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Legal Agreements


Letter of Agreement

The Letter of Agreement (for feasibility study funding) is an informal letter acknowledging and thanking the prospective investor. At this stage, the project developer has discussed the potential carbon offset project with a prospective investor. The investor has agreed to fund a feasibility study in order to assess the probability of success of such a project. The Letter of Agreement ("LOA") typically mentions the amount from the investor for the feasibility study, as well as the key components of the feasibility study. It should include request for signature, as well as information on where to send payment, etc. Because this Letter confirms the financial participant's commitment to funding a feasibility study, it requires a returned signature of the financial participant. A template for a Letter of Agreement can be found in Appendix section 3.1


Memorandum of Agreement

The Memorandum of Agreement ("MOA") outlines relationship between the project developer, the financial participants, and partners between the period of the feasibility study and the official start of the project. The MOA is an agreement among parties to develop a Project Proposal, and to establish the terms of such a proposal, and to confirm the financial participant's commitment to fund the Project Proposal. The MOA stipulates that the Project must obtain approval from the appropriate government agency. A description of the main sections of a Memorandum of Agreement can be found in Appendix section 3.2


Comprehensive Agreement

The Comprehensive Agreement is the working document for the actual carbon offset project. The Comprehensive Agreement identifies all parties to the project, their specific roles and commitments. It is a contract and sets forth the project objectives, project governance and project finance terms. The Comprehensive Agreement should be specific and detailed so as to prevent any future misunderstandings. A description of the main sections of a Comprehensive Agreement can be found in Appendix section 3.3. The comprehensive agreement is an example and should be modified as appropriate for each project.


Monitoring and Verification protocols



Monitoring and verification is essential to ensure the credibility of projects. Experts will be required to estimate accurately the amount of carbon sequestered by the project. Monitoring and verification activities involve the creation of a "baseline scenario" that illustrates what would have happened at the project site without the intervention.

As the carbon market develops there needs to be a reliable method for measuring the GHG benefits of carbon storage projects. Monitoring and verification activities will need to measure the amount of carbon emissions reduced, avoided or sequestered over the course of the project. Winrock International Institute for Agricultural Development has developed and implemented a rigorous protocol for carbon monitoring and verification based on a peer-reviewed, field-tested methodology.

Monitoring refers to assessment of the net difference in organic carbon stored in soil and forest biomass for project and non-project (or pre-project) sites over a specified period of time. The difference in carbon available, reduced, or mitigated is the amount of carbon sequestered (GHG benefit) by the project. Verification refers to an independent review of carbon monitoring methodologies, records and inspection, and calibration of measurement and analytical tools, similar to an accounting audit performed by an objective party.

Under the protocol developed by Winrock, in order to calculate the carbon benefits of a forestry or agroforestry project, the following steps should be taken:

  1. Establish a carbon baseline. Through the use of permanent forest measurement plots, satellite imagery, etc., quantitatively determine how much carbon exists in the project area.
  2. Establish a reference case. Quantitatively determine what would have happened to the land without the project, and establish data collection on plots of land representing this "without-the-project" reference case.
  3. Estimate the difference between the baseline and reference case. Using sound assumptions, determine, for example, how many tons of carbon offsets will be generated from the project by calculating how much more carbon will be sequestered, or how much carbon will not be released due to prevention of deforestation. Field based sampling includes measurement of above ground biomass, leaf litter, soil carbon and estimates of below ground biomass.
  4. Re-measure the carbon in the project area. Every 2-5 years over the project life, "true up" the original assumptions about how many offsets will result from the project.

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