REDD+ (Reducing Emissions from Deforestation and Forest Degradation) methodologies under Verra’s Verified Carbon Standard (VCS) program, the largest crediting program in the Voluntary Carbon Market (VCM), are undergoing significant updates. These changes are expected to improve VCM sentiment through more accurate quantification of project benefits and increase the supply of CCP-labelled credits in the long term.
On 19 July 2024, Verra announced updates to the VCS Jurisdictional and Nested REDD+ (JNR) Framework, effective immediately, to align with the Integrity Council for the Voluntary Carbon Market’s (ICVCM) Core Carbon Principles (CCP). New versions of the following documents were released to reflect the updates:
- JNR Non-Permanence Risk Tool
- JNR Requirements: Scenario 1
- JNR Requirements: Scenario 2
- JNR Requirements: Scenario 3
- JNR Registration and Issuance Process
With Article 6 advancing towards full operationalization, the JNR updates are expected to play an important role in carbon credit trading between countries. The international carbon market, enabled by Article 6 and the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), could scale more rapidly through the JNR updates, helping more credits meet their standards. An upward shift in credit supply could put downward pressure on prices, but these markets are
As part of Verra’s initiative to improve the measurement of REDD+ project benefits, the organization has invested in technology that develops deforestation baselines through jurisdictional-level data for projects under REDD+ methodology VM0048. The tool to account for the greenhouse gas (GHG) emissions reductions from unplanned deforestation avoidance projects, described in module VMD0055, can be applied for a jurisdiction after the completion of:
- Jurisdictional activity data collection: estimated area deforested the 10-year historical reference period (HRP).
- Forest cover benchmarking: forest/non-forest coverage in the jurisdiction mapped at three points in time over the HRP.
- Risk mapping: modelling the deforestation risk across the jurisdiction using geospatial data to assign risk levels to individual projects
- Requesting access: high-resolution jurisdictional data can be requested for a fee, but host governments are given the data free of charge.
Frequently asked questions related to the transition of REDD+ projects under VM0048 and VMD0055 can be found on Verra’s site.
The Project Activity Data Allocation (PADA) fee was announced last week. It requires project proponents to pay USD 10K per request and USD 0.25 per hectare, up to a maximum of USD 150K. If the project area changes if activity data was already allocated to it, a fee of USD 500 and USD 0.25 per unallocated hectare will apply.
Collecting data for jurisdictions will take months, so Verra is releasing the data availability schedule across multiple phases. The expected release of each jurisdictional baseline within Phase 1 was announced on 8 August 2024. The first set of jurisdictional data is expected to be fully released by December 2024. Verra has also announced that the Phase 2 schedule will be updated by the end of August.
The updated PADA system aims to standardize the process across projects, ensuring a more consistent, transparent, and accurate approach to GHG avoidance data. An improved oversight could benefit REDD+ credits, which have seen a steady price decline, as over-crediting and quality risks are mitigated for buyers. Project proponents could incur higher operational costs in aligning with these higher standards for nature-based projects. Still, a streamlined project development process could mitigate some risk and uncertainty for developers. Overall, the updates could place upward pressure on prices through supply-side and demand-side mechanisms and increased transaction costs.
Verra’s recent updates represent a significant shift towards greater integrity and transparency in the VCM, particularly within the REDD+ framework. While these changes may introduce short-term challenges for project developers, they will likely enhance the credibility and attractiveness of REDD+ credits in the long run. As the VCM continues to evolve, these developments could play an important role in shaping the market’s future landscape.
Please contact ClearBlue's Market Intelligence team for further discussion on these developments.