Conor Fox Can the CDM assist family farming agro-forestry?

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Conor Fox1
Can the CDM assist family farming agro-forestry?
We hear from many countries concern about the protection of tropical forests. Just as it is
very difficult for developed countries to change their energy matrix, for developing
countries it is difficult to change the development model.
Marina Silva, Brazilian Minister for Environment (2006)2
Introduction
Climate change is a trans-boundary problem that requires urgent action. It is essential to
create institutions and international agreements as part of its solution (Pearce et al, 2000,
p.206). On analysing causal relationships of climate change, we are faced with a
contemporary ethical issue as people that contribute least to the problem suffer earliest
and most.
The largest international climate change agreement is the United Nations Framework
Convention on Climate Change (UNFCCC). The Convention’s Kyoto Protocol, in
tackling the cause of the problem, obliges industrialised countries to reduce greenhouse
gas emissions by an average of 5.2% in the first commitment period (1/1/2008 to
31/12/2012), using 1990 as the baseline. In recognition of “common but differentiated
responsibilities” and that socio-economic development and poverty reduction are
overriding priorities; developing countries do not have reduction obligations.
Instead of designing a “command and control” mechanism with fines for noncompliance3, Kyoto opted to set emission caps where parties that over-comply can sell
‘offsets’ (i.e. human induced emissions reductions or ‘carbon sink’ enhancements) to
1
Researcher, Trócaire
Interview with Paulo Cabral, BBC Brazil, November 2006
3
If a party’s emissions are greater than its assigned amount, it must make up the difference in the second
commitment period, plus a penalty of 30%. It will also be barred from “selling” under emissions trading
and must develop a compliance action plan detailing the action it will take to make sure that its target is met
in the next commitment period
2
1
those that fail to meet targets. Also within Kyoto there is a flexible mechanism called the
Clean Development Mechanism (CDM) to assist industrialised countries to meet their
targets through buying certified emissions reductions (CERs) from developing country
projects; once the project proves that it is additional to what would otherwise have
happened4 and that it is contributing to sustainable development priorities of its host
country.
In 2006, CDM project based transactions for certified emissions reductions made up 17%
of the value (i.e. €3.8 billion) and 29% of the volume of aggregated carbon markets.
Buying and selling was dominated by Europe (86%) and China (61%) respectively, with
an average price of €8.40 / CER. Approximately half of CDM volume in 2006 was
accounted for by Hydrofluorocarbon (HFC-23) reduction and nitrous oxide (N2O)
destruction projects while renewable energy and energy efficiency transactions together
made up 21% of the CDM market (Capoor and Ambrosi, 2007, p.3-7).
This paper is a product of practical research carried out with Trócaire partners in Brazil to
question if family farmers in developing countries can generate and certify CDM carbon
offsets through agro-forestry projects. Practicalities of project design and market access
are discussed, with reference to local initiatives in Brazil. A critique of the mechanism is
presented with input from Brazilian civil society. Conclusions follow.
1. Can the CDM be part of a new development path for family
farmers?
Agriculture accounts for over 40% of the livelihoods in Latin America and the Caribbean
and for 70% in Africa (Maxwell, 2001, p.143-9) and the majority of these farmers are
small-scale. In tropical regions family farmers are already struggling to cope with a
changing climate and further warming will bring higher costs and few benefits.
4
The additionality criterion is key to demonstrate that something is being done that would not have been
done without the CDM. Emissions reductions must be additional to any that would occur in the absence of
the certified project activity (Art. 12.5c).
2
Highly diverse farming systems as opposed to commercial monocultures have repeatedly
been shown to be more resilient (Simms et al, 2006, p.8). They can recover from a stress
(e.g. increased temperatures) or shock (e.g. flood) more quickly and place less pressure
on regional hydrological systems.5 On marginal, rain-fed lands which have poor quality
soils, erratic rainfall and often steeper slopes, such systems can better secure livelihoods
and benefit from traditional knowledge.6 Agro-forestry is one such system where
particular trees and crops, such as nitrogen fixing crops, are planted together to improve
soil nutrient levels which increases crop yields.
Sustainable agro-forestry systems provide not only social benefits as they can sustain
family farming livelihoods and reduce vulnerability to climatic variability. Such systems
can also tackle the causes of climate change by promoting growth of biomass which
absorbs carbon dioxide from the atmosphere and stores it in the form of carbon. Further
climate benefits of sustainable agro-forestry are reversal of deforestation and
desertification, enhancement of natural carbon absorption in soil and reduced use of
synthetic fertilizers, which produce GHGs.7 Other ecological benefits of such systems
include the prevention of soil erosion, landslides and siltation; and conservation of
biodiversity, soil and water.
The CDM, in theory, can facilitate payments to small farmers for (i) removal of
atmospheric carbon dioxide and storage in vegetation and soils (living biomass) and (ii)
reduction or avoidance of fossil fuel emissions through decentralised low-carbon energy
options (e.g. wind, biogas, photovoltaic, micro-hydro etc.). This article will focus on the
former.
Eligibility of projects
Countries engaging CDM projects must ratify the Kyoto Protocol and designate a
national authority.8 Afforestation (establishing new forests) and reforestation (re5
Conway (1987), cited in Pearce and Barbier (2000)
Ibid
7
Girling (2005), cited in Stern Review (2006)
8
Of the countries where Trócaire works, Afghanistan, Angola, Burma, Burundi, Haiti, Iraq, Palestine,
Sierra Leone, Somalia, and Timor Leste had not designated a national authority for the CDM as of,
November 2006 http://cdm.unfccc.int.
6
3
establishing former forests) are eligible CDM activities. Curbing or avoiding
4
deforestation
is,
so
far,
not
considered
an
eligible
activity;
see
Box
1.
Box 1. Proposals from developing countries17 for incentives to avoid deforestation
Tropical deforestation results in the release of carbon dioxide into the atmosphere and
contributes to GHG emissions. Maintaining the rainforest is a highly cost-effective way of
reducing emissions and has the potential to offer significant reductions fairly quickly.
However there is no explicit incentive through the CDM for tropical counties to avoid
deforestation.
In 2005, Papua New Guinea and Costa Rica on behalf of the Coalition of Rainforest
Nations, proposed a mechanism to enable carbon saved through reduced deforestation in
developing countries to be traded internationally. Each rainforest nation would establish a
national deforestation baseline and negotiate a voluntary commitment to reduce deforestation
below this baseline. Reductions achieved could then be traded though Kyoto’s CDM or other
carbon markets.
In 2006 in Nairobi, Brazil proposed a similar mechanism for positive incentives for
voluntary action by developing countries to avoid deforestation outside the CDM framework.
Both proposals are on the table for discussion in 2007.
5
Sources: Stern Review (2006) and UNFCCC, Submission from Brazil, Dialogue working
For CDM purposes, forests are defined within the following margins: minimum area of
½-1 acre, at least 10-30% crown density cover and tree height at maturity of 3-5 metres.
Land with less than these parameters in 1990 is eligible for reforestation or afforestation
when it can be demonstrated that the parameters will not be reached in the future without
human intervention.
Given these parameters it is possible to envisage small scale community agro-forestry
CDM projects involving small farmer associations and land reform settlements.
Practical steps for a community CDM forestry project9
Demonstrate that the land for forestry is eligible. Historical aerial photos, remote sensing
data or public records (or preferably all three) can determine the forest history of a parcel
of land. If such records are unavailable applicants can supply a written testimony, using
participatory rural appraisal, to determine land status before 1990.
Assess capacity to demonstrate how the project activities offset carbon and are
additional to what would have occurred in the absence of the proposed activity. In other
words the project must prove that without the CDM it would not have happened. This is
known as the additionality criterion.
Assess carbon removal (or sequestration) rates – the project’s carbon removal potential
will depend on types of vegetation (particularly their growth rate and density), geography,
climate, soils, etc.
Determine the level of support. ‘Buy-in’ by various actors is critical for success.
Participant community interest is paramount along with a strong capacity to organise.
Draft a technical proposal to provide basis for attracting partners and institutional
support. NGOs and other entities may assist in the process in part due to the project’s
9
Adapted from Poffenberger et al. (2002) and Dutschke et al. (2006)
6
community capacity building orientation. A sound proposal should attract the interest of
potential investment sources and CER buyers from industrialised countries.10
Establish a carbon baseline (calculations of CDM project carbon removals are defined
with the help of a baseline scenario, which is by definition counterfactual as it describes
what would have happened in the absence of the project activity (Sutter et al, 2007 p.76).
For simplified small CDM forestry projects, if baseline carbon stock is expected to
remain the same or to decline in the absence of the project activity, the changes in the
carbon stock are assumed to be equal to zero. Otherwise, a specific equation is provided
for calculating this increase which uses density, volume and expansion factor of biomass
variables. Locally developed or national variables are used if available; otherwise
UNFCCC provides default values for use at this stage in the process.
Develop a monitoring and verification plan that provides for community monitoring with
a framework for third-party verification. Before CERs can be certified a third party
‘auditor’ called a designated operational entity (DOE)11 must validate a project design
document (PDD) and verify that real, measurable and long term benefits are actually
taking place. It is necessary to train community participants in routine vegetation
sampling techniques and to secure a local research institution to assist with this process.
Finalise PDD in the official format, which clearly demonstrates eligibility, additionality
and adheres to the aforementioned technical requirements.
Present PDD to the DOE for validation.
10
It was agreed in 2001 that CERs from forestry may not exceed 1% of each Annex-1 Party’s base year
emissions annually. Ireland through acquiring forestry CERs could finance more than 66 small scale
community forestry projects per year during the first commitment period.
11
A designated operational entity (DOE) is an entity accredited by the Executive Board of the CDM and
later ratified by the CoP/MoP. The responsibilities of DOEs are (i) to validate proposed CDM project
activities; and (ii) to verify and certify GHG emissions reductions and/or CO2 removals.
7
Send validated proposal to the designated national authority (DNA) of the host country to
evaluate the project’s sustainable development contributions. Subsequently registration of
the emission reductions by the Executive Board of the CDM can in certification and the
issuance of CERs and the transfer of payments from the buyer.
2. Carbon projects in Brazilian rural communities
Proambiente – APA-TO
Proambiente is a Ministry for the Environment Brazil Programme to compensate small
farmers for providing environmental services. The programme is based in the Amazon
“arc of deforestation” and was designed and set up by civil society. The programme is
managed in coordination with a wide range of public and civil society bodies.
In Tocantins State, Amazon APA-TO is implementing Proambiente with 318 participating
families in an area where large-scale cattle ranching, soya plantations and charcoal
extraction for pig-iron production are degrading the integrity and resilience of ecosystems.
Rural participatory appraisals, with 15 year horizons, formed the basis for community
development plans. Wise use rules or ‘community accords’ were collectively defined and
agreed. The accords reflect the reality of each community and range from refraining from
using ‘slash and burn’ techniques, minimising the use of pesticides, reforesting land
around river banks and streams, and raising awareness of neighbours and colleagues.
Some communities have established community managed forestry reserves and periodic
meetings address non-compliance with the community accords.
The majority of participants are reported to have changed their behaviour as a result of
the participative accords. Some farmers are reversing deforestation and generate greater
and more diverse incomes. One interviewed farmer earns more than the minimum
industrial wage on three hectares of agro-forestry integrated with bee-keeping. Such
systems integrate family members in adding value to produce and improve working
8
conditions. Many young family members have become ecological agents for the
Proambiente programme.
Environmental education is promoted through partners such as a local women’s group
that raises awareness and enhances people’s perception of the value of a native palm
called babaçu, which is often undervalued and cut down and sold as charcoal. The
organisation promotes increased gathering and processing of the palm’s fruit to
commercialise its various derivatives (nuts, oil, raw fuel etc.) with micro-agro industries.
Payments for environmental services have yet to be institutionalised through legislation
in Brazil but have been indirectly facilitated in Proambiente through a monetary incentive
for the establishment of accords and improved resource management. It is not clear how
such services will be given a value and how payments will be allocated. It is the intention
of the Ministry of the Environment, however, that payments for environmental services
become part of Brazilian public policy.
Ecológica Institute
Instituto Ecológica is a civil society organisation that aims to reduce the effects of climate
change through research, conservation and preservation of the environment and
sustainable development of rural communities. It works with projects directed at
environmental valuation and education promotion in the south of Tocantins state.
Through projects such as the experimental Bananal Project the “social carbon” concept
was developed to generate carbon offsets with a priority focus on social aspects. A social
carbon methodology, based on the sustainable livelihood approach, has been developed
whereby the impact of interventions are assessed based on the communities’ perceptions
of the changes in their access to resources using biodiversity, carbon, finance, human,
social and natural criteria.
A social carbon© label has been developed, whereby small producers are trained on
commercialising non-timber forest products. Communities use fruits and seeds from
9
native plants and trees to produce jewellery, preserves and liquors with the view to
acquiring the label. Products capture the standing value of fruit bearing trees and are
marketed as ‘climate friendly’ products.
The Institute also works with micro-enterprises. A local ceramic block factory has
substituted rice husk for firewood, which is usually extracted illegally from the savannah.
Production costs are lower, deforestation is avoided and a CDM project is being designed
as decaying risk husk that emit methane, a greenhouse gas, is now used as a fuel.
Implications for CDM projects on rural communities in Brazil
These ‘bottom up’ approaches provide valuable information in assessing the viability of
small-scale community CDM agro-forestry projects.
Proambiente’s innovative community accords result in smallholders defining their
property rights.12 Similar accords in Amazonian lakes resulted in increasing yields by
152% while enhancing fish stocks (ANA Brazil, 2006, p.3). Formalised resource use and
management norms are less vulnerable to external forces of change such as prices for fuel
wood and land speculation.
Slow adoption of agro-forestry is a function of absence of credit and technical assistance
(May et al, 2004, p.104). Getting credit designers to understand agro-forestry so
appropriate financial packages can be facilitated is essential. Incorporating potential
carbon sales and payments for environmental services as part of these packages will
make agro-forestry more feasible for small farmers.
Ecológica Institute and research partners have developed monitoring methodologies to
estimate carbon content of different forest types in regional ecosystems (rainforest,
savannah and Pantanal prairie). Results facilitate estimation of carbon content of local
agro-forestry systems of approximately 70 tonnes of carbon per hectare accumulated over
25 years (May et al., 2004, p.93). By converting the carbon to carbon dioxide equivalents
12
Property rights can be considered as entitlements defining the owner’s rights, privileges and limitations to
use of a resource: Pearce and Barbier (2002).
10
and dividing by the number of years of accumulation, the tonnes of carbon dioxide
equivalent per hectare per year are just over 10 tCO 2eq. With a price of €5 /tCO2eq the
‘carbon’ value of agro-forestry /ha/year is €50.13 The amount family farmers can earn will
depend on the transaction costs. Proambiente intends that public authorities and or
business assume such monitoring and certification costs.
Both initiatives have learned that agro-forestry systems are complex and can take more
than three years before benefits become evident. Exchange of experiences is an effective
form of sharing knowledge on soil, native species, plagues, diseases, rainfall patterns etc.
The agro-forestry process involves investment in capacity building, environmental
education and the development of consensus among participating parties. Some 1,011
agro-forestry experiences have been identified by the National Agro-ecology Platform in
Brazil. Carbon sales may bring new financial inputs to these and similar initiatives which
can complement the evolving process by facilitating the broadening of objectives.
Projects involving family farmers engaged in agro-forestry can not only contribute to the
double aim of the CDM of producing sustainable development and climate benefits but
can also reduce vulnerability in those communities that are likely to be impacted most by
increased climatic variability.
13
Adapted from May et al., 2004
11
3. Barriers to entry for a community CDM forestry project
Information
Information, although publicly available, is scarcely accessed by small-scale
organisations and social movements. The carbon market is dominated by large
corporations that have resources to interpret and make the most of opportunities.
Eligibility
Potential project areas are ineligible if they have been deforested since 1990. It may also
be difficult for semi-arid areas vulnerable to desertification to reach the minimum level of
forest definition, particularly tree height of at least 5 metres.
Land tenure
Evidence indicates that middle-income communities and relatively well-off farmers with
property rights to forests are more likely to benefit from carbon forestry projects than
poor households or women-headed households with no land titles and less formal rights
to access forest resources14. Also, rights over carbon credits become uncertain when land
ownership that accrues these credits is not clearly defined (May et al, 2004, p.85).
Transaction costs – economic viability
CDM transaction costs for planning, design, validation and verification occur before the
project starts so credits may be sold before they are certified at a discounted price. With a
price per tonne of CO2eq of €5, minimum transaction costs estimated to range from
€30,000 to €70,000 and a project with an output of less than 15,000 CO2eq over its
lifetime would not be viable under the current conditions of the CDM.15
14
15
Brown and Corbera 2003; Brown et al. 2004 and May et al. 2004 cited in Holm Olsen (2007)
Adapted from Dutschke et al. (2006)
12
Technical
In addition to agro-forestry skills such as propagation of trees, intercropping techniques,
identification of water retaining vegetation etc. to sustain growth of an agro-forestry
system it will also be necessary to develop skills in quantifying carbon in various biomass
form. Farmer to farmer communication, exchanges and formal agreements with local
research institutions are essential.
Institutions
Projects will require building consensus among farmers’ associations, social movements
civil society, public authorities, research institutes and international carbon brokers. It is
crucial to develop processes so that small family farmers have an entity to articulate and
negotiate politically.
Complexity
CDM forestry projects are complex and controversial.16. ‘End of pipe’ measurements for
energy projects, for example, are easier to quantify and monitor. Because of risk of rerelease of CO2 removals to the atmosphere, through fire for example, ‘forestry’ credits
may not be permanent and are distinguished as being temporary or long-term CERs,
hence their prices are discounted. Forest projects are also vulnerable to leakage where
reforestation in one area may lead to deforestation in another. The threats of such leakage
are accounted for in the project design document.
Scale
Offsets from large single species forestry plantations of uniform growth rates
(monocultures) such as eucalyptus, are easier to quantify, can be mechanically organised
and are likely to be more attractive to carbon brokers. However all the costs are not being
counted: plantations can negatively effect the hydrological cycle and reduce the amount
of land available to local population.
16
For example, forestry projects have been excluded from the first phase of the EU ETS (until 31
December 2007) and from the WWF gold standard (quality standards).
13
Small-scale projects benefit from simplified modalities and procedures, which can reduce
transaction costs. Another strategy for small scale projects may arise through
programmatic CDM where public or private sector programmes can deliver offsets from
many participants who, individually, could not be involved in a CDM activity.
Organisation
Small-scale community forest projects, limited to 8,000 CO2eq offsets per year, range
between 204 hectares of fast growing species and quick afforestation and up to 3,500
hectares for agro-forestry systems.17 With average landholdings of 5 hectares, between 40
and 700 families could participate voluntarily. Organising multiple participants with
multiple interests that do not live on contiguous settlements implies higher monitoring
transaction costs per hectare.
Projects are challenged in the trade-off of social development and carbon offset
generation. There is a danger that weaker parties will be left out and that CDM projects
have a potential to increase the gap between the local rich and the local poor (Dutschke et
al, 2006, p.53).
4. Critique of the Mechanism
Many interviewed for this article expressed doubts on how the CDM can benefit
traditional and indigenous peoples. For many the CDM seems like a “surreal” macro
mechanism with a “top-down” design.
Current targets are too low. Just to keep the temperature rise below 2°C of pre-industrial
levels, commitment targets should be progressively raised after 2012, some argue
between 60% and 80% by 2050 (Simms et al, 2005, p.4). The largest GHG emitter per
capita and the largest emitter in total terms, Australia18 and the USA respectively, have
refused to ratify Kyoto. They argue that emerging giants such as China and India, with
17
Locatelli and Pedroni (2004) as cited in Dutschke et al. (2006)
FAOSTAT (2004) Greenhouse Gas Emissions Data for 1990 – 2003 submitted to the United Nations
Framework Convention on Climate Change, Key GHG Data
18
14
per capita emissions less than world average, should be obliged to limit their emissions.
This may occur beyond the first commitment period.
Only one afforestation and reforestation CDM project, with high potential development
benefits, has been registered to date involving 27 villages along the Pearl River Basin,
China.
The “low-hanging fruit” for brokers are high-volume, low-risk projects such as HFCs
reductions. Although a requirement of CDM, sustainable development does not happen
unless it is given a value and left solely to the market the CDM does not achieve
objectives of local equity and sustainable development (Holm Olsen, 2007, p. 65).
National thresholds for sustainable development have been set low, so as not to deflect
foreign direct investment19 and are in danger of competing in a ‘race to the bottom’.
Regional equity has not been achieved. For example, by October 2007 only 21 out of 812
CDM projects are registered in Africa,20 while Brazilian and Indian CDM projects are
concentrated in wealthier States (Ministry of Science and Technology Brazil, 2007 p.11;
Sirohi, 2007 p. 99). At a medium-income level of development, greenhouse gas
emissions start to increase rapidly such that the countries which are the best targets for
large-scale emission reductions do not correspond to those that should have a priority in
sustainable development investment (Michaelowa et al., 2007, p. 3).
Deforestation is estimated to account for over 18%21 of global emissions, but there is no
implicit incentive under the CDM to reduce deforestation. The combination of existing
financial incentives to plant new forests, but the inadequate or insufficient incentives to
preserve existing tropical forest, could encourage perverse behaviour, such as cutting
down forest in order to replant it (Stiglitz, 2006, p.178-179).
Trade of emissions is criticised for facilitating responsibility “evasion”, whereby
governments can partially ‘buy their way out’ of Kyoto commitments.
19
SouthSouthNorth (2005) “A review of our first phase”, Cape Town.
http://cdm.unfccc.int accessed on 09-10-2007
21
Baumert et al. (2005) cited in Stern Review (2006)
20
15
It is argued that emission markets attempt to commodify natural resources and turn the
earth’s carbon cycling capacity into a product or service that can be bought or sold.22 It is
also argued, however, that monetary values have not been put on carbon environmental
services in the past and therefore policymakers, business interests and individuals have
ignored their social value leading to environmental degradation and natural resource
depletion.
5. Conclusions
The greatest danger for most of us is not that our aim is too high and we miss it, but
that it is too low and we reach it.
Michelangelo (1475-1564)
The success of the UNFCCC is likely to rest on the extent to which tradable permits
actually work (Pearce et al, 2000, p.206). The CDM is mobilising low-cost greenhouse
gas emissions reductions but has not yet produced a substantial benefit for poverty
alleviation and only limited support of sustainable social and economic development in
the host countries (Michaelowa et al, 2007, p.3). The compliance market for certified
emission reductions prioritises cost-effectiveness over sustainable development benefits.
Small-scale community afforestation and reforestation CDM projects have high potential
to achieve the double goal of the CDM and at the same time reduce vulnerability to
inevitable impacts of climate change, yet by October 2007 this category accounted for
only one out of 821 registered projects. The CDM’s design does not easily cater for
heterogeneous rural communities in developing countries while carbon quantification of
agro-forestry systems is not straightforward. Despite that, the design, implementation and
monitoring of such projects are not beyond the capacity of well organised communities in
developing countries.
22
Durban Group for Climate Justice, Durban Declaration, (2004) accessed at
http://www.carbontradewatch.org/durban/durbandec.html, December 2006
16
During 2005, Ireland’s greenhouse gas emissions were 26.3% above 1990 levels (EPA
Ireland, 2007, p.2). Irish emissions per capita are among the highest in the world 23. The
government will purchase up to 3.6 million credits per year from 2008 to 2012, 24 some of
which will be bought through CDM. As well as dramatically reducing local emissions
and minimising adverse impacts on developing countries, when purchasing CERs from
developing countries, Ireland must not only consider their quantity and price but also
place strong emphasis on their quality.
23
24
The Irish Times, 6 February, 2007
The Irish Times, 30 November, 2006
17
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Author Information
19
Conor Fox has an Msc in Environmental and Natural Resources Economics from
University College London. He has worked as an environmental economist for the
Environmental Protection Agency of the Cooperative Republic of Guyana and has
worked for local and international NGOs in Central America in programmes for
sustainable livelihoods and prevention and mitigation of disasters. He currently
researches for Trócaire on issues related to climate change and environmental justice in
Latin America and Southern Africa.
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