0.5 Mt 2.6 Mt

5.6 Mt 2.8 Mt 18.2 Mt

1.9 Mt

Turning over a New Leaf State of the Carbon Markets 2014

Sponsors

timber of the 21st century About Forest Trends’ Ecosystem Marketplace

Ecosystem Marketplace, an initiative of the non-profit organization Forest Trends, is a leading source of information on environmental markets and payments for ecosystem services. Our publicly available information sources include annual reports, quantitative market tracking, weekly articles, daily news, and news briefs designed for different payments for ecosystem services stakeholders. We believe that by providing solid and trustworthy information on prices, regulation, science, and other market-relevant issues, we can help payments for ecosystem services and incentives for reducing become a fundamental part of our economic and environmental systems, helping make the priceless valuable.

Ecosystem Marketplace is financially supported by organizations such as the Skoll Foundation, the Swiss Agency for Development and Cooperation, the International Climate Initiative (Germany), the Gesellschaft für Internationale Zusammenarbeit/Federal Ministry of Economic Cooperation and Development (Germany), the Gordon and Betty Moore Foundation, PROFOR (the World Bank’s Program on ), and the Climate and Land Use Alliance, as well as sponsors and supporters of our reports.

Forest Trends is a Washington, DC-based international non-profit organization whose mission is to maintain, restore, and enhance forests and connected natural ecosystems, which provide life-sustaining processes, by promoting incentives stemming from a broad range of ecosystem services and products. Specifically, Forest Trends seeks to catalyze the development of integrated carbon, water, and incentives that deliver real conservation outcomes and benefits to local communities and other stewards of our natural resources.

Forest Trends analyzes strategic market and policy issues, catalyzes connections between producers, communities and investors, and develops new financial tools to help markets work for conservation and people.

Forest Trends’ Ecosystem Marketplace 1203 19th Street, NW 4th floor Washington, DC 20036 [email protected] www.ecosystemmarketplace.com www.forest-trends.org Turning over a New Leaf State of the Forest Carbon Markets 2014

A Report by Forest Trends’ Ecosystem Marketplace

Allie Goldstein and Gloria Gonzalez

Edited by: Molly Peters-Stanley

November 2014 Copyright and Disclaimer:

© Ecosystem Marketplace is an initiative of Forest Trends.

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 the insights of a wide range of individuals across several continents. It would not be possible without the hundreds of individuals who shared critical information about their organizations.

This report is publicly available thanks to the generous sponsorship of EcoPlanet , New Forests, JPMorgan Chase, and Baker & McKenzie, as well as ongoing program support from PROFOR (the World Bank’s Program on Forests).

The production of this report has also required insights, time and support from dozens of people. They include Duncan Abel, Israel Amezcua, David Antonioli, Rebecca Anzueto, Steve Baczko, Elly Baroudy, Genevieve Bennett, Paul Bodnar, Lucio Brotto, James Bulinski, Ciro Calderon, Sean Carney, Nina Doetinchem, Joanna Durbin, Roberto Leon Gomez, Gary Gero, Mary Grady, MaryKate Hanlon, Joanne Hochheiser, John Holler, Simon Ingram, Toby Janson-Smith, Mike Korchinsky, Alexis Leroy, Sarah Mack, Aya Marabini, Stephen Matzie, Ben McCarthy, Brian McFarland, Charles Meschak, Belinda Morris, Ezra Neale, Daniel Nepstad, John Nickerson, Jessica Orrega, Heru Prasetyo, Caroline Puente, Mahmood Rahimi, Paul Ramirez, Cornelia Rindt, Alessandro Riva, Garrett Russo, Michael Sahm, Rajinder Sahota, Agus Sari, Brian Schaap, Steve Schwartzman, Jerry Seager, Jonathan Shopley, Gustavo Silva, Jenny Sinclair, Chris Stephenson, Katie Sullivan, William Sunderlin, Wes Swaffar, Naomi Swickard, Anne Thiel, Kevin Townsend, Pieter van Midwoud, Chandler van Voorhis, Wen Wang, Sean Weaver, Jennifer Weiss, Vicky West, Troy Wiseman, 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 2 e as North as e 2 e. 2 e, or 46% of all market 2 e of the offsets transacted in 2013, 2 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State e, down from $7.8/tCO 2 e, with Latin America-based projects behind 70% behind projects America-based Latin with e, 2 that pay for avoiding (REDD), planting , or adjusting or agricultural reductions fi nanced through market-based mechanisms market-based through nanced fi reductions injected millions towards halting tropical deforestation. injected millions towards halting tropical practices practices to enhance . These REDD “readiness” to “payment-for-performance”. Even to “payment-for-performance”. REDD “readiness” activity, resulting in the most-ever annual emissions at the project level, REDD comprised two-thirds of forest of two-thirds comprised REDD level, project the at activities activities are beginning to scale up to the state and country level as jurisdictions gradually move from buyers sector private as year last transactions offset carbon This level of investment matches 2010’s record market e used an internal or proprietary standard. 2 Executive SummaryExecutive e) of carbon offsets generated 2 e in 2013, a 17% increase from 2012 and tying with 2010 for the highest demand tracked in this in tracked demand highest the for 2010 with tying and 2012 from increase 17% a 2013, in e 2 million hectares of habitat for endangered species; and $41 million in education, health care, and Forest carbon projects provided many ts “beyond in carbon” 2013, benefi including 9,000 jobs; 13 report series. MtCO or demonstrate industry leadership on . Compliance buyers in California and infrastructure. in emissions reductions. Dozens of other jurisdictional REDD programs are under development. in emissions reductions. Dozens of other jurisdictional REDD programs Projects developed according to VCS methodologies transacted 14.6 MtCO of these sales. A/R was the most popular project type by count (60 projects), though demand for these for demand though projects), (60 count by type project popular most the was A/R sales. these of MtCO 2.7 just transacted projects IFM demand. CDM alongside decline to continued offsets Demand for REDD offsets nearly tripled to 24.7 MtCO 24.7 to tripled nearly offsets REDD for Demand utilities and food and beverage companies seeking to meet corporate social responsibility commitments commitments responsibility social corporate meet to seeking companies beverage and food and utilities sought offsets to meet carbon regulations. Cumulative market value topped $1 billion last year, though 2013’s value of $192 million represented an represented million $192 of value 2013’s though year, last billion $1 topped value market Cumulative earning more than $8 million in new contracts. activity. Another 12.6 MtCO collective management. Communities owned at least 3.8 MtCO Voluntary offset buyers purchased the majority (89%) of forest carbon offsets in 2013, led by energy American developers waited to transition into California’s compliance market. American developers waited to transition into California’s compliance An early example of public sector “payment-for-performance” for REDD was evidenced in the state of MtCO 8 for KfW, bank development German with agreement million $40 a secured which Brazil, Acre, Thirty-seven projects – the most ever recorded in this report series – were developed on land under The global markets for offsets from agriculture, forestry, and other land-use projects transacted 32.7 11% drop from 2012 as average offset prices fell to $5.2/tCO 11% drop from 2012 as average offset Summary Report Findings, of Key 2013 • • • • • • • •

million tonnes (MtCO last year stakeholders around the world purchased 32.7 purchased world the around stakeholders year last is key to these efforts. In service of that goal, that of service In efforts. these to key is forestation Protecting Protecting the world’s forests has gained greater by forestry and land-use interventions at a combined Celsius, the more optimistic believe catastrophic global temperature increases beyond 2 degrees experts believe it may already be too late to prevent visibility as countries battle the often deadly value just shy of $200 million. climate shifts are preventable – and halting de- consequences of a warming climate. While some Executive Summary vi The forest carbon market is comprised of thousands of comprised is market carbon forest The outr byr prhsd h lret hr of share largest the purchased buyers Voluntary State CarbonMarkets oftheForest 2014 corporate social responsibility (CSR) commitments or commitments (CSR) responsibility social corporate and China. are set to gain an expanded foothold in the market due emissions from deforestation and sequestering carbon series aims to shed light on the nature and impact of impact and nature the on light shed to aims series offset volumesandprices. sellers and buyers among interactions discrete of or emerging carbon pricing regulations in South Africa these transactions by collecting quantitative data on data quantitative collecting by transactions these report This activities. land-use in changes through reducing on dollars of millions spend collectively that o xetd nrae i dmn fo nw carbon new from demand in increases expected to their industry. However, compliance-driven purchases within change meet climate on leadership to demonstrate to often most – 2013 in offsets transacted Methodology markets such as California’s cap-and-trade program cap-and-trade California’s as such markets Map key: Chart key:MarketSharebyDevelopers’ ProfitStatus: Figure 1:ResponseRatebyCountry,TransactedVolumeDevelopers’HeadquartersRegion,andMarket Notes: Basedon32.7MtCO Response RatebyCountry: Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarket2014. 2 e intransactionsreportedby 136 forestcarbonoffsetprojectdevelopersandretailers. 5.7 Mt 11.5 Mt Share byDevelopers’Profi tStatus 1+ 5+ 10+ <1 Mt For-Profit /PrivateSector Public Sector/Government This report tracks both compliance carbon markets that u goa ana sre ge ot o udes of hundreds to out goes survey annual global Our country andprofi tstatus. active in the market. A total of 159 agriculture, forest, agriculture, 159 of total A market. the in active ers agree to the terms of offset delivery and payment, and delivery offset of terms the to agree ers 33 in Latin America, 16 in Oceania, 12 in Asia, and 5 and Asia, in 12 Oceania, in 16 America, Latin in 33 which may occur immediately on the spot market, or market, spot the on immediately occur may which Suppliers from 39 countries transacted offsets in 2013. occur atthepointofcontractwhensuppliersandbuy- on six continents: 36 in North America, 34 in , in 34 America, North in 36 continents: six on also is analysis Historical activities. project 2013 on data detailed reported projects (AFOLU) land-use or in futureyears. include forest carbon offsets and voluntary demand for in Africa. Figure 1 illustrates regional response rate by headquartered were retailers and developers Project in previousyears. data provided that projects 258 another by informed oet abn fst. e osdr tascin” to “transactions” consider We offsets. carbon forest retailers offset and developers project carbon forest 20+ 12.9 Mt 1.9 Mt <1 Mt Not-for-Profit /NGO

vii Executive Summary Count e 2 20 18 16 14 12 10 8 6 4 2 0 - $6.0 $4.8 $9.4 $9.7 $5.2 $5.0 $6.9 $9.8 $4.8 2013 $20.8 more $12 or $9- Count $11.99 Average Price Average $7.9 $1.1 $7.6 $8.2 $7.8 $7.5 $9.8 $7.7 2012 $13.3 $10.5 $25.3 $6- $8.99 2011-2014. Volume $3- - $5.99 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State 2013 $16 M $32 M $16 M $0.2 M $3.9 M $140 M $153 M $140 M $52.4 M $192.1 M Forest Carbon Markets, 2010-2013 Forest Carbon Markets, 2010-2013 State of the Forest Carbon Markets 2014. Less Value than $3 Source: Forest Trends’ Ecosystem Marketplace.

9 6 3 0 from the State of the Forest Carbon Markets reports

2 e 12 MtCO Figure 2: Relationship Between Volume and Price in Figure 2: Relationship Between Volume Notes: Based on responses associated with 119.2 MtCO 2012 $12 M $38 M $57 M $0.6 M $1.9 M $147 M $137 M $198 M $18.1 M $15.6 M $215.8 M 4 M 30 M 29 M 2013 0.0 M 0.0 M 1.7 M 1.5 M 2.2 M 0.4 M 29.0 M 32.7 M and Average Prices, All Markets Prices, All Markets and Average Volume e in transactions reported by 136 forest carbon offsets project developers and retailers. e in transactions reported by 136 forest e in 2012. e in 2 1 M 2 2012 28 M 22 M 27 M 0.5 M 0.2 M 1.5 M 2.9 M 6.3 M 0.6 M 22.3 M Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. Source: Forest Trends’ Ecosystem Marketplace. e in 2013, representing a 17% increase in increase a e 17% in representing 2013, 2 **The California and Australia markets were pre-compliance in 2012 but transitioned to compliance in 2013. **The California and Australia markets were Table 1: Comparison of 2012 and 2013 Forest Carbon Markets’ Transactions Volumes, Values, Transactions Volumes, Carbon Markets’ and 2013 Forest of 2012 Table 1: Comparison e e for “legacy” offsets sold on the Chicago 2 e in 2013 from $7.8/tCO from 2013 e in Notes: Based on 32.7 MtCO 2 CDM/JI NZ ETS California** Australia CFI** Grand Total Secondary Market Voluntary Compliance Total MARKET* Primary Market Other Voluntary Total als 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 lowest lowest value tracked since 2010, as average global Market Overview: 17% Increase in Demand, but Overview:Market 17% notable growth in the demand for forest carbon offsets, offsets, carbon forest for demand the in growth notable tCO from from deforestation (REDD), and the majority of those Prices for forest carbon offsets ranged from less carbon offsets than ranged for forest Prices prices fell by more than two dollars per tonne, to $5.2/ to tonne, per dollars two than more by fell prices of of both payments for offsets existing and early-stage project investments over time. However, despite offsets transacted from projects that reduce emissions emissions reduce that projects from transacted offsets were were sourced from Latin America, which tripled from share last year. last share Offset Prices Decline 32.7 MtCO Cumulative market value topped $1 billion, comprised comprised billion, $1 topped value market Cumulative $1/tCO global market value totaled $192 million last year, the global last market value million totaled $192 year, demand for forest-based emissions reductions over volumes tracked in this report series. More than 80% of of 80% than More series. report this in tracked volumes 2012 2012 activity and held almost half of overall market 2012 2012 and tying with 2010 for the highest transaction The global markets for AFOLU offsets transacted viii Executive Summary State CarbonMarkets oftheForest 2014 Japanese buyers purchasing domestic offsets as part As Figure 2 illustrates, volume and price in the forest the in price and illustrates,volume 2 Figure As carbon market have been inversely related over the overrelated inversely been have market carbon oue fo 21. vie dfrsain projects deforestation Avoided 2012. from volumes average of $9.7/tCO msin rdcin, opine ues ad an paid buyers compliance reductions, emissions dynamics in a market that has a stable but currently but stable a has that market a in dynamics lmt Ecag (C) o vr $100/tCO over to (CCX) Exchange Climate IFM BideTheirTime Project Types:Project REDDVolumes Trip REDD project developers and retailers transacted a transactedretailers and developersproject REDD past four years, reflecting classic supply-and-demand buyers paid an average of $4.8/tCO cost-containment a as used are offsets because of the country’s proprietary Scheme. J-Credit of the forest area of . mrvd oet aaeet IM ofes od to sold offsets (IFM) management forest improved record 24.7 MtCO 24.7 record for more than half of total market value and tripling and value market total of half than more for Forest carbon offsets transacted for compliance garner higher prices compared to voluntary offsets largely offsets voluntary to compared prices higher now cover almost 20 million hectares, about the size the about hectares,million 20 almost cover now limitedbuyer base. mechanism on compliance markets. While voluntary While markets. compliance on mechanism MtCO e 120 200 2 180 100 140 160 20 40 60 80 0 pre-2005 project developers and countless suppliers Notes: Basedondatareportedby418forestcarbonandland-useprojectdeveloperscountlesssuppliers $37 4

Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. Figure 3:CumulativeForestryOffsetTransactionVolumeandValue,AllMarkets 2 e REDD offsets last year, accounting 2005 $45 2 e. 6

2006 $66 1 1

2 e e for forest-based 2007 le WhileA/R, $106 1 9

Volume 2008 $143 2 2 e for for e 6 over nineyears.

2009 $230 4 The higher transactions volume, however, occurred however, volume, transactions higher The was the most popular pro- popular most the was / / ofes rnatd t h hget rcs f any of prices highest the at transacted offsets A/R (20%) to market value as buyers spent $31.3 million on at 3.5 MtCO 3.5 at continents. However, transaction However, continents. year. Only one in 10 REDD offsets transacted at a price volumes of offsets in 2013, leading to ample supply. at lower prices, with the average REDD offset selling offset averageREDD the with prices, lower at a result,a projectsthese contributed disproportionately et ye codn t te ubr f transactions of number the to according type ject Kyotooffsets Protocol CDM signatories thatusedA/R planting projects were a far-off second from REDD REDD from second far-off a were projects planting lne tes cos . mlin etrs n six on hectares million 1.6 across trees planted of many because partly year this lower were prices REDD 2013. in dollar a under at offsets sold project peak transaction volume of 14 MtCO project type, selling at an average of $9.5/tCO ofaverage an at selling type, project of 2012 deadline. from demand compliance in drop-off a to due partly point above $7/tCO above point eotd wt 6 atv AR rjcs rce that tracked projects A/R active 60 with reported, verifiprojects sizeable REDD ed largest world’s the for $4.9/tCO for to meet emissions reductions goals ahead of the end the emissionsreductionsofaheadmeet togoals -planting last year. efforts or ons od t es hn $3/tCO than less at sold tonnes four 8 Value

2010 $407 8 0

2 2 e in 2013 versus $7.8/tCO versus 2013 in e e and continued to decline from A/R’s A/R’s from decline to continued and e 2011 $644 1 0 6 2

e last year, while roughly one in one roughly whileyear, last e 2012 $859 1 3 4

$1051 Voluntary volumes $741 M 2013 1 2 6 e in 2011. This is is 2011. This in e 7

2 e e the previous 2 e. No REDD REDD No e. from tree- from $0 M $200 M $400 M $600 M $800 M $1,000 M $1,200 M 2 e. As As e.

US$ million ix Executive Summary 24.7 M 3.5 M 2.7 M 0.2 M 2013 ica Set e from 13 projects. At e projects. from 13 2 2012 2011 SALM/ State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State e, e, Africa also set a new for record forest 2 e, Peru supplied the second-largest volume volume second-largest the supplied Peru e, 2 2010 IFM land area of . Of that area, 11.9 million hectares hectares million 11.9 area, that Of Vietnam. of area land the forest carbon offsets of any other region as projects projects as region other any of offsets carbon forest the buyers’ captured deforestation Amazonian reduce that that completed transactions last year. last transactions completed that the Democratic Republic of Congo (DRC), Kenya, and and Kenya, (DRC), Congo of Republic Democratic the 5.1 MtCO Projects in Mexico, Guatemala, Argentina, , Project Project developers revealed that 30 million hectares times three transacted America Latin in based Projects other landscapes. other , Bolivia, and other countries also contributed to Latin Project Afr Locations: Latin America, Records New worldwide, with 14 projects transacting tonnes last year. year. last tonnes transacting projects 14 with worldwide, were under forest carbon management in 2013, a 13% 13% a 2013, in management carbon forest under were expansion expansion from the 26.5 million hectares tracked in and and trees, coastal and savannah ecosystems, and attention. attention. Brazil supplied the most offsets of any country, transacting 11.8 MtCO 11.8 transacting country, carbon carbon transactions as countries such as Zimbabwe, (about 40% of the total) were associated with projects projects with associated were total) 40% the of (about 2012. REDD, IFM, and A/R projects covered nearly the the nearly covered A/Rprojects and IFM, REDD, 2012. America’s breakout volume in 2013. in volume breakout America’s At 5.6 MtCO 2009 e 2 e in e in 2 A/R 2008 REDD as well as more than 500 projects reported historically. as well as more than 500 projects reported 2007 e last year from developed- 2 e of IFM offsets at a total value 2 2006 Figure 4: Transacted Offset Volumes by Project Type, All Markets, Historical Type, All Markets, Volumes by Project Transacted Offset Figure 4: Notes: Based on data reported by 159 projects and 50 additional offset suppliers in 2014,Notes: Based on data reported by 159 projects Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. Source: Forest Trends’ Ecosystem Marketplace.

5 0

Pre-2006 25 20 15 10

2 e MtCO more more projects in countries developing may be on the horizon horizon as emerging project types are expanding to the fact that many North America-based IFM projects projects IFM America-based North many that fact the to transacted in 2012. in transacted transacted transacted just 0.4 MtCO the defi nition of to “forests” include mosaicsof the crops defi the the delayed winding down of offset from agricultural transactions and land-based projects originally into into the California cap-and-trade market. Early-action rst compliance issued IFM the tonnes fi morethan a Market experts attributed the lower transaction volume volume transaction lower the attributed experts Market included included agroforestry and grasslands management – of of $19.9 million, a decrease from the 5.1 MtCO Board’s (ARB) Board’s registry in March 2013, and regulators were were holding onto tonnes as they transitioned to sell fi rst dip in volumes transaction last year amidlengthy fi developed developed for sale on the now-legacy CCX. But approval processes for these projects in the California California the in projects these for processes approval and and Oceania. The decline is directly attributed to cap-and-trade market. Across all regions, buyers contracted 2.7 MtCO year later. The average IFM offset sold for $7.6/tCO for sold offset IFM average The later. year country projects located in Europe, North America, IFM projects began listing on California Air Resources Resources Air California on listing began IFMprojects 2013, boosted by California’s higher compliance prices. compliance higher California’s by boosted 2013, After a bumper year in 2012, SALM projects – which After years of steady growth, IFM projects saw their Executive Summary x rnato vlms rm cai-ae projects Oceania-based from volumes Transaction Asian countries has not yet translated into increased intotranslated yet innot has countries deforestationAsian addressing on focus growing A State CarbonMarkets oftheForest 2014 Map key:HectaresImpacted: Chart key:TransactionVolumeandSharebyProjectType: year. However, and other Asian countries Asian other and However,year.Indonesia attempt to access the millions of dollars earmarked dollars of millions the access an to attempt in efforts readiness REDD+ their accelerated While the United States hosted the most forest carbon dropped back to the level of 2011 volumes, before the decline from the previousyear.the fromdeclineHowever, compliance Uganda committed to major initiatives to conserve their projects is entirely due to a decline in voluntary demand demand voluntary in decline a to due entirely is projects ues n aiona ogt . MtCO 1.7 bought California in buyers projects of any country (24),projects country projectsAmericanany of North by Norway and multilateral funds to stop deforestation. increase from pre-compliance demand in 2012 – so – 2012 in demand pre-compliance from increase for offsets sourced in the region. American North from volume transaction smaller the rnatd . MtCO 2.6 transacted transactions, which fell by nearly 40% in the region last tropical forests. Notes: Basedonresponsesassociatedwith30.1millionhectaresofcarbonprojectareaand29.4MtCO Figure 5:HectaresImpactedbyCountryLocation,TotalRegionalTransactionVolume Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. and SharebyProjectType(TotalHectaresCountry%Share) 2 e in 2013, a more than 60% 60% than more a 2013, in e 2.6 Mt America North 100+ America 18.2 Mt Latin 2 – slight a – e 10,000+ 5.6 Mt Europe Africa 0.5 Mt 50,000+ (brief) implementation of Australia’s carbon tax drove Australia’s tax ofimplementation (brief)carbon year employed local community members, providingmembers, community local employed year carbon projects. Nearly half of all projects tracked last empowerment,climateadaptation,changemore. and jobs to more than 9,000 people. Another 150,000 people up 2012 demand. were trained in new skills or participated in capacity in participated or skills new in trained were were the most commonly-reported co-benefi ts of forest Project Co-BenefiProject andMore ts: Jobs,Jaguars, Direct employment and training and capacity-building Ecosystem Marketplace explicitly tracked forest carbon building activities, readiness. often around REDD projects’ co-benefi ts – those benefi ts that go beyond the Projects that reforest degraded areas or keep tropical and measuringincreasingly are developers Project forests standing also provide benefiprovide also biodiversity.standing to forests ts the “story” behind the offset. monitoringbenefithese know buyers to demand as ts women’s jobs, including – emissions GHG of mitigation A/R 100,000+ IFM Oceania 2.8 Mt 1.9 Mt Asia 1,000,000+ REDD SALM/Agroforestry 2 e transacted. xi Executive Summary Eco- e. e. VCS’s 46% market 2 e of the offsets transacted 2 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State e for almost $5 or of 25% million, share market 2 market share – in the process refi ning their guidelines guidelines their ning refi process the in – share market many of which have undefi ned or unclear land tenure tenure ned land or unclear undefi have of many which large-scale fi nancing to fl ow to tropical forest countries, countries, forest tropical to ow fl to nancing fi large-scale last last year and earned more than $8 million from new to to facilitate methodologies that enable new AFOLU to look to and borrow even best from practices these that determines how lands can be used by individuals individuals by used be can lands how determines that from from projects in Africa, where communities sold 3.1 internal internal and proprietary standards made a surprising in in this report series. The majority of these projects MtCO in the region. region. the in offset markets. offset markets. project types. Governments around the world continue continue world the around Governments types. project ownership ownership by communities – the most-ever recorded only only 18 forest carbon projects reported private land in 2013. ownership owned at least 3.8 MtCO popular popular standard for AFOLU projects last year. in in 2013 – a total of 14.6 MtCO Last year, Ecosystem Marketplace tracked 37 projects projects 37 tracked Marketplace Ecosystem year, Last Debate Debate surrounding land tenure – the legal structure Land Tenure and Communities: Getting It Right Getting and Communities: Land Tenure Independent Streak standards standards in the voluntary market have jostled for under, under, about two-thirds of which transacted offsets share share represents about a 10% decline from 2012 as standards standards are each used in only one or two projects spanning millions of hectares. of millions spanning situated on land under collective or customary system system Marketplace tracked 93 projects developed development development of UN-REDD creates the potential for government-owned land or concessions as well as emphasis on public fi nance and bilateral agreements, agreements, nance bilateral and fi on emphasis public voluntary voluntary standards in devising their compliance and and communities – has continued to heat up as the are located in Latin America and projects) (16 Africa growing a and developers project sector private among comeback after years of consolidation. These “internal” “internal” These consolidation. of years after comeback community-owned hectares. Amid uncertainties contracts. contracts. The majority of these tonnes transacted Over Over the years, leading independent third-party Overall, Overall, this report survey reveals that communities (10 (10 projects). Ten projects were implemented on Verifi ed Carbon Standard (VCS) Verifi was againthe most Standards: Old Favorites, with a New Old Favorites, with a New Standards:

26 26

9M species species 13M hectares Protecting at least or involved in for endangered 150,000 people trained Climate change hectares of habitat capacity-building adaptation across

M women * 475 $4.8M benefits 10 State of the Forest Carbon Markets 2014. hectares $41M + 9,000 to communities in livelihood Watershed Source: Forest Trends’ Ecosystem Marketplace. in direct payments Including (at least) jobs that specifi ed gender, not the 9,000 total jobs. jobs that specifi Notes: Based on responses representing at least 75 people employed protection across Figure 6: Project Co-benefi ts: Key Impacts, 2013 ts: Key Impacts, Figure 6: Project Co-benefi projects. *The number of women employed is out of 2,000 habitat habitat for dozens of endangered species, including Developers Developers reported their project areas protected such such as education, infrastructure, and health care million. $41 services worth least at decreased and fl protection. ood fl and erosion decreased another 35 projects offered in-kind livelihood benefi ts ts benefi in-kindanother 35 offered livelihood projects and and bonobos. Project developers also reported on a myriad of ts watershed such protection as benefi communities communities totaling at least $4.8 million last year; charismatic charismatic mega-fauna such as orangutans, koalas, African elephants, cheetahs, jaguars, giant armadillos, armadillos, giant jaguars, cheetahs, elephants, African Thirty-six projects provided direct payments to xii Executive Summary h mjrt o frsr tne – ttl f 29 of total a – tonnes forestry of majority The Australia’s quasi-compliance-driven Carbon Farming Carbon Australia’squasi-compliance-driven VCS JNR. VCS State CarbonMarkets oftheForest 2014 Initiative (CFI) was again the third-most used standard carbon projects. alongside carbon sequestration. Of the 16.3 MtCO 16.3 the Of sequestration.carbon alongside cap-and-trade programcap-and-trade offi cially launched2013. in commitments or to demonstrate leadership on climate according to California’s Compliance Protocol nearly Protocol California’sCompliance to according verifi ed the delivery of co-benefi verifi CCB of (11.8 delivery under the ts ed doubled in transaction volumes from 2012 as the state’s Use of co-benefi ts and land area certifi area co-benefi land of was and Use cations ts Conversely, the volume of forestry offsets developed offsets forestry of volume Conversely,the standard is the Acre Carbon Standard, used by the by used Standard, Carbon Acre the is standard under FSC (3.2 MtCO (3.2 FSC under Buyers: Private Sector theHeat Feels Buyers: Brazilian state to track performance against emissions prevalent in 2013 as buyers sought out forest projects or by a single project developer. The largest internallargest developer. The project single a by or offsets to meet corporate social responsibility (CSR)responsibility social corporate meet to offsets MtCO n 03 tog mre sae rpe fo 10% from dropped share market though 2013, in MtCO MtCO ht rvdd ieiod n eoytm benefits ecosystem and livelihood provided that to 5% following the repeal of Australia’s carbon tax. tax. Australia’scarbon of repeal the following 5% to under pilot its continues Acre as targets reductions transactedunderindependent an standard, 81% also 2 2 2 e – were transacted to voluntary buyers using buyers voluntary to transactedwere – e e) or certifi ed sustainable land area attributescertifi area or land e) sustainable ed ) ihn h sm ae ta hue forest houses that area same the within e) 40% Standard Carbon Acre 24% Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. 46% Figure 7:MarketSharebyStandard/Certifi cationType,AllMarkets2013 2 Notes: Basedonthe32.2MtCO e) or Alliance (0.5 Alliance Rainforest or e) 5% 3% 2% 1% 1% 0.4% 0.4% 2 2 e e transactedunderastandardin2013. “take action“take climate on change” (12%). America after California offi cially launched its cap-and- nte 2% f ues netd n oet carbon forest in invested buyers of 25% Another carbon tax. Refl ecting a market still geared towardsRefl geared still tax. market carbon a ecting buyers Compliance industry. their within change and beverage companies were also a prominent buyer and Italy’s“zeroemissions” provinces. voluntary buyers, CSR was the most common buyer meet to2013 in offsets purchasedcarbon forestalso ead o frsr eisos eutos n 2013, in reductions emissions forestry for demand demand as the secondary market conceded market conceded market secondary the as demand Compliance-motivated purchasing rose in North North in rose purchasing Compliance-motivated sector last year, purchasing at least 1.3 MtCO sector, purchasing more than 5 MtCO 5 than sector,purchasingmore end- to directly selling developers project to share users. Energy companies stepped up as the top buyer were were Europeans buyers also purchased half a million tonnes of source largest the again were buyers European of the offsets associated with a buyer last year.last buyer Food a associatedwith offsets the of f oety fst wti islr oetc markets domestic insular within offsets forestry of demand of a source largest the with comprising and buyer associated tonnes of two-thirds purchasing projects to “demonstrate industry leadership” (13%) or (13%) or leadership” industry “demonstrate to projects nldn te Ks odad abn oe (WCC) Code Carbon Woodland UK’s the including for projects based in Latin America, Asia, and Africa. and Asia, America, Latin in based projects for For the fi rst time in this report series, offset retailers offset series, report fi this the in For time rst less expensive mitigation option in jurisdictions with a with jurisdictions in option expensivemitigation less oiain at er bhn 2% f transactions. of 27% behind year, last motivation a as industries’ or theiremissions on mandatedcaps Sink Initiative;0.1% Chicago Climate Exchange; 0.2% Permanent Forest Carbon Code; J-VER; 0.2% Other; 0.1% Woodland 0.2% not not h lret ore f oet abn offset carbon forest of source largest the Carbon FarmingInitiative Gold Standard Pacific CarbonStandard Plan Vivo Climate ActionReserve Clean DevelopmentMechanism California Protocols American CarbonRegistry Internal/Proprietary Verified CarbonStandard 2 e, or one third one or e, 2 e. Executive Summary xiii 2 3 3 2 2 Other 5 NGOs (1%) 6 6 Retail Retail Small- to to Small- Individuals (0.2%) market Transportation product 12 enterprises . An even smaller medium- sized sized medium- X Pre-compliance National government (1%) National government 6 Insu- rance 12 Subnational government (1%) Subnational government Finance/ Private sector (unspecified) sector Private Industrial processes climate change climate Taking action on Taking Customer engagement Development multilateral (0.1%) Development 77 OtherOtherOther industry 13 leadership Demonstrate 28 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State 9 beverage Food and Domestic corporations ) tracked $4.5billion in REDD commitments to X 1717 market observers frequently considered project-level many billions that developed-country governments least in the short term. short the in term. least Forest Trends’ Forest REDDTrends’ Expenditures Project Tracking that indeed dwarfs project-level fi nance. However, less less However, nance. fi project-level dwarfs indeed that recipient to disbursed been far so has billion $0.6 than reductions from forest carbon projects over the years topped $1 billion this year, with a record $100 million funding, which is mostly coming from the private buying from African-based projects. African-based from buying Latin Latin American buyers purchasing offsets from Latin Forest Carbon Finance: The Big Picture sector, to be a “drop in the bucket” compared to the governments, governments, according to REDD at – activities project-level pilot reach to likely is gure fi fl owingfl to REDD projects in 2013 alone. However, developing countries. are expected to commit to reducing deforestation in (REDD American projects and Africa-based companies The cumulative value of payments for emissions 14 tropical forest countries in the last few years – agure fi Compliance Compliance Compliance 2727 Carbon markets Carbon markets Carbon markets e – roughly half e half – roughly 2 2020

Resale, voluntary voluntary voluntaryResale, Resale, Resale, 54 Figure 8: Market Share by Buyer Sector, Type, and Motivation Buyer Sector, Type, Market Share by Figure 8:

Notes: Based on 212 buyer types as described by survey respondents. Notes: Based on 212 buyer types as described Multinational corporations Energy Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. Source: Forest Trends’ Ecosystem Marketplace.

33 27 responsibility Corporate social e last year, though this demand was spread 2 MARKET SHARE BY BUYER TYPEMARKET SHARE BY (% SHARE) MARKET SHARE BY BUYER SECTOR BUYER BY MARKET SHARE (% SHARE) MARKET SHARE BY BUYER MOTIVATION (% SHARE) BUYER MOTIVATION MARKET SHARE BY not not to participate in the second phase of the Kyoto repeated in 2013 because of the anticipated repeal of of repeal anticipated the of because 2013 in repeated the country’s carbon tax. Oceania was nevertheless fth-largest sourceof the demand fi for forest carbon trade program in January 2013. Overall, North American North Overall, 2013. January in program trade voluntary in decline a to owing year, previous the than tightened or transitioned toward other environmental initiatives such as energy effi ciency projects. ciency effi energy as such initiatives Mexican companies Mexican and six with in buyers This Peru. MtCO international offsets. Protocol, Protocol, and forestry project transactions nearly offsets in 2013, transacting 1.5 MtCO 1.5 transacting offsets in 2013, projects projects transacted approximately 60% fewer offsets of previous volumes. , home of the world’s world’s the of home Zealand, New volumes. previous of Buyers Buyers in developing countries contracted just 0.3 second-oldest Emissions Trading System (ETS), chose chose (ETS), System Trading Emissions second-oldest $40-million influx of carbon payments was not demand demand for offsets as CSR budgets in the region demand demand was mostly contained within the continent: ground to a halt due to competition from less expensive expensive less from competition to due halt a to ground across across six countries, including 15 transactions with As proponents of Australia’s CFI feared, 2012’s xiv Executive Summary 11 countries in the Carbon Fund pipeline. h mjrt o ti fnig a be disbursed been has funding this of majority The State CarbonMarkets oftheForest 2014 and private foundation funding supplying the bulk of of bulk the supplying funding foundation private and such as the World Bank’s Forest Carbon Partnership Carbon Forest Bank’s World the as such when it approved the Methodological Framework for Framework Methodological the approved it when REDD payments for emissions reductions. There are currently has whichFCPF, the to million$180 totaling pledges bilateral the overshadowingyears, few past the over its Carbon Fund, unlocking a potential $465 million in Fund, Carbonpotentialunlocking its a $465 funds in the “early” years of 2009 and 2010. In 2013, In 2010. and 2009 of years “early” the in funds ece a inf at ietn i Dcme 2013 December signifi in a milestone reached cant institution the but Fund, Readiness FCPF’s through ready for developing or programs. Finland, Germany, and Norway made new finew made Norway nancial and Germany,Finland, REDD for funding up ramped have (FCPF) Facility now committed $825 million to 47 countries getting countries 47 to million $825 committed now X fi ndings show that multilateral institutions multilateral that fi show ndings Figure 9:FlowofTransactedVolumefromProjectRegiontoBuyerRegion,2013(%Share) North America North North America North From Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. To North America Latin America Latin America From Notes: Basedon212buyertypesasdescribedbysurveyrespondents. To Oceania From Africa Africa Latin America To Europe This agreement builds on similar fi nancialcontributions It is important to note that almost all of the commitments a $40-million agreement spanning the next four years. years. four next the spanning agreement $40-million a n ipeet RD srtg, o payments-for- not strategy, REDD a implement and agreed to fi nance the reduction of at least 8MtCO emissions reductions from the Brazilian state of Acre in msin, hc Eoytm aktlc tak in tracks Marketplace Ecosystem which emissions, UN-REDD program, and no national governmentnationalhas no program,and UN-REDD However, select jurisdictions (e.g., states, provinces, provinces, states, (e.g., jurisdictions select However, performance REDD at a scale larger than the projectthe thanlarger scale a at REDD performance carbon forest of reduction actual the in performance tracked by REDD by tracked ein) r laig h wy o payment-for- for way the leading are regions) reached that stage yet. fi the and of third phase the nal in occur reductions verifi emissions for Payments ed series. report this level. In 2013, the German development bank KfW KfW bank development German the 2013, In level. From Europe To Asia X are grants to help countries develop Africa From Asia Asia To Europe Oceania Oceania From To 2 e of of e xv Executive Summary e 2 Financing commited Financing disbursed e or more annually contributed contributed e or annually more 2 $100 M+ e annually. Clearly, e this Clearly, annually. need was not State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State 2 e for forest carbon offsets in 2013, the lowest lowest the 2013, in offsets carbon forest for e 2 needing needing between $249 million and $450 million per reduced 100,000reduced tCO than than the price per tonne – is more important for cash resulted in overall values far values below in what overall is resulted needed to price price are inversely related: the greater the project’s per more price micro, offset were While there in 2013. prices since 2009. since prices 90% of the transacted volume last year – pulling down down pulling – year last volume transacted the of 90% which have the potential to reduce between 20 MtCO supported these projects last year. year. last projects these supported small, small, and medium projects by count, projects that sustain sustain these projects. Survey respondents reported $4.8/tCO fl ow. As illustrated in Figure 11, project size and offset and size project 11, in Figure illustrated As ow. fl entirely met by the $192 million in carbon fi nance that nancethat in carbon fi million the met by $192 entirely estimated estimated annual emissions reductions, the lower the average average prices. Voluntary buyers paid an average of and and 36 MtCO year to maintain currently active forest carbon projects, projects, carbon forest active currently maintain to year Across Across project types, developers say 2013 sales $10 M+ fi nance data, as of October 2014. nance data, fi $5 M+ and REDDX $1 M+ Figure 10: Comparison of Project- and Country-Level Finance, All Years Finance, Project- and Country-Level Comparison of Figure 10: <$1 M Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. Source: Forest Trends’ Ecosystem Marketplace. the State of the Forest Carbon Markets reports years of tracking for the State of the Forest Carbon Markets Notes: Based on value associated with all e of forestry offsets were issued in 2013, more 2 Private offsetting: maturity maturity and supplying more tonnes. A record 29.5 For projects that generate and issue tens or hundreds than tripling available supplies from 2012. Meanwhile, Meanwhile, from supplies 2012. than available tripling MtCO of of thousands of emissions reductions annually, project project developers and retailers reported that only buyers; the other 89% were sold to buyers already between the two governments in 2012. Dozens of other other of Dozens 2012. in governments two the between Project Financial Needs: Seeking Pacesetters sellers sellers often compete for the same clients. Though sources sources of demand that can keep pace with the jurisdictions are developing similar programs. similar developing are jurisdictions developers developers say the volume of offsets sold – rather growing growing number of forest carbon projects reaching active active in the voluntary carbon market, meaning voluntary offset competition drove prices vary widely, at least some sellers to accept less cash per tonne. Offset suppliers report struggling to identify new 11% of offsets sold last 11% year to were contracted “new” xvi Executive Summary State CarbonMarkets oftheForest 2014 ie ti sae f unvr peitn te future the predicting turnover, of state this Given In 2013, the forest carbon markets were in the midst the in were markets carbon forest the 2013, In hlegs n h vlnay n compliance-driven and voluntary the in challenges how into insightvaluable provide views Their years. outr dmn. hs ers uvy respondents survey year’s This demand. voluntary vie dfrsain rjcs ihn jurisdictions; within projects deforestation avoided estimated that the market would transact 30 MtCO 30 transact would market the that estimated demand in California; buyers’ evolving preferences for suppliers of forest carbon offsets intend to navigateto intend offsets carbon forest of suppliers tt o te akt s o ay ak Nevertheless, task. easy no is market the of state Developer Realism Predictions: Reigns Ecosystem Marketplace once again asked suppliersasked again once MarketplaceEcosystem of transaction activity become more conservative in conservative more become activity transaction of markets.offset policiesfading fewa statesin out countriesand while project types, standards, and locations; carbon pricing f eea sit: h saig p n “etn” of “nesting” and up scaling the shifts: several of in 2013 – a bit under the actual volume of 32.7 MtCO h fc o plc calne ad oeht fi somewhat and ckle challenges policy of face the to “guesstimate” market size for the current and future the transition from pre-compliance to compliance Figure 12 shows that project developers’ predictionsdevelopers’project that shows 12 Figure new ones emerged elsewhere. newones

MtCO2e 0.0 0.5 2.0 2.5 3.0 3.5 4.0 1.0 1.5 Notes: Basedonresponsesassociatedwith23.7MtCO (tCO <5,000 $13.6 Micro 0.1 Mt 24 Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. 2 e) 5,000-19,999 (tCO Small 0.5 Mt $9.5 Figure 11:VolumeandPricebyProjectSize,2013 16 Tonnes sold 2 e) in estimatedannualemissionsreductions. 20,000-99,999 Medium (tCO 1.9 Mt $6.8 19 2 e) Average price 2 2 e. e. e 2 e transacted from 103 projects that reported project size e transactedfrom103projectsthatreportedprojectsize 100,000-499,999 14% – the year-on-year average growth between 2010 2020 that is signifi predictedis was that than smaller 2020 cantly On a long-term basis, they foresee a marketplace in marketplace a foresee they basis, long-term a On conservative than the historical market growth rate ofrate historicalgrowth marketthe than conservative abn rnatos n 00 ta poeto has projection that 2020, in transactions carbon and 2013. A continuation of this historicalcontinuationratethis2013.of A andgrowth and 2013 respondents lowered their expectations even bud rnig rm ilos o ilos f dollars, of billions to millions from ranging abound, hl etmts f xsig n ftr mre needs market future and existing of estimates While since tempered:since 2012’srespondents predicted80 an signals orcomplementary market opportunities. would result in amarket size of MtCO 82 usata mre epnin s liaey id to tied ultimately is expansion market Substantial project types. y ro yas rsodns Wie w yas ago years two While respondents. years’ prior by f h frs cro mres asn ay regulatory any absent markets, carbon forest the of reduce and deforestation stop to needed is what of Market participants’ projections are now actually more MtCO further, to 70 MtCO 70further, to regulatory drivers. While recent policy announcements land-use emissions far outweighs the current capacity akt atcpns rjce 9 MtCO 93 projected participants market market participants point out that the cost estimates cost the that out point participants market (tCO 3.5 Mt Large $5.9 26 2 e forest carbon market by the end of the decade, 2 e) Project count 0.5-1 million Very Large 2.8 Mt (tCO 2 $4.1 e by 2020, across all marketand allacross 2020, by e 5 2 e) Mega-project >1 million 14.9 Mt (tCO 13 $4 2 e) 2 e in 2020. 2 e of forest forest of e $0 $2 $4 $6 $8 $10 $12 $14 $16

$/tCO2e

Executive Summary xvii

2020 2020 2019 2019 $2.3 B Value of

2013 prices) 2018 2018

pipeline (if sold at developers’ 5-year

2017 2017 2016 2016

projects 2015 2015 Developer State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State $0.9 - $1.6 B

support existing estimates to fully 2014 2014

2012 survey predictions Historical growth rate (projection) 2013 2013

nature of nature the the evolution, forest carbon are markets further momentum along the pay-for-performance path path pay-for-performance the along momentum further that that they must also be ready to adapt to a rapidly into increased government-to-government transactions, transactions, government-to-government increased into or an expanded shift from voluntary to compliance- within their control. But a growing number acknowledge acknowledge number growing a But control. their within undoubtedly turning over a new leaf. a new over turning undoubtedly driven project activities. Regardless of the exact changing market environment, whether that translates translates that whether environment, market changing 2012 2012 price $274 M 2013 value if

developers had

received desired 2011 2011

2010 2010 2009 2009

$119 M 2008 2008 73 survey respondents. Notes: Based on predictions provided by offset portfolio 2013 survey predictions Historical transactions volume Value of unsold

Figure 12: Project Developers Predictions, All Markets, 2012-2013 Markets, 2012-2013 Predictions, All Project Developers Figure 12: 2007 2007

. Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014 Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. Source: Forest Trends’ Ecosystem Marketplace. Table 2: Various Estimates of Market Reality and Future Needs, 2013 and Beyond Table 2: Various Estimates of Market Reality and Future Needs, 2013 2006 2006

$192 M Pre-2006 Pre-2006 2013 market value: ACTUAL 0 M holders holders in the forest carbon markets – developers, standards, registries, analysts, consultants, fi nancing needed to meet these ambitious goals. goals. ambitious these to meet needed nancing fi aim of ending forest loss by 2030 — hold promise, they they promise, hold 2030— by loss forest ending of aim the nding too common all about fi questions raise also communities, communities, and buyers – are focusing on initiatives 90 M 80 M 70 M 60 M 50 M 40 M 30 M 20 M 10 M Amid signifi cant policyuncertainty, Amid the signifi major stake- — such as the New York Declaration on Forests with its its with Forests on Declaration York New the as such — xviii Table of Contents and Figures State CarbonMarkets oftheForest 2014 1.5 Suppliers:ProjectDevelopersHailfromAllSectors,withHeadquartersin39Countries 1.4 SupplyChain:SecondaryMarketActivitySlumpsasProjectDevelopersSellDirectlytoEnd-Users 1.3 OffsetStageandRetirement:BuyersWaitforIssuance,PullBackonEarly-StageInvestment 1.2 MarketValue:Per-TonnePricesDecline,DiminishingValue 1.1 MarketVolumes:ForestCarbonOffsetDemandup17%in2013 1. Carbon Market Forest Overview Frequently AskedMethodology: Questions Introduction andAcronym Glossary Executive Summary 5.5 ContractType: AShifttoLater-Stage InvestmentsasProjects Reach Maturity 5.4 TimetoMarket:Careful Design 5.3 SourcesofProjectFinance: ComplementingOffsetSales 5.2 ProjectNeeds:Mindthe Gap 5.1 MarketValueandOffset Pricing:REDD’sChallenge Finance 5. Project 4.7 TreePlantingandForestManagementActivities: MixingItUp 4.6 REDDActivitiesandDriversofDeforestation:Shifting Incentives 4.5 ProjectLocation:Ramp-upinLatinAmerica,Africa 4.4 ProjectLandArea:GainingGround 4.3 CommunityInvolvement:OptingIn,TakingOwnership 4.2 LandTenure:GettingItRight 4.1 ProjectCo-Benefi ts:Jobs,Jaguars,andMore 4. Beyond Carbon: People and Ecosystems 3.5 EmergingProjectTypes:Wetlands,Grasslands,Bamboo,Climate-SmartAgriculture,andMore 3.4. IFMProjects:BidingTime 3.3 A/RProjects:StrongProjectDevelopmentbutModestTransactions 3.2 REDDJurisdictions:AcreLeadstheWay 3.1 REDDProjects:BreakoutYear and Jurisdictions Carbon Projects Forest 3. Overview: 2.4 TrendsinComplianceForestCarbonOffsetMarkets 2.3 TrendsinVoluntaryForestCarbonOffsetting 2.2 TrendsinREDDFinance 2.1 Introduction:ForestsCarbonMarketsandClimateChange Markets inContext Carbon Offset 2. Forest Table ofContents andFigures 40 28 10 45 44 43 42 40 38 36 35 34 32 30 28 26 25 24 22 20 16 14 12 12 12 19 xx 4 2 1 8 7 5 4 v Table of Contents and Figures xix 65 67 69 72 75 76 79 80 81 47 49 51 53 55 59 60 60 62 62 64 49 55 65 79 83 86 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State 8.2 Africa: Shattering REDD Volume Records 8.2 Africa: Shattering REDD Volume as Top Deforester 8.3 Asia: Indonesia Displaces Brazil Light for Markets 8.4 North America: California’s Guiding Market 8.5 Oceania: Policy Reversal Dampens UK, Italy Expand 8.6 Europe: Domestic Programs in Tempering Expectations 9.2 Remaining Portfolios and Pipeline: 9.3 Looking Ahead: 2014 and Beyond Directory 9. Looking Ahead: Market Projections Market 9. Looking Ahead: Reigns 9.1 Developer Predictions: Realism 8.1 Latin America: Breakout Year 8. Regional Market Deep Dive Deep Dive Market 8. Regional Sponsors Supporters and 7. Market Infrastructure: Registries and Market Standards 7. New Independent Streak Use: Old Favorites, with a 7.1 Overview of Standard 6.1 Buyer Types: Energy Sector Takes the Lead Takes the Lead Types: Energy Sector 6.1 Buyer 5.6 The Big Picture: Scaling Up REDD Finance Up REDD Finance Picture: Scaling 5.6 The Big 6. Forest Offset Carbon Buyers 6.2 Buyer Motivations: Feeling the Heat 6.2 Buyer Motivations: Two-Thirds of Buyers Are European 6.3 Buyer Locations: Doubling (and Tripling) Up cations: and Land Area Certifi ts Standards 7.2 Co-Benefi Standards: Insular Markets 7.3 Domestic-Only More Than Prices Demand Expressed in Volumes 7.4 Price by Standard: Issuance Majority of Tonnes Contracted After 7.5 Project Stage: and Retirements Soar; Registries Build JNR Infrastructure 7.6 Registry Use: Offset Issuances 7.7 On the Horizon: New Project Methodologies xx Acronyms and Glossary State CarbonMarkets oftheForest 2014 GCF FSC FPIC FIP FCPF EU ETS ETS ERPA EPA ERF DRC CSR CIFOR CFI CER CDM CCX CCER CCB CAR BC ARB AFOLU ACR AB3 AAU A/R Force Governors’ ClimateandForests Task Forest StewardshipCouncil Forest InvestmentProgram Forest CarbonPartnershipFacility Scheme European UnionEmissionsTrading Emissions TradingScheme Agreement Emissions ReductionsPayment Environmental ProtectionAgency Emissions ReductionsFund Democratic RepublicofCongo Corporate SocialResponsibility Research Center forInternationalForestry Carbon FarmingInitiative Certifi edEmissionReduction Clean DevelopmentMechanism Chicago ClimateExchange China Certifi edEmissionsReductions Standard Climate, CommunityandBiodiversity Climate ActionReserve British Columbia Air ResourcesBoard Use Agriculture, ForestryandOtherLand American CarbonRegistry California’s AssemblyBill32 Assigned AmountUnit Afforestation/Reforestation Free, PriorandInformedConsent andAcronyms Glossary OPR OPIC NZU NZETS NSW NDRC NCOS NAMA IWS ISO IPCC INDC IFM HFZ Ha GHG MtCO MRV MOU LDC KfW K-VER JNR JI J-VER 2 e Offset Project Registry Corporation Overseas PrivateInvestment New ZealandETSUnits Scheme New ZealandEmissionsTrading Reduction Scheme New SouthWalesGreenhouseGas Commission National DevelopmentandReform Standard Australian NationalCarbonOffset Nationally AppropriateMitigationAction dioxide equivalent Units ofmillionmetrictonnescarbon Investment inWatershedServices International StandardsOrganization Change Intergovernmental PanelonClimate Contributions Intended NationallyDetermined Improved ForestManagement High ForestZone Hectare Greenhouse GasEmissions Measuring, Reporting,andVerifying Memorandum ofUnderstanding Least DevelopedCountry Kreditanstalt fürWiederaufbau Reduction Program South Korea’sVerifi edEmissions Jurisdictional andNestedREDD Joint Implementation Program Japan’s Verifi edEmissionsReduction Acronyms and Glossary xxi The establishment establishment The Additional Additional environmental, social, or Land is managed using intermingled State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State The estimate of emissions gas greenhouse of Theestimate may may occur through additional sequestration and/or mon practice, and other factors that would have Improved Forest Management Existing (IFM): Once offsets: Issuance/issued a carbon offset Baseline: Baseline: forest areas are managed to increase carbon storage carbon storage increase to managed are areas forest regulatory regulatory targets. In the case of cap-and-trade pro- through additional sequestration. itional carbon in trees and/or soil and reducing carbon carbon reducing and soil and/or trees in carbon itional cation verifi and cation quantifi if offsets, carbon issued other silvicultural treatments. Emissions reductions occurred occurred without undertaking any action to mitigate requirements. regulatory meet or to project ed,has andbeen undergone validated, verifi practices. practices. Emissions reductions may occur through ed quantifi project carbon a from arising ts benefi other byned the project based ondefi or metrics indicators party carbon project standard accounting for both in a embedded ts carbon notare already of co-benefi project standard. predetermined meet to offsets or (allowances) permits of of forest on areas without , capturing which regulated entities obtain and surrender emissions emissions surrender and obtain entities regulated which uction, uction, avoidance, or sequestration of one tonne of grams, grams, participants – often including both emitters developer, a co-benefi ts certifi cation program, or third- or program, cation certifi ts co-benefi a developer, emissions compared to business-as-usual agricultural business-as-usualagricultural to compared emissions enable co-benefi ts certifi cation to ts be certifi enable “tagged”co-benefi onto and/or and/or to reduce carbon losses from harvesting or emissions. avoided additional sequestration and/or avoided emissions. avoided and/or sequestration additional nancial intermediaries and fi are – allowed trade to t from allowances to unused make allowances a profi additional additional carbon in new tree and other add- and sequestering forestry agricultural strategies, carbon emissions. carbon Carbonoffset: An instrument representing the red- or GHG equivalent. dioxide carbon Co-benefits: carbon pools. Emissions reductions occur primarily standards and registries Some ts. co-benefi and climate Compliance carbon markets: through Marketplaces (GHGs), (GHGs), population, gross domestic product, com- Agroforestry: Afforestation/Reforestation (A/R): Western Climate Initiative Woodland Carbon Units World Resources Institute Verifi ed Carbon Standard Verifi Voluntary Carbon Unit ed Emissions Reduction Verifi Woodland Carbon Code One tonne of carbon dioxide equivalent Framework Convention on Climate Change US Agency for International Development Sustainable Agricultural Land Management ed Emissions Reduction ’s Verifi Program ed Emissions Temporary Certifi Reductions Germany’s REDD Early Movers Regional Greenhouse Gas Initiative REDD Offsets Working Group Rights and Resources Initiative Payment On Delivery Reducing Emissions from Deforestation and Forest Trends’ REDD+ Expenditures Tracking Initiative Project Idea Note Project Idea Note Units Pending Issuance World Bank Partnership for Market Readiness Pacifi c Carbon Trust Pacifi Project Design Document Services Payment for Ecosystem Sink Initiative Permanent Forest Over-the-Counter Fund Peru Carbon Standard c Carbon Pacifi e 2 WCU WRI WCC WCI VCU VER USAID VCS UNFCCC tCER tCO T-VER RRI SALM RGGI ROW REM REDD REDDX POD PIU PMR PFSI PIN PDD PES PCS PCT OTC PCF xxii Acronyms and Glossary State CarbonMarkets oftheForest 2014 In the voluntary offset market, there are independentare there market, offset voluntary the In defiCancun in as negotiators “plus” 2010, the In ned chased voluntarily is permanently set aside by its owner unique a with owner project the to offsets carbon carbon reduction neutrality or target. efforts additional as well as degradation,forest and or change land-use of risk demonstrable with areas and/or projects’ environmental, social and other co- other and social environmental,projects’ and/or enhance carbon stocks. deforestation from emissions reduced encompassing emerged with the intent to increase credibility in the in credibilityincrease to intent the with emerged Land (SALM): Use Land is Land Agricultural Sustainable Standard: Sequestration: specifi c to regional needs, for use within voluntary and/ isbuyer’sintent the if importance particular of – sold unique serial number out of circulation. Retiring offsets ol hv poue hge eisos Emissions emissions. higher produced have would bon offsets, which are given unique serial numbers serial unique given are which offsets, bon otherrequired processes, registry offset an issuecan or complianceor markets. offset have standards competing many markets, offset benefi certifi be verifi voluntary or can In the ed ts ed. biospheresubsurfaceterrestrial or features reduceto in a designated registry – effectively taking the offset’s and tracked be identifi can ownership which after er its concentration in the atmosphere. registries available. system. registry proprietary own their utilize each typically markets carbon Compliance offsets. retire also can and lifetime, their throughout them track to and conserve and forests, manage sustainably to reductions occur primarily through avoided emissions. that scenario business-as-usual a of avoidance the in resulting conserved, are storage carbon reduced transferred, and offsets are eligible for retirement. euae mres ae lo eind standards designed also have markets regulated activities offsetting carbon which to criteriareporting a against reductions emissions offsets’ the claim to re- be cannot offsets that ensures registry a through Retirement: Registry: Reduced Emissions from and Deforestation forest xsig forest (REDDDegradation and REDD+): Existing managed to increase carbon stocks in the agricultural marketplace. More recently, national and sub-national A registry issues, holds, and transfers car-transfers and holds, issues, registry A A set of project design, monitoring, and monitoring, design, project of set A The point at which a carbon offset pur- offset carbon a which at point The The long-term storage of carbon in the the in carbon of storage long-term The Transaction (“transacted”/”contracted”): Markets through Markets markets: offset carbon Voluntary Verification: Voluntary (or Verified) Emissions Reductions Validation: verifi environmental, stated projects’ of delivery the es and methodologies for calculating emission reductions. contingent”). This report tracks all of the above contract agroforestry, and practices, tillage improved crops, are contracted or suppliers otherwise agreedeliverto suppliers contractedare otherwise or otheramong practices. (VERs): (VERs): social, and other co-benefi ts. sider “transactions” to occur at the point that offsets that point the at occur to “transactions” sider iutnosy “pt tascin; amn can payment transaction); (“spot” simultaneously which fiwhich organizations individuals,voluntarily and rms, buy carbon offsets. projects are eligible to receive carbon offsets; and/or offsets; carbon receiveeligibleto areprojects information on baseline scenarios, monitoring plans, monitoring scenarios, baseline on information submit must projects when stages, planning their in offsets actually issued to the project in the future (“unit tooffsets deliver (“fi “firm” or xed” delivery), or specify the in issued be toexpected offsets for delivery”) on (“paydelivery upon (“pre-pay”)immediately or occur offsets immediately in or the future. amn ad eiey f sud fst cn occur can offsets issued of delivery and Payment the volume of emissions reductions for which carbon which reductionsfor emissions of volume the transacted in the voluntary carbon markets. offset including design, project on information approval for types, and options some types, contracts, as “transactions.” that delivery and payment are based on the volume of fi of a volume specify rm can contracts and future; landscape. Project activities may include use of cover eea tr fr fst gnrtd and generated offsets for term General h apoa o cro ofe projects offset carbon of approval The The The process by which an auditor verifi es We con- 1 Introduction Associate Director Molly Peters-Stanley State of the Forest Carbon Markets 2014 2014 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 localities prompted regulated entities to spend another $52 million on forest carbon offsets as they sought to Forest Trends’ Ecosystem Marketplace – explores a global marketplace in the throes of several major shifts: The shifts: major several of throes the in marketplace global a explores – Marketplace Ecosystem Trends’ Forest for dozens of endangered species, built schools and health centers, and provided proof of concept that people people that concept of proof provided and centers, health and schools built species, endangered of dozens for reduce emissions as effi ciently as possible. reduce emissions as effi that forests have to compete with – from to grazing to urban development – this is no from North-South fi nancing fl ows to every-which-way fi nancing fl ows. shiftThe from public sectorfi nancing preparations owsfl to every-which-way nancing from North-South fi climate performance. nance and implementation to receiving payments for forests’ for REDD fi from forests to “landscapes” (which now include everything from wetlands to rice fi elds to bamboo plantations). from forests to “landscapes” (which now include everything from wetlands to rice fi implementing business-wide internal carbon pricing to drive investment. Meanwhile, climate laws in just a few improve forest management, and incentivize sustainable agricultural practices tripled. Given the many land uses uses land many the Given tripled. practices agricultural sustainable incentivize and management, forest improve information and insight for fostering a more accessible and effective marketplace. importance of forests but rather expands the potential of land-based carbon sequestration. And so on. importance of forests but rather expands based mechanisms to reduce or reverse deforestation. based mechanisms to reduce or reverse between 2012 and 2013 alone, the volume of offsets issued from projects that avoid deforestation, plant trees, ones but rather incorporating their methodologies. State-level efforts to reduce deforestation are not dislodging projects but rather “nesting” them within the bigger picture. A landscape approach does not diminish the would help projects maneuver and survive the project cycle. Those early investments largely paid off, and small feat. stage. Buyers nancing invested in emissions reductions set to occur in the future and hoped that their upfront fi shift from voluntary to compliance market drivers. The shift from pilot projects to large-scale programs. The shift The programs. large-scale to projects pilot from shift The drivers. market compliance to voluntary from shift $140 million for forests. They did so in conjunction with efforts to reduce their own emissions, in some cases We hope this report will continue to inspire project developers to share data and thank those that contributed and these ts” associated are “co-benefi scaling up as states, provinces, and countries begin to use market- can receive paychecks for protecting forests rather than destroying them. Meanwhile both project-level activities project-level both Meanwhile them. destroying than rather forests protecting for paychecks receive can challenges – in order to provide transparent, reliable information on emerging trends in every corner of the world. the of corner every in trends emerging on information reliable transparent, provide to order in – challenges It is no small feat, either, that in absence of carbon regulation, hundreds of private sector companies mobilized In all of these cases, “turning over a new leaf” does not imply that compliance markets are displacing voluntary Along with the market, we too are continuously exploring new metrics – from ts project to benefi needs to Just a few years ago, the majority of today’s forest carbon offset projects were squarely situated in a “start-up” These funds achieved more than emissions reductions. They also created thousands of jobs, conserved habitat conserved jobs, of thousands created also They reductions. emissions than more achieved funds These The shift from “tagging on” co-benefi ts delivery to fully incorporating these benefi ts into project designs. The shift The designs. project into ts benefi these incorporating fully to delivery ts co-benefi on” “tagging from shift The – the fi fththe Forest Carbon Markets 2014 Turning over a New Leaf: State of edition– inthe anfi annual series from Methodology: Frequently Asked Questions 2 The bulk of data was collected via an online survey online an via collected was data of bulk The designedtracktransactionsglobaltois of report This The survey was available between February 25 and 25 February between availablewas survey The To minimize the occurrence of “double-counting” vol- “double-counting” of occurrence the minimizeTo Green.TFS State CarbonMarkets oftheForest 2014 August 20, 2013. It was sent to approximately 500 500 approximately to sent was It 2013. 20, August JVR Rgsr, oe GG euto Registry Reduction GHG Korea Registry, (J-VER) OTC Market”). Information presented is based on data collected from carbon markets – such as the California cap-and-trade hne, nldn: P, utai’ Cen Energy Clean Australia’s APX, including: changes, as carbon offset accounting registries and exchanges asked respondents to specify the volume of offsets of volume the specify to respondents asked We complemented the survey with data and insights and data with survey the complemented We designed for organizations developing forest carbon forestdeveloping organizations for designed Center, Markit Environmental Registry, Numerco,, and Clean GHG Markets,Evolution Climex, Partners, CF ClimateChicago the (CTX), TradeExchange Carbon upir ad itiue truh h Ecosystem the through distributed and suppliers surrender of forestry offsets for compliance. umes reported by offset suppliers and brokers, we brokers, and suppliers offset by reported umes with a compliance obligation in regions that permit the data come from? xhne fst Rgsr Porm CC Climat, CDC Program, Registry Offsets Exchange Regulator Registry of Offsets Projects, BlueRegistry, BlueRegistry, Projects, Offsets of Registry Regulator over the counter to voluntary buyers and to buyers to and buyers voluntary to counter the over offset projects or supplying forest carbon offsets both offset project developers, retailers, and brokers, as well “Voluntary (the counter” the “over occur that offsets program – and voluntary transactions of forest carbon compliance bothinvestigates It developers. project carbon forest fromcollected data on basedprimarily is projects.It carbonforest from emissions carbon of offsets generated from the sequestration or avoidance raiain ietfe a psil frs offset forest possible as identified organizations once. once. ex- and brokerages, registries, major by provided Marketplace news briefs and Climate-L and Forest-L and Climate-L and briefs news Marketplace identifi edan overlap,the transaction wascounted only Verifi Japan Registry,Projects Reduction Emission ed that track and facilitate ownership. offset transacted through a broker or exchange. When we exchange.When or broker a throughtransacted Where does Ecosystem Marketplace’s market list serves. Frequently AskedMethodology: Questions This report presentsaggregatereport onlyThis supplier-All data. 1 Our analysis examines the volume of carbon offsets carbon of volume the examines analysis Our count each transaction to derive the volume and value clarify survey responses that were incomplete or raised raised or incomplete were that responses survey clarify a few cases where we were unable to confito thatunable wererm we where cases few a vintage for which we had fewer than three data points orto standard, type, projectcountry, any from volumes a red fl ag. This included any responses that varied that flresponses any red included a This ag. emissions for payments compliance and voluntary volume, along with origination numbers, represents the 2013. We do not track the individual “lives” of offsets as they We do collect data on the volume of offsets retired. This developer sold an offset to an offset retailerthen and offset an to offset developeran sold supplier-specifi c transaction data mentioned in the in supplier-specifimentioned data transaction c confi as Any treated dential. specifi is information c such as the World Bank’s annual reports on carbon on reports annual Bank’s World the as such signifi market“typical” behaviors cantly from thus and would also signifialso inflwouldIn trends. cantly market uence Because the aim of this report is to account for all for account to is report this of aim the Because pass through the value chain. For example, if a project project a if example, For chain. value the through pass pricing mechanisms. pricing of transactions in the overall market. This methodology protect confi the supplier’sthe of dentiality transaction s osset ih ot te mrepae analysis, marketplace other most with consistent is information. We do not share supplier information with the retailer sold the same offset to a fia to buyer, we offset nal same the sold retailer the terms of carbon offsetting and future project investment. transacted to chart the size of the global marketplace in transactions occurred, these responses were omitted. respondent. survey the from permission prior without parties third supplier.the or prices Additionally,identify not do we by approved or information public already was text follow up with dozens of respondents to confito orrespondents of rm dozens with up follow did However,we calculations. in included offsets for reductions, we do not apply any quality criteria screens How do you protect the confi the you protect do How survey of dentiality Does this report track environmental track impact? this report Does Do Ecosystem Marketplace researchers screen responses? the quality of offsets reported in this survey? this in reported offsets of quality the WorldBank,MappingCarbonPricingInitiatives. May 1 3 Methodology: Frequently Asked Questions State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State led the way (16), followed by Asia (12) and Africa (5). Africa and (12) Asia by followed (16), way the led What was the regional survey response response survey the regional was What What was the survey’s response rate in 2014? total total of 159 AFOLU projects reported detailed data from North American suppliers (36), followed closely forest carbon offset project developers that were active active were that developers project offset carbon forest from as many active forest carbon project developers developers carbon project forest active as from many to note that because of the fragmented nature the of market dentiality and issues confi projects surrounding all capture to impossible is it data, transaction to deliver offsets immediately or in the future; or when or the in future; offsets immediately deliver to contingent”). (“unit future the to deliver (“fi rm” or “fi xed” delivery), rm” or orspecify to “fi that deliver (“fi in in project development or monetized carbon offsets informed by another 258 projects that provided data years. previous in responses of number largest the received We 2013. in offsets to voluntary or compliance buyers in 2013. A on 2013 project activities. Historical analysis is also by European (34) and Latin American suppliers (33). based based on a donation model. Payment and delivery of offsets can occur simultaneously (“spot” transaction); (“pre-pay”) delivery of advance in occur can payment or upon delivery (“pay on delivery”) of offsets that offsets that are actually generated by the project in Each year, our goal is to identify and collect information information collect and identify to is goal our year, Each distribution? will will be generated from future emissions reductions. suppliers agree to retire an offset on someone’s behalf behalf someone’s on offset an retire to agree suppliers Contracts ne Contracts may volume c defi specifi a ofoffsets delivery delivery and payment are based on the volume of and and retailers who reported supplying forest carbon and and forestry offset suppliers as possible. It is critical transactions. and In terms of responses from the other regions, Oceania Oceania regions, other the from responses of terms In Offset suppliers from 39 countries transacted offsets This This year, we received survey information from 136 e). 2 e) e) or million metric 2 market value? market’s ultimate environmental impact – retired offsets retired – impact environmental ultimate market’s level as more granular than organization-wide pricing. pricing. than organization-wide as more granular level not be ascertained how signifi cant their answers were were answers their cant signifi how ascertained be not How does this report defi ne a transaction? How does this report defi How does this report defi ne “voluntary”How does this report defi How doesthis reportcalculate average prices and How does report this and How share market calculate For that organizations disclosed volume data but not tonnes of carbon dioxide equivalent (MtCO equivalent dioxide carbon of tonnes refers refers to all purchases of carbon offsets not driven throughout this survey are measured in metric tonnes in tonnes metric measured this survey are throughout the signifi canceof the theirresponse.signifi Responses from to the offset market. Market share is thus calculated aggregate volumes? aggregate volumes? includes transactions of offsets created specifi cally for for cally specifi created offsets of transactions includes offsets offsets are contracted; or suppliers otherwise agree buyers buyers voluntarily purchase to offset their emissions. by by an existing regulatory compliance This obligation. of of carbon (tCO equivalent dioxide pricedata, we used the market-wide average price as pricing pricing that was reported at the project/transaction by by respondents’ transaction volumes to determine based only on the transaction volume associated of of carbon emissions rmed that as were being confi year. each offset in weighted to determine their signifi cance. We prioritize prioritize We cance. signifi their determine to weighted with with each question. We do not extrapolate market suppliers suppliers who did not disclose 2013 transaction ndings to all volumes share reported fi in oursurvey, offsetting? dollars unless otherwise noted. The numbers presented presented numbers The noted. otherwise unless dollars We We consider “transactions” to occur at the point that voluntary buyers (Verifi that allowances or offsets market ed regulatory as Emissionwell as Reductions – VERs) a proxy in our monetary valuation of the overall market market overall the of valuation monetary our in proxy a value. market present we which for variables any and volumes were not included in many fi gures, as it could could it as gures, fi many in included not were volumes as the is to marketplace too make such differentiated assumptions. compliance obligations. can no longer be resold and so represent the amount and so can represent no be resold longer It It also includes transactions of offsets to prepare for In In this report, the phrase “voluntary carbon markets” All fi nancial fi gures fi nancial presented All are fi reported US in All All offset prices reported in this series are volume- All All of the calculations in this report are weighted 1. Forest Carbon Market Overview 4 1.1 Market Volumes: CarbonOffset Forest 17% increase in demand for forest-based emissions forest-based for demand in increase 17% These markets transacted 32.7 million tonnes carbon tonnes million 32.7transacted markets These expe offsets ri- carbon forest for markets global The State CarbonMarkets oftheForest 2014 2012 activity and held almost half of overall market share continue to incorporate offsetting as a core stra tegy for emissions from deforestation (REDD), and the majority deforestationmajority fromemissionsthe (REDD),and enced steady growth over the past three years as as years three past the over growth steady enced dioxide equivalent (MtCO equivalent dioxide Demand up17% in2013 of those were sourced from Latin America, which tripled rjcs ht eue msin b aodn de avoiding fo by res- emissions reduce that projects than 80% of offsets transacted from projects that reduce transactionseries.trackedMore volumesreport this in reductions over 2012 and tying with 2010 for the highest tion in managed forests reach maturity and as buyers buyers as and maturity reach forests managed in tion sequest carbon enhancing or trees, ra- planting tation, neutralizing the emissions they cannot reduce or for for or reduce cannot they emissions the neutralizing last year. meeting carbonregulation. *See acronymslistforexplanation ofmarketabbreviations.Totalsinthischartmaynotaddup perfectlyduetorounding. Voluntary Total Other Primary Market NZ ETS CDM/JI Australia CFI** California** Voluntary Secondary Market Grand Total Compliance Total MARKET* Notes: Basedon32.7MtCO ** TheCaliforniaandAustralia marketswerepre-compliancein2012buttransitionedtocompliance in2013. Table 3:Comparisonof2012and2013ForestCarbonMarkets’TransactionsVolumes, Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2014. 1. Carbon Market Forest Overview 2 e) in 2013, rep 2013, in a e)resenting 22.3 M 0.6 M 6.3 M 0.2 M 0.5 M 2.9 M 1.5 M 27 M 22 M 28 M 2012 1 M 2 e intransactionsreportedby 136 forestcarbonoffsetsprojectdevelopersandretailers. Volume Values, andAveragePrices,AllMarkets 32.7 M 29.0 M 0.4 M 2.2 M 0.0 M 0.0 M 1.5 M 1.7 M 29 M 2013 30 M 4 M $215.8 M $15.6 M $18.1 M $198 M $137 M $147 M $1.9 M $0.6 M $57 M $38 M $12 M The majority of tonnes – 29 MtCO 29 – tonnes of majority The hs byr icesnl suh ot fst with offsets out sought increasingly buyers These 2014, before its repeal. Thus transactions driven by driven transactions Thus repeal. its before2014, s aese poeto, nagrd pce con- species endangered protection, watershed as verifi benefi such sequestration, ed carbon beyond ts voluntary buyers using offsets to meet corporate social 2012 dustries’ emissions or as a less expensive mitigationexpensive less a as or emissions dustries’ opine ues lo ucae frs carbon forest purchased also buyers Compliance servation, and employment of local people. was the law of the land from mid-2012 through July throughmid-2012 from land the of law the was buyers engaged in the market in anticipation of carbon (as“pre-compliance” as Australia and California of this While tax. carbon a with jurisdictions in option in- their on caps mandated meet to year last offsets into effect in January 2013Australia’s and January ininto effect tax carbon responsibility (CSR) commitments or to de to or commitments monst (CSR)responsibility rate regulation), California’s cap-and-trade le gislation went report series previously tracked activity for the US state this report. in “compliance” considered are regulations these edrhp n lmt cag wti ter industry. their within change climate on leadership Value $192.1 M $52.4 M $140 M $153 M $140 M $3.9 M $0.2 M $16 M $32 M $16 M 2013 - $25.3 $10.5 $13.3 2012 $7.7 $7.8 $9.8 $7.5 $1.1 $7.9 $8.2 $7.6 Average Price 2 e – transacted to transacted – e $20.8 2013 $9.8 $4.8 $9.7 $5.2 $6.9 $5.0 $6.0 $9.4 $4.8 - 5 1. Forest Carbon Market Overview Other Other 2013 2013 32.7 M $192 M 2012 2012 NZ ETS NZ ETS 28.0 M $216 M 2011 2011 25.7 M $237 M NSW GGAS NSW GGAS 2010 2010 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State 32.7 M $177 M California 2009 California 2009 $87 M 21.5 M million last year, the lowest value tracked since 2010, last year, with cumulative market value – the total for verifi ed emissionsfor reductionsverifi – topping $1 billion. $192 totaled value market global offsets, carbon forest However, despite notable growth in the demand for Diminishing Market Value Diminishing Market amount nancing of invested fi in forests in exchange The forest carbon offset market reached a milestone 1.2 Market Value: Per-Tonne Prices Decline, Per-Tonne Value: Market 1.2 CCX 2008 2008 7.4 M $37 M Australia CFI 2007 2007 CDM/JI 7.4 M $40 M CCX 2006 2006 5.3 M $22 M e in transactions reported by 136 forest carbon offset project developers and retailers. e in transactions reported by 136 forest carbon offset project developers and retailers. e in transactions reported by 136 forest *See acronyms list for explanation of market abbreviations. *See acronyms list for explanation of market abbreviations. *See acronyms list for explanation of market 2 2 Australia CFI CDM/JI $8 M 2005 2005 1.7 M Figure 13: Historical Forest Carbon Offset Transaction Value, All Markets* Figure 13: Historical Forest Carbon Figure 12: Historical Forest Carbon Offset Transaction Volumes, All Markets* Volumes, Carbon Offset Transaction Historical Forest Figure 12: . Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014 Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. Source: Forest Trends’ Ecosystem Marketplace. 4.2 M $37 M Voluntary Voluntary pre-2005 pre-2005 5 0 5 0 0

Notes: Based on 32.7 MtCO Notes: Based on 32.7 MtCO

1 1 35 30 25 20 50

2

2 e MtCO 100 150 250 200 e MtCO made up a sizable portion of the market in 2011, those those 2011, in market the of portion sizable a up made the CDM or a similar market-based mechanism will Markets in Context”). be included in an international climate agreement – or or – agreement climate international an in included be of the Kyoto Protocol ended in 2012. Developed- whether a bottom-up system of subnational linkages Carbon “Forest 2, Section in this on (more emerge will under the Clean Development Mechanism (CDM) While afforestation and reforestation (A/R) projects vol umes dwindled vol after rst the compliance fi period country govern ments are now waiting to see whether waiting to see whether ments are now country govern 1. Forest Carbon Market Overview 6 State CarbonMarkets oftheForest 2014 as average global prices fell by more than two dollars two than more by fell prices global average as $273 million. per tonne, from $7.8/t MtCO $7.8/t from tonne, per in 2013. If prices on the voluntary carbon market had market carbon voluntary the on prices If 2013. in held at 2012’s average, 2013 value would have been have would value 2013 average, 2012’s at held Figure 15:RelationshipBetweenVolumeandPricein Notes: Basedonresponsesassociated with119.2MtCO MtCO e MtCO2e 12 2 0 3 6 9 from theStateofForestCarbonMarkets reports 0 1 2 3 4 5 6 7 8 9 Notes: Basedon32.7MtCO Source: ForestTrends’Ecosystem Marketplace. than $3 0.03 Less State oftheForest CarbonMarkets2014. $0 Forest CarbonMarkets,2010-2013 3.6 $1 Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. $5.99 $3- 2.9 $2 Volume 2011-2014. 0.5 $3 $8.99 $6- 3.2 $4 2 e in 2012 to $5.2/tCO to 2012 in e 2 e intransactionsreportedby136forestcarbonoffsetprojectdevelopersandretailers. $11.99 Count Figure 14:VolumeTransactedbyOffsetPrice $5 8.5 $9- 1.7 $6 $12 or more 1.2 $7 0.7 $8 0 2 4 6 8 10 12 14 16 18 20 2 2 e e 1.9 $9 Count nw byr ta etrd h mre i 21. Last 2013. in market the entered that buyers “new” $10 The depreciating price explains why a high-demanda why explains price depreciating The s iue 5 lutae, oue n pie n the in price and volume illustrates, 15 Figure As 2010’s ($5.5/tCO 2010’s er n em o vlm dd o crepn with correspond not did volume of terms in year year’s global average prices were therefore similar to similar therefore were prices average global year’s vious relationship between the parties, and a myriad determined is project carbon forest particular any at lowerprices. so do generally they tonnes, more sell retailers and While this is not a hard-and-fast rule, it refl ects classic growth in market value, but it doesn’t tell the whole the tell doesn’t it but value, market in growth et oain poet ie cro sadr, pre- a standard, carbon size, project location, ject sellers and thus varies considerably based on pro- on based considerably varies thus and sellers from offsets of price The pricing. of terms in story suppliers sold fewer tonnes but charged a higher per- higher a charged but tonnes fewer sold suppliers same volume – but lower than 2011’s and 2012’s when tbe u rltvl sann byr ae Suppliers base. buyer stagnant relatively but stable a has that market a in dynamics supply-and-demand unit price. Exchange (CCX) to $110/tCO to (CCX) Exchange of other factors. As Figure 14 illustrates, prices for prices illustrates, 14 Figure As factors. other of vr h ps fu yas We poet developers project When years: four past the over proprietary J-CreditScheme. purchasing domestic credits as part of the country’s hog ngtain bten icee ues and buyers discrete between negotiations through forest carbon offsets ranged from less than $1/tCO eotd ht hy rnatd ny 1 o ofes to offsets of 11% only transacted they that reported related inversely been have market carbon forest o “eay ofes od n h Ciao Climate Chicago the on sold offsets “legacy” for management (IFM) offsets sold to Japanese buyers Japanese to sold offsets (IFM) management 0.3 $11 0.1 $12 0.2 $13 2 e) – when the market transacted the transacted market the when – e) $14 0.2 $15 0.1 $16 2 e for improved forest improved for e $17 $18 $19 0.2 $20+ 0.07 2 e

7 1. Forest Carbon Market Overview US$ million US$ $1,200 M $1,200 M $1,000 M $800 M $600 M $400 M $200 M $0 M

77 66 11 2013 $741 M Voluntary $1051

44 33 11 $859 2012

66 00 11 $644 2011 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State

00 88 $407 2010

Value 88 last year the majority of tonnes (81%) were contracted were (81%) tonnes of majority the year last not yet achieved verifi cation.not Overyet theachieved lastverifi two years, from offsets sought increasingly have buyers however, fully operational (versus “in progress”) projects, and thirds of offsets were contracted from projects that had that projects from contracted were offsets of thirds reduction commitments, thus taking them permanently them taking thus commitments, reduction Forest carbon projects often take years to develop. in forest carbon projects. In 2011, for instance, two- only after offsets are issued. project to quantify the emissions reductions that have been achieved over a set time period. At that offsets can be “issued.” point, panies may “retire” the offsets against their emissions out of circulation to signal that a tonne of carbon often involves engaging stakeholders who live in or Historically, many buyers made early-stage investments early-stage made buyers many Historically, Investment sequestered. Buyers may contract offsets from sellers from offsets contract may Buyers sequestered. Under most standards, project developers begin with dioxide that would have otherwise been emitted is after they were issued. at any stage in the project development process, not around the project area. From there, a third party must party third a there, From area. project the around validate the project idea and, ultimately, audit the a Project Idea Note (PIN) that they then develop into a Project Design Document (PDD), a process that It is only after issuance that governments or com- Wait for Issuance, Pull Back on Early-Stage for Issuance, Pull Back Wait 1.3 Offset Buyers and Retirement: Stage 1.3 44 $230 2009 e 2

66 22 $143 2008 Volume

99 11 $106 2007 e. 2

11 11 $66 2006

66 $45 consistently traded above $11 per 2005 1 Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. Source: Forest Trends’ Ecosystem Marketplace. Figure 16: Cumulative Forestry Offset Transaction Volume and Value, All Markets Value, All Markets Volume and Offset Transaction Cumulative Forestry Figure 16:

44 $37 pre-2005 0

80 60 40 20

160 140 100 180 2 200 120 e MtCO An allowance is a permit to emit one tonne of carbon project developers and countless suppliers over nine years. carbon and land-use project developers and countless suppliers Notes: Based on data reported by 418 forest marks – but not by much. markets garnered higher prices compared to volun- Forest carbon offsets transacted for the compliance for forest-based emissions reductions, compliance tions in forests over the last nine years. that the purely voluntary over-the-counter market has tonne in 2013, and in Australia, where the carbon tax the level of the carbon tax. This was true in California, tary offsets largely because offsets are used as a implement carbon regulation (more on this in Section buyers paid an average of $9.4/tCO particular REDD, could someday dwarf voluntary pur- offsets in these markets generally sold below these below allowance prices in a cap-and-trade system or was set at $24.2 per tonne last year. Forest carbon where allowances Compliance buyers are willing to use this less exp- directed $741 million – about three-quarters of the While voluntary buyers paid an average of $4.8/tCO of average an paid buyers voluntary While ensive mitigation option as long as offset prices fall cumulative market value – towards emissions reduc- chases by the private sector as more governments cost-containment mechanism on compliance markets. dioxide. 2), a historical look at the forest carbon markets shows markets carbon forest the at look historical a 2), 1 Though compliance demand for forestry offsets, in 1. Forest Carbon Market Overview 8 0% poy rtrmn nme i Fgr 1 represents 18 Figure in number retirement “proxy” hs akd hf i byr eair s aty due partly is behavior buyer in shift marked This State CarbonMarkets oftheForest 2014 n mr poet ae o rahn te issuance the reaching now are projects more and msin rdcin cmimns ad registry- and – commitments reductions emissions msin rdcin ad ht hy a purchase can they that and reductions emissions early investmentgottheprojectoffground. gain confi dence that projects will achieve and verify and achieve will confi projects gain that dence stage – 29.4 MtCO 29.4 – stage unique projects, particularly if they can claim that their California ComplianceStandard, GoldStandard/Carbon- at er byr tasce ol 3 MtCO 3 only transacted buyers year, Last reported fortheAcreCarbon Standard,ACR,CAR,the eitis eotd ht ues eie 1. MtCO 15.3 retired buyers that reported Registries rjcs n 2013. in projects offsets toberetiredwhenevertheychoose. offsets sold at a global average of $4/tCO of average global a at sold offsets ues ht o o pa t rsl te. hs 11 These them. resell to plan not do that buyers investment stage, or pre-verifi cation, projects. However, MtCO tCO transacted before verifi cation cost an average of $9.3/ reported retirementnumberindicatesthattheywere. they did so at higher per-tonne prices: While issued While prices: per-tonne higher at so did they o h fc ta, fe yas f eeomn, more development, of years after that, fact the to h vlm o ofes otatd o uey voluntary purely to contracted offsets of volume the The buyers. voluntary by retired 2013 in transacted MtCO 4 reported respondents survey data, registry from forest carbon projects last year. In comparison to information. PFSI ,PlanVivo,VCS,andWCC. Seesection7.6formore Fix, ISO14064/65,J-VER,the Pacifi cCarbonStandard, 2 Includesissuancesfromland-use projectregistrydata 2.4 Mt Figure 17:MarketSharebyProjectStageatTimeofTransaction(LabeledTransactedOffsetVolume) 2 e. This refl ects buyers’ willingness to pay more for Notes: Basedon32.7MtCO 2 wr teeoe lkl” o e eie against retired be to “likely” therefore were e 10%

0.3 Mt Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. 1 Mt 0.3 Mt 2 s ag isacs cu, buyers occur, issuances large As PDD orPIN 2 20% e were issued from forest carbon forest from issued were e 2 e intransactionsreportedby136forestcarbonoffsetprojectdevelopersandretailers. 30% Undergoing validation 40% 2 e, offsets 2 e from 2 2 e e 50% – the retailers that buy offsets from project developers project from offsets buy that retailers the – 1.4 Market Activity Chain:Secondary Supply Slumps as Project Developers Sell Directly to SellDirectly Developers Slumps asProject 03 n sl js oe 2 MtCO 2 over just sold and 2013 fst ealr hv bit hi bsnse around businesses their built have retailers Offset otatd 2 MtCO 22 contracted outrl mnmz evrnetl mat r comply or impact environmental minimize voluntarily and then resell them to end-users – therefore play an play therefore – end-users to them resell then and decisions in a vacuum. They often contract emissions contract often They vacuum. a in decisions demanded tonnes. After a couple of years of growth, of years of couple a After tonnes. demanded tre o frs poet i wy ta rsnt with resonate that ways in projects forest of stories with carbon regulation. Secondary market participants End-Users Buyers of forest carbon offsets do not make purchase oee, h scnay akt o frs carbon forest for market secondary the However, rae vlnay fst akt i wih retailers which in markets offset voluntary broader the to compared year last small relatively was offsets that suppliers offset of list full a for report this of back offset and “portfolio,” a of purchases part are usually part of a larger strategy to as either types project offsets. Retailers have historically made up the single the up made historically have Retailers offsets. important role. to belisted.) chose and Marketplace Ecosystem to data reported the at Directory the (See audiences. intended their the tell and buyers corporate to markets carbon the inter- These strategy. reduction emissions rehensive other from offsets alongside forests from reductions forest carbon retailers held only 7% market share in share market 7% only held retailers carbon forest helping companies set and achieve carbon ma carbon achieve and nage- set companies helping largest source of offset demand, but that was not the not was that but demand, offset of source largest eire cn lo ep rnlt te ocps of concepts the translate help also can mediaries comp- a of part as serving offsets with goals, ment 17.2 Mt Validated 60% Verified 70% 2 – oe hn qatr f all of quarter a than more – e Issued 80% 2 o frs carbon forest of e 90% 100% 9 1. Forest Carbon Market Overview 4 11 3.6 2.2 2013 2013 e) and sold 2 13 2.3 6.3 7.2 2012 2012 3 15 4.6 4.9 2011 2011 Offsets sold to retailers State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State 2010 2010 Proxy retirement figure have also become more familiar with international, third-party voluntary carbon standards such as the without using retailers as intermediaries. End users dary market also reveals some interesting dynamics. developers (at an average of $4.9/tCO vet quality projects themselves. Verifi ed Carbon Standard (VCS),which Verifi allow them to A close look at the pricing on the primary and secon- As expected, retailers bought “low” from project 2009 2009 Sold by retailers Retired 2008 2008 Transacted 2007 2007 e last year. There are 2 e in transactions reported by 136 forest carbon offset project developers and retailers. e in transactions reported by 136 forest carbon offset project developers and retailers. e in transactions reported by 136 forest 2 2 Sold by project developers 2006 2006 Figure 18: Historical Transaction and Retirement Volumes, All Markets Volumes, All and Retirement Historical Transaction Figure 18: Figure 19: Historical Transaction Volumes, Primary and Secondary Markets Figure 19: Historical Transaction Volumes, . Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014 Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. Source: Forest Trends’ Ecosystem Marketplace. pre-2006 pre-2006 Notes: Based on 32.7 MtCO Notes : Based on 32.7 MtCO 5 0 5 0

25 35 20 15 10 30

25 35 20 15 10 30

2 2 MtCO e e MtCO most common buyer motivation. lopers and end users have built business relationships business built have users end and lopers transacted a total of 30.5 MtCO offsets directly to end users, and many project deve- developers have become savvier about marketing a few explanations for this. Over the years, project conceded market share to project developers, who case in 2013, when “resale” fell behind CSR as the The contraction of the secondary market essentially 10 1. Forest Carbon Market Overview 1.5 All Hailfrom Developers Project Suppliers: Sectors, with Headquarters in39Countries withHeadquarters Sectors, mrc al ot oe hn 0 oet abn offset carbon forest 30 than more host all America State CarbonMarkets oftheForest 2014 countries – including Brazil, Peru, and Mexico – made tid f l frs cro ofes rnatd n the on transacted offsets carbon forest all of third a different countries. uidcinl oenet Te up n ulc sector public in jump The government. jurisdictional supply seen in Figure 20 can mostly be attributed to attributed be mostly can 20 Figure in seen supply sold offsets directly to end users at an average of $3.8/ up more than a third of all offset suppliers and sold and suppliers offset all of third a than more up which developers sold to retailers, thus undercutting thus retailers, to sold developers which were public sector agencies or – for the fithe for a – – or time agencies rst sector public were non-profiinternational others or still local and were ts, others for-profi companies, were t developers Some price offered by retailers – lower, too, than the price at rjc dvlpr ad ealr, n Arc i now is Africa and retailers, and developers project project developers that skipped these intermediaries these skipped that developers project MtCO countries 39 in headquartered developers Project retailers’ possiblemarketpositions. h sae f ce Bai, hc are t spl 8 supply to agreed which Brazil, Acre, of state the developing from Suppliers 2013. in offsets transacted o-efrac” gemn va emn’ REDD Germany’s via agreement for-performance” “payment- a under year last (KfW) Wiederaufbau für tCO home to fi ve forest carbon project developers in in developers fifi project ve to carbon home forest ve higher ($6.9/tCO akt at er Nrh mrc, uoe ad Latin and Europe, America, North year. last market

% Market Share by Volume 100% 20% 30% 40% 50% 60% 70% 80% 90% 10% 0% 2 e, signifi cantly under the $6.9/tCO the under signifi cantly e, Notes: Basedon32.7MtCO 2 t Gra dvlpet ak Kreditanstalt bank development German to e 2005 Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2014. Figure 20:HistoricalMarketSharebyOffsetSuppliers’Profi tStatus,AllMarkets 2 e) to their end-user clients. However, For-Profit /PrivateSector 2006 2 e intransactionsreportedby136 forestcarbonoffsetprojectdevelopersandretailers. 2007 2 average e 2008 Not-for-Profit/NGO 2009 The majority of non-profi t forest carbon offset suppli- offset non-profi carbon of forest majority t The s n at er, rvt-etr rjc developers project private-sector years, past in As onr’ Mnsr o Evrnet n Frss But Forests. and Environment of Ministry country’s ers reporting transactions are based in Latin Ameri Latin in based are transactions reporting ers ca, xml, h Mkr RD+ rjc i in project REDD+ Makira the example, fi rst jurisdictional REDD program in the world to reach domestic enterprises working on a single project close jurisdictions in Brazil, Indonesia, Mexico, , and Nigeria, Mexico, Indonesia, Brazil, in jurisdictions several continents. supp lied the majority (65%) of offsets to buyers in 2013, where thebulkofREDDtonnesoriginatedlastyear. Early Movers (REM) fi nancing program. Acre’s is the fi is (REM) Acre’s Movers program. Early nancing oee, hs radw o poet eeoes by developers project of breakdown this However, eas a ige rjc my rw ates from partners draw may project single a because be considered a rough overview of suppliers by region the monetize therefore should 21 Figure in shown map The offsets. will Africa, South in based Nedbank, For collaborations. other and partnerships private profi t status and location is a bit neater than it is in the panies with dozens of projects in several countries to countries several in projects of dozens with panies Peru areworkingtowardsasimilarmilestone. MtCO 3.4 transacting years, past in have they than 2013 in for-profi t, is the lead implementer of the project and project the of implementer lead for-profi the is t, not- international an Society, Conservation Wildlife the the by owned is verifi year that last its offsets ed fi rst real world, where many projects are the result of public- hs ee o mre mtrt, huh eea other several though maturity, market of level this to home. Not-for-profihome. to role smaller a played suppliers t though thesefor-profi tentitiesrangedfromlargecom- 2 e at slightly above-average prices ($5.6/tCO 2010 Public Sector/Government 24% 2011 8% 67% 2012 24% 74% 8% 2013 10% 65% 25% 2 e). 11 1. Forest Carbon Market Overview Not-for-Profit / NGO <1 Mt 1.9 Mt State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State 12.9 Mt 20+ Public Sector / Government For-Profit / Private Sector <1 Mt 10+ 5+ 1+ 11.5 Mt 5.7 Mt and Market Share by Developers’ Profi t Status Profi Share by Developers’ and Market e in transactions reported by 136 forest carbon offset project developers and retailers. e in transactions reported by 136 forest 2 Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. Source: Forest Trends’ Ecosystem Marketplace. Figure 21: Response Rate by Country, Transacted Volume by Developers’ Headquarters Region, Region, Developers’ Headquarters Volume by by Country, Transacted Response Rate Figure 21: Notes: Based on 32.7 MtCO Market Share by Developers’ Profit Status: Chart key: Market Share by Developers’ Profit Status: Map key: Response Rate by Country: 12 2. Forest Carbon Offset Markets in Context h rl o frss n iiaig lmt cag has change climate mitigating in forests of role The 2.1 CarbonMarkets Forests Introduction: and State CarbonMarkets oftheForest 2014 Business,September2014.Available at: http:// Assessment Report,Chapter11:Agriculture,Forestry,and 2000 and 2012, a deviation from the 20th century when Climate Change year. Other LandUse(AFOLU),2013. challenge alone, voluntary buyers last year provided year last buyers voluntary alone, challenge lmt sinit peit iatos consequences disastrous predict scientists climate agriculture caused 71% of forest conversion between conversion forest of 71% caused agriculture eoetto hs elnd ic te al 2000s, early the since declined has deforestation agree thatdeforestation-related emissionscouldbecutin Central and South America combined. Though gross Though combined. America South and Central Clearing forests can be incredibly lucrative. Keeping lucrative. incredibly be can forests Clearing 4 www.climateandlandusealliance.org/uploads/PDFs/Disrupt- www.ucsusa.org/global_warming/solutions/stop-deforesta- HoleResearchCenter,2012.Availableat:http:// Warming.” CitingresearchfromWinrockInternationaland ropean Commission,andthe government ofGreatBritain oil is worth $1.4 trillion annually, trillion $1.4 worth is oil palm and paper, , soy, as such of commercial that reveals parent Trends orga Marketplace’s Forest nization Ecosystem by research New billions ofpeopleenterthemiddleclass. everything – commodities these from made products eoe nraigy rmnn a sceis fi to societies ght as prominent increasingly become f lbl emissions global of intensifying. forests were mainly cleared for timber. The global trade total emissions from burning fossil fuels in Africa and Africa in fuels fossil burning from emissions total them standing will require billions in fiin billions every require nancing will standing them from toothpaste to hamburgers to books – will grow as for 3 billion tCO accounts Deforestation ecosystems. and people for which beyond threshold the – Celsius degrees 2 than tion/deforestation-global-warming-carbon-emissions. ing_Global_Commodity.pdf. land-use change still accounts for an estimated 14% estimated an for accounts still change land-use ep h rs i goa aeae eprtr t less to temperature average global in rise the keep half for$20billion peryear. 6 5 3 IntergovernmentalPanelonClimateChange(IPCC)5th AnalysesfromtheUnionofConcerned Scientists,theEu- ClimateandLandUseAlliance,DisruptingtheGlobal UnionofConcernedScientists,“DeforestationandGlobal 6 Though forest carbon markets cannot meet this meet cannot markets carbon forest Though 2. Forest Carbon Offset Markets inContext Carbon Offset 2. Forest 2 e of emissions annually, more than the 4 n te het t frss are forests to threats the and 5 and demand for the for demand and 3

This section places the idea of payments for verififor payments ed of idea the places section This The signatories to this New York Declaration on Forests The cumulative value of payments for emissions re- emissions for payments of value cumulative The 2.2 Trends inREDDFinance ain cmitd o nig eoetto b 2030, by deforestation ending to committed zations 2014 UN Secretary General’s Climate Summit (which Summit Climate General’s Secretary UN 2014 Over the past year, global efforts to reduce deforest- reduce to efforts global year, past the Over Indonesia and the Amazon Basin. The global burden burden global The Basin. Amazon the and Indonesia context of international efforts to fi nance avoided defo- create reliable, national deforestation baselines to be to baselines deforestation national reliable, create carbon markets. Carbon fi nance can also advance other, and Chiapas, Mexico. The list also included consumer consumer included also list The Mexico. Chiapas, and and the United Kingdom and subnational governments ation have moved forward ahead of inter of ahead forward emi- moved national have ation toward balance” the “tip cases, some in can, and emissions reductions in forests – which, as this report this as which, – forests in reductions emissions f i nds, has so far mainly occurred voluntarily – in the in – voluntarily occurred mainly far fi so has nds, Agri- Golden and as such companies goods ductions from forest carbon projects over the years the over projects carbon forest from ductions $140 million to protect forests – money that would not would that money – forests protect to million $140 City, where more than 150 governments, companies, governments, 150 than more where City, Convention on Climate Change (UNFCCC) negotiations ssions reductions targets. One of the few concrete few the of One targets. reductions ssions working on jurisdictional REDD such as Acre, Brazil Brazil Acre, as such REDD jurisdictional on working Resources that have recently committed to stop clearing pledging aninitial$1billiontotheeffort. rvds ogaatd udne o cutis to countries for guidance long-awaited provides Framework Nations United 2013 the of outcomes included major donor governments such as Norway Norway as such governments donor major included organi- society civil and groups, York peoples indigenous New in process) UNFCCC the of outside is in Warsaw, Poland, was the REDD Rulebook, which Rulebook, REDD the was Poland, Warsaw, in regulations aroundtheworld. restation, as well as in the context of emerging carbon to protect forests and their carbon content brings brings content carbon their together anunusualbutpowerfulsetofstakeholders. and forests protect to as such places in protection forest of lines front the on peoples indigenous as well as oil, palm for forests recognized undertheUNFCCC. topped $1 billion this year, with almost $100 million $100 almost with year,this billion $1 topped Forests were similarly prominent at the September September the at prominent similarly were Forests non-market funding streams (see Section 5, Finance), 5, Section (see streams funding non-market the of infrastructure the without invested been have making treesmorevaluablealivethandead. 13 2. Forest Carbon Offset Markets in Context Financing commited Financing disbursed $100 M+ State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State fi ndings show fi that multilateral institutions X FCPF’s Readiness Fund, but the institution reached for payments in $465million potential a unlocking Fund, Facility Facility (FCPF) have ramped up funding for REDD funds funds in the “early” years of 2009 and 2010. Early in in 2013, Finland, Germany, and Norway made new pipeline: Chile, Costa Rica, the Democratic Republic of of Republic Democratic the Rica, Costa Chile, pipeline: Nepal, Peru, the Republic of Congo, and Vietnam. over over the past few years, overshadowing the bilateral REDD which has now committed $825 million to 47 countries countries 47 to million $825 committed now has which such such as the World Bank’s Forest Carbon Partnership Congo (DRC), Ghana, Guatemala, Indonesia, Mexico, Mexico, Indonesia, Ghana, Guatemala, Congo (DRC), fi nancial pledges totaling $180 fi million to the FCPF, developing programs. emissions reductions. a signifi cant a milestone signifi in December 2013 when Carbon its for it Framework Methodological the approved and private foundation funding supplying the bulk of In In September, Costa Rica rst became country the fi The majority of this funding has been disbursed through through disbursed been has funding this of majority The There are currently 11 countries in the Carbon Fund $10 M+ fi nance data, as of October 2014. nance data, fi $5 M+ and REDDX $1 M+ However, less than $0.6 billion billion $0.6 than less However, . In Indonesia, a deforestation X <$1 M Figure 22: Comparison of Project- and Country-Level Finance, All Years Finance, Project- and Country-Level Comparison of Figure 22: Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. Source: Forest Trends’ Ecosystem Marketplace. ) has tracked $4.5 billion in REDD X the State of the Forest Carbon Markets reports years of tracking for the State of the Forest Carbon Markets Notes: Based on value associated with all project-level fi nance. fi project-level many many billions that developed-country governments market market observers frequently considered project-level the last few yearsgure – that a indeedfi dwarfs hotspot, hotspot, donor governments, such as Japan and ject (REDD has has so far been disbursed to governments, recipient France, France, and multilateral institutions committed $2.4 funding, funding, which is mostly coming from the private Forest Trends’ REDD Expenditures Tracking Pro- commitments to 14 tropical forest countries in billion to the country’s REDD program starting in 2009, in starting program REDD country’s the to billion but just over $100 million of that funding reached Time often occur because lags as 2012. of programs work create to governments for takes it months the of plans, nancial set management up systems, fi and sector, to sector, be a “drop in the bucket” compared to the developing developing countries. fl owing to fl REDD projects in 2013 alone. However, decide on operational policies. on operational decide are are expected to commit to reducing deforestation in according according to REDD Private offsetting: 14 2. Forest Carbon Offset Markets in Context “International REDD+ payments come into the state the into come payments REDD+ “International “performance” here correlates with a specifi c reduction The Forest Investment Program (FIP), which is backed Agreements (ERPAs) negotiated with each country. It is important to note that almost all of the commitments Incentives for Environmental Services, known as “SISA” yet reachedthatstage. payments-for- not strategy, REDD a implement and million $50 additional an committed have donors and a variety of activities under Acre’s State System of System State Acre’s under activities of variety a msin, hc Eoytm aktlc tak in tracks Marketplace Ecosystem which emissions, emissions reductions at the jurisdictional level. Though denominated in carbon, but the state distributes the distributesstate the but carbon, in denominated UN-REDD program, and no national government has government national no and program, UN-REDD 3-0 ilo t frss n i jrsitos starting jurisdictions, six in forests to million $30-50 state of Acre in a $40-million agreement spanning the 8 MtCO 8 il eed n h Eiso Rdcin Payment Reductions Emission the on depend will with Oromia,. State CarbonMarkets oftheForest 2014 Development Bank, also increased its REDD funding REDD its increased also Bank, Development African the and Bank, Development Asian the Bank, Bank’s BioCarbon Fund also created a new funding new a created also Fund BioCarbon Bank’s However, by multilateral development banks such as the World the as such banks development multilateral by performance for the actual reduction of forest carbon forest of reduction actual the for performance participatory governance and promote transparency for bank KfW agreed to fito agreed KfW bank least at of reduction the nance on the maximum payment for emissions reductions emissions for payment maximum the on ntaie o frss te ntaie o Sustainable for Initiative the – forests for initiative indigenous peoples and local communi ties. The World MtCO 12 as much as for million $63 to up receive:could it reductions occur in the third and fi nal phase of the fi phase and nal third the emissions in verifi occur ed reductions for Payments series. report this tracked by REDDX are grants to help countries develop focusing on CDM projects. The initiative aims to direct extend to aims that Mechanism Grant Dedicated a to countries, eight in deforestation reduce to efforts for to sign a letter of intent with FCPF, providing insightprovidingFCPF, with intent of letter a sign to from thePortugueseacronym. on based communities and groups indigenous to flpayments the target, government state the from ow Forest Landscapes – in December 2013, after years of their willingness to pay $5/tCO pay to willingness their next four years, and that marks the fithe marks that for and payment years, rst four next last year. FIP has now pledged a total of $639 million $639 of total a pledged now has FIP year. last money money internally via payments for watershed services, ein) r laig h wy o payment-for- for way the leading are regions) n 03 te emn development German the 2013, In level. project the than larger scale a at REDD performance 2 e. Buyers in the Carbon Fund have expressedhaveFund Carbon the in Buyers e. 2 e of emissions reductions from the Brazilian the from reductions emissions of e select jurisdictions (e.g., states, provinces, 2 e, but the fithe but price e, nal The FCPF’s Methodological Framework for its Carbon its for Framework Methodological FCPF’s The h CX esd t vlnay u lgly binding legally but voluntary its ceased CCX The active only the currently also is market voluntary The Though REDD and other project developers hope that that hope developers project other and REDD Though 2.3 Trends Carbon Forest inVoluntary Acre is the fi rst jurisdiction to reach the payment-for- the reach fi to the jurisdiction is rst Acre 22 states and provinces in Brazil, Indonesia, Mexico, Indonesia, Brazil, in provinces and states 22 commitment to cut deforestation rates 80% by 2020, by 80% rates deforestation cut to commitment carbon market value over the past three years. In 2013, at Forest Trends. “As long as the state meets its REDD+ REDD+ its meets state the as long “As Trends. Forest at with consistent are that actions other of number any ne n e apcs f hs porm, including programs, these of aspects key on ance virtually non-existent due to fito from due competition non-existent erce virtually Kyoto the fi of the period after commitment halt rst a voluntary market buyers paid $140 million to protect protect to million $140 paid buyers market voluntary emissions reductions targets, the REDD+ payments REDD+ the targets, reductions emissions emissions reductions program at the end of 2010; new demand for forest-based emissions reductions, a a reductions, emissions forest-based for demand Offsetting Climate and Forests (GCF) Task Force, a coalition of coalition a Force, Task (GCF) Forests and Climate should continue to fl ow.” sus and implementation, and design program tainable a Declaration, Branco Rio the signed recently states eto teeoe ok a sm o te overarching the of some at looks therefore section IA” as eec Azeo a omr Program former a Anzueto, Rebecca says SISA,” world’s tropical forests. Thirteen governors from these REDD fi nancing fl ows. performance milestone, but others are in line. Leading for payments and restoration, habitat for payments Nigeria, and Peru that house more than a fia the than of more fth house that Peru and Nigeria, preventing four billion tonnes of emissions – if enough New Zealand’s Emissions Trading Scheme (ETS) is (ETS) Trading Scheme Emissions Zealand’s New projectactivities practicallyunder the CDM ground to payments for forestry offsets in California and Australia. Manager with the Communities and Markets InitiativeMarkets and Communities the with Manager is dictions could fi t into a national-scale emissions anational-scale into fi t could is dictions nxesv itrainl o-oety fst. This offsets. non-forestry international inexpensive for projectactivityforest 2012;and in endedProtocol offsets. forestry for demand of source international h ps fr uidcinl ED s h Governors’ the is REDD jurisdictional for push the transactions. their level of ambition, carbon accounting, safeguards, guid- provides framework The program. reductions trends among the thousands of discrete buyers and buyersdiscrete of thousands the among trends market compliance of value the triple almost forests, the proliferation of compliance markets will multiply multiply will markets compliance of proliferation the ud ecie hw oet abn rjcs n jur- and projects carbon forest how describes Fund itrcl ok hw ta pecmlac ad comp- and pre-compliance that shows look historical liance activity made up only roughly a quarter of forest 15 2. Forest Carbon Offset Markets in Context e for 2 e or more more or e 2 e of forestry offsets 2 e, respectively. Also, while 2 e in 2011 but dropped to $7.7/ e in 2011 but dropped 2 e), while the 18 very large or mega 2 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State e and $4/tCO 2 e in 2012 and then even more last year. This trend This year. last more even then and 2012 in e 2 most demanded offset type). most demanded market, market, meaning sellers often compete for the same more ow.important Asfor illustratedcash infl Figure more tonnes. A record 29.4 MtCO market plans to consider allowing REDD offsets from forest carbon offsets in 2013, the lowest prices since prices lowest the 2013, in offsets carbon forest in Latin America. Though California’s cap-and-trade tCO tonnes of emissions annually) transacted at an average an at transacted annually) emissions of tonnes time high of $10.3/tCO the greater the project’s estimated annual emissions reductions, the lower the price per offset in 2013. The tracked last year transacted at the highest average retailers reported that only 11% of offsets sold last year last sold offsets of 11% only that reported retailers there were more micro, small, and medium projects by projects medium and small, micro, more were there related in the voluntary forest carbon market: When retailers sell less volume, they fetch higher prices per supplying and maturity reaching projects carbon forest with the majority of supply coming from projects Demand for REDD offsets nearly tripled last year, in particular surged past wind project offsets (2012’s in the global average. projects (each of which reduces more than half a million a half than more reduces which of (each projects of $4.1/tCO of offsets sold – rather than the price per tonne – is prices ($13.6/tCO project developers and retailers sell more volume, they volume, more sell retailers and developers project offset (see Figure 15 in Section 1). offset (see Figure Demand has not kept pace with the growing number of number growing the with pace kept not has Demand were issued in 2013, more than tripling issuance were contracted to “new” buyers; the other 89% were Voluntary prices for forest carbon reached an all- an reached carbon forest for prices Voluntary 2009. sands sands of emissions reductions annually, the volume sold to buyers already active in the voluntary carbon select jurisdictions, these tonnes are currently only dynamics. Price and volume are more or less inversely less or more are volume and Price dynamics. and developers project when and prices; lower at so do growing interest in avoided deforestation. Buyers spent Buyers deforestation. avoided in interest growing volumes from 2012. Meanwhile, project developers and developers project Meanwhile, 2012. from volumes annually contributed 90% of the transacted volume last volume transacted the of 90% contributed annually available to voluntary buyers who are showing a can partly be attributed to classic supply-and-demand supply-and-demand classic to attributed be partly can clients. Though voluntary offset prices vary widely, less accept to sellers some least at drove competition cash per tonne. count, count, projects that reduced 100,000 tCO year – so their (lower) prices are weighted more heavily more weighted are prices (lower) their so – year 24, project size and offset price are inversely related: 24 “micro-scale” projects Ecosystem Marketplace Voluntary buyers paid an average of $4.8/tCO Voluntary Also, for projects that issue tens or hundreds of thou- contracts for forest- for contracts e e in 2012. However, Forestry and land use Household device Renewables Energy efficiency and fuel switch Methane Gases Other 2 e in transacted offset volume. e in transacted offset volume. 2 e agreement reveals that the for- the that reveals agreement e 49% 2 1% 1% e, e, up from 26.6 MtCO 2 State of the Forest Carbon Markets 2014. 4% Voluntary Carbon Offset Markets, 2013 Two out of ve every offsets fi transacted by 19% Source: Forest Trends’ Ecosystem Marketplace. 10% Figure 23: Market Share by Project Category, Notes: Based on 76 MtCO 16% making forestry the most sought-after offset category. in 2013 and comprised 49% of voluntary market increased 7% last year, with buyers demanding largest buyer sector. have therefore sold in smaller volumes. However, the types – in 2013, transaction volumes of REDD offsets tonnes last year, though corporations remain the single the remain corporations though year, last tonnes the largest single “buyer” last year was German Forestry and land-use offsets were the most popular most the were offsets land-use and Forestry because of their “charisma” – projects that plant trees plant that projects – “charisma” their of because or save endangered rainforest are easy to convey to brought prices closer to those of other prevalent project prevalent other of those to closer prices brought priced signifi cantly higher than renewable energy and and energy renewable than higher cantly signifi priced profi t buyers that have traditionally made up the bulk of bulk the up made traditionally have that buyers t profi Purely voluntary demand for forest carbon offsets based based emissions reductions. between companies and project developers or retailers. or developers project and companies between Buyers have always sought out forest carbon offsets Excluding this 8 MtCO 8 this Excluding uctions that resembles those usually negotiated sellers sellers that voluntarily enter into offset category in the voluntary carbon markets value. growing supply of forestry tonnes on the market has development development bank KfW facilitating finance from rst sovereignfi government to enter intosizable a voluntary buyers last year came from a forest project, voluntary demand purchased about 20% fewer forestry fewer 20% about purchased demand voluntary agreement supporting early REDD emissions red- consumers – but until recently, forestry offsets were Germany’s REM Programme. Germany was the 29 29 MtCO 16 2. Forest Carbon Offset Markets in Context State CarbonMarkets oftheForest 2014 (FSC), as buyers demanded that a project’s benefiproject’s a that demanded buyers ts as (FSC), abn eusrto. oe hn n de bonus, added an than More sequestration. carbon are exactly the project activities that will successfullywill that activitiesproject the exactlyare trainings community and streams, alternativeincome early-stage investment. This is the opposite picture of of picture opposite the is This investment. early-stage guidelines, and/or sourced from projects situated on situatedprojects from sourced and/or guidelines, $64.1 million on REDD in the Amazon Basin countries Basin Amazon the in REDD on million $64.1 just two years ago, when the majority of forestry tonnes standard on the voluntary market, were also developed percent Eighty-fi ve risk. mitigate and outcomes tg o dvlpet n byr sae bc on back scaled buyers and development of stage using the Climate, Community and Biodiversity (CCB) Biodiversity and Climate,using the Community REDD projects, since co-benefi ts such as local jobs, co-benefi local sinceprojects, as REDD such ts aeie xetto. hs s seily re for true especially is This expectation. baseline popular most the VCS, under transacted offsets of projects –theDRC,Zimbabwe,Kenya,andTanzania. of Brazil, Peru, Colombia, and . Another $15.4 Four out of fi ve forest carbon offsets were contr- were fioffsets of carbon out forest Four ve reduce deforestation. reduce a becoming increasingly are “co-benefits” these verifi alongside be ed, ecosystems and people to as “business-as-usual” now is projects carbon Measuring and verifying the co-benefi the forest of verifying ts and Measuring land areas certifi ed to theForest Stewardship Council as projects reached this fithis reached nal projects as issuance after acted million fl owed to East African countries advancing REDD project developers seek to deliver beyond-carbon beyond-carbon deliver to seek developers project

MtCO2e 0.0 0.5 2.0 2.5 3.0 3.5 4.0 1.0 1.5 Notes: Basedonresponsesassociatedwith23.7MtCO (tCO <5,000 $13.6 Micro 0.1 Mt 24 Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. 2 e) 5,000-19,999 (tCO Small 0.5 Mt Figure 24:VolumeandPricebyProjectSize,2013 $9.5 16 Tonnes sold 2 e) in estimatedannualemissionsreductions. 20,000-99,999 Medium (tCO 1.9 Mt $6.8 19 2 e) Average price 2 e transacted from 103 projects that reported project size e transactedfrom103projectsthatreportedprojectsize 100,000-499,999 2.4 Trends in Compliance Forest Carbon Offset 2.4 Trends Carbon Offset inCompliance Forest outr byr prhsd 4 o ter tonnes their of 44% purchased buyers Voluntary cess that critics were once skeptical of has come to come has of skeptical once were critics that cess a decade ago. Over the years, this report tracked nearly converging around internationally accepted voluntary voluntary accepted internationally around converging different than many stakeholders imagined they would opine akt fr oety fst lo much look offsets forestry for markets Compliance uidcinl ED tnad Ohr, uh s the as such Others, standard. REDD jurisdictional such as the Acre Carbon Standard which is a stand- a is which Standard Carbon Acre the as such jurisdictions, to or Standard, Carbon Peru the as such standards, namely VCS. These internal standards were use by just one or two projects. Still, VCS remained the the remained VCS Still, projects. two or one just by use were contracted pre-verifi cation. The 2013 market is pre-verifi market contracted 2013 were The cation. Standard alsomadeitsdebutintoforestrylastyear. Natural Forest Standard, were characterized by “internal” specifito countries, contained c geographically often in 2013, holding just over 50% market share. The Gold Gold The share. market 50% over just holding 2013, in VCS’s the pilot to moves it as state the by used in the market. fiof infusions from early-stage nance fewer receiving are developers project which in one also but – fruition verifiemissions the – mature more therefore pro- cation atr previously after 2013, in standards internal under Markets most popular forestry standard on the voluntary market most popular forestry standard on the voluntary market (tCO 3.5 Mt Large $5.9 26 2 e) Project count 0.5-1 million Very Large 2.8 Mt (tCO $4.1 5 2 e) Mega-project >1 million 14.9 Mt (tCO 13 $4 2 e) $0 $2 $4 $6 $8 $10 $12 $14 $16

$/tCO2e 17 2. Forest Carbon Offset Markets in Context Australia’s Australia’s Carbon State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State , the world’s largest GHG emitter, emitter, GHG largest world’s the China, New Zealand forest project developers, million, their estimated losses from the 80% drop in mechanisms. market market observers view California as a bellwether for launched seven subnational cap-and-trade markets liance demand in 2013 after the country’s carbon liance liance carbon market out there that accepts this and here’s here’s what the rules look like would be enormously Forest carbon projects under the the market. Early this year, Maori tribes in New policy. forest carbon offset prices due to the far, though, forestry offsets are allowed only in Hubei forest carbon project development is very limited. to launch in 2016, and a recent policy paper by the fraction of the $24.2 per tonne carbon tax. The head of head The tax. carbon tonne per $24.2 the of fraction resigned at the beginning of this year, citing a sharp EcoSolutions. C4 by analysis an to according reductions, tax became effective in July 2012. But the future forestry offsets and predict that the state’s acceptance acceptance state’s the that predict and offsets forestry Farming Initiative (CFI) enjoyed a full year of comp- inexpensive inexpensive offsets ooded from China and Russia fl included under the policy. Forestry projects in South owed international carbon offsets into its ETS and province – and likely in the city of Chongqing – and National Treasury indicates that forestry projects powerful,” powerful,” says Steve Schwartzman, Director of of these projects is uncertain now that the federal other other compliance markets in terms of its inclusion of er.” “magnifi a demand as REDDof act could Emissions Reduction Fund (ERF). Although the fund South Africa’s “tax-and-trade” program is also set who saw prices freefall after the government all- will be implemented through the existing CFI, project CO2 Group, one of the largest CFI project developers, project CFI largest the of one Group, CO2 drop in investor interest. déjà vu for developed under voluntary standards will likely be developers are now expecting offset prices to drop to a to drop to prices offset expecting now are developers government repealed the tax and replaced it with an erging economies are busy developing carbon pricing carbon developing busy are economies erging and plans to roll out its national market in 2016. So could produce up to 26 million tonnes of emissions credits, but putting a signal that says there is a is comp- there says that but putting a signal credits, As Oceania’s compliance markets falter, though, em- Africa (the program will accept only domestic offsets) Zealand threatened to sue the government for $600 The Australian government’s decisions may seem like like seem may decisions government’s Australian The The 120 rand per tonne (about $11.4 USD per tonne) Tropical Forest Policy at Environmental Defense Fund. Defense Environmental at Policy Forest Tropical “California “California is obviously not going to buy all of Brazil’s e of forestry offsets under the CDM, which 2 moving ahead of the UNFCCC process to price car- from international REDD from international located in projects and Acre two years of consultations. The ROW advised that the California program accept only jurisdictional restricted restricted to U.S.-based cials projects, ARB will offi their capped emissions. registry. In April 2014, forest management the (IFM) project Yurok located in tribe’s northern improved for the exchange of forest carbon offsets. reincarnation of the CDM or something completely reductions commitments until then, governments may tracked no CDM report. A/Rtracked year’s this in offsets the CDM Executive Board that were designed primarily primarily designed were that Board Executive CDM the source that But Protocol. Kyoto the with compliance for ivity in 2013 as “early action” projects developed under developed projects action” “early as 2013 in ivity projects) and a established set detailed of social and projects) bon locally and build compliance market infrastructure market compliance build and locally bon based mechanism to reduce emissions – whether a in a potential international climate agreement at the REDD offsets from states or territories (rather than of of demand was exhausted as buyers secured their state’s cap-and-trade program. Compliance buyers in Chiapas. Chiapas. The REDD Offset Working Group (ROW), a California may purchase offsets to cover up to 8% of California rst was to the befi issued offsets under the UNFCCC meeting in Paris in 2015 is still evolving. group group of indigenous leaders, environmentalists, and government released representatives, its recommen- dations to the ARB in July 2013, after more than different – would ultimately hang on the frame of each desired volumes before the end of the protocol’s fi rst rst desired volumes before the end of the fi protocol’s California saw rst its compliance fi forestcarbon act- environmental safeguards. safeguards. environmental establish Intended Nationally Determined Contributions Determined Nationally Intended establish and and does not have a timeline for doing so. However, and listed on the state’s Air Resources Board (ARB) voluntary standards Climate Action Reserve (CAR) and(CAR) Reserve Action Climate standards voluntary consider consider establishing regulations to allow offsets country’s INDC. allowed allowed offsets only from A/R projects approved by commitment commitment period in 2012. Ecosystem Marketplace In the meantime, many countries and jurisdictions are In In the wake of the CDM, the role of carbon markets (INDCs) to outline their goals. An international market- American Carbon Registry (ACR) were approved The ARB has yet nal to decision make ona REDD fi Though Though the state’s offset protocols are currently Though countries are not expected to make emissions make to expected not are countries Though 16 MtCO 18 2. Forest Carbon Offset Markets in Context comes next–ornot. carbon tax would drive an estimated demand of 30 of demand estimated an drive would tax carbon n waee itrainl tpdw cro market carbon top-down international, whatever and its at which, CDM, dormant the between bridge a forestry for markets compliance emerging other and sometimes with regional linkages. They are providing are They linkages. regional with sometimes up patchwork, sometimes at the subnational level and Section 8 of this report goes into more depth on these State CarbonMarkets oftheForest 2014 ek n 01 poie $3 ilo t AR projects A/R to million $23 provided 2011, in peak ground- a in developing are programs These offsets. enough be would say region the in active participants MtCO to sparkinterestinnewprojectdevelopment. 2 e per year in South Africa – a fi gure that market “ (IETA) event in September. “Why are you waiting for waiting you are September.“Why in event(IETA) could ficould inter- an market-based under into mechanisms t t n nentoa Eisos rdn Association Trading Emissions International an at ht Hues ainl euiy oni, speaking Council, Security National House’s White oenet ae eeoig fi developing mechanisms are nancing governments system to create carbon markets?” asked Paul Bodnar, Director for Environment and Climate Change for the for ChangeClimate and Environment for Director Building on this sentiment, national and jurisdictional and national sentiment, this on Building Why are you waiting for permission from the UNFCCC permission to link those systems together? Youdon’t together? systems those link to permission to protect forests and lower emissions. These policies These emissions. lower and forestsprotect to need permission.” need national climate agreement – but they don’t depend on it. 19 3. Overview: Forest Carbon Projects and Jurisdictions 24.7 M 3.5 M 2.7 M 0.2 M 2013 2012 2011 SALM/Agroforestry State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State 2010 IFM nished demand under Australia’s CFI, which recog- type. nizes the project these major forest carbon project types. It also pre- forest carbon project type accepted under the CDM, types fl uctuates according totypes policy fl and economic in 2013 as governments and companies focused issued offsets. of years, but topped the charts with record volumes on addressing deforestation and as many cation cycle REDD and rstprojects verifi completed their fi REDD REDD projects had a bumper year in 2010 in Demand for REDD was then subdued for a couple Kyoto Protocol (and therefore compliance demand) such as bamboo plantations and wetlands restoration. wetlands and plantations bamboo as such demand for IFM faltered last year partly due to dimi- dropped off after the fi rstdropped commitmentoff periodafter ofthe the fi drivers, or deterrents. Demand for A/R, the only ended in 2012. After several years of steady growth, anticipation of available methodologies to account for for account to methodologies available of anticipation the and market voluntary the in deforestation avoided ascent of REDD+ in international policy discussions. views emerging land-based carbon project types As Figure 25 illustrates, the popularity of these project project these of popularity the illustrates, 25 Figure As This section explores recent developments within 2009 A/R Project Project Project Project 2008 Project developers REDD as well as more than 500 projects reported historically. 2007 2006 Notes: Based on data reported by 159 projects and 50 additional offset suppliers in 2014, Figure 25: Transacted Offset Volumes by Project Type, All Markets, Historical Figure 25: Transacted Offset Volumes . Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014

5 0

of trees alongside crops), and/or other activities.of trees alongside crops), and/or other Sustainable Agricultural Land Management Pre-2006 Project developers enhance carbon sequ- carbon enhance developers Project (SALM): estration in agricultural landscapes through the use of use the through landscapes agricultural in estration cover crops, no-till farming, agroforestry (the planting (the agroforestry farming, no-till crops, cover Improved Forest Management (IFM): manage forests or enhance forest carbon stocks. manage forests or enhance forest carbon forest Degradation (REDD): losses, usually by leaving more trees on the land- forest, often by native providing people with alter reduce de forestation or degradation in a threat ened threat a in degradation or forestation de reduce to enhance carbon sequestration and/or reduce previously support forest (afforestation) or land that land or (afforestation) forest support previously Reducing Emissions from Deforestation and REDD+ project developers may also sustainably was previously deforested (reforestation). was previously deforested scape during harvest cycles. sources of income to forest-degrading activities. developers plant trees either on land that did not developers modify a forest management plan 25 20 15 10 Afforestation or Reforestation (A/R): 2 e MtCO 3. Overview: Forest Projects Carbon Jurisdictions and the main activity being undertaken in a given project area. project given a in undertaken being activity main the verged around four general project types that describe In recent years, the forest carbon markets have con- 20 3. Overview: Forest Carbon Projects and Jurisdictions “Some of the larger [REDD] projects are able to unload The Rimba Raya project in Indonesia verifi ed 2 MtCO The heightened market activity, however, occurred at occurred however, activity, market heightened The State CarbonMarkets oftheForest 2014 3.1 Breakout REDDProjects: Year 24.7 MtCO volumes of offsets in 2013, leading to ample supply. ample to leading 2013, in offsets of volumes a signifi cant quantity of offsets at a very lowprice very at a of offsets signifi quantity a cant year. Only 1 in 10 REDD offsets tran offsets REDD 10 in 1 Only year. sac price a at ted at $4.9/tCO at oue fo 21. vie dfrsain projects deforestation Avoided 2012. from volumes determined minimum price to sustain project activities, REDD prices were lower this year partly because many REDD projectsoldoffsetsforlessthanonedollar. of the world’s largest REDD projects verifiprojects REDD largest world’s the of sizeable ed others slashedpricestotransact tonnes. internally an below go to refused developers project project in Peru verifi ed 4.5 MtCO or Malaysia. McFarland of Maryland-basedCarbonfund.org. in June 2013, the same month that the Madre de Dios de Madre the that month same the 2013, June in point above $7/tCO above point Project developers and retailers transacted a record a transacted retailers and developers Project to help with their cash fl ow issues,” explained Brian fl explained cash issues,” their ow with help to or ons od t es hn $3/tCO than less at sold tonnes four tracked in this report survey cover almost 20 million 20 almost cover survey report this in tracked hectares, approximately the forest area of Cameroon of area forest the approximately hectares, lower prices, with the average REDD offset transacting more than half of total market value and tripling REDD REDD TYPE A/R IFM Agroforestry SALM/ TOTAL *The countincludesonlythoseprojectsforwhichEcosystemMarketplaceobtainedproject-levelinformation.The Notes: Potentialannualreductionsarebasedonsupplier-reportedrangesandincludebothearly-stage(i.e., 2 e of REDD offsets last year, accounting for 2 e in 2013 versus $7.8/tCO versus 2013 in e Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. Transacted (MtCO 2 Volume e last year, while roughly one in one roughly while year, last e parenthetical numberisthecountofprojectsthattransactedoffsetsin2013. 24.7 31.1 3.5 2.7 0.2 2 e) 2 Table 4:ProjectTypesbytheNumbers,2013 ($/tCO e. While some REDD Average Price 16.1 4.2 9.5 7.6 5.2 2 2 – huh no though – e e the previous the e 2 e) pipeline) andlate-stageprojects. ($ Millions) 153.1 Value 98.8 31.1 19.9 3.2 2 e cos ot eeat ein, u poet based projects but regions, relevant most across REDD+ market activity was geographically stratifigeographically was activity ed market REDD+ offsets last year. Brazilian projects, in particular, were were particular, in projects, Brazilian year. last offsets in Latin America alone transacted 70% of all REDD all of 70% transacted alone America Latin in Notes: Basedonresponsesassociated with20.1MtCO

MtCO e 12

2 (Transacting Figure 26:REDDPricingbyTransactedVolume 0 3 6 9 of Projects Projects*) 148 (78) Number Source: ForestTrends’Ecosystem Marketplace. 47 (26) 60 (27) 35 (22) than $3 Total 6 (3) Less from REDDprojectsthatreported aprice. State oftheForest CarbonMarkets2014. $5.99 and ResponseCount $3- Volume (Million ha) Land Area Impacted 19.4 1.6 8.9 0.2 30 $8.99 $6- $11.99 Count to HighEstimates, $9- Reductions (Low Potential Annual in MtCO 15.1 -21.2 Emissions 19 -34.3 2.1 -6.1 1.1 -3.9 0.7 -3.1 $12 or more 2 e) 0 2 4 6 8 10 12 14 16 18 20 2 e Count

21 3. Overview: Forest Carbon Projects and Jurisdictions US$ $20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 $3.3 3.7 33 Avoided Unplanned Deforestation Average price $3.1 e transacted from projects that defi ned e transacted from projects that defi Unplanned Deforestation State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State 2 14 Project count Volume Land area impact (hectares) 15.7 Planned Avoided Deforestation State of the Forest Carbon Markets 2014. Notes: Based on responses associated with Source: Forest Trends’ Ecosystem Marketplace. Figure 27: Comparing REDD Types: Project Figure 27: Comparing and Average Price for Avoiding Planned vs. and Average Price for Avoiding Planned whether deforestation was planned or unplanned. 13.6 MtCO

8 7 6 5 4 3 2 1 0

Count, Land Area Impacted, Transacted Volume, Count, Land Area 2 e MtCO e total. 2 e, versus 20 “unplanned” 20 versus e, 2 e for “unplanned” and $3.1/ and “unplanned” for e 2 e for “planned.” However, REDD projects 2 means changing a planned harvest regime or ensuring that a legal concession for agriculture does not livelihoods and who may not have clear title to lection of fuelwood , illegal , hectares versus just 3.7 million hectares for that avoided planned deforestation tended to sell large volumes, with just six projects MtCO 6.4 transacting the land. Preventing unplanned deforestation result in clear-cutting. tCO Planned deforestation usually occurs along a “frontier” where commercial agriculture or urban infra- projects that transacted 7.3 MtCO ing planned deforestation last year. The average The year. last deforestation planned ing of deforestation is more often instigated by the planned or unplanned deforestation, according to the VCS defi nition.* While both fall under the umbrella the under fall both While nition.* defi VCS the to according deforestation, unplanned or planned of REDD, these projects face categorically different threats to forests – usually requiring very different occurs in a “mosaic” pattern and may be of REDD projects. price per tonne was similar for both types of $3.3/tCO – projects while while Latin America played host to both types projects-v21 Avoiding Planned versus Planned Deforestation Unplanned Avoiding unplanned deforestation and 14 projects avoid- projects 14 and deforestation unplanned see a viable economic alternative to cutting same people who depend on the forests for their for forests the on depend who people same structure encroaches on forests. Land tenure is often clear for these projects, and avoiding deforestation avoiding and projects, these for clear often is tenure Land forests. on encroaches structure sistence agriculture, livestock grazing, col- jects mainly avoid this “mosaic” deforestation and Landscape-scale REDD Projects: http://www.v- accounting-mosaic-and-landscape-scale-redd- c-s.org/methodologies/methodology-carbon- down trees. deforestation is not as obvious as in planned deforestation and because local people must and small-scale extractive activities. This type approaches to . approaches to forest avoided unplanned deforestation. African pro- can can be complex both because the frontier of caused by a variety of drivers such as sub- covered a much larger land area – 15.7 million In contrast, unplanned deforestation usually Overall, our survey tracked 33 projects avoiding projects 33 tracked survey our Overall, Avoided planned deforestation projects also This report series for the fi rst time asked project developers to report whether their REDD project avoided project REDD their whether report to developers project asked time rst fi the for series report This * See VCS’s Methodology for Accounting Mosaic

22 3. Overview: Forest Carbon Projects and Jurisdictions State CarbonMarkets oftheForest 2014 3.2 REDD Jurisdictions: Acre LeadstheWay Acre 3.2 REDDJurisdictions: 21% of REDD market share as projects in Zimbabwe, Zimbabwe, in projects as share market REDD of 21% cesn sprt fnig tem, h to are two the streams, funding separate accessing a 3 MtCO 3 a activities, such as stakeholder consultations, govern- consultations, stakeholder as such activities, hl vlnay ED rjcs n U-ED rea- UN-REDD and projects REDD voluntary While While most UN-REDD fi UN-REDD most While nance fl sovereign owing from ies ae o a msl ivle dsic entities distinct involved mostly far so have diness oenet rmis erd oad raies – “readiness” toward geared remains governments f i nanced REDD offsets that were already issued and issued already were fi that offsets REDD nanced up themajorityoftonnestransactedunderCFI. projects also remained popular in Australia and made made and Australia in popular remained also projects projects also had a fruitful year, when the continent held baseline development, to prepare for national- or state- or national- for prepare to development, baseline Peruvian projects sold another 5 MtCO in the future. occur to projected reductions emissions in investing epnil fr 18 MtCO 11.8 for responsible the DRC, Kenya, and other countries sold 5.2 MtCO 5.2 sold countries other and Kenya, DRC, the tonnes are truly “paying for performance” rather than ratherperformance” “paying for truly are tonnes listed on a registry. Buyers purchasing already issued issued already purchasing Buyers registry. a on listed buyers voluntary of majority vast the –, REDD level et gny aaiybidn, n deforestation and capacity-building, agency ment Notes: Basedonresponsesassociatedwith22.5MtCO validation Undergoing Validated Verifi ed Issued Pre-pay Spot delivery Pay-on- 21 MtCO from respondentsthatreportedacontracttypeand Source: ForestTrends’EcosystemMarketplace. State oftheForestCarbonMarkets2014. Table 5:REDDProjectsUnpacked 2 e increase from 2012. Avoided conversion Avoided 2012. from increase e 2 e fromrespondentsthatreportedthestage at timeoftransaction. II. ProjectStages I. ContractType (MtCO Volume <0.1 <0.1 15.0 11.3 0.2 0.8 6.6 2 2 e) o ti vlm, while volume, this of e 2 Average Price e. African REDD $6.7 $2.7 $8.2 $2.9 $4.8 $12 $10 2 e 2 e, e, The state of Acre, Brazil is on the path to piloting VCS piloting to path the on is Brazil Acre, of state The JNR. In recent years, the state became the fithe became state juris- the rst years, recent In JNR. Acre has one of the most advanced JNR programs JNR advanced most the of one has Acre fe sgig Mmrnu o Understanding of Memorandum a signing After VCS’s JNR guidelines were released in fall 2012, and 2012, fall in released were guidelines JNR VCS’s 2012 the majority of project developers were still in still were developers project of majority the 2012 JR plt udr C ad nte egt actively eight another and VCS under pilots (JNR) carbon rights across large land areas, and determining accounting and verifiand accounting nested a have does ACR cation. as developing larger-scale deforestation baselines, deforestation larger-scale developing as activities alreadyunderway withinthejurisdiction. nae wt a oenet niy n integrating on entity government a with engaged diction to receive payments for performance, including governments orsimplyunsurehowtoprogress. f i ndings. It also resembles the kind of government- of kind the resembles fi also It ndings. sovereign commitmentstoreduceemissions. cln u RD porm. hs rcs takes process This programs. REDD up scaling sures to neighboring areas), clarifying land tenure and Ecosystem Marketplace’s survey has tracked REDD tracked has survey Marketplace’s Ecosystem Because it is not motivated by regulation but does but regulation by motivated not is it Because REDD+ standard that provides technical guidance for ED rjcs ee atv” at er wt eight with year, last “active” were projects REDD programs.REDD pilot projectstodate. projects nested within a REDD+ jurisdiction, but has no preliminary or technical discussions with jurisdictional with discussions technical or preliminary in contrast, In efforts. regional with baselines project REDD Nested Jurisdictional formal pursuing projects last the over ladder nesting the up moving projects regions(“jurisdictions”) or projectdevelopers as seek beginningto intersect at levelthe ofstates, provinces, rvnig ekg (f-odn dfrsain pres- deforestation (off-loading leakage preventing if REDD offsets are one day used to meet binding meet to used day one are offsets REDD if is agreement this Registry), Environmental Markit in the world, but other states and provinces are also are provinces and states other but world, the in O t coeae n h dsg o jurisdictional of design the on cooperate to MOU the voluntary standard remains the only one to have to one only the remains standard voluntary the w yas A son n iue 8 5% f nested of 58% 28, Figure in shown As years. two jurisdictional emerging within projects their “nest” to ogvrmn pyet tutr ta cud occur could that structure payment to-government offset carbon forest voluntary report’s this in tracked case this (in system registry established an through $40 of value a at KfW bank development German to ie s uidcin gape ih hlegs such challenges with grapple jurisdictions as time the best way to recognize or incorporate project-level incorporate or recognize to way best the hinge on the delivery of REDD+ emissions reductions emissions REDD+ of delivery the on hinge last year signing an agreement to deliver 8 MtCO 8 deliver to agreement an signing year last laid out a comprehensive framework for jurisdictional for framework comprehensive a out laid ilo, iacd y emn’ RM Programme. REM Germany’s by financed million, 2 e 3. Overview: Forest Carbon Projects and Jurisdictions 23 e from entering the 2 e of emissions over 30 years. e of emissions over 2 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State make the most advancements,” says Naomi Swickard, Swickard, Naomi says advancements,” most the make ments collaborating to build robust jurisdictional leverage the experience of private project developers developers project private of experience the leverage project REDD+ Ndombe Mai the concession, logging necessarily have to be subnational. The national-level national-level The subnational. be to have necessarily follow Acre’s lead and be the next to reach the stage of stage the reach to next the be and lead Acre’s follow things around.” fragile,” in August 2014, GCF states met in Acre’s mark. the private sector – a big question forestry administrations in Costa Rica and Chile have in turn “nest” jurisdictions. in in regional program development. For example, in DRC’s Mai Ndombe to develop a nested juris- Norwegian Agency for Development Cooperation Cooperation Development for Agency Norwegian payment-for-performance. by another 80% by 2020. Their pledge, however, by bringing together governors of tropical forest bonobos and forest elephants and is expected to Rica, Acre, Mai Ndombe, San Martín, and Madre de Rio Branco and committed to re ducing deforestation ducing deforestation Rio Branco and committed to re REDD+ programs, is also leading the push for JNR Dios. It is hard to say, though, which jurisdictions may Both countries also have agreements with the FCPF Despite the fact that individual REDD projects add would include its 300,000-hectare project. Once a signed agreements with VCS to pilot JNR programs. states to share best practices and promote market [jurisdictional] government agencies, and any time depends partly on payments-for-performance from development for jurisdictional offsets. The six Bra- dictional REDD approach in the province, which develop ment, ment, some governments develop have chosen to Wildlife Works partnered with the regional government government regional the with partnered Works Wildlife estation by 70% bet ween 2006 and 2012, preventing preventing 2012, and 2006 ween bet 70% by estation an event like an election comes up, that can turn atmosphere. Calling this progress cant “signifi but Readiness Market for Partnership Bank’s World the and will which strategies, REDD+ national develop they as an estimated 3 billion tCO avoid 100 MtCO area is home to 50,000 people as well as threatened a layer of complexity to jurisdictional programs’ (NORAD) is currently funding VCS’s work to develop zilian GCF states alone claim to have reduced defor- AFOLU Manger for VCS. “We see a lot of turnover in A 3-year $1.4-million grant administered by the A 3-year $1.4-million grant administered by the JNR cationaccounting frameworksand inverifi Costa Though GCF focuses on governors, JNR does not The GCF Task Force, a group of subnational govern- “It’s hard to predict which jurisdictions are going to 29% 29% 4% No, and won’t Unsure how to progress Preliminary discussion Formal pilot Actively engaged Awaiting approval Technical discussion 7% 4% 7% 21% Active . State of the Forest Carbon Markets 2014 Source: Forest Trends’ Ecosystem Marketplace. Source: Forest Trends’ Ecosystem Marketplace. In Progress Notes: Based on responses representing 29 projects. Notes: Based on responses representing Figure 28: REDD Projects by Project Nesting Progress Project Nesting REDD Projects by Figure 28: lines may also differ if the state or province uses non-project areas do not. do areas non-project FCPF with accordance (in rates deforestation historical nested project emissions – emissions project and nested specify what they will for increased deforestation pressures. crediting the In until baseline own its use may project this the case, issues. Their ultimate guidance, released in July 2013, 2013, July in released guidance, ultimate Their issues. period expires – then they must adopt the jurisdictional the adopt must they then – expires period baseline, according to VCS JNR guidelines. REDD+ programs in 2010, experts from California, within their respective land areas, but the jurisdiction’s jurisdiction’s the but areas, land respective their within suggests suggests that JNR programs must have transparent guidelines) while the REDD project baseline accounts baseline project REDD the while guidelines) do if nested projects achieve emissions reductions accounting systems for both state-level emissions and and emissions state-level both for systems accounting Offsets Working (ROW) Group to discuss these very Acre, Acre, and Chiapas, Mexico met as part of the REDD Jurisdiction-wide and project-level emissions base- 24 3. Overview: Forest Carbon Projects and Jurisdictions A/R was the most popular project type by count last count by type project popular most the was A/R State CarbonMarkets oftheForest 2014 3.3 A/R Projects: Strong Development3.3 A/RProjects: Project er Eoytm aktlc takd 0 cie A/R active 60 tracked Marketplace Ecosystem year. and continued to decline from an all-time high of 14 of high all-time an from decline to continued and oee, t . MtCO 3.5 at However, on sixcontinents. hectares million 1.6 across trees planted that projects tree-planting projects were a far-off second from REDD but Modest Transactionsbut Modest Quintana Roo,Mexico Jalisco, Mexico Chiapas, Mexico Campeche, Mexico West Papua,Indonesia West Kalimantan,Indonesia Papua, Indonesia East Kalimantan,Indonesia Central Kalimantan,Indonesia Aceh, Indonesia Republic ofCongo Mai Ndombe,Democratic Costa Rica Chile Tocantis, Brazil Pará, Brazil ,Brazil Amazonas, Brazil Amapá, Brazil Jurisdictional REDDprogram Ucayali, Peru San Martín,Peru Madre deDios,Peru Loreto, Peru Amazonas, Peru Cross RiverState,Nigeria Tabasco, Mexico Acre, Brazil Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014 . Table 6:StatusofCurrentJurisdictionalREDDProgramsAroundtheWorld 2 , rnato vlms from volumes transaction e, GCF TaskForce Member? 2012’s growth in the region was not repeated last year. after policy developments put the country’s carbon tax Kyoto Protocol signatories that used A/R CDM offsets CDM A/R used that signatories Protocol Kyoto ead o AR fst i Asrla lo diminished also Australia in offsets A/R for Demand Latin America transacted a modest number (0.6 MtCO of A/R offsets last year but reported that 30 projects are n h copn bok Wie sa cutis again countries Asian While block. chopping the on MtCO is partly due to a drop-off in compliance demand from to meet emissions reduction goals for a 2012 deadline. transacted more than half of all A/R offsets worldwide, offsets A/R all of half than more transacted VCS JNR Pilot? 2 e in 2011 followed by 8.6 MtCO 8.6 by followed 2011 in e California? MOU with preparation grant Country signed with FCPF? 2 e in 2012. This 2012. in e 2 e) e) 3. Overview: Forest Carbon Projects and Jurisdictions 25 e. 2 e in 2013 and 2 e to more than $50/tCO e to more 2 e on average, though prices ranged prices though average, on e 2 e in 2013. However, this phenomenon this However, 2013. in e 2 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State e this year. 2 mixed hardwood forest in the project area has been means landowners and developers must commit to maintain all credited emission reductions or removal ments of permanence commitments and you show ntually become the largest source of offset supply on to the Yurok tribe project in northern California. The the exibility most and fl quickest returns, landowners them where the voluntary price is versus where the for IFM, spent laying the groundwork for future tran- the California market, North American transactions of volumes, 2012 from 75% dropped actually offsets these MtCO 0.6 just to issuance for the projects. Given that IFM projects offer projects IFM that Given projects. the for issuance ities in California could therefore only purchase early Protocols. The year 2013 was therefore transitional oping a forest carbon project be it or under compliance standards voluntary and explaining the require- projects, project developers shifted their attention to Rather than marketing tonnes from existing voluntary Baczko, Vice-President of Business Development at ERA Ecosystem Services. Early action IFM projects began listing on the California the on listing began projects IFM action Early with the Cove project in Maine. Regulated ent- was much more a function of supply than demand. was much more a working with landowners on forest management proj- widely, from $4/tCO widely, from used for timber production since the California Gold sactions at California prices. Under the state’s cap- Compliance Offset Protocols did not occur until April California’s program requires forest carbon projects to projects carbon forest requires program California’s $11.3/tCO economic benefi tseconomic in benefi fi the rst year, explains Steve ensure the permanence of emissions reductions. This enhancements for 100 years following the last offset ersation as to which approach to take,” he says. ects in line with the California Compliance Offset an IFM project because they cant can receive signifi action tonnes from forestry projects in 2013. and-trade program, offsets typically sell just under the under just sell typically offsets program, and-trade oor price, set at $10.7/tCO allowance fl can be persuaded to sign a 100-year commitment for compliance price is, it’s often times a quick conv- average price for IFM tonnes dropped almost $3 from 2014, when the ARB issued over 800,000 tonnes 2012, to $7.6/tCO to 2012, Air Resources Board’s (ARB) registry in March 2013 The fi rst issuanceThe offi IFM tonnes under the California Though analysts project that IFM projects will eve- “When pitching a landowner tson ofthe devel- benefi e 2 e of 2 e. As 2 $7.9 $8.8 $7.6 $8.5 $11.3 $10.2 unknown Average Price Average e) 2 e of emissions reductions 2 2.2 0.5 0.3 1.8 0.9 0.3 0.1 Volume (MtCO I. Contract Type e transacted in 2012. The global II. Project Stages 2 at time of transaction. Table 7: A/R Projects Unpacked Table 7: e from respondents that reported the stage e from respondents that reported the stage e to 3.4 MtCO 2 2 . State of the Forest Carbon Markets 2014 e as of September 2014. 2 Source: Forest Trends’ Ecosystem Marketplace. Source: Forest Trends’ Ecosystem Marketplace. MtCO Pre-pay Spot Pay-on- delivery Project Design Document Issued Validated Verifi ed Verifi from respondents that reported a contract type and 21 from respondents that reported a contract Notes: Based on responses associated with 22.5 MtCO Notes: Based on responses associated had validated 89 mated projects to esti sequester 1.5 from the 5.1 MtCO other countries. Only a third of these projects transacted projects these of third a Only countries. other generate to potential the have they but year, last offsets on tree-planting efforts last year. MtCO project type, selling at an average of $9.5/tCO under development in Peru, Colombia, Guatemala, and Guatemala, Colombia, Peru, in development under under the UK’s Woodland Carbon Code (WCC), which fi rst dip in transaction volumes last year amidfi lengthy approval processes for these projects on the California the on projects these for processes approval a result, these projects contributed disproportionately annually. Reforestation efforts are also ramping up cap-and-trade market. IFM offsets at a total value of $19.9 million, a decrease a million, $19.9 of value total a at offsets IFM (20%) to market value as buyers spent $31.3 million 3.4. IFM Projects: Biding Time Across all regions, buyers contracted 2.7 MtCO A/R offsets transacted at the highest prices of any After years of steady growth, IFM projects saw their 1.9 MtCO 26 3. Overview: Forest Carbon Projects and Jurisdictions “forests” to include mosaics of crops and trees, coastal State CarbonMarkets oftheForest 2014 3.5 Emerging Project Types: Project 3.5 Emerging Wetlands, F poet sc a tee yial rcie “fi a rst- receive typically these as such projects IFM year bump” of verifiof bump” year following reductions emissions ed carbon management plan aims to improve habitat for habitat improve to aims plan management carbon and savannah ecosystems, and other landscapes. landscapes. other and ecosystems, savannah and deer and elk and reduce runoff that negatively affects negatively that runoff reduce and elk and deer Grasslands, Bamboo, Climate-Smart Agriculture, Agriculture, Bamboo,Climate-Smart Grasslands, shorthand, on the ground, these lines often blur. REDD project Though trees. the for landscape the seeing salmon andsteelheadpopulations. upfront carbon revenue can incentivize landowners to Emerging project types are expanding the defi nition of uh ad rbl edr sy ht oet os a left has loss forest that say leaders tribal and Rush, projects may involve tree-planting, and IFM projects projects IFM and tree-planting, involve may projects the fi buyer, tonnes a early nd these Assuming plan. types such as REDD, A/R, and IFM are useful useful are IFM and A/R, REDD, as such types management carbon-centric more a to transition the then continueoverseveraldecades. Forest carbon market participants are increasingly increasingly are participants market carbon Forest native plant and animal species struggling. The new The struggling. species animal and plant native may addresssomeofthekey causesofdeforestation. make the switch. Slow and steady issuance volumes issuance steady and Slow switch. the make and More Notes: Basedonresponsesassociatedwith22.5MtCO validation Undergoing Verifi ed Issued Spot delivery Pay-on- 21 MtCO from respondentsthatreportedacontracttypeand Source: ForestTrends’EcosystemMarketplace. State oftheForestCarbonMarkets2014. Table 8:IFMProjectsUnpacked 2 e fromrespondentsthatreportedthestage at timeoftransaction. II. ProjectStages I. ContractType (MtCO Volume 0.1 0.7 1.2 0.2 0.6 2 e) Average Price $4.0 $6.3 $6.5 $8.4 $40 2 e These “beyond-forest” project types refl reality types the project ect “beyond-forest” These The quickly disappearing coastal ecosystems along along ecosystems coastal disappearing quickly The VCS also revised its avoided conversion methodology methodology conversion avoided its revised also VCS VCS and CCB, and the project area meets requirements. 2014 when EcoPlanet Bamboo verifiBamboo EcoPlanet its when ed offsets 2014 fi rst Organization, the Chinese Academy of Agricultural Agricultural of Academy Chinese the Organization, In April 2014, VCS approved a new methodology for for methodology new a approved VCS 2014, April In credits may someday be recognized as Chinese Chinese as recognized be someday may credits Agricultural and Food UN’s The sequestration. carbon carbon methodologiesinSection7.) voluntary methodology hope that these land-based land-based these that hope methodology voluntary improve to animals grazing rotating as such activities the specifi to is c which methodology, the approved new piloting are developers project Pioneer edge. deforested atleast10years ago. f i rst of its 1.5 million validated tonnes to be listed on on listed be to tonnes validated million 1.5 fi its of rst Entergy as such utility a for win-win a – grow grasses a develop , which cover roughly 25% of the Earth’s Earth’s the of 25% roughly cover which Grasslands, Certifi edEmissionsReductions(CCERs). sustainable grasslands methodology that includes includes that methodology grasslands sustainable saltwater intrusion. The project involves diverting diverting involves project The intrusion. saltwater uncharted territory. Sciences, and other partners that worked on the the on worked that partners other and Sciences, Rather than encroaching on forests, EcoPlanet Bamboo to Resources Tierra prompted Coast Gulf Louisiana’s broad approach – one that doesn’t stop at the forest forest the at stop doesn’t that one – approach broad builds its plantations only on degraded land that was was that land degraded on only plantations its builds now are Trust Climate The and Entergy, Resources, piloted the methodology at its Taita Hills REDD+ REDD+ Hills Taita have not do that its landowners where Kenya, in project at methodology the piloted Markit registry. The offsets are developed under both both under developed are offsets The registry. Markit blue on (More coast. the along facilities generation of is that Orleans New of west wetland a at it piloting also made a debut on the carbon market in in market carbon the on debut a made also Bamboo Tierra and 2012, September in Delta, Mississippi that preventing land-use emissions will require a a require will emissions land-use preventing that the project because their hectares did not meet the the forest defi meet not nition. from did hectares excluded their because previously project the were land their on trees Works Wildlife shrublands. and grassland include to ACR Entergy. region, the in utility major the by funded from its bamboo plantations in Nicaragua, allowing the has also but emissions GHG its offset to wants that and sinking) (regional subsidence by threatened half a million miles of transmission lines and hundreds hundreds and lines transmission of miles million a half wetland the help to wastewater municipal nutrient-rich land surface, are also gaining access to carbon fi nance. methodologies to test carbon-accounting principles in in principles carbon-accounting test to methodologies carbon methodology, methodology, carbon restoration wetlands 3. Overview: Forest Carbon Projects and Jurisdictions 27 e generated by these activities 2 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State farmers. The BioCarbon Fund committed to purchas- through 2017, at an estimated value of $600,000. at an estimated through 2017, ing 150,000 tCO online. online. It recently concluded the public consultation that requirements agriculture climate-smart its on period will facilitate both stand-alone and grouped projects. grouped stand-alone and both facilitate will development. The organization now hosts the Cool Farm Cool the hosts now organization The development. ard ard is also opening up opportunities for SALM project After starting with an A/R methodology, The Gold Stand- Gold The A/Ran methodology, with starting After Tool that allows farmers to calculate their GHG emissions emissions GHG their calculate to farmers allows that Tool e last year from developed- 2 methodology, approved in 2011. The project, implem- project, The 2011. in approved methodology, tries may be on the horizon. The Kenya Agricultural transacted transacted just 0.4 MtCO include agroforestry and grasslands management – organization to issue offsets under VCS’s SALM Carbon Project rang in 2014 by becoming rst the fi ented by the Swedish NGO Vi Agroforestry, promotes promotes Agroforestry, Vi NGO Swedish the by ented and Oceania. But more projects in developing coun- climate-smart agriculture among 60,000 small-scale country projects located in Europe, North America, After a strong year in 2012, SALM projects – which 28 4. Beyond Carbon: People and Ecosystems Endangered speciesprotection Endangered speciesprotection s n vr rae nme o frse hectares forested of number greater ever an As State CarbonMarkets oftheForest 2014 come under carbon management each year; project year; each management carbon under come gered species, and more. Frequently, a wide scope wide a Frequently, more. and species, gered stake- in-depth conducting found be can developers with governments and indigenous peoples to defito peoples indigenous and ne governments with project categorysuchasREDD. bee- to patrols forest paid from – activities project of holder consultations with forest communities, working communities, forest with consultations holder land tenure, implementing measures to protect endan- keeping – is hidden under the umbrella of a broad a of umbrella the under hidden is – keeping Benefits tovulnerablegroups Benefits tovulnerablegroups Training orcapacitybuilding Training orcapacitybuilding Targeted benefitstowomen Targeted benefitstowomen Figure 29:ProjectCo-benefi ts:ProjectCountbyRegion,AssociatedVolume,andHectaresImpacted Climate changeadaptation Climate changeadaptation In-kind livelihoodbenefits In-kind livelihoodbenefits Watershed protection Watershed protection 4. Beyond Carbon: People and Ecosystems Direct employment Direct employment Direct payments Direct payments Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2014. Notes: Basedonresponsesrepresenting atleast75projects. Latin America 0 M 0 2 M 10 Associated volume(tCO Asia 4 M 20 – asking project developers to attempt to quantify non- quantify to attempt to developers project asking – This section explores some of the ways in which forest 4.1 Co-Benefi Project and More ts: Jobs,Jaguars, abn rjcs fet epe n eoytm, and ecosystems, and people affect projects carbon explicitly tracked forest carbon projects’ co-benefiprojects’ carbon forest tstracked explicitly in themarket. For the fi rst time this year, Ecosystem Marketplace Ecosystem year, fi this the time For rst how the beyond carbon beneficarbon translate beyond projects the of how ts Africa 6 M 30 Project Count North America 8 M 40 2 e) 10 M Hectares impacted 50 12 M Europe 60 14 M 70 Oceania 16 M 80 4. Beyond Carbon: People and Ecosystems 29 watershed State of Watershed benefi ts to biodiversity. biodiversity. to ts benefi training and capacity buil- State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State protection benefits from forest carbon projects, market. Ecosystem Marketplace’s mega fauna such as orangutans, koalas, African monitoring to fi refi ghting to sustainable pig farming to refi monitoring to fi larger than India. More than 50 IWS projects covering ding were the ts most of common forest co-benefi hectares claimed to provide climate change adaptation change climate provide to claimed hectares honey production – or participated in capacity-building in participated or – production honey habitats for dozens of endangered species, including Forty-two projects covering more than nine million forests standing also provide also standing forests terrain also mitigate the erosion that might otherwise to back primarily ts,based especially on co-benefi reductions emissions though – sequestration carbon for to more than 9,000 people. Another 150,000 people resilience” – or the ability of a given ecosystem to Direct employment and Project developers also cited a myriad of Projects that reforest degraded areas or keep tropical keep or areas degraded reforest that Projects increases or more intense precipitation events. For instance, projects that prevent deforestation on sloped on deforestation prevent that projects instance, in watershed services (IWS) often help to protect area an land, of hectares million 365 protecting 2013, in including ooddecreased protection,erosion, and fl occur after heavy rains or . Several developers otherwise pollute waterways. Conversely, investments Conversely, waterways. pollute otherwise part of their core mission often decide which projects benefits, many of which enhanced “landscape Nearly half of all projects tracked last year (77 projects) (77 year last tracked projects all of half Nearly bonobos, as well as a few lesser-known specimens Developers reported their project areas protected watershed payments last year, managed watersheds were trained in new skills – ranging from forest carbon carbon forest from ranging – skills new in trained were withstand climatic changes such as temperature security for local communities through the planting of species protection. such as the blue-throated piping-guan and the Amazon the and piping-guan blue-throated the as such drought-resistant crops or by maintaining the habitat for habitat the maintaining by or crops drought-resistant dwarf squirrel. Offset buyers such as the National elephants, cheetahs, jaguars, giant armadillos, and employed employed local community members, providing jobs absorption absorption of nutrient elds runoff that from would fi also reported their project activities contributed to food to contributed activities project their reported also aren’t quantifi ed in tonnes asaren’t theyquantifi are on the carbon ed. are not always quantifi activities, often focused on REDD readiness. activities, often focused carbon projects, according to survey respondents. carbon-rich landscapes, even if these benefits Geographic Geographic Society that focus on biodiversity as 240 million hectares and receiving $6.1 billion in 2014 tracked $9.6 billion in IWS investments IWS in billion $9.6 tracked 2014 Investment

26 26

9M species species 13M hectares Protecting at least or involved in for endangered 150,000 people trained Climate change hectares of habitat capacity-building adaptation across

M women * 475 $4.8M benefits 10 State of the Forest Carbon Markets 2014. hectares $41M + 9,000 to communities in livelihood Watershed Source: Forest Trends’ Ecosystem Marketplace. in direct payments Including (at least) jobs that specifi ed gender, not the 9,000 total jobs. jobs that specifi Notes: Based on responses representing at least 75 people employed protection across Figure 30: Project Co-benefi ts: Key Impacts, 2013 ts: Key Impacts, Figure 30: Project Co-benefi projects. *The number of women employed is out of 2,000 meet net-positive impact criteria for communities and the most popular “carbon-only” standard last year, these benefi ts as buyers demandthese tobenefi know the “story” of VCS offsets transacted in 2013 were also developed also were 2013 in transacted offsets VCS of or land area improvements. More than three-quarters behind the offset. biodiversity. Twenty percent of VCS tonnes were from projects developed within a land area that was FSC- under the CCB Standard, which ensures that projects developers are increasingly measuring and monitoring and measuring increasingly are developers empowerment, and climate change adaptation. Project adaptation. change climate and empowerment, acted offsets last year used only VCS as a standard. acted offsets last year used only VCS additionally sought to certify their non-carbon benefi ts additionally sought to certify their non-carbon benefi certifi ed. In fact, onlycertifi a handful of projects that trans- carbon project benefi ts – such as job creation, women’s creation, job as such – ts benefi project carbon The vast majority of projects developed under VCS, 30 4. Beyond Carbon: People and Ecosystems wnysx rjcs eotd providing reported projects Twenty-six provided projects Thirty-six omnte ls ya. hs pyet ttld at totaled payments These year. last communities vaccination campaign to honey sales. These benefiThese sales. honey to campaign vaccination ts f i gures). Another 35 projects provided communities provided fi projects 35 Another gures). with State CarbonMarkets oftheForest 2014 were worth at least $40.8 million – the value reported value the – million $40.8 least at worth were peoples. by just10outofthe35projects. the animals and plants consumed by hunter-gatherer by consumed plants and animals the from education to water storage infrastructure to a to infrastructure storage water to education from least $4.8 million (from 16 projects that reported dollar ee s o women benefi to ts Table 9:ExamplesofSpeciesProtectedbyForest by projectdevelopersthroughourannualsurveyandis Notes: *Thislistincludesonlythosespeciesreported Source: ForestTrends’EcosystemMarketplace. hc ranged which benefits livelihood in-kind State oftheForestCarbonMarkets2014. Tasmanian wedge-tailedeagle Blue-throated piping-guan therefore anunderestimate. Amazon dwarfsquirrel Razor-billed curassow Carbon Projects.*2013 Red howlermonkey Sanborn’s squirrel African elephant Tasmanian devil African wilddog Giant armadillo Giant anteater Lowland tapir Leche caspi Wild fi gtree Orangutan smtms hog women’s through sometimes , Cheetah Bonobo Macaw Jaguar Cedar Bilby to paymentsto direct targeted “On the map of Guatemala, our lands look like islands like look lands our Guatemala, of map the “On Thirty-eight projects covering 12.8 million hectares pro- 4.2 LandTenure: GettingItRight cesses, and offered training and leadership oppor leadership and training offered tu- and cesses, and Resources Initiative (RRI) found that deforestation deforestation that found (RRI) Initiative Resources and nig o lo t toia frs cutis manyof countries, forest tropical fl to to ow ancing area. Overall, out of more than 2,000 people employed vided targeted benefitargeted marvided or vulnerable to ts gi na lized 7 employed ranged from 0% to 50% – no project reported pro- decision-making in women included explicitly groups that generated their own income by selling by income own their generated that groups gatherer groups were in fact the main be main the fact in were groups gatherer ne fihunter- or minorities or ciaries ethnic cases, some In groups. securingrights_executive_summary.pdf streamlined their provision of in-kind livelihoods such as segments ofthepo pulation thatneedthemthemost. school subsidies, medical treatment, and training to the which have undefi ned or unclear land tenure spanning women within carbon projects lagged behind those for Change, July2014.http://www.wri.org/sites/default/fi les/ Debate has continued to heat up as the development the as up heat to continued has Debate ognition and government protection are dramatically dramatically are protection government and ognition by the World Resources Institute (WRI) and the Rights Rights the and (WRI) Institute Resources World the by Not only does unclear land tenure disadvantage com- disadvantage tenure land unclear does only Not filarge-scale for n- potential the creates UN-REDD of by theseprojects,just475werewomen. inevitably triggers questions of ownership. Who owns owns Who ownership. of questions triggers inevitably Placing a value on the carbon content of standing forests n sa f eatto, sy Mreoi Cortave, Marcedonio says devastation,” of sea a in Land tenure – the legal structure that determines how ae wti cmuiy oet wt srn lgl rec- legal strong with forests community within rates the goals of reducing deforestation. Recent research research Recent deforestation. reducing of goals the women of percentages the employed, they people the remains a hot-button issue because of these questions. receives revenuesfromthesaleofassociatedoffsets? Who contain? they carbon the owns Who forests? the that women held more than half of the jobs in the project from the Association of Forest Communities of Petén. of Communities Forest of Association the from the distinctionisstarkevento naked eye. nities. Overall, though, employment opportu employment though, Overall, for nities. nities projects Other ecotourism. advancing or handicrafts lower than in forests outside those areas. those outside forests in than lower lands can be used by individuals and communities – communities and individuals by used be can lands munities and indigenous people, but it also undermines millions ofhectares. of gender the on reported that projects 13 the Of men. managers of project activities. Other project developers WRIandRRI,SecuringRights, CombatingClimate 7 Sometimes, Sometimes,

31 4. Beyond Carbon: People and Ecosystems price Average $8 $7 $6 $5 $4 $3 $2 $1 $0 8 24 37 18 17 2013 0.3 $7.4 Other 12 14 42 17

2012 2.1 owned Privately

$3.4

concessions concessions Land-use Land-use 2 6 19 28 53 6.2 : 2011

$3.3 customary customary

Concession Collective or Collective

8.6 55 2 owned 8 30 12 $5.1

2010 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State Government- 9.9

Average price in 2013 $6.3 Other 2 4 37 Hectares impacted Latin America Asia Africa North America Europe Oceania 16 14 2009 Government

9 M 8 M 7 M 6 M 5 M 4 M 3 M 2 M 1 M 0 M to community ownership. In 2002, governments owned rights over 21%. By 2013, the percentages had shifted impacted Hectares world’s total forested area. In lower- and middle-income and lower- In area. forested total world’s countries, more hectares are slowly beginning to transfer to beginning slowly are hectares more countries, 10 M 71% of forested lands while communities held legal 2 2 12 12 27 2008 $8 $7 $6 $5 $4 $3 $2 $1 $0 e. Note that projects could report more than one tenure type; values 2 0.5 2 1 11 12 28 $7.4

2007 4.4 owned Privately $3.4

1

Collective or customary*

13 11 19

concessions concessions 2006 Land-use are counted towards multiple tenure types in these cases.

6.9

$3.3 customary customary

Figure 31: Historical Number of Projects Reporting Tenure Type of Projects Reporting Historical Number Figure 31: 1 6 5

10 Collective or Collective

Private 2005 3.9 owned owned $5.1

Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. Source: Forest Trends’ Ecosystem Marketplace. . Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014 Government-

0.5 1 8

11 23 *Collective or customary land tenure refers to land areas owned by communities or indigenous people. *Collective or customary land tenure refers Other Average price in 2013 $6.3 Notes: Based on responses associated with 104 projects reporting tenure type in 2013, and historical data.Notes: Based on responses associated Pre-2005 Volume transacted in 2013: Latin America Asia Africa North America Europe Oceania 0

9 M 8 M 7 M 6 M 5 M 4 M 3 M 2 M 1 M 0 M 80 60 40 20

Figure 32: Volume Transacted, Average Price, and Hectares Impacted by Tenure Type and Region, 2013 Figure 32: Volume Transacted, Average

10 M 2 Volume transacted in MtCO in transacted Volume 120 100 e Number of projects of Number munities are being destroyed.” 513 million hectares of forests, about an eighth of the Communities Communities currently hold legal claim to at least Notes: Based on responses associated with 16.1 MtCO “The lands that surround the forests of indigenous com- indigenous of forests the surround that lands “The 32 4. Beyond Carbon: People and Ecosystems Africa (10 projects). Ten projects were implemented were projects Ten projects). (10 Africa America or Asia, where the majority of projects were projects of majority the where Asia, or America State CarbonMarkets oftheForest 2014 4.3 CommunityInvolvement: In,Taking Opting (FPIC) – minimum thresholds for inclusiveness under inclusiveness for thresholds minimum – (FPIC) (4.4 MtCO (4.4 Offsets developed under collective or customary land customary or collective under developed Offsets carbon assets. contracted from projects sited on land-use con cessions agreements, only 18 forest carbon projects reported projects carbon forest 18 only agreements, a deve and project lopers private-sector among uncertainties Amid hectares. community-owned as n otiig re pir ad nomd consent informed and prior, free, obtaining and and opportunity costs are typically lower than in North ership by communities – the most-ever recorded in this growing emphasis on public fi nance and bilateral fi and public nance on emphasis growing 32 illustrates, carbon projects on government-owned on projects carbon illustrates, 32 Ownership sacted 6.9 MtCO 6.9 sacted own- customary or collective under land on situated Communities, theCarbonTrade, andREDD+Investments, Last year, Ecosystem Marketplace tracked 37 projects csse Mrepae se poet developers project asked Marketplace Ecosystem Latin America and Africa, where project development project where Africa, and America Latin private landownershipin2013. or land government-owned on projects are located in Latin America (16 projects) and private (0.5 MtCO (0.5 private project management and owned some or all of the of all or some owned and management project purchased eco-concessions. projects on community-owned land were common in common were land community-owned on projects – location to due partly is This land. privately-owned less at selling prices, lowest the garnered ownership Projects developed on community-owned land tran- land community-owned on developed Projects informing community members about project activities from ranged involvement community This 2013. in report series. The majority of these community-owned these of majority The series. report to 61% and 30%. and 61% to than half the average price of offsets sourced from sourced offsets of price average the half than the scalesforcommunityland rights?February2014. how communities were involved in project activities project in involved were communities how ments/fi les/doc_6594.pdf has slowedinthelastfi ve years. March 2014.http://www.rightsandresources.org/docu- leading carbon standards – to communities that led that communities to – standards carbon leading located on private or government-owned land, or on or land, government-owned or private on located land stillcovermorehectares. 8 9 RRI,LotsofWords,LittleAction: Willtheprivatesectortip RRI,StatusofForestCarbon RightsandImplicationsfor 2 e) or under government (3.9 MtCO (3.9 government under or e) 8 2 However, RRI warns that progress that warns RRI However, 2 e in 2013 – more than the volume the than more – 2013 in e e) ownership. However, as Figure as However, ownership. e) 9

concessions as well as concessions 2 e) or e) “Indigenous REDD+” mechanism that would prioritize would that mechanism REDD+” “Indigenous Asháninka leaders in Peru were murdered on their way 11 10 ie ti hsoy f oeie lf-hetnn en- life-threatening sometimes of history this Given croachments on their land, indigenous peoples are peoples indigenous land, their on croachments years and in 2013 released a document outlining an outlining document a released 2013 in and years a year and a half of discussions, ultimately deciding ultimately discussions, of half a and year a arguing that the unregulated voluntary market is “risky “risky is market voluntary unregulated the that arguing a are Acre of narco-traffi Asháninka and The ckers. four 2014, September In lines. front the on often are managed stakeholders Local principles. accounting While COICA is open to moving forward with REDD with forward moving to open is COICA While deforestation rates since many indigenous territories indigenous many since rates deforestation a tribeinPanamarejectedpay fortheircarbon-richforests.” jurisdictional REDD. in involved often most were members Community oeie setcl f usd gop ta want that groups outside of skeptical sometimes planet Cuenca Amazónica(COICA),IndigenousREDD+Alterna- redd-alternative-indigenous-territories-harmonious-life-cool- Basin, has engaged with REDD policymakers over the the over policymakers REDD with engaged has Basin, project” scenario. The Guna Yala people of Panama of people Yala Guna The scenario. project” payments as long as it is done on communities’ terms, to threats past thwarted have they because precisely September 2014. public funding over voluntary private-sector payments, payments, private-sector voluntary over funding public advance to efforts recent state’s Brazilian the of part carbon- in training through sometimes performance, patrolling for illegal extraction and in monitoring project include payments for standing forests with low historical nieos raiain fo ars te Amazon the across from organizations indigenous safeguard to work collective their continue to Brazil in some- is content carbon their and forests Protecting implementing project activities such as tree-planting or they considersacred. they didn’t need fi nancial incentives to protect a forest that carbon fi nance didn’t fi t with their culture and that rejected a REDD project proposal in October 2013 after “no- a to led cases other in has process FPIC the forests sosuccessfully. for indigenous peoples.” indigenous for of coalition a COICA, projects. carbon develop to loggers illegal of invasion the against territories their to meet with their tribal counterparts across the border peoples indigenous and – work dangerous times the projectthemselvesin23cases. tive: IndigenousTerritoriesof HarmoniousLifetoCoolthe Planet, 2013.http://theredddesk.org/resources/indigenous- might otherwise be excluded from a REDD fiREDD a nance from excluded be otherwise might .com. “REDD+ versus indigenous people? Why CoordinadoradelasOrganizacionesIndÍgenasla 11 10 The mechanism would also also would mechanism The 4. Beyond Carbon: People and Ecosystems 33 70 Oceania 60 50 Europe e of the offsets transacted 2 40 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State 30 Project Count North America e for almost $5 million, or 25% of market share 2 20 Africa last year and earned more than $8 million from new less than 5% of total market value. However, this should this However, value. market total of 5% than less from projects in Africa, where communities sold 3.1 the provincial government and the First Nations that the province spent years discussing carbon rights. to earn carbon revenues and sold 120,000 tonnes to a to tonnes 120,000 sold and revenues carbon earn to from carbon sales without conceding any land rights, facilitates offset sales from Great Bear. MtCO in the region. In Latin America, the Paiter Suruí people Suruí Paiter the America, Latin In region. the in of Brazil developed the fi rst indigenous-owned project indigenous-owned rst fi the developed Brazil of be considered a low-end estimate since it includes only those project developers that opted to report on owned at least 3.8 MtCO Nations since it meant that they could earn revenue be split up (joint ownership means that the First Nations First the that means ownership (joint up split be Brazilian cosmetics company, Natura Cosméticos. says Cornelia Rindt of ERA Ecosystem Services, which Services, Ecosystem ERA of Rindt Cornelia says jointly own the land rights to the Great Bear Rainforest Ultimately, they decided that though land rights cannot rights land though that decided they Ultimately, contracts. The majority of these tonnes transacted and the Crown both own 100% of the land area), carbon ownership. carbon rights could. This was important to the First IFM project which covers millions of hectares in Overall, community-owned carbon offsets constituted Overall, this report survey reveals that communities 10 Asia 0 Latin America Designed the project Designed the project Figure 33: Project Count by Community/Stakeholder Involvement, by Region Involvement, Community/Stakeholder Project Count by Figure 33: Helped design the project Helped design the Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. Source: Forest Trends’ Ecosystem Marketplace. Implemented project activities Implemented project 12 Monitored project performance Monitored project Led management of the project Led management Owned all associated carbon assets associated carbon Owned all Notes: Based on responses associated with 100 projects. Respondents were able to select multiple categories. Notes: Based on responses associated Received information about the project Received information RRI, Status of Forest Carbon Rights and Implications for must be clearly opt-in, and communities need ample level, the question whether land rights are intrinsically intrinsically are rights land whether question the level, linked to carbon rights remains a key unanswered laws and policies, RRI found that only two countries ned carbon rights, though six others have legally defi March 2014. http://www.rightsandresources.org/docu- ments/fi les/doc_6594.pdf ments/fi Forest carbon projects have in some cases been the to protect and include communities, at the national that carbon will be no different than other commodities other than different no be will carbon that time and understanding to make a collective decision impetus for clarifying carbon rights. In British Columbia, British In rights. carbon clarifying for impetus prominent prominent indigenous populations – Bolivia, Gabon, published in January 2013, specify that REDD activities REDD that specify 2013, January in published Some indigenous peoples and local communities worry communities local and peoples indigenous Some Communities, the Carbon Trade, and REDD+ Investments. question. In a review of 23 tropical forest countries’ drafted laws. fi nance through the FCPF. fi Owned portion of associated carbon assets of associated Owned portion extracted from their forests without their permission and for the enrichment of outsiders. Though third-party third-party Though outsiders. of enrichment the for and about how to move forward, or not. Three countries with countries Three not. or forward, move to how about and Paraguay – chose not to pursue REDD readiness carbon standards are continually refi ning safeguards carbon standards are continually refi 12 At the UN-REDD Programme level, the FPIC guidelines, FPIC the level, Programme UN-REDD the At 34 4. Beyond Carbon: People and Ecosystems 4.4 Project Land Area: GainingGround LandArea: 4.4 Project Of that area, 11.9 million hectares (about 40% of the of 40% (about hectares million 11.9 area, that Of expansion from the 26.5 million hectares Ecosystem hectares million 26.5 the from expansion were under forest carbon management in 2013, a 13% State CarbonMarkets oftheForest 2014 projects covered a land area nearly the size of Vietnam. rjc dvlpr rpre ta 3 mlin hectares million 30 that reported developers Project aktlc takd n 02 RD, F, n A/R and IFM, REDD, 2012. in tracked Marketplace Map key:HectaresImpacted: Chart key:TransactionVolumeandShare byProjectType: Latin America Notes: Basedonresponsesassociated with30.1millionhectaresofcarbonprojectareaand29.4 MtCO 3.1 MtCO 5 projects Figure 34:VolumeandValueofCarbonAssetsTransactedOwnedbyCommunities,Region $4.9M Figure 35:HectaresImpactedbyCountryLocation,TotalRegionalTransactionVolume Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2014. Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. 2 e and SharebyProjectType(TotalHectaresCountry%Share) 0.6 MtCO 19 projects $2.9M Africa Notes: Basedonvolumesassociatedwith15projects. 2.6 Mt America North 100+ 2 America e 18.2 Mt Latin 10,000+ North America 0.1 MtCO 4 projects $0.5M 5.6 Mt Europe Africa 0.5 Mt 50,000+ Two-thirds of the land area under carbon management ened forests. The average size for an avoided planned deforestation and avoided unplanned deforestation deforestation unplanned avoided and deforestation is associated with REDD projects, many of which seek seek which of many projects, REDD with associated is to reduce deforestation across large swaths of threat- of swaths large across deforestation reduce to transactions lastyear. completed that projects with associated were total) 2 e A/R 100,000+ 0.1 MtCO 3 projects IFM $0.5M Asia Oceania 2.8 Mt 1.9 Mt Asia 1,000,000+ REDD 2 e SALM/Agroforestry 2 projects Oceania 2 e transacted. na na 4. Beyond Carbon: People and Ecosystems 35 e) 2 e from from e 2 2013 e which is 2 Europe e, a decrease 2 2012 e, the lowest of any 2 2013 e, behind Peru’s). At 5.1 2 2012 North America State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State SALM/Agroforestry 2013 e agreement with KfW would put Brazil’s 2 e, a more than 80% increase over 2012’s e, Peru supplied the second-largest volume e of forest carbon offset transactions 2 2 2 Oceania 2012 IFM more more representative of the majority of African project heights. Indonesia earned the infamous title of “world’s of title infamous the earned Indonesia heights. transactions at 3.8 MtCO from last year when a few large-scale (>1 MtCO top deforester” in 2013, but the country is also the fi rst fi the also is country the but 2013, in deforester” top . The Rimba Raya project in Indonesia, the transactions drove volumes in the region to new region. Excluding signifi cant outliers, however, results region. Excluding signifi MtCO Projects in Mexico, Guatemala, Argentina, Colombia, in the world to establish a national REDD+ agency that agency REDD+ national a establish to world the in MtCO in a regional average price of $5.8/tCO priced at an average of $3.4/tCO offsets of any country, transacting 11.8 MtCO Bolivia, and other countries also contributed to Latin 8 MtCO worldwide, with 14 projects transacting tonnes last year. last tonnes transacting projects 14 with worldwide, Kenya, Uganda, and other countries attracted voluntary attracted countries other and Uganda, Kenya, demand. Offsets from Africa-based projects were developers’ typical transactions. volume, volume, as REDD projects in Zimbabwe, the DRC, aims to shift the lucrative palm oil industry away from its from away industry oil palm lucrative the shift to aims year as projects that reduce Amazonian deforestation captured buyers’ attention. Brazil supplied the most America’s breakout volume in 2013. America’s breakout Across the Atlantic, African projects transacted 5.6 Asian projects transacted 2.8 MtCO 12 projects and one jurisdiction (excluding Acre’s 2013 Asia A/R 2012 that reported a project type and location. REDD 2013 Africa

2012 17 Figure 36: Transacted Volume by Region and Project Type, 2012-2013 Figure 36: Transacted Volume by Region 2013 . Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014 Notes: Based on responses associated with 29.4 MtCO 2012 Latin America

8 7 6 5 4 3 2 1 0

2 e MtCO mostly in Canada and the US Because these projects last last year compared to 47 REDD projects, but REDD lower transaction volumes from tree-planting projects last year. The average tree-planting project covers hectares across the remote temperate rainforest of the remote temperate rainforest of hectares across hectare by hectare, they cover smaller land areas – fewer than 5,000 hectares ection– ofa therefl fact that reforesting degraded or deforested land is labor- typically typically require close on-the-ground management, respectively. respectively. However, some projects – such as the times the forest carbon offsets of any other region last region other any of offsets carbon forest the times intensive, so most projects are modest in size. Indeed, size. in modest are projects most so intensive, Project in – were much larger. Papua New Guinea Project in Projects based in Latin America transacted three projects covered 12 times the land area. projects covered 12 times the land project are 115,000 hectares and 57,000 hectares, Ecosystem Marketplace tracked 60 A/R projects British Columbia. Bear project breaks this rule, spanning millions of Kariba REDD project in Kenya and the April Salumei Africa an average of 30,000 hectares per project. The Great year, up from 1.2 million hectares in 2012 despite IFM projects covered a total of 8.9 million hectares, 4.5 Project Location: Ramp-up in Latin America, in Latin America, 4.5 Project Location: Ramp-up A/R projects expanded to 1.6 million hectares last 36 4. Beyond Carbon: People and Ecosystems State CarbonMarkets oftheForest 2014 Oceania’s transaction volumes dropped back to the the to back dropped volumes transaction Oceania’s vast majority of forest carbon projects in Oceania sell sell Oceania in projects carbon forest of majority vast any region. European projects again sold about half a a half about sold again projects European region. any While the United States hosted the most forest carbon carbon forest most the hosted States United the While f i rst REDD project to achieve methodology approval methodology achieve to fi project REDD rst decline from the previous year. However, compliance compliance However, year. previous the from decline under VCS and one of the largest in the world, verifi ed projects of any country (24), North American projects projects American North (24), country any of projects offsets to domestic buyers at an average price of $14.5/ The demand. 2012 up drove tax carbon Australia’s of projects is entirely due to a decline in voluntary demand ues n aiona ogt . MtCO 1.7 bought California in buyers increase from pre-compliance demand in 2012 – so so – 2012 in demand pre-compliance from increase rnatd . MtCO 2.6 transacted tCO for offsetssourcedintheregion. American North from volume transaction smaller the last year. level of 2011 volumes, before the (brief) implementation more than two million tonnes of emissions reductions emissions of tonnes million two than more Latin America 2 e – tying with Europe’s pricing as the highest of of highest the as pricing Europe’s with tying – e 32 Timber logging(illegal) Urban expansion Agriculture (local/subsistence) Note: Basedonmorethan300responsesbyprojectdevelopersindicatingdriversofdeforestation. Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. North America 5 23 2 e in 2013, a more than 60% 60% than more a 2013, in e 4 Figure 37:TopDriversofDeforestationbyRegion 22 3 2 e – a slight slight a – e 21 Fuelwood charcoal Timber logging(planned) Agriculture (commercial) Africa 12 Europe 4 The concept of using carbon fi nance to avoid defor- fi avoid carbon to using nance of concept The These and other regional developments are discussed 4.6 REDD Activities and Drivers of andDrivers 4.6 REDDActivities 13 gelsen090204.pdf and national policies tried to address deforestation by by deforestation address to tried policies national and estation arose as a “last resort.” Previous international international Previous resort.” “last a as arose estation an ideawhosetimehascome, orgone?CIFOR,2009. Deforestation: Shifting Incentives Shifting Deforestation: policies failed to target the source of the problem. the of source the target to failed policies to money grant sending forests, to access peoples’ implementing reduced impact logging, restricting local in greaterdepthsection8. tropical forest countries, and other strategies. But these http://www.cifor.org/publications/pdf_fi les/Books/BAn- markets intheUKandItaly. domestic insular from mainly year, last tonnes million WilliamD.SunderlinandStibniati Atmadja,IsREDD+ 8 3 7 Asia 4 3 Uncontrolled fires Livestock grazinginforest Oceania 5 3 5 13

37 4. Beyond Carbon: People and Ecosystems e 2 22 21 $9.4 $2.7 A/R e of offset transactions. 2 $2.5 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State $2.7 Sustainable Energy $3 Average price mangrove forests for shrimp ponds. level rise and subsidence may exacerbate forest loss logging is rampant in developing countries, avoiding tion – cited sustainable energy as a strategy to reduce to strategy a as energy sustainable cited – tion that directly address the causes of deforestation, and these strategies vary by location. Across all regions, ten means altering cycles of planned, legal harvesting legal planned, of cycles altering means ten ture – are the primary threats to forest. While illegal other seven projects – the majority of them in Africa, REDD project developers must design project activities project design must developers project REDD where fi rewood collection is a major driver of deforesta- of driver major a is collection rewood fi where sustainable sustainable agriculture was again the most common strategy last year, followed by sustainable forest man- sus unplanned deforestation. For coastal projects, sea projects, coastal For deforestation. unplanned sus deforestation. REDD projects that included t- tree-plan deforestation in North America and Oceania more of- agement. Ten projects transacting more than 4 MtCO 4 than more transacting projects Ten agement. alongside economic factors such as the conversion of conversion the as such factors economic alongside collectively used ecotourism as a REDD strategy. An- (see the Box in Section 3.1 on avoiding planned ver- 10 Ecotourism 14k 7M 7 Projects could report more than one REDD Activity. Projects could report more than one REDD 6 4M Figure 38: Most Common REDD Activities by Project Count, 2013 Project Count, 2013 Activities by Most Common REDD Figure 38: 4.5M Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. Source: Forest Trends’ Ecosystem Marketplace. Sustainable Forest Management Notes: Based on responses associated with 47 REDD projects and 21.1 MtCO Notes: Based on responses associated SALM 5.6M Each icon represents one project. Associated transaction volume Number of projects Number takes a wider landscape view of deforestation than to rise. ported by project developers vary by regions. In Latin In regions. by vary developers project by ported project project c area activities and that describe will specifi previous international approaches. Leading third-party Leading approaches. international previous Billions of dollars and several decades later, carbon sistence agriculture and fi rewood collectionsistence toagriculture make and fi standards require project developers to identify the social and economic drivers of deforestation in the succeed where other strategies fell short, the concept, fl ow according fl to the results achieved. also REDD dioxide dioxide emissions from land-use change continue encroach on rainforest hectares, while in Africa, sub- even even at the project-level, is distinct from previous address them. approaches. Through carbon markets, payments cooking charcoal – rather than large-scale agricul- America, smallholder and commercial agriculture As Figure 37 illustrates, drivers of deforestation as re- Though Though it is too early to say whether REDD will 38 4. Beyond Carbon: People and Ecosystems A/R was in fact the only project type that mixed in mixed that type project only the fact in was A/R State CarbonMarkets oftheForest 2014 4.7 Tree Management PlantingandForest 24 projects were home to a mix of native and exotic and native of mix a to home were projects 24 species In 2013, projects that planted or maintained only native IFM, and REDD, there is often a mosaic of forest types agriculture (see Section 3). Even within the boundaries is project carbon forest defi a the of result, nition a to approach” “landscape a taking increasingly are and non-invasive varieties) to reforest degraded land; degraded reforest to varieties) non-invasive and average priceforA/Rprojectsglobally. expanding to include new project types, from bamboo Activities: MixingItUpActivities: species transacted the majority of tonnes – 11.3 MtCO andconservationtechniques. ic RD poet tpcly vi deforestation avoid typically projects REDD since species, thoughmostweremorethan50%native. of traditional forest carbon project types such as A/R, as such types project carbon forest traditional of climate-smart to restoration wetlands to plantations others included -style plantings. Predictably, fast-growing (often species non-native used projects these of few A Africa. and America Latin in projects between, In species. exotic only planted that projects offsets at an average of $9.4/tCO of average an at offsets ing activities transacted less than 0.1 MtCO 0.1 than less transacted activities ing included exoticspecies. rarely projects these forests, tropical threatened in to which project developers may apply a variety of variety a apply may developers project which to as and sector, land-use the in emissions reducing from 80 projects – versus the less than 0.1 MtCO F more than 50% exotic species last year, in just seven just in year, last species exotic 50% than more exotic orest carbon project developers and policymakers and developers project carbon orest Only Bubble sizerepresentsnumber ofprojects 3 <0.1

projects Notes: Basedonresponsesassociated with107projectsand11.8MtCO

Mt Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2014. Figure 39:SpeciesMixbyProjectCountandTransactedTonnes,2013 Less than50%arenative 7 2

e, very close to the e, veryclosetothe 0.2 projects

Mt 2 e but sold sold but e 2 e from e from 2 e IFM and A/R project developers also reported on the on reported also developers project A/R and IFM • • • • • project area,acrossfi ve options: forest management strategies they used in the carbon More than50%arenative Notes: Basedonresponsesassociatedwith31projectsthat 17 reported amanagementstrategy.Projectdeveloperscould Agro-forestry –mixedforestryandagricultural Uneven-aged, monoculture–alltreesfromthe Uneven-aged, mixedspecies–treesfrom same age,butincludemultiplespecies same speciesandage same species,butwithmultipleageclasses Even-aged, mixedspecies–alltreesarethe Even-aged, monoculture–alltressarethe land use multiple speciesandageclasses 0.2 22%

Source: ForestTrends’EcosystemMarketplace. projects Figure 40:TransactedVolumebyForest

State oftheForestCarbonMarkets2014. Mt 0.1% 57% Management Strategy,2013 select morethanonestrategy. 13% 2 e ofoffsettransactions. 8% Agro-forestry Mixed species Uneven-aged management Monoculture Uneven-aged management Mixed species Even-aged management Monoculture Even-aged management 80 11.3

projects

Mt species native Only 4. Beyond Carbon: People and Ecosystems 39 e. These projects were not 2 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State transacting transacting 0.3 MtCO trees all of the same age – a common strategy for A/R primarily ed classifi as agroforestry, but rather used projects that use seedlings for tree plantings. Another within A/R or IFM projects that assist local farmers and Sixteen projects used a variety of species but planted symbiotic, not mutually exclusive, activities. symbiotic, not mutually consider growing food and conserving forests to be 14 projects planted or managed trees alongside crops, e. In contrast, only 10 projects 2 this management strategy in 2013, transacting tree plantations. planted planted or managed monoculture species typical of was uneven-aged management with mixed species just under 1 MtCO developers developers are managing forests full of native (rather than exotic) species. Thirty projects used The most popular management strategy last year – unsurprising given that the majority of project 40 5. Project Finance h peie f h frs cro mres et on rests markets carbon forest the of premise The State CarbonMarkets oftheForest 2014 compilation of short-term solutions to keep projects afl oat projects keep to solutions short-term of compilation and contracts that channel fi nance to projects in hopes enhance carbon storage across landscapes – making depth analysis of the forest carbon offset transactions offset carbon forest the of analysis depth fi nancing project developers require to deliveremissions ore o fnig o upeet abn finance. carbon supplement to funding of sources other accessing are projects many response, In sales. until (as project developers hope) demand picks up. urban development. This report section provides an in- or grazing, cattle production, oil palm as such uses Sometimes, these multiple income streams are part part are streams income multiple these Sometimes, einn a a ih ee, hs ers uvy res- survey year’s this level, high a at Beginning f h poet ein bt te tms hy refl they a times ect other but design, project the of pondents report that project needs – defi the – as needs ned project that report pondents of demonstratingandenablingtheirfeasibility. fiit communities and landowners for feasible nancially to keep trees standing. In many cases, carbon fi nance reductions “tip the balance” emissionsto incentivize activities that land-based for payments that idea the reductions – are not being met by current levels of offset must compete with the opportunity costs of other land

Value $100 M $10 M $20 M $30 M $40 M $50 M $60 M $70 M $80 M $90 M $0 M $88 M Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2014. Notes: Basedon31.3MtCO REDD $70 M $99 M Figure 41:ValuebyProjectType,2011-2013 5. Project Finance 5. Project $88 M 2 e transactedin2013,plushistorical datafrom2012and2011. $61 M A/R 2011 $31 M – observers have long recognized that policy-driven that recognized long have observers – Aichi Targets. 5.1 REDD’s Pricing: Market Value andOffset In the absence of such clear signals, the forest carbon Challenge compliance offset demand remains key to bringing the While voluntary forest carbon offset transactions have transactions offset carbon forest voluntary While fi nance – and accounted for 73% of total value in 2013 o a die te aoiy f aktbsd project market-based of majority the driven far so Buyers injected $192 million into forest carbon projects billion mark in transactional value last year. Decision- year. last value transactional in mark billion imates at $30 billion annually – the cost of achieving of cost the – annually billion $30 at imates conserve to needed funding of level the providing in n 03 a 1% eln fo 21’ $1 million. $216 2012’s from decline 11% an 2013, in the Convention on Biological Diversity’s forest-related Diversity’s Biological on Convention the est- Programme UN-REDD the which carbon, forest forest carbonmarkettoscale. nascent compliance markets is currently inadequate currently is markets compliance nascent makers admit that this combination of voluntary and voluntary of combination this that admit makers $1 cumulative a surpassed narrowly only market 2012 $53 M 2013 $49 M IFM $20 M SALM/Agroforestry $1 M $3 M 41 5. Project Finance e. 2 e, e, respectively) 2 e of REDD – more than 2 e. e. Therefore, though only about e and $9.5/tCO 2 2 expenditure tracking initiative). tracking expenditure State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State X e per year sold offsets at the highest 2 marketplace in 2013. in marketplace more than half a million tonnes of emissions annually may have also pulled prices down for smaller project market under UN-REDD is still at least fi ve years away, away, years ve fi least at UN-REDD still under is market million million tonnes annually, respectively) these projects large-volume large-volume transactions, the global average REDD large” or “mega” (defi ned as projects that avoided the the avoided that nedasprojects (defi or “mega” large” had a disproportionate effect on price. Excluding these thus distinct from the millions multilateral development development multilateral millions the from distinct thus effortsreadiness section 2.2 (see for data from Forest the next fi ve the years next (see fi the “pipeline” numbers in it it is important to keep in mind that these voluntary prices prices ($13.6/tCO ply was not met by a similar increase in demand since since demand in increase similar a by met not was ply of only buyers 11% were “new” to the forest carbon project size and offset price are inversely related: project developers implementing emissions reductions reductions emissions implementing developers project banks banks and governments are spending on REDD offset price would have been closer to $7.2/tCO to closer been have would offset price REDD fi nancing may be REDD inadequate sofi far, but the Depressed Depressed prices for REDD offsets resulted from a while while mega projects transacted tonnes at a global Section 9), matching supply and demand is a pressing pressing a is demand and supply matching 9), Section slumping slumping and any kind of international compliance developers. developers. Figure 24 (in section 2.3) reveals that dollars dollars are in fact “paying for performance” and are emission of more than half a million or more than a a than more or million a half than more of emission average of $4/tCO around around the world are also a proof of concept that ed, avoided deforestation can be monitored, quantifi ow. fl can indeed payments that – and valued and activities activities on the ground versus just $9.4 million about about a REDD market in which voluntary prices are combination combination of factors. Offset issuances tripled last year as large REDD projects reached maturity, and changing changing hands on the secondary market. Voluntary challenge. Given that project developers plan to bring more than than more bring to plan developers project that Given 2012’s total forest carbon issuance. This infl uxof sup- This carbon infl forest issuance. total 2012’s 20,000 tCO 200 million REDD offsets to the voluntary market in Very Very large or REDD“mega”-sized projects that avoid VCS alone issued 9.2 MtCO 47 47 REDD projects Ecosystem Marketplace tracked 40% of REDD that reported a projects “verywere size The majority (91%) The of majority REDD(91%) market value is paid to Trends’ REDD Though Though project developers are no doubt concerned “micro” “micro” and small projects that reduced less than $50 $40 $30 $20 $10 $- $60 State of the $16.1 SALM/ Agroforestry e average, REDD e average, 2 $7.6 e last year. Had REDD Had year. last e 2 IFM $9.5 A/R Project Type, 2013 24.7 carbon offset transactions. Forest Carbon Markets 2014. $4.2 Volume 2013 Average price 2013 REDD

8 6 4 2 0

10 2 14 12 MtCO e Notes: Based on responses associated with 31.3 of forest Figure 42: Transacted Volume and Average Price by Figure 42: Transacted Volume and market market in this report series. A/R market value has the the price of REDD offsets to what project developers trade market and thus “lay fallow” last year. Across all all Across year. last fallow” “lay thus and market trade fallen fallen steadily over the last three years following the its absence – are starkly apparent across report years. report across apparent starkly are – absence its projects’ trans actional market value would have neared neared have would value market actional trans projects’ prices remained at 2012’s $7.8/tCO 2012’s at remained prices project types, the effects of a compliance market – types, or the market project of effects a compliance sold at an average of $4.2/tCO of average an at sold simply simply waiting to transfer into California’s cap-and- spent just under $100 million on REDD offsets last year year last offsets REDDon million $100 under just spent Source: Forest Trends’ Ecosystem Marketplace. Ecosystem Trends’ Forest Source: $200 2013. in million describe describe as “unsustainable lows” as REDD offsets evident in light of the demand-side challenges forcing forcing challenges demand-side the of light in evident end of compliance demand under the Kyoto Protocol. end of Protocol. demand compliance under the Kyoto American American project developers reported that they were As shown in companies Figure 41, and governments The above-mentioned fi nancing The gap above-mentioned is fi particularly The number of IFM transactions – and thus value – was sliced in half from 2012, though many North – the highest value ever attributed to the REDD offset 42 5. Project Finance Across project types, developers reportedly contracted 5.2 Project Needs:MindtheGap 5.2 Project askedproject developers: • • • understand this gap, Ecosystem Marketplace’s survey what they say is needed to sustain these projects.Tothese sustain to needed is saythey what State CarbonMarkets oftheForest 2014 offsets last year at prices and/or volumes far below far volumes and/or prices at year last offsets in 2013 Value contracted timeframe) estimated, no projects (supplier to supportexisting Total valueneeded (average) meet projectneeds need tosell issuance developers of expectedannual Total years’worth issuance soldin2013 expected annual Years’ worthof contracted (actual) 2013 volume annual reductions Supplier-estimated estimated) projects (supplier support existing year Average valueper Their projects’expectedrangeofannual activities emissions reductions What theythinkthepriceofcarbonshouldbe How manyyears’worthofoffsetstheyneed project costs to sellcoverupfrontcapitalandongoing to supporttheirprojects’existingandfuture neededto Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2014. Table 10:ComparisonofProjectNeedsandActualActivity,2013 $708 M/$405M $52 M/$91M Unplanned) Unplanned) (Planned/ (Planned/ 15.1 Mt Notes: Basedonresponsesfrom 78projectdevelopers. (Planned /Unplanned) Low Low Low 1.6 15.8 /6.8 24.7 Mt $99 M REDD $727 M/$660M $58 M/$164M Unplanned) Unplanned) (Planned/ (Planned/ 21.2 Mt High High High 1.2 As shown in Table below, both A/R and IFM projects IFM and A/R both below, Table in shown As collective annual emissions reductions meaning that meaning reductions emissions annual collective otatd fst wti te oue f hi total their of volume the within offsets contracted available offset supply (tracked as estimated annual estimated as (tracked supply offset available and $450 million per year to maintain currentlymaintainactiveto year millionper $450 and msin rdcin) bt oh eevd carbon received both but reductions), emissions f i nancing at the very low end of their “need” range. “need” their of end low very fi the at nancing some avoided deforestation tonnes were contracted were tonnes deforestation avoided some ept slig oe hn hi ptnil annual potential their than more selling Despite REDD projects in contrast sold more offsets than their than offsets more sold contrast in projects REDD Last year’s Last $192 million market value falls of this short Developers reported needing between $249 million $249 between needing reported Developers issuance, REDD projects took home less than 70% of 70% than less home took projects REDD issuance, for future delivery or sourced from prior years’ vintages. reduce between 20 MtCO 20 reducebetween to potential the have which projects, carbon forest need by between $57 million and $258 million per year. $287 M $30 M 2.1 Mt Low Low Low 1.6 $31 M 3.5 Mt 17.7 A/R $771 M $71 M 6.1 Mt High High High 0.6 2 e and 36 MtCO 36 and e $325 M $21 M 1.1 Mt Low Low Low 1.9 $20 M 2.7 Mt IFM 7 2 $859 M e annually. e $75 M 3.9 Mt High High High 0.5 5. Project Finance 43 e 2 e, partly partly e, 2 e in 2013, up 2 e for each offset from e for each offset from 2 e desired by developers. A/R project State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State 2 e in 2012, these prices still fell short of 2 e for projects avoiding unplanned deforestation. 2 means countering the opportunity costs of logging or million million for projects avoiding planned deforestation last year, making the gap between ideal and real the last year – the only “actual” value that fell within the nned “patchwork” deforestation means overcoming the overcoming means deforestation “patchwork” nned needing between $21 million and $75 million in annual in million $75 and million $21 between needing highest highest across project types at $26.4/tCO refl ect the factrefl that avoiding planned deforestation revenue to support existing projects, but their offset regulated markets such as California’s cap-and-trade from the business-as-usual scenario in the project tCO from $7.3/CO range of the $30-71 million they said they needed, the $13.1/tCO in 2013, but they reported needing at least $52 projects were similar, the different project needs offset issuances on average – the longest timeframe of any project type. program. program. Actual IFM prices dropped to $7.6/tCO projects avoiding planned deforestation and $9.2/ plus plus at least $91 million for projects planned deforestation. avoiding un- REDD project developers described requiring an REDD projects contracted $99 million in offset sales widest of all. Overall, IFM project developers reported reported developers project IFM Overall, all. of widest sales fell short at $20 million last year. IFM developers IFM year. last million $20 at short fell sales Offset Sales fi rewood collection, or otherfi drivers of deforestation. due to the increasing popularity of the project type in developers contracted $31 million worth of offset sales offset of worth million $31 contracted developers agricultural concessions. In contrast, avoiding unpla- average price of $14.1/tCO also reported needing to sell nearly 18 years worth of additionality: additionality: The project must be markedly different area, and that difference must be made possible by nance. fi carbon of an injection average price on the market. However, project needs project price on the average However, market. varied widely by project type, as illustrated in Figure 43. albeit at the very low end. carbon projects to meet the basic principle of (smaller) opportunity costs of sma llholder (smaller) agriculture, opportunity costs of sma 5.3 Sources of Project Finance: Complementing Though actual prices for these two types of REDD Third-party offset project standards require forest The ideal price desired by IFM projects was by far the far by was projects IFM by desired price ideal The Though A/R prices rose to $9.5/tCO $30 $25 $20 $15 $10 $5 $0 State of the A/R $9.5 $13.4 IFM $7.6 $26.4 e e to support their projects 2 Developers $3.1 $14.1 REDD (Planned) Forest Carbon Markets 2014. $9.2 $3.3 REDD (Unplanned) REDD (Planned), and 23 REDD (Unplanned) projects. Minimum needed per project per year (averaged) Maximum needed per project per year (averaged) Average price needed per offset Actual price Figure 43: Project Needs as Reported by Project Figure 43: Project Needs as Reported $0 M $1 M $2 M $3 M $4 M $5 M $6 M Notes: Based on responses associated with 29 AR, 13 IFM, 8 Source: Forest Trends’ Ecosystem Marketplace. Ecosystem Trends’ Forest Source: needs to reach billions rather than millions of US dollars dollars US of millions than rather billions reach to needs needs, needs, as market participants are constantly re- through offset sales, more than three times the actual offset times the than actual more three sales, through these these suppliers point out that it’s the unit that’s most the minimum $143 million that project developers need developers project that million $143 minimum the annual project activities. to support in value in in value the next decade or two to support existing important, saying important, that saying the carbon forest offset market in in terms of how many emissions reductions existing projects – not to mention new projects. new mention to – not projects projects projects will actually achieve – and because the developers developers reported needing between $2.8 billion project 2011 to similar but estimates 2012 developers’ evaluating. The because is of range large uncertainty evaluating. estimates are based on rough back-of-the-envelope an an average of $16.9/tCO and and $5.3 billion. This is more than twice the value of calculations calculations by project developers. Nevertheless, Across all project types, developers reported needing needing reported developers types, project all Across To fi nance this year’s and future years’ activities, project project activities, years’ future and year’s this nance fi To 44 5. Project Finance At least that’s the idea. REDD for particularly – misconception common A As As shown in Table 11, Ecosystem Marketplace’s survey communities and other project owners could usually could owners project other and communities company personal or capital. another use for those responding to purely economicpurely respondingto those for use another a palm oil plantation or soy fi eld. Carbon fi nancedoes additionality, but can be tapped when the present value cesd y rjc dvlpr. y rjc count, project By developers. project by accessed eosrtd dvre ag o fnig sources funding of range diverse a demonstrated fi nance from offsetsales is falling short of theamounts fi ClimateAlthelia The extent. certain a nancing void to opeetr rvne tem ad alternative and streams revenue Complementary State CarbonMarkets oftheForest 2014 oee, s eto 52 lutae, urn carbon current illustrates, 5.2 section as However, people who already want to conserve a forest to do so. earn could landowner a amount the than greater be must hectare per payments carbon that is – projects of carbon revenues is insuffi cient tocover projectcosts. netet ore d nt ml a ak f project of lack a imply not do sources investment rvt-etr niis r sepn i t fl the fill to in stepping are entities Private-sector from an alternate land use to be feasible. In practice,feasible.In be to use landalternate an from eotd cesn mlil fnig streams. funding multiple accessing reported thischallenging market, dozens projectof developers the developers themselves fronting project costs with developersfrontingprojectthemselvescosts the or revenues offset of share a seeking investors from not provide an “incentive” to stop converting land to land converting stop to“incentive” an provide not needed to support existing projects. In the context of context the existingprojects.In support to needed motivations.fiRather,it makes it nancially possible for bymakerainforestmoneyconvertingmoremuch a to ot 2) ee upre b piae qiy either equity, private by supported were (21) most State of the Source: ForestTrendsEcosystemMarketplace.Stateofthe Other Philanthropic contribution Foundation grant bilateral fi nance International government/ Domestic governmentgrant Private equity Table 11:OtherProjectFinance,bytheNumbers Notes: Survey respondents could select multiple other Notes: Surveyrespondentscouldselectmultipleother Source Forest CarbonMarkets2014. project fi nancingsources. 5 4 9 7 10 21 Project count 0.2 0.5 0.2 0.5 0.1 0.4 Associated transaction (MtCO volume 2 e) h aeae ie eurd rm rjc Design Project from required time average The Aside from Plan Vivo projects which reportedly require 5.4 Time to Market: Design Careful 5.4 Time 2.5 years, a contraction from the 3.5 years reported years 3.5 the from contraction a years, 2.5 bu te yia tm rqie t priiae n a in participate to required time typical the about of cost overall the to contributors unpredictable and verifi cation, the majority of projects spend themost spend to ofprojects validation majority verifi from the move cation, to year one approximately standards, and types project across slightly varied and other ecosystem services projects. In March 2014, estimates of the time required of projects to surpass to projects of required time the of estimates especially since fewer buyers than before are “pre- are before than buyers fewer since especially diffi acquiringculty capital. necessary delivery contracts (see below). Section 5.5 developer Wildlife Works. fi nancing for forestconservation and sustainable land- ClimateFund to lend up to $134 million in commercial sources of fi nance to cover upfront capital costs – costs capital upfront fi cover of to sources nance signing their fi rstcontract for offset delivery a little over s poet i dvlpn cutis hr people where countries developing in projects use Kasigau Corridor REDD+ Project, operated by project by project operated Project, REDD+ Corridor Kasigau Document (PDD) development to offset verifi cation was Development (USAID) announced a new risk-sharingnew a announced (USAID)Development oee, vn hs piaesco efrs o not do efforts private-sector these even However, historic the Kenya’stoadjacent Taitain Hills, REDD+ support to commitment million$10 a project: REDD+ poor – honed in on particular on in honedsectors – such REDD+ as poor paying” for offsets to be delivered in the future, instead project types and standards. Project developers report by2013’s surveyed project developers acrossand all occur in a vacuum. The US Agency for International for Agency US The vacuum. a in occur igate the project cycle as one of the most challenging most the of one as cycle project the igate nav- to required time the cite often developers Project that feature demonstrable co-benefi ts, but experience rely on the forests for their livelihoods. The agency – in their projects. This year’s survey captures high-level captures survey year’s This projects. their huh fw set wr hl (oty constant. (mostly) held were aspects few a though relying more heavily on the spot market or payment-on- this of Because process. the starting after years two the fund made its long-awaited filong-awaited a its in investment made rst fund the REDD+ on spent be to million $80 than more raising iue 4 hw ta tm t poet development project to time that shows 44 Figure Fund completed its fi rst closing in June 2013 after 2013 June fi in its closing completed rst Fund a tm, eeoes fe ne t acs outside access to need often developers time, lag loan guarantee in June 2014 that will enable the Althelia keeping with its mandate to improve services for the for services improve to mandate its with keeping market wheresuchinformationisoftencloselyheld. major project milestones, aiming to inform expectations 5. Project Finance 45 3.5 e of forest forest of e 2 3 e. 2 e and also secured the 0.7 2 0.8 0.6 Average time to transaction 2.5 0.8 0.7 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State 2 e were associated with transactions 2 0.8 0.7 0.9 1.0 0.4 0.4 0.8 highest average price at $11.3/tCO forest carbon offsets, as defi ned in this report, appear report, this in ned defi as offsets, carbon forest for which developers will be paid upon delivery. to enable or technical costs. That trend remained intact for A/R projects in this year’s report future offset delivery) worth nearly $73 million. Another million. $73 nearly worth delivery) offset future in the box below. of transactions at 2.2 MtCO because of these projects’ need for upfront fi nancing because of these projects’ need for upfront fi payment (via spot transactions or prepayment for Remaining Remaining market value is associated with unknown REDD projects were associated with pre-payments Developers Developers reported that 10.3 MtCO Investments as Projects Reach Maturity as Projects Reach Investments Contractual agreements between buyers and sellers Contract terms can uence directly offset infl price, different terms. The most common contract types for and different project types often lend themselves to as pre-payments accounted for the largest volume create the structure by which offsets change hands. contract types. carbon offsets transacted in 2013 received immediate received 2013 in transacted offsets carbon In previous years, most tonnes transacted from A/R and A/R from transacted tonnes most years, previous In 5.5 Contract Type: A Shift 5.5 Contract Type: Later-Stage to 12.2 MtCO 1.5 0.7 Validation to verification 0.5 0.5 0.6 1 1.5 1.5 by Project Type and Standard, 2013 Type and Standard, by Project 1.3 1.1 PPD to validation 1.1 0.5 0.9 0.8 0.8 0.0 Figure XX: Supplier-Estimated Average Years to Achieve Project Milestones, to Achieve Project Average Years Supplier-Estimated Figure XX: Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. Source: Forest Trends’ Ecosystem Marketplace. A/R VCS IFM Overall PPD development Plan Vivo Notes: Based on responses associated with 29 AR, 13 IFM, 8 REDD (Planned), and 23 REDD (Unplanned) projects. Notes: Based on responses associated Gold Standard REDD (Planned) longest timelines of any project type at roughly three holders, and securing fi nance. holders, and securing fi time outlay to engage communities, establish tenure, three three years. It should be noted, however, that VCS for A/R projects compared to other project types. time in the project design stage. This “scoping” phase “scoping” This stage. design project the in time in large part to the extended PDD development period development PDD extended the to part large in projects tend toward larger scales and developing of time required for projects to “ramp up” sequestration. up” “ramp to projects for required time of baselines, clarifying land rights, engaging local stake- often includes time-consuming but essential activities REDD projects which in particular require signifi cant cant REDD projects which in particular require signifi By major offset project standard, VCS projects signifi cant scale. signifi spent nearly double the time in the PDD phase such as mapping the project area, calculating carbon calculating area, project the mapping as such developed according to VCS guidelines and some at at some and guidelines VCS to according developed generally moved at a faster pace of 1.8 years, owing extended extended the average timeline for VCS projects to erence in timeframes to market as IFM projects and reconcile deforestation baselines, among other activities. By far the majority of REDD offsets were compared to Gold Standard and Plan Vivo, which years to market, unsurprising given the greater amount greater the given unsurprising market, to years Once again, A/R project developers endured the A/R and IFM projects experienced the starkest diff- REDD (Unplanned) REDD (Unplanned) 46 5. Project Finance State CarbonMarkets oftheForest 2014 REDD A/R IFM Notes: Basedon22.5MtCO2e oftransactedforestcarbonoffsets.SeeBoxXforexplanations differentcontracttypes. specifi edincontract type ofoffsetsforanother,accordingtoaratio Swap contract:Anexchangeofonevolumeand a specifi edperiodoftime obligation) toselloffsetsatspecifi edpricewithin Put option: upon issuance obligation) tobuyaspecifi edvolumeofoffsets Call option: exactly specifi edincontract Fixed/firm delivery:Deliveredoffsetvolumeis how manyoffsetsareissued exactly specifi edincontract,butiscontingenton Unit-contingent: delivery Pre-pay: Paymentismadeinadvanceofoffset as theoffsetsareissuedanddelivered Payment-on-delivery (POD):Paymentismade payments aremadeinstantaneously Spot: ANDTERMS CONTRACT TYPES 0% Offsets arealreadyissued–deliveryand $10.2 10% $40 Figure 45:ContractType,MarketShare,andAveragePricebyProject2013 Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2014. Offsetbuyerhastheright(butnot Offset sellerhastheright(butnot $2.29 $9.2 20% Delivered offsetvolumeisnot $6.9 30% $11.4 40% 50% 60% $5 $11.3 – to the tune of $27 million – from the agency. But it was 70% 1 MtCO 1 That distinction belongs to Terra Global Capital’s Oddar of conversion and purchase the involves project The / o RD poet. bu 7% f F projects IFM of 75% About projects. REDD or A/R In January 2013, EcoPlanet Bamboo became the fithe became Bamboo EcoPlanet 2013, January rst In Investment Guarantee Agency to protect a South Africa- IFM IFM projects – particularly popular in active compliance carbon offset project to receive political risk insurance a pay-on-delivery a basis pay-on-delivery as project developers unloaded xsig eiidise RD ofes o address to offsets REDD verified/issued existing extent. In 2014, EcoPlanet Bamboo Group applied for an depressed average price of $2.9/tCO of price average depressed degraded land in South Africa into functioning bamboo growing supply-demand imbalance for this project type. $8.8 $8.8 million guarantee from the World Bank’s Multilateral otat em cniuly vle o refl market to ect evolve continually terms Contract a ad ii dsubne o a eid f 0 years. 10 of period a for disturbance civil and war However, pre-payments for REDD constituted less than offsets transacted on a spot basis – 6.6 MtCO 6.6 – basisspot a transacted on offsets REDD of volume large fl A cash issues. projects’ ow bio-charcoal forbio-charcoal sale. and activatedcarbon of production the for plantations and expropriation, as such risks against project based often seeking to de-risk projects to the greatest possible price of $8.4/tCO realitiesandchallenges, developerswith andinvestors transacted on a pay-on-delivery basis, with an average not the fi rst project to receive such insurance backing. markets – typically incur fewer upfront costs than either n/a 80% 2 e compared11.3thetoe MtCO 90% $4.4 2 e. e. $9.1 n/a 100% and POD) Mezzanine (mixofPP delivery &unitcontingent Pre-pay, mixoffixed Pre-pay, unitcontingent POD, fixedfuturedelivery POD, unitcontingent Spot 2 e, speaking to the 2 e contractede on 2 e – at a a at – e 47 5. Project Finance State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State look at us as a secure intermediary,” he says. “Because says. he intermediary,” secure a as us at look FREDDI that would act as a “fund of funds” for the to instead sell to the government at a predetermined this turn toward a jurisdictional approach and a shift recently of public sector funding in that direction,” he the jurisdictional approach.” its its pitch nancing. for Agus Carbon Sari, Fund chair fi is currently on an upward swing, is infi nitesimally small is currently on an upward swing, is infi is less available now because more of that is going to of that, buyers will be willing to pay the higher price from price higher the pay to willing be will buyers that, of of a working group within the Presidential Task Force on REDD+, nancingproposed mechanisma called fi between domestic and international carbon markets, perhaps by securitizing domestic carbon offsets and offer would which sale, international for them packaging offsets buying when enjoy not may they certainty buyers privately and sell to private buyers – but with the optionthe with but – buyers private to sell and privately in the market.price if unsuccessful because this funding that has been there for readiness REDD initiatives. The fund, emanating from the 2010 because we can buy at a higher price, we can enlarge our portfolio. Because we enlarge our portfolio, we are REDD projects to fulfi ll their objectives, the CIFOR study CIFOR the objectives, their ll fulfi to projects REDD Sari sees the REDD+ Agency acting as an intermediary an as acting Agency REDD+ the sees Sari what international policy changes are needed for these for needed are changes policy international what Some participants look to the UNFCCC for a viable uncovered uncovered an almost wholesale focus on economics us, which means we can buy at a higher price, and says. says. “Some of the projects are suffering even more solution to the supply-demand imbalance. When asked When imbalance. supply-demand the to solution Cancún Agreements, was established under the UNFCCC to help developing countries reduce their defi ciencies of the voluntary market. ciencies defi dies I have 200 others that survive, then any buyer will government itself to purchase voluntary REDD offsets. directly from private projects. emissions and adapt to the adverse effects of climate and funding and the need for interim pre-compliance arrangements in the run-up to 2020 to make up for even more secure, and that means the buyer will be even more willing to buy at a higher price. That’s the against the donor funding stream, partly because of change. Developed countries pledged $100 billion virtuous cycle that we’re looking for.” Indonesia incorporated a version of this concept in Jurisdictional governments could theoretically act as a The Green Climate Fund could nance be tapped to fi “If I buy from multiple projects in such a way that if one “buyer of last resort,” allowing REDD projects to develop to projects REDD allowing resort,” last of “buyer e, but the final price will depend on in Section 2.2, multilateral institutions have institutions multilateral 2.2, inSection 2 million to reduce deforestation on 350,000 hectares the viability of these jurisdictional REDD+ programs. REDD+ jurisdictional these of viability the FCPF funding would move from readiness to payment- that it has been growing unevenly in recent years and the oversupply pressuring prices in recent years. the REDD projects in the study were aiming for the However, However, this shift also creates some doubt about for-performance. the ssion Emi Reductions Payment Agreements total total of $465 million that could be paid to developing than 60,000 hectares of forest in one of ’s risk insurance policy valued at $900,000 in 2011 from the Overseas Private Investment Corporation (OPIC) – nance institution. development fi the US government’s Partnership Facility (FCPF) invested $825 million in in lending ts with mitigation and adaptation co-benefi scal year 2014, cant stands source in outfi as a signifi Meanchey Meanchey REDD project, which aims to protect more pay $5/tCO baseline. Eleven countries – Chile, Costa Rica, the operational in 2008. The BioCarbon Fund spent $90 of fi nancing for country-level REDD+ initiatives through initiatives REDD+ country-level for nancing fi of poorest provinces. The company obtained a political REDD+ readiness in 47 countries since becoming Buyers in the Carbon Fund expressed a willingness to Democratic Republic of Congo, Ghana, Guatemala, Study on REDD+ fi ndsStudy iton “troublesome”REDD+ thatfi many of work for its Carbon Fund in December, unlocking a uncertainty. William Sunderlin of the Global Comparative Global the of Sunderlin William uncertainty. study of 23 subnational REDD+ initiatives showed that since 2004. expanded REDD funding over the past few years and voluntary market, given the volatility of the market and almost half of the participants didn’t think they would and Vietnam – were in the pipeline as of mid-October a suite of programs. The World Bank’s Forest Carbon are beginning to explore paying not just for “readiness” performance. activities but also continue to operate beyond 2015 due to funding countries countries that reduce deforestation against a national Indonesia, Mexico, Nepal, Peru, the Republic of Congo, of Republic the Peru, Nepal, Mexico, Indonesia, (ERPAs) neg otiated with each country. At that point, the point, that At country. each with otiated neg (ERPAs) 2014, with fi nal decisions on funding still pending. 2014, with fi 5.6 The Big Picture: Scaling Up REDD Finance5.6 The Big Picture: Scaling Up A Center for International Forestry Research (CIFOR) As explored explored As The FCPF signed off on a new Methodological Frame- The World Bank, which provided a total of $11.3 billion$11.3 of total a provided which Bank, World The “The forest carbon voluntary market, in spite of the fact 48 5. Project Finance erialized materialized fund the to fi commitments but – nancing $1 billion commitment from France, in response to UN UN to response in France, from commitment billion $1 slowly. State CarbonMarkets oftheForest 2014 Secretary-General Ban Ki-moon’s request for countries countries for request Ki-moon’s Ban Secretary-General e ya b 22 – via – 2020 by year per than $2 billion to the fund in September, including a including September, in fund the to billion $2 than to begin capitalizing the fund. the capitalizing begin to n Jpn none nw omtet o $3 of commitments new announced Japan and Offibillion. $7.5 to pledges the acquire to expect cials billion and $1.5 billion, respectively, increasing total Green Climate FCPF Carbon Landscapes Sustainable Initiative for Investment BioCarbon Readiness Finance Program source Fund’s Forest Forest FCPF Fund Fund Fund However, countries collectively pledged more more pledged collectively countries However, Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. Amount million million million million billion $360 $639 $311 $465 $7.5 mx f ulc n private and public of mix a Administered World Bank World Bank World Bank World Bank UNFCCC In November, the US the November, In by… Table 12:SourcesofREDD+Finance Contributors banks, private sector donors 10 publicand governments, private sector governments: private sector governments, private sector governments, development UK, US,with contributors Developed Developed Developed Multilateral 18 private partners Norway, country country country sector Donor W lo frad o eig o te Gen Climate (Green the how seeing to forward look “We International Emissions Trading Association. “Private “Private Association. Trading Emissions International change mitigation and adaptation measures. They just just They adaptationmeasures.mitigationand change says Katie Sullivan, Director of Climate Finance for the the for Finance Climate of DirectorSullivan, Katie says investors are ready and willing to invest further in climate the beginningof2015. Fund) will use these pledges to leverage private capital,” need the right frameworks to invest.” necessary fundingtokick-startthefund’soperationsat Timeframe Investment Capitalized Capitalized November November approved countries all 8pilot plans for Through Through in 2013 2020 2013 2013 2020 by emissions reductions) emissions reductions developing countries mitigation toclimate forest management advancing climate- complement other change, including smart agriculture Available for… performance for performance for and sustainable 4-6 jurisdictions REDD grantsin Adaptation and REDD projects REDD funding $30-50 million (payment-for- Payment-for- available for Designed to

11 countriesin for indigenous begin in2015 operations to communities 22 countries have signed Fund grants the pipeline Mechanism jurisdiction $50 million Readiness Dedicated peoples & = Oromia, Includes Ethiopia Notes Grant Fund Pilot 6. Forest Carbon Offset Buyers 49 e 2 e, often e, often 2 e. These 2 e, respectively, accounting for another State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State 2 e – or 54% – of the tonnes that suppliers 2 meeting them. Those that did accounted for about much the same as in 2012, with 96% of tonnes sold to sold tonnes of 96% with 2012, in as same the much last year – just over $700,000 in value. However, Few public-sector entities purchased forest carbon For the fi rst timeFor inthe thisfi report series, offset retailers target or aiming to show leadership ahead of national- national- of ahead leadership show to aiming or target their prices to retailers. In turn, retailers say they’re to easily offset their emissions in tonne and half-tonne half-tonne and tonne in emissions their offset easily to toward larger-scale transactions, individuals’ de mand mand de individuals’ transactions, larger-scale toward radar the on blip a barely was offsets carbon forest for Previously, offset retailers were project developers’ investing in projects in line with each organization’s offsets last year in the absence of legally binding private-sector companies. private-sector companies. public sector buyers were mainly developed-country gure fi 2% the (Again, policy. carbon regional-scale or primary means to access corporate demand. Some on the back of these initial offering prices to end users that retailer on average undercut relationships, of drumming up corporate demand for high-quality Because market infrastructure is mostly geared Suppliers reported that multinational companies were were not the largest source of forest carbon offset 8.7 MtCO small-to-medium enterprises contracted 4.6 MtCO share to project developers selling directly to end-users. to directly selling developers project to share Code REDD, an organization founded with the goal governments each contracting 0.2 MtCO demand for forest-based emissions reductions looked reductions emissions forest-based for demand governments governments pursuing an internal GHG reduction denominations through a mobile website. demand as the secondary market conceded market developers have since built their own buyer networks emissions emissions targets or market-based mechanisms for excludes the KfW agreement.) European and North and 1.9 MtCO associated with a buyer. Domestic corporations and agreement, which is excluded from Figure 46 below, again the most common buyer type, contracting avoided deforestation projects, recently announced a a announced recently projects, deforestation avoided conservation or development mission. 2% of demand, with national and state or local Aside from this public sector payment-for-performance sector public this from Aside American NGOs also purchased 0.2 MtCO 40% of supplier-reported demand. “Stand for Trees” campaign that will allow individuals https://www.cdp. but in the context of the of context the in but 15 6. Forest Offset Carbon Buyers This data gives us a glimpse 14 See also discussion of potential future ERPAs (e.g., CDP, Climate action and profi tability: CDP S&P 500 CDP, Climate action and profi must must market offsets to end-users. This section again how how offset purchases may be connected to climate now political jurisdictions) that produce them. now political jurisdictions) For the fi rst time in thisFor reportthe series,fi we also include From multinational energy companies to domestic that that disclosed information to CDP’s 2013 climate responding to Ecosystem Marketplace’s survey. Project survey. Marketplace’s Ecosystem to responding reductions and in many ways shape the pro jects (and reductions and in many ways shape the pro food food and beverage producers to small jurisdictional forest offsets and 21% of market value contracted represents rstone payment-for-performance of the fi Marketplace will further examine this demand-side information to tsexplore into how carbon offsetting fi into forest carbon demand from the perspective of the of perspective the from demand carbon forest into net/CDPResults/CDP-SP500-leaders-report-2014.pdf includes these insights. buyers themselves. A forthcoming report by Ecosystem by report forthcoming A themselves. buyers in 2013 for immediate or future delivery. Other of buyers’ motivations and preferences because they preferences drive demand for forest-based emissions Costa Rica) under FCPF (Section 2.) Climate Change Report 2014. Available at: Available 2014. Report Change Climate under Germany’s REDD+ Early Movers Programme sons for entering – and remaining in – the market. Their market. the – in remaining and – entering for sons jurisdictions are building capacity in hopes of someday of hopes in capacity building are jurisdictions 6.1 Buyer Types: Energy Sector Takes the Lead Energy Takes Sector Types: Buyer 6.1 data on offset purchases from the 1,800+ companies demand demand from the perspective of the suppliers developers and retailers have a close understanding governments, carbon offset buyers have diverse rea- emissions reductions agreement with Acre, Brazil emissions from deforestation, from emissions change, regulatory, and reputational risk management. risk reputational and regulatory, change, companies’ overall emissions reduction strategies and strategies reduction emissions overall companies’ also signing a multi-million dollar contract to reduce agreements negotiated between a public-sector entity public-sector a between negotiated agreements and a REDD jurisdiction. This eight-million-tonne agreement alone accounts for nearly a quarter of the change questionnaire. German development bank KfW’s $40-million 2013 market, this agreement is an anomaly. 15 14 This report series has historically analyzed offset 50 6. Forest Carbon Offset Buyers MARKET SHAREBY BUYERMOTIVATION (%SHARE) MARKET SHARE BY BUYER TYPE (%SHARE) MARKET SHAREBY BUYERTYPE (%SHARE) MARKET SHAREBY BUYERSECTOR State CarbonMarkets oftheForest 2014 (according tothecompany’sCDPdisclosure). In retailers’ place, energy companies stepped up as up stepped companies energy place, retailers’ In category. PG&E, the utility that supplies electricity to electricity supplies that utility the PG&E, category. and-trade law, (voluntarily) purchased offsets from US- sequestered carbon from this offset origination project Starbucks, and others were a prominent buyer sector sector buyer prominent a were others and Starbucks, rts cohn cmay ak & pne – a – Spencer & Marks company clothing British back onexistingsupplies. product market was also a notable source of demand. demand. of source notable a also was market product einn i 20 ad otne t qatf the quantify to continues and 2001 in beginning operates hydroelectric plants in the state of São Paulo, Conservation The by developed projects CAR based cap- state’s the to subject is and California Northern buyer a with associated offsets the of third one or the top buyer sector, purchasing more than 5 MtCO reforested the riparian areas surrounding its reservoirs od n bvrg cmais uh s Danone, as such companies beverage and Food which S.A., Tietê AES utility electric Brazilian Fund. household name in the voluntary carbon market after market carbon voluntary the in name household looking to new projects offering exclusivity or falling or exclusivity offering projects new to looking last year, purchasing at least 1.3 MtCO 1.3 least at purchasing year, last last year. Electric utilities were prominent under this under prominent were utilities Electric year. last Corporate social Corporate responsibility 27 33 Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. Energy Multinational corporations Notes: Basedon212buyertypesasdescribedbysurveyrespondents. Figure 46:MarketSharebyBuyerSector,Type,andMotivation 54 Resale, voluntary 20 2 e. The retail The e. Carbon markets 27 2 e, Compliance Compliance Other private-sector buyers included banks, airlines, banks, included buyers private-sector Other Group and Tree Planting Program (known as “TIST”) as (known Program Planting Tree and Group country to be verifibe to country Gold The (now CarbonFix under ed opne ta dsls ter H eisos and emissions GHG their disclose that companies years of investments in offsets projects – continued – projects offsets in investments of years n cooae cmay buh ofes rm a from offsets bought company, chocolates and address themtoCDP. driving regional demand, NOEL, a Colombian cookies cookies Colombian a NOEL, demand, regional driving supporting forest carbon projects last year, purchasing Standard). Livelihoods Fund which invests in agroforestry and agroforestry in invests which Fund Livelihoods ucae t CP. n 08 Dnn cetd the created Danone 2008, In CDP). to purchases project in Kenya managed by The International Small Small International The by managed Kenya in project VCS+CCB a including projects, several from offsets reforestation project in Colombia – the fi rst in the fi in the rst – Colombia in project reforestation top buyer (among those that disclosed forest offset forest disclosed that those (among buyer top to use they that – offsetting including – strategies the of hundreds the among buyers private-sector 30 top trees. And, in an example of Latin American companies fruit for care and plant to smallholders teaches that rnh osmr tpe cmay aoe s the is Danone company staples consumer French oes sot tas ad oe Tbe 3 it the lists 13 Table more. and teams, sports hotels, 17 Domestic corporations Domestic Food and Food beverage 9 28 Demonstrate leadership 13 industry Other 7 Development (0.1%) multilateral Customer engagement Customer Taking actionon climate change Industrial processes Industrial Private sector (unspecified) Finance/ Subnational government (1%) 12 rance Insu- 6 National governmentNational (1%) Pre-compliance medium- sized enterprises 12 product product Transportation market Individuals (0.2%) Small- to Retail 6 Manufacturing 6 NGOs (1%) 5 Other 2 2 3 3 2 51 6. Forest Carbon Offset Buyers State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State e to essentially “tax” its own business divisions 2 motivations might simply be considered variations on movers in their sector, acting outside of regulation to mate change impacts as more immediate, likely, and half of forest carbon offset buyers said they faced to an “inability to do business” with certain customers if customers certain with business” do to “inability an to Alongside change. climate about proactive not are they the Congolese government, a subsidiary of Olam dev- recognize a failure to act carbonpurchase companies 377 and risk, reputational on climate change as a results will be recognized by watchdog organizations. reputational risks to their business due to climate from REDD and A/R projects in Kenya, Cambodia, reduce emissions and perhaps gain a competitive take action on climate change may have a deep the most common motive for purchases of in 2013. types within the broader voluntary market all offset talks in California: “We are part of the problem, esp- The solution.” the of part be to need we so require, they $6-7/ of price bon car internal an uses giant technology tCO investments in forest carbon projects achieve real business that operates in 65 countries, recognizes that recognizes countries, 65 in operates that business offsets as part of their emissions reductions strategy, offsetting itself can come with reputational risks. Ind- out ed projects to certifi third-party standards. Some REDD project in the Congo. jects to “demonstrate industry leadership” (13%) or CSR, they do include a bit of nuance. Companies that CDP data reveals that corporations now perceive cli- direct than they did just two years ago. More than eloped the North Pikounda REDD+ project, rst the fi eed, this is the reason why the majority of buyers seek these that and – ts benefi social and reductions emissions edge over their peers. Companies galvanized to experiencing the effects of climate change. This was ecially when we look at our customers and the prolif- eration of devices that are emerging and the energy a “rise in customer and NGO expectations” could leadcould expectations” NGO and customer in “rise a and uses the revenue to purchase forest carbon offsets carbon forest purchase to revenue the uses and and Brazil. aim to demonstrate industry leadership rst are likely fi atmosphere – sometimes because they are directly and Energy at Microsoft, put it as last year’s REDD+ change. Olam International, a Singapore-based agri- companies go to extra lengths to ensure that their concern about the consequences of a carbon-laden Another 25% of buyers invested in forest carbon pro- As Tamara “TJ” DiCaprio, Senior Director of Carbon Though nearly half of all companies reporting to CDP “take action on climate change” (12%). While these Banco Santander Banco Santander Brasil Macquarie Group Olam International Abengoa Pearson FedEx Corporation PUMA SE Deutsche Post AG British Sky Broadcasting Commerzbank AG Marks and Spencer Group plc Qantas Airways Starbucks Corporation Caltex Australia Sumitomo Chemical Co., Ltd. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. Buyers by Volume, 2013 Buyers by e in carbon offsets over the next 20 years. 20 next the over offsets carbon in e 2 State of the Forest Carbon Markets 2014. Danone BRF S.A TransAlta Corporation Allianz SE Norfolk Southern Corp. Natura Cosméticos S.A. AES Tiete SA The AES Corporation Barclays Microsoft Corporation Kering Novartis Nedbank Limited Old Mutual plc TUI Travel Source: Forest Trends’ Ecosystem Marketplace. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. climate change information to CDP for reporting year 2013. climate change information to CDP for reporting Table 13: Top 30 Private Sector Forest Carbon Offset Forest Carbon Top 30 Private Sector Table 13: mangrove restoration in Senegal, India, Indonesia, most common buyer motivation last year, behind 27% than 8 MtCO 8 than tire manufacturer Michelin, accessories brand Hermès, brand accessories Michelin, manufacturer tire investors in 2011, and European companies including of transactions – up from 23% in 2012. buyers, corporate social responsibility (CSR) was the Refl ectingRefl a market still geared towards voluntary 6.2 Buyer Motivations: Feeling the Heat Motivations: 6.2 Buyer and mail service La Poste are expecting returns of more of returns expecting are Poste La service mail and and Guatemala, among other countries. Now valued at 40 million euros, The Fund was opened to outside Notes: This list includes only those companies that disclosed Notes: This list includes only those companies 52 6. Forest Carbon Offset Buyers “We wanted to make ourselves, as much as possible, as much as ourselves, make to wanted “We NOpof’ eas Iv st nie fie with offices inside sat I’ve because ‘NGO-proof,’ Althelia Climate Fund, Dutch energy company Eneco company energy Dutch Fund, Climate Althelia the through projects REDD in invest to pledging After State CarbonMarkets oftheForest 2014 16 lmt rss o hi bsns sc a cags in changes as such business their to risks climate particular a against outside demonstrators climate companies that did not purchase offsets. For example, affecting operationsalready. area aspossible,whichwedid.” this in activities our for conduct of code a robust as deforestation projects. didn’t want people banging on our door saying ‘look at aa on ta ofe-uig opne reported companies offset-buying that found data slightly more potential climate risks, on average, than average, on risks, climate potential more slightly worked with the International Union for the Conservation what Eneco’s doing.’ It was really important to develop Ecosystem Marketplace’s preliminary analysis of CDP of analysis preliminary Marketplace’s Ecosystem of Conduct for private sector engagement in avoided in engagement sector private for Conduct of of Nature and the World Wildlife Fund to create a Code be felt in the next one to fi ve years – if they are not are they fi if to – one years next ve the in felt be to rise level sea and cyclones, tropical precipitation, physical anticipate companies of (45%) half Nearly Mark says in,” involved been have might we project Natura Cosméticos reported that climate change could Meyrick, head of Eneco’s carbon desk. “We certainly “We desk. carbon Eneco’s of head Meyrick, tive.pdf tive andAltheliaClimateFund. Availableat:http://cmsdata. iucn.org/downloads/summary_mou_redd__business_initia- MemorandumofUnderstanding: REDD+BusinessInitia- 40% viewchangesinprecipitationextremesanddroughtsasariskthatcouldaffectbusiness& Notes: Basedon96companiesthatpurchasedforestcarbonoffsetsinCDPreportingyear2013. Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. 55% 46% offorestcarbonoffsetbuyersareconcernedaboutreputationalrisks& 16 foreseechangingconsumerbehaviorrelatedtoclimatechange 22% 40% 33% forecastinducedchangesinnaturalresources anticipatecap-and-traderegulation& faceemissions-reportingobligations Table 14:RisksbytheNumbers 11% anticipateacarbontax Africa and Nedbank, two fi nancial institutions with fi institutions two nancial Nedbank, and Africa pre-compliance to tied was demand of 2% Another ACCUs from forestry projects in New South Wales and compelled to purchase forest carbon offsets to meet to offsets carbon forest purchase to compelled events climatic extreme that recognizes countries carbon forest purchases that Travel TUI company activity in anticipation of direct regulation. Barclays regulation. direct of anticipation in activity botanical potential the narrowing – biodiversity affect affect its supply chain if rising temperatures eligible under its upcoming carbon tax, presumed to presumed tax, carbon upcoming its under eligible Western AustraliaMallee. government is considering carbon pricing, wireless pricing, carbon considering is government destinations –adirectandimmediaterisk. South Africa’s National Treasury has indicated that indicated has Treasury National Africa’s South euain tef s ciae hne rs” rm a from “risk” change climate a is itself Regulation begin in 2016. In South Korea, another country whose originates Australia, in mines gold several operates looked them of many and – tax carbon Australia’s or program cap-and-trade California’s under obligations Ecosystem to According perspective. private-sector offsets from Nicaragua, Mozambique, India, and other aktlc dt, 7 o byr wr i fact in were buyers of 17% data, Marketplace it will consider approving VCS-certifi ed tonnes as VCS-certifi tonnes approving ed consider will it forest carbon offsetsaspartofaportfolio. purchased Telecom SK operator telecommunications Kenya. in project REDD Corrdior Kasigau the from for local projects. Newmont Mining Corporation, which headquarters in Johannesburg, purchase VCS offsets irr fr omtc pout. h Gra travel German The products. cosmetics for library may impair the tourism infrastructure in some of its key adversely 6. Forest Carbon Offset Buyers 53 e 2 $1 M Value $8.8 M $5.6 M $23.3 M $10.5 M $29.5 M $33.8 M e – roughly 2 e e e e e e e 2 2 2 2 2 2 2 e contracted for pre- 2 e of tonnes associated 2 Volume Value 3.1 MtCO 1.2 MtCO 1.1 MtCO 2.4 MtCO 2.2 MtCO 2.1 MtCO 1.5 MtCO with a buyer. State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State . State of the Forest Carbon Markets 2014 Source: Forest Trends’ Ecosystem Marketplace. Source: Forest Trends’ Ecosystem Marketplace. Notes: Based on 14.4 MtCO United Kingdom Country Germany Canada Netherlands United States France Australia Table 15: Top 7 Buyer Countries, by Volume and by Volume Top 7 Buyer Countries, Table 15: largest source of demand for projects based in Latin headquartered in the United States – the most of any nevertheless the fi fth-largest buyer of forest carbon nevertheless the fi half of previous volumes. The majority of these forestry offsets sold last year. Survey reported respondents 38 unique transactions with buyers reductions goals in other ways. Compliance volumes repeated in 2013 repeal of because the country’s carbon of tax. Aussies the were anticipated tonnes were again sourced from domestic projects, in REDD in invested buyers Australian some though in California’s compliance market grew to 1.7 MtCO 1.7 to grew market compliance California’s in in 2013 – up from the 1.5 MtCO purchased half a million tonnes of forestry offsets North American buyers contracted about fth a of fi offsets in 2013, transacting 1.5 MtCO Latin America. States and Canada transacted a quarter of the total within insular domestic markets including the UK’s slightly from 2012, when buyers based in the United $40-million ux infl of carbon payments not was demand among North American companies that WCC and Italy’s “zero emissions” provinces. volume. This was due to a drop-off in voluntary country. Even so, North American demand slipped chose not to renew offset contracts or met emissions compliance purposes the previous year. compliance purposes the previous year. America, Asia, and Africa. Europeans buyers also As proponents of Australia’s CFI feared, 2012’s e 2 majority (98%) sold tonnes to companies in developed in companies to tonnes sold (98%) majority last year, though this demand was spread across larger pool of companies – 28% of all companies that the compliance market familiarizes companies with the concept of offsetting and requires them to go forest carbon offsets in 2013. Of those project the most votes – and the investment. Airlines such as trade as a regulatory risk to their business. Of the more the Of business. their to risk regulatory a as trade than 500 companies that anticipated cap-and-trade, Mexican companies and six with buyers in Peru. offsets from outside of Europe and comprised the purchasing two-thirds of tonnes associated with a major Many million. $77 least) (at of value a at buyer offset retailers are based in Europe, and the EU based projects. purchases purchases around customers. Spanish soccer club However, However, a look at the CDP numbers reveals that a EU-based voluntary buyers sourced the majority of ETS has actually enhanced voluntary demand since since demand voluntary enhanced actually has ETS European buyers were again the largest source of Developing countries contracted just 0.3 MtCO Dutch, French, and German buyers each contracted Buyers from 23 different country locations contracted European with ALLCOT Group last June and allowed fans to Six percent of buyers were motivated by customer six countries, including 15 transactions with CSR claims. 6.3 Buyer Locations: Two-Thirds of Buyers Are Locations: Two-Thirds 6.3 Buyer United Airlines and Qantas have programs that allow demand for forestry emissions reductions in 2013, developers and retailers that reported a buyer, the vast the buyer, a reported that retailers and developers during Earth month last year. disclosed climate change data in 2013 – view cap-and- view – 2013 in data change climate disclosed engagement, engagement, and many designed their offset at least one million tonnes. countries. American, Australian, British, Canadian, customers to ight offset emissions fl with justa few clicks, and Delta matched customer offset purchases choose among three VCS projects in Latin America. carbon offsets specifi cally. carbon offsets specifi Getafe announced a fi ve-yearGetafe offsettingannounced commitment a fi American buyers purchasing American projects and offsets Africans buying from Africa- from Latin This demand was mostly insular by continent: Latin The RMDLT Portel-Pará REDD project in Brazil received Brazil in project REDD Portel-Pará RMDLT The 161 purchased carbon offsets and 38 purchased forest purchased 38 and offsets carbon purchased 161 “above and beyond” regulation in order to make 54 6. Forest Carbon Offset Buyers State CarbonMarkets oftheForest 2014 Figure 47:FlowofTransactedVolumefromProjectRegiontoBuyerRegion,2013(%Share) North America North North America North From Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. To North America Latin America Latin America From Notes: Basedon212buyertypesasdescribedbysurveyrespondents. To Oceania From Africa Africa Latin America To Europe From Europe To Asia Africa From Asia Asia To Europe Oceania Oceania From To 7. Market Infrastructure: Standards and Registries 55 e 2 Acre Carbon e. 2 internal and proprietary stan- Verified Carbon Standard Internal/Proprietary American Carbon Registry Plan Vivo Pacific Carbon Standard Gold Standard California Protocols Clean Development Mechanism Climate Action Reserve Carbon Farming Initiative State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State 0.2% Woodland Woodland Other; 0.1% J-VER; 0.2% Carbon Code; Exchange; 0.2% Chicago Climate long as the will be used for construction or d ards made d a surprising comeback after years no certifi cationcosts tono landowners,certifi since the Fund Forestry Standard also contains the unique feature of trees in the Amazon and allows for harvesting as than a fi fththan ofa VCSfi projects by count,these projects total land area under VCS forestry and land-use of of consolidation. These “internal” standards are project developer. project development. Standard, used by the Brazilian state to track perform- specifi c to Peru thatspecifi focuses on fast-growing native Carbon Fund (PCF) developed its own standard decline from 2012 as each used in only one or two projects or by a single ance ance against emissions reductions targets as Acre attributed to internal standards last year, the Acre-KFWthe year, last standards internal to attributed agreement lay claim to 8 MtCO another purpose that keeps it sequestered. The PCF continues its pilot under VCS JNR. Of the 12.6 MtCO covers the needed assessments. covered just over half a million hectares – 9% of the Other standards are proprietary by design. The Peru VCS’s 46% market share represents about a 10% The largest internal standard is the Permanent Forest Sink Initiative; 0.1% e transacted under a standard in 2013. 2 0.4% 0.4% 1% 1% 2% 3% 5% Notes: Based on the 32.2 MtCO Figure 48: Market Share by Standard/Certifi cation Type, All Markets 2013 Figure 48: Market Share by Standard/Certifi 46% Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. 24% Acre Carbon Standard 40% e. As shown in Figure 51, the majority of these 2 7. Market Infrastructure: Registries and Market Standards 7. facilitate methodologies that enable new AFOLU to look to and even borrow best practices from these that projects are reputable and that their climate for developing methodologies to build forest carbon tonnes were from REDD projects, though 14 VCS A/R impacts are confi rmed. impacts are confi MtCO project types. Governments around the world continue world the around Governments types. project offset markets. projects and verifying their emissions reductions. They reductions. emissions their verifying and projects projects last year. Ecosystem Marketplace tracked of which transacted offsets in 2013 – a total of 14.6 93 projects developed under VCS, about two-thirds share – in the ning lines process their to refi guide smaller volumes. Though A/R and IFM made up more Carbon offset project standards offer frameworks dards in the voluntary market have jostled for market voluntary standards in devising their compliance also provide signals to buyers who rely on standards and 6 VCS IFM projects also sold offsets, albeit in Over the years, leading independent third-party stan- with a New Independent Streak with a New VCS was again the most popular standard for AFOLU 7.1 Overview Use: Old Favorites, of Standard 7.1 56 7. Market Infrastructure: Standards and Registries “We “We believe it’s impossible to target a problem as large 71% in 2012. State CarbonMarkets oftheForest 2014 Australia’s quasi-compliance-driven Carbon Farming Farming Carbon quasi-compliance-driven Australia’s Initiative ( codn to according around this dramatic situation.” not was thatstandard a with Peru deforestationin as are usually published in English. Some chose internal chose publishedEnglish.usuallyarein Some done in Figure 49 below) reveals that VCS held 90% 90% held VCS thatreveals below) 49 Figure in done Conversely, the volume of forestry offsets developed offsets forestry of volume Conversely,the still designed their projects according to VCS. expensiveverifiless a as standards but option cation deterredthem barriers language said users standard Even so, VCS was the dominant standard utilized byutilized standard dominant the was VCS so, Even “Additionally,Riva. AlessandroDirector Executive we f . MtCO 3.7 of believeextremelyimplementingthatthehighof costs in 2013, though market share dropped from 10% to 10% from dropped share market though 2013, in Peruvian projects in 2013, guiding the development the guiding2013, in projects Peruvian the are junglePeruvian the internationalinstandards Putting aside the ascent of internal standards (as is (asstandards internal of ascent the aside Putting % olwn te eel f utai’ cro tax. carbon Australia’s of repeal the following 5% from using international voluntary methodologies, which main reason why they haven’t succeeded in turning in succeeded haven’t they why reason main PCF reality,”specifisays Peruvian made the for cally market share among independent standards, up from CFI 15% ) was again the third-most used standard 2 o tasce ofes Ohr internal Other offsets. transacted of e aionas opine Protocol Compliance California’s Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2014. 58% Notes: Basedonthe16.3MtCO 90% VCS *Excludes the12.6MtCO Figure 49:MarketSharebyIndependentStandard,AllMarkets2013* 11% 6% 4% 2 2% e transacted under an internal or proprietary standard. e transactedunderaninternal orproprietarystandard. 2 e transactedunderanindependent standardin2013. 1% 1% 1%

fst dvlpd ne te ntd Nations’ United the under developed Offsets diitr fst rjc Rgsre (Ps under (OPRs) Registries Project Offset administer as the averagetheas soldat $4.1/tCOoffset CDM voluntary market to sell some of the “legacy” tonnes “legacy” the of some sell to market voluntary each held approximatelyheldeach 1%threemarketshare, with actively to trying transfer. California’s Compliance Protocol, which will allow them California’s cap-and-trade program, and many United standards such as VCS and The Gold Standard noteStandard Gold The and VCS as standardssuch under both standards were just around half a million a half around just were standards both under States- or Canada-based projects developed under developed projects Canada-based or States- fst ls ya. C ad A a wl a VCS as well as CAR and ACR year. last offsets contracting standard each under developed projects originally developed for compliance. Voluntary-facingcompliance. for developedoriginally ot Aeia-aig standards American-facing North in 2013. in 2012, since CDM project developers looked to the to developerslookedproject CDM 2012,since in euaoy akt Cmie tascin volumes transaction Combined market. regulatory the of pool demand and prices higher the access to theirtonnesunder standardsthesecertify to aim now trans acted a similar volume as in 2012, again holding 2% 2% holding again 2012, in as volume similar a acted trans state’stheprogram offi cap-and-trade cially launched tonnes last year as projects underwent this transition. that a handful of CDM forestrythatproject handful a ofCDM developers are to the voluntary average – as opposed to $1.5/tCO to opposed as average– voluntary the to nearly doubled in transaction volumes from 2012 as 2012 from volumes transaction in doubled nearly market share. Value, however, increased considerably CAR +FSC;1% CCX only;0.2% Gold Standard Gold Standard Alliance; 0.3% + CCB;0.2% + FSC;0.2% Rainforest Other + VCS +CCBFSC Other +FSC CDM +CCB VCS +FSC Plan Vivoonly CAR only ACR only VCS only VCS +CCB ACR and 2 e – close– e CDM CAR 2 e

7. Market Infrastructure: Standards and Registries 57 e 2 $4.1 $8.6 $6.9 $9.9 $8.5 in 2013 $/tCO Average Average State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State First alignment of the A/R requirements with the FSCFirst alignment of the A/R requirements management Published Nested REDD+ standard impact logging grasslands conversion management, and avoided in a dozen other jurisdictions New AFOLU methodologies approved, including from agriculture New methodologies developed for rewetting drainedNew methodologies New AFOLU methodologies under development forNew AFOLU methodologies restoration and reducedtidal wetlands and seagrass New projects registered in India, Tanzania, and Kenya New version of Standard published (December 2013), Launched the road-test version of the Gold StandardLaunched the road-test version of the Gold requirementsAgricultural Standard Gold the of Launch Revised Protocol Expansion of existing projects into new regions rules California OPR work ramped up signifi cantly California OPR work ramped up signifi Cooperation with Hivos and Solidaridad to use theCooperation with Hivos and Solidaridad reductionsCool Farm Tool for calculation of emissions Chile, Costa Rica, and Peru, and under considerationChile, Costa Rica, and project issuance and fi rst fertilizer management project issuance and fi project issuance peatland, coastal wetland creation, sustainablepeatland, coastal wetland (at the UNFCCC Conference of the Parties in Lima) (at the UNFCCC Conference of the Parties after a year-long consultation with stakeholders grazed grasslands, and grazing land and livestock grassland management, improved nitrogengrassland management, VCS JNR REDD pilots underway in Acre (Brazil), DRC,VCS JNR REDD pilots Announced fi rst avoided conversion of grasslands rst Announced fi A/R on degraded lands, compost additions to A/R requirements Approved California OPR Adopted the Mexico Forest Protocol Approved California OPR 2013 -2014 Activity 2013 -2014 • • • • • • • • • • • • • • • • • • Carbon Standards Table 16: Popular Independent Carbon Standards Popular Independent Table 16: Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. level, while improving the sustainable use Programme aims to maintain and enhance the carbon stock stored at the landscape Description frameworks, and methodologies for the GHGframeworks, and methodologies Plan Vivo REDD, A/R, IFM, SALM Climate Action Reserve (CAR) Action Reserve Climate which are all based on International Standards www.goldstandard.org www.v-c-s.org www.americancarbonregistry.org www.climateactionreserve.org www.planvivo.org support fi nancial and environmental value in the nancial support fi practice.” programs, including forestry, agriculture, andprograms, including protocols, and tools for GHG accounting, program focused on ensuring integrity of GHGprogram focused on ensuring integrity Organization (ISO) 14064 and sound scientifi c Organization (ISO) 14064 and sound scientifi of resources, people’s livelihoods, and theof resources, people’s livelihoods, and other land- use activities.” US carbon market.” Gold Standard accounting of projects and jurisdictionalaccounting of projects emissions reduction projects to create andemissions reduction projects to create conservation of biodiversity.” Verifi ed Carbon Standard (VCS) Verifi more sustainably, with a view to generating American Carbon Registry (ACR) A/R, IFM, SALM A/R, IFM, REDD, SALM A/R, IFM, REDD, SALM A/R, IFM, REDD, SALM climate, livelihood, and ecosystem benefi ts. Plan climate, livelihood, and ecosystem benefi communities to manage their natural resources Vivo project design is community-led.” The Climate Action Reserve is a national offsetsThe Climate Action Reserve is a national “The Gold Standard’s Land-Use & Forests “VCS provides the most widely used standards,“VCS provides the most “ACR publishes standards, methodologies, “ “Plan Vivo is a framework for supporting 58 7. Market Infrastructure: Standards and Registries “The “The remaining question is what is going to happen with “I “I think it’s a great thing [The Gold Standard is] evolving The Forest Carbon Group had three projects under projects three had Group Carbon Forest The State CarbonMarkets oftheForest 2014 od tnad s h scn laig independent leading second the is Standard Gold Gold Standard forestry offsets to pick up in the coming years –and directly compete with VCS. are two standards,” referencing The Gold Standard’sstandards,”Gold referencing two The are a previous focus on renewable energy projects, The projects, energyrenewable on focus previous a year, an 18% increase in its market share from 2012, as CarbonFix CarbonFix that transitioned to The Gold Standard after as ihe Sh, h Frs Cro Group’s Carbon Forest the Sahm, Michael says market and market,overall voluntary the on standard Director of Strategic Marketing and External Affairs. External and MarketingStrategic of Director primary AFOLU market AFOLU primary rival, VCS. participants expect both supply and demand of The The of demand and supply both expect participants Plan Vivo Plan into the land-use space because I think it’s necessary,” the organization’s late-2012 acquisition of CarbonFix CarbonFix of acquisitionorganization’slate-2012 the therethataccept theyextent what to andbuyers, the found buyers. The buyers. found nine A/R projects transacting modest volumes. With volumes. modest transactingprojects A/R nine market share in its fi with projects, its forestry in shareof market year rst more than a dozen projects – mainly – A/R successfully Internal/Proprietary + CCB

Market share 100% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Not reported 0%

Internal/Proprietary only projects sold just under 0.2 MtCO 0.2 under just sold projects Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2014.

VCS + CCB + FSC Gold Standard Gold

Carbon Farming Initiative Figure 51:MarketShareofStandardUsebyProjectTypeCertifi ed,2013 Notes: Basedon30MtCO

REDD VCS + CCB held less than 1%than less held

VCS + FSC

Plan Vivo only 2 e associatedwithastandardand projecttype. 2 e last last e A/R

CAR only

Gold Standard + CCB The Gold Standard’s wing, 15 were previously under previouslywere 15 wing, Standard’s Gold The A/R projects. Of the 28 A/R projects currently undercurrently projects A/R 28 the Of projects. A/R developmentwithCarbonFix. VCS only Notes: Basedon13.2MtCO2etransactedunderco-benefi ts 14% Figure 50:MarketSharebyCo-benefi tsStandardor Permanent Forest Sink Initiative

Gold Standard + FSC 5% IFM Source: ForestTrends’EcosystemMarketplace. standards orprojectareacertifi cationsin2013. 8% State oftheForestCarbonMarkets2014. 2% Project AreaCertifi cation, 2013 89% CCB 0.4%

Gold Standard only SALM/Agroforestry 71%

ACR only Pacific Carbon Standard FSC +Other FSC +VCS CCB +Other CCB +FSCVCS CDM + CCB CCB +VCS

ISO-14064 + CCB 7. Market Infrastructure: Standards and Registries 59 e) e) or Rainforest Alliance 2 2013 -2014 Activity 2013 -2014 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State e). 2 e) or certifi ed sustainable e) land or area certifi attributes 2 have achieved verifi cation have achieved verifi FSC certifi cation of forest ecosystem services cation of forest FSC certifi to help project proponents and auditors using the in collaboration with The Gold Standard. Preparing the policy framework to enable forest management standards with The Gold Released third edition of the standards in Released third edition became the fi rst VCS & SOCIALCARBON to became the fi biodiversity, soil, and tourism December 2013 after a year-long review process. December 2013 after a year-long review Released version 5.0 of the standard in June Released version 5.0 of the standard Developing the Fairtrade Carbon Credit program Developing the Fairtrade Carbon Credit Developing approaches for joint application of Standard Foundation A/R requirements CCB Standards. Updates include the use of programmatic Updates include the use of programmatic outcomes at the site level: carbon, water, explanations of key concepts and requirements approaches to allow project area expansion, approaches to allow project area expansion, as of October 2014. Twenty-three CCB projects as of October 2014. Twenty-three CCB clarifi cation of FPIC requirements, promotion of clarifi verify offsets in August 2014 gender equality and empowerment designing VCS & SOCIALCARBON projects Validated a total of 85 projects in 35 countries Validated a total of 85 projects in 35 2013, along with a streamlined process for 2013, along with a streamlined process Alongside CCB, developed guidance providing The Ecomapúa Amazon REDD project in Brazil The Ecomapúa Amazon REDD project FSC, or both, and the vast majority of these tonnes transacted under transacted an also standard independent 81% MtCO Eighty-four percent of VCS offsets co-applied CCBpercent or Eighty-four under under FSC (3.2 MtCO verifi ed tsthe under delivery (11.8 of CCB verifi co-benefi (0.5 MtCO(0.5 • • • • • • • • e 2 Co-Benefi ts Standards* Co-Benefi Land Area Certifi cations Area Certifi Land Description Table 17: Popular Co-Benefi ts Standards and Land Area Certifi cations Certifi ts Standards and Land Area Co-Benefi Table 17: Popular Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. Fairtrade terms, it provides them with a better deal and Fairtrade terms, it provides them with Forest Stewardship Council (FSC) Fairtrade International from responsibly managed forests that provide projects for their contributions to sustainable projects for their contributions to sustainable trade and is based on a partnership between trade and is based on a partnership improved terms of trade.” the implementation of the most globally respected producers and consumers. When farmers can sell on producers and consumers. When farmers Rainforest Alliance Rainforest Ecologica Institute that certifi es emissions reduction Ecologica Institute that certifi SOCIALCARBON Climate, Community and Biodiversity Standards Climate, Community www.climate-standards.org smallholders, and well-being of local communities and simultaneously mitigate climate change, improve the simultaneously mitigate climate change, www.socialcarbon.org www.fsc.org www.fairtrade.net www.rainforestalliance.org standards in a variety of fi elds.” sustainability standards in a variety of fi (CCB) environmental, social, and economic benefi ts.” environmental, social, and economic benefi conserve biodiversity.” area certifi cations are applied to the hectares on which a carbon project occurs. cations are applied area certifi and improve livelihoods by promoting and evaluating development.” * Co-benefi ts standards are applied to carbon offsets themselves (e.g., a “Fairtrade Carbon Credit”) while land ts standards * Co-benefi “The CCB Standards identify projects that “The CCB Standards identify projects “SOCIALCARBON is a standard developed by the “SOCIALCARBON is a standard developed “FSC certifi cation ensures that products come “FSC certifi “Fairtrade is an alternative approach to conventional “Fairtrade is an alternative approach “The Rainforest Alliance works to conserve biodiversity that that provided livelihood and ecosystem benefits prevalent in 2013 as buyers sought out forest projects projects forest out sought buyers as 2013 in prevalent Use of co-benefi ts cations Use and was of land co-benefi area certifi alongside alongside carbon sequestration. Of the 16.3 MtCO Certifi cations: Doubling (and Tripling) Up (and Tripling) Doubling cations: Certifi 7.2 Co-Benefi Land Area and ts Standards Co-Benefi 7.2 60 7. Market Infrastructure: Standards and Registries “CCB + Other” category in Figure 50 includes some includes 50 Figure in category Other” + “CCB – will continue to guide the standard as part of a newly a of part standardasguide the continuetowill – 100,000-hectare Madre de Dios Amazon REDD project in three all claimed that offsets transacted of 1% Though CCB and VCS were by far the most common common most the far by were VCS and CCB Though The Gold Standard this year that aims to attach the attach to aims that year this Standard Gold The State CarbonMarkets oftheForest 2014 VCS will assume the day-to-day management of the of management day-to-day the assume will VCS VCS-CCB-FSC verifi cation, compared to less than to less verifi compared VCS-CCB-FSC cation, 2012. One of the largest triple-certifilargest the the of is One projects 2012. ed Only a handful of projects – mainly A/R in developed in A/R mainly – projects of handful a Only Offset Protocols, CDM, and the Pacifi c Forest Standard. co-benefi ts and carbon standard pairing in 2013, the the 2013, in co-benefi pairing standard carbon and ts 2014, November From only.” “VCS were – countries certifi ed land-owners also pursued carbon certifi cation call for proposals and plan to select up to 10 Fairtrade are expectedtobe“TheGoldStandard-only.” fe te raiain anhd prnrhp with partnership a launched organization the after s ih l Fitae iiu pie ytm, says systems, price minimum Fairtrade all with as develop effi ciencies that will ultimately make it easier it effi make develop ultimately will that ciencies depend on the costs of production and verifiand production cation, of costs the on depend CarbonFix also used CCB, though most future projects CDM offsets transacted last year also used the CCB the used also year last transacted offsets CDM The Alliance, Rainforest International, Conservation CARE, BiodiversityAlliance– andClimate, Community to “help will hope they move a in Standards CCB ne Te od tnad Clfri Compliance California Standard, Gold The under tnad a CM eeoes re t mk their make to tried developers CDM as Standards were derived from tropical forest REDD projects. Business Development forLanduseand Forests. Nearly 10% of offsets sold last year (3 MtCO (3 year last sold offsets of 10% Nearly from transferred that Standard Gold The of projects Several buyers. voluntary to attractive more projects Nature Conservancy, and Wildlife Conservation Society in Peru,whichverifi ed4.5MtCO triple the for went actually practices area project or be established for all these projects, but rather would would rather but projects, these all for established be not would price offset minimum general A 2015. of fithe in forward move will that projects quarter pilot rst a issued Fairtrade and Standard Gold The projects. producer-consumer relationships – to land-use climate and price minimum a as such – trade fair of principles interesting combinations. The majority of land-based of majority The combinations. interesting More Fairtrade carbon projects may be on the horizon More Fairtradecarbonprojectsmaybeonthehorizon Pieter van Midwoud, The Gold Standard’s Director of of Director Standard’s Gold The Midwoud, van Pieter formed steering committee. the of members current The separately. or together either standards” both use to developers project for from project land areas that were also certifialso were that areas land project the from by ed Fourteen percent of offsets that attached co-benefiattached that offsets of ts percent Fourteen FSC. While the majority of projects developed on FSC FSC on developed projects of majority the While FSC. land areas used VCS as their carbon standard, FSC- standard, carbon their as VCS used areas land 2 e inJune2013. 2 e) were were e) 7.3 Standards: InsularMarkets Domestic-Only 7.4 by Price Standard: in DemandExpressed The UK’s Woodland Carbon Code (WCC) also spent also (WCC) Code Carbon Woodland UK’s The Just under a million forestry offsets were transacted were offsets forestry million a under Just As shown in Figure 52, offsets developed under dom- under developed offsets 52, Figure in shown As Amid policy turnover in key jurisdictions, demand for demand jurisdictions, key in turnover policy Amid Volumes ThanPrices More Initiative (NZ PFSI) shriveled after the country opted country the after shriveled PFSI) (NZ Initiative In Asia, forest carbon offsets so far play a modest role country’s carbon tax. The Pacifi Standard The Carbon tax. c carbon country’s certifi affects stage project and supply, choice, cation oue o Nw eln’ Praet oet Sink Forest Permanent Zealand’s New on volumes the of repeal the anticipated buyers compliance as avoided conversion and IFM projects under Australia’s si pooos n mree it islr markets insular into marketed and protocols estic lgblt udr h saes a-n-rd program. cap-and-trade state’s the under eligibility towards transitioned slowly projects IFM early-action fi 2013. in nascent were initiatives these but void, the ll declined 35% last year to 2.8 MtCO 2.8 to year last 35% declined domestic woodland carbon to be sequestered in the in sequestered be to carbon woodland domestic F sl ruhy af h vlm rpre i 2012 in reported volume the half roughly sold CFI some insight into buyers’ preferences – including how standard is just one of the many variables that infl uence ssions reductions used in the pilots will be credited be will pilots the in used reductions ssions forest- accept pilots market carbon subnational seven under California’s Compliance Protocols last year as year last Protocols Compliance California’s under under the country’s national carbon market, projected within insular domestic markets. Only two of China’s of two Only markets. domestic insular within Environment Ministry to cut administrative costs. And costs. administrative cut to Ministry Environment New domestic offset programs may soon step up to up step soon may programs offset domestic New Protocol, Kyoto the of commitment second the of out the under it folding instead program, offset province’s price, looking at prices across standards does provide offset’s an Though $110. as much as and tonne per offsets’ appeal. fst tasce udr oetcol standards domestic-only under transacted offsets based offsets, though it’s expected that AFOLU emi- AFOLU that expected it’s though offsets, based in July2013. thus endingcomplianceoffsetdemand. Canadian the Pacifi operated the that Trust Carbon c transacted slim volumes but wore the highest price highest the wore but volumes slim transacted future – were listed on Markit Environmental Registry Environmental Markit on listed were – future representing – Units” Issuance “Pending first the to launchin2016. oet abn fst rcs agd widely ranged prices offset carbon Forest lost market share after British Columbia eliminated Columbia British after share market lost at er wt byr pyn a ltl a 1 cents 10 as little as paying buyers with year, last much of last year testing out new market infrastructure: 2 e. In particular, In e.

61 7. Market Infrastructure: Standards and Registries Average price Average e) than e) $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 2

9.4 CCX only only CCX VCS + CCB CCB + VCS

e) when located on FSC- cation Types, 2013 cation Types, CDM + CCB CCB + CDM 2

e for The Gold Standard and Standard Gold The for e

2 VCS + FSC FSC + VCS e more. Even offsets developed 2

State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State

12.6 VCS + CCB + FSC FSC + CCB + VCS e in transaction volume. 2 e for Plan Vivo. The Gold Standard and Plan 2 e; mostly REDD projects). 2

e) than VCS offsets that tagged on the CCB label

VCS only only VCS 2 Internal/Proprietary + CCB CCB + Internal/Proprietary

tCO those ed on land, non-certifi and The StandardGold relative scarcity of offsets under these standards – Plan – standards these under offsets of scarcity relative projects developed ed in forests FSC-certifi attracted on average $4/tCO principles were priced slightly higher ($4.2/tCO higher slightly priced were principles projects that sold, on average, at higher prices. The Buyers did, however, pay slightly more for offsets under California’s compliance IFM protocol were sold sited on land hectares managed according to FSC $6.9/tCO developed countries – sold at higher prices ($5.6/ derived from ed certifi land areas. VCS projects at higher prices ($15/tCO average prices: $8.5/tCO prices: average contributed to the above-average prices. certifi ed land. certifi Gold Standard forestry is brand new – may have also ($4/tCO Internal/Proprietary only only Internal/Proprietary Vivo offsets were almost exclusively from tree-planting The and volumes small in sell typically cates certifi Vivo

“VCS only” tonnes – mainly from A/R projects in Plan Vivo only only Vivo Plan

e – in

2

Permanent Forest Sink Initiative Initiative Sink Forest Permanent ACR only only ACR

Volume 2013 Average price 2013 Gold Standard + CCB CCB + Standard Gold

CAR only only CAR California Protocols Protocols California

Notes: Based on responses representing 31.4 MtCO Notes: Based on responses representing Pacific Carbon Standard Standard Carbon Pacific

$19.4

Gold Standard + FSC FSC + Standard Gold State of the Forest Carbon Markets 2014. Source: Forest Trends’ Ecosystem Marketplace.

$110 J-VER California Protocols + FSC FSC + Protocols California

Figure 52: Transacted Volume and Average Price by Standard and Other Certifi Price by Standard and Average Transacted Volume Figure 52:

3.0 Mt 2.5 Mt 2.0 Mt 1.5 Mt 1.0 Mt 0.5 Mt 0.0 Mt Initiative Farming Carbon

2 MtCO e less expensive international CERs. line with the program’s historically high-end pricing. highest prices seen on the market – $110/tCO facing facing standards CAR and ACR also traded near tags in 2013. In the case of Australia and California, benefi ts withinbenefi the carbon methodologies – namely invested in a domestic forestry project. If companies offsets offsets are used as a cost-containment mechanism want to make their operations carbon neutral, they’ll $8.6/tCO2e, respectively. Under Japan’s J-Credit Scheme, offsets sold for the fi ll in the “boutique” J-VER offsets in their portfolio with fi event or tproduct offor having the reputational benefi compliance prices, at an average of $9.9/tCO2e and carbon tax (in Australia) ooror price the allowance fl compliance instruments drove the price up since Independent international standards that embed co- (in California). Offsets developed under the California- Japanese companies typically buy a small number of J-VER offsets to neutralize the emissions of a discrete The Gold Standard and Plan Vivo – sold at above- – and therefore priced just under the level of the 62 7. Market Infrastructure: Standards and Registries “rarer” specimens,attractinghigherpricesasaresult. 7.6 Issuancesand Use:Offset Registry 7.5 Stage: Project Majority ofTonnes Contracted s lutae i Fgr 5, ne ams eey stan- every almost under 53, Figure in illustrated As State CarbonMarkets oftheForest 2014 VS CB, ues ad ewe $6/tCO between paid buyers CCB), + (VCS Over the years, carbon offset registries have played an dard, project developers and retailers contracted the contracted retailers and developers project dard, $6.8/tCO $3.8/tCO After Issuance After ne dvlpet u t byr’ ecpin that perception buyers’ to due development under Infrastructure ee iey vial. ues et oe confi in more dent felt Buyers available. widely were Retirements Registries BuildJNR Soar; However, the opposite was true last year. Under the Under year. last true was opposite the However, rcs. ale-tg ofes hrfr bcm the became therefore offsets the Earlier-stage of process. stages all through it make to projects new of important role in legitimizing carbon market activities market carbon legitimizing in role important the availability of forest carbon offsets and in the ability this is largely because, for the fi rst time, issued offsets these “fullycooked”offsetswerelower-risk. have historically been more expensive than those still those than expensive more been historically have notable shift from two years ago when the market saw Carbon FarmingInitiative more investment in early-stage projects. Issued offsets a issuance, after offsets their of – all not if – majority ot oua idpnet tnad combination standards independent popular most VCS +CCBFSC 2 2 Notes: Basedonresponsesrepresenting20.5MtCO e for issued tonnes. Suppliers theorize that theorize Suppliers tonnes. issued for e e, on average, for pre-issued tonnes and just Figure 53:MarketShare,AveragePrice,andStagebyPopularForestryOffsetTypes,2013 Plan Vivoonly CDM +CCB VCS +CCB VCS +FSC Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. CAR only ACR only VCS only 0% $6 $6 $7 $7 10% Pre-Validation 20% $9 2 and e 30% $7 $9 2 e associatedwithastandardandtransactionstage. 40% Australia’s CFI also typically have their own registries own their have typically also CFI Australia’s VCS alone issued more than 10 MtCO 10 than more issued alone VCS (9.2 MtCO (9.2 Of the record VCS issuance, the vast majority of offsets n h cmlac sd, he vlnay standard voluntary three side, compliance the On Inc. are the two major registries serving the voluntary the serving registries major two the are Inc. a-n-rd mre, loig hm o facilitate to them allowing market, cap-and-trade carbon market, holding 62% and 34% of offsets trans- offsets of 34% and 62% holding market, carbon agricultural offsetsin2013. ce i 21, epciey Frsr ad te land- other and Forestry respectively. 2013, in acted an equalbump involuntarydemand. xldn te 16 MtCO 11.6 the excluding Carbon Standard used only in this REDD+ jurisdiction, use offsets make up a large percentage of issuances of percentage large a up make offsets use upload project documentation and where buyers can buyers where and documentation project upload eitis eotd 95 MtCO 29.5 reported Registries previous years’ issuances and an all-time record. Even rgas uh s aa’ JCei Shm and Scheme J-Credit Japan’s as such programs verifi Domestic and cation. reporting, listing, project been have – VCS and CAR, ACR, – organizations on bothregistries:53%Markitand20%APX. can sellers where platforms transparent providing by offsets into the market – an infl ux that was not met with projects, contributing to the perceived “fl ood” of REDD from AFOLU projects in 2013, nearly three times the times three nearly 2013, in projects AFOLU from to trackoffsetissuancesandretirements. retire offsets. Markit Environmental Registry and APX and Registry Environmental Markit offsets. retire named Offset Project Registries (OPRs) for California’s last year’s issuances still shattered previous volumes. previous shattered still issuances year’s last Validated $10 $22 50% $4 $4 $4 $7 $4 2 e) were from REDD or avoided conversion avoided or REDD from were e) 60% Verified $2 70% 2 ise udr h Acre the under issued e Issued 80% $6 2 i nw issuances new in e $9 90% $7 2 e forestry and forestry e 100% 0.2Mt 2.3Mt 0.3Mt 0.1Mt 9.3Mt 1Mt 0.5Mt 1.5Mt 1.8Mt 7. Market Infrastructure: Standards and Registries 63 32.7 2013 15.2 29.4 28 2.6 2012 8 25.8 1.6 2011 6.9 32.7 .6 2010 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State 1 21.5 Transacted .3 2009 1 mechanisms, and the renewable energy credit market, credit energy renewable the and mechanisms, had no retirements yet. had no retirements release to – timeline what on and – taken be to needed registries are beginning to develop the infrastructure state, the at developed offsets forest retire and issue to that funding. The biodiversity markets, which have For a few standards – namely c the Carbon Pacifi that aren’t necessarily tied to carbon offsets. The Protocol and the UK’s WCC, were just ramping up and up ramping just were WCC, UK’s the and Protocol Markit began hosting the jurisdictional Acre Carbon Markit Registry features a dashboard through which indicating indicating a winding down of project development level. province, or country nance-tied goalsof fi or outcomes for jurisdictional programs and receive “alerts” with the next steps which operates at the state level, serve as models. which operates at the state level, serve Standard in 2013 as a placeholder of sorts for VCS JNR VCS for sorts of placeholder a as 2013 in Standard Standard in British Columbia, New Zealand’s PFSI, and PFSI, Zealand’s New Columbia, British in Standard under these standards. Other standards for new strive to reach the payment-for-performance stage, domestic programs, including California’s Compliance California’s including programs, domestic government authorities and others can create a set enables monitoring of performance-based milestones also used milestones in payment-for-performance activities and issuance. One of Markit’s enhancements Markit’s of One issuance. and activities ISO 14064/65 – retirements were higher than issuances, than higher were retirements – 14064/65 ISO As jurisdictional REDD programs around the world 7.4 Retired .2 2008 .6 7.4 Issued .1 2007 PFSI , Plan Vivo, VCS, and WCC. e. 2 .1 5.3 .1 2006 .1 1.7 Figure 54: Historical Issued, Retired, and Transacted Offset Volumes Figure 54: Historical Issued, Retired, .1 2005 e forest carbon offsets were “retired” were offsets carbon forest e 2 .1 Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. 4.2 e) in 2013 were developed under the Acre the under developed were 2013 in e) 2 .3 pre-2005 Notes: This fi gure tracks land-use project registry data reported for the Acre Carbon Standard, ACR, CAR, the gure tracks land-use project registry Notes: This fi .3 064/65, J-VER, the Pacifi c Carbon Standard, California Compliance Standard, Gold Standard/CarbonFix, ISO 14064/65, J-VER, the Pacifi

30 25 20 15 10 5 0 35

2 e MtCO near to distant past. The majority of offsets retired retirements reached a record 3.7 MtCO registries as registries “VCS ts only” may in fact have co-benefi the the CCB label. This is likely because VCS and CCB those offsets when the emissions reductions are retire offsets on a registry in the year when they want to make sustainability claims – though they may have issuances indicates that many AFOLU offsets listed on on listed offsets AFOLU many that indicates issuances in 2013. These tonnes are now out of circulation in the in circulation of out now are tonnes These 2013. in between between VCS+CCB transactions and VCS+CCB of of tonnes transacted under VCS were also pursuing Carbon Standard, but even excluding these tonnes, fi rst verifi cation and sale rst ofverifi VCUs.The fi discrepancy eventually verifi ed. Thus, retirement volumeeventually isverifi not an validations are sometimes staggered, and some forest forest some and staggered, sometimes are validations verifi cation under verifi ts standard co-benefi CCB, only accurate measure of market activity, as an unknown volume of offsets retired were already paid for in the certifi cationunderway. certifi carbon carbon projects choose to add on CCB after the contracted contracted offsets in projects’ early stages and retire carbon market and represent permanent removals of buyers Typically, atmosphere. the from dioxide carbon (11.6 MtCO (11.6 A total of 15.3 MtCO 15.3 of total A 4% of 4% tonnes issued on last year registries tagged on Though Though project developers reported that the majority 64 7. Market Infrastructure: Standards and Registries 7.7 New Methodologies OntheHorizon: Project The search for new or adaptable project methodologies The standard approved its coastal wetland creation wetland coastal its approved standard The After releasing the world’s fiworld’s methodology the carbon releasing rst After Across several standards, State CarbonMarkets oftheForest 2014 VCS also has several new blue carbon methodologies. 1 2014. And VCS’s tidal wetland and seagrass restoration abn trg o tee ecosystems these of storage carbon voluntary the again, Here programs. compliance an avoided conversion of grasslands and shrublands and grasslands of conversion avoided an peatlands drained rewetting for methodology new a anywhere in the United States, in January. Most recently, expected increases in demand for offsets from certain demand associated with an expansion of the program ucl eegn a te cec o te incredible the on science the as emerging quickly org/category/about/blue-carbon/ of MangrovestoPeople:ACall toAction,2014. cp byn te uf os ad o aiona A California. to and Coast Gulf the beyond scope seagrasses, tidal salt marshes, and mangroves are mangroves and marshes, salt tidal seagrasses, standards areshowingtheway. of light in especially ceases, never seemingly wetlands methodology is considered a top candidate top a considered is methodology wetlands Several new Several to fi expected its is up and wrapping assessment rst itit o xad h mtoooys geographic methodology’s the expand to District Resources teamed up with the Sacramento Municipal Sacramento the with up teamed Resources Brunei, and Papua New Guinea – was released in July offset protocols to contend with the anticipated rise in rise anticipated the with contend to protocols offset program, which will likely need to incorporate additional be availableearlyin2015. in 2015. incredible rate (2% per year) at which they are being are they which at year) per (2% rate incredible in – specifi– Indonesia, Asia Malaysia, Southeast cally in applicable but Authority Restoration and Protection o wtad rsoain n 02 AR n Tierra and ACR 2012, in restoration wetlands for o ftr acpac it Clfri’ compliance California’s into acceptance future for that seek to quantify and credit the carbon stored in stored carbon the credit and quantify to seek that traction recently. The Climate Trust helped develop helped Trust Climate The recently. traction lost methodology, which estimates the emissions avoided emissions the estimates which methodology, is world, the in anywhere applicable methodology, Coastal Louisiana the by developed methodology, 2 UnitedNationsEnvironmentProgramme,TheImportance TheBlueCarbonInitiative.http://thebluecarboninitiative. 2 –advances. methodologies also gained also methodologies grasslands blue blue carbon methodologies 1 ad the and – “We love land-based offsets,” she said. “We think it’s a This spring, ACR revealed the fithe revealed ACR developed spring, project This rst Though it has not fi SALM not for has requirements it its Though nalized VCS also recently revised its avoided deforestation avoided its revised recently also VCS 2014 is currently developing a US grassland project grassland OctoberUS a developing in currently is 2014 met that group working CAR A 2013. GHG assessment boundary and quantifiand boundary and assessment cation, GHG could be allowed into the program, but are aware of aware are but program, the into allowed be could conversion, and Wildlife Works is piloting the metho- the piloting is Works Wildlife and conversion, announcements about the next set of protocols that protocols of set next the about announcements fertilizer in reductions as such practices agricultural that calculator emissions gas greenhouse online an accommodating the California ARB program wherever as atonneforanemission intheregulatedsectors.” and making sure that a tonne for an offset is the same easily quantify emissions reductions from sustainable from reductions emissions quantify easily good sector to look at. It’s the challenge of making sure eind pcfcly o sm-rd ein where regions semi-arid for specifically designed dology at its Taita Hills project in Kenya. The Standard’s Change ProgramEvaluationBranch. California regulators are not ready to make any public ad aidr aoa ABs he o te Climate the of Chief ARB’s Sahota, Rajinder said utial gasad aaeet methodology, management grassland sustainable under its rice cultivation offset protocol and announced use. using the protocol, which protects rich prairie land in land prairie rich protects which protocol, the using with The Cool Farm Institute and its Cool Farm Tool, Farm Cool its and Institute Farm Cool The with Sustainable agriculture methodologies also continue projects yet, The Gold Standard recently joined forces possible. toward eye an with – aggregation and ownership defiproject as nition, such issues tackle to protocol October in ACR by approved was and Dakota North organization will also buy offsets from the fithe from offsets buy also will project organization rst road-test wetlands, grasslands, and rice protocols, rice and grasslands, wetlands, road-test the work being done by ACR and CAR to develop and trade inDecember. cap-and- California under protocol rice a include to rice protocol.) The ARB is expected to vote on whether a has also (CAR states. rice-growing Mid-South the to California beyond methodology the of expansion the more to farmers smallholder enable will hope they those offsets meet the criteria of the current regulation sophisticated. more become and – proliferate to from preventing conversion to crop production. The production. crop to conversion preventing from livestock graze,wasapprovedinApril2014. ehdlg t icroae vie grasslands avoided incorporate to methodology 8. Regional Market Deep Dive 65 2013 $4.8/t 0.3 Mt $86 M 18.2 Mt e worth of 2 e in the region. 2 65 2012 $8.1/t 0.2 Mt $50 M 6.2 Mt e – similar to the global 2 7 million hectares e – but signifi cantly e lower – but signifi 956 million hectares 2 2011 1.9 Mt $73 M 7.7 Mt $10.3/t the world). Market Snapshot All Markets, 2013 Land and project area Land and project State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State Forest Trends’ Ecosystem Marketplace. Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. ’s ’s record volume was in part due to the 2013 Table 18: Latin America by the Numbers, Table 18: Latin America Volume purchased domestically Value Average price Year Document Volume supplied** Total forest area* Carbon project area # projects represented in 2013 projects based in Latin America while volume purchased projects based in Latin America while volume based in Latin America (from projects based anywhere in based in Latin America (from projects based domestically is the number of offsets purchased by buyers domestically is the number of offsets purchased Notes: **Volume supplied is the number of offsets sold from Notes: **Volume supplied is the number than 2012’s average price of price $8.1/tCO average than 2012’s reached maturity and issued unprecedented numbers numbers unprecedented issued and maturity reached Brazil of tonnes (see section 1.3). section (see tonnes of Latin Latin America was $4.8/tCO saw saw dropping prices in a year when many projects development development bank KfW to deliver 8 MtCO due due entirely to large transaction volumes as prices declined. The average forest carbon offset price in emissions emissions reductions over four years. Historically a average average price of $4.7/tCO agreement between the state of Acre, Brazil and German and Brazil Acre, of state the between agreement Source: Total forest area from FAO 2010; All other data from Source: Total forest area from FAO 2010; American projects originated from REDD projects that The vast majority (95%) of offsets contracted from Latin Latin from contracted offsets of (95%) majority vast The e 2 e and 5.1 MtCO2e, 2 they want to invest in 8. Regional Market Deep Dive Deep Market 8. Regional because land area is currently under carbon management, respectively, respectively, and together accounting for 40% of from 65 projects (and one jurisdiction). More than half More than half one jurisdiction). (and 65from projects region to voluntarily offset their emissions. for North American-based forest carbon projects and transfer” are beginning to blur a bit as California’s tropical forests – while the majority of offset demand the need to manage forests for carbon in the face of runaway climate change. this report series has tracked forest carbon projects Propelled by emerging jurisdictional REDDPropelled by jurisdictional emerging programs overall, overall, contracting 11.8 MtCO of of all forest carbon offsets and 70% of REDD tonnes by region and takes a look at supply and demand as Buyers Buyers from Europe, Oceania, and within Latin Enhancing carbon sequestration in forests and worldwide worldwide originated in the region. Brazil and Peru countries supplier offset carbon forest two top the were well as major transactions and policy developments in developments policy and transactions major as well specifi c countries. specifi shows that the majority of offset supply comes from 8.1 Latin America: Breakout Year Year Latin America: Breakout 8.1 global market value. market global developing countries in Latin America, Africa, and endeavor, and buyers of forest carbon offsets often engage in the market volumes volumes in 2013, contracting more than 18 MtCO and and demand for offsets sourced from the Amazonian as private-sector actors in emerging economies such as Brazil and Colombia seek out projects within the a specifi ca place. specifi While less than 1% world’s of the agricultural landscapes is inherently a location-based carbon carbon projects in 14 Latin American countries last year. However, this chart-topping market value was cap-and-trade policy creates a compliance market comes from “emitter” countries in Europe and North companies, and communities increasingly realize America America channeled a record $86 million to forest America. However, the lines of this “North-South Asia – many of them containing rich but threatened A zoomed-out view of the global forest carbon markets carbon forest global the of view zoomed-out A This section breaks down 2013’s forest carbon market market carbon forest 2013’s down breaks section This “lungs of the Earth,” Latin America tripled its transaction transaction its tripled America Latin Earth,” the of “lungs “gaining ground” over the years as governments, 66 8. Regional Market Deep Dive 16 active forest carbon projects in Brazil, 13 of which of 13 Brazil, in projects carbon forest active 16 State CarbonMarkets oftheForest 2014 huh ce tl te ptih ls ya, ay pro- many year, last spotlight the stole Acre Though Agents15to(thedistinct home state isethnic groups Acre’s regional Association of Indigenous Agroforestry And early in 2014, Mato Grosso became the second the became Grosso Mato 2014, in early And cutting-edge payment for ecosystem services (PES) services ecosystem for payment cutting-edge t h sae ee. hs dvlpet pvd the paved developments These level. state the at endangered rainforest. Three months later, the Paiter the later, months Three rainforest. endangered development from deforestation. which territories), indigenous 35 among dispersed jects outside of the jurisdiction also reached important way for the KfW agreement through Germany’s REM REM Germany’sthrough agreement KfW the for way Services Services (called “SISA” from the Portuguese acronym) Suruí community sold 120,000 tonnes of carbon offsets rzla sae atr ce t cet a regulatory a create to Acre) (after state Brazilian ED rjc i Mt Gos wih n ue 2013 June in which Grosso Mato in project REDD pilot VCS’s JNR framework to reduce deforestation reduce to framework JNR VCS’s pilot became the fi rst indigenous REDD project under project REDD indigenous fi rst the became flmoney toagreement, ows the Under Programme. in 2010 and in 2012 became the fithe tobecame jurisdiction 2012 rst in and 2010 in hn itiue i t spot nieos territorial indigenous support to it distributes then a established Acre industries, cattle and timber the by threatened was that economy tapping rubber- framework forREDD+. from to Brazilian cosmetics giant Natura Cosméticos. Natura giant cosmetics Brazilian to from saving by offsets generate to standard VCS the Suruí Paiter the was them Among offsets. transacted law, the State System of Incentives for EnvironmentalIncentivesfor of System State law,the milestones in 2013. Ecosystem Marketplace tracked Marketplace Ecosystem 2013. in milestones aaeet ln (r lf pas) ht decouple that plans”) “life (or plans management Notes: Basedonresponsesfrom 62suppliers.Percentvaluesarebasedonthevolumesassociated withindividualquestions. Latin America Table 19:LatinAmerica:TransactedForestCarbonOffsetTypesandBuyers,AllMarkets,2013 Oceania Europe Buyer Locations REDD IFM A/R Project Type Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2014. 65% 28% 94% 4% 3% 4% Top TransactedForestCarbonOffsetTypes,2013 Top ForestCarbonOffsetBuyerTypes,2013 Project IdeaNote Carbon Market Verifi ed Energy Issued Other Buyer Sectors Project Stage Task Force that promotes jurisdictional REDD activities, 2014, which draws a clear connection between water water between connection clear a draws which 2014, omnte ta fro hi lgig ihs Partly rights. logging their forgo that communities projects. charismatic reported developers project other However, year. and forest conservation and establishes an “incubator” “incubator” an establishes and conservation forest and Congress unanimously passed its PES law in June June in law PES its passed unanimously Congress state of Campeche use offset sales to compensate to sales offset use Campeche of state the in project IFM Calakmul de Amigos the as such country’s the of 80% of upwards that means system many with country a in buyers for competition stiff ih 0 cie rjcs n h cuty collectively country the in projects active 10 with rjcs Mxc’ unique Mexico’s projects. Peru because of the slant towards IFM projects with high with projects IFM towards slant the of because last offsets transacting – REDD mostly – projects Peruvian14 with country, the in developmentproject in October2013. including San Martín, Loreto, and Ucayali which joined country’s the making, the in years action Six carbon future. the forest in more for poised be may Peru forests are community-owned, and carbon projects carbon and community-owned, are forests IFM from mainly offsets, million a half transacting regional and local governments to create PES projects. support will Environment of Ministry the which through Five Peruvian states are already active within the GCF GCF the within active already are states Peruvian Five Mexico ranked third in Latin America in terms of volume, national climate talks in December motivated some some motivated December in talks climate national ’s status as the host of the next round of inter- of round next the of host the as status ’s 15% 32% 45% 89% 3% 7% Resale tovoluntaryend To demonstrateclimate Internal/proprietary Corporate social responsibility leadership Plan Vivo Buyer Motivations users VCS Standard Use ejido ejido ad governance land 14% 44% 34% 69% 29% 1% 67 8. Regional Market Deep Dive Mt e, which e, <0.1 2013 $3.4/t 2 $19 M 5.6 Mt e, the lowest 2 19 N/A 2012 $7.2/t $22 M 3.1 Mt 1.8 million hectares 674 million hectares 674 million N/A 2011 $6.1/t $24 M 4.7 Mt to be at a critical crossroads Market Snapshot Land and project area Land and DRC State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State Forest Trends’ Ecosystem Marketplace. Forest Trends’ Ecosystem Marketplace. . State of the Forest Carbon Markets 2014 Volume purchased domestically Average price Value Year Document Volume supplied** Total forest area* Total forest Carbon project area # projects represented in 2013 from projects based in Africa while volume purchased from projects based in Africa while volume Notes: **Volume supplied is the number of offsets sold Notes: **Volume supplied is the number Table 20: Africa by the Numbers, All Markets, 2013 All Markets, Africa by the Numbers, Table 20: domestically is the number of offsets purchased by buyers domestically is the number of offsets purchased based in Africa (from projects based anywhere in the world). based in Africa (from projects based anywhere muted by the civil war that plagued the DRC since the since DRC the plagued that war civil the by muted might stability political increasing However, mid-1990s. results in a regional average price of $5.8/tCO of price average regional a in results transactions in Africa. the voluntary standard. result in forests falling under threat from development, of any region. Excluding signifi cant of outliers, any however, region. Excluding signifi is more representative of the majority of forest carbon offsets transacted in the region. Given the dominance predictable is VCS the of use widespread the REDD, of between sustainable development and widespread REDD offsets represented the vast majority of the were priced at an average of $3.4/tCO which could release 140 billion tonnes of GHGs. To deforestation. deforestation. The usual threats to forests – logging ensure that development does not come at the expense the at come not does development that ensure area in the world (after Brazil), many stakeholders and – have historically been consider the Source: Total forest area from FAO 2010; All other data from Source: Total forest area from FAO 2010; As the country that contains the second-most forest – 99% of projects in the region were developed under e, e, contributing 2 e from the Tolo 2 became the fi rst countrybecame to the sign a fi e for the emissions reductions. reductions. emissions the e for 2 e, a jump of more than 80% from the 3.1 2 e reported in 2012. However, the overall value Costa Rica 2 modestly modestly to market value in the region. In September mitigation activities, and the carbon markets have yet letter letter of intent with the World Bank’s FCPF to receive Forest Forest carbon projects in Argentina, Bolivia, Costa FCPF’s Carbon Fund have expressed a willingness to to a willingness expressed FCPF’s have Carbon Fund to Latin American buyers. In many cases, these buyers buyers these cases, many In buyers. American Latin to the compliance program. compliance the to resolve the supply-demand imbalance driving down driving imbalance supply-demand the resolve to their tropical forests in 2013 with an assist from the 53%, respectively. Offsets from Africa-based projects 5.6 MtCO MtCO Panama Panama collectively sold 0.7 MtCO initiatives. initiatives. Along with Acre, Chiapas MOU with signed California that an offers a pathway for their international community, particularly the government of of offsets from Latin America. However, projects participation participation in the US state’s cap-and-trade system of of Yucatan peninsula, are in the process of working on REDD readiness through training and legislative opportunity opportunity costs, Mexican offsets fetched prices that pay $5/tCOpay prices for REDD offsets. of Norway. However, a lack of nancial fi resources Rica, Colombia, Ecuador, Guatemala, Nicaragua, and and Nicaragua, Guatemala, Ecuador, Colombia, Rica, River REDD project in the Chocó. the in REDDRiver project were 20% higher than the average in Latin America. higher than the average were 20% seek to support forest carbon projects within their own own their within projects carbon forest support to seek Chiapas, Chiapas, Oaxaca, Jalisco, and the tri-state area 340,000 hectares. Though the ultimate terms of the 8.2 Africa: Shattering REDD Volume Records Records 8.2 Africa: REDD Volume Shattering $63 million for the regeneration of forests across developers also saw modest demand within the region, region, the within demand modest saw also developers energy energy companies purchased more than two-thirds and average price for these projects declined 14% and 14% declined projects these for price average and as 4% of offsets originating in Latin America were sold sold were America Latin in originating offsets of 4% as acted offsets last year, many Mexican states, including including states, Mexican many year, last offsets acted agreement agreement are yet to be negotiated, investors in the and Uganda committed to major initiatives to conserve to initiatives major to committed Uganda and country – for instance, the Colombian oil services fi rm rm fi services oil Colombian the instance, for country– continues to challenge efforts to scale up forest carbon forest up scale to efforts challenge to continues Independence bought 20,000 tCO In 2013, projects in the region transacted a record On the buyers’ side, European offset retailers and 2013, African countries such as Zimbabwe, the DRC, Kenya, DRC, the Zimbabwe, as such countries African Though Though few Mexican REDD projects actually trans- – if decide to offsets regulators allow international into 68 8. Regional Market Deep Dive State CarbonMarkets oftheForest 2014 t h ntoa lvl te R ws cetd into accepted was DRC the level, national the At (HFZ) primarily caused by cocoa farming continued farming cocoa by caused primarily (HFZ) In addition to the DRC, many other African countries African other many DRC, the to addition In an average price of $4.3/tCO of price average an and Plateaux using the UN REDD+ mechanism. VCS mechanism. REDD+ UN the using Plateaux and n dfrsain n hn’ Hg Frs Zone Forest High Ghana’s in deforestation and avoiding deforestation. are actively pursuing REDD readiness funding streams decision on funding forthcoming (they pursued $60 pursued (they forthcoming funding on decision developed countries will someday direct billions to billions direct someday will countries developed s ekn nal $. mlin n combined in million $6.7 nearly seeking is Ghana 300,000 hectares. In 2013, these projects generated projects these 2013, In hectares. 300,000 Cocoa Forest REDD+ Program aims to signifito aims cantly Program REDD+ Forest Cocoa nbtd o svrl eae, u te country’s the but decades, several for unabated f owy o io JR conig rmwrs in frameworks accounting JNR pilot to Norway of is government DRC the forests, rich country’s the of projects are active in the country, projecting nearly projecting country, the in active are projects Mai Ndombe. in hopes that national emissions reductions targets in targets reductions emissions national that hopes in eevd $. mlin rn fo te government the from grant million $1.4 a received Ndombe Mai of districts the in – England of size the reduce emissions across the HFZ. The funding will funding The HFZ. the across emissions reduce Carbon and Readiness FCPF’s the from funding the $3.4/tCO FCPF’s Carbon Fund pipeline in June 2014, with a fi nal Funds to back its REDD+ efforts. The degradation The efforts. REDD+ its back to Funds launching a new pilot program to safeguard nearly nine million hectares–10%oftheDRC’sforestsinanarea more than 1.3 MtCO 1.3 than more million through 2020). Meanwhile, several smaller-scale Notes: Basedonresponsesfrom 62suppliers.Percentvaluesarebasedonthevolumesassociated withindividualquestions. North America Europe Buyer Locations REDD A/R Table 21:Africa:TransactedForestCarbonOffsetTypesandBuyers,AllMarkets,2013 Project Type 2 e averagepricefortheregion. Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2014. 2 e of forest carbon offsets sold at sold offsets carbon forest of e 65% 95% 35% 2 4% e – which is more than more is which – e T op TransactedForestCarbonOffsetTypes,2013 Top ForestCarbonOffsetBuyerTypes,2013 Retail productmarket Carbon market Energy Issued Buyer Sectors Project Stage has eight REDD+ pilot projects fiprojects pilot REDD+ Tanzaniaeight has by nanced Africa-based projects reported that an average price average an that reported projects Africa-based zania Forest Conservation Group. “The price of carbon 2016. Since September 2009, NGO Tanzania Forest Tanzania NGO 2009, September Since 2016. covers nearly 175,000 hectares. The project focused project The hectares. 175,000 nearly covers and grievance redress mechanism. Ghana’s Forestry Ghana’s mechanism. redress grievance and benefithe developing and engagement, and t-sharing equitable incentives to communities to conserve and conserve to communities to incentives equitable go towards developing and implementing the forest the implementing and developing towards go osrain ru hs okd n 5ya pilot 5-year a on worked has Group Conservation com- be will readiness REDD+ expects Commission says Charles Meschak, Executive Director of the Tan- the of Director Executive Meschak, Charles says Beyond the REDD+ readiness phase, however, com- however, phase, readiness REDD+ the Beyond on demonstrating interventions that can be made at the that Norway of government fi the project by nanced billon dispersed by Norway’s International Climate and $1.7 the of 2% received country African the – Norway plete by2015. n h vlnay akt s o lw o ti t make to this for low too is market voluntary the on f $7.4/tCO of is expected to offi cially begin implementing REDD+ in incentivize behaviors that do not result in deforestation, term project development – about $4/tCO the currentaverageprice. rational economicsenseforcommunities,”hesays. Forest Initiative over the 2008-2013 time period – and – period time 2008-2013 the over Initiative Forest local level to reduce emissions via a model that directs monitoring and MRV system, stakeholder consultation uiis ut eev suffi receive benefi cient must tsto fi nancial munities manage theforestssustainably. 100% 48% 35% 8% 2 fr ED fst wud upr long- support would offsets REDD for e Anticipation ofdirect Resale tovoluntary Corporate social responsibility regulation Buyer Motivations buyers CDM VCS Standard Use 2 e morethan 10% 83% 99% 1% 1% 8. Regional Market Deep Dive 69 e. 2 e, e, according to an 2 e in 2013. Due to the the to Due 2013. in e 2 committed to new steps to eliminate 1 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State Wilmar, “No Deforestation, No Peat, No Exploitation mangrove mangrove restoration, and rural energy projects. The last year. One of A/R the largest last year. in the region projects lower lower volumes, the total value of Asia-based forestry Policy,” Dec. 5, 2013. Available at: http://www.wilmar- international.com/wp-content/uploads/2012/11/No-Defores- highest rate of forest loss. Facing pressure from NGOs from pressure Facing loss. forest of rate highest tation-No-Peat-No-Exploitation-Policy.pdf readiness effortsreadiness in hopes of tapping into the millions deforestation. stop to the project passes the scrutiny of the Designated funded by European companies to fi nance agroforestry, agroforestry, nance fi to companies European by funded of coast northern the on located is project Yagasu fund’s is belongs to the Livelihoods Fund , an investment fi rm fi investment an , Fund Livelihoods the to belongs is of dollars earmarked by Norway and multilateral funds funds multilateral and Norway by earmarked dollars of be eligible for use by compliance entities as long as Authority. National of their emissions under the carbon tax, generating participants are waiting to see participantsto waiting how are the play will policy decisions. investment any making out before increasing in intensity with climate change. climate with intensity in increasing offsets offsets fell tCO34% to $21 million although $7.6/ the to average 8% by increased offsets the for paid price Reforestation Reforestation – particularly of coastal mangroves – in Deforester which in 2013 displaced Brazil as the country with the , where a 2004 tsunami killed 170,000 people. people. 170,000 2004 a killed where tsunami Sumatra, Compliance entities may use offsets to cover up to 10% 10% to up cover to offsets use may entities Compliance 8.3 Asia: Indonesia Displaces Brazil as Top Displaces Brazil8.3 Asia: Indonesia Top as deforestation from their supply chains, many of which of many which chains, from supply their deforestation MtCO 2.8 to 40% nearly declined fi rst line of defense against the hurricanes and typhoons and hurricanes the against defense of line rst fi and and other Asian countries ramped up their REDD+ and consumers, major palm oil suppliers such as Asian a potential demand of 30 MtCO analysis analysis by project developer Camco Clean Energy. can be traced to the continent. Meanwhile, Indonesia can be Indonesia to traced the Meanwhile, continent. carbon carbon offsets transacted from Asia-based projects Indonesia Indonesia and other Southeast Asian countries is the Given Given the increasing focus on deforestation in Asian 1 Asia-based forestry and land-use transaction volumes volumes transaction land-use and forestry Asia-based Agri Agri and Wilmar A/R projects accounted for two-thirds of the forest The fi ght to The save fi Asia’s forests starts in Indonesia, Though Though the potential is significant, some market Kenya received prices near that e offsets transacted in that country was $7.3/ 2 e, reaching a total value of more than $8 million 2 n early 2014, a project in the Nyanza and Western million investment in the Taita Hills project, which market. The World Bank’s BioCarbon Fund committed Fund BioCarbon Bank’s World The market. more than 217,000 hectares in 2013. Wildlife Works’ largest largest national parks in the world. The program will released early in 2014 gave insight to the offset the Kyoto Protocol’s CDM. But the European Union that largely pushed traditional CDM heavyweights facilitates evaluation of a landscape in its entirety, not farmers on 45,000 hectares to, for the fi rst time, monitor time, rst fi the for to, hectares 45,000 on farmers their soil carbon cation– thata allows quantifi them to bring those metric tons of sequestered carbon to reductions, emissions of tonnes 150,000 purchasing to to be issued VCUs for REDD under VCS, and a roster Microsoft and Coca-Cola. from the project, including tCO in this change, but less than 3%, or 246 CDM projects, CDM 246 or 3%, than less but change, this in instituted a ban on CDM offsets from non-LDCs (least- pending pending national compliance carbon market on the project in that Wildlife Works developed an avoided between 2009 and 2016. Provinces in rstKenya tobecame earnthe offsets fi Projects based in ideal threshold, as the average price MtCO for the 1.1 of big-name international companies purchase offsets purchase companies international big-name of South Africa’s proposed carbon tax – the only will cover most of the forest wilderness area outside of Tsavo National Park, in one of the the Kenyan under under VCS, Gold Standard, CCB, and CDM that will up only 1% of Africa’s transactions last year. under the VCS’ sustainable agriculture methodology. Kasigau Corridor REDD rstproject project was the fi strong role for offsets – including forestry – developed – forestry including – offsets for role strong start was pushed back to 2016. But a policy paper such as China and India out of the market. Project just forests. developers saw opportunity for Africa-based projects developed developed countries) registered post-2012, a move generate REDD+ offsets from protection of the forest estimated at $600,000, generated by the project are based in the region, and A/R CDM projects made as a potential host of carbon offset projects under and savannah. The project differs from the Kasigau comp onent of the program. comp The paper carves out a continent – dealt with another delay as the program’s conversion of grasslands system methodology that In March, the Althelia Climate Fund agreed to a $10 I On the compliance side, Africa has been overshadowed been has Africa side, compliance the On The Kenya Agricultural Project recruited 60,000 – the most in the region. These projects protected 70 8. Regional Market Deep Dive State CarbonMarkets oftheForest 2014 h mgiue f h dfrsain hleg in challenge deforestation the of magnitude The Source: TotalforestareafromFAO2010;Allotherdata projects basedinAsiawhilevolumepurchaseddomestically 2013 after holding less than 1% of the market in 2012. GHG emissions 41% by 2020 – a goal that will require require will that goal a 41% – emissions 2020 by GHG Indonesia scheduled to end in May 2013, but extended Indonesia captured the attention of the international the of attention the captured Indonesia community. Norway pledged $1 billion in May 2011 to the in traction gained initiatives REDD+ countries, fiNorway and Indonesia between nancing agreement The forests. its fi protect to Indonesia’s efforts nance indigenous peoples to the forests and developing a developing and forests the to peoples indigenous in logging new on moratorium two-year a included billion price-tag. price-tag. billion iceberg in a country featuring 90 million hectares of hectares million 90 featuring country a in iceberg Marketplace’sthe of tip the survey.bewould that But hog 21. noei cetd RD+ Task REDD+ a created Indonesia 2015. through Force that contributed to strengthening the rights of rights the strengthening to contributed that Force forests. Indonesian offi cials aim to reduce thecountry’s in share market 22% a for accounted REDD region. Forestprojects carbon offset protected more than 1.8 massive forest protection efforts, with an estimated $5 million hectares in Indonesia is thenumberofoffsetspurchasedbybuyersbasedinAsia Notes: **Volumesuppliedisthenumberofoffsetssoldfrom Table 22:AsiabytheNumbers,AllMarkets,2013 2013 represented in # projects area Carbon project Total forestarea* supplied** Volume Year Document Value Average price domestically purchased Volume (from projectsbasedanywhereintheworld). State oftheForestCarbonMarkets2014. Forest Trends’EcosystemMarketplace. Land andprojectarea Market Snapshot 2.2 Mt 0.3 Mt $6.7/t 2011 $6 M 547 millionhectares 0.2 millionhectares , according to Ecosystem 4.6 Mt $32 M 0.3 Mt 2012 $7/t 12 2.8 Mt $21 M 0.1 Mt $7.6/t 2013 “We’ve spent years 50 developing this economy, and if elsewhere,” a massive economichit, and production will just go we simply stop producing palm oil, we will be taking Japan to switch over.” swap. This means identifying degraded land that could persuade the people who have palm-oil concessions concessions have who persuade the people palm-oil be used for palm oil and trying to see if there is away to ugig rsdn Ssl Bmag Yudhoyono Bambang Susilo President Outgoing In July 2013, confl icting land-use maps across different sectors and above that year’s levels – a change instigatedchangelargely a year’s levels– thatabove 3% than more rising from emissions its keep to aims bu 5 o goa GG msin – eesd a released – emissions GHG global of 5% about and other changes in land use that require a complete emissions to 25% below 1990 levels. Instead, Japan Instead,levels. 1990 below 25% to emissions Cai.and Lao established the REDD+ Agency – the fi rst national-level end of 2015. The second phase features wide-scale wide-scale features phase second The 2015. of end draft national REDD+ policyprovidesroadmapthat a nationalREDD+ draft UN-REDD Programme, UN-REDD fi nanced by a$30-million cash REDD+ preparations are also proceeding elsewhere proceeding also are preparations REDD+ Lam Dong, Ca Mau, Binh Thuan, Ha Tinh, BacKan, Tinh, Ha Thuan, Binh Mau, Ca Dong, Lam REDD+ body in the world – in September 2013 and 2013 September in – world the in body REDD+ program and abandoned its plans to reduce GHG GHG reduce to plans its abandoned and program by the country’s decision to shutter its nuclear powernuclear its shutter todecision country’s the by rvdn sgiiat iaca icnie sc as such incentives financial significant providing while years, three next the over dioxide carbon of tonnes billion one around capture could program 2014, May In Asia. in price remained constant. MtCO its agricultural economy. REDD for strategy national a developing with tasked is implementation of results-based REDD+ activities byactivities REDD+ results-based of implementation infusion from Norway and scheduled to last through the the country dropped out of the second phase of the of phase second the of out dropped country the the draft. Ecosystem Marketplace tracked less than 0.1 for implementation of REDD+ projects. The REDD+ REDD+ The projects. REDD+ of implementation for restructuring of not just the country’s forest sector, but thousands of land users across six pilot provinces:pilot six across users land of thousands the previous year, although the $6.7/tCO the althoughyear, previous the from the 2.7 MtCO 2.7 the from named Heru Prasetyo to head it in January.Prasetyoin it head to Prasetyo Heru named new licensing system and a process for reconcilingfor process a and system licensing new monies that fl ow to local communities, according to according flcommunities, that local monies to ow ministries. ministries. 2 s oe o h oiia Koo rtcl but Protocol, Kyoto original the to home is e transacted in India in 2013, a steep decline steep a 2013, in India in transacted e he says. says. he Vietnam 2 e e India-based suppliers transacted “So we have“So to engineer aland entered the second phase of the the of phase second the entered India – which accounts for 2 e average average e 71 8. Regional Market Deep Dive 3% 2% 97% 20% 75% Standard Use Standard VCS J-VER Buyer Motivations leadership responsibility driven mission Corporate social Pursuit of climate- To demonstrate climate State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State So far, forestry offsets are allowed only in 2 1% 5% 6% 33% 66% 82% Climate Economics Chair, CDC Climat, “Overview of 2 market were released, with the offsets named CCERs, from forestry and land use. But it forestry projects to materialize, the paper predicted. will take time for the majority of offset trades are unlikely to occur Paris-Dauphine University (Climate Economics Chair). in Chongqing. on industry and the energy sector,” says Wen Wang, preparing for a national system to launch in 2016. programs for up to 5-10% of obligations, although Hubei’s trading program and are likely to be eligible Climate Change Policies and Development of Emissions Scientifi cScientifi Director, Climate Economics Professor, up mitigation.” until 2016. sustainable grasslands – target emissions reductions short for China Certifi ed Emissions Reductions (CCER). Reductions Emissions ed Certifi China for short agriculture sectors because much more attention is now is attention more much because sectors agriculture after implementing seven pilot trading programs and In June 2012, the rules for China’s project-based offset offset project-based China’s for rules the 2012, June In Offsets exist as a compliance option in China’s trading China’s in option compliance a as exist Offsets As of March 2014, four new non-CDM methodologies Trading in China,” March 2014. – carbon sequestration, bamboo forestation, IFM, and “I want to see more innovative methodologies to scale “I want to see more methodologies on the forest and Project Stage Buyer Sectors Other Issued Validated Document Project Design Carbon Market Finance/Insurance Top Forest Carbon Offset Buyer Types, 2013 Top Forest Carbon op Transacted Forest Carbon Offset Types, 2013 Offset Types, Forest Carbon op Transacted T 1% 3% 22% 11% 67% 95% Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. Source: Forest Trends’ Ecosystem Marketplace. Table 23: Asia: Transacted Forest Carbon Offset Types and Buyers, All Markets, 2013 All Markets, Types and Buyers, Forest Carbon Offset Asia: Transacted Table 23: Project Type A/R IFM Asia REDD Buyer Locations Europe North America based on the volumes associated with individual questions. Percent values are based on the volumes associated with Notes: Based on responses from 62 suppliers. less expensive CERs from renewable energy projects for the bulk of the offset purchases needed to meet for neutralizing the emissions of c a event specifi or that the high price doesn’t matter, says Aya Marabini, forestry sector, almost all of them from IFM projects. from Domestic CDM and 59 projects from the J-VER). from the Domestic Credit System (Japan’s Domestic reduction) System. The J-Credit Scheme contains in the global carbon markets – behind the EU ETS – offsets in the world. Though IFM offsets are popular buy such small volumes of domestic forestry offsets only 30,000 tonnes from 11 projects. In addition, some projects transferred from the old systems (142 projects plants after the 2011 Fukushima disaster in a move that that move a in disaster Fukushima 2011 the after plants However, the government created a new streamlined Cooperation Centre. Japanese companies turn to CDM) and the J-VER (Japan’s ed verifi emissions China quickly became the second-largest player as part of a portfolio, Japanese companies typically a researcher at Japan’s Overseas Environmental about 60 new projects after one year, although the voluntary standard: the J-Credit System, which stems carbon neutral or other commitments. certifi ed offsets listedcertifi offi cial on site amountedthe to could increase fossil fuel use. use. fuel fossil increase could About 70% of J-VER offsets were issued from the J-VER offsets are the most expensive forest carbon 72 8. Regional Market Deep Dive Te rcs hs en xrml futaig” says frustrating,” extremely been has process “The State CarbonMarkets oftheForest 2014 carbon offset projects. “It’s very, very diffi cult as an diffi as very cult very, “It’s projects. offset carbon carbon pricing programs. In 2013, those efforts took a ahead of their federal governments by implementing by governmentsfederal their of ahead acted 2.5 MtCO 2.5 acted approves the avoided deforestation protocol. offset and-trade program. As of now, the program only allows either subject to carbon regulation anticipating or it. emitters must participate,must estimatedemitters 66% an meaning for Marketsfor eas n h ABs seset f fst projects. offset of assessment ARB’s the in delays carbon tradingscheme,”11Sept.2014.Availableat: domestic forestry offsets, but California could become assets/BPMR/SouthKorea/korea%20bpmr_summary_en.pdf 8.4 North America 8.4 North 4 Kevin Townsend, Chief Commercial Offi cer of Blue Offi of Commercial cer Chief Townsend, Kevin ore wih eeos oety n ohr ye of types other and forestry develops which Source, ot Kra ln t bps Cias ntaie and initiative China’s bypass to plans Korea South S eeoes eotd R rve o ter projects their of review ARB reported Developers Last year, North American project developers trans- developersproject American North year, Last REDD offsets REDD if the state’s Air Resources Board (ARB) However, only 10% of offsets may be surrendered be may offsets of 10% onlyHowever, of these tonnes sold to American-based buyersNorth become become the world’s second-biggest carbon emissions period – and the role of forestry offsets in particular in offsets forestry of role the and – period fithe duringprovided compliance total rst the of out of Korea’s total emissions will be included in the ETS. ness-Partnership forMarketReadiness, B-PMRMISSION KOREA: Industry-to-Industry Dialogue onEmissionsTrad- routinely took six to nine months and sometimes longer. h ost f aionas opine akt amid market compliance California’s of onset the the world’s top 10 carbon producers its of launch the with 2015 early in scheme trading the fi rst regulatory program to incorporate international remains uncertain. remainsuncertain. Forestry transactions declined 63% from 2012 despite nation-wide ETS. The small country is currently one of of one currently is country small The ETS. nation-wide idINL3N0RC2N720140911 ing &MarketReadiness.Available at:http://www.ieta.org/ http://in.reuters.com/article/2014/09/11/carbon-southkorea- major step forward with the launch of 3 InternationalEmissionsTrading Association(IETA)Busi- Reuters,“S.Koreaincreasesemissionscapinproposed elect US stateselect US andCanadian provinces are moving 2 e at a value of $20 million. The majority majority The million. $20 of value a at e : California’s GuidingLight 3

and the top Korean California ’s cap- 4

rud h tmn b wih R ms cmlt its complete must ARB which by timing the around n i or iw R saf hud ey oe n the on more rely should staff ARB view our in and effective complianceoption. California compliant offsets. The VCS accounted for accounted VCS The offsets. compliant California aionas oety rtcl a te ot widely most the was protocol forestry California’s California’s $10.7/tCO California’s system, especiallyontheearlyactionportionof sd wt nal 4% f oety rjcs n the in projects forestry of 40% nearly with used, ok hs pris o ahr hn rig o eet it repeat to trying than rather do parties these work oee, h aeae rc o frs cro offsets carbon forest of price average the However, been designed to incorporate expert verifi ers and verifi ers expert incorporate to designed been constraints regulatory no are there where program that through credits get to developer project offset n 03 ae abn fst a oprtvl cost- comparatively a offsets carbon made 2013 in n h rgo ol dopd 2 t $8.6/tCO to 12% dropped only region the in has program The time. long very a for court ARB’s in ein eeoe acrig o hs sadrs – standards those to according developed region review. We continue to wait for credits that have been have that credits for wait to continue We review. themselves.” ofoffsets, the integrity ensure certifi to registries ed not surprising given the higher prices generated for generated prices higher the givensurprising not Notes: **Volumesuppliedisthenumberofoffsetssoldfrom domestically isthenumberofoffsetspurchasedbybuyers based inNorthAmerica(fromprojectsanywhere projects basedinNorthAmericawhilevolumepurchased Source: TotalforestareafromFAO2010;Allotherdata 2013 represented in # projects area Carbon project Total forestarea* supplied** Volume Year Document Value Average price domestically purchased Volume Table 24:NorthAmericabytheNumbers, from ForestTrends’EcosystemMarketplace. State oftheForestCarbonMarkets2014. Land andprojectarea All Markets,2013 Market Snapshot 2 the world). $10.4/t e reserve price for allowances for price reserve e 6.9 Mt $70 M 6.0 Mt 2011 614 millionhectares 7 millionhectares 6.7 Mt $49 M 5.7 Mt $9.8/t 2012 30 2.6 Mt $22 M 3.3 Mt $8.6/t 2013 2 e as 8. Regional Market Deep Dive 73 7% 14% 15% 22% 68% 39% Standard Use VCS ACR Buyer Motivations regulation end users responsibility Corporate social Anticipation of direct Resale to compliance California Compliance e of forestry offsets – many of which 2 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State 7% 14% 49% 14% 51% 13% however, demand for voluntary offsets was somewhat somewhat was offsets voluntary for demand however, the Canadian province is not expected to pick up until until up pick to expected not is province Canadian the cap-and-trade the under included are distributors fuel to 10-20% of these portfolios at most. renewable energy and effi ciency space. space. ciency effi and energy renewable in Quebec could now theoretically purchase ARB- involved mixing large volumes of low-priced offsets ll methane category in with the more landfi expensive in the region, North American buyers continued to owances in November 2014. Though regulated entities regulated Though 2014. November in owances offsets from forestry, but purchases of these more program starting next year. program starting next purchase forest carbon offsets as part of voluntary with with California’s program and the two jurisdictions were eligible for California’s compliance offset market – – market offset compliance California’s for eligible were Overall, buyers. voluntary American North to sold were CSR dollars toward non-carbon offset initiatives in the the in non-carboninitiatives offset toward CSRdollars emissions reductions efforts. Many buyers took a are moving toward their fi rst offi cialjoint auction of all- rst offi are moving toward their fi approved forest carbon offsets, demand for offsets in charismatic and marketable offsets were often limited constrained constrained by buyers redirecting a portion of their offi cially linkedQuebec itsoffi cap-and-trade program Outside of the nascent subnational compliance markets compliance subnational nascent the of Outside About 1 MtCO “portfolio approach” to their offsetting programs that

Project Stage Buyer Sectors Other Issued Energy Verifi ed Verifi Retail product market Undergoing validation British Columbian British Top Forest Carbon Offset Buyer Types, 2013 Top Transacted Forest Carbon Offset Types, 2013 Top Transacted Forest Carbon Offset 2% 11% 98% 62% 26% . Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014 Project Type A/R IFM e ssions charge to for encourage GHG emi 2 Buyer Locations Europe Table 25: North America: Transacted Forest Carbon Offset Types and Buyers, All Markets, 2013 Table 25: North America: Transacted North America SALM/Agroforestry Notes: Based on responses from 62 suppliers. Percent values are based on the volumes associated with individual questions. market, and the standard accounted for a 6% share of share 6% a for accounted standard the and market, ments ments for developing offsets to be recognized as lower lower their emissions to zero through other means. All help help those offsets transition into the cap-and-trade taining carbon neutrality – fi rst achieved in 2010. Public 2010. in achieved rst fi – neutrality carbon taining the listing, reporting and verifi cation of offset projects of cation offset projects and reporting verifi the listing, the North American market in 2013. the North American market in 2013. PCT’s Pacifi c ned Carbon thePCT’s Standard require- Pacifi defi c Carbon Units. The standard Pacifi was originally ex- provincial public-sector organizations continue to pay North of the US-Canada border, the the border, US-Canada the of North program. VCS is the third organization to receive such such receive to organization third the is VCS program. program. program. In August, the ARB the designated VCS as However, the provincial government committed to main- to committed government provincial the However, sector organizations still purchase offsets if they cannot they if offsets purchase still organizations sector government dissolved the Pacifi cgovernment Carbondissolved Trustthe (PCT) Pacifi developed using the ARB’s compliance protocols and and protocols compliance ARB’s the using developed efforts to reduce emissions and energy costs. efforts to reduce emissions and energy a $25/tCO as part of a cost-saving maneuver in November 2013. a designation after ACR and CAR. and ACR after a designation aims to play a major role in California’s cap-and-trade California’s a in major role play aims to an offset project which registry, allows it to facilitate are now transacted by other parties for the voluntary clusively owned and transacted by PCT, but the units 22% of standard use in the region, and the organization organization the and region, the in use standard of 22% 74 8. Regional Market Deep Dive State CarbonMarkets oftheForest 2014 The ARB issued more than 6 MtCO2e of offsets of MtCO2e 6 than more issued ARB The The basics As it stands, the California program creates cha- creates program California the stands, it As Actual offset transactions for California’s program California’s for transactions offset Actual ARB plans to consider a REDD protocol that would 2014. The urban forestry protocol has produced has protocol forestry urban The 2014. In July 2014, the ARB offi cially amended its rules for IFM, avoided conversion, and urban forestry. The forestry. urban and conversion, avoided IFM, California’s Compliance Carbon Market and Forest Offsets 101California’s Compliance Carbon Market Offsets and Forest and they may purchase offsets to cover up to 8% of accept international avoided deforestation offsets deforestation avoided international accept emissions reduction legislation – went into effect into went – legislation reduction emissions Challenges date and is unlikely to do so because the protocol the because so do to unlikely is and date aionas opine a-n-rd market cap-and-trade compliance California’s state’s compliance regulations can be too cumber- too be can regulations compliance state’s sellers. The ARB decided to emphasize consistency sented a change from the previous rule that placed under AB 32 – the state’s landmark greenhouse gas under its forestry protocol as of early November early of as protocol forestry its under 2013-2014 developments project typesacceptedintoitsprogram. Ridges and the Maine-based Farm Cove Improved on January 1, 2013. About 350 entities are capped, in its treatment of the invalidation risk across all the to necessary volumes large the for impractical is based Willits Woods project developed by Coastal fithe California- generated the projects offsets: rst fi– component offset issued its nally and program program. fraud or a signifi cant calculation error – on the – signifi error a calculation or cant fraud to be invalidated in circumstances such as outright off for potential the – liability buyers’ of risk the sets repre- This buyers. the to offsets forestry for risk invalidation the shifting by projects carbon forest types are currently accepted for use in California: in use for accepted currently are types project AFOLU Three obligation. compliance their the DowneastLakesLandTrust. IFM fi Two the 2013. November in offsets forest rst cap-and-trade state’s the overseeing with tasked the into Mexico Chiapas, and Brazil Acre, from Forest Management Project from Finite Carbon and o abn fst fr h Clfri porm to program California the for offsets carbon no llenges for forest carbon project developers. The developers. project carbon forest for llenges make projects worthwhile, according to developers. materialized slowly in 2013. The ARB – the agency “The world is watching California to see if California be- market, this of outside sitting are “Landowners aray icuae b te egh issuance lengthy the by discouraged already – The future ARB publicly committed to consider REDD offsets REDD consider to committed publicly ARB VCS offi cials have high hopes for the potential in- potential the offi for VCS hopes high have cials F poet; F poet acutd o the for accounted projects IFM projects; IFM clusion of international REDD offsets in the Cali- the in offsets REDD international of clusion although the agency refused to commit to a timeline. a realopportunity.” Carbon Finite says upfront,” money of bit little a early as next year, when transportation fuels are fuels transportation when year, next as early gram to welcome international REDD offsets. The offsets. REDD international welcome to gram market California a to offsets carbon forest deliver and program, the in participating from – delays California’s 100-year permanence requirements for scale of jurisdictions rather than individual projects, subnational (state) level. The framework also es- also framework The level. (state) subnational be could crunch supply expected the to solution large than other anything for expensive and some Rising verifi cation costs preclude small landowners REDD+ programs. rgas mlmne a ete te ainl or national the either at implemented programs of theEarthInnovationInstitute. Director Executive and Scientist Senior Nepstad, partial One program. regulatory the into phased as starting shortage supply a face to projected to eager are developers project American North is going to implement REDD or not,” says Daniel says not,” or REDD implement to going is a as it see don’t “They Carney. Sean President to want they if wondering skeptical, somewhat ing integrated or “nested” within broader jurisdictional broader within “nested” or integrated that come from reduced deforestation at the larger a have all we think I yet. marketplace functional get to order in grandchildren and children their bind and years 100 next the for land their up tie forestry projectsservesasanotherdeterrent. inl uidcinl ciiis n poet t be to projects and activities jurisdictional tional subna- new and existing for pathway a tablishes REDD+ crediting and accounting for framework and jurisdictional VCS the using program fornia fithe become pro- to compliance California rst for nested REDD+ approach, which features the fithe features which approach, rst REDD+ nested little work to do to demonstrate to them that this is this that them to demonstrate to do to work little largest share of the North America market at 62%. at market America North the of share largest 8. Regional Market Deep Dive 75 2013 1.5 Mt $28 M 1.9 Mt $14.5/t 11 $8/t 2012 5.7 Mt $49 M 6.2 Mt e, e, but project developers 0.9 million hectares 2 191 million hectares 2011 0.8 Mt $15 M 1.8 Mt ’s ’s Emissions Trading System $12.4/t the world). Market Snapshot Land and project area State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014. based in Oceania (from projects based anywhere in Volume purchased domestically Average price Value Year Document Volume supplied** Total forest area* Carbon project area # projects represented in 2013 Notes: **Volume supplied is the number of offsets sold from projects based in Oceania while volume purchased domestically is the number of offsets purchased by buyers Table 26: Oceania by the Numbers, All Markets, 2013 Table 26: Oceania by the Numbers, less less expensive, international carbon offsets. In 2012, Forest Forest carbon offsets played a critical compliance For project developers, the policy change means reported no transactions specifi cally related to the ETS the to related cally specifi transactions no reported forestry forestry offsets in 2008 – in previous years. But that role diminished once the program began accepting role in New in role Zealand transitioning from companies to to transitioning selling regulated a in in this year’s survey. While forest New Zealand Units of of carbon offsets transacted for the NZ ETS at an Ecosystem Marketplace tracked about 200,000 tonnes about tracked Marketplace Ecosystem with with 30 forest carbon projects in Australia, says the shift will “block out” projects on the upper end of the single buyer: the Australian government, which made it it made which government, Australian the buyer: single average average price of $7.9/tCO a third of the $24.2 carbon tax (or less). less). tax carbon $24.2 the of (or a third compliance under the program in 2010, that amount fell fell amount that 2010, in program the under compliance cost curve as prices per tonne under the ERF under cost per tonne to curve as prices drop clear it will be looking to reduce emissions at the lowest lowest the at emissions reduce to looking be will it clear developer project a Group, Collar Green possible. cost (NZUs) (NZUs) constituted 65% of the units surrendered for (NZ (NZ ETS) rst – compliance the program to fi accept Source: Total forest area from FAO 2010; All other data from e of 2 e carbon tax 2 e after the $24.2/tCO 2 ’s Carbon Farming Initiative (CFI), the (CFI), Carbon Initiative ’s Farming Australia million in 2013, down from $49 million in 2012. However, knew that even prices just slightly under the tax would taxwould the under slightly just prices even that knew national carbon national tax with an ETS to linked the EU ETS the the average price paid for CFI offsets rose by nearly forestry and land-use offsets transacted in the region in in region the in transacted offsets land-use and forestry the the fund will be transacted on a competitive basis then in offi ce. ce. offi in then rhetoric contributed to his electoral victory – succeeded succeeded – victory electoral his to contributed rhetoric the near term. term. near the federal federal government followed through on a threat to repeal its carbon pricing program this Oceania, year. 50% to $19.8/tCO Minister Tony Abbott’s election in September 2013 cast cast 2013 September in election Abbott’s Tony Minister improving improving agricultural soils and res managing in fi in July 2014. Instead, Abbott – whose Instead, anti-carbon in July 2014. tax in the scrapping carbon program pricing in July after program that enabled farmers and landholders to earn earn to landholders and farmers enabled that program Prime as year last emissions, GHG reducing for offsets offsets offsets purchased through the program. To date, the be attractive. by nearly 70% in 2013 from the more than 6 MtCO 6 than more the from 2013 in 70% nearly by New Zealand, home of the second-oldest the ETS, homeof pulled Zealand, New out of the second phase of the Kyoto Protocol. The blip blip on the carbon market radar as the Australian Emissions Emissions Reduction Fund (ERF) through which the went went into effect in July 2012. for Therefore, the entire with with the idea of carbon markets these days, as even under under unlike other regions, appears to be less than enamored enamored than less be to appears regions, other unlike savannah savannah grasslands. offset However, purchases via several several futile attempts with the opposition legislature 8.5 Oceania: Policy Reversal Dampens Market Dampens Reversal Policy 8.5 Oceania: $1 billion more than initially pledged. pledged. initially than more billion $1 doubt on the future of the country’s carbon tax. carbon country’s the of future on the doubt government committed AUS $2.6 billion, which is about is which billion, $2.6 AUS committed government government government will pay for GHG emission reduction at at auction, which will limit the amount of carbon activities activities that ts, deliver such valuable as co-benefi as as a less expensive compliance option – and sellers absence of strong compliance signals in either country either in signals compliance strong of absence year year of 2013, regulated entities sought out offsets could could continue to dampen carbon market activity in In In its place, the federal government established an Oceania’s Oceania’s forest carbon projects were valued at $28 Oceania’s 2012 market growth proved to be a temporary temporary a be to proved growth market 2012 Oceania’s 2012. Regulated entities scaled back offset purchases purchases offset back scaled entities Regulated 2012. The previous government planned to replace Australia’s Australia’s replace to planned government previous The The overall volume of Oceania transactions declined 76 8. Regional Market Deep Dive State CarbonMarkets oftheForest 2014 The infl ux of international offsets instigated a major instigated offsets infl international The of ux Australia decided to count forest management toward toward management forest count to decided Australia 2013, because of double counting. VCS projects that that projects VCS counting. double of because 2013, Owners Association about the government’s alleged government’s the about Association Owners In Australia, Ecosystem Marketplace tracked six VCS VCS six tracked Marketplace Ecosystem Australia, In carbon offsets transacted in 2013 in New Zealand at Zealand New in 2013 in transacted offsets carbon the Amid 2014. October in government the of control an averagepriceof$7.9/tCO generate offsets under the voluntary standard once standard voluntary the under offsets generate ipt bten h gvrmn ad h Forest the and government the between dispute standard for the bulk (85%) of Oceania forest carbon carbon forest Oceania of (85%) bulk the for standard ne itra/rpitr sadrs n 6 under 6% and standards internal/proprietary under 95% of internationalofcompliance 95%submittedfor offsets But the VCS determined these projects could no longer oiy netit, ny 500 ons f voluntary of tonnes 25,000 only uncertainty, policy proposals is uncertain since the National Party retained while NZUs, be compliance for surrendered offsets carbon the of 50% requiring legislation proposed Party Labour the response, In deforestation. prevent offsets, followed by 9% of forestry offsets developed offsets forestry of 9% by followed offsets, CFI the utilized developers project surprisingly, Not issued offsets before that date retain those offsets, but 1, January beginning target reduction emissions its in favor of an emissions tax. However, the fate of both both of fate the However, tax. emissions an of favor in the Green Party proposed scrapping the ETS entirely entirely ETS the scrapping proposed Party Green the to activities domestic back sufficiently to failure than more the tocompared2013, in 0.3% of low a to forestry projects that transacted just over 0.1 MtCO 0.1 over just transacted that projects forestry the VCS. last year, according to government data. Notes: Basedonresponsesfrom62suppliers.Percentvaluesarebasedthevolumesassociatedwithindividualquestions. SALM/Agroforestry North America Oceania Europe Buyer Locations REDD IFM Project Type Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. Table 27:OceaniabytheNumbers,AllMarkets,2013 2 95% 11% 81% e. e. 2% 3% 4% T op TransactedForestCarbonOffsetTypes,2013 Top ForestCarbonOffsetBuyerTypes,2013 Undergoing validation Retail productmarket Carbon Market Energy Issued Buyer Sectors Project Stage 2 e. e. Amount Unit to guard against double counting – an – counting double against guard to Unit Amount Voluntary purchases of forest carbon offsets produced VCS to shift to the ERF, allowing projects protecting projects allowing ERF, the to shift to VCS cannot issue offsets for emission reductions after that that after reductions emission for offsets issue cannot although certain voluntary domestic programs could programs domestic voluntary certain although a 100% increase from 2012, as buyers in the United United the in buyers as 2012, from increase 100% a emissions reductionsandbiodiversitybenefi ts. estic IFM and agroforestry offsets. The overall value of of value overall The offsets. agroforestry and IFM estic ae uls te oenet acl a Assigned an cancels government the unless date, global average forest carbon prices, despite the 65% drop 8.6 Europe: Domestic Programs in UK, Italy inUK,Italy Programs Domestic 8.6 Europe: niey rpsto. oee, h gvrmn will government the However, proposition. unlikely igo, tl, n ohr onre tpe it dom- into tapped countries other and Italy, Kingdom, within Europe are limited because parties to the Kyoto Expand European buyers are consistently the major purchasers Europe-based projects was $8 million. Average prices on Europe-based projects was $8 million. Average prices on permit Australian-based projects approved under the the under approved projects Australian-based permit projects located within Europe). The region’s share of of share region’s The Europe). within located projects (and 2013 in Africa and Asia in projects from transacted offsets of majority vast the procuring world, the around projects from offsets carbon forest of be ramping up activity in the future. be rampingupactivityinthefuture. in Europesellintomostlyinsular domesticmarkets. rjcs n uoe rnatd . MtCO 0.5 transacted Europe in Projects in price from $41/tCO the global market on the supply side remains small, remains side supply the on market global the the continent were $14.5/tCO were continent the native forests on private land to continue to deliver to continue to land private on forests native 95% 41% 46% 5% 3% To demonstrateclimate Resale tovoluntaryend Resale tocompliance Internal/proprietary 2 e in 2012 – because many projects e in 2012 – because many projects leadership end users Buyer Motivations users VCS CFI 2 Standard Use e – almost three times the the times three almost – e offsets from all offsetsfrom 2 e, more than e, morethan 87% 99% 85% 24% 9% 6% 8. Regional Market Deep Dive 77 $8 M 2013 9.2 Mt 0.5 Mt $14.5/t 19 $41/t 2012 $11 M 0.3 Mt 11.4 Mt e last year, the most of e last year, the most of 2 196 million hectares 196 million <0.1 million hectares $2 M 2011 9.4 Mt 0.6 Mt $14.2/t the world). Market Snapshot Land and project area Land and State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State offset retailers Forest Carbon Group and Group Carbon Forest retailers offset Forest Trends’ Ecosystem Marketplace. Forest Trends’ Ecosystem Marketplace. . State of the Forest Carbon Markets 2014 German based in Europe (from projects based anywhere in based in Europe (from projects based anywhere Volume purchased domestically Average price Value Year Document Volume supplied** Total forest area* Total forest Carbon project area # projects represented in 2013 Notes: **Volume supplied is the number of offsets sold Notes: **Volume supplied is the number from projects based in Europe while volume purchased from projects based in Europe while volume domestically is the number of offsets purchased by buyers domestically is the number of offsets purchased Table 28: Europe by the Numbers, All Markets, 2013 All Markets, Europe by the Numbers, Table 28: management. At least two of them joined forces last Forest Finance Group pooled their sales operations the Gold Standard and the VCS in June 2013. Project developers and retailers with headquarters in projects located in Europe. The vast majority of these offset emissions through domestic forestry projects. Nucleo Monitoraggio has drafted an Italian Forest Because of close relationships between buyers and Europe supplied 12.9 MtCO suppliers are for-profi t companies, some of which have which of some companies, t for-profi are suppliers sellers, most forestry projects in Italy don’t use carbon standards. However, a stakeholder group called Code that specifi es the rules for forest carbon projects carbon forest for rules the es specifi that Code Code is currently being considered by the Ministry of going beyond Kyoto Protocol requirements. The any region, even though there are few forest carbon vince, though private sector food and beverage and portfolio of edforest under carbon projects verifi years of experience working with companies on carbon on companies with working experience of years year: companies such as pasta maker Jolly Sgámbaro also Agriculture and Forestry. Source: Total forest area from FAO 2010; All other data from Source: Total forest area from FAO 2010; e. 2 removed from 2 emissions. However, the UK e have been validated under 2 2 e. Eighty-nine projects estimated 2 UK Forestry Commission launched the WCC in Italy’s forest carbon market is similarly inward-facing, land or buy the rights to the carbon sequestered in to incentivize local action on forestry. The WCC the is standard for woodland creation projects in the tonnes of forest carbon offsets developed according to according developed offsets carbon forest of tonnes in 2013. the WCC standard to sequester 1.5 MtCO tonnes of offsets were sold from forestry projects. the WCC, representing an increase of 2% in projected to to report their gross CO the atmosphere by growing trees. Under the program, forests against their national emission reductions targets, creating a double counting conundrum. to deliver woodlands emissions reductions is sequestration carbon and in grow trees the once future the the Markit Registry last year and originally listed only their annual emissions reporting – one of only two cases two only of one – reporting emissions annual their initiatives such as the “zero emissions” Trento Pro- Protocol sometimes count carbon sequestration in Pending Issuance Units (PIUs) that represent promises represent that (PIUs) Units Issuance Pending offsetting plans. other being Japan). The WCC Registry went live on offsets already sold. of a national government allowing voluntary offsetting However, However, small transaction volumes were reported Demand is driven by public-sector subnational Department for Environment, Food and Rural Affairs with Italian A/R and climate-smart agriculture initiatives agriculture climate-smart and A/R Italian with way with 47 validated projects covering 2,276 hectares 2,276 covering projects validated 47 with way Since Since April 2013, UK companies have been required woodlands established by others. Starting in March 2014, however, Markit began listing under under programs such as the UK’s Woodland Carbon selling offsets to Italian buyers. In 2013, nearly 70,000 sequester 5.7 MtCO Code (WCC), for which we tracked more than 66,000 UK ablethat Woodlandgenerate Carbonverifi Units expected to sequester more than 1 MtCO a 55% rise since September 2013. Scotland leads the as of September 30, 2014. These registered projects verifi ed. This allows potential buyers to make long-term make to buyers potential allows This ed. verifi allows UK companies to claim WCC projects against carbon carbon sequestration since the previous quarter and companies can establish woodlands on their own cover 15,389 hectares of woodland and are projected to projected are and woodland of hectares 15,389 cover claims claims against mandatory emissions reporting (the (WCUs) (WCUs) – measurable amounts of CO 2011 as a domestic voluntary carbon offset program A total of 201 projects were registered under the WCC The 78 8. Regional Market Deep Dive State CarbonMarkets oftheForest 2014 Notes: Basedonresponsesfrom62suppliers.Percentvaluesarebasedthevolumesassociatedwithindividualquestions. SALM/Agroforestry Europe Buyer Locations Table 29:Europe:TransactedForestCarbonOffsetTypesandBuyers,AllMarkets,2013 A/R Project Type Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. 100% 63% 36% T op TransactedForestCarbonOffsetTypes,2013 Top ForestCarbonOffsetBuyerTypes,2013 Undergoing validation Retail productmarket Finance/insurance Validated Energy Issued Buyer Sectors Project Stage 29% 33% 17% 50% 24% 26% Resale tocompliance Woodland Carbon Pursuit ofclimate- Corporate social driven mission responsibility end users Buyer Motivations Code None VCS Standard Use 44% 44% 10% 13% 73% 7%

9. Looking Ahead: Market Projections 79 2020 2020

e of forest

2 2019 2019

e in 2020.

2

2018 2018 2017 2017

e by 2020.

2

2016 2016 2015 2015

State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State 2014 2014 2012 survey predictions Historical growth rate (projection)

e forest carbon market by the end of the decade, the of end the by market carbon forest e

2 2013 2013

market participants projected 93 MtCO nomies such as China and South Africa as well as the nomies such as China and South Africa MtCO Market participants’ projections are now actually more actually now are projections participants’ Market pace, market size would be 81.8 MtCO performance programs such as the FCPF and the BioCarbon Fund Initiative Landscapes. Compliance for markets in emerging Sustainable eco- Forest Survey respondents in 2014 were cautiously optimistic cautiously were 2014 in respondents Survey since tempered: 2012’s respondents predicted an 80 UK’s Woodland Carbon Code (WCC), and pay-for- etplace in cantly2020 smallerthat thanis prior signifi even further, to 70 MtCO even further, to 70 and 2013. If this growth were to continue at a steady and 2013 respondents lowered their expectations about potential demand signals from jurisdictional and-trade system, voluntary initiatives such as the years’ respondents predicted. While two years ago carbon transactions in 2020, that projection has conservative than the historical market growth rate of compliance programs such as California’s cap- On a long-term basis, however, they foresee a mark- 14% – the year-on-year average growth between 2010 2010 between growth average year-on-year the – 14% 2012 2012

e e.

2 2

2011 2011

2010 2010

2009 2009 2008 2008 Notes: Based on predictions provided by 73 survey respondents. 2013 survey predictions Historical transactions volume

Figure 55: Project Developers Predictions, All Markets, 2012-2013 Figure 55: Project Developers Predictions, 2007 2007

. Source: Forest Trends’ Ecosystem Marketplace. State of the Forest Carbon Markets 2014

9. Looking Ahead: Market Projections Market Ahead: 9. Looking 2006 Pre-2006 Pre-2006 0 M 90 M 80 M 70 M 60 M 50 M 40 M 30 M 20 M 10 M Figure 55 shows that project developers’ predictions the face of policy challenges and ckle somewhat fi fast-moving developments make cult it to diffi real-time on performance market for projections base future forest carbon offset pricing. from the time when market participants complete their complete participants market when time the from transactions to the time they respond to this report insight into how suppliers of intend forest to navigate carbon challenges offsets in the voluntary and in 2013 – a bit under the actual volume of 32.7 MtCO 32.7 of volume actual the under bit a – 2013 in of transaction activity become more conservative in Nevertheless, Ecosystem Marketplace once again survey, and to the time this report is published. These governing these projects often cantly shifting signifi estimated that the market would transact 30 MtCO evolution, with the policy and technical requirements voluntary demand. This year’s survey respondents asked suppliers to “guesstimate” market size for the compliance-driven offset markets. current and future years. Their views provide valuable provide views Their years. future and current 9.1 Developer Predictions: Realism Reigns Predictions: Realism Developer 9.1 The forest carbon market exists in a constant state of 80 9. Looking Ahead: Market Projections Planned, compliance Though project developers and retailers reported that that reported retailers and developers project Though State CarbonMarkets oftheForest 2014 (see section 6, Buyers), perhaps lending to their sense consider climate change risks to be more immediate, immediate, more be to risks change climate consider carbon markets in 2013, market participants continue to also create the possibility of larger-scale compliance larger-scale of possibility the create also discussions policy international in REDD+ of ascent ead o frs cro ofes tog these though – offsets carbon forest for demand sustainability decisions and that companies now now companies that and decisions sustainability corporations of dozens that fact the in potential see of urgencytoneutralizetheiremissions. forest the to new were buyers voluntary of 11% only try to drum up private-sector interest in offsetting. They now have internal carbon pricing that is driving their their driving is that pricing carbon internal have now likely, and direct than they did just a few years ago ago years few a just did they than direct and likely, markets wouldtakeseveralyearstorampup. Existing, compliance Planned, voluntary Existing, voluntary Notes: Basedontheunsoldportfolios of53surveyrespondentsandthepipelines75 respondents. $1,826 M REDD Source: Forest Trends’EcosystemMarketplace. StateoftheForest CarbonMarkets2014. 0 Mt Figure 56:Developer-EstimatedPortfolioandPipeline,AllMarkets 0.1 0.3 1 4 5 5 0.7 5 Mt SALM/Agroforestry 10 Mt $229 M A/R 17 15 15 Mt 21 Tempering Expectations 9.2 Remaining andPipeline: Portfolios as theminimumpricefortheiroffsets. au i toe fst hd rnatd t 03 prices. 2013 at transacted had offsets those if value some developers to sell below what they established they what below sell to developers some would have added $119 million to the overall market overall the to million $119 added have would eeoes eand bu 2 MtCO 26 about retained Developers oee, bu 9 MtCO 9 about However, ED fst cntttd h bl o te unsold the of bulk the constituted offsets REDD rjc dvlpr set uh f at er waiting year last of much spent developers project portfolio at 17 MtCO 17 at portfolio fst i ter otois t h ed f 03 which 2013, of end the at portfolios their in offsets rm F poet, any n ot Aeia where America North in mainly projects, IFM from $35 M 20 Mt IFM A/R Agro-forestry 25 Mt 9 SALM/ $24 M 2 IFM e, partly owing to the refusal of refusal the to owing partly e, 0.2 2 30 Mt o usl ofes were offsets unsold of e REDD Planned, compliance Planned, voluntary Existing, compliance Existing, voluntary 35 Mt 2 o unsold of e 208 40 Mt 81 9. Looking Ahead: Market Projections which are 17 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State Ecosystem Marketplace, “Role of Carbon Markets Still level in California’s cap-and-trade program for now constitute the largest share of issued offsets in Evolving in Run-up to Peru Climate Talks,” http://www. the program and have publicly committed to consider regulators have not established a timeframe for the regulators amend the offset rules. the New York Declaration on Forests, which – with its completely and 2020 by half in loss forest cut to work to of estimates of short far falling date, to declaration the to achieve such admirable goals. the funding needed if the latter implements a national ETS in 2016, as in China already include forest offsets. implement an agreement. implement an agreement. in Lima, Peru in December and Paris in 2015 reach be welcomed into the program is another source of possible incorporation of these offsets into their unless exists currently that surplus offset the of portion Nationally Determined Contributions, based emissions reductions. However, only about $1 nancialfi pledges are rmed attached to billion in confi these underpin to mechanisms nancing fi concrete on State regulators have already sent encouraging uncertainty, although two of the seven pilot programs php?page_id=10558§ion=news_articles&eod=1 signals about forest conservation projects, which sector-based REDD offsets. However, California skeptical the UNFCCC can overcome the stalemate California’s market will be unable to absorb a sizable ecosystemmarketplace.com/pages/dynamic/article.page. fi rmly restrict the use of international offsets,meaning fi deforestation as a climate solution and makes good expected. But the extent to which forestry offsets will expected to form the basis of an international and achieve to talks climate previous in experienced end it by 2030 – could spur increased demand for land- for demand increased spur could – 2030 by it end efforts. However, the role of the carbon markets – if any – ned remains in undefi the world of Intended an accord that recognizes the importance of avoided avoided of importance the recognizes that accord an could rise as a result of emerging carbon markets in countries such as South Africa and China, particularly carbon emissions has game-changing potential. liance market. The current rules comp of the program climate agreement. And some stakeholders remain commitments from so many of the largest stakeholders largest the of many so from commitments carbon project development if negotiators meeting 17 Aside from California, compliance-driven demand The potential inclusion of REDD+ at the jurisdictional The UNFCCC could provide momentum for forest e 2 e planned for 2 e for 2014-2019, as developers 2 moderated their expectations about demand. moderated their expectations marketplace, the pipeline of projects planned in may have also been temporarily stranded by the this category cantly. declined In signifi 2012, project replaced it. target portfolio, with some developers succumbing to their existing portfolio in 2013, unsurprising in the face the in unsurprising 2013, in portfolio existing their fuels. fuels. report. What’s clear is that the cost estimates of what forest carbon markets, absent any regulatory signals ranging from millions to billions of dollars over the next the over dollars of billions to millions from ranging inclusion of transportation, natural gas, and other is needed to stop deforestation and reduce land-use program with substantially higher prices. IFM offsets on California regulators to provide guidance on tran- on the projected value of developers’ 5-year pipeline, of compliance-related demand for these projects. A/R projects. these for demand compliance-related of projects contracted about 45% of their target sales program more than doubles in size in 2015 with the or complementary market opportunities. However, the compliance pipeline for IFM projects REDD developers sold 60% of their “available” or REDD offsets over the next fi ve years, but that pipeline that but years, ve fi next the over offsets REDD Less ambitious expectations, as well as the price Estimates of existing and future market needs abound, needs market future and existing of Estimates which shrunk to $2.3 billion, or less than 20% of the sitioning voluntary tonnes into California’s comp liance sitioning voluntary tonnes into California’s comp survey. shrunk to 208 MtCO $10.7 billion projected value reported in last year’s grew substantially, with 21 MtCO developers anticipated developing 1,222 MtCO decline for forest carbon offsets, had a visible infl uence infl visible a had offsets, carbon forest for decline demand imbalance that currently exists in the forest What policy developments could correct the supply- emissions far outweighs the current capacity of the abandonment of Australia’s carbon pricing program and the uncertainty about the scope of the ERF that volumes, while SALM placed 78% of these offsets. considerably compared to last year’s planned activity. activity. planned year’s last to compared considerably cash-fl ow issues. cash-fl compliance programs, as California’s cap-and-trade carbon markets? Some market participants point to IFM project developers reportedly contracted 78% of Given the extensive supply of REDD offsets in the 9.3 Looking Ahead: 2014 and Beyond 9.3 Looking Ahead: 2014 The pipeline for A/R and SALM projects also narrowed narrowed also projects SALM and A/R for pipeline The 10-15 years, as seen in Table 30 and throughout the 82 9. Looking Ahead: Market Projections hs saeodr cud lo ok o nue that ensure to work also could stakeholders These Amid such signifi cant policy uncertainty, the major uncertainty, signifi policy such cant Amid State CarbonMarkets oftheForest 2014 commodity supply chain initiatives to end deforestation r poel aind ih vie deforestation avoided with aligned properly are project various And Fund. Carbon FCPF’s the access nue out conig f msin reductions emissions of accounting robust ensure developers are experimenting with carbon accounting great potentialtoreduceland-useemissions. temie te oe i a anr eind to designed manner a in model the streamlined commu- consultants, analysts, registries, standards, stakeholders in the forest carbon markets – developers, hl smlfig h poes o JR rgas to programs JNR for process the simplifying while other landscapes new to the carbon markets but with but markets carbon the to new landscapes other n elns gasad, abo lnain, and plantations, bamboo grasslands, wetlands, in h cmlxte o is N faeok fr example, for framework, JNR its of complexities the about feedback to responding VCS, The control. their nities, and buyers – are focusing on initiatives within initiatives on focusing are – buyers and nities, value: ACTUAL 2013 market $192 M Table 30:VariousEstimatesofMarketRealityandFutureNeeds,2013Beyond Source: ForestTrends’EcosystemMarketplace.StateoftheCarbonMarkets2014. Value ofunsold offset portfolio $119 M received desired developers had 2013 valueif $274 M price At a minimum, stakeholders acknowledge the need to need the acknowledge stakeholders minimum, a At direction, butonseparate,unalignedtracks. e tee fot mvn i te ae appropriate same, the in moving efforts these see a are but exist, not do currently alignment an such of the exact nature of the evolution, the forest carbon forest the evolution, the of nature exact the of performance path or an expanded shift from voluntary adapt to ready be also must stakeholders But base. f o n ohr esn hn o trc nw buyers new attract to than reason other no for if projects, carbon forest about messaging the improve for Mechanisms markets. carbon the in incentives o opinedie poet ciiis Regardless activities. project compliance-driven to pay-for- the along momentum further that transactions, whether government-to-government environment, increased into changing translates rapidly a to customer expanded an of need real in market a to topic of discussion among some of these parties, who markets areundoubtedlyturningoveranewleaf. estimates tofully support existing $0.9 -$1.6B Developer projects developers’ 5-year pipeline (ifsoldat 2013 prices) Value of $2.3 B Add abouttext In conjunction with our plantations, EcoPlanet Bamboo invests heavily into research into heavily invests Bamboo EcoPlanet plantations, our with conjunction In Our conversion of degraded ed land bamboo into plantations certifi is coupled carbon dioxide, restore degraded soils, provide continuous canopy cover and and companies manufacturing enable and assist to development technology and companies, our turnkey solutions helps such companies secure the product they environmentally attractive ber alternative for fi timber manufacturing industries. expansion into Southeast Asia underway, we are providing a tangible solution values. New Forests manages over 500,000 hectares of land and forests and is carbon offset projects for the California carbon market. We work with family, and conservation. Founded in 2005, we offer institutional investors targeted With plantation operations in Central America, Southern and , and fi nancial value – increasing and diversifyingfi revenue for timberland owners. Our USD 2 billion in assets under management. Our assets include sustainable source of fi ber, these plantations sequester and store vast volumes of atmospheric of volumes vast store and sequester plantations these ber, fi of source with innovative technology development to provide bamboo based solutions for under theCaliforniacapandtradesystem. work delivers a reliable, high-volume supply of offsets to businesses regulated product developers to mainstream bamboo fi ber. In combination with Fortune 500 Fortune with combination In ber. fi bamboo mainstream to developers product EcoPlanet Bamboo is leading the industrialization of bamboo as a viable and products and markets that currently contribute to the deforestation of our world’s by a growing global population. In addition to providing a secure and long term for the need berfor toa meetsustainable thefi consumer products demanding for a future in which landscapes will encompass both production and conservation and production both encompass will landscapes which in future a for restoration and protection. New Forests focuses on managing our clients’ assets ecosystem to related investments conservation and land, rural plantations, timber industrial, and tribal landowners to create carbon offset projects that deliver real opportunities in c the region Asia-Pacifi and the United States and haveover is regeneratingstagnantruraleconomies. opportunities employment attractive and secure of creation the world, the of parts Forest Carbon Partners (www.forestcarbonpartners.com) is an investment fund natural forests. New Forests poorest the of some in Located tables. water maintain and biodiversity, for habitat need, inapositivemanner,tomeetdemandfortomorrow’smarkets. headquartered in Sydney with offi cesinSanFranciscoandSingapore. headquartered inSydneywithoffi managed by New Forests. Forest Carbon Partners fi nancesmanaged andby develops New forest Forests. Forest Carbon Partners fi manager offering leading-edge strategies in forestry, land management, (www.newforests.com.au) is a sustainable real assets investment Sponsors Directory 83 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State www.ferrero.com/fc-885/ www.agrinergy.com www.allcot.com www.anthrotect.com www.aider.com.pe www.atlanticasimbios.com www.auscarbongroup.com www.australiancarbontraders.com www.bauminvest.de www.biocarbongroup.com www.globalconsultrdc.com lica.com.br/web www.biofi www.bluesource.com www.bosquessostenibles.com www.brinkman.ca www.parks.ca.gov www.carbon-advantage.com.au www.carbonforestservices.co.nz www.carbongreenafrica www.carbontanzania.com carboneboreal.uqac.ca/home/ www.carbonfund.org www.carbonsink.it/ www.cassinia.com www.ceres-tr.com www.thjj.org Cityofarcata.org TIST.org www.clearskyclimatesolutions.com www.climatebridge.com www.climatefriendly.com Directory

Agrinergy Pte Ltd ALLCOT Group Anthrotect Investigación y el Desarrollo Asociación para la Integral - AIDER and Atlântica Simbios Environmental Consulting Services Ltd. Auscarbon Pty Ltd Australian Carbon Traders pty ltd BaumInvest GmbH & Co KG BioCarbon Group BIODEC sprl lica Environmental Investments Biofi Blue Source, LLC Bosques Sostenibles Brinkman Climate California State Parks Carbon Advantage Carbon Forest Services Ltd Carbon Green Africa Carbon Tanzania Carbone Boreal Carbonfund.org Foundation, Inc. CarbonSinkGroup S.r.l Cassinia Environmental Ceres EnvE China Green Carbon Foundation City of Arcata Clean Air Action Corp ClearSky Climate Solutions Climate Bridge Ltd. Climate Friendly Agrigeorgia Sponsors aae ofrn laigeg srtge i frsr, ad management, land forestry, in strategies leading-edge offering manager managed by New Forests. Forest Carbon Partners fiPartners Carbon Forest Forests. forest New develops by and managed nances natural forests. habitat for biodiversity, and maintain water tables. Located in some of the poorest need, in a positive manner, to meet demand for tomorrow’s markets. headquartered in Sydney with offi ces in San Francisco and Singapore. (www.newforests.com.au) is a sustainable real assets investment assets real sustainable a is (www.newforests.com.au) Forests New Forest Carbon Partners (www.forestcarbonpartners.com) is an investment fund investment an is (www.forestcarbonpartners.com) Partners Carbon Forest for the need for a sustainable fi ber to meet the consumer products demanding products consumer fi the sustainable meet a to for ber need the for for a future in which landscapes will encompass both production and conservation assets clients’ our managing on focuses Forests New protection. and restoration timber plantations, rural land, and conservation investments related to ecosystem is regenerating stagnant rural economies. industrial, and tribal landowners to create carbon offset projects that deliver real deliver that projects offset carbon create to landowners tribal and industrial, products and markets that currently contribute to the deforestation of our world’s our of deforestation the to contribute currently that markets and products by a growing global population. In addition to providing a secure and long term long and secure a providing to addition In population. global growing a by have over and States the United and Asia-Pacifi region the c in opportunities product developers to mainstream bamboo fi ber. In combination with Fortune 500 parts of the world, the creation of secure and attractive employment opportunities is leading the industrialization of bamboo as a viable and viable a as bamboo of industrialization the leading is Bamboo EcoPlanet with innovative technology development to provide bamboo based solutions for solutions based bamboo provide to development technology innovative with work delivers a reliable, high-volume supply of offsets to businesses regulated businesses to offsets of supply high-volume reliable, a delivers work under the California cap and trade system. source of fi ber, these plantations sequester and store vast volumes of atmospheric S 2 ilo i ast udr aaeet Or ses nld sustainable include assets Our management. under assets in billion 2 USD fi nancial value – increasing and diversifying revenue for timberland owners. Our owners. timberland for revenue fi diversifying and increasing – value nancial ih lnain prtos n eta Aeia Suhr ad et fia and Africa, West and Southern America, Central in operations plantation With environmentally attractive alternative fi ber for timber manufacturing industries. manufacturing timber fi for alternative ber attractive environmentally xaso it Suhat sa newy w ae rvdn a agbe solution tangible a providing are we underway, Asia Southeast into expansion n cnevto. one i 20, e fe isiuinl netr targeted investors institutional offer we 2005, in Founded conservation. and and technology development to assist and enable manufacturing companies and is and forests and land of hectares 500,000 over manages Forests New values. abn ixd, etr dgae sis poie otnos aoy oe and cover canopy continuous provide soils, degraded restore dioxide, carbon companies, our turnkey solutions helps such companies secure the product they product the secure companies such helps solutions turnkey our companies, family, with work We market. carbon California the for projects offset carbon In conjunction with our plantations, EcoPlanet Bamboo invests heavily into research u cneso o dgae ln it criie bmo pattos is coupled certifi plantations into bamboo land ed degraded of conversion Our Add about text 84 Directory State CarbonMarkets oftheForest 2014 myclimate Municipalidad Provincialde Chanchamayo Mozambique CarbonIntiatives LDA Development Mountain AssociationforCommunityEconomic Mikro-Tek Inc. Innovative CarbonInvestmentCo.,Ltd. Initiative Developpement IMEI Consultoria-BrasilMataVivaStandard Sustentable, A.C. Grupo EcológicoSierraGorda,I.A.P.andBosque GreenTrees, LLC Greenoxx Greenfl eet Green Resources Green Farm GREEN EVOLUTIONSA GFA ConsultingGroup Fundação AmazonasSustentável Forest CarbonGroup Finite Carbon Face theFuture Etc Terra EKO AssetManagementPartners Ecotierra Ecosystem ServicesLLC EcoServices ConsultingCo.,Ltd. EcoPlanet Bamboo Ecomapuá ConservaçãoLtda. Eco2librium Delta Institute Credible Carbon COSPE Cooperativa AMBIO Compensation InternationalProgressS.A. Community ForestsInternational CO2OL /ForestFinanceServiceGmbH www.myclimate.org www.munichanchamayo.gob.pe www.mozcarbon.co.mz www.maced.org www.mikro-tek.com www.innovativecarbon.com.cn/ id-ong.org/ www.brasilmataviva.com.br sierragorda.net/ www.green-trees.com www.greenoxx.com www.greenfl eet.com.au www.greenresources.no/ www.greenfarmco2free.com.br www.green-evolution.eu www.gfa-group.de www.fas-amazonas.org www.forestcarbongroup.de www.fi nitecarbon.com www.facethefuture.com www.etcterra.org/en www.ekoamp.com www.ecotierra.co www.ecosystemservicesllc.com www.ecoservicesi.com www.ecoplanetbamboo.com www.ecomapua.com.br/home_ingles.html www.eco2librium.net www.delta-institute.org www.crediblecarbon.com www.cospe.org www.ambio.org.mx www.ciprogress.com www.forestsinternational.org www.co2ol.de Directory 85 State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State www.nnrg.org www.oceaniumdakar.org/ www.offsetters.ca www.ossedi.webbs.com www.j-ver.go.jp/e/index.html www.permanentforests.com www.perucarbonfund.com www.prima-klima-weltweit.de www.pronatura.org.mx www.bonosdecarbono.com.ar www.reforestthetropics.org www.shanshui.org www.sigmaglobalcompany.com www.vccslindia.org www.sustainablecarbon.com www.takingroot.org www.terraglobalcapital.com www.carbonconsultingcompany.com www.cochabamba.coop www.conservationfund.org www.nature.org www.tol.org monotiti.amerisol.com/ www.uyoolche.org Viridor.net www.wmbeaty.com www.wildlifeworks.com www.woodlandtrust.org.uk www.ydmt.org Northwest Natural Resource Group Natural Resource Northwest Oceanium Climate Solutions Offsetters OSSEDI Malawi Cooperation Center, Overseas Environmental Japan NZ Limited Permanent Forests Peru Carbon Fund PrimaKlima -weltweit- A.C. Pronatura México R.Tarraubella & Asoc. Reforest The Tropics Shan Shui Conservation Center Sigma Global Socio-eCO2nomix-Global Sustainable Carbon Taking Root Terra Global Capital, LLC The Carbon Consulting Company The Cochabamba Project The Conservation Fund The Nature Conservancy The Trust for Public Land Titi Conservation Alliance Uyoolche AC Viridor Carbon Services W. M. Beaty & Associates, Inc. Wildlife Works Woodland Trust Yorkshire Dales Millennium Trust This is not a comprehensive list of all forest carbon offset suppliers. carbon forest all of list a comprehensive not is This These forest carbon offsets suppliers responded to Ecosystem Marketplace’s survey in 2014 and indicated that that indicated and 2014 in survey Marketplace’s Ecosystem to responded suppliers offsets carbon Theseforest directory. report the in listed be to like would they 86 Sponsors and Supporters State CarbonMarkets oftheForest 2014 timber ofthe21stcentury as MarkitandtheVoluntaryCarbonStandard. number ofREDDtransactions.Wehaveworkedcloselywithmarketmakerssuch market a including Standard, Carbon Voluntary the under deals of and transactions market development the in involved is team standards and infrastructure and has represented clients on many early Our voluntary 1990s. late the in Japan and between Australia transactions forestry early with past beginning fithe years, over market fteen carbon voluntary the in extensively worked has team Our transactions. derivative carbon the structured on fi rst advising and fi funds the carbon up rst setting fi contracts, the carbon writing rst including deals, on pioneering worked numerous has team dedicated Our clients. our to developments legal such of importance the and change climate address to efforts global of importance the Baker & McKenzie ( In conjunction with our plantations, EcoPlanet Bamboo invests heavily into research abn ixd, etr dgae sis poie otnos aoy oe and cover canopy continuous provide soils, degraded restore dioxide, carbon companies, our turnkey solutions helps such companies secure the product they product the secure companies such helps solutions turnkey our companies, and technology development to assist and enable manufacturing companies and expansion into Southeast Asia underway, we are providing a tangible solution for solution tangible a providing are we underway, Asia Southeast into expansion ih lnain prtos n eta Aeia Suhr ad et fia and Africa, West and Southern America, Central in operations plantation With growing global population. In addition to providing a secure and long term source deforestation ofourworld’snaturalforests. EcoPlanet Bamboo parts of the world, the creation of secure and attractive employment opportunities ofatmospheric vastvolumes andstore sequester plantations fi these of ber, provide to development technology innovative bamboo based with solutions for products and markets that currently contribute to the coupled is plantations fialternative timber attractive for environmentally ber and viable a as bamboo of product developers to mainstream bamboo fi ber. In combination with Fortune 500 is regeneratingstagnantruraleconomies. the need for a sustainable fisustainable a for need the a by demanding products consumer the meet to ber habitat for biodiversity, and maintain water tables. Located in some of the poorest need, inapositivemanner,tomeetdemandfortomorrow’s markets. manufacturing industries. Our conversion of degraded land into certifi ed bamboo Sponsors www.bakermckenzie.com) was the fi rst law fi rm to recognize ( www.ecoplanetbamboo.com) is leading the industrialization 87 Sponsors and Supporters State of the Forest Carbon Markets 2014 2014 Forest Forest of the of the Carbon Markets Carbon Markets State State Sponsors www.newforests.com.au) is a sustainable real assets investment JPMorgan Chase recognizes that economic growth and rising living resources natural planet’s standards the of vitality and abundance the on rely fundamentally nancial institutions, we are using and ecosystems. As one of the world’s leading fi and environmental reduce and identify clients our help to expertise and scale our social risks while capitalizing on new opportunities created by the transition to a global economy. more sustainable JPMorgan Chase & Co. rm with (NYSE: assetsfi JPM) of $2.4 trillion is and operations a worldwide. leading Thein global nancialnancial investment services banking, Firm is a leader fi services for fi consumers and small businesses, commercial nancial banking, transaction fi processing, asset management and private equity. A component of the Dow Chase & Co. Jones serves millions of Industrial consumers in the United Average, States and many JPMorgan of the world’s most prominent corporate, institutional and its J.P. Morgan and government Chase brands. Information about clients JPMorgan Chase & Co. under is jpmorganchase.com. available at www. manager offering leading-edge strategies in forestry, land management, nancesmanaged andby developsNew forest Forests. Forest Carbon Partners fi headquartered in Sydney with offi ces in San Francisco and Singapore. ces in San headquartered in Sydney with offi New Forests ( Forest Carbon Partners (www.forestcarbonpartners.com) is an investment fund timber plantations, rural land, and conservation investments related to ecosystem to related investments conservation and land, rural plantations, timber restoration and protection. New Forests focuses on managing our clients’ assets conservation and production both encompass will landscapes which in future a for industrial, and tribal landowners to create carbon offset projects that deliver real opportunities in c the region Asia-Pacifi and the United States and have over work delivers a reliable, high-volume supply of offsets to businesses regulated under the California cap and trade system. USD 2 billion in assets under management. Our assets include sustainable nancial value – increasing and diversifyingfi revenue for timberland owners. Our values. New Forests manages over 500,000 hectares of land and forests and is and conservation. Founded in 2005, we offer institutional investors targeted carbon offset projects for the California carbon market. We work with family, The Family of Forest Trends Initiatives

The Family of Forest Trends Initiatives The Family of Using innovative financing to promote the

conservationForest of coastal Trends and marineInitiatives ecosystem services

Using innovative financing to promote the A global platform for transparent information conservation of coastalThe and Family marine of ecosystem services on ecosystemForest service Trends payments Initiatives and markets The Family of Forest Trends Initiatives Using innovativeThe Familyfinancing of to promote the

conservation of coastal and marine ecosystem services ForestForest Trends Trade Initiatives& Finance A globalA global platform platform for for transparenttransparent information information Bringing sustainability to trade and financial onon ecosystem service payments payments andand markets markets investmentsUsing in theinnovative global financing market to promotefor forest the products

conservation of coastal and marine ecosystem services A global platformWater for Initiative transparent information

Protectingon ecosystemUsing watershed innovative service servicesfinancing payments throughto promote and markets themarkets and Forest Trade & Finance incentivesconservation that complement of coastal and conventionalmarine ecosystem management services BringingA globalsustainability platform for totransparent trade and information financial

investmentson in ecosystem the global service market payments for and forest markets products Building capacity forForest local Trade communities & Finance and governments BringingBringingA global sustainability sustainability platformForest for Trade transparent to & trade tradeFinance and informationand financial financial to engage in emerging environmental markets investmentsinvestmentsonBringing ecosystem in in the the sustainability global globalservice paymentsmarketmarket to trade for andfor forest financial marketsforest products products investments in the global market for forest products Forest Trade & Finance Bringing sustainability to trade and financial BuildingBusinessBusiness capacity and and Biodiversity Biodiversityfor local communities OffsetsOffsets Program, and developing, governmentsdeveloping, investments in the global market for forest products testingtestingto engageand and supporting supporting in emerging best practice practiceenvironmental in in biodiversity biodiversity markets offsets offsets Building capacity for local communities and governments

Building capacityto engage for in local emerging communities environmental and markets governments to engage in emerging environmental markets

BuildingBuilding capacity capacity for for local local communities and and governments governments BuildingBusiness a and market-based Biodiversity program Offsets toProgram, address developing, water-quality toBusiness engageto engage and in inBiodiversity emerging emerging Offsets environmental Program, developing,markets markets testing(nitrogen) andtesting supporting problems and supporting in best the best practiceChesapeake practice in in biodiversity biodiversity Bay and offsets beyond offsets

Business and BiodiversityCommunities Offsets and Markets Program, developing, testing and supporting best practice in biodiversity offsets SupportingBusinessBuilding local anda market-based BiodiversitycommunitiesThe Family program Offsets to make Program,to ofaddress informed developing,water-quality decisions testing and supportingIncubator best practice in biodiversity offsets Buildingregarding a (nitrogen)market-based theirFor problems estparticipation Tr program inends the Chesapeake in Initiativesenvironmental to address Bay and water-quality beyond markets, strengthening their territorial rights (nitrogen)Linking problems local in producers the Chesapeake and communities Bay and beyond to ecosystem service markets

BuildingBuilding a market-based a market-basedIncubator program program to to address address water-quality water-quality (nitrogen)(nitrogen) problemsLinking problems local in in theproducers the Chesapeake and communities Bay Bayand beyondand beyond Learn moreto ecosystem about service our programs markets at wwwIncubator.forest-trends.org UsingUsing innovative innovative financing financing to to promote the the Linking localLearn producers more about our and programs communities at conservationconservation of coastal ofwww coastalIncubator.f andores and marinet-trend marine s.ecosystemor ecosystemg services services to ecosystem service markets Linking localIncubator producers and communities to ecosystem service markets LinkingPublic-Private local producers Co-Finance and Initiative communities Creating Learninnovative,to ecosystemmore integrated,about service our andprograms markets efficient at financing A globalLearn platform more about for transparentour programs atinformation

to supportonwww ecosystem thewww transition.fores.f serviceores t-tot- trendtrendpaymentslow emissionss.s.oror gandg marketsand zero deforestation land use Learn more about our programs at wwwForest.fores Tradet-trend & Finances.org Learn more about our programs at www.forest-trends.org Bringing sustainability to trade and financial investments in the global market for forest products

Building capacity for local communities and governments to engage in emerging environmental markets

Business and Biodiversity Offsets Program, developing, testing and supporting best practice in biodiversity offsets

Building a market-based program to address water-quality (nitrogen) problems in the Chesapeake Bay and beyond

Incubator Linking local producers and communities to ecosystem service markets

Learn more about our programs at www.forest-trends.org