Strengthening the integrity of REDD+ credits: objectively assessing counterfactual methods using placebos

The financing of tropical forest conservation projects through the sale of carbon credits remains a key opportunity to curb forest loss. REDD+ projects generate carbon credits by reducing deforestation and degradation within the project area compared with a counterfactual area that faces similar pressures (known as “additionality”). Several methods are available for constructing counterfactuals, but comparing their effectiveness is challenging. Here, we present an evaluation approach based on the creation of placebo projects, in which there are no REDD+ activities and in which we would not expect any carbon credits to be generated. We compare four methods based on pixel matching to estimate counterfactual deforestation rates. Using 40 placebo projects spread across the tropics, we found that pixel-matching is a reliable way of calculating a key element of additionality (i.e. deforestation in counterfactual areas) when based on data gathered at the end of an accounting period (i.e. ex post estimation). However, forecasting additionality from information available at the start of projects (i.e. ex ante estimation) is much less reliable, reinforcing existing concerns about ex ante crediting mechanisms. We argue that systematic application of the placebo approach can accelerate the development and adoption of more credible counterfactual-estimating methods. As counterfactuals are the basis which underpins the validity claims of most nature credits, strengthening the credibility of counterfactuals will enhance the effectiveness of conservation finance, helping REDD+ and other nature-based solutions realise their full potential in delivering real, measurable benefits.