The Voluntary Carbon Standard and Current Developments in the Voluntary Carbon Market. 2 December 2010 World Bank Washington, DC

Transcription

1 The Voluntary Carbon Standard and Current Developments in the Voluntary Carbon Market 2 December 2010 World Bank Washington, DC

2 Overview 1) The Voluntary Carbon Standard Origins Development VCS Program 2) Recent developments and trends Crediting frameworks of the future Increasing role for AFOLU Role of the voluntary GHG programs 3) Key VCS processes Project registration and VCU issuance process Methodology approval process

3 1) The Voluntary Carbon Standard (VCS) Established by leading NGOs (IETA, WBCSD, The Climate Group, WEF) to: Establish a global benchmark for quality offsets Provide a framework to bring coherence to the voluntary carbon market Foster innovation within a context of quality, credibility and transparency Demonstrate workable frameworks that can be incorporated into compliance regimes worldwide

4 Voluntary carbon market Source: Ecosystem Marketplace, Bloomberg New Energy Finance, Building Bridges: State of the Voluntary Carbon Markets 2010

5 Development of the VCS VCS Version 1 (v1) released 28 March 2006 VCS Version 1 (v2) released 16 October 2006 Released for broad public stakeholder input Over 60 comments received Steering Committee appointed to draft VCS 2007 (Ecofys, WRI, Climate Trust, SGS, Cantor CO2e, Cheyne Capital, Taiheyo Cement, Interface, Goldman Sachs, BP, Invista, EcoSecurities, DNV, Blue Source, CCAR) VCS 2007 released 19 November 2007 VCS released 18 November 2008 Fully integrated AFOLU requirements into the VCS Program VCS 2011 forthcoming 60-day public comment period concluded (October 10, 2010) Further specification on certain areas (e.g., project grouping, appeals process) 349 comments received approx 50% on AFOLU

6 Voluntary Carbon Units (VCUs)

7 VCS Program

8 VCS Registry System New VCS registry? 3 registries that meet key criteria: Financial standing Insurance requirements Insolvency protection Registries agree to: Conflict of interest requirements Replacement of VCUs issued in error Registry system is expandable VCUs can be certified against other standards (e.g., CCB, Social Carbon)

9 Non-profit organization The VCS Association Headquartered in Washington, DC Also has a Swiss entity Single focus to develop and manage the platform: No consulting No methodology development No validation/verification No project development or proprietary positions Funded primarily by VCU levy ($0.10 per VCU) Foundation grants help supplement special initiatives

10 2) Recent developments and trends a) Crediting frameworks of the future Steady erosion in credibility of the project-based approach to setting baselines and testing additionality Perceived as potentially subjective Hard to determine when a certain practice is common Need for the creation of new crediting frameworks Programmatic a breath of fresh air CAR work on performance benchmarks VCS response Convened a steering committee to prepare requirements that will enable the development of standardized approaches under the VCS methodology approval process (performance benchmarks, technology tests) There is a steady move towards approaches based on sectoral or standardized crediting approaches

11 b) Increasing role for AFOLU In the land-based sector, CDM only accepts afforestation and reforestation, which excludes: Improved forest management (IFM) Agricultural land management (ALM) Reduced emissions from avoided deforestation and forest degradation (REDD) VCS has developed rules for Agriculture, Forestry and Other Land Use (AFOLU) Risk of non-permanence Leakage Nesting

12 New project types b) AFOLU... (cont) Peat rewetting and conservation (forthcoming) Avoided conversion of ecosystems (ACE, non REDD) Recent milestones First AFOLU and REDD methodologies already approved First AFOLU VCUs issued (September 2010) Several AFOLU (REDD/IFM) methodologies under second assessment under VCS methodology approval process Methodology approval process working more effectively Approvals forthcoming AFOLU credits guarded as potential source for domestic reductions

13 c) Role of voluntary GHG programs As a transition to compliance frameworks under different scenarios Source of voluntary activity Strengthened if government encourages voluntary action and provide frameworks for voluntary market (Australia s National Carbon Offset Standard) Source of early action credits if recognized by government for future compliance regimes Leveraging existing platforms in future compliance regimes No need to reinvent the wheel

14 Developing a National/Compliance Regime Early stage development ( Wild West Anything Goes ) Enactment Murky, ill-defined transition or Implementation Supervision by the Government Transitional phase that leverages existing GHG programs effectively and provides for: 1) Environmental integrity 2) Certainty for investors 3) Early supply of offsets 4) Capacity building 5) Learning Strengthen programs in the long run

15 3) Key VCS processes Project Registration and VCU Issuance Process Projects need to be independently validated and verified - which may be done simultaneously Project registration requires: Project Description, Validation Report & Representations Registry completeness check VCU issuance requires: Monitoring Report, Verification Report & Representations Registry completeness check Streamlined project cycle VCSA does not review projects, relies on validators/verifiers to assess projects

16 Registering Projects Sequentially: VCS & CDM Projects seeking CDM registration can claim VCUs for emission reduction not registered under CDM VCUs can be claimed back to the project start date Projects can use CDM validation report but need to complete a further validation for the VCS Program Validation has to be completed within 2 years of project start date CDM PoA Each CPA needs to be registered as a separate project accompanied with its PoA design document The start date of the first CPA shall be considered as the project start date for all the CPAs in the PoA Where the start date is before 2011 (release date of VCS 2011), validation can be completed within 4 years of project start date.

17 Methodology Approval Process (MAP) Unique bottom up process for methodology development Compensation mechanism to incentivize broadly applicable methodologies 25 methodologies in pipeline 7 approved and 3 to be approved in December 10 8 methodologies in second assessment Includes AFOLU methodologies, REDD methodologies, performance benchmark for weatherization, jet engine washing (2 methodologies submitted by the BioCarbon Fund)

18 MAP Lessons Learned Validator/verifier Bodies (VVBs) have gained experience in the process They have helped close loopholes on how methodologies will be applied in practice to a variety of projects, how methodologies could be gamed to work around rules 2 nd Assessments by VVBs have been effective at providing a second opinion on tricky issues, and have been done efficiently and quickly Methodologies (especially AFOLU ones) are technically complex they require close communication loops Improved guidance from VCSA to methodology developers and VVBs to help them navigate the process VCSA now assigns a staff member to oversee each methodology Greater transparency (on VCS website) Tangible milestones for the second assessment ensure greater accountability

19 Thank you David Antonioli (CEO) Tel: Aditi Sen (Program Coordinator) Tel: VCS Association 1730 Rhode Island Avenue, NW Suite 803 Washington, DC