Executive Summary


Executive Summary

Background

The concept of climate change began to attract attention in the 19th Century but it was not until the 1970s did substantial debate occur. In 1997, the Kyoto Protocol became the first environmentally focused, global, legally binding document. It has set limits on carbon emissions, officially defined the six greenhouse gases (CO2, CH4, N2O, HFC, PFC and SF6) and utilised three mechanisms (Emissions trading, clean development mechanism and joint implementation) to assist the market in financially viable emission reduction schemes. The voluntary carbon market emerged to fulfill the demand from organizations and businesses that wished to reduce their carbon emissions outside and beyond the compliance market.

Many organizations, especially in the US (74%), wish to buy carbon credits from forestry projects. The voluntary carbon market has taken the lead to meet this demand through the development of tools and methodologies for forestry carbon projects. This will permit project developers to certify their projects and sell carbon credits.

Objectives

– To gain a greater understanding of the compliance and voluntary carbon market and in particular the forestry carbon market.

– To develop a tool to assist organizations, businesses and individuals to identify which carbon credit they should purchase.

– To develop a new standard with the best tools available in the market.

Research

The standards analysed are Voluntary Carbon Standard (VCS), Climate, Community & Biodiversity Standard (CCBS), CarbonFix, Plan Vivo, Chicago Climate Exchange (CCX), California Climate Action Reserve (CCAR) and American Carbon Registry (ACR).

The criteria include:

Afforestation/ ReforestationAppraise 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.

REDDAscertain 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.

LocationThis criterion will analyse any limitations in the location of projects. The more locations accepted, in order for a project to begin, the higher the score (up to 5).

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

MethodologyThe methodology and 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.

PermanenceAnalysis 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.

LeakageExamination 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-benefitsAssessment 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.

RegistryInspection of the mechanisms to reduce the possibility of double accounting. The greater assurance a standard will give to double counting the more points it will receive.

Transparency – The more information on the project that is accessible to the public and the more public consultation provided; the more points to add.

ICROAInternational Carbon Reduction Offset Alliance (ICROA) was formed to provide a code of best conduct in the carbon market and currently serves thousands of businesses and individuals. ICROA members can only trade credits from CDM, JI, GS and VCS. A standard that is not accepted by ICROA will produce credits that a large part of the market will not accept. 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.

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.

Results

Table 1- “Forestry Carbon Standard results” summarizes the results of the different carbon standard reviews. This will provide an easy comparison of the standards on each of the parameters.

The total may be misleading as all the criteria have the same weight and the total should only be interpreted as a brief comparison. The objective is to produce a table to compare the criteria between the standards. Different organizations will have different interests with carbon credits; therefore they should be looking at the score of the relevant criteria and not the total score. Some criteria, highlighted with an asterix (*), are essential for any forestry carbon standard to guarantee that the carbon credits are real, verified, permanent, additional and unique.

Table 1 – Forestry Carbon Standard results

Highlights of the results

Voluntary Carbon Standard scores 56 points in total and 29 on essential, 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. VCS does provide the PDD, verification and validation documentation once projects have been validated. However, VCS should make it easier to access projects during the validation process and allow the public to comment directly on the VCS website. VCS only quantifies carbon emissions, and in order to assess co-benefits, project developers are advised to obtain double certification with CCBS.

Climate, Community & Biodiversity Standard scores 51 total and 27 in essential, and is well positioned to quantify the co-benefits of socio-economic and biodiversity factors, however it falls short in providing carbon credits. CCBS advises to use VCS to certify the carbon credits. CCBS needs to change its strategy as it could easily become worthless if the other main carbon standards begin to include co-benefits as well.

Plan Vivo scores 41 in total and 21 on essential. This may be explained as projects need to produce their own methodologies which are developed by research institutes or universities. This makes it difficult to compare with other standards and even between projects. In addition, the project documents are more similar to academic papers than to assessment projects that follow international standards. Plan Vivo’s objectives are altruistic; the projects certainly have a positive impact on rural communities. In addition, co-benefits and carbon reductions do occur, however their quantifications lack the general level of guarantee other standards provide. Tools and guidelines that are more detailed and standardized are strongly advised in order to improve methodology, permanence, leakage, and co-benefits assessment.

CarbonFix scores 48 in total and 30 on essential. CarbonFix scores the highest on additionality, methodology, permanence, leakage and co-benefits. CarbonFix managed to transform a highly complex process into a simplified, user friendly standard and still guarantees high quality carbon credits. It is a standard that adapts itself as much as possible to the needs of the project developer, brokers and customers providing videos to explain how to use the website, methodologies and tools.

For afforestation, reforestation and improved forest management projects, CarbonFix is highly recommended.

California Climate Action Registry scores 45 points in total and 25 on essential on the review. Methodology, permanence and leakage are dealt with to the highest level with detailed tools to quantify carbon, a buffer is used for permanence and any leakage is calculated and discounted. CCAR now uses a third party registry. Additionality is still too loose and public comments should be available to improve transparency.

CCAR is considered the most progressive carbon standard in the US.

Chicago Climate Exchange trades almost half of all voluntary market transactions in the world making it the most important platform for offset projects. However it is offering one of the worst services as a standard in the market scoring only 37 points in total and 15 on essential.

Additionality lacks the means to ascertain if the project would or would not have been possible without carbon finance. CCX only guarantees for 15 years the carbon sequestered in the trees. CCX only accounts for leakage in the delimited area and does not assess external leakage. CCX does double-check with other registries, which reduces the risk of double counting. CCX does not provide project documentation via the website, interested parties need to contact the project developer.

American Carbon Registry scores 50 points in total and 25 on essential and provides a reasonable guarantee that the carbon credits are real, verified, permanent, additional and unique. However, this is achieved as ACR requires the project developer to use tools from other standards in order to receive ACR certification. ACR needs to produce its own methodologies in order to differentiate itself from other standards.

Neo Forestry Carbon Standard this new standard uses the same approach as ACR as it utilises the tools developed by standards that scored the most. This method helps to understand which standards provide the best approach for each criterion.

The future of the forestry carbon standards

Greater regulation is highly recommended to oversee the voluntary carbon market as standards like Plan Vivo and CCX do not provide satisfactory guarantee that the carbon credits are measured, verified, additional, permanent and unique.

The future of the voluntary carbon market is very uncertain. The standards in the US (CCX, CCAR, Climate Leaders, RGGI and ACR) are awaiting the details of the Waxman-Markey Climate Bill. If the Climate Bill includes a large number of sectors and projects, there may be no more room for other standards. If the Climate Bill only focuses on a narrow number of sectors and projects size, there may be space for standards to fill the remaining niche. It is also possible that American standards become part of a national carbon market and no longer need to exist.

For standards outside the US, the risks are related with the negotiations for the post-Kyoto period at the COP-15 in Copenhagen. A sectoral approach for REDD might leave no space for a REDD VCM.  The risk cannot be underestimated, although it is quite likely that negotiations will leave space to the private sector to intervene and develop projects. In addition, the market will inevitably reduce the number of standards by deciding which standards will remain or not. At this moment, which methodologies and standard will win, is not clear.

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