1. William M. Ferretti, Ph.D., Sr. Policy Advisor, VCS
Regional Voluntary Carbon Markets - Alternatives to the Kyoto Protocol Market
4/30/2019
William M. Ferretti, Ph.D., Sr. Policy Advisor, VCS

2. Overview New paradigm for climate financing
Developing voluntary carbon markets
Introduction to the VCS
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3. New paradigm for climate financing
Continued emphasis on commitments to tackling GHG emissions
Copenhagen a good start, but need to go further
Need for clearly laid out plans and objectives
Self-reliance
Developing domestic initiatives (eg, markets)
Domestic capacity building, including MRV
Development agency resources as start-up capital
Pay-for-performance
Delivering results
Carbon markets as a useful model
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4. What does new paradigm mean?
Reduced dependence on outside financial resources
Leverage existing programs/frameworks
Make your strategy depend on local circumstances
Developing domestic infrastructure and skills (capacity)
Unleash domestic innovation
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5. Lessons from the CDM Reduced emissions (1 billion tCO2e)
Fostered significant private-sector investment (US $215 billion)
Demonstrated new pay-for-performance model
However…..
CDM market has been a “buyers market “ setting conditions on suppliers
Low demand given anemic growth in EU
EU decision to accept only LDC CERs post 2012
CDM has been restrictive regarding the types of activities that could be credited
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6. Enter the voluntary carbon market (VCM)
Source: Ecosystem Marketplace and Bloomberg New Energy Finance, Developing Dimension: State of the Voluntary Carbon Markets 2012, May 2012
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7. VCM is small, but it is robust
Strong supply
Variety of project types and standards
Many options for buyers
Steady and growing demand
Facts
Value of 2011 OTC transactions highest ever
Prices resilient (and increasing)
54% of VER purchases and retirements by corporates for purely voluntary reasons
Mechanism to regulate supply and demand exists
Corporates with commitments
Not formal, but effective
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8. Uneven distribution of demand
Volume and Value Transacted By Buyer Region and Top Country Locations, OTC 2011
Growth in last 3 years:
Carbon Expo 2006 – VCM didn’t really feature
Carbon Expo 2007 – VCM featured as the poor relations and the regulated market was concerned there might be a ruckus
Carbon Expo 2008 – VCM started to become part of the establishment, eg JPM Climate Care takeover / coming out party
So we see figures around the growth m in 2004, to 65m last year
It will continue to grow, though no-one quite knows how much
Companies are the main engine of growth, though NGOs 13%, individuals 5%, govt less than 1%
Motivations vary widely – will look at this later...
Source: Ecosystem Marketplace and Bloomberg New Energy Finance, Developing Dimension: State of the Voluntary Carbon Markets 2012, May 2012
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9. VCM has matured significantly
Infrastructure
Innovation
Linking sustainable development
New methodological approaches
New project types and moving towards jurisdictional approaches
Effective engagement with stakeholders
Credibility
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10. Why has this occurred? Overall corporate awareness, AND
Countries/entities taking leadership position
Australia National Carbon Offset Standard (NCOS)
Costa Rica C-Neutral Program
World Bank’s Partnership for Market Readiness
Includes Brazil, Chile, Colombia, Costa Rica and Mexico
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11. Introduction to the VCS
The VCS Association (VCSA )
Non-profit organization
Headquartered in Washington, DC
New offices in Santiago, Chile and Beijing, China
Established by leading NGOs (IETA, WBCSD, The Climate Group, WEF) to:
Provide a global benchmark and framework for the voluntary carbon market
Foster innovation within a context of quality, credibility and transparency
Demonstrate workable frameworks that can be incorporated into compliance regimes worldwide
Funded primarily by VCU levy ($0.10 per VCU)
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12. VCS Program
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13. Verified Carbon Units (VCUs)
Core Elements
Additional Certifications Recognized by VCS
(Thailand)
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14. Methodologies 20 approved VCS methodologies in the following sectors:
Energy and energy consumption (5)
Mining (2)
Industrial gases, ODS (2)
Reduced emissions from deforestation & avoided degradation - REDD (6)
Improved forest management (4)
Sustainable agricultural land management (1)
21 methodologies under development, including:
Transport (3)
Construction (3)
Energy consumption (1)
Manufacturing (fuel switching) (1)
Agriculture, Forestry and Other Land Use (AFOLU) (13)
Methodology developers include the Pacific Forest Trust (British Columbia government), World Bank, Food and Agriculture Organization (FAO), private sector, non-profits
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15. Liquidity… 880+ projects 100,000,000 + VCUs India: 260 China: 193
Projects by Country
880+ projects
100,000,000 + VCUs
India: 260
China: 193
Brazil: 68
U.S.: 40
Thailand: 32
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16. VCUs Issued by Sectoral Scope
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17. Use of third party standards in VCM (OTC), 2011
Growth in last 3 years:
Carbon Expo 2006 – VCM didn’t really feature
Carbon Expo 2007 – VCM featured as the poor relations and the regulated market was concerned there might be a ruckus
Carbon Expo 2008 – VCM started to become part of the establishment, eg JPM Climate Care takeover / coming out party
So we see figures around the growth m in 2004, to 65m last year
It will continue to grow, though no-one quite knows how much
Companies are the main engine of growth, though NGOs 13%, individuals 5%, govt less than 1%
Motivations vary widely – will look at this later...
Source: Ecosystem Marketplace, Bloomberg New Energy Finance,
Developing Dimension: State of the Voluntary Carbon Markets 2012 17

18. Use of third-party standards, forestry
Source: Diaz D. et al, (2011) State of the Forest Carbon Market 2011, From Canopy to Capital, Ecosystem Marketplace
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19. Looking Ahead - Crediting Frameworks of the Future
Standardized approaches
VCS developed framework for approaches that standardize elements of additionality and/or the crediting baseline, for a given class of project activity:
Activity Methods (positive lists)
Performance Methods (performance benchmark)
Crediting jurisdiction programs, esp. REDD+
VCS developed guidance and criteria for jurisdictional REDD programs to enable crediting at multiple scales (project, state/province and national)
Create a pathway for projects to “nest” within larger scale jurisdictional programs (both sub-national and national)
Develop best practice nested accounting and crediting at jurisdictional scales
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20. Conclusions We have a new paradigm for GHG-related financing
Largely influenced by the (positive) experience of the CDM
‘Pay-for-performance’ concept will dominate
Will emphasize domestic infrastructure (MRV, capacity)
Will emphasize domestic/regional demand development
Voluntary carbon markets provide good example
Can help build infrastructure (methodologies, accreditation systems, registries)
Less exposed to outside circumstances/decisions
Foster innovation
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21. Thank you Will Ferretti Senior Policy Advisor wferretti@v-c-s.org
VCS Association
1730 Rhode Island Avenue, NW
Suite 803
Washington, DC
4/30/2019