Abstract
Voluntary standards can help to ensure the quality of projects eligible for carbon offsetting, i.e., selling carbon certificates. However, in deciding on whether to adopt such standards, the managers of carbon offset projects are faced with uncertainty regarding the costs and risks involved. Decision Analysis provides a helpful set of tools that can support such decisions by forecasting outcomes under different scenarios. We applied Decision Analysis methods to generate models for the decisions to certify two projects in Costa Rica with the voluntary carbon offset label “The Gold Standard”. We evaluated certifying an additional site of a partially certified reforestation project, as well as the initial certification of an agroforestry project.We calibrated and interviewed decision-makers and stakeholders of the certification projects to identify important parameters and translate these into a decision model. We ran the final decision model as a Monte Carlo simulation to project plausible ranges of decision outcomes, expressed as Net Present Values and annual cash flows. We identified critical uncertainties and research priorities by using the Expected Value of Perfect Information. The results indicate that certification of the two projects would result in a positive Net Present Value. The partially low return on investment of the certification, however, shows the need for projects to undergo thorough evaluation and generate customized strategies before participating in a voluntary carbon offset scheme. The Decision Analysis approaches we describe can help to improve the process of decision making under uncertainty and should be widely adopted for evaluating the potential impacts of certification.
Highlights
Forests absorb the equivalent of roughly 2 G, of CO2 each year (FAO 2018)
Parallel to the Clean Development Mechanism (CDM), a Voluntary Carbon Offset Market (VCM) with private actors has emerged, where carbon credits are sold in the form of Verified Emission Reductions (VER), with each VER corresponding to 1 t of CO2 equivalent (Bumpus and Liverman 2008)
In accordance with the experts, we assumed that completing the certification of the agroforestry and the reforestation project would take 2 years
Summary
Forests absorb the equivalent of roughly 2 G, of CO2 each year (FAO 2018). At the same time, forest loss and degradation are estimated to contribute approximately 20% of annual greenhouse gas emissions globally. Parallel to the CDM, a Voluntary Carbon Offset Market (VCM) with private actors has emerged, where carbon credits are sold in the form of Verified Emission Reductions (VER), with each VER corresponding to 1 t of CO2 equivalent (Bumpus and Liverman 2008). One of the most important carbon offset labels, especially in the forestry and land use sector, is the Gold Standard It was initiated in 2006 by the World Wide Fund for Nature (WWF) and offers several methodologies under which projects can be certified, including an “A/R GHG Emissions Reduction & Sequestration Methodology” (The Gold Standard 2017)
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