Bringing forest carbon projects to the market

More documents

Recommendations

Info

Rest of the worldEuropeNorth AmericaTotal0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%0,5 - 2,5€ 2,5 - 6,5€ > 6,6 €Figure 34: Acceptable sale prices for buyers of forest carbon credits (Source: Ecosecurities)The first two points provide a basis for calculating the sale price of credits alreadygenerated (secondary credits). However, a great many transactions occur well aheadof their actual generation (primary credits). A discount is then applied according tothe risks involved in the transaction for the investor (financing of some of the costs,permanence risk, etc.). As shown in figure 35, the risks decline as the project advances,until the price of the credits reaches the market value initially set.How risks (red line) evolve with the progress of a CDM or JI projectPhase Feasibility Construction OperationClassicproject risksFeasibilityFellinglicenseDelaysCost of debtAggregation(CO2 fund)Technology implementationMarket pricesSuppliers/Implementationraw materialsFinancial andlegal risksQuid pro quoTradeSpecificCDM/JI risksValidation of Approval fromthe methodology investingApproval from host countrycountry DNA/DFP DNA/DFPValidation/determinationVerification,ETS fungibilityITL operationOperationMarketvolatilityTimeCER/ERUpricesSources: UNEP, Eurosecurities, World Bank, E&YFigure 35: Credit prices depend on the stage reached in the project cycle (Sources: UNEP,Ecosecurities, World Bank, E&Y)Bringing Forest Carbon Projects to the Market127
The parties may agree on the method to use to set prices, although the vendor isentitled to do so unilaterally in the case of auctions where the sale goes to the highestbidder. In over the counter sales, the most commonly used methods are as follows:◆ ◆◆ ◆◆ ◆◆ ◆Fixed price. The simplest approach is to set a fixed price per credit, whichwill remain the same throughout the duration of the contract. This approachis reassuring for both parties, but makes no allowance for inflation or marketfluctuations. Provision may be made for inflation in a fixed price contractstipulating that the unit price will automatically increase by X% each year;Indexed price. This is calculated on the basis of a spot rate. A spot rate usuallyrefers to other credits or, more frequently, to other emission reduction unitssuch as prices for allowances under the EU ETS. Consequently, the unit price willfluctuate, changing with each annual payment. This method of calculation involvesopportunities and risks for both vendor and buyer, depending on variations in thereference spot rate during the term of the contract. An indexed price simply meansthat neither the vendor nor the banks will be able to calculate their carbon income,or the value of the contract;Fixed price combined with an indexed price. Combining a fixed price withan indexed price gives a minimum guarantee and limits the impact of spot ratefluctuations on the unit price. The combination can also include a floor and ceilingprice per unit, as explained below; andIndexed price with floor and ceiling prices. Giving a floor (minimum unit price)and a ceiling (maximum unit price) protects both vendor and buyer from thelargest spot rate fluctuations and facilitates long-term planning.In at least one country (China, for the CDM), market prices are regulated. Somelocal regulations may stipulate floor prices. Foreign exchange controls in somecountries, although they may be favorable to the host country in the case of carbontransactions, may require compliance with certain procedures at the time of payment.The vendor should therefore refer to local regulations before setting a price orchoosing a method for doing so.3.4.3.6 How to sell the credits: directly or through an intermediary?Credits from the project may be sold directly to the credit end-user (e.g., as part ofan offsetting strategy) or through brokers and traders acting as intermediaries. The128Financing a forest carbon project and selling credits
Page 3 and 4:
Authors and AcknowledgementsThis gu
Page 5 and 6:
2.2. Br i n g i n g f o r e s t car
Page 9 and 10:
needed credibility to the forestry
Page 11 and 12:
This lower market share can be expl
Page 13 and 14:
that are used include grants, prefe
Page 15 and 16:
◆◆ ConclusionWhile forestry pro
Page 17 and 18:
a)Gt equiv-CO 2 /year28,735,639,444
Page 19 and 20:
1.2. The different types of forest
Page 21 and 22:
What is a forest?The United Nations
Page 23 and 24:
1.2.4. Projects concerning uses of
Page 25 and 26:
organized 13 . Rapidly increasing i
Page 27 and 28:
In national GHG inventories, Articl
Page 29 and 30:
◆◆ Forest carbon in non-Annex I
Page 31 and 32:
At present, CDM forest projects onl
Page 33 and 34:
to their development no longer exis
Page 35 and 36:
Primary CDM credits traded in 2008
Page 37 and 38:
Main forest quality standards on th
Page 39 and 40:
The quantities of forest credits tr
Page 41 and 42:
several plantation sites but run by
Page 43 and 44:
It should be remembered that the da
Page 45 and 46:
1< 5< 10< 30> 30Projects seeking st
Page 47 and 48:
We were able to collect data on sur
Page 49 and 50:
1.5. ConclusionCompared to the fear
Page 51 and 52:
2. Prospects for the forestcarbon m
Page 53 and 54:
of GHG emissions, etc.). Moreover,
Page 55 and 56:
For countries currently experiencin
Page 57 and 58:
2.1.2.2. Implementing and financing
Page 59 and 60:
With more robust data on GHG emissi
Page 61 and 62:
system similar to the current CDM o
Page 63 and 64:
Aside from these funds dedicated to
Page 65 and 66:
It should be noted that a change in
Page 67 and 68:
to boost project development. Howev
Page 69 and 70:
Project for commercial reforestatio
Page 71 and 72:
Investor Bank Public or philanthrop
Page 73 and 74:
Drawing up these documents and secu
Page 75 and 76:
Case 1:JumaCase 2: ARCorridorCase 3
Page 77 and 78: In order to cover these costs, the
Page 79 and 80: REDD project is to curb deforestati
Page 81 and 82: 3.2.1.2. Carbon costsImplementing t
Page 83 and 84: 3.2.1.3. Management costsManaging,
Page 85 and 86: Income will depend on the volume of
Page 87 and 88: 3.2.2.6. ConclusionCalculating cost
Page 89 and 90: 3.2.3.3. Conclusion and recommendat
Page 91 and 92: Titleholders (100 %)ShareholdersInv
Page 93 and 94: Other indicators can also give a go
Page 95 and 96: IRR examples for plantations and na
Page 97 and 98: Example of a debt-financed project:
Page 99 and 100: 3.3.2.3. Subsidies and donationsA s
Page 101 and 102: (Merrill Lynch, JP Morgan, BNP Pari
Page 103 and 104: InitiativesBioCarbon Fund(World Ban
Page 105 and 106: CasestudyNo. 1:JumaNo. 2: ARCorrido
Page 107 and 108: Carbon standardsExperience and cred
Page 109 and 110: 3.4.1.2. Project eligibility for th
Page 111 and 112: To handle the issue of permanence u
Page 113 and 114: number of credits generated under a
Page 115 and 116: Plan Vivo Suitable forvery small-sc
Page 117 and 118: ◆◆ Who has rights over the tree
Page 119 and 120: (when the transaction is effectivel
Page 121 and 122: ◆◆ the person(s) financing the
Page 123 and 124: 3.4.2.4. How should carbon credit o
Page 125 and 126: A contract presupposes an agreement
Page 127: carbon credits. It is important to
Page 131 and 132: Annex 1: Applicable methodologiesfo
Page 133 and 134: Methodologies for large scale affor
Page 135 and 136: Methodologies for small-scale Affor
Page 137 and 138: Annex 2: The CDM project cycle136
Page 139 and 140: The table below compares the calcul
Page 141 and 142: Case study no. 1Avoided deforestati
Page 143 and 144: Project activities and costs are as
Page 145 and 146: Case study no. 2Ankeniheny-Zahamena
Page 147 and 148: Project costs: 1.8 MUS$11%8%Activit
Page 149 and 150: Case Study no. 3Ankeniheny-Zahamena
Page 151 and 152: Direct income from conservation act
Page 153 and 154: Case study no. 4Commercial (re)affo
Page 155 and 156: Project costs: 15 M€4% Activity:
Page 157 and 158: Case study no. 5Afforestation on th
Page 159 and 160: Project costsProject income10%5%Pla
Page 161 and 162: GlossaryAcronym French Acronym Engl
Page 163 and 164: teqCO 2Tonne équivalent CO 2teqCO
Page 165: 164Etude de cas n°3
show all

Bringing forest carbon projects to the market

Create successful ePaper yourself

Delete template?

Save as template?