Non-permanence in the Broader Picture of LULUCF and the UNFCCC

INFORMAL WORKSHOP ON NON-PERMANENCE 1

NON-PERMANENCE IN THE BROADER PICTURE OF LULUCF AND THE UNFCCC


Introduction to BioCarbon Fund

• Tranches 1 and 2 - about $90 million:• $76 million for CDM A/R• $8 million for other LULUCF activities (voluntary carbon markets) • $6 million for technical assistance / readiness (BioCFplus)

• Multi-shareholder (public and private)


Introduction to BioCarbon Fund (cont’)Resources earmarked mainly to CDM A/R in a variety of carbon sequestration technologies

More than half of the resources supporting environmental restoration – soil, forest, water sources

21 projects, 17 involving multiple farmers as main partners 13 projects are Government and non-profit-led 8 projects are led by private sector

Tackling an inequitable distribution of projects

• Different types of A/R activities:• Plantations for fuelwood, paper mills• Agroforestry• Assisted natural regeneration• Watershed protection• Land restoration

• More than half of the resources supporting environmental restoration – soil, forest, water sources

• 21 projects• 13 projects are Government and non-

profit-led• 8 projects are led by private sector


Mitigating climate change through a variety of land use activities – examples

Assisted Natural RegenerationEthiopia Humbo – farmer managed natural regeneration on severe degraded community landsAlbania – assisted natural regeneration of degraded lands

Afforestation / ReforestationDRC Ibi Bateke – agroforestry on degraded savannah, and charcoal & fuelwood productionIndia & China – maintenance of watershedsUganda – timber production on degraded landsChile & India – timber production on severely degraded lands

REDD+Madagascar – creation of a sustainable use protected area, with local conservation and management activities

Sustainable Land ManagementKenya – adoption of sustainable agricultural land management practices by small-holder farmer groups to increase crop yields, farm productivity and soil carbon sequestration


Moving forward and currently open for new contributions

• Launched 2004• $90m (public & private)• Investment/donor thesis

based on delivery of carbon credits

• 20 plus projects/pilots in multiple countries – average size ~5k ha for reforestation ~ 30k for agriculture, ~ 100k for REDD

• Successful delivery of credits

BioCF T3BioCF T1 & T2

• Target $200m+ donor fund, leveraging private sector

• 4-5 jurisdictional ‘landscape’ level projects – min. size 100k ha.

• Blended climate and development impacts

• Innovative & flexible financial structure(s)

• (Re)aligning public and private sector interests


• 21 Pioneering projects spanning more than 16 countries

• Supporting restoration of close to 150,000 hectares of degraded land

• More than 10 methodologies developed

• Several firsts:– 1st A/R CDM methodology developed– 1st A/R CDM project registered– 1st A/R CDM credit issuance

BioCarbon Fund experience with CDM A/R


Summary on land use in Clean Development Mechanism – Where have we ended up (UNFCCC data April 2013)

CDM as a whole

• 6,699 projects registered

• Over 1.2 Bn CERs issued today

CDM A/R

• 44 A/R projects registered

• Around 5.6 million tCERs issued from 7 projects

• First tCERs issued in 2012 – per the rule (one verification per commitment period)

VCS

• AFOLU: More than 60 projects registered and issuing VCUs

• Projects include ARR, REDD, Agriculture


WHAT HAVE WE LEARNED FROM THE CLEAN DEVELOPMENT MECHANISM ON NON-

PERMANENCE


Background: Non-permanence vs. reversal vs. under-performance

• The inherent susceptibility of terrestrial carbon to re-release stored carbon

Non-permanence

• Release of carbon after a credit has been issued or payment has been made that causes the carbon stock to drop below what has already been credited or paid

• Creating a debit against previously issued credits / paid emission reductions

Reversal

• Loss of carbon before credits have been issued / payments have been made

• Not a debit or reversal per se but a diminishment in the number of emission reductions that are generated during that period

Under-performance


Background: illustration of terms based on A/R activities

Release of carbon stocks



First measurement

Second measurement



First measurement

Second measurement

At the time of the second measurement there is less carbon . If credits where issued against the first measurement, this would be a reversal



First measurement

Second measurement



First measurement

Second measurement

In this case, if credits where issued against the first measurement, the release of carbon would affect the performance of the activity but not necessarily lead to a reversal


• When the Modalities and Procedures for CDM A/R were designed, there was concern about potential reversibility and non-permanence of carbon stocks as a result of human activities, disturbances , or environmental change

• To deal with the risk of non-permanence, the CDM has taken a temporary crediting approach

CDM A/R: Approach taken to address reversals


n n+5 n+10 n+15 Years

Net

tCO2e

n n+5 n+10 n+15 Years

tCERs lCERsNettCO2e

• Temporary Certified Emission Reductions (tCERs) are issued for current carbon stocks and expire at the end of the commitment period following the one during which they were issued

• Long-term Certified Emission Reductions (lCERs) are issued for increase in carbon stocks and expire at the end of a project’s crediting period (lCERs).

Current approach in CDM A/R: temporary credits


• The replacement credit rule increases the risks for buyers of forest credits and increases transaction costs

• Prices (lower than CERs) were hard to accept by sellers• Virtually no interest in lCERs• Temporary crediting as an approach to address non-permanence

of A/R projects has limited effectiveness and reduces the demand for forest credits (e.g., banned from largest EU-ETS market)

CDM A/R: Lessons learned from dealing with temporary crediting

• Lessons learned from A/R CDM projects can be enriched with experiences from the voluntary carbon market where other approaches to non-permanence are used


Reversals at a landscape perspective

Reducing deforestation and forest degradation

Improved agricultural practices

Reducing reliance on non-renewable biomass for energy

Reforestation


Reversals might differ for different land use activitiesType of activity

Characteristics Permanence considerations

Relevant project type(Examples)

Emission reductions

Avoids land use conversion, disturbance or management activity that would otherwise occur and release stored carbon into the atmosphere

Emissions may simply be delayed if disturbance is deferred, rather than stopped (fire)

REDD+, avoided conversion of wetlands, grasslands, or croplands

Carbon sequestration

Changes land use or management to store more carbon on site

Carbon stocks or newly sequestered carbon can be re-emitted to the atmosphere as CO2

Afforestation/Reforestation, carbon stock enhancement, agricultural soil management, wetlands and grassland restoration


Different types of Reversal Risk

Unintentional

Reversals

Natural Disturbances: Fire, wind, floods etc

Intentional

Harvesting, Land clearing, abandonment etc.


Sources of Reversal RiskSource of Threat Risk of Loss Due To Risk Category

Internal to Project/Program

Intentional

Unintentional

High Opportunity CostChange in Financial Viability

Inadequate ER Program Management

Institutional

Inadequate Community Engagement

Inadequate Land and Resource Tenure

Political Uncertainty and Conflict

Natural Disturbances

FirePest and Disease

Extreme WeatherGeological Risk


Complicated LULUCF puzzle is developing

CDMSBSTA

REDD+SBSTACOPSBSTA/SBI

AgricultureSBSTA?

NAMAs (credited?)SBSTACOP

Parties reporting under Convention

Comprehensive accountingSBSTA


• Temporary crediting as an approach to address non-permanence of A/R projects has limited effectiveness and reduces the demand for forest credits

• The voluntary market has found solutions to make credits from LULCUF activities fungible with other sectors, mainly through the use of buffers

• CDM carbon capture and storage projects are able to generate permanent credits

Questions

Should LULUCF under the CDM create permanent credits comparable to other sectors?


• How does the discussion on non-permanence in the CDM affect other LULUCF related agenda items?

• Is a more integrated approach required to develop a complete picture for dealing with non-permanence and reversals and that allows Parties to address land-use in an integrated manner?

Questions

Links with discussions on non-permanence under the CDM to other LULUCF related topics


So can we go from this…


…to this when dealing with non-permanence and reversals?


MARCO VAN DER LINDENEMAIL: [email protected]

FOR MORE INFORMATION ON THE BIOCARBON FUND, PLEASE CONTACT:

ELLYSAR BAROUDYEMAIL: [email protected]

WWW.CARBONFINANCE.ORG

Thank you

Non-permanence in the Broader Picture of LULUCF and the UNFCCC

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