We’ve been covering a lot of US state and federal CDR policy in the last few episodes. Today we’re taking a much-needed international trip and discussing some critical stories happening across the globe.
Zimbabwe’s government has announced new regulations on voluntary carbon offset trading to prevent greenwashing and ensure that local communities benefit. Carbon credit schemes in Zimbabwe have been unregulated. The new policy mandates that all carbon projects register with the program, ensuring that a percentage of the revenue goes directly to local communities.
Deforestation rates in Brazil’s Amazon rainforest have fallen by 33.6% during the first six months of 2023 under the new administration of President Luiz Inácio Lula da Silva. This contrasts sharply with the record-breaking deforestation rates in 2022 under former president Jair Bolsonaro, who promoted mining and farming in protected areas.
The UK government has announced comprehensive changes to its Emissions Trading Scheme: a program designed to decarbonize the country eventually. The ETS will now include more sectors, set new emissions limits for the power sector, energy-intensive industries, and aviation, and incorporate carbon removal technologies into the ETS. CDR solutions, like direct air capture, BECCs, and nature-based removals, will now be traded in the ETS program.
Today I’m with our regular policy panel of Holly Buck Assistant Professor of Environment and Sustainability at the University at Buffalo and the author of Ending Fossil Fuels, and Wil Burns the Co-Executive Director of the Institute for Carbon Removal Law and Policy at American University.
On This Show
Resources
Cerrado Deforestation Increase
“Brazilian Amazon Indigenous Territories” paper
Petrobras Increasing Oil Output
Our Episode on California’s SB 308
Connect with Nori
Nori’s other podcast Reversing Climate Change
Nori’s CDR meme twitter account
Full Transcript
Announcer: You’re listening to Carbon Removal Newsroom, a weekly show about current events in the world of carbon removal, from technology and innovation to policymaking and job growth. Brought to you by Nori, the carbon removal marketplace.
Radhika Moolgavkar: Hello, everybody. Welcome to the July 18th episode of the Carbon Removal Newsroom. We’ve been covering a lot of U. S. state and federal CDR policy in the last few episodes. Today, we’re Taking a much needed international trip, we’re going to go around the world and discuss some critical stories happening across the globe. In Zimbabwe, the government took new steps to regulate their carbon offset markets. In Brazil, deforestation of the Amazon has significantly decreased, and the UK is adding carbon removal credits to its carbon trading program. Today, I am joined by our regular policy panel of Holly Jean Buck, Assistant Professor of Environment and Sustainability at the University of Buffalo.
Hello, Holly.
Holly Jean Buck: Hello.
Radhika Moolgavkar: And Will Burns, Co-Executive Director of the Institute for Carbon Removal Law and Policy at American University. Hi, Will.
Wil Burns: Hi.
Radhika Moolgavkar: And I’m Radhika Moolgavkar, Head of Supply and Methodology at NORI. So let’s just dive into Zimbabwe. They have announced some new regulations on voluntary carbon offset trading to prevent greenwashing and ensure that local communities benefit. Carbon credit schemes in Zimbabwe have been unregulated. This new policy mandates that all carbon projects register with the program, ensuring that a percentage of the revenue goes directly to the local communities. So, Holly, what problem is this policy aiming to solve, and what do you think of the government’s approach?
Holly Jean Buck: So I assume they’re trying to make sure they actually capture revenue from all this carbon explosion. They said that they were going to invalidate existing projects. That was controversial. I’m not sure what the status of that will be, but also establish a comprehensive carbon credit framework for the country, which involves the creation of a registry, the implementation of a national climate change fund. And also regulating carbon credit agreements. So the status quo is that Zimbabwe is actually the world’s 12th largest producer of carbon offsets. There were 30 registered projects last year generating 4.
2 million credits, and all of this was largely unregulated. And it came up pretty recently because there’s this one really big project called Kariba Red Plus project. Affiliated with South Pole. So this is like a mega project that they claimed was going to save a forest the size of Puerto Rico and local communities were supposed to receive a minimum of 50% of the revenue. But there is investigative journalism saying that wasn’t happening. That intermediators are getting the money, like describing a situation where some of these credits were priced at half a euro at the start of the chain in these communities, but sold to global brands for up to 20 euros each.
So quite scandalous. Obviously, the company says something different, but it illustrates the problems with greenwashing and a failure to get local benefits. Now the government will take half of all revenue from carbon projects with foreign investors limited to 30% and the balance of 20% going to local communities. So in principle, I’m aligned with this. In practice, there’s things I’m not sure about in the execution. Including the government’s ability to deliver the local benefits either, because if you have an authoritarian or corrupt government, you might not get results that actually accrue to the local people either.
So they’re building this new carbon credits exchange and it just kicked off with a large donation from Russian carbon credits from a Belarusian group announced by South Africa’s former president Jacob Zuma. Who’s, you know, just got sent back to jail by a court today, actually, because of all of the corruption counts. So it doesn’t seem like a very auspicious beginning to me, but we’ll see what happens.
Radhika Moolgavkar: Oh, Holly, you’re so polite in how you say that. How many bad actors could you name in one sentence? I wonder. So, Will, Setting aside maybe the government to where this is occurring, how does this new policy align with legal frameworks governing international carbon markets, and is this a notable move in comparison to how other companies operate?
Wil Burns: Well, I mean, you know, as we all know, there’s not really any international legal standards for voluntary carbon markets, right? That’s part of the issue for a lot of people. It’s largely the Wild West with the varied standards and various certification protocols. Zimbabwe. They’re bringing in carbon trade exchange to establish this registry and that’s, that’s just one of the many actors. It doesn’t necessarily increase the stringency of those approaches. Spearheading this new African Carbon Markets Initiative, which cuts across Africa, and that may, because it brings in a large number of other countries, create more scrutiny and perhaps And perhaps potentially in the long term, more, more stringency, but it’s just not clear.
If it does, it could establish direction for how we implement That meant Article 6. 4, which we’ve discussed before on the show in terms of how to allocate and confirm these credits. But right now, it just looks like they’re doing what everybody else did except putting it under national control.
Radhika Moolgavkar: Holly, if this were to succeed in the way it’s intended, what potential impacts on local communities Could this bring if they were to receive this revenue? And have you seen a model similar that’s been successful anywhere else?
Holly Jean Buck: That’s a great question. In contrast to my very long answer a minute ago, I’ll just say, I’m not really sure. It doesn’t seem to specify yet how local communities will get this 20% of the benefits. They were supposed to get 50% or 75% or more, I don’t know, in the REDD Plus scheme. So it’s really a matter of governance to see whether this will be delivered. I do think the literature on REDD+, of which there’s extensive social science and NGO research, indicates that communities can capture benefits under a number of conditions.
So there are models out there that they could look to if they wanted to.
Radhika Moolgavkar: Okay, and Will, the last question on Zinhwabwe is for you. Is this a step in the right direction or because it’s sort of just status quo, is it not enough? What should countries really be doing? I’ll let you opinionate, provide your opinion on that one.
Wil Burns: Okay. Yeah. I concur with Holly. I think that if indeed the government really does structure this in a way that provides more community benefits, it could be a really positive move, right? We clearly want more benefit sharing with countries for these projects as we move forward. But a lot of times it’s just green grabbing right it’s it’s local elites that are benefiting from this and governments and foreign interests. And in a lot of the red projects it’s resulted in actually increases in food insecurity and decreases in per capita income in the communities in which these projects have been established right and so unless the government.
If the government is going to structure this in a way that avoids that, it could make things worse or no better, right? So I have those concerns too. I’m concerned by the fact that Zimbabwe canceled existing contracts. I think that smacks of expropriation and probably rails the voluntary carbon markets even more. And there wasn’t any real reason to do that. They could have grandfathered those in, put them under a regulatory framework, and then established a different regulatory framework. I’m concerned that companies are going to take a 50% haircut on these projects.
Gold standards already said that they’re pulling back right now and determining what this means moving forward. If this is put in place and other countries don’t do commensurate things, you just may see a lot of projects move to other countries, right? So it’ll be interesting to see if they succeed in this context. And, you know, it’s certainly not... It’s very comforting that you have some of these interests that we’ve talked about engaged initially in this in this process. So, but what would I do, I mean, I would try to put Extremely stringent measures in terms of protecting community interests, strengthen land tenure, ensure that if there’s losers, quote unquote, in these sort of projects, that they’re compensated in ways that nobody is worse off in terms of these projects.
I wouldn’t expropriate and cancel existing contracts.
Radhika Moolgavkar: Okay, well, we will see what happens in Zimbabwe. Maybe one positive is they’re taking control of it and maybe that’s a good thing. Fingers crossed. We’ll move on to Brazil now where something good is happening. Deforestation rates in Brazil’s Amazon rainforest have fallen by 33. 6% during the first six months of 2023 under the new administration of President Luiz Lula da Silva. This contrasts sharply with the record-breaking deforestation rates in 2022 under former President Jair Bolsonaro, who promoted mining and farming in protected areas. I’ll give you a softball. Why is deforestation decreased after the transition from President Bolsonaro to President Lula?
Wil Burns: Yeah. Well, you know, I’m not certain that it has. I’ll talk about that a little bit. But, you know, it’s not a total surprise, right? In 2004 to 2011, during Lula’s first term, We actually saw substantial declines in deforestation in the Amazon, about 75%, right? And some of that was attributable to macroeconomic factors at the time, but it was also attributable to things like increased law enforcement, satellite monitoring, private employment. The public sector initiatives and new protected areas and so it bodes well that’s the blueprint that Lula seems to be adopting again.
They have substantially increased Fines are up about 160% for illegal logging from January through May. They’ve slapped embargoes on farms that are engaged in illegal activities. They’ve established six indigenous regulations. They’re going to prohibit dangerous logging practices, and they’ve also outlined an action plan to try to eliminate illegal deforestation in the rainforest. We’re protecting forests by 2030 and includes things like again intelligence and satellite imagery and regularization of land titles that provide more incentives for protecting forests and recovery of degraded forests. So I think those are all positive things.
Radhika Moolgavkar: Do we know what role indigenous communities and the newly established reserves that Will just mentioned play in protecting the Amazon and what role or benefit they’re getting from these types of protections?
Holly Jean Buck: Well, for context, there’s about 700,000 indigenous people in these indigenous territories in Brazil. Half of those territories are within the Brazilian legal Amazon. And so there’s been a lot of Research, and I’m going to refer to kind of the satellite based research, obviously, there’s probably good community based studies as well that get into the social dynamics, but just from a standpoint of like, how is deforestation going? It proceeds at a higher pace outside these indigenous territories. So there’s a recent paper this year from Silva Jr. and colleagues in Nature Scientific Reports called Brazilian Amazon Indigenous Territories Under Deforestation Pressure.
And so they looked at the change between 2013 and 2021, both inside and outside these Indigenous Territories. Outside, deforestation increased 137%, inside 129%. And over half of that was just between 2019 and 2021. So under the last president, there was really an increase in deforestation in these territories. Over that whole period, 96 million tonnes of CO2 emitted within the indigenous territories. And there was also an increase in illegal mining. So what this indicates is that you can have legal jurisdiction on land without the actual ability to Control it. It’s really about enforcement and governance.
And you had this rise in the gold price, the rise in mining, potential advances of malaria along with that illegal mining. These things can lead to decreased capacity for indigenous people to enforce their legal rights to this land and what happens on it. So I think there’s a big challenge. These territories will remain vulnerable without greater policy action and Yeah, there’s a new president, but without maybe a very strong congressional mandate. So there’s questions overshadowing what they might be able to accomplish, I think.
Radhika Moolgavkar: Well, so you mentioned that, you know, you made a little comment about whether it really is truly gone down. So I’ll ask you, is there improvement and is it significant for the long term and Are you optimistic about the Amazon’s future?
Wil Burns: Okay, so let me start with whether there’s improvement. Here’s where my skepticism is. One of the statistics that we’ve seen is that even though there’s been a massive decline in deforesting, Deforestation in the Amazon, in the Serato, which is a savannah biome that borders the rainforest, deforestation actually surged 83% in May, right? What we may be seeing is classic carbon leakage, right? Where it’s simply being displaced into other areas. And so unless the government winks and nods or doesn’t wink and nod and starts exerting enforcement in those areas also, we might not see a net decline in deforestation in Brazil.
The other thing we have to worry about is international leakage, right? If there’s still the demand for forests, it may simply move to other parts of South America or may move to places like Niger or to India. And at least from a standpoint of carbon releases, we may not see an improvement right so we with that needs to be looked at in a in a comprehensive sense, both in terms of leakage within Brazil. And also outside of it, right? So that’s part of my initial skepticism. In terms of what happens in the longer term, one thing that has to be emphasized is that the rate of defaults Deforestation has declined, but it declined from a very high rate, right, under the previous administration.
And to put it in perspective, last month, we still felled 313 square miles of forest in the Amazon, which is an area larger than the area of New York City. Right. And so we’re still at a rate of about 11,500 square kilometers a year. And so until we really bring that down, we face serious implications. There’s a recent study that said that the rates of deforestation are seriously denuding the actual resilience of the rainforest, their ability to recover. And that we might pass critical thresholds within the next couple of years that would ensure that even stringent efforts to protect the rainforest won’t be successful.
So that’s something that I worry about also. We’ll also see what happens in the summer months. That’s when deforestation traditionally accelerates and yet to be seen. And then highly adverted to the political headwinds that might exist. At the end of May, one of the two houses in Brazil approve legislation that would essentially invalidate indigenous land claims and open protected indigenous lands to activities, including cutting down trees. If that ultimately passes there and with an override of Lula’s veto, that could undermine these interests also. So there’s a lot of Potent political interests in a legislature still controlled by Bolsonaro’s people that could really scupper some of this.
Radhika Moolgavkar: Right, Holly. So how, I mean, this is a hard question and maybe it’s unanswerable, but when you think about the politics of all of these places, the U. S. included, Environmental action often hangs on the balance of a few percentage votes or a little swing in the House in this country or in the congressional delegations across the world. So how do you think about the environmental consequences of these political actions and how do we change it?
Holly Jean Buck: I mean, I think we change it by... You know, going to rural places and understanding the people that are voting for autocrats and, you know, selling them something better, basically. I think Brazil is, you know, many places are challenging. They have the agribusiness lobby really strong in their legislature, their Congress has gotten right. And then they have things like the oil company, Petrobras, planning to increase output pretty dramatically over this decade. Trying to get licenses to drill for offshore oil. That was actually rejected by a regulator. We’ll see how it goes.
So they have this very difficult situation that’s like here in the US, like many places. And I think it’s reaching out to these rural disenfranchised voters who are voting for these populists and Having a clear program of how the clean energy revolution will deliver material benefits to them.
Radhika Moolgavkar: Okay, as a quick follow-up, Holly, have you seen anything like maybe even within the U. S. that has successfully done this yet or any programs that you feel optimistic about that you know of?
Holly Jean Buck: I mean, here and there, I think that around things like Regenerative agriculture, talking to farmers that are frustrated by big agribusiness, you know, there’s bridges to be built in that situation. I think energy self-sufficiency and energy independence where people are really frustrated with their existing utilities is another avenue and language to use. Yeah, we could spend all day on this though.
Radhika Moolgavkar: A topic for a future podcast, maybe. All right, we’ll pivot to our final conversation, which is about the UK. So the UK just announced comprehensive changes to its emission trading scheme or ETS, which is a program designed to decarbonize the country eventually. The ETS will now include several more sectors. That have set new emissions limits, including the power sector, the energy intensive industries like aviation, and also incorporate carbon removal technologies into the ETS. So CDR solutions are all of a sudden on the table. Things like direct air capture effects and nature-based removals will now all be part of ETS.
So Will, can you give us a quick overview of how the UK program works and what changes were made particularly to include CDR?
Wil Burns: Yeah, so in January of 2021, the UK transitioned from its membership in the European Union emissions trading system to this new trading scheme reflecting The post-Brexit world, and it covers the electricity generation sector and heavy energy using industries such as power stations and refineries and iron and steel, and its first phase And that’s what we’re talking about today is to run until 2030 and it continues the principles of the EU ETS. The trading of those emissions and purchasing of emissions credits in an auction to cover the actual emissions for any regulated entity.
What the first round does is, first of all, it substantially ratchets down the emissions cap to try to reflect the net zero commitments on the part of the government goes down by about 500 million dollars. It also expands the purview of sectors include domestic maritime transport in 2026 and waste in 2028. And as you suggested, it also. Does something that’s been actively discussed in the EU ETS but hasn’t happened yet, which is recognize that greenhouse gas removal approaches could be a part of the system in terms of crediting moving forward.
Radhika Moolgavkar: So I’m curious, and I don’t know if either one of you knows this, but why is the UK able to do this? Do this at all like they’re run by a conservative government. They have many of the same inflationary issues worse than the US does. They have big, big problems economically. How did this happen? How, where, where does this will come from? Either of you have an answer to that question?
Wil Burns: Well, you know, it’s hard to know how much will they have right they’ve been criticized recently for for some retrenchment right in terms of their their overall commitments to reducing emissions, which is embarrassing, since they, you know, just just got done hosting a cop a couple years ago. You know, conservative governments there just never look like they do here, right? There’s a national consensus that climate change is real, that it has serious manifestations for a country like the United Kingdom and that they should be doing something about it. So I just think it’s the political configuration there is just very different.
Radhika Moolgavkar: They’re conservatives or are liberals.
Wil Burns: Yeah.
Radhika Moolgavkar: All right, so Holly, do you think this is a positive change for the CDR industry in the UK, and will it help grow opportunities for CDR companies over there?
Holly Jean Buck: Yeah, potentially, noting that, you know, this is subject to further consultation, but they, with this announcement, they published kind of a report from The last round of consultation, so it was basically a request for information where they had a whole bunch of questions and got responses and, you know, I agree with most of the responses who said that this could be an appropriate market for greenhouse gas removal with some conditions and then they asked these people about. You know, how could the design of this be adapted to include greenhouse gas removals while still maintaining the incentive to decarbonize for participants?
And they had these kind of questions about mitigation deterrence. And there are a lot of good ideas in that around how to manage the supply of removals as well as managing the use of credits. For example, having sectoral criteria for emissions reductions or The requirement that you have to have a suitable emissions reduction strategy before you can access these greenhouse gas removals. Or that maybe you should hold a portfolio of greenhouse gas removals. There’s just a lot of creative ideas in there. And so I think that even starting this conversation about it has spun up some ideas that I’m interested to see the community and policymakers continue to flesh out.
Radhika Moolgavkar: Will, so now that CDR credits have been included in this framework, what CDR methods do you think will be most successful in the UK? What’s your prediction?
Wil Burns: Yeah, it’s an interesting question. I mean, you know, the same kind of economic headwinds that CDR faces right now, the fact that other than nature-based credits, most of these approaches are more expensive than alternatives. Right. Probably means that in the shorter term, even incorporation into the ETS may not make a radical difference because I don’t think companies are really going to start purchasing a lot of I don’t know if it’s going to have a lot of impact in the shorter term. Probably the company and the sector that might most benefit from this and it certainly thinks it’s poised to do that is backs and this company tracks that’s based in North Yorkshire.
But if the government gives them billions of dollars, they think they can end up really scaling up BEX, right? But it’s far from certain that given how expensive BEX is, again, that’s really going to happen even if it’s incorporated into this. But as Holly suggested, I think it was a really good point. There’s all these efforts to potentially establish these parallel sort of commitments right in terms of emissions reduction and carbon removal. And if that’s depending on how that’s structured, if it ultimately, you know, creates something. And if there are some mandates for carbon removal simultaneously, somebody like Drax would be well positioned to, to benefit from this.
They’ve also suggested that the government suggested it may be amenable. I think it was called high quality nature-based solutions in this. And so if that were to happen, there’s a pretty robust regenerative agriculture sector in the United Kingdom that might be poised to benefit from that also.
Radhika Moolgavkar: All right. Final question for you, Holly. So last week, or very recently, we had a show about the potential SB308, I believe, in California that would mandate polluters to buy CDR credits. Now the UK is codifying removals as well. So do you think this is the beginning of a trend?
Holly Jean Buck: Well, I think it may be a trend of governments who have made net zero into law realizing that they need CDR. So, yeah, that was kind of maybe an inevitable thing once people are thinking through what they signed up to and we’ll see where it goes.
Radhika Moolgavkar: All right. Well, with that, I thank you both for the July policy episode. We will be taking the month of August off, so I will see you both in September. Thank you so much.
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