Telecoupling cannot be ignored for the forest-based carbon market

Abstract

The global carbon market has boomed in recent years; its reach has led to worldwide annual revenues from carbon taxes and emission trading systems topping an all-time high of US$95 billion in 2023 (World Bank 2023). Carbon markets incentivize actions to remove atmospheric carbon by generating and trading carbon credits, often to offset carbon emitting activities. In 2021 a framework for international carbon trading was established under article 6 of the Paris Agreement, which enables countries to collaborate in achieving their nationally determined contributions (NDCs) by trading mitigation outcomes (UNFCCC 2021). Already, 80% of countries have signaled their intention to use article 6 to achieve their NDC targets, and 24% have already started to engage with pilots or bilateral agreements (Granziera et al 2024). A common and increasingly popular way to generate forest-based carbon credits is through forest restoration (reestablishing forests in areas where they have been depleted) and afforestation (establishing forests in areas that have not historically been forested). The forest-based market has the potential to sequester 28.9 petagrams of carbon by 2050 (assuming current climatic conditions; see supplemental table S3; Walker et al. 2022) by encouraging emission reductions while contributing to other global objectives such as sustaining biodiversity and improving human well-being (Brondizio et al. 2019). Despite these benefits, there are an increasing number of examples showing that these markets can lead to unintended social, environmental, and economic consequences that can reverse progress made toward the sustainable development goals (Fairhead et al. 2012, Spaargaren and Mol 2013, Aguilar-Støen 2017, Greenfield 2023, United Nations 2024). Furthermore, inadequate transparency in investment decision-making, project monitoring, and reporting has created skepticism and reduced the market's integrity (Pan et al. 2022, Haya et al. 2023). For example, a recent assessment of voluntary REDD+ (Reducing Emissions from Deforestation and Forest Degradation in Developing Countries) projects in the Brazilian Amazon found evidence of leakage effects (shifts in deforestation to a different location) in a quarter of the projects assessed; these effects reduce the effectiveness of these carbon sequestration projects and lead to negative socioeconomic consequences (West et al. 2020). However, one typically overlooked issue that can exacerbate these negative effects is telecoupling.

Telecoupling refers to interactions between social–ecological systems across large, often global distances, such as international trade or land-use change in one region due to changing consumption patterns and food demands in another (Liu et al. 2013). A major consequence of telecoupling is that it significantly increases the challenge of effective governance for managing potential negative consequences of global carbon markets because of the complexity and uncertainty in global supply chains and international projects (Henders and Ostwald 2014). However, we argue that a telecoupling lens (Liu et al. 2013) can also enable the formulation of targeted policy recommendations through understanding cross-boundary interactions that occur among locations and stakeholders that demand and supply carbon abatement projects.

Telecoupled processes, although they facilitate many benefits, have been identified as an obstacle to meeting many of the world's global sustainability goals because they facilitate the externalization of environmental impacts (Zeng et al. 2022). The global forest-based carbon market is a telecoupled process, because it facilitates the buying and selling of carbon credits, allowances, and offsets across international and regional borders. However, how telecoupling drives negative impacts has been underreported and is, therefore, likely vastly underestimated (Schaltegger and Csutora 2012). This is particularly concerning as nations set to ramp up their international forest-based carbon trading under article 6 (UNFCCC 2021).

Using a random sample of 100 forest-based carbon abatement projects from Verra's public registry (verra.org, managers of the Verified Carbon Standard Program), we find that important impacts that are exacerbated by telecoupling and lead to negative consequences are rarely considered in project designs (figure 1, supplemental table S1). Some examples of these negative consequences include displaced deforestation (a leakage effect; Streck 2021) and unequal distributions of project benefits and costs (McMorran et al. 2022). We qualified the different elements considered in each project by asking whether each element was considered in the particular project—with the response being yes or no. For example, for additionality and global persistence of forests (a leakage effect), the Conservation and Restoration of the Tropical Dry Forest of the North Coast of Peru Project (Verra ID 3170) was marked as “no” because leakage did in fact occur and was not mitigated against, as is evidenced by the statement, “In the present project, degradation involves the extraction of wood for commercial markets. For this reason, the aim is to reduce the levels of wood extraction with the activities of the project, which entails the transfer of production to other areas to compensate for the reduction” (Verra 2024b). Similarly, for unequal distribution of benefits and costs The Russas Project (Verra ID 1112) was marked yes because the project focused explicitly on demonstrating “net positive community benefits” (throughout report; e.g., the “Profit-Sharing of Carbon Credits” Verra 2024b).

Figure 1.

Elements of carbon offset projects that are mostly, sometimes, and rarely considered. The processes under the “transparency of investments” heading are exacerbated by telecoupling and drive ecological and economic outcomes. We used Verra's public registry (https://registry.verra.org/app/search/VCS/All%20Projects) to obtain a sample of carbon offsets for forest-based projects (codes VM0003, VM0004, VM0005, VM0006, VM0007, VM0009, VM0010, VM0011, VM0012, VM0015, VM0034, VM0035, VM0037, VM0045; https://verra.org/methodologies-main). Using a random sample of 100 out of 315 registered projects, we searched their registration documents to determine which elements each project considered. We regard mostly as considered in 85%–100% of the projects, sometimes as 35%–85% of the projects, and rarely as 0%–35% of the projects. See table S1 for a summary of the projects.

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Using a telecoupling lens, we identify how unintended negative impacts may occur and provide recommendations for the forest-based carbon market to better account for telecoupling effects by prioritizing positive social impact, expanding comprehensive ecological outcomes, and improving the transparency of its investments. We provide recommendations for how these impacts could be addressed and call for a carbon market that is designed to account for its global or broadscale interconnectedness. One essential component is a global policy framework that quantifies and accounts for the wider array of effects arising from forest-based carbon projects, with explicit consideration of the telecoupling processes that drive them at global and regional scales. By applying a telecoupling lens, the carbon market can achieve more equitable and sustainable net positive impacts.

Social and economic outcomes

Projects are often implemented in locations that have weaker regulatory processes than the investors’ originating country (Michaelowa et al. 2019). This situation leaves market actors ill equipped to fully comprehend (or able to conveniently ignore) the full (positive and negative) range of impacts resulting from the projects (Spaargaren and Mol 2013). There are documented instances where forest-based carbon abatement projects have been implemented through unjust land acquisition or have limited people's access to land, negatively affecting local communities (known as green land grabbing; Fairhead et al. 2012). Stories of displacement of marginalized peoples have been observed across developing countries—so frequently, in fact, that the term carbon cowboys has been coined for unruly actors who seek to gain control over the forested lands of Indigenous people and local communities around the world to profit from carbon credits (Aguilar-Støen 2017).

Many carbon offset projects operate through top-down implementation, shifting responsibilities from governments to other actors, including international organizations, transnational networks and corporations, and nongovernmental organizations. This lacks local participation and disenfranchises communities. Examples from Colombia demonstrate how Indigenous communities can be easily disenfranchised through carbon offset projects as companies are left to create their own implementation rules through contracts that Indigenous leaders do not fully comprehend (they are in a foreign language or their leaders are tricked into signing while inebriated; Aguilar-Støen 2017). The distance between investors and local actors can also lead to unequal distributions of benefits and costs (figure 1). A recent report to the Scottish Land Commission has revealed that high demand for land, largely from overseas corporations looking for carbon offset investments, drove farmland values up by 31.2% in Scotland in 2021 compared with 6.2% across the United Kingdom (McMorran et al. 2022). With investments in rural land exempt from many taxes and driven by the UK government targets to plant 30,000 hectares of new forest per year to meet net-zero emissions pledges, the rapid increases in land values are pricing out local communities from the market. This has been flagged as potentially leading to a reduction in local employment, tourism, ecological management, and microbusinesses (McMorran et al. 2022).

Ecological outcomes

Although the carbon market can mobilize funding for ecosystem restoration for positive biodiversity outcomes, it can have a pernicious effect by weakening actions to conserve areas rich in biomass and biodiversity (Van Oosterzee et al. 2010, Reside et al. 2017). These effects are well documented at the site and landscape levels but are exacerbated by global transboundary transaction processes that leverage vast amounts of funding to favor restoration in marginal areas with low opportunity cost (those less favorable for agricultural or urban use), driven by distant demand for carbon credits (Lindenmayer et al. 2012, Carton et al. 2020, Fleischman et al. 2021, Böhm 2023, Tedersoo et al. 2023). In a globalized market, deforestation can also be spatially displaced (the leakage effect), which is more difficult to control beyond local boundaries (Streck 2021), affecting the maintenance and persistence of forests in other locations, and therefore compromising the additionality of the system as a whole (Villoria et al. 2022). For example, Villoria and colleagues (2022) showed that domestic deforestation leakage reduced the avoided deforestation induced by existing and proposed zero-deforestation supply chain policies in Brazil's soy sector by 43%–50%. Leijten and colleagues (2021) also showed that a moratorium on commodities produced in deforestation-risk areas in Indonesia induced 1324 square kilometers of deforestation in areas located within 10 kilometers of the targeted areas in the period of 2011–2018, most of which occurred near conservation and protection forests. Telecoupling can exacerbate leakage effects, because it can facilitate projects across international boundaries, leading to deforestation in locations that have lower regulation or governance than the project proponent because of the higher potential benefits and lower costs in those places (van Kooten 2017). Leakage is extremely difficult to trace, given the limitations in supply chain transparency (Hoang and Kanemoto 2021), and traceability is further obscured by weak governance (van Kooten 2017)—exacerbating leakage overall. Furthermore, large-scale global investment tends to be toward creating new forests with higher rates of carbon sequestration, where lands are cheaper, rather than conserving existing mature forests where biodiversity benefit is higher (figure 1, table S1; Brancalion and Chazdon 2017, Naime et al. 2020). For example, the Sustainable Forestry Management Plan Capture and Sequestration Carbon project—a private native forestry plantation (Verra ID 1561)—cuts down trees that have completed their carbon cycle, regarded as those older than 125 years and can “no longer capture carbon from the atmosphere” (Verra 2024b).

The global forest-based carbon market exists to mitigate climate change; however, when projects are focused on site-level carbon sequestration alone, they can fail to incentivize environmental activities that enhance a wider range of ecosystem services (the benefits nature provides to humanity). These ecosystem services include those linked to overall ecosystem integrity and, therefore, to climate adaptation. Positive adaptation outcomes associated with high-integrity forested ecosystems include increased water quality, water regulation and retention, climate and atmospheric regulation, protection from natural disasters, improved human well-being, facilitated species movement, increased phenotypic plasticity, thermal buffering, rainfall buffering, resilience to environmental stressors, increasing agricultural productivity, and creating habitat and climate refugia (Brancalion and Chazdon 2017, Elsen et al. 2023). However, carbon credits are much more competitive in the market when they are generated at sites with low opportunity and restoration costs (Quentin Grafton et al. 2021), but this disregards the broader potential benefits of forest restoration (Brancalion and Chazdon 2017). The pursuit of projects purely for carbon storage at the expense of neglecting biodiversity and other ecosystem services outcomes can lead to the prioritization of monoculture plantation projects that homogenize and decline forest biodiversity and their services (figure 1; Chazdon et al. 2016). For example, the Chinese government’s tree-planting program, Grain for Green, increased tree cover by 32% and reduced soil erosion by 45% in southwestern China over a 10- to 15-year period, but, like many large-scale reforestation programs, most new tree cover was composed of one or a few nonnative species such that the resulting grove had much lower biodiversity than native forests (Hua et al. 2018, Holl and Brancalion 2020). A telecoupled, globally operating market can exacerbate this process by providing broadscale access to cheap land with low restoration costs but with poor cobenefits regarding other ecosystem services.

Transparency of investments

Telecoupling can hamper transparency in the forest-based carbon market and can hinder the market's ability to achieve environmental and social benefits (figure 1; Chen et al. 2021). Multilateral carbon offset projects mean that numerous actors and entities are usually involved across different stages of the supply chain, from project developers and implementers to verifiers, brokers, and buyers, making regulation a challenge (Schaltegger and Csutora 2012). Understanding the flows and feedback of a complex market is made more difficult by the prevalence of unregulated intermediaries acting between buyers and sellers (Tjon Akon 2023). Transactions of carbon credits are often carried out through brokers who facilitate the sale, resale, and ultimate retirement of carbon credits with little oversight, transparency, or regulation (Chen et al. 2021). For example, Haya and colleagues (2023) identified important areas where improved forest management protocols deviated from scientific understanding related to baselines, leakage, risk of reversal, and the accounting of carbon in forests and harvested wood products, which resulted in an overestimation of carbon offset credits. This indicates a clear disconnect between the stakeholders who set the protocols and the intermediaries who deliver and measure the carbon credits. In a highly telecoupled market with many intermediaries, it can be challenging to track and verify the outcomes of projects (Michaelowa et al. 2019, Pan et al. 2022). This can lead to difficulties in assessing the integrity and effectiveness of carbon abatement projects, further exacerbated by the lack of global standardized reporting (Merger and Pistorius 2011). Although global carbon certifications exist, their voluntary nature makes it difficult to uncover the full range of impacts from forest-based carbon projects. Countries also have different reporting requirements, making it difficult to determine the additionality of these projects.

Leveraging a telecoupling lens to improve the forest-based carbon market

There is a critical need to avoid the pervasive impacts of telecoupled processes in the global carbon market. This first requires better global carbon accounting. For example, there is currently a lack of even seemingly simple statistics on how much of the forest-based carbon market is traded globally across international borders. Improved forest-based carbon accounting requires robust regulatory infrastructures, and, therefore, we echo the growing calls for a globally consistent framework for monitoring, reporting, and verifying carbon offsets (Boyd et al. 2023). There are existing well-developed telecoupling frameworks that can help to inform the design of such a system (Liu et al. 2013), but they have not yet been used in the design of carbon markets. Adopting a telecoupling lens allows for a more complete assessment of the performance of carbon projects (figure 2), which can be used to harness the benefits of telecoupling (e.g., efficiency, increasing options, innovation) while helping avoid market failure. Within the telecoupling framework, there are five major and interrelated components. The telecoupled system is hierarchically structured and is influenced by within-level and cross-level interactions. For illustrative purposes, we walk through its application using a carbon-market-focused illustrative example, which might be a company in the United States offsetting their carbon through a forest-based restoration project in Brazil (figure 2).

Figure 2.

The telecoupling framework described by Liu and colleagues (2013; left) and a simple hypothetical demonstration of how it could be used to comprehensively assess the performance of carbon projects using a hypothetical example of carbon projects between the United States and Brazil (right).

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The telecoupled system includes a set of interacting coupled human and natural systems through flows; in our example (figure 2), these systems are conceptualized as countries. Within this conceptualization, at the coupled system level, there are three interrelated components: agents, causes, effects. Then, at the component level, each component has different attributes. Using the example of Brazil, causes (e.g., availability of land and low restoration costs) produce a telecoupling between at least two coupled human and natural systems (in this case, Brazil, the United States, or another spillover country), which generate effects (e.g., forest restoration, loss of agricultural land, displacement of local people) that are manifested—in this case, Brazil. The telecoupling is made possible by agents (e.g., carbon market intermediaries, local communities, and farmers) nested within and between the systems that facilitate or hinder the unidirectional or bidirectional flows of money, carbon credits, and impacts among systems. Systems can be defined as sending (e.g., Brazil sending carbon credits and receiving money), receiving (e.g., the United States receiving carbon credits and sending money), or spillover systems (e.g., Indonesia’s trade flows and agricultural price changes resulting in leakage), depending on the directional movement of the flow considered. Beyond the telecoupling framework, there are other complementary frameworks that capture the interactions at multiple scales that drive outcomes. One such framework is the metacoupling framework, which is a combination of frameworks for intracoupling (it focuses on human–nature interactions within one system that consists of human and nature subsystems), pericoupling (the same as the telecoupling framework except that sending and receiving systems are nearby rather than far away), and telecoupling (Liu 2017, 2023). Taking this lens could provide additional insights on the effect of a broader range of cross-scale interactions in the forest-based carbon market.

By conceptualizing forest-based carbon projects through the telecoupling framework and by integrating well-documented carbon accounting information with a telecoupling lens, it becomes possible to estimate the full suite of consequences (many unanticipated) of forest-based carbon abatement projects across scales. Once it is adequately conceptualized, this approach could be operationalized through existing economic (Stevenson et al. 2012), ecosystem (Chaplin-Kramer et al. 2023), and integrated tools (McCord et al. 2018, Johnson et al. 2023). For example, leakage is generally estimated using two methods (Haya et al. 2023). One is using general equilibrium models, which are complex optimization models based on economic theory of how markets function and calibrated to real-world data. These models are designed to capture the interconnectedness of different markets (Hertel 1997). The second is using causal econometric models, which are an ex–post evaluation methodology that use statistical techniques to empirically evaluate programs and have been used to assign causal attribution to leakage from other project types (Roopsind et al. 2019). There is significant scope to leverage these methodologies with ecosystem and biodiversity models within a telecoupling framework (e.g., Johnson et al. 2023), to analyze different local and regional policies, and market designs that may improve the forest base carbon market considering its global connectedness. Currently, when estimating potential leakage, carbon projects sometimes only consider local-scale leakage but do not consider global-scale leakage (or leakage beyond national borders; figure 1, table S1). All new forest-based carbon projects should explicitly estimate leakage beyond the local scale using general equilibrium or causal econometric frameworks and models, which use a telecoupling lens. At the very least, where it is not feasible to directly integrate them into the project assessment process, these modelling efforts could inform on estimates of expected leakage—which could be considered as likely outcomes of a given project.

With an improved understanding of telecoupled effects, strategies such as cross-border governance and telecoupling impact assessments could be developed to guide actions to help mitigate the pervasive impacts of telecoupling or eliminate them altogether. This information can then be used to develop new standards for forest-based carbon projects and assessment metrics. Current carbon abatement standards (e.g., Verra 2024a and ICVCM 2024) overlook many of the negative social and environmental consequences that arise because of telecoupled processes. Some included criteria, such as stakeholder participation, deforestation control, and carbon persistence, could relate to telecoupling if considered at broad scales, but these are currently only considered at the local project level (figure 1). To guarantee additionality, new metrics and criteria must consider the impacts not only in systems and countries directly related to the locations where the carbon capture projects are being implemented but also those that are subsequently affected through telecoupled processes. These more comprehensive metrics should be linked to financial mechanisms to incentivize projects that meet higher transparency standards, therefore boosting investor confidence.

As with all broadscale policy frameworks, there are many associated challenges with implementation and its operationalization, especially as a large telecoupled system. These challenges include cross-border coordination, ensuring financial resources are available for project assessments, and aligning national level policies and legislation with global targets and commitments (Xu et al. 2021). With rapid growth in global carbon markets, there has never been a better time to establish coordinated principles within a comprehensive global policy framework to ensure global and regional net social and environmental gains from forest-based carbon projects.

Acknowledgments

This work was conceptualized in a workshop supported by the UQ Global Strategy and Partnerships Seed Funding Scheme, the QUEX Institute, and Centre for Biodiversity and Conservation Science. JRR and BAW were supported by an Australian Research Council Future Fellowship (grant no. FT200100096). SLC was supported by a McKenzie Postdoctoral Fellowships from the University of Melbourne.

Author Biography

Brooke A. Williams ([email protected]), Frankie Cho, and Jonathan R. Rhodes are affiliated with the School of Biology and Environmental Science at Queensland University of Technology, in Brisbane, Queensland, Australia. Brooke A. Williams, Frankie Cho, Anya Phelan, Sofía López-Cubillos, Lily K. Bentley, and Jonathan R. Rhodes are affiliated with the Centre for Biodiversity and Conservation Science, and Brooke A. Williams, Frankie Cho, Lily K. Bentley, and Jonathan R. Rhodes are affiliated with the School of the Environment at The University of Queensland, in Brisbane, Queensland, Australia. Jean-Paul Metzger is affiliated with the Department of Ecology, in the Institute of Biosciences, at the University of São Paulo, in São Paulo, Brazil. Frankie Cho is affiliated with the Land, Environment, Economics, and Policy Institute, in the Department of Economics at the University of Exeter, in Exeter, England, in the United Kingdom. Anya Phelan is affiliated with the Department of Business Strategy and Innovation, in the Business School at Griffith University, in Brisbane, Queensland, Australia. Sofía López-Cubillos is affiliated with the School of Geography, Atmospheric and Earth Sciences at The University of Melbourne, in Parkville, Victoria, Australia. Bojie Fu is affiliated with the State Key Laboratory of Urban and Regional Ecology, in the Research Center for Eco-Environmental Sciences, at the Chinese Academy of Sciences, in Beijing, China. Yangjian Zhang is affiliated with the Key Laboratory of Ecosystem Network Observation and Modeling, in the Institute of Geographic Sciences and Natural Resources Research, at the Chinese Academy of Sciences, in Beijing, China. Yanxu Liu is affiliated with the State Key Laboratory of Earth Surface Processes and Resource Ecology, in the Faculty of Geographical Science at Beijing Normal University, in Beijing, China. Justin Johnson is affiliated with the Department of Applied Economics at the University of Minnesota, in Saint Paul, Minnesota, in the United States.

References cited