Insurers, Investors Ponder Risk of Carbon Credits for Forests

by | Nov 30, 2008

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trees.jpgThe United Nations is promoting paying landowners to let forests grow as a viable way to fight climate change, but experts are not sure how to insure trees against fires. The issue becomes more pressing as granting forest owners tradable carbon credits will be on the agenda at the climate meeting in Pozan, Poland, Reuters reports.

Under the plans, forest owners will get carbon credits to slow the destruction of tropical forests, but fires caused by natural hazards are a big risk for insures and investors. If a tree dies, then the carbon stored as they grew would be released and render the carbon credits worthless. In addition, protecting a forest in one area may also lead to more logging or burning elsewhere.

Currently, there is wide disagreement on how to assess the risks under the new U.N. treaty. Forest owners want full access to the credits, but insurers suggests retaining half of the credits as buffer funds in case forests vanish in the future.

The Voluntary Carbon Standard recently launched a carbon standard that includes land use projects such as forestry and agriculture.

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