Fairtrade turning up the heat on the carbon market
Andreas Kratz, Director of Standards and Pricing at Fairtrade International, introduces the new Fairtrade Climate Standard.
Climate change is having an enormous impact on millions of smallholder farmers around the globe, including the 1.5 million Fairtrade producers in developing countries. Extremes of temperature and rainfall combined with a sharp increase in pests and diseases not only make planning when to sow and harvest difficult, it puts their very livelihoods at risk. Farmers are telling us that they quickly need more support to get the skills and finance they need to adapt to the changing climate, while also doing their bit to reduce their own emissions.
As Bayardo Bentanco, who grows Fairtrade coffee in Nicaragua put it:
“There is a chain on Earth that starts at the bottom where the producers are. They are the ones who suffer the consequences of climate change, the ones who get the least help, and carry all of the burden. It’s not fair.”
We’ve been consulting on how a Standard for Fairtrade Carbon Credits could support Fairtrade certified producers, and other farming and rural communities to mitigate and adapt to the effects of climate change. We consulted with farmers and communities involved in carbon projects of course, but also civil society representatives, businesses and experts in the carbon field.
We worked with Gold Standard, as the most widely respected and experienced organization working in climate security and sustainable development, to develop the Fairtrade Climate Standard and bring change in the carbon market.
Minimum Prices that cover the true costs of projects
Fairtrade Carbon Credits will be sold on the voluntary market. This is where anyone, businesses and individuals who are not required by law to compensate for their carbon emissions, can choose to buy different types of carbon credits.
The voluntary carbon market is in crisis, with slumping prices, project developers struggling to cover their costs, and a lack of transparency in pricing. It’s a little like the coffee market of 30 years ago, when Fairtrade was born as a response. We could see how relevant Fairtrade’s minimum price mechanism could be to the carbon market.
By calculating the costs involved in setting up and running a project that generates carbon credits, plus an extra to go to the communities implementing the project, we have worked out Minimum Prices and Premiums for three different types of project: forestry, renewable energy and energy efficiency. This leads to long term security in climate projects, for the communities and for those who invest in them.
Bringing together mitigation and adaptation
Our consultations made it clear that the Standard had to focus on how producer communities could adapt to climate change as well as mitigate (reducing or preventing release of greenhouse gases). This is where the Fairtrade Premium comes in. This extra money will allow the communities generating carbon credits to adapt and become more resilient to climate change, by investing in projects such as crop diversification.
Focus on rural communities
With the current low carbon prices, carbon projects aiming to benefit rural communities struggle to be financially viable. It’s complex to set up a project and expertise is needed, making the carbon market more inaccessible for these communities. The Fairtrade Climate Standard aims to make sure small farming and vulnerable communities are able to get involved in and benefit from the carbon market: the very ones who most need climate change finance and support.
The Fairtrade Climate Standard ensures that the communities will own the projects themselves. Over time and with the support of the project developer, skills and knowledge will be increasingly transferred to the communities, empowering them to tackle climate change and become more resilient.
Benefits for businesses
Businesses buying Fairtrade Carbon Credits are required to take measures to reduce their carbon emissions, and then take accountability for what’s remaining by purchasing Fairtrade Carbon Credits.
The Fairtrade Climate Standard is a chance for companies and organizations to take positive, credible climate action, and to be able to communicate this via their corporate communications in a powerful way. Businesses will be able to get transparent insights into the impact their commitment is having on producers. We have a monitoring and evaluation system ready to measure the impact for rural communities.
So what’s next?
We have selected seven projects to road test the standard, with more to be added soon. They include tree planting by coffee farmers in Peru to tackle soil erosion and deforestation, cookstoves for women in coffee growing communities in Ethiopia and biogas units for rural communities in India.
The Fairtrade Climate Standard will be published on 1 October, followed by a public launch of the scheme in Paris in December. Now we are looking forward to working with rural communities, project developers and businesses to turn this vision of more climate change support for farmers and a fairer carbon market into reality.