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BioCarbon Fund tCERs v. lCERs Ian Noble

BioCarbon Fund tCERs v. lCERs Ian Noble. Harnessing the carbon market to sustain ecosystems and alleviate poverty. BioCF To 2017. To 2037 - Seller’s contractual obligation to sequester and facilitate verification Special Purpose Vehicle managed by Participants. CP 1. CP 2. CP 3. CP 4.

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BioCarbon Fund tCERs v. lCERs Ian Noble

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  1. BioCarbon FundtCERs v. lCERsIan Noble Harnessing the carbon market to sustain ecosystems and alleviate poverty

  2. BioCF To 2017 To 2037 - Seller’s contractual obligation to sequester and facilitate verification Special Purpose Vehicle managed by Participants CP 1 CP 2 CP 3 CP 4 CP 5 CP etc • lCERs – verified every 5 years • New lCERs for increased sequestration • tCERs -- expire at the end of next commitment period • Re-measured every 5 years and new certificates issued CP 12

  3. CP 1 CP 2 CP 3 CP 4 Non-Permanence Risk Decreases replaced by AAU, CER, ERU, RMU or lCERs from same project

  4. CP etc CP 1 CP 2 CP 3 CP 4 CP 5 • Replacement Risk • At end of crediting period a lCER must be replaced by an AAU, CER, ERU or RMU • Implications of the Replacement Rule • Seller has no obligation or incentive to retain the sequestered carbon • May even have contractual obligation to harvest to offset costs of replacement CP 12

  5. tCERs v lCERs • Most people have favoured lCERs • Longer contract with seller to store carbon which is more compatible with goals of the BioCF • Verification costs of tCERs and lCERs are probably similar • tCERs are likely to have additional fees and taxes associated with there 5-yearly re-certification • Decision can be on project by project basis • But, tCERs may have a continuing value that can be sold on after 2017 (later slide)

  6. Cover for Non-Permanence and Replacement Risks • FMU will purchase CERs (permanent credits i.e. non LULUCF) • To be delivered in the second CP • This will allow buyers to make a choice in the third commitment period (2018 – 2022) whether they will continue to seek verification of their LULUCF purchases

  7. tCERs v. lCERs from the seller’s viewpoint • lCERs will have lower transaction costs • Due to tax applied to certification process • Possibly 2% applied 2 or 3 times through to 2017 • These costs will be charged against the project monitoring costs • Post 2017 – subject to negotiation with the buyers • But – if buyers decide to cease the verification process, then under current rules the seller cannot sell these credits to someone else

  8. tCERs v. lCERs from the seller’s viewpoint • tCERs • Require the same measuring and monitoring effort as lCERs • But must be re-certified every CP with associated tax except in small scale projects • But if buyers decide to discontinue the verification process (ie they replace their tCERs with CERs), then the sellers can place the tCERs on the market for new buyers

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