Assessing Alternative Approaches

INFORMAL WORKSHOP ON NON-PERMANENCE 1

ISSUES FOR CONSIDERATION IN DECISIONS ON ALTERNATIVE APPROACHES TO ADDRESSING NON-

PERMANENCE IN LULUCF ACTIVITIES


Assessing Alternative Approaches

Combination of Approaches

Risk assessment - are measures

needed to guard against non-permanence?

Mechanisms for Replacement- Buffer- Commercial Insurance- Government Guarantee- Performance Bond

Provide exception to low risk activities

Do credits expire or are they assumed to be permanent?

Measures Needed

Temporary Credits

Permanent

Expire

Measures Not Needed

Liability:Who takes on the liability ?

(Buyer v. Seller)

Are full credits awarded, or are they issued incrementally?

Tonne Year Crediting

Full

Incremental

Regulatory, policy, and financial considerations needed to implement


• Is the risk screening required?– Should screening be mandatory for assessing types of risks and their

potential, if yes, what aspects need to be covered in screening– Whether activities with low risk should be notified as categorical exceptions

and exempted from permanence requirements (e.g. buffer, insurance etc.), if yes, which categories of activities

– Whether activities with high risk should be excluded from eligible activities (e.g. activities of intentional reversal), if yes, which categories of activities

Issue – Need for Risk Screening


Liability

Entity Liability ExamplesProducer/seller Producer is liable to replace reversed

creditsNew Zealand ETS

Buyer Liability moves to ER holder – similar to default risk for a bond holder

Expired temporary credits under CDM

Customized contracts Contracts reflecting liability are negotiated between producer and buyer

Practice in over the counter transactions

System Program manages liability on behalf of sellers and buyers, and mechanisms are adopted to pool risks and to replace credits subsequent to reversal events

Voluntary standards, e.g. VCS, ACRCalifornia AB32 for forest carbon credits

• Who is liable for reversals ?– Seller – Buyer– System

• a) During contract period, and • b) Subsequent to contract period


• How long is the permanent period? – Policy and permanence requirements – Permanence period in different standards currently is:

40 & 100 years

Issue – Permanence Period


• What types of reversal risks need to be covered?– Unintentional– Unintentional and intentional– Exclusion of certain intentional reversals

Issue – Coverage of Reversal Risks


• Does the scale of activities influence the choice of approaches? – Project– Program/sub-national– National

Issue – Scale of Activities


• How feasible are various approaches in real world setting?– Balance of credit accounts – Financial viability– Institutional feasibility– Policy choice and limitations

Issue - Feasibility of Approaches or their Combinations


• Whether the approaches analyzed are adequate?• Is there a need for additional approaches?– If yes, which are these approaches

Issue – Adequacy of Approaches


• Do various approaches ensure environmental integrity?

Issue – Environmental Integrity


• Should implementing entities be allowed to choose from a menu of approaches?

Issue – Choice of Approaches


• Is there a need for a consistent policy for addressing risk of non-permanence across multiple land use activities?

Issue – Consistent Policy Across Land Use Activities


• How the discussion on non-permanence risk relates to broad LULUCF mitigation agenda?

Issue – Risk of Non-permanence in context of LULUCF agenda


• Risk Screening• Liability• Permanence period• Coverage of risks• Scale of activities• Feasibility • Adequacy of approaches• Environmental Integrity• Choice among approaches• Consistency across land uses• Relation to broad LULUCF agenda

Summary of Issues


RAMA CHANDRA REDDYEMAIL: [email protected]

FOR MORE INFORMATION ON THE BIOCARBON FUND, PLEASE CONTACT:

ELLYSAR BAROUDYEMAIL: [email protected]

WWW.CARBONFINANCE.ORG

Thank you

Assessing Alternative Approaches

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