Nature-based credits in Mexico earn an A rating

Thursday, 07 Sep 2023

Calyx Global is thrilled to have rated its first “A” nature-based credits. The A-rated credits come from the heavily forested areas of Durango, Mexico, covering a number of municipalities and supporting multiple ejidos. In addition to making a low-risk greenhouse gas impact, these credits support over 600 ejidatarios, in total. These are registered under the Climate Action Reserve’s (CAR) Mexico Forest Protocol (MFP). 

It is important to acknowledge that not all CAR MFP projects receive similar ratings and we will get into why these credits received a higher rating later in this post. To date, we have rated 11 projects under CAR’s MFP and, among these, two are A-rated, six at the B level (i.e. B or B+) and three are in the C range (i.e. C or C+). We note that none are rated A+ as we still see some minor risks related to the two projects that are our first A-level forest projects.

Among three common forest carbon project types: REDD, Afforestation/Reforestation (A/R) and CAR Mexico Forest projects, we see that the CAR MFP projects fare, in general, better than others. A/R projects are highly variable – as they can encompass everything from a natural restoration of native species and agroforestry to monoculture eucalyptus plantations. We have written much about REDD and look forward to the upcoming new VCS methodology for this project type, which we believe will improve the quality of such credits.

What makes a CAR Mexico Forest Protocol project A-rated?
1. Additionality
CAR MFP projects tend to have lower risk of non-additionality. This is because a formal meeting of the ejidos must be held prior to the start of the project to discuss whether to participate in exchange for the promise of carbon revenues, i.e. there is a clear demonstration of “prior consideration” – a core principle that we assess and is also included in the ICVCM. The photo below is from one such meeting of ejidos as members participate in community decision making.

Credit: Ejido San Diego de Tezains. (2022)

Furthermore, we find that the activities are not financially attractive – particularly in the short term – and managing forests for increasing carbon stocks is not common practice. In ejido lands across Mexico, the annual allowable cut is often exceeded, resulting in reduced biomass over time. At Calyx Global, we check to see whether biomass is, in fact, flat or declining in order to assess additionality (and baselines, see below).

2. Quantification
Furthermore, we believe that the quantification of removals is relatively robust – especially compared to other Improved Forest Management (IFM) projects in the market today. Most IFM projects derive their credits in the early years of the project lifetime from an assumed, often aggressive, harvest regime (the difference between that regime and a more moderate one implemented by the project is basically claimed as “avoided emissions”). By contrast, the CAR MFP sets its baseline as the existing carbon stock at the start of the project. Biomass growth above this starting point is credited. Calyx Global checks for the trends in biomass prior to the project start. Ideally, we see biomass decline – in which case the baseline would be conservative. Sometimes the biomass is constant – which means the ejido has been harvesting at allowable levels. If we see that biomass has been increasing, this results in a baseline risk. In the latter cases, the project would not receive an A rating from Calyx Global.

Robust quantification is in part due to the simplified baseline assumptions and in part due to a thorough, transparent process for calculating removals. CAR provides uniform spreadsheets for tracking trees and making calculations, sending data on removals back to the project. CAR’s growth model is modified to match the species composition for each forest’s ejidos. They constantly update model results to match the project’s new inventory data as it is submitted. The model thus ‘learns’ from the field data, resulting in better and better data over time. A project is not required to visit every inventory plot every year - they must visit all by the 12th year. If a project moves slowly through its inventory plots, the model will learn more slowly. As a result, when the growth data are checked, during the field verification at six years, CAR may issue a correction if trees were growing more slowly than expected by the model. Any extra credits that had been issued based on an inflated removal rate would be reclaimed from the project in subsequent reporting periods.

3. Permanence: 
The A-rated projects have committed to 100-year monitoring and compensation for reversals. What we see in many other nature-based projects is a very short time horizon to monitor for reversals. For example, many REDD projects have a duration as short as 20 or 30 years in countries with very high reversal risk. The forest that is being credited may not be standing beyond this time horizon. Therefore, at Calyx Global, projects that take a longer commitment period earn a better rating. The CAR MFP still allows a shorter period (e.g. 30 years) of monitoring. In such cases, the project will not achieve an A rating. All projects are assessed individually.

Permanence is an extremely complex topic. We will soon be publishing a blog about how Calyx Global considers this issue.

Calyx Global was pleased to see our first A-rated nature project and hopes we can see more in the future as the industry continues to drive towards quality. 

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For more information on how Calyx Global rates the GHG integrity of carbon projects, see Calyx Global GHG Ratings Explained.

About the author

Calyx Global

This article includes insights and input from multiple experts in Calyx Global.