VCS_Tool for AFOLU Non-Permanence Risk Analysis and Buffer Determination

8/14/2019 VCS_Tool for AFOLU Non-Permanence Risk Analysis and Buffer Determination

1/161www.v-c-s.org VCS Association

Voluntary Carbon Standard

Tool or AFOLU Non-Permanence Risk

Analysis and Buer Determination



Tool or AFOLU Non-Permanence Risk Analysis and Buer Determination

18 November 2008

I. SCOPE and PARAMETERS

Scope

1. This tool denes the step-wise approach or conducting the non-permanence risk analysis

to determine the number o buer credits that a given AFOLU project shall deposit into the

AFOLU Pooled Buer Account;

2. This tool shall be used in addition to any guidance provided by the most current versions o

the Voluntary Carbon Standard and VCS Program Guidelines;

3. Project proponents shall clearly document and substantiate this sel risk assessment covering

each risk actor applicable to the project. During validation and verication1 the VCS verier

will evaluate the document; and,

4. In evaluating the application o this tool to a proposed project activity, VCS Veriers shall

assess the credibility o all data, rationales, assumptions, justications and documentation

provided by the project participant to support the non-permanence risk analysis and buer

determination.

Parameters

Parameter Sign Description

Buer Withholding

Percentage

% Based on the projects overall risk classication,

the percentage o carbon credits generated by the

approved project activity that must be deposited into

the AFOLU Pooled Buer Account to cover non-permanence related project risks.

II. PROCEDURE

The project proponents shall take the ollowing steps:

Step 1: Conduct a risk assessment.

Sub-step 1a: Evaluate the project against the risk actors applicable to all AFOLU

project types.

Sub-step 1b: Evaluate the project against the risk actors associated with the specic

project type.

Sub-step 1c: Based on the above assessments, determine the overall risk classication or

the project.

Step 2: Based on the projects overall risk classication, deposit the appropriate amount o credits

into the AFOLU Pooled Buer Account.

Step 3: Repeat Steps 1 and 2 every time the project seeks VCS verication and adjust the projects

buer withholding as necessary.

1 Projects that are not validated and veried simultaneously must have their initial risk assessment validated

at the same time as VCS project validation. The risk assessment must also be reevaluated at the time o credit

issuance (i.e., verication).



Step 1: Conduct a risk assessment.

1. Project proponents shall assess both transient and permanent potential losses in carbon stocks

and determine the appropriate buer reserve based on this Tool.

2. The outcome o the risk assessment shall be clearly documented and substantiated and be

oered to the VCS verier or assessment when the project is being validated or veried.

3. The overall risk classication o the project shall be based on risk ratings or generic risk

actors and other risk actors associated with the specic AFOLU activity type:

Afforestation, Reforestation and Revegetation (ARR);

Agricultural Land Management (ALM);

Improved Forest Management (IFM); or,

Reduced Emissions from Deforestation and Degradation (REDD)

4. When determining the overall non-permanence risk classication, all the risk actors relevant

to the project shall be weighed up together. To assist with this process, the risk likelihood

signicance risk assessment methodology2, described in Appendix A, may be used.

5. Beore VCUs can be issued, a VCS verier will need to conrm the overall project risk

classication and the buer withholding percentage as determined by the project proponent

in accordance with this Tool.3

6. I the verier eels that the non-permanence risk associated with the project warrants a buer

reserve greater than the highest withholding percentage available or that project type (as

indicated in the buer tables below) then the project is not eligible or crediting under the VCS.

7. The outcome o the risk assessment at the rst VCU issuance and at subsequent risk

assessments where the project is classied as lower risk compared to the previous assessment

will be subjected to the VCS double approval process. I no agreement can be reached by the

two VCS veriers on the percentage o credits the project must withhold, the project can opt to

go with the more conservative o the buer determinations or appeal to the VCS Association.

2 This approach provides assessors with a ramework or evaluating both quantitative and qualitative risks in

an integrated manner in order to come to a deendable overall risk classication o low, medium, high

or unacceptably high/ail.

3 While this tool is intended to cover the key actors driving non-permanence risk, validators and veriers

may identiy other risks they consider signicant or a given project, in which case these additional actors

should be included in the overall risk assessment.



Sub-step 1a: Determination o the risk actors applicable to all project types

8. Generic risk actors that shall be assessed or all AFOLU project types are listed in Table 1.

Table 1: Risk actors applicable to all project types

Project riskRisk o unclear land tenure and potential or disputes

Risk o nancial ailure

Risk o technical ailure

Risk o management ailure

Economic risk

Risk o rising land opportunity costs that cause reversal o sequestration and/or protection

Regulatory and social risk

Risk o political instability

Risk o social instability

Natural disturbance risk

Risk o devastating re

Risk o pest and disease attacks

Risk o extreme weather events (e.g. foods, drought, winds)

Geological risk (e.g. volcanoes, earthquakes, landslides)

Sub-step 1b: Determination o the risk actors associated with the specic project types

I Aorestation, Reorestation and Revegetation (ARR)

9. To assess ARR project risks, the risk ratings listed in Table 2 below shall be assigned, whereby

the interaction between rotation period and the level o a projects commitment to replanting

across two or more rotation periods shall be expressed as short-term, medium-term or long-

term commitment.

a. Projects with rotation periods o less than 25 years and no commitment to replant ater

the rst harvest are characterized as having a short-term commitment period.

b. Projects with rotation periods o less than 25 years, but with a commitment to replant are

characterized as having a medium-term commitment period.

c. Projects with rotation periods o more than 25 years, but no commitment to replant arealso characterized as having a medium-term commitment period.

d. Projects with rotation periods o more than 25 years and a commitment to replant, and

those with primarily a orest restoration and habitat emphasis, are characterized as

having a long-term commitment period.

10. When determining the overall non-permanence risk rating or the project, veriers shall

weigh all the risk actors together. However, certain risks may be signicant enough that

their individual rating determines the projects overall risk rating, no matter what the project

scored on other risk dimensions.



Table 2: Risk actors applicable to ARR projects

Risk actor Risk

Rating

Project longevity/ Commitment period

Long-term commitment (i.e., many decades or unlimited) with no harvesting Low

Long-term commitment with no harvesting in politically unstable countries Medium

Long-term commitment with harvesting Medium

Medium-term commitment with harvesting High

Medium-term commitment (i.e., a ew decades) with no harvesting High

Short-term commitment with or without harvesting Fail

Ownership type and user rights

Established NGO or conservation agency owner; or owner-operated

private land

Low

Rented or tenant-operated land Medium

Clear land tenure but disputed land use rights High

Uncertain tenure but with established user rights High

Uncertain land tenure and no established user rights Fail

Technical capability

Proven technologies and ready access to relevant expertise Low

Technologies proven to be eective in other regions under similar soil and

climate conditions, but lacking local experimental results and having limited

access to relevant expertise

Medium

Financial capacity

Financial backing rom established nancial institutions, NGOs and/orgovernments

Low

Long-term project unding not secured Medium

Management capacity o project developer

Substantial previous project experience ( 5 projects) with on-site

management team

Low

Limited project experience (



11. Table 3 below provides the deault buer withholding ranges or ARR projects associated

with low, medium and high non-permanence risk classes. Veriers must use their expert

judgment to determine the appropriate withholding percentage within each range based on

whether the project is deemed to be at the low, medium or high end o a given risk class.

Table 3: Deault buer withholding percentages or ARR projects

ARR Risk Class Buer Range

High 40-60%

Medium 20-40%

Low 10-20%

II Agricultural Land Management (ALM)

12. To assess ALM project risks the risk ratings listed in Table 4 shall be assigned.

13. Permanence risk assessment applies only to emission reductions or removals (through sinks)

o CO2. Activities generating emissions reductions o N2O, CH4 or ossil-derived CO2 are notsubject to buer withholding, since these GHG benets cannot be reversed.





Table 4: Risk actors applicable to ALM projects

Risk actor Improved cropland

management

Improved grassland

management

Cropland & grassland

conversions

Ownership type and landtenure

Established NGO or

conservation agency owner;

owner-operated private land

Low Low Low

Rented or tenant-operated land Medium Medium Medium

Uncertain land tenure High High High

Unproven technologies

and practices

Use o proven practices

veried or local conditions

Low Low Low

Use o proven technology

shown to be eective elsewhere,

but not veried locally

Medium Medium Medium

Use o technologies with

minimal previous application in

similar environments to project

High High High

Use o technologies without

any scientic basis or

application to C storage or

greenhouse gas mitigation

Unacceptable Unacceptable Unacceptable

Table continued overlea.



Change in net nancial

returns rom displaced/

avoided commodity

production, or rom increased

costs4 due to project

< 10% reduction Low Low Low

10-20% reduction Medium Medium Low

> 20% reduction High High LowCompetitive land uses in

immediate vicinity (within

100 km radius)5

Negligible net losses o

agricultural land (e.g.,

conversion to settlement/

urban, other land uses)

Low Low Low

Discernible but limited (1-2%/

yr) net loss o agricultural land

Low-Medium Low-Medium Low-Medium

Signicant (>2%/yr) net loss

o agricultural land

Low-High Low-High Low-High

Incidence o crop ailure

rom severe drought or

insects/diseases

Inrequent (< 1 in 10 yrs) Low Low Low

Frequent (> 1 in 10 yrs) Medium Medium Low

Project longevity

Project plan and

demonstrated commitment

to long-term project

maintenance (>40 yr)

Low Low Low

Short-term project

commitment (20 to 40 years)

Low Low High

45

15. Table 5 below provides the deault buer withholding ranges associated with low, medium and

high non-permanence risk classes or dierent ALM activities. Veriers must use their expert

judgement to determine the appropriate withholding percentage within each range based on


Table 5: Deault buer withholding percentages or ALM projects

ALM Risk Class Improved cropland

management

Improved grassland

management

Cropland & grassland

conversions

High 30-60% 25-50% 25-50%

Medium 15-30% 15-25% 15-25%

Low 10-15% 10-15% 10-15%

4 This risk actor only applies to activities whose nancial viability is largely dependent on continued

production o agricultural commodities. For example, land restoration activities or conservation set-asides

in conjunction with NGOs or governmental entities may not be subject to these nancial risks.

5 Relative risk ratings or competitive land uses will depend, in part, on ownership attributes, where

commercial agricultural operations are likely to have higher risk in areas with competitive land uses and

increasing land values, whereas land conservation activities (e.g., by NGOs, government) may have a low

risk in spite o acing strong competition rom other land uses. Other actors, e.g., proximity to urban

development and landscape attributes, will also impact this risk actor, such that the risk analysis should

consider competitive land uses in the context o project-specic circumstances.



III Improved Forest Management (IFM)

16. To assess IFM project risks the risk ratings listed in Table 6 shall be assigned.

17. In the case o IFM projects, the actor with the highest rank determines the projects overall

risk rating and shall be used to determine the required buer.

Table 6: Risk actors applicable to IFM projects

Risk actors Conventional to

Reduced Impact

Logging (RIL)

Convert logged to

protected orest

(LtPF)

Extend rotation age

(ERA)

Conversion o

low-productive

orests to high-

productive

orests (LtHP)

Devastating re potential

Low to medium re return

interval (> 50 years)

Very low Low to Medium Very low to Low Low

High re return interval (5 yr),

because expect no

change in labor needs

Very low to Low

-because expect

no change in

labor needs

Very low Low Very low Very low

6

6 Zero risk does not indicate there is no eect but rather that there is no dierence between the baseline and project scenario.



18. Table 7 below provides the deault buer withholding ranges associated with low, medium and

high non-permanence risk classes or dierent IFM activities. Veriers must use their expert

judgement to determine the appropriate withholding percentage within each range based on


Table 7: Deault buer withholding percentages or IFM projects

IFM Risk Class Conventional

to RIL

Convert logged

to protected

orest

Extend rotation

age

Conversion o low-

productive orests

to high-productive

orests

High 40-60% 40-60% 40-60% 40-60%

Medium 15-40% 15-40% 15-40% 15-40%

Low 10-15% 10-15% 10-15% 10-15%

IV Reducing Emissions rom Deorestation and Degradation (REDD)

19. To assess REDD project risks the risk ratings listed in Table 8 shall be assigned.





21. Projects rated high risk across three or more o the most signicant risk criteria (shown

in bold in the table below) are not considered acceptable rom an overall risk perspective, and

are not eligible or VCS crediting.

Table 8: Risk actors and risk ratings applicable to REDD projects

Risk actor Risk rating or APD Risk rating or AFUDD

and AUMDD

Land ownership / land management type

Land owned by private or public orest conservation

organization with a good track record in orest

conservation activities and able to obtain and enorce

nationally recognized legal protection o the land

Very low Very low

Privately owned land Low-Medium Low-Medium

Uncertain land tenure Not applicable Medium-High

Land legally protected Not applicable Low-Medium

Land not protected by laws or protected with weak

enorcement

Medium Medium-High

Technical capability o project

developer/implementer

Proven capacity to design and successully implement

activities that are likely to ensure the longevity o carbon

benets (e.g., creating sustainable livelihood alternatives

and/or eectively managing protected areas)

Very low Very low

No previous experience in the design and implementation o

activities that may ensure the longevity o carbon benets

Medium Medium-High

Table continued overlea.



Net revenues/nancial returns rom the project to

ALL relevant stakeholders (e.g., project developer,

deorestation agents, national to local governments)

Lower than pre-project or lower than alternative land-uses Low if project developer a

conservation group

Medium to high or other

developer types

Low if project developer a

conservation group

Medium to high or other

developer types

Similar to pre-project or similar to alternative land-uses Low if project developer aconservation group

Medium for other

developer types

Low if project developer aconservation group

Medium for other

developer types

Higher than pre-project or higher than alternative land-uses Very low Very low

Inrastructure and natural resources

High likelihood o new road(s)/rails being built near the

REDD project boundary

Low-Medium Medium-High

Low likelihood o new road(s)/rails being built near the

REDD project boundary

Very low Low

High-value non-orest related natural resources (oil,

minerals, etc.) known to exist within REDD project area

Low to High depending on

who owns the project landsand their mission (private

company or conservation

organization) and who owns

(or is likely to own in the

uture) the mining right i

separate rom land ownership

Low to High depending on

who the project developer isand their mission (private

company, indigenous group,

conservation organization)

and who owns (or is likely

to own in the uture) the

mining rights

High hydroelectric potential within REDD project area? Same as above Same as above

Population surrounding the project area

Decreasing or increasing, but with low population density

(e.g., 150 people/km2)

Low to medium Medium to High

Incidence o crop ailure on surrounding lands rom

severe droughts, fooding and/or pests/diseases

Inrequent (1 in 10 years) Low Medium-High

Project nancial plan

Credible long-term nancial strategy in place (e.g.,

endowment, annuity-paying investments, and the like)

Low Low

Credible long-term nancial strategy absent Medium High

Legal easement or ongoing protection tied to land title

in place

Very low Very low

22. Table 9 below provides guidance or veriers to use when determining the appropriate buer

size or any given REDD project based on its risk class. Specically, the ranges listed indicate

the percentage o a projects carbon credits that are to be withheld as a buer reserve.

Table 9: Deault buer withholding percentages or REDD projects

Risk Class Avoided Planned

Deorestation (APD)

Avoided Unplanned

Frontier Deorestation

& Degradation

(AUFDD)

Avoided Unplanned

Mosaic Deorestation

& Degradation

(AUMDD)

High 20-30% 25-35% 30-40%

Medium 10-20% 10-25% 10-30%

Low 10% 10% 10%



Step 2: Deposit the appropriate amount o credits into the AFOLU Pooled Buer Account7

23. According to this risk rating, the appropriate percentage o carbon credits shall be withheld.

Such credits cannot be traded and will be held in the AFOLU Pooled Buer Account.

24. Future verication o AFOLU projects that have generated VCUs in the past is optional.

However, any subsequent verication o a VCS AFOLU project must take place prior to the

expiration o its crediting period. As a result o such uture verication a percentage o the

carbon held in the buer may be released i a project has demonstrated, over its longevity,

the projects sustainability and ability to eectively mitigate risks.

25. The remaining credit balance o a projects buer is automatically cancelled at the end o

the project.

Step 3: Repeat the previous steps each time a project seeks VCS verication and adjust the

projects buer withholding accordingly.

26. I during a subsequent verication total to-date project emissions are shown to exceed the

baseline emissions, or total to-date project emissions removals (rom sequestration) are less

than in the baseline scenario, then no uture VCUs are issued to the project until the decit isremedied. I VCUs were issued in previous verications, an amount o buer credits equivalent

to the excess emissions or reduced sequestration shall be cancelled rom the AFOLU Pooled

Buer Account. This necessity shall be indicated in the verication statement within the

verication report.

27. I a projects overall risk rating remains the same or decreases rom one verication event

to the next, then every ve years upon verication 15% o its total buer reserve (including

newly deposited credits rom the current verication) shall be released8 and made available

or trading. I a projects risk rating increases rom one verication event to the next, the

total buer reserve shall not be reduced.

28. I the projects risk rating decreases rom one verication event to the next, then the new (lower)buer withholding percentage shall apply to all credits generated to date by the project9.

29. The remaining buer credit balance associated with the project is automatically cancelled

rom the AFOLU Pooled Buer Account at the end o the project.

7 For an entire description o the AFOLU Pooled Buer Account methodology, see Program Guidelines.

8 When released, buer credits will be cancelled and converted into VCUs and deposited into the registry

account o the project and made available or trading.

9 In such cases, the projects buer shall be reduced to refect the lower risk-assessed withholding

requirement in addition to the 15% time-related release (i.e., these two kinds o buer reductions should

be applied cumulatively).



APPENDIX A

Likelihood Signicance Methodology or Assessing AFOLU Project Risk

Both quantitative and qualitative risks can be calculated based on a systematic prediction o the

likelihood and signicance o a given impact (absolute risk). Certain management practices may

help to reduce the absolute impact o a potential event. Thereore, a well-designed and implemented

project may be able to reduce the projects overall risk classication.

This risk likelihood signicance approach provides project proponents and veriers (together

reerred to as assessors) with a consistent and holistic ramework or assessing both quantitative

and qualitative risk in an integrated manner and coming to a single overall risk classication o

low, medium, high or unacceptably high/ail.

I relevant expertise and sucient project inormation exists, project risk ratings can be dened

more directly based on the risk guidelines dened in the individual AFOLU project category sections

ound in the main body o this document. These aorementioned risk ratings integrate inormation

on the above components o total risk (i.e., likelihood, signicance and counter measures). This

appendix outlines a project risk evaluation ramework that assessors can use in those instances

when direct assessment is not easible/credible. The ollowing approach can be used as an alternativeor to supplement a more direct risk assessment.

Steps to apply risk likelihood signicance approach:

1. Projects using the risk likelihood x signicance approach shall, at a minimum, be assessed

against each risk actor listed or their respective project category, outlined in this document,

to ensure that no key risk actors have been overlooked.

2. List any potential risks identied and classiy them as quantitative or qualitative.

3. Assess the likelihood (that the risk occurs) and signicance o the impact (the impact when it

occurs) without management intererence. This is reerred to as an absolute risk.

4. The likelihood is the inverse o the average number o times the event has occurred over a

period equivalent to the lie span o the project (see box 1).

5. The signicance o quantitative and qualitative risks are determined dierently:

a. The signicance o quantitative risk is determined by the damage that the project would

sustain i the event occurred and is expressed as a percentage o total carbon benets

(see box 2);

b. The signicance o qualitative risk is determined by assigning a relative rating o 0-3

(see box 3).

6. Identiy and list strategies being employed by the project to mitigate identied risks and

assess the quality o the management system to eectively implement the counter-measures

(see box 4).

7. Calculate project-specic total quantitative and qualitative risks (see box 5).

8. Convert the calculated risk into one o the ollowing risk classes: low, medium, high or

unacceptably high/ail (see section 6).

9. The highest risk rom the quantitative and qualitative assessment determines the buer

applied. For example, i a total quantitative risk is high and a total qualitative risk is medium,

or vice versa, the project is considered overall high risk. The buer withholding percentageis obtained rom the guidance provided within each project category section o this document.

Since this is a range or each risk class, the assessor has reedom to apply a higher or a lower

buer within this range, depending on the circumstances.



I available, steps 2 through 4 above can be replaced by a direct rating o risk according to the

tables and guidelines provided under each o the AFOLU project category sections.

Box 1: Determination o LIKELIHOOD

I historical data are available, the likelihood is dened as the inverse o the average number

o times the event has occurred over a period equivalent to the lie span o the project.

I the requency can only be guestimated, the ollowing guidelines can be used:

Frequency Likelihood

[General rule 1/(requency o event)]

Less than once during the lie o the project tends to 0.00

Once every 100 years 0.0100

Once every 50 to


14/16



Box 5: Calculation o a TOTAL RISK

R = L S (1 - (C M)/16)10

Where:

R = Total risk,

L = Likelihood o occurrence,

S = Signicance o impact,

C = Adequacy o countermeasures to avert or minimize risk,

M = Adequacy o management system.

Example: A risk actor is highly likely to occur once a year (likelihood 1) and is destructive

(with a permanent loss o carbon, e.g., due to re, without means to replant); L S = 1. I,

however, the project has measures and good management practices in place to counter this

risk, the total risk will be less than 1.

Section 6: Conversion o total risk into RISK CLASSES

Translating the risk assessment into a general risk class is based on a combination o quantitative

risks (as a total percentage) and qualitative risks (as a set o scores).

1. The sum o the quantitative risks is converted into one o our risk classes.

Score (example11) Risk Classication

> 6.0 Fail

4.0 6.0 High

2.0 3.9 Medium

0 1.9 Low

I the indicated quantitative risk percentage exceeds the highest buer withholding value available

or the project type being assessed as indicated in the tables in Step 1 o Risk Tool, then the project

is considered o unacceptably high risk and is not eligible or crediting under the VCS.

2. All individual qualitative risk calculations are converted into one o our risk classes.

Score Risk Classication

2.8 3.0 Fail

2.0


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All copyright and other proprietary notices contained in this document must be retained on

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No representation, warranty or guarantee express or implied is made in this document.

No representation, warranty or guarantee express or implied is made that the inormation

provided is accurate, current or complete. Whilst care is taken in the collection and provi-

sion o this inormation, the VCS Association and its ocers, employees, agents, advisers and

sponsors will not be liable or any errors, omissions, misstatements or mistakes in any

inormation or damages resulting rom the use o this inormation or any decision made or

action taken in reliance on this inormation.

Cover: Harvesting shade grown coee near San Vito, Costa Rica.

John Tidwell / Conservation International

Documents

VCS_Tool for AFOLU Non-Permanence Risk Analysis and Buffer Determination