Issues such as additionality and ways to ensure the credibility and integrity of the emerging Voluntary Carbon Market in Portugal were discussed by representatives from academia, the legislative process, businesses, and civil society at a round table titled "More than Carbon: Giving Credit to Biodiversity." The initiative, organized by CHANGE to mark World Environment Day, took place on June 5 at the Faculty of Science and Technology of the NOVA University of Lisbon.
The Voluntary Carbon Market is "a market where certified carbon credits, proper carbon credits, and carbon + credits, which are for projects that incorporate additional benefits for biodiversity and natural capital, will be traded," summarized Rui Santos, a member of the Board of Directors of CHANGE and a researcher at CENSE, who moderated the session, introducing the topic. "We are talking about carbon credits and carbon + biodiversity credits. These are complex goods with different interactions among them and associated complexities, such as defining the baseline that allows for the creation of real credits and not fictitious credits, avoiding greenwashing through the monitoring of transactions and compliance with requirements, separating unintended emission reversals from those attributable to the promoters' actions," continued Rui Santos.
Ana Paula Rodrigues, vice president of ADENE - Energy Agency, emphasized that "if we consider that the current annual average carbon sequestration value is 6 million tons, it becomes clear that there is a long way to go." She explained that "this instrument was very much focused on the dimension of carbon sequestration, although the legislation was created for any type of projects, whether emission reduction projects or carbon sequestration projects." The vice president of ADENE contextualized the Voluntary Carbon Market as "another instrument of this climate policy that prioritized, in fact, nature-based projects, particularly forest projects, but also agricultural ones, without neglecting other emission reduction and blue carbon projects." She added that "the creation of a market, which is voluntary but also regulated, was motivated by the fact that carbon credit transactions already existed in Portugal but were conducted without any rules."
João Torres, a researcher at CoLAB Forestwise, identified two problems in the implementation of this instrument in Portugal: permanence and involuntary reversals. "We unfortunately have a recurrence of fires that, even compared to other southern European countries, is alarming and obviously introduces a higher risk factor." He also highlighted the issue of additionality, "initially because of natural regeneration issues. For example, if we intervene in the natural regeneration of pine, it will sequester less carbon than if we don't intervene because we will be doing branch pruning. Of course, we are protecting against fires, but if we do the pure and hard calculations, following equations, we are not respecting the principle of additionality, which will have to be addressed."
José Rafael Marques, a researcher at MED and an entrepreneur at AgroInsider, identified the high cost of producing a national credit as a barrier to the Portuguese carbon market. "Whether in the agro-forestry system or the forestry system, the production cost will always be very high." Another difficult barrier to resolve was the significant difference in competitiveness within the national territory. "Because we are talking about carbon, we are paying for a service. A company is paying for a service where someone is storing CO2 in their operation. This means that in Minho or Mértola, two projects within the same country have completely different capacities and competitiveness." To resolve this, "the market either pays for the product or the service, and normally the carbon market prefers to pay for the product rather than the service. In Mértola, there are 30-year-old pines that are not very tall, but they provide a powerful environmental service by delaying desertification. This means that in Mértola, payment must be made for the service."
For Acácio Pires from Associação ZERO, "carbon credits are used to offset emissions," which he finds problematic. "The idea of carbon credits is to add to the actual emission reductions. A company with high emissions should first reduce emissions and not just find ways to offset them," he added. To enhance the credibility of this market, Acácio Pires suggested introducing mandatory insurance, meaning "projects would have to be designed to minimize the risk of reversals as much as possible, as insurance for less credible projects would be very expensive."
Ana Paula Rodrigues stated that "before offsetting, companies must reduce their emissions and ensure the credibility of their carbon footprint calculation, making offsetting the last option." She emphasized that the upcoming legislation greatly limits what can be done, considering all aspects of the market. Regarding the credibility of the Voluntary Carbon Market in Portugal, Ana Paula Rodrigues highlighted that "buyers want credibility because they have to meet Science-Based Targets or ESG (Environmental, Social, and Governance) requirements, which impose very strict criteria on the carbon credits used by these companies." She noted that for purchasing companies, additionality is the main requirement. "Additionality means that the project exists solely because the financial flow associated with carbon credits makes it viable. It cannot be legally required and must lead to the removal or sequestration of emissions. This seems trivial but is crucial for the market's functioning." Concerning market integrity, the vice president of ADENE stated that it is a "fundamental aspect addressed in the recently published legislation, providing the market with a guarantee mechanism, either through a guarantee fund or insurance." She explained that "even if a forest burns, the credits sold must be automatically deducted from the guarantee fund or replaced by an insurance mechanism. We all understand that there is a trade-off and a balance that must be achieved because the market, while providing these guarantees, also needs to function and have some liquidity, which has been attempted through future carbon credits, introducing additional risk. But this is based on the premise that project risk management mechanisms also work."
Ana Paula Rodrigues also mentioned that ADENE and the Portuguese Environment Agency (APA) plan to soon launch an informational website and provide a set of supporting documents "for both project promoters looking to sell Carbon Credits and buyers." She added that a first methodology is being developed, "which we hope can serve as an example for others, specifically a forestry methodology that also addresses carbon+ credits."
The session was followed by enthusiastic participation from both the in-person audience in the auditorium and those attending online.