In Sept 2019, the California Air Resources Board set the rules for how tropical governments in the Amazon can qualify to sell credits to companies seeking to offset their emissions. Credits from the Tropical Forest Standard (TFS) only apply to “subnational and national jurisdictions implementing jurisdiction-scale sector-based crediting programs to reduce emissions from tropical deforestation and degradation.”

By design, only large forest-protection programs will be able to receive carbon credits. Larger projects will ensure that reductions in deforestation actually happen, will require heavy involvement of government and indigenous groups, and will generate enough carbon credits to justify the high costs associated with monitoring these projects.

The California TFS was decided upon after 10 years of research and debate, and is intended to serve as a blueprint for other emissions trading systems to use. The TFS has several notable requirements:

• Deforestation credits are only awarded if it can be proven at the jurisdictional level: One-off projects under REDD and other forestry programs have long been criticized for not actually reducing deforestation within a country (e.g., protecting a particular stand of trees on 100,000 acres should not be rewarded if the logging company just went ahead and cut down 100,000 acres elsewhere in the country). TFS only applies to "subnational jurisdictions that have developed jurisdiction-scale programs to reduce emissions from deforestation and degradation, if applicable, of tropical forests within the geographic boundaries of the jurisdiction, and which are seeking to link their programs to an ETS."
• Credit is only given for native forests: TFS states that “an implementing jurisdiction would not be able to use monoculture or industrial plantations to set or meet its reference level or crediting baseline.” Native forest is defined as forest “occurring naturally in an area. Native forest must maintain a diversity of native species and multiple ages.”
• Soil carbon is not included: Can only apply to above and below ground standing live and dead biomass and lying dead biomass
• Monitoring is strict: Must include “transparent, high-quality, spatially explicit mapping data for above-ground biomass using remote sensing technology that has been calibrated to the implementing jurisdiction against ground-level measurements from within the jurisdiction.” Must be capable of recognizing native versus non-native forest. Monitoring, reporting, and verification duties must be separated to avoid conflicts of interest, and monitoring must be completed by a third party.
• The plan must involve consultation with local and indigenous people: Indigenous groups campaigned against the TFS, as they felt their way of life and sovereignty was violated by previous agreements to safeguard forests. Any projects applying for TFS support must prove that local communities were consulted through open meetings and engagement with local stakeholders
• Addressing Leakage: The plan must include a “framework and mechanisms for managing and mitigating activity-shifting leakage and market-shifting leakage” - in other words, the risk that deforestation is simply shifted outside of the jurisdiction’s borders. Since economics often drives deforestation, the plan will need to show how the implementing jurisdiction is creating alternative, sustainable economic opportunities
• Buffer Pool: Based on the risk level of the program, a certain amount of potential carbon offset credits (at a minimum of 10%) will be left in a buffer pool. In the event that carbon ends up being released into the atmosphere (e.g., deforestation ends up occurring), these credits will be retired
• Liability of credit-holder: If credits for emissions reductions are “subsequently found to be in error… the holder of these credits will be responsible for the replacement of these credits.”
• Nested projects complicate carbon accounting: Before a jurisdiction can qualify for getting credits through the TFS, they need to provide detailed information about nested projects to avoid double-counting credits. Nested projects are individual projects operated by forest-dependent communities, private or public entities, and other actors at a smaller scale within the jurisdiction-scale accounting framework.