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Voluntary Carbon Market Transition Framework

 
Ensuring integrity and relevance for projects in the voluntary carbon market. This hub aims to provide the most up-to-date information on what changes are expected, why they are needed, and how you can take action to move your projects forward and take advantage of new opportunities. 

The voluntary carbon market is in the midst of a number of major changes and developments that affect its operation now and into the future. This means that our rules, and consequently, your projects, will need to adapt to ensure they are able to access and remain eligible for market opportunities, continue to represent best practice and are protected from reputational risk.

2021 marks a transition point from the international framework of the Kyoto Protocol to that of the Paris Agreement. It is also the year in which governments are expected to adopt rules to bring to life carbon trading under ‘Article 6’. Aligning with the Paris Agreement can maximise the market opportunities for Gold Standard-certified projects, while minimising the risk of inadvertently undermining ambition and damaging the reputation of the voluntary carbon market.

We’d like to make sure we're working proactively with all our partners and stakeholders in this changing context. This hub therefore provides the most up-to-date information on what changes are expected, why they are needed, and how you can take action to move your projects forward. 

The hub currently reflects proposals outlined in Gold Standard's February 2021 consultation, Integrity for Scale: Aligning Gold Standard projects with the Paris Agreement. It will be updated as and when rule changes are implemented. 

This work is supported by the German Ministry of the Environment, Nature Conservation and Nuclear Safety (BMU), and developed in partnership with atmosfair.

We understand this is a period of great change, if you have any concerns, questions or feedback, email standards@goldstandard.org

SUPPORTED BY

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1. Transitioning and renewal of existing projects

Gold Standard wants to ensure that existing high-quality projects can continue operations in the post-2020 period, delivering benefits for the climate and sustainable development. We have made available guidance for projects wishing to transition to Gold Standard from other certification schemes, as well as a streamlined template for project developers.

As part of this, projects will have to demonstrate a risk of discontinuation when transitioning to Gold Standard from CDM or other standards. Meanwhile Gold Standard has proposed that existing projects will be required to demonstrate ongoing financial need to renew their crediting period post-2020 (subject to consultation). Both are important to ensure that projects continue to require revenue from the sale of carbon credits, to ensure carbon finance goes to projects that rely on it rather than those that are financially sustainable in its absence.

Transitioning and renewal of existing projects
Transitioning and renewal of existing projects

To ensure that existing high-quality projects can continue operations in the post-2020 period, we’ve updated our rules to better support projects that are faced with uncertainty related to the continuation of the Clean Development Mechanism (CDM) and at risk of discontinuation post-2020. This section presents a summary to transition projects to Gold Standard. For the full requirements, which take precedence, please see Annex B of the GHG Emission Reduction and Sequestration Product Requirements. These updates support our commitment to environmental integrity and channeling carbon finance where it has the greatest impact.

RECENT UPDATES TO SUPPORT PROJECT TRANSITION

Gold Standard has streamlined its requirements to enable a smoother transition for eligible climate projects/PoAs seeking to move from other certification schemes, including CDM, to Gold Standard for the Global Goals.

The objectives of these updates are to:

  • Ensure that work already completed within previous standards is retained to the extent possible when transitioning to Gold Standard – lowering time/costs
  • Provide more clarity on the different pathways that are possible for projects wanting to transition Key updates and benefits include:

REDUCING COMPLEXITY

Projects transitioning from other standards can continue using their current methodology until the time of renewal of their crediting period. This update reduces the complexity currently associated with transitioning projects, while still retaining our core principles for safeguards, stakeholder engagement and contributing to multiple SDGs.

PERIOD OF RETROACTIVE CREDITING AMENDED

Projects that transition to Gold Standard for the Global Goals are eligible for retroactive crediting prior to the preliminary review submission date, rather than the transition approval date. This ensures continuity and provides more certainty for project developers on when you can start claiming credits.

TRANSITION REQUEST FORM UPDATED TO SIMPLIFY + ACCELERATE PRELIMARY REVIEW PROCESS

A new template helps you submit a transition request in a simple, standardised, way populating the information required for a prompt preliminary review. This allows project developers to demonstrate potential compliance with the transition requirements without the need to re-design their project documentation (e.g. PDD). It also enables quick and easy review by SustainCERT. To further reduce the transition certification time and cost, we have also introduced an option to combine preliminary review, validation and design review for transition projects.  

 
SUMMARY OF KEY REQUIREMENTS FOR TRANSITIONING A PROJECT

The below section highlights some key requirements for projects transitioning from the CDM or other standards to GS4GG. For the full requirements, which take precedence, please see Annex B of the GHG emission reduction and sequestration product requirements.

SCOPE

The requirements outlined below are applicable to projects that intend to:

a) Issue new GSVERs
b) Convert emission reductions already issued under another standard to GSVERs

ELIGIBLE PROJECTS

CHECK TYPES
  • Projects can claim emission reductions of a given vintage only once and under one standard only. A declaration, in writing, must be provided in the monitoring report.
  • Projects transitioning must provide Gold Standard specific project documentation, or the project documentation provided under the other carbon certification scheme together with the Transition Request Form. This form includes a transition checklist that helps project developers easily identify any gaps between the other certification scheme and the requirements for Gold Standard, providing a clear path for transition. 
 
DEREGISTRATION FROM THE OTHER STANDARD
  • Eligible CDM energy or waste project/PoAs are not required to deregister from CDM  
  • Eligible CDM A/R projects are required to deregister from CDM to issue GSVERs
  • Projects registered under a standard other than CDM need to deregister and provide evidence of deregistration to their VVB before submission for design review

 

FINANCIAL ADDITIONALITY, RISK OF DISCONTINUATION AND ONGOING FINANCIAL NEED
  • CDM projects/PoAs are not required to carry out an additional assessment for demonstration of additionality, unless the project falls into a category that is deemed non-additional in applicable activity requirements
  • Projects transitioning from standards, other than CDM, are required to undergo additionality revalidation to re-establish the validity of the underlying assumptions
  • As applicable to all GS4GG projects, projects will need to demonstrate ongoing financial need, at time of renewal of the crediting period

 

ELIGIBLE METHODOLOGIES

The rules have been updated to allow projects transitioning from other standard to continue using their current methodology until the time of renewal of their crediting period. 

Projects can choose to apply the latest version of the Gold Standard-approved CDM methodology or methodology tool available. In such cases, the VVB will validate updated project documents.

 

MEETING GOLD STANDARD CORE PRINCIPLES
  • Compliance with safeguards, stakeholder engagement and contributing to multiple Sustainable Development Goals (SDGs) are core principles for Gold Standard certification.
  • Projects need to demonstrate compliance with the Safeguarding Principles and Stakeholder Consultation and Engagement Requirements. More guidance can be found in the !!!!!!!!!Transition Request Form !!!!!!!
  • All Gold Standard projects must make demonstrable, positive impacts to at least three Sustainable Development Goals (SDGs), one of which must be SDG 13 Climate Action. We have recently launched a new SDG Impact Tool, that helps project developers more efficiently monitor, quantify and verify a project's contributions to the SDGs.

 

PROJECT SCALE
  • Projects cannot change scale at the time of transition
  • When the scale of a project changes due to circumstances outside of the control of the project developer, the Design Change Requirements shall be followed. 

Microscale (does not apply to CDM projects)

  • Projects associated with annual emission reductions less than or equal to 10,000 tCO2eq per year
  • A/R Projects with a maximum project area of 500ha

Small scale

  • Renewable energy projects: maximum output capacity of 15 MW(e) or 45MW(th)
  • Energy efficiency improvement projects: Activities with a maximum energy saving of 60 GWh per year (or an appropriate equivalent)
  • Other project activities: result in GHG emission reductions not exceeding 60,000 tCO2eq per year

Large scale

  • All projects exceeding the above thresholds are considered large-scale

 
CREDITING PERIOD
  • Credits can be issued for the maximum crediting period allowed as per the Gold Standard activity requirements, or the crediting period under the project’s previous standard, whichever ends first. The crediting period registered with the previous standard cannot be extended.
  • The crediting period start date remains unchanged, i.e. the date as registered with the previous standard.
  • The start date for PoAs transitioning is the crediting period start date of the earliest CPA transitioning to Gold Standard for the Global Goals

 

WORKING EXAMPLES

Fixed crediting period i.e. 10 years: Standard X + GS4GG crediting period must remain within 10 years. If project has issued credits for 3 years under standard X, it can issue GSVERs for the remaining 7 years.

Renewable crediting period. For example. RE activity requirements allows issuance of GSVERs for max 15 years. An eligible RE projects that has claimed emission reductions for 5 years under Standard X, can issue credits for 10 more years under GS4GG.

 

ISSUANCE FOR RETROACTIVE PERIOD
  • A project that transitions to Gold Standard for the Global Goals will be eligible for retroactive crediting prior to the preliminary review submission date, rather than the transition approval date. This provides continuity and therefore more certainty for when credits can start to be claimed. 

 

PROJECT CYCLE
  • Projects that have transitioned to GS4GG need to follow the certification cycle for crediting period renewal (e.g. 5 years) in order to issue or convert issued emission reductions to GSVERs. The first crediting period renewal under GS4GG considers the crediting years already issued with the other standard.

For example, if a project crediting period start date with standard X is 01 Jan 2019, the project shall renew its crediting period with GS4GG on or before 01 Jan 2024, irrespective of date of transition approval with GS4GG.

 

PROJECT DESIGN CHANGE
How to transition your project
How to transition your project

Projects can transition at a project/PoA level or, in some cases, convert emissions reductions at a credit level. The bullet lists below provide simple instructions on how to transition your project for different scenarios. More guidance is located throughout the Transition Request Form.

PROJECT LEVEL
 
To transition a project from other standards to Gold Standard for the Global Goals to issue GSVERs
  • Initiate a request for transition by submitting a Transition Request Form
  • Follow the project cycle procedure as provided in the relevant Requirements. Please refer to Transition Request Form for different options available to expedite the certification procedure.
CREDIT LEVEL

GSCERs to GSVERs conversion procedure

For CDM projects that are also certified to Gold Standard for the Global Goals, projects can convert issued Gold Standard labelled CERs to GSVERs, by following these steps: 

  • Submit a Transition Request Form
  • Follow project cycle procedure as provided in the relevant requirements
  • Transfer the issued CERs to the Gold Standard Swiss CDM Registry Account.
  • Gold Standard retires the transferred CERs
  • Project developer pays the relevant fee
  • Gold Standard issues an equivalent number of GSVERs to the project in the Impact Registry
Converting issued emission reductions from other standards to GSVERs

Projects transitioning from standards other than CDM should reach out to Gold Standard/SustainCERT to confirm the procedure for conversion of issued emission reduction units to GSVERs.

CDM projects wishing to issue GSCERs

Due to uncertainty over future issuances under the CDM, project developers are encouraged to reach out to Gold Standard/SustainCERT if considering this option.

Don’t get confused with legacy requirements

There are also Transition Requirements related to the requirements and procedures for transitioning projects from previous versions of our standard to Gold Standard for the Global Goals.

If you are already a Gold Standard projects and still need to upgrade to GS4GG you can access the necessary information on Transition Requirements document

Determining vulnerability and ongoing financial need
Additionality

Additionality is a prerequisite for the environmental integrity of any carbon credit, protecting the buyer’s claim to have enabled climate mitigation and underpinning the integrity of offsetting and other financial claims. It is expected, based on draft Article 6 decisions developed at COP25, to be a required attribute of internationally transferred mitigation outcomes (ITMOs) under Article 6.2 and also required in the design of activities under the Article 6.4 mechanism.

WHAT DOES THIS MEAN FOR YOUR PROJECTS


Gold Standard is developing principles and guidance for the additionality of internationally transferred mitigation options (ITMOs) under Article 6.2, and will publish more information on this work shortly, including how it may inform approaches in the voluntary market.

Determining the vulnerability of projects

Gold Standard wants to enable a smooth transition for existing high-integrity projects, so they can continue to operate and deliver positive outcomes for the climate and sustainable development. We also want to ensure that projects that continue operations – whether transitioning to Gold Standard or renewing their crediting period – continue to require the revenue from the sale of carbon finance, to ensure that carbon finance goes to projects that need it rather than those that are financially viable without it.

WHAT DOES THIS MEAN FOR YOUR PROJECTS


For projects from other schemes wishing to transition to Gold Standard

Projects that started their first crediting period before 01 January 2016 must demonstrate risk of discontinuation at the time of transition to Gold Standard. This can be established based on the four-step methodology from the Oeko Institute Report, May 2017 or other suitable approaches submitted to and approved by Gold Standard.

This is an existing rule, available here.


For existing Gold Standard projects wishing to renew their crediting period

We have proposed that all Gold Standard projects must demonstrate ‘ongoing financial needs’ (OFN) at the time of renewal of their crediting period. This information, which was already required at the time of renewal of crediting period, would be used to formally determine whether a project shall be eligible to renew or not. This applies at CPA/VPA level rather than PoA level.

Criteria to assess ‘ongoing financial need’ will be developed and published at the time this rule becomes effective.

Why is determining the vulnerability of projects important?

The purpose of carbon finance is to support activities that are additional and require ongoing finance until the point they can become financially sustainable, i.e. where the mitigation activity would not have occurred and could discontinue in the absence of this source of revenue.

Whether or not a project can continue abatement without these revenues is a critical determinant of the impact of buying a carbon credit from a project that is already implemented. Purchasing a credit from a vulnerable mitigation project might prevent it from terminating GHG abatement. Non-vulnerable activities, on the other hand, could continue operations even without revenues from carbon credits, so the mitigation activity will continue even in the absence of a buyer. Assessing the vulnerability of a project is particularly important in the case of an over-supplied market, where many projects may not have received anticipated revenue from the sale of carbon credits due to a lack of demand. 

These requirements enable Gold Standard to continue to support projects that are additional and that deliver benefits that are at risk of discontinuation, while at the same time restricting competition to existing Gold Standard developers from projects that no longer need this finance stream. Projects that achieve financial sustainability, by definition, would not lose out because of this rule.

 

2. Using voluntary carbon credits in the new era

Gold Standard wants to ensure that units can be used legitimately and with integrity, without the risk of double claiming. Corresponding adjustments -- by which the national government hosting a project adjusts its international accounting so as not to count an emission impact -- are the most robust way to ensure this where units are used towards voluntary 'offsetting' or 'carbon neutrality' claims in the future. 

In order for these claims to be authorised by Gold Standard, we have proposed that units must have corresponding adjustment approvals associated with them. We have proposed introducing this on a staggered basis, starting with developed countries with vintages starting 01 January 2021 for new projects and 01 May 2021 for existing projects.

Projects will have the opportunity to continue operating as usual without corresponding adjustments, where units are used for purposes where this is not required, such as voluntary ‘financing’ claims where buyers do not claim to be offsetting their emissions. Gold Standard will work with partners to build the case for such claims among corporate buyers.

Summary of our proposed approach to claims and corresponding adjustments
Summary of our proposed approach to claims and corresponding adjustments

The avoidance of double counting is a core principle for carbon markets, and is essential to the integrity of carbon units and claims made by entities buying them. Gold Standard has existing rules in place to address double counting. However the new international framework and context under the Paris Agreement requires us to introduce new rules in order to ensure the same principle – the avoidance of double counting – is met.

Towards that end, we have proposed:

  1. Corresponding adjustments for voluntary offsetting claims: Introducing a requirement that approval of a corresponding adjustments must be in place when Gold Standard credits are retired in order for these to be authorised for voluntary offsetting claims. We propose to introduce this in a staggered way, focusing first in developed countries where in most cases Gold Standard already requires adjustments (see Annex A) to address double claiming. We intend to take special care to protect vulnerable projects, and so do not plan to require adjustments in LDCs, LLDCs, SIDS and conflict zones until vintages from 01 January 2025, subject to an assessment of whether circumstances allow.
  2. Alternative claims for credits without corresponding adjustments: Working with partners and stakeholders to further clarify and advocate for new clear, credible and compelling corporate financing claims and mechanisms for financing emission reductions and removals beyond boundaries – alongside traditional offsetting or carbon neutral claims.
  3. Enabling our registry to distinguish between the differing claims and use cases that a given credit is eligible for. In this way, buyers could clearly identify and acquire the appropriate credits for their intended use case.

Through this proposed approach, Gold Standard intends to ensure that potential risks – environmental and reputational – related to double claiming are avoided, and that credits can be issued and used with integrity. We believe that this approach would strike the right balance to protect environmental integrity and thus the reputation of the voluntary market while still enabling finance to reach projects delivering transformative benefits on the ground.

We welcome further engagement with stakeholders on this issue at standards@goldstandard.org

Avoiding double claiming when offsetting – our proposed approach
our proposed approach for introducing corresponding adjustments for voluntary offsetting claims
WHAT DOES THIS MEAN FOR YOUR PROJECTS


Under our proposals, for carbon credits to be authorised by Gold Standard for voluntary offsetting or carbon neutrality claims -- including cases where emission reductions are generated and used in the same jurisdiction -- projects would need to request a document from the host country’s designated focal point, or other suitable institution, authorising the project to export emission reductions or removals and provide assurance that double counting/claiming will be avoided. We envisage this being in the form of a Letter of Authorization and Assurance (LoAA) with confirmation that a corresponding adjustments (CA) will be carried out, but it could be in the form of another official document that serves the same purpose.

This official document from the host country would need to be submitted to Gold Standard any time before the retirement of credits on the Gold Standard Registry, in order for the credits to be authorised for use towards offsetting or carbon neutrality claims. Gold Standard is considering any necessary safeguards to protect against risks that corresponding adjustments committed to are not completed.

If other methods are established or identified that can provide the same assurance that double claiming will be avoided, Gold Standard will consider incorporating these into our rules.
 

Transition period for introducing corresponding adjustments:

We recognise that host countries will need time to build capacity to authorise and apply corresponding adjustments, and that the time required may depend on the country’s level of capacity. Our intention is to ensure that the transition to the Paris era is done in a thoughtful and equitable way. We have therefore proposed a staggered approach based on the following vintages:
 

PROJECTS IN DEVELOPED COUNTRIES

  • New projects: applicable immediately for all credit issuances with vintages starting from 01 January 2021.
  • For existing Gold Standard projects: applicable immediately for all credit issuances with vintages starting from 01 May 2021.

This rule updates the pre-existing requirement for cancellation of Kyoto units, such as AAUs, for projects in Annex B countries under the Kyoto Protocol. This update is necessary as the Kyoto Protocol is superseded.


PROJECTS IN DEVELOPING COUNTRIES

  • Credits with vintages starting 01 January 2023, though with the possibility of extensions on a case-by-case basis.


PROJECTS IN LEAST DEVELOPED COUNTRIES (LDCs), LANDLOCKED DEVELOPING COUNTRIES (LLDCs), SMALL ISLAND DEVELOPING STATES (SIDs), AND CONFLICT ZONES:

  • Circumstances will be evaluated to assess if the host country is in a position to issue an LoAA or other official document confirming that a corresponding adjustment will be done for credit vintages starting from 01 January 2025.

 

Host country requirements would supersede the timings outlined above in cases where governments require an LoAA or other official document earlier than the dates mentioned.

We recognise that Article 6 guidance – including rules related to corresponding adjustments - has not yet been adopted in the UNFCCC. The intention is for this to be finalised at COP26 this November, and we have proposed these timelines with this in mind. If Article 6 guidance is not adopted this November, we will reconsider the suitability of these dates.

Relationship to NDC:

The most recent draft Article 6.2 text, published at COP25 in 2019, proposes that corresponding adjustments are applied for mitigation outcomes from sectors and greenhouse gases outside of the host country's NDC as well as sectors and greenhouse gases covered by the NDC. Gold Standard recognises though that this is still an issue under negotiation between Parties. 

 

WHAT THIS COULD MEAN FOR PROJECTS

Until clarity is provided on this issue, we have proposed requiring corresponding adjustments for credits generated both inside and outside the scope of the NDC, in order for the credits to be authorised for use towards offsetting or carbon neutrality claims. This is in line with the most recent draft Article 6.2 text.

We have sought feedback from stakeholders on this issue, and will also consider final outcomes from the Article 6 negotiations.

 

Domestic offsets

There is growing demand for ‘domestic offsets’ in the voluntary market, which involves the emission and the use of the credit associated with it both occurring in the same country. The truth of the offset claim can still be undermined in such cases, running the risk of disrupting domestic policies and actions, and therefore Gold Standard has proposed applying this requirement for both domestic and international voluntary offsetting. This follows a precedent set by the UK Government, which has not allowed domestically generated ‘Woodland Carbon Units’ to be reported by companies as offsets due to the underlying emission impact also being accounted for towards the UK’s UNFCCC targets.

WHAT THIS COULD MEAN FOR PROJECTS

Under our proposals, the requirement for the host government to confirm that double claiming will be avoided would apply in cases where the credit is used within the same country for voluntary offsetting purposes, as well as cases where it is transferred internationally. This requirement would not apply where credits are used towards domestic compliance obligations, such as a mandatory carbon tax or emissions trading system. In such cases, the use of the credit is intended to support the implementation of the host country NDC so a corresponding adjustment would not be appropriate.

In time, alternative solutions to corresponding adjustments could emerge for domestic applications, which also address double claiming risks. However stakeholders are strongly advised not to assume that domestic offsetting is ‘exempt’ until any alternative provisions are developed and introduced.

Further assistance for project developers

We recommend that projects begin the process of engaging with their host country governments on this topic. We also recommend that project developers review Guidelines on Avoiding Double Counting for CORSIA published in June 2019. These guidelines include valuable advice on the process of obtaining host country authorisation, the content of an LoAA where this is sought, as well as other relevant requirements.

Project developers immediately affected by this rule change can contact us for additional information and support.

Finally, we recognise an urgent need for capacity-building with host governments in the coming years to ensure the resources, capacity and processes are in place to operationalise Article 6 guidance and the application of corresponding adjustments, including for mitigation outcomes authorised for voluntary offsetting purposes. We will seek opportunities to work with partners to take this forward.

For detailed guidelines on operationalising corresponding adjustment requirements: Treatment of double counting and corresponding adjustments in voluntary carbon markets.

Any comments or feedback can be addressed to standards@goldstandard.org

FURTHER READING:

 

Why corresponding adjustments are important for voluntary offsetting claims
Preserving the premise of carbon offsetting

Voluntary action now takes place in the context of the Paris Agreement, under which all countries – developed and developing – must take action to limit global warming in the form of Nationally Determined Contributions (NDCs). National governments will put in place policies and measures to achieve their NDCs, and must regularly track progress towards them.

By claiming to have offset emissions, an organisation is effectively stating that the act of purchasing carbon credits has counteracted their unabated emissions, leaving the atmosphere no worse of.

However, in a scenario where a government hosting a project generating carbon credits is able to count the underlying emission impact towards their NDC, it is possible that this emission impact will displace or defer other action that the government may have taken to achieve their NDC, if this is no longer required. Where this displacement or deferral occurs, the premise of the offset claim – that the atmosphere is no worse off – is no longer assured, as the underlying emission impact has replaced rather than added to abatement that would otherwise have happened.

Addressing risks associated with double claiming within voluntary markets

Gold Standard, like other standards in the voluntary carbon market, already requires the cancellation of eligible units (for example, Assigned Amount Units (AAUs)) in cases where a Gold Standard VER is issued in a country or region that operates within an international or domestic GHG Cap and Emissions Trading Scheme or carbon tax. Similarly, the UK Government has not allowed units issued under its domestic Woodland Carbon Code to be claimed by UK companies as offsets, as the underlying emission impact is already counted towards the UK’s UNFCCC targets (see pg. 116).

Within the UNFCCC, a new mechanism has been put in place to avoid ‘double claiming’ when mitigation is transferred for use by another party: a ‘corresponding adjustment’. A national government transferring a mitigation outcome must adjust its emissions balance to reflect the transfer and, in cases where the user of the outcome is another national government, they must make a corresponding adjustment to their emissions balance to reflect the use.

As well as avoiding double claiming between two NDCs, draft versions of Article 6 guidance produced in the UNFCCC at COP25 also accommodate the use of corresponding adjustments in other cases, such as where mitigation outcomes are transferred to airlines complying with obligations under CORSIA or companies making voluntary carbon offsetting claims.

By applying a corresponding adjustment, there is certainty that units will not be double claimed in this way. It is for this reason that Gold Standard has proposed requiring that units must have an associated corresponding adjustment in order to be authorised for use towards carbon neutrality or offsetting claims. This is necessary to ensure the integrity of carbon credits, the claims made by entities that use them, and to maintain confidence in the voluntary carbon market. We hope that other standards will follow suit.

For practical reasons, this requirement cannot be introduced immediately in all places. Please see ‘Avoiding double claiming when offsetting – our proposed approach for introducing corresponding adjustments for voluntary offsetting claims’ for more information on our proposals for a staggered introduction.

Any comments or feedback can be addressed to standards@goldstandard.org .

Claims for credits without corresponding adjustments – a new model for supporting high integrity climate action
New context, new claims

The voluntary use of carbon credits has until this point been synonymous with ‘carbon offsetting’. Through our proposals, Gold Standard is seeking to safeguard the integrity of claims to have offset emissions within a new policy context. At the same time, Gold Standard, like others in civil society, sees an opportunity to define a new type of corporate claim in this new context. Rather than ‘offsetting’ or ‘carbon neutrality’ claims, companies could purchase quality carbon credits with the same rigorous requirements - real, additional, unique, and independently verified – and claim to have ‘financed’ or 'contributed' to emission reductions or removals.

In this way, a company can use existing voluntary carbon market infrastructure to purchase and retire an amount of carbon credits equal to its unabated emissions, and claim to have ‘financed’ or 'contributed' tangibly towards the goals of the Paris Agreement.

This is different from an offsetting claim insofar as the company claims to finance the reduction or removal of an equivalent amount to its unabated emissions, but it does not claim their emissions have been ‘offset’. It enables voluntary buyers to invest in projects that do not have corresponding adjustments, but still contribute to quantified and verified impacts towards the host country’s NDC and therefore the Paris Agreement, as well as the Sustainable Development Goals.

The financing model has the potential to avoid complexity, ensure clarity and credibility of claims. When coupled with the implementation of Science-Based Targets, this marks a step-change in voluntary action and finance from the private sector.

Gold Standard has advocated for this approach in the past, including in a 2018 publication with CDP and WWF, and held extensive engagement with partners. This approach is also well-aligned with wider developments to define best practice for companies looking to take full responsibility for their emissions, such as the Science-Based Targets Initiative’s consultation on a new Net Zero Standard, and WWF's Blueprint for Corporate Action on Climate and Nature.

Gold Standard will continue to engage with stakeholders, including civil society, project developers and users of Gold Standard credits, to build the credibility and understanding of, as well as mechanisms for, ‘financing’ claims.

WHAT THIS COULD MEAN FOR PROJECTS

The financing model, for which there may be different terminology in the future, provides an alternative route for developers serving the voluntary market in the post-2020 period, and an additional way for companies to support and fund high-integrity climate action beyond their boundaries.

Gold Standard will issue both credits eligible for financing claims and those eligible for offsetting claims in the future. All will be required to meet the same rigorous requirements but will be distinguished in our registry so buyers can purchase the appropriate credits for the claim they intend to make.

Any comments or feedback can be addressed to standards@goldstandard.org

3. Aligning with the Paris Agreement

Gold Standard wants to ensure that projects continue to represent best practice internationally and are eligible across different markets and use cases, which we expect will increasingly align their requirements with those adopted under Article 6. We anticipate needing to update several other aspects of our existing rules to align with Article 6, once its guidance is adopted. Any rule changes will need to be consulted on in the future, but we are proactively seeking comments + feedback on three areas we have identified.

Ensuring reductions/removals are real
Baseline settings

The methodologies, including the baselines, used by Gold Standard projects to quantify emission reductions or removals must be true and accurate and not lead to an over-estimation of the emission reductions or removals that are credited.

To maintain this principle, there is recognition in civil society and academia, as well as within Article 6 negotiations, that methodologies will need to be updated to fit the new context of the Paris Agreement under which all countries now have NDCs in place and will introduce policies to achieve them.

Within the UNFCCC for instance, the most recent versions of Article 6.4 guidance from COP26 indicate that methodologies may be required to take into account relevant policy, be consistent with the host country’s NDC and encourage an increase in ambition over time.

Meanwhile the International Carbon Reduction and Offsetting Alliance (ICROA) has said that carbon standards will be required to update baselines and methodologies over time to ensure emission reductions over and above business-as-usual and regulatory requirements.

Gold Standard wants to ensure that our projects continue to be credited for emission reductions and removals that are real, and that the approach we take represents best practice.

WHAT THIS COULD MEAN FOR PROJECTS

Gold Standard will consider carefully the relevant provisions in final Article 6 guidance once this is adopted, to ensure alignment. At this point in time, we expect to update GS4GG to require the below when projects register or renew their crediting period:

  1. Baselines should take host country policies into account. Crediting baselines at project level should be updated taking into account the host country’s policies. Long term strategies and host country measures should be considered. The CDM E+/E- policy guideline should not be used in carbon markets after 2020.
  2. Baselines must be set below a business-as-usual scenario. Methodologies will need to be updated to enable projects to adjust their baseline so that they are conservative and below a business-as-usual scenario.
  3. Projects should update their baseline at least every 5 years, unless otherwise deferred by Gold Standard for specific project types. This is already required of Gold Standard projects and would also be required for Gold Standard CDM projects. Some methodologies may also shift to a dynamic baseline scenario, for example those for grid connected renewable energy projects in countries with ambitious renewable energy targets, which will change the grid emission factor frequently.

 

Suppressed demand

One issue that needs further consideration, by Gold Standard and more broadly, is suppressed demand, a concept developed to support communities that could not otherwise access carbon finance due to lack of access to minimum service provisions.

The need for suppressed demand activities could be seen to grow stronger in the future, as governments pursue their dual commitments under the Paris Agreement and 2030 Agenda for Sustainable Development, working to grow their economies and improve livelihoods while limiting and reducing emissions.

However, the nature of suppressed demand means that countries may not in all cases be willing to apply corresponding adjustments for such projects, where this could affect the achievement of their NDC. In addition, the latest draft Article 6 guidance does not include emissions avoidance – which includes suppressed demand - within the definition of Internationally Defined Mitigation Outcomes (ITMOs), proposing that further consideration is given to its inclusion.

WHAT THIS COULD MEAN FOR PROJECTS

Gold Standard remains firmly in support of ensuring carbon finance continues to flow to projects that deliver services to communities benefitting from suppressed demand baselines and that would otherwise be left behind by the impending market evolution.

Gold Standard proposes to not require corresponding adjustments in LDCs, which host the vast majority of suppressed demand projects, until 2025 at the earliest (unless the host country requires otherwise). As such, there is time to consider this issue further and consult with stakeholders on suitable approaches.

We will therefore continue to operate a suppressed demand approach, but highlight that changes may need to be made to the way it is applied in the future, or alternative approaches developed.

 

Any comments or feedback can be addressed to standards@goldstandard.org

FURTHER READING:

 

Supporting sustainable development
Contributing to sustainable development

Sustainable development has always been at the heart of Gold Standard’s work and projects. The intrinsic relationship between climate action and sustainable development was recognised in 2015 in both the UN 2030 Agenda for Sustainable Development and the Paris Agreement.

In the Paris Agreement, both Articles 6.2 and 6.4 recognise that market-based cooperation and activities must promote and foster sustainable development. How this will be operationalised is still to be decided, but Gold Standard is advocating for strong provisions through the Sustainable Development Initiative, and looking to build and share best practice across the market.

WHAT THIS COULD MEAN FOR PROJECTS

For Gold Standard, sustainable development has always gone hand in hand with climate mitigation and been a core requirement for all projects. This will remain the case in the future, and we expect our existing requirements will already go beyond what will be required under Article 6. Therefore we do not expect any changes to our requirements, though will keep this under review.

Instead Gold Standard intends to focus our efforts on making it simpler for projects to deliver more impact in a streamlined way. Gold Standard is rolling out SDG Impact Tools to strengthen, streamline and simplify the monitoring, quantification and reporting of SDG impacts, while ensuring credible claims.

 

Any comments or feedback can be addressed to standards@goldstandard.org

 

FURTHER READING:

 

Contributing to the overall mitigation of global emissions
Contributing to overall mitigation efforts

Currently, international carbon market mechanisms are in principle a zero-sum game for the atmosphere. An amount of greenhouse gas emissions is reduced in one place, and the transfer of these reductions allows emissions to increase by the same amount in another place. This helps to reduce the cost of mitigating climate change but does not directly lead to a net reduction of emissions.

A specific requirement of the new Article 6.4 mechanism is that it “shall aim (...) to deliver an overall mitigation in global emissions”, known as ‘OMGE’. How this is operationalised is part of ongoing negotiations between UNFCCC Parties. Some Parties have requested a discounting or cancellation of a percentage of credits at the point of issuance, and the most recent draft Article 6.4 guidance included a proposal for a cancellation of no less than 2% of credits at issuance, which could be used by neither the buyer nor seller. Other Parties have advocated for other ways to ensure OMGE, for instance the setting of conservative baselines.

WHAT THIS COULD MEAN FOR PROJECTS

It is still unclear how the goal of achieving an overall mitigation in global emissions will be reflected in Article 6 guidance, nor whether or how this will be adopted within the voluntary market. Gold Standard will wait for the Article 6.4 decision, and further voluntary market discourse on this topic, and consider aligning with provisions agreed at the international level.

As above, these provisions could include a partial cancellation or discounting of a proportion of credits at the point of issuance or other provisions such as conservative baselines. We therefore wish to highlight the emerging topic to our stakeholders.

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