EU Carbon Removal Certification Framework: A high-quality outline that does not guarantee the value of the final picture

Commentary by Simon Martel, Clothilde Tronquet and Julia Grimault, Institute for Climate Economics

The European co-legislators have reached an agreement on the content of the future European Carbon Removal Certification Framework (CRCF). Negotiations were swift and fruitful, against a backdrop of a general step back in the adoption of the various Green Deal texts. While today sees environmental issues played off against farmer’s livelihoods, this draft regulation brings these two elements together to create the conditions for investment in the transition of agriculture and forestry sectors. However, several details still need to be clarified to ensure that this framework actually enables effective and ambitious climate financing.

A focus on carbon removals and emission reductions related to soils

While the Commission’s initial proposal only focused on removals in the strict sense, the co-legislators have decided to broaden the scope to include emission reductions related to agricultural soils, whether they concern CO2 or N2O. This extension makes sense regarding the interconnected nature of the cycles of these two gases, but the negotiations were not a foregone conclusion. The experience of the Label bas-carbone in France has shown that this integrated GHG assessment approach at farm level ― combining emission reductions and removals ― is more effective in ensuring the transition. It also avoids perverse effects where CO2 sequestration in soils improves, despite a concomitant increase in N2O emissions, for example through nitrogen fertilisation of grasslands.

But we are only halfway there, as methane emissions, mainly linked to livestock, are not included, even though they account for 65% of European agricultural emissions. The provisional agreement between the European Parliament and the Council sets a review clause in 2026 for their possible inclusion and calls on the Commission to produce a pilot methodology by then. Let’s hope that the scope will be extended, so that livestock farming can also benefit from the funding provided by the CRCF to kick-start the necessary transition.

Lastly, the distinction of emission reductions and removals into separate units is to be welcomed, as it will ensure transparency in the funders’ communications and claims.

Any economic model for temporary credits?

Discussions on the risk of reversal (also known as risk of non-permanence) in soils and biomass took centre stage during the initial debates of the expert group supporting the European Commission in drafting certification methodologies. The risk of reversal may be the responsibility of the project developer, if practices are discontinued for example, or simply the result of natural hazards, enhanced by climate change (forest diebacks or fires, for instance). Various tools, here referred to as “liability mechanisms”, already exist to prevent these risks at global level: discount on the number of credits generated, buffer, up-front insurance, etc.

In addition to these mechanisms, Europe -in the different provisional versions of the regulation- also considers the use of temporary certificates to deal with the risk of reversal. This raises a number of questions:

The methodological translation of this temporary certificate concept will therefore be crucial if we do not want to discourage private stakeholders to finance carbon farming.

Safeguards for environmental integrity.

The provisionally adopted regulation requires carbon farming projects to generate at least a biodiversity co-benefit. This is an interesting concept to improve the environmental integrity of the scheme, but its practical implementation will be complex given the lack of consensual and operational indicators for measuring biodiversity.

On another issue, the legislators claim that they want to encourage practice changes, while rewarding the front runners of carbon farming. These are two laudable objectives, which might however be difficult to reconcile within the same instrument for the same uses. Unless Europe tolerates the creation of windfall effects, which would then be incompatible with the additionality criteria required by carbon markets.

Pragmatic view for the double counting between country and company

The outcome of the trilogue clearly indicates that the certificates will contribute to European Nationally Determined Contributions (NDCs) and not to those of any other state. This is in line with the proposals made by I4CE over the last ten years, which considers that contributions to national or European mitigation targets are legitimate and necessary, and do not prevent voluntary buyers from claiming funding. There is no double-counting as there are only compliant climate targets for the States in the Paris agreement. This principle has been applied for the last 5 years for the Label bas-carbone without altering the environmental integrity of the carbon contributors or of the French State.

Towards a variety of uses for the certificates?

Europe has chosen to leave the question of the certificates’ uses outside of this Regulation. The framework for their use is provided by other texts, notably the Green Claims Directive. Regulation of climate claims will have to be an important part of dedicated European legislation to avoid greenwashing scandals. While carbon certification tools have mostly been used in voluntary carbon markets until now, this European framework can be extremely useful to help direct other types of funding towards projects which guarantee their positive climate impact. Europe is opening up this promising avenue by explaining that certificates can be used in a variety of ways: public subsidies, voluntary carbon markets and, in the future, compliance markets. This openness is essential because the need to finance the transition of agriculture and forestry is so great that it will be necessary to combine sources. But the rules of the game will have to be clearly set out so that this different funding types can be combined effectively. A pragmatic vision will therefore be needed so that both value chain actors and actors outside the value chain can contribute and finance the transition. I4CE‘s proposals, based on the experience of the Label bas-carbone, provide answers that could be useful at European level.

The work has just begun

The provisional regulation provides an ambitious framework that is unique at a continental scale. However, many methodological issues have been left to the Commission and the expert group to be released in delegated acts. As the devil lies in the details, the relevance and integrity of the system will be in the hands of the Commission, which will have to strike the right balance between ambition and operationality. The next few months will be crucial in determining which methodologies are prioritised in the Commission’s calendar. I4CE will be keen to show that methodologies from the land sector should be at the top of the pile, particularly if they are no-regrets, rich in environmental co-benefits or relevant for adaptation to climate change. In this respect, the Horizon Europe INFORMA project will provide technical recommendations for the certification of forestry projects. At a time when national standards continue to gain momentum (Label bas-carbone in France) or are being developed (Ireland, Portugal), the new European framework will also need to seek complementarity with these schemes and give stakeholders a clearer idea of how the different levels fit together.

The Carbon Farming Summit in Valencia and the Spring expert group meeting will be two key moments in the coming months to make progress on the methodological implementation of this new framework.

German delegation explores cooperation with Valencia on the topic of Sustainable Forest Management

In the framework of the cooperation agreement between the regions of Sachsen-Anhalt (Germany) and Valencia (Spain), the INFORMA team at UPV (Polytechnic University of Valencia) welcomed this January a seven-member delegation from Germany to discuss potential areas of collaboration, including the topic of Sustainable Forest Management (SFM).

While UPV was represented by members of its research group ICTvsCC (Information and Communication Technologies versus Climate Change), the German delegation was composed of representatives of the Ministry of Economy, Energy, Climate Protection and Environment of Sachsen-Anhalt (MWU Sachsen-Anhalt), from academia, the private sector, among others. The delegation was led by Mr Uwe Zischkale, director general of Energy, Sustainability and Structural Change at the MWU Sachsen-Anhalt.

On Tuesday, 16 January, the delegation visited the Valencian municipality of Enguera, known for its forest wealth and the sustainable forest management practices that have been in place for years. During this visit, Professor José-Vicente Oliver-Villanueva, coordinator of INFORMA, explained the idiosyncrasy of the region’s forests, their vulnerability to climate change and the positive effect of implementing SFM to address these risks. Fernando Pradells from AMUFOR (Valencian Association of Forestry Municipalities) also shared his experience and knowledge, highlighting the need to demand SFM as a goal and not as a means, by which value is given to the bioeconomy with tangible products.

The following day, a meeting took place at UPV and featured a presentation of the projects in which the ICTvsCC research group is involved, including INFORMA. Among other subjects, the topic of the certification of carbon offset markets as a means of financing forest ecosystem services, explored in the context of INFORMA, was of great interest to the German delegation, as well as sustainable forest management practices adopted in the project’s case studies and prognosis of how they may change in future scenarios.

Webinar: Supporting Europe’s forests through Sustainable Forest Management and carbon certification

EIT Climate-KIC, in cooperation with its INFORMA consortium partners, warmly invites you to the first open webinar and discussion on “Supporting Europe’s forests through Sustainable Forest Management and carbon certification”. 

The webinar and discussion provide a virtual platform to share key insights and current (best) practices around sustainable forest management and forest carbon certification, as well as to learn more about INFORMA and how to collaborate with us further. 

Date: Thursday 7th December 2023
Time: 09:30 – 11:30 CET
Location: Microsoft Teams

Webinar agenda

Time (CET)Session
09:30-09:40Welcome, agenda overview, and intro question
09:40-09:50Presentation of INFORMA research project
09:50-10:20SESSION 1 Presentation by content expert: Forest carbon certification methodologies  

Speaker: Julia Grimault, Team Lead, Forest-based sector, carbon certification, Institute for Climate Economics (I4CE)  

Discussion: How can we build a Monitoring, Reporting and Verification (MRV) framework in carbon certification that is robust enough to ensure transparent projects, but also cost-effective and implementable? What are the methods to monitor this carbon sequestration?
10:20-10:50SESSION 2 Presentation by content expert: Carbon storage in wood products certification  

Speaker: Samy Porteron, Programme Manager, ECOS 

Discussion: Forests offer huge potential in carbon storage, sink, and sequestration. How can forest carbon certification support climate-smart forestry economies?
10:50 – 11:20SESSION 3 Presentation by content expert: Managing supply and demand in a timber marketplace  

Speaker: Samuel Welsh, Forest Carbon Ltd
11:20 – 11:30What next? How to get involved Co-creating sessions on improved carbon certification in Europe

Harnessing the full potential of Sustainable Forest Management in carbon schemes: An interview with I4CE’s Julia Grimault

Planting new trees is not the only way to offset carbon emissions. Managing existing forests to absorb more CO2 through Sustainable Forest Management (SFM) also holds great potential that has partially been recognised by some carbon certification schemes. Still, in practice, the real carbon sequestration capacity of SFM is far from being reflected by most carbon standards due to various technical difficulties – which the INFORMA project aims to help overcome.

The project’s carbon accounting expert Julia Grimault and her team at the France-based Institute for Climate Economics are gathering insights from research and practice on how to make SFM fully count towards carbon credits. Their goal is to improve current standards, support stakeholders working in the field to fund more climate-friendly forest management, and inform policy decisions, for instance, by the European Commission on its new carbon certification framework for removals.

Interested in Julia’s work? Then watch our video interview or read it below to learn about her research in detail!

How can carbon credits foster more sustainable forestry practices?

The objective of carbon crediting is to direct funding, possibly new types of funding, towards climate-compatible practices. There are two types of benefits: first, you can try and get funding that is currently not going towards forestry or other sectors that might also need it – agriculture, for example. Then you make sure that the funding is brought on the condition that it has an actual benefit for the climate. This can happen through, for instance, afforestation, reforestation, improved management, and forest restoration after a climatic event. And you make sure that the use of that funding is efficient.

Talking about a concrete situation: in many European countries, forest owners have been affected by bark beetle attacks, so they clear-cut the forests and now need to plan something new. Would the use of carbon schemes make sense in this situation?

It depends on which type of schemes are implemented. In France, this is typically one of the practices and actions that are eligible. Because often forest owners cut the trees that have been impacted but don’t necessarily regrow any forests because of cost issues and, in some cases, disappointment. Carbon certification then helps to trigger forest restoration. This can also be done with public funding for countries which have a mechanism in place. In France, we have a bit of both. I’m not going to get much into details on how this is articulated but this is typically one of the possibilities to help trigger an action that otherwise we believe would not have necessarily been done.

Can elaborate on how we can bring together Sustainable Forest Management (SFM) and carbon schemes in the INFORMA project? What is your approach?

There are two types of difficulties with SFM. The first one is also linked to all types of forestry projects. It is the uncertainty that you have when measuring carbon impact. Because forests are living things, you have the uncertainty of measurement and non-permanence risk – the risk that the carbon is reemitted at some point to the atmosphere.

Also with Sustainable Forest Management, it is sometimes harder to quantify and evaluate carbon benefits. For afforestation it is easy. You have nothing and then something. Well, not necessarily nothing but it’s easier to quantify. For SFM you don’t always have the tools to measure what impact this or that forest practices will actually have on the carbon stocks and fluxes. We hope that the INFORMA project will help provide the tools to have better and more precise measurements of different types of stands and forests. That way we can better quantify the carbon impact of different practices on the different carbon compartments, such as living biomass, and soils, for example, that we don’t really know how to take into account currently.

Forest management is already included in some of the existing carbon schemes but not necessarily all types of practices. So we hope that the project is going to help provide the tools to either integrate more practices or be more precise in the measurements. But still keeping in mind that the more precise you get, usually the most costly it often gets too. We have to find the balance between precision, cost and being as robust as we can be. At the same time, still provide tools that are accessible and easily usable by stakeholders who are not carbon experts but people working in the field who still need to get comfortable with those tools.

What are you exactly planning to do to improve the measurements and how will you share your knowledge with the stakeholders you want to engage?

First, we want to identify what is already considered in existing carbon schemes. A lot of methodologies and schemes already exist and are still being developed. So first we want to see what is missing in those schemes and what is done properly. And then be able to spot shortcomings and what improvements the project can bring. They could be, for instance, what we call conceptual improvements, maybe for forest compartments that are not taken into account such as soils or harvested wood products that could be better integrated. Or it could be the use of new tools or apps, for instance, to help forest stakeholders and owners monitor carbon more easily and precisely.

Then we are going to present this to the different stakeholders like project developers, intermediaries, buyers and funders of these projects to see what comes out of it: if the tools that we propose actually could be implemented properly and if they are not too costly. We are also going to provide just before that a cost-efficiency analysis, trying to keep in mind this balance between precision and something usable. The end game of all this is to provide overall recommendations to the existing carbon schemes and to the European Commission, which is developing a new carbon certification framework for removals at the EU level.

How to provide EU-level recommendations if carbon schemes are sometimes also based on national laws?

There are some themes that are going to be quite cross-cutting. For example, the cost efficiency of some tools, the economic challenges of additionality, and maybe conceptual challenges such as non-permanence. These are problems that are faced more or less everywhere in Europe. Some recommendations can apply quite widely and others would have to be specific for geographic regions and types of countries. We will find out throughout the project!