This chapter hitherto has assumed that the carbon sequestration projects analysed here will achieve permanent carbon sequestration. This assumption is not wholly unreasonable. Some of the forestry project proposals contain plans to utilise their harvested timber in furniture or in other means to prevent the carbon stored being released to the atmosphere.
The assunqjtion that carbon is stored permanently by the forestry projects is reversed here. This section assumes that all of the carbon stored by the project is released in 2030. The undiscounted sum of all carbon sequestration achieved over the project
Y ”/C
is discounted at 3% back to 1997 from the year 2030: — ■— This sum is (1.03)"'
entered on the spreadsheet in the year 2030 as a negative value. We thus envisage! projects that cumulatively store more and more carbon and then release that carbon in
2030. J
Were a 0% discount rate used, no net carbon sequestration, measured in 1997, would have been achieved by such a project. The cost of carbon sequestration for the project in such a situation would be infinite. A 3% discount rate is used in this analysis. We see in column six, table 3.19, that carbon sequestration costs nearly double in this scenario
compared to our main results given in table 3.15. ^
The cost of carbon emission reduction in three projects is now over 50$/tC. Five o f the eleven projects have costs greater than $10/tC. AH have the projects have been treated equally. But ironically, some of the projects that initially (in table 3.15) had higher carbon sequestration costs had these higher costs because they involved expensive measures to keep carbon stored for long periods. The cost o f Biodiversifix carbon sequestration, for example, should not be increased to the same extent as the cost of some o f the other projects because Biodiversifix has aimed for and budgeted for long term carbon sequestration.
Table 3.19: Carbon Sequestration Costs When Carbon Stored is Released to the Atmosphere in 2030 Project No.: Table 3.2 Project Letter: Appendix 3B
Method Country Cost
$/tC
Cost $/tC
FACE 4 Carbon planting Malaysia 4.0 8.6
FACE 5 Carbon planting Czech Republic 47.7 83.1
FACE 6 Carbon planting Ecuador 2.7 4.6
FACE 7 Carbon planting Uganda 4.4 6.4
FACE 8 Carbon planting Netherlands 81.0 118.0
A Carbon planting Russia 4.6 8.4
B Carbon plant & protect Costa Rica 13.4 24.2
Rio Bravo C Carbon plant & protect Belize 2.8 4.9
D Carbon protecting Costa Rica 3.2 5.5
Biodiversifix H Carbon planting Costa Rica 24.4 50.9
I Carbon planting Costa Rica 15.5 30.8
(Source: own table)
3.7.5 Additionality
The results presented above have been produced on the assumption that the data used were wholly satisfectory. There are two criteria against which a project’s data may need to be adjusted to get a truer price for the cost of abatement in a fully fledged carbon market: ‘additionality’ and ‘carbon focus’. The additionality criterion demands that the carbon emission reduction achieved by the project is calculated accurately and is shown to be incremental to the baseline. ‘Carbon focus’ is a criterion to determine that the correct costs are calculated. Adjusting for additionality would increase a project’s cost of carbon capture, while adjusting for carbon focus would reduce a project’s emission reduction cost. Additionality is discussed here, while carbon focus is examined in chapter 4.
Emission reduction is additional if it would not have been achieved under the baseline of normal private sector activity (section 2.4.5). The problem with this definition, however, is that at present, in the joint implementation pilot phase, there is little benefit associated with reducing emissions: no credits are awarded. This raises the possibility that some
USIJl projects are those that would have happened anyway and that any emission
reduction that they achieve is therefore not additional. . \
• r
■
Richards (1995, p. 14) likens the USIJI pilot phase, \
‘to a delicatessen that wants to test market a roast beef sandwich, but does not
\
want to invest in the roast beef until it knows there will be sufficient demand to \ justify the expense. So the deli places meatless roast beef sandwiches in its dispky
window and bases its estimate of interest in the real product on the basis of sales jof the unsatisfactory prototype’.
Richards concludes that
‘What is remarkable about existing joint implementation programs is not that few projects have developed, but rather that any projects have developed at
In fact there are some benefits from reducing carbon even in a world of no carbon credits: namely positive public relations, the chance that emission reduction achieved in the pilot phase is awarded with permits ex post via the grandfathering of permits and (for governments) the opportunity to show that joint implementation can work.
Despite this, additionality is still a problem; some of the projects studied here may not be wholly additional. Forestry protecting prefects suffer from leakage; the amount of carbon emission reduction they achieve is lessened as a result. Many of the fuel switching projects considered here would have happened anyway, or would have been able to operate as private sector projects had t
emission reduction claims should correspc
/
ley been delayed for a few years: their carbon ndingly be reduced."
The leakage problem is particularly grave for forestry protection projects. Forestry protecting projects may preserve ^ particular forest, but little net carbon savings may be
" The idea of adjusting benefits to ^proximate Wiolly additional carbon emission reduction is similar to a technique used by Van der Burg (1994, p. 94). He argues that one should predict the probability that a project is additional. If the probability that a project is additional is Y, one multiplies the emission reduction claimed by the project %iy Y.
made. Deforestation occurs because of demand either for land or for wood. When local people seek firewood, protecting one stretch of forest will cause them merely to search for wood elsewhere, unless the project provides wood by other means as part of your project. Admittedly, an extra cost may be imposed on those cutting down trees by such projects; people may have to travel further to cut down trees at another site, but this cost is small and will only save a small amount o f carbon.
Project 12 is the forestry protection project in the USIJI projects. This is a project to buy 2,000 hectares^^ of a 12,500 hectare park in Costa Rica which is threatened with destruction. How many carbon credits should be awarded for this project? The project proposal document claims credits for all the carbon in the 2,000 hectares of forestry that they are protecting. Is this right? 2,000 hectares worth of carbon is the right amount to claim only if all of the larger 12,500 hectares site would have been cut. If only say 6,000 hectares of the larger 12,500 hectares forest would have been cut down in the baseline, we do not know that 2,000 hectares would have been amongst them. Under these circumstances the project should only receive 48% (6/12.5) of the 2,000 hectares worth of carbon credits.
What then of leakage in this project? Will the preservation of this 2,000 hectare site merely lead other forests to be cut down? The project proposal is aware that, if leakage is ignored, protecting a forest is a much cheaper way to gain credits than planting a forest. The project document states that,
‘secondaiy forests generally do not accumulate as much carbon as primary forests for many years; thus, saving a hectare of existing forest that otherwise would be lost can effectively ofifeet for many years the emissions o f as much carbon as several hectares of new tree growth’.
The project proposal argues that all forests that are not already protected within the Costa Rican forestry system wül be cut down under the baseline of no intervention. It then
argues that because of this, there is no chance of leakage from this project. Those prevented from logging or destroying the project’s forests will not be displaced into destroying another forest because there will be no alternative forest to destroy!
Even if this baseline for Costa Rica is realistic and there is no chance of leakage within Costa Rica itself, however, leakage could spread to neighbouring countries. Once this point is accepted, the way is clear to accepting that the project achieves little net carbon capture. The alcoholic who is banned from drinking in his local pub is not cured. He can go to the next nearest pub and drink there. As it is with the alcoholic, so it is with
society’s demand for wood or land. , J r \
^ i r 0
Protecting a particular forestry site from destruction does have value; there is inherent value in that particular site. However, it would be wrong to claim that in protecting a site a net carbon sequestration gain is made, if the strength of the demand for wood or land
/
simply meant that forest elsewhere was destroyed.
Forestry planting projects will not suffer so much from leakage as forestry protection projects. Forestry planting projects might suffer leakage if the forests were planted in areas of high or rapidly rising land prices. In such cases the demand for cleared land could be met by cutting down other forests, or the project itself may break down as landowners realise that their land can achieve a higher economic return using the land for something else. Forest planting projects will not suffer from leakage in this way because forest plantation projects are usually undertaken in areas of low value marginal land.
Kolchugina of Oregon State University and an organiser of the Rusafor project argued that at present there is no market for land in large parts of Russia. Land use is controlled by the Russian Federal Forestry service, a highly centralised body that has operated since the time of Peter the Great. Their central control prevents leakage: trees planted in one location would not lead to deforestation at another site, because no market operates for that land. Although this is an interesting argument, it is probably not wholly correct.
Leakage could occur; demand for land could leak out to land not controlled by the Russian Federal Forestry service and the hold of the Forestry service could weaken over time. It is true, however, that there is a great deal of marginal land in Russia that is unlikely to be claimed for other purposes and is therefore ideal for forest planting.
The FACE forestry planting project in Malaysia is likely to suffer leakage. With rapidly rising land prices there, what guarantees are there that this project will be maintained until 2016 when carbon capture ceases, let alone for the full ninety nine years during which the captured carbon is meant to stay stored in the forest? FACE would only state that their projects are only initiated if FACE is convinced that the project would be maintained for its planned duration. FACE admitted that legally they can do little if the land is converted to another use.
We have considered above the question of forests being cut down. What of the opposite problem, if our project occupies a site that would regenerate into a carbon store of its own accord? Dan Janzen, manager of the Biodiversifix project, a forest planting project in Costa Rica (project number 16 on table 3.2) argues that without the project, the carbon stored per hectare will not increase:
Tf there is no project on the private lands, no regeneration will occur. The owners do not want it to, and will prevent it fi"om doing so through setting ‘accidental’ fires and cutting by hand if necessary....On the private land there will be no regeneration without the project (they will stay crummy pasture, without the money available to turn them into private plantations, but generating just enough income to keep their owners doing it, given that they are low-income people and have no buyer to help them to liquidate the asset and get out, wiiich they would all like to do’ (Janzen, 1995).
The USIJI secretariat asked Janzen if protecting this forest would prevent people fi*om scavenging for wood there, forcing them to scavenge elsewhere? Janzen argued that very few households in this region of Costa Rica still used wood for burning, most have now
turned to gas stoves or to electricity. The non carbon opportunities on the site are limited, meaning that the desire to covert the land to a non carbon usage now or in the future will be limited. Widespread leakage is unlikely.
The table below sets out our best estimate of how much each project’s figures should be adjusted to meet the additionality criteria. Most important is the ranking o f different projects according to how much they should be adjusted and the reasons behind different groups’ adjustments. Forestry planting projects located in areas with low land prices wfil not suffer fi*om leakage and so will achieve fully additional carbon sequestration $ (approximately 100%). Forestry protecting projects will not achieve as much carbon emission reduction as they claim (approximately 25%). Projects that are a mixture of forestry planting and forestry protecting will be in between these two extremes (approximately 80%). Were date adjusted according to these figures the price o f carbon sequestration by forestry protection projects would rise by 2.5 times and for planting and protecting projects by 25%.
Table 3.20: Suggested Alterations To Achieve 100% Additionality For Forestry Projects
Project Type Project Names % of Carbon Emission
Reduction Claimed That is Additional
Multiply Cost of Carbon Capture By
Forest planting FACE projects (4-8) Rusafor (9)
Biodiversifix (16) K linkid?)
approximately 100% 1.0
Forestry protecting Ecoland (12) approximately 40% 2.5
Forest planting and protecting
Carfix (10) Rio Bravo (11)
approximately 80% 1.2 (Source: own table)
Four questions must be asked to test if fuel switching projects are additional. Firstly, would each project have been possible as a straightforward private sector project? Secondly, even if one accepts that the project could not have taken place now, could it
have done so in four or five years time? (This is important because if the private sector did deliver such a project in four or five years time, the USIJI project should gain carbon credits only for the four or five years). Thirdly, would all of the energy that the project displaces would have come fi-om fossil fuel production. (If the USIJI project only displaces power fi-om a renewable energy source, the USIJI project does not achieve any emission reduction). Finally, does power newly supplied by the project displace fossil fuel based power or merely supplement it? If a USIJI renewable energy source replaces wood burning or a new fossil fuel source, the project achieves emission reductions; but if the baseline alternative to the new renewable resource was no new energy, there may be no emission reduction.
Table 3.21: Suggested Alterations to Achieve 100% Additionality for Non Forestry Projects
Project Type Project Name % of Carbon Emission
Reduction Claimed That is Additional
Multiply Cost of Carbon Capture By
Fuel switching Plantas Eolicas (13) Decin (14) Aero Energia(lS) Dona Julia (19) Tierras Morenas (20) Bio-Gen (21) El Hoyo (22) approximately 66% 1.5
Enersol Enersol (15) approximately 100% 1
Rusagas Rusagas (23) approximately 100% 1
(Source: own table)
These latter two questions are answered fully in the project proposal documents for many fuel switching projects. For example, the four Costa Rican fuel switching projects are guided by the USAID (1992) study asserting that their only 75% of their wind generated power would displace fossil fuel power in Costa Rica.
However, the former questions on additionality are problematic. Several o f the fiiel switching projects would have been undertaken even if the USIJI did not exist. The Bio-
Gen project was well advanced in its development as a successful private sector project when it gained accreditation. John Morrissette of Charter Oak energy, the company in charge of the Plantas Eolicas project admitted his company was planning to undertake the project before they became aware they could apply for USIJI accreditation. The feet that there are already private sector wind power projects operating successfully in Costa Rica raises questions about the additionality of the USIJI wind projects in Costa Rica.
The Enersol project has taken great pains to claim only wholly additional carbon as credits. This project supplies solar power units to households in rural Honduras. The project involves lending money to households that are not able to buy systems outright, due to lack o f funds or credit. The borrowed money is paid back over a long period. Steve Kaufinan of Enersol reported that whilst about 1,200 solar power units had been supplied by this leasing arrangement, perhaps three times as many units had simply been sold outright to wealthier households. Enersol is rightly not claiming the carbon emission reduction to be achieved over the lifetime of these units as carbon credits, as these units were baseline sales. However, this phenomenon raises the issue o f organisations that start out undertaking joint implementation projects finding out that they can operate through private sector (baseline) means. These organisations may decide to move into private sector activity and lose interest in joint implementation and carbon credits.
Notice what is happening with the outright sales o f Enersol solar power units. These baseline sales achieve negative cost carbon emission reduction: the buyers o f solar power units do not buy the units to reduce carbon emissions, but because they produce power at a lower cost or more conveniently than other power sources; so the carbon benefits come for fi*ee.
By not including outright sales o f solar units in its calculation, Enersol has avoided one way of exaggerating the emission reduction that it achieves. However, one can question the assumption that the solar units will be used instead of kerosene, so displacing carbon emissions fi-om kerosene fires. Households may use the units as well as kerosene, by
simply increasing their energy usage. The question then becomes, is the solar unit replacing another source of power that would have been used to meet this increased energy need, or have the units increased energy use beyond what would have been possible under the baseline? Emission reduction may have been achieved in the former case but not in the latter.
Several of the fuel switching projects could have gone ahead without USIJI accreditation. Several are claiming credits for emission reduction long into the future: credits should only be awarded until private sector activity in this sector becomes possible. For these reasons, the amount of carbon emission reduction conferred on these projects is reduced by 33% in the adjusted figures. No adjustment is suggested for the Enersol nor the Rusagas figures.