By Jake Spring
(Reuters) – The South American forest nation of Suriname plans to become the first country to sell carbon credits under a system set up by the 2015 U.N. Paris Agreement to help curb climate change, an adviser on the sale told Reuters.
The prospective sale is a bid to attract investors with government-backed carbon credits that follow U.N. guidelines, as companies grow wary of buying from private initiatives in the voluntary carbon market after studies found several projects failed to deliver promised climate contributions.
“This is the first signal of whether the Paris Agreement is actually working,” Kevin Conrad, executive director of the Coalition of Rainforest Nations, told Reuters in an interview. Suriname is a member of the coalition, and Conrad is advising on the sale.
The sale is divisive among carbon market experts. Some say that selling credits from places like Suriname could bring needed financing to developing countries. Others have expressed concern that the credits might not represent legitimate actions to limit global warming.
Suriname’s forest credits are generated using a baseline it registers with the United Nations stating how much carbon stock its forest contains. If the country protects its forest so the carbon stock rises, it can package those gains as carbon credits.
Suriname is one of a handful of “carbon-negative” countries, with its vast jungle absorbing more greenhouse gas than the developing nation emits.
The Paris Agreement says that countries can sell emission reductions in the form of credits known as “internationally transferable mitigation outcomes” or ITMOs, to other countries or companies to use toward their own targets.
Suriname within weeks could issue ITMO credits backed by emissions reductions in its forests, said Conrad, who also serves as Papua New Guinea’s climate envoy.
About 30 companies were already studying whether to buy the credits, Conrad estimated. He did not say how many credits would be issued or what the price would be.
The Suriname environment ministry did not respond to multiple requests for comment.
Conrad said the first credits would be backed by Suriname’s 2021 emissions reductions registered with a U.N. program called REDD+, aimed at suppressing deforestation and increasing carbon stored in forests.
Suriname reported its progress on REDD+ and on meeting climate goals to the U.N. in November 2022, stating that those reported emissions savings would support its sale of carbon credits.
Suriname’s President Chan Santokhi said in the documents the approval of carbon credits was integral to the implementation of his country’s economic and environmental policies. “It will mark the beginning of the long-awaited access to climate finance” he said.
According to the U.N. REDD+ website, Suriname has registered a reduction under the program of 4.8 million metric tons of carbon dioxide equivalent for 2021. That would allow for the country to sell up to 4.8 million credits, as each ton equates to one credit.
As the world’s first ITMOs, there is little precedent to determine their value. The LEAF Coalition, a private-public partnership of rich countries like the United States and companies like Amazon, has pledged to buy voluntary carbon market credits to finance forest protection for at least $10 per credit.
ITMOs can be applied to a country’s official Paris Agreement targets, although rules allow for companies also to buy the credits to apply to their own targets.
IMPERFECT SYSTEM
Gilles Dufrasne, lead policy analyst at nonprofit Carbon Market Watch, said that a company may want to buy ITMOs as their association with the U.N. could confer extra legitimacy.
But Dufrasne cautioned that the REDD+ emissions reductions backing the credits were not subject to robust verification standards to prove a contribution to curbing climate change.
The United Nations appoints independent experts to review each countries’ emissions reductions. These experts can suggest revisions, but do not have the power to reject national submissions.
“The review process at the U.N.-level is like many U.N. processes, it basically has no teeth,” Dufrasne said. “Ultimately it’s the seller that decides how much it is able to sell.”
Voluntary carbon market registries, by comparison, give reviewers the power to reject poor-quality credits, Dufrasne said. That’s become important following earlier market failings that approved credits for projects later found to have filed misleading information. For voluntary markets, the different registries set their own standards.
The U.N. review system was agreed in global climate negotiations after many countries refused to support a system in which their submissions could be rejected, said Gustavo Silva-Chavez, a REDD+ expert.
Ultimately, it would be up to the buyer to evaluate Suriname’s credits and to request more information from the government if needed, he said.
“It may not be a perfect system, but it’s better than nothing, and it’s better than the voluntary carbon market,” Silva-Chavez said. “By the time it gets perfect, it’s going to be in 20 years and the forests are gone.”
Suriname is expected within weeks to file an initial report to the U.N. authorizing the ITMOs meeting several criteria, including how the sale proceeds will be spent, Conrad said.
STALLED RULES
Nearly 200 countries adopted the Paris Agreement in 2015 which provided carbon trading principles. Countries settled on a carbon trading rulebook in December 2021.
Dufrasne said that while climate negotiators still must resolve technical details, such as how countries report trades, enough of the rules have been laid out to allow the credit sales.
A diplomat and veteran negotiator on U.N. carbon markets who spoke on condition of anonymity told Reuters that while the system wasn’t fully set up, an ITMO sale could go forward and be registered later when the system is ready.
Before Suriname, Gabon had announced its intention to issue ITMOs in 2022, a proposal Conrad also advised on.
But some environmentalists criticized the plans, accusing Gabon of seeking credit revenues without reducing emissions or increasing the ability of its forests to capture carbon.
Gabon paused its plan ahead of the August presidential election, but a military coup in the country has made the future of those plans unclear.
Conrad said he also was working with Honduras and Belize on ITMO sales to take place in 2024.
(Reporting by Jake Spring; Editing by Katy Daigle and Timothy Gardner)
