Voluntary Carbon Markets
for Wetland Conservation
and Restoration
Policy paperLead authors 		

Moritz von Unger (Silvestrum Climate Associates, LLC)

			and Femke H. Tonneijck (Wetlands International)

Contributing Author:

Cinthia Soto (Wetlands International)

Suggested citation:

von Unger, M., Tonneijck, F.H. and Soto, C. (2022).

			

Voluntary Carbon Markets for Wetland Conservation			and Restoration (Wetlands International).

Date

May 2022

		Acknowledgments:

The authors thank Maggie Comstock (Conservation

			International), Steve Zwick (Bionic Planet) and			

Tatiana Minayeva (Associate Expert Wetlands			International) for their comments, feedback, and			

review throughout the preparation of the			policy paper. The views and opinions

			

expressed are exclusively those of the			

authors and shall not be construed as views			or opinions of the reviewers or their			organizations. We are grateful for the			funding provided by COmON Foundation			that made this publication possible.

Foreword
Wetlands International has long supported efforts toamplify financing to safeguard and restore wetlands1– peatlands and mangrove swamps, salt marshes andriver floodplains – for people and nature across theglobe. While carbon markets have offered modest
incentives for wetlands investment in the past, there isincreasing interest among governments as well as nonstate actors in using carbon finance to help innovate
and roll-out Nature-Based Solutions (NBS) in general
and wetland habitats in particular.
This policy paper reflects on the larger debate of using
voluntary carbon markets for land-use projects anddefines benchmark conditions for channelling carbon
finance to wetland interventions.

Wetlands International commissioned this reportto Silvestrum Climate Associates, LLC

Cover picture: Peat swamp forest Central Kalimantan-Indonesia,
by Yus Rusila Noor (Wetlands International)© Wetlands International
No part of this document may be reproduced and/or published in any form,
without prior written permission of Wetlands International, nor may it beused for any work other than that for which it was manufactured without
such permission, unless otherwise agreed in writing. Wetlands International
does not accept liability for any damage arising out of or related to changing
the content of the document provided by Wetlands International.

2

Voluntary Carbon Markets for Wetland Conservation and Restoration

Wetland belonging to the area of Caserío Chacacancha,
Ninacaca local community in Pasco, Peru.
(Photo: © Alan Chamorro)

1
According to the Ramsar Convention of 1971, “wetlands are land
areas that are saturated or flooded with water either permanently
or seasonally. Inland wetlands include marshes, ponds, lakes, fens,
rivers, floodplains, and swamps.”

Policy paper3

Table of Contents
Foreword

3

Executive Summary

61.

Urgency and scale of required wetland investment

82.

Unlocking private carbon finance for wetlands

10

2.1.

Voluntary carbon markets

11

2.2.

Carbon pricing

12

2.3.

Opportunities and risks

12

3.

4.

5.

Ensuring the supply of high quality credits

14

3.1.

Project actions

14

3.2.

Quality benchmarks for projects

15

3.3.

Double counting

19

3.4.

Performance by projects

20

Ensuring responsible use of credits

21

4.1.

Corporate actions and the mitigation hierarchy

21

4.2.

Quality benchmarks for corporations

22

4.3.

Double claiming

24

4.4.

Performance by corporations

30

Literature

32

Picking mangrove fruits, Indonesia(Photo: © Nanang Sujana)

4

Voluntary Carbon Markets for Wetland Conservation and Restoration

Policy paper

5

Cranes over peatlands in Tsagan area, Mongolia(Photo: © Marcel Silvius )Executive Summary
The context for safeguarding and restoring
our world's wetlands via the Voluntary
Carbon Markets
Healthy wetlands store vast amounts of carbon in theirsoils and biomass, but they can become a huge sourceof emissions upon degradation. Peatlands, although
covering only 3 % of the world’s terrestrial area are thebiggest natural carbon stores, storing twice the amountof carbon present in all forests. Mangroves typically holdfive times as much carbon as a similar area of rainforest.
These habitats are at the centre of the planet’s triple
crisis of climate change, biodiversity loss, and landdegradation. More than two thirds of natural wetlands
have been lost or degraded, the vast majority of which
has taken place over the past century.
The degradation of wetlands causes unimaginable
destruction of biodiversity, as wetlands contain agreater concentration of life than anywhere else.
Degraded wetlands fail to sustain essential ecosystemservices such as food, freshwater supply, erosion, andflood control, all vital in the context of climate change
adaptation.
Upon degradation, wetlands keep on releasing massive
amounts of CO2 alongside CH4 (methane) and N2O(nitrous oxide) from their soils, adding to global warming.
No less than five percent of annual global emissions –more than the aviation and shipping sectors combined– come from draining and converting peatlands alone.
This makes protecting and restoring our wetlands a
number one global priority. But we need the funding to
do it, now.

Nature-Based Solutions (NBS) or Natural Climate
Solutions (NCS) – including peat and coastal wetland
conservation as well as restoration – could generate
up to 12 billion tCO2e in mitigation benefits per year.
This level of supply largely meets current expectations
concerning the demand from voluntary carbon markets(1.5 - 2 billion tCO2e). Voluntary carbon markets are ameans of supporting nature projects that were largely
ignored by the Kyoto mechanisms. They have been amodel for the design of new methodologies, at times
paving the way for compliance markets, in which
companies and governments who are regulated bymandatory national, regional, or international emission
reduction regimes can trade their emission permits(allowances) or offsets to comply with their regulatory
obligations.
Social-environmental integrity is the all-decisive
touchstone for climate and market success. A supplyof high-quality credits which are fair, equitable, andaccepted by the leading carbon credit verification
bodies needs to be secured along with the responsible
corporate climate action.
This summary of our policy paper provides a point-bypoint brief as to the opportunities, guidelines, and risks
around mobilising the VCM for the safeguarding andrestoring of out wetland habitats:»

If we are to reach the 1.5° target of the Paris
Agreement, we need to urgently safeguard
and restore wetland carbon stores to avoid
emissions and enhance sequestration.

»

To make that happen, finance must be mobilised
at scale: US$ 300 billion for peatland restorationand US$ 15 billion for mangrove restoration areneeded between 2021 and 2050.

»

Nature-Based Solutions (NBS)– including wetland
conservation and restoration – could generate up to
12 billion tCO2e in mitigation benefits per year if
mobilisation challenges are overcome, thus meetingthe expected demand from voluntary markets

Why carbon markets?
Governments and public financing cannot foot the billwith urgency needed. Private sector funding must be
mobilised at scale and at speed, and carbon markets
offer a unique opportunity to channel domestic andinternational investment into wetland conservation andrestoration.

6

Voluntary Carbon Markets for Wetland Conservation and Restoration»

Voluntary carbon markets have the potential tochannel much-needed finance to wetlands in the
short term.

»

However, to permit habitat restoration of
wetlands and other ecosystems at scale thecarbon price floor needs to lift considerably.

»

»

»

»

In the case of wetlands, both reducing conversion
and degradation as well as restoration result insignificant emission reductions. On top of that,wetland conservation and restoration may bothresult in emission removals. This is because mostwetlands have very carbon rich soils that continue
to emit GHG upon conversion and degradationor that continue to sequester GHG (albeit slowly)
when restored.
After two decades of practice, the key voluntarystandards have proved that their AFOLU projects
largely comply with high standards of quality,and efforts are continuously being made to makethem even more stringent. This means that supplyof high-quality credits can be ensured.
Voluntary carbon markets must not be used
to justify business-as-usual GHG emissions bycompanies if we are to achieve the 1.5-degree
target. It is essential to guarantee environmental
and social integrity in the sense of ambition
towards, and compliance with, a net-zero
pathway. Companies should set and disclose
robust, science-informed and high-ambition
targets along with a roadmap with shorter- andlonger-term milestones following the mitigation
hierarchy.
It is imperative that companies avoid and reduce
emissions – particularly also those related towetlands - while simultaneously offsetting
residual emissions that cannot yet be addressed.

»

While robust standards and guidelines are
essential, care should be taken not to makethem overly complex, to ensure accessibility topractitioners and to enable urgent action at scale.

»

While there is extensive guidance on productlevel carbon-neutrality claims, there issurprisingly little guidance at the corporate level
concerning appropriate strategies for offsetting.
This needs to be addressed urgently.

»

Although net zero pledges have been growing,corporate performance to date is still relatively
limited, and the companies sitting idle far
outnumber those taking an active position.

»

In our view, double claiming between voluntary
corporate offsetting efforts and national NDCs
does not pose a risk, at least in developing
countries that require additional finance toachieve their NDCs. This is because efforts are
only counted once at the level of the NDC of thehost country, while additionality is secured byadherence to the voluntary standards.

»

Hence, we encourage many developing countries
to take a flexible approach, as allowed by the
Article 6 Rulebook, recognizing that voluntarycarbon markets can both be a means forcorporations to offset their interim or residual
emissions and a meaningful contribution
towards host country NDC compliance. Countries
and investors should report and communicate thisin a transparent way.

Policy paper

7

Chapter 1

Urgency and scale of required
wetland investment
Healthy wetlands store vast amounts of carbon in theirsoils and biomass, but they can become a huge sourceof emissions upon degradation. Peatlands, although
covering only 3 % of the world’s terrestrial area (Xu etal. 2018) are the biggest natural carbon stores, storing
twice the amount of carbon present in all forests(Friedlingstein et al. 2020, 2021). Coastal wetlands –including mangroves, salt marshes and seagrasses are crucial carbon stores as well. Mangroves typicallyhold five times as much carbon as a similar area ofrainforest (Donato et al. 2011). Yet, these habitats areat the centre of the planet’s triple crisis of climatechange, biodiversity loss, and land degradation. Morethan two thirds of natural wetlands have been lost or
degraded, the vast majority of which has taken placeover the past century (IUCN 2019, Davidson 2014).
Some 35% of wetland loss occurred between 19702015 alone, and annual rates of loss have accelerated
overall since 2000 (Ramsar 2018), particularly in Asia,
while decreasing in Europe and North America.
The degradation of wetlands causes unimaginable
destruction of biodiversity, as wetlands contain agreater concentration of life than anywhere else.
Degraded wetlands fail to sustain essential ecosystemservices such as food, freshwater supply, erosion, andflood control, all vital also in the context of climatechange adaptation. Upon degradation, wetlands keepon releasing massive amounts of CO2 alongside CH4(methane) and N2O (nitrous oxide) from their soils,
adding to global warming. No less than five percent ofannual global emissions – more than the aviation andshipping sectors combined – come from draining andconverting peatlands alone, and this does not include
the vast emissions associated with peatland fires(Günther et al. 2020). A staggering 0.86 billion tonnesof CO2e2 could be emitted from peatlands annually(Huang et al. 2021) and 2,4 - 3,4 billion tonnes CO2efrom mangroves (Adame et al. 2020) across the globe
by 2100 (Loisel et al. 2021).

Natural mangrove Senegal(Photo: © Pieter van Eijk, Wetlands International)

Reverting the trend of degradation and associatedongoing emissions requires transformational changes
to agricultural practice and infrastructure, as well aslarge-scale restoration efforts for those wetlands thatare not irretrievably lost. The funding needs for thisHerculean task – above today’s business-as-usual
trajectory – are large in aggregate: US$ 300 billion
for peatland restoration and 15 billion for mangrove
restoration are needed between 2021 and 2050, or atleast US$ 10 billion per year (UNEP 2021).
The opportunities are numerous, however, and very
cost-efficient in comparison with technologicalsolutions. Cost-effective Nature-Based Solutions(NBS) or Natural Climate Solutions (NCS) – including
peat and coastal wetland conservation as well as
restoration – could generate up to 12 billion tCO2e
in mitigation benefits per year (McKinsey 2021).
Accounting for mobilisation challenges (including
regulatory bottlenecks and long lag times), thenumber drops considerably but remains at or above
2 billion tCO2e annually (Ibidem, Griscom et al.
2017). This level of supply largely meets current
expectations concerning the demand from voluntarycarbon markets (1.5 - 2 billion tCO2e) (TSVCM 2021).
Provided regulatory systems are implemented,
including compliance market regimes that target NBS
specifically, both supply and demand could further
expand substantially.

Key Messages»

If we are to reach the 1.5-degree target of the Paris Agreement, we need to urgently safeguard
and restore wetland carbon stores to avoid emissions and enhance sequestration.

»

To make that happen, finance must be mobilised at scale: US$ 300 billion for peatland
restoration and US$ 15 billion for mangrove restoration are needed between 2021 and 2050.

»

Nature-Based Solutions (NBS)– including wetland conservation and restoration – could generate
up to 12 billion tCO2e in mitigation benefits per year if mobilisation challenges are overcome,thus meeting the expected demand from voluntary markets.

CO2e or “carbon dioxide equivalent” means the number of metric tons of CO2 emissions with the same global warming potential as one
metric ton of another. Note that 1 tonne = 1000 kg = 1 million gram (106). This can be converted to Gigatonnes (109 tonne or 1015 gram), Teragrams (1012 gram) or Peta grams (1015 gram) that are often used.

2

8

Voluntary Carbon Markets for Wetland Conservation and Restoration

Policy paper

9Chapter 2

Unlocking private
carbon finance for wetlands
As public budgets are strained after the financial crisisof 2008 and the pandemic crisis the world has been
going through since 2020, one cannot expect thatmuch of the additional funding needed will easily
come from governments. Especially not from thosedeveloping country governments that are particularly
burdened by debt, poverty, and food insecurity.
Private sector funding must be mobilised at scale
and at speed, and carbon markets offer a unique
opportunity to channel domestic and international
investment into wetland conservation and restoration.
Most of the existing carbon markets are governmentbacked, confined to domestic marketplaces, forexample emissions trading in China, North America,
and the EU. These existing markets work on the basis ofa mandatory emission reduction target to be met andare therefore often referred to as ‘compliance markets’.
These compliance markets are primarily focused on
industrial emissions (Joosten et al. 2016).
A small but growing voluntary carbon market is built by
and for non-state actors, by contrast. These privatelyorganized, non-regulated (non-compliance) initiatives– ‘voluntary carbon standards’ that provide procedures
and methodologies for the crediting of emissions
reduction/removal action – fill a triple gap.
First, voluntary carbon markets have an importanttransnational segment. Two of the big four standards– the Verified Carbon Standard (VCS) and the Gold
Standard – are available across countries, and carbon
credits can be traded across borders. The other two –the American Carbon Registry (ACR) and the Climate
Action Reserve (CAR) – are available in the Americas.

10

Second, voluntary carbon markets have moved into thesectors left out by most compliance markets, notably
agriculture, forestry, and other land-use (AFOLU),
including wetland conservation and restoration. The
AFOLU segment – dedicated to a wide range of NBS/
NCS from sustainable cattle farming to forest andpeatland conservation, restoration, and management– accounts for much of the (strong) growth of thevoluntary carbon markets; accounting for a trading
volume of 37 million tCO2e in 2019 (US$ 160 million),for 48 million in 2020 (US$ 270 million) and, in ahuge leap, for almost 120 million tCO2e (US$ 545
million) in 2021 from January through August (Forest
Trends’ Ecosystem Marketplace, 2021a). While this is
impressive, it is nowhere near the finance need of 10
billion US$ per year.
Third, voluntary carbon markets have been found totest the ground for, and ultimately amplify compliancemarket application, which is ultimately required toreach the desired scale of financing. Several emissions
trading systems have started using voluntarystandards as a provider of tradable credits within
their relevant market system. The Climate Action
Reserve, for instance, has been retained by the state
governments of California (US), Ontario and Quebec(Canada) to develop specific protocols to that purpose,including on afforestation/reforestation, conservation
cropping, avoided forest conversion, sustainable forest
management, and grassland protection (Climate Action
Reserve 2021). All these project types and categories
grew out of voluntary engagement by non-state actors.
The policy framework for Reducing Emissions from
Deforestation and forest Degradation (REDD+) – today
recognized in the Paris Agreement (Article 5.2) – also

Voluntary Carbon Markets for Wetland Conservation and Restoration

owes many of its early piloting activities to voluntarycarbon standards (Streck and Costenbader 2012).
The scale that was able to be reached by including NBS
in compliance markets is variable and depends on thelevel of integration and the growth rate in compliancesystems that will pick them up. Broadly speaking,annual totals could get ever closer to the abstract
annual potential of 12 billion tCO2e. Global emissions
trading within Article 6 of the Paris Agreement alone(see below) may super-charge developments at thepace of 5.3 billion tCO2e per year (in 2030) (Yu et al.
2021).
In this policy paper, therefore, we zoom in on theopportunity and risks associated with voluntarycarbon market financing for wetland conservation
and restoration. We will also briefly reflect on recently
emerging hybrid markets.

2.1. Voluntary Carbon Markets
Voluntary carbon standards operate as “baselineand-credit” instruments. They define methodologies
to calculate in detail ‘baseline’ (or business-as-usual)
greenhouse gas (GHG) emissions from e.g., land
conversion, drainage of peatlands, degradation, andthen issue credits when and after the project verifies
that climate change mitigation has been achieved
compared to the baseline. Each credit stands forone (1) tonne of CO2e avoided, reduced, or removed(sequestered).
The credits are issued into a registry account where
they can be freely traded. The registries follow all credit
transfers from issuance to retirement; each credit has aunique serial number linking it to a specific project anda specific ‘vintage’ or generation year. However, there
is no single marketplace for traders. Most of the trades
happen over the counter, i.e., away from centralized
platforms or brokers.
The end users are companies, other legal entities, andindividual consumers that have committed to offset
part or all of their GHG emissions. Offsetting, in thisconstellation, is a voluntary action by the end users.
They are not under obligation from their government
and the offsetting action does not show in acompliance registry or the accounting registry system
under development at the level of the United Nations
Convention on Climate Change (UNFCCC).
Voluntary carbon credits have in the past primarily
been purchased by buyers from Europe (almost two
thirds) and North America (almost one third), with therest of the world representing only 5% of the offtake
amount, according to figures for 2019 (Forest Trends’
Ecosystem Marketplace 2021b). The market – despite
the pandemic – has seen a steep growth rate between
2019 and 2021, trading a volume of about 100 million
tCO2e in 2019, 188 million tCO2 in 2020, and 240
million tCO2 in the first eight months of 2021. Most
voluntary projects are developed in Asia (92 million
tCO2e in 2021 so far), followed by Latin America (37million tCO2e) and Africa (24 million tCO2e). Most
demand is corporate. The corporate (for-profit) shareof European buyers in 2019 was 98% (Forest Trends’
Ecosystem Marketplace 2021b). Energy firms are in
the lead (21%), followed by finance/insurance (17%),
consumer goods (16%), aviation (10%) and utilities(9%).

Policy paper112.2. Carbon Pricing
Average prices per credit have remained low, hovering
barely above US$ 3 per tCO2e (Forest Trends’
Ecosystem Marketplace 2021a). These are average
prices, however, that hide stark disparities in this noncommoditized market. Credits are traded at different
prices depending on the country of generation and the
project type. Renewable energy credits, for instance,
are sold at US$ 0.87 per tCO2e, while AFOLU credits
take in US$ 5.60 per tCO2e in average (2020 prices)(Ibidem ).
Recently, a clear distinction in value has also begun
to be made between credits based on avoided
emissions and emission reductions, on the one hand,
and removal credits, on the other hand. Removals have
traded for almost US$ 8 per tCO2e in 2020 and 2021,
with reduction credits (including REDD+) trading forless than US$ 2 per tCO2e. While the growing spreadin prices may be influenced by the public debate
around the role of offsetting on the path to Net Zero(see below), it is also a pragmatic reflection of thedifference in costs of the actual interventions taking
place on the ground.
Much more funding is needed to tap into the larger
mitigation potential. To finance natural climate
solutions worth 3.4 billion tCO2e in mitigation benefits,
US$ 10 per tCO2e is calculated to be the cost threshold(Griscom et al. 2017). However, at a price of US$ 100
per tCO2e another 6.8 billion tCO2e in mitigation
benefits could be realized. Many projects – in particular
restoration projects – cannot be developed at a pricebelow US$ 10.

Altogether, while today’s carbon markets are open toa fairly wide price spread among different credits, it is
crucial that the price floor be considerably lifted in the
coming years to permit habitat restoration of wetlands
and other ecosystems at scale. The valorisation of cobenefits for people and nature should help move pricelevels upwards substantially.
There are, indeed, tentative signs that a price shiftis under way. The new public-private initiative LEAF(“Lowering Emissions by Accelerating Forest finance”)
that aims to mobilise at least US$ 1 billion in funding,has recently set a price floor of US$ 10 per tCO2e(LEAF 2021). Mangrove (“blue carbon”) credits haverecently picked up prices in the range of US$ 15 pertCO2e, while some peatland projects in Europe charge
about US$ 100 or more per tonne and still find a buyer.
This is also a reflection that purchasers are increasinglyinterested in Nature Based Solutions, and that they pay
premiums for non-carbon benefits. The Gold Standard,
which includes sustainable benefit tests, Plan Vivo,
which is tailored to community benefits, and the
Climate, Community and Biodiversity (CCB) Standard,
which can be added to the VCS, all catch higher prices(Forest Trends’ Ecosystem Marketplace 2021b).

markets increase the visibility of the land sector andof Nature Based Solutions as indispensable for the2050 trajectory toward zero net emissions. And they
demonstrate that the land sector can be reliably
integrated in emissions trading systems, including in
the compliance markets of the future.
Besides these opportunities there are also risks
and potential trade-offs. Carbon crediting based on
AFOLU projects has long faced categorical rejection
from several environmental organizations andinternational grassroot movements3. They – often
vehemently – question both the effectiveness aswell as the integrity of emissions trading fromnature-based interventions.
Regarding the effectiveness of markets, werecognize that carbon incentives alone are notsufficient to facilitate the sort of transformationalchanges needed to make the economic use ofland truly sustainable. Critics are also right whennoting inconsistencies in today’s practice and theneed for enhancing interlinkages within the AFOLU
sector and with other sectors (Castagné et al. 2017).
Carbon markets cannot remove all the structuralgaps and deficiencies that hold us back on the path
to decarbonization. However, they can close funding
gaps and facilitate technological innovation. Further,carbon markets rely on the promise that the GHG
emission reductions and removals that are traded
are real and additional, not uncertain, imaginative(‘hot air’) or accidentally caused by other drivers
outside carbon finance. In relation to integrity,
it is key to ensure that AFOLU interventions are
specifically designed to benefit local communities
and biodiversity and that voluntary offsetting does
not come at the expense of the necessary steep
emission reductions by companies within their own
supply chain.
If carbon markets fail to deliver on this promise ofsocial and environmental integrity, the damage isubiquitous: to local stakeholders, the credibility ofthe project, the reputation of the investor, to thecarbon markets and ultimately to the combat against
climate change. Supply of high-quality credits needs
to be secured along with the responsible corporate
climate action that determines the demand for these
credits (see figure 1). Both aspects will be discussed
in the next two chapters.

2.3. Opportunities and Risks
Wetlands, the many services that they provide,and the local communities that rely on them
may benefit substantially from this new focus on
voluntary carbon projects and offsets. The voluntary
markets provide funding in particular in developing
countries, albeit not necessarily at the speed needed
for many wetland interventions. Voluntary carbon

Key Messages»

Voluntary carbon markets have done a lot to open nature conservation and restoration projects
to private sector investment and can potentially channel much needed finance to wetlands inthe short term.

»

The carbon price floor needs to lift considerably to permit habitat restoration of wetlands
and other ecosystems at scale. The valorisation of co-benefits should help move price levels
considerably upwards.

»

Social-environmental integrity is the all-decisive touchstone for climate and market success.
Supply of high-quality credits needs to be secured along with the responsible corporate climate
action that determines the demand for and use of these credits.

Supply of high-quality credits

Socio-environmental Integrity

Responsible use of credits
Organizations mostly critical of carbon offsets from AFOLU projects include Friends of the Earth (Netherlands), Fern (UK, Belgium), WWF(Switzerland), and Greenpeace.

3

Figure 1: Socio-environmental Integrity in the supply and demand of credits

12

Voluntary Carbon Markets for Wetland Conservation and Restoration

Policy paper

13

Research in highland peatland in
Solongot Davaa Pass, Mongolia(Photo: © Tatiana Minayeva)

Chapter 3

Ensuring the supply ofhigh-quality credits
Social and environmental integrity is the backbone of acredible carbon market, and carbon standards are highly
sensitive to criticism that some of their projects werelacking rigor on this front. They apply benchmarks andsafeguards to ensure that real and additional climatechange mitigation impact is achieved, without causing
direct or indirect harm. In this chapter we first introduce
different types of project interventions and then discuss
the benchmarks and safeguards that ensure that theseinterventions really result in high quality impact forclimate, people, and nature. While robust standards
and guidelines are essential, care should be taken not
to make them overly complex, to ensure accessibility
to practitioners and to enable urgent action at scale.
The issue of double counting is discussed separately,
given recent debates around it. We finally discuss actual
performance by projects against these standards.

3.1. Project Actions
An AFOLU carbon project is in essence a localized setof interventions to achieve climate change mitigation
impact, developed in close consultation with, anddirected at positively impacting, local stakeholders.

ImpactProject action
Reducing conversion anddegradation
Restoration

Climate change mitigation impact can be achieved in theform of either reduced or avoided GHG emissions, or in
the form of GHG removals or sequestration gains.
In the case of forests, reducing deforestation anddegradation results in emission reductions and forest
restoration results in emission removals. In the caseof wetlands however, both reducing conversion anddegradation as well as restoration result in emission
reductions. On top of that wetland restoration may resultin emission removals.4 See also Table 1. This is because
most wetlands have very carbon rich soils – consistingof decomposing vegetation that has accumulated overmillennia - that continue to emit GHG upon conversion
and degradation or that continue to sequester GHG(albeit slowly) when restored.
Preventing that a wetland is drained (for agriculturaluse), exploited (for energy or horticulture use), converted(to settlements or infrastructure) or degraded (due toinfrastructure that changes hydrology and sediment
dynamics) is a project activity (conservation) that avoids
emissions or reduces them in case protection is only partial

GHG Emission Reductions

GHG sequestration• Forests• Wetlands• Wetlands (albeit slowly)• Wetlands(particularly peatlands)• Forests• Wetlands(particularly mangroves)

Table 1. Project actions result in both emission reductions as well as removals in the case of wetlands

Note that in specific circumstances, wetland restoration may cause (often temporary) emissions that need to be taken into account. For
example in the case of boreal forests on peatlands, when long term drainage has resulted in a species composition that is no longer adapted to
the wet conditions that will be reintroduced as part of restoration.

4

14

Voluntary Carbon Markets for Wetland Conservation and Restoration

or if degradation is
ongoing. Ecosystem
restoration such as rewetting peatlands that are drained or
restoring degraded mangrove areas not only
sequesters carbon in biomass and soils, but also reduces
emissions. The latter is because the drained habitats would
otherwise emit GHG continuously until their organic soils
are fully depleted, a process that may take hundreds
or thousands of years, but that could be significantly
accelerated by fires. In the case of peatland rewetting, GHG
emission reductions far outweigh GHG sequestration, as
the latter does not exceed 0.4billion tones CO2 yr−1 atthe global scale (Frolking et al. 2011, Galego-Sala et al.
2018). Simultaneously, both conservation and restoration
usually lead to wetland carbon stock growth, as healthypeatlands and mangroves continue to absorb more CO2
in their aboveground vegetation as well as in their soils.
This also means that conservation (in the sense of reducing
conversion and degradation) and restoration activities
must always go hand in hand. Conservation speaks to
the need to keep wetland carbon in the ground and toprotect the rich biodiversity and ecosystem services
that healthy wetland habitats provide. Restoration, for
its part, addresses the legacy of past habitat losses anddegradation, while also protecting, i.e., conserving what
remains of the disturbed habitat and carbon sink.

3.2. Quality Benchmarks for Projects
Over the past decades, voluntary carbon markets
for NBS/NCS have been hotly debated, which has
resulted in a set of quality benchmarks, safeguards
and co-benefits that are defined and upheld by several voluntary carbon standards. Hot topics notably

include results-based-payments, baselines, additionality,
leakage, non-permanence, stakeholder engagement, safeguards against
negative impacts and lastly co-benefits.
These topics will be discussed briefly here.
The specific project inter-vention design must proverobust in terms of the capacity to achieve climate change
mitigation and meet a set of safeguards. First, carbon
crediting follows the concept of results-based financing
whereby climate finance is distributed on the condition
that pre-defined climate mitigation achievements froma certain intervention have been achieved and verified5.
This “ex-post” financing modality is widely applied
across various climate policy instruments and lies at thecore of emissions trading (carbon finance) as a whole:An emission reduction (or removal) has to be achieved(“generated”), reported and verified, before it can beissued and transferred and can thus be considered
reliable.
Second, the question how to set a baseline and whether a
GHG benefit has been generated relative to this baseline
must be answered by using a pre-defined, scientificallysound and peer-reviewed methodology (see Box 1),
and by following strict monitoring rules to trace actual
emissions (or GHG fluxes in land).

Some standards allow so called ex-ante crediting, i.e. the issuance of credits in anticipation of future climate mitigation achievements. Theseex-ante credits depend on the issuance of ex-post credits. The failure to achieve ex post crediting within a certain timeframe will usually nullify
the ex-ante credits concerned.

5

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Box 1:
Wetland Standards
At present, most wetland projects (around 15) – terrestrial as well as coastal – and the greatest
collection of methodologies can be found in the Voluntary Carbon Standard. The list of methodologies
covers the avoided conversion of peat swamp forests (VM0004), the REDD+ Methodology Framework(REDD+MF), which includes tidal wetland conservation and restoration activities (VM0007), coastal
wetland creation (VM0024), rewetting of drained tropical peatlands (VN0027), tidal wetland andseagrass restoration (VM0033), and rewetting drained temperate peatlands (VM0036).
Plan Vivo, a boutique international standard tailored to accommodate smaller projects (usually between
100 and 1,000 hectares) has three wetland projects in its portfolio. Both the Voluntary Carbon Standard
and Plan Vivo have an international scope, permitting a priori the development of projects across theglobe. The American Carbon Registry and Climate Action Reserve, by contrast, provide country-specificmethodologies (US and Mexico).
Smaller national standards can be found in Germany, Switzerland, and the UK. The German MoorFutures
Standard (Moor Futures 2021) has its origin in initiatives among academics, practitioners, and civilsociety in the Northeast of the country, and it retains elements of private stewardship, even though it
is formally hosted and administered by state agencies in three different German states, Mecklenburg
West Pomerania, Brandenburg, and Schleswig-Holstein.
In Switzerland, the peatland standard “max. moor” (Max Moor 2022) has been active since 2017.
Designed by the Swiss Federal Institute for Forest, Snow and Landscape Research (WSL), it targets
restoration activities for the country’s raised bogs which are believed to emit some 19,000 tCO2eq
each year (WSL 2017).
The UK Peatland Carbon Code (UK Peatland Code 2021a), developed under the auspices of IUCN,
certifies mitigation benefits from restoration activities. Four projects are validated so far, with six underdevelopment and more in the pipeline. The four validated projects together cover 450 hectares ofpeatland, which equates to an estimated GHG emissions reduction of 101,944 tonnes of CO2eq. (UKPeatland Code 2021b).

Peatland, Flow Country, Scotland(Photo: © Hans Schutten, Wetlands International)

Third, independent third-party validation of the project
design and the methodological approach as well as anindependent verification of these results are required.
Fourth, at the conditionality level, a topical concept forclimate finance intervention in general and for carbon
project development in particular, is the principle ofadditionality. It means that a project is only eligible
for carbon finance if it demonstrates that it cannot
be developed without this incentive. In practice, thismeans that project developers must either present
an individual, detailed scenario analysis to showthat the envisaged project is not the most likely or
profitable option and that there are barriers for its
implementation. Some methodologies permit theuse of a pre-defined ‘positive list’ of project types or
project conditions that are deemed additional. These
positive lists are a means to clarify and simplify how
to deal with this aspect of environmental integrity.
For conservation and restoration activities, they
define thresholds for activity penetration permitting
all projects that can show below-threshold activity toapply to claim automatic additionality. This enables
funding to flow directly to interventions on the groundrather than to expensive scenario analysis.
Fifth, the issue of leakage needs to be addressed.
Leakage concerns the risk that the project leads
directly or indirectly to an increase in emissions or adecrease in removals of greenhouse gases outside of
the project area. In an example, a project developerof a peatland conservation project needs to ensurethat the degradation drivers – e.g., palm oil production– does not simply move into peatland areas outside
the project perimeter and aggravates matters there.
Leakage considerations are, among others, behindthe drive to move from projects to jurisdiction-wide
programs and to find transformational solutions forstructural degradation problems (Seymour 2020).
All leakage that does occur must be calculated
and discounted from the number of GHG emission
reductions or removals achieved in the project area.
The discounts can be as high as 100%, in which case a
project is not viable.
Sixth, the issue of non-permanence. Projects thatremove CO2, for example by growing trees and/or accumulating soil carbon, come with the risk that
the CO2 is released in the future, either because

16

Voluntary Carbon Markets for Wetland Conservation and Restorationa tree is cut or because a peatland is drained, firestrikes, or something else. The risk of reversal puts
the long-term GHG benefit in doubt, which is one of
the reasons why carbon markets have long resisted
including the land sector in their coverage. If you
look at the matter carefully, the problem seems to be
confined to sequestration projects. A removal once
achieved may risk getting lost in the future and thevoluntary standards developed ways to handle thisrisk, as explained below. Projects that reduce or avoid
emissions, by contrast, slow the rate of degradation,
which is a permanent contribution to the climate. If one
rewets a drained peatland for 10 years, for instance,
the area will not release emissions during this time
except for a short period at the start, providing greater
benefits than letting the peatland degrade (Günther et
al. 2020). Even if drainage restarts from year 11, thebenefit of an emissions-free decade will continue toweigh in on the atmosphere.
The risk of non-permanence does not mean thatreversal will materialize, and there are ways tomitigate the risk. In the compliance market, the Clean
Development Mechanism (CDM) issued temporary
credits to afforestation and reforestation projects(other forest and soil projects were not permitted
under the CDM), that had to be continuously replaced(UNFCCC Secretariat 2013). While a consistent way
to address the non-permanence risk, the temporary
credit approach has proved difficult in practice and put
forestry project de facto at a disadvantage compared toprojects in other sectors (World Bank 2011). Voluntarystandards have gone a different way. They make an exante assessment of the non-permanence risk either
across the portfolio or (as in the case of the VCS) ineach project and stipulate a credit buffer amountin percentage on this basis. Whenever the projectissues credits, the buffer share will be deducted by
the standard and moved into a standard-wide buffer
account. All credits – those issued to the project
developer and those issued into the buffer account– are permanent credits. If a project faces a reversal
event (and an associated release of GHG), the buffer
account will compensate for this release through aretirement of credits in this amount.
Note that the permanence of emission reductions is
ultimately the same across economic sectors. Installinga filter in an industrial production facility – for example
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to produce fertilizer, a process that releases a potent
GHG, nitrous oxide (N2O) – may generate emission
reductions for a number of years (always seen against
the baseline of unfiltered production). When emissions
go back to baseline at the end of the filter’s lifecycle
the reductions achieved up to that point are rightly
considered permanent, as the benefit of temporary
low-carbon production is felt in the atmosphere incontinuity. Despite the equivalence between the land
sector and other economic sectors, carbon standards
have come to treat them differently, i.e. the same asremovals. Virtually all standards define the risk ofreversal as implicit in all land-use projects.
Seventh, clear, specific and inclusive involvement oflocal stakeholders is a mandatory element in project
design. Under the rules of the VCS (Verra 2022) thismeans that the project proponent must conduct a local
stakeholder consultation prior to validation to “informthe design of the project and maximize participationfrom stakeholders” and provide for “mechanisms forongoing communications”. The consultation must
be preceded in all AFOLU projects by a “thorough[stakeholder] assessment” that takes into account land
tenure and access rights (including under customarylaw). A project may only affect property rights if free,prior, and informed consent (FPIC) is obtained. The
FPIC protection that reflects standards developed at
the UN level (FAO 2016) is particularly important for

Indigenous Peoples (IP) and local communities (LC),and a project must not be validated if clear evidenceof FPIC process cannot be provided. It also retains its
relevance throughout implementation and monitoring.
Eighth, carbon standards also provide rules to accountfor and mitigate any indirect injury or damage. Undera standard’s safeguard provisions, project developers
must demonstrate that the activities will not
negatively impact the natural environment, indigenous
communities or local communities, and they shallidentify and address any negative environmental andsocio-economic impacts of project activities. Somestandards trace positive impacts beyond climate
mitigation, so-called co-benefits, such as enhanced
biodiversity, resilience, poverty reduction, or thecontribution to gender equality.
The way potential negative as well as positive impacts
are acknowledged and measured differs from standard
to standard. Almost all standards include safeguard
requirements, based on the concept of “no harm”: theproject intervention must not threaten, cause damage
to, or lead to an impingement of environmental
or cultural goods or human and indigenous rights.
Safeguard requirements range from an obligation“to describe” the environmental and socio-economic
impacts of a project (e.g. CDM Afforestation/
Reforestation) to in-depth mandatory safeguard

standards (cf. Gold Standard or American Carbon
Registry). The VCS sets out certain specific safeguard
requirements (in particular: native ecosystems mustnot be converted) and otherwise offers more detailed
safeguard assessments like optional add-on standard,
including the Climate, Community and Biodiversity
Standard (CCBS) and the Women Organizing for Change
in Agriculture and Natural Resource Management
standard (“WOCAN W+ Standard”). (Verra 2021b).
The Gold Standard has in recent years transferred its
various standards – those producing carbon credits aswell as its water standard – into a single framework:
the Gold Standard for the Global Goals (GS4GG)(GoldStandard 2019). The new framework allows, as the Gold
Standard did before, for the generation and issuanceof Gold Standard Emission Reductions. Yet, in addition,
projects can apply one or more of any approved
quantification methodologies to issue and separately
monetize what the Gold Standard refers to as the “GoldStandard Certified SDG Impacts” concerning, among
other, water benefits, gender benefits, as well as
impacts to reduce short-lived climate pollutants. While
the Gold Standard is not (yet) available for wetland
interventions outside reforestation, its focus on a wider
set of ecosystem services would boost the interest in
wetland projects, as they naturally deliver on a vast
number of additional benefits from healthy wetlands:
from water quality to habitat for rare biodiversity tocommunity resilience and poverty reduction.

Double issuance

Double selling

A unit is issued at least
twice

The same unit is sold atleast twice (other than ina chain of sales)

3.3. Double Counting
Double counting refers to the risk that the sameactivity or effect to reduce or remove GHG emissions
is accounted for twice (or multiple times). Double
counting can occur in different forms. A common
typology differentiates four types of double counting(see Table 2). Double selling occurs where an issued
unit is sold more than once to different actors.
Double issuance refers to a scenario in which a unit
is credited twice under different standards or indifferent registries or in which it is duplicated in
the same registry. Double monetization refers to asituation in which the same GHG emission reduction
effort is monetized multiple times, e.g., once by thegovernment at an inter-governmental level and thenby a company in a private transaction, or once as a
GHG credit and once as a GHG allowance. Double
claiming finally, occurs where two entities ‘claim’ theenvironmental benefit of the exact same reduction or
removal unit.
Voluntary carbon standards have developed robust
tools to prevent double-issuance, double-selling anddouble-monetization by requiring project developers
to provide clear proof of ownership of the mitigation
benefits concerned and by issuing individually
traceable credits (each equipped with its own serial
number) into individual accounts. The issue of double
claiming is discussed separately in chapter 5 as it
relates to responsible corporate climate action.

Doublemonetization

Double claiming

The same unit orunderlying effort istransferred for value or
to meet a liability

The same unit orunderlying effort isclaimed by at least two
different entities

Table 2: Double counting typology

Participatory project planning, Central Java, Indonesia(Photo: © Yus Rusila Noor, Wetlands International)

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Whimbrel around crabs(Photo: © Yus Rusila Noor, Wetlands International)

3.4. Performance by projects
After two decades of practice, the key voluntarystandards have proved that their AFOLU projects largely
comply with high standards of quality and process. In
a sign of confidence, the International Civil Aviation
Organization’s (ICAO) technical advisory body, whenassessing the solidity and rigor of voluntary standards
for their Carbon Offsetting and Reduction Scheme forInternational Aviation (“CORSIA”, see Box 3), approved
the ACR, CAR, and the VCS – all standards with important
AFOLU segments (ICAO 2020). While ICAO madeexceptions for certain methodologies of the VCS, allwetland restoration methodologies were confirmed asmeeting the threshold of environmental integrity.
Where there are criticisms, they regularly concern
forestry projects, in particular forest conservation
projects (REDD+) and what is portrayed as the subjective
nature of baseline calculations generated throughmodelling of complex deforestation risks. A projectthat incorporates implausibly high deforestation risk inthe baseline will be able to claim more credits than its
activities yield. In 2021, several observers – assembled
by The Guardian, the newspaper, and Unearthed, theinvestigative arm of Greenpeace, the NGO – questioned
the baselines of ten VCS forest protection projects,
which they argued were “inconsistent with previous
levels of deforestation in the area” (The Guardian 2021).

Verra – the organization that operates the VCS – reacted
to the publication in strongest terms, calling it a “hitpiece” (Verra 2021)6, but other observers have also
called for more consistent baseline rules across projects(Chagas et al. 2020). Even so, the findings hardly justify
the scandalizing narrative of what was otherwise
found – even by the investigators of The Guardian andUnearthed – to be “valuable conservation work”. Be thatas it may, Verra has been working for some time now
on updating and streamlining its REDD+ (conservation)
methodologies to “make them more streamlined anduser-friendly, and to ensure consistency so that suchprojects estimate their climate change mitigation impact
reliably” (Verra 2020). If the outcome of this work is amore standardized approach to baseline-setting, the
AFOLU carbon markets at large will benefit.
It is worth mentioning in this context that the points
raised in critique did not question the integrity of any
wetland restoration projects. This is because of thepeculiar degradation profile of wetlands, in particularpeatlands. While the destruction of forest is immediate,
the drainage of peatlands is a process that continuous
for centuries. Rewetting both saves peatlands andrebuilds them. The baseline calculation for drained
peatlands is much less error-prone than the baseline
calculation for dynamic deforestation events.

Key Messages»

In the case of wetlands, both reducing conversion and degradation as well as restoration result insignificant emission reductions. On top of that, wetland conservation and restoration may both result inemission removals. This is because most wetlands have very carbon rich soils that continue to emit GHG
upon conversion and degradation or that continue to sequester GHG (albeit slowly) when restored.

»

After two decades of practice, the key voluntary standards have proved that their AFOLU projects largely
comply with high standards of quality, and efforts are continuously being made to make them even more
stringent. This means that supply of high-quality credits can be ensured.

»

Some have been criticizing forest conservation (REDD+) projects on the grounds that the baseline
calculations proved too favourable for the project developer. While such criticisms must be attended toand checked; the risks for wetland conservation and restoration projects are small.

»

While robust standards and guidelines are essential, care should be taken not to make them overly
complex, to ensure accessibility to practitioners and to enable urgent action at scale.

Chapter 4

Ensuring responsible
use of credits
Much of the recent demand for credits is owed to“carbon neutrality” and “net zero” concepts that havecaught on with many corporates. They promote theirproducts and services as “carbon neutral” or “net zero”
after calculating the carbon footprint of the production
process – and sometimes the entire value chain oreven lifecycle process – as well as investing in offset
credits for the same amount.
However, offsetting can never be an end in itself. Eachoffsetting operation needs to be vetted against theneed to decarbonize all sectors of the economy, and all
operators, at speed. Voluntary carbon markets should
not be used to justify continued (“business-as-usual”)
GHG emissions by companies if we are to achieve the
1.5-degree target. In this respect, as well, it is essential
to guarantee environmental and social integrity – inthe sense of compliance with a net-zero pathway.
Increasingly, the terminology “net zero” vs. “carbon
neutrality” is used to highlight this rationale. “Carbon
neutrality” has no specific reduction target, it simply
refers to full offsetting, whatever the emissions level.
“Net zero”, by contrast, implies a maximum emission
reduction effort as a constitutive pillar. The concept
associates with the “mitigation hierarchy”(SBTI 2021a).
In this chapter we first introduce interventions thatcompanies can take to comply with the mitigation
hierarchy. We then discuss quality benchmarks andperformance.

7
6

The VCS alone has 169 operational AFOLU projects at the time of writing, cf. Verra Registry (2021).

20

Voluntary Carbon Markets for Wetland Conservation and Restoration

8

4.1. Corporate Actions and the Mitigation
Hierarchy
Mitigation hierarchies have long been used insustainable
resource
management,
includingwaste management (“Reduce, reuse, recycle”), andbiodiversity policies (“avoid, minimize, remediate, andoffset”). They prioritize efficient, resource-protective
management over resource-intensive and damagecalculating compensation. In the context of climate
mitigation action, mitigation hierarchies set an orderof preference starting with GHG emissions avoidance,
GHG reductions and carbon stock restoration within the
supply chain (each considered a form of “insetting”),
and finally turning to compensation, implying emission
reduction or sequestration efforts outside of the
supply chain (“offsetting”).
The role of offsets is to remedy residual (unavoidable)
emissions, especially during the process ofdecarbonization (see Figure 2)7. The Science-Based
Targets initiative (SBTI)8 – grown out of a partnership
between the Carbon Disclosure Project (CDP), theUnited Nations Global Compact, the World Resource
Institute, and WWF – also used to differentiate between
neutralization measures (carbon removals, within or
beyond the value chain) and compensation measures(avoided and reduced GHG emissions outside thevalue chain)(SBTI 2020), but has since abandoned theterminology of compensation (SBTI 2021b).

Cf. World Business Council for Sustainable Development and Nature4Climate (2020).
https://sciencebasedtargets.org

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and holds that “companies should publicly disclose
commitments, detailed transition plans, and annual
progress against these plans to decarbonize operationsand value chains”. It keeps its focus, however, on themobilisation of “high quality, high integrity market
for carbon credits with clear differentiation between
neutralization (removal credits) and compensation(avoidance/reduction credits)” (TSVCM 2021). While
several stakeholders, including the TSVCM and its
recently set-up Integrity Council for Voluntary Carbon
Markets, deal with the supply side dimension ofenvironmental integrity, it is harder to find initiatives
that focus on the interface between voluntary carbon
markets and responsible corporate climate action.

Figure 2. The mitigation hierarchy applied to climate action in a
temporal dimension. Adapted from: World Business Council for
Sustainable Development and Nature4Climate (2020).

Applied to corporate climate action, the mitigation
hierarchy demands that the primary corporate
responsibility is to avoid and reduce the GHG
emissions in one’s supply chain. In our context thispertains particularly also to GHG emissions related todirect or indirect impacts on wetlands. For example,
by avoiding palm oil production on peatlands or by
reducing impacts of changes in sediment dynamics
or hydrology when designing infrastructure so thatcoastal wetlands are not damaged. Note that many
sectors have a direct or indirect impact on wetlands
that needs to be mapped, not only the land use sector.
Offsetting is a complementary measure to remedy
interim and residual emissions on the pathway to netzero. In our view, as in Figure 2 above, we believe that
offsetting is part of a broader decarbonization strategy

which initially has high-volume needs (particularly
during this decade, then decreasing) and which willallow corporations and investors to move to net-zerotargets in parallel with ambitious mitigation actions
within and outside their supply chain.

4.2. Quality Benchmarks for Corporations
While there is extensive guidance on product-level
carbon-neutrality claims, with protocols for the
calculation of and communication on the carbon
footprint of products (including on lifecycle emissions)9,
there is surprisingly little guidance at the corporate
level concerning appropriate strategies for offsetting.
A leading initiative in the field, the Taskforce on Scaling
Voluntary Carbon Markets (TSVCM), notes the risk of“greenwashing” (TSCVM 2021) of corporate interests

ISO 14067:2018, at https://www.iso.org/standard/71206.html; ISO 14026:2017; PAS 2060 standard for carbon neutral products; PAS 2050 for
calculating lifecycle emissions from a product922

Voluntary Carbon Markets for Wetland Conservation and Restoration

Unfortunately, those networks and campaigns thathave recently begun to engage in defining corporate
standards for climate action barely recognize the roleand potential of offsetting, in an attempt to avoid
the risk or perception of greenwashing. A prominent
example is the SBTI. It works with companies to define
how much and how quickly they can and should
reduce their GHG emissions in line with what thelatest science deems necessary to meet the goals of
the Paris Agreement: limiting global warming to “wellbelow” 2°C above pre-industrial levels and pursuingefforts to limit warming to 1.5°C (Paris Agreement2015)10. This guidance is highly relevant and muchneeded. While this is in line with the mitigation
hierarchy, the SBTI’s recent push to relegate offsets tothe margins of decarbonization efforts is not: “Offsets(including neutralisation and compensation) do notcount as reductions toward meeting your sciencebased targets”(SBTI 2021d). While the SBTI previously
recommended that corporations might still undertake“efforts to compensate unabated emissions in thetransition to net-zero”, offsetting measures have nofunctional value for a company’s net-zero target andpathway. In the latest release of its Corporate Net Zero
Standard, it suggested discontinuing the terminology

10(and concept, it seems) of compensation altogether(SBTI 2021b).
In our view, given the urgency to address the interlinked
climate, biodiversity and land degradation crises, andthe need to mobilise the required private financing,
it is imperative that companies avoid and reduce
emissions while simultaneously offsetting residual
emissions that cannot yet be addressed. With annual
rates of losses accelerating since 2000, immediate,not deferred action is required. This said, responsible
offsetting does not need to be a rebuttal of the priority
for mitigation action. Most economic sectors and mostfirms will struggle to bring down their emissions to zero
immediately, leaving residual emissions to address.
Offsetting in these cases is a necessity, not a diversion.
Offsetting of emissions should be done immediately
and not only after reduction and avoidance ofemissions prove successful, as this can take several
years. Otherwise, there will be hardly a wetland left toprotect or restore.
It is encouraging, then, to see new initiatives emergethat point to a more constructive relationship between
ambitious corporate climate action and voluntarycarbon markets. The Voluntary Carbon Market Integrity
Initiative, a multi-stakeholder platform to “drive
credible, net-zero aligned participation in voluntarycarbon markets”(VCMI Initiative 2022) has recently
committed to looking into responsible corporate
climate action aiming to provide “clear guidance forcorporations and other [non-state actors] on highambition voluntary use of carbon credits” (VCMI
Initiative 2021: 7) (emphasis added). The Voluntary
Carbon Market Global Dialogue argues that carbon
crediting approaches can leverage transformational
investments specifically in developing countries
with broader development benefits and verified
contributions to the Sustainable Development Goals(Voluntary Carbon Market Global Dialogue 2021).

The recent Glasgow Climate Pact (2021) “resolves to pursue efforts to limit the temperature increase to 1.5 °C”.

Policy paper23

In this context, we also challenge the view thatencourages the use of offsets only when these offsets
are made through carbon removal (not emission
reduction) credits (Oxford Principles for Net Zero
Aligned Carbon Offsetting 2020). Wetland habitats are
the best example of the intrinsic relationship between
emission reductions and emission removals (seechapters 4.1). Keeping these separate does not makesense. Although a new embrace of restoration andsequestration projects is welcome and needed, theshift away from emission reductions is not just shortsighted but illogical. In the case of drained peatlands,
long-term sequestration is possible only on the backof emission reduction activities like rewetting.
If we are to avert catastrophic climate change, then,both ecosystem protection (emissions reductions) andrestoration (removals) are essential (Ibidem). In termsof urgency and priority, conserving tropical forests,
peatlands, and mangroves is more important thanrestoration due to their high and often irrecoverable
carbon stocks (Seymour and Langer 2021). Giving
conservation priority is also important for reasonsoutside climate mitigation, namely biodiversity
protection, enhancing resilience and adaptation
capacity and the provision of other vital ecosystemservices on which many of the most vulnerable andpoorest communities rely.

4.3. Double claiming
The Paris Agreement has created a new playing fieldin that it obliges contracting Parties to prepare andmaintain successive national plans to cut emissions(Article 4.2), the so called Nationally Determined
Contributions (NDCs) and in that it lays out a“progression” pathway towards a contracting Party’s“highest possible ambition” (Article 4.3). Most NDCs
define economy-wide or sector-specific emission
reduction targets, measured against baseline year

emissions (for example the European Union) or
measured against business-as-usual emissions(baseline scenario emissions). In NDC accounting
terms, emissions and removals from wetlands fallin the land sector (land use, land-use change andforestry: LULUCF or Agriculture, Forestry and Other
Land-Use: AFOLU), which a growing number ofcountries – developed as well as developing – coverin their NDCs.
With countries assuming country-wide or sectorspecific targets, it is sometimes argued that suchtargets would create a conflict with voluntary carbon
markets in that every emission reduction and removal
achieved by a voluntary project would be claimed or
accounted for both at the level of the project (or theinvestor behind it) and at the country (NDC) level11.
While other forms of double counting are addressed
effectively through the voluntary carbon standards as
discussed above (Chapter 4.3), in particular by usingtransparent digital registries, it is debated to what
extent voluntary standards can and should containthe risk of double claiming against NDC commitments.
While the Gold Standard decided to make a so called“Corresponding Adjustment” (see Box 2) from thehost country obligatory if the project proponent
wants to issue credits that can be used for offsetting,even when not used for compliance purposes, theVCS decided against such a requirement. The new
Glasgow Climate Pact agreed November 2021, which
lays out the rules for carbon markets, leaves it entirely
up to the host country how it wishes to treat thevoluntary carbon market. A host country may grant
an authorization to a voluntary carbon project which
in turn triggers a Corresponding Adjustment. The
absence of an authorization, however, does not meanthat a voluntary project could not be developed. It
only means that a host country will not account for it
through a Corresponding Adjustment (see Box 2).

Box 2:
Article 6 Trading and Corresponding Adjustments(Paris Agreement)
The Glasgow Climate Pact – the outcome of COP26, held in November 2021, in Glasgow, United
Kingdom – finally delivered the main missing parts in the set of implementing rules (‘rulebook’) for theParis Agreement. Notably the guidance on “cooperative approaches”, as established under Article 6.2of the Paris Agreement, and rules, modalities and procedures for the mechanism established by Article
6.4 of the Paris Agreement (UNFCCC 2021) .
The instrument on cooperative approaches (Art. 6.2 of the Paris Agreement) covers InternationallyTransferred Mitigation Outcomes (ITMOs) and enables Parties to the Paris Agreement to engage inemissions trading in a decentralized, bilateral or multilateral manner. The mechanism establishedunder Article 6.4 of the Paris Agreement resembles the Clean Development Mechanism (CDM) of the
Kyoto Protocol in being the more centralized instrument governed by a Supervisory Board responsible
for the accreditation of validation and verification entities (Designated Operational Entities or DOEs),
the approval of methodologies, the registration of activities, and the operation of a centralized registry.
Article 6.2 activities are bilaterally (and sometimes unilaterally, by the host country) defined anddeveloped. Article 6.4 activities are developed under rules and methodologies that are a priori thesame for all countries. These rules include provisions on set-asides (quotas of each issuance) that arecancelled or transferred to benefit overall mitigation efforts and adaptation purposes.
Both instruments allow for the trade in “emission reductions” as well as “emission removals” (either
herein referred to as ER), provided these are “real” (not hypothetical), “verified” (independently
confirmed) and additional (not accidental, in other words: generated because of the incentive offeredby emissions trading). Tradable ERs are those generated in 2021 or later. The Article 6.4 decisionalso provides for the use of some pre-2021 units issued under the Clean Development Mechanism
between 2013 and 2020, for use towards the first NDC period.
In contrast to voluntary standards and voluntary emissions trading, both Article 6 instruments imply
a form of ‘approval’ and/or ‘authorization’ of a specific ER activity or outcome by the host country.
For Article 6.2 authorizations, this means that the host country will need to make a ‘Corresponding
Adjustment’, i.e., neutralize the amount of traded emission reductions or removals (ITMOs) from its
balance sheet when accounting for its nationally determined contribution (NDC). In other words: An
emission reduction traded under Article 6.2 must not be considered towards the host country’s own
emission reduction (NDC) target.
Article 6.4 approvals do not require a Corresponding Adjustment per se. However, in practice, if a hostcountry seeks to trade Article 6.4 emission reductions/removals to another country, the authorization
procedure of Article 6.2 applies as well (i.e., the host country must approve under Article 6.4 andauthorize under Article 6.2).
There are three sub-types of Article 6.2 authorizations for Corresponding Adjustments: The host country
can authorize (i) the use towards another country’s NDC, (ii) the use for an “international mitigation
purpose” other than towards an NDC, and (iii) the use for “other purposes”. The first variation (towards
an NDC) allows another (investor) country to purchase mitigation outcome from the host country

11
Several thinktanks, including the Wuppertal Institute and NewClimate Institute, are vocal proponents of this view, see Kreibich / Hermwille(2021); Fernehough et al. (2020); Schneider et al. (2015); Schneider et al. (2020).

24

Voluntary Carbon Markets for Wetland Conservation and Restoration

Background paper

25Box 2and use it for its own NDC (though such use is not obligatory). The second variation (international
mitigation purpose other than NDC) aims at CORSIA and potentially other schemes that seek to curb
international emissions (for example international shipping). The third variation (other purposes) isa default authorization (‘any other purpose’), and a host country may define this “other purposes”
to include voluntary carbon markets, in which case an authorization and Corresponding Adjustmentin that host country are required when internationally transferred. It is important to note that a hostcountry is under no obligation to regulate or otherwise interfere with voluntary carbon projects. An
authorization of a mitigation activity for other purposes (including for the use of voluntary offsetting)remains at the discretion of the host country. In turn, this means that voluntary standards can operate
outside the Article 6 framework and outside NDC accounting.
Nature-based Solutions (NBS) are not specifically referenced nor excluded in either the decision on
Article 6.2 or Article 6.4. However, a parallel decision on “non-market approaches” (Article 6.8 of theParis Agreement) – which created the Glasgow Committee on Non-market Approaches – references“blue carbon” as an example for a potential focus area. NBS are still implicitly recognized both in thedecision on Article 6.2 and the decision on Article 6.4, as they acknowledge that “emission reductions
and removals” can qualify as ITMOs (Article 6.2) and that activities can be designed to increase removals(Article 6.4), respectively. Both decisions also include language involving the need to mitigate the “riskof non-permanence” and “reversals”, confirming that the land-sector and its specific characteristics fallwithin the scope of the Article 6 instruments. This is a major departure from the mechanisms of the
Kyoto Protocol, in particular the CDM, which excluded most NBS or land-based projects from its scope.
This said, both COP26 decisions also come with reservations. The decision on Article 6.2 refers thequestion whether “emission avoidance” could be considered an ITMO to a subsidiary body for further
reflection. The decision on Article 6.4 requests the subsidiary body to “elaborate further” on “[activities]
involving removals”. This does not, however, indicate that NBS or certain aspects of NBS would not yet
be seen as operational. The reference to “emission avoidance” should not be understood as a caveat
concerning nature conservation projects in general, or REDD+ in particular. Rather, the section must
be read as referring to long-standing discussions to what extent national decisions not to exploit any
fossil fuel fields could be credited under an emission reduction mechanism established within the
UNFCCC. (Marcu 2021)
Related to Article 6 discussions, it is worth referring to the San Jose Principles for High Ambition andIntegrity in International Carbon Markets. In 2019, during the Pre-COP 25 session held in San Jose,
Costa Rica, a group of countries foreseeing the slow pace of negotiations regarding Article 6, decided
to work together to define a set of principles that would guide their work. They wanted to ensurethat carbon markets would be guided by environmental integrity principles and enhance the highest
possible mitigation ambition. While negotiations on Article 6 finally concluded in Glasgow (COP 26),
the group reiterated their commitment to their principles. For instance, while the agreed Glasgow
Pact authorizes the carry-over of CDM (Clean Development Mechanism) credits emitted from 20132020 to the new Article 6.4 mechanism, nationally they will not buy nor sell such credits. The groupof countries is committed to continue working together in the coming intergovernmental processes,
which will further define Article 6 and its elements.

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Voluntary Carbon Markets for Wetland Conservation and Restoration

It is too early to see how this liberal solution tovoluntary carbon markets will play out in practiceand how the carbon markets will react. For now, thediscussion seems oddly prolonged, with all sides
claiming that Glasgow has vindicated their views.
We would like to set the discussion in the context
of both the overall purpose of NDC accounting andthe specific needs of developing countries, from astandpoint of environmental justice, international
climate finance and private sector investment.
First, NDCs and associated GHG inventories aretaking stock of what all sectors and actors in thatcountry collectively will or have achieved as enabledby that country. This also includes a priori efforts byvoluntary carbon projects that are financed throughcarbon markets. Second, this finance must generally
be considered as instrumental in assisting a country
to reach its NDC targets. Indeed, NDCs – especiallythose from least developed countries (LDCs) and small
island developing states (SIDS) – are often framed
as conditional to such finance coming in. Voluntarycarbon market efforts in these cases speak to the needfor multi-layered engagement and orchestration.
Conversely, requiring projects to obtain a
Corresponding Adjustment could create a sharp
chilling effect which cannot be afforded again given
the urgency to address climate change. Consider thesituation for voluntary carbon projects in industrializedcountries during the Kyoto years, from 2008 to 2020
when emission reduction targets applied for mostindustrialized countries. Neither the VCS nor the Gold
Standard at the time banned voluntary carbon projects
in the affected countries. Instead, they required

projects located in these countries to present what
the Gold Standard called “satisfactory assurances thatan equivalent amount of [government units] will beretired to back-up the [voluntary credits] issued”. In
practice, no government has ever offered a retirement
commitment from public books of this sort, and bothstandards remained (mostly) unavailable in the affectedindustrialized countries. This is not surprising given
the considerable capacity needs and transactionalcosts to governments for validation, monitoring andverification control alone, assuming that they would
not give blanket authorization to a specific voluntarystandard.
If there was an upside in the de facto non-availabilityof the big voluntary standards in most industrializedcountries, it is that developing countries benefited
most from carbon market investments. That edge would
disappear if a mandatory Corresponding Adjustment
feature were added to the voluntary carbon market.
Indeed, the dual onus for voluntary carbon projects– create a GHG mitigation benefit and have host country
governments agree on debiting their national accounts –would directly and negatively affect developing
countries, i.e., those countries that are disadvantaged
in terms of capacity and funding to transform theireconomies and adapt to the impact of climate change.
Outside the United States (which has its own set ofvoluntary standards) and a few other countries thathave built domestic carbon markets, voluntary carbon
projects have been implemented in developing
countries. Restrictions on Corresponding Adjustments
will almost exclusively be felt there – a dubious policy
result from the perspective of environmental (climate)justice.

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Another consideration in this context concerns theparticipation of local communities. Many voluntarycarbon projects – especially those in the land-use
sector – are implemented by local communities,
many of which are particularly vulnerable to climatechange. While the past decade has contributed to theunderstanding of the participatory (“carbon”) rights ofindividuals and communities, the argument that thosewould be conditional on a Corresponding Adjustment
by central governments is regressive.
For these reasons, we argue that there is no generalanswer to the question concerning the appropriatenessof Article 6’s “other purpose” authorizations and thatinstead, countries and markets should follow specificneeds assessments. It seems reasonable for developed
countries to have voluntary offsetting within theirboundaries linked to Article 6 “other purpose”
authorizations implying a Corresponding Adjustment.
Many developing countries, by contrast, particularly
those with conditional NDCs, should be granted amore flexible approach, based on the understandingthat voluntary carbon markets – outside authorization
procedures (which many will have difficulties to setup) and outside the mechanism of Corresponding
Adjustments – are both a means for corporations
to offset their interim or residual emissions and ameaningful contribution to host countries moving
towards compliance with their NDCs.
Hence, we believe that provided that voluntary carbon
projects prove to generate real and additional climatechange mitigation impact in a host country, there is no28

need to discount voluntary carbon credits from thatcountry’s (conditional) NDC through a Corresponding
Adjustment, whether or not the investors (credit
purchasers) claim them as part of their own net-zerostrategy. Indeed, the investor could claim to deliver
on a dual strategy: aiming at net-zero emissions at thecompany-level and at facilitating the host country toachieve its NDC target. This assumes, however, thatthe investors will not use the voluntary credits fordomestic compliance purposes, and that the credits
will also not be counted towards the NDC of the country
where the company is based, nor towards stand-aloneinternational commitments like CORSIA (see Box 3). In
either case, the transaction would lose its voluntary
nature and instead meet an official purpose. Thatfunction can only be achieved with foreign credits aspart of an ITMO.
We do agree that transparency can and should be
improved, and that guidance on the type of claim agovernment or a non-state actor makes is needed.
This is even more the case now that the fresh Paris
rulebook decisions offer a dual approach: voluntarycarbon transactions with Corresponding Adjustments
and voluntary carbon transactions without (see Box 2
above). Carbon standards and registries could consider
issuing labels that indicate credit issuance against
Corresponding Adjustment. Countries and investors inturn could be encouraged to report on the voluntarycarbon impact that contributed to achieving their
NDC or company target and how voluntary efforts areembedded in NDCs.

Voluntary Carbon Markets for Wetland Conservation and Restoration

Box 3:
International Aviation – International Shipping
A new hybrid market – that blends the compliance aspects (regulatory obligations) with voluntary
market aspects (use of voluntary credits) – is the Carbon Offsetting and Reduction Scheme forInternational Aviation (CORSIA), an instrument set up by the International Civil Aviation Organization(ICAO), a specialized United Nations agency (ICAO 2019). Emissions from international aviation are notcontrolled by national governments, and they do not show in NDCs. To build an emissions reduction
program outside NDCs and outside the Paris Agreement, ICAO introduced CORSIA, and airline operators
have pledged to offset a portion of their GHG emissions (CO2 emissions but no other GHG, andaccounting for international flights only) that they produce above a baseline 2019 level. CORSIA sets
standards for acceptable projects and credits to offset those emissions, and airlines across the globe
will ultimately (from 2027) be obliged to monitor their international emissions and surrender offset
credits. A pilot phase in which participation (for countries) is optional, started in 2021.
Likewise, international shipping may create demand for voluntary carbon projects and credits in the
future. The industry burns about 2bn barrels of the heaviest fuel oil made annually (Financial Times
2021) and, like the aviation industry remains largely unchecked by domestic or international climate
mitigation targets. Under increasing political pressure to contribute to global climate action, theInternational Maritime Organization (IMO), which regulates the industry at the international level, hasbeen discussing the use of “market-based measures” or “MBMs” for a number of years, though withlittle success so far. Several countries and organizations have promoted the use of “approved emission
reduction units” to offset emissions above a designated “target line”, while others (including industry
representatives) favour a global levy on carbon emissions (IMO 2021). Like international aviation,
carbon-neutral technology is not yet available, at least not for large vessels. Several operators haveturned to the use of carbon offsets to minimize their carbon footprint in the meantime.
Note that there is a difference between voluntary emissions trading and trading under the hybrid
CORSIA scheme. CORSIA fills a jurisdictional gap: While voluntary trading and offsetting occurs within‘capped’ environments, i.e., the emissions of the offsetting entity are accounted for in the NDC of thecountry where the entity is located, emissions from international aviation are not covered by any NDC.
ICAO targets represent a substitute for the missing NDC commitments. As CORSIA is designed to meet
the ICAO target and to the extent that voluntary carbon credits are accepted under CORSIA, these mustbe supported by Corresponding Adjustments as per the new Article 6 rulebook, or else the climatechange mitigation impact of the intervention concerned would show (be double accounted for) bothat the (host country) NDC level and at ICAO level.

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4.4. Performance by Corporations
More and more businesses embrace climate action
and other sustainability strategies. While the market
for offsets is growing fast, so is the corporate focus on
reducing emissions along the mitigation hierarchy. Morethan 2,000 businesses now are working with the SBTI
to reduce their emissions in line with climate science,as the initiative reports (SBTI 2021c). Almost 1,000
companies have raised their ambition by committing
to what the initiative calls “Business Ambition for
1.5°C” (Ibidem ). Despite these encouraging facts, thecorporate performance at large has been mixed (atleast to date).
This concerns not only the level of participation inclimate action but also the level of ambition. The
number of companies sitting idle is far greater than
the number of those taking an active position, andunfortunately much of the action of those that doengage turns out to be negligeable (“greenwashing”)
and insufficient. A surprise judgment (Milieudefensie
et al. vs. Royal Dutch Shell 2021) by a Dutch court (The
Hague District Court) from May 2021 gives fresh andinsightful evidence of corporate underperformance.
The court found the climate plans of oil major RoyalDutch Shell materially lacking. It ordered the firm tostrengthen its global corporate climate targets with areduction target of 45% by 2030 (compared to 2019
levels) for its direct (‘Scope 1’) and indirect emissions(‘Scope 2’) and a best-effort target for achieving anequal reduction along its global value chain (‘Scope3’)12. While this may have been a consequential
judgement (Shell is filing an appeal), it is still all too
rare. Most corporations will not be tried or tested on
their climate ambition.
Yet, it also concerns the level of commitment to offset
projects, in general, and nature conservation projects,
in particular. Investment in offsets remains tiny given
the task, and while conceptual scaling efforts are underway – the TSVCM and the VCMI Initiative are witness tothat effort – much of that scaling has yet to happen.

Greenchoice representative, visiting Scottish peatlands(Photo: © Femke Tonneijck, Wetlands International)

12
The court used the taxonomy of the World Resources Institute Greenhouse Gas Protocol which categorizes greenhouse gas emissions in
Scope 1, 2 or 3 as follows:•
Scope 1: direct emissions from sources that are owned or controlled in full or in part by the organization.
•
Scope 2: indirect emissions from third-party sources from which the organization has purchased or acquired electricity, steam, or heating
for its operations; and•Scope 3: all other indirect emissions resulting from activities of the organization but occurring from greenhouse gas sources owned orcontrolled by third parties, such as other organizations or consumers, including emissions from the use of third-party purchased crude oiland gas.

30

Voluntary Carbon Markets for Wetland Conservation and Restoration

Key Messages»

Voluntary carbon markets must not be used to justify business-as-usual GHG emissions bycompanies if we are to achieve the 1.5-degree target. It is essential to guarantee environmental
and social integrity in the sense of ambition towards, and compliance with, a net-zero pathway.
Companies should set and disclose robust, science-informed and high-ambition targets alongwith a roadmap with shorter- and longer-term milestones following the mitigation hierarchy.

»

Given the urgency to address the interlinked climate, biodiversity and land degradation crises,
and the need to mobilise the required private financing, it is imperative that companies avoid
and reduce emissions – particularly also those related to wetlands - while simultaneously
offsetting residual emissions that cannot yet be addressed.

»

While there is extensive guidance on product-level carbon-neutrality claims, there issurprisingly little guidance at the corporate level concerning appropriate strategies foroffsetting. This needs to be addressed urgently and it is encouraging to see emerging initiatives
like the Voluntary Carbon Market Integrity Initiative and the Voluntary Carbon Market Global
Dialogue along with the Science Based Targets initiative.

»

Although net zero pledges have been growing, corporate performance to date is still relatively
limited, and the companies sitting idle far outnumber those taking an active position. While
conceptual scaling efforts are under way much of that scaling has yet to happen.

»

In our view, double claiming between voluntary corporate offsetting efforts and national NDCs
does not pose a risk, at least in developing countries that require additional finance13 to achieve
their NDCs. This is because efforts are only counted once at the level of the NDC of the hostcountry, while additionality is secured by adherence to the voluntary standards.

»

Hence, we encourage many developing countries to take a flexible approach, as allowed by
the Article 6 Rulebook, recognizing that voluntary carbon markets can both be a means forcorporations to offset their interim or residual emissions and a meaningful contribution towards
host country NDC compliance. Countries and investors should report and communicate this in atransparent way.

13
NB. Voluntary corporate offsetting implies that the companies do not use the voluntary offsets for domestic compliance purposes andconsequently these offsets do not feature in an NDC other than that of the host country. While a corresponding adjustment in this case is notnecessary, investors should clarify that their offsetting action helps implement the host country achieve its NDC.

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31

Chapter 5

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34

Voluntary Carbon Markets for Wetland Conservation and Restoration

Background paper

35Voluntary Carbon Markets for Wetland
Conservation and Restoration
Policy paper