The Evolution of Redd+: At the Frontline of Carbon Crediting Integrity

The deforestation problem

The destruction of forests accounts for around 4.5 billion tons of CO2 a year. If tropical deforestation were a country, it would be the third highest emitting one, right below the US and China. 

The rate of deforestation has shown no signs of slowing down and has consistently exceeded 23 million hectares or around 56 million acres of tree cover loss per year since 2016.

That is not to mention the associated biodiversity collapse resulting from habitat loss, which has resulted in a species population loss of more than 60% relative to a 1970 baseline.

Put politely: if we don’t stop deforestation, we’re screwed. Governmental interventions are certainly a part of the solution, but such interventions can be fickle due to administrative changes, as the Brazilian context shows. Private markets will be crucial in reducing deforestation and maintaining our earth's biodiversity. 

The origins of REDD+

Reducing Emissions from Deforestation and Forest Degradation (REDD+) credits are a type of carbon credits that finance activities focused on the sustainable management and conservation of mature forests at risk of deforestation. The concept was first introduced in 2005 during the 11th Conference of the Parties (COP11) to the United Nations Framework Convention on Climate Change (UNFCCC) in Montreal. The initial idea was to create a mechanism to incentivize low- and middle-income countries to protect their forests by assigning a financial value to the carbon stored within them. 

In 2007, at COP13 in Bali, this concept was expanded to include conservation, sustainable management of forests, and enhancement of forest carbon stocks—leading to the "plus" in REDD+. The Bali Action Plan laid the groundwork, and then, in 2013, the Warsaw Framework for REDD+ was adopted at COP19, providing a set of guidelines and rules for the implementation of REDD+ activities that shaped the subsequent decade’s activity. Today, REDD+ comprises a large portion of the VCM activity, with close to 33% of retirements of all credits being comprised of REDD+ credits in 2023. 

REDD+ and carbon credit integrity

REDD+ has been the center of the quality debate within carbon markets because it represents a significant portion of the market and has had multiple instances of misuse. The most extensive criticism came in January 2023 when the UK newspaper The Guardian ran an article on REDD+ projects. The article drew on scientific studies and an on-the-ground investigation to analyze the carbon efficacy and community relationships of several REDD+ projects - concluding with heavy criticism of those types of projects. 

While the magnitude of the claims are disputed, anyone who works in carbon markets knows that their criticism has substance. Sylvera, one of the prominent rating agencies, estimates that 31% of REDD+ credits are high quality, 44% are medium quality, and 25% are effectively junk.

The controversy surrounding The Guardian articles, in addition to the general macro downturn, contributed to a significant reduction in REDD+ (avoidance) prices, from around $8 in January of ‘22 to less than $4 in September of '23:

While these criticisms have hurt the methodology's reputation and price in the short run, many see the criticism as a mechanism for progress. Barbara Haya (Director of the Berkeley Carbon Trading Project) hopes to “show what the problems are and really force the registries to tighten up their rules so that the market [can] be trusted.” In addition, Julia Jones of Bangor University’s highlights that 

If we don’t learn from the failures of the last decade or so, then there’s a very large risk that investors, private individuals and others will move away from any kind of willingness to pay to avoid tropical deforestation and that would be a disaster.

It’s important to highlight that REDD+ criticism does not call into question the underlying assumption of the nature-based carbon credit hypothesis—i.e., the preservation of forests sequesters carbon, and their preservation has a host of co-benefits. Instead, the specific issues that are the focus of critiques are:

1. The additionality, reporting, and baseline assumptions of REDD+ projects, i.e., to what extent projects are doing what they say they’re doing, and
2. The impacts on local communities.

Let’s take a look at these, in turn, to explore how they can be, and are being, addressed.

Evolution of the REDD+ methodology

Over time, the scientific understanding and available tools to effectively measure and quantify carbon credits have evolved. Many of the methodologies used for REDD+ projects were developed in the early stages of the VCM when registries and project developers had limited experience and data to draw on. As a result, such methodologies are often not aligned with the most up-to-date scientific findings and measurement techniques. 

Standards will periodically update their methodologies, but these are often lengthy processes that involve a multitude of stakeholders. Once a new methodology is issued, there is a lag before project developers are able to fully implement the updated guidance for new projects - prolonging the period from scientific consensus to on-the-ground changes. Keeping methodologies up to date is important, but it’s also important for project developers who use a certain methodology to know that they will be able to issue credits in accordance with that methodology for a prolonged period. If standards and credit issuance levels are constantly changing, the risks of starting a project would be too high. 

Verra, the largest issuer of REDD+ credits, began updating its REDD+ methodology in 2020 but didn’t release an updated methodology until November 2023. Updates in the methodology address several of the key critiques in The Guardian investigation, although – as noted above – the process predates the articles by several years. One of the most significant changes is the removal of the responsibility for setting baselines from project developers, recognizing that this can lead to a conflict of interest and potentially result in baseline inflation. Under the new methodology, Verra will use third-party service providers to determine historical rates of deforestation for whole countries or large subnational jurisdictions and then model where deforestation is most likely to occur based on well-documented risk indicators. This approach will ensure that the sum of all project baselines cannot exceed the national total, reducing the risk of manipulation. This is expected to strengthen the role of REDD+ in combating climate change and protecting critical ecosystems and increase the methodology’s market reputation.

Methodology updates will increase the average quality of REDD+ projects but we'll still have variance in how projects implement against a methodology. I.e. the quality of a methodology is a decent but not a great indicator of the quality or carbon efficacy of the projects that implement against it. This is why project level ratings and due diligence from ratings agencies is essential. Ratings agencies can provide a granular view of a project's additionality, baseline assumptions, and other characteristics. They will be essential for creating high integrity markets for REDD+.

Local communities and REDD+

While the updated REDD+ methodology aims to create higher-integrity credits, projects that also prioritize community-enhancing co-benefits alongside carbon sequestration are more likely to garner long-term support from stakeholders. This support is essential for ensuring the project's sustainability and effectiveness in reducing emissions, as local communities play a critical role in managing and protecting the forests targeted by REDD+ initiatives. 

Addressing community engagement concerns is the reason that the scope of REDD+ has evolved over time; achieving the additional objectives outlined in the Warsaw Framework requires the active involvement and support of local communities. Consequently, indigenous peoples and forest communities must have a crucial stake in the long-term success of any REDD+ project. As noted by Ecosystem Marketplace: 

Communities suffering from livelihood insecurity and constant threat by illegal actors need support to protect their territories and develop sustainable, forest-based livelihoods. Without alternatives and equitable access to markets and other resources, communities may otherwise have no choice but to base their economies on natural resource extraction. Or they may not have the resources to expel illegal loggers, miners, and other intruders.

Recognizing this reality, high-quality REDD+ projects work closely with local communities to ensure they benefit both financially and in terms of enhanced well-being. While community involvement is not currently a mandatory criterion for REDD+ validation, it is highly encouraged and often seen as essential for the success and sustainability of REDD+ projects. For instance, the Community-based REDD+ initiative (CBR+), a partnership between the UN-REDD Programme and the GEF Small Grants Programme, specifically aims to enhance the inclusion of local communities and indigenous peoples in national REDD+ processes by integrating their experiences and perspectives into national policies. Various safeguard systems also guide REDD+ initiatives to ensure that these projects adhere to the UN’s “Do No Harm” principle and provide social and environmental benefits. Moreover, third-party rating agencies—which, as discussed in a prior article, have an increasingly important role in defining quality in the VCM—often consider community participation and related co-benefits when assessing a project’s long-term viability and overall impact.

Focusing solely on maximizing carbon sequestration could lead to unintended consequences and abuse of local communities. By prioritizing a holistic approach that balances climate, community, and biodiversity objectives, REDD+ can more effectively deliver on its promise. Elias Avery from Renoster told us,

I would say that REDD+ methodologies often lack stringent requirements for community involvement…While critical components like mandating a percentage of revenue sharing are not required by most REDD+ methodologies, community impact analyses and Free, Prior, and Informed Consent are typically mandatory. However, these measures do not necessarily guarantee substantial benefits for local communities.

Expanding on this, Avery added:

At Renoster, we categorize community benefit claims into three distinct groups. First, there are direct payments, which are made to either individual community members or community groups and are clearly documented in the project's monitoring reports. Second, there are tangible benefits, which include infrastructure projects with a clearly defined cost, such as the construction of schools and water treatment facilities. Third, there are intangible benefits, which are soft benefits with unclear costs and gains, such as work training programs and community gardening classes. In our ratings, we favor projects that prioritize direct payments and tangible benefits over intangible benefits. Renoster also values clear, quantitative evidence of the percentage of project revenue being allocated to the community. While there is no universally ideal percentage, we believe that projects on public land should direct a high percentage of their revenue to the community, whereas projects on private land may allocate a smaller proportion.

Future outlook

Despite the challenges and criticisms faced by REDD+ projects, they remain a crucial component of global efforts to combat climate change and protect the planet’s forest ecosystems. The importance of this endeavor cannot be overstated; the United Nations Environment Programme urges that halting deforestation and forest degradation can avoid emissions of more than five gigatons CO2e/year and unambiguously declares that “Limiting climate change to well below 2C cannot be achieved without REDD+.”

That said, the financial hurdles here are significant: halting deforestation by 2030 is estimated to require an investment of $130 billion per year. While current funding falls far short of this target, carbon markets can play a vital role in bridging the gap and supporting the protection of forests. Efforts are also being made to mobilize additional resources through public and private partnerships, innovative financing mechanisms, and increased international cooperation. 

Encouragingly, the REDD+ landscape is evolving to address the challenges and criticisms it has faced. As we have seen, methodologies are being updated to reflect the latest scientific findings and best practices, ensuring that projects are delivering real, measurable benefits. Meanwhile, third-party quality control providers, such as Renoster, are emerging to provide additional layers of quality assurance. The certification standards themselves also take proactive steps to mitigate the risks associated with project invalidation. Cercarbono, for example, has established a substantial buffer pool of over 10 million credits to account for potential issues, demonstrating a commitment to the long-term viability of the projects it supports.

Technology is also playing an increasingly important role in enhancing the effectiveness and transparency of REDD+ projects. Companies like Pachama are utilizing remote sensing and machine learning to improve project monitoring, reporting, and verification, aiming to strengthen the integrity of forest conservation credits. Key features of this tech-driven approach include continuous project monitoring, replacing the static documents, and limited updates that were previously the norm.

Private markets aimed at reducing deforestation will be essential to addressing climate change and biodiversity collapse. The way we construct REDD+ markets to reflect the latest science and ensure they represent real climate impact will be critical for the adoption of these markets. We’re excited to reveal our vision for the future of REDD+ markets soon.