I NFORMAL WORKSHOP ON N ON - PERMANENCE 1 I SSUES FOR C ONSIDERATION IN D ECISIONS ON A LTERNATIVE A PPROACHES TO A DDRESSING N ON - PERMANENCE IN LULUCF A CTIVITIES

I NFORMAL WORKSHOP ON N ON - PERMANENCE 2 Assessing Alternative Approaches Combination of Approaches Risk assessment - are measures needed to guard against non- permanence? Mechanisms for Replacement - Buffer - Commercial Insurance - Government Guarantee - Performance Bond Provide exception to low risk activities Do credits expire or are they assumed to be permanent? Measures Needed Temporary Credits Permanent Expire Measures Not Needed Liability: Who takes on the liability ? (Buyer v. Seller) Are full credits awarded, or are they issued incrementally? Tonne Year Crediting Full Incremental Regulatory, policy, and financial considerations needed to implement

I NFORMAL WORKSHOP ON N ON - PERMANENCE 3 Is the risk screening required? – Should screening be mandatory for assessing types of risks and their potential, if yes, what aspects need to be covered in screening – Whether activities with low risk should be notified as categorical exceptions and exempted from permanence requirements (e.g. buffer, insurance etc.), if yes, which categories of activities – Whether activities with high risk should be excluded from eligible activities (e.g. activities of intentional reversal), if yes, which categories of activities Issue – Need for Risk Screening

I NFORMAL WORKSHOP ON N ON - PERMANENCE 4 Liability EntityLiabilityExamples Producer/sellerProducer is liable to replace reversed credits New Zealand ETS BuyerLiability moves to ER holder – similar to default risk for a bond holder Expired temporary credits under CDM Customized contractsContracts reflecting liability are negotiated between producer and buyer Practice in over the counter transactions SystemProgram manages liability on behalf of sellers and buyers, and mechanisms are adopted to pool risks and to replace credits subsequent to reversal events Voluntary standards, e.g. VCS, ACR California AB32 for forest carbon credits Who is liable for reversals ? – Seller – Buyer – System a) During contract period, and b) Subsequent to contract period

I NFORMAL WORKSHOP ON N ON - PERMANENCE 5 How long is the permanent period? – Policy and permanence requirements – Permanence period in different standards currently is: 40 & 100 years Issue – Permanence Period

I NFORMAL WORKSHOP ON N ON - PERMANENCE 6 What types of reversal risks need to be covered? – Unintentional – Unintentional and intentional – Exclusion of certain intentional reversals Issue – Coverage of Reversal Risks

I NFORMAL WORKSHOP ON N ON - PERMANENCE 7 Does the scale of activities influence the choice of approaches? – Project – Program/sub-national – National Issue – Scale of Activities

I NFORMAL WORKSHOP ON N ON - PERMANENCE 8 How feasible are various approaches in real world setting? – Balance of credit accounts – Financial viability – Institutional feasibility – Policy choice and limitations Issue - Feasibility of Approaches or their Combinations

I NFORMAL WORKSHOP ON N ON - PERMANENCE 9 Whether the approaches analyzed are adequate? Is there a need for additional approaches? – If yes, which are these approaches Issue – Adequacy of Approaches

I NFORMAL WORKSHOP ON N ON - PERMANENCE 10 Do various approaches ensure environmental integrity? Issue – Environmental Integrity

I NFORMAL WORKSHOP ON N ON - PERMANENCE 11 Should implementing entities be allowed to choose from a menu of approaches? Issue – Choice of Approaches

I NFORMAL WORKSHOP ON N ON - PERMANENCE 12 Is there a need for a consistent policy for addressing risk of non-permanence across multiple land use activities? Issue – Consistent Policy Across Land Use Activities

I NFORMAL WORKSHOP ON N ON - PERMANENCE 13 How the discussion on non-permanence risk relates to broad LULUCF mitigation agenda? Issue – Risk of Non-permanence in context of LULUCF agenda

I NFORMAL WORKSHOP ON N ON - PERMANENCE 14 Risk Screening Liability Permanence period Coverage of risks Scale of activities Feasibility Adequacy of approaches Environmental Integrity Choice among approaches Consistency across land uses Relation to broad LULUCF agenda Summary of Issues

I NFORMAL WORKSHOP ON N ON - PERMANENCE 15 R AMA C HANDRA R EDDY E MAIL : R REDDY WORLDBANK. ORG F OR MORE INFORMATION ON THE B IO CA RBON F UND, PLEASE CONTACT : E LLYSAR B AROUDY E MAIL : E WORLDBANK. ORG WWW. CARBONFINANCE. ORG Thank you