Harnessing the carbon market to sustain ecosystems and alleviate poverty

1. Overview of Methodology and Regulation for CDM AR Projects BioCarbon FundTraining Seminar, February 5-8, 2008 Harnessing the carbon market to sustain ecosystems and alleviate poverty

2. Outline • CDM A/R Methodology process: • Approved Methodologies • Program of Activities • Project Types • Project Design and Regulatory Compliance 4. Project Monitoring and Verification

3. CDM AR - Methodology Process

4. Overview of CDM A/R Methodology Process • Total of 35 A/R methodologies submitted for CDM EB review and approval so far • 10 A/R methodologies approved until Oct 2007 • 1 A/R methodology is rated B and is under review • 20 methodologies (including the resubmitted ones) are rejected • 1 new methodology is submitted for AR WG review during November 2007

5. Methodology Approval Process

6. Carbon Pools in Approved AR Methodologies Carbon pools

7. Overview of Approved Methodologies

8. Overview of Approved Methodologies…

9. Methodology for Small Scale A/R Projects • Lands eligible – grasslands/croplands; wetlands; and settlements • Baseline approach 22(a): Existing or historical, as applicable, changes in carbon stock in the carbon pools • Limit of GHG removals: 16,000 tonnes CO2e per annum • Carbon pools: Above ground biomass; below ground biomass • Leakage: Leakage assessment with indicators (% households displaced; % main product displaced; livestock units/ha displaced to areas outside project) • Upto 10% of GHG removals affected – no leakage • 10 to 50% of GHG removals affected – 15% leakage

10. Issues Covered in the Approved Methodologies • Land use: Degraded lands, grasslands, crop lands, wetlands, settlements • End use: Restoration of land productivity, fuelwood production, commercial timber production, biomass for industrial use • Baseline A/R: Pre-project afforestation implemented prior to project • Project emissions: Fossil fuel use, site preparation, biomass burning, natural fires, fertilizer application, N2O emissions from planting of legume shrubs • Leakage: clearance for agriculture, grazing, fuelwood collection, transport of project products, GHG (non-CO2) emissions from increases in livestock and manure management activities • Aerial/satellite methods: for carbon stock estimation

11. UNFCCC Tools to support Approved Methodologies • Tool for the demonstration and assessment of additionality for afforestation and reforestation CDM project activities (version 02) • Calculation of the number of sample plots for measurements within CDM AR project activities (version 01) • Tool for testing significance of GHG emissions in CDM AR activities (version 01) • Estimation of GHG emissions related to fossil fuel combustion in CDM AR project activities (version 01) • Procedure to determine when accounting of the soil organic carbon may be conservatively neglected in CDM AR project activities (version 01) • Estimation of direct nitrous oxide emissions from nitrogen fertilization (version 01) • Combined tool to identify the baseline scenario and demonstrate additionality (version 01) • Tool for estimation of GHG emissions from clearing, burning and decay of existing vegetation due to implementation of a CDM A/R project activity (Version 01) • Tool for Estimation of GHG emissions related to displacement of grazing activities in A/R CDM project activity (Version 01)

12. Program of Activities (PoA) for Afforstation/Reforestation

13. Terminology PoA-AR Program of Activities for AR CPA-AR CDM Program Activity for AR CDM-PoA-DD-AR: Design Document for AR PoA CDM-CPA-DD-AR: Design Document for AR CPA CDM-PoA-SSC-DD-AR:Design Document for Small Scale AR PoA CDM-CPA-SSC-DD-AR:Design Document for Small Scale AR CPA F-CDM-PoA-REG-AR: Registration request for AR PoA F-CDM-PoA-REQCERS-AR: Request for Issuance

14. AR Project Vs. AR PoA

15. PoA and CPA • Program of Activities (PoA) • Implementation of a policy, measure or goal • Institutional, financial and methodological framework to achieve ERs • CDM Project Activity (CPA) • Project Activity generates CERs • Unique and identifiable with a defined boundary

16. Characteristics of AR PoA • One coordinating agent • Private or public • Project participant communicates with the Board • Coordinates implementation and responsible for ER accounting • Ensures no double counting • Physical boundary could extend beyond one country • Letter of approval from each host country necessary • Duration • 30 years for fixed period / 40 or 60 years for renewable period • Baseline reviewed at every 20 years for renewable period • Revisions or deviations apply to all CPAs • Additionality • PoA would not be implemented under normal circumstances, or • Policy/measure would not be enforced, or • PoA leads to greater enforcement

17. Characteristics of AR CPA • One baseline and monitoring methodology for all CPAs • Sampling allowed for verification • Can be implemented by many entities/owners • CPA can be added to PoA at any time over the duration of PoA • All CPAs end when PoA terminates • All CPAs are identical • Unambiguous identification • Similar types of activities • Similar technology/technologies • One methodology • Small scale or large scale approved methodology • SSC methodologies are adjusted for leakage when used under PoA • All CPAs are monitored as per monitoring plan • Verification is done by sampling

18. Procedures of AR PoA • Coordination and implementation of policy/ measure by private/public entity • Boundary may extend to more than one non-Annex I country • Compliance with local/regional/ national policies and regulations • Apply same baseline & monitoring methodology (e.g., one type of technology / inter-related activities in same CPA) • Each CPA to be uniquely Defined, Identified and Localized (including start-end date) • CPA provides activity level information on eligibility, additonality, leakage, double counting

19. PoA CPA CPA CPA PoA with One AR Activity One PoA & Many CPAs: One Methodology, one technology, One or more project participants Implements policy/program or stated goal CPA with one technology - e.g., afforestation/reforestation CPA = One activity Many locations

20. PoA with Multiple AR Activities PoA CPA CPA CPA One PoA & Many CPAs : One Methodology, multiple technologies, one or more project participants CPA with multiple technologies e.g., silvipastoral activities (plantations, livestock etc) CPA= Multiple activities Many locations

21. PoA-DD-AR • Coordinating/Managing Entity • Boundary of the PoA • Policy/Measure or stated goal • Confirmation of voluntary action • Additionality of the entire PoA • Justification of the methodology • Eligibility criteria for inclusion of CPA • Start date and length of PoA • Operational and management arrangements • Monitoring plan (individual or sample) • Environmental Analysis and stakeholder comments • Letter of Approval from the host party

22. CPA-DD-AR • Identification of Responsible Entity • Host Party • Starting date, Type (fixed/renewable) and duration • POA Stipulation for inclusion • Eligibility criteria • Demonstration of additionality • Baseline, project and leakage emission calculations • Environmental analysis • Stakeholder comments • Confirmation that CPA is not part of another CDM project or POA

23. Choice of Methodology Scope 14: Afforestation/ Reforestation Project Program of Activity (PoA) Small scale Small scale Regular Regular Assisted Natural Regeneration Planting Pre-project A/R Activities No Pre-project A/R Activities No Activity Displacement Leakage Activity Displacement Leakage Activity Displacement Leakage No Activity Displacement Leakage

24. Activities Covered in Approved Methodologies

25. Methodologies Proposed for BioCF Portfolio Approved Methodology Methodology for UNFCCC review

26. Methodology on REDD • Current Status • Draft methodology is prepared and is under peer review • Next steps • The methodology would be revised based on peer review • Revised version of the methodology will be prepared by December 2007 • Revised methodology to be adapted for Window 2 projects in FY08 • Colombia – San Nicolas • Honduras – Pico Bonito • Madagascar

27. Project DesignProject Design Document

28. Project Types - Land rehabilitation • Often community based • Usually small plantings • Complex monitoring issues; but we have examples • Modest carbon content (<20 t CO2e/ha/yr) • Usually additional • Low leakage risk

29. Plantation forestry • Usually commercial enterprises • Often high rates of sequestration (e.g. 40+ t CO2e/ha/yr) • Must be able to demonstrate additionality • Leakage is possible through displaced land use • Best examples where the reforestation is part of a wider landscape project and/or is contribution to land rehabilitation

30. Agroforestry • Must convert non-forest to forest • Gains from carbon in the trees; sometimes from the under-crops; and usually from improved soil carbon • Additionality usually based on barrier tests

31. Silvi-pastoral • Carbon sequestered in trees; methane emissions from cattle often reduced • Complex to set up as they need to be split into two activities • Care in selection of the tree species

32. Non-renewable Biomass • Replace the unsustainable use of fuel woods (e.g., from cutting native forest), with alternative sources • E.g. methane digestors; sustainably managed fuel wood plantations

33. Features of A/R projects • Expiring CERs (non-permanence: A/R activities can be sinks and sources). • Small scale (< 16,000 tonnes CO2e yr-1) • Land eligibility limited to areas deforested before 31.12.1989. • Type of activities: Land rehabilitation, plantation forestry, agro-forestry, urban forestry, natural regeneration, etc… are eligible provided the definitions of land eligibility are met. • Species choice: Invasive alien species (IAS) and genetically modified organisms (GMO) are subject to host country legislation.

34. Project Design Document

35. Project Design Document • Formats - CDM-AR-PDD / CDM-PoA-DD-AR format a. Determine whether approved methodology is applicable b. New methodology is prepared and submitted to CDM • Baseline Information (Annex 2 of PDD) • Monitoring Plan (Annex 4 of PDD) • Ex ante estimation of ERs • Stakeholder consultations and quality control • Revision of the PDD to align with methodology • PDD submitted for DOE validation

36. Baseline approaches for A/R (22a) “Existing or historical, as applicable, changes in carbon stocks in the carbon pools within the project boundary” (22b) “Changes in C stocks in the pools within the project boundary from a land use that represents an economically attractive course of action, taking into account barriers to investment” (22c) “Changes in carbon stocks in the pools within the project boundary from the most likely land use at the time the project starts”

37. 200 Baseline removals Project removals 150 Increased Removals Removals (ktCO2e) 100 50 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Years Baseline Emissionremoval projects (A/R)

38. Additionality PASS PASS PASS Step 3. Barrier analysis Step 2. Investment Analysis OR PASS PASS Step 4. Common practice analysis PROJECT ACTIVITY IS ADDITIONAL A/R CDM project activities must be additional, as any other CDM project activity. The “A/R additionality tool” is similar to the standard one. Step 0. Preliminary screening based on the starting date and land eligibility Step 1. Identification of alternatives to the project activity consistent with current laws and regulations

39. Eligible carbon pools 2. Below-ground biomass Trees Non-Trees 1. Above-ground biomass 3. Dead wood 4. Litter 5. Soil organic carbon SOC

40. Accounting Carbon pools:more than 5 questions to answer

41. Carbon pools:more than 5 questions to answer • 2 assessments: ex ante & ex post • Pre-existing biomass: • Burning = emission • No burning but harvesting = Initial C stock decrease • No burning, no harvesting = Becomes part of project scenario OR assume initial C stock decrease • A pool can be excluded if the exclusion does not lead to an overestimation of carbon in the project • Leakage: If activity displacement induces land-cover change, all carbon pools must be accounted

42. Stratification • Carbon densities and carbon removal rates are spatially variant • Stratification reduces uncertainty and costs of the estimates • Baseline C strata are static: - Boundaries do not change over time. - ex ante= ex post. - Stock changes within each stratum = f (time), estimated ex ante and then “frozen”. • Project C strata are dynamic: - Boundaries may change over time. - ex anteex post. - Stock changes within each stratum = f (time), estimated ex ante and then measured. - Different class ages of planted trees.

43. Stratification - Baseline Ecological conditions Baseline land use Grazing land Soil A Cropland Soil B C2 C < 0 C > 0 C1 C = 0 C3 C4 C = 0 Baseline C strata ex ante = ex post

44. Stratification – Project ex post  ex ante Project implementation Ecological conditions Project land use Planted in year 1 Soil A Planted in year 2 Agro-Forestry Plantation Soil B Planted in year 3 C1.1 C2.1 C2.2 C1.2 C3.1 C4.1 C4.2 C3.2 Project C strata

45. Baseline removals C stock changes in the carbon pools: • Same C pools and initial C stocks as project scenario • Historical reforestation/regeneration rates to be included in the baseline scenario • Natural regeneration should not lead to a permanent forest • Ex ante estimations based on: • Projected changes in land-use/land-cover according to chosen baseline approach and selected baseline scenario • Growth data & models applicable to local conditions, or • Field-level measurement of a chrono-sequence (natural regeneration) or calibrated models such as CO2Fix

46. Baseline removals C stock changes in the carbon pools: • Ex post estimations: • Ex ante estimations are “frozen” (preferable) • Monitoring in plots is difficult: • within the project boundary – conflict of interest (area controlled by project participant) • outside the project boundary / control group approach – difficulties in tracing plots in areas not under the control of project participants)

47. Actual removals – Project scenario C stock changes in the carbon pools: • Same C pools and initial C stocks as baseline • Definition of “stand models” = species + management • Ex ante estimations based on: • Data & models applicable to local conditions, or • Field-level measurement of a chrono-sequence (existing plantations), • Models such as CO2Fix calibrated with the above. • Ex post estimations based on: • Field-level measurement in permanent plots. • Measurement frequency every 5 years (or more for slow changing pools, e.g. soil organic carbon)

48. Actual removals – Project scenario Project emissions: • Fuel powered machines & equipment: CO2, CH4, N20 • Fertilization: N2O • Fire: (CO2), CH4, N20 • Temporary C stock decrease should not to be considered permanent emissions.

49. Leakage – common types CO2 • Carbon stock changes from activity displacement: • Shifts in the agricultural and animal production from project land to areas outside the project boundary • Collection of fuel wood • Collection of fodder • Commercial collection of NTFP • Grazing • Increased emissions due to transport of products and personnel to areas outside the project: CO2, (CH4, N2O) • Basic principle of leakage prevention: baseline scenario and project scenario should deliver the same amount of goods and services.

50. Calculation of net CO2e benefits Baseline net GHGremoval by sinks Leakage = Net anthropogenic GHG removals by sinks Actual net GHG removal by sinks Project CO2e removals =C in carbon pools - Increase in GHG emissions Baseline CO2e removals =  C in carbon pools Leakage =  Increase in GHG emissions