GLOBAL COMMODITY LEAKAGE MODULE, PRODUCTION APPROACH
Public Consultation Document
GLOBAL COMMODITY LEAKAGE MODULE:
PRODUCTION APPROACH
(LM-P)
Public Consultation Document
27 June 2013
Copyright © 2012 VCS Association
GLOBAL COMMODITY LEAKAGE MODULE: PRODUCTION APPROACH
Public Consultation Document
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SOURCES
The VCS Jurisdictional Leakage Working Group led the development of this module and associated
calculation tool. The working group consisted of leading technical experts and REDD+ practitioners
(including project developers, environmental non-profit organizations and multilateral institutions) working
to develop jurisdictional and nested REDD+ (JNR) programs around the world. Further information on the
working group is available on the VCS website. This module was developed in conjunction with the VCS
Tool for the Estimation of Jurisdictional Leakage in VCS JNR Programs and is one of the options
available for quantifying global commodity leakage as set out in the tool.
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SUMMARY DESCRIPTION OF THE MODULE
This module provides instructions for using the accompanying VCS calculation tool Global Commodity
Leakage Calculation Tool: Production Approach, in Microsoft Excel. It allows a jurisdictional proponent to
estimate the global commodity leakage that is expected to result from REDD+ activities in the jurisdiction.
The global commodity leakage is expressed as a percentage of gross GHG emission reductions achieved
within the jurisdiction for the relevant monitoring period. The global commodity leakage percentage
corresponds to the global commodity leakage deduction that is applied to the corresponding factor in the
VCS Tool for the Estimation of Jurisdictional Leakage in VCS JNR Programs (ie, 4 percent corresponds
to a leakage deduction of 4 for the global commodity leakage factor in the tool).
The source of each input value must be entered in the appropriate field, in the same row where the value
is input. In the associated calculation tool, only the cells that are shaded green require input values. If the
contents of other cells are changed, the tool may not work. Input values must come from a recognized,
credible source and must be reviewed for publication by an appropriately qualified, independent
organization or appropriate peer review group, or be published by a government agency.
This module and associated calculation tool consist of an assessment of a number of factors that impact
the amount of leakage emissions that will occur outside the jurisdiction as a result of the JNR program.
This approach focuses on the volumes of foregone commodity production as a result of JNR program
activities. The tool uses averaged yield data to estimate the amount of production (considering the
commodities driving deforestation and/or degradation) that may have occurred on the area where
deforestation and/or degradation was prevented within the jurisdiction. The tool then uses econometric
factors to estimate how much of this foregone production will be demanded outside the jurisdiction.
This approach assumes that these commodities are traded as part of the international markets and
production will shift elsewhere internationally to fulfill demand. It applies the country’s share of
international production for the top commodities to determine how much of this production demanded
elsewhere will be made up outside the jurisdiction but within the same country. Finally the tool considers
the area of forest and agricultural land within the country where this production may be displaced to and
the carbon density of other forests within the country to estimate leakage emissions.
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DEFINITIONS
See the VCS document Program Definitions for definitions and VCS documents JNR Requirements and
Tool for the Estimation of Jurisdictional Leakage in VCS JNR Programs for further specification on terms
used within this document.
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APPLICABILITY CONDITIONS
The module is applicable under the following conditions:
1) The JNR program applies a Scenario 2 or Scenario 3 approach (see VCS document JNR
Requirements for a description of the Scenarios);
2) The JNR program is subnational in scope.
3) The area of land that would have been deforested due to infrastructure development (eg, roads,
cities) is de minimis.
The module addresses jurisdictional market leakage resulting from the production of commodities that are
driven by global market demand. The module addresses deforestation and degradation driven by the
production of agricultural products, livestock products, and forest products.
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PROCEDURES
The tool allows the JNR program to estimate the jurisdictional market leakage caused by the JNR
program using a series of equations embedded with the spreadsheet. The procedures for using the tool
are detailed in the following sections. The section headings correspond to the steps listed within the
calculation tool (ie, Section 5.1 corresponds to Step 1: Avoided Deforestation).
5.1
Step 1: Avoided Deforestation
Enter the size of the area (in hectares) where avoided deforestation occurred during the current
monitoring period. Unless the JNR program monitors non-market leakage (occurring outside the
jurisdiction, but inside the country) and has quantified the size of the area where non-market leakage
occurred during the monitoring period, all avoided deforestation is conservatively assumed to be subject
to market leakage. Where there is an area of non-market leakage that is included in the estimate of the
jurisdiction's GHG emission reductions and removals, the size of this area of non-market leakage must be
entered into the tool in this section. The tool excludes the non-market leakage area from subsequent
leakage calculations.
5.2
Step 2: Avoided Biomass and Soil Emissions
Part of calculating the GHG emission reductions and removals of a jurisdiction is (a) quantification of the
carbon stock of forests that would have been deforested, and (b) quantification of the carbon stock that
would have been present after deforestation, if deforestation had occurred. These two values are entered
in this step, in units of metric tons CO2e per hectare. All carbon pools for which the jurisdiction claims
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avoided GHG emissions must be included in these amounts. Care must be taken to ensure that the
carbon pools and pool boundaries are the same for both the pre- and post-deforestation carbon stock
numbers used here.
This step conservatively assumes that all biomass and soil emissions that will eventually occur from a
hectare of deforestation are counted in the period when the deforestation occurs, and are subject to
leakage.
5.3
Step 3: Fraction of Conserved Area with Avoided Production
Land is deforested for a purpose. In developing countries, the most common use of deforested land is for
agriculture. Often timber is extracted prior to the land being cleared for agriculture. Uses often overlap
spatially. For example, a common pathway to deforestation in developing countries is commercial logging
opening the forest to illegal logging for construction wood and/or fuelwood. After much or all of the wood
value has been extracted, land may be cleared for agricultural use. In addition to using land to grow crops
or livestock, forests may be cleared to make room to grow plants for oil used for biofuel feedstock or
human consumption.
In this section, the drivers of deforestation described in the jurisdictional program description are
considered. For the lands where deforestation was avoided, consider what land uses would have
occurred, and what commodities would have been produced. The VCS Tool for the Estimation of
Jurisdictional Leakage in VCS JNR Programs requires JNR programs to identify the most significant
commodities associated with deforestation (and degradation, where relevant). The commodities must be
included in this analysis. Identify the top three crops, by area cropped, that are expected to have been
grown on lands where deforestation was avoided. Enter the names of these crops in cells D16 through
D18 and the names of uses will be propagated through the rest of the tool.
In cells C16 through C18, enter the percentage of the area that would have been used for each crop.
Where the mix of uses of deforested land is not specified the jurisdictional program description, use the
existing areas of each crop in the jurisdiction or country to calculate these percentages. Typically, when
calculating the percentage of the area used for each crop, the three crops will total 100 percent. However,
justification may be provided that less than 100 percent of the area was subject to deforestation from
agricultural production (eg, there may be select regions not suitable for agricultural production that are
only subjects to deforestation for timber harvesting).
The tool requires that all lands that would have been deforested be attributed a non-forest use. Thus,
either the values in cells C16 through C19 (crop and livestock uses) must total at least 100 percent, or
fuelwood extraction (cell C20) must be attributed to 100 percent of the area where deforestation was
avoided. Where sufficient area is assigned a use, the tool returns "OK" in cell C23. The sum of uses in
cells C16 through C19 may be less than 100 percent only where fuelwood extraction results in
deforestation in the jurisdiction.
Because land uses can overlap, the total of agricultural uses may be more than 100 percent. However,
the tool notifies the user (in cell C24) where crops have been assigned to more than 100 percent of the
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area. Where crops overlap seasonally, a value greater than 100 percent may be appropriate. Production
of pulpwood and saw logs are expected to overlap. However, these forest uses are assumed not to cause
deforestation. Extraction of fuelwood could cause deforestation, although this will only occur near
population centers.
5.4
Step 4: Yields
This step is for entry of inputs that are later used to calculate amounts of forgone production caused by
avoiding deforestation. Enter the per-hectare yield of each type of good that would have been produced if
deforestation had occurred. Recommended units are in the template. Different units may be used, but all
units must be given in a per-hectare basis.
The values entered here may be estimated by monitoring production rates in the jurisdiction, regional
studies conducted according to methods that are publically available from a recognized, credible source
and must be reviewed for publication by an appropriately qualified, independent organization or
appropriate peer review group, or be published by a government agency.
Note that for livestock, the tool uses cattle head slaughtered per hectare per year as the default unit. The
value entered here will need to be appropriately converted. Typically this number will have to be
calculated by dividing the number of head slaughtered per year in the jurisdiction, divided by the area of
pasture in the jurisdiction.
A yield value must be entered for every type of production that, in Step 3: Fraction of Conserved Area
with Avoided Production, has an area production is forgone.
The tool is relatively insensitive to errors in yield values because the same yield rates may be used to
convert back to hectares later in the tool.
5.5
Step 5: Forgone production
In this step, the tool calculates amounts of forgone production caused by the jurisdictional program,
during the current monitoring period. These amounts are calculated as the area of forgone production
multiplied with the yield rate for the particular use.
Where the units other than the default yield units are used in Step 4: Yields, the units in Step 5: Forgone
production must be changed. The units in Step 5: Forgone production must correspond to the units in
Step 4: Yields, except the units in Step 5: Forgone production must be without the per hectare
denominator.
5.6
Step 6: Leakage Mitigation
JNR programs may implement policies or activities intended to mitigate leakage. Mitigation activities can
avoid leakage by increasing production elsewhere, to replace production forgone by the JNR program.
Also, mitigation activities can reduce demand for the forgone goods and services. An example of
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replacing forgone supply would be a program that helps farmers increase crop productivity, increasing the
total amount of crops produced without increasing the area farmed. An example of reducing demand
would be converting local people from inefficient three-stone hearths for cooking to efficient cookstoves,
allowing the same amount of food to be cooked with substantially less consumption of fuelwood.
Where mitigation activities are implemented, the achievements can be entered in this step. Achievements
must be demonstrated through amounts of production increased or consumption decreased, not effort or
activity. Amounts must be monitored and verified. For example, for a program where fuel consumption
decreases as a result of encouraging households to switch from three-stone hearths to efficient
cookstoves would have to monitor usage of stoves and fuel, and calculate the reduction in the amount of
fuelwood consumed. It would not be sufficient to merely report the number of stoves distributed.
There are two alternative approaches to quantifying mitigation. One approach could be to implement
specific activities and monitor those activities. For example, a jurisdictional proponent could provide
technical assistance to farmers or access to high yielding seeds and measure increases in crop yields on
farms that are assisted.
Alternatively, total production in the jurisdiction could be monitored. Where, across the entire jurisdiction,
total production of a category of goods remains constant or increases, then in cells C45 through C51
enter the corresponding value or values from cells C36 through C42. For example, where jurisdictionscale monitoring shows that timber production increased over time in the jurisdiction, then there would
have been 100 percent replacement of the predicted amount of forgone timber production. In this case,
input the calculated amount of forgone timber production in cell C50 as shown in cell C41. Note that units
in Step 6: Leakage Mitigation must be the same as the units in Step 5: Forgone production.
Where no mitigation activities are successfully implemented, values in this section will be zero. The JNR
program must provide evidence that this mitigation activity will be (at validation) or has been (at
verification) implemented.
5.7
Step 7: Production Reductions Subject to Leakage
In this step the tool calculates the amounts of production of each type of good that is subject to market
leakage, net of mitigation. These amounts are the foregone production amounts calculated in Step 5:
Forgone production, minus the amount of mitigation reported in Step 6: Leakage Mitigation. If no
mitigation is reported in Step 6: Leakage Mitigation, amounts in Step 7: Production Reductions
Subject to Leakage will be the same as amounts in Step 5: Forgone production.
5.8
Step 8: Gross Leakage
The fundamental premise of market leakage is that where production is decreased by one unit, then
production in other locations will replace some, but not all, of the forgone production. Based on economic
publications and studies, all the values for the rate of change of consumption as a function of change in
price and the rate of change of production as a function of change in price were compiled. The rate of
change of supply per unit of change in price is called the elasticity of supply. The rate of change in
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demand per unit change in price is called the elasticity of demand. Elasticities of supply and demand are
provided in Step 8: Gross Leakage of the tool and in the "Elasticities" worksheet of the calculation tool.
The elasticities provided must be used in the leakage calculations unless other elasticities are
demonstrated as more appropriate.
The elasticities are used to calculate the fraction of forgone production within the jurisdiction that is
replaced by production increases outside the jurisdiction.
These replacement rates are used to calculate the change in production elsewhere that is expected to
result from the net forgone production that results from REDD+ activities. Values must be entered in cells
F63 through G65 for the particular agricultural crops that would have been grown on deforested lands in
the baseline. Supply elasticity and demand elasticity values must be taken from the sheet named
"Elasticities" that is in the tool. Where the "Elasticities" worksheet does not have an elasticity value for the
crop being analyzed, then the value 0.36 must be used as the supply elasticity and -0.24 as the demand
elasticity, unless different elasticity values are demonstrated as more appropriate.
The tool uses these elasticity values to calculate expected amounts of increase in production of goods
that are expected to occur outside the jurisdiction as a result of the forgone production calculated in Step
7: Production Reductions Subject to Leakage.
5.9
Step 9: National Share of the Global Market
UNFCC policy establishes that countries are only responsible for their own GHG emissions. As a result,
emissions displaced from one country to a second country are not counted by the first country, and
instead are counted by the second country. Countries assert that they are sovereign and cannot be held
responsible for the emissions of other countries. As a result, a jurisdiction or country reporting GHG
emission reductions or removals does not report emission increases that may occur in other countries as
a result of the activities of the reporting country.
This step calculates amounts of leakage that are expected to occur in the country where the reporting
jurisdiction is located. Actual displacement depends on what the available production capacity of the
country, transportation costs, trade costs and other factors. The tool does not attempt to map global
production capacity and market linkages. Instead, the tool makes the simplifying assumption that there is
equal probability that emissions could be displaced to anywhere in the world. Thus, a country's share of
leakage is that country's share of the global production of the good being analyzed.
In this step, enter the amount of national and global production of each type of good where production is
calculated as forgone in Step 8: Gross Leakage. Where a value in cells C63 through C69 is greater than
zero, values must be entered for that good in Step 9: National Share of the Global Market. The units
used in this step may be different from units in other steps, but must be comparable. For each good, the
units must be the same for the national production amount and the global production amount.
Global production values may be taken from recent Food and Agriculture Organization (FAO) or World
Bank reports. Otherwise these values must be available from a recognized, credible source and must be
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reviewed for publication by an appropriately qualified, independent organization or appropriate peer
review group, or be published by a government agency. Where the country in which the reporting
jurisdiction is located has recent production data, this data may be more reliable or more recent than FAO
or World Bank data or reports. Trade organizations may have production estimates that are more reliable
than FAO or national reports. The JNR program must justify the appropriateness of the data source used.
5.10
Step 10: Domestic Share of Leakage
This step applies the fractions of domestic leakage calculated in Step 9: National Share of the Global
Market to the gross leakage amounts calculated in Step 8: Gross Leakage. The tool makes the
calculations and reports amounts of domestic leakage, by product type.
5.11
Step 11: Area of Domestic Leakage
The amounts of leakage calculated in Step 10: Domestic Share of Leakage are in amounts of goods.
To calculate the effect on GHG emissions, these amounts must be converted to areas of land required to
produce these amounts of goods. In this step, the tool converts amounts of production increases
elsewhere to the areas of land needed to produce these amounts of goods.
Where national yield rates are known and demonstrated to be different from jurisdictional yield rates,
enter the national yield rates in cells F91 through F97. Alternatively, where yield rates measured in the
jurisdiction are demonstrated to be more accurate than national numbers, the jurisdictional yield rates
from step 4 may be used in Step 11: Area of Domestic Leakage.
The tool makes separate calculations of areas of deforestation and degradation. The tool assumes that all
crop and livestock use is on lands that are deforested. The tool assumes that wood extraction reduces
forest carbon stocks but does not deforest the land. Thus, the deforested area is the area used for crops
and livestock. Where the area used for wood extraction is greater than the area use in agriculture, then
the additional area used for wood extraction is calculated to be the area where degradation occurs. The
tool assumes that saw log extraction, pulpwood extraction and fuelwood extraction overlap.
5.12
Step 12: Fraction of Domestic Leakage Causing Deforestation
Some production increases elsewhere in the country are expected to occur on lands deforested for new
production, some production increases are expected to result from bringing non-forest lands into
production, and some production increases are expected to result from increasing the efficiency of
production on lands already in production.
In this step the tool estimates the fraction of production that is expected to come from deforestation
elsewhere in the country. The tool makes the conservative simplifying assumption that no production
increases come from lands that are either non-forest or already in production. In reality, if grasslands exist
in a country, much new agricultural land is taken from grasslands and pasture, where the grasslands
have enough water to grow crops.
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The tool assumes that the fraction of new production that comes from forest is the fraction that is the
country's total forest area divided by the sum of the country's forest area and its agricultural area. The
areas of forest and agricultural land in the jurisdiction are subtracted from the areas of forest and
agricultural land in the country, and the forested faction of the total area is calculated.
5.13
Step 13: Carbon Density of Forests Receiving Leakage
Areas selected for REDD+ activities are usually selected for high biodiversity, carbon stock and/or
customary value, and often are different from other lands in the country. As a result, the carbon stocks in
forests outside a jurisdiction are likely to be different from carbon stocks within a jurisdiction.
In this step, enter the average carbon stock of forests outside the jurisdiction. Also enter the average
carbon stock of deforested lands outside the jurisdiction and the average carbon stock of degraded forest
outside the jurisdiction. These two values are entered in units of metric tons CO2e per hectare. All carbon
pools for which the jurisdictional proponent claims avoided GHG emissions must be included in these
amounts. Care must be taken to ensure that the carbon pools and pool boundaries are the same for both
the pre- and post-deforestation carbon stock numbers used here.
5.14
Step 14: Leakage Emissions and Deduction
This step calculates the amount of global commodity leakage expected to result from deforestation
occurring outside the jurisdiction (but within the same country) due to forgone production of goods within
the jurisdiction.
Global commodity leakage emissions, expressed in tCO2e, are calculated as the average emission per
hectare of deforestation outside the jurisdiction (calculated in Step 13: Carbon Density of Forests
Receiving Leakage), multiplied by the fraction of displaced domestic production that come from forests
(calculated in Step 12: Fraction of Domestic Leakage Causing Deforestation), multiplied by the total
area of production displaced to domestic locations outside the jurisdiction (calculated in Step 11: Area of
Domestic Leakage).
Global commodity leakage is also reported as a percentage of gross GHG emission reductions achieved
within the jurisdiction. The global commodity leakage percentage corresponds to the leakage deduction
for the global commodity leakage factor in the VCS Tool for the Estimation of Jurisdictional Leakage in
VCS JNR Programs (ie, 4 percent corresponds to a leakage deduction of 4 for the global commodity
leakage factor in the tool).
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APPENDIX 1: DOCUMENT HISTORY
Version
Date
Comment
v0.1
27 Jun 2013
Draft released for public consultation.
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