This blogpost is being periodically updated with new data about the fires in the Brazilian Amazon.
During the past few weeks, we have been witnessing a frightening increase in forest fires in the Brazilian Amazon. This crisis has raised a number of alarms around the world and has, once again, raised the important question about how we can best protect this important landscape. Our experience in managing the world’s foremost voluntary carbon credit program and the leading standard program in forest conservation and restoration (i.e., REDD+) projects indicates that carbon finance can be a critical part of the solution.
Brazil’s Forest Fires Are Human-Made
It is important to keep in mind that the fires that are endangering lives and ecosystems are not natural phenomena; they are the consequence of human-made deforestation, unsustainable agriculture and timber extraction. Most of these fires were started on already-deforested land that is being prepared for next year’s planting or are aimed at deforesting additional land for agricultural purposes. A significant amount of the forest landscape has been cleared for the purposes of grazing cattle. A second important factor fueling these fires are extreme drought events which are becoming more and more common. As a result of both the drought and the human-set fires, the fires can spread and destroy more rainforest which, in turn, will result in more widespread fires. It is a self-perpetuating cycle.
This means that the fires are happening as a direct result of utilizing this land for unsustainable agricultural purposes, which is driven by the fact that these practices have greater economic value and are more profitable than protecting and restoring the forest. Driving finance to efforts that protect and restore forests is thus absolutely essential if we are to be successful at preserving these critical ecosystems.
Forests Play a Critical Role in the Fight against Climate Change
Forests and other Nature-Based Solutions (NBS) — or Natural Climate Solutions (NCS) — play an essential role in the fight against climate change as they provide some of the greatest opportunities to both mitigate emissions and increase sequestration. A recent peer-reviewed study shows that Natural Climate Solutions can provide more than a third of the emissions reductions needed to keep global warming below 2°C. Moreover, these approaches are extremely cost-effective.
Forest carbon project activities include a variety of activities, from working to protect native forests, managing productive forests better and planting trees to reduce greenhouse gas emissions globally. By enabling project owners to sell carbon credits from their activities that reduce emissions or increase sequestration, there is an economic incentive to preserve forests, rather than cutting them down. Such projects therefore can play a key role in preserving the Amazon rainforest.
How Do the Brazil Forest Fires Affect VCS’ Forest Carbon Projects in the Region?
The Verified Carbon Standard (VCS) program, which Verra manages, has certified numerous projects in the Brazilian Amazon to drive finance to forest protection. Based on the currently available data, as of August 30, the forest fires in Brazil appear to have had a small impact on some of the VCS-registered AFOLU (Agriculture, Forestry and Other Land Use) projects in the region. Of the 19 VCS-registered AFOLU projects in Brazil, 4 (21%) have had or currently have active fires within their boundaries in the past 10 days, and an additional 4 (21%) have had or currently have fires within 3 kilometers.
The VCS program includes a mechanism to ensure issued credits remain “permanent” (i.e., real reductions have still been achieved). This consists of a global buffer pool which requires all land-based projects that have a risk of the sequestered carbon being emitted into the atmosphere (so-called “reversals”) to set aside a risk-adjusted percentage of the emission reductions and removals achieved. The risk assessment tool, used to calculate the number of credits to be deposited in the pool, takes natural risk (like fires) into account and provides incentives for active fire management. Buffer credits are then placed directly into a Verra-managed buffer pool and cannot be sold on the market. When reversals occur (e.g., in case of a forest fire), these buffer credits are cancelled to ensure that issued credits still represent real emission reductions. In short, the buffer pool serves much like an insurance policy, protecting losses against reversals.
The global buffer pool currently contains 36.5 million credits from over 120 projects in 34 countries. The diversification of projects — different types of projects from different countries — ensures that the pool is resilient and is not put at risk even by disastrous events such as the fires in the Brazilian Amazon.
To estimate the potential impact of the forest fires in Brazil on the VCS buffer, we made some simplifying (and conservative) assumptions. Specifically, we assumed that 100% of the credits issued by projects that have had fires within their boundaries will need to be backed up by buffer credits. For projects that have fires nearby, 50% of the credits they have issued may need to be backed up by buffer credits. Our analysis suggests that, at worst, between 4.7 and 6 million buffer credits* would need to be cancelled to cover any reversals from the forest fires in Brazil. In reality, the impact will likely be smaller, as projects may not have been completely lost and in some cases may recover partially or fully, depending on the severity of the fires in the local project area.
The above impact is small, especially if we consider that the buffer account continues to grow as a percentage of credits is deposited every time a project issues credits, and as new projects are added constantly. In addition, it is worth noting that the buffer account is intended to be dynamic — we designed it so that reversals could be handled in an ongoing and transparent way, recognizing also that some projects will face difficult situations.
We are monitoring this situation carefully and will take appropriate action if we find that forest loss in any of our project occurs as a result of these fires.
The “Big Picture” Argument for Forest Carbon Projects
While the forest fires in Brazil have not yet significantly affected the VCS projects in the region, it is important to ask the question whether the potential of such fires has any implications for forest carbon projects?
As mentioned, deforestation, primarily driven by the conversion of land for agricultural purposes and the associated economic incentive, is one of the main causes for these fires. By contrast, forest carbon projects allocate an economic value to the carbon stored in the forest and present an incentive to keep this forest alive. If people have an economic incentive to keep the forest standing — such as through the ability to sell credits generated by forest conservation projects — the risk of deforestation-caused fires that threaten these very forests would be diminished. At the same time, the risk of droughts, that perpetuate the spread of these fires, would be decreased with the existence of healthier forests. The Amazon is one of the most important ecosystems to protect in the fight against global climate change — now more than ever.
What certified forest carbon offsets, in particular, offer in this context is a high-integrity mechanism to drive finance to priority areas, ensuring these critical ecosystems are protected and enhanced, while driving numerous additional benefits for local communities and the planet. Carbon projects in the VCS and Climate, Community & Biodiversity (CCB) standards portfolio have consistently demonstrated this ability to reduce emissions and sequester carbon, while driving significant sustainable development benefits.
At the same time, carbon offsets cannot be the only approach in the fight against climate change. We need comprehensive national commitments and global agreements to reduce emissions and increase carbon sequestration, as well as active engagement of the private sector.
Without the finance provided by carbon markets, alongside well-designed policies and programs boosting natural climate solutions, we’re back to square one on how to compete with the very activities that have led to the devastating fires now taking place in the Brazilian Amazon. Undermining progress to stop this deforestation helps no one. Instead, supporting countries and communities in their progress toward lower-emission development pathways and thereby reducing deforestation and improving livelihood dynamics will achieve more resilient and lasting change. Forest carbon projects, and the financing needed to develop them, are a quintessential piece in this puzzle.
* The amount of 4.7 million VCUs is equal to 100% of VCUs from projects with fires within their bounds, plus 50% of VCUs from projects with fires within 3 km, which reflects the status of the forest fires in the region as of 30 August. The figure rises to 6 million VCUs, if fires within 5 km are taken into consideration.