Support for the Development of the National Registry Framework Concept Paper 10 June 2024 World Bank Group Contents Contents Contents 2 Tables and figures 3 Abbreviations and acronyms 4 Executive Summary 5 1 Introduction 7 2 Introduction to emissions trading registries 8 2.1 Functionality assessment of emissions accounting systems 9 2.2 Registry functions 10 3 Priority outcomes for a national registry for Lao PDR 12 3.1 Functionalities 12 3.2 Other outcomes 13 4 Registry options for Lao PDR 15 4.1 Evaluation Criteria 17 4.2 Assessment of options against set criteria 18 4.3 Timeline for implementing DMS 23 Support for the Development of the National Registry Framework – Concept 2 Paper Tables and figures Tables and figures Tables Table 1: Summary of functionality of different emissions accounting systems 9 Table 2: Registry options for Lao PDR 15 Table 3: RAG (Red/Amberr/Green) assessment of the list of options 18 Table 4: Option 1 implementation phases 20 Table 5: Option 1 details 21 Table 6: Combination of option 1 and 3 implementation 22 Table 7: Combination of option 1 and 3 details 22 Figures Figure 1: Functionality for international trade 10 Figure 2: Timeline for implementing DMS 24 Boxes Box 1: Article 131 of the Law on Forestry 2021 13 Box 2: Article 6.2 of the Paris Agreement 14 Support for the Development of the National Registry Framework – Concept 3 Paper Abbreviations and acronyms Abbreviations and acronyms DCC Department of Climate Chaine DMS Data Management System ETS Emissions trading system FPF Forestry Protection Fund GGGI Global Green Growth Institute ITMO Internationally Transferable Mitigation Outcomes NDC Nationally Determined Contribution NTFP Non Timber Forest Products NSEDP National Socio-Economic Development Plan OIMP Other International Mitigation Purposes RBCF Results Based Climate Financing UNFCC United Nations Framework Convention on Climate Change Reducing emissions from deforestation and forest degradation in developing REDD countries VCM Voluntary carbon markets Support for the Development of the National Registry Framework – Concept 4 Paper Executive Summary Executive Summary This Concept Paper forms part of the World Bank’s assistance to the Government of Lao PDR for participation in international carbon markets. The immediate assistance consists of two activities: ● Activity 1: Support for developing an overall carbon market strategy to implement Article 6 of the Paris Agreement and participate in voluntary carbon markets. ● Activity 2: Support for the development of the national registry framework. This Concept Paper covers Activity 2. It offers an overview of the emissions trading registry options while also focusing on the priority outcomes specific to Lao PDR. The assistance provided by the World Bank is addressing specific areas where support has been identified as needed and fits into the wider package of support on carbon markets being provided by the GGGI (Global Green Growth Institute). These reports are intended to complement and sit alongside other outputs prepared under that support. Effective participation in carbon markets and international cooperation in GHG emissions reductions require prior establishment of essential infrastructure. Such infrastructure are broadly of four types: 1. Greenhouse gas (GHG) inventory. 2. Data management system (DMS) A national DMS can be implemented even in the absence of a national register or transaction registry to track and avoid double counting of emissions from results-based climate finance (RBCF) (e.g. REDD+) and voluntary carbon market (VCM) projects and transactions. 3. Register - A database that records and tracks individual carbon units with a primary purpose of preventing double counting of carbon units and associated emissions. 4. Transaction registry - A database that has all the features of a register and is also able to transfer carbon units between multiple account holders within the transaction registry (internal transfer), and/or the capability to transfer carbon units to another transaction registry (external transfer). Based on communications with government stakeholders, the priority outcomes required from an emissions accounting system to function affectively in Lao PDR are the following: 1. A centralised system for monitoring carbon crediting (VCM and Article 6) and forestry related results-based climate finance (RBCF, eg REDD+) projects in Lao PDR. 2. Oversight of revenues generated through carbon crediting projects. 3. Sale of Internationally Transferrable Mitigation Outcomes (ITMOs) under article 6.2 of the Paris Agreement. Support for the Development of the National Registry Framework – Concept 5 Paper Executive Summary The first and second of the above priority outcomes are a likely the most essential aspect to be supported by a stand-alone system registry or DMS system that might be operated and managed internally by the Government of Lao PDR. At present carbon crediting and RBCF projects happen on an ad hoc basis in Lao PDR, and there is no central system for monitoring these projects. A centralised system for monitoring carbon crediting and RBCF projects would allow the DCC to provide oversight of carbon crediting as a whole and prevent double counting of emissions reductions across projects, enable tracking implications of carbon crediting projects for achieving Laos' NDC, and support the implementation for an efficient financing strategy to be introduced to support NDC achievement. Delivering those two objectives is likely possible through a national DMS. A transaction registry with advanced functionality is not currently considered a priority outcome since, at present, Lao PDR is not pursuing a domestic compliance carbon pricing instrument such as an ETS or a carbon tax with offsetting which would require a sophisticated transaction registry to facilitate internal transfer of carbon units within Lao PDR. Delivery of the third priority objectives could potentially be delivered through the use of the under development UNFCCC transaction registry. An initial assessment suggests that a DMS or transaction registry for external trade should be prioritised: ● A national DMS is simple and will be relatively low cost to implement. It can support achievement of both tracking all carbon crediting and RBCF activities as well as revenue collection from these activities. In this option, Lao PDR would not develop a bespoke registry but would utilise the UNFCCC registry being developed for Article 6.2 trades once that becomes available. Roll out of the UNFCCC registry has been targeted for the end of 2024. While this would limit the use of the registry to Article 6.2 trades and would not allow for tailored functionality, it would likely lower costs and ensure compatibility for all Article 6.2 trades. Establishing the legal framework and implementing a simple DMS would ideally be completed by end of 2024 when the UNFCCC registry could be ready. ● Alternatively, Lao PDR would implement the National DMS and subsequently develop a bespoke national transaction registry. Phased implementation is recommended so that the DMS can be introduced rapidly and begin tracking projects. A bespoke registry would provide Lao PDR with more flexibility to facilitate different types of trades including through the VCM. The registry could also be used to accurately track unit sales and support collection of revenue. Support for the Development of the National Registry Framework – Concept 6 Paper Introduction 1 Introduction This Concept Paper forms part of the World Bank’s assistance to the Government of Lao PDR for participation in international carbon markets. The immediate assistance consists of two activities: ● Activity 1: Support for developing an overall carbon market strategy to implement Article 6 of the Paris Agreement and participate in voluntary carbon markets. ● Activity 2: Support for the development of the national registry framework. This Concept Paper covers Activity 2. It offers an overview of the emissions trading registry options while also focusing on the priority outcomes specific to Lao PDR. The assistance provided by the World Bank is addressing specific areas where support has been identified as needed and fits into the wider package of support on carbon markets being provided by the GGGI (Global Green Growth Institute). These reports are intended to complement and sit alongside other outputs prepared under that support. The paper is structured as follows: ● Section 2 | Introduction to emissions trading registries ● Section 3 | Priority outcomes for a national registry ● Section 1 | Registry options for Lao PDR Support for the Development of the National Registry Framework – Concept 7 Paper Introduction to emissions trading registries 2 Introduction to emissions trading registries Effective participation in carbon markets and international cooperation in GHG emissions reductions require prior establishment of essential infrastructure. Registers and transaction registries constitute integral components of the emissions accounting infrastructure. Emissions trading registries are broadly of four types1: 4. Greenhouse gas (GHG) inventory - An inventory that records physical greenhouse gas (GHG) emissions and removals as required for monitoring of national emissions targets and reporting on international commitments. 5. Data management system (DMS) - A database that records information about a carbon unit and the policy, program, or project responsible for generating a carbon unit that is not stored in the transaction registry or register. Information recorded in a DMS may not be necessary for recording and transfer of units within a registry. However, for policy reasons it is required to transparently demonstrate environmental integrity, and ensure compliance with safeguards and other conditions. A national DMS can be implemented even in the absence of a national register or transaction registry to track and avoid double counting of emissions from results-based climate finance (RBCF) (e.g. REDD+) and voluntary carbon market (VCM) projects and transactions. 6. Register - A database that records and tracks individual carbon units with a primary purpose of preventing double counting of carbon units and associated emissions. Information recorded might include the issue data of the carbon unit, the identity and location of the project for which the carbon unit was issued, the project funder, and verification details. A register could also be used to track international trade in carbon units whereby a country “transfers” carbon units to a purchasing country through carbon unit retirement and double-entry bookkeeping (a subtraction of a carbon unit in one register mirrored by an addition in another). 7. Transaction registry - A database that has all the features of a register and is also able to transfer carbon units between multiple account holders within the transaction registry (internal transfer), and/or the capability to transfer carbon units to another transaction registry (external transfer). A primary purpose of the transaction registry is to prevent double counting of emissions units and the associated emissions during transfer of units. The initial category, GHG inventory, is used for recording economy or sector wide emissions and removals while the subsequent categories serve the purpose of recording individual carbon units, aiming to prevent double counting and facilitate emissions trading. For the purposes of this report the term “emissions accounting system” will be used to refer to data management systems, registers, and transaction registries. 1Source: Adapted from Partnership for Market Readiness (PMR) and Forest Carbon Partnership Facility (FCPF). 2016. Emissions Trading Registries: Guidance on Regulation, Development, and Administration. Support for the Development of the National Registry Framework – Concept 8 Paper Introduction to emissions trading registries 2.1 Functionality assessment of emissions accounting systems Each of the emissions accounting systems discussed above have varying levels of functionality where functionality is assessed based on the following four parameters: 1. Information required for transparency 2. Archiving of project and baseline information 3. Issuance, cancellation, surrender, and retirement of units 4. Internal and external transfer of units Table 1 provides a summary of the functionality of different emissions accounting systems based on the above parameters. Table 1: Summary of functionality of different emissions accounting systems Data management Register Transaction system registry Information required for ✓ transparency Archiving of project and baseline ✓ information Issuance, cancellation, surrender, and retirement of ✓ ✓ units Internal and external transfer of ✓ units An important conclusion from the table above is that DMS provide complimentary services to a register or transaction registry2. For this reason, data management systems are usually implemented in parallel to a register or transaction registry. However, they can be implemented stand alone for tracking purposes as well. 2 A register or transaction registry is commonly implemented in parallel to a DMS, because typically not all information about a carbon unit and associated project that is stored in a DMS is also held in the transaction registry or register. For example, it may be practical to limit the information held in a registry or national registry to ensure compatibility with third party systems when making international transfers. Support for the Development of the National Registry Framework – Concept 9 Paper Introduction to emissions trading registries Alternatively, a transaction registry provides additional functionality to a register by facilitating trade of units. Next, functionality in terms of facilitation of international trade is explored. When implemented alongside a DMS, transaction registries enable full international trade of carbon units, while a register can support simplified trade of ITMOs. This is further explained in Figure 1 below. Figure 1: Functionality for international trade 2.2 Registry functions Emissions accounting systems can have an array of functions dependent on the types of carbon markets they are serving. In general, a registry can embody the following functions3: 1. Issuance - The creation of a carbon unit by a registry and allocation of that unit to an account holder. 2. External transfer - The transfer of a carbon unit from an account in one registry to an account in another registry, e.g. as would be done during international transfer of units between national registries when making a trade under Article 6.2 of the Paris Agreement. 3. Internal transfer - The transfer of a carbon unit from one account to another within a registry, as would be done between participants in a domestic ETS. 4. Retirement - The disposal of a carbon unit for compliance with an emissions target; in some contexts, retirement is referred to as “surrender”. E.g. a unit would 3Source: Adapted from Partnership for Market Readiness (PMR) and Forest Carbon Partnership Facility (FCPF). 2016. Emissions Trading Registries: Guidance on Regulation, Development, and Administration Support for the Development of the National Registry Framework – Concept 10 Paper Introduction to emissions trading registries be retired when it is surrendered by an emitter to cover their emissions allowance in an ETS. 5. Cancellation - The disposal of a carbon unit where the unit is not used for compliance with an emissions target and cannot be used by others for compliance either. E.g. a unit would be cancelled when a private company has used that emissions unit as an offset to support corporate carbon neutrality claims. 6. Conversion - The transformation of one carbon unit type to another, e.g. a unit purchased through a VCM could be converted into a compliance unit to be retired as part of an emitters obligations for a carbon tax, as is done in South Africa. 7. Banking - The carrying over of unused carbon units from one compliance period to the next. 8. Borrowing - The use of carbon units from future compliance periods to meet obligations in the current compliance period. When making a choice, the level of sophistication, and therefore range of functions an emissions accounting system is capable of should be matched to the types of carbon market and types of transactions the registry is serving. For example, a register for tracking international trades of emissions units in the absence of a domestic compliance market (domestic emissions trading system (ETS) or carbon tax) might only need to issuance, external transfer, retirement, and cancellation functions. More complex transaction registries for use with domestic compliance markets will need additional functionality. Support for the Development of the National Registry Framework – Concept 11 Paper Priority outcomes for a national registry for Lao PDR 3 Priority outcomes for a national registry for Lao PDR 3.1 Functionalities An emissions accounting system can help provide oversight of carbon crediting projects and facilitate international transfer of carbon units. Based on communications with government stakeholders, the property outcomes required from an emissions accounting system to function affectively in Lao PDR are the following: 4 9. A centralised system for monitoring carbon crediting (VCM and Article 6) and forestry related results-based climate finance (RBCF, eg REDD+) projects in Lao PDR. At present carbon crediting and RBCF projects happen on an ad hoc basis, and there is no central system for monitoring these projects. Prospective project developers tend to approach line ministries (Ministry of Energy and Mines, Ministry of Agriculture and Forestry, and Ministry of Public Works and Transport), and do not notify the Department of Climate Change (DCC) of the Ministry of Natural Resources and Environment who have been nominated by the Prime Minister to be the central coordinating ministry for carbon markets. A centralised system for monitoring carbon crediting and RBCF projects would allow the DCC to provide oversight of carbon crediting as a whole and prevent double counting of emissions reductions across projects and enable tracking implications of carbon crediting projects for achieving Laos' NDC. 10. Oversight of revenues generated through carbon crediting projects. The Law on Forestry 2021 legislates that a share of revenue collected through forest carbon credits shall be allocated to the Forestry Protection Fund (FPF, see following slide for detail). Furthermore, while not a legal requirement, both the 9th National Socio-Economic Development Plan (NSEDP) Financing Strategy (2023- 2025) and the National Green Growth Strategy of the Lao DR till 2030 mention ambition to increase incomes from carbon crediting. Efficient collection of a share of carbon credit revenues will require a system to provide oversite of all carbon crediting activities. 11. Sale of Internationally Transferrable Mitigation Outcomes (ITMOs) under article 6.2 of the Paris Agreement. Lao PDR has potential to generate removals above nationally determined contribution (NDC) requirements which might therefore be sold to other countries on international markets. These trades will require a system for issuance, tracking, and international transfer of ITMOs. A transaction registry with advanced functionality is not currently considered a priority outcome since, at present, Lao PDR is not pursuing a domestic compliance carbon pricing instrument 4Sources: Lao Peoples Democratic Republic. 2021. Law on Forestry (Revised); Government of Lao PDR. The 9th National Socio-Economic Development Plan Financing Strategy (2023-2025); Secretariat for Formulation of National Green Growth Strategy of Lao PDR. 2018. National Green Growth Strategy of Lao PDR till 2030. Support for the Development of the National Registry Framework – Concept 12 Paper Priority outcomes for a national registry for Lao PDR such as an ETS or a carbon tax with offsetting which would require a sophisticated transaction registry to facilitate internal transfer of carbon units within Lao PDR. 3.2 Other outcomes 3.2.1 Providing oversight of carbon revenues A centralised emissions accounting system can provide oversight of carbon revenues as regards to requirements under the Law on Forestry 2021. Article 131 of the Law on Forestry 2021, presented in Box 1 below, defines sources of funding for the Forest Protection Fund (FPF). The FPF is a state fund established to collect and mobilise funds from forestry activities and activities involving the use of forest resources. The purpose of the FPF will be to support activities related to forest management. Clause 6 of Article 121 states that a share of the income from trade in forest carbon shall be allocated to the FPF. An emissions accounting system can provide oversight and track trade in forest carbon units (alongside all other forms of tradable carbon units and RBCF) and therefore support the collection of this share of income. The emissions accounting system can also support transparency in the collection process and help to provide assurance to project developers that the share of revenue being collected is consistent and fair. Box 1: Article 131 of the Law on Forestry 2021 Article 131 (Revised) Sources of Funding5 Sources of funding include the following: 1. State budget; 2. Forest resource fees or tree and NFTP planting fees ; 3. A share of the income derived from the sale of timber and NFTPs harvested from any sources including Production Forests and forestland conversion areas; 4. A share of the income derived from the sale of timber or NFTPs confiscated by the State; 5. A share of the income from the conversion of forestland for use for other purposes; 6. A share of the income from the payment of forest ecosystem services, including that from ecotourism, trade in forest carbon, etc. 7. A share of the income from fines and fees for the compensation for damage to forests, forestland and forest resources; 8. Contributions from national and international organizations and financial institutions; 9. Contributions from national and international individuals, legal entities or organizations. 5 Source: Lao Peoples Democratic Republic. 2021. Law on Forestry (Revised). Support for the Development of the National Registry Framework – Concept 13 Paper Priority outcomes for a national registry for Lao PDR The collection of a shares of the income from the sources described in 3 to 7 above, is prescribed in specific regulations. 3.2.2 Facilitating cooperation in NDC implementation through Article 6.2 of the Paris Agreement Countries looking to cooperate in NDC implementation through Article 6.2, as presented in Box 2 below, need to have an appropriate emissions accounting system. The Paris Agreement allows for flexibility in how countries can meet their national targets established in their NDCs through several mechanisms including through Article 6.2 which allows trade of ITMOs. Guidance for tracking of ITMOs traded under Article 6.2 was published by the CMA (Conference of the Parties serving as the meeting of the Parties to the Paris Agreement) following COP 26 (Conference of the Parties 26)6. Parties participating in the cooperative approach referred to in Article 6.2 must have or have access to a register or transaction registry for the purpose of tracking ITMOs. Key features of these emissions accounting systems include: ● ITMOs uniquely identified in a way such that each ITMO is traceable to the mitigation outcome it represents. ● Must include information on authorization, first transfer, transfer, acquisition, use towards NDCs, authorization for use towards OIMPs, and voluntary cancellation. Transaction registries will have to be inter-operable such that transferring ITMOs between registries can be done with minimal risk regarding consistency of data. Transfers between registries will be made when making sales between countries so that corresponding adjustments can be made to each country NDC and to avoid double counting. An international transaction registry will be developed by the UNFCCC Secretariat. Parties have the option to use this registry in place of or alongside domestic registries. As such the international registry will be able to support all of the functions required for Article 6.2 trades. Box 2: Article 6.2 of the Paris Agreement Trade in carbon credits (Internationally Transferred Mitigation Outcomes, ITMOs) Paris Agreement | Article 6 2. Parties shall, where engaging on a voluntary basis in cooperative approaches that involve the use of internationally transferred mitigation outcomes towards nationally determined contributions, promote sustainable development and ensure environmental integrity and transparency, including in governance, and shall apply robust accounting to ensure, inter alia, the avoidance of double counting, consistent with guidance adopted by the Conference of the Parties serving as the meeting of the Parties to this Agreement. 6 Sources: CMA4. 2022. Decision - CMA4. Matters relating to cooperative approaches referred to in Article 6, paragraph 2, of the Paris Agreement. Support for the Development of the National Registry Framework – Concept 14 Paper Registry options for Lao PDR 4 Registry options for Lao PDR There are four general emissions accounting system options for Lao PDR to consider for implementation, presented in Table 2. Table 2: Registry options for Lao PDR Option 4: National transaction Option 1: National data Option 3: National transaction Option 2: National register registry with internal and external management system (DMS) registry with external trades only trades The simplest registry option for Lao A national register could be set up A national transaction registry could A national transaction registry could PDR would be to introduce a stand to track carbon crediting projects as be established with all of the be established with all of the alone national DMS for carbon well as issue and track emissions functionality of Option 2: National functionality of Option 3: National crediting and results-based finance units for the purpose of prevention register but with enhanced transaction registry with external projects. of double counting. functionality to enable linking with trade only but with enhanced other registries to facilitate functionality to enable internal trade A DMS would record details The register could be used to track international trade of units. of units within the register. regarding all carbon crediting international trade via Article 6 and projects in Lao PDR but would not VCM whereby Laos cancels or Because international trades are Internal trade would facilitate trade require issuance of serialised retires units issued domestically made only with purchasers of emissions units between entities carbon units. when sold internationally to another operating outside of the national within Lao PDR, as would be country or a corporate purchaser, registry framework, this option required should the country This solution could provide a simple and through subsequent use of would not include functionality for introduce an ETS or a carbon tax solution to monitoring projects, double entry accounting on trading internal trade of units within the that allows use of carbon units as without the more sophisticated countries NDCs. national register. offsets. technology and security requirements of a register or transaction registry. Support for the Development of the National Registry Framework – Concept Paper 15 Registry options for Lao PDR Should any of Option 2, Option 3, and Option 4 be implemented; it is likely that Option 1 would also be implemented in parallel Should a national DMS be A national register or transaction registry would likely be implemented in parallel to a national DMS, because implemented without a national typically not all information about a carbon unit and associated project that is stored in a DMS is also held in the register or transaction registry, the transaction registry or register. For example, it may be practical to limit the information held in a registry or national proposed UNFCCC registry could registry to ensure compatibility with third party systems when making international transfers. be used to facilitate Article 6.2 trade. Support for the Development of the National Registry Framework – Concept Paper 16 Registry options for Lao PDR 4.1 Evaluation Criteria Five criteria have been identified based on Lao PDR’s priority outcomes for use in evaluating the long list of emissions accounting system options as presented above. These are as follows: 1. Tracking of all carbon crediting and results-based climate finance activities - Having a centralised process for monitoring of carbon crediting (including VCM) and results-based finance activities has been identified as a priority outcome from an emissions accounting system in Lao PDR. Tracking of activities can be done relatively simply and does not necessarily require the issuance of serialized carbon units. 2. Supporting the collection of a share of revenues generated through carbon crediting and RBCF - Lao PDR has stated an intention to collect a share of the revenue generated through carbon crediting activities. At a minimum this will require a system that tracks all such activities to ensure fair collection of revenue, however more detailed information on credits earned and sales prices achieved may be required dependent on how revenue shares are defined and collected. 3. Accurate accounting of emissions reductions and carbon units to prevent double counting – Issuance and tracking of serialised carbon units within a register supports robust accounting of emissions reductions and can help to minimise the risk of double counting when both internal and external transfer of emissions units are being made. A simpler data management system can prevent internal double counting, for example by preventing a forestry project from collecting RBCF and VCM carbon units for the same emissions reductions. 4. Providing a trading place for sellers of carbon units generated in Lao PDR to buyers outside Lao PDR (external transfers) - International sale of ITMOs will require a register or transaction registry that meets the associated requirements under Article 6.2 of the Paris Agreement. In the absence of a national system that can perform these functions, Lao PDR might use the proposed international registry being developed by the UNFCCC to make trades. If the number of trades made by Lao PDR is expected to be low, then the latter option might be the most appropriate. Because internal transfer of carbon units within Lao PDR has not been identified as a priority objective for a registry in Lao PDR at this stage, this function has not been included within the assessment criteria. 5. Viability of implementation considering Lao PDRs budgetary and capacity constraints & efficient use of resources considering priority outcomes - Lao PDR has limited capacity in terms of emissions accounting system development and operation, as well as limited financial resources. Previous attempts to manage similar registry platforms, such as the hydroelectric power generation registry, have not been successful. While emissions accounting systems have a range in terms of complexity and the functionality they offer, the more complex the proposed system is, the more issues Support for the Development of the National Registry Framework – Concept 17 Paper Registry options for Lao PDR limited capacity and budget are likely to cause. Therefore, it is important that any solution implemented in Lao PDR does not include unnecessary complexity and functionality that are likely to prevent success of the registry without delivering additional benefits. 4.2 Assessment of options against set criteria Table 3 conducts a RAG (Red/Amberr/Green) assessment of the list of options against criteria set above. Table 3: RAG (Red/Amberr/Green) assessment of the list of options Option 1: Option 2: Option 3: Option 4: National data National National National management register transaction transaction system (DMS) registry with registry with external internal and trades only external trades 1. Tracking of all May not be May not be Supports May not be carbon crediting and compatible compatible simple tracking compatible with results-based climate with tracking with tracking of all activities tracking RBCF finance activities RBCF RBCF Provides Holds Holds specific 2. Support the oversight of all specific Holds specific information collection of a share projects, but information information on on carbon of revenues will not have on carbon carbon units units and generated through specific units and and therefore therefore carbon crediting and information on therefore revenues revenues RBCF carbon units revenues earned earned generated earned Can require Holds Holds Holds 3. Accurate submission of serialized serialized serialized accounting of verified carbon units carbon units carbon units to emissions reductions emissions to prevent to prevent prevent double and carbon units to reductions but double double counting of prevent double will not hold counting of counting of emissions counting serialized emissions emissions reductions carbon units reductions reductions Support for the Development of the National Registry Framework – Concept 18 Paper Registry options for Lao PDR Could be 4. Provide a trading implemented Can support place for sellers of alongside Supports the Supports the simplified carbon units from UNFCCC external external trade through Lao PDR to buyers provided transfer of transfer of carbon unit outside Lao PDR registry to carbon units carbon units retirement (external transfer) support Article 6.2 trades Unlikely to Additional represent This option is functionality 5. Viability of value for simple and low over Option 2 implementation money Directly cost to is not considering Lao compared targets implement, and necessary at PDRs budgetary and with Option 3 priority is targeted this stage and capacity constraints considering outcome 3 towards therefore & efficient use of reduced and supports addressing Lao unlikely to be resources functionality priority PDRs top worth considering priority but similar outcome 2 priority additional cost outcomes technology objective and capacity and security requirements needs Key Well aligned with criteria Moderately aligned with criteria Not aligned with criteria As can be interpreted from the table, the RAG assessment suggests that a DMS or transaction registry for external trade should be prioritised implying that, Option 1 or a combination of Option 1 and Option 3 can support Lao PDRs priority objectives. 1. Option 1 - National DMS: A national DMS is simple and will be relatively low cost to implement. It can support achievement of both tracking all carbon crediting and RBCF activities as well as revenue collection from these activities. Initially the DMS can be a simple excel database that entities developing RBCF or carbon crediting projects would be required to report to on a regular basis. Including a requirement to report on verified emissions reductions could be used to support revenue collection. Going forward, a the DMS could be developed into a more sophisticated online system allowing for easy submission of project information and public sharing of project documents for transparency purposes. In this option, Lao PDR would not develop a bespoke registry but would utilise the UNFCCC registry being developed for Article 6.2 trades once that becomes available. Roll out of the UNFCCC registry has been targeted for the end of 2024. Support for the Development of the National Registry Framework – Concept 19 Paper Registry options for Lao PDR While this would limit the use of the registry to Article 6.2 trades and would not allow for tailored functionality, it would likely lower costs and ensure compatibility for all Article 6.2 trades. In this model it is proposed that use of the UNFCCC registry be managed by the DCC. 2. Combining Option 1 and Option 3: Lao PDR would first implement the National DMS and subsequently develop a bespoke national transaction registry. Phased implementation is recommended so that the DMS can be introduced rapidly and begin tracking projects. A bespoke registry would provide Lao PDR with more flexibility to facilitate different types of trades including through the VCM. The registry could also be used to accurately track unit sales and support collection of revenue. In this model it is proposed the registry be managed by a third party chosen and overseen by the DCC. 4.2.1 Option 1 In all cases Option 1, a national data management system, should be developed, and a phased approach for implementation is proposed. Details are presented in Table 4 and Table 5. Table 4: Option 1 implementation phases Initial Implementation Final Implementation Urgent – Next 12 months 12 - 36 Months It is proposed that a simple excel based DMS is It is important to note that a database for implemented as soon as possible. The purpose monitoring projects has already been developed of this initial system would be to support the with support from the Global Green Growth Department of Climate Change (DCC) in Institute (GGGI). This database is not up to date overseeing all carbon markets activities in Lao and currently lacks and owner, however the PDR. database could be used as a starting point for implementation of a DMS and eventually migrated to a more sophisticated DMS in the final implementation. Support for the Development of the National Registry Framework – Concept 20 Paper Registry options for Lao PDR Table 5: Option 1 details Parameter Details Legal basis A requirement to implement a national data management system and assignation of responsibility could be included in the decree on carbon markets. Details for implementation set out in separate regulation. An obligation for all carbon markets projects to report activities to the DMS might have to be mandated through legislation rather than through the decree. Technology Initial implementation: platform Microsoft Excel Final implementation: Bespoke web-based system. System development should be procured through competitive tender, with the system hosted and operated by the DCC. Information held Non-confidential information on proposed and ongoing projects including that required to demonstrate transparently, environmental integrity, compliance with safeguards, and other conditions. Security Security needs are low. Data held is not expected to be requirements sensitive and the system will not hold saleable carbon credits. Responsible Party Department of Climate Change Option 1 case study: Cambodia Cambodia’s National REDD+ Project Database7 is a data management system used by the country to monitor REDD+ projects. Cambodia’s National REDD+ Project Database is a database of information on officially recognised REDD+ projects and programmes in the country. The purpose of the database is to: ● support transparency regarding REDD+ projects and programmes through providing publicly available information, ● to ensure that projects are aligned with the National REDD+ strategy, ● and to ensure alignment between project and national accounting of GHGs. Any forestry based GHG emissions reduction project that intends to receive REDD+ payments must submit a request for registration in the National REDD+ Project Database to the REDD+ Task Force Secretariat. There is a two-part process for requesting registration within the system: ● Projects seeking to register with the database must first notify the REDD+ Task Force Secretariat and submit a project concept note evidencing how the project is 7 Source: Cambodia REDD+. Cambodia’s National REDD+ database. Accessed: 15 April 2024. Support for the Development of the National Registry Framework – Concept 21 Paper Registry options for Lao PDR aligned with the National REDD+ Strategy, and geographic information showing area covered by the project. ● Subsequently a formal application must be made, in which a completed REDD+ registration form alongside any additional documents needed to demonstrate conformance with eligibility conditions must be submitted. At present there are three active and nine pipeline projects listed in the database. 4.2.2 Combination of Option 1 and Option 3 If implementing a combination of Option 1 and Option 3 a bespoke national transaction registry would have to be procured and maintained. Details are presented in Table 6 and Table 7. Table 6: Combination of option 1 and 3 implementation Implementation 12 - 36 Months A combination of Option 1 and Option 3 requires implementing a national transaction registry in advance of making any transactions under Article 6.2 of the Paris Agreement. The urgency of implementation will depend on the expected timeline for development of projects associated with those transactions. Table 7: Combination of option 1 and 3 details Parameter Details Legal basis The process for authorizing corresponding adjustments made for trade in ITMOs will need to be defined in legislation. While the establishment of a registry may not need to be mandated by law, the use of an appropriate registry for facilitating transactions associated with corresponding Technology platform A transaction registry will likely be a bespoke platform developed by the qualified provider selected to be the party responsible for implementing and managing the transaction registry. The expected cost of implementing such a platform is estimated to be approximately US$50,000 to US$150,000, excluding ongoing Information held The registry will record serialized carbon units (or ITMOs) and other information specific to the carbon unit such as include the vintage of the carbon unit, the identity and location of the project for which the carbon unit was issued, the project funder, and verification details8. Security The transaction registry holds financial assets and sensitive requirements information and must have robust security. 8Source: Partnership for Market Readiness (PMR) and Forest Carbon Partnership Facility (FCPF). 2016. Emissions Trading Registries: Guidance on Regulation, Development, and Administration. Support for the Development of the National Registry Framework – Concept 22 Paper Registry options for Lao PDR Responsible Party A suitable third-party provider is recommended to be assigned the responsibility of being the registry administrator. The administrator might have experience in operating financial or energy markets to ensure they have requisite skills for operating a functioning marketplace. The DCC would be responsible for selecting the administrator and Option 1 and Option 3 case study: United Kingdom The United Kingdom Land Carbon Registry stores project information for transparency and facilitates trade of units to corporate buyers. The UK’s Woodland Carbon Code9 is the largest source of voluntary offset credits in Europe. The scheme issues carbon units generated by Woodland Carbon Code -verified woodland forestry projects located in the UK which can be used by companies to report against their UK- based emissions including as part of net zero claims. The UK Land Carbon Registry is a database that stores and publicly displays data about the status of Woodland Carbon Code projects and ownership and use of carbon units. All woodland projects generating credits through the carbon code must be registered with the registry. The UK Land Carbon Registry is an example of a system that combines the functionality of Option 1, a data management system, and Option 3, a transaction registry. The registry provides multiple services and operates as both a transaction registry and a data management system: ● The carbon unit register service enables projects to issue units, assign or transfer them to credit buyers, and for credit buyers to use/retire/report units once verified. ● The public database service provides public stakeholders the ability to view the status of all Woodland Carbon Code activities. The registry is managed and operated by S&P Global. 4.3 Timeline for implementing DMS Establishing the legal framework and implementing a simple DMS would ideally be completed by end of 2024 when the UNFCCC registry could be ready. Figure 2 presents a timeline from 2024 to 2027. 9Source: Woodland Carbon Code. UK Land Carbon Registry. Registry Rules of Use. Accessed: 15 April 2024. Support for the Development of the National Registry Framework – Concept 23 Paper Registry options for Lao PDR Figure 2: Timeline for implementing DMS Support for the Development of the National Registry Framework – Concept 24 Paper