Verra’s New Methodology for Unplanned Deforestation Aims to Silence the Critics

Verra’s new methodology, launched on 27 November 2023, is intended to deal with the long-standing issue of the large number of carbon credits issued from avoided deforestation projects (known as REDD+). If successful, this intervention could initiate a virtuous circle of increased interest from buyers, higher prices and further investment in protecting the world’s forests.

On 27 November, Verra launched its long-awaited, new REDD+ methodology (VM0048) covering projects that tackle unplanned deforestation (79 of Verra’s 92 REDD+ projects). The new methodology has been in the making since 2020 and arrives at a time of much criticism towards REDD+ over baseline, leakage and co-benefit issues. This new methodology changes the REDD+ game in three main ways:

1. Shifting to “jurisdictional” baselines and adding a new deforestation risk tool

We see the shift to the use of jurisdictional baselines as the most important aspect of the new methodology. Before, developers were responsible for creating their own baselines, which was criticised by many as a cause of significant over-crediting. Going forward, Verra has commissioned dedicated geospatial providers to develop baselines on the scale of whole jurisdictions, intended to enable centralised and standardised accounting that can also combat leakage issues.

The updated methodology also introduces a new geospatial deforestation risk tool. This tool distributes the share of the jurisdictional baseline to projects within a region by calculating deforestation risk in a buffer zone of the forest edge based on the deforestation rate over the last six years. Initially covering 14 regions the tool is planned to launch in Q1 2024. [1]

The closer the project is to a forest edge or areas that have seen high rates of deforestation, the higher the risk score, and the higher the baseline for developers. Any locations – or pixels – outside the buffer distance will not be considered at risk and will not factor in the baseline calculation. The new baseline reassessment period of six years is a compromise between potentially more accurate annual baseline assessments that compare the carbon impact of a REDD+ project relative to its surrounding area every year, and economic stability for the project developers.

The new methodology appears to be a significant improvement on how baselines have been set in the past, although some risks remain. Assessing deforestation risk from surrounding areas of deforestation and forest edges in proximity may work for many project sites, but not for all. It may also not fully account for the effects of land tenure (nearby landowners may be better equipped to control deforestation than those in areas where forest is already lost), the desirability or suitability of the land and other agents of deforestation.

2. The new methodology will be applied retroactively

Unlike Verra’s previous new methodologies, the new REDD+ methodology will apply to existing REDD+ projects retroactively. This is a significant change in approach by Verra. REDD+ projects can currently use up to five different methodologies for Avoiding Unplanned Deforestation (AUD) but under the new methodology projects will receive a grace period of six months, after which any new issuances or crediting periods must comply with VM0048.

Verra further specified the impact on legacy credits for projects using methodology VM0009 (used by 9 registered and 16 pipeline projects)[2]. If the transition to the new methodology produces a lower baseline and thus fewer credits than the old methodology, the projects must compensate for this difference by (1) cancelling legacy credits that had not been sold or used for offsetting, (2) cancelling legacy credits that had already been sold but not retired, with the permission of the buyer, or (3) ‘repaying’ the difference by cancelling a proportion of future credit issuances.

The nine registered projects (including four currently on hold) under VM0009 have so far issued a combined 124 Mt, with some 53 Mt of these issuances already retired[3]. If the transition to the new baselines does affect past issuances, part of the 72 Mt surplus may have to be cancelled or future issuances reduced.

Currently this rule only applies to VM0009. The issue of past over-crediting could also affect other REDD+ methodologies, e.g., VM0007 and VM0015, although to a lesser degree than VM0009, and it is possible that the modifications to VM009 will be applied to these other methodologies in the future.

3. Convergence with broader jurisdictional approaches

VM0048 reflects a move towards compatibility with jurisdictional REDD+ (J-REDD+), following the increasing shift in market focus towards J-REDD+. For example, indicative recommendations from the Science Based Targets initiative for ‘Beyond Value Chain Mitigation’, show growing support from stakeholders for a ‘jurisdictional-scale’ approach to combatting deforestation.[4] Singapore also recently signalled that for their national tax scheme, international REDD+ credits would have to be either J-REDD+ or REDD+ with jurisdictional baselines.[5]

While Verra is expected to create their own baselines, projects under the new methodology will be able to use jurisdictional baselines issued by their host states and countries, for example as part of J-REDD+ nesting procedures. Over 40 of Verra REDD+ projects (registered or pipeline) are situated within J-REDD+ pipeline programmes, so as more J-REDD+ programmes become operational, nesting will increase. The more REDD+ projects are already aligned with jurisdictional accounting, the easier this integration is likely be.

A virtuous circle?

Verra’s new REDD+ methodology is intended to be a step into the future of higher integrity projects to avoid deforestation, addressing concerns of over-crediting. The effects on the market could be far reaching – raising integrity, reducing both supply and surplus, and silencing the critics. This in turn could initiate a virtuous circle of increased interest from buyers, higher prices and further investment in protecting the world’s forests.