PWS In Kenya: How WWF And CARE Found Common Ground In High Hills

This is the second in a four-part series examining the interplay between economy and ecology in the Lake Naivasha Watershed.

7 March | NAIVASHA | Kenya | For years, Chege Mwangi watched helplessly as the rains washed bits of his steep one-acre farm high in the Abardares Hills down into the Terasha River below. He knew that he was watching his family’s future dribble away with it, but he didn’t know what to do.

Meanwhile, 40 kilometers (25) miles downstream, flower-growers on Lake Naivasha were noticing things as well. Sedimentation was gunking up the lines for their greenhouses, and water hyacinths had blanketed parts of the lake, killing the fish below.

“It all fits together,” says Peter Muigai, a community mobilization officer for WWF, as he looks out over Mwangi’s now-thriving acre of land. “For Naivasha to exist, the rivers from this side of the catchment have to flow, and increasingly, they don’t.”

He’s working with farmers in these hills on an ambitious Payments for Watershed Services project that aims to tap the wealth of Lake Naivasha flower-growers – as well as geothermal providers and hotels – to help upstream farmers like Mwangi implement sustainable agriculture practices. If the plan works, it will reshape the landscape across Lake Naivasha’s 3400-square-kilometer (2100-mile) catchment and preserve an economy that employs hundreds of thousands of people. If it fails, there’s little hope that those who live off the lake can continue to do so.

High Stakes

“There’s a lot riding on this,” says Daniel Koros, a 40-something veterinarian who’s been with WWF for two decades. “It’s a test of ideas we’ve been developing since before I got into this business.”

Koros started as a volunteer with WWF in the early 1990s before signing on as an employee in 1996. Since then, he’s been working on programs that combine conservation with sustainable livelihoods – first with Maasai herdsmen in the nearby Maasai Mara National Reserve and Tanzania’s adjacent Serengeti. Since 2011, he’s been here in Naivasha, where his title is Project Partnership and Liaison Officer for the PWS project.

“Looking back, I can see we were evolving towards PES (payments for ecosystem services) from the start, but we didn’t call it that,” he says. “Even in the early 1990s, we were beginning to realize that if you didn’t attack livelihood issues, you weren’t going to have a lasting impact on conservation.”

Steep Slopes

photo of recently-cleard hillside


Untiered farms on steep slopes are slowly losing their topsoil to the rivers below

 

 

WWF and CARE: of Plants and Poverty

The project began as a joint venture with CARE (Cooperative for Assistance and Relief Everywhere) – a humanitarian organization better known for poverty-alleviation than environmentalism. Koros says that’s because PES is one of a growing number of areas where the missions of the two organizations overlap.

“If you’re lifting people out of poverty by teaching them sustainable agriculture, what you’re really teaching them is how to make a living while conserving nature,” he says. “That’s what brings an organization like WWF into a program like this.”

The growing cooperation between the two groups has led each to appreciate how the other’s focus dovetails with its own.

“CARE are good with market linkages, while we are good with conservation and community mobilization,” says Koros. “Working together, we were able to achieve things neither of us could on our own.”

That’s reflected in the way each organization measures its success.

“We’re moving away from the kinds of conservation-oriented numbers we used to focus on,” says Koros. “For example, we used to look at how many trees or fruits were planted, but now we look at how peoples’ lives have changed.

That’s because people trapped in an unhealthy economy need to chop trees and harvest fruits with only tomorrow in mind. If the economy is healthy, it can survive without cannibalizing its future.

Terraces and Napier Grass

The most obvious way for Mwang to work his farm with tomorrow in mind is to build terraces – an activity the government widely supported until budget cuts started taking effect in the early 2000s. By 2006, WWF had decided to try and pick up the slack.

Using satellite images provided by the Ministry of Agriculture, they looked for parts of the Naivasha watershed with steep slopes, intensive agriculture, and direct routes to the water – all of which lead to excessive runoff. After identifying parts of five different catchments, they commissioned more detailed hydrological and sociological assessments that pointed them to two sites that they felt were contributing more than their share of degradation. One is in the Upper Turusha catchment, where Mwangi lives, and the other is in the nearby Wanjohi catchment.

The initial plan was to approach farmers in the catchments and see if they’d be open to terracing – but the answers were far from encouraging.

“Terracing is expensive and disruptive,” says Muigai. “The farmers said they couldn’t do it without a lot of support, and the feasibility study found other problems.”

Chief among these was the issue of maintenance: Aware of its own precarious situation, WWF wanted to make sure it was creating something that could go on without them – so even if they ran out of funding, the farmers wouldn’t be left in the lurch.

In place of terracing, the study recommended strips of mfufu, or Napier grass, every ten meters or so along the length of the hill.

Long a favorite of cattlemen, Napier grass is now a staple of sustainable agriculture programs across Kenya – and with good reason. First, it needs little in the way of water and fertilizer. Second, it attracts predatory insects that devour pests. Third, it pulls nitrogen from the air and “fixes” it in the soil, where it acts as a natural fertilizer. Fourth, it captures soil that slides down the hills whenever the rains come. Finally, as cow food, it provides fodder for dairy operations. By planting strips every ten meters, WWF hoped to create natural barriers that would capture sliding dirt and fertilizer before it became runoff – forming natural terraces over time.

Then there was the question of outreach: even if WWF came up with a plan that was low-cost and low-disruption, how would they explain it to the people in the hills?

“Farmers everywhere are very leery of anyone coming onto their land, offering ‘change’,” says David Mbugua, Secretary of the Upper Tarusha Water Resource User Association (UTWRUA), a private organization that coordinates water issues in Mwangi’s region. “Here, that leeriness is compounded by our colonial history – farmers generally suspect what you’re really doing is coming to take the land.”

Genesis of the PWS Program

WWF’s regional freshwater coordinator for Kenya, Robert Ndetei, felt that he could bring in the farmers if he just had a carrot – and that’s when he heard about a new program called Equitable Payments for Watershed Services (EPWS).

Launched jointly by WWF Netherlands (WWF-NL), CARE, and the International Institute for Environment and Development (IIED) with funding from the Dutch Directorate General for International Cooperation (DGIS) and the Danish International Development Agency (DANIDA), EPWS is a multi-year, global effort to push the envelope on PWS.

“We wanted to test the concept in different jurisdictions and under different circumstances to see what works, what doesn’t, and why,” says Julio Tresierra, who started EPWS within WWF-NL and has been spearheading it ever since. “We wanted to make sure we were looking at real-world scenarios that delivered real-world lessons and that could be scaled up if successful, but CARE also wanted to test the social impact as an end in itself rather than a means to an end.”

Ndetei reached out to his local counterpart at CARE, and together they decided to bring in a PWS element – one that would encourage downstream users to work with farmers up in the catchment. Their proposal was designed to both test the willingness of downstream users to pay for PWS and to experiment with ways of incentivizing upstream sellers to join the program.

When their project got the nod, CARE hired Muigai, who had impressed them four years earlier as a young college grad volunteering in Nyanza Province. There, he’d helped farmers develop marketing strategies until the Ministry of Agriculture hired him to do essentially the same job in 2005. In 2008, CARE hired him to work with farmers on the PES effort, and he in turn reached out to Mbugua and others in the upstream catchments.

The Legal Framework

The program was designed to work within the institutional framework established by the Water Act of 2002, which replaced the Ministry of Water and Irrigation’s centralized water management system with a decentralized system coordinated by a new entity: the Water Resource Management Authority (WRMA), which further delegates implementation to regional offices in each of Kenya’s six catchments.

Those offices then further delegate implementation to Water Resource User Associations (WRUA) like the UTWRUA where Mbugua works. These serve specific users within catchments and sub-catchments.

“The Ministry still determines policy, but WRMA implements it,” says Abigael Tamooh, Technical Officer, for the Lake Kaivasha Water Resource Users Association (LANAWRUA), which is the wealthiest and most advanced of the WRUAs, largely because of the flower growers. It’s one of 12 WRUAs in the Naivasha catchment.

“UTWRUA is about as far upstream as you can get, and we’re as far downstream,” she says. “But we’re inextricably linked to each other.”

She and Mbugua are where that linkage is formed. He negotiates on behalf of farmers, and she negotiates on behalf of flower-growers, geothermal powerplants, hotels, and anyone else who cares to participate.

“We each have dual responsibilities,” he says. “We need to sell our members on participating, but then we have to negotiate on behalf of our members to get the best deal.”

And that, it turns out, isn’t as easy as it seems.

Next Week: Selecting the Sellers, Pitching the Buyers

Congo Basin Forest FundSteps Up For REDD+ Piloting In DRC

Developed countries have pledged billions to get REDD up and running around the world, but very little of that has resulted in actual projects being implemented on the ground.   The Congo Basin Forest Fund is an exception, but it’s also not without growing pains. Here’s a look at the fund, its funders, and the lessons they’ve learned along the way.

Sixth in a series.

4 December 2012 | Doha | Qatar | The Democratic Republic of Congo introduced its National REDD+ strategy at climate talks here today (see “DRC REDD Strategy”, right), just weeks after heavily-armed insurgents surrounded and stormed the capital of the country’s North Kivu province, sending thousands fleeing into the countryside and putting even more pressure on the fragile ecosystem of the Virunga National Park.

It’s in the turbulent area around Goma that WWF Belgium is launching the Geographically Integrated EcoMakala REDD+ Pilot Project, which aims to protect forestland in part by providing clean cook stoves and planting a buffer of fast-growing trees so that locals can harvest them for charcoal (or “makala” in the local dialect) instead of chopping down the forest.

“We know that 80 percent of the charcoal comes illegally from the park,” says Mone Van Geit, WWF Belgium’s Project Manager, African Program.   “So, if the charcoal from our [plantations] gets on the market, that is avoided deforestation.”

It’s an innovative project testing new methods and, if successful, it could be replicated across Africa. Until those methods are tested and refined, however, private-sector investors are reticent about putting money on the line. That’s where the Congo Basin Forest Fund (CBFF) comes in.

Funded jointly by Norway and the United Kingdom, the CBFF aims to both alleviate poverty and address climate change by “reducing and eventually reversing the rate of deforestation in the Congo Basin forests.” It was established in the spring of 2008 with an endowment of £100 million – half from the UK and half from Norway. Fourteen percent of its portfolio currently goes to REDD projects, and the REDD+ phase of EcoMakala is being funded by a €2.5 million grant from the CBFF.

Administered jointly by the African Development Bank (AfDB), the World Bank and the United Nations, the CBFF is one of the few initiatives that is actually delivering on its promises, albeit slower than many had hoped, according to REDDX, Forest Trends’ REDD+ Expenditures Tracking Project, which is tracking REDD+ commitments to 13 countries around the world.

Lessons Learned and Growing Pains

For the AfDB, the REDD initiatives are a way to pilot both new REDD methodologies and new administrative procedures for overseeing them.

“The inclusion of REDD projects in the Bank’s portfolio will enable its technical staff to enhance their knowledge in new areas such as community forestry and REDD in moist dense forest,” reads an early AfDB assessment report.

Already, the program has yielded hard lessons on the challenge of administering community forestry programs, which is proving to be something like herding cats.

“(The Bank is) a big organization, and their processes are meant for projects worth $100 to $500 million,” says Bruno Hugel, the first project manager for EcoMakala who now works as a Kinshasa-based Technical Advisor for DRC’s REDD Coordination Nationale.   “Applying those procedures to small projects is very difficult for them.”

After initially stumbling, the Bank streamlined its procedures, but is now working through a backlog of more than 30 small forestry projects scattered across the country. EcoMakala, as a result, is more than a year behind schedule, and that means key milestones necessary to advance the project have not occurred. A biomass map and a system for identifying and tracking carbon stock, expected to be completed by the end of this year, have not yet started; an established and validated “base case” necessary for the eventual generation of carbon credits also missed its original 2012 deadline.

The CBFF, too, has faced challenges in administering so many small projects. Of the $103 million pounds pledged and funded to the CBFF, just $7 million had been disbursed as of July 2011.

The issue came to a head as far back as February 2011, when outside agents were brought in to advise the CBFF Secretariat on decisions about the fund portfolio. At the time a “fund management agent” –– comprised of both Pricewaterhouse Coopers and the Dutch Development Agency (SNV) –– was appointed with the approval of the UK and Norway, to assist the CBFF with the administration and oversight of projects under €2.5 million.

But as recently as August 2012 the CBFF conceded in a performance report that “…disbursement procedures are still tricky for some beneficiaries and something needs to be done in order to solve this issue.” CBFF donors Norway and the UK have made a total of three visits to the CBFF’s Tunis offices in the last two years to “…identify bottlenecks and solutions…to improve the performance of the CBFF portfolio,” according to the fund’s performance report.

Both the CBFF and the Bank say they’ve learned from the early setbacks, and projects are moving forward.

“We hope the project will get started in the next couple of months,” says Van Geit, “but we’re not sure exactly when yet.”

Why It Matters

Goma lies along the border with Rwanda – a flashpoint in numerous insurgencies since the 1994 Rwandan genocide. It is also DRC’s most populous region and home to the 7800 square km Virunga National Park, a UNESCO World Heritage site and crown jewel in a vast tropical rainforest spanning 1.6 million square km of the Congo Basin. The park spans six countries, and is a last respite for numerous endemic species including the Mountain gorilla.

The Virunga rainforests are the planet’s second largest remaining tropical rainforests after the Amazon, supporting at least 40 million people; the DRC accounts for over 60 percent of what’s left. Protecting the Congo Basin rainforest has become both a local and international priority, as countries like the DRC work to develop REDD+ capacity and pilot projects on the ground.

Two Phases

EcoMakala is coming in two phases. The initial phase of the project began in 2007 with a vision of reducing deforestation in the Virunga Park by creating 1000 hectares of “micro-forest plantations” on private land outside of the park boundaries. Small plot farmers, organized by local farmer associations, were enlisted to grow super fast-growing perennial tree species like eucalyptus, which are ideal for making charcoal. Not only would the plantations create a self-sustaining market for charcoal, enriching the small farmers and protecting the park, but the project would also distribute 4000 clean-burning stoves serving at least 20,000 people.

This phase was funded with €2.4 million from the EU, including multiple smaller contributions from WWF Belgium and others, and a second infusion of €1.9 million from the International Fertilizer Development Centre and the Dutch Cooperation Agency. Between 2007 and 2012, this combined funding allowed EcoMakala to realize 5000 hectares of new plantations.

The second phase is the one the CBFF is funding, and it’s a more formalized REDD+ initiative that involves extensive education campaigns to educate people on the value of the forest and the concept of ecosystem services, and the creation of a detailed measurement of carbon stocks, as well as the testing of other methodologies that could be part of a carbon offset program in the future.

Complex Funding Arrangements

Both Norway and the UK have input into how the CBFF operates: the CBFF is managed by a Secretariat at the African Development Bank, with support from the UK Department for International Development (DFID). A Governing Council includes representatives from DRC civil society, the Convergence Plan of the Central African Forests Commission (COMIFAC) and both the UK and Norwegian governments.

Funds will flow from the CBFF to the African Development Bank, to be transferred to a bank account accessible by the DRC’s Ministry of Environment, Nature Conservation & Tourism. The money will then be directly transferred to the project participants.

Norway and the International Climate and Forest Initiative

The Norwegian funds that reach the CBFF originate from the Government of Norway’s International Climate and Forest Initiative (NICFI).

In December 2007 Norwegian Prime Minister Jens Stoltenberg launched the NICFI, which pledged up to $500 million US per year to reduce emissions from deforestation and forest degradation in developing countries.

In addition to pledging billions to forests in Brazil, Indonesia and Guyana, the NICFI is providing funds supporting REDD methodology development and pilot projects to multilateral institutions like the UN-REDD Programme, the Forest Carbon Partnership Facility, the Forest Investment Program and the Congo Basin Forest Fund.

A spokesperson for the Norwegian Ministry of Environment told Ecosystem Marketplace that REDD+ pilot projects supported by Norway are “mainly supported” through the Congo Basin Forest Fund, the Norwegian Agency for Development Cooperation (Norad)’s Climate and Forest Funding Scheme for Civil Society, and the Norwegian embassy in Tanzania.

United Kingdom’s International Climate Fund

The UK’s support for Congo Basin forests dates back to at least March 2007, when the government pledged 50 million pounds for “sustainable management” in the Congo Basin to a special fund that would be officially launched as the CBFF in 2008.

This initial pledge came from a UK government fund that evolved into the International Climate Fund (ICF) in 2011, which is now the primary channel of UK climate change finance. It has been created to help developing nations adapt to climate change, tackle deforestation and kick start low carbon growth.

The ICF’s latest implementation plan shows a commitment to disburse 2.9 billion pounds of “official development assistance” to the ICF for the period 2011/12-2014/15. Funding for “forest finance” – 100 million pounds – will originate from the UK’s Department for Environment, Food and Rural Affairs (Defra).

“REDD+ is one of the priorities for the ICF, so a significant portion of the ICF is expected to be made available to support REDD+ activity in forest nations,” reads a July 2011 UK government-commissioned review of the country’s current and future REDD funding efforts.

In addition to funding projects through the CBFF, the UK currently supports the REDD+ process in DRC through the World Bank-administered Forest Carbon Partnership Facility and the Forest Investment Program.

The State of DRC’s REDD Readiness

In addition to government and non-government projects funded through the CBFF, Hugel says there are also DRC REDD projects developed and led by conservation NGOs and the private sector, although the government has been cautious with such projects.

“We need to develop the framework where we can control the kind of project developers and projects selected, because if bad developers mess up, this can endanger the whole international process and credibility of REDD+.”

To weed out the bad players and address concerns about corruption and money laundering – two issues that are very real in the DRC – a National REDD+ registry will be online by mid-2013. The registry will post the details of project approvals, and will eventually include on-the-ground info from approved carbon offset projects. “We have a strict understanding that a project that has not been validated or approved by government with all info provided, will not be allowed to get carbon credits in DRC.”

Some say much more fundamental issues need to be addressed before DRC can ponder the sale of carbon offsets from REDD+. Baudouin Michel, Director of the University of Kinshasa’s ERAIFT (a postgraduate tropical forest management program launched by UNESCO), says the DRC has virtually no policies to support rural development or agriculture for poor farmers. The DRC currently invests just one percent of its budget on agriculture and rural development, and it needs to address this deficiency before anything else.

“If you’re putting only one percent of your total budget into supporting 80 percent of the national population, that’s not a clear commitment from government,” says Michel. “Without clear policy supporting the small rural [farmers] in the field, you will never have the impact of REDD on deforestation going down. It’s impossible.”

EcoMakala Continues Amid Insurrection

As the insurgency continues, Van Geit and her WWF Belgium colleagues are busy working on a project design document for EcoMakala, and will apply for carbon finance through the afforestation/reforestation Clean Development Mechanism under the Kyoto Protocol.

Meanwhile in the northeast of DRC, the rebel group known as M-23 continues to hold Goma in defiance of both the international community and DRC government forces.

Hugel, who started the EcoMakala project, says the first phase has gotten remarkable results in spite of repeated insurgencies over the last five years. As the project leader based in Goma from 2006 to 2010, he had to evacuate the city three separate times, including one instance when a different rebel group encircled Goma (on this occasion, they did not attack).

EcoMakala has continued to function, he says, because the conflicts are often isolated to specific areas, while the project is dispersed across a wide area – the thousands of plantations average just one square hectare in size, so even if fighting limits access in one area, the project continues elsewhere.

“It’s been very important to spread our activities and spread the risk,” he says. “We were still able to have thousands of planters and over 4000 hectares of tree plantations, all with a very strong monitoring system, which is impressive in this context of conflict.”

Kenyan Flower-Growers Use Watershed Payments To Save Their Lake And Their Livelihoods

This is the first in a four-part series examining the interplay between economy and ecology in the Lake Naivasha Watershed.

25 February 2013 | NAIVASHA | Kenya | A giraffe munches nonchalantly on acacia leaves as a family of zebras dashes past him, lumbers up an embankment, and quickly zips across the road leading to Elsamere, where Joy and George Adamson rescued and raised Elsa the lioness in the 1950s. This is the Kenya of postcards and travelogues – of open vistas, Maasai herdsmen, and – increasingly – greenhouses, which have taken over the flatlands surrounding Lake Naivasha.

Some of the greenhouses are used for growing tomatoes and other vegetables, but the overwhelming majority are full of flowers – mostly roses – that will be sold in European flower shops within a day or two of being cut. Their export generates more than 2% of Kenya’s GDP, and their production directly accounts for roughly 50,000 jobs in and around the lake – not bad for a sector that didn’t even exist until 1982, when the Oserian Farm started producing cut-flowers for the Dutch market. At least 30 other growers have since followed suit, and now greenhouses cover hundreds of acres of prime farmland around the lake.

The greenhouses regulate temperatures, and some of them even make it possible to grow flowers without soil, but all need regular flows of clean water – as do the geothermal power stations in nearby Hell’s Gate National park, where the Kenya Electricity Generating Company (KenGen) is spending Sh98.6 billion ($1.314 billion) on a new 280-megawatt geothermal power plant. The facility needs the lake because the lake feeds subterranean waterways that provide the steam that will turn the plant’s turbines. Hotels along the edge of the lake need the lake, too – for it’s the lake that brings tourists here on their way to and from the Maasai-Mara National Park.

And that’s why the lovely green prairie beyond the greenhouses is an ominous site. It’s not solid land; it’s Lake Naivasha itself. What looks like prairie is actually a carpet of water hyacinth that’s choking the lake, and it’s being fed by tons of fertilizer washing down from the hills above.

Without quick action, the lake – and the economy that depends on it – will be a thing of the past.

Payments for Watershed Services

Less than a two-hour drive from Nairobi, Naivasha is the only freshwater lake in the Kenyan Rift Valley, and it gathers water from a catchment that spreads out over 3400 square kilometers. For millennia, its size has remained constant at roughly 150 square kilometers – its water evaporating and draining at the same rate as it enters the lake. But now that’s changing. Water surges into the lake in the wet season and disappears in the dry season, while roughly seven million tons of sediment ooze into the lake each year, reducing its depth, choking its fish, and gunking up the aquifers – and that’s on top of the fertilizer runoff that’s feeding the hyacinths and algae.

To turn this around, WWF has launched a massive Payments for Watershed Services (PWS) program designed to promote sustainable agriculture programs in the hills surrounding Lake Naivasha. So far, two major flower-grower associations have joined the program, but it will have to be scaled up tenfold at least if it’s to achieve meaningful results.

photo of recently-cleard hillside

Water Hyacinths Cover Lake Naivasha.

The Drivers of Degradation

“There’s a common misperception that the flower-growers are the biggest polluters of the lake,” says Peter Muigai, a Community Mobilization Officer with WWF Kenya. “There are certainly some bad actors among them, but most have become quite diligent about keeping the water clean, because sediments in the lake end up clogging the drip lines in their greenhouses, and that’s expensive.”

Most of the growers now filter their water before discharging it, often with the help of artificial wetlands that absorb excess fertilizer, says James Waweru, General Manager of the Flower Business Park Management Ltd., which oversees the Flower Business Park (FBP) itself.

The FBP handles common issues for eight flower-growers who employ thousands of workers in the region and provides housing, schools, and recreation facilities for employees. Its members pride themselves on their high rates of green certification, but the actions those certifications cover tend to stop at the park gates – which means they have no impact on people like Chege Mwangi, John Wachira, and Florence Muthoni.

Uphill Farmers

Mwangi owns and farms a one-acre lot on a steep slope in the upper catchment 40 kilometers north of the lake. His small farm, like thousands of others, liquefies in the rain, which means that everything he does eventually impacts the lake.

“I knew this was a problem, but didn’t realize how serious it was until I joined the program,” he says.

Wachira and Muthoni own larger farms to the south, on rugged land between recently-denuded hills and the lake. Rainwater gushes past them in the wet season, and then abandons them in the dry season. In years past, they spent the dry season in the hills above – contributing to the very degradation that is threatening their own farms and the lake below.

In the weeks ahead, we’ll be meeting each of these farmers and exploring the economic and environmental impact they’re having on the lake and land around them. We’ll also meet the WWF team spearheading the project and examine the motivation of different buyers as well as the regulatory framework within which the project functions.

Next Week: PWS In Kenya: How WWF And CARE Found Common Ground In High Hills
Additional resources

Tying The Knot:Buyers And Sellers In Kenyan PWS

This is the third in a four-part series examining the interplay between economy and ecology in the Lake Naivasha Watershed.

15 March 2013 | NAIVASHA | Kenya | It’s almost a year since that day in May, 2012, when Abigael Tamooh drove James Waweru to the steep slopes of Kenya’s Abardares Hills

“We wanted to show him directly how the payments for watershed services (PWS) were changing farmers’ behavior,” she says. “Because that’s the only way we’re going to get buy-in.”

Waweru runs the Flower Business Park Management Ltd., which coordinates activities of several flower-growers along the lake’s shore. He says he was sold within ten minutes of getting out of the car.

“The difference between those who subscribed to PWS and those who didn’t was quite apparent,” he says. “But then I had to convince our board as well.”

It’s a decision-making process that will be replicated around the world as cash-strapped governments turn to payments for ecosystem services (PES) in general and PWS in particular to promote good land stewardship – but it actually began four years earlier, when WWF and CARE started looking for partners in their ground-breaking PWS program.

 

Partnering to Find Buyers

During the feasibility studies that WWF and CARE carried out in 2007, three groups said they’d act as buyers in the pilot phase. The first was the Lake Naivasha Riparian Association (LNRA), an 80-year-old property-protection group that has been at the forefront of efforts to balance business and ecology. The second was the Lake Naivasha Growers Group (LNGG), which represents 19 flower growers and began working on water protection in the late 1990s. The third was the Lake Naivasha Association of Hotels.

With commitments totaling US $10,000, WWF and CARE set a target of 500 participating farmers. That would mean just $20 per farmer – not enough to cover the cost of the trees and Napier grass, but enough to provide a concrete incentive.

Partnering to Find Sellers

CARE and WWF came up with standardized criteria to make sure they were targeting those farmers most likely to deliver results, but rather than reach out to farmers themselves, they reached out to local Water Resource User Associations (WRUA).

“We wanted to make this sustainable,” says Peter Muigai, who was working with CARE at the time. “That meant getting local people involved in the administration of the program as soon as possible.”

One of the first people he approached was David Mbugua, Secretary of the Upper Tarusha Water Resource User Association (UTWRUA).

“They asked us to coordinate the outreach and also the verification and validation,” says Mbugua. “In exchange for this, they offered us 15% of the income from payments to cover our costs.”

 

The Criteria

Some of the criteria were based on hydrology: because steep land is more susceptible to erosion, for example, they restricted the first tranche of farms to those on gradients steeper than 20 degrees.

Other criteria were socioeconomic: to prevent inadvertently incentivizing more degradation, they required the land already be cultivated; and to make sure the people they targeted had a vested interest in the success of the project, they required that all participating farms either me managed by the owner or have the full mandate of the owner.

To create a baseline, they eliminated land that already had conservation structures like terraces and retaining walls.

 

The Proposition and the Uptake

To prime the pump, WWF and CARE offered to provide trees and Napier grass to farmers free of charge and show them how to install the grass in strips, with the trees behind it. If farmers implemented it correctly, they’d be rewarded with vouchers worth $17 that they could use for any agricultural inputs they wanted.

Of more than 700 farmers in both the Upper Tarusha and Wanjohi catchments, 565 agreed to implement the changes.

 

Drought and Default

The program was slated to begin in 2008, but a devastating drought prevented farmers from planting the grass. By 2009, however, the rains were back and the project was underway.

By early 2010, 470 of the 565 participating farmers had upheld their end of the bargain – but then came another surprise: when they went to collect the money from the buyers, only one of them – LNGG – honored its commitment.

“Once we realized we’d only get the one buyer, we were afraid of losing credibility with the sellers,” says Muigai. “So we went to the donors, and they agreed to cover any shortfall, so that we could still maintain the confidence of the farmer as we continue to negotiate with more buyers.”

The Dutch Directorate General for International Cooperation (DGIS) and the Danish International Development Agency (DANIDA) covered the shortfall, and the project continued. In late 2010, Muigai took a team from LNGG to the upper catchment to see the steep slopes and hear their plan.

“They were impressed,” says Muigai. “And they decided to pay the full amount: $10,000.”

Then came yet another setback: CARE announced that it didn’t have enough money to continue after 2010, so it was up to WWF to carry the load from there on in.

“Fortunately, CARE had laid a good foundation, and we were able to keep going without too much additional funding,” says Daniel Koros, a 20-year WWF veteran who came in to oversee the project in 2011. “We were able to hire Peter, and he continued doing for us what he had been doing for CARE.

 

Buyer Objections

Also in 2011, the Lake Naivasha Water Resource Users Association (LANAWRUA) hired Abigael Tamooh as a technical officer. Part of her job is to persuade flower-growers, hoteliers, and geothermal power providers to join the program – which isn’t always easy.

“LANAWRUA members use more water than the farmers in the catchments do, but they also pay nearly all the water fees,” she explains. “They often don’t see why they should be paying more on top of what they already pay.”

The FBP’s Waweru encountered that objection when he went to pitch the program to his board.

“The main objections were that we already paid for water charges – and that’s an objection I agree with,” he says, adding that several members argued that LANAWRUA should only participate if the upper-catchment WRUAs agreed to bring unregistered water users into the system. “But in the end, we decided that if we waited for everyone to come in, it wasn’t going to happen. So in June – one month after our tour – we made our first payment unconditionally.”

 

Moving Forward

In 2011, 504 farmers qualified for the bonus, and 785 farmers have joined the program this year. LNGG has pledged a whopping Ksh 1.3 million ($15,000).   FBP says it will also up its contribution from last year’s Ksh 250,000 ($3,000), but hasn’t settled on an exact amount yet.

Tamooh, meanwhile, is still working on the other potential buyers.

“Hotels are more concerned with the appearance of the water than with actual quality,” she says. “But the invasion of water hyacinths has shown that quantity and quality go hand-in-hand.”

Another potential big buyer is the Kenya Electricity Generating Company (KenGen), which runs geothermal plants that depend on clean subterranean waterways.

“They are open to the idea, but they also have a very bureaucratic decision-making structure,” says Tamooh. “But to achieve the scale we need, they’d have to join at some point.”

Next Week: Taking Stock: Environmental Benefits, Economic Challenges

 

Tanzanian Water Utility
Taps PWS To Keep Water Flowing

In 2010, a Tanzanian water utility became the first investor in a Payments for Watershed Services program designed to promote sustainable agriculture in the hills surrounding the city of Tanga. Three years on, the project is showing results – but more buyers will have to step up if it’s to achieve the kind of scale needed to keep the water flowing.

14 January 2013 | Sub-Saharan Africa’s urban population grew from 53 million to 400 million over the past 50 years, and is expected to grow another 345 million by 2030, according to the United Nations Food and Agriculture Organization. All those people will need clean and reliable sources of water, which will come to them from the same countryside that’s also expected to feed them.

In Tanga, a northern seaport city in Tanzania, the water authority is attempting to implement an Equitable Payments for Watershed Services (EPWS) program that will both conserve the mountain forests that keep the watersheds healthy and provide a livelihood for the people that maintain them.

The water supply of companies must be secure, says George Jambiya, a Policy Advisor for the World Wildlife Fund’s Africa Initiative (WWF.)

“We cannot continue as business as usual. Tanga has a vision of Tanga Urban Water Supply and Sewage Authority (UWASA) to be a leading authority in Africa in the provision of water supply and storage services comparable to the best practices in the world,” says Tanga Chairman Raymond Mhando, who has championed the project from its conception in 2008, its implementation in 2010, and its current stock-taking efforts.

The Project

WWF along with their Tanzania Country Office, a part of the WWF network that includes partnerships with local institutions, governments and communities, began implementing a PWS project in 2010. It focuses on the Zigi River located in the eastern Usambara Mountains, a range that is part of the Eastern Arc Mountains. Water flowing from the Eastern Arc Mountains supplies 3.5 million Tanzanians with water. The Zigi River is the only reliable source of water for Tanga City, a city of about 300,000 people with commercial and industrial sectors that are expanding, according to Iddi Mwanyoka, a Policy Officer for WWF in Tanzania.

From UWASA’s perspective, the challenge has been sedimentation in the Zigi River, but that problem begins in the foothills of the Eastern Arc Mountains, where farmers operating on steep slopes send topsoil cascading down into the river, along with nutrients like phosphorous and nitrogen. Those practices, in turn, lead to unreliable harvests that endanger the farmers’ livelihood. When WWF and CARE carried out their feasibility study, they found that 68% of the region’s population was food insecure.

UWASA provides farmers with buffers to capture runoff, which both improves their yields and reduces sedimentation.

“The PWS project in Tanga is basically an inexpensive alternative to an investment in a more expensive treatment plant,” says Mhando. “But it should also improve food security and income security for farmers, so it’s a classic win-win.”

The Buyers

When PWS programs emerged in the late 1990s, proponents had hoped to tap deep-pocketed international water users like Coca Cola and Pepsi, but Mhando’s decision to champion the project is proving to be the rule as domestic companies show they are able to make decisions more quickly than their bureaucratic global counterparts. Domestic companies can not only make decisions more quickly, but they have long term investments in the region whereas multinational companies can shift production elsewhere at a low cost and back out of a partnership and their role as a buyer.

As a municipal water company, Tanga UWASA has an obligation to secure residents with clean water and sewage services, and therefore is a long term buyer. Tanzania Breweries would arguably make a better buyer than Coke or Pepsi because those companies could easily switch production to another location while Tanzania Breweries can’t.

As a pilot, the PWS program in Tanga is meant to develop a relationship between buyers and sellers. Mwanyoka says he already sees growing cooperation between them.

“Buyers see the growing industry in Tanga,” Mwanyoka says. “Now they know they will have a dependable water source.”

As the project takes hold, he says, global players may become buyers as well. Indeed, some have made efforts to adopt sustainable policies. For instance, Nestle has a business plan that promotes issues that are key to its business needs like water, along with issues relevant to business activities such as nutrition and rural development. PepsiCo seeks to be the world’s prominent source for convenient food and beverages and gain financial rewards for that but also seeks to enrich their partnerships as well as the communities they operate in.

The Sustainability Component

The project isn’t the first to try and deliver clean water by promoting sustainable land use. In the early 1990s, for example, the Finnish International Development Agency (FINNDA) launched a conservation project called the, East Usambara Catchment Forest Project” (EUCFP) that aimed to provide clean water by saving forests and the species that live there. In the past, Finland had harvested wood from these forests and may have contributed to their degradation.

Initially, FINNIDA’s conservation project was a success. But the purely conservation project didn’t implement any long-term changes, and when the agency was finished and left Tanzania, the Usambara’s natural resources were again under threat.

“The market mechanism is what separates this project from that one,” says James Penney, a financial advisor to WWF. “It’s the element that makes this sustainable, because downstream users, if they see results, will keep making payments to upstream providers, who now have an even stronger incentive to keep up the practices. It’s like a Mexican stand-off, but in a good way.”

Tanzanian Water Utility Taps PWS To Keep Water Flowing

In 2010, a Tanzanian water utility became the first investor in a Payments for Watershed Services program designed to promote sustainable agriculture in the hills surrounding the city of Tanga. Three years on, the project is showing results – but more buyers will have to step up if it’s to achieve the kind of scale needed to keep the water flowing.

14 January 2013 | Sub-Saharan Africa’s urban population grew from 53 million to 400 million over the past 50 years, and is expected to grow another 345 million by 2030, according to the United Nations Food and Agriculture Organization. All those people will need clean and reliable sources of water, which will come to them from the same countryside that’s also expected to feed them.

In Tanga, a northern seaport city in Tanzania, the water authority is attempting to implement an Equitable Payments for Watershed Services (EPWS) program that will both conserve the mountain forests that keep the watersheds healthy and provide a livelihood for the people that maintain them.

The water supply of companies must be secure, says George Jambiya, a Policy Advisor for the World Wildlife Fund’s Africa Initiative (WWF.)

“We cannot continue as business as usual. Tanga has a vision of Tanga Urban Water Supply and Sewage Authority (UWASA) to be a leading authority in Africa in the provision of water supply and storage services comparable to the best practices in the world,” says Tanga Chairman Raymond Mhando, who has championed the project from its conception in 2008, its implementation in 2010, and its current stock-taking efforts.

The Project

WWF along with their Tanzania Country Office, a part of the WWF network that includes partnerships with local institutions, governments and communities, began implementing a PWS project in 2010. It focuses on the Zigi River located in the eastern Usambara Mountains, a range that is part of the Eastern Arc Mountains. Water flowing from the Eastern Arc Mountains supplies 3.5 million Tanzanians with water. The Zigi River is the only reliable source of water for Tanga City, a city of about 300,000 people with commercial and industrial sectors that are expanding, according to Iddi Mwanyoka, a Policy Officer for WWF in Tanzania.

From UWASA’s perspective, the challenge has been sedimentation in the Zigi River, but that problem begins in the foothills of the Eastern Arc Mountains, where farmers operating on steep slopes send topsoil cascading down into the river, along with nutrients like phosphorous and nitrogen. Those practices, in turn, lead to unreliable harvests that endanger the farmers’ livelihood. When WWF and CARE carried out their feasibility study, they found that 68% of the region’s population was food insecure.

UWASA provides farmers with buffers to capture runoff, which both improves their yields and reduces sedimentation.

“The PWS project in Tanga is basically an inexpensive alternative to an investment in a more expensive treatment plant,” says Mhando. “But it should also improve food security and income security for farmers, so it’s a classic win-win.”

The Buyers

When PWS programs emerged in the late 1990s, proponents had hoped to tap deep-pocketed international water users like Coca Cola and Pepsi, but Mhando’s decision to champion the project is proving to be the rule as domestic companies show they are able to make decisions more quickly than their bureaucratic global counterparts. Domestic companies can not only make decisions more quickly, but they have long term investments in the region whereas multinational companies can shift production elsewhere at a low cost and back out of a partnership and their role as a buyer.

As a municipal water company, Tanga UWASA has an obligation to secure residents with clean water and sewage services, and therefore is a long term buyer. Tanzania Breweries would arguably make a better buyer than Coke or Pepsi because those companies could easily switch production to another location while Tanzania Breweries can’t.

As a pilot, the PWS program in Tanga is meant to develop a relationship between buyers and sellers. Mwanyoka says he already sees growing cooperation between them.

“Buyers see the growing industry in Tanga,” Mwanyoka says. “Now they know they will have a dependable water source.”

As the project takes hold, he says, global players may become buyers as well. Indeed, some have made efforts to adopt sustainable policies. For instance, Nestle has a business plan that promotes issues that are key to its business needs like water, along with issues relevant to business activities such as nutrition and rural development. PepsiCo seeks to be the world’s prominent source for convenient food and beverages and gain financial rewards for that but also seeks to enrich their partnerships as well as the communities they operate in.

The Sustainability Component

The project isn’t the first to try and deliver clean water by promoting sustainable land use. In the early 1990s, for example, the Finnish International Development Agency (FINNDA) launched a conservation project called the, East Usambara Catchment Forest Project” (EUCFP) that aimed to provide clean water by saving forests and the species that live there. In the past, Finland had harvested wood from these forests and may have contributed to their degradation.

Initially, FINNIDA’s conservation project was a success. But the purely conservation project didn’t implement any long-term changes, and when the agency was finished and left Tanzania, the Usambara’s natural resources were again under threat.

“The market mechanism is what separates this project from that one,” says James Penney, a financial advisor to WWF. “It’s the element that makes this sustainable, because downstream users, if they see results, will keep making payments to upstream providers, who now have an even stronger incentive to keep up the practices. It’s like a Mexican stand-off, but in a good way.”

REDD+ Financing Efforts
Leave Pilot Projects In Limbo

Fourth in a series.

8 November 2012 | The Harmattan Trade Wind is an unrelenting blast of life-sucking dryness that roars down from the Sahara and across Ghana before passing into the Gulf of Guinea. It hits hardest from mid-November through March – the “dry season” – and leaves a swath of chapped lips, cracked skin, and parched earth.

For relief there’s shea butter – a creamy emollient crushed from nuts that drop off shea trees throughout the long wet season, beginning around April.

That’s when men start working their farms and women head into the forests to harvest the shea bounty – both for home use and for processing plants that sell the butter to skin-care companies around the world.

But the farming and foraging end when the Harmattan sets in. The rivers dry; the fields bake, and it’s the men who then head out to the forests – not to harvest nuts, but to chop trees for wood and cash.

It’s a practice that, for centuries, spared the shea trees.

“There was a taboo against chopping them,” says John Addaquay, who employs roughly 150 women as harvesters. “But that’s changing.”

Displaced migrants, charcoal producers, and – increasingly – desperate farmers have begun chopping shea in the dry season. It’s a one-time use that depletes the renewable supply of shea butter and leads to rainy-season shortages, which lead to more dry-season desperation, which leads to more chopping and lower harvests.

“Even the farmers have no choice,” says Nana Okofo Adjapong, a regional chief in Nkoranza South, a district in Ghana just south of the Volta River.   “Without irrigation and modern implements, they can’t work the land in the dry season, so they chop the trees.”

Fewer trees mean less business for Addaquay and The Pure Company, which is the shea processor that he co-owns with cosmetics supplier Vicdoris, Ltd. In addition to paying local women, the company pays a concession to Okatakyie Agyeman Kudom IV, the region’s paramount chief, who has direct control over an 8,000-hectare mosaic of woodland savanna and forest.

Confronted with a dwindling harvest, Addaquay and Kudom began looking for ways to put more money into farmers’ pockets so they could get through the dry season without killing the shea bounty.

“We looked at irrigation, and we considered planting faster-growing trees they could harvest,” says Addaquay. “We also looked at fruit trees and beekeeping, and we found it all works in some places but not everywhere.”

Hope For forests

Early last year, Addaquay saw a request for proposals (RFP) that seemed tailor-made to help him address the problem.

It had been issued jointly by Ghana’s Forestry Commission and its Ministry of Lands and Natural Resources, and it said the government was looking to fund projects that would test ways of using a carbon finance mechanism known as REDD (reduced emissions from deforestation and forest degradation) to save endangered forests for their carbon content.

More accurately, it was looking to fund REDD+ projects, which add in activities that go beyond just saving endangered forest.

“The National REDD+ Steering Committee … is … inviting proposals from individuals, companies, and various institutions, both local and international, for the piloting of REDD+ projects in Ghana,” it said.

“I thought I’d found the missing link,” he says. “REDD+ is designed to save forests, and we wanted to save forests.”

Into the Labyrinth

Addaquay told Kudom about the RFP, and together they set out to learn about REDD+.

“We didn’t really know what it involved then,” says Addaquay – echoing the sentiment of similarly green-minded entrepreneurs across the developing world.   “We thought we could just plant trees and get money.”

Building on their attempts to foster alternative livelihoods in communities around Kudom’s 8,000 hectares, they drew up a plan that would funnel REDD+ payments into projects that jump-start non-timber businesses, and then they submitted their proposal to the Forestry Commission.

Within a month, Addaquay was invited to a REDD+ workshop that the Forestry Commission was holding at its headquarters in Accra. This workshop, he learned, was paid for by the “REDD Readiness Fund”, which is one of two funding mechanisms that had been set up by the World Bank’s Forest Carbon Partnership Facility. The Readiness Fund had also paid for Ghana’s REDD+ Readiness Preparation Proposal (R-PP), a 60-page blueprint for building governance institutions in Ghana.

The workshop was part of the FCPF’s efforts to help the country implement the R-PP, and it’s there that he learned about the complexities of REDD+ and the challenges of measuring, verifying, and validating carbon sequestration. He also realized that his project provided exactly the kind of “learning by doing” opportunity that the Forestry Commission was looking to support.

As he moved further into the process, however, he found that such interest doesn’t always translate into funding. International donors like the World Bank and various national entities like the Norwegian Agency for Development Cooperation (Norad), for example, each come with their own specific mandates, philosophies, and sets of restrictions that aren’t always designed to support pilot projects like his.

But even before he could even begin to contemplate international support, he had to face a more existential dilemma: his project as conceived was just too small for anyone to take seriously.

Building Community Forestry: The Challenge of Scale

When he left the workshop, Addaquay’s mind was racing.

REDD+, he realized, would provide only small amounts of income for the community around Kudom’s forest – far less over time than, say, beekeeping – but it may be enough to help him get other community projects off the ground. The problem, however, was scale: less than 5,000 of Kudom’s 8,000 hectares were forested, and only part of that would ever qualify for REDD. Given the complex accounting mechanisms he had just learned of, that was just too small a piece of land to even contemplate turning into a viable REDD project.

“Most project developers won’t talk to you if you have less than 200,000 hectares, and the bare minimum is 30,000,” says Addaquay.   “We needed to scale up if we were to have a chance.”

He knew that he wasn’t alone. After all, most sub-Saharan landowners have small parcels, and many of them were also talking about REDD+. If he could find a way to bring several landowners together, it would have knock-on benefits for landowners across the continent.

Kudom got the ball rolling by raising the issue within the Nkoranza Traditional Council, a parliament of four dozen traditional leaders who together control more than 200,000 hectares of forested savanna. Kudom is the Council’s president, and his opinions carry weight.

Addaquay, meanwhile, started looking for technical support from John Mason, Founder and CEO of the Nature Conservation Research Centre (NCRC), an environmental non-profit that helps local communities develop economically viable conservation programs.

Mason told Addaquay about Kenya’s Kasigau Corridor REDD+ Project, which implemented REDD+ on private ranchland in part by providing alternative income for subsistence farmers. Addaquay realized that he could go one better: knitting scores of villages and hundreds of farmers into a project that could be replicated across Africa. This had never been done before, and he’d need pilot funding to get the ball rolling.

Using the Kasigau project as a model, Addaquay and Mason drew up a more detailed proposal and presented it to Victor Attafua, who runs Vicdoris Ltd. Attafua liked the idea and agreed to fund another workshop – this time for local chiefs at Kudom’s palace.

The Presentation

At the two-day workshop, Addaquay and Mason explained how REDD+ could provide bridge financing to enable the development of agriculture and other activities that each village would identify on its own. They explained that this was a pilot project, and that REDD+ was new and untested, but that they felt it was worth a shot.

When they took a vote, every single chief opted to give it a try.

Mason then contacted researchers at Oxford University for help surveying the region’s trees, shrubs, and grasses – and found the project could also be used to test new methods of incorporating biodiversity benefits into a REDD+ project.

They christened it the Vicdoris REDD+ Project and drew up a 21-page proposal, which they sent to the Forestry Commission in March – the same month that Ghana received $3.4 million from the FCPF to move forward on REDD+.

“At that point, we thought there’d be some funding or grant of support that would help us, because it’s all new to everybody in Ghana,” says Addaquay.

“If REDD+ is going to work in Ghana, it’s going to start from a project or landscape level initiative,” says Rebecca Asare, the technical leader of NCRC’s program on payments for ecosystem services. “REDD+ is tricky, so we have to first do it at a scale where you can learn how to do it and what the challenges are.”

When Piloting Isn’t

The Vicdoris REDD Project is one of seven that the World Bank identified as eligible for funding under the Readiness Fund, but the scope of that funding is currently limited by Paragraph 27 of the FCPF’s Readiness Grant Project Information Document (PID):

“The activities to be financed by the FCPF in support of the REDD+ Readiness Program in Ghana are limited to analytical studies, capacity building, and consultation processes at the national and sub-national levels and do not include the implementation of site specific REDD+ programs on the ground,” the PID says. “Through the Readiness Program, the government is expected to identify priority investment needs required to achieve the goals of REDD+. These investment needs will be financed by public and private donors, investors, MDBs, and the Government itself, and not by the FCPF Readiness Grant.”

Within the World Bank, he learned, there are no less than three initiatives designed to help developing countries build institutions to support REDD+.   While the FCPF is focused almost exclusively on creating a REDD infrastructure, the Forest Investment Program (FIP) and BioCarbon Fund are free to offer more targeted support to projects like his. What’s more, the FCPF has two funds: the Readiness Fund, which helps countries build up their REDD+ governance structures, and the Carbon Fund, whose funding commitments kick in after the readiness phase is complete. Like the BioCarbon Fund and the FIP, the Carbon Fund could fund individual projects – but not until early next year. While the BioCarbon Fund is supporting REDD+ projects by purchasing early-stage offsets, project developers are split over whether the prices on offer will even cover start-up costs.

The Project Funding Gap

This leaves Addaquay in the same position as scores of others, according to preliminary findings of REDDX, Forest Trends’  REDD+ Expenditures Tracking Project, which aims to document the flow of REDD+ funding from donors to recipients and highlight which REDD+ activities are being financed in the current funding landscape. During the REDD Readiness phases between 2010 and 2012, multilateral funding institutions such as The World Bank through the FCPF and the Forest Investment Program (FIP) as well as the UN-REDD Programme (UN-REDD) have focused more on developing capacity in countries with the idea that REDD+ demonstration projects will be financed once the capacity building and planning stage is complete.

Other donors that many believed would step in to fill the gap have largely failed to do so, leaving groundbreaking projects that could inform the process in a sort of limbo.

“Everybody has their idea about what is needed and useful and it doesn’t necessarily line up with the reality of how we roll these things out and how we learn by doing,” says Asare. “Ghana’s REDD initiative is bottom-up learning from doing and yet there’s nothing to support the doing.”

Other Funding Opportunities

Addaquay has sought private investors in the United States and Europe, but they all say the same thing: he’s trying too many new things for them to feel comfortable taking a plunge.

Last month, the Forestry Commission arranged a workshop in Kumasi to keep the chiefs updated, but Adjapong, the regional chief, says many of them are losing interest.

“We’re coming into the dry season now,” he says. “People are focused on more immediate needs.”

As for Addaquay, he says the Forestry Commission is doing all it can, and is confident something will give.

“But we haven’t had any financial support yet,” he says. “It’s getting a bit scary.”

NEXT: We take a deep dive into the World Bank’s forest carbon finance apparatus, and examine the competing philosophies regarding pilots vs capacity.

 

REDD+ Financing EffortsLeave Pilot Projects In Limbo

Fourth in a series.

8 November 2012 | The Harmattan Trade Wind is an unrelenting blast of life-sucking dryness that roars down from the Sahara and across Ghana before passing into the Gulf of Guinea. It hits hardest from mid-November through March – the “dry season” – and leaves a swath of chapped lips, cracked skin, and parched earth.

For relief there’s shea butter – a creamy emollient crushed from nuts that drop off shea trees throughout the long wet season, beginning around April.

That’s when men start working their farms and women head into the forests to harvest the shea bounty – both for home use and for processing plants that sell the butter to skin-care companies around the world.

But the farming and foraging end when the Harmattan sets in. The rivers dry; the fields bake, and it’s the men who then head out to the forests – not to harvest nuts, but to chop trees for wood and cash.

It’s a practice that, for centuries, spared the shea trees.

“There was a taboo against chopping them,” says John Addaquay, who employs roughly 150 women as harvesters. “But that’s changing.”

Displaced migrants, charcoal producers, and – increasingly – desperate farmers have begun chopping shea in the dry season. It’s a one-time use that depletes the renewable supply of shea butter and leads to rainy-season shortages, which lead to more dry-season desperation, which leads to more chopping and lower harvests.

“Even the farmers have no choice,” says Nana Okofo Adjapong, a regional chief in Nkoranza South, a district in Ghana just south of the Volta River.   “Without irrigation and modern implements, they can’t work the land in the dry season, so they chop the trees.”

Fewer trees mean less business for Addaquay and The Pure Company, which is the shea processor that he co-owns with cosmetics supplier Vicdoris, Ltd. In addition to paying local women, the company pays a concession to Okatakyie Agyeman Kudom IV, the region’s paramount chief, who has direct control over an 8,000-hectare mosaic of woodland savanna and forest.

Confronted with a dwindling harvest, Addaquay and Kudom began looking for ways to put more money into farmers’ pockets so they could get through the dry season without killing the shea bounty.

“We looked at irrigation, and we considered planting faster-growing trees they could harvest,” says Addaquay. “We also looked at fruit trees and beekeeping, and we found it all works in some places but not everywhere.”

Hope For forests

Early last year, Addaquay saw a request for proposals (RFP) that seemed tailor-made to help him address the problem.

It had been issued jointly by Ghana’s Forestry Commission and its Ministry of Lands and Natural Resources, and it said the government was looking to fund projects that would test ways of using a carbon finance mechanism known as REDD (reduced emissions from deforestation and forest degradation) to save endangered forests for their carbon content.

More accurately, it was looking to fund REDD+ projects, which add in activities that go beyond just saving endangered forest.

“The National REDD+ Steering Committee … is … inviting proposals from individuals, companies, and various institutions, both local and international, for the piloting of REDD+ projects in Ghana,” it said.

“I thought I’d found the missing link,” he says. “REDD+ is designed to save forests, and we wanted to save forests.”

Into the Labyrinth

Addaquay told Kudom about the RFP, and together they set out to learn about REDD+.

“We didn’t really know what it involved then,” says Addaquay – echoing the sentiment of similarly green-minded entrepreneurs across the developing world.   “We thought we could just plant trees and get money.”

Building on their attempts to foster alternative livelihoods in communities around Kudom’s 8,000 hectares, they drew up a plan that would funnel REDD+ payments into projects that jump-start non-timber businesses, and then they submitted their proposal to the Forestry Commission.

Within a month, Addaquay was invited to a REDD+ workshop that the Forestry Commission was holding at its headquarters in Accra. This workshop, he learned, was paid for by the “REDD Readiness Fund”, which is one of two funding mechanisms that had been set up by the World Bank’s Forest Carbon Partnership Facility. The Readiness Fund had also paid for Ghana’s REDD+ Readiness Preparation Proposal (R-PP), a 60-page blueprint for building governance institutions in Ghana.

The workshop was part of the FCPF’s efforts to help the country implement the R-PP, and it’s there that he learned about the complexities of REDD+ and the challenges of measuring, verifying, and validating carbon sequestration. He also realized that his project provided exactly the kind of “learning by doing” opportunity that the Forestry Commission was looking to support.

As he moved further into the process, however, he found that such interest doesn’t always translate into funding. International donors like the World Bank and various national entities like the Norwegian Agency for Development Cooperation (Norad), for example, each come with their own specific mandates, philosophies, and sets of restrictions that aren’t always designed to support pilot projects like his.

But even before he could even begin to contemplate international support, he had to face a more existential dilemma: his project as conceived was just too small for anyone to take seriously.

Building Community Forestry: The Challenge of Scale

When he left the workshop, Addaquay’s mind was racing.

REDD+, he realized, would provide only small amounts of income for the community around Kudom’s forest – far less over time than, say, beekeeping – but it may be enough to help him get other community projects off the ground. The problem, however, was scale: less than 5,000 of Kudom’s 8,000 hectares were forested, and only part of that would ever qualify for REDD. Given the complex accounting mechanisms he had just learned of, that was just too small a piece of land to even contemplate turning into a viable REDD project.

“Most project developers won’t talk to you if you have less than 200,000 hectares, and the bare minimum is 30,000,” says Addaquay.   “We needed to scale up if we were to have a chance.”

He knew that he wasn’t alone. After all, most sub-Saharan landowners have small parcels, and many of them were also talking about REDD+. If he could find a way to bring several landowners together, it would have knock-on benefits for landowners across the continent.

Kudom got the ball rolling by raising the issue within the Nkoranza Traditional Council, a parliament of four dozen traditional leaders who together control more than 200,000 hectares of forested savanna. Kudom is the Council’s president, and his opinions carry weight.

Addaquay, meanwhile, started looking for technical support from John Mason, Founder and CEO of the Nature Conservation Research Centre (NCRC), an environmental non-profit that helps local communities develop economically viable conservation programs.

Mason told Addaquay about Kenya’s Kasigau Corridor REDD+ Project, which implemented REDD+ on private ranchland in part by providing alternative income for subsistence farmers. Addaquay realized that he could go one better: knitting scores of villages and hundreds of farmers into a project that could be replicated across Africa. This had never been done before, and he’d need pilot funding to get the ball rolling.

Using the Kasigau project as a model, Addaquay and Mason drew up a more detailed proposal and presented it to Victor Attafua, who runs Vicdoris Ltd. Attafua liked the idea and agreed to fund another workshop – this time for local chiefs at Kudom’s palace.

The Presentation

At the two-day workshop, Addaquay and Mason explained how REDD+ could provide bridge financing to enable the development of agriculture and other activities that each village would identify on its own. They explained that this was a pilot project, and that REDD+ was new and untested, but that they felt it was worth a shot.

When they took a vote, every single chief opted to give it a try.

Mason then contacted researchers at Oxford University for help surveying the region’s trees, shrubs, and grasses – and found the project could also be used to test new methods of incorporating biodiversity benefits into a REDD+ project.

They christened it the Vicdoris REDD+ Project and drew up a 21-page proposal, which they sent to the Forestry Commission in March – the same month that Ghana received $3.4 million from the FCPF to move forward on REDD+.

“At that point, we thought there’d be some funding or grant of support that would help us, because it’s all new to everybody in Ghana,” says Addaquay.

“If REDD+ is going to work in Ghana, it’s going to start from a project or landscape level initiative,” says Rebecca Asare, the technical leader of NCRC’s program on payments for ecosystem services. “REDD+ is tricky, so we have to first do it at a scale where you can learn how to do it and what the challenges are.”

When Piloting Isn’t

The Vicdoris REDD Project is one of seven that the World Bank identified as eligible for funding under the Readiness Fund, but the scope of that funding is currently limited by Paragraph 27 of the FCPF’s Readiness Grant Project Information Document (PID):

“The activities to be financed by the FCPF in support of the REDD+ Readiness Program in Ghana are limited to analytical studies, capacity building, and consultation processes at the national and sub-national levels and do not include the implementation of site specific REDD+ programs on the ground,” the PID says. “Through the Readiness Program, the government is expected to identify priority investment needs required to achieve the goals of REDD+. These investment needs will be financed by public and private donors, investors, MDBs, and the Government itself, and not by the FCPF Readiness Grant.”

Within the World Bank, he learned, there are no less than three initiatives designed to help developing countries build institutions to support REDD+.   While the FCPF is focused almost exclusively on creating a REDD infrastructure, the Forest Investment Program (FIP) and BioCarbon Fund are free to offer more targeted support to projects like his. What’s more, the FCPF has two funds: the Readiness Fund, which helps countries build up their REDD+ governance structures, and the Carbon Fund, whose funding commitments kick in after the readiness phase is complete. Like the BioCarbon Fund and the FIP, the Carbon Fund could fund individual projects – but not until early next year. While the BioCarbon Fund is supporting REDD+ projects by purchasing early-stage offsets, project developers are split over whether the prices on offer will even cover start-up costs.

The Project Funding Gap

This leaves Addaquay in the same position as scores of others, according to preliminary findings of REDDX, Forest Trends’  REDD+ Expenditures Tracking Project, which aims to document the flow of REDD+ funding from donors to recipients and highlight which REDD+ activities are being financed in the current funding landscape. During the REDD Readiness phases between 2010 and 2012, multilateral funding institutions such as The World Bank through the FCPF and the Forest Investment Program (FIP) as well as the UN-REDD Programme (UN-REDD) have focused more on developing capacity in countries with the idea that REDD+ demonstration projects will be financed once the capacity building and planning stage is complete.

Other donors that many believed would step in to fill the gap have largely failed to do so, leaving groundbreaking projects that could inform the process in a sort of limbo.

“Everybody has their idea about what is needed and useful and it doesn’t necessarily line up with the reality of how we roll these things out and how we learn by doing,” says Asare. “Ghana’s REDD initiative is bottom-up learning from doing and yet there’s nothing to support the doing.”

Other Funding Opportunities

Addaquay has sought private investors in the United States and Europe, but they all say the same thing: he’s trying too many new things for them to feel comfortable taking a plunge.

Last month, the Forestry Commission arranged a workshop in Kumasi to keep the chiefs updated, but Adjapong, the regional chief, says many of them are losing interest.

“We’re coming into the dry season now,” he says. “People are focused on more immediate needs.”

As for Addaquay, he says the Forestry Commission is doing all it can, and is confident something will give.

“But we haven’t had any financial support yet,” he says. “It’s getting a bit scary.”

NEXT: We take a deep dive into the World Bank’s forest carbon finance apparatus, and examine the competing philosophies regarding pilots vs capacity.

 

Linking Smallholders to Modern Markets

Picking up flowers at the supermarket is an easy task for the average consumer, but the journey that those flowers take to get on those shelves is complicated.  For most smallholder farmers, this means their products will never end up on those shelves.  But a new project from the International Institute for Economics and Development is trying to change that.

This article has been adapted from the Linking Smallholders to Modern Markets. You can read it in its entirety here.

19 March 2011 | In 2008, Wilfred Kamami’s family-run business was already challenging the model of Kenyan flower exports from huge commercial farms. Wilmar Agro Limited exports cut flowers from 4,000 smallholder growers to the Dutch auction market. Once a farmer himself, Kamami invests in his growers, by enabling access to bank accounts for each grower, by using transparent pricing and payment models, and through technical support for sustainable production of flowers on mixed smallholder farms.

This inclusive business model was attracting farmers across Kenya, for whom high value cash crops can secure a livelihood on small, subdivided farm holdings. But business growth was limited by the wholesale market. With prices based on supply and demand, more growers and more volumes meant lower prices. Kamami needed to sidestep the Dutch auction’s monopoly and take more direct routes to flower supermarkets in order to expand his business.

IIED set out to support Kamami in finding those routes. In a pilot project for the New Business Models for Sustainable Trading Relationships programme, Wilmar supplied (and continues to supply) flowers from small-scale Kenyan growers directly to UK and US supermarkets. Consultant Steve Homer, a longtime IIED collaborator with substantial commercial experience in selling smallholder products to retailers, was the project’s commercial partner. Homer in turn contracted William van Bragt, who has long worked in the flower industry. Homer, van Bragt and IIED together served a role we call ‘ethical agents’ — enabling collaboration along supply chains and improving poor producers’ lives by injecting knowledge, building relationships and aligning interests, rather than handling the product.

Working with Wilmar, Rainforest Alliance and Walmart’s UK subsidiary, ASDA, the IIED team developed the first smallholder flower bouquets with the Rainforest Alliance sustainability certification.

In 2010, the Kenyan bouquets hit ASDA shelves and consumer shopping bags. But Wilmar soon had problems supplying flowers that consistently met the retailer’s exacting requirements. After 15 weeks, ASDA ended the pilot project.

It was clear that satisfying supermarket buyers is a big jump from supplying the auction market. The bouquet business demanded specific varieties and volumes, in the right ratios, on schedule, all at uniform length and maturity — and with enough smallholder content to get the Rainforest Alliance sticker. The team was learning about the stark transition from supplying the Dutch auctions — a ‘push’ market where the company sends a relatively undifferentiated product at wholesale volumes to meet minimal requirements — to a retail ‘pull’ market that tolerates no deviation from pre-agreed volumes and specifications.

To smooth this transition, Wilmar could use the support of ethical agents to help adapt products and processes for the new ‘pull’ markets while being conscious of the impacts on the business and smallholders. First, IIED and van Bragt renegotiated the Rainforest Alliance certification standard. Now bouquets were allowed to contain fewer smallholder-grown flowers, allowing for substitution when smallholder production was unable to meet the requirements. The team also arranged for Wilmar to sell bunches of single flower varieties, which could be packed in Kenya to add value locally. Drawn by the ASDA pilot, the US retailer Sam’s Club, another Walmart subsidiary, began purchasing these certified ‘consumer bunches’ as well as a limited number of bouquets.

The innovation in products meant that Wilmar’s capabilities could better match their customers’ needs, with smallholder growers supplying the same or greater volumes. The ethical agents worked with Sam’s Club to fine tune the bouquets to the capacity of the supplier, while helping Wilmar strengthen their systems and communications. With the product and process improvements, Wilmar has been supplying 100 Sam’s Club stores since July 2011.

The ethical agents provided support and opened doors at many levels of the supply chain. Their commercial knowledge and connections enabled Homer and van Bragt to create new retail opportunities, build Wilmar’s capacity, negotiate terms of supply, and encourage flexibility from the buyer. Ethical agents — with their network of relationships and ‘insider’ knowledge — were crucial in engaging retailers, cultivating their interest in a new business opportunity that is more than corporate social responsibility. In negotiations over the Rainforest Alliance certification, IIED could credibly communicate how inflexible certification was hurting growers, while van Bragt described expectations at the retail end of the chain. IIED also introduced systems to monitor the fairness of trading relationships along the chain. At the end of the project, the agents could step back knowing a commercially viable supply chain was in place.

Going forward, IIED will apply lessons from this project to a variety of other efforts to link small-scale producers with demanding formal markets — in agriculture, textiles, energy, mining and payments for ecosystem services. Different as these sectors are, understanding the network support and expertise needed to succeed in more demanding or formal markets is key.

In the four years of the project, the IIED team has revised strategies again and again. We moved from bouquets to single varieties; from niche supply of development products to mainstream supply of innovative products; and from ‘off the shelf’ certification to tailored, flexible certification. Had we kept to a rigid plan, we couldn’t have responded to unexpected challenges and opportunities. For any project testing new business models, flexibility is key to success

Bill Vorley is the principal researcher at IIED’s Sustainable Markets Group and team leader for market governance and business models. He can be reached at bill.vorley@iied.org. Abbi Buxton is a researcher with IIED’s Sustainable Markets Group. She can be reached at abbi.buxton@iied.org.

This article originally appeared on the IIED Web Site. Please cite the original in references and consult them for information on reprinting.

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Valuing the Arc: Five-Year Experiment Draws to a Close

The downward flow of water from the Eastern Arc Mountains of Africa generates up to half of Tanzania’s power and provides much of Dar es Salaam’s drinking water. As agriculture moves up the slopes, however, it destroys the natural ecosystems that support the ancient catchments.   A five-year effort to value those ecosystem services wraps up this month.

9 March 2012 | If anyone knows the value of the Eastern Arc Mountain ecosystem, it will be George Jambiya and Neil Burgess.

Together, they’ve spent more than three decades helping WWF and the Tanzanian government document thousands of rare plant and animal species that populate the Arc, not to mention the ecosystems they support and the animals and economies that depend on them.

Until now, however, neither can tell you with scientific certainty the value of the ecosystem services that flow from those plants and animals.

“On the one hand, you can say, ‘Look, we all depend on these services, so the value is inherent,'” says Burgess. “But we can’t go to Coca Cola and say, ‘This catchment delivers this amount of clean water, and has this value to you.'”

The ability to make that statement with confidence, however, would help save life-supporting ecosystem services that support – and, in our economic system, compete with – tangible hard commodities like timber and food.

“Right now, a lot of the values that are being applied to forestry management are only taking into account things like timber prices and logging permit values,” says Jambiya. “Things such as carbon sequestration and, especially, hydrological services don’t come into play, and the value of water is not determined by the market or even by supply and demand – but by an arbitrarily-set figure, which is probably very much on the low side. Often the official water fees are not paid, making the resource effectively free.   The values of biodiversity are even worse in terms of valuing their market value.”

The two are among a handful of experts spearheading a five-year research and policy project called
Valuing the Arc“, which wraps up this month. Its mission is to quantify the economic value of specific ecosystem services in the Eastern Arc Mountains, and it harvests expertise from five UK-based universities (Cambridge, East Anglia, York, Leeds, and Cranfield), two Tanzanian universities (University of Dar es Salaam and Sokoine University of Agriculture), the WWF Tanzania Programme Office, and the Natural Capital Project.

Along the way, they’ve helped with efforts to identify and educate potential buyers and sellers of ecosystem services and provide fodder for a CARE-WWF partnership called “Equitable Payments for Watershed Services (EPWS)”.

Katoomba in Uganda

Burgess got the idea for Valuing the Arc after attending a 2005 Katoomba Meeting in Kampala, Uganda (Katoomba VIII) on behalf of Tanzania’s Department of Natural Resources, for whom he was working at the time.

“We knew the forest was storing a lot of carbon, and the whole payments for ecosystem services thing was beginning to emerge,” he says. “The Katoomba Meeting catalyzed a lot of things, and brought a lot of people together.”

Among those people were PES project developers from Mexico, South America, and South Africa.

“I saw what they were doing and thought, ‘Well, that all looks similar to the beginnings of what has happened in Tanzania,'” Burgess recalls. “I figured maybe we could start to go more in the ecosystem service direction here.”

First the Price, then the Payment

“Neil basically realized that he needed to get beyond general statements about the value of nature and show decision-makers where the value lies within their actual landscapes,” says Taylor Ricketts, co-founder of the Natural Capital Project, which is itself a joint project of Stanford University’s Woods Institute for the Environment, The Nature Conservancy, and WWF.

Over the years, Burgess and scores of other researchers had taken a shot at mapping the ecosystems of the Eastern Arc Mountains, and several facts were clear:

First, they knew that area of fog-enshrouded, moss-laden “cloud forests” that capture and store moisture high in the mountains was declining. Second, they knew that farmers were both tapping the mountain streams for agriculture and for their domestic use, including washing in the rivers.

They also knew that downstream rivers were running faster in the wet season and slower in the dry season – and muddier all year long.

But they didn’t know the extent to which each problem could be attributed to specific practices, and they couldn’t determine how much maintaining the upper catchments was worth to end-users such as breweries and water filtration plants.

Building the Team

Once back home in the UK, Burgess mentioned his dilemma to Cambridge Professor Andrew Balmford, who told him about a grant available from the Leverhulme Trust. Balmford applied for and won that grant, while Burgess lined up the University of Dar es Salaam and the Sokoine University of Agriculture, each of which unleashed scores of staff and PhD students to ramp up the mapping process.

“That’s where we come in,” says Ricketts, whose Natural Capital Project (NatCap) supplied a tool called InVEST (Integrated Valuation of Ecosystem Services and Trade-offs) – a software package that that maps ecosystem services and their economic values.

As NatCap was joining the project, Ricketts applied for and won a grant from the Packard Foundation that complemented the Leverhulme grant – and set to work delivering their piece of the puzzle.

“We’ve basically built a program that plugs into the industry-standard GIS tool,” he explains. “You can map how much carbon is being stored in forests and woodlands, for example, or where people harvest products like medicinal plants directly from ecosystems.”

InVEST also offers modules that map important areas for water supply, flood control, timber harvest, crop pollination, and other ecosystem services. It is freely available on the Internet, and has been downloaded more than 2500 times.   NatCap alone is using it to support more than a dozen other projects around the world.

“You can use only the modules you care about, and customize those to your situation,” he says. “Every week, I get an e-mail from someone on the NatCap team telling us about a new project that used the tool, and it’s quite impressive what people are doing there.”

Laying the Groundwork and Priming the Pump

The tedious task of lining up the partners and identifying their responsibilities consumed much of the first phase of Valuing the Arc. After that came identifying the gaps.

“We spent quite a lot of the end of the first year putting together all available data on water flows, timber, carbon etc,” says Burgess. “A lot of the data was from previous work, including the previous project that I’d worked on. We basically compiled all available data that we knew of from the past 20 years.”

The project is broken into six teams: one for carbon, one for water, one for biodiversity, one for timber, one for non-timber forest products, and one for agriculture.

Early Rewards

In 2010, Cambridge University used the carbon team’s map to provide the government with two hypothetical maps showing the state of Eastern Arc carbon decades from now.   One map showed the state of carbon sequestration if the government adopted a sustainable development approach to the mountains, and the other showed what would happen under business as usual.   (Ricketts and Burgess contributed to a paper on the two scenarios, which was published in the Journal of Environmental Management).

That same year, the Tanzanian government used the carbon maps to demonstrate its growing REDD readiness at the 15th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 15) in Copenhagen. That led to a grant from the Norwegian government to expand the carbon mapping across all of Tanzania, beginning in January, 2011.

Mapping Other Ecosystem Services

Ricketts says even more tangible fruit will come due when results are published in March.

“For the last nine months we’ve been synthesizing the six services into multi-service assessments,” he says.   “Basically, trying to say where the value for each one is coming from, and where the overlap is.”

Some time around March, 2012, they hope to publish the results, showing the impact of different land-use practices on agriculture growth, urban health, urban growth, and other ecosystem-dependent.

“The science is to take the alternative scenarios and tell people what the consequences of each pathway are for a big bundle of ecosystem services,” says Ricketts.   “The big bundle is what we’re doing now.”

After the papers are out, they will hold a workshop for stakeholders who have been working with the project for the past five years.

Will Beneficiaries Become Buyers?

As the measurements become more concrete and targeted, Burgess believes the beneficiaries of ecosystem services will become buyers – and for economic reasons, and not just for philanthropy.

“We’ve got a lot of information coming together on habitat quality and on the amount of timber and non-timber resources coming out of the forest, as well as how much forest there is,” he says. “This will all be pretty fundamental stuff for the carbon baseline work in the near term, and should be valuable to the whole payments for ecosystem services arena that’s going to be there in five or 10 years time.”

Jambiya agrees, but says the near-term damage control can best be handled by government.

“The whole intention of Valuing the Arc is to try to establish the true values of these resources and the services that they offer, and through that make arguments for greater investment on the government side for conservation efforts,” he says, adding that private sector investors will still be needed to make the system viable over the long haul.

 

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Can Namibia Balance Mining and Nature?

Humans have impacted the Namib for millennia, but only now are their activities impacting ecosystems on a large scale.   That’s why the Ministry for Environment and Tourism commissioned a Landscape-Level Assessment for the Central Namib to help make sound decisions on economic development while retaining the desert’s special character and people’s livelihoods.

10 January 2012 | Namibia’s ancient Namib Desert has been shaped by fierce sun and wind, and is characterised by an extensive ‘sand sea’ with exceptionally high dunes, the glaring gravel plains and moon landscapes.  

The desert’s demanding ecological conditions have led to some peculiar and highly specialised fauna and flora – such as the large and diverse lichen fields flourishing near the coast due to regular fog events, the isolated communities of iconic Welwitschia mirabilis (strange cone-bearing plants, pictured above, that can live for hundreds of years and whose ancestors are believed to have been abundant during the Jurassic) and an intriguing diversity of tenebrionid beetles (more than 170 species), some with special physical and behavioural fog-harvesting adaptations that have even inspired the research and development of novel moisture-collecting materials in distant laboratories.

Rock paintings and archaeological evidence from different periods in history indicate that humans have been present in this region for several hundred thousands of years, but never have they impacted the environment as they are now as first diamonds and then uranium were discovered across the country.

The Uranium Rush and the Diamond Drive

Diamond mining began in the Southern Namib in the early 1900s and soon spread off-shore. The country is also rich in mineral resources, including deposits of copper, zinc, gold, and uranium.   The “Uranium Rush”, which peaked around five years ago and is centred on the fragile Central Namib, saw a surge in demand for large numbers of exploration and mining licences near and even inside the Namib Naukluft National Park, one of the country’s flagship protected areas.

The Government faced a dilemma: one of its main concerns is building a stronger economy to tackle persistently high levels of unemployment and poverty, so it wants to see these various resources developed as a priority, albeit within the framework of sustainable development.

The Moratorium

These areas where mining is concentrated provide one of the cornerstones of the tourism industry, which is rapidly growing to become a significant contributor to the national Gross Domestic Product. Indeed, to conserve its rich natural and historical heritage, and to contribute to meeting its commitments under the Convention for Biological Diversity, Namibia has established an excellent system of statutory Protected Areas. When counting community-managed conservancies, which may well offer the potential for future Payments for Ecosystem Services schemes and for the delivery of biodiversity offsets or compensation, this means that around 40% of the total land surface is under some form of protection.

But mining is the mainstay of the economy, and the government’s position was not an easy one. In the end, the response to the “Uranium Rush” by commissioning a Strategic Environmental Assessment (the Uranium-SEA) for the Central Namib and placing a temporary moratorium on the issuing of new licenses until it was complete.   The principal aim was to assess the likely direct, indirect and especially the cumulative impacts of a range of uranium mining scenarios on the receiving environment and then to provide recommendations and actions in a Strategic Environmental Management Plan to inform decision-making and to help avoid and/or limit negative impacts on people and the natural environment. Initiated by the Chamber of Mines and then officially commissioned by the Ministry for Mines and Energy (MME), the U-SEA was – by all accounts – the first SEA in the world to be conducted for a mineral province.

Are Offsets Part of the Answer?

The situation in the Central Namib has raised important questions: How can the goals of biodiversity conservation, social well-being and economic development (e.g. mining development, associated infrastructure) be aligned, and is it possible to strike a balance?  

These were some of the central themes explored in a national workshop in July 2010 on responsible development that takes place in the context of the mitigation hierarchy and biodiversity offsets and as supported by sound landscape level planning. The Business and Biodiversity Offsets Programme (BBOP, Forest Trends) together with Fauna and Flora International (FFI) organised and shared their collective experience with participants of the workshop, which was hosted by the Ministry for Environment and Tourism (MET).

In her opening speech, Minister of Environment and Tourism Netumbo Nandi Ndaithwah emphasised the timely nature of the debate, referring specifically to the potential for integrating promising developments in the uranium mining sector with mechanisms such as biodiversity offsets, in the context of the mitigation hierarchy, to ensure ecologically sustainable outcomes that take care of the natural ecosystems.

Putting it Together

When interpreted together with a strategic assessment previously undertaken for the Namibian coastline, the Uranium-SEA helps to put the proposed developments in the Central Namib into perspective. The outputs highlight some of the social, economic and environmental costs and benefits associated with the mining developments – and with different scenarios that might be expected. The products also lay out risks and offer recommendations for mitigating these risks, including the need for further studies. This kind of information is critical for further sound planning and decision-making, though it is important to recognise that it is most effective at an early stage in any developments so as to enable strategic decisions.  

A key issue raised in the Uranium-SEA as being in need of further investigation was the use of water in the arid region, and particularly the risk of unmonitored groundwater abstraction for uranium mining. A detailed study by the German Federal Institute for Geosciences and Natural Resources (BGR) and the Geological Survey of Namibia has now produced the first groundwater model for the Central Namib. This confirms experts’ concern around potential groundwater depletion due to increased use for mining in the region and the recommendation that alternative water sources (e.g. desalination plants) be used.

The Landscape-Level Assessment

Biodiversity considerations were included in the Uranium-SEA primarily through an expert mapping process that identified preliminary areas of high biodiversity value. However, to validate and refine these areas and to provide a spatial decision-support tool, a Landscape-level Assessment (LLA) was commissioned by the Ministry of Environment and Tourism in the latter half of 2011. BBOP is collaborating in this FFI-led project along with several partners, including the Gobabeb Research and Training Centre, EnviroMEND, Anchor Environmental, and Hamburg University. The project’s approach follows systematic conservation planning principles and the team is currently using field data and consultations with specialists to classify and map biodiversity patterns (species, ecosystems) and key ecological and evolutionary processes across the Central Namib landscape.

This is a challenge given the many different facets of biodiversity characterising parts of the region. Large mammals (Hartmann’s Zebra, springbok and other antelope, desert elephants, even lions) visit the area – some stick to the dry river corridors while others opportunistically use patchy grass resources on the plains; flamingos and other migratory birds form massive, globally significant seasonal congregations in coastal salt pans and lagoons; Cape Fur Seals get together in large breeding colonies that linked with the inland desert through corridors of nutrient transfer. The Namib is also a scorpion and reptile enthusiast’s paradise. Endemism is high, especially amongst the invertebrates, and new species keep being identified. Just recently, another new species of gecko was discovered.

What Will the LLA Accomplish?

The aim of the LLA is to establish the conservation status and significance of the different biodiversity features that characterise the Central Namib and which are important for the integrity of the natural landscape. As it is impossible to identify and map every facet of biodiversity though, surrogate features are used to represent biodiversity more broadly. For example, vegetation types, as based on the state-of-the-art vegetation map that the LLA team is currently producing, can serve as good surrogates. The LLA will assess the vulnerability of these biodiversity features to a range of different mining-related development scenarios, and it will examine spatial options for different conservation outcomes, highlighting critical biodiversity areas, ecological support areas, and the potential for appropriate biodiversity offsets. In this, the LLA team is not working in isolation but together with many stakeholders, individuals and organisations in Namibia and elsewhere, who are contributing valuable data and expert advice.

In turn, the project endeavours to contribute meaningfully towards developing institutional, technical and resource capacities for utilising the final outputs expected in April 2012. Training and capacity building has already been started as part of the ongoing LLA project. This is envisaged to continue once the products are available for use by the various Namibian Ministries (e.g. MET, MME, Lands and Resettlement), the Erongo Regional Government, Municipalities, the mining and tourism industries, and the communal sector through NACSO (the Namibian Association of Community Based Natural Resource Management Support Organisations).

The intention of the LLA is to develop a sound information base in order to support integrated land use planning and decision-making and sustainable development in the Central Namib. Yet, decision-support tools are only part of what is needed to achieve this. And judging by the active national debate and the high level of collaboration amongst different players in the country (e.g. at the recent ‘Mining in Protected Areas’ Conference) most stakeholders and decision-makers seem to recognise this. While information and outputs from planning processes such as the LLA can certainly help align important project development with the unique natural desert systems and people’s livelihood needs, the ultimate choices and decisions that need to underlie such a balance remain in the hands of Namibian society.

Ghana Builds REDD Regulatory Regime

 31 October 2011 | Africa is home to one of the world’s largest forest basins and should, by all rights, be a hotbed of forest carbon activity, yet   Ecosystem Marketplace’s 2011 State of the Forest Carbon Markets report documented only a sliver of last year’s record   volume coming from Africa.

Several countries are working to fix that, and of the most advanced is Ghana, which has been admitted to participate in the REDD+ Readiness Preparation processes of the World Bank’s Forest Carbon Partnership Facility (FCPF) and has several affiliations with other forest governance initiatives that give it a head start as far as forest governance and REDD are concerned.   It also just wrapped up a three-year effort to document and map all of its biomass – an accomplishment that could support REDD readiness across the continent.

To truly take advantage of REDD, however, Ghana must shore up aspects of its legal and policy framework, and that means answering questions such as how forest carbon rights and benefits are allocated under the current regulatory framework. These issues are as essential to address as what future legal and policy changes are needed for REDD and REDD+ projects to be implemented and thrive.

A new report commissioned by the Katoomba Group and Forest Trends (publisher of Ecosystem Marketplace) and authored by Nigerian law firm The Rock and Partners, in collaboration with legal consultants in Ghana and the Nature Conservation Research Centre (NCRC), attempts to untangle this complicated web of uncertainties about carbon rights and benefits as well as their implications in Ghana. It does so by closely examining not only the statutes on the books, but also by reading past judicial decisions on forest and natural resources issues – a necessity since Ghana is a common law country.

Who Owns the Carbon in the Trees?

Forest carbon rights in Ghana, as elsewhere, are complicated by the fact that no laws specifically apply to carbon captured in trees. So, to figure out what the laws are that regulate forest carbon, one has to draw inferences from related laws and norms related to land, forests, and natural resources, among others. But even this inquiry is far from straightforward in the case of Ghana.

As far as land rights are concerned, the country has a dual system of land ownership and control, where some land is held collectively under customary law (which can take a number of forms), and other areas are publicly owned and regulated by statute. The overlap of statutory and customary law creates confusion and conflict in some areas, while at the same time leaving geographic and regulatory gaps.

Perverse Incentives

Legal requirements around ownership also create perverse incentives for deforestation. For example, in areas subject to customary law, unoccupied land is considered to belong to the nearest community. Unfortunately, to claim unoccupied forest, the community has to clear trees or cultivate the land. In addition, according to law, all naturally occurring trees belong to the state, which in turn can grant timber concessions to companies and private individuals. As a consequence, a landowner may be subject to having concession-holders come in to remove naturally occurring trees. And even though timber concessionaires are legally liable to landowners if they damage the land, crops, or other property, farmers have an incentive to illicitly remove naturally-occurring saplings to avoid this possibility.

Getting rid of perverse incentives in the law is one priority area for legal and policy reform around REDD. Another key part of the puzzle is specifically addressing how forest carbon will be treated under the law.

In theory, tradable credits for emissions reductions or removals can be created via activities that either (1) prevent carbon emissions that would have occurred via deforestation or forest degradation or (2) cause more carbon to be stored in soil or plant biomass, e.g., via improved forest management or tree-planting. Given the existing legal framework in Ghana, such credits might be treated in a number of ways.

Vegetable or Mineral?

Carbon might be seen as a natural resource, like minerals, ownership of which is vested in Ghana’s government, in trust for the people. Under this interpretation, the people actually responsible for day-to-day land uses and land-use changes would have very limited access to REDD+ incentives, which would be controlled entirely by the state. It would be important for the state in such circumstances to provide for robust benefit-sharing with individual and community land managers to make sure their incentives align with REDD+ and benefits are shared equitably.

Alternatively, since in Ghana rights in trees are separate from rights in land, forest carbon benefits might be part of the rights that exist in trees. In this case, ownership would depend on where the trees are and whether they are planted or naturally-occurring. Generally speaking, carbon credits from all naturally occurring trees and planted trees in forest reserves would belong to the state. Carbon credits from planted trees outside of forest reserves would belong to the planter or owner of the land, as applicable. In general, this arrangement would limit direct participation in REDD+ to projects that involve reforestation, agroforestry, sustainable plantation management, and other REDD+ modalities that include tree-planting; it would largely exclude people from doing projects that are based on avoiding the loss or degradation of existing forests (generally, naturally occurring trees that belong to the state), which is at the heart of REDD+.

There is also the possibility that forest carbon credits might be considered to belong to the landowner on the reasoning that they are inherently tied to the land itself. This last scenario would be the most favorable one for REDD+ projects as it could provide key stakeholders – land users and managers – with direct economic incentives for preserving forests. However, it also is likely to face political difficulties as it does not necessarily include a major role for the government.

And of course, there is the possibility that a wholly unique regulatory framework will be created, with consequences that are difficult to anticipate.

New Laws for a New Concept

In order for the government to maintain ultimate regulatory responsibility, and at the same time for individuals and communities to be able to receive a major share of the incentives for forest conservation and restoration, collaborative approaches are needed.   The 1994 Forest and Wildlife Policy Act is a good first step but provides only the framework   without specific structures or processes for implementation.

One potential land-use arrangement that has been discussed as a possible model for expanded collaborative resource management and use on the ground is the Community Resource Management Areas, or CREMA. A CREMA is a geographically defined area with “one or more communities that have agreed to manage resources in a sustainable manner” and where the government actually transfers management authority to communities or community-based organizations. On the plus side, CREMAs’ objectives are very much in sync with those of REDD+.

At this point, however, CREMAs are not legally recognized entities and therefore do not by themselves provide the legal certainty needed to support REDD+ projects. In order for this to happen, a CREMA must be organized into a different entity, such as a company or fiduciary trust, so that its members can sue and be sued, providing legal certainty and recourse for participants –and potential buyers – in a REDD+ project.

However, there is a chance that new legislation, which is currently under consideration, will recognize CREMAs as legally independent entities, which would eliminate this problem.

All in all, this new report raises more questions than it provides answers – but in doing so, it paves the way, or rather points to ways that must be paved, for REDD+ projects to thrive in Ghana.

 

Additional resources

How Carbon Markets can Help Avert a Chocolate Shortage

25 November   2011 | Can carbon save cocoa? That, some say, is the million-dollar question – or, more accurately, the US$2.2 billion question, since industry insiders estimate that’s the value of carbon stored in Ghana’s cocoa landscapes.

That value could play an important role in ensuring the long-term survival of the nation’s cocoa industry, which faces existential threats in the wake of depleted soil fertility, reduced water supplies, and various diseases worldwide. Already Brazil, once the second-leading cocoa producer in the world, has seen its cash cow fall victim to a massive fungal disease. Now, instead of making money from cocoa, Brazil pays to import it.

Meanwhile Ghana – which is second only to the Ivory Coast in world cocoa production – has seen yields per acre farmed dwindle and until very recently stagnant national production; spurring some farmers to abandon the livelihood that supported their families for generations. That decline and the accompanying flight from farming have been in remission for three years – thanks largely to the current high price of cocoa – but current agricultural techniques are unsustainable over the long haul.

Two-thirds of Ghana’s stored carbon lies in its high-forest region – and the country has already lost most of this, seeing it shrink from 8.2 million hectares prior to 1900 to less than   2 million hectares today, including protected and unprotected forests.

The Cocoa Conundrum and the Sun Curse

Cocoa has always been rough on land. Under the best of circumstances, the cacao trees from which cocoa is harvested suck nutrients out of the soil at rates that require massive infusions of chemical fertilizer – which only 30% of cocoa famers use – and also require heavy doses of insecticides – which about half of farmers use, but in insufficient quantities.

Under traditional cocoa-farming systems forest trees were left intact, because older strains of cacao trees grow well in filtered sunlight, and because at the time it was very hard to remove large forest trees from the farm. Over time, hybrid varieties have improved yields – beginning with strains that can be harvested twice per year instead of once–but the   hybrid trees also tolerate more direct sunlight. This makes it possible for farmers to chop down larger shade trees, with the aid of chainsaws, and plant more cacao trees – an apparent improvement over traditional farmsbecause the hybrids offers higher yields.

Unfortunately, full sun or low-shade systems suck even more nutrients out of the soil because the hybrid tree’s metabolism operates at a higher rate in sunny environment .   Sun dominated system   also encourage some insect pests and – more importantly for the world at large – rob the planet of both carbon-sequestering trees and of valuable habitat for various species of rare animals and plants by encouraging the destruction of natural shade trees that store carbon and provide shelter.

Due to the rate at which full sun hybrid system absorb nutrients from the soil and exhaust the productive capacity of the cocoa trees, such plantations are often abandoned within a few decades and new farms planted on newly deforested land, says Michael Richards, a natural resources economist with Ecosystem Marketplace publisher Forest Trends. Cocoa farmers often then extend their farms or move into other forested areas, bringing deforestation with them and releasing more carbon into the atmosphere.

Most Ghanaian farmers still use the shaded variety of cacao tree, but the hybrids are taking hold – especially in the Western part of the country – and the global atmosphere is paying the price. Long-term, farmers are paying a price as well.

Soil fertility has shrunk noticeably; the hybrid-cocoa trees’ lifespan is growing shorter; and farmers are struggling to survive. Climate change and unsustainable farming techniques have decreased the amount of land supporting cocoa crops by 40% in the past four decades alone, reports the Ghanaian Nature Conservation Research Centre, the leading conservation NGO in West Africa – although the area under cocoa has been increasing in recent years as cocoa prices rise.

Some experts believe that if nothing is done, Ghana’s cocoa sector could go the way of Brazil’s.

“The world is focusing on how to increase consumer demand for chocolate, especially in Africa, but it may not be a great long-term investment if we run out of cocoa in 30 years,” says John Mason, executive director of the Nature Conservation Research Centre (NCRC).

Preliminary research by the University of Reading in the UK suggests that traditional shaded-cocoa farms store over twice as much carbon as shade-free farms. Farmers could be persuaded to increase their tree canopy and decrease their cocoa yield if carbon trading makes it worth their while.

Re-Thinking the Process

Scores of environmental non-governmental organizations (NGOs) have called for a moratorium on new sun cocoa plantations and a return to shade-cocoa. Many believe that carbon offsets for projects that reduce greenhouse gas emissions from deforestation and forest degradation (REDD) can make it worthwhile for farmers to return to shade-growing, but Michael Packer, managing director of ArborCarb Ltd, says simply reviving the shaded growth method will not be enough.

“Traditional cocoa is problematic, too, in the way it has been produced,” he says. “After all, that led to the deforestation that exhausted soil, which lead to the requirement for hybrids.”

The solution, he adds, is to manage cocoa plantations differently.

“We need to work with the ecosystem to manage soil nutrient content, biodiversity, and associated ecosystem services – including carbon sequestration and disease control,” he says.

Pioneering Cocoa Carbon

This sparked a push to create the world’s first-ever cocoa carbon initiative – and, not surprisingly, its Petri dish is Ghana.

Forest Trends, NCRC, and the Katoomba Group (an international network promoting ecosystem service markets and co-publisher of the Ecosystem Marketplace) are spearheading a carbon-offset pilot project under the Katoomba Incubator program, which has already initiated community-based projects across Latin America. At a larger scale, the cocoa carbon initiative is couched within an effort, also led by these organizations, to facilitate a climate-smart agricultural finance mechanism for Ghana’s cocoa sector.   If both endeavors are successful it could dramatically change the way that cocoa is grown in Ghana, providing both climate change mitigation and adaptation benefits to farmers.

Who Are the Farmers?

The majority of cocoa farmers still attain low yields (less than 400 kg of cocoa beans per hectare).   A large number of these cocoa farmers are share croppers, but many also farm on family land or land they have purchased. Regardless of the ownership structure, the cocoa carbon initiative plans to measure whether farm owners who preserve or enhance the carbon-stored in the shade trees on their farms and in adjacent forest lands can   receive benefits.   These benfits may be in the form of payments from the sale of carbon-offset credits, or through access to agricultural loans, insurance, and extension services that provide information on best farming practices.   The overall aim is to see whether increasing the amount of shade (and therefore carbon) on farms can go hand in hand with increasing productivity to improve farmer livelihoods.

According to Rebecca Ashley Asare, Coordinator of the West Africa Incubator and an expert on cocoa farming practices in Ghana, people’s initial response is always, “no-way” because shade does reduce productivity, but this assumes that the system is operating at its productive potential.

“Most farmers in Ghana could significantly increase their yields through the adoption of a few simple practices, like pruning the canopy of the cocoa trees and planting fewer cocoa trees to reduce competition”

Asare believes that there is real opportunity to increase yields on farm through the adoption of best farming practices, regardless of the shade level.   Carbon only creates an additional incentive to improve farming practices, and potentially new revenue streams by which to do so.
This could answer the US$2.2 billion question – if policymakers can navigate several complex hurdles. Chief among them is land tenure.

The Tenure Quandary

In 2009, the Katoomba Group invited key participants from a range of stakeholder groups – including various government departments – to an REDD Opportunities Scoping Exercise that identified tree tenure as a major constraint for REDD.

Tree tenure laws in Ghana, for example, discourage farmers from keeping timber trees because the state owns all naturally occurring trees, while planted trees belong to the person who plants them. Farmers, therefore, are only permitted to fell timber trees for household use, but not for income. Only timber groups with government concessions can fell naturally occurring trees for money – leaving cocoa farmers no economic or financial interest in preserving trees growing on the land they either own or work.

Adding to the complexity: many cocoa farms are located within the ‘off-reserve’ (land located outside of protected areas and forest production reserves) areas of timber concession zones. This means that a logger with a concession can harvest the farm’s trees – although the logger does have to let the farmer know he’s harvesting them, and technically he has to compensate the farmer for the felled timber trees and any damage to cacao trees from machinery. Unfortunately, there are no standards of compensation, and disputes are quite common.

To avoid the hassle – and the risk of damage – cocoa farmers often select smaller shade trees in preference to timber shade trees. They have also been known to destroy timber saplings and even ring-bark mature timber trees. Those who keep the trees often sell them clandestinely to chainsaw operators who cause minimum damage to cocoa.

The Katoomba Scoping Exercise concluded that the best chance for sustainable shade-tree cocoa farming, as well as other tree-based systems, would be the extension of what are known as Community Resource Management Areas (CREMAs) in which communities can hold greater rights manage and benefit economically from   the natural resources on their land, including trees.

NCRC is working with a few pilot CREMAs, but there are currently only a handful in the country, and the government has not adopted a policy of promoting them. Local NGOs argue this must change as part of a national REDD program.

The Importance of Education

A public-private partnership named the Sustainable Tree Crops Program (STCP) kicked off in 2000 to introduce sustainable innovations such as integrated pest management and reduced chemical use to enhance cocoa productivity.

Farmers graduating from the program’s “farmer field school” have seen their incomes improve by 15-50 percent, says Bill Guyton, president of the World Cocoa Foundation that supports the partnership and represents nearly 70 chocolate companies worldwide.

So far, however, only a small percentage of cocoa farmers participate in the field school, and Guyton says he’s anxious to explore the use of carbon credits to augment farmer income and industry sustainability.

Credits could be generated through four types of transactions activities under the REDD banner or as afforestation/reforestation projects under the Kyoto Protocol’s Clean Development Mechanism – or in the voluntary carbon market.

Compensation for Limitation

REDD-wise, cocoa growers could be compensated for not encroaching on forest reserves or deforesting to extend their plantations. On farms, they could get credits for maintaining shade cover and not promoting full-sun exposure. As for reforestation, farmers would be rewarded for reverting from a full-sun system to shaded cocoa to planting trees and encouraging regeneration. They could also get credits for rehabilitating abandoned plantations and not letting them turn into low-productivity agricultural land or bush, which have low carbon-storage capacity.

“It is a potential win-win situation for everyone,” says Richards. “It promotes biodiversity and environmental sustainability, would ensure supply sustainability for the big cocoa buyers, and it could improve the livelihoods of thousands of small farmers.”

Potential vs. Practice

Potential is one thing. Practice is another.

“We’re all convinced that this area has real potential,” says Ken Norris, a researcher from the University of Reading and a scientist who has studied the relationship between carbon and cocoa farming systems in Ghana. “The problem is there are a whole lot of practical issues to overcome to make it work.”

For instance, because verification of carbon offsets is expensive, CO2 contracts typically apply to project areas that cover a minimum of 30,000-50,000 hectares. But the average cocoa farmer in Ghana is only 3-4 hectares of cocoa. Each contract, then, would require approximately 7,00-13,000 farmers to federate.

And carbon rights are not established in law yet – although many are going on the assumption that they will follow the timber rights outlined above, namely, that standing trees will fall under the jurisdiction of the Forestry Commission, while planted trees – and their largesse – will be owned by whoever plants them.

“This is a major organizational democracy initiative about benefit-sharing,” says Mason. “We’re trying to work out the best way of doing it, perhaps through existing community groups or organizations.”

Money

And, of course, there is the issue of funding. Norris estimated the project cost at US$5.5 million.

Cocoa carbon credits are not expected to flow for at least another two or three years – yet Mason says he is optimistic; he already has potential buyers.

“The cocoa industry is prepared to buy our credits as soon as we’re able to bring them to market,” he says, adding that he’s been working with the cocoa industry over the last three years – and his message is sinking in.

“It’s gone from ignorance and skepticism to the realization that a major shortage of cocoa beans is looming.”

But, he says, he is concerned about what’s been done to mitigate the crisis so far.

“All the big manufacturers are competing against each other when this is a time for a major concerted effort.”

The Ghana CocoaCarbon Initiative and associated effort to establish a Climate-Smart Agricultural Finance mechanism for Ghana’s cocoa sector could answer these concerns.   The two initiatives have already received funding support from the Gordon and Betty Moore Foundation,the Rockefeller Foundation, and Norweigan development aid agency, Norad.

Winning Industry Support

Mason also asked the cocoa industry to chip in. He recently presented the initiative at the launch of a new not-for-profit organization called Source Trust. Set up by Armajaro, a leading cocoa supplier whose clients include Cadbury, Nestlé, and Kraft, amongst others, Source Trust certifies and promotes sustainable cocoa-farming practices in local communities.

It already raised US$1 million to pay for education and water projects that promote sustainable farming, as well as bed nets that reduce malaria. Chocolate manufacturers pay Armajaro a premium of US$30 per ton in exchange for a traceable and sustainable cocoa supply.

“As an industry, our interest is to ensure that farmers have good yields over the long term, not just in the next couple of years,” says Nicko Debenham, head of traceability and sustainability at Armajaro and a spokesperson for Source Trust.

Encouraging farmers to leave 40% shade cover on their farm would serve that purpose. Debenham says Source Trust will assess its stakeholders’ interest in providing the US$4 million Mason requested for the cocoa carbon initiative. The carbon pilot project could also piggyback on Source Trust’s certification program as the administrative platform for carbon payments.

Outside the Box

It will take years before cocoa-industry stakeholders can answer the US$2.2 billion question. But the final answer could transform not only the cocoa industry and carbon trading, but farming as we know it.

“Instead of thinking about producing food to the detriment of the environment,” Norris says, “we could produce food to preserve the environment.”

 

Additional resources

Kenyans Soft-Launch New Carbon Exchange

If carbon finance is to deliver environmental benefits in Africa, it needs a clear and transparent environment in which to operate.   The Zambian government has been spearheading efforts to build a viable cash market, and now the Kenyans have launched a futures platform in Nairobi.

24 March 2011 | NAIROBI | As Europe’s carbon registries slowly reopen after the more vulnerable among them were hacked in January, a new exchange – the African Carbon Exchange (ACX) – was soft-launched here on Thursday.

Like any soft launch, this one is still testing its wings.   The trading platform, for example, was demonstrated for reporters but won’t be open for trading until security concerns are worked out – a point that may be moot since it has only one registered member, Carbon Self.   ACX says other brokers such as Carbon Africa and Carbon Assets are in the process of joining, but major names are not among them.

That’s not necessarily a bad thing.

Starting Small – and Mimicking the Big Boys

Founded by a consortium of carbon brokers, financiers, and regulators, ACX will initially be supported by semi-autonomous governmental utilities like KenGen (the Kenya Electricity Generating Company) and KPLC (the Kenya Power and Lighting Company) as well as the Ministry of Environment and Natural Resources.  

Over time, it is designed to become an independent, for-profit exchange that will attract foreign direct investment (FDI) to Kenya, says Chief Executive Officer Tsuma Charo, who also outlined a growth strategy that echoes that pioneered by Indian exchanges such as the Multi-Commodity Exchange of India (MCX).

The Indian Model

MCX got off the ground by developing slow but reliable trade-matching engines designed to run on Microsoft Windows platforms instead of on sophisticated Sun Servers.   MCX has since become one of the top exchanges in India, and now subcontracts its development to Western providers.   Two years ago, Goldman Sachs became an investor.

Likewise, ACX is running a low-maintenance system developed locally by IT provider Partex Enterprises.  

It also seems to be mimicking MCX’s strategy of launching with “mirror” contracts that could be arbitraged against established contracts trading in Chicago and Europe, and then later branching into cash markets at home.   ACX will launch mirror contracts on Certified Emission Reduction (CER) certificates in May, and will then follow with cash markets designed to seed local projects.

That strategy worked in India because it allowed MCX to live off of speculative business while it built up a legitimate hedging operation.   Kenya, however, doesn’t have home-grown speculators, and it’s not clear the model will work.

Why Kenya?

Kenya has 17 projects lined up for approval under the Kyoto Protocol, and is home to the first-ever REDD credits approved under the Verified Carbon Standard (VCS, formerly known as the Voluntary Carbon Standard).

Job Kihumba, the founding chairman of the exchange, says the initiative  not only provides a platform for trading environmental products, but also for building Kenya’s capacity and role in the global carbon markets.  

“We hope to provide the players in the carbon market industry an opportunity to exchange ideas on the best practice in the exercise of their trade,” he says.

 He believes the exchange will become a regional hub for carbon trading.

“We have received very strong interest from Uganda, Zambia, Rwanda,” he says.   “After the launch, we expect more African interest.”

Co-Benefits and Buyers

Kihumba defines the platform’s success as the degree to which it engages Kenyans in carbon reductions and ecological improvements – like using more energy efficient technologies or engaging in reforestation.

Mohammed Mwachai, Permanent Secretary of the Ministry of Forestry and Wildlife, agrees.   He points to specific environmental goals that Kenya hopes to target with the new finance mechanism.

“We will use the carbon markets to conserve major water towers in the country like the Mau forests and the Aberdares,” he says.

Local Support

Local financial institutions like South Africa’s Nedbank and the Standard Bank Group are keen to identify new ways to channel their emerging investments in local projects.

Both have been active in the field. For example, in November 2009, Wildlife Works Inc. and Nedbank entered into a business arrangement whereby Nedbank acquired carbon credits from Wildlife Works Inc. for on-sale to the international and South African business community.

More than 2.5 million tonnes of carbon was made available through the avoided deforestation of the Rukinga and Kasigau Wildlife Corridor project Corridor guaranteed until 2026.

“This market has made it possible for the continent to effectively fight climate change, to uplift rural communities and to protect its wildlife through accessing carbon markets,” says Kevin Whitfield, Head of Carbon at Nedbank Capital.

However he admits there has been a scarcity of projects of this type to date, and even fewer large scale carbon projects.

“Our experience is that there is extraordinary demand for good quality African offsets, and prices are good.   Carbon credits represent a new asset class and I encourage Africa to leverage this opportunity,” says Whitfield.

At least five local banks like CFC bank and the Kenya Commercial bank seemed to have got a sense of hat Whitefield talked about and were represented at the Nairobi launch. A representative from KCB (who requested not to be named as he is not an official spokesperson) says it is just dawning on them about the lost opportunity.

Government Progress

The ACE launch follows signals from the government about its environmental priorities – like the Kenyan government’s move to allocate US$721 million towards establishing carbon credits and trading infrastructure in its 2009/2010 budget.

At that time, Kenya’s Finance Minister Uhuru Kenyatta explained that a framework for carbon trading — in which polluters buy and sell the right to emit carbon — would be established to outline how to register for and participate in a carbon trading scheme, how revenue would be shared and how to ensure accountability.

He had says the framework would also describe development areas to be funded by the resources generated from the scheme.

Additional resources

Odigha Odigha: Speaking Truth to Power

15 March 2010 | Odigha Odigha has taken on governments and corporations in true David versus Goliath style to protect his beloved forest in Cross River State, southern Nigeria.   But what comes across during conversations is his unwavering determination rather than a boastful list of successes.

“Forests mean life for us,” he says. “I hope I will be remembered for preserving them.”

Odigha was born in the district of Ikom in Cross River State in 1957 and spent much of his childhood roaming the rainforest with his grandfather. The area is a biodiversity hotspot: it’s home to about 20% of the world’s butterfly species and hosts the highest diversity of primates on the planet (including the highly endangered drills, gorillas and chimpanzees). It was during these formative years that Odigha developed a consciousness of how unique the forest was.

Through Business to Politics

Odigha left his native district in 1976 to study math and statistics before earning an MBA and doing his national service.

“I was inspired to study business by my mother: she was a very entrepreneurial woman,” he says. “There is also a lot of micro-enterprise in Cross River State, but many of these small businesses were badly run. I thought an MBA would give me the skills to add value to these businesses.”

When he went back to Cross River in 1986, however, he was dismayed at the state of the forest (about 90% of the rainforest in Nigeria has been lost since the 1960s).

“I saw oppressed local people, cocoa farmers exploited and forest products being taken without adequate compensation, and I felt I had to use my skills to put these issues right,” he says.

Cocoa farming was the cornerstone of the local economy, yet the industry was in disarray: farmers were poorly organized, crops sold at a loss, contracts rarely drawn up between buyers and sellers. Odigha therefore took it upon himself to re-organize the local cocoa buyers association, establishing a business plan, bringing farmers together, teaching basic accounting skills and raising awareness about the value of local forests.

“My idea was to rationalize the use of local resources,” he says. “I thought that if people earned enough with cocoa farming, they would not need to find alternative sources of income and turn to logging.”

Odigha worked extensively among local communities, and it was then that friends suggested he get involved in local politics.

“People said I would get more results working as a local politician, that I would have more influence and better resources,” he says.

Odigha took the leap and first got involved with his local government in 1987. A year later, he became representative of the People’s Front of Nigeria (later known at the Social Democratic Party, SDP) for Cross River State.

Constitutional Crisis

Odigha hoped that by lobbying at the national level, he would be able to hold logging companies more accountable and promote the rights of local people. But the 1993 presidential elections changed everything: deemed the first democratic elections of the country’s history, they gave Moshood Abiola of the SDP a clear victory. Incumbent ruler Ibrahim Babangida, however, saw it differently: he annulled the elections and re-instated himself as president. Nigeria plunged into political turmoil, a process that eventually led to dictator Sani Abacha seizing power in 1994.

“This event really upset my belief in democracy,” Odigha says. “We wanted to campaign for fairness and justice, and there was a government which clearly didn’t believe in that.   Nothing good was ever going to come out of it. That’s when I decided to go it alone and set up my own NGO.”

From Politics to Activism

He sold what little he had to get the Coalition for the Environment (NGOCE) set up in 1994 and set about raising awareness about Cross River State, its forests, its people and the devastating impact of commercial logging.

“Our mandate was to advocate the protection of the rainforest, and we did this at every level: locally, regionally, nationally, even with the international community,” he says.

A first victory came in 1995, when Odigha successfully forced Hong-Kong-based Western Metal Products Company (WEMPCO), one of the most aggressive loggers in Cross River state, to carry out an Environmental Impact Assessment. EIAs were compulsory under Nigerian law, but political interests had always over-ridden the requirement.

Odigha says a defining moment in his crusade to save Cross River forests came that year when he met Andrew Choi, then director of WEMPCO.

“He offered me Naira five million to stop lobbying against logging,” Odigha recalls. “It was a lot of money, but I refused, and he told me he would log Cross River until the very last tree. My response was just to increase the tempo of my activities.”

Odigha also encountered opposition from local people.

“I remember a local doctor telling me that my work was futile and that I should not waste my time,” he says. “I was determined to prove him wrong.”

More worryingly, Odigha’s campaign had ruffled many feathers among Abacha’s government. In 1995, fellow environmental campaigner Ken Saro-Wiwa was executed for promoting the right of Ogoni people in the Niger Delta. Odigha therefore went into hiding for three years. It was only after Abacha’s death and with the return of civilian rule in 1998 that Odigha resumed his work in earnest.

Victories and Challenges

Odigha approached the newly elected governor of Cross River State, Donald Duke, and with him, managed to set up the first ever Forestry Commission in Nigeria and obtain a first logging moratorium in 2000. The commission lacked teeth but it included representatives from the government, private sector and civil society – Odigha was on the board – a definite step in the right direction.

In the end, the ban only lasted one year. The commission was chaired by a consultant with close ties to WEMPCO and opposition to logging was weak. In 2002, WEMPCO even obtained the renewal of their concession, so Odigha decided to step down. This was an enormous blow for him.

“My campaign was to shut them down and send them packing. So the granting of the concession for me was a psychological punishment,” he says.

Odigha’s determination and efforts didn’t go unnoticed among members of the international community, however. In 2003, he was awarded the Goldman Prize – an annual award recognizing the work of environmental activists around the world, often dubbed the “Green Nobel” – for his tireless advocacy to protect the rainforest and determination to build democratic institutions to manage local resources.

It was a small compensation for the hardship Odigha encountered on the way and a huge morale booster.

“It was confirmation and affirmation that I was on the right track, working on a cause that is appreciated by the international community,” he says. “It also brought up awareness and credibility on a much wider scale. People thought: ‘Well, if this man can be recognized internationally, then we’d better take what he says seriously.’”

And seriously they took him. Odigha continued his advocacy following his award, and the victories kept coming: in 2007, WEMPCO was ordered to close down all its operations in Cross River State and has not returned since. In 2008, the new Cross River State governor Liyel Imoke asked Odigha to organise a state-wide Stakeholders Environment Summit to discuss the future of environmental policy in Cross River. The meeting resulted in radical actions: Governor Imoke declared a two-year, moratorium on all logging. He also re-organised the Forestry Commission so that it would have a full-time board (board members used to be part-time representatives with little power) and set up the Illegal Logging Task Force to ensure the moratorium was enforced.

John-O Niles, director of the Tropical Forest Group, an international conservation organization and UN observer that has worked in Cross River for many years, says that Imoke and Odigha have shown unique leadership in international conservation.

“It was a very bold decision from the state government,” he says.   “They basically agreed to forego one of the few revenue streams they had.   The challenge will now be for Odigha to show the state that he can put real alternative money on the table and this is a monumental task.”

Niles says that Governor Imoke absolutely trusts Odigha. Odigha was named chairman and chief executive of the Forestry Commission in July last year, a very symbolic nomination to a body he helped set up 10 years previously. The trouble is whether the international community will rise to the challenge of supporting such visionary leaders: the Cross River Moratorium is one of only two such measures in the world, the other being in the state of Aceh, Indonesia.

Odigha is well aware that his priority is now to find alternative revenues for local communities. Logging may not have benefited many, but in an area where every little counts few have the luxury of supporting visionary thinking without evidence that it’ll deliver results.

The trouble is that many initiatives can take years before yielding results, so Imoke and Odigha are casting the net wide: REDD+, Payment for Ecosystem Services, agroforestry, ecotourism; no stone is left unturned.

“We are looking for low-hanging fruit that we can pick and present to our people,” Odigha says. “Our success depends on results. If we are able to generate income from non-timber activities, I feel very strongly that we can extend the logging moratorium.”

Odigha says he wants to go further than halting deforestation and also wants to restore ecosystems and extend forest cover, all of which would increase Cross River’s carbon stocks and potential revenues from carbon credits.

Another difficulty is that Cross River is a regional government and that much of the support granted towards REDD development is done at a national scale, even though more than half of the rainforest left in Nigeria is in Cross River. Niles says that Odigha and Imoke have successfully engaged with the Nigerian federal government in that respect. Odigha and Imoke played a crucial role in getting Nigeria accepted in the UN REDD programme; they also facilitated the country’s application to the World Bank Forest Carbon Partnership Facility.

Best of all perhaps, Governor Imoke and Odigha are the first representatives of an African state to join the influential Governors’ Climate and Forest Taskforce (http://www.climatechange.ca.gov/forestry_task_force/index.html), an outfit bringing together several states from the USA, Brazil, Indonesia and now Nigeria, to promote cooperation on issues related to climate policy.

Odigha has also started campaigning about environmental issues more widely. At the Katoomba Meeting in Accra, Ghana, in October 2009, he told a cautionary tale of environmental demise and violence in the Niger Delta to an audience still high on the news that Ghana has oil (click the video below or scroll to the presentation at the bottom of this page for details).

The Oil Curse

“Oil was meant to be a blessing in Nigeria, but oil companies and the government just dispossessed local people of what God had given them,” he says. “I don’t think we would have degenerated to the current level of violence had the right of local people been taken into account.”

He says his other motivation was to demonstrate the role civil society can and must play.

“Politicians are rarely interested in what happens beyond their mandate. Four or five years is not long enough to build momentum; the same goes for businesses who are too short-sighted in their search for profit,” he says. “But when everybody else has to go, civil society will still be there. I have been working on forest preservation for 16 years.”

Most recently, Odigha and Governor Imoke gave a presentation (http://cop15.meta-fusion.com/kongresse/cop15/templ/play.php?id_kongresssession=2576&theme=cop15) at the COP15 Copenhagen Summit, calling on the international community to help them in their endeavour. The media spotlights of Copenhagen are a far cry from the lush forests of Cross River, but Odigha knows this is where his work is needed. His next calling perhaps.

“I can influence policy and the law now, and I have the power to make good, so I am happy in my new role,” he says resolutely. “But I still take people to the forest because you can’t just talk about solutions from sitting at your desk,” he says.

Niles says that Odigha and Governor Imoke “have done everything possibly imaginable to show real conservation results and international engagement”.

“This is precisely what the world needs to make a dent in tropical deforestation and the associated greenhouse gas emissions,” he adds. “If the international community wants to propel and expand tangible REDD+ leadership, right now is the time to show financial commitment and support.”

Presentations by Odigha Odigha at Recent Katoomba Events

At this year’s Katooma Meeting on Payments for Marine Ecosystem Services in California, Odigha delivered this presentation on the “Dutch Disease” and how abundant resources don’t always translate into wealth for all:

The Perils of Resource Development for People, Environment, and Business

Presented by Odigha Odigha, Government of Cross River State, Nigeria

At last year’s Katooma Meeting in Accra, Ghana, Odigha chaired this discussion on the role of ecosystem services in the larger land-based economy

Toward an Integrated Landscape Approach

Download MP3

Moderator:   Odigha Odigha, Chairman, Cross Rivers State Forestry Commission, Nigeria

PDFPolicy and Financial Mechanisms for Scaling up Climate Action in Agricultural Landscapes“, delivered by Musah Abu-Juam, Forestry Commission, Ghana

This presentation examines integrated land use in the context of transboundary conservation projects in the region, including the multi-donor TerrAfrica sustainable land management (SLM) project in northern Ghana and Burkino Faso.

“Monitoring and Measuring Carbon at the Landscape Scale”, delivered by Peter Minang, Global Coordinator for the Alternatives to Slash-and-Burn Partnership (ASB) of the World Forestry Centre, and Kieth Shepherd, Senior Scientist, World Agroforestry Centre

PDFInstitutional Challenges for Engaging Smallholder Farmers and Pastoralists in Landscape-scale Carbon Initiatives“, delivered by Sara Scherr, President & CEO, Ecoagriculture Partners

This presentation focuses on the policy and institutional issues for ‘landscape carbon’. The presenter emphasizes the need for economies of scale, focusing on carbon-rich landscapes and building on current institutions (e.g., micro-finance groups); the benefits of increasing productivity against the ‘compensating opportunity costs’ approach; the potential for bundling with agricultural certification; community training, etc.

The ensuing discussion included the great potential of such innovations as mobile (phone) finance and live Google maps which can be used by communities. Rainforest Alliance also mentioned the potential to build on their group-based agricultural certification work, and (again) the key role of the private sector in view of its interest in the sustainability of the supply chain, e.g.., for coffee, cocoa, etc.

Emilie Filou is a free-lance writer specializing in African development issues and a regular contributor to Ecosystem Marketplace. She is based in London, and can be reached at filouemilie@yahoo.com.

Please see our Reprint Guidelines for details on republishing our articles.

Additional resources

Zambians Building Carbon Exchange From the Ground up

Carbon finance can help rural Africans establish more sustainable ways of doing business, and several efforts are underway to build carbon exchanges that can help project developers identify prices and manage risk. These efforts will only generate meaningful change, however, if the rural poor understand carbon markets and how to access them. The African Carbon Credit Exchange aims to build that understanding.

23 November 2010 | Karin Sosis spent part of this past summer helping promote the use of energy-efficient stoves among farmers in the Zambian countryside.  The new stoves burn about half as much wood as the old ones did, and carbon offsets paid for them.

The money came from far away, but the benefits on the ground were immediate.  Farmers’ wives, for example, now spend less time gathering wood than they did before.  Their food cooks faster, and their families inhale less lung-clogging soot.

“We installed ten stoves in one community that had been identified by local leaders, and we made several visits up there and started talking to people and ended up having a big meeting,” she says.  “Maybe 35 or 50 people from the community came and told us what they thought – they wanted more stoves, and I thought it was really interesting that almost none of them had heard of climate change.”

Rural people are among those who can benefit the most from carbon finance, but they are also among those least informed about the potential benefits.  It’s as true in the Indonesian state of Ache as it is in the US state of Arkansas, but nowhere is it more true than in Africa, which lags the rest of the world in the generation of carbon offsets.

Scores of efforts are underway to correct that, and among them are a handful of fledgling carbon credit exchanges that aim to list UN-approved Certified Emission Reductions (CERs) and, in some cases, voluntary credits.

Sosis works with one of those efforts – the Africa Carbon Credit Exchange (ACCE), which is being set up with support from the United States Agency for International Development (USAID) and aims to build capacity and a platform for Zambia to engage the carbon markets – in that order.

Other exchanges are in various states of development in Kenya, Tanzania, Senegal, and Mauritius.

Why Build an Exchange?

Last year’s State of the Voluntary Carbon Markets report found that Africa-based projects captured a scant two percent of the global market share for voluntary carbon credits. Judging by Africa’s marginal engagement in both the voluntary carbon market and the UN’s Clean Development Mechanism (CDM), it may seem like ACCE is putting the cart before the horse.

But Sosis says the market mechanism could actually drive market development – providing much-needed transparency and accountability for investment in domestic projects.

“A lot of the carbon-offset deals that are being negotiated within Africa are very highly discounted,” says Sosis, referring to the lower price that carbon-offset projects in Africa often attract.  “An exchange can provide price discovery and some transparency about choice.”

More importantly, she says, it can provide a vehicle through which local farmers, brokers, and project developers manage their risk by locking in tomorrow’s prices today.

“The same thing that’s happening now in Africa happened over the last decade in India,” says Lamon Rutten, the former head of commodity finance, risk management and information at the United Nations Conference on Trade and Development (UNCTAD).   He’s now the joint managing director of India’s Multi-Commodity Exchange (MCX), which already lists CER futures and is in the process of setting up a mirror contract in Africa.

“We’ve seen time and again in agriculture that when you have price transparency and a centralized exchange, the small farmers win,” he says.   “In part, it’s because they learn the value of their product, so they’re not so easily hoodwinked on the low end or greedy on the high end, but it’s also because they can manage their risk and borrow against future earnings at a much lower rate, which ultimately makes their whole business more efficient.”

Ramalinga Ramaseshan agrees, but says there’s a catch.

“The small farmers have to understand the markets,” says Ramaseshan, who runs India’s other major commodity exchange, the National Commodities and Derivatives Exchange (NCDEX). “We’ve spent years educating local farmers, and we do it in their own dialect, using local instructors, and engaging local institutions, and I suspect the same thing will have to happen in Africa.”

He suspects it will have to happen in carbon as well, especially as the two markets become increasingly interrelated.

Indeed, a recent UN-sponsored conference in the Hague highlighted that interrelation and the need to address it.

Walk Before Crawling

When USAID decided to help the government of Zambia set up the Zambia Agricultural Commodity Exchange (ZAMACE), it didn’t start by creating a trading platform.  It started by supporting technology that made it easier for farmers, grain-elevator operators, and buyers to communicate with each other.

Likewise, now that USAID is helping to set up ACCE, it’s doing so in part by supporting the Green Knowledge Institute (GKI) and other capacity-building institutions so that local users are able to capitalize on the markets.  The GKI was originally part of the exchange, but is now operating as an independent not-for-profit entity.

“There’s a lot of awareness of carbon markets being both a viable mitigation tool and a good financing mechanism,” says Sosis, whose job is to coordinate capacity-building with both the ACCE and the GKI. “But by and large, except for people who are climate experts, there’s not very much expertise past that.”

As ACCE’s “capacity-building arm,” the GKI will take part in project support and implementation, methodology development, financial analysis and connecting local market participants with technical expertise or legal guidance to facilitate low-carbon technology transfer.

This is where the cook stoves (and an agro-forestry project) come into play. As Sosis and others working with the GKI wade through pilot project phases, they’re taking stock of the barriers and opportunities that future projects are likely to encounter.

Sosis points out that addressing some of these challenges may seem simple on paper but in fact could add years to a project’s timeline.

“You know certain things are issues with a capital ‘I’,” she says.  “On the ground, you don’t know whether it takes two or two hundred days to figure them out.”

But GKI recognizes the value of getting it right the first time.

“There’s a lot at stake if you get it wrong and you set up a project in a way that either isn’t fair, or is going to create conflict, or is not going to achieve your environmental or economic goals,” she explains.  “If it’s going to be a carbon market project, you want it to be viable enough to get those revenues in.”

Yet another arm of ACCE’s efforts is a hub to shed light on early-stage carbon projects in need of attention – from technical experts, investors and others who can help germinate the seeds of project ideas.

What Sosis explains as a “pipeline document” is a database of projects that – for reasons of lacking financing or technical expertise – are stalled in their early stages. She views the database as a precursor to the exchange itself.

“The idea with this is to start creating, ideally online and interactive, a database that is an early stage of the marketplace,” says Sosis. “You can have a certain amount of information submitted by the project owner or developer that can be vetted through an intermediary put it out there to start connecting these projects to help.”

Additional resources

Timber Turmoil Offers Lessons for REDD in Cameroon

Cameroon says it shares the money it earns from timber fees with local communities, but a study by the Center for International Forestry Research (CIFOR) says that program has been compromised by confusion and corruption, providing a cationaly tale for people hoping to distribute forest-based carbon revenues under the REDD+ mechanism.

18 November 2010 | YAOUNDÉ | Cameroon | A new study finds a lack of transparency and corruption are reducing the impact of an initiative in Cameroon that channels a portion of national timber levies to rural forest communities. The study highlights the challenges of using a climate change pact to do something similar in forested regions around the world.
 
In an article published in the peer-reviewed journal International Forestry Review, scientists at the Center for International Forestry Research (CIFOR) examined how revenues from a tax paid by logging companies in Cameroon, known as an Area Fee (AF), are distributed to local councils to reduce rural poverty and stimulate local economic growth.
 
Paolo Omar Cerutti, the study’s lead author, said the AF’s impact is diluted by a murky and unreliable system for distributing revenues to local communities and a failure to discourage embezzlement and mismanagement in areas that receive funds. CIFOR also found evidence that at least a portion of the AF money is being used for programs that should be supported by central government appropriations.
 
“Cameroon has established a potentially transformative mechanism for sharing timber revenues with poor communities but we found the AF distributions, while a very promising concept, are not yet realizing their full potential,” Cerutti said.
 
“But problems can be solved,” he added, “and they can be enormously instructive for establishing equitable mechanisms for the distribution of REDD+ funds.”
 
REDD+ is shorthand for “reducing emissions from deforestation and forest degradation” The plus is a recent add-on, which represents conserving and enhancing forest carbon stocks, as well as the sustainable management of forests. It is the term used within international climate change talks for a proposed agreement that would establish a system to reward developing countries for not cutting down their forests because of the carbon stored in them. If successful, REDD+ could generate billions of dollars for some of the world’s poorest communities.
 
The CIFOR study highlights the challenges that could arise in trying to fairly distribute REDD+ funds, and in seeing the money invested to improve the livelihoods of forest communities.
 
The law in Cameroon stipulates that local communities—mainly through their local governing councils and mayors—should receive 50 percent of AF taxes levied on logging companies. The sums are large, given that from 2000 to 2008, the national government collected €20 million (US$27.3 million) in AF taxes annually, which means €10 million (US$13,7 million) should have been available for local use.
 
Several problems have emerged.
 
For example, the amount of money received in a particular community is determined by a number of factors, including the area controlled by the local council, the boundaries of a particular logging concession, and the amount of the AF assessment levied on a logging company. According to CIFOR, each of these variables are subject to change and, furthermore, they are controlled by different ministries “who do not consult with each other.” As a result there are frequent instances in which communities don’t get the funds they are expecting. Given the lack of coordination and data sharing among ministries, it is difficult to determine whether allocations are fair or not.
 
In addition, there is widespread suspicion that some of the AF money is mismanaged and even embezzled by local officials. For example, an assessment of eight councils that received a large amount of AF money found that 22 percent of annual expenditures were “hardly traceable intangible expenses” that appeared to “depend on the discretionary power of the mayors.” The mayors must stand for election, but CIFOR found that the even when voters widely suspect them of diverting AF money for personal use, most manage to retain power by manipulating local councils and party power structures.
 
Other complications also emerged. For example, mayors are sometimes at risk of becoming the “political scapegoat” for funding shortfalls created by the national government’s distribution system. The CIFOR article notes that in 2009, the government’s AF was cut in half to soften the impact of the financial crisis on logging companies. That decision meant less money for local councils.
 
Meanwhile, local councils routinely invest the AF money in basic infrastructure projects that should normally be funded by national appropriations, encouraging the idea that AF money is simply “substitute revenue” for programs that should be supported by the central government.
 
“Clearly, a functional system for allocating forest revenues—whether we are talking about Cameroon’s Area Fund or, on a much larger scale, REDD+ funds—needs to be simple, equitable and transparent,” Cerutti said. “But improving the distribution component is not enough,” he added. “The experience in Cameroon also highlights the importance of independent oversight to monitor, detect and sanction embezzlement or mismanagement at the local level.”
 
Cerutti also said it is critical that such programs don’t end up as an excuse for governments to renege on their obligations, thus negating the potential for the new money to reduce poverty.
 
“If the Area Fee money, or REDD+ money becomes a substitution for funds that the central government should be providing, then we are right back where we started,” he said.
 
The study was published in the International Forestry Review in June 2010. For more information, see here.

 

Saving Trees in the Congo Basin: is REDD a Solution or a Quagmire?

The Congo Basin is rich in forests and poor in cash, which makes it hard to resist offers of easy money from loggers.   Carbon credits could, in theory, help save the forests, but the region’s historically low rates of deforestation (and governance) make it difficult to prove you’re saving trees.   Here’s a look at some of the complex challenges facing forestry advocates in this vital region.

18 November 2010 | Cash-strapped nations with tropical forest cover have been scrambling to qualify for Reduce Emission through Degradation and Deforestation (REDD) funds ever since climate negotiators agreed at their meeting in Bali three years ago on the need to fund rain forest preservation.

REDD financing could, in theory, offer subsistence farmers a way to earn money by preserving the rainforest instead of destroying it, especially after the UNFCCC placed new emphasis on REDD as an essential tactic to reduce global warming when they met in Copenhagen in December.

REDD in Theory

The idea behind REDD is simple.   Since studies show that deforestation causes 15-percent of greenhouse gas emissions, the second-leading cause of global warming, richer nations can pay poorer ones to protect their tropical rainforests.

Yet no clear consensus exists on what activities would make these nations eligible for REDD funding and how REDD will play out in the Congo Basin.

The six Congo Basin nations – the Democratic Republic of Congo, Gabon, the Republic of Congo, Cameroon, the Central African Republic and Equatorial Guinea – have been bogged down by more questions than answers.   How will they change the ways of their own farmers who for generations relied on slashing and burning forest cover to make way for farming?   And how will they counteract a history of abandoning environmental deals when loggers and corporations come knocking with ready cash?

The trouble, says Alain Karsenty, an economist at the Center for International Cooperation in Agronomic Research for Development, is that the region still perceives REDD as a quick money fix.

“On the one hand, they negotiate with Chinese companies over logging concessions, and on the other they’re negotiating with REDD,” he says. “There is a real contradiction at play.”

The struggle faced by Congo Basin nations in creating viable REDD-readiness plans provides a window into the complexities developed and developing nations tackle in creating lasting solutions in the battle against global warming.
   

Pay now; Profit Later

Ironically, nations with a history of watching while their rainforests disappear do not face the hurdles Congo Basin nations must leap to attract REDD dollars.   Indonesia and Brazil, for example, with deforestation rates approaching two-percent during the decade spanning from 1990-2000, will clearly qualify for REDD because they can point to a problem that they have solved.     But here, where deforestation rates hover at only 0.17-percent, Congo nations risk being bypassed by climate-negotiation funds.

“REDD will be a failure if it can only benefit countries who have deforested massively in the past,” says Raymond Mbitikon, executive secretary of the Central African Forest Commission (COMIFAC), a regional body promoting greater harmony in forestry practices in the Congo Basin. “It would encourage countries to deforest to gain compensation, which would be a very perverse system.”

The reasons behind the Congo Basin’s low deforestation rates are economic.   The region has experienced low levels of development and population pressure is limited.  

Yet the region’s deforestation rate is somewhat misleading.   It appears low because it stands in the context of an immense rain forest.   The region, in fact, is the leading exporter of tropical timber, according to a study prepared by the International Monetary Fund.   And the income this produces provides a huge incentive to chop down trees in a region where the World Forest Congress places the average annual income at $310 U.S.

Whether central Africa got to where it is by design or default, what is clear, most climate negotiators agree, is that there needs to be a system in place to preserve current resources from future pressure.

What does Money Do?

Money talks.   This is particularly true in nations where there is little of it.   This reality has prompted negotiators to come up with a slew of scenarios to promote REDD.   And it has prompted a similar number of environmental and finance-based objections.

Some negotiators representing Congo Basin nations advocate having REDD pay their nations for maintaining current forest cover. This appears fair because it would treat forests and carbon stocks as an asset similar to other natural resources.   The problem is that local governments, so far, have been unable to guarantee their forests’ preservation. Studies show that fewer than half of logging concessions in central Africa comply with forestry laws.

Another option for REDD readiness involves what are called “conservation concessions.” These concessions allow governments to sell swathes of land for conservation as they would for logging. But this will only work in areas with little economic pressure (and little risk of deforestation), says Robert Nasi, director of environmental service and sustainable use of forests at the Center for International Forestry Research.   This is because the money logging concessions can bring in far exceeds any returns from carbon payments.

Regional governments aren’t enthusiastic about this option either, says Matthew Hatchwell, now director for Europe at Wildlife Conservation Society but previously based in Madagascar and the Congo.

“Logging concessions bring lots of advantages beyond their contribution to GDP,” he says. “They’re often the main employer in areas of high unemployment. They also provide schools, health care and basic infrastructure that conservation concessions, for the most part, would not provide.”

Logging concessions: friend or foe?

This has led negotiators to discuss establishing a baseline scenario to encourage maintaining current forest stocks while allowing certain levels of deforestation for economic development. Most agree that this would be an imperfect but pragmatic solution.   It allows nations to work with logging concessions that occupy 40-percent of land area in central Africa and, as a result, hold economic and political might.  

Yet it raises a number of new questions.   First and foremost, what would be an ‘acceptable’ level of deforestation? Karsenty says this would remove all incentives for countries to change their modus operandi.

“Under this model, countries would get paid as long as deforestation is less than they thought it would be,” he says. That means all they’d have to do is choose a dramatic baseline scenario to be eligible for payment.

Moreover, would the baseline work on the assumption that logging concessions implement sustainable forest management practices? Karsenty says that many ignore such requirements. So it would be perverse, not to mention in breach of the additionality principle that provides carbon credits only to efforts that exceed “business as usual,” to offer REDD dollars simply for complying with the law.

Because of these concerns, Karsenty advocates a voluntary scale back of logging production.   This would satisfy the additionality principle and would be relatively easy to calculate and monitor.

Hatchwell, in turn, advocates creating an incentive system through taxation. Concessions achieving Forest Stewardship Council certification, for instance, could be rewarded with lower taxes.  

Addressing Deforestation Drivers

Unfortunately, even if these nations solve the so-far intractable issue of logging concessions, there remains yet another elephant in the room.   Subsistence agriculture is a huge issue that few countries have started tackling. Farmers on small and medium-sized plots use slash-and-burn farming on nearly 30-percent of central African land, according to recent studies.

It’s high time these farmers switch to more intensive practices that require smaller plots of land, Karsenty says.

“I’m not advocating the massive use of fertilizers,” he says, “but there are many environmentally friendly techniques that could increase yields and benefit both farmers and the climate
Nasi also points out how the need for fuel wood causes deforestation.

“The DRC exports about 250,000 tonnes of wood per year, but in Kinshasa alone, people use four million tonnes a year for heating and cooking,” he says. “We have known this for a long time so it’s not lack of awareness.   It’s just lack of political willingness to look into it and find alternatives.”

Finally, there is the issue of commercial agriculture. The region is ideally suited for oil palm trees and there are signs the industry is developing here.   In August, Singaporean agribusiness giant Olam signed a deal with the government of Gabon to develop a 300,000 ha palm-oil plantation in the southeast of the country. Returns from the crop are so high that struggling nations might find them an irresistible opportunity. In fact, Hatchwell says that even with a perfectly functioning REDD system; it would be touch-and-go whether carbon payments could match palm oil revenues.

Stumbling Along the Road to REDD

With so much at stake, the region is stumbling on the uncertain road to REDD readiness. It is an uneven playing field determined largely by how much funding and support a country receives to create its readiness plans.

The Democratic Republic of Congo currently stands as the regional leader. The World Bank’s Forest Carbon Partnership Facility (FCPF), an organization helping developing countries design a framework to implement REDD, approved this nation’s REDD strategy, referred as a Readiness Proposal Plan, or RRP back in March. The country also received substantial financial support from organizations such as UNREDD and the Congo Basin Forest Fund.   Thanks to this funding, the Democratic Republic of Congo is now awash with pilot projects.

The Congo’s Readiness Proposal Plan also received broad support at the FCPF meeting in Guyana in June. However, a variety of environmental organizations including Greenpeace and the Rainforest Foundation advocated against its approval in a joint statement.   They pointed to weak governance, regulations and monitoring in Congo Basin nations that could let large-scale logging industries wipe out forests given REDD credits.  

Christian Burren, the Wildlife Conservation Society’s climate change technical advisor in Congo, acknowledged that the country does indeed need to undertake more consultation to address these issues. But this requires additional funding.

“We know that the Congo will need more than the $3.4 million allocated by FCPF,” he says (of the total $11.5 million the Congo requested for its REDD preparation budget.) “But once the RPP is approved, it’s a great document for countries to use to approach donors and show exactly what they would use the money for.”

Harmonizing REDD

Unlike Congo, other Congo Basin nations have received limited funds to prepare their readiness strategies. As a result, Cameroon, the Central African Republic and Equatorial Guinea are making slow progress, negotiators say.

Meanwhile, Gabon’s REDD efforts are languishing, frustrated, insiders say, by political in-fighting including   bottom-line arguments over who is responsible for implementing REDD.   Separate ministries oversee environmental and forestry matters, posing another hurdle.  

Mbitikon says that COMIFAC is working hard to try and harmonize REDD efforts. The organization is considering opening a REDD coordination unit in Brazzaville, the capital of the Congo, although, with COMIFAC’s limited resources, it is still unclear how the unit would be funded and staffed.

No Silver Bullets

Together these issues have affected the region’s credibility over their commitment to REDD.

Karsenty says rhetorically that “Norway has committed $1 billion to Indonesia, $1 billion to Brazil but just $200 million to the Congo Basin; why is that?”

Karsenty says that Central Africa should start by regulating logging concessions and enforcing forestry laws.   He also questions the role the Central Africa Forests Commission can or should play when such a big part of the solution lies outside forestry.

To give the region its due, awareness of issues involved in establishing REDD readiness has grown by leaps and bounds in the last few years. Unfortunately, a solution to the vexing issue of how the region will fully benefit from REDD appears a long way off. What is clear is that central Africa still has much to do to achieve the levels of governance required to implement REDD.

“People see REDD as a silver bullet,” Nasi says.   “But there is no such solution.”

 

Emilie Filou is a free-lance writer specializing in African development issues and a regular contributor to Ecosystem Marketplace. She can be reached at filouemilie@yahoo.com.
Additional resources

Dutch Government Invests in African Carbon Fund

NOTE:   This is a breaking story.   It will be expanded into a full feature within the next two weeks.

3 November 2010 | THE HAGUE | Netherlands | Dutch minister for Agriculture and Foreign Trade Henk Bleker has signed a financial commitment with the investment fund Food 4 All. This fund specializes in smaller companies and cooperation’s in East and West Africa. It is the second deal that has been signed at the Investment Fair, which is taking place on the sidelines of the International Conference on Agriculture, Food safety and Climate Change in The Hague, The Netherlands.

The fund helps small companies set up or improve their business. Lack of management skills and lack of marketing abilities are the biggest reasons small companies in East and West Africa go bankrupt. In addition, obtaining the right financing is difficult for these companies-even if they have a high-quality plan.

Food 4 All is the the organization that offers financial and practical aid for companies in the agro food sector. In this way, entrepreneurship is rewarded and sustainable agriculture sector is further developed.

First-Ever African Soil-Carbon Deal Signed at Hague Investment Fair

NOTE:   This article is a breaking story.   It will be expanded and re-posted as a top story within the next week.

3 November 2010 | THE HAGUE | Netherlands | Small-holder farmers in Kenya are changing their farming practices and earning carbon credits. This is a result of the first soil carbon project approved in Africa, which seeks to improve food security, help address climate change, and improve the lives and livelihoods of rural dwellers who today live in poverty. The agreement to purchase the carbon credits which the project generates, the Emission Reductions Purchase Agreement (ERPA), was signed today in a ceremony held at the Global Conference on Agriculture, Food Security and Climate Change in The Hague.   Representatives from the Ministry of Agriculture in Kenya, Vi Agroforestry and the World Bank presented the project to the media and delegates at the Investment Fair of the conference.

The agreement adds the benefits of carbon finance to a sustainable agricultural land management project based on changes in the practices of farmers in Kenya which not only increase productivity but also sequester carbon dioxide from the atmosphere. The project, developed with the support of the Africa Region of the World Bank, generates carbon credits which are sold to the BioCarbon Fund. It allows small-holder farmers in Kenya to access the carbon market and receive carbon revenues through the adoption of productivity enhancing practices and technologies.

Not only is this the first project that sells soil carbon credits in Africa, but it is also paving the way for a new approach to carbon accounting methodologies, which do not yet exist for this nascent area. As Kenya ramps up its participation in carbon markets, this project illustrates concretely how carbon finance can support both the environment and generate revenues for local communities. Although the value of the ERPA exceeds this, the direct benefit to communities is over $350,000 with an initial payment of $80,000 to be made in the first year, 2011, based on project performance with payments for the sequestered carbon.

The Kenya Agricultural Carbon Project, implemented by the Swedish non-governmental organization Vi Agroforestry, is located on 45,000 hectares in the Nyanza Province and Western Province of Kenya. There, small-holder farmers and small-scale business entrepreneurs are trained in diverse cropland management techniques such as covering crops, crop rotation, compost management and agroforestry.   These practices increase the yield of the land and generate additional sources of income for the farmers through the payment for environmental services in the form of carbon credits.

“We are proud to be part of the development of this ground-breaking project. The development of a new methodology for carbon sequestration in agriculture has great direct benefits for the farmers in Kenya and tremendous potential for scaling up. Without the support of the World Bank and the Kenyan Government, this project would not have been possible”, says Henrik Brundin of Vi Agroforestry.

The project is an example of a triple win strategy: implementing policies and programs that will, first, increase farm productivity and incomes; second, make agriculture more resilient to variations in climate, and thus promote stability and security; and, third, help make the agriculture sector part of the solution to the climate change problem rather than part of the problem.

“The approval of this first soil carbon project in Africa is an important step in extending carbon finance to include agriculture. The potential for carbon sequestration in the soil is estimated at 5.5 gigatons annually with good land management practices, equivalent to 13% of current emissions from all sectors. So soil carbon has a huge contribution to make to addressing the climate change challenge”, says Dr. Andrew Steer, Special Envoy for Climate Change, World Bank.

The BioCarbon Fund is an initiative with public and private contributions, administered by the World Bank.   It purchases emission reductions from afforestation and reforestation projects under the CDM, as well as from land-use sector projects outside the CDM, such as projects that reduce emissions from deforestation and forest degradation and increase carbon sequestration in soils through improved agriculture practices. In addition, the BioCarbon Fund, which was created to help open the carbon market, develops methodologies and tools that are in the public domain.

Isabel Hagbrink of the World Bank can be reached in Washington at ihagbrink@worldbank.org.   Robert Bisset of the World Bank can be reached in the Hague at rbisset@worldbank.org

Biodiversity Boosters Hope to Leverage REDD Momentum at Nairobi Meeting

The UN has declared 2010 the International Year of Biodiversity, but the UN’s Convention on Biological Diversity (CBD) remains the poor (and largely forgotten) sibling to the headline-grabbing climate-change convention (UNFCCC). Delegates to CBD talks in Nairobi this week and next are looking at schemes designed to change that, in part by embedding more biodiversity values in the global carbon market.

Second in the series “Building the Biodiversity Marketplace”

10 May 2010 | NAIROBI | “I’ve been in these talks for years, and it’s frustrating,” says Horst Korn, who heads the biodiversity unit for Germany’s Federal Agency for the Conservation of Nature (Bundesamt fí¼r Naturschutz, BfN). “We need them, but they don’t need us.”

The “we” are the parties to the United Nations Convention on Biological Diversity (CBD), a global treaty spawned at the 1992 Earth Summit in Rio de Janeiro to promote means of conserving biodiversity and sharing genetic resources. It came into force in 1993, and is supposed to lead to a new ten-year treaty being signed in October of this year in Nagoya, Japan.

The “them” are the parties to the United Nations Framework Convention on Climate Change (UNFCCC), which also came together at the Rio Summit, but didn’t come into force until 1994. It’s designed to promote means of reducing greenhouse gasses in the atmosphere and reversing climate change, and hit a financing home run with the Kyoto Protocol’s Clean Development Mechanism (CDM), which helped create the global carbon markets that have the potential to mobilize billions in funding for the preservation of rainforests.

“Activities under the CBD can have positive effects for climate-change mitigation, but are not seen as affecting anything under the climate change convention,” said Korn today, while participating in a side event during a meeting of a key rule-making body of the CBD this week and next at the headquarters of the United Nations Environment Programme (UNEP) in Nairobi, Kenya.

“Climate change is a major issue for the CBD, because it will have an enormous impact on biodiversity; but biodiversity is seen as only a marginal issue for climate change,” he said.

Marginal to Major

The meeting is part of an ongoing process designed to forge agreement on how to measure, monitor, and promote the preservation of biodiversity. This agreement should, in theory, become a cornerstone of the treaty that everyone is angling towards this year.

This is the fourteenth time that the rule-making body (specifically, the Subsidiary Body on Scientific, Technical and Technological Advice, or “SBSTTA”) has met, and their plate is a full one. “Biodiversity and Climate Change” is just one of technical issues they’re addressing at this meeting, but it could be one of the most important in terms of attracting money.

The UNFCCC has its own Subsidiary Body for Scientific and Technological Advice (SBSTA), which will be meeting in Bonn from May 31 to June 9. That’s less than two weeks after the CBD meeting wraps up, and CBD delegates in Nairobi hope to generate concrete proposals that can be fed into that meeting.

The challenge will be feeding those proposals into the UNFCCC in a form it can digest – no easy task, even though most of the parties are members of both conventions. That’s not only because the CBD and the UNFCCC have different mandates, but also because they are dealing in completely different products.

“We don’t really have the one-size-fits-all product like the climate-change guys do,” says Korn. “Biodiversity needs different ecosystem solutions for different regions; there’s no currency in the diversity of life as in carbon, and taking biodiversity into account actually makes mitigation projects more expensive.”

What CBD Offers

“On the climate-change side, they’ll be looking at REDD-plus,” says Gary Steindlegger, Manager of WWF International’s Forest Programme, referring to UNFCCC efforts to reach agreement on how to use market mechanisms to incentivize Reduced Emissions from Deforestation and forest Degratation (REDD), as well as well as for promoting forest conservation, enhancement of forest carbon stocks, and sustainable forest management (REDD-plus).

“The key question is how to properly design REDD-plus so as to convince the respective decision-makers to adopt these properly-designed REDD-plus programs in their processes,” adds Steindlegger.

That begs the question: what, exactly, can the CBD offer the UNFCCC?

“We have the ecosystem approach to deal with large-scale management issues,” says Korn. “A lot of the large-scale mitigation activities run into trouble with local stakeholders and indigenous people because climate-change thought tends to proceed on technical terms and not so much on the whole social issue.”

That’s a key selling point in the voluntary carbon markets, where companies make reductions even thought they aren’t forced to do so. In such cases, the story behind a carbon reduction is just as important as the reduction itself, especially in forest carbon markets.

Anything beyond the amount of carbon stored is viewed as a “co-benefit”, but these co-benefits have tended to play a small role in bottom-line compliance markets.

The CBD is developing an approach to total ecosystem valuation that Korn hopes will provide a way of providing income that helps support the conservation of forests, wetlands, and peat bogs, among other things.

“Preserving these types of ecosystems is a cost-effective way of mitigate climate change, but until now it’s not something you can make money with,” he says. “From the economic point of view, it’s still more practical to destroy peat bogs and plant palm oil trees there.”

Three New Tools

Three tools will be getting plenty of attention these two weeks, and we’ll be covering each of them in more detail as talks continue.

The first is a global effort to map complementary biodiversity and carbon values. Sponsored by the United Nations Environment Programme’s World Conservation Monitoring Centre (UNEP WCMC), the carbon and biodiversity atlas is designed to help individual nations understand the value of potential co-benefits under an emerging REDD-plus regime.

The second is an online platform called LifeWeb, which is based on platforms developed in the voluntary carbon market. It is designed to help groups that need funding for biodiversity projects distill their needs into simple terms that potential donors can evaluate simply and transparently.

The third is an effort to create a completely new financing mechanism for biodiversity projects. Dubbed the Green Development Mechanism (GDM), this effort aims to create an international currency for biodiversity offsets that proponents hope will more actively promote economic development in the developing world.

Steve Zwick is Managing Editor of the Ecosystem Marketplace. He can be reached at SZwick@ecosystemmarketplace.com.

Additional resources

Streaming Video: Trading Africa’s Trees

Why all the fuss in Copenhagen about reducing greenhouse gas emissions from deforestation and forest degradation (REDD)?   In part because, it offers the quickest, most cost-effective way to reduce emissions today rather than tomorrow, but also because it gives people in developing countries an opportunity to develop sustainable lievlihoods by acting as guardians of the ecosystem, as this 26-minute film from documentary filmmaker Jeffrey Barbee makes clear.

13 December 2009 | COPENHAGEN | CIFOR’s third annual Forest Day has wrapped up at COP 15 in Copenhagen, where new technologies are making it easier and more cost-effective than ever to measure, report, and verify the reduction of greenhouse gas emissions from deforestation and forest degradation (REDD).

But what does REDD mean on the ground, for the people who live and work in areas where it’s being implemented? Documentary film-maker Jeffrey Barbee offers this glimpse into the impact of these projects on local communities — a perspective that is often missed in these talks.  

High-resolution CDs will be available through Barbee’s web site shortly.

Additional resources

Green Resources Is First to Achieve Validation for Tree-Planting under VCS

Norwegian forestry and carbon offset group Green Resources last week became the first carbon offset project developer to register a reforestation project under the Voluntary Carbon Standard’s guidelines for reducing greenhouse gas emissions from agriculture, forestry, and land use. This week, a second project was also verified – and plenty of others are sure to follow.

22 July 2009 | On Friday, July 17, German carbon offset project verifier TÃœV Sí¼d wrapped up a two-year audit and gave its stamp of approval to the first-ever carbon offset project recognized under the Voluntary Carbon Standard‘s (VCS) guidelines for agriculture, forestry, and land use (AFOLU), which were finalized in 2007.

The project, which covers two locations (Uchindile and Mapanda) in the Southern Highlands of Tanzania, was launched in 1997 by Green Resources, a Norwegian company focused on carbon offsets and forest products. It will reforest 10,814 hectares of degraded land and conserve 7,565 hectares for local biodiversity.

On a broader level, the project offers an opportunity to test the market’s acceptance of forestry credits that aim to achieve credibility by applying the VCS’s “buffer” approach – essentially allowing for the potential loss of forest by planting more trees than they sell credits for, and basing that set-aside on the perceived risk of damage.

“This is the first forestry-sector project to be validated under the VCS, and thus marks a tremendous milestone,” says VCS Association CEO David Antonioli. “Kudos to Green Resources for helping to demonstrate that by using the VCS one can generate permanent removals from the forestry sector that are perfectly fungible with other emission reductions.”

Long-Time Coming

The project was initially launched to fund reforestation by generating carbon credits under the Kyoto Protocol’s Clean Development Mechanism. When the protocol was finalized in 1997, however, the only afforestation and reforestation projects it recognized were those that began after 2000.

Green Resources then turned to the voluntary market, but found their efforts to sell offsets from the Tanzanian project hampered by the lack of standards. In 2008, the project was certified under the Forest Stewardship Council’s (FSC) standard for sustainable forest management, but still lacked the kind of pedigree that companies interested in voluntarily offsetting their greenhouse gas emissions look for.

As standards evolved, it became clear that only the VCS could offer that kind of assurance.

“One of the great things about VCS is that it has provisions for early start,” says Jenny Henman, Carbon Offset Certification Manager for Green Resources. “You basically have to prove that carbon income was considered from the beginning and that you had an independent review prior to 2002.”

Buffering for Long-Term Credits

In negotiations leading up to the Kyoto Protocol, critics of forestry offsets argued that any credits generated by capturing carbon in trees should only be given temporary status because of forests’ susceptibility to fires, pests, and illegal logging. Offset buyers, however, have been lukewarm to-called tCERs (temporary Certified Emission Reduction certificates), preferring instead permanent offsets that don’t expire.

The VCS has chosen to deal with the permanence issue by recognizing forestry credits as permanent if project developers meet certain criteria and then agree to plant a buffer of more trees than they sell credits for.

The Tanzanian project will generate permanent Voluntary Emission Reductions (VERs) over a period of 99 years, with a reserve buffer of 40%.

“This is the first time the risk buffer has been applied,” says Henman. “It’s an interesting process, and the final buffer is linked to things like the certainty of land tenure, measures that you have in place to deal with things like fire and pest control, your relationship with the local community, and the political stability in the country.”

The Pipeline

Green Resources submitted its project for validation almost as soon as the VCS guidelines for AFOLU were released in 2007. It’s not clear how many others did the same, but those that did will be coming to light over the next few months.

TÃœV Sí¼d has already validated a second reforestation project, and Sebastian Hetsch, the TÃœV Sí¼d auditor who validated the Tanzanian project, says others are in the works.

“This shows that the voluntary market is attractive for project developers, and that it works,” he says – adding that it’s still more profitable for reforestation and afforestation projects to go the CDM route if they can.

“There are six affforestation/reforestation (A/R) projects registered under CDM right now, and around 50 have started the validation process,” he says. “I wouldn’t be surprised to see 15 CDM A/R projects registered by year-end, but only expect another four or five to be registered under VCS.”

Henman agrees.

“We have other forestry projects, but they started after 2000, so we are going for CDM,” she says. “We would, however, definitely look to VCS for other categories of forest project type – like REDD (Reduced Emissions from Deforestation and forest Degradation) or Improved Forest Management, which allows for enrichment-planting and forest restoration.”

The second reforestation project to be verified under VCS is in Pucallpa, Peru, and was developed by Sustainable Forestry Management (SFM Ltd), which owns the emission reduction rights and manages the carbon, along with SFM-BAM, a joint venture between SFM and a local Peruvian company that owns the land and is in charge of implementing the project, together with local non-governmental organization Asociacií³n para la Investigacií³n y Desarrollo Integral (AIDER), which provides technical support.

Both projects have applied for additional validation under the Climate, Community, and Biodiversity Standards, which ensure that projects not only sequester carbon but provide support to local communities and promote biodiversity.



Steve Zwick is Managing Editor of Ecosystem Marketplace. He can be reached at SZwick@ecosystemmarketplace.com.

Please see our Reprint Guidelines for details on republishing our articles.

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Must We Make a Choice between Helping the Poor and Preserving the Environment?

Schemes that promote payments for ecosystem services (PES) should, in theory, reduce poverty while preserving the environment by rewarding the rural poor for acting as guardians of the ecosystem. Most PES schemes even list poverty reduction as an explicit goal; but will too much emphasis on helping the poor detract from the environmental benefits? Ecosystem Marketplace summarizes key research.

20 July 2009 | Markets for hydrological services – or “water trading” schemes – are prevalent throughout Latin America and gaining in Africa. Though primarily designed to clean water or restore water flows, these schemes tend to achieve their environmental goals by hiring small farmers and other impoverished people to restore or preserve catchments and perform other tasks that help deliver ecosystem services.

These payments for ecosystem service (PES) schemes have tended to be viewed – and funded – as win-win solutions that promote sustainable development while preserving environmental value. There are, however, two schools of thought concerning the payments themselves and the social benefits that flow from them.

One school believes that poverty reduction should be a stated goal of constructing such schemes, and that payments should be priced specifically to achieve that goal. The other school believes the payments should be based on the economic value of the environmental benefit, and worries that placing too much emphasis on pricing to reduce poverty will bankrupt the schemes, leaving us with neither environmental nor social improvement.

The Studies

Several studies have attempted to evaluate these theses, and we’ve attempted to summarize the studies. (For a more detailed examination, including a list of all studies surveyed and all works cited, please download “Pro-Poor PES”, right)

Among Latin American programs, we will examine literature evaluating Mexico’s Payment for Hydrological Environmental Services (PSAH) Program (which transacted payments worth US$27.3 million in 2004) and Costa Rica‘s National PES program (which has transacted payments worth US$140 million since its inception in 1997). We will also examine literature evaluating South Africa’s Working for Water (WfW) Program, which transacted payments totaling US$43 million in 2005.

The Costa Rica program was initiated after Forest Law No. 7575 recognized four environmental services provided by forest ecosystems: a) carbon sequestration b) hydrological services including water quantity and quality for consumption but also irrigation and energy provision c) biodiversity conservation d) provision of scenic beauty for recreation and tourism. The law also established the National Fund for Forest Financing (FONAFIFO), which manages the program and receives its revenues from a 3.5% gas tax as well as multilateral and bilateral funds.

The Mexican and South African programs each arose in response to water scarcity. Two thirds of Mexico’s 188 most important aquifers are overexploited, while an additional 28 percent are fully used, according to a 2003 study by the National Water Commission (Comision Nacional del Agua). This scarcity is coupled with high deforestation rates of 1.3% annually.

South Africa is also chronically water-stressed, with less than 1000 cubic meters of water available per person per year.

Extending Benefits to the Poor

All three schemes were devised primarily to improve the provision of ecosystem services, but they also had specific pro-poor objectives.

In the PSAH program, 31% of recipients had incomes below the extreme poverty line in 2004. One study demonstrated the Costa Rica program improved tenure security by preventing forested land from being considered idle, which would warrant its confiscation. In South Africa, the WfW Program employed 24,000 previously-unemployed people in 2000, 52% of whom were women.

Targeting Poverty and Preserving the Environment

In analyzing national government-financed PES schemes, Wunder et al (2008;see Ecological Economics Special Issue: Payments for Environmental Services in Developing and Developed Countries) argue that loading too many non-environmental benefits into PES schemes ultimately dilutes the environmental benefits themselves. On the other hand, if opportunity costs are known so that buyers pay providers just barely over their provision costs, program efficiency (maximizing the provision of ecosystem services from a given budget) is gained while welfare to providers is lost.

WfW’s experience, however, demonstrates that these goals need not be mutually exclusive – in part because the program’s stated goal of reducing poverty through job creation has attracted political support that a purely environmental program might not have.

Environmentally, the program clears invasive alien plants that affect water flows in water catchment areas. It achieves this by hiring roving “service providers” who are small-scale contractors. To make sure the program really is delivering social benefits, the contractor must have been previously unemployed.

The results, according to two studies – one conducted by Marais and Wannenburgh, and the other conducted by Milton et al – are good for both the environment (stream flows increased by nearly 46 million cubic meters per year) and the economy (the above-mentioned 24,000 newly employed in 2000).

Targeting Poverty in Mexico: The Grading System

In Mexico, the PSAH program also shows that after spatially targeting to achieve program effectiveness and efficiency in meeting the primary environmental objectives of PES, social side objectives can be incorporated.

In fact, in government-financed schemes, measures to improve efficiency such as price differentiation according to environmental service provision, risk of service loss (i.e. risk of deforestation) and participation costs (sum of opportunity, transaction and protection costs) can free up funds to further contribute to these dual goals. In the PSAH program, eligible areas are determined by spatially targeting recharge areas of overexploited aquifers, watersheds with high water scarcity and areas with high flood risk.

While poverty targeting is not part of the eligibility criteria, it is incorporated into a grading system (which includes a series of weights for water scarcity and an index for deforestation risk) during the selection process when eligible area applications exceed the budget.

In the three years of the program’s operation in eligible areas, 78% of payments went to forests owned by people living in population centers characterized with high or very high marginalization, but the very highly-marginalized were under represented relative to the high-marginalized.

This may be due to barriers to entry, such as a lack of education and clear land titles.

Targeting by Farm Size

Another example of targeting is by defining and prioritizing smallholders by farm size in the grading scale. In a Biocarbon Fund project a socio-economic characterization of the local farming community was undertaken and low and medium income farmers were targeted. The study identified the following types of actors:

• Agricultural worker: temporal worker without land
• Employee: permanent worker without land
• Low-income farmer or peasant: peasant with land that in addition works as a temporal agricultural worker. No more than 3 ha.
• Medium-income farmer or peasant: peasant with land that can work only with her family in her land. More than 8 ha.
• High-income fanner or peasant: peasant with land that can hire additional workers to work in his land. More than 8 ha.
• Rural Entrepreneur: landowner that has land, employees and also other business.

Policy Response: Define and map poor communities in environmentally sensitive areas using Geographic Information Systems (GIS). To encourage participation of the landless, target training and hiring of women and men below the national poverty line taking into account depth of poverty indicators for labor intensive activities such as nursery maintenance, tree planting or clearing of invasive plants. Incorporate a gender perspective by providing flexible hours, onsite child care facilities and training women in vegetable gardening, for example, to supplement their income at home.

Removing Regulatory Barriers

In addition to poverty targeting, a second step would be to remove any unnecessary regulatory obstacles that restrict access to the rural poor. The following are some barriers to entry for small holders to the market schemes identified by GRIEG-GRAN et al. 2005:

Informal and insecure land/resource tenure Eligibility requirements for PES schemes require clear land titles. The landless will be excluded de jure. In PES schemes it is necessary to be able to exclude access to land and resources in order for service providers to reliably guarantee specific land management services.

Regulatory access discrimination Another study regarding payments for reforestation in Huetar Norte in Costa Rica (GRIEG-GRAN et al. 2005) identified some factors in practice in the underlying regulatory framework that restricted access for the poor. For one, participation in the PES scheme meant a disqualification from accessing some other public benefits such as housing subsidies. Second, land reform beneficiaries are not eligible for PES, even if their land contains forest or is suitable for forestry activities. Third, forestry activities were not eligible for credit from the National Bank System for Financing, the main source of finance in Costa Rica. Additional finance is necessary for start up costs of reforestation and this restriction on bank credit penalizes small landowners as they have fewer alternatives for funding.

Exclusion of mixed land uses when defining eligibility criteria such as livestock-forestry or agro-forestry systems which are often favored by smallholders. In the national Costa Rica PES scheme agroforestry was excluded and empirical evidence has shown agroforestry benefits positively poor, small scale farmers. It can be implemented on marginal or degraded lands of poor land holders with low opportunity costs so as not to displace or replace other productive activities so that the income generated through these activities is entirely additional. It increases the productivity of the soil, diversifies income and complements reforestation, aforestation or avoided deforestation activities.

Policy response: Do not exclude smallholders with informal land tenure who have historical control over resources and have added value to the land. Instead devise strategies that strengthen land tenure and speed up the titling process, especially for those people living in environmentally sensitive lands. Risk insurance can be purchased for participants without formal titles until titles are secured to ensure continuous service provision.

In Costa Rica, the national law forbade using public funds to pay landowners without a formal title. As a first solution, they created parallel contracts similar to the National PES contracts financed by service buyers for landowners without titles. In a particular region, Platanar, they covered only half of the payments to landowners with titles and FONAFIFO paid the rest. This freed up funds to pay landowners without titles that would otherwise not be eligible for public funds. Afterwards the law was changed to allow public funds for the participation of landowners that lacked titles. In regards to the second, conduct an analysis of the program to identify any arbitrary barriers or impediments to participation within the management structures of the program that are biased towards small holders and initiate the necessary steps to remove them.

Thirdly, a lack of participatory decision-making structures in the formulation of rules—especially in government financed schemes—means the poor are not usually present when eligibility rules and project types are decided that determine access to the scheme. Conducting public consultations with communities within the target area that is to receive funds for ecosystem provision would be a starting point for carrying out an analysis of barriers and opportunities for smallholder participation as well as ensuring customary rights or access to resources are upheld.

Transaction Costs

Negotiating with 100 small service providers entails much higher transaction costs than negotiating with one or two large landowners managing an equal area of land. The Forests Absorbing Carbon-dioxide Emissions Forestation Program (PROFAFOR) in Ecuador has a minimum size criterion of 50 hectares due to the high transaction costs of working with smaller plots which effectively excludes smallholders.

Policy response: Costa Rica’s national PES program has developed a system of collective contracting through which groups of small farmers join the program collectively rather than individually, thus spreading transaction costs over a large group (FONAFIFO, 2000). Making contracts simpler and taking out requirements unrelated to the transaction at hand could also reduce transaction costs. Although the PROFAFOR program has a minimum size criterion it has aggregated smaller size areas into 43 collective contracts with cash poor highland communities. These account for nearly 30 percent of PROFAFOR’s contracts in the highland region of Ecuador and for 40 percent of the 23,722 hectares of land covered by these contracts. Coordination with microfinance networks and other women’s associations or community groups would be useful in identifying lessons learned to reduce transaction costs, to target poor communities and other activities to achieve pro poor outcomes.

Multilateral Funds and CCB Standards

Multilateral funds such as the UN REDD Programme, the BioCarbon Fund, the Forest Carbon Partnership Facility and the Forest Investment Program could be used to provide upfront financing to reduce transaction costs of poor landholders in designing national level PES programs as long as they are working towards establishing a REDD component. Alternatively, national level REDD initiatives can piggy back on these PES institutions or at the very least coordinate with national level PES programs to make sure there is information sharing of lessons learned and best practices as well as streamlining or identifying synergies of processes. Some areas with potential for collaboration due to economies of scale include: land use sector emissions inventories and baselines methodologies as well as estimations of net anthropogenic GHG removals by sinks; GIS spatial and poverty targeting as well as an analysis of deforestation drivers and projected location (spatial modeling); coordinated strategies for addressing drivers; monitoring and verification systems; registries; payment distribution mechanisms; rapid titling programs; targeted crediting systems for eligible activities. National level REDD initiatives are incipient at the moment—Panama and Guyana are the only two countries in Latin America that have initiated the Forest Carbon Partnership Facility process by submitting a Readiness Plan which has been approved. Indonesia’s plan was rejected.

A market-based mechanism for financing high transaction costs of incorporating the poor is to seek ‘gourmet carbon’ certification as it is a growing market niche. A recent review cites projects certified to Climate, Community and Biodiversity standards as getting about a 35% premium over uncertified projects. These ‘charismatic’ carbon credits can build on the CCB brand to fetch a premium and find buyers who are willing to pay more for co-benefits.

Maria Bendana manages the Forest Carbon Portal, a project of Ecosystem Marketplace. She can be reached at mbendana@forest-trends.org.

Please see our Reprint Guidelines for details

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Soil Carbon in Africa: Potentials and Pitfalls

Katoomba XV Publications

The above articles were consolidated, along with other material from Ecosystem Marketplace, in two brochures that were distributed at Katoomba XV.

Leading up to the meeting, Ecosystem Marketplace commissioned this series of articles to shed light on issues relevant to these meetings and that part of the world.

Carbon and Land-Use: The Economies of Cocoa, Timber and Agriculture examines the role that carbon payments for Reduced Emissions from Deforestation and Degradation (REDD) can play in promoting sustainable land-use practices West Africa.

Integrated Solutions: Water, Biodiversity, and the Clean Development Mechanism examines the role that PES schemes other than REDD can play in promoting sustainable land- and water-use practices in West Africa.

The following documents offer more detailed and technical treatment of the issues highlighted above:

Sweetening the Deal for Shade-Grown Cocoa: A Preliminary Review of Constraints and Feasibility of ‘Cocoa Carbon’ in Ghana

REDD Opportunities Scoping Exercise (ROSE) for Ghana Identifying Priorities for REDD Activities on the Ground: Preliminary Review of Legal and Institutional Constraints (Report of a Key Informant Workshop, July 2009)

Realizing REDD: Implications of Ghana’s Current Legal Framework for Trees

KATOOMBA XV SPONSORS

The Katoomba Group gratefully acknowledges the sponsorship and support of the following organizations for the Katoomba XV Meeting:

USAID; the Global Environment Facility (GEF); Gordon and Betty Moore Foundation; NORAD; Rockefeller Foundation; Rainforest Alliance; and Price Waterhouse Coopers.

First in the Series: The Road to Accra, leading up to the October Katoomba Meeting in Accra, Ghana.

9 September 2009 | Most of the 9,000 members of the Komothai Smallholder Farmers Cooperative earn their livelihood farming just over a half-hectare of land. That’s about the size of a soccer field, and it’s usually split evenly between a coffee-growing part and a subsistence farming part.

Modern farming methods have ratcheted up production of food products around the world – but often at the expense of tomorrow’s fertile fields. Now, however, farmers of the Komothai Smallholder Farmers Cooperative are managing their 7,000 hectares in ways that preserve the land for tomorrow, improve coffee quality, and suck carbon from the atmosphere so it can be stored in the soil. This carbon storage gives them an opportunity to earn the carbon credits that could ultimately make sustainable agriculture more profitable in the short term than current intensive methods.

Supported by international coffee trader ECOM Agroindustrial Corp and the German Technical Cooperation, GTZ, farmers involved in this pilot project produce shade-grown and bird-friendly coffee. The World Bank is helping to turn that stored carbon into carbon assets, and the Bank’s BioCarbon Fund intends to buy the emission-reduction credits generated by this project, which the bank believes will mitigate 3.5 tons of carbon dioxide equivalent (tCO2e) per hectare each year – or roughly 30,000 tCO2e in the entire project area per year. The credits will then be sold in the voluntary carbon market for US$ 3-5 t/Co2e.

It is estimated that the yield per hectare will increase from 1.5 to 5 kilograms without requiring the addition of anorganic fertilizers. Moreover, the new farming techniques will improve soil fertility and water holding capacity, and strengthen the land’s resilience to climate change.

 

Can It Be Replicated?

Can this example be a model for other farming communities in Africa? Can carbon market revenues help farmers adopt more sustainable agricultural practices? Can a project that works for coffee farmers in Kenya also work for cocoa farmers in Ghana? And can farmers in Africa become more than farmers, like their colleagues in Europe where the EU and national governments pay them not only to produced food but to restore and protect ecosystems that are vital to a societies economy and future?

US Secretary of Agricultural Tom Vilsack certainly thinks so. On a recent trip to Africa, he said countries there can boost global efforts to curb emissions through absorbing greenhouse gases by improving its farming sector.

“With proper techniques and management, Africa can help the world better balance its greenhouse gas emissions.”

Johannes Woelke agrees. He’s the senior economist at the World Bank’s Africa Department and has been working in Kenya to get carbon finance projects up and running.

“Carbon payments can be a catalyst to push for change in Africa,” he says – adding that change is desperately needed.

 

The African Challenge

Africa has the highest projected growth in agricultural emissions due to population growth and changing diets. Many countries risk heavy losses in agricultural production caused by climate change. Already, 66% of Africa’s crop land is severely degraded. And African forests are disappearing faster than in other tropical regions of the world, mainly because they are being converted into new crop land.

“If you ask African politicians and experts what are the three problems which need to be tackled, they will answer ‘agriculture, agriculture, agriculture’,” says Ralph Aston from the Terrestrial Carbon Group.

Therefore, land use and land-use change in Africa have huge climate-change mitigating potential. Soil carbon projects offer new possibilities for a continent that’s largely been missing on the global carbon market map. This would be welcome news to Africa’s rural people, of whom 229 million belong to the extreme poor.

 

REDD All Over Again?

Assuming a price of just 10 US$ t/Co2e, the resulting carbon revenues would be twice as high as official development aid flowing to African agriculture every year.

But in order to include African countries’ (or any other regions’) soils in carbon markets, other math needs to be done. And that’s where the difficulties just begin.

It is a bit like a déjí  vu. Remember when forests as carbon sinks appeared on the radar screen of emission traders, project developers and NGOs a few years ago? When contentious issues like additionality, leakage, permanence, verifying and monitoring seemed to be hurdles too high to overcome. Not to mention all those ideological questions about whether rich countries should be allowed to offset their emissions by financing forestry projects in developing countries.

Today, almost all agree that forestry should be an integral part of any post-2012 climate framework. The arguments are mainly over who should foot the bill.

If it comes to soil carbon, we are still at the outset.

 

Potential…

Soils are assumed to offer the largest potential for carbon storage of the terrestrial carbon cycle, but estimates of their dimension differ widely.

Many experts believe that enriching soil carbon and protecting existing carbon stocks is a good idea. It improves soil quality and retains water and nutrients – so it’s good for food security. Many farming techniques – such as crop rotation, mulching, manure management, reduced tillage, terracing, and agroforestry – are already in-use, time-tested, and can quickly be implemented. Also, enhancing soil nutrients through organic methods means using less fertilizers.

Some experts recommend biochar, which is charcoal made from organic waste, as a possible solution. Advocates of this newly rediscovered traditional way of fertilizing poor soils calculate that if biochar were applied on just 10% of the world’s crop land this could store 29 billion tons of CO2 equivalents offsetting nearly all emissions from fossil fuel burning. This might be a bit of a stretch, and critics, asking where all the additional organic material should come from in Africa, fear that this will lead to chopping down trees for ‘biochar-plantations’ if it were to be produced on in larger quantities. But it’s an ancient practice that had been used by tribes in the Amazon for millennia, and can be applied quickly on a small scale.

 

…and Pitfalls

Whether African soils are well-suited for soil carbon projects is a different story.

Research done by the Terrestrial Carbon Group found that only two African countries – South Africa and Congo – offer a high potential of soil carbon sequestration. Soil specialist and retired Duke University professor William Schlesinger is now president of the Cary Institute of Ecosystem Studies in New York. He says that peatlands, wetlands and cold regions are, in general, better places for locking up significant amounts of carbon in soils.

“Since soil carbon contents are driven more by decomposition rates than input rates, hot areas and deserts simply do not store as much carbon,” he says, adding that the best road to sequester carbon in soils in Africa would be to focus on incorporating crop residues or their ash into soils, where this has not been done traditionally.

 

Modeling vs. Measuring

Which brings us to the question of how to measure changes in carbon stocks. Releasing carbon from soils takes much longer than from trees and sequestering is a much longer process as well.

“Measuring and validating an estimate of soil carbon over any considerable area is a non-trivial amount of work due to the high degree of spatial variation in soil characteristics and the relatively small changes in the carbon content that will be seen on an annual basis,” says Schlesinger, adding that modeling cannot replace field surveys because the models are too dependent on the parameter estimates that drive them.

But Woelke believes that a robust, cost-effective method of measuring additional emission reductions and monitoring carbon-stock changes can be developed. In fact, his team has just done that for Kenya. He uses default values for variations in carbon stocks depending on agro-ecological zones and soil types. The method has been submitted for approval to the international Voluntary Carbon Standard, which was designed to give accountability to the voluntary carbon market. If accepted, other projects will be able to use it too.

Woelke admits that implementing these projects is challenging.

“The efforts are huge, and the mitigation potential for single units of land is small,” he says. “For the entire region, however, it’s big.”

That means it’s necessary to cover larger land areas and bundle projects together.

 

Soil Carbon as Bellwether

Ken Newcombe, CEO of carbon finance firm C-Quest Capital, believes that soil carbon credits could eventually have dual currency as an indicator of environmental health and sustainability.

“This is one of the really intriguing prospects for soil carbon,” he says.

Other businesses, however, are not convinced yet.

Carbon trading companies and project developers remain skeptical of whether it will be possible – and at which cost – to allocate credits for all the different types of soils, climates and land use systems.

 

Permanence and Other Echoes of REDD

Anna Lehmann from project developer Syndicatum Carbon Capital in London, doesn’t believe soil carbon credits should be recognized on the carbon market – largely because you don’t really know how long and how much of the stuff is being stored. Undisturbed, soil carbon will sit in the ground for millennia. But disturbances are far from rare events.

“This is even more difficult to manage than forestry, and much harder to verify,” she says, adding that a single tilling can again release 60 – 80% of stored carbon.

And then there are the old problems of credit fungibility, accounting and a dual credit system will be back.

“The market doesn’t like this,” says Lehmann.

Schlesinger believes the price for carbon credits would have to climb well above its current levels if soil carbon is to become profitable. Otherwise, he says, it will be more expensive to establish and validate soil carbon stores and their changes than the credits are worth.

 

The Regulatory Status

As for now, the only place you can sell soil carbon credits is the voluntary market – and then only for very short vintages.

Experts agree that in order to scale up and increase its mitigation effect, land use will have to be incorporated into the international frameworks for climate change. While there is a broad consensus among negotiators that carbon credits form reduced emissions from deforestation and forest degradation (so called REDD mechanism) should be included into any new climate treaty, soil carbon is still a long way to go.

Support, however, is growing.

“We want all terrestrial carbon to be included in either a reformed CDM or new mechanism”, says Aston.

 

The Holistic View

A wider use of carbon trading could help recession-hit industrialized countries add to pledged 2020 cuts which now total only 10-14% below 1990 levels which is below the 20-40% demanded by the UN climate panel to avoid the worst consequences of climate change.

The case for a holistic view in terms of land use is easily to understand if one looks at the link between forest protection and agriculture: 89% of deforestation in Africa is driven by expanding agriculture. To change this land productivity needs to be significantly increased.

“This won’t be possible without trade-offs”, says Bernard Mercer from the Forests Philanthropy Action Network, which works on priorities for terrestrial carbon options in Africa.

He argues that it’s necessary to intensify agriculture to take pressure off the forests. That means it might be necessary to use climate-harmful fossil-fuel-based fertilizers if we want less deforestation.

“And,” he adds. “Even if most African NGOs are opposed to it, we have to think about genetically-modified crops.”

 

More Research Needed

Mercer, who admits to be a bit unorthodox, also criticizes that the debate on land use and carbon mitigation zooms too much in on accounting and not enough on science.

“On the road to Copenhagen, people are fixed on the financial side,” he says. “But the topic of soil carbon is extremely under-researched, and we need to know what makes sense in a given context and is effective. The finance is second.”

He makes the analogy to the kick-start of Silicon Valley.

“You have to build the computer first and prove that it’s working. Then banks invest.”

 

Cocoa and Soil Carbon

So, what might work in West Africa, where the World Bank says no soil-carbon projects in the pipeline?

Probably, the first thing to look at is the important, export-driven and large-scale cocoa production.

Cocoa trees could be mixed with other tropical trees to form agroforestry projects which are already eligible under CDM rules. Agroforestry methodologies have been approved by the UNFCCC for afforestation and reforestation projects.

Another option is to adapt soil enhancing techniques for cocoa plantations that cannot be shifted to an agroforestry system. These large connected and more homogenous areas are, relatively speaking, easier to quantify and monitor. Like the coffee project in Kenya, they are more likely to whet investors appetite once those method problems have been tackled.

It will be much more difficult to attract project developers and private carbon finance outside the forest and cocoa plantation areas.

 

Lessons of EU’s CAP

Beyond the plantations, we mostly find small-scale subsistence farming, where “soils are plagued with inherent or human induced infertility”, as the FAO states, and are susceptible to severe erosion. Much of the land is not very productive. Many areas face accelerated desertification. But this is the land that could benefits most from improving soil quality. Here, reformed national policies could bring leverage to bear on change.

For Lehmann, the most promising route may be the European Union’s often-criticized Common Agricultural Policy, which nevertheless promotes soil fertility and environmental protection.

“Through subsidies, you can strongly influence farming practices like using fertilizers,” she says.

Mercer also favors agricultural policy interventions.

“We could use money from assigned REDD funds and distribute it to governments to push for land use reforms,” he says. “We have to start with what we can do today.”

If lessons were to be learned from CDM and forestry, which can considered to be a failure given the few projects actually realized, a terrestrial carbon scheme that also includes soils and wants to harness carbon finance faces huge problems with accounting, application and verification costs especially in Africa.

“At the end we need a simple plan”, says. “For me that means national inventories of carbon stocks.”

Michael Streck is a journalist and author who writes about environmental, climate change and carbon market issues. He also works as communications advisor for Business Communications Consulting in Frankfurt, Germany and can be reached at +49 69 90028880 and streck@bcc-ffm.de.

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Forest Footprint aims to Reward Companies that Save Trees

22 June 2009 | Andrew Mitchell finds inspiration in Mad Cow Disease – or, more accurately, in part of our response to it.

“We showed you could track a piece of beef from a farm in the country, through a slaughterhouse, to a butcher,” he says. “It’s not hard to do once people are properly motivated.”

Mitchell, who heads the Global Canopy Programme, also chairs the steering committee for a new endeavor called the Forest Footprint Disclosure Project (FFDP). He hopes the FFDP will make it possible to label the deforestation impact of beef that comes from tropical areas – as well as for four other “forest risk” commodities (timber, soya, palm oil and biofuels). The FFDP takes a cue from the nearly ten-year-old Carbon Disclosure Project (CDP), which has built the world’s largest database of corporate climate-change information by asking companies to come clean about their greenhouse gas emissions. The FFDP hopes to build a database of deforestation impacts by asking companies to come clean about where they get their raw materials, with the goal of identifying which companies have the most exposure to “deforestation risk” and which have the lowest.

To entice companies into participating, investors worth £1.3 trillion have signed a letter urging FTSE 100 companies to fill out the disclosure documents FFDP will be sending them between now and the middle of July. “By demonstrating their sustainable business model, the intention is that they will attract more confidence and – eventually – more investment from the financial community,” says project manager Steven Ripley.

The Benefits of Transparency

Companies will have until October to respond, and FFDP will announce the names of companies that are signed up to the project early next year. The goal is eventually to divide companies into three categories: those that are best in class, those that have adopted innovative policy and practice, and those that ignored the survey. Abyd Karmali, who is Global Head of Carbon Markets for Bank of America Merrill Lynch and a member of the FFDP steering committee, believes the mere act of doing a forest carbon inventory will motivate some companies to reduce their forest carbon footprint. “We’ve seen what sort of a transformation the CDP has been able to have on reporting of risks by listed companies,” says Abyd Karmali, who is Global Head of Carbon Markets for Bank of America Merrill Lynch and a member of the FFDP steering committee. “It’s also improved engagement with investors and raised awareness about what kind of climate risks and opportunities exist for companies going forward.” In some cases, he says, it’s resulted in emission reductions that wouldn’t have happened otherwise because companies realized they could slash emissions, win public support, and in some cases even cut costs.

Financial Instruments

Before merging with Bank of America, Merrill-Lynch was a lead global sponsor for the CDP, but it has not yet invested in the FFDP. Karmali says that’s partly because the merger has taken the bulk of their attention, but also because they’re waiting to see if the team develops number-crunching methodology that yields trustworthy numbers. “We’re at a very early stage of understanding about just what kinds of impacts participation in the forestry commodity area has on rates of deforestation,” he says. “Companies that are involved across the value chain in timber, palm oil, soya, beef, and biofuels know very little overall about the links between their activities and deforestation.” If the project brings those links into the light of day, the next step would be to create financial instruments like those based on the CDP’s Carbon Disclosure Leadership Index (CDLI) or Merrill Lynch’s Carbon Leaders Europe Index, both of which aim to channel investment funds into low-emitting companies by highlighting their carbon risk. “With the CDP, we have launched financial products that try to distinguish between companies that we expect to be winners and those we expect to be losers in terms of their differing carbon risks and responses to those carbon risks,” he says. “It’s too early to know whether we’ll be able to develop similar products for distinguishing among companies’ forestry-related risk.” Data from the FFDP would likely be a key input into such a product, but the challenge of creating reliable indexes based on forest carbon is significantly more complex than developing an index based just on carbon alone. “Activities in the forestry value chain include impacts on carbon emissions, biodiversity, indigenous peoples, and rural income,” says Karmali. “There is also the challenge of understanding the links to land use planning and the degree to which options selected now preserve or close off other choices for utilizing land.” The scheme is being funded by the UK Department for International Development, The Prince’s Rainforest Project, and other non-profit organizations. Steve Zwick is Managing Editor of Ecosystem Marketplace. He can be reached at SZwick (at) ecosystemmarketplace.com. Please see our Reprint Guidelines for details on republishing our articles.

Bottom-Up Approach Offers Hope for CDM in Sub-Saharan Africa

Africa has so far failed to harness the opportunities for sustainable development offered by the Kyoto Protocol’s Clean Development Mechanism, but First Climate’s Durando Ndongsok says it doesn’t have to be that way.   He offers a recipe for success post-2012 – and it starts on the ground.

There is no doubt: we want to help.   The well-documented horrors of extreme poverty around the world have created a moral imperative that people have responded to in their millions.   Yet poverty persists…”
            – Dambisa Moyo

23 November 2009 | You may not totally agree with some iconoclastic critics of Zambian economist Dambisa Moyo‘s assessment of the impact of foreign aid on Africa’s economy, but you can’t argue with her assessment of the continent’s state of affairs.

You also can’t deny that, after more than five years of committed actions, the Kyoto Protocol’s Clean Development Mechanism (CDM) is still not working in Africa.

It was designed to promote sustainable development by creating a global system of payments for ecosystem services (PES) that funnel income to those in the developing world generating environmental benefits.   It’s a sound idea, and one that has generated quantifiable results in places like China and India.   Africa’s share of the global CDM pipeline, however, has not grown beyond a disappointing 2%.   This fact takes on special meaning with global climate talks just ahead of us in Copenhagen and a global Katoomba meeting just behind us in Accra.

The situation is dire, but not hopeless. Africa can harvest the CDM to help reduce the amount of anthropogenic greenhouse gases in the atmosphere, and this help is dearly needed. The answer is to remove unnecessary hurdles to the CDM’s development in Africa, and to promote more grassroots action within the Continent.   It is high time to tackle barriers to the CDM in Africa more efficiently to make sure this needed participation of Africa is not lost.

The CDM: Genesis and Principle

The CDM is one of the programs designed by the United Nations Framework Convention on Climate Change (UNFCCC) in 1997 under the Kyoto Protocol to reduce effectively and cost efficiently anthropogenic greenhouse gases emissions that are altering the natural greenhouse effect and creating global warming. The consequences of this alteration in temperatures are multiple and diverse, with different levels of severity attached to them on their effect on mother earth. The implications of global warming are widely known: we can expect a sudden increase of sea level, rising occurrences of flooding and uncontrolled precipitations and hurricanes; or desertification of some part of the world like the horn of Africa that presently is already experiencing noticeable changes.

The principle of the CDM is very straightforward, though a bit complex in practice: one develops in a developing country a project that, through a process designed by the UNFCCC, is proven to reduce greenhouse gases as compared to how much greenhouse gases should have been produced in the absence of the project. The developer of that project gets carbon credits (known also as Certified Emissions Reduction – CERs) that he can sell. Buyers are often utilities in a developed country. Utilities, based in countries where they are subject to an emissions cap or trading scheme, such as the EU ETS, will then use these carbon credits for each metric ton of carbon dioxide equivalent (tCO2e) that they have emitted but have no allowance for.

The sale of carbon credits brings (additional) revenues to the project and is a good incentive for the project developer to invest in an environmental-friendly technology that is usually much more expensive than an existing business-as-usual technology.   This extra money tips the project into profitability and make sure it gets done.

Potential projects that can be accepted as CDM projects are in the sectors of renewable energies, landfill gas capture and usage, composting, energy efficiency, land use, land use change and forestry, fuel switch.   Their huge potential in Africa has been demonstrated time and again.

The CDM Must Work for Africa

Africa to date has less than 2% of CDM projects registered all over the developing world. The biggest share comes from China, which is also home to more than 60% of the current pipeline, followed by India and Brazil, with considerable shares too.

The population of Africa has so far managed to live with extreme poverty, malaria and AIDS etc, while solutions to eradicate these problems are taking time to come to fruition. Climate change, unfortunately, is going to worsen this situation, with rapid, severe consequences. Africa is again very unfortunate to be the most vulnerable to this and will struggle the most to find suitable adaptation measures if climate change was to reach the point of no return.

It’s Already Happening

Africa’s climate is highly sensitive to changes, and striking examples of what climate change is causing and will continue to cause are innumerable.

For example, the Chad Lake, which sources fresh water to Cameroon, Nigeria and Chad, has lost 90% of its capacity from 1963 to 2001 and is projected to dry up completely if nothing is done. Already there are environmental refugees in East Africa as consequences of the desertification of the horn of Africa. Agricultural production will decrease tremendously on a continent where more than a quarter of the population is already touched by famine and malnutrition.

The fight against climate change is a global issue. Developed countries and many emerging countries are taking hard measures to contribute significantly to the reduction of greenhouse gases into the atmosphere. Africa’s participation is dearly needed for this common but differentiated objective of protecting our environment by reducing greenhouse gases as much as possible through the CDM platform. If we are to avoid irreversible damages, there is no time to waste and scientists are insisting that we must reduce greenhouse gases in the atmosphere by 20% until 2020 and by 50% until 2050, compared to 1990 levels.

No Benefits before 2012

It is no secret to anyone with understanding of the carbon market that Africa will not benefit from the CDM market until after 2012, when the first commitment period of the Kyoto Protocol ends. The analysis of the existing CDM pipeline shows that Africa cannot advance beyond a 3% share in the global CDM pipeline until then. Whether it can even reach this level is doubtful, because more than 2000 CDM projects are under validation at the UNFCCC, and Africa possesses less than 100 of those projects.

That means 3% is an ideal and will most likely not be met.
 
Apart from this simple analysis of the CDM pipeline, an individual CDM project takes between 12 and 24 months to get registered with the UNFCCC these days. This does not take into account any non-CDM related project development – i.e., the feasibility study, business plan development and financial closure or the contracting – which can take more than three years.

Of course it is possible to combine both developments, but to start the CDM process one needs a minimum level of certainty that the project will fly. All in all, any project with a CDM component starting today might not have any carbon credit issued before 2013.

This should, however, stop anyone from searching for solutions to the problems infringing on the success of the CDM in Africa.  

Indeed, the future of the CDM looks bright after 2012 – especially for least-developed countries in general and Sub-Saharan Africa specifically.

The Future of CDM in Africa

The next UNFCCC meeting is taking place from December 7 to 18, 2009 in Copenhagen, and it is expected that a successor to the Kyoto Protocol will be conceived here, despite the skepticism that has gained attention in the media of late.

Even if the actual delivery of that successor is delayed as expected, there are already many incentives to continue developing CDM projects in Africa:

• The European Union is willing to accept carbon credits from African countries beyond 2012 in their Emissions Trading Scheme (EU ETS),

• Many trading schemes are under development all over the world and are likely to incorporate many lessons learnt from the EU’s experience,

• The principle of offsetting is widely accepted, i.e. reducing abroad to adjust the cap domestically has proven to be one of the most effective and cost efficient measures,

• Many existing and newly developing carbon funds are giving firm commitments by entering into binding contracts to buy carbon credits that will be issued after 2012. An example is the Post 2012 Carbon Credit Fund under the advisory of First Climate that is entering into forward binding contracts to buy carbon credits generated until 2020.

There is clearly an interest in and a market for carbon credits from Africa beyond 2012 – even if international negotiations in Copenhagen do not lead to a clear result for the future of the Kyoto Protocol beyond 2012. But the question that will continue to harass our mind is whether Africa will ever benefit from this clear opportunity of sustainable development which the CDM offers?

Top-Down Approach Has Not Worked

A lot has been said, written, discussed, and proposed during the last five years to make the CDM work in Africa. The result is clear today: 2% share of the CDM projects’ pipeline is from Africa. And discussions are going on, the same way.

Initially the main problem seemed to be the lack of CDM institutional support. While a lot of work has been done to install Designated National Authorities (DNAs, which represent the UNFCCC and make sure sustainable development criteria of the country are met in any single CDM project developed) in almost all African countries, there has not been any noticeable change in terms of the number of CDM projects from the region.

Many people believe that capacity building is urgently needed in order to stimulate the development of CDM projects in Africa. The result in some cases has been a perfectly developed Project Design Document (PDD) to put forward a project that only exists in the said PDD, totally ignoring that the CDM is merely an add-on to an underlying project.

Feed-in-tariffs are under development in many African countries to follow the example of South Africa. Although this is another very good initiative, there is no certainty that it will be the magical potion to make renewable energy CDM projects work for Africa.  

On the UNFCCC side, efforts are undertaken to make the CDM a reality in Africa. For example to solve the problem of the small and therefore unattractive size of projects of Africa, the Programmatic Approach has been developed. In theory this will help putting small scale projects spread in time and space into one Program. Although the idea behind the concept is genius, this might end up being even more complex than “normal” CDM projects.

Too Many Planners and Too Few Searchers?

William Easterly, in his strongly recommendable book “The White Man’s Burden:   Why the West efforts to aid the Rest have done so much ill and so little good” defines Planners as advocates of the top-down decision-making approach and Searchers as the agents for an alternative approach, that is the bottom-up one.

Let’s illustrate this with Mr. Easterly’s own example:

“The short answer on why dying poor children don’t get twelve-cent medicines, while healthy rich children do get Harry Potter, is that twelve-cent medicines are supplied by Planners while Harry Potter is supplied by Searchers…Planners determine what to supply; Searchers find out what is in demand”.

The difficult question of how to make CDM work in Africa seems to have always found desks of Planners.   Despite their good intentions and thorough motivation to support Africa, however, nothing noticeable has so far been changed in the reality. It is maybe time to think differently and try to clearly understand and find the real solutions to this stubborn disease.

The Diversity of Africa

External analysts are sometimes prone to think in pan-African terms, but Africa is no more homogenous than Europe is. This simple truth has obvious implications for any analysis of the barriers to CDM development.

Africa is comprised of more than 50 countries, all of which are very different and diverse in terms of cultural differentiation and integration, historic development, language, economic situation, natural advantages and disadvantages, political regime and stability, physical appearance to name just a few. In addition, regions of the same countries in most of the cases are as diverse as the whole continent.  

A well-designed capacity building might be of interest to Botswana or Ghana, whilst there is rather a basic need of institutional framework in Mauritania and Chad. Maybe the CDM is thoroughly understood in Senegal and Nigeria and there is a lack of seed money and venture capital to jump start selected projects and create a bandwagon effect that will see many projects in the pipeline within no time. Is English, the official and the only language of the CDM a huge and the main barrier to the Central African Republic? The feed-in-tariff may really boost the development of renewable energies in Cameroon, but can that be of some advantage to the CDM if the baseline of energy production in Cameroon is hydro? And is grid electricity a useful baseline when more than 70% of Africa’s population reportedly still relies on fuel wood as primary energy source for cooking and lighting?

Questions like these could span pages without clear answers today.

The Bottom-Up Approach

It is obvious then that the situation is extremely complex, and no simple solution can be envisaged. And if there is no simple solution, then it is more than clear that solutions designed off field will be totally obsolete.

There is a strong need for developing pilot projects (based on a bottom-up analysis) with people working on the field and having a better understanding of the business culture in countries where they are based. Instead of spending millions of Euros to develop(unreflected) capacity forever, it is important to develop success stories or at least to give it a hard try. In the end one will clearly know what the barriers are and find appropriate solutions or decide that CDM will never work for Africa and spare time, energy and money for other meaningful activities since there seems to be a lot left to do on the continent to meet the Millennium Development Goals.

Despite the diversity that African countries present, there can be meaningful similarities here and there that one can use to group countries. It might be too costly and cumbersome to start more than 50 pilot projects in different countries (and maybe there is no available capacity locally!). One can wisely choose six strategic countries to start with: One country in the Southern African regions (excluding of course South Africa); the other in Eastern Africa; then one French and one English speaking country in West Africa and one country in the Central African region; and finally one country in North Africa (perhaps Libya or Algeria who have no CDM at all in the pipeline).

The pilot projects mentioned here encompass all conventional and CDM related steps necessary to physically commission the projects and register them under the CDM to generate carbon credits. In the process, all barriers will be encountered, can be analyzed and suggestions and recommendations will be drafted and made available for future projects in the country. From these suggestions and recommendations, similarities can easily be drawn to be adapted to neighboring countries in the indicated region.

By the time all projects have been taken through the registration process and are implemented a new understanding of the diverse and manifold issues and ‘hurdles’ to African CDM development will have emerged – an understanding that should allow Africa to take up the challenge that climate change presents in its own unique and (hopefully for us all) powerful way. We have no time to lose!



Durando Ndongsok is a Senior Project Manager at First Climate.   He earned his MBA at the University of Freiberg, Germany, with a focus on resources and environmental management.   He also holds a B.Sc. in Mechanical Engineering from the University of Eindhoven, the Netherlands, and a B.Sc. in Chemistry from the University of Dschang, Cameroon. Please send your questions and comments to Durando.ndongsok@firstclimate.com.

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Special Report: Carbon Payments and Ghana

 

Cocoa is one of Ghana’s most important exports, but current farming techniques wreak havoc on both soil and surrounding forests.   This is not only unsustainable for cocoa, but also contributes to global warming and biodiversity loss. EM examines efforts to promote sustainable cocoa farming by tapping into the global carbon markets.

 

Third in the Series: The Road to Accra, leading up to the October Katoomba Meeting in Accra, Ghana.

 

About this Series

The Fifteenth Katoomba Meeting begins on October 6 in Accra Ghana, and runs through October 9 in two phases: phase one runs for two days and is open to anyone who registers and is designed to bring the debate over the role that payments for ecosystem services can play in promoting sustainable development to a larger audience.   Phase two also runs for two days (October 8 and 9), but is an intensive, invitation-only workshop for practitioners, policy-makers, and stakeholders.

  This series is designed to shed light on issues relevant to these meetings and that part of the world.

Part One, Soil Carbon in Africa, brings you up to date on ways that African farmers can earn income by adopting agricultural techniques that capture carbon in the soil.

Part Two, CDM in Africa, examines the role that local financial systems play in attracting CDM investment.

Part Three, Carbon and Cocoa, examines the interrelationship between cocoa farming, deforestation, and carbon sequestration.

Part Four, Gabon’s Mbé Watershed, examines a pioneering watershed protection scheme being implemented in Gabon.

Part Five, Ghana Readies for REDD, introduces you to the various players working to forge Ghana’s payments for ecosystem services regime.

Other stories will be added over the course of the month.

 

 

23 September 2009 | Can carbon save cocoa? That, some say, is the million-dollar question – or, more accurately, the $2.2 billion question, since industry insiders estimate that’s the value of carbon stored in Ghana’s cocoa landscapes.

 

That value could play an important role in ensuring the long-term survival of the nation’s cocoa industry, which faces existential threats in the wake of depleted soil fertility, reduced water supplies, and various diseases worldwide. Already Brazil, once the second-leading cocoa producer in the world, has seen its cash cow fall victim to a massive fungal disease. Now, instead of making money from cocoa, Brazil pays to import it.

 

Meanwhile Ghana – which is second only to Cí´te d’Ivoire in world cocoa production – has experienced a decades-long decline in cocoa yield per acre farmed, spurring farmers to abandon the livelihood that supported their families for generations.   That decline and the accompanying flight from farming have been in remission for three years – thanks largely to the current high price of cocoa – but current agricultural techniques are unsustainable over the long haul.

 

Two-thirds of Ghana’s stored carbon lies in its high-forest region – and the country has already lost most of this, seeing it shrink from 8.2 million hectares in 1900 to less than 1.2 million hectares today.

 

 

The Cocoa Conundrum and the Sun Curse

 

Cocoa has always been rough on land. Under the best of circumstances, the cacao trees from which cocoa is harvested suck nutrients out of the soil at rates that require massive infusions of chemical fertilizer – which only 3% of cocoa famers use – and also require heavy doses of insecticides – which are also not in wide use.

 

Traditional cocoa farming techniques recommend leaving much of the standing forest intact, because traditional strains of cacao tree grow best in filtered sunlight. Over time, hybrid varieties have improved yields – beginning with strains that can be harvested twice per year instead of once.   Newer plantations, however, are shifting to even newer hybrid trees that tolerate more direct sunlight. This makes it possible for farmers to chop down larger shade trees and plant more cacao trees – an apparent improvement over traditional farming because it, like earlier hybrids, offers higher yields.

 

Unfortunately, sun-free or low-shade systems suck even more nutrients out of the soil than do the already ravenous multi-harvest varieties; they also encourage some pests and – more importantly for the world at large – rob the planet of both carbon-sequestering trees and of valuable habitat for various species of rare animal and plant by encouraging the destruction of natural shade trees that store carbon and provide shelter.

 

As a result, these newer plantations are often abandoned within a few decades and replaced with newly-deforested land, says Michael Richards, a natural resources economist with Forest Trends (publisher of Ecosystem Marketplace). Cocoa farmers often then extend their farms or move into other forested areas, bringing deforestation with them and releasing more carbon into the atmosphere.

 

Most Ghanaian farmers still use the shaded variety of cacao tree, but the hybrids are taking hold – especially in the Western part of the country – and the global atmosphere is paying the price.

Long-term, farmers are paying a price as well.

 

Soil fertility has shrunk noticeably; the newer hybrid-cocoa trees’ lifespan is growing shorter; and farmers are struggling to survive. Climate change and unsustainable farming techniques have decreased the amount of land supporting cocoa crops by 40% in the past four decades alone, reports the Ghanaian Nature Conservation Research Center, the leading conservation NGO in West Africa – although that amount has been increasing in recent years as cocoa prices rise.

 

Some experts believe that if nothing is done, Ghana’s cocoa sector could go the way of Brazil’s.

 

“The world is focusing on whether Kraft is going to buy Cadbury and how much it’ll pay for it, but it may not be a great long-term investment if we run out of cocoa in 30 years,” says John Mason, executive director of the Nature Conservation Research Centre (NCRC).

 

Preliminary research by the University of Reading in the UK suggests that traditional, shaded-cocoa farms store over twice as much carbon as shade-free farms. Farmers could be persuaded to increase their tree canopy and decrease their cocoa yield if carbon trading makes it worth their while.

 

 

Re-Thinking the Process

 

Scores of environmental non-governmental organizations (NGOs) have called for a moratorium on new sun cocoa plantations and a return to shade-cocoa. Many believe that carbon offsets for projects that reduce greenhouse gas emissions from deforestation and forest degradation (REDD) can make it worthwhile for farmers to return to shade-growing, but Michael Packer, managing director of ArborCarb Ltd, says simply reviving the shaded growth method will not be enough.

 

“Traditional cocoa is problematic, too, in the way it has been produced,” he says. “After all, that led to the deforestation that exhausted soil, which lead to the requirement for hybrids.”

 

The solution, he adds, is to manage cocoa plantations differently.

 

“We need to work with ecosystem to manage soil nutrient content, biodiversity and associated ecosystem services – including carbon sequestration and disease control,” he says.

 

 

Pioneering Cocoa Carbon

 

This sparked a push to create the world’s first-ever cocoa carbon initiative – and, not surprisingly, its Petri dish is Ghan.

 

Forest Trends, NCRC, and the Katoomba Group (an international network promoting ecosystem service markets and co-publisher of Ecosystem Marketplace) are spearheading a three-part carbon-offset pilot project under the Forest Trends Incubator program, which has already initiated community-based projects across Latin America.

 

If the program overcomes funding and logistical hurdles, it could start as early as mid-2010, insiders say.

 

 

Who Are the Farmers?

 

Most cocoa farmers are share croppers, but many also live on gifted land or land they have purchased.   Regardless of the ownership structure, the project plans to measure whether farm owners who preserve or enhance the carbon-storing forest canopy of their farms can compensate for their decreased cocoa production with the sale of carbon-offset credits – and how this compensation can be spread among land-owners who lease their land to share-croppers and land-owners who farm their own land.

 

This could answer the $2.2 billion question – if policymakers can navigate several complex hurdles. Chief among them is land tenure.

 

 

The Tenure Quandary

 

The Katoomba Group recently invited key participants from a range of stakeholder groups – including various government departments – to an REDD Opportunities Scoping Exercise that identified tree tenure as a major constraint for REDD.

 

Tree tenure laws in Ghana, for example, discourage farmers from keeping timber trees because the state owns all naturally-occurring trees, while planted trees belong to the person who plants them. Farmers, therefore, are only permitted to fell timber trees for household use, but not for income. Only timber groups with government concessions can fell naturally-occurring trees for money – leaving cocoa farmers no economic or financial interest in preserving trees growing on the land they either own or work.

 

Adding to the complexity: many cocoa farms are located within the ‘off-reserve’ areas of timber concession zones. This means that a logger with a concession can harvest the farm’s trees – although the logger does have to let the farmer know he’s harvesting them, and technically he has to compensate the farmer for the felled timber trees and any damage to cacao trees from machinery.   Unfortunately, there are no standards of compensation, and disputes are quite common.

 

To avoid the hassle – and the risk of damage – cocoa farmers often select smaller shade trees in preference to timber shade trees. They have also been known to destroy timber saplings and even ring-bark mature timber trees.   Those who keep the trees often sell them clandestinely to chainsaw operators who cause minimum damage to cocoa.

 

The Katoomba Scoping Exercise concluded that the best chance for sustainable shade-tree cocoa farming, as well as other tree-based systems, would be the extension of what are known as Community Resource Management Areas (CREMAs), in which communities can hold greater rights to the natural resources on their land, including trees.

 

NCRC is working with a few pilot CREMAs, but there are currently only a handful in the country, and the government has not adopted a policy of promoting them.   Local NGOs argue this must change as part of a national REDD program.

 

 

The Importance of Education

 

A public-private partnership named the Sustainable Tree Crops Program (STCP) kicked off in 2000 to introduce sustainable innovations such as integrated pest management and reduced chemical use to enhance cocoa productivity.

 

Farmers graduating from the program’s “farmer field school” have seen their incomes improve by 15-50 percent, says Bill Guyton, president of the World Cocoa Foundation that supports the partnership and represents nearly 70 chocolate companies worldwide.

 

So far, however, only a small percentage of cocoa farmers participate in field school, and Guyton says he’s anxious to explore the use of carbon credits to augment farmer income and industry sustainability.

 

Credits could be generated through four types of transactions activities under the REDD banner or as afforestation/reforestation projects under the Kyoto Protocol’s Clean Development Mechanism – or in the voluntary carbon market.

 

 

Compensation for Limitation

 

REDD-wise, cocoa growers could be compensated for not encroaching on forest reserves or deforesting to extend their plantations. On farms, they could get credits for maintaining shade cover and not promoting full-sun exposure.

 

As for reforestation, farmers would be rewarded for reverting from a full-sun system to shaded cocoa to planting trees and encouraging regeneration.

 

They could also get credits for rehabilitating abandoned plantations and not letting them turn into low-productivity agricultural land or bush, which have low carbon-storage capacity.

 

“It is a potential win-win situation for everyone,” says Richards. “It promotes biodiversity and environmental sustainability, would ensure supply sustainability for the big cocoa buyers, and it could improve the livelihoods of thousands of small farmers.”

 

 

Potential vs. Practice

 

Potential is one thing. Practice is another.

 

“We’re all convinced that this area has real potential,” says Ken Norris, a researcher from the University of Reading and lead scientist for the pilot projects. “The problem is there are a whole lot of practical issues to overcome to make it work.”

 

For instance, because verification of carbon offsets is expensive, CO2 contracts typically apply to land sizes ranging from 3,000-5,000 hectares. But the average cocoa farm in Ghana is only 2-3 hectares. Each contract, then, would require approximately 2,000 farmers to federate.

 

And carbon rights are not established in law yet – although many are going on the assumption that they will follow the timber rights outlined above: namely, that standing trees will fall under the jurisdiction of the Forestry Commission, while planted trees – and their largesse – will be owned by whoever plants them.

 

“This is a major organizational democracy initiative about benefit sharing,” says Mason. “We’re trying to work out the best way of doing it, perhaps through existing community groups or organizations.”

 

 

Money

 

And, of course, there is the issue of funding. Norris estimated the project cost at US $5.5 million, and believes potential funding organizations will wait until after funding issues are resolved at the year-end Copenhagen Climate Conference before they decide how much they will contribute.

 

Cocoa carbon credits are not expected to flow for at least another two or three years – yet Mason says he is optimistic; he already has potential buyers.

 

“The cocoa industry is prepared to buy our credits as soon as we’re able to bring them to market,” he says, adding that he’s been working with the cocoa industry over the last three years – and his message is sinking in.

 

“It’s gone from ignorance and skepticism to the realization that a major shortage of cocoa beans is looming.”

 

But he says he is concerned about what’s been done to mitigate the crisis so far.

 

“All the big manufacturers are competing against each other when this is a time for a major concerted effort.”

 

The Ghana Cocoa-Carbon Initiative and pilot projects under the Forest Trends/NCRC/Katoomba Incubator could answer these concerns. The initiative already raised $1.5 million from international donors such as the Rockefeller Foundation and NGOs such as the Rainforest Alliance.

 

 

Winning Industry Support

 

Mason also asked the cocoa industry to chip in. He recently presented the initiative at the launch of a new not-for-profit organization called Source Trust. Set up by Armajaro, a leading cocoa supplier whose clients include Cadbury, Nestlé, and Kraft’s amongst others, Source Trust certifies and promotes sustainable cocoa farming practices in local communities.

 

It already raised $1 million to pay for education and water projects that promote sustainable farming, as well as bed nets that reduce malaria. Chocolate manufacturers pay Armajaro a premium of $30 per ton in exchange for a traceable and sustainable cocoa supply.

 

“As an industry, our interest is to ensure that farmers have good yields over the long-term, not just in the next couple of years,” says Nicko Debenham, head of traceability and sustainability at Armajaro and a spokesperson for Source Trust.

 

Encouraging farmers to leave 40% shade cover on their farm would serve that purpose. Debenham says Source Trust will assess its stakeholders’ interest in providing the $4 million Mason requested for the cocoa carbon initiative. The carbon pilot project could also piggyback on Source Trust’s certification program as the administrative platform for carbon payments.

 

 

Cocoa Carbon Projects

 

Once funded, the project plans to learn more about carbon sequestration in varied landscapes, Norris says. Three pilot sites will be chosen, one in western, one in central and one in eastern Ghana. Two of the incubator’s projects will be dedicated to carbon and cocoa.

 

Their objective is threefold. They will undertake detailed scientific work to build a robust case for future contracts between farmers and carbon credit buyers. They will establish methodologies and structures to take the credits to market. And they will federate farmers into groups or cooperatives that will work under a single contract to spread the impact of transaction costs.

 

 

Outside the Box

 

It will take years before cocoa-industry stakeholders can answer the $2.2 billion question. But the final answer could transform not only the cocoa industry and carbon trading but farming as we know it.

 

“Instead of thinking about producing food to the detriment of the environment,” Norris says, “we could produce food to preserve the environment.”

 

 

Emilie Filou is a free-lance writer specializing in African development issues and a regular contributor to Ecosystem Marketplace.   She is based in London, and can be reached at filouemilie@yahoo.com.

 

Alice Kenny is a prize-winning science writer and a regular contributor to Ecosystem Marketplace. She may be reached at alicekenny1@gmail.com

 

Steve Zwick is Managing Editor of Ecosystem Marketplace. He can be reached at SZwick (at) ecosystemmarketplace.com.

 

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CDM in Africa: Facing the Hurdle of Conventional Finance

Katoomba XV Publications

The above articles were consolidated, along with other material from Ecosystem Marketplace, in two brochures that were distributed at Katoomba XV.

Leading up to the meeting, Ecosystem Marketplace commissioned this series of articles to shed light on issues relevant to these meetings and that part of the world.

Carbon and Land-Use: The Economies of Cocoa, Timber and Agriculture examines the role that carbon payments for Reduced Emissions from Deforestation and Degradation (REDD) can play in promoting sustainable land-use practices West Africa.

Integrated Solutions: Water, Biodiversity, and the Clean Development Mechanism examines the role that PES schemes other than REDD can play in promoting sustainable land- and water-use practices in West Africa.

The following documents offer more detailed and technical treatment of the issues highlighted above:

Sweetening the Deal for Shade-Grown Cocoa: A Preliminary Review of Constraints and Feasibility of ‘Cocoa Carbon’ in Ghana

REDD Opportunities Scoping Exercise (ROSE) for Ghana Identifying Priorities for REDD Activities on the Ground: Preliminary Review of Legal and Institutional Constraints (Report of a Key Informant Workshop, July 2009)

Realizing REDD: Implications of Ghana’s Current Legal Framework for Trees

 

KATOOMBA XV SPONSORS

The Katoomba Group gratefully acknowledges the sponsorship and support of the following organizations for the Katoomba XV Meeting:

USAID; the Global Environment Facility (GEF); Gordon and Betty Moore Foundation; NORAD; Rockefeller Foundation; Rainforest Alliance; and Price Waterhouse Coopers.

 

Climate change threatens the world as a whole – and Africa in particular, because increases in droughts and floods mean more on a continent where the population is already struggling to make ends meet. The continent therefore has more than most to gain from financing schemes that promote sustainable development and slow climate change – but will Africa be in a position to benefit?

Second in the Series: The Road to Accra, leading up to the October Katoomba Meeting in Accra, Ghana.

16 September 2009 |
The Kyoto Protocol’s Clean Development Mechanism (CDM) offers an opportunity for projects in developing countries with the potential to reduce greenhouse gases compared to the baseline situation (i.e. business-as-usual situation ex ante to the project implementation) to secure extra revenues from Certified Emission Reductions (CERs; or commonly called carbon credits) which they receive in proportion to greenhouse gas emissions that they have reduced. Governments and companies in developed countries buy these credits, as they can use them as part of their greenhouse gas emissions reduction commitments under the Kyoto Protocol.

Since the Kyoto Protocol came into force, over 4,000 CDM projects have reached different stages of their CDM development, with around 1,800 already generating carbon credits. On average these projects reduce more than 300 million tons of greenhouse gases per year. With estimated prices of around €10 paid per carbon credit, a basic math calculation shows revenues of over €3 billion transferred annually to developing countries in support of these climate protection projects.

Africa, however, is trailing – we are tempted to say as usual – behind the rapidly growing market for project based carbon credits and is host to a meager 2% share of the global CDM pipeline. The main reason for this unfortunate situation lies in the difficulties associated with finding conventional project finance in Africa – and not so much in an often-debated lack of (CDM) capacity on the continent.

Why is Africa Trailing?

According to World Bank estimates, Africa has the potential for more than 3,200 clean energy projects which could provide more than 170GW of additional power generation capacity and thereby reduce about 740 million tons of greenhouse gases per year. Even greater emission reductions can be gained in the agriculture and forestry sectors, or by gas flaring and waste management technologies.

Despite this great emission-reduction potential, African countries have so far failed to benefit much from the CDM. Currently, there are 33 CDM projects registered on the continent, which constitute only 2% of the global total. The lion’s share of global projects are hosted by China (32%), followed by India (27%) and Brazil (10%).

South Africa leads the continent with 16 projects, followed by Egypt with five and Morocco with four.

These statistics show that CDM projects currently go first to those countries where the underlying project financing is easily available. Is project finance then the main hurdle hindering the success of CDM in Africa?

Carbon Finance is No Panacea

Africa suffers no shortage of great project ideas that expect financing from the CDM, but project developers need to understand that carbon credit revenue itself accounts for just 20% of the underlying financing of CDM projects on average.

That means the project has to be somewhat viable financially before the carbon revenue tops it off.

Let’s, for example, examine the conventional financial calculations for a biomass-to-energy project in Nigeria.

Let’s assume the math gives you an internal rate of return (IRR) of 12%, which you then find isn’t luring potential investors. So you investigate carbon finance, and that brings your IRR to 17%, and they bite.

This is the logic behind the CDM: that carbon finance can turn borderline projects into viable ones because their greenhouse gas reductions and subsequent carbon credits revenue make them worthwhile to investors. This also highlights the fact that the CDM is neither a panacea for projects that make no financial sense at all – nor an added bonus for projects that are profitable without carbon finance.

CDM finance is meant to tip the balance in favor of climate-protection projects that would just miss the profitability threshold without them – and therefore not be implemented.

The Cost of CDM Registration

Project developers often balk at paying for CDM registration, but that cost is insignificant compared to the revenue that one can expect – especially when you consider that a project that is bankable and has reached financial closure is unlikely to face further hurdles.

In fact, it costs just €80,000 or so to bring a simple project under the CDM process to the point of registration by the CDM Executive Board, and complex projects like afforestation and reforestation top out at €120,000. When you consider that an average CDM project generates around 30,000 to 50,000 carbon credits per year for up to 21 years at a price of roughly €10 per carbon credit in mind, it’s worth the cost.

But while costs related to the CDM process are low, it is unlikely that a conventional project would not require several million Euros to be implemented. A reasonable renewable energy project – for example, a biomass-to-energy project with just 5MW of installed capacity – will need an investment of at least €10 million, which will rise to €15 million and even more for solar photovoltaic. A composting plant that is taking only 500 tons of waste per day – an amount any small city in Africa is easily producing – will require at least €5 million to be implemented. The list of examples could be continued. If this financing is organized – complete with a feasibility study, a business plan, and financial closure – the CDM is unlikely to be a problem.

The Need for Capacity Building?

As we saw above, Africa’s meager slice of the global CDM pie is concentrated in three countries – South Africa, Egypt and Morocco – and all three are clearly emerging countries or even wealthy countries compared to the likes of Chad, Somalia or Rwanda. This fact supports the thesis that the CDM is growing in countries that have easy access to conventional financing.

We draw from here another seemingly straightforward conclusion: namely, that spending time and money on building capacity in Africa for the development of CDM projects is secondary. There is no question that the CDM development process is very complex, but its complexity is easily overcome if there is a bankable project that can be accepted as a CDM project.

Plenty of Demand for African Projects

Our experience, especially in Africa, shows that there are many CDM project developers that will never go beyond the great ideas that they have. But we have never come across a bankable project with CDM potential that has not been developed as a CDM because of its complexity or the lack of a maximum of €120,000 to finance the CDM process.

In fact, as soon as there is any bankable project with CDM potential in Africa, all the players in the carbon market are literally fighting to contract the project. In many cases consultants, brokers and buyer of carbon credits even take up all the cost of CDM development when they contract in advance carbon credits that will be delivered in years to come.

International institutions and development organizations supporting capacity building for the CDM in Africa should instead concentrate their efforts on finding solutions to make conventional project financing work for Africa. Africa has an almost eternal problem with national and foreign direct investment. But we are sure if a potential CDM project can be financed, its CDM part can easily and successfully be developed.

Here Is the Money; Where Are the Projects?

The appetite to invest in Africa is increasing – with funds, development agencies, banks and even private individuals willing to take comprehensive shares in CDM projects in Africa.

Although this is much appreciated, many of those interested investors are looking for bankable projects, i.e. projects with comprehensive feasibility study and business plans developed with at least a minimum equity financing already in place. Such projects are coming more and more from Africa, but the lion’s share is still idling at development stage, with developers lacking money to take projects to a comprehensive stage. We believe there is a strong need for seed money in Africa.

Many development agencies – especially those spending a lot on supporting CDM capacity building – should perhaps think more in the direction of providing project developers with the seed money, which in most cases is far below €100,000. Investors will be more attracted when a comprehensive project is presented to them, not just a great idea with no basic studies done. More venture investment is needed for Africa to tap the huge CDM potential.

This emphasis on project finance may seem naí¯ve. However, for us, while we are aware that many other African related barriers to the CDM exist, or at least are widely discussed, project finance is of prime importance to the success of CDM development in Africa. Of the other barriers, however, the prevalent risk perception of Africa by foreign investors is worthwhile considering.

Isn’t Africa Too Risky for Investors?

CDM-specific discussion papers or forums and conferences present Africa’s risk as perceived by international investors as a serious hurdle to the success of CDM in Africa.

It is clear that many outsiders still perceive Africa as a risky field for investment, even if this might be decreasing. In terms of the CDM, however, the CDM related revenues account at best for just about 20% of the overall revenue.

This means that 80% of the overall financial risks are related to the actual project itself.

In fact, we saw that in most cases the CDM is taking an insignificant share of the overall financial risk of any project. As mentioned earlier, the CDM development costs rarely go above €100,000, but on the other side, the revenue to be expected from the CDM ranges on average from €300,000 to €500,000 per year. This is based on the assumption of an average annual generation of between 30,000 and 50,000 carbon credits at a price of €10 each.

The pure CDM return for a project is, therefore, extremely attractive.

If we add to this the fact that the investment for the implementation of the physical project is always in the order of millions of Euros, we see that when a project can exist, the CDM part of it cannot fail to be tapped. Thus even if the risk perception that many investors have for Africa is true, there will be the CDM development, when there is a project implemented with a CDM potential.

Redirecting the Debate

There are efforts at the international level to help Africa benefit from the CDM, a concept that proves to be one of the best sustainable development tools for the least advanced economies.

The ruling body of the CDM, for instance, is working hard to reshape the concept to make it more beneficial for African countries.

Concepts like Program of Activities (PoA) and Reducing Emissions from Deforestation and Degradation (REDD) are very advanced in their development and are being tested already in the market. The PoA is to make the typically small size of CDM projects in Africa more attractive by combining many small projects in different locations into one large project. The REDD concept is to include avoided deforestation as a CDM activity. REDD will particularly benefit Africa where more than 70% of emissions are based on forestry and agricultural activities.

On a more political level, the European Union Emissions Trading Scheme (EU ETS) has clearly expressed its interest in accepting carbon credits from Africa beyond 2012, and this independently of what international negotiations about the future of the Kyoto Protocol post-2012 will lead to.

Thinking Beyond Kyoto

On the market side, few organizations are committing themselves to purchasing carbon credits beyond 2012, when the Kyoto Protocol expires. The most important organization currently buying those carbon credits is the Post 2012 Carbon Credit Fund advised by First Climate. The Fund was established by five leading European public financing institutions, all with Aaa ratings – the European Investment Bank (EIB), Caisse des Dépots, Instituto de Crédito Oficial, KfW Bankengruppe and the Nordic Investment Bank – with the express intention of providing certainty to the carbon credit market beyond 2012.

Launched in March 2008 as the first of its kind, the Fund is in the process of investing €125 million in carbon credits generated in the period 2013-2020. Already the Fund has invested in a composting and landfill project in Lagos, Nigeria and continues to look for further opportunities in Africa.

All these efforts are very important now and for the future of CDM in Africa. But they will only be helpful if the conventional financing of projects is working for Africa. We strongly recommend that the debate be redirected to finding solutions for making conventional project finance work for Africa. The CDM is the icing on top of the cake. No matter how much icing there may be, it cannot be enjoyed if there is no cake to hold it.

Durando Ndongsok is a Senior Project Manager at First Climate. He earned his MBA at the University of Freiburg, Germany, with a focus on resources and environmental management. He also holds a B.Sc. in Mechanical Engineering from the University of Eindhoven, the Netherlands, and a B.Sc. in Chemistry from the University of Dschang, Cameroon. Please send your questions and comments to Durando.ndongsok@firstclimate.com.

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Methodologies Tame Forest Carbon Jungle

As forests convert carbon dioxide in the air to carbon stored in woods, leaves and roots, a range of organizations are, in turn, working to convert forests into carbon offsets. The ‘exchange rate’ of this conversion is determined by specific standards’ methodologies — technical, but critical, tools shaping the rules of the game.

18 August 2009 | Richard Wineberg is rhapsodizing about trees. His firm, Terra Firma Carbon, owns several hundred acres of timberland in Indiana and North Carolina in hopes of managing it as a healthy forest. Browsing the bookshelf in his Chicago office, crammed with classics on silviculture, Wineberg describes teaching himself forestry over the last few decades.

“It’s more art than science,” he says. “Forestry comes from looking over your woods very carefully. You can see the forces at work in the woods when you look at it.”

Keeping Track

It can be daunting keeping up with all the latest developments in carbon methodologies and standards – forest-based or otherwise. That’s why Ecosystem Marketplace’s Forest Carbon Portal has launched the Methodology Watch and Standards Update to help you keep score.

 

Yet Wineberg’s world is getting a hefty dose of science – and rules. Forest carbon methodologies – sets of guidelines governing how projects are designed, managed and monitored – are emerging to catalyze demand for offsets generated by growing trees and crops.

From reforestation and afforestation (A/R) to reduced emissions from deforestation and degradation (REDD), more land-use methodologies have been submitted to voluntary standards in the last twelve months than were approved under the Kyoto Protocol’s Clean Development Mechanism (CDM) since the CDM Executive Board was formed in 2003, based on a review of standards’ websites. At least nine have been approved under the CDM since 2005, but more than a dozen are taking shape under voluntary standards such as the Voluntary Carbon Standard, Climate Action Reserve (CAR – formerly CCAR, the California Climate Action Registry) and others vying to become the standard for a new generation of voluntary carbon projects.

Wineberg, 57, plans to be an early adapter. After decades preaching and practicing sustainable forest management, he’s negotiating his first avoided deforestation project in Brazil. While optimistic that he can apply the new methodologies, he’s concerned forest management will not conform to rigid protocols.

“There’s no simple answer to anything in forestry,” says Wineberg who seems as likely to consult a walk in the woods as a yield table for decisions about forestry. “Every piece of land is different. You don’t want to make the perfect the enemy of the good in this business.”

Forest Carbon Methodologies

For now, business remains uncertain. The majority of forest carbon credits have been transacted in the voluntary carbon markets. As the primary source of demand for forest-related sequestration credits (and the only one for REDD), voluntary markets have had an historical affinity for charismatic projects like A/R – still the single largest category of biological carbon sequestration projects.

The market for voluntary offsets is expanding at an unprecedented rate: global voluntary markets more than tripled between 2006 and 2007 reaching a value of $331 million in 2007, according the 2008 State of the Voluntary Carbon Markets report. Yet the relative number of forest carbon credits that were traded last year declined from the year before. Representing 36% of over-the-counter transactions in 2006, forestry credits, which maintaining transaction volumes, dropped to 18% of such trades in 2007. Why? The reason may in part be due to skittishness about evolving rules of the game and long-term demand.

That may soon change. The pending US climate bill, known informally as Waxman-Markey, currently includes land based offsets. New Zealand and Australia are considering them, and even the EU has softened its stance on REDD. The worry, it seems, is that the credits must be real and fungible with the rest of the carbon market to win global acceptance.

At the same time, New project methodologies are arriving to guide the conversion of stored carbon to credits.

Standards such as the US Regional Greenhouse Gas Initiative (RGGI), the Environmental Protection Agency’s Climate Leaders, CAR, Chicago Climate Exchange (CCX), the Government of Alberta, American Carbon Registry, the Voluntary Carbon Standard, and CarbonFix, among others, have published forest-carbon methodologies (also called protocols), with revisions on the way. The number of projects is on the rise as well. Although the CDM has only registered 6 forestry projects out of 1,750 registered projects – mostly reforestation – at least 52 projects are registered or in the pipeline in the voluntary markets according to the Forest Carbon Portal.

The world, it seems, is finally awakening to Wineberg’s vision of managing forests for ecosystem services, especially the carbon in its biomass – so long as it can be measured, monitored and verified. When the UNFCC convenes it’s the next Conference of Parties in Copenhagen this December, REDD and other forms of terrestrial carbon credits will be a central element of the international climate agenda. Negotiators are set on curbing some of the 18% of the world’s greenhouse gasses (GHG) emitted by land use change and tropical deforestation each year. It is almost certain that whatever mechanism emerges, in some way it will rely on rigorous, science-based carbon methodologies to finance forest carbon credits.

What’s So Great about Methodologies?

Methodologies, like roadmaps, give project developers specific routes to achieve creditable emission reductions. Some are tied to specific scenarios such as reforestation of species in the tropical pasturelands. Almost all of them share measures to ensure the environmental integrity of emission reductions through the use of baselines, additionality, permanence, monitoring, verification and transparent accounting. These principles guide rules articulated in the methodologies’ detailed equations and procedures.

Yet methodologies do more than serve as technical blueprints. They underlie trust in markets for forest carbon offsets, says Derik Broekhoff, policy director at CAR, which is busy developing its own GHG reduction project protocols in the United States, including forestry.

“They’re important primarily because anytime you’re talking about carbon offsets, an intangible commodity, it’s really hard for buyers to know what they’re getting if you don’t have a methodology,” says Broekhoff.

Standards organizations like CAR ensure the quality of their credits, but methodologies theoretically guarantee the level of standardization so buyers and sellers know they are exchanging a real asset: additional, verifiable, and permanent GHG offsets. Without this, buyers would be forced to research the quality of every credit, and poor quality projects would blend in with credible one.

This rigor comes at a price.

A major complaint voiced by project developers is a tendency to favor perfectionism over practicality. Even authors of the methodologies agree. In the early days of the CDM, says Lucio Pedroni of Carbon Decisions, who has co-authored CDM-approved methodologies for AR projects, “a lot of effort was spent to capture minimal changes in carbon stocks, just to give the impression that we are perfect in a world that is never perfect.” This led to methodologies where, as CDM rules dictate, almost every carbon source was considered – from gasoline use to fence posts.

“Projects have to be perfect beyond what is needed for a credible market,” he argues. While this was feasible in industrial projects, this approach simply doesn’t work in forestry.

To simplify the methodologies, Pedroni has joined a recent effort to draft ‘modular methodologies’ for REDD under the VCS. If validated (posted for review here), the modules will represent a new approach: simplified, modular methodologies that can be rearranged or modified if projects differ slightly from one another. In the past, forest carbon methodologies (costing upwards of $100,000 to create) were so specific that applied to only a handful of potential projects, and developers were unable to restrict and license the use of their methodologies to recoup their investment. This hardly provided incentives for standardized and ongoing innovation.

By contrast, the REDD modules are split into the essential components of a viable forest carbon project – baseline, additionality, measuring and monitoring and other categories – that can be amended without revalidating the entire methodology.

“In the end,” claims Pedroni, “simpler methodologies are better for the climate. It’s better to have 1200 projects and ten that are not additional, than to have two that are perfectly additional.”

Financing the Future

Paying for these methodologies is still a challenge. While firms are poised to pour millions into the promise of the new market, large investors have traditionally steered away from forestry offset projects (only two of the 50 projects publically listed by EcoSecurities are in the sector). Yet a recent study by EcoSecurities found that forestry offsets purchased in the last ten years are comparable to volumes transacted in 2008 alone, and that projected demand is igniting a global search for credible projects, as well as close scrutiny of the potential of methodologies.

Eron Bloomgarden, president of environmental markets at Equator, a firm investing in timberlands and environmental assets, says the market has taken a wait-and-see approach to investing in forest carbon credits.

“The goal posts are still moving with many of the forest protocols,” he says. “It’s important these protocols need to be rigorous, yes, but they need to be workable and flexible to incentivize action.”

Bloomgarden’s reading of CAR’s recently-revised protocols highlights issues like permanence, which could extend monitoring liability for up to 100 years, as promising but potentially problematic.

“Overall, they’re pretty good protocols,” he says. “But I’m not sure how workable they are for large volumes of credits. The practicality of the protocols remains to be seen. The jury is still out.”

There will soon be no lack of choices. Various protocols address the same major issues, but in different ways, and offer project-specific frameworks. The CDM, for example, which approved its first A/R additionality and baseline methodology in 2005, now lists nine forest carbon methodologies and 13 ‘tools,’ or guidelines for specific project tasks, as well as two ‘consolidated methodologies’ combining all of it into a streamlined package.

Of the voluntary standards, RGGI has approved carbon sequestration through afforestation activities following its own “Model Rule”. The EPA’s Climate Leaders Program released its A/R methodology in 2008; the CCX has a “rulebook” governing afforestation, long-lived wood products, and sustainably managed forests; and the Voluntary Carbon Standard has at least one methodology approved, as well as eight undergoing validation, not to mention acceptance of CAR and CDM methodologies making it one of the most comprehensive sets of methodologies available.

Picking a Winner

So, how to choose? Voluntary market developers will find their choice of methodologies dictated by standards that certify certain activities. The CDM is limited to A/R in developing countries, while the VCS credits four categories – Afforestation, Reforestation and Revegetation (ARR), Agricultural Land Management (ALM), Improved Forest Management (IFM) and REDD – under its land-use methodologies. After clearing the eligibility hurdle, methodologies (and the standards that certify them) must be marketable. A 2008 survey of project developers found that public credibility and the permanence of CO2 storage were most important issues for forest carbon project, followed by the practicality of carbon accounting and transparency.

Which methodologies, and standard, will win out is not clear. Competition and market demand are driving the latest round of innovation, and project proponents are advancing new methodologies around the world. A few innovative ideas are taking root: more default values are being considered to streamline accounting; permanence measures like risk discounting and buffer pools are replacing unpopular temporary credits used by the CDM; performance standards that set a target for an industrial process are gaining favor under standards like the VCS; and the modular approach to methodologies promises to make modifications easier and less expensive. There’s even momentum toward crediting based on sectoral benchmarks or performance (CDM and VCS) under UNFCCC negotiations.

What works depends on their performance over the next few years and decades.

“We still have a lot to learn,” says Alexia Kelly in the World Resources Institute’s (WRI) Climate and Energy Program who is following the development of the US climate bill’s treatment of offsets. “In my mind, that’s the one thing that is missing: 20 years of project data to know the actual emission reductions that will occur [from methodologies]. That’s what we really need to really judge the effectiveness of a given protocol. We’re still groping in the dark.”

In the meantime, the voluntary market continues to push innovation as international negotiators advocate for methodologies to ensure the integrity of their crediting scheme. But Pedroni, who has seen this process before at the CDM, warns against sacrificing needs of the market for the comfort of strict but unworkable methodologies. Entering the UN climate negotiations in Copenhagen this December, the world has yet to make decisions about the tradeoff between certainty and pragmatism.

“What’s the right balance?” he asks. “We have not found that yet.”


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