Trade, Environment,
&
Climate Change
UPH-MTIC
23-27 June 2014
Table of Content
1. Climate Change Policy, Command
and Control, and Market Based
Approaches
2. Investing in Renewable Energy
through Clean Development
Mechanism
3. Other Types of Carbon Markets
4. Investing in Forestry through REDD+
5. Group Exercise
The image shows the
concentration of CO in
the atmosphere over a
period of time if
emissions continue
unaltered.
CO2 concentration
after 50 years of
unrestricted fossil
fuel burning (600
ppmv)
Present CO2
concentration
(386 ppmv)
CO2 (ppmv)
300
270
240
210
180
800
600
400
200
Thousands of Years Before Present
Climate change causes: natural greenhouse gases (GHG)
Carbon dioxide (CO2)
Source: fossil fuel combustion and land-use changes, particularly
deforestation
the most important GHG, but
lowest global warming potential (GWP) - 1
Methane (CH4)
Source: coal mining, landfill operations, livestock raising and natural
gas/oil exploitation and transportation
GWP - 21 ( 1t CH4 = 21 tCO2 in terms of global warming effect)
Nitrous oxide (N2O)
Source: fertilizer manufacturing, fossil fuel combustion (mainly in
transport sector)
GWP 310
Climate change causes: engineered greenhouse gases (GHG)
Hydrofluorocarbons (HFCs) and Perfluorocarbons (PFCs)
Alternative to ozone depleting CFCs and HCFCs
Source: manufacturing processes (e.g. refrigeration and air
conditioning equipment)
GWP: HFCs range from 140 to 11,700 (HFC23), CxFx range from
6.500 (CF4) to 9,200 (C2F6)
Sulphur hexofluoride (SF)
Used as a dielectric fluid (e.g. in power grids)
GWP - 23,900
Atmospheric lifetime of one molecule - 3,200 years
Most dangerous anthropogenic-induced GHGs
Annual greenhouse gas emission by sector
Source: Global Warming Art
Climate change: General UN Message
Science is clear: warming of climate system is
unequivocal and attributable to human activities
Severe impacts of climate change are already being
felt, particularly in developing countries, and demand
an urgent response
Economic assessments indicate that cost of inaction
will exceed the cost of taking action now by several
orders of magnitude.
9
International Response: UN Framework Convention on Climate Change
(UNFCCC) 1992
Objective: stabilize global GHG concentrations in atmosphere
Universally agreed: 189 countries have ratified/accepted UNFCCC
Principle of common but differentiated responsibilities:
Industrialized countries (Annex I) aim to restore GHG emissions to 1990
levels (no mandatory commitments thus legally non-binding)
Developing countries (Annex II) commit to build capacity of and facilitate
technology transfer to developing countries
Identifies two options to address climate change:
mitigation of climate change by reducing GHG emissions and enhancing
sinks, and
adaptation to the impacts of climate change
Both mitigation and adaptation are essential in reducing the risks of
climate change!!!
10
International Response: Kyoto Protocol, 1997
Kyoto Protocol amended UNFCCC with 2 principal provisions:
I.
Assigns mandatory (legally-binding) GHG emission reduction
targets to Annex I parties:
II.
11
Individual targets for each industrialized country: on average by
5% below 1990 levels
Establish time-frame (Kyoto commitment period): 2008-12
Developing countries and some economies in transition (nonAnnex I) countries do not have reduction targets
Introduce market mechanisms to allow industrialized countries to
meet their commitment in most cost-effective way by purchasing
GHG emission reductions from elsewhere:
from financial exchanges (Emission Trading)
from projects which reduce emissions (Clean Development
Mechanism (CDM) or Joint Implementation (JI))
International Response Map
PROBLEM
CONVENTIONS
- UN Framework
Convention on
Climate Change
(1992)
GLOBAL
WARMING
- Kyoto Protocol
(1997)
- [Post-Kyoto?]
(2015)
SOLUTIONS
Mitigation
Emissions Trading (ET)
Clean Development
Mechanism (CDM)
Joint Implementation
(JI)
Adaptation
Command & Control
Technology (input) standards
Required use of BBG/ biofuels
Required use of CFL lightbulbs
Performance (output) standards
US Clean Air Act > sets air quality standards
AMDAL
Command & Control
Input Standards
Output standards
Penal
Violation
Penal
Violation
Technology
Standard
Technology
Pollution
Standard
Company
2
Company
1
Compan
y3
Compan
yB
Compan
yA
Pollution
Command & Control
Pros:
Easier enactment & implementation
Easier monitoring
Clear enforceability (in theory)
Cons:
Uniform costs blind to unique capacities
Initial subsidies often needed
High monitoring & enforcement costs
Provides no incentive to do more than necessary
Information asymmetry between govt &
corporations
Market-Based Mechanisms
Objective: To Put a Price on
Externalities
An externality is a cost which
results from an activity which
affects an uninvolved party who
did not choose to incur that cost.
Pollution is an externality because
although it is emitted by a
producer, it affects the society,
and society must pay for the cost
ultimately (social cost).
Pricing externality means
Types of Market-Based Mechanisms
Tax
Cap-and-Trade
Tax
Companies with High Costs of Compliance
Companies with Low Costs of Complianc
Carbon
Tax
Emissions
Threshold
Emissions
Company
2
Company
1
Compan
y3
Compan
yB
Compan
yA
Tax
Pros:
Relatively simple to implement
Liberty to choose compliance mechanism
Commonly understood concept of disincentive
Money goes to govt
Emission leakage
Cons
Govt-dependant enforcement relatively difficult
Uniform costs blind to unique capacities
Money goes to govt
Emission leakage
Cap & Trade
Companies with High Costs of Compliance
Companies with Low Costs of Complianc
Carbon Credits sold to meet their emissions cap
Business
As
Usual
Reduction Program
1 ton CO2
Emissions
Cap
Emissions
1 ton CO2
1 ton CO2
Company
2
Company
1
Compan
y3
reductions
Compan
yA
Compan
yA
Carbon
Credits
Carbon
Credits
Carbon
Credits
Cap & Trade
Pros
Cost-efficiency
Self-monitoring mechanism
Acts as incentive & disincentive at the same time
Cons
Only works for atmospheric pollution
Complicated implementation
The reduction needs to be additional to businessas-usual reductions (Additionally Principle)
Table of Content
1. Climate Change Policy, Command
and Control, and Market Based
Approaches
2. Investing in Renewable Energy
through Clean Development
Mechanism
3. Other Types of Carbon Markets
4. Investing in Forestry through REDD+
5. Group Exercise
IPCC, UNFCCC, Kyoto
Protocol
Intergovernmental Panel on Climate
Change
United Nations Framework Convention on
Climate Change
North & South agree to mitigate climate
change before it is too late
Agree that they have Common but
Differentiated responsibilities.
24
PROBLEM
INSTRUMENTS
- UN Framework
Convention on
Climate Change
(1992)
GLOBAL
WARMING
- Kyoto Protocol
(1997)
- Non-Treaty
Actions
CARBON MARKETS
Clean Development
Mechanism (CDM)
Emissions Trading
Systems
Domestic Offset
Schemes
Voluntary Carbon
Market
The Kyoto protocol
Annex I
Non-Annex I
Not ratified
26
The Kyoto Protocol Mechanisms: economic rational
Developed countries:
Kyoto allows Annex I countries to purchase GHG
emission reductions instead of reducing emission
domestically
Costs of complying with Kyoto targets is prohibitive for
Annex I countries (most EU members with highly efficient,
low GHG polluting industries, and high environmental
standards)
Developing countries:
Kyoto encourages non-Annex I developing economies to
reduce GHG emissions since doing so is now economically
viable because of the sale of GHG emission reductions
27
Kyoto Protocol
It relies on market based flexible
mechanisms to reduce GHGs
emissions to mitigate GW.
Emission trading (trading of
allowances between Annex I
governments) Like between the EU
Members
Clean Development Mechanism
(CDM) (projects in Non-Annex I
countries with participation of Annex I
countries)
Joint Implementation (JI) (projects
28
Clean Development
Mechanism
Annex I (industrial countries)
Non-Annex I (developing countries)
e.g. Germany
e.g. Indonesia
CERs sold to Annex I to meet their emissions cap
Business
As
Usual
Clean
Development
Mechanism
1 ton CO2
Emissions
Cap
Emissions
1 ton CO2
1 ton CO2
Company
2
Company
1
Compan
y3
reductions
Compan
yA
Compan
yA
Certified
Emissions
Reductions
CER
CER
Emission trading (cap-and-trade)
Kyoto Protocol sets a limit or cap on the amount of GHG that can
be emitted
Each Annex I country is given credits or allowances (Assigned
Amount Units or AAU), i.e. the right to emit a specific amount which
corresponds to the cap
Countries that emit beyond their allowances must buy credits from
those who emit less than their allowances
This transfer is referred to as a CARBON TRADE
CAP
Trade in AAUs
Emissions in reporting year
Allocated allowances (AAU)
Country
A
30
Country
B
Surplus of certificates
Deficit of certificates
Generating Carbon Credits
GHG emissions
Without project
emission level
Carbon
credits
With project
emission level
Project
commissioned
Time
Project based emission reductions need to be calculated and verified
1 reduced Ton of Carbon Dioxide equivalent = 1 Carbon Credit
hereafter they can be sold on the open market.
31
GWP & Carbon Credits
Formula
Name
Global Warming Potential
CO2
Carbon dioxide
CH4
Methane
21
N2 O
Nitrous oxide
310
PFCs
Perfluorocarbons
9200
HFCs
Hydrofluorocarbons
11700
SF6
Sulphur hexafluoride
23900
If one tonne of GHG emission is
reduced then number of carbon
credits issued will be equivalent
to the GWP.
32
Supposed benefits of the market
mechanisms
Help identify lowest-cost
opportunities forreducing
emissionsand attract private sector
participation in emission reduction
efforts.
Cost of limiting emissions varies
considerably from region to region,
thebenefit for the atmosphere is the
same, wherever the action is taken.
Developing nations benefit in terms
of technology transfer and
investment brought about through
collaboration with industrialized
nations under the CDM.
33
Carbon market: Project (micro) - level
CDM Project Development Cycle
Carbon Credits needs to be certified and
verified
(UN BODIES and Govt)
CDM Eligibility Criteria
Project Examples
34
CDM: The long and winding road
Preparation and Review of the Project
Submission of the Project Information Note (PIN)
Project completion
Carbon Asset Due Diligence
Development of the Project Design Document (P
eriodic verification & certification
Construction and Start up
Validation process
Acceptance and Registration of the project
Project Appraisal and Negotiation
Signing of Emissions Reductions
Purchase Agreement (ERPA)
Source: adapted from Carbon Finance Branch, World Bank 20
35
CDM: The long and winding road
Phase
Responsible Entity
1. Project Design Document
Project-Developer
2. Letters of Approval (NATIONAL)
Designated National Authority
(DNA)
3. Validation (UN BODY)
Designated Operational Entity
(DOE)
4. Registration (UN BODY)
CDM Executive Board (EB)
5. Monitoring
Project Developer
6. Verification and Certification
Designated Operational Entity
(DOE)
7. Issuance of CERs
CDM Executive Board (EB)
8. Forwarding (tracking of buy
and sell)
CDM Registry Administrator
Designated National Authority (DNA)
Project participants shall get written approvals of CDM project from
the DNA of each Party involved
PPs may get written approvals in step (1), (2) or even (3), but before
a request for registration
The written approval from DNA must confirm:
-
The fact of Kyoto Protocol ratification; (Country)
Voluntary participation in CDM project activity; (Additionally Principle)
Contribution to sustainable development of the host Party
Additionally, the letter may contain:
-
37
Authorization of project participants (official confirmation of CER
ownership-owned by the developer)
DesignatedNational Authority (DNA)
DNA was established under KepMenLH No. 206/2005 jo. 522/2009.
DNA members consist of representatives from 14 govt institutions:
Coordinating Ministry of Economy
State Ministry of Environment
State Ministry of National Development Planning
Ministry of Energy and Mineral Resources
Ministry of Forestry
Ministry of Industry (CDM Project)
Ministry of Foreign Affairs (CDM steming from International treaty)
Ministry of Home Affairs (wants to know everything in the )
Ministry of Transportation (can be a transportation project, e.g. switching fuels)
Ministry of Finance (deals with govt revenue, wheter CDM projects can generation non-tax:
paying for licenses)
Ministry of Agriculture(can be a CDM n project, e.g. switching fuels)
Agency for Technological Assessment and Implementation (Maybe theres aquisition)
National Land Agency
National Council for Climate Change
Designated Operational Entity (DOE)
DOE is domestic or international legal entities that have been
accredited by the CDM Executive Board (Info in UNFCCC data base
http://cdm.unfccc.int/DOE)
It has two key functions:
1)
To validate and subsequently request registration of a proposed CDM project
activity (Step 4)
To verify emission reduction of a registered CDM project activity, certify as
appropriate and request the CDM Executive Board to issue CERs (Step 7)
verification is done periodically at the request of PPs
2)
12 DOEs officially accredited by CDM EB; only two from non-Annex I
Parties (South Korea and South Africa)
39
CDM Executive Board (CDM EB)
CDM EB is an international CDM governing body
It consists of 10 members (& 10 alternates): 2- from Annex I , 2 from non-Annex I, 1 from each UN region, 1 from small island
developing states
Its key functions:
to register CDM projects (Step 5) and issue CERs (Step 8)
to approve baseline and monitoring methodologies
to accredit DOEs
to do any others tasks according to the decision of COP/MOP of
UNFCCC
40
Project Participants
CDM Project owner (CER seller):
- Any legal entity officially registered in host country that can develop
and operate CDM projects (business, municipalities, NGOs)
- Each host country may establish additional criteria for project
owners (e.g. financial sustainability or share of foreign capital)
- Others: CDM broker, project financier, technology provider, project
operator, etc
CDM Project Investor (CER buyer):
- An entity that purchases CERs from a CDM project. The investor is
usually from an Annex I country and can be a corporation, a
government body or non-governmental organization, or an
international carbon fund (e.g. World Bank Prototype Carbon Fund)
41
Various Project Sectors
PROJECTS
Energy
S
E
C
T
O
R
Renewable
energy
(non-fossil
fuel)
Energy
efficiency
Others
Solar, wind, biogas, biomass,
hydro, geothermal, hybrid
systems, and waste.
Residential, service, industry,
agricultural
machineries/technology.
Agriculture (e.g. improved
fertilizer, water management),
fuel switching, transport, waste
management (irrigation), HFC.
Forestry Aforestation Replanting land that hasnt been
forest for at least 50 years
Reforestatio Replanting land that used to be
n
forest before 1990
Reduced Emissions from
CDM (basic) eligibility
1.
VOLUNTARY
2.
ADDITIONAL
Emissions would not have been reduced
without the CDM, because its a financing projec
3.
SUSTAINABLE
The project must fulfill sustainability requireme
4.
APPROVED
It
METHODOLOGY
It must not be required by law or
mandatory
uses UN-approved methods of reduction
choose and pick,
CDM Eligibility Requirements: Additionality
a) CDM projects must be additional. This concept requires careful attention.
b) Official language
(A CDM project must achieve) Reductions in
emissions that are additional to any that would
occur in the absence of the certified project activity.
A CDM project activity is additional if
anthropogenic emissions of greenhouse gases by
sources are reduced below those that would
have occurred in the absence of the registered
c) Interpretation
activity
CDM
CDM project
status will be
given only to those projects
that cannot be implemented without it.
Those projects that can/will be carried out in the
course of regular business (Business-As-Usual BAU - projects) are disqualified.
d) Paraphrase
CERs are offered as an incentive to encourage developers to
undertake GHG mitigation projects that do not normally happen.
44
CDM Eligibility Requirements: Measuring emission
reductions
CERs = Baseline emissions Project
emissions
The baseline is the amount of GHG that would be
emitted in the absence of the CDM project. It is
not necessarily the current amount of emissions.
KEY:
ability of a project developer to identify and
prove the selection of baseline scenario;
CDM projects must follow official UN Baseline
Methodologies (or get their new baseline
methodology approved by UN)
45
Selection of
project baseline
46
Source: GTZ
CDM Eligibility Requirements: Sustainable
Sustainable Development:
Development that meets the needs of the
present without compromising the ability of
future generations to meet their own needs. It
contains within it two key concepts:
1. The concept of needs, in particular the
essential needs of the worlds poor, to which
overriding priority should be given; and
2. The idea of limitations imposed by the
state of technology and social organization
on the environments ability to meet present
and future needs.
CDM Eligibility Requirements: Sustainable
The Indonesia DNA has defined four sustainable development
criterion:
1. Environmental Sustainability
1. Natural resource conservation
2. Local community health and safety
2. Economic Sustainability
1. Local community welfare
2. Local community income
3. Social Sustainability
1. Local community participation
2. Local community social integrity (no conflicts triggered)
4. Technological Sustainability
1. Transfer of know-how
2. Relevant technologies
The above checklist forms part of the Application Form for
National Approval of a CDM Project. All indicators must be
CDM Eligibility Requirements: Sustainable
Problems with the sustainability criteria:
1.
2.
3.
4.
Lack of standard criteria globally recognized
Backwards incentives of allowing host countries to define criteria
Exclusion of sustainability from CER prices
Lack of correlation between sustainability and emissions reductions
Will this ultimately be a social benefit?
CDM Eligibility Requirements: Sustainable
Law No. 32 of 2009 on the Environment:
1. The government is required to prepare a
Strategic Environmental Assessment to
ensure that the principle of sustainable
development is integrated into development
policies, which should then become a
foundation of all policies and planning in a
given area;
2. The Strategic Environmental Assessment
should be prepared with the participation
of the public and stakeholders through
dialogue, discussion, and public
ENERGY EFFICIENCY PROJECT
Solar cook stove
Business as usual
Location: Aceh
Method:
Solar cook stoves imported from Germany in
prefabricated kits, local assembly, distribution to
households
Frying, steaming, baking, etc, and simmering
can boil 6 litres of water within 55 minutes.
Funding:
Fully funded by the supplier (Klimaschutz e.V.) in
return for CERs Payment is used to buy the stoves
Potential CERs:
3,500 per year (for 1000 solar cookers)
24,500 cumulative for 7 years
Benefits:
Free technology and free energy
Saves money - increases welfare
Supports local food-selling businesses
Eliminates dependence on kerosene and firewood
Reduces lung and eye disease caused by dirty
RENEWABLE ENERGY PROJECT
Micro Hydropower
Location: Across Indonesia
Method: Program of Activities
Install approx 100 small hydropower plants
delivering energy to main grids and small
isolated grids for rural electrification
Combined installed capacity of no more
than 15 MW
Funding: Equity and loan by South Pole
Carbon Asset Management Ltd. (a BANK)
Potential CERs
973 per project per year
2,724,400 cumulative for 100 projects in 28
years.
Benefits:
Rural electrification to isolated areas
Electricity independence decentralized, no
bills
No emissions minimal impact on
environment
WASTE MANAGEMENT PROJECT
Landfill methane capture
Location: TPA Suwung, Denpasar; Yogyakarta
Method:
Waste separation and controlled
decomposition
Capture of methane for electricity
generation
Parties:
PT Navigat Organic Energy Indonesia
(developer)
Mitsubishi UFJ Securities Co. Ltd.
(consultant)
Funding: General Electric (machinery)
Potential CERs:
108,749 per year [=1000 cars]
761,246 over 7 years
Benefits:
Generates 10 MW electricity = 700
households
Improve municipal waste management
Table of Content
1. Climate Change Policy, Command
and Control, and Market Based
Approaches
2. Investing in Renewable Energy
through Clean Development
Mechanism
3. Other Types of Carbon Markets
4. Investing in Forestry through REDD+
5. Group Exercise
PROBLEM
INSTRUMENTS
- UN Framework
Convention on
Climate Change
(1992)
GLOBAL
WARMING
- Kyoto Protocol
(1997)
- Non-Treaty
Actions
CARBON MARKETS
Clean Development
Mechanism (CDM)
Emissions Trading
Systems
Domestic Offset
Schemes
Voluntary Carbon
Market
Supranational, national, and
sub-national, & voluntary Carbon Markets
European Union Emissions Trading Scheme (EUETS)
California Carbon Exchange (CCX)
Costa Rica Voluntary Domestic Carbon Market
(MDVCCR)
US Regional Greenhouse Gas Initiative(RGGI)
(Between federal states)
Australia, New Zealand, Japan, China, Korea
DISCUSS: ETS, RIP?
Other Carbon Markets
(Voluntary or Compliance) Buyer
Seller
Carbon Credits sold to Buyer to meet their emissions c
Business
As
Usual
Carbon
Credit
Project
1 ton CO2
Emissions
Cap
Emissions
1 ton CO2
1 ton CO2
Company
2
Company
1
Compan
y3
reductions
Compan
yA
Compan
yA
Verified
Emissions
Reductions
VER
VER
Legal Aspects of Carbon
Trade
Carbon Contracts Provide a documented framework
within which emission rights are bought , sold ,
acquired, transferred.
Ownership of Atmosphere : The Property Rights Issues
Nature of Carbon Contracts & Carbon Trade ERs a new
commodity
Ownership of Emission Reductions (ERs) and Legal
Process of Transfer- If Project is legal in domestic
jurisdiction and ERs are certified and verified by
authorised agents, then ERs are legal commodities
Carbon Contracts are called Emissions Reductions
Purchase Agreement (ERPA)
ERPAs Key Elements
The key elements in any ERPA will cover the
following areas:
Quantity of CERs to be delivered
Price per unit
Delivery schedule
Consequences of non-delivery
Other default events
ERPAs are usually long-term agreements and need to cover a
range of potential scenarios, so they will generally be more
complex than this, often extending to 30 40 pages.
Negotiating, Drafting & Executing
ERPA Or Carbon Trade Document
Key Issues for Project Developer:
Rewards you wish to achieve:
Maximizing future revenue from CER?
Using ERPA as collateral to obtain further
finance?
Upfront funding for project costs?
Overall Risks:
What barriers does the project face before
CERs delivered?
How big is potential for failure?
Balancing Rewards with Risks
Negotiating, Drafting & Executing
ERPA Or Carbon Trade Document
CER pricing and terms of sale
Types of Agreement
Spot Agreement (CERs are issued and ready for delivery)
Future Delivery Agreement (CERs to be issued in future)
Call Option (Buyer pays upfront premium; has right to
buy later at fixed price)
Put Option (Seller pays upfront premium; has right to
SELL later at fixed price)
Types of Pricing
Fixed Price
Floating Price
Combination of fixed and floating
Negotiating, Drafting & Executing
ERPA Or Carbon Trade Document
Risks
Country Risks
Change in laws
DNA doesnt approve
General Project Risks
Force Majeure
Project under-performs
Market risks
CDM Risks
Post-2012 uncertainty
Failure to validate and register or verify credits
Project Entity Risks
Credibility
Lack of resources
Financial risk
Negotiating, Drafting & Executing
ERPA Or Carbon Trade Document
Key Contractual Provisions
Representation and Warranties
Liabilities and Indemnities
Default,Termination and Remedies
Progress Reports and Audit Rights
Confidentiality
Arbitration and Dispute Resolution
Force Majeure
Third Parties
Compliance of Local/Domestic Laws
Taxes, Levies and Charges
Table of Content
1. Climate Change Policy, Command
and Control, and Market Based
Approaches
2. Investing in Renewable Energy
through Clean Development
Mechanism
3. Other Types of Carbon Markets
4. Investing in Forestry through REDD+
5. Group Exercise
REDD+
Reducing Emissions from
Deforestation and Forest
Degradation (REDD+) is a global
initiative designed to pay groups or
countries for protecting their forests
and reducing emissions of GHG
(countries that have tropical forests
have to be ). The plus takes the
mechanism to another level by
enhancing the lands capacity for
Bali Roadmap 2007
Encourages developing country parties to
contribute to mitigation actions in the forest
sector by undertaking the following activities as
deemed appropriate in accordance with
respective capabilities & national circumstances:
a. Reducing emissions from deforestation
b. Reducing emissions from forest degradation
c. Conservation of forest carbon stocks
(warehouse for carbons)
d. Sustainable management of forest
e. Enhancement of forest carbon stocks
(improving the quality to reserve carbons)
REDD+
Business As Usual- Baselines
Forest heterogeneous
Palm oil and pulp are plantations: homogenous
Emissions
From
Forest
Conversion
Reforestation or Avoided Deforestatio
No compliance market
Managed =>
reduce
emissions=> sell
carbon credits Sold
to voluntary
carbon credit buyer
Palm Oil
Palm Oil
1 ton CO2
Mining
Pulp
Pulp
Compan
y1
Compan
y3
1 ton CO2
credits
1 ton CO2
credits
1 ton CO2
credits
1 ton CO2
credits
1 ton CO2
1 ton CO2
Company
2
Mining
1 ton CO2
1 ton CO2
1 ton CO2
1 ton CO2
REDD+: voluntary but
popular
109 REDD activities around the world
44 demonstration activities
65 readiness activities
20 demonstration activities in
Indonesia
REDD+ Regulations
Permenhut 68/2008 on
Demonstration Activities for REDD
Permenhut 30/2009 on REDD
Permenhut 36/2009 on Carbon Use
Permenhut 20/2012 on Forest Carbon
Inpres 2013 on Forest License
Moratorium (stopping the licenses to convert
forests, 2 years )
[Norway US$1 billion grant for
REDD+]
Market-regulated REDD+
Acquire Forest Concession (hard in Indonesia because of
the beaurocracy, many diff. interests- project owner/developer )
Project Design Document (usually done by a consultant)
Verified by Voluntary Carbon Standard
(VCS) or Climate, Community, and
Biodiversity Standards (CCB) a higher
price for credits
Monitored and Verified (project owner are
verification)
Issuance of Credits
Verification
Proof of title that demonstrates their
right to the GHG emissions
reductions and the ownership of the
project.
Additionally: forest conservation
would not occur in the absence of the
REDD incentive
Permanence: both parties perform
obligations for the duration of the
contract
Some Problems with REDD+
Leakage: deforestation is avoided in one place but
forest destroyers might move to another area of
forest
Additionally: almost impossible to predict what
might have happened in the absence of the REDD
project (no one has claimed the forest, done by estimates)
Permanence: carbon stored in trees is only
temporarily stored and when trees die will be
released back to atmosphere (not really a problem at the
present because trees can have a long time span )
Measurement: accurately measuring the amount of
carbon stored in forests and soils is very complex.
DISCUSS: The Finitude of Forests
Table of Content
1. Climate Change Policy, Command
and Control, and Market Based
Approaches
2. Investing in Renewable Energy
through Clean Development
Mechanism
3. Other Types of Carbon Markets
4. Investing in Forestry through REDD+
5. Group Exercise
Simulation: Project CDM Geo
The Forest is a 50,000 hectare area
designated as Convertible Production
Forest. The forest concession is owned by
PT Agro, a palm-oil developer, with rights to
convert the forest into a palm oil plantation.
PT Pertamina owns a pinjam-pakai permit
for underground coal mining on the Forest.
Indigenous communities are scattered
throughout the Forest, for years
growing their own food & selling
weaved baskets.
Simulation: Project CDM Geo
Group I: Energy Developer PT.
Pertamina Geo
Group II: Forest Concession Owner
PT. Agro
Group III: Local Community
Group IV: Government of Indonesia
Project CDM vs. REDD
Group I: Energy Developer PT
Pertamina Geo
To put forth proposal on CDM project to
generate carbon credits by avoiding coal
extraction and shifting to geothermal
extraction in the Forest
To make sure the proposal is approved
by local community and government
Project CDM vs. REDD
Group II: Forest Concession PT Agro
To put forth proposal on REDD+ project
to generate carbon credits by avoiding
the conversion of its forest into palm oil,
and therefore conserving the Forest
To make sure the proposal is approved
by local community and government
Project CDM vs. REDD
Group III: Local Community
To ask a lot of questions scrutinizing
the impact of both proposed projects to
their community and livelihood
To decide which is more favorable to
them (CDM)
Project CDM vs. REDD
Group IV: Government
To identify whether each proposal meets
requirements
To scrutinize baseline, additionally,
impact to locals, society, and
environment
To want something in return
To issue letter of approval to one of the
projects
