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

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

2. 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)

3. Introduction to BioCarbon Fund (cont’) Tackling an inequitable distribution of projects Resources earmarked mainly to CDM A/R in a variety of carbon sequestration technologies • 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, 17 involving multiple farmers as main partners • 13 projects are Government and non-profit-led • 8 projects are led by private sector • 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

4. Mitigating climate change through a variety of land use activities – examples Assisted Natural Regeneration Ethiopia Humbo– farmer managed natural regeneration on severe degraded community lands Albania – assisted natural regeneration of degraded lands Afforestation / Reforestation DRC IbiBateke– agroforestry on degraded savannah, and charcoal & fuelwood production India & China – maintenance of watersheds Uganda – timber production on degraded lands Chile & India – timber production on severely degraded lands REDD+ Madagascar – creation of a sustainable use protected area, with local conservation and management activities Sustainable Land Management Kenya – adoption of sustainable agricultural land management practices by small-holder farmer groups to increase crop yields, farm productivity and soil carbon sequestration

5. Moving forward and currently open for new contributions BioCFT1 & T2 BioCFT3 • 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 • 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

6. BioCarbon Fund experience with CDM A/R • 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

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

8. What have we learned from the Clean Development Mechanism on Non-permanence

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

10. Background: illustration of terms based on A/R activities Release of carbon stocks

11. Background: illustration of terms based on A/R activities Second measurement First measurement

12. Background: illustration of terms based on A/R activities Second measurement First 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

13. Background: illustration of terms based on A/R activities First measurement Second measurement

14. Background: illustration of terms based on A/R activities 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

15. CDM A/R: Approach taken to address reversals • 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

16. Current approach in CDM A/R: temporary credits Net tCO2e Net tCO2e tCERs lCERs • 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). n n+5 n+10 n+15 Years n n+5 n+10 n+15 Years

17. CDM A/R: Lessons learned from dealing with temporary crediting • 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) • 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

18. Reversals at a landscape perspective Reforestation Reducing deforestation and forest degradation Improved agricultural practices Reducing reliance on non-renewable biomass for energy

19. Reversals might differ for different land use activities

20. Unintentional • Intentional Different types of Reversal Risk • Reversals • Natural Disturbances: Fire, wind, floods etc • Harvesting, Land clearing, abandonment etc.

21. Sources of Reversal Risk

22. Complicated LULUCF puzzle is developing REDD+ SBSTA COP SBSTA/SBI CDM SBSTA NAMAs (credited?) SBSTA COP Agriculture SBSTA? Comprehensive accounting SBSTA Parties reporting under Convention

23. Questions Should LULUCF under the CDM create permanent credits comparable to other sectors? • 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

24. Questions Links with discussions on non-permanence under the CDM to other LULUCF related topics • 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?

25. So can we go from this…

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

27. Thank you Marco van der Linden Email: MvanderLinden@worldbank.org For more information on the BioCArbon Fund, please contact: EllysarBaroudy Email: Ebaroudy@worldbank.org www.carbonfinance.org