Today is Thursday, 29 August 2024.
The MSCI Net-Zero Tracker is a periodic report on progress by the world’s listed companies toward curbing climate change risk.
We already covered this topic in one post in 2022. At that time, we were preparing for COP27 in Egypt.
Meanwhile the World got warmer and broke even more temperature records.
The image below was taken from the 27-pages MSCI Net-Zero Tracker from October 2022.
"Forest offsets in the path of wildfires" was the title of a scary chapter, as presented on pages 14 and 15 of the report, compiling data from BeZero Carbon, from NASA and MSCI itself.
Explaining the image, the regions are red colored with different intensities going, in one extreme, from white - such as most of the Sahara desert or Greenland - to the other extreme, in blood red - like central Africa and Northern Australia. These colors indicate the probability of wildfire, going from very low <0.01% (white) to very high >10% (blood red). These were wildfire data from MSCI ESG Research, as of Aug. 31, 2022.
The white arrows leading to selected 10 countries also present two numeric information about carbon credits: total issued (red) and total outstanding (orange). These were offsets data from BeZero Carbon, as of Sept. 16, 2022.
Accordingly, the top 5 in carbon credits were:
- issued: United States, Indonesia, Brazil, Peru and Cambodia
- outstanding: Indonesia, Brazil, Peru, Cambodia and Democratic Republic of the Congo
Climate change-induced heat and drought threaten to destroy natural reserves, including affecting forest-based offsets for both ongoing and potential projects.
As shown in the image below, the number of nature-based offsets is significant in areas with medium and high risk of forest fires.
What will happen to the carbon credits generated from forests that catches fire afterwards?
Well, there are the so called buffer pools. At least to mitigate.
Click here for a thorough article from Sylvera, “Guide to Carbon Credit Buffer Pools”.
Basically, “the total number of credits the project is permitted to sell is equal to the net emissions reductions or removals minus the buffer contribution and any other deductions. A portion of carbon credits generated by nature-based carbon credit projects is set aside and placed in a “buffer pool” or “buffer reserve” instead of being sold.”
Although not due to wildfires, there was a recent case of the buffer pool actually being used, South Pole’s Kariba Project. Recall this October 2023 statement from Verra.
By the way, that case was so notorious that caused Verra to change its pool compensation agreement for Agriculture, Forestry, and Other Land Use (AFOLU) projects early in 2024.
Back to MSCI Net-Zero Tracker, we now wonder what situation will appear when that “Forest offsets in the path of wildfires” chapter is updated.
Click at the image below for the October 2022 edition analyzed above and here to all Trackers. And do not miss MSCI analysis.
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