1. Carbon Markets and Carbon Crediting For Forestry West and Central Africa Tropical Forest Investment Forum – August 28 th to 30 th 2007 Timothy Pearson Winrock International tpearson@winrock.org

2. Goal to abate carbon emissions is to manage these flows to increase uptake and reduce emissions 1990s

3. Sequester carbon by planting trees Soil and roots Photosynthesis (P) fixes CO 2 Respiration (R) releases CO 2 P R R Photosynthesis exceeds respiration, resulting in storage of carbon Dead wood Litter Live biomass P

4. Examples of Forest Activities with a Carbon Benefit

5. Restore degraded lands

6. Afforest with timber or agroforest species

7. Afforest with native forest species

8. Stop deforestation to avoid carbon emissions

9. Improve forest harvesting to reduce carbon emissions

10. Carbon Projects

11. Issues for developing Forest Carbon Projects  Additionality  Baselines  Leakage  Non-permanence

12. Additionality—key step  A project activity is additional if the activity only takes place because of the anticipation of a potential sale of carbon credits  Activity such as forest restoration would not have taken place without anticipation of receiving carbon offsets

13. Baselines  What would have happened in the absence of the project activity  Must be project specific and prepared in a transparent and conservative manner

14. Baselines – A/R example:  Credits from a project is: Difference between C stocks with project and baseline C stocks With Project Baseline Carbon Credits

15. Leakage  Leakage is the unanticipated loss or gain in carbon benefits outside of the project’s boundary as a result of the project activities  Carbon emissions from leakage could offset gains from a carbon project, resulting in a reduction of the carbon “credits”  For example a farmer may cut down forest to replace the fields he lost to a plantation as part of a carbon project  Can be minimized by engaging communities in project and providing alternative lifestyles  E.g.—reforest with multi-purpose tree species, employ people to plant and maintain

16. Baseline Project Area 2007 Nearby the Project Area Activity shifting – A/R example 2013 CO 2 emissions

17. Permanence  Carbon can be lost if trees are cut down  Solutions:  Temporary crediting  Ongoing monitoring  Legal protection

18. Where does the Carbon Market Stand Now?

19. The Carbon Market Today?  Kyoto Protocol – Clean Development Mechanism  The Voluntary Market

20. Kyoto Protocol  Annex 1 vs non-Annex 1  Annex 1 – commitments  Non-Annex 1  CDM  Afforestation/Reforestation  Cap (1% of commitments)

21. Land use change and forestry sector under the CDM  Eligible activities restricted to:  Afforestation or Reforestation  Must have been deforested prior to Dec. 31, 1989  Examples  Planting trees  Planting seeds  ‘Human-induced’ promotion of natural regeneration  E.g. remove grazing animals

22. Host country eligibility requirements:  Ratified Kyoto Protocol  Designate a DNA - Designated National Authority  Approves CDM projects  Confirms that project in line with country’s sustainable development agenda.  Confirms that project in accordance with all laws  Reviews PDD to see if documents are completed  Approval process not set by CDM. Each country allowed to determine own rules

23. What is a forest?  Host country must define a forest within the following guidelines:  Minimum tree crown cover between 10 and 30%  Minimum land area between 0.05 and 1.0 hectare  Minimum tree height between 2 and 5 m  Values once chosen must remain fixed

24. Carbon Market To Date

25. CDM Project Locations  3% of CDM volume coming from Africa  But just 1% if North Africa and South Africa excluded

26. CDM  LULUCF still just 1% of transacted volumes  In Africa forestry projects have great potential to mitigate climate change and to help poor communities adapt to climate change, while delivering strong local community, environmental and economic benefits

27. CDM Prices  On average certified emissions reductions are being traded at between $8-15 per ton  Funders:  Global Market  Locally-based International Corporations  Investment Banks – including Biocarbon Fund

28. Voluntary Market  Chicago Climate Exchange  Retail Market  Voluntary markets have potentially more scope to provide sustainable development benefits through avoiding the bureaucratic process and high transaction costs of mandatory market

29. Voluntary Market Buyers  Corporate  Corporate social responsibility  Marketing  US Companies anticipating of future regulation  Non-profits  Events  Individuals

30. Voluntary Market  Prices observed on the retail market range from $1 to $78 per ton CO 2 !

31. REDD

32. Tropical deforestation and global carbon cycle Red = decrease >0.5%/yr Green= increase >0.5%/yr Grey= change below 0.5%/yr

33. Deforestation and Degradation in Developing Countries  Responsible for approximately 20% of global emissions  In Brazil deforestation and degradation accounts for 70% of total emissions, in Indonesia 80%  Currently under consideration  Focus on national level emissions reductions  Voluntary target

34. Challenges for Deforestation  Carbon stocks can be measured and monitored  Satellite technology works  Investment needed to build capacity  Country level approach reduces leakage risk  But specific activities will be needed to reduce rate of deforestation

35. East Kalimantan, Indonesia as a case study S. Petrova, F. Stolle (WRI), and S. Brown, 2007

36. Examples of proxy drivers of land-use change

37. Main proxy drivers of deforestation in East Kalimantan Accessibility is modeled as distance from …….. Tested 102 combinations of drivers to explain deforestation in the region

38. “Threat” map of future deforestation Combines suitability for change map with projected rates of deforestation over 10 year period— generates a potential land use change map for period 2003-2013 Rescaled based on equal interval of full range (1-210) into three classes

39. Combine with map of carbon stocks in above- and below- ground biomass pools Brown, S., L. R. Iverson, A. Prasad, A. L. Brenkert, T. W. Beaty, and R. M. Cushman. 2000. Geographical Distribution of Biomass Carbon in Tropical Southeast Asian Forests: A Database. ORNL/CDIAC-119, NDP-068.

40. Identifies areas with potential high “pay-off” if well protected

41. Changes in Forest Management

42. Funding for REDD  Forest Carbon Partnership Facility  Focused on positive incentives for REDD  $250 million over five years  $200 million to pilot carbon purchases  $50 million to readiness activities  Separate investment by:  UK Government – Congo Basin  German Government  Australian Government  Non-Profit Organizations

43. The Importance of Good Measurement and Monitoring

45. Thank You!  For more information see:  http://www.winrock.org/Ecosystems/tools.asp http://www.winrock.org/Ecosystems/tools.asp  Or contact me:  tpearson@winrock.org tpearson@winrock.org