CONTENTS

1. LULUCF strategy for UNDP in Eastern Europe and CISBratislava, 25 September 2007B. Schlamadinger, S. Settelmyer, V. BlujdeaTerraCarbon LLC

2. CONTENTS • Why focus on Eastern Europe and CIS • Kyoto (pre and post 2012), voluntary markets • Clean Development Mechanisms • Joint Implementation • Green Investment Schemes • Chicago Climate Exchange • Over-the-counter markets • Suggested short-term activities by UNDP • Project types, considerations • 5 short-listed projects • Marketing strategy • Longer-term strategy recommendations

3. WHY FOCUS ON EASTERN EUROPE AND CIS • Vast ecosystems amenable to improvement • Unmanaged or low management level; but threat of degradation (some of the last intact ecosystems) • Forest fires, illegal logging • Inefficient agriculture: improvement potential; minimize leakage • Many places with low or decreasing population density • Benefits to rural population • Synergies with biomass use • Most projects to date are in CDM. Wider options in JI or GIS are largely unknown

4. CLEAN DEVELOPMENT MECHANISM • Projects in non-Annex I countries • Restricted to afforestation and reforestation • 1% of Annex I emissions in 1990 • Several methodologies approved, some highly complex • SSC methodologies preferable? • Programme of activities possible • One registered project so far • Main player = World Bank BioCarbon Fund • Post 2012 may see expansion with • Revegetation • Avoided deforestation (but at national level) • Cropland, grassland, forest management

5. CLEAN DEVELOPMENT MECHANISM • New SSC methodologies recommended by EB for COP13 approval: • Switch from Non-Renewable Biomass for Thermal Applications by the User • Energy Efficiency Measures in Thermal Applications of Non-Renewable Biomass • Generate CERs, not tCERs • Only small-scale projects • Very attractive for SLM

6. JOINT IMPLEMENTATION

7. JOINT IMPLEMENTATION • For Annex I countries • Energy and other sectors: AAUs are converted into ERUs • For LULUCF, RMUs are converted into ERUs (ITL) • AAUs are assigned to countries up-front, RMUs must be „earned“ under KP Art 3.3 or 3.4 • Did country elect Art 3.4 „Forest Management“? • Did country elect annual accounting (else RMUs available only in 2014) • Likelihood of country meeting Track 1 requirements?

8. JOINT IMPLEMENTATION

9. GREEN INVESTMENT SCHEME • Trading of surplus AAUs under KP Article 17 • Buyers do not want „hot air“  hard greening • For LULUCF, GIS could be perfect alternative to JI • Solves ITL issue • Allows longer crediting period • Reduces transaction costs • No non-delivery risk • But reputational risk • Requires legal framework, and possibly an MOU

10. GREEN INVESTMENT SCHEME

11. VOLUNTARY MARKETS: CCX • 15 million credits to date • 55% from LULUCF (ag soils, forestation) • Permanent credits, 20% reserve • 3-4 USD / ton

12. OVER-THE-COUNTER MARKETS • End-users mainly in US (68%) and Europe (28%) • 36% LULUCF • Of that, 90% is afforestation and reforestation • REDD (10%) small but growing • Need for standardization, e.g., VCS • Afforestation/Reforestation, Revegation • Avoided Deforestation • Agricultural & Grassland Soil Carbon • Improved Forest Management.

13. SHORT-TERM ACTIVITIES BY UNDP • promote LULUCF as stand alone activities conducted by UNDP • Integrate LULUCF activities in CDM or JI capacity building activities, which could include working with Designated Focal Points (DFPs ) • Include bio-carbon aspects in newly initiated Biodiversity or Sustainable Land Management projects, for example by covering topics such as training, data collection, awareness raising, and in general capacity building.

14. PROJECT TYPES • Afforestation, reforestation, revegetation • Back-loaded • Timber investment • Upfront costs • Highly suitable for Green Investment Schemes, VERs • Forest fire management • More front-loaded • Methodologically complex • Carbon main revenue, additionality “easy” • Peatland restoration • Same features as forest fire management

15. PROJECT TYPES • Reducing illegal logging, protection against deforestation and degradation • Same features as forest fire management • Leakage concerns • Could be combined with fuelwood and timber plantations, non-renewable biomass project • Efficiency improvement or replacement of non-renewable biomass • Not yet tested, but great potential • Simple methodology • Great SD benefits

16. PROJECT TYPES • CDM: reducing savannah and agricultural residues burning • Develop SSC methodology • Cropland and grassland management • Small amount of credits per hectare • Small changes in large numbers • Not much experience yet • Leakage and additionality no major concerns

17. CRITERIA • Front loaded vs back-loaded • Co-investment needed? • Additionality and leakage • tCERs or permanent credits? • Host-country approval, KP status • MOU needed? • Local capacity • Size of project, transaction costs • JI: specific issues (RMUs) • Legal basis (CDM, JI, GIS)

18. SHORT-LISTED PROJECTS • Peatland restoration in Belarus • Forest certification and reducing illegal logging in the Rhodope Mountains in Bulgaria • Forest fire management toward a sustainable management of protected area in the Russian Portion of the Altai Sayan Ecoregion • Uzbekistan: replacing non-renewable biomass or no-till agriculture • Tbd (for now: hypothetical reforestation project under “Green Investment Scheme”)

19. PEATLAND RESTORATION, BELARUS • Last remaining wetlands in Europe of significant size • Many interested stakeholders (e.g., RSPB, hiring two carbon experts) • Government very interested, great technical capacity • Emissions of 5-30 tons CO2 / hectare in baseline • Methodological complexities: • Estimation of baseline emissions (conservative?) • Increases in methane and possibly nitrous oxide due to re-wetting • Careful hydrological design of project is necessary, possibly stratify according to water table • GHG monitoring (flux measurements?)

20. FOREST CERTIFICATION AND REDUCINGILLEGAL LOGGING IN RHODOPEMOUNTAINS, BULGARIA • Positive experience in pilot projects (22,000 hectares, another 50,000 hectares planned) • Cost effective, around 10 USD / hectare • Requires leakage management by providing sustainably produced fuelwood (market leakage may be possible to ignore) • JI approval uncertain at this time, but interest in GIS approach has been articulated • Methodology needs to be developed • GIS framework not yet in place, but planned for 2008 • Further presence of UNDP in Bulgaria?

21. FOREST FIRE MANAGEMENT,ALTAI SAYAN, RUSSIA • Promising LULUCF activities: • forest fire management (200 000 hectares annually), • reducing illegal logging, • reducing deforestation and improved forest management in buffer areas, • Forest fire management: could achieve 1 million tons CO2 reduction per year • Baseline: • average burnt area over past 10 years or dynamic baseline • CO2, N2O, CH4 emissions (IPCC defaults) • „recovery“ of dead wood and litter carbon pools after fire • Monitoring of fire emissions annually (remote sensing) • Could be in JI context (Russia chose annual accounting under Art 3.3 and 3.4)

22. FOREST FIRE MANAGEMENT,ALTAI SAYAN, RUSSIA • Possible measures to reduce fires (preventing fires, early detection of fires, improved fire fighting): • awareness of local population and companies, • enhance mobility and surveillance capacity, • allow access of tourists and organize trips inside the PA under strict control of PA rangers; • designate specific location for camping and fire places and map them on touristic maps, • improved access of rangers by shortcuts and tracks, • identify and ensure access to water supply points, • fire fighting field equipments like water tanks, 4 wheel cars and radio communication stations, • develop fire breaks perpendicular to dry season wind direction, etc. • To be completed in project planning phase

23. UZBEKISTANNON-RENEWABLE BIOMASS • Potential activities: • renewable biomass and energy efficiency of non-renewable biomass • Baseline: • Non-renewable biomass use • Could be done as a programmatic approach • Alternatives include • Briquettes from non-woody materials • Dung • Biogas (but difficult in winter) • Solar thermal energy • Improved wood stoves • Improved housing insulation

24. NON-RENEWABLE BIOMASS • New CDM methodologies (SSC), recommended by EB34 for approval at COP13

25. NON-RENEWABLE BIOMASS

26. NON-RENEWABLE BIOMASS • Definition of “renewable biomass”: • Woody biomass from forests or croplands / grasslands where • Land remains forests • Levels of stocks not decreasing systematically • Forestry / conservation regulations are adhered with • Non-woody biomass (conditions apply) • Biomass residues • Non-fossil fraction of waste

27. UZBEKISTANNO-TILL AGRICULTURE • Total cropland 4 million ha • Government-level interest in no-till agriculture • Experimental plots exist • Not CDM eligible but • Post 2012 may be possible • CCX • Low CO2 numbers per hectare, but large areas • Need to determine CO2 benefits and costs

28. AFFORESTATION OF DEGRADED LAND UNDER GREEN INVESTMENT SCHEME • Baseline: • carbon in woody biomass (zero) on available lands • With / without soil carbon options (trade-off between monitoring costs and carbon benefits) • Best undertaken in a GIS context (resolves upfront payment issue) • Lower transaction costs • For transaction: Host country to complete legal framework and fulfill Track 1 eligibility criteria

29. AFFORESTATION OF DEGRADED LAND UNDER GREEN INVESTMENT SCHEME • UNDP could act as trustee for funds received from buyer • Monitoring • monitor the planted areas over the project • field sampling of woody biomass accumulated due to afforestation (i.e. every 5 years) • Estimation of revenues • Assume planting cost is 1800 USD\ha • accumulation of CO2 is 10t CO2/yr/ha, in 20 years 200 t CO2 • at a price of 9 USD/t CO2 the total sum gained on carbon could be 1800 USDper ha

30. POTENTIAL BUYERS • The Word Bank Biocarbon Fund • European governments, in fulfilling their Kyoto commitments for the 2008-2012 period • Less likely, but still possible: governments of Japan, Canada and New Zealand • Japanese large emitters and trading houses • JI and GIS LULUCF workshop in Tokyo, early 2008 • First GIS deal (afforestation in Eastern Europe) under negotiation • Chicago Climate Exchange • Voluntary market buyers

31. LONGER-TERM STRATEGY • Capacity building • Technical Assistance • Financial Assistance • Marketing Assistance • Carbon Fund, either in conjunction with broader UNDP MDG voluntary markets fund, or as a separate bio-carbon fund • Contribute to international policy development