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