V – Review of Voluntary Carbon Standard (VCS)


1         Voluntary Carbon Standard

[Note: Information updated on 20th Dec 2009]

The Voluntary Carbon Standard (VCS) is becoming the most popular and robust standard in the carbon market with 22% of the overall VCM and 48% of OTC transactions (Hamilton, 2009). It offers credibility to project developers, ease of use and medium-range prices. It also has the support of brokers and carbon companies which prefer to work with less standards (Carbon Positive, 2009d). The VCS was initiated by the Climate Group, the International Emission Trading Association (IETA) and the World Economic Forum in 2005 and has the backing of the World Business Council for Sustainable Development and several NGOs. With the collaboration of risk experts, investors, NGOs and project developers, the VCS developed the Agriculture, Forestry and Other Land Use (AFOLU) program in 2007. The carbon credits are known as Voluntary Carbon Units (VCUs) (Voluntary Carbon Standard, 2009).

The analysis below has been assessed from information available at the VCS website (Voluntary Carbon Standard, 2009); Tool for AFOLU Methodological Issues (V-C-S, 2008a); Tool for AFOLU Non-Permanence Risk Analysis and Buffer Determination (V-C-S, 2008b); and information provided by Jerry Seager from VCS Association.

2 projects have been validated so far and a large number of new projects will be validated in the next few months. Project developers only contact VCS once the project has been third party validated, therefore VCS does not have an estimate of projects in the pipeline.

Afforestation/ Reforestation       Score: 5

VCS AFOLU includes:

–          Afforestation, Reforestation and Revegetation (ARR)

–          Agricultural Land Management (ALM)

–          Improved Forest Management (IFM)

REDD       Score: 5

VCS AFOLU includes REDD.

Location       Score: 5

VCS AFOLU accepts projects anywhere in the world as long as they reduce carbon emissions and are not part of a compliance scheme. So far all the projects have occurred in countries with no compliance market (all non-Annex I countries).

Additionality         Score: 5

The CDM additionality tool (CDM Executive Board) is accepted and widely used in VCS projects. The project must follow the specifications of the methodology which may require the use of the “Tool for demonstration and assessment of additionality” or the “Combined tool to identify the baseline scenario and demonstration of additionality”. Project developers can submit new additionality tools if developing new methodologies, and following rules in VCS 2007.1 (V-C-S Association, 2008).

VCS complies with the most comprehensive additionality tools available in the market, therefore it receives the best score.

Methodology Approved       Score: 5

An approved methodology must determine whether the project is additional or not; determine criteria for the most likely baseline scenario; and all necessary tools for monitoring and reporting of accurate and reliable carbon emission reduction or removals.

Projects following the CDM methodology for afforestation and reforestation projects (CDM EB, 2009) must include a project risk analysis prepared in accordance with the “Tool for AFOLU Non-Permanence Risk Analysis and Buffer Determination” (V-C-S, 2008b) as the CDM methodology is not enough. Project documentation shall determine the project type and land eligibility, project boundary, carbon pools, baseline, leakage and the net project GHG benefits.

There are four REDD methodologies undergoing the approval process and in public consultation at the moment: Baseline and monitoring (Terra Global Capital, 2009), Mosaic (BioCarbon Fund, 2009), Module (Avoided Deforestation Partners, 2009) and Frontier (FAS Amazonas, 2009) methodologies for REDD projects.

The REDD methodologies include tools to assess:

–          Aboveground and belowground biomass

–          Dead wood, litter, soil, wood products

–          Baseline planned and unplanned deforestation

–          Baseline rate and location of unplanned deforestation

–          Baseline degradation fuel wood extraction

–          Leakage activity shifting planned and unplanned deforestation

–          Leakage market effects

–          Leakage displacement fuel wood extraction

–          Non-CO2 emissions from biomass burning

–          Emissions from fossil fuel combustion

–          Monitoring forest cover change

–          Stratification

–          Significance

–          Justification

–          Uncertainty analysis

All the VCS AFOLU methodologies are extremely detailed and try to address all the issues involved in a carbon project to ensure that credits are real, measurable, permanent, additional, third-party verified and unique.

Permanence     Score: 5

VCS AFOLU projects must set aside buffer credits into an AFOLU Pool Buffer Account. The size of the project’s buffer may vary between 10-60%. The percentage is determined by the application of the “Tool for Non-Permanence Risk Analysis and Buffer Determination for AFOLU” (V-C-S, 2008b).

The tool provides the rules to assess the risk of a project based on the following criteria:

–          Risk of unclear land tenure and potential for disputes

–          Risk of financial, technical and management failure

–          Risk of rising land opportunity costs that cause reversal of sequestration and/ or protection

–          Risk of political and social instability

–          Risk of devastating fire, attacks of pests and disease

–          Risk of extreme weather events

–          Geological risk (e.g. volcanoes, earthquakes, landslides)

Based on the project’s overall risk classification, the project proponent must deposit the appropriate amount of credits into the AFOLU Pooled Buffer Account. The risk assessment must be repeated every time the project seeks VCS verification and adjust the project’s buffer accordingly.

The risk assessment is innovative, extremely detailed and complete; this gives VCS the highest score for risk assessment.

Leakage       Score: 5

Any leakage must be identified, quantified and discounted from the amount of carbon credits being sold using the “Tool for AFOLU Methodological Issues” (V-C-S, 2008a). Leakage is assumed zero for projects with less than 10,000ha.

For avoiding planned deforestation, the activities of those responsible for a planned deforestation will be monitored and discounted according to any leakage that has occurred. For example, if a farmer buys new rights and cut trees elsewhere, this will need to be discounted.

REDD project preventing illegal logging activities should firstly assess if this affects the supply of regional or national timber markets and if so, discount the respective leakage.

Leakage is well assessed and properly dealt with, giving a score of 5.

Co-benefits        Score: 2

The objective of VCS is purely to account for carbon reductions and does not consider any co-benefits. However, a VCS AFOLU project can only receive credits if the project activities do not have a negative environmental and socio-economic impact. Any issue should be mitigated in order to receive credits.

VCS also encourages the use of other standards to quantify the co-benefits such as CCBS, FSC and Social Carbon.

As VCS only accounts for carbon reductions but encourages the use of other standards to quantify co-benefits, therefore the score given is 2.

Registry       Score: 5

VCS has a VCS Project Database which includes all Voluntary Carbon Units (VCUs) and is operated by third-party registries such as APX, TZ1 and Caisse Depot. After delays in its implementation, it is now possible to check if the credits are active or retired. Having three registries encourages competition between them and improves the service provided whilst also reducing expenditure.

The registry checks all the documentation of a project and then submits a request to the VCS Project Database to ensure the project’s uniqueness. Once all the checks are completed, the VCS Project Database issues unique serial numbers for each VCU.

The use of third party registries improves transparency and a single serial number for each VCU guarantees its uniqueness. For these reasons, the registry scores 5.

Transparency        Score: 4

All documentation is available online on the VCS Project Database after a project has been approved. When the first VCU issuance occurs, the project is required to be publicly displayed on the VCS Project Database.

A new methodology needs two third-party verifiers to certify the methodology. New methodologies are accessible at the VCS website and are open for public comments.

Although information provided for each project in the VCS Project Database is complete which justifies the validity of the credits issued, there is no public consultation.  Therefore VCS scores 4.

ICROA       Score: 5

ICROA accepts VCS credits.

US Market           Score: 5

VCS is already widely accepted in the US and is being used as a learning tool to develop the standards in the US in particular CCAR.

Comments

VCS scores 56 points, which shows that it is a high quality standard that guarantees the carbon credits are real, verified, permanent, additional and unique. VCS provides some of the most detailed methodologies to quantify a reduction in carbon emissions. It scores the highest points on all criteria aside from transparency. VCS does provide the PDD, verification and validation documentation once projects have been validated. However, VCS scored 4 on transparency because it does not provide public consultation such as some other standards. VCS only quantifies carbon emissions, and in order to assess co-benefits, project developers are advised to obtain double certification with CCBS. It is possible to see that where VCS does not score 5 points, CCBS does and vice-versa. A double certification VCS/ CCBS will transform a project into a high quality standard project that not only reduces carbon emissions but also preserves biodiversity and has a positive socio-economic impact in the local communities.

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