Redd Project

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AEPAEPAEPAEPAEP: American Electric PowerAPOCOMAPOCOMAPOCOMAPOCOMAPOCOM: Apoyo Comunitario ( Program for the Sustainable Development of Local Communities)BABABABABAUUUUU: Business as UsualCARCARCARCARCAR: Corrective Action RequestCCBCCBCCBCCBC CB: Climate, Community and Biodiversity standard

CDMCDMCDMCDMCDM: Clean Development MechanismCIBAPCIBAPCIBAPCIBAPCIBAPAAAAA: Central Indgena Bajo Paragu (Bajo Paragua Indigenous Organization)FFFFFANANANANAN: Fundacin Amigos de la Naturaleza (Foundation for Friends of Nature)FFFFFAAAAAOOOOO: Food and Agriculture OrganizationGOBGOBGOBGOBGOB: Government of Bolivia INRAINRAINRAINRAINRA: Instituto Nacional de Reforma Agraria ( National Agrarian Reform Institute)NK-NK-NK-NK-NK-CAPCAPCAPCAPCAP: Noel Kempff Mercado Climate Action ProjectNKMNPNKMNPNKMNPNKMNPNKMNP: Noel Kempff Mercado National ParkPDDPDDPDDPDDPDD: Project Design DocumentPIPPIPPIPPIPPIP: Plan Integral de la Proteccin (Integral Plan of Protection)

PRODECOMPRODECOMPRODECOMPRODECOMPRODECOM: Programa de Desarrollo Comunitario (Community Development Program)REDDREDDREDDREDDREDD: Reducing Emissions from Deforestation and DegradationSCPSCPSCPSCPSCP: Site Conservation PlanSERNAPSERNAPSERNAPSERNAPSERNAP: Servicio Nacional de reas Protegidas (National Protected Area Service)SGSSGSSGSSGSSGS: Socit Gnrale de Surveillance (General Society of Monitoring)tCOtCOtCOtCOtCO22222eeeee : Metric tons of carbon dioxide equivalentTNCTNCTNCTNCTNC: The Nature Conservancy UNFCCCUNFCCCUNFCCCUNFCCCUNFCCC: United Nations Framework Convention on Climate ChangeUSIJIUSIJIUSIJIUSIJIUSIJI: United States Initiative on Joint ImplementationVERsVERsVERsVERsVERs: Verified Emissions Reductions

1 hectare (ha) = 2.47 acres (ac)1 metric ton of carbon dioxide equivalent (tCO2e) = 44/12 metric tons carbon (tC)1 metric ton = 1,000 kilograms (kg) = 2,205 pounds (lb) = 1.10 short (U.S.) tons

AAAAACROCROCROCROCRONNNNNYMSYMSYMSYMSYMS

Cover image:Arcoiris waterfall at Noel Kempff Mercado National Park in Bolivia in South America. Photo credit: Hermes Justiniano

CONVERSIONSCONVERSIONSCONVERSIONSCONVERSIONSCONVERSIONS

AAAAACKNCKNCKNCKNCKNOOOOOWLEDWLEDWLEDWLEDWLEDGEMENTSGEMENTSGEMENTSGEMENTSGEMENTS

Concept by Sarene Marshall. Research and writing by Nicole Virgilio. Design and layout by Lisa Shipley. This casestudy benefitted greatly from the contributions, review and support of Bill Stanley, Greg Fishbein, Zoe Kant, DianeFitzgerald, Natalia Caldern Angeleri, Hamilton Hardman, Duncan Marsh and Michael Wolosin.

Please cite this document as: Noel Kempff Mercado Climate Action Project: A Case Study in Reducing Emissions fromDeforestation and Degradation, The Nature Conservancy, 2009.

2009 The Nature Conservancy.


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INTRODUCTION......................................................................................................................................................PARTNERS AND CONTRIBUTORS ..................................................................................................................PROJECT OVERVIEW ...........................................................................................................................................

SITE DESCRIPTION .........................................................................................................................................PROJECT APPROACH........................................................................................................................................

ON-GOING PROTECTIONAND MONITORING ...............................................................................................PROJECT STRUCTURE..........................................................................................................................................

DEAL STRUCTURE ........................................................................................................................................ENDOWMENT FUND.........................................................................................................................................CARBON RIGHTS .........................................................................................................................................OFFSET COST....................................................................................................................................................

CARBON BENEFITS ..................... ............. ............. .............. ............. .............. ............. .............. .............. .............ESTIMATED LIFETIME CARBON BENEFITS ....................................................................................................

ADDITIONALITY .................................................................................................................................................BASELINE ........................................................................................................................................................

Avoided Deforestation Baseline ............................................................................................................ Avoided Degradation Baseline ..............................................................................................................

HISTORY OF PROJECT BASELINES ................................................................................................................LEAKAGE ...................................................................................................................................................................

AVOIDED DEFORESTATION LEAKAGE .........................................................................................................Estimation and Prevention of Leakage from Avoided Deforestation Activities ................................................

Monitoring Leakage from Avoided Deforestation Activities .......................................................................

AVOIDED DEGRADATION LEAKAGE .................................................................................................................Estimation and Prevention of Leakage from Avoided Degradation Activities ..............................................

Monitoring Leakage from Avoided Degradation Activities .........................................................................

PERMANENCE ..............................................................................................................................................................COMMUNITY BENEFITS .......................................................................................................................................ORGANIZATIONAL EMPOWERMENT .................................................................................................................LAND TENUREAND COMMUNITY PROPERTY RIGHTS ................................................................................LANDUSE PLANNINGAND CAPACITYTRAINING ...........................................................................................ELEMENTARYAND HIGH SCHOOL EDUCATION ............................................................................................HEALTH OUTPOST .............................................................................................................................................INCOME GENERATION .......................................................................................................................................

Alternative Employment ..........................................................................................................................

Sustainable Forestry .................................................................................................................................

Ecotourism ..............................................................................................................................................

Biotrade ..................................................................................................................................................

BIODIVERSITY BENEFITS ....................................................................................................................................MONITORING BIODIVERSITY ...........................................................................................................................

VALIDATION AND VERIFICATION ...............................................................................................................CONCLUSION .......................................................................................................................................................REFERENCES ..........................................................................................................................................................

TTTTT ABLE O ABLE O ABLE O ABLE O ABLE OF CF CF CF CF COOOOONTENTSNTENTSNTENTSNTENTSNTENTS

22333

3444456777

89911111112121213

1314141515151515151616161717171920


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The Noel Kempff Mercado Climate Action Project (NK-CAP) is preserving the rich, biologically diverseecosystems of northeastern Bolivias Noel KempffMercado National Park while preventing the release ofmillions of tons of carbon dioxide over 30 years. In late1996, when the ecological integrity of almost 832,000

hectares of tropical forest adjacent to the park wasthreatened by both timber harvesting and unplanneddeforestation, The Nature Conservancy and Bolivianconservation organization Fundacin Amigos de laNaturaleza worked with the Government of Bolivia toterminate logging rights in the area. This land, along withthree small existing conservation areas, was added to theoriginal national park. Investments from three energycompanies helped to fund project activities, in exchangefor rights to a share of the verified carbon benefitsgenerated by NK-CAP.

NK-CAP was one of the worlds first large-scale

Reducing Emissions from Deforestation and Degradation(REDD) projects, and is addressing the drivers of bothDs in REDD: deforestation from conversion to agricultureby local communities and degradation from loggingactivities in timber concessions. In 2005, NK-CAP wasthe first REDD project to be verified by a third partyusing rigorous standards based upon those developed forthe Kyoto Protocols Clean Development Mechanism.

As an early-stage REDD project, there were noprecedents for the Noel Kempff Climate Action Project tofollow. Instead, it was necessary to create new andinnovative methods to address scientific, institutional and

legal issues associated with REDD projects. Since NK-CAP was initiated, the forest carbon field has advanced inimportant ways. Remote sensing technology, for example,

has facilitated the development of more robust carbonaccounting and monitoring. With the benefit ofhindsight, it is possible to identify other areas in whichthe project could be improved, utilizing methodologies,legal arrangements, and conservation tools that were notreadily available at the time.

NK-CAP, nonetheless, serves as an example of how well-designed REDD projects can result in real, scientificallymeasurable, and verifiable emissions reductions withimportant benefits for biodiversity and localcommunities. Specifically, NK-CAP has produced thefollowing results:

- Avoided 1,034,107 metric tons of verified CO2emissions, which would have been caused by loggingand deforestation between 1997 and 2005;

- Estimated to avoid a total of 5,838,813 metric tons ofCO2 emissions over the 30 year project lifespan;

- Preserves a rich and biologically diverse forestecosystem, chosen as a UNESCO World HeritageSite for its outstanding biodiversity value;

- Facilitated indigenous communities achieving legalstatus as Communities of Native Peoples and inobtaining official land title;

- Provides alternative, environmentally sustainableeconomic opportunities for the local population viacommunity forestry and ecotourism;

- Raised $8.25 million in carbon financing, withadditional financing possible upon sale of theGovernment of Bolivias 49% share of the projectscarbon offsets;

- Established an endowment which is used to fundproject activities and preserve the park for futuregenerations.

The Noel Kempff Mercado Climate Action Project is a joint effort, to which the following partners contributed:

Project Development The Nature Conservancy (TNC), Fundacin Amigos de la Naturaleza (FAN)

Project Management Fundacin Amigos de la Naturaleza (FAN)

Project Investors American Electric Power Company (AEP), BP America, PacifiCorp

Country Partner Government of Bolivia (GOB)

Carbon Measurement Winrock International Institute for Agricultural Development, FundacinAmigos de la Naturaleza (FAN)1

Validation and Verification Socit Gnrale de Surveillance (SGS)

1 Winrock International was responsible for initial design of the measurement program; however, FAN has since taken on the responsibility of

carrying out the actual measurements.

INTRODUCTIONINTRODUCTIONINTRODUCTIONINTRODUCTIONINTRODUCTION

PPPPPARARARARARTNERS AND CTNERS AND CTNERS AND CTNERS AND CTNERS AND COOOOONTRIBUTNTRIBUTNTRIBUTNTRIBUTNTRIBUTOOOOORSRSRSRSRS

2


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SITE DSITE DSITE DSITE DSITE DESCRIPTIESCRIPTIESCRIPTIESCRIPTIESCRIPTIOOOOONNNNN

The Noel Kempff Mercado Climate Action Project (NK-CAP) was carried out in the northeastern section of theDepartment of Santa Cruz, Bolivia, in the Province ofVelasco (Figure 1). At the time of project scoping, a750,633 hectare protected area called Noel Kempff

Mercado National Park (NKMNP) was already inexistence. Characterized by outstanding topographicalfeatures, the park was principally defined by the

Huanchaca (or Capar) Plateau. The immediate area ofthe park consisted of natural vegetation and was devoid ofsizeable permanent human populations. Located in aclimatic transition zone between the wetter Amazonianand the drier Chaco and Cerrado eco-regions, the park

was considered one of the most biologically diverse areasof the world.

PROPROPROPROPROJEJEJEJEJECT APPROCT APPROCT APPROCT APPROCT APPROAAAAACHCHCHCHCHProject activities consolidated threatened areas justadjacent to the park with the park itself, creating oneexpanded protected area. On December 23 of 1996 the

Noel Kempff Mercado National Park was extended to itsnatural boundaries: the Paragu River (west), the TarvoRiver (southwest), and the Itenez River (north), viapresidential Supreme Decree #24457, negotiated with theGovernment of Bolivia by TNC and FAN. In total, thepark was expanded by 831,689 hectares, more thandoubling the previous size to its current 1,582,322hectares. The expansion incorporated ecosystems notrepresented in the original park perimeter and improvedthe parks protection by establishing natural boundaries.

Between 1996 and 1997, the project bought and retired atotal of three concessions from companies that had rightsto log the expansion area; the 187,554 hectare Moiraconcession, 152,345 hectare El Chore concession, and239,017 hectare El Paso concession (see Figure 2).

Additionally, the Paragua II concession was closed, as no

legal concession title existed.The expansion area covered the former concessions, twosmall protected areas, an existing private protected area tothe south (called El Refugio) and additional bufferzones. Inside the expansion zone, the area eligible forREDD (Reducing Emissions from Deforestation andDegradation) activities was 642,184 hectares of forestthat had been degraded by former logging activities, wasslated for future logging or predicted to be deforested.2 Itis this area that constitutes the carbon benefit generatingportion of the project and is what is referred to as NK-CAP (see Figure 2).

ON-GOING PROTECTION AND MONITORINGON-GOING PROTECTION AND MONITORINGON-GOING PROTECTION AND MONITORINGON-GOING PROTECTION AND MONITORINGON-GOING PROTECTION AND MONITORING

Protecting and monitoring the integrity of the parkagainst fire and illegal activities (logging, land clearing,hunting, fishing with nets) is an on-going activity. To thisend, project funds were used to hire 11 of the 27 parkrangers. New rangers camps have also been built, andequipment has been provided, as have the necessaryprovisions (fuel, food) to carry out the monitoringactivities. In 2008, for example, 664 river patrols, 9airborne patrols, and 4 field monitoring trips wereexecuted.

PROPROPROPROPROJEJEJEJEJECT OCT OCT OCT OCT OVERVERVERVERVERVIEVIEVIEVIEVIEWWWWW

2 Please note that the three small pre-existing protected areas within the expansion area are not included in NK-CAP (areas eligible for

REDD), as they would not qualify as additional.

Figure 1: NKMNP - in rose. Source: GIS data from FAN, cartography N.Virgilio.

NKMNPNKMNP

OriginalNKMNP

Pre- existingprotectedarea

NK- CAP


Pre- existingprotected

area

OriginalNKMNP


NK- CAP



area

OriginalNKMNP


NK- CAP



area

Figure 2: Current NKMNP boundaries include the entire colored area.Former timber concessions are depicted in cross-hatch. Source: GIS data fromFAN, cartography N. Virgilio.


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Various funding mechanisms exist for REDD projects,ranging from investment by project developers, grants,and philanthropic contributions to revenue generatedfrom the sale of verified emission reduction credits.REDD and other forest carbon projects face the sameobstacle of surmounting upfront costs. In the case ofNK-CAP, carbon revenue was provided upfront by three

energy companies: American Electric Power Company(AEP), BP America, and PacifiCorp (see Figure 3). Inreturn, they were guaranteed 51 percent of futurecertified offsets created over the 30-year project lifetime.These investors assumed the risk that the estimatedquantity of verified carbon benefits might not be fullyrealized. The Government of Bolivia pledged support forthe project plan, closed the timber concessions, expandedthe park, and received 49 percent of the carbon benefits,

which it agreed to use to fund community development,park management and other activities.

DDDDDEAL STREAL STREAL STREAL STREAL STRUUUUUCTURECTURECTURECTURECTURE

Funds from The Nature Conservancy (TNC), AmericanElectric Power (AEP), PacifiCorp, and BP America, as

well as returns on the initial investment, are distributedby TNC to project partner Fundacin Amigos de laNaturaleza (FAN). Project implementation costs include:the purchase and retiring of logging concessions,community development, carbon accounting, parkmanagement and protection (see Figure 4 and Figure 5).3

PROPROPROPROPROJEJEJEJEJECT STRCT STRCT STRCT STRCT STRUUUUUCTURECTURECTURECTURECTURE

Figure 3: Breakdown of investor contributions from 1997-2006. Total: $10.85

million. Source: FAN.

Remote sensing technology has been used to complementfield monitoring. Landsat satellite imagery taken between1997 and 2005 shows that deforestation within NK-CAPis being effectively limited. A 237 hectare area has beenlost due to flooding of the Paragua River and 17.5 hectaresof land have been deforested near the community of BellaVista. These events were factored into and subtractedfrom the estimation of project carbon benefits (see

Carbon Benefits section for more information).

Fires within NK-CAP are also being monitored usingMODIS satellite imagery (Rapid Response System FireResponse products). A total of 115 fires were detectedbetween 2001 and 2004, occurring mostly in savannahareas. Using this history of fire occurrence to derive arate of loss from fires, estimated carbon benefits fromreducing deforestation were discounted by 5% to coverpotential carbon losses from fire.

ENDOWMENT FUNDENDOWMENT FUNDENDOWMENT FUNDENDOWMENT FUNDENDOWMENT FUNDAn endowment fund was created to finance long-termmonitoring and protection of the park. The fund wasinitially begun with $1.5 million. As of 2006, it hadexpanded to nearly $3 million through philanthropiccontributions and returns on investments. It has beenmanaged by The Nature Conservancy since 1999 and

finances park activities in accordance with a long-termfinancial plan, which is approved by the NK-CAP Boardof Directors. FAN serves as the executor of activitiesfinanced by the fund and submits yearly reports on theactivities supported by endowment income.

After the project concludes in 2026, it is anticipated thatthe endowment will have funds remaining, which will beused for long-term benefit of the park.

CARBON RIGHTSCARBON RIGHTSCARBON RIGHTSCARBON RIGHTSCARBON RIGHTSAs per the NK-CAP Comprehensive Agreement, 51percent of the certified emission reductions were assigned

to corporate investors (AEP, BP and PacifiCorp) and 49percent to the Bolivian government. The governmentagreed to earmark proceeds from the sale of it share of theoffsets in the following manner: 31 percent for theprotection of the park, 10 percent for the national systemof protected areas, and 59 percent for other purposes,including biodiversity protection activities both insideand outside the project area, improving the livelihoods ofthe indigenous communities adjacent to the park, andsupporting other greenhouse gas mitigation strategiesthroughout Bolivia. Specific allocations of this 59 percent

were not negotiated upfront and communities in thevicinity of Noel Kempff Mercado National Park arecurrently negotiating with the Bolivian Government todefine their share. As of this writing, the Boliviangovernment had not yet sold its share of the verifiedemission reductions (VERs).

4

3In 2007, the Bolivian Tax Administration proposed that the investors share of the carbon offsets may be subject to tax obligations underBolivian law; the financial implications of this tax obligation were unclear as of this writing. Given the pilot nature of NK-CAP, there wereno precedents for forest carbon projects and tax obligations were not anticipated within the NK-CAP project structure or budget. TheNK-CAP project experience highlights the need to anticipate, to the extent possible, any tax or other legal obligations during project design.


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Carbon monitoring,

certification

7%

Management,

communications,

administration

9%

Budget support to

the Bolivian

Government

5%Indemnification of

concessionaires

15%

Protection

16%

Endowm ent Fund

21%

Scientific Rese arch

5%

Biocommerce

5%

Ecotourism

3%

Community

Development

14%

Figure 4: Project spending from 1997- 2006 totaled $11.55 million. Please note, expenditure is greater than initial funding dueto returns on the initial investment over time. Source: FAN.

Initial Investment

AEP, BP,Pacificorp$8.25MM

Funds Managed by TNC

$10.85MM

Funds distributed to FAN

Long- term Project Components(greater than 10 years)

Carbon Monitoring and VerificationProject Endowment (ongoing operations

and post-project funding)

Short- term Project Components(less than or equal to 10 years)

Concessionaire CompensationCommunity Development (10 years)

Ecotourism and BiotradeInitial Carbon Accounting

Govt of BoliviaCommitments

Concession CancellationPark Expansion

Park Management and ProtectionContributions

Foregone Tax Revenue51% of Carbon Offsets

Carbon Offsets

TNC Donors$2.6MM

51%

Implementation Funding

$500,000

49%

Proceeds fromoffset sales

10% National protectedarea system

31% Noel Kempff Parkprotection

59% Biodiversityprotection, borderingcommunitydevelopment, BolivianGHG mitigationstrategies

Initial Investment



Funds Managed by TNC

$10.85MM

Funds distributed to FAN

Long- term Project Components(greater than 10 years)

Carbon Monitoring and VerificationProject Endowment (ongoing operations

and post-project funding)

Short- term Project Components(less than or equal to 10 years)

Concessionaire CompensationCommunity Development (10 years)

Ecotourism and BiotradeInitial Carbon Accounting

Govt of BoliviaCommitments

Concession CancellationPark Expansion

Park Management and ProtectionContributions

Foregone Tax Revenue51% of Carbon Offsets

Carbon Offsets

TNC Donors$2.6MM

51%

Implementation Funding

$500,000

49%

Proceeds fromoffset sales

10% National protectedarea system

31% Noel Kempff Parkprotection

59% Biodiversityprotection, borderingcommunitydevelopment, BolivianGHG mitigationstrategies

Figure 5: Deal structure for NK-CAP partners. Source: G. Fishbein.

OFFSET COSTOFFSET COSTOFFSET COSTOFFSET COSTOFFSET COSTWhile investor contributions to NK-CAP were notstructured on a per-ton basis, the cost of implementingNK-CAP, in 2009 dollars, has been estimated at $18 permetric ton of CO2e. This estimate was based on ananalysis of project financials, and several key assumptions,including: that 20% of the carbon benefits would beretained in a permanence buffer, that offsets from theproject would be generated and sold at routine intervals,and that investors would seek a reasonable rate of returnon the project.

Under the carbon accounting standards in place at thetime NK-CAP was initiated and underwent its first

verification, only a 5% permanence buffer was retainedfrom the avoided deforestation component. Given theevolution of carbon accounting standards, theconservative assumption was made that 20% of carbon

offsets would need to be reserved to comply with current

standards, such as the Voluntary Carbon Standard.Likewise, although the first NK-CAP project verificationoccurred in 2005, and no offsets from the project hadbeen sold at the time of publication, the assumption wasmade, based upon typical practice in the market, thatoffsets would be verified and sold periodically (i.e.,

usually every five years).4

Finally, the analysis considers the projects expenses(historic and projected, capital and operating) andprojected revenue from the sale of verified offsets,regardless of which parties bear the costs, or to whom theoffset rights and revenue accrues. A nominal discountrate of 15% was assumed as a reasonable rate of return onthe project, based upon various benchmarks. The resultsare particularly sensitive to the discount rate used: whilea 15% discount rate yields an estimate of $18 / tCO2e,applying a 13% or 17% discount rate results in estimates of$15 and $22 per ton of CO

2

e, respectively.

4 Offsets generated from 1997-2000 were assumed to be verified and sold in 2001. A sale in 2006 of 2001-2005 offsets was assumed, andso on for five year periods, with a final sale in 2027 of offsets from 2021-2026.


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A B C D = A+B-C E F = D-E

Year

Emissions

Avoided from

Deforestation

(tCO2)

Emissions

Avoided from

Degradation

(tCO2)

Leakage

Deduction

(tCO2)

Total Carbon

Offsets

(tCO2)

Emissions

from

Project

Activities*

(tCO2)

Net Carbon

Offsets

(tCO2)

1997 56,401 48,180 7,264 97,317 169 97,148

1998 40,304 59,374 9,141 90,539 211 90,328

1999 39,783 69,931 10,960 98,753 282 98,472

2000 43,417 79,889 12,731 110,578 204 110,373

2001 41,158 89,298 14,454 116,003 167 115,836

2002 40,238 98,190 16,130 122,298 132 122,166

2003 33,972 107,081 17,589 123,462 109 123,353

2004 31,684 115,632 18,971 128,347 102 128,244

2005 44,693 123,867 20,277 148,282 96 148,186

Total 371,650 791,443 127,516 1,035,578 1472 1,034,107

* from transportation fuel use, etc.

Figure 7: Verified carbon benefits generated by NK-CAP. Source: Noel Kempff PDD.

B) Reducing EB) Reducing EB) Reducing EB) Reducing EB) Reducing Emissions from Dmissions from Dmissions from Dmissions from Dmissions from Degradationegradationegradationegradationegradation: Cessation of

logging in the former concessions that were incorporatedinto the project area avoids future timber extraction andcollateral damage due to logging. 468,474 square metersof timber slated for harvest were protected over the 1997-2005 verification period, corresponding to an avoidedemissions of 791,443 tCO2e. The baseline harvest wasmodeled using an advanced statistical model of theBolivian timber market (see Baseline section for adetailed description), simulating domestic/internationaltimber supply and demand at different scales: national,regional, and project level.5

As a result of both activities, the project generated a totalcarbon benefit of 1,034,107 tCO2e over the 1997- 2005

verification period. The annual breakdown of thesebenefits is shown in Figure 7.

Figure 6: Generic illustration of carbon benefits (emission reductions) fromproject activities. Source: N. Virgilio.

5 Sohngen, B. and Brown, S., Measuring leakage from carbon projects in open economies: a stop timber harvesting project in Bolivia as a casestudy, Canadian Journal of Forest Research 34 (2004), 829 839.

Carbon benefits resulting from REDD project activitiesare calculated as the difference between emissions fromthe without-project scenario (known as the baseline- seeFigure 6) and emissions from the with-project scenario,minus any deductions for leakage, uncertainty andimpermanence risk. Carbon benefits for a particular

verification period are calculated ex-post, using actualdata from the period in question. The carbon benefitsachieved between 1997- 2005 by the Noel KempffMercado Climate Action Project were verified by SocitGnrale de Surveillance (SGS) in 2005, using rigorousstandards based upon those described in the KyotoProtocols Clean Development Mechanism. This

verification made NK-CAP the first forest emissionsreduction project to achieve such a standard, anddemonstrates that REDD activities are capable ofgenerating scientifically measurable, real, and verifiablecarbon benefits.

Two distinct project components are generating carbonbenefits within NK-CAP:

A) Reducing EA) Reducing EA) Reducing EA) Reducing EA) Reducing Emissions from Dmissions from Dmissions from Dmissions from Dmissions from Deforesteforesteforesteforesteforestationationationationation: Byimplementing an economic development program and anextended protection scheme, the project is avoidingdeforestation by communities inside the project area.Baseline deforestation was modeled with a spatiallyexplicit land use change model (called GEOMOD - seeBaseline section for a detailed description), usingLandsat imagery to estimate historic deforestation ratesand modifying these rates based on monitoring from areference area with comparable socioeconomic

characteristics. As a result of the project, 763 ha weresaved over the 1997-2005 verification period,corresponding to 371,650 tCO2e.

CARBON BENEFITSCARBON BENEFITSCARBON BENEFITSCARBON BENEFITSCARBON BENEFITS

6

Business-as-usual emissions

With-project emissions

ProjectImplementation

EmissionsCO2e

Time

EmissionReductions


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ESTIMAESTIMAESTIMAESTIMAESTIMATED LIFETIME CARBTED LIFETIME CARBTED LIFETIME CARBTED LIFETIME CARBTED LIFETIME CARBOOOOON BENEFITSN BENEFITSN BENEFITSN BENEFITSN BENEFITS

The total carbon benefits from NK-CAP are expected toreach 5,838,813 tCO2e over the life of the project (1997-2026).

The estimate of lifetime carbon benefits has beenrecalculated several times since the project began, resultingin considerable reductions from initial estimates andincreases in accuracy. These changes, driven primarily by

adjustments to the baselines, reflect the pioneering natureof the project, which broke ground on methodologies forestimating baselines.

As a result of methodological advances, anticipatedlifetime carbon benefits were ratcheted down from theinitial approximation of 53,190,151 tCO2e calculated in1996, to the current estimate of 5,838,813 tCO2e calculatedin 2005. The large decrease in the lifetime carbon benefitestimate is due primarily to a shift in reliance on

interviews, secondary data sources, and referencedocuments from other parts of the world, to site-specificstudies, local field measurements and advanced statisticalmodels, which are more robust and accurate. Estimatedlifetime carbon benefits are just that estimates. Althoughthese forward-looking estimates may change over time,verifiedcarbon benefits, based on backward-lookingobservations of the verification period in question (in thiscase, every 5 years) will not change. Only at the end of the

30 year project will it be possible to know the total lifetimecarbon benefits of NK-CAP.

See the Baseline section for a more in depth discussionof the current methodology being used to determinebaselines for both the avoided deforestation and avoideddegradation components of the project and the History ofProject Baselines section for more on changes to theestimated lifetime carbon benefits.

ADDITIONALITYADDITIONALITYADDITIONALITYADDITIONALITYADDITIONALITY

A fundamental challenge for all REDD projects is todemonstrate additionality. Additionality refers to theamount of carbon dioxide captured, stored or preventedfrom reaching the atmosphere compared to what wouldhappen under business as usual practices. Additionalityis an important concept to ensure that the claimedbenefits from a carbon project are above and beyond

what would have happened anyway.

Since additionality involves assessing what would have (butdid not) happen, it cannot be measured exactly and isoften subjective. Nevertheless, there are several

suggested tests for determining whether emissionreductions are additional, specifically: Were projectactivities required and regularly enforced by law? Wouldproject activities have been financially possibleotherwise? Were the project activities common practice?Were business-as-usual (BAU) emissions the same orlower than the with-project scenario? An answer of noto all four questions helps to establish additionality.

NK-CAP met these tests of additionality on all fourgrounds. The project was not required by Bolivian law tooccur. Although there was a pre-existing park adjacent tothe expansion area, expansion was not planned or

required. A feasibility study, conducted prior to projectimplementation, demonstrated that the Government ofBolivia did not have the necessary funds or political willto close the forest concessions and expand the park. Thefunds provided by the project enabled changes to thestatus quo, by financing the buyout of timber concessions,the expansion of the park, and the communitydevelopment activities aimed at reducing forestconversion. Without the project, logging would havecontinued in the concessions and deforestation would

have spread around new settlements and communitieslacking land titles, as this was the common practice.Finally, the NK-CAP with-project scenario resulted infewer emissions than the baseline scenario.

BASELINEBASELINEBASELINEBASELINEBASELINE

A project baseline is the without-project or business-as-usual (BAU) scenario; simply put, the prediction of what

would have happened had the project not taken place. Aswas discussed in the Carbon Benefits section, themethods used in determining baselines greatly influence

both the magnitude and accuracy of carbon benefits, whichare calculated as the difference between the baseline andwith-project scenario. It is very important for baselinesto be monitored over time and corrections to be made forsituations such as changes in policy, governance,deforestation rates, and socio-economic conditions.

As the emissions reductions achieved through the NoelKempff Mercado Climate Action Project were the result ofa two-pronged strategy- avoiding deforestation anddegradation- it was necessary to treat each componentseparately in the calculation of the project baseline. SinceNK-CAP was the first forest carbon project of its kind, it

was necessary for the project to create its ownmethodologies for calculating baselines. As such, bothbaselines have been re-estimated several times since theproject began, as new information, refined methods andadvanced technology became available, increasing theaccuracy with each revision (see History of ProjectBaselines section for more detail). Some voluntarystandards require that baselines be monitored and re-evaluated periodically, to make adjustments for possiblechanges in external factors that could influence land usepractices. Moving forward, it is planned that the project


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baseline will be reevaluated every 5 years, and adjusted ifneeded. It is believed that the largest changes to thebaselines occurred in the beginning years of the project,

when methodologies were still being refined, and futurechanges will be minimal.

AAAAAvoided Dvoided Dvoided Dvoided Dvoided Deforeforeforeforefores tes tes tes tes tation Bation Bation Bation Bation BaselineaselineaselineaselineaselineThe creation of an avoided deforestation baseline in NK-CAP required 4 steps: 1) determination of deforestationrates, 2) prediction of likely locations for futuredeforestation, 3) determination of carbon content in areaspredicted to be cleared, and 4) calculation of emissionsresulting from anticipated deforestation.

Using historical satellite imagery from 1986, 1992 and1996, it was possible to observe deforestation andcalculate deforestation rates in the project area. Thelocation of future deforestation was simulated with thespatially explicit GEOMOD land use change model usingthis historical deforestation information. The model

identified lands in the project area that were statisticallythe most likely to be cleared in the future, based on severaldeforestation drivers (distance to roads, towns, rivers,forest edge and prior disturbance). GEOMOD resultsprovided a forecast of specific forest areas likely to becleared over the following 30 years.

While remote sensing technology and models likeGEOMOD can estimate areas of forest loss, estimatingemissions from that forest loss involves measuring thecarbon stocks of the vegetation in the area, since differenttypes of vegetation (e.g., tropical forest vs. temperateforest) contain different amounts of carbon.

In NK-CAP, the areas predicted to be cleared byGEOMOD were assigned one of five vegetation classes(e.g., high evergreen forest) using Landsat imagery andon-the-ground observations. The carbon content ofeach vegetation class was determined through fieldresearch, using time-tested, scientifically-proventechniques such as measurement of tree diameter andsoil analysis (Figure 8). To this end, 625 permanentstudy plots were established in and around NK-CAP to

measure and monitor carbon stocks (Figure 9). Allcarbon pools aboveground and belowground biomass,litter, dead wood, and soils to 30 cm depth wereanalyzed for their carbon content. Once carbon stocks

were determined for each vegetation class, the areaspresumed cleared in the baseline scenario were thenconverted into carbon emissions using establishedformulas.

Figure 9: Map of the Noel Kempff Climate Action Project showing thedistribution of the six forest strata and the location of the 625 permanent plots.Source: Winrock International.

8

Figure 8: Foresters and young men from the local community of Florida worktogether to measure the boundaries of the forest plots where logging impacts will bemeasured over 30 years in a forest concession (Cerro Pelado) near Noel KempffMercado National Park in Bolivia. Photo credit: Margo Burnham.


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MMMMMonitoring the Bonitoring the Bonitoring the Bonitoring the Bonitoring the BaselineaselineaselineaselineaselineThe avoided deforestation baseline will be re-evaluatedevery 5 years to capture any changes in institutionalstructure, local deforestation rates, and socioeconomiccircumstances that might affect the estimated emissionsfor the remaining years of the project. A reference area

was chosen adjacent to the Park to serve as a control forthe estimated baseline (Figure 12). This area will be

monitored over time using Landsat data and compared tothe predicted baseline for the avoided deforestationcomponent of NK-CAP. Differences between the two willbe investigated and adjustments to the baseline will bemade where appropriate to maintain accuracy.

AAAAAvoided Dvoided Dvoided Dvoided Dvoided Deg reg reg reg reg radation Badation Badation Badation Badation BaselineaselineaselineaselineaselineThe creation of the avoided degradation baselineinvolved predicting the business-as-usual emissions that

would have been caused by the closed timber concessions.Because timber harvesting is impacted by marketconditions, the avoided degradation baseline wasdetermined using an econometric model of Boliviantimber markets, developed by Brent Sohngen and SandraBrown3, which predicts the volume of future harvests inBolivia, both within the project area and the country as a

whole (important for leakage analysis), and the carbonimpacts of those harvests.

The model was based on the assumption that Bolivia is asmall open economy which is a price taker on globaltimber markets and, therefore does not significantlycontrol or effect global prices. In addition to economicparameters, the model considered many dynamics oftimber harvesting activities, including forest

characteristics (e.g., wood density), collateral damage dueto logging, decomposition of dead wood, carbon storagein dead wood products, and the difference in regrowthbetween logged and unlogged areas. Abovegroundbiomass and dead wood were the only carbon poolsincluded in the calculations, as soil carbon andbelowground biomass (roots) were not expected tochange significantly due to harvesting activities. It isimportant to note that a 1996 change in Bolivian law,requiring concessionaires to pay a fee per hectare of land,resulted in the reduction of nationwide timberconcessions by 75%. However, when analyzed within thetimber market model, it was found that this did not result

in a significant change in timber output, asconcessionaires simply increased harvest intensity ontheir holdings.

MMMMMonitoring the Bonitoring the Bonitoring the Bonitoring the Bonitoring the BaselineaselineaselineaselineaselineIn order to accurately estimate damage due to loggingactivities and to detect potential differences in regrowthrates over time between logged and unlogged areas, 102survey plots (dubbed Carbon Impact Zones or CIZs)

6 As per SGSs 2005 full verification report for Noel Kempff, pg. 29.

were established in the Cerro Pelao logging concessionadjacent to the project area. From these plots, it wasdetermined that over time, the difference in regrowthbetween logged and unlogged areas was not statisticallysignificant. Economic variables for the timber marketmodel (e.g., timber prices, inflation rates) are beingmonitored annually to every 5 years, depending on theparticular parameter.6

HISTORY OF PROJECT BASELINESHISTORY OF PROJECT BASELINESHISTORY OF PROJECT BASELINESHISTORY OF PROJECT BASELINESHISTORY OF PROJECT BASELINESAs mentioned in the Carbon Benefits section, baselinesfrom both the avoided deforestation and avoideddegradation components have been modified severaltimes since the start of the project. As a result ofimprovements in baseline methodologies and technology,the baselines have been adjusted significantly from theirstarting points in 1996. The biggest changes to the NK-CAP baselines occurred in the initial years of projectimplementation, as methodologies were still beingperfected. In particular, a change to the timber extractionrate used in the initial avoided degradation baselinedrove substantial adjustments in the early years of theproject. Plans exist to re-evaluate the project baselineevery 5 years as a part of the verification process in orderto capture any changes in government, policy,deforestation rates, and socio-economic circumstancesthat might have occurred over that time period, with thepotential to affect the business-as usual scenario forfuture years.

Although there were several modifications made to theproject baseline since the initiation of project activities,the largest adjustments occurred in 1999, 2001 and 2005.

In 1999, refinements made to the timber extraction rateand the lying dead wood carbon stock estimate, as well asthe introduction of 102 permanent plots in an adjacentconcession to measure damages attributable to harvestingactivities, led to a decrease of estimated lifetime carbonbenefits from 53,190,151 tCO2e to 23,719,919 tCO2e.Most of the decrease was attributable to refined timberextraction rates used in the avoided degradationcomponent baseline, and illustrates the substantial effectthis parameter can have on calculations. In 2001, satelliteimagery and advanced models employed for the first timein baseline estimation, as well as further refinement of thetimber extraction rate, led to a reduction in estimated

lifetime carbon benefits to 13,155,079 tCO2e. Again,most of the decrease was associated with the avoideddegradation component of the project and was largely dueto further refinement of the timber extraction rate.Finally, in 2005, the GEOMOD land use change modelemployed a more conservative approach to predicting theamount of land to be deforested, using a linear rate ofdeforestation based on historical trends. Subsequently,


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7 VCS. Guidance for Agriculture, Forestry, and other Land Use Projects. November 2008, Washington, D.C. see page 21.

estimated lifetime carbon benefits decreased to 5,837,341tCO2e.

The NK-CAP experience serves as a prime example ofthe importance of moving away from baselinemethodologies founded on surveys and proxy data fromother regions/countries, to approaches that rely on fieldtesting, satellite data and site-specific information in the

calculations. Since NK-CAP was one of the first large-scale REDD projects to be implemented, there were noprecedents for project developers to follow. Theexperience gained through the NK-CAP baselinemethodology development has helped to inform TNCsother projects and has served as a model for projectsdeveloped by other organizations, as well as in thedevelopment of project standards. For example, theVoluntary Carbon Standard, one of the most wellrespected standards for the voluntary market, refers to

Noel Kempff as an example for many of theirmethodological recommendations, including baselines.7

It is important to distinguish estimated lifetime carbon benefits,which are apt to change with each verification, and verifiedcarbon benefits, which are confirmed as the project proceeds.Unlike estimated lifetime carbon benefits, verifiedbenefits are based on backward-looking observations and

will not change, regardless of any adjustments made to thebaseline(s) for future periods (see Figure 10).

VerificationPeriod 1



Time

Emission

Rate

EmissionReductionsVerification

Period 1


Period 2


Period 3

Baseline: Verification period 1


Baseline: Verification period 3With- project scenario




Time

Emission

Rate


Period 1


Period 2


Period 3







Figure 10: General illustration of emission reductions over the course of several verification periods. Source: N. Virgilio.

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Leakage comes in two forms: activity-shifting (primary)leakage and market (secondary) leakage. Activity-shiftingleakage occurs when a project directly causes carbon-emitting activities to be shifted to another location,canceling out some or all of the projects carbon benefits.Market leakage, on the other hand, occurs when a project

changes the supply-and-demand equilibrium, causingother market actors to shift their activities. For example,if a project constrains commodity supply, market pricesmay rise and other producers may increase their activitiesin response.

Credible carbon projects must attempt to prevent, analyzethe risk of, calculate, compensate for and monitor leakagein order to accurately calculate carbon benefits.

Since it was possible that NK-CAP project activitiescould displace emissions elsewhere, every attempt wasmade to quantify potential leakage, while specificsafeguards were also built into the project design to avoid

leakage. As there were two emissions reduction activitiesoccurring in the project (avoided deforestation anddegradation), they were treated separately in the leakageanalysis.

AAAAAVVVVVOOOOOIDIDIDIDIDED DED DED DED DED DEFEFEFEFEFOOOOORESTRESTRESTRESTRESTAAAAATITITITITIOOOOON LEAKN LEAKN LEAKN LEAKN LEAKAAAAAGEGEGEGEGEEEEEEstimation and Pstimation and Pstimation and Pstimation and Pstimation and Prrrrrevention of Levention of Levention of Levention of Levention of Leakage freakage freakage freakage freakage from Aom Aom Aom Aom Avoided Dvoided Dvoided Dvoided Dvoided Deforeforeforeforefores tes tes tes tes tationationationationationAAAAActivitiesctivitiesctivitiesctivitiesctivitiesSince the establishment of the project, the largest short-term risk for activity shifting leakage existed fromsubsistence agricultural expansion by the communitiesliving along the border of the extended park area. Assuch, the project incorporated extensive leakage

LEAKAGELEAKAGELEAKAGELEAKAGELEAKAGE

OriginalNKMNP

Pre- existing

protectedarea

NK- CAP

TCO

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areas

TCO forestmanagement

area

Pre- existing

protected

area


area

OriginalNKMNP

Pre- existing

protectedarea

NK- CAP

TCO

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areas

TCO forestmanagement

area

Pre- existing

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area

prevention activities, in the form of communitydevelopment programs including: educational campaigns,

workshops in sustainable agriculture, assistance insecuring legal status and land tenure, and development ofa management plan for ancestral lands. See theCommunity Benefits section for detailed information

on the program.Perhaps the most successful aspect of the avoideddeforestation leakage prevention program was the legaldesignation of a 360,565 hectare indigenous ancestralterritory (TCO) for border communities, whichofficially granted them property rights. Communitieshelped design the Bajo Paragua Native Communal LandNatural Resources Management Plan for the landsadjacent to the project and sustainable forestry activitiesundertaken in the TCO are lessening pressure to deforest

within project boundaries.

As a result of these activities, it was anticipated that therewould be no activity-shifting leakage from the avoideddeforestation component of the project. Similarly, as thethreat of deforestation came from subsistence agriculturalexpansion and not commercial agricultural expansion, nomarket leakage was expected.

NOTE: The sustainable harvesting activities occurring inthe TCO are NOT being counted as activity-shiftingleakage. As the TCOs forestry use lies almost completelyinside the area of former timber concessions and outsidethe NK-CAP area (see Figure 11), these activities do notconstitute an increase in emissions as a result of the

Figure 11: The sustainable forestry activities carried out by border communities fall almost entirely within the former timber concessions (cross- hatch). Source: GISdata from FAN, Cartography from N. Virgilio.

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project; logging would have occurred there anyway as itwas BAU within the former concessions. The communityforestry activities actually result in fewer emissions than

would otherwise occur in the baseline scenario, sinceprevious harvesting activities in the former concessions

were more intense and did not operate according to asustainable management plan.

MMMMMonitoring Lonitoring Lonitoring Lonitoring Lonitoring Leakage freakage freakage freakage freakage from Aom Aom Aom Aom Avoided Dvoided Dvoided Dvoided Dvoided Deforeforeforeforeforestestestestestation Aation Aation Aation Aation Activitiesctivitiesctivitiesctivitiesctivities

Although no leakage was expected from this aspect ofNK-CAP, project developers still monitored for anyunanticipated activity shifts. The project designed a 15km control area around the borders of the NK-CAP zoneto capture possible activity shifts (see Figure 12 ). Therationale behind the chosen buffer width was based onbehavioral theory; it was highly unlikely that subsistencefarmers who were originally deforesting within theproject area, without access to cars or other personaltransportation, would travel large distances to deforestelsewhere.

A baseline deforestation scenario for the buffer zone was

created in the same manner as for the NK-CAP itself. Ifleakage were occurring, the deforestation rate in thebuffer area would increase from its baseline scenario andthe difference between the two would be the leakage. Areference area adjacent to the buffer served as a controlfor the baseline deforestation rate and any detectedleakage would be standardized by changes in overalldeforestation rate captured by the reference area.

Subsequent monitoring has revealed that deforestation inthe buffer zone is actually lower than that which waspredicted in the buffer baseline, confirming theprediction that no activity-shifting leakage would occur

for the avoided deforestation aspect of the project.

AAAAAVVVVVOOOOOIDIDIDIDIDED DED DED DED DED DEEEEEGRADGRADGRADGRADGRADAAAAATITITITITIOOOOON LEAKN LEAKN LEAKN LEAKN LEAKAAAAAGEGEGEGEGEEEEEEstimation and Pstimation and Pstimation and Pstimation and Pstimation and Prrrrrevention of Levention of Levention of Levention of Levention of Leakage freakage freakage freakage freakage from Aom Aom Aom Aom Avoided Dvoided Dvoided Dvoided Dvoided Deg reg reg reg reg radationadationadationadationadationAAAAActivitiesctivitiesctivitiesctivitiesctivitiesThe risk of leakage from the avoided degradationcomponent of the project was two-fold: thatconcessionaires themselves would relocate, but continuetheir activities elsewhere (so-called activity-shiftingleakage) and that the reduction of timber supply causedby closing concessions would affect prices, resulting inincreased harvesting elsewhere. The project employedseveral methods to prevent, quantify and monitor leakage.

The closing of sawmills, and the purchasing and retiringof harvesting equipment from concessionaires by projectdevelopers (as part of the overall concession buyout) wasa key leakage prevention activity undertaken for NK-CAP. Many concessionaires take out loans whenpurchasing equipment, thus must harvest to generateincome and pay off the loans. Purchasing and retiring theequipment took away the pressure for concessionaires toshift harvest activities elsewhere by taking away the debt

associated with the equipment. Furthermore, it preventedthe possibility for equipment to be sold inexpensively toother harvesters when the indemnified concessionairesleft the business. As a result of these equipmentpurchases, as well as expense and activity tracking of theindemnified concessionaires (explained below), it wasestimated that there was no risk of activity-shifting

leakage from the avoided degradation component of theproject.

In estimating potential market leakage from the avoideddegradation component of NK-CAP, project developersemployed the national timber model developedspecifically for Bolivia by Brent Sohngen and SandraBrown (see Baseline section for a detailed description).The model represented a landmark achievement inquantifying leakage on a national scale, particularlyimportant for the scaling up of REDD mechanisms in thefuture.

The difference between the modeled total annual timberproduction for all of Bolivia without-project wascompared with the modeled total annual timer productionfor all of Bolivia with-project. Various scenariosexplored the interdependence between price and demandfor timber, as well as upfront cost constraints, resulting inestimates of 14-44% leakage from the avoided degradationcomponent of the project. The higher leakage estimates

were for scenarios in which prices are highly sensitive tochanges in supply. Because it was determined that timberprices in Bolivia are NOT highly sensitive to supply

Figure 12: Map of NK-CAP project area, original NKMNP, buffer zone ( forleakage analysis), and reference area ( for baseline monitoring). Source: NK-CAP PDD.

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changes (the country is considered a price-taker notprice-setter on international markets), a final leakageestimate of 16% of avoided emissions from degradation(11% of total project carbon benefits) was used. Thistotaled 1,012,337 tCO2e for the lifetime of the project,

which was subtracted from the emissions reductions fromthe project, resulting in an estimate of lifetime carbonbenefits for the project of 5,838,813 tCO2e. Calculatedmarket leakage from the 1997-2005 verification period

totaled 127,515 tCO2e and was subtracted from the verifiedcarbon benefits, resulting in the final number of 1,034,107tCO2e (see Figure 7).

MMMMMonitoring Lonitoring Lonitoring Lonitoring Lonitoring Leakage freakage freakage freakage freakage from Aom Aom Aom Aom Avoided Dvoided Dvoided Dvoided Dvoided Degregregregregradation Aadation Aadation Aadation Aadation ActivitiesctivitiesctivitiesctivitiesctivitiesAlthough no activity-shifting leakage was estimated fromthe avoided degradation component of the project, theactivities of the concessionaires were tracked after theyrelinquished their holdings. The Agreement to Preventthe Displacement of NK-CAP Environmental Benefits,signed on January 16, 1997 by the former concessionaires,prevented the former concessionaires from initiating new

logging activities for a period of five years, and allowedFAN to track their activities outside the project area.

FAN closely tracked the expenditures of formerconcessionaires, most importantly to determine ifindemnification funds were reinvested into otherconcessions. This monitoring revealed that the majorityland holder left the timber industry entirely, while theminority holder re-invested a small amount (7.3% of the

indemnification funds) into a nearby concession, whichunderwent harvests in 1997 and 1998. This was notcounted as primary leakage in the analysis because aportion of the harvests had already been modeled in theBolivian timber model, thus to count them here would bedouble-counting.

In the case of market leakage, economic variables used inthe timber market model to calculate leakage are beingmonitored periodically.

PERMANENCEPERMANENCEPERMANENCEPERMANENCEPERMANENCE

Permanence refers to how robust a project is to potentialchanges that could reverse the carbon benefits of theproject at a future date. Although all sectors have thepotential for impermanence, forest carbon projects faceparticular scrutiny due to a perceived risk that poormanagement, fire, pests, etc. can lead to the destruction offorest and the subsequent release of emissions. Variousstrategies can be used to avoid and safeguard against therisk of impermanence.

First and foremost, it is important that all stakeholderinterests (government, communities, business, etc.) arealigned with the long-term project objectives. Specificapproaches, such as the purchase of conservationeasements, creation of protected areas, communitydevelopment, establishment of endowments for projectmanagement and monitoring, and the use of carbonbuffers can also help ensure permanence. Ultimately,strategies must be tailored to the particular project siteand situation.

Permanence of carbon benefits generated by the Noel

Kempff Mercado Climate Action Project is safeguarded bylegal, financial and institutional means. The project areahas been incorporated into a national park, as legallydesignated by the Government of Bolivia in a bindinglegal document (Supreme Decree #24457), with effectiveprotection under the auspices of the National Service ofProtected Areas (SERNAP) and FAN Bolivia as theproject administrator.

The Bolivian Government has a financial stake in theprojects success and continuity, as it is entitled to 49% ofthe verified emissions reductions from the project.Through the project, an endowment has been establishedto fund the protection and management of the expandedNoel Kempff Mercado National Park, including rangers,equipment, and infrastructure to protect the park. It isexpected that funds will be left in the endowment whenthe projects 30-year lifespan comes to completion, andthese funds must be used for the benefit of the NoelKempff Mercado National Park according to the legalendowment fund agreement.

The robust community development aspects of the projectare meant to result in long-term conservation by thecommunities adjacent to the park. Provided with newincome opportunities, land tenure and a sustainable land-use management plan, it is expected that communitymembers will permanently refrain from clearing withinpark boundaries for subsistence agriculture.

Risk of fire was considered in the calculation of projectcarbon benefits, using the actual occurrence of fires from1997-2005. As a result, 5% of the estimated avoideddeforestation carbon benefits were deducted as asafeguard against the risk of fire. There are no additionaldiscounts or reserves being held for other types ofimpermanence risk.

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By conserving forests that local people rely on, well-designed REDD projects can provide importantecological, cultural, and economic benefits tocommunities. Some times, as was the case with NoelKempff, local communities themselves are responsiblefor the forest loss that REDD activities aim to prevent.

Community development and involvement is oftencrucial to lessening pressure on forest conversion andobtaining long-term commitment and support for theproject. The use of standards such as the ClimateCommunity and Biodiversity (CCB) standard, whichsupports community involvement in the design ofclimate change mitigation projects, can help safeguardadequate consideration of community concerns.

As of 1996, there were seven communities adjacent tothe NKMNP Florida, Porvenir, Piso Firme,Cachuela, Bella Vista, and Esperancita de la Frontera

with a total population of 1,025. Traditionally, these

communities sustained themselves through subsistenceagriculture; with women and children in charge ofgathering firewood, fruits and medicinal plants, and menseeking income through seasonal work in sawmills, fieldclearing, hunting and fishing. Men working in sawmillscould be expected to earn between $66- $133/month.9Prior to project implementation, the communitiesgenerally did not have public services; rivers provided

water, health centers were in poor condition, roads wereseasonally impassable, public transportation was non-existent and schools lacked adequate supplies, space andteachers.

Community development activities undertaken as part ofthe project, including organizational empowerment,capacity building, improvement of basic services, anddevelopment of income generating activities, are likely toresult in overall long-term enhancement of livelihoods.8,9In 2005, FAN conducted a socioeconomic impactassessment which examined Human Capital, NaturalCapital, Physical Capital, and Financial Capital asmeasurements of community well-being and concludedthat, on average, the communities were benefitting fromthe project.

To enhance livelihoods in the communities adjacent topark, strengthen their organization and aid in leakageprevention, two sequential programs were initiated withproject funds. The Program for the SustainableDevelopment of Local Communities (Spanish acronym

APOCOM) ran from 1997-2001 and improved access to

basic services such as health, education, andcommunication. The Community Development Program(Spanish acronym PRODECOM), undertaken from2002-2006, emphasized community development bysecuring land titling, assisting self-organization, andsupporting income generating activities such ascommunity forestry and micro enterprise. A CommunityDevelopment Action Plan was carried out from 2006-2008 with the goal of raising the standard of living forthose communities affected by the project to levels at orabove those at which they resided prior to projectimplementation. It is expected that the Government ofBolivia will carry on future community developmentactivities with a portion of the income it receives frommarketing its share of verified carbon benefits from theproject. Thus far, however, the government has notcommercialized its share nor has it designated how muchof the proceeds will go back to the communities borderingthe park. Project developers and community leaders are

working with the Bolivian Government to resolve theseissues.

OOOOORGANIZARGANIZARGANIZARGANIZARGANIZATITITITITIOOOOONNNNN AL EMPO AL EMPO AL EMPO AL EMPO AL EMPOWERMENTWERMENTWERMENTWERMENTWERMENTOver the course of NK-CAPs evolution, the importance

of deeply involving communities in project design,ensuring adequate sharing of the project benefits, andrespecting and bolstering indigenous rights has been clear.Those analyzing the project with a critical eye might citelack of community involvement at the earliest stages ofproject development as a weakness in project design.9 Inpractice, community involvement can be difficult to

COMMUNITY BENEFITSCOMMUNITY BENEFITSCOMMUNITY BENEFITSCOMMUNITY BENEFITSCOMMUNITY BENEFITS

8 Caldern Angeleri, Natalia. Livelihood Impact Assessment: NK-CAP, Bolivia , November 2005. Annex 6 of PDD. Livelihood comprisesthe capabilities, assets (including both material and social resources) and activities required for a means of living.9 Asquith, N.M., et al. 2002. Can forest protection carbon projects improve rural livelihoods ? Analysis of the Noel Kempff MercadoClimate Action Project, Bolivia. Mitigation and Adaptation Strategies for Global Change 7: 323- 337.14

Figure 13: Chiquitano children living in one of the local communities just outside theborder of Noel Kempff Mercado National Park in Bolivia. Photo credit: HermesJustiniano.


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achieve if there is a lack of community/organizationalstructure, as was initially the case with the communitiessurrounding the Noel Kempff Mercado National Park.

As such, part of the project focused on assistingcommunities in creating an official indigenousorganization with legal status. Project developers helpedcommunities to access the correct government officialsand prepare paperwork to group themselves into the

official Central Indgena Bajo Paragu (CIBAPA), aregistered organization with legal standing representingthe indigenous communities around the park. As a group

with legal standing, CIBAPA was eligible to file for landtenure with the National Agrarian Reform Institute(Spanish acronym INRA).

As communities became increasingly organized, they wereable to take a more and more active role in the projectplanning. They fully participate in the managementcommittee of the Park, where all operational aspects of thepark are discussed.

LAND TENURE AND COMMUNITY PROPERTYLAND TENURE AND COMMUNITY PROPERTYLAND TENURE AND COMMUNITY PROPERTYLAND TENURE AND COMMUNITY PROPERTYLAND TENURE AND COMMUNITY PROPERTYRIGHTSRIGHTSRIGHTSRIGHTSRIGHTSPrior to project initiation, none of the communitiesbordering the park had rights to the land on which theyhad historically resided and which they had traditionallyused for hunting, logging, rubber exploitation, etc. Articlesix of Supreme Decree #24457, which expanded theNKMNP, recognized and guaranteed the subsistence useand exploitation of renewable natural resources withinthe expansion zone by communities, subject to the parkmanagement plan. Yet, the park management plan wassomewhat ambiguous as to activities allowed in the park.10In order to further protect community members access to

timber, plants and animals, FAN facilitated CIBAPAsclaim to 360,565 hectares of indigenous territory adjacentto the expansion area in 1998, and this claim was acceptedby the INRA (see Figure 11). In June 2006, the officialtitle for the indigenous territory (TCO) was granted toCIBAPA.

LANDLANDLANDLANDLANDUUUUUSE PLANNINSE PLANNINSE PLANNINSE PLANNINSE PLANNING AND CAPG AND CAPG AND CAPG AND CAPG AND CAPAAAAACITYCITYCITYCITYCITYTRAININGTRAININGTRAININGTRAININGTRAININGTo enhance livelihoods and to mitigate leakage, the projectfinanced the creation of a land use plan for the newly-titled indigenous territory (TCO). Through the efforts ofa consultancy team, FAN, CIBAPA and NKMNP, the BajoParagua Native Communal Land Natural ResourcesManagement Plan was developed and four communities

were trained in sustainable community forestry.Agricultural promoters were educated and 5 universityscholarships in strategic areas (business administration,tourism, agricultural and forest engineering) werefinanced, along with 7 awards for polytechnic level study.

ELEMENTELEMENTELEMENTELEMENTELEMENTARARARARARY AND HIY AND HIY AND HIY AND HIY AND HIGH SCHGH SCHGH SCHGH SCHGH SCHOOOOOOOOOOL EDL EDL EDL EDL EDUUUUUCACACACACATITITITITIOOOOONNNNNSchools in the communities of Florida, Piso Firme, andBella Vista were refurbished and, through an agreement

with the project, the Municipality of San Ignacio paid thesalaries of two teachers. Significant quantities ofeducational supplies were also purchased. Scholarships

were given to 120 primary and secondary school studentsto continue their studies in courses which were notavailable in the communities.

HEALHEALHEALHEALHEALTH OTH OTH OTH OTH OUTPOSTUTPOSTUTPOSTUTPOSTUTPOSTPrior to project implementation, operators of the Moiraconcession provided the community of Florida with theservices of a medical doctor for half a day/week, as well asdiscounts on medicine.9 In order to compensate for theloss of these services, project developers refurbished andexpanded a pre-existing health clinic in the community ofFlorida, which was in very poor condition, to includeliving quarters for a resident nurse. Another outpost, inPiso Firme, was expanded and converted into a micro-hospital, with a delivery room, laboratory, and dentalservices. Project funds were used to purchase medicine

which is administered by community members, and adoctor was hired to live in Piso Firme and make periodicvisits to all of the communities. 10

INININININCCCCCOOOOOME GENERAME GENERAME GENERAME GENERAME GENERATITITITITIOOOOONNNNNAt the time NK-CAP was initiated, sustainable logging,extraction of non-timber forest products, ecotourism, andbio-prospecting were all perceived to be promisingavenues for alternative income generation for forest-dwelling communities. The project employed all of theseefforts to help raise the standard of living of surroundingcommunities, to varying degrees of success. While asocioeconomic impact assessment concluded that, on

average, the communities were benefiting from theproject, the community of Florida still maintained anegative financial impact due to loss of jobs from theMoira sawmill. 10

AAAAAlternative Elternative Elternative Elternative Elternative EmploymentmploymentmploymentmploymentmploymentOne of the more significant initial negative impacts of theproject on the communities, particularly the communityof Florida, was the loss of jobs from closed timberconcessions and sawmills. In total, 20 men from Floridalost their jobs in the Moira sawmill.9 Project developersattempted to compensate for these losses by creating

opportunities for alternative employment. For example,approximately 80 community members have workedsurveying forest resources both inside and outside of theexpansion area.9 Of the 26 full-time park guards, 10 arefrom the local communities. Furthermore, six communitymembers were trained as tourist guides.

10 Caldern Angeleri, Natalia. Livelihood Impact Assessment: NK-CAP, Bolivia, November 2005. Annex 6 of PDD1


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SSSSSustus tus tus tus tainable Fainable Fainable Fainable Fainable ForororororestryestryestryestryestryProject developers supported the establishment of asustainable community forest concession within the TCO(see Figure 11). Community members have approval bythe Superintendant of Forestry to exploit heart of palm on11,000 ha of the TCO, as well as practice sustainableforestry in 90,000 hectares of the TCO. Today, CIBAPAis running its own sawmill and is the first indigenouscommunity with a timber selling point in the capital of theDepartment of Santa Cruz. Although the sawmill is not

currently turning a profit, money generated from theseactivities are going directly back into the communities,and help to offset employment losses from the Moiraconcession.

EEEEEcotourismcotourismcotourismcotourismcotourismA visitor center was constructed with the aim of fosteringincome generation through tourism activities, which

would work in combination with the project endowmentto fund post-project activities. Cabins were built andrepaired in several communities, boats and equipmentpurchased, and a pontoon bridge constructed for vehicletransportation. Two communities participated in tourismactivities by offering guidance, lodging, and otherservices. Unfortunately, it became apparent that theremote location of NK-CAP would make travel to thesite by tourists both difficult and expensive. Thus, therealized benefits via ecotourism have been fewer thanoriginally anticipated.

BiotradeBiotradeBiotradeBiotradeBiotradeA program aimed at expanding the scientific capacities ofFAN, while identifying marketable wild plants andproducts, was started. The GermoFAN laboratory wasestablished with the goal of producing in vitro nativeplants, such as orchids, that would generate incomethrough their sale, to be funneled back into projectactivities and help fund post-project activities.GermoFAN has commercially produced ornamental,medicinal and edible species. In addition, the largest

scientific collection of live-plant ornamental Bolivianspecies was established through NK-CAP. Today, itincludes 2,500 species, 52 of which were identified as newto science, and 18 of which were sponsored for furtherresearch.

Further enterprises in Biotrade have been carried out, butdid not prove viable. This included the creation ofCanopy Botanicals, a company whose aim was todevelop products, supplied by the communities, in threemarket sectors: organic foods (coffee beans, cocoa,mushrooms, and Brazil nuts), botanicals (medicinalplants) and ornamentals (orchids). The companypromoted sustainable development as well as theequitable distribution of economic benefits to suppliercommunities. Unfortunately, the venture ultimately faileddue to low returns on its investments, and the investorsincurred costs to dissolve the company. The NK-CAPexperience underscores the need for robust advancebusiness planning to determine the viability of economicdevelopment strategies and avoid losses on investments.

Figure 14: Park guards for Noel Kempff Mercado National Park in Bolivia. Photo credit : Hermes Justiniano.

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BIODIVERSITY BENEFITSBIODIVERSITY BENEFITSBIODIVERSITY BENEFITSBIODIVERSITY BENEFITSBIODIVERSITY BENEFITS

Beyond climate mitigation, forest carbon projects have thepotential to conserve important biodiversity, if designed

with this element in mind. As high biodiversity increasesecosystem resiliency in the face of climate change, the twostrategies complement and enhance each other. The useof standards, such as the Climate Community and

Biodiversity (CCB) standard, which support biodiversityconservation in the design of climate change mitigationprojects, can help secure this co-benefit.

The Noel Kempff Mercado National Park is located in oneof the few areas in South America where several differentecosystems converge; the evergreen forest of the highlands, the cerrados savannas, the savannas wetlands andthe forests wetlands, making the park one of the richestareas for its heterogeneity of habitats and prompting itsinclusion on UNESCOs list of World Heritage Sites.11The biodiversity of the area is one of the highest in theneotropics, with 4,000 species of vascular plants, 139

species of mammals, 621 species of birds, 75 species ofreptiles, 62 species of amphibians, 250 species of fish and347 species of insects. Rare and endangered speciesinclude tiger, puma, Brazilian tapir, jaguar and caiman,among many others.12

The Noel Kempff Mercado Climate Action Project wasdesigned to have beneficial impacts on biodiversity andhabitats in both the expansion area and original park.Local information suggests that there are many speciespresent in the expansion area which were not present inthe original park area, including 64 species of birds, themaned wolf and marsh deer. 13 This is likely due to major

differences in habitat and vegetation between the twoareas.

Despite these differences, there is generalacknowledgment of an ecological interdependencebetween the original park and expansion area.13 Migrationof fauna between the two areas is responsible for

11 IUCN. 2000. World Heritage Nomination IUCN Technical EvaluationNoel Kempff Mercado National Park (Bolivia) . See: http://whc.unesco.org/en/list/967.12 Killeen, T.J. and T.S. Schulenberg (Editors). 1998. A biological assessment of Parque Nacional Noel Kempff Mercado, Bolivia. RAPWorking Papers 10, Conservation International, Washington, D.C.13 Halloy, S. 1994 Study to determine the biological value of the area west of the Noel Kempff National Park as a basis for its inclusion in the

park. Technical Report.

significant dispersion of flora. For example, it has beendocumented that parrots and macaws migrate between the

areas on a daily basis, nesting in one and feeding in theother, and subsequently spreading seeds between both.Aquatic and marsh fauna are found in both areas andthese populations are expected to increase significantlydue to the added protection of marshlands and lagoons inthe expansion area. Furthermore, several large speciesmigrate annually between the areas, following the seasonalflow of water.

MONITORING BIODIVERSITYMONITORING BIODIVERSITYMONITORING BIODIVERSITYMONITORING BIODIVERSITYMONITORING BIODIVERSITYKey species populations (aquatic turtles, endemic wolves,amongst others) are monitored in the park through a SiteConservation Plan (SCP), which identifies key

conservation sites and targets. The Integral Plan ofProtection (Spanish acronym PIP) follows the guidance ofthe SCP and monitoring is carried out by park guards as

well as external entities, with the authorization of theNational Service of Protected Areas (Spanish acronymSERNAP).

1

Figure 15: Blue and yellow macaw at Noel Kempff Mercado National Park inBolivia, South America. Photo credit: Hermes Justiniano.

VVVVVALIDALIDALIDALIDALIDAAAAATITITITITIOOOOON ANDN ANDN ANDN ANDN AND VERIFIVERIFIVERIFIVERIFIVERIFICACACACACATITITITITIOOOOONNNNN

To ensure that the benefits claimed by carbon projects arereal and objectively measurable, a two-step process existsfor independent, third-party review and confirmation ofcarbon project results. The first step, validation, is aprocess designed to confirm that the Project DesignDocument (PDD) meets the stated requirements and

identified criteria of the specific voluntary or compliancemarket project standard under which the project has beendesigned. Verification is the second step, a process by

which claimed carbon benefits from a validated project areconfirmed.


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14The PDD is available at:http://conserveonline.org/workspaces/climate.change/ClimateActionProjects/NoelKempff/NKPDD/PDDZip/view.html15 SGS UK Ltd. Validation and Verification Report Noel Kempff Climate Action Project. Summary Only. PROJECT NO. VOL 0001 DATE:27 NOVEMBER 2005.

When the Noel Kempff Mercado Climate Action Projectwas first begun in 1996, there were not any specificationsfor carbon project design or validation. However, theUnited States, as a signatory to the United NationsFramework Convention on Climate Change(UNFCCC), had begun a program called the UnitedStates Initiative on Joint Implementation (USIJI). NK-CAP was submitted under the USIJI guidelines and

received approval in 1996. After the U.S. failed to ratifythe Kyoto Protocol, the USIJI system became obsolete.Since REDD projects were also excluded from the KyotoProtocols Clean Development Mechanism, it was notpossible to validate or verify NK-CAP under acompliance regime.

Thus, in 2004-2005, NK-CAP underwent an ex-postvalidation and verification assessment for the voluntarymarket. The validation and verification processes wereexecuted by Socit Gnrale de Surveillance (SGS),registered as a Designated Operational Entity to theClean Development Mechanism (CDM).

As no REDD voluntary or compliance standard existed,against which the project could be assessed, the projectdeveloped its own methodology, based upon the relevantCDM guidelines for afforestation/reforestation projects(as defined October 2005), adapting them for REDD asnecessary. SGS used this methodology, as detailed in theProject Design Document (PDD)14 as the basis for its

validation and verification processes.

In particular, SGS assessed the projects additionality,baseline, potential leakage, monitoring plan,

environmental and social impacts against the relevantUNFCCC and Kyoto Protocol requirements (whereappropriate), host country criteria and the guidingprinciples of completeness, consistency, accuracy,transparency and scientific appropriateness.

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VVVVValidation Falidation Falidation Falidation Falidation FindingsindingsindingsindingsindingsSGS opinion is that the project does currently meet the relevant criteria for CDM project activities and

fulfills the principles detailed above.SGS validation statement, Executive Summary, November 2005

VVVVVeeeeerification Frification Frification Frification Frification FindingsindingsindingsindingsindingsSGS opinion is that the project has implemented a monitoring plan and prepared a monitoring report that determines

additional sequestration and emissions reductions due to the projects activities in a manner consistent with the principlesdetailed above. Consequently, SGS verifies the voluntary emissions reductions claimed by this project as outlined in the

Schedule of Achieved Voluntary Emissions Reductions (SAVER) that accompanies this verification opinion.SGS verification statement, Executive Summary, November 2005

SGSs first validation and verification review resulted inseveral Corrective Action Requests (CARs), 2 major and8 minor. These included requests to improve the PDDand to develop an action program to address the needs ofthe communities adjacent to the park. The requestedcorrections were made to the PDD, a socioeconomicimpact assessment was conducted by FAN to determinethe needs of the communities, and a communitydevelopment action program was developed, whichrequires the establishment of a conditioned benefitsharing mechanism based on a participative approachthat would help to to raise the standard of living as aminimum up to the level that the communitiesexperienced before the commencement of the project.15These CARs were subsequently closed out and the projectreceived validation and verification from SGS in 2005

with a total of 1,034,107 metric tons of CO2verified bySGS for the period of 1997- 2005 (see Carbon Benefitssection for details).

It is important to note that although all CARs associatedwith the first validation and verification review wereclosed out to SGSs satisfaction, future verifications maybe in jeopardy. As of this writing, key milestones in thecommunity development action program have not beenreached. The program called for the GOB to establish thenecessary legal instruments to commercialize the GOBsshare of the carbon credits, to commercialize the carboncredits, and to assign carbon credit revenue according tothe earmarks set out in the NK-CAP Comprehensive

Agreement (which include community development seeFigure 5). Given turn over of government officials andother obstacles, the GOB has yet to complete these

milestones. The NK-CAP experience brings to light theneed for strong local government capacity to establish thenecessary legal, financial, and institutional means tomanage carbon revenue and benefit sharing.15


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CONCLUSIONCONCLUSIONCONCLUSIONCONCLUSIONCONCLUSION

FFFFFor more inforor more inforor more inforor more inforor more information contmation contmation contmation contmation contact:act:act:act:act:

Natalia Caldern Angeleri, Coordinator Noel Kempff Climate Action ProjectFFFFFundacin Amigos de la Nundacin Amigos de la Nundacin Amigos de la Nundacin Amigos de la Nundacin Amigos de la Naturaleza (Faturaleza (Faturaleza (Faturaleza (Faturaleza (FAN BAN BAN BAN BAN Bolivia)olivia)olivia)olivia)olivia)Casilla 2241Phone: +591-3-3556800Fax: +591-3-3547383Email: [email protected]

1

The Noel Kempff Mercado Climate Action Project (NK-CAP) is one of the worlds most ambitious endeavors toprotect tropical forest, fight climate change by loweringcarbon emissions, and contribute to the sustainablelivelihoods of local people. The project was broughtabout through the forward-looking partnership of The

Nature Conservancy, the Bolivian government, localconservationists, and three U.S. energy companies, whobought out logging concessions to expand Noel KempffNational Park and worked with local communities todesign economic development activities for the benefit ofboth people and forest health.

Initiated in 1996, in the earliest days of the globalmovement to recognize the power of tropical forests tofight climate change, the Noel Kempff project pioneeredmany of the approaches and methodologies that underpintodays most rigorous forest carbon projects. In doing so,it became the worlds first large-scale Reducing Emissions

from Deforestation and Degradation (REDD) project toscientifically prove that carbon benefits could be achievedby protecting standing forest. In 2005, NK-CAP becamethe first REDD project to be verified by a third partyusing rigorous standards based largely on those developedfor afforestation/reforestation projects under the KyotoProtocols Clean Development Mechanism. This

verification underscores the fact that well-designedREDD projects like NK-CAP can produce real,measurable emissions reductions as well as importantbenefits for biodiversity and local communities. In fact,since its inception, NK-CAP

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