Base Line Methods Developing Forestry and Bioenergy Projects with CDM Quito, Ecuador March, 2004

Joanneum Research Woodrising Consulting Inc. 2 Overview Fundamentals COP-9 Decision GHGProtocol Approach Example Project Length and Size

Joanneum Research Woodrising Consulting Inc. 3 Fundamentals Baseline Scenario –represents what would have occurred in the absence of the project. Baseline Emissions –emissions related to the baseline scenario. Emissions and Removals

Joanneum Research Woodrising Consulting Inc. 4 COP-9 Decision Baseline for LULUCF 22. In choosing a baseline methodology for an afforestation or reforestation project activity under the CDM, project participants shall select from among the following approaches the one deemed most appropriate for the project activity, taking into account any guidance by the Executive Board, and justify the appropriateness of their choice: (a) Existing or historical, as applicable, changes in carbon stocks in the carbon pools within the project boundary; (b) Changes in carbon stocks in the carbon pools within the project boundary from a land use that represents an economically attractive course of action, taking into account barriers to investment; (c) Changes in carbon stocks in the pools within the project boundary from the most likely land use at the time the project starts.

Joanneum Research Woodrising Consulting Inc. 5 Scenario Identification Geographic Area Temporal Range Candidates –Status quo –Project –Abandonment –Other use –Performance standard –Later implementation

Joanneum Research Woodrising Consulting Inc. 6 Energy Project Project Time CO 2 eq / Output Status Quo Performance Standard Later Implementation

Joanneum Research Woodrising Consulting Inc. 7 LULUCF Project Project Time Biomass Status Quo Abandonment Later Implementation

Joanneum Research Woodrising Consulting Inc. 8 Scenario Evaluation GHGProtocol Approach Barrier Test Investment Ranking Test Performance Standard Most Conservative Scenario –Lowest emissions –Highest biomass

Joanneum Research Woodrising Consulting Inc. 9 Barrier Test Identify Barriers –Legal –Financial capital, investment risk, opportunity costs –Technological knowledge, training, equipment –Market structure –Social structure –Resource availability Qualitatively Evaluate Barriers

Joanneum Research Woodrising Consulting Inc. 10 Barrier Test Example Plantations on Cropland Status QuoAbandonRanchingProject Legal X Financial XX Technology XX Market X Social Resources XX

Joanneum Research Woodrising Consulting Inc. 11 Investment Ranking Test Financial Analysis –Capital requirement –Internal rate of return (IRR) –Payback –Sensitivity to Assumptions

Joanneum Research Woodrising Consulting Inc. 12 Investment Ranking Example Plantations on Cropland Status QuoAbandonRanchingProject Capital without CDM $5000$250$1500 Capital with CDM $750 IRR without CDM 35%0%40%26% IRR with CDM 45% Payback without CDM 1 year1.5 years12 years Payback with CDM 12 years

Joanneum Research Woodrising Consulting Inc. 13 Performance Standard Existing Installations Historical Land Use Change –Deforestation rates –Reforestation rates –Probability of reforestation Geographic Area and Temporal Range

Joanneum Research Woodrising Consulting Inc. 14 Existing Installations Rank CO 2 eq / Output Weighted-average 20 th percentile 10 th percentile Best practice Best technology From GHGProtocol Project Quantification Standard, Road Test Draft, September 2003

Joanneum Research Woodrising Consulting Inc. 15 Probability of Reforestation

Joanneum Research Woodrising Consulting Inc. 16 Project Pinus radiata

Joanneum Research Woodrising Consulting Inc. 17 Status Quo Baseline Grassland (steady-state)

Joanneum Research Woodrising Consulting Inc. 18 Status Quo Baseline Grassland (cleared in 1989)

Joanneum Research Woodrising Consulting Inc. 19 Probabilistic Baseline Reforestation rate = 0.01%

Joanneum Research Woodrising Consulting Inc. 20 Project Length and Size Energy Projects –7 years, renewable twice –10 years LULUCF Projects –20 years, renewable twice –30 years Small Scale –Energy projects –LULUCF projects