Bringing forest carbon projects to the market

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1. The fragile position of forestryprojects in the carbon marketsHow do forest projects benefit from the rapidly growing carbon market? Amongstthese projects, which are eligible for carbon credits, and on which markets can thesecredits be traded? What projects already exist, what are the volumes traded and whattrends are emerging? Based on a review of the forest carbon market in 2009, thisintroductory section explains the key issues accounting for the fragile position offorestry projects in the carbon economy.1.1. The role of forests in climate changeTerrestrial ecosystems in general, and forest ecosystems in particular, have a crucialrole in preserving the equilibrium of the Earth’s climate. Worldwide, emissions ofgreenhouse gases (GHG) from land uses and the sectors referred to as Land Use, LandUse Change and Forestry (LULUCF1) amount to 17.4% of all GHG emissions, makingthis sector the third-largest source of GHG emissions - behind the energy sector(25.9%) and industry (19.4%), but ahead of agriculture (13.5%) and transport(13.1%).These emissions mainly arise from deforestation in countries in the intertropical zone,especially Brazil, Indonesia, Malaysia, and the Democratic Republic of the Congo.1 The term used in the IPCC guidelines for national GHG inventories (1996). A different termdesignating the same sector was defined in the updated IPCC report for 2006: Agriculture, Forestryand Other Land Uses, or AFOLU. However, LULUCF is still the official term used by the United Nations.Bringing Forest Carbon Projects to the Market15
a)Gt equiv-CO 2 /year28,735,639,444,749,0CO 2– fossil fuels, other sourcesCH 4– agriculture, waste, energyCO 2– deforestation, organic decomposition, peatN 2O – agriculture, other sourcesFluorinated gasesb) c)CH 414,3 %CO 2(deforestation,biomassdecomposition,etc.) 17,3%Fluorinated gasesN 4O1,1 %7,9 %CO 2(other sources)CO 2 (fossil fuels)Waste and wastewater2,8 %Forestry17,4 %Agriculture13,5 %Industry19,4 %Energy supplies25,9 %Transport13,1 %Residential andcommercial buildings7,9 %Figure 1: Worldwide GHG emissions from human activities (source: IPCC2)Although deforestation contributes heavily to anthropogenic GHG emissions, forestecosystems also help to combat climate change by absorbing large quantities of C02through photosynthesis. This occurs because forest surface areas are increasing in thenorthern hemisphere, and the quantities of carbon stored in existing forests are also2 IPCC, 2007. 2007 Climate Change Report: Contribution from Working Groups I, II and III to thefourth IPCC Assessment Report16The fragile position of forestry projects in the carbon markets
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: ◆◆ ConclusionWhile forestry pro
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
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to boost project development. Howev
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Project for commercial reforestatio
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Investor Bank Public or philanthrop
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Drawing up these documents and secu
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Case 1:JumaCase 2: ARCorridorCase 3
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In order to cover these costs, the
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REDD project is to curb deforestati
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3.2.1.2. Carbon costsImplementing t
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3.2.1.3. Management costsManaging,
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Income will depend on the volume of
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3.2.2.6. ConclusionCalculating cost
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3.2.3.3. Conclusion and recommendat
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Titleholders (100 %)ShareholdersInv
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Other indicators can also give a go
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IRR examples for plantations and na
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Example of a debt-financed project:
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3.3.2.3. Subsidies and donationsA s
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(Merrill Lynch, JP Morgan, BNP Pari
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InitiativesBioCarbon Fund(World Ban
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CasestudyNo. 1:JumaNo. 2: ARCorrido
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Carbon standardsExperience and cred
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3.4.1.2. Project eligibility for th
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To handle the issue of permanence u
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number of credits generated under a
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Plan Vivo Suitable forvery small-sc
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◆◆ Who has rights over the tree
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(when the transaction is effectivel
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◆◆ the person(s) financing the
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3.4.2.4. How should carbon credit o
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A contract presupposes an agreement
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carbon credits. It is important to
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The parties may agree on the method
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Annex 1: Applicable methodologiesfo
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Methodologies for large scale affor
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Methodologies for small-scale Affor
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Annex 2: The CDM project cycle136
Page 139 and 140:
The table below compares the calcul
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Case study no. 1Avoided deforestati
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Project activities and costs are as
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Case study no. 2Ankeniheny-Zahamena
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Project costs: 1.8 MUS$11%8%Activit
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Case Study no. 3Ankeniheny-Zahamena
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Direct income from conservation act
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Case study no. 4Commercial (re)affo
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Project costs: 15 M€4% Activity:
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Case study no. 5Afforestation on th
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Project costsProject income10%5%Pla
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GlossaryAcronym French Acronym Engl
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teqCO 2Tonne équivalent CO 2teqCO
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164Etude de cas n°3
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