Baseline Scenario and Demonstrating Additionality

For a project to earn carbon credits under any Verra methodology, it must demonstrate two things. First, it must establish what would have happened without the project (the baseline scenario). Second, it must show that the project activity would not have occurred without carbon finance (additionality). This lesson covers both requirements as specified in VM0044.

The Baseline Scenario

Section 6 of VM0044 defines the baseline scenario as the situation that would have occurred in the absence of the project activity. For biochar projects, this means describing what would have happened to the waste biomass if the project did not exist.

Under VM0044, the baseline scenario for waste biomass is one of two things: the biomass would have been left to decay naturally, or it would have been combusted for purposes other than energy production (such as open-field burning). Neither of these outcomes results in long-term carbon storage.

The project proponent must provide credible evidence to support the claimed baseline scenario. The methodology accepts several types of evidence:

• Annual government records about waste biomass disposal in the region.
• Records from a waste disposal facility that handled the same type of biomass.
• Records from a production facility that generated the biomass as a by-product.

If formal records are not available, the proponent may use data from existing literature about similar industries in the same region, existing survey data from comparable settings, or a survey conducted by the proponent specifically to establish the baseline.

The baseline scenario is documented once at the start of the project and does not change during the crediting period unless there is a fundamental change in the waste disposal practices in the region.

Additionality Overview

Section 7 of VM0044 requires that a project activity be additional. Additional means the emission reductions or removals from the project would not have occurred without the carbon finance provided by selling credits.

VM0044 uses a three-step standardized approach to demonstrate additionality. A project must pass all three steps. Failing any step means the project is not additional and is not eligible for crediting.

Step 1: Regulatory Surplus

The first step requires the project proponent to demonstrate that the project activity is not mandated by any law or regulation. If a government rule already requires producers to convert waste biomass into biochar, then a project doing exactly that is not going beyond what is legally required and cannot claim additionality.

The proponent must comply with the regulatory surplus rules in the most recent version of the VCS Standard and VCS Methodology Requirements. These documents specify how to identify applicable regulations and how to show that the project goes beyond them.

If regulatory surplus is demonstrated, the project proceeds to Step 2. If not, the assessment ends and the project is not additional.

Step 2: Positive List

The second step uses the Activity Method. The concept is straightforward: if an activity type appears on the positive list, all projects of that type are automatically considered additional, provided they also pass the regulatory surplus test and the investment analysis.

For VM0044, the relevant activity on the positive list is the processing of waste biomass to biochar. This activity qualifies for the positive list because the global adoption rate of biochar production is well below the threshold set by the VCS Methodology Requirements.

The VCS threshold is 5 percent. If more than 5 percent of the maximum technically possible biochar production is already happening globally without carbon finance, the activity would no longer qualify as additional on the positive list. The methodology calculates this using the Activity Penetration metric (APy).

Note: The result is multiplied by 100 to express as a percentage.

If the positive list conditions are met, the project proceeds to Step 3. If not, the assessment ends and the project is not additional.

Step 3: Investment Analysis

The third step requires the project proponent to demonstrate that the project activity would not be financially viable without carbon finance. This step uses the Verra tool VT0008 Additionality Assessment.

VT0008 offers two options for investment analysis:

• Option 1: Investment Comparison Analysis. This approach compares the internal rate of return (IRR) or net present value (NPV) of the project with and without carbon revenue. If the project is not financially attractive without carbon revenue and becomes viable only with it, the investment analysis supports additionality.
• Option 2: Benchmark Analysis. This approach compares the project's financial performance against a benchmark return expected for investments of similar risk in the same sector. If the project falls below the benchmark without carbon revenue, additionality is supported.

If the investment analysis confirms that the project would not proceed without carbon finance, the project passes Step 3 and is considered additional.

What the Proponent Must Document

To satisfy the additionality requirements of VM0044, the project documentation must include four elements:

1. Baseline scenario evidence: Credible records or surveys showing what would have happened to the waste biomass without the project. Government records, facility records, literature data, or a proponent survey are all acceptable.
2. Regulatory surplus demonstration: Analysis showing that the project activity is not required by any applicable law or regulation, consistent with the current VCS Standard and VCS Methodology Requirements.
3. Positive list confirmation: A statement confirming that the project meets all the applicability conditions of VM0044, which is the basis for the positive list claim. The activity penetration calculation from Appendix 1 (APy of approximately 0.06 percent) supports this claim.
4. Investment analysis results: A financial model completed under VT0008, using either Option 1 or Option 2, showing that the project would not be financially viable without carbon revenue.

All four elements must be included in the Project Description document submitted for validation. The third-party validator will review each element before the project can be registered and begin generating credits.