Case Study: Sustainable Fuelwood and Charcoal Production for the Pig Iron Industry in Minas Gerais, Brazil “ The Plant

1. Case Study: Sustainable Fuelwood and Charcoal Production for the Pig Iron Industry in Minas Gerais, Brazil “The Plantar Project” (Sustainable Development Analysis) Marina T. Mallare Climate Change Information Center November 5, 2003

2. Outline • A. Overview of the Project “Brazil: Sustainable Fuelwood and Charcoal Production for the Pig Iron Industry in Minas Gerais” • B. Sustainable Development Indicators • C. Evaluation of the Project

3. A. Overview of the “Plantar” Project • Project Objectives To promote environmentally sustainable socio-economic development in rural Minas Gerais, Brazil; To achieve greenhouse gas emissions reductions. • Project Location Minas Gerais State, Brazil

4. Brazil Map

5. A. Overview (cont.) • Type of Project Fuel switching, reducing emissions from charcoal production and afforestation. It involves the following: 1. Establishment of 23,100 ha of high yielding Eucalyptus; 2. Reduction of methane emissions during charcoal production; 3. The regeneration of “cerrado” native vegetation on 478.3 ha of pasture lands. .

6. Eucalyptus Plantation

7. Eucalyptus Trees

8. A. Overview (cont.) • Project Baseline Continuing decline in establishment of fuelwood plantation; ongoing switching to coal and coke for pig iron production and maintenance of pasture onformer natural forest land in Minas Gerais

9. Pig Iron

10. A. Overview (cont.) • Crediting Period Twenty-One years: three 7-year “renewal” periods depending on the development in the baseline • Estimated CO2 Reduction 2002 – 2009 : approx. 19,444 – 2,245,108 tonsCO2 /year 2010 – 2023 : approx. 395,246 & 376,346 tonsCO2/year 28 years lifetime: 2002 – 2029  12.9 million tons CO2

11. A. Overview (cont.) • Sources of Emissions Reduction 1. Establishing new fuelwood plantations; 2. Reducing methane emissions from charcoal production; 3. Reducing CO2 and NO2 emissions in pig iron production by switching from coking coal to charcoal; 4. Regenerating native forest on pasture land.

12. A. Overview (cont.) • Project Sponsor and Operator Plantar, S.A. • Project Planning and Assistance - World Bank, Brazil - World Bank Prototype CarbonFund

13. A. Overview (cont.) • Project Background - Iron and steel is one of the major industries in Brazil traditionally relying on charcoal from native forest to supply the fuel requirements of the pig iron industry; - The trend over the past decades has been toward the use of coke as a thermal reducer; - Plantar S.A. plans to establish between 2002 – 2009, 23,000 ha of plantation of high yielding provenance of Eucalyptus;

14. A. Overview (cont.) • Project Background -The plantation will be established in blocks of 3,300 ha, repeated each year for 7 years. - In the 8th year, the first block will be harvested and wood carbonized ; -These trees will regrow from coppice shoots and the growth and harvest cycle will continue for two rotation after which the plantation will be re-established with new seedlings;

15. A. Overview (cont.) • Project Background - Plantar will improve the carbonization process by redesigning the brick kiln; - It will also plant 478.3 ha of pasture land on which to proactively restore the native cerrado forest ecosystem.

16. B. Sustainable Development Indicators

17. B. Sustainable Development Indicators The CDM project can contribute to sustainability within the host country by: • Providing positive gains to man-made capital such as transfer of technology, building infrastructure, or improving efficiency of the economy, OR • Improving environmental assets by preserving biodiversity, or improving local air quality, OR • Improving social and human capital through creation of employment, raising of living standards and transfer of knowledge.

18. B. Sustainable Development Indicators (cont.) But, at the same time the CDM project should notcontribute to significant depreciation of environmental and social resources, or economic capacity.

19. B. Sustainable Development Indicators (cont.) Specifically, the CDM project can be assessed based on the project impact on the following categories: • Greenhouse Gas • Economy • Environment • Disadvantaged Groups

20. C. Evaluation of the Project

21. C. Evaluation of the Plantar Project Greenhouse Gas Reduction • Reduction of CO2 and NO2 emissions by substituting coking coal with charcoal in the pig iron production; • Reduction of emissions from charcoal production by improving carbonization process; • Regenerating native forest on pasture land; ( + impact ) ( + impact ) ( + impact )

22. C. Evaluation of the Plantar Project Greenhouse Gas Reduction (cont.) • The project validator, Det Norske Veritas (DNV), cannot ascertain whether the permanence of the carbon sequestration is sufficient to ensure long-term benefits related to the mitigation of climate change; (- impact )

23. C. Evaluation (cont.) Economy • The project will introduce improved technology of carbonization and high quality seedling farm; • The project will provide training for better forest management; • The project will provide charcoal to small scale pig iron producers; ( + impact ) ( + impact ) ( + impact )

24. C. Evaluation (cont.) Economy (cont.) • Will increase rural employment by shifting to plantation-based charcoal fuel economy from imported coal; • Will reduce foreign currency dependence due to less importation of coal; ( + impact ) ( + impact )

25. C. Evaluation (cont.) Economy (cont.) • Eucalyptus plantations give a lot of work during the first 2 years and generally limited work on the next 5 years; • Plantar was fined when the Regional Working Office found 194 workers without any registration during the field visit between March 11-12, 2003; (- impact ) (- impact )

26. C. Evaluation (cont.) Economy (cont.) • Various food products factories closed because of lack of raw materials increasing unemployment; • Local communities suffered from the restrictions of Plantar on cows grazing on the neighboring lands,including Plantar land; (- impact ) (- impact )

27. C. Evaluation (cont.) Economy (cont.) • Large plantations are not consistent with the land reform objective of distributing the lands and encouraging small-scale agricultural activities; • The land occupied by Plantar may be used for small scale diversified and ecological agriculture that will create more human-friendly jobs with better compensation; (- impact ) (- impact )

28. C. Evaluation (cont.) Environment • The effective fire control system established in the sites will reduce the risk in surrounding native forest and recovering forest areas; • High yeilding plantations and efficient carbonization reduce the overall plantation area and permit soil recuperation of former planted area; ( + impact ) ( + impact )

29. C. Evaluation (cont.) Environment (cont.) • The sustainably managed fuelwood plantations will reduce pressure of deforestation on the cerrado; • The plantation is enhancing the environmental contribution of forested areas by conserving native forest and gallery forest; ( + impact ) ( + impact )

30. C. Evaluation (cont.) Environment (cont.) • Permanent preservation areas were not respected; • Plantar was responsible for the destruction of some cerrado since they cleared some land for Eucalyptus plantation. • Spring water are contaminated making it unsafe for for drinking and killing the animal life in the stream; (- impact ) (- impact ) (- impact )

31. C. Evaluation (cont.) Environment (cont.) • Bad effects of the herbicide and pesticide used; • The detour on the road paralyzed the rehabilitation project of Boa Monte Stream protecting the vegetation in the stream and diminished flow and quality of water; (- impact ) (- impact )

32. C. Evaluation (cont.) Environment (cont.) • Plantar operates without environmental clearance; • FSC (Forest Stewardship Council) granted in 1998 by the certifier SCS is only valid for 4.8% of the total area of Plantar and does not guarantee “good forestmanagement” (- impact ) (- impact )

33. C. Evaluation (cont.) Environment (cont.) • The short cycle of eucalyptus monoculture does not allow any other plant or animal such as birds to live within it; • 15 –20% still use of native vegetation for charcoal due to lack of control on road; (- impact ) (- impact )

34. C. Evaluation (cont.) Impacts on the Disadvantaged Group • Improved carbonization will reduce particulates and other pollutant ; • Workers are trained in appropriate pest control techniques and undertake environmental education; ( + impact ) ( + impact )

35. C. Evaluation (cont.) Impacts on the Disadvantaged Group (cont.) • Improved health care, better transport facilities and recreation activities; • Plantar is sponsoring local agriculture schools, and training students in sustainable forestry and agriculture; ( + impact ) ( + impact )

36. C. Evaluation (cont.) Impacts on the Disadvantaged Group (cont.) • Stakeholders consulted by Plantar live in urban region and are not familiar with the actual sufferings of the local communities; • Though not specific to Plantar, the expulsion of Tupinikim and Guarani Indians was the result of the expansion of the plantation sector; (- impact ) (- impact )

37. C. Evaluation (cont.) Impacts on the Disadvantaged Group (cont.) • FSC certifier SCS did not enter into dialogue with local communities during their field work in 1998-2001 while doing the FSC-certification of Plantar; • Workers are exposed to dangerous working conditions and health hazards; (- impact ) (- impact )

38. C. Evaluation (cont.) Impacts on the Disadvantaged Group (cont.) • People are expelled from their land to accommodate the plantations resulting to migration to poor neighborhoods of urban centers; • Some people were forced to sell due to being isolated and the contamination of water; (- impact ) (- impact )

39. C. Evaluation (cont.) Impacts on the Disadvantaged Group (cont.) • The local people were pressured to sign support for the company; Plantar does not explain the scope and context of the project; • Detour on the road is disadvantageous to the local community; (- impact ) (- impact )

41. References/Links • PDD of the “Plantar” Project submitted for Validation on Oct 17, 2001; Updated and resubmitted for validation on March 2002; • http://www.cdmwatch.org/Plantar%20with%20more%20sigs%202%20june.doc. (a letter addressed to PCF dated May 23 2003 signed by different organizations/citizens); • CDM Watch Briefing Paper prepared by: Ben Pearson CDM Watch, Indonesia cdmwatch@indosat.net.id; www.cdmwatch.org; • WRM’s bulletin N° 60, July 2002;

42. References/Links (cont.): • FERN News Release dated Thursday 27 March 2003 ,entitled “Brazilian groups urge EU companies not to buy carbon credits from eucalyptus plantation” • Contact in Brazil: Marcelo Calazans (coordinator), FASE-ES (Espirito Santo) e-mail: fasees@terra.com.br • Contact in Europe: Jessica Wenban-Smith, FERN, +32 (0)2 733 0814 email: jess@fern.org • Contact in North America: Jutta Kill, FERN, +1 250 799 5386 email: jutta@fern.org

43. Thank you! Marina T. Mallare Climate Change Information Center Manila Observatory Tel. No : 426-59-21 Email : marina@observatory.ph