Suriname, a nation known for its vast rainforest, is taking a significant step in financing its environmental preservation by selling carbon credits. It aims to become the first country to sell carbon credits under the framework established by the 2015 UN Paris Agreement. These credits, known as Internationally Transferable Mitigation Outcomes (ITMOs), are generated through the country\’s efforts to preserve its forest cover, which acts as a major carbon sink, absorbing more greenhouse gases than the nation emits.
Suriname, a country on the northern coast of South America with only 600,000 inhabitants, got its independence from the Netherlands in 1975. Suriname is the world’s most densely forested country, and aims to be paid for the carbon savings its rainforests provide, now with the help of, of all things, recent offshore oil discoveries.
Suriname has announced its first offering of sovereign carbon credits, together with London-based investment bank BancTrust and ITMO Ltd, a private company that structures and trades these instruments.
The plan is based on a global carbon accounting system created under the 2015 UN Paris Climate Agreement. Under that system, countries can trade sovereign emission units, called internationally transferred mitigation outcomes (ITMOs), and count them toward their carbon reduction targets, called nationally determined contributions (NDCs).
With this first issuance, Suriname is offering 1.5 million ITMOs, each corresponding to one tonne of carbon dioxide (or equivalent emissions of other greenhouse gases). The reduction was achieved primarily through improved performance in addressing deforestation and forest degradation. Each ITMO corresponds to one tonne of carbon dioxide (or equivalent emissions of other greenhouse gases) that have been reduced beyond a business-as-usual trajectory. The issuance of ITMOs is backward-looking – this “vintage” refers to emissions that have been reduced in the year 2021.
Suriname has registered its carbon stock baseline with the United Nations. By maintaining and increasing this carbon stock, the country generates carbon credits that can be sold to other nations or corporations seeking to meet their emissions reduction targets. Suriname\’s forest conservation efforts are supported by the REDD+ program, which documents emissions reductions, notably 4.8 million metric tons of CO2 in 2021. These reductions translate into the same number of carbon credits, making the sale a key part of Suriname\’s strategy to access climate finance.
The sale of these credits is expected to attract investors due to the adherence to UN guidelines, especially as companies become increasingly cautious about voluntary carbon markets. While some experts have raised concerns about the rigorousness of these credits compared to private carbon markets, the government-backed nature of the initiative is seen as a way to generate much-needed funding for Suriname’s low-carbon development.
The plan is still in development. But government advisers said they hoped the country’s new requirements for fossil fuel exporters could help preserve Suriname’s rainforest. The plan could also help jump-start an international carbon market created by the 2015 Paris Agreement that has struggled to gain traction.
Backers hope that as the ITMO market grows, countries will treat their NDCs like bank accounts, and ITMOs like money. If a country goes over its carbon budget, it can offset it by buying ITMOs. Countries that protect their forests or reduce their emissions ahead of schedule can sell ITMOs to recoup some of the value of those carbon savings.
Furthermore, skeptics have asked why it would be cheaper or more politically attractive for countries to buy carbon credits from a rainforest country, rather than reducing emissions at home? And if so, does that suggest that the ITMO is priced too cheaply?
The ITMO trading market has gotten off to a slow start, with only about 70 bilateral deals signed through December 2023, according to data from S&P Global and the UN.
According to energy consultant Wood Mackenzie, nine deepwater fields have been discovered offshore Suriname since 2019. The discovered resources amount to more than 2.4 billion barrels of oil and liquids and more than 12.5 trillion cubic feet of gas. (For comparison, the U.S. figures were 48.3 billion barrels and 691 trillion cubic feet, respectively, at the end of 2022.)
The ITMO plan would require all companies operating in Suriname to purchase ITMOs to offset their domestic emissions. This would include major industries such as gold, bauxite and — crucially, given the expected boom in this sector — oil and gas.
https://www.ft.com/content/315d5693-8585-45db-ab43-9f0e77250ae5
https://www.rainforestcoalition.org/country-news/opinion-how-suriname-will-sell-itmos-under-un-redd
