The ENCOFOR case study in Uganda: Nile Basin Reforestation Project

Transcription

1 Facilitating Forestry Mitigation Projects in India: Promoting Stakeholder Dialogue and Capacity building June, , Indian Council of Forestry Research and Education,DehraDun The ENCOFOR case study in Uganda: Nile Basin Reforestation Project Timm Tennigkeit, Kay Kallweit, UNIQUE forestry consultants Xavier N. Mugumya, National Forest Authority Uganda

2 ENvironment and COmmunity based framework for designing afforestation, reforestation and revegetation projects in the CDM: methodology development and case studies

3 Project description 3 Background CDM in Non Annex I countries Limited to afforestation/reforestation (CDM AR) projects, rules set at COP9 Key feature: maximize C sequestration + additional benefits (sustainability, socio-economy) Negative impacts to be avoided Objective Test in four case study areas Develop a framework for designing CDM-AR projects

4 Structure of the project 4

5 Case studies 5 Uganda Kenya Bolivia Ecuador

6 Chronology of events 6 May 2004 June 2004 June 2004 Sept Oct 2004 Jan April 2005 May 2005 PIN for a small-scale CDM AR developed PIN submitted to BioCarbon Fund (BioCF) Positive feedback from BioCF and request to prepare Carbon Finance Document (CFD) CFD submitted to BioCF BioCF raised concerns about project financial viability Communication with BioCF revealed that this small-scale project is not financially viable Up-scaling CDM AR project and submission of CFD for a normal-scale project to the BioCF Project has entered the BioCF portfolio, advanced preparation phase

7 Location of the case study 7 Central Africa Uganda

8 People and forests in Uganda 8 Population 25.6 million; annual growth rate 3 % in 2003 GDP purchasing power parity per head: US$ 1,200 GDP growth rate 5.5% in 2002 Human development index 150 (1=most developed, 173= least developed) Forest 4.9 Mio ha (20% of the land area) - Woodlands: 3.9 million ha - Tropical high forest: 0.9 million ha - Timber plantation area: 4,000 ha - 70% of the forest on private land; 30% on public land - More than 90% of the energy supply from wood and charcoal

9 Land-suitability evaluation 9 Exclusion categories: Biophysical (rainfall, tree cover) Environmental (Nat. Parks, wetlands) Enabling conditions (political instability, infrastructure)

10 Project pre-feasibility evaluation based on Multicriteria analysis 10 Step 1: Brainstorm session with Stakeholders to list alternative Project ideas Step 2: Mindmapping with Stakeholders to identify Evaluation criteria Step 3: Weighing criteria By pairwise comparison Step 4: Rating alternatives Against criteria Step 5: select the best Project ideas from the Ranking Step 6: Sensitivity analysis (software Criterium DecisionPlus)

11 Small-scale CDM AR projects 11 Definition: Maximum annual CO 2 sequestration 8000 tco 2 Requirements for project design documents reduced Baseline methodology and monitoring plan simplified Bundled small-scale projects with the same project participants, registered within a period of less than two years and with project boundaries < 1 km apart from each other have to comply with normal procedures Perceived benefits: Multiple environmental & social benefits at less risks

12 The small-scale CDM AR case study in Uganda 12 Project developed by the National Forest Authority as a demonstration project to support the development of a project portfolio Carbon money should replace ODA financed timber prod. grant scheme Reforestation project with Pine (75%) and native species (25%) Project area: ~800 ha Planting area 25 ha blocks Community charcoal production PIN successfully submitted to BioCF CFD was rejected due to concerns about the financial viability

13 Small-scale CDM AR project costs 13 Cost item Baseline study/ Monitoring plan Validation Due diligence (Annual) Verification Total cost in 1st year of carbon generation Current carbon costs by BioCF US$ 40,000 US$ 20,000 US$ 120,000 US$ 20,000 US$ 200,000 Alternative cost scenario (estimates by 2 DOEs) US$ 20,000 US$ 20,000 US$ 50,000 US$ 15,000 US$ 105,000

14 Financial viability of a small-scale project with the current BioCF carbon costs 14 Annual credit generation max tco 2 e Carbon price at US$3-4 per tco 2 e Annual carbon revenue: US$ 24,000- US$ 32,000 Rotation cycle ~20 years, accordingly time average carbon stock after ~10 years For the project life time (note: numbers are not discounted): Total carbon revenues: US$ 240,000 US$ 320,000 Total carbon costs: US$ 380,000 SMALL SCALE PROJECTS ARE NOT VIABLE

15 IRR for the carbon component and the total project in relation to carbon price 15 50% 40% 30% 20% 10% 0% $2-10% $3 $4 $5 $6 $7 $8 $9 $10 Carbon price per tco2e -20% -30% -40% Carbon Component BioCF Cost Total Project BioCF Cost Carbon Component Alternative Cost Total Project Alternative Cost

16 Options and limits to make small-scale projects viable 16 Simplified methodologies for PDD development (baseline assessment, monitoring, validation and verification) estimated saving potential: 30%-40% per component Increasing the verification interval to 5 years after the establishment phase (Year: 1, 2, 5, 10, 15, 20.), estimated saving potential: ~US$ 100,000 Local capacity building Pooling national expertise and networking, development of CDM project portfolios to reduce transaction costs

17 Uganda Nile Basin Reforestation Project 17 Project developed by the National Forest Authority as a demonstration project Reforestation project with Pine (75%), Maesopsis (20%) and Prunus africana (5%) NFA planting area: 1,600 ha Communities will benefit from emission reduction purchase agreement between NFA and carbon buyer Carbon sequestration up to and including 2012: 116,813 tco2e Project is in the BioCF portfolio

18 Pre-conditions for successful CDM AR project development 18 Resources and good network necessary for successful project development A proven project implementation track-record Demonstrated environmental and community benefits based on a conservative financial model Additional project revenue stream necessary, certified emission reductions mainly contribute to generate early cash-flow Start-up capital required and sufficient collateral

19 Expected benefits and potential risks Thank you for your attention UNIQUE, forestry consultants Egonstrasse " Freiburg, Germany 19