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Carbon Emission Offsets

Carbon Emission Offsets. September 19, 2005. Gary Bull Faculty of Forestry, University of British Columbia Vancouver, Canada. Carbon Sequestration Carbon Markets 2004 Carbon Deals Carbon Actors – Intermediaries Challenges – People, Process. Does Carbon Sequestration Matter?.

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Carbon Emission Offsets

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

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

  3. Does Carbon Sequestration Matter? Bull

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

  5. Share of Emission Reduction Bull

  6. Market Buyers Bull

  7. Deals • Canada • Belize Bull

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

  9. Canada –voluntary market Bull

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

  11. Belize Bull

  12. Belize Project - Net Greenhouse Gas Removal by Sinks Bull

  13. Belize Forest Nursery Bull

  14. Belize – Carbon Ownership Bull

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

  16. Intermediaries • Lawyers • Accountants • Resource Consultants • Insurers • Engineers • Researchers Bull

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

  18. Types of Transaction Costs Bull

  19. Transaction costs Milne 1999 - CIFOR Bull

  20. Projects examples Bull

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

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

  23. Challenges Bull

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  40. Other activities • Biodiversity measurement in the Kootenays • ISO 14064 Bull

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

  42. Tools for creating deals Bull

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

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

  45. Financial Analysis Scenario 4: No Discounting Bull

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