Could bonds be used instead of, or in addition to, Terrestrial Carbon Credits?
Yes. It would be possible to use bonds. The value of the bond (in terms of carbon credits) would vary over time depending on the performance of the entity that issued the bond. For example, if a sub-national actor issued a bond for 10 tonnes of CO2e of avoided deforestation and in the first three years maintained all 10 tonnes as terrestrial carbon in their existing forest, the bond’s value would be equal to its face value. The purchaser of the bond could use the bond as a credit for 10 tonnes of CO2e. If, however, in the fourth year, the issuer of the bond cleared half their forest, emitting 5 tonnes of CO2e, the purchaser of the bond could only use the bond as a credit for 5 tonnes of CO2e, and would have to buy another credit for their remaining requirements. The risk of non-compliance would be reflected in the price purchasers are willing to pay that bond issuer: the higher the risk of non-compliance, the lower the price. Bonds would work best where the issuer is a repeat player in
