The ICVCM announced that three REDD methodologies now can receive the Core Carbon Principles (CCP) label. One is a project-based REDD methodology (VM48) and two others are jurisdictional REDD methodologies (ART-TREES and VCS JNR). Here we share our take on VM48. Calyx Global Platform subscribers will receive more on the jurisdictional REDD methodologies in the coming days.
In short, VM48 vastly improves on past REDD methodologies, where projects could leverage flexibilities in earlier methodologies (VM6, 7, 9 and 15) that allowed for extreme over-crediting. While outstanding risks remain, we believe that credits using VM48 will have higher GHG integrity than REDD credits issued in the past. It is unclear when the first credits from VM48 will emerge, though it will likely be sometime next year.
Past problem: Gerrymandered baselines
REDD has dominated voluntary carbon market news over the past few years, largely due to a range of studies showing that these projects claimed more credits than warranted. Our own analysis resulted in similar conclusions.
One key problem was that projects were able to derive their baseline from selected “reference areas”. Reference area selection was ostensibly prescribed by methodological guidelines, but somehow projects were still able to gerrymander these reference areas, as seen in the examples below.
Baselines will be better under VM48…
Verra has worked hard over the past several years to improve on earlier REDD methodologies. We believe that VM48 will result in significantly stronger emission reduction claims from unplanned deforestation, noting that this new methodology does not apply to “planned” deforestation (i.e., converting an agricultural concession to a forest conservation area).
Importantly, REDD baselines are set using an entirely new approach under VM48. First, an overall jurisdictional deforestation baseline is determined, akin to a pie from which slices will be carved. Next, a risk map for the jurisdiction is developed, identifying areas of low versus high risk. Pie slices are then allocated to the landscape based on the level of deforestation risk, which is determined by assessing the distance of existing forests to past deforestation. If a project is deep in the interior of a forest with little to no access, it will likely have little to no baseline emissions.
This new approach facilitates consistency among project baselines within a jurisdiction and avoids situations where the sum of project baselines in a jurisdiction overshoots the baseline emissions at the jurisdictional level. This is a major improvement.
Strictly speaking, VM48 does not meet the Core Carbon Principles (CCPs), as the uncertainty of the model used to allocate deforestation risk is not considered (it is neither estimated nor integrated into the emission reduction calculation). However, we look forward to seeing baseline allocations and will be benchmarking them against a Calyx Global model that operates much in the same way as VM48.
Another important element of VM48: for the first time, baseline setting responsibilities are transferred from project developers to an independent, unconflicted entity. A centralized system will produce and allocate deforestation (i.e., the slices of the pie). This will prevent project proponents from “optimizing” or maximizing credit generation by setting the highest possible baseline. We also see this as a significant improvement.
…but there are big implications for projects and the buffer.
Preliminary investigations by Calyx Global suggest that many current projects are likely to issue far fewer credits under VM48 due to the improved baselines. For some projects, baseline reduction could mean failure. Our analysis suggests that at least one-third of REDD projects are ineffective (i.e., they were not reducing deforestation) – but the high baseline was masking this problem. For others, the low baseline may create problems for their business case if carbon prices are not sufficiently high.
Project abandonment could mean a future drain on the buffer. That said, it may take VCS up to 15 years to recognize a project as inactive, given current standard-level rules. It will be at least five years before VCS puts 50% of a project’s buffer on hold and another 10 years before it will cancel 100% of the volume of previously issued units from the buffer. Eventually, there is a risk of significant buffer drawdown, affecting the insurance mechanism for all Agriculture, Forestry, and Other Land Use (AFOLU) projects. On the plus side, the new methodology may result in a future buffer pool that is capitalized with proportionally higher integrity credits.
Non-permanence risk will be somewhat reduced.
We also note that new REDD projects must commit to 40 years of monitoring and compensation. This change was adopted in December 2023, in a new version of the VCS standard (v4.5). Previously, most projects were committed to monitoring for 30 years. This extension is due to updates to the VCS Standard and the AFOLU non-permanence risk tool rather than to improvements associated with VM48. These requirements are effective for all forest and land projects that request registration on or after Jan. 1, 2024.
High quality? Only time will tell.
We expect credits issued using VM48 projects to be a marked improvement over past credits issued using older REDD methodologies. However, until a sample of actual projects has been assessed, it is impossible to know whether the new methodology will deliver high-quality REDD credits. We look forward to rating REDD projects under this new methodology.
For our assessment of other ICVCM CCP label approvals and rejections, see:
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Calyx Global
This article includes insights and input from multiple experts in Calyx Global.
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