Trading on Thin Air: Fictive REDD+ Carbon Chaos in the World’s Forests

The United Nations’ disastrous REDD+ offset program has hit the ground internationally. Its potential adoption by the California Air Resources Board will only make things worse.

Luan F. Makes Marks, Ph.D.

The BasicsSome state, national, and international governments, such as the State of California, limit pollutants and/or greenhouse-gas (GHG) emissions. Some governments also sell or allocate permits or allowances to emitting compa-nies to help in compliance with those limits.

Permits allow an emitter who holds them permission to discharge a specific quantity of emissions within a period of time. These emissions permits can be bought and sold. In addition, offset projects that provide quantifiable emissions reductions may be developed for credits to offset emissions. These offset credits can also be bought and sold. The buying and selling of permits and offset credits are part of international emissions trade in these and similar commodities.

The State of California’s Air Resources Board (CARB) has developed various programs, called offset project protocols, to govern certain areas of poten-tial GHG emissions reductions and the development of emissions offset projects. One particular area for offset projects is forestry, as living forests store carbon dioxide, a greenhouse gas, and their destruction releases it into the atmosphere.

The United Nations has also developed a forestry carbon offset program, REDD, now REDD+ (Reducing Emissions from Deforestation and Forest Degradation). CARB has considered the adoption of REDD+ carbon offset project credits for approval under California’s cap-and-trade program, al-lowing international forestry carbon offsets to be used and traded by Cali-fornia emitters in compensation for their emissions.

The Seeds of Emissions Trade and Ecosystem CommoditiesThe vaunted promises of environmental salvation and new profits from the development and trading of offset permits and credits has spurred on, and been spurred on by, an immense new industry of insiders, corporate in-vestors, environmental nonprofits, national and international government officials, and the emitting industries themselves.

Despite the financial softness of the carbon markets, carbon offsets, whether voluntary and mandatory, have become trading commodities that elicit huge investments, with the potential for gains and losses internation-ally. Its drivers are concerns for a changing climate as well as development opportunities and market returns. Now the influential CARB is set to adopt REDD+, which will further spread its flawed protocols.

The idea of emissions trading as a market-based incentive to control pollu-tion first sprouted from the seeds of speculative theories, in 1966 by Ameri-can economist Thomas D. Crocker and in 1968 by the Canadian economist John H. Dales.1 Over the next five decades, these theories would be culti-vated by Ronald Reagan, George Bush Sr., Bill Clinton, and California gov-ernors Arnold Schwarzenegger and Jerry Brown.

In the decades since then, emissions trading has grown into a pollution-con-trol mechanism in the United States. Twenty years ago, carbon emissions trading was incorporated into the Kyoto Protocol. REDD and its rebrand, REDD+, were initially cultivated at the international level through the United Nations as a market-driven mechanism to preserve, protect, and en-hance the capacity of forests to sequester carbon. In actuality, “[t]he offset mechanism allowed an industrialized country or company in these countries to emit more CO2 than the Kyoto Protocol permitted.”2

Global carbon trading is slated to become a massive commodity market. A particular focus has been on the remaining tropical rainforests. But the bur-geoning financialization of nature has expanded to include derivatives and futures of the entire commodity supply chain of ecosystem services. The Green Economy claims to salvage both the planet and capitalism’s claims of dwindling supplies of investments: “The [United Nations Environmental Pro-gramme], the World Business Council for Sustainable Development, the World Bank and others . . . say that ‘green growth’ will address these multi-ple crises in one sweep.’”3

But the air we breathe, the water we drink, could have a value, be commodi-fied, sold, and traded, while greenhouse gas emissions, development, and resource extraction continue relatively unabated: “Ecosystem service mar-kets offer this permission [to pollute and destroy] in the form of offset cred-its.’”4 This market may come to control the fabric of our lives at a profound cost.

1 www.britannica.com/technology/emissions-trading; www.wsj.com/articles/SB125011380094927137.2 www.foei.org/wp-content/uploads/2015/10/Financialization-of-Nature-brochure-Eng-lish.pdf, 5.3 Ibid., 2. 4 Ibid., 6.

REDD+ VictimsAs the UN’s REDD/REDD+ became global policy, it was widely reported that the development and trading of international forest offset projects are infested with problems, including: no real progress in carbon sequestration; amplified resource extraction, development, and pollution; rampant carbon speculation; pervasive land grabs; endemic corruption; and extreme viola-tion of rights, including forced removal of indigenous populations from their traditional lands, the reduction of their territories and territorial tenures, and violence.

REDD+’s victims have ranged from individuals to many governments and industries, all investing heavily in the idea that forest offset projects will somehow buffer lifestyle transgressions and fix the Earth’s atmosphere. But its biggest victims are the indigenous peoples who are traditional caretak-ers of the many forested lands now under siege. They are losing their homes, land rights, livelihoods, and lives. Their land tenure and rights are eroding whether through legislation, court decisions, government treaties, contracts and leases for resource extraction, seizures, and illegal occupan-cies, because those lands now offer speculative value as eco-resources. The promise of immense capital put into forest carbon project development has not trickled down significantly to indigenous peoples.

This is massive neocolonialization on the suddenly valued carbon frontier.

Other new epithets have grown up alongside carbon offset and REDD+ de-velopments to articulate their negative reputations.

Carbon cowboy denotes a breed of con-artist speculator descending on in-digenous peoples to quickly close fraudulent deals for land rights in indige-nous communities.

Carbon violence was coined “to give context to the diversity of structural, social, political, economic, and cultural harms connected with the way car-bon markets have evolved, and explores green resources’ role in the carbon violence experienced by the villagers and the local ecosystems they in-habit.”5

Carbon chaos aptly describes the worldwide disruptions of lives, communi-ties, lands, governments, industries, and the markets through carbon trad-ing and offset projects.

Nothing to Count On

5 Frédéric Mousseau and Shannon Biggs, “The Darker Side of Green: Plantation Forestry and Carbon Violence in Uganda: The Case of Green Resources’ Forestry-Based Carbon Markets,” (Oakland, CA: The Oakland Institute, 2014), 3, www.oaklandinstitute.org/sites/oaklandinstitute.org/files/Report_DarkerSideofGreen_hirez.pdf.

Despite the many substantive critiques against emissions trading, carbon offset projects, REDD+, and the financialization of nature, the industry has continued unchecked, impelled by monied interests. REDD+ and the rest have become firmly entrenched for speculative profit, even though they are touted as a solution to climate change. The “solution” is false and empty; emissions trading and offsets fail to address the stated problem of carbon build-up in the planet’s atmosphere, while at the same time causing sub-stantial harms.

Major criticisms are that such trading is fundamentally fraudulent, as a free-market mechanism developed under corporate, neoconservative/neolib-eral agendas to serve a for-profit speculation in developing and non-devel-oped communities at the expense of the environment. Emissions trading theory has been implemented without solid proof of efficacy, and it is cur-rently failing to produce expected results. It is not leading to conservation of resources, but to extensive development, resource extraction, and con-centration of wealth.

Global emissions trading and projects may represent environmental stran-gulation for the Earth, as more sustainable and effective solutions have been ignored and dismissed. Caught up by that web, indigenous peoples and environmentalist allies have risen in resistance internationally to mount their own critiques of social and environmental injustice.

Economist Thomas D. Crocker, who originally developed the theory of tra-dable emissions permits as a University of Wisconsin graduate student in 1966, indicated his own doubts in 2009 as retired academic, “‘I’m skeptical that cap-and-trade is the most effective way to go about regulating carbon,’ . . . He says he prefers an outright tax on emissions because it would be easier to enforce and provide needed flexibility to deal with the problem”:6

Mr. Crocker sees two modern-day problems in using a cap-and-trade system to address the global greenhouse-gas issue. The first is that carbon emissions are a global problem with myriad sources. Cap-and-trade, he says, is better suited for discrete, local pollution problems. “It is not clear to me how you would enforce a permit system interna-tionally,” he says. “There are no institutions right now that have that power” . . .

6 Jon Hilsenrath, “Cap-and-Trade’s Unlikely Critics: Its Creators,” The Wall Street Journal (13 August 2009), www.wsj.com/article_email/SB125011380094927137-IMyQjAxMDI5N-TEwMzExMTMzWj.html.

The other problem . . . is that quantifying the economic damage of cli-mate change—from floods to failing crops—is fraught with uncer-tainty.7

The other originator of emissions trading, John Dales, “was also a skeptic of using the idea to tame global warming.” “‘It isn’t a cure-all for everything . . . There are lots of situations that don’t apply.’”8

Carbon Emissions Accounting: Flawed and FraudCarbon emissions, carbon offset projects, REDD+ and the resulting schemes to commodify nature defy accurate accounting. There are inherent problems with attempting to measure and decide the many intangible facets of such enterprises, including the costs and damages of climate change and carbon offset project baselines, additionality, and leakage.

The difficulty of measuring the entire range, from atmospheric CO2 levels to emissions trading to financialization of nature, leads one to conclude that the project is like measuring the proverbial emperor’s new clothes.

Yet flawed carbon accounting has become institutionalized, per the follow-ing from wikipedia.org:9

[E]xamples for products based upon forms of carbon accounting can be found in national inventories, corporate environmental reports or carbon footprint calculators. Likening sustainability measurement, as an instance of ecological modernisation discourses and policy, carbon accounting is hoped to provide a factual ground for carbon-related de-cision-making. However, social scientific studies of accounting chal-lenge this hope,10 pointing to the socially constructed character of car-bon conversion factors11 or of the accountants' work practice12 which cannot implement abstract accounting schemes into reality13. . . The trustworthiness of accounts of carbon emissions can easily be con-tested.14

7 Ibid.8 Ibid.9 en.wikipedia.org/wiki/Carbon_accounting.10 Larry Lohmann, “Toward a Different Debate in Environmental Accounting: The Cases of Carbon and Cost–Benefit,” Accounting, Organizations and Society 34 (April 2009): 499–534.11 D. MacKenzie, “Making Things the Same: Gases, Emission Rights and the Politics of Carbon Markets,” Accounting, Organizations and Society 34 (April 2009): 440–455.12 Ingmar Lippert, “Extended Carbon Cognition as a Machine,” Computational Culture 1 (2011), computationalculture.net/article/extended-carbon-cognition; Ingmar Lippert, “Car-bon Classified? Unpacking Heterogeneous Relations Inscribed into Corporate Carbon Emis-sions,” Ephemera 12 (2012): 138–161.13 Ingmar Lippert, “Enacting Environments: An Ethnography of the Digitalisation and Nat-uralisation of Emissions” (Ph. D. dissertation, University of Augsburg, 2013).

Ingmar Lippert, in his Enacting Environments, cited above, “establishes how carbon emission facts are produced and co-configure climate change realities.” Such facts are constructed “to stage the company, and in conse-quence capitalism, as in control over its relations to an antecedent environ-ment.”15

Developing greenhouse gases and other ecosystem metrics and accounting has been deemed by many critics as an impossible task. Consider these fur-ther expert evaluations of the system:

A case in point is the continuing attempt . . . in various countries to tackle the riddle of “additionality” in offset markets (that is, how to prove that a project goes beyond business as usual), to which, as car-bon trader Mark Trexler noted years ago, there is no correct answer. Constantly manufacturing and reaffirming the notion that offset projects’ shortcomings are due either to imperfect methodology or in-correct implementation, ten years of regulatory effort have only fur-ther skewed the political economy of the offset markets . . . in favour of corporations locked into fossil fuel use, since it is only they who have the resources necessary for navigating the regulatory mazes that the additionality debate has made ever more intricate. Ironically, of course, this is an effect which, logically speaking, should itself en-ter into calculations of carbon saved and lost . . . The recent estab-lishment of a private carbon rating agency, as well as proposals for “programmatic” and “sectoral” carbon credits, which would help sidestep impossible “additionality” requirements, reflect a continuing commitment to “better calculation” in the face of irresolvable ten-sions between the needs for high-volume, predictable carbon credit output and for market credibility;16

And:The calculation of the number of offsets generated by a project is in-herently problematic. The key difficulty lies in the need to compare the projects’ actual emissions to a counterfactual scenario reflecting another reality, one in which the activity is not implemented as an off-set project. This scenario is referred to as the “baseline” scenario, and

14 Frances Bowen and Bettina Wittneben, “Carbon Accounting: Negotiating Accuracy, Consistency and Certainty across Organisational Fields,” Accounting, Auditing & Account-ability Journal 24, no. 8 (2011): 1022–1036.15 Ingmar Lippert, “Enacting Environments: An Ethnography of the Digitalisation and Nat-uralisation of Emissions” (Ph. D. dissertation, University of Augsburg, 2013).16 Larry Lohman, “Neoliberalism and the Calculable World: The Rise of Carbon Trading.” In Kean Birch and Vlad Mykhnenko, eds., The Rise and Fall of Neoliberalism: The Collapse of an Economic Order? (London: Zed Books Ltd., 2010), www.thecornerhouse.org.uk/sites/thecornerhouse.org.uk/files/Neolib&Calc.pdf, 9, citing Mark Trexler, “A Statistically Driven Approach to Offset-Based GHG Additionality Determinations: What Can We Learn?” Sus-tainable Development, Law and Policy 6, no. 2 (January 2006).

the number of generated credits is equal to the difference between emissions in the baseline scenario and emissions resulting from the project. There is no fail-safe way to divine what the baseline scenario would be. Various methodologies, protocols, and rules-of-thumb can be devised but ultimately the scenario cannot be known with cer-tainty;17

And:[T]he damage caused to the global environment by each incremental emission of CO2 is very small and perhaps unknowable, making it very hard to put an accurate price on emissions.18

Carbon emissions accounting fraud has now entered the language of the ac-counting field.19 It is an acknowledged problem that carbon fraud exists in carbon accounting. Even saying that there is an accurate and overarching carbon accounting standard for the industry is so untrue that it could be considered a form of fraud.

Analyst Chris Lang indicates the conflicts of interest and potential for fraud that are inherent in the industry in establishing carbon project metrics:

Clearly, it is in the REDD project developers’ interest to have a base-line that predicts a high rate of deforestation in the project area. The higher the rate of deforestation in the baseline scenario the more car-bon credits will be generated. And the less the project will have to re-duce deforestation.

Of course REDD project developers can’t pick their own baselines and hope that the rest of the world believes they are not just making things up. The methodology proposed by the project developers has to be validated and project has to be audited. This is where voluntary certification schemes come in, like the Verified Carbon Standard, Plan Vivo, CarbonFix Standard, and so on.

But there’s a catch. The voluntary certification schemes make their money from generating carbon credits. The more carbon credits gen-erated, the more money they make.

And the validators and auditors that are accredited by the certifica-tion scheme are paid directly by the project developers. In order not

17 www.co2offsetresearch.org/consumer/Additionality.html.18 www.britannica.com/technology/emissions-trading.19 Shamima Haque and Muhammad Azizul Islam, “Carbon Emission Accounting Fraud,” in Corporate Carbon and Climate Accounting, ed. Stefan Schaltegger, Dimitar Zvezdov, Igor Alvarez Etxeberria, Maria Csutora, and Edeltraud Günther (Switzerland: Springer Interna-tional Publishing, 2015), 243-257, papers.ssrn.com/sol3/papers.cfm?abstract_id=2771580.

to lose future work opportunities, auditors are unlikely to be too picky about approving their clients’ methodologies.

This is a blatant conflict of interest at the heart of the REDD mecha-nism.20

Lang also addresses the fraudulent natures of baseline metrics:Baselines allow project developers to put an exact figure on the num-ber of tonnes of carbon that have not been emitted as a result of their project. But this number is based on a fiction.

There is no way of testing whether a baseline scenario is true or not, because it is something that might have happened had the REDD project not gone ahead. As the authors conclude, “the baseline scenar-ios in REDD+ projects amount to untestable guesses”. . .

Fraud would be a better way of describing what REDD project devel-opers are doing when they set bogus baselines. The voluntary certifi-cation systems, such as [Verified Carbon Standard], are complicit in this fraud.21

Seyller et als., in their study of REDD+ projects, concluded that these projects “resemble ‘virtual emission reduction machines’ designed to inflate the production of carbon credits and that they do not structurally change the local economy characteristics which drive deforestation.”22

The Gaming of Carbon AccountingDespite negative critiques, individuals and organizations have continued to influence the establishment of standards for carbon accounting. Many have an inside track and may stand to profit or lose from future resolution of the current metric challenges. Indeed, we all may stand to profit or lose from it, since it is currently deemed pivotal to the issue of climate change.

It is not a simple or easy issue to resolve: “Accountancy can be a way of making things appear uncontroversial and non-political, but the technical debates about accountancy rules and standards sometimes involve intense power struggles.”23

20 Chris Lang, “The Virtual Economy of REDD: Conflicts of Interest, Hot Air, and Dodgy Baselines,” (2 June 2016), www.redd-monitor.org/2016/06/02/the-virtual-economy-of-redd-conflicts-of-interest-hot-air-and-dodgy-baselines/.21 Ibid.22 C. Seyller, S. Desbureaux, S. Ongolo, A. Karsenty, G. Simonet, J. Faure, and L. Brimont, “The ‘Virtual Economy’ of REDD+ Projects: Does Private Certification of REDD+ Projects Ensure Their Environmental Integrity?” International Forestry Review, 18, 2 (2016).23 Heather Lovell, Thereza Sales de Aguiar, Jan Bebbington, and Carlos Larrinage-Gonza-lez, “Accounting for Carbon,” Research Report 122, Certified Accountants Educational

Multiple, diverse offset standards (or protocols) now exist internationally:Offset protocols for a wide variety of project types abound.  These pro-tocols have been developed for offsets in voluntary carbon markets and the few mandatory carbon markets that exist, including under the Kyoto Protocol/United Nations Framework Convention on Climate Change (UNFCCC).  Protocols developed for use in the UNFCCC regime are by far the most numerous. 24

The California Air Resources Board (CARB) has established protocols and approved other organizations’ standards to govern development and opera-tion of CARB offset projects.

The REDD+ program has been under consideration by CARB for a number of years, with opposition reported from environmental and social justice or-ganizations, including CARB’s own Environmental Justice Advisory Commit-tee (EJAC). EJAC’s initial draft recommendation was to not include REDD in CARB’s Scoping Plan update.25

Their final recommendation was: ARB should minimize carbon offsets, and prevent use of international forestry offsets such as REDD, that could diminish direct emission re-ductions in disadvantaged communities in California and compromise [greenhouse gas (GHG)] reductions in-state. Any offsets used need to have accompanying data that verifies GHG reduction and that it is ad-ditional to business as usual.26

The EJAC’s request for data verifying greenhouse gas reduction and addi-tionality is referential to some of the same, extant carbon accounting prob-lems that remain unaddressed.

Next Nexus for MetricsThere has been a drive within the carbon industry since 2009 to provide a global, standardized carbon accounting system, based upon satellite moni-toring and shared software. This drive has been spearheaded by Dr. D. James Baker, Director of the Forest and Land-Use Measurement Program of the Bill, Hillary & Chelsea Clinton Foundation. Since at least 2007, Baker has held multiple titles in various metamorphoses of the Clinton Founda-tion’s programs, including the Global Carbon Measurement Program, Clin-

Trust for the Association of Chartered Certified Accountants, in partnership with Interna-tional Emissions Trading Association (London, 2010), www.accaglobal.com/content/dam/acca/global/PDF-technical/environmental-publications/rr-122-001.pdf.24 web.law.columbia.edu/climate-change/resources/international-resources/offsets-proto-cols.25 www.arb.ca.gov/cc/ejac/meetings/06062016/draft_ejac_recommendations052516.pdf, 7.26 www.arb.ca.gov/cc/ejac/meetings/041014/appendix_a.pdf, 32.

ton Climate Initiative—Carbon and Poverty Reduction Program, Carbon Measurement Collaborative, and the Clinton Climate Institute.

Among his other achievements, Baker was appointed Under Secretary of Commerce and Administrator of the National Oceanic and Atmospheric Ad-ministration in 1993 by Bill Clinton, serving in that capacity until 2001: “as the longest-serving official in that position, he significantly influenced U. S. climate and ocean policy.”27 During his term of office, “he guided the com-pletion of the modernization of the National Weather Service, initiated new climate forecasting services, and merged civil and military environmental satellite systems.”28

Baker was pivotal in the rise of global warming and climate change dis-course. In 2013, he was a member of the Technical Advisory Panel for the World Bank’s Forest Carbon Partnership Facility.29 He has been a long-time advisor to Vice-President Al Gore.30

In the course of his career, Dr. Baker has lamented the difficulties of accu-rate metrics and pointed to the need to maintain

long term observations for the understanding and prediction of ocean and climate change. These observations have to be globally distrib-uted and carried out over long periods of time. But a means of obtain-ing these observations . . . is not in place today. There is no global system of routinely funded long-term, high quality measurements to provide the necessary understanding of climate in general . . . Long term biological measurements are in an even more limited state of development.31

He has continued his interest in promoting observation and measurement through the Clinton Climate Initiative, which “helps countries comply with international measurement and reporting verification (MRV) standards, building a credible database on which to advance international agreements on deforestation.”32

As of January 2016, the “Clinton Climate Initiative [is] leading institutional arrangements”33 in the anticipated development of second generation car-

27 vjel.vermontlaw.edu/files/2013/06/James-Baker.pdf.28 Committee on Assessment of Impediments to Interagency Cooperation on Space and Earth Science Missions, Space Studies Board, Division on Engineering and Physical Sci-ences, National Research Council, Assessments of Impediments to Interagency Collabora-tion on Space and Earth Science Missions, National Academies Press, 2011, 62.29 environment.harvard.edu/climate-extremes.30 en.wikipedia.org/wiki/D._James_Baker.31 D. James Baker, Ray Schmitt, and Carl Wunsch, “Endowments and New Institutions for Long-term Observations,” Oceanography 28 (July 2007).32 theredddesk.org/countries/actors/clinton-foundation-clinton-climate-initiative.

bon estimating and reporting tools,” to be delivered and governed through a dedicated foundation, Moja Global:

A new second-generation integrating framework is under develop-ment that can greatly reduce duplication of future efforts by provid-ing a generic platform that works with existing or new modules devel-oped to address national circumstances. 34

It remains to be seen what will develop out of the Moja Global foundation platform framework. After seven years of attempts to resolve accounting is-sues, the next generation has not yet been delivered.

AnalysisThe promotion of these new measurement tools cannot be allowed to eclipse the issues that have haunted REDD+ and other emissions offset-project de-velopments. The very basis of emissions trading projects—measurement—is error prone no matter how the accounting system performs. There are irre-solvable structural issues such as additionality, leakage, permanence, en-forceability, verifiability, and validation. Systemic fraud and carbon violence against indigenous peoples will not go away under the REDD+ and other trading regimes.

Fraud also exists in the underlying premise that the free market can best re-solve climate change crises, even those that were caused by the free mar-ket. It is extant in the basic premise that financial incentives will stop pollu-tion better than consumer reductions, legislative restrictions, and tax in-creases. It is found when initial logging of forests to lower initial project baselines is preferable to leaving forests ecosystems and their indigenous caretakers alone and fossil fuels in the ground. It continues in the premise that the global market needs emissions trading and the financialization of nature as investment commodities to prevent economic collapse.

Emissions metrics and the emissions trading markets are fatally, systemi-cally flawed and fraudulent, in theory and in practice. The international REDD+ and other offset projects are creating carbon violence and chaos. It is time for the California Air Resources Board to weed out REDD+ and car-bon offsets permanently and to rectify the damages of carbon trading.

33 Werner A. Kurz, “Introduction to the Use of Carbon Accounting Models and How They Could Be Used to Determine a Reference Emissions Level,” at BioCarbon Fund Initiative for Sustainable Forest Landscapes Workshop to Discuss Landscape-Level Carbon Account-ing Approaches (Washington, D. C., 2016), 29.34 Ibid., 33.