Reducing Emissions from Deforestation in Developing Countries Thelma Krug INPE/IAI IEA, São Paulo, 16 September, 2006

Reducing emissions from deforestation (2) Positive incentives to reduce deforestation emissions in developing countries: views from Brazil Positive incentives to reduce deforestation emissions in developing countries: views from Brazil Workshop UNFCCC Workshop UNFCCC Rome, 30 August – 01 September 2006 Rome, 30 August – 01 September 2006 Official proposal by Brazil (MMA/MCT/MRE) Official proposal by Brazil (MMA/MCT/MRE)

Reducing emissions from deforestation (3) Objective Objective Develop a new arrangement to provide positive financial incentives for developing countries that voluntarily reduce their greenhouse gas emissions from deforestation. Develop a new arrangement to provide positive financial incentives for developing countries that voluntarily reduce their greenhouse gas emissions from deforestation.

Reducing emissions from deforestation (4) Premisses Premisses Voluntary arrangement in the context of the UNFCCC. Voluntary arrangement in the context of the UNFCCC. Does not generate future obligations. Does not generate future obligations. Does not count towards emissions reductions commitments of Annex I countries. Does not count towards emissions reductions commitments of Annex I countries.

Reducing emissions from deforestation (5) Overview of the Concept Overview of the Concept Positive financial incentives for the net reduction of emissions from deforestation in developing countries relative to a reference emission rate (calculated according to a pre- defined reference deforestation rate and an agreed Carbon Tonne content). Positive financial incentives for the net reduction of emissions from deforestation in developing countries relative to a reference emission rate (calculated according to a pre- defined reference deforestation rate and an agreed Carbon Tonne content).

Reducing emissions from deforestation (6) 1. Definition of the reference emission rate 1. Definition of the reference emission rate Average rate of deforestation in the country on a time period to be defined. Average rate of deforestation in the country on a time period to be defined. Based on assessment of previous deforestation rates. Based on assessment of previous deforestation rates. Periodically updated. Periodically updated. Agreed carbon content per unit area, per biome or vegetation type. Agreed carbon content per unit area, per biome or vegetation type.

Reducing emissions from deforestation (7) 2. Assessment of annual (or periodical) emissions from deforestation for comparison with the reference 2. Assessment of annual (or periodical) emissions from deforestation for comparison with the reference Based on a transparent, consistent and scientifically- based monitoring deforestation system. Based on a transparent, consistent and scientifically- based monitoring deforestation system. Emissions are to be defined using agreed standard values: tonnes of carbon per unit area. according to each biome or vegetation type. Emissions are to be defined using agreed standard values: tonnes of carbon per unit area. according to each biome or vegetation type. E.g.: Amazonia = 90 tonnes C ha -1

Reducing emissions from deforestation (8) 3. If emissions from deforestation have decreased, the difference is converted into a financial incentive to be received (credit). 3. If emissions from deforestation have decreased, the difference is converted into a financial incentive to be received (credit). 4. If emissions from deforestation have increased, the difference is converted into an amount to be subtracted (debit) from future financial incentives to be received. 4. If emissions from deforestation have increased, the difference is converted into an amount to be subtracted (debit) from future financial incentives to be received. The amount of the incentive per carbon tonne is to be calculated by a set amount to be agreed and to be reviewed periodically. The amount of the incentive per carbon tonne is to be calculated by a set amount to be agreed and to be reviewed periodically.

Quantifying the Incentive Reference Defoestation Rate Actual Deforestation Rate Credit Deficit

Reducing emissions from deforestation (10) 1. All the reduced emissions of a country are added together for a certain period. The reduction (in tonnes of carbon) is converted into a financial unit ($). 1. All the reduced emissions of a country are added together for a certain period. The reduction (in tonnes of carbon) is converted into a financial unit ($). 2. Annex II countries voluntarily share the bill. 2. Annex II countries voluntarily share the bill. 3. The total amount in (2) is split among the participating developing countries, proportionally to their deforestation emission reductions. 3. The total amount in (2) is split among the participating developing countries, proportionally to their deforestation emission reductions.

Reducing emissions from deforestation (11) Example Example 3 countries submit their deforestation emission reduction at time t (assuming 90 tC/ha): 3 countries submit their deforestation emission reduction at time t (assuming 90 tC/ha): Country A: 150,000 ha => 13,500,000 tC Country A: 150,000 ha => 13,500,000 tC Country B: 50,000 ha => 4,500,000 tC Country B: 50,000 ha => 4,500,000 tC Country C: 200,000 ha => 18,000,000 tC Country C: 200,000 ha => 18,000,000 tC

Reducing emissions from deforestation (12) A reduction of 36 million tC requires a positive incentive of $ 108 million, to be paid, voluntarily, by Annex II countries (assuming for example $ 3/tC). A reduction of 36 million tC requires a positive incentive of $ 108 million, to be paid, voluntarily, by Annex II countries (assuming for example $ 3/tC). Countries receive proportionally: Countries receive proportionally: Country C: 50,0% Country C: 50,0% Country A: 37,5% Country A: 37,5% Country B: 12.5% Country B: 12.5%