The virtual economy of REDD: Conflicts of interest, hot air, and dodgy baselines

In order for REDD projects to generate carbon credits, a “baseline scenario” has to be created. This is supposed to reflect what would have happened under business-as-usual, or what would have happened in the absence of the REDD project.

The baseline is also necessary to show that the REDD project is additional, that the reduced emissions would not have happened without the project.

Conflicts of interest

Clearly, it is in the REDD project developers’ interest to have a baseline that predicts a high rate of deforestation in the project area. The higher the rate of deforestation in the baseline scenario the more carbon credits will be generated. And the less the project will have to reduce deforestation.

Of course REDD project developers can’t pick their own baselines and hope that the rest of the world believes they are not just making things up. The methodology proposed by the project developers has to be validated and project has to be audited. This is where voluntary certification schemes come in, like the Verified Carbon Standard, Plan Vivo, CarbonFix Standard, and so on.

But there’s a catch. The voluntary certification schemes make their money from generating carbon credits. The more carbon credits generated, the more money they make.

And the validators and auditors that are accredited by the certification scheme are paid directly by the project developers. In order not to lose future work opportunities, auditors are unlikely to be too picky about approving their clients’ methodologies.

This is a blatant conflict of interest at the heart of the REDD mechanism.

A new paper published in the International Forestry Review, looks at two REDD projects and asks a series of questions:

• What can we learn from the study of baseline settings in REDD+ projects?

• Does it sufficiently address the issues of permanence and additionality?

• More importantly, can certification standards provide a legitimate guarantee that chosen baselines are reliable measures for predicting CO 2 emissions’ reductions in the long term?

The paper is titled “The ‘virtual economy’ of REDD+ projects: does private certification of REDD+ projects ensure their environmental integrity?”, and the authors are David F Scott, Coline Seyller, Sébastien Desbureaux, Symphorien Ongolo, Alain Karsenty, Gabriela Simonet, Jean-François Faure, and Laura Brimont.

The two projects that the paper looks at are the Mai Ndombe REDD project in the Democratic Republic of Congo and the Corridor Ankeniheny-Zahamena REDD project in Madagascar. Both of these projects were certified under the VCS system, in 2012 and 2014, respectively.

The authors note that,

It is tempting for project developers to design a ‘convenient’ baseline scenario to generate more credits in order to seek financial profit or, as currently appears to be the most frequent case, to render a high-cost REDD+ project financially viable.

Mai Ndombe, DRC

The baseline for Mai Ndombe was established, not by looking at historical trends of deforestation in the project area and extrapolating into the future, but by using a reference area.

According to VCS guidelines the reference area does not have to be adjacent to the project area. In the case of Mai Ndombe, the reference area is about 600 kilometres away: the Mayombe forest in Bas-Congo province.

The authors point out that there are important differences between the two areas. Mai Ndombe is a dense, humid forest. Mayombe is a mosaic forest. Mai Ndombe is about 50% further from Kinshasa, the capital of DRC, than Mayombe. Mayombe is close to major shipping harbours. Bas-Congo province has a high population density. Mai Ndombe is sparsely inhabited.

The authors describe the reference area as “a dubious choice”.

The developer of the Mai Ndombe project, Wildlife Works, chose the following baseline scenario:

Where deforestation is initiated by the primary agent through legally-sanctioned commercial harvest and the area is ultimately converted to non-forest by the secondary agent through unplanned deforestation (e.g. subsistence agriculture)…

The authors question the assumption that in the absence of the REDD project, the forest would be logged (legally) and then converted to agriculture by local communities:

Ultimately, the loss of forest cover in DRC depends on many drivers including commercial or illegal logging, mining, farming and industrial agriculture. The weight of each driver on deforestation and forest degradation may reflect the degree of compliance with the law by logging/mining/agricultural companies, the local context of poverty and land tenure, and overall, the capacity of state bureaucracies to implement an efficient command and control system.

Corridor Ankeniheny-Zahamena, Madagascar

The CAZ project, set up by Conservation International, also uses a “questionable” reference area. The reference area in this case is 22 times the size of the project area.

Differences between the reference area and the project area include elevations and slopes, farming practices, and population density (the reference area is more densely populated than the project area). The authors conclude that, “there are major differences between the CAZ project area and its reference area.”

There are differences in the deforestation rates in the two area. The reference area has an annual deforestation rate between 1% and 1.26%. In the project area the annual rate is somewhere between 0.5% and 0.6%.

In its project design document, Conservation International takes the higher rate of deforestation for the reference area as a baseline scenario. And then assumes this same rate to be the historical rate of deforestation in the project area!

“The deforestation rate inside a well-established protected area is 0.20%/yr, being an 84% reduction of the historical deforestation rate within CAZ 1.26%/yr).”

The authors point out that without doing anything on the ground, Conservation International could, on paper at least, reduce deforestation by half. This, the authors note, with a hint of academic dryness, “could lead to the so-called ‘hot air’ phenomenon”.

Baselines are “untestable guesses”

Baselines allow project developers to put an exact figure on the number of tonnes of carbon that have not been emitted as a result of their project. But this number is based on a fiction.

There is no way of testing whether a baseline scenario is true or not, because it is something that might have happened had the REDD project not gone ahead.

As the authors conclude, “the baseline scenarios in REDD+ projects amount to untestable guesses”.

[W]ith REDD+ projects there is a kind of irreducible uncertainty regarding what the ‘right reference scenario’ should be. Our case studies show that only small differences in baseline scenarios – whether designed intentionally or not – can have severe financial (positive for business actors) and environmental (negative for the climate) consequences. The interest of the project developers is obvious: as the market price of carbon credits falls, the financial viability of a project (that relies on the carbon market for financing) declines. ‘Optimizing’ the parameters, notably those related to baseline settings, seems to be the only way to maintain the viability of a project’s business model.

The authors of the paper are careful to talk about project developers “optimizing the parameters” or using a “convenient baseline scenario”.

Fraud would be a better way of describing what REDD project developers are doing when they set bogus baselines. The voluntary certification systems, such as VCS, are complicit in this fraud.