Verra tonne-year decision paves way for different approach

Quantum Commodity Intelligence - Verra's decision on Wednesday to suspend a proposal to include tonne-year accounting in its standard is not a final blow for the concept, but it opens the way instead for a different version to emerge, industry sources told Quantum Thursday. 

The US-based standard said it will not move forward with incorporating tonne-year accounting into the VCS Program at this time, but reserves the right to revisit this decision in the future, after another consultation.

Sources at Verra say feedback was generally positive, but that stakeholders preferred a much longer "storage period" than the one year championed by the methodology proposal.

Stakeholders asked for storage periods between five and 20 years, says Verra, which would in turn create the need for a buffer pool, a form of insurance against losses.

The tonne-year accounting concept would mark a radical departure from current practice by allowing temporary emission reductions to be counted as carbon credits.

The methodology proposal was made by startup NCX, which has developed a programme enabling small landowners in the US to earn carbon credits in exchange for a deferral of their timber harvest by one year.

The method is attractive for them as they often cannot bear the registration costs associated with a typical Verra project and do not want to lock up their land for long periods of time.

Projects are simply credited on an 'as you go' basis, which allows a landowner to engage in timber markets more fluidly.

NCX credits have cleared for between $8-17 per mt of CO2 in the past year, data showed.

However, it is unclear whether a longer harvest deferral period of, say five years, would be attractive enough for landowners and if prices would need to go much higher as a result.

"NCX can still sell its own credits by itself, and so I'll be interested to see if they get any buy-in. Presumably some of their investors (like Salesforce) should be willing to make that leap," said one source.

Too short

NCX's methodology - and the associated proposed update to the Verified Carbon Standard - was criticised publicly by influential carbon market watchdogs CarbonPlan and CarbonMarketWatch, which called it "flawed in its logic."

"It's not clear to us how more time or input would change the concerns about the physical shortcomings of tonne-year accounting, and we will be watching how the conversation continues to unfold with interest," says Freya Chay from CarbonPlan, who welcomed Verra's decision.

NCX's method has lighter requirements for participation than a typical improved forest management project, with much of the environmental integrity reliant on NCX's top-down model that calculates the probability of a particular plot of land being harvested over the next year.

A host of variables are taken into account, including the distance between the land plot and the nearest saw mill, its proximity to roads and bodies of water, local timber prices, the size of the property and the type of owner.

The company relies on historical timber harvesting data from the US, remote sensing to update a project's baseline every year as well as on-the-ground inventories.

But industry sources said even the world's best model cannot capture with full certainty the likelihood of land being harvested over the next year.

"If you shorten the duration of your project, it becomes more and more difficult to prove... How do you demonstrate that that landownder wasn't going to harvest trees for that year," says Elias Ayrey, a forest scientist who has looked at the issue.

"Take for example timber companies. This is 2022, there are labour shortages all over the place, timber companies can't hire enough people to actually cut down all their trees, so they're not able to harvest all the trees that they want to in 2022 right now."

Ayrey says the tonne-year accounting method works, but that additionality would be more robust over periods of three to five years, when models are generally good at predicting timber harvest requirements.