Renoster's Review of Open Forest Protocol's ARR Methodology

The voluntary carbon market (VCM) is crucial for mitigating climate change, but its effectiveness heavily relies on the integrity and rigor of its methodologies. As more organizations seek to offset their carbon footprints, the standards and practices guiding these efforts become increasingly important.

Earlier this year, Renoster undertook a friendly, pro bono review of Open Forest Protocol's (OFP) Afforestation, Reforestation, and Revegetation (ARR) methodology. OFP has granted us permission to highlight some of the takeaways from the review.

While no methodology is entirely perfect, OFP's ARR framework introduces several significant innovations that promise to enhance the quality and address some of the most pressing challenges within the carbon markets. We applaud their efforts in taking action to come up with tangible solutions. In this document, we share our general findings and discuss the potential impacts of OFP's work on the broader industry.

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1. Tackling Conflicts of Interest in Carbon Verification:

Although there are several key points that make this methodology stand out, we at Renoster were immediately attracted to Open Forest Protocol’s solution to tackling conflicts of interest in the carbon market through their rather innovative verification system.

Existing conflicts of interest in the market:

Typical carbon industry verification is conducted by a set of Validation and Verification Bodies (VVBs) who are licensed to operate by registries. Once these VVBs have been licensed, they can then be hired by project developers to verify their projects. Notably, developers are allowed to shop for their own VVBs, and then pay VVBs to validate their own set of numbers. This poses an obvious conflict of interest in that VVBs are incentivized to validate problematic projects in order to maintain their revenue stream, and project developers are incentivized to select VVBs that will easily sign off on their carbon claims. The result is a marketplace for VVBs that strongly incentivizes positive certifications of projects with minimal diligence.

Numerous academic studies have pointed to this conflict of interest as one of the key underlying causes of over-issuance in the carbon market, including Renoster’s own whitepaper on the subject [2, 3].

OFP’s verification mechanism:

The OFP verification process tackles these problems in a number of innovative ways:

• VVBs are assigned to verify carbon projects from a quasi-random pool, and thus are not selected by project developers. This reduces the pressure on VVBs to certify projects because they have no prior relationship with project developers, and are not employed directly by developers.
• VVBs are paid out of a global verification pool that makes use of an innovative token-based system. Once again, VVBs no longer have a financial incentive to certify projects that employ their services.
• Multiple VVBs are assigned to each project, dramatically increasing the chance that malfeasance is detected. In the already-verified projects that Renoster evaluated, the number of VVBs for each verification often exceeded 10. We also noted that different VVBs under OFP’s program brought different specialties to the table, with some having deep forest science backgrounds, others remote sensing, and others local regulatory knowledge. This too addresses a common complaint in traditional carbon markets — namely that VVBs are not properly equipped to handle the complexities of dramatically different projects worldwide.
• OFP’s VVBs, which they refer to as validators, verify projects through a weighted voting system that incentivizes VVB’s to both express their degree of confidence in the decision, and to vote in the correct direction. During the verification process, VVBs cast their vote for approval or disapproval of a project (along with notes), and then place ‘bets’ on their votes using tokens that will ultimately be used to pay for their work. A VVB that is more confident in their vote may make a larger bet, and if the other VVB’s votes fall in that direction, will be paid a greater reward for their verification. Thus, VVBs are incentivized to identify flaws in projects alongside their peers and vote in a similar direction. It’s important to note that VVB’s do this work independently at first so as not to be influenced by the work of others.
• Verifications are conducted extremely frequently, with verifications done every 6 months for the first two years of a project and annually thereafter.

Collectively this system represents the only approach that Renoster is aware of to remove the conflicts of interest that exist in the VCM’s verification process. Nevertheless, Renoster did have a few ideas that OFP assured us it will work into future iterations, such as:

• Allowing VVBs to communicate project issues with one another prior to voting.
• Requiring near-unanimous consent (or a weighted vote greater than a simple majority).
• Allowing multiple rounds of voting and a redress process should a project fail to be certified (so as to allow projects to fix errors more easily rather than waiting for their next verification).
• We think it is important this process be expanded to tackle all elements of carbon project certification (beyond carbon measurement), such as land tenure claims. Currently verifications only handle quantitative carbon elements of projects, whilst OFP itself takes on the work of verifying other eligibility requirements.

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2. Above-average Quality Criteria for ARR projects

The OFP ARR requirements are quite strict and designed to only allow the enrollment of genuine native forest restoration projects. This is in sharp contrast with other ARR methodologies such as Verra’s VM0047/ABACUS, which allows wiggle room to enroll forests that represent typical timber harvesting practices.

Existing problems in ARR credit quality

Numerous ARR projects in the VCM (and namely those created by Verra and Gold Standard) appear to suffer from a lack of additionality/justification because they sponsor normal timber practices for the region. This is problematic because apart from these projects offering minimal ecosystem services, they often represent trees that were likely already being planted by timber conglomerates. If the project’s trees were otherwise being planted without the incentive of carbon credits, then the credits have no value.

In particular, under Verra’s VM0047 ARR methodology, non-native monoculture plantations are permitted, as well as projects on landscapes recently cleared of trees. In a worst-case scenario, a major timber company such as International Paper could clear-cut a forest and plant non-native monoculture trees for paper production and Verra carbon offsets. Even Verra’s Abacus label contains very tight requirements around what is considered a ‘plantation’, and under the strict letter-of-the-law, three-species pine plantations could receive Abacus-certified credits even as they displace rich hardwood forests with 200+ flora species.

OFP’s Stringent ARR Requirements:

The OFP methodology tackles this problem through some of the strictest requirements for reforestation in the industry. These include the following quality criteria that are absent from Verra’s VM0047 methodology:

• Trees may not be planted on land that had been forested any time in the 10 years prior to the project.
• Projects must consist of mostly native tree species, meaning non-native pulp monocultures such as eucalyptus plantations may not enroll. Non-native species may only be planted with specific exceptions (like soil regeneration or food-bearing trees).
• Projects may not plant monocultures.
• Projects may not harvest their trees. This makes an ironclad case that these trees are being planted for restoration purposes, not timber.
• OFP pledges to provide financial support for forest conservation after the project’s contract expires, although the details of this are not fully fleshed-out.
• Contract length must be a minimum of 40 years. This is important because most ARR projects are shorter length, and may be shorter than optimal rotation age. In particular, many Verra ARR projects are 30 years long and coincide with optimal harvest timing of the planted trees, casting doubt on the project’s additionality. Ideally, contract length should vary based on optimal rotation age, and always exceed it to ensure additionality.
• Credits are not issued for traditionally difficult-to-quantify carbon pools, such as long-term wood products.
• Carbon quantification is done through robust field inventories that are made public, and conducted at extremely frequent intervals (every 6 months for the first 2 years, then annually).
• There is no ability for developers or proponents to select their own baselines, allometry, measurement techniques, etc.. which has typically led to over-issuance as developers ‘choose the best approach for them’. The methodology is entirely prescriptive.

Collectively this represents some of the most rigorous and strict standards for ARR in the VCM. We can think of few instances in which additionality could be questioned due to projects resembling typical timber practices, and the protocol’s requirements around native species and diverse planting ensures that reforestation will be accompanied by high biodiversity and ecosystem services. Nevertheless, Renoster had a few points for OFP to consider:

• 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. Likewise, we recognize the value that well-managed native forests can have as an alternative source of revenue from timber (while still providing enormous carbon and biodiversity co-benefits). We appreciate OFP’s choice to exclude harvesting from their program as a means of ensuring absolute justification for the project, although we hope that nuanced and intelligent harvesting can be allowed into later iterations of the program. OFP has assured us that this is in-development for the next iteration of the methodology.
• We recommend variable-length contracts (corresponding to exceed optimal rotation age), and biodiversity requirements that are ecologically-specific. For example, greater numbers of species could be required in moist tropical environments, while low species diversity could be acceptable in arid or boreal environments. We recognize that many typical timber operations in northern latitudes plant 2-3 species and harvest at 40+ year intervals, and would not like to see this program subsidize that otherwise-standard behavior.

‍3. A System for Small Farmers

OFP’s system is designed with small landowners/farmers in mind first, and to us this is overwhelmingly positive. Today, many projects on the VCM encompass tens of thousands of inhabitants. These projects are notoriously difficult to manage, people on the ground are left with  little personal stake in making the project work, revenue sharing is often unjust, and projects are essentially ‘too big to be allowed to fail’.

In contrast, small/personalized projects offer a direct means of engaging with people who can have the largest impact. Small farmers have a strong incentive to plant and protect trees on their land (as opposed to projects spanning tens of thousands of hectares). Payments are directly made to community members, who can choose how best to invest the money in their communities, rather than through complex and often corrupt governance systems. Finally, projects that fail to meet their commitments can be easily handled or corrected, oftentimes with a simple phone call. This is in contrast with projects whose revenues exceed hundreds of millions of dollars, that are essentially too big to be allowed to fail.

The key to this system is an entirely prescriptive/automated enrollment system that is dramatically cheaper than the status-quo on the VCM. Farmers make use of an app provided by OFP to measure their own trees and report their measurements to validators and the public at large. The app is designed to require farmers to photograph each tree located in designated sample plots as its being measured, geotagging it to ensure that these trees are where they say they are. This system allows farmers to make their own frequent measurements, which can then be reviewed by verifiers. This allows the otherwise lengthy verification system of many ARR projects (which can exceed 2 years in the VCM today), to be conducted efficiently and in an unbiased way, allowing for mass enrollment of small farmers.

To date, all of OFP’s 80+ projects in development represent small landowners, which we believe is generally more impactful from a climate and sociological stand-point.

‍4. Transparency

Those familiar with the VCM will know that despite considerable calls for transparency, many projects fail to release data fundamental to understanding the project and its accounting. In a survey of Verra’s nature-based carbon projects, 24.6% of projects failed to disclose the location of their conservation/restoration activities [4]. Likewise, seemingly core elements of carbon projects (such as carbon stock and standard error) are omitted from project documentation.

OFP’s methodology takes strides towards solving this by requiring project locations and field inventory data to be shared publicly on their “OFP Atlas”. This includes individual tree measurements alongside photographs of each tree within prescribed sample plots, and the locations of each plot. This is similar in nature to Verra’s new Abacus label requirements, but applicable to all projects on the platform. The usage of blockchain technology also allows for information about credit issuance and tracking, as well as verification information (such as notes) to be shared publicly.

Nevertheless, there are key elements to projects that are still not hosted on the OFP platform, including forest management plans (such as species percentages), and OFP’s eligibility analysis, which includes answers to questions such as land tenure, site survey data, regulatory requirements, and other elements typically found in project description documents.  Much of this data is available on OFP’s implementation of the NEAR blockchain protocol, and so is technically public, but difficult to access for those not versed in blockchain technology. OFP assures us that hosting this information in their Atlas for each project is a top priority for them, which we appreciate. We look forward to seeing these details  hosted publicly for each project, as it will allow us to fully endorse the methodology.

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5. Other Notes

Aside from the above major points, Renoster had a few recommendations that we consider to be best-practices that we hope OFP will consider adopting:

• We encourage OFP to make use of dynamic baselines in a similar manner to Verra’s VM0047/Abacus methodology. Numerous groups (including Renoster) have determined this to be a good approach to quantifying regeneration that might have occurred otherwise in the absence of the project — although we note that this is usually most important for projects that are similar in nature to industrial forestry, which are not otherwise permitted under OFP’s platform.
• Renoster is an advocate of Tonne-Year-Accounting to compute the 100-year value of 40-year credits. We acknowledge that this approach is seldom used in the VCM, but believe it has the ability to tackle permanence questions beyond the length of the contract term.
• We encourage the use of third-party insurance and conservation mechanisms to ensure continuance of mitigation activities in case of reversal.
• We encourage revenue-sharing requirements and financial disclosure between landowner and developer.

Admittedly, these are pet-causes that Renoster advocates for in-general, that are by-and-large not industry standard practices.

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‍Conclusions

‍From the perspective of comparing OFP’s approach to other industry methodologies (namely that of Verra, Gold Standard, and the American Carbon Registry), we find the methodology to be extremely rigorous and free of conflict. We ultimately conclude that credits issued through this approach represent some of the best that are currently on the voluntary carbon market. OFP is among those leading the way forward with more rigorous standards and solutions to problems that have traditionally plagued the VCM. We hope that this and other positive initiatives like it will drive meaningful change in our industry.

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‍References

‍[1] Afforestation, Reforestation, Revegetation Carbon Whitepaper. (April 2024). Version 1.1. Open Forest Protocol. https://www.openforestprotocol.org/our-approach & https://docsend.com/view/75zb4teqgzvvmyva

‍[2] Swinfield, T., Shrikanth, S., Bull, J. W., Madhavapeddy, A., & zu Ermgassen, S. O. (2024). Nature-based credit markets at a crossroads. Nature Sustainability, 1-4.

[3] Ayrey E. (2024) Fixing Verra. Renoster. https://www.renoster.co/resource/fixing-verra

‍[4] Karnik, A., Kilbride, J., Goodbody, T., Ross, R., & Ayrey, E. (2024). An open-access database of nature-based carbon offset project boundaries.