1. SOCIALCARBON Standard Introduction to criteria and procedures for certification

2. Who we are Ecologica InstituteEcologica Institute (EI) is a non-profit organization active in the Amazon rainforest. During the past ten years, EI’s mission has been to develop activities focused on climate change mitigation through: - scientific research. - environmental preservation. - community development. Canguçu Research Center

3. Results Realized until 2009 Climate Change 460,000 tons of carbon reduced through the promotion of projects in reforestation, conservation, and fuel switching. 46 studies on climate change, renewable energy, environmental conservation and community development. Forest 2,323 native hectares conserved through the support of the creation of private nature reserves. 300 hectares of forest restored. Community development 6,480 people trained 110 families included in the market through the commercialization of sustainable products that benefit the climate.

4. SOCIALCARBON Standard The Ecologica Institute is the developer of the Social Carbon concept and of the SOCIALCARBON ® Standard. The SOCIALCARBON Standard is an additional certification to guarantee that carbon offset projects are sustainable and result in social and environmental benefits.

5. Sustainable Livelihood Approach SOCIALCARBON was developed during the five-year implementation of a community-based forest Project. Objective: include local stakeholder’s perspectives in the development of project to guaranty commitment and long term success (i.e. activities to generate income: Agro-forestry systems) Its theoretical framework is based on the Sustainable Livelihood Approach (SLA), a world wild methodology used in planning new development activities and in assessing the contribution that existing activities have made to sustaining livelihoods.Sustainable Livelihood Approach e.g. International NGOs: CARE Save the Children OXFAM ITDG (Intermediate Technology Development Group) e.g. Bilateral: DANIDA SIDA DFID e.g. Multilateral : UNDP FAO WFP IFAD World Bank Source IFAD: Background of Sustainable Livelihoods

6. History The first large-scale carbon sequestration project in Brazil, 1998 Located entirely on the Bananal Island (Brazil) Objectives: Reducing deforestation; reforestation of degraded areas; and generating income for the communities involved Creation of the Canguçu Research Center Inauguration by Prince Charles Publication of the book “Social Carbon: adding value to sustainable development”

7. 1998 Forest project in Brazil 2006 Switching fuel projects (biomass in small industries) 2007 HPP, both large and small scale 2008 - SOCIALCARBON Standard published - First project certifyed 2010 - Over 40 projects certified in Brazil - Expanding globally - Creation of a SOCIALCARBON Board 2000 Development of the Social Carbon concept and methodology 2003 Publication of the book: Social Carbon: adding value to sustainable development 2003 - … All Ecologica Institute’s projects use Social Carbon methodology (capacity building, sustainable products, etc.) 2010 Publication of the second book: Biodiversity and Social Carbon SOCIALCARBON Standard: certification for carbon offset projects Social Carbon concept: methodology for community development projects Evolution of SOCIALCARBON

8. MARKET INFORMATION

9. Source: Ecosecurities Carbon Management and Offsetting Trends Survey Results 2009 1. Local Community Benefits 2. Experience & Credibility 3. Carbon Standards What Buyers Want…

10. VCS offsets by price-tier Prices

11. Market share

12. Buyers Certifiers Partners and endorsments

13. Project developers Current New project developers Asia Turkey Chile Colombia Formerly Social Carbon Company Brazil

14. HOW IT WORKS

15. SOCIALCARBON criteria Project developers establish a baseline using the standard's assessment tools. Developers must then demonstrate improvements in relation to this baseline through SOCIALCARBON monitoring reports that are independently verified by certifying entities.

16. Indicator123456 Education High degree of illiteracy. Illiteracy among older inhabitants. Some illiteracy. Little illiteracy. Almost no illiteracy. No illiteracy. Professional Capacity Professional skills nearly absent. Few people have acquired professional skills. Some people have acquired professional skills. People have professional skills that need upgrading. Presence of skilled professionals. Presence of various types of skilled professionals. 1 - Use of six basic resources: Social, Human, Financial, Natural, Biodiversity and Carbon. 2 - The indicators have a score beginning at the most precarious scenario (level 1) and ending at the ideal situation (sustainable use of resource – level 6). 3 - All the data is collected through participative methods (interviews, questionnaires and meetings with stakeholders). 4 -The average score by the indicators is plotted in a hexagon. How does it work?

17. PAYMENT OF SOCIALCARBON LEVY PAYMENT OF VCS LEVY SOCIALCARBON STANDARD & INDICATORS UNFCCC & VCS METHODOLOGIES SOCIAL CARBON REPORT (POINT ZERO) SOCIAL CARBON REPORT (POINT ZERO) D.O.E. VALIDATION MONITORING & ACTION PLAN D.O.E. VERFICATION (POINT ONE) D.O.E. VERFICATION (POINT ONE) VCS_PDD D.O.E. VALIDATION MONITORING D.O.E. VERIFICATION Feasibility Study REGISTRATION INTO MARKIT REGISTRY DOCUMENTS AND STATESMENT ISSUANCE Project Cycle Carbon AccountingSustainability

18. Aditional information for auditors Usually the DOEs involve two different auditors in the process, one for the PDD and one for the SOCIALCARBON Report. This is not a requirement of the Standard, but auditors of SOCIALCARBON Reports prefer to work this way for two main reasons: – to save time during the validation process; – SOCIALCARBON Reports are more similar to Sustainability Reports than Project Design Documents and auditors with experience in certifying ISO 14.000 are more efficient in certifying SOCIALCARBON Reports than those involved in CDM.

19. Exempla of SOCIALCARBON indicators The Indicators for Hydropower plants (HPP) used for the SOCIALCARBON assessment are based in The International Hydropower Association (IHA) Sustainability Guidelines. Example of SOCIALCARBON indicators for HPP:

20. Exempla of SOCIALCARBON Reports Example of SOCIALCARBON assessment for HPP (SOCIALCARBON Report):

21. Frequent Asked Questions (FAQs) “Which are the requirements for becoming an accredited certifier and how is the process and its costs?” – The Ecologica Institute does not have an accreditation procedure for auditors of the SOCIALCARBON Reports. – If your organization intends to audit a SOCIALCARBON Report, please fill the attached FORM II – Certifying Entities identifying the contact person responsible for SOCIALCARBON certification activities and e- mail it to: cecilia@socialcarbon.orgcecilia@socialcarbon.org – We will require you to send us the first draft Validation Report to make sure it complies with the SOCIALCARBON Standard criteria. – After the first successful validation your organization will be listed as one of Certifying Entities for SOCIALCARBON at: http://www.socialcarbon.org/Developers/Certifying-Entities/ http://www.socialcarbon.org/Developers/Certifying-Entities/ – There are no costs involved.

22. Frequent Asked Questions (FAQs) “Which are the requirements for becoming an approved organization for applying SOCIALCARBON in carbon offset projects and how is the process and its costs?” – The Ecologica Institute does not have an accreditation procedure for project developers. – Project developers wishing to apply the SOCIALCARBON Standard must first implement SOCIALCARBON in a pilot project under the supervision of the Ecologica Institute for demonstration of capacity. – If your organization intends to develop a SOCIALCARBON Report, please fill the attached FORM I – Approved Organizations identifying the contact person responsible for SOCIALCARBON assessments and e-mail it to: cecilia@socialcarbon.org cecilia@socialcarbon.org – We will require you to send us the first draft SOCIALCARBON Report to make sure it complies with the SOCIALCARBON Standard criteria. – After the first successful validation of a SOCIALCARBON Report your organization will be listed as one of Approved Organizations for SOCIALCARBON at: http://www.socialcarbon.org/Developers/Certifying- Entities/http://www.socialcarbon.org/Developers/Certifying- Entities/ – There are no costs involved.

23. PROCEDURES

24. Overview of SOCIALCARBON Procedures 123456

25. Project CycleStageSOCIALCARBON Cycle Selection of baseline and monitoring methodologies Getting started – Prepare your SOCIALCARBON indicators - The indicators are project specific and co-developers may choose between adapting existing indicators or creating new. SOCIALCARBON indicators for each of the six aspects: social, human, financial, natural, biodiversity and carbon. Documents: Template and guidance for adapting and creating new indicators Important: public consultation process for new indicators (especially certifying entities) Steps for new indicators: 1.List of potential positive and negative social, economic and environmental impacts 2.List significant risks for the project 3.List of stakeholders directly or indirectly affected 4.Benchmarking (best practices) 5.Indicators (establishment of scenarios 1-6) 1

26. Additional Information: Scores Scores Classification Characteristics 1 and 2Critical Existence of irregularities; high socio-environmental risk; significant levels of social and environmental degradation; or situation of extreme hardship, which significantly compromises the quality of life of the population. 3 and 4Satisfactory Meets all the legal requirements relating to its activities; surpasses them through the adoption of good practices and voluntary actions in some cases; or the quality of life reaches the minimum acceptable standard but requires improvement. 5 and 6SustainableExceeds its legal obligations and/or common practice in the market, in many cases adopting the best-possible practices for the sector; or communities have reached a sustainable livelihood, with adequate access to material and social goods, are capable of recovering independently from situations of stress, and are not causing the deterioration of basic environmental resources through their activities.

27. Project CycleStageSOCIALCARBON Cycle Project Design Document (PDD) Elaboration of SOCIALCARBON Report - This will define a baseline for assessing the project’s contribution to sustainable development. Collect data used to score the indicators through participative methods, like interviews, questionnaires or meetings with stakeholders. Then summarize it in a Report. Documents: Template and guidance for elaborating SOCIALCARBON Reports (SCR) Important: qualitative information and opinions from stakeholders count! SOCIALCARBON is more about understanding people’s needs and perspectives (the local people’s point of view) than matrix of numbers. Contents: 1.Identifying the project 2.General description of the Project activity 3.Method of applying SOCIALCARBON 4.Results 5.Analysis of Results 6.Perspectives 2

28. Project CycleStageSOCIALCARBON Cycle ValidationChoose one organization to certify the SOCIALCARBON Report – Is an independent process from the PDD, but DOEs can complete the validation and verification procedure both for PDD + SOCIALCARBON Reports at the same time. Documents: None. Validators are free to develop their own methods for auditing SCR and Validation Report format. SOCIALCARBON Standard Criteria: 1.Offset Project Eligibility 2.Elaboration of SOCIALCARBON indicators for the project 3.Data collection through participatory methods 4.Elaboration of SOCIALCARBON Report 5.Monitoring 6.Continual improvement 7.Independent auditing of SOCIALCARBON Reports 3

29. Additional information for auditors: new indicators During the first validation using a new indicators is common that certifying entities ask for some changes in the indicators, because: – Some indicators can not be audited There is no way to evidence the information required by the indicator, for example: the switching fuel project has an impact in reducing deforestation rates in the region. – Collecting evidence for the indicator is possible but not feasible: Usually indicators that contain the word “all” or “none” or “never” suit this category, for example: All employees are satisfy with the benefits offered by the company or none of the employees work in risk situations. If the certifying entity asks for changes in the indicators, the project developer must submit this to the Ecologica Institute for approval using the “template for adapting indicators”.

30. Additional information for auditors: methods for validation/verification of SCR Different methods for validation/verification of SCR: – TUV Nord: have a questionnaire (check list) and open CARs – Bureau Veritas: Check indicator by indicator

31. Additional information for auditors: scope of the auditing process Scope of the auditing process: – SOCIALCARBON is a holistic assessment. Nevertheless the organization is not obligated to demonstrate legal conformity within all the six aspects: social, human, natural, biodiversity, financial and carbon. – The auditing process must be limited to the information described or required in the indicator or else the scope of validation becomes “virtually unlimited” and a never ending process, because project developers have to demonstrate conformity with all the existent laws. – This decision was also taken to avoid that SOCIALCARBON became an excuse to audit other issues not related to the impacts of the carbon project, such as: fiscal, salary, social security or confidential information.

32. Additional information for project developers: examples of evidences that might be required by certifying entities Documentation: – All documentation mentioned in the SCR must be available for auditors – Documentation not mentioned in the SCR may be also required to evidence some information (i.e. if the project developer states that is planning to implement a project /program the “plan of activities” may be required) Questionnaires: – Always specify in the report the name, organization and position of people responsible for providing any type of information (not just the responsible) and ask for a signature whenever is possible. Meetings: – With local stakeholders: list of presence and tape it whenever is possible. – With project owners: another option is to summarize in a report and ask for a approval of the content. Others types of evidence: – Pictures, newspapers, certificates, etc.

33. Frequent Asked Questions (FAQs) Which are the procedures for validation of a SOCIALCARBON Report? – When we first contact D.O.Es to certify SOCIALCARBON Reports, both TUV Nord and Bureau Veritas stated that there was no need to establish an specific procedure for auditors, since they already had internal procedures for auditing Sustainability Reports that could be applicable for SOCIALCARBON. – Please confirm if your organization will need us to elaborate a specific procedure for you. – In general D.O.E.s evaluate if the: Report contains all information required by the Template and guidance for elaborating SOCIALCARBON Reports Information disclosure in each indicator is relevant and truth Score is in accordance with the described scenario in the indicators If the continual improvement criteria has been accomplished during verification periods

34. Frequent Asked Questions (FAQs) Regarding the SOCIALCARBON Report, should it be reviewed by the SOCIALCARBON team, after validation? – No. Is there any public consultation that should be done? – No public consultation is required.

35. Project CycleStageSOCIALCARBON Cycle Monitoring & Verification Monitoring and verification – elaborate annual SOCIALCARBON Reports and submit them to independent verification to demonstrate project’s contribution to sustainable development. Important: Achieving sustainability is not a quick and easy task; rather, it is a long process of continual improvements. After the first commercialization of carbon credits, project proponents: Must demonstrate goals for improvement and provide evidence that they are being achieved. Will not be allowed to present a decrease in the same aspect for two consecutive monitoring periods. 4

36. Additional information for project developers: Continual improvement criteria Commitment of the project owner is fundamental or else the continual improvement will not occur. The trick question: Assume a project owner wants to implement 5 measures to improve performance in the indicators. He could get SOCIALCARBON certification if he implements one measure each year for 5 years, but would loose it if he implements all measures in the first year and does not improve in the next 4 years to come. Therefore, he would have the incentive to delay these measures just in order to keep the SOCIALCARBON certification? – The assessment for continual improvement might be based not only in the improvement of indicators score, but also in evidences that proposed perspectives are being developed by the project owner, especially in cases where improvement is not perceptive in the indicators. – The objective is demonstrate that actions are in place and benefiting stakeholders, even if they do not push the indicator up one point. It should address not only the results itself but also the organization’s endeavor.

37. Project CycleStageSOCIALCARBON Cycle VER IssuanceAfter successful verification, you may issue the SOCIALCARBON credits through the Markit Environmental Registry. You must. request the registration of a SOCIALCARBON project or credits to Markit. This request must be accompanied by corresponding SOCIALCARBON documentation. Documents: So far the documentation required for registration is: The SOCIALCARBON Report and the Validation/Verification Report. In some cases we accept issuance only with SOCIALCARBON Reports without Validation Report because we still have a lack of validators. In Brazil we are not accepting this anymore. A “Terms and conditions” for issuance SOCIALCARBON units at Markit is in development and in the future will need to be signed by all project developers. Important: After initial issuance, the credits may be transferred to other registries (APX, Cassie Depots) 5

38. WHY WE ARE DIFERENT

39. Standards in the Market Name of Program Minimal focus on co-benefits versus required co-benefits International MechanismsGHG Accounting Protocols Clean Development MechanismWBCSD/WRI GHG Protocol for Project Accounting Joint ImplementationISO 14064 Mandatory cap-and-trade systemsComplete Voluntary Standards European Union Emissions Trading SchemeClimate Action Reserve Regional Greenhouse Gas InitiativeGold Standard Western Climate InitiativeVoluntary Carbon Standard 2007 Midwest Greenhouse Gas Reduction AccordVER+ Canada’s Offset System for Greenhouse GasesAmerican Carbon Registry Australian Carbon Pollution Reduction SchemePlan Vivo New South Wales Greenhouse Gas Reduction SchemeCarbonFix Voluntary cap-and-trade systemsAdd-on /complementary Standards Chicago Climate ExchangeClimate Community and Biodiversity Standards Other GHG SystemsSOCIALCARBON Standard Alberta Offset SystemOther Types of Standards British Columbia Emission Offset RegulationGreen-e Climate Protocol for Renewable Energy Climate Leaders Green-e Climate Program Co-benefitsApplies toProjects (pipeline) SOCIALCARBONAll types60 Gold StandardEE & RE150 CCBSForestry32, no issuance Plan VivoForestry5 small scale CarbonFixForestry5 small scale

40. Our Differential It is more flexible and responsive to the realities of developing countries Easily understood by all stakeholders, including communities It has a more practical vision (methodology instead of list of criteria) It strives for continuous improvement instead of selective criteria for projects It is based on Sustainable Livelihood Approach SOCIALCARBON Standard is the only standard created in a developing country (Brazil)

41. Our differential SOCIALCARBON does not compare a project to another project: – Is not about selecting and separating “best projects” or “high quality projects” from the “rest of the projects.” SOCIALCARBON compare the project in beginning with the project in the future: – to evaluate how carbon markets are directly and indirectly benefiting local stakeholders.

42. SMALL SCALE AND COMMUNITY PROJECTS

43. Projects – Ceramic Facilities Project TypeNumberTotal emissionsTotal VERsYears Fuel switching (biomass)58 1,114,445 9,542,32610 LocationProject ActivitiesCertifications

44. Lesson 01 – outstanding performance in small organizations is a mith Small organizations and communities have: – poor organizational capacity and ability to mobilize. – They also lack of management system for human, financial, and natural resources. Thus, ask small organization and community to have outstanding performance is a contradiction. – To make several demands in the beginning of the Project does not incentive improvement, but rather has a contrary effect and undermines people’s interest. Exclude people from the market is not the answer. For this reason, SOCIALCARBON does not establish a minimal score range, projects can be certified even if the score critical levels as 1 or 2 in the indicators.

45. Cerâmica Cavalcante – State of Pará (Amazon) Verified by:

46. Lesson 02: Adapting sustainable principles to a local reality assessment Example of criteria for sustainability assessment for Gold Standard: – The project respects the employees’ freedom of association and their right to collective bargaining and is not complicit in restrictions of these freedoms and rights? SOCIALCARBON assessment (indicators are project specific):

47. Lesson 03 - Approaching sustainability without considering local priorities is impractical The top down approach where Standards establish “what should be done” for achieving sustainability is not necessarily effective in practice, because lack of commitment and interest from the local stakeholders. For example, some important issues to ceramic owners and employees: – Better wages or benefits and reducing turn over rates – Capacity building on production, quality and security – Improving technology to reduce physical efforts and improve product’s quality – Reducing waste Improving this type of measures might be more relevant and cost- effective than, for example, a two public consultation process or the mitigation of “all potential negative impacts”.

48. LARGE SCALE PROJECTS

49. Why SOCIALCARBON accepts all types of projects Sometimes assuming that certain types of projects are better than others is more a matter of faith and belief than a rational decision about which is the best option for a specific location under a specific context. For this reason, SOCIALCARBON was not developed to select projects that are considered “best projects”, but to incentivize any project developer to improve sustainability performance. SOCIALCARBON Standard does not exclude large scale projects or any type of project activity, as long as: – Project developers can elaborate indicators and demonstrate co- benefits throughout the lifetime of the project

50. Hydroelectric Energy upgrading projects at the large- scale hydropower plant Mascarenhas and the small-scale hydropower plant Paraíso Objectives: Create a fund to support CSR projects through the sale of carbon credits Identify CSR projects through participative meetings with the communities

51. Benefits of using SOCIALCARBON in large scale projects For project developers – It is a good way to improve the attractiveness of the credits for buyers and also a new source of funds for implement CSR actions. – For example, one PO listed two projects already ongoing or in planning stages that they need more support for implementation as the sedimentation control and reforestation projects that could benefit from the addition revenues of SOCIALCARBON VCUs. For buyers: – Reduces project risk and improves long-term stability: SOCIALCARBON improves transparency of the project regarding, for example, environmental and social impacts, political and social risks related to local communities and commitment of the project owner with CSR. – Enhances buyers’ image and reputation due to projects’ high environmental and social benefits.

52. Contact us: Cecília Michellis cecilia@socialcarbon.org Tel. +55 11 6352 0027