Development of a carbon sequestration project through reforestation for small holder
farmers around Leon, Nicaragua.
From
Conservation Company
Leliegracht 19
1016 GR, Amsterdam
+31-(0)20-4277000
Rodney@conservation-company.com
Conservation Company. 2009
1 The project, development of a Project Idea Note
1.1
Introduction
The twin-city relationship between Utrecht and Leon, Nicaragua is one of the oldest and best
established relationships within this domain. Utrecht and Leon have worked together on the
expansion of Leon and Utrecht has assisted among other things with the capacity building
programs.
International solidarity was the main driver in the beginning (’70) that has been shaped by fases
of professional cooperation (’80-90), resulting in a municipality being able to manage programs
and projects independently from Utrecht with many other players. The relationship between
Utrecht and Leon has evolved towards targeting common problems like climate change.
Utrecht, is obliged to reduce carbon emissions and compensate the remaining. Leon has
suffered from deforestation, resulting in local climate change (warmer and drier) and a lack of
sufficient supply of timber for fencing, housing etc. both can be tackled when the remaining
carbon emissions can be sequestered and paid for via a small holder reforestation around the
city of Leon. Reforestation efforts will generate carbon credits that can be bought by the City of
Utrecht, resulting in a cash flow that actually finances the reforestation project.
Before being able to do so first a screening of the actual situation for implementing a carbon
project must be done. After this pre-assessment the sequence of the carbon projects should be
followed:
1.
2.
3.
4.
1.2
Pre-assessment
Development Project Idea Note
Development Project Design Document
Verification and execution
Standards and small holder carbon, pre-assessment
Carbon sales could be done totally on a voluntary base. It would mainly depend on the
willingness to buy and the trust a buyer would have in proper sequestration measures. This type
of carbon deal stems from the first years of the voluntary carbon market. Currently a
formalisation and standardisation is noticed. Deals require external verification also for the
voluntary market (VCS, CCB). Small holder organisations have no experience with carbon
projects although the have obtained much experience in the certified supply chain (Fair Trade,
organic, etc). So besides the estimation of carbon sequestration potential also a review needs to
be made about the different aspects of a carbon project, like:
- An assessment of the available technologies
- Whether or not to use approved methodologies
- An assessment of land suitability/eligibility
- A description of the potential project boundary
- An assessment of the baseline scenario
- An assessment of the with-project scenario
- An assessment of leakage
- An assessment of additionally
- An assessment of non-permanence risk
- A first description of the project structure
- An assessment of the scope for additional certification schemes (e.g. FSC, CCBA, etc.)
Financial feasibility:
- An assessment of the costs and revenues
- A list of potential investors, buyers including the future small holder Carbon Fund
- A first screening of direct marketing of future carbon credits1
1
Utrecht-Leon
2
Conservation Company. 2009
Legal and institutional feasibility:
- An assessment of land tenure, carbon right and taxation issues
- An assessment of needs for licences/permits
- An assessment of the state of relevant legislation and regulation
- An evaluation the various transactional structures of the project
1.3
Based on the pre-assessment, development of the PIN
The outcome of the pre-assessment will lead to a thorough understanding of the local potential
for a “formal” carbon project within the region and will be formulated in a Project Idea Note
(PIN). This project idea note will serve as the format for the PDD (Project design document).
1.4
Continuation, development of the PDD
Based on the PIN a clear inside in the feasibility of the project is obtained. Besides as a format
for the development of the PDD it also will serve as the proposal for additional investments for
small holder reforestation efforts.
Based on the minimum commercial viable size of a carbon project we already must assume that
it would not be cost efficient to develop a carbon project for less than 500-1000 hectares.
1.5
Verification and execution
After developing the PDD the actual implementation of reforestation projects will take place. The
carbon funds will co-finance the development and implementation of nursery systems,
preparations and co-finance the first five years of tree management. Also it would finance the
training of farmers and extension workers. Typically the carbon funds could co-finance up to
25% of the total project costs. The additional funding needs to be indentified but we expect it not
to be so difficult and assistance for this could be offered after having developed the full project.
1.6
Specific output:
By December 2009 a Project Idea Note that will enable the project to start approach buyers for
early presales and consequently fundraise for the PDD design and the fundraising of the full
reforestation program.
Proposed budget
Design of the project
Pre-assesment
Development of the PIN
Development of PDD
travel cost
Project total
vat
total
Utrecht-Leon
when
sept
okt/nov
dec
next year
days
10
12
7
cost per day
650
650
650
subtotal
6500
7800
4550
1500
29
20350
3866,5
24216,5
(ex
VAT)
3