May 2024 Methodology Updates (2/n)

This article is an automatically translated version of the original Japanese article. Please refer to the Japanese version for the most accurate information.

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Methodology Updates is a series covering Carbon Credit and biodiversity methodologies. In this article, we introduce updates regarding Verra's grassland management methodology.

While existing grassland management Methodologies included VM0026 and VM0032, it was announced that VM0026 will be retired, and VM0032 will be revised. Grassland management is an activity covered as part of ALM under the existing ALM Methodology VM0042, and its relation to VM0042 is also mentioned. While grassland management projects are not very common in Japan, Credits created from projects using VM0026 and VM0032 have been Retired by prominent global companies such as major IT firms like Netflix, Meta, and Salesforce, and fashion conglomerate Kering. Takeda Pharmaceutical Company has also Retired them among Japanese companies. The recent popularity of these projects is likely due to their perceived classification as Removal / Sequestration Credits rather than Avoidance / Reduction Credits (although they are not yet explicitly labeled as removal-based).

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Updates on Verra's Grassland Management Methodology

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Verra announced its policy for revising Methodologies for sustainable grassland management projects.

Grassland management projects are a type of Improved Agricultural Land Management (ALM) project. The latest ALM Methodology, VM0042, v2.0, covers a wide range of Agricultural Land Management activities, including grassland management. Generally, in ALM projects, changes in Soil Organic Carbon (SOC) stock are the largest source of Greenhouse Gas Emission Reduction, but SOC measurement requires meticulously designed sampling surveys and estimation using complex mathematical models of soil carbon cycling. In this regard, Verra points out the following challenges specifically for grasslands:

• Limited availability of observational data for calibrating and Validating biogeochemical models
• Heterogeneity of grasslands (pastures, shrubs/bushes, savannas, etc.) and scale are not adequately considered

To address these challenges, Verra appears to be developing independent grassland management Methodologies. While existing Methodologies for grassland management include VM0026 Methodology for Sustainable Grassland Management (SGM), v1.1 and VM0032 Methodology for the Adoption of Sustainable Grasslands through Adjustment of Fire and Grazing, v1.0, this announcement states that VM0026 will be retired, and VM0032 will be revised.

As of now (May 2024), specific details regarding the revision of VM0032 are largely not public, and it is still unclear how the updated VM0032 and VM0042 will be differentiated in their application. The announced revisions for VM0032 include 1) expanded guidance on model usage and 2) the introduction of Dynamic Baselines. However, VM0042, v2.0, already details highly technical aspects of general model operation in its sub-module VMD0053, and the concept of Dynamic Baselines has also already been introduced. We will provide updates on these points as more information becomes available. (Note that a major update is currently also being considered for VM0042. We plan to introduce this in a separate article.)

Below, as an introduction to grassland management projects/Methodologies, we will provide a more detailed overview of Issuance and Retirement performance for projects using VM0026 and VM0032, which are subject to this revision, as well as key points of the Methodology revision.

Issuance/Retirement Performance (Up to April 30, 2024)

We will show the trends in the volume of Credits Issued and Retired under each Methodology, along with a breakdown by corresponding country, project, and company. We will also focus on companies with high Retirement volumes and delve into what other types of projects they have retired Credits from.

• Looking at the Issuance / Retirement performance of VM0026 by country, both Issuance and Retirement of Credits registered under Methodology VM0026 have primarily been for projects implemented in China. Companies with high Retirement volumes include a wide range of industries such as Takeda, Goodman, Boston Consulting Group, and Nespresso. In particular, Takeda has Retired a large number of Credits in 2024.

The following is a classification of projects from which Takeda Retired Credits in 2024. Approximately 16% of the projects from which Credits were Retired in 2024 correspond to VM0026. It is also evident that Credits were Retired from Nature Restoration-related projects (ARR, SGM).