Sustainable Forest Finance Toolkit - PwC

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Forest carbon and otherecosystem services briefing note2 of 5New Application HOMEUptake and emissions from land-use change between 1850 and 2000 *Keeping up-to-date with Forest CarbonThe negative emissions,(uptake) post-1940 are largelydue to increasing forest area inthe US and Europe. The peakemissions in 1990 are linked toforest fires in IndonesiaSource: Stern, 2007* Note: This graph depictsemissions based on land usechange. Other calculationsconclude that the terrestrialecosystem is a net carbon sink.Forest Carbon is a fast-moving topic and changes month by month. These useful sources help provide updates on thecurrent issues:• The Forests Dialogue: http://research.yale.edu/gisf/tfd/• UN-REDD: http://www.un-redd.org/• Forest Carbon Portal: http://www.forestcarbonportal.com/Page 56Sustainable Forest Management (SFM)Sustainably managed forests are approximately carbonneutral. They form a mosaic across the landscape in whichthe growth of trees over a given area will compensate for thecarbon lost through annual logging of a much smaller area.On the other hand, a forest landscape subjected to land-usechange or over-harvesting will release more carbon than ittakes up. The rate of recapture of atmospheric carbondepends on several factors:A young stand with small trees will absorb carbon as thetrees grow, but the amount of carbon stored is initially small.The rate of storage is proportionate to the high rate of growth,and managed forests sequester a pool of carbon, withharvest balanced by re-growth.An old stand with big trees is the result of a long period ofbiomass accumulation. Although the science is stillinconclusive, it is generally accepted that old stands with bigtrees store large amounts of carbon. As their growthstagnates they may no longer take up as much carbon asthey release.Stable old-growth forests are a valuable pool of storedcarbon. Replacing these stands with young, vigorouslygrowing trees would reduce the amount of carbon stored onthe land, and it would take decades, or even centuries, forthe newer stands to recapture it.Sustainably managed forests, however, play an importantrole in climate change mitigation. Harvested wood productsand wood-based bioenergy from forests already beingsustainably managed contribute to climate mitigation throughcarbon sequestration and avoided emissions whensubstituted for more energy intensive materials. The IPCCfourth assessment report wrote 'In the long term, asustainable forest management strategy aimed atmaintaining or increasing forest carbon stocks, whileproducing an annual sustained yield of timber, fibre, orenergy from the forest, will generate the largest sustainedmitigation benefit.’pwc
Forest carbon and otherecosystem services briefing note3 of 5New Application HOMEAfforestation and Reforestation (A&R)projectsAfforestation: These projects involve re-establishing ‘forestcover’ (i.e. at least 20% canopy cover) on lands whichhistorically were forested but have not had significant forestcover for at least 50 years.Reforestation: As above, but on lands where deforestation –or severe degradation – of forest land occurred within the last50 years. Some forest carbon standards require thatdeforestation had to occur before 1990 (the Kyoto baselineyear) for projects to receive formal recognition.Reduced Emissions from Degradationand Deforestation (REDD)The aim of REDD projects is to identify areas undergoingrapid loss or degradation of existing forests, and developmanagement plans and financing to halt and reverse theseactivities and related carbon emissions (which occur throughsoil disturbance, burning of biomass for clearance, andorganic matter decay).The profile of REDD in the United Nations Climate ChangeConference in Copenhagen has risen, and now constitutesaround 10% of the negotiating text. One of the current ideasfor REDD is to break it into a three-stage ‘phased approach’.In phase 1 countries develop national REDD strategiesincluding institutional strengthening, in phase 2 a fund-basedinstrument is implemented that allows countries to accessREDD finance, and in phase 3 a GHG-based instrumentrewards countries based on emission reduction performance.More recently the idea of REDD+ has emerged which aimsat delivering more than reduced emissions and includesalleviating rural poverty, conserving biodiversity andmaintaining other ecosystem services.In 2008 The Forests Dialogue initiative published BeyondREDD, which includes suggested actions for financialinstitutions to take when considering funding REDDprojects.These can be downloaded at:www.wbcsd.org/DocRoot/pVG14xChqTkuI6kenBQ4/TFDclimatestatement.pdfIn 2009 the UK Department for International Development(DFID) and Department of Energy. Food & Rural Affairs(DEFRA) commissioned the Forest Investment Reviewwhich also contains useful information on investing inREDD. This can be downloaded atwww.forumforthefuture.org/files/130713_fff_07_FIR_for_web_r4.pdfWood-based biofuelsWood-based biofuels recycle to the atmosphere carboncaptured through tree growth. Compared to fossil fuels,which transfer carbon from geologic reserves into theatmosphere, wood-based biomass fuels are considered‘carbon neutral’ when the forests from which the fuelswere taken remain as forested areas, or trees are plantedelsewhere to compensate.There is increasing interest in the use of biomass fuelsfrom forests, especially in the transportation sector;however, if carried to the extreme, demand for woodbasedfuels could result in negative effects:• Unsustainable harvesting for biomass• Reduced carbon sequestration• Distortion of markets for limited wood supplies.Page 57pwc
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Sustainable ForestFinance ToolkitTh
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Guidance for using the ToolkitThis
Page 6 and 7: How does economic development impac
Page 8 and 9: Challenges and problems associated
Page 10 and 11: Sustainability issues in the forest
Page 12 and 13: Costs and benefits of certification
Page 14 and 15: Costs and benefits of certification
Page 16 and 17: 1 New ApplicationThis section provi
Page 18 and 19: Illustrative - Management Interview
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Page 22 and 23: Illustrative - Higher risk client a
Page 24 and 25: Legality issue briefing note2 of 5N
Page 26 and 27: Legality issue briefing note 4 of 5
Page 28 and 29: Small scale and community forestent
Page 30 and 31: Sustainable ForestManagement briefi
Page 32 and 33: Special places briefing note 1 of 4
Page 34 and 35: Special places briefing note 3 of 4
Page 36 and 37: Planted forests briefing note 1 of
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Page 46 and 47: Certification briefing note5 of 7Ne
Page 50 and 51: Pollution and EnvironmentalManageme
Page 52 and 53: Local communities and indigenouspeo
Page 54 and 55: Local communities and indigenouspeo
Page 58 and 59: Forest carbon and otherecosystem se
Page 60 and 61: Brazil - country briefing note 1 of
Page 62 and 63: Indonesia - country briefing note 1
Page 64 and 65: Malaysia - country briefing note 2
Page 66 and 67: Russia - country briefing note 2 of
Page 68 and 69: 2 Portfolio ManagementOne of the ha
Page 70 and 71: FMU / supply chain performance 1 of
Page 72 and 73: 3 Policy DevelopmentA carefully con
Page 74 and 75: Suggested Internal Bank ForestryPol
Page 76 and 77: Suggested Internal Bank ForestryPol
Page 78 and 79: 4 ProcurementIn 2007, the WBCSD and
Page 80 and 81: Sample procurement policy2 of 2Proc
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Page 84 and 85: Appendix 2: Client performancerequi
Page 86 and 87: Appendix 2: Client performancerequi
Page 88 and 89: Appendix 4: Consolidated duediligen
Page 90 and 91: Appendix 5: Acronyms1 of 1ASEAN Ass
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Sustainable Forest Finance Toolkit - PwC

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