4. REDD & Carbon Finance SPC /GTZ Fiji National REDD Policy & Scoping Workshop Suva, 27 August – 1 September 2009 4. REDD & Carbon Finance Dr Sean Weaver, Principal, Carbon Partnership Ltd www.carbon-partnership.com sean.weaver@carbon-partnership.com © Text and illustrations Sean Weaver, Carbon Partnership Ltd

Monday 31 August 2009

Monday 31 August 2009

Framework Scope Reference Level Financing Distribution What activities are eligible? Reference Level How are emission reductions measured? Financing Where does the money come from? Distribution Where do the money & benefits go to?

Carbon & Climate Related Finance Financing Where does the money come from?

Carbon & Climate Related Finance Compliance Carbon Market Voluntary Carbon Market Driver = Binding Obligations Driver = Carbon Neutrality & CSR Kyoto – CDM Copenhagen – REDD+ USA Domestic ETS Various voluntary standards Carbon Exchange OTC Payment for Ecosystem Services Market Grant Finance Driver = Strategic & Philanthropy Driver = Corporate Social Responsibility (CSR) Capacity Building Buy credits Project Development Corporate Sponsorship Direct Barter

Emissions Trading Carbon & Climate Related Finance Compliance Carbon Market Voluntary Carbon Market Emissions Trading

Unconstrained emissions CDM Collective Cap Emissions Trading Collective target is an allowed emission volume LULUCF 1 Unit (AAU) 1 tCO2e This volume is divided into units (tCO2e) Units are allocated to POs pursuant to their individual target (Assigned Amount Units – AAUs) Cap

NZ 310 million AAUs Units are allocated to POs pursuant to their individual target (Assigned Amount Units – AAUs)

NZ 310 million AAUs Units are allocated to POs pursuant to their individual target (Assigned Amount Units – AAUs)

To achieve compliance a country must demonstrate that its actual emissions over the management period match their number of allowances NZ 310 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012

What if a country under-complies with their binding target by overshooting their allowance? NZ 310 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012

What if a country under-complies with their binding target by overshooting their allowance? Country B over-complies with their target generating surplus Allowances Surplus Allowances 2008-2012 Country B 310 million AAUs Allowances 2008-2012 Country B 210 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Country A Country B

Got any spare Allowances? Wanna sell them? Got any spare Allowances? Yep Yep Surplus Allowances 2008-2012 Country B 310 million AAUs Allowances 2008-2012 Country B 210 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Country A Country B

$ Country A Country B Surplus Allowances 2008-2012 Country B 310 million AAUs Allowances 2008-2012 Country B 210 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Country A Country B

$ Country A Country B Surplus Allowances 2008-2012 Country B 210 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Country B 310 million AAUs Allowances 2008-2012 Country A Country B

$ Country A Country B Surplus Allowances 2008-2012 Country B 210 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Country B 310 million AAUs Allowances 2008-2012 Country A Country B

$ Country A Country B Surplus Allowances 2008-2012 Country B 210 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Country B 310 million AAUs Allowances 2008-2012 Country A Country B

$ Country A Country B Surplus Allowances 2008-2012 Country B 210 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Country B 310 million AAUs Allowances 2008-2012 Country A Country B

$ Country A Country B Surplus Allowances 2008-2012 Country B 210 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Country B 310 million AAUs Allowances 2008-2012 Country A Country B

$ Country A Country B Surplus Allowances 2008-2012 Country B 210 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Country B 310 million AAUs Allowances 2008-2012 Country A Country B

$ Country A Country B Surplus Allowances 2008-2012 Country B 210 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Country B 310 million AAUs Allowances 2008-2012 Country A Country B

$ Country A Country B Surplus Allowances 2008-2012 Country B 210 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Country B 310 million AAUs Allowances 2008-2012 Country A Country B

$ Country A Country B Surplus Allowances 2008-2012 Country B 210 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Country B 310 million AAUs Allowances 2008-2012 Country A Country B

$ Country A Country B Surplus Allowances 2008-2012 Country B 210 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Country B 310 million AAUs Allowances 2008-2012 Country A Country B

$ Country A Country B Surplus Allowances 2008-2012 Country B 210 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Country B 310 million AAUs Allowances 2008-2012 Country A Country B

$ Country A Country B Surplus Allowances 2008-2012 Country B 210 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Country B 310 million AAUs Allowances 2008-2012 Country A Country B

$ Country A Country B Surplus Allowances 2008-2012 Country B 210 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Country B 310 million AAUs Allowances 2008-2012 Country A Country B

In Compliance In Compliance Country A Country B Country B 210 million tCO2e Actual Emissions 2008-2012 NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Country B 310 million AAUs Allowances 2008-2012 Country A Country B

Clean Development Mechanism (CDM) Future REDD+ (?) NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Clean Development Mechanism (CDM) Future REDD+ (?) $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Demand $ Supply If REDD Market Mechanism Clean Development Mechanism (CDM) Future REDD+ (?) Demand If REDD Market Mechanism $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 Supply No emissions cap Developed Country Developing Country

$ Clean Development Mechanism (CDM) Future REDD+ (?) Developed Country Only Points of Obligation can play compliance trading Clean Development Mechanism (CDM) Future REDD+ (?) You can play in the voluntary market I’m not a Point of Obligation but I want to play carbon trading $ NZ 310 million AAUs Allowances 2008-2012 NZ 410 million tCO2e Actual Emissions 2008-2012 No emissions cap Developed Country Developing Country

Demand Voluntary Carbon Market Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR) This is a different league with different rules – but anyone can play

Voluntary Carbon Market Demand Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR) This may be for brand differentiation – e.g. “Our wine is carbon neutral” Grove Mill winery in Marlborough produced the world’s first carbon neutral wine

Voluntary Carbon Market Demand Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR) How does work? Three Steps: 1. Measure carbon footprint 2. Reduce carbon footprint 3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate

Voluntary Carbon Market Demand Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR) How does work? Three Steps: 1. Measure carbon footprint 2. Reduce carbon footprint 3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate

Voluntary Carbon Market Demand Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR) How does work? Three Steps: 1. Measure carbon footprint 2. Reduce carbon footprint 3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate

Voluntary Carbon Market Demand Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR) How does work? Three Steps: 1. Measure carbon footprint 2. Reduce carbon footprint 3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate

Voluntary Carbon Market Demand Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR) How does work? Three Steps: 1. Measure carbon footprint 2. Reduce carbon footprint 3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate

{ { Demand Voluntary Carbon Market Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR) How does work? Three Steps: 1. Measure carbon footprint { Energy efficiency Clean technology Behaviour change 2. Reduce carbon footprint Someone else’s emission reduction { 3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate

{ { Demand Voluntary Carbon Market Carbon Neutral Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR) How does work? Three Steps: 1. Measure carbon footprint { Energy efficiency Clean technology Behaviour change 2. Reduce carbon footprint Someone else’s emission reduction { 3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate Carbon Neutral

{ { Demand Voluntary Carbon Market Carbon Neutral Entities seeking Carbon Neutrality or Corporate Social Responsibility (CSR) How does work? Three Steps: 1. Measure carbon footprint { Energy efficiency Clean technology Behaviour change 2. Reduce carbon footprint Someone else’s emission reduction { 3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate Carbon Neutral

{ Supply Voluntary Carbon Market Voluntary carbon projects seeking financial support for voluntary climate friendly projects e.g. REDD projects Someone else’s emission reduction { 3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate

{ Supply Voluntary Carbon Market Voluntary carbon projects seeking financial support for voluntary climate friendly projects e.g. REDD projects Tropical rainforest carbon is the most popular in the voluntary carbon market When you protect a rainforest carbon reservoir you also protect biological diversity and other ecosystem services Someone else’s emission reduction { 3. Buy carbon offsets (carbon units) for residual emissions you were unable to eliminate

Voluntary Carbon Market Why Standards? Voluntary Carbon Market Transaction Volumes by Standard Used 2007 CCB – Climate Community and Biodiversity Standard There are many different voluntary carbon market standards Well suited to REDD Projects that simultaneously address climate change, support local communities and conserve biodiversity.

Voluntary Carbon Market Why Standards? Voluntary Carbon Market We need standards to safeguard against carbon cowboys Wanna buy some carbon credits real cheap?

Voluntary Carbon Market Why Standards? Voluntary Carbon Market A robust quality assurance process will prevent me from selling junk carbon Take a look at my voluntary carbon forestry project

Market Instruments Voluntary Market Compliance Market Quality Assurance Standards Voluntary Market Compliance Market UNFCCC CDM Executive Board UNFCCC REDD Executive Board ? Various Voluntary Standards These standards issue carbon credits only when the carbon is Measurable, Verifiable, and Additional Necessity for Measuring Reporting & Verification (MRV) capability

Market Instruments Fund Instruments REDD Readiness Quality Assurance Standards Fund Instruments Quality Assurance Standards World Bank Forest Carbon Partnership Facility (FCPF) Asian Development Bank Bilateral Grants (e.g. EC, UK, Norway, GTZ, Australia) UNFCCC REDD Fund (?) Strategy, Policy, Planning Capacity Building (e.g. MRV) Build Reference Scenario Buy REDD units REDD Readiness