Questions and Answers. 1. General Questions. 1. General Questions 2. Technical Questions

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1 Questions and Answers 1. General Questions 2. Technical Questions 1. General Questions Why are tropical rainforests so important for the climate? Tropical forests stabilise the global climate, working like giant air conditioners. They do this by converting solar energy into water condensation, cooling the atmosphere, and they are responsible for precipitation in the regions to the north and south of the equator. Forests are a guarantee for rain and hydrological cycles worldwide. Thus they make life possible. They supply cities, agriculture and industry with water. They safeguard the existence of humanity. The destruction of forests threatens this foundation for life. Tropical forests also store enormous quantities of carbon dioxide. As they disappear, this damaging greenhouse gas escapes into the atmosphere. Deforestation is responsible for 17 percent of global CO2 emissions. The deforestation in tropical regions of Latin America, Asia and Central Africa is particularly serious. The fight against climate change cannot be won without preserving the tropical forests. Why has it been so difficult up to now to conserve tropical forests and to manage them sustainably? Because conversion to other forms of land use has been much more lucrative than preserving forests up to now and so many factors have an effect: forests in tropical countries make way for agriculture, for wood, for extraction of raw materials and for infrastructure projects. Deforestation is driven above all by demand from the developed world for agricultural products such as beef, palm oil and soya. For example, about 60 percent of deforestation in Brazil is accounted for to create new grazing land for cattle. In Indonesia the largest part of the forests are cleared to cultivate palm oil plantations. Poverty and growing populations in developing countries increase the impact. Until now, it has been much more lucrative to clear a natural forest and to use the land for other purposes, mostly agricultural. The value of a natural forest and its services to the environment and humanity have been historically undervalued. Only if the multi-faceted ecological and societal functions of a forest are accounted for in monetary terms will the chances of conserving forests on a large scale increase. 1

2 How does forest protection and restoration offset the CO2 emissions of German companies? Forests are gigantic carbon stores, particularly tropical rainforests. Anyone who plants trees takes carbon dioxide out of the atmosphere by providing an additional carbon sink. Anyone who protects existing forests prevents greenhouse gas emissions, which would otherwise contribute to climate change, from occurring and helps to safeguard forests as carbon stores. Irrespective of where they are in the world. Because climate is global. If a company from Heidelberg, for example, finances forestation projects it helps to reduce/offset the impact of their emissions. In this way greenhouse gases that this company cannot reduce itself can be lowered somewhere else, thereby compensating for them. How is energy in Germany emissions neutral when trees are planted in Canada and New Zealand? If an energy supplier s electricity in Germany is already generated from renewable and climate friendly sources, but if this supplier cannot dispense with heat generation from fossil fuels, such as natural gas, they can compensate for the emissions from burning natural gas through forestry projects. Thus for the climate no more damage occurs overall from this specific energy production. Then we talk about climate or emissions neutral. Aren t forestry projects just an easy way out for companies in industrial countries that don t want to reduce their own emissions? No. Compensating for emissions somewhere else is a pragmatic, real, efficient, and inexpensive step towards climate protection and sustainable development that accelerates change in a global world. CO2 compensation means compensating for your own emissions by reducing or avoiding emissions somewhere else i.e. compensating for them. Such compensation can be acquired by countries, companies or people. The key criterion is that additional greenhouse gases are reduced. Compensation should always be considered as a third way if other methods of reducing emissions have been exhausted. The first two important steps: reducing your own emissions either by saving energy or higher energy efficiency; plus developing energy supply from renewable sources. If these possibilities have been exhausted for now compensation offers an additional way to balance out the remaining CO2 emissions. Who will guarantee that the trees will grow for 50 years and really absorb CO2? We will. And our business partners will. They are experts in sustainable forestry. The forestry protection schemes developed by our project partners are regularly monitored by independent licensed surveyors. Before the projects start checks are carried out to see if the schemes meet the criteria of the required and applied standards. Only then will the independent certification agencies release the projects. Now there has to be a guarantee that the trees can grow unhindered, that they are not destroyed by fire, that forests are restored and that carbon dioxide is actually stored for a long time. The continuation of the projects and the sustainable use of the forest area are safeguarded by long term contracts between our business partners on 2

3 site in close cooperation with local government in the region in question. If healthy forests emerge again from the projects the lifespan of the trees goes beyond the time period of the project contracts. The CO2 stored in the trees will then be stored for decades. How do we protect against risks? What do we do if our forestry projects do not provide the planned emissions savings? How do we prevent "virtual" emission savings from occurring? The Forest Carbon Group s emissions savings are verified by an independent audit institution, additionally and verifiable. Together with project developers and our partners on site local government, non-government organisations and central governments we try to minimise project risks. Of course, no one can predict with certainty what is going to happen in a forest area in the next 50 years. Fires, plagues of insects, illnesses or illegal logging can never be ruled out one hundred percent. But we design our projects so that the emissions savings that we sell to our customers also reflect actual emissions reductions. For example, a certain percentage of the emissions associated with the course of a project are not calculated for sale but are retained as a reserve in the event of damage. We also create forest reserves additional forestation that serves as a form of insurance in order to compensate for the possible loss of trees. It is undisputed that forestation and forest protection make sense. What do environmental organisations criticise about forest projects for climate protection? Some of them think that forest protection distracts from the necessary conversion of industry and transport in industrial countries. But both these things have to be done. Climate protection does not allow the luxury of dispensing with forest protection. Some complain that voluntary compensation projects by companies are merely green fig leaves. We see this differently. Every new tree helps the climate, the environment and people. On the other hand others prefer that rich states compensate poor countries for forest protection in principle, but criticise that forest projects are included in the carbon market. Although this is not our business here is a short answer: the critics see the risks above all and not the opportunities. They see the danger of unsound emission balances occurring if trees are cleared again. Therefore they reject the view that companies and states can achieve part of their binding emissions savings obligations through forest protection schemes. Instead they demand that industrial states only finance forest protection in tropical developing countries through state development aid. However, they overlook that development aid is far away from being able to mobilise the necessary billions to protect large forest areas in the required timeframe or to provide forestation. Only a dynamic carbon market can do this. And they ignore the fact that many risks can be significantly reduced if the market is designed suitably robustly. This is a task for politicians. Why are we committed to forest protection instead of renewable energies? Because forest protection has taken an outstanding position in climate protection. Without forest protection there is no climate protection. Forests have manifold, vital functions for ecosystems, biodiversity, local government and the economy. Forests shelter the greatest 3

4 biodiversity worldwide. Tropical rain forests only cover six percent of the Earth s surface but almost half of all species worldwide can be found in them. Forests are abundant suppliers of raw materials. They produce and supply not only wood but also fruit, fibres and medical plants. The worldwide trade volume with non-wood products amounts to between 7.5 and 9 billion US dollars annually. Medical plants and medicines derived from them are estimated to be worth 108 billion US dollars. In addition, forests directly safeguard the livelihood of around 1.6 billion people. By using forests and resources sustainably the forest can be kept as a means for providing a living for them. Not least forests supply people with a variety of so-called ecosystem services, whether as precipitation or erosion protection and soil conservation. These services provide a value of several trillion Euros annually that has previously not been calculated in conventional economic evaluations or has been assumed to be taken for granted. Compensation payments for forest protection are a first, important step in building up a future system for paid ecosystem services. Who is behind the Forest Carbon Group? The German energy supplier HSE and the consultancy firm BCC from Frankfurt founded the Forest Carbon Group together at the end of 2009 in order to offer climate neutral products and services. Our motivation: Forest protection is a decisive key to achieving climate protection. We place a great emphasis on improved forest management, reforestation, and conservation. We make it possible for companies to compensate for their emissions voluntarily and thus to slow the rate of climate change. In forest protection we recognise a market of the future. 2.Technical Questions How do we calculate how much carbon is stored in trees and for how long? The amount of carbon stored in trees generally depends on numerous factors such as the tree species, location, water balance and climate. It is not possible to make across-the-board statements about the CO2 sequestration capacity of trees in their respective ecosystems. In order to calculate the capacity to store carbon, the local ecosystem in its entirety has to be taken into consideration with its various site conditions. For example, the temperate rainforests in Canada differ substantially from the temperate coniferous and mixed forests in the temperate latitudes of Germany or from tropical forests. The regions in Canada, for example, in which the Forest Carbon Group AG has developed and financed projects, are forest ecosystems close to rivers along the Pacific coast of British Columbia. These are among the forests with the highest concentration of biomass or CO2 per hectare worldwide. The trees live for a long time (100 to 500 years), so that the CO2 is stored for centuries. The climatic conditions enable the trees to grow considerably quicker there, which means they produce more biomass growth for a given period in comparison to other regions. 4

5 Which standards ensure the quality of our CO2 certifcates? The amount of carbon stored in trees generally depends on numerous factors such as the tree species, location, water balance and climate. It is not possible to make across-the-board statements about the CO2 sequestration capacity of trees in their respective ecosystems. In order to calculate the capacity to store carbon, the local ecosystem in its entirety has to be taken into consideration with its various site conditions. For example, the temperate rainforests in Canada differ substantially from the temperate coniferous and mixed forests in the temperate latitudes of Germany or from tropical forests. The regions in Canada, for example, in which the Forest Carbon Group AG has developed and financed projects, are forest ecosystems close to rivers along the Pacific coast of British Columbia. These are among the forests with the highest concentration of biomass or CO2 per hectare worldwide. The trees live for a long time (100 to 500 years), so that the CO2 is stored for centuries. The climatic conditions enable the trees to grow considerably quicker there, which means they produce more biomass growth for a given period in comparison to other regions. Do forestry projects in Canada lead to carbon credits being counted twice? Canada is a so-called Annex B country, which undertakes to reduce greenhouse gas emissions within the framework of the Kyoto Protocol. Following the parliamentary elections in 2006, the newly elected conservative government announced, however, that it does not intend to purchase internationally tradable CO2 certificates. With this decision Canada is effectively ignoring its Kyoto obligations. In terms of voluntary CO2 compensation projects in Canada and the requirements for such projects in regard to issuing CO2 certificates (Voluntary Carbon Units) and the associated cancellation of UN-assigned emission allowances (Assigned Amount Units), the Board of Directors of the Voluntary Carbon Standard (VCS) ruled in 2009 that these requirements do not apply to Canada. The reason: There is no legal or regulatory framework that implements the Kyoto Protocol and there will not be any in the foreseeable future. For this reason, Canada can and will not be able to meet its commitments under the Kyoto Protocol. Projects for reducing or sequestering greenhouse gases in Canada cannot therefore deduct emissions twice. Moreover, all projects developed by ERA in Canada are not registered in regional or national registries; double counting cannot therefore occur. What are CO2 footprints and how do we calculate these for our costumers? Every person, company, piece of industrial equipment and manufactured object leave a footprint of CO2 emissions in the atmosphere during the course of their lifetimes. Corporate carbon footprints take into account all company-related emissions along the valueadded chain. These include direct emissions produced within the company, for example the combustion of fossil fuels to generate heat, and indirect emissions produced outside of the company, for example for generating electricity. These are determined according to The 5

6 Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, Revised Edition 2005, published by World Resources and ISO : Specification with guidance at the organization level for quantification and reporting of greenhouse gas emissions and removal. The product carbon footprint encompasses all relevant greenhouse gases generated when producing raw materials and when producing, utilising and disposing of a product or service. The CO2 emissions are balanced according to the ISO and PAS 2050 (Public Available Specification) standards. The Forest Carbon Group balances company-related greenhouse gas emissions in accordance with the WBCSD/WRI GHG Protocol or ISO For product-specific balancing, we use PAS 2050 and ISO What happens to the CO2 certificates generated by our projects after they have been sold? Here there are various possibilities: The Forest Carbon Group opens a sub-account for a customer under its own account at the Markit financial information and inventory service. We transfer the CO 2 certificates (VERs) to be retired to this sub-account. As soon as these are on the sub-account we retire them or alternatively, transfer a specific number of CO 2 certificates to the Markit account of a customer or to another registry. It is left to the customer to decide whether, when and how many certificates are retired. In general, a CO 2 certificate in the voluntary carbon market can be further traded. If, however, a company wants to attain CO 2 neutrality for a product or process, the CO 2 certificates must be retired; otherwise no additional emissions reduction will be achieved. The retired and registered CO 2 certificates remain in Markit s inventory list; the series numbers allotted to them enable them to be continually tracked. However, they cannot be issued or sold again. 6