Carbon Credit Specification

1. Basic requirements

Third-Party Certification

The involvement of an impartial third party in the verification and validation process is a fundamental aspect of any carbon project. In essence, the verification or validation conducted by an independent third party instils confidence in investors, business partners, and consumers that the information, data, and statements presented are accurate and reliable. Third-party certification is essential as it provides an objective evaluation of a product or service, which can enhance credibility and trust, ensure compliance, improve quality, confer a competitive advantage, and demonstrate a commitment to sustainability. In the context of the Planetary Carbon Standard (PCS), the Sri Lanka Climate Fund (SLCF) is the designated third-party entity responsible for conducting unbiased audits of PCS carbon projects. Being the only government entity in Sri Lanka authorized to issue carbon credits under the Sri Lanka National Carbon Crediting Scheme, the SLCF plays a pivotal role in ensuring the credibility and integrity of carbon credits associated with PCS projects.

Double counting

Double counting in the carbon credit context refers to the practice of claiming the same emission reduction or removal twice to generate carbon credits. This issue can arise when a single credit is used to meet multiple regulatory or voluntary schemes or sold to various buyers. Insufficient monitoring and reporting procedures can contribute to double counting at different levels of the carbon credit supply chain, resulting in negative impacts on carbon markets such as an artificial oversupply of credits, overestimation of emissions reductions, and a drop in credit prices. To prevent double counting, standardized accounting and reporting procedures, along with robust monitoring and verification mechanisms, are crucial. Coordination and cooperation among project developers, regulators, and other stakeholders are necessary to ensure that each credit is counted only once and not used to satisfy multiple schemes or sold to multiple buyers.

The importance of eliminating double counting in the carbon trade cannot be overstated, as it can undermine the integrity of the entire carbon market, leading to a lack of trust among buyers and sellers. This can result in a decrease in demand for carbon credits and diminish the effectiveness of the carbon trade in reducing greenhouse gas emissions.

To address this issue, the Planetary Carbon Standard (PCS) has been developed, which requires independent verification and certification of carbon offset projects to ensure that each credit represents a genuine reduction in emissions and can only be retired once.

PCS leverages Blockchain technology to enhance transparency and mitigate the risk of duplicative accounting. The carbon credits generated through PCS are recorded in both the PCS and SLCF registries, with both registries being updated simultaneously. The movement of PCS carbon credits is meticulously monitored by both PCS and SLCF, enabling the carbon credit buyer to verify the legitimacy of the carbon crediting project and obtain detailed information about the project. Upon the sale of carbon credits to the end buyer for carbon offsetting purposes, the credits are marked as retired to ensure they cannot be reused for any purpose.

2. Carbon Credit Generation

Additionality

Additionality in a carbon credit project refers to the concept that the project must result in a reduction of greenhouse gas emissions that would not have occurred in the absence of the project. In other words, Additionality is a key concept in carbon offset projects, which refers to the reduction in greenhouse gas (GHG) emissions that would not have occurred in the absence of the project. In other words, it ensures that the carbon credits generated by a project represent real, additional reductions in emissions that are not already required by law or market forces.

PCS always considers additionality seriously when considering a project site, such as bordering the area identified as the “Deforestation belt” of the Amazon Rainforest. Many reports on the area are freely available in the media.

The importance of additionality in carbon projects cannot be overstated. It is a fundamental principle that underpins the integrity and credibility of carbon markets and ensures that they are effective in reducing global emissions. Without additionality, there is a risk that carbon credits could be issued for emissions reductions that would have occurred anyway, without any intervention from the carbon project.

Permanence

Permanence is a critical aspect of all PCS projects as it refers to the sustained protection of carbon sequestered. These efforts serve to reduce greenhouse gas emissions by preventing activities that contribute to deforestation, degradation, and carbon dioxide released into the atmosphere. In the context of carbon offset projects, permanence is particularly important since these initiatives aim to reduce greenhouse gas emissions by preventing deforestation or promoting forest regeneration, which results in carbon sequestration from the atmosphere. Carbon offsets are then sold to individuals or companies seeking to offset their emissions, and for this to be effective, the carbon sequestration must be permanent. If the forest is cut down in the future, the carbon stored in the trees will be released back into the atmosphere, thus defeating the purpose of the offset.

To ensure the permanent preservation of a forest and the carbon it contains, e.g. the TMZN rainforest conservation project employs several measures. One such measure involves introducing sustainable land-use practices such as agroforestry systems that combine crop cultivation with forest preservation to reduce the risk of deforestation and forest degradation. Collaborating with local communities is another effective way of building support for the project and promoting long-term forest conservation by providing economic incentives, creating employment opportunities, or supporting local businesses that rely on forest resources.

Maintaining the permanence of forest conservation efforts requires continuous monitoring and enforcement to prevent illegal logging, encroachment, and other threats to the forest. It also involves the participation and support of local communities to ensure that the project's benefits are valued and sustained over the long term. Regular monitoring and reporting can track changes in forest cover and identify potential threats to the project's long-term

Baseline Setting / Baseline Methodology

Establishing a baseline is a crucial aspect of forest carbon projects because it provides a reference point for measuring carbon emissions reductions. The baseline represents the level of carbon emissions that would have occurred in the absence of the project and is used to determine the number of carbon credits that the project can generate and sell in carbon markets.

Setting a baseline is essential for maintaining the environmental integrity of the project. By establishing a clear and verifiable baseline, the project can demonstrate that it is achieving real and additional emissions reductions beyond what would have occurred without the project. This helps to ensure that the project is genuinely contributing to climate change mitigation efforts.

A transparent and credible baseline methodology enhances the transparency and credibility of the project. It allows stakeholders, including investors and local communities, to understand and verify the project's carbon benefits. By using internationally recognized standards, such as the Planetary Carbon Standard (PCS), project developers can ensure that their baseline methodology is rigorous and transparent.

Leakages

Accurate carbon accounting necessitates the consideration of leakages. Failure to account for leakages can result in an overestimation of the amount of carbon sequestered by the project, leading to false claims of emission reductions.

Leakages are a crucial factor to be addressed for the environmental integrity of carbon forest projects. If leakages are not taken into account, they can result in a net increase in carbon emissions, defeating the purpose of the project and undermining its credibility.

Addressing leakages involves collaborating with various stakeholders, including local communities, government agencies, and private entities, to identify and mitigate potential leakage risks. Such collaboration can help establish support for the project and promote its long-term success.

E.g: To address leakages in the TMZN Amazon rainforest conservation project, several measures have been implemented, including:

Additionality assessment: Conducting a thorough additionality assessment before the project begins helps to identify any potential leakage risks. By understanding the local socio-economic and environmental conditions, the project can identify potential displacement of activities that may lead to leakages.

Collaboration with neighbouring communities: Working with neighbouring communities to promote sustainable land use practices helps to minimize the displacement of activities that may result in emissions leakage. This involves collaborating with communities to establish alternative livelihoods that do not rely on deforestation or land-use changes that may lead to emissions leakage.

Monitoring and reporting: Regular monitoring and reporting help to identify any potential leakage risks and track changes in greenhouse gas emissions outside the project boundary. This involves using satellite imagery, on-the-ground surveys, and other tools to assess changes in land use and identify any potential displacement of activities. PCS projects aim to identify and prevent any risks

Establishing safeguards: Implementing safeguards, such as buffer zones around the project area, can help to prevent the displacement of activities that may lead to emissions leakage. This can involve establishing legal protections, such as zoning laws or protected areas, to ensure that adjacent lands are not converted to activities that result in emissions leakage. The TMZN rainforest conservation project has taken measures to safeguard the project site by employing guards. These guards are responsible for monitoring and securing the project's perimeters to prevent any unauthorized access, trespassing, or damage to the site.

By implementing these measures, the PCS projects aim to minimize the risk of emissions leakage and ensure that the greenhouse gas emissions reductions achieved through the project are additional and permanent. Additionally, the project can help to promote sustainable land use practices and support the development of alternative livelihoods for neighbouring communities, which can contribute to the long-term success and sustainability of the project.

3. Management and Reporting

Measurability

Measurability is a critical component of carbon projects, as it plays a key role in verifying carbon sequestration, promoting accurate monitoring, enhancing credibility, and ensuring accountability. These factors are essential to ensure that forest carbon projects can effectively contribute to mitigating climate change while providing social and environmental benefits.

Accurately measuring carbon sequestration potential is essential for verifying the carbon sequestration benefits of a forest carbon project. To calculate the carbon sequestration potential, baseline emissions levels must be established, and any changes in carbon stocks resulting from forest management practices must be measured precisely. Accurate measurement of carbon stocks and emissions levels is critical in ensuring that the project's carbon benefits are real and can be verified.

Measurability also ensures that the project's monitoring is accurate and reliable. A robust monitoring system is necessary for tracking changes in carbon stocks and emissions levels over time. This monitoring system must be capable of detecting any changes in carbon stocks and emissions levels resulting from the project's activities, including any potential leakage from the project area.

In this regard, international standards such as the Planetary Carbon Standard (PCS) require transparent monitoring requirements to be established for relevant projects. These monitoring requirements ensure that the project's carbon benefits can be accurately tracked, reported, and verified, enhancing the project's credibility and accountability.

Monitoring

Monitoring is a crucial component of a rainforest conservation project, as it helps to track changes in forest cover and carbon stocks over time, assess the effectiveness of the project, and identify any potential threats to the long-term success of the project.

The Planetary Carbon Standard (PCS) recognizes the importance of monitoring carbon crediting projects and has established rigorous monitoring requirements to ensure the accuracy and credibility of carbon credits generated by rainforest conservation projects. These requirements include using both conventional and advanced technological tools to measure and verify emissions reductions and carbon stock changes.

To address these limitations, PCS encourages the use of advanced technological tools such as remote sensing mechanisms, satellite imagery, LiDAR, and artificial intelligence to improve the accuracy and efficiency of monitoring. These tools can provide detailed and up-to-date information on forest cover, biomass, and carbon stocks over large areas, and can help to identify changes in forest cover due to deforestation, forest degradation, or natural disturbances such as fires or storms.

By incorporating advanced technological tools into the monitoring process, PCS aims to ensure that carbon credits generated by rainforest conservation projects are based on accurate and reliable data and can be verified through an independent third-party verification process. This not only enhances the credibility of the carbon credits but also helps to attract investment and support for rainforest conservation projects.

4. Transaction

Proximity of Leveraging Credits

The proximity of leveraging credits refers to the extent to which a carbon credit project can maximize its impact by generating additional benefits beyond carbon emissions reductions. These benefits may include improved livelihoods for local communities, biodiversity conservation, and sustainable land use practices.

By leveraging the co-benefits of carbon credit projects, project developers can enhance the overall impact of the project while attracting additional investment and support from stakeholders. For example, a project that supports sustainable forest management practices may also generate additional benefits such as improved water quality and increased biodiversity.

The proximity of leveraging credits is an important consideration in the development of carbon credit projects. By identifying and maximizing co-benefits, project developers can enhance the environmental and social sustainability of the project, promote accountability, and increase the credibility of carbon credits in the market.

Furthermore, leveraging credits can contribute to the achievement of broader sustainability goals, such as the United Nations Sustainable Development Goals (UNSDGs). By aligning with the UNSDGs, carbon credit projects can enhance their impact and contribute to the achievement of global sustainability targets.

The proximity of leveraging credits is a crucial element in the design and implementation of carbon credit projects, as it can help maximize the project's impact and contribute to broader sustainability goals.

E.g. for the TMZN Amazon rainforest conservation project, the PCS has established specific criteria for measuring the project's emissions reductions. The project's baseline methodology, REDD+, requires that emissions reductions must be measured and verified within the project's defined boundaries, which include the protected forest area and the buffer zone around it. Any emissions reductions claimed by the project must be attributed solely to the project activities within this defined area.

The Proximity Principle is critical for the environmental integrity of carbon credit projects, as it ensures that emissions reductions claimed by the project are real and additional, beyond business-as-usual scenarios. By leveraging the Proximity Principle, conservation projects can ensure the accuracy and credibility of their carbon credits, while promoting sustainable development in local communities and protecting vital ecosystems.

5. Sustainable Development Goals (UNSDGs)

Safeguard Principle

The Safeguard Principle plays a crucial role in carbon projects as it ensures environmental protection, social benefits, stakeholder engagement, and compliance with international standards. It is essential to ensure that carbon projects are sustainable and responsible, and deliver multiple benefits to people and the planet.

The Planetary Carbon Standard (PCS) provides requirements to address the Safeguard Principle. For instance, PCS requires a set of measures and procedures that ensure project activities do not harm people, the environment, or biodiversity while promoting social and environmental benefits.

The Safeguard Principle ensures that forest carbon projects are designed and implemented in a way that protects the environment and promotes biodiversity conservation and ecological sustainability. It requires the involvement of all stakeholders, including local communities, in the planning, implementation, and monitoring of forest carbon projects, ensuring that their voices are heard, their needs are considered, and that they benefit from the project.

Using the example of the TMZN Amazon rainforest project, it is evident that forest carbon projects can have a positive impact on the local community. The project provides economic benefits by creating employment opportunities for local people in various project-related activities. Additionally, the project offers training and capacity-building programs that enhance the skills and knowledge of local people, improving their livelihoods.

Conservation of rainforests also has significant social benefits for the local community, such as preserving traditional land rights and the cultural heritage of indigenous communities living in the forest. The project can provide access to clean water and improve the quality of life by reducing deforestation and degradation in the area.

PCS incorporates the Safeguard Principles into its framework to ensure that carbon projects adhere to the highest standards of sustainability. These principles include:

Social and Environmental Standards: Carbon projects must respect the rights of local communities and ensure that they benefit from project activities. The projects must also minimize adverse environmental impacts and promote the conservation of biodiversity.

Gender Equality: Projects must promote gender equality and ensure that women are involved in project design, implementation, and decision-making.

Inclusion: Projects must ensure that marginalized groups, such as indigenous communities, have a say in project design and implementation.

Accountability: Carbon projects must have clear governance structures and be accountable to stakeholders. They must also promote transparency and access to information.

Human Rights: Projects must respect human rights and ensure that they are not violated through project activities.

Sustainability: Projects must promote sustainable development and contribute to the achievement of the UNSDGs.

The Safeguard Principle is essential in forest carbon projects as it ensures environmental protection, social benefits, stakeholder engagement, and compliance with international standards and PCS exemplify the importance of safeguarding the environment, promoting social benefits, and engaging with local communities in forest carbon projects.

Contribution to the local community

The Planetary Carbon Standard (PCS) recognizes the importance of local community engagement in carbon crediting projects and requires the projects to incorporate the principles of Free, Prior, and Informed Consent (FPIC) and ensure the active participation of local stakeholders. This helps to ensure that the local community is involved in the decision-making process, benefits equitably from the project, and has a say in how the project is implemented.

By incorporating the principles of FPIC and ensuring local community engagement, PCS aims to ensure that the benefits of the project are equitably shared among all stakeholders.

Example: The TMZN rainforest conservation carbon credit project has a positive impact on the local community by providing various economic, social, and environmental benefits. The project has created employment opportunities through the recruitment of local people for various project-related activities such as monitoring, maintenance, and management. Additionally, the project can provide training and capacity-building programs for local people, enhancing their skills and knowledge, and improving their livelihoods.

The conservation of rainforests also has a significant social benefit for the local community. For example, the project can preserve the traditional land rights and cultural heritage of indigenous communities living in the forest. Moreover, the project can provide access to clean water and improve the quality of life by reducing air pollution and preventing soil erosion.

Furthermore, the TMZN rainforest conservation carbon credit project contributes to environmental sustainability by mitigating climate change, conserving biodiversity, and protecting ecosystems. The project can help to maintain the ecosystem services that the local community depends on for their livelihoods, such as water regulation, soil fertility, and natural resources.

6. Antisocial Activities

Money Laundering

Money laundering in forest carbon projects can occur when individuals or organizations use these projects as a means to launder money obtained through criminal activities. Forest carbon projects involve the sale of carbon credits, which are generated by projects that reduce greenhouse gas emissions by conserving or restoring forests.

Money laundering in forest carbon projects can take many forms. For example, criminal organizations may use carbon credits as a way to "clean" money earned through illegal activities. They may buy the credits with illegal funds and then sell them on the open market as legitimate assets.

The Planetary Carbon Standard (PCS) has established strict guidelines and procedures to prevent money laundering in its carbon credit projects. PCS requires that project developers implement adequate due diligence procedures to ensure that all parties involved in the project, including buyers and sellers of carbon credits, are legitimate and comply with relevant laws and regulations.

PCS also requires that project developers maintain detailed records of all transactions related to the project and conduct regular audits to identify and address any suspicious activity. Additionally, PCS requires that project developers report any suspected instances of money laundering to the appropriate authorities.

In addition to these specific measures, PCS adheres to a range of general practices to prevent money laundering, including compliance with relevant international anti-money laundering standards, ongoing training and education for staff and partners, and regular risk assessments to identify and address potential vulnerabilities.

PCS takes a comprehensive approach to preventing money laundering in its carbon credit projects, recognizing the importance of maintaining the integrity of the carbon market and ensuring that carbon credits are generated through legitimate and sustainable activities.

Child Labor

Child labour refers to the employment of children in any work that deprives them of their childhood, interferes with their ability to attend school, or is harmful to their physical or mental health. It is a serious issue that affects millions of children worldwide and can have long-term negative effects on their well-being and prospects.

The Planetary Carbon Standard (PCS) is committed to promoting sustainable and ethical practices in carbon-crediting projects and does not support projects that involve child labour. To prevent the involvement of child labour in its projects, PCS requires project developers to adhere to its safeguarding policies, which prohibit the use of child labour and other exploitative practices.

PCS also requires project developers to conduct rigorous due diligence on their supply chains and project activities to ensure that they comply with local laws and regulations regarding child labour. This includes conducting regular site visits and audits to verify that no child labour is being used in project activities or in the supply chains that support those activities.

In addition to these measures, PCS works closely with local communities and stakeholders to raise awareness of the risks and negative impacts of child labour and to promote education and alternative livelihood opportunities for children and families. By working collaboratively with local partners and implementing strict safeguarding policies, PCS aims to prevent the involvement of child labour in its projects and to promote sustainable and equitable development in the communities where it operates.