Jósa was an undergraduate classmate of your correspondent at McDaniel College here in Budapest. He went on to pursue a master’s degree in environment and resource management at VU Amsterdam before getting internships at the United Nations and the World Health Organization and then working at a few NGOs in Western Europe. Just before the pandemic, he decided to strike out on his own as a consultant and returned to Budapest.

At a college reunion a few months ago, I caught up with Jósa, who related several of his most recent projects. One that stood out was his work with Silvanus.

“I was talking to a childhood friend of mine who recently took over a family business, Silvanus Forestry,” Jósa said at the time. The company has been operating for more than 30 years, cross-breeding tree varieties to create a hybrid ideal for high-quality industrial timber output. Under new stewardship, Silvanus was now looking to incorporate a more environmental approach to the business.

“This friend of mine asked me if I wanted to come and build the sustainability branch of the business so that it’s not only the industrial wood output, and it’s not only the sales of seedlings and saplings, but also developing carbon projects, and developing partnerships for the climate,” Jósa recalls.

While the core of Silvanus’ business remains selling trees, Jósa describes carbon projects as “selling these selectively-bred trees and the growing technology to landowners, municipalities, to carbon project developers who turn these forests into carbon projects and then market the carbon credits resulting from them.”

But what are carbon credits exactly, and how do they work? To find out, I spoke with James Atkins, co-founder of Vertis Environmental Finance. Established in 1998, the company grew along with the practice of trading carbon credits, also known as emissions trading, to become one of the leading privately owned emissions trading companies in Europe.

Atkins says there are two different approaches to the business. “You’ve got to make a distinction [.…] between emission trading schemes that are about forcing everyone involved to reduce their emissions, and emission trading schemes that are about compensating emissions for reductions.”

Fixed Limits

In the former case, think of the European Union setting a fixed limit on the pollution companies are allowed to emit in a given year. To emit any pollutants, a company must receive a certificate called an allowance, the total number of which are being reduced every year.

“It’s literally about a whole population of industries in aggregate reducing their emissions over time,” Atkins underscores.

“The other type of thing is carbon credit,” Atkins continued. “And when you talk about carbon credits, that is where someone does a project in a developing country [….]. They plant some trees, or they change a farming practice, and that reduces emissions.”

Another company, which could be anywhere in the world, can buy the carbon credits generated by the project, effectively subsidizing it to offset its own emissions.

Over his several decades in the industry, Atkins has naturally developed a healthy skepticism of certain approaches to sustainability. For instance, he was quick to point out how flawed carbon credit projects can be.

“There’ve been lots of scandals where people who develop emission reduction projects in different countries [.…] might have planted a forest or said they planted a forest, but they hadn’t really planted it, or it hadn’t grown properly, or it burnt down or got ill,” Atkins cautions. Jósa acknowledges the challenge.

“We all know that there have been many problems with these carbon credit projects in developing countries,” he says, citing similar issues of lackluster forest growth or maintenance and substandard project monitoring. But rules are gradually tightening.

“This has been changing through [….] a lot stricter standards, [and] more rigorous processes,” on behalf of standard-bearing carbon credit certification companies, Jósa says.

Competing Crises

Notwithstanding the effectiveness of carbon emission reduction projects, Atkins also pointed out what he sees as a higher-level issue with Silvanus’ approach.

“We’ve got a climate crisis, and we’ve got a biodiversity crisis,” Atkins argues. “Every bit of land that we use in an engineered way is making the biodiversity crisis even worse.” As he understands it, a “plantation is engineered forestry.” This practice of “planting things of one species in a row,” known as monoculture, “isn’t good for biodiversity and wildlife at all,” Atkins insists.

“We’ve all learned through better environmental awareness that monocultures are not ideal,” Jósa responds. “I think the major negative side of monocultures in this regard is the degradation of the land being used [for] single crops.”

Jósa points out that Silvanus does not recommend using its trees on sites where a natural forest could thrive “because our application will never out-compete, and it shouldn’t ever out-compete a natural forest.” Rather, Silvanus’ trees “are really meant for utilization of degraded lands.”

Rather than trying to recreate a natural environment, Silvanus’ trees could help restore degraded soil so that it could be used for that purpose again someday, Jósa says.

“There is this factor when it comes to land use, which really influences everything you do, and it’s called climate change,” Jósa notes.

“And so, we are finding ourselves in a situation where we can make plans [….] but today’s and yesterday’s knowledge and today’s and yesterday’s techniques will likely not work tomorrow due to climate change, due to [the] degradation of land, due to migrating species, migrating pests. This is where our technology really comes into play, using varieties that can better withstand these foreseeable impacts.”

This article was first published in the Budapest Business Journal print issue of September 6, 2024.