Review of Standards Used In the Voluntary Offset Market

Offset Standard Types

In order to better understand the different standards and their goals we distinguish between the following types of offset standards:

Full-fledged carbon offset standards offer all three components:

• Accounting Standards
• Monitoring, Verification and Certification Standards
• Registration and Enforcement Systems

Project Design Standards (PDS) include accounting standards and some monitoring standards or guidelines, but do not offer certification of offsets or a registry. These PDS are useful for project developers in the initial phase of project development and may help secure upfront funding. But the project developers must use the PDS in conjunction with a full-fledged standard in order to get certification and access to a registry once the project starts producing credits.

Offset Standard Screens are not full-fledged standards by themselves but accept projects that were implemented under other standards and that adhere to their screening standards (e.g an offset screen that accepts all CDM credits, except those from large hydro and industrial gas projects.)

Offset Accounting Protocols provide definitions and procedures to account for GHG reductions from offset projects but have no associated regulatory or administrative bodies. They have programme-specific rules and procedures for reviewing, validating, and registering GHG projects, as well as verifying and certifying GHG reductions. Yet protocols do not define eligibility criteria or have procedural requirements. Many of the full-fledged standards are based on such protocols (for example, the VCS uses ISO-14064 methodologies).

Other Standards Types. Some standards don’t quite fit any of the above mentioned categories. These are usually less widely used standards that have been developed for very specific project types. Some of these standards, such as Plan Vivo, sell ex-ante credits. In other words, they sell carbon offsets that are projected to be produced in the future. The standards discussed in this paper fit into the following categories:

Pricing of Offsets for Each Standard

Full-Fledged Carbon Offset Standards	Project Design Standards	Offset Standard Screens	Offset Protocols	Other Standard Types
CDM VER+ CCX Once they have established their registries: Gold Standard (GS) Voluntary Carbon Standard (VCS)	Climate, Community & Biodiversity Standards (CCBS)	Voluntary Offset Standard (VOS)	ISO 14062-2 WRI/WBCSD's GHG Project Protocol	Plan Vivo

The following sections describe each standard in more detail. To facilitate cross comparisons, we have followed the same order of topics and the same layout for all standards. The only exceptions to this are the bio-sequestration rules for CDM and VCS, which are discussed in more detail in chapter 7.4 on forestry standards. In these sections, the numbering system is slightly different.

The standards are summarized as objectively as possible. Editorial comments and opinions about the standards can be found in the Authors’ Comments at the end of each standard description. Their brief comments focus on what they consider the main strengths and weaknesses of each standard.

Full-fledged Standards

Full-fledged carbon offset standards offer all three componenets:

1. Accounting Standards; 2. Monitoring, Verification and Certification Standards and; 3. Registration and Enforcement Systems. In the following sections we describe these full-fledged standards: CDM, Gold Standard, Voluntary Carbon Standard, VER+, and CCX.

Clean Development Mechanism

http://cdm.unfccc.int/index.html

Overview

Type of Standard

The Clean Development Mechanism (CDM) is a fullfledged offset standard and is a part of the international legally binding Kyoto Protocol and its related accords. It is administered by the United Nations Framework Convention on Climate Change (UNFCCC). CDM enables industrialized countries to achieve emissions reductions by paying developing countries for certified emission reductions (CERs).

History of Standard

Recognizing the need for stronger action to combat climate change, the parties of the UNFCCC negotiated and adopted the Kyoto Protocol in 1997. At the time of its adoption, the treaty only sketched out the basic features of the GHG trading mechanisms like the CDM. The rulebook detailing how the mechanisms would operate was fleshed out over the next four years, culminating in the Marrakech Accords. The treaty came into force on 16 February 2005, making the trading mechanisms operational.

Administrative Bodies

Conference of Parties serves as the Meeting of Parties to the Kyoto Protocol (COP/MOP): The COP/MOP is the ultimate decision-making body of the UNFCCC. It is comprised of representatives from each member state that has ratified the Kyoto Protocol. The COP/MOP reviews and approves the CDM EB’s recommendations, thereby providing guidance and direction to the EB in administering the CDM.

CDM Executive Board (CDM EB) supervises the CDM under the authority and guidance of the COP/MOP, and is fully accountable to the COP/MOP. The EB has 10 members from parties to the Kyoto Protocol including one representative each from the five UN regions, two each from the list of industrializing countries with emission reduction targets and those without targets, and one from the Small Island Developing States.

The responsibilities of the CDM EB include:

• Developing and amending the rules of procedure for CDM
• Accrediting DOEs
• Registering CDM projects
• Approving new baseline and monitoring methodologies or amendments to existing ones
• Authorizing the issuance of CERs

Accreditation Panel reviews applications from prospective DOEs, reports conclusions and prepares recommendations to the EB for accrediting and designating operational entities.

Methodologies (Meth) Panel reviews proposed new or amendments to existing baseline and monitoring methodologies, and makes recommendations to the EB regarding their approval or amendments. The Meth Panel also makes recommendations to the EB regarding changes to the guidelines for methodologies for baselines and monitoring plans. The Meth Panel is co-chaired by two members of the EB and is composed of an additional 15 members who serve as technical experts on the panel.

Afforestation and Reforestation (A&R) Working Group prepares recommendations to the EB on submitted proposals for new baseline and monitoring methodologies for CDM A&R project activities in cooperation with the Meth Panel.

Small-Scale (SSC) Working Group prepares recommendations to the EB on submitted proposals for new baseline and monitoring methodologies for CDM small scale project activities.

CDM Registration and Issuance Team (RIT) assists the CDM EB by appraising requests for registration of project activities and requests for issuance of CERs. It is chaired by a member of the EB on a rotational basis. The RIT was established in 2006 (before that, in 2004-5, projects were assessed by individual Board members).

Designated National Authorities are agencies designated by each party to the Kyoto Protocol to act as a nodal agency for administering CDM involving parties within its jurisdiction.

Designated Operational Entities (DOEs) are the accredited auditors who validate and verify CDM projects. There are currently 19 registered DOEs, of which 18 are authorized to validate projects and 7 of the 18 are also authorized to verify projects. Only one of 19 is designated solely as a verifier. DOEs are not allowed to do the validation and the verification for the same project, and the sectors that each of them can cover also varies.

Financing of the Standard Organisation

The CDM is financed through the CER issuance fees and through start-up donations from Annex I countries.

Recognition of Other Standards

The CDM does not recognize any other standards. However, many of the regulated and voluntary carbon offset schemes recognize CDM and accept CERs as eligible offsets under their respective schemes. These schemes include the EU ETS, the VOS, VER+, CCX, and the VCS.

Number of Projects

As of September 2007, there are 827 registered projects with a further 154 in the registration process, 2,647 projects in the CDM Pipeline, 46 projects have been rejected and 8 withdrawn. 85,9 million CERs have been issued to date.¹

Eligibility of Projects

Project Type

CDM accepts projects that reduce the emissions of, avoid the release of or sequester any one of the six gases covered by the Kyoto Protocol with the exception of nuclear energy projects, and sequestration projects other than afforestation and reforestation projects (REDD).

Project Location

CDM only accepts projects in non-Annex I countries.

Project Size

There are no restrictions on the size of projects. Projects may be classified as small-scale CDM projects.² Small-scale projects use simpler documents and are subject to a simpler approval process than other projects.

Start Date

Originally: 1 January 2000

This rule has lapsed. Currently, the start date is the date of registration.

Crediting Period

The crediting period options for CDM projects are the same for all project types, except afforestation and reforestation projects. In the case of the former, project developers can choose between: (i) a seven-year crediting period with the option of up to two seven-year renewals, , provided the project baseline is still valid or has been updated to take new data into account or (ii) a maximum period of 10 years with no renewal option. For afforestation and reforestation projects, the choice is between: (i) a 20-year period with up to two 20-year renewals or (ii) a maximum of 30 years with no renewal.

CDM Pre-Registration Credits

N/A

Project Funding Restrictions

CDM projects cannot accept any Official Development Assistance (ODA).

Environmental & Social Impacts

While there are no explicit guidelines laid out for the environmental or social impacts of CDM projects, the Kyoto Protocol requires that CDM projects enable developing countries to achieve sustainable development. Each country sets the policies for the sustainable development criteria by which it can assess CDM projects. Social criteria may include improvements in the quality of life, alleviation of poverty, and greater equity, while environmental criteria may include the conservation of local resources, removing pressure on local environments, health benefits, and compliance with domestic environmental policies.

An analysis of the environmental impacts of the project, including trans-boundary impacts, must be provided in the PDD. If an Environmental Impact Assessment (EIA) is required by the host country, the project developer must also include conclusions of the EIA in the PDD. Similarly, the project developer must also describe the process of inviting comments from local stakeholders likely to be affected by the project, summarize their comments and document the action taken to address their concerns.

The PDD is published for commenting for 30 days on the CDM website.

Additionality and Baselines

Additionality Requirements

CDM uses project-specific tools to assess additionality. However, some of the baseline tools are based on performance standards.

The process of determining whether a project is additional involves three or four steps as laid out in the UNFCCC additionality tool version 4 (for details, see Appendix B).

Step 1: Identifying realistic and credible alternatives to the proposed project activity that are compliant with current laws and regulations

Step 2: Investment analysis to determine that the proposed project activity is not the most economically or financially attractive, or step 3

Step 3: Analysis of barriers that prevent the implementation of the proposed project activity or do not prevent the implementation of one of the other alternatives

Step 4: Analysis as to whether the proposed project activity is ‘commonly practiced’ by assessing the extent of diffusion of the proposed project activity

Baseline & Monitoring Methodologies

CDM follows a bottom-up, project-specific approach to determine baseline and monitoring methodologies. However, once a baseline and monitoring methodology is developed and approved by the CDM EB, the same framework can be used to develop other projects, provided they meet the other eligibility requirements. Existing methodologies have been amended and refined over time as new projects have been proposed and approved with amendments to the previously existing methodologies. Further, similar methodologies for certain types of projects have been consolidated into single methodologies so that they are applicable to a broad range of projects.

Project developers or consultants acting on behalf of the project developers may propose new methodologies. The proposal for a new methodology must be submitted to the UNFCCC secretariat through a DOE. The DOE or a member of the Meth Panel may undertake a pre-assessment of the proposed methodology. Upon receipt of the complete documentation and a fee of USD 1,000, the secretariat makes the methodology publicly available for comment for a period of 15 days. The Meth Panel reviews and assesses the proposed methodology with the help of the secretariat and based on the independent assessments of four members of the Meth Panel (who are selected on a rotational basis), two independent experts, and comments from the public. Based on the recommendations of the Meth Panel, the CDM EB approves or rejects the proposed methodology. If the proposed methodology is approved or incorporated into a consolidated methodology, then the USD 1,000 fee is adjusted in the registration fees.³

Validation & Registration

Process

The project developer or a consultant acting on behalf of the project developer must prepare a Project Design Document (PDD) describing the project activity, the baseline methodology to be used to calculate the emissions reductions under the project and the methodology that will be used to monitor the emission reductions achieved. The PDD is then reviewed by a DOE to confirm the veracity of the information and arguments provided. Simultaneously, the PDD is posted on the DOE’s website and opened to public comments for a period of 30 days. The DOE and project developer need to consider the comments received and take action (if deemed necessary) before the DOE finalizes the Validation Report. The DOE review process also involves visits to the project site and consultations with local stakeholders. The DOE’s assessment and conclusions, including a summary of the stakeholder consultations, are synthesized into a Validation Report.

The PDD and the Validation Report are submitted to the project host nation’s DNA for approval. If the project meets the sustainable development criteria, complies with the country’s laws and regulations, and fulfills any other requirement specified by the DNA, the DNA issues a letter confirming the host nation’s approval. The PDD, the Validation Report and the Host Nation Approval are then submitted to the CDM EB for registration.

Within 8 weeks (or 4 weeks for small projects) of receipt of the Request for Registration, the EB is required to register the project. The RIT supports the EB in this process by reviewing the reports submitted along with the Request for Registration. If a party to the project or at least three members of the EU request a review of the project, then registration can be delayed until the next EB meeting.

Key Requirements

• Completed PDD with the baseline and monitoring methodology
• Validation Report including the stakeholder consultation
• Host Nation Approval

Monitoring, Verification & Certification, and Issuance

Process

Once the project is operational, the project implementer or a consultant acting on behalf of the project implementer is required to prepare a Monitoring Report on a periodical basis in accordance with the monitoring protocol in the PDD. The report must also include an estimate of the CERs generated during the reference period. A DOE verifies the Monitoring Report and also carries out a site visit, if deemed necessary. The DOE prepares a Verification Report documenting its assessment of the monitoring report and verifying the emissions reductions. The same DOE that validated a project cannot also verify it except in the case of smallscale projects.

The Monitoring, Verification and Certification Reports are submitted to the CDM EB with a request to issue the requisite amount of CERs. Within 15 days of receipt of this request, the EB must authorize the issuance of the CERs unless a project participant or three EB members request a review. The RIT supports the EB in this process by reviewing the reports submitted along with the Request for Issuance.

Key Requirements

• Monitoring Report estimating the emissions reduction achieved
• Verification and Certification Reports from the DOE confirming the emissions reductions.

Evaluation of Auditors

The CDM Accreditation Panel (CDM-AP), which reports to the CDM EB, is required to undertake regular surveillance of the DOE’s management responsibilities, resource and organizational management, and technical and analytical review processes, with a view to assessing the DOE’s ability to deliver the intended quality of its service. The CDM-AP carries out this surveillance at least every three years with the help of the CDM Assessment Team (CDM-AT).

In addition to the regular surveillance, the CDM EB, with the help of the CDM-AP and the CDM-AT, can conduct an unscheduled assessment of a DOE, a ‘spot check’ to ascertain whether the DOE still meets the accreditation requirements.

For both the regular surveillance and the spot checks, the DOE that is being assessed pays for the expenses to be incurred by the CDM-AP and CDM-AT in carrying out the assessment in advance.

Registries

The CDM Registry is administered by the UNFCCC secretariat. Upon authorization from the EB to issue CERs for a project activity, the secretariat forwards the issued CERs into a Pending Account until it receives instructions to forward CERs into the relevant Holding Account. Project participants may have a Holding Account either in the CDM Registry or in the National Registry of an Annex I country.⁴

For CERs to be transferred from an account in the CDM Registry to a National Registry account, they must pass through the International Transaction Log (ITL). The ITL, which is still under development, will record transactions of CERs from the CDM registries to the Annex I National Registries. These transactions include issuance, cancellation, replacement, retirement and the transfer of CERs.⁵ Once the CERs are received in a National Registry account they may be traded or used for complying with national or regional targets. At present, CERs cannot be transferred between National Registries but internal transfers within a National Registry are possible.

Fees

New methodology submission fee: USD 1,000 (adjustable in the registration fee if the methodology is approved or consolidated)

Registration fee: USD 0.10 per CER issued for the 15,000 CERs issued in a given calendar year and USD 0.20 per CER for every CER issued over and above the 15,000 CERs. The upper limit set for the fee is USD 350,000. No registration fee is charged if the average annual emissions over the crediting period are less than 15,000 tCO₂e. If the project is not registered, then any amount above USD 30,000 is reimbursed to the project developer.

Issuance fee: 2% of the CERs from each issuance is charged to cover administrative expenses and adaptation costs.

Gold Standard

http://www.cdmgoldstandard.org

Overview

Type of Standard

The Gold Standard (GS) is a full-fledged carbon offset standard. The Gold Standard (GS) requires social and environmental benefits of its carbon offset projects and has a very well developed stakeholder process. The GS can be applied to voluntary offset projects as well as to CDM projects.

History of Standard

The GS was developed under the leadership of the WWF in order to ensure that emission reduction projects are real and provide social, economic and environmental benefits. The GS CDM was launched in 2003 after a two year period of consultation with stakeholders, governments, NGOs and the private sector from over 40 countries. GS VER was launched in 2006. The GS is endorsed by 56 NGOs.

Administrative Bodies

The Gold Standard Foundation is a non-profit organisation under Swiss Law, funded by public and private donors. The operational activities of the GS are managed by the Gold Standard secretariat based in Basel, Switzerland, including capacity building, marketing and communications, certification, registration and issuance as well as maintenance of the GS rules and procedures. The secretariat has currently a staff of 5.

The Foundation Board oversees the strategic and organizational development of the Gold Standard. The Board has currently 8 members. At least 50% of its members must be recruited from the Gold Standard NGO supporter community, and one member is at the same time the Chair of the Gold Standard Technical Advisory Committee (GS-TAC, see below). In case of significant changes to the Gold Standard rules and procedures, the Board decides whether or not a Gold Standard NGO supporter majority is necessary to implement the change.

Technical Advisory Committee (GS-TAC) evaluates and approves projects, new methodologies for VER projects and is in charge of updating the GS rules and procedures. It is the equivalent of the CDM EB / Meth Panel for VER projects. The GS-TAC has currently 7 members, all acting in their personal capacities. The GSTAC members are from the NGO community, multilateral organizations, aid agencies and the private sector.

Gold Standard NGO Supporters decide on major rule changes (e.g. eligibility of project types). Gold Standard Supporter NGOs must be consulted as part of the Gold Standard stakeholder consultation in case they have operations in the relevant host country. Supporter NGOs are also invited to take part in the project reviewing process and can request an in-depth audit of GS projects both at the registration as well as issuance stage.

GS Auditors are UNFCCC accredited DOEs who carry out validation and verification of GS projects. DOEs are not allowed to do the validation and the verification for the same project, except for micro and small scale projects.

Financing of the Standard Organisation

The standard is financed through donors and income from issuance fees and franchising fees.

Recognition of Other Standards

The GS does not recognize any other voluntary standards. Yet the GS it is recognized by the VOS and is likely to be recognized in the near future by several other standards (VER+, VCS.)

Number of Projects

In total, 10 projects have been registered under the Gold Standard. About 35 projects are official Gold Standard Applicants, representing about 4 million CERs and 500,000 VERs. Another 65+ projects are in the pipeline.

Eligibility of Projects

Project Type

The GS accepts renewable energy (including methaneto- energy projects) and energy efficiency projects. It excludes large hydro projects above 15 MW capacity.

Project Location

Gold Standard VER projects cannot be implemented in countries with an emissions cap, except if Gold Standard VERs are backed by AAUs being permanently retired.

Project Size

The Gold Standard does not have any project size minimum. Project sizes for Gold Standard VERs are: micro-scale (<5,000 tonnes CO₂ per year), small-scale (5,000-60,000 tonnes CO₂ per year) or large-scale (>60,000 tonnes CO₂ per year).

For Gold Standard CERs, the same size limits as for the CDM apply.

Start Date

The earliest start date for retroactive crediting of Gold Standard VERs is January 1st 2006, and retroactive crediting is only permitted for a maximum of 2 years prior to the registration date.

Retroactive crediting for CDM projects submitting documentation (Gold Standard Validation report) is limited to two years prior to the date of registration for the Gold Standard. For years with compliant verification reports that lie only partly within that period, a proportional volume of credits is issued.

Crediting Period

Crediting periods are either one 10 years period, or a 7 year period renewable three times, except for validated pre-CDM Gold Standard VERs (see below).

Projects can opt-in for Gold Standard crediting during the overall crediting period by submitting a Gold Standard-compliance verification report to the Gold Standard. Projects can opt-out of Gold Standard crediting during the overall crediting period, but optout is final and the project cannot be communicated as Gold Standard any more.

Prior to opt-in and after opt-out it is permissible to seek issuance of credits from other standards. It is however not permitted to apply for issuance of credits under different standards if this extends the overall crediting period of the project beyond what is possible under the Gold Standard VER rules.

CDM Pre-registration Credits

The Gold Standard does certify CDM pre-registration credits for a maximum of a year prior to the project’s CDM registration date under certain conditions:

• The project developer can provide proof that the final version of the PDD has been submitted for validation to the DOE prior to 31st of January 2008.
• The DOE must provide a verification report covering the Gold Standard VER period either with the first verification of Gold Standard CERs or separately.
• The reasons for the delay between the start of project operation and CDM registration have to be explained by the DOE as part of the verification report covering the Gold Standard VER period.

Gold Standard VERs will only be issued after the project has been successfully registered as a Gold Standard CDM project. Once the project has been registered as a Gold Standard CDM project the normal Gold Standard rules apply.

Project Funding Restrictions

Official Development Assistance (ODA) funding is not allowed for Gold Standard CER projects, except from the development of the PDD or of a new methodology, but is acceptable for Gold Standard VER projects if additionality of the project can be clearly established.

Environment & Social Impacts

Both Gold Standard CER and Gold Standard VER projects must show clear sustainable development benefits, including local and global environmental, social, and economic as well as technological sustainability. The GS provides a sustainability matrix to help project developers develop their sustainability criteria. The GS requires that critical and sensitive sustainable development indicators and mitigation or compensation measures are monitored over the entire crediting period and information on the status of the indicators is included in the verification reports.

Both the project developer and the stakeholders consulted assign scores between -2 (major impact that cannot be mitigated) and +2 (major positive impact) to a broad set of pre-defined indicators covering all aspects of sustainable development. Scoring depends on specific circumstances, and the framework chosen for the scoring process is tailored to each project and must be clearly explained and justified.

Environmental Impact Assessment (EIA) requirements are the same for both VER and CER stream for smalland large-scale projects. For micro-scale voluntary offset projects, an EIA is required if the relevant local or national law prescribes an EIA or potentially if stakeholders have concerns about environmental impacts for which mitigation measures cannot be identified – in such a case, the project must be treated as a small- or large-scale project. If no EIA is required by the legislation, the project developer still has to provide a statement confirming that the project complies with local environmental regulation.

Gold Standard requires two public consultation rounds for all projects (except micro-scale projects, which require one initial consultation only). VER offset projects require a letter to the Designated National Authority (DNA or, if not present, other relevant authority) to communicate the development of the project as a GS voluntary offset project. For micro-scale projects, only one consultation round is needed during the design phase.

During a 60-day period prior to finalizing the validation process, stakeholders must have the opportunity to make comments on the GS-PDDs. For VER projects, no international stakeholder consultation is required, in contrast to CDM projects. National Gold Standard NGO supporters and international GS NGO supporters with offices in the host country must be involved in stakeholder consultations in all cases.

Additionality

Additionality Requirements

The additionality tools for both GS CERs and VERs are project based. In addition, previous announcement checks are required for both CER and VER projects.

The GS requires the application of the latest UNFCCC additionality tool .

Baselines & Methodologies

GS CDM projects can only use CDM EB approved methodologies. Gold Standard VER projects can choose to use the baseline methodologies approved by the Methodology Panel of the CDM Executive Board, the Small Scale Working Group (SSC WG) or the United Nations Development Programme (UNDP) MDG Carbon Facility. If no suitable methodology exists, Gold Standard VER projects can propose a new one to Gold Standard, to be approved by the Gold Standard Technical Advisory Committee at a fixed cost paid by the project developer. The fees are USD 2,500 for small & large projects and USD 1,000 for micro-scale projects. A methodology for the deployment of a fleet of smallscale biodigesters has been approved so far and others are under review.

Validation & Registration

Process

In general, the requirements for Gold Standard VER and Gold Standard CER projects are identical, but for VERs, some requirements of the CDM have been simplified or removed:

• Simplified guidelines for micro-scale projects (< 5000 t of emission reductions annually)
• Broader eligibility of host countries
• Lower requirements on the use of official development assistance (ODA)
• Broader scope of eligible baseline methodologies
• No need for formal host country approval

All Gold Standard projects must be validated and verified by a DOE. The Gold Standard supports DOEs with a validation manual for each VER and CDM stream.

Micro Projects

Validation and verification procedures are often unreasonably costly for micro-scale projects. Hence, micro-scale projects pay a standard fee to a validation fund (USD 5,000) and to a verification fund (USD 2,500). After submitting all documentation, Gold Standard TAC uses a ‘targeted random’ selection method to select projects for validation and verification. Actual validations and verifications performed by DOEs are paid for via the Gold Standard validation and verification funds. Projects not selected for DOE validation/ verification in this approach are validated/verified by the Gold Standard in-house but may be required to undergo DOE verification in later years.

Key Requirements

• Stakeholder consultation report
• Completed PDD with the baseline and monitoring methodology, and the sustainable development matrix
• Validation Report
• Acceptance of the Gold Standard Terms and Conditions.

GS CDM projects use CDM PDD and validation forms, with the additional Gold Standard specific information on project type, stakeholder consultation and contribution to sustainable development provided as an appendix. The GS provides templates and instructions for GS VER project verification documents.

Monitoring, Verification & Certification

Process

Project developers monitor projects according to monitoring plans as given in the PDD. Monitoring reports are submitted to a third-party auditor (DOE). Gold Standard-specific verification is conducted by DOEs. It includes emission reduction data and monitoring of sustainable development indicators. Monitoring reports have to be submitted yearly. Normally, the same DOE cannot validate and verify the same project, except for micro-scale and small-scale projects.

The Technical Advisory Committee, the GS secretariat and GS NGO supporters can request clarifications or corrective actions within a 2-week period after submission of the verification report to the GS before credit issuance (GS VERs) or certification of CERs is initiated.

Until the Gold Standard VER Registry has been approved, GS VERs are issued with unique provisional serial numbers. Currently, VERs are issued directly by the Gold Standard.

Key Requirements

The verification report showing compliance with GS reporting criteria (especially Sustainable Development Indicators.) Indicators must be monitored if:

• they are crucial for the overall positive impact on sustainable development
• they are particularly sensitive to changes
• stakeholder concerns have been raised.

Appropriate success indicators for mitigation or compensation measures must also be monitored.

Evaluation of Auditors

The GS only accredits DOEs and relies on the quality control procedures of the UNFCCC (e.g. CDM spot check procedure).

Registries

The Gold Standard Foundation announced in November 2007 that APX, Inc. has been selected to create and manage the Gold Standard’s Registry for Verified Emissions Reductions (VERs) in the voluntary carbon market. CERs are registered in the CDM registry and will be tracked in the Gold Standard registry as well. VERs will be registered in the Gold Standard registry which will be launched in early 2008.

The Gold Standard does not engage in project or credit transactions. In the upcoming Gold Standard VER registry, it will be possible to track the number of retired Gold Standard VERs and to review the number of issued Gold Standard VERs. However, buyers and intermediaries between the point of issuance and the point of retirement remain unknown to the Gold Standard. The ownership of retired credits can be made public if desired.

Fees

The Gold Standard charges an issuance fee of currently 0.01 USD for CERs and 0.10 USD for VERs. No registration fee is charged. Separate fees are charged by the Gold Standard VER registry operators: 0.05 USD at issuance and 250 USD per year for all accounts except project owners. The 250 USD include trading transactions for 25,000 credits p.a., after which every trade is charged with 0.01 USD/credit. No fees are charged to transfer the credits out of the project owner account.

Already operational projects can earn retroactive Gold Standard status. For this, they need to go through a feasibility pre-assessment process for which the Gold Standard charges a fee of USD 0.01 per VER for an amount of VERs equivalent to the expected annual volume of reductions (with a minimum fee of 250 USD).

If the project developer submits a new baseline methodology, the methodology must be approved by the Gold Standard TAC. A fixed fee is charged for this process (1,000 USD for micro-scale and 2,500 USD for small and large-scale projects).

Voluntary Carbon Standard 2007 (VCS 2007)

http://www.v-c-s.org

Overview

Type of Standard

The Voluntary Carbon Standard is a full-fledged carbon offset standard. It focuses on GHG reduction attributes only and does not require projects to have additional environmental or social benefits. The VCS 2007 is broadly supported by the carbon offset industry (project developers, large offset buyers, verifiers, projects consultants). VCS approved carbon offsets are registered and traded as Voluntary Carbon Units (VCUs) and represent emissions reductions of 1 metric tonne of CO₂.

History of Standard

The Voluntary Carbon Standard (VCS) version 1 was published jointly in March 2006 by The Climate Group (TCG), the International Emissions Trading Association ( IETA) and the World Economic Forum Global Greenhouse Register (WEF). The VCS 2007 was launched in November 2007 following a 19-member Steering Committee review of comments received on earlier draft versions. The Steering Committee was made up of members from NGOs, DOEs, industry associations, project developers and large offset buyers. The World Business Council for Sustainable Development joined in 2007 as a founding partner of the VCS 2007. The VCS will be updated yearly for the first two years and every two years after that.

Administrative Bodies

VCS Association manages the VCS. The VCS Association is an independent, non-profit association registered under Swiss law that represents the VCS Secretariat and the VCS Board.

VCS Secretariat is responsible for responding to stakeholder queries, managing relationships with registry operators and accreditation bodies, and managing the VCS website and projects database.

VCS Board is responsible for approving any substantial changes to the VCS 2007. It also evaluates and approves other GHG Standards (whether in full or elements of them) project methodologies and additionality performance standards. It also has the authority to suspend an approved programme temporarily or indefinitely if changes are made to it that affect its compatibility with the VCS Programme. Further, it can sanction validators and verifiers, project proponents and registry operators for improper procedure. Finally, it decides on appeals made by project developers against a validator or verifier.

Technical Advisory Groups (TAGs) support the Board by providing detailed technical recommendations on issues related to the programme and its requirements (e.g. the Agriculture, Forestry and Other Land Use TAG for bio-sequestration projects).

Accredited Third-Party Auditors have the authority to validate and verify GHG emission reduction projects, validate new baseline and monitoring methodologies, validate additionality performance standards, and perform gap analyses of other GHG programs. They can only do so for project scopes and geographies for which they are accredited. To receive accreditation, they must either be accredited under an approved GHG Programme or under the ISO 14065:2007 with an accreditation scope specifically for the VCS Programme. Unlike under CDM, accredited third-party auditors can validate and verify the same project.

Financing of the Standard Organisation

Start-up funding for the VCS Standard Organisation comes from TCG, IETA and WBCSD with additional fundraising currently underway. Donations from commercial organisations are capped at €20,000 per annum. In the medium term costs will be covered by a per-tonne levy charged at the point of VCU issuance.

Recognition of Other Standards

At present, the VCS Programme recognizes the CDM and JI, and is in the processing of evaluating the California Climate Action Registry. VCS will evaluate and adopt other offset standards either fully or elements of them. The approval process will be based on the principle of full compatibility with the VCS Programme. If another offset standard is fully adopted by the VCS, all their auditors and methodologies are automatically accepted by the VCS. All credits certified by that standard will then be fungible with VCS credits, the Voluntary Carbon Unit (VCU).

Number of Projects

VCS 2007 was launched in November of 2007. It is not possible to determine how many projects have been certified under VCS 2007 to date because the VCS registries and central project database are still under development. Several projects were validated and verified against VCS version 1. The VCS Association expects that between 50–150 projects creating between 10–20 million tonnes of CO₂e will have been approved under the VCS Programme by the end of 2008.

Eligibility of Projects

Project Type

All project types are allowed under the VCS Programme provided they are supported by an approved VCS methodology or if they are a part of an approved GHG programme. Exceptions are: projects that are “reasonably assumed” to have generated GHG emissions primarily for the purpose of their subsequent reduction, removal or destruction (e.g. new HCFC facilities) and projects that have created another form of environmental credit (e.g. Renewable Energy Certificate). RECs are fungible with VCUs if the GHG Programme certifying the RECs has been approved under the VCS. In addition, projects that have created another form of environmental credit must provide a letter from the programme operator that the credit has not been used under the relevant programme and has now been cancelled (so it can not be used in the future).

Project Location

No restrictions. Retirement of corresponding AAUs required for projects in Annex-1 countries.

Project Size

There is no upper or lower limit on project size. VCS does however classify projects into 3 categories based on their size:

• Micro projects: under 5,000 tCO₂e per year
• Projects: 5,000–1,000,000 tCO₂e per year
• Mega projects: greater than 1,000,000 tCO₂e per year

The rules on validation and verification vary to some degree for projects that fall in the ‘micro’ or ‘mega’ categories.

Start Date

The earliest project start date permissible under the VCS is 1 January 2002. For the 1st year of the VCS 2007’s operation, projects that started anytime after January 1st 2002 will be accepted provided they complete the validation process within a year from 19 November 2007. After the first year, only those projects that started within 2 years before the validation date will be accepted. In other words, retroactive crediting is allowed for up to two years from the validation date.

Crediting Period

The earliest permissible start date for the crediting period is 28 March 2006. The duration of the crediting period can be a maximum of 10 years and it can be renewed up to three times.

CDM Pre-registration Credits

CDM pre-registration credits are allowed in accordance with the start date and crediting period rules above. No further additionality proof required.

Project Funding Restrictions

The VCS imposes no exclusion of ODA funds.

Environmental & Social Impacts

The VCS does not focus on environmental and social benefits. It is sufficient for VCS projects to show that they are compliant with local and national environmental laws.

The requirements for stakeholder involvement are based on ISO 14064-2 requirements and are stated in general terms: Independent stakeholders are provided with access to all documents that are not commercially sensitive and given sufficient opportunity to offer comments and other inputs.

Additionality and Baselines

Additionality Requirements

The VCS uses project-based, performance-based and positive technology list-based additionality tests. The project-based test closely follows CDM procedures:

Step 1: Regulatory surplus: The project must not be mandated by any enforced law, statute or other regulatory framework. This criterion also applies to projects using the performance or positive list tests.

Step 2: Implementation barrier: The project must demonstrate that it faces capital or investment return constraints or an institutional barrier that can be overcome by additional revenues from VCU sales, or that it faces technology-related barriers to implementation of the project.

Step 3: Common practice: The project must demonstrate that it is not common practice in the sector or region when compared with other projects that received no carbon finance, and if it is found to be common practice, then the project proponent must identify barriers it faces that were not faced by the other projects. In demonstrating this criteria, the VCS advocates the use of guidance provided by the GHG Project Protocol for Project Accounting (see GHG Protocol).

A performance test can be used as an alternative to the project-based additionality test. With a performance test, a project can demonstrate that it is not business as usual if the emissions generated per unit of output it generates are below a benchmark level approved by the VCS Programme for the product, service, sector or industry. At the time of its launch, no performance standards had been approved. New performance tests will be approved through the double approval process and by the VCS Board.

A positive list of approved technologies can be used as an alternative to the project-based additionality test. The project developer still has to use a baseline methodology to determine the number of offsets a project will create. At the time of its launch, no technology was included in the positive list. The list is currently under development.

Baselines & Methodologies

The VCS accepts projects using existing methodologies either approved under the VCS Programme or another approved GHG Programme, and also approves new ones. At the time of the VCS 2007 launch, all CDM baselines and monitoring methodologies had been approved for use under VCS and methodologies from the California Climate Action Registry were under consideration.

For the most part, VCS draws on guidelines provided in ISO 14064-2:2006 to guide the development of a VCS Programme Methodology (see section on ISO 14064). The VCS Board will approve new methodologies using a double approval process which entails seeking an approval from two independent accredited auditors, one appointed by the project developer and the other appointed by the VCS Secretariat. The Board automatically approves the standard if there is unanimity amongst the two auditors and rejects it if there is a disagreement between them. The project developer can appeal the decision. If it does so, then the VCS Secretariat appoints an independent consultant to review the project proponent’s claim. Based on the review, the VCS Board then makes a final decision. The expenses for each review are borne by the project proponent.

Validation & Registration

Process

Under the VCS, validation is required but can be done at the same time as verification. The VCS provides a template for both the validation and the verification report.

Projects may choose to be validated either as an individual project or as part of a grouped project including two or more subgroups each retaining their distinctive characteristics. Group projects are only sampled by the project auditor.

A project proponent contracts an accredited auditor of the VCS Programme or of a VCS-approved GHG Programme to validate the project. The auditor evaluates the project against the VCS’ validation requirements (see below) and prepares its report as per the VCS Validation Report template.

The project is automatically approved if it is successfully validated by the auditor. A formal registration process with the VCS Association takes place only at the time of issuance of VCUs. However, upon successful validation, a VCS project may volunteer to be recorded on the VCS Project Database. In order to do so, its documents are checked for authenticity by the registry operator and the verifier completes a GPS search on the project database that checks if the project has been registered under the VCS before.

Key Requirements

The validation of a project is to be carried out in conformance with the requirements of ISO 14064- 3:2006 and the report prepared as per the VCS Validation Report template including:

• Project Design
• Baseline
• Monitoring Plan
• Calculation of GHG Emissions
• Environmental Impact
• Comments by Stakeholders

Monitoring, Verification & Certification

Process

The emission reductions achieved by VCS projects can be verified by the same entity that validated the project. The VCS Board does not approve or reject projects; it is the auditors themselves who verify the projects and approve the claimed emissions reductions. The third-party auditor verifies the emissions reductions and the accuracy of emission reduction calculations as per the requirements of ISO 14064-3:2006. After a project has been validated and verified, the VCS Project Document and proof of title are submitted to the registry operator. Electronic copies of these documents are then put on the VCS project database and are publicly available.

Key Requirements

Verification report prepared as per the VCS Validation Report template.

Evaluation of Auditors

One year after the launch of the VCS 2007, the VCS will conduct an external review of all the projects that will have been certified. This work will likely be carried out by a commissioned NGO. VCS will then evaluate the results and decide if any of the rules have to be modified to improve the standard or close any unforeseen loopholes.

There is currently no plan to have a systematic evaluation of the third-party auditors. Yet the VCS board has the authority to sanction auditors, project developers or registry operators “based on evidence of an improper behavior.” (VCS Programme Guidelines, p.7).

Registries

The VCS will accredit different registries. To avoid double counting and to ensure that VCUs are only registered in a single registry, the VCS will also maintain a project database on its website which will assign a serial number to each project. The database will be publicly available and enable anyone to look up the vintage of the offsets, the project proponent, the registry in which they are kept, and other project information.

To minimize the risks of double counting, the project owner must further submit the following to the VCS:

a) A letter confirming that the VCUs being registered have not been registered, transferred or retired prior to the said registration;

b) Where emissions reductions have occurred in an Annex-1 country, a certificate from the national registry of the host country stating that an equal number of Assigned Amount Units have been cancelled from that registry;

c) Proof that emission reductions (from renewable energy projects) have not arisen from an activity used to meet a regulatory renewable energy commitment or to generate Renewable Energy Certificates or that the latter have been cancelled.

Fees

The registration fee for each VCU issued is 0.04 Euros (November 2007). Account fees will be set by each of the VCS approved registries.

VER+

http://www.tuev-sued.de/climatechange
http:/www.netinform.de

Overview

Type of Standard

The VER+ is a full-fledged carbon offset standard and closely follows the Kyoto Protocol’s project-based mechanisms (CDM and JI). It does not focus on cobenefits.

History of Standard

The VER+ standard was developed by TÜV SÜD, a Designated Operational Entity (DOE) for the validation and verification of CDM projects. It was designed for project developers who have projects that cannot be implemented under CDM yet who want to use very similar procedures as the CDM. The VER+ was launched in mid 2007.

Administrative Bodies

TÜV SÜD certification body “climate and energy” has four members who supervise and administer the VER+ standard’s criteria. The same body also reviews all the CDM projects that TÜV SÜD audits as a DOE before the documents are submitted to the CDM EB.

Third Party Auditors are CDM and JI accredited auditors. They are approved to validate and verify projects. In the validation and verification process, the auditing company is obliged to follow the requirements as defined by the Validation and Verification Manual (initially published by Worldbank / IETA), in its most recent version. Unlike under CDM, accredited thirdparty auditors can validate and verify the same project.

Financing of the Standard Organisation

The VER+ is financed by funds from TÜV SÜD and by issuance fees for use of the registry.

Recognition of Other Standards

If a project that has been initially implemented under another standard seeks VER+ certification, a so called “equivalence check” is carried out. Based on validation and verification reports, the auditor in charge confirms that the already audited project also complies with VER+ requirements.

Number of Projects

At the end of 2007 there were approximately 25 validated projects and several verifications were taking place. The demand for VER+ is growing, especially among project developers in China and for CDM preregistration credits.

Eligibility of Projects

Project Type

VER+ accepts all project types except HFC projects, nuclear energy projects, large and hydropower projects over 80MW. Hydro projects exceeding 20MW have to conform with World Commission on Dams rules. LULUCF projects, including REDD, are accepted if implemented with a buffer approach to address the risk of potential non-permanence.

Project Location

VER+ follows the same project criteria as JI but without limitation to the status of the host country. Hence, the host country can be an Annex I, non-Annex I or nonratification country.

VER+ credits generated in an Annex I country need to demonstrate the retirement of AAUs in order to be fully interchangeable with VER+ credits from a non-Annex 1 country. Furthermore VER+ credits can be issued if it is demonstrated that the host nation does not participate in International Emissions Trading (Kyoto Protocol Art 17) or if it is confirmed that VER+ credits will not be transferred out of the host country.

Project Size

No restrictions apply.

Start Date

Applications for retroactive VER+ accreditation can be submitted for start dates as early as January 1st, 2000. Retroactive crediting has been limited such that credits are issued for 2 years back from the registration date (at the certification body of the auditor in charge) and will be phased out by the end of 2009.

Crediting Period

The crediting period of VER+ activities ends at the end of the latest agreed commitment period under the UNFCCC scheme. At the end of 2012 a brief check up on the “Kyoto status” of the host country will be carried out to avoid double counting with UNFCCC regimes. Once this review is carried out, the crediting period is extended up to the end of the next commitment period (as defined by UNFCCC). At the end of this next commitment period (e.g. 2020), a revalidation is required. The maximum crediting periods are limited to 25 years for standard projects and 50 years for LULUCF activities.

CDM Pre-Registration Credits

The generation of VER+ credits is possible ahead of the registration of a CDM project without any further additionality testing. A registered CDM project has to have started to operate and reduced emissions prior to UNFCCC registration. The earliest starting date for this pre-CDM/JI crediting is the date of publication of the PDD on the UNFCCC website (Global Stakeholder Process). VER+ crediting may occur until CDM/JI registration. No separate PDD is needed for CDM or JI activities applying for VER+ credits for a crediting period prior to the one under UNFCCC.

Project Funding Source

As under CDM rules, VER+ projects are not allowed to use Official Development Assistance (ODA).

Environmental & Social Impacts

If the project activity requires an Environmental Impact Assessment (EIA) due to national legislation, it needs to be submitted for project approval.

If required by national law, a local stakeholder process has to be carried out. Otherwise, the project developer can choose between:

• performing a voluntary stakeholder process and include documentation to the VER+ Project Design Document (PDD), or
• justifying in the VER+ PDD that the project does not impact the vicinity.

Just like in CDM the PDD is published for 30 days on the DOE’s website and comments can be made via the website, which will then be considered in the audit process.
(www.netinform.de; look for climate and energy).

Additionality and Baselines

Additionality Requirements

Additionality tests for VER+ are project-based.

Baselines & Methodologies

All CDM approved baselines and methodologies are allowed. The latest versions of the CDM methodologies have to be used. If there is no existing CDM methodology that matches the project conditions, a project specific methodology can be developed. This new methodology is reviewed on a project by project basis. The project methodology has to be based on “guidance on criteria for baseline setting and monitoring” as defined for JI activities.

Additionality Criteria

VER+ projects are required to:

• follow specific additionality rules of an approved CDM methodology or
• in all other cases, apply the most recent version of the CDM Additionality Tool.

Validation & Registration Process

Process

A UNFCCC-accredited auditor reviews the validation process and approves the project. The project is then registered with the auditor in charge. The results of the validation (as well as verification at a later stage) are forwarded to the BlueRegistry, where relevant information of VER+ projects is held and publicly available.

Key Requirements

The requirements are similar to those of CDM but they do not require approval from the host country:

• Completed PDD
• Validation Report

A project specific approach as defined for JI can be used for those project settings where a CDM approved methodology is not available or fully applicable.

Monitoring, Verification & Certification

Process

Verification is based on monitoring reports from the project developers and conducted by an auditor. The auditor also approves the verification report. All VER+ project documentation is submitted to the BlueRegistry. Unlike under CDM rules, an auditor is allowed to do validation and verification of the same project.

The first verification is required at latest one year after registration of the starting date of the crediting period. For LULUCF projects, a first verification is required within 5 years from validation.

For any VER+ activity, the frequency of the proceeding verifications can be chosen by the project participants. Based on a positive verification statement, VER+ credits are issued by the auditor.

Key Requirements

• Monitoring Report
• Verification Report

Evaluation of Auditors

Since the VER+ relies exclusively on DOEs, the standard relies on the review procedures of the CDM.

Registries

In June 2007, TÜV SÜD launched its own BlueRegistry for VER+ credits. An account is opened for each verified VER+ project at TÜV SÜD’s BlueRegistry. In an effort to prevent project developers from registering their credits with multiple registries, VER+ includes in its contract a clause that stipulates that the credit holder shall refrain from double selling / registering. The BlueRegistry intends to accept GS-VER and VCS certified credits and already registers green energy certificates. Agreements on the standardized interchange between registries are currently pending.

Fees

Total costs for validation, registration and VER+ issuance charged by the auditing company vary depending on project size, technology, location etc. and is estimated to be in the range of 5,000 to 15,000 Euros.

If verification has been carried out by TÜV SÜD then all VER+ credits are automatically registered in the BlueRegistry without additional costs.

For projects and credits not verified by TÜV SÜD, there is a registration fee which covers incorporation into the BlueRegistry. TÜV SÜD charges a one time subscription fee (550-1100 Euros) and a registration fee (1500-3000 Euros p.a.) for opening and maintaining accounts. In addition the transaction fee for registered credits ranges from 120 Euros for 200 tonnes or less to 700 Euros for 10,000 tonnes or more.

Chicago Climate Exchange (CCX)

http://www.chicagoclimatex.com

Overview

Type of Standard

The Chicago Climate Exchange (CCX) is a voluntary GHG emissions cap-and-trade scheme based in North America. Although participation is voluntary, compliance with emission reduction objectives is legally binding once a member joins. CCX has as part of its cap-and-trade scheme an offset programme with a full-fledged carbon offset standard. CCX members commit to reduce their emissions by a fixed amount below the established baseline level.⁸ Members who cannot achieve the reduction target through cutting their emissions internally can meet their compliance commitment by purchasing emission allowances (called Carbon Financial Instruments; CFI) through CCX’s electronic trading platform from other CCX Members that reduce their emissions beyond the reduction target. Offsets from projects implemented through the CCX offset programme can also be used to comply with reduction targets. Total use of offsets for compliance is limited to no more that one half of the required reductions.

History of Standard

In 2000, a group of researchers led by Richard Sandor at Northwestern University carried out a feasibility study on the viability of a cap-and-trade market to reduce greenhouse gas (GHG) emissions in the US. Through 2002, they developed the rules and protocols required to establish the scheme and, by 2003, they launched trading operations with 13 members that made voluntary but legally binding commitments to reduce six GHGs. Total membership has grown to almost 400 entities.

Administrative Bodies

CCX Committee on Offsets is responsible for reviewing and approving proposed offset projects. The offset committee has currently approximately 12 members. Each member is appointed by the CCX Executive Committee for a 1 year appointment with the possibility of renewal.

External Advisory Board provides external strategic input to the CCX team and includes experts from the environmental, business, academic and policy-making communities.

Technical Advisory Committees are established by request of each CCX standing committee or on an ad-hoc basis. These technical committees are usually comprised of outside experts. Currently CCX has technical advisory committees on agricultural methane capture, landfill methane capture, soil carbon sequestration for conservation tillage and rangeland soils, forestry and ozone depleting substances.

CCX Committee on Forestry is responsible, among other things, for reviewing proposed forestry offset projects.

CCX Regulatory Services Provider is the Financial Industry Regulatory Authority (FINRA), the largest nongovernmental regulator for all securities firms doing business in the United States, which provides external verification of the baseline and annual emissions report of each member, monitors CCX trading activity and reviews verifiers’ reports for offset projects.

Third-party Offset Project Auditors are called ‘verifiers’ and are approved by CCX for each project type to verify an offset project’s annual GHG sequestration or destruction. There are currently 29 approved auditors (12/07).

Financing of the Standard Organisation

Climate Exchange PLC is a publicly listed company on the AIM division of the London Stock Exchange. Financials of Climate Exchange, including CCX, are available to the public. The operations and management of the exchange is financed primarily through trading and offset registration fees as well as through enrolment and annual fees generated from its members.

Recognition of Other Standards

The CCX allows trading of credits generated in some projects registered under the CDM. Such projects must be approved by the CCX Offsets Committee and must retire their CERs in exchange for receiving CCX credits. Number of Projects registered and offffsets issued 44 offset projects have been issued 20.82 million metric tonnes of CO₂e offsets since the scheme’s inception in 2003 as of 28 November 2007. (http://www. chicagoclimatex.com/offsets/projectReport.jsf, accessed Nov 28, 2007)

Eligibility of Projects

Project Types

CCX accepts the following project types:

• Energy efficiency and fuel switching
• Renewable energy
• Coal mine and landfill methane
• Agricultural methane such as anaerobic digesters.
• Agricultural soil carbon: Project owners must make a minimum 5 year contractual commitment to continuous no-till, strip till or ridge till on enrolled acres.
• Rangeland soil carbon: Projects must take place within designated land resource regions. Further, non-degraded rangeland projects in specific locations that are managed to increase carbon sequestration through grazing land management that employs sustainable stocking rates, rotational grazing and seasonal use are eligible.
• Forestry carbon: a) Forestation and forest enrichment projects must be on deforested or degraded lands b) forest conservation projects in specified locations may be eligible if they are undertaken in conjunction with forestation on a contiguous site. CCX rules address permanence issues of forestry projects by requiring a carbon reserve pool equal to 20 percent of all offset credits issued for the project and the cancellation of reserve pool offsets in case of sequestration reversal.
• Ozone depleting substance (ODS) destruction is accepted only for chemicals that can no longer be produced and where there is no legal requirement to destroy remaining stocks.

Project Location

Most CCX offset projects to date are located in the US. In order to avoid double counting, CCX accepts projects in any country except in member states of the EU-ETS. Furthermore, CCX does not allow for the registration of projects in Annex 1 countries during the Kyoto period that might be counted under the country level inventory (AAU).

Project Size

There is no limit on the project size. However, projects with less than 10,000 metric tonnes of CO₂e cannot trade on the exchange directly but can do so through an offset aggregator.

Start Date

Projects selling offsets on the CCX should not have started earlier than January 1, 1999 for most project types. However, the earliest start date for forestry projects is January 1, 1990 and for HFC destruction projects is January 1, 2007.

Crediting Period

Most of the eligible project types can earn offsets for the period 2003 to 2010 (8 years). The exceptions include renewable energy projects, which can earn offsets from 2005 to 2010 (6 years), HFC destruction projects, which can earn offsets from 2007 to 2010 (4 years), and rangeland soil carbon projects, which can earn offset from 2006 to 2010 (5 years).

CDM Pre-registration Credits

CCX generally approves CDM pre-registration credits if all the CDM documentation is in place. CCX does not require any further additionality proof for such preregistration VERs.

Project Funding Restriction

No funding restrictions.

Environmental & Social Impacts

Offset projects must comply with the rules and regulations of the host country. Beyond this legal prerequisite, CCX does not have any requirements for stakeholder involvement and other co-benefits. The vast majority of CCX offsets are implemented in developed countries where legal and regulatory frameworks already require assessment of environmental and social impacts. In cases where projects originate from a non- Annex I country, environmental and social impacts are considered by the offset committee on a case by case basis depending on the project type.

Additionality and Baselines

Additionality Requirements

Additionality requirements are primarily performance-based. Additionality criteria are incorporated into the eligibility criteria of the project types. The CCX requires that projects are new, beyond regulation and involved in highly unusual “best in class” practices. There is no formal project-specific assessment of additionality. Additionality of each project is reviewed by the CCX Offsets Committee.

Baselines & Methodologies

The baselines and methodologies for calculating emission reductions are defined for each project type through the use of specified crediting rates for eligible project activities. Some baselines are project-specific (e.g., large reforestation projects are credited relative to measured site-specific carbon levels prior to the start of the project). Other baselines are based on performance standards (e.g. avoided deforestation projects in Brazil are credited using predetermined annual deforestation rates for specific states within Brazil).

Validation a and Registration (Initial Verification and Enrolment)

CCX does not distinguish between validation and verification. Both steps are usually done at the same time by the same auditor and are called “project verification and enrollment.” In other words, an initial validation of projects is optional. Credits are generated after verification.

Process

The following steps are involved in verifying or enrolling an offset project on the CCX:

• An offset project owner submits a project proposal or questionnaire for an eligible project to the CCX.
• The proposal is reviewed by the CCX Committee on Offsets and they provide a preliminary approval if the project is eligible (the project may be referred to scientific technical advisory committees, if required).
• Once approved by the Committee, the project owner or aggregator must obtain an independent verification by a CCX-approved verifier (the verification may include site visits) to accurately assess a project’s annual GHG sequestration or destruction potential.
• The verification reports are then reviewed by CCX staff as well as the CCX provider of regulatory services, FINRA, for completeness and accuracy.
• The offset provider can then join the CCX and enroll the project (if the offset provider is already a member or offset aggregator, then the new project is enrolled independently or aggregated together with other projects).

Key Requirements

• Eligible project proposal
• Verification Statement by the third-part auditor

Monitoring, Verification and Certification (Annual Verification and Issuance)

Process

The steps involved include:

• The CCX-approved auditors verify the project’s actual annual GHG sequestration or destruction.
• The CCX then issues the offset provider or aggregator Carbon Financial Instrument® (CFI™) contracts equivalent to the quantity of emission sequestered or destroyed (one CFI is equivalent to 100 metric tonnes of CO₂e).

Key Requirements

Verification Statement by the third-part auditor are required.

Evaluation of Auditors

Auditors are approved for each project type. Once approved the CCX does not have a formal process in place to evaluate and sanction auditors in case of underperformance.

Registries

Offset project developers can participate in CCX by registering offsets either as Offset Providers or Offset Aggregators. An Offset Provider is an owner of an offset project that registers and sells offsets directly on the Exchange. An Offset Aggregator is an entity that serves as the administrative representative for multiple offset-generating projects on behalf of multiple project owners. The CCX Trading System has three components:

1. The CCX Registry
as the official record holder and transfer mechanism for Carbon Financial Instrument® (CFI™) contracts. All CCX Members have CCX Registry Accounts.

2. The CCX Trading Platform
The CCX Trading Platform is an internet-accessible marketplace in order to execute trades among CCX Registry Account holders and to complete and post trades that are established through private bilateral negotiations.

3. The Clearing and Settlement Platform
The Clearing and Settlement Platform processes daily information from the CCX Trading Platform on all trade activity.

Fees

Fees for CCX membership areUSD1,000-35,000 per year depending on the size and type of member. Offset registration fees are USD 0.12 per metric tonne from non-Annex I countries and USD 0.15 per metric tonne from Annex I countries. The trading fee is USD 0.05 per metric tonne. Trading and offset registration fees are posted on the CCX website and are subject to change.

Offset Standard Screens

Offset Standard Screens are not full-fledged standards by themselves but accept projects that were implemented under other standards and adhere to their screening standards.

Voluntary Offset Standard (VOS)

http://www.carboninvestors.org/

Overview

Type of Standard

The Voluntary Offset Standard (VOS) is a carbon offset screen that accepts other standards and methodologies using certain screening criteria. It currently accepts Gold Standards VER projects and projects that employ CDM procedures but which are implemented in countries that have not ratified the Kyoto Protocol and are therefore not eligible for CDM.

History of Standard

The International Carbon Investors and Services (INCIS) launched the VOS in June 2007. INCIS is a not-for-profit association of large investment companies that provide carbon-related investments and services. INCIS has 26 members (as of November 2007).

Administrative Bodies

Since the VOS is a new standard, many of its administrative structures are not yet in place.

Members: INCIS was initially set up as the “European Carbon Investors and Services” but has since its launch expanded to represent the interests of 26 members based both within and outside of Europe. These include, among others, ABN AMRO, Baker & McKenzie, Barclays Capital, Climate Change Capital, Credit Suisse, Deutsche Bank, Fortis, ING, MGM International, Morgan Stanley, and Standard Bank.

Auditors: UNFCCC approved DOEs verify and approve projects.

Financing of the Standard Organisation

The VOS is financed through INCIS membership fees and will further be financed through the issuance fees once its registry is established.

Recognition of Other Standards

The VOS accepts credits from CDM, JI, and Gold Standard CER and VER projects. Other VER standards (or specific methodologies approved under these additional standards) may be recognised under the VOS in the future by INCIS.

Number of Projects

No information is available: the VOS relies upon DOE certification so there will be no central entity to collect VOS project numbers until a registry is established.

Eligibility of Projects

Project Type

VOS accepts project types covered under the CDM/JI mechanism, with the exception of new HFC projects and 20 MW-plus hydroelectric dams unless they meet the criteria and guidelines of the World Commission on Dams.

Project Location

Projects are allowed in any country except those based in countries covered by a scheme for greenhouse gas emission allowance trading, such as the EU-ETS, if there is no mechanism in place to retire the equivalent numbers of allowances in that country (e.g. retiring of AAUs).

Project Size

The limitations specified under CDM/JI mechanisms apply.

Start Date

The limitations specified under CDM/JI mechanisms apply.

Crediting Period

The same as CDM/JI and CDM Gold Standard

CDM Pre-registration Credits

Pre-registration VERs are generally accepted by the VOS. Such VERs can be issued from the project start date if the project has been successfully validated by a DOE as meeting the CDM standard, including additionality, and the number of VERs has been verified by a different DOE.

Project Funding Restriction

The limitations specified under CDM/JI mechanisms apply.

Environmental & Social Impacts

The limitations specified under CDM/JI mechanisms apply. If the credits are GS, then Gold Standard rules apply.

Additionality and Baselines

The rules and guidelines specified under the CDM/JI mechanisms and the Gold Standard apply.

Validation & Registration

For GS VERs: validation is done through the Gold Standard. For CDM standard VERs: validation is done through DOE certification.

Monitoring, Verification & Certification

For GS VERs: verification is done through the Gold Standard. For CDM standard VERs: verification is done through DOE certification.

Evaluation of Auditors

The VOS relies on the review processes of the CDM and does not have its own review process for auditors.

Registries

The VOS is planning to establish its own registry.

Fees

For GS VERs: see the Gold Standard section. For CDM standard VERs: the DOE validation and verification costs. Registry costs are yet to be determined.

Bio-Sequestration Standards

CDM Afforestation and Reforestation Standard (CDM A/R)

Overview

This section focuses on CDM’s bio-sequestration rules only. For a complete description of the CDM, see Here.

Number of Projects

As of September 2007, only 10 afforestation/ reforestation projects are registered with CDM. (Source: http://www.cdmpipeline.org/cdm-projects-type.htm)

Eligibility of Projects

Project Type

CDM accepts afforestation¹² or reforestation¹³ projects. CDM forestry projects can only be implemented on land (a) that is not forested at the start of the project activity; (b) which was not recently harvested; and (c) which is not likely to become forested in the near future without human intervention. All other forms of biological sequestration or land-based emissions reduction activities, including avoided deforestation, are currently not allowed.

The requirements for registering, validating, and certifying forestry projects are the same as for other project types. However, the following requirements are specifically for CDM forestry projects.

Leakage

Specific methods to account for leakage are developed under each baseline methodology. Methodologies must identify the sources of leakage and explain which sources of leakage are to be calculated, and which can be neglected. They must also specify any relevant calculations, parameters, and coefficients; indicate how values will be obtained; and describe uncertainties associated with key parameters. Specific methodologies may identify circumstances in which a particular source of leakage can be “neglected” or ignored. Such exclusions must be justified.

CDM does not account for international leakage and market shifting.

Permanence

To address the risk that carbon might be re-released in the atmosphere due to forest destruction, CERs from forestry CDM projects produce temporary emissions credits. Specifically, these are either termed “temporary CERs” (tCERs) or “long-term CERs” (lCERs). Both types of CERs have expiration dates, after which they must be replaced by another tradable emissions unit under the Kyoto Protocol (e.g., standard CERs, AAUs, ERUs, or RMUs).

If an Annex 1 country uses a tCER for compliance it must replace it with a permanent Kyoto unit or an unexpired tCER in the next commitment period. If the project is still performing as expected, the new tCERs will just replace the expired ones. If the project fails during the first year of the commitment period, the tCERs will not have to be replaced until the end of that commitment period. This reduces the risk for the buyer who can plan for the whole commitment period.

lCERs expire at the end of the final crediting period for the project activity. lCERs may be cancelled if the verification reveals that the stored carbon for which they were issued got released back into the atmosphere. Upon cancellation, they must be replaced by another Kyoto Protocol emissions trading unit.

Crediting Periods

CDM forestry projects have either a single 30-year crediting period, or 20-year crediting periods that are renewable up to two times.

Other Rules

During the first commitment period, Annex 1 countries are limited to using forestry credits for no more than 1% of their baseline emissions.

VCS AFOLU Standard

http://www.v-c-s.org/afl.html

This section focuses on bio-sequestration rules only. For a complete description of the VCS, see here.

Overview

Voluntary Carbon Standard (VCS) includes biosequestration and land-based emissions reductions projects and has developed a specific set of rules to address the particular issues and risks associated with these project types. The VSC uses the acronym AFOLU (Agriculture, Forestry and Other Land Use) for its biosequestration projects.

Number of Projects

The VCS AFOLU standards were launched on November 19th, 2007, and new methodologies and projects have yet to be approved.

Eligibility of Projects

Project Type

The following types of projects are acceptable under the VCS AFOLU:

• Afforestation, Reforestation and Revegetation (ARR)
• Agricultural Land Management (ALM)
  • Improved cropland management
  • Improved grassland management
  • Cropland to grassland conversions
• Improved Forest Management (IFM)
  • Conventional to Reduced Impact Logging
  • Convert logged to protected forest
  • Extend rotation age
  • Conversion of low-productive forests to productive forests
• Reducing Emissions from Deforestation (RED)
• Further activities can be added in the future

Leakage

The geographical area subject to potential leakage must be identified ex-ante, and any potential leakage subtracted from the net carbon benefits generated. Each project activity type has specific rules governing how leakage must be addressed.

Given the potential for regional markets to shift leakage from improved forest management projects (if they reduce overall timber supply), the VCS provides default leakage factors to ensure that potential leakage impacts are captured and subtracted. These default values can range from 10% to 70%.

In the case of RED projects, an analysis of agents and drivers of deforestation must be presented to the verifier, as well as a description of the measures that will be implemented to address them (e.g., building in sustainable agricultural intensification practices when shifting agriculture is a deforestation driver, or incorporating fast-growing wood lots to address local fuel wood or timber needs). The identified factors must subsequently be monitored on a regular basis. Depending on the extent of possible leakage, the area subject to leakage monitoring could encompass the entire host-country. If significant leakage that is directly attributable to the project is likely to occur beyond this area (such that it cannot be monitored), the activity is not eligible.

In line with the CDM, VCS AFOLU does not account for international leakage or international market shifting.

Permanence

Unlike CDM, the VCS does not issue temporary credits. VCS AFOLU projects produce permanent VCUs that are fully fungible regardless of the project type generating them. VCS AFOLU projects set aside a portion of all their credits generated into a buffer reserve to mitigate nonpermanence risk. The buffer credits from all projects are held in a single pooled VCS buffer account to act as insurance against unanticipated project failure.

The buffers are sized depending on the risk level of a project. Projects with higher risk of (partial) failure must include a larger buffer than projects with smaller risks.

Risk Class	RED Buffer	ARR Buffer
High	20-30%	40-60%
Medium	10-20%	20-40%
Low	5-10%	5-20%

This risk assessment and subsequent buffer determination is conducted by two separate independent verifiers to ensure that a conservative number of credits are set aside.

The buffer solution to permanence issues in biosequestration projects reduces the risk to the buyer and seller of the offsets because the buffer acts as a guarantee. Credits in the buffer are cancelled when carbon is lost from the project compared to a previous issuance event, or should the project not be re-verified in the future. The buffer approach is meant to encourage developers to design projects for longer time-horizons and adopt strong risk mitigation strategies, since longterm projects with a low risk profile will be subject to a lower buffer withholding requirement.

Buffers can be drawn upon over time as project’s longevity is established and risks shown to be effectively mitigated. 15% of project’s buffer is released every 5 years at re-verification. For example, a mediumrisk project starting out with a 30% buffer would have 15% of this (or 4.5% of total credits) released at its next verification event five years later. This 15% release would continue (e.g., at next verification would release 15% of 25.5% of credits from buffer), so that by 50 years after the first verification (or 55+ years since project start), assuming that the project’s risks have been shown to be effectively managed, the project would be subject to a ~6% buffer withholding.

Verification of the project is in theory optional, but it is in interest of project proponents to regularly submit verification reports to the VCS because if a project fails to submit a verification report to the VCS within five years from latest verification, 50% of the buffer credits are cancelled. After another five years, all remaining buffer credits are cancelled. Projects may claim cancelled credits in the future by submitting a new verification before the end of the crediting period.

To ensure the environmental integrity of the buffer approach the VCS will conduct “truing up” of the overall VCS buffer pool every few years. A review of existing VCS verification reports for all AFOLU projects under the VCS would flag the projects that have failed or underperformed and then identify their common characteristics. The buffer values and/or risk criteria for VCS projects going forward would then be adjusted accordingly.

Crediting Periods

VCS crediting period for AFOLU projects are the same as the life of the project, with a minimum of 20 years and a maximum of 100 years.

Socio-Economic and Environmental Impacts

VCS requires all AFOLU projects to “identify potential negative environmental and/or socio-economic impacts they might have, and effectively mitigate them prior to generating VCUs.” However, VCS does not monitor social and environmental impacts; project developers simply have to demonstrate to verifiers that there are no negative social and environmental impacts.

The Climate, Community & Biodiversity Standards

http://www.climate-standards.org/

Introduction

Type of Standard

The Climate, Community & Biodiversity Standards (CCBS) is a project design standard and offers rules and guidance for project design and development. It is intended to be applied early on during a project’s design phase to ensure robust project design and local community and biodiversity benefits. It does not verify quantified carbon offsets nor does it provide a registry. The CCBS focus exclusively on land-based biosequestration and mitigation projects and require social and environmental benefits from such projects.

History of Standard

The CCBS was developed by the Climate, Community and Biodiversity Alliance (CCBA) with feedback and suggestions from independent experts. CCBA is a partnership of non-governmental organizations, corporations and research institutes, such as Conservation International, The Nature Conservancy, CARE, Sustainable Forestry Management, BP and CATIE. The first edition was released in May 2005.

Administrative Bodies

CCB Alliance is formed by representatives from each member organisation. The alliance currently has 13 members and makes decisions about changes to the standards. It also works closely with the auditors, advising them on interpretation and application of the standards.

Working groups are comprised of alliance members and external advisors and are appointed when needed to address specific issues. Working groups proposals for changes must be approved by the Alliance.

Third-party auditors are certified DOEs under the CDM for afforestation and reforestation – organizations that are approved to evaluate CDM projects – or evaluators who are certified under the Forest Stewardship Council.¹⁴ Validation and verification can be done by the same auditor.

Financing of the Standard Organisation

The CCBS are managed by the CCBA which is supported by contributions from alliance member organizations and by foundation grants.

Recognition of Other Standards

Because CCBS is a project design standard only, and not a full fledged carbon offset standard, project developers who want to sell certified or verified emissions have to apply another standard to get certification and registration of their offsets. About 30% of the projects are developed as CDM projects that will generate CERs. 70% of the projects are looking to sell their offsets in the voluntary market.

Projects may combine the use of several different standards (e.g. CCBS to ensure validity of design to generate carbon credits with social and environmental benefits, FSC for certification of timber products, and the VCS for verification and registration of carbon credits). Using different standards might potentially help projects attract different funders and product buyers at different stages in the project cycle.

Number of Projects

As of September 2007, two projects have been validated against CCBS, a further five projects are undergoing validation and at least 20 more projects plan for CCBS validation in the coming few months. Over 70 projects are under development using the CCB Standards. The pool is growing by a few projects every month.

Ex-Ante Sale of Carbon Offffsets

Some CCBS projects are selling ex-ante credits. Some are planning to sell a mixture of ex-ante and ex-post credits. Ex-ante credits enable projects to raise funds for project implementation. Because of the risk that is associated with purchasing ex-ante credits, buyers are often offered preferential rates for such up-front credits. In cases where the buyer requires carbon verification, the projects can, once real carbon benefits have been generated (5-12 years for most reforestation projects and shorter for avoided deforestation and degradation), apply a carbon verification standard such as the CDM or VCS.

As a design standard, CCBS does not verify emissions reductions. The offsets must be verified through another standard (e.g., VCS or CDM). When the carbon credits are verified, they are tracked by the registry associated with the carbon accounting standard used. It is the responsibility of the project proponent to register and cancel any ex-ante carbon credits that might be sold in advance of verification, in order to prevent double selling.

Eligibility of Projects

Project Type

CCBS focuses on land-based climate change mitigation projects, and accepts the following project types:

• primary or secondary forest conservation;
• reforestation or re-vegetation;
• agro-forestry plantations;
• densification and enrichment planting;
• introduction of new cultivation practices;
• introduction of new timber harvesting and/or processing practices (e.g., reduced impact logging);
• reduced tillage on cropland;
• improved livestock management; etc.

Project Location

Projects can be located in industrialized and developing countries. The revised version of the Standards – CCBS (2008) – will include rules to prevent potential double counting of Annex 1 based projects.

Project Size

There is no restriction on project size.

Start Date

There is no restriction on project start date but projects must have credible documentation for baselines from the start of the accounting period for carbon, community and biodiversity benefits.

Crediting Period

The CCBS has no rules on crediting periods because it is solely a project design standard.

CDM Pre-registration Credits

N/A

Project Funding Restriction

No restrictions on funding sources. On the contrary, since offset revenue alone is usually not enough to ensure project viability, many projects rely on cofunding through other means.

Environmental & Social Impacts

CCBS projects must generate net positive impacts on biodiversity. The standard employs a screen to rule out negative impacts and a point system to reward additional environmental benefits. The screen stipulates that projects cannot have negative effects on species included in the IUCN Red List of threatened species or species on nationally recognized lists. Invasive species or genetically modified organisms cannot be used in a project. CCBS rewards projects with an additional point each for the use of native species and water and soil resource enhancement.

Projects must generate net positive impacts on the social and economic wellbeing of communities and must mitigate potential negative effects caused by the project on-site and offsite.

Stakeholder involvement is required and must be documented during all phases of project development. Stakeholders must have an opportunity before the project design is finalized, to raise concerns about potential negative impacts, express desired outcomes and provide input on the project design. The project design must include a process for hearing, responding to and resolving community grievances within a reasonable time period. The overall net social and economic effect of the project has to be positive. Additional credit is given for capacity building activities and best practices in community involvement.

Leakage

Decreased carbon stocks or increased emissions of non- CO₂ GHGs outside the project boundary resulting from project activities need to be quantified and mitigated. The project proponents must:

1) Estimate potential offsite decreases in carbon stocks (increases in emissions or decreases in sequestration) due to project activities.

2) Document how negative offsite impacts resulting from project activities will be mitigated, and estimate the extent to which such impacts will be reduced.

3) Subtract any likely project-related unmitigated negative offsite climate impacts from the climate benefits being claimed by the project. The total net effect, equal to the net increase in onsite carbon minus negative offsite climate impacts, must be positive. (Climate, Community and Biodiversity Project Design Standards, First Edition, p. 17)

Permanence

Permanence is addressed by requiring that projects identify potential risks up front and design in measures to mitigate potential reversals of carbon, community and biodiversity gains, including establishing buffer zones. Yet because CCBS is a project design standard, it does not have specific permanence requirements such as the issuance of temporary offsets.

Additionality and Baselines

Additionality Requirements

The additionality tests for CCBS are project based and specified by individual methodologies.

The CCBS require:

Step 1: Regulatory Surplus: Project developers must prove that existing laws or regulations would not have required that project activities be undertaken anyway. The standard also allows for project developers to make claims when a law is in existence but is not enforced e.g. if heavy logging happens in an area that is pro forma under protection.

Step 2: Barriers: Financial, Lack of Capacity, Institutional or Market Barriers or Common Practice: Several additionality tests are required. The project proponents must provide analyses (poverty assessments, farming knowledge assessments, remote sensing analysis, etc) showing that without the project, improved land-use practices would be unlikely to materialize.

Baselines & Methodologies

CCBS relies on methods and tools developed by other organizations and standards for their baseline calculations. For example, to estimate net change in carbon stocks they accept the methodologies of the IPCC’s Good Practice Guidance (IPCC GPG) and any methodology approved by the CDM.

The baseline calculations must be based on clearly defined and defendable assumptions about how project activities will alter carbon stocks and non-CO₂ GHG emissions over the duration of the project or the project accounting period.

Validation & Registration

Process

Once a project has been designed, a third-party auditor validates the project. After reviewing relevant project documents, a site visit, and taking account of the comments received during a 21-day public comment period, the auditor approves or rejects the project. The CCB Alliance works very closely with the auditors, commenting on and reviewing project documentation. Yet is it is ultimately the auditor who makes the decision to approve or reject a project.

Key Requirements

The CCBS include fifteen required criteria and eight optional “point-scoring” criteria. Silver or Gold status is awarded to exceptionally designed projects that go beyond the basic requirements. Such Gold and Silver projects use primarily native species, enhance water and soil resources, build community capacity, and adapt to climate change and climate variability.

Monitoring, Verification & Certification

Process

To keep its CCB validation, each project must be verified every 5 years. Verification includes a project document review by the auditor and a site visit to check on project implementation and monitoring results in addition to any changes in project design.

The validation and the verification can be done by the same auditor. Currently all of the CCB projects are less than 5 years old and have therefore not yet been verified. CCBA intends to develop and publish further rules and guidance on project verification.

Key Requirements

The CCB verification does not include a quantitative certification of the carbon benefits but is a qualitative evaluation that confirms carbon benefits as well as the environmental and social benefits of the project.

Evaluation of Auditors

The accreditation of auditors lies with the CCB Alliance currently limited to DOE’s accredited by CDM EB for Afforestation and Reforestation auditors accredited by the Forestry Stewardship Council (FSC). There is no formal procedure in place to “spot check” auditors but the CCB Alliance could potentially decide to ban or restrict certain auditors that under-perform.

Registries

Because CCBS is a Project Design Standard it does not have a registry accredited for its offsets.

Fees

Cost for validation of a project rages from €3,500 to €10,000. If the validation is being done in conjunction with CDM, validation costs are lower for CCBS than for stand alone projects, because many of the requirements for CCBS will already have been fulfilled through the CDM requirements (e.g. baseline calculations).

Plan Vivo System

www.planvivo.org

Introduction

Type of Standard

Plan Vivo is an Offset Project Method for small scale LULUCF projects with a focus on promoting sustainable development and improving rural livelihoods and ecosystems. Plan Vivo works very closely with rural communities, emphasizes participatory design, ongoing stakeholder consultation, and the use of native species. The Plan Vivo Foundation certifies and issues only exante credits, called Plan Vivo Certificates, and therefore does not verify ex-post offsets.

History of Standard

The Plan Vivo System was initiated in 1994 for a research project in southern Mexico. The system was developed by the Edinburgh Centre for Carbon Management (ECCM, http://www.eccm.uk.com/), a consulting company that focuses on climate change mitigation strategies and policies, in partnership with El Colegio de la Frontera Sur (ECOSUR), the University of Edinburgh and other local organisations with funding from the UK Department for International Development (DFID).

Administrative Bodies

Plan Vivo is currently managed by the Plan Vivo Foundation (formerly BioClimate Research and Development), a non-profit focused on promoting actions to reconcile human development and environmental change. The Foundation reviews and registers projects according to the Plan Vivo System, issues Plan Vivo Certificates annually following the submission and approval of each project’s annual report, and acts as overall ‘keeper’ of the Plan Vivo System which is periodically reviewed in consultation with projects and other stakeholders. It also approves third-party verifiers and registers resellers of Plan Vivo Certificates.

Consultants are hired by Plan Vivo to review certain aspects of their projects. Because of the small number of projects, there is no established procedure for this. The Plan Vivo Foundation also conducts frequent field visits to projects in order to monitor their progress and see that evaluations are done as needed.

Project Developers: Plan Vivo works with local NGOs who function as project developers (‘project coordinators’). They coordinate sales with the offset purchasers and administer payments to local farmers based on the achievement of ‘monitoring targets’.

Financing of the Standard Organisation

The financing of the Plan Vivo Foundation is sourced primarily from a levy imposed on the issuance of Plan Vivo Certificates. They currently take USD 0.30 per tonne of carbon dioxide sold. Other sources of income come from project and resellers’ registration fees.

Recognition of Other Standards

Plan Vivo does not currently work in conjunction with other standards.

Number of Projects

Plan Vivo currently has three projects (in Mexico, Uganda and Mozambique) and a few more are currently being reviewed.

Ex-Ante Sale of Carbon Offsets

Plan Vivo exclusively certifies ex-ante credits.

Eligibility of Projects

Project Type

Plan Vivo accepts the following project types: forest restoration; agroforestry/small plantations; forest protection and management; soil conservation and agricultural improvement.

Project Location

Plan Vivo projects are located in developing countries.

Project Size

There is no minimum or maximum size limitation for Plan Vivo projects. Projects generally expand in size over a number of years as more farmers hear about the project, learn more about the notion of selling carbon as a commodity and see it working in practice. The current Plan Vivo projects range in size from a carbon offset potential of 10,000 tCO₂/ yr to 100,000 tCO₂/yr.

Start Date

In order to sell Plan Vivo Certificates, projects must first be registered as Plan Vivo projects. There is no time restriction on this.

Crediting Period

The crediting period varies from project to project. Farmers are reimbursed for sequestration activities for 5-15 years, yet carbon benefits are calculated over much longer time periods of up to 150 years.

CDM Pre-Registration Credits

N/A

Project Funding Restriction

No restrictions are imposed on funding sources. On the contrary, since carbon finance only becomes available once a project has gone through the process of feasibility studies, detailed project design, extensive training and registration, many projects rely on cofunding through other means during the initial stages.

Projects are designed so that carbon payments will sustain the projects once they are fully functional.

Environmental & Social Impacts

Plan Vivo requires that all its projects provide additional benefits to the local environment and community through the development of sustainable land-use systems, planting of native species, and promotion of sustainable and improved livelihoods through the diversification of income sources. Metrics for quantifying environmental and social benefits of Plan Vivo projects have recently been revised and standardized and can now be found in the Plan Vivo Standards.

Leakage

Leakage at individual plot level
To minimize leakage, each producer must show that they are not reducing their agricultural output below sustainable levels. In other words, a Plan Vivo project will not be registered unless the producer can live sustainably from their land under the plan , and has identified management objectives beyond receiving carbon payments (e.g. sustainable timber production, fruits or other non-timber products, agro-forestry).

Leakage at project level
Leakage is assessed for each land-use activity in the technical specifications, considering the local and regional trends, identifying potential leakage risks and mechanisms for controlling them. Some examples are given in the following table:

Land use activity	Potential leakage	Mitigation
Afforestation	Planting trees on agricultural land leads to further deforestation as farmers clear new areas of forest to plant crops	Ensure that farmers have sufficient land for agriculture and tree-planting
Forest Conservation	Leads to increased harvesting in other areas in order to meet demand for timber	Ensure that Plan Vivo management plan includes actions to improve sustainable timber production

Permanence

The Plan Vivo System contains a number of mechanisms that ensure permanence:

• Projects are initially assessed for their long-term viability, taking into account issues such as the organisational capacity and experience of all partners involved and the stability of the area.
• Producers selling carbon through the Plan Vivo System must enter into long-term sale agreements (contracts) with the in-country project coordinator which ensures that payments are made following monitoring against measurable and realistic goals.
• Producers must hold land tenure agreements (or community concession or similar usufruct rights) to demonstrate long-term ownership of land.
• All producers are under obligations to re-plant where trees die, for example from disease or extreme weather events, or if harvested for timber.
• Projects are internally monitored by Plan Vivo through the approval of annual reports and site visits.
• Each project maintains an unsold reserve of carbon credits called a risk buffer. The level of the risk buffer is set by the Plan Vivo Foundation according to its risk assessment of the project (normally 10-20%). The aim of the risk buffer is to cover any unexpected shortfall in carbon credits supplied to purchasers, for example due to extreme weather events, inaccuracies in baseline assumptions or producers defaulting on sale agreements.

Additionality and Baselines

Additionality Requirements

The additionality tools for Plan Vivo are project based. Additionality may be demonstrated through an analysis of the barriers to implementing activities in the absence of the project. These could include, for example, lack of finances, lack of technical expertise or prohibitive political or cultural environments. Only native species, which are unlikely to be planted without financial incentives in many countries where seedlings are difficult to find, may be planted. Commercial forestry projects are excluded from participation.

Baselines & Methodologies

Baselines are calculated at the project level and also modelled at the regional scale. Carbon sequestration potential, for the sale of ex-ante credits, is calculated on a per hectare basis for a specified length of time using information on the management regime, growing conditions, proposed species, growth rates, and proposed planting densities.

Technical specifications which describe the methodologies for and carbon potential of each landuse system (e.g. boundary planting, mixed species woodlot etc.) are commissioned by the Plan Vivo Foundation. All existing technical specifications can be viewed in the project pages of the Plan Vivo website (www.planvivo.org).

All Plan Vivo Technical Specifications are currently being externally reviewed by independent organisations including the University of Edinburgh and TerraCarbon. When this process is concluded the Plan Vivo Technical Advisory Board will discuss the results and the Plan Vivo Foundation will commission revisions and new Technical Specifications as necessary.

Validation & Registration

Process

Projects must register as Plan Vivo Concepts, which involves a desk review of the project’s long-term viability. The project developer must describe the proposed project area and proposed activities and identify its sustainable development aims in consultation with the communities.

Key Requirements

Projects can be registered as Plan Vivo projects once they have:

• A Plan Vivo Foundation approved set of technical specifications (used for describing land-use activities, carbon accounting, prescribing risk and other management activities and monitoring indicators and containing analyses of leakage, additionality and permanence)
• A Plan Vivo Foundation approved operational manual (for describing project governance, systems for evaluating and monitoring Plan Vivos, administering payments and community-led planning)
• Been validated by an expert reviewer chosen by BR&D.

Monitoring, Verification & Certification

Process

Monitoring is conducted throughout the crediting period by local technicians based on the protocol and indicators identified in the technical specifications of the Plan Vivo project approved by the Plan Vivo Foundation during project validation.

All operational projects must conduct and submit annual reports to the Plan Vivo Foundation using the standard Plan Vivo Annual Reporting Template. This report contains a full update of the project’s status and development, including what sales and payments have been made, the results of monitoring and outcomes of consultations. The Plan Vivo Foundation reviews each annual report and issues Plan Vivo Certificates after approval of the report. Approval of annual reports may be qualified by imposing corrective actions, if the report shows the project fails to act in full compliance with the Plan Vivo System or Plan Vivo principles.

The Foundation may choose to follow up corrective actions with site visits where it is deemed necessary.

The local project coordinators monitor the work of each individual farmer and pay them when they are found to have reached their targets. The exact payment schedule varies with each project, but normally involves periodic monitoring and payments over periods of 10–15 years. The Plan Vivo System currently does not require thirdparty verification, but has procedures for assisting projects in preparing for and choosing a verifier which must verify the project according to the Plan Vivo System (terms of reference are provided by the Plan Vivo Foundation). In the future as there are more Plan Vivo projects, it is likely that more specific verification requirement rules will be instituted.

Key Requirements

Each project must develop its own internal Monitoring Protocol based on the monitoring of indicators prescribed in the project’s technical specifications. Any change to the Monitoring Protocol must be reported to the Plan Vivo Foundation in the project’s annual report.

Specific requirements for each producer are set out in their individual sale agreement with the project coordinator. For example, a producer may receive 20% of the total payment after completing 50% of planting, and a further 10% after one year provided they have completed 100% of the planting.

Evaluation of Auditors

Plan Vivo has no formalized process to evaluate and sanction auditors in case of underperformance.

Registries

The Plan Vivo Foundation maintains a registry of carbon credits sold from Plan Vivo projects and issues Plan Vivo Certificates to purchasers accordingly. All carbon credits are sold as ex-ante payments. Each Certificate has a unique serial number which can be traced back to the project and exact producer, which ensures there is no double-counting of carbon credits.

Fees

Costs vary from project to project. Example operational costs can be found in project annual reports which can be viewed on the Plan Vivo website (www.planvivo.org).

The Plan Vivo Foundation currently charges no validation fee but takes a levy of USD 0.30 per Certificate issued. The Plan Vivo Foundation plans to implement registration fees for both projects and resellers, which are expected to be nominal amounts to cover administrative costs.

Offset Accounting Protocols

Offset Accounting Protocols provide definitions and procedures to account for GHG reductions from offset projects yet they have no associated regulatory or administrative bodies and do not define eligibility criteria, or procedural requirements. Many of the full-fledged standards are based on such protocols, for example the VCS uses ISO-14064 methodologies. Below we describe the GHG Project Protocol and ISO 14064.

GHG Protocol for Project Accounting

www.ghgprotocol.org

Introduction

Type of Standard

The GHG Protocol Initiative has developed two separate protocols. The Corporate Accounting and Reporting Standard covers accounting for corporate GHG emissions inventories. The GHG Protocol for Project Accounting is an offset accounting protocol. It is a tool for quantifying and reporting GHG emissions reductions from GHG mitigation projects. It does not focus on verification, enforcement or co-benefits. We discuss only the latter and refer to it as the GHG Protocol.

History of Standard

The GHG Project Protocol was jointly developed by the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (WRI) in partnership with a coalition of businesses, NGOs, governmental and inter-governmental organizations. The initiative was launched in 1998 with the aim of developing internationally accepted GHG accounting and reporting standards. The Corporate Accounting and Reporting Standard (revised edition) was published in 2004. The GHG Protocol for Project Accounting was finalized and published in December 2005.

Administrative Bodies

The GHG Protocol is developed by the WRI and the WBCSD:

The World Resources Institute (WRI) is an environmental think tank “that goes beyond research to create practical ways to protect the Earth and improve people’s lives. [WRI’s] mission is to move human society to live in ways that protect Earth’s environment for current and future generations. [WRI’s] programme meets global challenges by using knowledge to catalyze public and private action.” (GHG Protocol, p. 145)

The World Business Council for Sustainable Development (WBCSD) is a coalition of 175 international companies “united by a shared commitment to sustainable development via the three pillars of economic growth, ecological balance and social progress. [WBCSD’s] members are drawn from more than 30 countries and 20 major industrial sectors.” (GHG Protocol, p. 145)

Financing of the Standard Organisation

The development of the GHG Project Protocol for Project Accounting was supported by numerous companies, organisations, and governmental sponsors, including Energy Foundation, US AID, US EPA, BP, Chevron Corporation, Ford, International Paper, SC Johnson, Dow, and Environment Canada.

Recognition of Other Standards

The GHG Project Protocol is programme neutral and is often used in conjunction with other standards or programs.

Number of Projects

N/A

Eligibility of Projects

Project Type

The GHG Project Protocol can be used to develop any project type. The protocol is supplemented with more specific guidelines for accounting for GHG emissions reductions in grid-connected electricity and LULUCF projects.

Project Location

Not defined under the GHG Protocol

Project Size

Not defined under the GHG Project Protocol

Start Date

Not defined under the GHG Project Protocol

Crediting Period

The protocol does not specify the duration of the crediting period and advises the project developer to err on the side of conservativeness.

The protocol recommends that the following aspects be taken into account when determining a crediting period:

• The pace at which economic conditions, technologies or practices are changing.
• The point at which the underlying assumptions, the barriers or the net benefits are likely to change significantly.
• Whether the baseline emissions are static or dynamic.

CDM Pre-Registration Credits

N/A

Project Funding Restriction

Not defined under the GHG Project Protocol

Environmental & Social Impacts

GHG Project Protocol does not address environmental and social impacts as they are not directly related to GHG reduction accounting and quantification per se. It acknowledges the importance of these issues but leaves it to the users of the protocol to determine policies in this regard and incorporate them in their programme’s or standard’s requirements.

Additionality and Baselines

Additionality Requirements

The GHG Protocol contains no formal requirements for additionality determination. It discusses additionality conceptually with respect to baseline determination (see below), but doesn’t require specific additionality tests.

Baselines & Methodologies

The GHG Project Protocol offers guidance on the use of both project-specific and performance-based methods for estimating the baseline in a project. The protocol recommends the use of the performance standard procedure when:

• a number of similar projects are implemented
• obtaining verifiable data on alternatives to the project activity is difficult
• the project developer intends to keep confidential data that would need to be revealed if a projectspecific standard were used
• the number of baseline candidates is limited or the GHG emission rate data for baseline candidates are difficult to obtain.

Validation & Registration

Process

The GHG Project Protocol is only an accounting guidance document, and therefore does not provide guidance on validation or registration.

Key Requirements

N/A

Monitoring, Verification & Certification

Process

The GHG Project Protocol requires a plan for monitoring GHG emissions related to the primary and relevant significant secondary GHG effects of a project within the scope of the assessment boundary. The GHG Project Protocol does not cover verification or certification.

Key Requirements

The monitoring plan must describe the quality assurance and quality control measures that will be employed for data collection, processing and storage. It also requires the monitoring of data related to baseline parameters and assumptions to ensure their continuing validity.

Evaluation of Auditors

N/A

Registries

N/A

Fees

The GHG Project Protocol is free and publicly available for any GHG programme or project developer to use.

ISO 14064

http://www.iso.org/

Overview

Type of Standard

ISO 14064 is an offset protocol. It is an independent, voluntary GHG project accounting standard, and is deliberately policy neutral. The ISO 14064 standard consists of three parts. The first part (14064-1) specifies requirements for designing and developing organisation or entity-level GHG inventories. The second part (14064-2) details requirements for quantifying, monitoring and reporting emission reductions and removal enhancements from GHG projects. The third part (14064-3) provides requirements and guidance for the conducting of GHG information validation and verification.

Unlike the GHG Project Protocol, which has specific guidelines on what tools and accounting methods to use, ISO 14064 gives guidance on what to do but does not spell out the exact requirements. The requirements are usually spelled out only in general terms. For example, ISO points out that additionality needs to be taken into account but does not require a specific tool or additionality test to be used. These would be defined by the GHG programme or regulation under which ISO 14064 is used. ISO 14064 does not focus on co-benefits.

History of Standard

ISO 14064 was developed over several years by the International Organisation for Standardization (ISO). It was launched in the spring 2006.

Administrative Bodies

ISO (International Organisation for Standardization) is the world’s largest developer and publisher of International Standards. ISO is a non-governmental organisation that forms a bridge between the public and private sectors. It is a network of the national standards institutes of 157 countries.

Financing of the Standard Organisation

ISO’s national members pay subscriptions to cover the operational cost of ISO’s Central Secretariat. The subscription paid by each member is in proportion to the country’s Gross National Income and trade figures. Another source of revenue is the sale of standards. The cost for ISO 14064 is around € 85 for each of the three standards.

Recognition of Other Standards

Because ISO 14064 is an Offset Standard Protocols and not a full fledged offset standard it provides definitions and procedures to account for GHG reductions yet does not define eligibility criteria. ISO 14064 is therefore intended to be used in conjunction with other regulations or standards. For example, the procedures for the VSC are based on ISO 14064.

ISO 14064 is intended by be programme-neutral and the requirements of the programme under which ISO is used take precedence to the ISO rules.

Number of Projects

N/A

Eligibility of Projects

Project Type

Not defined under ISO 14064.

Project Location

Not defined under ISO 14064.

Project Size

Not defined under ISO 14064.

Start Date

Not defined under ISO 14064.

Crediting Period

Not defined under ISO 14064.

Project Funding Source

Not defined under ISO 14064.

Project Funding Restriction

Not defined under ISO 14064

Environmental & Social Impacts

The requirements are listed in only general terms: an Environmental Impact Assessment (EIA) is required if the host country or region requires the completion of such an assessment.

ISO also specifies that relevant outcomes of stakeholder participation have to be presented.

Additionality and Baselines

Additionality Requirements

ISO 14064-2 contains no formal requirements for additionality determination but offers general guidelines. The guidelines for additionality tools generally assume a project-specific approach. However, since the requirements of a GHG programme take precedence over specific ISO 14064-2 requirements ISO 14064-2 allows performance standards to be used where this is prescribed by a GHG programme.

Baselines & Methodologies

ISO 14064-2 does not prescribe baseline procedures, but rather offers general requirements and guidance on how to determine a project baseline.

Validation & Registration

Process

ISO 14064-2 strongly recommends the use of third-party auditors but it is a requirement to do so only if the party wants to make its GHG claims public.

ISO 14064-3 defines the validation and verification process. “It specifies requirements for selecting GHG validators/verifiers, establishing the level of assurance, objectives, criteria and scope, determining the validation/verification approach, assessing GHG data, information, information systems and controls, evaluating GHG assertions and preparing validation/ verification statements,” (ISO-14064-3) Validation and verification requirements are stated together with few distinctions between the two.

Key Requirements

ISO 14064 does not require validation or verification. Such requirements are usually elements of a GHG programme. If a GHG project has not been linked to a specific GHG programme, the project proponent has to decide on the type of validation and/or verification (1st, 2nd or 3rd party verification) and the level of assurance (e.g. high or moderate) required against the GHG assertion. The GHG assertion is a statement on the performance of the GHG project usually made by the project proponent. ISO 14064- 3 specifies principles and requirements for the validation and verification of GHG assertions.(ISO 14064-2)

Monitoring, Verification & Certification

Process

ISO defines criteria in general terms: Project proponents must establish the criteria and procedures for project monitoring, including selecting or establishing “criteria and procedures for selecting relevant GHG sources, sinks and reservoirs for either regular monitoring or estimation.”

Key Requirements

Project only have to be verified if they are reported publicly. Project proponents must identify and justify which GHG sources, sinks, and reservoirs will be monitored.

Monitoring procedures should include the following:

• purpose of monitoring;
• types of data and information to be reported, including units of measurement;
• origin of the data;
• monitoring methodologies, including estimation, modelling, measurement or calculation approaches;
• monitoring times and periods, considering the needs of intended users;
• monitoring roles and responsibilities;
• GHG information management systems, including the location and retention of stored data.

Evaluation of Auditors

ISO 14065 was released in 2007 and spells out the requirements for greenhouse gas validation and verification bodies for project accreditation and emissions reductions verifications.

ISO is currently developing ISO 14066 which will outline how individuals can get accredited auditors and how auditors will be reviewed.

It is not yet clear how ISO will supervise the work of its GHG project auditors.

Registries

Not applicable

Fees

The purchase cost of each of the three ISO standard manuals is around € 85.

1	UNEP RISOE Center http://www.cdmpipeline.org/, accessed on 15 November 2007
2	Projects can qualify as small scale if they fulfill the following two criteria: the energy output does not exceed 15 MW, the reduction in energy consumption is less than 15 gigawatt hours per year or the reduction in emissions is less than 15 kilotons of CO2-equivalent per year.
3	http://cdm.unfccc.int/Reference/Procedures/Pnm_proced_ver12.pdf
4	http://cdm.unfccc.int/Issuance/IssuanceCERs.html
5	http://regserver.unfccc.int/seors/file_storage/ak11nelszgfgrda.pdf
6	Commercially sensitive information is defined as: Trade secrets, financial, commercial, scientific, technical or other information whose disclosure could reasonably be expected to result in a material financial loss or gain, prejudice the outcome of contractual or other negotiations or otherwise damage or enrich the person or entity to which the information relates. (VCS 2007, p.6)
7	TÜV SÜD responded to this criticism: The well established internal quality control processes and the general relevance of transparent procedures within a company for which auditing is a core business activity, create the safeguards, which ensure that standard definition does not constitute a conflict of interest with validation and verification. (e-mail communication, Markus Knödlseder, 14/11/07)
8	In the first phase of the scheme, from 2003 to 2006, members agreed to cut their emissions by 1 per cent each year below their annual average emissions for the period 1998 to 2001, thereby by achieving a reduction of 4 per cent by the end of the fourth year. For the second phase from 2007 to 2010, the original members have to further cut their annual emissions to achieve the target of six per cent by 2010. The new members who did not participate in the first phase have to achieve the same target by 2010 by reducing their emissions by 1.5 per cent each year.
9	J. Goodell, "Capital Pollution Solution?" New York Times Magazine (July 30, 2006).
10	CCX responded to this criticism by claiming that tillage can only be ensured through a contract and a verification process, which CCX provides. “There is no guarantee it would go on without a contract with CCX.” No-till has been practiced for decades. Where it can rightfully be assumed that more farmers will change to no-till now that revenue from offsets are available, the argument that without the offsets the amount of no-till agriculture would actually decrease below the current level is not supported. CCX further states: The primary concern was that we not encourage perverse actions that would encourage people to game the system to qualify as “new no-tillers” by virtue of the fact that they have tilled up fields that formerly had been subject to conservation tillage that removes CO2 from the air. We did not want to see reversals of stored carbon dioxide with the resulting release to the atmosphere. (Michael Walsh, e-mail communication 12/21/08) Although a valid argument, it is unclear how many farmers would choose to start to till again, since they had enough incentive to switch their tilling practice before offsets were available. Even more importantly, the argument ignores the issue that nonadditional offsets will lead to a de facto increase in emissions under a cap-and-trade system
11	Dale S. Bryk. (2006). ‘States and Cities Should Not Join the Chicago Climate Exchange.’ Natural Resources Defense Council
12	Afforestation: The direct human-induced conversion of land that has not been forested for a period of at least 50 years to forested land through planting, seeding and/or the human-induced promotion of natural seed sources (Kyoto Definition).
13	Reforestation: The direct human-induced conversion of non-forested land to forested land through planting, seeding and/or the human-induced promotion of natural seed sources, on land that was forested but that has been converted to non-forested land. For the first commitment period, reforestation activities will be limited to those lands that did not contain forest on 31 December 1989.
14	The Forest Stewardship Council (FSC, www.fsc.org/en/) is a non-profit organisation with a mission “to promote environmentally appropriate, socially beneficial and economically viable management of the world’s forests”. It certifies sustainably managed forestry operations, and tracks their timber through the supply chain to the end product, which can then carry the FSC ecolabel.