Why a jurisdictional programme (not a single project) changes credit risk, scale, and governance
A J-REDD+ first and foremost changes who controls the rules of the game. In project-based REDD+, accounting and governance are largely “private”: the baseline, leakage management, risk buffer, and reporting depend on the individual developer and the chosen standard. In a jurisdictional/national REDD+ (J-REDD+), the logic is different: accounting shifts to a national or subnational scale, with common rules on baselines, leakage, and risk management, within a public governance framework (ministries, forest authorities, national registries). This is where concepts such as jurisdictional REDD+, nested approach, national accounting come in.
The practical point for a buyer is that a national programme tends to produce a more “industrializable” supply. If MRV and reporting are aligned with the UNFCCC REDD+ framework—therefore FREL/FRL, NFMS, and Safeguards—it becomes easier to structure large, repeatable procurement: multi-year, multi-vintage, multi-lot, with specifications that remain consistent over time. This reduces the typical risk of portfolios made up of many micro-projects, where each project has different assumptions and disclosures.
Risk does not disappear, however—it changes form. In theory, intra-jurisdictional leakage decreases, because accounting covers a wider perimeter and “sees” shifts in deforestation better within the boundaries. In exchange, exposure increases to sovereign and regulatory risk: authorizations, registration and transfer rules, export/ITMO policy, potential taxes, benefit sharing, and above all the risk of policy reversal (rules changing midway through a delivery cycle).
The national scale is also evident in the numbers that feed into UNFCCC accounting. In the UNFCCC technical assessment published on 31 August 2023, Paraguay’s national FREL is shown as revised to 53,943,964.4 tCO₂e/year. That order of magnitude explains why, when people say “national,” different controls, datasets, and processes are needed compared with a single project.
In a corporate tender or an aviation-linked offtake, this translates into contractual flexibility. A jurisdictional programme can support lot substitution clauses, rolling delivery, and quality KPIs (CORSIA tags or Article 6), but it requires due diligence that looks more like an institutional counterparty analysis than a simple developer assessment.
Governance becomes truly material when the scale moves from hundreds of thousands of hectares to millions. At that point, supply, perceived additionality, and the market’s capacity to absorb volumes all change.
Size, areas, and expansion potential: what it means to move from 480,000 hectares to millions of hectares
With a J-REDD+, the right question is not “how big is the project.” It is “what portion of territory is covered by the MRV perimeter,” and how the jurisdictional boundary is defined. For a buyer, credit quality depends on that boundary: what enters the accounting, what stays out, and how expansion to new areas or biomes is managed without creating discontinuities in baselines and rules.
Scale can change unit economics in two opposite directions. More area can mean greater issuance potential and therefore a larger pipeline, with a risk of supply overhang if the market does not absorb it. But more area can also mean greater ability to control leakage and enforce rules, if the State can actually enforce land-use rules and controls. The critical variable is enforcement capacity, not size in itself.
For procurement, a useful context metric is that Paraguay already has a UNFCCC technical setup for REDD+ accounting through an assessed national FREL. This becomes the backbone for scaling perimeters and reporting: it does not automatically guarantee issuance or quality, but it indicates that a public reporting structure and assumptions exist against which precise questions can be asked.
Expansion brings immediate trade-offs. More hectares means more stakeholders and more potential conflicts: communities, private property, protected areas, and economic pressures linked to land use. For a buyer, this translates into complexity around rights, benefit sharing, and traceability of carbon rights. At national scale, it is not enough for “a project” to have strong documents: the programme needs rules that are applicable and verifiable across the entire perimeter.
A B2B example: a buyer that needs to cover 100k–500k tCO₂e/year may prefer a “millions of hectares” programme to reduce sourcing and diligence costs per tonne. But they should require unit-level disclosure: vintage, area of origin, risk buffer, and above all Article 6 authorization status and CORSIA tagging.
If scale increases, an end market is needed that can absorb volumes. This is where CORSIA comes in: demand, rules, and price volatility become part of the REDD+ credit risk model.
CORSIA as an end market: opportunities, eligibility constraints, and price risk for REDD+ credits
CORSIA can function as a demand anchor for forest credits, but it is not an “open” channel. Access is filtered by programme eligibility and by requirements for CORSIA-Eligible Emissions Units and the associated documentation. In practice, it is not enough to have a “forest” unit: it must be issued by an eligible programme and meet the conditions required for regulatory use.
ICAO maintains a table/list of eligible programmes and units for compliance periods (Pilot 2021–2023, First Phase 2024–2026, Second Phase 2027–2029). In 2025, a re-assessment was initiated in view of 2027–2029 supply. For a buyer, this means “CORSIA-grade supply” is a category that can change over time, even with the same methodology.
The key post-2020 constraint, for the First Phase (2024–2026) and more generally for regulatory use, is host country authorization and management of the corresponding adjustment to avoid double claiming. This is where a national programme such as a J-REDD+ becomes particularly relevant, because authorization and NDC accounting are, by definition, in public hands.
On price, compliance demand can create signals that differ from the “generic” VCM. One example often cited as a price discovery event is the first large sale of CEEUs linked to Guyana’s jurisdictional programme (ART TREES), with purchases reported at USD 21.70/unit in an auction/event facilitated by IATA/Xpansiv (late 2024). The message for the buyer is not “this will be Paraguay’s price,” but that the CORSIA label and regulatory use can support higher price levels than non-eligible credits.
The supply-side risk is bifurcation. If a national programme scales significantly but only a share obtains LoA, CA, and CORSIA tagging, a spread emerges between “CORSIA-grade” and “non-CORSIA” credits, with illiquidity or discount risk for the latter. For procurement, this must be managed ex ante, not when the market turns.
To understand whether a J-REDD+ credit can truly end up in CORSIA, you have to get into the details of Article 6 and the corresponding adjustment: documents, timing, and failure modes.
Article 6 and corresponding adjustment: how to avoid double counting and what to ask in due diligence
The operational distinction is simple: credits used as a mitigation contribution can exist without a corresponding adjustment, but claims are more limited and cannot be presented as a “transferred” reduction toward an international target. Credits authorized for use toward NDCs or international targets, including CORSIA, require authorization by the host country and management of the corresponding adjustment to avoid double counting and, above all, double claiming. This is where keywords such as LoA, ITMOs, host country authorization come in.
Document checklist, in a B2B and “auditable” version:
- Letter of Authorization (LoA) from the competent authority, with a clear indication of the authorized use (CORSIA and/or Article 6.2 transfer) and the scope (vintage, volumes, unit type).
- Evidence of when and how the corresponding adjustment will be applied, and where it will appear in the UNFCCC reporting cycle. Timing matters: a CA that is promised but not finalized can create ex post non-compliance risk.
- Registry traceability: serialization, tag/label (CORSIA/Art.6), and chain of custody through retirement or delivery.
- Contract clauses covering revocation or modification of the LoA: remedies, unit substitution, or other forms of buyer protection.
A contractual pattern emerging in CORSIA contexts is the use of backstops/guarantees if the CA is not finalized. This can be a replacement obligation, a guarantee, or a remedy structure that protects the buyer from regulatory non-compliance risk.
The practical warning is what many buyers learn late: LoA does not mean the CA has already been applied. In due diligence, you need to understand whether you are buying (a) units with CA already completed and correctly tagged, or (b) units with a future commitment by the country, and therefore exposure to delays or non-performance.
Even with LoA and CA, the harder question remains: is the unit environmentally and socially sound? With national MRV, the controls that matter also change.
Environmental and social integrity: leakage, permanence, community rights, and MRV transparency at national level
Regulatory suitability is only the first filter. Intrinsic quality depends on leakage, permanence, and the robustness of national MRV. At national scale, leakage should be read as land-use dynamics inside and outside the perimeter and as enforcement capacity. Permanence should be read as reversal risk linked to fires, illegal logging, and governance instability, and as the existence and management of a reversal risk buffer.
The UNFCCC framework helps because it makes many assumptions public. Paraguay, having a UNFCCC process for an assessed national FREL, provides a starting point to interrogate baselines, included or excluded pools, data granularity, and improvement pathways. For a buyer, this is not a “quality stamp”; it is a set of documents and technical choices against which precise questions can be asked.
Social due diligence, at national scale, must change shape. It is not enough to ask “did the project do FPIC?” You need to ask whether the programme has rules that are applicable and auditable on:
- carbon rights and benefit entitlement
- consultation and, where relevant, FPIC
- grievance and remedy mechanisms
- benefit sharing and allocation criteria
Transparency is the litmus test. Minimum B2B expectations include disclosure on deforestation datasets, methodologies, QA/QC, third-party verifiers, and publication of reports. They also include a credible explanation of how the programme manages conflicts between economic incentives and REDD+ objectives.
Operationally, many buyers are bringing these topics into the contract. It works well to include covenants on annual MRV reporting, notification obligations for reversal events (for example fires), and the right to suspend or renegotiate delivery if authorization rules change or if material social non-compliances emerge.
After compliance and integrity, what remains is the part that determines whether the transaction works: real procurement, communicable claims, and fallback plans if CORSIA does not absorb volumes.
Practical implications for Italian buyers: procurement, contracts, communicable claims, and alternatives if CORSIA does not absorb supply
A robust procurement starts with a tranche structure. A typical approach is to buy for 2026–2030 windows with conditions precedent linked to LoA, CA, and tagging (CORSIA/Art.6 label). It also makes sense to include an upgrade/downgrade option between classes: “CORSIA-grade” when available, or “mitigation contribution” if authorization does not arrive or arrives late. For Italy-based buyers, this matters because procurement and claims are often scrutinized against EU and Italian corporate reporting and compliance expectations.
Contracting should cover the most likely failure modes, not theoretical ones. Useful clauses include:
- Delivery schedule by vintage and clear rules on slippage.
- Remedies for CA revocation or delay: unit substitution, extension, or cash settlement.
- Replacement units as a backstop, with equivalence criteria (same vintage or window, same eligibility, same risk level).
- Representations and warranties on rights, absence of double claiming, and consistency between registry and Article 6 documentation.
- Audit rights over MRV and programme documentation, with cooperation obligations.
Communicable claims should be separated by unit category. For authorized credits with CA, claims can be compatible with regulatory uses and “beyond value chain mitigation” contexts, but they require internal policies and rigorous disclosure on serials and registries. For “contributional” credits, claims must be more cautious and consistent with the absence of CA, avoiding ambiguity about “transferred reductions.”
Price-risk planning requires a multi-channel portfolio. If the CORSIA thesis does not hold, or if supply exceeds demand, it is prudent to have alternatives: (a) an aviation-linked channel where possible, (b) other schemes with Article 6 authorization via bilateral agreements, (c) high-integrity VCM with conservative claims. The reason is structural: LoA and CA are constrained resources and can become the bottleneck.
As a reputational hedge and a reversal-risk hedge, a mix with removals or other non-REDD+ nature-based units with different risk profiles can make sense. This is not a 1:1 substitution. It is portfolio risk management across policy risk, reversal, and reputation.
The article’s logic is a simple progression: programme scale, CORSIA demand, Article 6 and CA rules, integrity, and finally procurement. If you need to turn it into a checklist, here it is in four questions:
- CORSIA-ready? Eligible programme and units, clear tagging, re-assessment risk managed.
- CA-ready? Valid LoA, CA plan with timing and responsibilities, contractual remedies.
- MRV & safeguards-ready? Sufficient disclosure, leakage and buffer management, auditable social rules.
- Contract-ready? Delivery by vintage, replacement, audit rights, and options if the market changes.
