Cincs Carbon Sequestration Introduction

A Carbon Sequestration Introduction: Climate Change, Established Frameworks and the Carbon Markets

A Carbon Sequestration Introduction:
Climate Change, Established Frameworks and the Carbon Markets

June 2008

The world is showing increasing concern about the threat of global warming,
substantiated by over a decade of scientific examination. The state of the environment
and the consequences of climate change increasingly drive policy, impact consumer
behavior, underlie shareholder actions, and inform corporate decisions. This document is
put forth by CINCS, LLC. CINCS is a technology services company focused on global
monitoring, accounting and verification systems for emerging environmental markets.
CINCS provides geo‐spatial technology solutions for carbon accounting and environmental
monitoring.

®
CINCS • 561 Broadway, Suite 6A • New York, NY 10012 1
Tel: +1.212.925.8106 • fax: +1.212.226.1625 • www.CINCS.com

This document is Copyright of CINCS ®, LLC, 2008, and contains data and opinions compiled by CINCS. CINCS is not liable for

information or data herein that changes daily with market trends or the study of climate change.

Credits

Research and text: Stephen J. Donofrio, Mark Chapman, Daniel Buckley, Plinio Ribeiro
Design and printing: Stephen J. Donofrio, Mark Chapman
Picture on front page: Mark Chapman

New York, NY USA 2008

CINCS, LLC

CINCS, LLC is a technology services and consulting company focused on innovative global monitoring,
accounting and verification systems for emerging environmental services markets.

CINCS can apply emerging technologies to global environmental questions and issues, and also provide
these accurate and rigorous measuring and monitoring technologies to better understand land use
changes, natural resources and environmental markets. The development of environmental markets
worldwide, such as carbon, requires assurances and verification for buyers and sellers of emissions
reductions from land use carbon offset projects.

Headquartered in New York, CINCS can offer remote sensing products and technologies to aid in these
verifications.

C2008, CINCS, LLC
561 Broadway, Suite 6A
New York, NY 10012
United States of America
Telephone: +1.212.925.8106
info@cincs.com
www.cincs.com
®
Table of Contents
Acronyms ...................................................................................................................................................... 5
1.0 A Global Warming Introduction ....................................................................................................... 6
1.1 What is global warming? ............................................................................................................... 6
1.2 What are the effects of global warming? ..................................................................................... 6
1.3 How are greenhouse gas concentrations affected by human activity? ........................................ 7
1.4 What about Greenhouse Gas Emissions from Land Use Activities? ............................................. 8
1.5 What technological solutions exist to mitigate global warming? ................................................. 8
2.0 Carbon Sequestration .................................................................................................................... 10
2.1 What is carbon sequestration? ................................................................................................... 10
2.2. What is vegetative carbon sequestration? ................................................................................. 10
2.3 What is the potential for vegetative carbon sequestration in terrestrial ecosystems? ............. 11
3.0 Overview of Land Use, Land‐Use Change & Forestry (LULUCF) Projects and the Global Carbon
Markets ....................................................................................................................................................... 13
3.1 What significance does the Kyoto Protocol have for emitters of greenhouse gases? ............... 13
3.2 Are Land Use, Land‐Use Change and Forestry (LULUCF) offset credits accepted by the Kyoto
Protocol? ................................................................................................................................................. 13
3.3 Why have LULUCF projects not maintained strong activity and approval in the Kyoto‐compliant
trading mechanism? ............................................................................................................................... 14
3.4 What non‐Kyoto markets accept land use, land‐use change and forestry offset credits? ......... 15
3.5 Is there active support for high‐quality LULUCF project emission reductions? ......................... 15
3.6 Saving Tropical Rainforests with Reduced Emissions from Deforestation and Degradation (RED)
Project Activities ..................................................................................................................................... 16
4.0 Land Use, Land‐Use Change & Forestry (LULUCF) Projects and the Kyoto Protocol ................... 17
4.1 What is the scope of LULUCF within the Clean Development Mechanism (CDM) of the Kyoto
Protocol? ................................................................................................................................................. 17
4.2 What is the CDM Project Cycle? ................................................................................................. 17
4.2.1 Project Documentation: Project Idea Note, Letter of Expression, Letter of Intent ............ 18
4.2.2 Project Design & the Project Design Document (PDD) ....................................................... 18
4.2.3 Emissions Reduction Purchase Agreements ....................................................................... 18
4.2.4 Project Validation ................................................................................................................ 19
4.2.5 Monitoring Project for Verification and Certification ......................................................... 19
4.2.6 CDM Executive Board (EB) Verification and Certification ................................................... 20
®
4.3 LULUCF Costs and Risks under the CDM ..................................................................................... 20
4.3.1 Transaction costs ................................................................................................................ 20
4.3.2 Gauging Performance: Temporary CER vs. long‐term CER ................................................. 21
4.3.3 CDM & forestry risks ........................................................................................................... 21
4.3.4 Forestry credit prices .......................................................................................................... 22
4.3.4 Prices and Risk ..................................................................................................................... 23
4.4 LULUCF Costs and Risks under the CDM ..................................................................................... 23
4.4.1 Foresty credit buyers in the CDM market ........................................................................... 23
4.4.2 Market demand for forestry offsets ................................................................................... 24
4.4.3 Successful Commercialization Checklist (from CATIE guidebook) ...................................... 25
5.0 Greenhouse Gas Disclosure and Reporting Frameworks .............................................................. 26
5.1 What are some of the Voluntary Greenhouse Gas Disclosure and Reporting Frameworks that
exist today? ............................................................................................................................................. 26
5.1.1 Carbon Disclosure Project ................................................................................................... 26
5.1.2 Program 1605b ................................................................................................................... 26
5.1.3 Eastern Climate Registry ..................................................................................................... 26
6.0 Overcoming Vegetative Carbon Sequestration Project Inhibitors ............................................... 28
6.1 What are the concerns of quantifying GHG offset benefits from forestry projects? ................. 28
6.2 What are the inhibitors associated with promoting vegetative carbon sequestration projects?
28
6.3 What processes and technologies exist to overcome some carbon sequestration project
measuring and monitoring inhibitors? ................................................................................................... 30
6.3.1 On‐the‐ground measuring and monitoring ........................................................................ 30
6.3.2 Aerial photography as measuring and monitoring ................................................................. 30
6.3.3 Satellite remote sensing ...................................................................................................... 30
6.4 What carbon accounting research contributions have been made by the Food and Agriculture
Organization? .......................................................................................................................................... 31

®
Acronyms

AAU Assigned Amount Unit
BAU Business As Usual
CER Certified Emission Reduction
CCX Chicago Climate Exchange
CDM Clean Development Mechanism (Kyoto Protocol)
CH4 Methane
CO2 Carbon Dioxide
CO2e Carbon Dioxide Equivalent
CSR Corporate Social Responsibility
EO Earth Observation
ERU Emission Reduction Unit
EU ETS European Union Emissions Trading Scheme
GHG Greenhouse Gas
GIS Geographic Information System
GPS Global Positioning System
GWP Global Warming Potential
IPCC Intergovernmental Panel on Climate Change
lCER Long‐term Certified Emission Reduction
NAP National Allocation Plan
NOx Nitrogen Oxides (nitrous oxide + nitrogen dioxide)
N2O Nitrous Oxide
REC Renewable Energy Credit
SF6 Sulfuric Hexafluoride
SOx Sulfur Oxides (sulfur dioxide + sulfur trioxide)
SRI Socially Responsible Investing
tCER Temporary Certified Emission Reduction
UNFCCC United Nations Framework on Climate Change
VER Voluntary Emission Reduction

®

1.0 A Global Warming Introduction

Over the past two decades, there’s been an outpouring of research and debate over global warming, which
scientists call climate change. A broad consensus has now formed: Climate change is real, well under way,
and is an enormous potential threat. The good news is that a range of viable solutions exists, including land
use and forestry approaches that can reduce the existence of greenhouse gases in the atmosphere and help
us adapt to coming changes.

This paper gives a brief overview the science behind climate change and then turns to look more closely at
Land Use, Land‐Use Change and Forestry Projects (LULUCF).

1.1 What is global warming?

Over the last 10,000 years, Earth’s thermostat has been set to an average surface temperature of around
57°F. However, the Earth’s average planetary temperature has been rising; an effect called global
warming or climate change. This change in climate is attributed to an enhanced greenhouse effect, or in
other words, increased trapping of the sun’s rays inside Earth’s lower atmosphere due to a build‐up of
“greenhouse gases”.

Greenhouse gases such as carbon dioxide (CO2), methane (CH4), nitrous oxides (NOx), and sulfuric oxides
(SOx) form a pervious blanket around the Earth reaching a distance of 100km (60 miles) from its surface.
These gases, particularly CO2, play a critical role in maintaining the complex and delicate balance of
Earth’s thermostat and in sustaining life throughout our history. They aid the planet in maintaining a
homeostatic surface climate by keeping a portion of the sun’s rays close to the Earth rather than allowing
them all to escape.

Despite this important role, these greenhouse gases are also waste products of the fossil fuels that almost
every person on the planet uses for heat, transport, and other energy requirements, which are rapidly
increasing the proportion of greenhouse gases in the atmosphere.i As these concentrations increase and
exceed Earth’s ability to control it within bounds, the amount of solar radiation and warmth kept close to
the Earth, and hence temperature, also increases.

1.2 What are the effects of global warming?

Climate change has already caused and is expected to continue causing a wide array of changes. Changes
to climate and weather may deprive key agricultural regions of rain and lead to more severe storms, could
contribute to broad‐based destruction of natural habitats and the extinction of speciesii, could lead to
rising sea levels that will threaten coast development, and potentially induce serious changes upon global
climate regulators such as thermohaline current (Fig. 1), the jet stream and the Arctic and Antarctic
icecaps.iii

®

Figure 1: Solar Radiation and Generalized model of thermohaline circulation; “Global Conveyor Belt”iv

These shifts have already caused floods and droughts in certain regions, which have left people starving
and malnourished, thus global warming threatens all species connected to and dependent on the planet.
Climate change particularly impacts the lives of the poor as they lack the resources the industrialized
world has to deal with its ramifications.

1.3 How are greenhouse gas concentrations affected by human activity?

There is undeniable evidence that greenhouse gas (GHG) emissions from human activities are contributing
to global warming and having increasingly harmful effects on the environment. The overwhelming
consensus among scientists is that GHG concentrations are increasing as a result of the combustion of
fossil fuels, industrial manufacturing, agricultural practices and other anthropogenic activities.

Since the beginning of the industrial revolution, atmospheric concentrations of carbon dioxide have
increased nearly 30%, methane concentrations have more than doubled, and nitrous oxide
concentrations have risen by about 15%.v Although the situation is serious, we can reduce and mitigate
emissions through a variety of approaches.

Figure 2: Global Carbon Dioxide Emissions by Type and Region

vi

®
Humans do not only have the potential to increase the existence of greenhouse gasses, but we have
opportunities to reduce and remove them as well. The concentration of greenhouse gasses can be
mitigated by, 1) removing greenhouse gases currently in the atmosphere and 2) reducing future
greenhouse gas emissions.

According to internationally acclaimed scientist Tim Flannery in his recent book The Weather Makers,
climate change is a serious and immediate cause for concern. Flannery suggests investments in renewable
power sources and technological engineering solutions as a means to counter‐act the increase in
greenhouse gas emissions, in addition to offering an insightful analysis of the carbon emission regulations
such as the Kyoto Protocol.

1.4 What about Greenhouse Gas Emissions from Land Use Activities?

Land use related activities such as tropical deforestation and forest fires are the second‐largest source of
GHG emissions after the burning of fossil fuels. Tropical deforestation is one of the most critical
environmental problems faced by many developing countries.vii Table 1 summarizes the main sources of
GHGs with respect to land use activities. Of the 7.5 billion tons of annual carbon emissions estimated to
be released by humans to the atmosphere, 1.5 to 1.8 billion tons come from forest‐related sourcesviii,
primarily from deforestation in the tropical regions of Central and South America, Africa, and Asia.ix

Table 1: Land Use Related sources of Greenhouse Gases
x

1.5 What technological solutions exist to mitigate global warming?

Since the 1980’s, industry and scientists have been working to create new sources of renewable energy,
such as wind and solar, improve efficiency and research engineering solutions such as carbon
sequestration, which would allow for the continued use of fossil fuels without causing the climate harm.xi
®
However, challenges of implementation, scale, and cost have limited the growth of clean energy and
other engineered solutions.

Along with these approaches, scientists have been exploring the potential of forests, agricultural land and
other forestry project to act as carbon sinks. While vegetative carbon sequestration is a natural process,
new technology, such as geographic information systems (GIS), global positioning systems (GPS) and earth
observation (EO) satellites has made possible the measuring and monitoring of carbon stocks and flux. By
using a combination of remote observation and on‐the‐ground measurement, we can provide
scientifically accurate and verifiable data on the amount of carbon being absorbed by a project. This adds
an exciting and cost‐effective tool to combat climate change and provide a host of other positive benefits,
such as reducing air pollution and flooding and enhancing natural habitat.

Other technological means by which the presence of greenhouse gases in the atmosphere may be
reduced are considered fuel‐switching projects, whereby hydroelectric, wind, biomass and a number of
other renewable energy technologies are implemented to offset current or future fossil fuel power
generation in eco‐friendly manners.
®
2.0 Carbon Sequestration

2.1 What is carbon sequestration?

Carbon sequestration is the uptake and long‐term storage of carbon in the terrestrial biosphere (i.e. rocks
and sediments, swamps, wetlands, forests and their soils, grassland and agriculture) or in the oceans. As a
result of this storage, the amount of CO2 contributing to the greenhouse effect will decrease. Carbon
sequestration can be achieved through natural processes by maintaining or enhancing forests, farmlands,
open spaces or ocean habitats. Engineered approaches are also being developed to sequester carbon,
such as carbon capture and geological storage (CCS).xii

Figure 3: A simplified carbon cycle diagram

2.2. What is vegetative carbon sequestration?

Vegetative carbon sequestration is the removal of CO2 from the atmosphere by agricultural and forestry
practices, primarily through photosynthesis, the absorption and subsequent storage of CO2 occurring in
plants and organic matter. Agricultural and forestry lands that absorb CO2 are referred to as vegetative
“sinks”.xiii The UNFCCC defines a sink as “any process, activity or mechanism that removes a greenhouse
gas, an aerosol or a precursor of a greenhouse gas from the atmosphere”.xiv In turn, through the process
of respiration of the living biomass and the decomposition of dead organic matter in soils, CO2 is returned
to the atmosphere. As a result, net sequestration of this type only occurs when the amount of
photosynthesis taking place exceeds the total amount of plant and soil respiration. xv

Points of carbon storage, or pools, can take the form of “living, aboveground biomass (e.g., trees and
shrubs), products with a long, useful life created from biomass (e.g., lumber), living biomass in soils (e.g.,
roots and microorganisms), or recalcitrant organic and inorganic carbon in soils and deeper subsurface
environments”.xvi Trees make up much larger carbon reservoirs than herbaceous plants. Sequestration in
®
trees occurs while a stand of trees is growing and lessens significantly as the stand reaches maturity. As a
consequence, the non‐renewed growing of trees to sequester carbon would result in a one‐time benefit
over a limited periodxvii, while growing trees for an energy substitute to fossil fuels and harvesting them
periodically before they mature leads to a continuous offset benefit.xviii

Soils have a large potential for carbon sequestration. In fact, global carbon content in soils is three times
larger than in plants and animals, twice the amount in the atmosphere and a third of the carbon found in
fossil fuels. Specifically, the carbon stored in soil organic matter depends on the balance between the
annual input of dead plant material and the annual loss of organic matter through decomposition. When
ecosystems reach maturity, the carbon content in soils remains constant, although the actual amount
varies among ecosystems. Such variation occurs in very large amounts of carbon content in peatlands,
where anoxia slows respiration rates, and very small amounts in hot, dry areas where respiration
proceeds rapidly and inputs of organic matter are scarce.xix Physical disruption of soils (i.e. cultivation,
draining, etc) accelerates soil respiration, causing carbon to be added to the atmosphere, while practices
aimed at increasing productivity (i.e. application of fertilizers) are likely to create a carbon sink.xx

2.3 What is the potential for vegetative carbon sequestration in terrestrial ecosystems?

The IPCC Third Assessment Report of 2003 estimates that nearly 100 billion tons of carbon could be
sequestered through forest preservation, tree planting and improved agricultural management over the
next 50 years. This would offset 10‐20% of the world's projected fossil fuel emissions.xxi Over 300 million
tonnes of carbon could be sequestered each year from activities in Annex I countries. However, the
potential sequestration is much larger in non‐Annex I countries.xxii Table 2 summarizes the estimates for
carbon sequestration in both Annex I and Non‐Annex I countries (the quantities for articles 3.3 and 3.4
cannot be summed since they may apply for the same area).xxiii Table 3 presents this same potential on a
country basis.

Table 2: Estimates of carbon sequestration through LULUCF activities by 2010 (Mt C/y)
Activities Annex I Non‐Annex I
Article 3.3
‐ Reduced deforestation 60 (0‐90) 1,698
‐ Afforestation and reforestation 26 (7‐46) 373 (190‐538)
Article 3.4
‐ Croplands (e.g. reduced tillage, erosion control) 75 50
‐ Forests (e.g. enhanced regeneration, facilitation) 101 69
‐ Grazing lands (e.g. herd, fire and wood management) 69 168
‐ Agro forests (e.g. management of trees in agriculture) 12 14
‐ Urban land (e.g. tree, waste and wood products man.) 1 1
‐ Deforested land to agro forest instead of pasturelcrop 0 391
‐ Severely degraded land to crop, grass or forest land 1 3
‐ Cropland to grassland 24 14
Total for Article 3.4 300 710xxiv

®

Table 3: IPCC estimates of the global potential for carbon sequestration by 'forestation' and agro forestry between
1995 and 2050)

Region/ Country Land available Planting rate Carbon sequestered
(Million ha) (Million ha/yr) (GtC)
High Latitudes
Canada 28.3 1.14 1.11
Nordic 0.4 0.01 0.03
Former Soviet 66.5 1.66 1.76
Mid Latitudes
USA 21.0 0.70 3.36
Europe 7.7 0.31 0.96
China 62.5 2.5 1.70
Asia 12.5 0.5 2.19
Africa 1.9 0.07 0.44
America 4.6 0.18 1.02
Australia 4.3 0.12 0.67
New Zealand 5.0 0.10 1.70
Low Latitudes
Trop. America 40.8 0.74 9.68
Trop. Africa 31.6 0.58 3.53
Trop. Asia 57.7 1.05 9.53
Total 344.8 9.66 37.68 xxv

Tropical forests ‐ According to estimates by the United Nation’s Food and Agriculture Organization, in
2005 some 4 billion ha or about 30% of the earth’s land surface is forested, of which over 2.1 billion ha
are in tropical regions. In addition, the area of degraded tropical forests where vegetative sequestration
might be usefully undertaken totals some 1,344 billion ha (64% of 2.1 billion ha). xxvi Estimates are that a
net gain of 729 Gtons of CO2 is possible in tropical regions over a 50 year period. However, it must be
noted that without successful programs to facilitate vegetative sequestration, carbon will continue to be
emitted in tropical regions at the preset rate of about 1.1 Gton per‐annum. xxvii

United States ‐ U.S. forests and croplands currently sequester over 600 Mtons of CO2 equivalent, after
accounting for both gains and losses in carbon. This current amount of sequestration in forests and
croplands offsets approximately 12% of total U.S. CO2 emissions from the energy, transportation and
industrial sectors.xxviii

European Union ‐ If the processes of afforestation and reforestationxxix continue at the present rate, it
may result in a sequestration potential of approximately 3.84 Mt C/yr. (14 Mt CO2 eq/yr) during the first
commitment period. In case of a sustained afforestation trend and taking into account an extended EU of
25 Member States, a technical sequestration potential of 34 Mt C/yr (125 Mt CO2 eq) could be reached in
the long term.xxx

®

3.0 Overview of Land Use, Land‐Use Change & Forestry (LULUCF) Projects and
the Global Carbon Markets

3.1 What significance does the Kyoto Protocol have for emitters of greenhouse gases?

The Kyoto Protocol is an agreement between 166 countriesxxxi adopted on December 11th, 1997 and
entered into force on February 16th, 2005. It stipulates that participant bodies must collectively achieve
emissions levels at 5% below recorded levels in December of 1989 by the year 2012.xxxii The United
Nations Framework Convention on Climate Change has established the Clean Development Mechanism
(CDM) which is an arrangement under the Kyoto Protocol whereby industrialized Annex II countriesxxxiii
with a ratified commitment to greenhouse gas reductionsxxxiv may invest in emission reduction or carbon
sequestration projects in developing countries (non‐Annex I) rather than invest in higher cost emission
reduction endeavors in their own countries in order to meet their Kyoto compliance requirements.

3.2 Are Land Use, Land‐Use Change and Forestry (LULUCF) offset credits accepted by the
Kyoto Protocol?

Article 3.3 of the Kyoto Protocol contains the following agreement to include afforestation, reforestation
and deforestation:

'The net changes in greenhouse gas emissions from sources and removals by sinks
resulting from direct human‐induced land use change and forestry activities, limited
to afforestation, reforestation and deforestation since 1990, measured as verifiable
changes in stocks in each commitment period, shall be used to meet the
commitments [in 2008‐2012] in the Article of each Party.’

The terms afforestation, reforestation and deforestation are defined as follows:

• Afforestation refers to the direct human‐induced conversion of land that has not been forested for
a period of at least 50 years, to forested land through planting, seeding and/or the human‐induced
promotion of natural seed sources.xxxv
• Reforestation is the direct human‐induced conversion of non‐forested land to forested land
through planting, seeding and/or human‐induced promotion of natural seed sources, on land that
was forested but has been converted to non‐forest land. For the first commitment period [2008‐
2012], reforestation activities will be limited to reforestation occurring on those lands that did not
contain forest on 31 December, 1989.xxxvi
• Deforestation is the direct human‐induced conversion of forested land to non forested land.xxxvii
This action results in a net loss of carbon in the terrestrial stock since most alternative land uses have
a lower potential for carbon sequestration than forests.xxxviii

The Marrakesh Accords (COP 7, 2001) and the Montreal COP 11 (2005) clarified the tree planting activities
eligible under Article 3.3 as follows:xxxix

• The activity must have begun after December 31st, 1989 and resulted in the deliberate human‐
induced conversion of non‐forested land –typically abandoned farmland‐ into forest.
®
• Forest is defined as any land area covering at least 0.05‐1.0 hectares that has at least 10‐30% tree
crown cover, with trees that have the potential to reach 2‐5 m height at maturity.
• Land is eligible for afforestation if it is at least 0.05‐1.0 hectares in size and has less than 10‐30% tree
crown cover, with trees that have the potential to reach 2‐5 m height at maturity, prior to planting.
Article 3.4 of the Kyoto Protocol opened the possibility to include additional Land Use, Land‐Use Change
and Forestry activities:
'The Conference of Parties... shall...decide upon modalities, rules and guidelines as
to how and which additional human‐induced activities related to changes in
greenhouse gas emissions and removals in the agricultural soil and land use change
and forestry categories shall be added to, or subtracted from, the assigned amount
for Parties included in Annex I [the reduction targets], taking into account
uncertainties, transparency in reporting, verifiability, the methodological work of the
IPCC...'xl

The Bonn Agreement formulated at the 6th Conference of the Parties to the UNFCCC in July 2001 clarified
the implementation of Article 3.4 in the context of defining agricultural and forestry terminology as well
as noted eligible project activities. Eligible activities include cropland management, grazing land
management and revegetationxli, provided these activities are human‐induced, have occurred since
December 31st, 1989 and are within each Parties individual cap of each management activity type. In
addition, the Marrakech Accords established legally‐binding guidelines for reporting and accounting for
agricultural carbon sinks.xlii Incremental carbon sequestration from managed forests can be accounted for
and used to meet a country’s commitments, however, no additional credits are so farxliii provided for
carbon that is precluded from being emitted by avoided deforestation measures (conservation of an
existing forest area that is protected to prevent its loss resulting in carbon emissions) since no change in
stock has occurred. Additionally, if a forest is destroyed (i.e. by a fire) and carbon is released, emission
debits are generated on the grounds of occurred deforestationxliv.

Another important issue is the extent to which carbon sequestered by forest management activities,
defined under Article 3.4., could be counted toward the target carbon reduction. The agreed cap was 15%
of current carbon sequestration totals attributable to forest management. For Japan, Canada, and Russia,
the cap was adjusted upward. A country could choose not to use LULUCF activities to obtain carbon
credits, while also not being held accountable for emissions that might occur on those lands either. xlv

3.3 Why have LULUCF projects not maintained strong activity and approval in the Kyoto‐
compliant trading mechanism?

Although emissions offsets from LULUCF projects in the form of CERs are permissible for use in meeting
national emissions reduction quotas under the Kyoto regime, they are not accepted in the European
Union Emissions Trading Scheme. The EU ETS has not permitted the trading of LULUCF CERs as a
precautionary measure hedging against decreased investment in projects that generate CERs through
energy efficiency and fuel‐switching measures.xlvi Kyoto signatory countries may still implement forestry
activities in the form of afforestation and reforestation projects, however the amount of emissions
reduction claimed by such activities are only eligible for covering 1% of each signatories emissions
reduction quota.

The European Union Emissions Trading Scheme (EU ETS) denies market access to certified and voluntary
Land Use, Land‐Use Change and Forestry (LULUCF) emission reductions. The Kyoto Protocol itself
®
authorizes only afforestation and reforestation activities for the generation of LULUCF emission
reductions, completely excluding categories such as soil carbon storage, sustainable forest management
and avoided deforestation. Even in their currently‐eligible categories, LULUCF assets have been singled
out to require particularly complex methodologies, with ten large scale and three small scale
methodologies having been approved so far.

Although buyers (especially in retail markets) often express a preference for agro forestry projects that
show actual community benefits, the market share held by these projects has been relatively modest due
to regulatory complexity and limited market access in the EU. The LULUCF‐based share of transactions has
experienced a regular decline in the carbon market. Although LULUCF projects represented 41% of the
tons of emission reductions sold between 1996 and 1999, their share declined to just 7% in 2003, 3% in
2004 and 1% in 2005.

The shares are expected to stay small as large‐scale transactions reducing industrial gases such as HFC‐23
or nitrous oxide take a greater presence. The smaller number of LULUCF transactions are mostly due to
low demand that stems from the confined attention paid to LULUCF activities in the Kyoto Protocol and
other emission reduction regimes.

Market imbalances, therefore, create opportunities in other trading mechanisms, namely the voluntary
market in the US.

3.4 What non‐Kyoto markets accept land use, land‐use change and forestry offset credits?

The Voluntary Carbon Market (VCM) “involve(s) the trading of allowances created by voluntary emission
reduction commitments and/or of credits from voluntary investments in emissions reductions projects –
emission reduction credits generated by projects voluntarily undertaken to reduce greenhouse gas
emissions below a project baseline level.”xlvii This voluntary market plays a significant role in climate
change mitigation, advancing societal awareness of climate change and the impacts of consumer
behavior, while allowing for forestry and other offset projects to be implemented outside of conventional
Clean Development Mechanism trading floors.xlviiiThe emission offsets generated by LULUCF projects not
utilized toward compliance quotas of the Kyoto Protocol are verified by independent agents but are not
certified by a regulatory authority, which prevents them from being used as a compliance instrument.
These offsets are commonly referred to as Verified Emission Reductions (VERs) and carry a possibility, but
not a guarantee, that governments will allow them to be used to comply with future emission reduction
requirements by becoming Certified Emission Reductions (CERs) or Emission Reduction Units (ERUs).xlix

In the US, trading of voluntary emissions reduction units is prominent on the Chicago Climate Exchange
(CCX), where LULUCF projects, including forest management and forest conservation, are eligible. The
voluntary nature of this trading mechanism foster strict project requirements are less than under the
Kyoto Protocol flexible mechanisms and this market is likely to see expansion. Prices for tradable emission
allowances on the CCX are at around $US5.70 currentlyl, being the highest price since the market was set
up. The CCX is the hub for the US voluntary market and a major determinant of prices for voluntary
carbon offset credits in the US as well as globally.

3.5 Is there active support for high‐quality LULUCF project emission reductions?

An objective of the World Bank’s BioCarbon Fund is to “test and demonstrate how LULUCF activities can
generate high‐quality emission reductions with environmental and livelihood benefits that can be
measured, monitored and certified, and stand the test of time”li. Many other organizations continue to
promote LULUCF activities with a similar goal: successful demonstration of these types of project activities
®
as significant to the growth of the carbon market, and that current rules and regulations under the Kyoto
Protocol and the EU ETS exclude a large portion of the developing world from gaining access to the carbon
market.

The World Bank is presently the largest buyer of forestry credits generated through the Clean
Development Mechanism, with the BioCarbon Fund having assembled a portfolio of candidate projects
that are projected to deliver up to 22 million carbon credits. Adjustments to that projected volume to
account for the risk of project underperformance reveal expectations that the BioCarbon Fund could
produce approximately 6 million carbon credits from their portfolio. The LULUCF market volume not
already committed to can be provided by other potential government and industry buyers with their
increased engagement stimulated by projects’ emission generation security and subsequent market
acceptance. The interest stimulated by Tranche One of the BioCarbon Fund among private and public
sector participants, host countries, and carbon market experts has prompted the Bank to propose
Tranche Two. It is the logical next step following the realization of the fund’s first projects.
3.6 Saving Tropical Rainforests with Reduced Emissions from Deforestation and
Degradation (REDD) Project Activities
According to the IPCC, 15% to 25% of global annual greenhouse gas (GHG) emissions come from
deforestation of tropical forests, with most of the forest destruction taking place in less‐developed
countries. The idea of Reduction Emission from Deforestation and Degradation credits (REDD) is to
“create a competing economic value for standing forests vs. clear cutting, cattle ranching, or other
agricultural uses.” By doing that, it monetizes the carbon that is now stocked in the forest and that
emission reduction can be traded in regular carbon markets.
Emissions from deforestation and degradation have been ignored by the regulatory carbon markets. The
Kyoto Protocol and its CDM mechanism does include REDD as an accepted project activity to combat
climate change, however, the December 2007 Conference of Parties 13 (COP 13) in Bali requested that
the Subsidiary Body for Scientific and Technical Advice (SBSTA) “undertake a programme of work on
methodological issues related to a range of policy approaches and positive incentives for reducing
emissions from deforestation and forest degradation in developing countries.” It is expected that the
outcome of this “programme of work” will be the inclusion of a REDD mechanism into the international
climate change agreement to succeed the Kyoto Protocol of 2008‐2012.
On the other hand, REDD is welcome within the voluntary carbon markets, with support from the Climate,
Community and Biodiversity Alliance (CCBA), the Voluntary Carbon Standard (VCS) and the Chicago
Climate Exchange (CCX). Pushing the development of REDD mechanism are governments, non‐
governmental organizations and private sector entities, whom are working together to develop pilot
projects that will demonstrate the viability of REDD projects. Experiences, information and data collected
from these projects will be used to inform policy makers and encourage carbon markets worldwide to
include REDD.
®
4.0 Land Use, Land‐Use Change & Forestry (LULUCF) Projects and the Kyoto
Protocol

4.1 What is the scope of LULUCF within the Clean Development Mechanism (CDM) of the
Kyoto Protocol?
Under the first commitment period for the Kyoto Protocol, Annex I parties may satisfy only five percent of
their targeted GHG reductions through the use of CDM forestry projects and the CERs they generate. The
treaty allows only reforestation or afforestation of degraded lands, conversion of formerly agricultural
land to sustainable forestry projects, and some commercial projects. Initial development of LULUCF
projects under the CDM for commercialization in the Kyoto markets has been slowed by political,
technical, and financial concerns over project monitoring and baseline establishment, permanence of
vegetative carbon sequestration, and questions about leakage, lack of additionality, and socioeconomic
co‐benefits. With only one forestry CDM project fully validated, registered and commercialized so far,
interest has piqued more recently with the acceptance of additional reforestation/afforestation
methodologies by the CDM EB.

4.2 What is the CDM Project Cycle?

®
4.2.1 Project Documentation: Project Idea Note, Letter of Expression, Letter of Intent
The CDM cycle begins when a Project Idea Note (PIN), summarizing the basic structure of the project, is
submitted for approval of the host country, who will then issue a letter of endorsement (LOE) or letter of
no objection. The LOE serves as a confirmation to proceed with the outlined designed of the forestry
project. Furthermore, a prospective buyer will issue a letter of intent (LOI), which along with the LOE,
which will be taken into account in the project design phase.

4.2.2 Project Design & the Project Design Document (PDD)
The project design phase does not begin until host country endorsement of the PIN is assured. Developers
then further define the project, estimate the GHG removals as a result of the activity, perform a feasibility
analysis and finally solicit and identify partners in order to develop a working plan. The formal outline of
the project is fixed in the project design document (PPD) that developers submit to the CDM for project
approval. Submitted PDDs include the following:

Among the documents for submission should be a description of the methodology used for calculate the
project and the estimated GHG removal potential of the sink. Most projects select previously accepted
methodologies in order to expedite (to the extent that is possible) the approval process. Project
methodology write‐ups are scientific and engineering documents that outline, among other things,
boundary definition, eligibility (whether soil carbon or underbrush count in CO2 removal) and inventory
design. Since very few methodologies have been approved so far, the vast majority of the projects select a
CDM‐preferred methodology in order to help assure verification.

4.2.3 Emissions Reduction Purchase Agreements
At any time in the CDM project cycle, a party may establish emissions reduction purchasing agreements
(ERPAs). The project developer and credit buyer might want to sign an ERPA as soon as possible because,
unlike the LOI, the ERPA is a legally‐binding agreement. Moreover, the ERPA is often necessary at an
earlier project stage in order to generate CER revenues in order to attract further capital to implement or
complete the project.

®
Before the project may be validated by the CDM designated operational authority (DOE), the host country
must approve of the project by issuing a letter of approval (LOA). The way in which a country carries out
the approval and validation process may differ depending on the salient domestic laws. Yet many host
country approvals occur concurrently with DOE validation, as many nations look to the DOE to provide
proof that the project conforms to the particulars of the Kyoto Protocol.

4.2.4 Project Validation
In order to validate and eventually register the project, third‐party, accredited, and independent certifiers
– vetted by the CDM EB – known as designated operational entity. The DOE analysis of the PDD and other
relevant documents tests several criteria.

Once the DOE has received the LOA from the host country, it may complete validation of the project. The
PDD will be made publicly available over the internet, followed by a forty‐five day public comment period.
At the end of this time, the DOE will decide whether or not the activity will receive a positive validation.
Registration of the project triggers the implementation of the project. A validated project document is
published by the DOE, with the hopes that an activity may be registered within eight weeks of submission.

4.2.5 Monitoring Project for Verification and Certification
Implementation of the project requires that monitoring commence as well. Periodical monitoring may be
performed by the project developers or farmed out to specialized forestry agencies or carbon inventory
firms.

®
4.2.6 CDM Executive Board (EB) Verification and Certification
The final step before any CERs may be issued is an audit of the implementation and monitoring of the
activity. Again, a DOE must verify the project and will generally be a different DOE from the validation
phase.

CDM LULUCF projects are verified every five years, or once per Kyoto commitment period. Verification
may occur at any time during the first five years of the project, yet must be carried out on a five‐year cycle
thereafter. A special consideration for LULUCF initiatives is that verification cannot occur at peaks in the
carbon stocks. Forestry verification under the CDM requires that verification cannot consistently occur
right before periods of harvesting, if such an activity is allowed under the PDD. The CDM EB publishes a
verification report with their findings. Successful projects are formally issued CERs that correspond to the
GHG removal figures found under verification.

4.3 LULUCF Costs and Risks under the CDM
4.3.1 Transaction costs
Given the complex process through which LULUCF projects must pass to gain certification, the transaction
costs are generally quite high when registering a forestry project in the CDM. Several subcontractors may
be hired simply to complete the verification phase. In an attempt to encourage smaller‐scale projects,
those initiatives that garner fewer than 8000 CERs are subject to different procedures and requirements.

®
4.3.2 Gauging Performance: Temporary CER vs. long‐term CER

One more decision must be made by the project developer before the credits generated by the forestry
project can be purchased on a Kyoto market. Because LULUCF projects bear the special risk of carbon
sequestration reversal – that is, their carbon removal is only permanent so long as that vegetation
remains intact, unburned, and unharvested – the CDM requires an audit every five years to gauge the
forest’s carbon removal performance. In order to address the unique characteristics of vegetative carbon
sequestration, the CDM created subcategories of CERs in order to allow project developers to choose the
market option that works best for their project.

Temporary CERs (tCERs) are issued each commitment period (every five years) and account for the total
amount of carbon sequestered since the project start date. These credits expire at the end of the
commitment period for which they are issued and must be replaced (based on a carbon audit) by an AAU,
a permanent CER, ERU, RMU or another tCER. Since the entire carbon stock is verified every five years and
credits are re‐issued according to that calculation, tCERs are lower risk than lCERs; loss of carbon removal
does not require replacement.

Long‐term CERs (lCERs) are issued once at the beginning of the project and are valid until the end of the
project’s unique crediting period (usually 20 years, but may be as long as 55 years). A carbon audit and re‐
verification still takes place every five years, as in the case of tCERs, yet that process calculates the
incremental loss or gain in carbon removal since the last commitment period. The decrease in carbon
removal due to silviculture, forest fire, or other loss, causes the lCERs to expire. Those expiring lCERs that
have been traded prior to expiring trigger a liability that project developers must address through carbon
replacement and the acquisition of AAUs, CERs, ERUs, or RMUs. An expiring lCER cannot be replaced by a
tCER or another lCER.

The decision to sell tCERs or lCERs will be often be dictated, at least in part, by the potential buyers of the
project credits. Long‐term CERs currently account for nearly two‐thirds of the market, as they more
adequately address issues of non‐permanence. Recent market activity suggests that tCERs are increasingly
popular, due to their financial flexibility and their lack of a liability. With many Kyoto parties looking to
plug holes in their compliance targets through the credit markets, tCERs provide a short‐term solution for
the imminent 2012 Kyoto goals assessments. Moreover, since tCERs assure compliance for the current
commitment period and lCERs for the project’s entire crediting period, tCER prices will be lower; a price
the seller absorbs for the lack of risk in a tCER project and the shorter period of time for which compliance
has been purchased. It is that fluctuation in price that makes tCERs attractive because their
commercialization can be timed with periods of high prices. Essentially, after every fifth year as
verification is carried out, the entire block of tCERs can be re‐commercialized, provided that there is no
net loss of carbon stock. This plays as somewhat of a disadvantage of tCERs, as they incur issuance fees
every five years, whereas lCERs credits are paid for upfront, and only marginal increases in the carbon
stock generate more credits and more fees. Therefore, lCER projects must be well‐capitalized, as upfront
costs are high and the majority of revenues come at the beginning stages of the project. TCER projects
accrue higher issuance fees in total, yet due to the mandatory expiration of the tCERs at the end of the
commitment period, income is more evenly distributed as tCERs are verified every five years and their
credits commercialized.

4.3.3 CDM & forestry risks

The inherent risks of CDM forestry projects are borne out in the debate between generating tCERs or
lCERs. The uncertainties surrounding forestry projects in general, even if they eventually yield competitive
rates of return, are clearly prohibitive for many developers. Forestry projects, whether in the CDM or
voluntary markets, must contend with:
®
lii

The nascent bureaucracy known as the CDM also adds a layer of risk and uncertainty that project
developers and potential buyers must take into account. Not only is the permanence of the forest’s
carbon removals in question; so is the permanence of the CDM itself and any post‐Kyoto (2012) regime
for CERs. The current lag time for registering forestry projects in the CDM not only delays implementation
and return on investment, it throws the conclusion of the registration process itself in doubt. There are a
number of hurdles, from host country approval, validation, registration, verification, CER issuance. Any
failure in this chain and the project collapses.

Since the CDM is still being constructed, the ability to trade credits is not automatic. Both the investing
and the host country must have valid CER accounts, and many nations, particularly in the developing
world, are still without any registry at all. The international transaction log and individual international
registries are supposed to be completed by 2008. There are also eligibility requirements for countries to
meet in order to trade CERs although most nations are expected to fulfill those requirements.

4.3.4 Forestry credit prices

The major purchaser of forestry credits is currently the World Bank. The BioCarbon Fund purchases these
CERs under a different set of guidelines than the normal Kyoto markets and only later are they transferred
into the Kyoto credits. So while the largest purchaser of forestry credits is operating somewhat outside of
the normal Kyoto boundaries, its average price paid per ton CO2e – from $3.75 to $4.35 per ton with a $3
default price floor.

Since the purchase of either tCERs or lCERs buys only temporary compliance – that is, both tCERs and
lCERs must be replaced eventually by CERs, ERUs, or EUAs – their prices will be lower than the
“permanent” type of credit. It follows that the purchase of temporary credits ensures that the buyer will
increase its future purchase of carbon credits, since that tCER or lCER must eventually be replaced by a
recognized permanent credit. The decision to buy a permanent versus a temporary credit will reflect not
only the buyer’s compliance needs but also the expected relative replacement prices. A buyer will
purchase an expiring credit so long as its price is less than the difference between the current price of a
permanent credit and the net present value of any expected price of a permanent credit in the future.
Under these conditions, the prices of CERs will increase with longer expiration times (as with lCERs) or
higher discount rates. Therefore, the value of a temporary CER is inversely correlated with the value of
permanent CERs.
®
4.3.4 Prices and Risk

The risks in developing forestry projects in order to generate carbon credits have been detailed in sections
above. CDM forestry projects face additional risks in that no CERs are issued – or are even guaranteed to
be issued – when the project’s contract (ERPA) is signed. Carbon credits generated through the CDM carry
much higher risk, and therefore a lower price, than the most secure brand of credit, the EUAs in the
European market. Representing the right to emit one ton of CO2, EUAs carry minimal risk since they avoid
the pitfalls of a CDM project. These projects must absorb performance, monitoring, validation, and
verification risks, some of which are out of the project developers’ hands as the DOE and DNA carry their
own unique risks.

In order to minimize risk and drive up forestry CER prices, developers have engaged in a number of
actions in order to hedge against CDM‐ and forestry‐related risk.
• Approval of quality standards:
Although forestry projects in the compliance market are likely less risky than those in the voluntary
markets, and LULUCF project entails significantly more risk with little sector standardization. The
CDM‐approved methodologies lend credibility to one step in the process. A set sector‐wide standards
and guidelines, from project design to credit issuance, would help cut risk and raise credit prices.
These best practices can also lead to socioeconomic co‐benefits likely to improve public image and
even increase credit prices. The popularity of the Climate, Community and Biodiversity Alliance
standards proves that such quality assurances are marketable.
• Insurance:
A credible investment firm or bank can offer good protection for forestry project risk, as European
insurance firms have covered CDM‐related risks in terms of credit verification and issuance.
Traditional risks to the project’s carbon stock from fire or other disasters can be purchased through
standard fire insurance policies.
• Portfolio management:
Those who purchase or managed carbon credits stemming from forestry projects would be wise to
bundle these credits in a larger portfolio of less risky credit sources in order to balance out the
LULUCF risks. Major carbon credit purchasers have seen high CER prices for their forestry projects
because the larger, sounder portfolio tact helps protect delivery of credits to the buyer.

4.4 LULUCF Costs and Risks under the CDM
4.4.1 Forestry credit buyers in the CDM market

Purchasers of carbon credit from LULUCF in the CDM markets are looking to carbon credits in order to
meet compliance targets. Governments and industry are a large proportion of these buyers. Yet forestry
projects can be directed and developed to produce a number of social and environmental co‐benefits that
are attractive to credit purchasers who have concerns beyond compliance to consider. Buyer preferences
often also cite the location of the project to be a major factor in their consideration, as a number of
governments and funds (and some industry) look to direct investment in least‐developed nations.

Although several countries will look to carbon credits as a significant source of Kyoto compliance,
transaction costs and bureaucratic hurdles may be too high for direct purchase by some states. The
presence of major trading companies in CDM forestry markets may be a sign that further market potential
®
exists for these funds to act as bundlers of projects, helping to ensure project implementation (some
buyers will assist the CDM process), higher credit prices, and lower project risk.

Japan

The Japanese government made plans to significantly cut emissions under the Kyoto Protocol. Yet it plans
on achieving its carbon reductions in the long‐term through energy efficiency and conservation programs.
Thus, the government in the short‐run will need to make us of all of Kyoto’s mechanisms to cover for its
compliance gaps. Japan has introduced a national emissions trading platform that is voluntary, but will
likely pick up speed as Japan nears the end of the commitment period. Over the next five years, it is likely
that Japan will be over 200 million carbon credits short of full compliance with their Kyoto targets. Other
estimates has place Japan’s shortfall at around 725 million credits. It is clear that Japan will need to make
significant use of purchasing allowances and carbon credits as part of its strategy to comply with Kyoto.

Canada

Canada’s national emissions reduction scheme for the largest, end‐of‐pipe polluters is called Plan Green
and will commence in early 2008. It will allow compliance via technology transfer and reduction,
emissions allowances trading and carbon credit purchase and development in accordance with the Kyoto
mechanisms like CDM. Even with the measures in place since the adoption of the protocol and Plan
Green’s emissions reduction contribution, Canada will likely need to acquire credits to ensure compliance,
so many analysts consider Canada a credit buyer. Before the conservative Harper government took
power, some research suggested Canada would be about one billion credits short of compliance by 2012.
However, with the “wait‐and‐see” approach of the new Canadian administration, Plan Green may not be
fully implemented and the government’s aggressiveness in its future compliance attempts is uncertain.

European Union

The Emissions Trading Scheme (ETS) in Europe is the major credit market for carbon. While the initial
phase of the ETS allows for the transfer of flexible Kyoto mechanisms into the system through the linking
directive. However, forestry projects, even CDM LULUCF projects, are not valid for counting against each
state’s ETS target. A decision on forestry projects will be made soon for implementation in Phase II,
expected by the end of 2008. The ETS requires states to achieve 60% reductions by means other than
trading EUAs. Smaller and relatively poorer European nations cannot rely on domestic reduction programs
like those in Germany and the UK, so some EU states, such as Spain or Italy, may be credit buyers, given
that LULUCF projects are admitted by the ETS when the regime is reorganized in 2008. There is strong
support for including some forestry projects in future versions of the ETS.

4.4.2 Market demand for forestry offsets

There still exists great crediting potential for increasing the number of LULUCF projects in the Kyoto
markets, especially with significant support for including certain forestry practices in the post‐2012 Kyoto
landscape, as well as in the EU ETS. Crucial to expanding the market share of forestry carbon credits will
be educating buyers about the special benefits and risks of investing in LULUCF projects. Price
expectations on permanent versus expiring CERs varies by sector; carbon funds see non‐permanence
LULUCF credits to be the main issue for its lower relative price, while industry sources are more
concerned with explicit risks to the project in the form of fires or disasters. The obligation to replace lost
credits constrains the popularity of LULUCF projects, however with better methodologies, standards, and
®
monitoring, the risks and uncertainties of forestry credits should decrease as the market becomes more
mature; there is simply too much potential credit demand to ignore LULUCF crediting in the future.

Current market demand is driven by the BioCarbon Fund of the World Bank, which buys up a majority of
available forestry credits in the Kyoto markets. Individual states will begin to test their own domestic
forestry credit trading schemes before they can enter the international markets; Japan is expected to roll
out such a program soon as their demand for credits to meet 2012 targets is rising. Governments in the
EU will also need to define standards and policies for forestry projects as the call for LULUCF inclusion in
the EU ETS grows.

Critical to ensuring the growth of the LULUCF credit market is the adoption of pro‐forestry initiatives into
CDM for the second commitment period. There is no market activity, save for some projects funded by
the World Bank, that extends past 2012, as uncertainty over the validity of forestry credits in a post‐2012
regime chokes out investment. While such uncertainly is stifling investment beyond 2012, the possibility
that new streams of forestry credits, from avoided deforestation and forest conservation, may be added
to the CDM and adopted and utilized by Japan, Canada and the EU ETS is generating excitement at what
can be achieved for the future of the forestry credit market.

4.4.3 Successful Commercialization Checklist

Forestry projects have many variables that will affect the success or failure to effectively commercialize
credits from LULUCF. Projects that achieve credit issuance:

liii

®

5.0 Greenhouse Gas Disclosure and Reporting Frameworks

5.1 What are some of the Voluntary Greenhouse Gas Disclosure and Reporting
Frameworks that exist today?

5.1.1 Carbon Disclosure Project

The Carbon Disclosure Project “provides a secretariat for the world's largest institutional investor
collaboration on the business implications of climate change”. Representing a process whereby many
institutional investors collectively sign a single global request for disclosure of information on Greenhouse
Gas (GHG) emissions, the Carbon Disclosure Project has acquired than 1,000 large corporations reports on
their emissions.liv The Carbon Disclosure Project has most‐recently made public its 4th reporting phase
with documentation in corporate, country and regional categories form 2006.

5.1.2 Program 1605b

The department of Energy’s Program 1605b is a voluntary greenhouse gas (GHG) registry created as part
of the Energy Policy Act of 1992, whereby companies could record their voluntary reductions of GHG
emissions with pressure on enhanced measurement accuracy, reliability, verifiability of the data reported,
and standards set forth in such programs as the European Union Emissions Trading Scheme (EU ETS).
Abatement strategies on the power supply side include fuel switching from high to low carbon fuel
sources, nuclear and hydroelectric power plant availability improvement, greater plant efficiency,
increases in low‐ or zero‐emitting generation capacity, decreases in high‐emitting capacity, and
withdrawal of high‐emitting plants. Demand side management projects are intended to improve the end‐
use energy efficiency of both stationary and mobile sources in the industrial, commercial, residential,
agricultural, and transportation sectors. Carbon sequestration projects report carbon fixing through
afforestation and reforestation.lv Individuals, organizations, small businesses, and large corporations are
encouraged to report under Program 1605b. Over 450 of the latter two categories have reported to date.

5.1.3 Eastern Climate Registry

With ten Northeast and Mid‐Atlantic States agreeing to participate in the Regional Greenhouse Gas
Initiative, the Eastern Climate Registry has formed “to provide a GHG emissions platform to support state
voluntary and mandatory GHG reporting programs and to provide the technical platform for state and
regional climate change initiatives”.lvi The program’s goal is to ensure the use of common GHG accounting
standards, and that consistent data reporting and accounting methodologies be able to function across
policy and program differences. The primary goals of the program are noted as:
• Development of a software platform to support GHG emissions reporting and allowance tracking in
the region;
• Establishment of the guidelines and procedures of the regional voluntary GHG reporting program;
and
• Determination of how the Eastern Climate Registry should be linked with other GHG registry
programs in the U.S. and abroad.lvii
®
Companies are encouraged to supply their GHG emissions data for demonstration of environmental
leadership, carbon‐related risk management, increased operational efficiency, and documentation of
early action. Other Western and Mid‐Western states have developed their own reporting initiatives and
are collaborating with the Eastern Climate Registry as well as.
®

6.0 Overcoming Vegetative Carbon Sequestration Project Inhibitors

6.1 What are the concerns of quantifying GHG offset benefits from forestry projects?

The key concerns for the quantification of GHG offset benefits derived from forestry projects are as
follows:
• Establishing baselines to set a standard against which the GHG benefits of the project can be
evaluated (e.g., often the level of GHG emissions or carbon sequestration that would occur in the
absence of project implementation).lviii
• Identifying leakage for the unanticipated decrease or increase in GHG benefits outside of the
project's accounting boundary as a result of project activities.lix
• Addressing duration (also referred to as reversibility or permanence) to account for the fact that
the benefits of carbon sequestration in agriculture and forestry are partially or completely
reversible.lx
• Monitoring and verifying GHG benefits to ensure that a forestry or agricultural project is achieving
real and credible results.

6.2 What are the inhibitors associated with promoting vegetative carbon sequestration
projects?

One of the primary stumbling blocks to developing vegetative carbon sequestration is that project
measurement and monitoring is often too expensive. In most projects dealing with afforestation and
reforestation, ample on‐the‐ground GIS, GPS and manual labor resources for measuring and monitoring
are available; however, satellite alternatives offer huge improvements in cost and speed. Remote sensing
technology is easier to use, can survey a broader area and can obtain higher resolution data ‐‐ although
any digital models and observations must be cross reference with on‐the‐ground assessments. Aerial
photography remains an alternative to on‐the‐ground measuring and monitoring practices but only where
access to land tracts can be achieved with smaller, low‐flying planes. The benefits of on‐the‐ground and
aerial photography project activity measuring and monitoring are discussed in section 4.3.

With regard to CO2, net emissions between the atmosphere and land surfaces are inferred from changes
in carbon stocks (i.e. amount of carbon in soils and in vegetation).lxi The carbon content of a soil sample
can be determined with a high degree of precision; however, the challenge lies in the detection of
changes in terrestrial carbon at large scales (i.e. fields and larger areas).lxii Areas containing soils under
observation would require comprehensive and detailed soil maps, with estimates of soil carbon for each
soil type and also including measurements of the rate of change in soil carbon when the respective land
use undergoes change. This information does not exist in most countries, where there are also lacks in
land use‐change statistics that are needed because of the long timescale of soil carbon changes.lxiii

In countries where afforestation and deforestation do exist, it is essential to rely on spatially explicit maps
of the forest areas under consideration. Areas of forests defined in terms of canopy cover may be
quantified using remotely‐sensed imagery. Forest areas defined by their specific land designation,
however, require ground sampling or the use of maps.lxiv
Models can be used to provide reasonable estimates of carbon stocks, offering one way of overcoming
some of the carbon measuring limitations. For these modeled estimations to be accepted, though, the
®
model must be 1) accepted by the scientific community; 2) include parameters that reflect the local
conditions; and 3) tested against data that represent those local conditions. Obtaining the input data for
their validation and calibration is often difficult, depending on each model’s level of sophistication. Also, it
must be kept in mind that model results are only estimates that cannot be substituted for real data.lxv
Table 4 summarizes the issues mentioned as well as other characteristics of LULUCF data that make the
measurement and monitoring of emissions from these types of projects challenging.

Table 4: Characteristics of LULUCF data

- emissions are comparably low (especially N2O and CH4) compared to the size of the
storage pools
- temporal and spatial variability is large
fluxes (direct
- the system boders are difficult to determine due to the complexity of physiologically active
emissions/removals)
ecosystem compartments
- measurements of direct emissions are very cost intensive
- uncertainties are especially high when estimating direct fluxes
- not all biomass pools are accounted for in measurements (ground vegetation, coarse roots,
etc.), and the pool sizes cannot be directly determined from regular inventories
- biomass carbon stocks are mostly (indirectly) assessed using models (BEF) (even direct
biomasss measurements use models for representative sampling)
- soil carbon stocks can only be assessed from concentration measurements using pedo-
transfer rules or measurements of bulk density
carbon storage (in
- many countries lack the necessary infrastructure to conduct large scale measurements of
biomass and soils)
the estimation parameters needed to detemine forest biomass (e.g. representative forest
inventories)
- national inventories are often staggered (e.g. different regions are completed in different
years) and often have ca. 10 yr return intervals ("periodic inventories vs. annual
inventories)
- small differences in carbon stocks from large storage pools are difficult to detect
- basic assumption: fluxes are equal to changes in carbon stocks in biomass and soils
- disturbances reflect spontaneous events changing emission rates/defaults and can offset
regional sink effects
source/sink capacity of - silvo-genetical cycles/forest stand developments have to be considered before long-term
forests averages can be derived
(emissions/removal rates) - non-linear development of C-stocks during stand development has to be considered
because of positive and negative feedback mechanisms (e.g. effects of clear cutting)
- non-steady state/direction of net fluxes can change over time. There is an upper, though
mostly unknown treshold as the limit for the maximum biomass storage capacity
- forest harvest is not necessarily a net surce due to storage of carbon in forest products
- forest harvest might change the source/sink behavior in the UNFCCC reporting category 5A
- present and future CO2 fluxes are affected by changes in land use (past land-use activities
management effects
always have to be considered)
- carbon pool compartments react differently (e.g. different lag times for response reaction)
after implemented management measures
- there are little or no data available for ARD
- spatial and temporal variability in terrestrial ecosystems is high
additional uncertainties
- lack of direrct measured data for the baseline for projects in most countries
related to definitions and
- lack of infrasturcture to assess lands with activities under the articles 3.3. and 3.4 of the
annual accounting
Kyoto Protocol
- uncertainties in base year emissions for net-net accounting lxvi

®
6.3 What processes and technologies exist to overcome some carbon sequestration project
measuring and monitoring inhibitors?

6.3.1 On‐the‐ground measuring and monitoring

The techniques and methods used for sampling and precisely measuring individual carbon pools are based
on commonly accepted principles of forest inventory, soil sampling, and ecological surveys. Techniques to
measure soil carbon and the carbon pool in living tree biomass, understory and herbaceous plants, roots,
fine and coarse litter are also abundant. However, the fact that standard methods have not been
universally applied to all projects generates difficulties in comparing results across different LULUCF
project activities.lxvii

For the spatial and temporal quantification of the rates and limits of carbon accumulation in soil systems,
belowground sensors can be used (i.e. miniaturized nuclear magnetic resonance imaging devices). Such
measurements should account for (i) soil carbon, water, and nutrients as a function of depth; (ii) biomass
(roots and microbial community) imaging; and (iii) porosity or soil structural changes.lxviii Permanent
sample plots are considered to be a statistically superior means for evaluating changes in forest carbon
pools because they allow for efficient assessments of changes in carbon stocks over time and for
verification of a project’s reported carbon benefits. These field methods with extensive permanent plots
may however be expensive to implement and maintain in certain isolated areas.lxix

6.3.2 Aerial photography as measuring and monitoring

Aerial photographs taken from low‐flying airplanes can provide a useful means to monitor LULUCF
projects. An advancement in this area couples dual‐camera videography with a pulse laser profiler, data
recorders, and differential GPS mounted on a single‐engine airplane. This system can produce indices of
crown density, number of trees per unit area, and tree height, while also identifying the extent of gaps
which could be especially useful for projects that are monitoring small‐scale logging disturbance in
protected forests.lxx

6.3.3 Satellite remote sensing

Satellite imagery is one of the low‐cost carbon measuring alternatives. This method is accurate and can
operate on a huge.lxxi Satellite remote sensing may be used to:

• identify initial areas of different land‐cover types, including forests;
• determine the extent, rates of change, and locations of activities that result in forest clearing and
regrowth or other activities;
• identify other natural and human‐induced changes in terrestrial ecosystems; and
• provide parameters for models that calculate the net exchanges of gases between terrestrial
ecosystems and the atmosphere

These data could be used as a primary information resource for countries reporting sources and sinks of
carbon or for verification.lxxii In the last 10 years, great progress has been made by the scientific
community in simulating the exchanges of carbon (and other material) between terrestrial ecosystems
and the atmosphere. Many of the models used in these simulations require remotely‐sensed data to
establish areas of land‐cover type to which different attributes (e.g., production efficiency, surface
roughness, albedo) are assigned.lxxiii
®

Satellite data from mainly from the National Oceanic & Atmospheric Administration were initially used to
generate maps of global land and forest cover, with the capability to also be used to track and monitor
changes in forest cover at the national level. Utilizing a more detailed analysis, sources and sinks of carbon
from forest clearing and regrowth can also be estimated. This analysis requires 1) repeated
measurements of forest clearing over large areas, 2) precise spatial and temporal scale analyses to
document regrowth, and 3) existing data on carbon pool fluctuations that are associated with changes in
land cover. Data from high‐resolution satellites such as NASA’s Landsat and the Centre National d’Etudes
Spatiales’ SPOT have been used to regularly measure regional clearing of forests and subsequent
regrowth. Since revegetation may occur rapidly in cleared areas, annual measurements make it easier to
detect the clearing of land areas that begin to regrow quickly.lxxiv One of the complications associated with
even high‐resolution satellites is that they may fail to distinguish clearing and regrowth from other land
cover changes, such as harvests or natural disturbances such as fire, insects, and storms. Still, very high‐
resolution data from GeoEye’s commercial IKONOS II satellite can be utilized in determining the actual
activities on the ground that have led to forest clearing.lxxv

The costs associated with employing remote‐sensing data vary greatly on a per‐hectare basis contingent
upon the actual sensor and the year in which the data are originally acquired. The most recent data from
NASA’s Landsat‐7 are less expensive since the system is now operated as a public resource. Conversely,
SPOT data are more expensive since they have a greater detail of spatial resolution, however they do not
provide global coverage. Table 5 (after section 5.4) provides and overview of the advantages and
disadvantages of forestry monitoring techniques.

6.4 What carbon accounting research contributions have been made by the Food and
Agriculture Organization?

In addition to its primary efforts to defeat global hunger, The United Nations’ Food and Agriculture
Organization (FAO) “is also a source of knowledge and information. We help developing countries and
countries in transition modernize and improve agriculture, forestry and fisheries practices and ensure
good nutrition for all”.lxxvi The FAO’s Global Terrestrial Observing System (GTOS) is a program designed for
the observing, modeling and analyzing terrestrial ecosystems in support of sustainable development. This
program facilitates access to terrestrial ecosystems in an effort to assist researchers and policy makers in
detecting and managing global and regional environmental change.lxxvii This information is provided free
of charge, however most of FAO’s work in this area is in the research or testing phase.

The overarching goals of GTOS’ Terrestrial Carbon Observations (TCO) “are to better identify the potential
end users, and their requirements; organize and coordinate reliable data and information on carbon; and
link the science community with potential users”.lxxviii The TCO consider existing, satellite, and terrestrial
ecosystem data from local, regional and global scales while providing the spatial and temporal distribution
information of terrestrial carbon sources and sinks. The new mission of TCO “is to focus on specific
products, such as: an operational database system; validated and parameterized models; manuals,
standard methodologies and related documentation; productivity estimates; and the creation of a
common forum for scientists and stakeholders interested in carbon accounting”. lxxix

The objective of GTOS’ SIBERIA‐II, applied to 200 million ha North Eastern Europe, is to demonstrate the
viability of full carbon accounting on a regional basis using the environmental tools and systems presently
available. The tools and systems employed include a diverse set of multi‐sensor instruments, detailed
databases of field information and some of the worlds most advanced climate models. In total, these
provisions will account for fluxes between the land and the atmosphere as SIBERIA‐II develops a
combined monitoring system to yield estimates of carbon sources, sinks and pools at multiple spatial and
temporal scales for relevant application in land use policy and resource management.
®

Table 5: Advantages and disadvantages of forestry monitoring techniques

Techniques Advantages Disadvantages
Relatively quick and
inexpensive. Useful for baseline
Relies on highly simplified
development. Can be used for
Modeling assumptions. Need to be
bioenergy projects. Most useful
calibrated with onsite data.
as a complement to other
methods
Time and knowledge needed to
transform spectral classifications
Provides relatively rapid regional- into accurate land use or land-
scale assessments of land cover, cover classifications. Access to
Satellite
land use, and green vegetation high-quality imagery may not be
remote sensing
biomass. Useful for monitoring available during certain seasons or
leakage. due to sun angles. Has not been
used to measure carbon. Can be
quite expensive.
Complements satellite remote
Aerial sensing. Useful for monitoring
In test phase.
photography leakage. Less expensive than
satellite remote sensing.
Useful for determining what was
actually implemented in project
and fo tracking fate of wood
products. Flexible in selection of
Field/site May be more expensive than other
methods and precision. Peer
measurements methods
reviewed and field tested
systems available. Using control
plots can calculate net carbon
sequestration. lxxx

®
A Carbon Sequestration Introduction: Climate Change, Established Frameworks and the Carbon
Markets
Bibliography

i
Flannery, Tim. The Weather Makers. Melbourne, Australia: Text Publishing Company. 2005.
ii WWF has listed the Polar Bear as the first animal to be on the “endangered species” list due to climate change
iii Flannery, Tim. The Weather Makers…supra note 1.
iv Climate Variability. NASA Oceanography. http://science.hq.nasa.gov/oceans/system/climate.html
v http://www.epa.gov
vi Marland, G., T.A. Boden, and R. J. Andres. 2003. "Global, Regional, and National CO2 Emissions." In Trends: A Compendium of
Data on Global Change. Carbon Dioxide Information Analysis Center, Oak Ridge National Laboratory, U.S. Department of Energy,
Oak Ridge, Tenn., U.S.A.
vii http://www.rcfa-cfan.org/english/issues.13.html
viii Ibid
ix IPCC (2000); IPCC Special Report: Land Use, Land-Use Change, and Forestry
x Ciesla, W. 1995. “Climate change, forests and forest management”. FAO Forestry Paper 126, Food and Agriculture Organization
of the United Nations, Rome, p.128
xi Flannery, Tim. The Weather Makers…supra note 1.
xii http://cdiac2.esd.ornl.gov/index.html
xiii http://www.epa.gov/sequestration/
xiv http://unfccc.int/methods_and_science/lulucf/items/1084.php
xv http://www.sd-commission.org.uk/panel-sd/position/co2/anna.htm
xvi http://csite.ornl.gov/
xvii http://www.epa.gov/sequestration/
xviii http://www.sd-commission.org.uk/panel-sd/position/co2/main.htm
xix http://www.sd-commission.org.uk/panel-sd/position/co2/anna.htm
xx http://www.sd-commission.org.uk/panel-sd/position/co2/anna.htm
xxi IPCC Third Assessment Report, 2003.
xxii Kolshus, H.H. 2001. Carbon sequestration in sinks: an overview of potential costs. CICERO Working Paper 2001: 11.
xxiii See section 3.3 of this document for a definition of the activities included in Articles 3.3 and 3.4 of the Kyoto Protocol
xxiv Missfeldt, F. and E. Haites, 2001. The Potential Contribution of Sinks to Meeting Kyoto Protocol
Commitments. In Environmental Science and Policy, 4(6), pp. 269-292.
Noble, I. and R.J. Scholes, 2001. Sinks and the Kyoto Protocol. Climate Policy 1 (2001), pp. 5-25.
(cited in: Kolshus, H.H. 2001. Carbon sequestration in sinks: an overview of potential costs. CICERO Working Paper 2001: 11.)
xxv Intergovernmental Panel on Climate Change (IPCC). 1997,Greenhouse Gas Inventory Reporting Instructions. Volumes 1, 2 and
3. IPCC Technical Support Unit, Hadley Centre, Meteorological Office, Bracknell, UK
xxvi FAO forestry situation report for 2005 (FAO forestry paper 147)
xxvii Leake, J.E. 2006. Rehabilitation of tropical and subtropical regions as a means of bio sequestration of Carbon. Draft for
review.
xxviii http://www.epa.gov/sequestration/
xxix See section 3.3. of this document for a definition of afforestation and reforestation
xxx ECCP - Working Group on Forest Sinks FINAL REPORT. Conclusions and recommendations regarding forest related sinks &
climate change mitigation
xxxi See Appendix 2.1 for a list of Annex I & Annex II countries
xxxii “The 1997 Kyoto Protocol shares the Convention’s objective, principles and institutions, but significantly strengthens the
Convention by committing Annex I Parties to individual, legally-binding targets to limit or reduce their greenhouse gas emissions.
Only Parties to the Convention that have also become Parties to the Protocol (i.e. by ratifying, accepting, approving, or acceding
to it) will be bound by the Protocol’s commitments. 165 countries have ratified the Protocol to date. Of these, 35 countries and
the EEC are required to reduce greenhouse gas emissions below levels specified for each of them in the treaty. The individual
targets for Annex I Parties are listed in the Kyoto Protocol’s Annex B. These add up to a total cut in greenhouse-gas emissions of
at least 5% from 1990 levels in the commitment period 2008-2012.”
The Provisions of the Kyoto Protocol and its Rulebook, from http://unfccc.int/kyoto_protocol/items/2830.php
xxxiii See Appendix 2.1 for a list of Annex I & Annex II countries
xxxiv Note: The United States of America are Annex II countries that have not adopted the Kyoto Protocol
xxxv UN FCCC/CP/2001/13/Add.1, English, p. 58
xxxvi Ibid
xxxvii Ibid
xxxviii Sedjo, R. 2006 Forest and Biological Carbon sinks after Kyoto. Resources for the Future and Weathervane, Background
paper.
xxxix Ibid
xl Kyoto Protocol to the UNFCCC http://unfccc.int/resource/docs/convkp/kpeng.html
xli Cropland management is the system of practices on land on which agricultural crops are grown and on land that is set aside
or temporarily not being used for crop production; grazing land management is the system of practices on land used for livestock
production aimed at manipulating the amount and type of vegetation and livestock produced; and revegetation is a direct
human-induced activity to increase carbon stocks on sites through the establishment of vegetation that covers a minimum area of
®
tel: +1.212.925.8106 • fax: +1.212.226.1625 • www.CINCS.com
A Carbon Sequestration Introduction: Climate Change, Established Frameworks and the Carbon
Markets
0.05 hectares and does not meet the definitions of afforestation and reforestation (European Climate Change Programme (ECCP):
Working Group Sinks Related to Agricultural Soils Final Report)
xlii European Climate Change Programme (ECCP): Working Group Sinks Related to Agricultural Soils Final Report
xliii See section 3.6 on REED credits
xliv Sedjo, R. 2006 Forest and Biological Carbon sinks after Kyoto. Resources for the Future and Weathervane, Background
paper.
xlv Amano, M & Sedjo, R. 2003. Forest Carbon Sinks: European Union, Japanese and Canadian Approaches. Resources for the
Future, Discussion Paper:. RFF DP 03-41.
xlvi World Bank Technical Workshop, Using Forest Carbon Credits in the Carbon Market Focus on the European Emission Trading
Scheme, Brussels, March 29, 2006.
xlvii IETA. 2006. The Voluntary Carbon Standard. Proposed Version 2. Consultation
xlviii http://www.fs.fed.us/ecosystemservices/carbon.shtml
xlix http://www.eurocarbonltd.com/carbon_trading.htm
l From January 2008 from link: http://www.chicagoclimatex.com/market/data/summary.jsf
li Research Reports International, Inc. http://www.researchreportsintl.com/products/samples/CarbFundSamp.pdf
lii Ibid
liiiTill Neef and Sabine Henders, February 2007, CATIE, “Guidebook to Markets and Commercialization of Forestry CDM projects”
liv Carbon Disclosure Project: http://www.cdproject.net/
lv The US Department of Energy Website: http://www.eia.doe.gov/oiaf/1605/frntvrgg.html
lvi Eastern Climate Registry, Project Overview: http://www.easternclimateregistry.org/
lvii Ibid
lviii For more informaiton on establishing baselines, please visit: http://www.epa.gov/sequestration/baselines.html
lix For more information on how to identify leakage, please visit: http://www.epa.gov/sequestration/leakage.html
lx For more information on reversibility (duration), please visit: http://www.epa.gov/sequestration/duration.html
lxi lxi Paustian, K., Antle, J.M., Sheedan, J., Paul, E. 2006. Agriculture’s role in GHG mitigation. Pew Center on Global Climate
Change.
lxii US DOE. Carbon Sequestration in terrestrial ecosystems:
(http://www.fe.doe.gov/coal_power/sequestration/reports/rd/index.html)
lxiii British Government Panel on Sustainable Development (http://www.sd-commission.org.uk/panel-sd/position/co2/anna.htm)
lxiv ibid
lxv World Resources Institute, 2006. The Greenhouse Gas Protocol: The Land Use, Land Use Change and Forestry Guidance for
GHG Project Accounting.
lxvi Rypdal, K. & Baritz, R. 2002. Estimating and managing uncertainties in order to detect terrestrial greenhouse gas removals.
CICERO Working Paper 2002:07
lxvii For more information on monitoring techniques, please read Chapter 2 of the IPCC special Report: Land Use, Land-Use
Change, and Forestry
lxviii US DOE. Carbon Sequestration in terrestrial ecosystems
(http://www.fe.doe.gov/coal_power/sequestration/reports/rd/index.html)
lxix Slaymayer et al. 1999. Calculating forest biomass with small format aerial photography, videography and a profiling laser
(pdf available at: ftp://vis-ftp.cs.umass.edu/Papers/slaymaker/Reno99.pdf)
lxx IPCC. 2000; IPCC special Report: Land Use, Land-Use Change, and Forestry
lxxi Reedy, H. 2003. Feasibility Assessment of Afforestation for Carbon Sequestration (FAACS): Exploring Options for Aggregating
and Selling Afforestation Carbon Credits from Small Landowners.
lxxii IPCC (2000); IPCC special Report: Land Use, Land-Use Change, and Forestry
lxxiii IPCC (2000); IPCC special Report: Land Use, Land-Use Change, and Forestry
lxxiv Ibid
lxxv Ibid
lxxvi http://www.fao.org/UNFAO/about/index_en.html
lxxvii http://www.fao.org/gtos/
lxxviii http://www.fao.org/gtos/tcoABT.html
lxxix Ibid
lxxx Vine, E., Sathaye, J. and Makundi, W. 1999.Evaluation, Reporting, Verification, and Certification of Forestry Projects for
Climate Change Mitigation. Ernest Orlando Lawrence, Berkeley National Laboratory
®
tel: +1.212.925.8106 • fax: +1.212.226.1625 • www.CINCS.com

Cincs Carbon Sequestration Introduction

Enviado por

Dados do documento

Descrição original:

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

Cincs Carbon Sequestration Introduction

Enviado por

Direitos autorais:

Formatos disponíveis

A Carbon Sequestration Introduction: Climate Change, Established Frameworks and the Carbon Markets

Você também pode gostar