Some businesses still go for the cheapest carbon credits: The Nature Conservancy APAC chief

In Asia Pacific, these ecosystems are prized for different reasons by different communities. Indigenous people have called them home for centuries. As the region has developed, many of these areas are being decimated for large-scale forestry, agriculture or fishing.

Now, a new group of corporates is honing in on the natural areas that still stand. Nature-based carbon projects are becoming increasing popular, as a way to cheaply offset carbon emissions generated from industrial work. Projects usually involve restoring degraded forests, or protecting those at risk of being cut down.

Nature-based solutions have got the backing of the Intergovernmental Panel on Climate Change, which lists avoided deforestation and reforestation as top climate mitigation strategies in its latest paper. The world hammered out rules for the carbon market at climate summit COP26 last year. A global marketplace, Climate Impact X, launched in Singapore last year to connect projects with buyers.

The market is projected to grow to US$50 billion in by 2030, up from US$269 million in 2020.

Carbon markets hold huge potential to drive down emissions, but critics contend there are equally big issues. Different standards exist for how forest projects should be monitored and how carbon savings are calculated, some less stringent than others. Several existing projects have been found to fall short of their climate targets. Indigenous people who depend on earmarked land may also be denied a fair share of benefits, or get lost in red tape.

The Nature Conservancy (TNC), one of the world’s largest environmental non-profits, has been involved in forest carbon projects as early as the 1990s. It hasn’t always been smooth sailing, with a Bloomberg report in 2020 accusing the organisation of protecting forests in the United States that weren’t at risk.

TNC is now looking at about a dozen forest carbon projects in Asia Pacific countries such as Indonesia and China, it told Eco-Business. One project involves working with Indigenous rangers in northern and central Australia to set controlled fires to reduce the risk of huge blazes during dry weather. The emissions saved from prevented fires generate carbon credits that fund Australia’s national climate plans.

These projects complement TNC’s US$45 million conservation and climate work funded by donors and investors in the region.

“We position ourselves at the pioneering stage of the market rather than the well developed stage,” said Will McGoldrick, TNC’s Asia Pacific managing director.

McGoldrick is a conservation veteran who has held earlier positions at TNC as its director of climate strategy, and conservation director in the Asia Pacific region. He previously spent four years with another global environmental group, WWF.

In this interview, McGoldrick talked to Eco-Business about the nature-based carbon market, the challenges of operating in the Asia Pacific region, lessons from TNC’s early work, and what’s needed to protect critical ecosystems.

Will McGoldrick is the regional managing director for The Nature Conservancy’s Asia Pacific division. Image: The Nature Conservancy.

What’s your assessment of the quality of carbon offsetting projects offered by organisations across Asia Pacific today?

There is no doubt that there is variation in quality across the region. You have some terrific examples of projects which were developed with communities, science, integrity and high quality methodologies. Then you have others that used less rigorous methodologies.

What I find interesting and exciting is that a lot of corporates, for example, the Climate Impact X initiative that launched with the Singapore stock exchange, is that a lot of the bigger firms are really interested in finding common ground on what defines a good project, and what are the integrity criteria and co-benefits for communities and biodiversity, before they rush into carbon trading.

All the big corporations and banks are all far more familiar with this now than five years ago, and that’s encouraging.

I wouldn’t necessarily judge the market based on existing projects, but the direction the market is heading based on new initiatives. Are we going to see a lift in the integrity of projects, and will there be more quality?

If we don’t, I don’t think the market will grow to its full potential because the projects won’t have the social licence to operate.

Who are those offering the lower-quality projects, and what are the main issues with them?

Some methodologies and standards are not as robust as others. The more rigorous the standard used, the higher the transaction cost of the project, and the more hoops you need to jump through.

So there is an incentive to reduce that transaction cost as much as possible, and some of the standards that have been developed aren’t as robust.

I’m not saying that people who develop projects intentionally develop them in a certain way, it is just that the market will naturally go towards the minimum that’s required. That is what the market will always do to minimise cost.

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There is no doubt that there is variation in quality across the region. You have some terrific examples of projects which were developed with communities, science, integrity and high quality methodologies. Then you have others that used less rigorous methodologies.

Of the private firms you’ve worked with, how vested are they in making sure that they pay for quality carbon credits, versus going for cheap or poorly managed projects?

I don’t think they are going for the lowest quality, I think they are trying to go for the lowest price. 

There are a few different ways to reduce the price. You can find an activity that generates carbon offsets that is really cheap to implement, and that usually is driven by the cost of the land being used and the technology.

The other way is to reduce the transaction cost of the verification process. There could be a tendency to go towards the less robust credits.

However, most corporates, especially the larger multinationals, are very aware that if the carbon they are buying is not deemed to be credible by stakeholders, then they might as well not buy. They are really trying to get the balance between keeping the cost as low as possible, and the need to ensure that the carbon is generally seen as credible and high quality by groups like us, and WWF, and whoever else there might be in the marketplace.

Quite a lot of corporations are investing quite heavily in their own internal capabilities, to be able to make the judgement calls themselves. The more sophisticated buyers don’t just buy carbon credits using one standard, for example Verra. They might say that is the base criteria, and add additional criteria on top of it.

How does The Nature Conservancy work with local communities to protect their land and interests, especially in regions where they may not have explicit land ownership?

When you look at the forests in Indonesia, we and our local partner in Indonesia recognise that we need to be working with the forest concession holders and the palm oil developers as well.

Companies that control large tracts of forests and other land are all surrounded by communities, and these communities will determine in a lot of cases the long-term success of the projects.

We developed a programme called SIGAP, a programme to help local communities improve their leadership skills. We spend a lot of time developing village and land-use plans. They go through a very methodical process to find out a community’s plans for the land that they live in and control, or in some instances may not have legal tenure over.

This initiative is time-intensive but it builds a sense of partnership. I think it’s now in about 200 villages. It’s very much aligned with the government’s own goals around village development. It also provides a structure where corporates can engage with the community.

I’m not saying it’s always perfect, I’m not saying it deals with all the problems, but at least it gives them a structure to work with.

We are also working with women on mangrove forests in Papua New Guinea. They harvest crabs and other materials from the mangroves. There is an opportunity around carbon offsetting there, but there are also uncertainties around who legally controls the forest, who legally owns the carbon, and how we make sure that the women, who will manage these forests in the future, benefit from carbon trading. That’s one of our goals.

There are a whole lot of complicated social realities that need to be worked through. That’s where groups like The Nature Conservancy can play a really important role, and hopefully set the standard for others to follow.

Having said that, there is no doubt that there will be people in the carbon market who are only interested in making money. Our job is to try and steer the market towards high quality, inclusive projects that benefit communities.

With the huge focus on climate action today, do you see it shifting funds away from conservation? Have you faced a conflict in balancing climate action with conservation in your work?

Not so much, because we realised a long time ago that one of the most important solutions to climate change is nature – forests, grasslands, and wetlands absorb and store huge amounts of carbon for a long period of time.

If you do that well, you also achieve a whole lot of benefits in biodiversity conservation. We really focus on nature as one of the core solutions to climate change. We achieve multiple goals by focusing on climate change.

Globally, I think it’s fair to say that the focus on climate change has meant that there has been less attention on the biodiversity crisis.

But it’s been great to see China hosting the Convention on Biological Diversity. They have an interest in bringing about progress, and they carry a lot of sway in the international community.

The other encouraging thing here is that, interestingly, some corporations I’m talking to are now saying that the next big topic on their agenda is biodiversity.

Carbon could be used as a framework for them to address biodiversity. If they invest in high quality carbon projects, they can also point to the biodiversity benefits they get from those projects.

Across the Asia Pacific, which areas do you think are most in need of conservation now and what are the challenges of doing so?

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Many parts of Asia have benefitted hugely from recent economic development. But reconciling that with the need to conserve biodiversity and tackle climate change is the most important theme of the coming decade. We’re not there yet.

Most of the places where we are working now are priority areas when it comes to biodiversity, like the island of Borneo. Papua in Indonesia is also facing challenges with the growth of oil palm plantations. The question is, can we get the balance right there between the market desire for oil palm and the need to protect Papua’s unique biodiversity? 

Myanmar is also a big priority for us from a conservation point of view. At the moment it’s challenging to advance the work because of the political situation, but we hope in the future we will be able to continue again.

Communities in Asia aspire for economic development, for good education and healthcare. Many parts of Asia have benefitted hugely from recent economic development. But reconciling that with the need to conserve biodiversity and tackle climate change is the most important theme of the coming decade. We’re not there yet.

There’s a lot you can do with data. You can look at a landscape and map out the biodiversity, cultural and mining assets, and use a decision-making framework to work out the future of that land or river.

At the moment it’s often looked at project by project. When you look at the cumulative impacts over time, projects can have a massive impact on the environment. I encourage governments to balance all these competing issues across the whole landscape rather than take a piecemeal approach.

Does the Nature Conservancy issue carbon credits for forest protection projects in Asia Pacific? If so, how do you ensure that the forests protected were actually at risk?

We are exploring this at the moment. If it is very clear to us that that forest was never at risk, then there’s no carbon project for us, and we would use other sources of funding to make sure that project is managed.

In our methodologies, we try to account for some of the risks around carbon. We use a really robust approach to make sure this is truly additional carbon.

It’s not so straightforward, though, because you might look at a piece of land and it’s not being actively logged at the moment. But when you actually spend time in the field, there’s maybe illegal logging happening or encroachment from smallholders on the margins. Also, the forest may not be managed so it’s just degrading over time.

So it’s not always easy to understand whether a forest is 100 per cent protected already. Yayasan Konservasi Alam Nusantara, our main partner in Indonesia, has over 100 staff and they have lots of relationships with communities and concession holders, and they can give us a really good sense on the ground of what’s real and what’s not.

Bloomberg highlighted in 2020 that some of Nature Conservancy’s projects in the US may be protecting forests that weren’t at risk. Have processes for vetting projects changed since then?

I don’t think the issue was as substantial as the reports indicated in most of the projects. We found a few examples — they were certainly not intentional of course — and a lot of those projects were at the very early stages of the whole carbon market. They weren’t done just last year. Everyone was learning as they went, and we’ve learnt a lot since then.

Having said that, we also have a far more rigorous approach to managing carbon projects now, which has been under development for a number of years.

It requires a much more centralised sign-off and approval of all carbon projects. A team assesses them based on our integrity criteria.

We also introduced changes to who we sell the carbon to. We are now focused on selling carbon to buyers that have in place truly transformational approaches to climate change. They need to have the right target. They need to have clear strategies that involve them reducing their own emissions and then only using offsets for the leftover emissions.

It’s really challenging not only for us but others in the marketplace. How do you use a trading platform where in theory, anyone can buy and sell credits. How do you dictate who can really engage with the market? That’s still to come, but it will be good because it will force buyers to put in place a much more strategic approach.

The world may finally hash out a plan for biodiversity protection this decade, after failing on the Aichi Biodiversity Targets for 2010-2020, such as halving the rate of biodiversity loss, protecting 17 per cent of terrestial and 10 per cent of marine ecosystems, as well as reducing aquatic pollution. What do you think is needed in this new plan to ensure greater success?

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We need to get real about what it costs to achieve our biodiversity goals. In the past, governments made commitments but didn’t really have a plan in place to fund the commitments and to achieve them.

The key thing here is that we need to get real about what it costs to achieve our biodiversity goals. In the past, governments made commitments but didn’t really have a plan in place to fund the commitments and to achieve them.

The Nature Conservancy and the Paulson Institute released a study last year to understand how much money is required to really achieve our biodiversity goals. The figure was close to US$700 billion a year.

There’s a huge gap between the current funding that’s available and, frankly speaking, philanthropy is not going to close the gap. Carbon markets may contribute, but there are other things that need to be done. One of the most important is subsidies – changing the way governments manage their subsidies programmes for agriculture is really critical.

If you have a subsidy that incentivises clearing land, it doesn’t incentivise protecting biodiversity. That’s a huge financial tool that you can use to really try and reverse biodiversity loss.

There are lots of opportunities, but for us that’s the key piece. Unless we find a way to fund them, the targets remain targets, and they don’t become reality.

This interview has been edited for clarity and brevity.