Harnessing the carbon market to sustain ecosystems and alleviate poverty Overview of Methodology and Regulation for CDM AR Projects Overview of Methodology and Regulation for CDM AR Projects BioCarbon Fund Training Seminar, February 5-8, 2008

Outline 1.CDM A/R Methodology process: a)Approved Methodologies b)Program of Activities 2.Project Types 3.Project Design and Regulatory Compliance 4. Project Monitoring and Verification

CDM AR - Methodology Process

Overview of CDM A/R Methodology Process Total of 35 A/R methodologies submitted for CDM EB review and approval so far 10 A/R methodologies approved until Oct A/R methodology is rated B and is under review 20 methodologies (including the resubmitted ones) are rejected 1 new methodology is submitted for AR WG review during November 2007

Methodology Approval Process

Carbon Pools in Approved AR Methodologies Methodology AR-AM00XX Living Biomass Above-ground (AGB) Below-ground (BGB) Dead Biomass Dead Wood (DW) Litter (L) Soil Organic Carbon (SOC) Carbon pools

Overview of Approved Methodologies MethodologyApplicabilityCoverageRemarksWB Supported Methodology AR AM0001A/R on degraded lands Two poolsNo leakage from activity displacement Yes (China) AR AM0002A/R on degraded lands All (Five) pools; CO2 Fix model; Baseline A/R No leakage from activity displacement Yes (Moldova) AR AM0003A/R on degraded lands; assisted NR Two pools; assisted NR Activity displacement leakage due to grazing Yes (Albania) AR AM0004A/R on agricultural lands Two poolsActivity displacement leakage - agri.conv, grazing and fuelwood Yes (Honduras) AR AM0005A/R on grasslands for commercial/indus trial use Two pools; Baseline A/R Activity displacement leakage - agri.conv. & Fuelwood Yes (Brazil)

Overview of Approved Methodologies… Meth.ApplicabilityCoverageRemarksWB Supported Methodology AR AM0006Degraded lands; nitrogen fixing species; and forage Three poolsCovers leakage from transport, forage fed to livestock No AR AM0007Pasture & agricultural land, Four poolsCovers leakage from transport, displacement of employees, fuelwood collection & fence posts No AR AM0008Degraded lands, remote sensing for monitoring Two poolsCovers leakage from transportNo AR AM0009Degraded lands Four poolsCovers leakage from transport & wood for fence posts Yes (Columbia) AR AM0010Unmanaged grasslands Two poolsCovers leakage from transportYes (Brazil)

Methodology for Small Scale A/R Projects Lands eligible – grasslands/croplands; wetlands; and settlements Baseline approach 22(a): Existing or historical, as applicable, changes in carbon stock in the carbon pools Limit of GHG removals: 16,000 tonnes CO 2e per annum Carbon pools: Above ground biomass; below ground biomass Leakage: Leakage assessment with indicators (% households displaced; % main product displaced; livestock units/ha displaced to areas outside project) –Upto 10% of GHG removals affected – no leakage –10 to 50% of GHG removals affected – 15% leakage

Issues Covered in the Approved Methodologies Land use: Degraded lands, grasslands, crop lands, wetlands, settlements End use: Restoration of land productivity, fuelwood production, commercial timber production, biomass for industrial use Baseline A/R: Pre-project afforestation implemented prior to project Project emissions: Fossil fuel use, site preparation, biomass burning, natural fires, fertilizer application, N 2 O emissions from planting of legume shrubs Leakage: clearance for agriculture, grazing, fuelwood collection, transport of project products, GHG (non-CO 2 ) emissions from increases in livestock and manure management activities Aerial/satellite methods: for carbon stock estimation

UNFCCC Tools to support Approved Methodologies Tool for the demonstration and assessment of additionality for afforestation and reforestation CDM project activities (version 02) Calculation of the number of sample plots for measurements within CDM AR project activities (version 01) Tool for testing significance of GHG emissions in CDM AR activities (version 01) Estimation of GHG emissions related to fossil fuel combustion in CDM AR project activities (version 01) Procedure to determine when accounting of the soil organic carbon may be conservatively neglected in CDM AR project activities (version 01) Estimation of direct nitrous oxide emissions from nitrogen fertilization (version 01) Combined tool to identify the baseline scenario and demonstrate additionality (version 01) Tool for estimation of GHG emissions from clearing, burning and decay of existing vegetation due to implementation of a CDM A/R project activity (Version 01) Tool for Estimation of GHG emissions related to displacement of grazing activities in A/R CDM project activity (Version 01)

Program of Activities (PoA) for Afforstation/Reforestation

Terminology PoA-AR Program of Activities for AR CPA-AR CDM Program Activity for AR CDM-PoA-DD-AR:Design Document for AR PoA CDM-CPA-DD-AR: Design Document for AR CPA CDM-PoA-SSC-DD-AR:Design Document for Small Scale AR PoA CDM-CPA-SSC-DD-AR:Design Document for Small Scale AR CPA F-CDM-PoA-REG-AR: Registration request for AR PoA F-CDM-PoA-REQCERS-AR: Request for Issuance

AR Project Vs. AR PoA ProjectProgram of Activities One or more locations Multiple locations, could include more than one country One or more project participants (PP)Multiple project participants (PP) One project at a time Number of activities submitted in groups (CPA) over the life-time of the PoA One crediting periodEach CPA has its own crediting period PP known ex-ante At least one PP known ex-ante, rest join later

PoA and CPA Program of Activities (PoA) –Implementation of a policy, measure or goal –Institutional, financial and methodological framework to achieve ERs CDM Project Activity (CPA) –Project Activity generates CERs –Unique and identifiable with a defined boundary

Characteristics of AR PoA Characteristics of AR PoA One coordinating agent –Private or public –Project participant communicates with the Board –Coordinates implementation and responsible for ER accounting –Ensures no double counting Physical boundary could extend beyond one country –Letter of approval from each host country necessary Duration –30 years for fixed period / 40 or 60 years for renewable period –Baseline reviewed at every 20 years for renewable period –Revisions or deviations apply to all CPAs Additionality –PoA would not be implemented under normal circumstances, or –Policy/measure would not be enforced, or –PoA leads to greater enforcement

Characteristics of AR CPA Characteristics of AR CPA One baseline and monitoring methodology for all CPAs –Sampling allowed for verification Can be implemented by many entities/owners –CPA can be added to PoA at any time over the duration of PoA -All CPAs end when PoA terminates All CPAs are identical -Unambiguous identification -Similar types of activities -Similar technology/technologies One methodology -Small scale or large scale approved methodology -SSC methodologies are adjusted for leakage when used under PoA -All CPAs are monitored as per monitoring plan -Verification is done by sampling

Procedures of AR PoA Coordination and implementation of policy/ measure by private/public entity Boundary may extend to more than one non-Annex I country Compliance with local/regional/ national policies and regulations Apply same baseline & monitoring methodology (e.g., one type of technology / inter-related activities in same CPA) Each CPA to be uniquely Defined, Identified and Localized (including start-end date) CPA provides activity level information on eligibility, additonality, leakage, double counting

PoA CPA CPA = One activity Many locations CPA with one technology - e.g., afforestation/reforestation PoA with One AR Activity Implements policy/program or stated goal One PoA & Many CPAs: One Methodology, one technology, One or more project participants

PoA CPA CPA= Multiple activities Many locations CPA with multiple technologies e.g., silvipastoral activities (plantations, livestock etc) PoA with Multiple AR Activities One PoA & Many CPAs : One Methodology, multiple technologies, one or more project participants

PoA-DD-AR Coordinating/Managing Entity Boundary of the PoA Policy/Measure or stated goal Confirmation of voluntary action Additionality of the entire PoA Justification of the methodology Eligibility criteria for inclusion of CPA Start date and length of PoA Operational and management arrangements Monitoring plan (individual or sample) Environmental Analysis and stakeholder comments Letter of Approval from the host party

CPA-DD-AR Identification of Responsible Entity Host Party Starting date, Type (fixed/renewable) and duration POA Stipulation for inclusion  Eligibility criteria  Demonstration of additionality  Baseline, project and leakage emission calculations Environmental analysis Stakeholder comments Confirmation that CPA is not part of another CDM project or POA

Choice of Methodology Scope 14: Afforestation/ Reforestation Regular Program of Activity (PoA) Assisted Natural Regeneration Planting No Pre-project A/R Activities Project Small scale Pre-project A/R Activities Regular Small scale Activity Displacement Leakage No Activity Displacement Leakage Activity Displacement Leakage

Activities Covered in Approved Methodologies Methodology AR-AM00XX Activity Consumption of fossil fuels (CO 2 ) Elimination of pre-existing vegetation (C) Biomass burning (CH 4, N 2 O) Nitrogentate fertilization (N 2 O) Nitrogen Fixing Species (non-tree) (N 2 O) Nitrogen Fixing Species (tree) (N 2 O) Increase of livestock numbers (CH 4, N 2 O) Consumption of fossil fuels(CO 2 ) Activities displacement (C) Livestock Agriculture Displacement of fuelwood collection (C) Displacement of people (C) Fencing (C) Forage production (CH 4, N 2 O)

SnoProject Name Methodology proposed to be used 1Albania AR-AM0003 2Brazil AES AR-AM0010 3China Rearl River AR-AM0001 4Colombia - San Nicholas ARAM0009 5Colombia - Caribbean Savannah AR-AM0004 (revision) 6Congo Batake AR-AM0002 7Costa Rica Coopagri AR-AM004 (revision) 8Ethiopia Humbo/Soddo AR-AM0003 9Honduras - Pico Bonito AR-AM India Improving Livelihoods AR-AM Kenya Green Belt Movement SSC A/R Meth 12Madagascar Biodiversity AR-AM Mali Acacia Plantation AR-AM Mexico Sea water AR-AM Moldova Soil Conservation AR-AM Nicaragua Futuroforestal AR-AM Nicaragua precious woods AR-AM Niger Acacia Plantation AR-AM Philippines Watershed SSC A/R Meth 20 Uganda Nile Basin SSC A/R Meth Approved Methodology Methodology for UNFCCC review Methodologies Proposed for BioCF Portfolio

Methodology on REDD Current Status –Draft methodology is prepared and is under peer review Next steps –The methodology would be revised based on peer review –Revised version of the methodology will be prepared by December 2007 –Revised methodology to be adapted for Window 2 projects in FY08 Colombia – San Nicolas Honduras – Pico Bonito Madagascar

Project Design Project Design Document

Project Types - Land rehabilitation Often community based Usually small plantings Complex monitoring issues; but we have examples Modest carbon content (<20 t CO 2e /ha/yr) Usually additional Low leakage risk

Plantation forestry Usually commercial enterprises Often high rates of sequestration (e.g. 40+ t CO 2e /ha/yr) Must be able to demonstrate additionality Leakage is possible through displaced land use Best examples where the reforestation is part of a wider landscape project and/or is contribution to land rehabilitation

Agroforestry Must convert non- forest to forest Gains from carbon in the trees; sometimes from the under-crops; and usually from improved soil carbon Additionality usually based on barrier tests

Silvi-pastoral Carbon sequestered in trees; methane emissions from cattle often reduced Complex to set up as they need to be split into two activities Care in selection of the tree species

Non-renewable Biomass Replace the unsustainable use of fuel woods (e.g., from cutting native forest), with alternative sources –E.g. methane digestors; sustainably managed fuel wood plantations

Features of A/R projects Expiring CERs (non-permanence: A/R activities can be sinks and sources). Small scale (< 16,000 tonnes CO 2e yr -1 ) Land eligibility limited to areas deforested before Type of activities: Land rehabilitation, plantation forestry, agro-forestry, urban forestry, natural regeneration, etc… are eligible provided the definitions of land eligibility are met. Species choice: Invasive alien species (IAS) and genetically modified organisms (GMO) are subject to host country legislation.

Project Design Document

Formats - CDM-AR-PDD / CDM-PoA-DD-AR format a. Determine whether approved methodology is applicable b. New methodology is prepared and submitted to CDM Baseline Information (Annex 2 of PDD) Monitoring Plan (Annex 4 of PDD) Ex ante estimation of ERs Stakeholder consultations and quality control Revision of the PDD to align with methodology PDD submitted for DOE validation

Baseline approaches for A/R ( 22a) “Existing or historical, as applicable, changes in carbon stocks in the carbon pools within the project boundary” ( 22b) “Changes in C stocks in the pools within the project boundary from a land use that represents an economically attractive course of action, taking into account barriers to investment” (22c) “Changes in carbon stocks in the pools within the project boundary from the most likely land use at the time the project starts”

Years Removals (ktCO 2 e) Project removals Increased Removals Baseline removalsBaseline Emission removal projects (A/R)

PASS OR Step 0. Preliminary screening based on the starting date and land eligibility Step 1. Identification of alternatives to the project activity consistent with current laws and regulations PASS Step 2. Investment Analysis Step 3. Barrier analysis Additionality PASS PROJECT ACTIVITY IS ADDITIONAL PASS Step 4. Common practice analysis A/R CDM project activities must be additional, as any other CDM project activity. The “A/R additionality tool” is similar to the standard one.

Trees Eligible carbon pools 1. Above-ground biomass 2. Below-ground biomass 3. Dead wood 4. Litter 5. Soil organic carbon Non-Trees SOC

Accounting Carbon pools: more than 5 questions to answer Carbon poolComponentsBaseline Project Ex anteEx post above-ground biomass trees ?? ? non-trees ?? ? below-ground biomass trees ?? ? non-trees ?? ? dead wood standing ?? ? lying ?? ? litter ??? soil organic carbon ???

Carbon pools: more than 5 questions to answer 2 assessments: ex ante & ex post Pre-existing biomass: –Burning = emission –No burning but harvesting = Initial C stock decrease –No burning, no harvesting = Becomes part of project scenario OR assume initial C stock decrease A pool can be excluded if the exclusion does not lead to an overestimation of carbon in the project Leakage: If activity displacement induces land-cover change, all carbon pools must be accounted

Stratification Carbon densities and carbon removal rates are spatially variant Stratification reduces uncertainty and costs of the estimates Baseline C strata are static: - Boundaries do not change over time. - ex ante = ex post. - Stock changes within each stratum = f (time), estimated ex ante and then “frozen”. Project C strata are dynamic: - Boundaries may change over time. - ex ante  ex post. - Stock changes within each stratum = f (time), estimated ex ante and then measured. - Different class ages of planted trees.

Stratification - Baseline Stratification - Baseline Baseline land use Cropland Grazing land Ecological conditions Soil B Soil A Baseline C strata C1 C2 C3 C4  C = 0  C < 0  C = 0  C > 0 ex ante = ex post

Project land use Ecological conditions Soil B Soil A Project C strata Plantation Agro- Forestry C1.1 C2.1 C3.2 C4.2 Stratification – Project ex post Stratification – Project ex post Project implementation Planted in year 1 Planted in year 2 Planted in year 3 C1.2 C2.2 C4.1 C3.1  ex ante

Baseline removals C stock changes in the carbon pools: –Same C pools and initial C stocks as project scenario –Historical reforestation/regeneration rates to be included in the baseline scenario –Natural regeneration should not lead to a permanent forest –Ex ante estimations based on: Projected changes in land-use/land-cover according to chosen baseline approach and selected baseline scenario Growth data & models applicable to local conditions, or Field-level measurement of a chrono-sequence (natural regeneration) or calibrated models such as CO2Fix

C stock changes in the carbon pools: -Ex post estimations: Ex ante estimations are “frozen” (preferable) Monitoring in plots is difficult:  within the project boundary – conflict of interest (area controlled by project participant)  outside the project boundary / control group approach – difficulties in tracing plots in areas not under the control of project participants) Baseline removals

Actual removals – Project scenario C stock changes in the carbon pools: –Same C pools and initial C stocks as baseline –Definition of “stand models” = species + management –Ex ante estimations based on: Data & models applicable to local conditions, or Field-level measurement of a chrono-sequence (existing plantations), Models such as CO2Fix calibrated with the above. –Ex post estimations based on: Field-level measurement in permanent plots. Measurement frequency every 5 years (or more for slow changing pools, e.g. soil organic carbon)

Actual removals – Project scenario Project emissions: –Fuel powered machines & equipment: CO 2, CH 4, N 2 0 –Fertilization: N 2 O –Fire: (CO 2 ), CH 4, N 2 0 –Temporary C stock decrease should not to be considered permanent emissions.

Leakage – common types Carbon stock changes from activity displacement: –Shifts in the agricultural and animal production from project land to areas outside the project boundary –Collection of fuel wood –Collection of fodder –Commercial collection of NTFP –Grazing Increased emissions due to transport of products and personnel to areas outside the project: CO 2, (CH 4, N 2 O) Basic principle of leakage prevention: baseline scenario and project scenario should deliver the same amount of goods and services. CO 2

Calculation of net CO 2 e benefits = Net anthropogenic GHG removals by sinks Actual net GHG removal by sinks Project CO 2 e removals =   C in carbon pools -  Increase in GHG emissions Baseline CO 2 e removals =   C in carbon pools Leakage =  Increase in GHG emissions Leakage Baseline net GHG removal by sinks

Accounting GHG Removals Credits: temporary CERs (tCERs) valid for 1 commitment period. long-term CERs (lCERs) valid for the crediting period. On expiry of credits from A&R activities, they have to be replaced by an equal number of credits. Crediting period: Renewable – 20 year period, twice renewable. Fixed - 30 year period.

tCERs & lCERs: Quantification tCERs NAGRS n n+5 n+10 n+15 yrs Crediting period (20x1, 20x2, 20x3 o 30 years) Crediting period (20x1, 20x2, 20x3 o 30 years) NAGRS lCERs

End of subsequent commitment period End of crediting period NAGRS tCERs lCERs tCERs & lCERs: Expiration

Project Implementation & Monitoring (Monitoring Plan)

Project Implementation Project participants shall ensure that the project implementation follows the monitoring plan Collection of information on the project activities Focus on the specific risks of the AR projects –Risks from natural events Natural fires Pest outbreaks Natural disasters – Floods, droughts – Risks from anthropogenic events Human caused fires Harvest damage (legal/illegal) Project to assess and record the events as part of monitoring

Validation Designated Operational Entity (DOE) is contracted for validation Project participants submit the latest PDD and relevant documents to the DOE DOE reviews PDD, including baseline study and monitoring plan PDD and other project documents are posted for public comments during 30-day period DOE issues a preliminary report outlining the corrective action requests and clarification requests Project participants reply and clarify to the DOE DOE issues the final validation report

Monitoring Project participants shall ensure that the project implementation follows the monitoring plan Collection of information on the project activities Special focus on the risks that affects the ERs –Example: Occurrence of fire Project monitoring to assess and record the deviations from monitoring plan

Quality Assurance Data collected and archived as per monitoring and operational plans that comply monitoring methodology Data archival in electronic & print formats Quality assurance and quality control to follow standard operating procedures outlined in the monitoring plan Periodic checks of archived data to ensure the consistency in the data collected and archived.

Verification and Certification First verification of AR project to be conducted as per the choice of project participants (usually between 3 and 5 years) Subsequent verifications at five year intervals Project entity conducts measurement of permanent sample plots and other data relevant for verification DOE undertakes verification and issues verification reports Project participants submit verification report for CER issuance t CERs valid for compliance during the commitment period and expire at the end of subsequent commitment period for the purpose of their replacement Issuance of CERs, accounting under the funds (BioCF, PCF etc.) and transfer to the fund participants and national registries at the end of commitment period

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