Replacing REDD+ with the Forest Carbon Ledger (FCL)
Forest conservation needs a new carbon methodology
Brief Introduction
REDD+ is failing as a tool for forest conservation and carbon accounting. The Forest Carbon Ledger (FCL) is a better alternative. It’s cleaner, more objective, easier to verify, and harder to cheat. Blockchain is not required but could help strengthen it. It’s time for a change.
Summary
REDD+ stands for Reducing Emissions from Deforestation and Forest Degradation. It’s a methodology for measuring the CO2 benefit of forests and unlocking funds for the protection of those forests. But it’s not working.
A rash of high-profile criticisms of REDD+ have undermined its credibility among carbon offset buyers and forest conservation practitioners. Refer to recent articles from The Guardian and Bloomberg for details.
The fundamental defect with REDD+ can be traced back to the convoluted concept of “avoided deforestation” and the speculative projections that are used to estimate it. As such, REDD+ calculations are based on hypothetical scenarios and counterfactual analysis — all of which is highly subjective. This opens the door for data manipulation and bias, inaccuracies, and over-estimation of climate benefits.
The Forest Carbon Ledger (FCL) avoids those pitfalls. It calls for incentive payments based on the total amount of CO2 stored in the forest on an annualized basis. The payments, which are strictly tied to performance, are paid directly to the forest stewards ex post.
Once the carbon stock of the entire forest is established, it is reassessed each year using satellite imagery analyzed by machine learning algorithms that detect changes in forest cover. This data is fed into a simple ledger, from which payments are calculated.
Annual FCL payments are only made when the annual carbon outcome is positive or neutral. This is different from REDD+, which issues payments to projects even when deforestation occurs.
The FCL approach also eliminates the need for counterfactuals and subjective projections. Permanence and leakage are handled differently, and additionality is no longer taken into account. Smart contracts stored on a blockchain could be used to coordinate all transactions.
Both conceptually and operationally, this new approach is cleaner than REDD+. It’s easier to calculate, monitor, and verify. Likewise, it’s harder to cheat and manipulate.
- For a side-by-side comparison of FCL and REDD+, check out: Comparing FCL to REDD+: Using the Capuchin Corridor in Ecuador as a case study.
- For a much deeper dive into why REDD+ is failing and how FCL solves those problems, check out: Flipping REDD+ on Its Head: The Forest Carbon Ledger (FCL) is a new CO2 valuation method
- Mongabay interviews the creator of FCL in Carbon Counting Without the Guesswork.
The FCL Process
Before we get into the numbers, here’s a look at the FCL calculation process.
- At the beginning of Year 1, we start with an initial estimate of the total carbon stock of the forest. This estimate is matched to, and informed by, aerial imagery of the entire forest at that point in time.
- At the end of Year 1, we take a second round of aerial images of the same area. Machine learning algorithms then compare the new images with the original images and assess if there has been any deforestation or forest degradation during the year. If yes, the tally of ongoing CO2 storage is reduced accordingly in the ledger.
- Meanwhile, immature forests that are still actively growing will absorb additional CO2 each year, which is also added to the ledger. This only applies to immature forests — i.e., secondary-growth forest.
- Mature forests are considered to have reached carbon equilibrium and are not credited with additional carbon absorption, but their CO2 storage capacity — which is substantial — is included in the overall tally.
- All of this data is fed back into the ledger to recalculate the total CO2 storage at the end of the year, which is amortized over 50 years.
- If necessary, a risk buffer and/or leakage percentage is discounted.
- The resulting annualized value is then multiplied by the price per ton of CO2.
- Some of this payment is immediately paid to the forest stewards. The remaining balance can be held as an additional risk buffer and paid out after a certain pre-established period.
Examples from the Capuchin Corridor
Every FCL calculation needs two data sets:
- Average carbon density per hectare (informed from biomass inventories)
- Land cover assessment (informed from aerial imagery paired with machine-learning algorithms)
Below are examples from the case study of the Capuchin Corridor in Ecuador.
FCL Calculation in Year 0
FCL measures how much CO2 is stored by a given forest, but annualized. To do this, we calculate the total amount of CO2 that is presently stored in the forest and then divide this number by 50, which gives us the annual CO2 storage number.
Why do we do this? The FCL treats CO2 stored in a forest as a long-term asset. To use accounting terminology, we are amortizing the total CO2 value of the forest over a period of 50 years. For a more in-depth explanation, go to Flipping REDD+ on Its Head.
So we first extrapolate the total amount of carbon (as in C, not CO2) currently stored in the entire forest. We then multiply that number by 3.67, which is the ratio of molecular weight of CO2 to C. This converts the amount of carbon (C) to carbon dioxide (CO2). That gives us the tonnage of CO2 that is currently stored in the entire forest, which we divide by 50.
Once we obtain the annual CO2 storage of the forest, we can subtract a percentage as a risk buffer or leakage discount. We then multiply this by price per ton of CO2, which gives us the CO2 value of the forest.
Side-by-Side Comparison of REDD+ & FCL
TMA (Third Millennium Alliance) performed a carbon assessment of the Capuchin Corridor in Ecuador using both REDD+ and FCL. Both are measured in terms of total carbon stock as well as above-ground biomass. Below is a comparison of the numbers.
Total Carbon Stock vs Above-Ground Biomass
There is a valid debate to be had in the carbon industry on one point in particular. Should FCL values be measured in terms of all carbon pools stored on the land (i.e., total carbon stock) or should it only be measured in terms of carbon stored in above-ground biomass? This is discussed at greater length in Flipping REDD+ on Its Head. I welcome your thoughts on the matter.
Factoring in CO2 Uptake of Immature Forests
Mature forests have already reached a steady state of carbon. They already store immense amounts of CO2, which FCL includes in its total CO2 tally. But their annual net uptake of CO2 is zero.
Younger forests (i.e., secondary-growth forests) are a different story. Their biomass is still actively growing from year to year. In other words, their net annual uptake of CO2 is positive. REDD+ generally ignores this fact. FCL takes it into account.
To determine the annual average carbon uptake of secondary forests, we use this formula:
(Carbon density of mature forest — carbon density of secondary forest) / 30 years x 3.67
This assumes that, on average, it takes a secondary forest 30 years of growth to accumulate the same level of aboveground carbon as is contained by a mature forest. This is informed from Sierra (2012).
In the case of the Capuchin Corridor, the annual carbon uptake of secondary evergreen forests is:
(116.8 mg C/ha — 66.3 mg C/ha) / 30 = 1.68 mg C/ha per year.
To convert C to CO2, we multiply 1.68 x 3.67 = 6.18 Mg CO2/ha per year.
This means that, on average, each hectare of secondary evergreen forest removes 6.18 tons of CO2 from the atmosphere per year as it continues to grow. After 30 years, it will (on average) effectively reach its maximum carbon stock.
We don’t need to amortize annual CO2 uptake by dividing it by 50 because the annual uptake is already an annual number.
The FCL Ledger in Action: Year-Over-Year
All of the above changes to the carbon stock of the forest are fed back into the ledger at the end of each year. Here’s a hypothetical FCL ledger over a three-year period in the Capuchin Corridor. In this case, only carbon in above-ground biomass is measured.
For a better look at these numbers, refer to our case study in the Capuchin Corridor of Ecuador.
Performance-Based Results
If the carbon stock of the forest doesn’t remain steady or increase over a given year, payments may be suspended. In other words, if deforestation and/or forest degradation occur — to a notable degree — the financial reward is not issued. FCL is built to be an economic incentive for forest conservation.
In the 3-year ledger example above, the general performance summary is the following:
- Degradation rate since Year 0: 0.24%
- Deforestation rate since Year 0: 0.15%
- CO2 uptake from growth since Year 0: 2.91%
- Net CO2 gains since Year 0: 2.74%
Notice that there is no counterfactual analysis here. We’re not comparing this performance to what maybe could have happened in an alternate universe in which the project was not undertaken. We’re simply tabulating the carbon stock of the entire forest, every single year, and using that number to determine the CO2 value.
Note: the FCL system only works if it only makes payments in the event of minimal or no deforestation over the course of that year. Otherwise, bad actors could exploit the system — as is demonstrated in detail in the “FCL in the Event of Deforestation” section of Flipping REDD+ on Its Head: The Forest Carbon Ledger Is a New Valuation Method.
Additional Considerations
For a more detailed examination of FCL in the context of biodiversity, sustainable harvest, leakage, permanence, and moving beyond additionality, refer to Flipping REDD+ on Its Head: The Forest Carbon Ledger (FCL) is a new CO2 valuation method.
Next Steps & Additional Links
The FCL concept will first need to be discussed and debated within the industry. Some players that are heavily vested in REDD+ will understandably be resistant to a new methodology. But some of these same players will also have the most valuable insight into how the FCL concept could be refined and made ready for application.
And if anyone would like to help us build this — particularly specialists in the fields of remote sensing and blockchain, please get in touch with me.
In the meantime, TMA is has already begun to pilot the Forest Carbon Ledger in the Capuchin Corridor in Ecuador. The Capuchin Corridor protects one of the last remnants of the Pacific Forest of Ecuador. TMA is exploring different ways to provide economic incentives to local communities to protect and restore this ecosystem. For more information, check out:
- Comparing the Forest Carbon Ledger (FCL) to REDD+: Using the Capuchin Corridor in Ecuador as a case study
- Carbon Assessment of the Capuchin Corridor & Camarones River Basin
- Full-Spectrum Forest Valuation: A Holistic Model for Quantifying the Value of a Forest (Coming Soon)
- Brief Summary of the Capuchin Corridor: A 40,000-hectare rainforest conservation & restoration project
Last but not least, we also propose a new financing mechanism for global ecological restoration: Creation of the International Biosphere Fund, modeled (somewhat) like the IMF.
