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A Study on A/R CDM Application of Deforested Land in North Korea

A Study on A/R CDM Application of Deforested Land in North Korea. June 7, 2007 Young-Chool OH Dong-Kun Lee Jae-Uk Kim Seoul National University, Korea. Contents. Ⅰ. Introduction. Background Method of Study. Ⅱ. Literature Review. A/R CDM Criteria Forest Area in North Korea.

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A Study on A/R CDM Application of Deforested Land in North Korea

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  1. A Study on A/R CDM Application of Deforested Land in North Korea June 7, 2007 Young-Chool OH Dong-Kun Lee Jae-Uk Kim Seoul National University, Korea

  2. Contents Ⅰ. Introduction • Background • Method of Study Ⅱ. Literature Review • A/R CDM Criteria • Forest Area in North Korea Ⅲ. Result & Discussion • Analysis of Forest Changes in North Korea • Selection of A/R CDM Sites • Project Simulation • Economic Analysis Ⅳ. Conclusion 2/36

  3. Ⅰ. Introduction Background • Kyoto Protocol came into force(Feb 2. 2005)- North Korea : joined on April 27,2005- South Korea : AnnexⅠcountry in the 2nd Commitment Period (2013∼2017) • Deforested land is increasing after mid 1970’sin North Korea • Alternative approach to restoration of deforested land in North Korea 3/36

  4. Ⅰ. Introduction Review GIS/RS Good Forest Period - 1975/76/77/79 A/R CDM Criteria Kyoto Mechanism Mid 1970’s Landsat Image CDM Base year - 1987/88/89 Data on NK Forest Changes Late 1980’s Landsat Image Recent Forest - 2000/01/02 A/R CDM & Restoration Earlier Studies Recent 2000’s Landsat Image Eligible Species for A/R CDM Eligible Sites for A/R CDM Site Survey Experts Interview No No Yes Suitable Site & Species Project Simulation Economic Analysis Method of Study 4/36

  5. Ⅱ. Literature Review Kyoto Mechanism • Emission Trading (ET)Allow the developed countries to transfer emissions credits to each other(Unit : AAU, RMU, ERU, CER) • Joint Implementation (JI)To be implemented between two or more AnnexⅠ countries • Clean Development Mechanism (CDM)To promote sustainable development by encouraging invest by governments and private firms in projects in developing countries 5/36

  6. Ⅱ. Literature Review Credit Limit on Forest Activities 6/36

  7. Ⅱ. Literature Review E-D D-C C-B B-A A E D C B A CDM Project Criteria • “Non Permanence” of carbon stored in A/R CDM projects ⇒ Temporary credits ℓCER(long-term CER) - Be used in the commitment period issued - Expire at the end of the crediting period tCER(temporary CER) - Be issued periodically - Expire at the end of the commitment period subsequent to the period issued 7/36

  8. Ⅱ. Literature Review Forest cover forest Non-forest T-50 T Time Forest cover forest forest Non-forest ’90 T Time Definitions of LULUCF activities AfforestationLand that has not been forested for at least 50 years ReforestationLand that was non-forest on 31st Dec. 1989) 8/36

  9. Ⅱ. Literature Review CDM Project Criteria Net Human-Induced CO2 Absorption by Sinks tCO2 Net Absorption (C) Net Human-Induced Absorption (C-B-A) = Credit Leakage (B) Baseline Net Absorption (A) T Time 9/36

  10. Ⅱ. Literature Review Forest Changes in North Korea ※ Deforested forest area is increasing after 1970 in North Korea : 2.2 million ha 10/36

  11. Ⅱ. Literature Review Forest Changes in North Korea • Deforested Area(1998) (Unit : 1,000㏊) (Lee, 2004) ▲Deforested mountain Naseunsi ▲Diverted for cultivation in Hwaeryung 11/36

  12. Ⅱ. Literature Review Forest Species (KFRI,2004) • Natural Forest • Artificial Forest- Fuel Wood & Fruit Bearing Tree - Main Species : Japanese larch, Korean pine, Robinia pseudoacacia, Chestnut tree, Mongolian oak 12/36

  13. Ⅲ. Result & Discussion Forest Changes ▲ 8,648,314 ㏊ in late 1980’s (744,913 ㏊ ↓) ▲ 9,393,227 ㏊ in mid 1970’s 13/36

  14. Ⅲ. Result & Discussion Forest Changes ▲ 7,426,921 ㏊ in recent 2000’s ▲ 1,966,306 ㏊ ↓ since mid 1970’s 14/36

  15. Ⅲ. Result & Discussion Forest Changes (Unit : ㏊) 15/36

  16. Ⅲ. Result & Discussion Forest Changes • Verification of land cover classification results 16/36

  17. Ⅲ. Result & Discussion Forest Changes (Diverted for cultivation near the Cheongcheon River, 2006.2.26) (Deforested mountain along Pyungyang-Hwaecheon Expressway, 2006.2.27) 17/36

  18. Ⅲ. Result & Discussion Forest Changes (Deforested land in Nampo, 2006.2.27) (Deforested mountain around Pyungyang-Hwaecheon Expressway, 2006.2.26) 18/36

  19. Ⅲ. Result & Discussion Selection Criteria for A/R CDM • Suitable Site Criteria : Overseas Forestation Data →Valuation -. Minimum size of unit site : 200㏊↑ -. Slope : 20° ↓ -. Altitude : 600m ↓ • Suitable Species : Indigenous Species →Valuation -. Japanese larch -. Korean pine -. Mongolian oak 19/36

  20. Ⅲ. Result & Discussion Eligible Site for A/R CDM ▲ Decreased Area 744,913 ㏊ of late 1980’s since mid 1970’s ▲ Eligible A/R CDM Site : 605,156 ㏊ (Non-forest land in recent 2000’s) 20/36

  21. Ⅲ. Result & Discussion Suitable Site forA/R CDM • Suitable Sites satisfied with Site Selection Criteria among Eligible A/R CDM Sites ▲ Slope : 20° ↓ ▲ Altitude : 600m ↓ ▲ Unit Site Size : 200㏊↑ 21/36

  22. Ⅲ. Result & Discussion Suitable Site forA/R CDM ▲ Suitable A/R CDM Site : 174,542 ha 22/36

  23. Ⅲ. Result & Discussion A/R CDM Site in North Korea (Unit : ㏊) 23/36

  24. Ⅲ. 연구결과 Project Simulation • Project Area : 174,542 ㏊ • Project Period : 30 years (Monitoring cycle : 5 year) • Planting Species : Japanese larch, Korean pine, Mongolian oak • Carbon Pool : Above-ground biomass, Below-ground biomass(Not considered Litter, Dead wood, Soil organic carbon) • Biomass & CO2 Calculation Index • Baseline : present land use will continue by the end of the project,Additionality and No Leakage in North Korea (Han, 2005). 24/36

  25. Ⅲ. Result & Discussion Biomass & CO2 per ㏊ • Planted 3 species at the same rate CO2: 7.21 tCO2/㏊/year Biomass : MAI 4.42 ㎥/㏊ 25/36

  26. Ⅲ. Result & Discussion Total Biomass & CO2 CO2 : 37,728,272 tCO2 (1,257,609 tCO2/year) Biomass : 23,158,814 ㎥ (771,960 ㎥) 26/36

  27. Ⅲ. Result & Discussion Economic Analysis Preconditions • Project Size : 174,542㏊ • Period : 30 years • Species : Japanese Larch,Korean pine,Mongolian oak • Land Cost : free (North Korea’s expenses) • Labor Cost : 2.4 U$/day (real wages in Kaesong Industrial District) • Carbon credit : ℓCER • CER price : 15U$/tCO2 • Exchange Rate : 930 \/U$, 1.3 U$/Euro • Discount rate : 4% 27/36

  28. Ⅲ. Result & Discussion 6,830 7,697 9,177 5,623 2,324 Economic Analysis • Products of A/R CDM Project ※ ERU : JI Project, RMU : Domestic Afforestation/Reforestation ℓCER classified by period 28/36

  29. Ⅲ. Result & Discussion Economic Analysis • Forestation Cost : 4,939 U$/㏊ • Timber Revenue : 9,185 U$/㏊ 29/36

  30. Ⅲ. Result & Discussion Economic Analysis • ℓCER Income : 1,067 U$/㏊ ※ ℓCER Value (Discount rate : 4%) • ERU or RMU Income: 3,177 U$/㏊ 30/36

  31. Ⅲ. Result & Discussion Cash Flow Analysis • A/R CDM Project (unit : 1,000U$) ※ IRR : 6.70% 31/36

  32. Ⅲ. Result & Discussion Cash Flow Analysis • A/R CDM Project(Without Timber Sales) (unit : 1,000U$) ※ 45% of Total Cost can be covered by ℓCER Income. 32/36

  33. Ⅲ. Result & Discussion Cash Flow Analysis • JI Project or Domestic Afforestation/Reforestation (unit : 1,000U$) ※ IRR : 5.16% 33/36

  34. Ⅲ. Result & Discussion Sensitivity Analysis • IRR changes of A/R CDM and JI/Dom. project according to carbon credit prices ※ Linear Regression Analysis : goodness of fit 99% A/R CDM project y = 0.1178x + 6.3495R2 = 0.9999JI or Dom. A/R project y = 0.4854x + 3.7653R2 = 0.9967 34/36

  35. Ⅲ. Conclusion Conclusion of study • Confirm the eligible A/R CDM sites in North Korea - Eligible sites for A/R CDM : 605,156 ㏊ → Suitable sites : 174,542 ㏊ - Better accessibility for forestation than other countries • Confirm the feasibility of A/R CDM Project for restoration of deforested land in North Korea - A/R CDM project : IRR 6.70% - A/R CDM(without timber) : 45% of total cost is covered by ℓCER Income - JI or Domestic A/R : IRR 5.16% (without timber) • JI : When both South and North Korea are AnnexⅠcountry • Domestic A/R : If we are unified in the future • A/R CDM Project is Alternative approach toSouth and North Economic Cooperation 35/36

  36. Thank You !

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