Carbon Emission Offsets PowerPoint Presentation

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Carbon Emission Offsets Gary Bull Faculty of Forestry, University of British Columbia Vancouver, Canada September 19, 2005

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Bull 2 Carbon Sequestration Carbon Markets 2004 Carbon Deals Carbon Actors – Intermediaries Challenges – People, Process

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Bull 3 Does Carbon Sequestration Matter?

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Bull 4 Carbon markets potential 2006 International Pre-Compliance Retail Market Regional Markets - EU National Markets – Japan, Canada, Australia US Market SUB-NATIONAL MARKETS Massachusetts New Hampshire NSW National market Denmark National Market United Kingdom

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Bull 5 Share of Emission Reduction

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Bull 6 Market Buyers

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Bull 7 Deals Canada Belize

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Bull 8 Canada-Chile? Hog farm Agricola Super Ltd, Chile 400 thousand tonnes annual reduction 10 years - 4 million tonnes credit $20 million technology investment to reduce methane Transalta, Canada Releases 30 million tonnes CO2E annually Not sure what its obligations are under Kyoto Purchased 1.75 million tonnes CO2E for 9 million $US

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Bull 9 Canada –voluntary market

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Bull 10 Belize – Reforestation - CDM 8000 ha planted 50 000 ha in total

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Bull 11 Belize

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Bull 12 Belize Project - Net Greenhouse Gas Removal by Sinks

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Bull 13 Belize Forest Nursery

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Bull 14 Belize – Carbon Ownership

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Bull 15 Actors International Institutions Governments Buyers Sellers Brokers Intermediaries Transactions costs

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Bull 16 Intermediaries Lawyers Accountants Resource Consultants Insurers Engineers Researchers

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Bull 17 Transaction Costs Summary of the Mark-up on Product Pricing – Bamboo flooring Source: Bull 2004

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Bull 18 Types of Transaction Costs

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Bull 19 Transaction costs Milne 1999 - CIFOR

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Bull 20 Projects examples

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Bull 21 Challenges Process People Manage the ‘mad’ scientists! Recognize the limits to bureaucratic intelligence! Beware of the lawyers, insurance salesman, consultants and accountants! Shady sellers and ignorant buyers

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Bull 22 Conclusions Forest and Agriculture need inclusion Deals are diverse - Wild West mentality Transaction costs will kill many deals People in the process can also kill deals

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Bull 23 Challenges

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Bull 24 Key challenges Process Mixed motive problem Accounting tools Leakage, Baseline, Permanence Risks Learning curve

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Bull 25 Kinds of offsets Landfill gas, methane reduction, bioenergy, etc. Forest carbon sequestration Afforestation, Reforestation, Deforestation (Article 3.3) Management Intensification (Article 3.4) Avoided losses - (Article 3.4)

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Bull 26 Key Questions Why do we want forest carbon sequestration included in the current global dialogue on climate change? To find money: basic forest management – e.g. part of ftg costs institutional reform costs – e.g. carbon pooling mgmt plans multiple objectives management strategy – e.g green-up alleviate poverty ? - unknown

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Bull 27 What are the opportunities? Planting degraded or barren areas Intensify management on existing forests Conserving or manage differently forests which have large carbon stock

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Bull 28 What are the challenges? Risks (fire, insect and disease) Measurement tools (all the carbon pools) Reluctance to allow sequestration to trade off against emission reduction Property rights are new Transaction costs Income distribution

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Bull 29 Solutions to the challenges Risk Build risk models Create carbon pools Buy insurance Measurement Use the best available science Make sure the measurement is cost effective Invest in new R and D. Use biological models sensitive the marketplace

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Bull 30 Solutions to the challenges Sequestration vs. Emission Team up with the agriculturalist Help people get the perspective e.g. fire Use good science on the measurement side

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Bull 31 Kinds of offsets Landfill gas, methane reduction, bioenergy, etc. Forest carbon sequestration Afforestation, Reforestation, Deforestation (Article 3.3) Management Intensification (Article 3.4) Avoided losses - (Article 3.4)

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Bull 32 Key Questions Why do we want forest carbon sequestration included in the current global dialogue on climate change? To find money: basic forest management – e.g. part of ftg costs institutional reform costs – e.g. carbon pooling mgmt plans multiple objectives management strategy – e.g green-up alleviate poverty ? - unknown

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Bull 33 What are the opportunities? Planting degraded or barren areas Intensify management on existing forests Conserving or manage differently forests which have large carbon stock

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Bull 34 What are the challenges? Risks (fire, insect and disease) Measurement tools (all the carbon pools) Reluctance to allow sequestration to trade off against emission reduction Property rights are new Transaction costs Income distribution

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Bull 35 Solutions to the challenges Risk Build risk models Create carbon pools Buy insurance Measurement Use the best available science Make sure the measurement is cost effective Invest in new R and D. Use biological models sensitive the marketplace

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Bull 36 Solutions to the challenges Sequestration vs. Emission Team up with the agriculturalist Help people get the perspective e.g. fire Use good science on the measurement side

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Bull 37 Solutions to the challenges Developing new markets Clarify ownership Strengthen the weak institutions Deal with the specifics – leakage, contract period, permanence Experiment Make sure you deal with the distribution of income issue

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Bull 38 Solutions to the challenges Research Transaction costs Efficient regulatory framework Efficient markets Income distribution Collect data – household Analyze

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Bull 39 Carbon activities Article 3.3 CDM project proposals in Belize, China and Uganda Non spatial and spatial forest risk models Transaction costs analysis Institutional analysis for small farmers Article 3.4 Fertilization impact assessment Develop new forest planning model Carbon conservation in Canadian old growth ~ avoided deforestation in other context

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Bull 40 Other activities Biodiversity measurement in the Kootenays ISO 14064

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Bull 41 Carbon Emission Offsets Payment systems Actors Deals Challenges Links to poverty reduction

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Bull 42 Tools for creating deals

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Bull 43 Area: 610 000 ha (1 549 400 acres) Current Harvest: 900 000 m3 Biogeoclimatic Zones: AT, BG, ESSF, ICH, IDF, MS, SBPS, SBS Major Tree Species: Black Cottonwood, Trembling Aspen, Douglas-fir, Sub-alpine Fir, White Birch, Lodgepole Pine, Engelmann Spruce Red-listed Species: American White Pelican, Peregrine Falcon, Prairie Falcon, Brewer’s Sparrow, Yellow Breasted Sparrow, Lake Whitefish, Giant Pygmy Whitefish Lignum IFPA Project Area

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Bull 44 125,000 Polygons Age Operability Area Forest Cover >200 Layers Defining Management Objectives Roads … >2,000 Yield Curves Block Size Targets Patch Size Targets FORECAST Carbon Curves FSOS

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Bull 45 Financial Analysis Scenario 4: No Discounting