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Why a 60-minutes checklist on accessing �carbon finance for jurisdictional forest mitigation

Jurisdictions with forest mitigation programmes are increasingly looking to attract carbon finance from voluntary carbon markets.

It is not always easy to understand a jurisdiction’s potential to access carbon finance. There are several carbon standards available, each with its own set of requirements. Understanding how jurisdiction can apply these carbon standards a complex analysis of legal, technical, and policy aspects. Moreover, preferences of market buyers need consideration, but could be opaque.

There are many aspects to consider, �but some are more critical and less obvious �than others. This slide deck gives an overview �of “what to look out for” when preliminarily assessing whether a jurisdiction’s forest mitigation programme could access carbon finance.

The checklist could be used by governments for a self-assessment, or it could be used by donors and carbon credit buyers screening investment opportunities

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Success factors for a jurisdiction’s access to carbon finance

1
Project design and its eligibility for carbon standards

2
Availability of emission reductions

3
Forest monitoring

4
Safeguards

5
Ownership of emission reductions

6
Participation of stakeholders

7
Attractiveness for voluntary carbon market buyers

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Success factors for a jurisdiction’s access to carbon finance

Project design and its eligibility for carbon standards
Does the programme cover a large area? Does the programme cover deforestation and forest degradation? Can the start date be linked to significant policy action? Does the country meet HFLD criteria? Is the implementation plan embedded into a strong NDC?

Availability of emission reductions
Is the programme designed to reduce delivery risk? Is there a strong implementation plan?

Forest monitoring
Are activity data collected using best practices? Are emission factors collected using best practices? Does carbon accounting address risks of non-permanence, leakage and uncertainties?

Safeguards
Is there a Safeguards Information System with regular Summary of Information submissions? Is there a high level of detail in the safeguard indicators?

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Success factors for a jurisdiction’s access to carbon finance

Ownership of emission reductions
Does the country’s legal framework provide clarity on emission reduction ownership? Can the government proof emission reduction ownership?

Participation of stakeholders
Is there a transparent and detailed benefit-sharing plan available? Are there detailed rules on project nesting agreed and being applied? Is a national approval process and registry for mitigation actions available?

Attractiveness for voluntary carbon market buyers
Is the programme narrative conducive to be part of corporate communications of carbon credit buyers? Could the carbon credit be used for voluntary / compliance offsetting in multiple contexts?

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How a country case is assessed


Looks great – no additional work required	Something is available but is �likely to need additional work	There is an issue with this criteria, the country will need to address this before moving ahead with applications for climate finance

Success factors are rated as follows:

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Project design and its eligibility for carbon standards

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Project design and its eligibility for carbon standards: �does the programme cover a large enough area?

	ART/TREES	VCS JNR
Minimum area	No requirement for programs that cover an entire country. Subnational programs must correspond to one or several jurisdictions no more than one administrative level ‘down’ from the national scale (and/or indigenous territories) and must contain 2.5 million hectares of forests. From 2030, only national-scale programs eligible.	No requirement Subnational programs must correspond to one or several ecosystems / jurisdictions no more than two levels ‘down’ from the national scale

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Project design and its eligibility for carbon standards: Can the start date be linked to significant policy action?

	ART/TREES	VCS JNR
Start date �of initial crediting period	Up to four years before �the year of the TREES �concept note (LEAF only purchases vintages 2022-2026)	Up to three years before initiating the pipeline listing process – to be justified based on “the establishment �of relevant GHG laws, policies (including jurisdictional REDD+ strategies or plans), or regulations”.

2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023	2024	2025	2026	2027	2028	2029	2030
			Reference period I					Crediting period I
								Reference period II					Crediting period II
													Reference period III					Etc.
																		Etc.

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Project design and its eligibility for carbon standards: Does the programme cover deforestation and forest degradation?

	ART/TREES	VCS JNR
Deforestation	Required	Required
Forest degradation	Required (Can be excluded if this leads to conservative emission reduction estimates or if emissions from degradation are less than 10% of emissions from deforestation.)	Required (Can be excluded if emissions from degradation are less than 10% of total emissions.)
Removals �in new forests	Optional (May only be included if there are ER from deforestation and forest degradation.)	Not eligible
Removals in standing forests	Not eligible	Not eligible

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Project design and its eligibility for carbon standards: �Does the jurisdiction meet HFLD criteria?

When using HFLD modalities, jurisdictions can issue carbon credits from retaining emissions at the same historical level without the need to reduce emissions below past emission levels.

	ART/TREES	VCS JNR
Regular approach to reference level setting	Average emissions across a 5-year reference period	Average emissions across a 4-6-year reference period
HFLD modality for reference level setting	Limited adjustment above historical average emissions based on 0.05% of carbon stock and the HFLD Score. Eligibility based on HFLD Score.	As above (No special provisions for HFLD)

HFLD score >0.5 -> eligible for HFLD crediting

HFLD score >0.5 -> not eligible for HFLD crediting

HFLD = High Forest cover, Low Deforestation

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Project design and its eligibility for carbon standards: Is the implementation plan embedded into a strong NDC?

	ART/TREES	VCS JNR
Implementation plan	Programmes “shall submit a REDD+ implementation plan as part of the initial documentation and each subsequent TREES Monitoring Report which outlines the new and ongoing programs and activities including locations planned to achieve the ERRs”.	Programmes justify the start date of crediting based on “the establishment of relevant GHG laws, policies (including jurisdictional REDD+ strategies or plans), or regulations that target GHG mitigation and/or concrete implementation of relevant GHG mitigation activities”.
Relation to NDC	Country’s NDC must have an ER target that includes forests, but does not need to be a specific sectoral target for forests	No requirement

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Availability �of emission reductions

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Availability of emission reductions: Is the programme designed to reduce delivery risk?

Understanding the carbon credit delivery risk is essential. Where it is uncertain whether carbon credits can be generated, this is unattractive for the buyer. Where risks are low, there will be more demand, higher prices and better prospects to obtain upfront funding.

Key questions:

Are the credits already issued?
Do monitoring results indicate that credits could be issued?
Is it an HFLD jurisdictions where carbon credits can be generated simply by keeping emissions constant?
How strong is the implementation plan to reduce emissions?
Are there carbon credits already selling carbon credits, which would need to be deducted from jurisdictional credits?

Low delivery risk

High delivery risk

Issued credits	Past vintages where monitoring indicates emission reductions	Future vintages (in non-HFLD jurisdictions) – with strong implementation plan	Future vintages (in non-HFLD jurisdictions) – with average implementation plan” to this: “Future vintages in non-HFLD jurisdictions	Future vintages (in non-HFLD jurisdictions) – with average implementation plan	Future vintages in jurisdictions where active carbon projects are also selling carbon credits

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Availability of emission reductions: Is there a strong implementation plan?

Proximate causes

Underlying causes

Economic factors

Demographic factors

Technological factors

Policy & institutional factors

Cultural factors

Agricultural expansion

Infrastructure extension

Wood extraction

Deforestation and forest degradation

Well-defined policy action to address the drivers of deforestation �and forest degradation

Government

Civil society

A strong implementation plan creates confidence that the jurisdiction �will be able to reduce emissions and generate emission reductions.

Source: modified from https://doi.org/10.1016/j.jenvman.2020.110736

Example of Brazil:

Acquisition

international

funding

Fiscal and

Regulatory

incentives

Expansion �of protected areas

Enhanced �law enforcement

Brazil’s

cross-sectoral policy cocktail

to reduce deforestation in the 2000s and early 2010s

Supply-

chain action

to address deforestation

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Forest

monitoring

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Forest monitoring: Are activity data collected using best practices?

Key questions on activity data:

Are area estimates based on visual area sampling, ideally of high-resolution imagery and ideally using multiple assessments?
Are detailed Standard Operating Procedures available and being applied?

	ART/TREES	VCS JNR
Deforestation	Verifiable ground-derived data (e.g., logging statistics) or remote sensing results (i.e., area measurements from combination of visual area sampling and maps, map-based only if statistically not different)	Area measurements (from combination of visual area sampling and maps)
Forest degradation	(Same as for deforestation)
Removals	Verifiable statistics or remote sensing results (only for new forests)	Not applicable

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Forest monitoring: Are emission factors collected using best practices?

Key questions on emission factors:

Are net emission factors being used that consider carbon stock after the observed change?
Has a systematic, plot-based forest inventory been recently conducted with a representative sampling frame?
Are detailed Standard Operating Procedures available and being applied?

	ART/TREES	VCS JNR
Deforestation	Measurements for above-ground biomass, flexible otherwise, must include carbon stock after the change	Measurements for above-ground biomass, flexible otherwise, must include carbon stock after the change
Forest degradation
Removals	Flexible on data sources (only for new forests)	Not applicable

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Forest monitoring: Does carbon accounting address risks of non-permanence, leakage and uncertainties?

Carbon market standards (ART/TREES and VCS JNR) include a detailed carbon accounting approach requiring application of a series �of discounts to address risks related to uncertainties, leakage and reversals. A carbon accounting model needs to factor these in.

Gross �emission reductions

Uncertainty discount

(0-?%)

Leakage discount

(0-20%)

Reversal �risks

(5-25%)

Carbon �credits

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Safeguards

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Safeguards: Is there a Safeguards Information System with regular Summary of Information submissions?

Key questions:

Does the country have an operational SIS?
Does the country have safeguards SoIs submitted to the UNFCCC?
Do the SoIs cover the period for which payments are sought?
Do SIS and SoI provide information relevant for the scale of the jurisdictional programme?

	ART/TREES	VCS JNR
SIS with regular �SoI submissions	Safeguard Information System with summary of information on how countries address and respect safeguards – for all of the period for which payment is sought

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Safeguards: Is there a high level of detail in the safeguard indicators?

Key questions:

Does the country have an operational SIS?
Does the country have safeguards SoIs submitted to the UNFCCC?
Do the SoIs cover the period for which payments are sought?
Do SIS and SoI provide information relevant for the scale of the jurisdictional programme?

	ART/TREES	VCS JNR
Indicators for the Cancun safeguards	Safeguard Information System with summary of information on how countries address and respect safeguards – for all of the period for which payment is sought

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Ownership �of emission reductions

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Ownership of emission reductions: Is there clarity on emission reduction ownership?

Degree of clarity on emission reduction ownership could be:

Unclear
Regulated explicitly
Regulated implicitly considering emission reductions as an (intangible) asset linked to forest land tenure rights

Primary emission reduction ownership (before any transfers occur) could be:

With the government
With the land resource/forest tenure rights holders
With those who implement activities to reduce emissions

Actual emission reduction ownership could result from:

Allocated forest land ownership or use rights
Devolution of rights from government to other entities implementing REDD+ actions (e.g., VCS projects)
Transfer of rights between contractual parties buying and selling emission reductions
Arrangements clarifying who is entitled to claim for benefits derived from emission reductions

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Ownership of emission reductions: Can the government prove emission reduction ownership?

Three basic options for governments to demonstrate emission reduction ownership:

Option 1: Reference to existing legal and regulatory frameworks – applies if…
Degree of clarity on emission reductions ownership: clarity Primary ownership: with the government For example: Zambia, DRC, Mozambique where the government is primary owner of emission reductions according to existing law / regulation

Option 2: Sub- arrangements with potential land and resource tenure rights holders – applies if…
Degree of clarity on emission reductions ownership: not (explicitly) defined by law but implicitly associated with forest land tenure, or else unclear Primary ownership: unclear or with forest tenure holder (forest tenure holders can be identified, and contracts enacted to devolve emission reduction rights to the government) For example: Costa Rica where participation in the national scheme for payment for ecosystem services also devolves emission reductions (lessons learned show that those arrangements are complex to achieve at a large scale)

Option 3: Benefit sharing arrangement - applies if…
Degree of clarity on emission reductions ownership: not (explicitly) defined by law but implicitly associated with forest land tenure, or else unclear Primary ownership: unclear or with forest tenure holder (forest tenure holders cannot be identified, and contracts enacted to devolve emission reduction rights to the government) For example: Ghana, Chile where arrangements clarifying who is entitled to claim for benefits derived from emission reductions are established in accordance with the benefit-sharing plan

ART/TREES	VCS JNR
Programmes must demonstrate ownership rights to emission reductions and identify government entity able to enter into transactions

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Participation of stakeholders

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Participation of stakeholders: Is a national approval process and registry for mitigation actions available?

Example of �Colombia’s RENARE

Legal basis: Resolution 1447 (2018)

Registry at http://renare.siac.gov.co/GPY-web/#/gpy

Detailed information within the registry on mitigation actions

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Participation of stakeholders: Are there detailed rules �on project nesting agreed and being applied?

A jurisdictional programme does not exist, which could issue credits	The jurisdiction issues credits (deducting projects’ issuances projects)	The jurisdiction issues credits (baseline consistent with project baseline	The jurisdiction issues credits and passes on benefits �(or credits) to projects
Issues: Government may be keen to develop a jurisdictional programme, contention around stand-alone projects	Issues: What if project issuance very high or jurisdictional performance low? First come first serve problem	Issues: Need to agree monitoring protocol	Issues: Need to agree monitoring protocol. What if jurisdictional performance low? Time delays

Registry

Government

Registry

for the jurisdiction

Government

Registry

for project

Reconcile

Registry

Benefit

sharing

Governement

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Participation of stakeholders: Is there a transparent and detailed benefit-sharing plan available?

	ART/TREES	VCS JNR
Benefit-sharing plan	A benefit-sharing plan is not formally required Under the transparency and anti-corruption safeguard, requires the distribution of REDD+ benefits to be carried out in a fair, transparent and accountable manner	Must have an equitable, transparent, participatory and legally binding benefit-sharing system that considers stakeholders’ carbon rights, as well as their mitigation contribution
Use of carbon payment	Not prescribed	Not prescribed

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Attractiveness for voluntary carbon market buyers

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Attractiveness for voluntary carbon market buyers: �Is the programme narrative conducive to be part of corporate communications of carbon credit buyers?

Often, buyers in the voluntary carbon markets will aim to refer to the carbon credits and the underlying project or programme in their corporate communications

Key questions related to using �the programme for corporate communications:

How strong is the narrative about biodiversity / community co-benefits?
How strong is the narrative about �on-the-ground action to achieve mitigation?
Is there an immaculate human rights profile?

“Prices vary widely by standard, but are driven by the underlying project attributes and co-benefits.”

“REDD projects lead volume, while tree-planting consistently commands higher prices.”

“Forestry and land-use offsets often deliver co-benefits such as support for indigenous peoples, the provision of jobs, and other activities advocated in the Sustainable Development Goals (SDGs). For this reason, prices for offsets generated from forestry and land-use projects are often higher than those generated through renewable energy.”

“More than 80% of the VCS credits added the Climate, Community and Biodiversity (CCB) Standard to verify co-benefits ‘beyond carbon’.”

“Direct relationships and a good project story are still preferred over more standardized exchanges and crypto.”

Quotes from the 2021 report on the State of Forest Carbon Finance by the Ecosystem Marketplace:

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Attractiveness for voluntary carbon market buyers: Could the carbon credit be used for voluntary / compliance offsetting in multiple contexts?

Some buyers will aim to use carbon credits to support corporate sustainability claims, for example under the science-based targets initiatives. Other buyers may aim to offset commitments under CORSIA – or under their country’s mitigation efforts.

Key questions related to the potential use of the carbon credit:

What is the carbon standard?
Is there a corresponding adjustment?
Is this regular crediting or crediting using an HFLD modality?
Is this removals or emission reductions?

	Voluntary offsetting	Compliance offsetting
What is the carbon standard?	Market dominated by project-based standards, only little experience with ART/TREES and VCS JNR so far	ART/TREES and VCS JNR eligible for CORSIA, but not the project-based standards, Article 6.2/6.4 to be determined
Is there a corresponding adjustment?	Corresponding adjustment optional	Corresponding adjustment required
Is this regular crediting or crediting using an HFLD modality?	So far challenging to find interest in ART/TREES’ HFLD modality	CORSIA also allows crediting using ART/TREES’ HFLD modality
Is this removals or emission reductions	Highest interest in removals, some buyers focus exclusively on removals, but most volumes on emission reductions	Both removals and emission reductions are equally eligible