[PDF] Operationalising an EU carbon farming initiative





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Operationalising an EU carbon

farming initiative

Annexes case-studies

The information and views set out in this study are those of the authors and do not necessarily reflect the official opinion of the Commission. The Commission does not guarantee the accuracy of the data included in this study. Neither the Commission nor any person acting on the CommissionÕs behalf may be held responsible for the use which may be made of the information contained therein.

202 3 This report should be cited as:

COWI, Ecologic Institute & IEEP (2021) Annexes to Technical Guidance Handbook - setting up and imple menting result-based c arbon farmi ng mechanisms in t he EU. Report to the Eur opean Commi ssion, D G Climate Action on Contrac t No.

CLIMA/C.3/ETU/2018/007. COWI, Ko

ngens Lyngby.

5 Annex I. Peatland restoration and rewetting

Annex II. Agroforestry

Annex III

. Maintaining and enhancing soil organic carbon (SOC) on mineral soils

Annex IV

. Livestock farm carbon audit

Annex V

. Managing soil organic carbon on grassla nds

7 Abbreviations

ACoGS Avoided Conversion of Grasslands and Shrublands

AECM Agri-Environment Climate Measure

AFOLU

Agriculture, Forestry and Other Land Use

AGC Avoided grassland conversion

API Application programming interfaces

AU ERF

Australian Emission Reduction Fund

BLKB

Basellandschaftliche Kantonalbank

C Carbon

CAP Common Agricultural Policy

CAP2ER

Calcul Autom atisŽ des Performances Envi ronnementales en Elevage de Ruminants

CAR Climate Action Reserve

CAR

B California Air Resources Board

CCOP CaliforniaÕs Carbon Offset Program

CDM Clean Development Mechanism

CF Carbon Farming

CH4

Methane

CRF

Common Reporting Format

DAC Development Assistance Committee

DEFs Default Emission Factors

DKW Wetland Restoration RDP measure in Denmark

EAFRD European Agricultural Fund for Rural Development EAGF

European Agricultural Guarantee Fund

EC European Commission

EEA European Environment Agency

EES Ecosystems and Ecosystem Services

EF

Emission Factor

EIA Environmental Impact Assessment

EIP -AGRI Agricultural European Innovation Partnership

ERF Emission Reduction Fund

ESPG Environmentally Sensitive Permanent Grassland

ETS Emissions Trading Scheme

EU European Union

FAO Food and Agriculture Organisation

FAO-WRB FAO World Reference Base for Soil Resources

FaST Farm Sustainability Tool

FiBL

Research Institute of Organic Agriculture

FLBC GAEC Good Agricultural and Environmental Conditions

GDNL The Dutch Green Deal

GEST Greenhouse Gas Emissions Site Type

GHG

Greenhouse Gas

GHGI Greenhouse Gas Inventory

GIS

Geographic Information System

HNV High Nature Value

IACS Integrated Administration and Control System (CAP data system)

IPCC Intergovernmental Panel on Climate Change

JI

Joint Implementation

JRC Joint Research Centre

LBC Label Bas Carbone

9 LENs Landscape Enterprise Networks

LPIS Land Parcel Identification System

LUCAS Land Use/Cover Area Frame Survey

LULUCF Land Use, Land Use Change and Forestry

MF MoorFutures

MM

Maxmoor

MRV Monitoring, Reporting and Verification

MS Member State

MtCO2 eq Metric tonnes of carbon dioxide equivalent

N Nitrogen

N2O Nitrous Oxide

NGOs Non-Governmental Organisations

NIR

National Inventory Report

OECD Organisation for Economic Cooperation and Development PC

Peatland Code

PCF Portuguese Carbon Fund

PFSI Permanent Forest Sink Initiative

PIU Pending Issuance Unit

PRP

Polish RePeat Project

RBCF Result-based Carbon Farming

RBP Result-Based Payment

RDP Rural Development Programme

REDD+ Reducing Emissions from Deforestation and Forest Degradation. Mechanism developed by Parties to the UNFCCC to r educe deforestation and forest degradation in developing countries.

RPP Restoration Projects in Poland

RS Remote sensing

SDGs UN Sustainable Development Goals

SOC

Soil Organic Carbon

UNFCCC

United Nations Framework Convention for Climate Change

VCS Verified Carbon Standard

VCSA VCS Association

VCU Verified Carbon Unit

Verra (see VCS)

WFD Water Framework Directive

WSL Swiss Federal Institute for Forest, Snow and Landscape research

WTO World Trade Organisation

WWF World Wildlife Fund

11 Glossary

Action-based carbon farming: a scheme where a farmer or landowner receives a payment for implement ing defined management actions, independently of the resulting impact of those actions. Agroforestry: the prac tice of deliberately i ntegrating woody vege tation (trees or shrubs) with crop and/or livestock production systems to benefit from the resulting ecological and economic interaction Farm carbon audit tool (audit tool): a computer model that calculates a farmÕs GHG emissions and/or carbon sequestration based on input data that summarise the farmÕs mana gement others. T hey can also calcula te other outputs, including sustainability indicators such as nutrient runoff or emissions intensity. Hybrid approa ch/model: a scheme that us es a combination of r esult-based and action-based payments on the same parcel of land. Peatland: land that contains peat in the sense of a histic horizon (e.g. mires, moors, meadows). A histic horizon is a soil layer near the surface which, when not subject to drainage, consists of p oorly a erated organic material which is wa ter sa turated (o r would be in the absence of drainage) for 30 consecutive days or more in most years. Result-based carbon farming: a scheme where a farmer or landowner receives a payment for reducing net GHG fluxes from their land, whether that is by reducing their GHG emissions or by seques ter ing and storing carbon. A re sult-based appr oach requires a direct and explicit link between the results delivered (e.g. GHG emissions avoided or carbon sequestered) and the payments that the land manager receives. It differs from the mo re familiar action-based schemes, where the farm er is paid for complying with very specific farming pr actices or technologies, which have been selected by the managing authority for the assumed climate mitigation benefits.

Annex I

PEATLAND RESTORATION AND

REWETTING

A CARBON FARMING CASE STUDY

Peatland Restoration and Rewetting a carbon farming case study

January 2021 2

Peatland Restoration and Rewetting a carbon farming case study

January 2021 3 Table of Contents

Table of Contents ...........................................................................................3

Summary and recommendations .......................................................................5

1.Introduction ........................................................................................ 13

2.Exploring options and approaches ........................................................... 15

1.Feasibility, support and enabling development .......................................... 31

2.Setting scheme objectives and demonstrating additionality ......................... 37

3.Choosing results indicators and MRV ....................................................... 43

4.Paying for results ................................................................................. 55

5.Delivery, scaling up adoption and evaluation............................................. 66

6.References ......................................................................................... 74

7.Summary of peatland schemes/initiatives included in this case study ............ 78

8.Interviews and reviews ......................................................................... 80

9.Peatland workshop 23 March 2020 (via WebEx) ........................................ 82

Authors: Ager Strange Olesen (lead) and Sarah Pyndt Andersen, COWI

Contact: asos@cowi.com

Peatland Restoration and Rewetting a carbon farming case study

January 2021 4

Peatland Restoration and Rewetting a carbon farming case study

January 2021 5 Summary and recommendations

Context: As th e world largest natural terrestrial carbon store, peatlands are key for combating climate change. Intact peatla nd plays an i mporta nt role for the carbon cycle, c limate mitigatio n and provision of ecosystems services due to their role as a permanent water-locked carbon stock and ong oing sink. However, years of unstainable land management practices have resulted in peatland degradation limiting their ability to p rovide effective climate r egulation servic es. Currently, degraded ω/yrs, a nd are r esponsib le for almost 5% of global total

ω. From peat land drainage alone ω

are emitted in the EU per year1. Restoration, rewetting and conservation of peatlands are promising carbo n farming options due to the high-level potential climate benefits per hectare of peatlands, while ensuring the provisioning of other ecosystem services2. However, the use of re sult-based appro aches and schemes for sup porting p eatland restoration and rewetti ng are c urrently limited and wider a doption and upscaling are needed. aim and scope: Results-based carbon farming schemes offer a promising way to incentive e.g. governments, authorities and farmers to develop and implement peatland restorat ion and rewetting projec ts as they (1) pro vide a new/addit iona l source of finance to high upfront restoration costs, and (2) provide an opportunity to valorise GHG emissions from large, geographically confined emission sources based on current carbon credit prices. The ca se study focuses on avoid emissions from peatlands throug h peatland restoration and rewetti ng. Emissions from grazing livestock on dr ained peatlands is within scope to the extent that this as an eligible ac tivity for crediting.

1Source: Grifswald Mire Centre (2019). https://www.greifswaldmoor.de/files/dokumente/Infopapiere_Briefings/202003_CAP%

2Source: Joosten et al., (2016).

Peatland Restoration and Rewetting a carbon farming case study January 2021 6 Recommended peatland scheme summary Objective: Incentivise restoration of pe atlands through mobilis ation of carbon finance payments for the avoided emissions. Scale/coverage: C onsidering foreseen CAP support, a peatland carbon farmin g scheme is on ly viable where full restoration of pe atlands on alr eady degraded marginal agricult ural land is po ssible. Minor c hanges to water table and partial rewetting without restoration can be considered but will most likely not yield sufficient credits for a competitive return o n land and business c ase. The MS specific implementation of the restri ctions f or ploughing and drainage of peatl ands ( under GAEC 2) is decisive for the business case of many peatland projects. Climate actions: For a start, a scheme should target avoided emissions of CH4 and ω resulting from rest oration of water levels and vegeta tion. While undisturbed peatlands constitute a continuo us carbon sink, it is considered non-anthropogenic by most standards and hence not an eligible activity. The build of the carbon stock in the period imme diately after restoratio n takes 20-50 years and is initially hardly measurable. U ntil data an d measurem ent syst ems can detect this build up, t he carbon remova l part of peatl and restoration is not recommended as basi s for crediting. Design principles: There are dif ferent go-to-market models that can be a pplied, depending on the nature of the potential link to what market or type of buyers and the role and responsibilities that farmers, the scheme administrator and governments are willing and able to manage. If a scheme is created to provide offsets for national compliance w ithin the non-ETS se ctor, a more ela bora te system with d ecentralised responsibilities, a central registry and a more market-linked role of farmers is more suitable. However, for voluntary niche CSR based offsetting, a much smaller set up can be operated and driven by a group of researchers, leaving limited administrative and pro ject development work on farmers. However, with the rising a ttention o f governments and the EU on th e potential for peatl and rest oration as a GHG mitigation measure, the framework conditions that shaped the existing schemes may change, and new designs must be developed. MRV: I t is no t possib le or necessary to condu ct on-site, conti nuous monitoring producing primary data as emission factor s are well correlated to water table, land use and vegetation. Therefore, most schemes must rely on monitoring of indicators, while relyi ng on baseline data from trials and su rveys in similar climatic settings. Reporting and monitoring can be conducted at project level or by the scheme to save costs, however verification should always be entrusted to third verifiers approved by the scheme. All MRV data including site specific emission factors and ac tivity data should be made p ublic and a vailable to scrutiny through e.g. scientific publications, as this will add an additional level of trust and review. Rewards: Peatland rewett ing and restoration deliver m any benefi ts in addition to GHG mitigation. However, GHG benefits are recommended for crediting. Many buyers will pay a price premium for the higher quality and additional co-benefits of peatland credits, in particular if these originate from a site in an area of commercial relevance to the buyer. This is so even if the co-benefits are not quantified and verified. Any new pea tland carbon farmin g scheme would be re commen ded to focus on GH G benefits until ex perience and methodologies from existing scheme on qua ntific ation Peatland Restoration and Rewetting a carbon farming case study January 2021 7 and monetisation of co-benefits can be adopted. Funding and gov ernance: In t he pilot phase and c onsidering c urrent c redit price levels, any new scheme must rely on other complementary sources of funding than carbon market finance from sale of offsets or credits. Cash flow will be an issue for most land owners partic ipating in a peatland carbon farmin g scheme, s o upfront funding is cr ucial. Switching to ex-ante cred iting to raise climate finance upfront cannot b e reco mmended as most comp liance schemes does not allow this practice. However, some hyb rid mo dels using car bon credits as instalments on zero interest loans are being explored and may prove feasible. Overarching considerati ons: Provided that a g iven MS or r egion would n aturally host several extensive peatlands, the feasibility of a peatland carbon farming scheme should be considered upfront and focus on a few key issues such as profitability of marginal agricultural land on drained peat soils, availability of country specific data on peatlands (activity data and emission f actors) and int erest of farmers and pri vate investors. Where these elements are conducive and information available, a feasibility assessment could be initiated. Peatland Restoration and Rewetting a carbon farming case study January 2021 8 Recommendations regarding scheme design Scope and coverage. The main obj ectives of the peatlan d schemes should be rewetting and rest oration of d rained peatlands in order to s ecure climate mitiga tion objectives. The re wetting and restorat ion of pe atlands comes with numerous co- benefits linked to ecosystem servi ces including nature, biodive rsity and water protection. H owever, the quantification and monetization of th ese benefits is not a pre-requisite for a successful scheme. It is recommended to target a peatland carbon farming scheme at marginal and drained agricultural land on peat soils and target full rewetting and restoration or approp riate paludiculture as ma in eligible activities. For piloting or to reduce implementation time for frontrunner projects, the scheme should also targ et potential restorati on projects where few landowners are in volved a nd where partial or full public ownership is existing or possible. Scheme feasibility. Any potential peatland project must first identify the presence of a peatland layer currently subject to drainage but preferably with a thickness of more than 50 cm. Without an exposed peat layer or a very shallow peat layer a project or scheme is not feasible. In order to identify/screen for suitable sites the land use and land profitability must be considered following a three-pronged approach: To i dentify soil types, soil m aps or lan dscape mo dels must be u sed. Prese nce of histic soils is a prerequ isite, but presence of current drainage (pipes or ditches) is also needed. To identify land use, maps, agricultural statistics and/or satellite and drone imagery can hel p, but it requires Geographic Information System (GIS)/Remote Sensin g (RS) expertise for d ata prep aration an d interpretation. Relevant authorities should be involved early on. To screen for sites with a potential business case for restoration or rewetting, land profitability must be estimated (including current CAP payment entitlements). It will take simp le economic modelling to determine the total carbon financing that would ensure sufficient funding of a restoration project. Specifically, density and amount of avoided emissions and various pricing scenarios can then help determine the extent of possible sites with a positive business case. Before setting out for mapping and assessment of vast areas it should be noted that for many non-boreal geographies, peatlands are few and far between. Experts will be able to d etermi ne peatland from landscape analysis and simple rainfall and groundwater data. Applying natio nally relevant e mission factors (EF) will then allow for ini tial estimates o f GHG potential from carb on farming. It is r ecomme nded to analyse 3-4 larger peatland restoration areas, which are commercially viable for a full restoration. The analysis sh ould include, as part of a feas ibility study, economic considerations including pote ntial pa thways, areas, and price level s, as for the

Peatland Code (PC).

At a later stage, within the governance and operation of a scheme, individual project level development of restoration and rewettin g will require detai led high-resolution mapping and assessment of parameters such as soil type, vegetation, water regime, including rainfall and groundwater dy namics. This is speci alist work requ iring researchers or technicians. To s upport the ear ly phase of sc heme design, i nvestors and reg ional or national governments should consid er setting up a dedicated carbon fund that coul d provide guarantees for projects that receive advance payments and provide inputs to setting up a market platform. The carbon fund can be designed in several ways as explained Peatland Restoration and Rewetting a carbon farming case study

January 2021 9 in more d etail under markets considerations later in t his gui dance. A public-private-

partnership carbon fund may serve this purpose and guarantee the first three years of credits at a fixed price, with permission to sell on/transfer credits. Additionality and leakage considerations. While additionality is crucial to maintain the int egrity of a scheme, more ri gorous rul es might lead to lower willingness from project owners to participate. In many cases, the additionality of a restoration project can be determ ined by an as sessment of its profit abilit y in the abs ence of c limate finance but with the access to CAP pillar 1 payments. Leakage cannot be standardised other than through a minimum percentage of leakage calculated as a deduction of the impact quantification as is used in some standards, and it is necessary to account for leakage on a project-specific basis (von Unger et al., 2019). As co ncerns permanence risk, it is recom mended to apply ensure use of long-term land contracts, use lan d deeds ac tively and oth er legal measu res. Th is shoul d be combined with man datory buffer accoun ts to guarantee is sued cred its. Existing peatland schemes set a low (10-30%) buffer account. Governance structure: The sc heme should be governed by a secretariat and supported by a technical advisory committee and a st akeholder or steering group inviting in farme rs, in vestors, authorities and interest organisations. The technical advisory committee of experts and researchers should actively guide and support the e.g. development of rules, practices a nd standards for b aselines , additionality, risk buffers, MRV and insurance pricing and sale of credits. Result indica tors. Project level result indic ators serves as a bas is for est ablishing result-based payments and should ideally be defined early on. Indicators might entail GHG emissions, water table height and/or abundance of vegetation types. If a scheme is de veloped in the conte xt of a Rural De velopment Program or supporting CAP implementation, scheme level indic ators will be needed to be de vised in close coordination with relevant au thorities. It is recommended to further explore possible sustainability indicators at project level to in clude price pre miums for off sets that entail broader socio-economic or environmental co-benefits.

Co-benefits and sustainability indicators

If possible, one, more or all co-benefits should be quantified and monetised to allow for charging a price premium. There are two options for monetising co-benefits, and both can be applied: Bundling is gr ouping multiple ecosystem servi ces (ESS) together in on e comple te package to be sold as a single credit. This option might be useful if only one ESS can be commodified. However , additional EES c ould all ow for charg ing high er premium prices. Layering refers to a scheme where payments a re made for several, distinct EES which are t hen so ld separat ely. Layering in only possible w here EES can be commodified individually and where a market deman d ex ists. Laye ring should however be carefully quantified to avoid potential double-counting. Monitoring, Reporting and Verification (MRV). It is not feasible or cost-efficient to measure data on-site in th e restoration area in re al time fo r all indi cators continuously, so schemes would have to rely partially on modelled data, spot checks and ref erence data. These data s hould be obtain ed from inventory operation, local researchers and other projects. Peatland Restoration and Rewetting a carbon farming case study

January 2021 10 A core project-level indicator will concern avoided emissions and sequestered carbon;

therefore, emission and removal fac tors must be e stabli shed early on. Defining so called default factors will be a key responsibility of the technical advisory committee (covered under governance) . This process should be op en and inc lusive and ensure the ass essment and evaluation of data and factors used nationally for peatlands (or used internationally in geograp hies with similar climate and landscape). Emission and removal factors should be determined for each land category and for each peatland state within each land category. Emission factors could be determi ned by u sing proxies or reference dat a and supplemented by direct me asurem ents in the pr oject areas. It is suggested th at best practice would be to publish the research behind proposed emission factors as a s cientific paper in a peer revi ewed journal, in o rder to have scrut iny an d transparency. For early, pre-EF as sessments, scheme owners can as sume an annual peat decomposition rate of 1 cm. It is recommended to consult the National Inventory Report (NIR) and the submitted reporting tables (CRF tables submitted to the UNFCCC) to identify approaches, maps and data used, classification of soils and use of emission factors. Also, data should be shared for modelling purposes e.g. at EU level. Lastly, it is recommended to strive for consistency in data approaches, classifications applied, and in annual work cycles between nationa l inventory makers an d scheme owners. There are currentl y no rules or guidelines in plac e within the EU or internationally that supports establishing exchange of data, h owever by 2023 t he European Commission will release a standard for Carbon Removals which may address some of these issues. In general, scheme owners should observe policy developments in the EU and abroad on this matter, and encourage domestic inventory compilers to proactively address the issue. In order to quantify results, the monitoring system should be constructed to match the selection of result indic ators and the metric for est imating and reporting results. Matching monitori ng systems and result indicators is an exercis e that requires technical expertise, but it is key to a functioning scheme. Monitoring indicators should be dev eloped for monitoring peatland rewet ting and restoration projects. Th e Greenhouse Gas Emissions Site Type (GEST) method is the most deve loped indirect technique (by the researc hers behind MoorFutures but also applied with modification by other peatland initiatives and schemes) to quantify GHG emissions. Regular evalua tion, reviewing and improvement of the scheme to as sess progress towards objectives and improvement of the peatland scheme are recommended. This scheme evaluation, which i s quite sepa rate f rom the scheme could focus on im pacts, effectiveness, practical f easibility, efficiency, equity an d sustainability of a peatland scheme, or adapted to other carbon farming schemes. Reward. It is recommended to quantify and monetise ω4 emissions as t he basis for c alculati ng the reward to the lan downer. I n addition, it ca n be considered to map and document non-carbon benefits in or der to add mark-up on price compared to European emissions allowances or voluntary markets. Peatland Restoration and Rewetting a carbon farming case study

January 2021 11 The un it price w ill usually be hi gher than mark et prices for allowances and exi sting

initiatives that have either applied cost-based pricing or relied on project specific price negotiation between project owner, developer and buyer (which allows for factoring in a price premium for non-carbon co-benefits). If there is little compliance demand and no transparent and free markets setting prices, it is recommended to use one of these two approaches. Pricing of volun tary market units (V erra, REDD+) may be used as inspiration or benchmar k, b ecause some buye rs will compare European pea tland restoration credits to credits available from these schemes. Markets and payments considerations. Taking accou nt of questions such as who owns, issue s, markets, prices, trans fers and uses the ge nerated c redits constitut es market desi gn and sho uld be careful ly ass essed as peatland cr edit markets are still few and nascent, and the cre dits are not yet ac cepted at compliance mark ets regulated under UNFCC C rules or EU legislation. The re commended approach to market design is ou tlined in the scheme platform model (m odel 1, see case study) which entails projects that are developed by and later run by the scheme owners on behalf of the landowners. As scheme owners in this model are actively involved in all decision proc esses alongside the deployment of accred ited dev elopers where necessary, the model allows f or the simpl est d ecision-making process as wel l as providing the h ighest l evel of flexibil ity f or expansion. The model is par ticularly well suited t o small scale and early testing in a situation with limited upfront funding and restricted access to carbon markets. In more regulated environments, where peatland restoration can already contribute to G HG targe t compliance, the other present ed models are better suited. As pa rt of mark et des ign, buyer restr ictions s hould also be considered in vi ew of potential reputational, i ntegrity or price setting implications. Restrictions could be on: An important market restriction is recommended for on-sale/trading of units, unless a national and linked registry exists. Restrictions may al so target certain types of buyers (per sector, ind ustry, geography). Conditional access to c redits shoul d be based on merit. Conditional ities could, for example, prevent any company with unabated emissions from owned, leased or in- supply chain wetlands from acquiring units. Considering the above, it is recommended to start with targeting potential buyers with local prese nce or commercial intere st in peatlands or rur al landscapes, e.g. global/foreign companies with branch offices/clients in the area, or fo od, outdoor equipment, timber or tourist businesses. The common and well-established practice of carbon markets is to tie the payment to the iss uance and subsequent tran sfer of the credit from the proj ect owner to th e buyer. However, it i s reco mmended to consider both ex-ante and ex-post payments/crediting in the design phase but only to apply ex-ante if tied to low interest upfront loans w ithout instalmen ts where credits constitute payback. Also, this approach may exclude credits from na tional or international voluntary or compliance markets. To link markets and compliance schemes, it is necessary to prepare and test ex-post crediting. Farmer eng agement, t raining and advice. Farmers (and la ndowners) should be engaged m ore to ensure increase buy-in and take-up. Key elements include creating economic i ncentives for farmers/landowners by ensuring that peatland rewetting and restoration is more profitable than the status quo and could be presented as a newquotesdbs_dbs24.pdfusesText_30
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