How to control the risk of leakage and ensure permanence?

Explanation of concepts

Leakage is the phenomenon in which greenhouse gas (GHG) emissions increase in another location as an indirect consequence of implementing an emission reduction project in a specific area, reducing the true effectiveness of the project if left uncontrolled. For example, a reforestation project that causes local residents to lose agricultural land might unintentionally drive them to deforest neighboring areas, creating new emissions. Permanence, on the other hand, refers to the long-term maintenance of GHG reductions or removals. If the reductions are reversed, due to events such as forest fires or post-project deforestation, the environmental benefits are lost.

Measures to control leakage and enhance permanence

International standards, such as the Verified Carbon Standard (VCS), particularly for Agriculture, Forestry, and Other Land Use (AFOLU) projects, require developers to implement specific measures to manage these risks.131 132

Leakage risk assessment in project design

During the Project Design Document (PDD) phase, a thorough leakage risk assessment must be conducted, evaluating indirect impacts like land-use shifts, livelihood pressures, or market effects. Where significant risks are identified, mitigation measures may include establishing buffer zones, supporting alternative livelihoods, or discounting claimed credits to account for leakage.

Establishing a “buffer pool” for non-permanence risk

To address the risk of non-permanence, standards like VCS require projects to contribute a percentage of their issued carbon credits to a central "buffer pool." This pool acts as a shared insurance mechanism against unavoidable reversals (e.g., natural disasters like wildfires or floods). The contribution percentage is determined by a project-specific non-permanence risk assessment, typically ranging from 10% to 20%. Credits held in the buffer pool are not tradable and are cancelled if a reversal event occurs, ensuring the overall integrity of the carbon market.

Long-term Monitoring, Reporting, and Verification (MRV)

AFOLU projects require a long-term commitment to monitoring. Project activities, forest carbon stocks, ecosystems, and community impacts must be monitored periodically (e.g., annually or every five years). MRV reports must be continuously updated to detect any factors that could affect permanence or cause leakage, allowing for timely corrective actions.

Illustrative example

Illustrative example

A reforestation project in Vietnam’s Central Highlands aims to sequester CO₂ through assisted natural regeneration. The design phase identifies risks such as high illegal logging pressure near a timber transport route, medium wildfire risk during the dry season, and potential impacts on local livelihoods due to restricted access. The project addresses these by contributing 15% of issued credits to the VCS buffer pool, establishing protective buffer zones and community patrols, providing fire prevention training and efficient cookstoves, and implementing a monitoring plan with annual site visits and a full risk reassessment every five years. By correctly implementing these risk management measures, SMEs can enhance project credibility, reduce legal and reputational risks, and ensure their carbon credits meet the high-quality standards expected by international buyers.

References

131. Verra. (2023, September 6). Area of focus: Agriculture, Forestry, and Other Land Use (AFOLU). Verra. https://verra.org/programs/verified-carbon-standard/area-of-focus-agriculture-forestry-land-use/
132. Gold Standard. (n.d.). Land-use & forests activity requirements. Gold Standard for the Global Goals. https://globalgoals.goldstandard.org/203-ar-luf-activity-requirements/