As written by Chris Lang” 15th December 2011

In March 2011″ a consulting firm called the Munden Project put out a report about forest carbon markets. The report concluded that carbon trading is “unworkable as currently constructed.”

In October 2011″ Lou Munden of the Munden Project spoke at an event organised by the Rights and Resources Initiative” the Forest Peoples Programme and Forest Trends in London. Frances Seymour” the head of the Centre for International Forestry Research (CIFOR) was facilitating. She introduced Munden in her inimitable style:

    “I’ve gotta tell you Lou” you’ve broken the hearts of forestry researchers around the world. They’ve been killing themselves to develop methods for establishing baselines and measuring carbon stocks and flows and you’re basically saying it’s not good enough. So is it really that hopeless” and if so what’s the alternative?

“Certainly for that model as it’s currently constructed it’s hopeless” yes”” Munden replied” but added that the broader picture is significantly more hopeful. Watch Lou Munden’s presentation here.

Predictably” the Carbon Markets and Investors Association (CMIA) wasn’t very happy with the Munden Project’s report. In August 2011″ CMIA produced a four-page “Response to the Munden report.” CMIA argues that the Munden report fails to examine existing carbon markets and this “fundamental error” leads to three further errors:

    1) They assume that emission reductions based on credited projects will never be suitable for the commodity markets.

    2) They miss the concept that the primary and secondary markets for carbon credits can and do happily co-exist and in fact both are necessary to be able to help project developers hedge their carbon exposure and raise project finance.

    3) They overlook the rapid pace with which carbon credit contract structures evolved to greatly reduce any market asymmetries and perceived inequity between buyers and sellers.

Last week” the Munden Project released “A Response to CMIA: Towards a broader approach to achieving REDD.” Munden’s response to CMIA”

    “it begins by burying the curious and incorrect notion that the problem with REDD is a lack of liquidity” instead focusing on the real problem of the lack of alignment between the market structure for REDD’s development and forest conservation objectives.”

    “We then explain why we do not believe that a comparison with carbon markets is either technically accurate or flattering” then respond directly to the three aforementioned errors CMIA believes our report contained.”

   ” Finally” we open a discussion about the urgent need for alternative financial solutions to REDD” and the need for experienced market actors such as CMIA to engage in this discussion.”

What follows is a summary of Munden’s response” under three headings: Liquidity” Carbon markets and REDD finance. But the Munden Project’s response to CMIA is well worth reading in full.

Continue reading the article here