Developing and Registering a Forest Carbon Project in Northern California

8/3/2019 Developing and Registering a Forest Carbon Project in Northern California

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Developing and

Registering

a

Forest Carbon Project

Terrestrial Carbon Sequestration and Carbon Market Workshop Anderson, California



.

– Offset quality criteria

– What does an offset “registry” do?

2. Develo in and re isterin a forest carbonproject

– 3. Legislative and market update



• r nh mi i n r i n r

removal used to compensate formi i n h r l wh r

• Project-based GHG reductions occurring,

entity for compliance

• .• Specific project type and vintage



Voluntary and pre‐

compliance offsets

-

– Value based onperceived quality

– Value based on compliancerecognition

– Buyers want “the story”behind the project

– Marketin or re utational

– Registered in approved earlyaction program

– Meet ri orous set ofbenefit

– Regulatory approval not

standards

– Independently verified

– May not be verified,registered or retired

– experience, hedge againstfuture requirements, help

– Variable quality s ape regu a ons



‐ ‐

-

emissions – Government sets declining cap on emissions

– Program administrator (EPA, CARB) creates allowances

and distributes via allocation or auction – ac year cappe ent t es must o a owances = pr or

year emissions

–

• Reduce GHG emissions at covered facilities

• Purchase allowances from other regulated entities

• urc ase a owances rom overnmen a auc on

• Purchase offsets



‐ ‐



Additional Reductions are beyond regulations, beyond common practice,- -

Real After-the-fact, measurable GHG reductions

ermanent tmosp er c ene t s permanent, or reversa r s s assesse anmitigated to make non-permanent offsets fungible with other offsets,

on-system reductions and allowances

Net ofleakage

Emission increases outside project boundary, due to project, aremitigated

Rules complied with and GHG assertion is without materialdiscrepancy

only once



• Publish/approve standards, methodologies, tools

– Public consultation and scientific peer review (ACR) – Stakeholder work groups (CAR)

• Act as gatekeeper on quality

– Set standards and certify they have been met – e ers now w at s requ re , uyers ave con ence o set s

real/has compliance value, public has confidence in results

• Provide trans arent serialized trackin of issuancestransactions, retirements

• Make project documentation publicly accessible

• Oversee third-party verification



• . .

– Founded 1997 by Environmental DefenseFund and Environmental Resources Trust

– 30 million tons issued

• Pioneered system of transparent on-linereporting and serialization of verifiedproject-based offsets – now the industry

s an ar• Joined Winrock International in 2007

– Founded 1984 as a “public benefit

corporation” under Arkansas state law



What does developing a forest

carbon project

mean

to

you?

• in h r

• Key players and their roles

•

protocols• Eligible activities

• Additionality

• Permanence and risk mitigation

•



Methodology /

protocoldevelopment oracceptance

Project designphase

Preparation and

submission ofProject Documents

Preliminary

screening orcertification

-Project registrationTransactions,

(early registration)

verification

project documentsposted

retirements etc.(off-registry)

Ongoingmonitoring and

periodicNew issuances

Blue: landowner and proponent oraggregator

Oran e: ro ram/re istrverification

involvement

Green: third-party involvement



Party Basic roles

••May be required to sign long-term agreement•May have monitoring, verification, risk mitigation obligation

Proponent •Project design, interface with registry• a e o se e, ncur cos s, mar e o se s… many mo e s•May have monitoring, verification, risk mitigation obligation

Aggregator•Aggregate landowners to spread transaction costs and diversify risk•Educational and organizational role

RPF •Project design assistance

Offsetro ram or

•Publish/approve protocols•Gatekeeper on quality

registry •Transparent serialized tracking•Oversee verification

Verifier •Third-party auditing against requirements of program•O inion on whether GHG assertion is without material discre anc

Offset buyer •Entity purchasing and using offsets for voluntary, pre-compliance, or

speculative purposes



ACR CAR

Scope Worldwide United States

Mexico, Canada in future

Land Private, all public, Tribal Private and public (non-federal)owners ps or re orestat on an ;

private for avoided conversion

Eligible •Afforestation/Reforestation •Reforestation••Reducing Emissions from

Deforestation (AvoidedConversion)

••Avoided Conversion

•Urban Forestry

Minimumterm

40 years from start date 100 years after last creditsissued

mitigation

Insurance and other financial

options



ACR CAR

Agreement

with

Proponent Landowner

ona y ree-prong es orperformance standard

er ormance s an ar approacAutomatic for reforestationBased on baseline stocks for IFM

period(baseline

validity)

IFM

Otherrequirements

Sustainable harvesting, “naturalforest management,” age classes,max. 40-acre clearcuts…

Verification By independent third-party verifiers accredited by ANSI forrelevant sectoral scope



• Establishing, increasing and restoring vegetative

cover through the planting, sowing or human-assisted natural regeneration of woody vegetation

• Targets eventual establishment of forest

• Carried out on marginal agricultural or rangelands,rus e s, u er areas, w n rea s, e c.

• Not cleared of forest in last 10 years solely to

– Exceptions for fire, natural disturbance, brush removal for



• Activities to reduce GHG emissions and/or enhanceGHG removals, implemented on lands designated,sanctioned or approved for forest management

– Increasing forest productivity by thinning diseased or

suppressed trees – Managing competing brush and short-lived forest species

– Increasing buffers or other set-asides

–

– Increasing carbon stocks in harvested wood products

– Improving harvest or production efficiency

– Shifting from shorter- to longer-term wood products



•

would have occurred under current forestry lawsand regulations, current forest industry practices,and under a business-as-usual scenario

– Regulatory surplus and exceeds performance standard – Three-prong test:

• Regulatory surplus

• Exceeds common ractice for area forest t e similar

landowners

• Faces at least one implementation barrier: financial,technolo ical institutional



-

• More subjective, open togaming

• Less subjective• Efficient to apply

•process

• Rigorous tools available

• Heavy up-front datarequirements

• Potential for over-crediting• ess anger o over-cre t ng w t out un er-cre t ng to

balance



Permanence and risk

mitigation (ACR)

• Minimum Pro ect Term of 40 ears

– Ensure project activity maintained, monitored and verified overrelevant timeframe

– Balance time commitment with broad landowner participation

– Required of Project Proponent only

• s assessmen an m ga on ma es oresoffsets effectively permanent and fungible with

,reductions

“made whole”



• Pro ect-s ecific risk assessment

• Buffer contribution – From project itself

– ERTs of any other type and vintage

• Unintentional reversal: – roponen pays e uc e ; re res u er ons orremainder; “premium” goes up

• Intentional reversal “bu -out o tion” : – Proponent replaces all issued ERTs for that portion of project

• Alternate risk mitigation options accepted – Insurance or other financial assurances to replace losses



Permanence and risk

mitigation (CAR)

• PIA obligation of 100 years after last credits

– Project monitoring, verification, reversal liability,harvest guidelines and “natural forest management”

– Required of landowner (and successors, heirs,assigns, and new owners)

– uper or to a ot er c a ms un ess a t ona u ercontribution made

• – Avoidable vs. unavoidable reversals

– >1:1 penalty for any avoidable reversal before 50 yrs

• Focus on monitoring carbon stocks on site



• Key for transaction cost efficiencies (inventory,

monitoring, verification) and risk diversification• Agreement is still with Proponent (here aggregator)

– Proponent commits to reversal risk mitigation, including exit ofparticipating landowners

• For inventor and monitorin recision tar etsapplied at overall project level – ±10% of the mean at 90% confidence

– se s ra ca on; oes no requ re p o s on every an o ng• Verification (reasonable assurance; ±5% materiality)

– Risk-based approach and not all properties necessarily visited



• “Aggregate” capped at 5,000 acres, 2 or more

Forest Owners• Each Forest Owner still has own PIA, liability for

reversa s, account, ase ne nventory, annuareports, etc.

transactions

• Goals: – Fewer plots to achieve ±5% at 90% confidence sampling error

– Only half of properties verified each 6-year interval

• Constraints on leaving aggregate



Legislative and regulatory

landscape• No U.S. federal climate legislation

– Scaling back

from

economy

‐wide

cap

‐and

‐trade,

to

power sector cap‐and‐trade, to RES, to offshore oil

etc., to nothing

– Bills generally

friendly

to

offsets,

recognize

cost

containment and political value… but no bill

• EPA proceeds with regulation under Clean Air

Act – Endangerment finding, mobile sources, stationary

sources

– Offsets and

other

market

mechanisms

unclear



Eligible offset types

‐

• Projects that reduce, flare or use methane:

– , ,

– Reduce fugitive emissions in oil & gas sector

– Manure management,

anaerobic

digestion,

waste

aeration

• Projects that reduce CO2 emissions or increase sequestration in agriculture, livestock,

orestry, an use:

– Afforestation/reforestation, improved forest management, reduced deforestation, urban forestry

– Agricultural, grassland, and rangeland sequestration and management

– Avoided conversion

of

grassland/rangeland/forest

– Management/restoration of peatlands and wetlands

– Conservation of marine coastal habitats

– N2O emission reduction (fertilizer production and/or use)

– Biochar roduction and use

• Recycling and

waste

minimization

• Carbon Capture & Storage (with or without enhanced oil recovery)

• Destruction of ozone‐de letin substances

• Small off ‐grid renewable electricity

• Projects reducing

the

GHG

intensity

of

agricultural

production



“Qualified Early Offset

Programs”• Established before Januar 1, 2009

• Offset standards/methodologies/protocols must: – Be developed through public consultation or peer review

– Require offsets be measurable, additional, verifiable,enforceable, permanent

– Be made available to the public

• Require verification by accredited verifier

• Publicl accessible re istr , serialized tons

• Financial assurance requirements

• N r r m inv lv m n in r v l m n



Legislative and regulatory

landscape• Focus shifts (back) to states and regional

programs• ‐ ‐

– Proposition 23

‐ ‐

– Not all original members participating

• sets seen

as

ey

– No clarity yet on which protocols will be recognized

– Forestry a safe bet



• Marked decline in transaction volumes and

prices – Voluntar activit down

– Pre‐compliance demand awaiting more clarity

– . .

temporarily close U.S.

desks

– Scandals in

CDM

market

– Uncertaint in ost‐K oto

negotiations



Still… forest carbon remains a

relatively safe

bet

• Protocols are well established

• Generally

cost‐

effective

offsets

at

an

attractive

cost

per ton

– Large potential supply

– Attractive to both voluntary and pre‐compliance buyers

• State and regional programs likely to recognize

– Key to register on an established program

– ,

,

poss y

,

poss y

o ers• Has become central to federal discussions

ro ec eve opmen me rame may e a year, more

or less…

pays

to

start

now



Nicholas Martin

Chief Technical Officer, American Carbon Registry

[email protected]

. .

‐



Protocol development: ACR

and CAR

ACR CAR

Established 1997

(Merged with Winrock 2007)

2008

(CCAR established 2001)Protocol •Both external (bottom up) •Top-down only

eve opmentprocess

an nterna•Public consultation•Scientific peer review•Final a roval and

• rotoco scop ng•Multi-stakeholder workgroup•Public comment•Board ado tion

publication

•Transparently developed, regulatory-quality protocolsmeeting criteria of federal legislation

•State and regional approvals in process



Protocols (existing and in

progress)ACR CAR

•Forestry•AR•

•Forestry•Reforestation•

•REDD

•N2O from fertilizer

•Avoided conversion

•Urban forestry• ves oc me ane•Landfill methane•Fugitive methane in oil & gas

• an me ane•Livestock methane•Coal mine methane

sector•Improved grazing land

•Organic waste digestion•Ozone-depleting substances•

•Wetland restoration and

avoided loss

under consideration

Developing and Registering a Forest Carbon Project in Northern California

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