Origin of the Voluntary Carbon Standard
The Voluntary Carbon Standard (VCS) is the product of a collaboration beginning in late 2005 among The Climate Group, the International Emissions Trading Association, the World Economic Forum, and, beginning in 2007, the World Business Council for Sustainable Development. The objective of this collaboration was the implementation of a “robust, new global standard and program for approval of credible voluntary offsets.”
Version 1 of the VCS (March 2006) was both a consultation document and a pilot standard. A second version (October 2006) was a consultation document. The VCS standard is the single most widely used standard among sellers of voluntary carbon offsets.1
On November 19, 2007, the VCS Association released a series of three documents establishing (i) the VCS standard for carbon offsets (VCS 2007), (ii) the framework for a program of validation and verification of offsets (Program Guidelines), and (iii) a guidance document describing additional requirements to be imposed on Agriculture, Forestry, and Other Land Use projects (AFOLU Guidance Document).2 Together these documents establish an institutional framework for the validation and verification of offsets and the issuance of tradable carbon credits. The VCS Association plans to issue a call for registries by the end of 2007, and hopes to have registries approved by the middle of 2008.
Pathway to a Voluntary Carbon Unit
When the VCS Program is operational, the proponent of an individual offset project or group of offset projects will obtain VCUs for sale through approved registries by the following six-step process3:
The project proponent submits the following items to a VCS approved validating and verifying entity: (i) project description, (ii) monitoring plan and reports, and (iii) proof of title.
- The validating and verifying entity assesses the documentation against the VCS 2007 standard and issues the following items back to the project proponent: (i) a validation report assessing methodology and additionality, (ii) a verification report including ex-post determination of GHG reductions and removals, and (iii) a certification statement.4
- The project proponent submits the following items to the operator of a registry approved by the VCS: (i) project description, (ii) proof of title, (iii) validation report, (iv) verification report, and (v) certification statement.
- The registry operator forwards copies of the documentation to the VCS Association with a request for VCU serial numbers and payment of the registration fee (currently €0.04 per VCU).
- The VCS Association checks to ensure that the project is not previously registered and issues VCU serial numbers to the registry operator.
- The registry operator issues VCUs into the account of the project proponent. VCS 2007 Characteristics
The documents submitted by the project proponent must demonstrate compliance with the VCS 2007 standard. The following are some of the key characteristics required for compliance with the standard:
- Methodology. Methodology refers to the manner in which a project proponent (i) determines conservative baseline scenarios; (ii) determines GHG sources, sinks, and reservoirs; (iii) determines additionality; and (iv) implements a monitoring, quantification, and reporting process. Project proponents must apply methodologies approved by the VCS by choosing (i) methodologies previously approved by the VCS; (ii) methodologies previously approved by another GHG Program that is approved by the VCS (e.g. the UNFCCC Clean Development Mechanism and UNFCCC Joint Implementation programs5); or (iii) methodologies specifically approved by the VCS after a double approval process. To secure approval of methodologies through the double approval process, the methodology must first be approved by the validator selected by the project proponent and then by a validator selected by the VCS.
- Additionality. Additionality must be demonstrated using one of three tests. In all three tests, the proponent must first show that the project is not mandated by law or regulation. In addition, the project proponent must demonstrate one of the following three options: (i) in the project test, the project must face some investment, technological, or institutional barrier and the project type must not be common practice in the region compared with projects that have not received carbon financing; (ii) in the performance test, the emissions generated per unit output must be lower than a level approved by the VCS; or (iii) in the technology test, the project must be listed as a project type approved as being additional by the VCS.
- Project Start Date. Projects validated under the VCS version 1 will be grandfathered in. Project start date for projects validated under VCS 2007 cannot commence before January 1, 2002, and cannot be validated against the VCS 2007 before November 19, 2007. The earliest credit start date is March 28, 2006.
- Rejection by other GHG Programs. Proponents of projects that have been rejected under other GHG Programs can apply for VCUs but must state why the project was rejected and provide the rejection documents.
- Grouping. Grouped projects may be described in one project description. The description and the verification reports must describe the sampling procedures used in monitoring the grouped project.
- Validation and Verification. Validation and verification processes can be carried out by the same entity, but all validators and verifiers must be approved by the VCS. Micro projects can be validated and verified by entities that meet less stringent requirements.
Additional Requirements for AFOLU Projects
Due to the considerable quantity of offsets currently generated by AFOLU projects and the perceived risk of non-permanence of these projects, the VCS Association will allow VCUs from AFOLU projects under the VCS Program, but only with the restrictions described in the AFOLU Guidance Document. The restrictions described in the current AFOLU Guidance Document will be incorporated into the next release of the VCS standard in 2008, but are published in advance to allow interested parties to begin developing AFOLU projects. AFOLU projects follow essentially the same pathway to award of VCUs as other projects, including the same requirements for methodology, additionality, etc. The key difference in the VCS approach for AFOLU projects is the creation of a “buffer pool” to manage risk of non-permanence.