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By Scott Sager

One of the most interesting features about the market for carbon credits is its origins as a completely voluntary system. While a government-mandated, cap-and-trade system is all-but-certain to be in place in the next few years, the current market has developed absent any government oversight. This is in stark contrast to other markets for other ecosystem services such as wetlands mitigation, threatened or endangered species’ habitat, and water quality where government regulation has not only created the demand, but also has total programmatic authority.

Variety of Voluntary Certification Systems

While free-market advocates applaud the carbon market for just this reason, historically this lack of regulatory oversight allowed for significant fraud in the market. In part to counter this, a variety of trading platforms and/or certification systems have developed, including the Chicago Climate Exchange, the Voluntary Carbon Standard, the Climate Action Reserve, and the American Carbon Registry, to name a few. As part of efforts to address concerns about fraud and provide validity to their system, these entities require a detailed audit of sequestration (offset) projects by independent (third-party) firms, commonly referred to as a verification.

Verifications are performed by third-parties certified by the trading platform/certification system. Requirements for certification vary by entity, but typically an approved verifier must have previous auditing experience, as well as significant expertise in the project sector. “Sector” refers to the broad category in which the project operates, such as forestry, agricultural soils, agricultural methane destruction, and similar.

Definition of Carbon Sequestration Verification

Verifications are a periodic review of a project to confirm compliance with the protocol of the trading platform/certification standard, and to identify any changes to the project, or the project’s surrounding circumstances, that change the nature or amount of the sequestration. Typically projects are intensively reviewed at inception, with both field inspections and detailed document review performed. Following verifications may occur as frequently as annually, and are typically “desktop” – a review of aerial photos, receipts and similar paperwork documenting recent activities, and supporting documentation.

Basic Elements of Carbon Sequestration Verification

Though the brevity of this article will not permit us to outline all the elements and timeframes associated with a verification, there are elements which are common to all verifications that provide a frame of reference. The basic verification process includes:

  • Definition of the verification scope, criteria, level of assurance, objective and materiality threshold for the specific project
  • Records/document request from project developer
  • Review of project documentation
  • Preparation of a verification plan and associated sampling plan
  • Conducting the field and desktop review
  • Addressing Non-conformities
  • Preparation of a verification statement (opinion) and report
  • GHG Program and project developer review of verification statement and report

As stated previously, the role of the verifier was created to provide a level of certainty under the current lack of governmental oversight. However, the federal government is currently reviewing cap and trade legislation which would provide a regulatory structure and oversight for carbon projects and markets. Under this legislation it is not yet clear if the role of independent 3rd party verifier would still exist, or be undertaken by a governmental agency. With that stated, it is likely that verification will still exist in one form or another under federal regulation.