentivize and assets carbon ed verifi deliver to ability Australia; as donor governments initiated support for he second-highest demand ever attributed to forestry to attributed ever demand second-highest The Tropical Forest Alliance and the Carbon Disclosure Executive SummaryExecutive e) of carbon offsets from 2 e, or 57% of all market activity. Around 12.2 MtCO 12.2 Around activity. market all of 57% or e, e, a 9% increase from 2011. Market value reached $216 million in 2012, 8% shy of 2011’s 2 2 market activity. Two out of every three offsets were sold to multinational corporations. Businesses BOX 1: SUMMARY OF KEY REPORT 1: SUMMARY FINDINGS, 2012 BOX record $237 million. Forestry offsets’ average price fell slightly to $7.8/tonne (tC record $237 million. Forestry offsets’ representing 162 projects responded in 2013, including 62 projects never before reported. representing 162 projects responded the Global South transacted half of overall market share. MtCO Projects seeking or cation achieving to certifi the ed Carbon Verifi Standard (VCS) transacted 15.7 MtCO North American projects generated one quarter of all offsets transacted, while project developers in REDD offset demand grew for the fi rst time since the project type’s all-time high in 2010. REDD offset demand grew for the fi Demand for offsets from A/R projects remained high (8.6 MtCO were motivated by offset-inclusive corporate social responsibility (CSR) activities, or to “demonstrate sought forestry offsets to prepare for compliance carbon markets. sought forestry offsets to prepare for dual certifi cation to VCS and the Climate, Community and Biodiversity Standards (CCB Standards). cation to VCS and the Climate, dual certifi valued at an estimated $0.9 billion over time from the carbon management of 26.5 million hectares. as corporate buyers renewed or pursued new climate targets, while buyers in California and Australia and California in buyers while targets, climate new pursued or renewed buyers corporate as climate leadership” in their industry or to send signals to regulators. Over time, this report series has tracked 513 forest and land-use carbon projects. Developers Voluntary offset buyers drove 95% of all market activity (27 MtCO The private sector remained the largest source of demand, responsible for 19.7 MtCO This report series has tracked a cumulative 134 MtCO 134 cumulative a tracked has series report This The global markets for offsets from agriculture, forestry, and other land-use projects transacted 28 The forest carbon markets extended project development to 58 countries, up from 54 locations in 2011. in locations 54 from up countries, 58 to development project extended markets carbon forest The

• • • • • • • • million forested hec tares by purchasing a near-record near-record a purchasing by tares hec forested million land (A/R), reduce emissions from deforestation and forest degradation (REDD), and introduce sustainable sustainable introduce and (REDD), degradation forest reinforced the environmental, economic, and tstarian of egali- benefi sustainable forestry and use land forestry projects in 2012, valued at $216 million. forestry projects in the management, conservation or expansion of 26.5 improve forest management (IFM), afforest or reforest reforest or afforest (IFM), management forest improve Healthy forests are a key defense against the natural agri cultural or agroforestry practices. agri as they injected millions of dollars into projects that and socio-economic impacts of climate change. Re- cog nizing this, businesses around the world fi nanced nanced nizing this, businesses around the world fi cog In 2012, offset buyers from individuals to corporations corporations to individuals from buyers offset 2012, In 28 million tonnes (MtCO Executive Summary vi These and other fi ndings are described in this fourth this fi in other described and are These ndings fa- that registries alongside standards, same The State CarbonMarkets oftheForest 2013 iiae fst wesi, utee faeok and frameworks furthered ownership, offset cilitate dto o the of edition early as least year – but more so in 2013. The year was rpld ih h dcso o wehr n hw to how and whether of decision the with grappled sustainable rice cultivation, and soil carbon sequest- carbon soil and cultivation, rice sustainable eid h see, eut-ae cro account- carbon results-based scenes, the Behind prac titioners, offset buyers, and the projects they they projects how the throughout and buyers, demonstrates offset prac which titioners, series, port voluntary among demand offset buyers. still-limited brave to or nert it gvrmn faeok o markets, or frameworks government into integrate approaches new approve to continued standards ing for progam development and emissions reductions as of Some fibilateral into tap to began governments these internationally. nance programs REDD regional ration, amongotheractivities. restoration, wetlands of evaluation technical the for doors opening reductions, emissions land-based to o wtot t calne, oee, s developers as however, challenges, its without not ehdlge t spot uidcin pursu ing jurisdictions support to methodologies Notes: Basedon28MtCO America Figure 1:ResponseRatebyCountry,TransactedVolumeDevelopers’HeadquartersRegion, 3.8 Mt Latin State oftheForestCarbon Marketsre- Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2013. America 2 8.5 Mt North North e intransactionsreportedby165forestcarbonoffsetsprojectdevelopersandretailers. and MarketSharebyDevelopers’Profi tStatus Map key(Responserate): Graph key(Marketsharebyprofitstatus): For-Profit /PrivateSector A total of 162 agriculture, forest, or land-use (AFOLU) land-use or forest, agriculture, 162 of total A Analysis is also informed by project activities reported contributed one-third (50) of survey responses, from responses, survey of (50) one-third contributed eind o rc tascin o ofes generated offsets of transactions track to designed sup port covered new ground in 2013 in the race race the in 2013 in ground new covered sup port sented in our survey (48), followed by 37 Europe-based what’s required to keep economies and ecosystems ecosystems and economies keep to required what’s world, including 62 projects reported for the fithe for reported projects 62 including time world, rst rjcs ee eotd i or lbl nul survey annual global our via reported were projects North American developers were most heavily repre- heavily most were developers American North raiain haqatrd n ai Aeia (30), America Latin in headquartered organizations in balance. in thisyear’ssurvey. Marketplace Ecosystem time, Over years. previous in in theAFOLUsectors. to close the gap between what’s available and and available what’s between gap the close to from projects that sequester or avoid carbon emissions respondents. Practitioners from develop from Practitioners countries respondents. ing Methodology has tracked 513 unique AFOLU projects around the around projects AFOLU unique 513 tracked has Europe 7.5 Mt <1 Mt Africa 1+ Not-for-Profit /NGO 5+ 10+ Oceania 3.5 Mt 20+ Public Sector/Government 2.9 Mt Asia vii Executive Summary e 2 e from 2 $9.8 $7.6 $7.8 $7.5 $7.7 $8.2 $7.9 $1.1 2012 $10.5 $13.3 $25.3 Average Price - - $7.2 $9.2 $9.2 $8.1 $3.9 2011 $10.3 $19.7 $8.1 M $12.1 M e or 70% of sacted offsets tran 2 2012 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State $57 M $12 M $38 M $1.9 M $0.6 M $148 M $216 M $137 M $198 M $18.1 M $15.6 M e in offsets contracted from forest carbon 2 e in 2011. 2 1 Value - - 2011 of every three offsets Buyers: corporations Multinational out transacted two Forestry offsets’ average price fell to $7.8/tCO re mainder mainder were re sought by businesses complying mained the largest pool of re buyers, responsible for reached $216 million in 2012, 8% shy of 2011’s record 2011’s of shy 8% 2012, in million $216 reached for-profi t entities acting voluntarily in response to – or for-profi in spite of – weak or uncertain regulatory climates. in spite of – weak Much of this value was contributed by hundreds of in 2012, a cant signifi increase from 12.3 MtCO in 2011. offset markets, where value grew 7% to $198 million. projects, valued at an estimated $0.9 billion over time. time. over billion $0.9 estimated an at valued projects, with or preparing for regulation. The private sector $9.2/tCO $237 million. Most value was derived from voluntary at least 19.7 MtCO 2012 were sold to purely voluntary buyers, while the All told, this report series has tracked a cumulative The majority (71%) of forestry offsets transacted in e overall market value of forest carbon offset demand demand offset carbon forest of value market overall The 134 MtCO $13 M $23 M $29 M $172 M $237 M $143 M $185 M $51.5 M $54.7 M 1 M 28 M 22 M 27 M 2012 6.3 M 2.9 M 1.5 M 0.2 M 0.5 M 0.6 M 22.3 M and Average Prices, All Markets Volume - - e in transactions reported by 165 forest carbon offsets project developers and retailers. 2011 21 M 7.3 M 4.9 M 1.6 M 5.9 M 1.5 M 2 16.7 M 25.6 M 18.3 M e, a 9% increase from 2011. 2 . Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013 e), as corporate buyers sought offsets 2 Table 1: Comparison of 2011 and 2012 Forest Carbon Markets’ Transaction Volumes, Values, 1: Comparison of 2011 and 2012 Forest Carbon Markets’ Transaction Table Notes: Based on 28 MtCO Voluntary OTC California / WCI Grand Total Secondary Market Compliance Total MARKET* Primary Market Voluntary Total CDM / JI Australia CFI Other NZ ETS *See Acronyms list for explanation of market abbreviations. Totals in this chart may not add up perfectly due to rounding. Not all survey respondents reported a buyer. Thus, the private sector transacted 97% of offsets for which respondents nears record highs Market overview:Market Demand for forest carbon offsets from forestry to renew or pursue new climate targets from offsets A/R for Demand compliance. for prepare to or reductions, emissions ed certifi (temporary CDM the tCERs) fell by 91%, as buyers preparing for the end transacted 28 MtCO response rate distribution by country and profi t status. status. t profi and country by distribution rate response positive regulatory signals by seeking AFOLU offsets of the rstKyoto phaseProtocol’s hadfi secured their . future the in or immediately occur may which payment, Clean Development Mechanism – CDM) and voluntary and CDM) – Mechanism Development Clean desired volumes by the start of 2012. demand for forest carbon offsets. We consider and buyers in California and Australia responded to and buyers agree to the terms of offset delivery and In 2012, the global markets for AFOLU sets off (27 MtCO reported a buyer, OR 70% of all offsets transacted in 2012 - including those for which the buyer is unknown. 1 Voluntary buyers drove 95% of all market activity Asia (12), and Africa (8). Figure 1 illustrates regional This report tracks compliance carbon markets (e.g., the (e.g., markets carbon compliance tracks report This “transactions” to occur at the point that suppliers viii Executive Summary h pbi sco – any ainl oenet in governments national mainly – sector public The mrc, ai Aeia ad cai – purchased – Oceania and America, Latin America, State CarbonMarkets oftheForest 2013 $430,000 worth (or 2%) of offsets transacted in 2012, in transacted offsets of 2%) (or worth $430,000 Europe and state or provincial governments in North in governments provincial or state and Europe MARKET SHAREBY BUYERMOTIVATION (%SHARE) MARKET SHARE BY BUYER TYPE (%SHARE) MARKET SHAREBY BUYERTYPE (%SHARE) MARKET SHAREBY BUYERSECTOR MtCO2e 100 120 140 160 180 200 20 40 60 80 Offset retailers Offset 0 Resale, pre-compliance 20 Notes: Basedondatareportedby513AFOLUprojectsandcountlessoffsetsuppliersovereightyears. Pre-2006 27 $82 6 Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2013. Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2013. Figure 2:CumulativeForestryOffsetTransactionVolumeandValue,AllMarkets 2006 $103 Notes: Basedon213buyertypes asdescribedbysurveyrespondents. 11 Figure 3:MarketSharebyBuyerSector,Type,andMotivation and forestry Agriculture Multinational corporations 17 67 2007 $143 Corporate social Corporate 19 responsibility 23 16 Energy 2008 $180 26 V olume Government program. on rm 8 ls ya de o elnn demand declining to due year last 18% from down od no rts Clmi’ (C Cro Neutral Carbon (BC) Columbia’s British into sold o tEs n bcue ee frsr ofes were offsets forestry fewer because and tCERs for Transportation climate leadership Communication/Information 2009 $267 11 48 Demonstrate Retail market product V 20 alue Food and Food beverage 2010 $444 8 Tourism 80 Private sector, unspecified 12 4 pre-compliance 14 Direct Direct 4 2011 $681 106 Subnational governments (1%) Small- to medium- sized enterprises 3 National governmentsNational (1%) Conservation NGOs(0.5%) Conservation NGOs, unspecified (0.2%) NGOs, unspecified 12 Climate-driven mission 2 2 Individuals (0.3%) $897 2 voluntary 2012 12 134 PR/Branding Resale, Finance/Insurance Manufacturing Events/Entertainment 12 Other Domestic 6 corps $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1000 2 1

$ Million ix Executive Summary 8.6 5.1 5.7 2012 7.4 14 4.2 2011 e). 2 0.1 5.8 2.8 19.5 2010 e) but fell from the prior year, as 2 e of REDD offsets were transacted in 2 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State e vs. $8.5/tCO 2 0.6 8.8 9 1.8 2009 interest IFM, agriculture in methodologies, and locations emerged in response to response in emerged locations and methodologies, Project type: REDD rebounds while new markets drive drive markets ProjectREDD rebounds type: new while high (8.6 MtCO to carbon offset projects is fairly straightforward. In type’s all-time high in 2010, as projects matured and the volume of available offsets continued to grow. the sector did not see a repeat of the cant reported in 2011. signifi Markets for forest carbon offsets have evolved at plentiful supplies and earlier-stage investments led to breakneck speed. Again in 2012, new project types, signals. buyer and policy-maker outpaced market activity from other project activities, both Latin America (80%) and Africa (70%), as large Historically, demand for offsets from A/R projects has REDD projects were the dominant activity tracked in REDD projects came to market from both regions in Sharing the stage with A/R projects, REDD offset slightly lower average prices than the previous year demand grew slightly for the fi rst time since the project the since time rst fi the for slightly grew demand While 8.6 MtCO as the translation from philanthropic tree-planting compliance demand from Kyoto member countries ($7.8/tCO 2012 (+16%), their value fell to $70 million (-20%), as 2012, transactions reported for A/R projects remained projects A/R for reported transactions 2012, 0.1 2 1 3.3 2008 including 180 observations in 2013. REDD A/R IFM Agriculture/Agroforestry 3.5 1.2 0.5 2007 e. These top buyer sectors 2 4.9 0.02 2006 Figure 4: Transacted Offset Volumes by Project Type, All Markets, Historical Figure 4: Transacted Offset Volumes . Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013 e to resell to their clients. e to resell 2 Notes: Based on data reported by 513 AFOLU projects and countless offset suppliers over eight years, 1.6 3.5 e-2006 Pr 8.0 6.0 4.0 2.0 0.0

20.0 18.0 16.0 14.0 12.0 10.0

2 2 e e MtCO MtCO leadership” within their industry and/or in the absence absence the in and/or industry their within leadership” from developed regions, where EU-based corporates in 2012, purchasing over half of all offsets associated proportion of offsets developed from projects in Africa in projects from developed offsets of proportion of strong national climate policies. Private sector buyers industries and interests. Carbon offset retailers were represented an array of based ecosystem services (e.g., clean water) for their forestry in invested some thus products, or operations offsets out of recognition that their business models with a buyer. EU buyers transacted the largest were the largest source of demand for forestry offsets was resale to voluntary or future compliance end- users. Businesses seeking offsets for purely voluntary Corporate Social Responsibility (CSR) commitments. depend on c place-specifi resources and forest- natural infrastructure. depend on healthy end use were primarily motivated by offset-inclusive and Asia. chose forestry offsets to “demonstrate climate and beverage, and tourism sectors collectively pur- again the single largest source of demand, purchasing purchasing demand, of source largest single the again chased another 9.7 MtCO Another cant signifi proportion of voluntary buyers 7.2 MtCO The vast majority of tonnes (99%) were sold to buyers The most common driver of offset purchases in 2012 The energy, agriculture/forestry, transportation, food Executive Summary x gooety n ar-etr fst rjcs have projects offset agri-sector and Agroforestry State CarbonMarkets oftheForest 2013 2 Colombia, Ecuador, Ghana,Liberia,Tanzania, andVietnam. (“co-benefi unprecedented saw combination This ts”). Offsets from IFM activities have climbed in popularity, in climbed have activities IFM from Offsets compliance carbon markets. In 2012, IFM transactions demand in2012,underpinning12.2MtCO sought by both voluntary buyers and those positioning will pursue certifi cation to the VCS and CCB Standards were mostly sourced from projects implementing no- implementing projects from sourced mostly were rga. goig ubr f akt participants market of number growing A program. increased 23%to5.1MtCO ht eiy h dlvr o adtoa poet benefi project ts additional of delivery the verify that or achieved have projects these of All years. recent h lgc Ciao lmt Ecag (C) offset (CCX) Exchange Climate Chicago legacy the till/low-till and other land management practices under carbon the to offsets few precious provided typically hmevs o el r urne frsr ofes into offsets forestry surrender or sell to themselves markets. In 2013, offsets transacted in this category this in transacted offsets 2013, In markets. Notes: Basedonvalueassociated withallyearsof“Stateof”forestcarbonmarkettrackingand REDD fi nancedatasourced Asoffall2013,REDDX(reddx.forest-trends.org)has reportedREDDfi nancecommittedand disbursedtoBrazil, $0.1M+ Source: ForestTrends’Ecosystem Marketplace.StateoftheForestCarbonMarkets 2013. Conservation via Private Offsetting Conservation Forest Millions of$Supporting Figure 5:ComparisonofProject-andCountry-levelForestFinance,AllYears 2 e. $1M+ from reddx.forest-trends.org, as ofOctober2013. 2 e. Countries hostingforestcarbonprojects(2012survey) $10M+ Financing Committed Financing Millions of$REDD Trends’ REDD Expenditures Tracking Project (REDDX) n eet er, akt bevr hv predicted have observers market years, recent In n ivsos r een te etr o is strong its for sector the eyeing are investors and deforestation. oprd o h $. blin n au atiue to attributed value in billion $0.9 the to Compared seven countriesaloneinthelastfewyears. were right. would dwarf the millions of dollars that private actors uies ae n cmlmnay is o avoided to ties complementary and case business themes in2012 eot ta oe $ blin a be cmitd to committed been has billion $1 over that reports Forest time, over transactions offset carbon forest countries developing in strategies REDD support to governments country ﬂdonor funds from that owing have voluntarily channeled to forestry projects. They projects. forestry to channeled voluntarily have key and“nesting” Donorengagement REDD indepth: $50M+ Financing Disbursed Financing Millions of$REDD $100M+ 2 xi Executive Summary e transacted. 2 100,000+ Asia 4.6 Mt 6.2 Mt Oceania 50,000+ State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State 10,000+ SALM / Agro-forestry 100+ management of 26.5 million ha management of 26.5 million hectares (ha) in 2012 – around 43% of the total the of 43% around – 2012 in (ha) hectares million Locations and land area: Carbon financeLocations and supports larger nance pools notof availabledonor tofi stand- land area of Ecuador. their private projects to access them grant might so doing that recognizing within a regional program, the largest impact on forested land, with 17 million ha ha million 17 with land, forested on impact largest the payments. Democratic Republic of the Congo (DRC) or the total supply chains via jurisdictional results-based REDD Carbon nance fi reached projects impacting 11.3 development according to our survey. This land attentive to and engaged in talks about “nesting” alone projects. area is comparable to the entire forested area of the associated with REDD projects that continue to have 26.5 million ha that are currently under forest carbon Thus, this year’s survey respondents were more The majority of carbon-managed land area is REDD IFM <1 Mt Europe Africa 3.1 Mt 3.1 A / R Graph key (market share by project type): Map key (hectares): countries have (Total Hectares by Country and % Share) North 6.7 Mt America Latin 6.2 Mt America . Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013 Notes: Based on responses associated with 26.5 million hectares of carbon project area and 27 MtCO new phase in REDD nance, fi however, seeing the Forest Carbon Partnership Facility (FCPF) agree to the Tropical Forest Alliance could pursue sustainable to maintain their scale. The year 2013 may herald a Many hope that such regional REDD programs, which public and private interests in AFOLU. For example, REDD in Costa Rica. primary agenda-setters. In 2012, pilot taking in exist gaps major that meaning REDD, public of sector level. projects to the next which are unaware of how to tap into bilateral REDD some market participants theorize that future parties to parties future that theorize participants market some Consistent cient but demand insuffi for REDD offsets Up to now, partners in X REDD fi nance – raises doubtsfi about carbon projects’ ability fi nance was limited to preparation for the next phase fi described described donor governments, rather than recipient enable traditional projects, will be the tie that binds are administered by the public sector but theoretically a $63-million results-based purchase agreement for already coming to market from projects – many of countries countries or their forest communities, as REDD’s Figure 6: Hectares Impacted by Country Location; Total Regional Transaction Volume and Share by Project Type Project by Share and Volume Transaction Regional Total Location; Country by Impacted Hectares 6: Figure xii Executive Summary State CarbonMarkets oftheForest 2013 2011. New projects were identifi ed in both developing In 2012, the forest carbon markets extended project extended markets carbon forest the 2012, In and developedregions. nte 82 ilo h, F poet sw >100% a saw projects IFM ha, million 8.2 another the double is 2012 in reforestation or afforestation by impacted ha million 1.2 the so, Even overall. area development to 58 countries, up from 54 locations in locations 54 from up countries, 58 to development several millionhectares. u . mlin a eotd n rvos er. Spanning years. previous in reported ha million 0.6 REDD projects to transact the market’s largest volume ot Aeia poet gnrtd n qatr (6.7 quarter one generated projects American North of offsets – but from a signifi cantly smaller project signifi smaller a cantly from but – offsets of r opyn wt a opine abn akt in market carbon compliance a with complying or MtCO increase in land under management – owing largely owing – management under land in increase to a few signifi cantly sized IFM projects impacting projects IFM signifi sized few cantly a to hs oue a suh b byr peaig for preparing buyers by sought was volume this Notes: Basedonresponsesrepresenting 81projects.Respondentswereabletoselectmultiple categoriesofengagement, nder management. A/R project developers tied with tied developers project A/R management. nder Direct politicaladvocacyDirect groups vulnerable/marginalized Targeted to benefits women and grievanceFormal mechanism redress project Community-led Consent process Free, andInformed Formal Prior to community payments Direct In-kind livelihood benefits employmentDirect and monitoring Social impacts andriskassessment participation Capacity buildingfor community to localstakeholders disseminated information Project 2 ) f fst tasce i 21. ny 7 of 27% Only 2012. in transacted offsets of e) Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2013. Figure 7:Project-levelCommunityEngagement,bytheNumbers,2012 and projectcountsarerounded tothenearest“5”. Africa. Quite the opposite was true for offsets from projects from offsets for true was opposite the Quite countless buyertypes. an Australian carbon price, pre-compliance dominated California, British Columbia, or Alberta. The remainder stage projects with multiple revenue streams which streams revenue multiple with projects stage varied region each in Performance 2012. in share were more abundant in Latin America and less so in so less and America Latin in abundant more were non-AFOLU from pricing competitive weathered a sl fo a i o al FL poet ye to types project AFOLU all of mix a from sold was buyers – leaning toward support for smaller, earlier- smaller, for support toward leaning – buyers voluntary to available offsets forestry of types the by offset typestotransacthalfoftheoverallmarket offsets. Despite the slow start and uncertain future of future uncertain and start slow the Despite offsets. n e Zaad n Asrla wee developers where Australia, and Zealand New in the regionalmarket. rnatd h scn-ags vlm o AFOLU of volume second-largest the transacted oet abn rjcs n h dvlpn world developing the in projects carbon Forest One treerepresents5projects % Share and Count of Projects andCountofProjects % Share Engaging with Communities, Engaging % Share and Count of Projects andCountofProjects % Share Engaging withCommunities, Engaging Africa, Asia, 16 13 REDD, by Type Project IFM, 9 by Region 39 America, Nor America, 4 Latin th 39 A/R, 25 Oceania, 2 Executive Summary xiii Climate Action Reserve California Protocols Internal / Proprietary Pacific Carbon Standard Clean Development Mechanism ISO-14064 Verified Carbon Standard Chicago Climate Exchange Carbon Farming Initiative State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State e in 2012. FPIC guidelines acknowledge e was transacted from projects using an 2 2 d; 2% y; 1% ivo; 1% manent est Sink Panda Carbon and standards report – overall record use Project standards: – and CCB Standards VCS facing REDD projects also tracked in this survey – to develop a REDD project, and verify and transact from relevant communities – 19 of which transacted forestry and other development projects sited on internal standard, making 2012 a watershed year information information to community employment to identifying in 2012, when 98% of transacted offsets were (or projects (39) were based in Latin of America, which made some up the large number of community- offsets. obtain Free, Prior and Informed Consent (FPIC) Rights of Indigenous Peoples, adopted in 2007, 0.4 MtCO 9.3 MtCO Suruí were the rst world’s indigenous fi community was fi rstwas outlined fi within the UN Declaration on the development projects worldwide. also 39 projects. In 2013, Latin America’s Paiter as community-led projects. Just over half of these and has since been applied to major infrastructure aimed to be) ed certifi to a project standard. Only communities, communities, ranging from disclosure of project communities’ rights to grant or withhold consent to collective or customary lands. The concept of FPIC carbon offsets, project standards raised the bar In both voluntary and compliance markets for forest At least 32 projects managed a formal process to American J-VER; <1% Per For Registr Initiative; 1% Plan V Standar CarbonFix; <1% Woodland Carbon Code; <1% e were 2 2% 2% 2% 2% 2% 5% 4% communities – can become 10% Notes: Based on 628 observations from 357 reported projects or secondary transactions. . Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013 Figure 8: Market Share by Standard/Certifi cation Type, All Markets, 2012 (% Share) Figure 8: Market Share by Standard/Certifi 57% e of offsets. 14% 2 age of consent management. more easily determined on private land. Partly for this Land tenure and communities: Forest carbon reaches least common arrangements in terms of the number reported some level of engagement with forest transacted from 13.7 million ha under carbon tied to European buyers’ greater comfort with Asian transactions. the legal structure that determines how lands can be reason, more than 50% of forestry projects tracked in Projects with customary or collective land tenure proportion of land area also or falls customary under ownership, collective where 9.2 MtCO project developers reported market growth in 2012, large-scale few a and – CDM the of legacy a – projects of projects utilizing concessions, but these projects Resolving project-area issues around land tenure – used by individuals and generated nearly $53 million from the transaction of arrangements reported the highest value overall at market nearly $70 million, globally. The largest a barrier to project cation, certifi but is (typically) Government or private land-use concessions were the the were concessions land-use private or Government 2012 were developed on private lands. 2012 were developed on private lands. A total of 74 projects that transacted offsets in 2012 Asia was the only region in the Global South where 7.3 MtCO xiv Executive Summary vrl, 71 MtCO 17.1 Overall, carbon projects’climateandcommunityimpacts. a certifi cation program like the Forest Stewardship Stewardship the Forest like program certifi cation a dual certifi cation to both VCS and the CCB Standards. oi-cnmc eeit t te C Sadrs orto CCB Standards benefi the socio-economic to ts perienced a boost in market share, transacting 15.7 transacting share, market in boost a perienced MtCO rjcs civn o seig C apoa ex- MtCO approval VCS seeking or achieving Projects State CarbonMarkets oftheForest 2013 that certifi ed their additional environmental and/or and/or environmental additional their certifi ed that o mauig rprig ad eiyn (R) forest (MRV) verifying and reporting, measuring, for MtCO e Figure 9:MarketSharebyCo-benefi tsorProjectArea

2 100M Notes: Basedon628observationsfrom357reported 11% 10M 20M 30M 40M 50M 60M 70M 80M 90M Source: ForestTrends’EcosystemMarketplace. 0 2 2 10% o ti vlm ws rm rjcs pursuing projects from was volume this of e 12.2 Around activity. market all of 57% or e,

Pr State oftheForestCarbonMarkets2013. e-2006 Notes: Basedonpredictionsprovided by97surveyrespondents.*Estimatedannualissuancebased on projects orsecondarytransactions. 7% 2012 surveypredictions 2013surveypredictions Estimated annualissuance* Historicaltransactionvolumegrowth rate(Projection) 1%

2006 Source: Forest Trends’ EcosystemMarketplace. StateoftheForest CarbonMarkets2013. <1% Certifi cation,2012 2 e was transacted from projects projects from transacted was e

2007 71% Figure 10:ProjectDeveloperPredictions,AllMarkets,2011-2012

2008 Fair Trade+VCS FSC only+VCS CCB +VCS CCB +FSCVCS FSC +Other 2009 CCB +Other

2010 developer-reported ranges.

2011

2012 “guesstimate” market size for 2012 and future years. future and 2012 for size market “guesstimate” 2012. Only 2% of transacted offsets used California’s used offsets transacted of 2% Only 2012. cations like FSC, Fairtrade, and Rainforest Alliance Alliance Rainforest and Fairtrade, FSC, like cations atrd ut % f h mre, s h California the as market, carbon market awaited clear the guidelines for the state’s of 5% just captured sihl hge pie s rsl. h oc energy- once The result. a as price higher slightly a oue f oet abn fst ise ( MtCO (8 issued offsets carbon forest of volume combined (ACR), Registry Carbon American and eco-certifi ed forest products. These offsets received received offsets These products. eco-certifi forest ed and/or retired(2.6MtCO With the benefi t of hindsight and already some insight oni (S) r arrd lbl Ln ae certifi - area Land label. Fairtrade or (FSC) Council tnad, h Ciae cin eev (CAR) Reserve Action Climate the standards, Standard and partnered with both FSC and Fairtrade Fairtrade and FSC both with partnered and Standard eitis mawie rpre te largest-ever the reported meanwhile, Registries, programs are not formally “linked” to a carbon carbon a to due fi sustainability “linked” indicate nancial can formally but project not are programs place-specifi c methodologies represented 28% of represented methodologies place-specifi c late in program state’s the for registries project offset CarbonFix the acquired Standard Gold oriented rmrl (u nt niey Nrh America-facing North entirely) not (but Primarily in 2012. no 03s efrac, e se sples to suppliers asked we performance, 2013’s into to the complementary revenues derived from other other from derived revenues complementary the to transactions, valuedat$60million. other and These protocols. forestry regulation-based dubbed were Both offsets. compliance of treatment iue 0 hw ta, t es fr h peiu and previous the for least at that, shows 10 Figure Developer New predictions: new ground, challenges

2013

2014

2015

2016 2 e) in2012.

2017

2018

2019

2020 58 M 80 M 93 M 2 e) xv Executive Summary

grow 5-year pipeline $ 10.7 B $ 10.7 Value of developers’ Value of developers’ State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State to fully support existing projects $ 1.1 - 2.3 B - $ 1.1 Developer estimates Developer estimates market growth ultimately hinges on regulatory drivers. rate offset portfolios in their favor, courting brands like like brands courting favor, their in portfolios offset rate their share, developers are positioning incentive forest project standards, developers, registries, resilience and innovation that tomorrow’s markets. is already seeding offset market was largely stable as a result. To payments to AFOLU projects to enhance supply- But as market participants will admit, cant signifi eBay, PUMA, and Microsoft. Last year, the forestry emerging regional frameworks; experimenting with analysts, consultants, and community stakeholders commodities; and formalizing community participation community formalizing and commodities; carbon management. continue to break new ground in 2013 – cultivating chain security and producer relationships. In the quest to remain relevant to funders of all kinds, Thus, developers are integrating project plans with – many in hopes of tapping into bilateral funds for forest for funds bilateral into tapping of hopes in many – “stacking” forest carbon assets onto other ed certifi e 2 e of e of e in in e 2 2 $ 280 M 2012 value if developers had received desired price $ 236 M offset portfolio Value of unsold e by 2020). 2 State of the Forest Carbon Markets 2013. Ecosystem Marketplace. State of the Forest Carbon Source: Forest Trends’ Table 2: Various Estimates of Market Value and Future Needs, 2013 and Beyond Future Needs, of Market Value and Estimates Table 2: Various $ 216 M $ 216 ACTUAL 2012 market value: 2012 market value: millions to billions of dollars in this decade. Up to the respondents predicted 9% growth. Both estimates our actual fi ndings.our Respondentsactual infi both years also project that the market will transact 35 MtCO in 2012 – worth an additional $236 million if they had been successful. They also expect to reduce another Developers were unable to fi nd a buyer for 30 MtCO 30 for buyer a nd fi to unable were Developers Beyond 2013, this year’s survey respondents predict which is from REDD projects. anticipated last year’s market size within 1 MtCO are cantlyslightly smallerto thansignifi if the market an average annual growth rate of 13%, while 2012 current years, both 2012 and 2013 survey respondents respondents survey 2013 and 2012 both years, current continued to grow according to its historical rate challenge, 2012’s forestry practitioners tipped cor po- challenge, 2012’s forestry practitioners tipped cor Overall, estimates of market need range widely, from (reaching 93 MtCO 2013. 2013. 1.4 billion tonnes over the ve next years fi – 93% of xvi Executive Summary State CarbonMarkets oftheForest 2013 transacted tonnes retired 9 1.5. Supplierprofi tstatus:Governments’shareshrinksasprivatesectorstepsup 1.4. Supplychain:Secondarymarketgrowsagain,butstilladeveloper’sworld transactedtonnesretired 1.3. Offsetstageandretirement:Almosttwo-thirdsofoffsetstransactedpre-verifi 1.2. Marketvalue:Valueandpricedecline,lessextremethaninotheroffsetmarkets 1.1. Marketvolumes:Forestryoffsetdemandup9%in2012 Markets in20131. CarbonOffset Forest Overview: Frequently AskedMethodology: Questions Introduction andGlossary Acronym Executive Summary 5.4. Contract type: Two-thirdsofpayments occurredup-frontin2012 5.3. Timetomarket:Thinking inyears 5.2. Sourcesofprojectfi nance:Theequityfoundation 5.1. Projectneeds:Pricing thelastresort Finance 5. Project 4.7. Landtenureandcommunities:Forestcarbonreaches ageofconsent 4.6. Treeplantingandforestmanagementactivities: Goingnative 4.5. REDDproject“nesting”:JNRadvancesthrough progressingpilots 4.4. REDDactivities:Sustainablelandusekeytoavoided deforestationacrossregions 4.3. Projectlocation:Compliancecompelsmarketmovement indevelopedworld 4.2. Projectlandarea:Doubletheimpact 4.1. Introduction:Whatliesbeneath inDepth CarbonProjects 4. Forest 3.4. Agroforestryandsustainableagriculturallandmanagementprojects:Tillwemeetagain 3.3. IFMprojects:Onwardandupward 3.2. REDDprojects:thegreatmigration 3.1. A/RProjects:VoluntarybuyerspickupCDMmarketslack Types CarbonProject Forest 3. Overview: 2.4. Trendsincomplianceforestcarbonoffsetmarkets 2.3. Trendsinvoluntarycarbonoffsetting 2.2. TrendsinREDDfi nance 2.1. Introduction:Forestcarbonmarketlandscapeintransition Markets inContext CarbonOffset 2. Forest Table ofContents andFigures cation; oneineveryten xvi 34 39 38 36 34 31 30 27 26 25 24 24 22 21 20 19 15 14 12 12 24 18 12 5 2 1 9 6 5 v Executive Summary xvii 41 52 52 54 59 60 62 64 66 67 68 71 72 75 41 42 43 45 50 67 64 45 52 78 57 65 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State 8.5. Asia: Planting seeds for compliance 8.5. Asia: Planting seeds for compliance 9.3. Looking ahead: 2013 and beyond… 8.2. North America: Taking the lead 8.2. North America: Taking the lead challenges ahead 8.3. Latin America: REDD rules, but puzzles remain 8.4. Oceania: Transactions surge, policy demand? 8.6. Africa: How to sync supply and 8.7. Europe: Still a buyer’s market REDD ready for ramp-up 9.2. Remaining portfolios and pipeline: A.1 Forest Carbon Accounting Standards ts Programs A.2 Project Co-Benefi c Programs) A.3 Domestic (Country- or Region-Specifi A.4 Standards to Watch Sponsors and Supporters ANNEX les Annex A: Standard Profi 9. Looking Ahead: Market Projections 9. Looking Ahead: Market new challenges 9.1. Developer predictions: New ground, 8.1. Introduction: Parsing a Product Market 8.1. Introduction: 8. Regional Market Deep Dive Deep Dive Market 8. Regional 7. Market Infrastructure: and Registries Market Standards 7. and proliferation 7.1 Standards: Consolidation 6. OffsetBuyers connections types: Landscape 6.1. Buyer 6.2. Buyer Motivations: Why Forests? Motivations: Why 6.2. Buyer EU rules 6.3. Buyer locations: retired Record offset volumes issues and 7.2. Registry Use: xviii Acronyms and Glossary State CarbonMarkets oftheForest 2013 CCX CCB CAR BMV BC ARB AG AFOLU ACR AB32 AAU A/R IFM Ha GHG FSC FPIC FIP FCPF EU ETS ETS DRC CSR CFI CER CDM Hectares Improved ForestManagement Greenhouse GasEmissions Forest StewardshipCouncil Free, PriorandInformedConsent Forest InvestmentProgram Forest CarbonPartnershipFacility Scheme European UnionEmissionsTrading Emissions TradingScheme Democratic RepublicofCongo Corporate SocialResponsibility Carbon FarmingInitiative Certifi edEmissionReductions Clean DevelopmentMechanism Chicago ClimateExchange Standard Climate, CommunityandBiodiversity Climate ActionReserve Brazil MataViva British Columbia California AirResourcesBoard Auditor General Agriculture, ForestryandOtherLandUse American CarbonRegistry California’s AssemblyBill32 Assigned AmountUnit Afforestation/Reforestation

andGlossary Acronyms MRV MOU MOEJ K-VER JNR JI J-VER REDD PRM PFSI PPD POD PFSI PEFC PCT PCS OTC OPR NZU NZ ETS NDRC NCOS NAMA MtCO 2 e Measuring ReportingandVerifying Memorandum ofUnderstanding Japan’s MinistryoftheEnvironment Reduction Program South Korea’sVerifi edEmissions Jurisdictional andNestedREDD Joint Implementation Program Japan’s Verifi edEmissions Reduction and ForestDegradation Reducing EmissionfromDeforestation Readiness World BankPartnershipfor Market Permanent ForestSinkInitiative Project DesignDocument Pay UponOffsetDelivery Permanent ForestSinkInitiative Forest Certifi cation Programme fortheEndorsementof Pacifi cCarbonTrust Pacifi cCarbonStandard Over-the-Counter Offset ProjectRegistry New ZealandETSUnits New ZealandEmissionsTradingScheme Commission National DevelopmentandReform Standard Australian NationalCarbonOffset Nationally AppropriateMitigationAction dioxide equivalent Units ofmillionmetrictonnescarbon Acronyms and Glossary xix Existing forest Marketplaces through which

State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State The point at which a carbon offset that is both climate and ts. co-benefi Some standards registries and enable ts “tagged” co-benefi cation onto issued certifi carbon offsets, cation if quantifi and to be cation verifi of project standard.embedded in a carbon co-benefi ts are Compliance markets: not already regulated entities obtain and permits (allowances) or surrender offsets in order emissions to meet pre- cap-and- of case the In targets. regulatory determined trade programs, participants – often including nancial intermediariesemitters – both and arefi allowed to unused from t profi a make to order in allowances trade regulatory requirements. allowances or to meet Improved Forest Management (IFM): Existing forest areas are managed and/or to to reduce increase carbon losses from carbon other harvesting or storage silvicultural treatments. Emissions may reductions occur through additional sequestration and/or avoided emissions. Issuance/issued offsets: Once a project has ed, been carbon and validated, undergone verifi offset other required processes, an offset registry can issue carbon offsets to the er, after project whichidentifi ownership owner can be tracked with and a unique for retirement. transferred, and offsets are eligible Forest and Deforestation from Emissions Reduced Degradation (REDD and REDD+): areas with demonstrable risk of land-use change or reduced carbon storage are conserved, resulting in the avoidance of a business-as-usual scenario would that have produced higher emissions. avoided emissions. through primarily occur reductions Emissions In 2010, negotiators in Cancun nedas traditional defi the REDD activities, “plus” plus additional efforts to sustainably manage forests, enhance carbon stocks. and conserve and Registry: A registry numbers serial unique given are which offsets, carbon issues, holds, and to transfers track them throughout their lifetime and can retire also offsets. Compliance typically utilize their own carbon proprietary registry system. markets In the voluntary offset each market, there are independent registries available. Retirement: purchased voluntarily is permanently set aside by its owner in a designated registry – effectively taking the Retiring circulation. of out number serial unique offset’s offsets through a registry ensures that offsets cannot or 2 Land is managed using intermingled Woodland Carbon Code Western Climate Initiative Wildlife Conservation Society Verifi ed Carbon Standard Verifi Unit Voluntary Carbon ed Emissions Reductions Verifi Sustainable Agricultural Land Management Land Agricultural Sustainable Thailand’s ed Verifi Emissions Reduction Program Reductions ed Emission Temporary Certifi dioxide equivalent One tonne of carbon Forest Trends’ REDD+ Expenditures REDD+ Expenditures Forest Trends’ Initiative Tracking Working Group REDD Offsets 2 WCI WCS VER WCC VCU tCO VCS T-VER tCER SALM REDDX ROW Co-benefi ts: Additional environmental, social, or other ed Co-benefi quantifi are that project carbon a from arising ts benefi based on nedmetrics byor theindicators project defi developer, cation ts a program, certifi co-benefi or a third-party carbon project standard that accounts for GHG equivalent. Carbon offset: In this report series, a carbon offset is ned as andefi instrument representing the reduction, avoidance, or sequestration of one tonne of CO Baseline: The estimate of greenhouse emissions, gas (GHG) population, common practice, gross and other factors that would have domestic occurred without product, undertaking any action to mitigate carbon emissions. agricultural and forestry additional carbon in strategies, trees and/or soil sequestering and reducing carbon emissions compared to agricultural business-as-usual practices. Emissions occur reductions through may avoided emissions. additional sequestration and/or Agroforestry: The establishment The Afforestation/Reforestation (A/R): of forest on areas additio without forest carbon cover, in capturing carbonools. new Emissions tree reductions through additional sequestration. biomass occur and primarily other xx Acronyms and Glossary State CarbonMarkets oftheForest 2013 eiey f sud fst cn cu simultaneously occur and can offsets Payment issued future. of delivery the in or immediately offsets are contracted or suppliers otherwise agree to deliver consi der “transactions” to occur at the point that offsets Transaction (“transacted” or “contracted”): and practices, agroforestry, amongotherpractices. tillage improved crops, cover of use include the may activities in Project landscape. stocks agricultural carbon increase to managed is Land Sustainable Agricultural LandManagement(SALM): voluntary and/or complianceoffsetmarkets. usewithin for standards needs, designed regional specifi also to c have markets regulated marketplace. More recently, national and sub-national have the in standards credibility increase to intent competing the with emerged mnay markets, offset Inthevoluntary be certifi ored. benefi ed can verifi ts co- other and social, environmental, projects’ and/or activities offsetting carbon which to and criteria reporting monitoring, design, project of set A Standard: reduce itsconcentrationintheatmosphere. biosphere or subsurface terrestrial features in order to Sequestration: The long-term storage of carbon in the carbon reductionorneutralitytarget. a against reductions emissions offsets’ the claim to is be re-sold, of particular importance if the buyer’s intent We We u cro ofes o oneblne hi net their counterbalance to carbon emissions. offsets carbon buy fi voluntarily which organizations and individuals, rms, Voluntary carbon offset markets: social, andotherco-benefi ts. environmental, verifi stated projects’ of delivery the es and/or offsets; carbon receive to eligible are projects carbon which for reductions emissions of volume the Verification: and generated offsets for transacted inthevoluntarycarbonoffsetmarkets. Reductions term General Emissions Verifi(VERs): ed) (or Voluntary monitoring scenarios, reductions. baseline schemes, and methodologies for calculating emission on information including design, project on information approval for submit must projects when stages, planning their in Validation: some optionscontracts,as“transactions.” and types contract above the of all tracks report This contingent”). (“unit future the in project the to issued actually offsets of volume the on based are payment (“fi “fi or rm” and delivery that specify or delivery) xed” delivery”) and contracts future; on can specify the a in fi issued (“pay rm be volume of to offsets to expected deliver delivery offsets for upon or (“pre-pay”) immediately occur can payment transaction); (“spot” h apoa o cro ofe projects offset carbon of approval The The process by which an auditor verifi es akt through Markets 1 Introduction Associate Director Molly Peters-Stanley State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State Forest Trends’ Ecosystem Marketplace Introduction Forest Trends Michael Jenkins Founding President and CEO mitigation. Inclusive business. This report’s headline fi nding – that carbon-fi nanced forest protection, expansion, expansion, protection, forest nanced carbon-fi that – nding fi headline report’s This business. Inclusive mitigation. multi-faceted market for forest carbon offsets – for empowering stakeholders from indigenous communities to that carbon offsetting was a corporate fad that has been eclipsed by more cost- and results-oriented solutions. that carbon offsetting was a corporate Forest Trends’ Ecosystem Marketplace – itself covers new ground as we explore projects’ development, drivers, drivers, development, projects’ explore we as ground new covers itself – Marketplace Ecosystem Trends’ Forest forestry began over two decades ago. So much so that project developers say they’re prepared to implement response to a call from a growing community of practice eldin ofthe paymentsfi for ecosystemthe services. time, At and even still, an inspiring array of activities was being implemented around the world, but basic frameworks favored by donor governments; and deployment of market policies that work for forest projects. All of a general absence of regulations that reward their investments. And they did so despite a common assumption common a despite so did they And investments. their reward that regulations of absence general a of offsets that support sustainable forestry and land use. They did so in recognition of ciencies the potential effi businesses’ widening embrace of these concepts. It is increasingly an integral part of these concepts. is increasingly an integral part of these embrace of these concepts. It businesses’ widening insp ire project developers to share data and thank those that contributed data for fostering a insp more transparent information about transactions and impacts was limited. information about transactions and pursuing avoided deforestation to supply emerging or existing carbon markets that recognize forestry offsets. business uptake of carbon offsetting as best (and common) practice; a migration of existing projects toward new toward projects existing of migration a practice; common) (and best as offsetting carbon of uptake business Business and community resilience to climate change. Ecosystem-based adaptation. Supply chain material risk material chain Supply adaptation. Ecosystem-based change. climate to resilience community and Business Several of these governments and markets feature technical requirements fi rst trialed by voluntary offset projects offset voluntary by trialed rst fi requirements technical feature markets and governments these of Several use of offset registries. Project developers were also increasingly engaged with governments and communities disconnects, and future direction. Eight years ago, Ecosystem Marketplace launched its “State of” series in achieved by putting forest carbon solutions in the hands of its direct benefi ciaries – communities and practitioners. and communities – ciaries benefi direct its of hands the in solutions carbon forest putting by achieved and management are having a greater impact on land use and carbon emissions than ever before – mirrors at their core. colored with dozens of expert interviews, point to an almost comprehensive uptake of third-party certifi cation and cation certifi third-party of uptake comprehensive almost an to point interviews, expert of dozens with colored and effective marketplace. at an unprecedented scale. climate policy negotiators, to private sector offset buyers and investors. We hope this report will continue to In 2012, a growing number of businesses, particularly those with a global environmental footprint, bought carbon bought footprint, environmental global a with those particularly businesses, of number growing a 2012, In All told, the forest carbon markets have covered signifi cant ground since the fi rstfi carbon-driven investments in cant groundAll sincetold, thethe forest carbon markets have covered signifi Covering New Ground: State of the Forest Carbon Markets 2013 Covering New Ground: State of the – the fourth edition in an annual series from This report’s fi ndings are based on survey responses from 162 forest carbon projects in 58 countries. The results, The countries. 58 in projects carbon forest 162 from responses survey on based are ndings fi report’s This They did so to demonstrate climate leadership within their industries and in public policy. They did so regardless regardless so did They policy. public in and industries their within leadership climate demonstrate to so did They Transparent and reliable information is critical in any marketplace. We believe it is particularly important to this 1.4 billion tonnes of emissions reductions over the next fi ve years. But this new level of climate action will require will action climate of level new this But years. ve fi next the over reductions emissions of tonnes billion 1.4 Methodology: Frequently Asked Questions 2 The bulk of data was collected via an online survey online an via collected was data of bulk The o iiie h ocrec o “double-counting” of occurrence the minimize To Trade Exchange, the Chicago Climate Exchange (CCX) and 21 January between available was survey The s designed to track global transactions oftransactions global track to designed is report This State CarbonMarkets oftheForest 2013 uy 1 21. t a sn t apoiaey 800 approximately to sent was It 2013. 31, July APX, Inc., Australia’s Clean Energy Regulator Registry Registry Regulator Energy Clean Australia’s Inc., APX, (the “VoluntaryOTCMarket”). Marketplaceʼs doesEcosystem Where market data Offsets Registry Program, Climex, Tianjin Climate Climate Tianjin Climex, Program, Registry Offsets nomto peetd ee s ae o data on based is here presented Information olce fo ofe poet eeoes brokers, developers, project offset from collected carbon markets – such as the Kyoto Protocol-based Kyoto the as such – markets carbon n rties a wl a cro offset-accounting carbon as well as retailers, and volumes reported by offset suppliers and brokers, we brokers, and suppliers offset by reported volumes We complemented the survey with data and insights insights and data with survey the complemented We designed for organizations developing forest carbon forest developing organizations for designed Canadian Standards Association GHG CleanProjects™ upir ad itiue truh h Ecosystem the through distributed and suppliers ih cmlac olgto i rgos ht permit that regions in obligation compliance a with cee N ES – n vlnay rnatos of transactions voluntary and – ETS) (NZ Scheme Exchange, and the Santiago Climate Exchange. Exchange, andtheSantiago ClimateExchange. ex and includ registries changes, as ing: well as LLC, Registry, CDC Climat, Japan Verifi ed Emission Emission Verifi Reduction Registry ed Center, GHG Markit Environmental Registry, Korea Carbon Japan Registry, (J-VER) Climat, Reduction CDC Registry, vr h cutr o outr byr ad o buyers to and buyers voluntary to counter the over offset projects or supplying forest carbon offsets both offset ownership. of Offsets Projects, BlueRegistry, BTAAB Registry, Registry, BTAAB BlueRegistry, Projects, Offsets of fi Evolution brokerage as major such by rms provided offset forest possible as identifi ed organizations rjc dvlpr. t netgts oh compliance both investigates It developers. project carbon forest from collected data on based primarily is It projects. carbon forest from emissions carbon of offsets generated from the sequestration or avoidance Markets, Armajaro, Amerex, Karbone, and TFS Energy and Climate-L and briefs news Marketplace eitis ad xhne ta tak n facilitate and track that exchanges and registries, the surrenderofforestryoffsetsforcompliance. oet abn fst ta ocr oe te counter” the “over occur that offsets carbon forest Forest-L listserves. akt ad h Nw eln Eisos Trading Emissions Zealand New the and markets come from? Frequently AskedMethodology: Questions “lives” of offsets as they pass through the value chain. value the through pass they as offsets of “lives” This report presents only aggregate data. All supplier- All data. aggregate only presents report This Our analysis examines the volume of carbon offsets carbon of volume the examines analysis Our calculations. However, we did follow up with dozens with up follow did we However, calculations. n qaiy rtra cen fr fst icue in included offsets for screens criteria quality any any responses that varied signifi cantly from “typical” signifi from varied cantly that responses any e rsodns o pcf te oue f credits of volume the specify to respondents asked an offset retailer and then the retailer sold the same the sold retailer the then and retailer offset an vintage for which we had fewer than three data points, or standard, type, project country, any from volumes separately in order to derive the volume and value of value and volume the derive to order in separately supplier-specifi c transaction data mentioned inthe mentioned data supplier-specifi transaction Any as c confidential. is treated information specifi c were unable to confi rm that transactions occurred, transactions confi that to rm unable were eas te i o ti rpr i t acut o all for account to is report this of aim the Because of respondents to confito respondents of responses survey clarify or rm apply not do we reductions, emissions for payments only once. rjc ivsmn. e o o tak h individual the track not do We investment. project offset to a fi nal buyer, we count each transaction we count fi buyer, a nal to offset n ec mre ted. n fw ae wee we where cases few a In trends. infl market uence identifi ed an overlap, the transaction wascounted the transaction overlap, an identifi ed s osset ih ot te mrepae analysis, marketplace other most with consistent is information with third parties without prior permission prior without parties third with information confithe supplier’s protect the to of order dentiality in these responseswereomitted. that were incomplete or raised a red fl ag. This included transacted through a broker or exchange. When we When exchange. or broker a through transacted rnatd n re t cat h sz o te global the of size the chart to order in transacted transactions in the overall market. This methodology This market. overall the in transactions from thesurveyrespondent. supplier share not do We information. transaction or prices identify not do we Additionally, supplier. the by approved or information public already was text For example, if a project developer sold an offset to offset an sold developer project a if example, For How doyou ofsurvey theconfidentiality protect track environmental impact? Does thisreport MarketplaceDoes Ecosystem thequality screen of akt eair ad hs ol as signifi also cantly would thus and behaviors market marketplace in terms of carbon offsetting and future and offsetting carbon of terms in marketplace offsets reported inthissurvey? reported offsets responses? 3 Methodology: Frequently Asked Questions State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State may have continued project activities but did not How does this report does this How define a transaction? to deliver offsets immediately or in the future; or when that buyers voluntarily purchase to offset their the world, including 62 projects reported for the fi rst rst the world, including 62 projects reported for the fi time in this year’s survey. transact offsets in 2012. Including these projects forest carbon offset project developers that were from as many active forest carbon project developers to note that, because of the the fragmented market nature and projects of all dentialitycapture to impossible is it confi data, transaction issues surrounding informed by historical responses from projects that information from 513 unique forestry projects around offsets are contracted; or suppliers otherwise agree based on a donation model. Payment and delivery of offsets can occur simultaneously (“spot” transaction); payment can occur immediately (“pre-pay”) or upon based in the US (25% of all respondents). After the of offsets to prepare for future compliance obligations offsets in 2012. Another 38 offset retailers reported Each year, our goal is to identify and collect information collect and identify to is goal our year, Each suppliers agree to retire an offset on someone’s behalf behalf someone’s on offset an retire to agree suppliers supplying forest carbon offsets to voluntary or pre- US, suppliers based in Brazil and the United Kingdom United the and Brazil in based suppliers US, delivery (“pay on delivery”) contracts reductions; emissions future from generated of offsets that will be We consider “transactions” to occur at the point that emissions. emissions. It also includes preemptive transactions and payment are based on the volume of offsets that are actually generated by the project in the future as well as regulatory market offsets or allowances and over time, Ecosystem Marketplace has tracked active in project development or monetized carbon and forestry offset suppliers as possible. It is critical and transactions. can ne defi specifia c volume of offsets to deliver compliance buyers in 2012. This report is also What was the regional surveyWhat was response distribution? What was this reportʼsWhat was survey response rate in 2013? (“fi rm”(“fi or xed” “fi delivery) or specify that delivery (“unit contingent”). (“pre-compliance”). The largest proportion of survey respondents was This year, we received survey information from 162 e). 2 e) or million tonnes of 2 3 http://documents.worldbank.org/curated/en/2013/05/17751166/mapping-carbon-pricing-initiatives-developments-prospects market value? market aggregate volumes? aggregate volumes? How does this reportHow define “voluntary” offsetting? How does this reportHow average calculate prices and How does this report does this How share and market calculate not be ascertained how signifi cant their answers were answers their cant signifi how ascertained be not through out this survey through are measured in tonnes of the market’s ultimate environmental impact – retired refers to all purchases of carbon offsets not driven tize pricing that was sac- reported at the project/tran organization-wide than granular more is it as level tion the signifi cancethe of signifi their response. Responses from to the offset market. Market share is thus calculated includes transactions of offsets created specifi cally for cally specifi created offsets of transactions includes offsets can no longer be resold and so represent the year. being offset in each pricing mechanisms. by an existing regulatory compliance obligation. This pricing. For organizations that disclosed volume of the overall market and any variables for which we present market value. by respondents’ transaction volumes to determine based only on the transaction volume associated weighted to determine cance. their We signifi priori- with each question. We do not extrapolate market unless otherwise noted. The numbers presented such as the World Bank’s annual reports on carbon suppliers who did not disclose 2012 transaction ndings toshare all fi volumes reported in survey, our data but not price data, we used the market-wide We do collect data on the volume of offsets retired. This retired. offsets of volume the on data collect do We amount of carbon emissions rmedthat as were confi volume, along with origination numbers, represents voluntary buyers (Verifi ed Emission Reductions – VERs), – Reductions Emission ed (Verifi buyers voluntary carbon dioxide equivalent (tCO average price as a proxy in our monetary valuation volumes were not included in many fi gures, as it could it as gures, fi many in included not were volumes as the marketplace is too differentiated to make such assumptions. carbon dioxide equivalent (MtCO In this report, the phrase “voluntary carbon markets” 3 All fi nancial fi gures presented are reported in US Dollars US in reported are presented gures fi nancial fi All All offset prices reported in this series are volume- All of the calculations in this report are weighted Methodology: Frequently Asked Questions 4 ae a a hl, e eevd h lret number largest the received we whole, a as Taken State CarbonMarkets oftheForest 2013 (9% each),followedbyCanadaandAustralia. ee h scn-ags pooto o respondents of proportion second-largest the were f epne fo Nrh mrcn upir (8 – (48) suppliers American North from responses of in line with the large volume of offsets supplied and supplied offsets of volume large the with line in rnatd n h rgo. h rsos rt from rate response The region. the in transacted (page vi) illustrates regional response rate distribution Offset suppliers from emerging markets in developing onre cnrbtd n-hr (0 o survey of (50) one-third contributed countries Latin America (29), Asia (12), and Africa (8). Figure 1 Figure (8). Africa and (12), Asia (29), America Latin (37). behind close was suppliers offset Europe-based by country. epne, rm raiain haqatrd in headquartered organizations from responses, 5 1. Overview: Forest Carbon Offset Markets in 2013 2012 28 M Other NZ ETS 2011 25.7 M 2010 NSW GGAS 32.7 M State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State nia 2009 Califor 21.5 M not yet active until 2013 and mid-2012, respectively. transactions reported from these marketplaces. transacted a record volume of offsets under Australia’s Australia’s under offsets of volume record a transacted tied to a market that now faces an uncertain post- this report, as their compliance offset markets were in the “other” category due to the small number of Market, while activity remained largely unchanged for markets pre-compliance Australia’s and California’s in throughout analysis market OTC voluntary in included price-linked forestry offsets saw little activity, while participating in British Neutral Government directive or Columbia’s the Alberta Carbon (BC) Carbon Western fellow from demand eying developers project Less volume was reported as sold to buyers Climate Initiative (WCI)-member state California. Climate Initiative (WCI)-member state emerging Carbon Farming Initiative (CFI), which is election fate. across the Tasman Sea, offset buyers and suppliers are presented separately in Figures 11 and 13, but are are but 13, and 11 Figures in separately presented are Alberta and BC forest carbon offsets are captured To demonstrate their market size, volumes contracted contracted volumes size, market their demonstrate To CCX 2008 7.4 M CDM/JI e, or 95% of all all of 95% or e, 2 2007 7.4 M e in transactions reported by 165 forest carbon offsets project developers and retailers. 2 Australia CFI 2006 5.3 M e for immediate or future deli- 2 Figure 11: Historical Forest Carbon Offset Transaction Volumes, All Markets Figure 11: Historical Forest Carbon y OTC . Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013 e-2006 5.9 M oluntar V Pr

5 0

Notes: Based on 28 MtCO 35 30 25 20 15 10

2 2 e e MtCO MtCO in 2012 this increase, responsible for 27 MtCO 27 for responsible increase, this roles, and type of forest carbon project. forest carbon project. roles, and type of targets with forestry offsets. CDM projects, conversely, conversely, projects, CDM offsets. forestry with targets forest carbon offsets transacted in 2012, as forestry Protocol’s fi rst compliance period hadProtocol’s securedfi their preparing for compliance, while some noteworthy Demand and prices were again highly ed stratifi Emissions Trading System (EU ETS), New Zealand’s Challenged by plummeting prices in the European desired volumes by the start of 2012. desired volumes by the start of 2012. according to buyer motivations, suppliers’ market very, representing an overall 9% increase from 2011. and land-use projects became available to buyers contracted 28 MtCO contracted 91% less volume than in 2011, as Kyoto many the of end the for preparing buyers compliance corporate buyers renewed or pursued new climate In 2012, the global markets for forest carbon offsets

Offsets sold to voluntary buyers contributed most to 1. Overview: Forest Offset Carbon 2013 in 1. Markets 1.1. Market volumes: Forestry volumes: Market offset up 9% demand 1.1. 1. Overview: Forest Carbon Offset Markets in 2013 6 1.2. Market value: Value andpricedecline,less h goa aeae oet abn rc – n 2012, in – price carbon forest average global The As in previous years, most of this value was derived derived was value this of most years, previous in As State CarbonMarkets oftheForest 2013 dw 8) sih, oprd o h dces in decrease the to compared slight, – 8%) (down average price. average price. value of Europe’s carbon market. Survey respondents all project types (down 11% in 2012) and the plunging environmental and social co-benefi ts. Figure 12 Figure co-benefi ts. social and environmental ral b poet tnad lcto, n other and location, standard, project by greatly $7.8/tCO shy of2011’s$237-millionmarket. with pre-compliance fell by 14%, in line with their lower f uey outr ofe transactions offset voluntary purely of just 2012, in million $216 reached transactions offset f udes f eotd rc pit ta vary that points price reported of hundreds aggregation the of is but dynamics, price market of in California and Australia. On the other hand, the value $198 to 7% grew value market while 45% increased lutae te oue f oety fst transacted offsets forestry of volume the illustrates from contracts to voluntary buyers. Here, volumes volumes Here, buyers. voluntary to contracts from reported that the overall market value of forest carbon Forest carbon markets saw a decline in overall value overall in decline a saw markets carbon Forest million, buoyed primarily by pre-compliance activities activities pre-compliance by primarily buoyed million, across offsets for demand voluntary of value market extreme than in other offset markets extreme thaninother offset $ Million 100 150 200 250 50 Notes: Basedon28MtCO 0 2 e – marks the starting point for a discussion Pr V $45 M e-2006 oluntar Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2013. y OTC Figure 13:HistoricalForestCarbonOffsetTransactionValues,AllMarkets $22 M 2006 2 CDM/JI e intransactionsreportedby 165 forestcarbonoffsetsprojectdevelopersandretailers. $40 M 2007 associated associated not CCX Australia CFI $37 M 2008 at each dollar point. Here, one can see that the vastthe that see can one Here, point. dollar each at egtd vrg pie ewe $6-7/tCO between price average weighted aoiy f fst wr tasce a a volume- a at transacted were offsets of majority 165 forestcarbonoffsetsprojectdevelopersandretailers.

Notes: Basedon28MtCO MtCO2e 7 0 1 2 3 4 5 6 8 Figure 12:VolumeTransactedbyOffsetPrice $87 M Source: ForestTrends’EcosystemMarketplace. Califor 2009

State oftheForestCarbonMarkets2013. $0

nia $1 $2

$177 M $3 NSW GGAS 2010 $4 $5 2 e intransactionsreportedby $6 $/tCO $7 $237 M 2011

2 $8 e NZ ETS $9 $10 $11

$216 M $12 2012 Other 2 , with e, $13 $14 $15

7 1. Overview: Forest Carbon Offset Markets in 2013 $ Million $ $1000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 $9.8 $7.6 $7.8 $7.5 $8.2 $7.7 $7.9 $1.1 2012 $10.5 $13.3 $25.3 134 2012 $897 Average Price Average - - $7.2 $9.2 $8.1 $9.2 $3.9 2011 $10.3 $19.7 $8.1 M $12.1 M 106 $681 2011 2012 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State 80 $57 M $12 M $38 M $1.9 M $0.6 M $148 M $216 M $137 M $198 M $444 2010 $18.1 M $15.6 M contributed by hundreds of t for-profi Value alue V 48 - - $267 2009 2011 million. As seen throughout this report, much of this forest carbon projects, valued at an estimated $879 or in spite of – relatively weak or uncertain regulatory entities acting on a voluntary basis in response to – value was $13 M $23 M $29 M $172 M $237 M $143 M $185 M $51.5 M $54.7 M olume V 26 $180 2008 1 M 28 M 22 M 27 M 2012 6.3 M 2.9 M 1.5 M 0.2 M 0.5 M 0.6 M 22.3 M and Average Prices, All Markets and Average 19 Volume $143 2007 - - e in transactions reported by 165 forest carbon offsets project developers and retailers. e in transactions reported by 165 forest 2011 21 M 7.3 M 4.9 M 1.6 M 5.9 M 1.5 M 2 16.7 M 25.6 M 18.3 M e in offsets contracted from 2 11 $103 2006 Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013. Source: Forest Trends’ Ecosystem Marketplace. . Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013 Figure 14: Cumulative Forestry Offset Transaction Volume and Value, All Markets Figure 14: Cumulative Forestry Offset 6 $82 Pre-2006 Notes: Based on data reported by 513 AFOLU projects and countless offset suppliers over eight years. Table 3: Comparison of 2011 and 2012 Forest Carbon Markets’ Transaction Volumes, Values, Transaction Volumes, Carbon Markets’ and 2012 Forest of 2011 Table 3: Comparison 0 Notes: Based on 28 MtCO 80 60 40 20

Voluntary OTC California / WCI Secondary Market Compliance Total Grand Total MARKET* Primary Market Australia CFI Voluntary Total CDM / JI Other NZ ETS

200 180 160 140 120 100

2 MtCO ls in this chart may not add up perfectly due to rounding. abbreviations. Totals in this chart may not add up perfectly *See Acronyms list for explanation of market e From pre-2006 to 2012, this report series has tracked below this price range. a cumulative 134 MtCO considerably fewer volumes contracted above or 1. Overview: Forest Carbon Offset Markets in 2013 8 0% two-thirds of Almost 1.3. andretirement: stage Offset eln Cmec Cmiso’ Gieie for Guidelines Commission’s Commerce Zealand Verifying emissions reductions and issuing offsets is offsets issuing and reductions emissions Verifying State CarbonMarkets oftheForest 2013 abn etaiy lis ae o ter purchase their making on based comfortable claims more neutrality carbon feel buyers corporate and retirement of offsets. In cases such as the New the as such cases In offsets. of retirement and environments, environmental benefi ts even in their early stages early in their even benefi ts environmental hte te ivle lnig poetn, r better or protecting, planting, involve they Whether ouet PD. ot al ivsmns cu with occur investments early Most (PDD). document Carbon Claims, buyers are even obligated to disclose support forproject-levelactivities. use (AFOLU) projects in in 2011-2012, last year saw year last 2011-2012, in in projects (AFOLU) use Resulting from the verifi cation of emissions reductions offsets whentheyreachanappropriatestage. were projects while pre-verifi occurred volume cation offsets that have been forward sold and not yet issued. f mlmnain Mc te poie f h 2011 the of opposite the Much implementation. of n h poes f eeoig hi poet design project their developing of process the in tonnes retired transacted n cmlac mrepae ad ay voluntary many and – marketplace compliance a in MtCO through a registry – and in some cases issue retire – carbon and verify will project the that expectation the from some large agriculture, forestry, and other land other and forestry, agriculture, large some from to consumers when their carbon neutral claims involve surrendered and at traded be can offsets that is point that It projects. carbon forest most of goal end the had not yet achieved verifi cation. At least half of this of verifi half achieved least yet At not cation. had akt te ags vlms f fst (2 o 16 or (62% offsets of volumes largest the market, generate projects carbon forest forests, managing offsets transacted pre-verification; one in every ten oneinevery pre-verification; transacted offsets Figure 16:MarketSharebyProjectStageatTimeof Transaction (LabeledbyTransactedOffsetVolume) Notes: Basedon28MtCO 2 ) rnatd n 02 ee rm rjcs that projects from were 2012 in transacted e) 10% 8 n i mn css ersns direct represents cases many in and Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2013. Mt 20% Issued Project DesignDocument(PDD) 2 e intransactionsreportedby 165 forestcarbonoffsetsprojectdevelopersandretailers. 30% 1 Mt Veriﬁed 40% 5 Mt Validated 50% oue ae lgbe o rtrmn, ec forestry hence retirement, for eligible are volumes an unprecedented volume of offsets issued by major by issued offsets of volume unprecedented an offset retirement as a proportion of transacted offsets transacted of proportion a as retirement offset in forestry offsets were issued, while 2.6 MtCO eotd y eitis s eie. ny hs issued these Only retired. as registries by reported registry activityin2012,seeSection6. registries – and retired as a result. In 2012, 8 MtCO 8 2012, In result. a as retired and – registries a be lw hsoial. o mr ifrain on information more For historically. low, been has 165 forestcarbonoffsetsprojectdevelopersandretailers. Notes: Basedon28MtCO MtCO2e Figure 15: Historical Transaction and Retirement Figure 15:HistoricalTransactionandRetirement Project IdeaNote(PIN) 35 30 15 25 10 20 Undergoing Validation 0 5 Source: ForestTrends’EcosystemMarketplace. pr 60%

3 e-2006 State oftheForestCarbonMarkets2013. Mt

2006 Volumes, AllMarkets 70% Transacted Proxy retirementﬁgure 2007 2

e intransactionsreportedby 2008 80%

8 2009 Mt Retired 2010 90%

2011 15 3 2 0.06 Mt e were 2012 2.3 100% 13 2 e

9 1. Overview: Forest Carbon Offset Markets in 2013

2012 2012

e less than e less than 2011

2010 2010

e) than did offset etailers

2009 2009

oject developers etailers

e in transactions reported by

2008 2008 2

fsets sold to r

Sold by pr Sold by r Of 2007 2007

and Secondary Markets

State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State 2006

e. In some cases, however, both project

2 State of the Forest Carbon Markets 2013.

e-2006 e-2006

r p Source: Forest Trends’ Ecosystem Marketplace. 5 0 e for offsets sold to their end user clients. Project Project clients. user end their to sold offsets for e

35 25 15

30 20 10

Figure 17: Historical Transaction Volumes, PrimaryFigure 17: Historical Transaction Volumes, 2 e MtCO Notes: Based on 28 MtCO 165 forest carbon offsets project developers and retailers. 165 forest carbon offsets project developers and retailers. as private sector steps sector up as private nonetheless cant a contributor signifi to market size. to the same end user – and project developers sold to to sold developers project and – user end same the to retail price. Thus, they cantly supplied more signifi retailers. retailers to end users, the retail market was worth from well-established non-profi ts executing large multi- large executing ts non-profi well-established from tCO Project developers’ profi t status varies widely, ranging widely, varies status t profi developers’ Project Combining both offsets transacted from project $7.5/tCO $107 million in 2012 – or half of all market value. market value. $107 million in 2012 – or half of all developer and retailer attempt to sell the same offsets offsets same the sell to attempt retailer and developer developers developers ted repor an overall average price of developers to retailers with offsets then sold from end users at an average price of $2/tCO volume to end users (10.8 MtCO The secondary market for forest carbon offsets is 1.5. Supplier profit status: Governmentsʼ share shrinks Supplier profit status: Governmentsʼ 1.5. e 2 e. Even 2 e or 78% 2 e, from 4.6 MtCO 4.6 from e, 2 e of offsets transacted 2 2011 saw an unprecedented onetheless, the secondary market for forest carbon markets. markets. matured around a host of other project types that use. offset voluntary and compliance both for markets responsible for the remaining 6.3 MtCO to purely voluntary buyers and so may be voluntarily retired in the future. fed into and helped to develop sizeable secondary to retailers increased to 7.2 MtCO 7.2 to increased retailers to the scale of transactions attributed to energy and in 2012 were issued and retired. Representing 88% of 88% Representing retired. and issued were 2012 in Project developers transacted 21.7 MtCO in 2011 (Figure 17). As a result, the community of of overall market share – while offset retailers were offsets once they change hands, we also ask another N offsets continues to encounter barriers to achieving other project type alternatives. project developers’ competitive pricing. For example, This is related to offset retailers reported an average price of $9.8/ offset retailers that together make up the secondary offset market was the largest single source of offset Because some suppliers cannot confi rm the fate of their of fate the rm confi cannot suppliers some Because still a developerʼs world still a developerʼs where offset retailers or wholesalers supplied 56% of of 56% supplied wholesalers or retailers offset where Since then, however, the global carbon markets were among their reported transactions in 2012. us some insight into the broad market coverage of this of coverage market broad the into insight some us survey and report (Figure 15). survey and report sold some of the earliest carbon offset products. so, this represents a 29% increase in forestry offset so, this represents a 29% increase in forestry offset surprising, given that Compared to the broader voluntary offset markets – denotes the volume of offsets that were contracted question in our survey regarding buyer motivations. dents reported that 2.3 MtCO directly) are more common in the forest carbon demand in 2012. demand in 2012. all retirements reported by a registry, this fi nding gives nding fi this registry, a by reported retirements all all offsets transacted in 2012 – primary transactions volumes supplied by retailers. This increase is not volume of offsets sold to retailers – some of which In comparison to registry data, “State of” survey res pon- res survey of” “State data, registry to comparison In (where offsets are supplied by the project developer Also seen in Figure 15, this gure “proxy” retirement fi Almost two decades ago, foresters generated and Again in 2012, volumes sold from project developers 1.4. Supply chain: Secondary Supply chain: again, but grows market 1.4. 10 1. Overview: Forest Carbon Offset Markets in 2013 100% State CarbonMarkets oftheForest 2013 In 2012, transaction volumes associated with public with associated volumes transaction 2012, In a cnrcs o oenet gnis facilitating agencies government to contracts year osrain Gs evd s gatekeeperstothe as served NGOs conservation variety of actors. In 2012, as in previous years, large years, previous in as 2012, In actors. of variety for market secondary emerging the of result a as niis ed at o hi psto a te market’s the as position their to fast held entities dominant source of forest carbon offset supply, partly some of the earliest actors in the forest carbon space, carbon forest the in actors earliest the of some sector private while shrank, programs offset sector private sectoractors. Non-profi ts’ market share remained stable in 2012. As offsets. rna in fo dmsi poet, o traditional to projects, domestic from transac tions o poetlvl ciiis wt cnrbtos rm a from contributions with activities, project-level for compliance future and emerging to attention their shifting players market of also and offsets forestry non-profi ts play a critical role in facilitating finance role acritical non-profi play ts akt ta hv idctd n neet n forestry in interest an indicated have that markets Figure 18: Historical Market Share by Offset Suppliers’ Figure 18:HistoricalMarketSharebyOffsetSuppliers’ 10% 20% 30% 40% 50% 60% 70% 80% 90% 165 forestcarbonoffsetsproject developersandretailers. Notes: Basedon28MtCO 0% Source: ForestTrends’Ecosystem Marketplace. 2005 State oftheForest CarbonMarkets2013. 2006 Profi tStatus,AllMarkets Public Sector/Government Not-for For-Profit /PrivateSector 2007 -Pr 2008 2 e intransactionsreportedby ofit /NGO 2009 2010 2011 24% 67% 8% 2012 74% 24% 2% This report did not track a sizable difference in the in difference sizable a track not did report This h vlm o ofes rnatd y ulc sector public by transacted offsets of volume The Yet, European companies made up the largest share largest the up made companies European Yet, J-VER), focused on project development (as with the with (as development project on focused J-VER), -E porm tpcly >$100/tCO (typically program J-VER Asia-based NGOs supplied a slightly larger volume of (3 MtCO ($7.9/tCO Government program). This share may be expected be may share This program). Government lbly te ags vlm o ofes upid by supplied offsets of volume largest the Globally, lbly nt ny i dvlpn country-based developing did only not Globally, an average $19.2/tCO average an vrg pie f fst sple b non-profi ts by supplied offsets of price average auction basis. agencies fell to less than 1 MtCO 1 than less to fell agencies and/or fi nancialrelationships. like organizations which with donors, multilateral and eeoe udr h gvrmn-u CI n an on CFI government-run the under developed domestic offsets developed to and sold through the through sold and to developed offsets domestic developed countries. hn Gen abn onain, r ipy varied simply or Foundation), Carbon Green China supplying the largest share of offsets from any region. unaided. NGOs also continue to play a large role in role large a play to continue also NGOs unaided. with British Columbia’s high fi xed offset price ($25/ fi price high offset Columbia’s xed British with oit o Lno hv hsoial srn working strong historically have London of Society euto Fn my u ofes rm projects from offsets buy may Fund Reduction programs (as with British Columbia’s Carbon Neutral Carbon Columbia’s British with (as programs rgas und o nenl etcuig a with (as restucturing internal to turned programs NGO relationships rather than enter the offset market offset the enter than rather relationships NGO f rvt sco tascin (. MtCO (7.4 transactions sector private of rjc dvlpr mk u oetid f l survey all of one-third up make developers project Public sector programs, on the other hand, reported hand, other the on programs, sector Public in North America. Overall, North American suppliers American North Overall, America. North in forestry offsets than did North America-based NGOs America-based North did than offsets forestry fall 2013 announcement that its proposed Emissions proposed its that announcement 2013 fall to increase in 2014, given the Australian government’s the mix of forestry and other offsets supplied by their by supplied offsets other and forestry of mix the tCO represented a variety of organization types, together types, organization of variety a represented based agencies by transacted was sector public the rnatd rae vlms hn i toe in those did than South volumes Global greater the in transacted based NGOs – respondents the Wildlife Conservation Society and the Zoological the and Society Conservation Wildlife the bilateral large from funds REDD of disbursement the Figure 19.) o al ak n existing on back fall to tend which of some names, market for signifi cantly sized buyers with household with buyers signifi sized for cantly market 2 e) and signifi cantly above-average prices for prices above-average signifi cantly and e) 2 e versus2.6MtCO 2 e) versus for-profi t entities ($7.3/tCO entities for-profi t versus e) 2 e, with premiums associated premiums with e, 2 e). 2 e lastyearassome 2 ) (e also (See e). 2 ) while e) 2 e). 11 1. Overview: Forest Carbon Offset Markets in 2013 Asia 2.9 Mt Public Sector/Government 3.5 Mt 20+ Oceania State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State 10+ 5+ Not-for-Profit / NGO Africa <1 Mt 1+ 7.5 Mt 7.5 Europe For-Profit / Private Sector Graph key (Market share by profit status): Map key (Response rate): and Market Share by Developers’ Profi t Status Profi Share by Developers’ and Market e in transactions reported by 165 forest carbon offsets project developers and retailers. e in transactions reported by 165 forest 2 North 8.5 Mt America Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013. Source: Forest Trends’ Ecosystem Marketplace. Latin Figure 19: Response Rate by Country, Transacted Volume by Developers’ Headquarters Region, Region, Developers’ Headquarters Volume by by Country, Transacted Response Rate Figure 19: 3.8 Mt America Notes: Based on 28 MtCO 12 2. Forest Carbon Offset Markets in Context “performance-based payments”forREDD. The United Nations recognized A/R activities as eligible hs te tt o te oet abn akt must markets carbon forest the of state the Thus, 4 project resultsand methodology. Liberia, Tanzania,andVietnam, basedonin-countrypartners’survey-basedresearch.Visitreddx.forest-trends.org formoreonthe State CarbonMarkets oftheForest 2013 2.1. carbonmarket Forest Introduction: landscapein .) ad mrig opine abn markets carbon compliance emerging and – 2.4) conservation fi nance such as these hold the promise the fi hold conservation these as such nance actors in the sector – including infrastructure providers and then only impacted a fraction of the world’s critical While forestry gains a foothold in the regulatory debate, section provides an overview of both market- and non- sustainable forestryandlanduse. okn a a icesnl lre cl, n private and scale, large increasingly an at working inclusion the enabled or considered have worldwide u ae nta bit n h fudto li b early by laid foundation the on built instead are but vacuum, a in occurred developments these of None fimitigation carbon forest of scale new a of by nanced of Sources strategies. REDD theprocess national developing in of countries those to fi nance bilateral and Germany, Norway, like countries progressive of forestryinemitters’portfolios. 26 of upwards on activities supporting and projects forest private to dollars billion a almost drive offsets e nesod n h cnet f hs divergent report This these efforts. of interconnected context increasingly but the in understood be price on forest carbon and premium for products from only source of carbon fi nance for forest conservation – transition the United States have taken early steps to channel to steps early taken have States United the emissions international an trading in program – albeit on a temporary basis use (Section compliance for ud ta hv pae ter at i te uue f a of future the in faith their placed have that funds brought has decade last The areas. forest threatened For decades, the voluntary carbon markets were the were markets carbon voluntary the decades, For oee, eig outr dmn fr forestry for demand voluntary seeing however, ie tnad ad eitis poet developers project registries, and standards like million hectares. mitigation. market-based mechanisms for fi nancing forest carbon fi nance, carbon forest in developments new many Asoffall2013,REDDX Markets inContext CarbonOffset 2. Forest haspubliclyreportedcommitments anddisbursalsofREDDfi nancetoBrazil,Colombia,Ecuador,Ghana, Tanzania. The money is fi nancing the country’s development of a signifi amounts invested cant has sector public The cos l REDDX all Across mrc, r diig h RD aed b pouring by agenda REDD the driving are America, 2.2. Trends inREDDfinance in the last few last the in committed to seven countries alone enn ta mjr as xs i taking in exist gaps major that of REDD,meaning ) reports that reports (REDDX) Government of Norway being the primary benefactor primary the being Norway of Government n eet er, akt bevr hv predicted have observers market years, recent In years. country between 2009 and 2012 – about $46 million $46 about – 2012 and 2009 between country attributed to forest carbon offset transactions over time, carbon projectstocontinueexpandinscale. eeomn. n azna fr xml, ery $94 nearly example, for Tanzania, In development. f i nance – raises major questions about the ability of ability the about questions major fi raises – nance oo aece, ahr hn niiul countries individual than rather agencies, donor far beenlimitedtopreparationforthenextphase stakeholders say. stakeholders would dwarf the millions of dollars that private actors private that dollars of millions the dwarf would ih 8. mlin n udn, codn t REDDX. to according funding, in million $84.4 with Donor efforts to fito be efforts all Donor could readiness REDD nance REDD strategy, a national registry, research, capacity building, and pilot projects, of which there are nine in nine are there which of projects, pilot and building, the with – disbursed been already has which of REDD for potential with countries several in money of f hte o hw hy a tp no iaea REDD bilateral into tap can they how or whether of e. n cnitn but consistent And level. next the to projects pilot Latin and Africa in forests the of owners the or insuffi coming already offsets REDD for demand cient o upr RD srtge i dvlpn countries developing in strategies REDD support to governments country donor fl from funds owing that they were right. Compared to the $0.9 billion in value in billion $0.9 the to Compared right. were they oet rns RD Epniue Takn Project Tracking Expenditures REDD Trends’ Forest for naught if the world cannot make a case for private for case a make cannot world the if naught for to market from projects – many of which are unsure are which of many – projects from market to ae outrl canld o ED rjcs And projects. REDD to channeled voluntarily have million in REDD fi the REDD to in committed million been has nancing money into REDD readiness and jurisdictional efforts, jurisdictional and readiness REDD into money 4

But public sector fisector public But so has nance ate cutis government countries, partner more than$1billion has been 13 2. Forest Carbon Offset Markets in Context $100M+ Millions of $ REDD Financing Disbursed State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State $50M+ larger pools of nance donor not fi available to stand- level, and many small to mid-sized initiatives can number of CSR buyers,” explains Christian del Valle, Valle, del Christian explains buyers,” CSR of number head of the recently-closed $80 million Althelia their private projects within a jurisdictional program, recognizing that doing so might grant them access to from the voluntary markets fueled by a growing this means looking to emerging government-led More than in our 2011 results, 2012 survey respondents respondents survey 2012 results, 2011 our in than More were attentive to and engaged in talks about “nesting” sustain their activities with carbon revenues arising Climate Fund. Climate Fund. explains, “and in the absence of compliance markets alone private projects. alone private projects. nance at the project ven predominately by carbon fi availability of longer term, nancing,” scaled-up he fi “There are a number of activities designed to be dri- the require activities ‘landscape-level’ scale larger “But Millions of $ REDD Financing Committed $10M+ Countries hosting forest carbon projects (2012 survey) from reddx.forest-trends.org, as of October 2013. $1M+ Millions of $ Supporting Forest Conservation Offsetting Private via Figure 20: Comparison of Project- and Country-level Forest Finance, All Years Figure 20: Comparison of Project- and . Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013 $0.1M+ carbon market tracking and REDD fi nance data sourced Notes: Based on value associated with all years of “State of” forest carbon market tracking and REDD fi theorize that Consumer Goods Forum the members Tropical Forest Alliance could pursue sustainable to theoretically carve out room for traditional projects, will projects, traditional for room out carve theoretically rationale, it’s probably not going to happen.”rationale, it’s probably Many hope that jurisdiction-scale REDD programs, in Johannesburg. Abel points out that the volume of payments for REDD. be the tie that binds public and private interests in the in interests private and public binds that tie the be projects, but it just doesn’t make sense to develop any develop to sense make doesn’t just it but projects, of them,” Abel explains. “Until there’s a commercial private fi nance has not kept pace. nance has not kept private fi REDD offsets has skyrocketed in only two years, while years, two only in skyrocketed has offsets REDD which are administered by the public sector but supply chains through jurisdiction-scale results-based results-based jurisdiction-scale through chains supply sector investment in REDD, says Duncan Abel, Senior Abel, Duncan says REDD, in investment sector AFOLU sector. For example, some market participants market some example, For sector. AFOLU Transactor Transactor of Forestry Carbon at Nedbank Capital “We’ve got access to a whole load of really good potential good really of load whole a to access got “We’ve 14 2. Forest Carbon Offset Markets in Context The market for voluntaryoffsettingThe market washometo To this end, the Norwegian government made a $1.4 a made government Norwegian the end, this To Australian buyers tapped into a collective 4.4 MtCO 4.4 collective a into tapped buyers Australian 2012 State CarbonMarkets oftheForest 2013 2.3. Trends carbonoffsetting involuntary overall 101 MtCO overall 101 Forestry andland-useoffsets madeup34%ofthe the vastmajorityofforestryoffsetsin transacted compliance markets. competing offset products, at least some of this growth consumer preference, global economic conditions and transacted acrossallproject types– making forestry against commitments made to the international Kyoto international the to made commitments against voluntary OTCmarket. there Because regulation. potential for preparing are as pre-compliance demand by emitters in emerging emerging in emitters by demand pre-compliance as well as leaders, industry among transactions voluntary outr dmn fo mliainl corporations most multinational the saw enterprises medium-sized to small- and from demand voluntary demand from 2011 (up 45%). While voluntary demand structures that will require a migration to jurisdiction- to migration a require will that structures underpinning these transactions, most of them them of most transactions, these underpinning Board that are primarily designed for compliance use compliance for designed primarily are that Board Historically and in the present day, transactions in the the in transactions day, present the in and Historically only from A/R projects approved by the CDM Executive offsets forestry offers currently which CDM, the being owes to corporate actors’ increasing receptiveness receptiveness increasing actors’ corporate to owes payments from its $390-million Carbon Fund – sized – Fund Carbon $390-million its from payments several in programs REDD nested jurisdictional of of forestry offsets in preparation for compliance, purely Protocol. mechanism exchange or driver regulatory formal no is identifi ed. h vlnay T mre i oe f ny w active two only of one is market OTC voluntary the or targets reduction emissions pursue voluntarily that forest carbon marketplace are primarily driven by buyers to forest carbon offsets. This was seen in both purely purely both in seen was This offsets. carbon forest to of whims the to vulnerable remains offsets forest for to support around fi ve programs that have yet to be to yet have fi that around programs support ve to performance-based receive to eligible be will that fi its to nalize aims also FCPF the 2013, In regions. the most popular offset category. While Californian and Following the phase-out of the CCX at the end of 2010, level emissionsreductionsandcarbonaccounting.” marketplaces with an international scope – the other the – scope international an with marketplaces the in contracts negotiated privately as materialize methodological framework for jurisdictional programs jurisdictional for framework methodological development the support to VCS the to grant million 2 MtCO (27 2 e), seeing a signifi cant recovery in signifi recovery a cant seeing e), 2 e ofoffsets thatvoluntary buyers 2 e C, ln wt svrl te vlnay project voluntary other several with along VCS, Source: Forest Trends’ Ecosystem Marketplace. C Sadrs oe hn obe t oe 12 over to doubled than more Standards CCB Another 3.6 MtCO 3.6 Another s n h cro mres s whole, a as markets carbon the in As offsets doubled than more developers where Asia, Demand for offsets certifi ed to both the VCS and VCS the certifiboth offsets to for ed Demand o ee a a os, hl rcvrn ter margins their recovering while loss), a at even (or MtCO standards, approved landmark methodologies for and VCS), rice cultivation (ACR and CAR), soil carbon certifi cation of the delivery of project co-benefi ts. VCS n sl n hg-rcd fst fo frsr a cost buying at by forestry from pricing offsets sell high-priced and offset ing to approach” “portfolio a development in the fithe in development (ACR restoration wetland of elds growth, jumping by 33% to 22.3 MtCO project types on the fringes of traditional forestry fell in2012,to$7.6/tCO price paidbyvoluntarybuyersforforestryoffsets abn eity AR, n te lmt Action Climate the and (ACR), Registry Carbon ol abn ad giutr. C, h American the VCS, agriculture. and carbon, soil Reserve (CAR) signifi cantly expanded their AFOLU their signifi expanded (CAR) cantly Reserve programs, including methodology and/or pilot project pilot and/or methodology including programs, rc ars al outr ofe tascin ($5.9/ transactions offset voluntary all across price average the than higher remained nonetheless price y akn u audn, nxesv ofes from offsets inexpensive abundant, up marking by project types,dominatedbybutnotlimitedtoREDD. offsets tracked in 2012 were sourced from a variety of certifibe Standards CCB additional without VCS to ed percent increase in forestry offset volumes came from refl ecting a growing interest in support of blue carbon, tCO renewable energyprojects. transacted fromA/Rprojects. 9% 9% 2 Figure 21:MarketSharebyProjectCategory, e). This is partly owed to offset retailers that take that retailers offset to owed partly is This e). 8% 2 e, representing a new height for both programs. Voluntary CarbonOffsetMarkets,2012 6% www.forest-trends.org/vcm2013.php 33% Voluntary CarbonMarkets2013. 2 e of transacted offsets were or will or were offsets transacted of e 34% 2 e from$10.3/tCO cookstoves Clean orefficient Renewables Forestry andlanduse Gases and fuelswitching Energy efficiency Methane 2 e. The greatest the average State ofthe 2 The e. , 15 2. Forest Carbon Offset Markets in Context e of 2 , with only 0.5 MtCO State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State New Zealand, meanwhile, opted out of Clean Development Mechanism Clean Development Mechanism (CDM) has methodologies pertaining to A/R projects, and those of end the at offsets permanent with replaced be must has generated signifi cant interest and conversation in has generated signifi to 5% below 1990 levels between 2008 and 2012. It the compliance period. traditionally been the world’s largest compliance offset compliance largest world’s the been traditionally the forest carbon world, if not yet much in the way of transaction activity. understood most but year, last participants market for that regulators had to proceed with caution to rst time.” things through this system for the fi in the atmosphere. The protocol entered into force in projects are granted temporary CERs that expire and by reducing greenhouse gas (GHG) concentrations participating in the second commitment period of the allowance with future, uncertain an faces but program initiated prices was CDM driven The market. primary down the in to oversupply unsustainable lows by an of its carbon pricing mechanism, although the status of the country’s program ux is now in that fl its newly probably understaffed and they’ve got a lot of smart people that are working hard to get there,” says Harold Buchanan, CEO of California-facing CE2 Executive Board-approved projects. which enable the trade of offsets (most often the with us on projects we’re associated with and getting Kyoto Protocol, a decision that has implications for under the Kyoto Protocol, an international agreement CDM, Joint Implementation (JI), and the EU ed emissions reductions or “CERs”) from ETS, CDM’s certifi California’s offset program was a source of anxiety Carbon Capital. “They’ve been very good at working domestic forest carbon accounting. domestic forest carbon accounting. established exibility “fl mechanisms”, including the elected leadership has pledged to abolish the initial ensure a smooth rollout of the offsets program. “Our experience is that they’re working really hard, they’re as Annex I countries – to reduce their GHG emissions adopted in 1997, aimed ghting at global fi warming carbon tax. volume and value in 2012 2005 and required 37 industrialized countries – known – countries industrialized 37 required and 2005 2.4. Trends in compliance forest in compliance offset carbon Trends 2.4. markets California’s newly launched cap-and-trade program The Executive Board has so far only admitted for use The The slow publication of guidelines governing Australia ux saw of an activity infl around the launch The CDM market plummeted both in terms of in both CDM market plummeted The

e) than 2 VCS and management, management, and sustainable agricultural land ma- methodologies for use under Australia’s CFI program more details on standard and registry activity). more details on standard lower price. The total value of investments in early- half of all forest carbon market value in 2012. nt (VCS). nagement (VCS). they did from more mature projects – albeit at a slightly a at albeit – projects mature more from did they that adapted elements of existing VCS methodologies to suit the Australian context. forestry methodologies from to consider CAR new and offset protocols continues developed in the the Climate, Community and Biodiversity Allianace Markit’s new partnership with the Brazilian state of Methodologies developed in the voluntary space also program. In Oceania, project developers submitted building in the forestry space through emerging programs in Oregon, Oklahoma, BC, Colombia, Costa Colombia, BC, Oklahoma, Oregon, in programs Rica, Italy, Japan, the Netherlands, Thailand, and the stage forest carbon activities reached $104 million, or use under China’s emerging cap-and-trade pilots. standard and partnered with the Forest Stewardship see continued support in government-backed offset California’s Air Resources Board (ARB) borrowed Council (FSC) and Fairtrade consumer label in its in pre-verifi cation stages in (62% pre-verifi or 16 MtCO UK. efforts to expand into forestry and land use. efforts to expand into forestry and land voluntary market for use in its budding compliance alliances with c forestry-specifi programs, such as certifi cation designed to lower AFOLUcertifi projects’ audit costs. Meanwhile, the traditionally energy-oriented tary standards began, for the rst fi time, to methodologies continued in 2012, major volun- 2012, major in continued methodologies support for forestry and land-use projects in their space into emerging compliance offset markets. offset space into emerging compliance Gold Standard acquired the forest-facing CarbonFix (CCBA) launched a joint approval process for dual use project methodologies from the voluntarythe from methodologies project use Registries and standards reported new highs in highs reported new and standards Registries early stages, seeking greater volumes from projects verifi ed offset issuances and retirements from the verifi consolidate process expertise. and Governments also adapted forestry and land- Governments also adapted forestry Acre to develop a REDD registry (see Section 6 for Voluntary offset end users showed a resurgence of resurgence a showed users end offset Voluntary The Panda Standard submitted its methodologies for Although some proliferation of standards and proliferation of standards and some Although Registries also lent a hand to capacity- to hand a lent also Registries sector. AFOLU 16 2. Forest Carbon Offset Markets in Context We i cms o D AR rjcs w’e not we’re projects, A/R CDM to comes it “When “Sweden is still very much in support of the CDM even CDM the of support in much very still is “Sweden 1990 levels by 2020. CDM offset purchasing has been h Wrd ak iCro Fn, h mjr buyer major the Fund, BioCarbon Bank World The State CarbonMarkets oftheForest 2013 5 2013. Serkovic wonders how many of these projects these of many how wonders Serkovic 2013. omtet eid tees o a el ead for demand real credits. Wewouldexpecttoseeactivitylevelingout.” a not there’s period, commitment commitment under the EU burden-sharing agreement, and JI mechanisms – having been active in the CDM the in active been having – mechanisms JI and Swedish the with strategy, its of component major a from emissions GHG its in reduction 40% a for aiming current projects to issuance, explains Mirko Serkovic, Mirko explains issuance, to projects current verifi cation process in order to maximize the volume the maximize to order verifi in process cation end of2012. hl sm mre priiat ae rdcig a predicting are participants market some While demand fortCERsandcurrentmarketconditions. since beforeitsformallaunch. pnos atd ni te n o 21 t bgn the begin to 2012 of end the until waited sponsors under-delivered or didn’t achieve issuance before the before issuance achieve didn’t or under-delivered were issued, with another 4.7 another with issued, were we are experiencing last-minute delivery shortfalls. In shortfalls. delivery last-minute experiencing are we low historic the given buyers identify actually will were negotiated prior to the last year of the compliance Serkovic also notes that many project developers and nry gny is ainl uhrt fr h CDM the for authority national its – Agency Energy la ftr fr h CM rga, ohr remain .others program, CDM the for future bleak period – to provide “room for error” in case the project only issue once per commitment period of the Kyoto can the of period projects commitment per once forestry issue only since issued, be to tCERs of new any in engage not did credits, A/R CDM of Protocol. In 2012, 5.6 2012, In Protocol. terms of the overall market, though there’s a second a there’s though market, overall the of terms if only deals new into entering and issuance through projects the getting portfolio, the of management the the majority of our capital years ago. Now it’s committed “We says. he deals,” new for looking really more about though the market is obviously in the doldrums right doldrums the in obviously is market the though but Protocol, Kyoto the to party a is Sweden relevant. CR tasce ls ya cmae t 21’ all- MtCO 5.9 of peak 2011’s time to compared year last transacted tCERs rnatos n 02 ised ouig n guiding on focusing instead 2012, in transactions Fund Manager. a etbihd tre ta ge wl byn its beyond well goes that target a established has remain and rebound can mechanism the that hopeful market participants explain that most tCER contracts tCER most that explain participants CDM market 2012. in million $1 than less to 2011 in million Visitwww.nama-database.org formoreinformation. LastaccessedOctober2013. MtCO 2 e. Value similarly fell from $23 from fell similarly Value e. 2 of CDM forestry offsets forestry CDM of e MtCO 2 issued so far in far so issued e Ee i a e wrd f AA ad e market new and NAMAs of world new a in “Even Zink. “Based upon the merits of individual cases, we cases, individual of merits the upon “Based Zink. A major evolution for the CDM could also be on the on be also could CDM the for evolution major A Nationally Appropriate Mitigation Action (NAMA) Mitigation Action Nationally Appropriate are able to pay above the current secondary market secondary current the above pay to able are n esr ta dvlpn cutis a benefi t can countries developing that ensure and NCC ntttos ae iey o e are over, carried be to likely are institutions, UNFCCC plans between the CER market and thedevelopmentof between theCERmarket Database, 6% of reported NAMAs are developed in developed are NAMAs reported of 6% Database, rfsinl xets ta hs en ul u over up built been has that expertise professional partly as a result of the vast wealth of institutional and the in participating actively We’re CERs. for price projects withintheirborders. relatively limitedbudget.” the AFOLUsector. NAMA online the to According says. Zink years,” the ol ad esn fo te D, n possibly and CDM, the from lessons and tools reduction emission low-cost for opportunities the from now,” says the Swedish Energy Agency’s Christopher Agency’s Energy Swedish the says now,” horizon, as stakeholders discuss the potential market, trying to support it as much as we can with a with can we as much as it support to trying market, ehnss wih e r epoig a o o the of lot a exploring, are we which mechanisms, Figure 22:HistoricalTransactedandIssuedVolume,

Source: ForestTrends’Ecosystem Marketplaceandthe MtCO2e 0 6 1 2 3 4 5 7 CDM/JI Database.Lastaccessed October2013. $3.6 that aim to support a broader range of activities 0.9 Averageprice Contracted volumeIssued

2005 $4.2 3.6

2006 and AveragePrice,tCERs $4.2 1.1

2007 5

2008 $4.7 2.0

2009 $4.5 1.4 2010 $3.9 5.9 2011 0.6 5.6 0.6 2012 4.7

2013 interplay $0 $1 $2 $3 $4 $5 $6 $7 $8 $9 $10

$/tCO2e 17 2. Forest Carbon Offset Markets in Context State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State BioCarbon BioCarbon Fund culty recognizes the current diffi less interested in buying carbon offsets given market that we had in the Fund, and we have been thinking of thinking been have we and Fund, the in had we that the purchase of carbon offsets. Many private fi rms are rms fi private Many offsets. carbon of purchase the their business models that simultaneously support interest. “They’re interested in our model in which in gaining cant signifi interest investors to from support these private kind of sector activities through ways to continue involving the private sector.” ways to continue involving the private we use carbon as an indicator of results,” Baroudy says, “We always valued the public-private partnership public-private the valued always “We says, desire to “green” or secure their supply chains from conditions, but are interested to look for synergies in climate change and has seen some expressions of AFOLU activities. The Thus, the fund hopes to appeal to the private sector’s ment ing at reforestation, the landscape level, combin more than 20 projects in Tranches 1 and 2, the BioCF BioCF the 2, and 1 Tranches in projects 20 than more Fund Coordinator and Fund Manager for Tranche 3. Fund Coordinator and Fund Manager resilience of local communities and environments at the major buyer of CDM A/R offsets is looking ahead to innovative approaches that build from its past about encompassed which – projects A/R small from into an integrated approach to mitigate climate is developing a third Tranche that will evolve away REDD+, agriculture, and biomass energy activities 80% of the fund’s initial resources. initial resources. 80% of the fund’s experiences. experiences. After committing about $90 million to a much larger scale, says Ellysar Baroudy, BioCarbon Baroudy, Ellysar says scale, larger much a change, enhance food security, and increase the In light of the diffi culties in the tCER market, however, however, market, tCER the in culties diffi the of light In The fund now hopes to incentivize better land manage- land better incentivize to hopes now fund The 18 3. Overview: Forest Carbon Project Types cos l rpr yas vlnay ead o off- for demand voluntary years, report all Across State CarbonMarkets oftheForest 2013 2010, as projects matured and the volume of issued of volume the and matured projects as 2010, n 02 ta atd oue fo AR projects A/R from volumes tran sacted 2012, In compliance demand from Kyoto member countries member Kyoto from demand compliance straightforward. fairly miti is carbon projects gation acknowledged the sector’s potential. Last year, REDD dologies, and locations ever-emerging in response to to response in ever-emerging locations and dologies, es rm / poet hs upcd volumes outpaced has projects A/R from sets hrn te tg wt AR rjcs at year, last projects A/R with stage the Sharing ED rjcs a vlms pk i 21 as 2010 in spike volumes saw projects REDD buyer andpolicy-makersignals. metho- types, project new with speed, breakneck offset supplycontinuedtogrow. since fi time the rst for slightly grew demand offset rkets for forest carbon offsets have evolved at at evolved have offsets carbon forest for Markets nentoa ad oetc abn policy-makers carbon domestic and international reported in2011. significant the of repeat a see not did sector the as 2011, from significantly fell but high remained to tree-planting philanthropic trans from the lation as activities, project forest other from transacted e mtooois eae vial ad both and available became methodologies new

MtCO2e 10.0 12.0 14.0 16.0 18.0 20.0 0.0 2.0 4.0 6.0 8.0 Pr e-2006 Notes: Basedondatareported by513AFOLUprojectsandcountlessoffsetsuppliersovereight years, 3.5 Types CarbonProject Forest 3. Overview: 1.6 Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2013. Figure 23:TransactedOffsetVolumesbyProjectType,AllMarkets,Historical 2006 0.02 4.9 2007 0.5 1.2 3.5 including 180observationsin 2013. ED / F Agriculture/Agroforestry IFM REDD A/R 2008 3.3 1 2 0.1 hs mliya ted pit o h drc link direct the to point trends multi-year These Offsets from improved forest management (IFM) (IFM) management forest improved from Offsets Oceania’s strengthening activities in 2012 a temporary confer a maximum number of social and environmental even offsets, REDD welcome to market compliance outr dmn. il aiona eiltr allow legislators California Will demand. voluntary activities have climbed in popularity, year-on-year, from Will Australian lawmakers opposed to carbon pricing carbon to opposed lawmakers Australian Will state regulators to take the leap in becoming the fithe becoming in leap the rst take to regulators state shifting dynamicsintherealmofpublicforestfi nance. making program, country’s the reverse successfully benefi ts – beyond carbon – and to remain attuned to to attuned remain to and – benefi carbon beyond – ts that projects seek to forces economic by pressured preferences, which can ultimately make or break even between demand for forestry offsets and policy-maker carbon compliance into offsets sell forestry to surrender or positioning those and buyers voluntary both blip onthescreen? n h fc o a oetal oe-upid market? over-supplied potentially a of face the in Purely voluntary market dynamics were no less comp- less no were dynamics market voluntary Purely lex in 2012, as corporate buyers were increasingly increasingly were buyers corporate as 2012, in lex markets. In 2012, IFM transactions increased 23%. markets. In2012,IFMtransactionsincreased23%. 2009 1.8 9 8.8 0.6 2010 19.5 0.1 2.8 5.8 2011 4.2 14 7.4 2012 5.7 5.1 8.6 19 3. Overview: Forest Carbon Project Types e) 2 2 8 4 12 25 CO 4.1 7.6 6.7 7.6 7.4 6.7 7.9 N/A 13.7 34.6 64.4 11.4 Average Average (Mt Price (US$) High Estimate e) 2 e) 2 CO 5 1 6 1 1 1 6 7.1 2.5 5.1 N/A 21.9 36.7 <1 <1 <1 <1 CO (Mt Volume (Mt Low Estimate Potential Annual Reductions Potential Annual I. Contract Type II. Project Stages III. Credit Vintage 8.2 0.3 1.2 16.8 <0.1 $26.5 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State Hectares Million ha Total Project Total Project Table 5: A/R Projects Unpacked Table State of the Forest Carbon Markets 2013. Source: Forest Trends’ Ecosystem Marketplace. 8 45 27 17 49 Notes: Based on responses from 49 project developers. 146 Pre-Pay Pay-on-Delivery Spot PDD Issued ed Verifi Validated Pre-’06 => ’08 ’09 => ’12 ’13 => Post-’16 Undergoing Validation Count of Projects* Respondents Total Number Number Total e 2 70 49 40 61 0.5 216 Value reported in the survey). $ Millions e 2 7.8 Price Table 4: Project Types by the Numbers, 2012 Types by the Table 4: Project 7.8/8.7 6.5/0.1 52/n.a. 7.3/5.7 $/tCO 10.4/7.3 Average (Primary/ Secondary) e of offsets (Table 4) in 2 e 2 28 <1 8.6 5.1 5.7 8.6 Volume MtCO Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013. Source: Forest Trends’ Ecosystem Marketplace. ed ranges and include both early- (i.e., pipeline) on supplier-reported ranges and include both early- (i.e., Notes: Potential annual reductions are based TOTAL Ag/Agro-forestry Other/ Unknown REDD IFM A/R TYPE that transacted offsets in 2012 (of a total 162 projects that were only includes projects that transacted offsets in 2012 (of a total and late-stage projects. *Project count managed to tie with REDD activities as the most widely most the as activities REDD with tie to managed major buyers of their offsets, like the BioCarbon Fund, million reported in the prior year. market role in 2012 as the Kyoto Protocol neared the land-based mitigation opportunities in coming years. like China’s Panda Standard for A/R projects. Asian nifi cant ly compared to 2011 activity, these offsets still cant nifi historically been active in CDM A/R activities, but nounced growth in A/R transactions, more than transacted forest offset type. slack in A/R transactions, in response to the launch of of offsets transacted in 2011, but declined to a still- intend to shift their attention to a broader landscape of of landscape broader a to attention their shift to intend project developers, primarily in China and India, have of A/R credits also fell 30% to $61 million, from $88 strong volume of 8.6 MtCO doubling volumes reported in 2011 through programs end of rst its compliance fi period. The overall value Oceania also experienced a nearly two-thirds increase two-thirds nearly a experienced also Oceania 2012. Compared to 2011, compliance buyers seeking buyers compliance 2011, to Compared 2012. 3.1. A/R projects: Voluntary buyers up CDM market pick 3.1. A/R projects soared to an all-time peak of 14 MtCO Although A/R projects’ market share dropped sig- Across regions, Asia experienced the most pro- A/R offsets through the CDM played a less signifi cant A/R offsets through the CDM played a less signifi 20 3. Overview: Forest Carbon Project Types h sm cud e ad o Nrh mrc, where America, North for said be could same The h peiu ya, idie ok’ aia Corridor Kasigau Works’ Wildlife year, previous The The Walt Disney Company in 2008, gained VCS and VCS gained 2008, in Company Disney Walt The Yet, REDD offsets’ overall value fell to $70 million from Across all regions, the largest volume of A/R offsets A/R of volume largest the regions, all Across Australia’s federal carbon price in 2012 and despite and 2012 in price carbon federal Australia’s A/R projects compared to the region’s REDD activities. State CarbonMarkets oftheForest 2013 Thegreat migration 3.2. REDDprojects: C+C RD ofes rnatd n 02 were 2012 in transacted offsets REDD VCS+CCB On the fl ip side, Latin America experienced a dramatic fst Ld nw fstes ad idie Works Wildlife and Offsetters) (now Ltd Offsets contracted in 2012 will not be verifi ed until or after verifi until be ed not will 2012 in contracted complements theNZETS. completed validation and verifi cation of the fi rst REDD n te emnn Frs Sn Iiitv (FI that (PFSI) Initiative Sink Forest Permanent the ETS and NZ the under offsets for demand fl in a agging volumes dropped to below 1 MtCO decline in transaction volumes, from the 3.5 MtCO 3.5 the from volumes, transaction in decline 8 mlin ai a lniu spl o RD offsets REDD of supply plentiful a amid million, $88 C vldto i 21. h vs mjrt o issued of majority vast The 2012. in validation CCB signifi cantly sized REDD projects came to market from urban forestry, are eligible for California’s compliance California’s for eligible are forestry, urban ee r-ad o con fr /’ hge up-front higher A/R’s for account to pre-paid were stages early the in while buyers to contracted were under VCS. In Latin America, Peru’s Alto Mayo REDD Mayo Alto Peru’s America, Latin In VCS. under way for a rebound in transaction activity for the project f D dvlpet ad ot f hs contracts these of most and development, PDD of program. REDD offsets continued to flto continued carbon offsets forest REDD the into ow REDD project in Kenya became the fi rst project to fi project the rst became Kenya in project REDD project forestry dominant the were projects REDD implementation costs. Around 4 MtCO e sud outr Cro Uis VU) o REDD for (VCUs) Units Carbon Voluntary issued be project. REDD Ndombe Mai the DRC, the in project Carbon ERA 2012, In years. recent in regions both neet n / ofes f ae wih ol pv the pave could which late, of offsets A/R in interest offsets were transacted, up from 7.4 MtCO 7.4 from up transacted, were offsets Project, which secured $3.5 million in fiin from million nancing $3.5 secured which Project, reported in 2011. Project developers reported growing ye Rfrsain rjcs aogie F and IFM alongside projects, Reforestation type. required ofbothdevelopersandinvestors. commitment long-term the illustrating 2016, year the this may not remain so given the relative scarcity of scarcity relative the given so remain not may this the previousyear($7.8/tCO that were priced slightly lower on average than during type in both Latin America (80%) and Africa (70%) as (70%) Africa and (80%) America Latin both in type transacted in 2011 to under 1 MtCO market in 2012 when a total of 8.6 MtCO 8.6 of total a when 2012 in market 2 e vs.$8.5/tCO 2 2 e in 2012. However, e from 2.2 MtCO 2 e of A/R offsets 2 2 e of REDD of e 2 e). e in 2011. in e 2 2 e e Tee r sal onre, hr a ige project single a where countries, small are “These C ad ln io rvsos o poet grouping. project for provisions Vivo Plan and VCS n diin o h msie rjc sae neet to inherent scale project massive the to addition In a very big proportion of the nation’s need to protect to need nation’s the of proportion big very a existing project areas following project validation, as validation, project following areas project existing ihn hs porm, icee rjc activities project discrete programs, these Within iprt atvte truh te mas including means, other through activities disparate Currently, a grouped project is underway spanning the using thePlanVivoStandard. an are alone which projects, these from sourced unprecedented sourceofVCSoffsets. ooo Ilns n Vnau n h Pacifi Islands, the c in Vanuatu and Islands Solomon REDD projects in the world’s critical forest basins, some rjc dvlpr ae lo ekn sae o small, for scale seeking also are developers project rjc. Pugn it a ige rjc mgt satisfy might project single a into “Plugging project. project or programme of activities,” says Sean Weaver, rnia a Cro Prnrhp a ate i the in partner a Partnership, Carbon at Principal grouped single a into units aggregate to region the in ht et r-salse ciei my e de to added be may criteria pre-established meet that long as the additionality of the project is not impacted. might be too small if it didn’t link up with other projects ’13 =>Post-’16 ’09 =>’12 Pre-’06 =>’08 PDD/PIN Verifi ed Undergoing Validation Issued Validated Pay-on-Delivery Spot Pre-Pay Notes: Basedonresponsesfrom45projectdevelopers. Source: ForestTrends’EcosystemMarketplace. State oftheForestCarbonMarkets2013. Table 6:REDDProjectsUnpacked III. CreditVintage II. ProjectStages I. ContractType (Mt Volume 7.9 1.5 4.4 CO <1 <1 <1 <1 <1 2 1 1 2 e) Price (US$) Average 7.5 7.7 7.7 7.6 7.7 7.2 7.6 16 8 6 8 21 3. Overview: Forest Carbon Project Types 5 16 12 16 6.5 9.6 7.6 8.3 9.3 8.4 15.6 Average Average Price (US$) e) 2 1 <1 <1 <1 <1 <1 <1 <1 CO 1.6 1.3 1.2 Volume (Mt I. Contract Type II. Project Stages III. Credit Vintage State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State Table 7: IFM Projects Unpacked Table State of the Forest Carbon Markets 2013. Source: Forest Trends’ Ecosystem Marketplace. Notes: Based on responses from 27 project developers. Pay-on-Delivery Spot Pre-Pay Undergoing Validation PDD Issued Verifi ed Verifi PDD/PIN Pre-’06 => ’08 ’09 => ’12 ’13 => Post-’16 market-based and not. market-based and the California compliance carbon market comes to into other sources of fi nance forinto REDDother interventionssources – of fi purchase REDD offsets. The campaign aims to bring public attention to REDD projects while encouraging to engage in best practices. project stakeholders pass. steady upward trend and could be poised for signifi cant signifi for poised be could and trend upward steady jurisdiction-scale jurisdiction-scale accounting. On the voluntary side, greater voluntary offset demand and migrating to Wildlife Works launched the Code REDD campaign in growth again in 2013 if the anticipated demand from efforts to migrate to jurisdictional programs and tap and nesting (Section 4.5) describe project developers’ project describe 4.5) (Section nesting and IFM project offset transactions continued on their Other report sections on nance project (Section fi 5) 2012, in an effort to encourage corporate buyers to 3.3. IFM projects: Onward and upward 3.3. IFM projects: Onward market that may emerge in coming years, large- memorandum of understanding (MoU) with California, markets. level REDD offsets within any compliance carbon limit accepted offsets to those from “jurisdictional nation’s fi rst comprehensivenation’s cap-and-trade fi program. though Acre is currently seen to be further along in the in along further be to seen currently is Acre though to test ne and the refi protocol which, if successful, furthers these concerns. the at-home ts economic of benefi implementing the to REDD offsets due to concerns about international forest, without needing to invest in a lot of top-heavy Mexico, to feed into the California program. Both is now eyeing the development of three pilot projects Protocol providing guidance to account for projects within jurisdictional carbon accounting. CAR boundaries and have established protocols accepted by California regulators. proponents will have to make the case that safeguards that case the make to have will proponents proposed by the REDD Offsets Working (ROW) offsets from outside of California amid fears of diluting diluting of fears amid California of outside from offsets international offsets of any kind, let alone REDD. REDD” programs, which means they must come from other sources of demand, California’s cap-and-trade program is seen as a beacon of hope by those who of voluntary offset buyers alone to absorb the infl ux of of voluntary offset buyers alone to absorb the infl policy and REDD readiness building, particularly for REDD offsets – from projects large and small. Exploring small. and large projects from – offsets REDD However, many market participants question the ability the question participants market many However, But it is not yet clear if the state program will incorporate incorporate will program state the if clear yet not is it But weighing options associated with both fostering scale project developers in particular are currently states that are reducing GHG emissions within their safeguards, as well as a new push to bar the use of support the inclusion of REDD in compliance offset Chiapas and the Brazilian state of Acre are party to a California could be renewed in 2014 and, if so, Uncertainty emanates from long-standing opposition quest to become the fi rst jurisdiction-scale program to program jurisdiction-scale rst fi the become to quest deliver REDD compliance offsets based on its use of afforestation, reforestation, revegetation, and IFM could smooth the path for REDD offsets from Chiapas, from offsets REDD for path the smooth could countries with smaller government capacity.” with smaller government countries In October 2013, CAR approved a Mexico Forest Given uncertainties associated with integrating project- integrating with associated uncertainties Given Group are more than adequate. Those safeguards VCS jurisdictional nested REDD (JNR) guidance. A legislative effort to ban international offsets in The state’s potential over-allocation of allowances also also allowances of over-allocation potential state’s The 22 3. Overview: Forest Carbon Project Types atog frsr ofe isacs r epce to expected are issuances offset forestry although – The ARB, for example, did not designate offset project huh rdtoal a oua pecmlac offset pre-compliance popular a traditionally Though State CarbonMarkets oftheForest 2013 On a global level, a record 5.1 MtCO 5.1 record a level, global a On Oceania’s regionaldevelopmentingreaterdepth. F poet ae en y nlss s eventually as analysts by seen are projects IFM F vlms Nrh mrc ws gi te markets’ the again was America North volumes, IFM cnweg dly i cmlac frsr offset forestry compliance in delays acknowledge elsewhere – particularly Oceania (1.7 MtCO eeomn i 21, trbtd n at o h slow the to part in attributed 2012, in development California offset market. However, project developers project However, market. offset California California/WCI program dipped slightly to 1.5 MtCO 1.5 to slightly dipped program California/WCI California’s cap-and-tradeprogram. survey. Overall value also declined slightly from $13 from slightly declined also value Overall survey. unsustainable forestuse(Section4.4). ee rnatd n 02 a ices fo te 4.2 the from increase an 2012, in transacted were was also the most oft-reported activity utilized within utilized activity oft-reported most the also was eto 6. ne h AB eesd t guidelines, its released ARB the Once 6). Section Landowners are also markedly skeptical about having REDD projects to avoid deforestation associated with associated deforestation avoid to projects REDD price inchedupwardto$8.2/tCO fst sune euss Te R hs e t issue to yet has ARB The requests. issuance offset regulatory the at stalled again once process the but program fromitsprimaryregulator,theARB. the for supply offsets of source largest the becoming Responsible for the remaining 44% of all transacted all of 44% remaining the for Responsible Sink Forest Permanent Zealand’s New VCS+CCB, certifi the were to region ed the in offsets of transacted IFM offsets were from projects located projects from were offsets IFM transacted of n 02 rm h 16 MtCO 1.6 the from 2012 in MtCO rjc tp i Nrh mrc, 6 o 29 MtCO 2.9 or 56% America, North in type project offsets in 2012, owing to the project type’s inclusion in describes which 7, Section also See ETS. NZ the or Pre-compliance offset purchases associated with the with associated purchases offset Pre-compliance o el ih h porms 0-er permanence 100-year projects program’s pursue to able is ARB the if particularly requirements, forestry the for with deal contracts to long-term sign to protocol substances ozone-depleting its utilizing far so offsets compliance issued all with offsets, forestry pipeline, the through move to began projects forestry also (see 2012 December until (OPRs) registries offset state’s the on guidelines critical of release transacted IFM offsets). Most projects that transacted that projects Most offsets). IFM transacted happen beforetheendof 2013. ee a dvlpr wie fr h AB o review to ARB the for waited developers as level million in 2011 to $12 million in 2012, but the average the but 2012, in million $12 to 2011 in million major source of both supply of and demand for IFM for demand and of supply both of source major 2 e reported in 2011 (Table 4). Forest management 2 rpre i ls year’s last in reported e 2 e from$8.1/tCO 2 e of IFM offsets IFM of e Initiative (PFSI) Initiative 2 e or30%of 2 e. 2 2 e e Agriculture Land Management Project, which supports gooety n ar-etr fst rjcs have projects offset agri-sector and Agroforestry Land Agricultural andSustainable 3.4. Agroforestry 01 te C apoe a ehdlg t quantify to methodology a approved VCS the 2011, n 02 57 MtCO 5.7 2012, In climate benefi ts, are accounted for under abroader for under benefi accounted climate are ts, carbon sequestration on about 20,000 hectares (out hectares 20,000 about on sequestration carbon carbon market. Again in 2013, the largest volume of volume largest the 2013, in Again market. carbon gooety rsde aaeet composting, management, residue agroforestry, and credit the GHG benefi ts of sustainable agricultural agroforestry activities to provide alternative community expected toissue offsetsin2013. groups of smallholder famers to employ cover crops, cover employ to famers smallholder of groups sector for its strong business case and complementary submit offsets for avoided reversals. ARB regulators ARB reversals. avoided for offsets submit a iiily ple t te ey Sustainable Kenya the to applied initially was REDD methodology. However, most of these activities, and their associated organizations todate. f gooety o oet abn iiain overall. mitigation carbon forest to agroforestry of of a target of 45,000 ha). The now-verifi is The project ha). ed 45,000 of target a of benefi tofavoideddeforestation. the eyeing are investors and participants market of now- the under practices management rangeland grassland or and no-till/low-till, implementing projects from sourced was category this in transacted offsets pursuing mandatory carbon neutrality. The Trust has Trust The neutrality. carbon mandatory pursuing North of the border, the Pacifi c Carbon Trust continues akt eeomns ol bd wl fr additional for well bode could developments Market n nrae co yed, am rdciiy ad soil and productivity, farm yields, crop increased in is onlyscheduledtorunthrough2020. program California the that fact the by complicated is the World Bank’s BioCarbon Fund. The methodology The Fund. BioCarbon Bank’s World the relevance the of underestimate gross a likely is this of use common the Given projects. agroforestry from cly rvdd rcos e ofes o h forest the to offsets few precious provided typically than 2.3 MtCO 2.3 than more retired has and offsets, issued million 1.8 than entities more with portfolio, its in projects IFM validated three sector public (BC) Columbia’s British to offerings of portfolio its within offsets IFM include to to them force and offsets deliver to failing for them this category, only 0.1 MtCO 0.1 only category, this Management: Till we meetagain Till Management: have created a buffer pool to address such risks. This ad aaeet SL) rcie, eeoe by developed practices, (SALM) management land however, projects, REDD many within livelihoods eay C ofe porm Bt goig number growing a But program. offset CCX legacy market activity under these project types. In December mulching, and other practices. It has thus far resulted far thus has It practices. other and mulching, 2 e on behalf of BC’s 128 public sector public 128 BC’s of behalf on e 2 o ofes ee rnatd in transacted were offsets of e 2 e of which was sourced was which of e 3. Overview: Forest Carbon Project Types 23 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State management related to tropical forest conservation, reforestation. reforestation. including working with smallholder farmers and other producers on - sustainable agricultural intensifi partnership is the brainchild of the US government, led government, US the of brainchild the is partnership by US Agency for International Development and the will also share best practices for tropical forest and Consumer Goods Forum, a network of more than 400 ecosystem conservation and commodity production, agricultural land use, and land tenure. Members associated associated with the sourcing as of commodities palm such oil, soy, beef, and paper and pulp. The cation, promoting the use of degraded lands and companies with annual sales topping $3 trillion.companies with annual

The aim of the Alliance will be to improve planning and and planning improve to be will Alliance the of aim The remain a centerpiece of its programs, but also the that resulting sustainable commodities will play an third tranche. The Fund’s coordinator Ellysar Baroudy forest land-management and -accounting which increasingly important role in attracting and leveraging and attracting in role important increasingly Partly as a result of lessons learned through this and private capital. private capital. on landscape-scale integration of agricultural and with the goal of reducing tropical deforestation says that carbon mitigation and accounting will sector collaboration into the programs of the Fund’s similar projects, the BioCarbon Fund is now embarking now is Fund BioCarbon the projects, similar creates a stronger business case for drawing private- In related developments, the Tropical Forest Alliance 2020 recently emerged as a public-private partnership public-private a as emerged recently 2020 24 4. Forest Carbon Projects in Depth This section explores a few of the many considerations The forest carbon markets channeled carbon ficarbon channeled markets carbon forest The nance State CarbonMarkets oftheForest 2013 4.1. Whatliesbeneath Introduction: Doubletheimpact landarea: 4.2. Project competition, andbuyerrelationships. de- economic interactions, stakeholder community eo m n plc iﬂune poet ik, market risks, project inﬂ uence, velop policy ment eciig hi ovos etrs eg, “improved e.g., – features obvious their describing successfully transactedforestryoffsetsin2012. rjcs r otn rue it na categories neat into grouped often are projects on this list as defi ning features of projects that of projects features defi ning as list this on beneath the surface, project developers must account eue eom seis rtcin patn cycles, planting protection, species reform, tenure for and manage a multitude of variables, such as land But deforestation.” “reduced or management” forest o rjcs matn 1. mlin a in ha million 11.3 impacting projects to o te ae f ipiiy frs cro mitigation carbon forest simplicity, of sake the For *Average priceperhectarebased onvalueassociatedwithvolumetransactedfromoneyearof emissionsreductions Notes: Basedonresponsesassociated with26.5millionhectaresofcarbonprojectareaand 27 MtCO Figure 24:HectaresUnderManagementbyProjectCountryLocation;AveragePricePerHectare* $86 Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2013. inDepth CarbonProjects 4. Forest /ha $13 /ha Map key(hectares): (MtCO (averaged acrossvintages). 2012 – 2 e [bycountry]and$/ha) $15 $7 /ha /ha h mjrt o cro-aae ln ae is area land carbon-managed of majority The forested entire the to comparable is area land This / poet eeoes i cnrs, id ih REDD with tied contrast, in developers, project A/R Great BearRainforestCarbonProject. >0% nrae n etrs ne mngmn – management under hectares in increase >100% a projects. REDD of number growing a with associated area oftheDRCortotallandEcuador. development accordingtooursurvey. pnig eea mlin etrs ie Cs coastal BC’s like hectares million several spanning ne frs cro mngmn sne 01 (4.7 2011 since management carbon forest under pnig nte 82 ilo h, F poet saw projects IFM ha, million 8.2 another Spanning REDD projects continue to have the largest impact on owing largely to a few signififew a to largely owing projects IFM sized cantly rjcs o rnat h mre’ lret oue of volume largest market’s the transact to projects forested land, with 17 million ha under management. under ha million 17 with land, forested land of area the in increase 142% a representing ilo h) Ti rpeet 4% f h ttl 26.5 total the of million hectares that 43% are currently under forest carbon represents This ha). million 100+ 10,000+ $209 50,000+ 100,000+ /ha $13 2 e transacted. /ha 4. Forest Carbon Projects in Depth 25 e transacted. 2 100,000+ Asia 4.6 Mt 6.2 Mt Oceania e) transactions. e) transactions. 2 50,000+ State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State 10,000+ SALM / Agroforestry 100+ more abundant in Latin America and less so in Africa. Africa. in so less and America Latin in abundant more leaned toward support for smaller, earlier-stage large-scale (>1 MtCO Forest carbon projects in the developing world weath- world developing the in projects carbon Forest types available to voluntary buyers. Generally buyers tied to European buyers’ greater comfort with Asian from a mix of all AFOLU project types to countless sacted tran in 2012. Performance in each region future of an Australian carbon price, demand was projects with multiple revenue streams – which were project developers reported market growth in 2012, projects – a legacy of the CDM – and a couple of buyer types. At least 25% of North American offsets sive offset pen types to generate half of all offsets were sold to European buyers. The drivers of offset differed according to the variety of offset projects and and projects offset of variety the to according differed demand were quite different in New Zealand and (82%). dominated by pre-compliance ered competitive pressures from non-AFOLU ex- in Asia was the only region in the Global South where Australia where, despite the slow start and uncertain REDD IFM <1 Mt Europe Africa 3.1 Mt 3.1 A / R Graph key (market share by project type): Map key (hectares): (Total Hectares by Country and % Share) North 6.7 Mt America Latin 6.2 Mt America . Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013 e) of all offsets transacted in 2012. Only 27% of of 27% Only 2012. in transacted offsets all of e) 2 Notes: Based on responses associated with 26.5 million hectares of carbon project area and 27 MtCO Figure 25: Hectares Impacted by Country Location; Total Regional Transaction Volume and Share by Project Type Project by Share and Volume Transaction Regional Total Location; Country by Impacted Hectares 25: Figure movement in developed world in developed movement million ha area reported in 2011. area reported in million ha this volume was contracted to buyers preparing for or or for preparing buyers to contracted was volume this the unique location-based considerations within each in California, BC, or Alberta. The remainder was sold MtCO in both developing and developed regions. Due to offsets – cantly but smaller from projecta area signifi overall. Even so, the 1.2 million ha impacted by Deep Dive (Section 8). were responsible for generating one quarter (6.7 development to 58 country locations, up from 54 afforestation afforestation or reforestation in 2012 is double the 0.6 already complying with a compliance carbon market are discussed in greater detail in this report’s Regional report’s this in detail greater in discussed are country or region, the trends introduced in this section country locations in 2011. New projects were identifi ed identifi were projects New 2011. in locations country In 2012, the forest carbon markets extended project 4.3. Project location: Compliance compels market market 4.3. Project compels location: Compliance As seen in Figure 25, projects based in North America America North in based projects 25, Figure in seen As 26 4. Forest Carbon Projects in Depth giutrl ah et ae ae o mn factors, many on based are rents cash Agricultural rent cash for estimates hand, other the on America, State CarbonMarkets oftheForest 2013 ($209/ha), calculated according to the average value average the to according calculated ($209/ha), carbon payments as an alternative or complementary or alternative an as payments carbon other Asia’s for rents cash of estimates most contrast, value inperspective. this puts which >$100/ha, are uses land agricultural anywhere from $15/ha to $60/ha in Brazil – to >$150/ to – Brazil in $60/ha to $15/ha from anywhere hl 35 ilo h ae ne cro management carbon under are ha million 3.5 While does not differentiate between the transactional value transactional the between differentiate not does ial tascin oue Tu te vrg value average the Thus volume. transaction sizable iial i Nrh mrc, hr dvlpr also developers where America, North in Similarly or operatingexpenses. to comparison useful a provides uses land potential pursue activities that are most profi table (i.e., maximize prices, historical rents. Landowners are incentivized to By transaction. the with associated hectares the by divided and year vintage single a from sold offsets of region other any in than here greater is hectare per including land productivity and availability, commodity Latin In estimates. state-wide all across 2012, in this with associated were ha million 0.1 only Asia, in that represents profirepresents that capital covers which that versus t revenue source. Bear in mind, though, that this survey other from revenue per-hectare at looking thus rent), >$250 was rent cash land agricultural average the value, carbon per-hectare average high a reported for soy production on recently deforested land ranges ha inArgentina.

MtCO2e 4 7 0 1 2 3 5 6 Nor 2011 th America Notes: Basedonresponsesassociatedwith28MtCO Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2013. 2012 Figure 26:TransactedVolumebyRegionandProjectType,2011-2012 2011 Oceania 2012 / IM REDDSALM/Agroforestry IFM A/R 2011 Latin America 2012 rud af f l tasce RD ofes were offsets REDD transacted all of half Around Another section of this report fi nds that offsets that fi nds report this of section Another landusekey4.4. REDDactivities:Sustainable to ($7.9/tCO ($8.1/tCO omn ED ciiy n 02 ofes associated offsets 2012, in activity REDD common certifi ($7.7/tCO ed commercial sustainable agriculture activities – priced – activities agriculture sustainable commercial activities that occur beneath the canopy are what truly bymngd nry rdcin eg, charcoal (e.g., production energy ably-managed vrg pie a se fo poet reporting $8.8/tCO average an at projects from seen was price average defi neREDDprojects’effectivenessandlongevity. guidelines similarly obtained a higher average price average higher a obtained similarly guidelines ore fo poet ta egg i sustainable in engage that projects from sourced with projects that employed forest management within were also priced slightly higher than other activities. other than higher slightly priced also were sustain- and agriculture sustainable Smallholder-led rdcin ta rdc pesr t frse areas forested to pressure reduce that production) only impacting0.2millionha(Table8). e te ae RD rdcs r vis emissions avoids or reduces REDD name, the Per hi budr wr pie sihl aoe others above slightly priced were boundary their the but – degradation forest and deforestation from oet aaeet o vi ussanbe forest unsustainable avoid to management forest transacted from project areas that are certifi ed to FSC for projects reporting other approaches. The highest The approaches. other reporting projects for avs a a rvr f eoetto. h most The deforestation. of driver a as harvest avoided deforestation across regions across avoided deforestation 2011 2 e offorestcarbonoffsettransactions. Asia 2 2 e), compared to a range of $4.3-7.6/tCO of range a to compared e), e) than those that were strictly VCS+CCB strictly were that those than e) 2012 2 ) Poet developers Project e). 2011 2 Africa e for a total 0.7 MtCO 0.7 total a for e 2012 2011 Eur say these ope 2012 2 e, but e, 2 e 4. Forest Carbon Projects in Depth 27 5.1 are forced to to forced are 7.5 0.2 5.0 2.8 Commercial agriculture Sustainable energy Smallholder agriculture Other Sustainable forestry Ecotourism A/R activities 3.9 4.7 Hectares Impacted, by Hectares REDD Activity (million ha) REDD Activity State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State 5 5 3 4.7 7.5 0.2 3.9 Hectares Impacted (Million ha) e) 2 have a desire to see projects as part of broader has yet been made available to projects from donor their project-level emissions reductions within regions’ transactions would be facilitated, how any offsets opportunities for projects to access different types of broader policy and program frameworks in order to or recipient governments themselves, outlining the process by which projects would make the transition. or nancial fi benefi ts wouldorganization would be distributed, evaluate what and issue offsets (if Easier said than done, however, as little guidance with projects, so we need ne to structures defi that Swickard, Naomi says relationship,” of type that within Scant clarity has been offered regarding how jurisdictional frameworks. “Nesting can create new urisdictional or regional) activities. REDD projects that projects REDD activities. regional) or jurisdictional fi nance from different sources of demand.” fi development – thus have an interest in synchronizing access deeper pockets of demand. are uncomfortable with having a direct relationship are already in their later stages – as well as those under those as well as – stages later their in already are can reward emissions reductions at different scales any) – and, most importantly, where demand would come from in the case that governments that case the in from come AFOLU Manager at VCS, noting that many buyers “A lot of bilaterals and multilaterals on the donor side CO 7.4 7.6 7.9 7.5 8.8 7.6 4.3 Price Average ($/t e of REDD offsets. *Survey respondents were allowed to report an e of REDD offsets. *Survey respondents 2 9% 1% 40% 13% 53% 18% 42% (% Share) Transacted % of all REDD % of all REDD e) 2 CO 1.2 3.5 4.6 1.5 0.7 3.6 <0.1 (Mt Associated Associated Transaction Vol. Transaction Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013. Source: Forest Trends’ Ecosystem Marketplace. Table 8: North America: Transacted Forest Carbon Credit Types and Buyers, All Markets, 2012 and Buyers, All Credit Types Forest Carbon America: Transacted Table 8: North REDD Activity Notes: Based on responses associated with 8.6 MtCO Notes: Based on responses associated Sustainable energy Ecotourism Forest management A/R activities Commercial ag Smallholder ag Other offset volumes are aggregated under multiple categories. categories. thus some land area and offset volumes are aggregated under multiple unlimited number of project activities – progressing pilots for charcoal production and subsistence agriculture. for charcoal production and subsistence agriculture. transacted from Asia and Oceania were from projects projects from were Oceania and Asia from transacted forestry and agriculture at various scales was behind forest protection. to focus on the critical interplay between sustainably occurs as a result of unsustainable harvest/clearing offsets produced and transacted project varied location. highly As by seen in Figure 27, sustainable practitioners are recognizing that donor country 64% of transacted offsets from Latin America. where we fi nd the largest infl uence from nd sustainable the largestwhere infl we fi supporting ecotourism and smallholder agriculture. similar breakdown of REDD activities, the volume of sourced commodities, forest carbon mitigation, and Conversely, the largest proportions of offsets deforestation by a variety of means – and here is fi ndings together exemplifyfi a looming shift in REDD governments are gravitating toward larger-scale (i.e., While projects in every region reported a roughly energy and A/R activities, since deforestation often Offsets sold from Africa-based projects avoided 4.5. REDD project “nesting”: through JNR advances As bilateral funding for REDD ow, begins market to fl 28 4. Forest Carbon Projects in Depth ue 03 ol ofes rm etd rjcs would projects nested from offsets only 2013, June As one example of how demand could shift, if California State CarbonMarkets oftheForest 2013 outr ofe sadrs ie h VS AR CAR, ACR, VCS, the like standards offset Voluntary cap-and-trade program and follow the REDD Offsets REDD the follow and program cap-and-trade address technical issues as they provide guidance to guidance provide they as issues technical address to charge the leading been have Standards CCB and as well as groups, indigenous and environmental emerging frameworks. For example, tthe CCB Alliance Working Group’s fi nal recommendations released in released fi recommendations Group’s nal Working scale back REDD offset payments due to weakened to due payments offset REDD back scale ee o cet nentoa RD ofes no its into offsets REDD international accept to were u itrainl ED fst fc a uhl battle uphill an face offsets REDD international But political willoreconomicconstraints. projects outsideofthestate. market. compliance state’s the access to eligible be fes h RD Sca ad niomna Standard Environmental and Social REDD the offers certain from opposition fi erce to due California in resistance to the notion of spending money on offset on money spending of notion the to resistance Figure 27:REDDProjectCountryLocations;RegionalDistributionofActivities Graph key(%transactionstiedtotheseactivities): Map key: Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2013. Sustainable energy Notes: Basedonresponsesassociatedwith8.6MtCO Smallholder agriculture REDD activities Latin America REDD countries Sustainable forestmanagement Afforestation /Reforestation

REDD countrieswithprojectsactivelyengagedinnesting REDD activities Africa te uidcinl qiaet f hi certifi cation their of equivalent jurisdictional the – The JNR guidelines released by VCS in fall 2012 so far ACR, too, released a nested REDD+ standard in 2012 and development of a Mexican carbon standard, the standard, carbon Mexican a of development and law climate Mexico’s with developments new account 2013, fall in Protocol Forest Mexico its for approval hc gie nsig f foetto, reforestation, afforestation, of nesting guides which ED atvte, hl CR a rcie board received has CAR while activities, REDD+ ulnn rgsrto rqieet fr project-level for requirements registration outlining program forprojects’co-benefi ts. fe te ny uln o a opeesv framework comprehensive a of outline only the offer Norma Mexicana. following a public consultation last year that took into took that year last consultation public a following lagged previously revisions Protocol program. trade jurisdictional a at projects IFM and re-vegetation, following other standards are technically eligible to be verifiand accounting jurisdictional Projects for cation. ee fr oeta lnae ih aionas cap-and- California’s with linkage potential for level 2 e ofREDDoffsettransactions. Commercial agriculture Ecotourism REDD activities Asia and Oceania Other 4. Forest Carbon Projects in Depth 29

73% oject oject

44% r Mega-p

28% large-scale y

r e

V 21% Large-scale

18% Medium-scale Medium-scale All REDD projects Projects in nesting discussion

State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State 20% Small-scale

State of the Forest Carbon Markets 2013. o-scale o-scale

Source: Forest Trends’ Ecosystem Marketplace.

5 0

r “Actively Engaged” in Nesting, by Project Size “Actively Engaged” in Nesting, by Project Mic

25 15 30 20 10 Figure 29: Count, All REDD Projects vs. Projects Figure 29: Count, All REDD Projects Notes: Based on responses representing 45 projects. Project Count Project more likely to defi ne themselves as “actively en gaged” en “actively as themselves ne defi to likely more not relevant to all projects, particularly smaller-scale to 20 projects in 2011. to 20 projects in 2011. themselves themselves as actively engaged with the relevant 5 reported that nesting is not relevant to their project in nesting discussions, versus those managing in 2012. A smaller proportion of project developers projects that can be sustained primarily with carbon offset revenues. Indeed, Figure projects operating 29 at the large- illustrates to mega-scale that were policy or technical discussions, compared to 33% in baselines; or were seeking regulatory approval or of projects (44%, up from 35% in 2011) described smaller-scale activities. shifted from passive to active engagement in nesting said they were uncertain of where to start, while only government government entities to develop and/or utilize regional area or that they don’t intend to pursue it – compared already developing a formal jurisdiction-scale pilot. Of course, report interviewees note that nesting is 2011 – as several projects previously in this category Another 29% of REDD projects were engaged in early Across all REDD activities, a growing proportion Actively engaged No, and won’t Formal pilot Preliminary discussions Preliminary Unsure how to progress Technical discussions e of REDD offset transactions. e of REDD offset transactions. 2 30% Nesting Progress 20% . State of the Forest Carbon Markets 2013 10% 20% Source: Forest Trends’ Ecosystem Marketplace. Source: Forest Trends’ Ecosystem Marketplace. 10% Notes: Based on responses representing 45 projects, Notes: Based on responses Figure 28: Proportion of REDD Projects by Project Projects by Project Proportion of REDD Figure 28: associated with 8.6 MtCO associated with 8.6 10% largely due to challenges related to the current lack level, while Vietnam is slated to conduct a provincial level in Costa Rica and at subnational levels in Acre nested under a VCS framework, though there is not transcend borders to include both Laos and Vietnam. the meantime, the World Wildlife Fund has been the possibility of nation-wide JNR schemes. If these through JNR by the end of 2013. VCS has also been to develop and pilot JNR frameworks at the national is accounting for agriculture and soil carbon activities, carbon soil and agriculture for accounting is Mai Ndombe province (DRC). of technological capacity to establish and monitor of development, and Acre is expected to become the Norwegian Agency for Development Cooperation Brazil’s Acre and Amazonas states are at the forefront the at are states Amazonas and Acre Brazil’s Still absent from JNR frameworks for the time being would become the rst fi to address forest carbon working with Peru, Costa Rica, and Chile to explore standard. developing a system for measuring, reporting, and fi rstjurisdiction-wide program to deliver REDD offsets fi emissions by partnering with an international carbon efforts move forward, these national governments agricultural emissions baselines across a jurisdiction. verifying (MRV) REDD to apply to a project that would about adopting a jurisdictional baseline. yet explicit guidance for how such projects would go In Asia, Laos has been preparing to pilot VCS’s In early 2013, VCS received $1.4 million from the GHG gap assessment to see if JNR is t.a In good fi (Brazil), San Martin and Madre de Dios (Peru), and JNR framework in two provinces at the jurisdictional 30 4. Forest Carbon Projects in Depth hs atvte wr acutd o udr n A/R an under for accounted were activities These lhuh n poet ra s fe hm t several to home often is area project one Although State CarbonMarkets oftheForest 2013 4.6. Tree managementactivities: plantingandforest n-hr o poet rpre uiiig agro- utilizing reported projects of One-third one only using reported that projects A/R the Of aged stands in 2012 (Figure 30). IFM projects that only different techniques for silviculture and conservation, and silviculture for techniques different strategies acrossfi veoptions: strategy, almost half planted a mix of species in species of mix a planted half almost strategy, tlzd n srtg wr ruhy iie between divided roughly were strategy one utilized Project developers outlined their forest management forest their outlined developers Project Going native h lret rprin f rjcs use ol one only pursued projects of proportion largest the oety rcie wti ter rjc boundaries. project their within practices forestry uneven-aged and even-aged with working those management strategyin2012(Figure30). ehdlg (8 rjcs o IM ehdlg (6 methodology IFM or projects) (18 methodology mixed speciesforestareas. • • • • • Uneven-aged, monocultur A/R IFM Uneven-aged, monocultur Agro-forestry – mixed forestry and agricultural land age, butincludemultiplespecies nvnae, ooutr – l tes rm the from trees all – monoculture Uneven-aged, Uneven-aged, mixed species – trees from multiple from trees – species mixed Uneven-aged, species andage same species,butwithmultipleageclasses species andageclasses use vnae, ooutr – l tes r te same the are trees all – monoculture Even-aged, Even-aged, mixedspecies–alltreesarethesame Even-aged, monocultur Even-aged, monocultur Uneven-aged, mixed Uneven-aged, mixed Figure 30:ProjectCount:ForestTypebyType,PrimaryandOtherPlantingApproaches Even-aged ,mixed Even-aged, mixed Agr Agr Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2013. o-for o-for estr estr y y e e e e Uneven-aged, monoculturemixedAgro-forestry Only 1strategyEven-aged,monoculturemixed Notes: Basedonresponsesrepresenting76projects. 2 pr 2 pr 4 pr ojects ojects 6 pr ojects ojects even- even- 11 pr 100% ojects 10% 20% 30% 40% 50% 60% 70% 80% 90% 0% Notes: Basedonresponsesrepresenting 76projects. Source: ForestTrends’Ecosystem Marketplace. Figure 31:ProjectCountbySpeciesType, State oftheForest CarbonMarkets2013. 42 8 1 (% ShareofReportedProjects) (% ShareofReportedProjects) 18 pr REDD Historical Historical and2012Only 20 pr ojects <50% native100%exotic 100% native>50%Native 20 4 26 pr 2012 27 pr ojects ojects ojects 74 15 7 8 Historical A/R 29 12 2 3 2012 28 2

Historical 39 pr IFM ojects 10 1 2012 31 4. Forest Carbon Projects in Depth e 2 e in 2012. FPIC guidelines 2 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State e of offsets. 2 mid-2013, following government approval delays. ments in terms of the overall project count, but management. net rate, net explains Marie-Claude Bourgie, Climate two Forest Conservation Concession contracts to transacted 9.3 MtCO to projects that reported some level of community regions too remote for basic infrastructure to pe- Projects with customary or collective land tenure in 2012. Mai Ndombe project rst– REDD the Congo Basin’s fi MtCO interaction. involvement in project design and implementation project timelines in greater depth. tion por of land area reportedly also falls under or proponents and the government. In the DRC, the project – is assembled from two former logging of Nature and Tourism and ERA Carbon Offsets Ltd. process to obtain Free, Prior and Informed Consent Earth’s Rimba Raya project, cation obtained in verifi Developers say that the time-cost of these delays ERA, which reported the project’s fi rst verifi ed offsets ed offsets rst verifi ERA, which reported the project’s fi Éco Ressources: Éco “When you have a lot of small were transacted from 13.7 million ha under carbon Change and Finance Expert for Quebec City-based governmental review of the DRC National Forest Code. Code. Forest National DRC the of review governmental generated nearly $53 million from the transaction of 7.3 of transaction the from million $53 nearly generated essence, a partnership between project developers a project that requires sign-off. Section 5 evaluates arrangements generated the highest overall value market at nearly $70 million globally. The largest pro- villages that live off the and forest, expensive to it mobilize is so many cult really people to diffi stop cannot be overestimated in the process of planning collective or customary ownership, where 9.2 MtCO concessions that were suspended in 2008 following a a following 2008 in suspended were that concessions communities’ livelihoods and biomass energy in clearing the forests.” In 2011, the Ministry of Environment, Conservation In In Africa, illegal logging is a primary source of (now Offsetters) signed a Carbon Rights Agreement (FPIC) from relevant communities – 19 of which Another project nite- utilizing forestry concessions, Infi A total of 32 projects reported managing a formal These types of concession arrangements create, in This experience illustrates the importance of community of importance the illustrates experience This – a fi rst for– thea DRCfi – followed by the assignment of – which is why 83% of primary market value went reaches age of consent age of reaches may struggle to adapt to the introduction of exotic markets have evolved to account for that challenge, made progress toward resolving land tenure issues for issues tenure land resolving toward progress made native species, with one exception in the REDD number of projects planting exotic species (Figure 31), (Figure species exotic planting projects of number tree species, standards and programs in the carbon facing CarbonFix Standard – explains that prior to the legal structure that determines how lands can Meanwhile, government or private land use con- is more easily determined on private land and forestry forestry and land private on determined easily more is More than 50% of all forestry projects tracked in 2012 2012 in tracked projects forestry all of 50% than More projects primarily involved 100% native or mostly of steering forestry projects away from plantings of -native species in tree planting. planting. tree in species non-native of use the banning offer livelihoods and food security to surrounding or A/R (Section 3), it is a popular project activity projects) projects) rather than as strictly agro-forestry. Hence, projects reﬂ ect this. ect this. projects reﬂ ownership is clear. Otherwise, tenure becomes a of 38 A/R projects, for example, 22 were developed on privately owned land. Pieter van Midwoud of The be used by individuals and communities – may be not a new challenge, broader A regions. across working but developers project remains an obstacle for Recognizing that wildlife and native plant species Resolving project-area issues around land tenure – with Plan Vivo and other frameworks limiting or outright or limiting frameworks other and Vivo Plan with within these categories that addresses the need to while the market share associated with agro-forestry were developed on privately owned land (Table 9). Out Out 9). (Table land owned privately on developed were signifi cant barrier cation. tosignifi Ownership project certifi specifi c projects. specifi global examination of land tenure challenges is fast exotic species. emerging, while throughout 2012, several developers as well as plantation forestry (Figure 30). as well as plantation forestry (Figure category. Only ve fi projects were associated with communities. cessions were the least common land tenure arrange- In 2012, tree planting activities within IFM and REDD Gold Standard – which last year acquired the A/R- (Figure cantly 30) loweris thansignifi forREDD, IFM 4.7. Land tenure and communities: Forest carbon 4.7. A/R project implementation, it’s important that land A/R projects, which have historically seen the largest These efforts appear to be having the desired effect 100% exotic or mostly exotic planting activities within 32 4. Forest Carbon Projects in Depth “For us, this is maybe the most important starting starting important most the maybe is this us, “For h U RD Porme anhd t working its launched Programme REDD UN The UN the fi within was outlined FPIC rst of concept The nw eso o FCs rnil ad rtra for Criteria and Principle FSC’s of version new A State CarbonMarkets oftheForest 2013 (14 projects), followed by Asia (9 projects). (14 projects),followedbyAsia(9projects). community consentpriortoprojectstart. projects development other and forestry to consent consent priortotheimplementationofactivities. a policy and operational framework for seeking and seeking for framework operational and policy a are and area land indigenous of swath growing a major to applied been since has and 2007 in adopted withhold or grant to rights communities’ acknowledge ed o ban community obtain to need the acknowledging and f i nal version of FPIC guidelines after two years after guidelines of FPIC version fi nal REDD utiaiiy n efciees f ED n thus and REDD of effectiveness and sustainability sited oncollectiveorcustomarylands. elrto o te ihs f nieos Peoples, Indigenous of Rights the on Declaration roiiig tkhle eggmn fo project from engagement stakeholder prioritizing recognizing REDD, of context the in FPIC obtaining describe guidelines consensus The refi nement. and testing, building, pilot analysis, consultation, of occupy projects carbon activities, development other of the FSC-linked Gold Standard. Surveyed projects projects Surveyed Standard. Gold FSC-linked the of behalf on says Midwoud van project,” every for point FPIC to rights community of scope the broadening inception. Like worldwide. projects development infrastructure implemented across several certifi cation programs programs certifi cation several across implemented oetdpnet omnte t te long-term the to other and communities peoples indigenous forest-dependent of role critical the obtain to stakeholders project from pressure feeling reported that community consent obtained via formal formal via obtained consent community that reported FPIC procedures was most prevalent in Latin America America Latin in prevalent most was procedures FPIC 2012, March in approved was Stewardship Forest IFM A/R Privately owned Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2013. 22 13 7 Table 9:ProjectCountbyTenureArrangement,2012 Notes: Basedonresponsesrepresenting 86projects. Collective orcustomary 4 7 8 120,000 tonnes of carbon offsets from its REDD project The project area, Mongo Wa Mono, has been legally been has Mono, Wa Mongo area, project The Community Ujamaa with partnered has Tanzania communities grants legislation forestry country’s The Tanzania, for example, was a socialist country until the n ai Aeia a itrc rnato occurred transaction historic a America, Latin In mlmnain f PC n oety rjcs is projects forestry in FPIC of Implementation challenges, including creating a comprehensive list of village andcommunityrightsareeitherwelloratleast and villages full user rights to forest resources. Carbon ensures that the project is asking the right questions. right the asking is project the that ensures f i nance for the Hadzabe to implement conservation toimplement Hadzabe the fi for nance designated as protected area for natural resource use legacy, socialist its to part in due But democracy. regulations. and rules, laws, national on dependent stakeholders are reached. Finding auditors who speak ensuring and consulted be should who stakeholders underpin contractdesigns. ne priiaoy oet aaeet y the by management forest participatory under eeoes a prnr ih omnt rights community with partner may Developers Hadzabe, ahunter-gatherergroup. reserve forest community a create to Trust Resource n 03 we Bai’ Pie Srí omnt sold community Suruí Paiter Brazil’s when 2013, in principles FPIC the that guarantee to organizations by supporting their legal rights and facilitating carbon facilitating and rights legal their supporting by deforestation of rate current the reducing is project by the Hadzabe, who use a form of land-use planning partly understood. to Brazilian cosmetics giant Natura Cosméticos. The Cosméticos. Natura giant cosmetics Brazilian to the local dialect and understand the legal framework legal the understand and dialect local the those that guarantee to place in are mechanisms that ht rcdd abn aznas novmn. The involvement. Tanzania’s Carbon preceded that PC mlmnain rsns uiu st of set unique a presents implementation FPIC measures. multi-party a became country the when mid-1980’s, Government-owned and/or -managed 5 5 4 concession Land-use 2 5 5 4. Forest Carbon Projects in Depth 33 2 Oceania, A/R, 25 39 th Latin 4 America, Nor America, 39 by Region Region by IFM, 9 by Project Type by REDD, 13 Asia, 16 Africa, Engaging with Communities, % Share and Count of Projects EngagingCommunities, with % Share and Count of Projects State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State 2: FPIC Defined BOX “Free: Should be free of coercion, corruption, interference, and external pressure; Prior: Mutually agreed period of time in advance of an activity or process when consent should be sought; Informed: The type of information that should be provided prior to seeking consent and also as part of the ongoing consent process; Consent: Customary decisions made by indigenous peoples and other forest- dependent communities reached through their socio-cultural decision-making process.” One tree represents 5 projects Figure 32: Project Count by Tenure Arrangement, 2012 Tenure Arrangement, Project Count by Figure 32: Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013. Source: Forest Trends’ Ecosystem Marketplace. Project information disseminated stakeholders local to community Capacity building for participation and risk assessment Social impacts and monitoring Direct employment benefits In-kind livelihood Direct payments community to PriorFormal and Informed Free, Consent process Community-led project redress mechanism Formal grievance and women benefits to Targeted vulnerable/marginalized groups Direct political advocacy s were able to select multiple categories of engagement. of engagement. 81 projects. Respondents were able to select multiple categories Notes: Based on responses representing language. for the land, explains says Chief Almir Narayamoga projects have been put on hold in Peru, Panama, and provided tools to help develop the strategy, the Suruí people themselves remain ultimately responsible people to address being faced various by the community, including a declining challenges that population, were territorial issues, deforestation, and a Honduras due to land tenure disputes. But the Suruí project notwithstanding, indigenous Suruí, who facilitated the community’s FPIC process fi nance fi a 50-year life developedplan by the Suruí devaluing of the indigenous culture. While the supporters and partners of the project and community projects remain a challenge in Latin and translation of related documents to their native continue to be sited on privately owned land. Even UN Even land. owned privately on sited be to continue carbon revenues generated from the project will help America, where two out of every three projects 34 5. Project Finance frsr” se te ee o cnitny n pricing in consistency of level the seen “forestry”) hs eto epoe wa ifrain s available is information what explores section This hs icsin oe a mre vle el o all for fell value market as comes discussion This State CarbonMarkets oftheForest 2013 IFM transactions propelled by pre-compliance were pre-compliance by propelled transactions IFM bu tascin/otat tesle, s el as well as themselves, transactions/contracts about across project types (i.e., REDD, IFM, etc.) as in 2012. agroforestry activities (Figure 34). Rarely in this report ht ih b tre a rgeso t te mean,” the to “regression a termed be might What developers’ use of non-offset-based revenue sources, revenue non-offset-based of use developers’ commodity like than markets product differentiated developers say they series has pricing for an offset category (in this case, this (in category offset an for pricing has series Because the forest carbon markets behave more like more behave markets carbon forest the Because one’s approach to market, and the resources project resources the and market, to approach one’s others whichareknownonlytothebuyerandseller. project types in 2012, with the exception of small-scale in 2012. h tm rqie t tasc ofes codn to according offsets transact to required time the and data, our in apparent are which of some – factors price is often determined by dozens of dozens by determined often is markets, theirprice 14 MtCO2e 10 12 4 0 2 6 8 Source: ForestTrends’Ecosystem Marketplace. $7.3 State oftheForest CarbonMarkets2013. Volume 2012Average price 2012 Notes: Basedon28MtCO

A/R Figure 33:TransactedVolumeand Average PricebyType

REDD $7.8 need, compared to what they $10.4 IFM 2 e transacted. SALM/Agr for Finance 5. Project

estr $6.5

y o- $- $10 $20 $30 $40 $50 $60 got

$/tCO2e h goa cro pie rs hs ruh new brought has crash price carbon global The 5.1. resort thelast needs: Pricing Project compare to what developers need or hope to happen to hope or need developers what to compare also evidencedinFigure33. $1.3/tCO elr te eut o wih a pie fl fr all for fall prices saw which of results the – seller rjc dvlpet n cnrcs o screeching a to contracts and development project or thatareintheirearlystages? offsets delivering already are that projects – projects this Against (A/R). performance market year’s year last does how last backdrop, type project one but nxesv ofes rm eeal eeg projects energy renewable from offsets inexpensive in the carbon marketplace in order to sustain existing sustain to order in marketplace carbon the in rcn my e nraigy osset bt nonethe- but consistent, increasingly be may Pricing the single exception to average prices that varied by varied that prices average to exception single the high end (REDD at $7.8/tCO at (REDD end high at n ot etr eggd n h CM Likewise, CDM. the in engaged sectors most in halt es ersns cmrms bten ue and buyer between compromise a represents less $ Million $1 Figure 34:ValuebyProjectType,2011&2012 $20 $30 $40 $50 $60 $70 $80 $90 $1 Source: ForestTrends’EcosystemMarketplace. 00 $0 0 State oftheForestCarbonMarkets2013. Notes: Basedon28MtCO 2 fo lw arfrsr a $6.5/tCO at (agroforestry low from e $88 A/R 2011 $6

2012 1 $88 REDD 2011 $70 2012 2 e). This consistency is consistency This e). 2 e transacted. $53 IFM 2011 $49 2012 A f $0. orestr g/A

2011 1 2 gr $1 ) to e) y o- 2012 5. Project Finance 35 0.4 High High $216 12 Mt IFM $15 2010 $10.4 $49 M $77 M 5.1 Mt 5 years 0.7 Low Low 7 Mt $165 0.3 High High 35 Mt $1,307 $10 $7.8 2010 REDD $70 M $86 M 8.6 Mt 5 years 0.4 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State Low Low $742 22 Mt 0.6 need to sell to cover upfront capital and ongoing be to support their existing and future activities; project costs; How many years’ worth of anticipated offsets they What developers think the price of carbon should High High $743 14 Mt • • managed funds that employ auction or bidding resort,” allowing REDD projects to develop privately instead sell to the government at a predetermined processes to purchase REDD predetermined criteria. Others have suggested that offsets that meet price if they’re unsuccessful in the marketplace. policy-makers and forest carbon market participants pricing. To understand what developers regard as an will no doubt engage in a dialogue regarding optimal jurisdictional governments act as a “buyer of last acceptable price – as well as to understand the full value of existing project requirements – we asked: and sell to private buyers – but with the option to In the case that any of these policies are considered, Thus, some have made the case for REDD offset “bailouts”, or government- or development bank- $10 $7.3 A / R 2007 $61 M $86 M 8.6 Mt 11.5 years 1.7 Low Low 5 Mt $219 project type, for rows marked with “*” Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013. Source: Forest Trends’ Ecosystem Marketplace. velopers desire or need: velopers versus what de contracted in 2011, volumes projects Prices and developers need to sell: volumes developers need to Volumes contracted versus Estimated annual reductions: Table 10: Comparison of Actual and Desired Price and Volume, and Estimated Annual Reductions and Estimated Price and Volume, and Desired Comparison of Actual Table 10: Values if developers contracted credits at the volumes and prices needed or desired to support projects: Values if developers contracted credits Because a large number of respondents reported on project developers.*Because a large number of respondents Notes: Based on responses from 111 active were then applied to all respondents’ data according to These median variables were then applied to all respondents’ data rather than volume-weighted responses. Total value required to support existing Total value required to support existing projects (supplier estimated, no timeframe)* Supplier-estimated annual reductions Supplier-estimated Years’ worth of expected annual issuance Years’ worth of expected annual issuance developers need to sell* 2012 Volume contracted (actual) sold Years’ worth of expected annual issuance in 2012 Project start date 2011 respondents (median) Project start date 2011 Desired price* 2012 Value (actual) price* 2012 Value with desired 2012 Average price (actual) 2012 Average price falling prices in 2012-2013, expressing concerns that the lesser-felt impact of the CDM market crash among forest carbon projects may reaction. At the same time, simply supply continues to grow, be a delayed retailers to include both inexpensive offsets they (where often recovered margins) and pricier types like forestry in the same portfolio in a way ed that satisfi project investors, and developers included. prices to forestry offset developers. of the low-priced offsets did not collapse the carbon price across project types, but did enable some project developers looked oad to some offl of their Developers nonetheless began to feel the heat of unsold volumes – though not to the fl ooding effect that effect ooding fl the to not though – volumes unsold some market players expected. and the market may eventually face the risk of stranded of risk the face eventually may market the and assets and disenchanted stakeholders – communities, client price requirements and still paid above-average above-average paid still and requirements price client continued to enter the voluntary offset market as CDM as market offset voluntary the enter to continued On the contrary, and in many ways, the availability project needs but did not transact offsets in 2012, we analyzed this data using the median desired price and years reported years and price desired median the using data this analyzed we 2012, in offsets transact not did but needs project 36 5. Project Finance – which is between $2.2 and $2.7/tCO The fi rst tier of data in Table 10 shows that developers hs ais y rjc tp, hr IM project IFM where type, project by varies This State CarbonMarkets oftheForest 2013 ($7.9/tCO Given that this range represents developers’ back-ofdevelopers’ represents range this that Given Our survey fi which survey 10, Our Table in presented are ndings osdrd satn pit o udrtnig and understanding for point starting a considered captured in this report survey are expected to generate ers ot acrig o hg etmt. hs is This estimate. high a to possible according worth of year’s worth years’ two almost contracted reported potential their of 25-29% only contracted annually, across all project types. Within this category, addressing shortfallsindemand. n siae 3-3 MtCO 37-73 estimated an adequate fi nancing. of scenario a under impacts environmental other and developers’ 2011 estimates, due in part to market exit market to part in due estimates, 2011 developers’ developers reportedly require between $1.1 and $2.3 and $1.1 between require reportedly developers developers reported requiring, and in 2012 receiving, 2012 in and requiring, reported developers $10/tCO $280 millionversus$216million. uvyd rjcs Ti i ruhy af h vle of value the half roughly is This projects. surveyed where individual projectperformancevaries. ae o tee siae, oee, ED projects REDD however, estimates, these on Based ED rjcs r rsosbe o approximately for responsible are projects REDD a poet cnrce ofes t hs desired these at offsets contracted projects Had y fw ag RD poet ad lo skepticism also and projects REDD large few a by ilo t spot xsig n ftr atvte from activities future and existing support to billion prices, 2012’s market value would be 29% higher – at – higher 29% be would value market 2012’s prices, on the other hand, said their ideal price is $10/tCO is price ideal their said hand, other the on buyers in California. A/R and REDD project developers, Moving down a tier, developers reported that projects he tms h CO the times three to their projects’ unique timelines, this account is best is account this timelines, unique projects’ their to according each and estimates, survey the-envelope prices. offset carbon forest of direction the regarding eel ta ars al 02 uvy responses, survey 2012 all across that reveals reported receivingin2012. tCO reductions based on low estimates, or not quite one quite not or estimates, low on based reductions hand, other the on projects, A/R 2012. in reductions climate for scale potential REDD’s to speaking types, the higher per-tonne prices expected of compliance of expected prices per-tonne higher the than the reported actual market-wide average in 2012 the highest price per tonne ($15/tCO need or desire to contract offsets at a median price of esrd cos l sree poet, f course, of projects, surveyed all across measured • n ter rjcs epce rne f annual of range expected projects’ their And reductions, intCO 2 e actual). This estimate is no doubt infl uenced by 2 ars al rjc tps $2/tCO – types project all across e 2 e), and$2/tCO 2 2 e. rdcin o ohr project other of reductions e 2 e lessthan2011estimates. 2 i eisos reductions emissions in e 2 e desired, $10.4/ 2 e less than they 2 e more 2 e cmlmnay rvne tem ad alternative and streams revenue “complementary” This is attributed to the projects’ high upfront costs that This begs the questions, the begs This A/R As REDD projects begin to incorporate similar activities in carbonfi nance incomingyears? streams canprojectsharvesttoaccountforshortfalls they generate carbon revenues? What other revenue supporting overhalfofallmarketvolumesbefore Theequity finance: ofproject foundation 5.2. Sources 2011, to between $0.7 and $1.3 billion according to according billion $1.3 and $0.7 between to 2011, Scin ) n tu itgae lentv revenue alternative integrate thus and 4) (Section area overitslifetime. are estimated to require between $0.2 and $0.7 billion both on Based years. 6.5 by type, project other any additionality. In the case of the most popular forms of forms popular most the of case the In additionality. activity alone may not sustain current activities for long. s nesv a fr / poet, o eape their – example for projects, A/R for as intensive as oue 5 er mda) Ti i ms lkl de to due likely most is This median). years (5 volume hl IM rjc dvlpr’ eie pie s $5/ is price desired developers’ project IFM While e u ti qeto t dvlpr t determine to developers to question this put We developer estimates. other or timber from revenue complementary deriving streams – and as ongoing project management is not is management project ongoing as and – streams similarly fallen from between $1.1 and $2.1 billion in billion $2.1 and $1.1 between from fallen similarly eto 54 eosrts ht eeoes received developers that demonstrates 5.4 Section wood productsales. of natural or human-induced destruction to any project project monitoring and additional plantings in the case f abn fst. ts motn t ba i mn that mind in bear to important It’s offsets. carbon of project fi nance, private equity investmen ts were made vrl etmtd ed fr abn eeus has revenues carbon for needs estimated overall – sequestration carbon for harvest timber optimizing rjcs eotdy eur a rcin f h sales the of fraction a require reportedly projects include not only measurement and planting but also but planting and measurement only not include issuance over11.5years. in 2012 – up from less than half in 2011. Yet we also we Yet 2011. in half than less from up – 2012 in immediate payment for two-thirds of offsets contracted netet ore d nt ml a ak f project of lack a imply not do sources investment to support existing activities, or $19-65 million/annual $19-65 or activities, existing support to this and their desired price, A/R projects in this survey tCO to avoid deforestation drivers within their project areas h ntr o IM rjc atvte wih include which activities project IFM of nature the how projects are fi nanced beyond the direct sale direct the beyond fi nanced are projects how nw rm h peiu scin ht xsig market existing that section previous the from know more years’ worth of expected annual issuance than issuance annual expected of worth years’ more 2 project developers also reported needing to sell to needing reported also developers project e more than that of A/R project developers, IFM developers, project A/R of that than more e what source of fiof source what are nancing 37 5. Project Finance 7 9 8 6 5 38 16 15 Project Count** 5 89 35 26 14 13 10 13 ($ M) Value 6 e) 2 13 CO 5.2 3.5 1.8 1.8 1.2 1.3 0.6 10.9 (Mt Associated Transactions State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State State of the Forest Carbon Markets 2013. Source: Forest Trends’ Ecosystem Marketplace. only pertains to projects that transacted offsets in 2012. Table 11: Other Project Finance, by the Numbers Table Notes: *Survey respondents were allowed to select multiple Other Private equity Source* Carbon fund Loan Grant High net-worth individual(s) Bilateral source CSR (no offset delivery) project fi nancing sources fi nancing sources. **“Project count” fi nancing sources project fi 14 8 Region and Globally Region and ate equity Carbon fund Loan Grant High net-worth contribution Private equity Carbon fund Loan delivery) Other Bilateral source Philanthropy (no offset CSR distribution (no offset delivery) Count, projects reporting complementary project revenues Number: Count, projects reporting complementary project Graph key (% Share by Financing Source): 43 Notes: Based on responses from 111 active project developers. Notes: Based on responses from 111 active 13 Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013. Source: Forest Trends’ Ecosystem Marketplace. 41% 2% 20% 2% 3% 7% 5% by finance sourceby 13% Global proportion 7% of transacted volume of transacted volume Figure 35: Proportion of Transacted Volume and Count of Projects Utilizing Other Finance Sources, by Project Finance Sources, Utilizing Other and Count of Projects Volume Proportion of Transacted Figure 35: larger market value was associated with projects that Fund which raised $80 million to channel resources to resources channel to million $80 raised which Fund the agricultural drivers of deforestation. received fi nancial support from carbon-facing private received fi 2013 year The Fund. Livelihoods Danone the like funds themselves fronting project costs with company or tapping into private equity were also private-sector fully cover project costs, but does tip the balance in favor of carbon management. Private loans that might require fi nancial repayment or repayment nancial fi require might that loans Private investment from revenues generated partly from offset from partly generated revenues from investment offset delivery were next in line by project count, but a but count, project by line in next were delivery offset personal capital. The majority of project developers were supported by private equity, either from investors from either equity, private by supported were with the expectation of offset delivery or a return on saw the close of one such fund – the Althelia Climate seek ing a share of offset seek revenues or the developers sales. In other nancecases, alonecarbon mayfi not jurisdiction-scale activities, some of which will address will which of some activities, jurisdiction-scale entities. and transacted offsets represented in this question Table 11 shows that the largest number of projects 38 5. Project Finance State CarbonMarkets oftheForest 2013 This year, no project fi nance was reported from reported was fi nance project no year, This n nraigy omn opnn o REDD of component common increasingly An A number of projects received fi nancing from bilateral REDD Grant support came from a variety of levels within levels of variety a from came support Grant critical to avoiding their reversion to forest destruction. is and use forest unsustainable abandoning of cost components. given underestimate an likely is This commodities. n RD Cnotu ad rpcl oet Alliance Forest Tropical and Consortium REDD and opportunity the for communities compensate to aims diinl eeus rm h sl o sustainable of sale the from revenues additional While forward-thinking initiatives like the Roundtable the like initiatives forward-thinking While While a signifi a project While of source some fi cant nance, oos oe hl o wih ee rvt project private were when 2011, which from shift a represents This of developers. half over donors, second- the transacted projects grant-supported rjcs te rmto o atraie livelihoods alternative of promotion the projects, projects and REDD projects with agricultural or IFM or agricultural with projects REDD and projects long-standing on relied primarily donors public 2012, in that found We grants. NGO-managed or n rn fnig rae mre dsotos that distortions market creates funding grant on if they obtained project support from public sector public from support project obtained they if the growing transaction volumes associated with IFM with associated volumes transaction growing the channel to funding toREDDpilotprojects. NGOs conservation with relationships h pbi sco, s el s rvt foundations. private as well as sector, public the he fi rst time this year, we asked respondents we year, fi this the time For rst ags vlms n vle n h marketplace. the in value and volumes largest multilateral donors, while only four projects obtained projects four only while donors, multilateral market development. inhibit and requirements price true projects’ mask reliance that concern express participants market A/R IFM Other Finance Sources: By Project Type Figure 36:ProportionofTransactedVolume,ProjectsUtilizingOtherFinanceSources:ByProjectType (MtCO Philanthropy OtherCSRcontributionNGO/FoundationNoothersourcereported Private equityCarbonFundLoanGrantHighnet-worthcontributionBilateralsource 2 e [“M”]=totaltransactedvolumeassociatedwithotherfi nancingsources,byprojecttype) .Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2013. Notes: Basedonresponsesfrom111activeprojectdevelopers.

As seen in Figure 37, these estimates vary according vary estimates these 37, Figure in seen As to market: Thinkinginyears 5.3. Time n vrg, hs de a adtoa ya’ time year’s additional an added this average, On etf ain y a o vhce lk FSC,Fairtrade, like ofvehicles way certifi by cation currently is information little REDD, and commodities available describing the scale, land area impacts, or impacts, area land scale, the describing available between relationship reciprocal the exploring are any project type, end-to-end, given the greater amount ln te a – s n o te ot signifi most and the cant of one as – way the along We found that across all project types and standards, eiey a sge aon 2 yas no this into years 2½ around signed was delivery Certifi cation. such informationisoftencloselyheld. survey captures high-level estimates of the time that time the of estimates high-level captures survey unpredictable contributors to project cost. This year’s a rqie o poet t sras ao project major surpass to projects of required was REDD projects (7months)orIFMprojects (5months). r h Porme o te nosmn o Forest of Endorsement the for Programme the or commodity sustainable with associated premiums between validation and verifi cation, compared to compared verifi cation, and validation between of time required for projects to “ramp up” sequestration. of timelines longest that reported developers project process. developers Project verifi years. offset 3.5 was cation rjc dvlpr bma te ie eurd to required time the bemoan developers Project to a multitude of project variables. For example, A/R example, For variables. project of multitude a to report that, on average, their fi offset their for average, contract on rst that, report to development PDD from required time average the where market a in participate to required time typical o hr-at sadr rqieet ta occur that requirements standard third-party to aiae h poet yl – n ay changes any and – cycle project the navigate milestones, aiming to inform expectations about the about expectations inform to aiming milestones, 2.6 M 6.6 M 7.5 M 5. Project Finance 39 e of e of 2 e) as e) 2 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State e) through spot transactions, 2012 saw a drop in 2 many interacting factors, it is diffi cult to extrapolate the extrapolate to cult diffi is it factors, interacting many later if they’re unable to identify buyers themselves. to identify buyers themselves. later if they’re unable help to close this gap. help to close Figure 38 shows that most IFM tonnes were transacted were tonnes IFM most that shows 38 Figure remnant indicator of their early and ongoing support to some of the rst market’s projects fi – but also as up-front in 2012 up-front in 2012 they’re the “how” of the transactions. Contract terms tCO forest carbon offsets transacted in 2012 received for which developers will be paid upon delivery or on to buyers that will pay upon offset delivery (POD), via that were at earlier stages of project development. for planting or technical transacted from these project costs, types were associated so most volumes immediate payment (via spot transactions or pre- project developers’ tendency rst to try fi theirhand project types often lend themselves to different terms. payment for future offset delivery) worth $53 million. uence that contract terms have on price. particular inﬂ of forestry offsets were issued for rst the time fi and buyers paid the highest prices (an average of $12/ buyers sought out offsets from new, unique projects However, in contrast to 2011, when a large volume Developers indicated that a reported 6.7 MtCO South offset transactions and emerging markets may Since the price at which offsets are sold depends on Sometimes, the nature of a project makes a particular with pre-payments. spot transaction prices (to an average of $7/tCO of average an (to prices transaction spot sold to retailers (3 years). Retailers explain this as a structure by which they transacted offsets in 2012 Contractual agreements between buyers and sellers difference difference in time to market directly for projects to that end sold users (2 years) versus those that We asked project developers to specify the contract at direct marketing and to turn to retailers some time a call option basis – while remaining market value is types. associated with unknown contract and REDD projects tend to need nancing upfront fi create the structure by which offsets change hands – can directly uence inﬂ offset price, and different contract type more amenable. For example, A/R One of the widest gaps among market actors is the (Figure 38). 5.4. Contract type: Two-thirds of payments occurred 5.4. Contract type: Two-thirds Another $40 million was associated with transactions .4 1 .5 .4 1 0.8 1 1 .4 0.8 0.6 0.6 .5 1 1 0.9 . 1 0.9 1 1 .7 1 2.4 2.3 .8 .6 .5 1 .4 .3 1 .3 1 1 1 1 0.6 relevant milestones. PDD development PDD to validation Validation to verification PDD development to offset transactions All A/R All IFM VCS A/R CAR IFM All REDD Plan Vivo VCS REDD Total Years . State of the Forest Carbon Markets 2013 Standard, and Buyer Type, 2012 (Years) and Buyer Type, Standard, Source: Forest Trends’ Ecosystem Marketplace. Buyer: End Use All VCS Forestry Figure 37: Supplier-Estimated Average Years Average Years Supplier-Estimated Figure 37: to Achieve Project Milestones, by Project Type, by Project Type, Project Milestones, to Achieve Notes: Based on responses from 89 projects that achieved Notes: Based on responses from 89 projects Buyer: Offset Retailer not rstsee transactiontheir untilfi over fours years remote regions – and that the emergence of South- time lag before an initial transaction than did projects projects did than transaction initial an before lag time Suppliers cantly. signifi vary not did otherwise timelines recent years. Likewise, newer A/R projects reported Projects based in developing countries saw a longer in North America and Oceania (3.1 years versus into the >5-year average timeline. These projects of ciencies market that effi have been achieved in say this may be related to developed country projects’ projects’ country developed to related be may this say shorter timelines. survey respondents and so did not have the benefi t survey respondents and so did not have the benefi greater degree of access to end buyers than those in in those than buyers end to access of degree greater also reported some of the earliest start dates among among dates start earliest the of some reported also commitment reported of any project type and did 2.4 years, on average), despite the fact that project VCS A/R projects required the greatest up-front time time up-front greatest the required projects A/R VCS 40 5. Project Finance REDD State CarbonMarkets oftheForest 2013 contracts that allowed payment and delivery of credits are able to produce – mitigating uncertainty as to how delivery that hinges on the quantity of offsets projects guaranteed offset delivery, rather than “unit contingent” $9/tCO tl, F ofe byr wr wlig o a almost pay to willing were buyers offset IFM Still, offset marketsthatwerenotyetinfullswing. to minimize risks associated with compliance carbon compliance with associated risks minimize to sought buyers and costs up-front project fewer this incurs Typically, type date. later a at place take to many offsetsthebuyerwillultimatelyreceive. Notes: Basedonresponsestiedto11MtCO IFM AR All 0% 2 Pre-pay, fixeddeliveryPre-payed,otherMezzanine(mixofPPandPOD)Calloption Spot POD*,unitcontingentPOD,fixeddeliveryPre-pay, mr we te O cnrc specifi a contract ed POD the when more e Figure 38:ContractTypeMarketShareandAveragePricebyProject(Share$/tCO $7 $7 $11 $5 . Source:ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2013 10% $6 $7 $18 20% 30% $19 2 e oftransactedforestcarbonoffsets.*PODstandsfor“paymentondelivery”. 40% $7 $7 50% “fi rm” delivery, contracts often defi ne what happens whathappens ne often defi contracts “fi delivery, rm”

In the case of the 2.6 MtCO 2.6 the of case the In guarantees in 2012, typical options include: replacing replacing include: options typical 2012, in guarantees delivery – whether the tonnes are sourced from the the from sourced are tonnes the whether – delivery project undercontractornot. specifia in locking cases most in for buyer, volume ed in the case of project under-delivery. Though we did did we Though under-delivery. project of case the in the buyer; meeting delivery with offsets from from offsets insurance with third-party a delivery useing or issuances; meeting future buyer; the the offsets with others from the marketplace; refunding not survey project developers regarding delivery delivery regarding developers project survey not mechanism. These guarantees mitigate risk for the the for risk mitigate guarantees These mechanism. $8 60% $10 $8 70% $18 2 80% e contracted for fifor or contracted xed e N/A N/A 90% $9 N/A 2 e) $18 100% 41 6. Offset Buyers 1 NGO 2 corps 6 Domestic Other 12 Events/Entertainment Manufacturing Finance/Insurance Resale, PR/Branding 12 voluntary 2 Individuals (0.3%) 2 2 Climate-driven mission Climate-driven 12 NGOs, unspecified (0.2%) Conservation NGOs (0.5%) National governments (1%) National governments 3 sized enterprisessized Small- to medium- medium- to Small- Subnational governments (1%) Subnational governments 4 Direct 14 e of offsets in 2012. 2 pre-compliance 4 12 unspecified Private sector, Private State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State Tourism 8 beverage Food and 20 Retail product market Retail Demonstrate 11 Communication/Information climate leadershipclimate transacted in 2011. A were contracted full to multinational corporations (Figure 67% of forestry 39). offsets Private sector buyers purchasing included offsets for not corporate social only responsibility rms fi also but compliance, for preparing or purposes (CSR) those offsetting entertainment and sporting events or offering customers the option to offset emissions from ights or shipments. their ﬂ The public sector – mainly national governments Europe and in state or provincial governments in North America, Latin America, and Oceania – $430,000 purchased worth of offsets in 2012, making up about 2% of the marketplace, down This from 18% decrease last relates year. to demand a for drop tCERs in as of the public rst the Kyoto fi compliance Protocol sector came to period a close at the 2012 end and of because fewer forestry offsets into were BC’s Carbon Neutral Government program. sold and individual buyers just transacting 0.2 MtCO barely made the map, Transportation e 2 Energy 16 23 6. Offset6. Buyers responsibility Corporate social 67

developers and retailers in 17 Multinational corporations Agriculture and forestry Figure 39: Market Share by Buyer Sector, Type, and Motivation Figure 39: Market Share by Buyer Sector,

Notes: Based on 213 buyer types as described by survey respondents.

. Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013

e from project 27

2 20 Resale, pre-compliance Resale, Offset retailers MARKET SHARE BY BUYER TYPE BUYER MARKET SHARE BY (% SHARE) MARKET SHARE BY BUYER SECTORMARKET SHARE BY (% SHARE) MARKET SHARE BY BUYER MOTIVATION (% SHARE) MOTIVATION BUYER MARKET SHARE BY 6.1. Buyer types: Landscape connections Buyer 6.1. Amid ETS, upheaval EU the within use from offsets forestry in of exclusion compliance markets the majority (71%) of forest and carbon offsets transacted the in 2012 were sold to purely voluntary buyers without compliance or pre-compliance motives. contracting buyers, The of pool largest private the remained sector 19.7 MtCO This report engages purchasing. in offset carbon forest an toward attitudes buyer in-depth examination of It dives into the types of buyers interested in forestry offsets, their motivations, and their locales, based on information provided by offset suppliers and through purchasers. conversations with private-sector offset Carbon offset buyers are incredibly bringing buyer each diverse with preferences, and in motivations their and offsetting for reasons of set unique a market the to guide their purchases. different criteria that 2012, cant a increase signifi from the 12.3 MtCO 42 6. Offset Buyers State CarbonMarkets oftheForest 2013 demand, purchasingacollective9.7MtCO and beve rage, and remaining the of majority a composed sectors tourism food transportation, forestry, ucaig . MtCO 7.2 purchasing their clients were again the largest source of de mand, and other intermediaries purchasing offsets to resell to of industries array and interests in 2012. broad Carbon offset re a tailers represented buyers sector Private akt n 02 prhsn 8 MtCO 8 purchasing 2012, manufacturing in market the carbon coin, voluntary the in the demand dominated of industry side other the On North in projects America andOceania. from mainly bought They offsets. land-based for preference a has sector land-based this that indicating – offsets carbon forest for demand overall voluntary offset market, but represented 17% the of in transacted offsets of (4%) portion small a only The agriculture/forestry sector, for instance, purchased on. depend businesses their infrastructure natural the may invest in forest carbon offsets as a way to protect (e.g., clean water) for their operations or products and place-specifinatural on c resources depend and forest-based sectors ecosystem buyer services top These MtCO Table 12:NotablePrivateSectorForestCarbonOffset Walt DisneyCompany National Geographic TUI AG&Travel Motorola Mobility Source: ForestTrends’Ecosystem Marketplace. 2 o ta ws oet abn I combination, In carbon. forest was that of e Interface, Inc. Buyers andProjectInvestors,2012-2013 SK Telecom Bain &Co. PUMA AG State oftheForest CarbonMarkets2013. eBay Inc. Peugeot Qantas Allianz Eneco Arval DHL 2 . h eeg, agri energy, culture/ The e. Obayashi Corporation Natura Cosméticos Marks &Spencer Crédit Agricole Shiseido Co. BNP Paribas ARP Integra SK Telecom Microsoft Nedbank Entega PG&E 2 Kent UPS PPR , u ol 0.4 only but e, 2 e. carbon neutrality goal for FY2012, remain visibly active. its meet to carbon forest in invested which Spencer, & sector. Still, product retailers such as UK-based Marks they when 2011, from transacted 14% of the forest carbon sold to the private drop a represents demand market of (3%) share small market’s product retail The forest carbonoffsets. bec o srn ntoa ciae oiis Some policies. climate national strong “demonstrate of absence to they order the in and/or that industry their in within leadership” climate say projects often offset support buyers corporate Voluntary chain. supply their within and buildings their from emissions reduce to measures reasonable all taken have they sourced) in 2012, uses offsetting as a “last resort” after forest- them of (many offsets on $200,000 spent company that publishing US a Macmillan, example, For the sustainability of problem.” out way larger their buy a “to simply not of and strategy part as activities off- communicate setting to prefer buyers corporate opinion, many customer and attention media to Sensitive in-house emissionsreductions. any and target emissions the between gap the close to intended offsetting carbon with efforts, other and chains, energy supply includes “greening” that effi improvements, plan ciency sustainability larger a of part a as targets reduction GHG set often Companies targets GHG pursue commitments. broader companies’ to within established was offsets carbon forest buying for motivation primary the use, end voluntary Among private sector actors seeking offsets for purely markets that intend California’s to allow offsets from forest or projects. tax compliance newest two the – program cap-and-trade carbon Australia’s under regulation either anticipate that companies by transacted in 2012 was resale to voluntary buyers (2.3 MtCO (2.3 buyers voluntary to resale was 2012 in common motivation for forest carbon offset purchases Led by demand from carbon market players, the most 6.2. Buyer Motivations: Why forests? r uue opine n-sr (. MtCO (5.4 end-users compliance future or events and entertainment – contracted 2.1 MtCO 2.1 contracted – entertainment and events and insurance; fi and manufacturing; nance product market; retail the information; and communications like – infrastructure physical and security, food use, land to connections less-straightforward with sectors the pre-compliance side, a total of 4.3 MtCO 4.3 of total a side, pre-compliance the 2 2 ) On e). e were e 2 e of 2 e) 6. Offset Buyers 43 e of offsets – more than half of e of offsets – more than half of 2 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State its corporate emissions – in 2012, also has a particular particular a has also 2012, in – emissions corporate its nity foraffi the ts co-benefi of forest projects. “We’re really drawn to forestry drawn to reforestation projects in projects particular that have and we’re really watershed protection, habitat rehabilitation as well as a GHG component,” said Bob Antonoplis, assistant general counsel for The Walt Disney bulk of our money is spent on forestry projects.” Company. “A 6.3. Buyer locations: EU rules 6.3. Buyer Buyers from 20 different country locations transacted these of majority vast The 2012. in offsets carbon forest developed in based buyers to sold were (99%) tonnes regions, while buyers of volume cant in insignifi an purchased China and Brazil emerging economies like offsets from forestry activities. opt-in offset programs to forestry projects. customers, focusing on Many companies also lean because toward they offer ts social and environmental forestry benefi ed offsets certifi offsets Forestry sequestration. carbon beyond tripled than more Standards CCB and VCS the both by their transaction volume in 2012, indicating growing private-sector interest in “charismatic” projects. The Gold Standard’s Land-Use and newly available in June 2012 following a decade-long Forestry small- to available ciencies Protocol, effi targets energy, on focus cation of both carbon mitigation holders seeking certifi ts. co-benefi and the delivery of ts, buyers With an eye to these charismatic co-benefi are often willing to pay offsets. Buyers like the National Geographic Society, slightly more for forestry which supported a reforestation project in Kenya to offset the use of natural gas in their a buildings and REDD project in from Brazil their to 2012 offset business the travel, ts.projects explicitly emissions Theywith haveco-benefi look bought offsets for Chief the Wegner, Hans but prices above-average at cerSustainability at Offi National Geographic, says that the high quality of threatened the for habitat expand forestry or protect offsets they that fact and the species ora of and fl fauna can make it worth while: their “I’m looking for projects that restore the forest while also expanding habitat for species. that Projects protect threatened or endangered species are especially attractive because they address multiple issues simultaneously.” The Walt Disney Company, which spent $3.5 million to support the Alto Mayo REDD project in Peru and purchased 0.4 MtCO 2% 1% 27% 23% 20% 14% 12% Share Ranking by %Ranking by Motivation . State of the Forest Carbon Markets 2013 Source: Forest Trends’ Ecosystem Marketplace. Source: Forest Trends’ Ecosystem Marketplace. Table 13: Market Share by Buyer Motivation Market Share by Table 13: Resale to pre-compliance buyers Resale to pre-compliance Corporate social responsibility Resale to purely voluntary buyers Resale to purely voluntary Demonstrate climate leadership in Demonstrate climate industry Pre-compliance Climate-driven mission PR/branding Often, buyers say that projects it’s are among the because easiest stories forest DHL to company tell shipping carbon International from perspective. a CSR offers customers a carbon-neutral option for sending projects carbon forest that nd fi marketers and parcels, are straightforward to with explain emissions to reduction projects, those explains Daniela Spießmann unfamiliar of DHL’s Corporate Social Responsibility team. Moving companies U-Haul and Kent also offer Overall, the motivations of forest carbon offset buyers buyers offset carbon forest of motivations the Overall, are very similar to those of carbon offset buyers general. in So why do support forest voluntary carbon buyers projects out choose project of to the types suite available of to forestry them, offsets typically especially transact at when above-average prices? Climate leadership reportedly ve also motivated the fi corporations that supported the launch of the Code REDD campaign in June 2012, including insurance giant Allianz, French (previously PPR retail Group), energy conglomerate companies and Entega, and South African Eneco bank Kering Nedbank. Code private-sector securing of goal the with operates REDD from offsets of millions for contracts secure to pledges high-quality REDD projects. companies – most notably The Walt Disney Company and Microsoft – have imposed price on select an business divisions internal in the absence carbon of a domestic carbon price mechanism. Following their other several that say suppliers offsets US-based lead, corporate buyers have since expressed following their lead. interest in 44 6. Offset Buyers State CarbonMarkets oftheForest 2013 rjcs cnuig lot he-ures f the of Within projects. three-quarters American North domestic by transacted offsets almost support consuming to projects, appetite characteristic exhibited and their worldwide offsets forestry one- of than quarter more transacted buyers American North forestry offsetdemand. European dominated Germany and in France, based UK, the buyers Together, details). for 8.7 Section (see efforts mitigation national other report and frameworks emissions national within acknowledged credits are these Portugal, and UK the in and creation, programs forestry domestic developed have EU However, the in countries abroad. few a from offsets traditionally land-based have region sought this in based buyers thus and Asia from Africa. Forestry offsets are excluded from the EU ETS, offsets carbon forest for demand of developers source largest the representing project and buyer a reported which for offsets all of half than more of purchasing 2012, in offsets forestry source for demand largest the again were buyers EU-based North America North North America North From To Figure 40:FlowofTransactedVolumefromProjectRegiontoBuyerRegion,2012(%Share) Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2013. Latin America Latin America From o netvz lcl woodland local incentivize to To Notes: Basedon213buyertypesasdescribedbysurveyrespondents. From Europe Europe From Africa To To carbon price. Australian the of shape future the over uncertainty tremendous given 2013, in repeated be will the region in activity of volume high the is whether It unclear projects. America-based Latin from also sourced was volume some Carbon though country’s Initiative, Farming the under developed those as such home, to close projects support to buyers preferred Australian 2012. 1, July on effect took tax carbon country’s the as purposes, pre-compliance for contracted were offsets these of Most volumes. offset transactionglobal of 15% to linked and country any in private million $40.4 purchases – and the highest value attributed to behind buyers in players were companies market carbon Australian not specifyabuyersector. did motivation this with associated responses survey most and California, in pre-compliance by motivated were transactions offset of 36% However, demand. of and events and entertainment sectors were key sources the region, US buyers from the tourism, manufacturing, From Asia Oceania Oceania From To To 7. Market Infrastructure: Standards and Registries 45 e of transacted offsets. Projects Climate Action Reserve California Protocols Internal / Proprietary Pacific Carbon Standard Clean Development Mechanism ISO-14064 Verified Carbon Standard Chicago Climate Exchange Carbon Farming Initiative 2 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State d; 2% y; 1% ivo; 1% manent est Sink locations – retained the bulk of market share in 2012, networks. Forestry Standard focus on forest carbon opportunities carbon forest on focus Standard Forestry the Rainforest Standard and the Peru Carbon Fund’s fungibility with emerging domestic carbon markets. transactions as early as 2014. than doubles, CDM slows that have achieved or are seeking VCS approval Meanwhile, the traditionally energy-oriented Gold behind 24.5 MtCO of transaction volumes among independent standards, independent among volumes transaction of Panda Standard partnered with the FSC and the Fairtrade specifi c tospecifi Latin America. China’s Panda Standard CarbonFix standard in its efforts to expand into forestry into expand to efforts its in standard CarbonFix Carbon dards applicable to multiple project types and country experienced a boost in market share, capturing 71% and land use and leverage existing cation certifi consumer label and acquired the forest-facing continued to pilot projects in 2012 while exploring carbon and other offsets available for domestic In late 2013, Thailand’s Voluntary Emission Reduction Independent forest offset standards: VCS share more Independent forest offset standards: (T-VER) standard is slated to go into force, with forest forest with force, into go to slated is standard (T-VER) Among new players to emerge on the scene in 2012, As in previous years, independent standards – stan- American J-VER; <1% Per For Registr Initiative; 1% Plan V Standar CarbonFix; <1% Woodland Carbon Code; <1% 2% 2% 2% 2% 2% 5% 4% 10% Notes: Based on 628 observations from 357 reported projects or secondary transactions. . Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013 Figure 41: Market Share by Standard/Certifi cation Type, All Markets, 2012 (% Share) Figure 41: Market Share by Standard/Certifi 57% 14% 7. Market Infrastructure: Market Registries and Standards 7. ration tinued of in standards and methodologies con the land area impacted by nance carbon in fi 2011. introduced a process for cation simultaneous certifi issuance and retirement. of transaction volume, new methodologies from other of cations certifi available for forestry and land-use standards. For example, VCS and the CCB Standards Standards CCB the and VCS example, For standards. standards – each with their own unique selling points, some exible, internationally some fl locally attuned – designed to lower audit costs for projects seeking While forest carbon projects’ characteristic prolife- While the most dominant combination of project also gained traction. Alongside the growing gamut activities, registries backed record levels of offset activities across 26.5 million hectares, doubling credit for both emissions ts. reductions and co-benefi consolidation of market share and expertise among certifi cations, VCS+CCB, more than doubled its share certifi carbon offsets, project standards raised the bar in In both voluntary and compliance markets for forest Overview of standard use in 2012 2012, the market also saw the fi rst signs of signifi cant cant signifi of signs rst fi the saw also market the 2012, 2012, providing guidance for forestry and land-use 7.1. Standards: Consolidation and proliferation Consolidation Standards: 7.1. 46 7. Market Infrastructure: Standards and Registries h ls o AOU rjc tps cetd o ue in use for accepted types project AFOLU of list The State CarbonMarkets oftheForest 2013 2012 – slowing after 2011’s rush to contract, register, contract, to rush 2011’s after slowing – 2012 Offsets from A/R projects developed according to CDM carbon methodology, and a new category for blue blue for category carbon methodologies. new a and methodology, carbon compliance offsets in the California cap-and-trade cap-and-trade California the in offsets compliance vie cneso, n ubn oety drawing forestry, urban and conversion, avoided Kyoto the of end the of ahead volumes issue and rwn eprie rm oh C ad A. ACR, CAR. and ACR both from expertise drawing of treatment registry and issuance, development, aiona nlds mrvd oet management, forest improved includes California this attribute standards The market. the of 5% just on lo nld a rtcl o rc management, rice for protocol a include also soon combined their half lost ACR and CAR standards hc rlae a ehdlg fr eti wetlands deltaic for methodology a released which or 57% of all transactions, market-wide. While not yet yet not While market-wide. transactions, all of 57% or program. program. included the release of its JNR framework, a new soil soil new a framework, JNR its of release the included t apoc fr pooo fr eti rsoain in restoration deltaic for protocol a for approach its America-facing North entirely) not (but Primarily fiProtocol’s for 2.4 Section (see period compliance rst refl ected in 2012 fi ndings, VCS’s recent milestones milestones recent fi VCS’s 2012 ndings, refl in ected restoration in 2012, will also lobby regulators to adapt to regulators lobby also will 2012, in restoration may It projects. voluntary for protocols CAR’s from players market project for guidelines clear awaiting themselves found as environment “wait-and-see” a to capture to year previous the tran from volume saction in transacted offsets forestry of 2% only represent to more oncompliancemarkettrends). dramatically fell buyers CDM for and methodologies 8% 7% Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2013. Notes: Basedon628observations from357reportedprojectsorsecondarytransactions. Figure 42:MarketSharebyIndependentStandard,AllMarkets2012,(%Share) 6% 50% 71% 16% 5% 2% 2% 2% 2% CarbonFix; <1% Mvn frad i’ icmet ht l proponents all that incumbent it’s forward, “Moving Plan Vivo;1% sd fo pors i jrsitos hr carbon where jurisdictions in progress from Aside io wie tl sal n akt hr, xadd its expanded share, market in small still while Vivo, e been yet xlrn mas o cl poet b providing by projects scale to means exploring ihn h frs cro mres tee ean a remains there markets, carbon forest the Within guidance to jurisdictions that wish to “nest” projects “nest” to wish that jurisdictions to guidance fi nance has already made an early mark, independent California. In the meantime, CAR also fi nalized its fi nalized also CAR meantime, the In California. Standard, VCS, Plan Vivo, and CCB Standards seek to why programs like JNR have become so important, as within theirbroaderconservationframeworks. Solomon Islands, countries where no projects have projects no where countries Islands, Solomon f oa t pu it te uidcinl rgas of programs jurisdictional the into plug to today of projects the fi allow conservation to forest ways of nd at sadrs Pa Vv mitis uiu “ex- unique a maintains Vivo Plan standards. party activities small-scale grouping for mechanisms offer increasing an but activities, project isolated for place fst rjc dvlpet o e lctos Plan locations. new to development project offset into larger Gold accounting areas to improve ease of access CDM, the as such programs Meanwhile, Mexico ForestProtocol,releasedinOctober2013. for smallholders. that allowforscaled-upemissionreductions.” partnerships public-private for vehicle the create they is “This Antonioli. David CEO VCS says tomorrow,” reach to support communities in Sri Lanka and the and Lanka Sri in communities support to reach hr-at sadrs lo otne t extend to continued also standards third-party ubr f tnad lk VS AR ad A are CAR and ACR, VCS, like standards of number ACR; 1% eitrd ne ohr needn third- independent other under registered VCS VCS +FairTrade VCS +FSC VCS +CCB Internal /Proprietary ISO-14064 CDM CAR CCX VCS only

47 7. Market Infrastructure: Standards and Registries

otocols (CA) (CA) otocols

PCS (BC) (BC) PCS

CAR CAR

r P CARB

CCB + Other CCB + FSC + VCS FSC + Other y y CCB +VCS FSC only + VCS Fair Trade + VCS

r oprieta

r nal/P

r Inte 71%

Certifi cation, 2012 cation, Certifi

CCB + FSC + VCS VCS + FSC + CCB <1% CCX CCX FSC + Other Other + FSC State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State 1% 7% projects or secondary transactions. State of the Forest Carbon Markets 2013.

e or two-thirds of all transacted offsets tied to

CarbonFix CarbonFix 10%

2 ivo ivo Source: Forest Trends’ Ecosystem Marketplace.

11% Notes: Based on 628 observations from 357 reported

V Plan

MtCO benefi tsbenefi cations certifi were behind roughly 17.1 process, while others such as VCS or ACR apply strictly to carbon accounting, but can be tagged with with tagged be can but accounting, carbon to strictly CCB Standards. Combined, these different types of carbon and co- Figure 44: Market Share by Co-benefi ts or Project Area Figure 44: Market Share by Co-benefi environmental criteria within their carbon certifi cation cation certifi carbon their within criteria environmental an additional layer of co-benefi ts certifi cation, like the the like cation, certifi ts co-benefi of layer additional an a standard.

ACR ACR

ISO-14064 ISO-14064

PFSI (NZ) (NZ) PFSI CDM CDM

REDD A/R IFM Agriculture/Agroforestry

CCB + Other Other + CCB

CFI (AU) (AU) CFI FCS + VCS + FCS Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013. Source: Forest Trends’ Ecosystem Marketplace.

Notes: Based on 2,813 observations from 357 reported projects or secondary transactions. Notes: Based on 2,813 observations from

Figure 43: Market Share of Standard Use by Project Type Certifi ed, 2012 (% Share) ed, 2012 Project Type Certifi Standard Use by Market Share of Figure 43:

rade + VCS VCS + rade

T Fair

CCB + VCS VCS + CCB VCS (all) (all) VCS 0% 90% 80% 70% 60% 50% 40% 30% 20% 10% however, a tonne of carbon is often viewed as a proxy a as viewed often is carbon of tonne a however, Forestry and land-use carbon offset projects are, at their their at are, projects offset carbon land-use and Forestry from the atmosphere. Due to their inextricable link with link inextricable their to Due atmosphere. the from the communities and biodiversity that inhabit them, for the myriad ts other conferred benefi by forestry thirds majority type came from emerging activities under Australia’s the North American market, including CAR, the Pacifi c Pacifi the CAR, including market, American North the to issue and retire credits for reductions before they independent third-party standard with transacted or Plan Vivo embed sustainability and other offset projects. occur, and is expected to release a new version of its REDD volumes, though CAR accounted for some standard in late 2013. Carbon offset standards like The Gold Standard Co-benefi ts and other land area certifi cations: A two- ts and other land area certifi Co-benefi CFI. Carbon Standard, the ARB Protocols, and ISO-14064. While the CCX offset program transacted the bulk of agricultural offsets, most of the value for this project avoided conversion volume. A/R was the most ante” approach to project crediting, allowing projects core, designed to reduce or remove carbon emissions emissions carbon remove or reduce to designed core, commonly transacted project type across standards. IFM volumes drew primarily from standards servicing As can be seen in Figure 43, VCS remained the only 100% 48 7. Market Infrastructure: Standards and Registries Te an s o CB tnad a te oet is moment the at Standards CCB of use main “The Iaie stain hr a ad management land a where situation a “Imagine Alliance Director. State CarbonMarkets oftheForest 2013 VCS methodology that were tagged with additional co- 2012’s offset transactions. The largest volume of these fe, oet rjcs il lo use diinl non- additional pursue also will projects forest Often, In addition, CCB Standards will simplify requirements simplify will Standards CCB addition, In community, and biodiversity benefi ts but not want to want benefi not biodiversity but and ts community, agricultural smallholder a or project conservation carbon certifi cation of products generated within their their within generated certifi products carbon of cation certifi cations. eco- project-area other reported also standard carbon other indicates presence their as standards carbon r lyn ot h otos n sen i tee might there if seeing and options the out laying are activities. smallholder optimize to intended approach activities with a silviculture regime. The volume of offsets eco-certifi these tracks nonetheless report This cations. While the CCB Standards can apply to any land-use land-use any to apply can Standards CCB the While quantifying net-positiveclimatebenefi ts. go through the expense of the full carbon accounting carbon full the of expense the through go standard to demonstrate net-positive benefinet-positive demonstrate to standard without ts standard,” sheadds. tnad, hc my ute ices wt the with increase further may which Standards, was applied mostly to project areas hosting A/R A/R hosting areas project to mostly applied was Later this year, the CCB Standards are set to launch to set are Standards CCB the year, this Later benefi certifi ts MtCO 12.2 Around cation. efrac-eae fnig ihu big linked being in without interested projects funding from performance-related interest additional be programs’ newlylaunchedjointapprovalprocess. project type, the FSC Forest Management certifiManagement Forest FSC the type, project cation project might want to demonstrate net-positive climate, rjc aes lk FC fr utial frs ma- forest sustainable (for FSC like areas, project offsets was attributed to projects developed under a under developed projects to attributed was offsets primary a reported that 2012 in transacted offsets traditional alongside certifi cations project-area other offset fi rst the produce “non-carbon” with bundled formally will also is that product FSC with partnership n obnto wt VS bt ih h rvsos we revisions, the with but VCS, with combination in its use to want that projects support to order in VCS+CCB to certifi cation dual pursued 2012 in their third edition. New features include a programmatic reported from areas under Fairtrade and FSC manage- FSC and Fairtrade under areas from reported the CCB Standards were the most prevalent among prevalent most the were Standards CCB the of 13% full A owners. project to conferred revenues Standard’s tain certifi Gold agriculture The able cation. Figures 42 and 44 show that projects certifi ed to certifi ed projects that show 44 and 42 Figures necessarily to offsets,” explains Joanna Durbin, CCB Durbin, Joanna explains offsets,” to necessarily nagement or planting) or the Rainforest Alliance’s sus- Alliance’s Rainforest the or planting) or nagement ment could also increase in coming years, given the the given years, coming in increase also could ment 2 e transacted e 13% share among domestic programs. “Not reﬂected Alberta OffsetProtocol. Australia’s lead in market share could be challenged be could share market in lead Australia’s 28% of market share in 2012, valued at a total of $60 of total a at valued 2012, in share market of 28% PS cpue 2 o oeal akt hr ad a and share market overall of 2% captured (PCS) Offsets generated for BC’s Pacifi c Carbon Standard Standard PacifiBC’s Carbon for c generated Offsets icmtne. oetc tnad commanded standards Domestic circumstances. t ptnil rniin Te FI s urnl under currently is PFSI The transition. potential a at agriculture and other activities relevant to smallholders. While internationally ﬂ exible standards enable a variety eiin o p ot f yt’ scn commitment second Kyoto’s of out opt to decision on frad ie te e Asrla leadership’s Australian new the given forward going 10% some buyers in Australia and California were buying were California and Australia in buyers some Sink Initiative fell in market share and is likewise looking Domestic-only standards:Noplacelikehome Ramping up for their respective compliance markets, compliance respective their for up Ramping n iue 5 u as atv i 21 ws Canada’s was 2012 in active also but 45 Figure in period. that reported America North and Oceania in projects remain worldwide markets carbon as particularly ficarbon access to countries of audiences the nance, e Zaads yt-eedn Praet Forest Permanent Kyoto-dependent Zealand’s New climate-smart tackle to aims alliance The programs. intention todismantlethesupportingcarbonprice. eiw o ipoeet floig h government’s the following improvements for review though compliance, for prepare to offsets forestry local to customized highly often and fragmented strong, remain standards tailored domestically for new alliance between The Gold Standard and both both and Standard Gold The between alliance new million. 8% 13% Notes: Basedon628observations from357reported Figure 45: Market Share by Domestic Standard, Figure 45:MarketSharebyDomesticStandard, Source: ForestTrends’Ecosystem Marketplace. 7% 2% State oftheForest CarbonMarkets2013. projects orsecondarytransactions. 2% All Markets,2012 58% California Protocols Pacific CarbonStandard Carbon FarmingInitiative J-VER Woodland CarbonCode Initiative Permanent ForestSink Panda Standard

7. Market Infrastructure: Standards and Registries 49

2 e $/tCO 100%

$60 $50 $40 $30 $20 $10 $0 CCB + FSC + VCS VCS + FSC + CCB

90%

FSC + Other Other + FSC CCB + Other Other + CCB 80% $12

cations Types, 2012 cations Types, rade + VCS VCS + rade T Fair

$8 Co-beneﬁts/ 70% FSC + VCS VCS + FSC

Other Certiﬁcations $9 CCB + VCS VCS + CCB 60%

State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State

PFSI (NZ) (NZ) PFSI $6

otocols (CA) (CA) otocols r P CARB 50%

$8 PCS (BC) (BC) PCS $7

Figure 46 shows that while CarbonFix project de- obtained signifi cantly above-averageobtained pricing.signifi So too standard use, due to the forest carbon market’s small size and lack of intra-year price transparency. velopers reported small transaction volumes, they CFI (AU) (AU) CFI 40%

$7 Domestic Standar CarbonFix CarbonFix

30% ivo ivo V Plan Plan $14 $12

d ACR ACR Volume 2012 Average price 2012 e associated with the use an independent third-party project standard. e associated with the use an independent

20%

y y r oprieta r nal/P r Inte

$5 ISO-14064 ISO-14064 $6 10% $8

$9 CDM CDM CAR CAR 0% Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013. Source: Forest Trends’ Ecosystem Marketplace. Project Design Document (PDD) Undergoing validation Validated Veriﬁed Issued

ivo CCX CCX Notes: Based on 628 observations from 357 reported projects or secondary transactions. . Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013 Notes: Based on 27 MtCO Independent Carbon Standar

CAR IFM Plan V VCS VCS Figure 46: Transacted Volume and Average Price by Standard and Other Certifi Price by Standard and Average Transacted Volume Figure 46: Figure 47: Market Share, Average Price, and Stage by Popular Forestry Offset Types, 2011 & 2012 Figure 47: Market Share, Average Price, VCS + CCB A/R VCS + CCB A/R 8 4 2

6 0 VCS + CCB REDD VCS + CCB REDD

14 12 18

10 16

2 2012 2012 2011 2011 e MtCO from project location to type to size – has a statistically a has – size to type to location project from Price by forest carbon and co-benefi ts standards Price by forest carbon and co-benefi signifi cant impact onsignifi forest carbon credit price. The same is true of the choice ts of carbon and co-benefi When considered individually, no project variable – 50 7. Market Infrastructure: Standards and Registries o upr dcso-aes goig neet and interest growing decision-makers’ support To 7.2. volumes issuesand Use:Record offset Registry hs id f eosrbe rc peim remained premium price demonstrable of kind This These higher average prices were obtained primarily obtained were prices average higher These Action Quantifi compliance Action and Methodologies cation ACR and CAR as offset project registries for California’s paet rm iue 7 erysae ciiis were activities early-stage 47, Figure from Apparent State CarbonMarkets oftheForest 2013 VCS offsets generally brought in a higher average price 26 MtCO (2.6 In terms of additional co-benefi ts and other certifi cation, a-n-rd porm n ae 02 rvdd the provided 2012 late in program cap-and-trade cost of land and project inputs tends to be higher. One n big fst oln uig tt-prvd Early state-approved using online offsets bring and as Japan, Canada, and the United States where the where States United the and Canada, Japan, as oue f fst ise ( MtCO (8 issued offsets of volume registries space, land-use and forestry the in activity a middleparty. average, compared to $7.5/tCO to compared average, exception was New Zealand, where a linkage to the to linkage a where Zealand, New was exception ih h eegne f oetc abn programs, carbon domestic of emergence the With i poet uig nenly eeoe o domestic or developed internally using projects did supporting infrastructure necessary for projects to list to projects for necessary infrastructure supporting of approval the States, United the In programs. scale tnad, atclry n eeoe cutis such countries developed in particularly standards, tg atvte ta te dd o mtr projects. mature for did they than activities early- support stage to tonne per more paid buyers some Kyoto marketshasdrivendowndomesticprices. when based in an FSC-certifi ed forest area ($8/tCO when combined with CCB Standards ($7.7/tCO Standards CCB with combined when offset protocols. program, which saw the fithe saw which program, issuance rst-ever buyers havepaidapremiuminselectcases. y rjc dvlpr ta etbihd direct established that developers project by cycle, project the in along further are that projects in 2011, back when there was a clear pricing pattern pricing clear a was there when back 2011, in from A/RprojectsinEthiopiaandBrazillastyear. forestry offset issuance was a key achievement in the for carbon offsets. Registries reported the largest-ever tracking and providing an extra layer of due diligence relationships with offset end buyers without the use of use the without buyers end offset with relationships from contracted offsets for support greater relatively demonst still rate volumes transaction While tonnes. issued with associated risk delivery lower rewarding have continued to aid standards and jurisdictions in jurisdictions and standards aid to continued have not as disadvantaged in terms of price as they were they as price of terms in disadvantaged as not lower average prices – though spreads indicate that indicate spreads though – prices average lower reﬂas combinations other for developed less in ected major registries fi ne-tuned their support for jurisdiction- retired 2 ) n 02 Wie D atvt slowed, activity CDM While 2012. in e) 2 e without), especially without), e 2 ) n/r retired and/or e) of tCERs of 2 e on 2 e). As other emerging markets like Ghana, Kenya, Uganda, n ai Aeia Mri sge a eoadm of memorandum a signed Markit America, Latin In ot poiig xblt i dtriig h right the determining in ﬂ exibility providing cost, and other forest carbon project development, major development, project carbon forest other and afforestation activities. UK’s Woodland Carbon Code registry also went live went also registry Code Carbon Woodland UK’s hl, n Taln cnie otiig registry obtaining consider Thailand and Chile, understanding (MoU) with the Brazilian state of Acre of state Brazilian the with (MoU) understanding f netvs o Evrnetl evcs becoming Services, Environmental for Incentives of f odad abn nt bsd n domestic on based Units Carbon Woodland of ownership of transparency the enhancing Markit, on infrastructure to support emerging capacity for REDD track REDD offsets at the state level that will facilitate will that level state the at offsets REDD track and issue to program a establish fi to the registry rst Program voluntary state’s the for registry a develop to o eeo jrsitoa rgsre a reasonable at registries jurisdictional develop to registries are looking to provide customizable options linkages with Acre’s partners in Brazil. In July 2013, the Canadian StandardsAssociation’s CleanProjectsRegistry CleanProjects Registry,orAlberta OffsetsRegistrydueto Notes: Tracksland-useprojectregistrydatareportedfor MtCO e PFSI, Pacifi cCarbonStandard,CarbonFix,andJ-VER. 2 Does notincludeissuedorretired volumesfromCCX, VCS, CAR,ACR,ISO14064/65,PlanVivo,CarbonFix, 0 6 9 pr 1 2 3 4 5 7 8

Source: ForestTrends’Ecosystem Marketplace. e-2005 Figure 48:HistoricalIssuedandRetired 0.3 State oftheForest CarbonMarkets2013.

2005 0.1 unavailable yearlybreakdown.

2006 0.1 Credit Volumes

Issued 2007 0.1

2008 .6 .2

Retired 2009 1 .3 2010 1 .6

2011 6.9 1.6

2012 8 2.6 51 7. Market Infrastructure: Standards and Registries State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State noting the DRC as a leading example. noting the DRC as readiness process will most likely develop a registry – She stresses that any country going through a REDD support of REDD,” says Rebecca Asare, West Africa Coordinator Coordinator of Forest Trends’ Katoomba Incubator. “Registries “Registries can become an enabler of policies in level of registry automation. While there are inevitably inevitably are there While automation. registry of level players note the importance of registries in providing standardization standardization and transparency in the project jurisdictions that currently lack data. jurisdictions that currently approval process, which is particularly valuable in costs associated with setting up a registry, market 52 8. Regional Market Deep Dive h floig etos eal einl oety trends forestry regional detail sections following The America in 2012, seeing companies step up to obtain to up step companies seeing 2012, in America State CarbonMarkets oftheForest 2013 2011 (Table 14). The overall value of North American North of value overall The 14). (Table 2011 In most markets, forest carbon offsets are not a a not are offsets carbon forest markets, most In capacity and concerted strategies around REDD and REDD around strategies concerted and capacity an introductiontothesedevelopments. for 4.5. Section See report. this throughout tracked as “top-down” these between overlap of deal great a and activities project-level for funding includes also and/or their credits call home is an important starting starting important an is home call credits their and/or admit internationalREDDoffsets. greatly by region. While analyzing project location is just decline from the 6.9 MtCO down from$70 millionin2011. Climate action leadership was a key theme in North in theme key a was leadership action Climate some cases, activated and disbursed. Here one fione Here disbursed. and activated cases, some nds summary of offsets supplied by country and regional regional and country by supplied offsets of summary standardized commodity, but are instead a product product a instead are but commodity, standardized at er Nrh mrcn rjc developers project American North year, Last project developers and market infrastructure providers carbon forest of work “bottom-up” the and programs in and, raised being currently is that projects pilot but readiness” “REDD national toward targeted been has funding this of most date, To actions. forest other national promote that initiatives and funding bilateral and multilateral of context broader the within also but by both the volumes of credits supplied from that that from supplied credits of volumes the both by regions examining – sections previous in presented contributions varying markets’ the understand to point supplier a where cake,” the “cut to ways many of one offset transactions similarly fell by 43% to $39 million, $39 to 43% by fell similarly transactions offset practices and policy – and seeing California consider California seeing and – policy and practices information by region is summarized in Section 6. information byregionissummarizedinSection6. Taking America: 8.2. North thelead 8.1. market aproduct Parsing Introduction: region and the buyers who transacted them. A global global A them. transacted who buyers the and region been have fi that of ndings lens the through regional trends explores section This value. and volume to transacted 6.7 MtCO 6.7 transacted the title of hosting the fi industry inﬂ rst regulatory offset program to uencing of name the in offsets forest not only as reported by project developers themselves, location can be found in Section 4.3, while buyer buyer while 4.3, Section in found be can location market where preferences, prices, and projects vary vary projects and prices, preferences, where market 2 e from domestic projects, a 3% a projects, domestic from e 8. Regional Market DeepDive 2 e reported for the region in “Voluntary buyers certainly see the benefi ts in forest benefi in the ts see certainly buyers “Voluntary The prospect of national carbon regulations for existing America focused on buyers preparing for compliance for preparing buyers on focused America Overall, resale to purely voluntary end users was the was users end voluntary purely to resale Overall, carbon because of the co-benefi ts and all the other all co-benefi and the ts of because carbon climate leadership or to improve their CSR credentials. trbts ht oe ln wt ipoe forest improved with along come that attributes soitd ih 7 o al fst sl. Meanwhile, sold. offsets all of 37% with associated emitters, but it is unclear, and some would say doubtful, ipd lgty o . mlin n 02 Te au of value The 2012. in million 1.5 to slightly dipped $12.9 million to $11.9 million – but the average price average the but – million $11.9 to million $12.9 with stateorprovincialmandates,alongsidevoluntary ucae b cmais ekn t demonstrate to seeking companies by purchases North in activity transactional Therefore, offsetting. US-based for ahead loom to continues plants power inched upwardto$8.2/tCO these transactions also declined slightly – by 8%, from purchases offset California/WCI of volume overall the ht hs rls a cre u a lc fr carbon for place a out carve can rules those that management,” saysGaryGero,CARpresident. ot rmnn die o tascin i te region, the in transactions of driver prominent most # projects represented Carbon projectarea Total forestarea domestically Volume purchased Value Average price Volume supplied Table 14:NorthAmericabytheNumbers, 1 Source: FAO2010;Allother: Forest Trends’ EcosystemMarketplace. Land andProjectArea 1 All Markets,2012 Market Snapshot $ millionor 2 Mt e. 5.7 Mt $39 m 6.7 Mt $9.8/t CO 614 millionha 2 7 millionha e 42 % change from 2011 +19% -43% -5% -3% 8. Regional Market Deep Dive 53 e of offsets from 2 e on behalf of BC’s 128 2 e of issued offsets. PCT has 2 e paid for carbon offsets to PCT by 2 e. PCT reports three IFM projects that projects IFM three reports PCT e. 2 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State months, when the ce BC of Offi the Auditor General necessary changes. The government will evaluate the public sector organizations and re-evaluate what the PCT retains as a surplus from buying and selling released a report in March 2013 that questioned the cally criticized The Naturereport Conservancy specifi found no reported offset projects developed out of the of out developed projects offset reported no found targets and established a regulation that laid out the requirements for emissions reductions to satisfy this the CAD$25/tCO reaffi rm thereaffi high quality of the Darkwoods project, transparency, of area the in namely recommendations, retired more than 2.3 MtCO in the way of concrete project development based PCT engaged in a broad re-evaluation of the offsets and how the money is spent. North American buyers continue to be motivated to purchase offsets on a strictly voluntary basis for a public sector organizations. provincial government’s carbon neutrality claims. The of Canada’s Darkwoods Forest Carbon Project from on its three approved protocols. This report survey of CAD$25/tCO of offset purchasing in service of the province’s public parties recruited to make independent reviews in light in reviews independent make to recruited parties of the auditor general’s report, all of which served to by releasing pricing information on an annual basis. Reduction Targets Act of 2007 set legislated GHG British Columbia maintained its steady pace of Darkwoods project, with input from several third which PCT purchased 450,000 tCO what has essentially been a pilot phase with not much much not with phase pilot a been essentially has what with more than 1.8 MtCO with the report’s overall conclusions, the PCT has would examine PCT’s pricing model and make any system in Quebec is still quite new and remains in sector carbon neutrality goal. The Greenhouse Gas says Acting CEO David Muter. But while disagreeing Canadian province to date. Canadian province goal. Under the policy, covered public sector entities are validated according to its Pacifi c Carbon Standard, Carbon c Pacifi its to according validated are and effi ciency,and as effi well as through acquisition the of already implemented some of the Auditor General’s can achieve carbon neutrality through internal savings internal through neutrality carbon achieve can carbon offsets – including forest offsets – from Crown c Carbon Trust (PCT)corporation atPacifi a set price In February, the provincial government announced it 2008 to 2010. The program has not escaped controversy in recent e, tied to grassland management and no-till and management grassland to tied e, 2 e – thus contributing little to overall market value. 2 more than half of North American volumes in 2011, lot more of that on-the-ground activity among forest have – whether for voluntary or regulatory purposes – reforestation, IFM, and Urban Forestry. IFM constituted IFM Forestry. Urban and IFM, reforestation, receiving compliance offset project listings.” there was a lot of activity by ARB, the registries, and the year than anticipated,” says Mary Grady, ACR’s the more support we have in protecting forests, which which forests, protecting in have we support more the resulting from California’s adoption of a forest carbon regulated entities in the Canadian province looking to tCO in forestry offsets, with project developers elding fi is what forest offset projects were designed to achieve.” to designed were projects offset forest what is into a carbon market, a regulatory regime, and that but agriculture-based projects also comprised a large large a comprised also projects agriculture-based but these of Most share. markets region’s the of proportion project developers leading up to rst compliance offset projects.prepare Once for the the fi approvals to pass through several additional hurdles post-issuance hurdles additional several through pass the but instruments, compliance valid becoming before projects for compliance. “The ARB Offset Project offset project registries issue to organizations two the allows which programs, (OPRs) and offsets generated early-action according to the ARB compliance program in January 2013 instigated growing interest owners. This is critical because the more activity we protocol. protocol. There is the elevation of forest carbon now or edlow-till under agriculture, thewere legacy certifi Registry er and approvals Verifi came much later in Registry offset credits and early-action offsets must still must offsets early-action and credits offset Registry Director of Business Development. “Nevertheless, But actual transactions were slow to materialize in we were approved as an OPR, we immediately began immediately we OPR, an as approved were we when the ARB designated both ACR and CAR as 3.9 MtCO 3.9 California’s trading system, which is likely to result in California to provide any needed offsets. The offset CCX offset program and priced at an average $0.1/ guidelines on the offset program from the ARB. guidelines on the offset program from questions from landowners about the state program and early-action quantifi cation methodologies. and early-action quantifi and the types of forest activities they could implement. could they activities forest of types the and certainly got a lot of people’s attention. We saw a Quebec is mere months away from its linkage with OPR designation was a critical fi rst step in submitting OPR designation was a critical fi 2012 with market participants eagerly awaiting critical awaiting eagerly participants market with 2012 The project types eligible for California’s program are That guidance did not emerge until December 2012, The cial offi launch California’sof cap-and-trade “But also, of course,” he adds, “we did see activity 54 8. Regional Market Deep Dive h Ltn mrcn oet abn akt remains market carbon forest American Latin The State CarbonMarkets oftheForest 2013 Van Voorhis, Managing Partner with project developer In 2011, the region maintained above-average pricing companies are also looking to improve their rankings their improve to looking also are companies trciees o h vros eso fns looking funds pension various the to attractiveness and pricealldroppingby 20% ormore. get a better ranking in sustainability. What that means that What sustainability. in ranking better a get driving shareholdervalue.” eeoig oet abn fst, u te market the but offsets, carbon forest developing C2Invest. “There is a lot of pension money now,” he now,” money pension of lot a is “There C2Invest. says. “One of the motivations for voluntary buyers is to struggled in 2012 amid issues around unsettled land unsettled around issues amid 2012 in struggled ai Aeia a hsoial be a e lae in leader key a been historically has America Latin eas i’ gt go rnig I’ mtvtd by motivated It’s ranking. good a got it’s because f H tres o CR esn (al 1) Public 15). (Table reasons CSR for targets GHG of rjc dvlpet dsie trcie rcn for pricing attractive despite development, project is that some of the pension funds can cover that stock in sustainability or disclosure indices to enhance their enhance to indices disclosure or sustainability in in spite of decreased volumes. However, 2012 fi ndings butchallenges REDDrules, 8.3. LatinAmerica: ahead o genr opne t ivs i, as Chandler says in, invest to companies greener for reveal declines across the board, with volume, value, volume, with board, the across declines reveal these offsets. A/R in decline a and policies, REDD unclear tenure, ubr f esn, nldn dmntaig climate demonstrating including reasons, of number highly fragmented, resulting in many different policies different many in resulting fragmented, highly edrhp ihn hi idsre ad h pursuit the and industries their within leadership Notes: Basedonresponsesfrom52suppliers.Percentvaluesarebasedthevolumesassociatedwithindividual North America Table 15:NorthAmerica:TransactedForestCarbonCreditTypesandBuyers,AllMarkets,2012 Agriculture Europe Buyer Locations IFM A/R Project Type Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2013. 28% 72% 34% 58% 7% Top TransactedForestCarbonOffsetTypes,2012 Top ForestCarbonOffsetBuyerTypes,2012 questions, notincludingan“other”response. Agriculture/Forestry Project DesignDoc Manufacturing Verifi ed Energy Issued Buyer Sectors Project Stage uy 03 eot ht ald o te cetne of acceptance the for called that report 2013 July fst Wrig ru (O) fe sgig 2010 a signing after (ROW) Group Working Offsets n dmn. eea Ltn mrc-ae project America-based Latin Several demand. and the However, lines. sub-national and state across a “huge setback” if the offsets from these projects are hl sm idgnu saeodr ae skeptical are stakeholders indigenous some While lbly rgntd n ai Aeia ad rzl and Brazil and America, Latin in originated globally developers describe a market “swamped with REDD with “swamped market a describe developers jurisdictional REDD offsets. Whether or not California not or Whether offsets. REDD jurisdictional compliance international potential a as California some stakeholders, but project developers speak of speak developers project but stakeholders, some 80% oftheregion’soffsetsin2012werefromREDD. il liaey eie o cet nentoa REDD international accept to decide ultimately will oee, s ih ot ein, upir express suppliers regions, most with as However, f omte ad ipre RD fns Overall, funds. REDD dispersed and committed of transacted offsets REDD of half than More pioneer. f h RW eomnain, ED rjcs in projects REDD recommendations, ROW the of offsets remains uncertain amid fi erce opposition from watching closely are developers Project offsets.” Peru led the way in receiving some of the largest sums sus RW eesd t rcmedtos n a in recommendations its released ROW issues. REDD change climate on cooperate to California with MOU the of part are Chiapas of state Mexican region has also solidifi ed its reputation as aREDD as reputation solidifi its also ed has region the region recently made signifi cant strides with strides signifi cant made recently region the rejected. akt wee h Baiin tt o Ar ad the and Acre of state Brazilian the where market, supply in mismatch a about concerns mounting 89% 26% 54% 10% 3% 5% Pacifi cCarbonStandard Climate leadership Pre-compliance Buyer Motivations Resale CCX CAR Standard Use 61% 10% 47% 18% 20% 13% 8. Regional Market Deep Dive 55 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State market options are so they can make the best markets in Latin America, including Peru Carbon have emerged to cater cally specifi to domestic Fund’s Forest Standard, which works exclusively with reductions payments up to $63 million, which will in tune with the local business climate and ecology. Mata Viva from earlier years. in Colombia. An MoU has already been signed with participation is better for Colombians, says Fundacion says Colombians, for better is participation Natura’s Roberto Gomez. ones who should decide what standard to use. We rst developingbecoming countrythe tofi introduce a performance in 2012, project developers spoke highly spoke developers project 2012, in performance of ts the of benefi such projects, which saw above- or the US and are more expensive to hire while less based Fundación Natura is taking the opposite Rica’s National C-Neutral Standard and the Rainforest the and Standard C-Neutral National Rica’s want people to know what all the voluntary carbon Standards, and other standards are based in Europe Colombia. in region, the in resides VCS and Standards Standard, both of which emerged in 2012, and Brazil scarcity compared to REDD. scarcity compared standards and auditors, a number of standards standards to raise awareness and train local auditors signed into being in September 2013 with a Letter of standard verifi cation.standard Many verifi auditors for CCB VCS, small and medium landowners and provides free Costa Rica recently took that a step further by Currently, only one approved auditor for the CCB decisions.” domestic voluntary carbon market. The Costa Rican decline in 2012 – an 83% decrease from 2011 fi gures decline in 2012 – an 83% decrease from 2011 fi With Latin American project developers ever While most suppliers continue to work with foreign World Bank’s FCPF. The FCPF will provide emissions explains. “We think that project developers are the average pricing due to Fundación Natura their relative relative their Natura Fundación to due pricing average international existing with working are They approach. about the scarcity of local auditors for international validation services if landowners meet their minimum conscious of prices, there is a recurring complaint Costa include standards regional Other commitments. Instead of creating its own standards, the Colombian- the and Rica Costa of Government the between Intent (Table 17). Despite the data’s stark review of A/R VCS, and the foundation plans to bring the CCB Voluntary Domestic Carbon Market (MDVCCR) was Alliance and Gold Standard on board soon, as greater as soon, board on Standard Gold and Alliance “We are not married to any of these standards,” he -20% -22% -32% -90% from 2011 % change 62 2,450 Mt e 2 956 million ha 11.3 million ha CO $8.1/t 6.2 Mt $50 m 0.2 Mt Mt $ million or Source: WRI CAIT database. All other: Market Snapshot e) 2 2 All Markets, 2012 All Markets,

1 Land and Project Area Land and (MtCO 2 Forest Trends’ Ecosystem Marketplace Forest Trends’ Ecosystem Marketplace Table 16: Latin America by the Numbers, Latin America by Table 16: Carbon project area Carbon project area Annual land use emissions Volume supplied Average price Value Volume purchased domestically Total forest area # Projects represented Projects # Source: FAO 2010; makers’ attention when The Walt Disney Company last year. Involving 419 farmers and their families, launched in late 2012, the rst fi community-owned, however, as many project developers in Latin America Latin in developers project many as however, remain wary of unclear land tenure laws and prefer for a discussion of land tenure issues). the project got a strong start and attracted policy- implement the project in 2008. Mayo REDD Project gained VCS+CCB validation indigenous-led project to generate offsets by saving Project and sold 120,000 tonnes of carbon offsets to indigenous and community groups. The Paiter Suruí indigenous people of Brazil received dual VCS+CCB project certifi edproject in certifi Colombia. It ed is now VCS-verifi REDD projects, A/R projects experienced a marked Contrasted with Latin America’s continued increase in increase continued America’s Latin with Contrasted Chocó-Darién Conservation Corridor REDD Project, developing on privately owned land (see Section 4.7. donated $3.5 million for Conservation International to endangered rainforest. Also noteworthy is Colombia’s and CCB Gold Standard-validated. Lastly, Peru’s Alto a Brazilian cosmetics company, becoming rst the fi verifi cation in 2013 for their Suruí REDD Forest Carbon Forest REDD Suruí their for 2013 in cation verifi collectively titled land project rst and VCS fi REDD Indigenous and community projects remain a minority, a remain projects community and Indigenous 1 56 8. Regional Market Deep Dive State CarbonMarkets oftheForest 2013 (NAMAs) asitspreferredclimateresponse. leaning reportedly is Mexico though 2013, in (PMR) change laws. In 2012, the Brazilian state of Rio almost allowances from a compliance carbon market in Rio Rio in market carbon compliance a from allowances a range of domestic environmental laws, including ETS explored the possibility in their fi nal proposals to proposals fi nal their in possibility the explored ecosystem for payments Rica’s Costa expand de Janeiro. However, while the Rio compliance market market compliance Rio the while However, Janeiro. de activities carbon forest Instead, approach. down launch could Mexico and Chile level. quasi-national ocetd rud hs ie a BRo a environ- an BVRio, was time this around Co-created evcs rga ad upr RD atvte a a at activities REDD support and program services rzls eeait oenet a nt ae a top- a taken not has government federalist Brazil’s rzls ainl lmt Cag Plc lw a total a law, Policy Change Climate National Brazil’s off on the ETS and the government has now retreated now has government the and ETS the on off planned ETS. However, the state governor did not sign climate own their have currently states Brazilian 19 of in sight. into talks with the private sector with no future deadline range across all levels of government. In addition to addition In government. of levels all across range toward other Nationally Appropriate Mitigation Actions Readiness Market for Partnership Bank’s World the both as (ETS), schemes trading emissions own their Farms in Brazil that don’t meet their native forest cover cover forest native their meet don’t that Brazil in Farms has been delayed, BVRio is already operating other other operating already is BVRio delayed, been has markets, including Brazil’s mandatory Forest Code. Code. Forest mandatory Brazil’s including markets, with compliance facilitate to created exchange mental its with country the in reality a markets carbon made Notes: Basedonresponsesfrom52suppliers.Percentvaluesarebasedthevolumesassociatedwithindividual North America Table 17:LatinAmerica:TransactedForestCarbonCreditTypesandBuyers,AllMarkets,2012 Oceania Europe Buyer Locations REDD IFM A/R Project Type Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2013. 23% 35% 38% 10% 80% 9% Top TransactedForestCarbonOffsetTypes,2012 Top ForestCarbonOffsetBuyerTypes,2012 questions, notincludingan“other”response. Project DesignDoc Carbon markets Validated Tourism Verifi ed Energy Buyer Sectors Project Stage h cd idrcl cmests amr for farmers compensates indirectly code The Amazonas, Mato Grosso, Para, and Tocantins are all all are Tocantins and Para, Grosso, Mato Amazonas, sophis- most world’s the among are states Amazon and research, building its State System of Incentives Incentives of System State its building research, and activities and link them with compliance schemes. Acre credits. Once REDD+ becomes a compliance product, emphasis on REDD activities. lentv suc o fnig o ED voluntary REDD+ to funding of source alternative demand of the proposed Rio industrial cap-and-trade industrial Rio proposed the of demand Unlike Brazil’s rocky start with carbon trading, its its trading, carbon with start rocky Brazil’s Unlike support thismarket. work in 2010 to recognize ecosystem services with an an with services ecosystem recognize to 2010 in work Vi’ Pdo or Csa as ht h supply the that says Costa Moura Pedro BVRio’s to BVTrade, platform, trading its adapt will BVRio in particular has been noted for its progressive legislation the surpass vastly would Brazil in credits REDD of obligations can trade or buy offsets from another who who another from offsets buy or trade can obligations is stringent enough to create enough demand for what for Environmental Services, which established a frame- a established which Services, Environmental for Amapa, Acre, markets. carbon forest regarding ticated Force, which seeks to advance jurisdictional REDD REDD jurisdictional advance to seeks which Force, to abuyers’market.” forestry can potentially supply. Otherwise, you’re back has exceeded the requirement. has exceededtherequirement. limits. “We need to go back to a global agreement that members of the Governor’s Climate and Forests Task Task Forests and Climate Governor’s the of members maintaining forest carbon stock, providing a domestic 80% 15% 66% 6% 8% 7% Internal/proprietary Climate leadership ISO-14064 Buyer Motivations Resale CSR VCS Standard Use 64% 13% 90% 18% 4% 3% 8. Regional Market Deep Dive 57 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State e of offsets from RM Williams’ revegetation 2 methodology that had not yet received CFI approval. long-term commitments have been challenged in the Following his landslide victory, Prime Minister Tony Facing the prospect of limited market access, the savannah-burning methodology, say that their reform later this year. the agreement fell through in early 2013 and the face of legislative uncertainty. for projects is available through the CFI Non-Kyoto form of investment. We need reforesting the long-term planet and also need to be able to act signals for farmers to overcome barriers or brokers. through aggregators to entry by working independent third-party standards. Notwithstanding, in a global marketplace where we can hedge bets.” MtCO beef producer in Australia to without future a in earn viable nancially fi offsets be not will projects under project, mostly to comply with the carbon tax, with a project collapsed, having relied on a rangeland plans, the government would eventually invite bids for price signal. “I’ve been told that the average of piece carbon legislation in Australia has a lifetime of participant participant in the initiative, who adds that there opportunities are for small players like mom-and-pop Landowners such as the Tipperary Group, rst the fi Suppliers say that another constraint on project sequestered, which ultimately means less carbon that carbon less means ultimately which sequestered, small proportion set aside for voluntary use. However, original his on based proceeds he If opposition. some suppliers are grappling with the lack of long-term Carbon Fund, Biodiversity Carbon Farming Fund. Fund, and Indigenous any for does that what “Imagine eet. Greenﬂ at Carbon development has been that the CFI reports a emissions reductions from project developers, using a carbon tax. a policy with a limited budget that prioritizes least- conservative 40% of the carbon that can be is claimed and monetized. The actually 40% is due for cost emissions reductions. Beyond that, grant funding funding grant that, Beyond reductions. emissions cost Outside of the CFI, a few players have been using and can be cult difﬁ for some to says a enter,” 248 days,” says Justin Glass, Executive Manager of Abbott is working to rescind the carbon price amidst Australian airline Qantas agreed to buy up to 1.5 The failed agreement served as one example of how The fi rst CFI contractThe wasfi signed in July 2012, when “The CFI scheme is designed to manage integrity manage to designed scheme is CFI “The -36% +19% + >100% + >100% from 2011 % change 11 e 2 1.4 million ha 191 million ha CO $8/t 5.7 Mt $49 m 6.2 Mt Mt $ million or Marketplace Market Snapshot e of forestry and land-use offsets

2 1 Land and Project Area e. A full 36% of offsets transacted by Oceania- 2 Source: FAO 2010; All other: Forest Trends’ Ecosystem 1 Volume purchased domestically Average price Value Carbon project area represented Projects # Volume supplied Total forest area remain Farming Initiative (CFI), the country’s main outlet to the longer-than-anticipated wait time for methodology for time wait longer-than-anticipated the to regeneration of native forest, and savannah burning for domestic AFOLU carbon abatement activities. future delivery of offsets accredited under the Carbon 8.4. Oceania: Transactions surge, policy puzzles Oceania: Transactions 8.4. in response to the launch of its federal carbon price. Nearly 3 CO Mt on the carbon market radar. on the carbon market price, however, it is unclear if this high level of activity projects, while just around 25 carbon sequestration projects have registered to cover A/R and savannah- burning activities. based buyers were pre-compliance purchases for the will be repeated in 2013 or merely be a temporary blip temporary a be merely or 2013 in repeated be will were transacted from Australia-based projects, up was comparatively slow. Market players attributed this signifi cantly from the year prior, at an average price of signifi $8/tCO approval and a lack of clarity on the rules.approval and a lack of clarity on the In 2012, Australia experienced a surge of transactions transactions of surge a experienced Australia 2012, In Amid signifi cant uncertainty over the fate of the carbon the of fate the over uncertainty cant signifi Amid Actual project development based on CFI-approved AFOLU methodologies like avoided deforestation, To date, most CFI uptake has been ll for gas landfi Table 18: Oceania by the Numbers, All Markets, 2012 Table 58 8. Regional Market Deep Dive h bl o tee fst ae eonzd ne the under recognized are offsets these of bulk The Zealand has opted out of participating in the second the in participating of out opted has Zealand As in previous years, voluntary Australian buyers took buyers Australian voluntary years, previous in As on double-counting regarding restrictions Australia’s utain raiain o wa cnttts quality constitutes what on organizations Australian State CarbonMarkets oftheForest 2013 Voluntary or compliance, forest carbon markets face markets carbon forest compliance, or Voluntary Given New Zealand’s position as the fi rst and only fi and the rst as position Zealand’s New Given country faces a unique struggle on how to recover its recover to how on struggle unique a faces country sector forest its regulate partially to to-date country costs that don’t lend themselves to low up-front costs.” volume for forest carbon offsets dropped drastically in niiae te ons te onr my e be to able be may country the soonest the anticipates n pil ate n utai. Aodd deforestation “Avoided Australia. in battle uphill an offsets of 63% drawing 2012, in approach portfolio a volumes ofoffsetsatlowercosts. election cycletrends. emissions trading scheme (NZ ETS) and drive down drive and ETS) (NZ scheme trading emissions domestic market for forest carbon offsets. Transaction get back on an ETS track would be 2020, based on based 2020, be would track ETS an on back get rw oe tm, u Asrla os’ hv much have doesn’t Australia but time, over grown to due standards offset voluntary to domestically oenetamnsee Ntoa Cro Offset Carbon National government-administered n taig cee the scheme, trading emissions national a under Kyoto-compliant land. Forests Alive (formerly REDD REDD (formerly Alive Forests land. Kyoto-compliant h rmi ae okn t bte dfeetae their differentiate better to working are remain who Southeast Asia, with an eye to generating larger larger generating to eye an with Asia, Southeast players Australian stopped not have restrictions Such tnad NO) wih ulns udne for guidance outlines which (NCOS), Standard New Zealand in 2012 (to 0.3 MtCO 0.3 (to 2012 in Zealand New possible in the voluntary market space. One supplier One space. market voluntary the in possible prices highest the secure to order in products offset rjc dvlpr “h tp o atvt ta can on-ground involves that typically here activity carbon scale at of done forest be type Australia-based “The developer. an project says that,” of offset types. offsets (both domestically and internationally sourced), claims. neutrality carbon limited some with projects, independent an using domestically accredited project New Zealand Unit (NZU) prices. Going forward, New forward, Going prices. (NZU) Unit Zealand New mlmnain n tcnlg ad ihr labor higher and technology and implementation in early 2013 adding VCS REDD to the list of eligible of list the to REDD VCS adding 2013 early in ae ot f h mre i te at er Those year. past the in market the of out faded eurs o ufot aia ad oprtvl low comparatively and capital upfront low requires domestic from 37% and forestry international from in particularly development, project overseas from Tasmania. in project IFM an for standard third-party projects develop to potential limited a is there foreign Kyoto offsets continued to ﬂto continued domestic offsets the Kyoto ood foreign ae wt ucrany a ubr f upir have suppliers of number a uncertainty, with Faced Forests) remains the only project developer with a a with developer project only the remains Forests) esrmn css s poe t frs you’ve forest to opposed as costs measurement 2 e) as inexpensive as e) The region’s remaining transaction volume in 2012 was The situation is similarly, if not more, diffimore, not if PFSI similarly, for is cult, situation The with foresters ETS diffi for more cult is situation The Zealand’s opting out of the Kyoto Protocol, the Ministry 1% f e Zaadbsd fst wr sold were offsets Zealand-based New of 16% Just Apart from forest carbon activities recognized under recognized activities carbon forest from Apart n em o poet pep ayn wo ws more owns who anyone upkeep, project of terms In costs are more manageable for the handful of large- of handful the for manageable more are costs claim credits every year. Under the ETS, measurement years at minimum, but annually if forest owners want to forestry domestic the impacting adversely credits, commitment period of the Kyoto Protocol. The country category of tall indigenous forests. Article 3.4 forests, 3.4 Article forests. indigenous tall of category voluntary buyersinCanada,Germany,andJapan. eligible forcomplianceuse. exclusively for the carbon without the timber element. timber the without carbon the for exclusively hl te FI eis n yt uis de o New to due units, Kyoto on relies PFSI the While oiae b a e szbe fst rnatos from transactions offset sizable few a by dominated lucky were Suppliers PFSI. government-administered growth forests. cl frsr cmais ih signifi old-growth with cant companies forestry scale fievery once ve – them measure and plots sampling sector. smaller plots or who cannot log due to the lack of old- of lack the to due log cannot who or plots smaller nt ad Es eeae truh h country’s the through generated VERs and units unclear whether tall indigenous forests, still operating still forests, indigenous tall whether unclear within the voluntary space, will at some point become point some at will space, voluntary the within a without but track, UNFCCC the following be still will projects located inOceania’sislandcountries. of remainder years, The prices. better low faced during otherwise but signed contracts purchase New Zealand has opted out of the rules, it still remains to how discussing been has Industries Primary of forests new planted or forests having existing log, to bought not choose who developers project forest for market global the in relevant less NZUs made has opt-out the practice, In obligation. binding f hy lsd el a hge pie fo forward- from prices higher at deals closed they if ee Wi, niomna Mngr t rsa One. Ernslaw at Manager Environmental Weir, Peter independent oftheKyotoframework. forests that engage in selective logging, according to according logging, selective in engage that forests run to obligated is forest post-’89 of hectares 50 than offset of number limited a to went offsets transacted Kyoto both including 2012, in buyers domestic to ht ae no oc satn 21. oee, since However, 2013. starting force into came that rules new to owing Protocol, Kyoto the within of scope the now are pre-1990, established third forests those still-nascent the is there PFSI, and ETS the units generate can it that such PFSI the restructure 8. Regional Market Deep Dive 59 e, all from e, all from 2 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State e at an average price of $6.7/tCO 2 have thus far had little to no presence in China. A has historically reported the world’s highest voluntary Forest carbon offsets remained the most popular remained remained untouched by the VCS or CDM forestry accept to intend beyond) and 2013 in schemes trading forest carbon offsets into their schemes. representative from one standard says this could though forest carbon is also fungible into Saitama from 2011, which might be amplifi ed in years to come, to years in ed amplifi be might which 2011, from reduction obligations is unclear. Prefecture’s compliance emissions trading scheme. Project developers await more information from the Meanwhile, Japan has continued to buck the trend of inward-facing Asian markets by investing in projects imminent in the region’s emerging pilot carbon trading carbon pilot emerging region’s the in imminent is still vetting. Domestic initiatives like the Panda MtCO powerhouses, but did see their fi rst projects registered registered projects rst fi their see did but powerhouses, programs. Beijing, Chongqing, Guangdong, and piloted via the China Green Carbon Foundation and both in China and externally, homegrown standards which 2012, in program J-VER Japan’s in type project been primarily motivated by CSR and philanthropy, Hubei (among seven jurisdictions launching emissions launching jurisdictions seven (among Hubei Development and Reform Commission (NDRC) to Environmental Defense Fund. Standard, China’s rst fi voluntary carbon standard, will be allowed to surrender against emissions under Plan Vivo in 2013, spanning a combination of standard that would allow projects to access markets China-based projects saw slight growth in demand domestic voluntary offset scheme administered within government on what changes the merger could entail. given new opportunities for forest carbon that are none trading, emissions domestic for offsets generate a different ministry – to form the J-Credit Scheme. are seeking approval of their A/R methodologies. change, noting that insofar as there is interest to use a use to interest is there as insofar that noting change, yet address forestry and land use, which the NDRC could face competition. carbon offset prices. To date, Japanese buyers have In early 2013, J-VER merged with J-CDM, another Of the methodologies approved by China’s National Other relevant domestic methodologies are being A/R activities. A/R and IFM activities. Aside from the CDM, international offset standards To India’s north and south, Nepal and Sri Lanka The percentage of forest carbon offsets that emitters +4% e) ultimate- + >100% + >100% from 2011 % change 2 NO CHANGE 20 1,808 Mt e 2 3.5 million ha 547 million ha CO $7/t 0.3 Mt 4.6 Mt $32 m Mt $ million or e. Forest carbon projects not only Source: WRI CAIT database. All other: Market Snapshot 2 e) 2 2

1 Land and Project Area (MtCO 2 Forest Trends’ Ecosystem Marketplace Table 19: Asia by the Numbers, All Markets, 2012 Table Average price Volume purchased domestically Carbon project area Annual land use emissions Volume supplied Value Total forest area # projects represented projects # Source: FAO 2010; ly came from A/R projects using three voluntary transacted offsets (93% or 4.3 MtCO temporary nature of tCERs – a few ed have recertifi the global slowdown in CDM A/R project development project A/R CDM in slowdown global the 8.5. Asia: Planting seeds for compliance compliance for Asia: Planting seeds 8.5. Project developers in Asia, primarily in China and increase in average price that enabled overall market Panda Standard. In India, suppliers transacted 2.7 based projects. or are considering recertifying their projects using be costly, and under primary contender VCS project project development. However, in conjunction with of inexpensive renewable energy offsets, but saw an Expensive to develop or not, the lion’s share of Asia’s Asia’s of share lion’s the not, or develop to Expensive sustained popularity in Asia against the larger supply standards – VCS, Plan Vivo, c and the China-specifi Courtesy of signifi cant transactions in India, Indonesia, Indonesia, India, in transactions cant signifi of Courtesy developers developers doubled their transaction volume in and China, Asia-based forestry and land-use project voluntary offset standards. But making the switch can value to jump fi vefold. value to jump fi costs remain high, particularly for small community- India, have historically actively pursued CDM A/R 2012, to 4.2 MtCO 1 – reportedly because buyers were not fond of the 60 8. Regional Market Deep Dive dpig lmns rm -E ad -E (South K-VER and J-VER from elements Adapting State CarbonMarkets oftheForest 2013 Cs o a igeya rprig eid Insurance period. reporting single-year a for VCUs In Indonesia, Infi niteEARTH’s Rimba Raya REDD Raya Rimba Infi niteEARTH’s Indonesia, In verifi confi 2013, May MtCO in 2.1 ed rming was process, VCS the through methodology REDD a across Indonesia,Malaysia,andCambodia. bod icuig ED n ce Bai, hog its through Brazil, Acre, in REDD including abroad, earn “Triple Gold” CCB designation in recognition of recognition in designation CCB Gold” “Triple earn giant Allianzpickedupoffsets fromtheproject. aaiy ulig otne t dmnt efrs in efforts dominate to continues building Capacity upr frsr poet a hm aogie other alongside home at projects forestry support oe’ euvln) te hiad rehue Gas Greenhouse Thailand the equivalent), Korea’s Bilateral OffsetCreditMechanism. msin euto (-E) rga i 21 to 2013 in program (T-VER) Reduction Emission Earlier this year, the Oddar Meanchey REDD Project REDD Meanchey Oddar the year, this Earlier prtn lrey f o bltrl ED ud versus funds REDD bilateral of off largely operating project types. Project, the world’s fi rst project to develop and navigate aaeet raiain a be gtig ready getting been has Organization Management in 2012, transacting 1.5 MtCO 1.5 transacting 2012, in in Cambodia became the world’s fi rst project to project fi rst world’s the became Cambodia in o nrdc te ogatcptd hiad Voluntary Thailand long-anticipated the introduce to region managed to land signifiland to managed region support corporate cant with Asia, Southeast in countries timber-exporting market-based fi nancing. However, a few and projects in stages the early in still development project most Notes: Basedonresponsesfrom52suppliers.Percentvaluesarebasedthevolumesassociatedwithindividual North America Europe Buyer Locations REDD Asia IFM A/R Project Type Table 20:Asia:TransactedForestCarbonCreditTypesandBuyers,AllMarkets,2012 Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2013. <1% <1% 91% 94% 2 9% 6% Top TransactedForestCarbonOffsetTypes,2012 e inoffsetscollectively Top ForestCarbonOffsetBuyerTypes,2012 questions, notincludingan“other”response. Food andbeverage Project designdoc Communications/ Carbon markets 2 e worth of worth e information Validated Issued Buyer Sectors Project Stage The African continent offers signifi cant potential for signifi potential offers cant continent African The Africa’s top source of offsets and market activity, with activity, market and offsets of source top Africa’s Africa-based forest carbon projects face the consistent At the jurisdictional scale, Laos has been preparing been has Laos scale, jurisdictional the At Vietnam has been working on a provincial greenhouse 2012 was limited by a lack of demand that has some has that demand of lack a by limited was 2012 In 2012, 3.1 MtCO 3.1 2012, In hlegs f ad eue ipts calne to challenges disputes, tenure land of challenges omnt, idvriy ad dpain benefi on adaptation ts and biodiversity, community, apply to a REDD project that would transcend borders government capacity, and civil unrest. New activity in activity New unrest. civil and capacity, government gas assessment of its own to test JNR’s compatibility JNR’s test to own its of assessment gas stakeholders questioning the degree to which market- which to degree the questioning stakeholders with the local context. Meanwhile, the World Wildlife World the Meanwhile, context. local the with project revenues. the support realistically fi can carbon nance based projects in the region, a signifi cant decline from the 4.7 MtCO How8.6. Africa: anddemand? to syncsupply oet ad as n toia rifrs. vn so, Even rainforest. tropical and mass land forest extensive its from stemming mitigation carbon forest region’s forestry projects as a stand-alone source of source stand-alone a as projects forestry region’s to pilot VCS’s JNR framework in two provinces, while provinces, two in framework JNR VCS’s pilot to top ofVCSaccountingforemissionsreductions. to includebothLaosandVietnam. ud a be plig oehr n R sse to system MRV an together pulling been has Fund 2 e reported in 2011 (Table 21). Kenya remains Kenya 21). (Table 2011 in reported e 33% 93% 12% 6% 1% 1% 2 e of offsets were transacted from transacted were offsets of e Climate leadership Panda Standard Buyer Motivations Resale J-VER CSR VCS Standard Use <1% 58% 91% 38% 4% 9% 61 8. Regional Market Deep Dive “If the compliance market State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State Funding committed from Norway to Tanzania 6 makes up the largest proportion of these contributions contributions these of proportion largest the up makes mechanism is going to be limited,” he notes.mechanism is going livelihoods or the biodiversity features of the projects. features of the or the biodiversity livelihoods horizon, with countries including Ghana, Liberia, and For many African project locations, the prospect of the three where project developers transacting have offsets, reported to the tune of $3.7 time. million over transacted offsets (Table 22). part of the country, where Director Marc Baker says public sector signals have been slow to materialize. project was the fi rstproject REDD was projectthe originatingfi in the projects climbs, market participants are increasingly projects, REDD was by far the most popular forestry project type on the continent, behind 70% of all project developers leveraged to avoid deforestation a support to Norway) (mainly governments foreign by broad range of REDD readiness and implementation preservation preservation – are likely to be a primary driver of buyer Here, Carbon Tanzania completed Plan Vivo REDD fi nanceREDD from fi bilateral donors loomson the Beneath the surface, sustainable forest management stem from project-level interventions. Across all sustainable charcoal production for regional Capital in Johannesburg. “Carbon as a funding Co-benefi tsCo-benefi – perhaps even more than forest by the Yaeda project is being driven by voluntary by driven being is project Yaeda the by interest at all.” distribution – were the most common activities that activities.) REDD on more for 4.4. Section (See drivers. emphasizing other sources of project revenues that efforts. and potentially includes nancing fi for project-level activities. Coincidentally, Tanzania is the only one of reasons,” he explains. and sustainable energy – which primarily involves attention to these projects in the future, says Duncan certifi cations of its Yaeda REDD project in the northern the in project REDD Yaeda its of cations certifi In the DRC, offset supplier Offsetters’ Mai Ndombe ever does come online, we would hope they would they would hope would we come online, ever does accept our project as valid because of it being certiﬁ ed, but certiﬁ I don’t see any compliance market Abel, Senior Transactor of Forestry Carbon at Nedbankat Carbon Forestry of Transactor Senior Abel, REDD region’s the from issued offsets of volume the As Tanzania reporting an initial $117 million committed “As of now, all the interest in the credits generated the interest in the all now, “As of “I’m e, as e, as 2 NA -8% -35% +18% from 2011 % change 36 600 Mt e 2 2.5 million ha 674 million ha CO NA $7.2/t 3.1 Mt $22 m Mt $ million or Source: WRI CAIT database. All other: Market Snapshot e) 2 2

1 Land and Project Area (MtCO 2 e transacted from Kenya-based projects, at 2 Forest Trends’ Ecosystem Marketplace Table 21: Africa by the Numbers, All Markets, 2012 Table Carbon project area Annual land use emissions Volume purchased domestically Volume supplied Average price Value Total forest area # Projects represented Projects # These fi gures are derived from a mix of 2011 and 2012 results report from the reddx.forest-trends.org REDD expenditures inventory. These fi Source: FAO 2010; Last accessed October 2013, updates anticipated November 2013. 6 namely the interaction and impact they have on local remained strong in 2012, rising 18% to $7.2/tCO to 18% rising 2012, in strong remained the tropical forests,” says Baudouin Michel, Director of Director Michel, Baudouin says forests,” tropical the the University of Kinshasa’s ERAIFT (a postgraduate tropical forest management program launched by inability to access forested areas, remains problematic, problematic, remains areas, forested access to inability Marketing the ts co-benefi of forestry projects has potential in countries such as the Democratic Republic Republic Democratic the as such countries in potential to its sprawling forest lands. of Congo (DRC) due project developers and offset retailers reporting nearly reporting retailers offset and developers project become a top priority projects, for these of elements charismatic developers, the like buyers as voluntary buyers continued to show interest in projects that can can that projects in interest show to continued buyers while poverty rates continue to rise, he notes. successfully establish their t co-benefi credentials. UNESCO). But the ongoing impact related to the a total value of $11.9 million. But stakeholders also see also stakeholders But million. $11.9 of value total a and indigenous communities in providing alternative country’s civil wars, namely the lack of security and the and security of lack the namely wars, civil country’s he says. is not getting better,” afraid that situation 1 The average price of Africa-based forest carbon offsets offsets carbon forest Africa-based of price average The 1.6 MtCO “DRC is one of the most important countries in Africa for Africa in countries important most the of one is “DRC 62 8. Regional Market Deep Dive “It’s a very capital-intensive undertaking and requires and undertaking capital-intensive very a “It’s h Mi dme rjc, hc lk mn REDD many like which project, Ndombe Mai The ibbe Cro Gen fias aia REDD Kariba Africa’s Green Carbon Zimbabwe, State CarbonMarkets oftheForest 2013 Se eto 47 fr oe. rjc certifi is Project cation more). for 4.7. Section (See country to be fully validated and verifi ed, and the verifi and and ed, validated fully be to country and the climate, but a growing burden to those tasked appropriately andtheco-benefi tsaredelivered.” expected annual emissions reductions of any project any of reductions emissions annual expected expertise to ensure the carbon program is managed is program carbon the ensure to expertise f i rst REDD project in the Congo Basin. The project – project The Basin. Congo the fi in project REDD rst delivery of multiple co-benefi ts, reports the largest the co-benefi reports multiple ts, of delivery same timeperiod. supported by the Congolese government and the UN pnig 3-eid A iial lre rjc in project large similarly A 30-period. a spanning undertaking to develop one of these projects,” he says. with managing the massive project area. Says Steve Says area. project massive the managing with forests the to boon a are projects mega-scale Such upir sy ht oe f h ogig challenges ongoing the of some that say Suppliers ERA Ecosystem Services and Offsetters, “It’s quite an quite “It’s Offsetters, and Services Ecosystem ERA for Development Business of Vice-President Baczko, REDD Programme and recognized within the DRC’s the within recognized and Programme REDD projects is also tapping into the trend of verifying the verifying of trend the into tapping also is projects rjc, s xetd o eue 2 MtCO 52 reduce to expected is project, n h VS ytm oe 10 MtCO 100 over – system VCS the in in-country technical, operational, and socio-economic tropical rainforestfromcompletelossofforestcover. o rnig oet abn rjcs o akt are market to projects carbon forest bringing to national REDD registry – protects 300,000 hectares of magnifi issue tenure land the particularly Africa, in ed Notes: Basedonresponsesfrom52suppliers.Percentvaluesarebasedthevolumesassociatedwithindividual North America Europe Buyer Locations REDD IFM A/R Table 22:Africa:TransactedForestCarbonCreditTypesandBuyers,AllMarkets,2012 Project Type Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2013. 94% 29% 70% 6% 1% Top TransactedForestCarbonOffsetTypes,2012 Top ForestCarbonOffsetBuyerTypes,2012 questions, notincludingan“other”response. 2 cumulatively e Project DesignDoc 2 Carbon markets e overthe Transportation Verifi ed Energy Issued Buyer Sectors Project Stage C RD ofes rnatd vr ie ae been have time over transacted offsets REDD VCS In 2012, European buyers were once again the major the again once were buyers European 2012, In aia, eibe eortc oenet ms also must governments democratic reliable capital, and thusseekingsupplementalincome. diffi cult to achieve if the land tenure is in dispute or dispute in is tenure land the if diffi achieve to cult fi nanceandfutureneeds. some countries making monthly salaries of sub-$100 of salaries monthly making countries some structures reliable establishing addition, In unclear. ore fo Arcn rjcs a byr remain buyers as projects, African from sourced major a remains Corruption hands. wrong the in up rjcs rud h wrd prhsn hl o all as of proportion same the half – 2012 in purchasing transacted offsets world, the from around offsets projects carbon forest voluntary of purchasers Despite these challenges, a signifi of a proportion challenges, cant these Despite in 2011. But the region’s share of the global market on be in place, without the danger of the money ending money the of danger the without place, in be being communities the to goes projects these by 8.7. Still Europe: abuyerʼs market btce wt ee drco-ee cvl evns in servants civil director-level even with obstacle, impacted remains a tricky endeavor. To attract foreign Norway-backed VCS JNR pilot in Mai Ndombe, which Ndombe, Mai in pilot JNR VCS Norway-backed of the region’s carbon-fi nanced forest conservation. carbon-fi forest region’s nanced the of the supplyside remainssmall. akt atcpns r nw unn ter attention their turning now are participants Market ht nue ht h mjrt o cs generated cash of majority the that ensure that to the integration of project-level activities within the within activities project-level of integration the to many hope will begin to fi existing to between begin gap will the hope ll many oiae t spot rltvl sed proportion steady relatively a support to motivated 82% 25% 25% 16% 6% 5% Climate leadership ISO-14064 Buyer Motivations Resale CDM CSR VCS Standard Use 42% 95% 34% 18% 1% 3% 8. Regional Market Deep Dive 63 -54% +21% + >100% + >100% from 2011 % change 10 e 2 0.1 million ha 196 million ha 196 million CO $41/t 0.3 Mt $11 m 11.4 Mt Mt $ million or Market Snapshot

1 Land and Project Area Land and State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State other: Forest Trends’ Ecosystem Marketplace other: Forest Trends’ Ecosystem Marketplace Source: FAO 2010 – excludes Russian Federation; All Source: FAO 2010 – excludes Russian 1 Volume purchased domestically Carbon project area # rojects represented Volume supplied Average price Value Total forest area Total forest Table 23: Europe by the Numbers, All Markets, 2012 All Markets, Europe by the Numbers, Table 23: registered projects, 42 have completed audits and together come to projects woodland of groups allow to now is and piloted successfully been has validation for the UK Forestry Commission to incentivize woodland that UK-based companies can purchase as an been independently validated. In addition, a scheme open to applicants, making the process more cost- Environmental Registry. signaling their intent to seek validation. Of these 133 sequestration. WCC projects against their annual emissions reporting reporting emissions annual their against projects WCC effective for smaller projects. evaluate and promote agricultural land-based carbon environmental credit. emissions reporting (the other being Japan). allowing voluntary offsetting claims against mandatory against claims offsetting voluntary allowing creation – supports the creation of a per-tonne unit In July 2013, the WCC was launched on the Markit (35,000 acres) have been registered under the WCC, A total of 133 projects covering 14,200 hectares Affairs allows UK companies to claim any support for The UK’s Woodland Carbon Code – administered by The UK Department for Environment, Food and Rural – one of only two cases of a national government management, reduce fertilizer use, protect and mechanisms established by the Kyoto Protocol – the municipalities in the Vicenza province sold offsets management land-use plan that employs sustainable market participants to evolve within what has half the market size reported in 2011 (Table 23). (Table 23). half the market size reported in 2011 historically raised issues about the rigor of MRV and historically been the world’s largest market for carbon carbon for market largest world’s the been historically Fund, with less than 300,000 offsets reported as transacted from the entire region in 2012 – or about forest management practices. reporting for countries that are parties to the Kyoto into the market. into the market. in two regions in northeast Italy, does not include Protocol. Small transaction volumes were reported implementation. REDD and IFM projects have been in 2012, with the collapse of CDM prices forcing opportunity to buy local carbon credits to offset their offsets from agroforestry activities. In 2012, several public forest owners are given the opportunity to projects as eligible. projects as eligible. offsets. Forestry carbon projects have not played a promote the carbon sink capacity of the forests, and EU ETS, CDM, and JI – as well as investing in domestic in investing as well as – JI and CDM, ETS, EU within the region have been extremely limited due to use sector. Under the program, both private and under the UK’s Woodland Carbon Code (WCC), Italy’s Italy’s (WCC), Code Carbon Woodland UK’s the under use. It also res, supports measures to prevent forest fi small- and medium-sized enterprises had the sell carbon offsets received by developing a carbon social safeguards in the context of forestry project signifi cant rolesignifi in regionalthe program,stakeholders, certain as particularly environmental NGOs, have Carbomark was launched as a pilot action aimed at Carbomark program, and the Portuguese Carbon enhance forests, and encourage biomass energy emissions reductions. The fund supports agriculture emissions. It focuses on local mitigation activities excluded from the CDM program, leaving only A/R and forestry efforts that promote better country-side acquire GHG emissions reductions using the ﬂ exibility ﬂ the using reductions emissions GHG acquire activities taking place in other countries, and favors creating a local voluntary carbon market in the land- complications regarding land-use accounting and Voluntary purchases of forest carbon offsets produced produced offsets carbon forest of purchases Voluntary The Portuguese Carbon Fund was created in 2006 to The market started in September 2010, when local The European compliance offset market struggled 64 9. Looking Ahead: Market Projections State CarbonMarkets oftheForest 2013 years, project developers have an unprecedentedly unprecedentedly an have developers project years, Figure 49 shows that, at least for the previous and current might beheaded. it where of indications and market the of temperament current the into insight useful provide they subjective, are predictions these While ahead. years the and year current some the for 2012, for size and already market “guesstimate” to suppliers asked we performance, hindsight 2013’s into insight of benefi t the With from 2012. the time that developers responded to its survey – and significhanged already have requirements from cantly technical and policies project carbon forest reality, In which isbestviewedasanindicatorofrecentactivity. data, historical on purely rely must too, practitioners, are impossible. Backward-looking reports such as this and pricing offset performance carbon forest market time” “real for on based projections future – cases by exchange separated are participants an on occur don’t transactions and miles of thousands where market a In challenges 9.1. Developer New predictions: new ground, MtCO e

2 100M 10M 20M 30M 40M 50M 60M 70M 80M 90M 0

Notes: Basedonpredictionsprovided by97surveyrespondents.Estimatedannualissuancebased on e-2006 – or even become public knowledge in many 2012 surveypredictions 2013surveypredictions Estimated annualissuance* Historicaltransactionvolumegrowth rate(Projection) 9. LookingAhead:Market Projections

Source: Forest Trends’ EcosystemMarketplace. StateoftheForest CarbonMarkets2013. 2006

2007 Figure 49:ProjectDeveloperPredictions,AllMarkets,2011-2012

2008

2009

2010 developer-reported ranges.

2011

2012 ee ihn MtCO 1 within size were market 2013 2012 for and estimates 2012 respondents’ survey both analysis, market intra-year of r indicative oflong-termopportunities. fias bilateral nance accommodate will that programs jurisdiction-scale toward progress and near- Fund; Climate the China; and fi California nalization of the FCPF’s Carbon Fund and the Althelia like markets from to pointing outlook, demand offset forest future for signals early promising market future about optimistic more nonetheless were 2013 in respondents Survey to itshistoricalrate(reaching93MtCO signifismaller than if the market continued to to grow according cantly slightly is foresee 2020 in that also marketplace a projections survey-based years’ Both Respondents from both years also project that the the that project market willtransact35MtCO also years both from Respondents 23 MtCO a to equates This rate. growth 9% a predicted 2012 in reporting developers while 13%, of rate growth annual 2013, this Beyond year’s survey widens. respondents predict estimates an average respondent survey year’s this and year’s last between gap the ahead, Looking ealistic view of market activity. Even in the absence absence the in Even activity. market of view ealistic 2013

2014 2 e difference in market size by 2020. e differenceinmarketsizeby2020.

2015 2

2016 performance. market actual of e

2017 2 e in 2013. e in2013.

2018 2 e by 2020). e by2020). 2019

2020 58 M 80 M 93 M 9. Looking Ahead: Market Projections 65 80 $147 M 20 70 Salm/Agroforestry e). Conversely, IFM 2

R // A 60 $265 M 7 1,222.6 e offset pipeline in the compliance 2 50 11 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State IFM $558 M Existing voluntary Existing pre-compliance Existing voluntary Existing pre-compliance Planned voluntary Planned pre-compliance 40 markets. As seen in Figure 50, the cant market requires anticipated signifi suppliers’ accommodate to order in growth project developers expect to MtCO transact 53 anticipated 82% of their available offsets with available of 58% a contracting – middle buyer. the in somewhere A/R projects fell out offset portfolios. Looking ahead, project developers over market to offsets billion report 1.4 another bring to intend that they ve yearsthe –next 93%fi of which would be sourced from REDD projects. Respondents also report that the vast majority of these REDD offsets are intended for voluntary buyers (1,223 MtCO 30 24 43 REDD A/R IFM SALM/Agro-forestry 20 15

D 0 2 1 D 6 0.4 E Notes: Based on predictions provided by 97 survey respondents. $9,767 M 10 R 6 4 Figure 50: Developer Estimated Portfolio and Pipeline, All Markets Portfolio and Developer Estimated Figure 50: 1 0 y y Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2013. e – would have been worth an additional oluntar oluntar 2 V V e-compliance e-compliance e-compliance

Pr Pr

Existing Existing Planned Planned “Leftover” ndings portfolio vary fi by project type. For example, IFM project developers contracted 87% of available volumes in 2012, while REDD agroforestry and developers SALM/ only placed 36% over their $236 million if it had been transacted at 2012 prices. In prices. 2012 at transacted been had it if million $236 reality, the market achieved 48% of its potential value of $453 million if all supply had been transacted. Also in the unsold survey, portfolios their in we remained that offsets asked of total volume a developers – response about Their 50). the (Figure 2012 of end the of as of 30 MtCO 9.2. Remaining portfolios9.2. Remaining and pipeline: REDD ready for ramp-up 66 9. Looking Ahead: Market Projections State CarbonMarkets oftheForest 2013 is what keeps them in the game game the in them keeps what is years saythisreality challenging more and good markets’ the both through projects forestry manage to continue that Developers scarce of overuse natural resources.Andtheyhavebeenforyears. and/or misuse against defense of line only fi and world’s rst the this currently are in space actors private and communities, indigenous governments, forest NGOs, conservation to international the solution manyof large-scale Inreality, thecorner. other around fi just is some nance that – particular in the policy-makers, from and – consumers, media, belief the encounter where market, often small practitioners a for questions big are These act together? other leversthatcanbepulledtopushbothsides are the economic (and socio-economic), policy, and that investmentsandactionsbothwillbelasting?What confimutual establish dence two the can How goals? and privatesectorstogetherachievethesenecessary – discussions market of forefront at the arealready that questions fi raise These gures approaching trillions ofdollars. some or with fi to gures, these comparable than are greater forests, the critical protect most to least world’s at or deforestation, halt or slow to estimates cost markets, carbon forest the Beyond from millionstobillionsofdollarsinthisdecade. ranging abound, needs market future and existing of As seen in Table 24 and throughout this report, estimates 9.3. Lookingahead:2013 andbeyond… size overfi veyears. billion/year required to support a project pipeline of this equates to a market value of $10.7 billion, or roughly $2 For o oversupply. avoid to context, REDD offsets contracted in 2012 plans represent 1% and expectations downsized – suggested have some as or, – portfolios 2012 marketvalue: f this pipeline. Based on current pricing, this pipeline pipeline this pricing, current on Based pipeline. this f ACTUAL $ 216 M Table 24:VariousEstimatesofMarketRealityandFuture Needs,2013andBeyond Source: Forest Trends’ EcosystemMarketplace. StateoftheForest CarbonMarkets2013. Value ofunsold offset portfolio $ 236M How can the public How canthepublic received desiredprice developers had 2012 valueif $ 280M source of innovation and experimentation that is is that experimentation and already seedingtomorrow’smarkets. innovation of source resilient a cultivating – ground new stakeholders break to continue community and consultants, analysts, registries, developers, standards, project market’s the kinds, all of funders to relevant remain to quest the In intention ofmarryingpublicandprivatepriorities. the with many – participation stakeholder community formalize to and commodities; agricultural certifiand forest other ed onto assets carbon forest “stacking” with experiment to frameworks; accounting regional emerging with integrated programs pilot to beginning are conservation forest for support sector public into these opportunities head-on, developers aiming to tap growth ultimately hinges on regulatory drivers. To meet But as market participants will admit, signifi cant market based supplychainemissions. land- buyers’ target directly that projects benefi of ts co- as relationships producer improved and supply of security enhanced for case the making increasingly grow the private offset market’s share, developers are To stabilized. forforestry- largely has offsetting voluntary based market most market’s the the relationships, high-profi of le some managed and have traditionally that these retailers as offset of such presence efforts continued the ongoing of result a As about forestryandland-usemarketopportunities. discourse market up stepping are Association Trading Emissions International the like associations industry And practice. best industry of promotion and events high-level through sector the to awareness REDD driving is Code program Corporate-facing Peugeot, others. Microsoft, and UPS, PUMA, eBay, like brands household of agenda the make offsets forestry seeing solutions. to land-use year, current the in continues momentum forward This government and forestry of implement ahead rapidly acting consistently and Developer estimates $ 1.1 -2.3B existing projects to fullysupport Value ofdevelopers’ $ 10.7 B 5-year pipeline 67 ANNEX State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State Buffer Volumes: This Buffer Volumes: column buffer standard’s captures each to contributed credits of volume the total start the from calculated are Volumes mechanism. pool date of the buffer policy until the end of 2012. Thus, volumes will vary by standard – not to only buffer start according date but also based on how standards manage intentional versus whether unintentional or not they accept reversals, additional “donations” to by for compensated are reversals what and buffer, the the project owners themselves. the buffer pool versus Issuance from Projects Annual Expected Average year’s this time, rst fi the For that Have Issued Credits: annex reports on expected projects that annual have already issued issuance credits in from order to provide a better sense of future offset supply. These expected annual gures issuance should fi simple are they that given however, salt, of grain a be taken with differences nuanced to regard without taken averages in crediting period and project type. issuance Actual going annual forward will also depend greatly whether on a nds project fi issuing of trouble the through go a solidnot will projects many prospective buyer; buyers. credits until they have assurance from A note on our methods: Most standards do not have a clear picture of the volume of edtheir cation credits standard reportto until isa verifi submitted verifi to a registry. We have cation therefore omitted verifi gures,fi focusing insteadtransacted, retired, and buffer pool volumes. In this section, we rely on trackingexclusively on registries’ retirement issued, data and not the retired volumes survey, we as track registries’ in our retired more volumes comprehensive. are Retirement volumes slightly tracked from the available data. The proportion of CarbonFix market supply that Standard represents ect unreported, refl private publicly unknown. Finally, activities we include a universal legend remains for the “Validated and Transacted Projects charts for by rst the time Type” fi breaking it c specifi AFOLU project types. out by ANNEX Issued to Retired Ratio: to Issued This ratio compares the to according registry a by issued the credits of volume featured standard against the volume of credits that for standard, that from retiring reported have registries all years and in 2012. Issued to Transacted Ratio: Issued to Transacted This ratio compares the volume of credits issued by a registry according to the featured standard against that volume suppliers have reported transacting, of for all years credits and in 2012. In some cases, transaction volumes are higher than issuance volumes – this market turnover and forward sales. captures both In between these quantitative and qualitative sections, qualitative and quantitative these between In a series of ratios explore the relationships volumes. available, transacted, and retired offset between At the top of each le standard’s any standard profi that has – createdmore than one for year’s worth of project carbon forest guides that and data transaction standard the of summary a present we – development transacted for information volume and price basic and forest carbon credits. The bottom le half of each profi standard’s the about information basic to dedicated is geographic and technical scope; use cation of forverifi third-party various project activities; the number of projects validated by project category through the end of 2012; and the market share for different types of credits that were transacted under each standard in 2012 only. Throughout summer 2013, we surveyed and registries standards to explore the credits – including forestry and land-use offsets – that volume and types of have been tracked through their systems, as well as how each standard’s structure and uptake. scope Tracked impacts information varied slightly by each infrastructure provider, but what obtain is we reported in the following section, were along with able to data. six years’ worth of historical survey Annex A: Standard Profiles A: Standard Annex 68 ANNEX State CarbonMarkets oftheForest 2013 *Would applyto anyCarbonFixprojectstransferred toTheGoldStandard. A.1 Standards CarbonAccounting Forest Emissions Reductions Emissions Reductions Use &ForestsFrameworkandRequirements. Land Standard Gold established newly the under rules the meet they if projects Standard Gold into transition may acquired and Standard Foundation Standard Gold The by hosted Gold being are projects CarbonFix The Existing forests. and use 2012, land into expansion its September support to order in In CarbonFix responsibility. ecological and socio-economic to commitment demonstrate that a projects agroforestry and regeneration, natural reforestation, afforestation, to applies Standard CarbonFix The wetland deltaic fi for the methodology include rst restoration, anestedREDDstandard,andmethodologyforagriculturalN 2012 in released ACR Guidelines protocols. offset early-action or compliance Board’s Resources Air California the using developed being verifi offsets listing, of the issuance oversee and, helps cation now it scientifi c peer review. In 2012, ACR was approved as an Offset Project Registry forA California’s cap-and-trade program, under which verifi cations (years): MAX. time between MAX. timebetween verifi cations(years) Eligible Countries Eligible Countries CR, founded in 1996, is a nonprofi t enterprise of Winrock International with three published standards, all of which have undergone Asset Generated Asset Generated Methodologies Methodologies Standard Type Standard Type MAX. timeb/w Co-benefi ts Co-benefi ts All Years Projects All Years All Years All Years Projects Usage Usage Ratios Ratios 2012 2012 2012 2012 Verification Requiredfor: Verification Requiredfor: Standard Scope Standard Scope Average Price Average Price Carbon accounting+taggedco- Carbon accounting+embedded $13.3 $11.4 $7.4 $8.4 Issued :Transacted Issued :Transacted Carbon credit Carbon offset co-benefi ts 8to10 benefi ts Tagged 13 to1 7 to1 3 to2 All All √ √ √ √ √ √ √ 5 5 American CarbonRegistry(ACR) CarbonFix Standard(CarbonFix) Transacted (Mt) Transacted (Mt) 0.05 0.5 3.2 0.2 # ProjectsValidated # Projects Validated Issued :Retired Issued :Retired Transacted ProjectTypes, Transacted ProjectTypes, 930to1 915 to1 2012 (by%Share) 2012 (by%Share) 2012 (by%Share) 9 to1 6 to1 2 O. 9 7 2 4 agroforestry) All ag(SALM/ reforestation Afforestation/ agroforestry) All ag(SALM/ reforestation Afforestation/ 100%! 100%! Volume Retired (Mt) Volume Retired (Mt) Projects thatHaveIssuedCredits*(Mt) Projects thatHaveIssuedCredits(Mt) Avg. ExpectedAnnualIssuancefrom Avg. Expected Annual Issuance from Avg. ExpectedAnnualIssuancefrom Mixed forestry management Improved forest Mixed forestry management Improved forest 0.003 0.003 0.04 0.1 Validated ProjectsbyType Validated ProjectsbyType (byCount,through2012) (byCount,through2012) 2! 0.04 0.2 conversion REDD/avoided conversion REDD/avoided 9! Buffer Pool(Mt) Buffer Pool(Mt) 0.3 1.3 5! ANNEX 69 0.5 16! Unknown Buffer Pool (Mt) Buffer Pool (Mt) 1! REDD/avoided conversion REDD/avoided conversion 0.04 UNKNOWN! Unknown 5! (by Count, through 2012) (by Count, through 2012) Validated Projects by Type Type Validated Projects by Validated Projects by Type Validated Projects by Type 0.4 1.1 Unknown Unknown Improved forest management Mixed forestry Improved forest management Mixed forestry Avg. Expected Annual Issuance from Avg. Expected Annual Issuance from Avg. Expected Annual Projects that Have Issued Credits (Mt) Projects that Have Issued Credits (Mt) Projects that Have Issued Volume Retired (Mt) Retired Volume Volume Retired (Mt) Retired Volume ! 99%! (IFM) 0.98% State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State 92%! 8%! Afforestation/ reforestation All ag (SALM/ agroforestry) Afforestation/ reforestation All ag (SALM/ agroforestry) 0.2%! 0 16 22 36 2012 (by % Share) 2012 (by % Share) 4 to 1 16 to 1 3.5 to 1 Unknown Transacted Project Types, Transacted Project Types, Transacted Project Types, Issued : Retired Issued : Retired # Projects Validated Projects # # Projects Validated 1.2 3.9 4.2 7.7 Transacted (Mt) Transacted (Mt) 5 √ √ √ √ √ √ 6* All N/A 6 to 1 1 to 1 1.1 to 1 Carbon credit Carbon credit US & Mexico Climate Action Reserve (CAR or “The Reserve”) Climate Action Reserve (CAR or “The Chicago Climate Exchange (CCX) Offset Standard Climate Exchange Chicago Price Issued : Transacted Issued : Transacted Carbon accounting only Carbon accounting only $8.9 $0.1 $7.7 $1.1 Average Avgerage Price Standard Scope Standard Scope Verification Required for: Verification Required for: 2012 2012 2012 2012 Ratios Ratios Usage Usage Projects All Years All Years All Years Projects All Years Co-benefi ts Co-benefi Co-benefi ts Co-benefi Standard Type Standard Type Methodologies Methodologies Asset Generated Asset Generated Eligible Countries MAX. time between Eligible Countries: verifi cations (years): cations verifi MAX. time between verifi cations (years) verifi The Reserve is an environmental non-profi t that serves as a carbon offset registry and standards-setting body. The Reserve has so has Reserve The body. standards-setting and registry offset carbon a as serves that t non-profi environmental an is Reserve The Offset an became Reserve the 2012, In Mexico. cases some in and US the in use for protocols offset carbon several developed far theoversee helps it roles, these Through program. cap-and-trade California’s for Program Offset Action Early and Registry Project offset early-action and compliance Board’s Resources Air California the using developed being offsets of issuance and registration market. of four Reserve protocols approved for use in the new compliance protocols. Its Forest Project Protocol is one in 2011 to register verifi ed emissions reductions based on a comprehensive set of established protocols that builds off of ISO–14064 of off builds that After retiring its voluntary cap-and-trade scheme in protocols 2010, CCX launched the Chicago Climate Exchange Offsets Registry Program established of set comprehensive a on based reductions emissions ed verifi register to 2011 in Registry Account Holder. to become a CCX offsets may apply in acquiring registered Participants interested procedures. Emissions Reductions Emissions Reductions *Timing of the second verifi cation for a reforestation project is at the forest owner’s discretion. After the second verifi cation, the standard the cation, verifi second the After discretion. owner’s forest the at is project reforestation a for cation verifi second the of *Timing 6-year cycle applies again. 70 ANNEX State CarbonMarkets oftheForest 2013 they arevalidated towhentheyareregistered. *For the VCS program, the registration date is more relevant than the validation date, since projects often experience a gap from when Emissions Reductions Emissions Reductions verifi cations (years): well asrequirementsforwetlandrestoration,andsoilcarbon. fiworld’s the released VCS year, the of end the Toward projects. REDD nesting for as requirements, REDD nested jurisdictional rst WBCSD. In early 2012, VCS released new guidance on standardized methods for V additionality and crediting, and technical guidance updated setofstandardguidelines,whichitplanstoreleasesoon. an on process consultation public a undertook Vivo Plan 2012, In time. over cost-effectiveness on lessons learn and transparency Foundation monitors and publishes operational costs (including distribution of payments to communities) in order to create fi nancial diversifiare sources income Vivo Plan The degradation. land and deforestation of causes root the tackle and poverty reduce to ed P MAX. timebetween verifi cations(years): Eligible Countries: MAX. time between MAX. timebetween Eligible Countries CS was founded in 2005 by The Climate Group, the International Emissions Trading Association, World Economic Forum, and the local and design project into built and considered are needs livelihood that certifi ensuring Vivo programs, lan offset forestry es Asset Generated Asset Generated Methodologies Methodologies Standard Type Standard Type Co-benefi ts Co-benefi ts All Years All Years Projects All Years All Years Projects Usage Usage Ratios Ratios 2012: 2012: 2012 2012 Verification Requiredfor: Verification Requiredfor: Standard Scope Standard Scope Average Average Price Carbon accounting+embedded Carbon accounting+tagged $6.5 $7.5 $7.5 $7.0 Developing countries Issued :Transacted Issued :Transacted Carbon offset(VCUs) Price Carbon offset co-benefi ts co-benefi ts 0.9to1 2 to10 1.2 to1 2 to10 None All √ √ √ √ √ √ √ √ 5 Verified CarbonStandard(VCS) Transacted (Mt) Transacted (Mt) Plan VivoStandard(PlanVivo) 1.4 0.3 43 16 # ProjectsValidated # Projects Validated Issued :Retired Issued :Retired Transacted ProjectTypes, Transacted ProjectTypes, 25%! 1.1to1 1.1 to1 2 to1 3 to1 2012 (by%Share) 2012 (by%Share) 54 10 29 1 13%! agroforestry) All ag(SALM/ reforestation Afforestation/ agroforestry) All ag(SALM/ reforestation Afforestation/ 100%! Ag! -0.1%! 62%! Volume Retired (Mt) Volume Retired (Mt) Projects thatHaveIssuedCredits(Mt) Projects thatHaveIssuedCredits(Mt) Avg. ExpectedAnnualIssuancefrom Avg. ExpectedAnnualIssuancefrom Mixed forestry management Improved forest Mixed forestry management Improved forest 2.5 1.6 1.4 0.3 Validated ProjectsbyType Validated ProjectsbyType (byCount,through2012) (byCount,through2012) 21! 2! Unknown 2! 9.7 1! 6! conversion REDD/avoided conversion REDD/avoided Buffer Pool(Mt) Buffer Pool(Mt) Unknown 1.8 34! 5! 71 ANNEX 33! N/A ts. Buffer Pool (Mt) REDD/avoided conversion 6! 2! 18! (by Count, through 2012) Validated Projects by Type* Type* Validated Projects by 0.7 1.2 Improved forest management Mixed forestry Retired (Mt) Retired Volume 62%! State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State Afforestation/ reforestation All ag (SALM/ agroforestry) 13%! 15 59 2012 (by % Share) 2012 (by % Share) 25%! Transacted Project Types, Transacted Project Types, # Projects Validated Projects # 13 36 Transacted (Mt) 5 √ √ √ All Certifi cate Certifi Co-benefi ts only Co-benefi $7.7 $9.5 Climate, Community & Biodiversity Standards (CCB Standards) Standards Community & Biodiversity Climate, Average Price Standard Scope Verification Required for: 2012 Projects All Years Utilization Co-benefi ts Co-benefi Standard Type Methodologies Asset Generated Eligible Countries MAX. time between The CCB Standards are project-design criteria for evaluating land-based carbon mitigation projects’ community and biodiversity co- biodiversity and community projects’ mitigation Transaction carbon standard. land-based carbon evaluating underlying for another criteria ed against project-design are Standards CCB The verifi be must reductions GHG standard, ts-only co-benefi a As ts. benefi approval project joint a introduced VCS and CCBS 2012, In cation. certifi CCB with tagged projects carbon from are below volumes approach programmatic a include which review, under are CCBS the of Edition 3rd the on Comments process. issuance offset and cover sheet for co-benefi for the climate section, and a ed requirements project, simplifi similar to the VCS grouped verifi cations (years): cations verifi Emissions Reductions A.2 Project Co-Benefits Programs *Mixed forestry projects here combine REDD and A/R, and A/R and agricultural land management. *Mixed forestry projects here combine REDD 72 ANNEX State CarbonMarkets oftheForest 2013 * Drawsfrompre-compliance transactionsinthe voluntarymarket,whichdiverge fromthefi xedcompliance priceof$23/tCO orRegion-Specific Programs) (Country- Domestic A.3 Emissions Reductions Emissions Reductions verifi cations (years): and certifi cationofthewholeprocessbyTÜVRheinland. verifi (IDESA), University, Socioambiental UNESP e by Econômico cation Desenvolvimento de Instituto the by validation following production units to add value to areas’ rural production, re-composition, and recovery. Projects generate Sustainability Credit Units methodology aims to generate resources for the introduction of new sustainable technologies for land use and the establishment of BMV is a payment-for-environmental-services standard with a forest carbon accounting component. Through its application, the BMV on theirapproval.TheCleanEnergyRegulatorisresponsibleforadministeringtheCFI. committee, the Domestic Offsets Integrity Committee, assesses offset methodologies and advises the Minister for the Environment methodology-specifi c requirements along with positive and negative lists to determine project additionality. An independent expert national scheme to regulate the creation and trade of carbon offsets from farming, landfiEnabled ll,by andthe Carbon forestry.Credits The(CC) Act CFI2011 as usesa legislation-part of and the Australian Government’s Clean Energy Future Plan, the CFI is the fi rst verifi cations(years): MAX. time between MAX. timebetween Eligible Countries Eligible Countries Asset Generated Asset Generated Methodologies Methodologies Standard Type Standard Type MAX. timeb/w Co-benefi ts Co-benefi ts Projects All Years All Years All Years All Years Projects Usage Usage Ratios Ratios 2012 2012 Verification Requiredfor: Verification Requiredfor: Standard Scope Standard Scope Average Average Price Carbon accounting+embedded No AFOLUissuanceyetin2012 $13.5* $13.3 $12 Carbon accountingonly Issued :Transacted Issued :Transacted Sustainability Credits Price Carbon offset co-benefi ts Australia Multiple 3 to1 N/A √ √ √ √ √ √ 5 6 Transacted (Mt) Transacted (Mt) Carbon FarmingInitiative(CFI) Brasil MataViva(BMV) 3.1 2.9 5 # ProjectsValidated # Projects Validated Issued :Retired Issued :Retired Transacted ProjectTypes, Transacted ProjectTypes, 48% 4 to1 2012 (by%Share) 2012 (by%Share) N/A 28 3 3 agroforestry) All ag(SALM/ reforestation Afforestation/ agroforestry) All ag(SALM/ reforestation Afforestation/ 100%! Volume Volume Retired (Mt) Projects thatHaveIssuedCredits(Mt) Projects thatHaveIssuedCredits(Mt) Avg. ExpectedAnnualIssuancefrom Avg. ExpectedAnnualIssuancefrom 52% Mixed forestry management Improved forest Mixed forestry management Improved forest None None Retired (Mt) 4 Validated ProjectsbyType Validated ProjectsbyType (byCount,through2012) (byCount,through2012) 1! Unknown N/A conversion REDD/avoided conversion REDD/avoided 28! Buffer Pool(Mt) Buffer Pool(Mt) Unknown 0.02 2 2! e. ANNEX 73 * 0.009 (A/R)! 1! Buffer Pool (Mt) Buffer Pool (Mt) 137! 43! REDD/avoided conversion REDD/avoidedREDD/avoided conversion 0.2 Unknown (by Count, through 2012) (by Count, through 2012) Validated Projects by Type* Type* Validated Projects by Validated Projects by Type* Validated Projects by Type* 0.02 0.05 0.05 0.004 Improved forest management Mixed forestry Improved forestImproved forest management Mixed forestry Avg. Expected Annual Issuance from Avg. Expected Annual Issuance from Avg. Expected Annual Projects that Have Issued Credits (Mt) Projects that Have Issued Credits (Mt) Projects that Have Issued Retired (Mt) Retired Volume Volume Retired (Mt) Retired Volume State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State 100%! 100%! Afforestation/ reforestation All ag (SALM/ agroforestry) Afforestation/Afforestation/ reforestation All ag (SALM/ agroforestry) 36 43 138 2012 (by % Share) 2012 (by % Share) 4 to 1 7 to 1 6 to 1 Unknown None issued Transacted Project Types, Transacted Project Types, Transacted Project Types, Issued : Retired Issued : Retired # Projects Validated Projects # # Projects Validated 0.1 0.5 0.3 1.5 Transacted (Mt) Transacted (Mt) √ √ √ √ √ √ N/A N/A Japan 1 to 5 1 to 1 1 to 1 NZ Permanent Forest Sink Initiative (PFSI) NZ Permanent Forest Sink Initiative co-benefi ts co-benefi None issued Carbon credit New Zealand Price Issued : Transacted Issued : Transacted Japan Verified Emissions Reduction Scheme (J-VER) Scheme Emissions Reduction Japan Verified Carbon accounting only $4.3 $105 $115 $10.6 Allowances (AAUs)**, VERs Carbon accounting + embedded Average Price Average Standard Scope Standard Scope Verification Required for: Verification Required for: 2012 2012 2012 2012 Ratios Ratios Usage Usage Projects All Years All Years Projects All Years All Years Co-benefi ts Co-benefi Co-benefi ts Co-benefi MAX. time b/w Standard Type Standard Type Methodologies Methodologies ew Zealand’s PFSI offers landowners of permanent forests established after 1 January 1990 the opportunity to earn Kyoto Asset Generated Asset Generated Eligible Countries Eligible Countries Eligible Countries Eligible Countries MAX. time between apan’s Ministry of the Environment (MOEJ) launched the J-VER voluntary offsetting scheme as an effort “by and for Japan,” verifi cations (years): cations verifi verifi cations (years): cations verifi Protocol Assigned Amount Units (AAUs) for the carbon sequestered by their forests since 1 January 2008. Because New Zealand’s New Because 2008. January 1 since forests their by sequestered carbon the for (AAUs) Units Amount Assigned Protocol government has opted not to participate in the Kyoto Protocol’s second commitment period, domestic emitters will no longer be Scheme (ETS) and is PFSI is complementary to the New Zealand Emissions Trading able to access Kyoto units starting 2015. The the New Zealand government. currently under review for improvements by N with Japan-only internal methodologies (based on ISO 14064), internal registry, and complementary Voluntary Carbon Offsetting other the – J-CDM and J-VER scheme. domestic purely a comprise together that Scheme Offset Carbon Japan including Activities for applications accepting began and 2013 in Scheme J-Credit the into merged – scheme offset voluntary domestic Japan’s of part projects in August. J Emissions Reductions Emissions Reductions buffer. *While there is no regulated buffer pool, individual participants may choose to hold a portion of the units they receive as a may be issued for its rst commitment period (2008–2012), another unit type yet to be determined **While AAUs are issued for NZ’s fi second commitment period (2013–2017). 74 ANNEX State CarbonMarkets oftheForest 2013 **Verifi cation isrequiredatYear5,then every 10years. *WCC has119,000PendingIssuance Units,tobeconvertedintoBufferUnitsfrom2016onward. Emissions Reductions Emissions Reductions are nowtransactedbyotherpartiesforthevoluntarymarket. provincial government’s carbon neutrality commitment. Originally exclusively owned and transacted by Pacifi the meet c Carbon to Trust, PCUs offsets sourcing with tasked corporation Crown Pacifi Columbia by British developed a was Trust, standard Carbon c The Pacifi c Carbon Standard defi nes the requirements for developing offsets to be recognized as Pacifi cCarbon Units (PCU). This Carbon Unitswillbeissuedforverifi edsequesteredcarbon. and independent certifi cation. The WCC went mechanism, liveproject-grouping pool, onbuffer a like Markitstandards international with infeatures shares JulyWCC the issue, 2013,double-monetization and the fi rst verifi cations will occur requires in 2016,projects to whenmeet Woodland the UK Forestry Standard’s environmental/social criteria. While projects cannot and generate additionality offsets test due to certifito method using project-based the projects the forestry uses domestic WCC credits The forestry. WCC cates. The on action local incentivize to mechanism voluntary domestic a as 2011 in WCC the launched Commission Forestry The verifi cations (years): MAX. timebetween verifi cations(years): MAX. time between MAX. timebetween Eligible Countries Eligible Countries Asset Generated Asset Generated Methodologies Methodologies Standard Type Standard Type Co-benefi ts Co-benefi ts Utilization All Years Projects All Years All Years Projects Usage Ratios Ratios 2012 2012 2012 2012 Verification Requiredfor: Verification Requiredfor: Standard Scope Standard Scope Average Average Price Carbon accounting+embedded Unknown Unknown $25 $25 Carbon accountingonly Issued :Transacted Issued :Transacted Price United Kingdom British Columbia Carbon offset co-benefi ts Certifi cate 1to 1 to2 10** N/A N/A √ √ √ √ √ √ √ Transacted (Mt) Woodland CarbonCode(WCC) Transacted (Mt) Pacific CarbonStandard(PCS) 0.1 0.6 1.2 0.6 # ProjectsValidated # Projects Validated Issued :Retired Issued :Retired Transacted ProjectTypes, Transacted ProjectTypes, 7 to10 3 to2 2012 (by%Share) 2012 (by%Share) N/A 19 22 3 1 agroforestry) All ag(SALM/ reforestation Afforestation/ agroforestry) All ag(SALM/ reforestation Afforestation/ 100%! 100%! Volume Retired (Mt) Volume Retired (Mt) Projects thatHaveIssuedCredits(Mt) Projects thatHaveIssuedCredits(Mt) Avg. ExpectedAnnualIssuancefrom Avg. ExpectedAnnualIssuancefrom Mixed forestry management Improved forest Mixed forestry management Improved forest N/A N/A 0.8 0.5 Validated ProjectsbyType Validated ProjectsbyType (byCount,through2012) (byCount,through2012) 0.7 N/A conversion REDD/avoided conversion REDD/avoided 19! 3! Buffer Pool(Mt) Buffer Pool(Mt) N/A* 0.4 ANNEX 75 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State Buffer Zone”, and 40% to the Conservation Area for project implementation schemes cation and certifi additional of use the encourages monitoring. The The areas. GCS project in farming organic or FSC, VCS, like standard’s GCS Registry will record CCU issuance, and project details. ownership, retirement, – Forestry and Land Use The Gold Standard Programme (2013) The Gold Standard, historically focused on renewable CarbonFix the acquired ciency, effi energy and energy Understanding of Memorandums signed and standard with the Forest expansion its support to order in 2012 late in Fairtrade Stewardship Council projects CarbonFix Existing forestry. and use land into (FSC) and have been transitioned into Gold Standard projects if they meet the rules under Gold Standard version 3.0. In parallel with the integration of CarbonFix, The Gold Standard will also begin developing areas other for methodologies suitable and framework a governance of land use, including improved sustainable forest agriculture management. and As of The Gold August Standard 2013, had released for the requirements afforestation/reforestation methodology for climate-smart agriculture is currently (A/R) being developed, and projects. the methodology for improved course.” due “in A developed be will management forest Collaboration will see The Gold Standard incorporate and build upon elements of FSC’s safeguarding and resource management enable FSC to rely on requirements The Gold Standard’s approach and to carbon taccounting sharingand would whenbenefi FSC edcertifi forest operations seek carbon fi Fairtrade incorporating is Standard Gold The addition, nance. In principles into Gold Standard carbon projects across all project types, whether energy or land-based. April 2013) 1.1, The Natural Forest Standard (Version The Natural Forest Standard (NFS), Ecosystem developed cation Certifi by OrganizationEcometrica, (ECO) is intended and for medium- use by and developers large-scale conserve to wish who eligible) be of to ha 20,000 exceed projects (projects must and restore natural forests at community under risk not from are that deforestation areas in degradation and or smallholder control or management. cally The specifi designed NFS for is REDD projectsforests that exclude in natural commercial resource extraction. The Standard aims to optimize the time requirements for bringing cover to reserve projects buffer a uses from NFS The issuance. credit initial implementation to against the risk of potential future losses and requires additionality, On years. 20 of period project minimum a in the “Commercial Global Conservation Standard – GCS Global Conservation Standard – GCS 1.2, 2011) (Version Launched in March 2011, the GCS t is a not-for-profi registered in Offenburg, Germany, designed to make populations local and landowners for pay conservation of ow) fl the (not volume stock the on based worldwide measurable ecosystem ts. service It benefi does this through the issuance and sale of Conservation Credit Units (CCUs). GCS’s rstCCUs fi based methodology on es carbon stocks quantifi in vegetation; CCUs are third-party ed verifi and valid additionality, for the one year. GCS On does additionality not Thus, emissions. compensate that offsets issue or generate nedas under defi ISO 14064-2, the Kyoto Protocol, and other emerging standards is not the applicable GCS. Conservation to Areas are monetized based on accounting follows: as distributed for is CCUs the of sale existing the from ecosystem Revenue services. the to 40% landowner, legal or government the to 20% in-country Stakeholder Foundation that reinvests indigenous and rural communities in A.1.4 Standards to Watch to Standards A.1.4 ARB – Board Protocols Air Resources California (2011) Protocols The California Air California’s Resources Board California’s (ARB) under program cap-and-trade a developed Environmental within Assembly Bill Protection 32 (“AB32”) that voluntary draws carbon from Agency market existing infrastructure. Approved in 2011, the ARB Protocols were adapted from existing protocols developed by California’s Reserve Climate (CAR). So far, they Action consist of four protocols: livestock manure, ozone-depleting substances, urban forestry, and forestry protocols Other conversion. avoided and management – including improved under forest consideration include mine methane, and REDD. rice The REDD Offset Working cultivation, Group coal (ROW), established in 2011, legal, examined technical, what and institutional mechanisms would be required to link compliance with buyers REDD in offset projects California developed in the states of Chiapas, Mexico, and Acre, Brazil. The ROW released nal recommendationsits infi July 2013. Under AB32, forest offsets must persist for 100 forest years ensuring for and liability the – – unlike types offset other ARB’s carbon offsets lies with the project consideration under developer proposal a (though buyer the than rather in October 2013 may shift rst liability to buyers). The fi compliance period in California began on January 1, 2013, covering over 350 businesses. 76 ANNEX o oe patto mitnne ot. h main promote to is The Standard Forestry PCF costs. the of purpose maintenance plantation cover to profi landowners the the of to 70% returned to ts 60% costs are borne through CCC sales to an investor, with Carbon Capture Certifi cates (CCC) free of charge. The issue and certify then will Fund Carbon Peru the tree met, species are native requirements these If wood. use sawn for plantations to commit and purposes livestock or agriculture for government the by given market. To be eligible, landowners must possess a title Peru who otherwise might not have access to a carbon offset voluntary standard focused on small and medium a landowners in produce to knowledge used local Fund their Carbon in Peru experience the Amazon, afforestation Peruvian of the years ten over With Forestal Version 1.0,2013) Peru CarbonFund’s ForestryStandard(Estandar course of2013. the over launch to set pilots cap-and-trade emerging China’s under CCERs issue to eligible methodologies its credits, the Panda Standard has applied to have its of fungibility boost To province. Sichuan in grassland initial project is piloting the methodology on degraded July 2012, supports revegetation of degraded land. An in released and Winrock by developed methodology second A 2011. in transacted were offsets Standard fiThe Panda Standard. rst Panda the for project pilot fithe as plantation rst bamboo 15000-ha a support to Understanding of Memorandum a signed CBEEX and Développement, de Française Agence the BlueNext, in2010, Cancun in 16 COP At certifi scheme. cation Version 1.0 describes the Standard core Panda procedures 2009, of in its Copenhagen project in 15 COP at both using Launched methods. project-based and additionality standardized determines on standard The benefi alleviation Land- ts. focuses poverty with Other projects offset and Standard Use Forestry, Agriculture, Panda promoting the Standard Panda the Association, by Governed carbon economy. rural Chinese domestic nascent the into investment the encourage and market support to China, order for specifiin cally designed standard fi voluntary the rst carbon as Standard Panda the founded International, Winrock of support the and with BlueNext, Exchange Environment Beijing China Partners Panda Standard(Version 1,2009) validated underNFS. been had Brazil in project one 2013, September of As crediting. for eligible be not shall requirements legal are that activities restoration Any policies. existing to relative additionality demonstrate must projects NFS State CarbonMarkets oftheForest 2013 Version 4.0 guidelines for all reports certifi ed until certifi ed reports December 31, 2013. all for guidelines 4.0 Version REDD indicators. The Standard will continue to accept Amazon released newly has effi Standard the ciency, energy and energy renewable on While focused historically period. monitoring SOCIALCARBON the with period monitoring accounting VCS the of 50% at least of overlap an mandating by VCS with processes metrics with a “temporary nature rule” that streamlines July 2013, featuring simplifi ed templates and improved criteria. The fi fth version of the standardadditionality wasown its set not releaseddoes it program, in verifying offset- an with conjunction in used usually is standard alongside non-forest carbon project types. Because the projects afforestation/reforestation accounting covering standard carbon a the under developed with been have Indicators standard. paired be to standard “stacking” another is SOCIALCARBON carbon. and fihuman, social, biodiversity, project: natural, nancial, livelihoods sustainable Standard apply indicators to that the correlate developers with project six aspects requires of that on the approach based program certifi a cation is 1998, in (Brazil) the Institute Ecologica by developed Standard, SOCIALCARBON The SOCIALCARBON Standard(Version 5.0,2013) existing and test, incen incentives tives test. economic test, al ity addition- legal a uses standard the additionality, On offsets. carbon of sale the from incentives economic long-term create and region Amazon the of realities social and conditions ecological the accommodate to isintended RFS socio-cultural/ REDD, specifi for Designed cally accounting, outcomes. biodiversity and carbon impacts, socio-economic for protocols and requirements integrate to for aims (RFS) Standard Center Rainforest The University’s Society, and Columbia Economy, Environment, and Peru) Amazon and Ecuador, fi Colombia, ve Brazil, in (Bolivia, countries based Basin funds fi leading trust by ve 2012 environmental June in Rio+20 at Launched The RainforestStandard(Version 2.0,June2012) Packing andPlastics,usingCCCs. company, plastics Peruvian certifi a neutral for cation fithe carbon provided rst PCF year, Last companies. certifithe farmers, and other to resalable not are cates Intended to promote receive a unique support. link between companies for their individual, turn certifi and in carbon-neutral cation corporate both cattle-raising. Investors, and agriculture migratory by caused employment in the jungle as a way to end deforestation ANNEX 77 State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State compliance with relevant ISO standards. Three Rivers Rivers Three standards. ISO relevant with compliance allows for both project-based, performance-based and/or technology-standard cationsSpecifi for agriculture, additionality forestry,and grassland, livestock tests. projects are under development, but no projects have been registered as of September 2013. AFOLU project methodologies that have been automatically be may VCS and CDM the by approved approved by Three Rivers, but may also be subject to a review c and conditions. China-specifi revision Requirements process to for social account and environmental impacts of projects are based on for national laws and supplemented by guidance from international initiatives. other domestic and The Three Rivers Standard standard is based in the rst western fi voluntary area China, that located includes in the Qinghai the by Initiated Rivers. Mekong an and headwaters Yangtze, of the Yellow, Environment and collaboration Energy with other Exchange Chinese and partners, (QHEX) the standard applies to mitigation activities international in sectors. of range a cover will and China in conducted following 2012 in released were documents Standard a public consultation process based on the ISEAL Code of Good Practice for standard setting and in Three Rivers Standard – Three Rivers Three Standard – Three Rivers 0.1, 2011) (Version 78 Sponsors and Supporters State CarbonMarkets oftheForest 2013 andSupporters Sponsors rmu Sponsors Premium Supporter Sponsors Sponsors and Supporters 79 www.profor.info) is a multi-donor State of the Forest Carbon Markets 2013 2013 Forest Forest of the of the Carbon Markets Carbon Markets State State www.biocarbonfund.org) has allocated ( (PROFOR) ( ) www.facethefuture.com is an independent organization www.newforests.com.au) manages investments in sustainable Premium Sponsors New Forests ( forestry and associated environmental markets for institutional and other qualifi ed qualifi other and institutional for markets environmental associated and forestry wholesale investors. geography, returns, risk-adjusted New around choice Forests and diversity with executes clients provide three investment strategies that and market exposure: sustainable timberland investment in Australia and New Zealand; forestry investment in high-growth markets cof region; the Asia Pacifi and conservation forestry and environmental markets investment in the United ces in Sydney, Singapore, and San Francisco and States. The company has offi as at October 31, 2013 manages over AU$1.9 in funds 415,000 hectares of land in Australia, the United States, and Asia. and assets and over The Program on Forests partnership managed by a core team at forest-related the World Bank. nances analysis PROFOR fi and improving people’s livelihoods through better management of forests and trees; processes that forest sustainable nancing fi enforcement; law and governance forest enhancing support the PROFOR’s 2013, In sectors. across policy forest coordinating following and management; goals: donors included the European Commission, Finland, Germany, Italy, Japan, the Kingdom and the World Bank. Netherlands, Switzerland, the United Fund Bank BioCarbon World The ( Face the Future with worldwide operations, aiming to measurable tssocial toand mitigate local biodiversity communities.benefi Our climate team of change and values forest of marketing and and developing identifying, in specializes experts provide biodiversity. In our work we focus on innovation and sustainable development. our support that opportunities economic identify to expertise our use to want We and responsibility. commitment to sustainability resources to projects that transform landscapes and directly benefi t poor farmers poor t benefi directly and landscapes transform that projects to resources world to rst carbon fund established in the fi since its creation in 2004. It was the focus on land use. Housed within the Carbon Finance Unit of the World Bank, the BioCarbon Fund is a public-private sector nancing initiative to mobilizing fi help develop projects that sequester or conserve carbon in ecosystems. It forest has been and a pioneer agro- in this sector, developing the infrastructure land-use carbon market. needed to pilot transactions in a growing Tranches One and Two of the BioCarbon Fund committed about $90 million to more than 20 projects around the world. The and large majority are Reforestation Afforestation (A/R) though Clean a small portion Development of funds support Mechanism REDD+ and Land Management Sustainable (SALM) projects under Agricultural (CDM) the voluntary carbon market. A third projects, tranche is currently being established to incentivize better land management at the landscape level, combining afforestation/reforestation, REDD+, agriculture, and biomass energy activities into an integrated and scaled-up approach. 80 Sponsors and Supporters State CarbonMarkets oftheForest 2013 as MarkitandtheVoluntaryCarbonStandard. number of REDD transactions. We have worked closely with marketmakers such market transactions and deals under the Voluntary Carbon market Standard, including a of development the in involved standards and is infrastructure and team has represented Our clients on 1990s. many early late voluntary the in Japan and Australia between transactions forestry early with fi beginning years, fteen past the over market carbon voluntary the in extensively worked has team Our transactions. the derivative on fi carbon advising the structured and fiup rst funds carbon rst fithe writing setting including contracts, deals, carbon pioneering rst numerous on worked has team dedicated Our clients. our to developments legal such of importance the and change climate address to efforts global of importance the & McKenzie( Baker osrain f idvriy n eoytm ucin ad mrvmn in improvement and function; ecosystem emissions; conservation statusofthreatenedandendangeredspecies. and gas biodiversity greenhouse of reduced stakeholders; conservation local of spectrum wide by a benefi realized livelihood ts and economic outcomes; environmental and that include: positively transformed land-use models delivering social, economic aligned withsoundenvironmentalstewardshipandsocialdevelopmentimpacts Southeast and America fi Latin competitive fully that be demonstrates can portfolio returns Our nancial Africa, Asia. in ecosystems natural useand land of conservation sustainable towards thetransition catalyzing scale, fi at and innovation nance Landscapes deliver to partnerships Sustainable private public Althelia as up and set vehicles Fund, Fund Climate Althelia the manages It to address forests andothernaturalecosystems. of degradation solutions and profidepletion the and table and change climate from arising new challenges pioneering to dedicated platform Althelia Ecosphere( Sponsors www.bakermckenzie.com) was the fi rst law fi rm to recognize i a ast management asset an is www.altheliaecosphere.com) The Family of Forest Trends Initiatives

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