*Update on 11/10/22: See our updated Methodology for Harvest Deferral based upon feedback from the Verra Tonne-Year Accounting and methodology comment periods.
Last week, Verra released an update to their Verified Carbon Standard (VCS) and in doing so, made it clear they are not adopting tonne-year accounting at this time. We have now had a chance to read, in detail, the comments Verra received on tonne-year accounting from various individuals and organizations. Feedback and conversation are critical to innovation, and we appreciate the time commenters took to respond to the consultation.
As a method for quantifying and crediting yearly climate impact, tonne-year accounting has the potential to unlock scale, immediacy, and accountability in carbon markets. At NCX, we’ve reviewed the public comments and found support along with few substantive issues for tonne-year accounting. We are taking all feedback into consideration as we move the tonne-year conversation forward.
Embedded in the comments submitted to Verra are a mix of:
- Reasonable questions about an unfamiliar concept that warrant exploration and clarification
- Fear about a new innovation that threatens the status quo business model of selling credits whose impact won’t be fully delivered for decades
The first type of comments we will address below and in much greater detail in the coming weeks and months. We thank the climate mitigation community for engaging in this dialogue. Learning in public is part of our ethos, and we are grateful for the constructive feedback provided through Verra’s consultation process.
We believe that the second type of comment, however, really has no place in a public process that aims to solve the most colossal and urgent challenge of modern times. For example, a few commenters cited the risk that adopting tonne-year accounting could lead to a massive uptake in new credits that might reduce demand for status quo credits. Wouldn’t that actually be a terrific outcome in a market where current carbon projects lack the immediacy and scale we need?
As Verra stated in their comment responses, tonne-year accounting, “was put forward as a method for incentivizing greater climate action.” It is already in use by other verification bodies and was recently adopted by Canada’s federal program. We encourage climate solution providers to adopt the approach with appropriate rigor and program designs in place. As problem solvers, we don’t believe these kinds of anti-competitive comments have merit and we don’t plan to address them further.
We wanted to highlight the key issues and themes that are embedded in the comments Verra received in the public consultation about including tonne-year accounting in their VCS. While the consultation was on tonne-year accounting (and some unrelated updates to VCS), commenters largely conflated tonne-year accounting itself and the NCX proposed methodology for short-term crediting. Within the comments, it is hard to disentangle the two. However, readers should be aware that tonne-year accounting is simply an accounting method and wholly distinct from the mechanics of a methodology for storing and sequestering more carbon.
Overall, there was considerable support for the concept of tonne-year accounting. Commenters recognized that tonne-year accounting provides much-desired flexibility for landowners and therefore has the potential to increase enrollment in carbon offset programs. Commenters stressed, however, that tonne-year accounting should only be used for methodologies that were explicitly designed for it.
We very much agree that implementing tonne-year accounting requires certain safeguards to ensure the methodology is not gamed and exploited. Our methodology does that by including, for example, dynamic annual baselines, ex post credit delivery, and requiring landowners to enroll all of their land. However, commenters rightly noted that not all methodologies under VCS are currently equipped to handle tonne-year accounting appropriately.
Commenters focused heavily on questions about short-term crediting, which is related to, but distinct from, tonne-year accounting. Most of those comments focused on three key areas:
- Measuring Additionality
Commenters questioned whether measuring and delivering additionality – the foundation of any carbon credit – is possible over short periods, including NCX one-year terms. We recently closed our first full annual cycle and are excited to share what we believe is the first-ever accounting of fully delivered, nature-based climate mitigation impact. We are working to increase transparency and are developing new ways to show how we are delivering real climate benefit with measurable, verifiable additionality from one-year harvest deferral carbon credits.
With one-year terms, it is possible to document fully delivered additionality using rigorous approaches to measuring uncertainty. In contrast, for offset programs with long crediting periods, it is extremely difficult to predict the future over a long period of time with any level of reasonable uncertainty. That leaves buyers of those credits uncertain if their climate benefits will ever materialize.
- Tonne-year Accounting vs. Short-Term Crediting
There were many comments that conflated tonne-year accounting with short-term crediting. Let’s take a moment to provide clarity. A tonne-year is one tonne of carbon held out of the atmosphere for one year. Tonne-year accounting is a way to quantify and credit climate impact in single year increments. Think of this as a partial credit when compared to the arbitrary 100 years required by Verra for a project or a credit to be considered “permanent.”
As an accounting method, it can be applied to a 1-year, 20-year, 100-year, or even a 1,000-year project. Although this comment period was not focused on short-term crediting, tonne-year accounting makes it possible, so we will discuss this further.
Increasingly, the climate mitigation community is recognizing that there is no such thing as “permanent” storage that exists in perpetuity from nature-based solutions. At NCX, we believe in being honest about the inherent lack of certainty and permanence in nature – let’s not pretend natural systems are static, and let’s not pretend that 100 years is forever. The 100 year timeframe is a policy choice, but obviously does not mean something lasts forever.
As Verra and several commenters have pointed out, tonne-year accounting provides a method for issuing ex post credits that cannot be reversed because the benefit is already delivered by the time they are issued. For short-term projects where credits are only issued in tonne-years on an ex post basis, the delivered climate impact is immediately delivered and cannot be reversed. Acknowledging and designing for temporary storage using tonne-year accounting and short-term crediting provides accountability when fires, pests, and climate change itself make long-term forest predictions near impossible.
We believe short-term credits are necessary for stimulating climate action in this critical decade. NCX has already seen a huge acceleration in the number of U.S. landowners interested in our program, largely because of our one-year commitment term. In our first year alone, we enrolled 3,800 landowners owning 4.6 million acres of forest. Relative to traditional forest carbon methodologies, short-term crediting using tonne-year accounting can deliver 20 times the climate impact by 2030. That is the kind of scale the climate crisis demands.
- Economic Costs of Emissions
The next theme in the comments was focused on whether you can mix physical and economic costs and benefits when accounting for emissions and offsets. We have previously addressed this topic and will summarize here. The critique focuses on the physical quantity of carbon that moves from Earth into the atmosphere and finds that using a discount rate to incentivize climate action breaks the presumed equivalency of emissions and offsets. We acknowledge, and embrace, the idea that discounting the value of a tonne-year is an economic construct.
While the purported goal of climate mitigation is to reduce the amount of carbon in the atmosphere, the ultimate goal is to minimize the damages to people and the planet from associated temperature changes. The damages that will result from continued inaction are valued in economic terms. And so, we believe it is entirely appropriate to use an economic incentive system that values the damages caused by emissions to drive behavior that will reduce the physical harm caused by too much carbon in the atmosphere.
Many commenters also took issue with the concept of discounting the costs and benefits of climate action – not a critique of tonne-year accounting itself, but of the exchange rate between a tonne-year of climate impact and a so-called “permanent” (100-year) ton. We have written in-depth about this concept. Both Verra and NCX believe that choosing a discount rate – no matter what that rate is – is a policy and social choice, not a scientific one.
Reasonable people can disagree over the choice of discount rate, but it is indisputable that climate action today is preferred over doing little and waiting until decades from now to act. Tonne-year accounting can incentivize providers of nature based solutions to begin enhancing carbon sequestration and storage immediately.
In addition to Verra’s consultation on tonne-year accounting, earlier this year, Verra also solicited input on the NCX proposed methodology for short-term crediting through harvest deferrals. Our proposed methodology – which relies on tonne-year accounting – is now also delayed in moving forward with Verra. We will fully address the comments Verra received on that separate public consultation in the coming months.
We know the climate crisis gets worse every year that we fail to act decisively. We know further that nature based solutions can buy us time and provide a bridge to a future where we have additional options for removing carbon from the atmosphere. We also hear loud and clear from our customers and partners that the market is currently constrained by a lack of real high-quality carbon credits. NCX is proposing a solution to that very problem. We call it Forest Carbon 2.0, and invite you to read read more about it.
Although Verra has chosen to delay moving forward with tonne-year accounting, the planet can’t wait. At NCX, we are proud to be driving forward an innovation that will increase the integrity and scale of forest carbon markets. We are committed to a rigorous, scientific approach to climate action and will soon be releasing data and analysis to demonstrate our impact. As always, our mission remains the same: achieving near-term climate impact at scale by empowering all landowners to participate in carbon markets.