International Forestry & Global Issues

1. International Forestry& Global Issues Carbon Accounting and markets Thomas DUFOUR ONF International 18 April 2012, Nancy.

2. Outline • A brief overview of climate policies • The various carbon markets • The EU-ETS • The Voluntary market • The place of forestry in carbon markets

3. Outline • A briefoverview of climatepolicies • The variouscarbonmarkets • The EU-ETS • The Voluntarymarket • The place of forestry in carbonmarkets

4. Climate negotiations • 1896: First mention of climate change by Sven Arrhenius • 1970s: New interest in the issue in climate sciences circles • 1988: US President G. Bush puts climate change on G8 agenda  creation of the Intergovernmental Panel on Climate Change (IPCC) • 1990: IPCC First Assessment Report (alarmist) • 1992: Rio convention, signature of the UN Framework Convention on Climate Change (UNFCC)

5. The UNFCCC • Recognizes the risk of climate change • “The ultimate objective of this Convention […] is to achieve, in accordance with the relevant provisions of the Convention, stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.” • Introduces the concept of “common but differentiated responsibility” • Imposes reporting obligations on countries

6. From UNFCCC to Kyoto • 1995: Berlin Mandate: decision to negotiate on emissions targets • 1996: IPCC Second Assessment Report, less alarmist than First, but increasing confidence that humans at origin of observed warming • 1997: Signature of the Kyoto Protocol after two years of negotiation

7. Kyoto & its flexibility mechanisms 3 flexibilitymechanisms EA Emission Allowance Market JI Joint Implementation C D M C D M C D M Annex I Non Annex I

8. After Kyoto • 1998-2001: Difficult negotiations of the ‘application decrees’ of the Kyoto Protocol • 2000: US (and Australia) decision not to ratify Kyoto, near-collapse of negotiations in The Hague • 2001: Signature of the Marrakech Accords • 2001+: First experiments of transactions under the Kyoto Protocol mechanisms • 2003: Signature of the EU Emissions Trading Scheme (ETS) directive • 2005: Entry into force of the Kyoto Protocol and of the EU ETS

9. Plan de la présentation • A briefoverview of climatepolicies • The variouscarbonmarkets • The EU-ETS • The Voluntarymarket • The place of forestry in carbonmarkets

10. Basis of a carbon market

11. Carbon markets

12. The carbon market trend • A large preponderance of Allowances (especially EU-ETS) • A boom of secondary market (brokers, traders, banks, etc.)

13. Outline • A briefoverview of climatepolicies • The variouscarbonmarkets • The EU-ETS • The Voluntarymarket • The place of forestry in carbonmarkets

14. The European EU-ETS

15. The European EU-ETS Limitations of CO2 emissions in developed countries (Annex I) 4 options for companies 1/ Pay expensivefines. 2/ Carry out carbon reduction through processes improvement. 3/ Buy emissions credits on the CO2 market (ETS). 4/ Carry out carbon reduction through technology transfers in CDM or JI project.

16. The European EU-ETS

17. Plan de la présentation • A briefoverview of climatepolicies • The variouscarbonmarkets • The EU-ETS • The Voluntarymarket • The place of forestry in carbonmarkets

18. Company perimeter Renewable energy project Avoided emissions Emissions before project Emissions Reference year Reduced emissions Emissions after project Emissions to compensate Avoided emissions Emissions stocked by the project Reforestation project Emissions stocked by the project Carbon stock before project Carbon stock before project The voluntary market : the carbon neutrality Source: Climate Mission of the Caisse des Dépôts et Consignation

19. The voluntary market : slightly lower volume but exponential

20. The voluntary market: focus on forestry activities under various standards

21. Outline • A brief overview of climate policies • The various carbon markets • The EU-ETS • The Voluntary market • The place of forestry in carbon markets

22. The forest: sink, stock and source of carbon Respiration  60 GtC/yr Photosynthesis  120 GtC/yr Decomposition  50 GtC/yr Perturbations  9 GtC/yr Photosynthesis light n[CO2 () + H20]  n[CH2O] + nO2 () Forests, Soils  2300 GtC Source : IPCC, 2007

23. The place of forestry in carbon markets Voluntary CDM

24. The place of forestry in carbon markets

25. Forestry projects in the framework of the CDM • Late definition of modalities and procedures (2003) & only Afforestation/Reforestation activities • Delay in the elaboration of methodologies for project design (2005) • Exclusion of temporary credits (tCERs) by EU ETS (1st and 2nd period) • Issue related to “permanence” consideration – temporary credit • A progressive breaking down of barriers • 20 methodologies approved (baseline and monitoring methodologies) • About 40 projects awaiting validation • 37 projects approved (19 in 2011)

26. Forestry and voluntary market • Very communicative «  carbon » projects : • « meaning » in the fight against climate change • Projects strongly linked to local communities • Numerous environmental benefits: biodiversity, water, erosion • Projects in the less advanced countries as Africa • Sector linked to company activities: wood products, agro-industry, cosmetic, bio-energy, etc. • Sector with a “positive image” Source : Survey Ecosystem Marketplace, 2009

27. Conclusion : three types of markets • « voluntary » initiative : carbon compensation and environmental patronage • « lauch of mechanisms »: public sector of the development aid, public/private pilot initiatives, public, private • « rentability » : (pre)-compliance or investment

28. « Voluntary » initiative • Carbon compensation and neutrality: standardization and professionalization of the market • Environmental patronage : innovative and risky projects, with high media repercussions • Case of foundations : Prince Charles Rainforest foundation, Packard Foundation, Gore, Clinton initiatives, etc.

29. « Launch of mechanisms » • On the model of prototypes funds of the World Bank, these initiatives aim to launch projects and mechanisms : • World Bank : BioCarbon Fund (BioCF) • World Bank : FCPF • UNEP : UN-REDD, CASCADe • Public/private initiatives (FFEM…), current considerations on the design of a fund dedicated to biocarbon in Africa

30. Stern review « rentability » • Rentability improvement of industrial projects related to agro-forestry • (pre) Compliance at lower cost: « low hanging fruits » • Investment and seeking of rentability on projects with high potential

31. 1800 ha of plantations from 1999 onward, but only 1000 ha eligible under carbon standard Carbon monitoring in 2010 : 144.000 carbon credits (VCU), 8 VCU/ha/an Carbon credits issued and sale in 2011 Example of pilot project: « carbonsink » of the Fazenda Sao-Nicolau

32. Project proponent (ONF-Peugeot) PIN : Project Idea Note PD : Project Description DOE : Designated Operational Entity VCU : Verified Carbon Unit Project Identification Project Construction Documentation (PIN & PDD) Project operation Endorsement local authorities Finding buyer PD Validation by DOE Generation of Carbon credits Registration VCS Contract with buyer Verification/ Certification by DOE Buyer pays Project proponent Registry Issues VCUs VCU BUYER OF VCU Project cycle

33. Procedure of capture and monitroing of CO2

34. Procedure of credit production

35. Main forestry carbon credits CarbonSinkFazenda

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