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CD
M p
ote
nti
al in
fo
rest
ry s
ecto
r
Nat
ion
al S
emin
ar o
n
Cle
an D
evel
op
men
t M
ech
anis
m a
nd
Car
bo
n T
rad
ing
O
pp
ort
un
itie
s in
Ag
ricu
ltu
re a
nd
Alli
ed S
ecto
rs
CR
IDA
, Hyd
erab
adM
ay 0
8, 2
008
Var
gh
ese
Pau
lF
ello
w, T
ER
I
OU
TL
INE
…
•Introduction
•CDM project requirements
•Cost effectiveness of CDM-forestry
projects
•Voluntary Carbon Markets
•SWOT analysis of forestry projects
Ho
w f
ore
st s
ecto
r is
rel
evan
t to
Clim
ate
Ch
ang
e?
•As a source (deforestation and forest degradation)
•Impacted by the Climate Change
•As a sink (Existing natural forests & TOF)
•Offer opportunities for C-sequestration
(Afforestation, reforestation & existing plantations)
Car
bo
n M
arke
ts
•C-Sequestration
–Mandatory –CDM
–Institutional buying ( WB’s Biocarbon fund)
–Voluntary –CCX
•Asia Carbon Market –Yet to take off…
•India Carbon Exchange –
May be, we’ll have in future …
•Compensated Reduction & Conservation
–Relevant to post 2012 and being negotiated. Outcome
expected by Dec 2009
Kyo
to P
roto
col (
1997
) -
Co
mm
itm
ents
on
E
mis
sio
ns
Red
uct
ion
•At the heart of the Protocol lie its legally binding
emission reduction targets for Annex I Parties.
These amount to an aggregate reduction shared
among all such Parties of at least 5.2 percent
from 1990 levels by 2008-2012.
•KP provides for 3 flexible mechanisms
�JI (Joint Implementation)
�ET (Emission Trading)
�CDM (Clean DevelopmentMechanism)
•KP is operational since 16-02-2005
Th
e C
lean
Dev
elo
pm
ent
Mec
han
ism
(C
DM
)
CDM is designed to :
(a)Help developing (non-Annex I) countries in
achieving sustainable development and
(b)Assist developed countries (Annex I) to meet
emission reduction targets.
CD
M &
Fo
rest
Sec
tor
�CDM sink projects are limited to Afforestationand
Reforestation (A&R)
�C-pools accepted –AGB, BGB, woody litter and soil
carbon.
�C-pools being debated –Harvested Wood Products
�Under CDM GHG emission offsets are measured in
tonnes of CO2equivalent and are called Certified
Emission Reductions(CERs)
�CERsissued under forestry projects are non-permanent,
and are of two types:
�lCER(Market price: 50-70% of normal CER).
�tCER(Market price: 15-20% of normal CER).
Def
init
ion
: F
ore
sts
•Forest : is a minimum area of land of 0.05-1.0
hectares with tree crown cover (or equivalent stocking
level) of more than 10-30 percent with trees with the
potential to reach a minimum height of 2-5 meters at
maturity in situ.
•A forest may consist either of closed forest formations
where trees of various storeysand undergrowth cover
a high proportion of the ground or open forest.
•Young natural stands and all plantations which have
yet to reach a crown density of 10-30 percent or tree
height of 2-5 meters are included under forest, as are
areas normally forming part of the forest area which
are temporarily unstockedas a result of human
intervention such as harvesting or natural causes but
which are expected to revert to forests.
Def
init
ion
of
Fo
rest
Definition: A
fforestation
•Direct human-induced conversion of land
that has not been forested for a period of at
least 50 yearsto forested land through
planting, seeding and/or the human-induced
promotion of natural seed sources
50 years
Def
init
ion
: R
efo
rest
atio
n
•Direct human-induced conversion of non-forested land to
forested land through planting, seeding and/or the human-
induced promotion of natural seed sources, on land that
was forested but that has been converted to non-forested
land
•For the first commitment period, reforestation activities will
be limited to reforestation occurring on those lands that did
not contain forest on 31 December 1989 1990
Land use
change
Afforestation: If “non
forest”for 50 years.
Reforestation: If “non-
forest”on 31 Dec. 1989
Elig
ibili
ty o
f la
nd
s: e
xam
ple
s
50%
can
op
y co
ver:
is a
fo
rest
, th
eref
ore
is n
ot
elig
ible
(e.
g. n
o
lan
d u
se c
han
ge
occ
urs
.)
0% C
ano
py
cove
r,
bu
t d
efo
rest
ed in
19
92, n
ot
elig
ible
(e
.g. f
ails
to
mee
t th
e cr
iter
ia o
f 19
90 o
r 50
yea
rs)
10%
can
op
y co
ver
sin
ce 1
985,
it is
el
igib
le
Elig
ibili
ty o
f la
nd
s (c
on
td…
)
Mandatory tool for land eligibility
(EB 22 ndmeeting : Annex16)
•Demonstrate that the land at the moment the project
starts is not a forest at the start of the project
–The land is below the national thresholds of forest definition
–The land is not temporarily unstocked
•Demonstrate that the activity is a reforestation or
afforestationactivity
–31 December 1989 rule
–50 years rule
•Documents to prove land eligibility
–Aerial photographs, satellite imagery
–Ground based surveys (land use plans, land management plans, cadastre,
owners register)
–PRA documents
Ind
ia’s
th
resh
old
s
•Crown Cover : 30 %
•Tree height :5 m
•Land area: 0.05 ha
Implications:
•Degraded forests below 30 % crown
cover eligible for CDM activity
•Eligibility of agroforestsdoubtful
–With high canopy cover definition conversion of
non-forests to forests is difficult in case of
agroforests
Cri
tica
l co
mp
on
ents
of
CD
M
Pro
ject
s
Wh
at is
tra
ded
?
Certified Emission Reduction(CER)
1 CER= 1 tonneof CO2e
Bio
mas
s-C
arb
on
rel
atio
n1 tonneof biomass = 0.45 tonneof C
1 tonneof C corresponds to 44/12
(3.667) tonnesof CO2
Pro
ject
Bo
un
dar
y
�Project boundary should geographically
delineate all sequestrations and
emissions that are significant, can be
attributed to the project and are under
the control of project participants
�The project boundary can include one or
more discrete areas of land
�Boundaries should be clearly delineated
on the map or using GPS
•The baseline is the scenario that
reasonably represents the anthropogenic
emissions by sources of GHGsthat would
occur in absence of proposed project
activity
•Baseline scenario is used to calculate
additional removals from the project
•A clear and verifiable baseline scenario
giving C-stock changes in ‘without
project’ situation needs to be presented
using approved methodologies
Bas
elin
e
•Sequestration additionality
•Financial additionality
A/R CDM activity is additional, if it leads to
increase in net C-sequestration to what
would have happened in B-A-U scenario.
To demonstrate additionality, prove that
the project would not have gone ahead in
the absence of CDM benefits.
Additionality
Lea
kag
e
•Increase in greenhouse gas emissions by
sources which occurs outside the boundary of
an afforestationor reforestation project
activity under the CDM which is measurable
and attributable to the afforestationor
reforestation project activity
•Leakage may be because of displacement of
agricultural activities, livestock, fuelwood,
vehicle use, use of fence posts use
•Total leakage is equal to the sum of each of
the leakage components
Exa
mp
le o
f b
asel
ine
and
ad
dit
ion
al r
emo
vals
Time
Additional removal
Baseline scenario (BAU)
Removals
(CO2e)
Project scenario
Leakage
Fra
mew
ork
fo
r ca
lcu
lati
on
s
Net anthropogenic greenhouse gas removals
by sinks (NR):
The quantity of removals that will be issued as
ICERsor tCERs. It is calculated by subtracting the
baseline and leakage from the actual removals by
the project as:
NR = AR-BL-L
Cre
dit
ing
�tCERS
-expires at the end of the commitment period following
the one during which it was issued
-The amount of credits issued in each certification
corresponds to the total removals achieved by the project
since the beginning of the project
-Fees charged for issuance very five years
-Provide freedom for project proponents to retire credits if
they chose to harvest or discontinue an area
Crediting period: Max 30 yrs or 20 yrs with
two renewals
•lCERs
–expires at the end of the crediting period
–Must be replaced as soon as verification
shows carbon stock has decreased or if
there is no verification.
–The quantity of credit issued in each
certification corresponds only to the new
removals
–Likely to receive a higher price, but
commits carbon for the length of crediting
period
–Greater risk for the project operator
tCE
R
So
urc
e:G
EC
F, J
apan
lCER
lCER
Source:GECF, Japan
�C stock changes
�Socio-economic impact &
environmental impact assessment
�Biodiversity conservation
�Leakage
Mo
nit
ori
ng
& v
erif
icat
ion
(Sou
rce:
CA
TIE
, 200
7)
CD
M P
roje
ct C
ycle
Ob
stac
les
to F
ore
stry
Pro
ject
s
•Forest sinks were viewed as “loophole”
policy
•Late start (Dec 2003)
•Temporary credits
•Long-term investment
•Methodological & procedural issues
•Higher transaction costs & risks
•Leakage
Ob
stac
les
to F
ore
stry
Pro
ject
s
•Tenure
•Scattered land parcels
–Scattered VSS
•Presence of root stock-may revert to
forests if protection and some ANR is
provided
•Establishing land eligibility
•Establishing additionally
Fac
tors
th
at m
ay le
ad t
o a
su
cces
sfu
l C
DM
pro
ject
•Objectives & project description
–Strong combination of objectives:
•promotion of sustainable development
•biodiversity enhancement
•erosion control &
•poverty alleviation
•Tree species
–Mainly native species. Fast growing exotics
may be included purely for the reasons of
early income to the communities
Fac
tors
th
at m
ay le
ad t
o a
su
cces
sfu
l C
DM
pro
ject
contd…
•Contractual agreement
–Agreement between local communities & SFD or there
may be multi stakeholder agreement
•Strong local institutional mechanism
•Methodological & procedural approaches
–Additionality
–Leakage
–Monitoring
Mu
lti-
Sta
keh
old
er P
artn
ersh
ip (
MS
P)
for
LU
LU
CF
pro
ject
s
•Govt. to encourage private investment and
strengthen community participation in CDM forestry
projects.
•Legally enforceable MoUbetween parties
•Parties to MSP
–Investor: the investing entity may be a private company, Firm, User Group,
Trust, Society or any such organization.
–Local Community : Forest dwellers or local communities from adjoining
areas represented by local institutions like VSS, FDA or Gram Sabha.
–Land Owning Agency : government, institutions, public sector enterprises.
–Forest Department : Regulator, facilitator, providing technical know-how.
Exp
ecte
d d
eman
d o
f C
ER
sfr
om
fo
rest
se
cto
r u
nd
er C
DM
�Major Buyers: Japan, Spain & Italy
�Other Buyers: Finland, Portugal & Sweden
�Total Demand: 101 million CERsfor 2008-2012
�Annual demand = 20 million CERsduring 2008-
12
�Assuming 10% demand met by India, a market
potential of 2 million CERsper year is expected
�With avg. sequestration potential of 2 tC/ha/yr
i.e. 2 x 3.67 = 7.34 lCERs/ha/year, Land which
can be dedicated = 272,480 ha
Co
st E
ffec
tive
nes
s o
f F
ore
stry
Pro
ject
•Assumptions
–Project area: 6812 ha
–C sequestration potential: 2 tC/ha/year
–CO2removal: 2 X 3.67 = 7.34 X 6812
–Expected number of CERs/year: 50,000
–CER price: $10/t CO2
Co
st E
ffec
tive
nes
s o
f F
ore
stry
Pro
ject
(Pro
ject
siz
e -
50,0
00 C
ER
s/ye
ar)
No
Co
stIn
tern
atio
nal
mar
ket
Ind
ian
Sce
nar
io
(US
$)(I
NR
)
1P
roje
ct D
evel
op
men
t60
,000
-180
,000
20,0
0,00
0
2V
alid
atio
n15
,000
-25,
000
600,
000
(US
$ 15
,000
)
3R
egis
trat
ion
Fee
$0.1
0/C
ER
(F
irst
15,
000
CE
Rs)
@0.
20/C
ER
(15
,001
on
war
ds)
8,50
0 x
51,
700,
000
(US
$ 8,
500
x 5)
4M
on
ito
rin
g C
ost
Dep
end
s o
n s
ize
(25,
000
ha) --
-
7,00
,000
@R
s. 1
00/h
a/5
year
s5
Ver
ific
atio
n C
ost
15,0
00-2
5,00
0 p
er
aud
it60
0,00
0(U
S$
15,0
00)
No
.C
ost
Inte
rnat
ion
al m
arke
tIn
dia
n S
cen
ario
(US
$)(I
NR
)
6Is
suan
ce F
ee$0
.10/
CE
R (
Fir
st 1
5,00
0 C
ER
s)$0
.20/
CE
R (
15,0
01 o
nw
ard
s)
---
7A
dap
tati
on
Lev
y(b
y E
B)
2% o
f C
ER
gen
erat
ed(A
dap
tati
on
fu
nd
)20
,00,
000
8T
axes
Ho
st c
ou
ntr
y m
ay
char
ge
a sh
are
in
CE
Rs
issu
ed
Nil
9T
ota
l2,
27,5
00*
76,0
0,00
0
*Mo
nit
ori
ng
co
st f
or
pro
ject
s in
inte
rnat
ion
al m
arke
t n
ot
incl
ud
ed
Co
st E
ffec
tive
nes
s o
f F
ore
stry
Pro
ject
(Pro
ject
siz
e -
50,0
00 C
ER
s/ye
ar)
Exp
ecte
d C
ER
rev
enu
es
Expected revenue = 50,000 CERsX 10 $ X 5 Yr (Ist
verification)
= US$ 2,500,000
or Rs. 10,00,00,000 (10 Crore)
The revenue will accrue every 5 years on verification
Co
st/B
enef
its
Ver
ific
atio
n S
tag
e (R
up
ees
`000
)
IIIII
IVV
Mo
nit
ori
ng
Co
st70
070
070
070
0
Ver
ific
atio
n C
ost
600
600
600
600
Ad
apta
tio
n F
ee2,
000
2,00
02,
000
2,00
0
To
tal C
ost
3,30
03,
300
3,30
03,
300
Rev
enu
e10
0,00
010
0,00
010
0,00
010
0,00
0
Verification
Expected Benefit
(Rs.)
Expected Benefit
per ha/yr (Rs.)
I92,400
,000
2712/-
II96,700,000
2839/-
III96,700,000
2839/-
IV96,700,000
2839/-
V96,700,000
2839/-
Net
ben
efit
s ex
pec
ted
(In
clu
din
g t
ran
sact
ion
co
sts)
(Pro
ject
siz
e –
50,0
00 C
ER
s/ Y
ear)
SW
OT
An
alys
is o
f F
ore
stry
Pro
ject
s
Strengths
•Projects have multiple
benefits for local people
and their environment.
•Carbon finance can
enhance sustainable
forest management.
•Approved methodologies
present broad scope of
possible project types
(e.g., RDF, ANR agro-
forestry & silvipastoral)
Weaknesses
•First generation CDM
methodologies and
procedures are still
complex and time-
consuming.
•High upfront-financing
and late returns
•Projects bear risks of
non-approval under the
CDM, and non-
permanence risks.
SW
OT
An
alys
is o
f F
ore
stry
Pro
ject
s contd…
Opportunities
•Demand for carbon
credits by governments
is increasing.
•Insurance schemes can
address risks
•Political commitment to
mitigate climate change
and increasing public
awareness of forests’
crucial roles in it.
Threats
•Temporary credits face
competitive disadvantage
and relatively low value.
•EU Emissions Trading
Scheme excludes forestry
credits
•Kyoto Protocol imposes
1%-cap on forestry
credits.
•Future CDM regime (post
2012) still remains
uncertain.
Vo
lun
tary
Mar
kets
(Chicago Clim
ate Exchange)
•First voluntary, legally binding, GHG
reduction and trading system
•Launched on 1stJan 2003 & crediting
period 2003 -2010
•CCX members
–Companies
–Utilities
–Universities
–States
–City municipalities
Ch
icag
o C
limat
e E
xch
ang
e (C
CX
)
Ho
w d
oes
CC
X w
ork
?
•CCX members make a legally binding
commitment to
–reduce 1% per year from 2003-2006, for a total of 4%,
below a baseline average of 1998-2001 [PHASE I]
–reduce 6% below baseline by 2010 [PHASE II]
•Offset projects sequester or eliminate
GHGs, which can then earn credits that sell
on CCX to buyers seeking reductions
Req
uir
emen
ts o
f a
CC
X F
ore
stry
Off
set
Pro
ject
�Attestation that the planting occurred after Dec
31,1989
�A description of the pre-project condition and legal
description of the project area
�Demonstration that entity-wide forest holdings are
sustainablymanaged and maintained as forests;
�Demonstration of long term commitment to maintain
carbon stocks
�A projection of anticipated exchange forestry offsets
(XFOs) to be earned for each of the years 2003-2010;
�Among the C-pools, only above ground living biomass
is considered
Fo
rest
ry O
ffse
t P
roje
cts
contd…
•Carbon stock as on 31-12-2002 is the base line for carbon
sequestration estimation
•Above ground living biomass growth during 2003 to 2010 is
eligible for credits
•Verification by a CCX approved verifier, required for medium &
large projects.
•For quantification, CCX forestry projects are classified into
three categories as per CO2sequestration levels:
•small (<2,000 t CO2pa): C-accumulation tables/direct
measurements, subject to inspection; (may be around 200 ha)
•medium (2,000 –12,500 t CO2pa): accumulation tables/direct
measurements, subject to inspection; (may be around 500-2000
ha)
•large (>12,500 t CO2pa)–direct measurements/growth models.
(>2000ha)
•Offset aggregator can help in reducing the transaction costs
Exp
ecte
d c
arb
on
ben
efit
s fr
om
CC
X m
arke
t
Assumed sequestration levels = 2 tC/ha/yr
= 7.34 VERs(CO2ev)
VER price = $ 5.5 / t CO2
Expected benefits = 7.34 x $ 5.5*
= Rs. 1612/-** / ha / yr
* chicagoclim
ateexchange.com; ** 1 US $ = Rs. 40/-
Ro
ad m
ap f
or
C-b
enef
its
un
der
CC
X
•List out productive plantations which have
been planted after 1stJan 1990.
•Shortlist the plantations on the basis of
–Faster growth during 2003-10
–Workability of baseline as on 31-12-2002
–Ease of growth calculations (simpler plantation models)
–No harvest in near future
–Involvement of local communities
–Risk analysis
•Decide on the project size
•hApproachCCX through offset aggregator
CD
M V
s C
CX
Only living above
ground biomass
(AGB)
AGB, BGB, Soil C,
Litter
C-pools eligible
Carbon Reserve Pool
lCERs/tCERs
Permanence
Simpler
Complex
Methodologies
2003-2010
Up to 2008-12
Crediting period
Permanent
Temporary
Credits
Simple procedures
Lengthy process
Project approval
ODA and routine
funds are eligible
Dedicated funds for
CDM projects
Project funding
Forestation & Forest
enrichment (Existing
plantations eligible)
Afforestation &
Reforestation (A&R)
Eligible activities
CCX
CDM
Parameter
Thanks…
Thanks…
Thanks…
Thanks…
Lo
cal i
nst
itu
tio
nal
fra
mew
ork
fo
r C
DM