Glossary

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

Basic Knowledge of Nature-based Carbon Credits

Carbon Standards

Here are some representative (voluntary) Carbon Standards. Currently, VCS accounts for the largest share based on annual transaction volume.

• VCS (Verified Carbon Standard): VCS is the most widely used Voluntary Carbon Standard globally, managed by Verra. VCS projects issue Carbon Credits called Verified Carbon Units (VCUs).
• Gold Standard: A Carbon Standard focused on projects that contribute to environmental protection and the achievement of Sustainable Development Goals (SDGs), established by environmental organizations such as WWF. Gold Standard projects issue Carbon Credits called Gold Standard VERs (Voluntary Emission Reductions).
• American Carbon Registry (ACR): ACR is a Voluntary Carbon Standard that evaluates and certifies Greenhouse Gas Emission Reduction projects, operated by Winrock International, primarily in the United States. ACR projects issue Carbon Credits called Emission Reduction Tons (ERTs).
• CAR (Climate Action Reserve): CAR is a Voluntary Carbon Standard that evaluates and certifies Greenhouse Gas Emission Reduction projects, operated by Climate Action Reserve, primarily in the United States. CAR projects issue Carbon Credits called Climate Reserve Tonnes (CRTs).

Types of Nature-based Carbon Projects

Nature-based carbon projects are projects that contribute to climate change mitigation by reducing and sequestering Greenhouse Gases through ecosystem conservation and restoration. On our platform, these are referred to as AFOLU (Agriculture, Forestry and Other Land Use) Activities, among others.

Here, based on the VCS classification, we explain the main types of nature-based carbon projects such as REDD (AUD, APD), ARR, IFM, and WRC.

• REDD（Reduced Emissions from Deforestation and Forest Degradation）: REDD projects aim to reduce emissions from Deforestation and Forest Degradation. REDD aims to promote carbon sequestration and reduce carbon emissions through forest protection and sustainable forest management. Many REDD projects are found in South America, especially Brazil.

  • AUD（Avoided Unplanned Deforestation）: AUD projects aim to reduce carbon emissions by preventing Avoided Unplanned Deforestation. They achieve carbon emission reductions by curbing forest destruction through measures such as regulating deforestation, cracking down on illegal logging, and promoting sustainable forest management.

  • APD (Avoided Planned Deforestation): APD projects aim to reduce carbon emissions by preventing Avoided Planned Deforestation. Planned deforestation is carried out, for example, for commercial plantations of acacia, eucalyptus, and oil palm. APD projects minimize forest destruction and achieve carbon emission reductions through proposing alternative development methods and formulating sustainable land-use plans.

• ARR（Afforestation and Reforestation）: ARR projects aim to increase carbon sequestration through Afforestation and Reforestation. These projects address climate change by creating new forests and planting trees on previously deforested land, thereby increasing the amount of carbon-absorbing trees.

• IFM（Improved Forest Management）: IFM projects aim to increase carbon sequestration and reduce carbon emissions through Improved Forest Management. For example, by focusing on proper harvesting plans and the conservation of forest ecosystems, these projects increase carbon stocks. Many IFM projects are seen in North America.

• WRC（Wetland Restoration and Conservation）: WRC projects aim to increase carbon sequestration and reduce carbon emissions through Wetland Restoration and Conservation. Wetlands have high carbon storage capacity and play a crucial role in climate change mitigation. WRC projects contribute to climate action by maintaining and restoring the healthy state of wetlands, thereby increasing carbon stocks and protecting Biodiversity. Many WRC projects are particularly found in Indonesia, Congo, and Peru.

Calculating Emission Reductions and Sequestration amounts specifically requires specialized knowledge. For REDD, please refer to the following article.

The Concept of REDD Projects

Basic knowledge of nature-based carbon credits. The impact of deforestation on climate change. Forests absorb Carbon Dioxide from the atmosphere during their growth and store it in their trunks, roots, and leaves. In this way, they remove Carbon Dioxide from the atmosphere and contribute to climate change countermeasures. On the other hand, when forests are cut down, they are used as fuel or wood products, eventually becoming Carbon Dioxide and being released into the atmosphere. While efforts such as afforestation are initiatives to absorb Carbon Dioxide from the atmosphere, preventing deforestation (REDD) also prevents the release of Carbon Dioxide into the atmosphere, contributing to climate change countermeasures in the same way as afforestation.

sustainacraft’s Newsletter

Furthermore, the following article provides a more in-depth analysis of REDD.

Regarding the Guardian Article on Forest Credits

This is the 10th Newsletter from Sustainacraft Inc. The Guardian recently published the following article, claiming that over 90% of forest credits issued by Verra are worthless, which has become a significant topic in the industry (Verra itself has issued a rebuttal). Revealed: more than 90% of rainforest carbon offsets by biggest provider are worthless, analysis shows Only a handful of Verra’s rainforest projects showed evidence of deforestation reductions, according to two studies, with further analysis indicating that 94% of the credits had no benefit to the climate.

sustainacraft’s Newsletter

Methodology

Within each project type, Methodologies are defined in a more subdivided manner. Below are examples of representative Methodologies under VCS, though not exhaustive.

• Methodologies related to AUD: VM0006, VM0007, VM0009, VM0015, VM0037, etc.

  • While the above Methodologies exist, revisions are underway to integrate them.

  • For details, please refer to the following:

    Monthly: Methodology Updates (March)

    This is Sustainacraft Inc.'s newsletter. Starting this month, we will send out the following content once a month as a "Monthly Update": Monthly Methodology Update: An overview primarily on VCS Methodology revisions, etc. Monthly VCM Update: An overview on the VCM market and international regulations. This newsletter corresponds to the first Monthly Methodology Update. In conjunction with this, we recently introduced two plans for this newsletter: a free plan and a paid plan. Going forward, the above Monthly Update content and some individual articles will be included in the paid plan (for academic institutions and NGO/NPO organizations wishing to subscribe to the paid version, please contact us individually).

    sustainacraft’s Newsletter

• Methodologies related to IFM: VM0003, VM0010, VM0012, VM0045, etc.

  • IFM projects include Methodologies such as advanced harvesting practices and cessation of planned harvesting. The applicable Methodology varies depending on the content of the activity and the climatic zone to which the project area belongs.

  • For details, please refer to the following article:

    IFM (Improved Forest Management) Methodologies

    This is the 7th Newsletter from Sustainacraft Inc. Forest projects are broadly categorized into AUD (Avoided Unplanned Deforestation), ARR (Afforestation, Reforestation), and IFM (Improved Forest Management). Major revisions to the Methodologies for each category are currently underway at Verra, one of the Voluntary Carbon Markets. This time, we focus on IFM and introduce three Methodologies: existing Methodologies in Verra, a new Methodology currently under development to integrate multiple previous Methodologies, and a Methodology proposed by the US startup NCX.

    sustainacraft’s Newsletter

Standard Documents in Carbon Standards

Below, using VCS as an example, we summarize the documents required during the project Registration, Validation, and Issuance process1.

On our platform, we collect this information as digital data and provide reports on the analysis results using technologies such as Remote Sensing and Causal Inference.

• PDD (Project Design Document)

  • A document that summarizes the basic information and detailed plan of a Carbon Project.

  • The PDD describes the project's objectives, scope, Greenhouse Gas Reduction methods, relevant laws and regulations, Baseline setting, and Monitoring Plan.

  • The PDD is an important document for increasing project transparency and helping stakeholders understand project details, but in some projects, the information included may be inaccurate or essential information may be missing.

• Validation Report

  • A report prepared by a third-party Validation/Verification Body (VVB) before a Carbon Project begins.

  • This report is used to confirm that the project's PDD has been properly prepared and complies with relevant standards and guidelines.

  • The Validation Report is an important document that demonstrates the project's reliability and feasibility.

• Verification Report

  • A report prepared by a third-party Validation/Verification Body after a Carbon Project is underway or completed.

  • This report is used to Verify whether the project has actually achieved Greenhouse Gas Reductions.

  • The Verification Report is an important document that ensures the accuracy and reliability of the project's outcomes.

• Monitoring Report

  • A report regularly prepared by the implementer of a Carbon Project.

  • This report is used to track and evaluate the extent of Greenhouse Gas Reduction/Sequestration achieved while the project is ongoing.

  • The Monitoring Report requires project operators to regularly monitor Greenhouse Gas emissions and reduction effects, collect and analyze relevant data, and report them.

  • This allows stakeholders to understand the project's performance and effects, and ensure its reliability.

Elements Constituting Carbon Credit Quality

More detailed explanations can be found in our platform's project detail reports, so please refer to those as well.

• Baseline

  • The Baseline represents a hypothetical scenario in which a Carbon Project would not have been implemented, and indicates the Greenhouse Gas emissions in that scenario.

  • Setting the Baseline is crucial and serves as a standard for accurately evaluating the Greenhouse Gas Reductions achieved by the project.

  • Establishing an appropriate Baseline improves the quality of Carbon Credits.

• Permanence

  • Permanence is an element that evaluates whether the Greenhouse Gas emissions reduced by a Carbon Project are sustained over the long term, rather than being temporary.

  • Projects with high Permanence are considered to have high quality Carbon Credits, as Greenhouse Gas Reductions are sustainably achieved.

  • In forest projects, evaluation is required from various perspectives, such as the risk of natural disasters like floods, droughts, and forest fires, as well as whether the operating institution will maintain the activities.

• Additionality

  • Additionality is an element that indicates whether a Carbon Project brings about new Greenhouse Gas Reductions that would not have been achieved by existing policies or market mechanisms alone.

  • Carbon Credits are viewed as project finance, and it must be demonstrated that the project would not have been implemented without that finance.

• MRV

  • MRV refers to the process by which a Carbon Project's Greenhouse Gas Reductions are accurately Measurement, Reporting and Verification by a third party. Proper MRV ensures the quality and transparency of Carbon Credits.

• In addition, aspects such as social and environmental safeguards and contributions to SDGs are also considered important.