Renoster's Review of Ecosystem Restoration Standard's ARR Methodology

Earlier this year, Renoster undertook a friendly peer-review of the Ecosystem Restoration Standard’s M001 afforestation/reforestation methodology. The full review has been provided to ERS with specific policy recommendations, but we highlight some of the takeaways here.

Renoster considers ERS’ methodology to offer a number of innovations for improving conflicts of interest, and some of the firmest quality-control measures that we’ve ever observed in the carbon markets. Broken out into sections, we note the following:

1. Registry-level considerations‍

ERS employs what might be the most transparent and strongest registry-level safeguards in the carbon industry. These practices go a long way towards mitigating or eliminating conflicts of interest that exist in today’s voluntary carbon markets. They include:

• ✓ Registry fees are based around hectarage enrolled rather than credits issued. This reduces the potential incentive of the registry to create credits unconservatively.

• ✓ Many project’s core accounting information is calculated automatically by the registry through a pre-defined process, rather than on-the-fly by project developers. This includes carbon stock, baselines, buffer contributions, leakage, and more. This dramatically reduces the ability for a project developer to overstate their achievements.
• ✓ The ERS registry operates with the most transparent and conflict-free governance structures that we’ve observed in the carbon market. Registry procedures such as: governance, fiduciary requirements, data administration, quality control, Know Your Customer procedures, and anti-fraud procedures, and advisory procedures are all laid out clearly and professionally. We cannot stress how unusual this is in the voluntary carbon markets, where major registry governance decisions often take place behind closed doors and in informal settings.

2. People and Organizations

The methodology offers some of the strongest checks in place in the carbon markets for ensuring good behavior and governance. We highlight a handful of important innovations:

• ✓ ERS conducts a registry-level check of land tenure, beyond the industry normal of a project developer and VVB.
• ✓ ERS requires an investigation into the land’s history including past use and management practices. This is helpful for preventing enrollment of land with an unsavory history (such as seizures by an authoritarian government).
• ✓ The registry has a strong KYC (Know Your Customer) procedure for investigating project developers and proponents. This is critical for keeping groups with a history of bad action in the carbon markets off the registry (carbon cowboys so to speak).

3. Legality and Environment

Strong mechanisms exist to examine project legality and the sociopolitical climate of carbon offsets. Those include:

• ✓ Registry-level checks of regulatory surplus, beyond PD and VVB checks. This is done during a public feasibility assessment process
• ✓ Sources of alternative funding for the project’s activities must be described and justified.
• ✓ Political risk is thoroughly examined and includes environmental legislation and potential future legislation. These checks are redone every four years.
• ✦ Renoster noted the need to include language around civil obligations for project activity (such as contractual or donor obligations). We provided some example language.

4. Governance and budget

‍The methodology has excellent requirements around project governance, as well as a clear and impartial governance structure of its own. A highly detailed budget template is also provided.

• ‍✓ Pre-project feasibility documents cover many core elements of project governance, including the restoration plan, and roles/professionals tasked with carrying the plan out. All stakeholders must be mapped and their relevance to the project described.
• ‍✓ ERS requires the creation of a thorough restoration plan that includes monthly timelines, spatially explicit zones, and a complete picture of project activity.
• ‍✦ A detailed budget template is provided, and this includes a great deal of thought. However, we pointed out that the methodology seems to lack a requirement of a balanced budget, which is an important tool to address project success.

5. Additionality

‍Being focused on long-term native ecosystem restoration, the additionality of this methodology is fantastic. Trees cannot be planted for typical commercial purposes, and the end-goal of all projects must be to restore a forest to a native mature state. There are seldom reasons to do this in the absence of carbon offset subsidies.

• ‍✓ All project documentation appears to be made public, including documents of great detail such as the feasibility study and the planting plan. This level of transparency is extremely rare in the carbon markets, and allows for third parties to easily verify project claims.‍
• ✓ The methodology is likely immune to issues of gerrymandering.‍
• ✓ The methodology requires that reforestation actively work towards rebuilding a native ecosystem identified ahead of time as a reference. Projects must plant a mix of native species, favor rare species, include the input of a local ecologist, and forbid harvesting. Collectively, these mean that engaging in this project activity for reasons other than the project’s offsets is extremely unlikely.
  
  Forbidding commercial harvesting is not necessarily the best for restoration/management or for permanence — deriving a continuing income-stream off this land is a key component to ensuring projects last. However it does demonstrate additionality because it rules out the potential that these trees were planted with timber in mind rather than carbon.‍
• ✓ The program has safeguards for enrolling trees that were planted prior to project enrollment. ERS allows a three year window, which is better than the industry-standard of five years. Likewise, considerable justification is needed for retroactive enrollment, including proof that carbon offsets were considered necessary at the time of planting.‍
• ✦ We note that ERS allows the enrollment of land that may have been deforested less than ten years prior. This is common in the carbon industry, but we feel it to be bad practice because it could create an incentive to deforest — even a passive incentive should the denuded land be valued higher.

6. Baseline

‍ERS makes use of a remotely-sensed dynamic baseline that is generally considered best-practice in the carbon markets today.

• ‍✓ The baseline proposed makes use of a stocking index that is highly correlated with forest carbon stock.‍
• ✓ The baseline is entirely algorithmic and difficult to game.

7. Leakage

The methodology handles leakage in a competent manor. Geographic leakage is considered via a leakage belt with a 5km radius. Market leakage is not considered to the same degree that it is under Verra’s program, although an argument could be made that their program is overly-punitive on this point. Leakage mitigation is required.

8. Quantification

✦ ERS makes use of spaceborne carbon estimated derived from a third party for carbon quantification. Renoster was not satisfied that this approach would result in accurate estimates of carbon stock. We highlighted the following problems with this:

• Spaceborne carbon estimates tend to over-generalize, predicting the region’s average for any forest. This would result in over-issuance in the early years of the project.
• Spaceborne carbon estimates are not trained to estimate the carbon of small trees. Most global maps discard trees less than 10cm in diameter. Thus, they are not appropriate for quantification of young forests.
• Spaceborne carbon estimates are not trained to estimate carbon in planted stands, where trees are placed in structurally homogenous rows, and where canopies obtain full closure earlier than they would in natural systems.
• The spectral signature of a young forest may be indistinguishable from space from a field of competing shrub-like vegetation, thus for the first handful of years a project’s success could be over-stated.
• The approach used to validate the spaceborne maps was too limited (dealing only with mature semi-arid forests in Mozambique). Uncertainty estimates provided in project descriptions are smaller than we might expect. We note that the geospatial provider has a strong incentive to exaggerate their map’s accuracy.
• We ultimately had several recommendations for better quantifying carbon stock:
  • Field-based forest inventory plots (potentially with geo-tagged images)
  • Model-assisted inference to combine satellite estimates with a light field sampling.
  • Airborne LiDAR-based models
  • Drone-based models, with either photogrammetric point clouds or tree counting
  • Terrestrial LiDAR

9. Forest management and growth modeling

‍ERS has best-in-class requirements around forest management planning. These include:

• ✓ The methodology requires a thorough management plan attached to a timeline and spatial information. This plan needs to be signed off on by a local ecologist, which is highly valuable for assuring success.
  • Details such as species being planted, seed sourcing, potential risks, rational for actions, and monitoring approach.
  • Site details must be considered in this, including soil substrate, hydrologic condition, etc…
• ✓ The methodology for forecasting future credits is impartial and consists of comparing the project’s end-state to an existing ecosystem nearby. This is slightly simplistic relative to growth and yield models, but more importantly, its less likely to lead to over-exaggerated claims of future growth, which is a common occurrence in ARR projects.
• We encouraged ERS to allow some commercial harvesting for the sake of forest health and continuous long-term revenue. As forest scientists, we recognize the value in occasionally harvesting trees for reasons such as wildfire mitigation, or promotion of uneven-aged forest structure and understory biodiversity. Harvesting is equally important for ensuring permanence. As projects near the end of their contract, their trees increase in standing value, while the carbon revenues decrease. Allowing commercial harvest can provide ongoing revenue to help ensure forest integrity in later years.

10. Monitoring

‍There are strong positives to the methodology’s monitoring framework, which are designed to eliminate historic issues of years between monitoring reports, bias in reporting, and project abandonment:

• ✓ Monitoring is conducted by the registry, which alleviates the traditional conflict of interest wherein a project developer monitors their own project.
• ✓ Monitoring is done on an annual basis, which is better than many protocols that allow for up to five years between remeasurement.
• ✓ The threshold for reporting losses is very low (1 ha). On the one hand, this might be impractically small, but on the other, its an assurance of very high quality.
• ✓ Multiple data sources are used to monitor projects, including global deforestation alerts and commercial datasets.
• ✓ The registry’s governance structure and data management system assures us that this data will remain accessible for the duration of the project’s lifetime.

11. Permanence

‍Project permanence and lifespan are in-line with industry norms. Risk management can be considered above-average for the industry, with considerable care paid towards fire mitigation and quantification of many other risks.

• ✓ Project lengths are intended to be 40 years. This is a reasonable standard, and in conformance with ICVCM principals, however we note that in some ecosystems longer duration projects might be desirable. Allowing longer lived projects would also extend the incentive to retain the trees once they reach a merchantable size.
• ✓ ERS has considerable safeguards around risk, in the planning, mitigation, and insurance of that risk. Projects must address an exhaustive catalog of risks, although it was not clear to us how these claims were checked, an independent local ecologist does need to weigh-in. Major risks must be mitigated by the project, including program-level requirements for fire breaks and wildland firefighting preparation.
• ✓ ERS uses a 20% blanket buffer pool contribution, which makes it one of the larger buffers in the industry. For example, Verra’s buffer pool contributions are determined via risk assessment, but in a survey of five recent projects we determined VM0047 buffer pool contributions to range between 10-18%.
• ✓ We note that the program’s biodiversity guarantees and focus on ARR make it inherently safe from many risks. Biodiverse forests are resilient to most forms of damage. Likewise, planting trees across many small areas makes them resilient to most risks.

12. Biological Co-benefits

‍At a core level, the methodology is designed to restore native ecosystems and all their accompanying ecosystem services. This leaves no question as to the use of this program for exploitative or ‘neutral’ practices such as plantation forestry. This makes the methodology one of the strongest on the market for

• ✓ Projects must highlight a ‘target’ natural ecosystem, which they are to aim for in their restoration efforts. This is a novel means of ensuring true native restoration is taking place.
• ✓ Projects must employ a local ecologist to assist in the development of the forest management plan. This is an excellent way to ensure that local knowledge is best leveraged for a natural outcome.
• ✓ Projects must plant native trees and are forbidden from commercial timber harvest. This ensures both project additionality, and ecosystem co-benefits.
• ✓ Projects must emphasize rare species, ecological principles of restoration, and ecosystem services such as soil health.

13. Equity and Justice

‍The methodology has in place some of the industry’s strictest criteria for equity and justice. These include:

• ✓ Possibly the industry's strongest grievance redress mechanism, that allows wronged parties to appeal to the registry or third-parties rather than just project developers.
• ✓ Some of the strongest community consultation requirements, including consultation requirements at multiple stages in project development.
• ✓ Strong requirements around project labor, including clear quantitative targets that must be met.
• ✓ Clear reporting requirements for community benefits, such that project finances can be publicly traced to individuals on the ground.
• ✦ We note that there are no community revenue sharing minimums — something Renoster likes to see, but is not common in the carbon industry due to project-specific nuances.

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