guidance for agriculture, forestry and other land use …co2-expert.com/pdf/vcs 2007 afolu...

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Voluntary Carbon Standard

Guidance for Agriculture, Forestry and Other Land Use Projects

19 November 2007

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Voluntary Carbon StandardGuidance for Agriculture, Forestry and Other Land Use Projects

19 November 2007

Table of Contents

Foreword ……………………………………………………………………….............................. 3

Introduction ……………………………………………………………………….............................. 5

General AFOLU Guidance ……….................………………………………………………........... 6• GeneralVCSApprovalProcess• Non-PermanenceRiskAnalysisandBufferTables• GuidanceRegardingApprovalofNewMethodologies

Afforestation,ReforestationandRevegetation(ARR)……………………………................15• EligibleProjects• Non-PermanenceRiskAnalysisandBufferApproach• MethodologicalGuidance

AgriculturalLandManagement(ALM) ……………………………………............................20• EligibleProjects• Non-PermanenceRiskAnalysisandBufferTables• MethodologicalGuidance

ImprovedForestManagement(IFM) ………………………………………………...............26• EligibleProjects• Non-PermanenceRiskAnalysisAndBufferTables• MethodologicalGuidance

ReducedEmissionsfromDeforestation(RED)…………………………………..................33• EligibleProjects• Non-PermanenceRiskAnalysisandBufferTables• MethodologicalGuidance

AppendixA–“LikelihoodxSignificance”RiskAssessmentMethodology………........40AppendixB–FinancialAnalysisofBufferWitholdingunderDifferentProjectScenarios…...44

Glossary ………………………………………………………………………….........................46

ListofAcronyms ………………………………………………………………...........................53

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Using this Document

AfteritstranslationintoISO-approvedlanguage,thisVoluntaryCarbonStandard(VCS)guidancedocumentforAgriculture,ForestryandOtherLandUse(AFOLU)projectswillbeincorporatedintothenextreleaseoftheVCSinthefirstquarterof2008.Inadvanceofthisrelease,interestedpartiescanusethisguidancedocumenttodevelopVCS-compliantAFOLUprojectsandmethodologies.

Foreword

The framework laid out in this document has been developed to enable high-qualityAFOLUprojectsfromaroundtheworldtogenerateVoluntaryCarbonUnits(VCUs)thatarecredible,robust,permanentandfungible.

Theresultofanintensiveten-monthdevelopmentprocessmanagedbytheVCSAFOLUAdvisoryGroupandoverseenbytheVCSSteeringCommittee,theseguidelinesemployinnovative and best-practice thinking in order to create standards that are at oncerigorousandworkable. Afterconsiderablepublic input,workinggroupscomposedofleading experts in each of the four AFOLU project categories authored the followingdocument.Morethanadozenindependentreviewers,includingpreeminentriskexperts,investors,NGOrepresentativesandprojectdevelopershelpedcreatethefinalversionofthisdocument. Thefollowingindividualsweretheprimarycontributors:

VCS AFOLU Advisory Group

Ken Newcombe (VCS AFOLU AG Chair) – GoldmanSachs,USABernhard Schlamadinger – TerraCarbon,Austria Toby Janson-Smith (VCS AFOLU project manager) – ConservationInternational,USATanja Havemann – ClimateChangeCapital,UK

Afforestation, Reforestation and Revegetation (ARR) Expert Group

Igino Emmer (lead author) – EmmerInternationaal,TheNetherlandsNeil Bird – JoanneumResearch,AustriaManuel Estrada – NationalInstituteofEcology,MexicoMartin Schröder – TÜVSÜD,GermanyFrank Werner – SwissFederalInstituteofTechnology,Switzerland

Agricultural Land Management (ALM) Expert Group

Keith Paustian (lead author) - NREL,ColoradoStateUniversity,USAHenry Janzen – AgricultureandAgri-FoodCanada,CanadaDaniel Martino – Carbosur,UruguayDavid Powlson – RothamsteadResearch,UKMike Robinson – Syngenta,UK

Improved Forest Management (IFM) Expert Group

Sandra Brown (lead author) - WinrockInternational,USABrian Murray – DukeUniversity,USATimothy Pearson – WinrockInternational,USABrent Sohngen – OhioStateUniversity,USA

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Reducing Emissions from Deforestation (RED) Expert Group

Lucio Pedroni (lead author) – CATIE,CostaRicaManuel Estrada – NationalInstituteofEcology,MexicoCharlotte Streck – ClimateFocus,GermanyEveline Trines – TreenessConsult,TheNetherlandsXiaoquan Zhang – ChineseAcademyofForestry,People’sRepublicofChina

VCS AFOLU Consultants

Amanda Hawn (VCS AFOLU editor) – EcosystemMarketplace,USAMichael Jenkins (program development) – ForestTrends,USADavid Shoch (buffer financial analyst) – TheNatureConservancy,USA

Independent Reviewers

Jüergen Blaser – Intercooperation,SwitzerlandBenoît Bosquet – CarbonFinanceUnit,WorldBank,USABruce Cabarle – WWF,USAPhil Cottle – ForestRe,UKJan Fehse – EcoSecurities,UKMartin Schröder – TÜVSÜD,GermanyJoerg Seifert-Granzin – FAN,BoliviaBill Stanley – TheNatureConservancy,USAMarc Steininger – ConservationInternational,USACraig Trotter – LandcareResearch,NewZealandMartijn Wilder –Baker&McKenzie,AustraliaXiaoquan Zhang – ChineseAcademyofForestry,People’sRepublicofChina

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Introduction

Aspartofitsdriveforcredibilityandinnovation(combinedwiththefactthatforestryprojectsaccountfor35%-50%ofalloffsetssoldwithinthevoluntarycarbonmarket),theVCSwillincludeAgriculture,ForestryandOtherLandUses(AFOLU)inthelistofeligibleprojectactivitiesbasedonanewapproachtomanagingnon-permanencerisks.Tobeginwith,thefollowingfourcategoriesofAFOLUprojectactivitieswillbecoveredundertheVCS:

• Afforestation,ReforestationandRevegetation(ARR)• AgriculturalLandManagement(ALM)• ImprovedForestManagement(IFM)• ReducingEmissionsfromDeforestation(RED)

Inthe future, theVCSBoardwillconsideraddingnewAFOLUprojectcategories (e.g.,avoideddevegetation) as best-practices become defined and robust methodological frameworks areestablished.

Themajorcontributionofland-basedactivitiestoclimatechangeiswidelyrecognizedbythescientificcommunity.Dominatedbydeforestationinthetropics,land-usechangegeneratesabout20percentofglobalGHGemissions,andifagricultureisincludedthisrisestomorethan30%.Deforestationis also the leading cause of species extinctions and a significant source ofwater pollution, airpollution,soilerosionandtheimpoverishmentofruralcommunities.AFOLUprojectsareuniqueinthattheyhavethepotentialtomitigateclimatechange,whileatthesametimeaddressingtheseotherpressingsocialandenvironmentalchallenges.

Despite their clear potential, AFOLU projects can be quite challenging to design, implementandmonitor.Fortunately,definedsolutionsfordealingwithpermanence,additionality,leakage,measurement,andmonitoringhaveemergedinthelastfewyears.Thedocumentthatfollowshasbeendesignedtoreflecttheselatestsolutionsandtoprovidebest-practiceguidanceforthedifferentAFOLUprojectactivitiessothatverifierscancrediblyandrobustlyaccountforthemundertheVCS.Inparticular,thisdocumentdelineatestherecommendedcriteriafor:

• DefiningeligibleAFOLUprojectactivities;• Identifying,assessingandmitigatingprojectrisks;and,• DeterminingtheacceptabilityofnewAFOLUmethodologiesthatmightbeproposedtothe

VCS.

Inordertostreamlinethediscussionofeachofthesetopicswhileatthesametimehighlightingimportantdifferencesinthefourprojectcategories(ARR,ALM,IFMandRED),theensuingpagesareorganizedinfivesections.Thefirstsectionwillprovidegeneralguidancethatiscommontoallfouroftheprojectcategories,whilethesubsequentfoursectionswill,inturn,provideguidancespecifictoeachprojectcategory.

Inordertofostercost-effectiveintegratedprojectsundertheVCS,projectsmaycombineavarietyofactivitiesspanningthesefourgeneralcategoriesintoasingleProjectDocument(PD)andverificationevent.Forexample,someagroforestry/enrichmentplanting(ARR)andcommunityforestry(IFM)practicesmay be combined into a single project so as to avoid duplication, given that farmersoften integrate theseactivitieswithinasingle landscape. Similarly, forestconservation (RED),fast-growingwoodlots (ARR)andimprovedagriculturalmanagementpractices (ALM)mightbecombinedtomaximizesynergieswithinasingleproject. However,eachcategoryofprojectactivitymustbeassessed(intermsofriskcriteria,bufferwithholdingandcarbonaccounting)usingtherelevantguidancesectionsinthisdocument.

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General AFOLU Guidance

1. General VCS Approval Process

A. Carbon verification

VCSverifierscanonlyperformvalidations/verificationswithinthesectoralscopesforwhichtheyareaccredited.TherearetwoVCSAFOLUsectoralscopes:(1)Forestry–coveringARR,ILMandREDprojects;and(2)Agriculture–coveringALMprojects.Accreditedfortheappropriatescope(s),VCSverifierswillpossesssignificantexpertiseforassessingAFOLUprojectactivities,andwillbeinapositiontousetheirexpertjudgmenttofollowtheguidanceprovidedinthisdocument.

B. Validation of methodologies

Methodologiesarestep-by-stepexplanationsofhowemissionsreductionsorremovalsofgreenhousegases(GHGs)aretobeestimatedfollowingacceptedscientificgoodpractice.Methodologiesshouldbe applied conservatively, transparently and thoroughly. To generate Voluntary CarbonUnits(VCUs),aprojectactivitymustapplyaVCS-approvedmethodologytoestimateandmonitoritsnetGHGemissionreductionsorremovals.

ExistingmethodologiesundertheCleanDevelopmentMechanism(CDM)andJointImplementation(JI) are approved automatically under the VCS. If nomethodology exists for the project type,theprojectproponentmustsubmit to theVCSBoardanewmethodology. NewAFOLUprojectmethodologies will be subject to the standard VCS double approval process (see VCS 2007).Verifiersshouldconsultwithrelevanttechnicalexpertsasappropriatetoproperlyevaluatenewmethodologies.

Althoughtheguidelinescontainedinthisdocumenthavebeenconceivedforproject-basedactivities,theVCSmayconsiderapprovingmethodologiescoveringsectoralapproachesinthefuturethatwouldencompasscountry-wideorregionalAFOLUactivities.

C. Approval of tools

Inadditiontoapprovingcompletemethodologies,theVCSwillsupportinnovationbyapprovingnew tools that lower the cost and/or increase the transparency of project design,methodologyapproval,monitoringandverification.

Toolscanbecategorizedintotwotypes:• Components of a methodologythatcanbeappliedasastand-alonemethodologicalmodule

toperformaspecifictask.Examplesofthistypeoftoolarethe“Tool for demonstration and assessment of additionality”1andthe“Tool for testing significance of GHG emissions in A/R CDM project activities”2.These“tools”shouldbeconsideredcomponentsofamethodology.

• Calculationtoolsarespreadsheetsand/orsoftwarethatperformcalculationtasksaccordingtoanapprovedmethodology(e.g.“Tool to calculate sampling size for terrestrial sampling and the estimated costs of conducting sampling”3orTARAM–“Tool for Afforestation and Reforestation Approved Methodologies”4).

NewtoolsapprovedundertheVCSshouldsatisfytwomaincriteria:(1)theyshouldbeassimpleaspossibleinordertofacilitatetheirlow-costapplication;and,(2)theyshoulduseconservativeandtransparentapproaches.

1 EB16,Annex1.(http://cdm.unfccc.int/methodologies/ARmethodologies/approved_ar.html)2 EB31,Annex16.(http://cdm.unfccc.int/methodologies/ARmethodologies/approved_ar.html)3 DevelopedbyWinrockInternationalandBioCarbonFund

(athttp://www.winrock.org/Ecosystems/tools.asp?BU=908 and www.carbonfinance.org.)4 DevelopedbyCATIEandBioCarbonFund

(availableatwww.proyectoforma.com and www.carbonfinance.org).

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TheVCS automatically accepts all tools approved by theCleanDevelopmentMechanism (CDM)Executive Board and Joint Implementation Supervisory Committee. Tools referenced in newmethodologiesmayalsobeapprovedundertheVCS,subjecttotheusualdoubleverificationprocess.AllapprovedtoolswillbepostedontheVCSwebsitetofacilitatetheiruse.

D. Community and/or environmental impacts of projects

ItisimportanttorecognizethatAFOLUprojectshavethepotentialtogeneratebothpositiveandnegativesocio-economicandenvironmentalimpacts.Thepositivesocioeconomicandenvironmentalco-benefitsofaprojectcanincreaseitsoverallattractiveness.Incontrast,poorlydesignedand/orpoorlymanagedprojectsmaynegativelyimpacttheenvironmentand/orsocio-economicsysteminwhichtheytakeplace,thusreducingtheiroverallattractivenessandincreasingprojectrisk.Consequently,theVCSrequiresallAFOLUprojectstoidentifypotentialnegativeenvironmentaland/or socio-economic5 impacts and take steps tomitigate themprior to generatingVoluntaryCarbonUnits(VCUs).

TheVCSencouragesAFOLUprojectstouserelevanttoolsandbest-practicestandardstoensurethatprojectsareappropriatelydesigned,andwherepossiblegeneratesocialandenvironmentalbenefits beyond climate change mitigation. For example, projects in their design or earlyimplementationstagemaychoosetobeindependentlyvalidatedundertheClimate,Community&BiodiversityStandards6todemonstrateprojectqualityacrossmultipledimensionsinadvanceofVCSverification.ForestryprojectsmayalsofindtheEnCoFor7CDMtoolkithelpfulforassessingenvironmentalandsocialimpacts.Forforestmanagementprojects,ForestStewardshipCouncil(FSC)8certificationcanprovideassurancethattheprojectismanagedsustainably.Theapplicationofsuchmultiple-benefittoolsandstandardscanresultinholisticprojectswithlowerriskprofilesintermsofcarbonnon-permanenceandleakagethansingle-dimensionprojectsfocusingexclusivelyoncarbonbenefits.9

5 TheVCSencouragesprojectstoundertakeastakeholderconsultationprocesstohelpidentify socio-economicimpactsoftheproject.

6 www.climate-standards.org 7 www.joanneum.at/encofor 8 www.fsc.org 9 Multiple-benefitAFOLUprojectscanmitigateprojectrisksinanumberofways.First,bytakingan

holisticapproachtowardsmeetingthevariousresourceneedsoflocalcommunities(e.g.,by generatingsustainablelivelihoodsandincorporatingagroforestrysystemstomeetlocalwoodand agriculturalneeds),theycanminimizeleakageandnon-permanencerisks,sincelocalpeoplearelesslikelytobedriventoundertakeresource-depletingactivitieson-oroff-site.Second,thecarbonfromprojectsthatrestoreorprotectbiodiverseecosystemsislesssusceptibletoloss,sincespeciesdiversityincreasesresiliencetonaturalthreatssuchaspestsandfire.Finally,projectsthatdelivertangible socialandenvironmentalbenefitstothehostcountryaregenerallypreferredandlesslikelytoface approvalandimplementationroadblocksfromlocalcommunitiesandthegovernment.

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2. Non-Permanence Risk Analysis and Buffer Approach

ForAFOLUprojectstobeeligibleforVCScrediting,theriskofnon-permanence(i.e.,thepotentialreversibility of sequestered/protected carbon)must be addressed. As the VCS does not includemandatory future verification of the carbon benefits previously claimed by verified projects,anaccountingmethodmustbeemployed thatcredibly,yet cost-effectively,dealswith thisnon-permanenceissueupfront.TheVCSapproachforaddressingnon-permanenceistorequirethatprojects maintain adequate buffer reserves of non-tradable carbon credits to cover unforeseenlossesincarbonstocks.ThebuffercreditsfromallprojectsareheldinasinglepooledVCSbufferaccount.

ThenumberofbuffercreditsthatagivenprojectmustdepositintothepooledVCSbufferaccountisbasedonanassessmentoftheproject’spotentialforfuturecarbonloss.Projectproponentsarechargedwith: (1)undertaking the initial risk assessment,whichmust consider both transientand permanent potential losses in carbon stocks; and (2) determining the appropriate bufferreservebasedonguidanceprovidedinthisdocument.Thisselfriskassessmentmustbeclearlydocumentedandsubstantiatedwherepossible.Duringverification,theVCSverifierwillevaluatetheproject’sriskassessmentandadjustitasappropriatebeforedeterminingtheproject’srequiredbufferreserve.

Then a secondVCS verifierwill conduct a desk review10 of this first verifier’s risk assessmentandbufferdetermination,andeithersign-offonthisorworkwiththeoriginalverifiertoreachagreementonwhatconstitutesanappropriatebuffer. IfnoagreementcanbereachedthentheprojectcanopttogowiththemoreconservativeofthebufferdeterminationsorappealtotheVCSOrganizationaccordingtotheappealprocessdefinedinthemostrecentversionoftheVCSProgramGuidelines. HavinganotherVCSverifierperformthesecondcheckwillpromotecross-learningand consistencyamong the verifiersmaking these riskdeterminations, thereby enhancing theeffectiveness,accuracyandfairnessofthebufferapproach.

Futureverificationisoptional,butitisintheinterestsofprojectproponentstoverifyperiodicallyinordertoclaimagreaterpercentageofthecarbonbenefitsheldinthebuffer.Thebuffercanbedrawnuponovertimeasaprojectdemonstratesitslongevity,sustainabilityandabilitytomitigaterisks(see“C.Incentivesforperiodicverification”sectionbelow).

TheadvantageofthisbufferapproachovertemporarycreditingliesinitssimplicityandthefactthatitallowsVCSprojectstoproducepermanentVCUsthatarefullyfungibleregardlessoftheprojecttype(AFOLUorotherwise)generatingthem.

Thecredibilityandenvironmentalintegrityofthebufferapproachrestsonthefactthattherewillbeaperiodic“truingup”oftheoverallVCSbufferpooleveryfewyears.Thissemi-quantitativeassessmentwillbebasedonareviewofexistingVCSverificationreportsforallAFOLUprojectsundertheVCS.Thisprocesswouldflagtheprojectsthathavefailedorunderperformedandthenidentifytheircommoncharacteristics.Thebuffervaluesand/orriskcriteriaforVCSprojectsgoingforwardwouldthenbeadjustedaccordingly,sothatthereisalwaysanetsurplusofcarbonintheoverallbufferaftersubtractingtheactuallossesfromprojects.Forexample,ifitisdeterminedthatadisproportionatenumberofthehigh-riskARRprojectsfailedovertime,thentheassociatedriskcriteriaforsuchprojectscouldbetightened,ortherecommendedbuffervaluescouldberevisedupwards.Thisperiodicassessmentcouldalsoidentifyverifierswhoseworkisnotofacceptablequalityandwhoshouldbesubjecttoreviewandpotentialblacklisting.Operationalproceduresforthe“truingup”willbedefinedbytheVCSBoardwithintwoyearsafterthefirstissuanceofVCUsgeneratedbyAFOLUprojects.

A. Non-permanence risk analysis

BeforeanyVCUscanbeissued,AFOLUprojectsmustundergoariskassessmentbyaVCSverifierwhowillassignariskratingaccordingtothenon-permanenceriskcriteriaoutlinedinthefour

10 Thecostofthedeskreviewconductedbythe2ndverifierwillbecappedat$1,500USD(equivalenttoap-prox.oneday’sworthofwork),sothattheprocessdoesnotbecomeunnecessarilycostlyorburdensometoprojects.

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projectcategorysectionsofthisdocument.Accordingtoitsriskrating,apercentageofthecarboncreditsgeneratedbyaprojectwillbewithheldinthepooledVCSbufferaccounttoinsureagainstpotentialfuturecarbonlossesfromtheprojectandtheprojectpoolatlarge.Thisbufferreservecannot be traded.

ThisriskassessmentmustoccureverytimeaprojectseeksVCSverificationbecausetheproject’sriskprofilemaychange.Importantly,therepetitionoftheriskassessmentprovidesanincentiveforprojectstoenhancetheirriskmitigationstrategiestolowertheirriskratingovertime.Projectsthatreducetheiroverallriskratingwillbesubjecttoasmallerbufferwithholdingrequirement,allowingthemtotradeagreaterpercentageofthetotalcarboncreditsgeneratedbytheproject.

Thegeneralsectionandthefourprojectcategorysectionsofthisdocumentincludeguidanceforverifiersandprojectproponentstousewhendeterminingaproject’sappropriaterisklevel.Besidesevaluatingtheriskfactorsoutlinedintheguidancesectionrelevanttotheprojecttypeinquestion,verifiersandprojectproponentsmustalsoconsiderthefullspectrumofrisksthatcanaffectallprojects,includingthoseoutlinedinthetablebelow.

Risk factors applicable to all project types

Project risk

Riskofunclearlandtenureandpotentialfordisputes

Riskoffinancialfailure

Riskoftechnicalfailure

Riskofmanagementfailure

Economic risk

Riskofrisinglandopportunitycoststhatendangerthefutureviabilityoftheproject

Regulatory and social risk

Riskofpoliticalinstability

Riskofsocialinstability

Natural disturbance risk

Devastatingfirerisk11

Riskofincidenceofpestanddiseaseattacks

Riskofextremeclimaticevents(e.g.floods,drought,winds)

Geologicalrisk(e.g.volcanoes,earthquakes,landslides)

Guidanceondeterminingtheappropriateoverallrisklevelofagivenproject,basedonmajorriskfactorsassociatedwithspecificprojectactivities,isprovidedintableforminthefourprojectsections(ARR,ALM,AFMandRED)ofthisdocument.Inadditiontousingthetabularguidance,assessors(whethertheprojectproponentorverifier)maychoosetoapplythe“risklikelihoodxsignificance”riskassessmentmethodologyoutlinedinAppendixA.Thisapproachprovides

11 Thepotentialriskofcarbonlossisoftenoverexaggerated. Forexample,evenwithadevastatingfireonly a portion of the aboveground forest carbongoesup in smoke – a lotgets left as charredwood,whichispracticallyapermanentstore.Anotherportionisleftasstandingdeadtrees,whichcantakeseveraldecadesormoretodecomposedependingonclimateandsizeoftreesburned.Andinsomecasestherewouldbesalvagelogging,whichputsthewoodintolong-termstorage.FromWinrockstudiesinCaliforniaitisestimatedthatonlyabout50%ofthecarbonislostduetoasevereforestfire,eveniftherewasnoreplantingofthetrees.

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assessorswithaconsistentandcomprehensiveframeworkforevaluatingbothquantitativeandqualitativeriskinanintegratedmannerinordertocometoasingleoverallriskclassificationof“low”,“medium”,“high”or“unacceptablyhigh/fail”.Oneofthebenefitsoftheproposedmethodologyisthattheassessorisforcedtoseparateabsoluteriskfromthewayinwhichaprojectmitigatesthisrisk.Thisapproachprovidestheprojectwithamanagementtooltosupportthereductionofnon-permanencerisksandshouldenableverifierstomoreeasilyjudgechangesinaproject’sriskprofileatsubsequentverifications.

B. Buffer account TheVCSwillmaintainasinglebufferaccountinwhichallbuffercreditsassociatedwithindividualprojectswillbeheld,andfromwhichtheriskoftheentireVCSAFOLUportfoliocanbemanaged(seeCancellationofBufferCreditssectionbelow).ThispooledbufferaccountwillresidewithinthecentralVCStrackingsystem.Inaddition,thebufferassociatedwitheachprojectwillbetrackedbytheregistryholdingtheVCUsgeneratedbytheproject.Thiswillfacilitatethereleaseofthebuffer,astheprojectprovesitselfovertime,wherebysomebuffercreditswillbeconvertedintoVCUsandmadeavailablefortrading–see“Incentivesforperiodicverification”sectionbelow.

Individual countrieswill be allowed tomanage the risk associatedwith their portfolio of VCSprojects(i.e.,byestablishinganationalVCSbufferaccountratherthanparticipatinginthegeneralVCSbufferpool)ifthecountrycandemonstratetotheVCSBoardthatthiscanandwillbedonecrediblyandeffectively.Inthefuture,asappropriateinsuranceproductsbecomeavailable,individualAFOLUprojectscouldhavetheoptionofmanagingnon-permanenceriskthroughinsurance(andpotentiallyotherriskmitigationstrategies)deemedcrediblebytheVCSBoardandcouldbeexemptfromparticipatingintheVCSbufferpool.

C. Incentives for periodic verification

Thebuffercreditsassociatedwithagivenprojectcanbedrawnuponovertimeasanincentiveforfutureverificationandtorecognizethat,astheproject’slongevityisdemonstrated(throughsubsequentverifications),certainprojectriskscanbereduced.Forexample,aprojectentitythathasestablishedasolidtrackrecordofsuccessfullyoperatingagivenprojectforanumberofyearsandcanprovidehistoricperformancedatatoverifiersshouldbeviewedaslowerriskthanasimilarbutlessexperiencedprojectentity.This“longevity-based”riskadjustmentisindependentofthemorespecificriskassessmentthatwillbeconductedateachverificationeventinordertodetermineifanyofthemajorriskfactorsandmitigatingactivitiesassociatedwithaprojecthavechangedsinceitslastverification.

Ifaproject’soverallriskratingremainsthesamefromoneverificationeventtothenext,thenanadditional15%ofitstotalbufferreservewillbereleased11(fromthepooledVCSbufferaccount)infive-yearlyincrementsuponverification,andmadeavailablefortrading.Ifaproject’sriskratingincreasesfromoneverificationeventtothenext,thentherewillbenoreductionofthetotalbufferreserves.Iftheproject’sriskratingdecreasesfromoneverificationeventtothenext,thenthe15%reductionwouldapplytothenewbuffervalues.

Forexample,ifaproject’sfirstriskassessmenttookplaceatyearfive(i.e.,fiveyearsafterprojectstart/implementationdate)anddetermined that itshouldbesubject to30%bufferwithholding,thentheprojectwouldhave15%ofthisbufferreleasedatitsnextverificationatyeartenorlater(i.e.,≥5yearsafterthe1stVCSverification),provideditsriskratinghasnotincreased.Thiswouldmeanthatnow25.5%oftotalcarboncreditsgeneratedbytheprojectwouldhavetobewithheld.Andatyear15(orlater)fromtheprojectstart,atthenextverificationeventtheprojectwouldhave15%ofitsremainingbufferreleasedandsoon.Thefollowingtableillustrateshowthebufferwouldbedrawndownovertimeforaprojectstartingwitha30%buffer.

11 Whenreleased,buffercreditswillbecancelledandconvertedintoVCUsanddepositedintothe registryaccountoftheprojectandmadeavailablefortrading.

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Projectsmaychoosetobeverifiedmoreorlessfrequentlythaneveryfiveyears.Thetotalbuffertobewithheldisbasedonthenumberofyears(brokendowninto5-yearlyincrements)sincetheinitialVCSverification,whichisconsideredthedatewhentheprojectfirstestablisheditstrackrecordforjustifyingthebufferrelease.

AppendixBsummarizesthefinancialimplicationsforprojectssubjecttoVCSbufferwitholdingundervariousscenarios.Dependingontheprojectduration(i.e.,30yearsor70years)andwhetherthepriceofcarbonincreasesovertime,typicalmedium-riskARRandREDprojectswillonlyforgo3%to15%oftheirtotaldiscountedcarbonrevenuesstartingwith20%-30%buffers.

D. Cancellation of buffer credits

The environmental integrityof thebuffer approach is credible only if credits in thebuffer arecancelledwhencarbonislostfromtheproject.Ifnetprojectemissionsexceedbaselineemissions,ornetprojectemissionsremovals(fromsequestration)aregreaterinthebaselinescenario,thenno futureVCUsare issued to theprojectuntil thedeficit is remedied. IfVCUswere issued inpreviousverifications,anamountofbuffercreditsequivalenttotheexcessemissionsorreducedsequestrationisautomaticallycancelledfromtheVCSpooledbufferaccount.Theminimumbuffervalues fro the various project types have been conservatively estimated and set at a level thatshouldbesufficient toprevent thebalanceofcredits in thebufferaccount fromeverbecomingnegative.TheVCSwillperiodicallyreviewtheminimumbuffervaluestoensurethatapositiveandsafebalanceofbuffercreditsisheldintheVCSregistryatalltimes(see“truingup”above). IfaprojectfailstosubmitaverificationreporttotheVCSwithinfiveyearsfromitslatestverification,50%of the credits associatedwith its bufferwill automatically be cancelled.After anotherfiveyears,allofitsremainingbuffercreditswillbecancelled.Ifnosubsequentverificationhasbeenpresentedwithinaperiodof15years,andthecreditingperiodoftheprojecthasnotyetexpired,buffercreditsarecancelledfromtheportfoliobufferaccounttowhichtheprojectbelongsforanamountequivalenttothetotalnumberoftradablecreditsissuedtotheproject.Creditsarecancelledundertheconservativeassumptionthatifaprojectdoesnotverifyasexpectedduringitscreditingperiod,thencarbonmusthavebeenlostinthefield.

Itshouldbenotedthatalthoughcreditsfromthebufferpoolarecancelledtocovercarbonknown,orbelieved,tobelostfromthesystem,theVCUsalreadyissuedtoprojectsthatsubsequentlyfailarenotcancelledanddonothavetobe“paidback”.Asaresult,allAFOLUVCUsgeneratedundertheVCS are considered secure andpermanent,whichprovidesmarket/buyer confidence in thesystem.Thisapproachalsoworksfromanatmosphericintegrityperspectivebecausethebufferpoolwillalwaysmaintainanadequatesurplustocoverunanticipatedlossesfromindividualprojectfailures.AcrosstheentirepoolofVCSAFOLUprojectsthetotalvolumeofrealcarbonbenefitsgeneratedwillalwaysbegreaterthanthetotalnumberofVCUsissued.

Projectsmayclaimthecancelledcreditsinthefuturebysubmittinganewverificationpriortotheexpirationoftheircreditingperiod.

The remaining credit balance of a project’s buffer is automatically cancelled after the projectends.

3. Guidance Regarding Approval of New Methodologies

WhenassessingnewAFOLUmethodologies,VCSverifiersmustusetheguidanceprovidedinthis

Years since 1st VCS verification

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70

Total buffer (% withheld of total carbon credits generated by project)

30.00 25.50 21.68 18.42 15.66 13.31 11.31 9.62 8.17 6.95 5.91 5.02 4.27 3.63 3.08

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documenttodeterminewhethertheproposedmethodologyisacceptableandshouldbeapprovedundertheVCS.

ThefollowingsectionprovidesmethodologicalguidancerelevanttoallAFOLUprojectsandistobeusedinconjunctionwithguidance,foundlaterinthedocument,specifictoeachofthefourprojectcategories.Thisguidanceisnotintendedtotaketheplaceoftheactualdetailedmethodologythatprojectsmustuse.

A. Determining project boundaries Theprojectboundaryisdefinedby:

• Thegeographicboundarywithinwhichtheprojectwillbeimplemented;• Thetypesofgreenhousegases(i.e.,CO2,N2O,CH4) andsourcesandsinkstheprojectwill

affect;and• Thecarbonpoolstheprojectwillconsider.

Geographical area: Projectparticipantsneedtoclearlydefinethespatialboundariesofaprojectsoas to facilitateaccuratemeasuring,monitoring,accounting,andverifyingof theproject. Ingeneral,theprojectboundaryencompassestheareaundercontroloftheprojectparticipantsastheyaredefinedintheprojectdesigndocument(PDD).Whendescribingphysicalprojectboundaries,itisnecessarytoincludethefollowinginformation:nameoftheprojectarea(e.g.compartmentnumber,allotmentnumber,localname,etc.);map(s)ofthearea(paperformatand/ordigitalformat,ifavailable);geographiccoordinates(preferablyobtainedfromaGPS);totallandarea;anddetailsofownership.

Eligible gases: Projectsmustaccountforanysignificantsources(sinksareoptional)ofcarbondioxide (CO2),nitrousoxide (N2O)andmethane (CH4) thatarereasonablyattributabletoprojectactivities—significantsourcesarethosethataccountformorethan5%ofthetotalCO2-eqgeneratedbytheproject.Forexample,projectstargetingsoilcarbonstockincreasesmustalsoaccountforconcomitantincreasesinemissionssourcesofN2OandCH4iftheyexceed5%ofthetotalCO2-eqbenefits12.

Carbon pools: VCSprojectsshouldconsider thesamepoolscoveredunder the IPCCguidelines(i.e.,above-groundbiomass,below-groundbiomass,deadwood,litterandsoilcarbon).Activitiesthat reduce theharvest of timbermayalso reduce theproductionof long-livedwoodproducts.Therefore,accountingforthechangeinwoodproductsmustbeincludedtoavoidoverestimatingthenetGHGbenefitof theproject. The IPCCguidance forgreenhousegas inventories13 setsaprecedentforincludingthispoolifitchanges.TheIFMsectionthatfollowsalsoprovidesguidanceconcerninghowtoincludewoodproductsasacarbonpool.Poolscanbeomittediftheirexclusionleadstoconservativeestimatesofthenumberofcarboncreditsgenerated14.

B. Establishing a project baseline

AFOLUprojects are subject to the same baseline rules as defined by theVCS, applicable to allprojecttypes.

C. Proving additionality

AFOLUprojectsaresubjecttothesameadditionalityrulesandtestsasdefinedbytheVCS,applicabletoallprojecttypes.

12 ThefollowingEBtoolcanbeusedtotestthesignificanceofemissionssources- http://cdm.unfccc.int/EB/031/eb31_repan16.pdf

13 Winjum,J.K.,S.Brown,andB.Schlamadinger.1998.Forestharvestsandwoodproducts:sourcesandsinksofatmosphericcarbondioxide.ForestScience44:272-284;andLim,B.,S.Brown,andB.Schlamadinger.1999.Carbonaccountingforforestharvestingandwoodproducts:areviewandevaluationofpossibleapproaches. EnvironmentalScienceandPolicy2:207-216;AlsoseeChapter12,IPCCGuidelinesforNationalGHGInventories,2006.

14 See,forexample,theA/RCDMtoolfortheconservativeexclusionofsoilorganiccarbonhttp://cdm.unfccc.int/EB/033/eb33_repan15.pdf

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D. Assessing and managing leakage

ManyGHGmitigationactivities (whetherenergy, industrialprocessorAFOLUbased)have thepotential to cause leakage (i.e., offsite impacts leading to increased emissions). Based on themethodological guidance provided for each AFOLU project category, project proponents mustidentifypotentialleakageandmitigateittotheextentpossible.

When calculating the number of carbon credits that should be issued to a given project, it isimportantthatVCSverifierssubtractoutleakageafteraccountingfornon-permanenceriskandothernon-CO2GHGs(whicharenotsubjecttonon-permanencerisk).Thiscalculationprocessisillustratedintheexamplebelow:

Assumetwoprojects(AandB),eachsubjecttoa20%bufferwithholdingrequirementandgeneratingthesameincreaseincarbonstockswithintheprojectboundary,buthavingdifferentimpactsintermsofprojectGHGemissionsandleakage.Thenumberofcreditstoberetainedinthebufferaccountwouldbethesameforbothprojectsbecausethebuffercalculationisbasedononlythecarbonstockchangeswithintheprojectboundary.However,becausethetwoprojectshavedifferentimpactsintermsofprojectemissionsandleakage,thetotalnumberofcreditsissuedwouldbedifferent(seetablebelow).

Project A Project B

tCO2-eq Comment tCO2-eq Comment

Project compared to baseline:

Changeincarbonstocks 1000 non-permanent 1000non permanent

ChangeinGHGemissions(e.g.,fromdecreaseorincreaseinmachineryuse)

50 permanent -50 permanent

Totalprojectvs.baseline 1050 =1000+50 950 =1000-50

Leakage16:

Changeincarbonstocks -150consideredpermanent 100

ignoredwhenpositive

ChangeinGHGemissions -80 permanent -80 permanent

Totalleakage -230 =-150-80 -80 =N.A.-80

Carbon credits issued:

Totalcreditsissued 820 =1050-230 870 =950-80

Creditsheldinbuffer(determinedasapercentageoftotalcarbonstockbenefits)

200 =1000*20% 200 =1000*20%

ImmediatelytradableVCUs 620 =820-200 670 =870-200

16 Carbonstocklossescausedbyleakageeffectsareconsideredpermanent.Someprojectsmayhavebeneficialspillovereffects,butaccountingforpositiveleakageisnotallowed(asinProjectBexample).Leakagecanbeestimatedeitherdirectlyfrommonitoring(andquantifiedinunitsoftCO2-eq),orindirectly(asa percentage of total project carbon benefits)when leakage is difficult tomonitor directly butwherescientific knowledge provides credible estimates of likely impacts (e.g., using the IFM leakage tablesfoundlaterinthisdocument).

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E. Estimating and monitoring net project greenhouse gas benefits

Estimating net emissions reductions and GHG removals. ApprovedVCSAFOLUmethodologieswillprovideguidanceforestimatingnetGHGbenefitsfromprojectactivitiesagainstthebaselinescenario.Projectsmustusefullgreenhousegasaccounting,providingannualestimatesofoverallprojectGHGimpactsexpressedintermsofCO2 equivalentsemployingglobalwarmingpotentials(GWPs)of310forN2Oand21forCH4.

15

Monitoring net emissions reductions and GHG removals. TobeeligibleundertheVCS,AFOLU projects must have robust and credible monitoring protocols as defined in the approvedmethodologies.

F. Crediting period

TheVCScreditingperiodforAFOLUprojectsshouldbethesameasthelifeoftheproject,withaminimumof20yearsandamaximumof100years. The lifeof theproject isdefinedas thetimeframe overwhich the projectwill operate. The projectmust have a robust operating plancoveringthisperiod.

AFOLUprojectsmusthaveaprojectlengthofatleast20yearstobeeligibleforVCScrediting.Shorter-term projects are not eligible since they carry too high a non-permanence risk to beaccommodated under the VCS buffer approach. However, ALM projects focusing on emissionreductionsofN2Oand/orCH4canhaveshorterprojectperiods,sincepermanenceisnotanissue.

AFOLU projects are subject to longer crediting periods than other non-AFOLU projects undertheVCS.Thisisnecessarybecauseitcantakefarlongerformanyforestryprojects,comparedtoenergyandindustrialprojects,toaccumulateasignificantportionofthetotalcarbonbenefitsthattheprojectwillgenerateoveritslifetime.Similarly,theaccrualofsoilcarboninALMprojectstypicallyoccursoveraperiodofseveraldecades,andinfactshort-termprojectscanresultinnetsoilcarbonloss.

15 ItshouldbenotedthattheseGWPsmaybeupdatedovertime,inwhichcasethemostcurrentUNFCCCGWPsshouldbeused.

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Afforestation, Reforestation and Revegetation (ARR)

1. Eligible Activities Eligible activities in the ARR project category consist of establishing, increasing or restoringvegetativecoverthroughtheplanting,sowingorhuman-assistednaturalregenerationofwoodyvegetationtoincreasecarbon(C)stocksinwoodybiomassand,incertaincases,soils.

Duetodifferencesintherespectiveriskprofilesofagricultureandforestry,revegetationpracticesinvolvingwoodyvegetation(e.g.,orchards,agroforestry)shouldbeconsideredunderAgriculturalLandManagement(ALM)guidelinesifthemaincommoditiesproducedareagriculturalinnature(e.g.,fruit,animalfodder).Similarly,forestmanagementpracticessuchasenrichmentplantingandliberationthinningshouldbeconsideredusingthecriteriaspecifiedforImprovedForestManagement(IFM)projects.RevegetationactivitiesthatprimarilytargetwoodybiomassproductionshouldbeconsideredusingtheARRguidelinesthatfollow.ARRprojectactivitiesplanningtoharvesttimberarenotexcludedbecauseharvestingpracticeswillsimplybeincorporatedintotheriskanalysisprocesssurroundingtheissueofnon-permanenceandmustaccountforthecarbonlossesduetoharvesting.ExamplesofenvisagedVCSARRactivitiesincludethe:reforestationofforestreserves;reforestation or revegetation of protected areas and other high priority sites; reforestation orrevegetationofdegradedlands;androtationforestrywithlongharvestingcycles.

TheVCSdoesnotwishtoprovidepotentialperverseincentivesfortheclearingofforestedorotherecologicallyvaluablelandsinordertogeneratecarboncreditsthroughtreeplanting.Therefore,in order tobeeligibleforcreditingundertheVCS,ARRprojectproponentsmustdemonstratethattheprojectareawasnotdeforestedspecificallytocreateVCUs.Specifically,forARRprojects,theprojectproponentmustprovideprooftotheverifierthatthelandhadbeenclearedandusedforaland-usecommonintheregion,withclearancetakingplaceatleasttenyearspriortotheproposedVCSprojectstart.Theburdenofproofrestswiththeprojectproponent.

NoteontimingofVCSverificationsforARRprojects:Thetimingofverificationsshouldbechosensuch that a systematic coincidence of verification and peaks in carbon stocks is avoided. Forexample, verifications should not systematically occur just before timber harvesting activitiesarescheduled,whichwouldgiveanunrealisticallypositivepictureoftheaveragecarbonbenefitsassociatedwiththeproject.

2. Non-Permanence Risk Analysis and Buffer Table


Aswithanycarbonreductionproject,ARRprojectsshouldbeassessedforawidevarietyofrisks,rangingfromthosethataresocio-politicalinnatureatanationalleveltothosethataretechnicalinnatureatthesub-projectlevel.Recognizingthatit isworthconsideringthefullspectrumofrisks,verifiersshouldlookcloselyatprojectlengthwhenassessingtherisksassociatedwithARRprojects.

Project length is considered a factor of paramount importance when assessing ARR projectsbecauseof thebearing ithason the riskofnon-permanence. For example, ifprojects commitonlytooneshortrotation(withashortrotationdefinedasanythinglessthan25yrs),theriskofnon-permanenceisconsiderablygreaterthanifaseriesoflongrotationsisplanned.Projectsthatinvolvetheharvestingofwoodcangenerallybeconsideredtohaveahighernon-permanenceriskthanthosewithoutharvesting.Verifiersmayevaluatesuchriskbylookingattheincentivesto replant in rotation forestry, rotation length, and economic, legal or regulatory incentives tocontinuemaintainingtheforestbeyondthecreditingtime.

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Verifiersshouldassignoneoffourqualitativeclassesofrisk(e.g.,low,medium,high,unacceptablyhigh/fail)toeachoftheriskcategorieslistedinthefollowingtable.Theinteractionbetweenrotationperiodandthelevelofaproject’scommitmenttoreplantingacrosstwoormorerotationperiodshasbeencapturedinthetablebelowasasingleprojectcharacteristic“commitmentperiod”.

• Projectswithrotationperiodsoflessthan25yearsandnocommitmenttoreplantafterthefirstharvestarecharacterizedashavingashort-termcommitmentperiod.

• Projectswithrotationperiodsoflessthan25years,butwithacommitmenttoreplantarecharacterizedashavingamedium-termcommitmentperiod.

• Projectswithrotationperiodsofmorethan25years,butnocommitmenttoreplantarealsocharacterizedashavingamedium-termcommitmentperiod.

• Projectswithrotationperiodsofmore than25yearsandacommitment toreplant,andthosewithprimarilyaforestrestorationandhabitatemphasis,arecharacterizedashavinga long-termcommitmentperiod.

Guidance on risk factors and risk ratings for ARR projects

Risk factorRisk

Rating

Project longevity/Commitment Period

Long-termcommitmentwithharvesting Medium

Medium-termcommitmentwithharvesting High

Short-termcommitmentwithharvesting Fail

Long-termcommitment(i.e.,manydecadesorunlimited)withnoharvesting Low

Long-termcommitmentwithnoharvestinginpoliticallyunstablecountries Medium

Medium-termcommitment(i.e.,afewdecades)withnoharvesting High

Short-termcommitmentwithnoharvesting Fail

Ownership type

EstablishedNGOorconservationagency;owner-operatedprivateland Low

Rentedortenant-operatedland Medium

Uncertaintenurebutwithestablisheduserrights High

Uncertainlandtenureandnoestablisheduserrights Fail

Technical capability

Proventechnologiesandreadyaccesstorelevantexpertise Low

Technologiesproventobeeffectiveinotherregionsundersimilarsoilandclimateconditions,butlackinglocalexperimentalresultsandhavinglimitedaccesstorelevantexpertise

Medium

Financial capacity

Demonstrablebackingfromestablishedfinancialinstitutions,NGOsandgovernments Low

Noexternalfinancing Medium

Management capacity

Substantialpreviousprojectexperience(≥5projects)withon-sitemanagementteam Low

Limitedprojectexperience(<5projects)withon-sitemanagementteam Medium

Limitedprojectexperience(<5projects)withouton-sitemanagementteam High

Future income

Appropriatemanagementplanandfinancialanalysisincludefutureincometofinancefuturemanagementactivities(e.g.carbonfinancetobeusedforprojectmanagement,tendingoperations,etc.)

Low

Futurecostsandincomenotconsidered High

Future/current opportunity costs

Alternativelandusesareunlikelytooccurinthefuture Low

Projectiscompetingwithotherlandusesthatarelikelytobecomemoreattractiveinthefuture

High

Endorsement of project or land-use activity by local or national political establishment

Endorsementgivenandnotlikelytochangeinthefuture Low

Endorsementgivenbutmaybesubjecttochangeinthefuture Medium

Noendorsementgiven High

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Whendeterminingtheappropriateoverallrisklevelofaprojectbasedonthespecificriskfactorslistedaboveandinthegeneralguidancesection,assessors(whethertheprojectproponentorverifier)maychoosetousethe“risklikelihoodxsignificance”riskassessmentmethodologyoutlinedinAppendixAiftheyfindithelpful.Thisapproachprovidesassessorswithaconsistentframeworkforevaluatingbothquantitativeandqualitativerisksinanintegratedmannerinordertocometoadefendableoverallriskclassificationof“low”,“medium”,“high”or“unacceptablyhigh/fail”.

B. Buffer table

The buffer table provides the default buffer percentages forARRprojects associatedwith low,mediumandhighnon-permanenceriskclasses.

Risk Class Buffer Range

High 40-60%

Medium 20-40%

Low 5-20%

3. Methodological Guidance

ThissectionincludesgeneralmethodologicalprinciplesforARRprojectsandreferstoexistingtoolsandguidelines.TherequirementsforARRprojectsareinprinciplesimilartothoseforA/RCDMprojectactivities.

A. Determining project boundaries

Carbon pools included. Eligiblecarbonpoolscomprise:abovegroundbiomass,belowgroundbiomass,deadwood,litter,soilorganiccarbon,andwoodproducts.Poolscanbeomittediftheirexclusionleadstoconservativeestimatesofcarboncredits16. Thefollowingtableprovidesguidanceastowhichpoolsmustbeincludedinthemonitoringplanforthebaselineandproject(Y),whichpoolsaretobeincludediftheirreductionduetotheprojectissignificant(S),andwhichpoolsarestrictlyoptionalalthoughtheircarbonstockincreasesasaresultoftheproject(O).

ARR Carbon Pools

Living BiomassDead Organic

Matter Soil Wood

productsAboveground woody

Aboveground non-woody

Below-ground

LitterDead wood

Y O/S Y O/S O/S O/S O


General guidance concerning the determination of baselines, applicable to all project types, isdetailedintheVCS.Inaddition,forARRprojectsthe(ex-ante)determinationandquantificationofthebaselinescenariomustfolloweitherestablishedIPCCguidanceonthetopicorapprovedA/RCDMmethodologies.Inthecaseofemissionsbysourcesoccurringunderthebaselinescenario,theseemissionscanbeestimatedbyreferringtotherespectiveguidanceintheIPCCapprovedA/RCDMmethodologies,takingintoaccounttheirapplicabilityconditions.

C. Proving additionality (see overview general AFOLU section)

16 See, e.g. theA/RCDMtool for the conservative exclusionof soil organic carbonhttp://cdm.unfccc.int/EB/033/eb33_repan15.pdf

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InthecontextofARRprojects, leakageisdefinedasanyincreaseingreenhousegasemissionsthat occurs outside of a project’s boundary, but ismeasurable and attributable to its activities.Such impactscanresult from,butarenot limitedto, the:shiftingofgrazinganimals,shiftingofhouseholdsorcommunities,shiftingofagriculturalactivities,shiftingoffuelwoodcollection,increaseduseofwoodenfenceposts,andemissionsfromtransportationandmachineryuse.Therequirements forassessingandmanaging leakage inARRprojectsare, inprinciple,similar tothoseforA/RCDMprojectactivities.

• Ifdeforestation increasesoutsideofaproject’sboundarybecause theprojecthassimplydisplaced land-clearingactivities toanewarea, then the effectsof thisdeforestationonallcarbonpoolsmustbeassessedandtakenintoaccountwhencalculatingnetemissionreductions;

• If fuelwood collection or similar activities (e.g., grazing) increase outside of a project’sboundarybecausetheprojecthassimplydisplacedtheseactivitiestoanewarea,then,aslongastheactivitiesarenotsignificantlydegradingtheforest(i.e.theextractedvolumeresults in emissions equivalent to less than 5% of total GHG removals by sinks), onlytheportionofthegatheredwoodthatisnon-renewablemustbeassessedandtakenintoaccountwhencalculatingnetemissionreductions.Inthecasethatforestsaresignificantlydegraded,theeffectsofthisdegradationonallcarbonpoolsmustbeassessedandtakenintoaccountwhencalculatingnetemissionreductions(seemethodsforParticipatoryRuralAppraisal(PRA)andEq.3.2.8forfuelwoodgatheringasoutlinedinIPCCGPG2003:http://www.ipcc-nggip.iges.or.jp/public/gpglulucf/gpglulucf.htm).

• The determination and quantification of off-site GHG impactsmust follow the relevantIPCCguidanceand/oruseapprovedA/RCDMmethodologiesapplicableunder thegivenconditionsofaproject.Verifiersandprojectproponentscantestthesignificanceofoff-siteclimateimpactsusingthetooldesignedforthispurposeintheA/RCDMmethodologies17. Insignificantoff-siteclimateimpactscanbeexcluded.


Estimating net emissions reductions and GHG removals. Emissionssourcesthatmustbeconsideredwhen calculating net emissions reductions for ARR projects include, but are not limited to:emissionsfrombiomassburningduringsitepreparation;emissionsfromfossilfuelcombustion18;directemissionsfromtheuseofsyntheticfertilizers19;andemissionsfromN-fixingspecies(CDMEBtoolcurrentlybeingprepared).

Differentcalculationmethodologiesmustbeusedwhencalculatingnetemissionsreductionsforactivitieswithandwithouttreeharvesting.Projectsharvestingtreesmustdemonstratethatthepermanenceoftheircarbonstockisassuredandmustputinplaceamanagementsystemtoreducetheriskoflosingthecarbonduringafinalcutwithnosubsequentreplantingorregeneration.Inthecaseofrotationforestryprojects,themaximumamountofcarboncreditstobeassignedtotheprojectwillbedeterminedbythelong-termaverageofthecarbonstoredintheselectedcarbonpools,adjustedforbufferwithholdings,projectemissionsofN2OandCH4,andleakage.

The(ex-ante)determinationandquantificationoftheprojectscenarioshouldfollowtheguidanceprovidedbytheIPCCorapprovedA/RCDMmethodologies,accountingforspecificprojectconditions.Ingeneral,itisrecommendedthatnationalorregionalbiomasstablesbeusedincalculations.Additionally,theprojectproponentshouldusethefollowingguidanceforquantifyingspecificcarbonpools:

17 http://cdm.unfccc.int/EB/031/eb31_repan16.pdf 18 Fortheirquantification,see,e.g.,http://cdm.unfccc.int/EB/033/eb33_repan14.pdf 19 Fortheirquantification,see,e.g., http://cdm.unfccc.int/EB/033/eb33_repan16.pdf

192021

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19

• Litter–seeIPCC2006GLforAFOLU

• Deadwood – see IPCC 2006GL forAFOLU,with the assumption that this increase incarbonstockoccursoverthelifetimeoftheproject

• Soil–seeIPCC2006GLforAFOLU,withtheappropriatecalculationsfortheamountofsoilorganiccarboninnon-forestlandsasmentionedfromelsewhereinthesamedocument.

• Below-ground biomass – estimated using species-dependent root-to-shoot ratios or theCairnsequations(seeIPCC2006GLforAFOLU).

Toreducethecostofcarbonmonitoringincaseswheregoodgrowthtablesareavailableandthereisahightreesurvival-rate,carbonstocksofabove-groundbiomasscanbeconservativelyestimatedasfollows:

• Forplantations:theprojectproponentsmustdemonstrate90%seedlingsurvivaltwoyearsafterplantingandmayusenationalorregionalvolumeorbiomasstablesforthelowestsiteclassplantationsforthespeciesplanted.Ifplantationtablesarenotavailable,thennaturalregenerationtablesmaybeused.

• Fornaturalregeneration:theproponentsmayusenationalorregionalvolumetablesforthelowestsiteclassnaturalregenerationforthespeciesplanted.Ifnaturalregenerationtablesarenotavailable,thenplantationtablesmaybeusedbut10yearsmustbeaddedtotheageofthestand(s).

• Theproponentsmayusehighersiteclassyieldtables if theycandemonstratethroughmeasurementthatthetreesarebehavingasexpectedonthehighersiteclassyieldtable.

Toquantifyemissionssources,projectsmustfollowtherespectiveguidancebytheIPCC,approvedA/RCDMmethodologies,orspecifictoolsapprovedbytheExecutiveBoardoftheCDM.Twooptionsareavailabletoprojects:(1)Theymayworkwithanapprovedmethodology(CDMA/Randothers),inwhich case the boundary description and its justification defines the list of emissions to beconsideredandtested;or,(2)Theymaydeveloptheirownmethodology,inwhichcasetheymust:justify the list of emissions sources to be considered and tested; justify the exclusion of otheremissionsources;andprovethatithasassessedandmanagedallsignificant20sourcesofleakage.

Monitoring net emissions reductions and GHG removals. Monitoringandex-postquantificationof the project scenario (including off-site climate impacts)must follow the applicableguidanceavailableinapprovedA/RCDMmethodologiesand/orIPCCdocuments.

F. Crediting period (see general AFOLU section)

20 The followingEB tool canbeused to test the significanceof emissions sources -http://cdm.unfccc.int/EB/031/eb31_repan16.pdf

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Agricultural Land Management (ALM)

1. Eligible Activities

Landuseandmanagementactivitiesthathavebeendemonstratedtoreducenetgreenhousegas(GHG)emissionsoncroplandandgrassland(seeIPCC2006GLforAFOLU)byincreasingcarbon(C)stocks(insoilsandwoodybiomass)and/ordecreasingCO2,N2Oand/orCH4emissionsfromsoilsareeligibleforcertificationundertheVCSasALMprojects.Threebroadcategoriesofactivitiesareincluded:(A)improvedcroplandmanagement;(B)improvedgrasslandmanagementand,(C)croplandandgrasslandland-useconversions.Landconversionsofcroplandorgrasslandtoforestvegetation are considered ARR activities and are not discussed here21. Projects developed foragriculturalbiofuelproductionasawaytogenerateVCUsasfossil-fueloffsetsareNOTincludedintheAFOLUsectionoftheVCSguidanceandarethusnotaddressedhere.

A. Improved cropland management activities

Improved croplandmanagement activities include the adoption of practices that demonstrablyreducenetGHGemissionsfromadefinedlandareabyincreasingsoilCstocks,reducingsoilN2O emissions,and/orreducingCH4emissions.22

• SoilCstockscanbeincreasedbypracticesthatincreaseresidueinputstosoilsand/orreducesoilCmineralizationrates.Suchpracticesinclude,butarenotlimitedtothe:adoptionofno-till;eliminationofbarefallows;useofcovercrops;creationoffieldbuffers(e.g.windbreaks,riparianbuffers);useofimprovedvegetatedfallows;conversionfromannualtoperennialcrops; and introduction of agroforestry practices on cropland. Where perennialwoodyspeciesareintroducedaspartofcroplandmanagement(e.g.fieldbuffers,agroforestry),Cstorageinperennialwoodybiomassmaybeincludedaspartofemissionreductioncredits.

• ReducingsoilN2OemissionsgenerallyinvolvesenhancingtheNuseefficiencyoftargetedcropstoreducetheamountofNaddedasfertilizerormanure.Examplesofspecificpracticesinclude:improvedtimingofapplication(e.g.,splitapplication),improvedformulations(e.g.,slowreleasefertilizers,nitrificationinhibitors)andimprovedplacementofN.

• ReducingsoilCH4emissionsisanapplicablepracticeprimarilyinfloodedricecultivation.PracticesthatreduceCH4emissionsinclude:improvedwatermanagement;andtheuseofricecultivarswithreducedcapacityformethaneproductionandtransport.

B. Improved grassland management activities

TheseactivitiesincludetheadoptionofpracticesthatincreasesoilCstocksand/orreduceN2O and CH4emissions.

• Soil C stocks can be enhanced by practices that increase belowground inputs or slowdecomposition. Such practices include: increasing forage productivity (e.g. throughimprovedfertilityandwatermanagement); introducingspecieswithdeeperrootsand/ormorerootgrowth;andreducingdegradationfromovergrazing.

• Reducing N2O emissions involves N fertilizer management practices similar to thoseoutlinedaboveforcroplandmanagement.

• Reducing fire frequency and/or intensity can reduce N2O and CH4 emissions fromburning.

• ReducingemissionsofCH4 and N2Ofromgrazinganimalscanbeachieved,inter alia,byimprovedlivestockgenetics,improvingthefeedquality(e.g.,byintroducingnewforagespecies,orbyfeedsupplementation);and/orbyreducingstockingrates.Ifthesepracticesinvolvedisplacementofanimalstooutsidetheprojectarea,leakageshouldbeaccountedfor,particularlyifdisplacedanimalscauseareductionincarbonstocksoutsidetheprojectarea

21 Revegetationpracticesinvolvingwoodyvegetation(e.g.orchards,agroforestry)willbeconsidered underALMguidelinesifthemaincommoditiesproducedareagriculturalinnature(e.g.,fruit,animalfodder).Ifrevegetationactivitiesmainlytargetwoodybiomassproduction,however,theyshouldbetreatedasARRactivities,andrefertotheguidanceprovidedinthatsectionofthisdocument.

22 GuidancerelatingtomanuremanagementisprovidedelsewhereintheVCS(i.e.,outsideofAFOLUscope).

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C. Cropland and grassland land-use conversions

CroplandconversiontoperennialgrassvegetationislikelytobethedominantlanduseconversionforALMprojects.However,somegrasslandconversionstocroplandproduction(e.g.,introducingorchardcropsoragroforestrypracticesondegradedpastures)couldincreasesoilCstocks(therebyreducing net GHG emissions). Under such conditions, these conversion practices would alsobe considered eligible for project certification. However, projects converting grasslands mustdemonstratethattheydonotharmlocalecosystemsasoutlinedinthegeneralAFOLUguidance(seesection“B.Communityand/orenvironmentalimpactsofprojects”).

• The conversion of cropland to perennial grasses can increase soil carbon by increasingbelowgroundCinputsandeliminating/reducingsoildisturbance.

• Conversionofdrained,farmedorganic(e.g.,peat)soils23toperennialnon-woodyvegetation,alongwithreductionsoreliminationofdrainage,canreduceemissionsofCO2 and N2Ofromorganicsoils.However,potentialincreasesinCH4emissionswouldneedtobeaccountedfor.

• ThecessationorreductioninNfertilizerfromcroplandconversiontograsslandset-asideshouldnotbeconsideredaneligiblepracticeforreducingN2Oemissionbecausethereisa high risk of leakage (e.g., theN fertilizer is simply displaced to cropland productionelsewhere).



Ingeneral,carbonstockaccumulations(inparticularsoilC)associatedwithALMactivitiesarelessvulnerabletonaturaldisturbancesthanarecarbonstocksassociatedwithotherlanduseactivitycategories.TheprimaryriskfactorsforALMactivitiesarethoseassociatedwithmaintainingaproject’seconomicviabilityandlongevity.Forexample,ifchangingeconomicconditionsincreasetheopportunity cost ofnotproducinganalternative crop, landmanagersmight revert topre-projectconditions,leadingtothelossofCstocks.

Projectdevelopersandverifierswillevaluateeachproject’scharacteristicsandwilldetermineitsriskratingaccordingly.The following tableprovidesguidanceconcerning thekeyrisk factorsandrelativeriskratingsforALMprojects.Theriskfactorsconsideredmostsignificantintermsofpotentiallossofgreenhousegasmitigationincludediscontinuationofpracticesarisingfroma change in land tenure (ownership type) or a change in potential net financial returns. Forexample,ifcostsofmaintainingthepracticeescalateoriftheeconomicreturnsfromanalternativeproductincrease,landmanagersmaybetemptedtoabandontheC-conservingorGHGmitigatingpractice.

Guidance on risk factors and risk ratings for ALM projects

Risk factorImprovedcroplandmanagement

Improvedgrasslandmanagement

Cropland&grasslandconversions

Ownership type

EstablishedNGOorconservationagency;owneroperatedprivateland

Low Low Low

Rentedortenant-operatedland Medium Medium Medium

Uncertain land tenure High High High

Unproven Technologies and practices

23 Organicsoilsreferstopeat-ormuck-derivedsoilswithhighorganicmattercontent,andnotto ‘organicallyfarmed’soils.

25

25

22

Useofprovenpracticesverifiedforlocalconditions

Low Low Low

Useofproventechnologyshowntobeeffectiveelsewhere,butnotverifiedlocally

Medium Medium Medium

Useoftechnologieswithminimalpreviousapplicationinprevalentenvironment

High High High

UseoftechnologieswithoutanyscientificbasisforanunderlyingmechanismofCstorageorgreenhousegasmitigation

Unacceptable Unacceptable Unacceptable

Change in net financial returns from displaced or avoided commodity production, or from increased costs26

<10%reduction Low Low Low

10-20%reduction Medium Medium Low

>20%reduction High High Low

Competitive land uses in immediate vicinity (within 100 km radius) 27

Negligiblenetlossesofagriculturalland(e.g.conversiontosettlement/urban,otherlanduses)

Low Low Low

Discerniblebutlimited(1-2%/yr)netlossofagriculturalland

Low-Medium

Low-Medium

Low-Medium

Significant(>2%/yr)netlossofagriculturalland Low-High Low-High Low-High

Incidence of crop failure from severe drought or insect/diseases

Infrequent(<1in10yrs) Low Low Low

Frequent(>1in10yrs) Medium Medium Low

Project longevity28

Projectplananddemonstratedcommitmenttolong-termprojectmaintenance(>40yr)

Low Low Low

Short-termprojectcommitment(20to40years) Low Low High

Minimaldurationofcommitment(<20years) Unacceptable Unacceptable Unacceptable


26This risk factor only applies to activities whose financial viability is largely dependent on continuedproductionofagriculturalcommodities.Forexample,landrestorationactivitiesorconservationset-asidesinconjunctionwithNGOsorgovernmentalentitiesmaynotbesubjecttothesefinancialrisks.

27Relative risk ratings for competitive land uses will depend, in part, on ownership attributes, wherecommercial agricultural operations are likely to havehigher risk in areaswith competitive landusesandincreasinglandvalues,whereaslandconservationactivities (e.g.byNGOs,government)mayhavealowriskinspiteofstrongcompetitionfromotherlanduses. Otherfactors,e.g.,proximitytourbandevelopmentandlandscapeattributes,willalsoimpactthisriskfactor,suchthattheriskanalysisshouldconsidercompetitivelandusesinthecontextofproject-specificcircumstances.

28Projectlongevitycriteriadonotapplytoemissionreductionactivities(e.g.,toreduceN2OandCH4)asthesearenotsubjecttobufferwithholding.

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B. Buffer table

Thebuffer tableprovides thedefaultbufferpercentagesassociatedwith low,mediumandhighnon-permanenceriskclassesfordifferentALMactivities.Itshouldbenotedthatthepermanenceriskassessmentappliesonlytoemissionreductionsorremovals(throughsinks)ofCO2.ActivitiesproducingemissionreductionsofN2O,CH4,orfossil-derivedCO2arenotsubjecttothepermanencebuffermechanism,sincetheseGHGbenefitscannotbereversed.

Risk ClassImproved cropland management

Improved grassland management

Cropland & grassland conversions

High 30-60% 25-50% 25-50%Medium 15-30% 15-25% 10-25%Low 10-15% 10-15% 5-10%



• Eligible gases. ReductionsinCO2(includingthosefromincreasedCstocks),N2OandCH4

areconsideredeligibleforcreditingunderALMprojectactivities.

• Carbon pools included. SoilcarbonistheprimarypoolofconcernforALM,althoughactivitiesthatincludeawoodybiomasscomponent(e.g.,agroforestry,silvipasture,orchards)alsoneedtoconsiderabovegroundwoodybiomassCstocks.Thetablebelowprovidesguidanceastowhichpoolsmustbeincludedinthemonitoringplanforthebaselineandproject(Y),whichpoolsneednotbemeasuredbecausetheyarenotsubjecttosignificant24changesunderALMactivitiesorare transient innature (N),andwhichpoolsareoptional formeasurement,dependingontheALMpracticesinvolved(O).

ALMCarbonPools

LivingBiomassDeadOrganic

MatterSoil

WoodproductsAboveground

woodyAbovegroundnon-woody

Below-ground

LitterDeadwood

Y N O N N Y O


General guidance concerning the determination of baselines, applicable to all project types, isdetailedintheVCS.Inaddition,forALMprojects,pre-projectCstocksforbaselineestimationcanbedeterminedfrommeasuredinventoryestimatesusingapprovedmethodologiesand/oractivity-based estimationmethods (e.g. IPCC2006GL), considering current and previousmanagementactivities.Ifactivity-basedmethodsareusedforsoilCstocks,stockestimatesshouldbedeterminedrelative to the computedmaximum C stocks that occurred in the designated land areawithintheprevious10years.25MinimumbaselineestimatesforN2OandCH4emissionsshouldbebasedonverifiablemanagementrecords(e.g.fertilizerpurchaserecords,manureproductionestimates,livestockdata)averagedoverthe5yearspriortoprojectestablishment.

24ForVCSAFOLUprojects,GHGsourcesthataccountformorethan5%ofthetotalCO2-eqbenefitsgeneratedbytheprojectareconsidered“significant.”ThefollowingCDMEBtoolcanbeusedtotestthesignificanceofemissionssources:http://cdm.unfcc.int/EB/031/eb31_repan16.pdf

25Forexample,ifCstocksontheprojectareawere100tonnesC/hain2002,thendeclinedto90tonnes/haby2007afterintensivetillage,theminimumbaselineCstockforaprojectestablishedin2008wouldbe100tonnes/ha.

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C. Proving additionality (see general AFOLU section)


LeakagepotentialshouldbeassessedforallprojectactivitiesusingfullGHGaccountingprinciplesand,wheresignificant,estimatedleakagemustbedeductedfromthenetCO2benefitsgeneratedbytheproject.ForVCSAFOLUprojects,GHGsourcesthataccountformorethan5%ofthetotalCO2-eqgeneratedbytheprojectareconsidered“significant.”PotentialsourcesofleakageforALMprojectsarelistedbelow:

• Reductions in C stocks outside the project area due to the displacement of pre-projectactivities.

• IncreasesinN2O,CH4andproduction-relatedfossilCO2emissionsoutsidetheprojectareaduetothedisplacementofpre-projectactivities.

• OtheremissionsofCO2 fromfossilfuelusethatareattributabledirectlytotheprojectbutoccuroutsideofprojectboundaries;forexample,thetransportationofproductsfromtheprojectthatareadditionaltothoseaccountedforinthebaseline.

ForALMprojectsinvolvingcroplandorgrasslandmanagementactivities,theleakagerisksarelikelytobenegligiblebecausethelandisbeingactivelymaintainedforcommodityproduction.

Forprojectsinvolvinglandset-asides,i.e.,croplandorpasturesconvertedtograsslandconservationset-asides, leakagecouldoccurduetodisplacementofpre-projectactivities toareasoutside theprojectarea.Forsmall-scalelandset-asides(<10,000ha),leakageduetodisplacedactivitiescanbeassumedtobezero.Projectsabovethissize,shouldestimateleakagefordisplacementofpre-projectactivities,takingintoaccountpossiblereductionsinbiomass,Cstocks,andemissionsofN2O,CH4andfossilCO2emissions.Guidanceonaccountingforleakageassociatedwithshiftingof pre-project activitiesdue to land conversions fromagriculture tograsslandare functionallysimilartoconversionoflandtoforestvegetationunderARR(seeARRsectionforreferencestoCDM-derivedguidance). Alternatively,projectsshouldconsider includingleakagemanagementzones26aspartoftheoverallprojectdesign.


ProjectsthattargetsoilCstockincreasesmustaccountfor,wheresignificant,concomitantincreasesin N2OandCH4andfossil-derivedCO2;similarly,projectstargetingN2Oemissionreductionneedtoaccountfor,wheresignificant,reductionsinsoilCstocks.Inaddition:

• If livestock grazing occurs, projects must account for CH4 emissions from entericfermentationandCH4 and N2Oemissionsfrommanure.

• Where land-use conversion requires intensive energy or infrastructure inputs (e.g.,establishmentofirrigationordrainagesystem),theemissionsassociatedwiththeconversionprocessmustbeincludedinanyassessmentofoverallemissions.

• ReducedemissionofCO2asaresultofenergy-conservingpractices(e.g.,adoptingno-tillcanreducefueluse)canbeincludedasapartofthenetGHGreductionestimate.

Measurementofcroplandandgrasslandsoilmanagementprojectscanincludeactivity-basedmodelestimatesordirectmeasurementapproachesoracombinationofboth.TheIPCC2006Guidelinesfor National Greenhouse Gas Inventories (http://www.ipcc-nggip.iges.or.jp/public/2006gl/index.htm)providesguidanceforthree‘tiers’ofestimationmethods;withprogressivelyhighertiernumber,datarequirementsandcomplexityincreasebutuncertaintyisreduced.

26Leakagemanagementzonescouldminimizethedisplacementoflanduseactivitiestoareasoutsideofaproject’sboundariesbyprovidingforthemaintenanceofgoodsandservices(e.g.agriculturalproducts)within areas under the control of project participants. To avoid displacing activities to new (possibly unmanaged lands),moreefficientproductionperunitareaof landwouldberequiredwithina leakage

managementzone.

Leakagemanagementzonescouldminimizethedisplacementoflanduseactivitiestoareasoutsideofaproject’sboundariesbyprovidingforthemaintenanceofgoodsandservices(e.g.agriculturalproducts)within areas under the control of project participants. To avoid displacing activities to new (possibly unmanaged lands),moreefficientproductionperunitareaof landwouldberequiredwithina leakagemanagementzone.

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Tier1methodsinvolvetheuseofIPCCequationsanddefaultstockchangeandemissionfactorsspecified for broadly defined climate, soil and land use and management conditions. Tier 2methodsusetheIPCCequations,butwithmoreregionallyrelevantstockchange/emissionfactors.Estimationofstockchangeand/orsoilemissionfactorsforTier2methodsshouldbebasedondatafromreplicatedfieldexperimentshavingadurationofatleastfiveyears(preferablylonger),forclimate and soil conditions andmanagement activities representative of the project conditions,usingestablished,reliablemeasurementmethods.StockchangefactorsforsoilCorwoodybiomassCthatarebasedonexperimentsof lessthan20yrsdurationshouldbeprojectedovernomorethan20years.Tier3methodsusemorecomplex,dynamicmodelswhichhavebeenvalidatedforconditionsrepresentativefortheprojectarea,and/ordirectmeasurementsofCstockchangesand/or N2OandCH4madeontheprojectarea.Tier3model-basedestimatesandmeasurementsshouldspantherangeofsoil,climateandlanduse/managementconditionsfortheentireprojectarea.

Measurementsshouldbebasedonrandomizedsampling,usingestablished,reliablemethods,withsufficientsamplingdensitytodeterminestatisticallysignificantchangesata95%confidencelevel.SoilCstockchangefactorsshouldbebasedonmeasurementsofsoilCstockstothefulldepthofaffectedsoillayers,accountingfordifferencesinbulkdensityaswellasorganicCconcentrations.Measurements to estimate project-specific N2O and CH4 emissions factors should be based onscientificallydefensiblemeasurementsofsufficientfrequencyanddurationtodetermineemissionsforafullannualcycle.

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Improved Forest Management


Activitiesrelatedtoimprovedforestmanagementarethoseimplementedonforestsremainingasforests(seeIPCCAFOLU2006report27).Variousforestmanagementactivitiescanbechangedthatcouldincreasecarbonstocksand/orreduceGHGemissions,butonlyasubsetoftheseactivitiesmakeameasurabledifferencetothelong-termincreaseinGHGbenefitscomparedtobusiness-as-usualpractices.Thefollowingimprovedforestmanagementpractices,inbothuplandforestsandwetlandforests(e.g.peat-swamps,mangroves,etc.),qualifyaseligibleactivitiesundertheVCS:

1. Conversion from conventional logging to reduced impact logging (RIL) typicallyreducescarbonemissionsduring timberharvestingdue to: reductions indamage toothertrees(byimplementingdirectionalfellingorvinecutting,etc.);improvedselectionoftreesforharvestingbasedoninventoriedknowledgeconcerningtreelocationandsize;improvedplanningofskidtrails(inpeatswampforeststhiscouldincludeavoidingtheuseofcanalstoextractthelogs—thecanalsdrainthepeatandincreaseCO2 emissions)androads;and,thereducedsizeofloggingroads.However,reducedimpactloggingcouldalsopotentiallyreduce theflowof timberoff thesite, therebycausing leakagethroughthedisplacementofloggingactivitytootherforestareas.Thisleakageshouldbeaccountedforusingtheleakagetablebelow.

2. Conversion of logged forests to protected forests (LtPF) includes: (1) protectingcurrentlyloggedordegradedforestsfromfurtherlogging;and,(2)protectingunloggedforeststhatwouldbeloggedintheabsenceofcarbonfinance.Eligibleareasfortheseactivitiesincludeuplandforests,lowlandforestsandwetlandforests(e.g.peat-swampforests,mangroves,etc.).Generallyspeaking,convertingloggedforeststoprotectedforestsreducesemissionscausedbyharvestingandincreasesthecarbonstockastheforestre-growsand/orcontinuestogrow.

3. Extending the rotation age of evenly aged managed forests (ERA) (e.g., pine orteakplantations)alsocanincreasecarbonstocks.Treesaretypicallyharvestedataneconomicoroptimalrotationage;extendingtheageatwhichthetreesarecutincreasestheaveragecarbonstockontheland.Thereisnofixedperiodofyearsoverwhichtheextensionshouldoccur,butgenerallythelongertheperiod(ontheorderof5-20years),themoretheaveragecarbonstockincreases.

4. Conversion of low-productive forests to productive forests (LPtPF), orimprovingthestockingofpoorlystockedforests,canalsoincreasecarbonstock. Lowproductivityforestsusuallysatisfyoneofthefollowingconditions:theyqualifyasforestasdefinedby the host country, but do not containmuch timber of commercial value; they areeitherdegradedorintheprocessofdegradingduetofrequentdisturbance(fire,animalgrazing,fuelwoodgathering,etc.);ortheyhaveaveryslowgrowthrateorlowcrowncover. Projectactivitiesmayincludetheintroductionofothertreespecieswithhighertimber value or growth rate, the mitigation of disturbance events, the adoption ofenrichmentplantingtoincreasethedensityoftrees,and/orotherforestmanagementtechniques(e.g.,fertilization,liming)toincreasecarbonstocks.

27 http://www.ipcc-nggip.iges.or.jp/public/2006gl/index.htm32

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Guidelinesforotheractivitiesthatcouldincreasecarbononsite(e.g.,actionstoreduceforestfires)arenotincludedinthisdocumentbecauseofunresolvedscientificandtechnicalchallenges(e.g.,toestablishacrediblebaselineiscomplex).However,workontheseissuesisongoingand,astheyareresolved,theVCSwillconsidercoveringsuchnewactivitiesinfutureversionsoftheVCS.



Thefourriskfactorsconsideredmostsignificantintermsofpotentiallossofcarbonbenefitsare:firepotential,timbervalues,illegalloggingpotentialandunemploymentpotential.Forprojectswithhigh(orrising)timbervalues,thereisariskthatprojectimplementerswouldbetemptedtoharvestsomeofthevaluablespecies.Ifprojectscreateunemployment,thenthereisariskthatthosewhohave lost their employmentwill resort to illegal activities suchas loggingor forestconversiontosupplementtheirincome,particularlyinLtPFactivity.

Guidance on risk factors and risk ratings for IFM projects

Risk factors

Conventional to Reduced Impact Logging (RIL)

Convert logged to protected forest (LtPF)

Extend rotation age (ERA)

Conversion of low-productive forests to productive forests (LPtPF)

Devastating Fire Potential

Lowtomediumfirereturninterval(>50years)

ZeroLow to Medium

ZerotoLow Low

Highfirereturninterval(<50years)…

…withfirepreventionmeasuressuchasfuelremoval,firebreaks,firetowers,firefightingequipment

…withNOsignificantfirepreventionmeasuresinplace

LowLow to Medium

Low to Medium

Low to Medium

High High High High

HighTimberValue

Highlyvaluablespeciesonsite,withstronglikelihoodthatthetimbervalueincreasesovertimeand…

…thereisnoforestcertification

…theprojectiscertifiedbyarecognizedforestcertificationcompany

Zero Medium

ZerotoLow(ifextendrotation ≤5 yrs)

Medium

Zero N/AZeroforanyextensionperiod

Low

Illegal Logging Potential

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Presenceofillegallogginginarea(locationandintensityinrelationtotheprojectareaaffectsactualriskvalue)…

…withforestguards

…withoutforestguards

Zerowithnochangeinharvestintensity*

Low Zero Low

Mediumwithchangeinharvestintensity(potentiallymore timber toharvestillegally)

High Low Medium

Unemployment Potential

Alternativelivelihoodopportunitiesforlocalworkforcetomitigateriskofunemployment:

Few

Many

ZerotoLow-becauseexpectnochangeinlaborneeds

MediumtoHigh

Low(extendrotation ≤5 yror>5yr),becauseexpectnochangeinlaborneeds

ZerotoLow-becauseexpectnochangeinlaborneeds

Zero Low Zero Zero

*Harvest intensity of timber extraction (number or m3 of commercial species) per unit area per year

Theabovetableprovidesguidanceforverifierstousewhenassessingtheriskofcarbonreversal(non-permanence)associatedwithspecifickeyfactorsandconditionsexistingattheproject-level.Becausethenon-permanenceriskfactorspresentedherearethemostsignificantones,whenusingthistabletoassesstheriskofnon-permanence,thefactorwiththehighestrankdeterminestheproject’soverallriskratingandshouldbeusedtodeterminetherequiredbuffer.

For example, if fire has a high return interval frequency and no fire prevention activities arepresent, thenall threeproject typeswouldberankedhighfor this factorandhighoverall. Incontrast,foraLtPFprojectwherefirewasnotafactoratall,buttherewerefewopportunitiesforalternativelivelihoods,thentheoverallrisktopermanenceismediumtohighdependingontheemploymenthistoryofthepriorloggingoperation.


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B. Buffer table

Thefollowingtableprovidesguidanceforverifierstousewhendeterminingwhatportionofthecarboncreditsgeneratedbytheprojectshouldbewithheldasabufferreserve.ThetableisbrokendownbyriskclassandIFMprojectactivitytype.

Risk Class Conventional to RIL

Convert logged to protected forest

Extend rotation age

Conversion of low-productive forests to productive forests

High 40-60% 40-60% 40-60% 40-60%Medium 15-40% 15-40% 15-40% 15-40%Low 5-15% 5-15% 5-15% 5-15%



• Eligible Gases. CO2istheprimarygreenhousegasinvolvedinimprovedforestmanagementprojects.Additionally,extendingrotationperiodscouldproduceincreasesinN2OandCH4 ifbiomassleftonsiteafterharvestingispiledandburnedasafirepreventativemeasureinwildfire-proneareas.EmissionsofN2O wouldalsoneedtobeaddressedifanynitrogenfertilizerwasappliedduringthecreditingperiod

• Carbon pools included. Forcarbonaccounting,allpoolsthatareexpectedtodecreasetheircarbonstocksabovea de minimis (lessthan5%oftotalincreaseincarbonstock)asaresultofprojectactivitiesmustbemeasuredandmonitoredinboththebaselineandprojectcase.28 Thefollowingtableprovidesguidanceastowhichpoolsmustbeincludedinthemonitoringplanforthebaselineandproject(Y),whichpoolsarelikelytobebelowthede minimis limit or even increase slightly and thereforeneed not bemeasured (N), andwhich pools arestrictlyoptional(O).Basedonthislogic,itisconservativetoomit(O).ForRILandLtPF,changesinsoilCarelikelylessthanthedeminimisforforestsonmineraluplandsoils,butcouldbeconsiderablylowerthanthebaselineforforestsgrowinginwetlandareassuchaspeat-swampforestsormangrovesandalthoughconservativetoomit,theycouldprovidesignificantcarbonbenefitsifmeasuredandestimated.

Asnotedbelow,woodproductsmustbe included inactivities that reduce theharvestoftimberandtheproductionof long-livedwoodproductsbecausereducingthequantityoflivebiomass(i.e.carbon)intheharvestedtimberdoesnotnecessarilyentailanatmosphericemissions reduction below the established baseline (see discussion of estimating netemissions).Similarly,projectsundertakingRILandLtPFmustaccountforthedeadwoodpoolintheirbaselineandprojectcasedocuments.Bothoftheseactivitiesreducetheamountoftimberextractedperunitarea,which,inturn,reducesthedeadwoodpoolintheprojectcase(fewertreesharvestedmeanslessslash,lesscollateraldamage,fewerskidtrailsetc.).

ForERA,theissuewiththedeadwoodpoolisslightlymorecomplexbecauseitdependsonhowpost-harvestslashistreated.Slashcaneitherbepiledandburnedonsite(ashappensinfireproneareas)orleftonsitetodecompose.Extendingaharvestrotationwouldincreasethe amount of dead wood produced because the trees would be somewhat larger whenharvestedandthusmoreslashwouldremain.Becausethedeadwoodpoolwouldincrease(probablymore than the deminimis), this pool is deemed optional. (Note: by extendingrotationagethereislikelytobeanincreaseintheabovegroundbiomassassociatedwithincreasedloggingresidues).

28 ForVCSAFOLUprojects,GHGsourcesthataccountforlessthan5%ofthetotalCO2-eqgeneratedbytheprojectareconsidered“insignificant.”ThefollowingCDMEBtoolcanbeusedtotestthesignificanceofemissionssources:http://cdm.unfcc.int/EB/031/eb31_repan16.pdf

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Themeasurementofbelowgroundbiomassisoptionalinallcasesbecausechangesinrootscarbonstockscanbedifficultandcomplextoaccountfor.Furthermore,theextentto,andrateat,whichdecompositionoccurswhen treesareharvested isunknown, so efforts tomodelrootbiomassasa functionofabovegroundbiomass (as iscommonpractice)oftenencounterproblems.Inallcasesitisconservativetoexcludebelowgroundbiomass.

Eligible activities

Carbon Pools

Living BiomassDead Organic

Matter

Soil Wood productsAboveground-

treesAboveground-non-tree

Below-ground Litter

Dead wood

ConventionalloggingtoRIL:

a.withnoeffectontotaltimberextracted

Y N O N Y N/O N

b.with>25%reductionintimberextracted

Y N O N Y N/O Y

Convertloggedtoprotectedforests

Y N O N Y N/O Y

Extendrotationage Y N O N O N O

Conversionoflowproductiveforeststoproductiveforests

Y N O O O N O


InadditiontofollowingthegeneralVCSguidelinesforestablishingabaseline,projectdevelopersmustprovidethefollowinginformationtoprovethattheymeetminimumbaselinestandardsforimprovedforestmanagementprojects:

• Adocumentedhistoryoftheoperator(e.g.,operatormusthave5to10yearsofmanagementrecordstoshownormalhistoricalpractices).Commonrecordswouldincludedataontimbercruisevolumes,inventorylevels,harvestlevels,etc.ontheproperty;AND

• Thelegalrequirementsforforestmanagementandlanduseinthearea;AND

• Proofthattheirenvironmentalpracticesequalorexceedthosecommonlyconsideredaminimumstandardamongsimilarlandownersinthearea.



Leakageisdefinedhereascarbonlossesoccurringoutsidetheboundariesoftheproject(butwithinthesamecountry)resultingfromthereductioninharvestscausedbytheproject.Whenimprovedforestmanagementactivitiesresult inareductionof timberproduction, it is likely that timberproductioncouldshifttootherareasofthecountrytomakeupthereduction.

Thetablebelowoutlinesadjustmentsthatshouldbemadetoaccountforthispotentialleakage.These credit adjustments should account for actions that occur offsite. Project developers areresponsible fordemonstrating that there isno leakagewithin their operations – e.g., onotherlandstheyoperateoutsidetheboundsofthespecificproject.

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Giventhat this leakageassessment ismeant toprovideguidance itmaybesubject todifferinginterpretations,whichcouldsignificantlyimpactthenumberofVCUsissuedtoprojects.Therefore,theVCSrequiresthatasecondverifierdoublechecktheinitialIFMleakageassessment.Thiswillbedoneatthesametimeandfollowthesameprocedures(withoutadditionalcosttotheproject)asthesecondverifierreviewoftheoriginalverifier’srisk/bufferanalysisoftheproject,asdescribedintheGeneralAFOLUGuidancesectionofthisdocument.

Project Action Leakage Risk Leakage Credit Adjustment

Reducedimpactloggingwithnoeffectorminimaleffectontotaltimberharvestvolumes

None 0

Extendrotationsmoderately,(5-10years)leadingtoashiftinharvestsacrosstimeperiodsbutminimalchangeintotaltimberharvestovertime

Low 10%

Substantiallyreduceharvestlevelspermanently(e.g.,forestprotection/nologgingproject,orRILactivitythatreducestimberharvestby25%ormore)

ModeratetoHigh

Dependsonwheretimberharvestislikelytobeshifted…

• Similarcarbondenseforestswithincountry:40%

• Lesscarbondenseforestswithincountry:20%

• Morecarbondenseforestswithincountry:70%

• Outofcountry:0%(accordingtostatedVCSandCDMpolicyofnotaccountingforinternationalleakage)


To date, no approved methodologies exist for forest management project activities under theUNFCCC. Guidanceforestimatingcarbonstocksandchanges inthemisprovided intheIPCC2003GoodPracticeGuidanceforLULUCF29(seethe“forestsremainingasforests”section).ProjectdevelopersmustprovetoverifiersthattheyusedthisIPCCdocumenttoguidethemonitoringandestimationprocessfortheirproject(particularlyforN2OandCH4,qualityassurance/control(QA/QC),anduncertaintyanalysis).Inaddition,othersoundmonitoringandestimatingprotocolsexist,manyofwhicharetailoredmorespecificallytotheeligibleactivitiesincludedinthissection.

Theverifierneedstodetermineifthemonitoringandestimationmethodologyfortheprojectusesoneofthefollowingmethodologicalframeworks:

• Conversionofselectivelyloggedtropicalforesttoprotectedforest(basedontheNoelKempffClimate Action Project - http://www.noelkempff.com/English/Welcome.htm) can also be used forconversionfromconventionalloggingtoreducedimpactlogging.Theframeworkalsoincludesmethods for incorporating reduction in harvested wood products and dead wood into theestimationofcarboncredits.

• CaliforniaClimateActionRegistryForestProjectProtocol–alsoincludesaprotocolforincludingharvested wood products: http://www.climateregistry.org/docs/PROTOCOLS/Forestry/Forest_Project_Protocol_Version_2.1_Sept2007.pdf

29 IPCCNGGIP,GoodPracticeGuidanceforLandUse,Land-UseChangeandForestry,editedby:JimPen-man,Michael Gytarsky, TakaHiraishi, ThelmaKrug, DianaKruger, Riita Pipatti, Leandro Buendia,KyokoMiwa,ToddNgara,KiyotoTanabeandFabianWagner.2003. http://www.ipcc-nggip.iges.or.jp/pub-lic/gpglulucf/gpglulucf.htm

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• http://www.climateregistry.org/docs/PROTOCOLS/Forestry/Forest_Project_Protocol_Version_2.0.1.pdf.

• ThevoluntaryreportingsystemoftheUSGovernment,knownas1605(b)afterSection1605(b)oftheEnergyPolicyActof1992,TechnicalGuidelinesforVoluntaryReportingofGreenhouseGasProgram,Chapter1,EmissionInventories,PartIAppendix:Forestry(APPENDIXC-ScenariosofHarvestandCarbonAccumulationinHarvestedWoodProducts,APPENDIXD-SummaryofDataandMethodsContributingtoCalculationoftheDispositionofCarboninHarvestedWoodProducts;andSection3:MeasurementProtocolsforForestCarbonSequestration—providesmethodologicalframeworksforallthreeVCSeligibleactivities.(http://www.pi.energy.gov/enhancingGHGregistry/documents/January2007_1605bTechnicalGuidelines.pdf)

• Non-CO2greenhousegases:refertotheIPCCGPGmethodsinthecasewherebiomassisburnedaspartoftheslashremovalafterharvestingornitrogenfertilizerisused.IPCCNGGIP,GoodPracticeGuidanceforLULUCF:http://www.ipcc-nggip.iges.or.jp/public/gpglulucf/gpglulucf.htm).

The verifier alsoneeds to check that aQA/QCplan is prepared andused in implementing theprojectactivities.

F. Crediting period (see general AFOLU section)

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Reduced Emissions from Deforestation (RED)


Activitiesthatreducetheconversionofforestlandtocropland,grassland,wetland,peatland,settledareasand/orotherlandusesarecreditableundertheVCSaccordingtotheguidanceprovidedinthisReducedEmissionsfromDeforestation(RED)section.

Activitiesthatreduceforestdegradation30 areincludedwithintheImprovedForestManagement(IFM)VCSprojectcategoryandsoarenotdiscussedunderthisREDsection.Similarly,activitiesthatrestoreforestcoverondeforestedlandareincludedwithintheAfforestation,ReforestationandRevegetation(ARR)sectionandarenotconsideredhere.

A. Avoiding deforestation reduces three main categories of GHG emissions sources:

• Deforestation typically involves converting forestland with high carbon stocks to non-forestlandwithlowercarbonstocks31.Avoidingdeforestationreducestherateofcarbonstockdecreaseinforests.

• Deforestationusuallyinvolvestheuseoffireand/ormachinerythatconsumesfossilfuels.Avoidingdeforestationreduces thecarbondioxide (CO2) emissionsassociatedwith fossilfuelconsumptionand/orthenon-CO2emissionsfromtheburningofbiomass(CO2emissionsfromburningofbiomassaretobeincludedintheaccountingofcarbonstockchanges).

• Cropland and grassland management often entails the use of nitrogen-rich fertilizers.Additionally,agricultural landmanagementgenerally involvestheuseofmachinesthatconsumefossilfuels.Similarly,livestock,wherepresent,generateCH4and N2Oemissions.Lastbutnotleast,thefloodingofforestedareasmayleadtotheemissionofCH4.Avoidingdeforestationthushasthepotentialtoreduceemissionsfromallofthesesources,dependingontheactivitiesbeingdisplacedbyaproject.

B. Eligible activities must satisfy the following conditions:

• Ifnotproperlydesignedandimplemented,activitiesthatreducedeforestationarepronetoleakageeffectssinceprotectingforestsinoneareamaysimplyshiftthethreatofdeforestationto another area. Therefore, the geographical area subject to potential leakagemust beidentifiedexante,takingintoaccount:thecharacteristicsoftheproject;andthedriversandagentsofdeforestation.Allofthesethingsmustsubsequentlybemonitoredonaregularbasis.Dependingontheextentofpossibleleakage,theareasubjecttoleakagemonitoringcouldencompasstheentirehost-country.Ifsignificantleakagethatisdirectlyattributableto theproject is likely tooccurbeyondthisarea (such that it cannotbemonitored), theactivityisnoteligible.

30 Conversionfromforest-landtonon-forestlandcanoccurinaveryshorttime(deforestation=forest>non-forest)oroverseveralyears,asaconsequenceofaprogressivedegradationprocess(deforestation=forest>degradedforest>non-forest).Practicesavoidingeitherofthesepathwaysareconsideredeli-gibleundertheREDcategoryoftheVCS.

31 Afewexceptionsmayoccur,e.g.,conversionoflow-biomassnaturalforesttoplantedforestorhighbio-masscrops(suchasoilpalm).Carbonstocksincarbonpoolsthatarelikelytoincreaseafterdeforestationmustbemeasuredandaccountedfor.

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• Dataonforestcoverandstatus(i.e.,primary-intact;primary-logged;secondary,etc.)mustbeavailableforatleastthreepointsintime(spanningaperiodofatleastfiveyears)priortotheprojectstartdate.Thesedatamustallowprojectproponentsto:(1)analysehistoricalchanges in land-useand land-cover (LU/LC);and, (2)model expectedchanges for futureperiods.Thedurationofthehistoricandprojectionperiodsshouldbesufficientlylongtoensurethatanydetected/projectedLU/LCchangeisabovetheclassificationerroroftheLU/LCdataanalysed.32

• An analysis of agents and drivers of deforestation should be presented, as well as adescriptionofthemeasuresthatwillbeimplementedtoaddressthem.33 Ifthisanalysisshows that significant leakage isdirectly attributable toproject activities but cannot bemonitoredandmeasured,theproposedprojectactivityisnoteligibleforcertificationundertheVCS.

C. Eligible areas should meet the following criteria:

• Allareas includedwithin theREDprojectboundaryshouldhavequalifiedas “forests”34 sinceatleast15yearsbeforetheprojectstartdate.Thislengthoftimeisnecessarysinceit isverydifficulttodiscriminatethroughsatelliteimageryyoungforestsfromcertaintypesofcropsandaccuratelydelineatetheboundaryofforestlandatthestartoftheproject.35 Younger forestsremaining forestsandmaturing intoolder forestswouldqualifyunderIFMorARR,butnotunderRED.

• Discreteareasofforestshouldbeallocatedtoonesinglepre-definedforestclass.Aforestclassmayincludeprimary(old-growth)foreststhatareeitherintactorlogged,secondaryforests,plantedforests,agro-forestryandsilvo-pastoralsystemsmeetingthedefinitionof“forest”.Eachforestclassmustbedescribedunambiguouslysothatagivenareacanneverbeclassifiedintomorethanoneclass.36

• AreasincludedintheboundaryofaREDprojectshouldnotincludeareasthatwouldbeeligibleforALM,ARRorIFMactivitiesorthathavebeenregisteredunderanothercarbonprojectregistries(bothvoluntaryandcompliance-oriented).

32 Anymapofland-useandland-cover(LU/LC)changeproducedbyanalysisofremotelysenseddataissub-jecttopre-processing,classificationandpost-classificationerrors.ThetotalerrorofsuchmapsshouldbesmallerthanthelevelofLU/LCchangedetected.WhereannualLU/LCchangesaresmallordistributedacrossseveralsmallpatchesofland,longerhistoricalandprojectionperiodsshouldbechosen.Thisisbecausethelargerthehistoricandprojectionperiods,themorelandareawillbesubjecttoLU/LCchangeandthemorelikelyitbecomesthatLU/LCchangeswillbedetectedorprojectedaccurately.

33 Whereagriculturalexpansionisthedriverofdeforestation,theprojectcouldaddressthisby,forexample,designingprojectactivitiesthathelpfarmersincreasetheircropyieldsinasustainableway(withinten-sification,newproductionpractices,under-storyfarming,etc.).And,incaseswheretimberorfuelwooddemand is causing deforestation, the project could incorporate a fast-growing plantation component.Thesemitigatingactivitiescanbesupplementedbyprovidingeconomicopportunitiesforlocalcommuni-tiesthatencourageprotection,suchasemploymentasprotected-areaguardsorecotourismguides,orbytraininginsustainableforestuseandassistingcommunitiessecuringmarketsforforestproducts(e.g.,rattan,vanilla,cacao,naturalmedicines,etc.).Holisticprojectstakinganintegratedapproachtosatisfy-inglocalresourceandlivelihoodneedsnotonlydelivermultiplesocialandenvironmentalbenefitsbutarealsomorelikelytogeneraterobustandresilientcarbonbenefits.

34 A “forest” is defined according to minimum thresholds of vegetation indicators used for defin-ing forests (area, tree crown cover, height and, optionally, minimum width) by the host country (e.g.,forCDMpurposes).

35 The second technical challengeassociatedwith includingyoung forests in the eligible areaof aREDproject,isthatthenthecarbonstocksintheSoilOrganicCarbon(SOC)poolshouldbemeasured.Thisisbecausereforestationingrazinglandcancausealossofcarboninthesoil.ThatlossofcarbonstocksintheSOCpoolstabilizesafterafewdecades,sobyonlyincludingolderreforestationinREDprojectsitisunlikelythattheprojectscenariowillcausemorecarbonstocklossesintheSOCcarbonpoolthanthebaseline,meaningthatthispoolcanconservativelybeexcluded.

36 This is important because each class represents a carbon density class and specific profile of GHG emissions,dependingonthelanduseandmanagementinthatclass.

37

38

39

40

41

37

38

39

40

41

35

2. Non-Permanence Risk Analysis and Buffer Tables


Forestsdonotstorecarbonforever;naturaloranthropogenicdisturbances,suchasfire,pestsorland-usechangedecisionscanresultinGHGemissionsfromforeststhatwereonceprotected.

Intheworst-casescenarioREDactivitiesdelaydeforestationforafiniteperiodoftime.Thatsaid,anydelayinemissionshasalong-termeffectonatmosphericcarbonthat,inmostcircumstances,willbeintrinsicallypermanent(seefigurela,below).Alossofbenefitforthemitigationofclimatechangewouldonlyoccurwherethefinalstabilizationleveloftheforestundertheprojectcaseissimilartothatunderthebaseline.Thiswouldonlyoccurincircumstanceswheredeforestationratesafterforestprotectionwerehigherthantheywereunderthebaselinescenario(seefigure1b).ThisisunlikelybecauseREDprojectactivities,tobesuccessful,havetoaddressthedriversofdeforestationandprovidesustainablelivelihoodalternativestothedeforestationagents.Afteraminimumperiodofatleast20years(theminimumprojectduration),asuccessfulREDprojectshouldhaveinducedstructuralchangesthatmakeareturnofpre-projectlevelsofdeforestationunlikely.Thesestructuralchangesandrelatedbenefitsare,inmanycases,likelytoextendbeyondtheaccountingboundariesoftheproject,therebyresultinginpositiveleakage,eventhoughthisisnotcreditable.

Figures 1a & 1b: Long-term effect of RED project activities

Tomitigatetheriskofnon-permanence,theVCSwilluseabuffermechanismtosecurethelong-termcarbonbenefitsofREDprojectactivities(seeGeneralGuidancefordiscussionofthisbuffermechanism).GuidanceontheprincipalriskfactorsandassociatedriskratingsforREDprojectsbasedonindividualprojectcharacteristicsandcircumstancesisprovidedbelow.

Longtermcarbonbenefit

CARBON

TIME

PROJECTSTABILIZATIONLEVEL

INTRINSICALLY PERMANENTCARBON BENEFIT

BASELINESTABILIZATIONLEVEL

BASELINE

PROJECT

REDPROJECTLIFETIME

CARBON

TIME

FINALSTABILIZATIONLEVEL

LONG TERMCARBON BENEFIT

BASELINE

PROJECT

REDPROJECTLIFETIME

36

Guidance on risk factors and risk ratings for RED projects

Risk factor Risk rating

Land ownership type

Privateorpublicforestconservationorganizationwithacredibletrackrecordinsimilaractivity/legallyprotectedlandwithgoodenforcement

Low

Privatelyownedland/legallyprotectedland Low-Medium

Uncertainlandtenure/legallyunprotectedlandorprotectedwithweakenforcement

Medium-High

Technical capability of project developer/implementer

Provencapacitytodesignandsuccessfullyimplementstrategies(e.g.,creatingsustainablelivelihoodalternativesand/oreffectivelymanagedprotectedareas)forensuringlongevityofcarbonbenefits?

Low

Nopreviousexperienceinthedesignandimplementationofstrategiesforensuringlongevityofcarbonbenefits

Medium-High

Net revenues from the protected forest (including carbon)

Lowerthanpre-project/lowerthanalternativeland-uses High

Similartopre-project/similarthanalternativeland-uses Medium

Higherthanpre-project/higherthanalternativeland-uses Low

Infrastructure and natural resources

Highlikelihoodofnewroad(s)/railsbeingbuiltnearorinsidetheprotectedforest

Medium-High

Lowlikelihoodofnewroad(s)/railsbeingbuiltnearorinsidetheprotectedforest

Low

High-valuenaturalresources(oil,minerals,etc.)knowntoexistintheprotectedforest

High

Highhydroelectricpotentialwithinprotectedforest Medium-High

Population surrounding the project area

Decreasing,orincreasingbutwithlowpopulationdensity Low

Stableandhighpopulationdensity Medium

Increasingandhighpopulationdensity High

Net financial returns for deforestation agents

>10%comparedtopre-projectsituation Low

Aboutsimilar Medium

<10%comparedtopre-projectsituation High

Incidence of crop failure on surrounding lands from severe droughts, flooding and/or pests/diseases

Infrequent(<1in10years) Low

Frequent(>1in10years) Low-High

37


B. Buffer table

ThefollowingtableprovidesguidanceforverifierstousewhendeterminingtheappropriatebuffersizeforanygivenREDprojectbasedonitsriskclass.Specifically,therangeslistedindicatethepercentageofaproject’scarboncreditsthatshouldbewithheldasabufferreserve.Inparticular,projectproponentsshouldassesstheriskthatdeforestationrateswillincreaseaftertheprojecthasended,sincethisisthemostsignificantfactorfordeterminingthepermanenceofthecarbonbenefitsgeneratedbytheproject.Thehighertheriskofanincreaseinthedeforestationrateabovebaselinelevels,andtheshortertheproject(expected)lifetime,thehigherthebuffershouldbeset.

Risk Class Buffer Range

High 20-30%

Medium 10-20%

Low 5-10%

3. Methodological guidance

Todate,noapprovedmethodologyexistsforactivitiesthatreduceemissionsfromdeforestationundertheKyotoProtocol.Accordingly,basedontheguidanceprovidedbelow,theVCSwillacceptnew methodologies for RED project activities following the approval process described in theGeneralAFOLUGuidancesectionofthisdocument.


• Eligible gases.ReductionsinCO2,N2OandCH4areconsideredeligibleforcreditingunderRED project activity guidelines (see discussion of Eligible Activities for more on thistopic).

• Carbon pools included. Eligible carbon pools comprise: above-ground biomass, below-groundbiomass,deadwood,litter,soilorganiccarbon,andwoodproducts.Forestsexistingforatleast15yearspriortoprojectstartdatewillmostlikelyhavehighercarbonstocksin their carbon pools than land-use systems thatwere established after deforestation.37 Consequently,excludingcarbonpoolswillgenerallygiverisetoconservativeestimatesofaproject’snetemissionsreductions.Above-groundbiomassistheprimarypoolofconcernfor RED, although carbon stock changes in other carbon poolsmay also bemeasured,dependingonthemagnitudeanddirectionofchange.Carbonstocksinthenon-treeabove-groundbiomasscarbonpoolshouldbemeasuredwhentheland-usesystemimplementedafter deforestation is likely to have higher carbon stocks than the original forest (e.g., conversion of forest to coffee or cocoa plantations that do not qualify as “forest”according to the definition of forest used in applicable to the project). The table belowprovidesguidanceas towhich carbonpoolsmust bemeasured (Y),whichpools arenotsubject to significant changes underRED project activities and thus do not need to bemeasured(N),andwhichpoolsareoptionalformeasurement(O),dependingontheexpectedmagnitudeanddirectionofchange.

37 Onepossibleexceptiontothisrulederivesfromthefactthatthenon-treecomponentoftheliving biomasscanbehigherincertaincroplandandgrazinglandsystems(e.g.coffeeplantation)than itisinforests.

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38

Baseline Scenarios

Carbon pools

LivingbiomassDeadOrganic

Matter

SoilWoodproducts

Above-ground trees

Above-ground non-tree

Below-ground

LitterDeadwood

1.Conversionofforesttolanduse-systemswithhighnon-treebiomass

Y Y O O O O O

2.Conversionofforesttoothersystems Y N O O O O O


General guidance concerning the determination of baselines, applicable to all project types, isdetailedintheVCS.

Inaddition,baselinesforREDprojectactivitiesshouldhavetwomaincomponents:aland-useandland-cover(LU/LC)changecomponentandtheassociatedcarbonstockchangecomponent.GHGemissionsassociatedwitheachLU/LCcategorymayalsobecounted.

ForREDprojectactivitiesitisgoodpracticetodevelopbaselinesforthreegeographicalareas: a Reference Region, a Project Area and a Leakage Belt.

• TheReferenceRegionistheanalyticdomainfromwhichinformationaboutdeforestationagents,driversandratesisobtained,projectedintothefutureandmonitored.Thereferenceregionincludestheprojectareaandtheleakagebelt.Toproducecrediblecarbonbenefits,aprojectareamustdemonstrablybeunderthreatofdeforestationduringthecreditingperiod.Developingspatiallyexplicitbaselinesisthemostappropriateapproachfordemonstratingthataprojectlocationisunderthreatofdeforestation.Suchbaselinesshouldbedevelopedforareferenceregionthatislargerthantheareaoftheproposedactivityandrepresentativeoftheconditionsprevailingintheprojectarea.

• TheProjectArea is thegeographical area delineated by the project’s boundarieswithinthe reference region where the project participants will implement activities to reducedeforestation.Theremustbeademonstrabledeforestationthreatwithintheprojectareaoverthetimeperiodoftheexpectedemissionreductions.

• TheLeakageBeltisthelandsurroundingtheprojectareainwhichleakageislikelytooccur.The leakagebelt defines the area outside theproject’s boundarywhereproject activitiesinfluencedeforestation.

For each of these three areas, the methodology must outline the measurements, calculationsandassumptionsusedtoestimatethe level and location ofexpecteddeforestationunderbaselineconditions(withoutprojectintervention).ThebaselinenetGHGemissionsandremovalsmustbeestimatedforeachyearoftheproposedcreditingperiod.

Baselinesmustbeadjustedperiodicallybasedonobservationsofland-useandland-coverchangein the reference region. In thisway, baselinesperiodically incorporate the effect that changesinnationalandlocalpoliciesandcircumstanceshaveontheland-usedecisionsofdeforestationagents.Baselinesmustbereassessedatleastevery10years.


39


LeakageoccurswhenaREDprojectactivitydisplacesdeforestationagentsoutsidetheprojectareainsteadofprovidingthemwithalternativelivelihoods.Toavoidthedisplacementofdeforestationoutsidetheprojectboundary,leakagepreventionmeasuresshouldbedesigned,implementedandmonitored.Ifsuchmeasuresincludetreeplanting,agriculturalintensification,fertilization,fodderproductionand/orothermeasurestostabilizecroplandandgrazinglandareas,thentheincreaseinGHGemissionsassociatedwiththeseactivitiesmustbeestimatedandsubtractedfromtheproject’snetemissionsreductions.

LeakageinREDprojectactivitieshasthreemaincomponents:

• Displacementofdeforestationagentsfromtheprojectareatotheleakagebelt,leadingtoapossibledecreaseincarbonstocksandincreaseinGHGemissionsintheleakagebelt;

• IncreaseinGHGemissionsduetoleakagepreventionmeasuresimplementedintheleakagebelt;and

• IncreaseinCO2emissionsduetotheincreasedconsumptionoffossilfuelsforimplementingforest protection,monitoring and surveillance taskswithin the leakage belt (otherwise,thesewouldbeprojectemissions).

Thesepotentialleakagesourcesshouldbeassessed,minimized,monitoredandaccountedforwhenestimatingnetemissionreductions.


Currently, there is no CDM approvedmethodology for estimating the net emission reductionsgeneratedbyREDprojectactivities.Guidanceforestimatingcarbonstocksandchangesincarbonstocks(includingrecommendationsfor:takingemissionsofnon-CO2gasesintoaccount,qualityassurance,qualitycontrol,anduncertaintyanalysis)isprovidedintheIPCC2003GoodPracticeGuidanceforLULUCFinchapters:3.3.2;3.4.2;3.6.2;4.2.6;and4.3.Monitoringandestimationmethodsshouldbebasedonthesereports.Inthefuture,however,specificmethodologiesforREDprojectactivitiesmaybecomeavailable.ShouldthesemethodologiesbeapprovedundertheUNFCCCorVCSschemes,theiruseshouldbepreferred.

Typically,monitoringofaREDprojectactivitywillinvolveestimatingLand-UseandLand-Cover(LU/LC) changes using remote-sensing technologies and estimating carbon stock changes andchangesinGHGemissionsintheareassubjecttoLU/LCchangeusingfieldsamplingtechniques.MeasurementsandestimationsshouldbecarriedoutatpredeterminedtimeintervalsintheReferenceRegion,ProjectAreaandLeakageBelt.Increasesinbiomassovertimewouldbecreditableaslongastheydonotimplyaconversionfromnon-foresttoforest,inwhichcasetheywouldfallundertheARRprojectcategory.

F. Crediting period

The crediting period for RED project activities can be specified by project developers, with aminimumof20yearsandmaximumof100years. However,baselinesmustbereassessedandvalidatedatleastevery10years,andcantakeplaceatthesametimeastheVCSverification.

40

Appendix A

LikelihoodxSignificanceMethodologyforAssessingAFOLUProjectRisk

Bothquantitativeandqualitativeriskscanbecalculatedbasedonasystematicpredictionofthelikelihoodandsignificanceofagiven impact (absoluterisk).Propermanagementpracticescanhelptodiscounttheabsoluteimpactofapotentialevent.Basedonthisrecognition,agoodprojectdesigncanreducehigh absolute riskintoalow total riskrating.

This“risklikelihoodxsignificance”approachprovidesprojectproponentsandverifiers(togetherreferredtoas“assessors”)withaconsistentandholisticframeworkforassessingbothquantitativeandqualitativeriskinanintegratedmannerandcomingtoasingleoverallriskclassificationof“low”,“medium”,“high”or“unacceptablyhigh/fail”.

Ifrelevantexpertiseandsufficientprojectinformationexists,projectriskratingscanbedefinedmoredirectlybasedontheriskguidelinesdefinedinindividualAFOLUprojectcategorysections.These riskratings integrate informationon theabovecomponentsof total risk (i.e. likelihood,significanceandcountermeasures).Thisappendixoutlinesaprojectriskevaluationframeworkthat assessors can use in those instances when direct assessment is not feasible/credible. Thefollowingapproachcanbeusedtosupplementamoredirectriskassessment.

Tasksforapplyinglikelihood*significanceapproach:

Listanypotentialthreatstopermanenceandclassifythemasquantitativeorqualitative.1. Assess the likelihood and significance of the impact without management interference2. (i.e.absolute risk).Quantitativerisksshouldbecalculatedasapercentageoftotalcarbonbenefits,whilequalitativerisksshouldbeassignedarelativerating(0-4).Identify and list strategies employed for risk mitigation and assess the quality of the3. managementsystemtocontrolimplementationofthecounter-measures.Calculateproject-specific4. total quantitativeandqualitativerisksConvert thecalculatedrisk intooneof the followingriskclasses: low,medium,highor5. unacceptablyhigh/fail

Ifavailable,steps2through4abovecanbereplacedbyadirectratingofriskaccordingtotablesandguidelinesprovidedundereachoftheAFOLUprojectcategorysections.

LIKELIHOOD

Ifhistoricaldataareavailable,thelikelihoodisdefinedastheinverseoftheaveragenumberoftimestheeventhasoccurredoveraperiodequivalenttothelifespanoftheproject.Ifthefrequencycanonlybe“guestimated”,thefollowingguidelinescanbeused:

Frequency Likelihood [Generalrule 1/(frequencyofevent)]Lessthanonceduringthelifeoftheproject tendsto0.00Onceevery100years 0.0100Onceevery50to<100years(1/75) 0.0133Onceevery20to<50years(1/35) 0.0286Onceevery10to<20years(1/15) 0.0667Onceevery5to<10years(1/7.5) 0.1333Onceevery1and<5years(1/3) 0.3333Onceperyear 1.0000

Wherethefrequencyofeventscannotbepredictedbasedonhistoricalrecordsorprobabilities,thefollowingscoringsystemisused:

41

Frequency LikelihoodZerolikelihoodofoccurringornotapplicable 0Aneventlikelytooccurlessthanonceduringtheproject 0.05Aneventlikelytooccuronceortwiceduringtheproject 0.1Aneventlikelytooccurseveraltimesduringtheproject 0.25Aneventlikelytooccuratleastonceayear 1

SIGNIFICANCE: QUANTITATIVE RISK

Thesignificanceofaquantitativeriskisdeterminedbythedamagethattheprojectwouldsustainiftheeventoccurred.Thisiscalculatedasthequantityofcarbonbenefitsthatwouldbelost(i.e.,thereductionintheabilityoftheprojecttosequesterorstorecarbon).

Theimpactiscalculatedas:tonnesofcarbonlost*likelihood*no.ofyearsthatlosscontinues

Fordestructiveevents,thecarbonbenefitsgeneratedbythedestroyedpartoftheprojectareassumedtobecompletelylost.Inthiscase,thenumberofyearsthatlosscontinuesequatestotheremaininglifespanoftheproject:tonnesofcarbonlost*likelihood*lifespanoftheproject

SCORING OF RISK MITIGATION STRATEGY

Theriskmitigationstrategyincludestheriskresponseandtheadequacyofthesysteminwhichitisimplemented.Theapproachtotheassessmentisshowninthefollowingtables.

RATING OF RISK MITIGATION

Quality of mitigation efforts ScoreFailuretorecognisepotentialrisksand/orabsenceofcountermeasures 0Countermeasuresdevelopedbutnotimplemented 1Countermeasuresimplementedbutinadequateforthesituation 2Countermeasuresimplementedandadequateforthesituation 3Countermeasuresusingbest-practicesandadaptedtothespecificrisk 4

RATING OF RISK MITIGATION MANAGEMENT SYSTEM

Guidelines ScoreNoevidenceofsystematicstructureinidentificationofriskorincontrollingimplementationofcountermeasures 0

Controlactivitiesimplementedirregularlybutno documentationorcorrectiveactions 1

Controlsformostcountermeasuresinplacebutpoorlydocumented managementsystemandnointernalauditing 2

Systemforcontrollingcountermeasuresisinplaceanddocumented. Internalauditsperformedbutnostructuresforreviewandfeedback. 3

Documentedmanagementsysteminplacewithrisksidentified,targets forreducingthemset,proceduresandassignedresponsibility, internalauditing,reviews,training 4

42

ISOorEMASregisteredmanagementsystem, Score cont. (ISO9000,14001,EMAS)orequivalent 4

CALCULATION OF TOTAL RISK

R=LxSx(1-(CxM)/16)43

Where: R=Totalrisk,L=Likelihoodofoccurrence,S=Significanceofimpact,C=Adequacyofcountermeasurestoavertorminimizerisk,M=Adequacyofmanagementsystem.

Example:Ariskfactorishighlylikelytooccuronceayear(likelihood1)andisdestructive(withapermanentlossofcarbon,e.g.duetofire,withoutmeanstoreplant);LxS=100%.If,however,theprojecthasmeasuresandgoodmanagementpracticesinplacetocounterthisrisk,thetotalriskwillbelessthan100%.

SIGNIFICANCE: QUALITATIVE RISK

Wheretherisksrelatetotheprojectasawholeanddiscretecarbonbenefitscannotbeassigneddirectlytothebuffer,thesignificanceisscoredusingthefollowingguidelines:

Degree of impact ScoreNegligibleimpact 0Damaging(apartof)oneyear’sworkprogramme 1Damagingseveralyear’swork 2Damagepossiblyleadingto(almost)completefailure 3

Theassessorhasfreedomtodeviatefromtheseguidelinesifsignificancecannotbeexpressedintheseterms.Example:Shortageoflabour 1(low)Shortageofincome 3(high)Politicalinstability 2(medium)

GUIDELINES FOR RISK CLASSIFICATION

QUANTITATIVE RISKScore (example44) Risk Classification >60% Fail40–60% High25–39% Medium0–24% Low

QUALITATIVE RISKScore Risk Classification 2.8–3.0 Fail2.0–<2.8 High1.0–<2.0 Medium0–<1.0 Low

43TheproductCxMisdividedby20becausethemaximumscoresforCandMare4and5respectively,andtheirproductis20

44Rangesspecificforprojectcategoriesprovidedinrespectivesections.

43

Conversionoftotalquantitativeandqualitativeriskintohigh,mediumorlowriskclass

Translating the risk assessment into a general risk class can be based on a combination ofquantitativerisks(asatotalpercentage)andqualitativerisks(asasetofscores).

1. Thesumofthequantitativerisksisconvertedintooneof4riskclasses,seetextboxabove.Onecanarguethatifthepercentageexceeds60,theprojectcannotbeaccepted.Thisisbecauseabsoluteriskisveryhigh,orcountermeasuresarelacking,orboth.

2. Allindividualqualitativeriskcalculationsareconvertedintooneoffourriskclasses,seetextboxabove.

3. Thehighestriskfromthequantitativeandquantitativeassessmentdeterminesthebufferapplied. For example, if quantitative risk is high and qualitative risk is medium, theprojectisconsideredoverallhighrisk.Thebufferpercentageisobtainedfromtheguidanceprovidedwithineachprojectcategorysectionofthisdocument.Sincethisisarangeforeachriskclass,theassessorhasfreedomtoapplyahigheroralowerbufferwithinthisrange,dependingonthecircumstances.

44

Appendix B

Financial Analysis of Buffer Witholding under Different Project Scenarios

ThefinancialimpacttoprojectsoftheVCSbufferwithholdingisassessedbyanalyzingtotal(lifeofproject)discountedcarbonrevenue(TDCR),ratherthanNetPresentValue–whichismoreinfluencedbycostsunrelatedtotheuseofbuffersandmayvarysubstantiallyfromoneprojecttothenext.

Therelevantassumptionsare:

• Ex-postsalesfollowingevery5-yearverificationevent

• 6%financialdiscountrate

• Projectriskcategory(i.e.,High,Med,Low)remainsconstantthroughlifeofproject

Thefollowingscenarioswereconsidered:

• Initialbuffersof0,10,20,30and50%(exceptinthecaseoftheREDproject,forwhichbuffersdonotexceed30%)and15%releasesonsubsequentverifications

• 30-yearand70-yeartemperateARR,tropicalARRandtropicalREDprojectcasestudies

• VCS-verifiedCO2emissionreductionpricesofUS$5permetrictonandannualincreasesinvalueofVCS-verifiedCO2emissionreductionof0%and5%

Note:TotaldiscountedcarbonrevenueinthesummarytablesisinunitsofUS$perhectareforARRprojectsandUS$millionforthe350,000haREDproject(forwhichaperunitareavalueislessmeaningful)

Theprojectcasestudiesaremeanttobeillustrative.Absoluteamountsofdiscountedcarbonrevenuearelessinformativethanpercentreductions,whichshouldbebroadlyrepresentative.CarbonprojectionsfortemperateARR,tropicalARRandtropicalREDprojectsaredrawnfromdatafromLowerMississippiValleyUSAbottomlandhardwoodforests,tropicalbroadleafforestsaroundMantadiaNationalParkinMadagascarandMakiraNationalParkMadagascar.

Theresultswerefairlyconsistentacrossthethreeprojecttypes(temperateandtropicalARR,andtropicalRED).Shorterterm(i.e.,30yr)projectswereharderhitbecausetheyhadcomparativelylessopportunitytocashinonbufferreleases.TotalpercentagereductionsinTDCRwerelessthantheinitialbufferpercentagesduetotheprogressivereleases,butalsobecausethemostexactingbufferset-asideswereappliedattheearlystagesofprojects,coincidingwithlowerratesofproductionofemissionreductions,asexpectedforbothforARRandRED.Theassumptionofanincreasingvalue(5%peryear)ofcarboncreditsreducedtheimpactofthebuffersonTDCR(i.e.valuesareincreasingwhileset-asidesaredecreasing)byasmuchas50%comparedwiththeassumptionofaconstantcarbonvalue.

45

Percentage Reductions in Total Discounted Carbon Revenue (TDCR) due to VCS Buffer Witholding

ProjectTypeandDuration

TotalDiscountedCarbonRevenues

%ReductioninTotalDiscountedCarbonRevenues

Initial bufferwitheld

…withconstantCprice

...with5%annual increaseinCprice

…withconstantCprice

…with5%annual increaseinCprice

Tem

per

ate

AR

R P

roje

ct

30

Yea

r P

roje

ct

50% $371/ha $1,047/ha 22.3% 19.4%30% $412/ha $1,149/ha 13.5% 11.6%20% $435/ha $1,198/ha 8.8% 7.8%10% $454/ha $1,247/ha 4.7% 4.0%0% $477/ha $1,299/ha 0.0% 0.0%

70

Yea

r P

roje

ct

50% $521/ha $2,440/ha 16.6% 7.2%30% $563/ha $2,517/ha 9.9% 4.3%20% $583/ha $2,554/ha 6.7% 2.9%10% $603/ha $2,594/ha 3.6% 1.4%0% $625/ha $2,631/ha 0.0% 0.0%

Tro

pic

al A

RR

Pro

ject

30

Yea

r P

roje

ct

50% $820/ha $1,865/ha 25.2% 19.9%30% $931/ha $2,050/ha 15.1% 11.9%20% $986/ha $2,141/ha 10.1% 8.0%10% $1,042/ha $2,235/ha 5.0% 3.9%0% $1,097/ha $2,327/ha 0.0% 0.0%

70

Yea

r P

roje

ct

50% $968/ha $3,231/ha 21.3% 8.4%30% $1,072/ha $3,349/ha 12.9% 5.0%20% $1,124/ha $3,409/ha 8.6% 3.4%10% $1,178/ha $3,468/ha 4.2% 1.7%0% $1,230/ha $3,527/ha 0.0% 0.0%

Tro

pic

al R

ED

Pro

ject

30

Yea

r P

roje

ct 30% $14.15m $34.84m 14.3% 11.8%20% $14.94m $36.40m 9.6% 7.8%10% $15.73m $37.95m 4.8% 3.9%0% $16.52m $39.50m 0.0% 0.0%

70

Yea

r P

roje

ct 30% $20.00m $101.11m 10.7% 4.2%20% $20.80m $102.58m 7.1% 2.8%10% $21.59m $104.05m 3.6% 1.4%0% $22.39m $105.52m 0.0% 0.0%

46

Glossary

Aboveground biomassAlllivingbiomassabovethesoil;includingthestem,stump,branches,bark,seeds,andfoliage.

Absolute riskAquantitativeorqualitativepredictionofthelikelihoodandsignificanceofagivenimpact.

In the VCS, the level of absolute risk can be calculated using the ‘likelihood x significance’methodology.Thecalculatedriskcanthenbeconvertedintoariskclassification.

AdditionalityReferstothesituationwhereaprojectresultsincarbonbenefitsadditionaltothosethatwouldhavetakenplaceintheabsenceofthecarbonprojectactivity.

AFOLUprojectactivitiesaresubject tothesameAdditionalityrulesandtestsasdefinedbytheVCS.

AgroforestryAn ecologically based natural resource management system in which trees are integrated infarmlandandrangeland.

AfforestationThedirecthuman-inducedconversionoflandthathasnotbeenforestedforaperiodofatleast50yearstoforestedlandthroughplanting,seedingand/orthehuman-inducedpromotionofnaturalseedsources.

Agriculture, Forestry and Other Land Uses (AFOLU)TheIPCCrubricusedforagriculturalandland-basedactivitiesthathavethepotentialtoimpactcarbonstocksandemissions.ThisintegratesthepreviouslyseparateAgricultureandLandUse,Land-UseChangeandForestry(LULUCF)projectactivities.

In thecontextof theVCS,AFOLUencompasses foureligibleprojectactivities: ImprovedForestManagement(IFM),AgriculturalLandManagement(ALM),ReducingEmissionsfromDeforestation(RED)andAfforestation,ReforestationandRevegetation(ARR).

Afforestation, Reforestation and Revegetation (ARR)Increasingcarbonstocksinwoodybiomass(andinsomecasessoils)byestablishing,increasingandrestoringvegetativecoverthroughtheplanting,sowingorhuman-assistednaturalregenerationofwoodyvegetation.

ARRisoneofthefoureligibleprojectactivitiesundertheVCSAFOLUcertification.

Agricultural Land Management (ALM)DecreasingGHGemissions(includingincreasingcarbonstocksinsoilsandbiomass)throughthefollowingeligiblelanduseandmanagementactivities:improvedcroplandmanagement,improvedgrasslandmanagement,andcroplandandgrasslandland-useconversions.

ALMisoneofthefoureligibleprojectactivitiesundertheVCSAFOLUcertification.

AssessorsThecollectivetermforVCSprojectproponentsandverifiers.

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Baseline scenarioThe scenario that represents the sum of the changes in carbon stocks (andwhere significant,N2OandCH4emissions)inthecarbonpoolswithintheprojectboundarythatwouldoccurintheabsenceoftheprojectactivity.Abaselinescenarioshouldcoverallcarbonpoolswithinaprojectboundary.

ThebaselinescenarioissetusingoneoftheapprovedVCSbaselinemethodologies.

Belowground biomassAlllivingbiomassofliveroots.Finerootsoflessthan(suggested)2mmdiameteraresometimesexcluded because these often cannot be distinguished empirically from soil organicmatter orlitter.

Buffer approachAself-insurancemechanismwherebyacreditreserveismaintainedinordertoreplaceunforeseenlossesincarbonstock.

IntheVCS,thesizeofthebufferisdeterminedbythelevelofriskinherentintheprojectactivitiesasdeterminedbytheNon-permanenceRiskAnalysis.

Buffer creditsReferstothecarboncreditsheldinthebuffer.Thesecreditscannotbetradedorsold.

Buffer tableAconversiontableindicatingtheproportionofcreditsthatmustbeplacedinthebufferaccordingtotheriskclassification.

Carbon creditsThenetcarbonbenefitsthataprojectgeneratesafteraccountingforleakage.ThenumberofVCUsissuedtoaprojectisequaltothetotalcarboncreditsgeneratedminusthenumberofcreditsthatmustbewithheldasabufferreserve.

Carbon poolsA reservoir of carbon that has the potential to accumulate carbon over time. InAFOLU, thisencompasses aboveground biomass, belowground biomass, litter, dead wood and soil organiccarbon.

TheImprovedForestManagement (IFM)sectionoftheVCSalsorequiresthe inclusionofwoodproductsasacarbonpool.

Carbon stockThequantityofcarbonheldwithinapool,measuredinmetrictonsofCO2.

Climate change mitigationTheprocessbywhichtheemissionsofGHGarereducedorremovedinordertostabilizeGHGsintheatmosphere

Community and/or environmental impactsRefers to the effect that project activities may have on the socio-economic or environmentallandscape.TheGeneralApprovalProcessoftheVCSrequiresthatprojectactivitiesdonothaveanynegativeimpactsanddonotprovideperverseincentivesfortheclearingoflandtogeneratecarboncredits.

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Crediting periodTheperiodoftimeforwhichthenetGHGremovalsareverifiedandcertified.

FortheVCS,thecreditingperiodisthesameasthelifeoftheproject.

CroplandArableandtillageland,andagro-forestrysystemswherevegetationfallsbelowthethresholdusedfortheforestlandcategory,consistentwiththeselectionofnationaldefinitions.

DeadwoodIncludesallnon-livingwoodybiomassnotcontained in the litter,eitherstanding, lyingontheground,or in the soil.Deadwood includeswood lyingon the surface,deadroots, andstumpslargerthanorequalto10cmindiameteroranyotherdiameterusedbythecountry.

FallowAperiodduringtheyearwhenthelandiskeptbareandnocropisraisedonit.

ForestKyotoProtocoldefinition:Aminimumareaoflandof0.05–1.0hectareswithtreecrowncover(orequivalentstockinglevel)ofmorethan10–30percentwithtreeswiththepotentialtoreachaminimumheightof2–5metresatmaturityinsitu.Aforestmayconsisteitherofclosedforestformationswheretreesofvariousstoreysandundergrowthcoverahighportionofthegroundoropenforest.Youngnaturalstandsandallplantationswhichhaveyettoreachacrowndensityof10–30percentortreeheightof2–5metresareincludedunderforest,asareareasnormallyformingpartoftheforestareawhicharetemporarilyunstockedasaresultofhumaninterventionsuchasharvestingornaturalcausesbutwhichareexpectedtoreverttoforest.

FungibleFullyexchangeableortradable

GrasslandManaged rangelands and pastureland that is not considered as cropland, where the primaryland use is grazing. May also include grass-dominated systemsmanaged for conservation orrecreationalpurposes.

Greenhouse Gas (GHG) Agreenhousegasreferstoanygaseouscompoundthatabsorbsinfra-redradiationintheatmosphereandcontributestowardsthewarmingoftheatmosphere.InAFOLU,theprimaryGHGconsideredisCO2,butprojectactivitiesmayalsoconsiderCH4andN2Oemissions.

Global Warming Potential (GWP)CalculatedastheratiooftheradiativeforcingofonekilogrammegreenhousegasemittedtotheatmospheretothatfromonekilogrammeCO2overaperiodoftime(e.g.,100years).CH4hasaGWPof21andN20of310.

ImpactThecalculationofthelevelofquantitativeriskusingthe‘likelihoodxsignificance’methodology.

Theimpactiscalculatedas:tonnesofcarbonlost*likelihood*no.ofyearsthatlosscontinues.

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Fordestructiveeventswherecarbonbenefitsarecompletelydestroyed,thenumberofyearsthatlosscontinuesequatestothelifespanoftheproject:tonnesofcarbonlost*likelihood*lifespanofproject.

Improved Forest Management (IFM)Changingforestmanagementactivitiestomakealong-termreductioninGHGemissionsthroughoneofthefollowingeligibleactivities:conversionfromconventional loggingtoreducedimpactlogging(RIL),conversionofloggedforeststoprotectedforests(LtPF),andextendingtherotationageofevenlyagedmanagedforests(ERA).

IFMisoneofthefoureligibleprojectactivitiesundertheVCSAFOLUcertification.

LeakageNetchangesofanthropogenicemissionsbyGHGsourcesthatoccuroutsidetheprojectboundary,butaremeasurableandattributabletooffsitetheprojectactivity.

Leakage beltThelandsurroundingtheprojectareainwhichleakageislikelytooccur.Theleakagebeltdefinestheareaoutsidetheproject’sboundaryinwhichleakageislikelytooccur.

TheleakagebeltisoneofthethreegeographicalareasthatabaselinescenarioneedstobedevelopedforREDprojectactivities.

LikelihoodTheinverseoftheaveragenumberoftimesaneventhasoccurredoveraperiodequivalenttothelifespanoftheproject.

LitterIncludesallnon-livingbiomasswithadiameter less thanaminimumdiameterchosenbyeachcountry (for example10 cm), lyingdead, in various states of decomposition above themineralororganicsoil. This includes litter, fumic,andhumic layers. Livefineroots (of less thanthesuggesteddiameter limit forbelowgroundbiomass)are included in litterwhere theycannotbedistinguishedfromitempirically.

MethodologyStep-by-stepexplanationsofhowemissionsreductionsorremovalsaretobeestimatedfollowingscientificgoodpractice;tobeappliedconservatively,transparentlyandthoroughly.

Inaddition,amonitoringmethodologyreferstothemethodusedforthecollectionandarchivingofallrelevantdata.Abaselinemethodologyrefers to themethodusedtoestablishthebaselinescenario.

Net Emissions ReductionsTheGHGremovalsbytheprojectactivityminusthebaselinescenarioandleakage.

Nitrification inhibitorA substance that prevents or delays nitrification. These are useful for conserving nitrogen,increasingnitrogen-useefficiencyandinreducinglossesofappliednitrogenfertilizer.

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Non-permanence Risk AnalysisTheprocessbywhichariskassessmentisconducted,andsubsequentlyverifiedindependentlybyaVCSaccreditedentity.Ariskratingcanthenbeawardedwhichdeterminesthesizeofthebuffer.Theimpermanenceriskanalysisevaluatesfourtypesofriskfactors:projectrisk,economicrisk,regulatoryandsocialrisk,andnaturaldisturbancerisk.

Participatory Rural Appraisal (PRA)Participatorymethodsthatemphasiselocalknowledgeandenablelocalpopulationstomaketheirownappraisal,analysisandplans.

PermanenceRelatingtothelongevityofterrestrialcarbonstocks.AuniquefeatureofthecarbonstockmanagedinAFOLUprojectactivitiesisthepotentialforreversalofmitigatedGHGwhenexposedtoriskfactors.

TheVCSutilisestheriskbufferapproachinordertoinsureagainsttheriskofimpermanence.

Project areaThegeographicalareawithinthereferenceregionwheretheprojectdevelopersimplementactivitiesto reduce deforestation. Theremust be a demonstrable deforestation threatwithin the projectarea.

ThereferenceregionisoneofthethreegeographicalareasthatabaselinescenarioneedstobedevelopedforREDprojectactivities.

Project boundariesThe spatial or methodological confines of the project activity. Refers to the geographicalimplementation area, the types of GHG sources and sinks considered, and the carbon poolsconsidered.

Project proponentTheindividualororganisationadvocatingandinitiatingthedevelopmentofaparticularprojectactivity.Thismayincludetheprojectinvestor,designerand/ordeveloper.

Project developerTheindividualororganisationimplementingandmanagingtheprojectactivity.

Reducing Emissions from Deforestation (RED)ThereductioninGHGemissionsfromthereducedconversionofforestlandtocropland,grassland,wetland,peatlandandsettledareas.

REDisoneofthefoureligibleprojectactivitiesundertheVCSAFOLUcertification.

Reference regionThe analytic domain from which information about deforestation agents, drivers and rates isobtained.Thereferenceregionincludestheprojectareaandtheleakagebelt.

ThereferenceregionisoneofthethreegeographicalareasforwhichabaselinescenarioneedstobedevelopedforREDprojectactivities.

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ReforestationThe direct human-induced conversion of non-forested land to forested land through planting,seedingand/orthehuman-inducedpromotionofnaturalseedsources,onlandthatwasforestedbutthathasbeenconvertedtonon-forestedland.

KyotoProtocoldefinition:reforestationactivitiesarelimitedtoreforestationoccurringonlandsthatdidnotcontainforeston31December1989.

RevegetationA direct human-induced activity to increase carbon stocks on sites through the establishmentofvegetationthatcoversaminimumareaof0.05hectaresanddoesnotmeetthedefinitionsofafforestationandreforestationcontainedhere.

Risk Classification (or class)Aset of four categories representing the level of qualitative or quantitative risk, based on theresultsofthe‘likelihoodxsignificance’methodologytocalculatethelevelofabsoluterisk.

Theclassificationsystemisasfollows:low,medium,highorunacceptablyhigh/fail.

Risk FactorsRiskassessmentcriteriathatallprojectactivitiesmustbetestedagainstinordertodeterminethelevelofrisk.Riskfactorsarecomposedofageneralsectionandamorespecificprojectcategorysection.

Risk Mitigation StrategyTheapproachusedtoaddresstherisksidentified.

IntheVCS,theriskmitigationstrategyofaprojectproponentforaddressingquantitativeriskcanbescoredaccordingtotheadequacyofcountermeasuresimplementedtoavertorminimiseriskandtheadequacyofthemanagementsystem.

Risk RatingsQualitative or quantitative grading for indicating the level of risk in the Impermanence RiskAssessment.Thesizeofthebufferisdependentontheriskrating.

SequestrationTheprocessofincreasingthecarboncontentofacarbonpoolotherthantheatmosphere.TheVCSAFOLUinvolvesthesequestrationofCO2throughbiologicalprocesses.

Significance of GHG EmissionsAnindicationoftherelativeimportanceofagivenGHGemissionsource.

ForVCSAFOLUprojects,GHGsourcesthataccountformorethan5%ofthetotalCO2-eqgeneratedbytheprojectareconsidered“significant.”ThefollowingCDMEBtoolcanbeusedtotestthesignificanceofemissionssources: http://cdm.unfcc.int/EB/031/eb31_repan16.pdf

Significance of RiskAnindicationofthedamagethattheprojectwouldsustainifagivenriskeventoccurred.

Thesignificanceofa quantitative riskiscalculatedasthequantityofcarbonbenefitsthatwouldbelost.Thesignificanceofa qualitative riskiscalculatedaccordingtoascoringsystembasedonthedegreeofimpact.

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Slow release fertilizerAfertilizerthat isnotreadilysoluble,butreleases itsnutrientsslowlyoveraperiodof timetobettersynchronizenutrientavailabilitywithplantdemands.ForpurposesofapplicationtoALMprojects,thisreferstoNfertilizersonly.

Soil organic carbonIncludesorganiccarboninmineralandorganicsoils(includingpeat)toaspecifieddepthchosenbythecountryandappliedconsistentlythroughthetimeseries.Livefineroots(oflessthanthesuggesteddiameterlimitforbelowgroundbiomass)areincludedwithsoilorganicmatterwheretheycannotbedistinguishedfromitempirically.

ToolsMechanismsutilisedundertheGeneralApprovalProcessoftheVCS.Toolsareeithercomponents of a methodology (appliedasastand-alonemethodologicalmoduletoperformaspecifictask)orare calculation tools (spreadsheetsorsoftwarethatperformcalculationtasksaccordingtoanapprovedmethodology).

Total RiskIntheVCS,theterm‘totalrisk’isusedtorepresentthetotallevelofquantitativerisk:R=LxSx(1–(CxM)/20)

Where:R=Totalrisk,L=Likelihoodofoccurrence,S=Significanceofimpact,C=Adequacyofcountermeasurestoavertorminimiserisk,M=Adequacyofmanagementsystem. Theprojectisgivenariskclassificationbasedontheleveloftotalrisk.

VerifierThe VCS individual responsible for ensuring that project proponents comply with all VCSguidelines.

Voluntary Carbon MarketRefers to all CO2-eq commodity transactions that are not required by regulation or forcompliance.

WetlandLandthatiscoveredorsaturatedbywaterforallorpartoftheyear(e.g.,peatland)andthatdoesnotfallintotheforestland,cropland,grasslandorsettlementscategories.Canbesubdividedintomanagedandunmanagedaccordingtonationaldefinitions.Includesreservoirsasamanagedsub-divisionandnaturalriversandlakesasunmanagedsub-divisions.

Wood productsProductsderived from theharvestedwood froma forest, including fuelwoodand logs and theproductsderivedfromthemsuchassawntimber,plywood,woodpulp,paper.

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VCS Acronyms

AFOLU Agriculture,ForestryandOtherLandusesALM AgriculturalLandManagementARR Afforestation,ReforestationandRevegetationCCB Climate,CommunityandBiodiversity(standards)CDM CleanDevelopmentMechanismEB ExecutiveBoard(oftheCDM)EMAS Eco-ManagementandAuditSchemeERA ExtendingtheRotationAge(ofevenlyagedmanagedforests)GHG GreenhouseGasGWP GlobalWarmingPotentialsISO InternationalOrganisationforStandardisationIFM ImprovedForestManagementJI JointImplementationLtPF LoggedforesttoProtectedForest(conversion)LULUCF LandUse,Land-UseChangeandForestryPDD ProjectDesignDocumentPRA ParticipatoryRuralAppraisalRED ReducingEmissionsfromDeforestationRIL ReducedImpactLoggingTARAM ToolforAfforestationandReforestationApprovedMethodologiesUNFCCC UnitedNationsFrameworkConventiononClimateChangeVCS VoluntaryCarbonStandardVCU VoluntaryCarbonUnit

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