Work program 2: Reforestation Transaction Delivery

SFI has argued that expert commissions and dedicated research about well-accounted and scalable removals markets will likely be attended, understood, accepted and accelerated only if there are practical and transparent transactions that are negotiated and delivered in parallel to these necessary bench-centered activities.  After lengthy explorations and associated research of the feasible transactions that could fit this purpose, we have concluded that a significant reforestation deal led by Brazil and Singapore is a prime candidate to demonstrate how such markets could work consistently with the principles of Article 6.2 of the UNFCCC framework.  To shape and facilitate such a transaction in the period between COP 30 and COP 31, we have recently advanced discussions, first with the Prime Minister’s office (National Climate Change Secretariat) in Singapore and then in Sao Paulo and Belem, which brought together experienced and skilled Brazilian industrial and investment groups in the (re)forestation sector, Brazilian ministerial approval of the framework deal terms and conditions, and Singapore’s concerns for creditworthy counterparties and credible risk assignments. Substantive negotiations during COP 30 have led to NCCS agreement on an initial term sheet with the private Brazilian reforestation firm, Regreen.   These negotiations between counterparties were complemented by workshops with the Brazilian National Development Bank, Finance Ministry, Environment Ministry, and leading private Brazilian investors and investment banks.

Continuing SFI consultations to further specify legal and investment banking details for these parties will reconvene in Singapore from December 9-13, to be closely followed by December 15 meetings in Sao Paulo with the Brazil’s B3 commodity exchange, favored by Brazil’s finance ministry as the agency through which sound carbon market transactions will be authorized and supervised.  Singapore’s ambitious goal is to close the prototype transaction early in 2026.   At the sovereign parties requests, SFI has also begun preliminary discussions with other national buying authorities interested in participating in a buyers’ group with Singapore. This coalition-centered strategy has been identified by the COP 30 Presidency as an action agenda priority.  Finally, SFI has initiated and will expand collaborative talks and workshops on E-Asset rules with key state enterprises and private firms with substantial future emissions projections in Singapore and Southeast Asia, which would be likely ultimate end users of regional reforestation and below the soils (Biochar, ERW) removals credits to be transferred among participating jurisdictions.

The prototype transaction under consideration is structured as a sovereign-to-sovereign transaction in order to incorporate the rule book and architectural features of E-Ledgers assets and assets trading as contractual terms, rather than as still widely contested institutional arrangements.  However, we wish to be wholly clear that the transaction under discussion is built around structural features that will characterize the future markets it advocates and exemplifies in several critical elements.  First, the ultimate counter- parties to the transaction are private entities—a private reforestation developer in Brazil and both state owned and commercial enterprises in Singapore that anticipate residual emissions over the 2030-2050 period in need of recognized carbon offsets.  The sovereign-to-sovereign form of the transaction simplifies, but does not distort, for short run purposes more complex organizational and institutional arrangements that will become necessary for large scale credible trading among private firms.  These institutional and supervisory arrangements are anticipated and discussed at more length in Work program 3.  Second, the transaction assumes and illustrates that nature based (reforestation), and other removals modalities do not require quasi-permanent duration.  The duration terms of the assets being traded are defined in the transaction and will be matched with long duration carbon liabilities through portfolio assembly in collaboration with specialized carbon asset managers who hold multiple forms of dated carbon removals, which can be combined and customized according to buyer and seller demand.  Ex-post auditing of performance and adjustment of carbon balances for compliance purposes are consistent with these duration terms.  Again, this proposal provides further discussion of these innovative market structures under Work program 3.