INTERVIEW: Honduras to lift moratorium on VCM projects once Paris frameworks set, says deputy minister

The government of Honduras introduced June 24 a moratorium on the sale of voluntary carbon credits issued by domestic nature-based projects, making it the second country globally to introduce a ban on voluntary carbon projects after Papua New Guinea in March, and Indonesia in April.

S&P Global Commodity Insights spoke to Michael Stufkens, Deputy Environment Minister of Honduras, to understand the extent of the ban, the reasons behind it and when it will be lifted.

S&P Global: Is the moratorium referring to all forest-related voluntary carbon activities taking place in the state of Honduras?

Stufkens: It refers to all forest activities covered under articles 5 and 6 of the Paris Agreement and the Warsaw Framework for REDD+. If a project plans to reduce emissions from deforestation or forest degradation, conserve carbon stocks, sustainably manage forests, or enhance forest carbon stocks, then [it should be implemented] under the already agreed-upon United Nations regulations.

S&P Global: Does the moratorium extend to other segments of the voluntary carbon market as well?

Stufkens: The temporary moratorium does not extend to other segments of the voluntary market. Voluntary projects in non nature-based solution sectors can continue operating and transition to become compliant with Article 6 of the Paris Agreement.

S&P Global: What are the main concerns that the government of Honduras has on forestry activities taking place in its territory as part of VCM markets?

Stufkens: Our main concern is our people and their livelihood. The Honduran territory has a high vocation for forestry activities. Therefore, we need to transparently tackle the potential social, environmental, and economic risks and conflicts associated with the recent escalation in the sale of forest carbon credits in the national territory at unfair and obscure prices. Speculators can no longer engage in unregulated carbon trading activities that leave our rural people with a few dollars/mtCO2e while accumulating forest carbon credits to later settle them for over $20/mtCO2e. We are committed to putting our rural households in a position to receive the best benefit possible so that they can continue enhance their forest carbon stock and protect our precious biodiversity while diversifying their income through climate-friendly activities such as ecotourism, agroforestry and scientific research, development, and innovation.

The Honduran State is active in the multilateral climate change regulatory development process to combat climate change. We believe the Paris Agreement is the appropriate framework to reduce or remove greenhouse gas emissions.

We are keen to manage in our way the implementation and fulfillment of the Nationally Determined Contributions, therefore there is a need to have a clear panorama of our national carbon stock, and have the legal framework defined before opening to voluntary carbon markets that could end up being counterproductive for the country and majority of people.

S&P Global: Are voluntary carbon market activities potentially threatening the ability of Honduras to produce enough emission reductions domestically to be used to reach your NDCs?

Stufkens: The voluntary market helps industries to pilot projects while waiting for the Paris Agreement to be regulated. Now that Article 5 and 6 on forests and markets are fully regulated and operational, we are in a better position to scale up at the national level the necessary monitoring, verification, and accounting systems to ensure the necessary transparency while reporting and sharing the benefits with our indigenous people and local communities. We cannot simply leave these regulatory functions in the hand of speculators.

S&P Global: Is there currently a tax that international developers pay for profit made from the sale of carbon credits produced on Honduras' territory? Or do the proceeds from the sale of carbon credits go 100% to the international developer?

Stufkens: Currently, there is no carbon tax paid by international developers, and it is very likely that our local communities are not receiving their fair share of benefit.

S&P Global: When would the ban be lifted?

Stufkens: The moratorium will be lifted once the Honduran government has completed the new forest carbon inventory, updated its REDD+ safeguards and strategy, consolidated its institutional arrangements, updated its regulatory frameworks, implemented the carbon accounting system (which allows for non-duplication), and the crediting process.