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2.4 Management of Risks and Permanence

What is 'Permanence'?

Permanence describes the issue of ensuring removal of carbon dioxide from the atmosphere is permanent, and not reversed at a future point in time.  Woodland projects carry a risk of reversibility and as such safeguards must be in place to minimise that risk as well as to guarantee replacement or compensatory woodland planting should a reversal occur.  

Woodlands sequester carbon from the atmosphere, but can also lose carbon either through natural causes (pest and disease attacks, extreme weather events or fire) or through management (felling and not replacing the trees).   Project managers need to make every effort to ensure that any claimed carbon store remains in the woodland for the duration of the project and beyond. 

The measures set out below work together to ensure that the risk of loss is minimised, and that if there are any unavoidable losses, there is a method for these to be dealt with.  Where there is an avoidable loss (eg where the management regime set out in the Project Design Document is not followed by the project), this can be dealt with by legal and contractual means.   

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Managing woodland to minimise losses

Projects certified to the Woodland Carbon Code can manage their woodland in a variety of ways, including periodic clearfelling.  The Project Design Document should clearly state the management intentions for the project over the project duration and beyond.  These management intentions should be realistic for the type of woodland as well as the conditions at the site.

Whatever the management regime, the maximum that can be claimed is the long-term average carbon stock of the woodland type and management on the site.  Clearfelling should be carried out in line with plans set out in the Project Design Document; restocking should be carried out in line with any Felling Licence conditions.  

In addition to notifying the Forestry Commission of any Felling proposals, Certification bodies should be notified about any change to the management regime and projects should update their Project Design Document,  including re-calculating their project's predicted carbon sequestration.  

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Minimising risks to minimise losses

In order to insure against unforeseen losses of woodland carbon, a risk assessment should be carried out on all projects using the Risk Assessment Template.  For each project the potential risks should be identified, and strategies developed to mitigate these risks.  As a minimum, the following areas should be considered:

  • Legal/ Social
  • Project Management
  • Finance
  • Natural Disturbance:  Fire
  • Natural Disturbance:  Weather
  • Natural Disturbance:  Pest and Disease
  • Natural Disturbance:  Direct Climate Change Effects

Having completed a risk assessment and identified ways of mitigating each potential risk area, the level of risk should be determined within the High/Low thresholds that have been given.  Each project should then set an overall Risk Score of between 15% (Low risk) and 40% (High risk).

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WCC Buffer - Purpose

The WCC buffer safeguards the investment made by carbon buyers and maintains and protects the integrity of verified Woodland Carbon Units.  Thus WCUs issued for a project are permanent and would never have to be cancelled or ‘paid back’ should that project subsequently fail; we will ensure there are always sufficient units in the pooled buffer to cover any unanticipated losses from individual project failures. 

The WCC Buffer is a single account held in the Markit Environmental Registry and managed by the Forestry Commission.  It contains the contributions from all verified projects.

For avoidance of doubt the following would not be covered and losses would be borne by the project:

  • Pending-Issuance Units (PIUs)
  • Sequestered carbon which is not yet verified

Contributing to the buffer

Project developers shall each contribute a proportion of the project’s net carbon sequestration to the buffer based upon project risk (15-40% of net carbon sequestration).

At validation, this risk-based proportion of PIU’s shall be transferred into the ‘WCC PIU buffer’ account managed by the Forestry Commission.  This will indicate the potential size of the buffer over time.  It will not be possible to make claims from the WCC PIU buffer account.

Upon verification, PIU’s will be cancelled in the ‘Pending Issuance WCC Buffer’ account and the same proportion (based on the project risk) of verified carbon units from the project shall be allocated to the WCC Buffer account managed by the Forestry Commission.  The the verified WCC buffer can be drawn upon in case of any losses of verified WCUs from a project.  Buffer units are not tradable.

Losses

A ‘loss’ of carbon is defined as when the woodland loses some of its trees and standing volume, and therefore carbon, due to avoidable or unavoidable circumstances.

Should a loss occur, the project should immediately inform the Forestry Commission and Markit.

The project must submit a ‘Loss Event Report’ within 6 months of discovery of the loss.  The Loss Event Report shall include estimates of carbon losses and an indication of the accuracy of the report.  The relevant number of WCC buffer units to cover the loss will be put on hold.

The project will then conduct their next regular verification as per the verification schedule.

Reversals

A reversal is defined as when the net greenhouse gas benefit of the project, taking into account the baseline, leakage and project carbon sequestration, is negative in a given monitoring period.  The size of the reversal is the net carbon sequestration at the current verification minus the net carbon sequestration at the previous verification.

If at the next regular verification there has been a reversal since the previous verification:

  • Firstly, if desired, any unsold WCUs in the project-developer’s account which are not part of the amount lost, can be cancelled to cover the reversal. 
  • Secondly, should this be insufficient to cover the loss then the relevant number of WCC buffer units already put on hold will be cancelled to cover the remaining proportion of the shortfall.  If this number is insufficient additional WCC buffer units will be cancelled.  If too many were put on hold the ‘surplus’ will be released back into the buffer.
  • Thirdly, the Project Design Document shall be reviewed with a view to taking Corrective Actions to make good the losses in a reasonable time-frame of, perhaps, 10-20 years.

If at the next regular verification there has been a net increase in carbon sequestration since the previous verification, then there is no reversal and any buffer credits put on hold at the time of the loss event report will be released back to the buffer.

Replenishing the WCC buffer

An unavoidable reversal relates to a loss due to natural disaster (eg severe storms, flooding, drought, fire, pest & disease attacks) or man-made events over which the project has no control (eg terrorism, war).

If a reversal has occurred, then:

  • If the reversal was avoidable (eg poor management or early/over-harvesting of timber) the project shall reimburse the WCC Buffer for all credits cancelled to compensate for the loss before further WCUs are issued to the project. 
  • If the reversal was unavoidable the project is only required to repay the WCC Buffer for carbon units cancelled in excess of the contribution their project had previously made (eg if a project had contributed 50 units but 60 were cancelled to cover their loss, the project would only have to repay 10 units).  Further WCUs can then be issued.

The project would then continue to contribute a proportion of verified carbon units (based on risk assessment) into the WCC buffer at each subsequent verification.

End of project duration

At the end of a project’s duration, all remaining buffer units which were contributed by that project will be cancelled.

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Legal instruments to ensure permanence

The landowner of a Woodland Carbon Code project, by creating a new woodland, must commit to a permanent land use change to woodland, and to maintaing the woodland as a woodland carbon sink.  Any unavoidable losses due to natural disturbances such as fire, pest, disease or wind damage will be eligible to make a claim from the 'buffer' of unclaimed carbon.  Avoidable losses (e.g. the landowner choosing to fell and not replace the trees) must be dealt with by legal or contractual means.

Contractual Obligation  Where a contract is in place covering the landowner's obligations to provide carbon sequestration through woodlands, claims may be made in the event of a breach of contract.   

In addition to any contractual obligations set up under the Woodland Carbon Code, projects are subject to existing legislation that would guard against deforestation or the removal of woodland. 

  • Environmental Impact Assessment Regulations (1999) require an Environmental Impact Assessment for deforestation over 1ha. 
  • The Forestry Act (1967) prevents the felling of trees without the permission of the Forestry Commission or Forest Service, through a Felling Licence. 

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Future developments

  • During 2014/15 we will continue further work on assessing risk and the level of contribution to the WCC buffer. 
  • During 2015/15 we will clarify what sanctions or incentives can be included to encourage and reward maintenance of verification over the project duration.
  • We will develop recommendations for standard terms to be included in contracts between landowners project managers and investors.

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