How Can Emission Reduction Programs Mitigate Risk?
In order to account for risks related to uncertainty and reversals, certain ER units, called “buffer ERs,” can be set aside in an ER transaction registry and deducted from the total volume of verified ERs generated by a program entity. This means that a share of the ERs generated are held in reserve in case any future events reverse the ERs that were generated.
- Uncertainty buffer ERs are verified ERs that are reserved in the transaction registry to account for the level of uncertainty associated with the estimation of emission reductions. These buffer ERs may account for errors related to estimating emissions baselines or measuring emission reductions.
- Reversal buffer ERs are verified ERs that create a buffer for the ER program’s level of reversal risk. ER reversal is the intentional or unintentional release of carbon back into the atmosphere; a reversal might be caused by natural disturbances, climate change, and/or anthropogenic activities. For example, if an ER program generates 10 million tons of ERs over a five-year period, but in the fifth year a forest fire occurs which generates one million tons of GHG emissions, the previously transacted and paid for ERs are protected against this reversal event by the cancelation of one million reversal buffer ERs.
Once ERs are verified and buffer ERs are set aside, the remaining ERs are available to be transacted under the ERPA.