Everland on the Voluntary Carbon Market and REDD+:
Tags: Climate Change, Carbon Offset, Deforestation, Climate, Trees

Topic 2: We must avoid adding restrictions or complexity to the Voluntary Market

In the past year, as part of the Stakeholder Initiatives, we have seen engagement by new institutions that provide fresh perspectives, including on how to build market infrastructure that can significantly scale the voluntary carbon market and how to establish principle guidelines to ensure voluntary offsets lead to substantive climate outcomes. However, we have also seen a tendency for these institutions to seek to “fix” the voluntary market in ways that do not need to be fixed. It is imperative that we remove barriers and disincentives to mobilizing private sector investment in forest conservation through REDD+, yet some of these initiatives may be creating new barriers. Given the time pressure we are under to address climate change, we must only focus on making changes that we know will actually drive greater emission reductions and removals.

Here are three issues that warrant particular attention, which threaten to stand in the way of the immediate scale-up that is needed:

Do not establish unwarranted restrictions on carbon offset qualities

We agree with the effort by Stakeholder Initiatives, such as the Carney Taskforce, to provide guidance on “core carbon principles” (CCPs) that set threshold quality criteria for a verified ton of carbon reduced or removed; however, these principles should truly be core and not restrict the voluntary market. Two such “core” principles that are currently being debated within the Carney Taskforce would be detrimental to the voluntary REDD+ market:

Potential Restriction requiring REDD+ projects to be nested

Where national programs exist, projects should be nested to ensure the environmental integrity of project performance claims when rolled up to national and international levels. This is discussed below in Topic 4.

Where national programs exist, projects should be nested to ensure the environmental integrity of project performance claims when rolled up to national and international levels. This is discussed below in Topic 4. Potential “Project Start Date” Restriction

The Carney Taskforce is considering the potential of having a restriction on when a project started — that a project wouldn’t meet the “core carbon principles” if the project was started before 2016, with no explanation other than a reference that the UN International Civil Aviation Organization (ICAO) had included this restriction for its regulatory regime the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).¹⁶

For the rare regulatory programs that use a “Project Start date” restriction, the purpose has been to reduce the number of offsets available to drive up price and demand for the development of new projects. Based upon projections of the growing demand for the voluntary carbon market and associated price increases, this is not relevant. Another reason for a project start date restriction has been to use it as a proxy to avoid the inclusion of certain Clean Development Mechanism (CDM) project types out of quality concerns, rather than conduct a closer review. Some have taken the step to evaluate CDM project types for whether they require ongoing carbon funding to continue their emission reduction work (vulnerability assessments), determining that large hydropower projects (for example) do not require additional carbon credit funding to continue¹⁷. Clearly REDD+ projects fall into the category where financing is needed to continue to address the direct and indirect drivers of deforestation, including the ongoing maturity of sustainable sources of income that are developed and expanded over time.

Limiting access to voluntary market funding for a project simply because it was in existence before 2016 would be arbitrary and not based upon the quality of the project. In fact, a project that has matured and proven it has established good management structures and community relationships is a project that we should all want to ensure continues to receive funding. REDD+ projects work in deep collaboration with the community and local government to develop changes that directly and indirectly address the drivers of deforestation — including changes to education, access to water, access to markets, and new livelihoods that create higher economic value for the trees standing and animals alive than cut and poached. If a project was established in 2010 and has matured 10 years and demonstrated its accomplishments and trajectory to full realization, what could possibly justify being cut off 20 years early from voluntary carbon market funding? The only result we see would be the arbitrary disqualification of some of the most impactful and important forest conservation initiatives in operation today. What benefit would this result be for our collective climate and biodiversity crises?

Note: A “Project Start Date” is not to be confused with the term “Vintage.” A Project Start Date is when the project originally started its work on reductions/removals). Vintages are generated each year. For example, a “2020 vintage” would be the year in which the Verified Emission Reductions (VERs) took place.

Do not create layers of unnecessary oversight

The Carney Taskforce is also considering the complex and unnecessary step of creating a new “certification body” above the well-established, existing international standards (such as the Verified Carbon Standard, the Gold Standard and Plan Vivo). The organizations promulgating these have developed, through extensive peer-reviewed processes, and successfully applied robust standards and methodologies to which offset projects must achieve verification. The Carney Taskforce’s current consultation document suggests that a newly created certification body would certify each of the existing standards bodies, such as Verra, as meeting criteria newly developed by the Taskforce. In addition, this new oversight body would review the individual methodologies to see if they meet these new criteria. This additional oversight would be costly, time consuming, and create confusion as to who is creating the standard. More to the point: we do not need to re-do or second-guess the work that has already been done by the voluntary market standards bodies with extensive global stakeholder input, particularly those that have been in existence for 15+ years. Where does the exercise stop — who will then certify that this new certification body is suitable or following the right procedures? Our focus should be on ensuring that resources flow to the field, rather than investing in time-wasting and unnecessary work to create an entirely new set of certifiers and auditors who will then need to be paid for their services.

To be clear, we agree that it makes sense to identify core quality attributes of offsetting standards, and even that an independent organization — say the International Emissions Trading Association — could provide a general review of which Standards organizations meet these core attributes; however, this type of “meta-standard” would fall well short of being a “certification” and clearly would not involve conducting reviews of each methodology, which is unnecessary given the robust multi-stakeholder work that has gone into developing them.

There is no risk of double counting emission reductions from voluntary offsetting: corresponding adjustments are not necessary

The Stakeholder Initiatives have differing views on whether, when a company purchases a carbon offset from a project in a given host country for a voluntary commitment, the host country would then need to make an adjustment in their accounting under the Paris Agreement to account for this transfer (a “Corresponding Adjustment”). The concern is that without a Corresponding Adjustment, a voluntary emissions reduction purchased by a company would be “double counted” both by the company, and by the host country within which the emission reduction actually took place. This is a tricky issue, but in reality there is no risk of this happening. That’s because the carbon accounting systems for voluntary emissions reductions, and for mandatory emissions reductions under the Paris agreement, are in fact separate.



A voluntary emissions reduction is generated when a project is verified to have reduced emissions against an applicable baseline, through an audit undertaken to a voluntary standard’s requirements. That reduction is placed into the voluntary standard’s registry, in the account of the project that generated the emissions reduction performance. For example, when a German company purchases a voluntary emission reduction from a VCS-verified REDD+ project in Cambodia, the emissions reduction performance is transferred from the project’s VCS registry account to the company’s.



The Paris compliance system, under which countries achieve and account for their emissions reductions against national baselines, is entirely separate. In the example above, the transfer of performance from the Cambodian project to the German company is done within the VCS registry system. Neither the performance verified by VCS, nor its transfer through the VCS registry system, are recognized in the Paris system. And neither Cambodia nor Germany are recognizing or accounting for that emissions reduction performance. This is why there can be no “double counting” of emissions reductions associated with the sale of voluntary offsets.

The International Carbon Reduction and Offset Alliance (ICROA) explains as follows:

No corresponding adjustments: As carbon reductions are not exported from the Host Country, no corresponding adjustments are needed. Carbon finance through the voluntary carbon market does not undermine ambition, it simply becomes one of a number of sources of finance to increase ambition.

No double counting: Voluntary activity does not lead to double counting because carbon reductions are recorded only once by the Country hosting the mitigation activity.

Claiming carbon reductions: When emissions are balanced by internal abatement and verified carbon reductions outside the organization, carbon neutrality can be claimed.

For additional discussion and depictions that help to explain “Corresponding Adjustments” further see the position paper by ICROA¹⁸. The bottom line is that the compliance system and the voluntary system are complementary but separate, and do not require any reconciliation in order to spur effective climate outcomes.

When voluntary REDD+ projects are “nested” within national / jurisdictional REDD+ programs, this adds some complexity. In this case, the emissions reduction performance achieved by a nested project is recognized both by the voluntary system to which the project is verified, and by the national accounting system of the host country — into which the project’s performance is rolled up. But again, transfers of performance will continue to be accounted for separately by the voluntary and compliance systems. Any transfer of national performance through the trading of compliance credits will take place under rules being developed under Article 6 of the Paris agreement; these rules will ensure that performance is only counted once.



The bottom line is that the compliance system and the voluntary system are complementary but separate, and there is no risk of double counting emissions reductions. This is why Corresponding Adjustments are unnecessary.

Conclusion

New restrictions for offsets or rules for engagement in the Voluntary Market should be carefully considered to avoid arbitrarily excluding high quality projects or creating additional layers of authority that would impede rather than propel the market.