Leakage / displacements

For the purposes of this webpage, leakage refers to changes in anthropogenic emission reductions or removals of GHGs outside the accounting system that result from activities that cause changes within the boundary of the accounting system. Leakage is important because failing to account for it can affect the environmental integrity of emission reductions or removals claimed by a REDD+ project or programme.

Leakage is also referred to as ‘displacement’. Some distinguish the two suggesting that displacement only refers to increased emissions (or decreased removals) that occur outside the project or program boundaries. In contrast, leakage may occur both within and outside the project or program boundaries and represents any increased emissions (or decreased removals) that are not accounted for—for example, degradation both within and outside a project boundary, attributable to a project that is only accounting for deforestation. In many cases, treatment of leakage differs when taking a jurisdictional (national or subnational) approach versus a project-based approach, with more stringent requirements at smaller scales where activity shifting is assumed to be a much higher risk.

There is no current precedent in international agreements to account for leakage, or displacement, beyond a country’s national borders (“international leakage”).  Where countries take a national level commitment (under the Convention or Kyoto Protocol) or in the case of national level REDD+ programmes (e.g. Brazil, Guyana), leakage is not considered or is assumed to be captured in the national monitoring and accounting system.

International project-based offsets (e.g. under the CDM or JI) include provisions to manage leakage. Domestic programmes that recognize project-based offsets also require accounting for leakage. This includes both activity shifting and a discount for any loss in productivity in the project area. Leakage (displacement) is also raised as an issue that needs to be considered for REDD+ activities under the UNFCCC. The REDD Offsets Working group recommendations for possible international sectoral offsets for California’s cap-and-trade system suggests that even at the jurisdictional level, participating states should account for residual leakage outside their borders. The VCS JNR also requires accounting for domestic leakage – including that which may occur outside subnational state or province wide REDD+ programs, but within the same country.

Voluntary carbon standards have some of the most stringent requirements for leakage. Such standards require accounting for leakage, and in some cases also require monitoring outside the program area for leakage (e.g. within a “leakage belt” or a circumference that surrounds the project area). Such standards also require consideration of various types of leakage: market, activity shifting, and ecological.

Finally, most safeguard standards are created to be complementary to carbon, or GHG, standards and defer to such standards for the management and accounting of leakage. Only the Climate, Community and Biodiversity Standards have explicit leakage requirements.