Although projects are still focused on large forests, small producers must pay attention to the subject
Anyone producing forests might have already heard of the carbon credit market. In the financial world, these credits are alternative investments that can be made by companies with the purpose of mitigating their own emissions of greenhouse gases (GHG). One carbon credit is the representation of a ton of carbon that was not issued onto the atmosphere, thus contributing to the reduction of the greenhouse effect and climate change. It would be a kind of financial investment for forest producers – whether native or planted – to continue doing their work. In the case of planted forests, it would be an additional income. But is it actually working and can it benefit small and medium producers? The Paraná Wood Group talked about it with Forest Engineer, Lawyer and MSc. in Forest Politics and Economics Mr. Marcelo Schmid, a consultant for the Index group.
He explains that the matter of carbon credit came into existence a little prior to the end of last millennium, with a lot of strength, and bringing a lot of hope, within the Kyoto Protocol. “It was from the finding that humans interfere in the climate of the planet, that human intervention worsens global warming, that it was decided that incentive mechanisms should compensate for the maintenance and planting of forests”, he says. However, after a few years, the mechanism created to generate carbon credit was not renewed. “Then came the Paris Agreement, and even to this day the market does not have a formal, regulated mechanism that can be extensively applied for the generation of carbon credits”, he explains.
The expert explains that an official market regulated by the UN was created with the Kyoto protocol, but several institutions created their own standards for the generation of carbon credit, and that developed a market referred to as “voluntary”, where you do not need UN’s approval to join, since the agreement is celebrated between the parties. “That was born in an incipient manner, and grew throughout the years. But around 2015, it went through a global economic crisis, and everyone stopped making carbon credits. First, let’s focus on finances, they said”, he tells us. He explains that the Index Group worked a lot with that market and had to practically stop everything. “Two or three years ago, it came back with full force, maybe because we are now taking advantage of the Environmental, Social and Corporate Governance (ESG) policies the companies are now seeking. And one of the ESG policies is actually the climate issue. And different from the beginning, when forest carbon credit was surrounded by doubt and disinterest from the market, it is now the most sought after”, he declares.
According to Schmid, currently, there are only two ways of reducing the carbon emission on the atmosphere. “One is to not issue any. I have a factory that is a high producer of greenhouse gas, I change its energy matrix to any other thing that is not as harmful to the environment. The second way is to take that CO2 in the atmosphere and remove it from there. And the only feasible way of doing that is by planting trees, in what we call carbon sequestration”, he says.
According to him, the first project category is quite easily measurable. “If I have emissions caused by the burning of fossil fuel and I stop burning it, I am able to define how much I stopped issuing to the atmosphere”, he points out. But when we speak of forests, the measurement is not quite right, yet. “In this case, we have living beings, and although monitoring has evolved quite a lot, it is still full of variables. There is the possibility of the forest burning, there is a series of variables that back in the beginning made this carbon credit less interesting. However, nowadays, forest carbon credit delivers something the industrial project does not, which is a strong social-environmental component. We are talking not only of reducing emissions, we are talking about biodiversity, the involvement of communities, and also of involving small, medium, and large producers within a global effort aimed at the reduction of the phenomenon referred to as climate change. All of this makes it much more interesting, democratic, and aligned to several other global guidelines aimed at the conservation of the environment”, he declares.
However, according to Schmid, the carbon credit market is not feasible for small areas yet, since all the costs involved in the project are overwhelming to the producer. “If I am a producer with an area of 50 hectares, I will have to develop a project, I’ll have to call a certifying institution, and all of that costs more than the revenue such area would provide me in carbon credits. The idea is that, a while from now, we are able to have cooperative projects, involving several small producers, so that they have sufficient scale to go to the market”, he explains. Today, he says, the forest carbon projects existing in Brazil are projects with tens of thousands of forest hectares. And that results in most people investing in the Northern region of the country, where there are areas of that size. “But it is an extremely urgent matter, and the matter of the participation of forest producers has to be solved in the next few years, because the producers are effectively holding a fixed amount of canton, whether in planted or native forests, and are contributing to the environmental issue”, he states.
According to Schmid, Index is developing a platform as a way to monitor the carbon gain from different properties, regardless of size, starting from one hectare. “We want to monitor that and create a way, using technology and digital currencies, to compensate those producers. I have no doubt that it will happen, but it depends on the market, on governmental and political will, and it is going slower than we wished. But we hope the market becomes very large in the future, in a five-year horizon”, he declares. And he advises the producers to pay attention and continue monitoring the topic. “The climate is being discussed at the UN again. Things are moving, slowly, but we will get there”, he advises.