Gold Standard
www.cdmgoldstandard.org
Overview
Additionality and Quantification Procedures
Overview
Type of Standard and Context
The Gold Standard (GS) is a voluntary carbon offset standard for renewable energy and energy efficiency projects. The GS can be applied to voluntary offset projects and to Clean Development Mechanism (CDM) projects. It was developed under the leadership of the World Wildlife Fund (WWF), HELIO International and SouthSouthNorth, with a focus on offset projects that provide lasting social, economic and environmental benefits.
The GS CDM was launched in 2003 after a two-year period of consultation with stakeholders, governments, non-governmental organizations (NGOs) and private sector specialists from over 40 countries. The GS Verified Emission Reduction (VER) standard was launched in 2006. The GS is presently endorsed by over 60 environmental and development NGOs. The stated goals of the GS are:
“to help the CDM achieve its twin objectives of reducing compliance costs through project-based emission trading while at the same time fostering sustainable development in developing countries without generating additional emissions.
"In the voluntary market, the Gold Standard guarantees that offsetting emissions is not a zero-sum PR stunt, but real engagement with real impact.
"The objectives of the Gold Standard Foundation are to:
• help boost investment in additional sustainable energy projects
• ensure significant and lasting contributions to sustainable development
• provide assurance that investments have environmental integrity
• increase public support for renewable energy and energy efficiency” (Gold Standard, n.d.).
Standard Authority and Administrative Bodies
The Gold Standard Foundation is a non-profit organization. The operational activities of the GS are managed by the Gold Standard secretariat, and include capacity building, marketing, communications, certification, registration and issuance, as well as maintenance of the GS rules and procedures. The secretariat currently has a core staff of 15.
The Foundation Board oversees the strategic and organizational development of the GS. The Board currently has six members. At least 50% of its members must be recruited from the Gold Standard NGO supporter community, and one member is at the same time the Chair of the Gold Standard Technical Advisory Committee (GS-TAC, see below). In case of significant changes to the GS rules and procedures, the Board decides whether a Gold Standard NGO supporter majority is necessary to implement the change.
The Technical Advisory Committee (GS-TAC) evaluates and approves projects and new methodologies for VER projects, and is in charge of updating the GS rules and procedures. It is the equivalent of the CDM Executive Board (EB)/Methodology Panel for VER projects. The GS-TAC currently has seven members, all acting in their personal capacities. GS-TAC members are from the NGO community, multilateral organizations, aid agencies and the private sector and all work for the GS on a pro-bono basis.
The Gold Standard NGO Supporters officially endorse the practices of the GS method and approve major rule changes (e.g. eligibility of project types). Gold Standard NGO Supporters are consulted as part of the GS stakeholder consultations and are invited to take part in the project review process. They may also request an in-depth audit of GS projects at both the registration and the issuance stage.
The Gold Standard Auditors are UNFCCC accredited Designated Operational Entities (DOEs) who carry out validation and verification of GS projects. DOEs are not allowed to carry out the validation and the verification of the same project, except for micro- and small-scale projects.
Regional Scope
The GS is an international voluntary carbon offset standard. The large majority of projects are in non-annex 1 countries, but Gold Standard projects also exist in, for example, New Zealand and the US.
Recognition of Other Standards/ Linkage with Other Trading Systems
The GS does not recognize any other voluntary standards, but the GS is recognized by the Green-e Climate. It is likely to be recognized by several other standards (e.g. VER+ and VCS) in the near future.
Market Size and Scope
Tradable Unit and Pricing Information
GS VERs (07 and 08 vintage) traded at 8.38 Euros per tonne in the spring of 2009 (Carbon Finance, April 2009).
Participants/Buyers
GS Credits are purchased by buyers who place a high value on environmental integrity and strong co-benefits. These are buyers from the compliance market and voluntary buyers, such as NGOs, large corporate entities with strong Corporate Social responsibility (CSR) profiles, businesses and offset retailers.
Current Project Portfolio
As of May 2009, the Gold Standard Registry listed the following projects:
Gold Standard VERs: 3 validated,20 registered, 7 issued, 76 listed
Gold Standard CERs: 5 validated, 7 registered, 4 issued, 91 listed
5 Gold Standard JI projects
Retired VER credits as of March 2009: 0.45 mMtCO2e
(Current project portfolio information changes rapidly. For the latest information, see the Gold Standard Registry.)
Offset Project Eligibility
The latest version, GSv2.1 was released on June 1, 2009. The GS Requirements (“Requirements”) present the fundamental principles and the rules of the GS certification in a concise way. The Requirements provide an “at a glance” overview of the basic certification criteria for validators and project developers. The Gold Standard Toolkit describes the project cycle and provides examples and detailed instructions on the use of the GS. Based on experiences and recurring queries, the Toolkit will be updated to include the most relevant examples and guidance. The Toolkit comes with fixed templates (annexes) that are easily used to report information being passed between project proponents, validators, verifiers and the GS. All GS-related documents can be downloaded from the ‘Technical Documents’ section of the GS website.
Project Types
The GS accepts renewable energy (including methane-to-energy projects) and end-use energy efficiency projects.
The eligibility of hydropower plants with capacity over 20MWe is evaluated on a case-by-case basis. All such projects must undertake a pre-feasibility assessment, which must include
(i) the provision of a Compliance Report proving the project's compliance with WCD guidelines, to be validated by a DOE/AIE.
(ii) a specific stakeholder consultation, including a site visit by local stakeholders. (see Annex C p.94 of the GS toolkit).
Project Locations
GS VER projects cannot be implemented in countries with an emission cap, except if GS VERs are backed by Assigned Amount Units (AAUs) being permanently retired.
Project Size
The GS does not set a minimum project size. For GS CERs, CDM project size limits apply. Project size requirements for GS VERs are:
• micro-scale (<5,000 tons CO2 per year),
• small-scale (5,000–60,000 tons CO2 per year) or
• large-scale (>60,000 tons CO2 per year).
Start Date
The earliest start date for retroactive crediting of GS VERs was January 1, 2006, and retroactive crediting is only permitted for a maximum of 2 years prior to the registration date.
The GS does certify CDM pre-registration credits for a maximum of one year prior to the project’s CDM registration date under certain conditions:
• The project developer can provide proof that the final version of the PDD was submitted for validation to the DOE prior to January 31, 2008.
• The DOE must provide a verification report covering the GS VER period either with the first verification of GS CERs or separately.
• The reasons for the delay between the start of project operation and the CDM registration have to be explained by the DOE as part of the verification report covering the GS VER period.
GS CERs will only be issued after the project has been successfully registered as a GS CDM project. Once the project has been registered as a GS CDM project, the normal GS rules apply.
Crediting Period
Crediting periods are either one 10-year period or three renewable seven-year periods, except for validated pre-CDM GS VERs (see above).
Projects can opt-in to GS crediting during the overall crediting period by submitting a GS-compliance verification report to the GS. Projects can opt-out of GS crediting during the overall crediting period, but opt-out is final and the project can no longer be communicated as a GS project.
Prior to opt-in and after opt-out, projects are permitted to seek issuance of credits from other standards. However, projects are not permitted to apply for the issuance of credits under different standards if this results in extending the overall crediting period of the project beyond the GS VER rules.
Co-benefit Objectives and Requirements
Both GS CER and GS VER projects must show clear sustainable development co-benefits, including environmental, social and economic benefits, as well as technological sustainability. The GS provides a sustainability matrix to help project developers develop their sustainability criteria. The GS requires that critical and sensitive sustainable development indicators as well as mitigation or compensation measures are monitored over the entire crediting period, and that information on the status of the indicators is included in the verification reports.
Both the project developer and the stakeholders consulted assign scores of - (a major negative impact) 0 (neutral impact) or + (a major positive impact) to a broad set of predefined indicators covering all aspects of sustainable development. Scoring depends on the specific circumstances. The framework chosen for the scoring process is tailored to each project and must be clearly explained and justified.
Environmental Impact Assessment (EIA) requirements are the same for VER and CER for both small- and large-scale projects. For micro-scale voluntary offset projects, an EIA is required if the relevant local or national law prescribes an EIA or if stakeholders have concerns about environmental impacts for which no mitigation measures can be identified – in such a case, the project must be treated as a small- or large-scale project. If no EIA is required by the legislation, the project developer still has to provide a statement confirming that the project complies with local environmental regulation.
The GS requires two public consultation rounds for all projects. VER projects require a letter to the Designated National Authority (DNA) or, if no DNA exists, another relevant authority to communicate the development of the project as a GS voluntary offset project.
During the 60-day period prior to finalizing the validation process, stakeholders must have the opportunity to make comments on the GS Project Design Documents (PDDs). In contrast to GS CDM projects, no international stakeholder consultation is required for GS VER projects. However, all Gold Standard projects undergo two rounds of local stakeholder consultations, national GS NGO supporters and international GS NGO supporters with offices in the host country must be involved in stakeholder consultations in all cases.
Additionality and Quantification Procedures
Additionality Requirements
The additionality requirements for both GS CERs and GS VERs are project-based and bottom-up. The GS requires the application of the latest UNFCCC additionality tool. In addition, previous announcement checks are required for both CER and VER projects.
Quantification Protocols
GS CDM projects can only use CDM EB-approved methodologies, which are bottom-up and project-based. GS VER projects can choose to use the baseline methodologies approved by the Methodology Panel of the CDM EB, the CDM Small Scale Working Group, or the United Nations Development Program Millennium Development Goals’ Carbon Facility. If no suitable methodology exists, GS VER projects can propose a new protocol to be approved by the GS-TAC at a fixed cost paid by the project developer. The fees are USD 2,500 for small- and large-scale projects and USD 1,000 for micro-scale projects. Methodologies for the deployment of a fleet of small-scale biodigesters, as well as for energy efficient cooking stoves have so far been approved and implemented and others are under review.
Project Approval Process
Validation and Registration
Projects are approved by the GS-TAC after it has reviewed and agreed all the required documentation. CER projects must additionally go through the CDM approval process. In general, the validation requirements for GS VER and GS CER projects are identical, but for VERs some requirements of the CDM have been simplified or removed. These include:
• Simplified guidelines for micro-scale projects
• Broader eligibility of host countries
• Less stringent rules on the use of official development assistance (ODA)
• Broader scope of eligible baseline methodologies
• No need for formal host country approval.
All GS projects must be validated by a DOE. The GS provides support to DOEs in the form of a validation manual for each VER and CDM stream. The key validation requirements for GS projects are:
• A stakeholder consultation report
• A completed PDD with the baseline and monitoring methodology and the sustainable development matrix
• A Validation Report
• Acceptance of the GS Terms and Conditions.
GS CDM projects use CDM PDD and validation forms, with the additional GS-specific information on project type, stakeholder consultation and contribution to sustainable development provided as an annex. The GS provides templates and instructions for GS VER project verification documents.
Validation and verification procedures are often unreasonably costly for micro-scale projects. Hence, micro-scale projects pay a standard one-time fee to a validation fund (USD 5,000) and an annual fee to a verification fund (USD 2,500). The GS TAC uses a “targeted random” selection method to select projects for validation and verification. Actual validations and verifications performed by DOEs will be paid for via the GS validation and verification funds. Projects not selected for DOE validation and verification in this approach are validated and verified by the GS in-house, but may be required to undergo DOE verification in later years.
Monitoring, Verification and Certification
GS-specific verification is conducted by DOEs. It includes emission reduction data and the monitoring of sustainable development indicators. Monitoring reports have to be submitted yearly. Project developers monitor projects according to the monitoring plans provided in the PDD. Monitoring reports are submitted to a third-party auditor (a DOE). Except for micro-scale and small-scale projects, a DOE cannot validate and verify the same project..
The GS TAC, the GS secretariat, and GS NGO supporters can request clarifications or corrective actions within a two-week period after submission of the verification report to the GS, before credit issuance of GS VERs or certification of GS CERs is initiated.
The verification report must demonstrate compliance with GS reporting criteria (especially Sustainable Development Indicators (SDIs). The SDIs must be monitored if they are:
• crucial for the overall positive impact on sustainable development
• particularly sensitive to changes
• generating stakeholder concerns.
Registries and Fees
The GS Foundation launched an independent Gold Standards registry operated by APX Inc. in mid-March 2008. The registry tracks ownership transfers of GS VERs in the voluntary carbon market. It is a proprietary registry and the GS Foundation is the only entity to issue credits. CERs are registered in the CDM registry and will be tracked in the GS registry as well. The GS registry includes the GS Project Database and manages the transfer of documents during the certification process. The public has access to a number of reports and to project information.
The GS does not engage in project or credit transactions. The GS registry makes it possible to track the number of retired GS VERs and to review the number of GS VERs issued. However, buyers and intermediaries between the point of issuance and the point of retirement remain unknown to the GS. The ownership of retired credits can be made public if desired.
The Gold Standard Foundation has to date been funded through sponsorships, grants and fees. From August 1, 2009, new projects applying for the Gold Standard will no longer be charged a fee per credit certified, but instead will deliver a percentage of actual credits to the Gold Standard Foundation -- 1.5% of CERs and 2% of VERs. This fee structure mimics the financing mechanism used by the UNFCCC for the adaptation fund. The offsets are purchased by Sindicatum Carbon Capital, an offset project developer and the proceeds are delivered to the Gold Standard Foundation. The Gold Standard Foundation retains its independence and status as a non-profit NGO.
Projects that are already operational may apply for retroactive registration to the GS. For this, they need to go through a “(retroactive registration) pre-feasibility assessment” for which the GS charges a fee of USD 0.01 per VER for an amount of VERs equivalent to the expected annual volume of reductions (with a minimum fee of USD 250).
Selected Issues
The GS is generally accepted as a high quality standard, in particular with respect to co-benefits. It is the only voluntary standard that has all three of the following elements: 1) clearly defined additionality rules, 2) requires third-party auditing and 3) has a project approval body similar to the CDM EB.
Co- Benefits
The supplemental criteria of the GS are all validated by a DOE. According to project developers, this often makes the validation process more intensive. In their experience, DOEs take this additional GS validation seriously and ask tough questions about the project’s background data before filling in the GS SD matrix.
The CDM does not have a well defined process for involving stakeholders (Kollmuss et al., 2007). The GS has improved on this process by developing clear and detailed definitions of the stakeholder consultation process. However, the project types eligible for the GS generally do not face serious concerns from stakeholders. It is much more important to improve stakeholder consultation over other CDM projects, such as large hydro-projects.
Additionality
Similar to the stakeholder process mentioned above, the UN regulations on additionality for small-scale projects are not very well defined. The GS addresses this issue by requiring that the additionality tool is also applied to small-scale projects and providing further guidance.
Complex Documentation
The GS sets more demanding requirements and has more complex documentation. This makes validation and verification more stringent, and therefore at times more time-consuming and expensive. Some project developers might decide that the higher income from GS CERs and VERs (does not justify the extra work.
The new GS version 2 streamlines much of the GS documentation. It is now easier for potential project developers to access the required information.
Limitation of Project Categories
The GS only certifies offset reductions from renewable energy and end-use energy efficiency projects. This is potentially limiting, since these energy sectors are the most likely to be covered by mandatory reduction targets. If the United States, for example, were to implement a cap and trade program covering the electricity generation sector, generating US domestic offsets from these types of projects would no longer be possible, although the GS could potentially be recognized and grandfathered into a US compliance scheme. The GS is in the initial stages of developing a strategic plan for remaining active under a US program, as demonstrated by the recent launch of its US office in Boston, Massachusetts.
In addition, given the large contribution that deforestation makes to climate change, it would seem important to add bio-sequestration projects, especially since the GS, with its focus on high-quality offsets with secondary benefits, could play an important role in ensuring quality in this sector. The NGO WWF has begun preliminary research into high quality sequestration offset projects as part of WWF’s Forest Carbon Initiative. Given the Gold Standard’s historical collaboration with WWF, it is likely that they would seriously consider positive recommendations on forestry from WWF or other credible NGOs. The Gold Standard is also soliciting funding to do its own research on conservative methods for recognizing emission reductions through forestry related projects.
References
Gold Standard (2007). The Gold Standard Brochure.
Gold Standard (n.d.). Objectives.