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Voluntary Carbon Market & Voluntary Carbon Standards

Voluntary Carbon Market & Voluntary Carbon Standards. Training in 2-3 hours. A word that was never the core of your training (till 2006-7). It has lots of promises/ potentials to be untapped/ unraveled. A word that has promised to pour money on trees/forests.

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Voluntary Carbon Market & Voluntary Carbon Standards

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  1. Voluntary Carbon Market & Voluntary Carbon Standards

  2. Training in 2-3 hours A word that was never the core of your training (till 2006-7) It has lots of promises/ potentials to be untapped/ unraveled A word that has promised to pour money on trees/forests A word that has gifted Bankruptcy to many organizations A word that has changed the whole focus of forestry Carbon And Forestry Carbon Standards show a way forward..

  3. Agenda

  4. Objectives of the session • Voluntary Carbon Market • Forestry Carbon Market: Global Perspective • Forestry Carbon Standards • A/R CDM v/s Voluntary Standards • Project Cycle and Technical Aspects • How to identify a good ‘Standard’ in Indian Context • Financial Aspect • A path for forestry carbon projects

  5. Teasers Carbon Market…the new ‘poster-child ‘ of globalization- a newspaper (June 2010) Chicago Climate Exchange to shut down emissions trading- CNN Money (Nov. 2010) Three US Solar Companies file for Bankruptcy in a month – NY Times (Aug. 2011)

  6. Voluntary Carbon Market (VCM)

  7. Carbon Credits : Have a look CO2 storage Leakage Baseline tCO2 Source; CarbonFix Standard Years

  8. Carbon credit generated here will have higher value-Vintage Key Terms • Climate Forestation (CF) Projects: • Vintage: • Carbon credits generated in the recent past are generally more highly valued than those generated • long ago or in the future. • Voluntary Carbon Market (VCM): • Basically non-compliance market : credits for CSR, PR, Future-compliance need etc. Most of them to retire the credit.

  9. Key Terms (cont..) • Registries: • (Inventory, ownership and transaction register) • Markit (not Market) • NYSE Blue • CDC Climate • American Carbon Registry (ACR) • Over the Counter (OTC): • one to one deal, over the table deal • CERs: The common ‘currency’ of the KP and climate mitigation projects. An standardized emission offset instrument under compliance. 1 CER= 1 Tonne of CO2 (tCO2-e) • VERs: Verified Emission Reductions: Carbon credits from voluntary standards and voluntary carbon market

  10. Snapshot -VCM “The compliance market has been unable to produce enough forestry projects while the voluntary market has developed innovative tools and methodologies to fulfil the demand for these types of credit” (Lopes, 2009) • < 1% CER from A/R CDM Projects • A/R projects under voluntary carbon market command almost 7-10% (10% in OTC Market in 2009) • OTC comprise 75% of total forestry carbon transaction in 2010 (Hamilton et. al.) • Annual growth rate 27% (global) but signs of decline between 2011-2015

  11. Historic Volume in VCM (MtCO2-e) Source: Ecosystem Market Place, 2011

  12. Snapshot A/R Start dates of A/R projects 1995 – 2015 Source: Merger, 2010

  13. Status of Climate Forestation Projects Sirsa (Haryana) 370 ha Marginal crop land, fallow land TCO2: 31.3/ha/yr AP , ITC Initiative 3070 ha Marginal crop land, fallow land TCO2: 17.6/ha/yr AP & Orissa 3500 ha Degraded crop land TCO2: 102/ha/yr CG 282 ha Degraded wastelands TCO2: 0.63/ha/yr Karnataka 18181 ha Marginal crop land, fallow land TCO2: 18.2/ha/yr NCR 727 ha Degraded grassland TCO2: 20.7/ha/yr MH 533 ha Degraded wastelands TCO2: 43/ha/yr HP, Forest-community and Pvt. land 370 ha TCO2: 25.3/ha/yr AP, Orissa & CG 17986 ha Degraded Cropland, wasteland TCO2: 7.6/ha/yr Uttarakhand Information can’t be disclosed JH 37 ha Barren land TCO2: No info. Tamilnadu Degraded crop land, fallow land TCO2: 34/ha/yr

  14. Characteristics of Indian A/R projects • Multiple stakeholders • Small parcels of land • Afforestation of wastelands • Agroforestry projects getting popularity

  15. Land Type in A/R Projects in India

  16. Land ownership in A/R Projects in India

  17. Voluntary Carbon Standards

  18. Standards: Conceptual Understanding Standard: Procedural bodies having set certain principles and criteria for project types and issuing carbon credits. It has to be accepted by developers and buyers. Always supported by reputed organization, international body or conglomerate CBSE/RBSE/GSBE/TBSE

  19. VCS- Simplified Go back to 1980s/90s Post 2000 • Long waiting period • Unreliable services • Too many issues • Unionization • New Players; Many options • Efficient services • Instant connection • Better reliability • Customer Satisfaction

  20. Types of VC Standards

  21. Types of VC Standards • Regulation only on GHG quantification is provided by the following standards: • - A/R CDM • - Forest Carbon Project Standard by the American Carbon Registry (ACR) • - ISO 14064 • - Voluntary Carbon Standard (VCS) AFOLU • Regulation only on the net positive social and environmental benefits is provided by: • Climate, Community and Biodiversity Standards (CCBS) • Social Carbon

  22. Types of VC Standards Standards that consider GHG accounting and social and environmental aspects are: - Forest Project Protocol by the Climate Action Reserve (CAR) - CarbonFix Standard (CFS) - Plan Vivo Standards

  23. Popularity of accounting standards Adapted from: Merger, E. 2010

  24. Voluntary Forestry Carbon Standards

  25. Standards: Global Scenario • New Standards are flooding the market • Existing ones are being updated • Market price and acceptance depends on the credibility of a standard • Some projects use multiple standards

  26. Why Voluntary Carbon Standards • Emerged due to complexities of A/R CDM: • Complex CDM methodologies • Complex and cumbersome project documentation and certification procedure • It takes 3 to 5 years to get through all the stages and get the final CDM EB approval • High transaction and monitoring costs • High risk of non-approval • Temporary accounting of CERs • Restrictive A/R definitions; Rule of 50 years and 31 Dec.1989

  27. Answer to inherent Problems • Voluntary forestry carbon standards try to answer inherent problems; • Non-permanence • Leakage • Monitoring Issues

  28. WWF’s Meta Standard Framework • WWF promotes Standards which ensure: • Fair carbon accounting • Adhere to environmental standards • Social Safeguards

  29. WWF’s Meta Standard Framework

  30. Average Price 2010 (MtCO2-e) Source: Ecosystem Market Place, 2011

  31. A/R CDM Vs. A/R under Voluntary Stakeholder’s capacity building Environmental Benefits (By Merger & Shah on WWF’s Meta Standard Framework)

  32. A/R CDM & A/R Project Cycle × × × × Source: Neeff, 2008

  33. A/R CDM & A/R Project Cycle

  34. Eligible Projects’ Type

  35. Cost (US$ 12000-15000)

  36. Cost Categories Source: Neeff, 2008

  37. How to select an standard • Ability to sell the carbon credits: Buyers perception • Easy and understandable criteria • Easy Methodologies and procedures • Guarantee of co-benefits • Application cost

  38. Comparison of Voluntary forestry carbon standards (15 int. projects) Social Benefits Environmental Benefits Buyer’s preference HR & Stakeholders’ Capacity building Economic/Financial Benefits

  39. Advantages of VCSs • Less time requirement • Reduced transaction cost • Easier procedure • Less documentation • Some standards get premium over market price • Sustainability and accountability • Provision of Buffer stock • Smaller projects can be registered

  40. Lets Do it… • Project Location • Project Participants: • Proponent • Developer • Land Owner • Financier • Eligibility Check • Additionality Check • Project Idea Note • Opt for an Standard • Project Design • GIS mapping • Biomass estimation • Baseline, and all other technical aspects • Validation & • Registration • Implementation • Verification and Monitoring

  41. Demonstration Eligibility Check Additionality Check 1500 ha PA 600 ha Forest Definition PIN and Standard Identification Start Date PDD Crediting Period Validation Implementation & Registration Verf. & Monitoring

  42. Additionality Environmental Additionality – the project produces fewer greenhouse gas emissions than the baseline scenario Financial Additionality : the project developer must also usually demonstrate that, without carbon revenues, the project would not be viable and/or commercially attractive .

  43. Carbon revenue makes the project attractive relative to investment alternatives Investmentthreshold Revenue / NPV / IRR Project without carbon revenue is profitable – but not sufficiently profitable compared with alternatives Project without carbon element Project with carbon element Additionality – benchmark analysis Choose an appropriate financial indicator and compare it with a relevant benchmark value: e.g. required return on capital or internal company benchmark

  44. Eligibility Check

  45. Lets Do it.. (Cont.)

  46. Lets Do it.. (Cont.)

  47. At the end..we must say.. “There is definitely uncertainty about Compliance based carbon market, but voluntary carbon market shall survive as it existed before the Kyoto Protocol came into the picture…..”

  48. Thank You for your Attention !! A Presentation by: Team NGOBOX info@ngobox.org www.ngobox.org If you have a presentation on a topic related to development and environment sectors, and want to share with fellow professionals, send it to us at ngobox@outlook.com

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