Reductionism

The biggest mistake we've made with carbon and biodiversity markets is one which characterizes Western civilization as a whole — reducing supposedly "objective" reality to a series of quantifiable metrics, which are then pursued with tunnel-vision, ignoring the complexity around them or any potential trade-offs involved in optimizing for one metric at the expense of the whole.

Current nature markets focus almost entirely on carbon, but this reductionism fails to acknowledge the complex web of biodiversity and community ties these habitats foster. NbS, however, deliver immeasurable value in biodiversity and community relations.

To put it bluntly - it is simply not true that a tonne of carbon sucked out of the air with a carbon capture machine in New Hampshire is as valuable to conservation efforts as a tonne of carbon avoided by protecting virgin rainforest in Papua New Guinea. One really is just a tonne of carbon, the other is a tonne of carbon as well as a rich web of symbiotic relationships with insects, birds and mammals who have co-evolved for millions of years.

As Catherine Childs, Founder of Island Offsets, says: “The biodiversity crisis is inextricably connected to the climate crisis and we cannot correct one without remedying the other.”

If companies and organizations are to effectively mitigate their impact on the natural world, they have to look beyond carbon and consider the intricate web of life that sustains us all.

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Exploitation of Indigenous Communities

A second critical oversight of carbon markets is to overlook the role of indigenous communities. It is similarly indicative of Western civilization that a social technology designed to preserve nature has often ended up disenfranchising and marginalizing the very people who have lived in harmony with it for generations.

Projects like REDD+ have been criticized for emphasizing carbon sequestration over social impacts such as indigenous rights, land tenure, and community involvement, particularly regarding indigenous rights and participation.

Carbon offset initiatives have been notorious for "carbon-grabbing," where rights are stripped from indigenous people, preventing them from funding their conservation efforts through carbon credit sales. There are examples of projects that appropriate land, forests and rivers used by indigenous communities for their sustenance, medicine, spiritual and cultural traditions.

Even where attempts have been made to consult local communities, many projects have encountered challenges in effectively communicating and engaging with them. In particular the lack of emphasis on the principle of Free, Prior, and Informed Consent (FPIC) has often resulted in conflicts and tensions during implementation. 

As Marciely Ayap Tupari, secretary coordinator of Coordination of Indigenous Organizations of the Brazilian Amazon (COIAB) explains, “companies often end up coming to us with a proposal, wanting to finance, wanting to supposedly protect nature, but in their own way. When we explain our vision as indigenous peoples, many do not understand.”

Often this is a case of mistranslation and misunderstanding. Elsewhere it can be more nefarious:

“Information on jurisdictional REDD+ and carbon markets is often presented in very technical or legal language, and not necessarily in indigenous peoples’ first language,” said Marcio Halla, Director of the Territorial Governance Facility and Economic Initiatives Lead at Forest Trends. “More concerningly, we have sometimes seen information on risks de-emphasized in proposals to communities or hidden in the fine print.”

Furthermore, there have been reports of indigenous people being forced from their lands to optimize carbon absorption — which apart from violating their human rights, is a strategy which fails on its own terms by overlooking the broader environmental and cultural context in which carbon sequestration is embedded.

Binary Additionality

To some extent both these challenges can be tied back to flawed thinking around the concept of 'additionality'. This principle posits that carbon offset funds must lead to carbon sequestration that would not occur without such financial support. In theory, additionality ensures that investments by individuals and companies genuinely contribute to climate change mitigation. In practice, the rigid application of additionality has spawned numerous unintended consequences which have undermined integrity and trust in carbon markets as a whole.

One reason for this is that additionality is adjudicated in a binary manner: a tonne of carbon is either deemed additional or not, with little consideration for the shades of grey in between.

For instance, validating additionality is relatively simple for technological interventions like direct air capture (DAC), or active regeneration such as monocrop tree planting. The price per metric tonne of carbon sequestered ranges from $600 to $1000 for the former, despite having literally zero (or potentially even negative) biodiversity or community co-benefits and $20-$50 for the latter, where co-benefits are negligible.

In contrast, proving additionality for existing forest — where deforestation is prevented through the sale of carbon credits — is more complex. And yet the market demands both clear-cut additionality and certainty. This has led to a gross underestimation of the value of natural assets, to the point where the market price for carbon stored in primary rainforests has fallen to $2.5 per tonne. From an environmental standpoint this discrepancy is absurd. Primary forest is infinitely more valuable than technology-based reductions or direct tree planting in terms of the biodiversity and the human communities it supports, not to mention its capacity to regenerate and evolve. Nor is $2.5 per tonne anywhere near enough to protect any forest from exploitation, legal or otherwise.

Treating additionality as binary also creates an incentive to certify projects as additional which on closer inspection prove to be dubious. This was highlighted in a 2023 Guardian investigation which revealed that up to 90% of a leading carbon accreditor’s credits from avoided deforestation did not hold up under scrutiny.

More troubling still are the perverse incentives that additionality constraints create. If communities can only monetise forest when they can prove the threat of deforestation then there is an incentive to overplay threats, if not to actually manufacture them. The consequence is that communities who have engaged with logging and mining companies are able to monetise whatever forest is left, whereas those communities who have managed their natural assets responsibly or put in place laws to protect them struggle to demonstrate additionality, effectively excluding them from market participation.

Even where there is a clear direct threat to natural assets, the time it takes to prove the threat is often longer than it takes for the threat itself to manifest. As Catherine Childs, Founder of Island Offsets says: “By the time we can prove that a specific parcel is under immediate threat, it is usually too late to save it.” Many carbon stocks are lost in this way as the pace of development outstrips the pace at which carbon project owners can prove additionality.