FSC could access to the carbon market: new study

Figure 1Forests are major carbon storage reservoirs and carbon sequestration agents. FSC AC

In 2005, the Millennium Ecosystem Assessment determined that more than 60% of ecosystems were already degraded or in danger. Initiatives seeking to address this problem didn’t take long in being developed, including specific schemes created to protect services provided by natural ecosystem, which total value has been estimated at US$145 trillion (equivalent to approximately AU$200 trillion). The Forest Stewardship Council, better known as FSC -which logo is found in many products in the market– joint this red of initiatives in 2011 by launching the Forest Certification Ecosystem Services (ForCES) pilot project with the purpose to adapt FSC standards to emerging ecosystem service markets.

Untitled3.pngFSC logo for Forest Management Strategic Green LLc

It is necessary to remember that the FSC is highly recognized worldwide by the credibility of its forest management and chain custody certifications. So, how difficult could it be for FSC gain access to ecosystem service markets? Last year the FSC Ecosystem Service Strategy was released together with the new versions of its FSC key guidelines -the FSC Principles and Criteria and the FSC International Generic Indicators– with to aim to extend forest management certification to the protection and enhancement of the following ecosystem services: carbon sequestration and storage services, protection of watersheds and conservation of biodiversity. And in order to determine the feasibility to access these markets, the strategy proposes the conduction of research and market analysis at national levels.

Analysing the carbon market

Recently, Lorena Vazquez from University of New South Wales concluded a research focused in the analysis of the status of the voluntary carbon market in Australia and the possibilities of FSC Australia to gain access to it through an ecosystem service certification. The study determined the existence of a growing voluntary market fed, in part, by carbon offsets from five forest management projects: “Tasmanian Native Forest Protection Project” in Tasmania–which is divided in Project 1, Project 3 and REDD Forest Grouped Project; the “New Leaf Carbon Project” located also in Tasmania; and the “Australian Yarra Yarra Biodiversity Project” in Western Australia.

Untitled.pngCarbon sequestration and storage services provided by forests. Phyo Si Thu Trading Co., Ltd 2016

These findings mean that carbon offsets -carbon credits- are being created in Australian forests managed with specific criteria to ensure their sustainability and the real sequestration of carbon from the atmosphere and/or storage of carbon in vegetation and soils. To guarantee these criteria, project developers used one of the following standards to certified their offsets: the Verified Carbon Standard (VCS), the VCS linked to the Climate, Community and Biodiversity Standard (CCBS) and the Gold Standard Land Use & Forest (GS LUF). In addition, two management approaches are being applied: Improved Managed Forests (IFM) –which seeks to enhance carbon sequestration and/or to reduce losses by leaving more standing trees- and Afforestation and Reforestation (A/R) -which involves tree planting activities in deforested land or land that never had forest before.

This provides valuable information for FSC Australia. It can be said that VCS, VCS +CCBS and FS LUF would be FSC main competition once accessing to the carbon market. Also, the current application of IFM and A/R approaches within the carbon projects results positive for FSC, because the organization already has strong knowledge and experience related to their implementation and monitoring. In addition, the study provides a list of the retailers and clients that have purchase these offsets since 2012, which could be considered as a list of potential buyers of future FSC offsets. Heading the list, Climate Friendly is the retailer with the highest number of registered transactions in the Markit Environment Registry, followed by Virgin Australia and the governmental program Carbon Neutral.

A second part of the research was focused in determining the mechanisms that FSC requires to implement in order to access the carbon market. The list of required criteria was obtained by comparing the FSC standard with VCS, CCBS and GS LUF standards. Among the main requirements for FSC, is the development of carbon accountability mechanisms and the inclusion of carbon credits property rights within its legal framework. On the other hand, FSC presents some advantages over the other standards due to its excellent performance in the provision environmental and social benefits, sustainable forest management and efficiency in accreditation and verification mechanisms.

Untitled6.pngFSC main requirements to access the carbon market. Vazquez 2016

From forest to carbon

There are other aspects that FSC needs to consider in order to finally gain access to the carbon market. It is being determined that even though the voluntary carbon market is growing up at enormous rates, there is still a low demand for forest carbon offsets, which is evidenced by the high volume of offered credits in the market and the relative long time that often takes to get them retired.

Also, according to the State of the Voluntary Carbon Markets 2015 the price of Australian offsets is higher than the international average price, which limits its demand in international markets. However, Australia presents a high potential to reduce its offsets’ prices through the development of projects covering large forest areas. This reduces the rate of transaction costs per hectare and thus, increases the margin between costs and offset price, which results in higher economic benefits to the landowners, including indigenous communities.

Figure 4Historical forest carbon offsets transaction volumes considering all market types Goldstein and Gonzales 2014

Another important opportunity is that, according to State of the Forest Carbon Markets 2014, the demand for carbon offsets originated from forest management projects is increasing worldwide, which is a positive trend for the expansion of the market through the addition of new participants. Especially for FSC, which already possess important strengths to face competition, such as brand credibility, geographic reach, financial backing and experienced personnel. Furthermore, there is a current demand for a standard that includes responsible forest management and carbon sequestration and storage, which is reflected by the presence of products with double certifications in the market.

Taking advantage

It can be said that FSC has strong advantages that would make it succeed within the voluntary carbon market once the standard adheres the required carbon accountability and legal mechanisms. FSC then, has the potential to satisfy a demand for a standard that ensures the sustainable management of forests and the absorption and retention of carbon from the atmosphere in order to face environmental problems that generate major concerns in Australia and worldwide: Loss of biodiversity and natural ecosystems and global warming.

 

 

 

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