RA-VAL-VCS Verification Statement Issued: April 1, 2011

Transcription

1 Verified by: 65 Millet St. Suite 201 Richmond, VT USA Tel: Fax: Verification Assessment Report for: Producción, Industrialización, Comercialización y Asesoría de Hule Natural, Sociedad Anónima (PICA) in Izabal and Suchitepéquez, Guatemala Carbon Forestry Verification Audit Managed by: Adolfo Lemus Regional Manager Rainforest Alliance/ SmartWood Program 8a Avenida 15-62, Zone 10 Guatemala, Guatemala Tel: (502) Fax: (502) Contact person: Adolfo Lemus alemus@ra.org Date Final Report Issued: April 1, 2011 Date Draft Final Report Issued: March 25, 2011 Date Draft Report Issued: March 4, 2011 Audit Dates: January 17-20, 2011 Lead Auditor: William Arreaga Second Audit Team Member: Jared Nunery Senior Internal Reviewer: April 1, 2011 Audit Standard: VCS, , Nov 2008 Voluntary Carbon Standard Program Update 21 January 2010 VCS, Tool for AFOLU Methodological Issues, Nov 2008 VCS, Guidance for AFOLU Projects, Nov 2008 VCS, Program Guidelines, Nov 2008 VCS, Tool for AFOLU Non-Permanence Risk Analysis and Buffer Determination, Nov 2008 VCS Program updates. Verification Code(s): RA-VAL-VCS Verification Statement Issued: April 1, 2011 Project Latitude/Longitude: Lat: Long: Project Proponent Contact: Ing. Pablo Domínguez Project Proponent Address: 7a Ave., 7-33 Zona 9 Edificio Grupo Financiero de Occidente Ciudad de Guatemala Doc. No. C-57 Jan2011 Page 1

2 Voluntary Carbon Standard 2007 Verification Report Template 19 November 2007 Verification Report: Name of Verification company: Date of the issue: Rainforest Alliance April 1, 2011 Report Title: Approved by: PICA VCS verif 11 Rainforest Alliance, SmartWood Program Client: Project Title: Produccion, Industrializacion, Comercializacion y Promoting Sustainable Development through Asesoria de Hule Natural, Sociedad Anonima (PICA) Natural Rubber Tree Plantations in Guatemala Summary: Doc. No. C-57 Jan2011 Page 2

3 This project is designed to promote sustainable development through the establishment of natural rubber tree plantations in two distinct regions of Guatemala. The proposed project activities involve certifying the proposed project areas under the Forest Stewardship Council (FSC) forest management certification, in addition to the validation and verification of the project as an Afforestation, Reforestation, and Revegetation (ARR) project with the VCS. The project is registered as a validated ARR project VCSR350 Account ID: 682 (see The project involves the reforestation of 2, hectares of degraded pastureland, with a variety of clones of Hevea brasiliensis. The Project Design Document (PDD) and supporting documents were designed to conform to the VCS standard, specifically as an ARR project under the AFOLU project types. The project employed an approved CDM Afforestation and Reforestation methodology, AR-ACM0001 v.3. The project was validated by the Rainforest Alliance on the 26 th of October This project aims to be the first FSC certified rubber tree plantation in Guatemala. The project intends to diversify investment opportunities for businesses in Guatemala interested in investing in sustainable rubber production. The project area includes 7 different farms, divided geographically in both the north (3 farms) and the south (4 farms) of Guatemala. Traditional rubber production currently exists in the south of Guatemala, however, this practice is less common in the north, where soils are less productive, and a longer rainy season presents additional challenges with increased impacts of a fungus that affects rubber plantations. The project intends to sequester a net carbon stock benefit of 1,739,855 t CO 2 e over the course of the 42 year crediting period. The project includes a financial analysis that demonstrates the impact of the sale of carbon credits associated with project activities, resulting in an increased rate of return for investors above a minimum investment threshold that decreases the financial risk of the project making investments in project activities possible. The project asserts that without the sale of carbon credits, it would not be able to meet the minimum investment return threshold. Although rubber production is common in the south with traditional rubber production, this project intends to increase the sustainability of rubber production through certification of FSC, which is not common throughout the entirety of Guatemala. The rubber plantations involved in project activities will be managed for rubber production for a minimum of 36 years, according to interviews with Project Proponents, plantation managers, and management plans. Following this rotation period, the rubber trees will be harvested, and the plantations will be re-planted as rubber tree plantations. The verification of project activities was requested of Rainforest Alliance by PICA. The audit of the Monitoring Report, supporting documentation, field visit, and interviews has provided Rainforest Alliance with the evidence to determine conformance to the VCS standard with a reasonable assurance. Work carried out by: Number of pages: Rainforest Alliance 79 Doc. No. C-57 Jan2011 Page 3

4 Table of Contents 1 Introduction Objective Scope and Criteria VCS project Description Level of assurance Methodology Description of the Audit Process Audit team Review of Documents Stakeholder Interviews Resolution of any material discrepancy Verification Overview Verification summary Correct Action Requests Observations Actions taken by the Project Proponent Prior to Report Finalisation Verification Findings Project title, Purposes and Objectives Stratification of Baseline and Project Areas Ownership/Proof of Title/Right of Use Implementation of project activities during monitoring period Double counting and whether the project participated in another emission trading programme Observation of local laws and regulations Completeness of monitoring Project boundary monitoring Conformance with PDD Monitoring Protocol Baseline carbon stock and emissions monitoring (if applicable) Project carbon stock and emissions monitoring Monitoring of leakage (if applicable) Accuracy of Emission reductions calculations Conformance of ex post calculation with identified methodology and validated PDD The correctness and transparency of formulas and factors used Calculation of emissions in the baseline scenario (ex-post estimate) Calculation of emissions from project activities (ex-post estimate) Calculation of emissions reductions or avoided emissions due to the project (ex-post estimate) Calculation of emissions from leakage (ex-post estimate) Calculation of net VCUs to be issued (ex-post estimate) Appropriate use of default values The assumptions made for calculating GHG emission reductions and/or removals Quality of evidence used to determine emissions reductions Verification of inventory equipment used to calculate emissions reduction and/or removals Verification of use of GPS and remote sensing analysis Assessment of uncertainty Implementation of sampling plan described in the PDD Adequacy of sampling intensity Application of uncertainty deduction (if applicable) Management and Operational Systems Field monitoring roles and responsibilities identified Field inventory competency Field inventory quality management systems Data transcription quality management systems Inventory data analysis systems Doc. No. C-57 Jan2011 Page 4

5 4.5.6 Data management and archival systems Risk Assessment Risk applicable to all project types Risk factors applicable to ARR projects Default buffer withholding percentages for ARR projects Verification Conclusion Verification Statement Appendix A: Company Details Contacts On-line Certification Contact Appendix B : Verification Field Measurements Doc. No. C-57 Jan2011 Page 5

6 1 Introduction 1.1 Objective The purpose of this report is to verify the calculated emissions reductions and/or removals of Promoting Sustainable Development through Natural Rubber Tree Plantations in Guatemala, and assess conformance with the requirements of the Voluntary Carbon Standard (VCS) verification standards. The project was developed by PICA S.A., hereafter referred to as Project Proponent. The report presents the findings of qualified Rainforest Alliance auditors who have evaluated the Project Proponent s monitoring report and performance against the applicable standard(s), identified methodology, and validated Project Design Document (PDD). Section 5 below provides the audit conclusions. The Rainforest Alliance s SmartWood program was founded in 1989 to certify forestry practices conforming to Forest Stewardship Council (FSC) standards and now focuses on providing a variety of forest auditing services. In addition to being an ANSI ISO 14065:2007 accredited verifier and validator with VCS, Rainforest Alliance SmartWood program is also a member of the Climate, Community, and Biodiversity Alliance (CCBA) standards, and an approved verification body with a number of other forest carbon project standards. For a complete list of the services provided by Rainforest Alliance see Dispute resolution: If Rainforest Alliance clients encounter organizations or individuals having concerns or comments about Rainforest Alliance / SmartWood and our services, these parties are strongly encouraged to contact the SmartWood program headquarters directly. 1.2 Scope and Criteria Scope: The scope of the verification audit is to verify the emissions reductions and/or removals of PICA's Reforestation project in Guatemala against the VCS standard, the identified methodology and the validated PDD throughout the monitoring period from June 2007 to August The objectives of this audit included a verification of the project s calculated emissions reductions against the VCS requirements and any additional requirements of VCS AFOLU projects. In addition, the audit assessed the project with respect to the validated baseline scenarios presented in the PDD. The project covers an area of 2, ha. The land is privately own. The forest type will be reforested to a rubber tree plantation with a variety of clones of Hevea brasiliensis.. During the monitoring period of three years, the Project Proponent has calculated it will reduce and/or remove 13, tco 2 e, of which 2, tco 2 e will be contributed to the VCS buffer pool. Standard criteria: Criteria from the following documents were used to assess this project: Voluntary Carbon Standard, , Nov 2008 Voluntary Carbon Standard, Tool for AFOLU Methodological Issues, Nov 2008 Voluntary Carbon Standard, Guidance for Agriculture, Forestry and Other Land Use Projects, Nov 2008 Voluntary Carbon Standard, Program Guidelines, Nov 2008 Voluntary Carbon Standard, Tool for AFOLU Non-Permanence Risk Analysis and Buffer Determination, Nov 2008 Applicable Voluntary Carbon Standard Program Updates ( Applicable VCS Association Policy Announcements ( Voluntary Carbon Standard Validated Project PDD Identified approved methodology within the PDD Materiality: All stocks and emissions equal to or greater than 5% of the total GHG assertion as defined in section of the VCS standard. 1.3 VCS project Description The carbon project developed by the Project Proponent, intends to find new ways to promote sustainable development through natural rubber tree plantations in Guatemala. This project aims to become the first FSC certified rubber tree plantation in Guatemala. The project intends to diversify investment opportunities for businesses in Guatemala interested in investing in sustainable rubber production. The project area includes seven different farms, divided geographically in both the north (3 farms) and the south (4 farms) of Guatemala. Traditional rubber production currently exists in the south of Guatemala, however, this practice is less common in the north, where soils are less productive, and a longer rainy season presents additional challenges with increased impacts of a fungus that affects rubber plantations. The project intends to sequester a net carbon Doc. No. C-57 Jan2011 Page 6

7 stock benefit of 1,739,855 tco2e over the course of the 42 year VCS crediting period. The project includes a financial analysis that demonstrates the impact of the sale of carbon credits associated with project activities, resulting in an increased rate of return for investors above a minimum investment threshold that decreases the financial risk of the project making investments in project activities possible. Without the sale of carbon credits, the project would not be able to meet the minimum investment return threshold. Although rubber production is common in the south with traditional rubber production, this project intends to increase the sustainability of rubber production through certification of FSC, which is not common throughout the entirety of Guatemala. According to interviews with Project Proponents, plantation managers, and review of management plans the rubber plantations involved in project activities will be managed for a minimum one complete rotation with the commitment to replant rubber tree plantations following the culmination of the 36 year rotation period. Following this rotation period, the rubber trees will be harvested, and the plantations will be re-planted as rubber tree plantations. 1.4 Level of assurance The calculated GHG assertion was verified to a reasonable level of assurance. Based on the audit findings, a positive verification statement reasonably assures that the project GHG assertion and monitoring report are materially correct and is a fair representation of the GHG data and information. Doc. No. C-57 Jan2011 Page 7

8 2 Methodology 2.1 Description of the Audit Process In May of 2010 Rainforest Alliance completed the validation audit of the PICA forest carbon project. At this time all documents related to ownership, and ex ante GHG ownerships were assessed. In addition, the validation audit included an initial validation of the project self-risk assessment. Project information, including the self-risk assessment was re-visited during the verification audit. The verification audit was completed by a team of two Rainforest Alliance auditors. The audit was conducted in three (3) of the seven (7) farms within the project area. During the field audit the audit team met with farm managers, monitoring crews, relevant stakeholders, and PICA staff responsible for project management and implementation. On-site inspections of reforestation areas was combined with the re-measurement of 46 plots by the audit team, including two plots where inventory techniques were demonstrated by the PICA monitoring crews. In total 1,380 trees were re-measured by the audit team, representing a total census of 10 sub-strata. In addition to field re-measurements, monitoring inventory techniques and correct use of equipment was observed by the audit team on two farms visited. Field data sheets were also reviewed for all strata, and a random sample from each sub-strata was assessed for correct data entry into excel spreadsheets used to calculate GHG removals. During the field audit, monitoring records were evaluated, and record retention protocols were assessed by the audit team. Following the field audit, several follow up interviews were conducted by the audit team of additional project stakeholders and forest statisticians. Below is a list of relevant information collected during the verification audit. Location/Facility Date(s) Length of Audit Auditor(s) Horizonte Farm 17 Jan 11 8 hours William Arreaga and Jared Nunery Horizonte Farm 18 Jan 11 5 hours William Arreaga and Jared Nunery Farm 19 Jan 11 6 hours William Arreaga and Jared Nunery Asuncion Farm 19 Jan 11 4 hours William Arreaga and Jared Nunery Asuncion Farm 20 Jan 11 6 hours William Arreaga and Jared Nunery 2.2 Audit team Auditor(s) William Arreaga, Rainforest Alliance, Forester, SmartWood Central America Region Lead Auditor Contact info: warreaga@ra.org Phone: (502) Jared Nunery, Rainforest Alliance, SmartWood Program Carbon Technical Specialist Audit team member Contact info: jnunery@ra.org Phone: +1(802) Qualifications William is a Rainforest Alliance Lead Carbon Auditor. Guatemalan; Forestry Specialist, Central American SmartWood Office. Forestry degree from the Escuela Nacional Central de Agricultura, and an engineering degree from USAC; in 2002 he received an M.Sc. in Tropical Forest Management and Biodiversity Conservation from CATIE (Costa Rica). His work has been focused in plantations and natural forests managed in Central America. He also has experience in carbon storage and carbon flows in natural forests and plantations. In 2007, he spent two months at Winrock International as a fellow. Jared has led the technical review of multiple validation assessments for the VCS. In addition he has participated in two Improved Forest Management methodological assessments for the VCS. Before joining the Rainforest Alliance, Jared worked as a member of the Carbon Dynamics Lab at the University of Vermont, where he conducted research on the effects of forest management on carbon sequestration. Jared has published multiple scientific articles on forest carbon dynamics as well as general forest ecological processes. Jared has a B.S. in Environmental Sciences from the University of Vermont and earned his M.Sc. in Forestry from the University of Vermont. Jared has extensive Doc. No. C-57 Jan2011 Page 8

9 experience in forest stand dynamics, forest carbon dynamics, forest mensuration, GHG quantification, forest growth and yield modeling, and wildlife habitat conservation. In addition Jared is a certified lead auditor with the Climate Action Reserve for Forest and Urban Forest projects. 2.3 Review of Documents The following documents were viewed in the audit process: Ref Title, Author(s), Version, Date Electronic Filename PICA Monitoring report 2010 PICA Monitoring report 2 Map of Asuncion Project Area Boundary ASUNCION_PROJECT_BND 3 Map of Horizonte Project Area Boundary BELLO_HORIZONTE_PROJECT_BOUND_16dic 4 Map of Concepcion Project Area Boundary CONCEPCION_project_bnd 5 Map of Project Area Boundary HORIZONTE_PROJECT_BND20DIC 6 Map of Los Patos Project Area Boundary LOSPATOS_PROJECT_BOUND 7 Map of Palmeras Project Area Boundary PALMERAS_PROJECTBOUND 8 Map of Rio Frio Project Area Boundary RIOFRIO_PROJECT_BOUNDARUY_6jan 9 Map of Farms of PICA's carbon project Farms of PICA's carbon project 10 PICA - Baseline Report PICA - Baseline Report 11 PICA - Leakage Analysis - Tables PICA - Leakage Analysis - Tables 12 PICA - Leakage Analysis PICA - Leakage Analysis 13 Planting density reports, years 2007, 2008 and 2009 Planting density reports, years 2007, 2008 and Map of Horizonte Planting N1- Horizonte clones distribution 15 Map of Concepcion Planting N3-Concepción plantations distribution 16 Map of Palmeras Planting S1-Palmeras clones distribution 17 Map of Los Patos Planting S2-Los Patos-Clone distribution 18 Map of Asuncion Planting S3-Asunción-clone distribution 19 Map of Planting S4--clone distribution 20 Map of Asuncion Sampling Plots ASUNCION 2009 presamplinng event 21 Map of Horizonte Pre-inventory Sampling Plots BELLO HORIZONTE 2009 presampling event 22 Map of Concepcion Pre-inventory Sampling Plots CONCEPCION 2009 presampling event 23 Map of Pre-inventory Sampling Plots EL HORIZONTE 2009 presampling event 24 Map of Los Patos Pre-inventory Sampling Plots LOS PATOS 2009 presampling event 25 Map of Palmeras Pre-inventory Sampling Plots PALMERAS 2009 presampling event pre-sampling field sheet 2009 pre-sampling field sheet 27 Sampling plots MIRASILV summaries 2,009 Sampling plots MIRASILV summaries 2, Horizonte Inventory Monitoring 2007 Planting PSP-N Horizonte Inventory Monitoring 2008 Planting PSP-N Horizonte Inventory Monitoring 2009 Planting PSP-N Concepcion Inventory Monitoring 2007 Planting PSP-N Concepcion Inventory Monitoring 2008 Planting PSP-N Concepcion Inventory Monitoring 2009 Planting PSP-N Palmeras Inventory Monitoring 2007 Planting PSP-S Palmeras Inventory Monitoring 2008 Planting PSP-S Los Patos Inventory Monitoring 2007 Planting PSP-S Los Patos Inventory Monitoring 2008 Planting PSP-S Asuncion Inventory Monitoring 2008 Planting PSP-S Asuncion Inventory Monitoring 2009 Planting PSP-S Inventory Monitoring 2007 Planting PSP-S Inventory Monitoring 2008 Planting PSP-S Inventory Monitoring 2009 Planting PSP-S Monitoring field sheet 2010 Monitoring field sheet Doc. No. C-57 Jan2011 Page 9

10 44 Map of PSP Locations Horizonte PSPs-N Map of PSP Locations Concepcion PSPs-N Map of PSP Locations Palmeras PSPs-S Map of PSP Locations Los Patos PSPs-S Map of PSP Locations Asuncion PSPs-S Map of PSP Locations PSPs-S Monitoring calculations summary 2010 Monitoring calculations summary 51 PICA - Monitoring Plan v PICA - Monitoring Plan v AR-ACM0001 v.3 AR-ACM0001 v.3 53 Estimación de una ecuación de biomasa para cuantificar Morales 2000 el carbono que fija el arbol de hule (Hevea brasiliensis) en las plantaciones de la Costa Sur de Guatemala, F.A. Morales Ralda, Monitoring audit entering data sheet 2010 Monitoring audit entering data sheet Monitoring entering data audit 2010 Monitoring entering data audit Monitoring field measurements audit 2010 Monitoring field measurements audit Monitoring field measurement audit 2010 Monitoring field measurement audit Monitoring field audit sheet 2010 Monitoring field audit sheet 59 PICA VCS PD 6 th October 2010, v04 PICA VCS PD 6 th October 2010, v04 60 IPCC Good Practice Guidance for LULUCF / Chapter 4: GPG-LULUCF-Chp4 Supplementary Methods and Good Practice Guidance Arising from the Kyoto Protocol 61 Field Sampling photos and videos Various photos and videos 62 Laboratory analysis photos Various photos 63 Informe de análisis Laboratory reports and results 64 Procedimiento para realizar medición de peso en campo Soluciones analísitcas laboratory protocol y peso seco en laboratorio de muestras para proyecto PICA DE HULE NATURAL 65 Sourcebook for AFOLU Projects (Pearson et al, 2005) Winrock-BioCarbon Fund Sourcebook 66 Estimación de una ecuación para cuantificar la cantidad Statistical report for developing a new equation. de carbono fijado en árboles de Hule (Hevea brasiliensis), con diámetros menores a 5 centímetros en Guatemala. (Quemé, S. 2010) 67 Comparison between models Test of models 68 PICA's methodology of a new equation Developing a PICA's methodology of a new equation new equation to estimate Carbon stock in rubber trees (Hevea brasiliensis) below 5cms of diameter at breast height (DBH) in Guatemala. PICA s Carbon Project PICA Monitoring report v PICA Monitoring report v.2 70 PICA CAR s Closure Narrative PICA CAR's closure.docx 71 PICA CAR Closure Spreadsheet PICA's car's closure.xls 72 PICA Monitoring Plan v2 PICA - Monitoring Plan v PICA-Protocolo para la Custodia de Documentación 1 PICA-Protocolo para la Custodia de Documentación 74 Data archiving-packing list Data archiving-packing list Monitoring calculations summary 2010 Monitoring calculations summary.xls 76 PSP-N1-07 PSP-N1-07.xls 2.4 Stakeholder Interviews The following is a list of the people interviewed as part of the audit. The interviewees included those people directly, and in some cases indirectly, involved and/or affected by the project activities. Audit Name Title Date Luis Alejandro Mejia Caniz Ecobusiness Manager, PICA Doc. No. C-57 Jan2011 Page 10

11 January January 18 January January January January January January January January January 31 January Pablo Ignacio Dominguez Ronaldo Pasos Miguel Angel López Marlon Alvarado Andrés Cabrera Waldemar Dell Alvaro Mérida Macario Canás Abel Flores Hugo Ordóñez Sergio Quemé Pac Technical Sustainability and Carbon Manager, PICA (Monitoring coordinator) General Farm Manager ( Horizonte) Monitoring Crew Team Leader ( Horizonte) Monitoring Crew Team Member ( Horizonte) Monitoring Crew Team Member ( Horizonte) Manager Ingenio Magdalena Manager Ingenio Magdalena Monitoring Crew Team Leader (Asunción, ) Monitoring Crew Team Member (Asunción, ) Monitoring Crew Team Member () Statistician consultant 2.5 Resolution of any material discrepancy The audit identified non-conformities to the assessment criteria 4.3.1, 4.4.3, 4.4.6, and 4.6, 4.7. These led to 4 Corrective Action Requests (CARs) that were resolved by the client, as evidenced by findings on CAR closure in this report, section 3.2, and our opinion is that the GHG assertion is free of material discrepancy. Doc. No. C-57 Jan2011 Page 11

12 3 Verification Overview Based on Project s conformance with VCS requirements, the auditor makes the following recommendation: Final Report Conclusions Verification approved: No CARs issued Verification not approved: Conformance with CAR(s) required Draft Final Report Conclusions Verification approved: No CARs issued Verification not approved: Conformance with CAR(s) required Draft Report Conclusions Verification approved: No CARs issued Verification not approved: Conformance with CAR(s) required The Project proponent has 7 days from the date of this report to submit any comments related to the factual accuracy of the report or the correctness of decisions reached. The auditors will not review any new material The Project Proponent has 30 days from the date of this report to revise documentation and provide any additional evidence necessary to close the open corrective action request. If new material is submitted the auditor will review the material and add updated findings to this report and close CARs appropriately. If no new material is received before the 30 day deadline, or the new material was insufficient to close all open CARs the report will be finalised with the CARs open, and verification will not be achieved. If all CARs are successfully addressed, the report will be finalised and proceed towards issuance of a verification statement. 3.1 Verification summary During the field audit, four non-conformances were identified. These non-conformances were identified in the Draft Verification Report as Corrective Action Requests. Following the issuance of the Draft Verification Report, PICA revised the Monitoring report and supporting documents to address identified CARs. The findings relevant to the closure of all CARs are included in section 3.2, whereas the findings from the field audit are included in section 4 below. Following the receipt of the revised Monitoring Report and supporting documents, all CARs were closed. With the closure of all four CARs, Rainforest Alliance now finds the Monitoring Report and project activities in conformance with the VCS standard and can verify the GHG assertion outlined in 5.1 below with a reasonable level of assurance. 3.2 Correct Action Requests Note: A non-conformance is defined in this report as a deficiency, discrepancy or misrepresentation that in all probability materially affects carbon credit claims. Corrective Action Request (CAR) language uses shall to suggest its necessity but is not prescriptive in terms of mechanisms to mitigate the CAR. Each CAR is brief and refers to a more detailed finding in the appendices. CARs identified during draft verification reports must be successfully closed by the Project Proponents before Rainforest Alliance submits the final verification report and opinion to the VCS. Any open CARs will result in a negative verification statement which lists: (a) all corrective action requests, (b) rationale for each request, and (c) impact of each material finding on GHG assertion. Qualified verification statements are not accepted by VCS. Evidence submitted to close CARs were reviewed by the audit team, and findings relevant to the assessment of additional evidence and revised documents is described in this section. Doc. No. C-57 Jan2011 Page 12

13 CAR: 01/11 Reference Standard & Requirement: Conformance of ex post calculation with identified methodology and validated PDD Non-conformance: The audit team reviewed every spreadsheet related with ex post calculations (e.g. PSP- N1-07.xls) to make sure the Project Proponent has estimated the total amount of carbon (stock/removals) within the monitoring period ( ) in conformance with the selected methodology and the validated PDD. The revision revealed that the calculations followed the VCS requirements and the methodology was implemented accordingly. However, in the specific case of PSP number 10, established in Horizonte farm (Plot ID PPM-N ), the clone was registered as PB-260, while the map of the farm shows differently, clone PB-255. This could be an error made during the transcription of the information into the spreadsheet. However the audit team considered that if this error were not corrected it could result in unrealistic carbon stock calculations in the clones involved. Corrective Action Request: PICA shall correctly estimate the mean carbon stock of Horizonte farm (tco 2 /ha) taking into account the actual clone. Timeline for Prior to verification conformance: Evidence to close CAR: The audit team reviewed the spreadsheet named PSP-N1-07.xls which corresponds to the specific case of ex post calculations of Horizonte/Plantation year 2007/Clone PB The Project Proponent shows the calculations of all the plots distributed in the farm, now taking into account the real clone of every plantation block. One basic correction was done, then all the calculations were modified automatically since everything is linked with formulas. Now, in the sheet named calc.summary the total tree live biomass of the mistaken data is found in the correct clone, PB-266. Then automatically the following changes appear: a) PB-266: 42.5 tco 2 /ha ± 3.8 of standard deviation (n = 4 plots), b) PB-255: tco 2 /ha ± 4.5 of standard deviation (n= 5 plots), As a result, the correct weighted mean carbon stock of Horizonte also changed from tco 2 /ha (5.27% of precision at 95% of confidence) to tco 2 /ha (5.16% of precision at 95% of confidence). Finally, the total carbon stock of the project was updated to 41, tco 2 /ha. Based on these new calculations, the audit team considered that the nonconformance was addressed in an appropriate way. CAR Status: Closed Follow-up Actions: No follow up action required CAR: 02/11 Non-conformance: Reference Standard & Requirement: Conformance of ex post calculation with identified methodology and validated PDD PICA did not clearly state that all documents would be retained for 2 years follow the end of the crediting period as required by the VCS Corrective Action Request: PICA shall clearly state in the monitoring report that all documents would be retained for two years follow the end of the crediting period as required by the VCS. Timeline for Prior to verification conformance: Evidence to close CAR: Following the issuance of the Draft Verification Report, PICA revised section 7 of the Monitoring Plan to clearly state: According to VCS Standard, data archiving must be done for at least two more years after the end of the project crediting period. The PICA s project crediting period ends in PICA has assurance that data archiving and storage will be carried on until year 2051, which is in accordance with the VCS Standard Additionally, section 9.3 PICA s QA/QC for data archiving of the Monitoring Report was Doc. No. C-57 Jan2011 Page 13

14 revised to clearly state data archival procedures in conformance with the VCS CAR Status: Follow-up Actions: CAR: 03/11 Non-conformance: Finally, PICA also submitted additional documents included in Annex VI QA/QC. These documents include further procedural guidance on the archival of data, including specific guidance on the VCS data archival requirements. This is specifically outlined in Section II of the document titled: PROTOCOLO PARA LA COSTODIA DE DOCUMENTACIÓN. The audit team found the revisions to the Monitoring Plan and Monitoring Report to be sufficient to close CAR 02/11. Closed Future verification audits should assess conformance with the revised data archival procedures. Reference Standard & Requirement: 4.4.3, Quality of evidence used to determine emissions reductions The VCS requires that project proponents include an assessment of uncertainty. As cited in section of the VCS standard: The project proponent shall establish and apply quality management procedures to manage data and information, including the assessment of uncertainty, relevant to the project and baseline scenario. The project proponent should reduce, as far as is practical, uncertainties related to the quantification of GHG emission reductions or removal enhancements. It is not clear how PICA has assessed uncertainty related to the quantification of GHG emission removals. Specifically, the GHG calculations do not include any quantification of uncertainty associated with GHG removal calculations, or a deduction of associated uncertainty. With no assessment of uncertainty, it is not clear how the GHG assertion is in conformance with the fundamental VCS guiding principles of accuracy and conservativeness outlined in section 5.1 of the VCS standard. Corrective Action Request: PICA shall include within the monitoring report an assessment of uncertainty. Timeline for Prior to verification conformance: Evidence to close CAR: During the field audit, quality control procedures were assessed by the audit team, and also verified (see Section and Appendix B of this report). Included in the revised Monitoring Report is Section 10 PICA s Uncertainty Analysis. The revised section includes a comprehensive description of the mechanisms and procedures PICA employed to reduce uncertainty within carbon calculations. The revised Monitoring Report clearly describes the QA/QC procedures, and how the implementation of these procedures addresses the uncertainty requirements of AR-AMS0001 v3 and the VCS Moreover, section 10 of the revised Monitoring Report includes an assessment of the project activities in conformance with the IPCC Guidance for National Greenhouse Gas Inventories (2006). Section 10 includes Table 21 Summary of PICA s uncertainty assessment. CAR Status: The addition of Section 10 to the Monitoring Report now clearly describes the procedures utilized by PICA to reduce the risk of high uncertainty. These procedures were found by the audit team to be in conformance with the AR-AMS0001 v3 Methodology and the VCS Standard. As such CAR 03/11 is closed. Closed Doc. No. C-57 Jan2011 Page 14

15 Follow-up Actions: No follow up action required. CAR: 04/11 Non-conformance: Reference Standard & Requirement: 4.6 and 4.7 Risk Assessment and Buffer Determination The monitoring report does not include the VCS Non-Permanence Risk Analysis and Buffer Determination. Corrective Action Request: PICA shall include the completed VCS Non-Permanence Risk Analysis and Buffer Determination within the monitoring report. Timeline for Prior to verification conformance: Evidence to close CAR: During the field audit, the risk assessment was presented to the audit team for review (see sections 4.6 and 4.7 below), however the risk assessment was not included within the Monitoring Report. The revised Monitoring Report v2 includes Section 11 Risk Assessment. Section 11 of the revised Monitoring Report includes a comprehensive general risk assessment in conformance with Table 1 of the VCS Tool for AFOLU Non-Permanence Risk Analysis and Buffer Determination. Within the general risk assessment, all criteria are identified as low risk with the exception of the Risk of social instability and Risk of extreme weather events. During the field audit, the audit team assessed the general project risk criteria and found the self-risk ratings to be sufficient. Furthermore, risk mitigation activities such as commitment to FSC certification reduce the risk of social instability through increased communication with impacted stakeholders and required adherence to social responsibility criteria associated with project activities. Risk of extreme weather events is rated as medium, however this was justified to be medium-low due to the relatively large return interval for catastrophic disturbances such as hurricanes within the project region (category 5 hurricane return interval being 33 to 500 years). Additionally, the revised Monitoring Report includes an ARR project type specific risk assessment in conformance with the VCS Tool for AFOLU Non-Permanence Risk Analysis and Buffer Determination. In this assessment all criteria are identified as low risk with the exception of Project longevity/commitment period and Ownership type and user rights. The risk of project longevity is mitigated by the commitment to replant following the final harvest of the project area after the 36 year rotation. During the validation field audit in May 2010, the Rainforest Alliance audit team visited additional rubber plantations owned by the Project Proponent not included within the VCS project activities, where long-term management of rubber trees was demonstrated. Furthermore, interviews with project staff and farm employees all confirmed long-term commitment to the carbon project. Additionally, the medium risk of land ownership is the result of one of the project areas being leased by the farm manager. During the field audit, the audit team was presented with clear legal rights to the project areas, and also clear contracts documenting ownership of all carbon rights. The legal lease contracts for 50 year periods by Ingenio Magdalena were reviewed during the validation audit in May 2010 by Rainforest Alliance, and found to provide reduced risk of land ownership disputes. During the validation audit conducted by Rainforest Alliance in May 2010 the project Non- Permanence Risk Analysis was assessed by Rainforest Alliance and found to be in conformance with the VCS standard. During the verification field audit in January 2011, no change in the identified risk assessment criteria were found (see findings in sections 4.6 and 4.7 below). As such, the audit team determined that the identified selfrisk classification of medium was found to be appropriate. Furthermore, the use of a 20% buffer was found to be justified, as required by the 13April2010 VCS Program Update, based on the mitigation activities and referenced evidence to justify the use of the lower threshold within the ARR default buffer withholding for Medium ARR Risk Class projects. Doc. No. C-57 Jan2011 Page 15

16 CAR Status: Follow-up Actions: Closed No follow up action required Note: Observations are issued for areas that the auditor sees the potential for improvement in implementing standard requirements or in the quality system; observations may lead to direct non-conformances if not addressed. Unlike Corrective Action Requests, Observations are not formally closed. 3.3 Observations OBS 01/11 Reference Standard & Requirement: Project implementation As noted in 2.4.4, the baseline area was divided into two strata, largely defined geographically by the north and south strata. At the time of validation, it was intended by the project developer to use the same stratification for the project area. However, following initial monitoring results of 2007 and 2008 planted areas conducted in 2009, it became evident that additional stratification was required to account for highly variable growth rates between varying clones planted within each farms. The updating of strata in the project area is explained in section 4.1 of the monitoring report. Ex post stratification of the project area is allowed by AR-ACM0001 v03, as a means of reducing variability and increasing accuracy of sampling. The Monitoring Report describes the ex post stratification as being based on clones planted per planting year. However, during the verification audit, interviews with PICA staff responsible for GHG calculations revealed that clones planted per planting year were used as sub-strata to calculate a weighted average used to calculate mean carbon fixation per farm per planting year. The total carbon fixation per farm per planting year was then summed to calculate total project area carbon fixation, as per equation 14 of the AR- ACM0001 v03. As such, section of the Monitoring Report incorrectly describes the clones planted per planting year as the ex post strata, when these are actually being used as sub-strata to calculate carbon stocks within the strata. Observation: PICA should clearly explain how ex post strata and sub-strata are used to calculate project GHG removals. OBS 02/11 Reference Standard & Requirement: Project boundary monitoring During the monitoring period, the project area boundary did not change. As such, PICA is not required to account for changes in the project area. However, discussions with PICA staff revealed confusion over how carbon stock losses are accounted for following a disturbance. It should be noted that it is not appropriate to simply re-calculate the project boundary following a disturbance (excluding those disturbed areas and not accounting for carbon stock loses), but rather the project proponent is responsible for accounting for the carbon stock loses in carbon stocks within the validated project boundary. This was explained to the project proponent during the field audit. Observation: PICA should be aware of the VCS requirements for calculating carbon stock losses in future verifications. OBS 03/11 Reference Standard & Requirement: Conformance of ex post calculation with identified methodology and validated PDD In the monitoring report, the company defines removals as carbon fixation, this is incorrect according to the methodology used Observation: PICA should use the correct definitions of VCS according to the methodology: removals instead of carbon fixation. OBS 04/11 Reference Standard & Requirement: Conformance of ex post calculation with identified methodology and validated PDD During the field audit, audit team reviewed the Monitoring Report and revealed that the amount of SOC is slightly different from the spreadsheet (2010 Monitoring calculations summary.xls. The total amount of SOC was estimated by PICA for the first three years ( ) as 2,233 tco 2 e in the Monitoring Report. However, the spreadsheet 2010 Monitoring calculations summary.xls shows a minimum difference (2,234 tco 2 e) Observation: PICA should align the monitoring report and the spreadsheet 2010 Monitoring calculations summary.xls with the correct soil organic carbon (tco 2 e). Doc. No. C-57 Jan2011 Page 16

17 OBS 05/11 Reference Standard & Requirement: Conformance of ex post calculation with identified methodology and validated PDD In the selected methodology, the definition of t equilibrium is: Time until a new equilibrium in carbon stock in soil organic matter is reached. The project proponent uses well this definition and the value suggested by the methodology (20 years), however, in the monitoring report calculations use a value of 23 years. The other default value of was used accordingly. This is considered by the audit team as a deviation which does not represent a current significant difference while calculating the total SOC within the monitoring period. However it is necessary that the project proponent clarifies for further verifications, why they are using 23 years instead of 20 years for the calculation of t equilibrium. Observation: PICA should clearly explain in the monitoring report the decision of using 23 years as the time when the equilibrium in the soil is reached, instead of 20 years as mandated by the methodology. OBS 06/11 Reference Standard & Requirement: Calculation of net VCUs to be issued (ex-post estimate) It should be noted that the procedure clearly explains that the buffer percentage shall be multiplied by net GHG credits, meaning the project proponent cannot subtrack leakage before applying the buffer percentage. However, as leakage emissions related to project activities are estimated to be equal to zero (as demonstrated in the validated PDD and supporting documents in Annex I. Baseline), the Project Proponent has calculated the total number of VCUs correctly. Observation: PICA should note that according to the VCS requirements, the number of VCUs shall be estimated subtracking the leakage after applying the buffer percentage. 3.4 Actions taken by the Project Proponent Prior to Report Finalisation Following the issuance of the Draft Verification Report on March 4 th, 2011, PICA revised the Monitoring Report to address CARs identified during the field audit. Following the submission of the Draft Verification Report, PICA contacted Rainforest Alliance on March 7 th and March 9 th for additional clarification regarding the CARs identified in the Draft Verification. On March 16 th, 2011, PICA submitted the revised Monitoring Report, and supporting annexes to Rainforest Alliance for review. The findings related to the closure of all CARs were included in section 3.2. Doc. No. C-57 Jan2011 Page 17

18 4 Verification Findings The findings presented in this section represent the findings from the field audit. All non-conformances identified during the field audit are described within this section. Additional evidence submitted following the issuance of the Draft Report was assessed by the audit team, and findings related to the assessment of additional evidence submitted by the Project Proponent to close CARs is described in section 3.1 above. 4.1 Project Implementation The discussion, findings and conclusion regarding the conformity of the actual project activity with the registered project design document should be summarised in this section Project title, Purposes and Objectives Findings from Review on March 4 th, 2011 The carbon project title: Promoting Sustainable Development through Natural Rubber Tree Plantations in Guatemala accurately reflects the proposed project. The additionality argument of this carbon project is founded in the financial analyses based on the Project Proponent s dedication to promoting sustainable development of rubber plantations in Guatemala. This dedication is expressed in the text on page 3 of the 2007 PICA statement of intent, which declares the Project Proponents dedication to the promotion of Forest Stewardship Council Certification of rubber tree plantations. The primary argument of the project proponent is that by meeting the 10 principals of FSC certification, PICA will be able to increase the sustainability of their rubber plantations both environmentally and economically through the pursuit of new markets for the sale of Nontimber Forest Products (NTFPs). Conformance Yes No N/A CAR/OBS No CAR or OBS raised Stratification of Baseline and Project Areas Findings from Review on March 4 th, 2011 As noted in 2.4.4, the baseline area was divided into two strata, largely defined geographically by the north and south strata. At the time of validation, it was intended by the Project Proponent to use the same stratification for the project area. However, following initial monitoring results of 2007 and 2008 planted areas conducted in 2009, it became evident that additional stratification was required to account for highly variable growth rates between varying clones planted within each farms. The updating of strata in the project area is explained in section 4.1 of the monitoring report. Ex post stratification of the project area is allowed by AR-ACM0001 v03, as a means of reducing variability and increasing accuracy of sampling. The Monitoring Report describes the ex post stratification as being based on clones planted per planting year. However, during the verification audit, interviews with PICA staff responsible for GHG calculations revealed that clones planted per planting year were used as sub-strata to calculate a weighted average used to calculate mean carbon fixation (meaning removals, according to VCS) per farm per planting year. The total carbon fixation per farm per planting year was then summed to calculate total project area carbon fixation, as per equation 14 of the AR-ACM0001 v03. As such, section of the monitoring plan incorrectly describes the clones planted per planting year as the ex post strata, when these are actually being used as sub-strata to calculate carbon stocks within the strata. (OBS 01/11) Despite the confusion within the Monitoring Report, review of the annexed document 2010 Monitoring calculations summary and interviews with PICA staff responsible for GHG calculations, revealed that the ex post stratification of the project area is in conformance with the requirements of the AR-ACM0001 v03 methodology. Conformance Yes No N/A CAR/OBS OBS 01/ Ownership/Proof of Title/Right of Use Findings from Review on March 4 th, 2011 The project area consists of seven different farms, located in three zones: Suchitepéquez, Izabal, and Alta Verapaz. PICA S.A. as the project proponent, does not own any of those farms by itself. All the farms belong to different Sociedades Anónimas (LLC), where PICA has the explicit rights to manage and sell the carbon credits. Doc. No. C-57 Jan2011 Page 18