V – Methodology


“Voluntary and regional carbon reduction initiatives continue to save tropical rainforests by using them as carbon sinks – along the way helping to define and standardize the means of measuring carbon captured in trees.” (Rose, 2009)

The compliance market does not provide businesses with what they are seeking, such as carbon credits from forestry related projects. The voluntary carbon market is filling the gap and a multitude of standards have appeared around the world with a different view on how to tackle the problem.

The voluntary carbon market has come a long way since its early days when the regulatory market still did not exist. Credits were not third party verified, there were no registries, no standardized contracts and all transactions took place over the counter. Today, a number of standards are emerging, contracts are increasingly standardized with some credits starting to be traded in exchange markets, carbon credits are third party verified, and the voluntary market now sits alongside the regulated market (Shopley, 2009).

1         Methodology

In order to correctly review the different standards, this section will describe the methodology used to compare the standards as summarised by Figure 7 – Methodology. By understanding the history, the compliance carbon market, the voluntary carbon market, afforestation, reforestation and REDD, it is now possible to begin reviewing the standards by defining the criteria needed to compare them.

Figure 7 - Methodology

Figure 7 – Methodology

1.1       Criteria

Due to the complexity of carbon forestry standards, an extensive list of criteria is needed in order to effectively compare them. The criteria used in this research are inspired by previous comparative studies such as “A Comparison of the Leading Standards in the Voluntary Carbon Market” by Merger which compared at VCS, Plan Vivo, CarbonFix and CCBS (Merger, 2008); also by the study of Carbon Positive “Overview: Forest Carbon Standards in the Voluntary Market” which analyses VCS, Plan Vivo, CCBS, CCAR, ACR, VER+ and CarbonFix (Carbon Positive, 2009d).

1.1.1          List of criteria

–          Afforestation/ Reforestation

–          REDD

–          Location

–          Additionality

–          Methodology approved

–          Permanence

–          Leakage

–          Co-benefits

–          Certification

–          Registry

–          Transparency

–          ICROA

–          Costs

–          Price of credits

–          Pipeline

1.1.2       Scoring Criteria

To simplify the comparison between the different standards, a score system will evaluate each criterion between 1 and 5, with 1 being the most ineffective and 5 being the most effective. This is a simplified version of a Multi Criteria Analysis whereby different weightings of criteria are purposefully omitted. Applying different weightings may lead to a subjective interpretation while the goal of this research is to provide a tool for businesses, organizations or individuals to identify the best standard according to their needs. The audience has the opportunity of weighting the varied criteria according to their objectives based on this research.

The scoring assessment for each criterion is explained in “Definition and scoring assessment of each criterion”.

1.2       List of Standards

The list represents all the carbon standards that accept forestry projects in the voluntary carbon market.

–          Voluntary Carbon Standard (VCS)

–          Climate, Community & Biodiversity Standard (CCBS)

–          Plan Vivo

–          CarbonFix

–          California Climate Action Registry (CCAR)

–          Chicago Climate Exchange (CCX)

–          American Carbon Registry (ACR)

–          Climate Leaders

–          RGGI

–          Gold Standard

–          Climate Leaders EPA

1.3       Definition and scoring assessment of each criterion

Afforestation/ Reforestation – Check if the standard accepts afforestation/ reforestation projects and any singularity from a particular standard. Because this is a yes/no answer, the score will be 1 for NO and 5 for YES.

REDD – Check if the standard accepts REDD projects and any singularity from a particular standard. Because this is a yes/no answer, the score will be 1 for NO and 5 for YES.

Location – This criterion will analyse any limitations in the location of projects. The more locations that are accepted for the commencement of a project, the higher the score (up to 5).

Additionality This criterion will look at how projects must demonstrate additionality. The standard that provides the most detailed information on additionality will score the most.

Methodology A methodology is a guideline taken from the standards that project developers need to follow in order to be certified. For CDM and JI, the Project Design Document needs to follow approved methodologies for the different projects. A biogas project is assessed differently from a wind power project therefore needs a different methodology to calculate the reduction in carbon emissions. Some of the standards in the VCM deal with this differently. The baseline will also be discussed. This criterion will analyse how standards use methodologies to approve the projects. The more detailed methodologies will receive the higher scores; the less detailed will receive the lower scores.

Permanence – Analysis of how permanence is dealt with in the different standards. The highest score will go to the standard that assures the most permanent carbon credits.

Leakage – Examination on how leakage is dealt with in the different standards. Standards that provide the best mechanisms to minimize leakage will receive the higher score.

Co-benefits – Assessment of co-benefits and how they are included in the standard. The more co-benefits a standard accounts for, the more points it will receive.

Certification – Analysis of the certification process that involves the time needed for certification and which companies are eligible to certify the credits. The fastest certification process and the amount of accredited certifiers will provide the highest score.

Registry – Inspection of the mechanisms to reduce the possibility of double accounting; in addition an indication of where the carbon credits should be registered. The greater assurance a standard will give to double counting and the more registries that accept it will receive the highest score.

Transparency – Evaluation of how transparent a standard is by looking at the amount of information a project needs to provide publicly and if there is any public consultation as part of the process. The more information about the project that is accessible to the public will receive the higher score, in addition the more public consultation provided, the more points will be added.

ICROA – The International Carbon Reduction Offset Alliance (ICROA) was formed to provide a code of best conduct in the carbon market and currently serve thousands of businesses and individuals. ICROA members can only trade carbon credits that are real, measurable, permanent, additional, third-party verified and unique. ICROA only supports credits from CDM, JI, Gold Standard and Voluntary Carbon Standard. A standard that is not accepted by ICROA will produce credits that a large part of the market will not accept. The founding members are Carbon Clear, The Carbon Neutral Company, ClimateCare (JP Morgan), Climate Friendly, Co2Balance, Native Energy, TargetNeutral (BP) and Terrapass; in addition many more companies are now members.

This criterion will check if the standard is accepted or not by ICROA. Because this is a yes/no answer, the score will be 1 for NO and 5 for YES.

Costs – Analysis of the costs involved to certify a project. The cheaper the costs of the overall process the more points it will receive.

Price of Credits – Indication of the price of carbon credits in the different standards. The most expensive standards will receive the highest score because this illustrates that the market has provided greater demand for that standard whilst increasing prices.

Pipeline – Number of projects certified and in the process to be certified. The success of the standard can be measured by the amount of projects apparent in the pipeline; therefore these standards will receive the highest scores.

1.4       Reassessment of criteria and standards

After in-depth research of the different standards, some adjustments need to be made.

Some of the criteria are not relevant anymore:

Certification: the certification process is very similar in all standards, such as the certification companies or the time to certify a project. The differences are so small that it makes this criterion irrelevant; businesses will not look at the certification process to make a decision on which standard to use.

Costs: costs directly involved with the validation/certification/registry process are also very similar from standard to standard. The size and complexity of the project is the biggest factor involving costs.

Price of credits: the volatility of the market, the small number of projects and other higher interests behind each standard makes it impossible to compare them correctly. Therefore instead of scoring the price of carbon, Figure 8 in section 1.5 will show the different prices.

Pipeline: most of the standards are quite new and therefore only a few projects have been validated so far. Also, some standards have more detailed information about the number of projects in the pipeline than others. The reason is not related to their efficiency but due to the difference among their organizational structures and do not provide a valid comparison. Therefore the number of projects will not be assessed as a criterion any longer; the information will be available on the standard description.

Added criterion:

US Market: As the US market will be the most important market for forestry projects. A standard that is not popular in the US will not endure. This criterion will analyse the likelihood for the standard to be widely accepted in the US market. The more likely, the higher the score will be.

In addition, deeper research showed that some standards may not be reviewed at this stage due to different reasons:

RGGI (Fontaine, 17/08/2009) does accept forestry projects but no offset project of any type has been or is in the process of being approved. In addition, it is reducing its activities until there is a better understanding of the Waxman-Markey Climate Bill. There is not enough data to produce a correct assessment; as a result RGGI will not be reviewed.

Gold Standard (Gold Standard, 2009) aims to explore the opportunity of expanding to forest carbon projects. The Gold Standard NGO supporter, WWF, is assisting GS to compile the necessary information to make the correct decisions. At this moment GS does not accept forestry projects.

Climate Leaders EPA (Climate Leaders EPA, 2009), an EPA program that helps US companies reduce their carbon emissions, only began in June 2009 and is still at a very early stage. It is not a stand-alone offset program, project developers must come forward with a Climate Leaders partner company who will use the project reductions in achieving its goal. This will be recorded on the partner company’s goal-tracking submissions. Only two projects have been approved so far and none are forestry projects, therefore there is not enough data to review the standard correctly. There is one interesting aspect however, whereby Climate Leaders provide an online estimator (EPA, 2009). This estimator provides a project developer with the function to choose the state and county, and the estimator assesses the likelihood of the project being additional (e.g. in Jackson, Mississippi, the Major Source Land Area is converted to forest at a rate of 2.31%/year, therefore there is a 97.69% likelihood that the project is additional). Leakage is also calculated in this situation, and stands at 42.5%. It is also possible to manually change the variables according to the project.

1.4.1        The new list of criteria

–          Afforestation/ Reforestation

–          REDD

–          Location

–          Additionality

–          Methodology approved

–          Permanence

–          Leakage

–          Co-benefits

–          Registry

–          Transparency

–          ICROA

–          US Market

1.4.2        The new list of standards

–          Voluntary Carbon Standards (VCS)

–          Climate, Community & Biodiversity Standard (CCBS)

–          Plan Vivo

–          CarbonFix

–          California Climate Action Registry (CCAR)

–          Chicago Climate Exchange (CCX)

–          American Carbon Registry (ACR)

1.5       Carbon price per standard

Figure 8 shows the average price of carbon credits traded in 2008 for the different standards.

Figure 8 - Average Carbon Price 2008, Numbers in parentheses indicate number of data points source  (Hamilton, K. 2009)

Figure 8 – Average Carbon Price 2008, Numbers in parentheses indicate number of data points source (96 Hamilton, K. 2009)

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