2011 outlook: Individual, bilateral climate actions advance
Letter from CEO David Antonioli
Dear Friends & Colleagues,
2011 promises to be quite an interesting one for carbon markets and for the VCS in particular. While we maintain our view that the world faces the real potential for fragmented markets going forward, it is becoming clear that fragmentation does not mean inaction. We are encouraged to see governments and organizations continuing with individual efforts to curb emissions, even in the absence of a global agreement, while states and nations pursue bilateral mechanisms for trading offsets – a scenario that holds huge potential opportunities for VCS.
Corporate demand in particular looks positioned for a comeback in 2011. This is partly because organizations are taking a second look at offsets after trying to curb emissions on their own and discovering it isn’t easy. Also, the offset industry itself has matured and confidence in offset quality has increased. Appealing new kinds of offsets are coming to market – from avoided deforestation to improved forest and agricultural land management to new approaches to fuel efficiency in jet engines and homes.
The compliance market outlook is more daunting, with hopes for a multinational agreement uncertain at best. But here again, more individual states and nations are seeking market-based solutions as they grapple with the scale of financing required and with the challenge of curbing emissions alone. Many are seeking guidance from robust standards like VCS.
Then there is California, a large, innovative part of the U.S. economy moving to implement cap and trade. VCS is actively engaging with regulators in California to share our knowledge and ensure this new market has access to every new type of credit, robust approach and best practice. We aim to be active participants this year in helping California build a solid base of support for offsets inside – and outside – the U.S. Read on to learn more about our policy initiatives for 2011.
Program outlook: VCS targets linking, scaling up in 2011
With REDD a reality, VCS aims for streamlining, linking and scaling up in 2011
In 2011, we will start seeing the fruits of major initiatives to streamline all VCS requirements and processes and to advance major policy work on Reducing Emissions from Deforestation (REDD). We have just crossed the threshold of 50 million VCUs issued, and projects using new VCS-approved methodologies are poised to issue their first verified credits this year. This shows that, not only is the methodology approval process up and running smoothly, it is proving its ability to open up new areas of supply. Nowhere is this more evident than in Agriculture, Forestry and Land-Use. REDD alone has four new VCS-approved methodologies and more on the way, opening a path for many new projects and credits.
Credit issuance will be helped by the streamlined VCS Program 2011 documents to be rolled out in the first quarter – and thereafter to be known as VCS version 3. VCS version 3 advances program usability by light years, and we expect it to speed the project pipeline, from methodology development to project validation to credit issuance.
Another big first: when projects start issuing credits using VCS-approved methodologies in 2011, methodology developers will receive their first rebates under the program. The VCS compensation mechanism will rebate two cents (US$) to methodology developers for every credit issued using their methodology. To our knowledge, this is the first time that the hard work of methodology developers will be explicitly recognized by carbon markets.
VCS will also be busy sowing the seeds for future harvests in 2011. Our policy work will push us into exciting new areas centered on streamlining, linking and scaling up of carbon crediting. Already a new VCS steering committee has begun work to set out requirements for developing standardized approaches to provide clear guidelines for setting baselines and assessing additionality. This work will help with reducing transaction costs, enhancing transparency, and enabling further scaling up of carbon crediting. At the same time, VCS has launched a major new initiative to work with states and other national and sub-national jurisdictions to develop crediting frameworks for integrating REDD projects and jurisdiction-wide programs and policies. This is a major step along the road to linking projects into state and national frameworks. Read more about this initiative below.
Coming soon: Advisory group for nested, jurisdiction-wide REDD accounting
In January, VCS completed a call for experts to join a new advisory group that will develop a robust new policy platform to operationalize jurisdiction-wide and nested REDD frameworks. This initiative will open the way for states and nations anywhere in the world to integrate REDD projects into larger jurisdiction-wide frameworks, opening a path for individual and bilateral actions to scale up REDD. VCS received more than 100 applications from technical experts and government officials wishing to join the advisory group. We will bring you more information about this initiative when we announce advisory group members in the coming weeks. The advisory group will aim to develop criteria and procedures for integrated jurisdiction-wide REDD accounting by the end of 2011.
New methodology pipeline
Fourth new REDD methodology, by Wildlife Works, approved in January
On 11 January, a fourth new methodology for crediting REDD projects was approved for use under VCS. Developed by environmental consultancy Wildlife Works Carbon, the methodology offers a user-friendly way to account for greenhouse gas emission reductions and removals from activities that curb deforestation in tropical forests. Specifically, it provides an approach for calculating historical deforestation rates based on historical satellite imagery together with information about external drivers of forest destruction. This could be useful for projects that do not have a complete historical series of full-coverage satellite imagery. The methodology was developed around the Rukinga project in the semi-arid tropical forest of Kenya, but it can be used more broadly to account for emission reductions in projects throughout the tropics. Read more
Two new methodologies submitted in January, kicking off 2011
In January, VCS posted two new methodologies for public comment. Carbon Credit Corp. submitted a new methodology for crediting activities on lands where indigenous peoples and the state have negotiated land-use planning agreements that improve forest management in logged-over areas. GreenCollar climate solutions submitted a methodology that would credit carbon reductions from improved grassland management practices on grasslands used for primarily for livestock production. See methodology pipeline.