Harnessing the carbon market to sustain ecosystems and alleviate poverty

Overview of Methodology and Overview of Methodology and

Regulation for CDM AR Projects Regulation for CDM AR Projects BioCarbon Fund

Training Seminar, February 5-8, 2008

OutlineOutline

1. CDM A/R Methodology process:

a) Approved Methodologies

b) Program of Activities

2. Project Types

3. Project Design and Regulatory Compliance

4. Project Monitoring and Verification

CDM AR - Methodology Process

Overview of Overview of CDM A/R Methodology ProcessCDM A/R Methodology Process

• Total of 35 A/R methodologies submitted for CDM EB review and approval so far

• 10 A/R methodologies approved until Oct 2007• 1 A/R methodology is rated B and is under review• 20 methodologies (including the resubmitted ones) are

rejected• 1 new methodology is submitted for AR WG review during

November 2007

Methodology Approval ProcessMethodology Approval Process

Progress of AR Methodology Approval

1 3 3 4 510

12 3 3 2

1

44

5 5 7 17

6

910

1220

1124

0

5

10

15

20

25

30

35

Feb-06 May-06 J un-06 Aug-06 Dec-06 Oct-07Month & Year

Approved (A) P relim. Recommendation (A-B) In progress (B)

Rejected (C) Rejected/resubmitted (C/?) To be reviewed (?)

Carbon Pools in Approved AR MethodologiesCarbon Pools in Approved AR Methodologies

Methodology AR-AM00XX

01 02 03 04 05 06 07 08 09 10

Living Biomass

Above-ground (AGB)

Below-ground (BGB)

Dead Biomass

Dead Wood (DW)

Litter (L)

Soil Organic Carbon (SOC)

Ca

rbo

n p

oo

ls

Overview of Approved MethodologiesOverview of Approved MethodologiesMethodology Applicability Coverage Remarks WB Supported

Methodology

AR AM0001 A/R on degraded lands

Two pools No leakage from activity displacement

Yes (China)

AR AM0002 A/R on degraded lands

All (Five) pools; CO2 Fix model; Baseline A/R

No leakage from activity displacement

Yes (Moldova)

AR AM0003 A/R on degraded lands; assisted NR

Two pools; assisted NR

Activity displacement leakage due to grazing

Yes (Albania)

AR AM0004 A/R on agricultural lands

Two pools Activity displacement leakage - agri.conv, grazing and fuelwood

Yes (Honduras)

AR AM0005 A/R on grasslands for commercial/industrial use

Two pools; Baseline A/R

Activity displacement leakage - agri.conv. & Fuelwood

Yes (Brazil)

Overview of Approved Methodologies…Overview of Approved Methodologies…

Meth. Applicability Coverage Remarks WB Supported Methodology

AR AM0006 Degraded lands; nitrogen fixing species; and forage

Three pools Covers leakage from transport, forage fed to livestock

No

AR AM0007 Pasture & agricultural land,

Four pools Covers leakage from transport, displacement of employees, fuelwood collection & fence posts

No

AR AM0008 Degraded lands, remote sensing for monitoring

Two pools Covers leakage from transport No

AR AM0009 Degraded lands

Four pools Covers leakage from transport & wood for fence posts

Yes (Columbia)

AR AM0010 Unmanaged grasslands

Two pools Covers leakage from transport Yes (Brazil)

Methodology for Small Scale A/R ProjectsMethodology for Small Scale A/R Projects

• Lands eligible – grasslands/croplands; wetlands; and settlements• Baseline approach 22(a): Existing or historical, as applicable,

changes in carbon stock in the carbon pools

• Limit of GHG removals: 16,000 tonnes CO2e per annum

• Carbon pools: Above ground biomass; below ground biomass• Leakage: Leakage assessment with indicators (% households

displaced; % main product displaced; livestock units/ha displaced to areas outside project)– Upto 10% of GHG removals affected – no leakage– 10 to 50% of GHG removals affected – 15% leakage

Issues Covered in the Approved MethodologiesIssues Covered in the Approved Methodologies

• Land use: Degraded lands, grasslands, crop lands, wetlands, settlements

• End use: Restoration of land productivity, fuelwood production, commercial timber production, biomass for industrial use

• Baseline A/R: Pre-project afforestation implemented prior to project

• Project emissions: Fossil fuel use, site preparation, biomass burning, natural fires, fertilizer application, N2O emissions from planting of legume shrubs

• Leakage: clearance for agriculture, grazing, fuelwood collection, transport of project products, GHG (non-CO2) emissions from increases in livestock and manure management activities

• Aerial/satellite methods: for carbon stock estimation

UNFCCC Tools to support Approved UNFCCC Tools to support Approved MethodologiesMethodologies

• Tool for the demonstration and assessment of additionality for afforestation and reforestation CDM project activities (version 02)

• Calculation of the number of sample plots for measurements within CDM AR project activities (version 01)

• Tool for testing significance of GHG emissions in CDM AR activities (version 01)• Estimation of GHG emissions related to fossil fuel combustion in CDM AR project

activities (version 01)• Procedure to determine when accounting of the soil organic carbon may be

conservatively neglected in CDM AR project activities (version 01)• Estimation of direct nitrous oxide emissions from nitrogen fertilization (version 01)• Combined tool to identify the baseline scenario and demonstrate additionality

(version 01)• Tool for estimation of GHG emissions from clearing, burning and decay of existing

vegetation due to implementation of a CDM A/R project activity (Version 01)• Tool for Estimation of GHG emissions related to displacement of grazing activities

in A/R CDM project activity (Version 01)

Program of Activities (PoA) for Program of Activities (PoA) for

Afforstation/ReforestationAfforstation/Reforestation

TerminologyTerminology

PoA-AR Program of Activities for AR

CPA-AR CDM Program Activity for AR

CDM-PoA-DD-AR: Design Document for AR PoA

CDM-CPA-DD-AR: Design Document for AR CPA

CDM-PoA-SSC-DD-AR:Design Document for Small Scale AR PoA

CDM-CPA-SSC-DD-AR:Design Document for Small Scale AR CPA

F-CDM-PoA-REG-AR: Registration request for AR PoA

F-CDM-PoA-REQCERS-AR: Request for Issuance

AR Project Vs. AR PoAAR Project Vs. AR PoA

Project Program of Activities

One or more locationsMultiple locations, could include more than one country

One or more project participants (PP) Multiple project participants (PP)

One project at a timeNumber of activities submitted in groups (CPA) over the life-time of the PoA

One crediting period Each CPA has its own crediting period

PP known ex-anteAt least one PP known ex-ante, rest join later

PoA and CPAPoA and CPA

• Program of Activities (PoA)– Implementation of a policy, measure or goal– Institutional, financial and methodological framework to achieve

ERs

• CDM Project Activity (CPA)– Project Activity generates CERs– Unique and identifiable with a defined boundary

Characteristics of AR PoACharacteristics of AR PoA

• One coordinating agent – Private or public– Project participant communicates with the Board– Coordinates implementation and responsible for ER accounting– Ensures no double counting

• Physical boundary could extend beyond one country– Letter of approval from each host country necessary

• Duration– 30 years for fixed period / 40 or 60 years for renewable period– Baseline reviewed at every 20 years for renewable period– Revisions or deviations apply to all CPAs

• Additionality– PoA would not be implemented under normal circumstances, or– Policy/measure would not be enforced, or– PoA leads to greater enforcement

Characteristics of AR CPACharacteristics of AR CPA

• One baseline and monitoring methodology for all CPAs – Sampling allowed for verification

• Can be implemented by many entities/owners – CPA can be added to PoA at any time over the duration of PoA- All CPAs end when PoA terminates

• All CPAs are identical - Unambiguous identification- Similar types of activities- Similar technology/technologies

• One methodology- Small scale or large scale approved methodology- SSC methodologies are adjusted for leakage when used under PoA- All CPAs are monitored as per monitoring plan- Verification is done by sampling

Procedures of AR PoAProcedures of AR PoA• Coordination and implementation of policy/ measure by

private/public entity• Boundary may extend to more than one non-Annex I country• Compliance with local/regional/ national policies and regulations• Apply same baseline & monitoring methodology (e.g., one type of

technology / inter-related activities in same CPA)• Each CPA to be uniquely Defined, Identified and Localized

(including start-end date)• CPA provides activity level information on eligibility, additonality,

leakage, double counting

PoA

CPA

CPA

CPA

CPA =One activity

Many locations

CPA with one technology - e.g., afforestation/reforestation

PoA with One AR ActivityPoA with One AR Activity

Implements policy/program or stated goal

One PoA & Many CPAs: One Methodology, one technology, One or more project participants

PoA

CPA

CPA

CPA

CPA=Multiple activities

Many locations

CPA with multiple technologies e.g., silvipastoral activities (plantations, livestock etc)

PoA with Multiple AR ActivitiesPoA with Multiple AR Activities

One PoA & Many CPAs : One Methodology, multiple technologies, one or more project participants

PoA-DD-ARPoA-DD-AR

• Coordinating/Managing Entity• Boundary of the PoA• Policy/Measure or stated goal• Confirmation of voluntary action• Additionality of the entire PoA• Justification of the methodology• Eligibility criteria for inclusion of CPA• Start date and length of PoA• Operational and management arrangements• Monitoring plan (individual or sample)• Environmental Analysis and stakeholder comments• Letter of Approval from the host party

CPA-DD-ARCPA-DD-AR• Identification of Responsible Entity• Host Party• Starting date, Type (fixed/renewable) and duration• POA Stipulation for inclusion

Eligibility criteriaDemonstration of additionalityBaseline, project and leakage emission calculations

• Environmental analysis• Stakeholder comments• Confirmation that CPA is not part of another CDM project or POA

Choice of MethodologyChoice of MethodologyScope 14:

Afforestation/ Reforestation

Regular

Program of Activity (PoA)

Assisted Natural

Regeneration Planting

No Pre-projectA/R Activities

Project

Small scale

Pre-projectA/R Activities

Regular Small scale

Activity Displacement

Leakage

No Activity Displacement

Leakage

No Activity Displacement

Leakage

Activity Displacement

Leakage

Activities Covered in Approved Activities Covered in Approved MethodologiesMethodologies

Methodology AR-AM00XX

Activity 01 02 03 04 05 06 07 08 09 10

Consumption of fossil fuels (CO2)                    

Elimination of pre-existing vegetation (C)                    

Biomass burning (CH4, N2O)                    

Nitrogentate fertilization (N2O)                    

Nitrogen Fixing Species (non-tree) (N2O)                    

Nitrogen Fixing Species (tree) (N2O)                    

Increase of livestock numbers (CH4, N2O)                    

Consumption of fossil fuels(CO2)                    

Activities displacement (C)Livestock                    

Agriculture                    

Displacement of fuelwood collection (C)                    

Displacement of people (C)                    

Fencing (C)                    

Forage production (CH4, N2O)                    

Sno Project Name Methodology proposed to be used

1 Albania AR-AM0003

2 Brazil AES AR-AM0010

3 China Rearl River AR-AM0001

4 Colombia - San Nicholas ARAM0009

5 Colombia - Caribbean Savannah AR-AM0004 (revision)

6 Congo Batake AR-AM0002

7 Costa Rica Coopagri AR-AM004 (revision)

8 Ethiopia Humbo/Soddo AR-AM0003

9 Honduras - Pico Bonito AR-AM0004

10 India Improving Livelihoods AR-AM0004

11 Kenya Green Belt Movement SSC A/R Meth

12 Madagascar Biodiversity AR-AM0004

13 Mali Acacia Plantation AR-AM0004

14 Mexico Sea water AR-AM0004

15 Moldova Soil Conservation AR-AM0002

16 Nicaragua Futuroforestal AR-AM0004

17 Nicaragua precious woods AR-AM0004

18 Niger Acacia Plantation AR-AM0004

19 Philippines Watershed SSC A/R Meth

20 Uganda Nile Basin SSC A/R Meth

• Approved Methodology • Methodology for UNFCCC review

Methodologies Proposed for BioCF PortfolioMethodologies Proposed for BioCF Portfolio

Methodology on REDDMethodology on REDD

• Current Status– Draft methodology is prepared and is under peer review

• Next steps– The methodology would be revised based on peer review– Revised version of the methodology will be prepared by December

2007– Revised methodology to be adapted for Window 2 projects in FY08

• Colombia – San Nicolas • Honduras – Pico Bonito • Madagascar

Project DesignProject DesignProject Design DocumentProject Design Document

Project Types - Land rehabilitationProject Types - Land rehabilitation

• Often community based

• Usually small plantings• Complex monitoring

issues; but we have examples

• Modest carbon content (<20 t CO2e/ha/yr)

• Usually additional• Low leakage risk

Plantation forestryPlantation forestry

• Usually commercial enterprises• Often high rates of sequestration (e.g.

40+ t CO2e/ha/yr)

• Must be able to demonstrate additionality• Leakage is possible through displaced

land use• Best examples where the reforestation is

part of a wider landscape project and/or is contribution to land rehabilitation

AgroforestryAgroforestry

• Must convert non-forest to forest

• Gains from carbon in the trees; sometimes from the under-crops; and usually from improved soil carbon

• Additionality usually based on barrier tests

Silvi-pastoralSilvi-pastoral

• Carbon sequestered in trees; methane emissions from cattle often reduced

• Complex to set up as they need to be split into two activities

• Care in selection of the tree species

Non-renewable BiomassNon-renewable Biomass

• Replace the unsustainable use of fuel woods (e.g., from cutting native forest), with alternative sources– E.g. methane digestors;

sustainably managed fuel wood plantations

Features of A/R projectsFeatures of A/R projects

• Expiring CERs (non-permanence: A/R activities can be sinks and sources).

• Small scale (< 16,000 tonnes CO2e yr-1)

• Land eligibility limited to areas deforested before 31.12.1989.

• Type of activities: Land rehabilitation, plantation forestry, agro-forestry, urban forestry, natural regeneration, etc… are eligible provided the definitions of land eligibility are met.

• Species choice: Invasive alien species (IAS) and genetically modified organisms (GMO) are subject to host country legislation.

Project Design DocumentProject Design Document

Project Design DocumentProject Design Document

• Formats - CDM-AR-PDD / CDM-PoA-DD-AR format

a. Determine whether approved methodology is applicable

b. New methodology is prepared and submitted to CDM• Baseline Information (Annex 2 of PDD)• Monitoring Plan (Annex 4 of PDD)• Ex ante estimation of ERs • Stakeholder consultations and quality control• Revision of the PDD to align with methodology• PDD submitted for DOE validation

Baseline approaches for A/RBaseline approaches for A/R

(22a) “Existing or historical, as applicable, changes in carbon stocks in the carbon pools within the project boundary”

(22b) “Changes in C stocks in the pools within the project boundary from a land use that represents an economically attractive course of action, taking into account barriers to investment”

(22c) “Changes in carbon stocks in the pools within the project boundary from the most likely land use at the time the project starts”

0

1 2

50

100

150

200

3 4 5 6 7 8 9 10 11 12 13 14 15

Years

R

emo

vals

(k

tCO

2e)

Project removals

Increased Removals

Baseline removals

BaselineBaseline

Emission removal projects (A/R)

PASS

OR

Step 0. Preliminary screening based on the starting date and land eligibility

Step 1. Identification of alternatives to the project activity consistent with current laws and regulations

PASS

Step 2. Investment Analysis Step 3. Barrier analysis

AdditionalityAdditionality

PASS

PROJECT ACTIVITY IS ADDITIONAL

PASS PASSStep 4. Common practice analysis

A/R CDM project activities must be additional, as any other CDM project activity. The “A/R additionality tool” is similar to the standard one.

Trees

Eligible carbon poolsEligible carbon pools

1. Above-ground biomass

2. Below-ground biomass

3. Dead wood4. Litter

5. Soil organic carbon

Non-Trees

SOC

Accounting Carbon pools:Accounting Carbon pools:more than 5 questions to answermore than 5 questions to answer

Carbon pool Components BaselineProject

Ex ante Ex post

above-ground biomass

trees ? ? ?

non-trees ? ? ?

below-ground biomass

trees ? ? ?

non-trees ? ? ? 

dead woodstanding ? ? ?

lying ? ?  ?

litter   ? ? ? soil organic

carbon  ? ? ? 

Carbon pools:Carbon pools:more than 5 questions to answermore than 5 questions to answer

• 2 assessments: ex ante & ex post

• Pre-existing biomass: – Burning = emission– No burning but harvesting = Initial C stock decrease– No burning, no harvesting = Becomes part of project

scenario OR assume initial C stock decrease

• A pool can be excluded if the exclusion does not lead to an overestimation of carbon in the project

• Leakage: If activity displacement induces land-cover change, all carbon pools must be accounted

StratificationStratification

•Carbon densities and carbon removal rates are spatially variant •Stratification reduces uncertainty and costs of the estimates

• Baseline C strata are static:- Boundaries do not change over time.

- ex ante = ex post. - Stock changes within each stratum = f (time),

estimated ex ante and then “frozen”.• Project C strata are dynamic:

- Boundaries may change over time.- ex ante ex post.- Stock changes within each stratum = f (time), estimated ex ante and then measured.- Different class ages of planted trees.

Stratification - BaselineStratification - Baseline

Baseline land use

Cropland

Grazing land

Ecological conditions

Soil B

Soil A

Baseline C strata

C1

C2

C3 C4C = 0

C < 0

C = 0

C > 0

ex ante = ex postex ante = ex post

Project land use Ecological conditions

Soil B

Soil A

Project C strata

Plantation Agro-Forestry

C1.1 C2.1

C3.2 C4.2

Stratification – Project Stratification – Project ex postex post

Project implementationPlanted in year 1

Planted in year 2

Planted in year 3

C1.2 C2.2C4.1C3.1

ex anteex ante

Baseline removalsBaseline removals

C stock changes in the carbon pools:– Same C pools and initial C stocks as project scenario– Historical reforestation/regeneration rates to be included in the

baseline scenario– Natural regeneration should not lead to a permanent forest – Ex ante estimations based on:

• Projected changes in land-use/land-cover according to chosen baseline approach and selected baseline scenario

• Growth data & models applicable to local conditions, or• Field-level measurement of a chrono-sequence (natural

regeneration) or calibrated models such as CO2Fix

C stock changes in the carbon pools:- Ex post estimations:

• Ex ante estimations are “frozen” (preferable)• Monitoring in plots is difficult:

within the project boundary – conflict of interest (area controlled by project participant)

outside the project boundary / control group approach – difficulties in tracing plots in areas not under the control of project participants)

Baseline removalsBaseline removals

Actual removals – Project scenarioActual removals – Project scenario

C stock changes in the carbon pools:– Same C pools and initial C stocks as baseline– Definition of “stand models” = species + management– Ex ante estimations based on:

• Data & models applicable to local conditions, or• Field-level measurement of a chrono-sequence (existing

plantations), • Models such as CO2Fix calibrated with the above.

– Ex post estimations based on: • Field-level measurement in permanent plots.• Measurement frequency every 5 years

(or more for slow changing pools, e.g. soil organic carbon)

Actual removals – Project scenarioActual removals – Project scenario

Project emissions:

– Fuel powered machines & equipment: CO2, CH4, N20

– Fertilization: N2O

– Fire: (CO2), CH4, N20

– Temporary C stock decrease should not to be considered permanent emissions.

Leakage – common typesLeakage – common types

• Carbon stock changes from activity displacement:– Shifts in the agricultural and animal production from

project land to areas outside the project boundary– Collection of fuel wood– Collection of fodder– Commercial collection of NTFP– Grazing

• Increased emissions due to transport of products and personnel to areas outside the project: CO2, (CH4, N2O)

• Basic principle of leakage prevention: baseline scenario and project scenario should deliver the same amount of goods and services.

CO2

Calculation of net COCalculation of net CO22e benefitse benefits

= Net anthropogenic GHG removals by sinks

Actual net GHG removal by sinks

Project CO2e removals = C in carbon pools - Increase in GHG

emissions

Baseline CO2e removals = C in carbon pools

Leakage = Increase in GHG emissions

LeakageBaseline net GHG

removal by sinks

Accounting GHG RemovalsAccounting GHG Removals

Credits: • temporary CERs (tCERs) valid for 1 commitment period.• long-term CERs (lCERs) valid for the crediting period.

On expiry of credits from A&R activities, they have to be replaced by an equal number of credits.

Crediting period:• Renewable – 20 year period, twice renewable.• Fixed - 30 year period.

tCERs tCERs && lCERs: lCERs: QuantificationQuantification

tCERsNAGRS

n n+5 n+10 n+15 yrs n n+5 n+10 n+15 yrs

Crediting period

(20x1, 20x2, 20x3 o 30 years)

Crediting period

(20x1, 20x2, 20x3 o 30 years)

NAGRS

lCERs

End of subsequent commitment period

2012 2017 2022 2027 2032

End of crediting period

NAGRS NAGRS

tCERs lCERs

tCERs & lCERs: tCERs & lCERs: ExpirationExpiration

Project Implementation & Monitoring(Monitoring Plan)

Project ImplementationProject Implementation

• Project participants shall ensure that the project implementation follows the monitoring plan

• Collection of information on the project activities• Focus on the specific risks of the AR projects

– Risks from natural events • Natural fires• Pest outbreaks• Natural disasters – Floods, droughts

– Risks from anthropogenic events• Human caused fires• Harvest damage (legal/illegal)

• Project to assess and record the events as part of monitoring

ValidationValidation

• Designated Operational Entity (DOE) is contracted for validation• Project participants submit the latest PDD and relevant documents to

the DOE• DOE reviews PDD, including baseline study and monitoring plan• PDD and other project documents are posted for public comments

during 30-day period• DOE issues a preliminary report outlining the corrective action

requests and clarification requests• Project participants reply and clarify to the DOE• DOE issues the final validation report

MonitoringMonitoring

• Project participants shall ensure that the project implementation follows the monitoring plan

• Collection of information on the project activities• Special focus on the risks that affects the ERs

– Example: Occurrence of fire • Project monitoring to assess and record the deviations

from monitoring plan

Quality AssuranceQuality Assurance

• Data collected and archived as per monitoring and operational plans that comply monitoring methodology

• Data archival in electronic & print formats• Quality assurance and quality control to follow standard

operating procedures outlined in the monitoring plan• Periodic checks of archived data to ensure the consistency

in the data collected and archived.

Verification and CertificationVerification and Certification

• First verification of AR project to be conducted as per the choice of project participants (usually between 3 and 5 years)

• Subsequent verifications at five year intervals• Project entity conducts measurement of permanent sample plots and

other data relevant for verification • DOE undertakes verification and issues verification reports• Project participants submit verification report for CER issuance• t CERs valid for compliance during the commitment period and

expire at the end of subsequent commitment period for the purpose of their replacement

• Issuance of CERs, accounting under the funds (BioCF, PCF etc.) and transfer to the fund participants and national registries at the end of commitment period

Thanks!Thanks!