Scaling up REDD+: From Projects to Integrated National Approaches
Summer Montacute (Verified Carbon Standard (VCS))

I will be speaking about the work that VCS has done in providing specific guidance for governments on
how to scale up REDD+ by moving from the project level to an integrated sub-national or national
approach to REDD+ accounting.

In my presentation, I will provide a quick overview of the VCS and AFOLU 1 Program.

I will discuss theneed for Jurisdictional and Nested REDD+, which we call JNR within VCS. I will give a high leveltechnical overview of the VCS-JNR requirements, the next steps we are looking at with JNR and then I willalso mention something about the applicability of VCS in the development of the Japanese JCM.

The VCS was established by leading NGOs: International Emissions Trading Association, The World
Business Council for Sustainable Development, Climate Group, and World Economic Forum to provide a1Agriculture, Forestry and Other Land Use: http://v-c-s.org/develop-project/agriculture-forestry-projects

rigorous trustworthy, and innovative global standard and validation and verification program forGreenhouse Gas offsets. VCS is a non-profit organization.

We are headquartered in Washington DC.

We also have an office in Santiago in Chile, and we have representatives in Bangkok and Beijing and soonin Brazil as well.

Our focus is only to develop and manage the VCS standard and platform, so we do notundertake consulting, we do not undertake methodology development, validation and verification or project
development.

Those things are all done by third party organizations that fit into our VCS standard. Our

program is funded through a levy on the issuance of VCUs, which is $0.10 USD per VCU and also fromfoundation grants. The VCS AFOLU Program has made significant contributions in bringing land-based
activities into the carbon market including the vast majority of REDD+ projects internationally are using
the VCS standard.

In this visual, you can see the VCS standard supported by the work of third-party organizations, which
undertake development of innovative methodology elements, independent auditing through verification andvalidation bodies, and transparent registry system for issued VCUs or Verified Carbon Units.

VCS’s Agriculture Forestry and Other Land Use or AFOLU Program supports methodologies developed
under the following categories: Afforestation, Reforestation, and Revegetation; Agriculture and Land

Management; Improved Forest Management; Reduction in Emissions from Deforestation and Forest
Degradation; Wetland Restoration and Conservation; and Avoided Conversion of Grasslands andShrublands.

In our AFOLU requirements document, which is downloadable from the VCS website, you can find all of
the specific guidance around AFOLU project requirements including about crediting periods, leakage
management and addressing the risk of non-permanence. There are also methodological requirements forthe development of methodologies under the AFOLU program including quantification of greenhouse gas
emission reductions, removals and monitoring, and also requirements for validation and verification ofAFOLU projects.

Getting into Jurisdictional and Nested REDD+, JNR was developed because of the need that the VCS saw
for guidance for governments on how to bring together the two separate tracks of on-the ground projects
and the development of REDD+ programs that has been ongoing at the national level.

First of all what do we mean by nesting.

In English, and perhaps this is the case in Japanese as well, theterm ‘nesting’ has two meanings; one would be like the bird’s nest on the right and the other definition is aplace affording snug refuge or lodging, a home, so this can refer to the picture on the left of the bowls,
which fit snugly or nest together and this is the idea of nesting in REDD+. A project would nest with alarger level such as state or province that can then nest within even larger levels at the country level. This
scale-up means a scale-up in potential emission reductions and accounting at the jurisdiction scale means
enhanced environmental integrity and ability to more completely address leakage and also to avoid doublecounting.

The VCS JNR framework enables robust accounting and crediting of REDD+ programs at multiple levels;
national, subnational, and nested projects. This is the first international framework for accounting andcrediting jurisdictional REDD+. The JNR provides detailed guidance for development of jurisdictional
REDD+ programs and this is something that has been missing up till now and is unlikely to come from theUNFCCC until 2020 or after, so we see JNR as sort of a bridge between now and when that eventual future
guidance is provided. JNR provides significant flexibility to facilitate use by a variety of different kindsof jurisdictions. It allows customization while maintaining robust, consistent accounting and establishes apathway for subnational programs to fit within an existing or future national REDD+ framework and alsoenables governments to allow projects to be nested within jurisdictional programs.

This means there areincentives for early action projects as well as for policies and programs at higher subnational or nationallevels.

The development of VCS JNR went through an intensive 2-year process involving a wide range ofstakeholders including governments, research institutions, private sector, NGOs and individuals.

Theadvisory and technical expert committees were convened in 2011, draft requirements were issued in May oflast year for public consultation, and we received over 500 comments which were then incorporated into
the final requirements that were released last October (2012). The second phase that we see with JNR ispiloting, which is taking place this year.

Now, I will give a quick overview of the JNR technical requirements and the full details of this areavailable if you download the JNR Requirements document from our website. The requirements covertechnical issues such as defining geographic and program boundaries; developing and nesting baselines
including scope, pools, additionality and updating; grandparenting, providing time for projects and lower
level jurisdictions to transition into national/subnational programs; leakage such as leakage fromdeforestation to degradation, from project to jurisdiction or between jurisdictions; ensuring consistency ofmonitoring results across levels; crediting; reversals and natural disturbance; and then other issues such aslegal issues, the right of use of carbon emission reductions, safeguards and approvals.

In Dr. Matsumoto’s presentation, he showed three approaches which are similar to the JNR Requirements.
We have three scenarios that jurisdiction can select from, so this allows some flexibility. The first, on thefar left, is a pre-jurisdictional scenario and this involves establishing a jurisdictional baseline, which is thenadopted by projects with crediting going directly to those projects.

In the second scenario, in the middle,

this involves development and registration of a full jurisdictional program with projects adopting thejurisdictional baseline and becoming nested within the jurisdiction. This would involve wall-to-wallmonitoring across the jurisdiction and crediting going directly to projects and also to non-project areas in
the jurisdiction.

Finally, the third scenario is a fully jurisdictional approach where there is no crediting toprojects and crediting only happens at the jurisdictional level. The jurisdiction would develop an internal
allocation system for distributing those benefits.

It is possible to start with a bottom-up approach. You can start with projects in a province or state anddevelop a provincial reference emission level followed by those provincial reference emission levels
feeding into the development of a national reference emission level as shown here. It is also possible tostart with the development of a national reference emission level, which can then be adopted by subnational
jurisdictions and at the next level down by nested projects. There are several different approaches that canbe taken. And nesting is how all of these would fit together. I would like to emphasize that including
projects is optional and it is up to the government to decide whether they would like to include projects aspart of the accounting framework or not.

To give a very quick idea of the kinds of requirements that are included in the JNR, the requirements here
are examples relating to baselines, monitoring, safeguards and national/subnational alignment. But, I will
move on to the Next Steps with JNR.

We are developing some additional tools, documents and templates to accompany the requirements.

For

example, we have working groups underway right now to develop a jurisdictional non-permanence risk tooland a jurisdictional leakage tool as well as other documents and templates, which will all be released for
public consultation this year.

As we gather lessons learned from our pilot activities, we will be putting out

a guidance document and also revising and updating the requirements probably a year from now.

To mention piloting, we are providing support currently in about a dozen interested jurisdictions in Latin
America, Asia, and Africa. We have an MoU 2 signed at the moment with the State of Acre in Brazil,
Chile, and Costa Rica and piloting is underway this quarter in about five or six jurisdictions with verified
emission reductions we expect within the next 2 years. We recently received a significant grant fromNORAD 3 to fund pilots in Peru, the Democratic Republic of the Congo, Costa Rica, and the State of Acrein Brazil and also have some funding from GIZ 4 and Forest Carbon Markets and Communities, FCMC,
under USAID 5.

In Asia, the idea of nesting frameworks is also moving forward. We are in conversation

with government in Laos, Cambodia, Vietnam, and Indonesia about how this might work in their countries.
In our pilots, we typically undertake a gap assessment and the goal in each jurisdiction is different, maybe
they are looking at scenario 1 or scenario 2 or 3.

In some cases, the end goal for the jurisdiction would be

the verification and issuance of credits, but that is not necessarily the case.

Some jurisdictions may justuse the JNR as a framework if they are looking just to have pay for performance results.

2

Memorandum of Understanding - A document describing a bilateral or multilateral agreement between two or

more than two parties
3Norwegian Agency for Development Cooperation

4Gesellschaft für Internationale Zusammenarbeit, the German Society for International Cooperation:

http://www.giz.de/en/
5United States Agency for International Development: http://www.usaid.gov

We recognize that the demand side is a critical component of all this and the intention with JNR is to create
a fungible mechanism that can serve multiple markets from voluntary to bilateral to pre-compliance orcompliance markets and to track new public and private finance to support REDD+ at multiple scales tohelp build more confidence among policy makers, donors and investors and then to ultimately helptransform REDD+ from a public financed activity to a market financed activity. Some of the engagements
we are involved with are some of the emerging pre-compliance and compliance markets and we are also
working to help advance domestic voluntary carbon markets primarily in South America.

We are working

with the World Bank on the development of the Carbon Fund Methodological Framework to make sure thataligns well with JNR.

Finally, I will quickly say something about how VCS AFOLU/JNR may be leveraged for the Japanese Joint
Crediting Mechanism, JCM, which Dr. Matsumoto presented in the previous presentation. Essentially,
VCS AFOLU/JNR may help to provide more detailed or operational guidance on top of the high-level
requirements that may come from the JCM, and key program elements could be harnessed such as theaccreditation, verification processes, and reversal management such as the use of VCS AFOLU buffer pool
to mitigate risk of non-permanence.

This would allow jurisdictional REDD+ emission reductions

generated by countries to use a single program to serve multiple donors and markets including JCM, theWorld Bank Carbon Fund and host of other different potential markets or donors.

If the JCM allows the use of third-party programs or standards such as the VCS to meet its requirements
this could work in the following way.

If meeting AFOLU/JNR requirements would satisfy JCM

requirements, there would not be an issue there.

If the JCM requirements are stricter then AFOLU/JNR

requirements, the use of tagging to ensure both sets of requirements are met and verified might be apossibility and where the requirements are different or incomplete, then VCS could work with Japan toseek solutions on that.

This is my last slide.

I will just clarify on the mention of tagging that VCS has additional certification

possibilities such as CCBA 6, Social Carbon, and Crown Standard of the Thai Government, which indicatesthat an issued VCU has met certain criteria above and beyond that of the VCS standard. Potentially JCM
could be tagged in a similar manner, but this is just one idea and we look forward to seeing thedevelopment of REDD+ within the JCM over the coming year.

6The Climate, Community & Biodiversity Alliance: http://www.climate-standards.org