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Brazil’s Acre State may have REDD+ credits issued by next year

Köln, 31 May 2012

The first credits for Reduced Emissions from Deforestation and Forest Degradation (REDD+), usable within mandatory cap-and-trade schemes, could be available from the Brazilian State of Acre by as early as next year, according to Thomson Reuters Point Carbon.

“The issuance of REDD+ credits by Acre State would be a significant turning point in the development of global carbon markets as they move from national emission reduction targets to a smaller-scale, regional and sectoral crediting approach”, said Emil Dimantchev, analyst at Thomson Reuters Point Carbon, and author of the report.

“Acre is leading the way because its system to incentivise emission reductions from forest preservation is of a high enough quality to be used in a compliance market. The state has adopted forest sector emission reduction targets, signed into law a sectoral REDD+ programme and a private project developer, CarbonCo LLC, is already developing the first voluntary REDD+ project in the state”, Dimantchev said.

It is possible that the REDD+ credits generated by Acre State, which Thomson Reuters Point Carbon estimates could be as much as 48 Mt between 2012 and 2020, could initially be used for compliance within the Western Climate Initiative (WCI), where they would play a crucial role as a cost containment mechanism within a market that is currently short of offsets. “Credits from Acre could enter the WCI in 2015, the likely start-date for California’s regulators to allow the use of REDD+ credits, increasing the supply of offset credits by 60% and helping to fill the current gap in offset supply”, said Dimantchev.

California, whose carbon market is linked to Quebec’s under the WCI, has been working with a coalition of rainforest nations on recognizing REDD+ credits and has signed memoranda of understanding with Acre, making it is likely that California’s will be the first compliance market to open its doors for REDD+ credits. However, following the signing of a Memorandum of Understanding with regulators of Rio de Janiero’s proposed carbon market, Acre’s REDD+ credits could also be used within the Rio scheme which will be launched in June this year. Korea may also allow the use of offsets for its proposed carbon market, which is due to start trading in 2015.

Acre’s REDD+ programme will be implemented through a basket of measures that includes both public and private sector initiatives. Large-scale initiatives, aimed at a specific group of land owners, will be carried out by a quasi-public development agency which is to be set up with both public and private funding. Smaller-scale REDD+ activities will be implemented through projects developed by the private sector. Projects will have to be registered with government authorities to be a part of Acre’s REDD+ programme. The state government is currently developing methodologies for monitoring, reporting and verification.

Dimantchev concludes: “Implementing REDD+ has faced many challenges in the past, specifically with regard to the prevention of carbon leakage, ensuring project permanence, and additionality. Whether and how Acre solves these issues will determine whether the state will be able to issue credits in 2013 and, more importantly, whether California will accept credits from the programme”.

“Although the idea of generating fungible credits from avoided deforestation initiatives got off to a slow start, today there is a real possibility that REDD+ credits could be used for future compliance in California and beyond. If Acre is successful in generating compliance-grade REDD+ credits it will pave the way for a new compliance instruments and mark the beginning of new segment of the global carbon market”.

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