VCS Jurisdictional and Nested REDD+: Advancements andOpportunities
Ms. Naomi Swickard (Verified Carbon Standard)

DAY2
Session 2

VCS Jurisdictional and Nested REDD+: Advancements and Opportunities
Ms. Naomi Swickard (Verified Carbon Standard)
I am going to speak about the VCS Jurisdictional and Nested REDD+ approach. I will givea little bit of background for those of you who are unfamiliar with that work, but we have talked here a
few times at this seminar in the past, so I am not going to go into too much detail on the background or
overview of the standard, but really focus on what we have done since the launch of the Jurisdictionaland Nested REDD+ approach, which is really to begin working with a number of different countries
who are piloting this approach, and the status of a number of those initiatives.

I will also talk a little bit about the VCS and potential interactions with the JCM building a biton what Dr. Matsumoto presented.

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For those of you unfamiliar with the VCS Association, we are a non-profit organization
headquartered in Washington DC. We have more than 1000 projects that have been validated to the
VCS criteria all over the world.

These points of light are the different project locations. We also havea number of regional offices.

The VCS has been working in the agricultural and forestry space for a number of years. We

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VCS Jurisdictional and Nested REDD+: Advancements andOpportunities
Ms. Naomi Swickard (Verified Carbon Standard)

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are really the first standard to bring the broader suite of forestry and agricultural activities to thevoluntary markets and to carbon markets generally, particularly beyond afforestation and reforestation.
This slide shows two graphs from Ecosystem Marketplace’s 1, most recent State of the Forest
Carbon Markets 2 report from last year. You can see that in the voluntary market about 71% ofproject activities in the agricultural and forestry space are using the VCS standard; many of those incombination with the climate, community, and biodiversity standards that really focus on safeguards andmultiple benefits as well as combining with a few others like FSC and Fair Trade 3. After many years
working in the project space, we really recognized the need to get beyond that; to scale up and to alignwith what was happening in national strategies.
The second graph you see here on the bottom corner represents those project activities andtheir involvement with jurisdictions.

If you add up those that are in preliminary or technicaldiscussions and those that are actively engaged, you will see that about 60% of those project activities
are now thinking how do we integrate into what is happening at national and sub-national scales.

This

is a really big evolution in the project world and we are very excited to see a lot of what used to be twovery different realms of discussion finally coming together and working together to say, how do weactually integrate these different activities at different levels?
That really pushed us to get into this space as well as the demand from a number ofjurisdictions who are saying, “We do not have a lot of guidance in terms of how you actually put
together a credible system for accounting at a jurisdictional scale.” What has come out so far from
UNFCCC is still very high level, and the detail has not been there, but particularly in terms of how you
would integrate what is happening at different levels. Obviously, there is a lot of benefit and a need foraction at a national level in setting policy, in setting an enabling environment, but many of the activities
that need to be done are really very site specific. How do we actually integrate those different levels?

http://www.ecosystemmarketplace.com/
http://www.forest-trends.org/fcm2013.php
3 http://www.fairtrade.org.uk/
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The VCS, along with a very large number of different stakeholders, some of you are in theroom today, put together a two-year multi-stakeholder process to come up with a set ofrecommendations and guidelines for Jurisdictional and Nested Accounting Framework.
What that really does is provide guidance on all of the particular technical aspects related tosetting baselines, reference levels, monitoring systems, as well as addressing leakage, and things like that,
if you are starting at a jurisdictional level.

It is really the first global accounting standard available to do that, especially one that
integrates those different levels.

Part of the reason and focus on the higher level jurisdictions, at either

national or sub-national scale, was really to increase the level of integrity to address some of the issues
that have continued to plague projects in terms of leakage, for example, as well as to ensure that all of
the emissions across the jurisdiction are able to add up appropriately, as well as to allow for rewarding
activities that are done by different scales. For example, policies and programs at a jurisdiction level aswell as activities that are happening on the ground coming from projects.
Another main point of this was really to help provide

fungibility and the ability forjurisdictions and projects to increase their potential for demand and access to finance, and really be able

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VCS Jurisdictional and Nested REDD+: Advancements andOpportunities
Ms. Naomi Swickard (Verified Carbon Standard)

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to open up the opportunities especially between now and 2020 when we will see our results-based
framework, hopefully, out of the UNFCCC.

The JNR framework really allows for a number of different opportunities depending on whata jurisdiction wants to facilitate, and how they want to design a jurisdictional program. We have of
three scenarios. These are not entirely matched up with the three scenarios that Dr. Matsumotopresented earlier, just to make that clear. The first is really where the jurisdiction is setting out its
reference level, but is not ready to have a results-based framework yet. They are at an earlier phase in
the development of that program, but they do want to both allow for project activities, as well as toensure that those project activities are being done in a way that is consistent with the planning at ahigher level. This would allow a jurisdiction to register a reference level that could be used by project
activities ensuring that they are then sort of stepping into and becoming integrated into what ishappening at higher scales. This is not really a pure jurisdictional approach.
The two and three are much more jurisdictional in nature where you have monitoring systems
and all of the full program elements in operation at a jurisdictional scale and then there are options interms of whether project activities could be directly credited under scenario two or might be otherwise
allocated as benefits under a purely jurisdictional approach.
There is a lot of flexibility in this framework that allows customization based on what
jurisdictions are after what they are designing with their programs.

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Again, one of the main aspects of this was really to help allow for an expansion ofopportunities in terms of finance, particularly in the near term. The jurisdictional framework is really
being used as that central accounting mechanism by a lot of our pilot activities. Layered on top of that,
we have integrates number of stakeholder and safeguard requirements within the JNR itself, which
follows the Cancun safeguards.

Many jurisdictions are using the CCBA 4/CARE 5 REDD+ SES 6

standards or those under the World Bank to ensure that safeguards are also monitored and reported on.
Beyond that, depending on what the jurisdiction wants to access in terms of finance, it ispossible to layer on additional components as well. Some are looking to access voluntary and domestic
markets and where those markets would have specific additional requirements. Those can be layered aswell on top of the JNR, for example to access theCalifornia market. The California recommendations
for REDD have allowed that a jurisdiction could use a third-party program like the VCS JNR, but they
do have a couple of specific requirements related to the California market that can then be added on top
and ensure to ensure that those jurisdictions are able to meet the requirements of and access thatmarket.
Climate, Community & Biodiversity Alliance: http://www.climate-standards.org/
Cooperative for Assistance and Relief Everywhere: http://www.careclimatechange.org/
6 REDD+ Social & Environmental Standards: http://www.redd-standards.org/
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VCS Jurisdictional and Nested REDD+: Advancements andOpportunities
Ms. Naomi Swickard (Verified Carbon Standard)

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Likewise, with FCPF 7 Carbon Fund, we worked very closely with them as the methodologicalframework has been developed to ensure that the JNR and that framework will be consistent andcohesive. Many of the jurisdictions that are accessing the Carbon Fund will be using the VCS
Jurisdictional and Nested REDD+ approach to demonstrate how they have met the Carbon Fundrequirements.
We are also just finalizing a very good piece of work that is comparing those two sets ofrequirements and ensuring that there are no issues in application. We will be making a few updates tothe VCS approach to ensure that those jurisdictions accessing the Carbon Fund can very easily integrate
into the requirements for that.
The same potential is there with REDD+ Early Movers, and I will talk a little bit about oneof our pilot jurisdictions in a moment. Acre, Brazil who are also accessing KfW‘s 8 REDD+ Early
Movers program and still using the Jurisdictional and Nested REDD+ approach from VCS as aconsistent accounting framework that can then access these multiple opportunities.
One other thing I want to mention briefly because I know that this will be relevant to thelandscape accounting item that is on the agenda for the next discussion. The VCS is also looking at
how we can build out this framework over time to include accounting for agricultural activities to allow
jurisdictions where that is very important to integrate this into a cohesive framework that will be able toaccount for the different activities that appear across the landscape.

78Forest Carbon Partnership Fund: https://www.forestcarbonpartnership.org/
https://www.kfw.de/KfW-Group/

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What have we been up to since?

We have been working with a number of different

jurisdictions to implement this framework. A lot of this is really being done on a piloting level to help
inform national strategy, to help generate lessons learned for how we actually integrate these activities
that hopefully can inform both JCM or UNFCCC discussions and others that are moving forward inthis space.
We have funding from a number of different sources to pilot in Acre and Amazonas in Brazil
with Costa Rica at a national level, with the DRC coordinated with the national government but looking
at a particular province of Mai-Ndombe, and with Peru as well, including sub-national implementationin two districts, but also coordinated with the national government.
We have additional pilots moving forward in Chile, Guatemala, and Laos, and then a large
number of others that were in initial discussions with. Those that are in red here are those that overlap
with the JCM countries. You can see that there are a lot of them that we are all working in some ofthe similar areas.

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VCS Jurisdictional and Nested REDD+: Advancements andOpportunities
Ms. Naomi Swickard (Verified Carbon Standard)

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Session 2

To give you a bit of a flavor about what this looks like, the first one I will talk about is Acre,
Brazil, a small state in the Brazilian Amazon.
Acre is really poised to be the first jurisdiction to have compliance grade REDD+ credits
issued to the jurisdiction and accessing multiple markets. They have an agreement with California, butof course, there is still some development to be done there in terms of finalizing and thenoperationalizing REDD+ in that market. They have an agreement from KfW that is paying foremission reductions for large amount of reductions coming from Acre, but not everything. The stateis really looking to ensure that it has one consistent accounting framework that can access multiple
sources of demand. They also have lined up a buyer in the voluntary market that is very interested injurisdiction level credits from the VCS.
We are working with them now on the validation of their program. They are actually
undergoing review now and hoping to issue credits this year using the framework.
One of the key pieces for Acre has really been how they align with the national strategy ofBrazil.

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In Chile, we are also working with the national government.
They are taking a very different approach. I want to raise Chile as an interesting example ofthe link between sustainable forestry management and REDD+.

Chile does not have a lot of

historical deforestation. They have a similar scenario to India that we heard about yesterday. Theirprimary interest is really in enhancements and forest management. Chile has taken the initiative to
divide their area not by administrative boundary jurisdictions, but by eco-regions. They are doing thatby defining a number of different typologies based on the different forest management activities and¥afforestation by different species that they will be doing in different areas of the country.

They havedefined a number of different regions, and these will be overlaid with activities and through that they aredefining eco-region boundaries that can be used as a jurisdiction.

Chile also is very interested in spurring private sector investment. They are interested inensuring that project activities are able to move forward, but are concerned about the cost of that andthe efficiency, or lack thereof, of doing it at a project-by-project approach.
What they are doing is really creating a national system that supports those private sector
actors to be able to still develop things at a project level while integrating and ensuring that efficiencies

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Ms. Naomi Swickard (Verified Carbon Standard)

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are there at the higher level. If each of these were to undertake their own initiative, there would be ahigh cost and high complexity. They are looking to set and are starting out with two particularprovinces or eco-region jurisdictions in Chile where they will be setting the reference level andmonitoring system that can then be used by private actors on the ground to develop project activities.
This is really a unique example I think where they are really trying to spur that private level
activity. In Chile, most of this forest land is held privately, so it does not make sense for them tonecessarily be doing everything from a governmental level, but instead are really helping to create anenvironment that allows those private sector actors on the ground to make decisions and access themarket and ensure that the consistency is maintained at a jurisdictional level.

We have an agreement with the Government of Chile and are starting working in two
provinces. They are looking at a number of different potential sources of demand including voluntary
markets and donor funding, as well as establishing their own domestic market that will hopefully drive
demand for some of those activities.
They are also applying the CARE/CCBA REDD+ standards to ensure safeguards are met atthe higher level and incentivizing the project level standards for those project level activities.

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Beyond the piloting, we have also been working on a number of helpful tools and templates
that will help jurisdictions be able to advance their programs. One that I really want to mention is the
JNR leakage tool. For many countries that are starting on a subnational level, that is allowing them topilot, innovate, and learn lessons on the ground that can then be scaled up. One problem with that isthat starting at a subnational level does not address leakage in the way the national monitoring systemcan. You still have the risk that leakage from one subnational area may impact other areas in the
country.

We have spent quite a bit of time with a high-level working group over the last couple ofyears to develop a tool that will help jurisdictions account for any leakage where the country is startingwith subnational implementation. That has just been released this week, and we hope that it will besomething that really facilitates jurisdictions to be able to take that leakage into account. It offers adefault approach that is fairly simplified as well as a couple of modules that are much more detailed if
the jurisdiction has the data to go further to really estimate what the leakage might be, for example, fromglobal commodity production.

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Ms. Naomi Swickard (Verified Carbon Standard)

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We also have been very innovative in terms of how we address non-permanence risk. The
VCS project level uses a buffer approach to set aside credits that can be canceled in the event thatcarbon is lost in the field. We have worked on adapting that approach as well to a jurisdiction level thatwould facilitate accounting for and allowing a jurisdiction to move afford and manage that risk of
non-permanence.

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I want to address at the end how could the VCS and the JCM potentially work together. The
VCS has what we call a ‘tag’ that is often used at the project level to add on for example the CCBA
requirements that demonstrate a project has met multiple sets of certifications.
This is also being leveraged in Thailand. The Thai government has what they call the Crown
Standard, which is a set of sustainability requirements as well. That can also be layered on top. Thisis one potential option as well for the JCM if a project was to use the VCS and then also be seeking toenter into the JCM mechanism.

Similarly, to the jurisdiction level, many projects are using the VCS as a core accounting
standard; layering CCB and have the potential to layer on additional requirements for the market thatthey are trying to access. We see this in particularly domestic markets where we are working with Chile,
Costa Rica, and Colombia on setting up their own domestic markets. They are going to recognize VCS
and allow those credits into their system, but they have the potential to say, “In addition to that, we have
X, Y, and Z requirement.” We can set up a tag that then ensures that those projects have met therequirements of the domestic market. This is a potential pathway that could serve JCM.

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VCS Jurisdictional and Nested REDD+: Advancements andOpportunities
Ms. Naomi Swickard (Verified Carbon Standard)

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The same is true for jurisdictions. I showed this earlier, but I want to reference it again now,
because one of the main benefits of using the VCS in this way is that, for a project to meet many setsof requirements, it becomes very difficult. When you start talking about a jurisdiction, it becomes evenmore difficult. We see many of the places that are working with the JCM are also looking at accessing
FCPF. FCPF has its own methodological requirements. We have worked hard to ensure that the JNR
and methodological framework requirements are aligned.
If there is then another set of requirements, how does a jurisdiction decide how to develop
one cohesive program if it has different sets of requirements from everyone it is working with? I think
this will be a very difficult thing in terms of the potential for fragmentation in the next couple of years.

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As I mentioned, one particular option would be to recognize VCS and use a tagging
mechanism to ensure that any of the requirements from Japan are met.
Just to briefly be very provocative for a moment, if instead you create an entirely different setof standards and frameworks, this could cause a lot of difficulty in terms of a project being able toaccess multiple sources of finance, or for a jurisdiction in particular, where it becomes very difficult tomeet the needs of multiple sets of requirements.

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Ms. Naomi Swickard (Verified Carbon Standard)

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Just some questions here in terms of the potential issues that could arise if a project is selling
only a portion of its credits or jurisdiction only a portion of its credits to Japan, and a portion tosomeone else, there becomes a number of issues in terms of the potential for double counting if that
accounting is done differently for each system. Other issues could arise from that.
I will leave you with that and I am interested to hear what others think, and I am intentionally
being a little bit provocative with this one, so please bear with me there.
Thank you very much.

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