Environment Trade Law Presentation

Trade, Environment, &

Climate Change

UPH-MTIC 23-27 June 2014

1. Climate Change Policy, Command and Control, and Market Based Approaches

2. Investing in Renewable Energy through Clean Development Mechanism

3. Other Types of Carbon Markets4. Investing in Forestry through REDD+5. Group Exercise

Table of Content

3

800 600 400 200 0

CO

2 (p

pmv)

Thousands of Years Before Present

Present CO2 concentration (386 ppmv)

CO2 concentration after 50 years of unrestricted fossil fuel burning (600 ppmv)

240

300

270

210

180

The image shows the concentration of CO2 in the

atmosphere over a period of time if emissions continue

unaltered.

6

•Carbon dioxide (CO2)– Source: fossil fuel combustion and land-use changes, particularly

deforestation – the most important GHG, but – lowest global warming potential (GWP) - 1

• Methane (CH4)– Source: coal mining, landfill operations, livestock raising and natural

gas/oil exploitation and transportation– GWP - 21 ( 1t CH4 = 21 tCO2 in terms of global warming effect)

• Nitrous oxide (N2O)– Source: fertilizer manufacturing, fossil fuel combustion (mainly in

transport sector) – GWP – 310

Climate change causes: ”natural” greenhouse gases (GHG)

7

•Hydrofluorocarbons (HFCs) and Perfluorocarbons (PFCs)

– Alternative to ozone depleting CFCs and HCFCs – Source: manufacturing processes (e.g. refrigeration and air

conditioning equipment)– GWP: HFCs range from 140 to 11,700 (HFC23), CxFx range from

6.500 (CF4) to 9,200 (C2F6)

•Sulphur hexofluoride (SF)

– Used as a dielectric fluid (e.g. in power grids)– GWP - 23,900– Atmospheric lifetime of one molecule - 3,200 years– Most dangerous anthropogenic-induced GHGs

Climate change causes: ”engineered” greenhouse gases (GHG)

8

Annual greenhouse gas emission by sector

Source: Global Warming Art

9

Climate change: General UN Message

Science is clear: warming of climate system is

unequivocal and attributable to human activities

Severe impacts of climate change are already being

felt, particularly in developing countries, and demand

an urgent response

Economic assessments indicate that cost of inaction

will exceed the cost of taking action now by several

orders of magnitude.

10

•Objective: stabilize global GHG concentrations in atmosphere

•Universally agreed: 189 countries have ratified/accepted UNFCCC

•Principle of common but differentiated responsibilities:

– Industrialized countries (Annex I) aim to restore GHG emissions to 1990 levels (no mandatory commitments thus legally non-binding)

– Developing countries (Annex II) commit to build capacity of and facilitate technology transfer to developing countries

•Identifies two options to address climate change:

– mitigation of climate change by reducing GHG emissions and enhancing sinks, and

– adaptation to the impacts of climate change

•Both mitigation and adaptation are essential in reducing the risks of climate change!!!

International Response: UN Framework Convention on Climate Change (UNFCCC) 1992

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• Kyoto Protocol amended UNFCCC with 2 principal provisions:

I. Assigns mandatory (legally-binding) GHG emission reduction targets to Annex I parties:

– Individual targets for each industrialized country: on average by 5% below 1990 levels

– Establish time-frame (Kyoto commitment period): 2008-12

– Developing countries and some economies in transition (non-Annex I) countries do not have reduction targets

II. Introduce market mechanisms to allow industrialized countries to meet their commitment in most cost-effective way by purchasing GHG emission reductions from elsewhere:

– from financial exchanges (Emission Trading)

– from projects which reduce emissions (Clean Development Mechanism (CDM) or Joint Implementation (JI))

International Response: Kyoto Protocol, 1997

GLOBAL WARMING

CONVENTIONS

- UN Framework Convention on Climate Change

(1992)

- Kyoto Protocol(1997)

- [Post-Kyoto?](2015)

Mitigation

Adaptation

SOLUTIONS

• Emissions Trading (ET)

• Clean Development Mechanism (CDM)

• Joint Implementation (JI)

PROBLEM

International Response Map

Command & Control

• Technology (input) standards– Required use of BBG/ biofuels– Required use of CFL lightbulbs– …

• Performance (output) standards– US Clean Air Act –> sets air quality standards– AMDAL– …

Command & Control

Company A

Company 1

Company 3

Company 2

Input Standards

TechnologyStandard

Technology

Output standards

PenalViolation

Company B

PollutionStandard

PenalViolation

Pollution

• Pros:– Easier enactment & implementation– Easier monitoring – Clear enforceability (in theory)

• Cons:– Uniform costs blind to unique capacities– Initial subsidies often needed– High monitoring & enforcement costs– Provides no incentive to do more than necessary– Information asymmetry between gov’t & corporations

Command & Control

Market-Based Mechanisms• Objective: To Put a Price on Externalities

An externality is a cost which results from an activity which affects an uninvolved party who did not choose to incur that cost. Pollution is an externality because although it is emitted by a producer, it affects the society, and society must pay for the cost ultimately (social cost).

“Pricing externality” means making the producer pay for the cost of that externality / pollution.

• Tax• Cap-and-Trade

Types of Market-Based Mechanisms

Company A

Tax

Company 1

Company 3

Company 2

Companies with High Costs of Compliance

EmissionsThreshold

Emissions

Companies with Low Costs of Compliance

Carbon Tax

Company B

Tax

• Pros:– Relatively simple to implement– Liberty to choose compliance mechanism– Commonly understood concept of disincentive– Money goes to gov’t– Emission leakage

• Cons– Gov’t-dependant enforcement relatively difficult– Uniform costs blind to unique capacities– Money goes to gov’t– Emission leakage

Cap & Trade

Company 1

Company 3

Company 2

Companies with High Costs of Compliance

EmissionsCap

Emissions

Companies with Low Costs of Compliance

Company A

Business AsUsual

Carbon Credits

CarbonCredits

CarbonCredits

Carbon Credits sold to meet their emissions cap

Company A

Reduction Program

reductions

1 ton CO2

1 ton CO2

1 ton CO2

Cap & Trade

• Pros– Cost-efficiency – Self-monitoring mechanism– Acts as incentive & disincentive at the same time

• Cons– Only works for atmospheric pollution– Complicated implementation– The reduction needs to be “additional” to business-as-

usual reductions (Additionally Principle)




Table of Content

24

IPCC, UNFCCC, Kyoto Protocol

• Intergovernmental Panel on Climate Change• United Nations Framework Convention on Climate

Change• North & South agree to mitigate climate change

before “it is too late”• Agree that they have “Common but Differentiated

responsibilities”.

GLOBAL WARMING

INSTRUMENTS


(1992)


- Non-Treaty Actions

CARBON MARKETS


•Emissions Trading Systems

•Domestic Offset Schemes

•Voluntary Carbon Market

PROBLEM

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The Kyoto protocol

Annex INon-Annex INot ratified

27

The Kyoto Protocol Mechanisms: economic rational

Developed countries:• Kyoto allows Annex I countries to purchase “GHG emission reductions”

instead of reducing emission domestically• Costs of complying with Kyoto targets is prohibitive for Annex I

countries (most EU members with highly efficient, low GHG polluting industries, and high environmental standards)

Developing countries:• Kyoto encourages non-Annex I developing economies to reduce GHG

emissions since doing so is now economically viable because of the sale of GHG emission reductions

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Kyoto Protocol

• It relies on market based flexible mechanisms to reduce GHGs emissions to mitigate GW.– Emission trading (trading of allowances between

Annex I governments) Like between the EU Members

– Clean Development Mechanism (CDM) (projects in Non-Annex I countries with participation of Annex I countries)

– Joint Implementation (JI) (projects between Annex I countries)

Clean Development Mechanism

Company 1

Company 3

Company 2

Annex I (“industrial” countries)e.g. Germany

EmissionsCap

Emissions

Non-Annex I (“developing” countries)e.g. Indonesia

Company A

Business AsUsual

CertifiedEmissionsReductions

CER

CER

CERs sold to Annex I to meet their emissions cap

Company A

Clean Development Mechanism

reductions

1 ton CO2

1 ton CO2

1 ton CO2

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Emission trading (cap-and-trade)

Kyoto Protocol sets a limit or cap on the amount of GHG that can be emitted

Each Annex I country is given credits or allowances (Assigned Amount Units or AAU), i.e. the right to emit a specific amount which corresponds to the cap

Countries that emit beyond their allowances must buy credits from those who emit less than their allowances

This transfer is referred to as a CARBON TRADE

Emissions in reporting yearAllocated allowances (AAU)

Surplus of certificatesDeficit of certificates

Country A Country B

CAPTrade in AAUs

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Generating Carbon Credits G

HG

em

issi

ons

TimeProject commissioned

“With project” emission level

“Without project” emission level Carbon

credits

Project based emission reductions need to be calculated and verified 1 reduced Ton of Carbon Dioxide equivalent = 1 Carbon Credithereafter they can be sold on the open market.

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Formula Name Global Warming Potential

CO2 Carbon dioxide 1

CH4 Methane 21

N2O Nitrous oxide 310

PFCs Perfluorocarbons 9200

HFCs Hydrofluorocarbons 11700

SF6 Sulphur hexafluoride 23900

GWP & Carbon Credits

If one tonne of GHG emission is reduced then number of carbon credits issued will be equivalent to the GWP.

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Supposed benefits of the market mechanisms

• Help identify lowest-cost opportunities for reducing emissions and attract private sector participation in emission reduction efforts.

• Cost of limiting emissions varies considerably from region to region, the benefit for the atmosphere is the same, wherever the action is taken.

• Developing nations benefit in terms of technology transfer and investment brought about through collaboration with industrialized nations under the CDM.

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Carbon market: Project (micro) - level

• CDM Project Development Cycle

Carbon Credits needs to be certified and verified

(UN BODIES and Gov’t)• CDM Eligibility Criteria• Project Examples

CDM: The long and winding road…

35

Source: adapted from Carbon Finance Branch, World Bank 2005

Preparation and Review of the Project•Submission of the Project Information Note (PIN)

Carbon Asset Due Diligence•Development of the Project Design Document (PDD)

Validation process•Acceptance and Registration of the project

Project Appraisal and Negotiation•Signing of Emissions Reductions Purchase Agreement (ERPA)

Construction and Start up

Periodic verification & certification

Project completion

3 month

2 month

2 m

onth

3 month

1 – 3 years

up to 21 y

ears

Phase Responsible Entity

1. Project Design Document Project-Developer

2. Letters of Approval (NATIONAL) Designated National Authority (DNA)

3. Validation (UN BODY) Designated Operational Entity (DOE)

4. Registration (UN BODY) CDM Executive Board (EB)

5. Monitoring Project Developer

6. Verification and Certification Designated Operational Entity (DOE)

7. Issuance of CERs CDM Executive Board (EB)

8. Forwarding (tracking of buy and sell) CDM Registry Administrator

CDM: The long and winding road…

37

Designated National Authority (DNA)

• Project participants shall get written approvals of CDM project from the DNA of each Party involved

•

• PPs may get written approvals in step (1), (2) or even (3), but before a request for registration

• The written approval from DNA must confirm:- The fact of Kyoto Protocol ratification; (Country)- Voluntary participation in CDM project activity; (Additionally Principle)- Contribution to sustainable development of the host Party

• Additionally, the letter may contain:- Authorization of project participants (official confirmation of CER

ownership-owned by the developer)

Designated National Authority (DNA)

• DNA was established under KepMenLH No. 206/2005 jo. 522/2009.

• DNA members consist of representatives from 14 gov’t institutions:

• Coordinating Ministry of Economy• State Ministry of Environment• State Ministry of National Development Planning• Ministry of Energy and Mineral Resources• Ministry of Forestry• Ministry of Industry (CDM Project)• Ministry of Foreign Affairs (CDM steming from International treaty)• Ministry of Home Affairs (wants to know everything in the )• Ministry of Transportation (can be a transportation project, e.g. switching fuels)• Ministry of Finance (deals with gov’t revenue, wheter CDM projects can generation non-tax:

paying for licenses)• Ministry of Agriculture(can be a CDM n project, e.g. switching fuels)• Agency for Technological Assessment and Implementation (Maybe there’s aquisition)• National Land Agency• National Council for Climate Change

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Designated Operational Entity (DOE)

• DOE is domestic or international legal entities that have been

accredited by the CDM Executive Board (Info in UNFCCC data base http://cdm.unfccc.int/DOE)

• It has two key functions:1) To validate and subsequently request registration of a proposed CDM project

activity (Step 4)

2) To verify emission reduction of a registered CDM project activity, certify as appropriate and request the CDM Executive Board to issue CERs (Step 7) – verification is done periodically at the request of PPs

• 12 DOEs officially accredited by CDM EB; only two from non-Annex I Parties (South Korea and South Africa)

http://cdm.unfccc.int/DOE

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CDM Executive Board (CDM EB)

• CDM EB – is an international CDM governing body

• It consists of 10 members (& 10 alternates): 2- from Annex I , 2 - from non-Annex I, 1 from each UN region, 1 from small island developing states

• Its key functions:− to register CDM projects (Step 5) and issue CERs (Step 8)

− to approve baseline and monitoring methodologies

− to accredit DOEs

− to do any others tasks according to the decision of COP/MOP of UNFCCC

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Project Participants

•CDM Project owner (CER seller): - Any legal entity officially registered in host country that can develop

and operate CDM projects (business, municipalities, NGOs)- Each host country may establish additional criteria for project owners

(e.g. financial sustainability or share of foreign capital)- Others: CDM broker, project financier, technology provider, project

operator, etc…

•CDM Project Investor (CER buyer):- An entity that purchases CERs from a CDM project. The investor is

usually from an Annex I country and can be a corporation, a government body or non-governmental organization, or an international carbon fund (e.g. World Bank Prototype Carbon Fund)

Various Project Sectors

Energy Renewable energy (non-fossil fuel)

Energy efficiency

Others

Solar, wind, biogas, biomass, hydro, geothermal, hybrid systems, and waste.

Residential, service, industry, agricultural machineries/technology.

Agriculture (e.g. improved fertilizer, water management), fuel switching, transport, waste management (irrigation), HFC.

Forestry Aforestation

Reforestation

[REDD+]

Replanting land that hasn’t been forest for at least 50 years

Replanting land that used to be forest before 1990

Reduced Emissions from Deforestation & Degradation]

P R O J E C T S

SECTOR

CDM (basic) eligibility

It must not be required by law or mandatoryVOLUNTARY

ADDITIONAL

SUSTAINABLE

APPROVED

METHODOLOGY

1.

2.

3.

4.

Emissions would not have been reduced without the CDM, because it’s a financing project

The project must fulfill sustainability requirements

It uses UN-approved methods of reduction choose and pick,

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a) CDM projects must be “additional”. This concept requires careful attention.

b) Official language ・ (A CDM project must achieve) Reductions in emissions that are

additional to any that would occur in the absence of the certified project activity. 　　　　　　　　　　　　　　　　　　

・ A CDM project activity is additional if anthropogenic emissions of greenhouse gases by sources are reduced below those that would have occurred in the absence of the registered CDM project activity

CDM Eligibility Requirements: Additionality

c) Interpretation・ CDM status will be given only to those projects

that cannot be implemented without it. ・ Those projects that can/will be carried out in the

course of regular business (Business-As-Usual - BAU - projects) are disqualified.

d) Paraphrase• CERs are offered as an incentive to encourage developers to

undertake GHG mitigation projects that do not normally happen.　　　

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CERs = Baseline emissions – Project emissions

The baseline is the amount of GHG that would be emitted in the absence of the CDM project. It is not necessarily the current amount of emissions.

KEY:– ability of a project developer to identify and prove the

selection of baseline scenario;– CDM projects must follow official UN Baseline

Methodologies (or get their new baseline methodology approved by UN)

CDM Eligibility Requirements: Measuring emission reductions

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Selection of project baseline

Source: GTZ

CDM Eligibility Requirements: Sustainable

Sustainable Development:

“Development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It contains within it two key concepts:

1. The concept of needs, in particular the essential needs of the world’s poor, to which overriding priority should be given; and

2. The idea of limitations imposed by the state of technology and social organization on the environment’s ability to meet present and future needs.”


The Indonesia DNA has defined four sustainable development criterion:

1. Environmental Sustainability 1. Natural resource conservation2. Local community health and safety

2. Economic Sustainability1. Local community welfare2. Local community income

3. Social Sustainability1. Local community participation2. Local community social integrity (no conflicts triggered)

4. Technological Sustainability1. Transfer of know-how2. Relevant technologies

The above checklist forms part of the Application Form for National Approval of a CDM Project. All indicators must be checked with a “yes”.


Problems with the sustainability criteria:

1. Lack of standard criteria globally recognized2. Backwards incentives of allowing host countries to define criteria3. Exclusion of sustainability from CER prices4. Lack of correlation between sustainability and emissions reductions

Will this ultimately be a social benefit?


Law No. 32 of 2009 on the Environment:

1. The government is required to prepare a Strategic Environmental Assessment to ensure that the principle of sustainable development is integrated into development policies, which should then become a foundation of all policies and planning in a given area;

2. The Strategic Environmental Assessment should be prepared with the participation of the public and stakeholders through dialogue, discussion, and public consultation.

Solar cook stoveENERGY EFFICIENCY PROJECT

Location: Aceh Method:

• Solar cook stoves imported from Germany in prefabricated kits, local assembly, distribution to households

• Frying, steaming, baking, etc, and simmering – can boil 6 litres of water within 55 minutes.

Funding: • Fully funded by the supplier (Klimaschutz e.V.) in return for

CERs Payment is used to buy the stoves Potential CERs:

• 3,500 per year (for 1000 solar cookers)• 24,500 cumulative for 7 years

Benefits:• Free technology and free energy • Saves money - increases welfare• Supports local food-selling businesses• Eliminates dependence on kerosene and firewood• Reduces lung and eye disease caused by dirty fumes

Business as usual

Micro HydropowerRENEWABLE ENERGY PROJECT

Location: Across Indonesia Method: Program of Activities

• Install approx 100 small hydropower plants delivering energy to main grids and small isolated grids for rural electrification

• Combined installed capacity of no more than 15 MW Funding: Equity and loan by South Pole Carbon Asset Management Ltd. (a BANK) Potential CERs

• 973 per project per year• 2,724,400 cumulative for 100 projects in 28 years.

Benefits:• Rural electrification to isolated areas• Electricity independence – decentralized, no bills• No emissions – minimal impact on environment• Enhances economic activity• Creates employment opportunities

Landfill methane captureWASTE MANAGEMENT PROJECT

Location: TPA Suwung, Denpasar; Yogyakarta Method:

• Waste separation and controlled decomposition• Capture of methane for electricity generation

Parties: • PT Navigat Organic Energy Indonesia (developer)• Mitsubishi UFJ Securities Co. Ltd. (consultant)

Funding: General Electric (machinery) Potential CERs:

• 108,749 per year [=1000 cars]• 761,246 over 7 years

Benefits:• Generates 10 MW electricity = 700 households• Improve municipal waste management• Improve environment around landfill site• Reduce health hazard and risk of landslide• New technology• Employs scavengers




Table of Content

GLOBAL WARMING

INSTRUMENTS


(1992)


- Non-Treaty Actions

CARBON MARKETS


•Emissions Trading Systems

•Domestic Offset Schemes

•Voluntary Carbon Market

PROBLEM

Supranational, national, and sub-national, & voluntary Carbon Markets

• European Union – Emissions Trading Scheme (EU-ETS)• California Carbon Exchange (CCX)• Costa Rica Voluntary Domestic Carbon Market

(MDVCCR)• US Regional Greenhouse Gas Initiative(RGGI) (Between

federal states) • Australia, New Zealand, Japan, China, Korea

• DISCUSS: “ETS, RIP?”

Other Carbon Markets

Company 1

Company 3

Company 2

(Voluntary or Compliance) Buyer

EmissionsCap

Emissions

Seller

Company A

Business AsUsual

VerifiedEmissionsReductions

VER

VER

Carbon Credits sold to Buyer to meet their emissions cap

Company A

Carbon CreditProject

reductions

1 ton CO2

1 ton CO2

1 ton CO2

Legal Aspects of Carbon Trade

• Carbon Contracts Provide a documented framework within which “emission rights” are bought , sold , acquired, transferred.

• Ownership of Atmosphere : The Property Rights Issues

• Nature of Carbon Contracts & Carbon Trade – ER’s a new ‘commodity’

• Ownership of Emission Reductions (ERs) and Legal Process of Transfer- If Project is “legal” in domestic jurisdiction and ERs are “certified” and “verified” by authorised agents, then ERs are legal commodities

• Carbon Contracts are called Emissions Reductions Purchase Agreement (ERPA)

ERPA’s Key ElementsThe key elements in any ERPA will cover the following

areas:◦ Quantity of CERs to be delivered◦ Price per unit◦ Delivery schedule◦ Consequences of non-delivery◦ Other default events

ERPAs are usually long-term agreements and need to cover a range of potential scenarios, so they will generally be more complex than this, often extending to 30 – 40 pages.

Negotiating, Drafting & Executing ERPA Or Carbon Trade Document

Key Issues for Project Developer:– Rewards you wish to achieve:

• Maximizing future revenue from CER?• Using ERPA as collateral to obtain further

finance?• Upfront funding for project costs?

– Overall Risks:• What barriers does the project face before

CERs delivered?• How big is potential for failure?

– Balancing Rewards with Risks


• CER pricing and terms of sale– Types of Agreement

• Spot Agreement (CERs are issued and ready for delivery)

• Future Delivery Agreement (CERs to be issued in future)• Call Option (Buyer pays upfront premium; has right to

buy later at fixed price)• Put Option (Seller pays upfront premium; has right to

SELL later at fixed price)

– Types of Pricing• Fixed Price• Floating Price• Combination of fixed and floating


Risks– Country Risks

• Change in laws• DNA doesn’t approve

– General Project Risks• Force Majeure• Project under-performs• Market risks

– CDM Risks• Post-2012 uncertainty• Failure to validate and register or verify credits

– Project Entity Risks• Credibility• Lack of resources• Financial risk

• Key Contractual Provisions– Representation and Warranties– Liabilities and Indemnities – Default,Termination and Remedies– Progress Reports and Audit Rights – Confidentiality– Arbitration and Dispute Resolution– Force Majeure– Third Parties– Compliance of Local/Domestic Laws– Taxes, Levies and Charges





Table of Content

REDD+

“Reducing Emissions from Deforestation and Forest Degradation (REDD+) is a global initiative designed to pay groups or countries for protecting their forests and reducing emissions of GHG (countries that have tropical forests have to be ). The “plus” takes the mechanism to another level by enhancing the land’s capacity for carbon storage by rewarding activities that improve forest health.”

Bali Roadmap 2007

“Encourages developing country parties to contribute to mitigation actions in the forest sector by undertaking the following activities as deemed appropriate in accordance with respective capabilities & national circumstances:a. Reducing emissions from deforestationb. Reducing emissions from forest degradationc. Conservation of forest carbon stocks (warehouse for

carbons)d. Sustainable management of foreste. Enhancement of forest carbon stocks (improving the

quality to reserve carbons)

REDD+

Company 1

Company 3

Company 2

Business As Usual- Baselines

EmissionsFromForest Conversion

Reforestation or Avoided Deforestation

1 ton CO2

1 ton CO2

1 ton CO2

Pulp

Palm Oil

Mining

Pulp

Palm Oil

Mining

1 ton CO2

1 ton CO2

1 ton CO2

1 ton CO2

1 ton CO2

1 ton CO2

1 ton CO2

1 ton CO2

credits

credits

credits

credits

Sold to voluntary carbon credit buyers

Forest heterogeneousPalm oil and pulp are plantations: homogenous

No compliance market

Managed => reduce emissions=> sell carbon credits

REDD+: voluntary but popular

• 109 REDD activities around the world• 44 demonstration activities• 65 readiness activities• 20 demonstration activities in Indonesia

REDD+ Regulations

• Permenhut 68/2008 on Demonstration Activities for REDD

• Permenhut 30/2009 on REDD• Permenhut 36/2009 on Carbon Use• Permenhut 20/2012 on Forest Carbon• Inpres 2013 on Forest License Moratorium

(stopping the licenses to convert forests, 2 years )• [Norway US$1 billion grant for REDD+]

Market-regulated REDD+

• Acquire Forest Concession (hard in Indonesia because of the

beaurocracy, many diff. interests- project owner/developer)• Project Design Document (usually done by a consultant)• Verified by Voluntary Carbon Standard (VCS) or

Climate, Community, and Biodiversity Standards (CCB) a higher price for credits

• Monitored and Verified (project owner are verification)

• Issuance of Credits

Verification

• Proof of title that demonstrates their right to the GHG emissions reductions and the ownership of the project.

• Additionally: forest conservation would not occur in the absence of the REDD incentive

• Permanence: both parties perform obligations for the duration of the contract

Some Problems with REDD+• Leakage: deforestation is avoided in one place but

forest destroyers might move to another area of forest• Additionally: almost impossible to predict what might

have happened in the absence of the REDD project (no

one has claimed the forest, done by estimates)• Permanence: carbon stored in trees is only temporarily

stored and when trees die will be released back to atmosphere (not really a problem at the present because trees can

have a long time span)• Measurement: accurately measuring the amount of

carbon stored in forests and soils is very complex.• DISCUSS: “The Finitude of Forests”




Table of Content

Simulation: Project CDM Geo

• The “Forest” is a 50,000 hectare area designated as “Convertible Production Forest”. The forest concession is owned by PT Agro, a palm-oil developer, with rights to convert the forest into a palm oil plantation.

• PT Pertamina owns a “pinjam-pakai” permit for underground coal mining on the Forest.

• Indigenous communities are scattered throughout the Forest, for years growing their own food & selling weaved baskets.

Simulation: Project CDM Geo

• Group I: Energy Developer PT. Pertamina Geo• Group II: Forest Concession Owner PT. Agro• Group III: Local Community • Group IV: Government of Indonesia

Project CDM vs. REDD

• Group I: Energy Developer PT Pertamina Geo– To put forth proposal on CDM project to generate

carbon credits by avoiding coal extraction and shifting to geothermal extraction in the Forest

– To make sure the proposal is approved by local community and government


• Group II: Forest Concession PT Agro– To put forth proposal on REDD+ project to

generate carbon credits by avoiding the conversion of its forest into palm oil, and therefore conserving the Forest

– To make sure the proposal is approved by local community and government


• Group III: Local Community– To ask a lot of questions scrutinizing the impact of

both proposed projects to their community and livelihood

– To decide which is more favorable to them (CDM)


• Group IV: Government– To identify whether each proposal meets

requirements– To scrutinize baseline, additionally, impact to

locals, society, and environment– To “want something in return”– To issue letter of approval to one of the projects

Documents

Environment Trade Law Presentation