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SRPP Publication l 25 July 2023
Overview
The Thailand Greenhouse Gas Management Organization (“TGO”) launched the Premium Thailand Voluntary Emission Reduction (“Premium T-VER”) on January 2023 to elevate Thailand’s commitments in achieving carbon neutrality by 2050 and to improve its carbon market. This article will explore the mechanisms of the Premium T-VER program and other voluntary carbon market mechanisms for incentivizing greenhouse gas (“GHG”) emission reduction projects particularly the Verified Carbon Standard Program (“VCS”). These programs aim to drive finance towards initiatives that reduce emissions, improve livelihood, and protect the environment.
Introduction to Premium T-VER
Premium T-VER is a specific category of the T-VER program which consists of project developers voluntarily participating in GHG emission reduction at a higher standard, adhering to the stricter guidelines prescribed in the Paris Agreement. Premium T-VER projects go beyond the basic requirements and are distinguished by their greater commitment to the environment.
The Premium T-VER program is designed to ensure the production of high-quality carbon credits consistent with international standards. In approving Premium T-VER projects, six fundamental principles are taken into account. These principles encompass the calculation, monitoring, and verification of GHG emission reductions. The six principles are (i) Relevance, which ensures a project’s alignment with emission reduction goals; (ii) Completeness, ensuring all relevant emissions sources are accounted for; (iii) Consistency, maintaining coherence in methodologies and data; (iv) Accuracy, guaranteeing precise calculations and measurements; (v) Transparency, providing openness and accessibility of information; and (vi) Conservativeness, promoting a cautious approach to ensure emissions reductions are not overestimated.
Premium T-VER projects are characterized by their capability to accurately measure real, permanent, and additional reductions in GHG emissions, and to ensure that there is no double counting. Furthermore, projects must contribute to sustainable development goals (“SDGs”); have safeguards in place to prevent any negative impacts and adhere to the principle of “do-no-net harm”. These characteristics are reflected in the conditions and criteria of Premium T-VER project registration, which is explored below.
The stringent requirements pave a way to meet market demands for high quality credits. Most voluntary carbon credits face issues of low reliability and trustworthiness; many lacking proper verification frameworks and transparency safeguards in their issuance of carbon credits leading to questionable carbon reduction results. Premium T-VER aims to foster and instill investor confidence in the quality of carbon credits issued by TGO and promotes the creation of projects which would steer Thailand towards a green economy and low carbon society.
Premium T-VER Registration
Premium T-VER serves as an advance tier within the T-VER program; only projects within a specific industry recognized by the TGO may be eligible to participate in the Premium T-VER program (please visit our previous article for more details on the eligible projects here). In addition, project developers must register their projects within the time prescribed by TGO. Most projects must apply for registration within 3 years from the date of project launch, and for certain types of projects, within 5 years from the date of project launch. However, projects need not be registered as a regular T-VER project before it is eligible for Premium T-VER registration.
Premium T-VER projects registration demands more rigorous conditions to be met compared to regular T-VER registration. Project developers are required to (i) submit a Modality of Communication (MoC) in the form prescribed by TGO in which project developers must warrant that its participation in Premium T-VER would not result in double counting of GHG emission reduction; if a project is found to engage in double counting, TGO may revoke project registration, (ii) hold a stakeholder consultation meeting and a transparent public consultation, (iii) ensure that the project reduces GHG emissions below business-as-usual levels, (iv) ensure that the project “do-no-net harm” and contributes to more than 2 SDGs in which a sustainable development and safeguards assessment report must be submitted and (v) submit other reports or documents as stipulated, such as a project design document and an independent third party validation report. In addition to the above, the project would also be subjected to another series of public comments and consultation administered by TGO. At minimum, project registration would take 2 months (notwithstanding public consultation periods or other factors) and the total duration may vary from project to project. As of June 2023, no project is registered with Premium T-VER as the program is within its infancy stage.
Premium T-VER carbon credit verification is similarly stringent, requiring the submission of multiple reports. Project developers of a certain type of project must also address non-permanence risk, the risk that carbon will be re-released into the atmosphere once the project ceases operation, as part of its carbon credit verification process. Once such project developer seeks carbon credit verification, it must deposit a certain amount of carbon credits to a pooled buffer account as security in case of credit loss by project impermanence. The pooled buffer accounts will hold non-tradable buffer credits which may only be withdrawn on application of the project developer under TGO’s rules. Additionally, a non-permanence risk report must also be submitted to TGO. Failure to submit the non-permanence risk report may result in the cancellation of the entire carbon credits in the pooled account and revocation of Premium T-VER registration. After verification, the carbon credits can then be transacted exclusively on TGO’s registry. Interested buyers may use the credits to offset their GHG emissions.
Premium T-VER Crediting Period
Premium T-VER stipulates a different crediting period to regular T-VER. Under the regular T-VER mechanism, most projects have a crediting period of 7 years, with the option for renewal for another cycle. However, certain projects, such as reforestation projects, have a crediting period of 10 years with unlimited renewal cycles. Whereas Premium T-VER projects have shorter crediting periods with more renewal cycles. Premium T-VER projects generally have a crediting period of 5 years, with the option for renewal twice. However, certain type of projects, such as reforestation projects, have a crediting period of 15 years, with the option for renewal twice. The changes aim to harmonize the duration of project crediting period with the Paris Agreement, ensuring that the projects continue to meet the high standards set for GHG reduction and sustainable development.
Other Mechanism – Verra’s VCS mechanism
TGO’s T-VER and Premium T-VER are not the only voluntary carbon crediting program available in Thailand, the VCS operated by Verra, a nonprofit organization established in the United States, also serves as an alternative carbon crediting program amongst others. Projects registered with Verra will be granted carbon credits called verified carbon units (“VCUs”) for each ton of carbon dioxide reduced by the project. Once verified, the VCUs can be traded on Verra’s platform, the Verra Registry. As of 2023, there are approximately 40 projects in Thailand registered under the Verra Registry.
For a project to undergo registration, it must successfully fulfill specific project requirements. These requirements include conducting a local stakeholder consultation, seeking public comment, evaluating the project's alignment with the SDGs, and assessing the project's adherence to safeguards. These steps are crucial in ensuring transparency, inclusivity, and the consideration of social and environmental aspects during the verification process.
Similar to T-VER projects, the duration of project crediting periods can either be 7 years with the option of renewal twice, allowing for a total period of up to 21 years, or a fixed period of 10 years which cannot be renewed. Certain projects, such afforestation projects, have a crediting period of at least 20 years and can be extended up to a maximum of 100 years. Renewal is possible up to 4 times, but the total duration of the project crediting period must not exceed 100 years.
On 25 August 2022, TGO and Verra entered into a Memorandum of Understanding on Technical cooperation in relation to Thailand Voluntary Emission Reduction Program. The MOU aims to assist TGO in aligning T-VER standards with internationally accepted practices. To achieve this, Verra will also share its experience and grant access to Verra Registry information and methodologies with TGO. In addition, the collaboration will aid the promotion of T-VER carbon credits to the international market to attract foreign buyers and to connect T-VER with other member states of the Paris Agreement.
Conclusion
Premium T-VER was introduced by TGO to align its carbon crediting program with international standards to ensure the issuance of high-quality carbon credits. Guidelines enshrined within the Paris Agreement were used to develop the requirements of Premium T-VER registration to ensure consistency with global practices. The new requirements demand projects to tackle issues previously unaddressed by regular T-VER such as SDGs contribution, public consultation, or safety concerns. Project developers in Thailand wishing to join a different carbon crediting program may choose alternatives offered by other organizations, one being Verra’s VCS, a global voluntary carbon crediting program. TGO has also collaborated with Verra by signing an MOU to improve T-VER and promote T-VER to the international community. Premium T-VER and TGO’s partnership with Verra is a part of Thailand’s ongoing efforts to contribute to sustainable growth and the environment at the international level.
What’s Next
One way to purchase carbon credits is to sign an Emissions Reduction Purchase Agreement (“ERPA”) with a seller of verified emission reductions. An ERPA is a legal contract that defines the rights and obligations of both parties, such as the price, volume, delivery schedule, and verification process of the carbon credits. The seller can be a government, a business, or an intermediary that represents a community group that has implemented a project or activity that reduces greenhouse gas emissions. The buyer can be a country, a corporation, or an individual that wants to offset their own emissions or comply with a regulatory requirement. Our next article will explore in details of the ERPA.
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