GARP Sustainability and Climate Risk Certificate Carbon Markets, Offsets & Payments for Ecosystem Services: practice questions

1 · Carbon pricing instruments: taxes and emission trading schemes · hard

A company sets an internal 'shadow' carbon price for investment appraisal. What does this do?

1. Charges each business unit a real fee per tonne, which the national tax authority then collects as a levy
2. Adds a notional cost per tonne to project cash flows so that high-emitting options look less attractive
3. Creates allowances that the company can sell on the national ETS when its projects cut emissions
4. Fixes the company's emissions at a cap, beyond which no new projects may be approved for any reason

2 · Major compliance markets and their design features · medium

What does the EU ETS Market Stability Reserve do?

1. Fixes the allowance price at a floor set each year by the European Central Bank for all covered sectors
2. Withdraws allowances from auction when the surplus in circulation is high and releases them when it is low
3. Holds buffer credits from forestry projects to cover reversals in the EU's land-use sector accounts
4. Lends allowances to installations that cannot afford to comply, to be repaid with interest within five years

3 · Major compliance markets and their design features · hard

Australia's reformed Safeguard Mechanism sets declining baselines for large facilities. A facility emits below its baseline. What happens?

1. It is issued Safeguard Mechanism Credits for the difference, which it may sell to other facilities
2. Its baseline for later years is raised by the amount of the difference, as a reward for early action
3. It must pay a carbon tax on the difference, because the scheme charges every tonne below the baseline it sets
4. Nothing: facilities below baseline are removed from the scheme and lose all rights to trade credits

4 · From the Kyoto mechanisms (CDM, JI) to Paris Article 6.2 and 6.4 · medium

The Article 6.4 mechanism issues 100,000 A6.4ERs for a project. 5% go to the Adaptation Fund as share of proceeds and 2% are cancelled for overall mitigation in global emissions (OMGE), both taken at issuance. How many units does the project participant receive?

1. 95,000
2. 98,000
3. 93,000
4. 90,000

5 · Voluntary carbon market structure: standards, registries, buyers · medium

Under ICAO's CORSIA, from 2024 what is the baseline above which international aviation emissions must be offset?

1. 100% of 2019 emissions
2. 100% of 2005 emissions
3. 85% of 2019 emissions
4. Average of 2019 and 2020

6 · Credit integrity: additionality, baselines, leakage, permanence · medium

Which baseline choice is the most common cause of over-crediting?

1. A baseline that is updated with observed data from matched control areas over the crediting period
2. A baseline set conservatively below historical trends to allow for uncertainty
3. A baseline standardised for a whole jurisdiction and allocated across its projects
4. A baseline projecting more emissions or deforestation than would really have happened

7 · REDD+ and nature-based credits (forest detail in the Forestry track) · medium

What did independent studies comparing many voluntary REDD+ projects with synthetic control areas find?

1. Many project baselines overstated the deforestation that would have occurred, so many credits lacked real reductions
2. Deforestation inside project areas was higher than in matched control areas, proving that projects increased clearing
3. No difference could be measured in any project, so remote sensing cannot be used to evaluate REDD+ at all
4. Project baselines understated deforestation, so projects had received far fewer credits than they deserved

8 · Validation, verification and buffer pools · medium

A wildfire releases 10,000 t CO2 from a forest project whose credits were all sold. The reversal is judged unavoidable. Under typical buffer-pool rules, what happens?

1. Nothing happens, because credits once issued cannot be affected by later carbon losses
2. The project developer must buy 10,000 credits on the market and pay a penalty per tonne
3. 10,000 credits are cancelled from the programme's buffer pool to cover the loss
4. The buyers' retired credits are reinstated and 10,000 of them are re-sold to cover the loss

9 · Integrity initiatives: core carbon principles and claims guidance · medium

Before making any VCMI Claim, what must a company first show?

1. That all its credits come from removal projects located in the same country as its headquarters
2. A public science-aligned target with progress against it and transparent emissions reporting
3. That it has been certified carbon neutral under ISO 14068-1 for at least three consecutive years
4. That it has retired credits equal to at least 100% of its Scope 1 and 2 emissions in each year

10 · Corresponding adjustments and double counting · hard

Under Article 6.2, a host country may define the 'first transfer' of ITMOs authorised for other international mitigation purposes (such as CORSIA) as which event?

1. Only the date the buyer's ship or aircraft leaves the host
2. Authorisation, issuance or use of the mitigation outcome
3. Only the year the project was first registered with the CDM
4. Only the date of the host country's next NDC submission