Carbon Credits Skip Willis 020410

8/9/2019 Carbon Credits Skip Willis 020410

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Carbon creditsA greenfield of opportunities

PAPTAC conference

Montreal, February 2, 2010

Deloitte & Touche LLP and affiliated entities.

Project types

Forest carbon management

The use of superior forest management practices to enhance carbon

storage in the managed forest

Afforestation or reforestation

Generally described as the planting of trees on acreage that hasntbeen forested for the past 50 years (afforestation) or since

January 1, 1990 (reforestation) according to the definition in the

Marrakesh Accord

Other jurisdictions have different start dates. The Stabenow Bill in the

US Senate uses January 1, 2009 as a start date

Avoided deforestation

The long term preservation of forest that would otherwise have been

harvested

PAPTAC Conference Carbon credits A green field of opportunities1


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Forest carbon management-permanence

Permanence

Important to recognize that there are two kinds of reversals,

intentional and unintentional

On a broad land mass basis, unintentional reversals are predictable

and can best be managed through a set aside

The credits in the set aside are accounted for separately andmonitored to ensure that the set aside always has a positive balance

Intentional reversals are a business decision, the value of the fibre isa known as is the cost of the carbon

Responsibility for replacing credits lost through intentional reversals

should lie with the land owner

Given the average residency of carbon in the atmosphere a 100 year

liability period for intentional reversals has been suggested

This essentially becomes a lien on the property much as a zoningrestriction would



Forest carbon management-baselines

The challenge with forest carbon management is that it is a continuousprocess that doesnt have an easily defined start date

The proposal is to use a broad regional average as a baseline againstwhich to measure performance

The baseline should be as broad as possible to respect species andclimatological differences but to avoid the situation where a forestmanager is competing with itself

Carbon can be measured at a point in time based on a specifiedsampling protocol and then the measurement can be repeated

periodically (every 5 years) to measure carbon flux

The commitment of the project proponent is that the carbon accountwould remain positive



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Forest carbon management-additionality

There is resistance to granting credits for existing forest management

practices that clearly would have happened anyway

It is important to consider what is to be rewarded and what behaviour isto be incented

If the best forest management regimes are deemed not worthy of

crediting because they are based on existing practices, then they are infact being punished for superior performance

In the same context, the opportunity for the greatest gains, and

therefore credits, then go to the companies that have done the least inthe past and therefore all of their activity will be additional

This area is frequently beset with regulatory paranoia. It is important toremember that, on a comparative value scale, forests are managed for

their fibre not for their carbon



Afforestation/Reforestation issues

Permanence

Similar issues exist as with forest management for unintentional

reversals

In most instances these projects are not commercial so intentional

reversals are less of an issue Baselines

The baseline is relatively straightforward, but the range of start dates

could be problematic

Land preparation will disturb existing soil and scrub brush carbon so

the project will not normally be positive for carbon until after the first

10 years

There needs to be consensus on sampling to balance accuracy,

conservativeness and cost



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Avoided deforestation

The most controversial of the project types, pay me or I will cut it down

Seismic lines are a good example of a project where the incentive

for avoided deforestation was instrumental in the implementation ofthe project

Globally this will be the foundation of program to Reduce Environmental

Degradation and Deforestation (REDD) which will be a significantsource of international credits



Final thoughts

Climate change negotiations have more to do with trade issues than

they do with environmental issues

Canada has a significant advantage because of its land mass andforests that need to be exploited

Bio-sequestration can be a source of low-cost credits because thecapital cost is already calculated in the fibre

This in turn is critical to managing the cost of compliance

The agricultural lobby is doing a far better job in building politicalsupport for their inclusion in the program



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Contact

Skip Willis

Senior advisor for Climate Change

Deloitte

Phone: 416-601-6150 x 7728

Email: [email protected]


Carbon Credits Skip Willis 020410

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