If you've attempted to read and decipher the new VM0048 methodology by Verra, and left the document more perplexed than when you started... you're in the right place.
Welcome to our explainer of VM0048, where we break down some of the jargon to get you there quicker. After all, climate change is not slowing down, so let's get to it.
Integrity
A quick recap of some of the drivers to may have led to the inception of VM0048. It wouldn't take one much googling to discover that integrity is a big issue in the Voluntary Carbon Market. 2023 saw the hood lifted on some of the world's biggest carbon projects, with claims of their credits worth nowhere near the value they were sold at. Read here, here, and here.
So what led to the rife over-valuation of REDD+ carbon credits?
Here's where understanding the process of a carbon project and roles of stakeholders become important. When a carbon project developer starts to evaluate whether a piece of land is able to generate carbon credits, one of the first things they will do is engage a technical consultant to choose an avoided deforestation methodology and produce relevant datasets of the land. Typically the technical consultant will not just produce one deforestation based dataset, they might produce several permutations of the dataset, using various methodologies applicable. Due to Verra's previous system, the responsibility of choosing a methodology and setting the project baseline sat with the developer and their technical consultant, hence it was only natural that they would gravitate to the option that maximised their credit yield. The baselines they set serve as the basis for calculating the emission reduction accomplished by each project and determining the corresponding issuance of credits. For example, setting a baseline too high will result in an overestimation of the credits sold by the project. Overtime, this practice led to numerous projects overestimating their credits. Ultimately, the lack of standardisation allowed for grey areas that many bad actors did exploit.
(That's not to say that every project resulted in over-crediting. Some examples of projects that were conservative include the likes of Manoa REDD+ VCS1571 and Rio Anapu-Pacaja REDD+ VCS2252 - courtesy of Renoster's 'Mercury-free' rating).
Taking a systems approach, in VM0048, Verra looked to address this by removing the need to source your own deforestation data for baseline setting. Instead, Verra has called out to Data Service Providers (DSP) around the world to tender for becoming Verra's vetted and trusted DSP. Each jurisdiction will have one source of truth - the same data for all project developers in the same jurisdiction, supplied by Verra - thereby improving integrity from Day Dot of the process.
Scalability
Now that we've reduced bias in the process, let's look at scale. It's taken 15 years to introduce the concept of Jurisdictional-scale carbon accounting to the VCM. In theory, along with the key systemic changes outlined above, project developers can hit the ground running in their desired jurisdictions using Verra-supplied datasets (jurisdictional activity data and forest-covered benchmark maps) without spending any time procuring their own. More importantly, the jurisdictional approach to emission reduction crediting is crucial for achieving widespread change in forest protection. This approach, leveraging both private and public finance and utilising government authority to regulate and enforce land use, is instrumental in addressing the root causes of deforestation and can lead to the large-scale, and enduring forest protection that the world needs today.
How the new VM0048 Methodology may result in a decrease in credits issued
Here's the clincher, the reform that VM0048 brings will inevitably mean one thing. Over-inflated credits will result in an enormous adjustment in their value.
A research paper published on SSRN details findings on an analysis of 4 carbon projects as outlined above. Out of the 4 projects analysed, 3 of them issued credits that were up to 93.6% over their 'true' value. One project appeared to have under-credited and increased by a whopping 64.5% after the VM0048 methodology was applied. The level of discrepancy exposed cannot be understated, and the true impact across REDD+ projects worldwide is yet to be discovered. For those who like to get into the weeds, read the paper here.
How does this impact your project?
Keen to find out how VM0048 may impact your project and issued credits? Get in touch for a non-obligation chat, our team would love to help! Nika.eco are carbon modelling experts based in South East Asia, Singapore. We take care of the entire carbon project process from pre-feasibility (or rapid assessment), feasibility to project design, right through to verification and credit issuance predictions. Drop us a line here for a discovery call, we look forward to meeting you!
In our next article we explain how nesting and nested jurisdictional projects work. For now, we hope this article brought clarity and demystified some of VM0048.
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