GHG Accounting Guidance Note Afforestation and Reforestation Projects

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1 GHG Accounting Guidance Note Afforestation and Reforestation Projects IFC CLIMATE BUSINESS GROUP SEPTEMBER 2011

2 Introduction The following is an overview guidance for IFC investment staff to conduct greenhouse gas (GHG) emission reduction calculations for afforestation and reforestation projects. For other project types, please see additional guidance notes from CBGSM. Such calculations are required in order to consider the project as mitigation or climate related and will feed into the climate-related tracking system required by management. 1 1 Previously called RE/EE tracking. KEY CONSIDERATIONS 1) This methodology is subject to refinement and expansion based on testing and implementation feedback, please visit our website for the latest version of guidance. See contact information at the bottom for more information and related questions. 2) This methodology is to be superseded by any externally accepted GHG calculation qualified for generating certified and/or verified carbon credits by an internationally recognized third party, such as the UNFCCC s Clean Development Mechanism (CDM) Executive Board. If approved as generating carbon credits, please upload the Project Design Document (in the case of CDM), or equivalent, as per the instructions in the Reporting section of the guidance note. Please note that a third party methodology must be followed in its entirety and any partial application of the methodology and assumptions is not acceptable. 3) Scopes: Net GHG calculations require inclusion of some degree of GHG lifecycle analysis (LCA), and all significant changes in GHG emissions affected by the project, regardless of ownership, are considered, per the guidelines herein. This is defined as partial lifecycle analysis in this methodology. 4) Boundary: IFC investments can often include multiple projects and facilities, both forestry related and non-forestry related, and the gross emissions calculation will typically capture all project components. However, for the purposes of GHG reduction calculations, project boundaries are limited to the impacts associated with the forestry portion of investments only. 1 This means that all changes in GHG emissions resulting from the forestry portion of the project, regardless of ownership, need to be captured, over and beyond the forest area covered by the project.

3 tco2e/mwh 5) Conservativeness is to be followed in all calculations to address uncertainty. Given ex ante calculations often require some level of assumption, staff should assume the project options and emission factors resulting in the lowest GHG reduction in order to not overstate project GHG emission reductions. When addressing any uncertainty, staff should also detail how conservativeness is being followed in their submitted calculation 2. Requirements: a) The IFC project must consist of Afforestation and Reforestation (A/R) activity types. b) For carbon stock calculations, GHG tools developed by the World Bank Climate Change Unit are to be used to estimate operational emissions c) Project must result in a net negative GHG reduction through biomass GHG sinks in forestry. 3 The GHG emission reduction methodology is illustrated in the graphic below: Baseline (Country) Project Emissions (PE) Additionality / GHGs emissions reduced 1 Absence of forestry-related practices is considered business-as-usual, does not result in any change in GHG emissions, and excluded from the GHG reduction calculation. These emissions are captured separately by IFC gross portfolio reporting. 2 As an example, consider an IFC project scenario where uncertainty exists between various species of tree that could be planted on the A/R project, based on future market availability. The GHG reduction calculation, in this case, would assume that the tree species with the lowest carbon-sink potential is to be planted in order to follow conservativeness, as it would result in the lowest GHG reduction. 3 Project resulting in a lower, net positive GHG increase are not to be considered.

4 Method 1. While other Climate Related Project use the CEET to estimate GHG reductions, the carbon sink in biomass is to be computed using the World Bank Carbon Assessment Tool for Afforestation and Reforestation (CAT-AR). Given the nature of these projects, the CAT-AR tool automatically establishes the baseline, project scenario, and GHG reduction. This tool is forthcoming. 2. Additional GHG emission sources are to be calculated using the IFC Carbon Emissions Estimator Tool (CEET). GHG emission sources to be considered are those that will change as a result of the implementation of the project. 1 A. UPSTREAM EMISSIONS: Upstream GHG emission increases can be any of the following and should be treated as described below: Construction related GHG emissions are excluded from A/R foresty projects upstream emissions. 2 Upstream manufacturing of the equipment and machinery installed or used onsite by the project are generally excluded from the calculation. The underlying assumption is that the scale of IFC project will not materially change these upstream manufacturing emissions. 3 A different reasoning applies if the project is intended to achieve material market transformation, please refer to the Advisory Services (AS, forthcoming) methodology for such cases. B. OPERATIONAL EMISSIONS: Calculate the post-ifc operational emissions for the A/R forestry project. This is already an IFC GHG accounting requirement as operational emissions are mandated in idesk prior to project approval. Operational emissions are to be calculated in the CAT-AR forestry tool. Ensure to consider the following: Mobile fuel combustion in maintenance and staff vehicles Stationary fuel combustion in back-up power or other Electricity purchases from grid Other emission sources C. LEAKAGE: Leakage is a change in GHG emissions beyond the project boundary. It can result from displacing a source of GHG emissions off-site or causing an increase in GHG emissions at a third party operation. 1 This purpose of this methodology is to identify GHG emission sources that will change between the baseline and project scenarios due to the project activity. Emission sources that remain constant between these scenarios are therefore excluded from the calculation. 2 Construction emissions can be large in some cases (e.g. large hydro). However, if these construction emissions were annualized over the project life, they would constitute less than 1% of the GHG reduction calculation and, therefore, are excluded from the calculation. 3 The implementation (or non-implementation as in the baseline scenario) of the IFC project is assumed to not affect upstream production levels and the resulting emissions of this equipment and machinery.

5 For forestry projects, ensure to consider activity shifting leakage, the displacement of materials, livestock, or equipment offsite resulting from the project. Use the CAT-AR forestry tool or IFC CEET to compute any form of leakage or change in GHG emissions that occur beyond the IFC project boundary resulting from the project. D. DISPOSAL: For these project types, the decommissioning and disposal of the A/R project itself is generally neglected if any of the following conditions apply: disposal GHG emissions are negligible 4 and/or not significant given IFC project timelines TIMELINE: The timeline for the project GHG calculation starts at the Commitment Stage of the IFC Project Cycle and is limited to the term of IFC financing and not beyond. For equity and other financial products with indefinite timelines, a standardized timeline of 10 years should be assumed to be conservative. Account for all GHG emission reductions and other associated impacts during the timeline REPORTING: Please use the GHG Emission Reduction Calculation Template 7 to record GHG reduction calculations and upload it to the project's idesk GHG Emissions tab, under the "attach" section. This is to support any project GHG reduction claims and is required for any project that is to be considered "climate-related" for the purposes of climate-related tracking. 4 If the disposed material has a low degradable organic carbon content and/or the disposal process itself does not generate significant GHG emissions (e.g. not combusted or requiring chemical processing). Also, if any disposal GHG emissions were annualized over the project life, they would constitute less than 1% of the GHG reduction calculation and, therefore, are neglected. 5 If any disposal GHG emissions were annualized over the project life, they would constitute less than 1% of the GHG reduction calculation and, therefore, are neglected. 6 Beyond IFC financing, implementation assistance, and supervision, we have no assurance that any GHG reductions are actually taking place. This is consistent with IFC s gross emissions accounting methodology and is also consistent with internationally accepted methodologies, such as CDM, where one-time net calculations do not extend beyond 10 years. 7

6 IFC Climate Business Group 2121 Pennsylvania Avenue, NW Washington, DC Lucas Broussard Sabin Basnyat